Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on February 17, 2013
Direct threat to Canadian economy posed by U.S. shale oil production
Remember Peak Oil, the theory that global crude oil supplies have peaked and are in irreversible, long-term decline?
The concept got a lot of media play but never really passed the smell test, since it didn’t account for the impact of technological change or rising oil prices.
In any case, the notion of Peak Oil seems amusingly quaint now that it’s been relegated to the same ideological trash bin as Y2K.
Thanks to such innovations as horizontal drilling and fracking (hydraulic fracturing), the U.S. is currently producing more oil than it has in 20 years. U.S. output now exceeds seven million barrels a day, and that has enabled the world’s biggest oil consuming nation to cut its imports to the lowest level in 16 years.
Since Canada’s crude oil exports are a critical driver of well-paid jobs, royalties, taxes — and ultimately, federal equalization transfers — that’s something that should alarm all Canadians.
Indeed, if current trends continue, the U.S. will overtake Saudi Arabia as the world’s top oil producer by 2017, the International Energy Agency has predicted.
As dramatic as that sounds, we may still be in the early innings of a worldwide shale oil revolution, says a new report by a team of energy analysts at PwC (PricewaterhouseCoopers) in London.
If it spreads, it could have huge implications not only for the North American oil industry and for Canada-U.S. trade, but for the entire global economy. Among the report’s key findings:
Global shale oil output could reach 14 million barrels a day by 2035, accounting for fully 12 per cent of the world’s total oil supplies. (By comparison, Saudi Arabia produces about nine million barrels of oil a day at present.)
The surge in shale oil supplies could lead to lower — not higher — global oil prices down the road. While the U.S. Energy Information Administration (EIA) expects oil to hit $133 US a barrel in real, inflation-adjusted terms by 2035, PwC says the price could be as low as $83 a barrel. That’s about $35 below the current price of Brent crude, the international grade.
Although lower oil prices would hurt major exporters like Russia, OPEC (the Organization of Petroleum Exporting Countries) and yes, Canada (which gets but a passing mention from PwC’s analysts), the net impact on the global economy would be very positive, the report says.
PwC estimates lower crude prices would boost global GDP (Gross Domestic Product) in 2035 by between 2.3 per cent and 3.7 per cent — or roughly $1.7 trillion to $2.7 trillion, in current terms.
The biggest beneficiaries would be major net oil importers such as India and Japan, which could get a GDP boost of up to seven per cent by 2035. The U.S., China, the Eurozone and the U.K. would also see GDP gains of up to five per cent, PwC says.
“The potential emergence of shale oil presents major strategic opportunities and challenges for the oil and gas industry and for governments worldwide,” the PwC report concludes. “It could also influence the dynamics of geopolitics as it increases energy independence for many countries and reduces the influence of OPEC.”
At the corporate level, the growth of shale oil output around the world will force producers to re-evaluate the economics of current and future projects, in light of potentially lower long-term oil prices.
“Oil producers will also need to review their business models and skills in light of the very different demands of producing shale oil onshore rather than developing complex ‘frontier’ projects on which most operations and new investment is currently focused,” PwC says.
Meanwhile, the prospect of lower oil prices could indirectly create a whole new crop of winners in industries that use oil as an input, from petrochemicals and plastics to airlines and vehicle manufacturers.
The report doesn’t have much to say about the environmental consequences or restrictions on shale oil that may be imposed by governments.
And that may be a rather large factor in coming years, particularly if the Obama administration rolls out a carbon tax that could render such developments uneconomic. But even if it does, it’s unlikely that many other oil exporting nations would follow.
“The potential availability and accessibility of significant reserves of shale oil around the globe — and the potential effect of increased production on global oil prices — has implications that stretch far beyond the oil industry,” the report says.
“Shale oil has the potential to reshape the global economy, increasing energy security, independence and affordability in the long term. However, these benefits need to be squared with broader environmental objectives at both the local and global level.”
17 Comments on "Direct threat to Canadian economy posed by U.S. shale oil production"
keith on Sun, 17th Feb 2013 2:07 am
Never heard of EROEI.
DC on Sun, 17th Feb 2013 2:12 am
This is from the Edmonton Urinal. Can safety ignore.
Kenjamkov on Sun, 17th Feb 2013 2:34 am
Shale oil proves peak oil. Hubbert was talking about cheap abundant oil, not expensive gloop. What a load of crap from people who obviously don’t know EROEI from OREOS.
BillT on Sun, 17th Feb 2013 3:08 am
Such blatant propaganda! We are fighting over oil one step up from road asphalt at $110+ per barrel and they still deny that we passed peak oil years ago. It is a perfect example of the panic that is happening in the petroholic oil industry. THEY know that their time is short.
Pacman on Sun, 17th Feb 2013 5:49 am
“The concept got a lot of media play but never really passed the smell test, since it didn’t account for the impact of technological change or rising oil prices.”
