OK, I want to discuss Hubbert’s Peak. Why? Because we seem to be near a second peak in US Oil Production, and our society is woefully unprepared for the effects of this. Too much of our transportation systems depend on liquid petrol based fuels.
When Marion King Hubbert postulated that the United States Oil Industry was subject to the constraints of a finite resource he ruffled feathers in his industry. It was 1956, he was a research geologist for Shell. Employers don’t like when their employees use company time and resources to predict an oncoming bust in business, Hubbert was predicting that oil production would peak in 10-15 years time and then start to decline long term. In early 1956 the past 35 years of US oil production looked like this:
data for all graphs comes from the US Energy Information Administration
SIDE BAR — The units I will use are “million barrels per day” because this is the way the data is reported. It is reported on a monthly average (2024 has 9 months reported, I’m using that 9 month average in my upcoming analysis), I am averaging the years…
Doing the math, 1 million barrels a day is a little more than 1/3 of a billion barrels per year.
So...the rest of the story — or at least the preface — is US production DID peak in 1970 at about 9.4 million barrels a day, and subsequently dropped for the next 38 years, before rebounding (our current oil boom)
US Oil Production 1920 — 2024
The current oil boom we’re in is distinctly different technologically and economically than the oil boom Hubbert predicted was soon to end. Hubbert KNEW that the oil we are extracting now was in the rocks. Technology of 1956 really didn’t see a way to ever extract it.
Already in 1970 Hubbert had serious detractors. He predicted a maximum output of about 8 million barrels a day, and production stayed over that threshold for almost a quarter century. So despite being lauded in some communities, the petroleum industry never really liked him, or his message.
In general you can split oil reserves in to “Easy Oil” which is contained in very porous rocks and under pressure. You literally have to control the flow out of the well, because if you don’t you have the stereotypical oil well blow out scene we’ve seen recreated in the movies. Basically, stick a straw in it and it comes up.
All Hubbert was really saying was eventually you lose the pressure, and the oil will stop flowing…
Enter hydraulic fracturing — Fracking. Now there was a method to get at the “Tight Oil” in the less porous rocks that capped the original stratigraphic trap fields. The oil that Hubbert KNEW was there but didn’t expect to be able to get at.
So currently the petroleum engineering world looks at Hubbert with barely disguised scorn. To me this is the money quote from author David Deming:
Hubbert’s peak oil theory was effectively falsified when United States oil production began to increase in 2009 and surpassed the 1970 peak in 2018. A close reading of Hubbert’s analysis reveals that the model was flawed from the beginning, because Hubbert had conceded that the life cycle of a resource would not necessarily follow a single curve.
Okay…
The previous comment in that abstract is that production peaked in 1970 and decreased (as Hubbert predicted) for THIRTY EIGHT YEARS. This was based essentially on the 35 years of data (OK, more since there is production data from prior to 1920...but not enough to alter the conclusions starting from 1920). And consider this — the peak was 15 years after Hubbert published his model. So 35 years of data predicted the next 63 YEARS of US oil production fairly closely.
Effectively falsified. Okay…
The comment about not being able to represent the life cycle of a resource using a single curve is clearly taken out of context. With formal mathematical training, Hubbert would have been cautioning that his model was certainly a gross simplification in many ways. I think anyone using math to describe nature knows that — I recall a professor in grad school saying “all our fancy vector theories about the weather are nice, but the atmosphere does what it wants to do”.
So I guess all meteorology is falsified.
Here is my SINGLE curve representation of the Easy Oil boom, compared to to the production curve:
Some Petroleum Geophysicists think this curve does not exist...
This curve is based on a total of about 220 billion barrels of “Easy Oil”, and for SEVENTY NINE YEARS it has an average yearly absolute error of about 6% and overstates cumulative production by about 1%.
It is after 1998 that the simple logistic distribution curve starts showing the systematic error induced by “Tight Oil”. The first 10 years were hard to discern when you subtract out my Easy Oil curve.
nw — is my shorthand in calculations for “New Wave”. Again this is the difference between the reported production and my Easy Oil Model...
I just decided to look at the chart from the above graph and look at some regressions. A linear trend has an R2 of about .88, an exponential curve has an R2 of about .72. There is almost no predictive value to this curve except to say there is a upward trend. By the way, a cubic curve can fit to an R2 of about 97%...a nice fit with zero relevance.
Now, adding in the next 17 years of data, we do see a curve that I can do some math on
My raw data for estimating the Fracking Boom — the NEW New Wave!
First — let’s look at the data from the last decade and half and see the signs of a slow down.
A 5 year moving average shows the slowdown in production very clearly
Having looked at a lot of logistic distribution curves, that rolling average is a familiar shape — the apex of the curve.
So now the question becomes “how much oil is ultimately extractable in this boom?” The best guess I can see poking around is 50-80% of the original yield...so I decided as a first step to look at the total for this boom to be about half the first and equal to the first…
Adding the new curves to the easy oil curve gets me this model
2 scenarios for the Shale Oil/Fracking Boom...my label is missing a factor of 100 — it’s 220 billion and 110 billion total barrels...
Having done quite a bit of this type of modelling in the pandemic, there are a couple things that strike me. First — my quick a dirty foray into this with at least 3 (maybe 4) fewer years of data came to essentially the same conclusion. The end of the boom is closer than the start.
