Has US oil consumption decreased because of peak oil?

Since 2008, U.S. oil consumption has declined by more than 20 percent, giving peak-oil theorists their confirmation — world crude oil production is decreasing. And no matter how much U.S. production increases, everyone will feel the squeeze in the face of rising international oil prices.

It is really hard to argue against this. After all, rising oil prices and decreasing consumption could be easily explained by one of the core peak-oil theories: the export-land model.

According to the export land model, once we pass the global peak production and prices rise, oil exporters get richer and consume more oil themselves. This creates a positive feedback cycle between rising export prices and domestic consumption (especially when the exporter subsidizes fuel products on top).

As a result, production decreases even faster, and net exporters turn into net importers. This pushes up global prices even further and forces net importers like the U.S. to consume less.

In fact, some predictions show that many of the top 10 U.S. crude oil suppliers could become net importers in the foreseeable future* — squeezing U.S. oil consumption as the model suggests. A peak-oil blogger even correctly estimated in 2007 that U.S. oil consumption would decrease by 20 percent by 2013.

On top of that, Jeffrey Brown, geologist and founder of the export-land model theory, confirms in the Resource Insights blog by Kurt Cobb, that the shale revolution won’t save the U.S. from its fate based on the following points:

“The EIA’s estimate for the most recent four-week average crude oil production rate was 7.6 mbpd (million barrels per day). Refinery runs were 15.8 mbpd, and net crude oil imports averaged 8.0 mbpd. The numbers for total liquids are, of course, different.

“As several people have noted for some time, the primary problem with the tight[oil]/[natural gas] shale plays is the high decline rate.

“At a (probably conservative) 10 percent/year decline rate for existing U.S. crude oil production, in order to simply maintain current U.S. crude oil production, the industry would have to put online the productive equivalent of every current oil field in the U.S. over the next 10 years. In round numbers, we would need the productive equivalent of 10 new Bakken plays over 10 years, in order to maintain current crude oil production.

“Citi Research [an arm of Citigroup] puts the decline rate for existing U.S. natural gas production at about 24 percent/year, which would require the industry to replace about 100 percent of current U.S. natural gas production in four years, just to maintain current production. Or we would need the productive equivalent of 30 new Barnett Shale plays over 10 years, in order to maintain current natural gas production.”

That’s it, right? This is the end of oil?

No, actually decreasing oil consumption and rising oil prices can be explained by many more facts than an assumed peak in global oil production:

• It is true that oil production decreases in countries like Saudi Arabia can be explained by dwindling oil reserves and a phenomenally high domestic demand (the second-highest energy demand per capita in the world). However, producers like Venezuela still have huge untapped reservoirs, and they just don’t manage to get the stuff out of the ground or to refine it after decades of bad management and underinvestment in the sector.
• U.S. crude oil consumption has been historically correlated to economic growth, and the decrease in consumption can be explained by the 2008 recession.
• According to a blog by policy analyst Gail Tverberg, U.S. oil consumption declined because industrial activity waned, and the U.S. has shifted more toward a knowledge-based economy (according to her estimate, this factor made up about 51 percent of the consumption decline).
• Cars are becoming more efficient. In the same blog, Gail argues that about 7 percent of the consumption decrease could be explained by improved mileage per gallon of gasoline.

So be careful the next time you read an article by a peak-oil theorist.

*Mexico by 2020, Saudi Arabia by 2030;Venezuela has already become a net importer of gasoline in 2012.

multibriefs

7 Comments on "Has US oil consumption decreased because of peak oil?"

peterjames on Sat, 3rd May 2014 6:41 am 



Does anyone know if the filling of the SPR counts as oil usage. The peak of US oil usage pretty much coincides with the completion of the filling of the SPR. It doesnt account for all of the fall since 2005, but its a decent percentage.

Beery on Sat, 3rd May 2014 6:48 am 



Wow! Today’s articles are raising the bar for unintentional humor. First the ETFE algae tent cities, now this.

Beery on Sat, 3rd May 2014 6:50 am 



I hate to break it to the author of the article, but Gail Tverberg is a dyed-in-the-wool hard crash peakist.

Nony on Sat, 3rd May 2014 7:15 am 



US consumption is down because of price. Now is price purely a function of depletion or are there elements of cartel action (OPEC)? Certainly in 2008, they took dramatic action, so it’s not possible to construct a long story that says they have no impact on price.

Kenz300 on Sat, 3rd May 2014 7:35 am 



We should all use less energy in our daily lives.

Saving energy saves money.

With the continuing rise in price of oil, coal and nuclear people have noticed the impact on their budget and have started to change behaviors.

Many new cars get over 40 mpg when just a few short years ago gas guzzlers reigned supreme.

Electric, hybrid, biofuel, flex-fuel, CNG and LNG vehicles are now beginning to be a bigger part of the market.

People are insulating their homes making them more comfortable and more energy efficient in the process.

Many businesses are converting their fleets of vehicles to use more electric, flex-fuel, biofuel and CNG fueled vehicles.

The world is changing. It is in transition to safer, cleaner and cheaper alternative energy sources.

Elon Musk Thoughts on transitioning to 100% renewable energy – YouTube

http://www.youtube.com/watch?v=rce5RZHCzLk

—————

The energy transition tipping point is here – SmartPlanet

http://www.smartplanet.com/blog/the-take/the-energy-transition-tipping-point-is-here/?tag=nl.e660&s_cid=e660&ttag=e660&ftag=TRE4eb29b5

westexas on Sat, 3rd May 2014 2:48 pm 



We can always look at actual data. The “Gap Chart” for Global Net Exports of oil (GNE*), from 2002 to 2012:

http://i1095.photobucket.com/albums/i475/westexas/Slide1_zps3161a25b.jpg

*Top 33 net oil exporters in 2005, total petroleum liquids + other liquids, EIA

rockman on Sat, 3rd May 2014 6:30 pm 



“Since 2008, U.S. oil consumption has declined by more than 20 percent, giving peak-oil theorists their confirmation — world crude oil production is decreasing.”

I suppose they assume folks will buy their BS without doing a 30 second web search: according to the EIS global oil production has increased from 85.7 million bopd on 2008 to 90.3 million bopd in 2013. And also according to the EIA US crude + condensate has increased from 5 million bopd to 7.5 million bopd over the same period.

Obviously there no connection between the decline in US oil consumption and US/global oil production. Simply put: global PO didn’t occur between 2008 and today. We might be there today…we might not be. Ply time will tell.

There’s also another basic problem: our citizens don’t consume oil…they consume refined products. And there has been a significant increase in the amount of refined products exported from the US. Today we are exporting about 3 million bbls of refinery products made from oil “consumed” in the US.

Given they couldn’t even get the basic numbers correct I didn’t waste my time reviewing the rest of the article. Just smelled too much like one more straw man set up.