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Tom Whipple: When Will Oil Production Peak?


Next to global warming, the end of our ability to produce ever increasing amounts of oil is one of the most serious developments that humanity faces in this century. Ten years ago, many were concerned that global oil production was about to peak; however, just as oil reached $148 a barrel and gasoline climbed to $4 a gallon in 2008, a deux ex machina arrived in the form of “shale oil.” The technology of drilling horizontal wells in dense, oil-bearing rock and then fracturing the sides of the well with high-pressure water had been around for many years but was always deemed too expensive for commercial exploitation. When oil prices climbed from $20-$30 a barrel to over $100, the fracking of shale looked profitable and, 10 years later, the U.S. is producing some 8.5 million barrels of shale oil per day. The profitability of the extraction process is a very open question as billions of dollars have been lost producing shale oil already.

The financial press was delighted that American ingenuity and technology had conquered the threat of shrinking oil supplies and the theory of peak oil was relegated off to a future that was so far away that it could be ignored. Few noticed, however, that in the last 10 years, conventional (non-shale) oil production hardly grew and that continuing economic growth was fueled primarily from the shale oil fields. Today, it is starting to look like that when U.S. shale oil production peaks, world oil production will be at or very close to peaking.

When the modern notion of peak oil was conceived some 20 years ago, it was based on the geology of oil production, i.e., there was not enough oil left that could be economically extracted. The theory that oil was about to run short was not an altogether outlandish idea, for the world currently is consuming some 36 billion barrels of oil each year while finding less than five billion. This, of course, is not a sustainable situation. It is interesting that in recent years some oil companies have adopted the practice of lumping new oil and natural gas finds together as “barrels of oil equivalent” leaving the impression that natural gas finds are really more oil.


Keep in mind that the term “peak oil” means that world oil production reaches its peak; there could be many reasons for the peak. For example, someday, the climatic situation will become so bad that legislation and policies will be implemented to reduce the combustion of oil and other fossil fuels drastically. New technologies may be in the offing which could produce pollution-free energy at a cost far below that of fossil fuels, making our current sources of energy obsolete.

Then we have an array of geopolitical disputes, wars, trade wars, sanctions, etc. that could lead to significant reductions in oil production. An economic recession like we had 10 years would almost certainly lower demand for oil so much that new drilling would be curtailed. Shale oil wells deplete so rapidly that in three or four years they are effectively gone. A few years without new drilling for shale oil could see a reduction in oil production by millions of barrels per day.

Many of these factors which could lead to lower oil production are so intertwined with other factors that would tend to increase production that it is impossible to sort out an estimate of the future. The critical question we should be watching is whether the peaking of oil production is likely to come in the next decade or so, or whether we can keep growing oil production for the next few decades as optimists are predicting.
Several developing situations should be watched closely for clues as to when the peak will be reached. As noted above, U.S. shale oil production has carried the burden of allowing economic growth for the last 10 years. However, except for the Permian shale oil basin in Texas and New Mexico, it looks like there is little growth left in the other half dozen U.S. shale oil basins. For now, it seems likely that if production from the Permian goes into decline, then the world’s oil production stops growing.

Moreover, concerns are growing that electric cars might reduce the demand for oil significantly in 10 years or so. Should such vehicles start replacing internal combustion vehicles, either by fiat, as in some European countries, or because of their many advantages, demand for oil could drop significantly.

As we have learned from experience, however, it is possible that significant new sources of oil will be found in the decade ahead. Southern Argentina seems to have a lot of potential for extracting shale oil by fracking. China and Russia both say they have significant reserves of shale oil waiting to be produced. Moscow is enthusiastic about how much oil it will find below the Arctic ocean after the polar ice cap melts. All this says there is no guarantee that the oil we currently know about is all that we will ever discover. Even if new sources of oil are found, keep in mind that we are presently using some 36 billion barrels of oil each year, and this will increase if the global economy continues to grow at projected rates.

In addition to watching oil production from the Permian Basin we need to keep an eye on the perturbations in the Middle East. Should tanker traffic through the Straits of Hormuz be blocked by hostilities, or production be slowed by increased hostilities, we would see unaffordable gasoline very quickly and even a peak to world oil production.

Although the production of renewable energy, mostly wind and solar, is growing rapidly, the demand for energy is growing so fast that we are likely to be burning even more fossil fuels 20-30 years from now than we are today. The climate, of course, will be much worse.


10 Comments on "Tom Whipple: When Will Oil Production Peak?"

  1. Coffeeguyzz on Thu, 20th Jun 2019 7:55 pm 

    This guy is starting to ramble worse than Gail.

    Still, it is shorter than the ‘War and Peace’ length efforts that Ms. Tverberg keeps churning out.

