[Mettezz]

high oil prices in 2008 didn't cause increased oil production.
On the oilwatch monthly there is a nice picture about how much spare capacity opec countries have. and as you can see in July and August of 2008 all the opec countries were draining their spare capicity. only 1 million barrels saudi arabia had left at the peak the rest of the opec countries where all out.


http://www.eia.doe.gov/emeu/steo/pub/gifs/Fig10.gif


http://www.peakoil.nl/wp-content/upload ... onthly.pdf

you can also see that spare capacity in 2009 is almost 5 million but that's because the world is only consuming like 83 million of barrels of total liquids now compared to almost 87 million in 2008.
and as you can see if oil comsumption increases to 87 million barrels again spare capacity will drain very fast.

High oil prices probably had something to do with it but basically what opec did whas pumping as much and as fast as possible as they could.

[Schmuto]

This is an important point.

I've read arguments that, when prices started ramping up in 07, OPEC was able to ramp up production but that the time required to ramp up production prevented them from doing so before the price dropped off.

I call nonsense on that.

From my position, OPEC is lying about its spare capacity until one of the following things happens:

1) They produce it.
2) They allow an independent audit that agrees that they can produce it.

[misterno]

Maybe they wanted price to go up so they did not produce more

[Tanada]

$this->bbcode_second_pass_quote('misterno', 'M')aybe they wanted price to go up so they did not produce more

[Schmuto]

$this->bbcode_second_pass_quote('Tanada', '')$this->bbcode_second_pass_quote('misterno', 'M')aybe they wanted price to go up so they did not produce more

[AirlinePilot]

$this->bbcode_second_pass_quote('Schmuto', 'I')f oil is selling for 200 dollars a barrel, and the KSA has doubled the life expectancy of its oil production capacity, then they, essentially, doubled the length of time during which they can make the same amount of money.

The reason they haven't done so must be a lack of internal discipline or external influence.

[Schmuto]

I just found this graph, which I think portrays a stunning failure of OPEC to capitalize on the price of oil going to 147:


The thing that really jumps out at me is that, as priced moved from 30 to 60 through 05, OPEC production was ramped up several times.

Then, from mid-05 until mid-08, as price screamed up to 145, production in OPEC only went up once (slightly) - in fact, dropping twice with the price at 60.

Then, after we come off of the 145 price, it's almost as if a relief valve has been pressed, and as prices tumble, production is cut when the price reaches about 80! 80! which is a really nice price for OPEC relative to the previous decades.

I interpret this as follows: prices are screaming over 100 and OPEC is having trouble sustaining output. They are desperate to maintain output, because, with oil moving toward 150, any sustained decrease in production would confirm they are maxed. Even if the smoke and mirror protection team came out to say that they were lowering production because demand was foreseen to be dropping, it would have been a disaster - then they become world pariahs for "gouging."

I'm not sure how else there is to interpret this graph other than to conclude that OPEC's ability to expand production ended in 05, which agrees with what many consider to be the all-time peak.

Some folks (RR) say that OPEC could have ramped up production, but there wasn't enough time.

Well I ask you this - if OPEC has a reserve production capacity of, let's say 4MBD, but 3 years isn't enough time to bring even a portion of that online, then what the hell is the operating definition of "reserve capacity?"

If it takes 5 years to get oil to market, that can't be described as "reserve capacity."

It's like you're going to kids birthday party and the other dad says - "you have enough cupcakes" and you say, "yeah, i've got 50, but I can make 100 if needed."

Then the party gets going and it becomes clear there are 70 kids there and the other dad says, "hey, we're going to need you to pump out another 20 cupcakes," and you say, "It'll take me 3 weeks to make them."

Was your statement that you "can make 100" accurate? Well, maybe yes, but given the time it takes you to make them, the implication that you made was misleading.

I have believed for several years now that the KSA is close to or in terminal decline.

I see only two possibilities remaining:

The KSA had the ability to pump more but chose not to do so because, for one reason or another they are preserving or being told to preserve their reserves.

The KSA can't pump any more and they're at maximum production right now, with any new projects coming on line doing nothing more than maintaining production or slaking decline rates.


The graph supports both.

If the latter is right, then we truly are in a death spiral, and we're within a year or two of chaos or merciless depression, your pick.

I don't buy conspiracy here. I don't think the will would be there to tempt the masses.

