BRAIN FOOD: WORLD OIL FORECAST #6
Hell Remailer
The entire text of ENERGY & RESOURCE QUALITY has been scanned and is now
online (in .gif format) at
http://www.bu.edu/cees/book/contents/contents.html
=========================================
WORLD OIL FORECAST #6
Rich Duncan
8-30-01
ABSTRACT: World Oil Forecast #6 concludes the following: (1) 23 out of 44
nations [representing 99% of world oil production in 2000] have passed their
production peaks, (2) 3 out of the 7 regions of the world have passed their
peaks, (3) 4 out of 11 OPEC nations have passed their peaks, (4) Non-OPEC
production will peak in 2003, (5) OPEC production in 2017, and (6) world oil
production in 2005.
INTRODUCTION
World Oil Forecast #6 has just been completed for 44 nations comprising more
than 99% of the world oil production in 2000. I used 44 separate models and
the System Dynamics approach utilizing many different sources of numeric
information (i.e., data) including (1) oil discoveries [USGS, World Oil,
etc.], (2) reserve estimates [USGS, O&GJ, BP, etc.], and (3) production data
[BP, O&GJ, World Oil, etc.]. Notable advantages of System Dynamics include
(1) its large selection of simulation tools, (2) great flexibility, (3) ease
of modification and iteration, and (4) high precision.
In this Forecast #6 I consulted with petroleum geologists in North America,
Europe, and the Middle East for their first-hand experience and their
heuristic (i.e., qualitative) knowledge. I call this method "Computer
Augmented Intelligence" (CAI, for short) -- it includes techniques I've used
(and invented) during the past 30 years while doing many different energy
projects.
Note: The CAI approach has nothing whatsoever to do with e.g., parabolic,
Gaussian, normal, or bell-shaped curves. Nor with Fourier or Laplace
transforms. Nor with .... etc. etc. It is an entirely new and, as far as I
know, unique approach to oil (energy) forecasting.
A PEEK AT THE PEAKS
Some important results of Forecast #6 are summarized below for 44 nations, 7
regions, OPEC, Non-OPEC, and the world. Two indicators are of special
interest: [1] the peak year of production for each nation, region, OPEC,
Non-OPEC, and the world, and [2] "EUR Used": the ratio of Cumulative Oil
Production (Q at end-2000) and Expected Ultimate Recovery (EUR) expressed in
percent [%].
"Peak Year" means the historic or forecasted year of peak oil production.
"EUR Used" means the ratio of Q (at end-2000) and the EUR expressed in
percent [%]. Briefly put: When "EUR Used" equals 100%, then oil production
stops -- forever.
------------------------------------------------------------------------
REGION I: NORTH AMERICA --
Nation Peak Year EUR Used [%] Comments
USA 1970 79.3 1st
nation to peak
Canada 2006 48.1
Mexico 2005 46.7
N AMERICA 1984 69.1% 1st region
to peak
------------------------------------------------------------------------
REGION II: SOUTH AND CENTRAL AMERICA --
Nation Peak Year EUR Used [%] Comments
Argentina 1997 62.7
Brazil 2008 23.1
Colombia 1998 47.7
Ecuador 2006 43.9
Peru 1979 76.6
Trinidad 1977 71.5
Venezuela 1970 51.6 2nd OPEC
nation to peak
S&C AMERICA 2008 48.2%
------------------------------------------------------------------------
REGION III: EUROPE --
Nation Peak Year EUR Used [%] Comments
Denmark 2000 29.2
Italy 1997 55.3
Norway 2003 44.8
Romania 1976 75.6
UK 1998 58.9 2nd peak
came from tax breaks
EUROPE 1999 52.9% 3rd
region to peak
------------------------------------------------------------------------
REGION IV: FORMER SOVIET UNION (FSU) --
Nation Peak Year EUR Used [%] Comments
FSU 1987 60.4% 2nd
region to peak
------------------------------------------------------------------------
REGION V: MIDDLE EAST --
Nation Peak Year EUR Used [%] Comments
Iran 1976 44.6 3rd
OPEC nation to peak
Iraq 2036 24.8 OPEC
Kuwait 2035 30.9 OPEC
Oman 2005 43.5
Qatar 2008 35.8 OPEC
Saudi Arabia 2019 29.1 OPEC
Syria 1995 48.8
UAE 2026 21.2 OPEC
Yemen 2006 18.2
MIDDLE EAST 2020 30.5% Has 2% of world's
population
------------------------------------------------------------------------
REGION VI: AFRICA --
Nation Peak Year EUR Used [%] Comments
Algeria 2006 48.6 OPEC
Angola 1999 38.7
Cameroon 1985 61.1
Congo 1999 35.5
Egypt 1993 63.3
Gabon 1996 47.7
Libya 1969 43.2 1st
OPEC nation to peak
Nigeria 2007 44.7 OPEC: "anarchy,
filth, and brutality..."
