In what must be an imminent Doomer’s worst nightmare, the IEA has signaled that October 2007 was the highest ever oil production month on record. After reporting that September production came in at 85.1 million barrels per day, the IEA is reporting for October:
World oil supply saw a monthly gain of 1.4 mb/d in October, as non-OPEC outages receded and OPEC volumes increased. Recovery in China and Azerbaijan plus rising Russian output boosted non-OPEC supplies. Continued outages in the OECD see non-OPEC supply levelling off in November before resuming growth in December.
The previous all-time high in July 2006 – which Doomers had pointed at for over a year now as “Peak Oil in the rearview mirror” – had been 85.467 million barrels per day. If the September number is not revised down (which it certainly could be), and the October number stands, the previous record will be shattered by over a million barrels a day.
So, what do you think people are going to think about those who confidently predicted that 2005, and then later 2006 was the peak? “They are crying wolf again.” This is exactly why I have urged caution with people when they are confidently proclaiming that oil production has peaked. The evidence was not strong enough to make such confident proclamations, and credibility is being lost each time a new production record is set. Meanwhile, we still have a pending energy crisis, and lost credibility won’t help us win any arguments.
Other news from the report:
Global demand for 4Q07 is revised down by 0.5 mb/d given high prices, weaker-than-expected data from the US and FSU, and delays to European heating oil restocking. Coupled with lower GDP growth, these revisions extend to the 2008 forecast, which has been adjusted down by 0.3 mb/d.
So, let’s review. We have an apparent all time high oil supply in October, and at the same time demand is being revised downward. Is it any wonder that oil is quickly back-pedaling from $100? The speculators have taken some big losses this week, and are in serious danger of steeper losses by Friday. I expect the chorus of voices who were justifying $100 oil a couple of weeks ago to start dying down, and the analysts to quickly develop amnesia about those forecasts.
We are not likely to recognize the peak until it is maybe 5-10 years in the rear view mirror.
With 80% of the world’s reserves locked up in a socialist resource development model, we have a political/economic peak, not a technical one.
The oil-will-run-out-soon meme is older than I am.
I never bought into the idea that oil use was exempt from economics. As the price goes up, people used less and alternatives are developed.
Now oil-shale is finally economical, China in investing in pebble-bed nuclear reactors, and there are fusion research projects that actually look promising.
If supplies are up and demand is down, doesn’t that suggest that inventories will soon begin to surge upwards? Maybe Michael Lynch was right and we’ll soon see $60 crude.
Robert–the idea of peak production is problematic. Clearly record production this month proves that the 2005 or 2006 production highs were not proof of Hubbert’s peak. That’s fine. My problem is all this discussion of peak production goes on without considering that production is the solution to the supply/demand function of price. It seems to me that if oil was still $50/barrel total demand would have been higher…could production have been significantly higher than 85M barrels/day? Unfortunately if we are finally seeing demand destruction, production matching demand at $80-100/barrel could well obscure indefinitely any clearer understanding of geologic/economic/technological production capacity. At that point, the foolishness of mindless extrapolation gives us the infamous “undulating peak”.
Let’s calmly consider the situation.
First, yes, two years down the road is too soon to proclaim the peak.
Second, considering the level of world consumption, 1 m/b is not a huge leap. Nothing to sneeze at, but also not worth getting too excited about.
Third, if consumption is down, WHERE is it down? It would be interesting to see some actual figures. Are poor people and poor countries doing most of the demand destruction?
Fourth, lower demand and higher production create a situation that is a double-edged sword. Lower prices will take some pressure off poor people and poor countries. That’s good. On the other hand, lower prices will also stimulate demand and generate more pollution. Further, while an uptick in production could give humanity some breathing room and more time to work on alternatives, we shouldn’t count too much on that. Why? Because people and governments don’t want to change, and will only do so when put up against the wall. The main effect of falling oil prices will be to make everyone breathe a sigh of relief and consume with abandon. In that sense, $100 oil is one of the best things that could happen to us. In the long run, the cheaper oil gets, the worse off we’ll be when decline really does set in. There is already a lot of needless suffering and death, and it’s going to be so much worse in a world counting on more cheap oil and unprepared for what will inevitably come.
