Energy, why can't we just ask Saudi Arabia & the US to open the taps more?

[lll3333]

I appreciate there's transport costs but SA is full of oil, what's stopping them upping their supply?

If only it were that simple……….

OPEC, for a start.

Saudi is tapped out. As is the US. You think they're sitting on some extra 10 million barrels per day that they just don't want to sell for massive profits?

But wait, it gets better. The only nation that has really shown any output growth in the last decade is... the USA. And only because of fracking, which is very much the sugar high of oil and gas. Quick and short lasting hits.

The rest of the world is more or less at peak, or past it. The decline rates for mature fields are estimated around 6.5% last I checked, meaning every year, we lose that much production. We have lost 10% of exported product since the highest global output rate recorded in late 2018. So 10% of all oil produced since 2018 has vanished from the market.

Welcome to the end of the oil age.

To every country they supply, or only yours?

And here's a short article about oil prices and production:

www.reuters.com/business/energy/us-oil-exports-surge-drawing-crude-away-storage-hub-2022-03-28/

This is informed by Jean Laherre's work on decline models. We have yet to beat the 2018 peak output, and outside of Iran getting a deal or OPEC+ having a massive change in fortunes, nothing is going to change this. The likes of Argentina and various African nations like Guyana are piecemeal additions and will barely offset natural decline, to say nothing of growing our output.

Well as mentioned on the BBC earlier , what about keeping the government paying for energy, whilst we pay it back over a decade.

Yes prices are increasing, but they will drop, hopefully next year or the year after. But when they drop, we still pay the higher cost to pay it back.

Basically a long term loan. I’d guess the energy companies are loaned money from the government, and we the customers pay them back. That’s surely better than paying what they’re asking for ?

Now ask yourself why the USA is drawing constantly millions of barrels a month from their strategic petroleum reserve, an emergency storage depot for in the event of war of disaster.

Biden went to the KSA cap in hand and was told "no". And the Saudis don't really have this excess capacity they always claim to have. If anything, the likes of Ghawar and Khurais are so heavily into their extended extraction lives, that the water cut will probably be even worse quicker than usual. Meaning the decline on those supergiant fields (in use since the 1930s) may be pretty drastic.

This is why fracked fields are so tricky. They have, on average, 90% decline rates once they've peaked, then settle at a very low output for several years.

Can't pay for what doesn't exist.

Here, I'll lend you a billion pounds to go get me a dozen dodo eggs. Good luck.

I don’t understand what you’re saying.

The energy bills have rocket, that most people will struggle. Hopefully this will be a short term problem. The government and energy companies take the brunt of the price hikes, whilst we pay them back over a longer period of time. So even when prices drop, we still pay back higher prices.

Oil production has peaked as of November 2018. From now on, oil production will decline. There is no more oil left to find and pump that isn't either expensive sludge or short lived, extremely expensive source rock in shale formations.

This is a permanent state of affairs now. There will never be a higher amount of oil produced per year than there was in 2018. Likewise, gas is similarly close to peaking in global output, predicted by 2030, maybe 2035 at latest.

Effectively, the era of cheap energy is over. Your bills will never be as cheap as they were in the 2000s, because even with renewables, the costs of implementing them to replace fossil fuels will be enormous, and the fossil fuels will still be needed to build them.

So it doesn't matter how much money you throw at this predicament, because unlike a problem, there is no solution here. Money will not put more hydrocarbons in the ground. That's very much 21st century political thinking: how much will it cost for this problem to go away?

Physics doesn't care about money. You can't get an overdraft a the Bank of Thermodynamics.

Do you read JMG by any chance? He pointed out the difference between a predicament and a problem.

OP - it is called 'peak oil'. Do some googling, but beware of conspiracy theories and rabbit holes.

I used to read his old blog before Ecosophia came about. I was a regular on The Oil Drum back in the day, among other places after getting an introduction into the subject by randomly coming across an upload of A Crude Awakening in 2007. It's been hard knowing this stuff was coming down the pipeline 15 years ago, and now that it's essentially happening (if expedited by Russia), it's a little unnerving.

