World Oil Production

A guest post by David Archibald

The views expressed in this post do not necessarily reflect the views of Dennis Coyne or Ron Patterson.

The BP Statistical Review of World Energy has oil production data by country up to the end of 2015. This is what that looks like from 1988:


The United States increased production by 5.1 million barrels per day from 2010 to 2015. The increase in production from countries around the Persian Gulf over the same period was slightly less at 5.0 million barrels per day. The increase in total world production was 8.4 million barrels per day so the rest of the world declined by some 1.7 million barrels per day. This was despite Canadian production rising 1.0 million barrels per day from oil sands developments plus some other increases from Russia, Brazil, Colombia etc. Most oil producing countries are in well-established long term decline or plateau at best. How these trends will interact can approached from a bottom-up basis. To that end, the following graphs show likely production profiles by region for the next five years.


Saudi Arabia used to be the world’s swing producer. That role has been taken by the shale drillers of the United States. The graphic assumes that enough shale wells are drilled each year to keep US production flat – profitless prosperity. Mexico’s decline is well established for geological reasons and Venezuela’s decline continues for political reasons.


Russian production has held up well and, combined with fields in development, it is assumed that Russian production remains in plateau. The Norwegian and UK production declines are well established.


Algeria and Egypt are in decline. It is assumed that Libyan production does not recover from Tony Blair and Nicholas Sarkozy’s adventure in regime change.


Iranian production peaked in 1974 at 6.1 million barrels per day as the Shah tried to overtake Saudi production. It is assumed that Iranian production is geologically limited. Iraqi production continues rising despite the civil war in that country. Currently at over 4.0 million barrels per day, Iraq’s geological endowment should see production continuing to rise towards 9.0 million barrels per day.


Most oil producing countries in the Asia Pacific region are in well established decline. They were joined by China in 2016 which has two thirds of its production from giant oilfields that have been in production for decades and now have high water cuts and high operating costs. The graph assumes that China will contribute 1.3 million barrels per day of a 2.1 million barrel per day decline for the region over the next five years.

Adding all those production profiles results in production in 2022 that is five million barrels per day lower than world production, per BP’s statistics, in 2015. That could be offset by a faster rise in Iraqi production combined with increased shale oil production. According to this graphic from BTU Analytics:


There are some 290,000 remaining shale oil well locations remaining in the United States. By Enno Peter’s work, about 62,000 shale wells have been drilled in the United States to date. Peak drilling year was 2014 with 14,262 wells drilled for 2.46 million barrels per day of production in January 2015. About half of that number of wells need to be drilled each year now to offset decline in US shale oil production.

From all of the above, not an original conclusion – the US shale oil well inventory is likely to buffer the oil price for at least the next five years.

David Archibald is author of American Gripen: The Solution to the F-35 Nightmare

This entry was posted in Uncategorized and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

353 Responses to World Oil Production

  1. Boomer II says:

    The North American chart projects a plateau for US oil extending to at least 2022. So the assumption is that decline rates will be matched by new production. I wonder if that will continue to be the case.

    • Dennis Coyne says:

      Hi Boomer II,

      Maintaining a plateau will not be a problem if oil price rise. I believe the final chart in the post is a bit optimistic about breakeven well costs unless they assume breakeven means an ROI of zero, I assume a real annual return on investment of 7% per year, the oil business is too risky for lower returns than this imo. Breakeven is $65.50 for the average Permian well in 2015-2016, $67/b for the Bakken and higher in other plays. Low oil prices (less than $67/b) will make it difficult to keep on a plateau.

      • Boomer II says:

        Whenever I look at LTO decline rates, I wonder how any area can keep up production for any length of time, even with adequate funding.

        • Dennis Coyne says:

          Hi Boomer,

          If enough wells are drilled, production can be kept flat, but eventually the sweet spots run out of room and then it becomes more and more difficult to keep production flat because the wells start becoming less and less productive (EUR decreases).

          So over the long term you are absolutely correct and even high oil prices won’t keep production on a plateau as poorer and poorer areas need to be drilled.

          • Boomer II says:

            I am more pessimistic than your projections, but I haven’t run the numbers. I just look at decline rates and the fact that so many companies have shifted to the Permian.

            • Dennis Coyne says:

              Hi Boomer,

              The Permian is more attractive because well head oil prices are higher there. This is due to the longer distance to major refineries from North Dakota relative to the Permian Basin which increases the cost to transport the oil from well to refinery.

              If oil prices rise to $68/b (Brent oil in 2016$), the completion rates in the Bakken will increase and output will go up. Until that occurs Bakken will ether decline or remain flat (it will depend on the price of oil and other factors like financing).

              Your pessimism may be warranted especially if oil prices remain about where they are.

        • Decline rates should be closer to say 8 % per year after the wells mature. The huge question is whether OPEX will be too high when these wells are producing 15 BOPD and have all sorts of lifting problems because their directional plans were poorly designed and they start slugging oil, gas, and water.

          • Dennis Coyne says:

            Thanks Fernando.

            I will adjust my model to reflect that. So I fit my hyperbolic to the first 36 months of data (I don’t have data beyond this). Then when my hyperbolic that has been fit to the data reaches an annual decline rate of 8%, I switch to an exponential with an 8% annual decline rate?

            Mike also thinks the cut off should be 15 b/d, so between you 2 experts this must be about right, I will also make that change.

            For the Permian average 2013 to 2016 well the EUR is only 150 kb if the well is shut in at 15 b/d, and 161 kb if it is shut in at 10 b/d.

            For the 2015 to 2016 average well (q0=25663, b=1, Do=0.4186) my original cutoff was 8 b/d with EUR=262 kb, at 10 b/d EUR=254 kb, and at 15 b/d EUR=232 kb. I may take a look at this in my models as it would reduce EUR by about 10%.

            Would maybe something a little lower make sense maybe 11 or 12 b/d, rather than 15 b/d? I am trying to avoid too pessimistic an estimate, in other words a best guess (F50) rather than a safe (F95) estimate.

            You guys (Mike and Fernando, as well as George, shallow sand, Doug and SoLAGeo) would all know much better than me.

            • Dennis Coyne says:

              Hi Fernando (and Mike),

              I looked at some ND Bakken/TF data (provided by Enno Peters and collected from the NDIC) for older wells with completion dates from 2005 to 2007 and one of which were spud as early as 1981, Quite a number of wells produce all the way to 10 b/d (this is roughly the average) and many go as low as 5 b/d (maybe 20% of the wells that have been shut in).

              So to me the 15 b/d cut off looks too conservative, there may be a few “problem wells” that get shut in this soon, but my guess the numbers will be low, around 10%, there are very few (less than 1%) Bakken wells to date that show such behavior (they are abandoned permanently at and average monthly output of 15 b/d or more). I will use 10 b/d for the economic cutoff for the average LTO well.

              • Dennis, it’s an oil price and well design issue. Those wells produce with a relatively high gas oil ratio, plus some water, they have a build curve from the vertical section to a long horizontal leg, etc.

                I think 15 BOPD is a barrier because wells start to slug and the OPEX for a well isn’t only a function of oil rate. The income can also include gas sales, and a 15 BOPD 2000 GOR well makes 30 mcfd a day, which helps cash flow a little bit.

                So the question I brought up was whether they stabilized at around 8 % before they reached 15 BOPD. That in turn gives them a little more legs. Even if they stabilize AT 15 BOPD and can produce to 5 BOPD they’ll make about 50,000 barrels extra oil. But they won’t make that much extra cash, because a lot gets eaten by OPEX.

                • Dennis Coyne says:

                  Yes I agree it doesn’t help profits much, but as long as cash flow is positive they will pump til it is zero.

                • Dennis Coyne says:

                  Hi Fernando,

                  The 2015-2016 Permian well is at an 8.5% annual decline rate when it gets to 15 b/b at 134 months, cumulative is 232 kb at that point, if they can go to 8 b/d cumulative is 262 Gb so only an extra 30k over 8 years and you may be correct that it will not be economic (I doubt 5 b/d makes sense on average, but 10 b/d might work at an oil price over $75/b (2016$).

                  • I think they’ll have to learn to put them on a clock and produce them a few days a month. I wouldn’t mind having a few wells to experiment with. We had a few wells producing from high pressure high temperature naturally fractured carbonates, some of them we decided to pump with hydraulic pumps, some were simply left shut in for a couple of weeks, produced for a few days.

          • Nathanael says:

            Thanks for the 8% number. I have to go rerun a rather complex model based on that… perhaps oddly, the faster decline rate means that oil companies survive longer, financially (through the medium of increased oil prices).

  2. Dennis Coyne says:

    Hi Carl Martin,

    You suggested elsewhere the a b for the hyperbolic well profile should be 1.4 or even 1.8.

    I collected data from on Permian wells from 2013 to 2016 and used least squares to fit to the first 34 months of data (first data point excluded). b is 0.804, parameters on chart EUR=171 kb, very close to the USGS mean estimate. A fit on the 2015-2016 data gives a higher well profile with EUR=265 kb (but fewer data points, about 22 instead of 34.)

  3. texas tea says:

    Not at all sure what is to be learned here. But I thank you for the BTU Analytics link which contradicts its study and the graph you presented, in part, in its own summary:

    • Increased investment in Oklahoma provides evidence that the SCOOP and STACK are attractive plays beyond what can be seen in current production data
    • Issues with Oklahoma data make analysis difficult on a comprehensive basis in comparison to other major horizontal plays
    • SCOOP and STACK provide optionality for wet gas and crude focused drilling
    • Crude oil takeaway is not expected to be an issue, while gas growth in the SCOOP and STACK will be impacted by changes in flows from other regions
    • SCOOP and STACK have the potential to impact overall US supply and demand balances

    I will take the time to add some color. My oldest Oil well in Scoop, keep in mind most on the forum maintained there was no oil in the SCOOP Woodford for a number of years, has made over 140,000BO in 22 months and is tracking ABOVE a 600,000BO type curve, add in natural gas and Nat gas liquids.

    A more recent Woodford OIL well is producing as follows;
    month 1: 5,899BO, month 2: 13,055BO months 3: 12,979BO month 4: 15,274BO month 6: 15,571BO still to early to plat a decline curve😜 again add in nat gas and nat gas liquids

    in the Springer formation, Newfield’s 1-James well has made 214,000BO in 12 months of production:
    3747: 34,117: 26,651: 20,905: 20,684: 19, 296: 15,960: 13, 568: 11,827: 12,236: 11,022: 11,194: 10,563

    now boys @ $50 oil that is $10,000,000 gross, in ONE FREAKIN YEAR not counting nat gas and nat gas liquids. The state is happy, mineral owners are happy, Working Interest owners are happy.

    being a part of the solution in making america great again 🇺🇸😊

    • Boomer II says:

      What studies are you talking about?

      You’re saying BTU data contradicts its own data?

      The above world data comes from BP.

      • texas tea says:

        Boomer the author including a chart from BTU analytics regarding Scoop. Did you read the article? Perhaps that explains your rather uninformed “opinions” regarding the oil and gas business.
        Now I am not saying you are stupid. But like many on this forum it is a waste of my time to engage someone like your self. In many respects it like to describing a elephant to a blind man. You have NO freakin clue just how little you know. You have little respect for the men(women) who have actual experience in this business, who have survived and prospered even in times of great stress. This is my 4th industry wide bust in my career. I am still standing, thriving and prospering. Not whining, not complaining not waisting my time telling other ignorant folks such as yourself just how stupid we (the successful) are. There are a small number of contributors here that actually know what the hell they are talking about. Fernando and coffeeguz are great examples. If you really want to learn (i know you don’t) you would do well to pay attention and ask questions rather then make uninformed and often ridiculous conclusions. you have an agenda….👎

        • Survivalist says:

          I believe he was asking a question. Two of them.

        • Boomer II says:

          Okay, I saw the chart at the bottom. So he is saying that shale will buffer the price for another five years. How does that contradict the world data he presented?

          You toss stuff out which still strikes me as bad for oil prices. How does that help you? As I pointed out, OK took a hit with declining oil prices.

          I often don’t follow your logic. I have never been rude to you. I have asked you why you think more production is good for you and others when it keeps the price down.

          I just post what others in the industry are saying.

          Oil executive warns of overproduction | News OK: “The biggest challenges the oil and natural gas industry face are those created by the oil and natural gas industry, an oil-field services company executive said Tuesday at an energy conference in Oklahoma City. …

          ‘More drilling means more production. That goes into the oil market, which adjusts the equilibrium. When you have too much of it, the price goes down.

          ‘If we continue like this, it’s bound to happen. We are bound to make it happen because everybody needs to pump.'”

          • Mike says:

            Boomer, ignore the manner less goat.

            Anyone with a love and passion for his work, with pride in his career, is always willing to share information and experiences to help other people learn. The American public is woefully uneducated and mistrustful of the oil and gas industry precisely because people like this don’t want you to know the truth. If he knew the answers to your questions (and how to spell) he would want to have answered them in a polite way, in a way that you would believe. To help. He is clearly only interested in people knowing how much money he makes. Most people that have that need, well, as we say in Texas, they are all hat and no cattle.

            Ignore him. You know a lot about the oil industry. Certainly enough to question the bullshit the shale industry says about itself in a desperate attempt to con more people out of their money.

            • Boomer II says:

              I was actually a partner in an oil company years ago. And I do have connections in the oil industry. I’ve also written about energy companies.

              Yes, I am more knowledgeable than the average person. What I keep trying to find out from Texas Tea is how increased production helps the industry when it only lowers prices and more companies suffer than benefit.

              We’ve even gotten Hamm and others in the industry suggesting that this mad rush to produce isn’t benefiting the industry overall.

              I’ve covered stocks, too, and the closest thing I can compare TT to is a sales pitch. I am not sure what he is selling, but I’ve followed the market since the 1970s and remember its highs and lows since then, particularly the penny stock and tech booms.

              • Boomer II says:

                What I’ve been trying to do here is to ask some questions to look a bit deeper in the future of oil in this country. Companies usually put the best spin on things, but behind the scenes can be activities that aren’t made public until things rapidly fall apart.

                I remember the coverage of Enron. The media and the market loved it. It was the future of the energy business. Then Fortune did a long article bringing up some questions about the company. That was the first negative reporting I saw. I started asking other people in energy if there were going to be problems with Enron. No one seemed overly concerned. Then the company collapsed.

                I think there are shifts happening now with the major oil companies which suggest to me that it is no longer business as usual with oil. The combination of LTO, a slower rate of demand in some areas, the lack of significant new discoveries, and extended low oil prices have changed their future outlooks.

                How it all plays out in the near term will likely depend on what happens with LTO areas. They are going to become less productive and/or financing will disappear, but what the timetable for those events might be, I don’t know.

                • clueless says:

                  Boomer – I guess that I do not understand why you do not use TT’s “Scoop” facts (?) to objectively question his wisdom. He says that he has a well that produced 140,000 bbl during the first 22 months: thus, an average of 6,363 bbl per month. Just as a rule of thumb [my thumb], I have to think that the latest month has to be around 50% of the 22 month average. So, let’s say, currently the WAG is 3,200 bbl per month or, about 105 bbl per day. Then, TT brags that the well is ABOVE a 600,000 bbl EUR curve. So, with 460,000 bbl to go, I guess that he is projecting the 105 bbl/day to last, unchanged, for the next 12 years.

                  Since you know more than most [your self assessment] about the oil business, I guess that you or TT can tell people like me what kind of production curve he is looking at.

                  • Boomer II says:

                    I didn’t want to go into it that deeply. My question is more about motivation. Why is he here talking up OK oil, and even more so, how Trump is going to enable the US oil business to boom?

                    I used to follow internet stock boards during the dotcom boom and you could see certain patterns. Some people were always promoting certain companies. Luckily, there were other investors who countered the BS.

                    Also, if he is trying to promote oil, leases, oil stocks, etc. this isn’t the audience for it. On the non-petroleum threads we see people who jump in based, I think, on keywords. If they see a topic being discussed anywhere on the Internet, they begin posting.

                    But trying to paint a picture of the oil business in this forum that is counter to what others in the industry are saying makes no sense, either from a factual point of view, or from a market manipulation point of view. We’re not going to bite. This isn’t a gullible forum.

            • Dennis Coyne says:

              Hi Mike,

              The breakeven numbers in the last chart of the post look very low to me. It occurred to me that they do breakeven differently from me and might use an ROI of zero.

              Note that I would agree with the idea that this makes no sense from a business perspective (why bother to complete a well if you generate no net income), but in any case I ran my breakeven analysis with a real discount rate of zero (nominal would be 2.5%/year to cover inflation).

              With that (unrealistic assumption) I get $57.35/bo for the Permian, $59.97/bo for the Bakken, $64.26/bo for the Eagle Ford, and $66.52/bo for US “other” LTO.

              The average US LTO well in each of these areas loses money (ROI is negative) on a point forward basis, full cycle would be worse.

              I know you already know this, I am doing this as a reality check and to suggest I am learning (at least a bit).

              Thanks for your help.

              • Dennis Coyne says:

                Hi Mike,

                It occurred to me that the very low breakeven oil prices may us a nominal ROI of zero so that the real ROI (in constant dollars) would be -2.5%/year (assuming annual inflation rate of 2.5%/year).

                Under this (ridiculous) assumption “breakeven” oil prices for the average well completed in the various areas where LTO is produced would be:

                Play———Breakeven oil price ($/bo-2016$)
                Eagle Ford–62.11
                Other LTO–63.54

                At these “breakeven oil prices” the companies only lose 2.5%/year to inflation on a point forward basis.

                • JG says:

                  I have drilled a large number of horizontal shale wells in most of the plays listed. It is a challenge to give a break even for a basin, think of it as individual square miles being like a pixel on a computer screen, each one is slightly different. For instance I drilled a 600 MBO Wolfcamp well, and one mile to the south is a fault, and across the fault wells will make 150 MBO. For each of these plays the vast majority of locations listed by applying a cookie cutter approach will be uneconomic except at very high oil prices, however there are still a significant number of wells that will be economic at $30 in the Permian, $40 in the Stack and Scoop, and $50 in the Bakken. Boomer II raises a good point in that since there is such an inventory of these wells economic at low oil prices we will drag out low prices for longer. Barring an unforeseen calamity, oil is likely to stay at $50 +/- for years, which is OK for those companies with just the right acreage, and will be the doom of those companies who don’t.

                  • Problem is that other sectors won’t keep up at lower oil prices. Take for example Colombia, Azerbaijan, China, Mexico, Egypt, and Indonesia.

                    This problem has a lot of moving parts, and a lot of heads which tend to think differently. And the players outside the USA which are in decline produce about 30 mmbopd.

                    One other issue: that BP production mixes NGL and all sorts of liquids we really can’t consider crude oil and condensate. We need a reliable source for worldwide NGL production.

                  • Eulenspiegel says:

                    No, a few very good wells can’t drag international oil prices down. They are about the total numbers and demand grow / decline.

                    A few very good wells are just a jackpot when everything else is in decline – you can make a lot of money. So is the SA big fields with low production cost. Only because Ghawar can produce 5 millions barrels a da y(more than all shale wells at the USA together) at 10$/barrel doesn’t mean world oil prices are that low – it means SA is making lots of money to throw at luxury car and bombing their neighbours.

                  • Dennis Coyne says:

                    Hi JG,

                    What matters for your bottom line is the average output of the wells you complete.

                    If you complete 1 good well for every 10 not so good wells, it may make for nice bragging rights to tell everyone about your 600 kbo well, but the question I would ask is what is the cumulative output of your average well, what are average capital costs per well, what is your average LOE per barrel of oil? The answer to these questions you will not answer because we would know your bottom line.

                  • Dennis Coyne says:

                    Hi Fernando,

                    We used to get data on NGL from the EIA, now the best we can do at the World level is take BP data and subtract the EIA data to estimate the annual level of NGL. We can also figure this for the limited number of countries the EIA still covers, but the list is very limited, basically OPEC and maybe 10 other large producers.

                    Absolutely agree it is the C+C that matters most and that 1 to 2 Mb/d more LTO output is not going to keep prices low.

                    There has been very little investment outside of LTO in the past couple of years, except for a few deepwater projects that had already been sanctioned, the pipeline of new large projects is very thin and within the year this fact may lead to declining output unless OPEC and Russia do not renew their cuts in July. Your $63/b oil price guess is starting to look pretty good (I think that is the 12 month average for 2017), what does your model predict for 2018? $75/b?

                • Mike says:

                  Dennis, a hyperbolic 1.4 b factor is ridiculous, a 1.8 is laughable. I note that the investor presentation this comes from involves a company’s whose UR’s to date are a little over 130K BOE per well and the same wells are currently below 100 BOPD. Now, by the miracle of making stuff up, it is going to drill 1M BOE EUR wells offsetting 250M BOE EUR wells. I am astounded people buy into that stuff.

                  Cherry picking a few good wells here and there in the middle of oodles of very bad wells is meaningless when trying to determine the role that unconventional resources will play in our energy future. Ignoring debt and lack of profitability is convenient when promoting an agenda, but meaningless in the big scheme of things.

                  Permian wells have gotten better, no doubt. I think by mid year you will have a larger data set that is going to likely improve EUR’s, but, and I repeat but, not enough to pay wells out at $50 dollar hedged oil. 265K BO will NOT do it and if by year 5 they are not paid out, they won’t pay out baring a hundred dollar price spike.

         Using proper accounting methods that include leasehold and infrastructure costs, those wells out there cost $9.5M + each; I saw a ticket on a 15M pound frac the other day and it was a wowzer.

                  Everything you are doing now with regards to “breakevens,” I believe is correct. It is indeed ridiculous, all of it, and it should now be clear that 99% of the shale oil wells drilled in America since 2014 are losers. Its not about how much you earn, its about how much money you can borrow to grow reserves, and pray that prices go up enough to be able to pay the debt back.


                  • Dennis Coyne says:

                    Thanks Mike,

                    Glad to hear I am roughly on the right track.

                    When I start saying really stupid stuff please call me on it. 🙂

                  • Ves says:


                    If I could summarise the last 3 years for shale in terms of the economics I would say that shale kept running (drilling) but the distance (profitability) always stayed the same.

                    Unless there is significant “subsidy” by capping the old conventional production to allow price to increase I don’t see any “solution” for shale production in terms of profitability. And regulating conventional production is impossible to do on global level.

                    I am afraid that Permian (and what is left in EF, Bakken) would be drilled regardless of the price in the next few years and that could keep price at around $50-60 as floor (with a help of natural decline of mature fields, no new offshore deep drilling, and OPEC cutting/talking little bit here and there). How many years of shale “recreational” drilling is left in these shale fields I have no idea.

                    In the meantime analyst, media, banks will just pretend that everything is fine until the moment comes that you cannot pretend anymore.

                  • Dennis Coyne says:

                    Hi Ves,

                    The Texas RRC still has the power to regulate output, perhaps the oil industry in Texas should ask the regulators to act so the industry doesn’t collectively shoot itself in the foot. Maybe the Texas RRC could quietly approach the NDIC and see if they can get them to regulate output as well.

                    They could do the old market leader thing that the Auto industry followed for years where the leader (Texas) sets output and then the NDIC sets its output levels a week later taking its cue from the RRC.

                    So far the US has been the problem(as far as overproducing), in fact the RRC could even coordinate with OPEC by setting its output levels based on the signals it gets from OPEC.

                    It would be better for the industry to control its output, that is the main reason the RRC and OPEC exist, change OPEC to the OPPC and have all the oil producers join.

                  • Boomer II says:

                    I’ve long been concerned about management of US oil supplies. The CO2 thing is a new wrinkle, but I would still be concerned about oil supplies and usage even if that weren’t a problem.

                    So I ask mostly about economics rather than environmental concerns. I think it would be wise, both for the oil industry and for the country in general, if oil production was spaced out better, both to conserve what we have and to raise oil prices to a profitable level.

                    I would like to see us make a transition to more renewables, more EVs, and more efficiencies so that we can reserve oil for the uses where it is still our best option. We’ll always need it, so let’s not use it all now.

                  • Dennis Coyne says:

                    Hi Mike,

                    Did you notice that they ignore royalties and taxes when calculating breakeven costs in the Drilling info piece?

                    I will have to find one of those tax and royalty free wells! Money makers for sure. 🙂

                    On the borrowing in the LTO sector, they make money the new fashioned way they borrow it. (A play on that old Smith Barney ad.)


                  • Mike says:

                    Dennis, yes, I did notice that. I submitted that DI link only to draw attention to acreage costs and the role that plays in total well costs. In that regard I believe the article was accurate as I believe actual well costs are that high in real life. Successful efforts accounting methods used by the shale oil industry is part of the slight of hand it uses to make costs look cheaper, and unprofitability look less, much like BOE and IRR and all that dribble. If you read investor presentations they all lie about well costs. They are much higher than published.

