free html hit counter Peak Oil Debunked: 409. THE IMPORT LAND MODEL

Thursday, July 09, 2009

409. THE IMPORT LAND MODEL

I've previously discussed the statistical gimmickry of Jeffrey Brown's Export Land Model (ELM). The problem can be quickly summarized like this: Suppose you have a fuel tank which is running down at a rate of 1 liter per hour. Ordinary people with common sense would say that the tank is being drawn down at a constant rate. Similarly, mathematicians would call this a simple linear decline at a constant rate. Jeffrey Brown, however, claims that the draw down is occurring at an exponentially accelerating decline rate. I kid you not. If you're curious about how this amazing feat of smoke and mirrors is achieved, here is a detailed explanation.

Today I'd like to talk about another gimmick of the ELM. Veterans who have read a lot of Brown's writing will have noticed that he always focuses on a few carefully selected examples: Indonesia, the UK and of course "Export Land" (the fictional country he uses to illustrate the model). He never seems to bring it all together, and give a coherent picture of the net export situation for the entire world. There is a good reason for this. When you look at the big picture, the ELM "crisis" appears in a very different light.

Consider the following table, showing oil consumption growth in the world's top 20 exporting countries (click to enlarge):

The first column gives the exporter, the second column gives growth in consumption from 2007 to 2008, and the third column gives average growth in consumption for the past 3 years. The figures in black come from the BP Stat. Rev. 2009, and the figures in blue come from the EIA. All figures indicate thousand barrels per day (kbd).

The first striking thing is how small these numbers are (with the possible exception of Saudi Arabia and Russia). For example, consumption in Mexico only increased by 13,000 barrels per day in 2008, and an average of only 35,000 barrels per day over the last 3 years.

For comparison, the US consumed 19.4 million bd in 2008. That's 1500 times the size of consumption growth in Mexico in 2008. Mexico's growth in oil consumption is literally one tiny piss-ant oil field a year. And Mexico is very representative of oil exporters in general.

So the idea that oil exporting nations are ravenously chewing into the developed world's oil supply is completely at odds with the facts.

In 2008, total world oil exports were around 40 mbd, and total growth in oil consumption by exporters was about 490 kbd. So growth by exporters in 2008 only consumed about 1.2% of the pool of available exports. Graphically, it looks like this:
According to the ELM, that little blue sliver is the bad guy. But try overlaying US oil consumption on the same graph for a size check:
Let's not fool ourselves about who's really sucking down all the oil, and needs to cut back. It's not the oil exporters.

And that leads me to the most interesting point.

On April 5, 2006, Jeffrey Brown (aka "Westexas") made the following prediction:

"As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis." Source

This turned out to be totally wrong in an interesting and unexpected way. The reason is that oil consumption in the US dropped by -1,262 kbd in 2008. This means that the decrease in consumption in the US alone cancelled out about 3 years of consumption growth by all exporting countries. Similarly, Japan's consumption has been dropping by about -166 kbd per year for the last 3 years, totally compensating for consumption growth in Saudi Arabia, the largest exporter consumer. There are also a number of other nations where oil consumption is steadily declining.

So instead of seeing a decrease in available exports due to rising consumption by exporters, what the statistics actually show is importer consumption dropping faster than exporter consumption is rising. I call this effect the "Import Land Model".

Given Brown's prediction it's a very paradoxical outcome. But it's also very satisfying. Clearly we should continue in just this vein: cancelling out exporter consumption growth through conservation and efficiency in the OECD.
by JD

51 Comments:

At Thursday, July 9, 2009 at 6:29:00 AM PDT, Anonymous Anonymous said...

My favorite "westexas" prediction. 8$ gas on 8/8/08 :D

TheAntiDoomer

 
At Thursday, July 9, 2009 at 8:30:00 AM PDT, Blogger JCK said...

JD,

Thanks for pointing this out. It's good to go back a couple years, and just see how wrong the doomers were then.

This crowd has been so consistently wrong on EVERYTHING for so long, it's surprising that anyone still takes them seriously.

 
At Thursday, July 9, 2009 at 10:44:00 AM PDT, Anonymous Jeffrey J. Brown said...

Strictly speaking, I proposed the Export Land Model (ELM) as a way to help me understand Net Export math. As we noted in our top five net exporters paper, the UK and Indonesia were both--like "Export Land"--consuming about half of their production at their final peaks. Export Land fell between Indonesia and the UK in terms of the production decline rate and between the UK and Indonesia in terms of the rate of increase in consumption (the UK had almost no increase in consumption over the decline phase). However, Export Land, Indonesia and the UK all showed accelerating net export decline rates--hitting zero net oil exports in nine, eight and seven years respectively.

With no increase in consumption, Export Land would go to zero net oil exports in 14 years, instead of 9 years, not exactly a big difference.
But the key issue that we are going to focus on with our upcoming paper is cumulative remaining net oil exports.

Primarily because of a drop in consumption (and a small increase in production), Indonesia's net exports increased in 1998, after a decline in 1997, so that their 1998 net export rate was only about 9% below their 1996 rate. However, by the end of 1998, Indonesia had shipped 44% of their post-1996 cumulative net oil exports, on their way to hitting zero net oil exports in 2004. The key point is that these net export declines are front end loaded, with the bulk of post-peak cumulative net oil exports being shipped early in the decline phase.

Indonesia, in 1997 and 1998, was shipping one percent of their post-1996 cumulative net oil exports about every 17 days (EIA). Based on Sam Foucher's modeling, the top five net oil exporters are currently shipping one percent of their post-2005 cumulative net oil exports about every 50 days or so.

