A New Peak Looms

The bandwagon of those who insist that world oil production has peaked has really filled up in the past six months. Even big names like Matt Simmons threw caution to the wind and declared that May 2005 was the all-time world peak in oil production. His logic (besides two years of flat production data)?

If you look at the numbers and you follow what’s going on starting with Mexico’s giant Cantarell field which is now in a very serious state of decline and then you look at the North Sea and you see just the UK and Norway, it’s pretty obvious to me that those three areas alone could actually decline by between 800,000 and 1 million barrels a day in 2007.

That pretty well wipes out almost all the production gains coming onstream and in implicit in that it assumes that everyone else is flat.

So I think basically too many of our oil fields are too old. Too many now are in decline. The Middle East is basically out of capacity. they’re some projects that are being worked upon, but most don’t hit the market until 2008, 2009 and we’re running out of time.

… I am firmly of the belief that over the course of the next year or two, this issue of peak oil will replace global warming as an issue that we’re all worrying, debating and talking about.

I actually agree with him on that last bit (though I think the time frame will be more like 5 years), but that’s another story. Briefly, I think the vast majority of people will be ready to take their chances with global warming and scream for tar sands, CTL, and anything else that can prevent them from paying > $5/gal for gasoline. But that’s a digression I won’t get into now.

T. Boone Pickens has also said that we have peaked, but he has a history of being wrong on the issue. But during the last half of 2007, I heard a great many people go out on a limb and go on record as saying that world oil production peaked in 2005. But you know what can happen when you go out on a limb? Sometimes the limb breaks. (Actually, among the true Doomers, it seems that these episodes of limb-breaking have no long-lasting effects, as people who continue to be wrong on this issue never seem to lose credibility).

So, on to the point. I reported previously that October of 2007 saw the IEA declare a new peak in all-liquids production that shattered the previous peak by over a million barrels per day. The EIA has now confirmed the shattering of the previous all-liquids peak.

So, what does “all-liquids” mean? It basically covers all of the liquid sources of energy, which include ethanol and various other liquid energy sources. Therefore, it still gives the “post-peakers” a fig leaf when you suggest that a new peak has been set:

Wrong! We may or may not have a new peak month for Global Liquids Production. But Oil peaked in May of 2005 at 74,298,000 barrels per day. October 2007 oil production will come nowhere close to that figure.

However twenty years from now, no one will ask what month we peaked. They will ask what year we peaked. That peak year will be 2005. If they say “but what if you throw in natural gas liquids, ethanol, biodiesel and refinery process gain”? Then that year will probably be 2006. But it sure as hell will not be 2007.

The phrase “oil production” generally refers to the production of crude oil plus condensate. And in fact, the all-time production high for this to date is May of 2005 at 74,298,000 barrels per day. But yesterday, the EIA released the latest figures for world production, and October 2007 certainly did get close to that figure. The number for October was 74,124,000 barrels per day, only 0.2% below the previous peak. Of course, “close to the record” is different from breaking the record. However, the indications are that the record has already fallen, but we don’t yet have the data in.

In November, OPEC reportedly increased production by 40,000 barrels per day, and then by an additional 370,000 barrels per day in December. If those numbers hold (and they certainly might not) then we already have a new all-time production record that even Doomers can’t deny.

So, if that happens will they forget that the bandwagon for May 2005 peak was ever full? Or will they step up, admit to being wrong, and try to understand the reasons for being wrong? After all, it’s OK to be wrong, but it’s not OK to be consistently wrong and never learn from the mistakes.

I will make my own position on peak oil clear in my next essay, which will definitely be unpopular in some circles: Debunking Matt Simmons. (Note that I actually think Matt has done a great deal of good, but he is sometimes being taken seriously on issues that he doesn’t really understand. That is the purpose of the debunking essay.)

29 thoughts on “A New Peak Looms”

  1. I think tar sands and coal-to-liquids will be slowed enough (by capital investment, water and natural gas availability, as well as environmental fights) that we’ll be forced down the road to efficiency.

    And if we make good progress on that road, it will make everything else easier.

    (New report of China and methane hydrates – if those prove easy, or worse yet easy and “lossy” allowing methane release, we are in deeper trouble.)

  2. We have a severe case of definitional disfunctionality when it comes to discussing matters such as oil production. What does anybody mean by “oil production”?

    Look at two of the respectable sources for oil production data in 2006 — supposedly just reporting the facts.

    The Oil & Gas Journal Dec. 18, 2006 reported estimated total world oil production in 2006 to be 72.486 Million Bbl/Day.