                    A recent Forbes article about the Exxon deal in the Delaware simply multiplied Exxons reserve estimates x $50 dollars and bingo; it is an awesome deal. Until you use and see how lousy those BOPCO wells are on that block Exxon bought.

                  • Dennis Coyne says:

                    Hi Mike,

                    One thing about land costs is that they are all over the place so trying to figure an average for a full cycle estimate is difficult for the kind of top down approach I attempt.

                    Also in the Wolfcamp there are several different layers A, upper B, lower B, and D have the best average EUR (according to the USGS paper) so for each given acre (or 100 acres) there might be 4 wells that might be drilled into each of these different layers, in those cases the land cost would be reduced (as a per well cost).

                    Based on the information in that piece it looks like $1.6 million per well for land.

                    I have not included this in my model, wow.

                    Any idea what average land costs are for the Eagle Ford (LTO focused wells)?

                  • Ves says:

                    Hi Dennis,

                    I think there is no real power at Texas level to regulate production. If 5mbd of US production out total 9mbd, is shale production than power is with the banks that finance those shale operations. That is where the real power is. If they get the money from the banks they should drill it. Obviously if banks don’t care so why should shale producers care?

                  • Dennis Coyne says:

                    Hi Ves,

                    It is possible the laws have been changed in Texas, Mike would know.

                    My understanding is that the Texas RRC still has the power to regulate oil output in Texas, it chooses not to use that power. This hurts the people that do it right like Mike and shallow sand and the LTO players are a little like the guy at the bar who needs to be cut off. The RRC is not a very good bartender, they just serve it up.

                    Oh well, the prices may crash again, but I really think we may be getting to the point where supply will have trouble meeting demand, it may not be until 2018 or possibly 2019, but pretty soon supply will be short.

                    Consider that a very conservative estimate for demand growth is 1 Mb/d each year and an optimistic estimate for US LTO is 3 Mb/d higher than Dec 2016 by Jan 2023 (high oil price scenario), that leaves us 3 Mb/d short even if we assume there will be no declines elsewhere (or that increases from OPEC, Russia, Brazil, and Canada offset those declines). The exact path of future prices is unknown, but the trend of the 12 month running average oil price will be up.

                  • Mike says:

                    Dennis, I would not say in general all Permian wells have those kinds of leasehold costs per well, no. Pioneer for instance had vast amounts of acreage HBP for decades that it acquired cheaply, and with lower RI burdens. Same with a lot of major integrated companies like Chevron, or Occidental.

                    Leasehold costs typically include bonuses paid to Lessors for leases, or cash consideration for assignments from 3rd parties, title research, curative title work, title opinions, etc. The Permian is a very old province, the tracts are large and title is well established. Those costs are most certainly cheaper than they were in the Bakken.

                    In the Eagle Ford trend, not so much and we, rather I, typically used $5K per acre as a rule in estimating costs to put a unit together prior to drilling. In S. Texas I have seen numerous title opinions that cost $100K just in legal fees. Additional wells in that unit dilute those leasehold costs, of course. Leasehold costs go up later in the plays as people wise up to what is going on and want more money for everything; dial in the QEP acquisition in the DI article.

                    Investor presentations are designed to solicit investment. Its kind of silly to believe the are biblical. I always add $1M to every well cost I read in an investment presentation (particularly if the company uses successful efforts accounting methods) for leasehold costs, geophysical costs and infrastructure costs (mostly for gas gathering systems). Bigger companies in dense areas of drilling saturation also have water gathering and SWD systems but I make no comment on that.

                  • Dennis Coyne says:

                    Thanks Mike,

                    I used the EIA paper to estimate well costs and land costs for Bakken, Eagle Ford and Permian. Link below


                    The complete report is pretty good to my eye, but I know less than you so may be missing the deficiencies. The study was published March 2016 so is a bit dated.

                  • Ves says:

                    Dennis: ” The RRC is not a very good bartender, they just serve it up.”

                    Hi Dennis,

                    I would think of RRC as bouncer in the bar. They don’t serve anything. It is the banks that serve the drinks and oil producers are on the floor at this point from too much of debt shooters 🙂

                    I agree that price will go up but I am not in business of predicting when that will happen. It could happen in a year or two or three or five. Nobody knows. I am just saying that looks to me that price could stay between $50-60 for another 1-2 years because of lack of any solid agreement between oil producers. But that could change in 6 months. Nobody knows.
                    I think you have asked me 2.5 years ago about the future price and my WAG answer was that it will be bellow $60 for the next 3 years. You were surprised that it could be that “low” for that “long”. So I have pretty good chance in the next 6 months that I had a “right” guess. But it was just lucky guess.

                  • Boomer II says:

                    This is likely to keep prices low for at least awhile.

                    Shale Drillers Hedge, Putting A Cap On Any Oil Price Rally | “U.S. shale companies have hedged about 27 percent of their production this year, compared to only 17 percent at the same point in 2016, according to Wood Mackenzie. The hedges lock them into relatively favorable price levels, securing some of the gains that accrued to oil since OPEC announced its deal in November.”

                    Surge in oil hedging could worsen US supply glut: Wood Mackenzie: “But according to recent disclosures, producers have rushed to hedge, or lock in, oil prices above $50 a barrel after OPEC’s November announcement to cut production.”

                  • Dennis Coyne says:

                    Hi Ves,

                    That was a very good guess, and you are correct that nobody knows future prices (except maybe you 🙂 ).

                    I did not expect LTO output to be as resilient as it has been, but I wonder if output will increase very much at oil prices under $60/b.

                    I have noticed that a lot of strange calculations are done with “breakeven” oil prices such as using a nominal ROI of 0% (or a real ROI at -2.5% with inflation assumed to be 2.5%). Doing that gets us to $58/b for breakeven on a point forward basis.

                    Not low enough?

                    No problem, then just ignore royalty and tax payments and we knock another 32% off the breakeven and we are under $40/b.

                    These are the kind of games being played.

                    The “real” breakeven with a 10% discount rate (nominal) is about $65/b in the Permian basin, if we ignore land costs (the so-called point-forward analysis.)

                    You probably know all this, but I am just starting to realize where the ridiculous break even numbers we read about come from, not a lot of sunshine there.

                    On prices between 50 and 60 for two years, my “medium oil price scenario” has oil prices averaging $56/b from Jan 2017 to Dec 2018. The oil price doesn’t rise to $65/b until April 2019, prices rise about $5/year until they reach $100/b in May 2026 ($0.41/month).

                    Seems relatively conservative to me, though some think these prices are too high.

                    My guess is that supply will have difficulty keeping up with rising oil demand which is likely to reach 90 Mb/d of C+C demand by 2026 (assumes a rise of 1 Mb/d each year), though the rate of rise in demand from 2005 to 2016 was only about 600 kb/d each year. If that rate should continue we would be at 86.6 Mb/d in 2026 for oil demand. I doubt we will keep up under the “medium oil price scenario” and supplies will be short unless oil prices are higher.

                    In fact oil supply will be short no matter what, imo, by 2019.

                  • Boomer II says:

                    Even with the faked ROI numbers, things should get worse before long if it is true, as has been said by several knowledgeable industry people, that drilling costs went down when there was a lack of business and they will go up as drilling picks up.

                    Therefore, many of those cost-saving efficiencies will disappear before long.

                    The question is how long investors and lenders can be strung along. The financial media has definitely caught on in recent months and is less likely to publish the hype without skepticism.

              • Nathanael says:

                Thanks, Dennis. Those numbers are brutal!

                A friend of mine helped me with a rule of thumb of 8 kwh == 1 gal in comparable-class electric car vs. gasoline car, and also ran a regression of average US gas price vs. WTI over 20 years.

                Assume an electric car with purchase price parity to a comparable-class gasoline car, and assume average US electricity prices. Fuel cost parity is at $2/bbl oil. That’s not a typo.

                If you use the least efficient superluxury electric car and the most efficient non-plug-in hybrid gasoline car (an unfair comparison), fuel cost parity is at $53.49. (Why would you get a non-plugin hybrid when you can get a plugin hybrid for about the same price?)

                With the most efficient non-hybrid econobox… fuel cost parity is at $26.84.

                Since electric cars are also nicer to drive than gasoline cars, this is it. Pass purchase price parity, and gasoline cars disappear as fast as electric cars can be manufactured. Oil price drops below fuel price parity and it cannot recover unless there’s a bottleneck in electric car manufacturing (which, of course, there is).

                When the investment money starts *really* flowing into electric cars (believe it or not, it hasn’t yet) the production capacity bottleneck could disappear very fast. Probably the good old 2 year lag time to get a factory up and running… and I think the big investment money goes in either in 2018 or 2019 at the latest. So 2020 or 2021, the demand destruction for oil should be even higher than my projections above.

                Chevron is bragging about Permian wells with breakeven of $20. Not so great if the oil price is $26.84 or less.

                I am starting to wonder about the breakeven of pumping out of *existing* wells.

    • Boomer II says:

      “The state is happy,”

      Looks like your contribution wasn’t quite enough.

      Oklahoma, three other energy states see personal earnings decline in 2016, BEA says | News OK: “Total earnings in Oklahoma fell 0.2 percent last year as the bureau said lower mining earnings (which includes oil and gas earnings) were the leading contributor to earnings declines in Oklahoma, Alaska, North Dakota and Wyoming. Earnings rose 4.1 percent nationally last year.”

    • Eulenspiegel says:

      Great to tap a bonanza – is this for the whole basin, or is this a lucky stricke to tap the jackpot?

      If you get 4 duds for one of these, you are still in the red, if you only have the best acreage you’ll get rich.

      How does this compare with ennos data, the average well in all basins is wide from these numbers?

      • Dennis Coyne says:

        Hi Eulenspiegel,

        Texas Tea touts Oklahoma where the state level data is not very good. Enno has found the Oklahoma data is not usable, he does have information on North Dakota and Wyoming. There is always wide variation in well output in every basin.

        You can really get rich if you only complete the really good wells like Texas Tea 😉

    • Dennis Coyne says:

      Hi Texas Tea,

      How many LTO wells in your portfolio?

      What is the average cumulative output (barrels of oil) of those wells over the first 12, 18, and 24 months?

      What is the average cost to complete those wells?

      What is LOE? Average well head price for oil for these wells?

      Maybe we could actually learn something from you, if you answered questions when asked.

    • Dennis Coyne says:

      Hi Texas Tea,

      I call bullshit on your well that has produced 140 kb in 22 months being above a 600 kb type curve,
      looks more like about 290 kb, not a bad well. How much was the capital cost? What is the LOE/b? At what month do you expect the well to pay out? Maybe you can list the first 22 months of monthly output and we can see what the type curve really is.

      • shallow sand says:

        Dennis. IHS Energy shows 111 horizontal wells in OK with first production from 1/1/2009 forward that have cumulative oil of 200,000 BO or more.

        EIA shows that since peaking at 473K BOPD in early 2015, OK oil production was 408K BOPD in 12/16.

        In both instances data quality concerns me a little. OK oil data seems delayed compared to other states.

        I have reviewed STACK “oil window” non-operated working interests for sale on Assuming total well cost of $8.9 million, as recently stated by CLR for a recent well, most will be challenged to reach payout within 60 months at present oil and gas prices.

        For reasons I do not know, gas production has very high deductions. Plant product prices there have also been poor.

        As an aside, we live in an area with small operators. One I know well sells around 8,000 BO per year. He does mostly his own pumping, roustabout, etc work, assume his total cost to produce a barrel is $25.

        In 2014 I estimate he cleared $500K pre income tax. In 2016 I estimate he cleared $80K pretax, and made all of that in the last nine months.

        • Dennis Coyne says:

          Hi Shallow sand,

          Thanks for the info. How many total horizontal wells in Oklahoma with first production from 1/1/2009 to the present? In other words what percentage of wells have produced 200 kbo or more?

          Does it seem to you that the 600 kb claim by Texas Tea seems a bit ridiculous, the man has a very big hat, but where’s the beef? 🙂

          • shallow sand says:

            10,795 hz wells with first production 1/1/2009 or later in OK per IHS Energy.

            The reason I gave an example of economics from 2014 to 2016 is to illustrate how much less net income a typical owner of oil working interests is receiving in 2014 v. 2016.

            Another illustration. If I own a 1/10 WI in a two section (1280 acre tract) that becomes a high density drilling unit, and assuming there is a 3/16 royalty burden (very common in OK), here is what I would have to pay upfront per an AFE for 8 wells in that unit:

            $8.9 million per well x 8 wells x 1/10 = $7,120,000.

            If each well produced 140,000 BO plus 500,000 mcf gas, plus 500,000 gal of plant products in the first 18 months, and production started on these 1/1/2015, I would then assume an oil price of $42, gas price after deductions of $1.50, and plant products price of .70 per gallon.

            I would be entitled to 8.125% of the production from each well.

            140,000 x 8 x .08125 x $42 = $3,822,000

            500,000 x 8 x .08125 x $1.50 = $487,500

            Plant products
            500,000 x 8 x .08125 x $.70 = $227,500

            Gross income $4,537,000 (includes estimated deducts for oil, gas and plant products severance).

            It looks like joint interest billing for LOE and administrative run about $14,000 per month per well for the 8/8 working interest. Therefore:

            $14,000 x 18 months x 8 wells x 1/10 WI = $201,600 of expenses billed.

            So, in my example, at 18 months, the project for the 1/10 WI owner is $2,784,600 from payout.

            Now, assume that in month 19 our production from the 8 well unit is 75 BOPD per well, 750 mcf per day per well and 750 gal per day plant products per well. I will bump up prices some for summer of 2016:

            75x30x8x.08125x$45 = $65,812.50
            750x30x8x.08125x$2.00 = $29,250.00
            Plant products
            750x30x8x.08125x$1.00 = $14,625

            LOE & Administrative expense
            $14,000 x 8 x 1/10 = $11,200

            So, in month 19 the project nets $98,487.50 for the 1/10 working interest owner.

            Assuming the production can hold steady for 28 more months, the project will payout in month 47. The concern is flat production for the next 28 months.

            I did this while eating a sandwich over lunch, so feel free to check my math, point out mistakes, including mistaken inputs. However, wells producing at the above are around the norm for STACK based on data I have seen. Clearly some better ones, there are a lot that are worse.

          • shallow sand says:


            The data I see shows 10,795 hz wells in OK with first production of 1/1/2009 or later, with 9,914 being shown as active.

            There are 16 wells with cumulative oil in excess of 300,000. One has cumulative oil in excess of 600K, Unit Petroleum’s Harper Thomas in Grady Co., which shows 675,618 cumulative BO, with 12/31/2016 production of 12,477 BO. First production was 1/1/2015. Producing out of the Hoxbar.

            It appears Devon and Newfield each have a couple of wells in this group of 16 that could hit 600K cumulative BO, each are over 300K cumulative BO and still over 200 BOPD most recent month. There is also a well producing in the Oswego that has surpassed 500K cumulative BO.

            • Dennis Coyne says:

              Hi Shallow sand,

              My claim was not that 600 kbo was not possible, but clearly the odds are not in one’s favor, out of 10,000 + wells drilled we have maybe 5 or 6 so far that might hit 600 kb0. My guess is that the average well will be between 200 kbo and 300 kbo, probably closer to the lower of these two WAGs.

              Thanks for the info.

              • shallow sand says:

                Dennis. I understand and agree. I think 600K+ BO cumulative hz wells in OK will be a small percentage of the total, just like in all other unconventional areas of the US.

    • Nathanael says:

      Great revenue, Texas Tea, but if your costs are higher than your revenue, then it’s a terrible business.

  4. I Wuz Wrong! Missed it by two months.

    World C+C, 12 month average, peaked in February 2016, not in 2015 as I predicted. 2015 12 month average was 80,546,000 barrels per day. 12 month average peak in February was 80,747,000 bpd. 2016 12 month trailing average was 80,621,000 barrels per day. High OPEC production plus that strange and sudden surge in Russian production did me in.

     photo World CC_zps0fwxdjz4.jpg

    However there is little doubt that Non-OPEC has peaked. High 12 month trailing average was in November 2015 at 46,515,000 bpd.

     photo Non-OPEC CC_zpsec9il7bk.jpg

    No, increased production from US shale will not make up for the decline in the rest of the Non-OPEC world. Remember, the last three months of this Non-OPEC data includes that sudden surge from Russia, yet December 2016 production was still almost 800,000 bpd below the December 2014 peak.

    All data is from EIA Total Energy

    • texas tea says:

      Ron says “No, increased production from US shale will not make up for the decline in the rest of the Non-OPEC world.” without commenting as to Ron being correct…. that is the definition of an investable thesis.

    • Dennis Coyne says:

      Hi Ron,

      I disagree. I think your call was correct if we use the centered 12 month average and get Sept 2015 as the 12 month average peak.

      Chart of World C+C output in Mb/d in chart below.

      • Dennis Coyne says:

        Lookin at the chart above I would call this a plateau from June 2015 to July 2016 for the centered 12 month running average of World C+C output. The 12 month centered average has fluctuated between 80.44 and 80.75 Mb/d over that 13 month period. The average World output over the 25 month period used for that set of 12 month averages (Dec 2014 to Dec 2016) is 80.57 Mb/d. We could call it 80.6+/-0.2 Mb/d for the centered 12 month average from June 2015 to July 2016.

        • Suyog says:

          We thought the peak was in 2005, then in 2008, and now we think it was in 2015/2016. Past history shows that when oil becomes expensive marginal sources are exploited and production rises. Within reason, the availability of oil is not static and is a function of price. The tight oil revolution in the US was not anticipated by the peak oil crowd and production of this type of oil has now stopped falling inspite of low price. How do we know other countries don’t have tight oil deposits similar to N Dakota?

          • Survivalist says:

            I suppose what is yet to be determined is can the extraction of marginal/unconventional resources offset the decline in conventional resources, and at what price, and can we afford it. As well, past history has also shown that when oil becomes expensive we have recessions. It’s going to be a very very interesting next several years.

          • George Kaplan says:

            Other countries do have tight oil and gas, probably only Russia has oil in game changing quantities similar to USA, and given the location and lack infrastructure is likely to be extremely expensive. Mexico – mostly gas, just starting to be looked at; Saudi – tight gas currently being developed; France – best geology is directly under Paris so won’t be developed, environmental opposition throughout; China – tight oil has been developed and is probably now in decline, the source rock is much more difficult to fracture than that in USA; Canada – oil is slow and steady, lots of gas in BC undeveloped given current LNG glut; UK – some oil and gas; Poland – looked promising but is a bust; Argentina – most attractive oil play outside USA in Vaca Muerta, many IOCs showing interest but doesn’t look as big as the Bakken at the moment.

            • Dennis Coyne says:

              Hi George,

              Thanks. Do you think the rest of the World will come close to US levels of LTO output? I know you believe it will be much lower than my estimates (maybe 20 Gb for total US LTO URR?), what ever your estimate might be do you think the rest of the World might eventually match the US LTO URR?

              • George Kaplan says:

                Haven’t a clue – you have to drill, and continue to drill to get a proper idea for what’s in place, and for LTO it looks like you have to frac and continue to frac to understand the recovery. I don’t think any of these areas have seen enough of either.

            • AlexS says:

              “probably only Russia has oil in game changing quantities similar to USA, and given the location and lack infrastructure is likely to be extremely expensive.”

              The Bazhenov shale is located in Western Siberia, beneath the conventional fields and is the source rock for these fields. So infrastructure (pipelines, roads, electricity and water supply) is not a problem.
              But Russian oil companies are about 10 to 15 years behind the US peers in terms of fracking technology.
              Another issue is that the Bazhenov shale is apparently less uniform than the Bakken.
              Even more important is that Russian oils will not follow shale companies’ business model based on increasing debt.
              Therefore, Russia’s LTO output is not anticipated to surpass 500 kb/d, and may reach that level only by the end of next decade.

              • Ves says:


                The only real reason why Shale production is first developed in US and not in Russia is due to lack of new conventional oil supply in US or we can simply call it desperation. That is THE reason. Technology is not a problem. Infrastructure is not a problem. Problems always have to have solutions. If something does not have a solution it cannot be called a problem.
                Geology is not a problem either. It is what it is, and we cannot change geology so it cannot be called a problem. If there is a desperate need for oil in 20 years shale oil would be extracted even from less uniform geological formation. But if there is no need it will stay in the ground.

                • AlexS says:


                  I agree with you, but there is another big difference between the Russian oil companies and the US shale drillers. The Russians cannot afford being cashflow negative for many years. They do not have access to almost unrestricted sources of cheap funding; and they are generally much more financially conservative.

              • Dennis Coyne says:

                Thanks AlexS,

                What is the TRR estimate for the Russian LTO, has it been evaluated? Are the EIA estimates (74.6 Gb) too optimistic in your view? What does Russia estimate?

                Checked this,

                Rosneft estimates 22 Gb see page 12.


                Also from 2012


                Output from Bazhenov could provide between 800,000 b/d and 2 million b/d by 2020, or up to nearly one-fifth of the country’s current total production of just over 10.2 million b/d, Russia’s energy ministry estimates.

                The national subsoil agency Rosnedra estimates that the most promising reserves of tight oil, the Bazhenov formation in West Siberia, may hold between 25 billion mt (182 billion barrels) and 50 billion mt of recoverable reserves.

                Wow that’s 180 to 360 Gb! I thought the EIA was optimistic at 75 Gb.

                So there is a wide range of estimates from 22 Gb to 360 Gb.



                where Wood Mac put OOIP at 2 trillion barrels.

                At a 3 % recovery rate that would be 60 Gb.

                • AlexS says:


                  Bazhenov shale covers an area far exceeding that of US shales’ combined. Therefore I believe the OOIP is huge. But nobody knows exactly which part of it is recoverable with today’s technology, as very few horizontal wells were drilled so far.
                  That explains a very wide range of estimates.

                  Of course it is impossible to estimate now what are economically recoverable resources at various oil price scenarios.

                  The most recent long-term LTO production projections by the Energy Ministry (base case) are certainly much less than 2 mb/d.
                  I actually guess that 2 mb/d you mentioned referred to “difficult to extract” resources, that under Russian classification include not only LTO.

                  As I said above, taking into consideration geological, technological, and economic factors, 500 kb/d by 2030 looks much more realistic to me.

                  • Hickory says:

                    In the the next decade, Russia may have the capacity to play the financial games we play, at least when it comes to extracting tight oil . A desperate China or Europe may do whatever it takes to extend credit to the government or drillers to get at that oil.

                  • Dennis Coyne says:

                    Thanks AlexS.

              • George Kaplan says:

                Alex – do they have a network of roads that would support well spacing every 200 acres, accomodation and workshops to support 1000 or more drilling and frac crews working 24 hours, maybe 10000 heavy trucks, water and gas manifolds to collect from the spaced out small wells, a supply infrastructure for proppant, gas plants to handle the NGLs. I doubt if anything there has been overbuilt so it just supports current activity, anything new would need to be added (i.e. doesn’t exist) or would ned to wait for capacity to come available (i.e. would not be a game changer in my view).

                • AlexS says:


                  Of course, the road network in Western Siberia is not, and will never be as dense as in Texas.
                  And it does not have to be, as Russia is not expected to replicate the U.S. shale boom.
                  Gradually increasing LTO output to 500 kb/d by 2030 will not pose a big problem for infrastructure, if oil prices are high enough.
                  Potential areas of tight oil development in Russia are close to or coincide with the existing fields, where there are roads built over the past 50-60 years. Building additional local roads linking existing roads with new well pads is not something new and unachievable, as thousands of conventional wells are being drilled each year.

                  But I agree with you that 500 kb/d is not a game changer, unlike 4-5 mb/d of the U.S. LTO output.

          • Strummer says:

            Suyog: “The tight oil revolution in the US was not anticipated by the peak oil crowd and production of this type of oil has now stopped falling inspite of low price”

            Last time I looked, the “revolution” still looked like this:


            Do you have any proof that this “revolution” can actually exist without this huge mountain of debt enabled by zero interest rate policy? Because if it can’t, then it’s not a “revolution” but a scam.

            • Suyog says:

              The fact remains that this oil was produced and its production was not anticipated by anyone in 2008. If the price of oil had stayed above $100/barrel, it would be profitable. My point is that peak oil is very difficult to predict because the supply of oil is to some degree a function of the price of oil. In another 10 years it won’t matter anyway because we will have a proliferation of cheap EVs.

              • Dennis Coyne says:

                Hi Suyog,

                How fast do you expect the ramp up in EVs to be? Let’s say my estimate of a peak in oil output between 2020 an 2025 is correct and just pick 2023 as a mean estimate.

