Brace Yourself: US Oil Output on the Verge of Decline. Here's Why.

Many people asked me publicly and privately to respond to Doomberg’s recent piece entitled “The Peak Cheap Oil Myth.”

I respect Doomberg a lot, and I always welcome a good challenge to sharpen my thinking, and it was time to revisit the US shale oil miracle anyway, so this was a win-win-win opportunity.

If you are thinking, “I don’t really care about oil, or oil data” let me gently suggest that you should. Whether you care about oil abundance, or not, its presence or absence will affect your entire economic life more than anything else

Not just at the gas pumps, of course, but because oil is integral to every single thing that is manufactured elsewhere and shipped to you, every calorie of food that lands on your plate, and to the rate of inflation you experience.

With an abundance of high-quality (and high net energy) oil everything is possible, including making and recovering from colossal mistakes.

With a deficit of oil, everything gets harder and harder, and more and more expensive. Mistakes are expensive and sometimes irreversible.


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So, when Doomberg put out a thesis that said not only will oil output grow seamlessly by 2% per year for the next 50 years, but it will get cheaper along the way, I had to respond.

In part I you will get my major thesis which is “as goes US shale, so goes the world’s oil abundance” and then put forth the data that strongly suggests that the US is pretty much at its peak of cheap oil and oil itself.

Remember, if the data changes, I’ll change. But this is the data I have.

More importantly, the entire world is facing a significant and ever-widening shortfall of oil supplies between here and 2030 according to JP Morgan’s commodities desk. Yet China and India are importing more and more. This is a recipe for vastly higher oil prices, and those would be quite bad for a world saddled with too much debt.

Bottom line: I am normally quite impressed with the depth of research and experience Doomberg brings to the game, but in this case I was unimpressed with the lack of data presented to bolster his thesis. So I think there’s not enough meat on Doomberg’s thesis yet to give it high marks. It basically boils down to, “The future is going to look exactly like the past - more oil at cheaper prices because people are inventive.”

To which I must respond, but in which basins, and which fields, and in which countries specifically? Where will all this magical technology be applied? After all, you have to find it before you can produce it, and the world has been running an enormous discovery- vs. production deficit since the mid-1980’s(!)

(Hat tip SRSRocco for reposting the above graphic to Twitter recently)

While I cannot discount human ingenuity, I can interpret oil data and right now that says, “the days of heady oil growth in the US are over.” Maybe forever due to geology (we’ll have to wait and see), but certainly oil output cannot appreciably grow at these too-low prices (currently ~$72/bbl for WTIC oil).

What could possibly get more oil to come out of the ground (for a while) in the US?

Higher prices. In other words, oil that’s not as cheap.

As always I heartily welcome any and all challenges, alternative data sets, and different interpretations, especially from people with actual industry, on-the-ground experience.

 

 

This is a companion discussion topic for the original entry at https://peakprosperity.com/brace-yourself-us-oil-output-on-the-verge-of-decline-heres-why/

Download Link Here

Hey All,
The download link is here. Odysee play back here.

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Canada’s O&g Not To Be Forgotten

Don’t forget, Canada, the US’ absent minded cousin, has millions of barrels locked in the OIL SANDS, which will be freed up for production once TruDope is tossed out of office. Polievre is on the record to rescue Canada’s O&G industry from the Trudopian Globalist cabal.
This is the same government that claimed there’s no business case for increased LNG exports from an LNG rich country.
These people are truly evil!

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Canada truly has some really large resources and reserves. I think the SAGD method for extracting the bitumen is really promising…much less destructive.
BUT…that requires creating a lot of steam. A nuclear plant would be ideal. Using natural gas (as is the case currently, mostly) is not terribly intelligent. Necessary given the anti-nuclear sentiment at present, but not smart.
Even then, the bitumen really needs all the US ultra-light stuff to blend with it to get it to an appropriate grade to put in the refineries, so the US and Canada could be really good partners on this. If we could see clearly.

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I’m in canada and can attest that we’re being really stupid with our natural gas resources.
Unless they burn coal, build nukes or burn their own product to make steam, dirty tar sand oil production is limited by natural gas reserves. Coal is too unpopular so it won’t be done, their own product is too valuable - so it will be gas.
It takes about 1 unit of natural gas to get 3 units of dirty tar sand oil.
Depleting our domestic natural gas resources we need for heating, industrial processes, petro-chemicals and more so “supply the world” with oil to make a quick buck is foolish. In the end we end up with the mess, the depleted oil reserves and natural gas shortages.
Right now the dirty tar sand operations consitute almost 30% of total natural gas consumption in canada. That’s insane!
(https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2017/market-snapshot-natural-gas-plays-important-role-in-albertas-oil-sands.html)
This is a bad deal for canada.
The only dumber thing to do with natural gas than tar sand oil extraction is export it over seas.
Trudeau is a fool, telling us not to use fossil fuels and taxing their use while blowing billions on a pipeline to export dirty tar sand oil. He’s a child with no spine being Sweigh by competing interests, desperate to stay in power.Polievre on the other hand is probably just owned by the oil companies and their strategy to get it out of the ground and export it as quick as possible for $$.
The smart thing to do would be conserve resources for future canadians and build pipelines from west to east to be energy independent. Also heavily invest in nuclear.
There is no understanding that natural resources are the real wealth, not the crap fiat currency money. Keep the “real money” in the bank for future use.
Canada first!