    BP in their 2007 Statistical Review of World Energy reported 2006 total world oil production at 81.663 Milion Bbl/Day.

    So what was world oil production in 2006 — 72.5 MMBD or 81.7 MMBD? That is a difference of 9.2 MMBD, or 12.7%.

    BP includes refinery gain on processing. There are issues about condensate and LPG. Goodness knows what else.

    Seems like it would be hard to agree on what constitutes “peak oil” when we don’t even have a common understanding about what constitutes “oil”.

  3. Whether the peak was last year, next week, or 10 years from now I don’t really care. We all agree oil will become very, very, very expensive in the coming decade, and in the end that’s all that really matters.

    I’m much more interested in this, and would love to hear RR’s thoughts on it:

    I actually agree with him on that last bit, but that’s another story. Briefly, I think the vast majority of people will be ready to take their chances with global warming and scream for tar sands, CTL, and anything else that can prevent them from paying > $5/gal for gasoline. But that’s a digression I won’t get into now.

    I’m not convinced PO will become a mainstream issue in the next year or two, but I have noticed PO-aware people popping up more frequently lately. e.g. my wife’s friend’s mother has read a PO book recently.

    However, I agree with RR that when PO does hit critical mass in the public’s conciousness, people will start screaming for CTL, tar sands and anything that will fill their tank.


  4. This is more good news. I suspect all liquid fuel production will rise slowly, even with Thug States crimping production (re, never maintaiing Canterelli, or chasing out Westerners in Iran etc).
    Still, you guys are missing the BIG, BIG story: Peak Demand!
    At anywhere over $60-70 a barrel, forces are set in motion which lead to declines, not increases, in fossil oil demand.
    Already, fossil oil demand is falling in most of the developed world. Even nations such as Thailand are looking for 4 percent annual economic growth in 2008, but a 1 percent decline in fossil oil consumption. Sweden is shooting for total independence, as is Indonesia.
    We saw demand rise 3.1 percent in 2004, then 1.4 percent in 2005, then 0.7 percent in 2006 (BP stats). 2007? I suspect flattish. And 2008 is a down year.
    Check out the 1980s. Once global demand starts falling, it does not spring back. In 1990, the globe used no more oil than in 1980. (BP stats).
    I am not afraid of Peak Oil. We have alternatives and conservation to carry us through handsomely. Indeed, I think we can move to cleaner, domestic energy sources, such as PHEVs and solar power plants.
    The good news is that liquid fuel production is not going to fall off a cliff in one to five years. If it does peak in the next 10 years, it likely will be a long slow decline after that (and may rise again, if Thug States get less thuggy).
    Meanwhile, Libya, KSA and Kuwait are ginning up big output increases. Canada, the Gulf, and Brazil. South Africa.
    China and India looking at coal and jatropha.
    In five years, you may se fossil oil demand from China begin too go flat.
    And, if oil is still over $90, then look for PHEVs worldwide to start driving fosil oil demand down, way down.
    $100 was a perfect time to short oil. I wish I hadn’t done so at $80. At $92 it still is a good play.
    PS Kinuachrach: I agree with you on the crazy way oil figures are kept, and when it gets into reserves, it gets worse.
    I just go with whatever BP puts on their website, and trust they try to compare apples to apple every year.

  5. Unless there is a REALLY BIG increase in production, couldn’t this the so-called undulating plateau? Even if production goes up a few million bpd, I don’t see anything worth getting excited about, or even debating about. Instead of arguing about whether we’ve come to the peak or not, I think it’s better to expend our energy deciding what we’ll do when decline sets in. So debunking Matt Simmons may be interesting or fun, but it won’t keep our fleets of SUVs running.

  6. Even if production goes up a few million bpd, I don’t see anything worth getting excited about, or even debating about.

    The debate will be “Those peakers were wrong again. They will be wrong the next time.” To me, the danger is that we are encouraging complacence when the wrong peak is called again and again. I have had this discussion with people before when I try to convince them that change is needed. I have heard the response “I have heard that we were running out of oil for 30 years. I have learned to discount the message.”

    So debunking Matt Simmons may be interesting or fun, but it won’t keep our fleets of SUVs running.

    That’s not the purpose of a debunking. The purpose is to highlight the need to take their claims with a grain of salt. And Simmons has made some pretty outlandish claims that are accepted as fact because of who he is.


