Another Failed Energy Prediction: Peak Oil Demand

Guest post by David Middleton

BP’s ‘Peak Oil’ Demand Prediction Falls Flat


By Jude Clemente
February 22, 2019

Always mandatory reading, BP just released its Energy Outlook 2019
It has caused quite a stir again this year.

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.

Real Clear Energy

Jude Clemente’s energy articles on Real Clear Energy and Forbes are always worth reading.

Key takeaways:

  1. 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.
  2. 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.
  3. Malthuisan predictions have a 100% track record of being wrong.
  4. 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:

Figure 1. Y-axis is the annual percentage growth in petroleum liquids demand.
Figure 2. US Energy Information Administration (EIA) 2019 global petroleum liquids demand forecast.

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.


Figure 3. AEO crude oil production forecasts vs actual crude oil production.

Figure 4. AEO natural gas production forecasts vs actual production.

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.


Figure 5. Selected AEO forecasts vs actual oil production.  Note that the shale “revolution” was not even in the range of technological possibilities as recently as 2008.  The 1998 forecast assumed that the US was past “Peak Oil.”

Figure 6. Selected AEO forecasts vs actual natural gas production.  Note that the shale “revolution” was not even in the range of technological possibilities as recently as 2008.  The 1998 forecast assumed steadily rising natural gas prices and failed to predict the collapse in natural gas prices triggered by the shale “revolution.”


“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.

Figure 7. “Extent of the Williston Basin with major North Dakota structures shown.” North Dakota Geological Survey.

The Williston Basin is an “intracratonic sedimentary basin” (AKA a bowl).

Figure 8. Structure map of Cretaceous Dakota Formation. Contours are feet below sea level. Sonnenberg 2017.

Figure 9. Cross section A-A’.
Sonnenberg 2017

The Williston Basin has numerous petroleum systems and is productive from the Cambrian through the Triassic.

Figure 10. Williston Basin stratigraphic column.
Sonnenberg 2017

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.

Figure 11. “Time-stratigraphic column of the North Dakota Williston Basin with the First and Second Order sea level curves of Vail, et al. (Modified from Fowler and Nisbet, 1985).” North Dakota Geological Survey.

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…

Figure 12. Structure map of the Mississippian Mission Canyon formation. Contours are feet below sea level. RMAG “Big Red Book.”

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.

Figure 13. “Total annual oil production in North Dakota” millions of barrels per year. North Dakota Geological Survey.

Then… A funny thing happened on the way to Peak Oil… A nearly ten-fold increase in Williston Basin oil production.

Figure 14. North Dakota crude oil production. EIA
Figure 15. Figures 13 and 14 merged at the same scale.

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.

Figure 16. SOURCE: CONTINENTAL RESOURCES INVESTOR PRESENTATION, 2011 (Motley Fool).

Compare the 1972 Williston Basin map to this recent map of the Bakken Formation. Bakken oil production is in green…

Figure 17. Structure map on top of Bakken Formation.
Sonnenberg 2017

Note that the highest density of Bakken wells and best production is east of the Nesson Anticline.

Figure 18, Bakken IP (initial production rate) in barrels of oil equivalent per day.

The best production is coincident with the thickest Bakken. Beets 2016.

Figure 19. Bakken isopach (thickness) map.
Sonnenberg 2017
Figure 20. Stratigraphic cross section. Datum is Lodgepole Formation.
Sonnenberg 2017

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.

Figure 21. Medium Oil ca.1993.

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.

Comments

  • 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…
Figure 22. Data laughing at you.

References

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

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118 thoughts on “Another Failed Energy Prediction: Peak Oil Demand

    • For the former, we can drain the historical pools of decomposed carbon-based life, and wait for them to refill. The pure scientist may be an advocate for petroleum extraction for this reason and no other. For the latter, we can infer to infinity, and beyond, but will never know the truth of origin, other than evolution begins in a scientific frame of reference at conception. Here’s to mom, dad, and unplanned parenthood.

  1. “…forecast that the global war on plastics will be the main factor in cutting global oil demand…

    This war is not yet won! I see no evidence of reduction of use of petroleum based products by all those little precious kiddy while doing strike to save the world. All I see is virtue signalling.

      • I am currently working on a process to use virtue signaling to turn a generator.

        I will be richer than Croesus as soon as I work out the kinks!

    • It is a shifting use of plastics. San Francisco just banned plastic straws, but provides free plastic needles.

        • Well, the luer hubs would be plastic, as would the needle guards. Or, if they’re using the small syringes with fixed needles, that’s quite a bit of plastic. There are plastic needles, but they’re typically referred to as spikes and used for IV connections not injections.

    • Not sure what difference it makes, as far as climate change is concerned, what the future demand will be for petrochemicals, because, well, other than hydrocarbon releases from manufacturing, they generally aren’t burned and release hydrocarbons to the atmosphere. Generally, they end up either being recycled or buried in landfills.

      As for making predictions, most people and systems aren’t very good at predicting the future.

      A decade or two ago, who seriously predicted the US would become the leading supplier of hydrocarbon products to the world in the late 2010s? Not very many … though there is always that proverbial stopped clock who ends up being right twice a day.

