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TrendLines Research ...
Long
Term Perspectives by Freddy Hutter
what's new,
eh? ...
.Peak Oil
Depletion
January
Update of our
Peak Oil Depletion Scenarios Presentation:
20-Model
Tier-1 Avg indicates
Peak Oil Target is
92-mbd
in
2022
January
Update
of Freddy Hutter's Peak Scenario
2200
Model:
Underlying Decline Peaked
@ 3.1%
in
2008
Recession
(Peak: 100-mbd
in 2030)
poli MP
Seat Projection
for
2010 UK General Election for the House of Commons ~
Conservative Party Poised for Governance
poli
MP Riding Projection plus Momentum Trend for the
2012
Canadian Election ~ Prospect of Majority fading
~
TrendLines
Debt Meter ~
Structural Budget Deficits Poised to Double USA
National Debt by
2019
~ Freddy
Hutter of TrendLines Research proposes the
Yukon Protocol to create a Climate
Change Mitigation fund for Developing Nations
~ science
~ Alarmists Warn of "Polar Ice Caps Melting" but
Sea Level Rise does not
Reflect Dramatic change in Rate
Scroll
down for this month'sTrendLines charts ~ click graph for more
background or topic venue
Looking at quarterly data,
this was the severest economic downturn since 1980. But, based
on annual data it was the worst since 1946.
Feb 7th ~
BEA's December
economic data continues to confirm our
declaration made on May 29th: the Recession is over!
But, just as our two month lead prediction that the NBER would be announcing
the commencement of the Recession on the 2008 Thanxgiving weekend, TrendLiners will have to wait
'til Monday May 3rd 2010 for their official proclamation
that the Recession indeed ended in April 2009.
The past downturn escalated to a Severe Recession in
September 2008, after entering a Technical Recession in December
2007. The
TrendLines Recession Meter Index set a record low of -6.4% in
February 2009,
smashing the -3.0% marker of January 1975. It is apparent that
the defined Recession ended in
April 2009, with a wind-up of the contraction following in November.
We are much less enthusiastic as to the strength of the Recovery
under way, and continue to be troubled by BEA's announced Q3 & Q4 numbers.
Last week, BEA announced a highly generous 2010Q4 GDP growth rate of
5.7%. This varies widely from the 0.5% inferred
by our Recession Meter Index and continues a major divergence
between official GDP figures and our Index that commenced in April
2009.
The Coincident & National Activity indices for December suggest
Q4's GDP was only 0.5%. Our recent disgruntlement
began with Q3 being originally announced at 3.5% whilst our
calculation is -1.1%. BEA later lowered Q3 to 2.2%. We
are confident that both Q3/Q4 will be downgraded with time.
These troubling numbers
may be signaling a reoccurrence of the episode to which we drew
attention on the way down.
The original 2008Q3 GDP announcement of -0.5% distressed us 'cuz our
Index was inferring -3%. We were overcome with satisfaction
when BEA later downward revised to -2.7%!
Shortly
thereafter 2008Q4 was announced at -3.8% compared to our Meter Index
inferred -7%. BEA later did a downward revision to -5.4%.
Real Unemployment
of 16.5% in January far exceeds the post-Depression record of 14% set in 1982,
albeit down from 17.4% in October.
With Inventories at business cycle lows, average weekly hours will
be on the increase, followed by overtime and finally new hiring.
The Unemployment Rate is in secular decline mode.
This comes about
mainly from our determination that
both New & Existing Home Prices
returned to their secular Price/Income trend level in January 2009.
The collapse in crude oil prices and gasoline was also quite
helpful. As we forecast in late 2008, the finding of a Housing Price bottom
has halted the general deterioration due to
Wealth Effect and substantial upticks in
Confidence levels.
The bottoming of New Home
Sales in January 2009 and subsequent 4% rise in unit sales is also starting to
contribute to the economic recovery. Car & Light Truck Sales also bottomed
(in February 2009) as consumers
were hopeful that the recent collapse in Crude & Gasoline Prices
was genuine and long term. That faith may be misplaced.
Animal Spirits
activity deems no double-dip is on the 12-month horizon,
However, whilst the normal business cycle would indicate that the
next cycle high should occur in 2013Q1, it is becoming increasingly
clear that this path will be significantly truncated in 2011Q4.
Our Barrel
Meter projection suggests that at that particular
juncture
the USA's contract crude price will re-attain the same oil/GDP ratio
that caused the collapse of New Car & Light Truck Sales in
2007Q4. At that time, the Demand Destruction Barrier will translate to $93/barrel
crude or $3.28/gallon gasoline.
Matters get worse in 2012Q3
when
contract crude breaches the oil/GDP ratio threshold ($105/barrel) that saw the
onset of Recessions across the globe in 2008Q1. This will cause a
substantial downturn in exports, and the Fed will have to navigate
its monetary policy delicately to prevent a pause in the Recovery
from blossoming into a full fledged Recession. Perhaps fortunately,
this event will occur when critical mass of the
economic recovery provides good momentum. Similar mitigation
activity by the Fed & Treasury Secretary implementation of Fiscal
Policy will determine whether the next cycle's contraction
bottom in 2017Q3 is a hard or soft landing.
click charts for
more...
