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Page added on December 24, 2013

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About that EIA Hail Mary

About that EIA Hail Mary thumbnail

The key take-away from the US EIA’s Annual Energy Outlook released one week ago jumps out in the graph below: US crude oil production should peak in 2016 at a level 26% higher than that projected just one year ago.  That’s an additional 2 million barrels a day (mb/d), pushing the US total to 9.6 mb/d within three years—the same total that the US produced during its first peak in 1970, as an acquaintance at the EIA pointed out last week.  That’s three more break-through years like the last two.  Then flat.  Finito.  As some wag asked last week, is that really a recipe for a continuing oil revolution or an oil retirement party?


Data: EIA’s Early Release Annual Energy Outlook, 2014.  From Ron Patterson.

It would be peachy for the US oil industry and oil consumers both here and abroad if US oil production rocketed to 9.6 million barrels/day by 2016 and held at that level for four years.  Through the first nine months of 2013, EIA data for the US already shows average crude production at 7.3 million b/d and rising strongly.  So repeating at 9.6 million b/d would seem to be a viable scenario, especially if some new deepwater fields in the Gulf of Mexico kick in within two or three years.

Yet as geologist David Hughes and financial analyst Mark Lewis reported to roughly 40 Trans-Atlantic Energy Security Dialogue attendees two weeks ago, the U.S. industry is battling raging production decline rates, the tailing off of sweet spots in our two largest shale oil plays, the brutal reality of an accelerating drilling treadmill, and relentlessly rising costs.

For those and other reasons, the EIA’s latest projection strikes this writer as being too optimistic.  The peak seems too high and the plateau too long.  And this just in: EIA apparently now assumes no major increase from their largest-rated shale oil field in the US—their 15 billion barrel Monterey shale, in California’s San Joaquin Valley—over the next couple of decades.  That helps cast big-time doubt on EIA’s long-term projection, which assumes just a gradual 100,000 b/yr decline rate for total US crude oil production for 20 years.

But unlike long-range forecasts, we won’t have to wait too long for this one to play out.  The beef is front-loaded. So mark down your own most likely scenario.  Then put me down for a peak of 8.5 million b/d in 2015-16, plus a three-year “bent plateau” at best.  Then keep all three estimates for your dartboard.

But don’t forget the larger picture here: at the world level, the surprising U.S. shale bonanza will most likely slip into decline relatively soon, worldwide shale plays will probably arrive later and bring more modest supply, all this is costing us much more than fuel used to (on multiple levels), and the world’s financial system—on which all oil and gas drilling is based—seems to be ominously creaking in the background.  And pricey oil doesn’t help muffle that squeaky financial wheel.

ASPO-USA



10 Comments on "About that EIA Hail Mary"

  1. Mike2 on Tue, 24th Dec 2013 1:50 pm 

    Sounds nearly serious in some way,.. except the Point that it Comes from ASPO and this guys where wrong with every prediction they did in the last years. 🙂
    Absolutely funny for example was and still is there assumption, that world can EVER go short on nuclear fuels…LOLROTFL
    So the more aspo is in drought of EIA predictions the more I tend to believe the EIA version. 🙂

  2. J-Gav on Tue, 24th Dec 2013 2:10 pm 

    It might be worthwhile to point out that even the EIA’s optimistic scenario is not really good news for the next generation of oil-users.

  3. eugene on Tue, 24th Dec 2013 2:24 pm 

    As I read so many blogs/comments, I have become convinced we will never run out of any type of energy, nothing but prosperity lies ahead for the entire globe, America is the best of everything and we are all just wonderful people.

    Long ago, I told people I wear boots as I continually walk in so much bullshit.

  4. John_A on Tue, 24th Dec 2013 3:41 pm 

    ASPO complaining about EIA projections is like the mouse who scares elephants suddenly realizing they are facing a tank. The EIA doesn’t do all decline, all the time like the chicken littles do, and ASPO had the chance to refute their methods a year ago now. AND HASN’T.

    Interesting that they don’t even mention that….

  5. GregT on Tue, 24th Dec 2013 5:15 pm 

    “The key take-away from the US EIA’s Annual Energy Outlook released one week ago jumps out in the graph below: US crude oil production should peak in 2016”

    Uh huh. The key take away here, is that the EIA is full of crap. US oil production peaked in the 1970’s.

    It isn’t ASPO that needs to ‘refute their methods’, it is the EIA.

    Interesting that some people still can’t figure that out.

  6. CAM on Tue, 24th Dec 2013 6:48 pm 

    Let’s not forget that we are in a one-off event for our species. Whether we hit peak oil a decade early or a decade late, or even two for that matter, will make little to no difference in the scheme of things. In retrospect those who warned of “Peak Oil” will be proven correct and it will matter not that some of those people were off by some number of years.

  7. Oldfarmermac on Tue, 24th Dec 2013 8:52 pm 

    Mike2, Did you ever hear the one about the grasshopper and the ant?

    my grandfather on Daddy’s side was a pretty smart old guy, but he got set in his ways after he passed eighty and you couldn’t ell him anything.

    One of his habits was to park his highly collectible 62 Chevy under a tree he had been parking his cars under for sixty years.The tree was getting old and rotten, and we all tried to tell him it would fall on that car- the nicest one for a hundred miles around.
    But he said the tree had never yet fell, and so he talked himself into believing it never would.

    The tree lasted longer than any of us thought it would, but in the end it fell on that car.

  8. Tom Mannis on Tue, 24th Dec 2013 11:13 pm 

    The Energy Information Agency (EIA)was just plain wrong. Sorry, Peak Oil Cultists. LOL:
    http://www.financialsense.com/contributors/guild/world-has-more-shale-oil-reserves-than-previously-thought#.UrnQdDjEZZc.twitter

  9. Makati1 on Wed, 25th Dec 2013 1:15 am 

    The sooner it all crashes, the more resources that will be available to help pick up the pieces. If we wait to long, there will be no one to pick them up.

  10. simonr on Thu, 26th Dec 2013 10:50 am 

    Assuming we are in for a ‘sporting time’ in 2016-2017 that gives us as individuals 2-3 years to prepare …. what preparations are people thinking of making ?

    Me, Solar array, more woodland, horses trained in more agricultural work

    You ?

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