                There are about a billion personal vehicles registered in the World and last year about 0.7 million plugin vehicles were sold. One has to make very aggressive growth estimates to see a peak in demand before 2023. I suppose it is possible if one buys the Tony Seba hype, but I think it in the absence of a recession (which will reduce demand and oil prices) it will be 2035 at the earliest before oil prices start falling due to a lack of demand and 2045 would be my best guess.

                I agree it will happen eventually, I just disagree with the timing. I also hope the optimists are right and I am wrong, but think we should prepare for rough water rather than smooth sailing.

                • Suyog says:

                  I think the transition will happen rather quickly. It will be a combination of owning and sharing EVs that will significantly reduce gasoline demand.

                  • Suyog, did you even read Dennis’ post? You made no attempt to counter his argument. You just declared that the transition will happen quickly.

                    In 2015 69 million cars and 22 million commercial vehicles were manufactured worldwide. Less than 8 tenths of one percent of those cars and none of the commercial vehicles were electric.

                    And you just think, you think, that the transition will happen quickly.

                    Please see my post on this subject further down titled: “Will Electric Vehicles Cause A Future Oil Crash?”

                • Ulenspiegel says:

                  “How fast do you expect the ramp up in EVs to be? ”

                  If we want to compensate for declining production of oil we have to save 2% per year (plus efficiency gains). i.e. to replace 2% of the ICE vehicle fleet per year.

                  As cars are around 16 years in use – that means 6% replacement per year – we need 30-40% of the sold cars to be EVs to make a difference. IMHO we will reach this after 2025.

                  • If we want to compensate for declining production of oil we have to…..

                    The general world public don’t give a rat’s ass about compensating for declining oil production. They want to food, clothing, shelter and the best life possible for their families. If they can buy and drive an EV cheaper than an ICE they will. If they can’t, they won’t.

                    And the automobile manufacturers will build what they can sell and still make a profit…. whatever that is.

                  • Dennis Coyne says:

                    Hi Ulenspiegel,

                    Passenger car sales were about 77 million in 2016 and plugin sales were about 0.7 million.

                    Let’s assume total personal vehicle sales grow by 2% per year from 2017 to 2025 and that plugin car sales reach 35% of total car sales by 2025. The average annual growth rate of plugin car sales would need to be about 93% per year from 2017 to 2025 to reach that goal.

                    Does that strike you as realistic?

                    I would call that an optimistic estimate. 🙂

                  • Nick G says:

                    he average annual growth rate of plugin car sales would need to be about 93% per year from 2017 to 2025 to reach that goal. Does that strike you as realistic?


                    Now, it would be very hard to sustain that growth rate for a new industry. But…plugins (or hybrids) aren’t a new industry. They’re simply different versions of the same thing: a light passenger vehicle. The drive train is different, sure. But most of the vehicle isn’t.

                    Can batteries by ramped up? Sure. For instance: hybrids like the Prius don’t even use lithium-ion, but they reduce fuel consumption by 60% over the average US vehicle.

           cars are used much more than old cars. So, the effective average turnover is more like 8.5% than 6%.

                    And some new cars are used much more than others, like taxis. This isn’t a simple linear thing.

                  • Dennis Coyne says:

                    Hi Nick,

                    You are very optimistic. The cars do need to be redesigned, one does not simply flip a switch and ICEV magically become plugin hybrids and EVs.

                    Of course the problem isn’t a simple exponential problem, the data on the distribution of how many miles are driven by which age cars is not available Worldwide. Do you have a citation for your effective turnover rate or are you blowing smoke?

                    I researched a bit more and found the paper linked below.


                    For large markets such as the US Western Europe and Japan their aggressive fleet turnover models suggest 100% of new cars sold can be reached by 2025 in all three markets for “alternative” technologies.

                    These can be anything from 85% ethanol to pure EVs, just not a straight ICEV (gasoline or diesel), but at least a hybrid or flex-fuel (85% ethanol) vehicle. If we assume 100% of “alternative vehicle” sales were reached by 2025 (the paper is from 2010, so really this is 15 years in the future). Then another 8 years to turnover most of the newer cars (that drive the most miles), this would be 2032 for most of the fleet to be replaced.

                    Since 2010 their has been some progress so perhaps it will only be 10 years from 2015, say 2027 when an “aggressive policy” might result in 100% alternative vehicles.

                    Let’s say based on current technology this is likely to be EVs, plugin hybrids, and hybrids at least for light duty vehicles, then possibly we might reach a light duty fleet where 75-80% of miles driven were by hybrids, plug-in hybrids, and EVs and possibly 40% of total miles driven on electric power by 2035. Depending on oil prices the fleet might quickly turnover to mostly EVs (with a few plugin hybrids) by 2045 with maybe 80% of total miles driven (by light duty vehicles) on electric power.

                    In addition there may be less miles driven as ride sharing becomes more common with more use of Uber and possible greater penetration of AVs.

                    I think this scenario is about as good as we will do (probability maybe 10%).


                    It is possible, also it is not very likely imo.

                  • Nick G says:

                    The cars do need to be redesigned, one does not simply flip a switch and ICEV magically become plugin hybrids and EVs.

                    Actually, they can and do. Long before Tesla and the Leaf, backyard mechanics did conversions. They’d pull out the ICE, drop in an electric motor and batteries, do some rewiring, and it worked just fine.

                    Actually, all ICEs are hybrids. EVs ruled the road until the electric starter motor was bolted to the ICE with the Model T. Install a more powerful starter motor, and you have a “mild hybrid”, which can stop the engine at a stoplight, and instantly restart it. Increase the battery size, and you can use that electric motor together with the ICE: a full hybrid. Add a plug, and you have a PHEV. Increase the battery and you have an extended range PHEV. Add some more battery capacity, and eliminate the ICE (and the transmission, radiator, fuel pump, etc., etc., etc), and you have a pure EV.

                    Does that oversimplify things a bit? Of course, but the basic ideas are valid: ICEVs, HEV, PHEVs and EVs share a great deal, and the transitions between them are much greyer than you might think.

                    Ideally, one would optimize things: in a hybrid one can use a slightly more efficient engine cycle if the ICE is no longer primary. One can add regenerative braking once one has a battery. Aerodynamics become more important with regen braking, vehicle weight becomes less important. And so on. But, this is fine tuning.

                    the problem isn’t a simple exponential problem, the data on the distribution of how many miles are driven by which age cars is not available Worldwide. Do you have a citation for your effective turnover rate?

                    It’s from the US DOT, Federal Highway administration. They publish very fat books of transportation statistics. One finds that the average VMT might be near 12k, but vehicles in their first year travel about 15k, those in their second maybe 14k (if memory serves). Vehicles equal to or less than 6 years old account for about 50% of VMT. Which means that it takes about 6 years to convert half the VMT. There’s a long tail, of course, but 12 year turnover is a pretty good rule of thumb.

          • Dennis Coyne says:

            Hi Suyog,

            The EIA estimates about 320 Gb of LTO in the rest of the World, but they also estimate 82 Gb of LTO for the US, but a more realistic estimate is about 40 Gb for US LTO.

            I would say for the rest of the World LTO is likely to be much less than 160 Gb and maybe 80 Gb might be a reasonable resource estimate.

            Laws for resource rights in other nations are much different from the US and it is quite possible that far less will be economically recoverable, maybe when oil prices get to $150/b (if that ever occurs) we might see 10 or 20 Gb of LTO production from the rest of the World.

            In the grand scheme even 80 Gb will make very little difference over say 10 years as the World consumes 29 Gb of C+C per year, I suppose one could claim that every little bit helps.

            I agree the current peak may be surpassed and we might see output rise as high as 84 Mb/d (for C+C only) in 2020 to 2025. I expect a plateau around the peak and many factors (oil price, World real GDP, the speed of adoption of electric transport to name a few) will influence the exact timing which is impossible to predict precisely.

            An alternative scenario is that we remain on a plateau of about 80 to 82 Mb/d from 2016 to 2025, higher output would lead to a shorter plateau and steeper decline on the other side.

            The ability to produce a lot of oil cheaply is quickly passing us by. Oil sands is not cheap and cannot be ramped up quickly and LTO is limited.

            Chart below has my latest US LTO high oil price scenario with corrections based on comments by several people.

            Economically Recoverable Resources (ERR) for All US LTO are 40.4 Gb.
            Permian 19 Gb, ND Bakken/TF 8 Gb, Eagle Ford 7.6 Gb, and Other US LTO 5.9 Gb. The peak output is 6.6 Mb/d in 2023 an increase of 2.5 Mb/d above Dec 2016 levels (4.1 Mb/d).

            • Dennis Coyne says:

              Chart below shows the various plays for US LTO on the same chart for the high oil price scenario. Note that the Permian model excludes vertical wells and as of Nov 2016 about 7% of Texas Permian horizontal wells are also excluded from the Permian estimate due to leases where multiple horizontal and vertical wells producing makes estimation difficult (Texas reports output by lease, where some states, such as North Dakota, report individual well output.) The output from the vertical Permian wells and the 7% of horizontal well output excluded up to Nov 2016 are included as part of the “other US LTO” output. In Dec 2016 the EIA reported Permian tight oil output as 1590 kb/d where my model has output at 1230 kb/d, the 360 kb/d difference is moved to the “other LTO” model. The total for US LTO for the model in Dec 2016 is within 34 kb/d (0.82%) of the EIA estimate of 4127 kb/d (model is 4093 kb/d).

              In the previous chart total wells completed in the US LTO sector is 218k. Permian 90k, Other LTO 58k, Eagle Ford 37k, and ND Bakken 33k.

              • Suyog says:

                Dennis, so we both agree that peak oil is very difficult to predict and the recent peak may mean nothing. Eventually we will have cheap mass produced EVs and peak oil may be due to peak demand and not constrained supply.

                • Dennis Coyne says:

                  Hi Suyog,

                  It does not matter if the peak is supply or demand driven. Peak oil is only the fact that output will peak and then decline.

                  Yes I agree that we do not know if the most recent peak is the peak in oil output. The test will come when oil prices increase. If they remain above $100/b for 3 years and a new peak is not reached we can be fairly certain that peak oil is behind us. Though it is possible that there could be an undulating plateau (at Q+/-1 Mb/d) where my best guess for Q is 83 Mb/d, from 2020 to 2027. In that case I would say the peak is the middle of the plateau (2023/2024).

                  But yes I agree, I cannot accurately predict the peak.

                  Eventually high prices will lead us to other forms of transportation energy, that is likely to happen beyond the peak after output has started to decline.

                  Or that’s my guess.

                  • Nick G says:

                    Peak oil is only the fact that output will peak and then decline.

                    I would disagree. I’d say that the Peak concept is generally understood to be about supply. The US saw peaks in both mercury and lead production/consumption, but they were phased out due to toxicity, and demand dropped. Prices never rose, as you’d expect from a supply-side peak.

                    I don’t think anyone would have described those events as Peak Mercury or Peak Lead.

                  • Joe Spain says:

                    Dennis, I have been reading this site regularly for quite a while. Fantastic forum. I authored/hosted a blog on the potential economic and societal impacts of Peak Oil for about 4 years (before running out of gas myself), but I am not a technical expert about the oil industry, so I can’t contribute much here.
                    When you say “Eventually high prices will lead us to other forms of transportation and energy…”, are you refering to things like horses and wood 😜? Forgive me if I am sounding like a wise guy, but would just like to hear a bit more about what you mean here. I ask because it seems to me that we are at that point of being “stuck between a rock and a hard place” in terms of oil prices.

                  • Dennis Coyne says:

                    Hi Nick G,

                    Well you might not, but I would say a peak in output is the peak in output, in any case oil is likely to peak at relatively high oil prices which suggests supply will be a factor, but it is always a matter of supply and demand which determines output. Which blade of the scissors does the cutting is never very clear.

                  • Dennis Coyne says:

                    Hi Joe Spain,

                    There will be a combination of things that happens, less single passenger vehicle use, more use of rail, light, rail, electric buses on overhead wires in cities, greater market penetration of hybrids, plugin hybrids, and EVs, better urban design with less need for vehicle use (walk to store to get groceries).

                    In addition greater use of wind, solar, hydro, and nuclear to produce electricity.

                    Higher prices for oil, coal, and natural gas as each of these energy resources reaches it’s peak in output will increase the demand for non-fossil fuel energy and in addition as these alternatives are ramped up there will be improved technology and economies of scale in their production which will drive the costs of alternative energy lower.

                    All of this will be disruptive to the economy and I expect a great Depression to result around 2030. A proper set of policies in a New Deal 2 would focus on facilitating the energy transition (electrification of rail, more public transport, better urban design, and getting an HVDC transmission grid installed (maybe the US Highway system could be the model for that).


                  • Nick G says:

                    Hi Dennis,

                    I think your perspective is that something that might be called Peak Oil Lite: oil prices have risen above the historical level, and that will drive a transition to substitutes. If production stagnates we’ll see higher oil prices, which will accelerate the transition. If the substitution is not fast enough, we’ll get a significant depression.

                    I agree with the idea of PO Lite. I also agree with the possibility of oil prices triggering recessions (if price increases are large and fast, unlike 2004-2008). If the recessions are decently well managed I see no reason for them to be no longer than normal: the effect of high oil prices is due to “friction” (delays between job losses in FF industries and job gains in new industries) and capex lag (delay between price increases and price-driven capital investment), which are temporary.

                  • Dennis Coyne says:

                    Hi Nick G,

                    A very concise and pretty accurate summary of my view.

                    I think the fall in output may be very disruptive to the economy. One thing that will be different from 1979-1982 is that in that case there was an obvious cause for the low oil output (two of the top producers had very low output during the Iran-Iraq War). In this case, most of the pundits assert that oil is plentiful and that the US is the new Saudi Arabia all backed up by EIA forecasts (AEO 2017), it will be a severe psychological shock to the economic system when all the Cornucopians have to admit they had their heads where there is little sunshine. I fear that the World economic system will keep thinking output will stabilize or rise from 2025 to 2030 and finally there will be a Minsky moment and a financial crisis followed by an economic crisis.

                    The optimist in me says that all the politicians will have read Keynes’ General Theory, but that has become so unfashionable in economics. The pessimist in me fears the politicians will follow the European prescription during the GFC and will believe we need to tighten our belts, just like Herbert Hoover.

                    The Depression will be long and severe in that case.

                    Unfortunately humans mostly don’t learn from the past they just repeat past mistakes.

                    The best we can hope for is that World War 3 is not the result.

                    Maybe all World leaders need to be history majors. 🙂

                  • Nick G says:

                    A very concise and pretty accurate summary of my view.

                    Thanks! I think good listening and mirroring back of ideas really helps communication.

                    One thing that will be different from 1979-1982 is that in that case there was an obvious cause for the low oil output (two of the top producers had very low output during the Iran-Iraq War).

                    That wasn’t so clear at the time. Go back and read Jimmy Carter’s comments about the imminency of PO.

                    it will be a severe psychological shock to the economic system when all the Cornucopians have to admit they had their heads where there is little sunshine.

                    That assumes that conventional economists and investors believe that a true PO event will be very bad for the world economy. I don’t believe that they believe that (nor do I believe that they should).

                    PO will be bad for countries and companies (including investors and employees) that are dependent on selling or consuming oil: Alaska, ND, Houston, KSA, Baker Hughes, some car companies, etc.

                    Almost all of the major car companies have committed to moving to EVs. I don’t believe that they’ve really changed their internal culture (e.g., Daimler/Mercedes Benz thinks that they’re being aggressive by moving their target for a big rollout of EVs from 2025 to 2022!). But, it’s happening. As oil prices rise that commitment will accelerate and become stronger, and the current development process is laying the groundwork for that kind of acceleration.

                    I’ve tried to give you examples in the past to inform your intuition about how substitution can accelerate given the proper price incentives. The rise in oil prices from 2004-08 was enough to create dramatic changes: one example is the car industry’s new attitude toward hybrids and EVs, another is the fundamental design and operating changes we’ve seen in both aviation and water shipping to reduce fuel consumption. I’d say that a 5 year period of oil prices above $100 would be enough to dramatically accelerate the transition away from oil in both the car industry and many other industries.

                  • Boomer II says:

                    I can’t predict what will happen with oil prices. I won’t even try.

                    What I am seeing is the shift in how oil companies, auto companies, and cities are responding to an anticipated future. They are talking about a future with less oil and less carbon.

                    The oil and the auto companies aren’t going to leave any ventures that are currently profitable, so they are still producing oil and they are still selling vehicles that use oil, but they are also signalling that when when oil gets more scarce, more expensive, and/or must be kept in the ground for environmental reasons, they will be ready.

                    Similarly the military has been very clear that they need non-fossil fuel energy options.

                  • Dennis Coyne says:

                    Hi Nick G,

                    Yes you have given such examples, there are a lot of ice vehicles that need to be replaced, I think it is possible things might work out, but I am less optimistic that they will. You believe the transition to other forms of energy will be relatively easy and that proper policy action will be taken.

                    Have you watched the news lately? In the US at least policy is off the rails, it is not necessary that it is believed peak oil will cause a recession. The late realization that oil supply is not infinite (as most average US citizens believe) will lead to high oil prices, low consumer confidence, falling sales, lower investment, in other words recession. This scenario has a much higher likelihood than what you foresee.

                    In any case, I hope you are correct, but we should prepare for the possibility that you are not.

                    Selling the idea that everything will be fine, may not lead to the action needed to make it so.

                  • Nick G says:

                    there are a lot of ice vehicles that need to be replaced

                    Actually, roughly half of all light vehicles are pretty under-used. They’re used even less in Europe, where average annual VMT is 40% lower than the US. Many vehicles don’t really need to be replaced to eliminate most fuel consumption.

                    I am less optimistic that they will.

                    I’ve tried not to make forecasts, optimistic or otherwise. I’ve tried to point out is what I regard as a fundamental fact: price incentives work. If oil prices rise dramatically, then the ongoing transition away from ICE’s will accelerate dramatically.

                    You believe the transition to other forms of energy will be relatively easy

                    The key word is “relatively”. How many wars have been caused by oil? How much pollution? How many careers have been ruined by the boom and busts in the oil industry??

                    and that proper policy action will be taken.

                    The US handled the GFC….ok. Europe was…adequate. That’s as much as we need.

                    The late realization that oil supply is not infinite (as most average US citizens believe) will lead to high oil prices, low consumer confidence, falling sales, lower investment, in other words recession.

                    Why low consumer confidence?? That’s not what happened in 2004-2008, or 2010 – 2015. Pundits will tell consumers that there are good substitutes for oil, and…it will be true.

                    So…will there be recessions? Of course. The business cycle hasn’t ended. There will be more bubbles, and oil may again be the needle that punctures them.

                    I look forward to domestically sourced, relatively stable electricity costs, which might reduce such disruptions.

                  • Dennis Coyne says:

                    Hi NickG,

                    Oh I think consumer confidence was pretty low in Europe, where the policy response was “adequate” in your opinion.

                    You keep pointing to a period of rising oil prices and rising oil supply.

                    How was consumer confidence in 1979 to 1982, when oil supply was decreasing?

                    You do not seem to appreciate how difficult an adjustment to falling oil supply will be.

                    I agree high oil prices will speed up the transition, I just don’t think it will happen as quickly or as easily as you do during a period of inadequate supply of oil.

                    That will cause disruption, uncertainty, low business and consumer confidence and eventually will lead to a severe recession.

                    You seem to be of the opinion that most people accept that peak oil will happen soon.

                    I don’t think that is the case and when it hits it will come as a severe shock to the system.

                    Most people associate peak oil with doom and gloom rather than sunshine and unicorns. 🙂

                  • Nathanael says:

                    As a firm advocate of “Peak Oil Light” (I like the term), I have been trying to model the timing of the effects of electric car adoption on the oil industry. I think the permanent glut happens by 2030 at the latest. But the permanent glut is “baked in” by the 2020-2023 period due to the rate of EV sales, at which point investment in oil dries up. (Investment in EVs booms starting in 2018, even more than now.)

                    And when the future glut is “baked in”, the far-out oil futures market becomes permanently very low (even if there’s a high spot market price). Since you can’t buy oil in the future and sell it now, there’s no way to arbitrage it; every oil company pumps as fast as humanly possible and attempts to dump it on the spot market. To pay their debts. This kills most high spot prices.

                    I’ve explained the core dynamic elsewhere. During the *rise* of an industry (like oil), high prices cause increased supply by capital investment, low prices cause increased demand, and volume always goes up. During the *fall* of an industry (like oil), high prices cause reduced demand by substitution, low prices cause reduced supply by drop in capital investment, and volume always goes down.

                    Two points need to happen to go from “rise” to “fall”. First, marginal production costs need to rise: this means that capital investment dries up at a higher and higher price over time, and only kicks in at a higher and higher price over time. This is related to the classic peak oil supply theory. Second, the price of substitutes needs to decline: this means that demand gets destroyed at a lower and lower price over time.

                    When these prices cross — so that if the price is high enough to support new investment, it’s cheaper for consumers to buy a substitute — then the industry has to go into decline.

                    We are already at the point where even with $20/bbl oil or $12/bbl oil it is cheaper to “fuel” an EV with solar electricity than to fuel a typical gas car with oil. We have been held up by upfront purchase price (sticker shock) issues with EVs vs. gas cars; this is being addressed, very very quickly.

  5. Survivalist says:

    This link has links to some interesting Surplus Energy Economics Data.

    Calls it ECoE instead of EROI.

  6. @David Archibald

    Great post David, thanks. The below needs to be highlighted. Wished you had shown it in a chart.

    Adding all those production profiles results in production in 2022 that is five million barrels per day lower than world production, per BP’s statistics, in 2015.

    Has BP became a stealth Peak Oiler?

    • Hickory says:

      If I am reading this correctly- the 5 mill bpd production decline by 2022, referred to here, does jive well with the outlook expressed in the HSBC peak oil report that Ron has recently posted.

      • Dennis Coyne says:

        I think any decline will cause oil prices to rise. In that case, oil output from LTO goes up by 2 Mb/d, Canadian oil sands output will increase, Brazilian output will increase and OPEC and Russian output will increase. Some of these increases are built into Archibald’s forecast already, but higher oil prices may also lead to lower decline rates than we have seen at the low oil prices of 2015 and 2016 as there will be more incentive to drill new wells at high oil prices.

        My guess is an undulating plateau between 80 and 84 Mb/d from 2017 to 2025.

        • Verwimp says:

          “I think any decline will cause oil prices to rise.”
          That is correct if only the supply side is considered. The demand side might suffer demand destruction in case of rising prices more significantly, so we might end up with lower prices.

          • Eulenspiegel says:

            It leads to boom / bust cycles, since demand won’t fall suddenly to high prices.

            Sure, some people can’t afford gas then, but many countries have regulated gas prices – here the government has to suffer first before they adjust.

            Demand destruction through buying better cars / moving next time nearer to work takes time, too.

            So if prices don’t shoot directly to 150$, demand destruction is slow. Then we’ll see heavy investing in oil industry (they never learn) and a new cycle.

            So, it takes years for the demand to fall, and years to increase production on heavy investing. Even in the fast shale industry there are bottlenecks – fracking equip is expensive and is not bought in advance by utility companies. Big companies investing in shale do this more conventional, they plan to complete x wells / month and create infrastructure for this – so no fast decline / growth here.

            • Nathanael says:

              Demand destruction through buying better cars takes time, but right now the main limit is the production capacity of electric cars, period.

          • Dennis Coyne says:

            Hi Verwimp,

            Yes there will be some demand destruction, but whether it is enough to reduce the quantity demanded below the quantity supplied at any give price P will depend on the short and medium term price elasticity of supply and demand. If these were well known, oil prices could be forecast accurately. If you have these, only tell me and we can make a bundle of money. 🙂

            • Verwimp says:

              If only we could, Dennis! 🙂

            • Nathanael says:

              The price elasticity of demand for oil is increasing in magnitude over time, that’s all I can say for sure.

              It’s also a function of the oil price, of course. It’s not linear.

              Right now I think there is some very serious demand destruction lined up regardless of near-term oil price movements: people who decided to get off of oil in 2008 or 2014 to insulate themselves against the price changes. Many have not actually been able to do it yet but will be able to in the next few years. By the time this backlog is burned off, the alternatives will be sufficiently mass-market that the price elasticity of demand for oil will be much larger in magnitude than it is now.

              If you make a bundle of money on the Contango starting in 2020-2025, remember me, OK? 🙂

        • Jeff says:

          ”higher oil prices may also lead to lower decline rates than we have seen at the low oil prices of 2015 and 2016 as there will be more incentive to drill new wells at high oil prices.”
          Yes and no. Infill drilling/EOR etc. was done a couple of years ago when the price was high brought production forward, i.e. natural decline rates will be higher in a couple of years than what would otherwise have been the case. Also, average field size is trending lower in each century. Smaller fields ramp up faster but also decline faster.

