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

[Tyler_JC]

What is your source? We have been above $40 for a long time, does not compute? This is not a problem of the market, but rather a problem of Geology IMHO!

Oil Price Forcasts from the EIA in 2005

The EIA predicted that oil prices would average $66 per barrel this year, falling to less than $50 by 2016.

$90 oil is nice but if your economic models are predicting prices at only half of that level in the future, you can't use that as your reference point.

As time goes on, oil price forecasts will increase and certain projects will be invested in, perhaps leading to another few million barrels per day of supply into the future.

Is it worth it to extract oil at $80/barrel if prices are predicted to drop to only $50 by 2016 (when your capacity would be online)?

[Starvid]

I'm sorry, but that chart doesn't indicate a peak.

It indicates a plateau.

We are only .5% below the top production level of 2006. There's too much uncertainty in that data to call that a peak.

In order to have a peak, we need to see several years of production declines, IMO.

Dip below 84mb/day, then 83mb/day, and finally 82...81...80...

There's your peak.

I think if you drill down and look closer at the monthly data, it appears a peak has occurred in July '06 which would concur with not only the quarterly and maybe the annual. Only time will tell see, link to post with monthly data below.

Did Peak Oil happen in July 2006 ?

We should know for sure after data comes from IEA for August through November. If production cannot match the bench mark of 85,500,000 per day from July 2006 with $90 oil, than I think we can conclude that peak oil has arrived. IMHO!

No we can't, because the industry cannot respond to $90 oil in a few months.

It is just recently the industry has chosen $40 as their investment price. That is, no fields with a production cost above $40 a barrel are being developed by the majors.

What is your source? We have been above $40 for a long time, does not compute?

This is not a problem of the market, but rather a problem of Geology IMHO!

Sorry, I had my numbers wrong. The investment price has just been raised from $40 to $60 by Total, the oil major.

But my point still stands, even if too a weaker degree.

High oil prices are here to stay, according to Total, the French oil multinational, which has raised its forecast value of a barrel of crude from $40 to $60 as it predicts continuing strong demand for oil, rising costs and political constraints on production.

http://business.timesonline.co.uk/tol/b ... 402920.ece

[shortonoil]

Cyrus said:

Exactly. We are now at a point where we have never beeen. In the past declines in existing fields were replaced with new fields which were still being discovered. Now, we must offset the decline with low EROEI alternatives(such as Alberta oil sands). Trust me, the situation isn't good.

Peak occurs at the point where an incremental increase in production results in a net negative energy contribution.

To increase production from this point forward requires energy input from an outside source.

This could also be stated as the point at which oil’s declining ERoEI will overtake energy contributed by an incremental increase in its production.

To compensate for oil’s present declining ERoEI it would be necessary to increase production in 2007 by 2.8% over 2006. That is not likely to happen.

[Zardoz]

Do they revise the demand or expected figures, I am pretty sure I sure I saw 87 or 88 mbd in the orange some time ago.............

IEA World Oil Demand chart

*fights the urge to end the post with "We're screwed."*

[shortonoil]

That fourth quarter 2008 number of 89.4 looks a little suspicious. It is the exact number needed to balance out their 2008 demand number of 88 mb/d.

I’m not going to get too excited over these estimates, I think they made them up!

[Armageddon]

Do not forget that domestic oil consumption in oil producing countries is rising, resulting in less oil exporting. This is going to really hurt.

[Zardoz]

This is going to really hurt.

And, according to their figure for the quarter we're in right now, the pain is going to start very soon.

[Starvid]

Cyrus said:

Exactly. We are now at a point where we have never beeen. In the past declines in existing fields were replaced with new fields which were still being discovered. Now, we must offset the decline with low EROEI alternatives(such as Alberta oil sands). Trust me, the situation isn't good.

Peak occurs at the point where an incremental increase in production results in a net negative energy contribution.

To increase production from this point forward requires energy input from an outside source.

This could also be stated as the point at which oil’s declining ERoEI will overtake energy contributed by an incremental increase in its production.

