Global Oil Production Update: A Strange Future Has Arrived

Since 2005, European oil consumption has fallen by 1.5 million barrels a day. And, in the same period, US oil consumption has fallen by 2 million barrels a day. If oil was priced at $60 a barrel, rather than $100 a barrel, then a fair portion of that lost demand might return. Instead, since 2005, global crude oil production has been bumping up against a ceiling around 74 million barrels a day. Thus, the tremendous growth in oil demand which emanates from the developing world, in Asia primarily, has been supplied by the reduction of demand in Europe and the United States. Why doesn’t the world simply increase the production of oil to 77, or 78 million barrels a day? After all, that is precisely the history of global oil production: a continual increase in supply to capture the advantage of rising prices.

Today, in 2012, I observe that many analysts of global oil production—and the interaction between oil prices and the global economy—continue to engage in a guessing game about the future. But, frankly, the future has already arrived. And it is not a random future, but a future that was held to be improbable, if not impossible. For each extra barrel of oil produced over the past seven years from Russia, and Canada, there has been a loss of production from the North Sea, from Mexico, from Indonesia and elsewhere. And in the case of OPEC, there has been a stubborn flatlining of production growth, which, in the true spirit of argumentum ad ignorantium, has been taken as proof of OPEC’s hidden and secret supply. Thus, we are led to the newest and strangest meme of all: the failure of global oil production to grow over seven years, in the face of a phase transition in oil prices, is not even suggestive of peak oil. But rather, proof of oil’s imminent supply resurrection.

–Gregor

  • http://twitter.com/NormCycles Norman Michaels

    You Understand, you are among the few whom actually get it. Why this trend has not sunk into the masses brain matter remains a mystery to me but alas the day is near.

  • http://www.facebook.com/profile.php?id=793059760 Paul Leskinen

    Doesn’t Occam’s Razor apply here? Isn’t the simplest explanation as to why OPEC is not producing more simply that they can’t?

  • frank r

    OPEC has no real power . Think Bilderberger in collaboration with Goldman Sachs.

  • Anonymous

    There’s a glut of oil on the market. Why would production grow if there’s no demand for it? Are producers supposed to pump oil and find someplace to store it?

  • Anonymous

    Why is the price so high with so little demand? Because the Fed’s money printing operation has too many dollars chasing too few goods = inflation.

  • Thomas Ballentine

    The fact that the U.S. has now become a net exporter of finished petroleum products is being heralded as a great success. Not mentioned is that this is because the American people cannot afford the higher cost of these products. Neither is it mentioned that the jobs that this oil used to power here at home when the oil was used here, are also being exported along with those refined products. Go figure. No doubt economists will be touting our positive balance of payments when we import no oil, export what we do produce and are all sitting home with no jobs and nothing to eat. Someone, please tell the la-la-land economists that an economy runs on energy and that money is always flowing in the opposite direction to real value (which is created with energy). 

  • http://profile.yahoo.com/YUSRQDHVWILYLFAQNVNJHICMLU Brian

    Hello Gregor,

    Do you mind sharing your thoughts as to whether the relatively new rock fracturing technologies that are being applied in the Bakken area have the potential to significantly boost global oil supply?  Do you know whether there are many other Bakken-like areas, over the glove, in which oil might be rediscovered?

  • Anonymous

    Does that mean Peak Oil wasn’t 2005, but after a lot of grubbing around for an extra 0.4%, was in 2010?

    Sure looks like a plateau to me!

  • Anonymous

    The housing market is really inflating fast. Next working theory.

    There are a couple of ways to get inflation.
    To get inflation via extra money supply requires several other conditions to, like pent up demand and supply bottle necks across the economy. Lots of them around!

  • Anonymous

    What are you smoking?

  • http://profiles.google.com/dagjohansen2 Dag Johansen

    The undulating plateau long predicted by CERA appears to have arrived 25 years earlier than they said it would.  

