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Page added on September 18, 2017

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Beyond peak oil

Consumption

The last decade has seen a significant change in the terms of the debate around the concept of “peak oil”. Ten years ago the focus was on when oil resources would start to run out and was still based on a concept developed in the 1950s by a Shell geophysicist called M King Hubbert.
Hubbert saw in the life story of an individual oil field, which rises to maximum production and then usually rapidly declines, a model that could be applied to the industry as a whole. As a finite resource, global oil would inevitably reach a point where the only prospect was decline.

Numerous worthy individuals and companies believed they could identify the peak. The US Energy Department has produced an invaluable list of those predictions. In 1972, Exxon said the peak would come around the year 2000. In 1977 with typical precision Hubbert himself put it at 1996.

None of those predictions has come true. The date has been progressively put back and the prediction made by Peter Odell, the doyen of oil economists, that the peak will not come before 2060 could yet be proved right.

Technology has enabled the industry to keep finding more oil and has identified ways to extract it from existing fields that had been thought close to exhaustion. Science and engineering have made production possible from resources once thought uneconomic for commercial development — the most obvious example of which is shale. The volume of identified reserves not yet developed is greater now than it was in 1977 when I first joined the industry, despite 40 years of growing production.

The concept of peak oil has therefore shifted from peak supply to peak demand. There is no consensus on the date but the expectation is that demand will begin to fall before supply starts to run out. Static or falling demand in the developed world reinforces that theory as does the suggestion, recently articulated by a senior Chinese official, that Beijing is considering banning petrol and diesel cars at some point. Some say the peak could come within five years; others put the date much later.
Perhaps the more interesting question for investors, the industry and oil-producing countries is: what happens after the peak? How rapidly will demand decline?
Much of the published analysis focuses on the use of oil in cars, which is the largest component of current demand. Cars and light vehicles account for around a quarter (24m barrels a day) of current oil demand. There are currently some 2m electric vehicles on the roads globally and at the current rate that could rise to between 9m and 20m by 2020 and between 40m and 70m by 2025 according to latest study from the International Energy Agency.

At that pace, using a rough calculation, EVs might displace 1m b/d of oil demand by 2025. Beyond that, the pace will depend on costs and regulation. Relatively rapid deployment could cut oil demand by over 2m b/d within 25 years. Fuel-efficiency standards for petrol-driven vehicles could displace even more. That sort of calculation is at the heart of peak oil demand forecasts.
Cars and light vehicles, however, account for only one segment of oil demand.There are three other areas where consumption is material and in each the current situation suggests that demand is growing rather than falling and that there are no obvious substitutes. Freight transport uses some 16m b/d; aviation 5.8m b/d and petrochemicals another 11m b/d.

Freight business is growing, especially across Asia, and relies on diesel, and although higher efficiency standards for trucks and lorries would help it is hard not to imagine that the growth in consumption in the sector will match the level of economic growth. Air transportation is increasing. The most authoritative forecasts suggest that passenger numbers will double over the next 20 years. Even with some efficiency gains that suggests an increase in demand of perhaps 3m or 4m b/d.

Petrochemical demand is also growing. Some substitution is possible but given the geographic shift of the industry to the Middle East the temptation to use local oil supplies will remain high.

What is the conclusion from all this? The most likely outcome is a long plateau. That is based on a peak in demand, particularly for petrol, within the next decade as EVs begin to break into the market using economics of scale, further advances in battery technology and the active support of public policymakers through steps such as tax concessions and parking regulations. Beyond the peak, demand for oil for use in personal transportation falls but the pace is limited by the capital stock of cars turning over only relatively slowly. The decline in petrol consumption will be offset by the continued growth in use of oil to move freight and air passengers. In both cases, demand will be driven by an increasing population and prosperity. Oil use in petrochemicals will also continue to grow. I think a reasonable prediction from all this is that a peak in demand — say in the mid to late 2020s — will be followed by a long plateau keeping global oil demand at around 100m b/d for many years. If that is right, the question shifts back to the supply side. Can that demand be met without a significant increase in prices driven by scarcity or rising production costs, or both? That will be the subject of next week’s post.
FT



27 Comments on "Beyond peak oil"

  1. Davy on Mon, 18th Sep 2017 6:36 am 

    So, in conclusion looking at the peak oil dynamics of supply and demand we are now on that magical plateau. Renewables, unconventionals, and other liquid fuels will keep us in the vicinity of 100m b/d. We will see continued growth of course despite the plateau. All this hinges on if we can keep the global economy in a straightjacket of financial management and avoid wars hot and cold. That is a tall order. It is always the black swans that mess up these nice predictions.

