Thread by @chrisnelder

A short thread inspired by bloom.bg/2Nx24MQ ... A decade ago, serious peak oil students like me (as distinct from those who had shallow technical knowledge and focused on stock market moves and popular narratives) were looking at key data points... 1/

Field discovery rates vs. production rates. Reserve to production ratios. Field decline rates. Oil quality (API gravity, suitability to the refining sector, etc.). Investment required per barrel of new reserves. Net energy over time. Conventional vs. unconventional. Etc. 2/

So much data, of which little ever made it into the pages of mainstream press coverage. Those who didn't understand this highly technical subject only heard shallow narratives like "We're running out of oil!" and "Energy independence!" and "Peak demand, not peak supply!" 3/

I think all of it did more harm than good in terms of improving the public's understanding. After years and millions of column-inches, most people still just wanted to know if we were headed for a zombie apocalypse, or if they could make a fast buck in oil. 4/

Then came along fracking circa 2007, and the shale gas, then the tight oil, booms. These wells had really high decline rates and required so much capital that they spent most of the next decade living off of infusions of debt and investor money, not cash flow. 5/

But again, only those few who actually understood the industry knew that. The rest of the world fell under a soma of absurd narratives about endless new abundance unlocked by miraculous new technology. Peak oil was dumb, neener neener, let the good times roll. 6/

The O&G industry put everything it had into peddling and amplifying these narratives, which were eagerly promoted by the banks who financed the operations, and a legion of stock market touts. They also engaged in vigorous disinformation campaigns against skeptics like me. 7/

Why? Because they had to maintain that story line about new abundance and energy independence in order to keep the fresh infusions of money flowing. In many ways, it was a classic Ponzi scheme, and over the past decade, lots of operators went bankrupt. 8/

Eventually, especially over the past 2-3 years, after consolidation, the oil price crash of 2014 forcing cost discipline, and increasing investor pressure to, you know, produce actual profits, the industry started to become more real. 9/

But the soma lingered. Everybody thought the peak oil spectre, and all the data it was based upon, had been killed and buried a decade ago. Nothing to see here, move along people. Meanwhile, shale's vulnerabilities were starting to peek out from under the carpet. 10/

Although the industry had vastly cut costs and sobered up a bit after its crazy gold rush period ca 2007-2013, and prices started recovering ca 2016, that narrative about many big plays nationwide had been replaced by one about the Permian Basin only. 11/

Why? Because--as those who understood the data had known all along--eventually those high well decline rates start to catch up with you. Eventually you start running out of high-quality places to drill in the field "sweet spots" and have to start moving to the periphery. 12/

Then it becomes much harder to keep drilling and turning a profit and overcoming the decline rates of the rest of the field. And that's what had started to happen to the Bakken, Eagle Ford, Austin Chalk, and Niobrara plays...and the "next big thing" plays like Utica fizzled. 13/

Most of them staged a modest recovery in production as prices recovered over the past ~2 years, but they no longer looked like they were going to increase US production to any substantive level. Only the Permian still looks like it has room to run. 14/

But, even in the Permian, those who understand the data see a different story: Yes, production per lateral foot drilled is up ~50% since 2012, but they had to increase water and proppant injections by over 4x to do it. Very resource intensive. 15/

And now we have a new rash of industry narratives: We'd be able to keep increasing Permian production if we had more pipeline capacity, if the gov't would get out of the way, if we didn't have limits on flaring, etc. All business propaganda. 16/

And no one even bothered to write the stories about "Oh, gee, remember those thousands of articles we wrote about how awesome all these new shale plays are going to be? Yeah, well, we're down to one play now." Because it was always about hype. 17/

For every sober-minded analyst like me who just wanted to get the story right and wasn't trying to get rich or serving an oil industry master in one form or another, there were a thousand touts and pump-'n-dumpers out there drowning us out. 18/

Now we're starting to feel a cold splash of water in the face: The old conventional fields have kept right on declining, and actually the decline rates have accelerated (as expected). Under-investment in big E&P projects since 2014 has set up an air pocket in the supply line. 19/

And the white horse of shale is showing is age after a decade. Now analysts are sharpening their pencils again, and saying hang on, we could have a real problem here. Can you guess what they're looking at? 20/

Field discovery rates vs. production rates. Reserve to production ratios. Field decline rates. Oil quality (API gravity, suitability to the refining sector, etc.). Investment required per barrel of new reserves. Net energy over time. Conventional vs. unconventional. Etc.

All the same stuff we were looking at a decade ago, which never went away and never became irrelevant for those few of us who didn't fall under the spell of the industry soma. Only what will be the new white horse of technology, riding in to save the day? 22/

Everything I see on the supply side looks pretty bad. Many of the workhorse big fields are in desperate shape with crashing production (Brazil, Mexico, Venezuela). Ex-Saudi OPEC has little spare capacity. 23/

Nobody really knows how much actual spare capacity Saudi has, or how long it would take for them to bring it online, but it's probably 1 mb/d or less. And that's really about it. A thin margin on a 98 mb/d global supply. 24/

Meanwhile, the foundations of that supply are crumbling. Both in conventional fields and in the shale saviors. And the world dreams on. I suspect a real price spike is next. Then, hopefully, DEMAND-side solutions. 25/

Because I really think that's all there is left. Even if the majors decided to open their purses and start making multi-billion-dollar investments in megaprojects again, it would take ~10 years for that oil to get to market. 26/

Anyway... just a few off-the-cuff observations. This could be a bad hangover, once the soma wears off.
The concerns that drove "peak oil" never went away, it just fell out of fashion as a narrative. And it could be about to make a strong comeback. /fin