Washington Capitulates: Peak Oil Is Real
Aug 31st, 2009 | By Doug Hornig | Category: Featured, Oil
Each year, generally in May, the Energy Information Administration publishes a less-than-eagerly-anticipated tome called the International Energy Outlook, 250+ pages of mind-numbing text, charts, graphs, and tables.
No one reads it. The mainstream media ignore it.
It’s the product of the best prognosticators in the Department of Energy. Okay, that may be what puts most people off. But if you’re patient enough to dig into it, it will cough up some fascinating nuggets of information.
The present edition is no exception. The report refrains from spelling out the conclusion that seems most obvious from its data. However, confirming a trend begun just last year, the 2009 edition clearly reveals that the government has been forced to admit that Peak Oil is coming. Moreover, it’s expected to arrive much faster than was believed as recently as two years ago.
This represents a remarkable turnaround in the agency’s opinion. Up until 2008, they were predicting unbroken growth in world oil supplies for the next two decades. But in ’08 and ’09, the rosy picture turned decidedly unrosier.
Before we look at the numbers, a couple of notes on terminology. The EIA makes its projections based on what its analysts call the “reference case,” i.e., average economic growth. It also provides estimates for better- and worse-case scenarios, but the reference case represents the best guesses they have.
Oil (as we generally think of it), upon which most of the world economy depends, is termed “conventional liquids,” i.e., the stuff that comes gushing up from under Saudi sands. “Unconventional liquids” – extra-heavy oil, bitumen, coal-to-liquids, gas-to-liquids, and biofuels – are also covered in the report, as we’ll see, but conventional is far and away the most important one at this moment in history.
With that in mind, by 2007 the IEO was in its final year of irrational exuberance, confidently predicting that world production of conventional liquids would be 107.5 million barrels/day (up from 81.9 in 2005). That dovetailed nicely with a forecast for world demand of 118 million b/d, with 10.5 million barrels of unconventional liquids taking up the slack.
By ’08, they had put the info into table form, and look what happened:
Same table, ’09:
Projected production, as you can see, is suddenly shriveling up. From 107.5 million b/d of oil projected for 2030 in 2007, to 102.9 million b/d in 2008, to this year’s meager expectation for 93.1 million. That’s a drop of 13.4% in only two years, and posits production growth of only 11.6 million b/d (14.2%) from 2006 levels.
If that isn’t an admission that the era of Peak Oil is upon us, what is?
The report assumes that some of this stunning shortfall will be made up by development of unconventional liquids to the tune of 13.5 million b/d, including a jump of 5.9 million b/d in biofuels. At the same time, while conventional liquid production from non-OPEC nations is projected to grow only 7%, OPEC is expected to substantially increase its contribution, ramping up output by almost 25%. (All figures are for the period of 2006-2030.)
Does this seem optimistic? Well, it presupposes some heavy lifting on the part of OPEC, a dicey proposition in the best of times.
And it means creation of the infrastructure necessary to exploit extra-heavy oils, tar sands, shale, ultradeep deposits and other unconventionals, all of which require sophisticated technological know-how and face significant environmental challenges.
Biofuel production could more easily be elevated. But to reach the lofty level of nearly 6 million b/d would necessitate a huge diversion of cropland from food to energy, certain to be attended by a rise in food prices, not to mention potentially serious food shortages. The need for food being rather more primal than the need for gasoline, politicians are going to be reluctant to risk loosing angry mobs into the streets.
Even if all of these developments proceed flawlessly, though, we’ll still have to face a widening gap between production and consumption. Or will we?
As it turns out, we’re in luck! Or so the EIA would have us believe. Because, accompanying that falling supply is – you guessed it – declining demand. In 2007, the IEO anticipated world demand for all liquids of 118 million b/d in 2030. This year, that estimate shrank to 107 million b/d, right in line with production.
The important point to take away from the IEO’s analysis is that the world is facing a decline in liquid fuel production and the government, after years of straight-faced denial, is now admitting it.
Does this mean we’re going to run out of oil? No. But supply constrictions mean that the good old days of limitless, cheap oil are gone. And, though viable alternatives eventually will be developed, there’s no way of putting a timetable on that. In the interim, we’re going to have to pay up if we want to keep the family jalopy on the road.
How much? The IEO report’s reference case calls for $130/barrel oil in 2030, but that’s based on relatively modest demand increases from India, China, and other developing nations, and we find it very optimistic. It easily could be twice that.
Regards,
Doug Hornig
August 31, 2009
The most bizarre part of this forecast is the implicit assumption that oil-exporting countries are going to want to exchange _more_ of their non-renewable oil for Federal Reserve Notes, instead of “leaving it in the ground”. Considering that the oil producers in California won’t pump unless the price is above $90-$100/bbl, I wonder why people think that the Arabs would sell oil for paper. . .
[...] [...]
One of my readers commented that when a civilization burns its food for fuel that society is doomed.
Thirty per cent. of the corn crop at present is being turned into very expensive ethanol which is used to debase gasoline to the detriment of our engines. This artificial shortage of corn, exacerbated by several drought years and concommitant small crops or crop failure, has lead to a vast increase in feed prices, which, in turn, is driving beef and dairy cattle producers and hog farmers and large poultry producers under.
Thanks for a great article and slogging through all those charts, graphs, and tables! LBT
[...] Washington Capitulates: Peak Oil Is Real [...]
I find it interesting in the chart that they list gas to liquids as a major increase from null to 19.3% increase which either makes a case for getting into long term natural gas or running screaming BS into the streets. The other side of the ethanol argument is the need for fertilizer, pesticides, and fuel, all derived from cheap oil to produce bio fuel. As much as the pundits would like us to believe they have a cage full of magical fairies they can shake magic dust out of to get this idea to fly the reality is that any sort of ramping in production of bio fuel will be a straight trade for barrel for barrel with crude for at least 5 years or more. Our media and government officials should be treated for cranial-rectal inversion immediately before they completely destroy our country and the future of our children.
