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Page added on March 4, 2014
More On Peak Demand
An observation worth noting … and pondering, from Mark Lewis (links in original):
Oil market commentators increasingly dismiss the very idea of supply-side constraints on the oil market, pointing to the recent surge in light-tight oil production from US shale deposits and the existence of vast shale formations elsewhere in the world….
But does this peak demand theory bear scrutiny?
[F]rom data for 2013 released by the EIA recently, it is now clear that US demand not only increased last year, but accelerated rapidly over the course of the year.
All of [the data reported by the author] implies that the reduction in US oil demand over 2008-12 was not so much structural as due mainly to the weakness of the US economy following the global financial crisis, and the tightness of the local oil market until recently. As the economy has started to recover and rising domestic supply has made local prices more affordable, US consumers – whose ranks have swollen by 14m since 2007 – have started coming back to market.
Against this backdrop, the peak-demand narrative looks deficient at best and a distraction at worst….
“Peak demand” [see my six-part October & November 2013 series on this topic beginning here] has served as a convenient argument by those who continue to profess that we have no energy supply concerns worth discussing, much less planning for. But as with too many of these convenient and dismissive arguments light on facts and context, the reality suggests otherwise.
That those who should and do know better continue to ignore the inconvenient portions of the true narrative is a concern now, and will be an even larger one in the future. As populations rise; as domestic demands by oil exporting nations likewise increase; as prices continue to remain high in order to both justify and permit exploration and production of unconventional reserves, and as production rates from both conventional crude and tight oil formations continue to decline (the latter more rapidly than the former), these additional facts suggest that a broader and more truthful perspective about future energy supplies needs to be injected into the conversations.
Consumers unaware of the realities about current and future production options must be respected enough to be told the truth and not just the carefully-massaged version which supports a limited group benefitting from the silence. So too must elected officials at all levels of government understand that same broader picture of what’s in store for all of us.
Planning for anything with the full array of facts is usually a better approach in any setting. With an issue of this magnitude, it’s actually the only option—even if that limited group now benefitting from the silence is impacted in order to benefit everyone else.
Should that really be such a difficult choice?
30 Comments on "More On Peak Demand"
deedl on Tue, 4th Mar 2014 2:37 pm
What a nonsense. Everyone with most basic knowledge in economics should know, that neither demand nor supply are numbers to compare but functions to intersect.
Market price and volume are derived from the intersection of both curves. What does basic economic knowledge tell us about supply constraints? They move the supply function to the left, resulting in a higher price and smaller traded volume without changing the demand function.
So the reduced traded volumes can be fully explained by supply constraints using markets basics, as long as they come with higher prices, as they do. Short term supply increase as in shale can be part of a market overshoot, since quantity/price diagrams don’t tell anything about the dynamics of getting from one market equilibrium to another one.
A demand constraint with unchanged supply would move the demand curve to the left resulting smaller volumes and lower prices. So the truth about peak supply and peak demand is told by the price, and prices are higher then ever.
Peak demand is a distortion of economic basics just to not have to agree to peak oil. Every “economist” talking about peak demand should return his college diploma.
Davy, Hermann, MO on Tue, 4th Mar 2014 2:54 pm
Deedl, peak demand sounds manageable to the general public. A general public with little economic understanding. It works well for the “lobby of plenty”. Politicians don’t see a problem with it because it is not referencing a running out of a vital resources. Peak demand can be pitched as a decoupling of the economy from energy constraints from increased efficiency and substitution bringing with it increased productivity. Sounds great doesn’t it. We here no better. We here know the direct relationship of economic activity and the demand for energy most critically oil. I would mention how we are hearing and seeing many discussions on the death of “Peak Oil”. I see this as a recognition of its meaning going mainstream and the intense effort to discount its real dangers. The industry got very lucky with the advent of the Shale revolution in the US. If it were not for this added supply the world oil situation would be more difficult and harder to explain. We got a breather but it will not last. We are already seeing warning signs in multiple areas concerning above and below ground supply constraints. It is just a matter of time until the deniers are quieted. Just look at the climate debate. Is the denier lobby as vocal as it used to be? NO. The PO denier lobby will be faced with the hard clear facts reality presents. Here is a good quote on the subject of reality:
You can avoid reality, but you cannot avoid the consequences of avoiding reality.
deedl on Tue, 4th Mar 2014 3:22 pm
Fortunately people may be stupid, but they are also frugal. So it makes in my view no difference what common people think about the future of oil, they will adapt their living style to the price reality, no matter if they understand this reality or not. So i don’t think this peak deamnd talk is aimed at the general public.
