370. MORE SLACK IN DEMAND
The latest Weekly Petroleum Products Supplied stats from the EIA show another massive drop in U.S. oil consumption. Here's the figures:
July 20, 2007: 21,006kbd
July 18, 2008: 19,903kbd
That's a year-on-year drop in U.S demand of 1,103,000 barrels/day. Huge. Roughly equal to the production of a super-giant oil field, or a small producing country like Qatar, Indonesia or Azerbaijan.
Now, there's a lot of confusion on what this means for oil prices due to the classic doomer/oil-bull soundbite:
If we burn less, India and China will burn it up, no problem.OR
The less we use the more China will use. China and the other emerging economies set the price of oil now, not the US.Let's look at the figures, and see if that theory holds up. I've compiled the following Table from the BP Statistical Review 2008. For the most important regions and countries, the Table gives the average annual increase in oil consumption (in 1000s of barrels per day) for the periods 2003-2007 and 2005-2007, as well as the increase in 2007 over 2006. This Table should give you a better feel for the size of demand growth under business-as-usual conditions. (Click the table to enlarge)
As you can see from the Table, US consumption has been approximately flat over the past few years, so the steep recent drop in US consumption is a net negative for world demand growth.A 1.1 million barrel/day drop in US demand is gigantic -- literally enough to wipe out all growth in oil consumption for the entire world, which at the moment is running at about 0.9mbd. (The current IEA forecast for 2008 demand growth is 0.89mbd. Source: July 10 OMR)
There is simply no way for China and India (who combined have average annual growth of around 0.5mbd) to overcome a 1.1mbd drop in US consumption. They simply can't grow that fast.
To conclude this post, here are some links with interesting detail on the current oil situation in China:
BEIJING, July 22 (Reuters) - China's crude oil imports from Iran in June halved from a year ago to its lowest monthly level in 18 months, contributing to the overhang of crude stored offshore in Iran, official customs data showed on Tuesday.
Iran shipped 1.176 million tonnes, or 286,000 barrels per day (bpd), of crude to China last month, 50 percent less than in June 2007, data from the General Administration of Customs showed.
This is also well below the 400,000 bpd of term volumes officially contracted for this year, and the even higher 465,000 bpd average imports of Iranian crude for the first quarter.Source
*****
BEIJING (Reuters) - China's worsening power woes are all but guaranteed to trigger a surge in imported oil, just as they did in 2004 during the worst crisis in decades, right?
Wrong, say experts and industry sources. While the theme is familiar, the circumstances couldn't be more different, suggesting that oil bulls looking for a reason to push crude beyond $150 a barrel will need to look elsewhere.
[...]
China appears to be well-stocked with foreign fuel after 8 months of steady inventory builds that caused diesel imports to surge 9-fold in the first five months this year.Source: Unlike 2004, China oil demand unmoved by power woes
by JD
posted by JD @ 12:02 AM
20 comments
20 Comments:
As usual, please use the Name/URL option (you don't have to register, just enter a screen-name) or sign your anonymous post at the bottom. The conversation is better without multiple anons.
Thank you,
JD
And the conservation movement is just underway. These demand drops reflect earlier and lower price levels, and also do not reflect the accumulating responses to higher prices.
Moreover, it makes sense that oil demand will decline continuously at these price levels, even for decades, as national car fleets turn over etc.
More likely we get a price bust somewhere.
Let's just hope that the price doesn't go too low. I don't want to see encouragement of demand in the coming decades.
Granted, if all the depletion models are right, then increased demand won't matter in 10 years anyway! Oh well!
"Yeah. I'm not exactly ancient but then again, having known him most of my life and having been in the oil business all of my life, I really wouldn't be qualified to make the call.
Oh, wait... yes I would. In fact, I can tell you that he is not the only player in the oil business that recognizes a serious problem ahead of us. You think a last-minute push for adaptation to alternate energy sources is simply an effort to look cool and be popular? They are trying to save your ass from an unimaginably bad future. It frustrates me to no end that people have a pre-conception about the slow-talking Texas oil men. The "generations past", as you so quaintly describe them, sit around and discuss things - in their heavy Texas accents - that would surprise most people; non-replenishable supplies, annual reductions in new discoveries, and the unsustainability of an oil-based global civilization.
