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Kurt Cobb

Kurt Cobb

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has also appeared in The Christian Science…

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Can Global Oil Production Climb If The U.S. Shale Boom Is Over?

  • Global monthly oil production peaked on a monthly basis in November 2018, and there are now real questions as to whether oil output will ever hit those heights again.
  • A combination of spending discipline and regulatory hurdles appears to have ended the shale boom, but shale production growth may well have slowed anyway.
  • There have been plenty of ‘peak oil’ predictions in the past, but with growing regulatory resistance, the death of U.S. shale, and less tier-one acreage, this really could be it.

Prior to the pandemic-induced downturn in world oil production, U.S. oil production growth was responsible for 98 percent of the increase in world production in 2018 (as reported in 2019). Almost all of that growth resulted from rapid increases in shale oil production which accounted for 64 percent of U.S. production (as of 2021).

Fast forward to today when Oilprice.com has declared that "The U.S. Shale Boom Is Officially Over." The reasons cited mostly have to do with management "discipline" regarding capital expenditure in favor of shareholder payouts and complaints about "anti-oil rhetoric" and "regulatory uncertainty."

But there might just be another reason for the slowdown in shale oil production in the United States: There isn't as much accessible and economical shale oil underground as advertised. Earth scientist David Hughes laid out his case for this view in his "Shale Reality Check 2021." (For a summary of Hughes' report, see my piece from December 2021 entitled, "U.S. shale oil and gas forecast: Too good to be true?")

There may be other sources of oil worldwide that will somehow make up for the significantly lower growth in U.S. shale oil production. But no other source seems set to provide the kind of growth U.S. shale oil provided, that is, 73.2 percent of the global increase in oil production from 2008 through 2018.

The world has actually been getting along with less oil for some time now. World oil production proper (crude oil including lease condensate) peaked on a monthly basis in November 2018 at 84.58 million barrels per day (mbpd). In August 2022 production was 81.44 mbpd. That's after a pandemic-induced shock that saw production fall to 70.28 mbpd in June 2020.

Neither the U.S. shale oil companies nor OPEC seem ready to increase production significantly (assuming that they can). Russia, among the world's top three producers, is under heavy sanction and may not be able to produce more oil for export anytime soon. (Again, it is not certain that Russia can significantly increase production. Except for the pandemic-induced drop Russia has long been on a production plateau of between 10 and 11 mbpd.)

No doubt some new oil savior will be announced soon whether credible or not. In the meantime, the world economy will be faced with limited oil supplies that do not simply grow to meet our fantasies of what we want. The result will be high prices, that is, higher than has been historically the case. A recession won't change this dynamic and, in fact, may reinforce it as oil companies are likely to reduce drilling activity when demand for oil slumps. That will make it doubly difficult for those companies to supply growing demand coming out of the next recession.

This is the way things might very well be for a long time if not indefinitely. Many of us who foresaw this day said that we would only see peak world oil production in the rearview mirror. It may take a few more years to determine if November 2018 marked the all-time peak.

By Kurt Cobb via Resource Insights

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  • Mamdouh Salameh on January 02 2023 said:
    With annual investments of $600 bn for the next 10 years and less pressure from the environmental lobby and governmental legislations, global oil production can climb but at a lesser rate than in previous years.

    There are three major oil powers in the world: Russia, OPEC and the United States. Russia is the world’s largest producer of crude oil and petroleum products. It is currently producing an estimated 11 million barrels a day (mbd) but it can produce in normal circumstance some 11.7 mbd. Russia is projected to add 1.6 mbd from its huge Arctic project Vostok by 2024/25.

    OPEC is currently producing an estimated 31 mbd and exporting 25 mbd or 38% and 54% respectively of the world’s total production and exports. It can’t raise its production currently because of virtual lack of spare production capacity.

    The United States whose shale production accounts for 64% of its total production is estimated to be producing currently between 9.5 and 10 mbd and not 11.7 mbd as the US Energy Information Administration (EIA) is claiming. The US can’t raise its shale production any more not because of capital discipline which is frequently given as an excuse but because shale oil is a spent force. The sweet and lucrative spots in the shale plays have already been exhausted forcing drillers to move to poorer and more costly to produce spots thus leading to a rise in production costs as a result of declining well productivity and declining production.

    Prior to the pandemic US shale oil producers were encouraged by various US administrations to overproduce even at a huge loss in order to undermine OPEC’s policies of defending oil prices and also to achieve unachievable and vain targets such as US energy independence and becoming the world’s largest crude oil producer. These fantasies have been crushed forever by the pandemic in 2020.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Guilherme Lessa on January 02 2023 said:
    Some statistics show that global oil production is around 100 mbpd, while others show that is around 85 mbpd.

    I did not get it because this difference apparently is not caused by the inclusion of natural gas in mboe.

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