WORLD OIL SUPPLIES:
AT THE TURNING POINT?
John Kaufmann
Oregon Department of Energy
Pacific NW Waterways Assoc.
15 October, 2008
Oil and Gas at Record Highs
Since 2002:
 Crude oil 6X
 Gasoline/diesel 3X
 Natural gas 3X
www.energytechstocks.com
Price Higher Than Last Year;
30% Price Drops Are Common
Data Source: EIA
Jim Hansen, “Investing in the New Energy Economy”
Presented to the ASPO-USA 2008 Peak Oil Conference
US Payments for Foreign Oil
Andrew Wiessman, “Time to Stop Playing Russian Roulette With American Economy”
Proceedings, ASPO-USA 2008 Peak Oil Conference
Price Gouging?
Manipulation? Speculation?
 Speculators profit
from conditions – they
don’t create them
 Price set in market
 Many buyers, sellers
 Fundamentals in place
– tight supplies
Long-Term Supply Leveling Off,
Demand Outstrips Production
Demand
Prices rise; economic
problems start here
Supply
Today
Increased Demand – China
•GNP growing 8-10%/year
•2nd largest user of oil
•Oil use up 7.5% annually
•Imports up 40% last year
Increased Demand – U.S.
 More people
 Driving more miles
 In less efficient
vehicles
Global Oil Production 2002-07
Source: www.UrbanSurvival.com, 5-21-07
Data from http://www.eia.doe.gov/emeu/international/contents.html
World Discoveries Peaked in
1960s
Production Exceeds
Discoveries Since 1983
David Hughes, Geological Survey of Canada
From Campbell, 2004
For Every Barrel We Find …

We use ~6 barrels
Production Follows
Discovery
US Discoveries Peaked in
1930, Production in 1971
Already Peaked
 2/3 of oil-producing
nations, two major
fields
 US
 Canada
 Mexico
 North Sea
 Indonesia
 Venezuela
 Iran
 Kuwait
 Nigeria?
 Russia?
 Saudi Arabia?
Indonesia – Net Importer
UK – 2006
Mexico?
Exports
Import
s
www.TheOilDrum.com/node/3657 , Feb. 22, 2008
Sources: Matt Mushalik, data from http://tonto.eia.gov/country/index.cfm
Mexico
www.theoildrum.com.node/3381, 18-Dec-07
Net Exports of Top 20
Exporters
Mark Reyondols, Anawhata Associates, NSW Australia
“Policies to Develop A Low Emissions Transport Sector in Australia,” 10 April 2008
From www.theoildrum.com/files/AnawhataGarnaut.pdf
No Spare Productive Capacity
30%
 The good news is,
the Saudis don’t
control the price of
oil any more
25%
20%
ARE OIL
ODUCTION
15%
APACITY
10%
 The bad news is . . .
No one does
5%
0%
1985
1990
2003
2004
Top-down: Trend Analysis
(Hubbert Methodology)
M. King Hubbert
 Trend analysis – historical, statistical
 Predicted U.S. and other peaks
 Predicts world peak within next few years
Hubbert Method Applied to
U.S. Production
Jeffrey Brown, “In Defense of Hubbert Linearization”
The Oil Drum, June 24, 2007
Bottom-up Analysis: Geologic
 Field-by-field
 Current production
– production declines
+ new fields
+ advanced recovery
 Peak by 2011
We Know More Than Ever
About Where Oil is Found
 We understand
conditions under
which oil was formed
 Seismic imaging
Natural Gas
Oil
 Millions of
exploratory wells
 Computer mapping
Robert Beriault,”Peak Oil and the Fate of Humanity.”
www.peakoilandhumanity.com
Drilling vs. Production –
U.S. Oil and Gas
Nate Hagens, “Charlie Hall: How Much Oil and Gas Will Increased Drilling Provides”
www.theoildrum.com, 15-Aug-2008
US Natural Gas Production and
Number of Producing Wells
Jean Laherrere, interview with Luis de Sousa
The Oil Drum, 4 August 2007
New Discoveries are Smaller,
Don’t Reverse the Trend
Effect of ANWR
Alaska North Slope
Lower 48
ANWR
Gail Tverberg, “Peak Oil Overview-March ’08,” www.TheOilDrum.com/node/3726
Strategic Energy Institute, Georgia Institute of Technology
Brazil’s Recent Find
 Est. 33 billion barrels
 Premature – based only on
seismic imaging
 Early announcements often
inflated
 1/3 recoverable – i.e., 4
months oil at current use
 10 year lead time
 Expensive – deepwater,
salt formations
Photo: Marcelo Sayao/EPA
The Guardian, 5 April 2008
Ease of Production:
Past and Present
When Will Oil Production Peak?