  7. What does anybody mean by “oil production”?

    As long as you are comparing like to like over different time frames, that’s what’s important. I can’t compare all-liquids last year to crude plus condensate this year. What I can compare is last year’s C+C to this year’s C+C.

    From a societal perspective, what we really care about is net energy available to run society. So, if we have a BTU of ethanol available, we have to discount that by the amount of BTUs that it took to produce the ethanol. In that sense, total liquids is not the appropriate measure, but then neither is crude plus condensate, since there are some alternatives other than C+C that do contribute net BTUs. So the true metric is somewhat less than total liquids and somewhat greater than C+C.


  8. Even if the public accepts peak oil there will be the question of decline: fast, slow, or with plateau.

    They’ll have to go through the stages that every peak oiler does: “oh no!” and then “wait, what does this really mean?”

  9. I’m not convinced PO will become a mainstream issue in the next year or two

    No, and I didn’t mean that I agreed with him on the time frame (and edited the essay to reflect that). Although I think it is realistic that in 5 years people are going to be much more concerned about high gas prices than they will about Global Warming. I personally see little reason for hope on this issue in the next 10 years.

    Ask yourself this question. If you put it to a popular vote, and people learned that GHG emissions could be arrested (hypothetically) if they were willing to pay $7/gallon of gasoline, what percentage would vote for that? My guess is that it would be well less than 20%, implying that GW concerns will give way to economic concerns.

  10. BTW, we are told that the man on the street does not trust scientists, but they keep on doing studies:

    “If you like fish, watch out for CO2. A Bering Sea experiment showed future oceans may have fewer fish, because future oceans may not support the productive, diatom-rich food webs that we have today.”

    I don’t know, maybe PO and GW are alike in that the action we get will depend on the events we are unlucky enough to experience.

    Do we have to wait for fishery crashes to believe they are possible?

  11. Would you offer them a stepped program or would you ask them to face $7 with the current fleet?

    If I was seriously trying to get a carbon tax implemented, not only would I offer them a stepped program and ample warning, but I would try to offset the increased carbon taxes with either tax credits or a lower income tax rate. That keeps the incentive to conserve, while penalizing those who refuse to lower their energy usage.

  12. Robert R wrote:
    I would try to offset the increased carbon taxes with either tax credits or a lower income tax rate.

    Fair enough, Robert, but that approach is getting dangerously close to endorsing those navel-gazing, “aren’t we better than ordinary people”, western environmental poseurs.

    We all know that somewhere between 2 & 4 billion human beings — people just like you and me — are living hopelessly constrained lives today because of lack of energy. What are western environmentalists doing for those people?

    Conservation is always good, but it is not the answer. Poor people can’t conserve their way to clean water supplies, good sanitation, decent health care.

    Globally, energy is a supply-side issue. We need a supply-side answer.

  13. Cone on Odograph. Even by your disappointing standards, this is crap. Let’s take the carbonpositive stove, for example:

    More than 2 billion people in developing countries burn traditional biomass fuels indoors for cooking and heating. According to the World Health Organization, the resulting indoor air pollution causes 1.6 million premature deaths each year, largely among women and children. …

    Whilst a considerable number of small stove-distribution initiatives have been undertaken to date, there have been very few successful large-scale projects. …

    The project aims [Emphasis Added] are to:

    manufacture, distribute, install and monitor the use of clean-burning stoves in Eastern and Southern Africa on a large scale
    secure carbon financing for the greenhouse gas emissions avoided.

    Crap! This is not something that HAS been done, this is yet another leftie effort to start a program which helps themselves while supposedly doing some good.

    Once the marks (sorry, donors) have been found, the enviros will undoubtedly rent themselves a nice office in some civilized country and pay lots of big fees to their friendly high-priced lawyers & consultants to secure the carbon credits. The donors’ money will purchase bureaucracy, not better technology.

    And at the end of it, there will still be 2 billion people burning whatever fuel they can find.

    Total left-wing self-congratulatory unproductive crap!

    We have a global energy supply issue — not enough energy to meet legitimate needs. When so-called environmentalists deal with that, they will be worthy of something more than our contempt.

  14. There are a countless small projects for sustainable development. Guess what? Each one, by itself, will not save the world.

    What’s your answer? Free oil for everybody? Who’s going to pay for that?

  15. Odograph — Stop trying to change the subject.

    What is the case for the existence of alleged anthropogenic global warming?

    This is not a trick question. I genuinely want to know. And since you want to see a world where all the dark-skinned people are using tinfoil reflectors to heat their lunch, you have a significant moral obligation to tell them (and us) why.

