World Oil Supply Research Articles

Urban form and long-term fuel supply decline: A method to investigate the peak oil risks to essential activities

The issue of a peak in world oil supply has become a mainstream concern over the past several years. The petroleum geology models of post-peak oil production indicate supply declines from 1.5% to 6% per year. Travel requires fuel energy, but current transportation planning models do not include the impacts of constrained fuel supply on private travel demand. This research presents a method to assess the risk to activities due to a constrained fuel supply relative to projected unconstrained travel demand. The method assesses the probability of different levels of fuel supply over a given planning horizon, then calculates impact due to the energy supply not meeting the planning expectations. A new travel demand metric which characterizes trips as essential, necessary, and optional to wellbeing is used in the calculation. A case study explores four different urban forms developed from different future growth options for the urban development strategy of Christchurch, New Zealand to 2041. Probable fuel supply availability was calculated, and the risk to transport activities in the 2041 transport model was assessed. The results showed all the urban forms had significantly reduced trip numbers and lower energy mode distributions from the current planning projections, but the risk to activities differed among the planning options. Density is clearly one of the mitigating factors, but density alone does not provide a solution to reduced energy demand. The method clearly shows how risk to participation in activities is lower for an urban form which has a high degree of human powered and public transport access to multiple options between residential and commercial/industrial/service destinations. This analysis has led to new thinking about adaptation and reorganization of urban forms as a strategy for energy demand reduction rather than just densification.

Reassessing the Oil Security Premium

World oil supply disruptions lead to U.S. economic losses. Because oil is fungible in an integrated world oil market, increased oil consumption, whether from domestic or imported sources, increases the economic losses associated with oil supply disruptions. Nevertheless, increased U.S. oil production expands stable supplies and dampens oil price shocks, whereas increased U.S. oil imports boosts the share of world oil supply that comes from unstable producers and exacerbates oil price shocks. Some of the economic losses associated with oil supply disruptions - gross domestic product losses and some transfers abroad - are externalities that can be quantified as oil security premiums. To estimate such premiums for domestic and imported oil, we take into account projected world oil market conditions, probable oil supply disruptions, the market response to oil supply disruptions, and the resulting U.S. economic losses. Our estimates quantify the security externalities associated with increased oil use, which derive from the expected U.S. economic losses resulting from potential disruptions in world oil supply.

The Peak of the Oil Age – Analyzing the world oil production Reference Scenario in World Energy Outlook 2008

The assessment of future global oil production presented in the IEA’s World Energy Outlook 2008 (WEO 2008) is divided into 6 fractions; four relate to crude oil, one to non-conventional oil, and the final fraction is natural-gas-liquids (NGL). Using the production parameter, depletion-rate-of-recoverable-resources, we have analyzed the four crude oil fractions and found that the 75 Mb/d of crude oil production forecast for year 2030 appears significantly overstated, and is more likely to be in the region of 55 Mb/d. Moreover, analysis of the other fractions strongly suggests lower than expected production levels. In total, our analysis points to a world oil supply in 2030 of 75 Mb/d, some 26 Mb/d lower than the IEA predicts. The connection between economic growth and energy use is fundamental in the IEA’s present modelling approach. Since our forecast sees little chance of a significant increase in global oil production, our findings suggest that the “ policy makers, investors and end users” to whom WEO 2008 is addressed should rethink their future plans for economic growth. The fact that global oil production has very probably passed its maximum implies that we have reached the Peak of the Oil Age.

Possible Us-Iran Military Conflict and Its Implications upon Global Sustainable Development

Energy is one of the most basic of human needs. The accomplishments of civilization have largely been achieved through the increasingly efficient and extensive harnessing of various forms of energy to extend human capabilities and ingenuity. Providing adequate and affordable energy is essential for eradicating poverty, improving human welfare, and raising living standards worldwide. The Persian Gulf is regarded as the energy headquarters of the world since the region holds over 65% of the global oil reserves and contributes to nearly 28% of the world oil supplies. Despite its crucial role in propelling the economic growth of the world over the last sixty years, the region has traditionally experienced a volatile geo-strategic environment. The article focuses on the escalating tension between the United States and Iran. It highlights the broader socio-economical implications of a possible military conflict between the two countries.