  • http://profiles.google.com/dagjohansen2 Dag Johansen

    If there is a “glut” of oil on the market then why is the price 5 times as high as it was back in 2000?   Surely you’ve heard of supply & demand, right?    Why do you call yourself ‘stopthesocialism’ if you don’t even have a basic understanding of capitalism?  

  • http://voluntary-exchanges-only.blogspot.com/ Voluntary Exchanges Only

    JODI data 2002-2011 (upto nov) total (everything) production
    705323
    2002

    770930
    2003

    798982
    2004

    813554
    2005

    820283
    2006

    834822
    2007

    845931
    2008

    816684
    2009

    807043
    2010

    718710
    2011

    production peaked in 2007, it’s been slipping downhill ever since, facts are fact & this is “their” own data! we are officialy post peak. all this despite deep water, arctic, tar sands, supposed “massive finds” & “more wells” coming on stream.
    batten down the hatches, we’re at the start of a rough ride…

  • Anonymous

    Money printing. Learn to read.

  • Anonymous

    How much oil is not being produced because of interference  by the BO administration?

  • Anonymous

    See my post about the other (non present) conditions that are needed for ‘money printing’ to produce inflation. Given the amount of debt around deflation is the outcome I’m planning around. A far more likely scenario.

  • Anonymous

    Fracking releases petroleum in tight sands and/or shales.  Essentially you’re breaking the rock into little tiny bits while it’s still in the ground, and those little tiny bits release what’s in them.  That’s almost always gas, although it can be mixed with some liquids.  That’s why we currently have a glut of gas and a shortage (or at least tight supply) of oil.

    There are *many* other areas internationally that can be developed with fracking technology that will produce lots and lots of natural gas.  This is a whole new concept over the last 10-25 years, and has completely changed the game for gas, but not for oil, although it has improved it somewhat over where we were a decade ago.  However, in order to use it properly, we’re going to have to change our infrastructure to use the gas for electricity, vehicles and heating to a much greater degree than we have now.

    What most people don’t understand is that what we’re doing now is sucking out the gas remaining in the source rocks.  It used to be (and still is, for conventional drilling) that the target is oil or gas or some combination that migrated from a ‘source rock’ through the pores of the rocks into an area where it was trapped. 

    The source rock is an organic black shale that consists of microscopic bits of organic matter (basically plankton that have been converted into oil and gas by ‘rotting’ under heat and pressure for a couple of millenia) enmeshed with tiny particles of clays and silicates.  Give it enough heat and pressure and time and the plankton changes into petroleum, which then works its way out of the rock through the pores or teensy fractures and into the surrounding rocks (that’s called migration.)

    Now, though, instead of finding the oil and gas in the usual place, a trap, we’re just going straight to the source rocks, drilling horizontally, then cracking it into little bits in the subsurface (fracking) and sucking out whatever comes out.  

    It’s rather like using the principal instead of the interest.  Once it’s gone, it’s gone.  Although given the time frames we’re dealing with (millenia) it’s basically a moot point.

    BTW, the technology was not pioneered by the government.  It was an idea that we can credit to George Mitchell (Mitchell O&G) who conceived applying the horizontal drilling and fracking technologies to a different kind of rock.  He did use some government funding to get the whole thing rolling. 

  • Anonymous

    It is great to see this in the news albeit not mainstream.  My husband, who is a petroleum geologist, has been saying for years that we are using a very precious resource that cannot be replaced and we are rapidly running out. 
    It would be great if we could at least convert to natural gas in this country for our major energy supply, but alas the powers that be are concerned that natural gas is produced by the evil oil industry so it not a viable green alternative to oil.
    The epa is doggedly attacking the oil industry in my neck of the woods (Texas) and is butting heads with the railroad commission in an effort to overrun states rights again.  Too bad the congress has not defunded the epa.

  • gregor.us

    Yes, Occam’s Razor does apply. I am being sarcastic, in my final paragraph. Bt one has to appreciate the context: it is when global oil production has failed for another year to reach a new high, that the flurry of media pieces declaring we’re awash in oil is also at a high. Why? Because of new fields that are being extracted. But of course, this is not news: there always has been, and always will be new oil fields coming on line.

