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Page added on May 8, 2017

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Art Berman: Don’t Get Used To Today’s Low Oil Prices

Oil expert and geological consultant Art Berman returns to the podcast this week to address head-on the question: Was the Peak Oil theory wrong? With the world “awash” in sub-$50 per barrel oil, were all the warnings about persistently higher future oil prices just a bunch of alarmist hand-wringing?

In a word: No.

Art explains how the current glut of oil created by the US shale boom — along with high crude output by both OPEC and non-OPEC  producers — is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of our demand curve. And at the same time, we’re extracting our reserves at a faster rate than ever. That’s a mathematical recipe for a coming supply crunch. It’s not a matter of if, but when:

I’m not interested in spreading any kind of false ideas that we’re running out of oil. We’re not running out of oil. We’re not running out gas. The problem that we’ve had now for the past twenty years is that we seem to have run out of inexpensive oil and gas — and that’s where the so-called shale plays, the offshore deep water kinds of ventures that have dominated the industry now for much of the last twenty years come in.

So, you can always find more. The question is: At what cost? That’s I think an issue that we don’t really want to talk about very much.

The second piece of that is the idea that somehow technology is always going to save us. I think that theme goes way beyond oil and gas and energy. But, it’s certainly prevalent in my line of work which is oil and gas and so the problem there is that people seem to lose the distinction between technology and energy. Technology does not create energy. Technology is simply a way to convert energy, or to convert resources, into work. So, you can improve the technology and basically it allows you to turn the faucet on harder. It doesn’t create any new energy and it certainly doesn’t help you conserve what you already have. In fact quite the opposite. The better the technology the quicker you run through what you have left.

So, yeah, we can always find more oil and gas. But will be able to afford it? Is our global economy capable of managing that cost? That’s really the issue.

We’ve been looking at diminishing returns as far as the size of what we’ve discovered now for the last 40 or 50 years. This was a trend that was of concern long before shale plays came onto the landscape. It’s an endemic problem and the reason why we went into things like tar sands and ultra-deep water.

We’ve got a hundred and fifty years of history of producing oil and gas wells and oil and gas fields around the world. So far, I have not seen the laws of physics give unconventional/shale plays a pass. There’s just nothing unusual about the fact that you should expect to see things grow, then peak, then decline. That’s just the way that natural systems work. All natural systems. Why should an oil field be different than any other natural system?

So, it all comes down to what we are willing to pay for that additional fix of energy? Unless we somehow figure out how to scale back our use of energy, there’s a day of reckoning which isn’t that many years out. Nobody knows exactly when, but soon we’re just not going to be able to do this anymore  — not at $40, $50 or $60 dollars a barrel. The big question is: What are the implications of that?

 



31 Comments on "Art Berman: Don’t Get Used To Today’s Low Oil Prices"

  1. bobinget on Mon, 8th May 2017 10:48 am 

    Here’s a huge ‘tell’; Some of the biggest offshore drillers may go bankrupt in the coming months.

    Off-shore is where we get huge returns for decades. Numbers like 250,000 Barrels p/d are rare but
    real. Anyone who watched live TV of BP’s GOM Horizon oil ‘spill’ saw thousands of barrels of oil a day pour into the Gulf.

    Most shale wells never live up to ‘their potential’.

    Shale is not unlike a human’s first hit of heroin.
    The initial reaction is often euphoric. Naturally,
    lots of drillers, investors get hooked. One glance at shale or tight rock charts tell the tale. In order to keep up production (high) we need another fix.

    With today’s limited off shore exploration there is no way shale can possible fill the gap. Keep in mind, once
    shortages become evident, prices return to triple digits
    it will be too late. Off-shore rigs, personnel, funding,
    all moved on.

    All the more reasons for alternative energies.

  2. Plantagenet on Mon, 8th May 2017 2:21 pm 

    We’re in an oil glut. Shale oil has not only filled the gap since the peak in conventional oil in 2005—its filled it to overflowing.

    Cheers!

