The Crude Oil Export Ban - "What, Me Worry About Peak Oil?"

Tyler Durden's picture

Submitted by Arthur Berman via,

Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer.

The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo.

The EPCA not only banned the export of crude oil but also established the Strategic Petroleum Reserve. Both measures were intended to keep more oil at home in order to make the U.S. less dependent on imported oil. A 55 mile-per-hour national speed limit was established to force conservation, and the International Energy Agency (IEA) was founded to better monitor and predict global oil supply and demand trends.

Above all, the export ban acknowledged that declining domestic supply and increased imports had made the country vulnerable to economic disruption. Its repeal last week suggests that there is no longer any risk associated with dependence on foreign oil.

What, Me Worry?

The tight oil revolution has returned U.S. crude oil production almost to its 1970 peak of 10 million barrels per day (mmbpd) and imports have been falling for the last decade (Figure 1).

Chart1_US Crude Prod-Imp-Cons

Figure 1. U.S. crude oil production, net imports and consumption. Source: EIA and Labyrinth Consulting Services, Inc.

(Click image to enlarge)

But today, the U.S. imports twice as much oil (97%) as in 1974! In 2015, the U.S. imported 6.8 mmbpd of crude oil (net) compared to only 3.5 mmbpd at the time of the Arab Oil Embargo (Table 1).

1974-2015 Comparison TableTable 1. Comparison of U.S. crude oil imports, production and consumption for 1974 (Arab Oil Embargo) and 2015 (Today).

Source: EIA and Labyrinth Consulting Services, Inc.

(Click image to enlarge)

Production of crude oil is higher today by 7% but consumption has grown to more than 16 mmbpd, an increase of 32%. At the time of the Arab Oil Embaro, consumption was only 12 mmbpd.

So, consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher?

We are far more economically vulnerable and dependent on foreign oil today than we were when crude oil export was banned 40 years ago.

What, me worry?

America-what-me-worry-alfred_e_neuman_Money and

Figure 1. Alfred E. Neuman. Source:

Peak Oil

While the world was focused on an over-supply of oil and falling prices over the last 18 months, world liquids production peaked in August 2015 at almost 97 mmbpd (Figure 2).

Chart_World Con-Uncon

Figure 2. World conventional and unconventional liquids production. Source: EIA, Drilling Info, Statistics Canada

and Labyrinth Consulting Services, Inc.

(click image to enlarge)

Average daily production of 95.5 mmbpd for 2015 exceeds EIA’s Annual Energy Outlook 2015 forecast (April 2015) by 2.6 mmbpd!

Conventional oil production peaked in February 2011 at 85.3 mmbpd (Figure 2) and non-OPEC conventional production peaked in November 2010 at 49.8 mmbpd (Figure 3).

Chart_Con-OPEC-Non-OPEC Conv

Figure 3. World conventional and unconventional liquids production showing OPEC and non-OPEC conventional production.

Source: EIA, Drilling Info, Statistics Canada and Labyrinth Consulting Services, Inc.

(click image to enlarge)

It’s not important whether this is the final, maximum world production peak or not. It is a signal about a trend that needs to be acknowledged and incorporated into our evolving paradigm about oil supply.

Peak oil production was accelerated by a confluence of factors. Zero interest rates in the U.S. and Middle East supply interruptions before 2014 caused high oil prices. Easy money caused over-investment in the oil business. Over-production and weakened demand resulted in the collapse in world oil prices. OPEC’s reaction and decision to produce at maximum rates have created the “perfect storm” for peak oil production several years before it would have occurred otherwise.

All oil producers are losing money at current prices but companies and countries are producing at high rates. Indebted conventional and unconventional players need cash flow to service debt so they are producing at high rates. OPEC is producing at high rates to maintain or gain market share. Everyone is acting rationally from their own perspective but from a high level, it looks like they have all lost their minds.

Peak oil is not about running out of oil. It is about what happens when the supply of conventional oil begins to decline. Once this happens, higher-cost, lower-quality sources of oil become increasingly necessary to meet global demand.

