Thursday, December 10, 2015

Peak Oil: are we seeing the real one?

World Supply-Demand November 2015


Art Berman reports on his blog the latest data from IEA. These data speak volumes about what has been happening in the oil markets during the past two years or so. The whole thing seems to have gone out of control, with everyone pumping as much as possible, worrying only about harming competitors and without too much concern about the overall disaster caused by overproduction. The excess has stimulated demand, but only weakly. The result has been the collapse of the oil price, that we are still seeing today.

It seems, now, that the market is slowly redressing the unbalance. Demand is growing, and supply seems to have peaked in July 2015. In a few months, we may go back to a situation where demand matches supply, at this point we'll see prices rising again. We'll likely see production going down, and the whole system regaining some kind of balance; at least for a while. For sure, the main element in the readjustment is the decline in the production from shales in the US (image from Ron Patterson).





Is the July peak "the" peak for all combustible liquids? We can't say yet, what we can say is that the period of oil glut has done a tremendous damage to the industry. Perhaps, we are starting right now the terminal decline of the world's oil industry; but we still have to wait to be sure. Americans, it seems, love boom and bust cycles and, if prices go up again, they might want to pour again money into the shale industry. The only sure thing is that fossil fuels must go, sooner or later.





16 comments:

  1. It's the peak Ugo! Probably!!

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  2. "peak Ugo"? An interesting concept....... :-)

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  3. I don't think the decline will be smooth. Tight oil is peaking in the US for now but will go up again.

    Will it ever rise above this latest peak? Definitely not.

    Will it ever rise as quickly as it did during the shale boom? Definitely not.

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  4. The best indicator of the peak will be when oil prices are at record levels for an extended period but production fails to exceed the previous peak. Since this recent period of overproduction took 3-4 years to develop with oil prices at record levels, I suggest that we wait until we see 3-4 years of very high prices, take a look at all-liquids production and then make the call. That said, I certainly hope this was the peak.

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  5. Hi Ugo,
    whats your opinion about the ETP-model of the Hillsgroup http://www.thehillsgroup.org/depletion2_002.htm ?
    As a physicist, i believe the thermodynamic approach is correct, and the conclusions of HG are logical. Please take a look at it. I would be highly delighted if you can comment on it.

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    Replies
    1. Yes, I knew that site. It is a straightforward application of the concept of EROEI. Seems to be good work, although I never resolved myself to pay the 38 euros for the full report

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  6. Hi there Ugo.

    I follow the statistics only on fossil liquids, and those were still growing quite well in the last data point. From the summer of 2014 to the summer of 2015 extraction went up by 4 Mb/d, about the same it grew the previous 8 years.

    Besides that, I understand this may not be straightforward for those not so familiar with Economics, but Supply is not the same as Extraction and Demand not the same as Consumption. Setting these terms straight is one contribution the "peak oil" community can still make.

    Regards.

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    1. Mmmmm.... this is an interesting point. Obviously, supply and production are not the same thing, however in the case of oil I thought they shouldn't be very different. In the EIA site cited by Berman, they show something that looks like the same curve shown by Berman, but they label it "production and consumption"

      It is here

      http://www.eia.gov/forecasts/steo/data.cfm?type=figures

      What do you think?

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    2. These monthly figures published by the EIA and the IEA refer strictly to production (or better said, extraction) and consumption. The difference between the two is what goes in or out of above ground stocks. Take this graph, for example:

      http://www.eia.gov/forecasts/steo/images/Fig32.png

      There are some folk that try to take conclusions regarding supply and demand from this data, but usually not very successfully.

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    3. Mr. Bardi,
      We have forwarded to you a link for downloading a copy of our full report.
      Thank You for your efforts,
      The Hill's Group

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    4. Thanks, will take a look asap

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    5. Hi Mr. Bardi,
      at "http://www.peak-oil.com/wp-content/uploads/2015/11/ETP-Modell_Total.pdf" you can find my interpretation of the HG study in german language. I am still struggling to convince people that the ETP-model is valid.

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  7. Does not factor the massive amount of debt currently crashing the economy.

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  8. Ugo, what do you think of Hansen's comments on a carbon tax rather than an emissions trading scheme (cap and trade)? Hear his speech here:
    http://www.ecoshock.net/downloads/ES_151209_LoFi.mp3

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    Replies
    1. I am afraid that neither will work, alas!

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)