Tier-1 Scenarios:
Jan 31st ~
This month's Tier-1 revision introduces the Richard Miller
Outlook & updates our own
Hutter Peak Scenario 2200
Based on 20-model Avg:
Peak Oil: 92-mbd in 2022
Post-Peak Production Avg Decline Rate to
2050: 0.7%/yr
The year 50% of URR/EUR has been extracted: 2039
The year flow
is under today's 85-mbd: 2040
The year we run out of oil: 2287 (less than 5mbd)
Global URR/EUR:
4,415-Gb
Global Depletion: 28%
of URR (net rate: 0.9%/yr)
click chart for
more...
For the realty
sector to recover completely, we've been awaiting four bottoms.
Two are Existing Home transactions/month & Existing Home Median
Prices. Done - January & January respectively. The other
pair are New Home monthly sales & Prices. Done - January &
March respectively. The increase in monthly transactions is
important to the Economy 'cuz it brings on increased revenues in
furnishings, landscaping/gardening, appliances, etc. And for
New Homes, rising sales mean "jobs". The passing of the bottom
of Prices for both categories is important 'cuz the subsequent
"wealth effect" affects consumer demand and durable good sales.
Jan 30th
~
Since May 2008,
the original version of this scenario has been predicting the return of
the USA Existing Home Median Price to its 2-Income Family Income trend.
The correction plunge was swift and deep ... much faster than
originally forecast, and resulted in a return to
the trend line in January 2009. It is no accident that the
2009 Severe Recession
came to an abrupt
end in April ... prior to delivery of the first fiscal
policy stimulus
cheques. Nasty real estate & mortgage practices caused the
economic contraction, and the return to norms also got it out of the
downturn.
Prices peaked for
both New Homes & Existing Homes in 2007Q1, and the
completed correction exhibits a classic "return
to the mean". The irrational
exuberance commenced in 2002 and culminated in a break from the Existing Home Price norm
to 2.8 x's Working Couples Family Income. Similarly, New Home Price drifted from its long
term metric
(2.5) to an unsustainable 3.1 x's Income.
The Existing
Home Price monthly median dropped 28%, from $229,000 (June 2007) to $164,800
in January 2009. This is
far less than the silly 40% prediction (2008/11/18)
by McDoomer Nouriel Roubini. But then, he also forecast
(Nov/2008) that 1,400 banks would "go bust in 2009".
He was out by 1,250 on that call. But i
digress! Existing Home Sales are up 24% from the January
low.
In turn, the
median New
Home Price decreased 22%, falling from $262,600 (March 2007) to $205,100
in March 2009. Unit sales are up 4% from the January low.
Existing Home Prices are up $14k
from the January bottom. New Home Prices have recovered $16k
from the bottom in March.
The 2009 Avg Existing Home
Price exceeded our 2009 target support level of $171k by a mere $3k.
2009 Avg New Home Prices were in breach of the $214k support
level by only $1k.
Looking forward
to next year,
the December $178k median Existing Home price exceeds by only $2k
the 2010
target price. Meanwhile, the $221k December New Home median price
is only $1k
shy of the 2010 target.
As seen in the
chart, it is probable
that new highs for New Home Price will not be set 'til 2014. Existing Home Price records should be stalled 'til 2017.
click chart for
more
Jan 30th ~
PS-2200:
Underlying Decline Peaked
@ 3.1%
in
2008
Recession
The Peak:
100-mbd in 2030
Post-Peak Production Decline Rate:
1.7% ('til 2050)
Worldwide Surplus Capacity: 6.3-mbd (exhausts in 2025)
The year flow breaches 2010 levels: 2046
URR/EUR:
7,584-Gb (consumed to 2009/12/31:
1229-Gb incl 4Gb BTL)
Underlying
Decline Rate Observed for
2009
All Liquids
-
2.7% (2.28-mbd)
Worldwide
click
chart for more...
PS-2200's 2035
Outlook:
Jan 30th ~
This higher resolution
of
PS-2200
illustrates two
hypothetical scenarios:
(a)
an ultra conservative All Liquids trajectory with an apparent 88-mbd
Peak in 2013, declining to 28-mbd by 2035 (hashed
lime line),
assuming an Avg 3.4% Underlying Decline Rate Observed. As a
Worst Case Scenario, it assumes that the oil & gas sector will never
augment the announced-to-date MegaProjects.
(b) the more
probable production profile whereby the present Megaproject trend of
3.5-mbd/yr is deemed to continue unabated 'til resource constraints
impede new additions after 2044 (post-2012
solid lime line). End-of-Year
Supply surges to a 100-mbd Peak in
2030.
In
practical terms, history (since 1970) has shown that the pessimistic projection
line incrementally rises thru time to meet the growth trend line.
Hence The Wedge shown continually gets pushed into the
future.
Viewing the future by our measure,
75-mbd of new capacity will be required to attain our 2035 target of
100-mbd. 15-mbd of this will raise production from 85 today to
100-mbd. The other 60-mbd will address UDO loss over the next 21
years. Added to the 78-Gb to cover 1970-2009, we calculate a
total 138-Gb of Capacity will be dedicated to this loss phenomenon
over the full six decades.
Flow from global New Capacity
in 2009 was a record 4.1-mbd. This
year's loss from Underlying Decline Observed (UDO) was a lesser
2.28-mbd. Some of the difference was responsible for raising
production, but most helped raise Global
Surplus Capacity to 6.3-mbd by year end. The
current 7-yr trend for installed New Capacity is 3.5-mbd/yr. Based on present
URR Estimates and subject to capital availability, Industry can
maintain this new installation activity level until inevitable resource
constraints begin to restrict new development (blue
line in chart inset)
in 2045.
