Friday, October 15, 2010

API: Rising Demand for Petroleum Indicates a Shift from Economic Stagnation to Economic Recovery

WASHINGTON, October 15, 2010 – "U.S. petroleum demand strengthened for all key refined products in September, indicating a shift from economic stagnation to economic recovery, according to the American Petroleum Institute’s (API) Monthly Statistical Report for September.

September distillate deliveries surged 6.9 percent compared with September 2009, driven by a robust demand recovery in ultra-low-sulfur distillates (ULSD), the type used for on-highway truck diesel fuel, indicating a bounce in industrial activity toward the end of the third quarter. September ULSD deliveries averaged 3.1 million barrels per day, up 9.4 percent from the same month a year ago. For the first nine months of 2010, ULSD deliveries averaged 2.95 million barrels per day, a 2.4 percent increase over the first nine months of 2009.

“The September data suggests a move toward economic recovery,” observed API Chief Economist John Felmy. “Stronger distillate demand indicates an uptick in industrial activity, while stronger jet fuel and gasoline demand point to increased business and consumer confidence.”  Jet fuel demand in September jumped 11.6 percent from 2009 to average 1.6 million barrels per day, while September total gasoline demand ticked up 0.1 percent over the same month a year ago to average 8.9 million barrels per day."

25 Comments:

At 10/15/2010 3:04 PM, Blogger VangelV said...

I hate to be the bearer of bad news but there clearly is a problem that we will have to deal with.

When Oil Peaked

 
At 10/15/2010 3:19 PM, Blogger juandos said...

Peak Oil Myth - Scam Busted by Noe van Hulst

 
At 10/15/2010 10:13 PM, Blogger VangelV said...

Peak Oil Myth - Scam Busted by Noe van Hulst

Try listening to the debate. Nobody is saying that we will run out of oil. The issue is when production will peak. Well, the data shows that the peak for light sweet came in 2005.

Noe van Hulst is a fool. He assumes that we will find the technology to extract more oil. Nobody in the Peak Oil camp denies that. The problem is that the technology will not have a meaningful impact. In fact, technology has created a situation in which the collapse will be faster.

By the way, about five minutes in he says something that makes my point for me. Even as an optimist he admits that the era of cheap oil is over. That means that Mark's optimism is misplaced since a rising oil price is a huge tax on users.

 
At 10/16/2010 6:08 AM, Blogger juandos said...

"The issue is when production will peak"...

Sorry the malthusian arguments put forth by clueless clowns and charlatans always fall flat just has the 'peak oil' already has on several counts...

Debunking the Myth of Peak Oil - Why the Age of Cheap Oil is Far From Over (Part 1)

 
At 10/16/2010 12:16 PM, Blogger James said...

If recovery is at hand why is Bernanke talking about Printing Money II aka QE2?

 
At 10/17/2010 8:03 AM, Blogger VangelV said...

Sorry the malthusian arguments put forth by clueless clowns and charlatans always fall flat just has the 'peak oil' already has on several counts...

There are big problems with the clip you referenced. First, it is fighting a straw man because nobody says that we will run out of oil. Second, it admits that the cheap oil is gone.

Third, the clip gets some simple things wrong. As someone who has invested heavily in tar sands I can assure you that the cost of production is not $15 per barrel. And as someone who is familiar with Saudi Arabian production I can tell you that the marginal barrel of oil does not cost $5 to get out of the ground. The fact that some of the barrels we get from Ghawar does cost $3 a barrel or less does nothing about the marginal barrel that is needed to prevent PEAK PRODUCTION.

Bottom line is that the clip does nothing to fight the PEAK OIL argument. It only supports the argument that we will not run out of oil, which is not what the Peak Oil proponents have ever claimed.

Debunking the Myth of Peak Oil - Why the Age of Cheap Oil is Far From Over (Part 1)

Another bad example. You cite an author who assumes that there will be enough massive fields found to prevent the peak. But he cites no examples of those massive fields that can be developed quickly enough to offset depletion. A field that can produce 1 mbpd needs to have around 10 billion barrels of reserves. It will take around 20 years for that field to go from discovery to peak production, longer if the environment is extreme.

The problem for the optimistic side of the argument is that they can't point to enough discoveries two decades ago (when discoveries were larger) that can offset the 4 mbpd of depletion that is coming from existing fields.

The Impending World Energy Mess

The Inevitable Peaking of World Oil Production

US Military--Joint Operating Environment Report

Der Spiegel--Military Study Warns of a Potentially Drastic Oil Crisis

As always, you are entitled to your own opinions but not to your own facts. The reports and books referenced above are supported by real world data and rigorous analysis. They deal with the real world situation in which we have depletion that reduces production from existing wells by 4 mbpd and in which most oil producing nations have already peaked, including the largest and most important producers.

