[Pops]

In March of 1971 the Texas Railroad Commission, the de-facto "OPEC" of the day, removed all limits on Texas oil production. This effectively marked not only the end of spare oil production capacity in the US but also the peak in US oil production. Coincidently it was 2 years later the Arab Oil Embargo showed just how dependent we were on that marginal imported barrel.

According to a report by the IEA last month, non-OPEC conventional crude oil production has peaked and non-conventional production will peak in the coming 5 years. The remaining growth is coming from bio-fuels and natural gas liquids.


Financial Times

Depending upon how fast we can mine and convert half-baked kerogen (tar sand) into liquid fuel or plumb the depths of the arctic, we, the non-OPEC nations of the world, are once again dependent on Export Land for that marginal barrel, that small excess supply that keeps the price plot from going vertical.

Recently, the King of Saudi Arabia quietly announced to a group of Saudi students studying in America, an end to new oil field development. He said he wanted to “... leave the underground wealth for our sons and their sons...” Whether that was just a PR talking point or not, the fact that it is reported at all (albeit obscurely) shows the importance of OPECs and in particular SAs spare capacity.

According to Jeffery Brown's Export Land Model, as an exporting country's internal demand grows and it's oil reserves deplete, there comes a point (long before the resource is exhausted) that exports stop. It only takes a little common sense to understand that it's cheaper to deliver a product closer rather than farther away, but more to the point, in most exporting countries today, the government controls the oil and uses the oil to control the population.

Of course keeping the US dollars flowing in is a good way to pacify a people and to that end Saudi Arabia announced it's intention to implement solar power as a replacement to oil fired desalinization plants - saving 1.5 million barrels of oil a day! The Saudis also are embarking on development of nuclear and other energy sources. Those alternatives (like in most countries) are far from replacing oil anytime soon but the sudden interest of SA, the UAE and other exporting countries in conserving their still vast reserves should be a hint to the importing countries that times are changing and the exporters are planning for a different future.

So that leaves us back at square one - except that this time it isn't just the US at peak production, its the entire non-OPEC world (aside from Canada tar) who will experience declining production. We are now completely reliant on OPEC for replacement of every barrel of conventional crude oil reserve depleted plus every barrel of demand growth desired. Of course this makes us vulnerable to politically motivated embargoes or physical disruption of supply from any exporting state but also decisions such as that hinted at by King Abdullah to "leave it in the ground".


Top 10 – Proven Oil Reserve Countries
Spare Capacity And Oil Price Dynamics, 2006 (Campbell on spare capacity in 2000 - the oil price figures are quaint!)
Oil Price History and Analysis, WTRG Economics
http://en.wikipedia.org/wiki/Export_Land_Model
http://en.wikipedia.org/wiki/1973_oil_crisis

[Plantagenet]

I don't get it Pops. Often your posts sound like they were written by Jed Clampett of the Beverly Hillbillies, but this time your post contains a succinct historical review and sophisticated analysis of the current global oil market.

Who are you? What did you do before you moved to the farm?

[efarmer]

Like Jed, Pops is all folksy and homespun until he squints and lines up his "shootin' iron".

[wisconsin_cur]

Yet we are moving in a direction where any exporting country finds themselves capable of enacting an embargo for whatever reason. Of course this also raises the risk to the policy makers who enact such a decision as well.

It is like the spread of the bomb; it makes the world an intrinsically more unstable place. We do not have to like it but we do need to learn how to live in it.

[Plantagenet]

France has insulated themselves from the global oil market by building nukes for electric power and an extensive high speed electric rail network between cities and electric light rail networks within cities.

Sadly, US politicians are too moronic to build the nukes or the high speed rail or the light rail we need to replace oil in our transportation systems in the US.

