Guest post by David Middleton
BP’s ‘Peak Oil’ Demand Prediction Falls Flat
But, this time the commotion that I see surrounds BP’s forecast that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected. As such, for the first time BP’s outlook predicted a “peak” in oil use. At 13 million b/d, global petrochemical feedstock is 13% of total oil demand.
This is part of a growing trend in recent years where BP continues to see “much slower” growth in new oil demand going forward (see Figure).
Meanwhile, IEA recently reported that it will be those very same petrochemicals that will someday become the largest source of new oil demand, even surpassing transport in the years ahead:
“Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then,” IEA, October 2018
This conclusion from IEA is predicated on the reality that oil is inherently ingrained in pretty much all aspects of our lives, even if those aspects are not immediately obvious in the ways that cars or airplanes are. In fact, perhaps the world’s greatest energy irony is that oil and petrochemicals themselves are integral to renewables, electric cars, and the overall “energy transition” itself:
“Petrochemicals are particularly important given how prevalent they are in everyday products. They are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles,” IEA, October 2018
From a broader oil use perspective, the truth is that population and income growth are the driving forces behind the demand for energy. The equation is a simple one to remember: more people, making more money, using more energy. As the most vital source of energy in the world, and lacking any sort of significant substitute, the upside for oil is clearly bright.
This is especially true since 6 in every 7 humans living today reside in still developing nations, where oil usage has really just begun. By 2050, the world’s economy will add $85 trillion in real GDP, and the global population will surge 30% to over 10 billion humans.
Potential demand is staggering: “What If India And China Used Natural Gas And Oil Like The U.S.”
I must note here that BP has drastically underestimated global oil demand before.
For example, in its Energy Outlook 2011, BP predicted global oil demand at 102 million b/d in 2030. Yet, the world could pass that level this year, and if not, surely will in 2020, or a solid decade before BP thought that we would.
Thus, new oil demand has been surging at twice the rate BP has expected.
To me, oil companies foreseeing the peak of oil without any current evidence is “a bit of a European thing,” particularly among the majors themselves that are venturing into more renewables, natural gas, and storage battery investments: “Shell is Wrong: Global Oil Demand Can Only Increase.“
The pressure from environmental groups against outwardly being “pro-oil” helps explain why super majors are understandably shying away from taking the position. In contrast, the smaller independent oil and gas producers are quietly marching forward under the very realistic assumption of “more.”
From a public relations standpoint, this all makes sense: the upside to loudly being “pro-oil” is tiny, while the downside is immense: you get called very bad names and accused of “denying science.”
Indeed, for a very long time now, baseline reference scenarios both IEA and EIA have been forecasting indicate very strong increases in global oil demand, pretty much continuously for as far out as they model.
As seen below, in EIA’s Annual Energy Outlook 2019 released last month, our National Energy Modeling System forecasts that global oil demand stands on very solid footing. More, more, and even more.
Either way, whether it is from me, BP, EIA, or Greenpeace itself, I have learned a very simple truth during my 15-year career in the energy business: one of two things usually happens when you make seriously bold predictions, especially for the longer term.
When the time comes to answer for being wrong, either you are not around to have to respond, or the critics will have forgotten that you ever made the prediction in the first place.
Jude Clemente’s energy articles on Real Clear Energy and Forbes are always worth reading.
- Major oil company (particularly European majors) predictions of a near-term peak in oil demand are 99.999% driven by politics and the need to appease the investment community.
- According to baseball legend, the late, great Yogi Berra, “It’s tough to make predictions, especially about the future.” So, make sure your timeline is long enough to evade having to take responsibility for failed predictions.
- Malthuisan predictions have a 100% track record of being wrong.
- As these United States become a net exporter of crude oil in the near future, we will have no problem finding customers.
Here are the graphs from Mr. Clemente’s article:
In an odd twist, the US government forecast for petroleum demand is more bullish than an oil company’s forecast, albeit a “woke” Euro oil company.
Predictions about oil and gas production over the long term are particularly difficult. The EIA conducts “post mortem” analyses of their forecasts and makes the results available to the public. I downloaded two Excel files for AEO crude oil and natural gas production. The most striking thing is that the “shale boom” came out of nowhere in the eyes of the EIA.
As recently as 2008, the EIA (and most of the rest of the world) had no idea how significant the shale revolution was. The realization that low permeability source rocks could be economically developed was a game-changer.
