Transportation Fuel Demand

This includes Gasoline, Jet Fuel, and “No. 2 Distillate,” which is both diesel and home heating oil, used mainly in Northeast. So this isn’t purely transportation fuel, but I figure it is close enough. I used moving averages to cut out the noise and seasonal variations shouldn’t matter since I’m comparing weeks to their counterparts 52 weeks earlier.

jpeggood

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…and this is the current production picture. The IEA data is through October. The EIA data is through August, with September and October extrapolated using the changes in IEA data. These are twelve month moving averages. You can see that in all cases we are at the highest point ever. Barring some disaster in the last 3 weeks of the year, 2008 will in all cases have a higher production level then 2005. I have been aware of this trend for the last year and for the last three months have been virtually certain of this outcome, or at least that 2008 production would be higher than 2007.

But now we can see beyond a reasonable doubt that 2008 production is higher than 2005. So it is a little bit odd that there are still those that say 2005 was the peak and that production is dropping.

iea_eia_910_jpg

What will happen is 2009? Well, the evidence suggests that production would have been higher than 2008 by maybe 0.5%. What is that evidence? Known short-term decline rates for every oil producing region on the planet that is actually declining and conservative guesses about increase rates of those regions that we know are increasing.

I’ll discuss Saudi Arabia soon.

But in October OPEC agreed to lower its production by 1.5 mbpd starting Nov. 1st. Consensus opinion (and the preliminary number should be out in the next 10 days) suggests they will successfully only cut production 1 mbpd and will need another month or two to get their shit completely together.

They flubbed it last month when they made no official decisions two at their unofficial get-together in _____. Oil prices continued to plummet. It is near certain they will agree to another 1.5 mbpd cut at their Dec. 13th meeting. If these extremely deep cuts will actually take place and how long it will take them to be implemented is another story. The reality is that the bulk of the cuts will fall on Saudi Arabia and only Saudi Arabia, Kuwait, UAE, Qatar and maybe Libya and Algeria can be counted on. You can forget about any honesty and effort coming from Nigeria, Iran, Ecuador, and Venezuela. But who knows. Angola is too new to the whole deal and their production has been rising pretty fast to be able to tell what they will decide to do.

So my best guess is that by mid-2009, at some point (and for how long, I don’t know), we should see global production 2.5-3.0 mbpd lower than October. I leave predictions to people that like being wrong. I give up. What I will say is that lower production in 2009 will not be due to geologic constraints on a global level. We’ll have to wait for 2010 or 2011 or beyond for that.

Here are some other versions of these charts I did two months ago looking at the data slightly differently

29 Replies to “Transportation Fuel Demand”

  1. Technically, this is “product supplied,” or “product consumed.” These numbers are unrevised weekly figures published a week after the fact, which in obviously more timely and probably more accurate than monthly global production numbers (which would be the “supply” side).

    And remember, demand always occurs at a specific price. We can only piece things together after the fact.

    There is no way to accurately forecast future demand, even for tomorrow and there isn’t even a way to accurately measure it in real-time.

    Also, these figures are for the US only. If we are going to talk about global demand, fuggetaboutit.

  2. Looks like Peak Demand for about 25% of the global. Will supply follow? My guess is it hasn’t, yet, hence the price drops. Lots of slack in the gears. Nice plots, JR.

  3. But if we account for 25% of world consumption, multiply by four and that will get you in the ballpark for world consumption.

    UY, sure there’s such a thing as demand. If you’re out of work, you’re not buying gas for your commute. Even if you’re still working, you might not be tanking up as much — a guy at the next table at lunch today had a USA Today paper that said many people who started riding public transportation when gas prices got too high hadn’t gone back to their cars. Here’s a related article.

    http://www.usatoday.com/money/industries/energy/2008-11-19-driving_n.htm

    «Douglas, 46, gave up driving the 26 miles from Gallatin, Tenn., to his office in Nashville in September, when gas prices were still high. He took a bus instead.

    Driving cost him $8 to $10 a day while the bus was $6. Now that gas prices have dropped and the cost benefits are gone, he’s still on the bus.»

  4. “But if we account for 25% of world consumption, multiply by four and that will get you in the ballpark for world consumption.”

    Yeah, I’d like to think that, but the earliest you will see the official numbers for 2008 will be when BP releases them in June.

    I’m only confident in saying that the US is a ballpark proxy for Western and industrialized nations – Japan, France, Germany, Canada, UK, Italy, Brazil, etc.

    It is anybody’s guess what is going on in India and China as a result of the “slowdown.”

    But a huge amount of the demand increases have been coming from rich exporters like Kuwait, Saudi, and UAE.

    if we say US demand is down about 1.1 mbpd for 2008, that wiould make it down 4-5mbpd for the world, ujsing the 25%, which is certainly plausible given the enormity of the price drop, but in my opinion a little high.

