Friday, September 23, 2011

US Becoming Oil Independent As Peak Oil Moves Decades Away

Massive new finds of oil in the Western Hemisphere and Africa, unconventional oil reserves in Canada and Venezueala, and new technology's ability to get more oil out of old, depleted fields are just some of the reasons why Peak Oil is now thought to be decades away rather than years. 

Daniel Yergin, the author of both The Prize and The Quest, states that 1 trillion barrels of oil have been produced by the oil industry since its birth, that 5 trillion barrels are in the ground, of which 1.4 trillion are recoverable technically and economically at today's prices and with today's technology.  He for one predicts an oil "plateau" around mid-century.

Even in the USA oil production since 2008 has been increasing and now is up 10%. This is a major reversal.

Joined with large increases in biofuels and lower oil consumption driven by rising efficiency, the growing US production has driven down net oil imports from 60% of total oil consumed here to 47%, according to the Energy Information Administration. This is big, good and so little discussed news.

 We have begun the journey to oil independence and need to finish the trip rapidly.

Just look at the Bakken field in North Dakota for a demonstration of why US oil production is up.

In 2003 Bakken ,000 barrels per day but is now at 400,000 barrels per day.  The USA consumes about 19 million barrels per day so Bakken provides 2% of USA consumption. 

Another way to measure Bakken alone is to compare it to our oil imports.  Net oil imports are a bit more than 9 million barrels per day so that Bakken is equal to about 4% of our imports.

Bakken is not alone by any means in the tight oil field category, and tight oil field production in the USA may reach 2 million barrels per day.  Exploration is underway in Ohio as one example of likely new oil production.

Global production capacity is now 92 million barrels per day in 2010 and growing.  Fierce debates erupt over how much capacity can or will grow.  Yergin believes production grows to over 110 million per day by 2030.

Does the rising world production of oil mean low prices ahead or that the world has inexhaustible supplies?  No to both. 

Most of the new oil that is being found or produced from unconventional sources is much more expensive than the Saudi oil fields.  Generally an oil price of about $80 per barrel is needed to recover costs at the most expensive, deep water finds.

And while world oil production is growing, world oil demand is growing more rapidly. John Hoffmeister, the retired head of Shell North America, believes world oil demand could jump 10 million barrels per day by 2015.

China consumes 9 million barrels of oil per day and may reach 15 million by 2015.  India is at 6 million and could be at 9 million by 2015.  The rest of the world may add another 1 million barrels per day by 2015.  All oil demand growth will likely be outside Europe and North America.

Absent a global recession or depression, world oil markets are going to be tight over the next 5 years, with prices higher than lower.  In the modern world, the way to low prices, like the $30 per barrel in December 2008, is ruin or depression.

High oil prices are economically damaging but low prices signal economic collapse because petroleum remains the dominant global energy fuel.  Every day America delays moving to natural gas, electrricity, efficiency, and domestic production to replace foreign oil puts America's economy and environment at more risk.


  1. I used to be more of a pessimist on this issue, but shale gas has really changed my perspective. But the math here seems wrong.

    I am not sure how Yergin gets a peak at mid-century with 1.4 trillion recoverable. At 92 million barrels a day, we consume about 33 billion barrels per year. Even if production stays at this level, that is one trillion barrels in 30 years and the whole 1.4 trillion in 42 years. So 150 years to consume the first trillion, 30 years to consume the second trillion. If the rate of consumption goes up as is predicted here, that trillion barrels will be gone even sooner. The way it will work is that some oil will be produced after the peak - its not one day at 100 million barrels a day and the next day zero. The Hubbert curve predicts that the peak comes when roughly half of the oil is gone but other researchers see the role of technology as putting the peak off to a later date but committing ourselves to a steeper decline after the peak. So if there is a total of 2.4 trillion recoverable, the halfway point would be at 1.2 trillion. That would give us six years at current levels of consumption to the halfway point of 1.2 trillion barrels. If the peak comes at 1.8 trillion, that would give us 18 years and put the peak off until around 2030 but an even steeper decline after the peak. This is all assuming that 1.4 trillion barrels remaining is the right number.

    It is still a reality that many of the larger super giant fields that have been producing for decades will soon will be in decline. It's going to be hard to make up for them with Eagle Ford and Bakken and tar sands.

    We should not be complacent on this issue. It's still a reality and nothing jolts the economy like high oil prices.

  2. One wrinkle to consider is that production capacity is about 92 million barrels per day today. Consumption has been closer to 86 million barrels per day.

    Most would judge high oil prices to be ahead no matter the impressive finds and production gains because one-third of the world's population in China and India are moving into cars and otherwise consuming dramatically more oil than 10 years ago.

  3. I originally wrote a lengthy response to this, but am opting for a simple point instead: Using rising production now (production that was in decline) as an indicator that production will continue to rise for decades is fallacy.

    Ok, now for the lengthy response...

    One data point, or even a few data points over-simplifies a very complex picture. "US Becoming Oil Independent As Peak Oil Moves Decades Away"... REALLY? Last time I checked, we are still consuming more than we produce. Imagine if your kids graduated school, and you still paid half their expenses, and they declared, "Look! We are becoming independent, Dad"... without any clear way to pay for their full share in the future. My dad cut me off when I graduated. I became independent; to me "independet" is a binary term. You either are or you aren't.

    I'm not a peak oil person, but I do know that the oil and gas is getting harder to access and extract (consider all of the input needed to drill a deepwater well, or a shale well... it is about as close to rocket science as you can get without leaving the ground). Technology may have allowed us more time, and access to new resources (delaying the inevitable), but to pretend that we can save ourselves from continually rising costs in the face of continually rising global demand or somehow eventually account for the large portion of the foreign oil that we currently consume soley by drilling more is just wrong in my mind. All of these new plays (shale and deepwater) offer high IP with less longevity than traditional plays at a higher and more demanding cost, not just in terms of money, but natural resources (consider the sand, water needed. or the canadian oil sands... mining for oil).

    I think this post gives a very false sense of hope. The status quo is not sustainable on the 100 year time scale. We might be able to buy ourselves time through technology at considerable costs, but that does NOT mean we are becoming independent. It just shows how dependent we are by revealing what lengths we will go to to find more oil and fossil fuels. Your data point means we are reducing our dependence on outside sources slightly, for now. Just to maintain production, we need huge amounts of drilling to constantly replace used reserves with new finds.
    Go find a resource pyramid, John. And look at it!

  4. I appreciate the post. I believe that the USA must eliminate oil imports because I think the price of oil will be damaging to the USA economy several times over the next 10 years. I also believe oil imports are a major national security risk.

    I am glad that Oil imports have declined 20%.

    5 things have to happen to eliminate the now 47% of our oil that is imported. It was 60% as recently as 2005.

    Number 1 is to use all oil--domestic or imported--much more efficiently. The two increases in the CAFE standards in the last 2 years are a key to the US eliminating oil imports and being oil independent.

    Number 2 is to substitute biofuels for oil and that is happening. Ethanol production is now 900,000 barrels per day, up from 700,000 barrels in 2008. Biodiesel production trippled in 2010 and is now at 1 billion gallons per year and growing.

    Number 3 is to substitute natural gas for oil and that is happening but too slowly and must be accelerated. I support the Natural Gas Act and other initiatives to use domestic gas in transportation.

    Number 4 is to substitute electricity for oil in transportation.

    Number 5 is to see recent boosts in domestic production continue.