I do think that we are in the throes of a severe net export crisis, and the decline in demand was partly a consequence of a bidding war for declining net oil exports:

http://www.energybulletin.net/node/47541

I think that we are seeing a combination of voluntary + involuntary reductions in net oil exports this year, which will probably transition to mostly involuntary net export reductions next year and in subsequent years.

Regarding the $8 gasoline "prediction," as the context of the comments made clear, I suggested that people plan on $8 gasoline. For more information on my advice for a post-peak world, you can do a Google Search for: ELP Plan.

For more information on our (Brown & Foucher) work on net oil exports, you can do a Google Search for Jeffrey Brown + Net Oil Exports. And by the way, the four year decline in net oil exports from Mexico is quite close to what the ELM showed.

 
At Thursday, July 9, 2009 at 12:39:00 PM PDT, Anonymous Jeffrey J Brown said...

It's interesting that JD generally avoids actually talking about export numbers. He quotes my comment from my very first essay on Net Oil Exports, in January, 2006, that we were on the verge of a ferocious export crisis, which I think is accurate. As noted above, I think that the bidding for declining net oil exports was a big contributor to the increase in oil prices, worsening the economic contraction, resulting in the decline in demand. Having said all of that, the scale of the decline in demand was a surprise to me.

In the January, 2006 missive, which focused on the top three net oil exporters at the time--Saudi Arabia; Russia and Norway--I introduced the Export Land Model. After conferring with Sam Foucher, my assessment in January, 2006 was that Saudi Arabia was on the verge of a production decline, Russia would probably resume its production decline within one to two years, and Norway's decline would continue. Note that we did not even have complete 2005 production data at the time.

In March, 2007, I posted a note to the effect that I did expect to see a future rebound in Saudi production ("Albeit to a level well below their 2005 rate")--probably the only time Robert Rapier and I agreed about the direction in Saudi production. My reasoning was that the water encroachment at North Ghawar took the Saudis by surprise, and it took them some time to partially compensate for the decline. Also the 2006-2007 production decline was below what the HL (logistic) model predicted. I still think that 2005 was the final Saudi production peak, but I could of course be wrong, and time will tell. But IMO, there is very little chance that Saudi Arabia will ever again exceed their 2005 net export rate.

In any case, here is what the EIA shows for recent combined net oil exports from Saudi Arabia, Russia and Norway (mbpd):

2002: 15.3
2003: 17.2
2004: 18.1
2005: 18.6
2006: 18.0
2007: 17.4
2008: 17.5

If the top three's rate of increase from 2002 to 2005 had continued out to 2008 they would have (net) exported 22.6 mbpd in 2008, instead they showed three years of lower net oil exports relative to 2005, which is precisely what we warned about in January, 2006.

 
At Thursday, July 9, 2009 at 1:50:00 PM PDT, Anonymous Anonymous said...

Does anybody know what are our options for fueling airplanes. I mean "electric planes" are not around the corner....so what will it be ? I mean even considering a late peak with a very slow decline, I still find it unlikely there will be anything to replace jet fuel ? Or is there ?

- Paul

 
At Thursday, July 9, 2009 at 2:24:00 PM PDT, Anonymous aangel said...

JD:

Are you using the world's largest economic contraction since WWII as evidence that the Export Land Model is incorrect?

Really?

And are you also suggesting that the current drop in oil production is due to conservation and efficiency?

Clearly we should continue in just this vein: cancelling out exporter consumption growth through conservation and efficiency in the OECD.

Can you please clarify exactly what you are claiming? I must be misunderstanding what you are saying because even when I disagree with you your thinking is usually solid, but your assertions here seem to be as odd to me as the commenter who thought it unreasonable to assume there would be food and fuel riots as the petroleum gets tight.

-André

 
At Thursday, July 9, 2009 at 2:55:00 PM PDT, Blogger Barba Rija said...

The main problem in the ELM is the inherent sheer irrationality of the countries behaviour that the model assumes as fact.

This is because in an ELM "crisis", prices should go through the roof (Jeffrey is here arguing that what happened in 2008 was precisely this, but this is merely an illusion of prejudices), and because they go through the roof, smoothly or not, these exporting countries are faced with a very big dillema:

Either continue to pander to their own population with pathetic gas prices and such, which would mean a ridiculously increasing amount of cash being thrown to the garbage, or rather, try to cull their own population oil's demand.

This also pressuposes that the oil crisis, which creates a huge economic crisis, doesn't affect these oil exporting countries, which of course it does.

Either way, the demand cliff we are witnessing and all the economic and political signs we are witnessing, although this crisis wasn't triggered by "peak oil" at all, is simply the refutation of this theory.

We only have to see what happened to Russia, Iran and Venezuela.

Not that it doesn't have its own merit as an academic example. It's only that the world includes many other variables that correct and changes ELM's conclusions completely.


If the top three's rate of increase from 2002 to 2005 had continued out to 2008 they would have (net) exported 22.6 mbpd in 2008, instead they showed three years of lower net oil exports relative to 2005, which is precisely what we warned about in January, 2006.

This is beyond ridiculous. You are cherry picking your examples, consciously or not, and making a point based merely on 5 or 6 numbers. This isn't science, its' numerology. There may be a number of reasons why the growth changed, and they may have something to do with ELM, or nothing at all with it. What am I referring to? Well, oh maybe that Iraq's production went to zero in 2003 and Saudi Arabia had to put their pedal into the accelerator to compensate?!?

Ahh statistics. Should I quote Mark Twain or should I trust your culture?

