Peak Oil is You

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Page added on January 30, 2018

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Revisiting Peak Oil; entering the era of abundant oil

Revisiting Peak Oil; entering the era of abundant oil thumbnail

Rather than witnessing peak oil supply or oil scarcity, we are now seeing a flood of new oil supplies across the world. Rather than worrying about where all the oil we will need in the future is going to come from, we are now talking about when global oil demand will peak. The timing of this is impossible to predict but what is clear is that we are entering the era of abundant oil and that is a paradigm shift for the whole energy industry as well as global geopolitics.

Peak oil used to be seen as the point in time when the production of oil would reach a maximum before starting to decline. This would happen because new oil supplies were impossible or too expensive to be extracted and the general view was that, once the point of peak oil had been reached, oil prices would rise sharply, which would in turn have a devastating impact on the global economy. This theory has subsequently been shown to be wrong thanks in large part to technological improvements which have enabled the cost effective and incredibly fast extraction of vast new oil resources from shale, tar sands and deep seas.

Today, peak oil is less about oil supply and more about peak oil demand, the point in time when oil consumption reaches a maximum as new technologies such as electric vehicles become better and more cost effective than oil based transport technologies. Some commentators such as Goldman Sachs are talking about peak oil demand as early as 2024.  However, the exact point is difficult to predict because of the complex array of factors which determine both the demand and supply for oil.  However, the combination of more plentiful supply and lower than expected demand does mean that we are now entering the era of abundant oil.

In this type of market environment, normally what happens is that prices fall as the low-cost players attempt to gain market share by trying to drive competition out of the market.  Saudi Arabia attempted this strategy in 2014 which is a large part of the reason why the oil price fell from $90 to a low of $30 in January 2016. This price fall did in turn impact the costlier US oil production which fell from 9.6m barrels a day in April 2015 to 8.5m barrels in September 2016. However, prices have since risen, largely because of the Saudi Arabia brokered OPEC deal to cut oil production, and US oil production is now above April 2015 levels.

Why this happened is critical to understanding what will next happen with the oil price. Saudi Arabia and many other major global oil producers are so dependent on oil that they need oil prices above $50 to balance their government books.  And this will probably become the base price for oil going forward until these economies reduce their economic dependence on oil. It is thus not a surprise that King Salman of Saudi Arabia, and the crown prince, Mohammed bin Salman are restructuring the Saudi economy, and with their new Vision 2030, they are making attempts to develop an innovative and sustainable economy. They are doing so because they believe in the era of abundant oil, and despite the recent oil price rally to $69, it makes much more sense to extract as much oil out of the ground as possible, and as soon as possible, as the alternative would to never extract such oil.

energy and carbon

16 Comments on "Revisiting Peak Oil; entering the era of abundant oil"

  1. Jef on Tue, 30th Jan 2018 9:54 am 

    So the patient is getting quite old, their body is starting to deteriorate and then… they have a heart attack. At the hospital recovering the Dr comes in and says “great news, you didn’t die so therefor you probably never will. in fact you will get younger and healthier for quite awhile yet”.

    Makes sense to me.

  2. a on Tue, 30th Jan 2018 10:25 am 

    Your chart is for US crude oil production. Even with the increased production due to shale oil (which may be a flash in the pan and unsustainable), the US is still a net importer of oil, now importing 40% instead of 50%. All this really shows is that it made more economic sense to invest in speculative technology at home than to pay for importing that 10%.

  3. Dredd on Tue, 30th Jan 2018 10:33 am 

    “entering the era of abundant oil”

    The planet poison has always been abundant.

    That is how the predicament came into being (Oil-Qaeda: The Deadliest Parasite Of Civilization).

  4. Boat on Tue, 30th Jan 2018 10:56 am 


    Not 40%. Go back to google and try again. Remember you said net.

  5. I AM THE MOB on Tue, 30th Jan 2018 11:24 am 

    Why Is The Shale Industry Still Not Profitable?