I think the KSA is going down.

I think we're about to witness the most important historical event since the birth of Mohamed.

[copious.abundance]

Yawn.

From the middle of 2007 to the middle of 2008, world crude oil production did, in fact, increase to the tune of 2+ million bpd, as this chart from October's TOD Oilwatch Monthly shows:



Compare this to the price. You can see the last big spike occurred starting around spring 2007. As recently as January 2007 the average price was around $54 (source).



Since the price crashed, as Economics 101 would predict, production has also crashed.


^
That was down to less than 72 million bpd as of January, but the April Oilwatch Monthly didn't put a handy-dandy world crude production chart on the TOD thread.

-------------------------------------------------------------------------------

Here I combined the two charts:



-------------------------------------------------------------------------------

Now, the argument has been made that a huge price increase only led to a relatively small rise in production. But as I explained exhaustively here, this is normal for most economic goods. For example, the median price of housing in the US rose almost 12-fold between 1968 and 2006, but did production (construction) of houses also rise 12-fold? No. In fact, aside from the usual hills and valleys it actually remained roughly the same. Here I also gave the example of wheat. So, oil is no different from anything else in this regard.

[Schmuto]

$this->bbcode_second_pass_quote('OilFinder2', '[')lots of crap]

[copious.abundance]

Schmuto didn't read my last paragraph.

Prove to me that it is normal for production of an economic good to rise/fall in 1:1 tandem (or even something close) with the rise/fall of the price of that good.

[copious.abundance]

$this->bbcode_second_pass_quote('Schmuto', '
')OPEC stood to make SEVEN times the money, at least SIX times of which was profit, for every extra barrel they pumped during the run up.

They pumped - about none extra.

[TheAntiDoomer]

http://www.petroleum-economist.com/default.asp?page=14&PubID=46&ISS=25406&SID=720397

Opec quota busters push output up

$this->bbcode_second_pass_quote('', 'O')pec oil production broke a seven-month downward trend in April, rising by 270,000 b/d to 28.2m b/d, according to the IEA.

[AgentR]

$this->bbcode_second_pass_quote('Schmuto', 'I')f oil is selling for 200 dollars a barrel,

[AAA]

$this->bbcode_second_pass_quote('Schmuto', 'T')his is an important point.

I've read arguments that, when prices started ramping up in 07, OPEC was able to ramp up production but that the time required to ramp up production prevented them from doing so before the price dropped off.

I call nonsense on that.

[AAA]

Has anyone else noticed that OF2 never gives much if any of his opinion? OF2 provides facts. Many times those facts are derived from theoildrum, EIA, etc...

People that argue with OF2 RARELY if ever have any evidence to prove OF2 wrong.

What does this mean? OF2 has more credibility than most all po members.

[Schmuto]

$this->bbcode_second_pass_quote('AAA', '')$this->bbcode_second_pass_quote('Schmuto', 'T')his is an important point.

I've read arguments that, when prices started ramping up in 07, OPEC was able to ramp up production but that the time required to ramp up production prevented them from doing so before the price dropped off.

I call nonsense on that.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'A')nd, if you can't raise production over a 3 year period when prices spike to all time highs, then, it seems manifest, you really don't have a 'reserve' capacity at all. What you have is good intentions.

[AAA]

$this->bbcode_second_pass_quote('Schmuto', '
')
Answer to angry one, above, and The Troll:

Troll - The graph was posted already - from June 05 until today OPEC has only increased production one time, and then only by a paltry 1/2 of 1 percent. They have decreased production in that same time period by a cumulative amount of about 6%.

So I say it again, despite its obvious nature:

If they had 3 years from 05 to the peak price in mid 08 to increase production and cash in on high oil prices, and they did not, the only reasonable conclusion I can draw is that - they could not increase production.

You, and others, keep repeating, "it's a "ramp up" and it can't be done all at once.

Apparently, it can't be done at all over a 3 year period.

And, if you can't raise production over a 3 year period when prices spike to all time highs, then, it seems manifest, you really don't have a 'reserve' capacity at all. What you have is good intentions.

And the road to post-peak oil hell is paved knee-deep in good intentions.

$this->bbcode_second_pass_quote('Schmuto', 'T')roll - The graph was posted already - from June 05 until today OPEC has only increased production one time, and then only by a paltry 1/2 of 1 percent.