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BP Data Suggests We Are Reaching Peak Energy Demand

BP Data Suggests We Are Reaching Peak Energy Demand thumbnail

Some people talk about peak energy (or oil) supply. They expect high prices and more demand than supply. Other people talk about energy demand hitting a peak many years from now, perhaps when most of us have electric cars.

Neither of these views is correct. The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP (BP Statistical Review of World Energy 2015).

Growth in world energy consumption is clearly slowing. In fact, growth in energy consumption was only 0.9% in 2014. This is far below the 2.3% growth we would expect, based on recent past patterns. In fact, energy consumption in 2012 and 2013 also grew at lower than the expected 2.3% growth rate (2012 – 1.4%; 2013 – 1.8%).

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. Based on BP Statistical Review of World Energy 2015 data.

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.

Recently, I wrote that economic growth eventually runs into limits. The symptoms we should expect are similar to the patterns we have been seeing recently (Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)). It seems to me that the patterns in BP’s new data are also of the kind that we would expect to be seeing, if we are hitting limits that are causing low commodity prices.

One of our underlying problems is that energy costs have risen faster than most workers’ wages since 2000. Another underlying problem has to do with globalization. Globalization provides a temporary benefit. In the last 20 years, we greatly ramped up globalization, but we are now losing the temporary benefit globalization brings. We find we again need to deal with the limits of a finite world and the constraints such a world places on growth.

Energy Consumption is Slowing in Many Parts of the World

Many parts of the world are seeing slowing growth in energy consumption. One major example is China.

Figure 2. China's energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

Figure 2. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

Based on recent patterns in China, we would expect fuel consumption to be increasing by about 7.5% per year. Instead, energy consumption has slowed, with growth amounting to 4.3% in 2012; 3.7% in 2013; and 2.6% in 2014. If China was recently the growth engine of the world, it is now sputtering.

Part of China’s problem is that some of the would-be buyers of its products are not growing. Europe is a well-known example of an area with economic problems. Its consumption of energy products has been slumping since 2006.

Figure 3. European Union Energy Consumption based on BP Statistical Review of World Energy 2015 Data.

Figure 3. European Union Energy Consumption based on BP Statistical Review of World Energy 2015 Data.

I have used the same scale (maximum = 3.5 billion metric tons of oil equivalent) on Figure 3 as I used on Figure 2 so that readers can easily compare the European’s Union’s energy consumption to that of China. When China was added to the World Trade Organization in December 2001, it used only about 60% as much energy as the European Union. In 2014, it used close to twice as much energy (1.85 times as much) as the European Union.

Another area with slumping energy demand is Japan. It consumption has been slumping since 2005. It was already well into a slump before its nuclear problems added to its other problems.

Figure 4. Japan energy consumption by fuel, based on BP Statistical Review of World Energy 2015.

Figure 4. Japan energy consumption by fuel, based on BP Statistical Review of World Energy 2015.

A third area with slumping demand is the Former Soviet Union (FSU). The two major countries within the FSU with slumping demand are Russia and Ukraine.

Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.

Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.

Of course, some of the recent slumping demand of Ukraine and Russia are intended–this is what US sanctions are about. Also, low oil prices hurt the buying power of Russia. This also contributes to its declining demand, and thus its consumption.

The United States is often portrayed as the bright ray of sunshine in a world with problems. Its energy consumption is not growing very briskly either.

Figure 6. United States energy consumption by fuel, based on BP Statistical Review of World Energy 2014.

Figure 6. United States energy consumption by fuel, based on BP Statistical Review of World Energy 2014.

To a significant extent, the US’s slowing energy consumption is intended–more fuel-efficient cars, more fuel-efficient lighting, and better insulation. But part of this reduction in the growth in energy consumption comes from outsourcing a portion of manufacturing to countries around the world, including China. Regardless of cause, and whether the result was intentional or not, the United States’ consumption is not growing very briskly. Figure 6 shows a small uptick in the US’s energy consumption since 2012. This doesn’t do much to offset slowing growth or outright declines in many other countries around the world.

Slowing Growth in Demand for Almost All Fuels

We can also look at world energy consumption by type of energy product. Here we find that growth in consumption slowed in 2014 for nearly all types of energy.

Figure 7. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 7. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Looking at oil separately (Figure 8), the data indicates that for the world in total, oil consumption grew by 0.8% in 2014. This is lower than in the previous three years (1.1%, 1.2%, and 1.1% growth rates).

Figure 8. Oil consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 8. Oil consumption by part of the world, based on BP Statistical Review of World Energy 2015.

If oil producers had planned for 2014 oil consumption based on the recent past growth in oil consumption growth, they would have overshot by about 1,484 million tons of oil equivalent (MTOE), or about 324,000 barrels per day. If this entire drop in oil consumption came in the second half of 2014, the overshoot would have been about 648,000 barrels per day during that period. Thus, the mismatch we have recently been seeing between oil consumption and supply appears to be partly related to falling demand, based on BP’s data.

(Note: The “oil” being discussed is inclusive of biofuels and natural gas liquids. I am using MTOE because MTOE puts all fuels on an energy equivalent basis. A barrel is a volume measure. Growth in barrels will be slightly different from that in MTOE because of the changing mix of liquid fuels.)

We can also look at oil consumption for the US, EU, and Japan, compared to all of the rest of the world.

Figure 9. Oil consumption divided between the (a) US, EU, and Japan, and (b) Rest of the World.

