I hate playing the role of Cassandra at the great oil party when it is clear that no one wants to hear. It is just that the direct impact on our lives will be so great that it is wrong to not get the message out. We are producing 85 million barrels of oil a day of conventional oil. That means that on average we were able to add 1million barrels of oil production a day every year for the past century. We have been able to do this using resources discovered over forty years ago that have now slid into natural decline. Those resources have not been replaced in the form of conventional oil.
What has replaced them is the equally huge heavy oil resources that are only now been mastered. From them we get perhaps three million barrels of production, now that the price of oil makes it viable. I believe it is possible to add a million barrels a day of heavy oil production per year, provided THAI holds up. Otherwise we are hooped as far as the oil economy is concerned.
The red hot problem is that this is still far too late to avoid a precipitous decline in conventional production. The harsh reality of that developing decline will not be minus one million barrels per day. It will be way faster than that for several years until alternatives kick in and take the pressure off.
Imagine a world two decades from now in which production from current producers is only supplying 55 million barrels a day. That is what happened to US production in the seventies and it has never recovered. The point is that this is going to be incredibly disruptive throughout the globe and will be a true global crisis.
North America is actually best able to add new production thanks to THAI and the Bakken formation which operate within a conventional infrastructure and can actually step up activity now. Elsewhere we are looking at deep sea deposits requiring years of construction. It is going to be one hell of a foot race and no one seems to have heard the starter's gun.
And pretending that rapid decline is not imminent is wishful thinking of the worst kind. I babble about a mere one million barrel decline. The fact is that we will stretch every spare resource to put off the decline until it becomes precipitous. The Saudis both reduced production this past year and suddenly became amazingly forthcoming on their production capabilities. This is a clear sign that it is all going into the crapper.
So what else could go wrong? A supply decline of historic proportions in oil production combined with a massive credit crunch in US currency denominated financial assets that must be sorted out we already have happening in slow motion. How about a crash and burn in the Chinese economy, while we are at it, precipitating a radical remake of the Chinese political system. It is way overdue and would likely be beneficial. Can all these difficulties be worked out in slow motion preventing massive real hardship? I keep thinking it is possible, except that it is not possible to replace a sudden loss oil production except through the aggressive rationing of gasoline which will ground a large segment of the economy.
Five years ago these were all future possibilities. We are living there now. We are entering one of the great transition periods of the global economy and it is all tied to new energy sources.
When is that gun going to be fired?
What has replaced them is the equally huge heavy oil resources that are only now been mastered. From them we get perhaps three million barrels of production, now that the price of oil makes it viable. I believe it is possible to add a million barrels a day of heavy oil production per year, provided THAI holds up. Otherwise we are hooped as far as the oil economy is concerned.
The red hot problem is that this is still far too late to avoid a precipitous decline in conventional production. The harsh reality of that developing decline will not be minus one million barrels per day. It will be way faster than that for several years until alternatives kick in and take the pressure off.
Imagine a world two decades from now in which production from current producers is only supplying 55 million barrels a day. That is what happened to US production in the seventies and it has never recovered. The point is that this is going to be incredibly disruptive throughout the globe and will be a true global crisis.
North America is actually best able to add new production thanks to THAI and the Bakken formation which operate within a conventional infrastructure and can actually step up activity now. Elsewhere we are looking at deep sea deposits requiring years of construction. It is going to be one hell of a foot race and no one seems to have heard the starter's gun.
And pretending that rapid decline is not imminent is wishful thinking of the worst kind. I babble about a mere one million barrel decline. The fact is that we will stretch every spare resource to put off the decline until it becomes precipitous. The Saudis both reduced production this past year and suddenly became amazingly forthcoming on their production capabilities. This is a clear sign that it is all going into the crapper.
So what else could go wrong? A supply decline of historic proportions in oil production combined with a massive credit crunch in US currency denominated financial assets that must be sorted out we already have happening in slow motion. How about a crash and burn in the Chinese economy, while we are at it, precipitating a radical remake of the Chinese political system. It is way overdue and would likely be beneficial. Can all these difficulties be worked out in slow motion preventing massive real hardship? I keep thinking it is possible, except that it is not possible to replace a sudden loss oil production except through the aggressive rationing of gasoline which will ground a large segment of the economy.
Five years ago these were all future possibilities. We are living there now. We are entering one of the great transition periods of the global economy and it is all tied to new energy sources.
When is that gun going to be fired?
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