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The future for oil…

Written By: - Date published: 9:50 am, April 30th, 2010 - 48 comments
Categories: economy, transport - Tags:

Jarbury at  Auckland Transport Blog wrote this excellent post. Reproduced with permission.

The graph below shows a comparison between the world’s likely demand for liquid fuels (including oil) over the next 20 years (the blue line) and the various components that will make up the supply of liquid fuels over that time. The emerging gap is alarming, as ‘Unidentified Projects’ would actually be more accurately described as ‘unfulfilled demand’ meaning quite literally a demand for oil that will not be able to be met.

Perhaps what is most interesting about this graph is that it doesn’t come from a peak oil thinktank or an environment group it comes from the USA Department of Energy. It is their official forecast for the supply of liquid fuels over the next 20 years. Forget wondering when peak oil might happen in the future the answer to that question is: it’s already happened.

As anyone who has ever done even the most basic study of economics would know, what happens when demand is greater than supply is that prices go up. This prices enough people out of the market to bring the level of demand back down to what is actually supplied as you can’t exactly consume something which doesn’t exist. An interesting analysis of the possible effects of peak oil can be found here (Hat Tip, AKT).

From the same source it’s interesting to look at how the split of where that oil goes is estimated to change over the next 20 years:

Transportation is projected to become an increasingly large consumer of liquid fuels over this time largely due to rising car ownership in developing world countries. This is likely to place even more pressure on the supply of transportation-grade fuels potentially pushing up their price even further.

So what does all this mean? Well for a start we can bank on petrol being a heck of a lot more expensive than it is now in the relatively  near future. Secondly, as we get towards 2030 it might actually be somewhat difficult to even secure a reliable supply of liquid fuel for our vehicles as there will be such a huge gap between the high level of worldwide demand and the available level of fuel supplies. In short, the days of the petrol-powered vehicle are limited.

Now the answer may be electric vehicles, but they still require a lot of oil in their manufacturing while the roads they drive along also require a tremendous amount of oil to build. Furthermore, electric vehicles are incredibly expensive at the moment and it may be a while before their prices truly come down. Given that last time petrol prices cracked $2 a litre here in New Zealand traffic volumes fell quite significantly, one does wonder how sensible it is to be spending $11 billion on state highways over the next decade.

48 comments on “The future for oil…”

  1. Funny how Shell wanted to sell it’s New Zealand pump stations eh?

    They wanted to because the market was as they stated “mature”.

    Better to get out before the collapse with a big chunk of money than to be stuck with network of polluted useless pump stations I guess.

    Oh, and with the right to sell our own oil back to our own Stations.

    • Lanthanide 1.1

      All of the major oil companies world wide have been pulling back on retail petrol stations. Actually this isn’t really a bad thing, as it frees up money and resources to focus on what they really should be doing, which is finding more oil.

      Two good peak oil websites:

      • Pascal's bookie 1.1.1

        I’m not sure. The oil isn’t really hiding as I understand it. The stuff we find will just be in hard to get to places, like a mile or two under water off the coast of florida….

        • Lanthanide

          Taken literally, yes, the oil isn’t ‘hiding’.

          What I mean is finding oil fields and developing them for extraction. They found those enormous oil fields off the coast of Brazil, except they’re the deepest in the world and 2nd in extraction costs to the Canada oil sands, and is likely going to be at least 10 years before any oil flows from them. That is what the oil companies need to invest in.

          • Draco T Bastard

            Quoting the referenced article:

            5. Demand will begin to outstrip supply in 2012, and will already be 10 million barrels per day above supply in only five years. The United States Joint Forces Command concurs with these specific findings. http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf , at 31. 10 million bpd is equivalent to half the United States’ entire consumption. To make up the difference, the world would have to find another Saudi Arabia and get it into full production in five years, an impossibility.

            Believing in the impossible is delusional.

          • Bill

            I has a question I has.

            If my memory serves me correctly, then in the 1920s or thereabouts it took one unit of energy input ( extraction etc ) to get 100 units of energy output from oil.