  3. Anonymouse on Mon, 8th May 2017 3:10 pm 

    The only ‘glut’ we have around here plantatard, is the glut of your same old retard one-liners. The two or three stock phrases you keep repeating over and over, are not even true, or relevant in any sense of the word either.

  4. Jerome Purtzer on Mon, 8th May 2017 4:31 pm 

    I guess the relevant question would be if there is so much cheap and plentiful oil out there why are we exploiting the Tar Sands, the Deep Water Salt plays, the fast depleting Shale plays and the extra heavy Venezuela plays? Take all of those out of the equation and we’d be on the down side of peak oil. With them in play we have a slight delay. Euphoria is almost always a temporary state.

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  18. Antius on Tue, 9th Jan 2018 8:09 am 

    The approaching shit storm that we were all warned about. It really shouldn’t come as a surprise to anyone here.

    When oil again goes above $100/barrel, western economies will enter recession and then depression. Over the past 10 years, they have built up too much debt to try and spend their way out of the next one – all of it in a vain attempt to maintain the status quo. When unemployment hits 40%, global food production peaks, millions face starvation and governments turn into naked oppressors; people will really wish they had listened. For all the idiotic ranting about climate change, peak energy will be the thing that kills billions.

    A sustained effort to develop passively safe reactors could have prevented this. Instead, we chose to bury our heads into the sand and follow people that chose to ruin the only technology that could have been scaled up in time, with burdensome regulations that did nothing but push up build times. Ironically, many nations will soon turn to nuclear energy in desperation. But in a resource constrained world, the results will make Chernobyl look like a Swiss watch.

  19. Davy on Tue, 9th Jan 2018 8:29 am 

    I am with you Antius. Peak energy and economic chaos combined will spell our systematic end. Climate change will be the consultation prize for out techno folly. The question for me and the reason I am here is when? I realize it all may end tomorrow but being a process this may drag on for years in a slow strangle. How and where all the various collapse events unfold to the status quo will determine the type of decays and decline.

    This is really what is of concern to the individual. That is when, how, and where. The “If” seems obvious if one is honest with the science. The rest is highly variable locally and the reason individuals with the means should leave poor locations now. If one cannot leave then one should be aware and if inclined make preparations. The alternative is to ignore the possibility. There is much to be said about disregarding the decline of civilization. One may choose to live with gusto now. This is an individual choice but remember it takes a community to survive so a community needs proactive concerned individuals to have a chance.

  20. Antius on Tue, 9th Jan 2018 9:06 am 

    “I am with you Antius. Peak energy and economic chaos combined will spell our systematic end. Climate change will be the consultation prize for out techno folly. The question for me and the reason I am here is when? I realize it all may end tomorrow but being a process this may drag on for years in a slow strangle. How and where all the various collapse events unfold to the status quo will determine the type of decays and decline.

    This is really what is of concern to the individual. That is when, how, and where. The “If” seems obvious if one is honest with the science. The rest is highly variable locally and the reason individuals with the means should leave poor locations now. If one cannot leave then one should be aware and if inclined make preparations. The alternative is to ignore the possibility. There is much to be said about disregarding the decline of civilization. One may choose to live with gusto now. This is an individual choice but remember it takes a community to survive so a community needs proactive concerned individuals to have a chance.”

    I don’t honestly know when collapse will occur or how it will play out. Mastermind thinks catastrophic collapse is coming within the next 5 years. He may be right.

    If oil prices rise and interest rates shoot up in response to the resulting inflation, then unconventional oil companies may suddenly find themselves unable to borrow regardless of the oil price. These folk weren’t making any money in 2014 when oil prices were $100/barrel. How will they cope with 5% interest rates, something that would have been normal until 10-15 years ago? Hence, an increase in oil price could actually trigger more oil shortages. That is the sort of scenario that could lead to a rapid collapse in GDP and a breakdown in existing social structures. I think much depends on whether the profits from increased oil prices can counteract the negative effect of higher interest rates. I am not an oil industry specialist or economist, but my hunch would be a ‘no’ simply based on past experience. We are heading towards what economists used to call stagflation.

