Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

The energy revolution driven by fracking isn’t over – 2 of 2

Training rig. Photo by James Ulvog.

Training rig. Photo by James Ulvog.

Horizontal drilling and hydraulic fracturing have turned the energy world upside down. The massive transition isn’t over. A few articles on the massive benefits of fracking. Part 1 of this discussion here.

2/14 – Matt Ridley, Rational Optimist – Low Oil Prices Are a Good Thing / The shale revolution has changed the world  – Article explains that low oil prices are an incredible benefit for consumers across the world.

Pointing out news that is not news to anyone who has paid attention to the energy business in the recent years, article explains the current volatility is currently disrupting and will continue to disrupt many producers. A lot of producers will go out of business. Keep in mind that the drilling rigs, equipment, and especially the oil under the ground will not vaporize as a result. The know-how to more efficiently drill more productive wells more quickly more cheaply will be around a long time.

Article explains a cited book which makes the point that the shale revolution is just getting started. The improved efficiency producing higher output in the last two years has brought many producers to the point where they can be productive in the $30 or $40 range.

The technology has increased to the point that if prices rebound to slightly higher levels than where they are now would make it possible to bring horizontal drilling and hydraulic fracturing into conventional oil fields and produce increases there.

The net effect of all these amazing advances is that shale oil will put a cap on how far oil prices can rise. As prices go up a whole bunch of undrilled locations become lucrative.

3/1 – Mark Perry, Carpe Diem – Charts and Updates on America’s Amazing Shale Revolution, It’s Not over yet – Astounding graphs, as usual.

By the way, thanks for Prof. Perry for giving me the inspiration to start drawing graphs to illustrate blogs.

First graph shows that production of crude oil in the United States hit a high point of about 9.5M bopd in the early 70s, dropped to about 5M bopd in about 2008, and rapidly climbed to around 9M in the latest data point available. An astounding reversal.

Yet one of the 12 comments announced we have already hit Peak Oil.

Or Peak Nitwittery, as the professor would say.

One quoted commentator says we might just possibly be in the first truly free oil market in the history of the industry. Producers sell as much oil as they want. My paraphrase is that we finally have in play something that resembles market clearing prices, not oligopoly influenced prices.

Another graph shows production of energy in the US as a share of the energy we consume. In 1970 it was about 93%. That fell to a low of 70% in about 2004. Since then there has been a rocket like takeoff to 91% in 2014.

Astounding. 90% puts us somewhere in the range of something that resembles self-sufficiency.

Final graph shows portion of US energy production coming from fossil fuels versus renewables from 1949 through 2015. The renewables’ share is essentially a flatline for the last 60 years. There has been a slight growth in the last 15 years, but the unreliables’ share has dropped in the last five years.

Select portions of Prof. Perry’s conclusion:

 America’s Amazing Shale Revolution is arguably one of the most remarkable energy, economic, entrepreneurial, and technological success stories in history. …

And make no mistake, the shale revolution is not going away, it’s here to stay and will be part of the global energy landscape for a long time. Despite a temporary slowdown and setback in domestic oil production in response to low oil prices, America’s bonanza of shale resources won’t vanish, but will remain available and accessible when needed. … And the shale producers will come back leaner and meaner than ever in the upcoming Shale 2.0 period, thanks to ongoing technological improvements in drilling and extraction technologies, less costly and shorter drilling times for new wells, and increases in the initial shale output flowing from new wells. When it comes to the future of America’s new status as an energy super-power, that’s a future of energy abundance that still looks very bright to me.

Keep those sunglasses handy. The future is so bright you’re gonna’ need ’em.

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