Editore"s Note
Tilting at Windmills

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July 16, 2008
By: Kevin Drum

CRUDE AWAKENING....Three years ago, in a piece called "Crude Awakening," I reviewed Twilight in the Desert, a book by Matthew Simmons which argued that Saudi Arabia had a lot less oil than they claimed. Simmons believed that their existing fields, including the freakishly productive supergiant Ghawar field, were barely able to sustain their existing production rates, and that new fields were few and far between. As a result, he estimated that although Saudi production might increase a bit in coming years, it would never hit their stated goal of 15 million barrels a day or anything close to it.

This week, in a piece called — you guessed it — "Crude Awakening," Business Week claims to have gotten access to a super-secret internal Saudi document with a field-by-field breakdown of estimated Saudi oil production from 2009 through 2013. Its conclusion? 15 million barrels is a pipe dream:

The detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data.

....One dramatic part of the data concerns a site called Ghawar, which has been the kingdom's workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013.

Italics mine. If this document is accurate, it means that Simmons was right on the money. What's worse, the details are even more discouraging: as the chart on the right shows, what little production increase the Saudis can sustain is all in medium and heavy crudes. Production of light crude, preferred by most refineries, actually decreases by 200,000 barrels per day between now and 2013.

For what it's worth, Saudi authorities say Business Week is wrong. From Reuters: "Top oil exporter Saudi Arabia will be able to pump at 12.5 million barrels per day for as long as the market needs when new capacity comes online next year, a Saudi oil official told Reuters on Tuesday....'This is sustainable for as long as the market needs it,' he said. 'We are on track to reach production capacity of 12.5 million bpd by the middle of next year and we will do it.'" Personally, I'm inclined to believe Simmons and Business Week, but time will tell. Stay tuned.

Via FuturePundit.

NOTE: I should mention that I'm not accusing Business Week of ripping off the title of my 2005 piece. We weren't the first to use it, and as near as I can tell just about everyone who writes about oil supply shocks eventually uses "crude awakening" in a headline. This won't be the last time you see it.

Kevin Drum 12:18 AM Permalink | Trackbacks | Comments (28)

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Comments

And of course Bush & Cheney knew nothing about this so they had no reason to invade Iraq!

Posted by: blowback on July 16, 2008 at 12:24 AM | PERMALINK

I'm sure if the Saudis could just drill offshore, they would find plenty of oil.

Posted by: PeakVT on July 16, 2008 at 12:27 AM | PERMALINK

'This is sustainable for as long as the market needs it,'
And if you think that is a bargain, just wait till you see my bridge!!

Posted by: on July 16, 2008 at 12:29 AM | PERMALINK

"We are on track to reach production capacity of 12.5 million bpd by the middle of next year and we will do it."

I hear summers in Riyadh are fabulous. Why can't we have a 'Surge' in Saudi Arabia? At least these fat fucks deserve it.

Posted by: enozinho on July 16, 2008 at 12:34 AM | PERMALINK

Which one will happen first: we grant Saudi Arabia statehood, or we have to sell them one of our fifty in order to pay for gas?

(Sorry, Kentucky; I think the sheiks have their eyes on you and your horse-fattening blue grass.)


Posted by: lampwick on July 16, 2008 at 12:42 AM | PERMALINK

I'm sure if the Saudis could just drill offshore, they would find plenty of oil.

Don't forget about the wildlife refuges. But the biggest step to increasing their capacity would be privatization, deregulation, dropping revenue sharing to 1%, and new government subsidies for drilling.

Posted by: B on July 16, 2008 at 12:48 AM | PERMALINK

The light sweet crude is always the first to go. They used to pump stuff out of the ground in New Mexico you could put directly in your model T.

Definitely time to invest in new hydrodesulfurization technology and equipment.

Posted by: B on July 16, 2008 at 12:56 AM | PERMALINK

Saudi Arabia has more oil than any other nation, and that is a fact. The Saudi aren't not dry yet.

If you really read the subject matter - we don't hit peak oil for several years, 40 years from now, they just step up when Bush got in office, so we are not at the PEAK yet - Even John Edwards, recently as a keynote speak in some meeting, (it's on C-Span, July 8), says that we are being price gouged by oil companies - nut don't worry Kevin, you'll have plenty of gasoline, as long as you pay the controllrf price for what the companies want.

Posted by: Me_again on July 16, 2008 at 1:38 AM | PERMALINK

Me again: Wrong, wrong, wrong. Stop reading Dan Yergin and his shilling for Big Oil. Heck, even Yergin finally broke down this spring and said $150/bbl oil is coming.

Edwards? Feh, he's bamboozling, and should know better.

NONE of the Prez candidates, though -- not just Schmuck Talk and B.O., but also McKinney, Nader and Barr -- are going to talk straight with the public about Peak Oil, though.

