Posts tagged “oil consumption”

In last week’s note: 2013 Crude Oil Outlook: Supply & Demand, we looked at the more immediate trend in global supply and demand. But this week, I want to examine the long-term oil production challenge facing the industry.

Current global oil consumption is running just under 90 MM b/d, with wellhead production at about a little over 85 Mm b/d, or a deficit or about 4.7 Mm b/d. As we pointed out last week, overall global oil consumption since 2000 to 2012 has been running at a per annum rate of 1.2%; should global consumption continue to grow at this rate, we will hit roughly 100 MM b/d by 2022, or in ten years. If global oil consumption should slow to a per annum rate of 1.0%, we will hit 100 MM b/d only two years later by 2024.

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Let’s build upon last week’s long-term bullish case for crude oil. Much has been said about, “Global Peak Oil” production in the last few years, and probably for good reason. We know that U.S. crude oil production peaked in the early 1970s just as Mr. King Hubbert predicted back in the late 1950s.

But, is peak global oil production just around the corner?

Energy industry analysts believe that global oil production will peak sometime between 2015 and 2025. That sounds like a fairly broad range. However, the reality is that it’s a fairly short timeframe in geologic time that does not even register a notch, and it’s rapidly coming upon us.

(Read More: Five Misconceptions About Peak Oil)

I’m not a forecaster, but I have studied oil supply and demand for the last 20 years, and I do believe that global crude oil production has reached a plateau, and may very well peak sooner than we think.

Why? For one thing, on average, the global natural decline rate of producing wells is roughly 7% plus or minus 1% or 2%. That means production has to grow at least 8% a year to register a net positive increase.

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Can Oil Supplies Grow Fast Enough to Keep Prices in Check?

I, along with my editor Sam Avro, recently conducted a broad-ranging interview with John Hofmeister, former President of Shell Oil and currently the head of Citizens for Affordable Energy, a non-profit group whose aim is to promote sound U.S. energy security solutions for the nation. In the first part of this interview Mr. Hofmeister spoke of A Difficult Decade Ahead For Oil Prices and Supplies. In the second, he set forth an Energy Plan for America. In the current installment, he discusses the events responsible for the explosion in the price of oil over the past decade.

Developing Demand and Depleting Supplies

I prefaced my question with my own view that the explosive growth in oil prices mostly boiled down to new demand outstripping new supplies, which resulted in loss of spare capacity. Some have suggested that the real culprit is a massive influx of financial players into the oil markets, so I was curious to get Mr. Hofmeister’s views on the factors behind the escalation in oil prices over the past decade. CONTINUE»

Saudi Arabia’s per capita oil consumption is higher than the U.S. and most developed countries

Long known as perhaps the most oil-rich country in the world, Saudi Arabia’s dwindling crude oil deposits could see that nation become an oil importer in less than 20 years, according to a a report compiled by Citigroup Inc.

With the country’s peak rates of electricity production growing at up to eight percent per year and with oil and its derivatives used to generate about 50 percent of the power used by its own citizens, the bank warns that Saudi Arabia could find itself without the crude oil needed to keep its young and relatively wealthy population stocked with energy, forcing it to import the fuel from other nations as soon as the year 2030.

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Following last year’s ASPO conference, I was interviewed by Aaron Wissner of Local Future, which is a non-profit educational organization dedicated to issues of energy, the environment, and sustainability. Aaron just made that interview available, and instead of an R-Squared Energy TV episode this week, I thought I would share this interview with readers.

Among other things, we discuss:

• The reasons that I became interested in energy issues
• My Long Recession hypothesis
• The relationship between oil prices and recession
• The importance of taking control of your personal energy consumption
• Why lower oil consumption in the U.S. didn’t lead to lower oil prices
• The climate change challenge

I want to post a quick rant on the uselessness of statistics about a country’s oil reserves. I was preparing this afternoon to write a blog post about the revolution in oil production in the US, caused by the adoption of new technologies of fracking and horizontal drilling in areas like the Bakken Shale and the Eagle Ford Shale.

The USGS reports that, with perspective additions, the U.S. holds 32 billion barrels (bb) of oil, 291 trillion cubic feet (tcf) of natural gas, and 10 billion barrels of natural gas liquids in mean potential undiscovered reserves. This is a substantial upwards revision from last year’s estimate – showing how the new technologies are revolutionizing America’s energy outlook.

Then I started doing the math. The U.S. uses about 18.7 million barrels of crude oil equivalent per day (mbd), according to the EIA. Of that consumption, we’re importing about 8.7 mbd, and producing about 10 mbd. That works out to a total annual consumption of about 6.875 bb of oil, of which about 3.65 bb is from domestic production. At those rates, America would completely exhaust its total reserves, as estimated by the USGS at 32 bb of oil in eight years, nine months. So, by April or May of 2021, the United States would no longer have any oil – if these reserve estimates went unchanged.

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In last week’s Energy Trends Insider our featured stories were Why China is Dipping Their Feet in the Canadian Oil Sands, CNOOC’s Purchase of Nexen May Signal New Wave of Consolidation, and Subscriber Questions on Lanzatech and Butanol. As we have done previously, we would like to share one of those stories with regular readers of this column. Interested readers can find more information on the newsletter and subscribe at Energy Trends Insider.

Why China is Getting their Feet Wet in the Oil Sands

Over the past two decades, Chinese oil consumption has quadrupled to nearly 10 million barrels per day. For the past decade they have been on a growth trajectory which has shown signs of slowing, but could nevertheless see them overtake the U.S. as the world’s top oil consumer by the end of the decade. As I have written before, I believe China’s economy will be the single-biggest long-term driver of oil prices over at least the next 5-10 years. CONTINUE»

In the first installment of this series, I reviewed U.S. and global oil reserves according to the 2012 BP Statistical Review of World Energy. The second installment covered oil production. Today, I want to examine the changes in consumption of coal, oil, and natural gas since 1965 in the three major consuming regions of the world: Asia Pacific, the United States, and European Union countries.

Highlights of this article and topics that will be explored include:

• Explosive consumption growth in all categories from Asia Pacific
• Why the arguments of climate change advocates are misplaced
• Recent declines in coal and oil consumption in the U.S. and EU
• Why natural gas consumption is increasing in the U.S.

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Red Herrings: Speculation & Regulation

As I noted last week, I have been working on a short paper for ASP on gas prices. It was published earlier today with a title of “Cause & Effect: U.S. Gasoline Prices.” I also published an Op-Ed in The Hill “Running on empty: Failing to address high gas prices“ and was quoted in Reuters saying “The truth is, neither party is offering policies that will effectively address high gas prices.”

The report seeks to get beyond both party’s preferred narratives on gas prices and looks more deeply at the root causes of today’s high gasoline prices. Hopefully, it will puncture some of the assertions and rhetoric that both political parties use about gas prices, whether it’s shouting “speculation!” by those on the left or “too much regulation!” by those on the right.

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Foreign Oil Imports at Lowest Level Since Before Y2K

U.S. crude oil imports have fallen to their lowest level since 1999, according to data provided by the U.S. Energy Information Administration (EIA), an arm of the U.S. Department Of Energy (DOE).

Crude oil imports for 2011 averaged 8.9 million barrels per day (bbl/d), falling below the 9 million bbl/d mark for the first time since 1999, and down 12 percent since hitting a peak of 10.1 million bbl/d in 2005.

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