2005
Deffeyes
Oil Geologist, Princeton
2006-2007
Bakhtiari
Former VP, Iranian National Oil Co.
2007-2009
Simmons
Energy Investment Banker, Houston
Before 2010
Goodstein
Physicist, CalTech
2010
Campbell
Oil Geologist, Ireland
2010
Weng; Pang Xiongqi
Chinese National Oil Co.
2010 +/- 2
Skrebowski
Editor, “Petroleum Review”
After 2010
World Energy Council
2010-2012
Intl. Energy Agency
(Supply, tightness; plateau)
2008-2018
Univ. of Uppsala
Sweden
Before 2015
ASPO-USA
U.S.
2016
Douglas-Westwood
Oil & Gas Market Analysis
After 2014
Wood MacKenzie
Energy/Scientific Consultant
2010-2020
Laherrere
Oil Geologist, France
After 2025
Shell Oil
Major Oil Company
After 2030
CERA
Energy Economics Consulting firm
2037
EIA
U.S. Govt.
0-5 yrs
5-10 yrs
10+ yrs
“Dean” of Wall Street
 Thru 2010  production flat;
falls short of demand
 Inventory drawdown
 2012  conventional oil peak
 Inventories insufficient
 2015  all liquids peak
Charles Maxwell
Weeden & Co.
Prospects Going Forward
North Sea, Mexico declining
Canada oil sands–low flow rate
Russia peaking?
Russia vs West in Caspian
Nigeria in crisis
Iraq at pre-invasion levels
Nuclear Iran
Kashagan, Khurais late
New fields smaller, more remote
New Finds Have Little Effect
2033
2024
- USGS P5
- USGS P50
Ken Verosub, UC-Davis, “Petroleum Geology 101”
Presented to ASPO-USA 2008 Peak Oil Conference
Geopolitics
 Invasion of Iraq
 Nuclear Iran
 Russia-Georgia
 Hugo Chavez
 Nigeria
 Pipeline
terrorism
Geopolitics Hastens Peak
“Geological peaking is
driving the
geopolitical events.”
~Jeff Vail
Jeff Vail, ”The Geopolitics of Energy”
Proceedings, ASPO-USA 2008 Peak Oil Conference
Bumpy Plateau / Descent
Price
Production
Jeff Vail, “Predator-Prey Dynamics in Demand Destruction and Oil Prices”
www.theoildrum.com/node/4448, 26-Aug-2008
U.S. Energy Mix
Nat. Gas
Oil
25%
40%
Coal
23%
Nuc.
8%
Other
1%
Hydro
3%
Oil Does Work for us
 In one year a
person can
perform the work
of ~8 gallons of
gasoline
Oil Packs Power
Why Oil Matters
 “Oil is unique in that it is so
strategic in nature. We are not
talking about soapflakes or
leisurewear here. Energy is
truly fundamental to the
world’s economy. The Gulf
War was a reflection of that
reality.
~ Dick Cheney
Halliburton, 1999
1970s on Steroids: Inflation,
Recession, Unemployment
Impacts – Business & Jobs
 Higher production,
distribution costs
 Supply chain problems
 Reduced demand
 Tighter profit margins
 Reduced benefits
 Business failures
 Unemployment
Social Security Administration, Special Collections
http://www.elderweb.com/home/node/9633
Impacts –
Airlines First to Feel Impacts
 Fuel represents
>30% of their costs
 70% of flights are
discretionary
Impacts – Trucking / Freight
Energy Returned on Energy
Invested, i.e. Net Energy
Old oil
100
Middle-East oil
30
Natural gas
20
Coal
10-20
Hydropower
10-40
Wind
5-10
Nuclear
5
Solar PV
~5
Oil Sands
3
Biodiesel
3
Shale Oil
1.5
Ethanol
1.3
No Magic Bullets
 Drilling
 Nuclear
 Coal
 Oil Sands
 Biofuels
 Renewables
 Hydrogen
Natural Gas Also Nearing
Peak Production
David Hughes, Geological Survey of Canada
Data from C.J. Campbell, 2005
Combined Oil/Gas Peak
David Hughes, Geological Survey of Canada
Data from C.J. Campbell, 2005
U.S. Natural Gas Production
Already in Decline
David Hughes, Geological Survey of Canada
Data from USEIA
Location of Natural Gas
Domestic Natural Gas
Replacement: LNG
 Intense competition
 Expensive
 Best use?
Heat existing homes?
Heat new homes?
New generation?
Displace coal?
Transport fuel (CNG)?
Feedstock?
 Transition fuel?