            Then it gradually dropped over time to about 7 units for every unit put in.

            And no matter how efficient extraction processes become, there will still come a point when the energy in/ energy out equation falls over. So finding fields (like the one off Brazil?) become exercises in futility.

            Anybody any idea how close we are to the point of oil extraction costing us energy? Or what depth or whatever would mean that extraction would cost energy?

            • Pascal's bookie

              Another problem with the deep hard to get at oil,
              is that as well as being hard to get out,
              it’s even harder to fix when things go wrong,
              which is in turn,
              something we can expect to happen more often,
              because it’s hard to get at because of the extreme conditions.

              What that means is what florida is about to find out.

      • travellerev 1.1.2

        With the HAARP installation is how they find oil these days and it is one hundred percent accurate. It also can be used to cause earth quakes and weather modifications.

        This a presentation of Dr. Nick Begich about HAARP. It is bad quality but still understandable. Angels don’t play this HAARP

      • Bored 1.1.3

        Hmmm ” frees up money and resources to focus on what they really should be doing, which is finding more oil”.

        That statement might be the right thing to do in the short term with any capital the oil companies have available BUT all it really does is delay the evil day. Might the capital be better used doing something longer term that helps the necessary transition from oil dependence?

        • Clarke

          It turns out that the Western oil companies aren’t really that interested in prospecting for oil given the risks and uncertain profitabilities. Both Exxon and Conoco-Philips are spending money on share buy-backs and producing windfall dividends for shareholders, in preference to spending the same money on speculative exploration. These are entirely rational responses from a shareholder perspective, but they rather undermine the idea that higher prices will automatically result in more discoveries.

  2. john 2

    If the Oil Age can be defined by an EVER INCREASING SUPPLY of OIL POWERING ever increasing Growth, by the constant supply of cheap fuel, which has been happening since the beginning of the 20c, The Great Oil Fiesta. And our Financial System has worked with Compound Interest and Fractional Banking and Fiat Currencies all based on this ever increasing Growth Paradigm based on expanding Oil supply. That Oil Supply is now going into terminal decline which means The Oil Age is OVER and we are now in the transitional phase to a much much lower energy supplied civilization.

    It’s urgent and vital for the survival of our society that the Government FACE UP to this reality NOW. Otherwise we will SUFFER even more than we have to already.

    [lprent: Please don’t


    It is noisy and disturbs my eyes. Disturbing sysops is hazardous to your freedom of expression. ]

    • Draco T Bastard 2.1

      lprent is, of course, speaking of your profligate use of caps. If you want to emphasise a point then use italics or bold. Instructions on how to do so are found in the FAQ.

    • Rich 2.2

      Also, nouns are not capitalised in the English language.

  3. LeeFluff 3

    I’m as big a proponent of peak oil as anyone, but I don’t think that this graph identifies peak oil as happening.

    It looks to me more like a standard business model of identified market requirements, and unidentified resources. I don’t think the intention is to say that the unidentified projects don’t exist; I think that the graph is merely presenting a case for further exploration and increased expenditure to meet this market demand.

    You are correct that peak oil isn’t suddenly going to happen on one day; peak oil is a market process whereby some users can no longer economically afford fuel for previously equable purposes.

    The only true identification of peak oil will come in a price forecasting graph, rather than an availability of fuel vs forecast requirements. There will come a time when the % expenditure per average household income becomes unsustainable… or a similar graph for government uses and %GDP (at a later more critical stage) – when this line takes an unacceptable gradient over time, then THAT will be the peak oil problem manifesting.

    • john 3.1

      The peak of Oil Discoveries happened in 1965, since then discovery of oil reserves has been in TERMINAL decline .Production peaks of the same fields happen usually about 40 years afterwards, circa 2005. There were blips delaying World production decline such as the North Sea and Alaskan Oil discoveries, both now in rapid decline. We are certainly past peak oil and, other than Deep Sea 10,000 feet down in the Arctic and equivalent extremely hard to get stuff, there’s nothing left to discover. Conclusion the “Unidentified Projects” Gap will NEVER be filled : TERMINUS of Oil Age.