The Evolution of Giant Oil Field Production Behavior

The giant oil fields of the world are only a small fraction of the total number of fields, but their importance is huge. Over 50% of the world’s oil production came from giants by 2005 and more than half of the world’s ultimate reserves are found in giants. Based on this, it is reasonable to assume that the future development of the giant oil fields will have a significant impact on the world oil supply. In order to better understand the giant fields and their future behavior, one must first understand their history. This study has used a comprehensive database on giant oil fields in order to determine their typical parameters, such as the average decline rate and life-times of giants. The evolution of giant oil field behavior has been investigated to better understand future behavior. One conclusion is that new technology and production methods have generally led to high depletion rates and rapid decline. The historical trend points towards high decline rates of fields currently on plateau production. The peak production generally occurs before half the ultimate reserves have been produced in giant oil fields. A strong correlation between depletion-at-peak and average decline rate is also found, verifying that high depletion rate leads to rapid decline. Our result also implies that depletion analysis can be used to rule out unrealistic production expectations from a known reserve, or to connect an estimated production level to a needed reserve base.

The Imf's Coordinated Growth Strategy of 1977/1978

The case documents the growth strategy that the IMF wanted to orchestrate after the first oil crisis and as the world economy did not return to the growth rates of the 1960s. The case illustrates the pinnacle of Keynesian thinking that prevailed at the time: a view of the international economy as an almost hydraulic system that could be manipulated by government policies at will to reach desirable aggregate targets. The failure of the strategy, among other things, emphasizes the importance of inflationary expectations. The case is also a nice opportunity to discuss the Phillips curve as well as the current global imbalances and what can be done about them. Excerpt UVA-G-0601 Rev. Aug. 4, 2009 The IMF's Coordinated Growth Strategy Of 1977/1978 In September 1973, Dr. H. Johannes Witteveen, a former finance minister of the Netherlands, took office as the fifth managing director of the International Monetary Fund (IMF), an independent U.N. organization that like no other organization oversaw the macroeconomics of the world economy. Exhibit 1 displays the size distribution of the world economy at the time. Witteveen's tenure at the helm of the IMF would be one of the most challenging since the IMF was founded at the Bretton Woods Conference of 1944. The Oil Crisis and its Aftermath In late 1973, the world woke up to soaring oil prices, as the Organization of Petroleum Exporting Countries (OPEC) reduced the world's oil supply. The Yom Kippur War between Egypt and Israel triggered OPEC's actions. OPEC announced that it would no longer ship petroleum to nations that had supported Israel. By 1974, oil prices had quadrupled to nearly $ 12 a barrel. . . .

Energy efficiency and conservation for individual Americans

Americans make up only 4% of the world population, yet currently consume 25% of the world’s fossil fuels. The U.S. imports 63% of its oil and it is predicted that by 2020 the U.S. will be importing 95% of its oil resources. Over the past century, ample and affordable supplies of fossil fuels have powered the growth and prosperity of the economies of the US and other countries. Within this century, world oil supplies will decline while demand is projected to continue to increase, suggesting that we will have to transition to different fuels or become much more energy efficient or both. Looking ahead to the near decades, estimates are that consumers will have to reduce their energy use by at least 50%. This reduction will be necessary in large part due the decline in the availability of conventional oil and gas, but also because the U.S. population will continue to grow in number. Although government action is important, individuals too often discount their ability to make significant contributions to solving such major problems. This investigation identifies how informed and concerned individuals can collectively conserve fossil energy.

