Rebounding US Oil Production: The Historical View

Excitement continues to run at very high levels, over the rebound in US crude oil production. Coming out of the new, historic low of 4.95 mbpd (million barrel per day) in 2008, the annual average of US production in the first 4 months of 2012 is currently on pace at 6.156 mbpd. This new production has largely been made possible by the price revolution in crude oil, which finally broke through the long-term, $25 ceiling during 2003-2004, and which is now mostly sustaining marginal production around the $90 level. A question: has the US, since its own production peaked near 10 mbpd in 1971, seen this kind of production rebound before? Let’s first take a look at the past decade. | see: US Average Annual Oil Production mbpd 2001 -2012.

If maintained, the current rebound would add back a little more than a million barrels a day to US production, compared to the 2008 low. Some analysts fervently believe that, despite ongoing declines from existing US fields, that production will go even higher into the end of this decade. Well, just leaving that issue aside for now, given that so much of this new production depends on sustained high prices, let’s briefly take a look at a previous rebound in US oil production. | see: US Average Annual Oil Production mbpd 1972 -1985.

Coming out of the 1976 low, at 8.136 mbpd, US production rebounded over the following 9 years by 800 kbpd–not quite a million barrels per day. However, a volume comparable to the current rebound. Afterwards, the 40 year decline in US production resumed its decline.

The course of US production into 2020 will be more dependent than usual on price. An increasing portion of total global production is crowded into the marginal price band of $80-$100 a barrel, and yet the world economy appears to struggle–on the demand side–at that very same level. Thus, new marginal production in the US and elsewhere is fated to continually pass back and forth, in and out of the domain of economic viability, as the world economy chokes, recovers, and chokes on high oil prices.

-Gregor

  • Gnoll110

    Just peachy. A chainsaw recession. Painful, yet not consistent enough to drive adaption.

  • chistletoe

    Most of the “rebound” from 1976 can be attributed to the discovery of oil on the north slope of Alaska …. at one time, that field alone was pumping out  over 2 million b/day …. but that has since slowed down so much that its getting very difficult to keep the Alaska pipeline functional with oil flowing so slowly that it tends to gel and seize in the cold weather.

    Most of the “rebound from 2005 has occurred care of the fracking in the Bakken shale in North Dakota and Montana … however its beginning to become common knowledge that a fracked well pays out much more quickly than a conventional well, and meanwhile the environmentalists are gaining more and more traction in their efforts to thwart all fracking.  While they may be shooting themselves in the foot by doing so, they are likely to continue to fire away until they miss their target and hit themselves in the brain instead ….

  • Philippe Roy

    Why do you call environmental action against fracking “shooting themselves in the foot”?  Is it because gas burns cleaner than coal/oil, or some other reason?

  • chistletoe

     There is not a simple answer to this question, which is a good one.
    I’ve been reading about and studying energy issues very actively for many years and I could go on and on and on, but I’ll try to distill just a few of the salient points.
    I took an excellent physics course in high school but I doubt that very many other participants have gone through a similar exercise either in high school or afterwards.  Then, I heat my home with firewood and the volume of wood required and time and effort to obtain it is a lesson that no school could ever teach.
    I grew up among effete intellectual liberals and only in recent years have I come to recognize the extent to which some of their hypocrisy goes, sometimes. 

    Few people understand how powerful and how convenient gasoline is … but when you put it through the formulae we had in class for heat, for momentum, energy and work, you can find that a single gallon of gasoline contains the potential to do an equivalent amount of work as one man in 414 hours.  People, especially in america, have ascribed our economic success as being primarily the result of our ingenuity or (heavens!) our superior politics, and they simply do not realize what a boost we got from the massive, easy-to-reach reserves in Pennsylvania, Texas, Louisiana, Oklahoma, etc.
    After so many years that the term “peak oil” has been bandied about most people still misunderstand it as a theory about the earth’s reserves when it is actually backed up with massive amounts of evidence about the aggregate rate of production, and that mankind has for sure reached the peak and begun the decline.
    Many folk recognize that all forms of energy involve risk, not merely financial risk but serious risks of fire, explosions, loss of life, and long term degradation of our land, water and air.
    Many folk want to have all the advantages of fossil fuels but none of the disadvantages.  If they agitate actively, if they pass environmental laws and so forth and so on, they can and largely have succeeded in pushing more production upon foreign locations inhabited by poorer, more disadvantaged people.  In order to mask their racism and elitism, they trumpet environmental causes, but they seldom reduce their dependence upon fossil fuels, they merely push the production elsewhere.

