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Heinberg: New U.S. Record-Level Oil Production! Peak Oil Theory Disproven! Not.

Production

Well, I’m amazed and impressed. Tight oil production has pushed total United States petroleum output to more than 10 million barrels a day, a rate last seen almost a half-century ago. It’s a new U.S. record. Fifteen years ago I was traveling the world with a Powerpoint presentation featuring a graph of U.S. oil production history. That graph showed a clear peak in 1970 and a long bumpy decline thereafter.

My message: as went the U.S., so would go the world at some point in the fairly near future. Peak oil—the inevitable moment when global oil supplies started drying up—would be a watershed for industrial societies, leading to economic contraction, geopolitical crisis, and social upheaval.

So is it time for a retraction? The optics are certainly unfavorable for peak oil theorists like me. Our forecasts obviously failed, in that none of us expected the current surge in U.S. output. But permit me to offer some context.

Everyone agrees that the surge is almost entirely due to tight oil (globally, there has also been growth in bitumen from Canada, deepwater oil, and other unconventional sources). The application of hydrofracturing and horizontal drilling to low-permeability source rocks in the United States represents an amazing success story for the oil industry—at least in terms of raw petroleum output. But what conditions led to this bonanza?

Return with me now to those thrilling days of yesteryear—the year 2005, to be precise. That’s when the rate of world conventional oil production stopped growing and hit a plateau that continues to this day. Oil prices were already scrambling upward; by mid-2008 they had zoomed to nearly $150 per barrel. And it was at that moment that the global financial crisis erupted. Which was, by most accounts, a survival threat to industrial society.

The world’s central banks knew they had to act boldly to prevent utter collapse. Their solution (unsurprisingly) was to bail out the investor class, which had steered the world into the crisis to begin with. Over the course of the next few years the Federal Reserve, the European Central Bank, the People’s Bank of China, and the Bank of England together conjured nearly 10 trillion dollars in new money and unleashed it in the accounts of investors.

It was at just this moment that the frackers appeared on the scene. They had the technology and they had the rocks. But they needed a lot of money to fund their ambitious business plans. That’s because the rocks were stubborn. Since those rocks lacked permeability, individual oil wells would deplete very quickly—with production in each well declining on the order of 70 to 90 percent in the first three years. That meant that relentless, expensive drilling would be needed in order to release the oil that was there. But, the frackers promised, with high enough oil prices the venture would be profitable.

Part of the central banks’ strategy to avert economic Armageddon was to keep interest rates low. That made it easy for the oil industry to borrow money. But it also meant that bonds and T-bills began offering pitiful returns. Investors flush with cash needed somewhere else to stash it; they were looking for the next big thing.

Suckers, meet swindlers. Get to know each other, see what you can do together, and report back in a few years.

What happened next? A hell of a lot of drilling. Tens of thousands of holes were poked into the ground and blasted with tons of explosives, billions of gallons of water, and millions of tons of sand. And all were drilled and fracked with somebody else’s money (very likely some of yours, if your savings are locked up in a pension fund). On the whole, the enterprise was hugely unprofitable, and was built on a giant bubble of debt.

Oh, but it gets worse. Like all debt bubbles, the fracking bubble  is going to burst at some point.  No one knows whether that will happen later this year, next year, or five years from now. But burst it will. And when it does, the carnage will extend far beyond the industry itself.

The frackers insist that their technology is getting better—and it is, in the sense that longer lateral segments, more fracking stages, closer well spacing, and (especially!) drilling preferentially in the most resource-rich areas has increased individual well productivity and lowered costs of production. But that just means that core areas are getting drained even faster; meanwhile, closely spaced wells are starting to interfere with one another, resulting in declining well productivity. Evidence suggests that technological improvement has reached the point of diminishing returns.

Yes, the amount of U.S. tight oil being extracted could continue to grow for a while longer—as long as investors keep ponying up money, or as long as the “sweet spots” last, or if oil prices rise significantly.  But then production will fall and the country will gradually (or perhaps quickly) return to dependence on declining conventional oil production.

As all this has been happening, the idea of a near-term peak in world oil supplies has become discredited. So discredited that even when multiple news organizations reported that the rate of new oil discoveries has plummeted to a level not seen since the 1940s,  no one dared even mumble the words “peak oil.”