[...] rest is here: Washington Capitulates: Peak Oil Is Real google_ad_client = “pub-3658190228035086″; google_ad_slot = “1112917537″; google_ad_width = [...]
mike-
“cranial-rectal inversion” is a gem. i’ll use it often; giving you full attribution of course.
Peak “easy oil” may be here. And it may not be here. There’s a lot of Earth left there to explore.
And I personally can’t automatically agree with a very left wing government’s proclamation of peak oil.
I don’t see a peak in this report, rather sort of a plateau.
However EIA is always among the word’s most optimistic (or rather consumistic?) institutions (EIA even demonstrates this on comparison tables e.g. on page 95).
And one should mention that they also have a high price scenario: $200 in 2030.
http://www.eia.doe.gov/oiaf/ie.....9small.jpg
However also here EIA is optimistic: Even at this price the world won’t stop to consume more and more of the black stuff.
(And you can be sure that even under Obama and Chu the EIA will again heavily underestimate the renewables. In their report of 1996 the “target” for 2010 was already passed in 2003, in the 2000 report ti was already passed in 2002. They’ll probably never learn it. )
It might be wortwhile to delve even more in the report. For example last year’s report showed a steep decline in oil production in the high price scenario: http://www.theoildrum.com/node/4386#comment-391045
Maybe this one had elapsed from the government’s censorship – as well as from the mainstream media.
I don’t see a peak in this report, rather sort of a plateau.
However EIA is always among the word’s most optimistic (or rather consumistic?) institutions (EIA even demonstrates this on comparison tables e.g. on page 95).
And one should mention that they also have a high price scenario: $200 in 2030.
http://www.eia.doe.gov/oiaf/ie.....9small.jpg
However also here EIA is optimistic: Even at this price the world won’t stop to consume more and more of the black stuff.
And you can be sure that even under Obama and Chu the EIA will again heavily underestimate the renewables. In their report of 1996 the “target” for 2010 was already passed in 2003, in the 2000 report ti was already passed in 2002. They’ll probably never learn it.
It might be wortwhile to delve even more in the report. For example last year’s report showed a steep decline in oil production in the high price scenario: http://www.theoildrum.com/node/4386#comment-391045
Maybe this one had elapsed from the government’s censorship – as well as from the mainstream media.
“Biofuel production could more easily be elevated. But to reach the lofty level of nearly 6 million b/d would necessitate a huge diversion of cropland from food to energy, certain to be attended by a rise in food prices, not to mention potentially serious food shortages.”
No and no. Switchgrass grows on scrub land that’s worthless for farming. Algae can grow in a glass box in a desert.
…Not.
http://www.bloomberg.com/apps/.....4RUTBIl_3Q
Dave -
There’s not much of the Earth left to explore, actually. The oil boys are very good at their job.
Government proclamations, left or right, don’t much matter, but data from Petroleum Review matters quite a lot — they track projects bringing in new oil.
From now through 2020, they are looking at about 2 to 3 mbd new oil added each year. That doesn’t begin to counter IEA’s decline rate of 6.7% per year — the way it works out, we’ll need to add the equivalent of two new Saudia Arabias by 2015 just to stay at current levels.
The Bloomberg piece is about BP’s “giant” Tiber field. It’s a drop in the proverbial bucket. Even at a respectable 3B barrels, Tiber will only account for about 1.5 mbd when it is fully producing. Yes, it’s good news that BP found it, because they’ve got to do it again, three or four times a year, every year, to make up for depletion rates in the world’s existing fields.
Think they can do it?
Dave Narby,
Don’t take it personally, but its because of cunts like you that we have our collective heads stuck in the sand.
Switchgrass, what a joke! Not only are they unable to process it NOW, but they will be unable to in the future as well. When I say “process it” I mean economically, viably.
Here, try an experiment… Run around your neighborhood collecting everyone’s grass clippings. Report back on what you find. I’ll tell you what you’ll find: that it take a LOT of energy to collect up that grass, and it takes a LOT of space to stage it for refining; and, all the while you have to keep it from breaking down naturally (piling a lot of biomass can generate a lot of heat, which means that the stuff is breaking down- sometimes with such vigor that fires start up!
People will make up whatever tales in an effort to keep their fantasies going… Simple physics lays waste to all these lunacies.
And on the subject of algae, HA HA! Yeah, grow it in the dessert, yeah, right. Do you know why desserts are desserts? It’s because they have very little WATER! Pump water there? Yeah, right again! It takes a LOT of energy to pump water, and that requires that you first have access to water; near arid locations water isn’t very plentiful, just check out the water situation in the US Southwest.
The ONLY real possibility is along more southern coastal regions. A problem here is getting the real estate: maybe you can kick those rich people away from the beaches, but I’m thinking not.
The ONLY real energy security that’s achievable is through conservation. The US could be independent of foreign energy (for a while anyway) if it used 1/4 of it’s current demand: that’s how Brazil is energy independent.
Mr. Narby,
Geology has very little to do with political leaning. Furthermore, after 8 years of the most opaque White House ever, I fail to see how you can realistically make a comment like that.
[...] Capitulates: Peak Oil Is Real Washington Capitulates: Peak Oil Is Real Washington Capitulates: Peak Oil Is Real [...]
Has anyone actually produced any oil or energy from algae?
Where and how much? And how much does it cost.
I don’t think it works. I think it’s an alternative fuel investment scam.
Show me actual numbers, not projections.
[...] is increasingly recognized as fact- even US Government reports acknowledge the difficulties that are presented by constrained production and increasing demand, [...]