Washington Capitulates: Peak Oil Is Real

[GliderGuider]

Washington Capitulates: Peak Oil Is Real

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.

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.

(...)

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.

Projected production 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 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.

[poopfuel]

1. another good link, simillar conclusion ultimately

http://seekingalpha.com/article/159517-expect-oil-prices-to-rise-three-major-oil-exporters-warn-about-production

[Nederland]

2. It is not an admission of Peak Oil

It is simply revising projections downwards due to a global recession.

[Terry in Austin]

3. Downward revisions

You say the EIA's revisions were because of the recession. Mm. Come to that, we could just as well say it was because of the coffee, or a choir of angels, or some other agent of revelation.

Look, these are the guys whose "production projections" for years were simply a ditto of projected demand -- their admitted methodology was just to assume that there would always be sufficient supply. They're just beginning to wake up from that, apparently, and that's good.

Still, a revision down to 107 mbd is one hearty chuckle -- I definitely want some of what they're smoking. They don't say where all that new oil is supposed to be come from. Fact is, all the new developments tracked in Petroleum Review "megaprojects" never get much above 5 mbd of new oil per year, going out to 2019.

That just barely replaces the world production decline rate, now estimated by the IEA at 6.7%, and does that only for the next couple of years, and then only if demand stays flat. But what it definitely isn't going to do is get us anywhere above the current 85 mbd production level, let alone 107 mbd.

[Nederland]

4. We will see

I wonder, how long has the EIA been doing these projections? I'd be curious to see what their track record is like...

[Terry in Austin]

5. Go for it -- seriously

Oil dependency is one issue that's vital for us all to be as well-informed about as possible. Too much FUD, not enough time!

:toast:

[joshcryer]

6. The OP makes the EIA report out to be preducting production capacity losses.

It's predicting production demand losses.

6 million barrels per day is not that much.

[wuvuj]

7. It's not PEAK OIL....necessarily

...it's a PRICE LOW. If demand goes up and oil availability plateaus....this is effectively...peak oil.

If it costs more to get oil out of the ground...and/or the quality of the oil is less...this is a PRICE LOW.

The 2 oil wars...CONFIRM...a long expected uptrend in oil prices.

[GliderGuider]

8. Supply plateau, price gyration

From mid 2004 until mid 2009 oil prices have gone from $40 to $140 and back to $40, and now back to $70. Over that five year period the supply did not budge from a 73 mbpd plateau. For five years the the oil supply has not shown any response to market signals. If the concept of a free market in commodities has any validity whatsoever, this is a very strong indication that the supply is being constrained by non-market factors.

[Nederland]

9. Oil Markets

There is no doubt the oil prices in general are subject to non-market factors. Political instability, government manipulation, and speculators all affect the price in ways that have nothing to do with supply and demand. However, I have to comment on these two sentences:

From mid 2004 until mid 2009 oil prices have gone from $40 to $140 and back to $40, and now back to $70. Over that five year period the supply did not budge from a 73 mbpd plateau. For five years the the oil supply has not shown any response to market signals.

You could easily write these exact same sentences to describe the period from 1978 to 1986. From 1978 to 1986 oil prices went from $15 to $37 and then back down to $15. During that time of historic high prices, oil production actually dropped by over 10%. So what does an analysis of oil production numbers and oil prices glean us?

Absolutely nothing.

[Terry in Austin]

10. Oil production numbers mean nothing?

What an extraordinary claim!

Peak oil is all about the numbers. Are you sure you know what they are?

[joshcryer]

12. I disagree about production in a vacuum, but if tied to prices...

...it doesn't give us much to go by. :/

[Nederland]

13. You don't understand Peak Oil Theory

Peak Oil is not about looking at two pairs of numbers, it is about looking at reams and reams of data on individuals fields and subjecting them to intense analysis. If you think that anything--anything at all--can be gleaned from looking at two numbers, global production and global price, you are sadly mistaken. I suggest you read up on what Peak Oil is actually about.

[Terry in Austin]

14. Priceless!

Peak Oil is not about... I suggest you read up on what Peak Oil is actually about.

Now that was a good one! Let me catch my breath... I've gotta say, you're in top form here, my friend.

No, really -- at this point, I'm starting to get this kind of lurid curiosity about just how much you're willing to presume.

[Nederland]

15. Epic Fail

Try actually responding to my post and answer a simple question: what can a person predict by looking only at global oil production and global oil price?

I'll wait for your answer.

[wuvuj]

11. You could draw a trendline from...

...$20 to $80...or...and an "exponentially" curved line from $20 to $85?

Would the lines predict anything if you did?

Not sure what if anything would cause the price to head down in a major way....too many factors pushing it up?