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Global oil demand hits new high — threatening both economic and national security

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"Global oil demand hits new high — threatening both economic and national security"

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The International Energy Agency (IEA) released new findings Tuesday April 13 that global oil demand will reach a record high level in 2010, as the world economy recovers and developing nations’ demand for oil grows to new heights.  IEA forecasts that average annual world oil demand will have rebounded 2% from 84.9 million barrels per day (mb/d) in 2009 to 86.6 mb/d in 2010.  Susan Lyon, Special Assistant on CAP’s Energy Opportunity team, has the story.

In its April 13 Oil Market Report, a monthly update on world oil market trends, IEA forecasts world oil demand growth this year at 1.67 mb/d, up by 100,000 bpd from its previous forecast.  Accordingly, the agency finds that “crude oil futures hit 18-month highs in early April, with expectations for an accelerating economic recovery.”  Since the last oil market report, global oil demand has been revised up by 30,000 barrels per day (b/d).

The report warns that rising oil prices may threaten continued economic recovery:

Ultimately, things might turn messy for producers if $80-$100 per barrel is merely seen as the new $60-$80, stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment.prices

On the supply side, due to lower OPEC output, global oil supply fell by 220,000 b/d in March as well.  The new data also reveals a new trend in global oil refinery throughput: “While China, India and Russia all posted record highs in February, European throughputs fell to their lowest level in 17 years.”

IEA’s report comes on the heels of last week’s 2010 Joint Operating Environment (JOE) report by  the U.S. Joint Forces Command (USJFCOM) lays out the energy crunch that lies before us and its likely consequences.  The projected growth of overall energy demand for decades to come, led by oil and coal, is alarming to the U.S. armed forces:

By the 2030s, [energy] demand is estimated to be nearly 50% greater than today. To meet that demand, even assuming more effective conservation measures, the world would need to add roughly the equivalent of Saudi Arabia’s current energy production every seven years.

Without tremendous energy efficiency efforts and a massive shift toward renewable energy, they note that the U.S. and world economies may suffer production bottlenecks as well as regional instability due to resource scarcity and price volatility.

Furthermore, the JOE (!) also pinpoints climate change as a top 10 security issue: “one of the ten trends most likely to impact the Joint Force.”  Previously, the Department of Defense’s Quadrennial Defense Review argued that climate change is a “destabilizing agent” and the Center for Naval Analysis convened a board of military officials who concluded in 2007 that climate change is a “threat multiplier.”

To face the dual challenges of energy and climate, we must pass a comprehensive clean energy and climate legislation that will reduce our dangerous dependence on foreign oil while also putting a limit on carbon pollution.  The IEA reminds us that the “return of economic growth” is delicate and requires reducing our vulnerability to oil price spikes and supply disruptions.

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28 Responses to Global oil demand hits new high — threatening both economic and national security

  1. Chris Dudley says:

    Production increase is coming from non-OPEC countries which means increased tar sand extraction. In terms of catastrophic warming threat oil is the new coal because there is so much more unconventional oil than there is coal. As renewable energy becomes very low cost, the temptation to use it in unconventional oil extraction will become overwhelming. Solar power devoted to cooking oil shale into production will become commonplace and the entire resource will be used. Retail PV panels have been available for under a dollar a Watt for about 6 months now so we are already at the point where this could be started.

    The only thing that can slow this down is to reduce the price of oil on the world market to below the cost of production of unconventional oil. Strong conservation measures such as gasoline rationing or import price controls for the US are needed to accomplish this.

  2. Neven says:

    The IEA reminds us that the “return of economic growth” is delicate and requires reducing our vulnerability to oil price spikes and supply disruptions.

    It’s the pathological emphasis on economic growth that has put us in this situation in the first place. Infinite growth is not possible in a finite system, but nonetheless this thinking (the sky is the limit) is the basis of our economy, culture and society. As long as this neoclassical economic concept is beyond dispute, no problem can ever be solved sustainably.

    It’s in our best interest to take the pain as soon as possible, so I hope oil prices will spike again. The more painful it becomes, the quicker people might wake up to the fact that the current economic paradigm is a self-delusional lie.

  3. George Ennis says:

    Sinopec has a $4.6-billion deal to acquire a minority stake in the Syncrude oil-sands plant would give the Chinese state-controlled company a veto over the crucial decision of whether the company should upgrade more oil in Alberta or export raw bitumen for processing.

    There has been a long-running concern in Canada regarding the export of raw resources for processing, and that is the strategy that China Petroleum & Chemical Corp., known as Sinopec, is expected to pursue.