The only permissible way to speak of the subject today is frame it differently—as “peak oil demand.”  The logic goes something like this:

  • The tight oil boom means that we are moving into a permanent age of oil abundance.
  • But the proliferation of electric cars means that demand for oil will reach a maximum and start to decline.
  • With supply beginning to exceed demand, there’s not enough investment going into future oil exploration and development.
  • Without enough investment, production will decline.
  • But production can’t decline due to supply problems, because we are moving into a permanent age of oil abundance. Therefore if and when oil production does decline, it will be because of other factors.

Sometime in the next few years, global oil output will indeed start to fall and the fact will be undeniable—even though the cause will likely be attributed to a financial or economic crash. But even if tenacious peak oil supply theorists feel vindicated, confirmation of their warnings will carry no sweetness. That’s because the whole point of the peak oil discussion was to warn society ahead of time so that it could prepare itself for the inevitable moment when the economic impacts of oil depletion hit home. The Hirsch Report in 2005  concluded that it would take a modern industrial nation like the United States at least a full decade to prepare for peak oil.

We had our ten years of warning and we blew it. Sure, we deployed a few electric cars, issued some subsidies for solar and wind power, and fledged voluntary efforts to build community resilience, but we haven’t done anything commensurate with the scale of the problem. And now the current U.S. administration has decided to throw the energy transition into reverse, discouraging alternative energy and expanding subsidies for fossil fuels. Unless the fracking boom can persist for another decade (which seems highly unlikely, given the economics and other factors) and the shift to electric vehicles accelerates ferociously, we will have run out the clock. When the crisis hits, it will be too late for the nation to do much of anything. It will be up to communities to respond as intelligently as they can. All there’s time for now, in all likelihood, is bracing for impact—which translates to building community resilience.

Meanwhile, let’s celebrate. Pop the cork. A new U.S. oil production record! It’s good to have something to cheer about.

resilience



24 Comments on "Heinberg: New U.S. Record-Level Oil Production! Peak Oil Theory Disproven! Not."

  1. MASTERMIND on Wed, 7th Mar 2018 11:07 pm 

    As M. King Hubbert (1956) shows, peak oil is about discovering less oil, and eventually producing less oil due to lack of discovery.
    https://imgur.com/a/6dEDt

    IEA Chief warns of world oil shortages by 2020 as discoveries fall to record lows
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Saudi Aramco CEO sees oil shortage coming as investments, oil discoveries drop
    https://www.reuters.com/article/us-aramco-oil/aramco-ceo-sees-oil-supply-shortage-as-investments-discoveries-drop-idUSKBN19V0KR

    Peak Oil Vindicated by the IEA and Saudi Arabia

  2. MASTERMIND on Wed, 7th Mar 2018 11:08 pm 

    Existing oil reserves are scheduled to begin a catastrophic crash within 1 to 3 years. When it hits the economic and social damage will be catastrophic. The end of Western Civilization, from China to Europe, to the US, will not occur when oil runs out. The economic and social chaos will occur when supplies are merely reduced sufficiently….
    https://imgur.com/a/6dEDt
    http://www.nature.com/nature/journal/v481/n7382/full/481433a.html
    http://www.sciencedirect.com/science/article/pii/S0301421509001281
    http://www.sciencedirect.com/science/article/pii/S030142151300342X
    http://www.sciencedirect.com/science/article/pii/S0016236114010254
    http://www.geo.cornell.edu/eas/energy/the_challenges/peak_oil.html
    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

  3. MASTERMIND on Wed, 7th Mar 2018 11:08 pm 

    The End of the Oil Age is Imminent!

    Recently, the HSBC oil report stated that 80% of conventional oil fields were declining at a rate of 5-7% per year. This means that there will be an oil shortage of ~30 million barrels per day by 2030 and ~40 million barrels per day by 2040.
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

    What is mentioned far less often is that annual oil discoveries have lagged annual production since the 1980s.
    https://imgur.com/a/6dEDt

    Now, this problem has nothing to do with the recent decline in the oil price, which started in 2014. This has been an on-going problem for the past 30 years. Now, the IEA is predicting oil shortages by ~2020 due to declining exploration.
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Here, the IEA blames this problem on the low oil price. But, this problem started in the 1980s. The problem is geological: we are running out of conventional cheap oil. Shale and tar sands are not the answer, either. Those resources are far too expensive, compared to conventional oil, because the global economy is based on cheap conventional oil. Expensive oil is not a replacement for cheap oil.

