- Home
- News Grid
- Local News
- Green Hawk
- Business
- Politics
- School Zone
- Nonprofits
- Missing Pets
- Multimedia
- Arts
- Movies
- Outdoors
- Sports
- News Releases
- Columnists
- Blogs
- Opinions
- Classifieds
- Advertise
- Donate
- Partners
Tam Hunt: Where Are Oil Prices Headed?
“It’s tough to make predictions, especially about the future.”
This is one of Yogi Berra’s more memorable sayings (and there are many). Yogi was, of course, correct. He was always correct. No one can know the future with absolute certainty, but we can identify long-term trends and make predictions that have a little more certainty than off-the-cuff hunches about where things are going. Long-term trends are those trends that take some time to develop. They took a while to get to where they are today and will also take a while to change. Correctly identifying relevant trends allows us to cut away some of the rampant uncertainty about the future.
So where are oil prices headed? Short-term, no one knows. My best guess is that they’ll oscillate between $100 and $200 a barrel over the next couple of years. But long-term, it’s quite clear they’re going up. Way up.
Peak oil theorists have been saying for years that global oil production is about to peak or may have already peaked. Different theorists pick different dates, but the general consensus seems to be that the all-time global peak for all types of oil production — conventional and unconventional — will be 2010 at the latest, with fairly steep declines to follow. But let’s first examine where we are today.
Global oil production has wobbled along on a plateau since 2005, while global demand has risen ever higher, exceeding production. According to the Energy Information Administration, or EIA, global demand exceeded supply by a tiny amount in 2006, but expanded to more than 1 million barrels per day on average in 2007, which is about 1 percent of global demand. In 2008, the shortfall has shrunk to 300,000 barrels per day, but we’re still using more than is being produced (see nearby chart). The result: declining oil inventories.
Oil inventories in the United States and other Western nations are down sharply over the last couple of years. The EIA states in its August Short-term Energy Outlook:
(Western nation) commercial inventories during the second quarter of 2008 increased by only 490,000 barrels per day, well below the average build of 910,000 barrels per day during this time of the year. At the end of the second quarter, estimated commercial inventories stood at 2.58 billion barrels, 17 million barrels below the five-year average and equal to about 53 days of forward consumption.
Now that we’ve established what’s happened over the last few years, where are we headed in the future?
The International Energy Agency, or IEA, the international equivalent of the EIA, projected in July that the world will require 3.5 million barrels per day of new production each year just to stay even. About 85 million barrels are produced globally each day, so we need to bring 4 percent of new oil capacity online each year just to stay at 85 million barrels per day. The EIA projects that the world will reach 99 million barrels per day for total liquid fuels production in a high oil-price scenario. We are definitely in the high-price scenario already, with oil well above $100 per barrel for almost all of 2008, up from $10 a barrel in 1998.
To reach 99 million barrels per day, we will need to find at least 95 million barrels per day of new production capacity by 2030 because we need to increase from today’s 85 million and counteract the 3.5 million barrels per day annual decline. This is the equivalent of nine new Saudi Arabias. Ninety-five million barrels per day of new production capacity exceeds the existing global production capacity. And today’s production capacity took 150 years to build. The absurdity of EIA’s 2030 production forecast is quickly made clear: there is simply no conceivable way that the globe can find nine new Saudi Arabias by 2030 because they don’t exist. Moreover, I wrote “at least 95 million barrels per day” because IEA’s 3.5 million barrels per day decline projection is sure to accelerate as more oil fields reach their peak and go into sharp decline.
But it gets even worse. As a nation that imports almost 60 percent of our oil, what we should care about and focus on is not global oil production and demand, but global oil exports. Global oil exports have declined over the last three years by about 4 percent, dropping to about 41 million barrels per day in mid-2008 from almost 43 million barrels per day in mid-2006. Mexico, our third largest oil supplier, is drastically reducing its exports as its production plummets. Its biggest oil field, Cantarell, which accounts for about half of its production, declined 36 percent in the last year and its net exports have declined 22 percent year to date. Mexico’s oil production is in terminal decline.
Nigeria and Venezuela, also in the top five of our biggest suppliers, are also decreasing exports precipitously due to both political and geological factors. Canada, our biggest supplier, is reducing its exports as it struggles to increase its tar sands production and uses more domestically. The large Persian Gulf suppliers, Saudi Arabia, Kuwait, Iran et al, are growing very quickly and thus using more oil domestically. Texas-based oil geologists Jeffrey Brown and Samuel Foucher project that by 2030 the top five oil exporters will see their oil exports decline to zero as they produce less and use more domestically. That’s right, zero.
The peak oil analysis leads to concerns about possible global declines at some point in the future, anywhere between now and 2020. The net exports analysis, however, shows that global oil exports are already in decline and very likely will go into increasing decline in the near future. At that point, $147 a barrel for oil may look very cheap in retrospect once such declines accelerate.
Weaning ourselves from oil should be at the top of every policymaker’s list of priorities. We need to focus our communities on increasing energy efficiency and conservation, producing sustainable biofuels to substitute for gasoline and diesel, and bringing renewable energy online at a massive scale, all of which are discussed in the Community Environmental Council‘s regional energy blueprint, A New Energy Direction.
We will need the focus and determination for these efforts that exceeds perhaps anything else we’ve achieved as a region or nation. The time is now because time is short to make this transition.
— Tam Hunt is energy program director and an attorney for the Community Environmental Council, and is a lecturer in renewable energy law and policy at UCSB’s Bren School of Environmental Science & Management. Click here for the CEC’s regional energy blueprint.