  2. Given the record of the Energy Information Agency and BP, was anyone publicly right in their predictions? One could write off the failure of BP to cautious securities lawyers, and the US government on pure green politics, but was anyone printing more accurate projections?

    • EIA’s failed predictions can simply be explained by the failure to grasp the magnitude of the Shale “Revolution” before it happened. The failed predictions of BP, Shell, Total and the company formerly known as Statoil are 100% virtue signalling.

      • David, you’re undoubtedly correct about BP, et al, and their failed predictions due to virtue signalling. However, my personal experience on Technical Advisory Group participation, for CONOCO and a variety of other companies, leads me to believe that “Think Tank” style groups within each company first work out the actual prediction, almost certainly at high accuracy, THEN the corporate types take over and convert the release into something politically correct. Remember, oil companies exist to enhance shareholder wealth, and if that means a little white lie here and there so be it. (Politicians, on the other hand, exist to enhance personal wealth)

        • The thing is that most predictions are wrong, in the sense that the aren’t exactly right. My experience is that higher precision predictions aren’t as accurate as SWAG’s… 😉

        • Ron Long
          March 12, 2019 at 3:13 am

          Ron this sounds remarkably like the way the IPCC santitises its technical reports to produce the infamous Summary For Policymakers!

      • What Shale “Revolution”? How revolutionary is to produce a lot of a product and sell it below the cost of production? Have you bothered to look at the free cash flows for the shale sector? It has been negative for a long time and given that production is now moving towards the more marginal areas it will never be cash flow positive. That means all of that debt that has been piled on will not be repaid and that the industry will collapse as only wells in areas that are productive can take place.

        It is time for both the Left and Right to give up on illusions and see things as they truly are. Just because human ingenuity will solve energy problems it does not mean that economic oil production has not yet peaked. After all, whale populations are still a long way from where they used to be even though petroleum products could be substituted for lighting purposes. And on the right, it is time that we looked at the economic reality and attributed the shale illusion to the Fed’s liquidity injections. There hasn’t been any positive free cash flows and no dividends. That should tell you something.

        • This is the “revolution”…

          Shale is not a panacea. It’s not easy to make money in this business. It never has been and it never will be, however…

          Continental Resources, the leading Bakken player, has had positive operating cash flow every year since 2014 and three straight years of positive free cash flow 2016-2018.

          EOG Resources, the leading shale player nationwide, has had positive operating cash flow every year since 2014 and positive free cash flow in 2014 and 2017-2018.

          Chevron, the top US oil producer and major Permian Basin player has had positive operating cash flow every year since 2014 and positive free cash flow 2017-2018.

          Very few oil companies of any kind were generating free cash flow in 2014-2016. $100+ oil made it difficult to reduce spending. The drop from $100-$30/bbl made it worse. However, the drop in prices created leverage to reduce costs, particularly rig rates and service company expenses. Everyone, conventional and unconventional players, ratcheted down spending from 2015-2017. Breakeven prices for the shale plays plummeted over this period.

          Over the last couple of years, E&P companies have become more efficient, forced to create investor returns at $40 – $50/barrel oil. Well productivity has improved as companies drilled longer laterals and used less proppant. After the crash in oil prices, oilfield services companies lowered their prices to compete for limited work. As oil prices recovered, the price of oilfield services was slow to catch up. Additionally, companies have more capital discipline than they ever did at $100/barrel oil prices.

          Even as oil prices have started to recover, companies are showing lower breakeven costs than ever before. As shown in the chart below, breakeven prices in the Midland Basin fell by 50% from $87 in January 2014 to $44 in September 2018.

          https://mercercapital.com/energyvaluationinsights/how-to-interpret-breakeven-prices/

          The vast majority of shale plays are economic at $80/bbl.

          https://www.rystadenergy.com/newsevents/news/newsletters/EandP/eandp-newsletter-september-2018/

    • I prepared a plot of the historical oil price in 2018 dollars (available in the BP workbook), over the last 40 years, and the linear curve fit shows 1.8 % per year price increase. This implies a doubling every 40 years can be expected, taking the price to around $135 dollars per barrel (in 2018 $). That price is a barrier for poor countries which can’t afford it.

      Another interesting point is that increases we see are mostly very light crude oils, natural gas liquids and condensates. And this isn’t about to change because we don’t have the ability to produce a medium crude from a ‘shale’ and make money. This explains why the US exports very light crude and condensate and imports crude oil: the refineries don’t do very well refining the oils produced from ‘shales’ and prefer to feed a mix, importing more expensive medium crudes to make sure they get the right product slate.

      It’s also important to note that IEA and other forecasts include natural gas liquids as ‘oil’ or ‘petroleum liquids’. This NGL stream is growing at a faster pace than crude oil and condensate. And a lot of it is used to manufacture plastics, which means it’s not released as CO2. This brings up the need to change the way CO2 emissions are estimated when we look at the future, which are bound to be much lower than estimated if one assumes what we are producing is crude oil and stabilized condensate. This later stream (the refinery feed) is growing at a much slower pace. And thus we can see different “peak oil” predictions because what the authors use different methods to define oil, and also have differences in their estimated price forecasts, as well as the price range which stops demand from growing.