  2. Cloggie on Mon, 18th Sep 2017 6:40 am 

    This article represents my current position and my development over the past 10 years.

    There is enough fossil fuel left to energy-fund the transition. It is unclear when peak oil demand will happen 5 year? 10..30? Much depends on the speed of technological development, particularly of battery technology for e-vehicles. But once the latter are price-competitive with the standard gasoline car, things could go really quick.

    In the sixties and seventies you were “backward” if you had no car. In the coming twenties you will be backward if you still have a (gasoline) car.

    #PantaRhei

  3. sidzepp on Mon, 18th Sep 2017 7:47 am 

    The current economic model of the world is based on consumption. It requires the harvesting of resources to send to the factories to manufacture the products to be shipped to consumers throughout the world. It is fairly obvious that this system is creating havoc with the natural world and therefore, threatening our existence along with a vast majority of the species inhabiting the planet.

    Unfortunately, nations, like individuals, are desirous for preserving their hegemony in the pecking order and as the problems continue to magnify from populations growth and the accompanying economic growth, nations will grow more desperate in their futile efforts to preserve their status quo.

    The question is not when peak oil will occur but how humanity will cope with the numerous problems that are rising from the increase in population and the decrease in easily accessible resources.

    “The times are a-changing.”

  4. makati1 on Mon, 18th Sep 2017 9:03 am 

    Seems that the Ps is moving forward while the Us is sliding backwards.

    http://www.zerohedge.com/news/2017-09-17/which-countries-have-most-economic-complexity

    “On the opposite side of the spectrum, the Philippines is the biggest mover upwards, ascending 28 spots.”

    Nice to be in a growing country, not a dying one. LOL

  5. dave thompson on Mon, 18th Sep 2017 9:18 am 

    Cloggie so much for your wildly touted “transition” http://climateandcapitalism.com/2017/09/15/the-green-energy-cornucopia-is-100-percent-wishful-thinking/ Serious energy policy must address overproduction, overconsumption and inequality. Without that, promises of an economy based on 100% renewable energy are misleading and dangerous.

    by Stan Cox

  6. Davy on Mon, 18th Sep 2017 9:22 am 

    “Seems that the Ps is moving forward while the Us is sliding backwards.”
    P’s has 100MIL people in the space of Arizona. Its GDP is similar to my insignificant state of Missouri. The two are not even comparable and it is mkat stupid daily bragging about this small insignificant overpopulated Island that is part of the reason this board has decline so much in quality.

  7. deadlykillerbeaz on Mon, 18th Sep 2017 10:43 am 

    A flat Earth is a concept, faulty stupid thinking through pure ignorance and denial.

    Peak oil is not a concept, it is something that will happen. At some point in time in the future, it will become painfully obvious.

    Until then, let the burning continue!

  8. Antius on Mon, 18th Sep 2017 11:13 am 

    It has been my observation that people with a strong stake in the present system, will do anything to avoid admitting that a fundamental shortage of resources could dampen human ambitions. They will talk about peak demand, new technologies, e.t.c in order to avoid facing up to the inevitable. They don’t like it and spend huge amounts of time arguing that it isn’t true, rather than actually doing things about it.

    “None of those predictions has come true. The date has been progressively put back and the prediction made by Peter Odell, the doyen of oil economists, that the peak will not come before 2060 could yet be proved right.”

    Outside of OPEC, the date has been and gone. Huge financial resources have been dumped into tight oil, which is unprofitable. The date of peak liquids is basically the date at which the money runs out. When will that be? Whenever the next financial crisis hits. There is no prospect of peak oil supply extending to 2060, unless new discoveries are made which literally double or triple the world’s reserves.

