It seems obvious to me that a sane government would want to keep the price of petroleum and natural gas low by ensuring a plentiful supply beginning with plentiful leases and drilling permits. This is especially true when shortages 5-10 years to be resolved by new drilling. Then, if one wants to encourage a shift to low carbon alternatives, we can tax carbon fuels and obtain revenue the federal government desperately need for roads, transportation and even general revenue. The Democrats strategy appears to be to induce an artificial shortage and higher priced by restricting the supply - a supply that takes years to respond to changing demand.
Unfortunately, gas taxes are the most highly visible tax citizens pay. In today's populist, expert-hating world, "sane policy" is an oxymoron.
I would hope that we could all get smart enough to similarly evaluate any and all claims of current-management effectiveness when there is a lead time between initiating and output. The current management benefits and/or suffers from his/her predecessors' decisions, but we see the leadtime issue missed over and over in business and government. The next guy ends up holding the bag or greatly benefiting. Climate study needs to be aware of this as well, of course.
Excellent counter. If you add in the proposed EPA regulations on hydrocarbon uses, you will find that the Biden administration is also trying to quash demand for them. So, they can say they support fracking, but if they are making the product unusable economically, what's the difference?
Thank you Roger. The information here reinforces my impression that the Biden Administration has not favored fossil fuel production, possibly (probably?) due to climate change concern.
For the author -- if, as you say, "fossil energy production on federal lands is likely to decline during the next two to four years", will that likely have an appreciable effect on consumer oil/gas/natural gas prices over the same period? Or do the federal lands contribute a relatively small percentage of US fossil fuel production?
US oil prices are linked to international oil prices. And international oil prices are in turn linked to supply/demand balances. Gradual reduction of oil production from US Federal lands could theoretically be offset by oil production elsewhere (OPEC, Russia, US private lands, Guyana, etc). This week's oil price is low enough to reduce investment in the oil patch, because it signals OPEC isn't going to allow US developers to grab more market share.
It seems to me OPEC prefers to see oil prices drop low enough to teach US developers a lesson they haven't learned in spite of previous oil production and price swings. US developers in turn have to be extremely careful to avoid being accused of collusion to fix prices. This is why I have written before that an optimum solution would be for the Texas Railroad Commission to show some leadership and control production together with other key oil producing states.
And until this happens I would expect market volatility to make future production and prices very difficult to predict.
Thanks much Roger. Perhaps the well known saying should be "the devil is in the lack of details"? That you have chosen to publish information that both clarifies and corrects gives me even more faith in the other information you post, which is the reason I subscribe.
Roger, thanks for this rebuttal. Yes, an Honest Broker.
The Permian Basin is in West Texas and SE New Mexico - the latter being where there is much federal land. Prior to Biden assuming the office of President, oil operators flooded New Mexico with applications for drilling permits, assuming that the new administration would oppose new drilling. The newly secured drilling permits were for far more wells than could be drilled in a just a year or two, and the increased oil production is partly a result of those anticipatory permits.
I suspect the oil industry has already leased most of the acreage that's worth leasing, and it wouldn't surprise me to see Texas crude oil production peak within the next ten years. Is it possible that Texas crude oil will peak in 2024?
How many times have we heard that we are near peak oil? They seem to keep finding more. Guyana is going to produce a huge amount of oil in the near future.
Guyana isn't in Texas. Oil reservoirs deplete inexorably. Sometimes we redevelop a reservoir, inject water and other fluids, reduce downtime, and trick a reservoir into yielding more oil. But peak oil for a given reservoir can't be avoided.
We can however develop other zones, which were previously uneconomic. This is done with new technologies such as drilling horizontally and fracking. But most of these technologies aren't feasible at low oil prices. And the way this works, what keeps production at a given level is the ability to produce marginal wells. This means that at $60 per barrel we can't produce as much as at $80 per barrel.
Reservoirs and fields are usually heterogeneous, and we usually try to develop the best prospects first. This means prospect quality drops over time. And lower quality prospects produce less oil, or produce it at a lower rate.
Thus we see that a confluence of factors cause a reservoir, a field, a basin, a region, and eventually a country, to reach peak oil and then decline. This has been observed all over the world, we understand why and how it happens, and know it's impossible to stop it.
You may ask yourself, then why not find more oil? We haven't found NEW oil reservoirs to replace production in many years, and there's no reason to expect we will do better. Guyana's new fields are large, but they aren't large enough to offset the natural decline we experience worldwide, approximately 3 to 4% per year.