  3. I worked for BP in the 1960s. At one point, we had a presentation from experts from the London office who forecast the price of crude oil 20 years out at $80 a barrel. At the time, oil was trading for two dollars a barrel. It sounded ridiculous to me, but in retrospect, they weren’t far off.

    • Wrong oil price predictions in both directions are a dime-a-dozen.

      “I have said that in my lifetime, I don’t think I’ll ever see $10 natural gas again,” he says, “but I do think we may see $8. I think you’re looking at $100-plus for oil forever.”

      T. Boone Pickens, May 2015

      Oil (Brent)bottomed out at ~$38/bbl in early 2016 and…

    • You’re not *the* Robert Ballard, are you?

      If you are, I have a book I would like to have autographed…

      • Sorry to disappoint, David, I am indeed *the* Robert T Ballard. Born to my home 1/4 mile from the beach and Buzzard’s Bay; our ships past as Robert D. moved to the coast and I to the mid-west. I keep a jar filled with sand on my desk.

  4. Excellent article David.

    Four thick salt layers where seas dried up.
    You are absolutely right, David. Any one of those events today would be blamed on CO₂ and evidence of Earth’s certain doom.

    “BP’s forecast that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected.”

    Somebody, or some people, in BP have an absurd belief regarding how much plastic is used in those plastic bags and straws banned by daft localities.
    Or does BP have investments in CNC machinery where BP plans to manufacture many plastic pieces in steel, or wood, or paper mache.

    • If you convince the “woke” folks on Wall Street thst peak demand and our salvation from Gorebal Warming is just over the horizon, pepper it with calls for a csrbon tax, spend a pittance on green schist and use the word “sustainable” a lot… they let you get on with your business.

  5. OK, I do not get this at all.
    “BP’s ‘Peak Oil’ Demand Prediction Falls Flat”
    With this title, you might think this was something about Peak Oil, or something.

    Then we see this:
    “Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030″
    OK, let’s break it down.
    World oil demand will continue to increase. Petrochemicals will be one third of that increase.
    All they are really saying is that petrochemicals will increase their market share. This is a totally reasonable forecast. As the world at large continues to modernize, consumption of plastics and other high-tech engineered materials will proceed at a somewhat accelerated pace.
    Not altogether that dramatic a forecast at all.

    The whole rest of the article did not really say much of anything at all.
    ??????????
    So what is all this noise about “Peak Oil”?

    @ ALLAN MACRAE
    Trouble with your keyboard, again?
    Have you tried hitting it with a hammer?

      • From the BP Energy Outlook document:
        “Much of the narrative in the Outlook is based on its evolving transition scenario. This scenario and the others considered in the Outlook are not predictions of what is likely to happen; instead, they explore the possible implications of different judgements and assumptions.”

        OK, so they are playing “What If”.
        And:
        “85% of the growth in energy supply is generated through renewable energy and natural gas, with renewables becoming the largest source of global power generation by 2040.”
        {OMG – on that renewables claim, but never mind.}

        And finally:
        “Demand for oil grows in the first half of the Outlook period before gradually plateauing, while global coal consumption remains broadly flat.” (by 2040)

        If that is a claim about “Peak Oil”, it is on pretty thin ice, and pretty tame, regardless.

    • OK, I do not get this at all.

      Indeed you didn’t. It’s not about “peak oil” as you wrongly believe, it’s about “peak demand for oil” as seen in this relevant quote:

      BP’s forecast that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected

  6. Oil demand will only increase given demand history. Trying to reverse the demand is a fool’s errand. All the virtue signalling in the world won’t change the fact that people prefer and want prosperity.

  7. I doubt China got the memo on plastics.
    After all, China IS the world’s “Cheap-plasticshit”R”us.”

    • no China is pushing the “memo” to try an con the rest of the world into not making plastics so they can be the only supplier. Their playbook is obvious its shocking how few see it. Same reason they play the climate change game with the west.

  8. Sometimes predictions are self serving.

    GM is moving automobile production to Mexico and closing plants in America and Canada. Their excuse is that they are pivoting to electric cars. Hmm. Ford dumped most automobiles without employing that excuse. Maybe GM is lying about its motivations.

    • The same people who are willing to drive all over town to save a few dollars on groceries, get upset when companies do the same thing.

    • Honda just announced it is moving out of the UK… one of the reasons given being the change to electric cars…

      ‘We have to move very swiftly to electrification of our vehicles because of demand of our customers and legislation’ said its European head.

      (there might have been another reason too)

      • “The first of them is that only a few months ago Japan and the EU signed their free trade deal, meaning tariffs on car exports from Japan are now being eliminated, alongside a host of other trade barriers.

        Suddenly, the economic barriers that might once have persuaded you to locate your plant in the UK have evaporated.”

    • It’s a stratigraphic, rather than structural cross-section. It is flattened on the Lodgepole Formation, which forms the seal above the Bakken. It shows where the Bakken is thickest in a vertical presentation.

