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Data Watch: US and Global Crude Oil Monthly Production September Releases

On September 30th, the U.S. government agency The Energy Information Administration (EIA) announced provisional U.S. crude oil production figures for July 2013. Key points:

  • July crude oil production was 232.1 million barrels, equivalent to 7.7 million barrels per day (bpd)
  • Change over July 2012 on a barrel-per-day basis: +17.3% y/y
  • July total crude oil plus natural gas liquids reached 311.1 million barrels, equivalent to 10.4 bpd

As can be seen from the chart below (click for larger image, link to original data here), the fracking of tight oil formations in the U.S. has made a major impact on U.S. crude production over the last few years. The critical question is whether the current large year-on-year percentage growth rates in oil production can be sustained.

US Field Production of Crude Oil  jpeg

Growth rates for both crude oil production by itself and crude plus natural gas liquids remain robust, continuing to track in the high teens. The situation for oil is in marked contrast to that of U.S. natural gas, where production growth has stopped.

The differentiator here is price. Both tight gas and tight oil are expensive to produce compared with the conventional alternatives. Accordingly, production investment requires a high product price to remain feasible. U.S. natural gas prices are down roughly by half from their average level in the 2005 to 2008 period (removing the temporary 2008 spike). By contrast, the price of West Texas Intermediate, the U.S. benchmark oil price, remains near all-time highs (again excluding the very short-term 2008 spike).

Given crude oil is a globally traded commodity, U.S. production numbers need to be placed in the context of world supply and demand. In its latest Oil Market Report dated 12 September 2013, the International Energy Agency (IEA) recorded global ‘all liquids’ production of 91.6 million bpd for August 2013, down 0.8 million pbd from the previous month.

Global Oil Supply August 2013 jpeg

Full quarterly IEA world supply-and-demand figures, including Q2 2013 estimates, can be found here. The preliminary estimate for Q2 2013, shows a 0.5% rise over Q2 2012. The lacklustre increase in supply accounts for why world oil prices remain strong despite a slowdown in global GDP growth.

Geopolitical instability remains a major obstacle on the supply side, with Libya the latest country to show a steep fall in output against the background of labour disputes and civil unrest. Increasing sectarian strife is also putting a question mark over Iraq’s ability to hit ambitious production growth targets.

Data Watch: US Natural Gas Monthly Production June 2013

The U.S. government agency The Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on August 30 and covers the period up until end June 2013.

Data is reported in billion cubic feet (bcf). Key points:

  • June 2013 natural gas dry production: 1,989 bcf, plus 1.4% year-on-year
  • Average monthly production for the 12 months to June 2013: 2,009 bcf, +1.6% over the same period the previous year

Since the end of 2011, the rate of production increase has rapidly decreased (click chart below for larger image) and on current trend should go negative over the next few months.

US Dry Gas Production June 2013 jpeg

The rapid deceleration in natural gas production growth has led to an uptick in prices over the last 12 months. Prices paid by electricity utilities have now reverted to between $4 and $5 dollars per thousand cubic feet from a low of less than $3 in April 2012. At some stage, rising prices should lead to a further investment in shale gas production, but this has yet to be seen.

Natural Gas Price jpeg

Much recent media attention has centred on a so-called shale-gas revolution in the United States and, in particular, the ability of shale gas to boost overall volume of natural gas production. Many claims are made with respect to the prospective expansion in shale gas production in the coming years including the following:

  • Shale gas will provide a low-cost source of natural gas, and thus cheap energy, for decades to come. This, in turn, will boost the competitiveness of the U.S. economy.
  • The U.S. will move toward an era of energy self-sufficiency, which will help buttress the country’s geopolitical security.
  • The scale of shale gas production will be sufficient to allow the U.S. to commence natural gas exports, thus transforming energy markets outside of the U.S. such as those in Europe.
  • Increased natural gas production in the U.S. will mitigate carbon emissions through displacing coal and so reduce the risk of dangerous climate change.

I have blogged extensively on these claims (some repeated by President Obama) hereherehere and here.

For these claims to be substantiated, significant year-on-year rises in U.S. natural  gas production will be required over an extended period. Through tracking monthly production of natural gas, a non-specialist can confirm or refute whether large rises in natural gas production are being achieved and, therefore, whether the claims associated with a shale-gas revolution are credible. In short, the monthly numbers allow you to evaluate the hype. Monthly data are currently not showing any material increase in production.