      • Lanthanide 3.1.1

        Actually there is plenty of oil in the Canadian tar sands, oil shales and in heavy crude in the Orinoco. The problem is refining it cheaply, at a fast enough rate with low environmental impact. Technological progress is being made on these issues all the time.

        Again, the problem is not a “lack of oil”, it is a lack of readily available *cheap* oil. It is possible, although unlikely, that technological breakthroughs could unlock many previously uneconomical sources of oil (include algae, and biofules) and deliver them at cheap prices.

        • Clarke

          Technically, peak oil occurs when the peak flow in production occurs. The big challenge with any tar sands/heavy oil play is the flow rate, which means that even finding a gazillion barrels of the stuff may not make any perceptible impact on the global availability of finished oil products.

        • Bored

          Couple of points Lanthanide.

          Its actually a bigger problem than “cheap”. The real issue with tar sands etc is that there is a diminishing return for energy output (refined products produced) versus energy inputs to actually get the outputs (drilling, moving, refining etc). Tar sands quickly go into the negative energy return territory once you have got at the easy stuff. Unlike money where you can fudge things energy budgets work on set physical laws.

          Second problem with tar sands etc is the obvious one: you only get one shot at it. Which begs the question: by using them up are you not just avoiding the issue and delaying the innevitable?

          • Lanthanide

            Price is a function of energy content.

            Even negative energy content could still be worth producing, for example if you have a big natural gas field that is difficult to pipe/distribute anywhere, you could use it on-site to create oil from tar sands. Even if the resultant oil technically has a negative EROEI, because you’re using natural gas that would have otherwise not been used for anything, it is still worth doing. Consider it in terms of changing a less useful resource into a more useful resource; as long as the $ value of the final resource is more than the inputs, it’ll be done, even if the energy is technically negative. Obviously you’ll never get anywhere by taking the finished product and using that to create less of the same thing, the input energy must come from other sources for negative EROEI to work.

            If the marginal EROEI for tar sands starts at say 5:1, and the drops over time to 2:1, then the price will go up even if the total barrel output is still the same.

            And yes, obviously once you use up all the tar sands, there aren’t any left. The thing is that tar sands and oil shale reserves worldwide are estimated to be at least 2 trillion barrels equivalent remaining, so having access to them (at reasonable flow rates as Clarke pointed out) could extend BAU for a good 40-50 years, enough time for something like a hydrogen or electricity economy to built properly, and not in a hodge-podge muddle-through fashion as is likely to be the case.

            • Bored

              You are right that you can trade one energy for another, usually at a worse EROEI. The problem with the scenario is fairly obvious for extracting oil from tarsands. There just is not enough energy to dedicate to this process. Concurrent to oil running out we also have gas doing much the same, coal just does not cut the mustard for this, and biofuels would replace oil anyway. The best hope would be hydro electricity but then rather than the 40 years supply at current rates it would be a trickle for 400 years.

              If your aim is to extend the current energy economies lifespan through to transition to a similar energy based model good luck. There simply is not the necessary energy from alternative sources to support our current levels of consumption and population. That does not consider the other bedfellows of this issue, global warming, environmental destruction, species extinction, etc.

              I am certain that the US Dept of Energy people who wrote the report are aware of the tarsands and include it in the graph. The simple truth is we wont be able to replace energy one for one, we had better find ways of using what we have better and not wasting it trying to sustain an unsustainable paradigm. For some good current information that traces problems and possible solutions have a look at http://www.energybulletin.net/

      • Bored 3.1.2

        Good point John, to further this lets just add another equation in: economic growth and energy use are inextricable. If energy availability decreases economic contraction is inevitable. You can expect the usual suspects to fudge the numbers, the real point where reality happens will be seen in diminished production (economic output).