 
At Thursday, July 9, 2009 at 2:56:00 PM PDT, Blogger bc said...

seem to be as odd to me as the commenter who thought it unreasonable to assume there would be food and fuel riots as the petroleum gets tight.

That's a plain lie, no one said that. Do you think we are stupid?

 
At Thursday, July 9, 2009 at 3:34:00 PM PDT, Blogger JD said...

Andre,
Your blog whoring was irritating me, so I deleted it. You're welcome to post here, but I'd appreciate it if you kept the blog whoring in check.

The point of this post is to present a number of straightforward facts:

A) The ELM is not performing as intended. Consumption growth in exporting countries is not cutting into net exports because it is being swamped by consumption shrinkage in importing countries. Like it or not, the import land effect is very real, and somebody needed to point it out.

B) Exporter consumption growth is a very small fraction (1.2%) of total exports. It is dwarfed by the massive overconsumption in the US, and that's partly why the import land effect occurs. America has the fat, so that's where the fat gets trimmed.

C) I attribute the decline in US demand in 2008 to standard demand destruction due to high prices. There were already huge drops in demand in early 2008, and by July of 2008, US consumption was down by 1.1mbd year-on-year (as I noted here in #365 and #370).

Peak demand is nothing new. It predates the financial crisis, and will continue afterwards. Japan peaked in 1996 and has been steadily declining since. A number of countries are in demand decline: Israel, Italy, Denmark, Germany, and now the U.S.

And yes, continuing this path is the way forward. It's a bit shocking that you, as a strong AGW believer, don't agree. Isn't reduction of emissions (i.e. reduction of oil demand) priority number 1 among global warming activitists?

I'm very interested to see what effect carbon trading/tax (and rationing woohoo!) has on the import land effect.

 
At Thursday, July 9, 2009 at 3:38:00 PM PDT, Blogger JD said...

My favorite "westexas" prediction. 8$ gas on 8/8/08 :D

I don't know... This one's definitely a contender for best-ever:

"From this point out I think we'll see a geometric progression in prices… you know, $50, $100, $200, $400, whatever. The only question now is how short the periods will be between prices doubling again”. -- Jeffrey Brown, June 5, 2008

 
At Thursday, July 9, 2009 at 3:44:00 PM PDT, Blogger JD said...

Jeff, you can spin tell the cows come home, but the bottom line is that your ELM isn't performing as advertised. Oil is heading down to $50 a barrel, and inventories are higher than they've been in 20 years. We may be having a crisis of some sort, but a net export crisis it isn't.

The fact is, you've made a lot of intemperate, poorly thought out predictions. A lot of people invested large sums of money based on your theories, and got MAULED. I'm glad I wasn't one of them.

 
At Thursday, July 9, 2009 at 5:12:00 PM PDT, Anonymous Anonymous said...

"Does anybody know what are our options for fueling airplanes. I mean "electric planes" are not around the corner....so what will it be ?"
Outside the US they will replace domestic long haul flights with high speed electric trains. I suspect Americans will DRIVE.
Over water long haul will have to be planes if you need to get their in a hurry. Biofuels work just fine for jets. So probably more trains, less (but still some) planes and more automobiles.
Unless somebody invents tamper proof crash resistant lightweight nuke plants that is.

DB

 
At Thursday, July 9, 2009 at 6:17:00 PM PDT, Blogger Eric J. Fox said...

On another note, look at what these guys are up to lately:

http://www.theoildrum.com/node/5555

 
At Thursday, July 9, 2009 at 7:09:00 PM PDT, Anonymous Jeffrey Brown said...

As I noted in the comment, I can't predict the time period between the doublings, and I almost always noted that the price of oil was a horse race between declining demand and declining net oil exports, and I think that next year the decline in net oil exports will again outpace the aggregate decline in demand. But as noted above, the scale of the decline in demand surprised me.

In any case, following is what we wrote in our paper on the top five net oil exporters, and I said the same thing when I presented out work at the ASPO-USA conference in 2007.

We can argue "why" until the cows come home, but the fact is that despite rising oil prices we have seen three years of lower combined net oil exports by the top net oil exporters, relative to their 2005 rate. Furthermore, our model and recent case histories show that net export declines tend to show an accelerating decline rate pattern, with the bulk of post-peak exports being shipped early in the decline phase.

http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-future-net.html
A Quantitative Assessment of Future Net Oil Exports by the Top Five Net Oil Exporters (January, 2008)

Excerpt:

“Declining net oil exports will inevitably result, absent a severe decline in demand in importing countries, in continued rapid increases in oil prices, as oil importing countries furiously bid against each other for declining oil exports.”

 
At Thursday, July 9, 2009 at 7:13:00 PM PDT, Anonymous Jeffrey J. Brown said...

Re: Barba Rija

Could you provide some examples of exporting countries that maintained constant to rising net oil exports, as their production fell?

I can provide you with some examples of oil exporting countries that became net oil importers, even before their production peaked, because of rising domestic consumption, e.g., the US and China.

 
At Thursday, July 9, 2009 at 7:25:00 PM PDT, Anonymous Jeffrey J. Brown said...

Regarding $8 Gasoline & Advice

As noted above, I said that for planning purposes one should assume much more expensive gasoline--for the sake of argument $8 on 8/8/08. As the Anti-Doomer knows, I also said that I really didn't expect gasoline to hit $8 in 2008.

