Friday, December 14, 2012

The Bumpy Plateau Tilts Upward


Every month I post the numbers for total oil supply, which seems to me the best way to get a sense for the issues around peak oil: how much the global oil supply is actually able to increase or decrease.

However, when you look closely, "oil" turns out to be a slippery concept with the global liquid fuel stream being made up of a variety of things, not all of which are altogether oil-like.  The EIA is the agency that keeps the best track of this, so every few months I like to post some graphs based on their breakdown.  The components, through August 2012, look as follows:


Here, crude and condensate (C&C: by far the largest part of the stream) are the most truly oil - hydrocarbon liquids that come out of the ground.  The other components are NGLs - molecules from ethane to pentane that are condensed out of the natural gas stream and may or may not be liquid depending on circumstances.  These are not exactly oil but may substitute for oil in various ways - for example, some butane is added to winter gasoline, propane competes with heating oil as a rural heating fuel, and NGLs and lighter crude fractions are substitutes to some degree as petrochemical feedstocks.  So it's not entirely unfair to consider them together with the liquid fuel stream, but nor is it entirely satisfactory.

The "other liquids" are mainly biofuels - ethanol and biodiesel that ultimately come from devoting portions of the world's cropland to fuel production.  Meanwhile, refinery gains reflect the fact that some heavier crudes expand during refining (this isn't really an energy gain but is an artifact of our tradition of using volume units for liquid fuels).

This next graph shows the C&C on the right scale and the others on the left scale, making it easier to compare changes (a 2mbd increase will be the same size on the graph for all components):



For a long time, the C&C was essentially flat and one could truthfully argue that all the increase in total liquids was coming from NGLs and biofuels (ie that "real oil" was plateaued or peaking).  However, this is no longer true: global C&C production has increased by about 2mbd since the beginning of 2005.  Over eight years, this is only a 0.33% average rate of growth - an incredibly slow crawl upward.  However, it seems indisputable that it has grown.

We seem to be on a bumpy plateau of global oil production, but that plateau has had a very slight upward tilt.

15 comments:

Luke Smith said...

The 'bumpy plateau', I would think, is a result of oil price related investment. As the price of oil increases, it should reason that logically high prices will pull investment money from elsewhere in the economy, and distribute that money toward marginal oil plays. The high prices mean high returns but marginal oil prospects mean high risk.

Greg T. Jeffers said...

My sense is that if this is what the OECD and importing nation's economies look like with .33% increase in C&C production then when the inevitable contraction takes place the economic fallout will be pronounced.

petemason said...

In simple language, enhanced recovery in Russia, saudi arabia and possibly the usa, has arrested the decline in conventional oils in the largest producers. Then add three huge efforts to extract oil by fracking and from tar sands and you see a small increase in oil production. And it seems no one can really guess the short term outcome. With some confidence one can suggest oil production will decline by 2020.

Island Man said...

One way of looking at what has happened is:
(1) KSA has made up for the Iran sanctions-led shortfall
(2) US tight oil has unexpectedly provided 1.2 mbopd
(3) Iraq has increased its production by about 0.8 mbopd.
Hence the 2 mbopd increase over 7 years.

sunbeam said...

I've given up on "evangelizing" other people about the whole Peak Oil thing.

As of now I kind of look at it from the perspective of someone who is reading a history book 100 years in the future.

My thinking is "Wow that is an interesting fact." Doesn't change a whole lot though.

I think Stuart has a theory that Iraq is the last really good undeveloped oil province left on land. Be interesting to know exactly what they have.

Someone knows, that's for sure. The cynic in me says it's not as good as Saudi Arabia was, because otherwise the US wouldn't have let it escape it's clutches.

cleggg said...

Good post. I would not be surprised to see N.American energy-independence by 2025. My real concern is that the industrializing world will be demanding vastly more oil over the next few decades. Some estimates say world oil demand will hit 110M-120M b/d by 2040. After studying oil for almost 10 years, I just don't see how we can deliver 120M b/d of affordable oil.