Links for the Week Ending 18 August 2013

  • I have much admiration for those climate scientists who publish cutting-edge research in their respective fields but at the same time feel a moral imperative to engage with a general audience over the dangers of global warming. Professor Andrew Dessler is one such soul, and in this short presentation (via Skeptical Science) he explains the concept of ‘decision-making under uncertainty’ and how it pertains to climate change—a subject close to my heart.
  • Last week I mentioned how even The Financial Times was talking up the competitiveness of solar on the back of the steep drop in panel prices (here). In a similar vein, The Guardian just published a lovely article on how sections of the American right were adopting solar as part of the ‘off grid’ movement that seeks independence from big government and big corporations.
  • The New York Times published some stunning satellite images onunder the title “Gorgeous Glimpses of Calamity“. Unfortunately, as the the title of the article suggests, all is not well with the planet.
  • Earlier this month, The New Scientist carried a special report called “Frack to the Future”. Unfortunately, it’s behind a pay wall, but hunt down a hard copy from a library if you have time. The conclusion of the article is that shale gas will have only a minor role in moderating CO2 emissions and should not be seen as the much-hyped bridge to a renewable future.
  • The four main swing producers in the global oil market are Russia, the U.S., Iraq and Saudi Arabia. Production trends in the first two markets are relatively transparent. Iraqi output, by contrast, is difficult to forecast, but a recent article by the The Financial Times article notes that current targets are being missed by a considerable margin. Given instability in a number of smaller producers like Nigeria, Libya and Southern Sudan, the responsibility for keeping the oil market in balance without the need for price spikes rests with Saudi Arabia. Whether Saudi has the spare capacity to carry out this role is a matter for debate, but Stuart Staniford at the Early Warning blog does a great job of tracking Saudi production and rig count.

Data Watch: Atmospheric CO2 July 2013

I haven’t posted monthly CO2 numbers for a while: although atmospheric CO2 concentration is vitally important for climate outcomes, any one particular month carries little meaning. Nonetheless, I think it worth checking in every quarter or so to look for any nascent deviation from trend.

Key numbers relating to NOAA’s August 5th release of July 2013 mean monthly CO2 concentration are as follows:

  • July 2013 = 397.23 ppm, +2.93 ppm year-on-year
  • Twelve Month Average = 394.53 ppm, +2.56 ppm year-on-year
  • Twelve month average over pre–industrial level = +41.2%

Atmospheric CO2 concentration is the world’s leading risk indicator. Every month, the National Oceanic and Atmospheric Administration (NOAA), a U.S. government federal agency, releases data on the concentration of atmospheric CO2 as measured by the Mauna Loa Observatory in Hawaii. The official NOAA CO2 data source can be found here.

This is the longest continuous monthly measurement of CO2 and dates back to March 1958, when 315.71 parts per million (ppm) of CO2 was recorded. The Intergovernmental Panel on Climate Change (IPCC) uses the year 1750 as the pre-industrialisation reference point, at which date the atmospheric concentration of CO2 was approximately 280 ppm according to ice core measurements.

Atmospheric CO2 displays annual seasonality: concentrations decline from the spring during the growing phase of terrestrial vegetation and rise in the autumn as vegetation dies and decomposes. The cycle is dominated by the northern hemisphere growing season since the northern hemisphere contains over 65% of the globe’s land mass. The cyclical pattern can be seen in the following chart (red line). The black line is the adjustment for seasonality.

Monthly Mean CO2 July 2013 jpeg

The peak for atmospheric CO2 concentration is generally in the month of May, as with this year when the average monthly value reached 399.76 ppm. The newspaper headlines reporting the CO2 concentration breaking above 400 ppm refer to the daily values. The rise in annual CO2 is due to fossil-fuel emissions and land-use change. However, there also exists some minor non-seasonal year-to-year variation related to weather, drought, fire, ocean current changes and volcanic eruptions.

A critical concern is whether the annual average mean increase in CO2 is accelerating. For the decade ending the year 2010, the annual average increase was around 2 ppm. The current 12-month moving average increase is now 2.5 ppm, although there is considerable year-to-year variation as the chart shows.

Annual Mean Growth Rate CO2 July 2013 jpeg

The Copenhagen Accord of December 2009 reached the following agreement with respect to atmospheric CO2 concentrations:

To achieve the ultimate objective of the Convention to stabilize greenhouse gas concentration in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system, we shall, recognizing the scientific view that the increase in global temperature should be below 2 degrees Celsius, on the basis of equity and in the context of sustainable development, enhance our long-term cooperative action to combat climate change.

The consensus best estimate is that a CO2 concentration of 450 ppm should not be surpassed in order to have a chance of keeping the increase in global mean temperature below 2 degrees Celsius. The current atmospheric CO2 trend suggests that the 450 ppm concentration and,  subsequently, 2 degree Celsius threshold will be substantially exceeded.

Data Watch: FAO Food Price Index for July 2013

Global food prices are currently on a downward trend since the type of extreme weather events that disrupt production have been largely absent this year as compared to last.