        • Lanthanide

          I don’t have figures or even links for you, but oil usage in Germany has been mostly flat for many years, while they have still grown their economy.

          However it is unlikely that all countries could simultaneously be faced with oil shortages and manage to grow; look at the fears of a domino effect with Greece recently.

    • Bored 3.2

      LeeFluff, if you Google Hubberts Curve you get a better picture of the methodology behind how the production matches discoveries over time. It explains a lot of the assumptions behind the graph.

    • jarbury 3.3

      The problem is that who knows what those unidentified projects will be. Most of the “likely” places where oil could be found have already been explored, and the remaining places are extraordinarily difficult/expensive to explore and then pump from. I have heard about enormous excitement surrounding a 20 million barrel find off the coast of NZ. Sure, at $80 a barrel that’s worth $1.6 billion. However, the world uses 80 million barrels a day, meaning that such a find will last the planet… oh about 6 hours.

      And that’s the problem really, we’re just using this stuff so damn quickly that no matter what we find, the need to pump so much oil a day is going to be increasingly difficult.

  4. ianmac 4

    Now or soon? But it does throw into relief the Government focus on roads rather than Public Transport. Electric Rail for instance? Increase in long term planning for Electricity demand? Road Lobby group must be powerful!

  5. Bored 5

    Nice post GUEST, might say a few of us have been cracking on like a broken record on this subject for a while. The normal response is a rebuff based upon the concept of “progress’ as expressed by the twin Gods of “markets’ and “technology’. These deities are they say going to save us.

    Begs the question of save us from what? Maybe our human propensity to destroy the environment in pursuit of ever greater consumption. You rightly point out that the allocation of enormous investment in future roads is a questionable exercise. I might add that electric cars won’t be driving them in anywhere near today’s capacity for a number of reasons that revolve around available energy inputs.

    Good luck with these posts, I for one would like to think that we might perchance reach a tipping point of awareness and willingness to take appropriate action prior to future events taking control out of our hands.

    • nzfp 5.1

      On 26 September 2000 “Guardian” reported “Gas find gives Palestinians new hope”. On January 8, 2009 “GlobalResearch” reported that the Gaza gas find “[r]eserves are estimated by British Gas to be of the order of 1.4 trillion cubic feet”. On 18/01/2009 Haaretz” reported “Israel`s largest-ever reserve of natural gas discovered off Haifa coast”. On February 18, 2009 “Oil in Israel” reported that the Haifa gas find reserves were estimated at “5 Trillion Cubic Feet”. On October 31, 2009 Tehran Times reported that “[c]onsiderable oil and gas reserves have been found in Khorramabad block, western Iran. […] The [National Iranian Oil Company (NIOC)] has recently discovered three oil and gas fields in Ilam, Fars and Khorasan provinces […] According to the Oil and Gas Journal, Iran’s 2008 estimated proven natural gas reserves stand at 948 trillion cubic feet (Tcf), second only to Russia”.

  6. nzfp 6

    On September 8, 2009 Bloomberg reported that “Russia is surpassing Saudi Arabia in oil exports”. On September 9, 2009 Tehran Times reported that “Russia is extracting more oil than Saudi Arabia, making it the biggest producer of “black gold’ in the world, figures show”. On the 11 January 2010 Guardian reported that”Gazprom has so much natural gas under the tundra of Siberia that its energy resources are equivalent to all the oil and gas fields owned by western energy companies put together”. On Sept. 5, 2006 MarketWatch reported that Chevron had discovered in the Gulf of Mexico’s Lower Tertiary formations which “hold 3 billion to 15 billion barrels worth of oil and gas reserves, rivaling discoveries made on Alaska’s North Slope back in the 1960s”. On 18 June 2007 BBC reported that “UK firm Tullow Oil has announced the discovery of 600 million barrels of light oil offshore from Ghana”. On the 29 June 2005 “The European Space Agency” reported that the “Cassini spacecraft has identified an intriguing dark feature that may be the site of a past or present lake of liquid hydrocarbons at Titan’s south pole”.