But what I have been advising people to do for close to three years has been very clear, which I reduced to the following essay in early 2007:

http://graphoilogy.blogspot.com/2007/04/elp-plan-economize-localize-produce.html
The ELP Plan (April, 2007)

Excerpt:

"For some time, I have suggested a thought experiment. Assume that your income dropped by 50%. How would you change your lifestyle?

Many employees of Circuit City don’t have to imagine such a scenario. Many higher paid employees at Circuit City have been fired and then been told that they are welcome to apply for their old jobs, subject to about a 50% pay cut.

In my opinion, the unfortunate new reality is that we are going to see a growing labor surplus--against the backdrop of deflation in the auto/housing/finance sectors and inflation in food and energy prices. By reducing your expenses now, while you can do it voluntarily, you will at least be better prepared for whatever the future may bring."

A question for JD:

Other than your implied message to "Party On Dude," because Peak Oil if off in the distant mists of time, precisely what have you been advising people to do for the past three years?

 
At Thursday, July 9, 2009 at 7:55:00 PM PDT, Anonymous Jeffrey J. Brown said...

The stipulated conditions for "Export Land" were a -5%/year production decline rate, a +2.5%/year rate of increase in consumption, with consumption equal to half of production at final peak. After four years, we saw an overall 18% decline in production, with an 11% overall increase in consumption, that resulted in a 47% overall decline in net oil exports.

For Mexico, since 2004 (EIA), we have seen a -4.7%/year production decline rate, a +1.3%/year rate of increase in consumption, and consumption was equal to about half of production at final peak in 2004. After four years, we have seen an overall 17% decline in production, with a 5.4% overall increase in consumption, that resulted in a 42% overall decline in net oil exports.

 
At Thursday, July 9, 2009 at 8:44:00 PM PDT, Anonymous DoctorJJ said...

"By reducing your expenses now, while you can do it voluntarily, you will at least be better prepared for whatever the future may bring."

Reducing expenses is a good way to prepare for the future??? Wow!!! Thank you, Captain Obvious.

DoctorJJ

 
At Thursday, July 9, 2009 at 9:22:00 PM PDT, Anonymous goofy said...

"I don't know... This one's definitely a contender for best-ever: "

the best ever is matt simmons basically going on fast money at the almost exact top of the oil market and saying we are all going to go back to living in villages.

http://www.treehugger.com/files/2008/07/matt-simmons-peak-oil.php

 
At Friday, July 10, 2009 at 3:24:00 AM PDT, Anonymous Brother Cadfan said...

Paul,

Jet fuel type compounds can be synthesized from coal and natural gas. I think in fact the process has been discussed a lot here. Whether this is environmentally sound, you decide. Remember, realistically speaking aviation is quite a small user of the contents of a given barrel of oil. The Nazis ran most of the Luftwaffe on coal synthesised fuel.

I'm a bit of a critic of trains, I must say. Some European countries have well developed train systems in which the huge infrastructure costs are paid and then subsidized ad naseum courtesy of the tax payer. It is a trade off. There is certainly a big role for trains in journeys up to maybe 500/600 miles but beyond that it's questionable (there have been studies on this).

It might shock American readers to learn that an open return train ticket from one end of Britain to another can set you back around $300. And it could take you half a day -in spite of the fact the tax-payer is piling in more money than when the railways were state owned.

 
At Friday, July 10, 2009 at 3:40:00 AM PDT, Blogger JD said...

Other than your implied message to "Party On Dude," because Peak Oil if off in the distant mists of time, precisely what have you been advising people to do for the past three years?

I haven't been advising anyone to do anything. I'm not a doomer. I'm sure that you, The Oil Drum, peakoil.com, LATOC, Clusterfuck Nation, Andre's peak oil lessons, The Archdruid, Dmitry Orlov, Richard Heinberg, Clifford J. Wirth Ph.D, and a few thousand other individuals, websites and peak oil peddlers have more than enough advice for anybody who wants to take it. What possible need could there be for one more clone flogging the exact same message?

My job in the peak oil community isn't to give people advice. It's to examine people like you with a skeptical and critical eye.

 
At Friday, July 10, 2009 at 3:47:00 AM PDT, Blogger Barba Rija said...

Could you provide some examples of exporting countries that maintained constant to rising net oil exports, as their production fell?

I don't need to, I'm not the one making predictions, see? The burden of proof is on your side not mine. It is quite easy to see that before an oil crisis occurs, exporting oil from exporting countries will always compensate for the consumption growth within importing countries. The fallacy of your thesis is twofold:

-To completely ignore the price signals into your system;
-To make the fallacy of "the part is like the whole".

The reason why "ELM" seems to fit some number of cherry picked examples was precisely because the world oil price didn't get swayed by this. There was no feedback to the "ELM" phenomenon in those countries.

Now, when you do this to the whole world, and claim that this effect will actually force the buyers to consume way less, and base your price predictions according to this, you are forgetting about feedbacks and second order iterations that you were warned about and didn't want to listen.

People told you (and I among them), that if such a spike would occur, demand would outspeed export decline as an answer, the economy would contract and this would also affect exporting countries. The end result would be a slight glut, and a deep conservation effort. The price of oil would not be allowed to "skyrocket" due to these inherent forces of the system.

This is what happened. And what do you have left, despite your lame excuses to everyone who invested the way you told them? Past examples. Well, here's a lesson for you, history never repeats itself.

 
At Friday, July 10, 2009 at 5:31:00 AM PDT, Anonymous Jeffrey J. Brown said...

JD: "My job in the peak oil community isn't to give people advice. It's to examine people like you with a skeptical and critical eye."