[wisconsin_cur]

And yet that still will not save them. They remain the #12 user of oil in the world:

http://www.indexmundi.com/g/r.aspx?t=20&v=91&l=en

1 United States 20,800,000
2 China 6,930,000
3 Japan 5,353,000
4 Russia 2,916,000
5 Germany 2,618,000
6 India 2,438,000
7 Canada 2,290,000
8 Korea, South 2,130,000
9 Brazil 2,100,000
10 Mexico 2,078,000
11 Saudi Arabia 2,000,000
12 France 1,999,000
13 United Kingdom 1,820,000

and move up the ranks to #9 as far as how much oil they import.

http://www.indexmundi.com/g/r.aspx?c=fr&v=93

Rank Country Oil - imports (bbl/day)
1 United States 13,150,000
2 Japan 5,425,000
3 China 3,190,000
4 Germany 2,953,000
5 Netherlands 2,465,000
6 Korea, South 2,410,000
7 Italy 2,182,000
8 India 2,098,000
9 France 1,890,000
10 Singapore 1,830,000

If we were being graded on a curve, they would, no doubt, receive a better mark than the United States but I am afraid that we have all enrolled on a pass/fail basis.

[americandream]

Plus they are hopelessy integrated into the global financial markets being a leading player in the capitalist pyramid scheme. When the global financial markets go down, the French will at least have the power to run the guillotines, I guess.

And yet that still will not save them. They remain the #12 user of oil in the world:

http://www.indexmundi.com/g/r.aspx?t=20&v=91&l=en

1 United States 20,800,000
2 China 6,930,000
3 Japan 5,353,000
4 Russia 2,916,000
5 Germany 2,618,000
6 India 2,438,000
7 Canada 2,290,000
8 Korea, South 2,130,000
9 Brazil 2,100,000
10 Mexico 2,078,000
11 Saudi Arabia 2,000,000
12 France 1,999,000
13 United Kingdom 1,820,000

and move up the ranks to #9 as far as how much oil they import.

http://www.indexmundi.com/g/r.aspx?c=fr&v=93

Rank Country Oil - imports (bbl/day)
1 United States 13,150,000
2 Japan 5,425,000
3 China 3,190,000
4 Germany 2,953,000
5 Netherlands 2,465,000
6 Korea, South 2,410,000
7 Italy 2,182,000
8 India 2,098,000
9 France 1,890,000
10 Singapore 1,830,000

If we were being graded on a curve, they would, no doubt, receive a better mark than the United States but I am afraid that we have all enrolled on a pass/fail basis.

[Plantagenet]

If we were being graded on a curve, they [France] would, no doubt, receive a better mark than the United States but I am afraid that we have all enrolled on a pass/fail basis.

The perfect is the enemy of the good.

France is clearly much farther along then US is in setting a pretty darn good power system and an excellent transportation network that aren't dependent on oil and that is carbon neutral.

Just last week France announced that they are replacing the last of their coal-fired power plants with more nukes. Good for them.

[eastbay]

When China oil consumption reaches 15 mb/d in just a few short years they'll be pulling that additional 6 mb/d from somewhere. So what countries will have their consumption reduced to accommodate this jump?

And when China consumption doubles near the end of this decade and reaches current US oil consumption of about 19 mb/d, where will their additional 11 mb/d come from? The pie isn't growing so they'll have to 'take it' from other nations. It's interesting to speculate which group of nations will surrender their current share to accommodate China's continuing spectacular growth.

[americandream]

Bingo!

When China oil consumption reaches 15 mb/d in just a few short years they'll be pulling that additional 6 mb/d from somewhere. So what countries will have their consumption reduced to accommodate this jump?

And when China consumption doubles near the end of this decade and reaches current US oil consumption of about 19 mb/d, where will their additional 11 mb/d come from? The pie isn't growing so they'll have to 'take it' from other nations. It's interesting to speculate which group of nations will surrender their current share to accommodate China's continuing spectacular growth.

[wisconsin_cur]

If we were being graded on a curve, they [France] would, no doubt, receive a better mark than the United States but I am afraid that we have all enrolled on a pass/fail basis.

