Home > Uncategorized > Peak cheap oil is an incontrovertible fact – Telegraph

Peak cheap oil is an incontrovertible fact – Telegraph

“Much as all the stakeholders in the energy industry would like to be optimistic, it isn’t an oil glut by 2020 that is keeping oil prices as high as they are. It is the reality that the oil sector has been pushed to the limit of its capabilities and that this difficult challenge will dominate energy markets for the rest of the decade,” he said.

The US turn-around has certainly been astonishing. The country now meets 94pc of its natural gas needs. It may ultimately become an exporter. Oil output from North Dakota’s Bakken field and other basins in Texas and Pennsylvania may push US shale/tight oil output to near 5m b/d by 2020, greatly reducing US reliance on imports.

This is a magnificent feat of engineering and panache, a perfect example of why one should never write off the US. American industry is currently paying a fraction of European and Asian prices for gas, an invaluable cost advantage that is spawning a renaissance for the US petrochemical industry. “It is an incredible boom,” says Adam Sieminski, head of the US Energy Information Administration (EIA).

The shale revolution has profound implications for America’s role in the world and the global balance of power, but let us not get carried away. Oil experts noticed how many crews in the Bakken field were told to stand down when crude prices dipped earlier this summer. “Supposedly cheap shale turned out to be rather expensive shale in that, as soon as Brent fell to $90 per barrel, a large proportion of US shale oil in key regions seemed to lose all its rent,” said Paul Horsnell from Barclays Capital.

Early hopes of a shale bonanza in Poland have been dashed. Exxon has pulled out of the country. China has more promise but exploration has barely begun and the government fears that leaks from the Sichuan basin could contaminate the Yangtze River that feeds so many of the great Chinese cities.

One might add that some of Brazil’s non-shale fields are so far offshore in the Atlantic that helicopters have to be refuelled in the air. The drilling is through layers of salt that blind the imaging technology. Extraction is even harder and more costly than the task that overwhelmed BP at Macondo.

The proper conclusion is to thank our lucky stars that US shale has helped the world avert an immediate crunch. It buys us a little more time to build a new generation of nuclear power stations — preferably based on thorium — and to achieve the Holy Grail of unsubsidised grid parity in solar technology.

Peak Oil may or may not have been discredited. Peak Cheap Oil remains to haunt us.

via Peak cheap oil is an incontrovertible fact – Telegraph.

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