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Page added on August 23, 2012
Wither Peak Oil?
Sorry folks, it’s been a while since we’ve posted! It’s not that there’s no more Peak Oil – rather we’ve been busy with other things, and we’ve said quite a bit about the topic in the past. Not much of that has changed, if any. But we’ve intended to provide an update. Now we find ourselves in the midst of comments (usually from friendly followers) like: “Gee, I guess Peak Oil has been postponed?”, or “I guess we don’t have to worry about Peak Oil anymore.” Often they have a smile on their face …
These comments come in the wake of a plethora of articles like Sad News for Disciples of Peak Oil
With all due respect to the smart people making those comments, you have to wonder why current oil prices (over $95/bbl) and gasoline prices (near $4/gallon) don’t make more of an impression on them – compared to a few news stories on shale oil booms. However, many people have been touched in a positive way by the recent shale gas and shale oil booms. Those who live in South Texas, or West Texas, or North Dakota, or the Texas or Okhahoma Panhandles have front row seats to the booms which are providing lots of jobs and opportunities to virtually everyone in those places. It you are ever in Carrizo Springs, Texas, go to lunch at one of the few cafes (if you can get a seat) and see how many smiles there are on everyone’s faces. What fool would worry about there ever being not enough oil when you’re in the midst of booms like these?
But – once again with all due respects to our questioners, most of them close friends – we would have to say that the confusion we have spoken of before is once again on the prowl. And understandably so – how can anyone, even those of us who keep pretty close tabs on the “oil patch”, sort through all of the stories and statistics?
So, if we have so much more oil production rate available, now, why is oil currently so expensive? Now, granted, things are getting more and more tenuous in the ME, but most analysts only give that a $20 – $30/bbl premium. Recall (we do, only too well) when oil was $12/bbl, as recently as 1999 … There hasn’t been that much inflation since then! So if Peak Oil has gone away, what gives? Big Oil conspiracy? We think not. Something else is [still] going on.
Back in June an analyst wrote an article tweaking Dr. Colin Campbell’s graphs. (As you may recall, Dr. Campbell is one of the modern fathers of Peak Oil.). It was a good article, but our response was this:
that of a ship executing a turn, then the graph of Dr. Campbell’s
estimates is remarkably correct, and still plenty scary. A few million
barrels more per day in supply due to shale oil, other discoveries, a
few million barrels per day less in demand due to the worldwide
recession – these things are “noise” in the bigger picture – which is
shown with sufficient accuracy on both Campbell’s and Deffeyes’ graphs.
Shale oil and shale gas are important resources that need to be
developed. Natural gas needs to be utilized in vehicles. These things
won’t “fix” Peak Oil. We need a lot fewer vehicles, a lot more mass
transit retrofits. We need a focus on conservation as well as new
energy supplies, both fossil and renewable. The good news is, these
things are happening – we just need to speed the efforts. And we need
to realize that these things are not mutually exclusive. They are part
of the “all of the above, silver BB solution” that
we need to continue to pursue, but at an accelerated rate. We waste
valuable time and resources arguing that we shouldn’t be doing one,
should only do the other, etc. We need them all.
So, yes, a little more oil and a little less consumption, but they
amount to “noise” in the longer term view. Consider them temporary
reprieves. Consider them not an invalidation of Peak Oil, but rather
one more chance, a little more time to ramp up the actions which
Dr. Hirsch et al said could take 20 years, if severe consequences were
to be avoided.
Today, one of the authors over at Seeking Alpha wrote a very succinct article explaining his continued bullishness on oil, and why he was bullish in the first place:
EOG’s CEO Mark Papa Is Still Bullish On Oil Prices, Should Investors Be Bullish On EOG?
The above article features a nice quote from Mr. Papa’s recent conference with analysts, and it shines a light on shale oil plays, and some folks’ belief that unconventional oil and gas will soon take off internationally:
“Now I’ll provide our views regarding macro hedging and the concluding remarks. Regarding oil, we still think the global supply-demand balance is tight, and we expect prices to strengthen throughout the remainder of the year. Two recent concerns I’ve heard from oil bears involve horizontal shale oil. One concern is will the U.S. create enough shale oil to affect global supply. EOG’s forecast is an increase in the U.S. of 2 million barrels of oil per day by 2015, which, we believe, will not impact a 90 million barrel of oil a day global market. We think there are only 3 consequential horizontal oil plays in North America: the Eagle Ford, Bakken and Permian, and that all other alleged oil plays are either inconsequential on a national scale or really NGL plays.