    ” Technology has enabled the industry to keep finding more oil and has identified ways to extract it from existing fields that had been thought close to exhaustion. Science and engineering have made production possible from resources once thought uneconomic for commercial development — the most obvious example of which is shale.”

    False. Rising prices have allowed extraction from resources that were not previously economic. Low prices (at least relative to 2008-2014) have killed a lot of investments. This could lead to a supply crunch by 2020. Oil discovery peaked in the 1960s and is now at record low levels.

    ” There are currently some 2m electric vehicles on the roads globally and at the current rate that could rise to between 9m and 20m by 2020 and between 40m and 70m by 2025 according to latest study from the International Energy Agency.
    At that pace, using a rough calculation, EVs might displace 1m b/d of oil demand by 2025.”

    Maybe, maybe not. EVs are substantially more expensive, have inherently poorer performance and require extensions to grid electric power supplies. Whether it is possible to achieve steady displacement of ICEVs depends upon how many individual nations can afford to both subsidise these technologies and afford the extra generation. Given the way government debt is racking up in the developed world, I think any prediction of EVs somehow displacing ICEVs on a large scale is optimistic at best.

  9. onlooker on Mon, 18th Sep 2017 12:06 pm 

    The author of this article talks without it seems any deference to how economically viable all those “reserves” are. And also with the typical techno hopium. You still need energy/money and lots of it to get at these reserves. And it is NOT looking good

    https://www.theguardian.com/environment/2015/may/18/fossil-fuel-companies-getting-10m-a-minute-in-subsidies-says-imf
    Fossil fuels subsidised by $10m a minute, says IMF

  10. MASTERMIND on Mon, 18th Sep 2017 12:37 pm 

    Saudi Aramco CEO sees oil supply shortage as investments and discoveries drop-NBC NEWS

    https://www.cnbc.com/2017/07/10/aramco-ceo-amin-nasser-sees-oil-supply-shortage-as-investments-and-discoveries-drop.html

    Peak total oil is now! God help us all!

  11. Antius on Mon, 18th Sep 2017 1:27 pm 

    From Onlooker’s Guardian article:

    “Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50% – about 1.6 million lives a year.”

    To reach this kind of mortality rate from nuclear power, would require a meltdown and large release somewhere in the world, every single day. So far we have had two such accidents in 30 years, both of them due to technology that we won’t be using in new reactors.

    We could be making life a lot easier for ourselves. Instead, we are deliberately tying one hand behind our backs.

  12. onlooker on Mon, 18th Sep 2017 1:32 pm 

    Yes Antius, we as in the entire planet should have diversified away from FF decades back.

  13. nathing@hotmail.fr on Mon, 18th Sep 2017 2:00 pm 

    It was so boring to wait for apocalypse that I finally bought an oil car and fly several times a year with airplane.
    As it wasn’t enough, I started buying new computer and smartphone every year and put heat at 25°C at home on the middle of winter and invested in an electric air conditionning system.
    As it wasn’t enough, I ate meat twice a day, always beef.
    But it wasn’t still enough, so I bought a second car and use it to buy heavy transformed food located 100 meters from home.
    If you all together do like me, we will success in reaching peak oil!

  14. Harquebus on Mon, 18th Sep 2017 6:49 pm 

    Consumer debt is what is supporting oil production. If not for this, peak oil would already be far behind us.

  15. onlooker on Mon, 18th Sep 2017 6:56 pm 

    Beyond Peak Oil comes contraction, decline and collapse.
     
    http://www.businessinsider.com/131-year … il-2010-11
    It Will Take 131 Years To Replace Oil, And We’ve Only Got 10

    “”If you think the economy is more important than the environment, try holding your breath while counting your money””

    onlooker 7547 Sun 10 Nov 2013, 12:49:04 NY, USA

  16. makati1 on Mon, 18th Sep 2017 7:12 pm 

    Harquebus, you are correct, and the credit is about maxed out. So…

  17. dave thompson on Tue, 19th Sep 2017 10:54 am 

    @ Cloggie, “Dr. Vaclav Smil was the speaker at a TISED and Fondation 3E event in September 2015 called “Energy Revolution? More like a Crawl” https://damnthematrix.wordpress.com/2017/09/18/energy-revolution-more-like-a-crawl-dr-vaclav-smil/