The Food and Agriculture Organisation of the United Nations (FAO) releases a series of monthly price indices for a variety of food commodities (here) at the beginning of each month. The headline FAO Food Price Index is a composite of five food groupings: meat, dairy, cereals, oils and fats and sugar. The base 100 is the indexed averaged price for the 2002-2004 period. The July 2013 index number was released on August 8th. Key points are as follows:

  • The FAO Food Price Index averaged 2o5.9 for July 2013, down 4.2 points from the revised value of 210.1 for June
  • The index was down 7.1 points from the 213.0 recorded in July 2012, or 3.3 percent
  • In inflation adjusted terms, the Food Price Index stood at 136.8 for July 2013 against the 2002-2004 base of 100

FAO Food Price Index July 2013 jpeg

Cereal prices have been leading the aggregate index down, with maize in particular showing significant falls in price on the back of good harvests in many producing areas across the globe. The sub-indices can be found here.

At this point, I usually highlight the long-term correlation between food prices and oil prices, but the World Bank recently came out with a report that looked at this relationship in some detail and I intend to post on it over the next few days.

Links for the Week Ending 11th August

  • Just occasionally we get some good news on climate change issues. The Financial Times published a full-page article near the end of the week on the increasing competitiveness of solar versus fossil fuels (free registration with the FT gives access to the article). In short, solar panels have come down their cost curves so quickly that they have reached the point where the economics stack up without government subsidies.
  • Much more discouraging is to see PM David Cameron throw his weight behind UK-based fracking in The Telegraph today. A major argument of the pro-fracking lobby is that shale gas CO2 emissions are far lower than those of coal. Accordingly, the substitution of shale gas for coal in electricity generation should allow natural gas to act as a bridge fuel that buys us time until renewable or nuclear technology matures. Unfortunately, the methane leaks associated with fracking make this assertion highly contentious. See, for example, here.
  • And Tom Murphy on his excellent “Do the Math” blog sets out in considerable wonkish detail why electric cars still need to get much further down their cost curves before they can compete with internal combustion engine rivals without a swathe of subsidies. Tom (as with myself and my Prius) has still opted for an electric, with the ethical consideration tipping the balance. However, given the strong psychological roots behind the average person’s climate change denial, hybrids and electrics will need to beat gasoline in a straight out financial fight before they can contribute significantly to CO2 reduction.
  • In 2000, the political scientist Robert Putnam came out with a landmark book called “Bowling Alone“. The book claimed that the atomisation of American life was destroying civil society. In The New York Times this week, Putnam has a beautifully written op-ed piece chronicling the decline of his home town Port Clinton, Ohio. The article tackles all those themes that have made the achievement of ‘the American Dream’ so much harder in recent decades.
  • Putnam’s piece was published as part of an NYT series of articles called “The Great Divide”, which is moderated by Nobel prize winner (economics) Joseph Stiglitz. There is some great writing within this series, much of which touches upon my preoccupation with a possible end to economic growth.

Links for the Week Ending 4th August

  • Lots on climate change in my links this week. Methane is the biggest “known, unknown” in climate change science and this comment by Whiteman, Hope and Wadhams in Nature has caused a huge stir and push back from a variety of climate scientists, such as Gavin Schmidt, who I have a lot of respect for (see here for a summary of riposte’s). Here is a defence of the comment by Peter Wadhams. As a reminder, risk is probability  times effect. So even if the probability of a methane burst is small, the harm it would cause could be massive. Accordingly, regardess of the comment in Nature, methane is a major risk that needs to be tracked constantly.
  • Just occasionally, some Republican supporters stand up and say something sensible about climate change, such as this from four Environmental Protection Agency heads who were appointed by the Nixon, Reagan, Bush I and Bush II administrations. How I yearn for the days when action on climate change was a bipartisan non-wedge issue—before the insidious influence of extreme right-wing think tanks and lobby groups took hold in the late 2000s. Conservative parties should be natural allies of action to conserve the planet, not to trash it.
  • On a less positive note is the attitude of U.S. farmers toward climate change. Ricky Rood blogging at Weather Underground quotes an academic paper by Arbuckle et al showing that only 10% of Iowa farmers believe humans are causing climate change. A bit more encouraging was the fact that only 5% thought that climate was not changing. The majority, 58%, believed climate change was either a natural process or  a combination of human and natural factors. To me, this is classic denial from those likely to be most hurt by human-induced climate change.
  • On Friday, a lacklustre jobs report was reported in the U.S. But the inability of almost all developed countries to create jobs in what should be the  recovery-portion of the economic cycle remains pronounced as a Floyd Norris article in The New York Times shows. Something different is going on this time around.
  • Gail the Actuary over at the blog Our Finite World has a nice post linking the issues of quantitative easing (QE) and resource constraints. It basically argues that the post-war economic model is grinding to a stop as resource depletion caps growth. I would argue that the nature of technological change and demographics are also important in the mix, but broadly agree with the main thread of her argument.
  • I often talk about the link between the oil price and food prices. The World Bank has a timely study showing this link more formally. This is such an important topic that it deserves a post of its own: so little time, so much to write about!