      375′ is the combined maximum vertical thickness of the Bakken and Three Forks formations.

  9. As outstanding a presentation as this is, I believe that natgas will eventually overtake oil in future years.

    As these ‘unconventional’ methods become the conventional, the physical properties of gas (it simply flows) will show its advantages vis a vis recovery of a viscous fluid travelling two miles sideways and 2 miles vertically through tubing the size of a man’s fist … for several decades, no less.

    The amount of gas available in the Appalachian Basin alone is almost unfathomable.

    When the advances in MOF technology (Metal Organic Framework), mature, CNG-fueled cars will be able to be filled right at a house’s residential supply.
    That time is rapidly approaching.

    Again, a great article.

    • That and the fact that the natural gas resource potential is about an order of magnitude greater than crude oil.

    • You will need a big rethink of the ICE if you plan to run anything but wimpy cars on natural gas. I had an F-250 that could switch between propane and gasoline. On propane it couldn’t get out of its own way, and if I ran on propane too long, the gaskets would leak when I switched to gasoline. What a mess.

      With the correct fuel to air mass ratio you simply cannot put much fuel mass into a small cylinder; hence small heat input per stroke. Natural gas engines run best as large, low rotation speed movers for big compressors.

    • For transportation uses, gasoline, diesel, and jet fuel are the most concentrated portable energy resources now available to us. What are the prospects for the future economic conversion of natural gas into gasoline, diesel, and jet fuel?

      The technology exists, but what factors would influence the long term economics of converting natural gas into conventional liquid fuels; e.g the long term supply of natural gas, the price of natural gas, the cost of conversion, the future supply of competing stocks of crude oil, the price/demand elasticity of gasoline, and so on.

  10. The oil companies are going to have to start investing in the offshore business soon if they want to meet the demand. They’ll also have to start attracting people back into the industry because at the moment it’s about as bad as i’ve ever seen it. Highly experienced people are ageing rapidly…

    • I know I’m fracking older than schist… And I’ve been working the area around one field in East Cameron, South Addition for four different companies since 1988. The first 3d I ever worked and first offshore well I ever drilled was on East Cameron 346… I figure I can’t retire until that platform retires… 😉

    • I’ve worked the Gulf of Mexico since 1988… But I’ve only had to go offshore one time.

      Back in 1990, Enserch was drilling a well on Mississippi Canyon 441. We were using the Zapata Lexington semi. As a grophysicist, I rarely had any well-site opportunities. However, we ere running a VSP on the MC 441 well and the boss wanted a geophysicist out there. My hard hat had expired, so I had to borrow one and I had to go buy a pair of steel-toed boots. I flew from Dallas to New Orleans, rented a car and drove to Port Fourchon. Since MC 441 is only a 3-hour boat trip, we weren’t running a helo. So I rode the crew boat with the Schlumberger logging crew. When we arrived at the rig, they all put life jackets on and went out onto the back deck.

      I followed them out. And then watched a crane lower a basket from the helipad to the boat with a couple of righands hagging on to the sides. The Schlumberger guys tosseed their bags into the basket and climbed on to the sides. It then lifted them to the helipad. One of the righands noticed I didn’t have a life jacket and he handed me a work vest and said “Here put dis on” in a very Cajun accent. When the basket was lowered back to the boat, the righand tugged on my vest and said, “Dat be on upside down. Oh, it don’t matta, da fall’ll kill ya”… I survived my introduction to the Billy Pugh Basket… 😉

      • That’s a funny story, David!

        My dad told me a story about a Korean war troop who was being flown out of South Korea with a bunch of other GI’s and all of them had to put on parachutes for the trip, and this particular guy asked the loadmaster how to activate the parachute, and the loadmaster said, “Just hit this button right here” and pointed to the button located on the center of his chest at the junction of four straps that came over his shoulders and around his legs and met in his middle at a button.

        The trooper’s trip was uneventful, and when he landed in Japan, he asked the ground crew how to get the parachute off, and one of the crew reached over and punched that button and his parachute fell off! It was the release button, not the parachute activator. Reportedly, the trooper said he would kill that loadmaster if he ever saw him again!

        Thanks for all the great articles you produce, David. Always interesting.

  11. Figures 1 and 2 don’t disagree a lot. Figure 1, projected “growth of new demand” (can existing demand also grow?) of global “petroleum liquids” by BP, says .7% growth in 2017 decreasing to .3% growth in 2019. Figure 2, projected oil demand by EIA, shows growth of demand generally decelerating until 2026 and averaging looks-to-me-like ~1.3% per year from 2018 to 2022 and .25-.3 % per year from 2022 to 2026. Also, Figure 1 has a subheading of “Reference outlook, over the next 15-20 years”, while having a bar graph of three years. I suspect there should be additional explanations.

    • It would have been better if Mr. Clemente used a more direct comparison. If I have time, I’ll see if I can gin one up.

    • We used to have a large group of Cajuns who came up to Fort Wayne each spring to work in the house building industry here. The were an extremely practical bunch. And come November they all headed back down south. “The geese all fly south before all that snow falls, and I’m at least as smart as a goose”.

