Peak Oil Exports
Where the World Went Wrong
Two days ago I wrote that I’d explain more fully what ELM was. The acronym stands for Export Land Model and is a very simple method of modeling, not oil production, but oil exports. It comes from a study by Jeffrey Brown and Samuel Foucher titled A quantitative assessment of future net oil exports by the top five exporters, published 1.8.08. This study examines the history of the top five oil exporters, Saudi Arabia, Russia, Norway, Iran and UAE which together account for half of world exports. You can read the full report here http://www.energybulletin.net/38948.html
Believe it or not, the desert middle eastern oil exporting nations are the highest per capita consumption nations in the world. This is, in part, because they survive in the 130F deserts by means of air conditioning powered by oil. They don’t ride camels anymore but Mercedes. They also have some of the fastest growing economies thanks to the hundreds of billions we Americans send to them every year.
The essence of the ELM is that it takes into account the combined effects of increased consumption by the exporters, plus their oil field depletion and how those two factors have or are likely to affect their oil exports. They used two recent examples of high exporting nations that quickly went from millions of barrels per day exports to zero, the U.K. with its North Sea fields and Indonesia.
The U.K. Example The great North Sea find went into production in 1975 and reached its peak of nearly 3 mbpd only 14 years later in 1999. Now here’s the rub: U.K. exports also reached its peak in mid 1999 but fell off to zero in mid 2005. Thus, it went from peak exports to no exports in only six years.
Indonesia Of course, the U.K. is a developed, high consumption nation quite unlike Indonesia which, at best, could be called a developing economy with very low per capita oil consumption. Yet Indonesia’s rate of decline was very close to that of the U.K., dropping off to zero in eight years. The difference probably lies in the fact that this country had fuel subsidies that increase consumption while the U.K. had extremely high taxes designed to curtain consumption. It did not.
At issue here is the combined effect of net oil use on depleting reserves that accelerates the rate of export decline very rapidly. The net result is that exports fall off far more rapidly than we realize. Bear in mind here that this study deal with the top five exporters that account for half of world exports. And while the authors did not use the term I will; if correct, these findings could prove catastrophic for the world, including us.
According to Brown and Foucher, the top five had a combined 3.7% annual increase in consumption from 2000 to 2005. From 2005 to ’06 that rate accelerated to 5.3% per year. Now here’s the kicker: from 2005 to ’06 the top five had a net export decline of 3.3%. Based on the ELM they calculate that Saudi will have a net export decline rate over the next ten years of 4.7% with exports reaching zero in 2031 in the middle case, 2024 in worst case, and 2037 best case. I detailed Saudi since they are largest, by far. Next we move on to their summary conclusions.
For the top five combined they conclude a middle case projected rate decline of 6.2% per year +/- 4%. In their words, “ . . . it is a near certainty that the top five are going to show an accelerating aggregate net export decline in 2007 relative to 2006” [it did - dp].
Mexico sets another startling example. Their giant Cantarell oil field has been in severe decline for many years now. Mexico, our second largest supplier, is projected to cease exports within six years! Their export decline rate this year is a projected 8%. Then there is Russia, which is now in decline (they have even warned us).
The bottom line is very simple. There is going to be less export oil on the markets with an increasing level of net shortage year after year. The point to key on here is how very rapidly exports can go into decline. That what the collective “we” failed to comprehend.
Their final conclusions:
In simplest terms, we are concerned that the very lifeblood of the world industrial economy—net oil export capacity—is draining away in front of our very eyes . . .
And, most obviously,
Declining net oil exports will inevitably result, absent a severe decline in demand in importing countries, in continued rapid increases in oil prices, as oil importing countries furiously bid against each other for declining oil exports.
If you have any doubts about this, ask yourself why are Saudi Arabia, UAE, Kuwait, Dubai, and Abu Dabi all are aggressively working to transition away from an oil based economy and spending hundreds of billions of dollars to do so. If you don’t know what they’re doing, I’d suggest that you find out. It is most enlightening.
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David, some thoughts on TOD (The Oil Drum) ELM (Export Land Model) and why doomsday is a hard sell so don’t give up the ship just yet!
This is a reply regarding a discussion that David has been carrying on in regards to Jeffrey Brown’s Export Land Model, and makes reference to sources that he and I are familiar with.
