By Jeremy Williams
In October 2018 the world crossed the symbolic threshold of 100 million barrels of oil a day. I didn’t think we’d ever get that high, to be honest. Neither did many in the industry. We’re ahead of the IEA’s rosy forecasts from 10 years ago, and we’ve crossed a line that even oil company executives were sceptical that we’d ever reach.
Christophe de Margerie, CEO of Total, said that 100 million was “optimistic about the geology” and that “world oil production may plateau below 90 million barrels a day.”
“I don’t think we are going to see the supply going over 100 million barrels a day,” said the CEO of Conoco-Philips in 2007: “where is all that oil going to come from?”
Well, sir, with the benefit of hindsight, it came from unconventional oil:
This graph doesn’t get us all the way up to 2018, but it makes the point clearer than anything else I could find. (There’s no official definition of conventional and unconventional oil, so industry bodies don’t usually make these sorts of graphs).
As predicted, conventional crude oil has peaked. That has pushed research and investment into unconventional oil, including tar sands, deepwater and shale. The most significant of these is American shale oil, now providing over 10 million of those barrels a day. This year the US is expected to overtake Saudi Arabia and Russia to be the world’s biggest oil producer – a position it last held in 1973.
From a climate change point of view, the success of US shale is a disaster. It delays the inevitable transition away from cars and towards public transport, active forms of transport and electric vehicles. It prolongs the power of fossil fuels and those that finance them. It strips any incentive for the US to decarbonise, and indeed, Trump has been happy to can fuel efficiency standards and the Paris Agreement. The world won’t be able to stop climate chaos without America, and America is revelling in its new oil wealth.
However, there may be trouble ahead for the US oil industry. It’s attracted huge investment, but as Jeremy Leggett and many others have pointed out, few of those pumping the oil is actually making a profit. The industry has taken on a huge amount of debt to expand, and a lot of people aren’t going to get their money back. The boom has been running on hype, and with producers not breaking even, it’s on borrowed time.
Perhaps the industry will surprise us again – it nearly collapsed in 2015, after all. One reason to suspect it won’t go on forever is that it has competition. Electric vehicles and sustainable transport are very slowly eroding the business model of the oil industry. Renewable energy already completely changed the prospects of coal. It will come for oil too, eventually. It’s bad news for the American economy and many others too, but profits will decline and debts will catch up, and oil companies will start to struggle. But at the moment, it is unlikely to happen in time to protect the climate.
The 100 million barrels a day mark is one we should never have reached in the first place. If the world continues at this rate of consumption, we will make the planet unlivable for future generations. And that means that weaning society off oil is a major priority. Support divestment where you can. Walk, cycle, take public transport. Consider an electric vehicle. Pressure your local and national governments to stop building roads, and invest in sustainable transport instead.
First published on Make Wealth History.