          • George Kaplan says:

            And I’ll add my usual caveat: because there have been so few new discoveries the bigger fields that are in line for development tend to be the more difficult and expensive ones that didn’t make the front of the queue when prices were over $100. There may be some cost saving going on that make them economic at lower prices – but keep in mind that some of those will be simplifications, for example reducing sparing or future expansion options, these also mean the decline rates could be faster, or at least more costly to ameliorate.

            See Wood Mac report in OE:


            They give a number of 45 pre-FID deep water projects to be considered over the next few years, with a total of about 30 Gb reserves – that would support about 4.5 mmbpd new production. I think there might be another 20 on top of these (smaller and more expensive still) – without new discoveries that’s it for deep water.

            • Dennis Coyne says:

              Hi George,

              I agree. It is for that reason that I expect oil prices to rise, manage to keep production flat for a time and then output will decline.

              As long as oil prices remain high the infill drilling that will occur onshore may help to reduce the decline rates, there will be more output also from oil sands in Canada and possibly Venezuela, if they can get their political situation under control.

              Based on the following things do not look good.


              (A google search on Venezuela will give you access.)

              • The National Assembly managed to meet yesterday and passed a resolution saying there was a breach of constitutional order, initiated by the Supreme Court. This was important because the Attorney General had said so on national tv, and now the process to impeach the court can theoretically proceed. The problem is the National Defender (Tarek William Saab) has to agree the court did carry out a breach, and he won’t (he’s a fairly mild mannered guy, and is in Maduro’s pocket).

                So today there’ll be more protests, the idea is to reach Saab’s office and make a din. But the regime has been mobilizing brown shirts who attack protesters in coordination with national guard units which are making generous use of tear gas.

                Meanwhile Gladys Gutierrez, one of the seven Supreme Court judges, has turned up in Madrid. I’m campaigning here to have her deported back to Venezuela, but I don’t expect to have any results. Coverage of Supreme Court judges revealed the current chief judge, Maikel Moreno, is a former convict with a long record of human rights abuses. In spite of this rather grim past the guy was given a visa to stay in the USA, and married a Cuban lady in 2012. Thus obama’s policy seems to have allowed Chavistas with jail records and very doubtful morality to enter the USA. Meanwhile Venezuelan professionals with perfect records are being denied visas.

                The story will go on, but I’m afraid that Trump won’t really be any better than Obama, he’s tied up with the false flag “chemical attack” in Syria, the North Koreans, etc. So Venezuelans will have to deal with this on their own. And I’m afraid all we’ll see is a lot of violence and repression, and venezuela simply will end up like Cuba. Not that any of you really care.

                • Nathanael says:

                  Cuba is far, far better off than Venezuela. I don’t know why you have some kind of irrational bias against Cuba, which is doing pretty great compared to Venezuela.

                  Venezuela’s core problem, as I explained before, is *massive* lead exposure from gasoline. See the work of Rick Nevin for the most extensive evidence — he’s not the only one proving these correlations though. Venezuela is simply not going to get better until the lead-poisoned generations age out.

                  Although Cuba eliminated leaded gasoline even *later*, it had reduced leaded gasoline to less than 5% of usage by 2001, while Venezuela was still using leaded gasoline in bulk in 2008. Also, before then, Cuba always had much less use of cars than Venezuela (thank you US embargo) so it had far lower lead *emissions*.

                  So the situation is much better in Cuba than in Venezuela.

                  The last three countries using leaded gasoline for motorcars are Algeria, Yemen, and Iraq. And disgracefully, the US still allows it for private planes.

        • Nathanael says:

          Dennis: I think the dynamics are wildly different *before* serious demand destruction starts to affect the oil price and *after* it does so. I’ve been trying to pinpoint the date. I currently think 2021-2023 in the futures market and 2027-2030 in the spot market. There are a number of “accelerants” which could cause this to happen faster, particularly on the spot market side. Always subject to revision, this is a work in progress…

          So I think the oil markets remain supply driven (any production decline causes oil prices to rise) *for about five years*. But starting sometime around 2020 to 2023, they start to transition to demand-driven with a secular decline in demand due to substitution.

          This happens earlier if there’s a global recession, but I’m not expecting one precisely because we are in the middle of a boom based on electric cars and renewable energy development.

          So I’ll go with your guess for 2017 to roughly 2025, after which I think the permanent glut will be understood and we’ll see the financial collapse of the oil business. The permanent severely-inverted futures curve will accelerate everyone’s pumping plans. The financial collapse will probably temporarily cause *increased* production, since bankrupt companies have additional perverse incentives to produce as fast as they possibly can.

          The futures curve only goes out to 2025 right now. With the futures curve becoming severely inverted starting in the 2020-2023 period, we can expect a massive contango opportunity to start opening up, first in the late maturities, eventually in all of them. The sharp traders will sell futures hoping to buy them back later. (Some will get caught by shortages and spot-price spikes; this still won’t cause any drilling investment.) Those with oil in storage will attempt to dump it.

  7. Evolv says:

    The number of shale wells yet to be drilled I think is overly optimistic. Art Berman has a good post on drainage for HZ wells in the Bakken. Implication is that there are going to be a lot fewer wells drilled then originally estimated.

  8. Verwimp says:

    @David Archibald

    There are not enough means to express my thanks to you for this analysis. Altough I do not fully agree with all of your extrapolations (especially the linear caracter of some future scenario’s) I agree with the final result.

  9. Boomer II says:

    Cramer says ConocoPhillips just proved low oil prices are here to stay: “The purchase, which left ConocoPhillips with $10.6 billion in cash and $2.7 billion in stock, sent its shares soaring. Cramer said the company sold the sands because at today’s prices, extracting oil from tar sands is simply not worth the cost.

    ‘It’s much better to take money from Cenovus, pay down debt, buy back stock and potentially increase the dividend than to keep pouring money into the dirtiest and most nasty form of oil around, the tar sands,’ Cramer said.”

    • Dennis Coyne says:

      Hi Boomer,

      An alternative view on oil prices

      Oil prices are not capped around $55 as is widely assumed but rather are on track to hit $70 per barrel later this year, according to Pierre Andurand, managing partner at Andurand Capital Management.

      Andurand is widely known for his bearish call on oil prices in the mid-2000s, delivered ahead of the drastic sell-off which saw WTI prices plummet from close to $150 in July 2008 to trade in the $30s a mere five months later.
      Hence why his switch from oil bear to oil bull has particularly caught the market’s attention. …

      • I have come around to Dennis’ way of thinking on this one. In fact I am now more bullish on oil prices than he is. Almost everyone is predicting low oil prices are here to stay, or at least stay for a long time. And the reason they are making such a prediction is that they believe the oil glut is here to stay.

        I am predicting that by the somewhere between the 4th quarter of 2017 and the 4 quarter of 2018, these people will receive a huge shock. That shock will be when they find out oil is not nearly as plentiful as they thought it was.

        I am also predicting that the price of oil will reach $80 a barrel in 2018.

        China was just the first country to see depletion hit because of huge capex cuts. What’s happening in China will, very soon, be seen around the world.

        Woe to oil: why China’s 2017 output will extend record decline

        “Increases in capital expenditure [on new projects this year] only impact production starting 2022 given the five-year project lead time,” Nomura’s Asia oil and gas research head Gordon Kwan said. “The prior years of expenditure declines from 2013 will trigger more oil production declines in China, especially in mature fields like Daqing and Shengli discovered in the 1960s,” he said.

        Capex cuts were made around the world when the bottom dropped out of the price of oil. The full results of those cuts are yet to be felt.

        Many fields, some giant fields, were on the verge of collapse anyway. Only massive infill drilling has kept that fact hidden. Infill drilling, with horizontal wells right along the top of the reservoir, makes some fields look like they are in the prime of life when in fact they already have one foot in the grave.

        • Boomer II says:

          What event or events between now and 2018 do you think will trigger a recognition that oil isn’t as plentiful as assumed?

          • Dennis Coyne says:

            Hi Boomer,

            You did not ask me, but I believe it will be relatively flat output (maybe a 200 kb/d increase) while demand continues to rise. Stocks will start to decrease and then there will be an OMG moment when the market realizes that LTO cannot be magically ramped up by 2 Mb/d overnight.
            The deep water and oil sands projects have very long lead times and the end of OPEC cutbacks and non-OPEC cutbacks may only offset decline elsewhere leaving oil supply short.

            Ron may see things differently than me, that is true most times.

            • Nathanael says:

              Ah, but the $64 million question is: will demand continue to rise? And for how long?

              First, note that economic growth has totally decoupled from oil production.

              Then, look at China, which is practically legislating gasoline out of existence over the next few years.

              An oil price spike will only accelerate this trend and cause other governments to copy China. Later generations will wonder why it was ever legal to have cars which emitted on-site fumes.

          • What else could it be rather than an unexpected decline in production…. just like China had, and Venezuela, and Mexico and…

            From the HSBC report posted earlier, bold mine:

            “Meanwhile, we expect the past two years’ severe crude price weakness to result in a return to balance in the global oil market in 2017. At that stage, we expect global effective spare capacity to fall to as little as 1% of demand. Supply disruptions have had only limited impact on price in 2015-16 due to the global oversupply, but the market will be much more susceptible to interruptions post-2017. In addition, given the almost unprecedented fall in industry investment since 2014, we expect the focus to return to the availability of adequate supply.”

        • Nathanael says:

          Ron, I have two working scenarios.
          In Scenario A, oil prices are low for good.

          In Scenario B, they spike up in 2018 and then start crashing hard in the early 2020s and THEN are low for good.

          I don’t know which one will happen.

          While it’s very interesting to compare the two scenarios and try to figure out which one will happen… I’m not sure it actually *matters*. In the big picture.

          Unless you’re a short-term trader, who cares? Either way, investment is oil is wasted, the industry is doomed, the age of oil is over, put your money in renewables before everyone else is rushing to do so.

          • Caelan MacIntyre says:

            I would put my ‘money’ (actually, more my valuable time, resources and effort, unless maybe it’s local pure-democratic currency) in ecovillages, local resilience, permaculture, real community and stuff like that, at least until which time as people can demonstrably and with little doubt figure out how to manage some things.
            I would have thought that someone who believed in the lead in gasoline thing would be a little skittish about technology, like, say, pseudorenewables and the industrialism and plutarchies that underpin them.

            Then again, maybe those in Venezuela are in dire need of solar panels.

            • Nathanael says:

              Well, I’ve never seen a “pseudorenewable” (that seems to be your own opium pipe fantasy).

              The fact is that every ecovillage and permaculture community I know of is putting up solar panels, and it’s become a huge part of the local resilience movement. Yes, even though they’re manufactured in big factories using high technology. The darn things do last over 30 years; you have ’em, they keep on working. Though it would be more *fully locally sustainable* to have a local solar panel factory (we’re getting one in this region!)

  10. Boomer II says:

    I think we have reached a tipping point. Major corporations see the future.

    Even ExxonMobil is Begging Trump to Show the Environment Mercy | Vanity Fair: “Supporting a decrease in carbon emissions is ultimately good business for Exxon, which had a not-inconsequential public relations disaster on its hands. A carbon tax would create a more stabile regulatory environment, polls show most people support the idea, and Exxon would be more than willing to pay a little more—with the expectation that other corporate tax rates would come down in exchange, of course—to buy some good P.R.

    Most importantly, Obama’s climate rules were actually pretty beneficial to Exxon in the long run. The Texas-based multinational is investing heavily in natural gas, a cleaner, cheaper alternative to coal that Obama touted as a bridge to building more renewable energy capacity.”

    In Rebuke to Trump Policy, GE Chief Says ‘Climate Change Is Real’ – WSJ: “… many big U.S. corporations, from candy maker Mars Inc. to oil giant Exxon Mobil Corp. XOM 2.05% , have pledged continued support for the Paris Agreement and efforts to reduce emissions.”

    • Boomer II says:

      As more businesses adjust to the idea of climate change, and in fact base business models and future profitability on it, the Trump administration will find it harder to stifle those actions. Most corporate businesses are global now, and if they see it is to their advantage to work toward lower carbon emissions, that’s what they will do.

      It’s like coal. Trump may want to promote it, but he is going against natural gas, which currently has the economic advantage in the US.

      More corporate CEOs are telling Trump to get with the program. I wonder when he will choose to.

      • Dennis Coyne says:

        Hi Boomer,

        Probably better to post these kinds of things in the Non-Petroleum thread. Most people on this thread are not very interested in climate change.


        I realize they are related, but it is a big can of worms and is the reason we have two threads.

        • Boomer II says:

          Ok. I thought that it was petroleum-related because it shows that Exxon and other big oil companies are changing their business models, but if people don’t see the connection, I won’t post them here.

          • Boomer II says:

            I’m not actually interested in discussing climate change. But I am very interested in where the big oil companies go from here. So that’s why I posted those articles.

          • Dennis Coyne says:

            Hi Boomer,

            The Exxon piece yes, but the GE piece not so much as they don’t produce a lot of oil or gas to my knowledge. 🙂

            I see now you highlighted the Exxon Mobil in the WSJ piece (which is available to subscribers only), the problem with even a mention of some topics is it attracts people who are only interested in that topic.

            I am just trying to keep those people on the other thread.

            The connection is pretty obvious.

            The discussion of what’s next also may get more traction in the non-Petroleum thread.

            • Boomer II says:

              I totally understand. That’s why I avoid the non-petroleum threads.

              Just as an aside, not only is GE in the energy business, it does have a significantly-sized division called GE Gas & Oil.

              GE Power – Wikipedia

              GE Oil and Gas – Wikipedia: “In 2016, GE Oil & Gas employs approximately 37,000, serving customers in over 140 countries.”

              • Boomer II says:

                GE Gas & Oil is also merging with Baker Hughes this year.

                GE Oil & Gas Remains Headwind Until Baker Hughes Deal Closes – TheStreet: “GE’s oil and gas business will have a vastly different look by mid-2017, however, when Baker Hughes (BHI) will merge its businesses with GE’s. The two companies inked a definitive agreement during the fourth quarter to combine businesses, creating a $32 billion-sales oilfield services giant. Under the terms of the deal, GE oil and gas and Baker Hughes will form a new entity: the ‘New’ Baker Hughes. GE will own 62.5% of the new company, while Baker Hughes shareholders will retain 37.5% of the shares.”

                • Boomer II says:

                  Here, there is this. I don’t think this was in the WSJ article, but it very definitely says what I said above. These gas and oil companies are global companies. They are going to pivot toward solutions that work best for various countries, not just the US. They see money to be made.

                  GE CEO Immelt knocks Trump on climate – POLITICO: “’Companies must be resilient and learn to adjust to political volatility all over the world,’ Immelt wrote Wednesday in an internal company blog post obtained by POLITICO. ‘Companies must have their own “foreign policy” and create technology and solutions that address local needs for our customers and society.’”

                  • GE is a service company. I think they give compressor and generator operating and maintenance services.

                    Baker Hughes has been getting heavily involved in those O&M services. My impression is they do a pretty decent job, we used them to provide platform personnel in West Africa, and I didn’t have any problems.

                    Baker Hughes also provides all sorts of other services, but the link with GE tells me they’re more focused on the O&M side.

              • Dennis Coyne says:

                Hi Boomer,

                I knew they had power systems, but did not know they were in the oil and gas business. My apologies.

                • Longtimber says:

                  Oh Holy Rad Turds – We end up with some Fukushima for our BHI Holdings?

                  Fridays News * F R A C K I N G 2 .0 *

                  “MIDLAND, Texas—Using a proprietary app called iSteer, Brian Tapp, a geologist for EOG Resources Inc., dashed off instructions to a drilling rig 100 miles away. This tool is among the reasons the little-known Texas company says it pumps more oil from the continental U.S. than Exxon Mobil Corp.—or any other producer. ”

                  • Dennis Coyne says:

                    WSJ is only available to subscribers so those links are not very useful.

                  • Boomer II says:

                    Here’s the same WSJ article at a different site. You might be able to read it here. It doesn’t really say much, though.

                    ‘Apple of oil’ EOG stays ahead of rivals with fracking 2.0

                    And here is a copy of the GE Wall Street Journal I posted earlier. It should be accessible at this site.

                    GE's Immelt Says Climate Change Is Real — WSJ

                  • Dennis Coyne says:

                    Thanks Boomer,

                    The GE article worked the other article required subscription.

                  • Boomer II says:

                    Here are some of the highlights from the fracking article.

                    “Using a proprietary app called ­iSteer, Brian Tapp, a geologist for EOG Resources, dashed off instructions to a drilling rig 160km away. This tool is among the reasons the little-known Midland, Texas, company says it pumps more oil from the continental US than Exxon Mobil, or any other producer.”

                    “EOG, part of Enron Corp until 1999, now drills horizontal wells in West Texas more than a mile (1.6km) long in 20 days, down from 38 days in 2014. It has done it in as few as 10½ days. It estimates it can get at least a 30 per cent rate of return on wells at $US40 a barrel, and that at $US50 it can boost oil production at least 15 per cent a year through to 2020.

                    The company said it produced roughly the same amount of oil last year as it did in 2014. with a budget 67 per cent smaller.”

                    About iSteer. “EOG said adjustments can happen in minutes, instead of a process that in the past took at least 30 minutes. The quick modifications keep the drill in a 3m-4m window, which EOG said improves the output and consistency of a well.”

                    “Critics have questioned EOG’s habit of quickly ramping up production from individual wells, ­arguing that that can cause wells to peter out prematurely.

                    The company used the strategy to supercharge returns in the Eagle Ford, an oil-rich region of South Texas where it was ahead of the pack in leasing more than 200,000ha for a tiny percentage of what others would pay later.

                    Chief executive Bill Thomas said trial and error had proven its Eagle Ford wells weren’t damaged when allowed to flow aggressively: ‘If you get a higher return and it doesn’t damage the well, then why not do it?'”

                  • Boomer II says:

                    The reason I said that the WSJ fracking article didn’t say much is that its the same story other LTO companies are saying. “Technology has improved and we’ve got our costs down.”

                    EOG is in the news primarily as an investment. It still lost money last year, but less than the year before. We’ll have to see if drilling costs remain low as activity picks up.

                    EOG Resources narrows losses as oil prices rise and efficiency improves | Fuel Fix: “EOG’s revenues rose by 30 percent in the last three months to years, climbing to $2.4 billion from $1.8 billion in the same period in 2014. The company’s losses shrunk to $142.4 million, or $0.25 per share, compared to a $284.3 million loss, or $0.52 per share in fourth quarter of 2015.

                    For all of 2016, EOG lost $1.1 billion, or $1.98 a share, in 2016, compared to a loss of $4.5 billion, or $8.29 per share, in 2015. Revenues for the full year in 2016 were $7.65 billion, as compared to $8.7 billion in 2015.

                    The company attributed its improved performance to higher crude oil and natural gas prices and more efficient operations. For instance, the EOG produced nearly the same volumes of oil and gas in 2015 and 2016 but cut exploration expenses by 42 percent, the company said in a news release.”

                  • Dennis Coyne says:

                    Thanks Boomer,

                    I was able to get it with a google search on the title. I agree it was mostly hype. With more rigs turning in the Permian, costs will increase and profits will decrease unless oil prices rise.

                  • Mike says:

                    We have been steering bottom hole assemblies from remote computers for many years, now they have an app for it on a cell phone; big deal. This should give everyone some insight into how desperate the shale business has become trying to find ways to make itself look better than it actually is. Same with re-frac’ing. It does not work economically. A $3M dollar re-frac with oceans of water and diverters requires 125,000K BO to payout. Not one I have heard about in the Eagle Ford has been successful at generating increased UR. They don’t do them anymore. Productivity should never be confused with profitability.

                    EOG operates in my hood; they went thru a period of gutting their wells to make big IP splashes for investors and for the sake of cash flow, and ruined them. EOG’s CEO can say stuff like that because 99.99% of the people in the world would believe him and not call him out. In solution gas drive mechanisms pressure maintenance thru choke flowback management is very important. Gutting a well hurts it, believe me. If you can flow one on restricted rates before putting it on AF, why wouldn’t you do that? Because you need the bucks and are in such dire straits financially what happens to your well 2 years from now is irrelevant. Just lasting two more years is the biggest obstacle the shale oil industry has.

                    Because of increasing GOR and rolling over into bubble point most of these shale wells in my opinion will be left with over 50% of their UR in the form of marginal gas streams, not liquids, and economic limits will be reached much earlier than people think.

                    Its always fun to me to hear what BS the shale oil industry is going to come up with next. Next up on the hit parade it is going to be vibrating the wellbore with giant sub-surface woofers or something.

                  • Dennis Coyne says:

                    Hi Mike,

                    Thanks again for your perspective, about all I know about drilling a well is the bit turns clockwise (do they have an app for that?) 🙂

                • PROTEUS says:

                  Yep, big G E Oil&Gas building south of 290 on Beltway 8 in Houston.
                  Been there for some/many years that I recall.

  11. Lightsout says:

    As of 21st March 2017, the Arctic Fox drilling rig had completed mobilisation to the Franklin Bluffs gravel pad, the location for the Icewine#2 appraisal well. The conductor has been set and installation of the cellar is currently underway. Final permit approval and delivery of additional equipment required for spud remain on schedule for an April 2017 spud.

    Could be an interesting one to watch as Alaska has high hopes for success.

  12. Boomer II says:

    This article mentions several companies selling off oil storage assets. It could be that as prices rise there could be less demand. Or it could be that these companies want to shift away from oil altogether. I haven’t looked into it.

    Exclusive: Glencore in talks to sell global oil storage stakes – sources | Reuters

    More info. It isn’t really getting out of the business.

    Glencore Agrees Deal With HNA Innovation To Form HG Storage Venture – Finance News – London South East: “The deal will result in a newly incorporated business, HG Storage International, which will consolidate Glencore’s existing petroleum products storage and logistics business into a ‘global portfolio of high-calibre assets’ that will have ‘an established presence in major trading hubs and strategically important locations across Europe, Africa and the Americas’.”

  13. Oldfarmermac says:

    Someplace upthread, there was speculation as to whether the TRRC still has the power to regulate oil production in Texas.

    My guess is that while that authority may remain in place, in the technical sense, it’s gone in the political sense. There has to be some sort of consensus among the various people involved in the industry in order for the TRRC to be politically capable of acting, and that consensus within the industry and the Texas state government is probably a thing of the past by now. Beyond that, there would likely be some interference from DC, given the Trump administration.

    IF the TRRC IS still politically and legally capable of acting to regulate Texas production, then the problem becomes the same one that plagued OPEC to such a great extent. The Saudi’s did most and maybe at times nearly all of the cutbacks, while the smaller OPEC countries cheated and took advantage of the higher prices resulting from Saudi cuts.

    • Dennis Coyne says:

      Hi Old Farmer Mac,

      Based on my modelling about 75% of any future increase in US LTO output will be from Texas, so for the US, just as was the case from 1935 to 1970, Texas controls US output.

      Excess supply from the US was the reason for the down turn in World oil prices. There are a lot of oil producers in Texas and they would be helped by the RRC controlling output as they once did as they would receive more money for each barrel that they produce.

      Now if the Texas oil producers like low oil prices, then by all means, there should be no change in how they do things. It’s their state, their call, I would prefer that they were successful, but that is just me.

  14. Oldfarmermac says:

    I am surprised that outright civil war has not yet erupted in Venezuela.

    Any discussion of the root causes of the problems there should go in the non oil thread, but there is an obvious possibility that Venezuelan oil production might crash hard and fast if the opposition finally decides that by Sky Daddy, if we are going to starve, the rest of you will starve WITH US.

    A revolution there would likely result in the price of oil going up quite a bit for at least a year or longer, until things settled down, and the job of restoring production could be started. And then it would likely take another year or longer to get production back up to the current level, with the best of luck.

    • Nathanael says:

      Root cause of the troubles in Venezuela is lead from gasoline. Read the work of Rick Nevin.

  15. Hickory says:

    Question for those with expertise regarding fracturing and oil/gas recovery-
    When a well is fracked, any idea of what percent of the fossil fuel in the zone is ‘typically’ recovered?
    How far from the laterals does the fracking reach? Can a well head be re-fracked?
    When fracking is done- is it a one time hydraulic event, or is there some mechanism for repetitive impulse waves to be propagated?
    Trying to understand the whole thing. I’m sure there is a lot of variability depending on the geology and methods.

    • clueless says:

      Hickory: “Trying to understand the whole thing.”

      Places like the University of Texas, University of Oklahoma, etc. have very good reservoir engineering schools.

      Its like the young investor who goes up to a Wall Street trader and asks him how to make money in the stock market. The trader asks: “Do you want the long story or the short story?” The guy says, well, give me the short story. Trader – okay, buy low and sell high. The young investor says: “but, how do you do that?” The trader says: Well, that is the long story.