Mitigation of maximum world oil production: Shortage scenarios

A framework is developed for planning the mitigation of the oil shortages that will be caused by world oil production reaching a maximum and going into decline. To estimate potential economic impacts, a reasonable relationship between percent decline in world oil supply and percent decline in world GDP was determined to be roughly 1:1. As a limiting case for decline rates, giant fields were examined. Actual oil production from Europe and North America indicated significant periods of relatively flat oil production (plateaus). However, before entering its plateau period, North American oil production went through a sharp peak and steep decline. Examination of a number of future world oil production forecasts showed multi-year rollover/roll-down periods, which represent pseudoplateaus. Consideration of resource nationalism posits an Oil Exporter Withholding Scenario, which could potentially overwhelm all other considerations. Three scenarios for mitigation planning resulted from this analysis: (1) A Best Case, where maximum world oil production is followed by a multi-year plateau before the onset of a monatomic decline rate of 2–5% per year; (2) A Middling Case, where world oil production reaches a maximum, after which it drops into a long-term, 2–5% monotonic annual decline; and finally (3) A Worst Case, where the sharp peak of the Middling Case is degraded by oil exporter withholding, leading to world oil shortages growing potentially more rapidly than 2–5% per year, creating the most dire world economic impacts.

Energy efficiency and conservation for individual Americans

Americans make up only 4% of the world population, yet currently consume 25% of the world’s fossil fuels. The U.S. imports 63% of its oil and it is predicted that by 2020 the U.S. will be importing 95% of its oil resources. Over the past century, ample and affordable supplies of fossil fuels have powered the growth and prosperity of the economies of the US and other countries. Within this century, world oil supplies will decline while demand is projected to continue to increase, suggesting that we will have to transition to different fuels or become much more energy efficient or both. Looking ahead to the near decades, estimates are that consumers will have to reduce their energy use by at least 50%. This reduction will be necessary in large part due the decline in the availability of conventional oil and gas, but also because the U.S. population will continue to grow in number. Although government action is important, individuals too often discount their ability to make significant contributions to solving such major problems. This investigation identifies how informed and concerned individuals can collectively conserve fossil energy.

Oil Crunch Forecasted

The International Energy Agency (IEA) is ratcheting up its concern about peaking world oil supplies that could trigger price hikes. In its annual energy outlook released this week, the agency warns that it cannot rule out a “supply-side crunch” in world oil markets by 2015 as flagging oil

Federal Tax Policy Towards Energy

On Aug. 8, 2005, President Bush signed the Energy Policy Act of 2005 (PL 109-58). This was the first major piece of energy legislation enacted since 1992 following five years of Congressional efforts to pass energy legislation. Among other things, the law contains tax incentives worth over $14 billion between 2005 and 2015. These incentives represent both pre-existing initiatives that the law extends as well as new initiatives. In this paper I survey federal tax energy policy focusing both on programs that affect energy supply and demand. I briefly discuss the distributional and incentive impacts of many of these incentives. In particular, I make a rough calculation of the impact of tax incentives for domenstic oil production on world oil supply and prices and find that the incentives for domestic production have negligible impact on world supply or prices despite the United States being the third largest oil producing country in the world. Finally, I present results from a model of electricity pricing to assess the impact of the federal tax incentives directed at electricity generation. I find that nuclear power and renewable electricity sources benefit substantially from accelerated depreciation and that the production and investment tax credits make clean coal technologies cost competitive with pulverized coal and wind and biomass cost competitive with natural gas.