The perfect is the enemy of the good.

France is clearly much farther along then US is in setting a pretty darn good power system and an excellent transportation network that aren't dependent on oil and that is carbon neutral.

Just last week France announced that they are replacing the last of their coal-fired power plants with more nukes. Good for them.

I thought we were talking about peak oil and I do not know what carbon neutral means in that respect unless they are actively putting oil back in the ground somewhere to offset what they are using.

I am merely observing that their good is not good enough and that they still have plenty of need for liquid transportation fuels. Nukes instead of coal is good but largely irrelevant given the absence of nuclear powered transportation for all the imports which reach their shores, nuclear powered semi-trucks to move it around and nuclear powered whatever else they use which has made them the #8 oil importer per capita in the world.

The lights will stay on, good for them but that does not mean that the trucks will still roll (bad for them).

[Plantagenet]

Hi Wisconsin cur:

You are right that France, like other countries, still uses lots of oil.

And when the oil gets embargoed or runs out, countries around the world will have to shift to other energy sources. All I'm saying is that France is farther along then most countries on doing this. As people are forced to give up their cars, France already has an excellent electric rail transit system that can address transportation needs. When the crunch comes, and French people are forced to curtail driving and start taking the train and trolley----the system is already constructed.

There really is no need to own a car in France right now---you can get almost anywhere by electrically powered mass transit.

In the industrial sector as gas powered trucks are phased out and more electric vehicles are added for industrial and freight transport, France's nuclear powered electrical grid provides a viable and reliable way to generate huge amounts of additional electricity to run electric cars, electric trucks, electric tractors and electric motorcycles and electric scooters.

Being carbon neutral is a bonus.

[Pops]

It is like the spread of the bomb; it makes the world an intrinsically more unstable place. We do not have to like it but we do need to learn how to live in it.

I think that's right.

India and China are competing for oil deals around the world, including in Canada and even here in the US:

Chesapeake, one of the pioneers in opening up vast new reserves of natural gas in the U.S., has been talking to some Chinese oil firms about buying as much as 20% of its Eagle Ford field in Texas, Rowland told reporters in Beijing. He estimated the total cost of that project could be $4 billion. Chesapeake also is talking to Asian investors about buying as much as a 10% stake in the Marcellus shale gas field in the eastern U.S.

Rigzone

Lots of levers being pulled at once nowadays: computerized hedge and arbitrage schemes, OPEC manipulations and governmental fiscal gyrations of all sorts, demand from developing countries, rising fears of GH gases – all adding to and arising in some part from fossil fuel volatility.

Really, I try to be optimistic about Iraq and Russia growing just fast (slow?) enough and unconventionals like tar and NG and condensates and way-offshore and all the rest staying just expensive enough to get us off the dime to transition - but not so expensive they kill us (or give some tin-pot an excuse to push the wrong button) and not so plentiful we forget again like we did in the '90s. In any case it won't be fun but its gotta be done.

.
There's more than one way to skin a cat, but there ain't no way to make the cat enjoy it.
-- J. Clampett

[Leutnant]

When China oil consumption reaches 15 mb/d in just a few short years they'll be pulling that additional 6 mb/d from somewhere. So what countries will have their consumption reduced to accommodate this jump?

And when China consumption doubles near the end of this decade and reaches current US oil consumption of about 19 mb/d, where will their additional 11 mb/d come from? The pie isn't growing so they'll have to 'take it' from other nations. It's interesting to speculate which group of nations will surrender their current share to accommodate China's continuing spectacular growth.

But how can China maintain its growth if there's a severe energy crisis?

[dolanbaker]

But how can China maintain its growth if there's a severe energy crisis?

By outbidding other countries! They will simply buy (continue buying) up supplies where ever they can and outbid where necessary.

China by all accounts owns America (well all it's debts) so therefore may "cut a deal" by reducing the debt in exchange for some of the oil that America would have bought on the open market.