The math works against your side of the argument and we will clearly need to start relying on natural gas to take care of some of our liquid fuel problem. While the gas side is more optimistic for now, even the overly optimistic IEA admits that we will have to replace half of current production by the development of new wells by 2030. That will not be easy given the depletion characteristics of many new wells. Which is why I have some of my money on ocean mining of hydrates.

 
At 10/17/2010 8:29 AM, Blogger VangelV said...

If recovery is at hand why is Bernanke talking about Printing Money II aka QE2?

We know that recovery is not at hand. Unemployment is still very high. The regulatory environment is still far too burdensome. Regime uncertainty is still far too high. And the USD and USTs are still in a bubble.

 
At 10/17/2010 11:02 AM, Blogger juandos said...

Sorry vangeIV your leftist, malthusian arguments are truly flawed but mostly for reasons of political correctness as all your sources show...

Your comment has reminded me of a very recent Walter Williams commentary on basic economics and how it plays in our collective cost of living going up...

 
At 10/17/2010 1:59 PM, Blogger VangelV said...

Sorry vangeIV your leftist, malthusian arguments are truly flawed but mostly for reasons of political correctness as all your sources show...

My sources include the US and German Military which are not exactly concerned with political correctness.

All you have is a straw man argument to knock down but I have never made that argument. I have never claimed that we will ever run out of oil. I have simple pointed out that the data shows that we will hit peak production in the next few years if we have not already done so. You have yet to provide a single credible argument that counters my position.

Your comment has reminded me of a very recent Walter Williams commentary on basic economics and how it plays in our collective cost of living going up..

You are avoiding direct debate about the issue and are relying on general economic arguments instead. As I said before, I have never claimed that we will run out of oil. I have never even claimed that we cannot eventually find substitutes for our liquid fuels problem. I am simply pointing out that the data is telling us that peak oil production is near and that objective analysis shows that we are not ready to make the transition.

Instead of general arguments you need to deal with specific issues. In no particular order:

1. Where will the 4 mbpd of new production that is required to keep production flat come from?

2. How exactly will you get Alberta tar sands production to go over 5 mbpd?

3. How will you reverse the decline in Alaska? Or Texas?

4. With Daqing, Burgan, Cantarell, and Ghawar having peaked how many new fields will you need to offset their lost production? Where are they?

 
At 10/17/2010 4:27 PM, Blogger juandos said...

"My sources include the US and German Military which are not exactly concerned with political correctness"...

Well wrong again vangeIV and its either that you're not paying attention ot you're lying to yourself...

A simple google search using the terms, 'political correctness +US Armed Forces' will turn up reams of material that show otherwise...

"All you have is a straw man argument to knock down but I have never made that argument"...

Hmmm, more of that 'Polly want a cracker' bit but nothings there...

re: your five points based on decades old technology are the straw you're seeking?

BTW can you say, "Abiotic Oil"?

The whole aim of practical politics is to keep the populace alarmed — and hence clamorous to be led to safety — by menacing it with an endless series of hobgoblins, all of them imaginary.

–H. L. Mencken

 
At 10/17/2010 7:22 PM, Blogger VangelV said...

A simple google search using the terms, 'political correctness +US Armed Forces' will turn up reams of material that show otherwise...

This is an economic issue, not social. The German and US military leaders are not very concerned about political correctness when it comes to oil. If they were, there would be no prediction of the failure of democracy and the rise of a tyrant after the peak became evident and society collapsed because of the restructuring that would be required.

Again I note that you have done nothing to deal with the actual issues. Where will the four million barrels per day of new production that is required to keep production flat come from this year? And the next? And the next? If you can't answer that simple question you have no argument against the Peak Oil position because even the IEA and EIA have admitted that the depletion rate will reduce production from existing wells by that much.

re: your five points based on decades old technology are the straw you're seeking?

What old technology? Horizontal drilling and water drives have been used for several decades. If you talk to the private capital people who financed that technology you will find that there is nothing new in the pipeline that can make a difference.

Yours is the 'trust me' argument. Well, I do not trust you and want you to show us what technology will do what you are saying. Some of us actually invest in the sectors and know what we are talking about. Hell, we have even invested in some of that new technology that will help get a bit more oil out of the sands or out of old fields. But we are not deluded enough to believe that the old production numbers will ever be reached again for the vast majority of fields. In fact, some of us make our money by looking at old fields and use special methods to get some of the oil that was trapped behind when the water drives and other methods that you are pinning your hopes behind were used to get oil out faster rather than ensure that most of the oil that could be extracted was extracted. While we may get a nice return, our efforts are not capable of offsetting the effects of depletion.