My March 2009
analysis revealed that Global UDO
first
became significant during the 1970 American Recession.
Chart#3 illustrates
long term global annual UDO, but it is the UDRO inset
(annual rates) that is most
instructive. I have found that the
Underlying Decline Rate Observed exhibits a tendency to ebb and
flow. Further study in October revealed that these cyclical crests
correlate with all six USA Recessions of the past four decades.
These cycle tops appear to reflect reduced EOR activity during
economic contractions, no doubt due to Capital/Cash Flow limitations,
as well as reduced Demand realities.
These crests
(orange line)
further coincide with depletion rate peaks of the major
petroleum provinces: the Persian basin (Iraq/Iran) in 1977, USA/Russia All
Liquids in 1984, the North Sea in 2001 & the present
deterioration in Mexico.
The highest annual surge was 6.3% of All Liquids production in
1984 in the wake of the double-dip 80's recessions.
The recent cycle top of the 2001 Recession was followed by an UDRO trough
of 1.9% in 2006, then the 3.1% high of the 2008 Recession.
The loss factor was 2.7% in 2009, and is projected to bottom @ 2.6% in 2012
before its next cycle high (3.7%) during a probable 2017 Recession.
Extrapolation of the general trend (including its 8.5 year cycles) should
see UDRO rise to 5% by 2050.
Over
the last 40 years, UDRO has averaged 2.7% annually. From 1970,
this necessitated the construction of 119-mbd of new facilities:
78 to address UDO & 41-mbd to raise Extraction Capacity from 51 in
1969 to 92-mbd today. In short, the oil sector has been adding
3-mbd/yr ... or a new Saudi Arabia every three years! Terminal Global Production Decline will commence upon
Annual New Capacity
no longer exceeding the
UDO trend line.
This intersection is set to occur in 2031.
click chart for more...
Jan 29th
~ Figures
released by StatCan today reveal that GDP growth averaged 4.8% over
the 90 days ending Nov 30th. This compares well with the 5.3%
inferred by the leading indicators shown by our Recession Meter
Index. As predicted, StatCan has upward revised Q3 from 0.4%
to 1.6%, comparing better with our 5.2% number. Stay tuned for
more revisions to the upside down the road, along with our 6.2%
outlook for Q4.
Looking forward with the aid of Animal Spirits
and the back half of stimulus cheques still coming, GDP should stay
above 4.1% 'til year end. Unfortunately, shortly thereafter
things are likely to get messy. As described down in the USA
Realty Correction Scenario segment below, the American Recession has
its roots in the Real Estate Bubble ... unsustainable home prices
robbed folks of disposable income. But that
economic downturn was in part precipitated by rising
energy prices that caused a collapse of USA New Car Sales in 2007Q4
when USA contract crude price broke the $85/barrel ($3/gallon
gasoline) threshold. On its present path, crude and gasoline
will breach that same oil/GDP ratio in 2011Q3 @ $92/barrel
($3.25/gal).
Upon that occurring, USA New Car & Light Truck
Sales risk another collapse. And since a significant volume of
those vehicles (or parts) are assembled/built in Ontario, an export
hiccup is in the cards. Whether the economy (USA or Canada)
suffers a hard or soft landing will depend on Monetary Policy
mitigation. Upon recovery, GDP should drift back to its mean,
before finding bottom again as the current business cycle comes to
its natural end in 2017Q3.
As illustrated in our new long term
chart, the 2009 Recession was the 4th deepest Canadian economic
event since WWII ... and it turns out it was a double-dipper (as in
80-81).
Revised GDP stats indicate that Canada entered a Technical
Recession in February 2008, eight weeks later than the USA ... not October
2008 as originally assumed. Originally, StatCan
reported a slight early 2008 downturn followed by a very robust
Summer. Newer figures show the first dip to be much deeper
accompanied by a mere Summer spurt. This sheds a whole new complexion on the discussions
surrounding the 2008 Election campaign, where Harper and Flaherty
were adamant that there was no Recession in play and there would be
no chance of a Deficit; while the Opposition used anecdotal evidence
to "talk things down".
Although we didn't know it at the time, Canada was in a Technical
Recession thru most of 2008. And within days of Election Day,
it suffered a swift and deep plunge right into a Severe Recession.
As mentioned, this clarity was unfortunately absent during the
critical Fiscal Update period in November 2008. The reported
apparent Summer Recovery (via GDP & Leading Indicators) was downgraded a year later, and the
second major downturn was not
reported by StatCan 'til January 30th 2009.
Understandably, these reporting
inaccuracies sent mixed signals and resulted in the failure to
address stimulus in the infamous November 2008
Fiscal Update by the Federal Gov't. This misunderstanding was
compounded by actions (or inaction) of the Bank of Canada, which
made no effort to use its monetary policy privilege to reduce
interest rates after March 2008. The Bank Canada finally
reduced rates by 0.5% on Oct 8th 2008, but only as part of a
concerted effort by six Central Banks to address the international
liquidity crisis. At the time, it was not aimed at any
perceived critical Canadian softness.