Figure 9. Oil consumption divided between the (a) US, EU, and Japan, and (b) Rest of the World.

While the rest of the world is still increasing its growth in oil consumption, its rate of increase is falling–from 2.3% in 2012, to 1.6% in 2013, to 1.3% in 2014.

Figure 10 showing world coal consumption is truly amazing. Huge growth in coal use took place as globalization spread. Carbon taxes in some countries (but not others) further tended to push manufacturing to coal-intensive manufacturing locations, such as China and India.

Figure 10. World coal consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 10. World coal consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Looking at the two parts of the world separately (Figure 11), we see that in the last three years, growth in coal consumption outside of US, EU, and Japan, has tapered down. This is similar to the result for world consumption of coal in total (Figure 10).

Figure 10. Coal consumption for the US, EU, and Japan separately from the Rest of the World, based on BP Statistical Review of World Energy data.

Figure 11. Coal consumption for the US, EU, and Japan separately from the Rest of the World, based on BP Statistical Review of World Energy data.

Another way of looking at fuels is in a chart that compares consumption of the various fuels side by side (Figure 12).

Figure 8. World energy consumption by fuel, showing each fuel separately, based on BP Statistical Review of World Energy 2015.

Figure 12. World energy consumption by fuel, showing each fuel separately, based on BP Statistical Review of World Energy 2015.

Consumption of oil, coal and natural gas are all moving on tracks that are in some sense parallel. In fact, coal and natural gas consumption have recently tapered more than oil consumption. World oil consumption grew by 0.8% in 2014; coal and natural gas consumption each grew by 0.4% in 2014.

The other three fuels are smaller. Hydroelectric had relatively slow growth in 2014. Its growth was only 2.0%, compared to a recent average of as much as 3.5%. Even with this slow growth, it raised hydroelectric energy consumption to 6.8% of world energy supply.

Nuclear electricity grew by 1.8%. This is actually a fairly large percentage gain compared to the recent shrinkage that has been taking place.

Other renewables continued to grow, but not as rapidly as in the past. The growth rate of this grouping was 12.0%, (compared to 22.4% in 2011, 18.1% in 2012, 16.5% in 2013). With the falling percentage growth rate, growth is more or less “linear”–similar amounts were added each year, rather than similar percentages. With recent growth, other renewables amounted to 2.5% of total world energy consumption in 2014.

Falling Consumption Is What We Would Expect with Lower Inflation-Adjusted Prices

People buy goods that they want or need, with one caveat: they don’t buy what they cannot afford. To a significant extent affordability is based on wages (or income levels for governments or businesses). It can also reflect the availability of credit.

We know that commodity prices of many kinds (energy, food, metals of many kinds) have been have generally been falling, on an inflation adjusted basis, for the past four years. Figure 13 shows a graph prepared by the International Monetary Fund of trends in commodity prices.

Figure 9. Charts prepared by the IMF showing trends in indices of primary commodity prices.

Figure 13. Charts prepared by the IMF showing trends in indices of primary commodity prices.

It stands to reason that if prices of commodities are low, while the general trend in the cost of producing these commodities is upward, there will be erosion in the amount of these products that can be profitably produced, and hence, that can be purchased. (This occurs because prices are falling relative to the cost of producing the goods.) If, prior to the drop in prices, consumption of the commodity had been growing rapidly, lower prices are likely to lead to a slower rate of consumption growth. If prices drop further or stay depressed, an absolute drop in consumption may occur.

It seems to me that the lower commodity prices we have been seeing over the past four years (with a recent sharper drop for oil), likely reflect an affordability problem. This affordability problem arises because for most people, wages did not rise when energy prices rose, and the prices of commodities in general rose in the early 2000s.

For a while, the lack of affordability could be masked with a variety of programs: economic stimulus, increasing debt and Quantitative Easing. Eventually these programs reach their limits, and prices begin falling in inflation-adjusted terms. Now we are at a point where prices of oil, coal, natural gas, and uranium are all low in inflation-adjusted terms, discouraging further investment.

Commodity Exporters–Will They Be Next to Be Hit with Lower Consumption?

If the price of a commodity, say oil, is low, this is a problem for a country that exports the commodity. The big issue is likely to be tax revenue. Governments very often get a major share of their tax revenue from taxing the profits of the companies that sell the commodities, such as oil. If the price of oil or other commodity that is exported drops, then it will be difficult for the government to collect enough tax revenue. There may be other effects as well. The company producing the commodity may cut back its production. If this happens, the exporting country is faced with another problem–laid-off workers without jobs. This adds a second need for revenue: to pay benefits to laid-off workers.

Many oil exporters currently subsidize energy and food products for their citizens. If tax revenue is low, the amount of these subsidies is likely to be reduced. With lower subsidies, citizens will buy less, reducing world demand. This reduction in demand will tend to reduce world oil (or other commodity) prices.

Even if subsidies are not involved, lower tax revenue will very often affect the projects an oil exporter can undertake. These projects might include building roads, schools, or hospitals. With fewer projects, world demand for oil and other commodities tends to drop.

The concern I have now is that with low oil prices, and low prices of other commodities, a number of countries will have to cut back their programs, in order to balance government budgets. If this happens, the effect on the world economy could be quite large. To get an idea how large it might be, let’s look again at Figure 1, recopied below.

Notice that the three “layers” in the middle are all countries whose economies are fairly closely tied to commodity exports. Arguably I could have included more countries in this category–for example, other OPEC countries could be included in this grouping. These countries are now in the “Rest of the World” category. Adding more countries to this category would make the portion of world consumption tied to countries depending on commodity exports even greater.