      ^¿^

  12. The primary feed stock for plastics is natural gas, and natural gas liquids. Alberta has a fairly large petro chemical industry and seemly endless supply of natural gas.

  13. As a summer engineering student I observed a well frac operation in AMOCO’s Beaver Creek, WY field in 1967.

    That was before they added horizontal drilling.

    Add plus 30 years of engineering design & O&M in climate wrecking power generation – using all the most popular designs and fuels.

  14. Plastic toys and many tools do not last like they did years ago. I still have many of the plastic toys I bought my kids in the 70’s. When I buy a plastic toy for the great grandkids today, very good chance it is broken before they take them home, and many are in the trash within a month or so. Has that FACT been factored into the predictions?

  15. David,
    When fracking became newsworthy, there was some concern expressed about the shale plays declining sooner and more steeply than conventional oil wells. I haven’t read much about that lately. What is your take on the longevity of shale plays?

  16. Getting to my personal bottom line, this is all good news; I’m scheduled for a 525hp (0-60 about 3.6 sec) 2020 BMW M550 in Oct 2019…

    No, I don’t NEED this; yes I will drive responsibly; and I want it because I want it.

    Zoom Zoom (apologies to Mazda).

      • We haven’t reached “Peak Horsepower” yet. I saw an automaker offering a 700 H.P. Mustang this year.

        It used to be that 425 H.P. was a lot, but that’s in the rearview mirror now! It’s good to know we will have plenty of gasoline to power these cars. Low-power, economy models need not apply.

  17. Thanks David.

    My favorite prediction is “Peak Copper.”
    https://en.wikipedia.org/wiki/Peak_copper#History
    In 1924 geologist and copper-mining expert Ira Joralemon warned:
    “… the age of electricity and of copper will be short. At the intense rate of production that must come, the copper supply of the world will last hardly a score of years. … Our civilization based on electrical power will dwindle and die.”[3]

    These sorts seem to be far more numerous than the Julian Simon types. ==> “The Ultimate Resource”

  18. I first noticed something odd was going on in fossil fuel production when any semblance of a relationship between NG and Oil prices broke down in 2009/2010.

    Gas is priced per million BTUs. A barrel of oil is ~6 million BTUs. In the 1990s Oil ran $15-20/bbl. and gas was $2-3/MBTU. In the early years of the 21st Century, oil and gas prices both trended up.

    In 2005, amidst cries of gas shortage gas went over $13/MBTU, and oil went to the 60s. See that relationship. With the Iraq war on, oil prices spiked in 2008 ($140 in summer 2008), but gas prices were pretty high too (almost $13 at the same time). Then the Panic of 2008 kicked in and smashed all commodities prices.

    In early 2009 both bottomed out Oil around $50 and gas was under $4 at the end of winter 2009. Then oil went back up, hitting $100 in early 2011. And gas stayed under $5. The price/energy relationship was way off.

    The most recent oil price regime kicked in in q3-4 of 2014 when oil dropped from $100 to $50. Right now, $50 seems to be a stable number for oil. But, Gas has stayed well under $5 closer to $3 during this entire time.

    The price ratio is still way above the energy ratio. Will they reconverge? If so will oil come down? or gas go up?

    Price data:
    https://www.eia.gov/dnav/pet/hist/RWTCD.htm
    https://www.eia.gov/dnav/ng/hist/rngwhhdm.htm

    • The issue is that you are looking at one country, the USA. Gas is a lot harder to export than oil, so it tends to be cheap in countries that produce it, particularly if production has risen recently.

      I expect USA gas prices to rise as facilities to liquefy it for export expand; however, I expect it to remain cheaper than oil on a per BTU basis.

    • There was a time when a barrel of oil cost about 6 times the price of one thousand cubic feet (mcf) of natural gas. Shale disrupted this relationship in North America.

      As BillP points out, oil is much more fungible than natural gas.

  19. I have heard it said that it is ftight dolomtes within the bakken rather than te shale per se that is the bakken fraccable reservoir most organic rich shales seem a bit plastic -would be like fracking chewing gum.also what need for a geophysicistin fracworld?

  20. I recall as a young person long ago, being taught that oil came from dead animal and plant matter, plus heat and compression Is that true, or is there another source of oil, such as continuous generation from deep down, driven by the heat energy of the molten core of the Earth ?

    If the latter then as we learn more about the composition of the crust, we may find that the use by us of oil and natural gas is almost unlimited. Plus of course it would mean that oil and gas are “Renewables”

    In regard to the use of plastic. We should explain to the Greenies that we now live in a plastic world. Its not just throw away plastic bags at the supermarket, as Coles a supermarket chain says, “Save the World, one bag at a time” or plastic straws and cups, its just about everything, from carbon fibre composites to item such as all electronic goods, PC’s TV’s etc. Its a plastic
    world, so if we are to be 100 % committed about getting rid of plastic, then its back to before “Bakerlight,” the wonder substance of the 1930 tees.. Radio cabinets were made of it back then.

    Welcome to the 18 the century.

