Remember all the dire "peak oil" predictions?

[Midpack]

What US demand does isn't as infuential as it once was. Oil is a global commodity more than ever, even though we use way more than our "fair share" per capita, demand and pricing is global, including the BRICs among others. Though they don't consume like we do (yet), there are 9 times as many "capitas" in the BRIC countries vs the US.

And some of the posts here seem to be mixing transportation energy (mostly oil) and power generation (not oil) in their arguments.

 

[ejman]

I think peak oil arguments were reasonable with the technology known at the time. What was vastly under estimated is the ability of technology to push out the limits. This is simply a reflection of the old adage "we don't know what we don't know". I think like wise all of the dire predictions on global warming, health costs increasing to the moon SS collapsing, Medicare collapse etc. etc. are short sighted. Even though I'm at the geezerhood stage I really don't share the pessimism that seems to be endemic of our age. Except for ReWahoo's asteroid of course. That one is going to get us.

 

[REWahoo]

That one is going to get us.

+1

 

[Mulligan]

What US demand does isn't as infuential as it once was. Oil is a global commodity more than ever, even though we use way more than our "fair share" per capita, demand and pricing is global, including the BRICs among others. Though they don't consume like we do (yet), there are 9 times as many "capitas" in the BRIC countries vs the US.

And some of the posts here seem to be mixing transportation energy (mostly oil) and power generation (not oil) in their arguments.

If I understand your comment correctly, actually some oil is still used. In the northeast there are many people who still use fuel oil to heat their homes. I bet that is expensive! Some power generation stations still use it. USVI electrical grid is powered by fuel oil. And they complain about their bills, too. Close to 50 cents per KWH. Ouch!

 

[M Paquette]

IMO, part of this really still does not add up. We are in the worse recovery since the 30s, yet the price of gasoline is at its long term high, and although WTI is well off from its high in 2007, it is still quite high relative to its long term average or trendline. Why is this if we are drowning in oil?

Well, the good news is that our exports are up. Really. The refineries on the west coast are producing more than is consumed regionally, and there is now an export trade in refined oil products helping to make use of the surplus refining capacity. Oh, and keeping the price up, courtesy of the higher demand for export. Tankers move through SF Bay daily, carrying product to Central and South America.

http://www.eia.gov/todayinenergy/detail.cfm?id=9030
http://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm

The west coast refineries have been overhauled fairly extensively, so that they can run around 92% of the time, up considerably from where they were 30 years ago. They haven't been able to run at much past 80-82%, though. The export markets are expected to help out with increasing the demand for product.

http://www.eia.gov/dnav/pet/pet_pnp_unc_dcu_r50_m.htm

Brent is higher yet, but North American oil is still to some extent landlocked so our production is affecting Brent prices more through our demand being somehwat lower than our supply reaching international markets. As far as I know know, there are controls on the export of US crude , but refined products such as diesel can be, and are being exported in good quantity. I've read that there are also some workarounds wrt the export restrictions.

NG is a different, and there had been no talk about peak natural gas. Even though no one that I know of predicted the large technological advances in horizontal laterals from one pad, or in formation fracturing, plenty of geologists remain unconvinced that gas can continue to be profitably extracted at current flow rates and prices.

Ha

The Seaway pipeline has been reversed, so thats 150,000 (rising to 400,000 any time now) barrels a day, with a second loop being added for 850,000 barrels a day by 2014, moving surplus crude from Cushing to the coast. This will help us move the surplus at Cushing to the Gulf Coast for export, so eventually the Cushing price will better track the Brent Crude price. (That is, the Cushing price will rise to match the Brent Crude price.) If we can get some LNG terminals built, we can export our surplus natural gas production, relieving the oversupply problem and depressed nat gas prices. (US nat gas prices will rise to match the world market.)

 

[photoguy]

IOW, there might be lots of oil somewhere, enough to 'drown in', but expensive to get to and it will never be sold for less than the cost of production.

Like the oil sands in canada and us? Very expensive to mine but potentially trillions of barrels available:

Oil reserves in Canada - Wikipedia, the free encyclopedia

Oil sands - Wikipedia, the free encyclopedia

 

[mortal]

+1 for The Oil Drum | Discussions about Energy and Our Future

This site is well respected even by many in the industry.

I'd also recommend Resilience.org
It used to be called the energy bulletin.

The 'shale' boom is *great* news for America. However, it doesn't magically solve peak oil. What it gives us is a steady if small volume source of oil that will be there for a long time. Think of it as a glass of ice cubes. You can sip the melt water a little at a time, but you're not getting a lot at once. What it does give us, is more time to move on to something else.