Like Canada, the USA contraction found
its bottom in January 2009. The American slowdown in the sales of
new home construction & autos devastated imports
from Canada of softwood lumber, auto parts/vehicles, and the
general manufacturing sector. It is little known that more
cars & trucks have been assembled in Ontario than Michigan since
2005. Fortunately, as we predicted in Autumn 2008, a Spring
recovery for both homes & cars came as scheduled in 2009.
American New Home sales are up 22% from the January low.
Back on August 19th we declared that the Canadian Recession had ended in
July. The StatCan GDP figures are now confirming the
essence of that
prediction. Using industry definitions, the Recession was over in June,
and the economic contraction completed its cycle in August.
Down south, we expect the NBER to announce February 1st that the USA
Severe Recession was over in April and its economic contraction
ended in November.
click chart for more macro economics...
Global
GDP: 2009Q4
+4.0% 2009Q3 +4.7%
2009Q2 +3.6%
Year 2009
-1.3% Year 2008
3.1% Year 2007 5.1%
G-20
Nations in Technical or Severe Recession:
2009Q4
2009Q3
2009Q2
2009Q1
2008Q4
2008Q3
2008Q2
2008Q1
2007Q4
stats
pending:
Russia
Mexico
Turkey
7% of Global GDP
UK
Turkey
Mexico
Russia
10% of Global GDP
UK Russia Italy Canada
Mexico
SouthAfrica Turkey
29% of Global GDP
USA Japan Germany
UK Russia France Brazil
Italy Canada Turkey Mexico SouthAfrica
53% of Global GDP
USA Japan Germany UK
Russia France
Brazil Italy Canada Turkey Mexico
SouthAfrica
53% of Global GDP
USA
JapanGermany
UK
France
Italy Mexico
43% of Global GDP
USA
Japan Germany France Italy
38% of Global GDP
USA
21% of Global GDP
USA
21% of Global GDP
And Not in
Recession in Q4:
USA, China, Japan, India, Germany, UK, France, Brazil,
Italy, Canada, South Korea, Indonesia, Australia, Saudi
Arabia, Argentina & South Africa (in order of GDP & comprising
70% of worldwide
GDP; excludes 20th membership, courtesy to EU)
Remaining 160 nations
comprise only 23% of worldwide GDP
Jan 29th ~ 2009Q4 GDP was 4.0%, down slightly the 4.7%
of Q3, confirming a major recovery from the
-6.3% in 2009Q1. Only 3 G-20 nations (Russia,
Mexico & Turkey) remained in Technical or Severe Recession.
Together, they represent about 7% of global GDP.
The duration of
the global Recession was 2008Q3
to 2009Q1. Despite the Mainstream Media hysteria,
at its worse only 12 G-20 nations (representing 53% of global GDP
were in Recessions. 2009's -1.3% GDP decline was the first
contraction in the last four decades. This economic episode was in
part precipitated by rising energy prices that caused a collapse of
USA New Car Sales in 2007Q4 when USA contract crude price broke the
$85/barrel ($3/gallon gasoline) threshold. On its present
path, crude and gasoline will breach that same oil/GDP ratio in
2011Q3 @ $92/barrel ($3.25/gal).
The long
term effect of this downturn will be an acceleration in China's
overtaking the USA as the largest Economy. We determines that
this event will occur in 2051 ... a mere 40 years away.
In turn, India's demographics create the situation whereby it is poised to take the title of largest economy in
2075.
World trade in
July 2009 was down 16% from its record peak in February 2008.
The trough (-19%) was January 2009.
click chart for more
macro economics ...
Jan 28th ~
Less than 18 weeks to the UK Election ...
Brown's Labour Party
would have commenced a hypothetical early December election campaign
with a lead in 191 Seats, 32 less than thirty days prior.
The Liberal Democrats are ahead in 56 (up 4). Cameron's Tories
have gained 23 potentials and sit with 366 MPs. Based on the
underlying long term momentum, TrendLines Research projects that the
Conservative Party is poised for an ultimate 385 MP Majority
victory upon expiry of the current Parliament in June 2010.
click chart for more
TrendLines Research commenced monthly
tracking of available Canadian Riding Projections in April 2004.
Over the past four major Elections, our multi-model methodology has
proved the most accurate forecasting tool
available.
click chart for more...
Jan 27th
~ The Harper Conservatives ended the year with a potential seat
count equal to their status after the October 2008 election ... 143
seats. Pacifists from both the Opposition and the mainstream
media have hijacked political discussion for yet another month in
their irrational quest to lay war crime charges against a score of
members the Canadian military operation active in Afghanistan in
2006.
Core support for the Ignatieff
Liberals seems to have been established in low 80's. Unfortunately for the Liberals,
we're predicting StatCan will
shortly announce a 2009Q4 GDP growth rate of 6.2%, as the economic recovery lays
the foundation for further reductions in the Unemployment Rate.
If that's not enuf bad news in the short term, layered over this
will be the patriotic enthusiasm surrounding the Vancouver Olympics.
The TrendLines Research composite Riding
Projection has been Canada's most accurate forecast tool, measured over the last four
Federal/Ontario elections. Each month, its chart depicts the average of currently
available seat projections from across Canada & the UK. One of
the models included is our own
conversion, which on its own was the
most accurate in the 2008 Autumn Election. It indicates that the Conservatives would have started a hypothetical
January 1st Election Campaign with a lead in 142 Seats, followed by:
92
Liberals, 30 NDP, 43 BQ & 1 Indep't.
