Energy trends

The US Government's Energy Information Administration (EIA), the International Energy Agency (IEA), OPEC and many other well respected agencies publish data that supports the notion that global peak oil passed in 2012.  Peak oil in Saudi Arabia was passed in 2011.  New discoveries have not matched consumption since 1968.

The US Government’s Energy Information Administration (EIA), the International Energy Agency (IEA), OPEC and many other well respected agencies publish data that supports the notion that global peak oil passed at a point between 2005 and 2012 when crude oil production remained flat for a period of 10 years.  This has never happened before.

Saudi Arabia passed its peak in 2012.  The peak was passed in the North Sea in 1999.  New discoveries have not matched consumption since 1968. Conventional crude oil production increased by 1.5% per year between 1995 and 2005.  After 2005 conventional oil production was flat for 7 years and then started to fall.

The increase in the liquid energy supply since 2008 came from Tight Oils meaning Tar Sands, Fracked Oil and Ultra Deep Water drilling. This masked the decline in conventional crude oil production.

The sun is setting over fracking. Output is declining rapidly.

The current oscillation in oil price is indicative of a product whose production and consumption are nearly matched. The production of conventional crude is flat out and demand is falling in Europe and Japan. It is unclear how markets and governments will respond when the supply of the most important finite resource on the planet tightens and prices rise dramatically.

The current oscillation in oil price is indicative of a product whose production and consumption are nearly matched.  Production of conventional crude is flat out and demand in Europe and Japan fell dramatically in 2014.  It is unclear how markets and governments will respond when the supply of the most important finite resource on the planet tightens and prices rise dramatically.

As the UK Energy Research Centre (UKERC) which is funded by the British Government reported

“… a sustained decline in global conventional production appears probable before 2030 and there is significant risk of this beginning before 2020… on current evidence the inclusion of tight oil resources appears unlikely to significantly affect this conclusion, partly because the resource base appears relatively modest.“

“Crude oil production grew at approximately 1.5% per year between 1995 and 2005, but then plateaued with more recent increases in liquids supply largely deriving from NGLs, oil sands and tight oil”.

“These trends are expected to continue… Crude oil production is heavily concentrated in a small number of countries and a small number of giant fields, with approximately 100 fields producing one half of global supply, 25 producing one quarter and a single field (Ghawar in Saudi Arabia) producing approximately 7%”. 

“Most of these giant fields are relatively old, many are well past their peak of production, most of the rest seem likely to enter decline within the next decade or so and few new giant fields are expected to be found.“

“Crude oil production is heavily concentrated in approximately 100 fields which are responsible for delivering one half of the global supply.  25 fields produce one quarter of the total and a single field (Ghawar in Saudi Arabia) produces 7%.  Most of these giant fields are old and many are well past their peak of production.  Output in 37 out of 54 oil producing countries is in decline.  The rest will start to decline within the next decade.  The production of the big five oil majors (Exxon, BP, Total, Chevron and Shell) has fallen by 26% over the past nine years”.

If peak oil has passed then the remaining half of the planets known oil reserves will be consumed by 2082.  The contribution of tight oils like shale will not significantly affect the outcome because the resource base is so modest.  Canadian Tar Sands will deliver only 5 mil bll per day by 2030, which represents less than 6% of the IEA’s projection of all-liquids demand by that date.  Greater reliance on fracking will exacerbate the trend in global decline rates, since these wells decline very fast – typically 40% in the first year.

Increasingly oil production is moving into hostile environments

Hydraulic fracturing or “fracking” was supposed to be the new hope for the world. The “shale revolution” in the US was only possible because Wall Street injected US$ 1.5 trillion into fracking.  This is an investment that will never be recouped.  Poland was supposed to be a blessed in this regard.  66 wells were drilled. They produced only 10% to 30% of the gas flow that was needed for them to be commercially viable.  Of the world’s major energy companies only Chevron and ENI are still active in Poland’s shale gas sector.  The remainder have withdrawn.

The ratio between Energy Return on Energy Invested for crude oil is falling.  100 years ago it took the equivalent of one barrel of oil to extract 100 barrels.  By 2000 one barrel was needed to obtain ten.  In the more difficult conditions like very deeper water in the Gulf of Mexico it takes one barrel of oil to win seven.  Fracking oil only gives a yield of 5:1.  Tar Sands are as low as 3:1.  When one barrel of oil invested delivers only two the exercise makes no sense.  The term Peak Oil does not relate to the end of oil but rather the point where extraction makes no commercial sense.

The price of oil rose almost continuously from 1998 to the middle of 2014, starting at $24 a barrel.  There was a sudden spike to $150 a barrel followed by a collapse in 2008/2009, but the price then climbed to over $110 and remained there until 2014 when it fell below $50 a barrel.  The price rise since 2000 resulted in new exploration and development, but few new finds were made and these new finds have not increased overall production of conventional crude oil due to the decline in old fields.  This is indicative that oil production has peaked.  As the Energy Return on Energy Invested (EROEI) declines long-term economic growth will become harder to achieve and eventually the global economy will collapse.

Oil and gas supplies will be severely stressed at some point around 2040, and coal by 2060 as coal will be used as a substitute for other fossil fuels.  The real problems will become apparent when some countries decide to stop exporting hydrocarbons to protect their people’s future.

As a consequence people will have to live on a lot less energy than they do at the moment.  If the market drops in a controlled manner then the amount of energy that is available to heat and cool dwellings and to warm water will be less than 5% of today’s figure by 2050.  The remainder of the fossil fuel supply will be used for agriculture.  Only off-grid-homes will be habitable by 2040.