Global and Russian Energy Outlook to 2040

Ron Patterson Uncategorized

Like BP, OPEC, the EIA and the IEA Russia also publishes an annual energy outlook. It is called the Global and Russian Energy Outlook to 2040. It is published by The Energy Research Institute of The Russian Academy of Sciences and The Analytical Center for The Government of The Russian Federation. I have no idea who these guys are but their titles sound impressive and they seem to be Russian think tanks funded by the Russian Government. But that is just an assumption of mine.

It is a very large 175 page PDF file that appears to be very scholarly and well researched. However they appear to be very optimistic in their prediction of the future oil supply out to 2040.  In one scenario they are not optimistic at all for coal production however.

The report has three scenarios, the Baseline Scenario where business as usual continues until 2040. The New Producers Scenario where oil prices collapse due to overproduction and The Other Asia Scenario which is based on peak coal and the effect this will have on China and India. In that scenario they assume China coal production will peak within the next ten years. The Baseline Scenario assumes adequate supplies of coal will be available however. Only in the Other Asian Scenario do they figure in peak coal. All three scenarios assume plenty of oil will be available through 2040.

Russia Take Energy GrowthObviously they don’t see any peak in oil production out to 2040, only growth. However they have coal and gas growing even more. And they seem to be very optimistic about “other” renewables. I don’t know exactly what that might be.

Russia's Take Price

And here is their take with an oil price overlay. It appears they think, because production increases right along with demand, that the oil prices will remain flat.

Below is their prediction of future crude oil production in barrels per day converted from tons per year using 7.27 barrels per ton.

Russia Snip

There seems to be some gross overestimates of even current production here but some others, like Russia, China, India and a few others are pretty close. I suspect that they may be counting some NGLs for some countries. But it is the change per 5 year period, the growth or decline is the important thing.

To better see what these Russian Think Tanks are predicting we need to look at the percent change. Here barrels per ton doesn’t make any difference. Below is the percent increase or decrease per 5 year period. These are 5 year percentage changes, not annual changes.

Russia Snip 2

They are some astounding predictions here. They are predicting Norway will increase production by 21 percent between 2015 and 2020. That is an increase 3.9% per year. China does even better and Iraq is the biggest gainer of all, producing 5.75 million barrels per day by 2020. But they have them producing 4.92 million barrels per day in 2015. That is about 1.6 million barrels per day more than they are producing today.

But notice they have Russia peaking by 2015. In fact the number they give for 2015 Russian production is about 100 thousand barrels per day below what Russia says they are producing today, which is just over 1,440 thousand tons per day. And that is about 15 to 20 thousand tons per day below what they said they produced in December. So there is no doubt that these two Russian think tanks believes Russia has already peaked. And keep in mind that this is coming from people who believe almost every other country will continue to increase production for about two decades. These people may be a little naive about the rest of the world but they should be well versed on Russia’s production prospects.

By 2020, or a year or so thereafter, the US will be importing only from Canada. They are predicting that Europe and Asia, by 2040, will depend on imports for 77 and 80% of their oil. And this coming from folks who are extremely optimistic about oil production… Scary!

Russia's Take Imports

In the Baseline Scenario, the dependence on imported oil in all key importing regions, except North America, will continue to increase. As of 2020, due to increased domestic production, North America will be able to do without crude oil imports from other regions, although the key country in the region – the USA – will depend on its neighbour, Canada, for more than a third of its supplies right up to 2040 (Table 1.11).

And here’s why:

Russia's Take Shale

They believe shale oil, by 2040, will be will account for about 9.4% of the world’s oil production from about 2.8% in 2015. The lions share coming from the USA. And notice none comes from Russia.

Converting million tons per year to barrels per day, using 7.55 barrels per ton of Light Tight Oil, they have the US producing about 2.5 million barrels per day in 2015, increasing to 4.1 mbd in 2020 and 8.3 mbd in 2040. They have the world producing 2.7 mbd today and about 9.3 mbd in 2040.

Russia's Take US

I made the above chart using the Russian data in the table above. I had to make the change linear between the five year data because that is all the data they provided. You may think they are using Crude plus NGLs but if that were so then that would put US production in 2010 at 7.57 million barrels per day.

At any rate they have US peaking around 2025 where the EIA  has the US starting to decline in 2020.

Russia's Take Producers

Here is where they expect the increase to come from. They are expecting big things from the Middle East. After 2025 almost all the increase comes from the Middle East.

But as optimistic as these guys are concerning oil world production, they are still not quite as optimistic as the EIA. Russia's Take Opinion

The EIA is far more optimistic concerning coal production also. Everyone expects all types of energy consumption to increase right on through 2040.

Russia's Take GDP

This is their outlook for the future GDP of the world’s largest economies. In 2010 they have China’s GDP at 25% below that of the USA, but in 2040 they believe China’s economy will be double that of the USA.

Russia does everything in tons but the two tables below gives a very good indication of where they see everything going, from GDP, Population, CO2 emission to all types of energy consumption. And they give the annual rate they expects these things to grow.

Russia's Take Basic Energy

Notice the only thing with negative growth is GDP energy intensity. That is they expect World GDP to grow much faster than energy consumption. They have GDP growing faster than energy by 2.1 percent per year, and that is every year. I am not so sure this is possible. I know GDP is not pegged to energy consumption but there is a definite connection. There is an elastic tether tying GDP to energy consumption and that elastic tether can only be stretched so far before it snaps.

78 thoughts to “Global and Russian Energy Outlook to 2040”

  1. I have read a good bit maybe most of what used to come out of Russia in the days of the old USSR- the real stuff written by the few people who managed to get out.

    Russia is still a state under the influence of a less than benign authoritarian government and it is difficult to impossible to tell when Russian data is influenced by political considerations.

    But since they are predicting a decline in their own production I personally choose to read the rest of their scenarios as pablum for the children and the naive masses of Joe and Suzie Sixpacks world wide. They authors probably expect people with a modest amount of brains to do a little reading between the lines and simply discount most of their optimistic scenarios.