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. Based on BP Statistical Review of World Energy 2015 data.

Figure 1- Resource consumption by part of the world. Canada etc. groupng also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.

My concern is that low commodity prices will prove to be self-perpetuating, because low commodity prices will adversely affect commodity exporters. As these countries try to fix their own problems, their own demand for commodities will drop, and this will affect world commodity prices. The total amount of commodities used by exporters is quite large. It is even larger when oil is considered by itself (see Figure 8 above).

In my view, the collapse of the Soviet Union in 1991 occurred indirectly as a result of low oil prices in the late 1980s. A person can see from Figure 1 how much the energy consumption of the Former Soviet Union fell after 1991. Of course, in such a situation exports may fall more than consumption, leading to a rise in oil prices. Ultimately, the issue becomes whether a world economy can adapt to falling oil supply, caused by the collapse of some oil exporters.

Our World Economy Has No Reverse Gear

None of the issues I raise would be a problem, if our economy had a reverse gear–in other words, if it could shrink as well as grow. There are a number of things that go wrong if an economy tries to shrink:

  • Businesses find themselves with more factories than they need. They need to lay off workers and sell buildings. Profits are likely to fall. Loan covenants may be breached. There is little incentive to invest in new factories or stores.
  • There are fewer jobs available, in comparison to the number of available workers. Many drop out of the labor force or become unemployed. Wages of non-elite workers tend to stagnate, reflecting the oversupply situation.
  • The government finds it necessary to pay more benefits to the unemployed. At the same time, the government’s ability to collect taxes falls, because of the poor condition of businesses and workers.
  • Businesses in poor financial condition and workers who have been laid off tend to default on loans. This tends to put banks into poor financial condition.
  • The number of elderly and disabled tends to grow, even as the working population stagnates or falls, making the funding of pensions increasingly difficult.
  • Resale prices of homes tend to drop because there are not enough buyers.

Many have focused on a single problem area–for example, the requirement that interest be paid on debt–as being the problem preventing the economy from shrinking. It seems to me that this is not the only issue. The problem is much more fundamental. We live in a networked economy; a networked economy has only two directions available to it: (1) growth and (2) recession, which can lead to collapse.

Conclusion

What we seem to be seeing is an end to the boost that globalization gave to the world economy. Thus, world economic growth is slowing, and because of this slowed economic growth, demand for energy products is slowing. This globalization was encouraged by the Kyoto Protocol (1997). The protocol aimed to reduce carbon emissions, but because it inadvertently encouraged globalization, it tended to have the opposite effect. Adding China to the World Trade Organization in 2001 further encouraged globalization. CO2 emissions tended to grow more rapidly after those dates.

Figure 14. World CO2 emissions from fossil fuels, based on data from BP Statistical Review of World Energy 2015.

Figure 14. World CO2 emissions from fossil fuels, based on data from BP Statistical Review of World Energy 2015.

Now growth in fuel use is slowing around the world. Virtually all types of fuel are affected, as are many parts of the world. The slowing growth is associated with low fuel prices, and thus slowing demand for fuel. This is what we would expect, if the world is running into affordability problems, ultimately related to fuel prices rising faster than wages.

Globalization brings huge advantages, in the form of access to cheap energy products still in the ground. From the point of view of businesses, there is also the possibility of access to cheap labor and access to new markets for selling their goods. For long-industrialized countries, globalization also represents a workaround to inadequate local energy supplies.

The one problem with globalization is that it is not a permanent solution. This happens for several reasons:

  • A great deal of debt is needed for the new operations. At some point, this debt starts reaching limits.
  • Diminishing returns leads to higher cost of energy products. For example, later coal may need to come from more distant locations, adding to costs.
  • Wages in the newly globalized area tend to rise, negating some of the initial benefit of low wages.
  • Wages of workers in the area developed prior to globalization tend to fall because of competition with workers from parts of the world getting lower pay.
  • Pollution becomes an increasing problem in the newly globalized part of the world. China is especially concerned about this problem.
  • Eventually, more than enough factory space is built, and more than enough housing is built.
  • Demand for energy products (in terms of what workers around the world can afford) cannot keep up with production, in part because wages of many workers lag thanks to competition with low-paid workers in less-advanced countries.

It seems to me that we are reaching the limits of globalization now. This is why prices of commodities have fallen. With falling prices comes lower production and hence lower total consumption. Many economies are gradually moving into recession–this is what the low prices and falling rates of energy growth really mean.

It is quite possible that at some point in the not too distant future, demand (and prices) will fall further. We then will be dealing with severe worldwide recession.

In my view, low prices and low demand for commodities are what we should expect, as we reach limits of a finite world. There is widespread belief that as we reach limits, prices will rise, and energy products will become scarce. I don’t think that this combination can happen for very long in a networked economy. High energy prices tend to lead to recession, bringing down prices. Low wages and slow growth in debt also tend to bring down prices. A networked economy can work in ways that does not match our intuition; this is why many researchers fail to see understand the nature of the problem we are facing.

OurFiniteWorld.com 



65 Comments on "BP Data Suggests We Are Reaching Peak Energy Demand"

  1. penury on Thu, 25th Jun 2015 10:41 am 

    This appears to be the problem of the day. Consumers can not afford to utilize the energy, so less energy is provided. Sprt of a mobius strip of problem solving.

