March 10, 2010
Peak Oil In 2014?
Researchers at Kuwait University predict world conventional oil production will peak in 2014.
In a finding that may speed efforts to conserve oil and intensify the search for alternative fuel sources, scientists in Kuwait predict that world conventional crude oil production will peak in 2014 — almost a decade earlier than some other predictions. Their study is in ACS' Energy & Fuels, a bi-monthly journal.
Ibrahim Nashawi and colleagues point out that rapid growth in global oil consumption has sparked a growing interest in predicting "peak oil" — the point where oil production reaches a maximum and then declines. Scientists have developed several models to forecast this point, and some put the date at 2020 or later. One of the most famous forecast models, called the Hubbert model, accurately predicted that oil production would peak in the United States in 1970. The model has since gained in popularity and has been used to forecast oil production worldwide. However, recent studies show that the model is insufficient to account for more complex oil production cycles of some countries. Those cycles can be heavily influenced by technology changes, politics, and other factors, the scientists say.
The new study describe development of a new version of the Hubbert model that accounts for these individual production trends to provide a more realistic and accurate oil production forecast. Using the new model, the scientists evaluated the oil production trends of 47 major oil-producing countries, which supply most of the world's conventional crude oil. They estimated that worldwide conventional crude oil production will peak in 2014, years earlier than anticipated. The scientists also showed that the world's oil reserves are being depleted at a rate of 2.1 percent a year. The new model could help inform energy-related decisions and public policy debate, they suggest.
If true the decline will cause an extended economic contraction lasting several years. We are not yet ready to migrate away from oil as our primary source of energy for transportation.
US consumption is about 3 million barrels per day below peak consumption. Most of the import decline is because US consumers are getting gradually priced out of the oil market. I expect this trend to continue.
As for secondary peaks: This has happened before when Alaskan production came on line. But the secondary peak then didn't retrace back to the 1970 peak. The current surge is due in part to deep offshore and also natural gas liquids. Lower 48 land-based conventional oil production is not going to hit a second peak that comes anywhere near 1970.
The increasing oil from deep offshore does not bode well for the long term. Deep offshore has faster declines because it is too expensive to run deep water rigs for the decades during which much lower production can be achieved. On land the stripper wells can operate in old fields for decades pumping out the oil real slowly. But in deep water the decline in production is more sharp due to need to abandon fields with a higher percentage of the oil still remaining in the ground.
Your post about Hubbert linearization appears to be missing a second graph.
Production skew: Certainly the decline for US production hasn't been as sharp as the rise. But I wonder what the curve looks like for lower 48 onshore conventional oil.
We miss your posts on witchcraft and astrology.
Can you do a few more of those instead of peak oil for a while? Those used to be somewhat coherant.
Exxon Mobil: “ExxonMobil is an industry leader in reserves replacement,” said Rex W. Tillerson, chairman and chief executive officer. “We have replaced more than 100 percent of production for 16 consecutive years, reflecting our strategic focus on resource capture, a disciplined approach to investment and excellence in project execution. Adding new reserves ensures that ExxonMobil will continue to develop new supplies of energy to meet future demand and support economic growth and improved standards of living."
The quickest and easiest way to get off imported oil is to move to a methanol based economy (see http://www.thenewatlantis.com/publications/the-methanol-alternative and http://www.rollcall.com/news/40755-1.html ). Methanol is already available without gov't tax breaks. Methanol has about half the energy per gallon as does gasoline but it costs less than have the price. With a flex-fuel vehicle, you could use either one. Personally, I would impose a tax on IMPORTED oil to keep OPEC from lowering the price of oil to drive out the methanol ... and to help get the budget back in line. Of course, as we imported less oil, there would be less revenue to the gov't but the money spent on methanol would stay in the US and boost its economy. It would also get us out of the need to prop up regimes in the Middle East and spend money to protect the oil lanes. It would also pull the rug out from underneath Iran without firing a shot.
Most of the import decline is because US consumers are getting gradually priced out of the oil market.
If you look at the stats, I don't think you see that. Most of the reduction in consumption from 2005-2009 is in asphalt* and fuel oil - those aren't individual consumers, except for residential fuel oil. I think it's fair to say that residential fuel oil is being displaced by cheaper substitutes, which is much more positive than "getting gradually priced out" would suggest. I suspect that some asphalt is being replaced by cheaper concrete - again, a more positive story.
*"asphalt and road oil" consumption fell from 200 million barrels per year in 2005 to 130 million barrels per year in 2009. You have to add the preliminary data from 2009 monthly reports to the annual chart which hasn't been updated yet with the 2009 figure.
ExxonMobil's reserve replacements: I bet their reserves are shifting toward more natural gas as a percentage of the total mix. Also, they've done purchases (e.g. bought XTO) to get more natural gas reserves. So some of the new reserves showing up on their balance sheet just came from some other company's balance sheet. Good for XOM shareholders perhaps. But not helping us any.
US consumers are getting priced out in some lower value uses of oil. Obviously, they are more reluctant to give up oil usage for their cars. So the dip in demand for gasoline is much less in percentage terms than the dip in demand for some other more easily substituteable uses of oil.
I expect oil prices will go up high enough to force US consumers to shift toward smaller cars and other tactics to reduce gasoline usage too. The total Vehicle Miles Traveled number is still below 2007 peaks. Per capita VMT would show an even sharper turn down on VMT.
Any discussion about peak oil and oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand to give some idea of the magnitude of the supply issues we face:
- China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year
- Transition takes 30 years
- No peak in global production
In next 10 years we must find 44 million BOPD. If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
- Oil demand elasticity of -0.3
- Current production 84 million BOPD, current price US$ 80
- Peak production 100 million BOPD
- Post peak decline rate of 3-4%
If you want to try the model for yourself using your own assumptions it can be found at Petrocapita Income Trust: