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US shale boom is over, energy revolution needed to avert blackouts

US shale boom is over, energy revolution needed to avert blackouts thumbnail

I hate to say I told you so, but…

In 2012, the International Energy Agency (IEA) forecast that the US would outpace Saudi Arabia in oil production thanks to the shale boom by 2020, becoming a net exporter by 2030. The forecast was seen by many as decisive evidence of the renewal of the oil age, while informed detractors were at best ignored, at worst ridiculed.

Among my many reports exposing the geological and economic fallacies behind the shale boom narrative are this, this, this and this.

Even here on the Guardian, one headline declared the IEA report shows that “peak oil idea has gone up in flames.”

But the IEA’s latest assessment has proved the detractors right all along. The agency’s World Energy Investment Outlook released this week says that US tight oil production – which draws largely from the Bakken in North Dakota and the Eagle Ford in Texas – will peak around 2020 before declining.

The new analysis puts an end to the ‘100 year supply‘ myth widely promulgated by industry, and moves closer to the more sceptical assessment of a US tight oil peak within this decade.

The IEA report says:

“… output from North America plateaus [from around 2020] and then falls back from the mid-2020s onwards.”

The shortfall will make the US, and countries in Europe looking to import from America, increasingly dependent on Middle East supplies:

“Yet there is a risk that Middle East investment fails to pick up in time to avert a shortfall in supply, because of an uncertain investment climate in some countries and the priority often given to spending in other areas.”

The IEA pointed out that in the wake of the Arab spring, Middle East oil states are feeling the pressure to divert massive oil subsidies which maintain production into more social spending to alleviate instability. If they don’t, they could topple.

These countries already pour $800 billion in annual oil revenue into energy subsidies – and if they fail to cover the predicted shortfall due to the post-peak fall in US output, by 2025 the average cost of a barrel of oil could climb up by $15.

This March, when I broached them about the danger of an imminent oil shock, I was told confidently by a spokesperson at the UK Department for Energy and Climate Change that there was no risk of the lights going out – UK energy policy had it sorted.

Now IEA chief economist Fatih Birol says:

“In Europe we are facing the risk of the lights going off. This is not a joke.”

We need $48 trillion of new investment to keep the lights on – and it’s far from clear that investing in increasingly expensive unconventional oil and gas is going to cut it, without serious impacts on the global economy.

Currently, already, the IEA report reveals that over 80% of oil company investment is going into making up for exhausted fields where production is in decline. The agency also calls to ramp up investments in renewables and increasing efficiency, along with regulatory reform to incentivise investments, as part of the package.

While the fossil fuel empire is crumbling, the renewable energy sector has received 60% of total investment in power plants from 2000 to 2012.

Those who keep banking on fossil fuels to solve our energy and economic woes should take stock – they ain’t the answer. The time to ween well off was yesterday.

The Guardian

13 Comments on "US shale boom is over, energy revolution needed to avert blackouts"

  1. Davy, Hermann, MO on Mon, 9th Jun 2014 8:09 am 

    Finally we get a dose of reality. Bad news is good news on Wall Street so don’t expect much there other than more Ponzi BTFD activity. The real changes may come for those from the Lobby of plenty who may have second thoughts about preaching plenty at the extremes we have witnessed in the past few years. Possibly we will see a little more sobriety. With this IEA news those who read between the lines and those who realize the investments the IEA proposes is folly will undoubtedly take pause from the last few years of the shale gold rush and the AltE renaissance. This is truly a pronouncement at the highest levels the “Houston we have a problem”. Those savvy investors who are not going to go on the talking head stage will react accordingly. The talking heads will continue the party talk and keep people near the punch bowl no doubt but they will increasingly look naked. Can you imagine the bar on the Titanic when the first jolt of the iceberg collision occurred? I imagine folks were sipping exotic cocktails and mentioning the unsinkable nature of the ship and all was well!

  2. rockman on Mon, 9th Jun 2014 8:23 am 

    The one big problem I’ve had with all the various projectionists (positive and negative) is very simple: not once have I seen anyone present a f*cking map showing each of those future drill sites. One can plot every damn metric out there to make a forecast and none of them are worth a damn IMHO because companies don’t decide to drill or not drill based on any of those metrics. Their geologists draw maps. The maps show what potential drill sites there are to left to drill based upon specific economic assumptions. It doesn’t matter if IEA or anyone else says there are X thousand Eagle Ford wells left to drill: if there isn’t a circle on some company’s map for each of those future locations they ain’t going to be drilled.

    That’s how the oil patch has functioned for 100 years. It isn’t going to change regardless of anyone’s expectations or requirements.

  3. paulo1 on Mon, 9th Jun 2014 8:25 am 

    Good comment, Davy.

    We are witnessing a monumental shift with implications of change in everything. As inviduals we can’t do it alone, but if this isn’t a call for attitude change and realistic prepping, (I’m not talking about those doomsday prepper idiots on tv), then I don’t know what is?

