What the new 2011 EIA oil supply data shows

The US Energy Information Administration (EIA) recently released full-year 2011 world oil production data. In this post, I would like show some graphs of recent data, and provide some views as to where this leads with respect to future production.

World oil supply is not growing very much

Figure 1. World crude oil and other "liquids" supply has dropped below the 1983-2005 trend line in recent years. Actual data is from EIA International Petroleum Monthly, through December 2011.

The fitted line in Figure 1 suggests a “normal” growth in oil supplies (including substitutes) of 1.6% a year, based on the 1983 to 2005 pattern, or total growth of 10.2% between 2005 and 20011. Instead of 10.2%, actual growth between 2005 and 2010 amounted to only 3.0% including crude oil and substitutes.

The shortfall in oil production relative to what would  have been expected based on the 1983-2005 growth pattern amounted to 4.7 million barrels in 2011. This is far more than any country claims as spare capacity. This is no doubt one of the reasons why oil prices are as high they are now. These high oil prices tend to interfere with economic growth of oil importing nations.

The shortfall in growth especially occurred in crude oil. Figure 2, below, shows crude oil production separately from substitutes.

Figure 2. World oil and other liquids supply, broken out into crude and condensate, natural gas plant liquids, other liquids (mostly ethanol), and processing gain (increase in volume from refining heavy oil), based on EIA data.

Between 2005 and 2011, crude oil production rose only 0.5%. It was mostly the substitutes that grew.

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World Energy Consumption Since 1820 in Charts

Figure 1 shows the huge increase in world energy consumption that has taken place in roughly the last 200 years. This rise in energy consumption is primarily from increased fossil fuel use.

Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent

With energy consumption rising as rapidly as shown in Figure 1, it is hard to see what is happening when viewed at the level of the individual. To get a different view, Figure 2 shows average consumption per person, using world population estimates by Angus Maddison.

Figure 2. Per capita world energy consumption, calculated by dividing world energy consumption shown in Figure 1 by population estimates, based on Angus Maddison data.

On a per capita basis, there is a huge spurt of growth between World War II and 1970. There is also a small spurt about the time of World War I, and a new spurt in growth recently, as a result of growing coal usage in Asia.

In this post, I provide additional charts showing long-term changes in energy supply, together with some observations regarding implications. One such implication is how  economists can be misled by past patterns, if they do not realize that past patterns reflect very different energy growth patterns than we will likely see in the future.

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OPEC says, ‘Don’t Count on Us’ for More Oil Supply

The results of OPEC’s latest meeting to set oil production quotas were announced this morning. Instead of production targets for individual countries, a group production ceiling of 30 million barrels a day was set. This amount is a bit less than OPEC produced in November 2011 (actual 30.367 mbd), according to its reckoning, and less than it would have produced most of 2011, if Libyan production had stayed on line, based on the amounts shown in its November Oil Market Report.

A recent history of oil production from the November Oil Market Report, both for OPEC and in total, is shown in Figure 1.

Figure 1. Recent oil production for World and for OPEC, according to OPEC November Oil Market Report.

According to a Platts report of the meeting, Venezuelan Oil Minister Rafael Ramirez told reporters, “We are going to reduce the level of production of each country to make space for Libya.” That is not what people want to hear–Brent oil price is still over $100 barrel, even with what seems to be record production for both the world and OPEC, based on Figure 1.

The same Platts report also says, “OPEC on Tuesday said it expected demand for OPEC crude next year to average 30.09 million b/d.” Thus, the new production cap is slightly less than what OPEC sees as demand going forward.

It should be noted that the new limit includes Iraq in addition to the “regular” OPEC countries. Thus, the agreement says that if Iraq increases its production, other OPEC countries will reduce their production to keep total production to 30 million barrels a day.  Continue reading

Saudi Arabia – Headed for a Downfall?

Saudi Arabia recently announced that it had halted a $100 billion oil production expansion plan to raise capacity to 15 million barrels a day by 2020. At this point, the country claims to have capacity of 12 million barrels a day. What does this mean for its future? Let’s take a look behind the figures.

Figure 1. Saudi Arabian oil production and exports, from Energy Export Data Browser. Note that oil production is in grey, oil exports are in green, and the black line represents consumption.

The figure shows that Saudi Arabia has not been increasing its production for many years. At the same time, the country’s own oil consumption has been rising rapidly. The combination means that oil exports have already started declining. Continue reading

2012: Reaching “Limits to Growth”?

It looks to me as though 2012 is likely to be a truly awful financial year, with several crises converging:

  1. Either very high oil prices or recession,
  2. The US governmental debt limit crisis,
  3. The Euro crisis,
  4. The Chinese debt problem,
  5. Debt deleveraging in the US and elsewhere,
  6. Further MENA (Middle East/North Africa) political problems, and
  7. Conflict between need for greater resources and pollution issues.

It seems to me that we may be reaching “Limits to Growth,” as foretold in the book by the same name in 1972. The book modeled the consequences of a rapidly growing world population and finite resource supplies. A wide range of scenarios was tested, but the result in nearly all scenarios was overshoot and collapse, with the timing of collapse typically being in the 2010 to 2075 time period.

Figure 1. Base scenario from 1972 "Limits to Growth", printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

The authors of Limits to Growth did not model the full interactions of the system. One element omitted was how debt would impact the system. Another item omitted was how prices for oil and other resources would affect the system.

If a person follows through the expected effects of high oil prices and debt, the financial system would appear to be the most vulnerable part of the system. The financial system would also appear to be what telegraphs problems from one part of the system to another. Unless a solution is found, failure of the financial system could ultimately bring down the whole system. Continue reading