    People who used to live in the old USSR got to be very expert at reading whatever actual data was included in the output of the soviet press and ignoring the conclusions supplied. I think maybe that this way of reading the Russian oil outlook papers might be the way to go.Look at whatever they state as a fact or as a problem as having a high likelihood of being true and the rest as window dressing of one sort or another.

    This may seem a little extreme but it is basically what we have to do even when we read a lot of stuff put out by our own government. Even the longest of long shots gets polite treatment- as in the case of fusion power- and problems are downplayed – as in peak oil being poo pooed by just about all of the mainstream press.Why should we expect the Russians to be any different?

    Maybe I am an idiot but so help me there is no way I can see oil prices remaining flat for a couple more decades in real terms except if the world economy develops a terminal case of cancer and gradually just stagnates worse and worse. The energy returned on energy invested is necessarily going to go down barring techno miracles and likewise the actual material needs such as concrete and steel to develop marginal oil fields is going to increase.Population is going to increase and even if living standards don’t rise much or even at all the developing countries appetite for oil is going to grow because they can get so much utility out of a barrel compared to rich countries. In Bangladesh a barrel is very likely to be burned in either a bus or a farm tractor as compared to any well off country where it is apt to be burnt in a car with one passenger at the most.

    Depletion never sleeps and while I am gung ho in respect to the future of the personal electric car and other energy saving changes in lifestyle I don’t think we are going to escape a truly deep and extraordinarily long depression as the result of peak oil. We might not even survive as an industrial civilization if the peak has a sharp enough crest and the backside is a steep enough shark fin.That would leave too little time to adapt to less and less oil.

  2. So … if the US extracts 2.5 million barrels LTO per day in 2015 and 8.3 mbpd in 2040 an average would be (appx) 5.5 mbpd x 365 = 2,007 mbpy (per year) x 25 (years, from 2015 to 2040) = 50 billion barrels. That is a lot of ‘undiscovered’ petroleum considering the USGS and EIA only have Bakken + Eagle Ford reserves = 10 billion barrels (or so).

    The report no doubt does not mention how much it will cost to extract these last bits of hydrocarbons nor how little (no) returns will be gained by their use; how all returns within the petroleum ambit have to be borrowed … by insolvent debtors from insolvent lenders. This is more wishful thinking.

    1. These things bring me memories!
      Isn’t the population ‘Just’ the population growth [NOT including depletion of existing fields] is about 3 times faster than the new discoveries… If the ‘projections’ for these new discovered fields are to be believable, or real?

      Isn’t BP, ExxonMobil, Total SA, Chevron, and Royal Dutch Shell ‘Projections’ are a total joke. Hyper scams to loot investors and small-operators through merge and acquisitions. Astounding fraud! Some of BP’s PAST ‘Projections’ track records shows over 300% miss.

      Kurt Cobb: Reports issued in the year 2000… the U.S. EIA forecast that total world liquid fuel supplies would reach 93.2 million barrels per day (mbpd) in 2010. The IEA forecast 95.8 mbpd.
      Actual total worldwide liquid fuel production for 2010 was 87.1 mbpd.
      The U.S. EIA report included a price projection for crude oil of about $28 a barrel for 2010 (adjusted for inflation).
      http://resourceinsights.blogspot.com/2012/12/previous-long-term-government-industry.html

  4. As far as I’m concerned I think their cover image says it all: “The Ghosts of Energy Past”. The rest is pretty much a bed time fairy tale for the little children… Though I did kinda like the giant picture of the refinery with the tiny insert of a solar panel in the lower left hand corner , nice touch!

    As for the adults, Мы трахались!

    1. Hi Fred,

      What is the translation?

      Methinks you have some insights similar to mine when it comes to reading Russian documents.

      2. Mac,

        Re my insights into reading Russian documents… My ancestry is Hungarian and I have visited Széll Kálmán tér (Square), formerly Moszkva tér, Moscow (Square) in Budapest.
        The subway there is fabulous!

        Cheers!
        Fred

  5. It almost LOOKS like everyone is bluffing and the Russians are laying their cards on the tables instead of calling the bluff.

  6. 11 mbpd to be added to the middle east by 2040?

    They must be looking for Iraq miracles.

  7. Ron,

    There have been a string of important new oil discoveries in Norway’s Barents Sea which might be reflected in the Russian document. This fact is based both on newly published reports and on my own conversations with numerous Norwegian oil people (I’m in Norway three or four months every year primarily for family reasons).

    My other comment is that I have spent a significant percentage of my professional career assessing data and helping various people convert Russian engineering reports into a form acceptable to Western companies and Western regulatory bodies. Without exception, in the stuff we saw, the Russians produced very conservative resource assessments and their conclusions were almost exactly the same as ours – perhaps more conservative.

    That said, I have no opinion on or experience with Russian Think Tanks and therefore no idea whether these conclusions are reasonable or not. I am absolutely certain, however, the information they have about their own resources are as good as anybody’s (Except perhaps Norwegians!). I will add that my knowledge of technical Russian was quite good at one time and my wife is perfectly fluent but in spite of having read your post and having some oil knowledge she refuses to give any comment – even to me!

    Doug

    1. Wonder if the recently discovered Johan Sverdrup giant field in the Norwegian sector of the North Sea is the main reason for the optimistic estimate of Norway’s future production. According to Wikipedia:
      Production startup is expected in 2019. Peak production is estimated to be over 500 000 barrels per day…

      On the other hand, I think almost all other Norwegian fields are in terminal decline.

      1. Yes and no. Most optimism stems from Norway’s Barents Sea. The existing fields are in terminal decline as you say. Johan Sverdrup giant field is in the south and was kind of a (pleasant) surprise. When I say south that’s a relative south of course.

            1. That link has announcement of first drilling in the Kara Sea starting apparently now. Drilling Aug to Oct, it says. We may see if there’s anything there before the year ends.

              $600 million for the first try. If you have to have it, you drill. Print the money when you need it.

            2. I second Doug’s comments on the general accuracy of Norwegian and Russian estimates and reports. ‘Johan Sverdrup’ is definitely the reason for any predicted uptick in Norwegian production (with recoverable reserves currently pegged at 1.8-2.9 bboe (billion barrels)), which will offset continued declines elsewhere in Norway in the 2015-2020 time window.

