Crude Oil Production

I think the following chart does a good job showing that OPEC currently has about 3-4 million barrels of spare capacity.

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This chart divides global production into two categories:

1) Swing: All of OPEC plus Russia, Kazakhstan, and Azerbaijan.

2) Baseline: All the other countries in the world.

69 Replies to “Crude Oil Production”

  1. I assure you…. no, just kidding, I have no idea. I wouldn’t worry about it though, the Chinese are overrated.

  2. If the rest of the world can’t earn enough yuan to buy chinese goods, then I guess the chinese won’t be selling those goods and won’t be able to buy oil, and will starve. Everything is related.

    The Iranians have been threatening to start an oil bourse and trade in Euros or whatever else is out there for years. It makes a lot of sense when certain people explain it. It just never happens. Probably because the real story is more complicated.

  3. http://en.wikipedia.org/wiki/Iranian_Oil_Bourse

    there’s a lot of history in trading oil for dollars. you have to remember that the oil industry was originaly a US industry, exclusively, no matter where you were on on earth. as the post WW2 US hegemony unravels there will be a lot of pressure to use vehicles other than the dollar to settle.

    my own thoughts have been something like, the value of the dollar has been supported by the need to settle energy, and a lot of other commodities and hard goods, in dollars. as other settlement vehicles enter markets, by creating there own markets, the value of the $ cannot help but drop in relation to these other mediums of exchange(iranian, chinese, fucking brazilion?, whatever).

  4. well, to me, a swing producer has enough reserve extraction capacity, in place, ready to go, to effect the market. What do you mean by “swing producer”? so OPEC as a whole, not just the saudis, and even they’re iffy from what i understand, has spare capacity? i don’t think so. of course i don’t know in any definative way.

    no, i’ll stick to my own story, $200 oil before the summer of 2010.

  5. Thanks, JR. I needed some assurance. I guess the US military presence in the Gulf would not be a big factor in Iranian planning. But then, maybe.

    Club Orlov’s commentors are saying the IMF recently offered it’s gold reserves for sale and the Chinese bought all of it.

    I don’t know about gold, but it seems prudent to me to be buying commodities if you have the surplus cash slogging around as digits on your computer’s hard drive.

  6. “no, i’ll stick to my own story, $200 oil before the summer of 2010.”

    i hope for all our sakes that $200 by then will only buy a pair of tennis shoes, or a barrel of crude oil.

    oh, wait a minute…

  7. dave, i know where vast sheets of pure copper reside at the tops of our buildings on campus. some sillies even made rain gutters and such shit out of it. still shiny, too.

  8. Sorry, I should have said something about that. I just used “Swing” as a label. I couldn’t think of anything else. Got any ideas?

    I wanted to divide all the countries into two groups. I initially used just OPEC in the one group, but decided to add Russia for heft and Azerbaijan and Kazakhstan because they seem to have a little more steam in them.

    The idea is that we cannot predict total production, but we can at least try to separate the countries out that we might be able to predict as a group.

    The Baseline group is declining on average between 1 and 2 percent a year. This is important because these are

    1) Not part of OPEC so they have no quotas to mess with

    2) Importers for the most part, so a drop in global demand like we are seeing now doesn’t translate to them cutting production, but rather cutting imports. They’re domestic imports should remain largely the same.

    3) The companies doing the drilling and pumping should tend more towards the multinational-efficient type.

    4) As you can see, they’re production has steadily and consistently declined all through what might be thought of as the last boom and bust cycle of the oil industry.

    I won’t predict but if I was personally given the opportunity to bet what their production will be in 5 years, I would say down 1.5% a year times five years, with a very narrow margin of error.

    As far as the other group, I would say for the time being Saudi has 2 mbpd of spare capacity. The rest of OPEC has another 1-2 mbpd based on their cuts in the last 6 months. Russia is flat. Azerbaijan and Kazakhstan could potentially pull out more than 2mbpd between them, but that will be eaten by the drop in the”Baseline” countries.

    Iraq? Who knows.

    Of course you could spend hours talking about each of these countries or spend all day reading the back on forth on TOD, but that’s the long and the short of it.

  9. I’ve got detailed charts on OPEC, but they need to be updated for the last few months. I might do that Friday when I’m on this computer next. Or maybe I’ll do that now.

    first I have to find that stuff. I’m lost in Excel files.