  2. forbin on Thu, 25th Jun 2015 11:48 am 

    so globalization enable workers to have less money and ergo they could buy less energy

    and then the ecoomy collapsed

    um, not so sure this report is any good

    Forbin

  3. Northwest Resident on Thu, 25th Jun 2015 12:20 pm 

    I think it all boils down to the fact that we just aren’t getting anywhere near the energy that we used to for every barrel of oil produced. The cost to get the average barrel of oil out of the ground these days is significantly higher than it was back in the good ol’ days, which means that there is far less “extra” money to circulate to the masses so they can keep up their consumption levels. And that is even with all the QE and functional equivalents of QE that other governments are enacting, pumping vast sums of “money” (debt) into the system, just to finance energy production and keep asset prices from dropping through the floor. Without QE and ZIRP, the economy would have simply collapsed into a smoking pile of ash a long time ago. QE and ZIRP are stretching out the inevitable a little ways, but in so doing the wealth transfer is starving the happy consumers of the extra cash/credit that they need to keep consumption levels high enough to make it all work. The system is severely broken and there are no fixes, short of a magnificent new find of “easy to get” conventional oil. We’re living now in that twilight period between BAU and the smoking pile of ash that was pushed out to the future a little ways. That “future” is increasingly getting closer to “now”, it is a looming reality that we’ll eventually have to face up to.

  4. peakyeast on Thu, 25th Jun 2015 12:27 pm 

    I might be mistaken, but no matter what system it is never going to be fun being in reverse gear while population grows, pollution spreading and natural resources all but gone…

    Is there such a gear for ANY economy or system that makes this fun and easy?

  5. apneaman on Thu, 25th Jun 2015 1:26 pm 

    Itochu Exits U.S. Shale Selling Biggest Energy Purchase for $1

    http://www.bloomberg.com/news/articles/2015-06-23/itochu-exits-u-s-shale-selling-biggest-energy-purchase-for-1

  6. Northwest Resident on Thu, 25th Jun 2015 1:42 pm 

    apnea — So, it looks like Itochu got $1 more for the sale than what it is worth. 🙂

    Fracking plays, by and large, have had zero real “worth” in terms of profit earned. But they have had enormous (gigantic!!) worth in terms of propaganda and financial skullduggery value. On average, shale plays have been the proverbial bottle of “snake oil” that the crooks are able to cook up and sell to dimwitted and clueless suckers in order to run their scam operation for a little while longer.

  7. BobInget on Thu, 25th Jun 2015 2:37 pm 

    I drone no, Actual (oil) consumption is going higher in the US EVERY WEEK. True, we are in the so called ‘driving season’. Even so, 7% over last year ain’t chicken scratch.

    We apparently are driving more, getting better mileage. If it were not for those high profit SUV’s
    we could be pooping in high grass.

    Don’t let stats confuse. Perhaps ‘rates’ of
    new cars purchases are lower but vehicles do last longer. WE are in some kind of baby glut at this time. Births slacked off while
    capitalism was collapsing around the world.
    Exploitation is back, bigger and better.

    WE are all set for another ten years of oil.
    After 2025 ISIS will still be trying to occupy Mecca but in 46 C temps, who cares?

  8. beammeup on Thu, 25th Jun 2015 2:59 pm 

    Looking at figures 2, 7 and 12, oil usage (conveniently graphed in blue in all three figures) sure doesn’t seem to indicate any significant drop off in global oil usage. The drop in the OECD seems to have been more than offset by increases in the developing world, and the net trend is up. Given that US consumers are responding to lower gasoline prices by buying more SUV’s and driving more miles, at least one member of the OECD may trend up in 2015, pushing the global trend up again in 2015.

  9. Rodster on Thu, 25th Jun 2015 3:26 pm 

    “Scientists will release robots next week that can dive to 2,000m to gather previously unattainable information from the Indian Ocean.

    All life in the ocean really comes from the amount of sunlight that’s turned into edible carbon by phytoplankton. They are the meadows of the ocean,” Hardman-Mountford said.

    Understanding these basic processes tells us how much carbon is being taken up by organisms and that relates to how much carbon dioxide gets taken up by the ocean, but also how much energy there is to go into the food webs of the ocean to sustain those ecosystems.”

    http://www.theguardian.com/environment/2015/jun/26/floating-robots-primed-for-release-to-capture-elusive-ocean-data

  10. Northwest Resident on Thu, 25th Jun 2015 4:37 pm 

    “doesn’t seem to indicate any significant drop off in global oil usage”

    We have to burn more oil just to keep the amount of energy in the economy constant. The average barrel of oil today contains far less energy than the barrel of oil from ten or even five years ago. The deeper they drill, the harder they pump, the more of the dregs they dig up, the more liquids they classify as oil that really aren’t oil… well, you get the picture. It is called depletion, I believe. If BAU lasts another year, we’ll be burning even MORE barrels of oil just to keep the net energy provided to the economy constant.

  11. marmico on Thu, 25th Jun 2015 6:07 pm 

    Tverberg says: This is far below the 2.3% growth we would expect, based on recent past patterns.

    What garbage. 2010 was the only year in the last ten years where the oil (as defined by BP) consumption growth rate has increased by 2% or more.

    Consumption has increased by ~11% over the prior 10 years or ~1% per year.

  12. beammeup on Thu, 25th Jun 2015 8:05 pm 

    “The average barrel of oil today contains far less energy than the barrel of oil from ten or even five years ago.”