              The difficultly of production in the Barents Sea is a major cost hurdle. Those discoveries are relatively small (100-150 mboe) and may need other local discoveries to justify moving to development under current prices. Remember the discovery of the Goliat field (174mboe) was made in 2000 and is only now scheduled to come on stream in 2015 via an FPSO (Floating Production Storage and Offloading unit).

              http://www.eninorge.com/en/News–Media/News-Archive/2013/Goliat-er-godt-utrustet-for-Barentshavet/

              The Kara Sea is even more remote, has – probably – harsher conditions and is under different political conditions.

    1. ”The US will always have to import around 6 mb/d”

      We won’t be importing it so long as it is available at the business end of the American military industrial complex.

      I am not too sure how much longer we will be the worlds combination cop and playground bully but I doubt it will be more than another decade or two at the most.

    2. Unless someone get the bright idea of taxing the stuff at the pump. Then demand would fall fairly quickly.

      1. It already IS taxed. Heavily.

        A more likely scenario, given a price/barrel increase, is a tax cut and then subsidies.

        You don’t get re-elected raising the price of things on your voters.

        1. Gasoline and diesel taxes in the US are peanuts compared to Western Europe.I agree for now that a European level oil tax is utterly out of the question but twenty years ago I would have said the same about socialized medicine being the norm in this country. It will be the norm in a few more years.

          Once peak oil kicks in with a vengeance the people who cannot drive might just find leadership enabling them to ” stick it” to the ones of us who can still afford to.A gasoline tax could be made palatable by earmarking it just right for the right constituents.

        2. Teehee, the highway fund is broke, and has been for years, which is a de facto subsidy for gas, because you need roads to burn the stuff.

          I pay about €1.50 a liter, mostly taxes. I get pothole free roads so I can drive 200+ kph and excellent public transportation (300+kph) to boot.

          1. And of course the country profits enormously from the tax, which is a direct transfer of money from oil exporters to the national treasury.

            The American solution to over-consumption of oil has been to print dollar bills and send them overseas. This has gone well for a generation for reasons unrelated to energy, but it will have to stop fairly soon. All those dollars sloshing around the international money markets will have to come home eventually. You can’t buy noodle soup in Tokyo with dollars. You have to buy the fruits of American labor or American assets with that paper.

  10. Projecting China to have double the GDP of the US 25 years from now is kind of silly. China’s population will peak shortly and start rapidly falling before 2040, and the workforce is already shrinking as the population ages rapidly, which doesn’t bode well for continued growth. The US will grow by about 1/3 by 2040.

    The Brazil figure, with them dropping relatively to the world at large is surprising, though the China prediction consuming such a large part of the pie may have a role.

    1. I dunno, China will still have nearly 3 times the population of the US in 2040. Why not double the economy?

      1. They actually have about 4.4 times the population of the US on about the same land area.

        They would have double the amount of cars, double the amount of roads, double the amount of everything with about the same land area. But they cannot double the farming area. In fact the arable land would decrease.

        I guess it could happen but highly unlikely. In fact the Chinese economy is a bubble, especially the construction and real estate part of it. That will burst soon but no one knows exactly when. But it will be well before 2040.

        1. I seriously doubt the Chinese will ever have as much car traffic per capita as the Americans, because the cities are too densely built. And if they do, the vehicles will be much smaller.

          Cars take up a huge amount of space on three levels — roads need to be wide to accommodate fast traffic safely, noise from car traffic vastly reduces land values (thus reducing density indirectly), and parking space eats lots of land.

          This wasted space means thing people actually want need to be farther apart. A lot of the time you spend in sitting in a car is time spent traversing….car infrastructure. The tail is wagging the dog.

          This peculiar American situation is the result of almost seventy years of direct government subsidy, including a huge amount of money spent gutting American cities. I think it is very unlikely that the Chinese will do something similar. What is more likely is a mass migration of better off Chinese to North America –polls show hundreds of millions are interested. I can’t guess what effect would that have on the US.

          My guess is that Africa and Latin America might emulate the US, but Asia will end up being more like Europe. It already is.

        2. My population number was a guess for 2040. I agree with Eric that China’s population has peaked,but I think the US will continue to grow, especially if there is a lot of immigration. I expect a lot of Asians to come over in the next 30 years.

          It is true that China is by far the world’s largest market for new cars, but their investment in public transportation is even more impressive, as Wikipedia shows.

          http://en.wikipedia.org/wiki/Urban_rail_transit_in_China

          They’ve built more light rail in the last 10 years than exists in North America, and are not slowing down.

    1. 100 mt per 5 yrs would be about 4% annual decline rate of presently producing wells, unless they have in field drilling tossed in there to fuzz it all up — AGAIN, in which case it’s 4%/yr decline of present fields with in field drilling.

      We should pay as little attention to these projections as to any others.

    2. Thanks Matt, I don’t know how I missed putting that graph in the post. It should definitely have been there because, as you said, it is one of the most important graphs in the publication. Notice how “reserve growth” grows until it is over twice the size of “new discoveries”. This means things in Russia are a lot worse than I thought.

      So called “reserve growth” is nothing more than revisions in the original estimate of URR. When they are, or were, too low then they are revised upward to the new estimate. But better estimates due to better technology mean new fields will not have much reserve growth at all.

      Their very old fields in Western Siberia have already undergone all the reserve growth they are going to get. So any new reserve growth will have to come from new discoveries. That much reserve growth is just not going to happen. From the new fields they could just as well have “reserve shrinkage”.

  12. A fascinating post and very interesting comments: (thanks also Doug for the comment / insights regarding recent Norway).

    I guess that both the Russian and US and EU governments and perhaps more importantly the various business and financial audience will, with reservations, generally believe this to be a sober and broadly correct set of estimates. Each of the above, including their militaries however will have caveats, and will seek to maximise competitive advantage using these and other similar estimates, but the belief in some kind of BAU still seems nearly universal.

