Peak Oil is You
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Page added on April 15, 2015
Has The U.S. Reached “Peak Oil” At Current Price Levels?
Last night the EIA once again capitulated on the myth that rig counts don’t matter and the productivity of wells would largely offset, leaving the industry on a continuous path to higher output. The current consensus of 500,000 B/D additional growth in 2015 US production now appears very much at risk.
Look how far we have come, folks, from all that media hysteria this past year. Yesterday, Reuters even wrote an article stating that the EIA prediction of a sequential decline in oil production in May vs. April would be the first, if proven, true prediction. Meanwhile, fact checking would indicate that this, in fact, occurred last week as reported here. In any event the EIA now thinks that production will decline 57,000 B/D in May counter to earlier expectations that the Permian would largely offset declines in the Eagle Ford and the Bakken. This is despite higher productivity of existing wells proving that rig count does matter and the market has underestimated the effects of high decline rates.
Further, the hysteria about Cushing overflowing with oil also appears unlikely to occur, as a result. Yet another in a string of attempts by the media to misconstrue the facts.
Now as a topper, we hear from the North Dakota Resource Management that amazingly February oil output fell 1% sequentially in the month despite producing wells increasing! Thus even the theory that well productivity would increase is dispelled. To reiterate, look for EIA to revise its oil production estimates for 1Q after the crisis wanes later in 2015. The warning in an article here sounded that producers reaching deep into the lower cost, most productive regions (which is clearly occurring in Bakken), would come at a price.
That price is depletion of those regions at a faster rate, leading to cost pressures down the road. If prices don’t rise to offset those higher drilling costs then production will start declining. A further point, the talk of all these uncompleted wells potentially coming on line during 2015 can now be looked upon as not increasing output, but as an effort to maintain it which was the theory here all along (another media theory dispelled makes what, 4?).
One has to wonder if “Peak Oil” at the current price deck in the US is very real indeed. Look for draws and not inventory additions to start in earnest in May. The next media spin will now focus on future risks to oil supply in 2016 to keep the oil curve flat, whether it be the rise in the US dollar or Iran. The short term risks appear to be clearing so the attention will be turning on preventing prices from rising too high. Just this morning, Dow Jones ran an article quoting the Citibank oil analyst that days of triple digit prices are in past. Thump…that’s the sound once again of someone falling off their chair in utter amazement as to what is occurring to distort reality.
By Leonard Brecken for Oilprice.com
19 Comments on "Has The U.S. Reached “Peak Oil” At Current Price Levels?"
Plantagenet on Wed, 15th Apr 2015 2:44 pm
When you get an oil glut and oil prices tumble, oil drilling is going to slow down. However, that is not the same as peak oil which is the final, ultimate, maximum limit on oil production.
We know now the US did hit peak oil in 1970 as Hubbert claimed, and I doubt we’ll hit peak oil in 2015 either. Once the oil glut ends and oil prices go back up, oil drilling will speed up as well. We’ll hit peak oil eventually, but IMHO the frakking revolution postponed peak oil from 2005 until today, and will likely postpone it a bit longer as well.
Plantagenet on Wed, 15th Apr 2015 2:45 pm
typo: Make that the “Us did NOT hit peak oil in 1970…”
Cheers!
Lawfish1964 on Wed, 15th Apr 2015 3:28 pm
The US did hit peak oil in 1970. 9.65 million barrels a day. Hasn’t been reached since. Granted it appears we will have a second peak but for now, 1970 was it.
Tom on Wed, 15th Apr 2015 4:45 pm
What bout peak BTUs from crude oil production? The light stuff now being produced doesn’t have close to the amount of energy per barrel as the real crude that was being produced in the 1960s. Also it was requiring a lot less energy to produce that conventional, near surface, onshore oil than is the had to get stuff now being produced. Physics, man, physics, not some economist’s BS.
Gil on Wed, 15th Apr 2015 6:09 pm
Excellent observation, Tom. Not all oil – or coal – is equal when it comes to the end product, btu’s.
Brent on Wed, 15th Apr 2015 6:11 pm
Planet where do you suppose the money to invest in tracking is going to come from after the oil glut ends?
Plantagenet on Wed, 15th Apr 2015 6:11 pm
There is no such thing as a “second peak oil” in oil. production Oil production can reach its peak only once. If/when US production exceeds the 1970 peak, then 1970 will no longer be the peak of US oil production.
Plantagenet on Wed, 15th Apr 2015 6:12 pm
Brentet, where do you suppose the the money came from to invest in fracking after the last oil and financial bust in 2009?
Davy on Wed, 15th Apr 2015 7:04 pm
Who says Planter we can’t have a second peak. What about peak conventional oil and peak all liquids. What about peak affordable oil and peak net energy. Does the glut meister choose to define peaks like he defines gluts?
