THE International Energy Agency (IEA) Thread pt 2 (merged) A

[yesplease]

Equivalent graphs for the rest of the world can be found at the IEA's Statistics page. Select a region, then the graph for "Evolution of Electricity Generation by Fuel." Most show a contraction of use of oil in the early 80s - permanent demand destruction. The current crunch in the transportation sector will largely be transitory.

I'm not seeing the permanent demand destruction in oil used for electricity you're referring to. Here's the data for world electricity generation by fuel source from 1971 to 2005, and according to my ruler the amount of electricity from fuel oil is the greater in 2005 than in 1971. It's definitely fluctuated in the interim, but I don't see this permanent demand destruction you've been posting about. World electricity from oil in 2005 is greater, or at the very least roughly the same as it was in 1971.

[rockdoc123]

They aren't driving their SUV's, not towing the RV's and aren't riding their ATV's. Even with gas at $1.75 a gallon the spell is broken. They were yesterday's toys.

I'm not sure that's the case, I haven't seen data that supports it directly and I sure haven't seen an absence of drivers on the roads. I think much of the demand destruction in fuel is in the industrial side of things...factories shutting down, sizing down etc., less stuff being shipped by truck. My bet is once the economy turns around and people start to consume willynilly again demand will take a sharp upturn. The industrial part of demand is just a bit less than half of the total I think.

[ki11ercane]

Are the tar sands even viable at $40/barrel? that's a million barrels a day gone ..

A million barrels a day is only 365 million barrels less per year, or 4.3 days of lost production over 365 or about 1.2% annually.

The IEA estimates a 9% decrease in oil availability per year. If we simplify things and say production and consumption are par and we produce/consume 85 million barrels a day, that's a loss of another 2793 million barrels a year.

Add them both together and we get 3158 million barrels of oil, or 37 days lost annually. It would take 10 years of time to pass to lose one year.

This calculation is not taking into consideration anything reducing consumption, however we have seen demand destruction occurring and not making a DENT in consumption.

So a million barrels a day on it's own is of no significance.

[dohboi]

Thanks Tanada. Did you see thisarticle about problems with insuring carbon capture and sequestration facilities? A big leak could be quite disastrous.

I like the organic rather than the high-tech approaches to CCS--native grasses, trees...

At 387+ppm we need to both halt further emissions and start sequestering like mad. Almost none of this is happening (deliberately) as far as I can see, and certainly not at the rate the facts call for.

We're still mostly sleep walking into the apocalypse.

[yeahbut]

They aren't driving their SUV's, not towing the RV's and aren't riding their ATV's. Even with gas at $1.75 a gallon the spell is broken. They were yesterday's toys.

I'm not sure that's the case, I haven't seen data that supports it directly and I sure haven't seen an absence of drivers on the roads.

A quick search brought up this:

The number of miles traveled by American drivers fell 5.6 percent in August, according to an Oct. 23 report. That was the biggest single-month drop ever recorded by the U.S. Department of Transportation, which started keeping track in 1970.

It also brings to a record 10 months in a row, the number of months “vehicle miles traveled” have fallen versus the year-ago month. The state of Florida, which has been hard hit by the housing bust, fell the most in August of any state, down 9.7 percent, the DOT said.

All told, the latest data means Americans have driven 78.1 billion fewer miles in 2008 year to date, than the same eight-month period a year ago.

link I couldn't find anything more up to date but I'm sure it's out there, it would be interesting to know if that trend has stopped with gas prices dropping, or if the uncertain economic times and new consumer behaviour has continued it. Anyone?

[Tanada]

Thanks Tanada. Did you see thisarticle about problems with insuring carbon capture and sequestration facilities? A big leak could be quite disastrous.
I like the organic rather than the high-tech approaches to CCS--native grasses, trees...
At 387+ppm we need to both halt further emissions and start sequestering like mad. Almost none of this is happening (deliberately) as far as I can see, and certainly not at the rate the facts call for.
We're still mostly sleep walking into the apocalypse.

Yeah I saw it, and IMO it just gfoes to prove that mechanical sequestration is a dead end, in ever sense of the term

The two strategies I see as being viable and long term successful, hey wait this is the wrong thread for this discussion. Ask me on the right thread dohboi and I will gladly continue this discussion

[TheDude]

I'm not seeing the permanent demand destruction in oil used for electricity you're referring to.

That's because you're looking at the world as a whole, not individual sectors. Perhaps you're being deliberately obtuse. Consumption of petroleum products for generation in the OECD took a definite downturn in the early 80s, it's still used in poorer parts of the world where options are limited.

The FHA publishes monthly updates on Traffic Volume Trends in the US. The decades long advance in VMT began to lessen its rate of ascendancy a few years ago, and took a very noticeable downturn beginning this year.

[yesplease]

I'm not seeing the permanent demand destruction in oil used for electricity you're referring to.

That's because you're looking at the world as a whole, not individual sectors. Perhaps you're being deliberately obtuse. Consumption of petroleum products for generation in the OECD took a definite downturn in the early 80s, it's still used in poorer parts of the world where options are limited.