    It is probably broadly accepted already that diminishing returns will shift the balance of relative advantage / ‘growth’ from ‘advanced economies’ to ’emergent economies’. Similarly, that the benefits of ‘energy intensity’ change and change of GDP per capita will become distributed differently from now. Some will see this as confirmation of the relative ‘Decline of the West’. There seems, however, still to be a strong following in the USA for the notion that the US can be essentially ‘independent of imports of oil’, which could be expected, they think, to sufficiently counteract the rise of other powerful economies.

    I also guess it is generally assumed that the race for various ‘Hi-tec’ developments will continue along with the continued net expansion of the global energy base.

    For seven years now I have been looking for ‘inflection points’ in trends to see if they confirm the approach of a future peak rate for the use of fossil fuel. Personally I still guess that teams such as Aleklett’s and the lone authority of Lalerrere, and informed comment such as Ron et al, are broadly correct – i.e. Peak Oil rate is close, Peak Energy rate looms within decades. But as yet I see no adequate test of these assumptions.

    1. Looks like all our problems are solved. Pack the bags, jobs done, let’s go home.

      I eagerly await the IEA’s WEO every year, so the extreme level of laziness in this report is no surprise. Create a pleasant GDP growth level, map out how much demand will grow given said super-happy-fun-time GDP growth, assume production will match this demand growth, then invent where you’d like this production to come from.

      In 2008 Fatih Birol got very close to proporting a near-term peak oil type scenario. How could he not? Production was millions below predicted levels, prices shot to $147 instead of the $25 predicted by the IEA, EIA, CERA, etc.

      The laughable predictions of the IEA from 2003 forward weren’t even hitting the darkboard. It was the voices warning of stagnating production, price spikes, severe recession, and financial and monetary collapse that hit the bullseye year after year.

      As prices quickly recovered from their March 2009 lows it seemed to me we were in for a final blow. Production was declining, and soon the tepid recovery (rising demand) would bump against the new lower supply limit and round 2 would be the mortal wound. The ensuing Arab Spring and European Debt Crisis were, to me, harbingers of the next leg down. All we needed was a price spike from $100 to $150, and humpty dumpy would break as all the kings horses culd not print their way back to health twice in a row.

      I’ll admit it was not until 3rd Quarter 2011 that I realized global production was not declining like I’d anticipated. In 2009 I’d written a thesis in Advanced Writing for the Sciences predicting that gyrating oil prices would cause uncertainty and inhibit investment in unconventional production – Deepwater, LTO, Oil Sands. Prices had just gone from $147 to $35 in 9 months, then back to $80. Who would invest in a resource that requires $95 barrel if there’s little guarantee prices will remain that high in the future?

      Turns out I was flat wrong, prices stabilized at a level I once thought mandated recession. Impressive, coordinated actions by Central Banks globally allowed for slivers of growth; an ideal scenario in my mind – ANY GROWTH, even anemic growth, if just enough to prevent the global financial and monetary system from collapse, and the slower the growth the slower the rise in oil demand, which buys us time to transition. Quite unexpectedly, we stumbled into the most beneficial scenario (considering the circumstances) possible.

      Is it possible that come 2017-2019, whenever the next 2008 type spike occurs, that we will encounter a near repeat? Another near depression will occur, unprecedented measures will patch it all together as oil prices tumble to acceptable levels, then prices re-calibrate to whatever price oil shale becomes economical?

      Many of us didn’t think the world could handle $100 oil, yet it has for several years. The system is more resilient than I’d predicted. There is a chance that a genuine collapse event may happen next time, but there’s also a chance it’ll hold together. If it holds together, then I could see a repeat where oil prices, after collapsing, slowly recover to a new stable price of $150 or whatever level the massive oil shale reserves become economical to produce.

      I haven’t heard this scenario discussed much. Often the discussion ends at “shale oil will peak in 2016-2018, and then global production will peak”. I’d be intrigued by some hypotheses about what happens after. If a mixture of increased efficiencies and transition to other energy sources made $100 barrel oil bearable, then couldn’t the same trend continue and a new higher price point would lead to another boom is more expensive hydrocarbon resources?

      We held a conference for the plastics industry a few months back. Every division of the industry was there – manufacturers, resin makers, product makers, lobbyists, equipment manufacturers, etc – and I was told something very interesting; the entire industry is in the middle of a 3 year, capital intensive process of switching from petroleum to nat gas as the feedstock. Every upstream producer is spending billions to buy the equipment to make resins and beads from nat gas. EVERYONE.

      The free markets work under stable price conditions, transitions happen, albeit slowly. The stable price environment of the last few years has allowed for this to occur as well as the continued efficiency and cost improvements in PV, the development of Tesla Motors, which will release a $35,000 all electric vehicle in 2017 (after building the Gigafactory, which will produce more Lithium batteries than the current global world supply in one building). When all is said and done we’ll be ready to begrudgingly accept $150 oil after the next crash. Oil shale will boom, prices will stabilize, and the free market will continue the slow plod of a transition.

      For those who say we cannot maintain our civilization with the EROEI of renewables, oil shale, etc I would contend that we can, and clearly ARE. Low EROEI means that more jobs will come from energy production instead of other sectors – we already see this happening with the amount of jobs created in LTO fields, in the solar industry, in the wind industry. A larger and larger percent of the population will be involved in energy production, be it engineering solar plants, R&D, roughnecks, even battery production since it’s a necessary component of renewable energy sources. As EROEI has trended down efficiency has increased. This trend will continue. For instance, if the fuel economy of the average vehicle stayed at 20mpg as EROEI got smaller, then, yes, civilization could not take it, but in the real world fuel efficiency is rising, making that lesser amount of excess energy go further.

      There’s a lot I covered here, and I’m sure many of you have robust retorts. My views are malleable, and the members of this site are, in my mind, the most well informed, reasonable, and data-driven individuals I have had the pleasure of coming across, so let’s discuss!

      1. Brian,

        The production of any economy is determined by the amount of net energy available (EROI) times the efficiency of energy use. You are correct that the market economies will optimize energy use from various sources according to price signals, but if net energy availability declines faster than any increase in efficiency of energy use, then at some point an economy must contract.