    • coffeeguyzz says:


      Not claiming expertise in this area, but addressing some of your questions …
      Generally accepted that 3%/8% of original oil in place is currently recovered.
      Higher for gas. Some operators in Appalachian Basin are said to be approaching 25% recovery.
      Current frac lengths extend 300’/500′ laterally from wellbore. Vertical extent is a bit of a crap shoot but critical to avoid out of zone fissures and unwanted water intrusion. Hence, targeting/placement of wellbore is crucial.
      Half lengths have been achievable due to introduction of diversion technology, ie, degradable fibers/balls that temporarily block larger, near wellbore fissures as well as far field diverters to limit unwanted lengthening of frac.
      Pulsing has been employed for a few years with the ramping up and down of hydraulic pressure which seems to increase fracturing effectiveness.

      Refracs continue to evolve and are increasingly implemented with widely divergent rates of success.

      Aogrdotcom has an extensive archive, as well as up to the moment, columns relating to all things fracture-wise in the unconventional field.

      • Hickory says:

        Thank you. Fascinating to try and visualize what is going on below the surface. I’ll have do more reading up on this. Wouldn’t be surprised to see a wave of re-fracking of the juicy spots in the future.

        • coffeeguyzz says:

          Re refracs, it’s already started with operators in the Bakken – at least – reentering older wells to restimulate while frac equipment is nearby to fracture new wells.

          • Dennis Coyne says:

            Hi Coffeeguyzz,

            Doubtful that the extra oil from the refrack will pay for the cost of the refrack for most wells. The frack job is often about $4 million, for the best wells it may pay out at current oil prices (but we are talking about maybe 10% of the wells drilled to date, at most.)

            • coffeeguyzz says:


              I am going amp up my researching on precisely what is going on in the completion world because – apparently – it is becoming the norm for operators to pump older ‘parent’ wells with water at elevated pressure levels to inhibit interference from new, nearby fracs.

              This is not re-frac’ing, by any means, but the significant increase in oil output after being brought back online regularly ranges from double to tenfold according to Bruce Oksol’s ongoing reporting.

              This procedure, in fact, may well be part of the so called ‘halo effect’ that indisputably accompanies many, many new fracture operations.
              The contraction to the core would accentuate these occurrences.
              One problem in this area is that the operators are uniformly mum about these goings on.

        • Dennis Coyne says:

          Hi Hickory,

          My guess is that in the core areas the recovery factor might be higher than average, but I doubt there are many places where it is 8% (maybe 1% of the wells).
          The USGS estimates about 11 Gb for a mean TRR, OOIP is about 400 Gb so the average recovery factor is 2.75% based on the USGS estimate.

  16. I dont know if the ongoing coup in Venezuela is being reported or not. But I suspect by tomorrow evening you will hear about it.

      • clueless says:

        I would be surprised if that was the “coup” that Fernando was referring to, since the incumbent’s court puppets orchestrated that.

        For Americans, who revere the court when it agrees with them and despise it when it does not, it should give one pause when courts in the US try to usurp the powers of the other branches of government – like they are the Gods or something.

        • Dennis Coyne says:

          Hi Clueless,

          The court’s job is to interpret the law and protect individual rights as laid out in the Constitution. I think the US Supreme Court does a pretty good job.

          Not sure how Supreme Court appointments are done in Venezuela, but Maduro seems to have packed the court with supporters, I don’t follow the politics in Venezuela closely though so I could be wrong.

    • Jeff says:

      Do you know what the opposition is doing and if they can organise/unite themselves against Maduro AND avoid blood on the streets?

      Reuters has a story about some top officials that breaks with government (
      “The opposition is hoping the military – whose top ranks still pledge absolute loyalty to Maduro though there is believed to be dissent lower down – may nudge him into bringing forward a presidential election slated for the end of 2018.
      But there is no public sign of that happening.”

      • Dennis Coyne says:

        Hi Jeff,

        Thanks. At least the Supreme court reversed it’s decision. Though it looks pretty bad at this point and may have undermined it’s own legitimacy with the initial ruling.

        • Nick G says:

          And whatever legitimacy was left was destroyed by reversing itself at the instruction of the executive branch.

        • The Supreme Court didn’t reverse its decisions. It issued new decisions “amending” the two earlier decisions, but left in place most of the previous rulings.

          Under Venezuelan law and constitution, the Supreme Court can’t “amend” a previous ruling. Attempting to do so is illegal and punishable by jail. What the court is supposed to do is wait for aggrieved party (the National Assembly) to file a motion requesting the ruling be voided.

          In this case the court, same as usual, ruled as ordered by Maduro. The reversal was also ordered by Maduro. This of course shows the court is a puppet, not independent.

          I just sat through a long seminar given by eminent law professors and lawyers, who explained the court judges can now be accused of treason. They say the papers were filed with the Attorney general. This lady was the official who broke ranks with Maduro and his Mafia. She declared on national tv (during an unrelated act) that the court had broken the constitution, and although it was left unsaid the next step, according to the law, is for her to accuse formally the seven judges. They are then supposed to be delivered for trial BY THE NATIONAL ASSEMBLY.

          As a result of the ongoing coup ( which remains active because the court didn’t override all of previous coup enabling rulings), Mercosur nations declared a formal breach of the constitution. The OAS will meet in a few hours. Germany declared that Maduro was holding the Venezuelan people hostage.

          Late last week I was getting messages that individuals should pick up weapons and attack certain government offices. Then a message came out suggesting they blow up a few oil wells. I told them it was definitely better to blow a couple of wells, but that shooting was nonsense, to wait until the international community could put pressure. Otherwise I think the poop will hit the fan. With the Attorney General switching sides all they need one more official switching (such as the National People’s Defender, Tarek William Saab, a chavista who sure looks scared on tv). If he switches and the international community doesn’t act forcefully we may see a civil war.

          • Caelan MacIntyre says:

            “If he switches and the international community doesn’t act forcefully we may see a civil war.” ~ Fernando Leanme

            Perhaps this has already been discussed, but how would that affect global and/or US (looting of) access to Venezuelan oil?

  17. George Kaplan says:

    EIA GoM production for January came out today: 1748 kbpd, still not quite beating September 2009 with 1752. It is up 19,000 bpd or 1.1% from December and 138 kbpd y-o-y (8.6%). My prediction that it would get to about 1850 kbpd by June and then decline isn’t looking good. There may be 20 to 50 kbpd to come from ramp up from start-ups last year and this (Thunder Horse South with 40 kbpd nameplate was started about 9 months early in January) but not much else this year, and the high decline rates for the deep fields – up to 10 or 12% per year, so maybe 15 kbpd per month total – are ever present.

    • Dennis Coyne says:

      Hi George,

      Within 100 kb/d is pretty good and there are still 6 months, if it is flat from here you are only off by 5%, if we get the 35 kb/d increase your guess was only 3.5% low (for me that would be spot on). 🙂

      • clueless says:

        Idle minds ? Cause trouble?

        George really keeps up with the offshore details. I think that his “prediction” was more than a “guess.” And, from the end of January thru June, I get 5 months.


        • George Kaplan says:

          Maybe an educated guess, but not educated enough apparently. I think I’ll be further out than DC says. Also I hadn’t included Thunder Horse South which was bought on early and will give up to 40 kbpd. I think I missed on three things: 1) I didn’t appreciate how fast the deep wells reach decline, a lot don’t have a plateau, they ramp up, cut water and immediately start to decline in as short as six months. To keep hubs full they need continuous new wells coming on. 2) Some of the new hubs like Delta House have low availability by design – i.e. not much sparing. They were designed before the price crash so this must be a new operating idea. Therefore they have much lower average production than nameplate capacity especially in their first year. 3) Some of the projects like Heidelberg are deliberately phased so they don’t achieve nameplate until after the first year Julia had two phases by design, but even the first phase seems to be split into two halves for ramp up with only the first half achieved so far. Phase II hasn’t been scheduled and I didn’t count it. In fact I think some hubs have extra capacity built in for later, putative tie ins, so their nameplate isn’t a very good indicator of production.

          • Dennis Coyne says:

            Hi George,

            I failed to account for the 15 kb/d decline which adds up to 75 kb/d by June and needs to be deducted from the 35 kb/d mean estimate for new output so we would be at 140 kb/d under your estimate for June 2017 at maybe 1710 kb/d, do I have that right now?

            Thanks for the correction (and any future corrections).

            • SouthLaGeo says:

              Appreciate George’s comments above. I agree with all except I don’t think item #1 – rapid well decline – is as bad as George says. Rapid well decline can be an issue with wells producing small reserves, which tends to be more common with 2-3 well tiebacks. These often tend to be bright spot associated, channelized systems where reservoir connectivity is a big concern.
              I am familiar with wells in some of the big, high cum , high OOIP fields, where the wells are high on structure, far away from the oil water contact, and have decent aquifer support. The reservoirs in these fields tend to be well connected sheet sand systems or highly amalgamated channel systems. The wells are long-lived and either have already produced 20 mmbo or more, or are on pace to produce at those levels. (Some have much higher ultimates – 40 mmbo or more). Fields such as Mars, Ursa, Tahiti, Atlantis, Mad Dog, Shenzi, and Jack-St.Malo are good examples.

              • George Kaplan says:

                SLG – To be clear I wasn’t suggesting the wells are exhausted in six months, just that they start to decline really early when I’d expected them to show a plateau through 2017. Below are some of the leases with new production showing the decline (sometimes these are more than one well). Maybe some of these are due to surface issues and production will come back – and hence my guess will look a bit better, but they look more like either water break through or just general pressure decline to me. There were a couple of wells in particular for Lucius which just crashed when water increased, but unfortunately I seem to have messed up my Excel file and can’t show them exactly. I’ll have to try to get the data from BOEM again.

                • SouthLaGeo says:

                  Thanks George,
                  Regarding the chart – how are you pulling the data, by lease or by field? I know the Caesar Tonga production is more than you are showing. It should be in the 50-60 kbopd range. If you are pulling the data by lease – it is more than one lease. I don’t know the lease numbers (that is, the OCS-G-_____), but it should include Green Canyon Blocks 683, 726 and 770 (I think these are correct). Block numbers in the deepwater increase by 44 as you go south row to row. Caesar Tonga is a long, skinny subsalt three-way closure trapped against salt- that is why it covers numerous blocks.

                  • George Kaplan says:

                    It’s just leases that started up in 2014 or later by BOEM data. I tried to look at individual wells but it looked too much of a hassle. The lease data gives how many producing wells there are, so sometimes you can see when a new one is added and, if you squint, whether it held much of a plateau. For most recent, smaller additions, especially tie backs, there are usually only one or two wells per lease, so it’s a bit easier.

    • Energy News says:

      Mexico and Brazil in the news earlier today

      2017-03-31 Mexican oil regulator: proven oil reserves revised to 9.16b barrels. down 10.6% in 2016 from 2015.

      Brazil expects to see new record high production level this year…

      Brazil readies two new FPSOs for subsalt oil and natural gas output: Petrobras
      Rio de Janeiro (Platts)–30 Mar 2017
      Fresh production records are also expected in 2017, when Petrobras and its partners developing the subsalt region are scheduled to install three new FPSOs. Petrobras expects to install new FPSOs at the Lula Norte and Lula Sul areas of the Lula Field in 2017, as well as a single floating production unit that will produce from the sister Tartaruga Mestica and Tartaruga Verde fields.

      • Energy News says:

        Mexico’s existing oil reserves are dwindling so fast the country could go dry within nine years without new discoveries.
        That’s the message from the National Hydrocarbons Commission, which said Friday that the reserves fell 10.6 percent to 9.16 billion barrels in 2016, from 10.24 billion barrels a year earlier. Once the world’s third largest crude producer, Mexico’s proven reserves have declined 34 percent since 2013.
        The decline in proven reserves is driven by record-low drilling activity the last three years, according to CNH Commissioner Hector Acosta. State-owned producer Petroleos Mexicanos drilled 21 wells last year, a record low, after averaging 31 per year since 2010.

        Mexico ended Pemex’s production monopoly in 2013 to let private operators develop oil in the country for the first time since the 1930s.
        Given increased crude development activity anticipated in the deep waters of the Gulf of Mexico by private producers, the country’s production is forecast to climb to 3.4 million barrels a day by 2040, according to a report by the International Energy Agency.
        Bloomberg – March 31st

        • Energy News says:

          The chart starts with JODI Data but the last few years are Pemex. JODI Data = Pemex Data to within 3kb/day average.

          • Energy News says:

            Italian energy major Eni says its recent discovery off the coast of Mexico could be a lot bigger than its initial estimates of 800 million barrels. CEO Claudio Descalzi says the company has discovered “new layers of good light oil” in the field, located about 7 km offshore. Eni was the first international company to drill offshore Mexico after the country opened its energy sector to foreigners. Shell, Chevron and ExxonMobil have recently won deepwater exploration blocks in the region.

            • George Kaplan says:

              800 mmboe in place might only be 200 mmbbl oil recoverable. I doubt if there has ever been a single discovery announced that hasn’t been followed by something like “there could be a lot more”. There could be a lot less as well, that’s why the P in P50 stands for probability, but that never gets said.

        • George Kaplan says:

          According to Bloomberg the drop in reserves is principally because drill rigs dropped by 10 from 2010, so presumably if they added another 50 they could add several billion worth of new finds. In addition they aren’t going to go dry in 10 years, no field has ever acted like that and the author should know it. In exponential decline R/P actually stays constant (i.e. according to Bloomberg they will forever be going dry in exactly 10 years). Misleading rubbish.

        • Watcher says:

          Remember how opening up the fields to private operators was going to end the decline? Oh, so very many sophisticated statements from experts picked up by Bloomberg and Reuters.

          Make no mistake here, this news likely has far more importance than US production. When the time comes that the US is cut off from other imports, having a million bpd coming in from so close a distance — or not, because flow died — will matter a great deal.

          • It takes time, and oil prices do have to recover. At some point private industry should help stabilize production. I have experience taking over government fields in a few countries. It usually takes us about 18 months to get contractors lined up, warehouses full of goodies, and activity started. In some cases when new plants are needed it may take three years to show results.

  18. Boomer II says:

    I’m most interested in the DJ-Niobrara. The less interest there is, the less likely oil and gas companies will be pitted against communities.

    U.S. Shale Ignores OPEC’s Warning: Oil Rig Count Soars By 21 | “The Permian Basin saw the most number of rigs added again this week, bringing 4 additional rigs online after adding 7 last week, now at 319 versus only 145 rigs a year ago. Cana Woodford and DJ-Niobrara each lost two rigs, while Eagle Ford, Granite Wash, and Haynesville all added a rig.”

  19. Only for those who are interested.

    The two below graphs are from the EIA’s latest Monthly Energy Review

    The data is in thousand barrels per day and is through January 2017.

     photo US CC_zpsaylbttyy.jpg

     photo Texas CC_zpsf4u7n76n.jpg

    The decline in US crude oil production has definitely stopped. But I fail to see that huge upsurge in production everyone is taking about.

    • Nick G says:

      What was the 1971 US peak? I’m thinking it was about 9.6M BOPD, which means that the Spring of 2015 peak was mighty close…

      • What difference does it make? The peak is the peak, no matter the date. The point is that fossil fuel has peaked, or is in the process of peaking right now. So now the question is: “Will renewables make up the difference?” You say yes, I say no. We shall see.

        • Nick G says:

          Just curiosity, really.

          If you happen to know, I’d be much obliged.

        • Nathanael says:

          Renewables will absolutely 100% guaranteed make up the difference. That isn’t even in question. It can be done with a small block of the Arizona desert. The batteries can be supplied with lithium from a small block of the Chilean desert, cobalt from the Congo if we *have* to, and the rest of the minerals are practically glutted already.

          But perhaps I misunderstood you. Perhaps you are merely suggesting that there will be a gap between the fall in oil supply and the point when renewables replace it all. This is a possibility, though I currently consider it highly unlikely due to China’s monumentally high solar panel manufacturing rates.

    • shallow sand says:

      I note OK is still falling per EIA.

      • shallow sand says:

        Interesting the number of US states that have fallen significantly from late 2014/ early 2015 highs in terms of BOPD, per EIA data. I have listed the “peak” date and production in terms of “thousand barrels per day” and then listed January, 2017 production.

        Kansas 10/14. 143K. 1/17 93K
        Oklahoma 3/15 473K. 1/17 391K
        LA 9/14 189K. 1/17 140K.
        MS. 5/15 73K. 1/17 51K
        CO 8/15 357K. 1/17 298K
        MT 2/15 86K. 1/17 58K
        UT 10/14 116K 1/17 82K
        WY 4/15 251. 1/17 186K
        CA 11/14 569K. 1/17 485K

        Totals: Peak rate 2,257K. 1/17 1,784. Aggregate decrease from peak: 473K BOPD.

        This decrease in production from the smaller states (production wise) has been largely ignored, at least I have not seen much reporting on this topic.

        I would also note that the rig count in these states is up 95 in the most recent Baker Hughes data from one year ago. So, we may see these declines reverse in upcoming months?

        • Dennis Coyne says:

          Hi Shallow sand,

          Another way to look at this is to look at US L48 onshore which decreased about 1106 kb/d from the peak in April 2015 to Jan 2017.

          Then we divide big producing states (TX, ND, and NM) from the rest of US L48 onshore. The big 3 declined 611 kb/d from the 5197 kb/d peak in March 2015 or 11.8%, the rest of the USL48onshore declined by 495 kb/d from the 2483 kb/d peak in March 2015 or by 19.9%. Increases in output in the GOM (367 kb/d) and Alaska (10 kb/d) offset the declines in the US L48 onshore from March 2015 to Jan 2017.

          • shallow sand says:

            Dennis. Thanks for that analysis.

            I appreciate all of the GOM information posted here for the reason you point to.

            As GOM spending declines, I assume it will peak and reverse course.

            • Dennis Coyne says:

              Hi Shallow sand,

              I second that. Thank you George Kaplan and SoLaGeo for keeping us up to date on GOM.

              I also agree with Shallow sand that the lack of spending shoud result in a decline in GOM before long, maybe mid 2017?

    • Dennis Coyne says:

      Hi Ron,

      I think the increased output talk is based on the weekly data.

      The weekly data is not very good.

      In any case, the 5 week centered moving average of US C+C output increased by 200 kb/d from mid January to mid-March, if one extrapolated this rise for 12 months we would get an increase of 1.2 Mb/d for 2017, I doubt that will happen, I expect maybe 400 to 500 kb/d at most. Decline in the Eagle Ford is likely to level off and the Permian Basin output may continue to increase, most of the output increase in 2017 will be from the Permian basin imo.

      Also if we consider L48 onshore C+C from Aug 2016 to Jan 2017, output has actually decreased based on the monthly data by about 75 kb/d (deducting GOM and Alaska output fro US total for L48 onshore).

    • daniel says:

      It looks like the monthly data is below the weekly one for the first time in a year (by quite a margin)…. is this correct?

      • Yes, I averaged the weekly data and the January data here comes out at 111,000 bpd below the average weekly data for January.

        Weekly …. 8,946
        January ….8,835
        Difference -111

  20. Wow, thanks for all the informed, insider discussion here folks. As an industry outsider writing for industry outsiders (General Public and her Army of Precarious Proletarians), what keeps striking me about U.S. shale oil production is this —

    they seem to keep blowing-up their own business model. Just as soon as WTI oil prices go up for a few months, the drill rigs coming roaring back into these fracking fields, Wisconsin (where I dwell) loses a whole shitload more acres of farmland to frac-sand mines, and LTO production starts rising quickly, which leads to business news headlines like “Oil prices fall on shale producers nose-thumbing at idiotic OPEC cutback-ers” (or whatever they say on the CNBC).

    So now for the next 24 months, U.S. production keeps rising, and by some miracle they figure out where to store over 600 million barrels of oil in inventories, and then, we have another oil price crash, right?

    Meanwhile, the odds of The Next Great Recession just seem to keep rising, given the very long time since the cusp of That 2008 Thing.

    What do we think another Greater Recession 2.0: Too bigger to fail-er, will bring to the oil and gas business? I should think, not good things…

    Cheers from Wiscolandia…

    • Watcher says:

      Don’t presume cycles exist. A recession is due because it is overdue?

      That’s historical. History stopped in 2009 when the Federal Reserve and other CBs created money from QE (the Fed created 25% of GDP in about 6 yrs.). The other CBs are still creating. In the past, without cooperation, currencies would have fallen vs some other currency and stopped it, but given cooperation that didn’t happen and need never happen if systemic risk is presented for global fix.

      Perhaps more than anything else, Bernanke’s QE precedent is now defined as an available solution to use against all problems. How can there be a global financial disaster again when CBs can create money from nothingness and hand it to the disaster mechanism? No more disaster. CBs have infinite money.

      Only oil scarcity can prove immune to that solution. If there’s none there, decreed price won’t matter.

      • Doug Leighton says:


        “80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy…A report by HSBC shows that contrary to the commonplace narrative in the industry, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century…”

        • twocats says:

          Doug – asked and answered on this thread (search “twocats” to find the section of the thread)

          basically watcher, dennis, et al don’t believe that price or eroei have much to do with GDP given the new ultra low interest rate / global CB QE express. They make a strong argument, and its hard to argue with the results of the past 9 years.

  21. Matt says:

    Hi guys!

    Rising interest rates…any idea how this may affect US oil production and these high leveraged oilcompanies?

    Time will tell.

    • Watcher says:

      They have been falling for 40 yrs. Why is now the reversal?

      • Boomer II says:

        Is there going to be a point where banks decide there are better places to put their money than LTO companies? It is happening with coal, though for environmental rather than risk and return issues.

        Citigroup Becomes Third Major Bank to Cut Financing to Coal Industry – EcoWatch: “This is the second major bank to cut financing for coal mining this year after Bank of America announced a similar policy in May, following years of campaigning by Rainforest Action Network (RAN) and allied groups. Europe’s third largest bank Credit Agricole also adopted a similar commitment earlier this year, under pressure from European organizations. Citigroup’s move follows the launch of the Paris Pledge this summer, a global coalition of over 130 organizations calling on the banking sector to end its support for coal mining and coal-fired power prior to the Paris Climate Conference this year.”

        Seems like student loans are more of a sure thing for banks.

        Trump Administration Rolls Back Obama Protections On Student Loans | Zero Hedge

        • Nathanael says:

          Major foreign syndicates have practically given up on coal (Adani for example). In China, the money is flowing straight into factories building solar panels, batteries, and electric cars.

          Big money is going into wind farms and solar farms, worldwide (they have that wonderful guaranteed return like utility stocks used to), but that’s money which would never have been invested in oil (too conservative).

  22. Dennis Coyne says:

    Hi GreenPeopleMedia,

    My model suggests about a 230 kb/d increase in LTO output in 2017 if Brent oil prices average $55/b (2016$) for the year in the high price model where oil prices rise linearly from Jan 2018 to 2027 at $7/year (monthly increases of 59 cents per barrel every month). There will be a total rise in LTO output of 2.5 Mb/d over 6 years which will not keep pace with rising demand of 600 kb/d each year (3.6 Mb/d over 6 years). Possibly increases in output elsewhere (OPEC, Brazil, and Canada) might more than offset declines in China, Mexico, and elsewhere. I think not and believe oil will be either short or just barely able to keep up with demand, for this reason I expect after mid 2018 oil prices will be rising and may level off around 2026 at $120/b. At this point demand destruction may keep supply and demand in balance at this price level until the recession in 2030, which may be a big one worse than GFC.

  23. Rune Likvern says:

    My update on Norwegian crude oil (published a couple of weeks ago).

    Norwegian Crude Oil Reserves And Extraction per 2016

  24. Will Electric Vehicles Cause A Future Oil Crash?

    BP’s most recent Energy Outlook 2035 assumes that non-oil based transport will grow just 5 percent per annum for the next 20 years, and that essentially all of this growth will be in the gas-powered transport segment. Similarly, The Outlook for Energy: A View to 2040 published by ExxonMobil assumes that by 2040 “plug in” electric vehicles (EVs) and fuel cell vehicles (FCVs) will have no more than a 4 percent market share. Chevron, meanwhile, has indicated that it plans on the basis of the assumption that the auto industry will remain fundamentally the same for at least another 50 years.

    Of course that is the oil industry’s outlook. The article gives alternative outlooks. But even the most optimistic outlook, for EVs that is, nothing much happens until 2030. And by 2040, the very most optimistic outlook has just over two billion cars on the road, and almost half of them, or one billion ICE cars will still be on the road. That is almost as many as are on the road right now.

    And by 2030, by the most optimistic outlook, has 1.6 billion ICE vehicles on the road. By 2030 the oil crisis will be raging like a wild fire.

    So for all you guys on this list who see EVs replacing ICEs in a quick revolution, just where the hell are you getting your data? No one else, not even the most optimistic people, not even the EV industry people, believe a damn word of it.