  10. OK, looking at your plot now. Very interesting analysis, JR! So, it looks like another 4 years or so of gentle decline in global oil production, followed perhaps by steeper decline rates. More BAU unless events and processes set into motion by the initial decline and price spike take over, i.e., financial collapse.

    And the war card is still in play. The USA is looking moron like a high-tech version of Rommel’s Afrika Corps, running around terrorizing the ME desert while the rest of the world figures how to land a Patton and Monty show to give the troops some real competition on the ground.

  11. Looking at your newest chart now, and I agree that it shows about a 4 million barrel per day spare capacity, as OPEC clearly ramped up production to meet the higher prices in late 2007 through 2008. When the global and US economy lurched, prices dropped as demand dropped, clearly seen in the production drop but with some months time lag.

  12. “4) As you can see, they’re production has steadily and consistently declined all through what might be thought of as the last boom and bust cycle of the oil industry.

    I won’t predict but if I was personally given the opportunity to bet what their production will be in 5 years, I would say down 1.5% a year times five years, with a very narrow margin of error.”

    eh, i don’t know, but i’m making different bets.

    http://blogs.wsj.com/environmentalcapital/2009/05/11/oil-prices-norwegian-supply-falls-is-100-oil-far-away/

  13. dave, i know where vast sheets of pure copper reside at the tops of our buildings on campus. some sillies even made rain gutters and such shit out of it. still shiny, too.

    ya, now all you need is some slaves to get that shit for ya.

  14. i hope for all our sakes that $200 by then will only buy a pair of tennis shoes, or a barrel of crude oil.

    i hope that by then i can get a loaf of bread for $500. i need slaves, that’s what i need.

  15. dave, you’ve got energy slaves (cheap gas), and your garden slaves (J.Rhee, et al), and still you need more slaves??

  16. I’ve got the audio version on CDs in the car now, so when not listening to NPR, it’s Taleb 24/7.

    I am still very confident on that decline scenario for that particular group of countries. And I will immediately (next month) start publishing results of that forecast/prediction so you can make fun of me all you like on a regular basis.

  17. My understanding is that the Iranians already trad 85% of their exports in Euros.

    BTW, that extra production is what?
    Sour, heavy, light sweet, semillon, cabernet-merlot?

  18. “…that’s the long and the short of it.”

    I think you’ve framed it pretty well, and that your 1.5% decline rate is pretty much a reasonable middle of the road expectation. Hope for 1%, prepare yourself for 2%+. The gap between the two trajectories over a few years is of course enormous. Steep decline rates in many non-OPEC fields are, at this point, a grim reality. As far as stemming this, places like West Africa become key in that regard. Its a grim picture. Preaching to the choir I know. Is there still a sleeping elephant or two out there somewhere? I dunno, hope so, I’m human.

  19. Bif, the elephants off West Africa and Brazil, if they exist, are sitting under thick salt deposits about 2.6 km below the seafloor in about 2.6 km of water. That’s going to be some engineering project. Maybe $100/barrel oil will make it happen.

  20. those garden slaves are a pain in the ass though. i often times wonder if it’s worth it.

  21. shit, i said that i’m not trying to fuck with you. but to think that any process is going to continue on some set tragetory for some unspecified time is just silly. i’d rather go along with kunstler in thinking that the world ends on memorial day.

  22. dave, not to worry. I’m cranking away at a simultaneous solution chock full o variables, adaptive scale factors, feedback loops, black swan quants, as well as probabilistic representations of foreseeable events with attendant black swan consequences.

    By the time I step away from this white board, Staniford is going to look like a complete sissy. (I guess he’s out of the game now, pulling an oar at some real day job of late, so it’s probably not fair to pile on unduly. But a little bit is still fun.)

    http://www.ecb.int/pub/pdf/scpwps/ecbwp855.pdf

    Monkeys can attempt to hang with Bunn, but they derive in vain. They would be better off sticking to their strong suits, like competitions involving the hurling of fecal matter at the smarter monkeys standing around their cages.

    EE, in some circumstances, I’m a hands-off kind of a god. And it pleases me to no end, especially in your case, to be such an effective diversion. But I’m not everybody’s cup of tea and that is very much by design.

  23. BunnBunn, who are you calling a monkey? I don’t have a tail. I’m an ape. Sure, monkeys and man are both simians, but we diverged a long time ago.
    We don’t call you a rodent, do we?

