Oil Forecast #6
Sid Omigo
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
=========================================
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!
[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