On the two major energy fronts moving forward, I'm very optimistic about electricity but quite pessimistic about oil. I know that markets adjust to whatever is affordable. This probably means that much of what today is oil-powered will fairly quickly become NG- and EV-powered. Sasol just announced the largest foreign infrastructure investment in U.S. history -- a $30B natural-gas-to-oil conversion plant that will do 100k b/d. Sasol is forecasting, as I am, that oil will get increasingly expensive, as U.S. NG remains relatively affordable.

I think we'll see installed small PV for less than $1.00/DCW by 2030 ($0.035/kwh median U.S. raw cost), and certainly no later than 2040. I think this trend towards cheaper electricity will signal vastly greater investment into storage and EV mobility research, which will help offset much of forecasted vehicle oil demand growth over the next few decades. The "market" can't magically make cheap oil, but it can trigger massive structural adjustments.

Unknown said...

big deal, we've multiplied by 6x E&P CAPEX spent from about USD 100 billion/annum to almost USD 600b/annum to deliver only +2 MMbbls/d of production...

Michael said...

And not a single peak oil evangelist will have the humility to say they were WRONG.

No, they will continue to sell their crappy books and make their hare-brained predictions.

Mr. Sunshine said...

I cannot believe I just traded for a new Ford hybrid. With this level of explosive recovery in supply growth, gas will be $3.00 a gallon again before I get any ROI on that 47 mpg it gets.

Stephen B. said...

Michael, fear not. There *will* be a peak, unless you think crude and condensate liquids production can increase forever.

Antonio Gallo said...

This graph is not too much meaningful, you have to also show how much the price of oil has risen.

See this graph, where you can see the price on the x-axis and the production on the y-axis:

http://www.lanxsatura.org/admin/media/articoli/produzione_prezzo_petrolio/produzione_prezzo_petrolio_giugno_2012.png

@Michael: please, just see the Brent price (that is the global Benchmark). Do you really think that Peak Oil is a myth (when before 2000 the price was 20 dollars)? Most of the studies see the start of the decline after 2010, see Laherrère (2010-2020), Skrebowski (2012), Upsala oil center (2012-2018) and so on. Colin Campbel was wrong (2010) but really, do you think one or two year are really important?

116681512062944565861 said...

@Michael,

All this unconventional oil has been produced due to rising prices. If the world has easily recovered fossil fuels just lying around, why would we be do the difficult and expensive work (technologically impressive to be sure) of drilling in 5,000 feet of ocean water? For fun?

Was it just for giggle that we lost 11 Men and almost ruined the Gulf of Mexico in 2010? Do you think pressure washing sand in Alberta to get the oil off of it (with an EROEI as low as 8:1 vs. 100:1 in the days of Pennsylvania light sweet crude) would be econmical if not for $80-$100/barrel prices?

In 2005 the U.S. spent $700 million per day on imported oil. In 2012 we spend $900 million per day.

Gee what amazing progress.

DurangoKid said...

0.33% growth is anemic. And it kind of matches our anemic economy. Robust growth, the kind that is alleged to get us out of this recession, needs robust growth in energy production. In a down economy consumers are more interested in debt service than consuming. To get the economy going again, consumers need a market for their labor. Making stuff needs energy. To get people making stuff the economy cannot tolerate a rise in energy prices which seems inevitable at a 0.33% growth rate in hydrocarbon production. It hardly seems to matter if oil production is peaking. We're still in a situation where the price/production problem stymies growth. And what's with hoping for increased oil production? Doesn't that create CO2 problems in the atmosphere? Isn't that like planning a party where the Kool Aide is laced with cyanide?

Ashley said...

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http://www.nytimes.com/interactive/us/natural-gas-drilling-down-documents-4.html

Nate H said...

Peak oil is about 2 races:

1) the race between technology and depletion (measured ultimately by how many societal resources we devote towards energy extraction, and how much energy is left over for non-energy society) and

2) the race between higher costs of extraction and societies abilitiy to afford them.

Given above, peak oil was never really about maximum production, but maximum affordability. I continue to believe that societal wealth/ability to purchase oil, will decline faster than natural well decline rates during next decade (which then will accelerate decline rates). How we adjust to that is the big question