Kevin: this is why KSA opened that new oil production complex late this spring. It's to handle the more sour oil that they're going to be producing more and more of, though they'll never admit it.

Anyway, we're not even KSA's No. 1. customer any more. Three guesses as to a href="http://socraticgadfly.blogspot.com/2008/06/saudis-lie-american-dollars-die.html"> who actually is. Note: Simmons has said most of the Saudi's production expansion plans are just to keep treading water.

Posted by: SocraticGadfly on July 16, 2008 at 3:53 AM | PERMALINK

Sure, there's lots of oil left...little more than half what we started with. But the stuff that's easy to get to is mostly gone.

They're drilling in 5000 feet of water in the Gulf of Mexico to find mostly natural GAS deposits...and then of course there's the nuke plant they wanna to build in Canada to git out that there oil from shale...boiling rocks and fermenting corn to fill up SUVs...it's mornin' in Merika!


Posted by: john manyjars on July 16, 2008 at 7:45 AM | PERMALINK

To me it seems Jimmy Carter was right on the money 30 years ago. Too bad we didn't listen.

A fast temporary fix would be to reduce the maximum speed limit nation-wide to 60 mph. That would immediately help on consumption AND reduce car fatalities.

Any takers?

Posted by: brat on July 16, 2008 at 8:15 AM | PERMALINK

Interesting. If the chart is correct, then the Saudis will peak or more accurately "plateau" in 2010 for several years. That is roughly about 5 years later than what many had thought previously. With higher prices encouraging harder to extract production, total peak world oil output might be fairly close to what the oil industry had thought - around 2030 (from what I remember). Twenty-two years isn't a very long slice of time, and demand is growing. The question will be-how can the newly developing economies afford to buy more if it is pinching the developed world so hard?

Posted by: Doc at the Radar Station on July 16, 2008 at 8:49 AM | PERMALINK

That is roughly about 5 years later than what many had thought previously . . .

total peak world oil output might be fairly close to what the oil industry had thought - around 2030

ummm . . . Peak Saudi Oil ≠ Peak Oil. For conventional reserves Saudi Arabia ought to be one of the last countries to peak. It's hard for me to believe that we can push tar sands, etc. hard enough to keep up current production levels that long.

Posted by: B on July 16, 2008 at 9:05 AM | PERMALINK

First two lines should be in italics.

Posted by: B on July 16, 2008 at 9:07 AM | PERMALINK

A fast temporary fix would be to reduce the maximum speed limit nation-wide to 60 mph.

Maximum fuel efficiency is generally between 30 and 45 mph. If your vehicle happens to be roomy, tall, and built like a couple of stacked bricks it's closer to 30 mph. Of course, I used to be able to bicycle 10 miles on the flat with an average speed over 30 mph.

Make your policy decisions accordingly.

Posted by: B on July 16, 2008 at 9:17 AM | PERMALINK

We need to phase out ALL fossil fuels as quickly as possible -- long before "peak oil" becomes a serious problem.

If continue the business-as-usual burning of oil and coal, the resulting carbon emissions and consequent global warming will render the Earth inhospitable to life, causing a global climatic and ecological catastrophe, mass extinctions, and the collapse of human civilization.

Posted by: SecularAnimist on July 16, 2008 at 10:01 AM | PERMALINK

....'This is sustainable for as long as the market needs it,'
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
So, for 100 years? 500 years? Seems a rather optimistic promise in light of the burgeoning populations and economies in Asia, to say nothing of the U.S. continued love affair with all manner of gas and diesel powered vehicles. Jim Kunstler is pilloried by some for his allegedly pollyannish screeds regarding peak oil and our nearsighted approach to energy consumption. Reading an archive of his writings would mean labeling him a prophet if only for those many now echoing his alarm.

Posted by: steve duncan on July 16, 2008 at 10:04 AM | PERMALINK

brat wrote: "A fast temporary fix would be to reduce the maximum speed limit nation-wide to 60 mph."

Good luck with that. I just drove through Pennsylvania on Interstates 83, 81 and 84 where the posted speed limit is 65 MPH, and pretty much everyone but me (including many, many huge semi trucks as well as innumerable giant SUVs carrying only one or two people) was driving at least 80 MPH. It was actually unsafe to drive the posted speed limit. There was absolutely no law enforcement presence whatsoever.

Posted by: SecularAnimist on July 16, 2008 at 10:07 AM | PERMALINK

SecularAnimist: "I just drove through Pennsylvania on Interstates 83, 81 and 84 where the posted speed limit is 65 MPH, and pretty much everyone but me (including many, many huge semi trucks as well as innumerable giant SUVs carrying only one or two people) was driving at least 80 MPH. It was actually unsafe to drive the posted speed limit. There was absolutely no law enforcement presence whatsoever."

