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Page added on July 31, 2014

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Peak Oil: How Soon? How Serious?

Petroleum Geologist Jeffrey J. Brown provides an overview of the global energy picture, focused on oil supply and demand and the impact of peak oil exports. Is the world at or near the maximum of oil production? Can new finds make up for increasing consumption? How might net exporters alter supply? Series: Humanitas [9/2008] [Public Affairs] [Science] [Show ID: 14989]



29 Comments on "Peak Oil: How Soon? How Serious?"

  1. westexas on Thu, 31st Jul 2014 10:02 am 

    I wouldn’t trust this guy.

  2. Jerry McManus on Thu, 31st Jul 2014 10:36 am 

    @westexas

    LOL! Nicely done.

  3. ghung on Thu, 31st Jul 2014 11:50 am 

    So Jeff; have your conclusions changed much in six years?

  4. Pops on Thu, 31st Jul 2014 12:15 pm 

    Yeah, we put anyone on here…

  5. shortonoil on Thu, 31st Jul 2014 12:56 pm 

    “I wouldn’t trust this guy.”

    Shifty eyed character, isn’t he?

    But seriously WestT, your Export Land Model is right on the mark. It agrees almost exactly with our model, which uses entirely different parameters, and initial assumptions. When exports cease, you have reached the end of the oil age. When the average barrel of oil is no longer a net energy provider you have reached the end of the oil age. Keep pounding on it, the world had better wake up, and pretty dam soon. Your doing a hell of a job at getting the message out. They are starting to listen.

    http://www.thehillsgroup.org/

  6. poaecdotcom on Thu, 31st Jul 2014 1:41 pm 

    Please provide link to:

    “WestT, your Export Land Model”

    and

    “our model”

    Thanks in advance

  7. steve on Thu, 31st Jul 2014 2:07 pm 

    Yes I am curious as well…do you have that same sense of optimism today that you did in 2008? I wake up in the morning and sometimes I think yes we will survive other mornings I think not….

  8. rockman on Thu, 31st Jul 2014 3:25 pm 

    You can always tell when a geologist is exaggerating any situation: he smiles. Especially those damn exploration geologists. We development geologists aren’t afforded the margin of error wildcatters get.

    I was smiling all the way when I drilled the only two “sure shot – can’t miss” prospects in my career. That was until I logged both DRY HOLES. Since then I’ll drill wells that have a relatively high probability of success but now I always avoid the “can’t miss” ones like the plague.

  9. rockman on Thu, 31st Jul 2014 3:42 pm 

    Optimism…what’s that? I work for a billionaire who will drill any well that I present to him that makes economic essence even if somewhat risky. And I live with a daily sense of pessimism that we won’t find enough such wells to drill to justify our employment. Seriously…no LOL this time. Not being a public company my owner’s sole concern is rate of return. If me and my cohorts don’t find enough drillable prospects he’ll flush us.

    As I’ve said before: it ain’t personal…just business. Even though my owner does have a lot of affection for me…I make him laugh a lot.

  10. Scott Benson on Thu, 31st Jul 2014 3:52 pm 

    This is an old presentation. It does not take into account recent history: the rise of oil production in the U.S. from 5.4 mbpd three years ago to this weeks 8.8 mbpd via fracking.

  11. Scott Benson on Thu, 31st Jul 2014 4:01 pm 

    And by the way, the prices that everyone was predicting would go to the moon for oil & food in 2008 was driven by 40 year old traders hyper-trading commodity contracts, trying to lock in “the investment of the century.” That is the only conclusion from the commodity price collapse that followed 2008. It was all nonsense. There is, no nor will there ever, be shortages of anything in the near future.

  12. rockman on Thu, 31st Jul 2014 9:08 pm 

    Scott – “It does not take into account recent history…”. Very true: he fails to mention that US refiners have increased their outlay for oil from $225 billion/year to over $600 billion/year. I fully agree: folks do need to stay current on the stats.

    “…nor will there ever, be shortages of anything in the near future.” Also true IMHO. In fact there will never be a shortage of any commodity. Higher prices will guarantee there will always be enough oil etc. available for everyone that can afford the price. Just as we have today: the supply of oil meets the demand of all the buyers that can afford the current high price. Of course, there are many potential buyers that can’t afford much if any of the current production. They might wish to buy more oil. But wanting to buy oil isn’t the definition of “demand”. Demand is want the economies can afford to acquire…not what they need to buy. Prices do a great job of making supply equal demand.

  13. peakyeast on Fri, 1st Aug 2014 12:09 am 

    A good rehearsal on an important point:

    A 1/3 increase gives only a 5 year delay in peak.

  14. MKohnen on Fri, 1st Aug 2014 12:41 am 

    “There is, no nor will there ever, be shortages of anything in the near future.”