But people are also greedy. I guess the entire peak-oil-is-dead-crap is just about finding dumb money from dumb investors to make some bucks at the fossil party as long as possible. Funnily the most professional greedy investors are among the clearest to see the realities of investement in fossil fuels. So follow the smart money and you will leave fossils. Follow the dumb money and you will get to the peak demand crowd.
Dave Thompson on Tue, 4th Mar 2014 5:17 pm
This is an article that needs to be spread far and wide.
Nony on Tue, 4th Mar 2014 6:14 pm
* Open the offshore areas (85% are off limits, VACAPES project was stopped by Feds). Give the states a cut of the $$ (that will change their tune in Florida).
* Open ANWAR. It’s not a National Park and it’s basically a big boring mud flat.
* Open National Forests (not Parks, Forests…those are lands that are supposed to be exploited).
* Approve Keystone.
Davy, Hermann, MO on Tue, 4th Mar 2014 6:56 pm
Nony, I am not saying no to these things you mention because we are going to find ourselves deep in doodoo when we start the slippery slide down the energy gradient to the eventual end of industrial man. I think it is too late in any case but anything will help. These things you mentioned would have needed to be been done many years ago to make a difference. Yet, we should know where the reserves are like Rock talked about in his postings. We have these lofty ideas about the environment but what about when people are dying. This is a tough moral question of kill our environment or save people. That is what it is going to come down to in many different circumstances related to our energy supply. We are close to a cliff we better prepare. If I were the boss I would mandate moves towards efficiency, resilience, and sustainability to offset the real potential damages these actions you mentioned could have. You can trash the environment if you change your habits. I feel it is unbalanced to have unfettered access to all locations for supply possibilities without an equally strong approach to demand changes. Without demand changes I would veto your request that is if I ruled the world.
Northwest Resident on Tue, 4th Mar 2014 7:10 pm
Nony — The end result of exploiting all those natural resources you list, even IF they could be exploited in time (which they can’t), would be to prolong BAU for just a little while longer before its final demise.
Let’s go full sarcastic mode here.
To keep BAU going for another year longer than would otherwise be possible, let’s cut down all forests, poison all fresh and salt water bodies, kill all “non-essential” species, blow up all the mountains to get at the nuggets of minerals that are hiding deep within. Did I miss anything? In other words, let’s just trash planet earth to the maximum extent possible — JUST to keep BAU going for X number of days longer than it otherwise would have.
Makes sense to me! 🙂
Sarcasm switch off.
WATF (we are totally f’d) with thinking like that you expressed. I hope that you realize the error of your way.
GregT on Tue, 4th Mar 2014 7:15 pm
“This is a tough moral question of kill our environment or save people.”
And here, lies our biggest dilemma.
If we save people, by killing more of our environment, we ultimately kill more people.
We had the chance to change our ways 4 decades ago. We have repeatedly been warned about the consequences of continuing to burn fossil fuels. We either stop now, and face the consequences, or we continue on ‘exploiting’ the Earth, and face even more dire consequences. The future of humanity is now in our hands. Will we act responsibly, or continue down the path of greed and destruction? Time is rapidly running out for the human experience.
Nony on Tue, 4th Mar 2014 7:31 pm
NR: It’s not that bad. They can do it safely. Be more optimistic, please. Those are good jobs. For Americans.
https://www.youtube.com/watch?v=w9MMsEkadGw
GregT on Tue, 4th Mar 2014 7:38 pm
Nony,
“It’s not that bad.”
Extinction is as bad as it can possibly get, and that is exactly what you are advocating.