        So how likely is it that efficiency will increase faster than EROI contracts? It depends on whether the opportunity to save energy by investing more capital (in more fuel efficient autos for example) outweigh the capital increases required to continue extracting raw materials and producing goods at the same rate from less and less concentrated resources (copper ore and oil for example). Thermodynamic long term trends mean efficiency gains must approach zero and extraction/production costs from raw materials must approach infinity. Recycling could limit production costs, but only if population stops increasing.

        I personally think we are near the point in time where those efficiency and extraction/production curves intersect. By “near” I mean within at least a few decades, but perhaps very soon indeed. We might have avoided this predicament, but we have waited far too long to make a transition to a steady state economy powered by renewable energy. The capital is no longer available for such a transition. See Tom Murphy’s Energy Trap post on Do The Math for a good explanation.

        How will our national and global economies react to continuous contraction? I think they will very likely collapse due to instabilities and crises in our worldwide financial system, a system that is dependent on continuous growth for relatively smooth functioning.

        My worry is that BAU will continue to fumble along until a tipping point is reached in people’s confidence that things will keep getting better or at least stay the same. Once a critical mass of people think that the economy will only get worse, then panic will ensue as all those people with financial instruments as investments head for the exit at once. The onset of panic could happen literally over night. Within days, all money could be worthless. The number of people who die prematurely in the aftermath will depend on how gracefully nations switch to command economies after the end of the market economy. It will definitely be ‘interesting’ .

        1. ”I personally think we are near the point in time where those efficiency and extraction/production curves intersect. By “near” I mean within at least a few decades, but perhaps very soon indeed.”

          I tend to agree but I have comet to believe that we can adapt considerably faster than most people would think to higher energy costs.The real question in my mind is how real costs will increase. IF costs go up at only two or three percent a year richer western countries can in my estimation at least maintain some semblance of business as usual via conservation and increasing efficiency and reverting to more modest lifestyles.

          Some technologies that are highly effective are ready to be scaled up such as the adoption of led lights and ground source heat pumps.Buses and trains controlled by well developed computerized systems can probably run on time and run fast enough to obviate the need for regional air travel.

          There are already appliances on the market that run on half the energy of most of the older ones still in use.Almost anybody with credit or cash enough to pay for it can get a new car that will get from fifty to a hundred percent better fuel economy than the one he is probably driving today.The gas hogs traded in can be used by people who drive less- and there is a ton of room for people to drive less. The average high school these days has a couple of hundred cars in it for every thousand students and a couple of hundred more parents make two round trips to drop of their kids- although a bus passes their house in most districts.

          The price of one cosmetic dentistry or nose job will put triple glazed windows and another foot of insulation in a house.Laws can be passed, and will be passed, that enable people to conserve by sharing rides without liability to any substantial extent except in cases of obvious negligence.Companies will find that once they have a low paid employee who lives very close by in a given slot that there is no longer any turnover in that particular slot.

          ( I have noticed this at fast food restaurants near my home and asked a cashier in a joking manner about finding a home behind her cash register.The usual response is that having once landed a job within a mile or two of home she will never give it up except for a better one.Most of them have little hope of finding a better job.)

          Thermostats can be adjusted a couple of degrees and the homeowner or building manager can shave ten percent off of heating and cooling costs.The post office can go to every other day rural delivery and nobody will notice after the first couple of months.People who can no longer afford to fly will just quit flying- but they will become advocates for high speed rail in some cases.

          Landlords with so so properties located in and very near to business districts will find it profitable to upgrade them from just livable to desirable.

          Electric bicycles and scooters will take the place of a second or third car in a lot of households and the money saved put toward energy efficiency.

          People react to troubles like a herd of sheep or cows. Whichever direction they get started is the direction the whole panicked bunch tends to run.

          IF the dormers are right and a panic ensues from a sudden loss of confidence in the financial system and a sudden shortage of energy we are going to be in a world of hurt but I have no doubt Leviathan ( UNCLE SAM in our case) has contingency plans ready for just such a scenario and rationing will be imposed within a matter of days rather than months.From there it will be government and economy by edict under established emergency powers and the people will mostly go along.

          IF the supply of oil in particular and energy in general drops slowly but steadily I think we can maintain some semblance of business as usual by adaption but the days of fast growth will be over- imo they are over already.

          BUT barring the very poor people I know-personally- just about everybody I know – personally can adapt to a couple of percent less oil at the personal level for a good long while by modest changes in lifestyle and by diverting money spent on other things to the purchase of more durable and efficient goods and less energy intensive services.

          Half the people around here even in these famously depressed Appalachian hills have somebody driving up in a four by four truck hauling a couple of ten thousand dollar lawn mowers cutting their grass. We can easily go back to the neighbors kid doing that on ten percent of the fuel once the religious social service nut cases in charge of child labor laws are out on their asses cutting grass themselves.

          It is true that millions of people are going to be thrown out of work by peak oil. But if the peak is relatively flat and long lasting and the decline is relatively slow those people will find work renovating old houses and building coal to liquids plants and bike lanes and farming on a small scale locally and providing services locally.Entertainment today consists of ten or twenty thousand people listening to a band in a basketball stadium. This employs a few janitors and a handful of musicians. A thousand times as many will make a bare living- but a living never the less- in local establishments operated by people who live upstairs.Four foot tv screens are common already and paying for one is soon going to be ( is already ) cheap compared to a few movie tickets and the price of gasoline and concession popcorn and drinks.

          I am not saying that peak oil in particular and peak resources in general will not result in a more or less total collapse of business as usual. There is a significant and perhaps high possibility of this happening for sure no question at all.I am as a matter of fact sure that collapse is baked in already in a lot of countries with few natural resources and large populations already.

          But I can see no reason to give up a reasonable hope of a country such as the US or Canada pulling thru the peak oil bottleneck more or less whole although I do not doubt times are going to get very hard indeed at some point- and not just because of peak oil.

          Any discussion of any sort of serious problem is almost totally pointless unless all parties are on the same page in terms of the time frame under consideration.When I comment about peak oil and economic troubles I am generally thinking about the next couple of decades or so unless I say otherwise.