BTW can you say, "Abiotic Oil".

Yes I can. I looked into it when Gold first came up with the idea. I read his papers and paid attention when the Lake Siljan drilling put his theory to the test. So far Gold's theory has been a bust.

Before I forget, which version of the adiabatic oil theory do you believe in? Gold himself was a proponent of the weak version where oil is formed abiotically, but at rates that are lower than those that petroleum geologists assume for oil formation. (He never claimed that fields will replenish themselves, which make the adiabatic oil theory irrelevant.)

Given your ignorance of the subject I will assume that you are a believer of the strong version of the adiabatic theory. But if you think about it just for a few minutes or simply look out your window you will immediately see that this version is false. That leaves you a choice between a false version and an irrelevant one, which means that you have no argument.

(Sorry if I am going too fast for you. Your ignorance is not as much of a concern to me as the character limit put on these postings. Instead of making a fool of yourself try doing some research before you post.)

 
At 10/17/2010 7:27 PM, Blogger VangelV said...

“The whole aim of practical politics is to keep the populace alarmed — and hence clamorous to be led to safety — by menacing it with an endless series of hobgoblins, all of them imaginary.”

–H. L. Mencken


I love Mencken. But you have it backwards in this case. The politicians are the ones that are saying that there is nothing to worry about. They are the ones who accepted the claim by Iran and Iraq that it was possible to double their reported reserves at a time when they were waging war against each other and were doing no exploratory drilling. They are the ones who rejected the claims of the analysts and managers of ARAMCO while accepting the word of the Saudi Royal family that they had doubled reserves without ever having to drill.

I suggest that the political incentive is to keep people ignorant, as you are, about the actual problem for as long as possible. That kicks the can down the road for the next guy in office and allows those that know what is going on to prepare better for the coming economic and political storms.

 
At 10/17/2010 8:07 PM, Blogger juandos said...

This comment has been removed by the author.

 
At 10/17/2010 10:24 PM, Blogger VangelV said...

Yeah, sure pseudo benny

Ad ad hominem attacks are for losers. Please deal with the facts by answering the question about what projects will offset the 4 mbpd decline this year and every other year. Our only hope for low prices is a collapsing economy (as we saw after 2008) but low prices do not stimulate investment in new supply.

I take it that you have no answer to the abiotic oil logic problem that I pointed out, that you have no new technology that you can point to, and that you can't identify the new supply that will be enough to offset the 4 mbpd of decline in existing wells.

 
At 10/18/2010 4:50 AM, Blogger juandos said...

"Ad ad hominem attacks are for losers"...

Hence you know of where you speak: "Given your ignorance of the subject I will assume that you are a believer of the strong version of the adiabatic theory"...

'adiabatic theory'?!?! What are you talking about now? Crude oil lines?

Now I note this bit of delusional drift seems berift of market logic: "Please deal with the facts by answering the question about what projects will offset the 4 mbpd decline this year and every other year"...

You have no facts and nothing credible to back that '4 mbpd decline' up....

Its someone's guess, maybe a well educated guess but where is the credible substance to back that up?

Does the word 'valve' or 'cap' mean anything to you?

Just asking...

"I take it that you have no answer to the abiotic oil logic problem that I pointed out, that you have no new technology that you can point to..."...

Read this from 1995...

Still if you're really worried here's YOUR chance to make some serious money if a handful of small hurdles can be overcome: Bring back gigabarrels of the stuff...:-)

 
At 10/18/2010 9:30 AM, Blogger VangelV said...

Hence you know of where you speak: "Given your ignorance of the subject I will assume that you are a believer of the strong version of the adiabatic theory"...

I did not call you a retard or stupid. I simply point out the empirical evidence; you are ignorant of the subject of peak oil. Everything that you have referenced to support your position is editorial commentary that ignores the basic facts.

You claim that new technology will help prevent peak oil by getting more oil out of old fields. But you do not show what new technology will be able to get production rates high enough to offset the natural decline. As I said, I actually invest in the sector and I am not familiar with anything that will have a meaningful impact.

You mention Thomas Gold's adiabatic oil theory (which is also sometimes written as abiotic) without knowing that he was wrong when he tried to apply the field in the real world. You also seem to be unaware of the logical problems that make the theory either obviously wrong or irrelevant.

