EWG: Peak Oil happened in 2006

[rhoenix]

World oil production has already peaked and will fall by half as soon as 2030, according to a report which also warns that extreme shortages of fossil fuels will lead to wars and social breakdown.

The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel.

"The world soon will not be able to produce all the oil it needs as demand is rising while supply is falling. This is a huge problem for the world economy," said Hans-Josef Fell, EWG's founder and the German MP behind the country's successful support system for renewable energy.

The report's author, Joerg Schindler, said its most alarming finding was the steep decline in oil production after its peak, which he says is now behind us.

The results are in contrast to projections from the International Energy Agency, which says there is little reason to worry about oil supplies at the moment.

However, the EWG study relies more on actual oil production data which, it says, are more reliable than estimates of reserves still in the ground. The group says official industry estimates put global reserves at about 1.255 gigabarrels - equivalent to 42 years' supply at current consumption rates. But it thinks the figure is only about two thirds of that.

Global oil production is currently about 81m barrels a day - EWG expects that to fall to 39m by 2030. It also predicts significant falls in gas, coal and uranium production as those energy sources are used up.

Britain's oil production peaked in 1999 and has already dropped by half to about 1.6 million barrels a day.

The report presents a bleak view of the future unless a radically different approach is adopted. It quotes the British energy economist David Fleming as saying: "Anticipated supply shortages could lead easily to disturbing scenes of mass unrest as witnessed in Burma this month. For government, industry and the wider public, just muddling through is not an option any more as this situation could spin out of control and turn into a complete meltdown of society."

Mr Schindler comes to a similar conclusion. "The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life."

Jeremy Leggett, one of Britain's leading environmentalists and the author of Half Gone, a book about "peak oil" - defined as the moment when maximum production is reached, said that both the UK government and the energy industry were in "institutionalised denial" and that action should have been taken sooner.

"When I was an adviser to government, I proposed that we set up a taskforce to look at how fast the UK could mobilise alternative energy technologies in extremis, come the peak," he said. "Other industry advisers supported that. But the government prefers to sleep on without even doing a contingency study. For those of us who know that premature peak oil is a clear and present danger, it is impossible to understand such complacency."

Mr Fell said that the world had to move quickly towards the massive deployment of renewable energy and to a dramatic increase in energy efficiency, both as a way to combat climate change and to ensure that the lights stayed on. "If we did all this we may not have an energy crisis."

He accused the British government of hypocrisy. "Tony Blair and Gordon Brown have talked a lot about climate change but have not brought in proper policies to drive up the use of renewables," he said. "This is why they are left talking about nuclear and carbon capture and storage. "

Yesterday, a spokesman for the Department of Business and Enterprise said: "Over the next few years global oil production and refining capacity is expected to increase faster than demand. The world's oil resources are sufficient to sustain economic growth for the foreseeable future. The challenge will be to bring these resources to market in a way that ensures sustainable, timely, reliable and affordable supplies of energy."

The German policy, which guarantees above-market payments to producers of renewable power, is being adopted in many countries - but not Britain, where renewables generate about 4% of the country's electricity and 2% of its overall energy needs.

So, to summarize: a German watchdog group uses actual production figures instead of what spokespeople say is happening, and discover that the excrement has already been flung into the portable rotary cooling device.

Given Admiral Valdemar's threads I've been reading in the past year, I can't say I'm especially surprised.

[Adrian Laguna]

Huh, I was pretty sure it had peaked in '05.

[Sikon]

[...] The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel. [...]

So, to summarize: a German watchdog group uses actual production figures instead of what spokespeople say is happening

Oil having 7% annual decline rates, like a decline to less than half of today's production 10 years from now? That's not well suggested by historical production figures, to say the least...

Here are production figures:

World crude oil under the EIA's definitions:

First 7 months of 2006: Average rate of 73.54 million barrels a day

First 7 months of 2007: Average rate of 73.19 million barrels a day

Change for those periods of 2007 versus 2006: Less than 0.5%.