          Now as as far as a tight oil revolution world wide coming to pass and saving our collective butts-I cannot say it will not happen but it seems extraordinarily unlikely to me. I think depletion of the old large legacy fields is going to far outpace the rise in tight oil production on a world wide basis and that oil is going to be very expensive and very scarce within the easily foreseeable future.

          But it is not equally distributed world wide and some countries such as the US have a lot of domestic oil and a lot of stuff to export to pay for imports.We in particular have foodstuffs and democracy.The food stuffs will be in permanent demand and while the democracy doesn’t seem to take root and grow it keeps the oil coming temporarily at least.

          When the shit really gets into the fan some countries will preferentially export to us because of the assurance that our navy and air force will protect them from invasion on the part of their neighbors.

          Anybody who does not believe that Detroit can’t build a hundred mpg car in a year has never read the history of war time industrial production in the forties.All that is necessary for that to happen is that we kick all the playground mummies in Washington out on their collective over paid over bennied well intentioned asses and let them find a job flipping burgers which is about as complicated as what they do now but pays about ten percent or so max.

          All it will take to ensure that the hundred mpg car will sell is to retain a few congressmen in DC long enough to pass a law saying it has to sell because less efficient cars can no longer be manufactured.Most of us don’t know or have forgotten that UNCLE outlawed the production of cars except for govt use for the duration of WWII.

          Leviathan will act when the time comes that action is absolutely unavoidable. The real question is whether action will come quick enough.

          That in my estimation depends almost totally on how fast the crisis unfolds.

  13. “But as yet I see no adequate test of these assumptions.”

    When you get a picture of me pedaling my bamboo bicycle in the passing lane on I95 you will know for sure that the assumptions have been verified >;-)

    1. Very much looking forward to it, Fred, but I’m getting on a bit now!
      Phil

    2. Or your electric bike. They’re all the rage in China these days, with over 200 million on the road.

      1. Ilambiquated,

        I’ve already looked into adding an electric hub motor and an off the shelf bamboo encased battery pack to my bamboo bike. Bamboo bike frames ares still a bit of a fad but I can see them making quite a dent in the metals frames market in the not too distant future.

        Bamboo is light weight, has the tensile strength of steel and the flexibility of carbon fiber. Bamboo is a fast growing grass and an excelent carbon sink when planted for large scale harvest and it grows well in depleted land.

        This picture is of the first one I put together. Rides like a dream!

        Cheers!
        Fred

      1. Doug,

        We aim to please. 60% of Americans polled believe Obama is not doing enough to deal with the “BULLY” Putin. If this is true, then in my opinion the Advertising Executives that run the 6 corporations that control 90% of the MSM, are publishing some of the best propaganda that Goebbels would be proud.

        GOD HATH A SENSE OF HUMOR

        steve

      2. There is no and was no military column. With satellite recon it makes no sense for such a thing to be sent, let alone crept across a border at night.

        There was no artillery attack on the non existent column.

        And why should any report from the Ukraine government (this one by the president) be believed?

        There are no stupid people on either side. The Kiev folks know that winter is coming, and they also know that no one has promised to pay their gas bill. So they strongly, almost desperately need to drag Russia and then the EU into an outright war — because then they can get someone to pay their gas bill. Russia isn’t going to send an armored column to attack Ukraine troops when they can just bomb them to nothingness with no invasion at all.

        All they have to do is keep those eastern rebel folks going for 3 more months and then arrange to keep the east warm while the rest . . . isn’t, and reality sets in.

        1. Watcher, As you said…reality sets in. Mr. Putin has the best military man in the world at his side. A certain General by the name of Winter has annihilated entire armies with his mere presence. One only needs patience to await his arrival and he shows up every year in this part of the world like clockwork. Why invade and risk a lot of equipment and manpower when you can merely sit back and wait. Only a double digit IQ with a longing for dramatics would consider a military operation would be carried out under the guise of humanitarian aid when Mr. Putin could easily rain a bit of “democracy”down on these folks from the skies a la USA. Something tells me that a lot of forest land in Western Ukraine will be used for fuel.and a lot of cleared areas will be available for some booming , upscale suburban development. It would seem that bad judgment begets more of the same until a brick wall is encountered.

  15. I think there are two good takeaways from this document:

    — Russia is peaked and no one in Russia believes in some coming Russian shale bonanza. All everyone is arguing about is the decline picture and whether the Arctic works (the US Arctic pointedly has not).

    — Even with very, ah, “optimistic” numbers on US production and other countries, they see the US shale growth rate slowing dramatically after 2015.

    1. Good points Anon IMHO.
      But I think US shale growth dramatically slows after 2025 not 2015?

      1. Nah, look at the chart on 5-year growth. 15-20 in the US is a third of what 10-15 was. Both numbers are all shale; US deepwater has not added net production.

  16. How can we trust any governmental figures when the Saudi Government
    the country with the largest reserves, claim no change in their total
    reserves of 265 billion barrels since 1989, despite pumping 9 million
    barrels per day for 365 days a year for 25 years, which equals
    80 billion barrels.

  17. Today: BBC World News

    Russia’s state-controlled energy giant Rosneft has asked the Russian government for a $42bn (£25.2bn) loan, as it feels the impact of Western sanctions.

    The government said it will consider the request from Igor Sechin, head of Rosneft, in the next two weeks.

    1. This Continues:

      “… Russia’s exports are almost all raw materials and about 60% of these are energy products.

      David Spencer-Percival, chief executive of international energy recruitment firm Spencer Ogden, said: “[This is] the clearest sign yet that the Western sanctions are biting hard.

      “Given the West’s reliance on the Russian energy industry, it is vital governments across Europe reassess their self-sufficiency. This is likely to prompt greater investment in renewable and alternative sources.”

      The news was initially reported in Vedomosti, the Russian business daily. The paper quoted a letter from Russian Prime Minister Dmitry Medvedev, in which he asked officials to analyse the data.

      Mr Sechin, a close ally of President Putin, said the company needed the money to help it cope with a ban on US credits and loans with a maturity of longer than 90 days, a ban which European banks and investors have also agreed to.

      Rosneft has an outstanding debt of $44.5bn (£27bn) following its acquisition of TNK-BP in 2013.

