Peak Oil (Demand) Front Update 2

Hat tip to Raul Ilargi Meijer of The Automatic Earth.

Source: Bloomberg via The Automatic Earth.

The Permian shale oil basin contains as much as the Ghawar oil field did originally? That'll put supply-side Peak Oil off until the storms of our grandchildren REALLY ramp up.

US Shale Producers Weather Oil Price Storm (Ambrose Evans Pritchard - The Telegraph)

[OPEC’s] worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has failed to break the back of the US shale industry. The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is an illusive victory. North America’s hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits. 

Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week – with some poetic licence – claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel. “Definitely we can compete with anything that Saudi Arabia has. We have the best rock,” he said. Revolutionary improvements in drilling technology and data analytics that have changed the cost calculus faster than most thought possible. The “decline rate” of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more. Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.

But oil demand is still either running behind oil supply, or is actually on the decline. Remember, consumption of fossil fuels have remained stagnant for the past three years, 2013 through 2015.

Growing Oil Glut Shows Investors There’s Nowhere to Go But Down (Bloomberg)

Money managers have never been more certain that oil prices will drop. They increased bets on falling crude by the most ever as stockpiles climbed to the highest seasonal levels in at least two decades, nudging prices toward a bear market. The excess supply hammered the second-quarter earnings of Exxon Mobil and Chevron. Inventories are near the 97-year high reached in April as oil drillers boosted rigs for a fifth consecutive week. “The rise in supplies will add more downward pressure,” said Michael Corcelli, chief investment officer at Alexander Alternative Capital, a Miami-based hedge fund. “It will be a long time before we can drain the excess.” 

Hedge funds pushed up their short position in West Texas Intermediate crude by 38,897 futures and options combined during the week ended July 26, according to the Commodity Futures Trading Commission. It was the biggest increase in data going back to 2006. WTI dropped 3.9% to $42.92 a barrel in the report week, and traded at $41.75 at 12:20 p.m. Singapore time. WTI fell by 14% in July, the biggest monthly decline in a year. It’s down by 19% since early June, bringing it close to the 20% drop that would characterize a bear market. 

U.S. crude supplies rose by 1.67 million barrels to 521.1 million in the week ended July 22, according to U.S. Energy Information Administration data. Stockpiles reached 543.4 million barrels in the week ended April 29, the highest since 1929. Gasoline inventories expanded for a third week to 241.5 million barrels, the most since April. “The flow is solidly bearish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It reflects a recognition that the market is, at least for the time being, oversupplied.”

"According to David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. 'Demand growth has faltered a bit.'” That is, demand is still growing slower than expected in response to the lowered oil prices compared to their June 2014 heights or even dropping. Now where are the latest statistics on fossil fuel demand in 2016?

Oil Glut Proves Harder To Kill Than Saudis To Goldman Predicted (Bloomberg)

The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs declared the supply glut over is rapidly ebbing away. Oil is poised for a drop of 20% since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts. “The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal,” said Harry Tchilinguirian at BNP Paribas in London. 

“It’s probably going to take a little longer than they expected.” Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices retreated to a three-month low near $41 a barrel this week amid a growing recognition the surplus will take time to clear. “There’s lots of crude and refined products around,” said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. “Demand growth has faltered a bit.”

In closing allow me to show you the glut in oil inventories since 

Source: Bloomberg via The Automatic Earth.

And demand is certainly going to drop again once the USA summer recreational driving season is over when school starts again.

Suppose Consumption of Fossil Fuels Were to Peak in 2030

Even though, so far, they appear to be peaking due to the levelling off of demand, due to the ramp-up of renewables and because of affordability and financial reasons, like too high a debt load.

Source: Sam Caranas, Arctic News.

But if the did, a certain Grebulocities figured out a possible end point for atmospheric carbon content and posted it a a response to the post "Dark Ages America: Climate" at The Archdruid Report blog, in which the archdruid, John Michael Greer, suggested that fossil fuel emissions might peak in 2030 -- this was on July 30, 2014 mind you:

Now if only I could somehow find a time machine or a longevity potion and see if you're right... 

I just made a crude spreadsheet in Excel to see what type of CO2 concentration we might peak at under the assumption that the rate of change of the CO2 concentration peaks around 2030, falling to 0 by 2100. Under my model, the CO2 concentration rises by 0.55% this year (roughly equal to its average growth rate over the last decade) and the growth rate increases by 0.01% per year from now until 2029 (at 0.7%/year), then falls by 0.01%/year until it bottoms out at 0 by 2099. 