Second — these models give me the same feeling I sometimes got trying to model new covid cases. The calculation already seemed out of date as soon as I made them.
Diving into some industry literature from March of this year, we see some reality poking its nose into the big oil tent. Some seem to think that a peak is near, but don’t seem concerned about a production decline…
Last week at the CERAWeek conference in Houston, ConocoPhillps CEO, Ryan Lance forecast that U.S. production would advance to about 14 mm BOPD a few years hence, and then plateau. He was quoted in an SP Global article-
"Probably later this decade we'll see US production plateau and will probably stay there a long time," he said. "I don't know that we'll get to 15 [million b/d], but I think we'll pass through 14 million [b/d] on the way to 15 million [b/d].” For this year, Lance thought, “US crude oil production growth in 2024 will likely drop to about 300,000-400,000 b/d in 2024, down from around 1 million b/d in 2023.”
(H/T to Eastsidebill for providing the above link, and pushing me to return to this analysis a week or so ago in the APR)
Another firm quote in the above link is a bit more alarmed of the time horizon:
In contrast to the point of view expressed by Mr. Lance, natural resources analyst firm Goerhring & Rosencwajg, put out a bulletin in the third quarter of last year with a much closer time-horizon, based on declines acreage quality and the fact that you can only let air out of a balloon for so long.
“We now calculate the Permian has also produced half of its reserves and expect sequential growth to turn negative within the next few months. With a growing degree of confidence, we expect 2024 will be the peak in Permian production. Over the last fifteen years, the US shales have represented all non-OPEC growth. In the previous five years, the Permian has dominated US shales. If correct, we are entering an unprecedented period of tightness in global oil markets.
Another article Eastsidebill pointed out is from September. With 5 more months of essentially flat lined production growth, it seems that Goerhring & Rosencwajg’s analysis is getting more consideration. In it they mention the data showing that both the Eagle Ford and Bakken Shale fields appear to be in decline — thus past the 50% extractable point. I find that the estimates on the low end for these 2 fields are over over 10 billion barrels. Considering that the current shale boom is unlikely to be over 2 billion barrels, this seems inflated. The estimate for the Permian Basin is its shale oil potential is about 40-45% realized…
The main conclusion:
Therefore, when we put these signals together, we seemingly get a reasonable basis for peaking US oil production. Whether that is in 2025 or 2026 remains to be seen, and even then, we are likely to see plateauing production for the remainder of the decade before any material decline, with short-term production changes likely subject to oil prices themselves. But if US oil production is peaking on net, it will have significant ramifications for oil prices over the medium-term.
And so I tried to find a better fit, slightly lower yield, and came up with this — 43% of the expected Easy Oil…
Ruh-roh? And even this gives me the “already failed” feeling (by the way — labelled the total amount correctly here! 95 billion total barrels)
So...it’s not out of the question that technology can find a solution, but .remember the “stick a straw in it” model for Easy Oil? well, it takes MORE pressure to frack the tight oil out. And these wells deplete fast. So there are a lot of new wells. And existing fractures from the old wells.
What does this do to the pressure you need inject? Ha ha dumbfuks! We’re starting to see the effects of this according to how I read the techno-jargon. Diminishing returns. Reality rears its ugly head again.
So let’s assume another “boom” can be brought about by technology, starting next year. Diminishing returns — how much more oil do we get relative to the current boom? The same amount? that seems...optimistic, and not really “diminishing returns”, although it will cost far more to extract. But let’s say that happens.
So I added a 2nd wave of production starting next year, identical to the current model (95 billion total barrels extracted at the same rate).
A very unlikely scenario — I’ve retained the component models in this rather busy view
This still would not avoid a downturn in production and all the bad things that portends economically. It would also lead to a brief upswing that would be like a hit of heroin to a tweaking junkie. Immediately after that brief peak would be another crash.
More likely, if there is going to be another technologically aided tight oil boomlet it would NOT be as productive as the current shale boom. At 75% of the current boom this scenario would have a much lower secondary peak, and could possibly allow a protracted period of approximately 1970 production. Yeah I can see the oil companies being restrained like that. LOL. And without reducing demand the economic ripples go further.
To conclude — Denise Oliver Velez made a suggestion that I try to look at a more social aspect of this, and suggested I look at an article about Puerto Rico suing one of the oil companies for hiding information they knew about climate change. This is basically just another example of the same deceit.
David Deming is (I presume) a very intelligent person. He KNOWS he is misrepresenting Hubbert’s work and words. But I do appreciate the position he is in. I was once involved in the retrofit of a complex incinerator gas cleaning system to try and reduce the amount of dioxins we emitted. We ended up increasing the dioxin levels instead. But there was industry buzz about “activated carbon injection” and I had to write a paper on the project for a journal. My conclusion was “don’t design an experiment this way”...my boss was not amused. We published some feel good buzz words and never mentioned the chemical analysis in much detail. Just the engineer specs…
Yogi Berra was reputed to say “It’s tough to make predictions. Especially about the future.” I learned from trying this math on the pandemic data that it’s very hard to see the peaks and valleys (i.e. predict the inflection points). But this data is far more simple and reliable; it is not hard to see that no matter what scenario we are in there are going to be changes in domestic oil production that have very difficult effects.