Ah, but with declining tax revenue, there are incentives for prosecuting increased speed limit violations. As a former PA resident, the State Police were rather German in their enforcement of the 55 mph limit back in the 1980s & 1990s. Of course, having out-of-state plates made you a trooper magnet.

Speeding fines...the new "revenue enhancement."

Posted by: brat on July 16, 2008 at 10:14 AM | PERMALINK

I would think it might be dangerous for the Saudi monarchy to let their people know that they are running out of oil and would have to make do with using solar energy to make glass out of their abundance of sand.

Posted by: Luther on July 16, 2008 at 11:32 AM | PERMALINK

Speeding fines...the new "revenue enhancement."

Yes, even though traffic has been declining where I live there is a proposed drop in residential speed limits from 30 to 25 and I know someone that works for the city and the number of tickets being written have increased-and this after some police officers went on layoff due to tight budget.

Posted by: Doc at the Radar Station on July 16, 2008 at 2:27 PM | PERMALINK

B, not true on maximum fuel efficiency; within non-ridiculous parameters, max fuel efficiency is what carmakers engineer it to be.


And, in short, they engineer to the test.

EPA tests at 55 MPH? Then, strangely enough, your car's max efficiency will be at about 55 MPH.

Posted by: SocraticGadfly on July 16, 2008 at 3:28 PM | PERMALINK

SocraticGadfly: Then, strangely enough, your car's max efficiency will be at about 55 MPH.

Wow, those automotive engineers are smarter than I thought - they've learned to overcome physical laws like the fact that the energy required to overcome the air resistance in traveling a given distance is proportional to the square of the speed.

Of course when choosing gear ratios, sundry engine parameters, etc. they do try to optimize the mileage over the EPA mileage test drive cycles. However that's not the same as designing the car to get it's maximum mileage over the EPA drive cycles.

To the extent that the EPA cycles don't reflect real world driving, the fault lies with the EPA in not specifying the test conditions more realistically. The EPA has finally recognized this and revised their mileage tests.

Posted by: alex on July 16, 2008 at 4:45 PM | PERMALINK

SecularAnimist: If continue the business-as-usual burning of oil and coal, the resulting carbon emissions and consequent global warming will render the Earth inhospitable to life ...

Nonsense. During the Paleocene–Eocene Thermal Maximum (55.8 MYA) global mean temp. was 6 C higher than today, and life survived just fine - alligators love the arctic.

... and the collapse of human civilization.

Ok, you may be right about that one.

Posted by: alex on July 16, 2008 at 5:07 PM | PERMALINK

EPA tests at 55 MPH? Then, strangely enough, your car's max efficiency will be at about 55 MPH.

A little too late, but do you have any data to back that up?

Posted by: B on July 16, 2008 at 7:47 PM | PERMALINK

SG-

I was basing my post above on a 1991 OTA report. I don't think the physics have changed that much in the mean time. However, typical coefficients of drag have. A couple of fundamentals:

1) above 30 mph aerodynamic drag is the dominant resistant force

2) The power needed to overcome drag increases with the cube of velocity.

If you really care to go deeper I'd look at the fuel efficiency record attempts and Prius/Insight marathons. I believe they all tend to compete under 30 mph.

Posted by: on July 16, 2008 at 9:38 PM | PERMALINK

A lot of modern cars contain trip computers that show the real time MPG numbers on the dashboard. Why doesn't somebody do some real world testing on a flat stretch of highway under low wind conditions and show us what the real results are? Compare that with other model cars with real-time trip computers with their MPG numbers? Then put this stuff up on YouTube for people to link to and check it out for themselves?

Posted by: Doc at the Radar Station on July 17, 2008 at 12:18 AM | PERMALINK

Doc, I think it's a pretty interesting subject specifically because the common perceptions (55mph) appears to be dead wrong and there doesn't seem to be a good place for a clear answer. The EPA has a cartoon on their website where they show a broad plateau from 30-55 mph and then a rapid drop off. A freeper posted a cartoon they drew with an etch-a-sketch that looks similar. I'm pretty sure both were drawn by people that just wanted to make the point that efficiency rapidly decreased above 55. Truth is that's not peak efficiency. It's a trade off between impatience, road rage, and efficiency.

But if you look into it very hard you'll notice the efficiency records and marathon winners (farthest on a tank of gas) average 15-30 mph and the real data downloaded from fairly efficient aerodynamic cars looks like the following:

Prius:
http://hiwaay.net/~bzwilson/prius/epa.jpg

Geo Metro:
http://metrompg.com/posts/photos/mpg-vs-speed-chart-z.gif

Prius:
http://home.hiwaay.net/~bzwilson/prius/calculated_MPG_Rev_B.jpg

----------
Another interesting question is the most efficient speed for container ships, trains, etc. For the record most shipping companies are dramatically slowing their fleets. They aren't going for peak efficiency though. Time still counts for something.

Posted by: B on July 17, 2008 at 1:47 AM | PERMALINK




 

 

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