  18. rockman on Tue, 19th Sep 2017 10:56 am 

    sid – “The question is not when peak oil will occur but how humanity will cope with the numerous problems that are rising from the increase in population and the decrease in easily accessible resources.” Will cope with numerous problems? So back to the same difficulty many have: believing that life will significantly change on the relatively insignificant date we reach global PO. Impossible to ask this without sounding flippant: where have you been the last 40+ years? Yes, the world has been suffering from the Peak Oil Dynamic at least that far back. And obviously long before the GPO (global PO) date was reached (which could be this year…or not). The huge price increase in the 70’s along with Middle East exporters exerting their dominance sent the entire world into a severe recession. Which led to reduced consumption and lower prices that severely hurt revenues of the same exporters. And also aided the other global ecooomies to recover.

    And just focus more recently…the last 25 years. Even though the world increased production the prospect of a future shortage of oil led to a number of military incidents by the US in the ME that cost us thousands of the lives of our military and $TRILLIONS in tax payer monies. As well as tens of thousands of civilians lives in those foreign lands. And that dynamic Is still very active today.

    Some folks speculate of what the world will look like when we reach that magical GPO date. There’s no need to speculate: we seen various potential aspects played out for decades already. Consider we may have actually reached GPO in the last year or so. Of course it will take many decades to be confident of that possibility: consider how close we came to setting a new US PO date 4 decades after we were certain we had already done so.

    The world is dealing with PO today. It was dealing with PO decades ago. And none of conditions required a GPO date to have been reached.

  19. Anonymous on Tue, 19th Sep 2017 11:04 am 

    If you just look at the 2004 peak oil prediction from Campbell for ASPO,you will see how wrong the peak oilers have been.

    You don’t have to go far. The picture is the icon image ON THIS POST. Used for all the peak oil posts on this site actually. Here is a more readable view:

    http://www.albany.edu/geosciences/04oilpeak.jpg

    According to Campbell, global total liquids should have peaked in 2007 and by now be down to 25 billion bbls/year in 2017.

    What are we actually, this year? 35 billion barrels per year! That’s right. 40% higher production than he predicted.

    And yet, you all still believe. And you even use that FAILED prediction as your icon. OMFG.

  20. Boat on Tue, 19th Sep 2017 11:24 am 

    rock,

    The rise of oil consumption has always been dominated by geopolitics but two looming trends will bring peak oil to its final high. The first is a growing electric transportation future and 2nd is climate change destruction.

  21. dave thompson on Tue, 19th Sep 2017 11:29 am 

    Anonymous, where have those gains come from? Mostly crappy shale and tarsands. Hardly a net energy gain when you consider the EROEI. But I do agree that the total volume of liquid hydrocarbons has increased. However the stuff that runs the worlds industrial civ has not increased that is, conventional oil. Conventional oil has remained on a plateau that is easily determined when you remove the crappy unconventional liquid production.

  22. Anonymous on Tue, 19th Sep 2017 12:14 pm 

    Dave:

    1. Bottom line is that Campbell didn’t predict what happened. He could have shown tarsands and NGLs increasing more. But he didn’t. And he completely missed shale. And he overestimated decline of conventional. He was HUGELY wrong.

    2. Bakken crude sells for ~WTI prices (at delivery). That is GREAT crude oil. The funny thing is in 2005, the peakers when they wanted to waffle a little would say there was no more light sweet crude coming. (Because they knew about tar sands.) Guess what shale oil is? Light sweet crude!

    3. Tar sands, shale oil, and NGLs are all very different. Tar sands is very heavy (10 API) and sour (full of sulfur). Shale oil ranges from 44 (Bakken) to 47 (Eagle Ford). There is also a fair amount of condensate (from Eagle Ford or gas wells) that is in the 50s. It is very sweet (LOW sulfur) and much higher API than tar sands. FWIW light crudes and condensates are great mixing stock with tar sands oil.

