The End of Oil? Not Yet

I have rarely written about the issue of "peak oil", mostly because I believed the risk to have been exaggerated. I was confident that technology would catch up with new production needs, even as our need for oil declined. For instance, "[p]etroleum consumption in the US was lower in 2014 than it was in 1997, despite the fact that the economy grew almost 50% over this period." Yet, during the same period, new reserves of substantial sizes were still being discovered. For instance, in 2015, the United States Geological Survey discovered that Colorado’s Mancos Shale in the Piceance Basin had recoverable oil and gas far in excess of what was previously estimated:

The discovery makes Colorado’s Mancos Shale in the Piceance Basin the second-largest known shale reserve in the country (after Pennsylvania), assessed by the USGS with over 66 trillion cubic feet of gas, 74 million barrels of shale oil, and 45 million barrels of natural gas liquids.

Part of the increase in proven reserves is simply because fracking has made it possible to get oil from areas where oil had been declining, or where it simply wasn't possible to extract the oil previously.

     How big a difference has fracking made? Well, even though Saudi Arabia lost 50% of its oil production this past weekend, it really won't be anything but a bump in the road. The Dallas Morning News reports:

      Yes, half of Saudi Arabia’s daily production capacity was knocked out last week when facilities were damaged by airstrikes. Yes, if it takes many months for the Saudis to repair the facility, that could keep oil prices elevated.

      But there is no energy crisis, at least not today. No need for the U.S. military to secure oil in the Middle East for American consumption, no immediate need to tap emergency U.S. oil reserves, certainly no need to top off your gas tank today and hoard fuel in your garage.

      That’s because the world, and especially the U.S., has plenty of oil. The Saudis have enough reserves to keep their customers supplied for a month; the kingdom even told other OPEC countries to stand down in boosting production. And U.S. producers have the ability to quickly boost oil production thanks to fracking technology.

     Consider that the U.S. now produces more oil than Saudi Arabia.

This means that things like the Oil Embargo of 1973-74 would be impossible or ineffective, and subsequent oil shocks are much less likely. And fracking is only getting more efficient. John Wilder writes:

      Water usage in fracking is down.  Chemical usage in fracking is down.  Drilling costs, energy expended, and labor per barrel are down.  After practicing thousands of times on thousands of wells, companies have figured out how to frack a well to maximize crude oil production and minimize cost (and energy) put into it.  One metric I saw showed that fracked oil was now competitive (with a profit) compared with the cheapest oil on the planet – oil from Saudi Arabia.  Companies have gotten so good at fracking that natural gas in the United States is essentially free.

     Fracked oil is on a trajectory to be competitive with the lowest cost oil produced conventionally any place in the world.  And fracked oil has some other advantages – it’s “lighter” than conventional crude – that means it contains more gasoline and diesel, and less of the “heavier” stuff that is harder to turn into gasoline and diesel – think asphalt.

And looking forward, we haven't even tapped the Green River Formation in Colorado and Utah.

      A recent report by the U.S. Government Accountability Office estimated that if half of the oil bound up in the rock of the Green River Formation could be recovered it would be "equal to the entire world's proven oil reserves."

     Both the GAO and private industry estimate the amount of oil recoverable to be 3 trillion barrels.

     "In the past 100 years — in all of human history -- we have consumed 1 trillion barrels of oil. There are several times that much here," said Roger Day, vice president for operations for American Shale Oil (AMSO).

The Green River Basin's oil cannot be extracted with conventional fracking. It requires heat to separate the oil from the rock within which it is bound. But companies are working on methods other than digging up the shale rock and heating it on the surface, including microwave fracking.