Snake Oil: How Fracking's False Promise of Plenty Imperils Our Future by Richard Heinberg Page B
Authors: Richard Heinberg
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Estimated Production (mb/d)
Actual Production (mb/d)
Difference between EIA Estimates and Actual Production (b/d)
2009
N/A
1.62
N/A
2010
1.67
1.61
60,000
2011
1.77
1.37
400,000
2012
1.82
1.29**
530,000
** Data through October 2012.
Source: Roger D. Blanchard, “Commentary: US DOE/EIA Forecast Estimates Face Reality,” ASPO–USA (website), January 14, 2013, http://aspousa.org/2013/01/commentary-us-doeeia-forecast-estimates-face-reality/.
The IEA has a record that’s no better. The 2000 IEA forecast for the price of oil a decade hence, adjusted for inflation to the 2000 dollar, was $28.25. The actual price in 2010 was $79.61, roughly three times the forecast price (and that was in the wake of the Great Recession). Also in 2000, the IEA forecast that total world liquid fuels production would reach 95.8 million barrels per day in 2010. The actual figure was 87.1 mb/d.
More examples could easily be cited—including ones from BP’s annual “Statistical Review of World Energy.” The natural question: Why have these agencies apparently adopted a bias toward overestimating production and underestimating prices? Longtime observers tend to agree that the agencies do not intend to deceive; they are merely producing demand-driven forecasts arrived at by assuming continuous GDP growth and a corresponding increased requirement for energy. Geological limits and the need for capital investment play a minor role in these calculations.
In 2009, the Guardian reported that a senior IEA official accused the agency of deliberately underplaying a looming world oil shortage for fear of triggering panic buying. “The senior official claims,” according to the story, that “the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.” 21 The International Energy Agency, set up in the 1970s to warn the world’s industrialized nations about future oil shocks, evidently bows to pressure from the United States. Meanwhile, the US Department of Energy’s Energy Information Administration appears to make its forecasts of future oil production conform to politically comfortable assumptions about economic growth.
During the past decade, there has been one notable exception to the agencies’ tendency toward over-optimism: in the years prior to 2009, the EIA and IEA failed to foresee the substantial increase in US natural gas and oil production resulting from the application of hydrofracturing and horizontal drilling. But as soon as the new trend of growing production in Texas, North Dakota, and Pennsylvania became apparent, the agencies appear to have overcompensated. They quickly reverted to their usual pattern of overestimating future supplies and underestimating future prices. 22
The Bottom Line on Fracking’s Potential to Revolutionize Oil and Gas Production
Raymond Pierrehumbert, Professor of Geophysical Sciences at the University of Chicago, recently summarized the situation with crystalline brevity: “Oil production technology is giving us ever more expensive oil with ever-diminishing returns for the ever-increasing effort that needs to be invested.” 23 The numbers tell the story: in the decade between 1994 and 2004, roughly $2.4 trillion in oil industry capital expenditures buoyed the worldwide rate of oil production by 12 million barrels per day. Yet a similar $2.4 trillion in capital expenditures spent from 2005 to 2010 failed to stem the tide of declining production in the world’s older, supergiant oil fields. Global oil production during those five years declined by two hundred thousand barrels per day. 24 The ongoing substitution of conventional, cheap oil with expensive, technology-intensive, unconventional oil sources can be compared to the human body’s use of internal energy resources in the absence of sufficient food. If one doesn’t eat for a few days, the body starts burning stored fat, then
Actual Production (mb/d)
Difference between EIA Estimates and Actual Production (b/d)
2009
N/A
1.62
N/A
2010
1.67
1.61
60,000
2011
1.77
1.37
400,000
2012
1.82
1.29**
530,000
** Data through October 2012.
Source: Roger D. Blanchard, “Commentary: US DOE/EIA Forecast Estimates Face Reality,” ASPO–USA (website), January 14, 2013, http://aspousa.org/2013/01/commentary-us-doeeia-forecast-estimates-face-reality/.
The IEA has a record that’s no better. The 2000 IEA forecast for the price of oil a decade hence, adjusted for inflation to the 2000 dollar, was $28.25. The actual price in 2010 was $79.61, roughly three times the forecast price (and that was in the wake of the Great Recession). Also in 2000, the IEA forecast that total world liquid fuels production would reach 95.8 million barrels per day in 2010. The actual figure was 87.1 mb/d.
More examples could easily be cited—including ones from BP’s annual “Statistical Review of World Energy.” The natural question: Why have these agencies apparently adopted a bias toward overestimating production and underestimating prices? Longtime observers tend to agree that the agencies do not intend to deceive; they are merely producing demand-driven forecasts arrived at by assuming continuous GDP growth and a corresponding increased requirement for energy. Geological limits and the need for capital investment play a minor role in these calculations.
In 2009, the Guardian reported that a senior IEA official accused the agency of deliberately underplaying a looming world oil shortage for fear of triggering panic buying. “The senior official claims,” according to the story, that “the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.” 21 The International Energy Agency, set up in the 1970s to warn the world’s industrialized nations about future oil shocks, evidently bows to pressure from the United States. Meanwhile, the US Department of Energy’s Energy Information Administration appears to make its forecasts of future oil production conform to politically comfortable assumptions about economic growth.
During the past decade, there has been one notable exception to the agencies’ tendency toward over-optimism: in the years prior to 2009, the EIA and IEA failed to foresee the substantial increase in US natural gas and oil production resulting from the application of hydrofracturing and horizontal drilling. But as soon as the new trend of growing production in Texas, North Dakota, and Pennsylvania became apparent, the agencies appear to have overcompensated. They quickly reverted to their usual pattern of overestimating future supplies and underestimating future prices. 22
The Bottom Line on Fracking’s Potential to Revolutionize Oil and Gas Production
Raymond Pierrehumbert, Professor of Geophysical Sciences at the University of Chicago, recently summarized the situation with crystalline brevity: “Oil production technology is giving us ever more expensive oil with ever-diminishing returns for the ever-increasing effort that needs to be invested.” 23 The numbers tell the story: in the decade between 1994 and 2004, roughly $2.4 trillion in oil industry capital expenditures buoyed the worldwide rate of oil production by 12 million barrels per day. Yet a similar $2.4 trillion in capital expenditures spent from 2005 to 2010 failed to stem the tide of declining production in the world’s older, supergiant oil fields. Global oil production during those five years declined by two hundred thousand barrels per day. 24 The ongoing substitution of conventional, cheap oil with expensive, technology-intensive, unconventional oil sources can be compared to the human body’s use of internal energy resources in the absence of sufficient food. If one doesn’t eat for a few days, the body starts burning stored fat, then
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