When our
own study is blended with other available models for a broader
analysis, the findings as featured in our headline chart result.
Today's presentation is based on
the conversion of
4 national polls conducted Dec 9-20 2009
by 5 active projection models (along with practitioner canvassing). It reveals
that the governing Conservative Party would have commenced an
early January Election Campaign with a lead in 143 Ridings ... no
change from thirty days prior. The Bloc & NDP would start a
late Autumn campaign with 47 &
32 Ridings respectively. Albeit Ignatieff's standing rose only
three Members to 86,
long
term momentum continues to indicate that the Liberal Party will
eventually take
the projection lead (January 2012), and is poised for an ultimate 112 MP Minority victory upon expiry of the current Parliament in October
2012. This marks the third time since April that a Liberal
Majority was not in the cards long term.
Jan 10 2010 ~ Yesterday
we expanded our
Barrel Meter presentation to
introduce a 25 Year Target for Crude Price. This was
accomplished by importing data on Extraction Costs & Surplus
Capacity from our Peak Scenario 2200 into the model. The
result is a projected $218/barrel in 2035.
Last month
our première Price Forecast compilation chart introduced Adam Sieminski's price study, it mirrors our
sentiment that current crude prices are poised for at least a 15%
downward correction to better reflect underlying fundamentals.
The
chief energy economist of Deutsche Bank (Washington)
projects contract prices to reach $182/barrel by 2035.
Seeing the global Recession subsiding
more quickly, IEA bumped up its 2015
forecast seven bucks to $73 this week. Their long term targets
mostly skim a tad below Deutsche Bank, rising to $158 by 2030.
EIA released its
2010 AEO in mid-December. Converse to IEA, its path straddles above the
Deutsche Bank course, rising to $203 in 2035.
For a reference point, we've inserted
our Demand Destruction Barrier (DDB). It demarks the
apparent Oil/GDP ratio where rising prices eventually attain
critical mass leading to sea changes in conservation and
substitution. This invisible ceiling halted the epic 2008
spike at $131/barrel, and should thwart the current price run at
$157 in 2014Q4, followed again by a very major correction, according
to the
Hutter Barrel Meter.
Disagreement that such a constraint
mechanism exists separates conventional price forecasting from those
within the McPeakster fraternity. For illustration purposes,
we include their three showcase predictions to demonstrate the
divergence. Monthly updates by a "joker" over at theOilDrum
(aka Ace) have been trimmed recently, but still warn the cult
following of a $179/barrel spike within 40 months! From here,
we deteriorate to contributions by two members of the
Lunatic Fringe: Jeff Rubin (ex-CIBC
World Markets) foresees "sustained pricing" of $205 in 2012 &
Matt Simmons (investment banker) sports infamous speculation of
$300 by 2014 & $546/barrel ($600 WTI) in "much less than 20 years".
click chart for more...
Today, we're pleased to introduce this enhancement of the Barrel
Meter. By incorporating surplus capacity data from our Peak
Scenario 2200 study, we are able to expand the model's Price
projections to 2035:
Jan 9th ~
The USA Contract Crude Price averaged $71 in December, down $3 from
November, and almost double the $37/barrel four year low of December
2008.
Including spikes, Crude
Oil should settle into a
general trading range of $60
to $76/barrel thru Q1/Q2.
The present spiking activity is completely detached from fundamentals.
As seen in the chart, Prices during the last three seasons have been hugging the
Unconstrained Spike Potential line (dashed
red line). An $11/barrel downward correction
to $60 appears imminent.
With December's fundamentals-based Crude Price
(yellow
line)
at $41/barrel, the contract price averaged 1.7 x's fundamentals.
This is down slightly from 1.8 in July, but for both figures point
to unduly inflated prices considering the average margin over the
last five years: 1.4 x's fundamentals. The high for this
metric was 2.1 in y2K, and it slipped to 1.6 during the July 2008
spike on its way to "0" upon the collapse later that year.
These unsupported Prices reflect
relative bullishness not seen since 2002. The current spike
activity, which began in May, seems to have at least some foundation
in mostly false rumours rampant within the futures fraternity of a colder than average Winter approaching.
However, there has been no basis for this within recognized seasonal
forecasts. This suggests manipulative speculation behaviour.
As reality becomes evident, the Monthly Contract Price should slide
to $60, before resuming its secular uptrend.
Another factor for the relatively
higher Price could rest with renewed speculation/hedging activity. A
new record of 285 thousand long futures contracts was set in late
October,
breaking the March 2008 volume. When we add total
non-commercial contracts, the long/short volume has just passed the
former record May 2008 mark.
The TrendLines
Research price targets are based on our projections of future Avg
Extraction Cost, Currency Debasement, Hedging Activity,
National Inventories & Surplus Capacity. The Media
Noise-du-Jour component reflects its cyclical nature.
