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The shale oil “miracle”: how growth may falsely signal abundance

The shale oil “miracle”: how growth may falsely signal abundance thumbnail



Oil production (all liquids in barrels per day) in the US and Canada. (From Ron Patterson’s blog). Does this rapid growth indicate that the resources are abundant and that all the worries about peak oil are misplaced? Maybe not….

Sometimes, we use a simple metric to evaluate complex systems. For instance, a war is a complex affair where millions of people fight, struggle. suffer, and kill each other. However, in the end, the final result is seen in terms of a yes/no question: either you win or you lose. Not for nothing, General McArthur said once that “there is no substitute for victory”.

Now, think of the economy: it is an immense and complex system where millions of people work, produce, buy, sell, and make or lose money. In the end, eventually, we think that the final result can be described in terms of a simple yes/no question: either you grow, or you don’t. And what McArthur said about war can be applied to the economy, as well: “there is no substitute for growth“.

But complex systems have ways to behave and to surprise you that can’t be reduced to a simple yes/no judgement. Both victory and growth may well create more problems than they solve. Victory may falsely signal a military might that doesn’t really exist (think of the outcome of some recent wars….), while growth may signal an abundance which is just not there.

Give a look at the figure at the beginning of this post (from Ron Patterson’s blog). It shows the oil production (barrels/day) in the US and Canada. The data are in thousand barrels per day for “crude oil + condensate” and the rapid growth for the past few years is mostly due to tight oil (also known as “shale oil”) and oil from tar sands. If you follow the debate in this field, you know that this growth trend has been hailed as a great result and as the definitive demonstration that all worries about oil depletion and peak oil were misplaced.

Fine. But let me show you another graph, the US landings of North Atlantic Cod, up to 1980 (data from Faostat).

Doesn’t it look similar to the data for oil in the US/Canada? We can imagine what was being said at the time; “new fishing technologies dispel all worries about overfishing” and things like that. It is what was said, indeed (see Hamilton et al. (2003)).

Now, look at the cod landings data up to 2012 and see what happened after the great burst of growth.

I don’t think this requires more than a couple of comments. The first is to note how overexploitation leads to collapse: people don’t realize that by pushing for growth at all costs, they are destroying the very resource that creates growth. This can happen with fisheries just as with oil fields. Then, note also that we have here another case of a “Seneca Cliff,” a production curve where the decline is much faster than growth. As the ancient Roman philosopher said, “The road to ruin is rapid”


9 Comments on "The shale oil “miracle”: how growth may falsely signal abundance"

  1. Plantagenet on Tue, 24th Feb 2015 7:09 pm 

    The difference between the Atlantic cod landings and shale oil is that no one knew in 1980 how many cod still remained in the ocean.

    In contrast, the subsurface shale oil deposits (Eagle Ford, Bekken, Utica, Permian, etc.) are well known and the amount of oil remaining in them can be determined with some degree of confidence. For instance, in the Bakken the USGS recently upgraded their estimate of recoverable oil to ca. 7.4 BILLION barrels of oil. Its taken about 10 years to produce approximately 1 billion bbls of oil from the Bakken, so at current rates it might take another 50-60 years to extract all the shale oil from the Bakken. Similar estimates have been made at other shale oil deposits.

    These estimates by the USGS and others may be overly optimistic, but it is overly pessimistic to expect an immediate and rapid end to shale oil production when there are still billions and billions of barrels there to be produced.

  2. Davy on Tue, 24th Feb 2015 7:38 pm 

    Planter, son, are you smokin man. Geeze, that kind of talk is hopium from a BAUtopian who is flattered to be part of the exceptioanlist crowd. Give me a break on how much oil is in the ground. How much can you deliver to my farm and for what price is what I want to know.

  3. Plantagenet on Tue, 24th Feb 2015 8:03 pm 

    Daver, why should I deliver oil to your farm? Why don’t you just drive down to the local gas station and buy it for yourself?

    A word of advice— gasoline is really cheap right now thanks to the oil glut, These low prices probably won’t last long so its a good time to fill up your reserve tanks, if you’ve got some on your farm.


  4. Davy on Tue, 24th Feb 2015 8:07 pm 

    Planter, friend, I was being point descriptive not literal. You know you have to read into what your buddy Daver says. Anyway, Planter, these low prices “could” be here to stay because the economy “could” be finished.

  5. Plantagenet on Tue, 24th Feb 2015 8:17 pm 

    Daver—I agree—-you may be absolutely right that the economy is finished. Your point is very well taken.

    Have a great day!

  6. Industrial on Tue, 24th Feb 2015 9:15 pm 

    Matt simmons in the beginning of the movie crude impact was talking about why we never had a nuclear because we worried about it for 50 years…i take it one step further and say we are living already in a post apocalyptic world.Endocrine disrupting chemicals are altering human biology…i for example am far better than a normal man because a normal man doesn’t have as much of a soft side as me…it just makes it all better because i love myself more and you all the less…i love disasters and the reason why is because the entire universe is merely a series of disasters….right now im about to watch a video about bill hicks so that i can study alex jones….after that ill prolly put on some industrial music and dance around my house as i wait for you all to die from peak oil…so thanks BPA for making me into a person that seriously wants to be worshiped like RA from the movie stargate and also someone that cares… typically tho not about you:)

  7. Westexasfanclub on Wed, 25th Feb 2015 7:50 am 

    Yeah, that’s it, folks. We crossed the peak and go on walking for another decade on our plateau before sliding down down the hill – assuming an axisymmetric curve (Though I tend to assume a faster downward trend beginning within five to seven years).

  8. shortonoil on Wed, 25th Feb 2015 8:03 am 

    If you follow the debate in this field, you know that this growth trend has been hailed as a great result and as the definitive demonstration that all worries about oil depletion and peak oil were misplaced.

    If you follow the growth trend then you are admitting that all barrels of oil were made equal. That is like stating that all trees in the forest were made equal. Of course, that would be a incredibly mindbogglingly stupid thing to say, but apparently there are quite a few mindbogglingly stupid people in the world. Now, if that graph was replaced with something like it takes 10 barrels of shale oil to replace one barrel of conventional crude, and 5 barrels of tar sands oil it would be more representative of reality. It seems that there are a number of mindbogglingly stupid people who are interested in something other than reality. Chances are they are selling something!

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