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Another Peek at the Plateau

Neil King, Environmental Capital (blog at Wall Street Journal)
Deutsche Bank’s oil team is jumping into the swirling peak-oil debate, arguing that steep decline rates in existing oil fields will make it aossible for producers to break beyond a 100 million-barrel-a-day ceiling.

Their analysis puts the bank, long a big player in the oil patch, among a growing chorus who see the world hitting a production plateau of 100 million barrels a day within seven or eight years. The world is now consuming around 87 million barrels a day, but most institutional forecasts say that demand will top 100 million barrels a day by 2015.

The bank says that supply constraints could push the price of oil to $150 a barrel by 2010. The big question will be whether prices at that level will finally lead to a sharp break in demand, something that $100-a-barrel oil has yet to do.

Deutsche Bank bases its supply-side gloom on how much harder it is for oil producers to make up the difference for slumping production in aging fields. For the last 36 years the world has managed to add, on average, around 4.2 million barrels a day to annual supplies. But with a conservative 5% decline rate in existing fields, that figure will have to rise to over 7 million barrels a day to get to 100 million barrels a day-a level “that has never been achieved,” according to the report.

But Deutsche Bank is adamant that it is not joining the peak-oil crowd, which the bank slams as being in the “stopped-clock school of analysis.”

“We’re not in the crowd that we’re all doomed, we’ve had it,” says Deutsche analyst Paul Sarkey, one of the report’s authors. “We can handle this.”

Instead, the growing school of supply plateauists – which already includes the CEOs of Total and ConocoPhillips – has just gotten one bank larger.
(27 February 2008)
Neil King has been covering peak oil-related stories at the Wall Street Journal. -BA

Oil hits a high; some in U.S. see $4 gas by spring

Jad Mouawad, International Herald Tribune
Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel.

… With the run-up in prices in recent years, economists say energy’s share of disposable income is slowly creeping up again. Last December, that figure reached 6.1 percent, the highest level since 1985. The increase of two percentage points – amounting to $200 billion – is a huge sum, a little less than half what Americans spend each year on new cars and automobile parts.

“You’re adding an oil shock on top of a crunch on credit and a housing collapse,” said Nigel Gault, an economist at Global Insight. “Even the U.S. economy cannot withstand all of that at the same time.”

… While demand keeps growing, producers are struggling to catch up. They are not replacing the oil they are pumping out of the ground fast enough because of various restrictions on access to fields, as well as rising costs. Meanwhile, demand from China, India and the Middle East is expected to push oil consumption up by more than 1 million barrels a day, each year, for the next decade.

“An oil crisis is coming in the next 10 years,” John Hess, the chairman of Hess Corporation, said at a recent conference in Houston hosted by Cambridge Energy Research Associates. “It’s not a matter of demand. It’s not a matter of supplies. It’s both.”
(26 February 2008)
At the New York Times site, Jad Mouawad “explains how oil consumption and price intermingle”: Oil Prices Reach a Symbolic Mark (audio)

Comment from pedestrian at The Oil Drum:
I have sensed a shift, both in tone and content, in how Jad Mouawad (NY Times) and others at major media outlets are explaining the surging price of oil.

Has anyone else noticed that recent explanations for high prices haven’t been emphasizing a fear premium, geopolitics, or market speculation? The fact that Jad ends his piece with a quote about a coming oil crisis seems to typify this shift.

Things aren’t as bad in the Gulf as claimed

Gary Taylor, The Barrel (blog at Platts)
Things aren’t as bad in the Gulf as claimed

Overzealousness recently backfired on the peak oil crowd after Platts investigated the actual data behind their claims that the first generation of deepwater Gulf of Mexico fields has failed to fulfill expectations.

Challenged on that assertion to provide backup data, peak oil guru Matt Simmons was unable to comply.

Since Platts has no axe to grind in this debate and strives only to serve as referee, we accepted the challenge and spent the better part of a month in our own painstaking review of US Minerals Management Service historical oil production records on the seven highest profile Gulf discoveries of the 1990s.
(22 February 2008)

North American Natural Gas Production and EROI Decline

Jon Friese, The Oil Drum

(TOD Editors Note: This is a guest post by TOD reader Jon Friese. Jon is a software engineer living in Minneapolis and a volunteer with the Twin Cities Energy Transition working group, seeking a path to a low carbon future. Under his own initiative Jon tracked down literature on EROI methodology, contacted the Canadian Government and an energy consulting company for data, and came up with the following analysis on declining energy return on Canadian Gas. The analysis is impressive (and frightening, suggesting possible energy break even for natural gas within a decade). … – Nate Hagens)

… Abstract

Creating an Energy Transition Plan away from natural gas requires at least a rough forecast of future production. Two very different forecasts for North American natural gas exist. The official “consensus” view published by Natural Resources Canada [NRC 2006] argues that 2,200 Tcf (trillion cubic feet) remain and that less than 50% of the total natural gas has been produced. Jean Laherrere has posted a forecast which shows only 600 Tcf (trillion cubic feet) remaining with about 70% already produced of the total supply of 1900 Tcf.

Energy Return on energy Invested (EROI) was explored as a method for choosing between the two forecasts. Examining a historical study of Louisiana natural gas production shows that EROI declined rapidly post peak production and that peak production occurred at about 70% of URR.

The EROI of Canadian natural gas production was found to be falling quickly. If current drilling rates are maintained, Canada could see energy break even occur as soon as 2014.

The EROI analysis was extended to the US by comparing data on Yield-per-foot drilled and Yield-per-well drilled between the two countries. It was found that the US is rapidly approaching the same low EROI as Canada.

Taken together this evidence supports Laherrere’s position that North America is past peak production and that as little as 30% of our natural gas endowment remains to be produced.
(27 February 2008)

This Week in Petroleum 2-27-08

Robert Rapier, The Oil Drum
I haven’t reported on inventories in about a month, because there really weren’t any developments that merited a report. While crude, distillate, and propane inventory levels have been typical for this time of year, the gasoline situation is worth a note.

It sort of crept up on me, but last week as I reviewed This Week in Petroleum, I was struck by just how fast the U.S. has built gasoline inventories. Currently at 230 million barrels, I could not recall ever seeing gasoline inventories that high. So, I went back and looked, and the last time gasoline inventories stood at this level was in 1994. And in this week’s report, we again had an increase in gasoline inventories:
(27 February 2008)

Peak oil in a car review

Jim Motavalli, Hartford Advocate
It’s funny the assumptions we make. Just because we’re reaching peak oil and climate change is a huge problem, we think “they” are taking care of it. After all, the UN keeps having these big, important conferences, and there are summits and such almost daily. It’s handled, right?

Alas, we’re not even making a dent in oil dependence. If you took all the electric battery vehicles, biodiesels and hydrogen cars and piled them end to end, well, it wouldn’t be all that big a pile. And meanwhile, the guzzlers are pouring out of the factories just as fast as they ever did. Faster, in fact.
(27 February 2008)
(Just added.) These are the lead paragraphs for a review of the Mitsubishi Outlander.

Author Jim Motavalli has written on peak oil before. Not sure why automotive journalists like Motavalli and the Washington Post’s Warren Brown seem to “get” peak oil so much faster than other journalists. -BA