I thought we had more time.

I got the message about 15 years ago, and I'm surprised we have had as long as we have.
But nobody expected fracking to go ahead at such scale even thought it is a money pit and nobody has made any profit.
My DH says they will drill the Arctic/Antarctic and we will have many more decades yet before TSHF. He may be right, but that just delays the inevitable and makes the climate worse :-(

Essentially we would have been in this trouble a couple of years ago but the lockdowns destroyed demand. Russia is affecting the gas, but I am not sure they are affecting the oil price much? They are certainly a convenient scapegoat for the politicians.

Nice to come across another JMG reader on here.

There's also the small issue that a lot of the current energy shortfall is gas not oil. The two aren't interchangeable.

The pandemic did buy us some time, yes. 2018 basically showed us the peak amount we can probably produce without any issues, fracking had come back from the doldrums of 2014 and there were no issues with Nigeria or KSA or Russia etc. Even though crude and condensate was still more or less flat, the exotic oils had come and boosted output.

But now people are withholding investment in fracking until they see some returns. So the days of throwing literal trucks worth of cash at that money pit are over, not without massive increases in the price of oil, which effectively puts us in the vice like grip of prices too high for consumers, yet too low for producers, leading to recessionary pressure.

I'm sure with the Arctic sea ice melting at a faster rate, they will certainly take advantage of the north-west passage opening and the areas that now can be prospected for oil. Do I see it changing anything? Not really. Firstly, that's deep sea stuff, like the Gulf of Mexico. Secondly, it won't be cheap, and that's the problem. There aren't any good projects coming onstream that are affordable or sizeable enough to make a dent. We can alleviate the decline if we push hard for it, but the CAPEX losses for fossil fuel development have led to this as much as the move to renewables and "cleaner" investments. Those massive profits Shell and BP and Exxon are reaping now won't be going towards new fields. They'll be going to taxpayers to cover energy costs, or pension dividends.

@ErrolTheDragon It's both. Oil is no longer as big an issue because the markets got spooked by recession talk in the last month. Those fears are now grinding against the very real issue of significant shortfalls, not least because the OPEC+ meeting recently said they don't have any more capacity. This moment of candour helps them get a better price, and they also want to reduce output to an extent, not boost it as the US wanted. The US right now is exporting about as much distillate and other refined products as it can, because it's making a killing especially as prices are turning up again past $100/bbl. The problem comes when the SPR releases stop and the exports drop off, since these refineries are running way above their normal output factor. When that happens, all the oil products Europe has been getting to off-set Russia being removed will be short, and that leads to a diesel crisis at the very least.

This same situation applies to LNG. The US is now seeing a big increase in gas prices too. Not to the extent of us chumps, but certainly putting the hurt on people, and we're going into midterms soon for the US, so Biden does not want this to land now. Holding off on exports of LNG will sacrifice Europe, but will help the US consumer. Are we really so special in this relationship?

The world runs on diesel and gas now. A shortfall in either, even a small one, can lead to drastic market reactions until the imbalance is addressed.

The good news is that when the oil price is higher it is more worth while extracting it from the more expensive (ie difficult) places. We take the easy stuff first. Of course, why wouldn't we? Some of the North Sea sites are looking more viable now but it's not easy just to source and tow in a load of drills, rigs and platforms, etc, so we can't just change our tactics overnight.

Don't forget that, apart from burning some of it, the Russians are still producing oil. They are still selling it to countries that are prepared to buy it, who then don't compete for the non-Russian oil, so more of that is available - at a price. It's much cheaper for Europe to get their oil via pipelines than ships.

The other problem is that, pushed by governments, the 'energy' (as they call themselves now, rather than 'oil') companies are investing in renewables research and technology, leaving less of the profits from current high prices to invest in R&D of oil and gas fields. If governments take more of the profit in 'windfall taxes' or other measures to protect the consumer, there is less available for oil and gas production and less chance of prices falling sooner rather than later.

