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Page added on March 18, 2023
Did The EIA Finally Get Realistic About U.S. Shale Output?
Readers will recall that, for the last several months, I have noted that US oil production per the EIA’s weekly Petroleum Status Report was inconsistent with the data from the EIA’s monthly Drilling Productivity Report (DPR)
The graph below shows the state of play as of last week. The two red arrows at right show the contradictory trends, with total oil production essentially flat while shale oil production is shown rising at a healthy clip. I have noted that this contradiction would have to be resolved by either increasing the weekly numbers or reducing shale oil output.
We now have the answer.
The graph below shows the state of play as of March 14th, when the EIA issued the March DPR. It shows simply massive downward reductions in US shale oil output. In the March report, shale oil output from the key plays is reduced by 443,000 bpd for January and 250,000 bpd for February. If we go back one more month to the January DPR, shale oil production has been reduced by 542,000 bpd for December 2022. This is a huge revision, more than 4% of total US crude and condensate production over a two month period.
With this revision, as the current graph (below) shows, US shale oil production is largely flat over the last four months, and trends in shale oil supply are consistent with the overall US crude oil supply (including conventional onshore wells, Gulf of Mexico offshore, and Alaska). I need hardly point out that this is not good news, as the visible peak of horizontal oil rigs is now beginning to pair up with plateauing oil production, just as we would expect.
The most plausible interpretation is that US crude and condensate production will stagnate for the balance of the year. As I wrote in The Oil Supply Outlook (Feb. 2), the plateau has been expected since at least 2017 (see Fig. 6), so it should come as no surprise. I think the surprise, however, will be in production trends going forward. The EIA sees a long plateau in US oil production. I think it is more likely that we’ll see the beginning of an erosion in supply from 2024.
In light of this, President Biden’s approval of drilling in Alaska is not hard to understand, but don’t expect it to have a material impact on supply anytime soon.
By Steven Kopits of Princeton Policy Advisors via Zerohedge.com
One Comment on "Did The EIA Finally Get Realistic About U.S. Shale Output?"
theluckycountry on Sat, 18th Mar 2023 3:05 pm
When the numbers are run, capital investment, repayment with interest, the shale industry as a whole never made a red cent.
But what it did do, as hundreds of millions of barrels of oil were used to power the process, and millions of tons of sand and chemicals were poured down those holes, was allow for a large expansion of debt.
Debt is what allows the industrial economy/engine/way of life to continue. An ever increasing amount of debt, borrowed from a future that can never repay it. It’s a beautiful shell game and the debt money is real in that it can buy real things like maserati, Lürssen yachts, Gulfstream jets.
For you see while the amount of debt money is ginormous and real, it cannot be used to lift the living standards of the average person. That is because the labor of the average person and the remaining minerals and oil are used to backup the fraction of that money that finds it’s way into ‘Real’ things. The real standard of living in the West, and the developing world, has actually been falling for decades.
Yes you have a new iphone, but your wife has to work longer hours. Your house was super expensive, but it’s made out of garbage materials and will be worthless in 40 years. From the junk food you eat to the crap roads you drive on to the quality of your recreational activities, all has declined (for the majority) in real terms. Nutritious healthy fresh food meals have been replaced by cheap processed foods. Theater and dancing and the occasional walk in move has been replaced by cheap TV programming.
But if you have access to the fresh debt money, as a wealthy business or corporate leader/ major investor, well then the sky is the limit, literally. And Shale oil? It was just another of the last gasp attempts to keep the oil flowing at ever higher rates to fuel the addicted world. But it never would have been undertaken if the people doing it had to sit down and run it like a conventional business, one that provided a real return for the investors. It just absorbed endless amounts of new debt money, a decent percentage of which was siphoned off to buy those maserati, Lürssen yachts and Gulfstream jets for the corporations running it and for the Wall street players peddling the companies.