Comments: Unconventional Growth

This year's SPE Annual Technical Conference and Exhibition (ATCE) in San Antonio features panel discussions on several critical issues facing the industry, including the classification of reserves, the development of young professionals, and the increasing importance of heavy oil in the global production equation. Plenary and panel sessions at ATCE offer a good temperature check of the industry. Five years ago, "e-business" was a hot topic, and 10 years ago, industry consolidation and emerging gas technology drew interest. The Opening General Session at this year's ATCE—titled "Heavy Oil: From Rock Face to Fuel Pumps"—will feature a panel of experts discussing the challenges that heavy and ultra heavy oil present as well as comments on related technology development and R&D efforts. With global demand rising steadily, conventional reservoirs overtaxed, and oil prices buoyant, heavy oil, as Marathon President and Chief Executive Officer Clarence P. Cazalot points out, has grown from a marginal production play a few years ago to one of increasing importance (see page 24). The conventional wisdom sees heavy oil accounting for a growing share of glob-al production. In a report issued last month, Cambridge Energy Research Assocs. contends that world oil production capacity could increase by as much as 25% over the next decade with unconventional supplies such as heavy oil, oil sands, and gas liquids accounting for a major portion of the increase. With high oil prices making development of once-marginal resources more economic, unconventional liquids could go from 25% of the world's oil supply today to almost 40% by 2015, the report said. Extra heavy production capacity is predicted to more than double from 1.9 million BOPD this year to 4.7 million BOPD in 2015. Growth in unconventional supplies from Canada, primarily from oil sands, is booming. Total Canadian oil production is projected to increase from the current 2.5 million BOPD to 4.6 million BOPD in 2015 and to 4.9 million BOPD by 2020, according to the Canadian Assn. of Petroleum Producers. Oil sands output, now at more than 1 million BOPD, is forecast to rise to 3.5 million BOPD by 2015 and to 4 million BOPD by 2020, making up more than 80% of total Canadian production. That growth, along with the shift from conventional oil production to oil sands and synthetic crude, will have a major impact not only on pipeline capacity but also on refinery configurations. An article beginning on page 58 of this month's issue catalogs that heavy oil and oil sands growth and describes some of the accompanying technical challenges involved. Canada's bright production outlook has led to a series of acquisitions by major companies as well as an increase in R&D in the region. Canadian Natural Resources, Husky Energy, and Nexen are funding a 3-year, U.S. $9.6 million project at the Petroleum Technology Research Center in Regina, Canada, to research vapor heavy oil extraction, which uses solvent gases such as butane or propane to reduce heavy oil's viscosity. And last month, Sonic Environmental Solutions created a subsidiary to focus on the application of sonic-generator technology there. Chevron recently scooped up several heavy oil leases in the Athabasca region of northern Alberta with an estimated 7.5 billion bbl of oil in place. Shell has been particularly active. It paid U.S. $400 million earlier this year for oil sands properties in northern Alberta, and in July, it acquired BlackRock Ventures Inc. of Calgary through a subsidiary. Last month, it began working with its joint-venture partners to expand its Athabasca Oil Sands project to increase output there to 550,000 BOPD.

Q&A with J. Larry Nichols, CEO, Devon Energy

How have recent high oil prices affected your E&P program? Our capital budget has tripled over the past 5 years. Part of that has come from higher oil and gas prices, but part of that has been because we have been growing the size of the company. While oil and gas prices have had some impact, we recognize that prices are volatile, and we are not relying on them staying at their current elevated level. How did last year's hurricanes in the Gulf of Mexico affect your operations? We were affected some, but not as badly as a lot of other companies. We had three platforms that suffered damage—they actually sank—but they were not critical platforms. They were in the area of other platforms, and we just rearranged our production scheme without having to rebuild those platforms. We were affected by some third-party pipelines that resulted in about 80,000 BOPD being suspended for a period. We have restored all but 6,000 BOPD of that now. You recently acquired Chief Holdings and have made major acquisitions in the past. What is Devon's philosophy regarding growing through acquisitions or through the drill bit? Does that philosophy change in a high-price environment? We have always stated that we like both; it depends on the circumstances whether acquisitions are attractive. We certainly have done a lot of acquisitions since we went public in 1988. But because of high oil prices, they are now increasingly difficult. One of the things we have done with our acquisitions is that each time we have bought a company, we have turned around and sold the bottom part of our portfolio, resulting in an ever-increasing quality of our portfolio. It is now difficult to find transactions that are accreting in value and that improve the quality of our portfolio. Chief was one of those rare exceptions. What is your outlook for oil and natural gas prices? You have to start with oil because that has such an influence on gas prices. It involves huge political questions that are very difficult to answer. Obviously, the world supply of oil is tight, and in the countries where one could increase production, many of them are difficult to do business in. That is why oil is trading where it is now, because of the political uncertainty of the Middle East, Venezuela, now Bolivia, and Nigeria. Long-term, we think that oil in the area of U.S. $50–55/bbl is probably a reasonable number, but that is not to say that there might not be huge volatility both above and below that number. Gas is also challenged. In the U.S., companies are denied access in many areas where they could expand production, which has resulted in the supply of natural gas being very tight. We had a mild winter last year, and that helped.