    • Draco T Bastard 6.1

      And that all means what?

      For example “hold 3 billion to 15 billion barrels worth of oil and gas reserves” sounds like a lot but, @15b barrels, is about half a years use at present levels. It’s also going to take time to bring online and, when it does come online, it’s unlikely to meet the production decline. So, it’s there but it’s not going meet demand, all it will do is push the use of oil products out another couple of years but the economy, which is based around oil fuelled perpetual growth, is still going to be in decline.

      • nzfp 6.1.1

        It means Oil and Gas finds are still being discovered and production is increasing and decreasing with the market.

        • Draco T Bastard


          Oil finds peaked in 1968. We started using more than we were finding in 1981. At this precise moment in time we’re finding SFA – the oil companies are so confident in not finding any they aren’t really looking any more. There’s a few places that may have a few hundred million barrels to add to the present reserves but they tend to be in out of the way places that are difficult, if not impossible, to drill. All this adds up to one thing: We’ve hit Peak Oil and there’s nothing we can do about it.

          • nzfp

            What’s a /facepalm?

            On October 31, 2009 Tehran Times reported that “[c]onsiderable oil and gas reserves have been found in Khorramabad block, western Iran. […] The [National Iranian Oil Company (NIOC)] has recently discovered three oil and gas fields in Ilam, Fars and Khorasan provinces […] According to the Oil and Gas Journal, Iran’s 2008 estimated proven natural gas reserves stand at 948 trillion cubic feet (Tcf), second only to Russia’.

            Seems there is a 41 year gap between 1968 and 2009.

  7. Draco T Bastard 7

    The future isn’t all that rosy – no matter how the NACTs will try to spin it. My guestimate of the next few years:

    1.) In the next 5 years the economy will stagnate in line with oil production. Global food production, which needs oil input, will go into decline resulting in famine in the poorest parts of the globe.
    2.) 5 to 10 years out the global population will start to stagnate as famine becomes normal for much of the world. Food riots and food refugees will increase political tensions especially around the Middle East, Africa, India and possibly Europe. Asia will have it’s own problems in regards to food and manufacturing. US military projection will decline resulting in a power vacuum. Although I don’t foresee a global war as a result of this power vacuum I do see local wars (wars are always about resources and the ones we have are about to go into terminal decline) extending on a global scale. NZ, being on the periphery, will have to hold it’s own and, although we’re not exactly resource rich we can maintain ourselves but others are likely to want the farms.
    3.) 10 to 20 years out is where things get fuzzy. Western high tech civilisation is in terminal decline but there will be pockets that can maintain that tech advantage. NZ is likely to be one such place if we manage to prevent ourselves from being overrun either by an invading country or refugees.

    As at this precise moment in time we need to plan for this rather bleak future. That means that we, as a nation, are going to have to develop high tech industry here, build up our own military hardware R&D, and stop selling ourselves to the highest foreign bidder. Basically, it’s time to stop the free movement of capital into and out of NZ and to stop relying on others to defend ourselves. And it’s time to stop immigration.

    • Bored 7.1

      Nice summary, practical actions are really needed now. Cant see the common garden dude and dudess in the street buying into the need until things clock them between the eyes. By then it may be too late, but heres hoping.

    • NickS 7.2

      1.) In the next 5 years the economy will stagnate in line with oil production. Global food production, which needs oil input, will go into decline resulting in famine in the poorest parts of the globe.

      Except for the fact that what we’ll likely see is an increase in food prices on the global market due to both the rising costs of oil and the diverting of some food production to biofuel feedstock, to which these increases will likely drive attempts to reduce oil use in agriculture, probably resulting in a decrease in the rate of price increases. Are there going to be problems given the reliance on cheap oil for energy in agriculture and feedstock for agricultural chemicals? Yes, but colour me firmly sceptical to it driving bigger issues than those climate change pose to agriculture. Of course, successful adaptation and mitigation is dependent on how quickly governments act…

      Which given the dragging of the knuckles on climate change doesn’t fill me with so much confidence.