    The company is Asia’s biggest refiner and has been expanding its capacity to handle heavy oil, the kind that is produced at Syncrude before it is upgraded into synthetic crude oil.

    Source Globe and Mail April 13 2010

    This does not bode well for reducing carbon emissions.

  4. sasparilla says:

    The JOE report (love to say that), also said it anticipated all the additional slack in world production capacity will be gone by 2012 and that a shortage of about ~10% in world production capacity compared to demand would probably occur by about 2015.

    The $4+/gallon of gasoline (in the US) in 2008 was because world production capacity couldn’t significantly increase since 2005 and was tapped out – we haven’t experienced an actual shortage of world oil production capacity yet (beyond the short term political ones in the early 70′s) – but one can guess it will be most unpleasant.

    I was really hoping we’d get another couple of years before oil started vacuuming the disposable income from our recovering economies, but it doesn’t appear that will be the case.

  5. paulm says:

    peak civilization?

  6. James says:

    A corollary to go along with this news is that it will be much harder to get off cheap dirty coal (and doing what we need to do for our climate in general) while oil and its associated products go through the pricing roof and reek havoc on our economies. We really don’t need this right now (or the next 5 years), from a whole host of angles.

  7. Bill R says:

    James…

    Will Coal be “cheap” when oil becomes twice as expensive? Does the coal energy infrastructure depend on cheap oil (to a degree?)

    Will not all other competitors to oil (energy sources) and efficiency and conservation be stimulated by the peaking of oil?

    You are right that I would rather be going through peak coal before peak oil, but that does not seem to be in the cards.

    If humans are not serious enough about cutting fossil fuel dependence to do it themselves, as a fall-back I don’t mind mother nature giving us a “last-call”.

  8. ToddInNorway says:

    May I recommend the 2010 model of the VW Golf BlueMotion? It gets 60.5 MPG (US gallon) on the highway. Or how about the 2010 VW Polo BlueMotion? It gets 74 MPG on the highway! These are production cars with room for 4 people and are produced literally by the millions. They are available throughout Europe today. If this technology is taken up in the market to its full potential in Europe, it will lower overall oil demand by 3-5 million barrels per day there. It would lower N. America´s oil consumption by 5-7 million barrels per day. I predict it will happen when people expect crude oil price to be permanently higher than 100 USD/Barrel.

  9. Neven says:

    I would recommend the Opel Combo 1.6 CNG edition. I’m about to buy one that will hopefully serve me for the next 10 years. If all goes well I will even be able to fill it with ‘Biogas’ (methane form organic waste added to CNG), which means 45% less CO2 (depending on the amount of methane in the mixture), 80% less aerosols, 95% nitrogen oxide and 100% less particles. I believe this is the least polluting alternative in Europe at the moment, depending on where you live, of course. But in Germany, Italy and Austria there is already quite a bit of infrastructure.

  10. Bob Wallace says:

    Chris -

    “Retail PV panels have been available for under a dollar a Watt for about 6 months….”

    Whatcha saying here? You mean ‘retail’ as in very large volume prices? (What I’d call ‘wholesale’.)

    I’ve not seen any ‘buy them one at a time’ retail prices much below $3 per watt.

    I’ve heard that First Solar has broken the $1 manufacturing barrier. Got any links to any company selling in any sorts of volume close to $1?

  11. Bob Wallace says:

    Chevy Volt. 40 miles on electricity alone.

    Nissa Leaf and Mitsubishi iMev. All electrics with a 100 mile range.

    Look for a rapid change in how we fuel our rides.

    (The Leaf. About $25k after the federal rebate. About $20k after the additional California rebate. Average 12k mile per year driver should save an additional $6k over the first five years. And that’s with gas staying at $3….)

  12. Brendan says:

    @Bob Wallace. Exactly. This will cause EVs and PHEVs to hit critical mass. I’m pretty sure adoption is going to be much swifter than most are currently predicting.

    Has no one seen the price of gas lately? You could have known we’re approaching the peak again just by looking at the prices on the gas station marquees. The big question is will this cause another economic dip, or will we shoot past production capacities first and see $200+/bb oil? It ain’t gonna’ be pretty either way! The idea of producing more from tar sands is scary, but I have to question if production can really be ramped up quick enough to have a big effect on the inevitable, which is a strong shift toward electric power.

  13. Chris Dudley says:

    Bob (#11),

    Here is a 4 kW system at $1.97/Watt, panels are $0.98/Watt http://sunelec.com/index.php?main_page=4080_watt_kaneka_grid_tie_system

  14. Bob Wallace says:

    Chris – Thanks. Interesting. These seem to be thin film panels. First I’ve seen sold to retail customers. And they seem to be very new to the market.