To compensate for oil’s present declining ERoEI it would be necessary to increase production in 2007 by 2.8% over 2006. That is not likely to happen.

Your argument does not make sense. It's not hard to imagine a situation where you would still increase oil extraction levels or make liquid fuels, even if the EROI of doing it went negative.

[shortonoil]

Starvid said:

Your argument does not make sense. It's not hard to imagine a situation where you would still increase oil extraction levels or make liquid fuels, even if the EROI of doing it went negative.

I was a little reticent to post this because I suspected that some one would bring up this very issue, which I would then have to defend:

First: you can not have a negative ERoEI. ERoEI is a ratio; ER/EI, neither energy returned, or energy invested can be negative, there is no negative energy (outside of theoretical discussions in physics and Star Trek movies).

Second: if you have a situation where you extract oil at an energy loss to provide liquid fuel, you are inputting energy into the process. Such as converting hydro, NG, nuclear or coal into oil by subsidizing the process with energy from those sources. This is impractical as you loose energy in the process (The Second Law). It would be more efficient, therefore more economical, to produce synfuel directly from the coal or NG. If you were insistent on pursuing such a program you would soon be out of business as your competitors could always under price you. Of course we have examples of energy loosing products being produced, like ethanol, where the government subsides the farmers and producers. This is only possible because the funds originate from (still) energy delivering oil.

[Starvid]

First: you can not have a negative ERoEI. ERoEI is a ratio; ER/EI, neither energy returned, or energy invested can be negative, there is no negative energy (outside of theoretical discussions in physics and Star Trek movies).

Well, do excuse my sloppy wording. What I meant was of course an EROI below 1.

Second: if you have a situation where you extract oil at an energy loss to provide liquid fuel, you are inputting energy into the process. Such as converting hydro, NG, nuclear or coal into oil by subsidizing the process with energy from those sources. This is impractical as you loose energy in the process (The Second Law). It would be more efficient, therefore more economical, to produce synfuel directly from the coal or NG. If you were insistent on pursuing such a program you would soon be out of business as your competitors could always under price you. Of course we have examples of energy loosing products being produced, like ethanol, where the government subsides the farmers and producers. This is only possible because the funds originate from (still) energy delivering oil.

No, this is wrong.

Consider that you have an oil well with an EROI at 0.9.

You must add energy to the process to get it too work. Sure. You can still make money because liquid energy can be sold at a premium.

Consider CTL. The process has large capital costs, far larger than just adding some nodding donkeys to a depleted old oil field.

It's also energy negative. Just like you have to add energy to a depleted oil field to get out liquid energy, you must do the same to a CTL factory.

That's why enhanced oil recovery is pursued much more vigourusly than CTL is.

[shortonoil]

Starvid said:

Well, do excuse my sloppy wording. What I meant was of course an EROI below 1.

You must add energy to the process to get it too work. Sure. You can still make money because liquid energy can be sold at a premium.

You can make money at it because there was an energy source available to you with an ERoEI greater than 1:1. Since oil constitutes 40% of the world’s energy supply, we don’t have that alternative available to us when it comes to the production of oil. It is much more likely we will convert to geothermal or cellulose ethanol than pump very valuable energy into the ground. Corporations try very had to avoid, “pounding sand down a rat hole”! Of course, the government does it all the time, so anything is possible?

[Starvid]

Starvid said:

Well, do excuse my sloppy wording. What I meant was of course an EROI below 1.

You must add energy to the process to get it too work. Sure. You can still make money because liquid energy can be sold at a premium.

You can make money at it because there was an energy source available to you with an ERoEI greater than 1:1. Since oil constitutes 40% of the world’s energy supply, we don’t have that alternative available to us when it comes to the production of oil. It is much more likely we will convert to geothermal or cellulose ethanol than pump very valuable energy into the ground. Corporations try very had to avoid, “pounding sand down a rat hole”! Of course, the government does it all the time, so anything is possible?

Well, that is correct. When the EROI of oil falls below 1, oil is no longer an energy source. But it can and will still be the premier source of liquid fuels.

And that's what matters, because Peak oil is not an energy crisis. It is a liquid fuel crisis.