Guest Editorial: Canadian Oil Sands - Myth and Reality

Was M. King Hubbert, the famous American Earth scientist, really the first visionary to talk about peak oil? Indeed, many regard Hubbert as the Nostradamus of the oil industry, with his 1950s analytic work on peaking oil production part of any discussion about world oil supply today. But on the other side of the Atlantic Ocean, John Cadman was an oil oracle too, predating Hubbert by 30 years. Though Cadman's thoughts about the future of oil were more qualitative, we are witnessing his important prophecies today. In the end, Hubbert's numerical analysis and Cadman's astute foresights go hand in hand. A geologist by training, Cadman eventually became Chairman of Anglo-Persian, the predecessor company to British Petroleum, which has evolved into today's BP. Accepting the Chairmanship of Anglo-Persian on 2 November 1927, Cadman said in his inaugural address, "Very many years must elapse before natural petroleum resources will be unable to meet the greater part of the world's requirements. Of course, the time will eventually come when the world may have to look for a great part of its supplies from secondary and synthetic sources." Fast forward 80 years. Enough time has passed to have seen many of the world's prime hydrocarbon reservoirs mature. Big oil exploration has gradually migrated from the easy geographies of Pennsylvania and Texas to the deep offshore waters of the Gulf of Mexico. Internationally, megascale oil projects today are found in places such as offshore Africa, the offshore Arctic waters of Russia, or many other places that are at what I call the "ends of the Earth"—geographically extreme places where the oil is buried deep under water and rock. In addition, a lot of oil is buried under deep layers of authoritarianism, corruption, civil strife, and geopolitical intrigue. On the demand side, the President of the United States has acknowledged that the United States is "addicted" to oil. But the addiction does not end at the U.S. border; the craving for oil is global. Using Cadman's phrase for consumption: "The greater part of the world's requirements" is now a thousand-barrel-a-second oil dependency that is growing relentlessly year after year. So, the time has come. The world's requirement for more and more oil is taxing the industry's ability to supply it easily. We have finally reached Cadman's point of transition, where the world needs to look for a great part of its oil supplies from "secondary and synthetic sources." Where is this happening on a big scale?

Non‐OPEC production near to decline

Last year, the world produced some 82.2 mn bpd of crude oil and natural gas liquids (NGL), of which 48.2 mn bpd, or 59%, came from countries outside OPEC. Most of these non‐OPEC countries are now mature oil‐producers, in long term decline (see Box). A few have still to reach peak output, but non‐OPEC production as a whole is within a few years of its peak, after which any net increase in world oil supplies will have to come entirely from OPEC. NON‐OPEC PRODUCERS Most non‐OPEC producers are past their peak of production and are in long term decline. Some others are close to their long term peak and will shortly go into decline. A few have arrested the process of decline and may even succeed in increasing their output from present levels, but any increase will prove only temporary ‐ lasting a few years at the most ‐ and these countries too will resume their long term decline. A handful of countries have yet to attain their peak level of production and will go on increasing their output for a number of years. The principal non‐OPEC producers may be classified as follows: Countries with declining output Argentina Gabon Romania Bahrain Great Britain Syria Brunei India Tunisia Cameroon Norway Turkmenistan Congo (Brazzaville) Oman USA Egypt PNG Yemen Countries that have temporarily arrested their decline Canada Russia Peru Trinidad & Tobago Countries close to their peak Australia India Thailand China Malaysia Vietnam Denmark Mexico Ecuador Sudan Countries where output is still growing Angola Brazil Mauritania Azerbaijan Chad Bolivia Kazakhstan Source: Pearl Oil

World Crude Oil Markets: Monetary Policy and the Recent Oil Shock

This paper examines the relationship between monetary policy and oil prices within a world oil demand and supply model. Low price and high income elasticities of demand and rigid supply explain high price volatilities and producers' market power. Exchange and interest rates do influence oil market equilibrium. The relationship between oil prices and interest rates is a two-way relationship that depends on the type of oil shock. During a supply shock, rising oil prices caused interest rates to increase; whereas during a demand shock, falling interest rates caused oil prices to rise. Record low interest rates led to high oil price volatility in 2005. Data shows that world economic growth and price stability require stable oil markets and therefore more prudent monetary policies.