    All the deals I’m seeing are in pallet quantities (25 or so).

    Prices from different dealers are all over the place. Your company is listing at $58.80. One company is offering at a bit over $80 per. Other companies are over $200 per panel (over $3 per watt).

    It could be that the higher priced places are trying to sell close to market prices and maximize their profit and the other, low priced guys, are going the volume route.

    This is either going to turn out to be a scam or it’s going to be a disruption in the flow of how things were supposed to go.

    If they can actually deliver a quality 4kW package for $8k then solar becomes immensely affordable.

    (I’ve emailed some folks at one of the ‘tried and true’ off the grid companies to get their feedback.)

  15. Bob Wallace says:

    $2 installed (do it yourself).

    Drive 12,000 miles per year (to get back to the topic of oil). An average of 33 miles a day.

    Burn 0.25 kWh per mile and you need ~8 kWh per day to top your tank, er, batteries.

    That 4kW system would fill your batteries in two hours. You live in a place with an average of four hours of sun a day (most of the lower 48 + where Obama was born) and you are going to supply your house with the other 8kWh making the car charging part about $4,000.

    Drive a 30 MPG car 12,000 miles per year and you’re going to burn 400 gallons. At $3 per gallon that’s $1,200 a year. Solar system payback in a bit over 3 years. $5 per gallon and it’s two years payback and free fuel for the rest of your life.

    (Yes, there’s all that ‘sun doesn’t shine all the time stuff. But that’s a different discussion.)

  16. Mike #22 says:

    Todd In Norway, I am looking forward to the Polo BlueMotion making it to the US. Tripling mpg here in the US would free up 5 million bpd–and it is so easy. We need to stop building three ton SUVs and start building hypercars–that seems simple enough. Think of the recycling potential. One three ton car should source enough material for at least two new efficient cars.

    I see that VW is serious about getting their one liter hybrid hypercar on the road for 2013. +150 mpg. The one liter designation refers to a fuel consumption of one liter/100 km, which a VW prototype achieved 2002 (well over 200 mpg). And a car that gets +150 mpg is also capable of getting over 10 miles/kwh. http://media.vw.com/index.php?s=43&item=501

    Globally there are estimated 600 million cars on the road today. Global production is about 50 million per year. How long does it take to get the old guzzlers off the road and replaced?

  17. Chris Dudley says:

    Bob (#15,16),

    Thin film amorphous silicon has been available to home owners for a while at a lower cost than crystalline silicon. It has been less efficient so you need more roof space for the same power. Much of the market has been for ground mounted systems. These Japanese panels are better but they are still heavy for the amount of power delivered. That means more work to install so there is a cost trade off there too.

    One thing that looks really nice about the Japanese panels is that their degradation curve looks better than for crystalline panels. They might last 80 years with substantial power output. That makes the cost per kWh particularly low. Much of the degradation of crystalline panels is from lattice defects introduced by cosmic rays. Presumably amorphous silicon is more robust to this since it is already disordered. Of course, the construction of the panels would have to be up to an 80 year hitch so that water damage or contact delamination, as examples, do not interfere with the extended life of the collecting surface.

    FirstSolar which produces non-silicon thin film with good efficiency is not selling in the home market I think because they want to control the recycling of their product. Don’t know what their main rival NanoSolar will do but they seem to want to do big solar farms right now.

    For now, I think the home market (where most of the roofs are) will remain silicon. Since most shingle is 30 year, it may well be that crystalline silicon will continue to dominate owing to a higher power to weight ratio even if it remains a bit more expensive in $/Watt since you will have to take it off to replace the roof and you might as well go with new panels at that time.

  18. Bob Wallace says:

    The Dow solar shingles “integrate low-cost, thin-film CIGS photovoltaic cells into a proprietary roofing shingle”. Not really shingles in the normal sense, but a roof made of solar panels.

    Making the panels serve as the roof surface means that connections can be inside the house protecting them from the elements and making them easy to access (given proper roof design).

    Racks on the roof may soon be a thing of the past. If prices are falling this rapidly then people are going to start wondering “composition, steel, or solar?” when it’s time to replace their existing roof covering.

    With new construction designing the roof so that a portion orients south and is built at the optimal angle is going to be part of the process. People will buy houses that create their own electricity if the house is equally attractive and does not cost appreciably more. (We’re already seeing ‘solar’ houses sell for a premium in some markets.)

