Monday, January 4, 2016

Peak Oil? What Peak Oil?



It is unbelievable how many times I've heard people telling me "the US has become self-sufficient in oil production," a group that includes some respectable members of the EU parliament. This is probably due to the confusion that the media have made on the fact that the US production has recently surpassed the US imports of oil. It is true, but that tells you nothing of how much oil the US still imports. And that is, actually, much more than it was at the time of the oil crisis and domestic consumption is on the increase (as you see in the figure above, from Art Berman's blog)

This misperception on the actual dependence of the US on imports is probably one of the reasons that led to the recent lifting of the ban on US exports, that dated from the time of the great oil crisis of the 1970s

Art Berman clarifies the situation and wonders why "consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher?" Here is an excerpt from his post.

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The Crude Oil Export Ban–What, Me Worry About Peak Oil?

by Art Berman

Posted in The Petroleum Truth Report on December 27, 2015


Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer.

The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo.

The EPCA not only banned the export of crude oil but also established the Strategic Petroleum Reserve. Both measures were intended to keep more oil at home in order to make the U.S. less dependent on imported oil. A 55 mile-per-hour national speed limit was established to force conservation, and the International Energy Agency (IEA) was founded to better monitor and predict global oil supply and demand trends.

Above all, the export ban acknowledged that declining domestic supply and increased imports had made the country vulnerable to economic disruption. Its repeal last week suggests that there is no longer any risk associated with dependence on foreign oil.


What, Me Worry?

The tight oil revolution has returned U.S. crude oil production almost to its 1970 peak of 10 million barrels per day (mmbpd) and imports have been falling for the last decade (Figure 1).






Figure 1. U.S. crude oil production, net imports and consumption. Source: EIA and Labyrinth Consulting Services, Inc. (Click image to enlarge)

But today, the U.S. imports twice as much oil (97%) as in 1974! In 2015, the U.S. imported 6.8 mmbpd of crude oil (net) compared to only 3.5 mmbpd at the time of the Arab Oil Embargo (Table 1).



Table 1. Comparison of U.S. crude oil imports, production and consumption for 1974 (Arab Oil Embargo) and 2015 (Today). Source: EIA and Labyrinth Consulting Services, Inc.
(Click image to enlarge)

Production of crude oil is higher today by 7% but consumption has grown to more than 16 mmbpd, an increase of 32%. At the time of the Arab Oil Embargo, consumption was only 12 mmbpd.

So, consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher?

We are far more economically vulnerable and dependent on foreign oil today than we were when crude oil export was banned 40 years ago.

What, me worry?

Continue reading on Art Berman's blog

14 comments:

  1. Moreover, US oil production per capita is down 45% since the peak in 1970, and down 25% since the secondary peak in 1985.

    At the inexorable log-linear depletion trajectory at the current level of (unsustainable) oil production, US oil production per capita will have declined 50% and then more by no later than the early 2020s.

    Should production decline in the meantime, which appears likely, the 50% threshold will be achieved sooner.

    Thereafter the rate of deceleration of oil production per capita will increase, putting the US in the position of having extracted and burned half of all available recoverable oil at a price that the economy can afford to extract and to burn, resulting in a permanent structural constraint on (un)economic activity thereafter.

    As important, world oil production per capita peaked in 2004-05 and is where the US was in the late 1970s to early 1980s, i.e., peak industrialization and the onset of deindustrialization and financialization. The implication is that China-Asia is at the same point of the onset of oil depletion per capita as the US was 35 years ago. China-Asia's growth of industrialization is over. The US had low debt to wages and GDP, $20 oil, and demographic tailwinds when deindustrialization and financialization began.

    However, China-Asia faces demographic drag effects (as do the US, Japan, and EZ), $35-$40 oil, and massive debt to GDP.

    Peak Oil, Peak Debt, Peak Demographics, Peak Industrialization, Peak Financialization, and Peak Inequality.

    It's all down the Olduvai slope and Seneca Cliff from here . . .

    Happy New Year.

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  2. UB > This is probably due to the confusion that the media have made on the fact that the US production has recently surpassed the US imports of oil. It is true, but that tells you nothing of how much oil the US still imports.

    I find the sentence above needless confusing.

    By definition, if a country needs to import all or part of a product it needs, then it's not self-sufficient. Why don't journalists/politicians misunderstand something as simple?

    The US consumes about 16mbpd and only produces 10mbpd: Therefore, it needs 6mbpd to fill the gap, a not-insignificant 37,5%.

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  3. The USA is still the largest economy in the world and in terms of resources uses dramatically more resources per capita than any other large population.

    As well as requiring large inputs of oil across its borders the USA is a net importer of many other important resources. This document has a chart of minerals and metals that the USA must import. minerals.usgs.gov/minerals/pubs/mcs/2015/mcs2015.pdf

    Also, USA increasingly imports manufactured goods embodying resources from elsewhere. It is not too fanciful to conclude that as well as importing the fruits of cheaper labour elsewhere, the USA has relied significantly in the last 15 years on the stupendous ten-fold increase in coal production and consumption in China. To a lesser extent these importing trends during late-industrialisation (reliance on importing resources) are present in other OECD countries, notably net-importing regions like EU.

    From the USGS document it appears that the USA has been lucky (not quite the right word) to have Mexico and Canada as resource-rich adjacent polities, although only Canada has net consumption levels per capita comparable with USA.

    best
    Phil

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    Replies
    1. The USGS document that I linked to (above) had the following summary:

      “In 2014, the supply for more than one-half of U.S. apparent consumption of 43 mineral commodities shown in the figure came from imports, and the United States was 100% import reliant for 19 of those. U.S. import reliance has increased significantly since 1978, the year that this information was first reported. At that time, the United States was 100% import reliant for 7 mineral commodities, and more than 50% import reliant for 25 mineral commodities.”