    MJE

  21. One of the things this fascinating article mentioned was an assumption that the world would reach 10 billion people. I really wonder if that is going to be true, even without the eco-loons killing millions with their corrupt and insane energy catastrophe crash plan. It seems to me that there is a more than fair chance the drop off in population increase is going to be even faster than the predictions of the excellent Hans Rosling.
    Tough game this prediction business, as the increasingly hissy fit greens are discovering.

  22. 1/. Oil represents a store of energy that was historically created (depending in who you believe) by geothermal or solar energy.

    2/. The amount of geothermal or solar energy falling on the earth given the conversion efficiency of biomass, is insufficient to replenish the oil we are burning.

    These are, if you believe in science AT ALL inescapable FACTS.

    3/. The corollary is that therefore no matter how big the oil reserves are, as yet untapped or undiscovered, fossil fuel has a limited life at current burn rates.

    4/. The argument amongst rational minds is therefore not if ‘peak oil’ will occur, but when, and how to meet the challenge.

    5/. ‘Renewable energy; which derives us energy from the same place that fossil fuel does but without storage, is as handicapped as the fossil fuel is. It too cannot be a long term solution and indeed running the numbers it isn’t actually a solution at all.

    6/. Likewise Malthus was not wrong, just out by a few centuries.

    7/. There will be peak oil. There will also likely be peak population, since exponential expansion of humanity and its use of energy is simply not possible on a finite planet, receiving finite energy from the sun, and containing finite resources of energy.

    8/. No energy is renewable, Science if correct tells us that all the free energy there ever was or ever will be, was contained in the big bang: Life is surfing the shock wave of entropy it created, and when that runs out, so will life.

    9/ The biggest resource we have left available to us is nuclear energy. That buys us a few thousand years. Renewables actually hasten the collapse of civilization and coal and oil have at best a couple of hundred years of rising prices.

    Fracking and unconventional oil have bought us time, but at a price – the price of ever higher oil prices in real terms.

    Oil costs more and takes more energy to extract. It is already way higher per unit energy than the cost of uranium extraction and purification.

    That we are not using nuclear power to do everything it can do better than hydrocarbons is a tribute to the power of the oil industry and geopolitics to demonize it to the point where running a reactor profitably is impossible under current Draconian regulations.

    Go figure…

    • Mostly correct.

      However…

      Crude oil is the product of both solar and geothermal energy.

      Crude oil is not getting more expensive…
      inflation adjusted oilhttps://inflationdata.com/articles/charts/inflation-adjusted-oil-prices-chart/

      It’s not the oil industry that’s demonizing nuclear power.

      “Peak Oil” will occur when we’ve produced about half of the recoverable resource. We’ve produced about 17% of the recoverable resource.

      Malthus will never be right because something better than oil will emerge before Peak Oil becomes a problem.

        • It’s a combination bad policies, supply and demand… complicated by the inelasticity of both supply and demand. The most recent peaks were due to demand growing faster than supply. During these periods, OPEC’s excess production capacity gets drawn down, driving prices through the roof. However, the price spikes tend to curb demand and the cycle goes on.

      • So you believe that an infinite number of humans can populate a finite sized planet?

        So you believe it takes less energy to extract a barrel of oil now than it did 50 years ago?

        So you believe teh oil and gas industry are firm supporters of Nuclear power?

        Strange…

        • Since I can’t resist burning down straw men…

          I never even suggested that Earth could support an infinite number of people. It can easily support 7 billion and will probably support the projected maximum population of ~10-11 billion people.

          I never said that it takes less energy to extract a barrel of oil now than it did 50 years ago. I never even hinted at EROEI because it is a totally irrelevant metric. It doesn’t matter how much energy it takes to extract, refine and transport fossil fuels. EROEI (Energy Returned on Energy Invested) is even less relevant than AGW and Peak Oil. I don’t spend energy to fill my tank. I don’t give energy back to the gas & electric companies in exchange for them being nice enough to heat and light my home. My company doesn’t drill for oil & gas to make energy.

          I spend money to fill my tank. My company drills wells for oil & gas to make money. My gas & electric bills are paid for with money. My pay check, ExxonMobil & Shell credit card statements and checks to the gas & electric companies aren’t denominated in joules, kilowatts or btu – They are denominated in $.

          I don’t give a rat’s @$$ if 1 barrel of amoeba farts uses less energy to produce than 1 barrel of crude oil… Because the barrel of amoeba farts costs $1,100 and can’t be produced in sufficient quantities to be waiting for me at the Exxon or Shell station when I need it.

          If oil companies (or any businesses) used EROEI to guide their investment decisions, they would go out of business (unless the gov’t was footing the bill).

          I never said that the oil and gas industry are firm supporters of Nuclear power. You made the baseless accusation that the oil & gas industry was demonizing nuclear power. Apart from the API’s opposition to Energy Secretary Perry’s plan to bail out failing coal and nuclear power plants, I have never seen a hint of industry hostility towards nuclear power. The AAPG even has an Energy Minerals Division, which includes nuclear power…

          ♦ Uranium (nuclear minerals) – 70 new reactors are under construction in 13 countries and 160 sites are under development, most in Asia.