Crude oil and condensate production is about 83 million barrels per day, so every year we are supposed to add about 3 to 4 million barrels per day to keep things steady. But that's for the whole world. Texas is a different issue, we don't see much beyond what we already know ought to be there. And the fracked wells decline much faster than average, which means we have to drill a lot to keep production steady. And this has a limit. My guess is that in the near future we won't be able to keep production steady, and thereafter the decline will be unstoppable (all we will do is try to reduce the overall decline).
So when it comes to Texas the optimum solution is for the state authorities to manage the total so it remains as steady as possible. This requires a slow increase in the workforce, steel and sand mining, and does put a strain on the community, but it's doable. But the crazy "drill baby drill" we see Trump advocating is bad for Texas. And probably for the US.
I would only add that increasing regulations at the state and federal level also has the effect of not only driving up cost but driving even mid majors to sell to the majors thereby reducing the number of companies. The in turn makes it easier for NGOs and their allies in government to control the industry. Fewer bigger targets.
I beg your pardon, I got the numbers wrong a little. The 899 leases in 2020 dropped to 407 in 2021, Biden's first year, a drop of 55%. 120 new leases in 2022, a drop of 87% compared to 2020. Leases went up a tad in 2023, to 144. Still an 83% drop compared to 2020. And note the drop in lease acreage, which is even more dramatic. In my opinion VP Harris has nothing to brag about on this issue.
I note that Kamala Harris claimed, in the recent debate, that her administration opened up more leases due to the misnamed "Inflation Reduction Act". Yet the table shows that the 899 leases in 2020 dropped by half, to 400 odd, in 2021, by 68% in 2022 to 127, then dropped again in 2023. VP Harris's claim to have opened up more leases would seem to be, how shall I say this, a fact-free assertion made to score points in the debate.
Yes, just like her claims that the US currently has no troops in combat zones for the first time since WW2. ABC news (of all sources) pointed out that that claim is false since we currently have troops in Syria and Iraq.
Alas, it is as I thought and commented under on the original article -- the previous administrations oil policies and actions, plus industry momentum, led to to opening up the pathways of more oil production are what accounts for the increase in the Biden years.
Well-stated and well-documented. I made the same point, much less elegantly, in a comment on Roger's original post. I am impressed, but not surprised, that Roger solicited and/or approved this guess post. Ron
I await Mr Pielkes response. In the meantime, can someone tell me why their is no data for 2016-2019?
It seems obvious to me that a sane government would want to keep the price of petroleum and natural gas low by ensuring a plentiful supply beginning with plentiful leases and drilling permits. This is especially true when shortages 5-10 years to be resolved by new drilling. Then, if one wants to encourage a shift to low carbon alternatives, we can tax carbon fuels and obtain revenue the federal government desperately need for roads, transportation and even general revenue. The Democrats strategy appears to be to induce an artificial shortage and higher priced by restricting the supply - a supply that takes years to respond to changing demand.
Unfortunately, gas taxes are the most highly visible tax citizens pay. In today's populist, expert-hating world, "sane policy" is an oxymoron.
I would hope that we could all get smart enough to similarly evaluate any and all claims of current-management effectiveness when there is a lead time between initiating and output. The current management benefits and/or suffers from his/her predecessors' decisions, but we see the leadtime issue missed over and over in business and government. The next guy ends up holding the bag or greatly benefiting. Climate study needs to be aware of this as well, of course.
Excellent counter. If you add in the proposed EPA regulations on hydrocarbon uses, you will find that the Biden administration is also trying to quash demand for them. So, they can say they support fracking, but if they are making the product unusable economically, what's the difference?
Excellent post.
Roger,
Thanks for having the courage to post a counter-argument. It speaks highly of you.
Thank you Roger. The information here reinforces my impression that the Biden Administration has not favored fossil fuel production, possibly (probably?) due to climate change concern.
For the author -- if, as you say, "fossil energy production on federal lands is likely to decline during the next two to four years", will that likely have an appreciable effect on consumer oil/gas/natural gas prices over the same period? Or do the federal lands contribute a relatively small percentage of US fossil fuel production?
US oil prices are linked to international oil prices. And international oil prices are in turn linked to supply/demand balances. Gradual reduction of oil production from US Federal lands could theoretically be offset by oil production elsewhere (OPEC, Russia, US private lands, Guyana, etc). This week's oil price is low enough to reduce investment in the oil patch, because it signals OPEC isn't going to allow US developers to grab more market share.
It seems to me OPEC prefers to see oil prices drop low enough to teach US developers a lesson they haven't learned in spite of previous oil production and price swings. US developers in turn have to be extremely careful to avoid being accused of collusion to fix prices. This is why I have written before that an optimum solution would be for the Texas Railroad Commission to show some leadership and control production together with other key oil producing states.
And until this happens I would expect market volatility to make future production and prices very difficult to predict.
