Friday, September 10, 2010

The shape of oil decline

CM's 9/4/2010 daily digest blog featured two articles which I highly recommend:

Dmitry Orlov’s Peak Oil is History and, Jim Quinn’s PEAK DENIAL ABOUT PEAK OIL

Orlov argues that proponents of peak oil often present what Orlov calls a "Rosy Scenario" view of the decline in oil production following peak oil:

If climbing up to the peak must have required mountaineering techniques, the downward slope looks like it could be negotiated in bathroom slippers.... This, you must agree, is extremely suspicious....And so I like to call this generic and widely accepted Peak Oil case the Rosy Scenario.

Orlov goes on to discuss four factors that are often not considered and are the reasons why he thinks the Rosy Scenario is flawed. One of the four factors is the export-land model, which I discussed in the first post in this thread.

By chance, Quinn’s article presents a graph that I think Orlov would agree would be representative of the Rosy Scenario:

Based on some rough calculations from this graph, I estimate that from about 2005 to 2025, the rate of decline would be only about 0.5% per year. For example, according to this scenario, oil production might be expected to decline from 2010 to 2020 by about 5%.

While this is not in anyway a criticism of Quinn’s excellent article (or Quinn himself), I think this graph could give one false sense of time in which to prepare for the effects of peak oil, or, to cause one to delay in such preparations in these hard economic times.

I can illustrate how mistaken that false sense of time might be, by using my recent calculations which I ran when considering the effect that the export-land model would have on hastening gas/diesel rationing in the USA.

Briefly, Jeff Brown’s export-land model predicts that oil producing countries will stop exporting at a much faster rate than the rate of decline in oil production in order to service their own domestic needs.

Here is a graph of the percentage of decline in oil available in the USA if I assume that imports to the USA steadily decline at 6.2%/y (Brown’s expected decline for the top 5 exporters) and domestic product declines at a more modest 2%/y (my assumption, based on the AER 2009 report).

Notice that at present, the percentage of the USA’s oil from foreign imports is over 60 percent, but then this rapidly declines, and eventually, the majority of the USA's oil comes from what’s left domestically.

To illustrate how much steeper the shortfall could (will?) be for this scenario as compared to the "Rosy Scenario," I overlaid on the above graph the portion of the "Rosy scenario" (RED line) that corresponds to the 2010-2055 period that I ran my calculations for.

Alternatively, here are the foreign and domestic oil decline curves overlaid on the "Rosy Scenario" curve:

This illustrates that those disruption events that Quinn’s graph identifies: “Shortages and Rationing, Financial Market Collapse, Crime & Civil Disorder, etc..,” would all occur much sooner than expected than expected from the "Rosy Scenario." About ten years earlier, I estimate. Of course, this may mainly apply to large oil importing countries, like the USA. This also assumes that the events in Quinn's graph are mainly driven by a certain percentage decline in oil.


  1. Right, and where in this analysis is the fact that the US has the largest military in the World, and the fact that it will not be permitted for foreign governments to cut exports?

    Frankly, I think it likely that the US's Oil needs will have priority over most of the rest of the World, include other countries domestic needs.

  2. "it will not be permitted for foreign governments to cut exports"

    Right, and what confidence you have in the USA military to enslave multiple foreign countries and still expect their infrastructure to pump and export oil to stay intact. Just look at the top eight exporters to the USA, in addition to Iraq (, and tell me which of these countries the USA military would have a hope of invading and controlling just to sustain imports to the USA at present levels? Or are you planning to invade them all? If the experience in Iraq is any guide, this has zero likelihood of working or occurring.


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