    Based upon the HSBC report and the IEA, the End of Oil Age will start around ~2020: there will be a dramatic economic depression due to exhaustion of cheap oil. This will cause a global economic collapse.

  4. Sissyfuss on Wed, 7th Mar 2018 11:44 pm 

    I’m waiting for Clogdernoodle to file an official protest against this site for allowing a Richard Heinmaster article on peak oil to appear here. Even if it is cogent and enlightening.

  5. Cloggie on Thu, 8th Mar 2018 12:20 am 

    BS Sissy, I have never questioned the right of Richard Heinberg to speak his mind. Or mine to respond.lol Right-wingers are much more into free speech as lefties like you.

    My accusation towards Heinberg is that he is mixing energy realities (fossil + renewable) with his personal dream of a New Age post-industrial nirvana and ecological fundamentalism.

    Mind you, he is allowed to have these dreams and promote them and live them. And there is a lot I can accept from him.

    But he hoped that industrial civilization would collapse and that is not going to happen. There is far more potential to keep civilization from collapsing in a manner that is less destructive than the current modus of operation.

    There is now a global awareness (minus America.lol) that we need to change course. In Western Europe everybody is “green”. We need to rapidly phase out fossil fuel, to begin with in Europe and expand the renewable energy revolution from there over the rest of the globe.

    The prospect that billions are going to die, secretly factored in by the collapsniks, is not an attractive perspective and is not necessary.

    After the immanent end of the US empire, Greater Europe and China need to sit around the table and develop a plan for the third world. Core of the plan: development in return for a birth reduction program.

  6. Cloggie on Thu, 8th Mar 2018 12:41 am 

    Poor Richard, he is a specialist in Velikovsky:

    Heinberg, after two years in college and a period of personal study, became personal assistant to Immanuel Velikovsky in November 1979. After Velikovsky’s death, Heinberg assisted his widow in editing manuscripts. He published his first book in 1989, Memories and Visions of Paradise: Exploring the Universal Myth of a Lost Golden Age, which was the result of ten years of study of world mythology.

    https://en.wikipedia.org/wiki/Richard_Heinberg

    This is the real Heinberg, the mythological dreamer. He is not an engineer but pretends to be one. He just hopes that the shale revolution is only a short blip and will fizzle out soon all by itself.

    Well, I’ve got bad news for you Richard. Technology has more potential than just fracking to extend the life of the fossil fuel era. Michael Klare understands that much better than Heinberg when he talks about a Third Carbon Age. After shale there is still underground coal gasification, with a potential far bigger than the cumulative amount of oil and gas pumped up to date. There is enough for another thousand year of fossil fuel.

    However we should not go there. We should rapidly move into renewables and in the mean time use the required fossil fuel (oil, gas, shale, UCG) to get there and leave the rest in the ground.

    Richard, the dreamer, pretending to be a techie that he isn’t, vastly underestimates the potential of renewable energy and the speed with which the transition can be accomplished.

    But hey, Americans achieved global prominence piggy-backing on oil and can’t imagine anything else.

  7. print baby print on Thu, 8th Mar 2018 1:01 am 

    EXCELLENT ARTICLE Nothing to add

  8. JH Wyoming on Thu, 8th Mar 2018 1:49 am 

    I concur, pbp.

  9. coffeeguyzz on Thu, 8th Mar 2018 1:50 am 

    It is the inability for individuals like Mr. Heinberg to simply man up and admit he was wrong that continues to besmirch the whole hydrocarbon scarcity view.

    It is no big deal as, being human, we are all of us susceptible to inaccuracies.
    At least Mr. Heinberg had the courage to forcefully communicate about his beliefs since hydrocarbons – or lack thereof – are so crucial to modern day life.

    But … but … this ongoing litany of woulda/coulda/shoulda bullshit just makes a mockery of all you peakers.

    Individuals such as David Hughes and the Desmog blog, Resilince gang, Post Carbon Institute bunch are all preaching hollow mea culpas and ‘any day now’ warnings to a shrinking, increasingly reality-disconnected following.

  10. Davy on Thu, 8th Mar 2018 3:29 am 

    Peak oil dynamics are alive and well but a stricter version of peak oil is not as relevant. Peak conventional easy to get oil that makes economies wealthy is in serious depletion. These figures I have seen are somewhere in the 5%-7% range. New conventional oil production is at a low. How could anyone not worry about that?

