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Has oil peaked?

October 10, 2020

Has oil peaked?

Last month, the world’s 4th largest oil company—BP—predicted that the world will never again consume as much petroleum as it did last year. So, have we finally hit peak oil? And if so, what does that mean for our economy and our world?

There was fierce controversy in the first decade of this century over claims by petroleum geologists and energy commentators that peak oil was imminent (I was a figure in that debate, writing several books on the topic). Most of those early claims were based on analysis of oil depletion and consequent supply constraints. BP, however, is talking about a peak in oil demand—which, according to its forecast, could fall by more than 10 percent this decade and as much as 50 percent over the next 20 years if the world takes strong action to limit climate change.

Source: PeakOilBarrel.com; production in thousands of barrels per day.

Numbers from the US Energy Information Administration’s Monthly Review tell us that world oil production (not counting biofuels and natural gas liquids) actually hit its zenith, so far at least, in November 2018, nearly reaching 84.5 million barrels per day. After that, production rates stalled, then plummeted in response to collapsing demand during the coronavirus pandemic. The current production level stands at about 76 mb/d.

Many early peak oil analysts predicted that the maximum rate of oil production would be achieved in the 2005-to-2010 timeframe, after which supplies would decline minimally at first, then more rapidly, causing prices to skyrocket and the economy to crash.

Those forecasters were partly right and partly wrong. Conventional oil production did plateau starting in 2005, and oil prices soared in 2007, helping trigger the Great Recession.

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RED WARNING LIGHT: The World Is Rapidly Burning Through Its Conventional Oil Reserves

February 15, 2020

RED WARNING LIGHT: The World Is Rapidly Burning Through Its Conventional Oil Reserves

While Americans continue to enjoy the convenience provided by the just-in-time inventory supply-chain Leech and Spend Suburban Economy, the rate we are consuming the high-quality conventional oil reserves should scare the hell out of people.  But, it doesn’t.  Why?  Because, virtually no one sees it or has a clue.  Unfortunately, 99.5+% of Americans believe in “Energy Magic” or the Energy Tooth Fairy.

Day in and day, the American population has approximately 60 billion energy slaves working for them.  That figure is based upon the data provided by Jean-Marc Jancovici during his presentation to the OECD back in September 2019. Jean-Marc says each human, on average, has about 200 energy slaves working for them.  I just multiplied 300 million Americans by 200 energy slaves to equal 60 billion energy slaves.  Easy-Peasy.

Due to the complex layers of technology and our vast supply chain system, Americans totally dismiss energy altogether except when they have to pay a BILL FOR IT. Americans are only concerned about the cost or the energy bill they have to pay.  Never is the sustainable supply or quality of energy considered on the internet, the press, or on TV.

So, the blind continue to lead the blind.

However, the amount of conventional oil reserves that we are burning through is quite alarming.  According to data from Rystad Energy, the EIA – Energy Information Agency, and info from Labyrinth Consulting Services, the following chart shows how much conventional oil the world discovers each year versus total consumption (production):

The white part of the bar represents global conventional oil discoveries for that year compared to an average of 23.5 billion barrels consumed.  The 23.5 billion barrel in annual conventional oil consumption (production) is based on the following chart showing approximately 65 million barrels per day of this source since 2013.

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New U.S. Record-Level Oil Production! Peak Oil Theory Disproven! Not.

March 6, 2018

New U.S. Record-Level Oil Production! Peak Oil Theory Disproven! Not.

Well, I’m amazed and impressed. Tight oil production has pushed total United States petroleum output to more than 10 million barrels a day, a rate last seen almost a half-century ago. It’s a new U.S. record. Fifteen years ago I was traveling the world with a Powerpoint presentation featuring a graph of U.S. oil production history. That graph showed a clear peak in 1970 and a long bumpy decline thereafter.

My message: as went the U.S., so would go the world at some point in the fairly near future. Peak oil—the inevitable moment when global oil supplies started drying up—would be a watershed for industrial societies, leading to economic contraction, geopolitical crisis, and social upheaval.

So is it time for a retraction? The optics are certainly unfavorable for peak oil theorists like me. Our forecasts obviously failed, in that none of us expected the current surge in U.S. output. But permit me to offer some context.

Everyone agrees that the surge is almost entirely due to tight oil (globally, there has also been growth in bitumen from Canada, deepwater oil, and other unconventional sources). The application of hydrofracturing and horizontal drilling to low-permeability source rocks in the United States represents an amazing success story for the oil industry—at least in terms of raw petroleum output. But what conditions led to this bonanza?

Return with me now to those thrilling days of yesteryear—the year 2005, to be precise. That’s when the rate of world conventional oil production stopped growing and hit a plateau that continues to this day. Oil prices were already scrambling upward; by mid-2008 they had zoomed to nearly $150 per barrel. And it was at that moment that the global financial crisis erupted. Which was, by most accounts, a survival threat to industrial society.