(If curious, it can also be seen that world production was 73.79 million barrels a day back in 2005, having over recent years stayed almost the same while desired demand increased, leading to price rise).

The above is from the official government statistics here.

Since 2007 is almost over, soon it will be possible to compare the total for this year to 2006.

Likewise, a year from now, 2008, it will be possible to look back to read this thread again and see if oil production in absolute terms is 7% less, then a couple years from now in 2009 do so seeing if it is 14% less, and so on.

After all, one aspect to predictions like the 7% annual decline rate claim in the quote above is that it will be possible to check them...

(Such is different from a price rise alone, which can be caused by desired demand exceeding supply, which only requires supply in absolute terms to do anything other than keep pace with rapidly increasing desired demand ... a lot of demand with various factors including China's economy is estimated as growing at 11% annual rate).

Incidentally, one of the complications here is definitions.

For example, the frequent term "conventional crude oil" does not include all categories of what could be described as oil in a broader meaning of the term. Indeed, the meaning of conventional crude has been changed over time, such as offshore production once having been counted as unconventional but grown since the 1970s to account for 30% of the total as described on page 30 in PDF reader of the IEA 2007 report.

The IEA uses a broader definition of the term oil that includes condensates, liquids produced from converting natural gas to such, and non-conventional sources such as biofuels. As a result, it estimates 89.23 million barrels per day total in 2007. Such is much higher than the 73 million barrels per day described above, but that's the result of including more oil and oil-equivalent liquids under the category of oil. The IEA predicts 92 million barrels per day next year in 2008.

Fossil fuels are a limited resource, and there is a need to switch away from them for multiple reasons. But a group being opposed to oil dependence for good reasons doesn't make all claims from them accurate, as only proper conformance with quantitative figures can accomplish that. As an analogy, almost everyone is opposed to nuclear war for good reasons, but that historically hasn't made every quantitative prediction of nuclear winter effects by someone arguing for peace be actually accurate.

[Medic]

Sikon, isn't one of the biggest problems about fossil fuels other than good ol' reliable crude that they generally take a bit more to obtain from the environment on one hand and/or on the other take more resources to process for consumption? In less words, they're less efficient sources of energy and that should be kept in mind when their contribution is added to world energy supplies.

The figures I'm more concerned about would be the net energy we get out of what we're still pumping out of the earth, how efficient this or that energy source is. If we get so many more millions of barrels of oil a day this year than last but it takes just-that-much-more energy expended to GET it, that's a backwards slide in efficiency and net energy and will result in less bang-for-our-buck over the long term, higher prices, ever-increasing tensions WRT supply, etc.

[Master of Ossus]

Holy shit! The world economy came to an end and no one even noticed. Pity no one predicted that.

[Sikon]

The figures I'm more concerned about would be the net energy we get out of what we're still pumping out of the earth, how efficient this or that energy source is. If we get so many more millions of barrels of oil a day this year than last but it takes just-that-much-more energy expended to GET it, that's a backwards slide in efficiency and net energy

That's not the case, though, since the relevant sources of energy don't have a 1:1 ratio of energy expended to energy return but much higher, with multiple times as much energy obtained as used in their production, providing net gain. There isn't a case of expending as much energy to get them as their payback.

Naturally, suitable net gain is a requirement for an energy source to be viable, economically and otherwise. For example, a little fusion has been caused many times experimentally, but it has not achieved the needed breakeven and needed net gain (outside of thermonuclear bombs impossible for power generation outside of some weird proposals), which prevents it from being a power generation option so far ... no company being foolish enough to build a power plant producing X kilowatt-hours if they had to unaffordably purchase more than X kilowatt-hours to run it.

All energy production methods always have and always will consume some portion of their total energy output. All workable sources of energy provide substantially more energy than that expended to get them, from windmills to oil sands to nuclear power.

An analogy is a car, where some of the mechanical power is consumed by the alternator generating electricity. Of that electricity, used for multiple purposes, some indirectly allows the engine to start in the first place through the spark plugs and charges the battery. Yet the energy consumed is less than the total energy release, providing net gain, so the car works.

