Perspective on Oil Over-Optimism
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Stuart Staniford with an updated chart that is as useful as it is basic. The chart: The history of US oil production.
All the recent media coverage on the US energy boom tends to conveniently omit the obvious fact that US oil production peaked in 1970. You'll also notice that charts about the energy boom rarely go back in time as far as 1970. You'll sometimes hear phrases like "We're producing more oil today than we have since [Date X]" - where "Date X" is some date 10-20 years ago, a date that shows a dramatic turnaround - but without the context of 1970 production.
There's a few important things you should take away from this:
- The quickest way to quiet an energy over-optimist is simply to ask them if they believe US oil production will soon exceed the 1970 peak. No one is suggesting that recent production climbs aren't important and significant - they are both. And production in 2013 will likely be over 7 MB/d. This is an amazing turnaround for the industry. But they would likely have to keep this miracle going year after year for most of this decade to come close to passing the 1970 numbers. That's a tall order. Not only would they have to keep up these miracle growth rates, they would have do it on top of depletion. And depletion never sleeps.
Think about the EROI here and consider this: The US produced well over 9 MB/d in 1970, with 1970s low oil prices, 1970s understanding of petroleum engineering, and 1970s technology. Today we're using the most advanced technology in history, with oil prices at historic highs, attacking oil plays that are only profitable to attack because of those same high prices.
One goes after the easy low-hanging fruit first, and we already did that - we spent most of our oil producing history doing that.
The days of cheap and easy oil are over. Now we're going after shale oil, deep offshore, arctic, etc. And the oil optimists are assuming not only that we can scale up this tough oil to levels higher than the 1970s, but they're also assuming that the economy can handle the high oil prices necessary to profitably extract that tough oil in the first place.
Don't forget history - ever. The truth is, this isn't the first time we've heard oil optimism like this. People likely said the same things when Prudhoe Bay came online in the early 1980s, it's the bump in the chart after the 1970 peak. People probably thought they were saved, they probably though it was the game changer that would permanently reverse recent declines... that was until it too peaked in the mid 1980s - sending US production into its two decade decline.
And a lot of what we're hearing now was probably also said in the late 1960s, at new heights of oil production, after years of years of increases. As Matt Simmons would often recall, they laughed at the time and mocked M. King Hubbert as that person who predicted a coming decline. "But look we're now producing more than ever," they might have said.
But the funny thing about a Peak - you're always at the highest right before the fall.
