Thanks Dolan, the proof of the pudding.
Economists have been telling us right along that demand "makes" energy so not to worry about physical constraints on production because profit seekers will find new tech and new resources in order to make a buck. I think it might be the greatest irony if now, back in the real world, shareholders are forcing international oil companies to switch from long term investment in "making energy" to short term returns because the shareholders want to make a buck - now. The intersection of "financialization" or "end stage capitalism" with Limits to Growth and peak oil.
Back in '08 before the crash Prof John Stevens wrote in "The Coming Oil Supply Crunch""
This report argues that unless there is a collapse in oil
demand within the next five to ten years, there will be a
serious oil ‘supply crunch’ – not because of below-ground
resource constraints but because of inadequate investment
by international oil companies (IOCs) and national oil
companies (NOCs). An oil supply crunch is where excess
crude producing capacity falls to low levels and is followed
by a crude ‘outage’ leading to a price spike. If this happens
then the resulting price spike will carry serious policy implications
with long-lasting effects on the global energy picture.
... The willingness of the IOCs to invest is constrained by
the adoption of ‘value-based management’ as a financial
strategy. Thus they are returning investment funds to
shareholders rather than investing in the industry. For the
NOCs, willingness is driven by depletion policy.
Increasingly this is motivated by a view that ‘oil in the
ground is worth more than money in the bank’.
Of course there was a momentary collapse in demand - along with a temporary surge in "new" tech and supply. But the supply crunch, or at least supply "crimp" has been right on time, early in fact, as witnessed by flat production and the record high average prices and for a record length of time. Which makes sense if 5-8 years is typical to develop a conventional reservoir. The notable statistic however is that the oil companies, both IOC & NOC have been investing record amounts of dollars since 2008 yet production is flat nonetheless.
Most ironic is that there are fewer and fewer places in which to invest - 50% of conventional reserves are in Iran, Iraq, Kuwait & KSA. The euphoria of drillers and service companies over the advent of profitable LTO in the US then is not surprising, they fell in love at first sight with the Red Queen.
We are right now at the point where Stevens predicted the lack of investment would begin to manifest in a lack of replacement capacity. The fact that IOCs & NOCs did invest - and invest big - but came up dry is a bad sign. Of course he was talking about conventional reservoirs, which take years to develop but last for years and decades. The fact that so much attention and dollars have been focused on US LTO is the most worrisome to me because wells there won't last for decades. Not only did it divert OilCo CapEx and attention to a flash in the pan that will not be repeated elsewhere in the world in any significant timeframe, it diverted public attention from the problem as well - witness the 625hp Corvette ZO6 at the Detroit Car Show this week.
So not only are we facing 4.5% yearly depletion from conventionals (Yergin, 2007) that may not be replaced, we are increasingly dependent on rapidly depleting unconventionals like LTO & deepwater; but also on slow to develop unconventionals like bitumen and kerogen that may not scale up fast enough to replace conventional depletion.
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https://www.gov.uk/government/uploads/s ... crunch.pdf
http://www.argutori.com/kreuz-set-sail/
http://fuelfix.com/blog/2013/12/17/shal ... -oil-boom/