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  4. UB > This is probably due to the confusion that the media have made on the fact that the US production has recently surpassed the US imports of oil.

    Curious. I thought that it was rather due to the fact that these very recent years, the US has become a net exporter of *refined* oil products (while most of this crude oil to be refined was imported, of course).

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    Replies
    1. This is the standard answer I get (even from a distinguished European MP) when I say that the "US self sufficiency" is a legend.

      It is a legend for two reasons: the first is that the export of refined products is marginal and changes little to the overall picture. Then, if you want to play this game, you should also take into account how much oil is imported in the US from China and elsewhere in the form of plastics objects, synthetic textiles, and more stuff. I don't have the specific data, right now, but I am sure that the US remains by large a net importer if you consider the overall balance.

      So, I think it is best to set a boundary and remain with it: the US is a net importer of crude oil, and that's a firm point.

      Delete
    2. Ah.... let me add to the above that the "refined products" legend works very well in the "questions and answers" session of an audit of the European Parliament. It goes like that.

      1. Someone says that the US has become self sufficient in oil supply because of the production from oil shale fields.

      2. Someone else raises up and objects that it is not true; the US is still a net importer.

      3. The first one retorts that you should consider also the exports of refined products.

      then it is over, there is no rebuttal after a rebuttal and the moderator moves to another question. So, the MPs in the audience have understood that it is true that oil shales have made the US self sufficient!!!

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    3. UB > the export of refined products is marginal and changes little to the overall picture

      Let me get it straight. For me, a refining industry is just about refining, not extracting. You don't become self-sufficient in iron just because your steel-making industry produces more steel than what your country use every year (which makes it a net steel exporter).

      So you confirm that's precisely the most common confusion you face when discussing with politicians and more generally, uninformed people, right? They indeed mistake crude oil extraction and supply for gas and diesel oil refining...

      Delete
    4. Well, there is nothing wrong in calculating a mass balance of mineral imports and exports; as long people understand what they are doing. In this specific case, yes, I am afraid they don't.

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  5. According to the EIA, net imports of crude and refined products was about 5 million bbl/day in 1991, which gradually increased to about 13 million bbl/day in 2007 and is now about 5 million bbl/day. The drop of 8 million bbl/day since 2007 was due to about 3 million bbl/day less consumption and about 5 million bbl/day in increased production, mostly from tight oil. Now that tight oil is beginning to decline, imports will begin to increase, especially since consumption is also likely to increase in response to low prices.

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  6. Gentilissimo Prof. Bardi, sono un po' disorientato dagli avvenimenti degli ultimi mesi. La teoria del “picco di produzione” riferita alla risorsa petrolio prevederebbe un crescente squilibrio tra i costi di estrazione e i margini di profitto legati allo sfruttamento di questa risorsa. Il ché vorrebbe dire, semplificando: non rimarremo senza petrolio, ma non potremo più permetterci di estrarlo.
    A titolo esemplificativo, vorrei ricordare un commento di Greer di alcuni anni fa riguardo al superamento dei fatidici 100 dollari al barile: si intitolava “a milestone in the dust”..
    Allora sembrava tutto chiaro: più si estrae, più la materia prima diventa costosa. Ma adesso sembra di vivere su un altro pianeta, un mondo “rovesciato” in cui il petrolio costa sempre meno. Una crisi petrolifera al contrario.
    Mi spiace, ma nulla di quello che ho udito o letto negli anni passati prefigurava questa situazione. Nemmeno le simulazioni del MIT, mi pare, prevedevano una simile china dei prezzi.
    Si tratta di una fluttuazione temporanea? Sono forse le avvisaglie di un collasso imminente?
    Ho la sensazione che i modelli teorici, per quanto accurati, presentino comunque delle lacune. Le sue analisi di carattere storico mi sono sembrate per certi versi molto più feconde, e fondate, rispetto alle simulazioni al computer.
    Un saluto cordiale.

    Fausto Ghini

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    Replies
    1. Si, tutti sono disorientati; in effetti anche i "picchisti" sono stati presi alla sprovvista dal crollo dei prezzi. Come del resto anche gli economisti tradizionali che un anno fa prevedevano prezzi intorno ai 60-80 dollari al barile. E invece siamo sotto i 30.

      Allora, cosa possiamo dire? La prima è che i prezzi sono imprevedibili e che non sono un'indicazione affidabile della disponibilità di una risorsa. Che il petrolio costi 180 dollari al barile o 30, non cambia nulla rispetto a quanto petrolo esiste sotto terra. Quindi, se i prezzi sono crollati, vuol dire che il mercato si sta adattando agli alti costi di estrazione ammazzando le ditte che producono ad alti costi. C'è un articolo piuttosto illuminante di Gail Tverberg su questo punto che puoi trovare a:

      http://ourfiniteworld.com/2016/01/19/why-oil-under-30-per-barrel-is-a-major-problem/

      Saluti e grazie per l'interesse

      Delete
  7. I can't help but think that this chart is misleading : they should have put Consumption on the same scale as Imports and Production!
    (And maybe presented it as an addition/subtraction area chart (including exports).)

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    Replies
    1. Yes, it can be criticized. They chose to normalize the data, and that resulted in two different scales. But the data are there for anyone who cares to read the numbers

      Delete

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)