    Best,

    G

  • gregor.us

    None. The Obama Administration has presented zero roadblocks to new oil production. Are there roadblocks? Yes, but they have been in place for years. In offshore California, for example.

    G

  • gregor.us

    Nope. The price is high as OECD demand falls because the Non-OECD is providing all the demand the market requires, and more.

    The 5 billion people in the developing world now control the price. Not you, and not me.

    G

  • moraymint

    Just checking in to say hello to all here.  I’m a regular reader of this blog, but have never commented here before; I comment a great deal over at the Daily Telegraph, as it happens.  I am a peak oiler, by the way.  A physicist by university education; spent 20 years as an officer in the British Army; now run my own company (designing and building off-site manufactured homes) in Scotland.  Great blog Gregor … keep up the good work.  One day (soon) we’ll see a critical mass of the population of the so-called ‘Developed World’ twig that we’re pretty much at- or post-peak oil.  Then the fun will start …

  • Anonymous

    I live in Chicago and gave up owning a car. Too expensive. Instead, for $11 an hour, I rent a Zip Car, and idea whose time is right (they went public a few months ago I think). I consume far less petro than before. I think less usage is an American trend. At the same time, I’m excited to learn of our vast natural gas reserves. Companies like WPRT have partners and already have the technology to power trucks on gas. There seems to be no momentum there at the moment, but there will be at some point. I don’t pretend to have some of the knowledge y’all do, but these things will happen, are happening. What does that mean for oil. I’m interested in your opinions. Thanks. Ralph Braseth

  • Will Stewart

    ” there always has been, and always will be new oil fields coming on line.”

    With the additional capacity to replace falling existing capacity? Wishful thinking…

  • gregor.us

    That’s right. But you see, this is how humans process information. If a person reads an exciting and well written story about new oil production from North Dakota, and a CEO of a Mid-Cap Oil and Gas company is quoted talking about energy independence, the person reading the story has no context to gauge the overall accuracy of the situation. Editors like their journalists to write exciting stories. Telling readers that North Dakota oil does not overwhelm decline from existing fields is a plot point that doesn’t “sell.”

    I have addressed these issues for years. Even as recently as a few months ago, when the FT, NYT, and WSJ, and Telegraph UK all went ballistic on US energy independence.

    G

  • gregor.us

    I don’t expect oil from shale regions to allow aggregate global supply to increase. Except on an oscillating month to month basis. The decline from existing fields is too great. And, all new resources–even as they come on line–now come on line too slowly. I’ve said for years that places like the Bakken are wonderful news for investors. But, will do zero to lower oil prices.

    G

  • Anonymous

    If only the Obama Administration was holding back some oil. That is exactly what someone with foresight would be doing. Spreading finite resources over a longer time  frame. Making ‘cold turkey’ easier, when it comes. That’s a weakness of democracy, thinking about the short term, the 3, 4 or 5 year election cycle.

  • http://twitter.com/FantasyScribe Robert Fanney

    All the bold statements of a ‘new age’ in oil production are just a happy cover for desperation. Fracking, biofuels, tar sands, the rush for deep water. It’s all indicative of a rampant depletion. And the oil companies are involved in a mass misinformation campaign to retain energy dominance. We’ve been put to sleep by nonsense, again. It’s amazing the power information control and messaging can exert.

  • Anonymous

    80% offshore off limits (86 billion barrels)
    ANWR off limits (30 billion barrels)
    Arctic Ocean off limits (400 billion barrels)
    Green River formation off limits (1 trillion barrels)

    1.5 trillion barrels est total

  • http://twitter.com/FantasyScribe Robert Fanney

    Wow. How accurate is the JODI data when compared to EIA, IEA? This shows a rapid decline since 2008. Very bad. I suppose the shortages are all in the price. There’s just such a huge contradiction between this data and what the IEA, EIA is saying.

  • http://twitter.com/davidstvz Dave T

    Quantitative easing by the Fed has chased investors into both stocks and commodities.  QE corresponds with higher gold and oil prices not just stocks.  So I wouldn’t say that none of it is due to inflation (unless you don’t call QE inflation).  However, the flat oil supply is definitely the bigger issue.