    Now we have unconventional sources and other liquids. We have other technologies like renewables and old technologies like NUK. We still have plenty of coal and gas. What we have done is a substitution and transformation of sorts. The reason I say sorts is because these new resources and technologies are not making wealth. It is taking wealth to produce them. No longer do we have the material benefits of high quality energy raising prosperity organically. Now we have a situation where economies must work to produce a vital foundational energy sources. When energy density drops more work is involved ask the wolf chasing the increasing scare rabbits.

    The economy is now a very important component of this situation. We currently have an unhealthy economy with debt, bubbles, and artificial price mechanism. This leads to misallocations of capital that is part of global malinvestment. This is then further distorted by not allowing the cleansing effects of recession and bad debt realizations. We can’t allow bad debt with so much debt and managed debt. This is a vicious catch 22 circle. The repressive effects of artificially low interest rates are the backbone of these distortions. Try normalizing rates and 25% of global businesses and many governments are insolvent. We then have the unnatural effects of quantitative easing that supplies unhealthy liquidity to the certain parts of the economy causing wealth transfer to segments of society that are already rich and connected. This is creating a house of cards with lower classes and especially the middle class being disenfranchised. These classes are the backbone of demand that drives economic velocity.

    So you see this how peak oil meme gets diluted with the systematic issues of economics and social realities are included. In this situation then oil is now more systematic, economic and less mineral. Peak oil is now subject to economic downturns much more than it used to be. Now it will take enormous efforts to maintain production if an economic downturn occurs. The 100% renewable world is a technological fantasy and socially a sick joke. Economic downturns used to just create a glut of cheap easy to get oil. Do not confuse the past tight oil glut with what we used to have with conventional oil in an economic downturn. In the past we could just turn off the taps of cheap oil off for a time. This latest glut was a bubble glut. It was misallocation of resources that allowed excess expensive product.

    It has turned out that the tight oil revolution has allowed peak oil to be postpones. We now have renewables coming on strong and these technologies serve as another impulse of economic energy to be added to the system to again stall the effects of a drop in useful energy to the global economy. It is lifting the all-important optimism effect also. Confidence is liquidity. We are falsely fat and happy that technology has come to the rescue but at a cost we avoid acknowledging. It is an economic and systematic cost of a species in overshoot and continuing to attempt vital growth. This economic cost has come also in the realm of global finance that provides the liquidity that keeps modern economies humming with vital activity. We are now very exposed to economic risks. These risks have been dispersed throughout the system where we are in danger of economic problems from multiple sources. If we have a serious economic difficulties energy will be immediately affected. Renewable efforts will stall. Central bank monetary management will become problematic.

    You see the new side of peak oil? It is now peak economic oil wrapped up in peak technical modernism. This all points to diminishing returns of a global civilization smacking up against limits both technological and resource based. Add in the human overshoot component, planetary decline, and climate disruption and you see there is nothing to pop a cork over. This is serious business going forward. We are now on an undulating plateau of economic, resource, and social efforts to maintain the unmaintainable. We are a red queen running in place thinking we are getting somewhere. It is wonderful we made it through the financial crisis and imminent peak oil but worse is ahead and we are still back slapping and joking around at a bar on the proverbial titanic. This is a slow ship wreck, the kind techno optimist and cornucopian modernist can revel in as they are slowly consumed. Phase change is all around us but we are able to discount is because of the bright light of techno optimism. Techno optimist have a rude awakening ahead because when the right conditions materialize this is going to be a nasty adjustment. If the degree and duration is too much we may not adjust.

  11. Antius on Thu, 8th Mar 2018 5:57 am 

    “Sometime in the next few years, global oil output will indeed start to fall and the fact will be undeniable—even though the cause will likely be attributed to a financial or economic crash. But even if tenacious peak oil supply theorists feel vindicated, confirmation of their warnings will carry no sweetness. That’s because the whole point of the peak oil discussion was to warn society ahead of time so that it could prepare itself for the inevitable moment when the economic impacts of oil depletion hit home.”

    So very true. When imminent Peak Oil became obvious in mid-2000s, huge amounts of effort went into denying the fact rather than doing anything proactive about it.

    Kind of like an alcoholic who is told that he has cancer. Cutting out the processed carbs and laying off the sauce could save his life. But it is much easier and more profitable in the short run, just to deny reality and stick his head in the sand. When crisis hits, it ends up being impossible to do anything about it.

