ODAC Newsletter 16 November 2012


Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.

The US as the new Saudi Arabia, energy insecurity for most of the rest of the world, and climate chaos for everyone – such were the headline points of the latest World Energy Outlook from the International Energy Agency. Consider these assertions:

  • Crude oil production peaked in 2008 at 70 mb/d, and will never return to that level;
  • US production of tight oil (shale oil) will peak at 3.2 mb/d by 2025, with a minor contribution from the rest of the world;
  • Production of natural gas liquids (primarily the gases ethane, propane and butane, always counted as liquids) will rise from 12 mb/d today to 18 mb/d by 2035;
  • Remaining recoverable resources are now 5900 billion barrels, including tight oil and oil retorted from shale by heating;
  • North America will be a net oil exporter by 2030, with the US producing 11.1 million b/d in 2020 and 10.2 mb/d in 2030. Note that current US demand is 18.8 mb/d

So conventional oil production has peaked, some 4-5 million b/d of tight oil may be possible adding some 5% to global oil production, most of the rise in production isn’t exactly liquid, huge amounts of unconventional carbon can now be technically extracted and burned, and the US is expected to export oil by, we presume, slashing its consumption. News headlines rang out with the great news of US energy independence, and The Guardian, amongst others, declared that the peak oil theory had gone up in flames.

So what to believe? It is fair to say that peak oil commentators have been slow to recognise the considerable impact (however temporary it may be) of shale oil. With other sources of oil in decline and prices high enough to support extensive drilling, fracking has turned around the oil production trajectory in the US, seemingly making a mockery of the old decline bell curve. US production of 11.1 million barrels per day in 2020 (this is for liquids not just crude oil) would top Saudi Arabian production (which by this calculation appears to have stagnated). This is quite a staggering increase from today and is called into question in a post by Gail Tverberg at The Oil Drum. She claims that the IEA is failing to take into account the diminishing returns of shale production – that the most productive areas are being drilled first and that decline rates are rapid. Certainly the cost of tight oil will lock in high prices.

But let’s assume that the picture is broadly plausible. What does this mean for the coming years? In essence the picture is still the same. The global picture points to a future of volatile energy prices and economic instability as long as economies depend on oil, a point made clearly in a new report from the New Economics Foundation (nef) with ODAC The economics of oil dependence: A glass ceiling to recovery. The emergence of shale oil is a step along the path of exploitation of resources with diminishing returns. As the easy to access oil and gas declines, the industry is finding clever ways to exploit resources which were previously uneconomic – these are however more costly and take more energy to extract, and come with higher environmental risks. What our new report points out is that the higher cost required comes with a drag effect on economic growth. Yes oil demand may be in decline in the OECD and poorer countries around the world, but so far this is not primarily because of  energy efficiency policy (which the IEA laments as an “epic failure”) but due to demand destruction from high prices leading to economic contraction.

It is interesting, though perhaps not surprising that some environmental commentators – George Monbiot, and Damian Carrington at The Guardian for example - have condemned the peak oil idea almost as if it has betrayed them personally. ODAC’s position has always been that those working to mitigate climate change need to take peak oil into account not because oil production would fall off a cliff and thus prevent the need for any proactive emissions reductions, but rather because the effects of peak oil – volatile oil prices, economic crisis, exploitation of resources with even higher carbon emissions like tar sands - would make climate policy changes all the more difficult. You have to look no further than the latest political rows in the UK over fuel duty and energy policy to see how true this is.

View our Reports and Resources page

Note: Final bullet point amended to show North America rather than the US becoming a net exporter by 2030.


Disclaimers

Oil

US can become world's biggest oil producer in a decade, says IEA

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U.S. the New Saudi Arabia? Peak Oilers Scoff

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Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence

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US won't eclipse Saudi without free crude trade

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Our reign as oil king likely to be very short

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Energy Independence in the United States? Don’t Pop the Cork Yet

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IEA slams 'epic failure' of global energy efficiency policy

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US to overtake Saudi Arabia in oil as China's water runs dry

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How cheap energy from shale will reshape America's role in the world

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IEA report reminds us peak oil idea has gone up in flames

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Iranian oil output, exports rebound - IEA

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Energy pricing: the market is manipulation

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Oil Heads for Weekly Decline as Economy Counters Mideast Tension

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BP agrees record $4.5bn settlement over Gulf spill

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Gas

Gas Prices Doomed to Stay Low as Producers Pump Faster

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Renewables

Wind industry could provide a fifth of global electricity by 2030

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Germany Has Built Clean Energy Economy U.S. Rejected in 80s

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UK

Fuel Duty: Government May Still Axe Increase

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The energy policy conflict at the heart of government

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Polling day shambles for coalition over climate change policy

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Business chiefs call for emissions targets in power sector

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Whistleblower claims that energy market is rigged

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Climate

World Energy Outlook is bad news as far as climate change is concerned

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Transport

Zut alors! Famous French cars may be banned from Paris

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Auto industry dodges tougher EU emission rules: sources

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EU Commission freezes airline carbon emissions law

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Disclaimers

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