The Oil Drum: Local

Report authors: Euan Mearns, Samuel Foucher and Rembrandt Koppelaar

This chart is from a section of the IEA publications called key graphs and appears in Chapter 11, p250 as Figure 11.1.

Chapter 10, p 243 of IEA WEO 2008 says this:

On this basis, we estimate that the average observed decline rate worldwide is 6.7%. Were that rate applied to 2007 crude oil production the annual loss of output would be 4.7mmbpd.

So it seems reasonable to expect the decline rate on currently producing fields shown above should be 6.7%. Not so. The decline rate in the chart above seems to be much closer to 4%. So what's going on here? There's more below the fold.

It's been a while since I did a Countdown diary - no wonder, given that oil is now below $60, ie at the same level as when I started the initial "Countdown to $100 oil" series back in 2005...

While the $200 target looks to be some ways off right now, given the expectations of a massive global downturn, the mechanism that has been pushing prices down is the same one that had been pushing prices up in the first part of the year. As I explained in this recent opus of the series: it's the marginal cost of demand destruction that matters, rather than the marginal cost of production. Demand was driving prices up when it was strong, and it is now driving prices down just as brutally by crumbling just as spectacularly (whether directly, finally, because of high prices, or indirectly via the economic crunch).

But we now, unexpectedly, have a strong "buy" signal again: an article by CERA's Daniel Yergin telling us that current prices are justified.

This is the post where I try and draw my own conclusions from the Conference. And not recognizing many of the papers in this does not mean that they weren’t important, but rather that from my own perspective that this is what I got most from.

The recurrent word that cropped up, again and again, was Scale. It was an attempt by the speakers to try and convey to their audience the size of the problem that is coming at us, increasingly rapidly. That one word encapsulates the difference between those who talk of the world energy problem in Quads (quadrillion Btu’s), as opposed to those that talk of the solution in terms of kilowatts and Megawatts. (The handy Dashboard on my Mac tells me that a Megawatt is 56,869 Btus/min. A Quad is 1,000,000,000,000,000 Btu.) The current shortages of gasoline are largely brought about by a transient closure of refineries that affects around 1 mbd of oil supply. The time is not far distant when such shortages will become more regular as we compete for supply in a more competitive global market.

The tipping point that seemed still a comfortable distance away three years ago when the American ASPO meetings began in Denver, is now just about here. And the solutions that have been discussed do not approach, as yet, the millions of barrels a day (mbd) of fuel replacement that we may need before long. At the same time, to return to the theme of my own paper, we do not have the educated human resource that we need. Data from my Dean of Enrollment shows that ACT report national high school student interest in engineering was at 14% in 1982. By 1992 it had dropped to 9%. By 2005 it was down to 5%, and has fallen below that since.

This is a summary of the peak oil story at June 2008. The major themes of this presentation are

• The US oil story
• The world oil story
• Five myths

I have put this summary together in the format of a PowerPoint presentation plus notes. In this format, it is a multi-purpose document. You can

1. Read the post yourself, with or without my comments.

2. Use the presentation (PDF) as a handout, to give to one or two of your friends. My comments are intended to give you some more background, so you can better explain the presentation and answer questions.

3. Use the presentation for a group, using the PowerPoint format.

The PDF version of this presentation is available here. The PowerPoint version is available here.

(New readers, click "there's more" below for the whole article...)

Global Total Liquids production and oil price, January 2002 to present. Production data from the IEA, data files supplied by Rembrandt Koppelaar. Monthly average WTI oil prices from Economagic.

With oil reaching $135 / barrel, Oil Drum readership exceeding 30,000 unique visitors per day and many wild stories circulating in the MSM as to why oil prices are so high this post strives to explain why oil prices are rising exponentially:

• Supply and demand
• Decline of older fields
• Declining net energy and energy density
• New mega-projects
• OPEC spare capacity
• Peak exports

In our last poll on 16 APR (and here's the old accompanying comment thread), 42% of you predicted that CL would hit $127 in the front month before it hit $103. Yep, we've passed it today, though we closed below it. Oil has risen from $115 to $127 (~10%) in a month.

This is the comment thread for the poll, offer your conjecture and reasoning here...the actual poll itself is at this link.

In our last poll on 5 MAR (and here's the accompanying comment thread), 43% of you predicted that CL would hit $115 in the front month. We've passed it, but we haven't closed at it yet.

Either way, I thought a new poll was in order to celebrate Three Yergin Day. This is the comment thread, the poll is in the link below.

We have been writing for almost 3 years on this site about the privatization of energy data by IHS Energy and the negative impact the lack of accuracy that CERA's historically optimistic claims are having on energy policy. The rebuttals and counteranalysis at TOD to CERAs assertions are too numerous to list. Today at the IHS Energy Conference in Houston, the CEO of IHS Energy, parent of CERA and other energy information agencies, asserted that Peak Oilers don't have the data to support their claims. This post is a brief rebuttal to this 'news' coming out of Houston, and a plea to refocus the questions to what is relevant and probable, not on what is irrelevant and unlikely.

Source - various - detailed here by G. Morton(Click to enlarge)

.... and Cresswell takes a pot shot at CERA...

Back in November I ran article highlighting Peak Oil in the Mainstream Business Press lifted from the monthly Energy Supplement from the Press and Journal, a broad sheet that serves North Scotland - including Aberdeen, the Houston of the North. This month, two stories by Dick Winchester and Jeremy Cresswell caught my eye.

My, my, Gordon, you really are losing the plot

By Dick Winchester

GORDON Brown has come up with a new way of doing things. What you do is go and visit your biggest competitor, who has saved a few hundred billion quid to invest in or simply buy companies you might own, and who is already making oodles of cash because you’re subcontracting to said competitor most of the things you used to do, and then give them £50million to help them develop new “green” technologies.

Yes, folks, Britain’s PM’s been at it again. In exchange for a couple of carry-outs and a tour of the Beijing Olympic village, he’s offered the Chinese:....