Northwest Resident on Tue, 4th Mar 2014 7:40 pm
Nony — In my book, the optimistic point of view is one which has long term benefits despite the short term pain inflicted. It seems that in your book, the optimistic point of view is one which has short term benefits but inflicts long term pain. Scavenging for a little more oil now merely prolongs the inevitable, and makes it that much worse for whoever survives the bottleneck. Like GregT says in his post above, “Will we act responsibly (now), or continue down the path of greed and destruction?” Your optimistic pov has us continuing down the path of greed and destruction, a very short term plan at best, and a failure to man up and accept the inevitable sooner rather than later for the long-term benefit of humanity.
nemteck on Tue, 4th Mar 2014 8:11 pm
Here are some videos you may or may not have seen on the above subject.
There is no tomorrow
http://www.youtube.com/watch?v=VOMWzjrRiBg
Video about popoulation and energy energyhttp://www.albartlett.org/presentations/arithmetic_population_energy_video1.html
The end of surburbia film. 52min
http://www.youtube.com/watch?v=Q3uvzcY2Xug
louis wu on Tue, 4th Mar 2014 9:30 pm
Even if everything proposed by NONY is done, which it probably will when things get worse, will most Americans be able to afford what is extracted?
GregT on Tue, 4th Mar 2014 10:39 pm
There is scientific consensus, that if we burn the remainder of the ‘known’ fossil fuel reserves on our planet, we will very likely cause a global mass extinction event. So NO most Americans will not be able to ‘afford’ what is extracted. Mainly because most, if not all future Americans, will be dead.
The largest threat to the human race is not running out of fossil fuels, it is what will happen to the planet if we continue to burn them. This is the predicament that we have created for ourselves by our exploitation of fossil fuels.
Nony on Tue, 4th Mar 2014 11:24 pm
That’s why I don’t trust peak oilers. Most of them are environmental advocates. They don’t want any disturbance of the environment (even with safety precautions). So when they say “don’t bother, there isn’t any”, I don’t trust them. If they REALLY thought we were running out, they’d be all like “Hey, knock yourself out, you won’t find any anyway…nothing to worry about and you will give up soon”.
I’m reading Yergin’s book The Quest and he makes the point that the mid 2000s peak oil movement was kind of confounded with a climate change concern. Not just reflection on geology and depletion.
Davy, Hermann, MO on Tue, 4th Mar 2014 11:52 pm
Nony, Peak Oilers have morphed into different persuasions. Some have become drill baby drill advocated, others are doomers, still others are environmental advocates, and finally some are all of the above. The movement morphed when the central theme was fully explored and defined. It is a misnomer to categorize Peak Oilers anymore. I myself am all of the above. I am a doomer in regards to status quo BAU from a soon to happen financial contraction and or collapse. The Peak oil dynamics come in with a brick wall time frame for a crash of 5 to 9 years. I am saying financial crash any day energy induced crash following in the wings if the financial system limps along without a crash so either way we are doomed in 9 years or less. I am an environmentalist because I believe we need to start prepping for postindustrial man and post status quo BAU. This may take time so in the mean time we have to take steps to safeguard our ecosystem support structures. We need to adjust, mitigate, and adapt to climate instability. I am saying drill baby drill because it will take a great effort now to buy us a few more years. If we are going to make it to the 9 year mark before a major crash we need lots of new oil. I am hopping we have a few more years so we can build up the multiple sources of ideas and practices to get us through a transitional period of BAU crashing and a new living arrangement. We need multiple plan B’s for multiple locations. These plans need to focus on resilience, sustainability, and efficiency. We need to plant seeds of hope in local arrangements that have a chance to navigate the many dangers ahead. We are facing the greatest dangers humans have faced since the great bottleneck that research said most likely cut the human population back to a few thousand in a pre-modern history. We are heading in the direction of a bottleneck lets prepare now.
Dave Thompson on Wed, 5th Mar 2014 1:05 am
I really enjoy reading these posts, my two cents is this, as in these comments, lets all remember to be kind to one another. No matter what the outcome of our predicament. It will be the best thing for all.
rollin on Wed, 5th Mar 2014 1:12 am
From what I see, BAU is still going juggernauts. The sad fact is that few realize that BAU is a completely wrong direction, one that leads to nothing but disaster.