Coal
 3X – 4X increase
 Runaway global warming
 Peak coal
Nuclear
 10X increase
 Peak uranium
Oil Sands / Oil Shale
 CO2 emissions
 Land, water pollution
 Low energy return
 Low flow rates
Hydrogen
 Net energy loser
 Bulky to store, transport
 3% evaporation loss/day
 Doesn’t use existing
infrastructure
Biofuels
 Ties food price to fuel price
 Reduced ecosystem services
 Low energy return
 Small fraction of our needs
Renewables: Wind and Solar
 Non-transportation only
 Less concentrated,
more expensive
 Necessary …
but sufficient?
Find Alternatives
Plan for Higher Fuel Prices
 Scenarios
 Resiliency
 No regrets policy
 Viability, not costeffectiveness
Andrew Wiessman, “Time to Stop Playing Russian Roulette With American Economy”
Proceedings, ASPO-USA 2008 Peak Oil Conference
Think Carefully About Major
Infrastructure Investments
 Position yourself for the
future
 Avoid major stranded
investments
 Port facilities
 Ships
 Multi-modal connections
Evaluate Your Market
 Demand – what do
you ship?
 Discretionary or
necessary?
 Distance?
 Competition?
 Will it still pay?
 Globalization?
 Has it peaked?
Begin Now . . .
Hirsch Report:
 Peak is inevitable
 Consequences are serious
 Massive effort
 20 years lead time
 $1 trillion
 Need oil as bootstrap
 Cost of preparing too late
will far exceed too soon
Destiny?
Contact Info:
John Kaufmann
503-378-2856
john.kaufmann@state.or.us
Best Resources
www.energybulletin.net
www.theoildrum.com
www.postcarbon.org
www.globalpublicmedia.com
Impacts – Tourism
… Another Early Casualty?
Impacts –
Food & Agriculture
 Food sector = 17% of energy
 Higher food prices
 Fertilizer
Lower productivity
Also




Variety of food decreases
Nutrition, esp. for low-income
Shifts in food retailing
More household food production,
preservation, preparation
www.timeinc.net/time/magazine.archives/cover/1973/1101730409_400.jpg
Time Magazine, April 9, 1973
Impacts – Vulnerable
Population Hit First / Hardest
 Food?
 Medicine?
 Heat?
 Rent or mortgage?
 Transportation?
Impacts –
Public & Social Services
 Demand for services up
 Revenues, charitable
contributions down
 Stretches already
stressed systems
 Fractured community
networks
Fred. A. Hatfield, www.novanewsnow.com, 22-May-2007
Impacts –
Public & Social Services
 Reduced health
coverage
 Less preventive, more
emergency care
 Public health concerns
 Housing, homelessness
 Hunger
 Substance abuse,
domestic violence,
property crimes
www.gothamist.com, 11-October-2007
Expand Energy Efficiency
Programs
 (Dramatically) ramp up
existing programs
 More and faster
Low Impact Housing
Encourage Efficient &
Renewable Transport Choices
 Get people out of their
cars
 Ensure alternatives
are safe, convenient




Walk
Bicycle
Ride share
Mass transit
Fuel Efficient Vehicles Now, www.fev-now.com
Change Land Use Patterns
from this …
Reduce transportation needs
Promote walkability
Easy access to services and
transportation options
to this …
Transit Alternatives
Preserve Local Food
Production Capability
 Preserve nearby
agricultural land
 Support local food
processing industry
 Urban gardens
 Farmer’s markets
 Co-ops
www.oregonfarmersmarket.org
Preserve Safety Net, Protect
Vulnerable Populations
 Sense of community
 Health care
 Public health system
 Hunger relief
 Shelter
Emergency Planning
 Fuel allocation
 Food
 Transportation
Armed Forces International
www.armedforces-intcom/categories/emergency-planning-and-management
What Can You Do?
 50% in 14 years
 Encourage family,
friends to pledge
www.OregonPeaceWorks.org
5% Solution
Carbon Footprint: Annually Reduced 5%
25
Tons CO2 per year
 Sign the Pledge:
Reduce your carbon
footprint 5% every
year
20
15
2022: 50%
10
2036: 75%
5
0
2008
2013
2018
2023
2028
Year
2033
2038
2043
2048
How to Reduce Your
Footprint
 Reduce your housing footprint
 Heating system, insulation and
windows, appliances, water heating
 Reduce your transportation
footprint
 Walk, bike, ride share, public transit
 Buy, consume less
 Things take energy to produce and
distribute
 Eat local, organic, lessprocessed foods
New Yorker, July 2, 2007
Reinvigorate Rail
Per Capita Oil Consumption
Ken Verosub, UC-Davis, “Petroleum Geology 101”
Presented to ASPO-USA 2008 Peak Oil Conference