Jan/2011 -
TrendLines Research 1-yr Target for USA Contract Crude Price:
$75/Barrel
Jan/2015
-
5-Year Target: $156/barrel
Jan/2020
- 10-Year Target: $173/barrel
June/2035 - 25-Year Target: $218/barrel
Re-collapse of USA New Car Sales:
2011Q4 @ $93/barrel crude & $3.28/gal gasoline
Return of G-20
Recessions:
2012Q2 @ $104/barrel
crude
Potential Spike to $100/barrel:
2011Q2
Sustained Prices over $100:
2012Q1
Next Potential Spike to
record $131/barrel:
2012Q2
Sustained Prices over
record $131:
2013Q1
click
chart for more
Using the proper historic narrow definition
of RCC, these
production profiles exclude NGL, processing gains & the
non-conventionals (Bitumen, X-heavy, Arctic, Deep Sea, Biofuels,
GTL, CTL & Kerogen). Hence, we have excluded
"conventional" projections by Guseo,
Korpela, Laherrère & Walsh.
Regular Conventional Crude (RCC) peaked
@ 68-mbd in 2005, and terminal decline has brought extraction down
to 62-mbd in 2009. It comprises only 74% of All Liquids production
today, and it is clear that NGL & the non-conventionals play an
ever increasing role. The
PS-2200 model projects RCC will be a mere 58% of 2030 All
Liquids, and will fall below 50% in 2044 ... a
significant threshold for posterity.
Regular Conventional Crude Scenarios:
Nov 30th ~ There have been only 4 modellers worldwide
that study Regular Conventional Crude ... the light sweet
oil: Albert Bartlett (USA), Colin
Campbell (Ireland), M King Hubbert (USA) & TrendLines'
own Freddy Hutter (Yukon Canada).
Hubbert's initial projection
commenced the discourse on Peak Oil in 1956. It's Y2k Peak
Date was intuitive but the model was flawed with its lowly 1,250-Gb
estimate of URR. His 1974 update boosted resource to 2-Tb,
a figure that is still relevant by modern standards, but the path met its demise in a
collision with OPEC the following year...
A later effort was the forecast of a 73-mbd
peak in 2004 by the 1998 Bartlett
model. In fact, RCC crossed the midpoint of its URR a year later in
October 2005.
Jean Laherrère & Colin
Campbell have been the sector's most stalwart peak oil practitioners.
Both have shared their annual analysis for two decades.
Campbell's 2009 Depletion Model foresees a continuation of RCC's
dramatic 2.4% production decline until 2030. Conversely, the Hutter Peak Scenario 2200, the
only other current profile, projects a softer 0.3% Decline Rate to 2033.
On the longer term, whereas Campbell predicts annual Decline will soften after 2030,
Hutter sees major resource constraints, especially after 2042, resulting in serious deterioration
that culminates
in an R/P 9 environment.
2010 is the
watershed. If Campbell's hypothesis of continued aggressive decline is
in play, RCC will dwindle to below 61.0-mbd next year. OTOH, if RCC stays
above that threshold, then the Hutter premise is superior. And by
extension, the scenario with the correct interpretation will be
likely be rewarded with the more accurate All Liquids projection
as well.
click chart for
more
click chart for
more
Linearization Method:
URR/EUR Comparisons
Geo/Tech Method:
4,775-Gb
All Liquids
(incl
BTL)
7,689-Gb
2,000-Gb
Regular
Conventional Crude
1,914-Gb
270-Gb
Saudi Arabian Crude
900-Gb
300-Gb
NGL-GTL-Ref/Gain
1,630-Gb
310-Gb
Bitumen/X-Heavy-CTL-Kerogen
3,858-Gb
225-Gb
Deep Sea & Arctic
244-Gb
Nov 14th ~ Linearization analysis is a
guiding counterweight to our geology/technology based Estimates of
Ultimate Recoverable Resource (URR/EUR). When compared, All
Liquids succumbs to a 3,563-Gb differential, mostly attributed to
Bitumen, GTL, CTL & Kerogen not yet reflecting their potential flow
rates.
OTOH, this shortfall is somewhat mitigated by the tainted BTL influence.
Biofuels-to-liquids are not included in our URR tally, but its 2-mbd
flow is indeed
reflected in All Liquids production data.
Based on these
linearizations, the world won't run out of light sweet oil (RCC)
until Year 2089, and there's enuf of the other stuff to take us to
2146.
Tier-2 Scenarios:
Oct 31st ~
Faults
within this month's update of the Rembrandt Koppelaar Outlook
cause its downgrade (again) to Tier-2 status. Its failure to
reconcile with minimum recognized URR estimates place its production
profile on the wrong side of the
Worst Case Scenario
... joining similarly deficient efforts by Jeff Rubin &
Fredrik Robelius.
Members of the
Tier-2 & Hail Mary presentation exhibit one or
more deemed flaws.
click chart for more & Tier-2 footnotes
click chart for more
Sept 15th ~ This update
of
Colin Campbell's Depletion Model tracks two
decades of revisions. Its forecasts of Peak Year have ranged from
1989 to 2012. In fact, December marks the 20th anniversary of
Campbell's initial All Liquids declaration that oil had Peaked.
His Peak Rate spans the virgin call of a 66-mbd sub-peak (to 1979) to last
year's 97-mbd. The underlying All Liquids URR estimates
range from 1575-Gb in 1989 to 2900-Gb.
The new chart excludes Campbell's 1991, 1996, 1997 &
1998 projections as those studies have been determined to forecast RCC (Regular Conventional Crude)
... not All Liquids. Campbell's current forecast for RCC
can be compared to the only three other such projections for light sweet
here.
