Peak Oil Could Hit In Just 14 Years, But It Might Not Be What You Think

22 Comments on "Peak Oil Could Hit In Just 14 Years, But It Might Not Be What You Think"

Harquebus on Tue, 3rd May 2016 9:12 pm 



Keyboards at the ready. More unsustainable debt required.

Makati1 on Tue, 3rd May 2016 9:25 pm 



2030? How about 2015? The Turn down has already begun. Only the blind or the oily deniers cannot see it. There is less and less money to purchase non-necessities and oil is NOT a necessity. It is a luxury.

energyskeptic on Tue, 3rd May 2016 10:53 pm 



I’d like to remind everyone of what James Schlesinger, former Secretary of Defense said at two Senate hearings in 2005 and 2006:

“By about 2010, we should see a significant increase in oil production as a result of investment activity now under way. There is a danger that any easing of the price of crude oil will, once again, dispel the recognition that there is a finite limit to conventional oil. In the longer run, unless we take serious steps to prepare for the day that we can no longer increase production of conventional oil, we are faced with the possibility of a major economic shock—and the political unrest that would ensue.” (1, 2)
1. Senate 109-860. May 16, 2006. Energy security and oil dependence. U.S. Senate hearing.
2. Senate 109-64. June 2006. Energy diplomacy and security. a compilation of statements by witnesses before the Committee on Foreign Relations. U.S. Senate.

If demand is dropping, it’s because people are dying!

When someone can explain how trucks will keep running (tractors, harvesters, mining, cement, logging, construction, long-haul) on anything but fossil fuels by 2030 (plus the new distribution system), then there is an argument to be made. but without trucks, civilization ends. I looked at every possible fuel and electricity that trucks could run on in my Springer 2015 book “When Trucks stop running: energy and the future of transportation” and didn’t find anything.

Northwest Resident on Wed, 4th May 2016 12:27 am 



“…we are faced with the possibility of a major economic shock — and the political unrest that would ensue.”

From energyskeptic’s post above, to the U.S. Senate.

TPTB are fully briefed and aware of the imminent dangers. They are obviously doing everything possible to hold things together, for the time being at least. Of course there are plans in place to deal with what is most certainly coming. Diligent preparations are being made. This is all going to come to a head one of these days. It is just a matter of when, and more specifically, how soon. We are living in dramatic times!

joe on Wed, 4th May 2016 1:04 am 



Heres a link to the hearing statement.

http://www.resilience.org/stories/2005-11-19/former-secretary-defense-testifies-senate-peak-oil

He seems to say that even with investment, the base line scenario of dropping conventional sources of easy oil is the most powerful factor to influence any future economic shock.

With fracked wells still pumping at 40 dollars I wonder is a fair game being played out, or is somthing else going on. At 40 dollars per barrell it means that each well needs to pump around 200 barrels a day to cover set up costs, and break even will be slightly higher due to royalties and taxes etc. I am estimating the set up cost of a well at around 8 million dollars.
Even if fracked wells costs could be cut in half its obvious that from the shape of the production curve alone, a constant stream of new wells is needed because after 3 years a fracked well is probobly only pumping enough to pay the bills and not making profit and the future production of that well is only going down.
So logically it seems that there is only 2 ways to make money in fracking, the first is the find the cheapest way to set up a well, the second is to make sure competition is limited.
We are seeing the opposite of whats needed to secure profitability in tight oil, instead of investment and growth we see decline of between 10-25% and profitability of about 8%
Its obvious that as easy oil declines, tight oil will come in and it will introduce volitility to the markets eventualllly leading to the economic shocks needed to get us off of oil, but the impact of getting off oil might lead to decades of global social unrest. As we saw 2 world wars getting hooked on oil, coming down off it will likley be worse.