    • Brian Rose says:


      Tesla vehicles recently passed 4 BILLION miles driven.

      That is every mile from every Tesla ever produced combined.

      Impressive right?

      So, let’s see how much fuel that saved…

      8 hours of U.S. gasoline demand.

      Tesla’s total combined impact on the world has been… 8 hours of U.S. (not world, but just U.S.) gasoline demand.

      I am an EV enthusiast and owner and am optimistic on the rise of EVs. That being said, the simple math of the situation is daunting. Even a rapid adoption of EVs (say, 10% of new vehicle sales by 2022) leaves us woefully unprepared.

      The existence of Tesla, and everything it has done since 2003, saved us 1/3 of one day of U.S. gasoline demand. How much gasoline did it take to build the vehicles and infrastructure to support them?

      • Boomer II says:

        Teslas have been a high end EV so their adoption hasn’t been about making a dent in gasoline use. It’s been a marketing
        tactic to make EVs cool.

      • Caelan MacIntyre says:

        There seem to be at least 2 particular individuals that come to mind on this site who still seem to embrace a kind of narrative or fantasy or whatever they want to call it, about how if, when and/or as oil prices rise, there will be a transition, or increased transition, to greater efficiency and electrification of various areas normally powered by fossil fuels and societal restructuring stuff along those lines…

        That writ, maybe there are some parts where they also functioned as their own devil’s advocates and discussed issues of increasing socioeconomic destabilization and chaos, with some catastrophic spikes here and there in ‘fractal collapse/decline’ fashion, in light of post peak oil increasingly digging in, and how this may play out and affect their particular narratives/fantasies/etc.?

        • Dennis Coyne says:

          Hi Caelan,

          I expect difficult times leading to a Great Depression 2, but hopefully not leading to World War 3 and a nuclear holocaust. If most large nation states respond with aggressive government action to solve the problem, things might work out ok.

          The problem in this case is the need to transition from fossil fuel use to other forms of energy. There are many other problems that might be addressed as well such as overpopulation and damage to the environment and rising inequality.

          • Dennis, damn man, you are getting smarter every day. Congratulations! 😉

          • Nathanael says:

            I’m definitely worried about the WW3 scenario. A combination of not-fit-for-purpose political systems and high inequality, along with generations of lead poisoning, seems to be promoting dangerously stupid and impulsive people into power, worldwide. I’m hoping this trend can be reversed FAST.

        • Nathanael says:

          *Cough* I’ve basically been saying that those who make the energy transition early (and relocate to places less threatened by global warming) will have a huge advantage over those who don’t, who will lose out.

      • Oldfarmermac says:

        A similar argument could have been and was made back in the earliest days of the Model T Ford, which was the first really successful internal engine vehicle. You had to be pretty forward looking and at least “comfortable” financially to buy one the first few years they were available.

        It didn’t take the public very long to figure out that if you could afford the upfront cost of buying one, it was a better option than owning a horse and buggy.

        I don’t know how long it will take for electric cars to become more practical and economical than conventional cars, but if battery prices keep coming down as fast for the next five years as they have for the last five, and oil gets back up towards a hundred bucks……. that day will be here. People will start buying electrics because they are going to be the better deal.

    • Nathanael says:

      Ron, all those outlooks are far, far too pessimistic for electric car adoption. You probably haven’t seen a serious investment-quality analysis yet. Here are the key points:

      (1) Electric cars (EVs) including plug-in hybrids (PHEVs) and pure battery-electrics (BEVs) are cheaper to fuel than all gasoline-only cars, even at oil prices of $27/bbl
      (2) They are also cheaper to fuel than the most effiicent non-plug-in hybrid at oil prices above $53.48
      (3) PHEV users have been documented by survey to primarily use electricity and only use gas occastionally for road trips
      (4) Electric cars, both BEV and PHEV, are in all qualitative ways superior to gasoline cars: smoother ride, better handling, more responsive, higher acceleration, quicker braking, no oil changes or smelly fluids, refuels while you’re asleep

      (5) These fuel costs are based on US average electricity prices, 12.2 cents /kwh
      (6) Electricity prices cannot go up. Large scale solar or wind + standard delivery charges is already being contracted for lower prices than this. Home solar is already being contracted for prices lower than this (outside the US; there’s something messed up in the US). Batteries + solar at utility scale is already being contracted for prices significantly less than this. Solar prices are still dropping fast and battery prices are still dropping very fast. Conservative projections are that batteries + solar + distribution will be cheaper than this price in 2 to 3 years.
      (7) Battery prices are dropping fast, which allows electric cars to reach purchase price parity with gasoline cars, first in the expensive market segments, and then in the cheaper segments. BEVs reach purchase price parity for the top half of the US car market *this year*.
      (8) China has a deliberate policy to promote electric cars by restricting gas cars, thanks to the horrific smog in their major cities. It is very severe and makes it very hard to *register* a gas car, but you can register electric cars immediately
      (9) The TCO on BEV buses is already better than that on diesel buses and agencies around the world are adopting them.
      (10) BEV yard goat trucks are now being purchased. Multiple manufacturers.

      (11) The big investment money hasn’t gone into the market yet. It’s just starting now, and it will accelerate due to Chinese policy and the publicity from Tesla Model 3 and the buses which are already on the road. CATL is raising 4 billion to build a battery factory just for electric cars. Tesla, obviously, can raise money with stock any time it wants to, and is expanding as fast as they possibly can. Hyundai has made a serious electric car which people like and will be fixing its range limitation next year. BYD, BAIC, SAIC, Kandi, and Geely are all pushing hard to make large numbers of electric cars (and trucks, and buses) — and each carving out niches to try to avoid direct competition (Geely’s doing taxis, BYD’s doing a lot of buses and working on trucks). Even GM and the German companies are finally, grudgingly admitting that electric cars are the future (though they’ll be left in the dust). There are even more startups getting funded, with Lucid being the most likely.

      Conclusion: the adoption curve for electric cars is limited strictly by how fast they can build factories. I’ve been using the conservative 41% growth rate (that’s the y-o-y from 2015 to 2016, from insideevs; it’s been higher some years).

      The car market is only averaging 4% y-o-y growth. That’s about 3.5 to 4 million cars. Electric car production will exceed that in 2021 by a *conservative* projection, and quite possibly sooner. Sure, something could go wrong, it could take until 2023.

      After that, the gas car fleet will be *shrinking every year*. That won’t kill oil demand immediately, but it sure will do so eventually (and it’ll kill investment in oil).

      I guess this very roughly corresponds to the “high case” scenario in your last chart, except that “2021-2030” should be labeled “2021-2025” (why did they use non-evenly-spaced graph labels? trying to confuse people?). Following that, the exponential curve continues and oil is put into permanent glut in the 2025-2030 period

      Their “high case” is, in reality, too low.

      I think maybe you should look at the projections being made by companies like CATL, BYD, and Tesla. The thing is they generally only project their own corporate production; the other thing which is happening is that more companies are getting into the market every year. A lot are falling flat on their face, but if you add it all up, you can see very clear trends. has the most detailed historical data; insideevs has much more convenient summary charts. There is an exponential curve being followed here.

      Anyone who thinks the exponential growth curve is going to level off before electric cars wipe out gasoline cars has to explain *why* people would, at the same price, prefer to buy a car which is qualitatively worse, more expensive to operate, and uses flammable, explosive liquid, rather than a nice electric car.

      I actually have a 14-page research note on this with citations to every piece of data, but I’m not ready to publish it.

  25. Another article by a logical thinker:

    Why Big Oil Shouldn’t Worry About Electric Cars

    Going from 1 percent to 50 percent in a little over 30 years looks like a pretty ambitious plan—a plan that is contingent on too many ifs, such as governments having enough money to incentivize buyers and build the vital charging infrastructure; carmakers making good on their promises to roll out affordable and reliable vehicles; battery-makers making good on their promises, in turn; and, when all is said and done, car buyers having enough money to switch to EVs, not just in Western Europe and the U.S.

    It seems to be indeed too early for the oil industry to start worrying about electric cars and the demise of the internal combustion engine.

    • Boomer II says:

      What could happen, though, is worldwide recession where people don’t rapidly replace ICE vehicles with EVs, but they don’t drive much, either. That’s the scenario I think will happen to reduce demand.

      • Boomer II says:

        There was an article in the last few days citing how many retail stores are closing. And as some of the bigger stores close, that will lead to more mall closings. People don’t shop the way they used to. Stuff like that could lead to a cumulative change in driving patterns.

        • Nathanael says:

          We already basically reached peak oil demand in the US; we may be hovering around peak car, and increases in fuel efficiency seem to be balancing any growth.

          The oil industry has been betting on growth in oil demand from China and India. I say it won’t happen. Chinese policy favors electricity over oil by a *spectacular* degree and India (which doesn’t have any domestic oil) will follow.

      • You are correct, that is a very real possibility. In fact I think a worldwide recession is the most likely outcome of all.

        As to stores closing, I have noticed that as well. WalMart and Amazon are putting everyone out of business. I used to go to BestBuy for all my electronics. That was before I realized that was from 15 to 25% cheaper on everything. Now I get all my electronics from Amazon.

        It is a changing world, changing fast. People will not pay more for electric cars when ICE cars are cheaper. And if money gets tight they will drive those old cars until the wheels fall off.

        Also, I know there must be charging stations somewhere but I have never seen one. Basically electric cars are for people who only make short trips and can recharge their cars at home overnight. Until the infrastructure is in place, electric cars are not an option for the vast majority of people.

        • Boomer II says:

          My community does have charging stations. There is one in the public downtown parking garage. There is one at one of the recreation centers. Several stores have them outside. Etc. So my community is putting them up quite quickly.

          However, my community also has lots of condos where people park in a parking lot rather than in a garage. Many of those parking spots don’t have direct access to an outlet, so being able to plug one’s car in overnight isn’t a given for those folks.

          The most popular car in town appears to be a Prius right now. I think as it becomes easier to everyone to charge their cars daily, more people will make the switch to a pure EV. And the used Priuses will filter down to replace some of the ICEs.

          • Boomer II says:

            Also, my community has lots of buses. So many people who have ICEs and park them in parking lots can minimize driving by taking the bus.

            The goal here locally is to eliminate the need for ICE driving as much as possible.

          • Watcher says:

            People tend to think what they see where they live is what everyone sees where they live.

            The definition of urban and rural has changed over decades with an increase in distance defining urban. If X number of people exist in Y radius circle, it is urban. Y has depended on cars of the traditional sort — but probably more important this whole thing is the basis for quoting % of the population that is urban vs rural.

            I ain’t seen a charging station either. Don’t know if I’m urban or rural.

            • Boomer II says:

              I know my community isn’t typical. It is very committed to reducing its carbon impact.

              I just pointed out that communities like mine that want to encourage plug-ins are making a point of putting them in public places.

              As that idea catches on in places like mine, it may or may not catch on in other places. However, in suburban locations where everyone has a house and a garage, public charging stations are less necessary.

              We already see the popularity of golf carts in retirement communities. They are small versions of EVs that are low cost, low maintenance, and work well on community paths.

              • Jonathan Madden says:

                There is a misconception about EV charging points in relation to a gas filling station. Charging points are frequently installed as a paired outlet, permitting two vehicles to take on, say, 50kWh in 30 minutes from two 120kW supplies.

                A typical petrol station has 20 pumps. Each can supply 10 US gallons per minute, (30 gallons per minute for trucks.) 10gpm is equivalent to 7MW of mechanical work.

                Assuming 5 minutes per transaction, and 15 gallons per average fill, this gives the filling station a max. continuous capacity of about 40MW mechanical, excluding trucks.

                An EV charging station therefore needs 200 pairs of outlets (and a very chunky 3-phase supply) to reach equivalance with a single petrol station. Many more if trucks are included. A single charging point at the local supermarket really does not cut the mustard.

                • Nick G says:

                  Most charging will take place at home.

                  Unlike underground fuel tanks, electrical infrastructure can be placed anywhere: parking meters, parking garages, wireless pads under parking spaces, etc., etc. My local drugstore has 4 charging spots.

                  Go to Canada: above a certain latitude cars need to be plugged in to heat the engine block overnight: those plugs can be anywhere.

                  One charging point at the market doesn’t cut the mustard. Hundreds of charging points distributed all over the neighborhood certainly will.

              • Phoenix mike says:

                for fun I tried to determine what cost of gasoline makes hybrid and electric cars make economic sense. Using the Honda Civic, Toyota Prius and Chevy Bolt as the standard bearers for ICE, hybrid, and electric. My base case has ICE being least expensive for gasoline <$2.00/gal. Hybrid best $2-3/ gal and electric at above 3. So assuming people are rational and are only concerned with lifetime costs (both bad assumptions but better in aggregate). People expecting a rapid transition to EVs are basically predicting above $3/gal gas. Which corresponds to $75+barrel oil.

                • Hickory says:

                  While this discussion really belongs in the non-petrol thread, here is a excellent tool to access the relative costs of ICE and electric or hybrid vehicles based on real numbers. You can vary the electricity and gasoline or diesel prices to match your local conditions, and most vehicles are available to compare.

                  • Nathanael says:

                    That is a really great tool. Glad someone finally made it!

                    Obviously if you get solar panels and batteries at home you can plug in your LCOE.

            • Oldfarmermac says:

              Watcher has a VALID point. I’m not sure myself what the word urban versus rural really means these days as it is generally used. There’s a specific definition for use in technical reports, but I haven’t looked it up.

              It’s perfectly obvious that at least eighty to ninety percent of the people who live within five to ten miles of a city limit in my part of the world are IN EFFECT urban, in economic terms. They work in or adjacent to the city, they shop in or adjacent to the city, they provide little or nothing for themselves in the way of food or fuel or employment, etc, as rural people do, at least in the usual rural versus urban stereotype.

              As far as this argument goes, even serious farmers aren’t all that rural anymore in terms of the way they live. There’s no doubt in my mind that ninety five percent of the food consumed by a TYPICAL working farmer and his family these days is purchased in a super market.

              I still burn wood, but not because it’s economical to do so.

              I would be way better off to spend the time and money I spend on firewood working and then spending my extra earnings on a heat pump. Gardening and raising chickens and cows for home consumption works, if you are long on time and short on employment opportunities, but if you have an opportunity to work for decent wages………..

              Most observers don’t realize it, but anytime you see houses crowding a highway five or ten miles out into the so called countryside past the city limit, there’s a very strong possibility that those houses are NECESSARILY served with water and sewer lines, etc.

              If these utilities aren’t already in place, in most places they will HAVE to be put in place within the foreseeable future, when houses are so close together, due to limited ground water supplies meaning some houses have wells that run dry, and due to septic systems not working well enough to be safe when so many are so close together.

        • Dennis Coyne says:

          Hi Ron,

          A lot of people don’t drive on long trips that much. The Chevy Bolt can go over 200 miles on a charge, so a car like that can mostly be charged at home, as more people buy EVs there will be more demand for charging stations and they will be installed. People will stop and grab a bite while their car charges (fast charging will take about 30 minutes).

          I agree it will take some time (2035 at least), but higher fuel prices will mean that people will use the most efficient iceV or hybrid that they own, will car pool more, will use public transportation more, will combine trips, in short they will drive less.

          UPS and FedEx and other carriers will upgrade their fleets to hybrids, natural gas, or EVs to deliver all the stuff ordered online by people trying to cut down their fuel use.

          The transition will indeed be difficult, perhaps impossible, and I agree a severe recession is likely (probability above 75%) before 2035.

          If proper policy is followed, (no government austerity in response to economic crisis) and governments take steps to help move the transition forward, support for wind, solar, EV infrastructure, rail, light rail, and other public transport and an HVDC grid, we may eventually emerge from Great Depression 2 by 2045 or 2050 with demand for fossil fuels falling below supply so that much of the remaining fossil fuel is left in the ground (prices will be too low for most of it to be economically viable.

          I know you think such scenarios are silly and I agree this is optimistic, but think it is something to strive for.

          • Caelan MacIntyre says:

            Dennis, your scenarios seem to always be based on industrialism and the way the current pseudostability of the sociopoliticaleconomic structure/order presently operates.

            Other scenarios could also, and just as easily, involve revolts/revolutions, civil unrest, wars, civil disobedience, sabotage, etc., and people getting out of wage slave and tax-coercion, etc., predicaments and reinvesting some of those kinds of unproductive efforts, if sometimes out of necessity, in a lot of native vegetation, local food and real community and family, etc., again.

            Much of that is of course already happening. It just hasn’t quite hit some people’s gated ‘communities’ or necks of the woods, such as there in– what is it?– Boston? Well, there was a bombing there not too long ago, yes? (To digress, I like me a good Boston clam chowder and cream pie or donut…)

            Driving an EV around could be done with a little ” ‘Whoosh whoosh!’ (as opposed to ICE’s ‘Vroom vroom!’) vocal sounds from within your local sandbox.”, so that scenario is still possible, if on a much smaller scale.

            • Dennis Coyne says:

              Hi Caelan,

              The possibilities are indeed infinite. The kinds of changes you foresee are possible especially over the long term they become more likely as there will need to be a change in the social order as more work is performed by machines and less by manual labor.

              Whether such a change happens gradually or suddenly is difficult to predict, but sudden changes usually lead to physical violence.

              That may be your preference, but it is not mine.

              The future is unknown, but a future society with less coercion (whether by government or by indivuals and their tribes) and greater equality would be my preference. Their are many different paths society might take to arrive at that destination.

          • Nathanael says:

            You’re underestimating how fast UPS and FedEx will change over.



            They’re going mostly for hybrids with some BEVs now, but it won’t take long for them to go full-BEV

        • Nathanael says:

          The more important point, Ron: People will not pay more for ICE cars when electric cars are cheaper.

          The average miles driven per day in the US is 43.

          Over 2/3 of all households in the US have their own driveway or garage and can charge at home. Of the remainder, many don’t have cars at all.

          In Europe, more people don’t have a private driveway, but more people also don’t have cars.
          In China and India, way more people don’t have cars, and when they get cars, they will get electric cars. Partly due to government anti-smog policy.

          I researched all of this. You clearly didn’t. Pay attention. If you believe that people will be looking for public charging stations… well, that’s just not how it works. People with electric cars overwhelmingly charge at home, or some of them charge at work. They need charging stations for road trips only. This has been addressed by Tesla; remains to be seen when the competitors will address it (which seems to be happening in Europe first).

      • Caelan MacIntyre says:

        That seems the most likely scenario.

    • Nick G says:


      Where does the idea that ICE’s could be replaced quickly come from?

      It comes from here, you dummy!

      All of those forecasts are based on Business as Usual. None of them are based on imminent Peak Oil. If oil prices rise to over $100 and stay there for 5 years, things will start changing in a big hurry.

      Hybrid and EV production isn’t supply limited. It’s limited by demand. If demand suddenly becomes ferocious and really pushes the car makers, they could convert all of their ICEs to hybrids in 10 years, and convert their hybrids to EVs in another 5 years after that. In 10-12 years oil consumption would be dropping fast.

  26. Boomer II says:

    I don’t think this has been posted here before. It has good graphs, and is a good summary of potential demand reductions and what the major oil companies are doing about that.

    Big energy fears peak oil demand is looming: “Bernard Looney, BP’s head of exploration and production, argues that large oil companies face a new competitive landscape as a result of the US shale revolution, the falling costs of renewable energy, and governments’ efforts to combat climate change by curbing use of fossil fuels.

    ‘There’s an abundance of hydrocarbons in the world . . . more hydrocarbons than the world needs, possibly,’ he says.

    ‘I don’t know how those [factors shaping the future of energy] are going to play out . . . Nobody does. But I think it would be very unwise to ignore them.'”

  27. Another really great article on the threat the oil industry has from electric vehicles.

    Electric cars pose little threat to oil demand

    The shift towards electric has to be supported by significant government incentives. Norway, for example, owes its success to the hundreds of millions of dollars in tax revenues diverted towards subsidies making it almost free to drive an electric car. Today it is normal for a Norwegian to buy an electric car in addition to a petrol vehicle for daily use to save money. Without such a subsidy, sales would fall, as demonstrated in Denmark last year. When the incentive was dropped in January 2016, electric car sales plunged 80 per cent from the previous year.

    Battery technology is improving but not as fast as necessary. Even at the $150/kWh — considered widely as the level to trigger mass production — a battery pack for an electric car with a comparable range to that of a petrol-powered car would cost tens of thousands of dollars.

    Cost aside, the improvement in battery effectiveness as measured by energy density is also slow. It is not possible to quickly increase the amount of distance travelled unless you add more batteries to a car, which means more weight and, in turn, a reduction in how far you can go.

     photo Vehicle Pool 3_zpsrhdzag1c.jpg

    Nick wrote about the electric car links I have posted:

    All of those forecasts are based on Business as Usual. None of them are based on imminent Peak Oil. If oil prices rise to over $100 and stay there for 5 years, things will start changing in a big hurry.

    Really now? Nick, the changes to the economy, brought about by peak oil and the accompanying high oil prices, will be devastating to the economy. All automobile sales will be hit hard but electric car sales will be hit the hardest. They will still be much higher than ICE vehicles. And the government, suffering from enormous tax losses, will not subsidize them. And the government will not subsidize the vast infrastructure it will require to support them.

    From Jonathan Madden’s post above:

    An EV charging station therefore needs 200 pairs of outlets (and a very chunky 3-phase supply) to reach equivalance with a single petrol station. Many more if trucks are included.

    With a recession raging just who do you think will fork over the money to build one of these every hundred miles or so on the interstate?

    • Eulenspiegel says:

      What can be done now is to build cheap electric cars to commute with – not the big ones replaceing a ICE car 1:1.

      You would cut back at reach, but the millions people who own houses or have condos with a fixed parking slot can easy buy a car with only 100 miles range they load at home every evening with a normal tap – and these cars can be build cheap. Even now. And they will be build in Asia, anyhow.

      It’s tiny, it’s slow, it’s ugly, but it would bring you to work without gas and without getting wet for less than 6000$ for a new one – and you can buy it right now, at least in china:

      A more westly one would be able to come out about 10.000$ if you accept a tiny, slow car with limited reach (100 Miles). And without these 1000 gadgets build in a modern car.

      And you can buy a used ICE car for cheap to make the longer trips, if you like.

      • Ves says:

        It’s tiny, it’s slow, it’s ugly, but it would bring you to work without gas and without getting wet for less than 6000$ ”

        You can buy today cheap, ugly, slow ICE for even $2k. It is called TATA. And probably there is whole range of cheap Chinese cars for less than $10k. Why don’t you buy it? Ahhh it is not on the western market. Well than the whole thing is not about ICE or EV. It is about monopoly. And it is monopoly for feeding you the debt. Automobile are just device for creating a debt. The more expensive vehicle – bigger the debt and bigger the profit for the car manufacturers. Win for the banks and win for the car companies.

      • Oldfarmermac says:

        Industrial machinery such as bulldozers CAN BE overhauled in a factory to nearly new quality and reliability standards, although this is not much done.

        Individual components, such as engines and transmissions ARE routinely remanufactured, and generally work as well as new ones, for a LONG time, almost as long as new, sometimes even longer.

        If batteries get to be cheap enough, there is a very real possibility that an electric car conversion industry will be born. There are tens of millions of older well used compact cars available for peanuts, and there are enough of some given models that setting up a work line to convert that particular model could be practical. Will it happen?

        Up until a couple of years ago, there was a crew of buyers working for Egyptian companies that combed the southeast buying up just about any old Japanese pickup truck, so long as it wasn’t excessively rusty. Nothing else mattered except rust. They took these trucks to sea ports, cut them in half right behind the cab, and packed them in shipping containers, while packing the empty spaces with used clothing, etc.

        In Egypt, the trucks were remanufactured with the engines, transmissions, etc being overhauled, new paint, tires, etc, and sold to proud new first time owners of a motor vehicle.

        This worked like a charm because there was a HUGE tax on new imported vehicles, but little or no tax on old ones past a certain model year, and because it was done on a volume basis with relatively low paid labor.

        I don’t know if these guys are still in business, but they sure cleaned out the back lots and cow pastures in my area. They wouldn’t buy a domestic model, due to domestics still having not fully standardized on metric.

    • shallow sand says:

      Not to get too far off oil, but reading the posts about what an “EV” charging station needs leads me to ask:

      1. What would the investment be in dollar terms for such an EV station?

      2. What would an owner of such a station need to charge to recoup expenses?

      3. Why do I never see charging stations at gas stations? I seem to only see charging stations at high end urban shopping centers and malls (although I did see one at a Holdiay Inn Express just off I70 in Salina,KS – never in use).

      It seems given the gas stations already have the strategically located real estate, and the large convenience stores, Tesla would be trying to partner with a company like Casey’s, etc to just located chargers there?

