[AirlinePilot]

The refinery business will come back when we work through the inventory a bit and gasoline prices are allowed to climb. Otherwise we are in for a very big wakeup call. Shutting down refineries right and left, losing refining capacity..its ok for the moment, but when we need them, where will they be? If they cant make money, they go out of business.

I guess there is some hope for demand to be low enough for that paradigm to succeed, but frankyl I doubt it, especially with any sort of economic recovery no matter how small it is.

[Graeme]

Peak Oil Demand Is Coming, But Here's Why It's Not Good News

$this->bbcode_second_pass_quote('', 'W')hen oil crossed $120 a barrel for the first time in May 2008, oil cornucopians knew they were in trouble. Prices had quadrupled in just five years, yet had failed to bring new production online. Regular crude had flatlined around 74 million barrels per day (mbpd). The case for peak oil was looking stronger with every new uptick in crude futures.

The following month, prominent peak oil critic and cornucopian Daniel Yergin of IHS-CERA changed his stance: The peak oil threat would be neutralized by peak demand. Gasoline consumption had peaked in the U.S. and Europe, he argued, due to the combined effects of increasing efficiency, biofuels, and the recession.

The first was a Reuters report that the last quarter of 2009 had “wiped out” the equity of Mexican state oil monopoly Pemex, leaving it $1.4 billion in the negative. Falling crude output, falling refining margins and a burgeoning dependency of the state on its revenues had squeezed it to death.

Not only did the report offer further confirmation that the oil export crisis has arrived, but it also confirmed my growing suspicion that the oil production everyone has assumed will come online in five to ten years might, in fact, fail to materialize. Negative equity companies have a hard time raising capital for new exploration.

As we enter the post-peak phase of global oil supply sometime around 2012-2014, the price that heavily import-dependent countries like the U.S. would have to pay for that marginal barrel will become increasingly intolerable. In a weakened economy, $100 a barrel (or less) could be the new $120.

The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel, but it will not be destroyed by improved efficiency.

[mcgowanjm]

$this->bbcode_second_pass_quote('AirlinePilot', 'T')he refinery business will come back when we work through the inventory a bit and gasoline prices are allowed to climb. Otherwise we are in for a very big wakeup call. Shutting down refineries right and left, losing refining capacity..its ok for the moment, but when we need them, where will they be? If they cant make money, they go out of business.

I guess there is some hope for demand to be low enough for that paradigm to succeed, but frankyl I doubt it, especially with any sort of economic recovery no matter how small it is.

[AirlinePilot]

Chindia's Net Imports

From 2005 to 2008, Chindia's (China & India) net imports increased at about 9%/year (EIA). Expressed as a percentage of combined net exports from the (2005) top five net exporters, Chindia's net imports went from 19% in 2005 to 27% in 2008 (probably to about 33% in 2010). If we take a best case scenario for net exports from the (2005) top five and project Chindia's current rate of increase in net imports out to 2018, then in 2018, Chindia's net imports would be equivalent to 100% of projected (2005) top five net exports.

But have we ever seen a sustained near double digit rate of increase in net oil imports over a long time period?

From 1949 to 1977, the rate of increase in US net imports was 11.8%/year, exceeding the current rate of increase in Chindia's net imports. Of course, until 1973, oil prices were fairly stable and this time period (1949-1977) corresponded to generally increasing global net exports, but on the other hand Chindia has shown increasing consumption and net imports, even as oil prices rose at 20%/year from 1998 to 2008.

EIA (PDF) production, consumption, net imports chart for the US:

http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_4.pdf

Incidentally, the rate of increase in net imports from 1949 to 1970 was 11%/year, but US net imports really kicked up after US production peaked in 1970, going from 3.2 mbpd in 1970 to 8.6 mbpd in 1977 (and then entering a period of decline, before resuming the increase in later years). But in any case, the rate of increase in net imports from 1970 to 1977 was 14%/year, after US production peaked in 1970. Over the same time period, 1970 to 1977, US oil prices also rose at 14%/year (EIA).

Note that two factors contributed to the late Seventies decline in US net oil imports--falling consumption and rising production from Alaska, as the Alaskan pipeline was finished. It would appear that the all time annual record high for US net imports was in 2005, at 12.5 mbpd.

Recent EIA data show that Chinese oil production is flat, while Indian oil production is down slightly.

[TheDude]

Copycat.

[AirlinePilot]

I specifically talked to Jeffrey about this and he has allowed me to post his relevant stuff right here...just so you know

[TheDude]

$this->bbcode_second_pass_quote('AirlinePilot', 'I') specifically talked to Jeffrey about this and he has allowed me to post his relevant stuff right here...just so you know

[GoghGoner]

$this->bbcode_second_pass_quote('TheDude', '
')
In other words, the average change year to year of Norway Net Exports over the years was 55 mb/d.

[TheDude]

$this->bbcode_second_pass_quote('GoghGoner', '')$this->bbcode_second_pass_quote('TheDude', '
')
In other words, the average change year to year of Norway Net Exports over the years was 55 mb/d.

[truecougarblue]

Dude, in your opinion which are the next five countries to slip from net exporter to net importer?

[TheDude]

$this->bbcode_second_pass_quote('truecougarblue', 'D')ude, in your opinion which are the next five countries to slip from net exporter to net importer?

[truecougarblue]

Thanks dude.

[TheAntiDoomer]

Someone with photoshoping capabilities should label the man in this pic Jeffrey Brown and write "Export Land Model" on the horse....

[AirlinePilot]

Yeah so westexas is the boy who cried wolf..SO WHAT? In the near term this IS going to be the big issue. I suspect it becomes very serious after we start decline, though he seems to think its a big deal now.

This will be the main problem with which we all have to deal with due to the inability to move significantly away from the peak/plateau we are currently on. I will follow what he says far quicker than listening to corny trolls who think reserves magically grow on trees and technology always comes to the rescue.

[AirlinePilot]

From Westexas over at TOD......

The four largest sources of imported oil into the US are Canada, Mexico, Venezuela and Saudi Arabia.

Venezuela's net exports started declining in 1998.

Mexico's net exports started declining in 2005.

Saudi Arabia's net exports started declining in 2006.

Only Canada has shown an increase, and their increase in net exports has not even been sufficient to offset the recent declines in any of the other three countries.

The four countries' combined net exports in 2005 were 14.1 mbpd, and in 2009 they were down to 11.0 mbpd--as Canadian net exports increased from 0.79 mbpd in 2005 to 1.02 mbpd in 2009 (BP). Granted, there was some level of voluntary reduction in production in Saudi Arabia in 2009, but I suspect that most of what they shut-in was what Matt Simmons characterized as "Oil stained brine," and the key point is that Saudi Arabia, Mexico and Venezuela are all showing multiyear net export declines, relative to recent peaks.

Note that the increase in US production (C+C+NGL) from 2005 to 2009 was about 0.3 mbpd (and of course 2005 was suppressed because of the hurricanes), and the increase in Canadian net oil exports from 2005 to 2009 was about 0.2 mbpd. So increased US production + increased Canadian net oil exports from 2005 to 2009 was a combined 0.5 mbpd. Over this same time frame, 2005 to 2009, combined net oil exports from Saudi Arabia, Mexico and Venezuela dropped by about 3.3 mbpd.

[gollum]

$this->bbcode_second_pass_quote('pstarr', 'W')e are still getting what we need from these four declining exporters. That tells me some country somewhere is not receiving their share. Could it be Zimbabwe? Haiti? Ireland? Portugal? Greece?

Nah. Those problems are mortgage related