    I think we also need to look at production which is at historically the highest levels it has ever been (despite what JHK and The Oil Drum crowd is saying, I don’t know what numbers those people are looking at). I will show this next.

  5. Prolonged global economic issues (as is appears to be the case) combined with the attendant and mostly involuntary drop in global consumption (especially by the largest consumers) may forestall on the near term the effects of peak production and do not bode well for the sought(i) after price floor for oil or for price stability.

    And, the Saudi’s grand projects in the desert to increase production to meet heyday demand are likely to put a serious dent in their $2.00 a barrel production cost claim and that photovoltaic electricity mecca al-Goebbels was going on about on the 60 Minutes piece.

    Was it me or did al-Goebbels sound a lot like Big Tobacco in that interview?

  6. UR, if you think the present involuntary drop in global consumption is impressive, just wait until some serious die-off gets underway. I’m still assuming it will be Africa first, followed closely by Chindia. OTOH, those folks don’t suck too much petroleum.

    BTW, notice how we have flipped polarity and are now discussing the demand side of the equation and its effects upon production?

  7. “BTW, notice how we have flipped polarity and are now discussing the demand side of the equation and its effects upon production?”

    Yeah, well, it’s still the #$%@^ speculators. Despite the obvious.

    Still, I am recommending dim view on Chinese Soylent Green. It’s not the melamine, it’s the heavy metals.

    Perhaps it will devolve to the point that living long enough to collect social security will be considered unpatriotic. And a dignified death is how many you took with you when you went. And an unsanctioned birth is a crime against humanity.

  8. 2 things:

    it’s tough, almost meaningless, to do 1 or 2 year moving averages on 3 years worth of data. i know you didn’t do that, and that’s my point.

    i’d say that there’s a break in the extraction trend right around may 2005, soon to turn into an inflection, after smoothing of course.

    three, i lied. what are the discovery curves and where is the inflection on that curve? long time ago, i think. the old saying something like: ya can’t pump if you can’t find the hole. at least that’s what i say.

  9. dave, the discovery peaked globally in the mid-1960s, so forty years ago. those data are scattered, and really need a moving average. i think your pick of the break in extraction is accurate.

  10. so this is what life’s like living on the top of Hubbert’s peak? well, it’s really gonna be shits and giggles on the downslope!

  11. JR, is that you as “Positive_Photaxis” giving the TOD regulars a hard time on Saudi production/demand histories? If it’s not you, it must be a clone. I’m sure you will enjoy reading the exchanges.

  12. No, I’m not Positive_Phototaxis. But, it’s funny, I read that whole exchange between him and Westexas and Darwinian and it made me really angry. It shouldn’t have, since it came as no surprise and I’ve personally had this same conversation with both those clowns.

    It only confirms to me what an aweful place TOD is if you want honest, intellectual debate about oil.

    Just look at the very large and consistent negative feedback Positive_Phototaxis gets vs. the positive feedback the other two get. This will show you the extent to which the “comment raters” on TOD have been brainwashed or how they come into the picture with a set of notions and biases that they will not let facts and history interfere with.

    Darwinian is simply wrong on the topic of why consumption dropped in the early 1980s. He has ccreated his own history. He has been challenged on his understanding of events in the Middle East during this period several times (originally by me) and simply re-emerges every 6 months with the same fabrications, muddled thinking, and spin.

    From what I read rather quickly, Positive_Phototaxis is completely correct. On the plus side, TOD has been rapidly losing it’s influence over the last 3 months. Their hits have gone from an average of 28,000 per day to about 17,000.

    Anybody with half a clue doesn’t pay attention anymore. (I’ve clearly got less than half a clue).

    I’ll be creating a graph or two complete with historical references for the period soon.

  13. EE to Doom-

    What say ye on this news via Salon?

    Wednesday, Dec. 10, 2008 15:33 PST
    Obama’s pick to solve the energy crisis
    “You should interview Steven Chu,” the scientist at the Joint Genome Institute in Walnut Creek, Calif., told me. “He already has one Nobel Prize. He wants to get a second one for solving the energy crisis.”

    That was two years ago, and I sorely regret not following through and landing an interview with Chu, a physicist who has dedicated his post-Nobel Prize career to the development of alternative sources of energy. Because as Barack Obama’s nominee for secretary of energy, Steven Chu is going to get a chance to make his dreams come true, with the full backing of the U.S. government.

    Since 2004, Chu has served as the director of the University of California-managed Lawrence Berkeley National Laboratory, spearheading, among other things, a massive research effort in solar power. To get a sense of the man’s interests, here’s the second sentence of his bio at the LBNL Web site. (LBNL, located in Berkeley, Calif., should be distinguished from Lawrence Livermore National Laboratory, which does weapons research for the U.S. government.)

