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Robert Hirsch oil production outlook downgraded from Tier-2 status to Invalidated

click to enlarge ... more peak oil charts @ my SA Instablog & website
click to enlarge ... more peak oil charts @ my SA Instablog & website

Peak Oil:  95-mbd in 2024

Nov 25 2011 delayed FreeVenue public release of Aug 25th MemberVenue guidance ~ Today's monthly revision:  (a) updates Tier-1 Outlooks by Peter Wells & our own Hutter Peak Scenario-2500 & (b) downgrades Robert Hirsch outlook to Invalidated (from Tier-2)

Global production has increased dramatically from the Recession low of 83.1 Mbd (Jan/2009), setting yet another monthly record (88.8 Mbd) in July 2011.  The 17-model average infers the oil sector is on pace to shatter last year's annual record and monthly production is poised to break the 90-mbd threshold in 2014, the 95 milepost in 2021 & geologic peak should be pre-empted by Peak Demand of 95 Mbd in 2024.  International Inventories are well above the 5-yr avg and 5% of global capacity is presently idle eagerly awaiting new Demand.

It is little known the pause in global production seen in 2009 was actually the 11th annual decline since 1975.  The PS-2500 model incorporates similar disruptions during cyclical business cycle recessions in 2017, 2026 & 2034.

See our World Production Records venue for higher resolution charts of current extraction both at the global level and by the Top 7 nations.  Historical analysis of Crude & Gasoline Price components & future target prices (out to 2035) can be viewed via our Gas Pump & Barrel Meter charts.

Today's Model Reviews:

The 2011 Outlook update by Peter Wells amends Peak dramatically to 107 Mbd in 2028 (from 93 in 2020) and predicts OPEC surplus capacity will rise to 6 Mbd in 2018.  Wells had drastically reduced Peak Rate in 2009, but has decided to reverse that action and in fact is raising his former high water mark as well as a substantial postponing of Peak Date.  In so doing Wells becomes the third most optimistic practitioner (from #14).

A favourite contribution to this 17-model Depletion study is of course my Peak Scenario-2500.  The only depletion model that publishes updates monthly, its current revision reflects six factors:  (a) target for Underlying Decline Rate Observed (UDRO) in 2050 decreases to 4.0% (from 4.5%);  (b) the projected annual New Capacity trend to Year 2100 decreased to 3.3 Mbd (from 4.1 Mbd);  (d) to maintain the integrity of supply chain realities the model assumes Proved Reserves will continue to be developed from available resource at a rate consistent with the historic 40-yr Reserves/Production ratio; (e) in a quest to preserve the aspirational soundness of price discovery, global Surplus Capacity is prevented from dipping below 3 Mbd throughout the timeline;  & (f) 48 Gb increase in URR/EUR.

In its early life, the PS-2500 model revealed the onset of terminal decline in a petroleum province is usually brought on by either (a) constraints in securing sufficient proved reserves at will on an annual basis, or (b) due to the magnitude of rising annual Underlying Decline Observed inevitably surpassing the annual New Capacity installations.  Because it appears the potential capacity peak is being truncated by a waning growth rate in consumption, PS-2500 is currently monitoring two scenarios:  Geologic PEAK & PEAK Demand.

The Geologic PEAK scenario assumes extrapolation of the 1 Mbd/yr production pace in play since 1970.  The other reflects a sea change that occurred July 2010 when my newly implemented Peak Demand module began to detect a waning growth rate in long-term Demand.  The module's feedback serves to explain the inability of Consumption to mop up the growing global surplus capacity in the system (6-mbd) at the end of the 2009 G-20 Recessions.

At this time, it appears Demand will peak @ 98 Mbd in 2029.  Post-peak decline will average 0.3%/yr during the first two decades.  Conversely, when the PEAK Demand module is deactivated, PS-2500 projects there is sufficient capital, Proved Reserves & a demonstrated build rate for global production to reach 115 Mbd in 2039 (119 Capacity).

In tandem with the Barrel Meter module, Peak Scenario-2500 warns policy makers to target their strategies for transition away from gasoline/diesel transportation fuels to 2030, when Crude Price permanently breaches a definitive Crude-Cost/GDP threshold that historically decimates USA light vehicle manufacturing and sales.

The model gauges the pace of Underlying Decline Rate Observed @ 3.4% in 2011 and destined to rise to 4.0% by 2050.  Its cyclical nature and projected performance can be viewed in a 1970-2050 (UDRO) chart.  The model estimates 77 Mbd of the 120 Mbd of All Liquids Capacity added since 1970 addressed Underlying Decline Observed; and a further 85 Mbd is required to attain the 99 Mbd capacity target for 2035 in our PEAK Demand scenario:  8 to increase present capacity and 77 Mbd will address future UDO.

Visit our PS-2500 venue for lots more details and charts on non-conventional dynamics, Underlying Decline Observed & the inherent flaws (and myths) associated with the McPeakster fraternity.

The early 2009 musings by Robert Hirsch proposed All Liquids production had indeed peaked, would never see 87.0 Mbd and at best would maintain a plateau 'til 2011.  Committed to the 8% UDRO (Underlying Decline Rate Observed) camp, he forecast a 4% post-peak annual decline rate, implying URR of only 2,206 Gb.  The 2011 surge by Saudi Arabia forces a downgrade of the Hirsch outlook from Tier-2 status and adds yet another failed McPeakster projection to the Invalidated presentation.

end of highlights - balance in originial article