HSBC report on peak oil... world heading to oil crunch

[Lord Beria3]

https://medium.com/insurge-intelligence ... .1tq2aepae

Great article on why the world is heading towards a massive ol crunch after 2018!

[johnhemming2]

I glanced at this, but it has oil levels currently at 60mbd when it is more like 90mbd. Hence I am not inclined to spend more time on looking at it.

[PS_RalphW]

I glanced at it. I saw it listed current production at 74M bpd which is the current crude and condensation production. The 90 Mbpd includes NGL and other dubious sources.

However it seems simplistic in assuming a decline of 5% a year post peak. Initially the decline is likely to be shallow - as demand exceeds supply in the next couple of years there will be some short term response as fracking picks up and it will probably take a couple of years of $100 oil to tip us into the next recession. Then demand will fall again as the decline curve picks up a bit moderating prices again.

Peak oil could happen and most people would never notice. It would just be blamed on the 'economy stupid'

[johnhemming2]

Peak conventional oil happened in 2006-8. Dubious sources, however, will affect the overall peak.

[kenneal - lagger]

In the blog by Kunstler highlighted in another post he has it that the EROEI of oil coming below 30 is the reason that everything it going tits up. Charles A Hall in Energy and the Wealth of Nations said that EROEI of oil had to be more than 5 for it to have a positive effect on the economy. That is quite a difference and if Kunstler is correct it is no surprise that we are having problems now.

I was thinking before reading that blog that the US could achieve energy security in time of conflict by massively increasing it's out put of fracked gas and oil but if Kunstler is correct there would be no advantage in increasing the output of a product that had a negative effect on the economy. Energy maths trumps economics every time!

[Lord Beria3]

I'm not a expert like some of you on the numbers but the overall article seemed to make sense and chimed with other reading which indicates a major oil crunch by the end of the decade.

[johnhemming2]

I think next decade is more likely

[kenneal - lagger]

From what Kunstler and Hall say it is not the availability of oil which will be the problem but the EROEI of the sources which will be the problem for the economy. Hall says that in order to get a nett gain for the economy by covering the energy input for all the machinery involved in oil production an EROEI of 5 is the minimum and Kunstler is saying that as EROEI falls below 30 the economic activity that can be supported by oil decreases markedly. Actual oil production is not the problem.

[Pepperman]

However it seems simplistic in assuming a decline of 5% a year post peak. Initially the decline is likely to be shallow - as demand exceeds supply in the next couple of years there will be some short term response as fracking picks up and it will probably take a couple of years of $100 oil to tip us into the next recession. Then demand will fall again as the decline curve picks up a bit moderating prices again.

I read the HSBC report as saying that the post-peak conventional production (accounting for 81% of supply) is forecast to decline at 5% to 7%, i.e. not that the whole market will decline at 5%.

But if 81% of the market declines at that rate (3-4.5mb/d according to HSBC) I struggle to see how unconventional production could expand sufficiently to fill that gap.

[Little John]

However it seems simplistic in assuming a decline of 5% a year post peak. Initially the decline is likely to be shallow - as demand exceeds supply in the next couple of years there will be some short term response as fracking picks up and it will probably take a couple of years of $100 oil to tip us into the next recession. Then demand will fall again as the decline curve picks up a bit moderating prices again.

I read the HSBC report as saying that the post-peak conventional production (accounting for 81% of supply) is forecast to decline at 5% to 7%, i.e. not that the whole market will decline at 5%.

But if 81% of the market declines at that rate (3-4.5mb/d according to HSBC) I struggle to see how unconventional production could expand sufficiently to fill that gap.

Well, if we assume, for the sake of a thought experiment, those numbers are right - eg:

80% of total oil production is falling by, say, 4% per annum

Then a back-of-a-fag-packet calculation tell me that the remaining 20% of total oil production would need to increase its own annual production rate by approximately 16% to make up the deficit. In other words, for production to not fall overall.

I don't know what the rate of increase in production, per annum, has been for unconventional oil over the last few years (which is where, I am guessing, the 20% is coming from). But, I would be very surprised indeed if it could keep up an increased rate of production of 16% for any extended period, assuming it could even meet that target in the first place. And, of course, that increased rate of production is only for the first year of any fall in production of 4% of the other 80% of total production. As the years progress, the remaining 20% of unconventional oil production would need to increase it's own production rates by an ever higher percentage each year until, at some point, it became the majority percentage of total oil production. At which point, it's rate of increase in production could slow down to something approaching a static production rate.

That's not going to happen. Or, at least, it shouldn't happen unless we get into the crazy territory of mining methane clathrates and the like. Which, frankly, I think will happen.

Clearly, we are f*cked. As a species, we are unable to stop ourselves and we are f*cked. The best thing for both our own species and the rest of life on earth would be for full-on third world war with significant nuclear exchanges. Things would be pretty awful for a century or two and our global civilization would be driven back a few centuries. Not to mention, a massive concomitant reduction in the global human population. But, life would recover precisely because of that reduction in the human population.

[clv101]

Post peak, all bets are off. Anyone calming skill forecasting the trajectory of the downslope is taking through their hat. After a year or two of ~4% extraction declines we absolutely can not expect the global economy and the oil extraction industry to be operating 'normally'.

Regions that peaked decades ago tell us about decline rates in normal times. This tells us next to nothing about decline rates after the global peak.

[woodburner]

In which case most of the discussion on PS is redundant.

[clv101]

There's very little discussion here on what the post peak extraction trajectory will be.

[snow hope]

What do you think it will look like Chris?