    I’ve read variations of this claim several times on this forum. I can buy the claim poor quality resource plays require more energy to be consumed in the process of netting a given amount of energy output. But that’s NOT the same thing as saying the net barrel that pops out of the end of the supply chain contains less energy. What it really means is that the cost of that net barrel is higher. But if consumers and industry outside the oil industry are consuming more barrels, then there is more net energy being produced in an absolute sense. This can be true even while EROEI declines.

  13. Makati1 on Thu, 25th Jun 2015 8:14 pm 

    OurFiniteWorld.com is no longer worth reading. I stopped long ago when they got too far off the track and started sounding more and more like the US MSM.

    The Western countries are using less energy, per capita, because they are broke. Energy use in the rest of the world is still growing slowly.

    Thirty four percent of the world uses less than 10% of the energy used by the US, per capita. The Euro area uses half the US consumption, per capita. Who do you think is going to suffer the most pain as we slide down the ladder?

    http://www.economicshelp.org/blog/5988/economics/list-of-countries-energy-use-per-capita/

    Buckle up!

  14. Northwest Resident on Thu, 25th Jun 2015 8:53 pm 

    beammeup — They’re counting ethanol and biofuels as “oil” now, and that most definitely lower-energy liquid goes into the total barrel count, lowering the energy content per average barrel of oil. I can’t find the links and don’t have time to now, but from past reading it seems that a lot of the “oil” coming out of some/most of the shale plays might not be as energy intensive as your standard conventional barrel of oil. Some of that oil, I have read, is good for nothing but feedstock and isn’t highly marketable, to say the least. But your main point — that NET energy per barrel of oil is dropping — is probably the main point. Keep in mind that a major source of demand for oil is the oil producers themselves. So, when we see barrel count going up, it doesn’t mean what most people think it means. Part of that increasing barrel count — a large part — is just the oil producers burning oil to slightly ramp up total barrel count — and to keep BAU creaking forward a little while longer.

  15. Northwest Resident on Thu, 25th Jun 2015 8:59 pm 

    Makati1 — You’re saying that Gail Tverberg’s posts sound more and more like the US MSM? Seriously? In what way? Quote a passage and describe how it compares to the US MSM, please. Probably if you really think hard on it, you’ll realize that you just made a blanket statement that isn’t really true. Show me some mainstream media outlets that regularly dissect the economic and energy conditions we are seeing now and relate the findings to finite resources. Just one. On the other hand, Gail doesn’t obsess on nuclear war, the great evil that is America, and the wonderful growing power of the great hope of mankind — that would be China, per Makati1. It’s okay Mak, I know sometimes you’re just blurting out crap without really thinking about what you’re saying. We all do that, sometimes.

  16. Davy on Thu, 25th Jun 2015 9:10 pm 

    Folks you can talk per capita but total primary energy consumption is the better view.
    http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=44&pid=44&aid=2
    Total Primary Energy Consumption (Quadrillion Btu)
    us 95.058
    europe 81.45
    China 105.882

    Who do you think is going to suffer the most pain as we slide down the ladder? You got it all of us.

  17. Nony on Thu, 25th Jun 2015 10:08 pm 

    beam: heavier oils are denser (definition) so they are more energy containing when measured in barrels. The difference is pretty small though, since API is nonlinear. Maybe 10% difference, 20% at the most. On an EROI basis, the light sweet oils are more energy containing, since the heavy sour oils take more downstream processing to crack the long molecules and to remove sulfur. This is reflected in the price as well (light sweet is more valuable than heavy sour).

    It’s amusing to read the 2005 comments by peakers about how light sweet was better and we didn’t have enough and that only growth would be in blechy heavy sour…

  18. Nony on Thu, 25th Jun 2015 10:17 pm 

    BTW, not sure exactly where to put this, but propane at the Gulf Coast has reached record lows. Diverged from crude pricing and is at same price as March 2002 (during the recession). And that is not demand driven, but supply “glut” (volume consumed is at record levels too).

    In parts of Canada, propane is literally negatively priced. They are paying people to take it (they still get value for the other NGLs, so they process them and propane is like a waste stream).

  19. Makati1 on Thu, 25th Jun 2015 11:27 pm 

    NWP, you would need to read dozens to get the flavor. Capitalists are capitalists, no matter what title they use. I could not give you a paragraph, because I do not support their blog with hits for their advertising. I do not visit sites I write off. Nor do I debate with their supporters on other sites. Last time I looked I was still a free person allowed to have an opinion. lol

  20. Nony on Thu, 25th Jun 2015 11:30 pm 

    Fascinating reading some of these people talking US LTO down in 2012 or so.

    http://www.zdnet.com/article/energy-independence-or-impending-oil-shocks/

    The author criticizes Citi for predicting that the US could add another 2 million bpd of LTO to the 2011 total (by the end of the decade…2020). In fact, we added more than 3 MM bpd in just 3 years. We already blew away a prediction for 2020! One that this shale-hype-slayer thought was crazy optimistic.

    Man…shale has just annihilated the peakers. And it is hilarious to read how consistently you talked it down, the whole time it was going up.

  21. GregT on Thu, 25th Jun 2015 11:49 pm 

    “beam: heavier oils are denser (definition) so they are more energy containing when measured in barrels.”

    Not nearly as dense as you are Nony. You continue to cheerlead for your own demise. You are without a doubt the most ignorant person on these boards. You should be completely ashamed of yourself. If there is a way out of this mess, you will not be invited. You are a complete fucking loser, dipshit.

