Peak Oil: Are We Not Better Than This?

There are—almost always—at least two sides to any story of significance and potential impact upon others. The greater the impact and potential for a range of outcomes, the more certain one can be that there are more than a handful of factors, considerations, and perspectives to be accounted for if the issue at hand is to be both understood and resolved effectively.

Ignoring the “other side” of the issue may be effective if one prefers their narrative to remain unchallenged and to provide reassurance to fellow believers, but beyond that, it’s hard to understand what the benefit might be to those seeking information if what’s shared is inaccurate or purposely incomplete.

From the second article I’ve been referencing throughout this series:

In the USA, hydraulic fracturing has taken petroleum production to its highest level since 1972, and oil imports to their lowest level since 1995. America now exports crude oil, natural gas and refined products.
The fracking genie cannot be put back in the bottle. In fact, it is being adopted all over the world, opening new shale oil and gas fields, prolonging the life of conventional fields, leaving less energy in the ground, and giving the world another century or more of abundant, reliable, affordable petroleum. That’s plenty of time to develop new energy technologies that actually work without mandates and enormous subsidies.

 

FACTS OFFER A DIFFERENT TAKE

 

But in the real world where facts are actually important, a different story is told. Two days before the above-referenced article was published, we had this:

[N]ow, over 1.5 years into the price collapse, production declines in shale oil are finally starting to appear as low oil prices have slashed company investments in new supply, and production begins to decline from existing wells….
The array of spending cuts and production declines announced by dozens of separate companies may be difficult to wrap one’s head around. Put simply, the major shale basins in the United States are nearly all in decline.

Four days before that article was published, we had this, from Ron Patterson:

A closer look at the total U.S. total rig count.
October 10, 2014 1,609 rigs
February 26, 2016 400 rigs
Percent decline 75 percent….
Steep declines in oil production must eventually follow steep declines in the rig count.

And as noted in a prior post:

Western oil companies … have announced investment reductions worth about $200 billion this year….

Companies that grew quickly thanks to the shale boom are trying to weather the dramatic slide in oil prices with measures like scaling back production and laying off workers. But for many, sunk costs and high debt levels mean cutbacks are not enough.
As a result, defaults and bankruptcies are mounting in the U.S. energy industry….
According to Texas-based law firm Haynes and Boone, 42 U.S. energy companies in debt for more than $17 billion went bankrupt last year….
And there’s reason to believe the shakeout will continue. A report from consultant AlixPartners said the projected revenues of 134 North America-based exploration and production companies show there could be a gap of $102 billion against their operating and capital expenditures in 2016…..
‘Drilling activity in the United States declined by more than 50% in the past 12 months,”’ the AlixPartners report stated.

Oil companies delayed making decisions on 68 major projects world-wide last year, accounting for some 27 billion barrels of oil and equivalent natural-gas volumes and bringing total 2015 deferred spending to $380 billion industry-wide, energy consultancy Wood Mackenzie said in a report Thursday….
The put-off projects indicate a development slowdown that could lead to supply constraints — and rising oil prices — years down the road.

There may be no shortage of oil in general but there is a real shortage of low cost (easy to find and cheap to develop) oil in countries outside the Middle East….
For oil the industry is expecting that the current low oil prices are not sustainable beyond 2017/2018 when non OPEC supply will start to drop in earnest as a result of the recent drastic investment cuts.

Companies are continuing to lay off staff, cut back on projects, and report eye-opening losses.
These cutbacks will eventually bite at some point, whether as early as the second half of this year or later on this decade. The current low price environment, and its fallout, will lead to a tighter market and possibly a shortage given that supply projects are capital intensive and typically involve significant lags before coming online….
Both Exxon and Chevron will slice capex by around 25 percent this year, while BP is also scaling back. Some of the biggest U.S. independents, which have been instrumental in the shale boom, are slashing spending at even more dramatic levels. Continental, led by CEO Harold Hamm, announced that it would cut capex by an enormous 66 percent this year, with the company planning to reduce production by 10 percent. New York-based Hess, meanwhile, has said its capex would come it at $2.4 billion this year, down 40 percent from 2015.

 

PSEUDO-INFORMATION

 

So again the same inquiries: What’s the point of offering pseudo-information to readers when readily-available facts are cavalierly ignored? Who benefits? Who will not?

“Abundant” and “affordable petroleum” is certainly the preference if supply and demand are the only considerations. But an assertion of abundance requires more than an assertion of abundance when a host of real-world considerations make it much more likely than not that abundant resources will stay right where they are.

And as for affordable, it should by now be subject to no debate all that the unconventional resources being relied upon by the fossil fuel industry will likewise remain right where they are absent much higher prices. That would be the definition for not affordable, so what’s the point?

It is—if nothing else—amusing that those advocates on behalf of the fossil fuel industry have no quarrel with the subsidies extended to those companies, but even the hint of doing the same to and for fledgling industries—not exactly a novel concept over the course of American economic history—is suddenly a unbearably horrible idea certain to lead to an endless parade of awful outcomes.

Imagine if we actually engaged in meaningful conversations with “the opposition” which involved honorable considerations and discussions of both the merits and the disadvantages of policy proposals and the many factors in play before solutions were proposed! Who might benefit? Who might not?

More to come….

 

Peak Oil Matters