          U.S. production of uranium was the highest since 1996. Expenditures for land, exploration, drilling, production and reclamation were up 111 percent in 2012 over 2011, and 11 uranium mines are operating in Texas, Wyoming and Nebraska.

          China is developing as a major customer for uranium to fuel 28 new nuclear reactors (and more than 120 are in development).

          The U.S.-Russian agreement to downblend weapons-grade uranium from Russian warheads expired in November.

          Greenland and Mongolia are moving toward development of rare-earth element resources.

          https://explorer.aapg.org/story?articleid=3800

          Nuclear Is Part of Energy Equation Price Boosts Uranium E and PMay 2007 Michael D. Campbell
          There is general agreement on the necessity of transition to alternative energy sources, including nuclear power.

          The resurgence of the nuclear-power industry has stimulated a significant rise in the spot market price of yellowcake (U3O8). By the end of 2006, yellowcake prices rose above $72/pound — more than doubling over the previous 12 months — and are presently about $91.

          Although the average price involved in long-term contracts for deliveries in 2005 was less than $15/pound, as the contracts with the nuclear utilities mature, major price re-adjustments upward will certainly occur.

          Because of the price, there is a resurgence of uranium exploration and production activity.

          Discovery of new uranium deposits is resulting from following extensions of previously known, shallow deposits that were mined by open-cut methods (see figure 2). The oxidized tongue of sandstone shown in figure 2 as orange and grayish orange is represented in figure 1 as a leached, light gray color. The ore zone is medium gray surrounding the oxidized zone.

          Using the geologic methods developed in the 1970s (illustrated in figure 2), the success rates are going up.
          […]

          https://explorer.aapg.org/story/articleid/12570/nuclear-is-part-of-energy-equation

        • Leo

          No one believes that. but we are also now where near the “breaking/tipping point on either” and by the time we are (assuming we don’t fall down the socialist rat hole) we will, as the market always does, come up with solutions that actually solve the problems and not just make people feel good about themselves.

        • Leo, your strawmen look nothing like anything anyone has said here. Perhaps it’s time to get out of the strawman making business. Have you given learning to code a try?

    • Don’t be so myopic Leo. Most of the oil formations were laid down when there was much more CO2 in the air and the sun was a bit closer. The biosphere was several orders of magnitude larger than it is now. At the same time many times more carbon was laid down in coal beds. The deep coal beds haven’t even been touched. We’ve only tapped the most convenient ones.

      Biomass isn’t the only source of carbon in rocks. Probably the most abundant rock is limestone of various kinds made up of carbonates. It takes more energy than we currently get from the sun, but the same sunlight is available in open space at much higher energies. We just haven’t looked into exploiting space. The obvious solution is to go into space to mine the asteroids using, as much as possible, power derived from the sun or nuclear reactors.

      We’ll pass “peak oil” when we decide to use some other energy source, likely nuclear power. If the Greens are smart they will realize this fairly soon. Another option is using carbon based fuels electrolytically. That avoids the efficiency barrier inherent in any heat engine. We just don’t know how to do it yet.

      Malthus was indeed right with his limited theory. “all else being equal” we will run out of oil or overpopulate the earth. But “all else” never stays the same. Resources are stuff we can use economically for out purposes. He apparently didn’t understand economics at all.

      The entropy death of the universe is a long way off, if it ever occurs. The Big Bang is still a theory. The theory is very incomplete.

      I agree 100% about nuclear power. Perhaps when people realize that carbon based plastics are more useful as tools than burning oil they will decide to change to nuclear. Right now nobody wants to give up the easy life of fossil fuels and smart phones.

    • “Peak’ hydrocarbon production is dependent on what is the source of the hydrocarbons. There is another option for the source of hydrocarbons than solar (plants) or geothermal (surface water or something else converted).

      The same comment applies to Uranium reservers.

      I totally agree there is a limit as to maximum population.

      Are you aware there is as cheap as coal, mass producible, no catastrophic failure modes, nuclear reactor design?

  23. Here in the UK we have a type of food called ‘black pudding’ , when I was little it came in an edible skin (think haggis).
    At the beginning of this year I bought a bunch from our local supermarket to try it out, for old times sake. I bought two brands and all was well. for half a day.
    When the pains started, I did some research and found that one of the brands has a plastic skin.
    On the second day, I couldn’t do any more research (its hard to read when your eyes are watering and your stomache and intestines are trying to murder you)
    The third day was the worst although it was a bit of a blur, throbbing head and shaking hands and the sound. Oh the sound.
    The sound of my daughter and wife laughing. My daughter (a paramedic) laughed so hard she dropped her mobile phone into the washing machine. My wife (a nurse) claimed to ‘have warned me’
    I don’t remember any warning. So much for the caring professions.

    Its all past now, if you’ll pardon the expression, but remember folks. Take the wrapping off you food before you eat it. Esp the plastic bits.

  24. Educational. The T Boone Picken’s 2015 quote about oil prices is very good. Even those who should know often do not know. Good thing we didn’t make T Boone the Minister of Energy in a centrally planned economy. Of course if we did run things that way he would have worked his butt off to make his predictions come true.