    When GW was in power, it is clear that knowledge of imminent peak was a key driver behind the Iraq invasion. Had GW set the US auto industry on course for developing plug-in electric hybrids and led the US into a full scale revival of nuclear power, the US and the world would not now be facing imminent economic collapse. As it is, crisis is now very close and it would appear to be too late to do anything that will avert a crisis longer and deeper than the depression of the 1930s.

  12. Anonymouse1 on Thu, 8th Mar 2018 7:02 am 

    Nice wall of spam exceptionalist. Maybe one of these days, someone other than your boyfriend, cloggraham will actually read one of them.

  13. Davy on Thu, 8th Mar 2018 7:19 am 

    Weasel, are you capable of reading something more than a few lines? If so are you capable of a debate on any of the issues brought up? Stalking and pricking criticism from a intellectually lite dumbass like you is just
    noise IOW you are irrelevant in regards to furthering discussions here.

    Maybe you will off like other dumbasses that have come and gone. I am especially happy so many stupid extremist Canadians have melted away. Maybe you will vanish too. That would bring me great satisfaction. Pussy

  14. Sissyfuss on Thu, 8th Mar 2018 8:01 am 

    Now Davy, you know that when you compose an enlightening concise supposition it will have a triggering affect on the reptilian minded among the visitors here. And yes, I did read it in its entirety whereas Analmoose probably read the name Davy and went immediately into apoplectic shock.

  15. Duncan Idaho on Thu, 8th Mar 2018 9:53 am 

    “Suckers, meet swindlers. Get to know each other, see what you can do together, and report back in a few years.”

  16. Davy on Thu, 8th Mar 2018 10:16 am 

    Thanks siss, wouldn’t peace on earth be wonderful. Lol

  17. joe on Thu, 8th Mar 2018 11:45 pm 

    Dubya Bush announced years ago he wanted the US to become ‘energy independent’, guess what, it happened.
    When will people realise that this tight oil shit is no accident or freak of economics. It is US policy. To avoid being in the pocket of a country the next time they decide to ram airliners into your biggest cities. Pity the good people of Blighty couldn’t do the same thing….

    And btw, Heiney is fully correct in his analysis, its a matter of when, not if the economics of oil mining makes it impossible.

  18. Boat on Fri, 9th Mar 2018 1:27 am 

    Joe

    Not in your lifetime.

  19. Anonymous on Fri, 9th Mar 2018 1:57 am 

    Give him a little credit for acknowledging how wrong he was. Still needs to do a little more. But not bad. Better than most of the peak oil nutters or even lite types like Hamilton and Staniford slipping away. Not so interested in analyzing oil when it doesn’t go their way.

  20. Davy on Fri, 9th Mar 2018 5:19 am 

    Nony, great job hanging in there in the past under so much criticism but you don’t acknowledge the whole story. IMA, the future will likely be less bright for you as depletion and economic difficulties make US shale less of a force in gas and oil.

  21. joe on Fri, 9th Mar 2018 10:10 am 

    Boat, if not, then it will be CC that’s gets us first.

  22. John Norris on Fri, 9th Mar 2018 10:17 am 

    Joe, US has net imports of 5 mbpd of petroleum. How is that “energy independence”? Let me know when the US is a net exporter…

    PS: US also a net importer of nat gas; net exports of coal are approaching zero.

  23. Kat C on Fri, 9th Mar 2018 11:47 am 

    John Morris, yep the news likes to talk about the US as an oil exporter, which is true, but we are a net importer. But here it says crude production in the US for 2017 was 9 mbpd https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm And here it says that 19 mbpd was consumed by the US in 2015 https://en.wikipedia.org/wiki/List_of_countries_by_oil_consumption I presume that hasn’t changed much in 2 years. So wouldn’t that mean our net imports have to be 10 mbpd?
    Meanwhile Russia is a net exporter of oil. According to this they export 4.6 mbpd. According to this their production is 10.5 mbpdhttps://ycharts.com/indicators/russia_crude_oil_production But their demand is 3 mbpd https://en.wikipedia.org/wiki/List_of_countries_by_oil_consumption so shouldn’t their net export be 7.5 mbpd instead of 4.6. Am I reading this all wrong or is someone cooking the net import/export numbers. Regardless our balance of trade in oil is negative and Russia’s is positive.

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