The second concern relates to possible international horizontal oil shale plays and their potential impact on supply. My answer there is maybe it will happen, but it’s not likely for another 10 years at least. Remember, it’s been 10 years since horizontal drilling unlocked shale gas in the Barnett, and no one yet has found commercial shale gas outside North America. Also, the key to commercial shale oil or gas is the ability to drill thousands of wells at low per-well cost, and whether this can be done internationally is likely problematic.”
Meanwhile, here’s a graph from the Wall Street Journal, note the magnitudes of he projections for the Eagle Ford and Bakken. Remember, we use around 19 MMBO/D in this country, and import about 9 of that.
And a few charts from the Railroad Commission of Texas:
And, some from the EIA:
Study these and see what you think. We’ll get back to you in a bit to wrap up this post!
12 Comments on "Wither Peak Oil?"
Arthur on Thu, 23rd Aug 2012 11:49 am
So, even according to the WSJ, US national oil production is to merely increase from 5.5 to 6.7 mbd between 2010-2020?
This does not reflect at all the ‘gigantic’ reserves people like SOS like to dream about.
BillT on Thu, 23rd Aug 2012 12:05 pm
“… Shale oil and shale gas are important resources that need to be
developed …”
Why? Do you give an addict another hit so he can keep high? Do you give an alcoholic a bottle of Jack Daniels because he wants it? Do you destroy the very ecology that you need to live because you can make a buck?
Sane people would say no. But the oil pimps and addicts think that it is ok to leave a polluted, hot, depleted world for our grand kids and theirs. Sick, that’s what we are. We deserve what is coming, but they don’t.
Kenz300 on Thu, 23rd Aug 2012 2:25 pm
Quote — ” Shale oil and shale gas are important resources that need to be
developed. Natural gas needs to be utilized in vehicles. These things
won’t “fix” Peak Oil. We need a lot fewer vehicles, a lot more mass
transit retrofits. We need a focus on conservation as well as new
energy supplies, both fossil and renewable. The good news is, these
things are happening – we just need to speed the efforts.”
——————–
The influence of big oil and coal in the political process is detrimental to our energy security and national security. They love it when oil prices spike. They make huge windfall profits. They are doing all they can to block any competition from alternative sources of energy.
http://www.smartplanet.com/blog/energy-futurist/energy-policy-follow-the-money/547?tag=nl.e660
SOS on Thu, 23rd Aug 2012 8:08 pm
This author is not completely on base with the presentation or the vauge assertions.
The enormous reserves in North Dakota are there. Take a look at the graph. It should be pointed out all the estimates are subject to the anti production stance of the current administration and all would be higher, maybe much higher, if the politics were more supportive.
The gigantic resources in the Bakken are under political attack and that is affecting the price Americans are paying for oil. The political cost to Bakken crude is now about $25/barrel, maybe as high as $30. A lot of this can be recovered from the price once the Keystone is built. In the meantime oil producers are paying Warren Buffet that preium to ship by rail.
All along taxes and fees from both state and federal governments are rising. The state fees are justified, the federal charges are vindictive and political in nature. These fees and charges all have a huge upward influence in the price of oil and gasoline, something the author fails to mention.
There are over 300 wells in North Dakota waiting for fracking permits. This represents over 500,000 barrels/day of stalled production. This is costing you plenty and it is political in nature.
To find out why oil prices are near $100 and gas is near $4 the author only need look at the politics. Oil is high because of federal government assults along the entire supply chain. For instance, even though oil production in the Gulf is up if you consider non USA operations production in the US Gulf is down by 20% This is political.
One of the candidates for president is touting a plan that will have America energy independent by 2020. These log jams and vicious assults on free enterprise will stop. Investment in all forms of energy will increase. Jobs and new opportunities based on sound business pricipals, not solidra like cronyism, will be created. Guess which candidate that is.
DMyers on Thu, 23rd Aug 2012 11:59 pm
SOS
There’s no doubt that politics has a big part in all aspects of oil. I think all those influences should be revealed and discussed. But that’s for a different web site. Without going into the detailed arguments behind your broad assertions, the issue can’t be done justice.