  21. GregT on Tue, 9th Jan 2018 1:14 pm 

    “I think much depends on whether the profits from increased oil prices can counteract the negative effect of higher interest rates. I am not an oil industry specialist or economist, but my hunch would be a ‘no’ simply based on past experience. We are heading towards what economists used to call stagflation.”

    The problem isn’t higher oil prices per se, but rather fiat currencies loaned into existence, out of thin air, with interest attached. The system itself requires infinite exponential growth, or it will collapse in on itself. Infinite exponential growth, in a finite environment, is a mathematical and physical impossibility. The limits to growth will be met, regardless of what the eCONomists have told us. There is no substituting our way out of this ponzi scheme mess. Blame the eCONomists, and their TBTF banker friends.

  22. Boat on Tue, 9th Jan 2018 1:17 pm 

    A mouse,

    Of course Plant is right about shale oil and the glut. OPEC and Russia cut production and all but disappeared the glut but this has nothing to do with a lack of oil.

  23. Boat on Tue, 9th Jan 2018 1:28 pm 

    greggiet,

    Stagflation is great if you want the pace of climate change growth to slow. Look at OCED countries GDP vrs CO2 levels. Cut population numbers by 1 percent a year and see a what stagflation could really do.

  24. GregT on Tue, 9th Jan 2018 1:31 pm 

    “Of course Plant is right about shale oil and the glut.”

    If not for the oily stuff that came online when oil prices were north of $100/bbl, the world would already be facing shortages. Unfortunately, much of that oily stuff is not profitable at $50/bbl, and not affordable to our economies at $100/bbl. Peak oil already occurred, at least the stuff that lubricates modern industrial society.

  25. GregT on Tue, 9th Jan 2018 1:33 pm 

    “Stagflation is great if you want the pace of climate change growth to slow.”

    CO2 accumulates in the environment. Slowing the rate does nothing more than buy humanity a little more time. It does absolutely nothing to address the long term outcome.

  26. Davy on Tue, 9th Jan 2018 1:48 pm 

    “The problem isn’t higher oil prices per se, but rather fiat currencies loaned into existence“

    Like there is an alternative. The problem then becomes the affluence of globalism becuase there is no alternative to fiat currencies to facilitate what we have today.

  27. GregT on Tue, 9th Jan 2018 7:37 pm 

    “The problem then becomes the affluence of globalism becuase there is no alternative to fiat currencies to facilitate what we have today.”

    I’ll gladly pay you Tuesday, for a hamburger today.

    What ‘we have today’, was never sustainable.

    We can’t keep raping the Earth at a rate faster than it can naturally replenish itself, we can’t keep burning fossil fuels, and relying on non-renewable resources to maintain our societies, if we expect to leave a hospitable planet for our children, and our children’s children.

    To put it quite simply; We are living beyond our means, and leaving a huge deficit for all future generations. Energy wise, economically, and environmentally.

    And yes, there is an alternative. A steady state economy. Capitalism is the problem, it was never the answer.

  28. Boat on Tue, 9th Jan 2018 7:51 pm 

    greggiet

    Over sexed humans was always the problem and still is.Those handful of billionaires make their money off kids. Its not like they can create that market, only profit from it.

  29. Davy on Tue, 9th Jan 2018 8:09 pm 

    “And yes, there is an alternative. A steady state economy.”

    sure grehg, steady as we go with 7.5BIL people. There is no steady state except in a fantasy world. When capitalism ends it all ends badly.

  30. GregT on Tue, 9th Jan 2018 10:59 pm 

    “sure grehg, steady as we go with 7.5BIL people. There is no steady state except in a fantasy world. When capitalism ends it all ends badly.”

    Adding another billion people every 12 years or so, does not exactly make the situation any better. But what do you care? When grand-daddy’s’s farm gets overrun with the goons from St. Louis, you can always jump on Daddy’s jet and exile to the Bahamas until things get better, OR, you could always move to Italy, where the economy is still growing.

  31. GregT on Tue, 9th Jan 2018 11:10 pm 

    Sorry, not Italy specifically, but Europe. New alliances are being forged, and old ones are being systematically dismantled.

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