Why can't we mine the millions of tons of coal left under our own country, create jobs as well? What has happened to all the oil in the offshore oilfields? We need to be self sufficient so we are never held to ransome again. With the advent of electric cars the amount of oil we need for the automotive industry will reduce over the next 50 years.

Because coal production peaked in 1913 and started to drop off quite fast. By the '70s it was half as much as it was in the pre-war era. We don't have any good coal deposits left, it's primarily deep mined and the good anthracite is all gone, leaving lower quality veins of brown coal.

We only coal for 3% of our electricity production, with most coal plants long since decommissioned outside of Drax and a couple others that were to be mothballed this year and next, though have since got stay of execution thanks to our situation. You can't burn coal in a CCGT gas powered plant, which makes up the vast majority of our combustion powerplants now.

Also, it's dirty, both in terms of CO2 affecting climate and particulates and radiation killing people earlier. Coal is the absolute last thing we should be going to, and yet, China is growing more of its production if only because they need to power their industry to supply the rest of the world with stuff.

The North Sea is in decline. We became a net importer of energy in 2005 after the North Sea peaked in 1999. Those fields now are more of a liability than an asset when you factor in the costs of sealing the wells and decommissioning the rigs, which will cost billions. The small assets that have been floated as new fields to exploit will not radically alter this unless we use less energy.

The UK will never be energy independent. Even if we had 100% wind turbines and solar cells or tidal, we rely on mining the materials for those machines from the likes of China and Australia and Chile etc. We have long since exhausted most of our core minerals or they're so diffuse as to be uneconomical outside of massive price rises to be worthwhile.

Electric cars will not significantly impact on oil usage. Oil is used more for things outside of transportation than not, so while liquid fuels are still needed, switching cars won't make a dent on required usage of the black goo. In any case, EVs are not remotely comparable to HGVs, which are not going electric without some radical new battery technology which isn't on the horizon. We will still need diesel, and you cannot get more diesel than any other fracture of oil in distillation, so if we don't use petrol, we'd have to sell it off or burn it or store it as consequence of refining the oil for diesel.

None of this is easy of remotely quick to resolve on the supply side. The demand side is where it's at for those wins.

Coal is so dirty in terms of carbon emissions. But no doubt when it comes down to it we will dig it all up and burn it (as much as we can), because that is what humans do.
CCS (carbon capture and storage) is as yet just science fiction.

The oil in the North Sea was burnt and sold. There is still oil coming in from there, but it has peaked, so we will get less and less every year.

Electric cars are ridiculous - it takes oil to manufacture them, it takes gas or oil to generate the electricity to run them, and it takes oil to mine the rare earth minerals to make the batteries - which incidentally have such a short life and such a high replacement cost that many early adopters of electric cars are seriously regretting the choice.

Besides which, there are no electric lorries or trucks to replace the billions of diesel ones.

If you are looking for "solutions" - there aren't any. We will all just get used to a lower and lower standard of living, decade after decade. It is called the death of progress (amongst other names). Most people run screaming from the idea that 'progress' will stop.

The way to not be held to ransom is to lower your consumption to such a level that you don't need anyone else's fossil fuels.

I'm taking bets on us going for Option B, which is burn the furniture and all else to keep the lights on.

What an interesting post! (especially to someone who doesn't have much understanding like me) 🤭🙊

Fabulous post's, thanks liebag etc.

Surely not being held fo ransom is going to burning wood and those who can grow trees for wood to burn!

Heh, "liebag". Reminds me of the old kid's show Teabag.

Anyway, the English pretty much denuded the land of trees hundreds of years ago for shipbuilding and burning. I can't imagine what terror we'd exact on the natural habitat if near 70 million of us with modern tools took to burning anything that grew.

@Beancounter1

Electric cars are ridiculous - it takes oil to manufacture them, it takes gas or oil to generate the electricity to run them, and it takes oil to mine the rare earth minerals to make the batteries - which incidentally have such a short life and such a high replacement cost that many early adopters of electric cars are seriously regretting the choice.

Really interesting posts from you and @Liebig

Do you have any insights on hydrogen fuel cells?