For example, for oil sands, the efficiency of extraction is currently about 80%, so around 1/5th as much as its energy content is used in the production process from bitumen deposits. There is a 5:1 ratio of energy return to energy invested.

Of course, there's also the matter of the type of energy consumed. Usually the heat and electricity used to extract the oil sands comes from natural gas, though Energy Alberta Corp. is recently considering using nuclear power:

May 17, 2007
Nuclear power plants to power Alberta oil sands extraction

[...] Amid fluctuating natural gas prices, increased public pressure over greenhouse gas emissions, and dwindling conventional oil production, Energy Alberta Corp., in partnership with Atomic Energy Canada Ltd. (AECL) is proposing a C$3 billion, 750 megawatt Candu 6 (Canadian Deuterium Uranium) reactor for completion by 2014. This would produce enough energy to support a 100,000 to 150,000 barrel per day oil sands operation.

[...] "Instead of relying on natural gas for fuel at volatile world market prices, oil sands producers could count on a reliable steady price for nuclear power for the next 50 years," says Henuset.

The idea of nuclear power to fuel the energy intensive requirements of the oil sands production has been batted around for years. In the 1950's several U.S. and Canadian scientists were convinced they could release the heavy oil from the sand by blasting a nine kilotonne atomic bomb under the oil sands 60 kilometres south of Fort McMurray. The idea was to vaporize the rock and create a large cavity into which heated oil would flow and later be pumped out by conventional methods. The idea was killed due to political pressure, but resurrected briefly in the 1970's, and again in 1978.

Nuclear power discussions appeared on the provincial government agenda several times in the 1990's, but it wasn't until 2003 that Alberta's energy minister and Atomic Energy of Canada, the federal Crown Corporation that sells reactors, made their discussions public.

At the time AECL commissioned a study from the Canadian Energy Research Institute on how costs of nuclear power compared with natural gas-fired plants currently used to generate the steam and electricity needed to extract bitumen from the oil sands and the hydrogen necessary to process it into useable crude oil. The study showed that nuclear power is a viable option for the oil sands, and competitive at natural gas prices of US$3.50 per million BTU or higher. Gas prices have averaged $7.27 per million BTU this year on the New York Mercantile Exchange.

Nuclear power itself has exceptional energy payback, on the order of a 70:1 energy payback ratio over the first decade of operation for a nuclear power plant versus its construction.

There has been some increase in oil sands production and other components of unconventional oil, not enough to meet rapidly increasing desired demand but helping compensate for the current decline of conventional crude production in some regions:


(Click to enlarge; original sources are linked within here).

Coal to liquids is less efficient, with relatively low efficiency of around 60%, though that's still workable.

Condensates and natural gas to liquids (NGL) are easier and more common today than CTL.

Of course, all fossil fuels including oil sands have their disadvantages of limited resources and pollutant emissions upon combustion, so even nuclear-powered oil sand extraction would be a system that can't be relied upon forever, unlike using nuclear energy and renewables directly.

Once there was easy to obtain oil with an energy return ratio upwards of tens to one, while over the past several decades it has taken more trouble to access remaining oil. Production has involved drilling deeper, going offshore, and more. The energy return ratio has dropped towards around 10:1. When fossil-fuel oil eventually runs out, the situation will not literally be no drop of oil existing in the ground at that point but rather the remaining oil becoming more troublesome to obtain than it is worth. (As an analogy, people didn't stop using whale oil because there were literally no whales left anywhere but because its price rose and its availability dropped compared to the competition). As conventional oil prices rise, such stimulates unconventional oil production and substitution of other fossil fuels, but it eventually forces the real permanent solution, going to nuclear and renewable energy instead.

Sugarcane ethanol as widely used in Brazil has far better energy return than corn ethanol, with the ratio of energy return to energy investment being around 8:1 on average. (Corn ethanol can sometimes be quite a poor energy return ratio, but the U.S. government heavily subsidizes politically important corn farmers, making it an unusual situation).