  24. I can’t change my mantra at this point! Poetic license?

    But this really isn’t about me or monkeys or even simians. I’m talking about modeling infinite complexity and potentialities, with fewer and fewer simplifying assumptions to the point where the math merges with god.

    Okay, I’ll go back to sleep now.

  25. Darth, et al., speaking of destiny, here are two related, recent articles from TOD that are probably worth your attention, busy readers:

    http://www.theoildrum.com/node/5381#more

    Doom’s quickie critique: Reads like Catton’s Overshoot Redux, but always worth a second look. Figure axes need labeling and scale.

    http://europe.theoildrum.com/node/5388#more

    Doom’s quickie critique: We’ve seen similar studies on TOD before, that reached similar conclusions. This is different approach and a moron descriptive account with many nations broken out as to potential vulnerability and culpability wrt energy consumption.

  26. of course, then there’s overshoot. which has nothing whatsoever to do with oil, except that oil drove the speicies into overshoot and the unavoidable extermination of competitor species and the elimination of all but the most sterile habitat, good only for various forms of domesticants. it’s all good.

  27. fucking humans are apes with an extra large monkey brain. it gives some of them the ability to delay gratification, cocksucker motherfucker.

  28. basically apes are monkeys that don’t suck. humans are apes that do suck, something like that.

  29. i want to write an essay about the resolution of extentialism, phenomenology and and western psycology. but that seems like work. no tickee, no washee.

  30. my latest girlfriend can’t understand my obcession with asian prostitutes, dumb bitch.

  31. A couple years ago I had an especially nasty looking deer tick bite so I went to a local clinic to have it looked at. I don’t usually go to doctors, since I haven’t had health insurance the last twenty years. The doctor told me the itching and redness was just a reaction to the bite and not a bulls-eye rash from Lyme disease. My body was becoming progressively more sensitive to tick bites, acting like an early warning system. So, I get the ticks off much sooner, usually before they can dig in very far.

  32. once I had a big black tick on the end of my dick. it was there so long, I thought it was a mole. then one day, it finally died and i picked it off. we had been visiting relatives in southeast Texas that summer, so that’s were i got him/her, or i should say she/he got me. another true story, i swear.

  33. ya, i picked up a lyme tick a couple of years. i developed the distictive hot to the touch bullseye rash. i went to the ER and they gave me a course of antibiotics. this rash isn’t like that, but who knows. i might just go get it looked at anyway. i don’t have any health insurance either. that last time i went to the er it cost me $400 to have someone look at me for about 5 minutes. it was more than worth it though.

    also, since then, i’ve found a free public clinic, so i might go there.

  34. Jim e, crude has been trading at over $60 per barrel today. Is it summer yet? Getting close, I guess.

    In other news, “ace” over at TOD (Tony Erickson) has a new post up on his global oil production forecasts. He mentions something about the prospects for war over oil yet to be discovered in the Arctic, saber rattling by the Russians. Only thing is, they probably mean it.

    Meanwhile, I had a brain fart over why so much moron effort is now going into fighting the Taliban in the northern Pakistan tribal areas. Lookie at a map. If we bring oil and natural gas to port from the stans, avoiding the proximity problems with Russia ala Georgia, those lines have to go through the Afghanistan-Pakistan border area to reach the sea ports to the south. For all that to happen, we need stable, puppet countries in Afghanistan and Pakistan. Just a thought. Makes moron sense than spending all that money looking for Osama’s mummy in some cave.

