U.S. crude oil production is falling because investments into shale oil production dried up as the price of crude oil fell below $60/bbl. Companies aren’t interested in putting new capital to work, and because these oil fields deplete, that means crude production is falling. Why is that significant? Because most of the world’s new oil production in the past 6 years has come from U.S. shale oil fields. It is hard to overstate the global importance of the new crude supply that came online in the U.S. since 2008
THE COST FACTOR
With investments on the decline, and more than enough news from the industry highlighting the financial difficulties many oil producers find themselves confronting, expectations of unlimited amounts of oil at the ready are [no pun intended] a pipe dream. Fossil fuels don’t spontaneously extract themselves, for one thing.
And as Robert Rapier notes in the comment above, most of the surge in production over the past few years came from shale oil fields which are a much more expensive undertaking; and given the reality that fracked wells deplete at a very high rate, the need to stay on a fast-moving treadmill of drilling cannot sustain itself.
Another important factor is that the prime locations where tight oil can be found in those fields are the ones tapped first, which is a perfectly reasonable business decision to make.
But reality dictates that the lesser sources must then be explored. That secondary process is not free, and the results will be what any reasonable person would expect from those Plan B efforts. Without substantial investments, production efforts will grind much more slowly. And since fossil fuels are similarly bound by reality, fewer production efforts lead to fewer barrels of oil. Not rocket science.
High prices are a necessity to the oil industry now much more dependent on unconventional resources like the shale/tight oil fields, and there aren’t any high prices to be found. What happens as a result requires only another dose of second grade math.
If the high prices return, the flip side of industry delight is consumer dismay. That leads to reduced usage because of high price’s impact on their personal expenditures, and the increased demand-decreased demand-high price-low price wheel spins again. That’s the economic system sustaining us, and those drawbacks cannot be ignored or explained away by Happy Talk, no matter how earnest.
Empty assurances about the resources left untapped have a limited shelf life in the face of these and related facts and challenges of maintaining fossil fuel production at the levels needed—if not today, then soon enough. The sooner those peddling the repetitive but pleasant-sounding assurances about the future of our fossil fuel supplies, and instead start devoting their considerable skills to helping rather than hindering the transition, the greater our chances of actually managing an acceptable—but certainly not ideal—move away from society’s massive dependence on a finite supply.
That’s not rocket science, either. The question remains: will the deniers appreciate that fact and begin participating rather than obstructing?
~ My Photo: Bass Rocks, Gloucester MA – 05.22.16 ©
We face a choice going forward. There’s a kind of false dichotomy, a false choice that we’re being presented between policies on the left or policies on the right. It’s not left or right, it’s forward or backward. It’s a choice between investing in the future, leaving a better future for the next generation just like parents and grandparents did for us, or ignoring these hard choices and sentencing the next generation to a lower standard of living, to fewer opportunities, and a future that we could do better by. [With apologies for prior incorrect attribution: former] USDOT Deputy Secretary John Porcari
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Peak Oil Matters offers observations and insights about the realities of declining fossil fuel production, and its impact on our future well-being