For ethanol, cellulosic ethanol has the greatest potential, not using food but using agricultural waste, paper waste, and more. It can return up to 600% energy than the amount it takes to produce.

Of course, there is also the overall inefficiency of any system from energy production to energy consumption at the end-user.

Frequently the biggest component of overall inefficiency isn't the losses at production discussed previously.

Rather, the efficiency of energy extraction is usually relatively high compared to the frequently enormous inefficiency of end-users.

For example, burn gasoline in the average internal combustion engine, and typically not more than 25% of the chemical energy becomes mechanical energy at the driveshaft. Actually, overall, only on the order of 2% of so of the total energy becomes the kinetic energy of the driver, due to additional inefficiencies including a several thousand pound vehicle being accelerated to carry typically a single ~ 100-kg person. It is possible to improve the preceding, especially when the average vehicle on U.S. roads has just 22 mpg fuel efficiency, multiple times less than possible, even though that is a bit of an improvement since it was a mere 16 mpg average in 1980.

In other words, internal combustion engines are usually under 25% efficiency, while other factors tend to reduce overall efficiency even far more.

For example, efficiency is influenced by whether ethanol is produced with the figure for sugarcane ethanol or for cellulosic ethanol, but what particularly affects overall efficiency is whether the vehicle burning that ethanol gets 20 miles per gallon or 60 mpg.

There are losses in extraction for various energy sources, but often it is the end-user where there is exceptional inefficiency and a lot of potential for improvement.

[Darth Wong]

Holy shit! The world economy came to an end and no one even noticed. Pity no one predicted that.

Gee, that's not a strawman at all, is it?

In point of fact, Peak Oil is simply this exact point: when oil production hits a plateau. The decline will follow, unless magical new sources of oil are found (and while they will be, even if it becomes necessary to grow the stuff, it will become vastly more expensive, and may even become more environmentally destructive). No one ever said that everything would fall apart the moment Peak Oil occurred; Peak Oil is simply the point where we should start expecting the downhill slope.

Sikon is making a lot of hay going after that 7% decline figure, and I'm not sure how they are projecting that, but he's also misrepresenting it; he acts as though it has been disproven by the fact that it has not already declined by 7% this year, but it's only saying that it decline at this rate in future. Since this is a projection based on what is essentially guesswork about the level of optimism in industry claims, I wouldn't necessary expect it to be accurate. But anyone who thinks the industry is exaggerating its abilities by 0% would have to explain why.

[Illuminatus Primus]

If it doesn't obey classical economics, its sure to bring MoO out of thaw. Yet another of the Snip From the Gallery crowd. As if there weren't enough strawmanning whiners.

[Sikon]

Sikon is making a lot of hay going after that 7% decline figure, and I'm not sure how they are projecting that, but he's also misrepresenting it; he acts as though it has been disproven by the fact that it has not already declined by 7% this year, but it's only saying that it decline at this rate in future.

A claimed decline of 7% annually starting from now, this year.

They are making a rather specific claim.

When there is a specific claim about a deviation from past history by an order of magnitude, without a mechanism demonstrated, like this claim implying most world oil production gone in ten years (7% annual decline), it is the authors' burden of proof to support it, to demonstrate appropriate actual calculations and evidence.

If one avoids any automatic assumption of validity for one of various unproven claims from various political groups, the official government statistics (EIA) show the history of the past several years as mostly stagnant production for regular crude oil alone: 73 mbl/dy 2004, 74 mbl/dy 2005, 74 mbl/dy 2006. Nominally the figure for regular crude oil alone has gone down slightly compared to 2005 if one looks at it with three significant figure precision, although it's premature to draw too many conclusions from that yet, especially given fluctuations in past decades. A reference link is in the previous post.

If someone is to assume that there will be only around 58 mbl/dy oil production in 3 years (about 21% decline compared to conventional crude figures, although total oil figures are a different topic), deviating from past experience such as the change rates in Hubbert curves, they need to show serious evidence and calculations to fulfill the burden of proof before their claim should be considered probable.

