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Page added on September 27, 2016

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Peak Oil: Are We Ready To Act?

Consumption

U.S. crude oil production is falling because investments into shale oil production dried up as the price of crude oil fell below $60/bbl. Companies aren’t interested in putting new capital to work, and because these oil fields deplete, that means crude production is falling. Why is that significant? Because most of the world’s new oil production in the past 6 years has come from U.S. shale oil fields. It is hard to overstate the global importance of the new crude supply that came online in the U.S. since 2008

THE COST FACTOR

With investments on the decline, and more than enough news from the industry highlighting the financial difficulties many oil producers find themselves confronting, expectations of unlimited amounts of oil at the ready are [no pun intended] a pipe dream. Fossil fuels don’t spontaneously extract themselves, for one thing.

And as Robert Rapier notes in the comment above, most of the surge in production over the past few years came from shale oil fields which are a much more expensive undertaking; and given the reality that fracked wells deplete at a very high rate, the need to stay on a fast-moving treadmill of drilling cannot sustain itself.

Another important factor is that the prime locations where tight oil can be found in those fields are the ones tapped first, which is a perfectly reasonable business decision to make.

THE PROCESS
But reality dictates that the lesser sources must then be explored. That secondary process is not free, and the results will be what any reasonable person would expect from those Plan B efforts. Without substantial investments, production efforts will grind much more slowly. And since fossil fuels are similarly bound by reality, fewer production efforts lead to fewer barrels of oil. Not rocket science.

High prices are a necessity to the oil industry now much more dependent on unconventional resources like the shale/tight oil fields, and there aren’t any high prices to be found. What happens as a result requires only another dose of second grade math.

If the high prices return, the flip side of industry delight is consumer dismay. That leads to reduced usage because of high price’s impact on their personal expenditures, and the increased demand-decreased demand-high price-low price wheel spins again. That’s the economic system sustaining us, and those drawbacks cannot be ignored or explained away by Happy Talk, no matter how earnest.

Empty assurances about the resources left untapped have a limited shelf life in the face of these and related facts and challenges of maintaining fossil fuel production at the levels needed—if not today, then soon enough. The sooner those peddling the repetitive but pleasant-sounding assurances about the future of our fossil fuel supplies, and instead start devoting their considerable skills to helping rather than hindering the transition, the greater our chances of actually managing an acceptable—but certainly not ideal—move away from society’s massive dependence on a finite supply.

That’s not rocket science, either. The question remains: will the deniers appreciate that fact and begin participating rather than obstructing?

 Peak Oil Matters



16 Comments on "Peak Oil: Are We Ready To Act?"

  1. Davy on Tue, 27th Sep 2016 12:42 pm 

    I continue to see articles that do not acknowledge deeper issues to this oil supply and demand issue. The economy is in macro deflation and physical decay. This process is ongoing and increasing. Oil prices are low enough and oil supply is enough to mask real demand destruction. This is deeper than an oil issue. The economic numbers fail to show the true nature of this process. In fact the numbers are shielding the reality of this process because currently the numbers are being employed to stimulate confidence or in other words being manipulated for economic results. Too many articles want to show a direct relationship with demand destruction and oil but that is not completely the case. This is as much an economic process as a depletion process. Demand is being destroyed systematically because of a deflating economy in dysfunctional processes. Demand is also being destroyed by a depleting oil resources that is economically inferior and this inferiority is impacting the economy systematically and macro way. It is the combination of these two phenomenon that are deadly

  2. Plantagenet on Tue, 27th Sep 2016 1:31 pm 

    Oil goes to a global market. While the US and EU economies are weak, growth is strong in India—the most populous country in the world. The demand for oil in India will grow by over the next several decades.

    The bottom line is we can’t count on demand destruction to end the global demand for oil. The demand is going to be there right up to the moment that the oil supply peaks and starts to decline.

    cheers!

  3. penury on Tue, 27th Sep 2016 2:51 pm 

    In order to placate the “cornes” we need to change from “Peak Oil” to a phrase which will resonate with them. My first recommendation is ” automobile reduction program” which will lead to cleaner air. We can then promote less oil or ea green solution which will further be supported by much higher prices. Voila a new green movement will be born.nergy as

  4. penury on Tue, 27th Sep 2016 2:53 pm 

    In order to placate the “cornes” we need to change from “Peak Oil” to a phrase which will resonate with them. My first recommendation is ” automobile reduction program” which will lead to cleaner air. We can then promote less oil as green solution which will further be supported by much higher prices. Voila a new green movement will be born energy as means to lower pollution

  5. Boat on Tue, 27th Sep 2016 2:55 pm 

    Plant,

    When production of electric vehicles gets to around 27 million per year we will be close to peak oil and demand destruction will begin. That’s an approximate guess, today’s new vehicle growth is around 22 million vehicles per year.
    Of course, bio fuels, better mph, nat gas fleet vehicles, hybrids etc. will play their part but new EV vehicle sales will be the major tipping point.

  6. Boat on Tue, 27th Sep 2016 3:07 pm 

    Of course you can redefine growth like greggiet. If growth grows slower you can call it a recession. Even when the world is still in a growth pattern. Demand destruction in a world of growth. Lol

  7. Apneaman on Tue, 27th Sep 2016 3:35 pm 

    penury, it’s called a “virtue of necessity”. The econOpriests and other legitimizers use it all the time. Oh yes, 7 years of ZIRP is exactly how we meant it to be. Yeah, we planned it that way all along – see we even have graphs and charts proving it. It’s good fer ya. Even better is NIRP, which we planned for all along too.

