Kurt Cobb
- Global monthly oil production peaked on a monthly basis in November 2018, and there are now real questions as to whether oil output will ever hit those heights again.
- A combination of spending discipline and regulatory hurdles appears to have ended the shale boom, but shale production growth may well have slowed anyway.
- There have been plenty of ‘peak oil’ predictions in the past, but with growing regulatory resistance, the death of U.S. shale, and less tier-one acreage, this really could be it.
Prior to the pandemic-induced downturn in world oil production, U.S. oil production growth was responsible for 98 percent of the increase in world production in 2018 (as reported in 2019). Almost all of that growth resulted from rapid increases in shale oil production which accounted for 64 percent of U.S. production (as of 2021).
Fast forward to today when Oilprice.com has declared that
"The U.S. Shale Boom Is Officially Over." The reasons cited mostly
have to do with management "discipline" regarding capital expenditure
in favor of shareholder payouts and complaints about "anti-oil
rhetoric" and "regulatory uncertainty."
But there might just be another reason for the slowdown in
shale oil production in the United States: There isn't as much accessible and
economical shale oil underground as advertised. Earth scientist David Hughes
laid out his case for this view in his "Shale Reality Check 2021."
(For a summary of Hughes' report, see my piece from December 2021 entitled,
"U.S. shale oil and gas forecast: Too good to be true?")
There may be other sources of oil worldwide that will somehow
make up for the significantly lower growth in U.S. shale oil production. But no
other source seems set to provide the kind of growth U.S. shale oil provided,
that is, 73.2 percent of the global increase in oil production from 2008
through 2018.
The world has actually been getting along with less oil for
some time now. World oil production proper (crude oil including lease
condensate) peaked on a monthly basis in November 2018 at 84.58 million barrels
per day (mbpd). In August 2022 production was 81.44 mbpd. That's after a
pandemic-induced shock that saw production fall to 70.28 mbpd in June 2020.
Neither the U.S. shale oil companies nor OPEC seem ready to
increase production significantly (assuming that they can). Russia, among the
world's top three producers, is under heavy sanction and may not be able to
produce more oil for export anytime soon. (Again, it is not certain that Russia
can significantly increase production. Except for the pandemic-induced drop
Russia has long been on a production plateau of between 10 and 11 mbpd.)
No doubt some new oil savior will be announced soon whether
credible or not. In the meantime, the world economy will be faced with limited
oil supplies that do not simply grow to meet our fantasies of what we want. The
result will be high prices, that is, higher than has been historically the
case.
A recession won't change this dynamic and, in fact, may
reinforce it as oil companies are likely to reduce drilling activity when
demand for oil slumps. That will make it doubly difficult for those companies
to supply growing demand coming out of the next recession.
This is the way things might very well be for a long time if not indefinitely. Many of us who foresaw this day said that we would only see peak world oil production in the rearview mirror. It may take a few more years to determine if November 2018 marked the all-time peak. - Oil Price
By Kurt Cobb via Resource Insights