Tunisia 1983 63.8
Eq. Guinea 2005 14.5
AFRICA 2006 46.1%
------------------------------------------------------------------------
REGION VII: ASIA PACIFIC --
Nation Peak Year EUR Used [%] Comments
Australia 2000 50.2
Brunei 1979 63.6
China 2012 40.0 1.3
billion people
India 1997/2006 (tie) 44.4 1.1
billion people
Indonesia 1977 69.4 4th
OPEC nation to peak
Malaysia 2006 42.6
P N Guinea 1993 39.2
Vietnam 2005 22.8
Thailand 2006 25.9
ASIA PACIFIC 2010 47.8% Has 60% of
world's population
------------------------------------------------------------------------
WORLD --
Category Peak Year EUR Used [%] Comments
OPEC 2017 35.3% 72% of world
oil exports in 2000
Non-OPEC 2003 58.7%
WORLD 2005 46.5%
------------------------------------------------------------------------
DISCUSSION
1. 23 out of 44 nations are past-peak; 24 if you count India (i.e., 1997 &
2006 are tied).
2. A few nations that I count as "past-peak" could -- in fact -- establish
new peaks in the future. Time will tell.
3. In contrast to Item 2, a few nations that are NOT counted as "past-peak",
could -- in fact -- already be past-peak. Example: I forecast that Kuwait's
peak will occur in 2035, however it's actual peak may turn out to be 1971
when it produced 1.1 billion barrels compared to a mere 0.8 billion barrels
in 2000. Thus Kuwait would have to increase its 2000 level of production by
a whopping 37% to establish a new and higher peak. This may never happen.
4. 3 out of 7 regions are past-peak, and by 2010 all regions except the
Middle East will be past-peak.
5. In World Oil Forecast #1 (done in 1996 and presented at Princeton
University) I forecasted that the European peak would occur in 2000. Too
optimistic! It actually occurred in 1999.
6. The CAI method calls for one complete new oil forecast each year for each
nation, region, and the world. In this series of forecasts, each production
peak is tracked by a "phase diagram" (i.e., a graphical technique, not shown
here). For example: In Forecast #1 (done in 1996) through Forecast #6 (done
in 2001), I have predicted the world oil production peak six times as
follows: once at year 2007, twice at 2006, and three times at 2005
(including this Forecast #6, summarized above). Thus the annual series of
world oil forecasts is converging on the year 2005. That's my best forecast
at this time
CONCLUSION
Industrial Civilization (IC), as it were, is now staggering at the brink of
a sheer cliff so that a strong gust of ill wind (e.g., depression spook
(many intuit what's happening), collapse of the Sumo Giant (Japan), the
dot.com disease, resource and ethnic wars (e.g., Middle East, Macedonia, ad
infinitum), boatloads of refugees, etc.) could topple the global IC at any
time.