  16. Honestly, odograph — do you really believe your own bullshit?

    You consistently refuse to put forward any explanation for alleged anthropogenic global warming. When pressed, the best you can do is to point to an example of the usual scare-mongering alarmist pap — interesting only because is shows how far the National Geographic has fallen from the days when it was a respected publication.

    The article presents no case — NONE! Just the usual alarmist anecdotes, assertions about (flawed) model studies, references to the (discredited) IPCC, etc.

    From Alaska to the snowy peaks of the Andes the world is heating up right now, and fast. … The results aren’t pretty. … Flora and fauna are feeling the heat … The changes are happening largely out of sight … [Emphasis Added — You can’t see these terrible changes. Just trust us, they really truly are happening. Honest!].

    The theory of anthropogenic global warming rest on two logically distinct propostions :
    1) The planet is warming.
    2) Humans are causing that warming.

    The NG article simply asserts that both are true. This is not a supporting case. This is a religious statement of belief.

    Why is it so difficult for proponents of alleged anthropgenic global warming to provide a simple statement explaining why observations are not consistent with a continuation of natural processes?

  17. Odo, you really don’t pay much attention, do you? Maybe this is why you are so susceptible to pseudo-science.

    If you read back up the thread, you will see that I already made reference to realclimate.org.

    The so-called climate scientist got the sign of the adiabatic lapse rate wrong. This “scientist” thought that temperature increases with height in the troposphere.

    Credibility of realclimate.org — zero.

    But how does it feel to be you, Odograph? You have totally bought into the claims of alleged anthropogenic global warming; yet you are unable to put forward any kind of case at all for your belief. Pointing at the National Geographic or realclimate is not putting forward a case — it is simply chanting the saints’ names. Pure religion.

  18. I fell totally unsurprised.

    We saw days ago that you reject science, and scientists, and want to play a game where you and I are equal to them.

    It should stop and make any spectator think … is this all kinuachdrach has? Rejection of science?

    Yes, it is.

  19. couldn’t this the so-called undulating plateau

    I believe we’ve been there since 2005 and will remain there through 2015.

    there will be the question of decline: fast, slow, or with plateau

    Mathematically, it cannot be a steeep decline from where we are. Unless I’m missing something, an R/P ratio of 40 years implies that if a decline sets in now, we would decline at 2.5% per year, and the R/P ratio could remain constant throughout the decline. If the production decline is steeper than that, it implies that the R/P ratio will rise in later years. This is impossible by any definition of R, which is reserves you expect to produce economically, and is not to be confused with total resources in palce. A rising R/P ratio means you’ll never produce some of the R. A steep decline is possible only if we keep P high and the R/P ratio declines as R shrinks. If P plateaus and we don’t manage to increase R, then we could go for a decade or two at the same P until the R/P ratio shrinks to, say, 20, at which point a 5% decline would be mathematically possible. Regions well into decline (like N.A.) have R/P ratios in the 10-12 range. I don’t think any region is in steep decline with an R/P ratio of 100+. If I’ve missed something obvious here, someone please set me straight.

  20. is this all kinuachdrach has? Rejection of science?

    Learn how to concede gracefully, little Odograph. A useful life skill.

    You have consistently refused to talk about data or observations — if anyone is rejecting science, it is you. And you know that.

    You simply have blind faith in your quasi-religious beliefs about alleged anthropogenic global warming. Don’t be ashamed of your quasi-religious beliefs — but admit to yourself that is what they really are.

  21. Shrug.

    Not only do you not have the science, you need to lie about my position. I said:

    “I can doubt, but still (a) recognize the preponderance of scientific opinion, and (b) support moderate and appropriate actions.”

    If you can’t tell the truth about that .. what can we think?

  22. Odo — you can try to duck & weave all you want, but the facts are clear: you cannot explain (a) whether or not the planet is undergoing current warming, and (b) if so, whether human activities are responsible.

    Why are you lieing to yourself — pretending that your faith is based on science? Doesn’t matter to me. Doesn’t matter to anyone else who happens to read this thread. But it should matter to you. You have to live with yourself.

  23. At this point we are repeating ourselves, so it is obviously time to stop.

    I say “if you want to understand, go read the science.”

    You say “no, i reject the science YOU have to convince me.”

    I am not a PHD climatologist. As far as I know you are not a PHD climatologist. You are just a typical denier, in a backwater thread, pretending to be as important as the National Science Foundation or something.

    Gosh, I don’t know why they don’t all just ask you, eh?

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