Mish Moved to MishTalk.Com Click to Visit.
In light of Saudi Arabia wanting to step up production only to be rebuffed by the rest of OPEC, this story from elEconomista.es is rather interesting.
Courtesy of Google Translate please consider Saudi Arabia fears that the oil runs out in 2030 if current consumption is maintained
Note: I am rewording some awkward translations so they read better.
The electricity company of Saudi Arabia warns that oil in this country could be depleted by 2030 if left unchecked domestic consumption. According to a report of Saudi Electric, domestic consumption is estimated to be between 2.5 and 3.4 million barrels a day.Oil Running Dry
The report, published in the magazine Al Mashka says that the increase in domestic consumption of oil is one of the main challenges facing the country, mainly because oil accounts for 80% of national income.
Abdel Salam al-Yamani, head of the Saudi Electricity Company also warned of the consequences for citizens to ignore the calls to save electricity and water, and has advised that they depend more on solar energy.
The Economist says Oil production fails to keep up with demand
CRUDE-OIL prices shot up on June 8th—Brent crude to a one-month high of $118.59 per barrel—after OPEC representatives meeting in Vienna were unable to reach an agreement on production quotas. Many had expected an increase in quotas as members with spare production capacity, led by Saudi Arabia, pushed to avoid a price spike that may dampen long-term demand. As figures released in BP’s "Statistical Review of World Energy" show, global oil production has struggled to keep up with increased demand recently, particularly from Asia. In China alone consumption has risen by over 4m barrels per day in the past decade, accounting for two-fifths of the global rise. In 2010 consumption exceeded production by over 5m barrels per day for the first year ever, as world oil stocks were run down.Oil Consumption vs. Production
click on chart for sharper image
The above chart, referenced above by The Economist is from BP Statistical Review of World Energy June 2011
After falling for two consecutive years, global oil consumption grew by 2.7 million barrels per day (b/d), or 3.1%, to reach a record level of 87.4 million b/d. This was the largest percentage increase since 2004 but still the weakest global growth rate among fossil fuels.Consumption = Production
OECD consumption grew by 0.9% (480,000 b/d), the first increase since 2005. Outside the OECD, consumption growth was a record 2.2 million b/d, or 5.5%. Growth remained robust in China and Middle Eastern countries, with Chinese consumption growing by 860,000 b/d or 10.4%. Driven by the economic recovery, middle distillates (+4.4%) were the fastest-growing refined product category globally.
Global oil production increased by 1.8 million b/d, or 2.2%, but did not match the rapid growth in consumption. The gains in production were shared between OPEC and non-OPEC producers. OPEC production cuts implemented late in 2008 were maintained throughout 2010, although relaxed production discipline and rising output not subject to production allocations resulted in an increase of 960,000 b/d, or 2.5%. The largest increases were in Nigeria (+340,000 b/d) and Qatar (+220,000 b/d).
Oil production outside OPEC grew by 860,000 b/d, or 1.8%, the largest increase since 2002. Growth was led by China – which recorded its largest production increase ever – the US, and Russia. Continued declines in Norway – which saw the world’s largest decline – and the UK partly offset growth elsewhere. Non-OPEC countries accounted for 58.2% of global oil production in 2010, roughly the same share as in 2000.
Long-term consumption cannot exceed production. Even in shorter time frames, consumption can only exceed production if there is sufficient production in storage.
To cover 5 million barrels per day of excess consumption for a year, global oil stocks would have had to drop by 1.825 billion barrels. If that did not happen, we need another explanation.
- Cheating (under-reporting production) by OPEC
- Poor consumption numbers from China or elsewhere
- Another source of production not shown
- Some combination of the above
Regardless, it simply is not possible for oil consumption to grow faster than production for years on end.
I have been informed that the production numbers in the BP chart do not include biofuels or coal liquefaction, but consumption does.
The biofuel explanation falls under point number 3 above "another source of production not shown".
Thus, the ominous shortfall as suggested by The Economist is not really a shortfall at all, nor does it represent a huge drawdown in oil stocks. Instead biofuel production increased to make up the difference in demand.
As I said, it simply is not possible for oil consumption to grow faster than production for years on end. Logically, any increase in biofuel production will appear as a reduction in normal oil drilling production because of the mathematical truism consumption = production.
Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List