The highlighted years of distinction are:
2008 (highest peak 97mbd), 2002
(2900-Gb URR high), 2009 (current update), 2004 (Colin Campbell's dark days call: 80mbd
peak coming in 2006) & 1989 (Campbell's initial 66-mbd scenario
which declared that All Liquids would never break the 1979 record).
Because the Depletion Model newsletter graphic ends in 2050, it
was unapparent that many of his early All Liquids projections
failed to exhaust Campbell's designated URR. The expanded post-2050 view in the
TrendLines chart exposes
the methodology errors of the Depletion Model in 1999, Y2k, 2002, 2003 &
2004 via compensating plateaus or
"doglegs".
In short, these particular production profiles employed peaks that were
too low and/or decline rates that were too harsh.
In the dark days of 2004 episode, it seems that Campbell
was unduly influenced by zealot members of the McPeakster fraternity.
He slashed 500-Gb from his URR estimate, reducing it from 2900-Gb to 2400.
He advanced his All Liquids
Peak from 2012 to 2006. Peak Rate was reduced to 80-mbd
from 87-mbd.
Sept 11th ~ A new
Annual Supply record of 85.4-mbd was set
in 2008. The year-to-date pace of 2009 Extraction
(to Sept 11) is 83.7-mbd.
The
Quarterly
Supply record of 85.8-mbd was
set in 2008Q1.
July 2008
continues its distinction for the all time global Monthly Supply record: 86.6-mbd,
2.4-mbd above today's monthly pace of 84.2-mbd.
The
Quarterly record for Demand
of
86.9-mbd
was set
in 2007Q4
(with difference of 1.7-mbd drawn from inventories). High
Demand Month is February 2008's 87.7-mbd.
TrendLines
Research's All Liquids Underlying
Decline Rates Observed in 2009: 3.2% Worldwide &
2.5% in Saudi Arabia
click
chart for more
Invalidated Outlooks Archive:
Aug 31st ~
The
Club of Rome's 1972 "Limits to Growth" is introduced today.
This depiction reveals alarmist claims after its release that "the
world will run out of oil by the end of the century" were unfounded.
Its URR exhausts in 2075. Both its All Liquids 117-mbd
Peak preceded Hubbert's Conventional 111-mbd Peak were to occur in
1995. Hubbert's effort was released two years later.
Invalidated Outlooks
in general forecast low Peak Rates and/or
harsh post-peak Decline Rates. Typically they are constructed
on URR/EUR platforms less than the geology-based
Worst Case Scenario.
Current Production
exceeds Outlook Peak Rate: Hubbert 1956 (34mbd), Matt
Simmons (84.4), Bakhtiari (81), EWG-LBST (81) & Campbell (66)
Outlook's Peak Date surpassed: Hubbert-'56
(Y2k), Hubbert-'74 (1995), (Duncan-Youngquist
(2007), Matt Simmons (2007), Bakhtiari (2006), EWG-LBST (2006) &
Campbell (1989)
Guess
which one
predicts $600/barrel crude prices?
click chart for
more
Aug 25th
~ The social engineering agenda of the Pelosi/Obama Democrats will
double the last year's USA National Debt by 2019, and triple by 2025.
Already a staggering 96%, the National Debt to GDP ratio is poised
to attain the 200% threshold in 2030. This reality has played
heavy in the USDollar's secular decline of 3.2%/yr from 2004 to
2007. Interrupted by Russia's incursion into Georgia and the
Credit Crisis, the long term pattern re-emerged in April 2009 and it
is probable that the USA:EUR index will drop to 0.57 over
the next five years from 0.71 today.
Rising Debt interest, unfunded Social Security
liabilities,
Entitlements for Medicare/Medicaid and the strive for Universal Health Care
will drive the National Debt to $68 Trillion over the next 30 years.
On a brighter note, albeit the $1.6
Trillion Budget Deficit represents 13% of GDP, it will decline to
4% by 2013. This metric virtually guarantees future Treasury sales
on both the domestic & International stages, although at perhaps ever
rising yields to investors. Not so pretty is the escalation of
that ratio to a horrendous 17% by 2039. Somewhere along the
way, Congress is likely to have its credit card cancelled...
On the positive side, the string of
Export records seen in 2007 should continue as importers see nicer
prices. Manufacturing could also surprise when domestic
consumers start to shun high priced foreign goods.
The Pelosi-Obama Budget has shined a
light on the structural deficit issue. The problem started
long ago. Hopefully, closer Media & think-tank scrutiny will
spawn anticipatory action
by a more fiscally responsible Congress. If not, current CBO data
indicates that left unchecked, the annual Deficit rockets to $7
Trillion & $23 Trillion by 2050 & 2080 respectively.
Meanwhile, the National Debt surges to $127 & $543 Trillion
respectively...
click chart for more...
theOilDrum Peak
With their misinformation agenda
revealed, hits are down over 50% at theOilDrum this year!
A hijack of the site by the lunatic fringe
is virtually complete...
June 1at ~ In 1989,
McPeaksters proclaimed that All Liquids would never exceed that
year's 66-mbd flow rate.
They
repeated
the declaration in 1990 1991 1992 1993 1994 1995 1996
1997 1998 1999 Y2k 2001 2002 2003 2004 2005 2006 & 2007
July 2008 production smashed monthly records with a new marker of 86.7-mbd
It is indeed ironic that as
McPeaksters announced for the 20th time last Summer that 2008 was Peak "for sure" ... annual flow rate was a full 20-mbd over their virgin declaration!
