Tag Archives: fungibility between oil and gas

All Liquids Are Not Created Equal

Once upon a time when we talked about oil, the presumption was we were talking about crude oil (or perhaps crude oil plus condensate if you were a petroleum wonk). Nowadays, when BP, the Energy Information Administration (EIA) or the International Energy Agency (IEA) publish their flagship yearly reports (see here, here and here) the lead-in charts highlight ‘All Liquids’ (click for larger image).

I’ve taken the numbers below from Table 3.4 in the IEA’s World Energy Outlook 2012 (click for larger image). Apologies for the lack of a link since the report needs to be ordered and is not freely available on the web.

Oil and Liquids Supply jpg

As can easily be seen, traditional conventional crude oil is making up an ever smaller share of total liquids in percentage terms, falling from 88.8% in 1990 to 63.1% in 2035 under the IEA’s Current Policies scenario (basically business as usual).

This would be irrelevant if all liquids are perfectly substitutable amongst themselves; i.e., they are fungible. Unfortunately, they are not. The EIA released a great graphic yesterday showing two key determinants of fungibility (there are others): energy content per unit volume and energy content per unit weight here (click for larger image):

EIA Energy Density jpg

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Shale Gas (Part III): A Brave New World?

In this post, we will switch from a look at the shale gas outlook in the US to that globally. Again, the starting point is a forecast of total energy consumption out into the future, and then a discussion of what amount of gas would be needed to produce a true energy transformation. The latest set of forecasts we have are those from BP’s Energy Outlook 2012, just released this January. The report can be found here.

Interestingly, there is not that much difference between the aggregate energy numbers produced by the major organisations that predict energy supply and demand into the future (IEA, EIA, OPEC, BP and Exxon Mobile). I think that this is because they generally start with a GDP growth (and energy intensity) assumption and then work backwards to produce supply and demand forecasts. (The question of whether growth drives energy or energy drives growth is a topic for another post.)

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