I realize that I may be stepping into the jaws of a steel trap in saying this, and I should just let sleeping dogs lie, but you seem like a nice guy and as I said, I very much like the idea of a blog that follows and discusses the boat market, and issues surrounding boating such as oil prices, economics and the state of boating infrastructure today, so I am going to say what I am about to say in brief here, and just in case you are no longer following this thread, I will comment on some of your posts on your blog if you do not object…but here goes with what I have to say…
I have been a registered member of TOD for over two years. It has been a GREAT source of analysis, and some of the minds that post here are among the best statistical and technical thinkers you will find anywhere, including Stuart Staniford, Robert Rapier, Alan Drake and Jeffrey Brown. Make no mistake, I have on occasion had reason to differ with any one of these gentlemen, but I try to avoid it because I know I am usually outmatched by their knowledge and statistical abilities. In my own defense, I can swing a pretty mean rhetorical sword though, and work the logic side pretty well…:-) But…
The TOD board can have a tendency to take the darkest possible view of all things, and once a very dark scenario is proposed, it can have a tendency to become self feeding. This leads to scenarios that are so grim as to surpass normal comprehension. Often, the grim scenarios proposed, while having the possibility of coming to pass, are seen by most people (including many people in the energy business and some pretty good statisticians) as being statistically highly unlikely to occur. This does not mean they are not possible, but that in many cases they are highly unlikely. Just as the “cornucopian” can reassure us that IF everything goes well, we’re fine, so the “doomer” can make a case that if everything goes horribly wrong, we and our culture are all dead (and sooner than the normal course of nature would kill us off anyway)
What I am trying to say is that it is advisable to take many of the darkest scenarios seen on TOD with a huge grain of salt. It is clear by your description of the future of the boating industry that you are depicting a scenario far grimer than almost anyone in that industry would imagine. Since the scenario you are proposing for that industry would mean the absolute death of that industry, it goes without saying that few in the boating industry can accept or make use of such a scenario other than to simply abandon the industry and…?
This is the problem with all doomsday scenarios, in that leave no future course of action open as viable. The logic works like this:
“We are all doomed”
What can we do?
“Nothing will really change things”
So what should we do?
“We must change in a major way”
Will that save us?
“No, most of us will perish or be reduced to absolute poverty, anarchy and slavery”
Then why should we try to change?
?????????????????????????????????
As one can see, it becomes a tautological argument, and most people will recognize it as such, and as such, completely useless.
So don’t expect anyone in the boating industry to support such logic if the only answer comes out to be the death of the industry. Why should they? Now on the other hand, if we take a more balanced view and discuss real alternatives, and use real examples (one thinks of the European boating industry which has long survived in the face of fuel prices far higher than we in the U.S. have ever paid, or the Japanese boating industry, operating in a nation of high prices and no home resources)or the possibility of alternatives (there are such things as electric boats, solar can be used on boats, steam and Stirling engines are thoughts, fuel cells are possible, etc.
Of course, many will make the case here on TOD that these alternatives have a low probability of working. Perhaps so, but if the only alternative is certain death, why not try something? Even if
we can’t afford to take the boat out of the slip, these ideas would make some great debating material to kick around on rainy days down at the waterfront pub!
So don’t give up the ship just yet (o.k., nautical pun intended!
we still have some interesting times ahead of us, on land and water!
RC
Thanks for your imput. I agree with everything you wrote. On the other hand, its been demonstrated that nothing else gets people’s attention either. I don’t underestimate human versatility nor over estimate human stupidity; they tend to cancel out. I don’t know what’s going to happen and neither does anyone else. We are not omniscient, but I do think that presenting the potential for catastrophe serves an important function. True, most people won’t see what I write in perspective. For example, while I read the stuff survivalists write, I am not myself preparing for Armageddon, but am taking reasonable precautions, nor do I take everything I read on TOD as gospel, no matter how many Phds anyone has. My attitude is: read it and consider, investigate for yourself.
As for the boating industry, back in 1975 it was saved by a quirk of fate, a change in tax law that resulted in large corporations buying up the big boat builders like Chris Craft, Bertram, Hatteras, Trojan, etc. as tax write offs, allowing those companies to continue on at a loss during what was a temporary crisis. Would you agree that today’s crisis isn’t temporary?
Our economic problems go far beyond oil. Fictitious wealth is drying up day by day, but few understand what is happening. They just know they can’t pay their mortgages and can’t sell their boats or homes since they owe more than they’re worth. The decline we’re undergoing occurs so slowly that people tend not to notice, just like they didn’t notice or be alarmed at the dramatic rise in both home and fuel prices. People lost thousands but sluffed off the meaning of the tech and dot.com bubbles, only to pay a higher price later. But suddenly, in a flash, the terrible reality is upon them. Can’t sell that house that they paid $500k for that was worth $250 three years prior. Can’t sell that $45,000 SUV on which they owe $32,000. Same with boats, the market is flooded with them and no one is buying. Somethings got to give.
