Where Is U.S. Oil Production Going?

The Energy Information Administration (EIA) has certainly changed its tune since I wrote a post with this same title on March 6, 2011. At that time the EIA predicted that domestic crude oil production would decline last year and this year, but a new forecast indicates that oil production will grow and grow until 2020.

Domestic crude oil production has increased over the past few years, reversing a decline that began in 1986. U.S. crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in 2010.

Over the next 10 years, continued development of tight oil, in combination with the ongoing development of offshore resources in the Gulf of Mexico, pushes domestic crude oil production in the Reference case to 6.7 million barrels per day in 2020, a level not seen since 1994. Even with a projected decline after 2020, U.S. crude oil production remains above 6.1 million barrels per day through 2035.

Source. October, 2011 crude oil production stood at 5.784 million barrels per day (b/d).

The EIA's Annual Energy Outlook 2012 (AEO 2012) early release preview was designed to support Hopey-Changey's SOTU speech, which was laced with references to America's Bright Energy Future. Those references were meant to counter the "Drill, Baby, Drill" mantra of the Republicans. In fact, National Propaganda Radio is discussing this crucial issue even as I write this. Naturally, they have invited the wrong "experts" (like Phil Verleger) to give us (the naive public) some insight into America's limitless energy supply. (Phil just said America is a bigger oil products exporter than Iran. He thinks it matters!)

So-called "tight" oil refers to oil from shale rock reservoirs like the Bakken in North Dakota and the Eagle Ford in southwest Texas. (I describe it this way to distinguish this oil from imaginary "shale oil" from immature hydrocarbon formations in Colorado and Utah.)

How should we evaluate the EIA's forecast? One way to evaluate it is to look at this "all liquds" chart from the early AEO 2012 release. Although we are not out of January yet, I feel comfortable nominating this forecast for the Wildly Optimistic Future Estimate Prize (the WOFE, or "Woofy"), which is an award I just made up.

The term "all liquids" includes crude oil, natural gas liquids, biofuels and refinery gains. Looking at this chart, you can see the peak of liquid fuels production in the early 1970s. (That's also obvious in the first graph above, which covers only crude oil.) You can clearly see that the liquids fuels supply grows and grows after 2010, rising way beyond the 11-some million barrels-per-day we achieved in the early 1970s by 2035. Consumption remains flat, which means that our liquids imports drop to 36% of consumption by 2035. Woof, Woof, Woof!

In short, the EIA has postulated a miracle on the order of Jesus bringing Lazarus back from the dead, not to mention the resurrection of Jesus himself after the crucifixion. The EIA claims the U.S. will be producing 6.7 million b/d of crude oil by 2020. I will grant that this is possible, that there's an outside chance this could occur, given some very optimistic assumptions about the Bakken, the Eagle Ford and the Gulf of Mexico (GOM). After all, that's only some 900,000 barrels more than we produce right now.

The EIA then claims we will still be producing 6.1 million b/d by 2035, which requires a very large leap of the imagination. We simply don't know where all that crude oil is going to come from. We don't know what production profiles (like that shown in the first graph) were assumed for oil from shale reservoirs or the GOM. We don't know what decline rates were assumed for current oil production. We don't know these things and a whole lot more because the EIA didn't tell us what their assumptions were. Imagine that!

But even granting the dubious assumption that the U.S. will be producing 6.1 million b/d of crude oil by 2035, we are still entitled to ask where the hell those other 6-plus million barrels per day are going to come from. Those will be natural gas liquids barrels or biofuels barrels. Here we have entered the realm of Pure Imagination, Disney World's Magic Kingdom. We are now in Cinderella Castle.

That's Walt and Mickey welcoming visitors to The Magic Kingdom. Cinderella Castle is in the background. I first used this splendid image in America On The Move!

And so we can see how everything fits together—the President's SOTU speech, the EIA's rosy forecast issued about 24 hours prior to the speech and now a Woofie nominee, the political need to counter the "Drill, Baby, Drill" mantra of the Republicans. Taken together, these elements posit a Bright Energy Future for the United States. Given who we are in America, which is without question the Greatest Country on Earth, could it really be any other way?

I think not.

