“This is an historic shift that’s occurring, recalling the time before World War II when the U.S. and its neighbors in the hemisphere were the world’s main source of oil,” said Daniel Yergin, an American oil historian."
Cassandra da Rat in action...
Message 27644070
Cassandra da Rat believes there will be an article tomorrow in the WSJ by Daniel Yergin.
Here's a reply to it.
westexas on September 17, 2011 - 11:06am Permalink
My responses on the WSJ website:
Part One
The EIA shows that global annual crude + condensate production (C+C) has been between 73 and 74 mbpd (million barrels per day) since 2005, except for 2009, and BP shows that global annual total petroleum liquids production has been between 81 and 82 mbpd since 2005, except for 2009. In both cases, this was in marked contrast to the rapid increase in production that we saw from 2002 to 2005. Some people might call this "Peak Oil,” and we appear to have hit the plateau in 2005, not some time around mid-century.
?Only if we include biofuels have seen a material increase in global total liquids production.??
In the US, there are some good stories about rising Mid-continent production, and US (C+C) production has rebounded from the hurricane related decline that started in 2005, but 2010 production was only very slightly above the pre-hurricane level that we saw in 2004, and monthly US production has been between 5.4 and 5.6 mbpd since the fourth quarter of 2009, versus the 1970 peak of 9.6 mbpd. Incidentally, US net oil imports of crude oil plus products have fallen since 2005, primarily as a result of a large reduction in demand, because of rising oil prices (which Mr. Yergin predicted would not happen), but EIA data show that the US is still reliant on crude oil imports for two out of every three barrels of oil that we process in US refineries. ??
However, the real story is Global Net Oil Exports (GNE), which have shown a measurable multimillion barrel per day decline since 2005, and which are measured in terms of total petroleum liquids, with 21 of the top 33 net oil exporters showing lower net oil exports in 2010, versus 2005. An additional metric is Available Net Exports (ANE), which we define as GNE less Chindia's combined net oil imports. ANE have fallen at an average volumetric rate of about one mbpd per year from 2005 to 2010, from about 40 mbpd in 2005 to about 35 mbpd in 2010 (BP + Minor EIA data, total petroleum liquids).??
At the current rate of increase in the ratio of Chindia's net imports to GNE, Chindia would consume 100% of GNE in about 20 years. Contrary to Mr. Yergin’s sunny pronouncements, what the data show is that developed countries like the US are being forced to take a declining share of a falling volume of GNE. In fact, our work suggests that the US is well on its way to “freedom” from its reliance on foreign sources of oil, just not in the way that most people hoped.??
And for more information on some of Daniel Yergin's prior predictions, do a Google Search for: Daniel Yergin Day. ??In the “Daniel Yergin Day” article, I highlight Mr. Yergin’s prediction, in a November, 2004 interview in Forbes, that oil prices would be back to a long term price ceiling of $38 by late 2005--because of a steady increase in global crude oil production. It turned out that Mr. Yergin’s predicted price ceiling has so far been the price floor. The lowest monthly spot crude oil price that the EIA so far shows for post-November, 2004 is $39. ??
I suspect that just as Mr. Yergin was perfectly wrong about oil prices, he may be confidently calling for decades of rising production, just as we come off the current production plateau and just as an accelerating decline in Global Net Exports kicks in.
Part Two
You will find one of our articles if you do a Google Search for: Peak Oil Versus Peak Exports. ??In our "Peak Oil Versus Peak Exports" article, we show the 1972 Texas production peak lined up with the 1999 North Sea peak. These two regions, which accounted for about 9% of total global cumulative crude oil production through 2005, were developed by private companies, using the best available technology, with virtually no restrictions on drilling, and both regions have shown clearly defined peaks, with production declines that corresponded to rapid increase in oil prices. In other words, Peaks Happen, and global crude oil production consists of the sum of discrete regions like Texas and the North Sea. ??
Incidentally, just like the overall US, Texas has shown an increase in production, but Texas Railroad Commission data show that 2010 production is still below one mbpd, versus a 1972 peak of about 3.5 mbpd.
?Slowly rising global unconventional production will help, but Canada for example has increased their net oil exports by only 0.25 mbpd over the last five years. Over the same five year period, net oil exports from Saudi Arabia fell by 1.9 mbpd. In other words, we would have needed about eight Canadas just to offset the five year decline in net oil exports from Saudi Arabia.??
Regarding Saudi Arabia, our work suggests that Saudi Arabia, in 2005, may have been at the same stage of depletion at which the prior swing producer, Texas peaked in 1972. In any case, Saudi annual crude oil production has been below their 2005 annual rate for five years, with four of the past five years showing year over year increases in oil prices. This was in marked contrast to the rapid increase in production that they demonstrated from 2002 to 2005. Our modeling work suggest that Saudi Arabia will probably be approaching zero net oil exports some time around 2030 to 2035, in 20 to 25 years. ??
So far, the BP data base shows a 20% decline in annual Saudi net oil exports from 2005 to 2010, and if we extrapolate the Saudi's 2005 to 2010 rate of increase in their ratio of consumption to production, they would approach 100%, and thus zero net oil exports, in only 14 years.
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Permalink | A couple of points.
First, in terms of cash flow, because of rising oil prices Saudi Arabia has shown increasing cash flow from export sales, even as the volume of the net exports fell by 20% over a five year period. I call this a Phase One decline. In a Phase Two decline, generally rising oil prices can no longer offset the volumetric decline in oil exports, and their cash flow from export sales would decline.
Second, 21 of the top 33 net oil exporters showed net export declines from 2005 to 2010. So far, there was not a single case of an exporter cutting their consumption sufficiently so that their net export decline rate was less than their production decline rate.
Collectively, the 21 declining exporters showed a -2.3%/year rate of change in production, a +3%/year rate of change in consumption and a resulting -4.4%/year rate of change in net exports, from 2005 to 2010. If we extrapolate the production and consumption rates of change, the combined net exports from these 21 countries would fall from 25 mbpd in 2010 to 13 mbpd in 2020, almost a 50% decline.
Having said that, I generally, but not always, talk about when net oil exporters will "approach" zero net oil exports, but in any case I think that the first 80% decline in net exports is more important than the last 20% decline in net exports.
Incidentally, my favorite part of the essay was where Yergin credits rising US oil production for the 2005 to 2010 decline in US net oil imports of crude + refined products. This is partly true, but about three-fourths of the five year decline in US net oil imports was due to reduced consumption, which was largely a result of US annual oil prices averaging about $72 for 2005 to 2010 inclusive, versus Yergin's predicted price ceiling of $38, and post-2004 monthly spot crude oil prices have so far never been below $39.
So, he uses a decline in US consumption-resulting in a decline in US net oil imports, resulting from a price increase he said wouldn't happen--to refute Peak Oil arguments. It's certainly a novel approach.
As I said the other day, I am reminded of the old joke about a woman who walks in and finds her husband in bed with another woman. He denies that he is in bed with another woman, and asks, "Who are you going to believe, me or your lying eyes?" That is pretty much what is going on now among the Cornucopian Crowd. The data are there, but they don't want you to believe what you are seeing:
http://i1095.photobucket.com/albums/i475/westexas/Slide1-13.jpg
(Global Net Exports & Available Net Exports) |