      • 1. What would the investment be in dollar terms for such an EV station?

        I have no idea but the equipment would likely be less than a standard gasoline station. However the real estate would be a lot more. It takes 5 minutes or so to fill a car with gasoline but it would take about 30 minutes to charge an electric car. Therefore you would need about six times the real estate.

        2. What would an owner of such a station need to charge to recoup expenses?

        Well that would depend on how much business he has. I assume he would have to mark up his electricity charges to at least 15% above his costs.

        It seems given the gas stations already have the strategically located real estate,

        Well no, they do not. As I pointed out above, to service the same amount of cars they would need six times the real estate. And you would assume they wish to keep their gasoline pumps for another decade or so, so that means they would need all that extra real estate in addition to what they already have.

        If it ever does come to pass that EVs are plentiful then the ideal place would be big box stores parking lots. They could equip every parking place with a charging station then people could charge their cars while shopping. Or they could be in restaurant parking lots then people could charge their cars while eating.

        “Charge and eat at Joe’s, 10 miles ahead, exit 79.”

        That assumes of course that electric vehicles makes a comeback after the recession… if the recession ends before civilization as we know it ends.

      • HuntingtonBeach says:

        “Tesla would be trying to partner with a company like Casey’s, etc ”

        Toto, I don’t think we are in Kansas anymore. I have no idea what a Casey’s is, but here in the land of EV’s. Tesla is partnering with major chain stores. Putting solar panels on their roofs and charges in their parking lots. The Tesla owners gets a free charge while they shop. Really, why in the name of BaJesus would gas stations be turned into electrical charging stations ? There is no mass quantity of explosive fuel or environmental danger to be isolated.

        The Trumpster calls me in some form or another stupid here almost everyday on the non oil side, but I have to tell you. After reading some of the comments here on the oil side. I’m surprised some here can figure out how to charge their cell phone.

        Elon Musk has steered past Henry Ford in the minds of investors, the latest sign that the auto industry is undergoing a seismic shift.

        Tesla Inc., the upstart Silicon Valley electric-car maker run by Mr. Musk, has overtaken Ford Motor Inc., the automotive pioneer that is exactly 100 years older, as the second-largest U.S. auto maker by stock-market value.

        Shares in Tesla were up 4.6% at $291.17 midday Monday, pushing the California auto maker’s market capitalization to $47.49 billion, above the Michigan company’s $45 billion, according to FactSet. The next milestone for Tesla is General Motors Co., valued at $50.84 billion.

        Tesla shares, which had already received a vote of confidence last week with Chinese tech company Tencent Holdings Ltd. revealing it had taken a 5% stake, were boosted by an announcement Sunday that the auto maker’s first-quarter global vehicle sales reached a record.

        • Trumpster says:

          Trumpster sez he remembers you bragging about making a killing in the oil biz not that long ago, at the expense of stupid Trumpsters who use oil.

          He sez he is wondering if you are still investing in oil,given that the flavor of your comments indicate you are morally opposed to the industry and what it is doing to the environment, and that you seem to think it’s in big trouble and liable to wind up on the trash heap of history just about any time now.

    • Nick G says:

      Nick, the changes to the economy, brought about by peak oil and the accompanying high oil prices, will be devastating to the economy.

      Nah. When oil prices rose from 2004 to 2008, they didn’t devastate the economy. When they jumped back up after the GFC from 2010 to 2015 they didn’t devastate the economy. Rather, high prices brought LTO, and the first stages of a vast transition to electric transportation. In the same way, high oil prices in the future will accelerate the conversion to hybrids, EVs and so forth.

      electric car sales will be hit the hardest. They will still be much higher than ICE vehicles.

      They’re not “much higher” right now. A Nissan Leaf is just about the cheapest car on the road to own AND operate without the subsidy! (With the subsidy, of course, it’s insanely cheap). If you lease a Leaf you eliminate that capital outlay and turn it into a monthly expense. Add up all the monthly expenses of a Leaf: they’re very low.

      the government will not subsidize the vast infrastructure it will require to support them.

      What infrastructure? Most people just need the outlet in their garage. As I noted above, most charging will take place at home.

      Unlike underground fuel tanks, electrical infrastructure can be cheaply installed anywhere: parking meters, parking garages, wireless pads under parking spaces, etc., etc. My local drugstore has 4 charging spots. Go to Canada: above a certain latitude cars need to be plugged in to heat the engine block overnight: those plugs can be anywhere.

      More importantly, what’s this obsession with pure EVs? Hybrids reduce fuel consumption by 60% (the Prius C is about as cheap as the Leaf). Plug in hybrids like the Chevy Volt reduce fuel consumption by 90%. Pure EVs are nice, but we don’t need them any time soon.

      The perfect is the enemy of the good.

      • Nick, I did not say high oil prices would devastate the economy. What I said was: the changes to the economy, brought about by PEAK OIL AND the accompanying high oil prices, will be devastating to the economy.

        There was no peak oil during either of the two periods you spoke of therefore the economy was not devastated. High oil prices did have a very serious effect, but not nearly the effect you will see when the supply starts to seriously drop.

        Below is a chart of world oil production from 2004 to present. Peak oil may very well have already arrived but no one believes it has. Now imagine that curve going down about as fast as it has gone up. That, peak oil, along with the accompanying high oil prices would devastate the economy.

         photo World_zpsoramsmen.jpg

        And what’s this obsession with pure EVs? Hybrids reduce fuel consumption by 60% (the Prius C is about as cheap as the Leaf). Plug in hybrids like the Chevy Volt reduce fuel consumption by 90%. Pure EVs are nice, but we don’t need them any time soon.

        Hey, I was just making a point. I don’t really give a rat’s ass what kind of vehicle you are talking about, there still be a huge demand for oil… and gasoline… that was my point. And when that supply starts to fall and prices start to rise, all hell will break loose.

        Oil is everything to the economy, not just to power cars. And when the supply of oil starts to fall, and people realize it must continue to fall because very high prices aren’t bring supply back up, then there will be very, very serious problems.

        • Bergen Johnson says:

          You predicted peak oil would occur in 2015 but that chart seems to indicate it still hasn’t happened.

          • So far the high 12 month average high was February 2016. So I was off by two months…. Sue me!

          • Dennis Coyne says:

            Hi Bergen,

            The centered 12 month average of World C+C production peaked in Aug/Sept 2015. Monthly peak was Nov 2016.

            I think the recent 12 month peak will be surpassed by 2020, and the peak will be 2022/2023+/-1 year.

        • Dennis Coyne says:

          Hi Ron,

          If we deduct the “bottled gas” and non-fuel products from petroleum liquids leaving gasoline, diesel, and jet fuel (about 14 Mb/d in 2015), total light duty gasoline use in 2015 was about 8.2 Mb/d or 56% of the total in the US.
          Reducing the use from light duty vehicles will reduce the pressure on oil supply, eventually many of the other fuel uses diesel first and jet fuel later will also be reduced with high oil prices, there will probably be less air travel and the fleet will become more efficient over time. Long haul trucking will move to rail and rail will be electrified, short haul trucking from rail terminal to final destination could be done with overhead wires on main roads and batteries for the final few miles to destination. That transition will take to 2050 or 2060 its speed will depend on how fast oil supply declines relative to oil demand and the resulting oil price.

          • That transition will take to 2050 or 2060 its speed will depend on how fast oil supply declines relative to oil demand and the resulting oil price.

            Dennis, I can agree that it will take from 33 to 43 years, (2050 to 2060), to make such a transition. Where we disagree, and disagree rather dramatically, is that I don’t believe we have that long. Things will start going to hell one or two years after peak oil.

            The state of the economy will be critical. You are talking about dramatic changes in the infrastructure. And you are talking about huge changes in how the public transports goods and themselves. That will take a lot of money, both public and private. If the economy goes into a tailspin, like in the 1930s, that kind of money just will not be available.

            • Dennis Coyne says:

              Hi Ron,

              Where did the money come from for the New Deal and the build up to World War 2?

              Let’s say the economy does very poorly and unemployment is 25% Worldwide in 2033, governments can borrow from the rich by selling bonds and invest in appropriate infrastructure to make the energy transition proceed more quickly. There will be plenty of cheap labor and lots of unused industrial capacity, just a matter of utilizing it.

              A big difference is that you expect output to decline much faster than is likely at a high oil price level, if oil prices go down due to lack of demand, that suggests oil supply is no longer a constraint and as the economy recovers oil will be put to its most efficient and important uses (homes will be converted to propane, natural gas or heat pumps and very few wasted car trips etc).

              Not to imply this will be easy, any more than recovering from the great Depression was easy, indeed I expect very tough times ahead, but proper policy will just make it marginally less difficult. Perhaps this is not possible, but I don’t advocate giving up before we try.

              • Dennis, I am glad you have it all figured out. Well, you have the peak oil problem figured out, or at least you believe you do. I don’t really think so but I am in no mood to argue that point right now. I will just point out that oil is only one of the problems that the world is facing right now. And it is far from the largest problem. Far, far from the largest problem.

                But I have thrashed that straw for years now. I have come to the conclusion that people will never believe that we are in deep overshoot, or that the massive human population is killing the earth until well after civilization a we know it has collapsed.

                The sixth great extinction is raging.

                Do you believe in reincarnation? If you do, and if you are correct, the world that you will be reborn in, say 75 to 100 years from now, will look nothing like it does today. All the world’s megafauna, save one species of great ape and his domestic animals, will soon be gone. All the great forests will be gone. It will be mostly a desert.

                • Caelan MacIntyre says:

                  Dennis et al.’s ‘crony-capitalist plutarchy industrialized transition’ sentiment sometimes, maybe usually, sounds a little along the lines of Javier’s ‘AGW is really nothing to worry about’, with an ostensible contention predicated on a ‘growth-based economy’ (<– meta-oxymoron?), debt-based money system and still-large-scale, relatively energy-sucking technology/industry/transportation and government– all in the face of decreasing energy returns.

                  Large-scale, large-area, more-complex, less-democratic anything would seem to take more energy-sucking and in myriad forms, than small scale, localized and equable.

                  Sure, Dennis, if you are reading this, there will be efficiencies, lower-energy transitions and 'cheap labor' as you put it in your 'cool and calculating economic objectivity', not seeming to be too concerned about wage-slavery, tax-pimping or even authoritarian regimes ‘spontaneously appearing’ on your own home-turf and their effects, or any of that sort of thing.
                  But it will still be relatively resource and energy-sucking– a growth-based, industrialized, JIT, complex levels/supply-chains, debt-based IOU pseudoeconomy, in the face of energy shrinkage, ongoing environmental destruction, increasing societal instability/insecurity/land-grabbing/poverty, increasing population, decreasing government pay-ins and pay-outs (taxes, investment funds, civil infrastructure, social benefits…), and increasing sociogeopolitical strains, etc..

                  This shit knows it's shit and wants to hit the fan.
                  It's true dystopia– the kind with a white and greenwash that many people don't notice as such. The Matrix. Plato's Cave. That's the key to an effective dystopia– that people don’t recognize it as such.

                  This is why others are advocating things like true local resilience, green anarchy, equability, pure democracy, Transition Towns, and permaculture.

                  • Dennis Coyne says:

                    Hi Caelan,

                    People can choose to vote for candidates that might make your vision a reality.

                    In the mean time I deal with the World as it is and try to improve it incrementally.

                  • Caelan MacIntyre says:

                    Hi Dennis,

                    People can choose to opt out of the aforementioned, and redirect their attention and efforts toward their own their local communities. That’s real incremental improvement.

                    ‘Voting’ for people we don’t really know and in/for systems we have no real control over is a counterproductive path toward ‘incremental improvement’.

              • Boomer II says:

                I differ to some extent from both of you. I think oil is becoming less of an issue as we go on. Right now we’ve got relatively cheap oil and yet the global economy isn’t booming because of it. Pumping more oil into the economy doesn’t mean countries and companies and consumers are using that excess oil to invest in the future.

                Now, it is possible that if we had a severe sudden jump in prices, we’d see another recession as a result, but I think there are reasons to expect a recession even if oil prices stay low.

                In other words, I don’t think oil or lack of it is the reason the global economy is slowing down. We’ve done what we can do to boost economies through consumer spending. We could boost economies through more infrastructure spending, but I don’t see a lot of motions toward that, no matter what Trump says. There doesn’t seem to be a lot of interest in China, Europe, or the US to pump a lot of money into public works projects right now.

                As I have said, I think funding for more renewable energy would be a productive use of debt funding, but I don’t know that we can expect that from the current administration.

                However, we do have some very rich Silicon Valley types who are funding their own efforts.

      • Dennis Coyne says:

        Hi Nick G,

        The difference when we reach peak oil is that supply will no longer be increasing. In both examples you gave oil supply was increasing, a high price situation that leads to either flat output or declining output will be very different than 2003-2008 or 2010 to 2015 when oil supply was increasing at an average rate of 1 Mb/d each year over each of those 5 year spans.

        This time is likely to be much different and there is likely to be much economic disruption as the economy attempts to adjust. You seem to think that adjustment will be smooth and easy, I disagree.

  28. Tom says:

    For Norway a fast charging station (1 station) for EV typically cost 20-25 k $. Typically they are installed at parking lots, and I suppose the price of the real estate may be shared between the parking space owner (sometimes public) and the charging station owner. The price for charging is roughly 1$/kWh and upwards. Probable break even is ~30 cent / kWh. Norway has a relatively high labour cost and relatively low electricity price.
    Norway has reached more than 100 000 EVs due to a combination of very high price (governnental fees) for fossil fueled cars and a low price for EVs (no governmental fees, no VAT) + free public parking, are allowed to drive in bus/taxi lane, no road toll. In total about 3% of all cars are EVs, abd the market share of new cars the last 5 years have been about 15-20%. So even with all the benefits for EVs in Norway it does take time to change the cars into EVs.

  29. Boomer II says:

    Charging stations are there both for marketing and convenience. As people here have said, most will charge their cars at home. Some will charge at work. The public stations are just there to reassure people that there are places to charge if the unexpected happens. They are insurance, not for day-to-day use. Also, in my town, low emission cars get the best parking spots. They are reserved, just like handicapped spots are reserved.

  30. JN2 says:

    Boomer said “most will charge their cars at home”. Most rich people. Most poorer people can’t charge at home.

    • Boomer II says:

      Why? The home needs a 240 outlet, which is what is there for an electric stove. The charging station costs about $700 from what I have just read. That could be rolled into the purchase.

      People who are too poor to buy a car won’t be getting an EV anyway, but why would one have to be rich to get one?

      It also appears that you don’t even need a 240 outlet. 120 would work.

      • Boomer II says:

        “Many people can get all the charging they need from the 120V outlet that’s already in their garage. This is called Level 1 Charging, or more disparagingly ‘trickle charging.’ The Nissan LEAF will pick up about five miles of range per hour of charging from 120V. If your car is parked for at least 10 hours, that’s 40 miles or more of range, more than most Americans drive on a typical day. If you have access to an outlet where you park at night, you can just charge with the cable that comes with your car. If you have a typical daily commute, you don’t need to spend a dime on additional charging equipment.”

      • JN2 says:

        Why? Most poorer people rent and don’t have access to a charging point. Like me for example (landlord refused to install one). Maybe this will change when having charging points becomes a selling point…

        • Oldfarmermac says:

          Installing charging infrastructure while building new is not very expensive, maybe a couple of hundred bucks actual cost for the wire and labor, when building a new house. This two hundred does not include the actual charger that attaches to the end of the installed wire, but THAT does not need to be installed until such time as the homeowner actually wants it.

          And most if not all electric cars apparently come with a charging cord that can be plugged into an ordinary 120 volt or 240 outlet, meaning if a slow charge is acceptable to the homeowner / driver, well, a couple of hundred bucks will cover it, period.

          My impression is that even the cheapest new construction apartments built these days have washer and dryer connections more often than not. My opinion for what it’s worth is that most apartments that will be built starting when electric cars get to be common will have charging outlets, right by the parking slot assigned to that apartment.

          Sky Daddy alone knows what it would cost to upgrade the last mile of grid to accommodate hundreds of cars being charged at the same time, or what it might cost in a place with a powerful electrician’s union, etc, to install a charging circuit in an old house.

  31. Westexasfanclub says:

    Maybe this post is redundant … but I think what finally will make the difference is the self driving car.

    1) You don’t have to own it. You just use it when you need it. So it’s affordable for everyone.

    2) You can share it for cheaper fares. That makes it even more affordable for commuters and people with low income.

    3) Because many people will share their ride with others, these cars will become very efficient. Stop thinking for an instant in terms of MPG and think in PPG (passengermiles per gallon).

    4) These cars will be electric and won’t have much problems with their range: Once a car has used up its battery, it will be replaced by another car of the fleet. Even for long distance travel: The passengers simply change from the “empty” car to the charged car and continue their journey. The only problem: You better not carry too many suitcases 😉

    • Bergen Johnson says:

      If people share vehicles they will abuse them in a variety of ways.

      • Boomer II says:

        There is already car sharing. It’s popular in urban areas and college towns. The individuals don’t own the cars. It’s like car rentals but on a shorter term basis. By the hour, if that’s all you need.

        • twocats says:

          I’ve used both zipcar and car-to-go. both filled different niches at different times. In the proper area car-to-go was better than having your own car because you could leave it at a metered spot and just walk away (car2go negotiates with cities on whatever basis). But it wouldn’t take much incentive from cities and companies to get people to leave their cars behind (dedicated shared car spaces), or say, a family owns one car instead of two or three.

          i am also in the “hard transition” camp, but not because their aren’t (mostly painful) options, but because humans are only the smartest of the monkeys.

  32. Watcher says:

    A guy above laid out actual numbers of watts and watt hours.

    You wackos never want to do that math, but beyond watts and watt hours, also do temperature increase on the wires you somehow believe people want to sit and watch for hours (or 30 mins for rather less than full charge). The formula is watts of heat = current flow^2 X resistance of the wire. It ain’t zero. You can melt wires.

    That guy above laid out 100+ charge points. He understood electricity. I was surprised he didn’t go and have a look at the main cable feeding all 100 or so. That sucker gets hot. Probably melts. Damn sure is a liability risk.

    • Eulenspiegel says:

      You’ll have to install a special installation to feed this. That’s why there will be charging statitions at interstates, like today fuel stations with special installation.

      The norm will be tickle loading at the tap, at home in the garage or in a parking lot. Sweden and Kanada has these already installed for engine heating in winter.

      Fast loading will be more a thing during long trips – not in everyday. Perhaps big malls will have charging stations, too, to encourage people to take a long trip to visit them.

      • Boomer II says:

        I had a diesel that I had to plug in every night because it sat outside in very cold mountain weather. Engine block heaters were a wonderful thing to have.

    • Dennis Coyne says:

      Hi Watcher,

      That’s why you run it at high voltage like 48o V, then your reduce the current needed and the current squared times resistance losses are 4 times lower. So when you go from 240 V to 480 V, you get one fourth the heat. There are a number of us whackos that understand this basic physics, apparently you do not.

      • Watcher says:

        You should explain this to the power company feeding this charging business. Maybe they’ll be willing to feed that business with a few kv on the line rather than from the transformer everything else in the neighborhood runs on.

        • Dennis Coyne says:

          Hi Watcher,

          480 V works fine for most stuff that needs a lot of energy. FYI link below describes how Tesla’s Superchargers work

          For those of a technical bent, here’s how a typical Supercharger (in this case, the one at Port St Lucie, FL) is configured: the eight bay setup, like the one shown on the first page of this chapter, takes a 12 kV, 750 kVA feed from the Utility, steps it down to 480V three phase on site, pushes that into 2000A switchgear which feeds four banks of Supercharger (SC) units (one for each pair of “pods”) at 480V/200A. Each unit contains twelve 10 kW rectifiers (the same “charger” that is found in Model S) giving a total of 120 kW per pair of pods.

  33. Energy News says:

    Brazil is forecast to increase crude + condensate production by 210kb/day this year…

    2017-03-31 Brazil is poised to sharply increase oil exports this year as heavy investments spur new output and demand for its lighter crudes win more buyers, especially in China and India.
    Production is projected to rise 210,000 barrels per day (bpd) in 2017

    Already just in the first two months of the year, Brazil’s oil exports have soared 65 percent over the same period a year earlier to record highs of more than 1.46 million bpd, according to government data obtained by Reuters.

    Brazil appears to have exported a lot more than available in February. It must have come from inventories.

    • Westexasfanclub says:

      Energy News, I dont’t think those numbers will fit in the long term. Brazil has increased production over the last seven years at an average rate of 100.000 b/day, while consumption hovered constantly slightly above production. So Brazil never was an exporter, and probably will never be one. There might be some exports due to overproduction of some refinery products, but they will have to compensate that with imports. Energy independence is the only realistic goal Brazil can have – and even this is questionable in the long run. Thanks to their ethanol production, until now they went ahead. The actual crisis will “help”, too.

      • Energy News says:

        “compensate that with imports”

        Yes you are right there was a big increase in product imports in February. I didn’t look at products.

  34. Enno Peters says:

    I have a new post on the Eagle Ford, available here.

    • Eulenspiegel says:

      Thanks for the work!

      It looks like this basin is in final decline – the 2015 wells are a little bit worse than the 2015 wells, so technical progress and concentrating on sweet spot don’t help anymore to push them higher.

      Of caus some money still could be made either by milking stupid investors or with oil > 100$.

      • Boomer II says:

        Seems like the oil industry will attempt to keep the public (and perhaps the politicians) in the dark as long as possible about some areas being in permanent decline, but by watching oil companies that aren’t subsisting solely on stupid money to keep funding their operations, we can see what those companies are and are not doing. Based on their actions, we can get a sense of how they view the future.

  35. Boomer II says:

    Something that hasn’t been mentioned in depth (at least not in the petroleum posts) is the idea of less car ownership. We continue to talk about the cost of electricity versus petroleum, but as transportation options increase, we should see some shifts.

    With car ownership comes additional costs, like insurance and annual fees. People who sign up for car sharing because they don’t need a car all the time avoid those costs. The cost per trip is higher when you car share, but the cost for non-use is nil (aside from whatever membership charges there might be — there aren’t necessarily any).

    People own cars either because of pride in ownership or convenience. But if there are affordable options that don’t require ownership, some people will consider those. Cars are handy to get from one place to another, especially if there aren’t other ways, and to haul stuff. But if you can pretty much get a ride on demand, then you may find that not owning a car is cheaper and more convenient. No dealing with or paying for parking. No need for a place to keep your car by your residence.

    And then we have retailers like Amazon and WalMart who are trying to perfect door-to-door delivery so you minimize any need to haul anything from a store.

    Big vehicles are handy if you are hauling lots of people around. But if most of your trips don’t require that you need seating for 6+ people, then you can call for a big vehicle when you need it and a smaller vehicle when you need it. More flexibility than owning a vehicle for those few times you need extra capacity.

    In recent years we have seen an increase in car sharing, the use of Uber. etc. And many people switching from own cars to leasing when those benefits became obvious to them.

    So the argument isn’t really just around how many people will replace their ICE vehicles with EVs. It is also how many people will replace vehicle ownership with other options.

    More efficient transportation planning will likely reduce the number of overall personal vehicles that are owned. And then the companies that own the replacement vehicles can create a fleet of EVs if they want.

    Again, look at car sharing, Uber, and leasing for indications that people will change how they view vehicle ownership. Silicon Valley is looking for ways to use computerized systems to replace traditional industries and it will continue to do so. As we have seen, Tesla has replaced Ford in terms of the market. Whether that will last is hard to say, but it is a noteworthy milestone nonetheless.

    • Boomer II says:

      Traditional industries (e.g, fossil fuels, auto companies) have tended to try to preserve business as usual. Entrepreneurs look for ways to disrupt that. Although there will be failures in their efforts, they are likely to come out ahead in the long run because they are willing to try many things. The experimenters will know more about what might work than those who aren’t willing to contemplate a future different from the present.

    • clueless says:

      Boomer, let me take a stab at a reply. I fore-warn you that this is a totally ignorant reply. What you are trying to do, is reverse engineer history. With respect to the US, in the early 1900’s, a relatively few people had a car. In most cases, did not need one. But, relatively quickly, the majority of families got one. They were the first group of idiots – sorry first adopters. In 1953, dad also got mother a car. We lived in town of just under 20,000. She was one of the first. That started the second wave of stupid people. In 1959, I graduated from high school (lucky) in a class of 240. There were probably 5 kids that had cars. They were the the beginning of the third wave of stupid people. About half the rest of us had access to dad’s/or mom’s car on the weekends. In the last 30 years, 95% of the teenagers I have met 17 years old or older, have their own cars. This, despite the fact that in the 1950’s, 95% of the teenagers that I grew up with had some kind of job. And now, it is what? – 20%.