      1. hahaha a state owned company asks for a loan from the state. They will now wander about with grim faces and frowns and talk about the seriousness of it all, then grant the loan and nothing untowards will happen. Whatsoever.

        Oooh, or better yet, they will walk around with frowns and wonder publicly if maybe the oil might be more to Russia’s advantage kept underground and announce a voluntary reduction in production. They only burn 4 mbpd. Tack on 200K to that for Belarus and some other former allies on good terms with them and say . . . hey, y’all guys out there currently buying 7 mbpd from us. We’re going to cut that to 2 mbpd.

        Unless . . . you make a better . . . non monetary . . . offer.

      2. Doug,

        Rosneft’s $44.5 billion in outstanding debt sounds like a lot until we compare it to the U.S. Shale Gas Poster Child.. Chesapeake Energy. Chesapeake Energy holds $23 billion in outstanding debt-liabilities and it doesn’t rank as one of the Majors.

        Chesapeake still spent $100 million more in Q2 2014 on Capex than cash flow from operating activities and $230 million more in Q1 2014.

        While this Free Cash Flow figure is not as bad as it was a few years ago… Chesapeake is one Fart away from going Bear Stearns or Lehman Brothers if the U.S. economy heads into a severe recession pushing the price of natgas back down in the $2-3 range

        steve

        1. Steve you are our resident gold buy if I remember correctly.

          How much gold do you think the Russians have and how long would it take them to sell enough to settle up on a forty billion loan in the event of a panic when gold prices generally shoot up?

          My guess is that they would barely miss the gold. And if they want some more money there are soon going to be plenty of countries with things to exchange for oil that will enable them to avoid dealing with yankee dollars.

          I just can’t see Obama sending our navy to intercept ships headed to Russia or from Russia and such ships don’t need insurance if they are the property of a sovereign government.Nobody insures warships, lol. Nobody needs insure a tanker convoy escorted by warships.We are getting pretty close to the point that sanction are going to be unenforceable bullshit.Russia already has a blue water navy and China will have one within a decade.

          1. Sanctions are the policy selection to avoid bullets flying. They are mostly political. They let an anti military ideology appear to be taking strong action when a sovereign power makes them unhappy.

            And they aren’t too great. I have seen no video of starving Iranians. Not going to see any Moscow vacationers on the Black Sea beaches be photographed starving either. Just yesterday or the day before we got the report of 500K bpd of Iranian condensate being bought, without the buyer violating sanctions. Haven’t heard anyone refusing to take delivery of Russian oil, either.

            What we have heard was a US state department fella back in March say something like “we do not think it is morally acceptable for an oil and gas exporter to use oil and gas to influence the policy of consuming nations.” That was outright hilarious.

            FDR would not have agreed.

            1. You Sir, have obviously read a bit of history! Truly amazing results can be obtained by raising the “oil pressure”.

        2. Chesepeke is a pyramid scheme. They are smack in the middle of the unprofitability of fracking.

  18. Oil and the prospect of a Chinese shale boom

    Izabella Kaminska, FT.com, FTAlphaville | Aug 14 13:20

    In fact, it’s only through the return of a very significant contango that we can be sure to keep oil projects financed in the context of demand shortfalls. On that basis, if there wasn’t a contango appearing in the Brent market (as per the situation in WTI market in the US), it would be an even more bearish indicator for oil.

    Yes. That’s right. We’re breaking the orthodox opinion that backwardation always indicates tightness. What it more likely signifies nowadays is the expectation of oversupply (or insufficient demand) tomorrow.

  19. Why the Scientific Case Against Fracking Keeps Getting Stronger

    Anthony Ingraffea argues that fugitive methane emissions turn natural gas from a climate benefit into yet another strike against fossil fuels.

    —By Chris Mooney | Mother Jones| Fri Aug. 15, 2014 6:00 AM EDT

    With mounting scientific evidence behind him, then, Ingraffea makes a pretty strong case today that natural gas is a wolf in sheep’s clothing. The methane issue may not be settled fully, but it is undoubtedly grave—and certainly not something that we can afford to be wrong about. To still support President Obama’s “all of the above” approach to energy (which favors renewables, but also natural gas), you have to assume we can mitigate the methane leakage problem somehow. And you shouldn’t assume that without first listening, hard, to Ingraffea’s warning. As he concludes the Inquiring Minds interview:

    “For those who say we can regulate our way around this, just give us time and we’ll fix the problems—I’m sorry. We’ve had 100 years of commercial oil and gas development at very large quantities, around the world. Time is over. We’ve damaged the atmosphere too much, and it would take too long, it would take decades and billions of dollars, to begin to fix the problems that we know have existed for decades. And by then, it will be too late.“

    BTW: There’s a nice illustrative animated GIF at the link… but it’s too big to add here.

    1. Articles like this are such a farce. Fracking is NOT new technology, nor is it the boogeyman the communistic “green lobby” at the root of articles like this make it out to be. The reality is that the wonder of fracking has probably been the brightest spot in the US economy by saving us from sinking even further during the recession and putting many, many blue-collar people to work who otherwise would be jobless. Not to mention fracking shale oil and gas has allowed the US to recover much faster than Europe, which I realize is treated as a socialistic utopia on this website, but is simply regressing under the weight of fracking bans and insistence on using “renewable energy” schemes that make some people feel better about themselves but are completely and utterly impractical and bound to ultimately fail on cost alone. Just look at what a disaster “going green” has been for Germany. Do you really want the US to follow in the footsteps of that mess? I sure don’t, and you shouldn’t either. Face it, fossil fuels are the best form of energy we have and will ever have. We need to do all we can politically and economically to support the oil & gas industry in the US.

      1. “Face it, fossil fuels are the best form of energy we have and will ever have HAVE HAD.”

        There fixed that for you! And how much longer do you suppose that party will last?

        Obviously you do not quite grasp the concept of finite resources vs the the infinite growth paradigm so what is your plan B?

        Oh, and saying things like ‘communistic green lobby’ is so last century and most people here care a lot more about the data so please save your ideological rants for some other blog.

        1. This Mark guy is right about a bunch of things. One helluva lot of activity is going on in NoDak and Texas and it would not have been going on without fracking. The numbers start to get up to fractions of a GDP %. Not insignif.