    NanoSolar has announced that they will be selling some of their product to individual/residential users in the near future. I seem to remember a 2010 date mentioned.

    As for 80 year lifespan making the kWh price lower, yes, but I don’t think that will be a major market driver for the individual residential purchase. Initial price is the big one. Get the up front price down to where one can borrow the money and pay it off fast and installations will soar.

    If its possible to build an “80″ year roof with panels then that should be the icing on the cake.

  19. Richard Brenne says:

    Since Paulm’s comment at #5, “Peak civilization?” and Will Greene’s (#8) response of “Yup” (Could you guys please be more concise?:), most of the other comments from excellent commenters are about trying to keep what is approaching a billion vehicles on the road at all costs.

    I certainly support your ideas relative to everyone driving SUVs and Pick-Ups, but have to wonder if a billion individual vehicles of any kind are sustainable. Is there enough lithium – which mostly comes from Bolivia and is spoken for by the Chinese – or any substitutes to keep a billion individual vehicles running indefinitely? Or do we just wish that were the case?

    In 1973 only the U.S., Canada, Western Europe and Japan had substantial oil-based economies. Now, 37 years later, China and India have huge and rapidly-growing oil-based economies, and virtually every other nation on Earth has an oil-based economy or is desperately trying to have one (sorry, poorest nations, we got there first and you’ll never get there). What does that mean for global oil demand? Looking at the long-term trend, what do you suppose that will mean for oil prices?

    The best Peak Oilers have been saying for a long time that demand exceeding supply will drive up the price of oil and cause a large recession that will lessen demand and improve efficiency that will lead to a recovery and a greater demand for oil until lowered production makes the same thing happen again for as many times as it takes for us to catch on or for global collapse to occur.

    Most people seem determined not to catch on.

    Looking at Climate Change and all energy issues without regarding Peak Oil or Overpopulation and Overconsumption guarantees that you will never fully understand the global equation and what is really going on. Like most in the mainstream media and academia that means endlessly discussing effects or symptoms without ever really understanding the cause or disease.

    Aside from occasionally mentioning dates, James Howard Kunstler, Richard Heinberg and John Michael Greer are more right about Peak Oil and all its implications than all of the mainstream media and all of academia put together. Google them and go to their websites. Kunstler blogs every Monday morning, Greer every Wednesday evening, and Heinberg writes his Museletter early every month.

    Around July 20 in the San Francisco Bay Area I’m working to get Joe Romm on a panel with Richard Heinberg and between the two of them they get more than every pundit you see on every channel put together about this stuff, but like all of us they can always get more (I actually think they have great things to teach each other and discuss).

    In my book I synthesize Climate Change and Peak Oil more than anyone I know. Peak Oil is the jab that breaks our nose, while Climate Change is the uppercut that can knock us out.

    There are some crazy commenters on Kunstler’s blog, but many of his commenters and almost all of Greer’s (he very carefully moderates his discussions) are almost at the Climate Progress level of commenters, which is the highest of any blog I’ve ever seen. But folks here need to get what Heinberg, Kunstler and Greer are saying more than is currently the case.

    This stuff is not going away. The more we know and prepare, the better off we’ll all be.

    Climate Change and Peak Oil are two sides of the same coin that will determine our future more than any other categories, quite possibly including even technology and the free market, our current gods.

  20. Chris Dudley says:

    Richard (#20),

    There is vastly more unconventional oil than conventional oil. Combined with an energy glut from low cost PV, we will be increasing oil production rather than seeing a peak unless we do something now to avoid this. At about $50/barrel, tar sands are profitable. At $70/barrel, with cheap electricity, oil shale will be as well. A decline in production of conventional oil just means $80/barrel oil and lots of unconventional oil production as we are seeing now. Just so long as we can throw cheap inexhaustible energy at the problem, we’ll keep increasing oil production. This is very dangerous and must be stopped.

  21. Chris Dudley says:

    Bob (#19),

    I’m not saying the panels are built to last 80 years. It is just that the collecting material does not look limiting the way it does for crystalline panels.

  22. Richard Brenne says:

    Chris Dudley (#21) – That’s a very good point. I think many of my earlier points (in #20) still stand, but modified by your point.

    Relative to how much conventional oil (roughly half of all that’s ever been available) is left, how much tar sands, oil shale and coal to liquids potential do you think is left? And how much CO2 ppm could each create if used?

    I’ll give guesses and I’d enjoy hearing your estimates and those of anyone else.

    Since we’re halfway through all oil (and we’ve burned a lot of coal and natural gas) and we’re up to 389 CO2 ppm (for the 2010 average) from 280, my guess is that there’s another 50 ppm from conventional oil.