Comments

[Alexander Carpenter]

Dave, it's important to look at the net energy of all that "tight oil" production, whether or not the actual numbers are a fantasy. Since the oil is "tight" (meaning difficult and expensive to produce in terms of both money and energy) it will return less net energy than the oils we have been accustomed to using and figuring on. That means that when 100 barrels of oil (and other liquids) take 40 barrels-worth of energy to produce, that 100 barrels is really just 60. This is a huge difference from when that 100 barrels used 10 barrels-worth of energy in its production.

The Big Lie and the rosy forecasts for production are premised on people not understanding this, and are even less credible therefore. As are the projections for consumption and all the other props of the extend-and-pretend generation — hand-waving and whistling Dixie as we walk past the graveyard wherein the myths of American governance and the cult of growth are interred.

[eugene12]

Reality is not an option for, almost, everyone I know. Fantasy is so much better. Plus this an election year. Positive news everywhere!! We are living in the era of "dreams and schemes" as the old song said.

[John D]

Looks like the new method for forecasting is to start with the answer you want, then work your way backward. These folks are giving the political line, and they have to figure a way to make the numbers come out to match the storyline.

By the way, I am reading somewhere that H-C said that the US is producing a record amount of oil. I guess if he can't interpret a chart, then his agencies can put out any type of chart they want and he won't know the difference.

[Wanooski]

The most brainwashed people in the whole world? Maybe. No one is more susceptible to propaganda than those who think they aren't subject to it.

[Bill]

Dave,

"In Lincoln, Nebraska they're calling it the worst diesel shortage since the 1970s. And it's due primarily to the oil boom in N. Dakota, which one oil industry executive says may be both a blessing and a growing problem at the same time.

This morning Mike Rud, president of the North Dakota Petroleum Marketers Association told GasBuddy what's going on.

He said that,conservatively speaking, about 2 million gallons of diesel fuel (per day) are being shipped into the Bakken oil fields.

"Between what's going in to run the rigs, there's 200 rigs running; we estimate there's 3,000 gallons a day that just run the rigs. That doesn't take into account the #2 diesel they're using to frack with. They have to frack with #2 diesel fuel so that's what goes into the ground to pump the oil out. They have to frack with something they can refine so there's diesel fuel being used for that. We have no idea how much is being used for that. And, obviously, there's a huge commercial load up there too for what's powering all the vehicles up there. "This is unlike anything we've ever seen," Rud said."

http://blog.gasbuddy.com/posts/N-Dakota-s-Oil-Boom-Adds-to-Midwest-Diesel-Shortage/1715-471938-671.aspx

2MM gallons per day of refined diesel pumped into the Bakken as frack fluid. At present "production" levels, that seems to mean about 30% of the Bakken output is already refined and shipped in diesel.

[Dave Cohen]

@Bill, @Alexander

Bill's information is very interesting indeed, and speaks to Alexander's point about the net energy return of these shale plays.

-- Dave

[Shawn]

Pretty soon the will be pumping gasoline into those wells just so they can 'recover' it and put it on the books. Never underestimate funny accounting. I'm sure it will only add to the GDP.

As sad as it is, you have to admit that there are some very 'clever'
players out there. Anything to pump up that portfolio a bit, for a bit longer while they most certainly plan their exit - leaving you know who holding the bag....

[Honesty]

I just don't understand. Why lie? They're hurting more than they help with lies.

[Morongobill]

That diesel#2 going into the ground will make for an interesting bouquet and aftertaste in the groundwater.

Anyone else thirsty?

[Honesty]

Are you familiar with Jay Hansen Dave?

"One seldom thinks about the energy that is consumed in systems that supply energy — such as oil-fired power plants. Energy is consumed when exploring for fuel, building the machinery to mine the fuel, mining the fuel, building and operating the power plants, building power lines to transmit the energy, decommissioning the plants, and so on. The difference between the total energy recovered minus all of the energy consumed equals the “net energy” (in other words, the net amount of energy actually available to society to do useful work). For more on net energy analysis, see my 1999 paper ENERGETIC LIMITS TO GROWTH."

http://warsocialism.com/#net_energy_is_the_critical_variable

[Paul]

I am going to have to stop drinking groundwater. Maybe I could collect rainwater? As long as it doesn't get too polluted by the time it gets down here, that is. That's assuming the government will allow me to do so, of course.
Wow, drinking water used to be so uncomplicated.