"Oil Production, the price crash and climate change"

James W Murray, School of Oceanography, University of Washington

Nov 7, 2016 at | 358 Hayden Hall

Special Seminar


Outside of North America Global Oil Production has been flat since 2005 at 73 million barrels per day (mb/d). There has been an increase in global oil production due to syncrude oil from Canada (tar sands) and tight oil production in the US. Canadian syncrude production is neither scalable nor timely. Forecasts for increased production have always been exuberant and actual production has never lived up to the hype. US Tight Oil production has been a surprising and welcome addition but because of its extremely high first year decline rates and restriction to “hot spots” its production has been predicted to peak in 2016-2017. Both syncrude and tight oil production are expensive to produce and have been marginal financially. In fact all tight oil exploration and production companies except three had negative cash flow in 2014 when the average price of oil (Brent) was $99 per barrel. The shale revolution did not begin because it was a good idea but 1. Because more attractive opportunities were exhausted and 2. The price of oil climbed to support the cost of extraction. Since September 2014 the price of oil has decreased dramatically, primarily due to surplus production and due to cumulative demand destruction due to the high oil price from 2010 to 2014. Higher oil prices do not necessarily translate into increased supply as predicted by energy economists.  There may be an economic, rather than a geological, peak oil. As a result of the price crash, drill rig activity has declined dramatically and US oil production is now expected to decrease in mid 2015. It is difficult to envision how global oil production will ever exceed its present value of about 75 mb/d. The oil production component in many of the highest SRES emission scenarios will never be reached. The highest emission scenarios developed by the IPCC are unlikely to occur.