“It’s tough to make predictions, especially about the future.”
These sorts of forecasts can only incorporate conditions that were known at the time they are generated. The Williston Basin is a great example.
The Williston Basin is an “intracratonic sedimentary basin” (AKA a bowl).
The Williston Basin has numerous petroleum systems and is productive from the Cambrian through the Triassic.
The Williston Basin has survived wild swings in sea level. Modern climate “science” tells us that if this happened today, the planet would be destroyed. Also note that over the past 600 million years, sea level oscillated cyclically. Modern climate science has eliminated these cycles… presumably protecting the planet from water.
If I have to tell you when I’m being sarcastic, there’s no point in being sarcastic
The map below is from the 1972 Geologic Atlas of the Rocky Mountain Region published by the Rocky Mountain Association of Geologists. It is affectionately known as “The Big Red Book.” As I only have the huge print copy and am too cheap to spring for the digital version available from the AAPG, I took this picture with my phone…
Oil production in the Williston Basin was first established in 1951 with a discovery well on the Nesson Anticline. Anticlines are essentially subsurface ridges or hills. They are positive structural features. In 1972 all of the production from the Williston Basin was from traditional reservoirs. The oil was trapped on anticlines and up-dip in structurally and/or stratigraphically bound accumulations around the north and west flanks of the basin in porous and permeable sandstone and carbonate reservoirs. By 1985, it appeared that production from the Williston Basin had peaked.
Then… A funny thing happened on the way to Peak Oil… A nearly ten-fold increase in Williston Basin oil production.
The industry, largely led by Continental Resources figured out that through the miracles of horizontal drilling and hydraulic fracturing (frac’ing) they could produce lots of oil from one of the basin’s most prolific source rocks, the Bakken Formation’s shale members. Rather than discrete accumulations in various traps, the Bakken Shale was a continuous oil field, which essentially filled the center of the basin.
Compare the 1972 Williston Basin map to this recent map of the Bakken Formation. Bakken oil production is in green…
Note that the highest density of Bakken wells and best production is east of the Nesson Anticline.
The best production is coincident with the thickest Bakken. Beets 2016.
As recently as 2008, the EIA (and most of the rest of the world) had no inkling that vast, continuous oil resource plays like the Bakken, Eagle Ford and myriad plays of the Permian Basin were about to be exploited by the Climate Wrecking Industry. And that’s why their oil production forecasts were so far off the mark.
About the Author
David Middleton doesn’t normally speak of himself in the third person… But that’s how these “about the author” thingies tend to be written. David has a B.S. degree in Earth Science from “that fine oil school,” Southern Connecticut State University. David has worked in the evil Climate Wrecking Industry since 1981, entirely for small to mid sized companies, that most people never heard of.
His first employer, Enserch Exploration, decided he was a geophysicist because he minored in math. His fourth employer decided he was VP of Exploration because he was really good at PowerPoint. His current employer bought his fourth employer and decided he was a geologist due to the unique stratigraphic nature of his office. There actually was a time when there really was a difference between oil industry geologists and geophysicists… David never figured out the difference.
- I don’t care if you think someone else said “It’s tough to make predictions, especially about the future.”
- If you want to post nonsense about abiotic oil, go ahead and waste your time. You won’t be wasting any of mine.
- If you want to post nonsense about the Shale “revolution” being a failure…
Beets, Jerry. 2016. Bakken Play PowerPoint. LinkedIn Slide Share.
Clemente, Jude. BP’s ‘Peak Oil’ Demand Prediction Falls Flat. 2019. Real Clear Energy.
Crowe, Tyler And Chris Neiger. Better Know an Energy Play: Williston Basin. 2012. The Motley Fool.
Mallory, William W, and Melvin R. Hennerman. Geologic Atlas of the Rocky Mountain Region, United States of America. Denver: Printed by the A.B. Hirschfeld Press, 1972. Print.
North Dakota Geological Survey. Overview of the Petroleum Geology of the North Dakota Williston Basin.
Sonnenberg, Stephen A. Sequence Stratigraphy of the Bakken and Three Forks Formations, Williston Basin, USA. Search and Discovery Article #10990 (2017). Adapted from oral presentation given at AAPG Rocky Mountain Section Annual Meeting, Billings, Montana, June 25-28, 2017