But your current criticism basically comes down to "Consumption in importing countries has fallen," and the implied message of Peak Oil Debunked is that there is basically nothing to worry about in the short term, so continue on with the fossil fueled auto-centric lifestyle.

In any case, the following graph compares the actual year over year changes in net oil exports, from the first year of decline to the last year of net oil exports, for the ELM, the UK and Indonesia (EIA for actual net export data).

http://www.theoildrum.com/files/image005.png

A constant exponential decline rate would show up as a flat line, parallel to the horizontal axis. What the graph shows is an overall accelerating net export decline rate. If we added Mexico to this graph, it would also show an accelerating net export decline rate.

The real question for Mexico is going forward. At their 2008 production decline rate, they would have to cut their consumption by more than half by the end of 2012, if they wanted to maintain their 2008 net export rate (EIA). While some decline in consumption is likely, I seriously doubt that they can cut consumption enough to fully offset their decline in production.

I'll repeat a question I asked up the thread. Can someone give me some examples of net oil exporters maintaining or increasing their net exports, while their production declines?

And finally, I suspect that 2009 is to our current predicament as 1930 was to the Great Depression. World oil consumption fell in 1930, rising thereafter. And in terms of actual (nominal) oil prices, oil prices rose from the summer of 1931 to the summer of 1937.

 
At Friday, July 10, 2009 at 5:36:00 AM PDT, Anonymous Jeffrey J. Brown said...

Re: DoctorJJ

There were three components to the ELP Plan, which I proposed about three years ago, reducing it to an essay in April, 2007. As noted above, my point was that we were headed for deflationary trends in the auto, housing and finance sectors against inflationary trends in food & energy prices.

In early 2007, the price of one share of Citigroup stock and one barrel of oil were both about $55, versus about $3 and $60 respectively now.

 
At Friday, July 10, 2009 at 7:30:00 AM PDT, Blogger JCK said...

Talk about missing the forest for the trees.

"For some time, I have suggested a thought experiment. Assume that your income dropped by 50%. How would you change your lifestyle?"

This has nothing at all to do with peak oil, and everything with being financially responsible. Everyone should have a plan to deal with loss of income, whether peak oil was yesterday or will happen in 30+ years.

"The stipulated conditions for "Export Land" were a -5%/year production decline rate, a +2.5%/year rate of increase in consumption, with consumption equal to half of production at final peak. After four years, we saw an overall 18% decline in production, with an 11% overall increase in consumption, that resulted in a 47% overall decline in net oil exports."

Ahhhh, "stipulated conditions." But yet a "ferocious" crisis was predicted. So the model is right, but at the same time completely useless because, as JD points out, it only focuses on supply, not (decreasing) demand.

The doomers see the demand increases as inexorable, which it clearly is not. Constantly increasing demand is a cornerstone, fundamental assumption for any doomer argument. Remove that, and the whole thing falls to pieces.

In other words, the analysis is mental masturbation only, because it ultimately did not provide any useful information to anyone.

The remaining advice, as far as I can tell, is to be frugal. I don't need an ELM model to tell that wasting your money on a huge house far away from work and driving a fuel inefficient car is probably a bad idea, peak oil or no.

 
At Friday, July 10, 2009 at 7:34:00 AM PDT, Blogger Ari said...

It's interesting how much of the oil doomsday scenarios depend on the notion that oil consumption inexorably rises. The idea is always that demand, for some reason, cannot be stopped, and supply, due to geological restraints (and unmoving technology) remains stagnant or falls.

But what if demand stops growing in the most major consumer in the world?

http://robertreich.blogspot.com/2009/07/when-will-recovery-begin-never.html

Now, I'm not saying that I believe that Reich is necessarily right, but it's a very interesting possibility. Nor is this limited only to the US. Much of the OECD is saddled with all sorts of debt.

So, what if demand never actually recovers in the OECD?

It's not entirely impossible.

 
At Friday, July 10, 2009 at 8:17:00 AM PDT, Anonymous Anonymous said...

"And finally, I suspect that 2009 is to our current predicament as 1930 was to the Great Depression. World oil consumption fell in 1930, rising thereafter. And in terms of actual (nominal) oil prices, oil prices rose from the summer of 1931 to the summer of 1937."

Have you even read or considered the fact the US has reached peak demand a la Germany and Japan? Read this post by JD:

http://peakoildebunked.blogspot.com/2008/06/364-other-peak-oil.html

Sorry jeffrey but yet another one of your predictions is going to come around to bite you in the bum.

 
At Friday, July 10, 2009 at 8:43:00 AM PDT, Anonymous anony said...

"People told you (and I among them), that if such a spike would occur, demand would outspeed export decline as an answer, the economy would contract and this would also affect exporting countries. The end result would be a slight glut, and a deep conservation effort. The price of oil would not be allowed to "skyrocket" due to these inherent forces of the system.

This is what happened. And what do you have left, despite your lame excuses to everyone who invested the way you told them? Past examples. Well, here's a lesson for you, history never repeats itself."

in general the peak oil community seems so intent on pushing disaster on us they make mistakes. how many times have we seem them latch on to the "disaster" moment and and tell us it's the end of the world? it's bees. it's drought in atlanta.

if you already believe fervently that the world is doomed you don't come to rational conclusions.

 
At Friday, July 10, 2009 at 8:47:00 AM PDT, Blogger JD said...

the implied message of Peak Oil Debunked is ... continue on with the fossil fueled auto-centric lifestyle.

