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  • Writer's pictureDave Boyer

Peak Oil?

Updated: Dec 30, 2020

A recent blog post highlighting peak oil suggests that we are on the brink of an oil production collapse.

I am an optimist. Yes, oil is a finite resource, but it is also a commodity. Supply and demand (+geopolitics, regulations, energy competition, etc.) set a price for the product. I believe that over time we learn and develop new methods and technologies to find new resources and increase oil recovery in existing fields. Many attempts will fail, but within the right environment, some techniques will prove successful.

Below is a chart showing USA oil production and the WTI price of oil (real dollars).

From June 1983 to mid-Nov 2020, the average real price for WTI is $58/bbl. WTI closed today at $41.

Many oil programs will not work at today's prices or the average price. But the current shale "bust" is not due to lack of the resource. The low cost of capital led many companies to become highly leveraged and grow production at all costs. Unfortunately, for equity holders and workers in the industry, this has led to numerous bankruptcies and continued consolidation.

The world's energy demand will increase. Sources new and old will continue to play a role. There will be another increase in the price curve. The industry will be smaller. Let's continue to learn, use available tools, and apply new techniques.

Real $ calculated to May 2020 using BLS CPI

Sources: U.S. Energy Information Administration, Bureau of Labor Statistics, Mudrock Energy, LLC

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