Joe Clarkson on Wed, 15th Apr 2015 7:41 pm
Plantagenet has one thing right. Peak oil can only be called when prices are at record highs. We’ll only know we have reached the peak when production fails to equal the previous high rate of extraction despite having much higher prices.
That said, it is also true that peak oil will be reached at the same time as an oil glut and subsequent price collapse. The current price collapse and decline in production may signal the peak, but we won’t know for sure until the price goes back to at least the previous record high. If we then find that production can’t match the previous glut, we can call peak oil.
Nony on Wed, 15th Apr 2015 7:51 pm
Davy, leave Plant alone. Sometimes I think you just like to screw with people. You’re making me all male protective.
Davy on Wed, 15th Apr 2015 7:59 pm
NOo, Are you the pot calling the kettle black. Talk about someone who loves to shit disturb look in the mirror NOo.
shallow sand on Wed, 15th Apr 2015 8:37 pm
How do we define peak? Is it highest annual or monthly average barrels per day?
I think there were some months over ten million barrels per day average in either 1970 or 1971.
I think US could top early 70s peak, but will need $100 oil for a sustained period and would need to get oil rigs back up to 1,400 or more for a sustained period.
We were headed there, but price drop intervened.
steve on Wed, 15th Apr 2015 10:21 pm
I think I get it now! Some of you guys get so pissed off at other people here you…that it gets out of you…I on the other hand get so pissed off at people in everyday life that think we have a 100 years of oil and BAU….and want to call my insanity for believing that we are heading for a shit storm….
Nony on Wed, 15th Apr 2015 10:35 pm
We were definitely headed for 10+ MM bpd when at $100 and the 1400 rigs and all. Geology was not going to stop us.
Brent on Thu, 16th Apr 2015 12:35 am
Planet we are in way more debt now it is not like it was in 2008. Is the federal reserve just going to keep printing money forever and is China just going to keep buying our debt forever? I don’t think so. Investors are starting to wise up nd leave and there will be no more money left for Shale.
apneaman on Thu, 16th Apr 2015 12:44 am
Plant, which definition of oil are we talking about? The one up to 2005 or the new one they made up that year?
How changing the definition of oil has deceived both policymakers and the public
http://resourceinsights.blogspot.ca/2012/07/how-changing-definition-of-oil-has.html
Davy on Thu, 16th Apr 2015 6:59 am
NOo said “Geology was not going to stop us.” NOo, peakers have made this clear all along. The fact that the world still has copious hydrocarbon reserves is not the point. Affordability is the point. The last great surge in US production is all about a Ponzi scheme. It was a Ponzi scheme within a Ponzi scheme. It was a baby Ponzi scheme hatched by the fed from the mother Ponzi scheme of QE and repressed rates.
It is well discussed here that the shale production is costly. It is obvious from the huge debt balances in that sector this surge in production was debt fueled and low rate friendly. The US had the right combination of infrastructure, people, machines, and financing to make the shale bubble possible. What we are seeing now is a judgement on this shale bubble if it was an economic resource or a true financial bubble akin to the tulip bubble.
Financial repression and debt monitarization are approaching limits from diminishing returns. Shale is scaling back because of price reductions from demand stagnation. Luckily for the shale sector rates are still low. A significant amount of debt is distressed and companies insolvent except for the typical new normal practice of extend and pretend.
Geology is there in the US and globally to produce growing production. If the economy can’t support that production by growth then demand limits will curtail production. We also must ask was it high cost supply that caused demand destruction in the first place? Is the peak oil dynamic of total production energy at work. You can try to discount ETP but how can one argue lower quality oil at a higher price will not cause economic effects over time and broadly across the global economy.
We have been living beyond our means for many years. This came to a head with the 08 crisis. This was a financial bubble crisis of bad debt coupled with an oil price issues. Our financial system and oil sector are foundational to BAU both were dysfunctional in 08 and have been manipulated out of the envelope of normal since then with QE policies and rate repression.
We have now hit the point of a plateau in the financial policies post 08. Oil supply is responding to this plateau. It is obvious to many that reduction in the growth of oil demand caused the excess supply we currently see. Prices could come back because of financial volatility but I see little chance the economy can return to policies and conditions that promoted a bubble in the shale sector.
Geology may be there but the policies that promoted a bubble will likely not return. Shale will likely never again produce oil like the brief period of the last few years. It is not yet clear if global demand will permit the utilization of existing supply levels. We may be in the vicious cycle of demand and supply destruction. As usual we shall see.
Dredd on Thu, 16th Apr 2015 4:54 pm
The oil will never stop flowing here.