World Crude Oil Markets: Monetary Policy and the Recent Oil Shock

This paper examines the relationship between monetary policy and oil prices within a world oil demand and supply model. Low price and high income elasticities of demand and rigid supply explain high price volatilities and producers' market power. Exchange and interest rates do influence oil market equilibrium. The relationship between oil prices and interest rates is a two-way relationship that depends on the type of oil shock. During a supply shock, rising oil prices caused interest rates to increase; whereas during a demand shock, falling interest rates caused oil prices to rise. Record low interest rates led to high oil price volatility in 2005. Data shows that world economic growth and price stability require stable oil markets and therefore more prudent monetary policies.

Modelling long-term oil price and extraction with a Hubbert approach: The LOPEX model

The LOPEX ( Long-term Oil Price and EXtraction) model generates long-term scenarios about future world oil supply and corresponding price paths up to the year 2100. In order to determine oil production in non-OPEC countries, the model uses Hubbert curves. Hubbert curves reflect the logistic nature of the discovery process and the associated constraint on temporal availability of oil. Extraction paths and world oil price path are both derived endogenously from OPEC's intertemporally optimal cartel behaviour. Thereby OPEC is faced with both the price-dependent production of the non-OPEC competitive fringe and the price-dependent world oil demand. World oil demand is modelled with a constant price elasticity function and refers to a scenario from ACROPOLIS-POLES. LOPEX results indicate a significant higher oil price from around 2020 onwards compared to the reference scenario, and a stagnating market share of maximal 50% to be optimal for OPEC.

INDUSTRY COOPERATION IN AN EMERGING REGION

ABSTRACT During the 1990s, the Caspian Sea, Black Sea and Central Eurasia region emerged as one of the most important new sources of world oil supply, attracting development and providing vital new export revenue. With more growth and investment certain, the countries of the region are able to rely increasingly on the benefits arising from uninterrupted exports. As more oil is handled in the region, the shared desire is to eliminate any spills from these operations. Further to a strong commitment to apply preventive measures, a group of energy companies—working in cooperation with governments—also believe it is prudent to undertake actions that can significantly reduce the consequence of any such incidents. In 2002–03 these companies undertook a comprehensive study and detailed analyses of the state of oil spill preparedness in region. The study found that governments, companies, institutions and stakeholder groups widely agreed on the need for improved response capability. Beyond the significant economic and business risks posed by spills, there is universal concern to better protect the environment and the public. A poor spill response could harm the regions ecology, affect local business and the industry's reputation, with serious repercussions. In line with recommendations from the study, the oil industry launched an initiative to support the efforts of governments and promote regional response capability in mid 2003—the Oil Spill Preparedness Regional Initiative (Caspian Sea—Black Sea—Central Eurasia)—known as OSPRI. OSPRI embraces an overall vision, set out as … Industry and the region's governments work cooperatively to promote proven, credible, integrated, sustainable oil-spill response capability. OSPRI is action-oriented and brings a consistent, aligned approach for industry in its relationship with international and national partners when developing effective preparedness. OSPRI avoids piecemeal approaches and is encouraging planning processes based on clear command and control frameworks, the tiered response philosophy and response policy based on net environmental benefit (IPIECA 2000). This is making a significant contribution towards helping governments and operators achieve best practice in their contingency planning.

Plan B: What happens after peak oil?

With the price of oil at record highs and the limited spare capacity unable to meet the growing global energy demands, the news media are revisiting Hubbert's Peak again. Predicting oil's peak is really a guessing game. However, its occurrence is not! Someday the world's oil supply will peak.