Eric alluded to this in his last post, but I think it bears repeating: a major global review of petroleum industry trends found that worldwide oil production fell last year.
Of course, the decline was so small—0.2%—
that it may fall within the margins of error of the measurements. You might think that oil production figures would be pretty rock-solid, but apparently there’s always a bit of slosh in the data. When it comes to oil, even the numbers are slippery. (Yuk, yuk.)
Still, if the data are close to accurate, the news is sobering. Market theorists say that high prices should encourage the global petroleum industry to open up the taps, and start pumping more oil. But apparently, the market theorists were wrong—and some other forces are now in play.
Lots of folks are claiming last year’s production figures are a sign of a near term “peak” in oil production—a point when geological limits kick in, and global oil production declines no matter what the oil industry wants. (More on peak oil here, and lots of other places on the internets.)
Of course, oil industry analysts scrambled to claim that the geological peak is a long way off, and that last year’s shortfall was due to economics & policy:
“Political factors, barriers to entry, and high taxes all play a role here.
They might well be correct, of course; human decisions may have had a role in production shortfalls. For example, if I were an oil-producing nation or company, and I thought that oil would be more expensive next year than this year, I’d probably try to cut back a bit on production. That way, I could save my oil for next year, when it would command an even higher price.
Then again, that’s exactly the sort of reasoning I’d use…if I thought that oil was nearing a geological peak!
Image courtesy of Great Valley Center Image Bank’s Flickr account under a Creative Commons license.
David Hicks
Global politics as currently practiced [all short-term economic leverage, irrational hoarding, racism, strident nationalism, threat, incest, and deceit] is not a competent mechanism to guide global resource priorities [sustainability, logical conservation schemes, accurate reporting of reserves, adequate, coordinated search for substitutes, broad utilization of efficiency protocols], so we are left functionally impotent in the face of many grave planetary threats to any equitable human future. 21st century Homo sapiens is thus proving to be as Thomas Hobbes described in ‘Leviathan’ [‘where every man is enemy to every man, . . and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.’] What a shame! God must want to puke.
James
Clark,Don’t be too eager for Peak Oil to start. If we don’t handle this right, we can expect the economy to go into a tailspin. One of the side effects of desperate people is that concern for the environment becomes a very LOW priority.People will start raising hell to their politicians about energy prices. The result will likely be a massive expansion of coal mining, coal to liquids, etc.I would not be surprised if we completely fry the atmosphere as a result of Peak Oil. Coal is simply too easy to fall back on for a desperate government looking for energy. That is what Hitler did.
James
Clark,I do believe that we are close to Peak Oil or close to the plateau phase of the top of the bell curve. I have seen professional energy studies that indicate we could have real oil/gasoline/diesel shortages within 3 to 5 years, no matter what the price is.Certain areas of the USA (and the planet) are more prone to shortages than others. It really depends on where you live in relation to the supply pipelines and what the source of oil is for the region you live in.The Pacific Northwest is actually in fairly good shape in terms of reliable supply. There is a direct pipeline from Alberta Canada (TransMountain Pipeline) that provides reliable Canadian crude oil (including oil sands). This supply is actually growing and they are expanding the pipeline capacity. The pipeline runs from Edmonton to Vancouver, then south to the 4 refineries north of Seattle. Then there is a pipeline (for finished products like gas, diesel, jetfuel) that runs from the refineries, south to the Seattle region, then continues on to Portland.The 4 refinereries in this region actually produce about 2x more gas/diesel than is needed locally. The rest is exported via ship.The end result is, this region shouldn’t experience the shortages early on in Peak Oil. Other areas of the USA and the planet will have shortages before we do. We will have to pay market prices to keep the gas/diesel in this area, otherwise it will make more sense to export it via tanker to Los Angeles.
Seth
Could it be that this decline in extraction was a result of higher prices? That is, the more oil costs, the less of it people will burn. Oil companies won’t pump it out of hte ground just to store it in tank farms. What do the inventory data suggest?
James
Seth, from the data I have seen, every country is exporting at maximum except for Saudi Arabia. They have perhaps 1 million bopd in spare capacity, but it is mostly heavy crude, similar to the heavy crude from Venezuela. There are no buyers for this heavy crude because there is not any spare refinery capacity for it.Most of the refineries are geared towards lighter crude varieties which are easier to refine. There is a shortage of refineries that can handle heavy crude which is high in sulfer and other impurities.It makes sense. Oil producers go after the easy oil first. We are running out of that. Now more of the world production of oil is the medium to heavy grade of oil, and most of our refineries are not designed to handle so much of it.We have plenty of oil left on the planet which is low quality. The problem is that it is much more expensive to extract and it produces a lot more CO2 in the various stages of the process before it becomes gasoline, diesel or jet fuel.