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View Diary: Shale Gas Bubble About to Burst: Art Berman, Bill Powers (89 comments)

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  •  My thoughts exactly. (2+ / 0-)
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    New Minas, Happy Days

    I remember reading about how the "Shale gas bubble was about to burst" 6 months ago, and a year ago, and a year and a half ago, and two years ago...

    It's just another form of the same sort of peak oil scaremongering that's been going on since oil and natural gas first started to be produced (the first "peakers" were clamouring about how the US's only good oil fields were in Pennsylvania and they were about to be exhausted).  The peak is right around the corner, and just you forget that it's been "right around the corner" every year for the past century and a half.

    1855 ad for Kier's Rock Oil: "Hurry, before this wonderful product is depleted from Nature's laboratory."

    •  US Production Peaked in the 1970's (0+ / 0-)

      Hubbert 's peak oil prediction for the U.S. was at worst a few years off.

      The US response - a massive drilling effort during the 1970's and early 1980's that eventually went bust because cheap Saudi oil flooded the market (coupled with mysterious inflation of their reserve numbers - with, as far as anyone can tell, no basis in reality...)

      The result of our massive drilling campaign ?  Oil production that never came close to getting us back to our peak production numbers...

      Peak oil has nothing to do with running out of oil - it has EVERYTHING to do with running out of cheap oil.  Our economies aren't built on oil - they are built on ready access to cheap oil.  At the peak of a production curve, by definition, somewhere in the neighborhood of 50% of oil remains... far from running out.  Unfortunately it's just that it's the increasingly expensive stuff that remains in that second 50%.

      •  That's a completely meaningless figure. (1+ / 0-)
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        Happy Days

        The US is not an isolated system.  Oil production will always occur where it's cheapest.  If at a given point in time it's cheapest in the US, it'll happen in the US.  If at a given point in time it's cheaper somewhere else, it'll happen somewhere else.

        Hubbert's predictions for the US looked good at first but have increasingly gone awry.  First off, the shape of his curve on the downslope is wrong for the US - it's been far shallower, and it keeps shallowing up.  The shape is in general pretty awful for trying to match with a country's oil production - peakers often show a handful of graphs for different countries that it works well for, like Norway (although now even Norway is going awry), but conveniently omit, for example, Canada   Back in "the day", the peakers were shoving their curve for Canada onto the early 1970s.  Oops.  Sort of like what happened with the Hubbert Curves they used to stick on US natural gas production

        You can try to wedge a shape onto any arbitrary set of data by changing its scale and width.  That doesn't give it any relevance.  And to reiterate the key point, where it's produced is irrelevant.  It'll always be produced wherever it's cheapest, given the current balance of geologic availability, political stability, technology, etc.  For example, the increasing recent return of oil production to the US (despite all of the domestic opposition) is a technological one, from a number of different perspectives.  At the rate shale keeps increasing by orders of magnitude, too, the US could end up another Canada.  But again, it's irrelevant.  The oil companies will put their money wherever it's cheapest.

        You have an entirely backwards view of reserves.  Reserves increase by orders of magnitude as the price rises.  Raise the expected production price by about $20 and global oil reserves double.  Raise it by another $20 and reserves double again.  These aren't apocalyptic price numbers.  And, lest we not forget, technology is always battling against this, moving prices in the opposite direction.  The balance between demand increases and the usage of the rarer, easier stuff, and technology, goes back and forth, but on average has held about even in the past century (oil prices are, in inflation-adjusted dollars, similar to that at around the start of the 1900s when there were Spindletops and Lakeviews everywhere.)

        What you describe as a "massive drilling campaign" is highly deceptive.  Again, oil always follows the economics.  In the 1970s much of the lower-48 economics shifted from large fields to small, easy to access but isolated fields (of which there are countless, most still untapped today).  If you've been driving along a road and see a few oil wells pumping in some farmer's field, that's what's being talked about.  These are little cheap wells, you could drill hundreds for the price of one Deepwater Horizon, but they don't individually produce a lot.  So yes, there were "lots of wells drilled", but that's a meaningless figure.  They produced the amount of oil they were expected to.

        At the end of the 80s, the economics shifted again.  Offshore gulf oil began to exceed the economics of these numerous little fieds (again, primarily due to advancing technology).  Hence the rate of well drilling dropped as the money moved again toward centralization.  But the trend is reversing as now new fields like the Bakken which require a bunch of wells start becoming cheaper.

        •  I like to compare domestic production (0+ / 0-)
        •  You seem to know your O&G a lot better than most (1+ / 0-)
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          who are commenting here.

          Some people fight fire with fire. Professionals use water.

          by Happy Days on Fri Nov 23, 2012 at 12:18:20 PM PST

          [ Parent ]

        •  The only problem (0+ / 0-)

          with saying that the US is not an "isolated" system - is that is EXACTLY what these false proclamations regarding US energy "independence" are trying to give the impression of...  That we can become domestically "independent" producers - which to me implies we are reliant only on what we produce to power our own demands.

          The bottom line is that the worldwide demand for oil is higher than ever before.  The oil fields that matter - the super giants - peak and decline and no matter what technology is thrown at them they NEVER return to production numbers close to what their peak levels were.  North Sea, Prudhoe Bay, Cantarell in Mexico, Ghawar showing increasing water cuts...  all the "unconventional" (i.e. expensive) plays in the world are only allowing us the ability to continue "running to stand still".

          Increasing demand worldwide has made the market much more volatile and allowed for serious swings in prices over the past 5 years or so - there's no good evidence that the precarious national / global economies are robust enough to deal with higher prices that will be inevitable as unconventional sources are forced to pick up more of the slack for the former swing producers.  Reliance on unconventional plays and increasing technology is not something I'd be willing to bet on where demand is capped by a ceiling of ~$120 oil or has a floor of seemingly cheap $75 oil resulting from a stagnant economy.

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