You talk about new fields being discovered but fail to realize that they are much smaller that the large fields that have produced most of our oil, that they are more difficult and expensive to bring on-line, and that they have major depletion problems.

'adiabatic theory'?!?! What are you talking about now? Crude oil lines?

I am talking about your comment, "BTW can you say, "Abiotic Oil"?"

You need to do some reading on the subject because it has been discredited many times by many people. As I said, the weak version of the theory makes it irrelevant when discussing the Peak Oil issue and the strong version, which even Gold himself seems to have rejected is obviously wrong.

 
At 10/18/2010 9:30 AM, Blogger VangelV said...

You have no facts and nothing credible to back that '4 mbpd decline' up....

The ignorance alert lights are flashing. Even the IEA and EIA have accepted the higher depletion rate. For a guy who writes about Peak Oil, you don't seem to know much.

In addition to the links that I cited you may want to look to the typical financial publications, which have covered the subject. Here is one report.

When you read, "“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says," you need to answer the question that I asked but you keep failing to answer. Where are these new discoveries that will allow you to replace a 4 mbpd decline from existing fields?

Does the word 'valve' or 'cap' mean anything to you?

Yes it does. But that does not matter. What does matter most is depletion. But deterioration of infrastructure is very close behind. Just ask anyone who has walked beside a typical Russian pipeline or looked inside one of the many American refineries that still have parts that are a hundred years old inside them.

Read this from 1995...

That is what I have been telling you. I have been reading about it for decades. The first paper on the subject that I read about the topic was in Russian. It was written some time in the early 1970s and was speculating about flaws in the theory of oil formation. After that I began to read Gold's work and followed his failed attempts to prove it. I also found out about similar efforts by the government in Moscow but all those failed too. When I began to think about the implications and was discussing the issue with an old professor at a local bar he pointed out the logical flaw that made the theory irrelevant.

You are not aware of many of the things that you need to know in order to have an intelligent discussion with someone about the topic. I suggest that you actually do some research rather than cite opinion pieces that do not deal with the issues and peddle concepts proven to be wrong.

 
At 10/18/2010 12:16 PM, Blogger StVIS said...

Juandos,

I'd recommend you look up data for global crude production - you'll find it's been pretty flat the past few years.

VangeIV,

Good argument overall. I still disagree with you about your assessment of the Bakken's production costs, but that's a minor point anyway. Regardless of who is right, a few hundred thousand barrels of Bakken oil isn't going to make a big difference in the face of global depletion, and I think that's what the matter is about. In the end, I'm really not interested in pursuing subject of the Bakken any further.

Judging from statements you've said, it appears you've studied the subject of oil very well.

 
At 10/18/2010 1:38 PM, Blogger VangelV said...

Good argument overall. I still disagree with you about your assessment of the Bakken's production costs, but that's a minor point anyway.

The Bakken issue is not as simple as we are making it and needs to be taken more seriously from both sides. My problem with it comes from a simple look at the data that Mark cited. You are looking at some high depletion numbers and low productivity. Just a brief look shows you that the number of wells between January 2009 and August 2101 increased by 926 for a production increase of around 4.3 million barrels of new production a month. (I am just skimming this by eye so you may have to get the precise numbers yourself.) That gives us around 4700 barrels a month for each new well, which costs around $4 million to drill. Unfortunately, that gives us a daily rate of around 160 barrels for each of these wells over that period.

Let me be optimistic here and say that this is not bad of a return if you can keep the lease costs, overheads, transport costs, etc., low. Let us be more optimistic and say that it is possible to keep all these costs low and to make a few bucks from shale oil.

But wait. These are the best areas in the Bakken formation and that is all that they can do? Keep in mind the energy density demands that these wells are drilled far enough apart to allow maximum production from each one. How many more wells can you drill and still stay in the formation sweet spot?

Do you see the problem now? Yes, you and I could make a few bucks by picking the right well and keeping our costs low. But as a big area play the math does not work all that well. Returns are not high enough to develop the upper or lower Bakken formations and there isn't enough land to be developed to get high production that is sustainable. The way I see it, within ten years this formation will have seen its best days behind it and current wells will be shut down because it is too expensive to keep them operating.

Regardless of who is right, a few hundred thousand barrels of Bakken oil isn't going to make a big difference in the face of global depletion, and I think that's what the matter is about.

That is the real issue. We can get rich in many ways as individuals but can't produce a national or global solution by pursuing such minor plays that are of such low quality.

In the end, I'm really not interested in pursuing subject of the Bakken any further.

The Bakken still interests me and I have talked with small players about possible investments in specific areas. But as I said, as an area play I see too much risk and would rather pursue something safer and potentially more lucrative for fundamental reasons.