          Truck drivers are getting almost $100K/yr in NoDak. I wonder if the banks know that’s what their loaned money is spent on.

          1. I really think most people, banks included, look at NoDak and Texas and go “Look at that boom, lots of money coming out of the ground.”

            In reality, everyone who has looked at it from the outside – including the publicly traded supermajors – has concluded it net loses money. If the big IOCs thought that shale was as big and profitable as everyone says, they would have bought their way in long ago. They certainly have the exploration cash that’s not being useful.

            Its a financing boom more than an oil boom.

          2. “Truck drivers are getting almost $100K/yr in NoDak.”

            Whoop de doo! Wouldn’t be too surprised if most of them are blowing it and taking on more debt because of a false sense of security that they won’t ever be able to repay when the shale bubble collapses. I’ll bet not many of them are putting 50k/yr into savings accounts or investing in sustainable living practices and living frugally on the remainder.

            Fueling the consumer party with barrels of freshly printed money, conjured up out of thin air can only work for so long. Production decline rates, diminishing EROEI and ever increasing CAPEX for oil prospecting are not just a figment of someone’s imagination. They are real and there will be consequences. Hint, just look at the data on display here every day. Do people think those graphs with pretty squiggly colored lines are just abstract art and the numbers behind them made up?

        2. Beyond that little difficulty of the depletion of our finite supply of coal and gas and oil I have not yet heard a well reasoned explanation of why the push for renewables has been a disaster for Germany.

          Maybe it would have been better for them if they had spent the money on more freeways and AMG Mercedes and Porsche automobiles that will go almost 200 mph or used it to build another armored army so they could give it the old school try a second time just taking some oil and iron ore and other minerals from them pesky red commies formerly known as the USSR?

          Maybe they could have just spent it all partying like there will be no tomorrow and assumed that instead of earning their beer and sausages exporting they could continue to live well importing stuff on credit from China and their old buddies the Russians. I’ m pretty sure that most of the Russians who lived thru the time of the siege of Stalingrad are either dead or demented by now and a good many of their children too.

          But somehow I have this uneasy feeling that the Russians have a long institutional memory and that a whole hell of a lot of them are happily contemplating Germans shivering ”like a hound shitting cockle burs ”next winter if they decide to cut off the gas.I am reason ably sure a good many Russians would be delighted to cut it off even at the expense of lowering their own living standard.

          (I do not know how this colorful little piece of language came into being but it is very common among the old folks here who use it to describe the troubles of an enemy dealing with a tough problem. Hounds to the best of my knowledge do not eat cockle burs.)

    2. See this is the problem with these optimist green types. They don’t embrace “inevitable”. They always want to be heroic and persuade themselves if they cut back a cupful of oil then they are “doing their part” (of sending an extra cupful to China).

      And their layout always has the magical phrasings. “Before it’s too late.” “If we can just do this . . . .” Looks pretty clear to me that these folks will be imagining survival is still possible even as a bullet enters their brain.

      I saw a quote this week. From Admiral James Stockdale, holder of a CMH and 4 Silver Stars. Degree from the Naval Academy. Masters from Stanford in International Relations and Comparative Marxist Thought. Ran for VP with Ross Perot, and got ridiculed because he spent years as a POW in North Vietnam where he was tortured and could not sit for long periods without extreme pain, so walking around the stage during the VP debate made him seem unfocused and senile.

      When asked . . . which of the POWs didn’t make it out . . . what was the common denominator that killed them.

      “Oh, that’s easy. The optimists died first. They could not bear the constant destruction of their favorable scenarios.”

      1. There are probably more tough people around than most of us think. And when it comes to survival of a whole society the tough ones are apt to wind up in nearly all the critical positions of leadership – but maybe not before it is too late to save most of the softies.

        The blue collar guys who are used to working right on thru no matter what will figure something out when the shit hits the fan. I expect that if it hits before I am gone myself that I will take in a couple and their families on my place in exchange for food and shelter and companionship.

        They will have to work long hard hours but they won’t go hungry barring very bad luck or getting raided by well organized gangs.

        I don’t really expect any potential mad max scenario raiders to be well organized unless they are wearing national guard uniforms and foraging for a community food bank. In that case I will cooperate to the extent I must in turning over whatever food stores I might have on hand.

        So far as that goes I don’t expect any mad max scenarios in most parts of the US or other similarly rich and well endowed countries——At least not in the relatively near future and the relatively near future is all I have to worry about personally.My chances of seeing the 2040’s are slim indeed.I would not bet more than even on seeing 2030 personally.

      2. “See this is the problem with these optimist green types. They don’t embrace “inevitable””.

        Well, there can be many shades of ‘Green’.

  20. California’s Record Heat Is Like Nothing You’ve Ever Seen… Yet

    By Tom Randall, The Grid, Bloomberg, Aug 15, 2014 1:55 PM ET

    The high temperatures have contributed to one of the worst droughts in California’s history. The water reserves in the state’s topsoil and subsoil are nearly depleted, and 70 percent of the state’s pastures are rated “very poor to poor,” according to the USDA. By one measure, which takes into account both rainfall and heat, this is the worst drought ever.</blockquote

  21. No Room at the Bin for Grain Amid Buffett’s BNSF Rail Jam

    By Megan Durisin, Bloomberg, Aug 14, 2014 8:46 AM ET

    With the start of the spring-wheat harvest in Arnegard, North Dakota, a week away, the bins on Bob Wisness’s 11,000-acre farm are half full with last year’s crops that have been stranded by a train traffic jam.

    “With the railroad situation the way it is, it almost looks hopeless as far as catching up” for storage capacity normally at least 90 percent empty at this time, said Wisness, the president of the North Dakota Grain Growers Association.

    BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway Inc., and Canadian Pacific Railway Ltd. (CP) struggled with “greater-than-normal” demand from shippers of coal, oil, [Frack sand and ceramic proppant] and Midwest crops, the U.S. Department of Agriculture said last week in a report. Record-high grain and soybean harvests anticipated this year may exacerbate the squeeze in silo space.

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