    This statement is only true from the human perspective. And that perspective assumes that the damage we inflict on the environment is of no consequence to us because we have enough FF’s to overcome it. But this is a self-defeating argument with obvious disastrous outcomes. If you look at the eco-system as a whole, you’ll realize how staggeringly incorrect the statement at the top of this diatribe really is.

  15. westexas on Fri, 1st Aug 2014 5:38 am 

    Link to more recent paper (with data through 2011):

    http://www.resilience.org/stories/2013-02-18/commentary-the-export-capacity-index

  16. westexas on Fri, 1st Aug 2014 5:41 am 

    And some updated info, with data through 2012, and with some preliminary 2013 data:

    So Far, Global Net Exports of Oil Peaked in 2005

    Because of the way that we define net exports, we have to deal in terms of total petroleum liquids (plus other liquids for the EIA data set).

    Some definitions:

    Global Net Exports (GNE) = Combined net exports from (2005) Top 33 net oil exporters, total petroleum liquids + other liquids (EIA), which accounted for about 99% of total global net exports of oil in 2005

    Available Net Exports (ANE) = GNE less Chindia’s Net Imports (CNI)

    CNE = Cumulative Net Exports (for a given time period)

    ECI (Export Capacity Index) Ratio = Ratio of production to consumption

    GNE/CNI Ratio is analogous to the ECI Ratio

    Six Country Case History.

    The Six Country Case History consists of the major net oil exporters (net exports of 100,000 bpd or more) that hit or approached zero net exports from 1980 to 2010, excluding China. China, like the US, became a net importer prior to a production peak, because of a rapid rate of increase in consumption. Combined production from the Six Countries virtually stopped increasing in 1995, showing only a 2% increase from 1995 to 1999.

    The following chart shows the normalized values for production, ECI Ratio, net exports and remaining post-1995 CNE (Cumulative Net Exports) by year (1995 values = 100%).

    http://i1095.photobucket.com/albums/i475/westexas/Slide2_zps6c3a6280.jpg

    Note that even as production increased slightly from 1995 to 1999 (by 2%), net exports fell, because of rising consumption, as illustrated by the decline in the ECI Ratio. And note that even as production increased from 1995 to 1999, remaining post-1995 CNE fell by 54%.

    Estimated Six Country post-1995 CNE were about 9.0 Gb (billion barrels) based on the 1995 to 2002 rate of decline in their ECI ratio. Actual post-1995 CNE were 7.3 Gb.

    The key point is that a declining ECI Ratio corresponded to a rapid rate of depletion in remaining CNE, and even as Six Country production rose from 1995 to 1999, the rate of depletion in remaining post-1995 CNE accelerated, from 15%/year in 1996 to 26%/year in 1999.

    Global Net Exports of oil (GNE).

    GNE, the combined net exports from the top 33 net exporters in 2005, fell from about 46 mbpd (million barrels per day) in 2005 to about 44 mbpd in 2012 (2013 EIA consumption data not yet available, but I estimate that GNE in 2013 fell to around 43 mbpd). Combined production from the top 33 net exporters in 2005 rose slightly from 2005 to 2012, but because consumption increased faster than production, net exports fell, as evidenced by the decline in the ECI Ratio.

    The following chart shows the normalized values for production, ECI Ratio, net exports and estimated remaining post-2005CNE (Cumulative Net Exports) by year (2005 values = 100%).

    http://i1095.photobucket.com/albums/i475/westexas/Slide14_zpsbd9a272e.jpg

    Based on the 2005 to 2012 rate of decline in the Top 33 ECI Ratio, I estimate that remaining post-2005 Global CNE fell by about 21% by the end of 2012. As noted above, this methodology was too optimistic for the Six Country Case History, in regard to estimating post-1995 CNE.

    Available Net Exports of oil (ANE).

    ANE are defined as Global Net Exports of oil (GNE) less the Chindia regions (China + India’s) net imports (CNI). ANE fell from 41 mbpd in 2005 to 35 mbpd in 2012. Based on some preliminary 2013 data, I estimate that ANE fell to between 33 and 34 mbpd in 2013 (versus 41 mbpd in 2005).

    The following chart shows ANE from 2002 to 2012, including the gap between actual post-2005 values and where we would have been at the 2002 to 2005 rate of increase in ANE.

    http://i1095.photobucket.com/albums/i475/westexas/Slide04_zpsd68833b7.jpg

    The GNE/CNI Ratio is analogous to the ECI Ratio. The following chart shows 2002 to 2012 GNE/CNI data, with the extrapolation based on the 2005 to 2012 rate of decline in the ratio. Based on some preliminary 2013 data, I estimate that the 2013 GNE/CNI value will be between 4.6 and 4.7, which would be consistent with the following projection.

    http://i1095.photobucket.com/albums/i475/westexas/Slide20_zps26112103.jpg

    At a GNE/CNI Ratio of 1.0, China and India alone would theoretically consume 100% of Global Net Exports of oil, leaving no net oil exports available to about 155 net importing countries. Of course, the global economy can’t survive if only two countries are consuming anywhere close to 100% of Global Net Exports of oil, but that has been direction we have been headed in since 2002, up to and including 2013.