I would agree with rice farmer.
If production goes up 1.6%, that really doesn’t matter when China’s economy is growing 10%. In fact, it is utterly trivial.
Secondly, the whole talk about ‘demand destruction’ is highly speculative and dubious. Again, China’s demand hasn’t dropped and growths like a Behemoth. It is irrelevant if the US demand is flat or falls ever-so-slightly.
So debating about the ‘peak’ is rather bogus. We can all agree that world oil production has PLATEAUED. And meanwhile, the global economy, particularly China, continues to see enormous growth.
The price of oil will continue to rise in a volatile fashion. One disruption of supply at this point and the joke will be on those old timers who rest on the convenient assumptions of the past. They got through this month, but now the story is finally out of the bag. Even so, Pelosi et al just cut any support for alternative energy; we can see the writing on the wall: Bring it on!
China is the second largest importer of crude, behind the US, but well behind. They consume about 7.2 mil. barrels/day, importing not quite half of that. The US consumes 20 mil. b/d (about 25% of the world’s production) and imports 12. So yes, the US still matters.
Petroleum is used primarily as a transportation fuel. China uses some to generate power, in very inefficient oil fired boilers. Many of these old boilers will give way to newer coal fired plants and the Three Gorges dam project in 2009. Oil can’t compete with either hydro or coal on the margin.
Kingofkaty: Yes!
The dominance of thug states in the world oil market is the reason for lagging production of the past several years.
We may see constrained supplies for years. It is not Peak Oil. It is Thug Oil.
That being said, demand is now falling. Interesting world ahead. Will demand fall for many years? I say yes.
And don’t overestimate China. The USA uses 1/4 of world’s oil. And China is developing alternatives galore. So is India.
Remember, prices only started rising a few years back, and gradually, if steadily. Reaction time is slow.
Look for China’s demand to start flattening out soon. No more 10 percent annual gains.
We are at Peak Demand now, and that is globally. Hell’s Bells, global demand only grw by 0.7 pecent last year. Why would you think it would be more this year?
The doomsters had a good run, but the worst is behind us now. The tide has turned.
The world ahead will be very interesting, and I suspect we will reach a more prosperous and cleaner world, thanks to the inventiveness of man, and free enterprise systems.
In five years, the oil curse will look worse than ever. The oil Thug States have no intellectual capital, no sense of development, fair play, respect for minorities or women. And now their one commodity has topped out. Yet they lack the will, discipline and courage to change. They are dinosaurs, just like fossil oil.
The only sadness in this is the millions of people who live in Oil Thug regimes and who will never know a better life.
So, no energy catastrophes ahead. I think it just gets better from here on.
While I’m not convinced thing will always get better and better, I think the attraction of doomer porn is being able to feel superior to everybody else because you know something important other people who are richer, prettier, or more respected don’t get.
I suspect despite the protests by doomers on TOD that other people don’t get peak oil are false. They like to feel like lonely pophets.
I don’t think the exact peak is relevant anyway. We appear to be on a bumpy plateau that may last for years and will require us to make better use of what we produce as we continue to expand the world’s economy.
I find it difficult to imagine the world will ever produce more than 95mpd. I think we could theoretically have reached that level if we had drilled heavily in places like ANWR and the offshore US, and if the reserves of Venezuela, Iraq, and some other countries had not been mismanaged. I kinda like it better this way – the plateau will make it easier for us to manage the changes we need to make.
I can see I may be a minority view on this blog.
1) World population is going up.
2) World demand for oil is, by that fact alone, going up.
3) The Chinese and Indian economies are increasingly dominant, growing industrial economies with variegated petroleum needs
4) World oil production has plateaued
5) The price of oil will continue to go up and will soon top $100/b
6) Read the study by Energy Watch Group if you have not already done so. You don’t have to agree with it, but I get a sense that some folks that post to this blog have read that report yet. Read the Hirsch Report. Read the ASPO crowd’s books if you haven’t already.