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2 Things…

I always wonder-how reliable is data in general? If we’re going to give data so much credit, how do we know it’s accurate? Isn’t there someone out there who might have an interest in altering it?
And I’m not sure I’ve heard any calculations on how much oil is needed simply to extract more. I’d like to see that quantified in some way.

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Peak Oil/ Doomberg Rebuttal

I just listened to your public Utube video and came on over here for part two. I’m not a Doomberg subscriber but I saw Adam’s interview with Doomberg in which Doomberg repeatedly said that we would need to “expand our definition of oil”. He referenced LNG and I’m not sure what else as part of the new definition of oil . Chris, does his idea of “expanding” the definition of oil make sense to you, and does it possibly explain the different interpretations each of you have concerning peak oil?

…I guess we must have a criteria for evaluating data, look at a lot of it, see what corresponds and have dialogue with others. Connect the dots. You don’t need all the dots, just enough to see “yeah, that’s an elephant.” A puzzle is a good analogy too. That’s what we’re all doing here, right?
Suzanne Vega has a great lyric from her song “Night Vision”…
Find the line
Find the shape through the grain
Find the outline
And things will tell you their name
Jesus said something else: “Seek and ye shall find.”

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Venezeula’s Oil Next?

Even if it is heavy & sour, there’s a lot of it there. The US has been playing the long game in destabilsing the govt. And with the US Navy now withdrawing from the globe’s oceans, I’d put real money on US boots on the ground in Venezuela in the next few years.

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What If Both Chris And Doomberg Are Both Correct?

If that could be, I would say the fall down in just a few years ahead will be much more steeper and dramatic. This will cause even more chaos, yet give others more time to prepare.
Just a thought.
love the insights Chris brings.

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Chris, does his idea of “expanding” the definition of oil make sense to you, and does it possibly explain the different interpretations each of you have concerning peak oil?
Great question. I dive into that completely in part II. It matters a lot. The short answer is, no, it does not make sense .... depending on where you draw the line. Anything from 5 carbons on up, is fine. Toss it into the refining complex and get awesome things out the back end. But butane (4), propane (3) ethane (2) and methane (1) are a hard "no" from me. They have entirely different energy and end-use characteristics. This diagram gives a sense of what and why refinery outputs need long-chain hydrocarbons. https://peakprosperity.com/wp-content/uploads/2024/01/Reinery-output-2000-colorado-mine-1704553631.5398-800x503.jpg
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If I’m wrong, nothing bad happens to our standards of living and personal sense of wealth.
If Doomberg is wrong, energy ignorance coupled to self-delusion will be looked back on as one of the most colossal blunders humans ever inflicted upon themselves.
It brings to mind this quote:
https://peakprosperity.com/wp-content/uploads/2024/01/Thomas-Sowell-IQ-Disaster-1704553820.5839.jpg
My personal view is this is going to be one of those “slowly then all at once” things.
It begins with “Peak oil isn’t a thing.”
Then, “Okay it’s a thing but it’s not really important. We’ve got electric cars coming.”
To, “Okay, Peak Oil Demand was a premature concept, but since people will be living in 15-minute cities it won’t be that big of a deal.”
Finally, “Oh shit! Oil is finite!! Quick, let’s nationalize this valuable resource for our own domestic uses!!”
This is the same dynamic that happens with grains during poor harvests. Exporting countries get religion real quick and ban exports. This will happen too with oil. When it does, every single import-dependent country will experience an economic and financial shock unlike any other.
One of us has the story very wrong. It’s like you’ve got one doc telling you everything is fine and the other is pointing at a mass on your radiograph and speaking in worried tones.

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There are a number of issues with Venezuela’s oil, not least of which is the US has soured relations there for a long, long time.
Also, the oil isn’t “oil” in the sense that it flows easily. It’s a grade somewhere between oil and tar sands. It’s stupid thick stuff all throughout the Orinoco belt requiring both very capital intensive extraction and then refinery upgrading.
It will be done, but it won’t be done quickly or cheaply.
Finally, wouldn’t you know it? But China has already been making strong inroads all throughout the region from the Panama canal on south to VZ.
https://peakprosperity.com/wp-content/uploads/2024/01/China-in-Venezuela-1704554613.2653.jpg