  • Anonymous

    This is one of many myths often repeated by peak oil doomers. The facts are, proven reserves of convetional oil were 1.3 trillion barrels in 2000, and 1.5 trillion barrels in 2010. Even after having used up some 300 billion barrels in that time period. So obviously, new discoveries are more than keeping pace with consumption.

  • http://profiles.google.com/7continents7 Benjamin Cole

    Peak Oil will probably be a yawner.  There is Peak Demand (for crude), and we may be there already. CNG cars, PHEVs, luxury cars that get 41 mpg (Lincoln MKZ)–jeez, already, and that is with cheap lightly-taxed gasoline in the USA.  Crude oil demand has been falling for decades in Europa and Japan and is now falling in USA, and these trends seem to have more legs than a centipede. 

    The future looks cleaner and more prosperous. 

  • Anonymous

    How much is economically exploitable? Including the Green River shales shows, I don’t know, wishful thinking, maybe desperation? As oil shales, my understanding is that it’s at least a decade away from any meaningful production. They have been talking able oil shales here in Australia for 30 years, nothing so far. Rand Corp (2005), thought Green River oil would take over 20 years to get to 1 mbpd, assuming at the problems with water (it’s whole within the Colorado Basin) and land access for such a disruptive process, were got through.

    The other issue with this is return on energy. In 1930, oil got 100 units of energy back for every unit invested. Now conventional oil returns 19 units for each unit invested, and falling. Tar sands have a return of say no more than 7:1, with most estimate being considerable lower than that.

    Oil shales are harder to extract the oil from that oil sands. So such low returns of energy invested actually make current solar technology look like a better investment!

    While we’re on oil sands, the Alberta Energy and Utilities Board (AEUB 2003) says about 11% of their total reserves are economically exploitable.

    I’ll leave it to other, more local people to deconstruct the other figures of someone who would include unadjusted Green River shales in their reserves.

  • gregor.us

    Thanks for reading. As you can see, we have a number of people in this country who have been exposed to political propaganda which holds that the US has nearly unlimited oil resources that are also recoverable. As my blog has no political agenda, I can offer a more sober and scientific viewpoint: for example, you can see on this thread that, sadly, some think there is a political roadblock to recovering kerogen from the Green River formation. However, the barriers are all geological and economic (and operational). Raytheon, Shell have worked on the problem for decades. Whatever. When people mix religious views into their thinking, this is what happens.

    The time I spent living in the UK showed me a culture that was, by comparison, much more tied to empiricism. I miss it.

    Cheers!

    G

  • gregor.us

    Heh. Nice one. Yes, and it’s even worse than your clever quip. For, CERA only produced their Undulating Plateau theory after having to climb down from their Strong Growth in Oil Supply scenario which they were pushing as late as 2004/2005.

    G

  • gregor.us

    Ben you’ve been incorrect for years, on this issue. I think it’s time you faced up to your errors. There is only peak demand in the OECD because of price. Demand in the developing world, the 5 billion people who now control the price, is still moving forward. Your theory, of discretionary demand reductions for oil, is now disproven. It’s the reduction in the industrial economies of Europe and the US, which have now shed at least 3.5 mbpd of oil use, that has freed up supply to the non-OECD.

    Ben, if people had been listening to you–and others who held your view back in 2006-2009, a future of flat oil prices would have been the model. That’s just not going to happen, and more important, it didn’t happen.

    For everyone reading this thread: this is a great example of how the West has completely missed the fact that it no longer controls the price of oil–even when it reduces its own demand.

    G

  • gregor.us

    Ben you’ve been incorrect for years, on this issue. I think it’s time you faced up to your errors. There is only peak demand in the OECD because of price. Demand in the developing world, the 5 billion people who now control the price, is still moving forward. Your theory, of discretionary demand reductions for oil, is now disproven. It’s the reduction in the industrial economies of Europe and the US, which have now shed at least 3.5 mbpd of oil use, that has freed up supply to the non-OECD.