    • Alex Salmond of the SNP famously based his economic forecasts for an independent Scotland on an Oil price of $110 pb.
      Even when the price fell to 31 dollars he was adamant that the high prices would return.

    • The *best quote ever* was of the late, great Aubrey McClendon on August 1, 2008…

      We think gas prices will stay in this $9 to $11 range, there’ll be times like in July when they’re above it, there’ll be times when they’re below it and of course the weather will matter a lot as well. But we’re pretty confident that much below $9 you’d see a drop off in drilling activity particularly among the conventional drilling and then those pretty aggressive 35% to 40% first year declines are going to kick in and rebalance the market.

      I saw something the other day where some analysts had come up with production in 2010 was going to be up by something like 8 to 10 BCF a day and gas prices were going to be $6.25. That kind of analysis I think can only come at the dangerous intersection of Excel and PowerPoint, it can’t happen in reality.

      https://seekingalpha.com/article/88789-chesapeake-energy-corp-q2-2008-earnings-call-transcript?page=-1

      Natural gas prices have been below $6/mcf since December 2008 and below $4/mcf since August 2011… https://www.eia.gov/dnav/ng/hist/n9190us3m.htm

  25. It’s fascinating that many of the new “renewable” technologies require a lot of petroleum products. I keep thinking that at least some of the progressive agenda will have to give way to economic reality, like the desire for cheap consumer products .

  26. Thank you Mr. Middleton.

    I always enjoy your knowledgeable and thorough articles for a very simple reason: I usually learn something I didn’t know.

  27. “Peak Oil” has always been the only reason I could ever extract from the noise on Global Warming.
    Nobody wants to be told that “there is no more”, but with proper preening, you can appeal to the “Save the Earth” mentality and drag most along.

  28. I remember these not so brilliant predictions from IEA in Paris.

    https://www.jwnenergy.com/article/2016/7/iea-sees-record-middle-east-oil-supply-us-output-slumps/
    Output from all countries outside OPEC will tumble by 900,000 barrels a day this year, the largest decline since 1992, before recovering by 200,000 barrels a day in 2017, the agency predicted.

    https://www.nationalobserver.com/2016/02/23/news/iea-slashed-spending-drillers-could-lead-price-spike

    Nobody saw the shale-oil boom coming, and it has changed the market, said Neil Atkinson, who edited the IEA report released Monday.

    https://www.foxbusiness.com/markets/harold-hamm-dismisses-iea-shale-prediction

    The International Energy Agency (IEA), Paris-based global research and analytical firm supporting 29 member countries, released an updatedmid-term outlook Opens a New Window. for oil through 2020. In it, the IEA is expecting U.S. shale to basically peak at approximately 9.7 million barrels of oil in 2016, and then stay mostly flat into 2018, before resuming a mild uptrend to around 10.3 million barrels of domestic oil in 2020.

  29. We are asleep. The world of hydrocarbon energy is changing.

    There are immense amounts of ‘natural’ gas.

    This single 40 billion dollar, Canadian, ‘natural’ gas terminal will increase the world supply of natural gas by roughly 10%.

    https://www.nrcan.gc.ca/energy/natural-gas/5683
    https://www.lngcanada.ca/wp-content/uploads/2016/10/NSR02202-LNG-Project-Overview-Factsheet-Refresh-WEB-AWv1_FO.pdf

    “Canadian LNG Projects
    Eighteen LNG export facilities have been proposed in Canada – 13 in British Columbia, 2 in Quebec and 3 in Nova Scotia – with a total proposed export capacity of 216 Million tons per annum (mtpa) of LNG (approximately 29 Billion cubic feet per day (Bcf/d) of natural gas). Since 2011, 24 LNG projects have been issued long-term export licenses. Canada’s only operational LNG terminal (an import terminal) is Canaport LNG’s regasification import terminal located in Saint John, New Brunswick.”

    https://www.lngcanada.ca/wp-content/uploads/2016/10/NSR02202-LNG-Project-Overview-Factsheet-Refresh-WEB-AWv1_FO.pdf

    https://yearbook.enerdata.net/natural-gas/world-natural-gas-production-statistics.html

    “United States 767 bcm
    Russia 694 bcm
    Iran 209 bcm
    Canada 184 bcm
    Qatar 166 bcm
    China 147 bcm
    Norway 128 bcm
    Australia 99 bcm
    Saudi Arabia 98 bcm
    Algeria 95 bcm
    Turkmenistan 81 bcm
    Malaysia 73 bcm”

    “Gas production rebounded in 2017 (4%) after three years of slowdown

    • Gas production should increase because there should be many conventional targets that should offer cheap energy for many years. The problem is that shale gas is not economic.

    • I just love how they had no idea whatsoever how much oil there was just 50 years ago because the technology was so bad. The copious amounts of stupid I find extremely entertaining. Somehow, they always know exactly when we’re going to run out and how much money we have to give the UN to save ourselves. Genius! The BP shills know how much smarter they are then all those thousands of pesky scientists who disagree with them. They need some free marketer repellent.

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