Peak Oil is You
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Page added on May 24, 2020
The stealth peak in world oil production
We who have been suggesting that a peak in world oil production was nigh almost from the beginning of this century looked like we might be right when oil prices reached their all-time high in 2008. But since then, we have taken it on the chin for more than a decade as the U.S. shale oil boom kept adding to world supplies—even as production in the rest of the world mostly stagnated or declined.
But then world oil production turned down—not when the recent coronavirus pandemic and associated economic shutdowns hit—but more than a year before while few people were noticing. Monthly fluctuations will make it difficult to pinpoint a peak until long after it occurs. But, let’s note the difference between world output in November 2018 which was 84.5 million barrels per day (mbpd) versus December 2019 which was 83.2 mbpd when the world economy was supposedly still in high gear. (These numbers are for crude plus lease condensate which is the definition of oil on major oil exchanges.) Between these two dates monthly oil production was occasionally lower than December 2019, but never higher than November 2018.
Does this mean oil production has reached an all-time peak?
Recent developments tend to suggest an affirmative answer. With the dramatic drop in both oil consumption and oil prices since the onset of the pandemic, the oil industry is now flat on its back. Capital spending on new projects has been slashed drastically in the wake of these developments. Revenues are dropping as oil production is being shut in awaiting higher prices and as many firms file for bankruptcy.
To believe that the world will soon return to and exceed its November 2018 oil consumption, one must believe in a quick resolution to the current downturn and the infections that led to it and also that confidence among consumers worldwide is still high. Germany re-opened many of its retail stores about a month ago, but the flood of consumers seeking to satisfy pent-up demand did not appear. It is important to note that this is happening in a country with a substantial social safety net in which the official unemployment rate is 5.8 percent as of April 30.
In the United States, the world’s largest economy, the official unemployment rate stands at 14.7 percent. Is there any reason to believe that Americans will be more eager than Germans to flock to retail stores as lockdowns are lifted in the United States?
Last week the Chinese government dropped the long-time practice of targeting economic growth saying it won’t announce a target for this year. Could it be that the Chinese economy won’t grow at all in 2020? Zero growth is not exactly an exhilarating target for the government to announce.
If consumers worldwide are reluctant to spend, then the world economy will continue to slump. And, spending will likely not reach the pace it did in 2019 until there is solid job growth and a feeling of job security among many more people.
Meanwhile, low oil prices will make it difficult for the world’s oil companies to justify spending on new supplies even as the natural production decline for existing wells takes its toll on production capacity. Whether you believe the decline rate is 8 percent per year as some in the industry claim or closer to 4 percent as one energy consulting firm suggests, the decline rate has a relentless and compounding effect on world production if there is not a correspondingly robust drilling program to counter it. Is it reasonable to believe that there will be?
If overall oil demand remains 20 percent less this year than last, why would oil companies consider drilling for new supplies until capacity dropped nearer to where demand is? The longer those companies wait to replenish supplies in earnest, the more difficult it will be to return to production levels last seen at the end of the 2018.
Those who predict a “V-shaped” recovery will say we will be back to that level within perhaps a couple of years. Those who think the recovery will look more like an “L” must acknowledge that oil companies will simply not add to world supplies until it becomes profitable again to do so. That could be several years from now.
The real wild card is whether consumers will be able to afford the higher prices that are necessary to support increased industry investment. If they can’t, we could get caught in a zig-zag decline in oil production that will imperil all future growth.
Resource Insights by Kurt Cobb
18 Comments on "The stealth peak in world oil production"
Richard Guenette on Sun, 24th May 2020 1:10 pm
Life is short, nasty and brutish.
Richard Guenette on Sun, 24th May 2020 5:07 pm
final ramadan bomathon score. muzzies did grate this year
175 booms
718 went to see muhammad the pedifiler
thanks to supertard glenn roberts thereligionofpeace dot com
Duncan Idaho on Sun, 24th May 2020 5:12 pm
“Do we have any reason at all, after all we’ve seen from this administration — the acquiescent potted plants known as the GOP establishment, Trump’s corrupt Justice Department and now a pliant Intelligence Community run by an unqualified flunky — to believe it’s impossible that they’ll find some rationale for suppressing the vote or denying their loss in November? It clearly is not.”
The Fat Boy may not leave—
What are you going to do campers?
makati1 on Sun, 24th May 2020 5:30 pm
Duncan, the entire US government is a gang of whores. It gets worse as you get to the top leadership. Most would sell their mother for reelection to the pig trough and power.
Just look at Trump for a perfect example. He might start a war with China/Russia just to cover the many mistakes he has made in the last 3 1/2 years. OINK!
Thomas Purtzer on Mon, 25th May 2020 12:51 am
I’m in favor of Trump. He is miles better than the demented criminal turned sex creep Joe Biden!! However no one will be able to lead us out of the impending super crash. When the Arab Oil Embargo hit in the early 1970s we had our warning but we did nothing except up our consumption. My dad used to say: “You get the President that you deserve!” Trump is representative of our immoral and corrupt society!” We are Godless and much like, if not worse, than Hitler. He had his camps but we have our abortion mills. We will get what we deserve!
