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PeakOil is You

PeakOil is You

Peak Demand Theory Pt. 1

General discussions of the systemic, societal and civilisational effects of depletion.

The New Peak Oil: Peak Demand

Unread postby Graeme » Wed 14 May 2008, 05:55:37

The New Peak Oil: Peak Demand

Crude Oil rallied to a new intra-day high of $126.98 today, before pulling back to close the session close to $126/barrel. The trigger for the rally was a International Energy Agency report that the stockpiles of distillates in Europe were down 6.7% in March over the same time year ago. Last week's EIA's report had shown a similar reduction in US distillates stockpiles, with a 2.6% year to year decline. Heating oil, a proxy for distillates, rallied to a new high, with the June contract closing at $3.6989; heating oil prices have doubled over the past year and are up 40% year to date.

It is clear that the market has an incredibly bullish tone after Goldman Sachs' call for a super-spike which could take oil to as high as $200/barrel in the next 6-24 months. The market is focusing only on the good news and ignoring anything bearish.

Today's rally came in spite of news that IEA had again cuts its forecast for demand for crude-oil (to 1.03 million bpd); the current estimates for growth of oil demand are more than 50% less than the forecast put out in July, 2007 (2.2 million bpd). The IEA expects a further reduction in the forecast as high crude prices, and a slowdown in the developed economies are likely to cut demand further. There is even talk of reduced demand projections in the non-OECD oil importing countries (emerging economies), since the cost of subsidies is sky-rocketing and can no longer be sustained by their respective governments.

Lost in the bullish talk of $200 oil was Goldman's notes about demand destruction. The same report which predicted the super-spike also said that by 2012 the price of crude oil would fall to $75 normalized. Goldman expects the current euphoria to lead to a spike in crude oil prices, which will spur new supply development and also lead to permanent demand destruction.

In this article I shed some light on how high oil prices are resulting in a dramatic change in the energy industry and politics. High oil prices are accelerating the adoption of alternative energy resources and may signal the emergence of a new kind of peak oil fever: Peak Demand.


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Re: The New Peak Oil: Peak Demand

Unread postby idiom » Wed 14 May 2008, 06:43:01

Goldman thinks the Die off will occur that quickly?

Thats like, a billion people starving to death each year.

Or two weeks of thermal nuclear war.
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Re: The New Peak Oil: Peak Demand

Unread postby mididoctors » Wed 14 May 2008, 06:45:40

thats what they said about $105 oil in the original superspike report. back 3 years ago in 2005

its so much it can not be so as much as Goldman gaining kudos for the most blatantly wide and unspecific predictions that galls me. and they profiteered on the back of the original report.

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World oil demand shrinks

Unread postby Graeme » Wed 21 Jan 2009, 09:06:32

World oil demand shrinks

Global oil demand is seen contracting more sharply this year than previously expected, as the deepening economic crisis spreads to the developing world.

World oil demand will decline by 430,000 barrels per day in 2009 to 85.43 million bpd, according to a Reuters poll of 10 analysts, banks and industry groups.

Slowing demand has been the lead factor in sending prices crashing back down to about $40. The IEA predicts Chinese oil demand will grow by just 90,000 bpd in 2009. That is compared to average growth of around 400,000 bpd over the last three years.

Some experts are suggesting oil demand in the OECD may never return to the 2007 peak. They contend last year's record price spike and an increased focus on reducing carbon emissions to combat climate change may hold down fuel consumption even when the economy starts to recover.


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Re: World oil demand shrinks

Unread postby the48thronin » Wed 21 Jan 2009, 10:37:24

so far the experts seem to be scoring 100 percent...(at being wrong).


Industries collapsing, shipping glut driving hauling prices almost into negative figures, and 6,000,000 Chinese who will return from winter new years vacations to closed plants and no work.

Did anyone notice a few weeks ago when China canceled all oil contracts for importation of crude?

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Re: World oil demand shrinks

Unread postby bratticus » Wed 21 Jan 2009, 10:47:06

the48thronin wrote:Did anyone notice a few weeks ago when China canceled all oil contracts for importation of crude?


Rigs too.

Singapore Hot Stocks-Keppel in focus after contract cancelled

Reuters
January 12, 2009

SINGAPORE, Jan 12 (Reuters) - Oil rig-builder Keppel Corp
(KPLM.SI) may be in focus on Monday after it said a
$405-million rig contract deal was cancelled and as oil prices
fell to $40 a barrel.