  35. Jon Lee Anderson, A Reporter at Large, “Our New Best Friend,” The New Yorker, October 7, 2002, p. 74

    ABSTRACT: A REPORTER AT LARGE about the Democratic Republic of São Tomé and Príncipe, and its oil reserves… São Tomé is one of the world’s most indebted and most impoverished nations. The islands lie in the Gulf of Guinea, pretty much on the equator. They have a combined land mass of three hundred and seventy-two square miles, more or less the size of metropolitan Indianapolis… The Portuguese used the islands as a transshipment base for slaves on their way from Africa to Brazil… Forced labor continued in one form or another right up until the islands gained their independence, in 1975… São Tomé is sitting on reserves of perhaps four billion barrels of crude oil. Even if one uses a conservative number for the price of a barrel, say twenty dollars, it is clear that São Tomé and the United States do indeed have common interests… Nigeria, which is São Tomé’s neighbor to the north, now produces about two million barrels of oil a day, more than half of which goes to the United States. … There is talk, probably exaggerated, of São Tomé’s having two hundred years’ worth of oil reserves at production levels of five hundred thousand barrels a day… São Tomé is in a very rough neighborhood. The most immediate problem is Nigeria, one of Africa’s most endemically violent and corrupt countries. A treaty signed by Pres. Fradique de Menezes’s predecessor settled a dispute over the maritime borders of São Tomé and Nigeria and gave Nigeria a preëminent role in a joint authority that was set up to administer their shared oil bounty… The Nigerians do not have a good track record of adhering to agreements, and they are a daunting enemy. Tells about a visit by Fradique to the US… He met Bush for breakfast, went to Texas and to Washington, for meetings with oil executives, congressmen, the World Bank, the I.M.F., and White House and Pentagon officials. The high-level meetings were a sign of what Paul Michael Wihbey calls “a sea-change that is taking place in U.S. geopolitical strategy,” which includes Bush’s recently unveiled strike-first policy toward states like Iraq, and a possible military and commercial base in São Tomé…

  36. “once I had a big black tick on the end of my dick. it was there so long, I thought it was a mole. then one day, it finally died and i picked it off.”

    And Mrs. Dooms reaction to this was?

  37. Eastern Greenland has the right geology for oil reserves. Greenland is owned by Denmark. Denmark has the happiest people on Earth. Coincidence? I think not!

  38. Donovan, my longer reply was eaten by the internet police, so let’s see if this one gets past them. Short answer to your question: this incident occurred many years before I met Mrs. Doom. I think my mother was impressed, though.

  39. EE, that’s par for our course, alright. Poor little country with hugh oil reserves and unstable economy surrounded by malevolent neighbors needs rich, militarily strong country for economic stimulus (for a few) and international protection. Seaports are a plus. Apply to Hillary Clinton, US Dept. of State.

  40. so anyway, i went to the free clinic. the staff doctor is a korean female. korean whores don’t do nothing for free, which is as it should be. but shit, omfuckingg, i says to myself. she’s called me twice since my exam to see how i’m doing. dreams do come true. i think i’m in love

  41. so anyway, i’ll go in for a “follow up” next. that visit will tell the tale. fresh korean asshole, educated to boot, now that’s what i’m talkin’ ’bout.

  42. “i’m sorry. i’m acting like askosa now, all stupid and shit.”

    That would require a full lobotomy and bullshit transfusions. And The One’s cell phone #.

    Are we there yet, bitches? Yessiree Bob, intersection of Hope & Change. End of the line.

  43. “China is targeting storage capacity that will hold demand cover of around 90 days. (The U.S. currently has storage for about 62 days of oil imports.) In other words, there’s a lot more oil still to be packed away in China now and in the coming years as more facilities are built.

    And since China’s geology rules out underground oil storage, as in the U.S., ‘any new crude tanker storage built in China should be clearly visible on a map/satellite image with sufficiently high resolution,’ Bernstein says.”

    http://blogs.wsj.com/environmentalcapital/2009/05/22/chinese-oil-google-images-show-growing-crude-storage-in-china/

  44. I guess the Chinese are taking ace’s The Oil Drum predictions on future supply to heart. Hey, they have the capital and the cheap labor to make those tank farms. They are vulnerable to sabotage and air strikes, however, and anyone can track them, as the article suggests.

    The US should be squirreling moron away in underground storage. Maybe they are.

  45. I was wondering more on the geology aspect. China’s a big slab of real estate – is it all geologically unstable for underground storage?

  46. Isn’t the seismic hazard in China more in the west of the country? Doom would know. But perhaps in the east and south its more just a matter of economics rather than geologic hazard. Maybe the geology just doesn’t lend well to constructing cavern storage (i.e. like we have with salt domes on the Gulf coast in US).

  47. Bif, bingo, it’s the salt domes. They make wonderfully tight underground reservoirs. I doubt that they exist at the US Gulf of Mexico scale anywhere in China. Seismic hazard is all over China, because the collision that started the Himalayas over 55 million years ago is not yet finished, a slow-motion wreck in progress, manifesting itself in the occasional big killer earthquake. Could be more frequent in the SW sectors, but it’s bad all over that part of Asia.

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