  22. Northwest Resident on Fri, 26th Jun 2015 12:10 am 

    Where’s the Glutster? Maybe he can make sense out of this article which claims that the “oil glut” was and is nothing more than cooked-up EIA projections.

    But offers no proof.

    But that doesn’t stop the writer of this article from blaming the EIA and the “government” for the oil price crash and the unemployment of large numbers of oil industry workers — especially in Texas.

    It seems that maybe a lot of people in the oil business — especially in Texas — are getting a little ticked off as they see the whole industry crashing down around them. And it looks like the writer of this article is aiming his rant at that group of disgruntled, angry and no doubt frightened individuals.

    Gotta blame somebody. Facing up to the truth — you must be joking!

    U.S. Oil Glut An EIA Invention?

    http://oilprice.com/Energy/Energy-General/US-Oil-Glut-An-EIA-Invention.html

  23. Davy on Fri, 26th Jun 2015 5:46 am 

    NOo, you are compartmentalized and avoiding a bigger picture. Oil and the economy are intricately related in a dynamic systemic way. Peak oil dynamics is only part of it. The economy is the other part of a healthy oil sector with demand. What occurs with one will at the same time affect the other.

    The economy is not right as witnessed by some basic problem. The Fed is stuck with historically low rates and unable to raise them. Debt is at historic highs. Real unemployment is at record highs when one considers the amount of people actively in the labor force. What we have is a two speed economy that is lopsided.

    The economy is near dysfunction from limits and diminishing returns to years of central bank activity. Oil was part of that NOo. You want to crow about something just because of output but you have little concern if that output was healthy or bought about in a healthy way.

    It appears that the shale revolution was especially part of this considering the cost of producing this resource. Shale was part of the historic debt creation. NOo, how can you crow about this completely as a positive? Now that price has collapsed to uneconomic levels with debt service issues and unemployment issues you still say it’s good for the consumers. I see you cheerleading good whatever direction it goes. You rarely acknowledge negatives. It is always an “all is good” pitch.

    I enjoy your technical explanations of oil, oil markets, and econ 101 oil. This is important because this is part of how we quantify and measure a vital resource but you dismiss and discount anything negative. This is the pervasive attitude in the financial world today. It is about selling an idea not about talking reality.

    You can lay the hammer down on peakers about many things but then you yourself must take the hammer. Reality is not about winners and losers that is a human disposition. Reality is about relationships in balance and rebalance.

    NOo I have a lack of respect for you not because you are not smart with the material but because of your delivery of the material. It reminds me of CNBC selling their market noise. You are a snake oil salesman NOo. If you could show some balance and reduce your finger pointing I think you could be one of the most respected commenters here on PO.

  24. Davy on Fri, 26th Jun 2015 6:01 am 

    Now Mak is calling Gail Tverberg’s a capitalist. I find that odd because there is then the Marmi calling her a doomer nutter. Maybe she is on to something and the people here proselytizing an agenda find her hard to stomach.

    Mak, if you have a problem with Capitalist then you must have a problem with most of Asia that you have in such high regard. China is the biggest and ugliest of all the Capitalist witness by how they have destroyed their ecosystem and cultural fabric in the name of profit and greed. Isn’t that a capitalist Mak? I think your use of the capitalist label is part of the agenda of the good and great Asia and the decadent and bad west. Capitalist is for the western world but Asia is just an Asian Tiger.

    You ae a free person Mak but that freedom allows you to selectively use facts and preach your agenda. It also allows you to be the biggest hypocrite on this site. I admit to hypocrisy being stuck in our business as usual world and wanting to transition out. This is a catch 22 if you want to avoid hypocrisy. Yet, you never admit hypocrisy. That would diminish your agenda too much. Gail blows you away Mak.

  25. rockman on Fri, 26th Jun 2015 7:23 am 

    NR – “It seems that maybe a lot of people in the oil business — especially in Texas — are getting a little ticked off as they see the whole industry crashing down around them”. It might be a tad difficult to believe but there really aren’t many in the Texas oil patch that are “ticked off” by the crash. Disappointed, of course. But the crash is just a part of the natural cycle and was fully anticipated…it was just a question of when it would hit and not if.

    Why no one in the oil patch feels a bit guilty when prices peak and the general economy suffers: it will just be a matter of time before the role reversal kicks in.

  26. Nony on Fri, 26th Jun 2015 8:09 am 

    I haven’t heard much whining from the oil patch. Maybe shallowsand a little and even he has been pretty sanguine. Most of the ‘patch seems proud of the way they downsize like real capitalists. I think the comment about the patch is projection, not observation.

  27. Northwest Resident on Fri, 26th Jun 2015 9:27 am 

    rockman — Good to know. I wonder what the writer of that “U.S. Oil Glut An EIA Invention?” is basing his rant on, and why he specifically mentions Texas. Maybe the oil patch folks in Texas aren’t ticked off, but this writer sure seems to be steaming hot, blaming the EIA and “the government” for the “fake” oil glut. We see so much propaganda these days on the oil business, and so many slanted points of view with ulterior motives. I’m just trying to figure out what the angle is on this article. Any ideas?