That is, it doesn't seem hard (just very ambitious) to replace oil as an energy source, but it seems extremely hard to replace it as a source of liquid fuel.

That's why I have alway felt that EROI is the wrong metric to use in this debate. What we should rally use is LEROLEI, Liquid Energy Return On Liquid Energy Invested.

Then even corn ethanol might make some sense, even though it might be better to turn the natgas into diesel instead, or use it as CNG directly. That is an open question which I don't have the detailed knowledge to answer.

[aahala]

If you had predicted peak each time the annual production figure
had gone down between 1970 and 1993, you would have
predicted peak 12 times.

If you had predicted peak each time the annual production figure
had gone down at least 1% from the previous year, you would
have predicted peak 6 times.

You would have been wrong 12 of 12 or 6 of 6 times.

There are limits to human knowledge, particularily about the
future. To predict peak on such flimy evidence as we now have
means you believe you are not subject to these limits. In other
words, a super hero.

I'm no super hero and I don't believe anyone reading this is either.

[Zardoz]

There are limits to human knowledge, particularily about the future.

Do you think global oil production will ever reach 86 million barrels per day?

[Starvid]

There are limits to human knowledge, particularily about the future.

Do you think global oil production will ever reach 86 million barrels per day?

I think it might very well do that.

So, yes.

[eastbay]

After reading this and a few other websites for the past three+ years I went and predicted PO myself. I looked at all of the great charts and decided PO was in mid 2005 or early 2006, depending on various definitions.

I was right 1 out of 1 times. It's downhill from now on.

[Sketh]

Pretty alarmist change of view from the IEA in their latest World Energy Outlook released today. The executive summary could have been written by a peak oiler.

Time magazine has an article discussing the conclusions.

In a marked change from its traditionally bland, measured tones, the IEA's 2007 report says governments need to make urgent, bold decisions on energy policy, or risk massive environmental and energy-supply crises within two decades — crises and shortages that could spark serious global conflicts.

IEA chief economist Fatih Birol isn't pulling any punches either. Certainly not the normal, cautious and optimistic tone we've come to expect from the agency:

"I am sorry to say this, but we are headed toward really bad days...Lots of targets have been set but very little has been done. There is a lot of talk and no action."

Sentiment has certainly changed in just a few short weeks.

[Bas]

yes, it looks like the IEA has been fully converted from cornucopianism to doomerism in one short year. That ought to make governments and Mainstream media finally wake up. Though possibly they are too brainwashed now to wake up on such short notice

[No-Oil]

Similar report from the BBC on this here

http://newsvote.bbc.co.uk/2/hi/business/7082323.stm

[Gerontion]

I had a quick look at the Executive Summary and was confused by this:

“Their (OPEC) collective output of conventional crude oil, natural gas liquids and non-conventional oil (mainly gas-to-liquids) is projected to climb from 36 mb/d in 2006 to 46 mb/d in 2015 and 61 mb/d in 2030 in the Reference Scenario. As a result, OPEC’s share of world oil supply jumps from 42% now to 52% by the end of the projection period. Non-OPEC production rises only slowly to 2030, with most of the increase coming from nonconventional sources – mainly Canadian oil sands – as conventional output levels off at around 47 mb/d by the middle of the 2010s. These projections are based on the assumption that the average IEA crude oil import price falls back from recent highs of over $75 per barrel to around $60 (in year-2006 dollars) by 2015 and then recovers slowly, reaching $62 (or $108 in nominal terms) by 2030.”

Which is OK, though of course whether or not one agrees with it is a different matter, but the paragraph then continues

“Although new oil-production capacity additions from greenfield projects are expected to increase over the next five years, it is very uncertain whether they will be sufficient to compensate for the decline in output at existing fields and keep pace with the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out.”

Which seems directly to contradict the first part of the paragraph, unless either (a) the authors think there will be a 5 to 7 year period of unmet demand followed by an explosion in production, (b) they’re saying that the Reference Scenario is a load of bollocks or (c) – and much more likely – I’ve been an idiot and misunderstood something.