  8. rockman on Tue, 27th Sep 2016 9:17 pm 

    Davy – “Oil prices are low enough and oil supply is enough to mask real demand destruction”. Maybe…maybe not. Depends if one truly understands why we have higher demand today. There is no absolute amount of demand…it’s relative to the trend. IOW are we experience higher demand or less demand destruction? Think about it: when oil went from $35/bbl or less before 2006 we had demand destruction as a result of oil going to $100+/bbl. And so do we have increased demand or less demand destruction that was caused by higher oil prices?

    As I’ve pointed out many times I feel the oil price collapse and big increase in consumption to be some of the best evidence SUPPORTING peak oil. IOW it’s easy for most to see PO forces driving the price over $100/bbl. But it was the same force that led to those high prices that led to increased drilling that led to increased production that led to falling oil prices that have led to record breaking consumption.

    Again, though there are still some holdouts it still goes back to understanding the big picture. IOW it isnt’s about PO…it’s about the POD…Peak Oil Dynamic.

  9. makati1 on Tue, 27th Sep 2016 9:53 pm 

    Answer to the headline: NO!

    We will never “act”. The massive change needed to even slow our coming extinction is not in the cards, ever. At least not until most of the herd is over the cliff and then it will be too late. Exciting to watch though.

  10. makati1 on Tue, 27th Sep 2016 9:57 pm 

    Part of the “Big Picture” that most want to ignore:

    “Throughout the U.S., trees are dying at an astonishing rate. The reasons for the die-off vary from location to location — drought, disease, insects and wildfires – but the root cause in many of these cases is the same: climate change.”

    http://www.care2.com/causes/millions-of-trees-are-dying-across-the-us.html

    But who needs trees when we can have our cars, 72 inch TVs and McDonalds? lol

  11. Boat on Tue, 27th Sep 2016 10:25 pm 

    mak,

    You walk to shop? Walk to the airport? No gas or diesel for the farm? No pumps for water? My dear tree killer, me thinks your a hypocrite. Did you shyt the electricity for your computer? Every product in your house was made at some tree killing company. Idiot.

  12. makati1 on Tue, 27th Sep 2016 11:06 pm 

    Boat, yes, I walk everywhere except on the days I have to cross the city. My total taxi use in a year is less than 100 miles. My flight to the US uses only a small fraction of the fuel that I used when I lived in the US and they are coming to an end also.

    As for water on the farm, yes, all gravity fed. The annual 10+ feet of rain provides the tanks and ponds with what they need. No pumps required. No vehicles needed either. And the electric use will eventually be by solar or none at all. You CAN live without electric or any fuels if you have to. I do not need fuels for heat. 70s at night. 80s during the day, year round. Why do you think I chose this place to retire? lol

    I don’t expect the internet to last too many more years. Uses too much electric and the governments are trying to shut down that source of facts and truth. No loss there.

    Once again, you missed the point. the tree article was about climate change killing trees, not corporate destruction for profit.

    Idiot? Look in the mirror…

  13. GregT on Wed, 28th Sep 2016 1:34 am 

    “Every product in your house was made at some tree killing company. Idiot.”

    You’ve outdone yourself tonight Kevin, yet again………

  14. Cloud9 on Wed, 28th Sep 2016 7:51 am 

    The hula hoop phenomenon might help explain this. In 1958 the craze was begun by Whamo Toy Company. In the early eighties it died out here in the U.S. When demand seemed insatiable, marginal producers jumped into the market and eventually flooded the market with product. Demand was satiated before production was curtailed and an oversupply of hula hoops hit the market driving down prices. Many of the marginal producers dropped out of the market and the price of hula hoops stabilized. As the Old Italian grocer used to say about bread, stack them high sell them low. Stack them low sell them high.
    Marginal producers will continue to produce to meet pay days and creditor demands right and up until the moment they go bankrupt. Under normal circumstances, we would expect prices to rise once the oversupply is consumed and marginal producers are driven out of the market. If Short is right, this time is different.

  15. Ralph on Wed, 28th Sep 2016 7:54 am 

    plant,

    growth is strong in India—the most populous country in the world. The demand for oil in India will grow by over the next several decades.

    Not the last time I looked. China is more populous, and has far higher demand than India. India has an insatiable demand for coal, but not yet for oil. Oil prices are much more sensitive to the state of the Chinese economy. India has dysfunctional infrastructure and government compared to China, and massive economic growth appears unlikely going forward. Chinese oil production appears to have peaked and to be in sharp decline, which will impact their import demand as well.

  16. Davy on Wed, 28th Sep 2016 8:02 pm 

    “China’s Richest Man Says Mainland Real Estate Is The “Biggest Bubble In History”
    http://tinyurl.com/hl8rs42

    “The richest man in China, Wang Jianlin, made his ~$30 billion fortune by developed huge malls and office complexes across China but he now says Chinese real estate is the “biggest bubble in history.”

    “The big problem, according to Jianlin, is that prices keep rising in major Chinese cities like Shanghai but are collapsing in thousands of smaller cities where huge numbers of properties lie vacant. Per an interview with CNN, Jianlin notes that rising household debt is a major issue fueling the bubble but Chinese officials have been reluctant to restrict leverage due to the fear of the economic consequences.”

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