The peak concentration under these assumptions is "only" 562 ppm, obviously reached in 2099, conveniently about double the preindustrial level where temperatures were 0.8 C cooler than present. If the mean of most model estimates of equilibrium climate sensitivity is correct, we see about 3 C/doubling. So under these really crude assumptions, we've got a world 2.2 C warmer than present. Of course the error bars are huge, and they're larger on the warmer side. But if this is roughly where we end up, we're in the mid-Pliocene warm period at about 3.3 Ma, or perhaps a little worse. This is inconvenient because sea levels were 25 m higher than present, with no West Antarctic ice sheet and little or no Greenland ice sheet, but the East Antarctic ice sheet still existed and contained most of its current mass.

Well the CO₂ did rise by about 2.25 ppm on average from 2014 through 2015.by about 0.57% which is roughly on target with his prediction of 0.55%. But from 2015 through 2016? Well we don't have the minimum yet, but the CO₂ rise according to the graph maxima was about 3.5 ppm or about 0.88% according to the 2015 average content. And that's not even accounting for the fact that CO₂ content for 2016 finally peaked out at around 408 ppm in April - May, shown below.

Annual CO₂ pulse on Keeler Curve through July 2016.
Source: Mauna Loa Observatory, NOAA.

It appears that the 3.5 ppm rise is now being maintained. Although we're just coming off an El Niño, it's possible, especially when compared to the graph at the top, that we are having increased positive feedbacks or less negative feedbacks or both from natural sources, because it appears we did not have a nearly as big a Carbon Dioxide increase the last time we had an El Niño as strong as the one we've just had, i.e., the one in 1997-1998.

So will the atmosphere's Carbon Dioxide content be as little as 560 ppm? Don't know. But given the present rate of fossil fuels burning through 2030 and a new normal of 3.5 ppm for annual Carbon Dioxide content increase, we could be looking at 450 ppm or so around 2030, which makes the terminal content that much larger. Robertscribbler reports that under Business as Usual (IPCC's RCP 8.5) it could be as high as 936 ppm with a average planetary temperature increase at that time of around 4 to 5 degrees Celsius (7 to 9 Fahrenheit). Will it actually get that bad? Don't know.

But I DO know that global warming is NOT a myth!

Peak Oil Now or Else! Says the Earth.

From Flassbeck Economics on the ability of the IPCC, governments and scientists' worst case scenarios to keep up with what's actually happening:

The reality of Anthropogenic Climate Disruption (ACD) continues to outstrip our ability to model worst-case scenarios, as it is happening so much faster than ever anticipated.Sixty-three percent of all human-generated carbon emissions have been produced in the last 25 years and science shows that there is a 40-year time lag between global emissions and climate impacts. This means that we have not even started to experience the consequences of our growing emissions (see here). In the meantime, nothing substantial, nothing efficient is happening to curb CO2 emissions.

For example:

• Late 2007:The Intergovernmental Panel on Climate Change (IPCC) announcesthat the planet will see a one degree Celsius temperature increase due to climate change by 2100.
• Late 2008: The Hadley Centre for Meteorological Research predicts a 2C increase by 2100.

We've already blown through the 1.0 degree Celsius (1.8 Fahrenheit) increase from 1880s levels, we'll see a 2 degree Celsius (3.6 Fahrenheit) increase before too long. 2025?

The further predictions are dire and portrays scenarios which are extremely bad.

To avoid them we have to get off of fossil fuels as soon as possible and start sequestering carbon as soon as possible too. But that essentially requires a change in the corporate-driven capitalist system and a change of heart in humanity in general, in the American people in particular. Will the latter occur as it needs to? Morris Berman says it ain't gonna happen.

Peak Fossil Fuels Soon?

It looks like we may have peak fossil fuel demand quite soon, due to the ramp-up in renewable energies. But then again, it may be because of the overhang in debt is killing demand, at least for finished products.

And last year the demand for coal dropped quite a bit. It's probable that the drop in coal demand was because of drop in demand from China for commodities: its economy has been faltering a bit lately. But the drop in coal demand was made up for, and a little bit more, by demand for oil and natural gas. All in all, fossil fuel use rose by 0.56% yoy in 2015.

Sources:

Robertscribbler

The Automatic Earth (here, here, here and here)

Gail Tverberg's Our Finite World - Debt