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Unless they burn coal, build nukes or burn their own product to make steam, dirty tar sand oil production is limited by natural gas reserves. Coal is too unpopular so it won’t be done, their own product is too valuable – so it will be gas.
It takes about 1 unit of natural gas to get 3 units of dirty tar sand oil.
Depleting our domestic natural gas resources we need for heating, industrial processes, petro-chemicals and more to “supply the world” with oil to make a quick buck is foolish. In the end we end up with the mess, the depleted oil reserves and natural gas shortages.
Right now the dirty tar sand operations consitute almost 30% of total natural gas consumption in canada. That’s insane!
Great data. Thanks. That is insane! What's the freaking rush? Why this maniacal dedication to extracting everything as fast as possible, damn the consequences, and damn the future? The US has exported more oil in the past 1.5 years than it did over its entire oil production history from inception to then. Again, what's the freaking rush? Oh, and you know why the US didn't export oil back in the day? Because it had leadership that briefly looked at the practice and immediately realized that it would be stupid to export the source of your prosperity. It was not in our national interest to export such a valuable thing. So they blocked it. That was then. Now we're shot through with midwits who couldn't locate the logic and wisdom of that thinking if you sprayed it with a fluorescent dye and gave them a blacklight.
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Now we’re shot through with midwits who couldn’t locate the logic and wisdom of that thinking
I disagree. These people understand full well. Their allegiance is not to the US population. It's evident in more areas than energy policy.
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I Would Like To See You Discuss This With Doomberg

Perhaps Adam could host?

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“ What’s the freaking rush? Why this maniacal dedication to extracting everything as fast as possible, damn the consequences, and damn the future?”
I assume it’s because TPTB want to milk the system for as much as possible, while keeping oil prices low to keep the plebes from revolting.
If the system crashes hard, then they can hold up more government as the solution to our problems… just give up that old fashioned notion of freedom and you can get your UBI CBDC and weekly rations.
Maybe some of them are consciously trying to crash the system. I’m not sure all of those involved have the same goals or understanding of these matters.

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People in charge take the easiest way out - been like that for a long time.
politicians want the tax dollars from the industry and are corrupt. They do what politically keeps them in power.
It’s the same thinking that drives the replacement of coal with gas for power generation - another colossal waste of natural gas. Political support for ghg emission reduction plus coal makes more air pollution. it happened in my province.
They could have put scrubbers on the coal fired plants that didn’t have them and invested all the money spent on gas plants and wind/solar on new nuclear and energy efficiency programs.

Tangential Thoughts While Listening

Hey, @5, great explication. I had a couple thoughts along the way:
It’s not just a matter of having “more than enough” energy for our lifetime, but for long enough to pay off the debt we’ve already created by pulling forward future consumption. The related, necessary question is whether we’ll reduce our overall consumption in order for energy consumption to ever catch up and extinguish that debt, thereby bringing our lifestyle into alignment with our productivity. The answer is that we can’t; any move in the direction of reduced consumption - or even just stabilizing consumption at the current level - will tank the economy, no matter how much oil remains in the ground. So, we need to pump more, faster, just to put off the day of economic reckoning. And even if we stabilized oil consumption, the gap between our productivity and our consumerism only gets exponentially larger. The whole system, based on somehow securing enough oil to keep growing the economy fast enough to prevent the debt:GDP gap from becoming so large no one any longer believes the US can ever make good on its ballooned debt - because that realization crashes the US lifestyle even if there’s still some Permian in the ground.
Doomberg’s thesis seems to be: it’s not our problem because any of us now living will outrun real shortage. But, I ask – what about future generations? Do we have any obligation to the welfare of our children’s children? <crickets>
He also doesn’t appear to consider the geopolitical implications of BRICS+. As the West loses its colonial hold on world oil supply - now happening in real time - non-US oil supplies are going to head toward the developing world rather than the already-developed. That trend has started; it will only become more pronounced. The West has royally pissed off most of the world’s nations, and BRICS is well into developing the diplomatic, financial, resource, logistical, and technological rails that make it increasingly possible to bypass the West’s self-serving mechanisms. That will not only cut into the collective West’s GDP, exacerbating the debt problem, but it will also allow the world to increasingly ignore the expectations of the West to be the primary beneficiaries of the world’s productive efforts.
Increasingly, the question asked of the Western nations, one by one, will be: You want to join us? Rent seeking is no longer enough; what resources and or real productivity do you bring to the global table that we should give you a seat?
Heading over to Part 2 now…

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Great Debate!!

I am a huge fan of Doomberg and deeply respect the work they do. In the same vein I respect financial analyst like Raul Paul from Real Vision, but they both tend to have a similar view…that energy will be abundant in the future.
I can see the potential of mankind in generating cheaper energy with nuclear technology and transitioning hydrocarbon utilization toward natural gas (of which we have an abundance of). However, I cannot understand how we get there without significant pain as that infrastructure hasn’t even begun to be built toward that transition.
And if we do add these sources of energy, what will stop us from using it IN ADDITION to what we use today.
I am genuinely interested in where I am wrong here. Where does all this optimism come from?