    Then what, another 100 ppm from tar sands?

    100 ppm from oil shale?

    200 ppm from coal?

    50 ppm from natural gas?

    That’s another 500 ppm of possibilities not counting cement, deforestation, methane from rice paddies, livestock and landfills, nitrous oxide from biofuels and other sources, deforestation and other land-use issues, and of course positive feedback loops like methane from decaying vegetation that had been frozen in place by permafrost and the ultimate threat, release of methane clathrates on continental shelves in the Arctic Ocean.

    Of all those, is oil shale the least likely to be used? (Please keep in mind that each of all of these will always remain in the Earth’s crust, because when it takes more than a barrel of oil to get a barrel of oil out of the ground in a given oil field, nation or globally, then that field, nation or planet is effectively done producing oil. The same ideas extend to all energy sources, Energy Returned on Energy Invested (EROEI) being the primary concept in all discussion of energy.)

    Jim Hansen has said that if we burn all available tar sands and oil shales he feels that it’s a “Dead certainty” that Earth’s climate will suffer a runaway greenhouse effect toward that of Venus.

    A couple of other things to remember is that with the methane and nitrous oxide already in the atmosphere we’re above 430 ppm CO2 equivalency.

    And I’m afraid that when there are fossil fuel shortages people desperate for heating and cooking could deforest and burn far more wood than is being burnt now, removing a primary carbon sink on land and adding still more CO2 in a double-whammy.

    Other than all that, there’s no problem.

  23. Chris Dudley says:

    Richard(#23),

    This figure from the World Energy Outlook 2008 http://www.theoildrum.com/files/long_term_oil_supply_cost_cruve.png indicates that we have used about a third of conventional oil and about a seventh of all extractable oil including tar sands and oil shale. Including gas-to-liquids and coal-to-liquids we have produced about a tenth of everything that could be produced. Assuming the oceans stop accepting carbon dioxide at about 450 ppm then we are looking at about 900 ppm increase in the atmosphere not counting other feedbacks. That takes us to about 1300 ppm. These are pretty rough figures and feedbacks like permafrost destruction and clathrate out gassing likely add substantially.

    EROEI is a tricky tool. You need to look at the whole system. Suppose Nanosolar’s energy payback time is a few weeks and, since Bob says they want to go residential, their stuff lasts thirty years. Then their EROEI is about 500. Now, suppose that energy is use to extract oil shale on a one-to-one basis. The EROEI for the oil is 1 but for the system it remains 500. If you invest five times the energy you get out in oil, you are still doing as well as the EROEI for the gushers of the early days on a system basis.

    Cheap abundant renewable energy allows us to burn through fossil fuels faster and extract more of them than we would be able to do if these things had not been invented.

    The only consequential effect of ‘peak oil’ is that we have ceded control of oil prices to OPEC for the time being. But that is right in line with our policy of developing domestic supplies which requires a high price for oil. We want more and more oil production and we have a policy to ensure that that will happen: a high oil price policy.

    For any hope at all for the climate, the US needs to adopt a low oil price policy now and work diplomatically to ensure a moratorium on future tar sand and oil shale production so that when ultra-cheap electricity is available these will not become cheap oil sources.

  24. Richard Brenne says:

    Thanks Chris, that first paragraph is especially helpful. Those figures are all for converting various forms of fossil fuel energy into liquids primarily for transportation use, right?

    Would we add all the coal used for generating electricity and all three fossil fuels used in all the various forms of industry to that?

    Anyone else have any educated guesses about how much CO2 potential is still in the ground from all the various fossil fuels?

  25. Leif says:

    My son told me today that each GOOGLE web search uses as much energy as making a cup of coffee. Anyone have confirmation on that number. He could not recall the source.

  26. Chris Dudley says:

    Richard (#25),

    I think that the assumption is that all coal is used for liquids in the figure. But, the amount a coal available is somewhat controversial. Some groups consider that we may run into coal supply issues around 2025 rather than 2125. For electricity, the earlier date might have merit but for liquids, possibly converted in situ, well just think what insane efforts are made to get at Bakken oil….

  27. Richard Brenne says:

    Chris, you have a unique and valuable perspective on Peak Oil. Other than some very specific issues, I generally find myself agreeing with Jim Kuntstler, John Michael Greer and Richard Heinberg on most things, just as they’re generally in agreement with each other.

    I’d enjoy hearing to where you might disagree with them. Also you can e-mail me at rabrenne@hotmail.com if you wish – I’d enjoy talking.