    Historically speaking companies that dont make any profits go bankrupt!

  6. I AM THE MOB on Tue, 30th Jan 2018 11:24 am 

    As M. King Hubbert (1956) shows, peak oil is about discovering less oil, and eventually producing less oil due to lack of discovery.

    IEA Chief warns of world oil shortages by 2020 as discoveries fall to record lows

    Saudi Aramco CEO sees oil shortage coming as investments, oil discoveries drop

    Peak Oil Vindicated by the IEA and Saudi Arabia

  7. I AM THE MOB on Tue, 30th Jan 2018 11:26 am 

    The US Shale Business is “not profitable” and can’t fund itself whether oil is at 100 or 50 dollars a barrel

    MIT Technology Review: Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence

    The world’s largest oil trader Vitol says US oil production will peak in 2018

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude

  8. I AM THE MOB on Tue, 30th Jan 2018 11:27 am 

    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.

    What is mentioned far less often is that annual oil discoveries have lagged annual production since the 1980s.

    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.

    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.

  9. Mr. Pockets on Tue, 30th Jan 2018 12:04 pm 

    great responses, recapping everything we’ve known for a while now. But more preaching to choir. These kinds of “official” declarations by the EIA need to be countered in the mainstream, or if not, non-profit news sites.

  10. Antius on Tue, 30th Jan 2018 12:50 pm 

    More cornucopian drivel from people that have never researched what they talk about and end up parroting the popular feel-good opinion of the day.

    Talking about peak demand makes these people feel better, for the simple reason that it suggests we are adopting the end of oil voluntarily rather than having geological reality force it upon us. This conception is blind to the way that net energy decline actually plays out.

    In a perverse way they may actually be correct. The approaching economic correction will ruin hundreds of millions of people worldwide. Driving will be unaffordable to them; demand for material goods will decline (along with the associated transport oil demand)as fewer people will be able to afford them; Travel will decline generally as disposable cash drops off and what remains is increasingly concentrated in the hands of the 1%.

    Geological reality is effectively creeping in through the back door. Supply will decline because expensive oil is bankrupting the world economy.

  11. Sissyfuss on Tue, 30th Jan 2018 1:28 pm 

    It is a given that Mr Reids article has rendered extraneous, superfluous, and de trop. I shall miss it both bitterly and insouciantly. It irks me though that the aforementioned Monsieur Reid used the oxymoron ” market economy.”

  12. ????????????????????????????????? on Tue, 30th Jan 2018 5:33 pm 

    Shale is profitable only cuz of the worthless debt dollar.

  13. pat on Wed, 31st Jan 2018 8:23 am 

    the shale oil is just hugely overhyped and the last resort to continue BAU for little longer. this article(BS) would have made sense in 2016 and not presently. I strongly believe the signals of oil shortages are already visible and only to get accentuated, accelerate by end of 2018. god bless. prepare..

  14. Sissyfuss on Wed, 31st Jan 2018 9:01 am 

    Agree Pat. All of The Grifters machinations are designed to buy us a few more years of BAU. Though I’m sure that idea isn’t contained in any of his weakened neurons. And the oxymoron I was referring to in my previous post before the auto incorrect changed it was “market environment”, two mutually exclusive entities.

  15. Boat on Wed, 31st Jan 2018 11:40 am 

    I sense this growing tide of doom picking the end of 2018 as a moment in time oil production supply just can’t keep up any more. The gang has apparently jetsoned the former very popular ETP (low demand/low prices) concept. The new approach seems to follow two new trends. Shale will run out of steam and normal depreation of convential is just to high for the world to overcome. You doomers weigh in and tell me if I got it right.

  16. Sissyfuss on Wed, 31st Jan 2018 2:31 pm 

    ” Normal depreation of convential is just to high.” WTF, Boast. Someone’s ” too” high for sure.

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