I've been following the peak oil issue since 2005, and if I'm honest, global warming is a much more dangerous problem for future generations (and no, I don't believe our politicans will do anything about it until the 'worst case scenario' is well under way)

 

[ronocnikral]

+1 for The Oil Drum | Discussions about Energy and Our Future

This site is well respected even by many in the industry.

I'd also recommend Resilience.org
It used to be called the energy bulletin.

The 'shale' boom is *great* news for America. However, it doesn't magically solve peak oil. What it gives us is a steady if small volume source of oil that will be there for a long time. Think of it as a glass of ice cubes. You can sip the melt water a little at a time, but you're not getting a lot at once. What it does give us, is more time to move on to something else.

I've been following the peak oil issue since 2005, and if I'm honest, global warming is a much more dangerous problem for future generations (and no, I don't believe our politicans will do anything about it until the 'worst case scenario' is well under way)

What do you mean "magically solve peak oil?" Understanding how M. King Hubbert's curve changes as time marches on is just as you described. So, there is no "solving" the issue, rather it is all a delay. If you actually compare the Bakken "boom" development times to that deepwater developments, the Bakken is actually happening faster. Your ice water analogy describes just about every oil and gas well I have ever seen, so I don't understand what the point is between a "conventional" play and "unconventional" as far as your analogy is concerned.

At the end of day, we all obsess over something. My personal wealth and well being of my family is directly correlated to oil & nat gas, but I don't follow anything that has to do with peak oil, M. King Hubbert, worldwide decline etc. And I've never known a co-worker to obsess over it either.

In other words, nothing to see here folks.

 

[EllisWyatt]

Just to add my 2 cents worth....

While there are a lot of oil and gas resourses (stuff in the ground) in the shales and tight sands, there are stll only a few plays with major reserves (stuff you can get out under current economic conditions). The Kings of the plays, right now, are the Eagleford, Bakken and Marcelleus shales, which produce light oil and gas. The pure gas plays (Haynesville, etc.) are not attracting additional funding, as the price of gas has dropped below where they are economic to further exploit (largely caused by the low price for natural gas brought on by early success). The major players in the Haynesville are dropping rigs and drilling just enough to hold the leases they have.

When you see articles in the media about how much oil we have in the U.S., the distinction between resources and reserves is often not understood. So yes, we (arguably) have more oil resources than Saudi Arabia, but they still have more reserves than we do.

In time, and with further advances in drilling and completions, we may be able to catch up, but we're not there yet.

And for a little historical perspective.... in 1913 the U.S. government established the Office of Naval Petroleum and Oil Shale Reserves, so the understanding of the potential for producing oil from shales has been around for literally 100 years. The Mineral Leasing Act of 1920 was designed to promote shale oil development, but the first lease was let in the 1970's. The ongoing concept since the 1920's has been to mine the shales, crush it, and extract the oil. It has only been inthe last 10-15 years that industry has realized they could "tweek" an old technology -fracing - and apply it to oil shales and tight sands.

Over the course of 30 years in the industry, I've seen repeated how rapidly the oil industry can assilimate and advance technology (in the early 1980's, only the National Security Agency (NSA) had bigger/faster computers than the oil industry, as an example), so, should there be a way to tap into the shale oil resources economically, I have no doubt they will find a way.

 

[Midpack]

If I understand your comment correctly, actually some oil is still used. In the northeast there are many people who still use fuel oil to heat their homes. I bet that is expensive! Some power generation stations still use it. USVI electrical grid is powered by fuel oil. And they complain about their bills, too. Close to 50 cents per KWH. Ouch!

Glad you pointed that out, evidently my inference was only about 99% true...

 

[ERD50]

And some of the posts here seem to be mixing transportation energy (mostly oil) and power generation (not oil) in their arguments.

I think the connection is that as a side effect of oil drilling (for transportation) in the US, we are getting relatively cheap Natural Gas, and that NG can replace some coal (for power generation).

-ERD50

 

[Mulligan]

Glad you pointed that out, evidently my inference was only about 99% true...

I will take 99% every time, as I am usually about at the 50% mark, myself. I didn't write my answer very well, as it came across more on the electrical generation side than what I meant it too. Fuel oil was more my thought, though it didn't come out that way. About 8% of households still use fuel oil, with most of them up in the northeast I believe. A recent article said heating with oil during heating winter season was over $2000 compared to around $800 to natural gas. Glad I am not forced into using fuel oil.