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The Impending Curtailment of Conventional Oil and the Total Resource Curtailment

January 5, 2018

The Impending Curtailment of Conventional Oil and the Total Resource Curtailment 


In a previous post titled “The Soft Belly of the Oil Industry“, I mentioning the impending unlocking of numerous negative feedbacks affecting the oil industry. I argued that the gradual increase of production costs, the need of reducing emissions, the weakened demand created by the electrification of transport, and more were going to take the industry on a ride along the “Seneca Cliff.” Here, Geoffrey Chia goes beyond that, arguing that the negative feedbacks generated by a collapsing oil industry will affect the whole economic system.  It may be pessimistic as an interpretation, but it is a perfectly possible chain of events.  

Why the impending curtailment of Conventional Oil will lead to Total Energy curtailment and Total Resource curtailment

Outside of Medicine I am an expert in nothing*. In depletion matters I defer to the resource and energy experts such as Professor Ugo Bardi and Alice Friedemann who have conducted painstaking research and performed exhaustive quantitative analyses to arrive at robust conclusions. My main use, if I have any use at all, is to transmit important concepts from the experts to the general public in a qualitative manner, sometimes using my own original visual metaphors and bad jokes, which may hopefully facilitate better understanding by the lay audience. I also tend to view these issues through a medical lens in terms of diagnosis, prognosis and management planning, my aims being to prevent or minimise human morbidity (suffering) and mortality (premature death). Unfortunately due to gross overshoot, humanity are now well past any hope of cure and we are now into the phase of palliative care of a terminally ill industrial civilisation.

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Foiled by Oil

February 18, 2016

Foiled by Oil

“Pemex revenues are down 70% in the past 18 months. That is what Peak Oil looks like.”
“Oil in the ground is wealth only on paper – you may own that oil, but it earns you nothing until you recover and sell it. Yet paper wealth is still wealth. It goes on your balance sheet as an asset that you can sell. You can use it as collateral to borrow cash and buy other assets.”

People do use their oil shares to buy houses, cars, planes and college educations. When crude oil prices hit $140 per barrel, pension funds and college endowments rejoiced.

Our 2006 book, The Post-Petroleum Survival Guide and Cookbook was published just as conventional hydrocarbons struck their all-time global production top and began to decline (a picture that emerged only years later). The book challenged readers to consider how they might cope with $20 per gallon gasoline and the absence of public transit alternatives.

It also described the undulating top we now see, where high price destroys demand, which crashes price, which boosts demand, which raises price, and so on. Think of this part as the whoop-de-doos after the roller coaster cranks its way to the top and lets gravity take over.

Lately there have been a spate of articles in the financial press beating up on Peak Oil theorists for being so widely wrong in their predictions. They point to charts showing global oil production rising from 86.5 million barrels per day in 2008 to 96 million in 2015. Of course, they are mixing apples and oranges. What peaked, right on schedule in 2006, was conventional liquids.

After 2006 Big Oil played its hole card, unconventional oil and gas. Those inside the sector had been telling the Peak Oilers about this all along, but it still caught some incautious prophets out on a hoisted petard.

…click on the above link to read the rest of the article…

Understanding peak oil theory, 2007 U.S. House hearing

February 5, 2016

Understanding peak oil theory, 2007 U.S. House hearing

House 109-41. December 7, 2005. Understanding the Peak Oil theory. U.S. House of Representatives. 

[What follows are excerpts from the 95 page transcript of this hearing, the only one about peak oil and the possibility that peak production may happen soon. And also the only hearing where most of the speakers explaining peak oil, including Representative Roscoe Bartlett, were scientists. From now on think-tank experts and CEO’s of large companies, not scientists, promise peak oil production is decades away and that the U.S. has 100 years of energy independence. Has Congress only invited bureaucrats rather than scientists and engineers since 2005 so that after the next energy crisis they can say they knew nothing? Though of course they know we’re in deep trouble — see the March 7, 2006 “Energy Independence” Senate hearing.  Alice Friedemann   www.energyskeptic.com ]

RALPH M. HALL, TEXAS. We are having this hearing today to learn more about peak oil theory, to hear different opinions, and to learn what we can do about it, if anything. While some theorists believe that we have reached our peak, the point at which the rate of world oil production cannot increase at any time, there are others that tell us that we are not going to peak any time soon, and others who still believe oil is continuously being created and will therefore never peak. We have not been ignoring a possible peak in oil production and this energy bill that was signed into law in August had provisions that address oil usage by promoting conservation and conventional and unconventional production. Whether or not we are reaching our peak, it seems responsible to continue in the vain we are going in by continuing to work on ways to conserve energy while increasing our domestic supply of oil and using research to develop substitutes for conventional oil.

…click on the above link to read the rest of the article…

 

Can We Afford the Future?

November 19, 2015

Can We Afford the Future?

Broken road image via shutterstock. Reproduced at Resilience.org with permission.

As a child of the 1950s I grew up immersed in a near-universal expectation of progress. Everybody expected a shiny new future; the only thing that might have prevented us from having it was nuclear war, and thankfully that hasn’t happened (so far). But, in the intervening decades, progress has begun to lose its luster. Official agencies still project economic growth as far as the eye can see, but those forecasts of a better future now ring hollow.

