(Note: Commentaries do not necessarily represent the position of ASPO-USA)
World “oil” has been defined in different ways by different entities. IEA and EIA have defined it as total hydrocarbon liquids—including crude oil, lease condensates, natural gas liquids, heavy oil, oil sands, biofuels, and refinery processing gains. For his detailed studies, Colin Campbell has used the following categories: 1) regular conventional oil and gas; 2) heavy oil (>17.5 deg. API) and bitumen; 3) oil from oil shale (derived by heating immature source-rocks); 4) tight oil (also known as shale oil, extracted by hydraulically fracturing rock formations lacking adequate natural porosity and permeability); 5) deepwater oil (>500m); 6) polar oil; and 7) natural gas liquids (NGLs) from gas plants. Other analysts have chosen to use energy content as a means of differentiating between “conventional oils” and lower energy-content liquids, such as NGLs and biofuels.
These and other definitions have value in different contexts, but I’ve long been uneasy about them in the context of explaining the impending tragedy of “peak oil” to the public. I’ve also felt that the term “peak oil” has shortcomings, because of the various ways the term has been defined. I prefer the less catchy phrase “the impending decline of world liquid transportation fuels,” because when that decline sets in, the world will be faced with transportation fuel shortages and escalating prices, which will be the tragedies about which many in the “peak oil community” have been so concerned.
A number of months ago, I queried some colleagues on alternate definitions of “oil” to better describe the term in a way that might make better sense to a wider audience. Kjell Aleklett, professor of physics at Uppsala University in Sweden, suggested using transportation fuels produced from refineries. That concept struck me as potentially useful, and I pursued it further.
Long story short, I believe that a strong case can be made that the decline in world transportation fuels will mark a major turning point in modern economies, because of the importance of such fuels to essential human activities. The initial decline rate has been estimated by various analysts and is open to uncertainty, because of the myriad of variables involved. The long-term rate of decline will dictate the degree of economic damage; if it’s rapid, say 3-5 percent, it will likely be catastrophic, but if it’s less than 1 percent for a reasonable period, it likely can be accommodated without severe consequences.
Data on world refinery product production is available from various sources. One –the BP Statistical Review—provides the following world refinery product breakdown: light distillates, consisting of aviation and motor gasolines and light distillate feedstock; middle distillates, consisting of jet, heating kerosenes, gas and diesel oils (including marine bunkers); fuel oil, including marine bunkers and crude oil used directly as fuel; and others, consisting of refinery gas, LPG, solvents, petroleum coke, lubricants, bitumen, wax, other refined products and refinery fuel and loss. This breakdown gets us a long way towards isolating transportation fuels but not all the way. Light and middle distillates and fuel oils encapsulate the following transportation fuels: motor and aviation gasolines, jet and diesel oils including marine bunkers. The category of “others” includes products generally not used as transportation fuels. The problem areas include light distillate feedstock, heating kerosenes, and crude oil used directly as non-transport fuel, and biofuels, which, while small, need to be added as the only non-oil-refinery-produced transportation fuel.
In reflecting on this approach, Britain-based analyst Chris Skrebowski made the following points: “Their light distillates include light distillate feedstock (LDF) which to you and me is naphtha and not a transport fuel. Roughly half the naphtha is used as a petrochemical feedstock and half as a reformer feedstock to make a gasoline blend stock. But to avoid double counting, I assume they only count the finished gasoline numbers. Typically petrochemical naphtha accounts for about 5% of the product barrel but can be higher or lower.
“For middle distillates the main problem is gasoil. Diesel is simply a gasoil that meets acetane and other specifications. Over recent years, more and more of this fraction has been made and sold to diesel specification with the rest sold for heating purposes. Heating kerosene is now too low a volume to worry much about but the gasoil does need to be removed. Data on the gasoil/diesel split is really bad as both the IEA and EIA generally lump them together.
“For fuel oil, the world bunker market globally is under 1 million barrels/day (mbd) with the rest in power generation or other under-boiler use. So what this comes down to is 80% (an earlier approximation) is too high for transport fuels. If you say, as is reasonable, that most lubes and most bitumen use is directly connected to transport but you take out gasoil, naphtha and other fuel oil uses, you’re probably in the 72-75 percent range.”
From an analysis that I did using EIA data and following Skrebowski, I assumed that 75 percent of total world refinery output is probably a good first-cut estimate of world transportation fuel production.
Using BP Statistical Review data, June 2012, I estimated world transportation fuel production for 2001-2011. Comparing that with BP’s data for “Total (World) Oil Production,” yielded the plot below.
Among the conclusions from this preliminary exercise are the following:
- To focus on transportation fuels is to focus on the most important impacts that declining world oil supplies will have on modern economies. This is not to ignore the impacts of shortages of other products on their respective areas of industry and consumers; it is simply a matter of considering greatest likely impacts.
- Estimated transportation fuel production over recent years shows a generally linear growth during the period of the so-called “production plateau” in total liquids. My guess is that the linear increase is the result of refineries pushing their product slates towards the highest price products (transportation fuels) and away from lower valued products. Many refineries have the ability to shift without making large new investments. Detailed analysis is needed to establish that this is the case and the degree that further shifting is possible without and with major new refinery investments.
- In our previous work on mitigation (Hirsch, Bezdek, and Wendling), we did not consider the potential for upgrading lower value, non-transportation products to higher-value transportation fuels. That avenue for transportation fuel production enhancement is viable up to a point and merits more careful analysis to determine the potential, cost, and timing.
- Beyond this preliminary effort, a more detailed analysis might be useful and might yield useful insights.
Robert L. Hirsch is a former senior energy program adviser for Science Applications International Corporation and is a Senior Energy Advisor at MISI and a consultant in energy, technology, and management. Hirsch has served on numerous advisory committees related to energy development, and he is the principal author of the report Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, which was written for the United States Department of Energy.
