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Oil Supply/ Peak oil not till 2025


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In reply to: Sandalaphon on Tuesday 28/02/06 08:06pm

heck theres a car that runs on H20 in there somewhere


I believe an Australian was running his car on only water back in the early sixties. He was bought out by one of the oil companies or big 3 car manufacturers at the time. Evidently he discovered how to separate the hydrogen from the oxygen and use the gases as fuel.

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In reply to: happy2 on Tuesday 28/02/06 08:36pm

I could believe that


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In reply to: Sandalaphon on Tuesday 28/02/06 08:46pm

I know it sounds silly, really, but, the person that I heard relating the story on radio back in the 70s, claimed that that the modifications to the engine were not too difficult to do. Not sure whether he used water from a hose or distilled water. Evidently, this bloke lived in Western Australia somewhere on a rural property, and had been trained as an engineer.


From memory, there was discussion about the engine being a steam engine, but this was not the case.


Can imagine the impact this would have on the POO, though. Always wondered why water wasn't used as an alternative to oil. But the consensus at the time was that the knowledge would have been shelved because too much money was tied up in the production of petrol and oil.


In the event that water were to be used as fuel for cars, I would expect that this would require some major collaboration between oil companies and vehicle manufacturers. The water would probably have to be distilled, so one would have to still drive into a service station to fill up. Govt. would want their taxes on top of it too.



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You've made some pretty friendly assumptions - you're assuming the existing production base will decline by only 10% over 5 years, and you're assuming demand will only increase by 1 mmbd from China and India put together, and you are assuming that all the existing big projects will come onstream on time and to targets.


And it still gets a mere 5 mmbd cushion.


Shift either of these assumptions, and you are left with the current tight supply/demand situation.


Is it more likely that everything is going to go right, or that some things will go wrong ?


The top of the list is higher than expected demand. And demand has overshot estimates repeatedly in the last ten years.


Ian Whitchurch

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In reply to: ian_whitchurch on Wednesday 01/03/06 02:08am

Hi Ian.


Happy with my decline numbers out to 2010. With the higher price of oil they even may be a little too high ... its economic to keep pumping despite lower levels of production when the price of oil is US$60- as opposed to US$20-.


Always been worried more about the massive decline 2010-2020 that was looming when one looked at things in 2003. The decline was 20 mmboe a day ... but certainly by increases in OPEC capacity planned at around 6mmboe a day which will not run out in the 2010-2020 period and the possibility of TAR sands adding another 5-8 mmboe a day to the mix ... the whole peak oil question for me at least has been pushed way way out.


Yes I accept the argument that I have looked at things maybe from a little bit of a rosy side .... but dismissing the fact that during 2004 and 2005 the oil industry had zero excess capacity and this will grow at least to 5 mmboe a day by 2010 is a very large factor. The reason behing the spike from US$20- to the peak at US$73- was all about demand and supply .... and the easing of this condition with supply coming on line in a gradual fashion is unlikely to be changed since the supply is coming from over 20 different countries.


Also ... this does not take into account the yet to be announced projects which will come on line by 2010 and there certainly be quite a few ... if in a hurry a new oil production project can be brought on line in 18 months ... so this excess is going to grow.


My growth in demand ... sure maybe low but in reality its only been growing at 1.5 mmboe a day .... I have lowered this number to 1 mmboe a day for the years out to 2010. However one likes to put it ... large car sales and sales of 4WD's and SUV's have been sucking wind for 18 months down by massive margins. Each year 15% of all cars are replaced by new ones ... and if the trend between the US and others is buying 25% less of the gas guzzlers for the more fuel efficient ones that burn say 20% less fuel ... for a nation like the US consuming 22mmboe a day ..... 15% of cars burning 20% less fuel each year allowing for the petrol to make up half the total enerygy consumption of 22 million boe a day has the total petrol demand falling by at least 330,000 boe a day or around 2 mmboe total demand out to 2010 since this trend started.


Who knows ... too hard ....


The other gents with the great points ...

Agree totally Sandalaphon and Nizar.


Things are tight with not enuf production and exploration rigs.

Not enough trained people and the costs have exploded.


Possibly and probably the best jobs on the planet are oil drillers with demand well over the supply and they have been able to charge double the 2003 prices they did due to the demand. But like most things ... this will not remain the case for ever. I am sure there are many enterprising people in the industry right now building new drill ships and new drill rigs to cash in on this very imbalance.


My bottom line ... sure tar sands cost more than tradional oil to produce and I suspect after going over the accounts the real economic break even is around the US$30- level.

Oil is not going to fall back to that level and I doubt it will even fall back to the US$40- level ... thats not my point. If it ever were to fall to those levels the planned expansions looking forward will fall in a heap and we will be left with a worse situation as time goes on.

