The end of the Oil Age, as we knew it

Part 3 of Looking down the barrel — the Tooth Fairy & the Dragon-King

The Oil Fizzle Dragon-King in brief

Figure 1 — This is not a Black Swan

Oil as you (probably) don’t know it

In very limited amount various forms of oil or bitumen have been in use since the oldest antiquity, extracted from natural seepages. The oil industry began very modestly in 1745 in Pechelbronn, northern Alsace, France (with a first refinery built in 1857) and in Uktha, Russia, followed with developments in Baku in 1846.[1] The next significant oil resource development took place in the USA with Edwin Drake’s 21 metres well in Titusville, Pennsylvania, in 1858. Which was followed with the first great wave of oil drilling and the emergence of an oil-based industry. However, this remained a rather modest affair until the Spindletop Lucas 1, a 347 metres deep well in Beaumont, Texas, in 1901. This well flowed at an initial rate of close to 100,000 barrels/day, more than the total of all producing wells in the USA at the time. Lucas 1 marked the birth of the global oil industry. However, it was only after the mid 1950s that global oil production overtook coal and that concerns progressively emerged as to the ultimate size of what had become a major global resource, critical to ongoing world development. Ever since, debates have raged about “how much was left” and what came to be known as “Peak Oil”. However, nearly all assessments mix wide varieties of oil from heavy oils, through sour and sweet crudes, and all the way to light tight oils (LTOs) and condensates lumping them together indiscriminately, often referred to as C + C, standing for conventional crude and condensates. Statistics also list liquids that in addition to C + C also include natural gas plant liquids (NGPL), other biofuels, coal to liquids (CTL), natural gas to liquids (GTL), kerogen (oil shale), and refinery gains. These other liquids account for about 16% of total liquids.

The PPS “iceberg”

Figure 2 — The global “Oil Barrel”

A Transport fuels gauge

Overall, the system depicted on Figure 4 can be thought of as a business, the PPS, having as sole client the GIW. The PPS drains oil reserves that it is presently not able to replenish in order to deliver its sole product, ED, to the GIW. The question is: how long can this last? The ancillary questions are: how much time have we got to set in place something else and what this something else may be?

Reading tea leaves and writings on walls

The above perspective will look excessively grim to many readers. How could it be that bad when “mainstream” experts from the industry claim decades of increasing oil supply ahead of us and staunchly deny “Peak Oil”? How could the end of the Oil Age be so abrupt? In Post 4, Figure 7, we hinted that a growing number of industry players and financial analysts have begun to reach similar conclusions, albeit often in partial and somewhat “foggy” ways. We have already mentioned the sharp work of Robelius on the fate of Giant oil fields. The Appendix at the end of this post provides numerous further examples of analysts from financial or industry sources reading tea leaves and writings on walls about the end of the Oil Age, as we know it. We could add many more to the above snippets. Almost each week brings more to the fore.

The beginning of the end

We have stressed it. Our fuel gauge is conservative. In our view, as shown on Figure 6, if maximum efficiencies were achieved throughout the PPS and the GIW, the critical time horizon would be about 2030. Some parts of the OI may manage to drag production slightly further but, in the absence of “something else” able to change the “game”, the PPS as we know it is nearing its end. In other words, less than 15 years remain to address the challenge at the core of OFDK.

If you have followed our posts to this point, a reminder:

This series focuses on the emerging global demand for something else than what we currently have concerning energy and all other aspects of living in the globalised industrial world (the GIW). Most importantly it concerns money, the end of fiat currencies over the next few years and their unavoidable replacement with cryptocurrencies backed with sustainable energy supplies.

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Appendix — Reading tea leaves and writings on walls about the end of the Oil Age

  • Ward, Karen, Zoe Knight, Nick Robins, Paul Spedding and Charanjit Singh. 2011. Energy in 2050 — Will fuel constraints thwart our growth projections? HSBC.
  • Morgan, Tim. 2013. Perfect storm — Energy, finance and the end of growth. Tullett Prebon Group Ltd, financial brokers.
  • Al-Hamad, Abdlatif and Verleger, Philip, Jr. 2016. Oil and the Global Economy — includes two papers: The Challenges Ahead for the Oil Producer and Consumer Countries in the Middle East and North Africa Region and Oil: An Ossified Industry. Occasional Paper №94, Group of Thirty, Washington, D.C.
  • Doshi, Viren, Clark, Andrew, del Maestro, Adrian. 2016. Oil and gas trends — Are you prepared for a future that limits fossil fuels? PriceWaterhouseCoopers.
  • England, John W., 2016, Short of capital? Risk of underinvestment in oil and gas is amplified by competing cash priorities, Deloitte Center for Energy Solutions, Deloitte LLP.
  • England, John and Slaughter, Andrew. 2016. The crude downturn for exploration & production companies — One situation, diverse responses. Deloitte Center for Energy Solutions.
  • Fustier, Kim, Gordon Gray, Christoffer Gundersen and Thomas Hilboldt. 2016. Global oil supply — Will mature field declines drive the next supply crunch? HSBC. This study echoes in part the work of Robelius. The question in its title is rhetorical.
  • Jefferson, Michael. 2016. A global energy assessment. WIREs Energy Environ 2016, 5:7–15. doi: 10.1002/wene.179.
  • Stevens, Paul, 2016, International Oil Companies: The Death of the Old Business Model, Energy, Research Paper, Energy, Environment and Resources, Chatham House.
  • Brown James H., William R. Burnside, Ana D. Davidson, John P. Delong, William C. Dunn, Marcus J. Hamilton, Norman Mercado-Silva, Jeffrey C. Nekola, Jordan G. Okie, William H. Woodruff, and Wenyun Zuo. 2011. Energetic Limits to Economic Growth. BioScience 61: 19–26. doi:10.1525/bio.2011.61.1.7.
  • Exxon Mobil Corporation, 2017, 2017 Outlook for Energy: A View to 2040, sourced from exxonmobil.com.
  • Farrell, A. E. and Brandt, A. R. 2006. Risks of the oil transition. Environ. Res. Lett. 1 (2006) 014004 (6pp).
  • Hughes, J. David. 2014. Drilling Deeper, A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom. Post Carbon Institute.
  • Lewis, Mark C. 2014. Toil for oil spells danger for majors — Unsustainable dynamics mean oil majors need to become “energy majors”. Kepler Cheuvreux, a leading independent European financial services company. Sourced from: https://www.keplercheuvreux.com/.
  • Murphy, D.J., Hall, C.A.S., Adjusting the economy to the new energy realities of the second half of the age of oil. Ecol. Model. (2011), doi:10.1016/j.ecolmodel.2011.06.022.

Endnotes

[1] Pechelbronn was the birthplace in 1926 of now transnational oilfield services company Schlumberger.

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Louis is the catalyst and main author for the Fourth Transition Initiative and Cool Planet Foundation.

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Dr Louis Arnoux

Louis is the catalyst and main author for the Fourth Transition Initiative and Cool Planet Foundation.