The only “transistion” that will be made will be when fuels start to run out and this completely inter-dependent civilization falls in upon itself like a stack of cards. Why even the farmers can’t raise crops without fuel and electricity, let alone repair the machinery they have (no replacement parts).
The few people who have prepared will be in extreme mortal danger from those who have not. http://www.youtube.com/watch?v=zuj2yuoC3PY
It’s like lemmings swimming out to a place that no longer exists above water.
GregT on Wed, 5th Mar 2014 1:48 am
ht tp://mahb.stanford.edu/library-item/what-if-we-burn-all-the-fossil-fuels/
Burning all fossil fuels would produce a different, practically uninhabitable, planet.Our calculated global warming in this case is 16°C, with warming at the poles about 30°C. Calculated warming over land areas averages ~20°C. Such temperatures would eliminate grain production in almost all agricultural regions in the world (Hatfield et al., 2011). Increased stratospheric water vapor would diminish the stratospheric ozone layer (Anderson et al., 2012). More ominously, global warming of that magnitude would make much of the planet uninhabitable by humans (Sherwood and Huber, 2010; McMichael and Dear, 2010).
ht tp://math.350.org
It’s simple math: we can emit 565 more gigatons of carbon dioxide and stay below 2°C of warming — anything more than that risks catastrophe for life on earth. The only problem? Burning the fossil fuel that corporations now have in their reserves would result in emitting 2,795 gigatons of carbon dioxide – five times the safe amount.
ht tp://readthescience.com/2013/09/20/if-we-burn-all-the-fossil-fuels/
If we burn all the fossil fuels we have left in the ground, that’s about 10-15,000Gt of carbon that we could put in the atmosphere. That gives us 5x the CO2 from 1950, or 1,400ppm. This will give us 16oC of global warming. It will be a world where there’s an average temperature of 20oC on land and 30oC at the poles (the current average is 14oC). Keep in mind also, that 6oC of warming is generally enough for a mass extinction like the dinosaurs.
GregT on Wed, 5th Mar 2014 1:56 am
ht tp://www.theguardian.com/environment/earth-insight/2013/jul/10/james-hansen-fossil-fuels-runaway-global-warming
The world is currently on course to exploit all its remaining fossil fuel resources, a prospect that would produce a “different, practically uninhabitable planet” by triggering a “low-end runaway greenhouse effect.” This is the conclusion of a new scientific paper by Prof James Hansen, the former head of NASA’s Goddard Institute for Space Studies and the world’s best known climate scientist.
ht tp://www.columbia.edu/~jeh1/mailings/2012/20120130_CowardsPart2.pdf
The tragedy is that a common sense pathway exists that would solve our energy needs, stimulate our economy and protect the future of young people. Yet people benefiting from business-as-usual are able to block adoption of policies in the public’s interest, via the corrosive influence of money in politics and aided by corporate-dominated media.
ht tp://www.monbiot.com/2009/05/06/how-much-should-we-leave-in-the-ground/
Even ignoring all unconventional sources and all other greenhouse gases and taking the most optimistic of the figures in the two Nature papers, we can afford to burn only 61% of known fossil fuel reserves between now and eternity.
Or, using Meinshausen’s figure, we can burn only 33% between now and 2050. Sorry – 33% minus however much we have burnt between 2000 and today.
Davy, Hermann, MO on Wed, 5th Mar 2014 2:26 am
The tragedy is that a common sense pathway exists that would solve our energy needs, stimulate our economy and protect the future of young people.