That is definitely not the message of POD. I'm a dyed-in-the-wool car hater, and I've inveighed against the stupidity of the automobile at least a hundred times on this blog (e.g., 45. CARS ARE A VIRUS). On the topic of the automobile, I agree 100% with Jim Kunstler. I don't own a car, I don't drive. In fact, I haven't driven for most of my adult life, and I got off the car crack pipe years before I even heard of peak oil. I personally hate people that drive cars, and consider them to be idiots. I conduct my business by walking, bicycling and riding the train from time to time. In fact, I've written a lot on the carless lifestyle here in Osaka, e.g. 156. BICYCLES IN JAPAN, 285. STREET CAR!, 339. CARGO SCOOTERS AND BICYCLES.

I've also written a ton about scooters, mopeds, segways, electric bikes, electric cars, electric trucks etc. But that too has nothing to do with "promoting the fossil fueled auto-centric lifestyle".

What we're all about here is switching to a frugal, yet highly technological lifestyle which uses almost no fossil fuels at all. I know it's possible because I already live that life.

 
At Friday, July 10, 2009 at 8:49:00 AM PDT, Anonymous goofy said...

"It's interesting how much of the oil doomsday scenarios depend on the notion that oil consumption inexorably rises."

yes, but don't you know we are ADDICTED TO OIL? ADDICTED I TELL YOU! WE CAN'T STOP. we'll be towing our SUVs with horse. we'll never give them up!

obviously this is the serious flaw in doomer logic, that our lifestyle will not adjust to peak oil and one day the economy and our lifestyle will just collapse.

 
At Friday, July 10, 2009 at 9:08:00 AM PDT, Blogger Barba Rija said...

the implied message of Peak Oil Debunked is ... continue on with the fossil fueled auto-centric lifestyle.

Jeffrey Brown in a nutshell: a fallacious, blind, strawman lover and TODbsessed with Peak Oil.

Hope you enjoyed the ad hominemn straight back at ya.

 
At Friday, July 10, 2009 at 2:50:00 PM PDT, Anonymous Anonymous said...

Regardless of whether you're pro or contra automobiles, with the huge natural gas discoveries in Northern British Columbia in Canada it looks like we have gas up the yin-yang.

I wonder how much it will cost to convert a hummer to run on nat gas?
Also: I bet it's not too too difficult to convert nat gas to jetfuel.

Sorry doomers, I think if doom is coming it's not going to be for shortages of substitutes to oil.

In terms of "dieoff" I think the only thing to die off will the numbers of people holding on to the doomer mindset.

I think I am going to barbecue every day from now on and heat my house to 80F in the winter.

Doom indeed. Jeez.

DB

 
At Friday, July 10, 2009 at 5:37:00 PM PDT, Blogger Barba Rija said...

What about the kittens, DB?!? Think of the kittens!!

 
At Friday, July 10, 2009 at 8:07:00 PM PDT, Blogger Ari said...

DB,

The USAF has already flown a B52 using a natural gas/JP-8 blend. It's not difficult, but I am under the impression that because it requires Fischer-Tropsch to make the synthetic fuel (synthetic petroleum? That's like "fake plastic..."), it's a bit more on the margin to produce.

In any case, it's not Star Trek Jetsons future technology. It's pretty current.

 
At Saturday, July 11, 2009 at 12:25:00 AM PDT, Anonymous Gavin said...

For me a key deception of ELM is that producers such as the OPEC nations will leave foreign dollars on the table whilst providing oil at effectively subsized rates to their own citizens.

Although this will happen to a certain extent, I do not think that it will happen to the extent required for ELM to have the effect that its proponents say it will on prices.

When oil prices are super high, OPEC nations will increase their export rates to get more dollars in, and the locals will be forced to compete in the global market for oil.

Another point is even energy rich nations cannot escape global recessions. Think Russia, Iran, and Iceland (no oil but still energy rich). If an exporters economy is growing, then it will have diverse sources of income which will be negatively impacted if their overseas trading partners are ravaged by high oil prices.

 
At Saturday, July 11, 2009 at 3:37:00 AM PDT, Anonymous Tony said...

I'm not sure what this post is proving, JD. You posted a chart that showed the top 20 oil exporters increased their consumption by about 1.4 mbpd over the three years to 2008. That's 1.4 mbpd less to export. That's 1.6% of world oil production. In 3 years, presumably it will be closer to 3.5% of world oil production, at the rates of growth you indicated. Why is that insignificant?

Also, you mentioned in a reply that oil inventories were higher than they'd been for 20 years. Where did you get that information? I checked the EIA's STEO and found that it estimated mainly stock declines, since 2000. That is, stocks have actually declined in the last 8 years.

Your arguments don't seem to be very convincing.

 
At Saturday, July 11, 2009 at 6:47:00 AM PDT, Anonymous Jeffrey J. Brown said...

The UK is an interesting net export case history, since they have a very compact net export history--25 years of net oil exports from 1981 to 2005, inclusive (with almost no increase in consumption over their decline phase). The EIA shows cumulative total liquids net exports over this time period of 6.3 Gb. In 1999, the UK was a major net oil exporter, (net) exporting 1.2 mbpd, with production of 3.0 mbpd and consumption of 1.8 mbpd (all total liquids). As of the end of 1999--their all time record high annual net export rate--care to guess how much of the 6.3 Gb had been (net) exported?

At the end of 1999, the UK had shipped 5.1 Gb. So, at their all time production peak, and at their all time peak net export rate, they only had 19% of their cumulative remaining net exports left, having already shipped 81%. Two years later, at the end of 2001, their cumulative net oil export capacity was 90% depleted.