    Chu, an early advocate for finding scientific solutions to climate change, has guided Berkeley Lab on a new mission to become the world leader in alternative and renewable energy research, particularly the development of carbon-neutral sources of energy.

    Environmentalists and climate change activists are understandably delighted. Consider this: For eight years the United States has boasted an Energy Department that for all intents and purposes was a subsidiary of the U.S. oil industry. Now, should he be confirmed, a Nobel Prize-winning physicist who specializes in climate change and renewable energy and already knows how to run a decent-size bureaucracy is going to be in charge of realizing Obama’s bold promises to lead the United States toward an energy-sustainable future. Symbolically speaking, one would be hard put to draw a sharper contrast between the Bush and Obama eras than what is achieved by this single appointment.

    That said, Steven Chu is no stranger to Big Oil. He was instrumental in helping U.C. Berkeley land one of the biggest corporate bonanzas ever — $500 million from British Petroleum to establish the Energy Biosciences Institute, an ambitious joint venture that has been controversial from the get-go at Berkeley because of its plans to use oil money to do research and development into energy crops and other biofuel wizardry.

    And, as I noted after seeing him talk in early 2007 at a symposium titled “Domestic Bioenergy: Weaning Ourselves From Foreign Oil Addiction,” held at the annual meeting of the American Association for the Advancement of Science, he is on record as being a bit hyperbolic as to the potential of biofuels.

    There is enough marginal, unused agricultural land in the United States to generate the biomass necessary to reach the one-third goal [of displacing annual American gasoline consumption with biofuels,] without displacing food production, said Steven Chu, the Nobel physics prize winner who runs the Lawrence Berkeley National Laboratory. And the laws of thermodynamics won’t need to be broken — there is more than enough energy hitting the earth every day as sunlight to supply all of humanity’s energy needs.

    You can find plenty of scientists who will dispute such assertions, right down the hill from Chu’s offices above the campus of U.C. Berkeley. There’s also no question that the political climate for biofuels has changed drastically since February 2007.

    But for those who bemoaned the Bush administration’s steadfast opposition to taking action on climate change and its criminal abuse of the scientific method, there’s reason to cheer. The sight of a scientist whose professed goal is to combat climate change and wean the U.S. from dependence on oil put in charge of the U.S. Department of Energy is welcome indeed. You could almost call it change.

    ― Andrew Leonard
    Posted in: Climate Change

  14. EE, whilst I welcome the change Ho will wrought, to me it eptitomises the crushed hopes we all face. Not to argue too much with the Nobel laurette, but his promises on biofuels seem to overlook many things, like water scarcity and droughts because of climate change, ongoing soil degradation and erosion, and present reliance upon the FF Platform. So far, we have been getting our cakes and eating them too (not competely though, see soil problems above, add water pollution and nutrients loss), thanks to cheap, abundant Fossil Fuel. FF helps bring in those big crops, and we currently don’t need the biomass for transporation energy. Once the FF go away, there will be tremendous pressure just to maintain the food crops, not to mention all these grand schemes that will only work within or upon the FF Platform.

    Once I read JHK’s Long Emergency where he discusses these issues, it hit me that we would be in deep trouble down the road. I hope Ho is right and Jim and I are wrong, but I wouldn’t bank too much hope on it. Ho’s a cleaver guy, but he ain’t no Einstein.

  15. Thanks for the insights, Doom! Very helpful.

    And I always knew Chu was a Ho–you know what they say about Lawrence Berkeley guys… at least Joan Didion said it. %^}

  16. Ya, EE, I got a chuckle from the disclaimer in that article about how LBL is not to be associated with LLL, the “weapons lab” folks. They used to be sister labs with themselves and Los Alamos, and are within an easy commuting distance.

  17. “In addition, respected oil industry investment banker Matt Simmons writes, “Sadad al Husseini, former head of E&P [exploration and production] in Saudi Aramco, has said the Saudis should not produce more than 12 mbpd (million barrels per day) if they want to avoid damaging their reservoirs. He has also said that Middle East OPEC will never produce more than 25 mbpd. Yet IEA projects that these countries will produce 37.1 mbpd by 2030.” So, the two areas IEA claims will make up over 50% of global oil supply in the next 20 years are at very best problematic, and most realistically fairly useless. ”

    http://www.atimes.com/atimes/Global_Economy/JL10Dj03.html

  18. Via Cyrptogon

    “Oil companies booked 25 supertankers to store crude, enough to supply France for almost a month, as OPEC discusses output cuts to shore up prices that have plunged 69 percent in five months.

    […]

    Twenty-five tankers used for storage would probably be the largest number for at least 20 years, Fowle said.”

    http://cryptogon.com/?p=5747

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