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.
Jude Clemente’s energy articles on Real Clear Energy and Forbes are always worth reading.
Key takeaways:
- 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.
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.
The Williston Basin is an “intracratonic sedimentary basin” (AKA a bowl).
Sonnenberg 2017
The Williston Basin has numerous petroleum systems and is productive from the Cambrian through the Triassic.
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.
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…
Sonnenberg 2017
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.
Sonnenberg 2017
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.
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…
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
None of this is going to happen because the Synod of the Church of England is disinvesting in fossil fuels.
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
http://www.petroleum.co.uk/formation/
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.
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…
https://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.
notice the peeks happen during periods of bad political policy making not because of a supply 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 @ur momisugly$$ 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…
https://explorer.aapg.org/story?articleid=3800
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?
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.
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…
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
I hereby resolve to use the word “intracratonic” ten times today.
Ok, that’s one.
Working the Gulf of Mexico… cratonic-anything isn’t in common usage.
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 .
Just read this ….
https://www.yahoo.com/finance/news/shale-brink-m-oil-majors-210000486.html
My prediction is that ‘devastating and catastrophic predictions’ have yet to peak.
As infinite as virtue signalling.
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.
I usually learn a lot by writing them. A week ago, I knew next-to-nothing about the Bakken… 😉
“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.
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.
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.
Shale gas is economic. Conventional gas not so much… You can’t give gas away in the Gulf of Mexico (only slight hyperbole).
The breakeven price for the Marcellus averaged $2.15/mcf in late 2018…
Associated gas produced from the Permian Basin was actually economic if an operator had to pay to dispose of it.
Cabot Oil & Gas, the top Marcellus player, has generated positive operating cash flow every year since 2014 and positive free cash flow from 2016-2018.
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.
Could someone in simple language please explain to me just how the
oil and gas drillers manage to tell the drill bit how to change direction ?
MJE
Copious amounts of profanity… 😉
Gyroscopes, whipstocks, mud motors and elbow grease…
https://www.rigzone.com/training/insight.asp?insight_id=295&c_id=
David
You left out the vulgar and obscene! 🙂
Thank you David.
MJE