Why? It’s simple. We can’t afford it.

To understand why, it’s helpful to recall how the present got to be so much grander (in terms of economic activity) than the past. Much of that story has to do with fossil fuels. Everything we do requires energy, and coal, natural gas, and oil provided energy that was cheap, abundant, concentrated, and easily stored and transported. Once we figured out how to get these fuels out of the ground and use them, we went on history’s biggest joy ride.

But fossil fuels are depleting non-renewable resources, and are therefore subject to declining resource quality. Oil is the most economically important of the fossil fuels, and depletion is already eating away at expectations of further petroleum-fed progress. During the past decade, production rates for conventional oil—the stuff that fueled the economic extravaganza of the 20th century—have stalled out and are set to drop (according to the IEA’s latest forecast). Between 2004 and 2014, the oil industry’s costs for exploration and production rose at almost 11 percent per year.  The main bright spot in the oil world has been growing production of unconventional oil—specifically tight oil in North America associated with the fracking boom. But now that boom is going bust.

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The Easy Oil Is Gone So Where Do We Look Now?

February 24, 2015

The Easy Oil Is Gone So Where Do We Look Now?

In 2008, Canadian economist Jeff Rubin stunned the oil market with a bold prediction: With the world economy growing at 5 percent a year, oil demand would grow with it, outpacing supply, thus lifting the oil price from $147 to over $200 a barrel.

The former chief economist at CIBC World Markets was so convinced of his thesis, he wrote a book about it. “Why the World is About to Get a Whole Lot Smaller” forecast a sea change in the global economy, all driven by unsustainably high oil prices, where domestic manufacturing is reinvigorated at the expense of seaborne trade and people’s choices become driven by the ever-increasing prices of fossil fuels.

In the book, Rubin dedicates an entire chapter to the changing oil supply picture, with his main argument being that oil companies “have their hands between the cushions” looking for new oil, since all the easily recoverable oil is either gone or continues to be depleted – at the rate of around 6.7% a year (IEA figures). “Even if the depletion rate stops rising, we must find nearly 20 million barrels a day of new production over the next five years simply to keep global production at its current level,” Rubin wrote, adding that the new oil will match the same level of consumption in 2015, as five years earlier in 2010. In other words, new oil supplies can’t keep up with demand.

 

…click on the above link to read the rest of the article…

Whiplash!

January 20, 2015

Whiplash!

Over the course of 2014 the prices the world pays for crude oil have tumbled from over $125 per barrel to around $45 per barrel now, and could easily drop further before heading much higher before collapsing again before spiking again. You get the idea. In the end, the wild whipsawing of the oil market, and the even wilder whipsawing of financial markets, currencies and the rolling bankruptcies of energy companies, then the entities that financed them, then national defaults of the countries that backed these entities, will in due course cause industrial economies to collapse. And without a functioning industrial economy crude oil would be reclassified as toxic waste. But that is still two or three decades off in the future.

In the meantime, the much lower prices of oil have priced most of the producers of unconventional oil out of the market. Recall that conventional oil (the cheap-to-produce kind that comes gushing out of vertical wells drilled not too deep down into dry ground) peaked in 2005 and has been declining ever since. The production of unconventional oil, including offshore drilling, tar sands, hydrofracturing to produce shale oil and other expensive techniques, was lavishly financed in order to make up for the shortfall. But at the moment most unconventional oil costs more to produce than it can be sold for. This means that entire countries, including Venezuela’s heavy oil (which requires upgrading before it will flow), offshore production in the Gulf of Mexico (Mexico and US), Norway and Nigeria, Canadian tar sands and, of course, shale oil in the US. All of these producers are now burning money as well as much of the oil they produce, and if the low oil prices persist, will be forced to shut down.

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Global Oil and Other Liquid Fuels Production Update

November 3, 2014

Global Oil and Other Liquid Fuels Production Update.

•    Global conventional crude oil + condensate production (C+C) attained a value of 73 million barrels per day (Mbpd) in May 2005. Since then conventional C+C has been bumping along a jagged plateau with the all-time high of 73.3 reached in July 2008, immediately prior to the Chinese Olympic Games and the financial crash. It seems possible that the peak in global conventional oil production is behind us (Figure 1).

•    All of the growth in global liquid fuels has come from non-conventional sources, shale oil and tar sands, that currently are only produced in N America, and from “other liquids” such as biofuel and natural gas liquids. These liquids are inferior to conventional crude oil in a number of ways such as 1) requiring the use of more energy in their production, 2)  being less energy dense and 3) not usable as liquid transport fuel.

Global crude and Condesnate production

Figure 1 Conventional crude oil + condensate production has been on an undulating plateau just over 73 million barrels per day (Mbpd) since May 2005, that is for almost 10 years and despite record high oil prices! As the remainder of this post will show all of the growth in global liquid fuel supply has come from unconventional and low grade sources of supply. The periodic dips in C+C production reflect OPEC production cuts designed to support the oil price. The fact that OPEC has not cut production when faced with current price weakness has resulted in the recent oil price decline. Note that chart is not zero scaled in order to amplify details.

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