      So, for well over 100 years, societies around the world, have made the stupid, ignorant, crazy, un-economical decision that “I want my own car.” The cost is worth it. And, now you want everyone to listen to you, in that you are telling them that they really do not need one and should not want one. I think that you can make a fortune selling that idea, along with convincing everyone that they would be better off living in communes like China had 50 years ago. Good luck! I look forward to seeing your name listed in the Fortune 500.

      And, what is it with “you people?” You can never follow instructions. You are too smart for that. People in the petroleum post need the benefit of your wisdom.

      • Boomer II says:

        Car cultural doesn’t impress millinenials anymore. When I have a chance I’ll pull some articles for you. They are into electronics. And this is a generation that no longer buys music. They get it for free online. No more record or tape or CD collections. No need for digital downloads, either.

        When you can have what you want without the bother of owning it, you often find that better. Cheaper and more flexible.

        • Boomer II says:

          Millennials and car ownership? It's complicated – LA Times: “Many also are alarmed by a trend occurring among the youngest millennials: Only about 60% of today’s 18-year-olds have a driver’s license, compared with 80% in the 1980s, according to a study from the University of Michigan.”

          “There’s also a shift in how millennials perceive cars in general. Gone are the days when owning a car, the ultimate status symbol, meant freedom and maturity. For this generation, automobiles have become less of an aspirational purchase and more of a utilitarian one.

          An online survey conducted in September for the personal finance website NerdWallet reported that while 75% of millennials who own a car plan to buy another within the next five years, they just don’t seem to be that into it. Some 43% of them called owning a car a hassle.”

          • Boomer II says:

            The target audience for car replacements initially will be those people who don’t have a car, and those who do but don’t really want one.

            There’s already a group of seniors who no longer drive and depend on friends, relatives, and senior services to provide transportation. So providing transportation services for them is another market.

            Uber-style services work well for people who want to go out to drink or get stoned and don’t want to worry about driving home. So that’s another area to service.

            Another is to provide door-to-door service for kids needing to get to and from school, to and from after school activities, and to and from weekend games. Any family that has more than one kid in sports, or where both parents work, can tell you how hectic it is getting multiple kids multiple places.

            As transportation expands on demand availability, the need to own a vehicle goes down. And if driverless vehicles become the norm, one of the expenses of on-demand vehicles goes down: labor. If you don’t have to pay people to transport others around, then you have eliminated one of the costs of the process.

          • Boomer II says:

            Why GM is embracing car sharing: “’The whole idea of owning a car, parking it for $1,000 a month and letting it sit there 90 percent of the time is just ludicrous,’ said Julia Steyn, GM’s vice president of urban mobility programs.

            ‘We see that the demand for ride sharing and car sharing is growing 95 percent in the next two years,’ she told an audience at a session on disruptive strategies at the CAR Management Briefing Seminars here on Wednesday.”

      • alimbiquated says:

        My son is 21 and a perfectly adequate car I got for him has been sitting around for years because he is to lazy to get a driver’s license.

      • Dennis Coyne says:

        Hi Clueless,

        What has changed since 1910?

        The next 107 years are unlikely to be a repeat of the past 107 years. Were there self driving cars, video conferencing, and smart phones for most of the past 100 years?

        Do you think these innovations will change anything? Boomer II is not suggesting there will be no cars or need for transportation, only that these needs may be reduced (due to ride sharing and online ordering) and fulfilled by different means (driverless car services) in the future.

        Just as society looks very different today than it did in 1955, in 2079 it will look very different than it does today. Even the changes I have seen over the past 45 years would have seemed like science fiction 45 years ago (I probably would have guessed some of these things would have taken twice as long to accomplish if I thought they were possible at all), handheld computers, are you kidding?

      • Cracker says:


        Appreciate your thoughts.

        Here’s an anecdotal observation regarding your comment about teenagers driving to school and owning cars.

        In 2007, before the economic bust, the student parking lot at one of the local high schools I often pass had cars parked on the grass as its 300 plus paved parking spaces were full. Last week, I paused to look and estimated 15% of the spaces were occupied.

        Maybe those kids own cars, but they sure aren’t driving them to school.

        A paradigm shift has occurred already, and self-driving, on-demand transportation will cause another. My transportation planning friends (whose children work for companies developing software for autonomous vehicles) tell me to expect big changes by 2020, and accelerating. They say it will be cheap and easy to order up a car, costing about 35 cents US per mile. That is much cheaper than current transport to Tampa International Airport which runs above $2.00 per mile US.

        The roughly 1.5% reduction in US gasoline consumption year on year is probably not noise in the data. Think about the gain in energy available to human systems if much less energy is used in transportation. A lot of car oriented business will suffer, but what will be the effects of reducing a huge energy drain on the system? Where will that energy be used? Or will it be unprofitable to coax fossil fuels out of the earth in the face of diminishing demand?

        Thanks to all who contribute to the weighty discussions here.


    • Dennis Coyne says:

      Hi Boomer II,

      Yes those are good points, which will apply more to more densely populated areas, a lot more people may rely on Uber type services and public transport in the future. This will really take off when AVs become ubiquitous. There may be many fewer cars on the road as technology will allow easy car pooling by just allowing the AV to pick up 3 or 4 people. In addition much office work could be done from home with travel to the office 2 or 3 days a week for meetings, reducing need for commutes.

  36. Hickory says:

    This is purely for morbid interest and speculation, but any rough guesses as to the price of crude today if fracking hadn’t been feasible either for technical or credit/cost reasons. Assume all else related to oil supply and demand was unchanged over the past 10 yrs?

    • Dennis Coyne says:

      Hi Hickory,

      Probably $100-120/b as there would have been continued investment in deep water and oil sands without the fracking boom, there would also have been higher sales of plugin vehicles, and lower sales of low efficiency vehicles (aka demand destruction). Hard to know though.

  37. Boomer II says:

    Some of these arguments don’t make a lot of sense to me. EVs don’t have to replace all ICE vehicles. People will also stop driving ICE vehicles when they don’t need to drive anything, when fuel becomes too expensive, and/or when laws prohibit ICE vehicles or limit their use.

    Assuming it will be business as usual, with the same number of vehicles we currently have, but just running a different power system, seems to discount all the other economic, political, and cultural changes that will likely occur, too.

    I anticipate that an expanded number of EVs will just be a small part of a vast global change. I don’t think we’ll enter a recession because of high oil prices or declining supplies. I think we’ll likely end up in a global recession because the factors that drove growth in the past just aren’t operating so well now. I think consumption will go down because many people won’t have enough financial resources to consume much.

    Rather than oil causing the recession, I think the recession will discourage oil companies from pursuing expensive projects. Why do it if no one will pay you to do it? Then if the price of oil skyrockets, maybe it will only be purchased by those who need to pay excessive prices for it. Discretionary oil use will decline.

    • Caelan MacIntyre says:

      The snake may eat its tail and bring about changes that knock out and on a lot of industries and other assorted crony capitalistic/dystopic realms, which will, naturally, in turn, have knock-on effects of their own to occasionally bring about cascading and catastrophic failures… to make the era of too-big-to-fails, or Venezuela, look like happy days.

      We should do well to keep a close eye on Venezuela, incidentally, and for example, which may provide hints of something of the shape of things to come…

      Cars, no matter how they operate, don’t strike me as very high up on Maslow’s Hierarchy of Needs, are they? They might be high up on POB’s Hierarchy of Discussion Needs, but so what.

      • Dennis Coyne says:

        Hi Caelan,

        Humans have been moving from place to place for a long time. It can be done on foot. The wheel was invented for a reason.

    • Dennis Coyne says:

      Hi Boomer 2,

      There will be many changes, my contention is that a change from growing oil supply to flat or falling oil supply will result in a number of changes, oil prices will increase and people will change their habits in an attempt to adjust. My main point is that this will be something new (a permanent situation where oil supply no longer increases) which may be very disruptive to the economy.

      Which factors that drove growth in the past will no longer operate?

      There will be cycles in economic activity, as has been true for centuries and society has never been static, it has been constantly changing so the only business as usual that exists is one of no business as usual.

      To me it comes down to is the transition from fossil fuel energy as the dominant energy source to non-fossil fuel energy able to be accomplished in a smooth and easy way or will there be a catastrophic breakdown of the current social system leading to some dystopic future. It will be neither of these extreme (simplistic) choices, but something in between. Society will be different in the future, of that we can be fairly certain, its shape unknown.

      • Boomer II says:

        “Which factors that drove growth in the past will no longer operate?”

        Good question. I could probably pull some articles about the expectation of a future of slow growth, no growth, or even negative growth, but I won’t do it quite yet.

        I’ll just throw a few ideas out, based on impressions I have had from reading economic growth articles over recent years.

        Seems like growth can come from innovation, debt financing, and/or population growth.

        There have been articles about how we appear to be in an innovation slump right now compared to certain times in the 20th century. I think new energy technologies could be the next driver if it isn’t squelched by certain political factions.

        Debt financing is what was used to get us out of the last recession. There are suggestions that we’ve gone about as far as we can go with it this time around. If we try to finance even more of our economy and consumer spending with debt, then we either concede that money is an illusion and the government might as well pay everyone to spend, or we need to collect at some point.

        Population growth still seems to be the main global economic driver, but we could just end up adding more people without growing the global economy. Just slicing up what is being created into smaller pieces so that more people get less. I suppose we can talk about what resource depletion and excess labor means for future growth.

        • Boomer II says:

          This is a recent article, and I think I have posted it here before. It’s about China, energy consumption, growth, and the global economy.

          Global Economic Growth Is All About China… Nothing But China | Zero Hedge: “China of ’15-’30 will not grow, will not drive the global economy and absent Chinese growth…the world economy is set to begin an indefinite period of secular contraction (big picture outlined HERE). China ceased accumulating US Treasury debt as of July of 2011 and continues to sell while busy accumulating gold since 2011 (detailed HERE). Unfortunately, neither quasi-democracies nor quasi-communist states have any politically acceptable solutions to this problem of structural decelerating growth and eventual outright contraction…but that won’t keep them from meddling to stall the inevitable global restructuring.”

        • Boomer II says:

          Here’s a good article that I don’t think has been posted here.

          How global economic growth will drown in Trump’s oil glut after 2018

          Here’s an image from that article showing the decline in growth in the US, Europe, and Japan.

          1*j4LNAHOW4O41gNW7CKEtGg.png (PNG Image, 800�נ746 pixels) – Scaled (82%)

        • Dennis Coyne says:

          Hi Boomer 2,

          Economic Growth comes from population growth as well as increases in consumption per capita (about 1.4% per year average increase from 1970 to 2015). Resource constraints might slow this rate of growth, but typically price increases leads to innovation leading to substitution and increased recycling. Eventually population will peak (around 2070) and then decline as the total fertility ratio falls below 2.1 ( as it has already done in nations with populations totaling about half the World’s population).

          If population reaches a decline rate of 1.4%, then real GDP would be at steady state if per capita growth continues at 1.4%/year.

          Innovation is not over, in fact with AI it might accelerate. Excess labor can be solved with shorter work weeks, inequality with a highly progressive tax system (US system before 1965, but with tax brackets adjusted for inflation automatically).

          The debt issue is overblown, modern economies allow credit to be extended to more people and has resulted in higher World Debt to GDP as more of the World becomes developed. This is not to say debt can be expanded without limit, rising debt levels for the middle class and poor might be improved with a shift of more of the tax burden to the wealthy, rising wages would also help as median income has been stagnant at least in the US, some of that may be attributed to the fall of union power in the US.

          Note that discussions of economics and philosophy are probably best pursued in the non-Petroleum thread. Not sure the oil guys are interested in economic theory.

          • Boomer II says:

            I won’t drag this out, but are you familiar with Robert Gordon’s work? He says the century between 1870 and 1970 was unique in terms of innovation. Human history never had anything like it before and is unlikely to have anything comparable since.

            • Boomer II says:

              Why Future U.S. Growth Will Underperform the Past: “According to economist Robert Gordon, today’s innovations might dazzle, but they don’t transform everyday lives in the way that the internal combustion engine, the refrigerator, air conditioning and the elevator transformed the fabric of America from 1870 to 1970.”

              “The drop-off in growth following the ‘special century’ running from 1870 to 1970 is striking by any number of measures. TFP – which rose steadily in the 1920s, 1930s and 1940s, and peaked at nearly 3.5% in the 1950s – fell off in the 1960s and 1970s, and then plummeted in the 1980s. Overall, in the period after 1970, TFP has been a third its rate from 1920 to 1970. Two other measures – output per person and output per hour – also fell back to pre-1920 growth rates. Manufacturing capacity and net investment have also generally been down.”

  38. George Kaplan says:

    Following the example of Rune Likvern at Fractional Flow I charted all the UK offshore production as below – each slice is production starting in incremental years from 1975 with the greyed area an assumed projection. There are a number of projects starting this year and next: 2017 – Callater, Glen Lyon (Schiehalion), Greater Stella (Stella, Harrier, Hurricane, Austen, Vorlich), Kraken / Kraken North, Montrose Area Redevelopment (Shaw), Scolty and Crathes, WIDP (Harris and Barra); 2018 – Arundel, Greater Catcher (Catcher / Burgman / Varadero), Clair Ridge, Mariner. Many more than in Norway and with total nameplate capacity over 300 kbpd. But after that there is very little and few prospects, whereas Norway has some options and exploration prospects in the Barents Sea. I would imagine most major design teams in Aberdeen have been run down, soon to be followed by the completions, commissioning, and start-up teams as these projects finish. Hence the AmecFW takeover by Wood Group (with inevitable and probably ongoing job losses) and continuing smaller takeovers and bankruptcies up there. Seadrill, the second biggest offshore driller I think, is bankrupt and might not survive. I think it counts as UK based although has international reach.Reaaly the UK oil engineering and service industry is winding down. Some suppliers can probably survive on international trade – I’d guess Brexit is good for them as they wouldn’t trade much with the EU. Decommissioning is a growth area, but I think the issue of escalating costs and arguments about who should pay are only just beginning.The warnings from a few years back about the ‘big crew change’ and skills shortages are looking a bit stupid at the moment, I wouldn’t recommend any one to join it, but I’m not sure what as an alternative, we have a big advertising / PR / media industry but I think it would get crushed if / when energy shortages start to have major impacts. The advertising industry is good at getting people to load up on credit, which here is now looking like 2007 levels, I don’t see too much good news for the economy coming our way.

    (Note units should be thousand cubic meters per year – I tried SI for a change, but won’t be doing it again).

    • Dennis Coyne says:

      Hi George,

      An interesting post might be to put together your work with Rune Likvern’s to do a joint UK and Norway forecast. Thanks for your work.

      Also a blow up of 2011 to 2030 might be interesting.

      I wonder what you base the exponential decline rate on? Is that the average decline rate of past fields in the UK that have peaked? What is the rate you used?

      • George Kaplan says:

        I tried to match the UK Oil and Gas Authority (government body) which is predicting a slow decline over the near future, based on new production I know is coming. Older fields are at about 10%, which matched the decline before there were a few boosts in 2010 to 2014, mostly when ownership changed. The bigger declines are with Buzzard (light green starting in 2007), which is now 3 years beyond it’s predicted plateau and showing signs of rapidly increasing water cut so I think will go fast this year, and Captain (blue from 1997) which got a work over a few years ago but I think will run out of steam soon. A lot of the smaller tiebacks that gave small boosts in 2006 to 2014 might decline a bit faster as they usually have fairly short plateaus, but the older fields might do better, the UK O&G Authority probably have more info. so I’ll trust them until there’s an obvious problem.

        • Dennis Coyne says:

          Hi George,

          Thanks, where is the end of the gov’t forecast and where do your estimates begin (what year)?

  39. Energy News says:

    Syncrude outage limits ConocoPhillips oil sands production – April 04, 2017, By Reuters
    The 350,000 barrel-per-day Syncrude project cut production for all of April to zero, according to market sources, following a fire last month that damaged the facility and forced the operator to bring forward planned maintenance.
    ConocoPhillips has had to reduce production at its 140,000 bpd Surmont thermal plant because it uses light synthetic crude from Syncrude, one of the largest producers in Canada’s oil sands, to dilute tarry bitumen into a heavy blend that can flow through pipelines.
    On top of that Suncor Energy’s 180,000 bpd Firebag thermal plant is also undergoing planned maintenance this quarter, adding to the shortage of heavy crude.

  40. Hickory says:

    In Feb, the USA exported an average of about 1 Mbpd of crude oil.

    Any good reason to be doing this, other than making those in the industry happy?
    Seems extremely shortsighted to me.

    • Hickory, the US Government does not export oil, oil companies export oil. They export the grades of oil their refineries don’t need and import grades of oil their refineries do need. In February, US NET imports, that is imports minus exports, of crude oil, came to 7,082,000 barrels per day.

      • Evolv says:

        I think this is a key point. The type of oil that US Shale plays produce, light oil, is being exported as many USA refineries are setup to process heavier crudes. Massive capex is needed to complete a changeover. European/Indian/Asian refiners are better able to handle the lighter grades resulting in lighter USA derived grades shipping out to these markets.

  41. Longtimber says:

    Current global HC burn rates extracts a price.
    “Mexico’s National Hydrocarbons Commission said last week that as of January 1, 2017, the country’s proved oil and gas reserves are estimated at 9.16 billion barrels of oil equivalent, down by 10.6 percent from the 10.243 billion boe as of the beginning of 2016. Proved oil reserves were down 7.9 percent to 7.037 billion barrels from 7.641 billion barrels estimated as of 2016. ”

  42. Boomer II says:

    I find this primarily of interest because of who is investing in it.

    This Startup Backed By JetBlue And Boeing Plans On Flying Electric Planes By The Early 2020s: “This morning Zunum Aero, a Seattle-based startup that has been in stealth mode for three years, unveiled its plans for 10- to 50-seat hybrid and electric planes that could transform the industry by the early 2020s—slashing ticket prices and reducing travel time.

    Zunum, backed by JetBlue Technology Ventures and Boeing’s new HorizonX innovation venture fund, thinks the key to unlocking the potential of the short-haul aviation sector lies in the nation’s 5,000 regional airports.”

    • Boomer II says:

      Boeing, JetBlue Invest in Zunum Electric Aircraft Venture | Air Transport News: Aviation International News: “Now three years into development, Zunum Aero has attracted a multidisciplinary team of experts in aircraft engines and electric vehicle disciplines, including leaders of two flying electric vehicle programs and the leader of a NASA-funded program on drives for electric airliners.

      Along with backing by Boeing through its Boeing HorizonX ‘innovation cell’ and JetBlue Technology Ventures, Zunum has formed a long-term partnership with the Center of Power Optimization of Electro-Thermal Systems, an NSF Engineering Research Center at the University of Illinois. Separately, the team has engaged with the U.S. Federal Aviation Administration since 2014 on certification standards for electric aircraft. The company said it expects the FAA to develop the first set of standards for electric aircraft next year.”

    • Boomer II says:

      How Zunum Aero plans to revolutionize air travel with electric planes and regional airports | VentureBeat | Transportation | by Paul Sawers: “’Boeing is investing in Zunum because we feel its technology development is leading this emerging and exciting hybrid-electric market space,’ explained Steve Nordlund, VP of strategy at Boeing. ‘This technology and customer approach has the potential to transform the market for small, short-haul aircraft that can use smaller regional airports.’”

      “Google cofounder Larry Page is backing not one, but two secret flying car startups: Zee was founded in 2010 with a view toward ‘designing, building, and testing better ways to get from A to B,’ as the blurb on the company’s homepage states. It’s currently working on a ‘small, all-electric plane that could take off and land vertically,’ according to a Bloomberg report.”

  43. Watcher says:

    Have y’all noticed there are no digital calories?

    Looking forward to direct energy feed into muscle cells from the solar panels strapped to your heads.

    • Dennis Coyne says:

      Hi Watcher,

      Oil not used for cars trucks and planes can be used for tractors and other agricultural equipment.

      This is obvious to most of us, but apparently not to everyone. 🙂

  44. George Kaplan says:

    Impending Jones Act Changes Could Cause Significant Job Losses In Oil & Gas

    “Data from the report shows 30,000 lost jobs in 2017 if the new rules are passed, with a majority of cuts expected in the Gulf of Mexico area. Government revenues would fall by $1.9 billion according to the API estimates.”

    I had a short time working in GoM. The regulations aren’t particularly onerous and are pretty much what an oil company would do anyway. They are mostly based around API standards and tend to be prescriptive and general, which is a bit different than, say, the North Sea where developments are based on individual ‘safety cases’. The one exception seemed to be the Jones Act. It’s not my area, but it involves the use of US versus foreign shipping, and is quite restrictive (basically only US ships can transport goods directly between US ports). It seemed to come up often and definitely had an impact on project execution and economics.

    • Oldfarmermac says:

      This law is one that puts the spotlight on some issues involving unions, special interests, the national interests of the USA, and the political liberal versus conservative debate, with various individual people taking positions that are contradictory to their usual agenda.

      Yes, unless it has been changed, the Jones act bars foreign registered shippers from moving anything from port to port in Yankee waters.

      Yes, this is good for our national security, because otherwise, we probably wouldn’t even have any domestic shippers left, and we don’t want to be without them, in the event of war or political crisis short of war.

      Yes, this is good for our guys who work in this industry, because they are generally well paid to extremely well paid, considering what they would be paid in a free market where shippers can hire and train sailors. The sailors union is one not much heard of, but it’s one of the most potent, with lots of law written to favor it. It s not even a union in the usual sense.

      Likewise it’s good for the owners of the ships these guys work on, because otherwise they would be busted. You can’t pay American wages and maintain equipment to American standards and compete with shippers from the so called third world.

      It conflicts with the globalist argument, but the leftish leaning faction in this country generally approves, because it’s just about always ready to approve of special treatment for any particular group of voters who are SURE to donate and vote D.

      It pisses off the rightish leaning free market types who don’t believe in unions and government having much power and influence in commercial affairs, but a lot of that camp is particularly focused on national security, and therefore goes along with the Jones act.

  45. George Kaplan says:

    Comparison of reported reserves for some IOCs and independents below. The big changes were the reduction in ExxonMobils oil sands (I didn’t realise these had been counted as ‘developed’ before) and the overall increase in Shell’s numbers from the BG purchase (these may reduce again as the results of their continuing asset sales get seen this year). BP (after two bad years with numbers in the 60%’s) and Eni did best in reserve replacement ratio. Marathon is fading away, which might explain why they have 12 rigs operating in the Bakken at the moment – they don’t have many other options. Anadarko declined as their sales in Eagle Ford etc. were larger than the acquisition from the Freeport MacMoran purchase.

    • Boomer II says:

      With more natural gas than oil for most of these companies, you can see what many of them are now coming out in favor of carbon restrictions. It’s good for natural gas sales.

      • George Kaplan says:

        It’s also worth noting how little undeveloped reserve there really is. For C&C the total for all the companies is about 16 Gb (slightly down from last year. That will only support about 2.5 to 3 mmbpd additional production, which is only about one year of global decline by some estimates. Without new discoveries or proving up a lot of resource appraisals there’s not much left in the bank.

        • Boomer II says:

          That’s why I have been focusing on the major oil companies. I think they know the future and are changing business models even if they aren’t being extremely outspoken about it.

          I’m not sure if politicians in D.C. see the future, but maybe the oil companies will prevail upon them to recognize that there are limits to oil no matter what regulations are dropped and which public lands are opened for drilling.

  46. Enno Peters says:

    Here you can find my new post on the Permian.

    • AlexS says:

      Thank you, Enno

      Quite significant improvement in average well productivity. More than twice between 2012 and 2016.

      BTW, over-optimistic forecasts for the Permian from Oxy and Pioneer’s CEOs, made at CERAWeek-2017:

      Occidental President and CEO Vicki Hollub … said that Permian production could eventually grow to 5 million bopd. “I just think it is going to depend on oil prices. It will be there one day, it is just a matter of how fast it can get there.”

      “Today, you can grow the company at 5%, at $40-oil,” said Pioneer Executive Chairman and CEO Scott Sheffield. He compared the potential of the Permian to Ghawar field in Saudi Arabia. “You could easily see 8 to 10 MMbpd out of the Permian by 2027.” He went on to say that the Permian could contain an estimated total of 160-170 Bbbl of recoverable oil.
      “People have to realize we are currently going after two to three benches in the Permian. There are 12 to 16 benches we can go after in various price environments,” Sheffield said. “When you have 12 to 16 benches in the Permian, if the service companies can figure out how we can drill six to eight at one time, and frac them all at once, it will take the Permian to a level we can’t believe. Instead of growing 500,000 bpd a year, it could easily reach 1 MMbpd each year.”

  47. Longtimber says:

    Drinking water from a fire Hydrant – 720+ Documents on Energy

Comments are closed.