... snip ...
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Re: World oil demand shrinks

Unread postby ki11ercane » Wed 21 Jan 2009, 11:12:07

Which quantifies into 7 minutes fifteen seconds per day or 44 hours per year or 1 day 20 hours (almost 2 days) over one year. GOOD GAWD! THAT'S 18 DAYS 8 HOURS OVER A DECADE! RUN FOR THE HILLS PEOPLE!

As I have said before, wake me up when oil decline use is actually "newsworthy." Shaving off 1/9th of one hour per day doesn't even come remotely close to the issue constant global consumption.
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Re: World oil demand shrinks

Unread postby TireFire » Wed 21 Jan 2009, 11:52:46

It may not come close to what is needed but it is a step in the right direction, and it looks like the recession is forcing a powerdown in North America and Europe and if it accentuates, you may just see the pwerdown numbers you're looking for.

This is precisely the 'soft landing' scenario i've expected for the last 4 years. if oil is really depleted, then it is a simple question of never again 'powering up' on oil and the malaises we are experiencing now is the extent we will suffer - much to the doomer's dismay of course.
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Demand for crude oil is falling!

Unread postby sally1947 » Thu 05 Feb 2009, 06:28:36

Have you heard that the global demand for crude oil is falling. Oil demand fell last year and is expected to drop again this year.
OPEC (The Organisation of Petroleum Exporting Countries) says in its January report that it expects world demand for oil will fall 180,000 barrels per day in 2009 from the previous year.

Click here for more info
Last edited by sally1947 on Thu 05 Feb 2009, 07:12:35, edited 2 times in total.
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Re: Demand for crude oil is falling!

Unread postby Daniel_Plainview » Thu 05 Feb 2009, 06:38:36

Link?
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Re: Demand for crude oil is falling!

Unread postby Homesteader » Thu 05 Feb 2009, 06:59:06

180,000 bpd is a rounding error.

Have you heard the IEA (have you heard of the IEA?) estimates global crude production is falling at an annual rate of 6.1%?

Do the math. . .
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Re: Demand for crude oil is falling!

Unread postby kiwichick » Thu 05 Feb 2009, 07:10:57

70,000,000 barrels per day

6.1% =4,270,000 barrels per day (this rate of decline assumes close to $1 trillion additional investment in currently producing fields on top of investment for exploration and development of the new fields some of which we haven't found yet)

BTW 4,270,000 x2 =another Saudi Arabia

another KSA every 2 years!!!!!!!!!!!!!!!!! Yeah right!!
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Re: Demand for crude oil is falling!

Unread postby aahala2 » Thu 05 Feb 2009, 11:24:02

sally1947 wrote:Have you heard that the global demand for crude oil is falling. Oil demand fell last year and is expected to drop again this year.
OPEC (The Organisation of Petroleum Exporting Countries) says in its January report that it expects world demand for oil will fall 180,000 barrels per day in 2009 from the previous year.



This seems an extremely optimistic prediction based upon
history -- from OPECs standpoint.

The last time the world experienced high oil prices and a following
large economic drop, production/consumption worldwide dropped
3-6% a year for three years in a row, back in the early 80s.

The numbers for US petro products supplied shown on the EIA
website for Sep, Oct and Nov were down relative to a year
earlier by about 2.6 mbd, .8 mbd and 1.6 mbd respectively.
And the economy is even worse now than a few months ago.
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Re: Demand for crude oil is falling!

Unread postby misterno » Thu 05 Feb 2009, 12:50:43

kiwichick wrote:70,000,000 barrels per day

6.1% =4,270,000 barrels per day (this rate of decline assumes close to $1 trillion additional investment in currently producing fields on top of investment for exploration and development of the new fields some of which we haven't found yet)

BTW 4,270,000 x2 =another Saudi Arabia

another KSA every 2 years!!!!!!!!!!!!!!!!! Yeah right!!


If production is falling why don't we see it in IEA or EIA statistics? Are they lieing? Maybe 6.1% assumption is wrong. :)
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Re: Demand for crude oil is falling!

Unread postby kiwichick » Thu 05 Feb 2009, 13:38:13

the decline is from existing fields

new fields tend to offset this decline ....so far!
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Re: Demand for crude oil is falling!

Unread postby TonyPrep » Thu 05 Feb 2009, 16:21:13

sally1947 wrote:Have you heard that the global demand for crude oil is falling. Oil demand fell last year and is expected to drop again this year.
OPEC (The Organisation of Petroleum Exporting Countries) says in its January report that it expects world demand for oil will fall 180,000 barrels per day in 2009 from the previous year.

Click here for more info
According to the latest STEO (but due to be updated next week), consumption was flat in 2008, compared to 2007. No fall.
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Forget Peak Oil, What About Peak Demand?