Comments
Noozhawk's comments are moderated, but by posting here you accept your responsibility to follow our rules as part of Noozhawk's shared online community. Please keep your comments civil and helpful. Don't attack other readers personally, and do not use vulgar, abusive or discriminatory language. Use the "Report Abuse" link if a comment violates these standards or our Terms of Use.
» on 09.09.08 @ 07:12 AM
Excellent article, Tam. Although one might quibble with some of the specifics (e.g. Canada might have more than 7 Saudi Arabias in oil sand deposit), the ultimate conclusion is correct. We gotta get off the stuff, and a massive energy independence program similar to the man-on-the-moon program launched by John Kennedy in the early 60’s driven by our next President, using the best scientists, engineers, physicists, and economists might just get us there.
You don't have permission to flag this entry.
» on 09.09.08 @ 08:24 AM
Tam, why do you hate America?
You don't have permission to flag this entry.
» on 09.09.08 @ 08:52 AM
Again, the CEC proposes alternative fuel projects that just won’t work.
On August 26, during the County Board of Supervisor’s hearing on offshore oil, the CEC stated that people who live in the Northeast U.S could heat their homes with used cooking oil. That is an example of the kind of nonsense these people believe (the CEC cooking oil statement was in response to a question by Brooks Firestone and can be viewed at the County’s website).
The CEC is proposing that we replace our carbon based fuels, which provides 90% of our energy, with wind, solar and other “renewables”, which provide 5% of our energy. They want this to happen by 2033. What rot.
The CEC is proposing the massive use of biodiesel fuels. Millions of people around the world would starve if we did that.
The U.S has 2 trillion barrels of shale oil. We have massive amounts of coal, enough to last hundreds of years. California has offshore oil deposits equal to 20-25 years of imports from Saudi Arabia.
In perhaps 20 to 25 years we will begin the shift from conventional oil to shale oil and coal synfuels. In 75 years I doubt we will use carbon based fuels at all. In the meantime, however, we need to produce our own oil and gas.
We can begin producing oil and gas from existing undeveloped federal offshore leases in two years. We can produce from undeveloped state leases in 1 year. We can achieve full production in 10 years.
You don't have permission to flag this entry.
» on 09.09.08 @ 11:31 AM
Tam your good until the last part of the article. The truth is that only conservation can reduce our imports of energy. Alternative sources just won’t do it. Renewables won’t do it. But doing nothing will likely be the path our politicians take because politics in the US is utterly useless in looking more than an a couple years ahead and then only for the special interest needs of big corporations. But doing nothing does has it’s bonus….not for us but possibly for the rest of thew world. It’s called demand destruction and works by eliminating demand via economics. The poor stop buying oil at some point. And as the weekends news tell us that Fannie May and Fredie Mac are bankrupt it is now clear that the USofA is also bankrupt. In a few short years the US will be unable to afford to import oil. Bob
You don't have permission to flag this entry.
» on 09.09.08 @ 04:07 PM
Folks, the key issue, which I didn’t have space to include in the above discussion, is flow rates: with decline rates projected to be precipitous from about 2010 on for global exports, we need solutions that can ramp up quickly. I agree with Bob below that the only short-term significant solution is conservation - and this will be imposed by high prices and possible shortages. We can help ensure a soft landing, however, by promoting serious energy policies in our region that make conservation easier (better mass transit, better bike lanes, better ridesharing programs, etc.) and improving efficiency (smaller more efficient cars, hybrid cars, electric cars, etc.). While renewables and sustainable biofuels can’t do the job now, if declines set in hard, conservation and efficiency can lead the way and allow renewables and sustainable biofuels to make up the rest over the coming decades.
Also, it’s a little known fact that the US exports 1.5 million barrels of oil per day - this is over ten times what is projected to come from new OCS leases even by 2030. So one very quick solution for securing additional supplies for the US is for Congress to ban exports.
As for cooking grease for home heating, I did not make this statement and I have no opinion on this statement at this time b/c I haven’t looked into it.
You don't have permission to flag this entry.
» on 09.09.08 @ 05:53 PM
The U.S exports very little crude oil. We export refined products. Mexico and Canada are big buyers of diesel, gasoline, petrochemicals and plastics. They sell us their oil, we refine it and sell it back to them at a nice profit.
On August 26 Supervisor Brooks Firestone asked the CEC representative who made the CEC presentation how people in the Northeast U.S were going to heat their homes if they did not have heating oil. The CEC rep told Mr.Firestone that they could use biodiesel, which is made from used cooking oil.
You don't have permission to flag this entry.
» on 09.10.08 @ 06:00 AM
America need to create jobs and stop being pollitically correct, the wacky left has hurt America.
You don't have permission to flag this entry.
» on 09.10.08 @ 04:14 PM
Tom, I believe it was Abe Powell, from GOO, that made the comment on heating oil in the Northwest. We work together where appropriate, and we appreciate their work greatly, but GOO and CEC are different organizations.
You don't have permission to flag this entry.
More Local News »
Tam Hunt: On Time and Free Will
Was Einstein wrong about the nature of time and determinism?
Tam Hunt: The Decline and Fall of the Oil Age
High oil prices and new technologies a driving force behind massive transformation
Tam Hunt: Is It Time for California to Phase Out Nuclear Power?
There may be no better time than the present to begin a more aggressive transition to alternative power sources
Tam Hunt: Wiki-Government As an Antidote to Corruption
Crowdsourcing government could take many different forms and is spreading as an idea
Tam Hunt: A Postmortem of America’s War in Iraq
As a country, we owe it to ourselves and to the world to never again abide an illegal U.S. war and military atrocities by our troops
Weather: Fair 50.0º
Search Noozhawk »