    Ben, if people had been listening to you–and others who held your view back in 2006-2009, a future of flat oil prices would have been the model. That’s just not going to happen, and more important, it didn’t happen.

    For everyone reading this thread: this is a great example of how the West has completely missed the fact that it no longer controls the price of oil–even when it reduces its own demand.

    G

  • gregor.us

    Yes, constraints trigger the need for new technologies. Then, the success of those new technologies creates confidence. Finally, the new technologies run into the second phase limits of resource extraction, and a new barrier shows up: the increasingly poor economics of resource recovery. That’s precisely, as you note, where we are now.

    G

  • Anonymous

    I didn’t say it was anti-inflationary. I said it was *potentially* inflationary, where other conditions are needed to translate it into higher prices.

    In that the total size of debt, particularly, private non-business debt, dwarfs the size of QE. I’m still planning on the deflation side of things. Flat oil supply and the unserviceability of debt aren’t unrelated.

    I’ll point out that the deflation will be in things that are frequently purchased with debt. Big ticket stuff, like houses, shares, land, businesses etc. For the working poor, they will only see the ongoing supply/demand inflation driven by a tighter oil/energy supply. It’s the middle class and above, particular retirees, who will see the value destruction that goes with deflation.

  • moraymint

    Summarised by declining energy return on energy invested?

  • Anonymous

    The CBO just came out with a new estimate yesterday, and guess what? There will be another trillion plus dollar deficit this year. There are now too many lazy people in the US who are used to getting a government check. The only way the government can come up with this much money is to print it. Inflation is here, and it’s only going to get worse.

  • Anonymous

    There are a number of news reports about the Obama admin blocking oil shale leases e.g.

    http://articles.latimes.com/2009/feb/26/nation/na-oil-shale26

  • https://www.google.com/accounts/o8/id?id=AItOawmGtpQeloDYtBcBA4KXKFgviW6qp4W88To BMeph

    You are, in effect, arguing gregor’s point. US demand for oil is decreasing – he’s pointing out, that there’s an underlying reason behind it (we’re already in the “peak oil” stage) that isn’t being mentioned. Also, while subbing CNG for oil has been doable for decades, now, lubricant production is still a petroleum issue.

  • Bruce Berry

    I have been following PO for six years, used to think “Oh when will they wake up!”. But people will experience the downslope as job loss, infrastructure crumbling, and slowly realizing that the centralized authority has no answers other than maintaining control and privilege at gunpoint. The energy decline will be the cause, but they will ascribe all the symptoms to local and temporary phenomenon – like having the wrong politician in office and such. Don’t forget to vote! 

  • Anonymous

    found this via disqus!

    telegraph banned me as they are sponsored by JP Morgan and dont like my posting the video!

    http://www.youtube.com/watch?v=QaA-5_IjkeE

  • Anonymous

    video keeps getting taking down or links changed

    youtube 15 trillion lord blackheath

  • Schuyler Hupp

    Conventional oil discoveries peaked world wide, about fifty years ago. North American conventional oil production peaked about forty years ago, in spite of a recent, significant up swing. Conventional oil is very probably peaking now. As it becomes more expensive or less available due to diminishing exports from major producing countries, non-conventional sources will be developed; however, since they are more costly, there will be economic consequences. This is the crux of ‘Peak Oil’ concerns over the short and medium term. Over the long term, a transition away from fossil fuels will occur. Regardless of the time frame being considered, the economic future is uncertain, with the probability of social and economic turmoil in relation to resources being high. :-P   Regardless of what the future holds, I see much less risk in being cautious and conservative regarding our energy future, i.e. using the cheap and abundant resources we have now to begin the long term process of moving away from fossil fuels.

  • http://www.facebook.com/people/Nathan-Scandella/100000532399441 Nathan Scandella

    The fact that we discover new (more difficult to extract) sources of oil has no impact on the underlying scientific fact that oil takes tens of millions of years to form, and we’re consuming it orders of magnitude faster than it forms.

    Not sure what part of that you think is a myth.