Pundits at theOilDrum, PeakOil.com, Jeff Rubin & forecaster extraordinaire Matt
Simmons
were the main originators/disseminators of the disruptive
2007/2008 rumours that both the giant Ghawar well & general
Saudi Arabia production were in Terminal Decline.
click chart for more
TrendLines Research URR Highlights
Oil Initially in Place
(OIIP):
19-Tb.
URR avg:
3,785-Gb (doubled
since 1992)
Remaining Resource:
2,582-Gb (doubled since Y2k)
Remaining Resource/Annual Production Ratio: 86 (record low of 43
in 1996)
Proved
Reserves: 1,131-Gb (double
since 1982)
Past Consumption:
1,203-Gb (to
2009/2/28)
March
22nd (rev 2009/3/24) ~ Today's
version introduces URR studies by BGR of Germany & Peter
Wells of the UK. It updates figures from IEA, Laherrère, BP, Koppelaar, Campbell, OGJ, World Oil, EWG/LBST & my own (Freddy Hutter's
Peak Scenario 2300). The
estimate by WEC has been deleted due to its redundancy to
BGR. Samuel Foucher's linearization methodology is
deleted in favour of a similar but more robust model by Jean
Laherrère.
Chart-2
compares growth rates of the 21-model AVG with OGJ & BP. The
recent pricing regime fuelled favourable economics of previously
thought fringe contingent resources. Non-conventionals have been
growing at
a 124-Gb/yr pace (4.9%) since 1996. This far surpasses RCC's
growth rate of 30-Gb/yr (2.3%) from 1957-1995.
URR ain't growing like the good ol'e days. Unsustainable
crude prices drove discoveries, exploration, and conversion of
sub-commercial (contingent) resources over to the economic side of
the ledger. But sub $50/barrel pricing has been a real dampener of that
headiness.
Based on our
21-model Avg, 2009 is on pace for a
165-Gb augment to URR, compared to 290-Gb last year. Annual augments
to URR have exceeded Annual Consumption
(30-Gb in 2009) since 1997. There are 2,582-Gb (billion barrels) of oil
resource left...
This explains the
recent hiatus from exploration. The Remaining Resource/Annual
Production ratio is generational record 86 in 2009. Back in
1996, available Resource would have serviced only 43 years of
current production. This ration is a guide to long term supply
chain infrastructure needs. The historic Avg is 61 yrs.
A similar metric, the Reserves/Production Ratio is currently 38 and
has been in this vicinity for three decades.
click charts
for details
Evidenced in
brown,
green &
blue
lines in the chart, the terminal production decline
scenarios by Stuart Staniford & Ace at theOilDrum illustrate the
dangers of listening to agenda-driven pundits...
Pundits at
theOilDrum, along with forecaster extraordinaire Matt Simmons were
the main
originators/disseminators of the disruptive 2007/2008 rumours that Ghawar & KSA
went into terminal decline in 2006. Their common error was inability to
distinguish real decline from production decline. The latter is not
probable 'til 2024, in large part due to Aramco's unrivalled Surplus
Capacity.
Feb 10 2009 ~ A review of select Crude Supply Outlooks:
Sadad al Husseini's 2008 target was overly generous, a
result of Saudi Aramco's unpredictable compliance with OPEC-mandated
quota restrictions. He foresees a 2020-2023 Peak Plateau of
10.9-mbd.
The current Scenario-2200 Outlook projects a 2014-2023
Peak Plateau of 10-mbd based on a much reduced 212-Gb URR.
theOilDrum targets from both
2007 & 2008 would be hysterically low, had the Kingdom not shuttered
capacity in substantial fashion due to the aforementioned OPEC cuts.
As Aramco resumes normality in 2012, the growing divergence will
again become apparent.
click
chart for more
Feb
9 2009 ~ Saudi Arabia's Maximum
Sustainable Capacity (MSC) will be a record 13.05-mbd in 2009. Enjoy it.
Peak Oil has arrived in the Kingdom. From 2004 to 2007,
Saudi Aramco had bettered its self set targets. It didn't happen in 2008.
Fortunately, the miss was due to outside forces! By June, Saudi supply had
attained last year's goal of 9.5-mbd and was on the verge of busting the nation's
2006 All Liquids record. But within 30 days, Contract Crude was selling at
a record $134/barrel and Demand Destruction was kicking in. By year end,
OPEC members had agreed to pare down global quota by 4.2-mbd.
In compliance, Saudi production
was ratcheted down to 8.5-mbd and the 2008 year-end targets set back in 2004,
2006, 2007 all came up shy. A similar circumstance occurred in 2006 albeit
not as dramatic. Fortunately, these are merely asterisk events, and not a sign of terminal
production decline.
click
chart for more
Feb 3 ~ The recent
OPEC quota restrictions are unfortunate as Saudi Arabia missed its 10.68-mbd Annual
Record (set in 2005) by a mere 50-kbd.
Russia has an
insurmountable lock on second place
(10.0-mbd) for national suppliers. The USA has recovered well from Hurricane repercussions
(7.4-mbd). Following are China (3.9), Iran (3.8),
Canada (3.3) &
Mexico (3.1-mbd).
click chart for more
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