(Note: Commentaries do not necessarily represent the position of ASPO-USA.)

Recently President Obama, under pressure from Republicans and the public to bring down gasoline prices, announced a plan to expand domestic oil production in Alaska and the Gulf of Mexico.

The media appeared to joyfully trumpet the idea that with expanded oil drilling in the U.S., oil production would ramp up. No one in the media appeared to question that idea although I’ve made the case on several occasions (here and here) that U.S. oil production will, in general, trend down in the future even if every last acre of U.S. territory were soon opened for oil development.

The belief among the media, politicians and the public, in general, is that with increased drilling and expansion of available territory, oil production absolutely increases.

That has not been the case in Alaska. Since 2000, numerous oil fields have been brought on-line such as Alpine, Northstar, Fiord, Nanuq, Aurora, Polaris and Borealis yet Alaskan oil production declined by 342,000 b/d from 2000 to 2010 and another 55,000 b/d in the first 5 months of 2011 relative to the first 5 months of 2010.

Beyond the new production in Alaska during 2000-2010, much of the National Petroleum Reserve-Alaska (NPR-A) was opened for oil exploration and development during the Clinton and Bush administrations. Exploration results have been dismal and the US Geological Survey (USGS), which had estimated a mean technically recoverable volume of 10.5 billion barrels for the NPR-A in 2002, had to downgrade their volume estimate to 0.896 billion barrels in 2010.

Alaska illustrates that increased drilling and the opening of new areas for oil exploration and development do not necessarily translate into increased production.

U.S. oil production increased in 2009 and 2010 largely due to developments in the deepwater Gulf of Mexico (GOM), the Bakken Shale region of North Dakota, and Texas. I’m confident in predicting that deepwater GOM production peaked in 2010. Based upon my modeling of Bakken Shale oil production, it could peak as soon as 2015.

In terms of the deepwater GOM, oil geologists know where the most favorable geologic locations are for oil accumulations and that’s where they look first. They find the big fields early in the exploration phase. In the deepwater GOM, the oil industry has had more than 15 years of extensive exploration and has drilled wildcat wells down to the Mexican border. The industry is now in the “looking for scraps” phase of exploration in the deepwater GOM, so intensifying exploration will not significantly alter the future production profile for this region.

The public’s understanding of oil supply issues has not been enlightened by media coverage. From my perspective, the media does a terrible job of providing factual information concerning oil supply and oil price issues. Aspects of these issues appear to be taboo even for a media outlet such as National Public Radio which supposedly has the objective of educating the public about important societal issues.

I follow media coverage of the oil supply issue closely and there are several fundamentally important aspects that I have neither seen nor heard from media sources in recent years even though they are integrally related to the price of oil.

One is the anemic growth of global total liquid hydrocarbons (TLHs) production and more importantly, the decline in the energy content of that production.

Fundamentally, the reason the price of oil has been rising in recent years is that global production has mostly been flat while demand has been rising. In 2005, global TLHs production was 84.595 million barrels/day (mb/d) and in 2010 it was 86.711 mb/d according to US Department of Energy/Energy Information Agency (US DOE/EIA) data. That’s a rise of only 2.50% over the course of 5 years.

The production increase is actually deceptive because what has been increasing is largely the production of natural gas liquids and ethanol, both of which have much lower energy densities than crude oil, while crude oil production has declined.

The US DOE/EIA doesn’t have energy content data for total liquid hydrocarbons but they do have it for crude oil + condensate. In 2005, the energy content of global crude oil + condensate production was 153.2 QBtu while in 2009 (most recent data) it was 146.9 QBtu.

Using reported energy density values for natural gas liquids (US DOE/EIA value) and ethanol, the two other major components of total liquid hydrocarbons, provides a summed crude oil + condensate + natural gas liquids + ethanol energy content of 165.5 QBtu in 2005 and 160.8 QBtu in 2009. Those four components constitute approximately 97% of total liquid hydrocarbons production,

The decline in energy content doesn’t incorporate the fact that the energy needed to obtain those liquid hydrocarbons is increasing as more energy intensive extraction and production are necessary over time.

Beyond the decline of TLHs energy content, another important issue related to the price of oil is the decline in global oil exports. According to US DOE/EIA data, global exports of crude oil declined from 44.415 mb/d in 2005 to 41.299 mb/d in 2009 (most recent data). That decline has occurred during a period in which oil demand has increased rapidly in the developing world, particularly in China and India.

Unfortunately, magical thinking appears to now rule what goes on in America rather than critical analysis. The media and politicians are merely feeding that type of thinking.

Roger Blanchard teaches chemistry at Lake Superior State University and authored the book “The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region,” McFarland & Company (2005).

2 thoughts on “The President, The Media, and Oil Supply”

  1. Shell’s study suggests Alaska OCS production could increase by 1.8 mbpd in the next 10 years or so. That the USGS has downgraded the Alaska NPR resource only draws into question the credibility of the USGS–something which has frequently been challenged on this site anyway. If they botched their estimate by a factor of ten in 2000, why do we believe their 2010 number is so much better?

    The Bakken, Eagle Ford and other shale oils may increase production by 1-2 mbpd in the next decade or so as well. The GoM should recover with the resumption of permitting, although short-term we should expect declines there as well. So net-net, in the better case, US production could increase 1-2 mbpd in the next decade or so, I think.

    But even if it doesn’t, that’s not cause to avoid drilling. Every incremental barrel we produce lessens expenditure on imported oil and increases domestic economic activity. Look at Canada and Australia. Both a subject to high oil prices, but because both are commodity exporters, their economies as a whole are doing reasonably well.

  2. The real story of running out of oil is not merely about that, ’tis about what happens to all these complex systems. Agribusiness,the Failing Education system, Walmart, Suburbia, US Military, WallyWorld,I-35, Automobiles, etc. We need to seriously Abolish all of our dependencies upon black gold. We cannot run all of Modern Day USA on something other than oil, ’tis not realistic. We need to take a lot of the Complexity out of this Hyper Complex Society, if we as a Species want to live a life that looks remotely similar to what anyone has in the past, and has any sort of quality to it. That is WITHOUT counting the toils of Man-Made Climate Change that America and the world is facing today.

Comments are closed.