In terms of post-peak cumulative net oil exports, in just two years the UK had shipped 48% of post-1999 cumulative net oil exports. (Two years after Indonesia's final production peak in 1996, they had shipped 44% of post-1996 cumulative net oil exports).

The key difference between the top five net oil exporters and the UK/Indonesian case histories is consumption as a percentage of production at final production peak, about 25% for the top five versus about 50% for UK/Indonesia. So, it would take only a little over two years for the UK/Indonesia to ship about 50% of post-peak cumulative net oil exports, while it would take about 9 years for the top five to ship 50% of their post-2005 cumulative net oil exports (some time around 2014 based on Sam Foucher's modeling).

For the third time could someone show me some counter examples of exporting countries systematically cutting their consumption in order to maintain net oil exports?

Anyone? Anyone?

 
At Saturday, July 11, 2009 at 7:03:00 AM PDT, Anonymous Jeffrey J. Brown said...

Regarding the Great Depression analogy, the US is not the world.

In 1937, there were reportedly three million more cars on the road in the US in 1937 than in 1929. The key difference today is that hundreds of millions of people worldwide want to drive a car for the first time. In my opinion, China is to our current predicament as the US was to the Thirties.

In any case, as noted above, worldwide demand for oil, after falling in 1930, rose throughout the Thirties, with oil prices increasing at about 11%/year from the summer of 1931 to the summer of 1937. The difference is that we had an expanding oil supply in the Thirties, while our work suggests we are now facing a long term accelerating net export decline rate.

 
At Saturday, July 11, 2009 at 7:06:00 AM PDT, Blogger JD said...

You posted a chart that showed the top 20 oil exporters increased their consumption by about 1.4 mbpd over the three years to 2008. That's 1.4 mbpd less to export.

The US alone reduced its consumption by about 1.3 mbpd in 2008 alone, which compensated for the loss of exports. Net effect due to ELM for the last 3 years => 0.

Also, you mentioned in a reply that oil inventories were higher than they'd been for 20 years. Where did you get that information?

Link

 
At Saturday, July 11, 2009 at 7:46:00 AM PDT, Blogger JD said...

Jeffrey,
You're just repeating material we've all read in your various articles and TOD posts ad nauseum.

As I've pointed out to you before, the UK is not an example of the ELM because its consumption did not increase after it's peak. The UK is a case of pure depletion, unamplified by any real consumption growth in the UK.

I also find your use of percentages and cherry picked examples to be very misleading, particularly to less sophisticated readers, like the fool you bamboozled into thinking that Russian exports were likely to drop to zero in 6 to 9 years. If you are above board, I suggest that you include all major exporting countries in your model, as I have done, and speak in terms of quantities (barrels) instead of percents. I also suggest that you include a third term into your model besides exporter production and consumption growth: importer demand shrinkage. As this post has shown, importer demand shrinkage has a real and large effect on the size of the available export pool.

For the third time could someone show me some counter examples of exporting countries systematically cutting their consumption in order to maintain net oil exports?

There are no such examples that I know of. (Although Iran is close, since they eliminated subsidies to damp domestic consumption and maintain exports. There clearly is a motive for exporters to damp domestic consumption because of the huge monetary losses involved in maintaining domestic subsidies while international prices are high. You yourself have previously acknowledged this effect.)

Nevertheless, the lack of examples is not a problem, because the dynamic is working in the opposite direction, as I have shown in this post. I can definitely point you to an importer systematically cutting their consumption, and thereby maintaining the size of the available export pool. Read the post, Jeff. Why should exporters cut their growth when most of them are poor and have growth rates which are really just peanuts in the scheme of things. Is 5,000 barrels per year growth in Angola really "growth"? For that matter, Azerbaijan has been dropping its consumption for the last three years. Is that "growth"?

It's far easier to do the cuts in the US because that is where the fat is. And that's exactly what's happening. In fact, in my next post, I will be showing that consumption shrinkage in the US alone in 2009 will undoubtedly wipe out another 3 years of consumption growth by all exporters combined. So that's 6 long years where the effect of ELM will cancel out to nothing, zip, zero. Hardly a "ferocious" net export crisis, Jeff. Yes, the pool of exports is shrinking due to increased exporter consumption, but that is being fully compensated for by reduced importer consumption -- thereby leaving the size of available exports unchanged. It's the Import Land Model. It's real. Get used to it.

 
At Saturday, July 11, 2009 at 9:06:00 AM PDT, Anonymous Anonymous said...

Never fear, there will be NO ELM crisis! TheAutomaticEarth has proclaimed within 5 short years 2/3 of 'ordinary people' will be priced out of oil! "Demand collapse sets the stage for supply collapse", i'm not sure what they mean by that statement exactly, maybe someone could explain this new doom to me.

This is the boldest prediction I have seen recently, it even tops some of Simmons stuff. Use oil at an accelerating pace, like we were in the past and we are DOOMED. Use less oil than before due to lower demand and we are still DOOMED. :*(

--ZZ--

 
At Saturday, July 11, 2009 at 9:26:00 AM PDT, Anonymous Hothgor said...

While I appreciate your determination to 'unseat' Westexas, you should know that virtually every point in these comments has been discussed, rehashed and covered by numerous posters, myself included, over at The Oil Drum. Westexas simply can not be 'proven wrong' - not by you, or anyone else for that matter.

The 'goal post' will keep changing. Relevant data that he has been repeating daily for the last 5 years will suddenly 'not matter', only to be followed later on by "I was in the shower this morning and had a new brainstorm - it seems that...." or "I was sitting in my golf cart and got a brainstorm about..." and then he will provide one new paragraph into his copy/paste mantra before repeating the exact same dribble.