If more people had written about the housing bubble, fewer people would have fallen into the trap. The same applies to everything we’re talking about. Using terms like “doomsayer” is just a means of avoiding looking at reality.Sure, most people prefer to shoot the messenger. A few don’t. Does that mean there should be no messengers?
OTOH, boating has the best alternative of all WIND, but people still want to go fast cheaply. They’re not yet ready to accept the inevitable.
David,
Your approach to the current crisis seems balanced and thank you for an interesting reply.
You asked a most interestng question:
“Would you agree that today’s crisis isn’t temporary?”
That is really the heart of the question, isn’t it?
I think in the long view, the age of oil as the driver of economic growth is indeed over. But the timescale means everything, especially in relation to a discretionary industry like recreational boating. Indeed, do we believe that the current dislocation is the front end of the “last oil crisis” and that from this point on it will indeed only become worse and worse? Or do we believe that this is the first of many in a series of dislocations that will lead us away from the “oil age” albeit with some serious economic dislocation, but in the longer view, a managable change, much as the transportation industry made the change from steam and coal to internal combustion and oil.
We all must have known that the “age of oil” would not last forever. But to my knowledge there has been very little study of the “boat of the future” if we see the future of boating as non oil based. In a way, this is surprizing since we always knew the day would come when it had to be considered.
As you mentioned, wind has been used to do more work in the history of boating and shipping than almost anywhere else. Some of the newest ideas for sail boats are very creative. The sailing multihull is known to be a very efficient option:
http://www.boatdesign.net/gallery/showphoto.php/photo/11364/size/big/cat/
A more radical departure is this design for a solar powered multi hull:
http://www.boatdesign.net/gallery/showphoto.php/photo/11369
If we are to attempt to do boats that are still fast, we would need combustible fuel. Leaving oil out of the picture, right now the options would be propane (LPG) and compressed natural gas. In the 1970’s a firm founded by Gale Banks was well known for building very high performance LPG engines using turbocharging and intercooling. Propane, while expensive, is a byproduct of natural gas processing, and makes for a very clean burning fuel. Compressed natural gas likewise, but there would be some ethical discussion about using such a valuable fuel for boating in an oil short world, and natural gas is very expensive right now. The supply, while still large is also in some question in the longer range future.
A final thought: The only combustable renewable fuels available (if we lay aside hydrogen, which has some serious technical hurdles and would be astronomical in price) are biofuels and recaptured methane. Biofuels in boats suffer from all the same problem as biofuels in cars (the return on energy consumed in manufacture, the issue of “food vs. fuel” etc.).
Recaptured methane however is very interesting. Methane is for all practical purposes a wasted resource. Methane from sewage, from agriculture byproduct, from landfills, etc, often goes completely unclaimed. Compressed methane functions in very much the same way as Compressed Natural Gas (CNG) One could picture a co-op founded and funded by boat owners to create and operate methane recapture projects with the goal of using the methane for the continuation of recreational boating. Of course, if one takes as an absolute certainty the collapse of the Western economies, the odds against any of the above projects going forward is very high. I am not yet convinced of the permanent end of the modern Western economies just yet. A recession yes, is very likely already underway, and a depression may even be in the offing. But one has to make such a huge mental leap to predict the end of civilization that for now, I think believing in such is very much more a matter of faith than evidence.
Thanks for the opportunity to discuss boats, among other things!
RC
I don’t see CNG or any other compressed gas as an option. Gasoline leaks usually result in low grade explosions and fires, but a CNG leak is the equivalent of a bomb that could wipe out part of a marina. Liability potential here is far too great for degree of risk investment. Insurance likely too costly.
This is not the same as powering lift trucks with CNG in a warehouse with large internal volume so that any gas diffusion would be below explosive concentration in event of a leak. In a boat its a whole different ball game. Hydrogen gas cannot be used directly for cars for this reason, plus the fact that it provides explosive material for malcontents. DIY hydrogen bomb. Now wouldn’t that be fun! You have to think these things through all the way.
Yes, it’s true that CNG or compressed natural gas poses a problem in this area. With propane, the area in which the propane has been stored in historical cases of such use was to have them in a ventilated area, and provide fire suppression in the event of emergency and gas monitors in the storage area to detect a leak early. There would also be a very well planned “firewall” between the stored fuel and the cabin of the boat.
But, it is true that liability issues and insurance issues would be a factor, as risk could never be entirely done away with. It is not to be forgotten that boat fires have always been an issue with gasoline, so I guess it depends on how many would be willling to accept the “comparative” risk.
RC