Greg, this is the type of talk I feel is a fools bargain. There is no common sense pathway that solves our energy needs and stimulates the economy. There is a declining status quo BAU that will eventually crash and burn probably sooner than later. “OR” there is an alternative of a quick crash by leaving BAU to save the environment. That is a big “IF” too. It is possible this alternative quick crash scenario could find us in a less environmentally destructive place but it is most likely a difficult painful place. It will most likely mean a “BIG” drop in standard of living and population. What I find most bothersome is these climate change folks claiming the “IF ONLY” crap. There is no other outcome than less with less. If you are a believer in the “Net Present Value” morality then you will follow status quo BAU off the cliff. At least riding the BAU train gives us a few more years. If you want to roll the dice and hope for a better environment in a deindustrialized world then good luck. Both options are difficult, painful, and contain little hope. Hansen is a brilliant guy but he is foolish to think his hair brain ideas have any kind of decent hopeful future. He needs to admit what he wants is a quick collapse with the hope of an environment that will not be dead and sterile. He is talking trading some kind of environmental stability for a significant loss of life. IMHO you can’t have environmental salvage without a big loss in living standards and population. He wants his cake and eat it too. I am pretty sure if status quo BAU keeps on going long enough it is a game ender for the next generation but we still have a few good years. Hansen’s ideas are let us jump off the cliff now and hope for the best
GregT on Wed, 5th Mar 2014 2:42 am
“He is talking trading some kind of environmental stability for a significant loss of life. IMHO you can’t have environmental salvage without a big loss in living standards and population.”
Agreed Davy, there is no comfortable solution. We are faced with a dilemma, or maybe more correctly, the ultimate dilemma. We either crash BAU and face the consequences, or we destroy the planet for all future life on Earth. One pathway will be extremely ugly, the other will be catastrophic.
Like I said above, we should have listened to our scientific community back in the 70s. The results of burning fossil fuels were very well understood, even 40 years ago. We were taught all about the implications in high school. This is not recent news.
Makati1 on Wed, 5th Mar 2014 5:12 am
Considering that we are already seeing the pollution of 40 years ago, and it will be 40 years until the results of today’s pollution becomes evident, we are already F–ked.
I see the reality of ‘cost’ hitting the ‘dreams-of-more’ pretty soon. The financial blood is gushing out of the consumer classes all over the world. Oil is about to take a leap upwards in price as the revolutions around the world impact exports and finances.
Will the Ukraine events cause the Western banks to collapse?
Will Putin pull the plug on the energy needed by the EU?
Will he and China crash the dollar? Will Africa continue to boil and burn? Will California dry up?
What about that Russian spy ship in the Cuban harbor?
Fukushima?
Syria?
Iran?
Egypt?
We have a hot summer in the works and it is not even Spring.
Dave Thompson on Wed, 5th Mar 2014 6:19 am
I urge all to listen and watch this please, spread the word.http://www.youtube.com/watch?feature=player_embedded&v=mO1l3mPRkeg
Davy, Hermann, MO on Wed, 5th Mar 2014 12:40 pm
Dave, this is another one of the sobering climate dangers I have seen. I personally do not believe any effort other than complete collapse can bring an end to the damage. I am not even sure complete collapse will matter. If this is the case than why are the climate folks screaming about changes when there is little chance for a change. I believe we should agree that there is no hope on the climate front and focus on adaptation, mitigation, and adjustment. I feel the climate folks are lying to us just as bad as the “lobby of plenty” in their message of a future “Only IF” we change our industrial ways. This is not going to change. The results of climate change folks prescription for hope is death. Collapse that is needed to “MAYBE” save us will mean certain death for a significant amount of the population. So do we throw our lot in with the “lobby of plenty” & “lobby of human exceptionalism” and follow status quo BAU. I don’t think BAU can be changed except by BAU. The whole process is self-organizing and out of the control of the top or bottom. The best thing we can do is prep short term and long term with local life boats. The short term prep is a few months for the worst of a contraction. The long term is for a few years post contraction and or collapse. There is no guarantees but a little prep means some hope. If nothing more, hope now before collapse, that there is some future however short. Cancer patients do better when they have hope. We can practice relative sacrifice in the name of the environment and our fellow human beings. Relative sacrifice is small changes within the socio economic group and life style you are in. I think the contraction and or collapse of BAU will kill many of us and much sooner than climate change. Most likely they will operate in tandem. The worst of climate change in the later years will mean our species has very little hope of surviving except maybe in small bands somewhere spared the worst of all the hells awaiting us. Either way there is no future of normal beyond let say 10 years. I would bet in 10 years or less normal will be over but I cannot say when mass extinction is coming but all forecasts I see say it is coming within 50 years. “SO” Enjoy life now and live it to the fullest. Forget about the idiots of status quo bau. Pity those that are fooled by its false hope of BAU or should we wish we were the fools and living in the bliss of ignorance. If we are doomed it is nothing new we are all due to meet our maker. Will our species end also?