  28. apneaman on Fri, 26th Jun 2015 10:10 am 

    Whining panicking denial

    Oil prices dip further as glut appears likely to persist

    http://calgaryherald.com/business/energy/oil-prices-dip-further-as-glut-appears-likely-to-persist

  29. apneaman on Fri, 26th Jun 2015 10:12 am 

    Oil prices remain steady as US oil stocks data disappoints

    Read more at:
    http://economictimes.indiatimes.com/articleshow/47809229.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

  30. keith on Fri, 26th Jun 2015 10:16 am 

    Peak energy demand, so Orwellian

  31. Nony on Fri, 26th Jun 2015 10:21 am 

    ap:

    One story says price dropping; the other says steady. Was that your point, MSM confusion?

  32. beammeup on Fri, 26th Jun 2015 10:24 am 

    I realize there are small differences in energy content when comparing different grades of crude; that wasn’t my point. My point is that several posters on this website have been claiming that declining EROI somehow renders the net barrel of crude less useful to society, and I have seen nothing that convinces me this is true.

    Of course anyone reading these forums understands that ethanol, butane, propane, etc., are not the same as crude oil, so to the extent they have been lumped into “Total World Oil Consumption,” the trend line for “oil” has been skewed. That’s a completely fair point, although not really what I was addressing.

  33. apneaman on Fri, 26th Jun 2015 10:27 am 

    Very contradictory and confusing, just like you.

  34. Northwest Resident on Fri, 26th Jun 2015 10:44 am 

    beammeup — If it takes 1 barrel of oil to get one net barrel of oil out of the ground, then how useful is that net barrel of crude to society? Not very. Of course we aren’t at that point yet, but we are well on the way, which is the point that some of the posters on this forum have been making.

  35. marmico on Fri, 26th Jun 2015 11:16 am 

    What is the difference between 50:1 EROI at the oil wellhead 50 years ago and 10:1 EROI today when it comes to the distance travelled on a gallon of gasoline in a car?

  36. beammeup on Fri, 26th Jun 2015 11:29 am 

    NR – If it takes one barrel to produce one barrel, then the net is zero (i.e., there is no NET barrel).

    If absolute production is increasing, then there are only two possible interpretations: (1) There are more net barrels coming out of the system, or (2) All of the increase is due to the oil industry consuming more of its own product (i.e., no NET barrels). If interpretation 2 were true, you’d see no increase in airline fuel consumption (apart from the small component driven oil industry employees); you’d see no increase in SUV sales (apart from those sold to oil industry employees); no increase in miles driven, etc. But that’s not what we’re seeing. Oil usage really is going up (look at figures 7 and 12 of Gail’s post).

    So unless you believe that all of that increase is the result of oil industry employees consuming more oil, then there really has been an increase in NET barrels. And every net barrel of actual crude oil added today has the same energy content – and probably MORE utility (due to efficiency gains) – than a net barrel 10 years ago.

    BTW, I’m not cheerleading that all is fine in the world economy. I believe there are major structural problems that are being masked by exponentially increasing debt levels, and eventually there will be a major correction that could be quite painful and prolonged.

  37. Northwest Resident on Fri, 26th Jun 2015 12:19 pm 

    beammeup — We agree on the “net is zero” math — good point. Who said that “All of the increase is due to the oil industry consuming more of its own product?” Not me. I attribute increase in SUV sales to increase in stupidity among the general populace combined with subprime auto-lending practices — anything to keep the auto industry afloat for a while longer, I guess. I distrust the official stats on increase in miles driven. With economic conditions so clearly depressed worldwide, most notably here and in Europe, who is driving all the extra miles? Maybe the Chinese farmers as they commute back and forth to the big cities to do their stock trades, or fly to Shanghai to open new accounts? Or maybe it is all the welfare kings and queens driving back and forth to the unemployment and welfare offices in their new SUVs to pick up their checks? But the original point, the main one, is that the net energy available to the economy IS barely holding steady if not decreasing. Throw out the official stats because they are gamed and distorted, and the truth is that the global economy and even our national economy is contracting — they just don’t want us to know it. A decrease in net energy available to the economy would explain a contracting economy. I think we can both agree on that. Or not?

  38. beammeup on Fri, 26th Jun 2015 12:38 pm 

    NR – My main interest in these forums is oil, as opposed to other forms of energy. When you look at the steady march in global oil consumption, as depicted in graphs 7 and 12 above, it’s hard for me to believe that is all the result of misclassification of non-oil liquids, increased usage by the oil industry or deliberate falsification of the data. I think there really has been an increase in net barrels produced and consumed(i.e., barrels consumed by industries besides the oil industry).

    Here are some points on which I suspect we agree:

    1. More and more oil extraction is coming from lower quality plays, and that means EROI is declining, and the COST of the net barrel is going up

    2. Global population is increasing, and people living in the parts of the developing world where most of the increase is happening aspire to significantly higher living standards than what has been the case in decades past. That implies more overall energy usage. Efficiency gains will not be sufficient to provide a significantly higher living standard to a significantly bigger population while also decreasing overall energy usage. Something’s got to give

    3. The world economy is less rosy than GDP figures alone would indicate. Increasing oil prices and pricing volatility are two negative factors. I don’t see energy as the sole driving factor here, but it’s a big one.

  39. Davy on Fri, 26th Jun 2015 12:48 pm 

    Beam, systematically the pie is shrinking, population is growing, and most resources depleting. These are the limits. The diminishing returns are with technology and efficiency. Technologies are maturing without great innovations or substitutions. Efficiency is maturing and in some cases is counterproductive.

    We appear to me to be not progressing and just treading water. We may even be slightly sinking. Clearly all is not right in the oil complex. We know the economy is stuck with repressed rates and excessive debt.