These are not stupid people. I take part in many of these conversations, although I'm usually 20-30 years younger than the next youngest person in the room. I respectfully listen more than I talk. Oil executives recognize that their business is not sustainable and that the world is both unprepared and unable to change course. On my life, I swear this: To a man, they are worried and afraid of the outcome. They fear for those around them, including loved ones, neighbors, and the world as a whole (although they are definitely partial to their beloved U.S.A.). The truth of what is happening to the world right now is something they don't even tell their wives because "Women don't need to know all that. They would just get emotional." Regardless of who they tell, everyone around them senses that something is terribly wrong.
These men believe that warning people is just a waste of time, or perhaps that it would simply make things worse in the short term. It's a kind of "let them enjoy it while they still can" mentality. The fatalistic perspective of these men - and I am talking about some very, very powerful, wealthy, well-connected individuals - is staggering.
Discussions about oil on message forums and around water coolers will continue. Meanwhile, draconic political measures are being taken that I used to despise. About one year ago, I absolutely hated the things that were (and are) being done "in preparation" with so much passion that I could hardly stomach the thought if it. While I still hate it, I realize now that it is not the kind of power grab that I thought it was. This is not a left or right issue, nor is it democrat or republican issue, but that certainly makes a nice distraction for the general public to focus on.
Oil went down today? Great! Go fill your tank and have yourself a knowing chuckle about how someone like T. Boone was obviously wrong when he tried to warn us about reliance on oil.
Sigh... oh, well. Another long post on a message forum that changes nothing."
Here is a quote from an "oil insider" who claims to personally know T. Boone Pickens....Anyways JD, Ari and the rest what do you think of this?
I think he's calling a bluff as in he doesn't really know T. Boone, but then again....he is from Tx.
Anyways, apparently Boone and "others" know that we're doomed!
Anyways, what are your thoughts on this?
-Justin
P.S. Oil is down to 122.46, must really be supply and demand, huh?
/Sarcasm...
I found this article, what do you guys make of it?
http://321energy.com/editorials/cohen/cohen071708.html
-Justin
Jason,
Understanding oil depletion doesn't mean you can forecast what happens to economies. The problem with saying that otherwise reasonable and intelligent oil tycoons see a bleak future for oil doesn't mean you can take the next step and say that that the world, too, is screwed.
I've been following this issue now for about two months, and I've been reading from all sorts of sites. Everything from the doomiest crap (dieoff) to sites that don't even acknowledge that peak oil even exists! In the end, you can't listen to the extremes. For one, they rarely present solutions and much more than just fear mongering and prognostications.
I think that Pickens has some good ideas, and I think he has a place in all of this. I also don't think that things are as impossible as people suggest.
As James Hamilton over at Econbrowser points out, there are problems even with the most basic assumptions of the peak oil crowed (demand will outstrip supply!!!!) If they aren't even getting basic assumptions correct in their microeconomic models, how do we rely on them for predictive models?
I don't think that this is a non-problem. But I think that societies are remarkably adaptable, and have weathered much worse in the past. We'll pull through. The next few decades may blow, but I don't think that we're all headed for the armageddon that some portend.
Why not? Because some of us are working to make sure that it doesn't happen. We're not sitting around on The Oil Drum talking about living off the grid. We're doing things to make the grid work, dammit.
As for the article, I think he's making a huge mistake: he's not using ALL liquids. That's the point that JD constantly makes, and apparently Cohen doesn't believe in that.
Also, I question any site that has Kuntsler as an editorialist. Is that straying into the realm of fallacious ad hominem thinking? Yes. Does it make me question them? Hell yes.
Justin,
Sounds like a sales pitch to me.
Justin,
That is very dramatic and grandiose image. It is not my intention to be critical of you but that is kinda sensational and bigger than life, and it has an twist of that daddy Warbucks "father knows best" attitude .
Don't be a sheep.
Justin,
T. Boone Pickins is nothing but a conartist. He wants us to adopt natural gas so he can make billions off of his investments that he made prior to releasing his plan.
This warranted a quicker response however the weather here in Wales has been good, for once.
