The Real Energy Outlook

IEA and EIA - perhaps along with BP - may get the most media exposure for their energy outlooks, but one company dares to show some of the more inconvenient estimates in it's outlook. That company is ExxonMobil. It goes without saying that they have a vested interest in things happening as they lay it out, so one is advised to approach their Outlook for Energy - A View to 2030 with caution.

With that said, here's a short sampling of their scenarios with some comments.

So much for that hybrid & plug-in electric car revolution...

Commercial trucking taking the biggest chunk of oil demand growth

Renewables growing the fastest, but still being dwarfed by the fossils...

Fossils dominating even in electricity generation

Fairly optimistic assumption on efficiency growth...

Yet not overly optimistic on CO2 emission cuts.

Of course, the whole point of these scenarios is to make us think and also reflect our own assumptions of the world and energy. The backing of all this in the outlook is : "Don't worry, there's plenty of oil, gas and coal - where it all came from" as well as "we may not stop greenhouse gas emissions, but at least we'll be ever so more efficient in our economic growth".

Remove just one piece in this puzzle - constant growth of supply flow of oil - and the whole assumption falls apart.

It'll be an interesting next 20 years, that's for sure.

What would Sarah Palin write on her hand?

Click the image to find out.

Jeff Rubin on Next 10 Years of Oil

"Prediction is difficult. Especially about the future."
- Niels Bohr

With that quote, here's a prediction from Jeff Rubin, former chief economist at Canadian CIBC World Markets, who did his own study and understood peak oil. He also wrote a book, 'Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization' which is recommended for business types, who get bored by too much numbers or complex scientific analysis.

Publish Post

Toyota - New Concepts & Peak Oil Admittance

@ the tradeshow of a dying industry, Detroit Auto Show, Toyota USA launched new car concepts, including this:

Toyota FT-CH concept car

It's small (shorter than Yaris), efficient (more than Prius), meant for the young growing population and cheaper (emerging Asia, here we come).

At the same time, they gave this press release:

"Within the next 10 to 20 years, we will not only reach peak oil we will enter a period where demand for all liquid fuels will exceed supply."
- Jim Lents, Toyota Motor Sales (USA)

Well, well, what do you know.

Who would you you trust to tell you about Peak oil?

An oil company who's incentive is to lie about it as long as possible, so you won't start transferring to alternatives.

Or a car company, who knows that the first to reach alternative power sources, will reap potentially big benefits.

They are both biased, so take your pick.

However, Toyota didn't tell where all the energy for their battery electric and fuel cell hybrids would come from.

We can venture a guess with a high likelihood of being correct : C O A L.

Get ready for it, because that's what we are going to get. All other sources (wind, solar, natural gas, hydrates, unconventionals) are just too expensive, too slow to build, don't scale, in scarce supply or are geographically not as distributed.

IEA - Oil peaks by 2020 if no mega-discoveries

So, here it is then - the next step in slowly admitting to Peak Oil by the IEA. This time via the Economist.

“The output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”

- Fatih Birol, IEA chief economist

So, we have gotten from the "No peak ever" to "Plateau by 2050" to "Plateau by 2030" to "Conventional oil peak by 2020".

The question is, will it stop there, or is the forecasting trend going to continue to "Conventional Peak by 2015"?

Of course, they are still playing by the non-conventional + biofuels playbook, as if those are going to be able to be scaled to fill the shortfall in conventional oil. That remains doubtful.

However, recently Jeremy Gilbert (ex-chief petroleum engineer at BP) did suggest that there might be some more oomph left in the enhance oil recovery. Hence, even though demand is likely to grow and there are no new discoveries, the world could squeeze more out of the remaining reserves.

The idea is something like this graph, posted by Shox @ TOD:

This however requires that the service companies and national oil companies get enough of profit and future incentive to invest in new EOR technologies and make the required breakthroughs. The physics as well as the economics however, are against them. One thing is for sure, it is not going to be easy, even if it was to succeed.

The downside (there is always a downside)? With new and improved EOR techniques the cliff-dive after the plateau would be likely to be even more rapid, more like falling off a straight cliff than a mere 6-8% yearly decline.

That's the nature of the underlying geological constraints. No amount of money can fool that. Energy could, but it would be stupid to waste several barrels of oil worth of energy to get out each remaining one barrel of oil.