7) Then, if you’ve read all that stuff, you’ll be on the same page with me.
8) I like a bet and I tend to make money based on my knowledge of macroeconomic events.
9) If there’s anybody who wants to bet that oil is going down to $60, I’ve got a $1000 says your going to be wrong. Name a time framework within the next year and we can set up a paypal account to hold the funds.
10) Any takers?
I can see I may be a minority view on this blog.
Believe it or not, your position is not so far off from mine. I expect a peak – in the not too distant future – and Peak Lite between now and then. My beef has long been with Doomers who so confidently assert that they know when peak was, and they know what the consequences will be.
Cheers, RR
Let me tackle some of your points:
1) World population is going up. True
2) World demand for oil is, by that fact alone, going up.
Maybe not. Petroleum is used primarily as a transportation fuel. Where will all these Chinese & Indians drive? The US urbanized/suburbanized based on cheap domestic oil. China and India aren’t following that model.
3) The Chinese and Indian economies are increasingly dominant, growing industrial economies with variegated petroleum needs Yes, but there are alternaties for industrial energy needs: coal, natural gas, nuclear, renewables. No ready alternatives for transportation fuel. Just because these economies are growing doesn’t mean that petroleum use will grow at the same rate.
4) World oil production has plateaued Perhaps under the current development scenario. But there is lots more oil in Venezuela and Saudi Arabia that hasn’t been touched yet. Kashagan in the Caspian Sea has yet to produce its first barrel of oil. Oddly enough, at $50 oil you might see more production as countries try to maintain their petrodollar revenue streams.
5) The price of oil will continue to go up and will soon top $100/b Perhaps. It also depends on the value of the dollar.
6) Read the study by Energy Watch Group if you have not already done so. You don’t have to agree with it, but I get a sense that some folks that post to this blog have read that report yet. Read the Hirsch Report. Read the ASPO crowd’s books if you haven’t already. Been there, done that. Aren’t they all doomers? Maybe you should read CERA, Wood MacKenzie, and other experts who look at the real data to get a sense of the other side.
7) Then, if you’ve read all that stuff, you’ll be on the same page with me. Assuming I think the doomers are credible.
8) I like a bet and I tend to make money based on my knowledge of macroeconomic events. Me too, that is partly why they pay me. But if I could predict market prices I wouldn’t be here.
9) If there’s anybody who wants to bet that oil is going down to $60, I’ve got a $1000 says your going to be wrong. Name a time framework within the next year and we can set up a paypal account to hold the funds. Not within a year. Maybe 5 years.
10) Any takers? See #8 above.
I’ve lived through this cycle a couple of times. When prices are high, nobody sees how they can go lower. And when they are low, they think it will stay that way forever. I suppose if we live long enough the doomers will be right. By then in might not matter, we will have electrified our transportation and moved on to fusion or something else by then.
Sorry, but I’m confused here. Robert, you say the latest IEA numbers have global production at 85.1 Mbpd, but in July 2006, you say production was 85.4. And yet, the 85.1Mbpd is a new record?
Clarify?
Thanks.
rb
Sorry, but I’m confused here. Robert, you say the latest IEA numbers have global production at 85.1 Mbpd, but in July 2006, you say production was 85.4.
Their reported number for September was 85.1. In October, they said that supply added another 1.4, which will push the total to 86.5, presuming numbers are revised down (which they sometimes are).
So the July 2006 IEA local peak was 86.2 mb/d (after being revised upward) according to
http://omrpublic.iea.org/omrarchive/12sep06sup.pdf
And that was surpassed in November 2007 at 86.5 mb/d according to
http://omrpublic.iea.org/omrarchive/14dec07sup.pdf
87.0 mb/d in Dec 07, 87.2 mb/d in Jan 08 and 87.5 mb/d in Feb 08. Four months in a row seems more than just an aberration.
These numbers are higher than the EIA numbers. Does this mean it includes crude oil that the doomers don’t consider to be “conventional” enough to count?
Clee, yes those numbers you mentioned refer to “All liquids.” But the crude plus condensate number was also surpassed, at least in the preliminary numbers, for January.