    Guess that’s what happens when you’ve been wrong for the past 20 years and still feel that you have something to say.

  2. Anonymouse on Thu, 20th Jun 2019 8:51 pm 

    Nony, being wrong, and having nothing to say, hasn’t stopped you from flapping your virtual gums non-stop for years in the slightest either.

  3. Shortend on Thu, 20th Jun 2019 11:01 pm 

    Hoping they can squeeze the towel for another decade… that time I’ll be too old to give a hoot.

  4. makati1 on Fri, 21st Jun 2019 1:46 am 

    Actually Short, I’m hoping the who oily farce collapse’ tomorrow. $300/bbl oil? Go for it!

    It is that or an eventual nuke swap, I think.

    The sooner the mad dog US is put down the better for the other 7.3 Billion of us across the planet.

  5. Antius on Fri, 21st Jun 2019 2:05 am 

    The US Shale oil empire was built on zero interest rate debt and relatively high oil prices. The next recession will trash oil prices, but the US central bank will likely reduce rates even further and turn on the quantitative easing tap. The next crash will destroy the value of many currencies making the dollar relatively strong.

    Who knows what will happen. Next couple of years we find out.

  6. Anonymous on Fri, 21st Jun 2019 9:17 am 

    Way more readable than Gail. But still a typical analytically challenged peak oiler.

    For instance, the comments on BOE. The funny thing is I completely agree BOE is a bad metric and overestimates oil production. But “recent years”? This guy has been writing about PO for over a decade. And this is news to him?

    It’s almost as butt-silly as when the peakers talk about individual well declines with a “hey nobody has reported individual shale well declines”. When it has actually been reported ad nauseum a gazillion times even in the regular press. And definitely Groundhog Day over and over for a decade by the peak oilers.

    Plus, for that matter, anyone can convert to oil, not oil equivalent. Companies report oil in their 10K (and even IR decks). And of course overall country, world, etc. production numbers are easily given in oil only. Maybe some IR deck talks about BOE for a well or the like. But so what? Peakers care about things at a meta level. And that info (even down to the state or play in the US) is available in great EIA data series.

    What’s really funny is to look at the peak gas whining and articles from Berman, Hughes, etc. Yeah, conventional declined. Because shale gas kicked its ass. 10 years later and prices are down below $3 from $10+. And production is up 70%. So it ain’t demand dropping. It’s supply exploding. There’s a reason, Rock stopped drilling the shallow Gulf. It’s because shale nuked the price.

    Oh…and about that Red Queen. We’ve got less than 200 gas directed drills (and less than 800 oil). And we are putting out 100 BCF/day of lower 48 natgas. And growing 6-10 BCF/d/year. Art Berman sit your ass down!

  7. Coffeeguyzz on Fri, 21st Jun 2019 9:59 am 

    Know Knee

    As of this post … HH IS $2.16/mmbtu, which is less than 1/4 WTI price in energy equivalence.

    India is rushing FSRU LNG terminals to be online in the coming years.

    China likewise.

    Small outfit – Edge – is shipping LNG from NEPA to a Rhode Island utility via truck using Argentinian hardware (Galileo).

    People not following the ‘gas story’ closely will be stunned 5 years from now at just how extensively natgas in general, and LNG in particular, will have impacted the global energy markets.

  8. Chrome Mags on Fri, 21st Jun 2019 9:27 pm 

    What a lackluster article. For one, he never broaches the date of conventional peak (2006), or declining EROEI (reduced surplus energy) and its knock on economic effects, increasing financial stress around the world. Really boring.

  9. Shortend on Sat, 22nd Jun 2019 11:40 am 

    The big guestion….does Whipple Welsh on hisbets?
    Baker Mayfield doesn’t!
    Baker Mayfield isn’t a welsher.

    The Browns quarterback made good on his friendly (but expensive) wager with Giants running back Saquon Barkley regarding the 2018 offensive rookie of the year prize. Barkley won the award, so Mayfield commissioned a gold-and-diamond chain that says “QUADS.”

    That’s a reference to Barkley’s enormous upper legs, and a truncated version of a nickname for which Barkley doesn’t particularly care: Saquad.

    “It’ll say ‘quads’ on it,” Mayfield said in February, via Mary Kay Cabot of “Not ‘Saquads’ but just ‘quads.’ The two extra letters in there cost a little bit extra money, so we’ll stick with just ‘quads.’”

    Barkley was bracing for something like that, and possibly worse.

  10. Michael Griffin on Thu, 16th Jan 2020 1:54 pm 

    People in the know, like, Mr. Whipple use copious facts. You deniers have nothing but personal insults. Turn off Fox news and learn to recognize the manipulations of the fossil fuel industry.

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