Err rising oil prices IS the peak oil “smell test” Technology change would prove peak oil wrong (for now) if the price of oil was now at a historic low
Pacman on Sun, 17th Feb 2013 5:49 am
“The concept got a lot of media play but never really passed the smell test, since it didn’t account for the impact of technological change or rising oil prices.”
Err rising oil prices IS the peak oil “smell test” Technology change would prove peak oil wrong (for now) if the price of oil was now at a historic low
GregT on Sun, 17th Feb 2013 9:15 am
The biggest threats to the Canadian economy are rising fuel costs, food costs, a real estate bubble, and debt. The same threats as most everywhere else.
Nothing more than scare tactics by Big Oil, to gain support for Tar sands projects, and pipeline projects for fuels destined to Asia.
BillT on Sun, 17th Feb 2013 12:54 pm
Perhaps the greatest threat to Canada is the Us. So easy to take what they want just like everywhere else and they don’t have an ocean between them…lol.
Arthur on Sun, 17th Feb 2013 1:18 pm
The biggest threat to the Canadian economy can only be too many Canadians not willing to face the unpleasant facts and avoid starting the inevitable transition as soon as possible, before time runs out completely. If it is not too late already.
FarQ3 on Sun, 17th Feb 2013 2:18 pm
From where I sit the BIG OIL companies don’t seem to interested in shale oil/gas. It seems they like to let a minor company run the show and buy in as a partner. Also seems to me that they don’t want too much exposure into shale but are willing to sit back and participate through subsiduaries. This IMO limits their exposure should something disasterous happen. I think they know that the whole episode is an environmental disaster, but they are happy to take the profits without the exposure.
rollin on Sun, 17th Feb 2013 2:59 pm
“Shale oil has the potential to reshape the global economy, increasing energy security, independence and affordability in the long term.”
Rising food costs, disappearing fresh water sources, super-storm damage, crop failures, population shifts; any so-called affordability will be eaten quickly by forced climate change. The only secure energy is from the sun, all else is a short-term gamble and an ecological disaster.
Real life has turned into a sci-fi horror flick with mad businessmen and politicians running the show toward the cliff screaming ” We shall run the world!” .
Kenz300 on Sun, 17th Feb 2013 6:54 pm
The cost of production is too high to ever lower oil prices.
The era of cheap oil is over.
Get over it and move on.
It is time to transition to safe, clean alternative energy sources.
GregT on Sun, 17th Feb 2013 10:04 pm
Arthur,
“The biggest threat to the Canadian economy can only be too many Canadians not willing to face the unpleasant facts and avoid starting the inevitable transition as soon as possible, before time runs out completely. If it is not too late already.”
Agreed.
Unfortunately most Canadians have no clue that there is a storm brewing. Our media downplays any hints of fossil fuel depletion, climate change or economic hardship. It’s difficult to face unpleasant facts, when the picture that is being painted is one of growth and prosperity.
The longer it takes for the word to get out, the harder the fall is going to be. That is why I advocate for those that are aware, to be responsible for themselves now, while they still have options.
Terri on Mon, 18th Feb 2013 1:50 am
Kinda funny that Peak Oil is “history” yet I am paying $5 a gallon for gas.
Make it $1 and I will believe this shit.
Arthur on Mon, 18th Feb 2013 10:13 am
Sure Terri, just do not look at this graph:
http://en.wikipedia.org/wiki/File:Crude_oil_prices_since_1861.png
The 2008 dent in oil prices was due to the financial meltdown. At the cost of trillions of new debt there is some ‘recovery’ on steroids, and look, oil prices are sky high again and will continue to rise. Shale could dampen the process for a few years, but after that it is game over soon.
shortonoil on Mon, 18th Feb 2013 6:27 pm
Kenz300 said:
“The cost of production is too high to ever lower oil prices.”
This is exactly the problem, and as time progresses it will become an increasingly greater problem. These proponents of a Disney World interpretation of the world’s oil supply rattle on about the great abundance of oil shale, tight oil and other non-conventional sources. These are hardly earth shaking realizations. The planet has a great abundance of hydro-carbons; something in the neighborhood of 4300 billion barrels of them. The problem is that the end consumer can not afford to purchase the greater majority of these oils.
The fact is that only about 37% of the world’s hydro-carbons are within the economic reach of society. In 2012 this translated to a maximally sustainable affordable price of $131/barrel. Even though this number will increase slowly as time progresses, the cost of producing crude is increasing even faster. The cross over point is not very far into the future. The day when the average field can no longer produce economically viable crude in significant quantities is less than two decades away.
The Fairy Tale of unlimited supply from non-conventional sources is just that; a Fairy Tale. It will not be the savoir of modern society, it is only a harbinger of the decline of oil. Perhaps this will be its most valuable contribution to us.
The Hill’s Group
GregT on Mon, 18th Feb 2013 9:33 pm
Yes shortonoil,
And if the past five years is any indication of where we are heading at all, we are going to be in very serious trouble within the next decade.