You responded to a post I made about world consumption w/ a statement about oil used for electricity production. I responded by linking a graph from the site you mentioned about world oil use for electricity production. Since I was talking about world production, I figured that when responding to me, you would be referring to the same thing.
I said...

World dropped consumption by ~13% over about four years last time oil prices went up, and there's a chance we could see a greater drop since we could see a global recession as opposed to the global stagnation seen in the early 80s.

And you replied...

The early 80s decline in consumption can be in part chalked up to fuel switching from petroleum to NG in electrical generation. You might remember me pointing this out to you yesplease, here's a chart I made this morning:

I was talking about the world in my initial post. If you didn't mean to respond to me and instead wanted to talk about specific countries that's fine, but it has little to do w/ what I said since I was talking about world consumption. I was wondering why you then went on to talk about consumption in the U.S...

Anyway, regardless of how much oil use for electricity was cut in the U.S. it has clearly been "outsourced" to other countries, so there are still large cuts that can be seen in that arena at a later point in time. The cuts in the U.S. were not permanent in terms of world consumption, which is what I was talking about, and you responded to.

If you were merely confused as to what I was talking about or just wanted to talk about U.S. oil used in electricity production, it's all good, we all make mistakes. And if you were trolling by trying to draw me off topic, nice try.

[Tanada]

Actually as I can't resist butting in let me mention now that there were news stories circa 2005 that the PRC was using diesel powerplants to power a lot of individual factories simply because they could not build coal fired powerplants fast enough to keep up with the massive growth in electricity demand from their industrial expansion. Since then they have been completing 2 or 3 new powerplants every month. If things are actually slowing down in China at this time I predict that their grid will be able to catch up to demand and pretty soon the factories still running will all be converted over to grid power. Doing that will put a big dent in oil demand inside the PRC, though it now looks like they will store the extra into their SPR, which IMO would be a smart move.

[yeahbut]

They aren't driving their SUV's, not towing the RV's and aren't riding their ATV's. Even with gas at $1.75 a gallon the spell is broken. They were yesterday's toys.

I'm not sure that's the case, I haven't seen data that supports it directly and I sure haven't seen an absence of drivers on the roads.

A bit more on this(thanks Leanan):

NEW YORK (CNNMoney.com) -- Driving in America has undergone its most dramatic continuous decline in history, the Department of Transportation said Friday.

Americans drove 100 billion fewer miles during the 12-month period between November 2007 and October 2008 compared with the prior year, according to the DOT's most recent data.

U.S. Transportation Secretary Mary Peters noted that driving continued to decline even as gas prices came off their summertime peaks.

"The fact that the trend persists even as gas prices are dropping confirms that America's travel habits are fundamentally changing," she said in a statement.

The nationwide average price for unleaded gas was $1.656 per gallon on Friday, according to the motorist group AAA. Gas prices hit a peak of $4.114 a gallon on July 17.

In October, driving volume posted its steepest monthly drop since 1971, according to the DOT. Americans drove 3.5% less, or 8.9 billion fewer miles, compared with October 2007.

I find it interesting that there was such a steep drop in oct, gas prices being well down by then. Testament to the recession I guess, and to the elasticity of vehicle usage.

link

[misterno]

Here is what I don't understand. Let's be optimistic and say the depetion rate is %5 instead of %6-9 stated in the original posting. If this has been going on for years then who is coming up with extra oil to the market? Keep in mind that 5% of say 80MM b/d is 4MM b/d and this has been going on for years.

So where does the extra 4MM b/d every year coming from? It is even more than 4MM b/d because oil and gas production has been increasing. So where does the marginal production coming from?

Any ideas?

[seahorse]

Linking a PO thread on a recent Simmons and Hirsch interview. Haven't listened to it yet, but according to those who have, Simmons and Hirsch agree with the gist of this topic which is the IEA nightmare scenario is unfolding due to lack of investment.

PO Topic

[eastbay]

Linking a PO thread on a recent Simmons and Hirsch interview. Haven't listened to it yet, but according to those who have, Simmons and Hirsch agree with the gist of this topic which is the IEA nightmare scenario is unfolding due to lack of investment.

PO Topic

Lack of investment is true, but only to a point. The easy oil is tougher to find, of course, therefore only the costly oil remains. Sounds simple, but that's what they were talking about and agreeing upon.

In the interview, Simmons comments that Mexico ceases to be an energy exporting nation in 2009. I agree too, which means Mexico will become a major, major 'nightmare scenario' very soon. I'm talking about something well beyond the chaos they're now experiencing. This will be everyone's first 'whiff' of post oil living.

[seahorse]

Eastbay,

Just listened to it myself. What did you think Simmons meant when he said we have until next week to do something?

[eastbay]

Eastbay, Just listened to it myself. What did you think Simmons meant when he said we have until next week to do something?

I'm not sure I heard it. I may have been distracted as he said it. There's a lot of activity around here today... heh.

Was it regarding, 'next week we'll see a major turning point'? Or was he suggesting we need to act on this declining availability situation very soon?

Or was he talking about the OPEC meeting.

[seahorse]

He just said we have until next week to do something about it. Unfortunately, I have 3 kids running around here today, as well as several of their friends, so its hard for me to concentrate too.

