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Oilwatch Monthly – August 2009

Rembrandt Koppelaar, ASPO Netherlands
At the beginning of August Fatih Birol, chief economist of the IEA, gave an exclusive interview to the Independent in which he stated that ‘the international energy agency believes peak oil will come perhaps by 2020. ‘ And that an ‘oil crunch’ could occur after 2010 because of demand exceeding dwindling supplies. This more recent outspoken view from the IEA has been further developed in the analysis in their Medium term Oil Market Outlook published last June, wherein the IEA projects that Non-OPEC oil production including biofuels will decline by 0.4 million b/d between 2009 and 2014. Stating that ‘from 2012-14, non-OPEC supply is expected to fall each year.
(17 August 2009)

sent in by Bill Tamblyn, who says:
I am not going to post a monthly update on “World Oil Supply” this month. I think the peak is history and I’m not motivated to keep updating the 12-month moving total until I see some reason to do so.

Meanwhile, take a look at the latest edition of the excellent “Oil Watch Monthly” from Rembrandt Koppelaar – the PDF is here

And note in particular Chart 7 on page 3

World energy content from liquid fuels production

In production statistics all liquid fuels are aggregated as total ‘oil’ production while containing different amounts of energy per barrel produced. For example, a barrel of crude oil contains around 5.8 million British Thermal Units while a similar barrel of natural gas liquids contains 4.2 million BTU.

Conversion to BTU’s shows that actual available energy worldwide in June 2009 was 3.3% lower than liquids statistics counted in barrels would suggest.
[[[ July, I think, must be at least that much lower. ]]] Bill

The 2008 Oil Price “Bubble”

Mohsin S. Khan, Petersen Institute for International Economics
As oil prices began to rise in 2009 from a low point of about $40 a barrel in January to around $70 a barrel in July, a key question is whether the world is in for another oil price spike in the near term similar to that witnessed in early 2008. Several hypotheses were advanced when world oil prices started their inexorable climb from 2003–04 onwards, then skyrocketed from $92 a barrel in January 2008 to cross the $140 a barrel mark in June, finally hitting a record high of $147 a barrel on July 11, 2008, before collapsing to less than $40 a barrel in December (figure 1).1 There was the “peak oil” explanation, based on the theories of M. King Hubbert of “Hubbert’s Peak” fame and his supporters, notably Colin Campbell and Matthew Simmons, that the world was running out of oil.2 There were the market “fundamentalists,” including importantly John Lipsky, the first deputy managing director of the International Monetary Fund (IMF), and Philip Verleger, a well-known oil expert, who argued that the fundamentals of demand and supply were primarily behind the extraordinary rise in oil prices in the first half of 2008 (Lipsky 2009a, 2009b; Verleger 2005, 2008). Interestingly, this fundamentals view was also shared by the US Treasury and was articulated by David McCormick, then undersecretary for international affairs, in a presentation in July 2008 at the Peterson Institute for International Economics.3 Finally, there were those who maintained that such an increase could only be a “bubble,” unexplained by peak oil theory or market fundamentals. Many financial-market participants were proponents of this third view, notably Michael Masters (2008), as well as the main oil producers, who were as surprised as anyone at the speed and size of the price increase over only a few months. Their argument was that the phenomenal increase in financialization of commodity markets during 2006–08, including in particular the oil market, led to speculation and momentum trading, which pushed oil prices way beyond their long-term equilibrium level as determined by fundamentals.4
(August 2009)
sent in by EB reader Thomas Christiansen.

The Coming Oil Crisis

Lionel Badal, The Oil Drum
Over the past decade a fierce debate has emerged amongst energy experts about whether global oil production was about to reach a peak, followed by an irreversible decline. This event, commonly known as “Peak Oil” far outreaches the sole discipline of geology. From transportation to modern agriculture, petrochemicals and even the pharmaceutical industry all of them rely on one commodity: cheap and abundant oil. In order to sustain the needs of an ever globalized world, oil demand should double by 2050.3 Nonetheless, geological limitations will disrupt this improbable scenario. In fact, a growing proportion of energy experts argue that Peak Oil is impending and warn about the extraordinary scale of the crisis.

42 years of oil left?

According to the 2009 BP Statistical Review, the world has precisely 42 years of oil left.4 Those numbers come from a very simple formula, the R/P ratio, which consists of dividing the official number of global oil reserves by the level of today’s production. Nevertheless, this methodology is dangerously defective on several key points as it ignores geological realities. Oil production does not consist of a plan level of production that brutally ends one day; it follows a bell-shaped curve…
(18 August 2009)
Posted by Gail the Actuary on the Oil Drum, who writes:
This is a guest post aimed at the person who is unaware of peak oil. Be sure to send links to your friends! It was written by Lionel Badal, Postgraduate Student, Department of Geography, King’s College London. He can be reached at blionel3 at yahoo dot fr.

Opec’s greed will herald the end of the oil age

Bill Emmot, Times online
Proclamations of economic recovery in the past week in Japan, France and Germany, and soon in Britain and America too, may signal the end of the Great Recession of 2007-09, albeit bumpily. As things stand, though, this month may also signal the beginning of the end of something far more historic and significant: the age of oil.

Given how bleak the world looked as this year began, it feels remarkable to be seeing growth again so soon. But it is even more remarkable that the world is emerging from such a severe financial shock and slump with its most basic fuel, crude oil, priced at close to $70 a barrel, seven times its price of a little over a decade ago and double the level it was as recently as March.

So this must mean the rebound is even stronger than we think, with demand for oil soaring again? Not at all. Admittedly, this is a pretty opaque market, with many countries treating oil stocks as an official secret. Still, analysts at Banc of America Securities-Merrill Lynch reckon that global oil demand has been three million barrels a day lower in the second quarter of this year than in early 2008. They don’t expect it to get back above that until 2011 at the earliest…
(20 August 2009)