WTI Crude

Loading...

Brent Crude

Loading...

Natural Gas

Loading...

Gasoline

Loading...

Heating Oil

Loading...

Rotate device for more commodity prices

How To Trade The OPEC Meeting

How To Trade The OPEC Meeting

Weeks of rumors and rhetoric…

Lack Of Pipeline Capacity Could Force Down Canadian Crude Prices

Lack Of Pipeline Capacity Could Force Down Canadian Crude Prices

With current pipelines operating near…

Was 2015 The Peak For Crude And Condensate?

There is concern that World C+C may decline steeply after the peak, I believe those concerns are over blown. There is always the possibility that there could be a severe recession due to high debt levels, high oil prices or potentially due to both problems in combination. War and environmental damage due to overpopulation are also potential problems which may lead to a crisis.

If none of these problems arises in the near term (say for the next ten years), and demand for oil is high enough to keep annual average oil prices above $75/b from 2018 to 2025, then the average annual decline rate of oil (C+C) output will remain under 2%.

For simplicity in the analysis that follows, I assume the peak in C+C output is 2015 and that output will decline at a relatively steady rate from 2015 to 2025. This in unlikely to be the case in practice and the actual path of future world output is unknown, the intention is to determine a likely trend line for World C+C output. Using quarterly C+C output data from the EIA, I constructed the charts that follow.

Data is from the International Energy Statistics page at the EIA website.

The “Big 14” oil producers from 2002 to 2015 are (in order from largest to smallest): Russia, Saudi Arabia, United States, China, Iran, Mexico, Canada, UAE, Venezuela, Kuwait, Iraq, Nigeria, Norway, and Brazil. The Rest of the World (ROW) is all other oil producers besides the “Big 14”.

All charts below (except the natural log charts) are in kb/d.

The Big 14 increased C+C output by about 8 Mb/d from 2010 to 2015.

For the ROW C+C output decreased by about 3 Mb/d from 2010 to 2015.

Related: Are The Saudis And Russians Deliberately Sabotaging Doha?

To consider decline rates we look at the linear trend of the natural log of output. For the ROW the average annual decline rate was 2.69 percent from 2010 to 2015.

The C+C output of the Big 14 increased at an average annual rate of 2.71 percent from 2010 to 2015.

Related:Why Oil Prices Will Rise And Many Pundits Will Be Caught By Surprise

As a very simple future scenario, I assume the ROW decreases at 3 percent per year and that the rate of increase of the Big 14 is zero. The chart below shows the scenario, with ROW output read from the right axis, output is in kb/d on both left and right axes.

If we look at the natural log of World output we can find the average annual decline rate for the scenario above over the 2016 to 2024 period, it is 0.63 percent per year.

The scenario above is very conservative, as oil prices rise above $85/b it is possible that the output of the Big 14 will rise at 0.52 percent per year (5 times slower rate of increase than 2010-2015) and that ROW might decline at an average rate of 2 percent/year on average over the 2016 to 2024 period.

Related: Driverless Cars Or Electric Vehicles, Which Will Dominate The Future?

That scenario results in a plateau in C+C output, chart below, ROW is read from right axis.

In either case, C+C output either does not decline at all for 8 years (optimistic scenario) or declines slowly at 0.6 percent per year in a conservative scenario.

By Dennis Coyne via Peakoilbarrel.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • JHM on April 08 2016 said:
    Mr. Patterson presents two scenarios: one where the Big 14 stop growing production, and another where they slow to one-fifth the growth rate. Both scenarios yield declining aggregate production.

    The slow growth scenario (for the Big 14) supposes that oil price expectations remain at $85/b, but somehow this is not enough to continue at the full growth rate among the Big 14. I'd like to know why the author believes this to be the case.

    If we consider a third scenario where oil expectations are sufficient for the Big 14 to keep growing at full rate, then total supply rises from about 80 mbpd in 2015 to 95 mbpd by 2025. The problem with this scenario is that it perpetuate a glut as demand is unlikely to grow by 15 mbpd over the next 10 years. An if there is a glut, the price cannot meet the expectations that motivated the expansion of supply. So oil potentially remains below $40/b for the next ten years, while producers madly grow supply. This makes no economic sense over such a long timeframe.

    Perhaps the author has this in mind in his slow growth scenario. If so, the limiting factor is oil demand, not geologically limited supply. It may well be that the only way for the oil industry to enjoy sustained $85/b prices is to allow the supply to decline over the next ten years. The way to do that is to pull back investment until the oil futures curve slides up from $52/b in 2024 to $85/b. Overinvestment is the key thing that will destroy wealth in the this industry.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News