T Boone is a slippery character, to put it in a polite way. He has been calling the peak for the last couple of years. It would not surprise me to learn that Texan oil barons do indeed sit around and fear for the future. As any good peak oiler will tell you, they don't really control hardly any oil any more. Most is in the hands of OPEC, chock full of people who hate what they stand for. The Texan barons have become very powerful on the back of oil and they see that power slip away. Combined with the fact America may elect a president much less sympathetic to them. So not good news for them!
BTW, Boone Picken's plan has been thoroughly dissected elsewhere, and would just make America reliant on LNG imports. As much as I hate to say it, the US would be better off using its coal reserves.
ptgtl l00 and cadfan.
short comments but right, exactly.
J.C., Sr.
JD and others,
What do you think of this bombshell from the NY Times:
"countries with subsidies accounted for 96 percent of the world’s increase in oil use last year — growth that has helped drive prices to record levels."
If governments start to reduce subsidies even more than they already have, we are likely to see a HUGE drop in projected demand growth. And I have a feeling that in the coming years they're going to have to, as the threat of inflation and fiscal deficits become too great.
That's a bomb alright, jd walters. It means that for those governments to survive, they will have to stop subsidying fuel anytime soon...
When they will, massive riots will begin. But oil consumption will also be down. And price follows.
Yes, peak oil is an "emergency", but how I agree with Kunstler's adjective on that:
It's a Long Emergency. Wake me up when we get to colonize jupiter, now will you?
If those sly Chinese are not bluffing, they're going to build nukes by thousands :D No power worries with such arsenal :D
Now, if I could only google that link again....
Cars powered by windmills and LPG/LNG is utter stupidity/conartistry of highest order (depending on which side of the trade you are). Nukes will power everything, this is just a transition. Not crappy light water nukes we have now, but properly designed, deep burn, high temp, fast neutron nukes. And strong anti-nuclear sentiment will either change or US will have a serious risk of falling by wayside and becoming irrelevant in not so distant future.
I'm still oblivious as to why anyone would think shortage of oil(liquid fuels) would necessarily cause disasters?
Liquid coal was good enough for Luftwaffe and dozens upon dozens Panzer divisions to flatten Europe , yet somehow is useless to solve mundane problems, i.e. trucking food, driving to malls, etc, seven decades since?
-Raphael
"And strong anti-nuclear sentiment will either change or US will have a serious risk of falling by wayside and becoming irrelevant in not so distant future."
I have a strong anti-starving, anti-stranded, anti-freezing. sentiment.
As an American I don't think most Americans connect the 2 issues.
I think many alternative energy technologies have a place in different applications. we have gotten very used to either plugging something in or putting gas in it. it's pretty easy even at $4+ a gallon.
sorry for the obviousness of my post. but has anyone ever even tried to overcome anti-nuclear sentiment?
In my experience most Americans:
A.) Have no idea how it works.
B.) Are terrified of it.
c.) Have no idea where their energy comes from now.
Barba Rija.
You actually believe in what Kunstler says in his Long Emergency book?
I thought you weren't a doomer?
-Justin
Justin,
I haven't read any book by Kunstler, I rarely read comic books anymore. I was being sarcastic, and yet I honestly agree with this adjective he uses to define the emergency we live on, "long".
It will be very, very long. Like seeing a nuclear bomb explode in a very, very slow way. In fact, so slow even a slime walking off will survive it.
freak,
Actually, some polls find Americans to be warming to nuclear again. Especially if you tie it into reduced use of fossil fuels.
Also, despite what the doom and gloom crowd like to preach, attitudes can change with prices, current events, etc. It's not hard to imagine a nuclear renaissance in response to NG prices getting really high.
Barba Rija.
I am sorry, but it is kind of hard to tell when a person is being sarcastic on the internet.
You seem to be really intelligent by the way, I am interested in knowing your opinion in how you think this will play out?
-Justin
Good post, JD.
JD Walters also hit the nail on the head: subsidies are keeping the oil bulls (peak oil traders) in the market. Once subsidies phase out and demand falls off in those emerging markets, all of those pension fund managers who bet the bank on peak oil doom and $200 a barrel oil, are going to have to face some angry pensioners.
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