Unread postby Maddog78 » Mon 01 Jun 2009, 10:53:41

Interesting investment opinion, sure to get some here all hot and bothered.
I think he overestimates the effects of CAFE and similar regs in China, but anyways we'll see.


http://community.investopedia.com/news/IA/2009/Forget-Peak-Oil-What-About-Peak-Demand-F-GM-HMC-TM0601.aspx?partner=YahooSA


Forget Peak Oil, What About Peak Demand? (F, GM, HMC, TM)
June 01, 2009 | By Eric FoxWith so many investors and pundits obsessed with peak oil, they may be missing the real story for oil: that we have passed peak demand and it's only downhill from here. One of the central tenets supporting the bull market in energy has been the concept of peak oil. Asserting that the world cannot produce much more oil than it currently is, the concept of peak oil predicts a super spike in oil prices. With this view in mind, the less discussed trend going on for oil may instead be peak demand. (Read more in our related article, Peak Oil: What To Do When The Wells Run Dry.)


Demand Going Down
Rex Tillerson, the CEO of Exxon Mobil (NYSE:XOM) said at the company's annual meeting on Wednesday that U.S. gasoline consumption had peaked and would slowly decline due to the increased fuel economy of cars and the introduction of biofuels. Since transportation fuel is the main use of oil in the U.S, this does not help demand long-term. He also threw cold water on those oil bulls that have been encouraged by the recent run in oil prices into the low $60 price range. Tillerson said that optimism on the part of oil traders is just a "bet" and that "it's too early to call this economy".

snip.....................
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Re: Forget Peak Oil, What About Peak Demand?

Unread postby pstarr » Mon 01 Jun 2009, 11:10:42

I usually stop reading after 'biofuels' appears in an article, and this (and the associated piece on the subject) did nothing to dampen my complete and total derision. Why would Rex Tillerson promote direct competition for his petroleum industry if he really believed the stuff works? It's Cargil/ADM (not the oil companies) that would get rich off this stuff. Tillerson knows biofools won't drive Mom and the kids to the mall and that's why he is not afraid of it.

As for efficiency? Do American really have the means (small families, short commutes, pert fannies/tiny girths, etc.) to turn in for crushing all the Big Dog Trucks. Those things are not going away soon. Efficiency stands no chance during this downturn.

Demand for oil will not rise soon. But that demand is not elastic. And supplies are diminishing so . . . up. . . up. . . up. . . and . . . away go the prices.
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Re: Forget Peak Oil, What About Peak Demand?

Unread postby shortonoil » Fri 05 Jun 2009, 19:54:45

Peak demand is the principal concept behind the Available Energy model. It states, that as the ERoEI of fossil fuels falls, the energy contribution to the general economy falls. Peak occurs when the energy return becomes too small to permit the needed additional production to compensate for lower ERoEI. Since all economic activity requires energy, economic activity falls with the fall in fossil fuels’ energy contribution.

I am afraid the Rex is right, even though it is possible that he doesn’t fully understand why. He may, however, be seeing one of the corollaries to the AE model. Fossil fuel energy prices will never again be low enough to allow for positive economic growth.
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Re: Forget Peak Oil, What About Peak Demand?

Unread postby shortonoil » Sun 07 Jun 2009, 11:57:41

As a follow up to what was stated above, what is happening to the energy industry is that energy’s P/Q (price vs quantity) curve after Peak moved from a positive slope to a negative one. Prior to Peak, increasing prices resulted in increased total revenue. The P/Q line was almost vertical, and the effect of increasing price on demand was small. Since Peak, increasing price has reduced demand enough to result in a reduction of energy’s total dollar revenue.

This could almost be looked upon as a definition of Peak. The point where the price can not be increased, as increased price does not produce an increase in total revenue. Therefore, funds are not there to support additional production. Increased price results in a reduction in demand large enough to contract overall revenue.

This is the enviable consequence of fossil fuels’ falling energy contribution from declining ERoEI. When the ERoEI of fossil fuels falls past the point that increased production can not compensate for the energy lost, economic activity will fall resulting in reduced demand. When the P/Q curve turned negative this occurred.

The glut of oil now flooding the world is the result of reduced demand, not increased production. Curtailment of production lags a declining economy, and inventories build before producers cut back. Demand fell because energy’s P/Q curve is now negative. The curve moved from highly vertical positive to highly vertical negative. Increasing prices now have the affect of reducing oil producers total revenue.

Oil traders are now betting that demand and prices will rise because they expect the economy to recover. The energy to drive a sustained recovery is now not available. Once the extra oil now floating around the world is used, the economy will submerge into an even steeper downward spiral.





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