    All of this combines to make oil demand and supply relationship less functional than the past. Oil is more expensive to produce and the economy less able to utilize it as in the past. It is such a grey area currently but my opinion is a break is near then much will be reveled. Currently the argument can go either way.

  40. Northwest Resident on Fri, 26th Jun 2015 12:54 pm 

    beammeup — On those three points we totally agree. Although I would personally amend your final sentence to “I don’t see energy as the sole driving factor here, but it’s The Main One”.

    What lead me to Peak Oil issues started with my realization that the economy was undergoing severe distortions — less than two years I came to that realization. My investigation into WHY lead me directly to oil-related issues, and to the Peak Oil concept. Prior to that, I was just a clueless dude.

    But as you say, it isn’t JUST oil and energy-related issues. It is the sum total of ALL depleting resources in a world dominated by humans that consume everything in their path like an advancing locust swarm. Fisheries, forests, fresh water resources, iron and other ores — you name it, we’ve depleted it to the point of exhaustion, or simply obliterated it altogether.

    I guess I’ll leave it to the experts to explain why in a severely depressed and shrinking global economy, we have increasing oil usage. It SEEMS obvious to me that we are just burning more oil to break even — it IS taking more energy to produce the approximate same amount of net energy. Maybe that isn’t the whole explanation, but it must be a part of it.

    Interesting discussing this with you. Probably one thing we CAN agree on fully and that is, we’re screwed!

    🙂

  41. marmico on Fri, 26th Jun 2015 1:36 pm 

    Prior to that, I was just a clueless dude.

    You still are. So attempt to answer the question without word salad prattle:

    What is the difference between 50:1 EROI at the oil wellhead 50 years ago and 10:1 EROI today when it comes to the distance travelled on a gallon of gasoline in a car?

  42. Northwest Resident on Fri, 26th Jun 2015 1:57 pm 

    Sorry marmico, I only deal with your alter ego named Nony. And I don’t try to answer idiot questions posed by you that are based on dubious and unproven assumptions. So, you’re saying that I’m still “clueless” about Peak Oil? What a world class ASS you are. Won’t don’t you let Nony drive so you can go back to your dark corner and talk to the super smart know-it-all that you see in the mirror.

  43. marmico on Fri, 26th Jun 2015 2:54 pm 

    Nordent, you are a certified member of the “cave&crayola” tribe.

    Let me repeat the question:

    What is the difference between 50:1 EROI at the oil wellhead 50 years ago and 10:1 EROI today when it comes to the distance travelled on a gallon of gasoline in a car?

    Maybe the quart shy of oil buffoon will stop by to tie your shoe laces.

  44. GregT on Fri, 26th Jun 2015 3:00 pm 

    “What is the difference between 50:1 EROI at the oil wellhead 50 years ago and 10:1 EROI today when it comes to the distance travelled on a gallon of gasoline in a car?”

    Cost. Both economic, and environmental.

  45. Northwest Resident on Fri, 26th Jun 2015 3:13 pm 

    I pity you marmico. You try so hard to appear smart and in control. You use big words that you don’t know the meaning of. You advance ludicrous ideas as if they are fact. You post links to back your assertions up that when examined are nothing more than MSM propaganda and financial hype. You are compelled to insult and brag and pound your chest. The reason why you do all this is simple — because you realize you’re a pathetic nobody but you desperately need to PROVE that you’re somebody. The fact that Nony lets you do all his “dirty work” for him — name calling, insulting, etc.. — is proof that Nony recognizes that he has a really mean, nasty but pathetically insecure side that he doesn’t want to be associated with. So, marmico, when I say you are a NOBODY, I mean that literally. You are nobody — just a personality spin-off, a bunch of neurons firing inefficiently, processing data incorrectly, just a solid example of how screwed up the human mind can get. But go on doing whatever makes you feel BIG and important. Doesn’t bother me at all — you even make a good point every now and then. Have a great day, marmico. Give my regards to Nony.

  46. marmico on Fri, 26th Jun 2015 3:42 pm 

    GregT is another certified member of the “cave&crayola” tribe. So let’s take the arithmetic real slow:

    1. In 1965, 100 units at the wellhead left 98 units (50:1 EROI) for the supply stream to the underground retail fueling station. Joe Blow fills up the tank 98 units and drives 98 unit distance.

    2. In 2015, 100 units at the wellhead left 90 units (10:1 EROI) for the supply stream to the underground retail fueling station. Jane Chardonnay fills up the tank 90 units and drives 180 unit distance.

    3. The assumption is that distance travelled per gallon has doubled between 1965 and 2015. Joe drives 98 units (@50:1 EROI) and Jane drives 180 units (@10:1 EROI) per 100 units at the wellhead.

  47. GregT on Fri, 26th Jun 2015 4:39 pm 

    Back in 1965 Jane didn’t have to hold down a full time job to make ends meet, and Joe wasn’t concerned with the extinction of his children.

  48. marmico on Fri, 26th Jun 2015 4:47 pm 

    What a fucking goof!

  49. GregT on Fri, 26th Jun 2015 4:55 pm 

    You’re trying to solve a problem that you clearly do not have the capacity to understand marmico. It’s a forest through the trees kind of thing. You, apparently, can’t even get beyond the blades of grass in front of the trees. A complete simpleton. My six year old niece has more on the ball than you do.

  50. Davy on Fri, 26th Jun 2015 4:56 pm 

    Greg, I would translate the numb nut Marmi’s potty breath but we both know you stuck it in his suck.

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