joe on Wed, 4th May 2016 1:05 am 



Link

http://www.prnewswire.com/news-releases/shale-oil-production-in-bakken-eagle-ford-little-changed-in-march-platts-analytics-300261212.html

rockman on Wed, 4th May 2016 6:51 am 



Joe – Although there’s a considerable range your guestimates are fairly good. Except to one point: production economics. Even adjusting for royalties, severance taxes and LOE (Lease Operating Expense) a shale well producing just 10 bopd can still generate a positive (though insignificant) positive cash flow. At 40 bopd the net income can actually be pretty good. I have a well making 180 bopd and my LOE is less than $4/bbl so I can still make some money even at $10/bbl. And even when a well reaches a breakeven production level many companies will keep producing since if the stop they’ll not only lose the lease hold but also spend $5,000 to $10.000 to plug and abandon the well. In general folks often greatly overestimate the cost to produce AN EXISTING WELL.

But obviously that’s a very different dynamic then drilling new well. And no: IMHO we’ll never see those costs drop to 1/2 of what they were at the height of the drilling boom. Again lots of variations but costs have fallen around 20% to 30%. If the service companies reduce their fees much further they wouldn’t be able to maintain themselves. And we still have a wide range of results today: at $40/bbl some new shale wells will generate acceptable an ROR. But not all of them: there are shale wells being drilled today that will never recover 100% of their investment. Shale development is a risky business regardless of the price of oil or the cost to drill.

And back to the subject at hand: the state of the world when we reach global PO. First, no one can predict that dynamic because there too many factors and each of them is rather unpredictable. The biggest factor will be the condition of the global economy when we reach that point. Consider that the price of oil has crashed despite the fact the world is consuming more oil today than ever before in history. Granted that is in part due to low oil prices. OTOH the world’s economies were able to consume a large volume of $90+/bbl oil…until it wasn’t able to continue to do so. So back to the point I’ve made before: on that rather unimportant date we reach GPO oil might be selling for $30/bbl or $100/bbl. And there may be a sufficient amount of oil available to purchase for those with the money or we might be drawing down the SPR’s in the US, China, etc.

That’s an easy proposition to prove by just looking back over the last 10 years. First, we obviously didn’t reach GPO during that time because we are producing more oil today. Second, during this time we went from small releases (and talk of even bigger releases) from the SPR’s. And then the headlines quickly switched to record breaking amount of oil going into storage. And lastly we’ve seen the price of oil swing between historic low to record breaking highs.

So again: all these huge swings during the time when we had not reach GPO. And 15 years ago no one predicted the cycles we’ve experienced in the last 10 years. And someone seeks credibility for their predictions 14+ years into the future? Rather comical IMHO when you put it all into perspective.

Davy on Wed, 4th May 2016 7:23 am 



It is always pointing to a date in the future with these articles. It is happening now in a slow process that at any time could go non-linear. We are already seeing our climate destabilize and approach a non-linear change. This pointing to an event in the future is the problem of denial of our species. We are incapable of self-reflection now and seeing what is clearly in front of us and with us now. Right here right now is the end process.

There is no salvaging modern civilization as in the status quo of development and progress. Green efforts and technological progress will fail because they are system dependent and setup to fail. Nothing we do today can survive a necessary system failure except devolution to previous economic arrangements. I say necessary because it is natural law we will fail and there is no going against natural law.

It will be how long we delay this process of devolution that dictates how extreme the transition is. If we wait too long it may be beyond recovery in the respect of our identity as modern humans. We may just fall to a semi-barbaric or completely barbaric state of reorganization in every respect. That will likely happen anyway somewhere in the future because of climate change but let’s slow the drop down so we have some decent living of some sort ahead. How bad do you want it to get?

shortonoil on Wed, 4th May 2016 7:57 am 



These are researchers for Wall Street who apparently do not understand depletion, or even understand why oil is used in the first place? That is sort of like attempting to add up the number of fleas on a dog to determine how big the dog is. By skipping the science, and going directly to ECON 101 they can apply the knowledge of how to skim a trust fund that they acquired while studying for their MBAs. Wall Street is undoubtedly quite enamored by such an approach.

Unfortunately, if one applies real world variables to the problem, as opposed to those snagged out of the celestial plane of economics, another conclusion, that is much different than theirs, appears more likely. Petroleum has already reached a state where the benefits of using it are already out weighted by the efforts needed to acquire it. Since that does not easily fit into the Black-Scholes formula to determine the cost of derivatives exposure in 2030 they would likely find it incompressible.