    What happened from 2002 to 2012 is clear. The following chart shows normalized liquids consumption for China, India, the (2005) Top 33 net oil exporters and the US from 2002 to 2012 (2002 values = 100%) versus annual Brent crude oil prices (in red). Based on BP data, China’s consumption in 2013 was up to 204% of the 2002 value.

    http://i1095.photobucket.com/albums/i475/westexas/Slide14_zpsb2fe0f1a.jpg

    I’ve called what happens from 2012 to 2022, and in following years, to the GNE/CNI Ratio the “$64 Trillion Question.” The conundrum is that we continued to slide, at least through 2013, toward a point in time–a GNE/CNI Ratio of 1.0–that we cannot arrive at.

    The absolutely mind-boggling numbers are the estimated post-2005 Available CNE and the rate of depletion in remaining post-2005 Available CNE. Based on the seven year 2005 to 2012 rate of decline in the GNE/CNI Ratio, I estimate that post-2005 Available CNE (the estimated cumulative volume of post-2005 net oil exports available to about 155 net oil importing countries) are about 175 Gb (billion barrels). Through 2012, we burned through about 95 Gb of estimated post-2005 Available CNE, leaving remaining estimated post-2005 Available CNE at about 80 Gb.

    Based on my estimates, at the 2012 rate of consumption of ANE, the remaining volume of Available CNE (Cumulative Net Exports) would be depleted in about six years. Of course, the expectation is for a continuing decline in ANE, so Available CNE would not be depleted in six years, but this gives one an indication of just how catastrophic that the ongoing estimated depletion in Available CNE has been.

  17. westexas on Fri, 1st Aug 2014 5:52 am 

    We’ve had lots of discussion about the impact of rising production in net oil importing countries, e.g., the US. Curiously enough though, the Cornucopians never seem to mention the impact of falling production in net oil importing countries/regions, e.g., the UK.

    In any event, my point is that fluctuations in production and consumption in net importing countries have an impact on the demand for Global Net Exports of oil (GNE), but by definition, said fluctuations have no impact on the supply of GNE.

    And currently, note that the US is still dependent on crude oil imports for 44% of the crude oil processed daily in US refineries.

    Of course, where I do focus on the demand for GNE is in regard to Available Net Exports (ANE, or GNE less Chindia’s Net Imports, CNI), and here is our problem:

    Given an (inevitable) ongoing decline in Global Net Exports of oil (GNE), unless the Chindia region CUTS their consumption of GNE at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE (the volume of net exports available to importers other than China and India) will exceed the GNE decline rate and the ANE decline rate will accelerate with time, on a year over year basis. It’s a mathematical certainty.

  18. Davy on Fri, 1st Aug 2014 8:25 am 

    WT, your analysis is another nail in the Corny’s coffin. My addition to your analysis concerns at what point will the systematic pressure of the GNE decline cause our interconnected global economy to bifurcate? There is no chance of decouple from the global system so importers and exporters are in the life boat together. We also must consider when the exports’ oil revenue falls so low they cannot finance their country’s needs. What we may see in the initial GNE stress period is the non-essential countries in the global system will drop out. There are countries which do not have the export capacity to outbid TBTF countries in this global system. We also have to consider an economic contraction which is increasingly possible with our multiple global crisis at this very moment. This will change the production/consumption dynamics. IMO the financial system is in a huge bubble that will pop in a matter of months but there is no way to predict this especially in the “new normal” of financial repression. I said this a matter of months ago (I know) but the longer this bubble progresses the more likely an ugly contraction. WT, I especially like the 6 year forecast point for zero net export per your calculations. This give me an upper limit on our economic plateau we are seeing currently. There is no reason why financial repression and wealth transfer cannot last that long. WT, points out the upper limit of this economic plateau of repression and wealth transfer is 6 years. Of course, we know as we approach that 6 year point all hell will break loose before we approach that zero point. This could cut in half that 6 year period. So let us talk about 3 years. That is a scary number! What is in your prep portfolio Corny’s?

  19. westexas on Fri, 1st Aug 2014 9:09 am 

    Davy,

    Here is the irrefutable math problem we face:

    Given an (inevitable) ongoing decline in Global Net Exports of oil (GNE), unless the Chindia region CUTS their consumption of GNE at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE (the volume of net exports available to importers other than China and India) will exceed the GNE decline rate and the ANE decline rate will accelerate with time, on a year over year basis. It’s a mathematical certainty.