    I do agree that NGLs have less value. But it was Campbell who mixed them in. And even just crude and condensate we are doing way better than he predicted. We are up globally about 10% from 2004 (80MMbpd versus 72 MM bpd) and he predicted we would be down about 25% (55 MMbpd). Bottom line is that we have followed nothing like the path in that iconic peak oil picture which is all over this site…

  23. ____________________________________________ on Tue, 19th Sep 2017 2:11 pm 

    Hey fagtards.
    http://www.telegraph.co.uk/science/2017/09/18/immediacy-threat-climate-change-exaggerated-faulty-models/
    Ain’t I’ve been saying?

  24. rockman on Tue, 19th Sep 2017 10:29 pm 

    A – Yes, very critical that he missed the condensate/light oil boom in the US. No matter how many times I’ve explained the FACTS some still don’t get it. Before the Eagle Ford Shale boomed we had to import a lot of condensate to blend with our heavy oil imports. That was the only way to get the 32 API the refineries wanted. And then as the Canadian oil sands boomed it increased the demand for US condensate/light oil as we shipped 360,000 bopd to Alberta to blend with the oil sands to make the dilbit that could be sent down pipelines: Canada was producing only about 450,000 bopd needed.

    But even dilbit wasn’t suitable for the refineries: its was only 23 API. So once in the US more condensate/light oil had to be added. The world’s largest storage facility at Cushing, OK wasn’t built primarily to just store oil: it is the world’s largest OIL BLENDING facility. The blended oil is stored there waiting to be sold to the refineries. The condensate/light oil is so critical to heavy oil shipping and refining about a year ago Venazuela started importing some from Libya.

    Hopefully I won’t have to lay the FACTS again after doing so more the a half dozen times. But I doubt it. LOL.

  25. rockman on Tue, 19th Sep 2017 11:02 pm 

    A – But I’m confused that you agree that “NGLs have less value.” NGL’s prices are based their composite Btu content. The latest price is about $5.75 per million Btu. NG is current selling at Henry Hub for about $3.15 per million Btu. NGL’s are selling at a significantly higher price then NG for a good reason: they are critical for our economy in a variety of ways:

    “Ethane, propane, butane, isobutane, and pentane are all NGLs. There are many uses for NGLs, spanning nearly all sectors of the economy. NGLs are used as inputs for petrochemical plants, burned for space heat and cooking, and blended into vehicle fuel. Higher crude oil prices have contributed to increased NGL prices and, in turn, provided incentives to drill in liquids-rich resources with significant NGL content.”

    In fact the increase in ethane yields from the shales has caused tens of $BILLION spent on new ethane crackers. These processing units convert the ethane into ethylene, a primary component in the production of a wide variety of plastics.

    IOW the NGL’s associated with the increased production from oil and NG is a positive economic factor…not a negative. They increase the revenue stream the operators are revieving from their wells. Typically production with high level of associated NGL get a increased Btu price adjustment. And if the yield is high enough (as it is on several of the Rockman’s wells” a rental unit (about $2,000/month) is placed at the well head to seperate out the NGL’s at the wellhead so they can be sold directly by the Rockman at a higher net price then he would get from the Btu adjustment.

    Bottom line: high NGL yields are good…not bad. And no, NGL’s aren’t oil. But so what…neither is NG.

  26. Anonymous on Wed, 20th Sep 2017 12:24 am 

    Rock, I never compared them to NG. (You are bringing that in from left field on your own.)

    1. My sentence referred to shale oil, tar sands, and NGLs. Not NG. NGLs are less valuable than crude or condensate.

    2. And the Campbell graph shows total liquids. (NG is not part of that.)

    http://www.albany.edu/geosciences/04oilpeak.jpg

  27. Cloggie on Wed, 20th Sep 2017 1:50 am 

    @ Cloggie, “Dr. Vaclav Smil was the speaker at a TISED and Fondation 3E event in September 2015 called “Energy Revolution? More like a Crawl”

    Smil is an important Big Picture energy thinker. He will not say uninformed things like that “a renewable energy base is impossible” (do you hear that Greg?). Instead he says that we should strive for if, but it is going to be a difficult process. Smil is the favorite author of Bill Gates.

    https://deepresource.wordpress.com/2013/02/27/vaclav-smil-on-energy-transitions/

    https://deepresource.wordpress.com/2017/06/23/vaclav-smil-energy-civilization/

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