Besides the fact that the world’s petroleum industry is now finding less than 1 barrel for every 8 that they extract, and the present fields are not going to endure for another 14 years doesn’t seem to phase them one bit. That can be easily remedied, according to them, by adjusting an investment coefficient here, and changing an ROI value there. Now that they have presented their erudite research paper to the world, they can take a vacation, and wander off to Disney World for the weekend.

http://www.thehillsgroup.org/

joe on Wed, 4th May 2016 10:34 am 



Hey Rockman. I can only defer to your greater knowledge. I think though what I was trying to point out is that tight oil is going to be a huge part of the oil future, because there isnt going to be any more easy oil. As with the Saudis selling a stake in their only resource, we can see they are in agreement with me, though they cant just announce it.
Right now the US has brought down its trade imbalance because of tight oil supplies, which is good, its allowing the FED to weaken the dollar and help the world economy. Once the dollar goes up, oil goes up, and its goodbye world economy.
Its the economics of what I believe is the bumpy plateau model of peak oil. When the FED raises rates, China will fall flat, because in a higher rates world the already streached American consumer cant grow his/her personal budgets. As with the recession of 07/08, a series of rate hikes inverted the yeild curve and brought down the sub-prime market. We are only starting at a lower base, but this time its nationalised debt at stake.

joe on Wed, 4th May 2016 10:47 am 



I would ask anyone interested to read this.
http://www.bloomberg.com/news/articles/2016-05-04/opec-said-to-head-for-june-talks-without-plan-for-supply-limits-inswnyfd

This is the true impact of fracking. OPEC knows that anything it does to help iteself, will help frackers, and thus damage OPEC.
Its a no-win game for OPEC. Their only possible play should be to try to link their prices to fracking prices. But since easy oil defines many national budgets, then its almost impossible.
Another angle to persue would be to take the human interest angle of the story and support a global jihad against fracking also go to the UN and get support there, they could try to get western sympathy by saying fracking makes Arab and African and Venezuelan children hungry, that sort of thing. Not paying for terrorism would be a good place for oilistans to start looking for sympathy.
If left to the free markets, then easy oil producing nations are doomed.

HARM on Wed, 4th May 2016 11:00 am 



“Demand will then plummet due to factors such as fuel efficiency and use of alternative energy to power our machines.”

Uh-huh… riiiight. With +80 million net-new people being added to the planet every year and the BRIC countries (as well as others) rushing to rapidly industrialize (which turbo-charges oil and raw material use), somehow the world is going to need LESS energy tomorrow. All thanks to “efficency” and “alternative energy” (which will somehow skyrocket up from only ~11% today in 14 years).

Magical thinking at its finest.

rockman on Wed, 4th May 2016 11:25 am 



Joe – A huge part of our future? “Huge” is relative: maybe yes but maybe no…depends on the price of oil. But even at $100/bbl there’s still a finite number of Eagle Ford and Bakken locations left. Remember these are the “easy” unconventional oil reserves. Those two formation made up 80+% of the shale production even when we had high oil prices. Even if prices had not fallen we wouldn’t be drilling many EFS/B wells in 10+ years: all trends die regardless of prices because there’s only so many locations in any trend.

rockman on Wed, 4th May 2016 11:37 am 



Joe – Interesting link. But as far as a ban on frac’ng that hasn’t happened in the EFS or B. Internationally there’s no need for a ban because even when we had high oil prices no meaningful plays developed. And may never. Besides geology there’s two other big problems: lack of infrastructure to develop a play and a lack of the public oil companies that were THE driving force behind our shale boom.

geopressure on Wed, 4th May 2016 11:56 am 



Russian Oil Minister predicted back in 2013 that US Shale Oil Production would peak between 2017 & 2020… That from memory & may not be the correct dates, but the point is that it was not too far out there…

Of course, if the price is high enough, that changes everything…

Sissyfuss on Wed, 4th May 2016 2:47 pm 



From the article,” Climate change policies could also be an influence”.
COULD, are you f#%#ing kidding!!! Look at the natural world that lies beyond your ivory tower. If the influences grow any stronger, and they will, we’ll soon be growing mangoes in the Yukon.

energy investor on Wed, 4th May 2016 5:20 pm 



Sissifuss,

Just a couple ofpoints to remember.