 

[Masquernom]

Here's a little better explanation of US oil production;

US oil production: Don't believe the hype - CSMonitor.com

And here's some more insight into shall oil production;

http://www.csmonitor.com/Environmen...phenomenon-fabulous-miracle-with-a-fatal-flaw

 

[Midpack]

I will take 99% every time, as I am usually about at the 50% mark, myself. I didn't write my answer very well, as it came across more on the electrical generation side than what I meant it too. Fuel oil was more my thought, though it didn't come out that way. About 8% of households still use fuel oil, with most of them up in the northeast I believe. A recent article said heating with oil during heating winter season was over $2000 compared to around $800 to natural gas. Glad I am not forced into using fuel oil.

On that front, evidently about 94% not fuel oil. I realize it's more common in the northeast.

Heating oil is burned by 6% of U.S. households for winter fuel, with 8 out of 10 of those heating oil users located in the Northeast.

U.S. households forecast to use more heating fuels this winter compared with last winter - Today in Energy - U.S. Energy Information Administration (EIA)

 

[haha]

In other words, nothing to see here folks.

Although your viewpoint as an industry participant is helpful in some ways, it also gives you a very different bias and interest from someone who is primarily interested as an investor, or as a citizen trying to see into the future.

Your need is well paid, continued employment, as long as you intend to work. And security of your pension, if you have one. An of course what part of the industry you work in makes a big difference.

Drilling is at very high levels in the US today, which is very good news for anyone connected with drillers, or mud suppliers, or fracking chemical suppliers, pipe, etc. IOW, an employee or principal in this industry is in hog heaven, as the producers costs are their income.

But lease fees in the more periperal areas of some of these gas plays, for example the Haynesville, and some of the Marcellus have fallen dramatically recently.

For some industry participants the best world is one in which producers are on a treadmill trying to keep up production with rapidly depleting expensive wells, as long as there is acreage to be drilled and capital to drill it.

Ha

 

[ronocnikral]

Although your viewpoint as an industry participant is helpful in some ways, it also gives you a very different bias and interest from someone who is primarily interested as an investor, or as a citizen trying to see into the future.

Your need is well paid, continued employment, as long as you intend to work. And security of your pension, if you have one. An of course what part of the industry you work in makes a big difference.

Drilling is at very high levels in the US today, which is very good news for anyone connected with drillers, or mud suppliers, or fracking chemical suppliers, pipe, etc. IOW, an employee or principal in this industry is in hog heaven, as the producers costs are their income.

But lease fees in the more periperal areas of some of these gas plays, for example the Haynesville, and some of the Marcellus have fallen dramatically recently.

For some industry participants the best world is one in which producers are on a treadmill trying to keep up production with rapidly depleting expensive wells, as long as there is acreage to be drilled and capital to drill it.

Ha

Full disclosure, I do work for an operator ("producer"). And I do agree that my view point is different from that of an investor. I choose not to tilt towards Oil/Gas/Energy beyond what my index funds give me. Since my income is derived from that industry as well.

But, I would like to address some of the things that were said above, which my experience shows me to the contrary. 1) In the woodford (oklahoma), I drilled some wells last year with the expectation of them being un-economic stand alone, but the idea was they would hold the lease. I found service prices were dropping, and I was able to drill them for about $2MM less than what my employer thought I would. One well has paid out already in about 1 year, the other will soon. With that success, it prompted a small private company to drill an adjacent section. So, these areas aren't so devastated as many would think. Yes, rig count is down, but there are companies out there betting an improvement of gas price and getting the wells down now while they are cheap. To me, this is the correct approach, as the wells will probably pay out in 2-5 year range with today's prices if you can control your costs. Everything else is upside, with little downside. Very few public companies will do this though, b/c investors don't want $50MM+ developments in nat gas.

2) as far as leasing costs in the marcellus. We had some expiring leases and sent the checks per the agreement to extend the lease. No one cashed the checks.

Again, I remain optimistic, perhaps naively, about oil and nat gas in this country and worldwide. And fear none about any of my posterity facing empty reservoirs.

 

[haha]

Again, I remain optimistic, perhaps naively, about oil and nat gas in this country and worldwide. And fear none about any of my posterity facing empty reservoirs.

Thanks for some very helpful additional information. And of course I agree wtih you completely, our children will never face empty resevoirs. Not least because it is essentially impossible to empty a resevoir. But I feel pretty sure that todays surfeit of supply and low natural gas prices will give way to balance, and if LNG exporting gets going, American gas prices should eventually approach prices in in other parts of the developed world, which are not exactly cheap.

Regarding crude production, prices are fairly high now, and US production has gone up esp with so many rigs formerly drilling for unconventional gas now drilling in the Bakken and Eagle Ford etc. But world production stays on its long plateau, even with with these high prices.

Ha