Rich Duncan
8-30-01
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EIA's WORTHLESS "PRICE" MODELS
Jay Hanson -- www.dieoff.org
August 26, 2001
The US government has a long history of failed energy forecasting (e.g., the
Hubbert/Zapp debate, PROJECT INDEPENDENCE, etc.). Today, even though many
geologists and engineers are predicting a "peak" in global oil production
(est. 2006 [1]), the Energy Information Agency ("EIA") of the US Department
of Energy sees no supply problems for at least 20 years. [2] Why doesn't the
EIA foresee the looming peak in global oil production?
An even better question is "why has no economist EVER foreseen a peak in
global energy production?" Because a global energy production peak due to
physical constraints is impossible in an economic model! Why impossible?
Two fundamental problems make economic models literally worthless for global
energy peak forecasting: the "economic method", and the "explanatory
variables".
-------------------
THE ECONOMIC METHOD
-------------------
The economic method is after-the-fact price correlation and reasoning [3]
which, in principle, is unable to forecast the global peak. EIA's current
energy forecast comes from an "econometric" model developed something like
this: Economists first abstract everything to "prices". Economists then
observe relationships between (or "correlate") economic variables in the
economy. For example, if income (in $) increases, economists will observe
that energy consumption (in $) increases too. After thinking about it for a
while ("post hoc, ergo propter hoc", or after-the-fact reasoning),
economists conclude that consumption is a function of income: C= f(Y) .
Econometricians then calculate the mathematical, historical relationship
between income and energy consumption, and then use that relationship to
forecast how changes in income will effect consumption in the future.
Obviously, such a computer model is unable to foresee an event that has
never occurred before (such as a global, permanent shortage of energy). Nor
can a model based solely on economic trends forecast physical trends.
Economists have no way of modeling energy itself; they can only model
"energy prices".
In other words, it is fundamentally impossible for any after-the-fact
correlation to foresee an event that has never occurred before (e.g., a
global energy production peak due to physical constraints).
---------------
PRICE VARIABLES
---------------
The second problem arises because the "explanatory variables" in economic
energy models are "prices".
"This [Project Independence] demand modeling system
was really one of the first attempts to model the
demand for all energy products simultaneously, using
prices as explanatory variables." [4]
In an economic model, the reasons (explanatory variables) that production
declines in one area are either because demand declines or because another
area can produce it "cheaper". Moreover, since there will always be
"cheaper" some place, the economist believes a global energy production peak
due to physical constraints is literally impossible until the last drop is
sucked from the ground. [5]
In other words, economic models make no explicit provisions for universal
physical constraints like gravity, friction, thermodynamics, and so on. In
short, economic models like the EIA's are so unrealistic that they can't
even pass the "straight face test"! Yet, governments around the world are
betting their citizens' lives on them!
------------------------
SO-CALLED "FREE MARKETS"
------------------------
What about the economists' universal political agenda: so-called "free
markets"? Before the peak, there is a correlation of sorts between prices
and energy production. Simply stated, prices rise, then energy production
rises, and then prices fall. But after the impending peak, so-called "free
markets" will rapidly -- and utterly -- destroy what's left of the global
economy for two reasons:
#1. Energy bidders will "bid up" energy prices in a way that has no
relationship to the actual energy shortfall. It's like an auction where two
people each want the same unique painting. The price paid depends upon what
the other person did. Last year, spot energy prices rose 10,000% over what
they were a year earlier. [6] Again, economists have no way of forecasting
prices in this type of bidding war. At this point, all economic models
become completely worthless.
#2. Higher prices will not produce more energy because energy production
will be constrained by the limiting physical parameters. Economists are
totally unaware of these limiting physical factors. Instead, higher prices
will reduce oil production even further as freezing poor people riot because
the rich will still be playing their games in the refrigerated desert.
--------
WHAT IF?
--------
Although many of us expect the North American natural gas crisis (est. year
2003 [7]) to take everything else with it, what if the gas crisis is somehow
solved, and then global oil production "peaks" around the year 2006?