    I am picking up some storage bins today, you know the kind I mean, the little blue boxes on racks to organize nuts and bolts per size and type. They have some terrific sales right now on tools and things like that…as a lead up to Fathers Day. Years ago I ‘liberated’ a set of drawers out of a discontinued textile/sewing classroom at a high school. 45 good 3/4″ plywood drawers. I thought this would serve but you can’t see what you have/need. Instead, I use them for parts and will stock the bins with fasteners. A reommendation I make is to pick up building materials gradually, over time. Every so often I grab a 50lbs box of nails and big boxes of zinc 3″ deck screws. Invaluable. Common sense acquisitions, imho.


  4. Davey on Mon, 9th Jun 2014 9:01 am 

    Paulo, we are on same wave length. I am making my own parts, hardware, and tool supply effort. It is common sense in normal times but doubly so today!

  5. Kenz300 on Mon, 9th Jun 2014 9:33 am 

    Quote — “While the fossil fuel empire is crumbling, the renewable energy sector has received 60% of total investment in power plants from 2000 to 2012.

    Those who keep banking on fossil fuels to solve our energy and economic woes should take stock – they ain’t the answer. The time to ween well off was yesterday.”

    How Fossil Fuel Interests Attack Renewable Energy

  6. shortonoil on Mon, 9th Jun 2014 10:13 am 

    The shale boom was never been a factor in alleviating the world’s energy situation. Half of what is extracted is a low grade hydrocarbon chemical feedstock, and the world’s economies have never been powered by feedstock. We are already in the decline phase of the oil age, and world economies will continue to show increasing stress as the decline progresses. Shale has made a few banks, drillers, and service companies rich, many more investors will eventually pay the price. What happens to the shale industry will have no long range consequences for society, the energy supplying fields of the world are in decline. Without them the wheels will grind to a halt.

  7. Northwest Resident on Mon, 9th Jun 2014 10:41 am 

    “Shale has made a few banks, drillers, and service companies rich..”

    Don’t forget about the Public Relations propaganda specialists that put out daily articles heralding the wonders of shale oil and the magnificent investment opportunities in the shale oil plays. Those guys are probably making a few bucks off of all the hype too.

  8. Dutch on Mon, 9th Jun 2014 10:48 am 

    Good comment by Davy indeed.

    The fracking business probably means a delay of execution of BAU of ca. 12 years. And things will get tight in Europe faster than in the US.

  9. rockman on Mon, 9th Jun 2014 11:27 am 

    NR – And don’t forget all those private landowners. I estimate in the next 12 months they’ll collect about $40 BILLION in royalty from all the shale plays. And that does include previous royalty or lease bonus payments. And don’t forget the states. During 2013 the Texas state gov’t received $1 BILLION in production severance tax from just the EFS. That doesn’t include the severance tax from the boom in west Texas or corporate income tax.

    The shales are a very big pie with lots of different fingers in it.

    And for Dog’s sake can we stop calling it the “shale oil bubble”. The EFS is following the same pattern that ever oil trend ever developed in world has followed and will follow in the future: an initial ramp up in production followed by a plateau and then the eventual decline as the play is drilled up. The slope of the curves might vary from play to play but the track is the same.

    So all oil plays have been “bubbles” or none of them have been. Either way “bubble” is just a word.

  10. Northwest Resident on Mon, 9th Jun 2014 11:51 am 

    rockman — Thanks for adding to the “who’s making out big time on shale plays” list. Imagine being a regular Joe-Blow buying a patch of scrub brush out in the middle of the Texas no-mans-land ten or twenty years ago, just to get away from the city noise. And imagine getting the knock on the door from a shale oil company saying hello mister Joe-Blow, we’ll pay you ten million dollars to let us drill on your patch of scrub brush. Talk about hitting the jackpot!!!

    But another one for the list — How about all the shale oil drillers, pipe-layers and all the employees doing that work? I wonder what the stock market reaction would have been to seeing all those many oil workers standing in the unemployment line IF the shale oil plays had not taken off? My guess is that it would have been very difficult to assure the restless masses that we have plentiful oil and that BAU is in no danger, seeing all those unemployed oil workers. In that case, even the stupidest amongst would be able to put two-plus-two together.

  11. Pops on Mon, 9th Jun 2014 12:29 pm 

    Yep, Davey is right, the players make their cut regardless of which way the wind blows.

    But I was never worried about the pin-strippers, more about the regular joe who hears Diane Sawyer gush that the US will soon be the biggest EXPORTER (yes she did) and then makes his future plans based on the hype. Average people make decisions everyday and the hype is bound to have affected lots of decisions.

  12. Old Dog on Mon, 9th Jun 2014 1:48 pm 

    Hate to state the obvious here but those renewables have a huge subsidy from fossil fuels, ie. solar panels and wind turbines are made possible thanks to fossil fuels. Try make a wind turbine or solar panels solely from renewable energy and there isn’t a whole left over. Years ago, I was at a conference and the presenter said, ” We don’t need a solar technology so much as a solar culture.” and that world wouldn’t look anything like the one we have now.

  13. Makati1 on Mon, 9th Jun 2014 9:51 pm 

    We will not get to 2020. BAU is going to crash before that. Maybe next year? Tomorrow? We shall see.

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