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Page added on March 3, 2013
Lower highs: The real trajectory of U.S. oil production
The way the oil industry is touting gains in U.S. crude production, you would think that production is soaring to new all-time highs. But the facts say otherwise. Below is a monthly plot of U.S. crude oil production through December 2012.
U.S. production remains well below the peak achieved in 1970 and below a secondary peak in 1985—a lower high, if you will—which resulted from the ramp-up of production in Alaska. But since then production has gone relentlessly downhill until just recently.
It is true that a new form of hydraulic fracturing—high-volume slick-water hydraulic fracturing—has made available sources of oil not previously accessible. But it is also true that the industry’s hyperbole doesn’t square with the evidence. The U.S. Energy Information Administration’s (EIA) latest estimate of technically recoverable oil from so-called tight oil deposits—the ones made accessible by this new type of hydraulic fracturing—is 33 billion barrels (see below). It sounds like a lot. But, in fact, it would only supply the United States for about 6½ years (assuming current net annual consumption of about 5.1 billion barrels). Not bad; but not a world-changing number, especially when you consider that all oil goes onto a world market where 33 billion barrels would last a little over a year. Beyond this, the estimate says little about how much of that oil will ever be economically recoverable. Wherever it isn’t, no one is going to extract it.
But there is another column in the EIA table above that is worth focusing on, the one labeled “% of Area Untested.” We don’t yet actually know that much about the potential for the country’s tight oil (often mistakenly referred to as shale oil). In some areas drilling has only just begun, and in others there’s been no drilling at all.
There is reason to believe that things may not go as planned. In the areas already drilled, drillers have focused on a few sweet spots that have proven profitable. That makes perfect sense. But, it suggests that they must now venture beyond those sweet spots to find additional supplies from deposits that will be more refractory and thus more expensive and difficult to exploit. No one is certain how drillers will fare. But logic suggests that production growth will slow and then at some point stop—after which a production decline will begin in earnest.
The EIA projects that U.S. oil production will peak later in this decade—a little below the previous secondary peak in 1985. That would result in a tertiary peak, or yet another lower high. In the meantime the extra supply promises to lower America’s bill for oil imports. But the modest turnaround in America’s oil fortunes won’t solve the larger problem of worldwide oil depletion which, despite American gains, has kept worldwide oil production on a bumpy plateau since 2005.
We live in a global oil market, and that market remains tight as is evidenced by an oil price hovering around $90 in the United States and $110 in Europe, the latter price being more representative of what most people pay.
For obvious reasons the oil industry doesn’t want us to think about weaning ourselves off oil anytime soon. They believe that if they can convince us that oil is abundant, we won’t even try. But oil prices have been telling us for almost a decade that supplies are much tighter than the industry is acknowledging. And, the facts about U.S. oil production tell us that if there is a revolution going on in American oilfields, it is only a minor one, and one that will soon be reversed.
That doesn’t leave us much time to prepare for a world in which oil supplies are almost certain to dwindle globally as the current plateau in worldwide production turns into a decline. And, that will be a problem for everyone including the United States, a country that remains the planet’s largest importer of crude oil.
11 Comments on "Lower highs: The real trajectory of U.S. oil production"
CAM on Sun, 3rd Mar 2013 3:17 pm
An excellent macro view of the world situation. That fossil fuels will reach peak production and decline has never been a debatable issue. Timing is the only subject open for discussion. And nobody can be certain of that until it actually happens — which actually will be too late!
rollin on Sun, 3rd Mar 2013 3:55 pm
Technically recoverable oil means oil available with current technology irrespective of cost. In reality, cut that about in half, so maybe there is three years of supply spread over 20 years or more, if they keep drilling wells.
Amvet on Sun, 3rd Mar 2013 5:55 pm
EIA data shows that for 14 out of the last 16 quarters, global consumption exceeded global production.
Kenz300 on Sun, 3rd Mar 2013 7:44 pm
Technology now exists that an convert waste or trash into biofuels.
Every landfill around the world can be converted to produce biofuels, energy and recycled raw materials for new products. This is a more sustainable solution to the disposal of waste or trash than burying it.
Since the materials are already being collected they provide inexpensive inputs to the process.
Cloud9 on Sun, 3rd Mar 2013 8:52 pm
Kenz, can and will are two different things. Where is the infrastructure that will turn this biomass into fuel? On some level of energy consumption this is doable. I suspect that when we get to that level our economy is going to look more like barter town than anything we have going today.
meemoe_uk on Sun, 3rd Mar 2013 10:12 pm
” they must now venture beyond those sweet spots to find additional supplies from deposits that will be more refractory and thus more expensive and difficult to exploit ”
by the same logic, after the caveman used the 1st ever piece of coal on a camp fire, he then had to use more refractory and thus more expensive ( probably worth a whole bone necklace ) pieces of coal. Obviously it was peak fossil fuel EROEI back in 1million BC
BillT on Mon, 4th Mar 2013 1:00 am
And not a squeak about NET energy gained from fraking. Why? I think if an honest, thorough study was made, we would find fraked oil and NG in the very low to negative energy ration. Maybe 1.2:1?
After all, it takes energy to move water, energy and resources to make the chemicals, energy and resources to make the piping(mining, refining, smelting, forming), energy and resources to make the rigs (ditto), energy to move all of that stuff around (trucks, trains, manpower)and energy to collect it and get it to the refinery (trucks, trains, piping).
No, we are on a slippery energy slope and it is going to always be in the downward direction.
econ101 on Mon, 4th Mar 2013 1:15 am
Ignoring why production in Alsaka dropped off is to miss the point. There is no shortage of recoverable reserves in Alaska. We are topping our production without some of the worlds richest resource areas which are off limits not only in Alaska but across the entire USA and its territories.
There is more oil being produced now than ever before in this world and production is rising fast in this formally great country of ours. We need all the energy we can get.
econ101 on Mon, 4th Mar 2013 1:24 am
There is no need to mention the hugely profitable net energy situation that is fracking. My guess is it will be some thing like .05:1 when accounted for correctly.
Going back to the cavemans coal, when calculating the eroei of his coal do we count the cavemans spear? He protects himself with it when he walks around the corner for his coal which he used to get from his front yard. The low hanging fruit was gone for him and thats what he died off.
was the eroei for the cavemans coal the same as our eroei for coal? Should it be? Do we get more work from coal now than the caveman did? Is that work worth more to society than the effort to get the coal?
keith on Mon, 4th Mar 2013 2:56 am
econ101 you make no sense. What of the environmental impacts of all these things mentioned? The cost to the environment is never factored into the equation because it only effects the future generations of tomorrow. The people of the future will hate us fossil fools of yesteryear.
BillT on Mon, 4th Mar 2013 4:28 am
keith, econ/SOS is just a pimp for the oil industry. He doesn’t want to hear that his job is fading and that oil is going to disappear from use in his lifetime. He would destroy the world for his last fix, or kill his mother if she got in the way. Psychopaths are just irrational. Ignore it.