According to Roger Blanchard, production in a major, mature Norwegian oil
field typically declines at 15-25% per year. [8] So there is good reason to
expect that someday global oil production will also be declining at 15-25%
per year. After all, it's just a matter of time...
Two years ago, a 6% cut in production caused a tripling of oil prices. So we
may fairly assume a scenario something like the following. Suppose (very
conservatively) that by 2010 global production is "only" falling at, say, 6%
per year -- every year?
*-First year: global oil production drops 6% due to the physical limitations
of the resource (pore space in the rock, energy requirements to mine, etc.),
and this causes global oil prices to triple (say, to $100 a bbl).
*-Second year: the global economy slows 2-3% (layoffs, bankruptcies), so
would oil prices drop back to only double what they were the first year
($50) -- but at the same time, oil production drops 6% again, so oil prices
triple again ($150).
*-Third year: the global economy slows another 2-3% (even more layoffs,
bankruptcies), oil prices drop back to only double what they were the second
year ($75) -- but at the same time, oil production drops 6% again, oil
prices triple again ($225).
*-Fourth year: the global economy slows another 2-3% (even more layoffs,
bankruptcies), oil prices drop back to only double what they were the third
year ($110) -- but at the same time, oil production drops 6% again, oil
prices triple again ($330).
The above scenario repeats itself, year-after-year, until what? Until
country after country -- including oil producers like Columbia, Nigeria,
Sudan, the Caspian region, etc. -- either disintegrates into anarchy or
becomes a police state!
-----------------
WHAT CAN BE DONE?
-----------------
Can anything be done to mitigate the worst? Here are three, quick
no-brainers:
#1. Immediately re-regulate ALL aspects of energy production and
distribution. Simultaneously, government must prepare nationwide rationing
and safety net plans so that the most needy (e.g., hospitals, people who
live in cold climates) can get enough energy to survive as best as they can.
#2. Stop providing federal funding for roads. We aren't going to need them
anymore.
#3. Stop licensing fossil fuel power plants. We aren't going to need them
either.
Jay -- www.dieoff.org
Kailua-Kona, Hawaii
----------------------------
References:
[1] THE PEAK OF WORLD OIL PRODUCTION AND THE ROAD TO THE OLDUVAI GORGE, by
Richard C. Duncan, Ph.D.; Pardee Keynote Symposia, Geological Society of
America, Summit 2000, Reno, Nevada, November 13, 2000;
http://dieoff.com/page224.htm
Presentation to a House of Commons All-Party Committee on July 7th 1999: THE
IMMINENT PEAK OF WORLD OIL PRODUCTION, by C.J. Campbell at
http://www.hubbertpeak.com/campbell/commons.htm
See Campbell's estimates by country at http://dieoff.com/campbell.htm
---
[2] http://www.eia.doe.gov/oiaf/aeo/index.html
---
[3] -------
THE ECONOMIC METHOD:
After-the-fact Correlation and Reasoning
by analogy
Did I ever tell you about my cat? I have a cat that can predict the stock
market!!!!!
I got this cat about ten years ago from an old lady who said that it could
predict the stock market. She said that if the cat "meowed", the stock
market would go up on that day. I didn't believe it at first, but
sure-enough it was true. Over the last nine years the cat was right more
than it was wrong -- I made millions.
About a year ago, a car killed my cat. I really loved that cat so I had it
stuffed and put on the wall. You know what? The cat doesn't meow anymore,
but the stock market doesn't go up anymore either. So I am beginning to
think that the cat actually CAUSED the stock market to go up or down.
Numbers don't lie do they?
Now I am not sure whether the meow was cause or effect... I am sure I can
find out which by studying economics. (Although some say there are virtually
an infinite number of explanations for the same observation, and only the
"scientific method" can separate fact from fiction.)
What do you think? Was the meow cause or effect? Or both? Or neither?
Economists run into this problem all the time...