[seahorse]

Simmons brings up another interesting problem, which illustrates just how this credit crisis is leading us to the IEA worse case scenario, and that is the problem of rust, which never sleeps.

The IEA says without investment, decline rates will be about 9% per year. Okay, seems most everyone in the world is mothbolling new projects, rigs are being freed up etc. Profits are down. All this expensive equipment has to be maintained, bc rust never sleeps. Will we have or commit the money to maintain all this idled equipment? Its just an example of how one problem, lack of money, leads to other problems, and they start compounding on each other.

[ki11ercane]

Simmons brings up another interesting problem, which illustrates just how this credit crisis is leading us to the IEA worse case scenario, and that is the problem of rust, which never sleeps.

The IEA says without investment, decline rates will be about 9% per year. Okay, seems most everyone in the world is mothbolling new projects, rigs are being freed up etc. Profits are down. All this expensive equipment has to be maintained, bc rust never sleeps. Will we have or commit the money to maintain all this idled equipment? Its just an example of how one problem, lack of money, leads to other problems, and they start compounding on each other.

9% is the extreme, and they have estimated between 5-9%. Since I am not an economist, I cannot begin to use the skills of an economist to include figures like demand destruction, price changes, war, etc. in what it most likely will be. With current production estimated at 86.18 million barrels a day, a full 9% in decline is 33.42 days annually. That's STAGGERING on it's own if you look at it as one chunk of time. It's over a month of lost production in a year. However this isn't how the world works and we're not going to get to November 28/2009 and turn off the taps. If we use an average of 7% decline over one year, we come up to less of a decline. OilFinder2 has extrapolated a 200,000 barrel per day drop in demand for 2009, or a mere 2.88 minutes based on what is currently going on in the world overall. If we assume the above variables and include demand drop, it's a safer bet the average rather than the extreme will prevail.

After seeing the price of oil being 368% more this summer when production and consumption met or came close than it ever did before, (ie. a small change in production and consumption) it's safe to say that a decrease in production encompassing economic strain in the world is going to equalize things for the time being and we'll continue to see a price drop. If production TRULY slips below or comes near consumption taking into considertation the world situation again, you will see a repeat of 2008, however not as severe. A depressed global economy will simply not be able to afford it, and you won't see such an extreme price. However I think in the long term, with less money being made over production, this will affect the ability for more investment in more production, even standard production. When the world economy heals, and when we come out of the other side, we may be in a situation where no amount of money or value of oil will save us. It is truly possible that this year will decide that fact once and for all. It may come down to the fact that the economy will not be able to recover enough to tolerate a high enough price of oil for investment in production to ever meet demand, and we sprial down forever.

Again, for the economists here, if you can chime in, I'd be grateful.

[eastbay]

Simmons brings up another interesting problem, which illustrates just how this credit crisis is leading us to the IEA worse case scenario, and that is the problem of rust, which never sleeps.

The IEA says without investment, decline rates will be about 9% per year. Okay, seems most everyone in the world is mothbolling new projects, rigs are being freed up etc. Profits are down. All this expensive equipment has to be maintained, bc rust never sleeps. Will we have or commit the money to maintain all this idled equipment? Its just an example of how one problem, lack of money, leads to other problems, and they start compounding on each other.

Oh yeah, it's a carnival here too, but I hear the part about rust. It's the joker in the deck IMO.

I also heard Simmons say Cantarell is declining at 2.something% every month. This is an unstoppable decline that will lead Mexico into oblivion. We've been discussing Mexico more and more lately because it will be the scene of the next horrible accident due to oil depletion regardless of how or which way world oil use or production moves over the coming months.

The peak oil disaster will nail one nation after another... pop... pop... pop... until only a few small places remain. The only question is the speed at which it occurs.

Our responses will set the course for the 'after times'.

[Tyler_JC]

It's also important to remember that markets have a nasty habit of over-reacting.

The NASDAQ rose from 1,600 to 5,000 over the course of less than 18 months! ('98-'00)

Then when panic set in, the index crashed almost 80% in two years. ('00-'02)

The same happened to oil prices.

We had an orderly increased year over year from 2002 till 2007. Then something broke.



Look specifically at that sharp 2008 spike and drop. It was completely unprecedented.

No oil company executive looked at $147 a barrel as a serious price target but they also assumed that the floor in oil prices would be similar to the price floors of previous years.

Each year it looked like the price floor increased by about 10 dollars. They were budgeting for a worst case scenario of $50-$60 a barrel.

Well, shock and surprise, the markets over-reacted again. Prices have crashed all the way down from $147 to $45 a barrel.

This price level puts pressure on all of the marginal producers and is going to result in a drop off in production.

When the financial crisis passes and the economy begins to grow again, oil supplies will be inadequate to deal with the added demand.

Prices are going to shoot up faster than they did in the 2002-2007 period because the supply cushion just won't be there.

The current troubles in the oil market are just the tip of the iceberg. The nightmare scenario is a permanent increase in the volatility of oil prices.

We went from a flat, fixed price for oil (1968) to an extremely volatile and impossible to predict price for oil (2008).

Welcome to the new reality.