    Note that ANE fell from 41 mbpd in 2005 to 35 mbpd in 2012, and I estimate that it was down to between 33 and 34 mbpd in 2013.

  20. Davy on Fri, 1st Aug 2014 9:47 am 

    WT, what influences me is the systematic risk this introduces to the system and when. I appreciate your analysis. I followed the Export Land Model at TD but you have taken it further with your studies. This analysis concerns “Rocks” POD. We have a dynamic relationship going on with energy. The Wall Street Wak’s just don’t get it or do get it and are making money by shorting the whole phenomenon. This may sound twisted but they are shorting POD by going long against it thereby discrediting the science for investors. We are certain POD is not on their lobbyist agenda for promotion even as a potential money maker.

  21. Northwest Resident on Fri, 1st Aug 2014 10:23 am 

    “…we know as we approach that 6 year point all hell will break loose before we approach that zero point…”

    My guess — based on the large amount of news and information I absorb daily — is that we are deep into that approach right now and that we are already starting to see all hell break loose.

    My predictions: From here on out, economic contraction — end of economic growth, period. More hot spots with bloody fighting over resources from here on out, not less (good luck with those cease fires, guys). Higher food prices, constantly increasing. Less employment. Hotter temperatures. More drought.

    And I’m an optimist.

  22. shortonoil on Fri, 1st Aug 2014 10:26 am 

    “So let us talk about 3 years.”

    Let’s talk about 6 months. The Ebola virus entered Lagos (a city of 20 million) in March. It has apparently become an airborne pathogen. Not much news is coming out of Nigeria, but we do know that two aid doctors have died of the disease. The virus has mutated from a bush disease to one that can flourish in an urban environment, and it is quit likely that thousands (or more) have already contracted the virus. It is a virus that has a 90%+ mortality rate, and has a 2 to 21 day incubation period. The virus can be transmitted before, and after symptoms appear by contact, bodily fluids, and now by airborne transmission. It has now been identified in at least three central eastern African nations.

    Nigeria exports a little over 2mb/d of high quality light crude. With a disease on par with the Middle Ages Black Plaque now ravaging the country it is likely they will go off line before the end of the year. If Ebola makes a jump into the Middle East, far worse will happen!

  23. Scott Benson on Fri, 1st Aug 2014 10:30 am 

    Thanks for the updated info. I realize the fracking thing is on borrowed time, and it is so far a mostly US thing, with other nations not getting up to speed on fracking fast enough. I myself have always let the pricing do the heavy lifting. Let capitalists be capitalists. Less oil product = higher prices = less demand. I would feel sorry for all the people that cant afford higher oil/gasoline prices, but then again, I’d guess about half of all oil products are wasted on unnecessary transportation, etc.

  24. Davy on Fri, 1st Aug 2014 10:34 am 

    Good point short. If anyone has interest you can google David Korowicz work on Systematic collapse and pandemics which references exactly what Short mentions. In Shorts mention this could be reality not theory!

  25. Northwest Resident on Fri, 1st Aug 2014 10:46 am 

    Short, Davy — If not Ebola, it will eventually be something. Mother Nature never lets a great opportunity go to waste. And with 7+ billion people on planet earth, many of them packed like sardines into limited areas, malnourished and lacking prompt/adequate medical services, this is an opportunity that Mother Nature will not let pass unexploited.

    Anybody ever see “Outbreak” with Dustin Hoffman and Morgan Freeman? Excellent, realistic portrayal of a pandemic with origins in Africa.

  26. shortonoil on Fri, 1st Aug 2014 11:09 am 

    Just read:

    “CDC officials have called this “the biggest and most complex Ebola outbreak in history.”

    We’ll know soon!

  27. marmico on Fri, 1st Aug 2014 11:14 am 

    It’s a mathematical certainty.

    Baloney. Is it any wonder that Foucher (the modeler) dumped you, Brown (the face), due to evidence?

    The sheikdom in KSA will drive around in their stretched Mercedes limos wondering where the replacement rubber and metal is because they have no oil to trade! Ya, that’s the ticket.

    Net liquid exports are within a 5% range from the mean for 10 years now.

  28. Davy on Fri, 1st Aug 2014 11:56 am 

    M, you mean to tell me there are no bumps ahead with supply? Since you are an Corny expert enlighten me what dangers are out there if any? Please

  29. Beery on Sat, 2nd Aug 2014 3:33 pm 

    Has anyone involved considered editing out the pre-talk garbage? I mean, jeez! 5 minutes until the actual speakers start? This is the 21st Century, not only does no one want to hear introductions, no one has 10 seconds of attention span, never mind 5 minutes.

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