OIL DOWN SLOPE
Every time a minion complains about my preaching to acquire junk land, bolt guns and wheat, an angel gets its wings. I also do an article on Peak Oil, just to show you bastards who’s in charge here. Actually, as I was casually perusing Kuntsler’s Long Emergency ( I laboriously pulled it out of storage to give to a work volunteer who I’m trading books with ) it got my mind back there, even though it’s pretty much a rear view subject like economics ( all modern economics has been based on resource growth, and we obviously don’t have that anymore- and moreover, the markets are so obviously rigged by the Too Big For That Scrawny Little Kenyan Puke To Refuse Another Bailout To Banks it doesn’t even pay to pretend their signals are relevant anymore ) I don’t need to revisit all that often. I could be wrong, but I think most of us take the oil bell curve to mean the same thing. Since half the curve, the left side up side, was all the cheap and easily extractable oil, we all know the down side right side is the supply decline of far harder, far more expensive energy. We have already seen that in tar sands and fracking oil. Yet, don’t we typically view this as a kind of global curve? You know, the average of an entire global industry. I got to thinking ( and forgive me if I’m the only one and you are all way ahead of me ) that we kind of missed the down slope as practiced in the US. The importation of cheap and gushing middle eastern oil kind of blinding us to this.
The reason the North Sea oil came to Britain’s and Europe’s rescue in the 80’s was because US companies had already pioneered deep sea drilling in the Gulf of Mexico. And we had Alaskan oil, nobodies idea of cheap to extract, at one time providing a quarter of our domestic production ( way down from there now ). My point is that from our peak on, we’ve ONLY been pumping right side curve energy. Saudi Arabian oil masked that. Otherwise, we would have crashed and burned economically long ago ( our economy being cheap and abundant oil orientated ). Now that Saudi production has stalled, and they move to right side production, they can no longer hold back our economic comeuppance. Now, not only did we move to harder to extract oil, that itself is no longer even our primary source of energy. Now it is tar sands from Canada, the tropical equivalent from Venezuela, and ten percent of our gasoline derived from corn. We have gone from 20 barrel oil down to 2-5 barrel oil ( energy derived from one barrel invested ). In many cases we only get twice what we invest. That is a far cry from Texas Elephant Field of upwards of 100 barrels returned on one invested. You know, the oil that won us WWII.
Fracking oil isn’t new oil. It is old fields we couldn’t deplete before ( you can never extract all the liquid out of a well ) that are now giving us a little more oil for a lot more invested energy. We found a way to squeeze a few drops out of all the old corpses. And that isn’t even going to last us to 2020. The US in domestic oil production for the last forty years is the road map for the rest of the oil producing regions that are just now depleting ( and, keep in mind, that is a minority of fields globally. A LOT of areas also depleted during our time frame ). And the US has been the best managed contraction in supplies. Every one with a few exceptions is depleting a lot quicker ( because they didn’t have the Saudi oil for Greenback deal, they couldn’t slow their own production like we did ). There is no way the ride side of the curve is going to last anywhere close to the up side.
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