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Sunday, March 02, 2008 CE

Monitoring Peak Oil Number 9


World Total Liquid Fuel Production -January 2008: 87.18 millions of barrels per day (mbpd)1.


The production is again the highest prodution recorded so far. However, the production of crude and condensate achieved its peak in May 2005. This means that the production of natural gas plant liquids (NGPL), ethanol, biomass to liquids (BTL), coal to liquids (CTL), gas to liquids (GTL) and processing gains is still increasing. According to certain estimates, the peak fossil fuel production will be reached in 2018, taking into account also coal and natural gas 2. In the meantime, the supply and demand mismatch will create oil price increases and a slowing of the world economies as an average.


References

6 Comments:

Blogger Keep Life Simple said...

Marco,

I heard this morning on NPR that corn is now being produced primarily for ethanol which is driving up the cost of corn and corn syrup. However, an unexpected side effect is that the "remains", while edible, aren't tasty to humans, but cows like it. So, the number of cattle being raised in Iowa has tripled in recent months. Perhaps the price of beef will drop! Actually, no doubt that the price of beef will drop if the trend continues.

Q

9:25 AM  
Blogger Doctor Marco said...

The idea that ethanol can replace oil has no scientific basis. It is an example of how politicians with no idea of the concept of energy can ruin a society. It is an example of shortsightedness for some, of opportunism for others and of stupidity for the rest who support it.

11:33 PM  
Blogger Keep Life Simple said...

Marco,

Are you familiar with the "Le Chatelier Principle"? My interpretation: a stable system is one where the key forces are balanced. A stable system can easily rebalance in response to changes in forces. Of course, the magnitude of change is a significant factor. It seems that many people view changes in isolation and do not consider them from a systemic perspective. You clearly think systemically, but I thought this would interest you.

Q

. . . . . . . . . . . . . . .

The Oil Crisis of 1976
Le Chatelier’s Principle can be a very powerful predictive tool. A good example of the power of Le Chatelier in a situation where it was not used but should have been relates to the period just after the oil crisis of 1976.

At that time, the author was the Group Strategic Planner for an international holding company that had significant interests in polymers and plastic products. On this holding company’s board was a non-executive director who was also a director and main board member of one of the world’s leading international oil companies. This so-called industry expert made a presentation to our board immediately after the oil crisis predicting a Doomsday Scenario whereby the price of oil, and hence polymers that are derived from petrochemicals, would continue to escalate for the next decade or two along with massive and continuing inflation. His projections were based on limited oil resources and unrestrained population growth. As a consequence, demand for oil continued to increase over time and soon outstripped production and supply, as the known and available oil resources of the world got used up. He argued that we might therefore expect the trend towards higher oil prices to get steadily worse in the future. This was indeed a very grave economic scenario for our business.
However, this pessimistic forecaster clearly had no knowledge of Le Chatelier. He ignored the fact that when you apply a stress to a system in equilibrium, the system adjusts so as to undo or offset the effect of the stress.

Let us examine the three main factors involved here, or the inputs to the system , so called.

These three inputs are:
· oil consumption and demand
· population growth
· oil supply and sources of supply

First, as the price of oil went up, this provided a compelling need for change. Everyone had to get more efficient and use less oil. That is exactly what happened. Cars got smaller and more efficient by design, insulation on houses was improved, factories used less fuel in their processes, etc, etc. All of this was due to human initiatives in response to high energy costs backed by government that had an eye on balance of payments and the need to control cash outflows to purchase oil from the small number of countries who at that time controlled crude oil.

Secondly, the rate of population increase in the developed countries, who were the big oil users, slowed due to the unfavorable economic circumstances that people were experiencing. Families got smaller as people had less children.

Lastly, and perhaps most important of all, it became increasingly economic to explore for new sources of oil and natural gas and new sources of power. As a direct consequence, nuclear, solar, wind, and wave power were developed, and vast new and as yet untapped oil resources were found, not least among which were those in the North Sea, Alaska, etc. We now know that we have an almost unlimited supply of oil and natural gas, at least for the foreseeable future.

The author argued with the oil industry expert at the time that his extrapolations of population growth, oil usage and supply limitations were over-simplistic. Judicious use of Le Chatelier would have predicted all of the above changes and that the

Doomsday Scenario would be avoided by the establishment of a new but not very different equilibrium between oil demand and supply.
This is a good example of how to examine the main inputs to a system in equilibrium in an attempt to understand how they might change in response to the stress being applied so as to maintain a state of equilibrium.

Fortunately, the board did not buy the scenario being presented by the expert. If it had, it would have over-reacted unnecessarily, which might have had dire consequences on the businesses under its control.

9:45 AM  
Blogger Doctor Marco said...

Q

The concept you showed me is very similar to the concept of Gaia, the living planet. The only difference is that Gaia does not necessarily assume that human beings or thir civilization will be part of the new state of things.

As a physician and specially as a nephrologist I am very familiar with the concepts of "steady state", "equilibrium" and what happens when they are disrupted and a new state is achieved. And remember that death is the just the state in which a matter/energy equilibrium with the surroundings is finally achieved. One day someone asked me: "What are you doing?". I replied: (instead of saying "nothing") "Oh, I am here, exchanging matter and energy with the environment"

8:52 PM  
Blogger effay said...

"The idea that ethanol can replace oil has no scientific basis. It is an example of how politicians with no idea of the concept of energy can ruin a society. It is an example of shortsightedness for some, of opportunism for others and of stupidity for the rest who support it."

Cheers to that! Oh wait a second, before you drink, you'd better be prepared to pay up. You see, the artificially high demand for ethanol has led many farmers to convert their land from hops to corn which, shockingly, has led to higher hop prices and higher beer prices.

That's the real way to get to people's hearts - run a Super Bowl ad that informs America that they can have ethanol, which sucks either way, or cheap beer.

I vote for beer.

7:48 PM  
Blogger Keep Life Simple said...

Macro,

I heard (MSNBC maybe) that the U.S. is still filling the strategic oil reserve (the salt domes). I also heard they are near to full capacity (110 days of oil). That is the up side.

The downside is that I also heard on the same show that the Chinese have begun filling 3 strategic oil reserves...

Q

10:18 AM  

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