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.
…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.
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.