---
[4] p. 69, ENERGY PLANNING AND POLICY: The Political Economy of Project
Independence, Thomas H. Tietenberg; Lexington, 1976;
http://www.amazon.com/exec/obidos/ASIN/0669000485
---
[5] In the last 30 years, literally hundreds of qualified authors have
written critiques of Neoclassical theory. See, for example, Gene Tyner,
Sr., Ph.D., Dir. Oklahoma Institute for a Viable Future at
http://home.mmcable.com/oivf/EAcritique.htm
(Dr. Tyner was kind enough to review a draft of my paper.)
---
[6] UPDATE 1-Calif. pleads for emergency power imports
December 13, 2000 4:59pm
Source: Reuters
By Leonard Anderson
SAN FRANCISCO, (Reuters) - California power officials warned on Wednesday
that growing concerns over whether California can pay for its electricity
imports have cut those imports to the point where blackouts, perhaps as
early as Wednesday afternoon, might be unavoidable.
Officials at the California Independent System Operator (ISO), which manages
about 75 percent of the state electricity system, told a news teleconference
they were prepared to declare a Stage Three power emergency -- the highest
level -- later Wednesday, opening the possibility of rolling blackouts
throughout the state to avoid overloading the grid.
California, in its 10th consecutive day of power emergencies, is struggling
to keep the lights on as the needs of a growing population and strong
economy threaten to overwhelm supplies.
No major power plants have been built in California for the past 10 years.
Kellan Fluckinger, the ISO's chief operating officer, called California's
latest power crisis an ``extremely dynamic situation'' that was fluctuating
hourly. He said there was better than a 50 percent likelihood that blackouts
could begin as early as 1:30 p.m. PST.
Several key power traders in the Western U.S. and Canada have said they can
no longer accept the high risks linked to selling power to the real-time
California market, citing recent spot power prices briefly topping $3,000
per megawatt hour, nearly 100 times what they were fetching a year ago.
---
[7] Alberta natural gas to "peak" in 2003!
[snip]
Just how tenuous this math has become was driven home last month by the
staid provincial regulator, the Alberta Energy and Utility Board (EUB). Its
supply outlook for 2001 to 2010 predicted that conventional natural gas
production in Alberta, Canada's key producer, would peak by 2003 at 5.3 tcf
and therefore decline by 2% a year for the next five years. Over the next
decade, Alberta will have exported or burned up about three-quarters of its
potential gas reserves. It's a case of going, going, gone.
The rest is at
http://www.canadianbusiness.com/magazine_items/2001/aug20_01_thenext.shtml
Mexican Natural Gas Attracts U.S. Firms
[snip]
U.S. natural gas producers have been operating at full capacity since 1996,
Prize Energy Corp. Chief Executive Philip Smith said at the summit, which
has drawn about 800 people.
Despite a 50 percent rise in production spending in the United States during
that time, production volume will increase only 1 percent to 2 percent this
year, Smith said.
Meanwhile, U.S. demand for natural gas will rise 50 percent in the next 10
to 15 years for use by industry, for electricity generation and for
residential use.
The rest is at
http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=23091236&ID=cnniw
&scategory=Energy&
---
[8] ANALYSIS OF THE IEO2001 NON-OPEC SUPPLY PROJECTIONS, by Roger D.
Blanchard, Northern Kentucky University, 4/9/2001
http://dieoff.com/page231.pdf
Jay -- www.dieoff.org
Kailua-Kona, Hawaii
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Nomen Nescio
FourCell
I found the above to be very revealing. If you read the information
carefully, you'll come to the ultimate conclusion that the world
will almost be out of oil by 2050, the US well before that.
If you look at the amount of investment in the world
especially the West in oil-based fuels, vehicles and
petroleum products the handwriting is on the wall.
Anyone who thinks that the conversion to solar, wind
etc. will happen in the US in time is dreaming.
Nuclear is a negative investment, and not likely to
be propogated further.