Thanks much Roger. Perhaps the well known saying should be "the devil is in the lack of details"? That you have chosen to publish information that both clarifies and corrects gives me even more faith in the other information you post, which is the reason I subscribe.
Roger, thanks for this rebuttal. Yes, an Honest Broker.
The Permian Basin is in West Texas and SE New Mexico - the latter being where there is much federal land. Prior to Biden assuming the office of President, oil operators flooded New Mexico with applications for drilling permits, assuming that the new administration would oppose new drilling. The newly secured drilling permits were for far more wells than could be drilled in a just a year or two, and the increased oil production is partly a result of those anticipatory permits.
New leases have dropped by 90% over the past 4 years and new lease acreage has dropped by 95% over the same period. That's dramatic.
What caused new leasing to nearly stop and what does that portend for future energy production?
I suspect the oil industry has already leased most of the acreage that's worth leasing, and it wouldn't surprise me to see Texas crude oil production peak within the next ten years. Is it possible that Texas crude oil will peak in 2024?
I don't know.
How many times have we heard that we are near peak oil? They seem to keep finding more. Guyana is going to produce a huge amount of oil in the near future.
Guyana isn't in Texas. Oil reservoirs deplete inexorably. Sometimes we redevelop a reservoir, inject water and other fluids, reduce downtime, and trick a reservoir into yielding more oil. But peak oil for a given reservoir can't be avoided.
We can however develop other zones, which were previously uneconomic. This is done with new technologies such as drilling horizontally and fracking. But most of these technologies aren't feasible at low oil prices. And the way this works, what keeps production at a given level is the ability to produce marginal wells. This means that at $60 per barrel we can't produce as much as at $80 per barrel.
Reservoirs and fields are usually heterogeneous, and we usually try to develop the best prospects first. This means prospect quality drops over time. And lower quality prospects produce less oil, or produce it at a lower rate.
Thus we see that a confluence of factors cause a reservoir, a field, a basin, a region, and eventually a country, to reach peak oil and then decline. This has been observed all over the world, we understand why and how it happens, and know it's impossible to stop it.
You may ask yourself, then why not find more oil? We haven't found NEW oil reservoirs to replace production in many years, and there's no reason to expect we will do better. Guyana's new fields are large, but they aren't large enough to offset the natural decline we experience worldwide, approximately 3 to 4% per year.
Crude oil and condensate production is about 83 million barrels per day, so every year we are supposed to add about 3 to 4 million barrels per day to keep things steady. But that's for the whole world. Texas is a different issue, we don't see much beyond what we already know ought to be there. And the fracked wells decline much faster than average, which means we have to drill a lot to keep production steady. And this has a limit. My guess is that in the near future we won't be able to keep production steady, and thereafter the decline will be unstoppable (all we will do is try to reduce the overall decline).
So when it comes to Texas the optimum solution is for the state authorities to manage the total so it remains as steady as possible. This requires a slow increase in the workforce, steel and sand mining, and does put a strain on the community, but it's doable. But the crazy "drill baby drill" we see Trump advocating is bad for Texas. And probably for the US.
Demonstrating once agin that corolary to Murphy's Law: a simple falsehood will always triumph over a complex truth.
I would only add that increasing regulations at the state and federal level also has the effect of not only driving up cost but driving even mid majors to sell to the majors thereby reducing the number of companies. The in turn makes it easier for NGOs and their allies in government to control the industry. Fewer bigger targets.
I beg your pardon, I got the numbers wrong a little. The 899 leases in 2020 dropped to 407 in 2021, Biden's first year, a drop of 55%. 120 new leases in 2022, a drop of 87% compared to 2020. Leases went up a tad in 2023, to 144. Still an 83% drop compared to 2020. And note the drop in lease acreage, which is even more dramatic. In my opinion VP Harris has nothing to brag about on this issue.
I note that Kamala Harris claimed, in the recent debate, that her administration opened up more leases due to the misnamed "Inflation Reduction Act". Yet the table shows that the 899 leases in 2020 dropped by half, to 400 odd, in 2021, by 68% in 2022 to 127, then dropped again in 2023. VP Harris's claim to have opened up more leases would seem to be, how shall I say this, a fact-free assertion made to score points in the debate.
Yes, just like her claims that the US currently has no troops in combat zones for the first time since WW2. ABC news (of all sources) pointed out that that claim is false since we currently have troops in Syria and Iraq.
Alas, it is as I thought and commented under on the original article -- the previous administrations oil policies and actions, plus industry momentum, led to to opening up the pathways of more oil production are what accounts for the increase in the Biden years.
Well-stated and well-documented. I made the same point, much less elegantly, in a comment on Roger's original post. I am impressed, but not surprised, that Roger solicited and/or approved this guess post. Ron