Energy Problems? Obama's DOE Is Double-Plus Good

[Admiral Valdemar]

Not posted one of these in a while.

Washington considers a decline of world oil production as of 2011

The U.S. Department of Energy admits that “a chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 “if the investment is not there”, according to an exclusive interview with Glen Sweetnam, main official expert on oil market in the Obama administration.

This warning on oil output issued by Obama’s energy administration comes at a time when world demand for oil is on the rise again, and investments in many drilling projects have been frozen in the aftermath of the tumbling of crude prices and of the financial crisis.
Glen Sweetnam, director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the DoE, does not say that investments will not be “there”. Yet the answer to the issue of knowing when, where and in which quantities additional sources of oil should be put on-stream remains widely “unidentified” in the eyes of the most prominent official analyst on energy inside the Obama administration.

The DoE dismisses the “peak oil” theory, which assumes that world crude oil production should irreversibly decrease in a nearby future, in want of suffisant fresh oil reserves yet to be exploited. The Obama administration of Energy supports the alternative hypothesis of an “undulating plateau”. Lauren Mayne, responsible for liquid fuel prospects at the DoE, explains : “Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline.”

Glen Sweetnam, who heads the publication of DoEs annual International Energy Outlook, agrees that what he identifies as a possible decline of liquid fuels production between 2011 and 2015 could be the first stage of the “undulating plateau” pattern, which will start “once maximum world oil production is reached”.

M. Auzanneau - After 2011 and until 2015, do you acknowledge that if adequate investment is not there, a chance exists that we may experience a first stage of decline in the “undulating plateau” you describe ?

GLEN SWEETNAM - I agree, if the investment is not there, a chance exists that we may experience a decline. If we do, I would expect investment in new capacity to increase if there is still demand for oil.

Glen Sweetnam acknowledges the possibility of a close-by and unexpected fall of world liquid fuels production in an email interview, after several requests of details about a round-table of oil economists that Mr Sweetnam held on April 7, 2009 in Washington, DC.


The DoE April 2009 round-table, untitled “Meeting the Growing Demand for Liquid (fuels)“, was semi-public. Yet it remained unnoticed and unjustly, as it put forward forecasts that are far more pessimistic than any analysis the DoE has ever delivered.
Page 8 of the presentation document of the round-table, a graph shows that the DoE is expecting a decline of the total of all known sources of liquid fuels supplies after 2011.

The graph labels as “unidentified” the additional supply projects needed to fill in a gap that is expected to grow after 2011 between rising demand and decline of known sources of supply that the DoE supposes will start that year. The declining production foreseen by the DoE concerns the total of existing sources of liquid fuels plus the new production projects that are supposed to come on-stream before 2012.
The DoE predicts that the decline of identified sources of supply will be steady and sharp : - 2 percent a year, from 87 million barrels per day (Mbpd) in 2011 to just 80 Mbpd in 2015. At that time, the world demand for oil and other liquid fuels should have climbed up to 90 Mbpd, according to the presentation document.

“Unidentified” additional liquid fuels projects would therefore have to fill in a 10 Mbpd gap between supplies and demand within less than 5 years. 10 Mbpd is almost the equivalent of the oil production of Saudi Arabia, world top producer with 10.8 Mbpd.

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More of the article on the actual page which I'm not quoting here. The take-home point is this: the DOE doesn't believe in peak oil, the geological theory regarding a resource hitting an output peak, then declining. What it does believe will happen, though, is oil will hit a peak, likely next year, hover at that mark, then decline. This is not peak oil. Comprende?

By the way, the little get out of jail clause, did you spot it? It's the weasel wording of "if the investment is not there". Since conservative estimates from the IEA regarding keeping extraction up to spec and prospecting for new fields ranges around $1.5T annually, I think it's safe to say which way that is going.

[Morilore]

Is it better to "rebrand" or to go on the offensive supporting the old "brand name"? Hmmm. Obama seems to be the type to prefer rebranding, unless I'm totally not paying attention.

[Admiral Valdemar]

Given he carried over a lot of lackeys from Bush's era into fiscal responsibility, it's not surprising the DOE is playing the same game in trying to not rock the boat too much. To a smart person, this looks hideously funny in how low a level of respect it gives off for those reading it. To the average petro-chemical shill or person on the street not even clued in, it's just more BAU. There was a time when I was naïve enough to believe everything the government would say verbatim, without reading between the lines. I would've hoped after the credit crunch started, that even the most gullible person out there would suddenly realise that monolithic, supposedly intelligent institutions with vast resources are just as prone to confirmation bias and wilful ignorance as any single person can be with an agenda to keep.

So huzzah, we're certainly not in any spot of bother. Except, didn't we start this "undulating plateaux" around 2005? Hmm...

PS. No major news distributor in the US reported this, AFAIK. It took a French editorial to even bring this up, else I'd have missed it.

[The Duchess of Zeon]

The reason why all of this speculation has ended up useless is because there are so many factors affecting the actual production of oil that being able to quantify if the unquestionably real geophysical maximum of production has actually been reached is extremely difficult. And that's a very negative spin on what they said, anyway. Looking at it fairly I'd observe that they're trying to explain that the DOE doesn't believe that oil will peak and then immediately decline, there will be an undulating plateau first. Which is certainly true. Whether or not we are on it in geophysical terms cannot yet be determined though certainly it seems difficult to believe that it won't be reached sometime between 2011 and 2015. And then the question is how long the undulating plateau can last before production starts to go into continuous decline. 10 - 12 years generally seems an agreed upon figure; and before the economic collapse the beginning of the plateau was probably going to be 2012 - 2013, here I'd expect 2015 might be more reasonable. Energy resources per capita will thus probably begin declining midway through this decade, and total energy resources of civilization within a decade or two after that, in absolute terms. Current production is not a good indicator because it's influenced by economic forces as well as the actual physical quantity of oil left.