I’m interested in some of your numbers. Take the 500,000 bpd that politics is stealing from us, adding to the price we pay for gas. That sum of oil would be about 2.6% of our consumption at best. How much price swing does a 2.6% “glut” effect? And what is the cost of the externalities attributable to the extraction?
Then there is your indignity at gas being $100/4$. How much are you saying gas should cost outside politics? That’s cheap. The four bucks is very near the price of gas in 1970, adjusted for inflation.
Your argument about politics preventing oil production has to be based on environmental regulations, which are intended to prevent oil producers from destroying other people’s health and property values.
I’m not a big believer in the efficacy of regulations. I have to agree, they can be and are manipulated politically. But I will tell you this. When thick, black, smelly stuff starts oozing into YOUR back yard and dripping from YOUR faucet, and a flammable canal has appeared, abutting YOUR western property line, you will become an environmentalist of the fiercest sort.
BillT on Fri, 24th Aug 2012 1:10 am
SOS, those ‘huge reserves’ were there for millions of years. The oil companies knew it long ago, but they wanted to get all the cheap oil used up first. It was too much of a gamble and too polluting to even try to recover in the days of cheap oil. That oil should stay in the ground where it is, forever. If we are lucky, the US economy will go down before much of it can be recovered and the idea will be forgotten.
MarkR on Fri, 24th Aug 2012 5:37 am
I notice the projected 2012 figure for the Bakken is about 450,000 bpd and Eagleford less than 100,000 bpd. The Bakken is now pumping over 600,000 bpd and the Eagleford well over 200,000 bpd. It seems those predictions were a little too pessimistic.
SOS on Fri, 24th Aug 2012 12:40 pm
DMyers thank you for your comments.
MarhR is on to the trend. Depending on the politics, if favorable, there will be over 1. Mill brls/day coming out of ND very soon.
Fact is we have all the oil/gas we need. Politics, at the present, is preventing you from enjoying the benefits. Peak politics= peak oil.
Energy independence for north America by 2020 is the goal. Only one presidential candidate is proposing this. It will involve concentrating our efforts on all economically viable energy sources. I wonder which candidate will lead us to a 2020 energy indepedance?
BillT on Fri, 24th Aug 2012 2:58 pm
Dream on SOS…maybe the barrels will be full of contaminated ground water?
BillT on Fri, 24th Aug 2012 3:00 pm
Dream on SOS…maybe the barrels will be full of contaminated ground water? And if you think loser Romney and his new sidekick is going to make all your worries go away …lol… there is little chance of that happening. Obama is locked in for this election. Romney is good at shooting himself in the foot or putting his foot in his mouth.
MarkR on Fri, 24th Aug 2012 4:49 pm
For the record, I don’t particularly favor either candidate, I have problems with them both. Obama listens to people like Bill McKibben, whose Luddite ideas I despise. Obama does not really seem to favor an “all of the above” energy policy like he claims.
However, Romney is too extreme in the opposite direction. I assume he wants to eliminate the new mileage rules for new cars and mostly eliminate funding for R&D into high tech renewable energy. He would probably be fine with wealthy people driving Hummers even if it means everyone else cannot afford gas and have to walk. Not very practical with our spread out suburbs that are miles away from anything else.
Both seem to kiss up to their own special interests and the wealthy corporate elite. The main difference between the candidates is which factions of the wealthy elite they kiss up to.
BOTH of their ideologies are wrong. We need do drill for as much oil as we can AND we need to go all out developing alternative energy systems. Otherwise we will continue to be helplessly dependent on foreign oil sources.
Peak oil disaster, IMO can still be avoided if we develop the technology and infrastructure for a post peak world, AND drill for enough oil to keep our economy going for a few more decades until things like electric cars and trains become practical and widespread.
SOS on Fri, 24th Aug 2012 6:21 pm
I don’t think s Romney wants to eliminate anything. He has said all viable energy sources and conservation.
Our president has been no friend to American energy and that has hurt each and every one of you financially, it is starving children and is causing untold hardship as people are forced to make the false choice between energy and other necessities.
Energy is abundant. Politics is fooling some of you into believing its not. That’s why rising production figures, increasing development and growing discoveries of immense reserves world wide are ignored by those folks and red herring arguments employed.
Peak politics causes peak oil.