      I also wonder wtf you’re smoking when it comes to saying we need to stop immigration, particularly as R&D relies heavily on getting the right minds, the hardware, the material resources and the capital to do so. Which the first part generally requires _people_

      • Draco T Bastard 7.2.1

        Except for the fact that…

        The market may correct but I doubt it. the reason why we can grow as much food as we do now is because of the fertilisers produced from oil. Without those fertilisers, which equate to the real resources needed for food to grow, then the plants won’t, well, grow. Think about it, how much mass does a tomato plant need to grow to maturity? It’s the reason why GM food that produces more is a myth. To produce a bigger plant you need the resources to make it grow and Peak Oil is all about the reduction in available resources. As far as farming goes – that’s a direct reduction.

        Yeah, I don’t think I’ll put my faith in the market. It hasn’t worked well any time in the last 500 years and I don’t expect that to change.

        We have people. We just need to supply them with the resources and education to get the job done. We need to stop immigration because it’s unlikely that we’ll be able to support much more population than we have now.

        • Pat

          “We need to stop immigration because it’s unlikely that we’ll be able to support much more population than we have now”

          … without trade and technology. With trade and technology, a nation of our size, at a rough guess, could support a population the size of Japan or the UK. At a rough guess.

          • Rich

            Given that NZ is bigger than the UK and not much smaller than Japan (pop 120mln) you’d have to think so.

            It’s arguable that NZers are unfairly siting on such a huge country in such small numbers, and we should expand our population to level things out.

    • Rich 7.3

      wars are always about resources

      WW1 wasn’t, it was caused by a bunch of political factors including a network of entangling alliances, nationalism, and militarism. None of the main belligerents had particular issues in accessing resources.

      WW2 (in Europe) wasn’t, it was the result of the Nazis’ ideology mandating expansionism. It is true that German strategy was driven by a desire to gain Russian oilfields, but that was a tangential aspect.

      The Vietnam war wasn’t, it was driven by a misguided American desire to achieve security through military hegemony.

      I could go on, but it would me more accurate to say that wars are sometimes about resources.

  8. Pat 8

    “Basically, it’s time to stop the free movement of capital into and out of NZ and to stop relying on others to defend ourselves. And it’s time to stop immigration.”

    Kim Jong, you glate reader!!!

    • Draco T Bastard 8.1

      The worms are coming out of the woodwork I see.

      • Pat 8.1.1

        Well, what do you expect after a comment like that. Are you the ghost of Winston?

      • Quoth the Raven 8.1.2

        The worms are coming out of the woodwork indeed Draco. Stop immigration? That’s a ludicrous suggestion and as Gordon Brown might say bigoted. I’m surprised it’s come from you.

  9. George.com 9

    Meanwhile, the government and David Bennett (chair of the Transport select committee) have just stopped a petition with 11,500 signatures from making its way through parliament. The petition calls for a daly commuter train service from Hamilton to Auckland. By sinking the petition as the select committee level there is no opportunity to hear public submissions on the matter. The stated reason for killing the petiton, basically that local authorities do not support it.This is despite Mr Bennett himself being told in person that the Hamilton City Council does support a service starting and is prepared to put some start up money into it.

  10. eye saw 10

    At what point do the military step in and take the oil for “military” purposes.?

  11. Rich 11

    electric vehicles… still require a lot of oil in their manufacturing

    For two purposes, as energy for the process and as a chemical feedstock, mostly for plastics.

    The former is static energy and can be provided from any source including renewables.

    The latter mostly requires hydrocarbons and competes to some extent with liquid fuels, although there are alternate feedstocks (coal and biomass). There is also the option to replace plastics with metals (reversing the direction of recent vehicle design).

  12. john 12

    Here is a link showing that Peak Oil is being recognised in the mainstream media:
    namely CNBC Which, I Believe, is Canadian Broadcasting.

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