    Hydrogen is the fuel of the future.  It will ALWAYS be the fuel of the future.  Simply put, there isn’t any available, not anywhere on earth, as an energy source. 
    Wind and water energy were major sources before the advent of the gasoline age.  Capturing their energy requires massive infrastructure.  it is instructive to review a clipper ship and all its components and the labor required to operate it in comparison with one of today’s diesel ships.  Siolar cells require the mining and refinement of arcane minerals and rigid manufacturing methodologies which could only be possible in an environment where gasoline has been liberally available.  Just about the time that the electricity they provide starts to cover their cost, they wear out.  This is also true of the modern windmills which are now dotting the landscapes in places where the NIMBY liberals do not have enough votes to keep them out (they are unsightly, noisy beasts ….)

    The recent explosion of fracking enterprises has been a minor miracle in the energy industry.  US oil production has actually increased substantially.  Natural gas production was viewed as an emergency ten years ago because NG is critical for making fertilizer and some other applications, but today people are jumping into expanding its use.  Five years ago we started building terminals to import it from overseas, they are now being converted to EXPORT it.  It is understood that there are large areas such as the Marcellus which have barely been touched.  The net effect is to extend the era of cheap, abundant energy availability for the US for another 20 or 30 years beyond what we thought was possible.  We may get one whole more generation before the curtain closes on modern society, with all of its technological innovations, all the communication devices and easy lifestyles.

    The inescapable conclusiion that I have had for quite a long time is that mankind is due for a retrenchment such as has never before happened in history, back all the way to the technology of the horse, the ox, and the water wheel.  I know that few people share my conclusions but I keep finding them guilty of wishful thinking, deluded thinking, and denial of some basic information.

    However, we have on one side the bankers and investment community which is hell bent on making everybody else into serfs and slaves, and on the other we have the environmentalists wanting to speed up the process of impoverishing everybody and driving us all back to living in caves and relying on nothing but our own backs to get work done.  Such interesting times to be living!

    Does this help?

  • http://www.gregor.us/ gregor.us

    Thanks for the comments. It’s pretty interesting that this rebound in US oil production has been built up to a very large, thematic assertion of oil independence for North America. Growth in Canadian production is growing but at a very, very slow rate–much slower than even the Canadian oil industry thought possible several years ago. Meanwhile, Mexico’s production from all sources is now close to falling below 2.5 mbpd. So overall, consumption of oil in North America has seen a bigger rate of change (downward) than the production of oil in N.A. has moved upward: but that’s not how the story is being sold to the public.

    see data here: https://twitter.com/GregorMacdonald/status/225671680817778688

    G

  • http://independentstockanalysis.com/ JJ Butler

    Seems rather than peak oil, the world has entered a period of an undulating plateau.  The plateau’s shape will be determined by the oil price.  Give US producers $100 pricing and they will boom.  Yet the emerging market middle class working for $10 a day is affected by pricing the most.  Decling OECD consumption and growing EM consumption is only one dynamic.  Declining net exports vs shale oil is another.  Throw on the the credit bubble and money printing saga and I come back to price.

  • thoughtrational

    Chistletoe,

    Interesting comments, I don’t disagree with your analysis of recent energy developments extending the supply period for a brief time.
    My concern is the retrograding effect of this, “news” to the average viewer/listener of todays news cycle. So many are too busy to learn enough to make a informed decision about complex issues like energy production and use. The, “headline”, about the US becoming the worlds largest oil producer will be misappropriated to support all sorts of uninformed naive opinions justifying the energy status quo.

    I try to be more optimistic about our civilizations possible future path. The challenge is to convince the public that we are entering and need to focus on harvesting energy from entropic energy flows. To move from the careless consumption of very dense and orderly energy resources that are high carbon dioxide emitters and take millions of years to create to harvesting useful fractions of energy from large universe and planetary level energy flows. This will have to be coupled with a relentless pursuit of improved energy efficiency solutions for major infrastructure and systems.

    It won’t be the same world, it might be a better world in many ways. It is up to us to decide. A great book on the challanges that we face is, “Out of Gas (The end of the oil age)”, by Caltech professor David Goodstein.