Kenz300 on Wed, 5th Mar 2014 2:52 pm
Fuel economy standards continue to rise every year reducing gas guzzlers in the transportation pool.
Ethanol now is over 10% of the fuel supply and growing. Biodiesel is becoming more available around the country.
Electric, flex-fuel, hybrid, biofuel, CNG and LNG vehicles continue to become a bigger part of the transportation mix.
UPS, FedEx, USPS, Waste Management and others are converting their long haul fleets of trucks to CNG and LNG.
Oil keeps getting more expensive….. while the alternatives are getting cheaper.
Nony on Wed, 5th Mar 2014 3:08 pm
Deedl:
I feel your pain with people not even understanding the basics of supply and demand curves. It is both peakers and cornies with this flaw. Most of the people on this site get confused about a change in the demand curve itself (the function of indifference price) versus the movement of the intersection ALONG that curve with supply changes.
Whether you believe in peak oil (and even what that means definitionally) is a different thing than just agreeing that microeconomics, price signals etc. occur. The peak oil thing is a view of the future, of how depleting the resource will affect future supply. Hoteling’s rule can be applied to calculate how current pricing will already price in the future lower availability. What can not be so mechanically priced in is future advances in extraction technology or new geological finds. “Depletion drives the supply curve to the right. Knowledge drives it the left.” But in any case, discussion about this is not a basic micro-econ analysis of crossing curves, but discussions of how we think the curves will change over time.
I do find it interesting that the futures market is backwarded. IOW, it expects price to decrease over the years. It’s not a perfect predictor, but it’s the betting line. I wonder why it is backward (a perfectly simple depletion/peaker view would not lead to that). Are the futures pricing in further supply? Switching out to substitutes, but in a way that takes time?
And of course all of this discussion is free competition. But we saw in the 70s, that the cartel actually did function for a while…and then when cracked (and US oil production had a big marginal effect here in inciting cheating), that prices dropped and stayed down for 20 years.
So net, net: more free market, US firm competitive oil is probably helpful to lower prices. Hamm and Cheney and Rockman are all oilmen. They want prices high. At least the first two have even asked for government support to minimum prices(!) But when forced to compete (collusion is rather hard in the US), then they have the impact of driving down prices by their actions…
Davy, Hermann, MO on Wed, 5th Mar 2014 3:28 pm
Nony, you are deceived by the claims of free markets and their deceptive science of economics. Currently every market is rigged and manipulated. Have you ever considered this is a factor in the backwardation of the oil markets? They are arbitraging the spread for ill-gotten gains. The pseudo-science of economics is again a deception in these times of corruption, manipulation, and deception of economic indicators. We are in a new normal characterized by a bubble. This bubble is the complex global interconnected economy itself so it is all of us living beyond our means. Our financial system which is central to that bubble is in effect a Ponzi scheme. It will function as long as Ponzi schemes function which is a function of confidence. There is no science to a Ponzi scheme. This Ponzi scheme is leading to the classic case of a house of cards with the bottom cards being taken to the top in an ever higher tower of greed destroying the basic foundation. We all will pay the price and the top will fall the farthest.
GregT on Wed, 5th Mar 2014 3:32 pm
Davy,
There may still be hope for humanity. The first thing that must be done is to stop burning fossil fuels. The next would require a massive global initiative for geo-engineering of the Arctic. It may still be possible to reverse ice loss. There have been proposals already brought forward to governments and policy makers.
http://www.rsc.org/images/geoengineering_tcm18-179077.pdf
Davy, Hermann, MO on Wed, 5th Mar 2014 3:57 pm
Greg, I pray you are right and I am open to hope. We still have a couple of years to make big changes. We may find luck somewhere and somehow.