Even when I made a point of how 'noisy' his 'perfectly stable' Hubbert Linearizations were, he would not relent. He is either a big fool, or a networked group of bots that Leanan has fallen in love with!

Up next, he will bring up the Richard Rainwater defense. "If my theory doesn't work, I will use the Billionaire Investor as a trump card to hammer home my point".

BTW, WT, how has that worked out for him lately? He got out of oil at $129, and back in at $92. It must be terrible to see your investments worth half of what they were only months before...

I bet hes waiting for that geometric progression in price increases!

 
At Saturday, July 11, 2009 at 12:53:00 PM PDT, Anonymous Anonymous said...

JD,
There is an example.
Norway.
Through a systematic decades long program of extremely high taxation on the consumption side, Norway has managed to come out ahead of it's most comparable competitor the UK.
The UK is not an example of ELM, it's an example of gross mismanagement.

DB

 
At Sunday, July 12, 2009 at 6:06:00 AM PDT, Anonymous Jeffrey J. Brown said...

It's always interesting when I am told what my own model means. The crux of of my export argument is that net oil exports tend to fall at a rate faster than the production decline rate. If the rate of increase in consumption is fast enough, e.g., China and the US, a net exporter can go to net importer status, even as their production increases.

But the more common scenario is generally flat to increasing consumption, with declining production, leading to an accelerating rate of decline in net oil exports.

 
At Sunday, July 12, 2009 at 6:17:00 AM PDT, Anonymous Jeffrey J. Brown said...

Regarding Norway, like the UK, they have shown almost no increase in consumption over their decline phase, since peaking in 2001. And their overall net export decline rate, -5.0%/year, is only slightly higher than their overall production decline rate, -4.7%/year (EIA), but this is primarily due to the fact that their consumption as a percentage of production at final peak was so low, about 6%, which is primarily due to their population being so much smaller than the UK.

However, their net exports have fallen by 30% since their production peak, and Sam's modeling suggests that they will approach zero net oil exports around 2026.

I was accused of "cherry picking" examples of net export declines, which suggests that there are case histories I am ignoring. So, for the fourth time, where are the counter examples of net exporters systematically cutting their consumption in order to maintain net oil exports?

 
At Sunday, July 12, 2009 at 10:27:00 AM PDT, Anonymous Anonymous said...

Jeffrey asked for any example of a country where they had deliberately held back consumption.
I gave it to him. Norway held back consumption both before peak and after peak through taxation and other measures.
But he still won't shut up and is convinced he's right.

What he should do is get the hell off this site and stop polluting it with his nonsense.


Well I guess that's the difference between people with off the wall theories (and especially doomers with a religious end-of-the-world bent) and those who live in the real world.

What I find interesting about doom cults is this: why is there no mass-suicide peak oil doom cult when they clearly believe that demand (induced by excess population) is the problem.

DB

 
At Sunday, July 12, 2009 at 3:55:00 PM PDT, Anonymous Tony said...

The US alone reduced its consumption by about 1.3 mbpd in 2008 alone, which compensated for the loss of exports. Net effect due to ELM for the last 3 years => 0.

But you missed my point entirely, JD. As the exporting countries continue to increase consumption, that 1.4 mbpd over three years, becomes, say, 1.6 mbpd over three years, later 2 mbpd and so on. The US, the largest single consumer of oil, is unlikely to continue decreasing its consumption by 1.3 mbpd, is it? What if recovery starts next year and manages to continue for 3 years? What will the net export picture look like?

You don't see to think things through, JD.

On the question of inventories, I see that you included only the US numbers. As I'd mentioned, your statement of highest inventories for 20 years doesn't hold true at the world level. Did you realise that oil in freely traded around the world?

 
At Monday, July 13, 2009 at 1:53:00 PM PDT, Anonymous Anonymous said...

I think JD will turn out to be correct and US imports will continue to fall, with a few upticks here and there. I do not believe the US economy, or much of the world economies, will recover this year, next year, or even the next decade. The economy is one area where I am a doomer.

It's funny how non-peak oil believers and POers are coming to the same conclusion.. in the possibly near future we will be living at a 3rd world standard of living. Things that make you go hmm.

 
At Friday, July 17, 2009 at 5:36:00 AM PDT, Anonymous Jeffrey J. Brown said...

Re: Anonymous & Norway, what I asked for was an example of an importing country that cut its consumption in order to maintain constant net oil exports as their production fell. You provided an example of a country with basically flat consumption that showed net exports declining at a rate faster than their production.

I was criticized for "cherry picking" examples of exporters with declining production, yet the counter examples that the POD People provide show net exports declining faster than income, which supports my whole point.

BTW, Egypt is an interesting case history. Their consumption at their final production peak in 1996 was 54% of production (EIA). From 1996 to 2006, their production fell at -3.4%/year, and their overall net export decline was -29.3%/year, which fits the pattern that I and the POD People have shown.

 
At Friday, July 17, 2009 at 8:42:00 AM PDT, Blogger DB said...

"What if recovery starts next year and manages to continue for 3 years? What will the net export picture look like?"

You are making the assumption that the ENTIRE reduction in imports is due to the recession.
It isn't.

Thus your argument falls on it's ass.
This is yet another example of not being able to see the wood for the trees because you are so blinded by a model that you believe in intensely.

Sorry buddy it's only a model and it's a crappy model at that since it only models one subset of reality and misses a huge chunk.

DB

 
At Monday, August 17, 2009 at 2:02:00 AM PDT, Anonymous Sue said...

very interesting post...

 

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