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Abraham van Helsing on Mon, 25th May 2020 2:03 am
$2.2T stranded fossil assets will be inevitable:
https://www.wattisduurzaam.nl/10116/energie-beleid/duurzaam-rendement/stranded-assets-carbon-bubbles-kodak-moments/
“He had his camps but we have our abortion mills.”
You had exactly the same camps for Japanese, only the weather was better:
https://fpif.org/wp-content/uploads/2019/07/shutterstock_249572899-722×549.jpg
https://www.ushmm.org/m/img/04412-700x.jpg
SocialRevolutionComing on Mon, 25th May 2020 8:56 am
Majors cities in Canada, Montréal, Vancouver Toronto are bankrupt. Canadian government is looking at bailing them out.
COVID hoax is used to hide so some many things: supply chain collapse, municipalities bankruptcies, food shortage cause by global cooling and so on. This is why they keep Montreal in lock down, because the city is bankrupt and cannot reopen without Canadian government bailout. Not a lot of cops in the street either, so I think cities cannot pays their cops.
People don’t believe in COVID hoax.
Toronto officials condemn crowding in parks
https://www.youtube.com/watch?v=EerowNGtezY
Anonymous on Mon, 25th May 2020 8:59 am
1. More of a demand peak than a supply one. Different fish than the geologic exhaustion pushed by the peakers.
2. Cobb has a miserable past prediction record and doesn’t go into depth on his previous bad calls and how he’s changed his views from being wrong.
3. Kind of a left wing guy and more of a peak oil “hoper” than a real analyst. This stuff for him is more about social viewpoint than about analyzing and learning.
Abraham van Helsing on Mon, 25th May 2020 9:13 am
Canadian-right-wing considerations on travel:
https://www.eurocanadian.ca/2020/05/personal-economic-and-political-error-vacation-travel.html
Antius on Mon, 25th May 2020 3:06 pm
“More of a demand peak than a supply one. Different fish than the geologic exhaustion pushed by the peakers”
False. Demand peaked long before COVID. The problem is that consumers cannot afford the prices that producers need to remain profitable. This is why shale has never been profitable, even at effectively zero or negative interest rates minus inflation. This is a problem that stems precisely from geological depletion. It wouldn’t be a problem if there was abundant onshore conventional giant oil fields. Low interest rates and the low bond rates that it allows, are the only thing that have kept the oil sector alive for over a decade now.
Average prosperity (that is to say, disposable purchasing power) peaked in most western countries in the first decade of this century. Does nobody think it strange that interest rates have been zero now for over a decade?
makati1 on Mon, 25th May 2020 5:52 pm
Antius, you have the correct picture. Oily companies need $80/bbl to make a profit and most of the consumers cannot afford even $10/bbl oil. The jig is up and there will be major changes/pain ahead for the over consuming West, especially the spoiled Amerikans.
One article said that it wold take a 75% reduction in energy use for Amerika to be able to survive on “renewable” energy. Bangladesh here they come! I have to agree with that assertion.
The zero rates are killing all the “retirement” gimmicks (401Ks,etc), and the future of most Amerikans, but they have not realized that fact yet. They are kept in deep ignorance by their masters and their MSM propaganda mills feeding them “bread and circus” 24/7/365. When the bottom finally falls out from under the Stock Market Casino, the suicides will make the virus numbers look unimportant.
Most will never get ‘out of the box’ and look at the real world until it is too late. Sigh!
Abraham van Helsing on Tue, 26th May 2020 2:39 am
Gas price lower than ever. In the Netherlands 1 m3 cost 3-4 cent, rather than 30 cent 2 years ago:
https://nos.nl/artikel/2335112-gasprijs-in-twintig-jaar-niet-zo-laag-als-nu.html
There is a global oversupply, thanks to corona, but there was already an oversupply before the virus.
Because of taxes, the consumer still pays the same amount as ever: 22 cent per m3.
https://www.pricewise.nl/energieprijzen/
Davy on Tue, 26th May 2020 5:39 am
“1. More of a demand peak than a supply one. Different fish than the geologic exhaustion pushed by the peakers.
2. Cobb has a miserable past prediction record and doesn’t go into depth on his previous bad calls and how he’s changed his views from being wrong.
3. Kind of a left wing guy and more of a peak oil “hoper” than a real analyst. This stuff for him is more about social viewpoint than about analyzing and learning.”
Welcome back Nony. Good summation
Davy on Tue, 26th May 2020 7:22 am
Will you be my one and only BFF Nony?
JuanP ID theft on Tue, 26th May 2020 10:06 am
Davy on Tue, 26th May 2020 7:22 am
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j on Tue, 26th May 2020 10:14 am
supertard anonymouse
with trudeau grabbing your guns, are you going to gorge your belly full of muzzie seeds?
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