1. We don’t yet have suitable alternatives to fossil fuels for fungible energy storage, that are scalable and cost effective.
2. Climate change policies are diverting “ethical” capital away from investment in fossil fuels. And everyone wants to appear “ethical”.
3. Capital is fleeing the oil and gas industry as and when it can, because the industry participants are going bust and dishonouring their debts.
4. The Saudis with a B/E for their national budget of $98/bbl have realised that they must prepare for a future of low cost oil. They must have been listening to “short”…lol
5. CO2 is universally acknowledged as a weak greenhouse gas (despite its current volume in the atmosphere), so back-pedalling on fossil fuels won’t have much effect…a bit like King Canute trying to stop the tide coming in. Anyway, who is stopping the annual burning of forests in Brazil and Indonesia?
6. In year AD1 humans plus livestock comprised 5-7% of all land mammals – today we are over 97% of land mammals.
7. We don’t know when to stop. We are harvesting krill and cutting out other species. Mainly for fish food for our farmed fish as wild fish catches are falling YOY.
8. As a species with the hubris of being born in “God’s image and likeness”, we are on the path of exponential population growth towards extinction.

So in the scale of things, does it matter that one day we may be growing mangoes in the Yukon? After all, lots of other places will have exhausted potable fresh water aquifers?

And I wants me mangoes…

Boat on Wed, 4th May 2016 9:00 pm 



Non-powered dams represent a significant source of additional hydroelectric capacity

EIA expects 1,083 megawatts (MW) of hydroelectric capacity installed between 2015 and 2019 in the United States. Of that hydroelectric capacity, 422 MW of the capacity additions belong to dams that did not previously have electric generating units, commonly referred to as non-powered dams (NPDs). The image below shows the Cannelton Hydroelectric Project on the Ohio River in Kentucky, which is adding 88 MW of generating capacity to an NPD this year.

https://www.eia.gov/electricity/monthly/update/?src=home-b4

makati1 on Wed, 4th May 2016 9:12 pm 



Dream on Boat. EIA again? The Energy arm of the Imperial Ministry of Propaganda.

When are you going to stop drinking that stuff. It kills your brain cells. LOL

Sissyfuss on Wed, 4th May 2016 9:23 pm 



As to your point #5, Investor, methane is 80 times more powerful a GHG and we are in the process of releasing innumerable
gigitons of the unbenign flatulence in the defrosting Artic currently.And once it starts it will literally take our collective breath away.

Apneaman on Wed, 4th May 2016 9:29 pm 



Boat, that’s awesome!

Cancer is cancer is cancer.

Methane Emissions May Swell from behind Dams
Hydropower, which is increasing worldwide, may prove a huge source of the potent greenhouse gas

http://www.scientificamerican.com/article/methane-emissions-may-swell-from-behind-dams/

shortonoil on Thu, 5th May 2016 12:08 pm 



“As to your point #5, Investor, methane is 80 times more powerful a GHG and we are in the process of releasing innumerable gigitons of the unbenign flatulence in the defrosting Artic currently.And once it starts it will literally take our collective breath away.”

Methane production, along with CO2 are effects not causes. Burning fossil fuels dumps 67% as much heat into the environment each year as the world’s oceans adsorb (419 quad BTU vs 631.9 quad BTU). The world’s oceans are heating up at a rate of 1 °F every 32 years.

http://www.nodc.noaa.gov/OC5/3M_HEAT_CONTENT/

This is analogous to putting a fire under a pot of water on the stove. Regardless of what the impact of Green House gas are, as long as the world uses the tremendous amount of energy that it does, the world will continue to heat up. A high energy life style for 7.2 billion people on this planet is simply not possible.