Meanwhile, total oil production under a broader definition of the term as used by the IEA has not peaked so far, having continued to slowly increase and reached almost 90 mbl/dy. That's not simply in terms of uncertain industry predictions for the future but in terms of actual historical data up to the present time.

Seriously, really believing most world oil production will be gone in ten years could drastically affect a person's planning for the future on a personal level (rural versus city, education, employment choices, etc).

For those who aren't convinced by the preceding discussion, check back and look at this article again a couple years from now, like I've read a variety of insufficiently supported predictions by political groups dating back to the 1970s and then looked back at them years later.

Of course, the conventional crude component of oil will decline significantly sooner or later, but this article is making some very specific predictions such as the extreme rate of decline.

[Illuminatus Primus]

I don't know if I believe this dire of projections, either, but conventional production increasingly seems to have hit a brick wall. Simmons' figures out of Twilight in the Desert don't paint a rosy picture. With Cantarell now experiencing significant depletion, we'll probably see an insurmountable peak or decline in conventional production within the next five years. I mean, if they might be dry in seven years, exports will drop to negligible before that happens by several years.

[Admiral Valdemar]

Pickens, the oil tycoon, and Skrebowski the Petroleum Review editor agree with this report. Pickens always betting against the oil industry and IEA/EIA and always making money on it too and Skrebowski often being a quite anti-PO doomer and even had a huge campaign trying to debunk the theory a few years back.

I also believe Robert Rapier has a good piece on the massive slowdown in unconventional output rate increases for the medium term, which have helped off-set plateaus and declines recently with conventional crude.

The IAEA also have an interesting read on nuclear power growth in the medium term too, but this should be taken with a grain of salt given it will more than likely assume cheap oil.

As for the IEA's stance, you need to read between the lines. Their MTOMR this summer more or less accepts oil has peaked and a decline higher than all previous predictions is a very real threat along with price spikes to record highs (something also laughed off by industry when presented by Goldman Sachs). The IEA data also doesn't show oil reaching near 90 Mbpd, in fact, it's been hovering just over 85 since 1Q06.

[J]

What the decline after the peak looks like depends mostly on how oil producing countries manage the production profiles of their oil fields. There are indications that several Mid-East countries are taking the long view and deliberately constraining production and leaving reservoirs idle to save the oil for the future. By doing this they'll have a slower decline rate in the production when they pass the tipping point. Other countries have opted to squeeze oil from the ground at the greatest possible rate, these countries end up having frighteningly fast drops in production once they pass peak. The UK is a good example, production has dropped by half in about 7 years.

In vastly simplified form, what the future world decline looks like depends on the production strategies of the countries involved. Do they drill aggressively and rapidly drain their reserves or do they pace their production for the long run?

[Admiral Valdemar]

What the decline after the peak looks like depends mostly on how oil producing countries manage the production profiles of their oil fields. There are indications that several Mid-East countries are taking the long view and deliberately constraining production and leaving reservoirs idle to save the oil for the future. By doing this they'll have a slower decline rate in the production when they pass the tipping point. Other countries have opted to squeeze oil from the ground at the greatest possible rate, these countries end up having frighteningly fast drops in production once they pass peak. The UK is a good example, production has dropped by half in about 7 years.

In vastly simplified form, what the future world decline looks like depends on the production strategies of the countries involved. Do they drill aggressively and rapidly drain their reserves or do they pace their production for the long run?

The problem, then, is that we may be able to carry on with production being around where it is now and has been for a couple of years almost, but that means no economic growth with respect to using more oil. Or, in other words, demand destruction, as we are seeing now. $90 oil is easy for the rich First World to afford ('cept maybe the US is struggling a little), it's a whole different story with the Second and Third Worlds. Demand is nearing 90 million and we have yet to get over that even with unconventional sources added in. Couple that with conservation, tertiary extraction damage and export land having internal consumption increase, and 7% looks less unreasonable.

The IEA themselves say 4% is expected at the least given current market issues.