Some assorted Oil Graphs

What happens if we have to use too much of our money to buy oil?

What happens to oil decline rate if peak comes later?

Why does the price of oil keep going up?

Where is the expected oil demand growth going to come from?

What happens to oil price as oil production spare capacity shrinks?

What happens to oil demand in the greatest recession?

Sometimes a picture - even not so good one - is worth a thousand words. So, let's try some:

Acknowledging and Estimating Peak Oil

Two videos from Aspo-Usa about peak oil, by experienced oil geologists.

First, Acknowledging the Reality of Peak Oil. Are we coming around to it? If not, why?

"Peak Oil is happening as we speak."

Four petroleum geologists discuss how we cannot meet demand in the coming years with current oil field projects coming on-line. Peak Oil Reality - Production and Depletion.

"If you don't talk about them, you will never fix the situation."

An Economic Diversion - A Keynes-Minskyan model of Economic Growth

Steve Keen's excellent Debtwatch blog recently features a video broadcast of his recent lecture about "Debt and Economy - How do we Pay for it all?".

If one wants to understand economics more than the Friedmanian neo-economic liquidity pumping model, and how it links with economic growth based on energy availability, then this video is highly interesting.

World Energy Outlook 2009

The yearly report from the OECD energy watchdog International Energy Agency is out. It is called World Energy Outlook.

Here are some key points of interest from the exec summary (full report still under scrutiny):

Coal use expected to grow enormously - oil & gas as well

Problem is - we don't know where the oil & gas are!

Sine financial crisis investments in finding & developing oil are shrinking

So we will use LOTS more coal resulting in LOTS more CO2

So the only option is to go on a huge efficiency binge

So, if you are an investor and something like the above comes to pass (unlikely, but possible), keep on piling on oil till roughly 2015 as we'll get our next oil crunch by then, unless the economy goes south again. After 2015, start piling up on efficiency plays and lots more on coal. Biofuels will be a crutch, but will probably fail royally sometime before 2020-2025 due to thermodynamic stupidity.

More when the final report is out and fully analysed.

Who let the cat out of the bag?

Guardian has the scoop:

Key oil figures were distorted by US pressure, says whistleblower

Exclusive: Watchdog's estimates of reserves inflated says top official

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

Uh-oh. Reuters, AFP, Telegraph and many more are carrying the same story.

Embrace for impact. Today is going to be really interesting. Expect a thunder of denials.

In related news, as IEA's yearly World Energy Outlook is now coming out, FT has the scoop on the oil price rally of 2008 and the financial crisis.

Did oil cause the latest recession? IEA weighs into the debate

A feature in the draft executive summary of the IEA’s World Energy Outlook, which will be published tomorrow, revisits this argument and comes to a rather worrying conclusion.

It starts out keeping in line with the prevailing view: the run-up in oil prices from 2003 to mid-2008 played “an important, albeit secondary” role in the global economic downturn that took hold last year. Higher oil prices made oil-importing countries more vulnerable to the financial crisis, it says.

So a strengthening belief from the IEA in the contribution of oil prices to the latest recession is especially noteworthy. We will find out on Tuesday if the final draft provides more clarity on the agency’s view.

Well, we already knew as much, but it is always comforting to get the 'official confirmation', so to speak.

These two news put together might go some way explaining the apparent discrepancy in current consumption decline and price increases of longer dated oil futures:

Oil at $100 Doesn’t Compute as OPEC Output Pace Grows (Update4)

OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses.

The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II.

Saudi Arabia’s King Abdullah has targeted $75 oil as a fair price for consumers and producers and has the capacity to increase pumping by about 50 percent, or 4 million barrels a day, enough for all of Brazil. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10.

“It’s not in OPEC’s interest to see $100 oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “They know that it’s the speculators that are the main driver in sending prices higher. At some point this market will implode, because this isn’t sustainable.”

So, either the speculators never learn (perfectly plausible) or they know something the majority does not know. The dirty details are all in the decline rates and the shape of the peak.

Speculation or not, prices have pushed higher and volatility is killing hedging for commercial users of oil like airlines. Clearly this cannot mean good for the fledging 'recovery'.

Now that economy is officially 'recovering', it's time for oil to step back into the limelight.

Don't say you weren't warned already a year ago.

The ride's only starting.