My point is at US$61- per barrel .. the supply side to me looks set to vastly improve as time goes on. I believe things will be tight ... yes but looking at the oil price with stars in our eyes thinking US$100- or more is not going to happen barring a massive disruption in the oil supply. It may happen ... but I have my doubts since the oil still flows from Iraq and has barely been disrupted for any length of time. One just has to look at some producers that have actually had civil wars going on around the oil production facilites in Africia in the past.


Oil will never get cheap again. Never back to US$30- a barrel ... or if it does the dislocation of the planned supply coming on line by 2010 will be delayed and we will be in a hell of a pickle 2010-2020. I perversly see the only thing ... the only thing that can make oil prices go higher and much higher in the next 5 years is them going much much lower short term and sitting there for a while. This is very hard for me to see .... what I do see is some easing of the price in coming weeks/months. I accept the oil bulls and those still long oil stocks do not want to hear this view ... however the supply side has eased the overall situation and prior to the US holiday season in June and storm season in June-Oct ... I strongly suspect we have a strong pullback in things.


Longer term ... have had the veiw and shared it on SS the US$70- level was a bridge too far and we saw some serious political moves with the pollies in France for one threatening fines agains Total for charging too much ... kind of perverse when petrol is three times the price or Australia and made up 75% by the goverment taxes. But for me US$70- is a bride too far for now and suspect 2006 we see a range of US$48- to maybe US$68 if they manage a bad storm or two or something blown up.


Will be interesting anyhow ... my concern short term is this correction .... hedge funds have the commodity markets in their grips and not just oil but metals being played in very serious ways .... but for my money they are playing a loosing hand trying to protect their long positions in markets that in many cases have even better supply coming on board in coming years. Copper for one seems to have at least 20% over supply coming on line by 2010 ... yet till now they are holding things together .... cant imadgine what the oil market would do if the number for 2010 was 20 mmboe a day oversupple by 2010 as opposed to what I think is only 5 mmboe right now.


Only time will tell .... just a different view on things from here. Strongly of the opinion when something becomes so popular very few make money on the outcome. Time to be long oil was 2003/4 and early 2005 ... but here and now with certainly our oilers reflecting to a great degree these higher price assumptions going forward ... the downside for me is the risk. Let alone the miners .....


All the best

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not that i think the future will be an extrapolation of the past...


but assuming china will show 10% yearly growth for the next 20 years and assuming each 10% increase in growth is accompanied by a 10% increase in oil usage ...


and assuming my maths is correct [ i haven't checked the numbers ] ...


china oil usage ... 2005 ... 6mbo

2010 ... 9.66

2015 ... 15.56

2020 ... 25.06

2025 .... 40.4


how does this sit with you, K?

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In reply to: spot on Wednesday 01/03/06 10:22am



Yes suspect there is some growth from China ... but on the other hand China has crossed a barrier we in the West will not for some time. One talks about tar sands and how harmful it is to the environment ... then oil shale a little worse ... but the real bad one is coal liquification .... I think you burn 35-40% of a barrel of oil to produce a barrel of oil.


China already is opening coal liquification plants and has announced massive plans for the future. Any old hydrocarbon can be turned into fuel and China has fairly large resources of coal but not much oil. Suspect whilst the demand does go up as you suggested there are already plans going ahead for 500,000 BOE a day worth of coal liquification plants and suspect we see a mighty increase in this number as time goes on. Also China despite this nasty move is developing other alternatives and being a centalized govt there is not a hell of a lot of debate on matters. If they decided to across the baord make all new buses hydrogen powered .... it just happens. No unions or bleeding hearts or interest groups there to muck matters up.


Whilst the 500 k total against the 6 mmboe demand say in 2010 right now from coal liquification is not a hell of a lot ... again suspect we see a doubling of this number if not far far more. Ignoring anything else if one can produce a barrel of oil via coal liquification for less than US$30- per barrel ... their claim is US$25- ... but even so ... ignore the depletion of the ozone layer and look just in terms of numbers ignoring the rest as they are ... doesn't make any sense to buy oil for US$60- per barrel if you can make your own for half the price.


As much as we all would like to ignore these factors ... the tar sands into the mix by the US and Canada makes it very unlikley they can complain if China resorts to wide scale coal liquification. Then again I am sure they might try ......


Amusing poll on the TV last night about AWB. I think 65% believed the govt knew more than they are letting on about but regardless of that they approve of the govt strongly.


All about perceptions ... the oil debate ... the bubble or the doom and gloom called by many.


Last 6 months has seen radical improvements to the outlook on so many markets and commodities .... and suppose we must keep the myth alive !!


Good luck

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In reply to: Sandalaphon on Tuesday 28/02/06 07:06pm

Hi Sandalaphon,


I hope you didn't donate to this "worthy" cause because it sure looks like a scam to me. If they can't convince american technology investors, hey go on the internet and get donations from people who don't understand the fundamental laws of physics but hate oil companies with a passion. Big market, they are probably doing quite well.

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