For now coal, tar sands, and uranium are looking good and I am still dumb enough to pursue methane hydrates if I can find the right vehicle to invest in. On that front I am trying to arrange a little meeting with a company that may have the means to take a shot at the methane hydrate angle and make money at it, particularly if I can find a competent enough engineer to put together the right type of proposal about some of the equipment that we would need. If it works, methane hydrates could be a game changer.

 
At 10/18/2010 1:39 PM, Blogger VangelV said...

Judging from statements you've said, it appears you've studied the subject of oil very well.

When you do something long enough it is hard to be an idiot as much as you may try to be one. I have looked at this subject since I was a teenager and first read into the Hubbert methodology. I looked at what the Russians were doing in adiabatic oil, read Thomas Gold's stuff, did my usual reading of the stuff put out by the EIA and IEA, the BP Statistical Review of World Energy, and countless of books on the subject. While hardly an expert, I have an idea what I need to know before I can discuss the subject intelligently and get pissed off by people on both sides that try to pass off opinion as facts while they ignore the actual data and the historical issues that are material to the picture that we have been given over the years.

This is one of the most important issues facing modern civilization and the faster we figure out what is going on the better off we will be. Sadly, governments fear telling the truth because panic is likely to create massive dislocations in markets that have been protected from the need to correct in order to reflect reality.

If I am right it will be hard to adjust for most people. It is possible that governments will make things worse by using artificial rationing programs rather than to allow the market price to squeeze out marginal demand out of the system. Investors could see companies nationalized and there could be massive disorder because people are not prepared. Military power could be used to seize fields in weak countries that have reserves.

No matter how it plays out those that are not prepared will take a huge hit. It makes some sense to have exposure to producers that still have low costs but are sitting on reserves in relatively safe areas of the globe.

 
At 10/19/2010 5:01 PM, Blogger juandos said...

"I'd recommend you look up data for global crude production - you'll find it's been pretty flat the past few years"...

I recommend you look up how taps and valves work and why shutting a few of them down might help drive that flatness...

Reading this API item might help explain why many of the 400K+ wells that are capped but could be producing will stay capped...

 
At 10/19/2010 7:20 PM, Blogger VangelV said...

I recommend you look up how taps and valves work and why shutting a few of them down might help drive that flatness...

Let me get this straight. You claim that when oil went from $40 to $150 and companies invested hundreds of billions they were keeping the valves closed at the same time? Why would they invest anything if that were the case?

Reading this API item might help explain why many of the 400K+ wells that are capped but could be producing will stay capped...

There is nothing there to support your conspiracy theories. As I said, hundreds of billions were spent on new capacity yet production failed to go up. Those wells are capped because they are not profitable.

Like I said, you have nice stories and conspiracy theories but no data to back up anything that you say. As I said, to counter my argument all you have to do is to show where the 4+ mbpd of new production that is needed to keep current levels of production flat. Keep in mind that is 4 mbpd each and every year.

 
At 10/20/2010 3:02 PM, Blogger StVIS said...

Juandos,

"I recommend you look up how taps and valves work and why shutting a few of them down might help drive that flatness...

Reading this API item might help explain why many of the 400K+ wells that are capped but could be producing will stay capped..."


You're referring to wells long past their best days, and are capped because they're not productive enough to profitable.

Back when oil was over $100 a barrel in '08, there was some moves to reopen marginal wells; my guess is if oil sustains another high price climb, players will reopen capped wells and their could be a slight bump in production. But again, these are marginal wells, so don't count on a big increase in production.

 
At 10/20/2010 3:10 PM, Blogger StVIS said...

VangeIV,

I believe I misjudged you. Based on prior observations of you on several other blogs, I thought your dogged determination and lengthy dialogue meant you were an internet loser, that you trolled around comments sections because you had nothing better to do with your time. Based on what I've read in this blog, I now understand you can exert time defending views you strongly believe in because you're successful.

 
At 10/20/2010 3:14 PM, Blogger VangelV said...

I believe I misjudged you. Based on prior observations of you on several other blogs, I thought your dogged determination and lengthy dialogue meant you were an internet loser, that you trolled around comments sections because you had nothing better to do with your time. Based on what I've read in this blog, I now understand you can exert time defending views you strongly believe in because you're successful.

I am retired and have lots of time on my hands to do many of the things that interest me. One of the things that do interest me is education of people who seem to be unable to see reality as it is. While I do make far too many posts, I am fairly efficient and can usually type the maximum number or characters allowed on these threads in a few minutes.

 

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