Those secondary sources of oil include unconventional (oil sand and tight oil) and deep-water production. The contribution of unconventional and deep-water production has grown from about 15% in 2000 to approximately one-third of total supply today, and it will probably represent more than 40% by 2030.

Despite a popular belief that tight oil is price-competitive with conventional oil production, it is not (Figure 4).  

Oil Prod & Capex Tight Oil-DW-OPEC-Conv from SLB Howard Weil 032615Figure 4. Slide from Schlumberger CEO Paal Kibsgaard’s presentation at the Scotia Howard Weil 2015 Energy Conference.

(Click image to enlarge)

Figure 4 is from Schlumberger, a company that knows the costs of its global customers. It shows that tight oil is the most expensive source of oil, followed by deep-water and other offshore oil. Conventional oil from onshore and OPEC middle eastern sources is the lowest cost oil.

Schlumberger did not include oil sands in its chart because it is difficult to compare the costs of a manufacturing operation to the cost of drilling individual wells. Existing mined and SAGD oil sands projects, however, break-even at approximately $50 per barrel although new SAGD projects require about $80 per barrel.

Figure 4 reflects costs in 2014. Although cost and efficiency improvements since 2014 probably apply equally to all plays, Table 2 shows late 2015 costs and reserves for key tight oil operators.

The principal tight oil plays–Bakken, Eagle Ford and Permian basin–break even at $65 to $70 per barrel oil price today.

EAGLE FORD-BAKKEN-PERMIAN SUMMARY EUR & BE PRICE TABLE 25 DEC 2015Table 2. Key operator weighted-average estimated ultimate recoveries (EUR) in barrels of oil equivalent and break-even oil prices. Drilling and completion (D&C) costs used in the economic calculations are shown. Economics also include an 8% discount. Details may be found at the following links: Bakken, Eagle Ford and Permian.

Source: Drilling Info & Labyrinth Consulting Services, Inc.

(Click image to enlarge)

Although EUR is higher and break-even prices are lower for certain operators and core areas of the plays, Table 2 reflects representative average values for operators with the highest rates and cumulative production. If the price of oil increases, service costs will also increase and the production cost will be higher. Efficiency gains are largely behind us as new well production per rig has flattened in the last quarter of 2015 (Figure 5) so it is unreasonable to expect costs to decrease much further.

DPR Dec 2015

Figure 5. Tight oil new well production per rig. Source: EIA & Labyrinth Consulting Services, Inc.

(Click image to enlarge)

The economics of tight oil plays require spot oil prices that are double and wellhead prices that are triple current face values. Excluding new SAGD projects, tight oil is the world’s most-expensive and, therefore, marginal barrel of oil and its cost of production today is more than $70.

Perception is Everything

Congress’ decision to lift the 40-year U.S. ban on crude oil exports reflects the same misinformed and distorted thinking that declares that the world’s highest cost producer - tight oil - can somehow also be the world’s swing producer.

The 1975 export ban was enacted because of the disastrous economic consequences of becoming dependent on imports following the peaking of U.S. oil production in 1970. Now that oil production is again close to peak levels, we have apparently forgotten that imports were the problem then and that we import twice as much today as in 1975.

The same thinking concludes that because oil markets are over-supplied by about 1.5 mmbpd today, prices will remain low for years if not decades.  Although there is certainly a rationale for low prices based on fundamentals of supply and demand in the near term, the longer view is shaped largely by perception.

Oil prices (Brent) rallied, after all, to $65 per barrel in May when the market was more over-supplied (2.25 mmbpd) than it is today. That was based on perception that falling rig counts in the United States and withdrawals from oil-storage inventories would bring less supply. Neither perception was correct in the short term but it didn’t matter. Prices rose. There were, of course, other factors including concerns about the growth of the Chinese economy, the Greek debt crisis, and renewed Iranian exports.

Despite the recent trend toward price capitulation since late November, there is a certain potential energy in the market to find excuses to raise prices or to at least establish a bottom. For example, this week, U.S. crude oil stocks declined by 5 mm barrels and WTI futures increased $3.36 per barrel. We are in the winter de-stocking period so a withdrawal from inventory is normal but the previous week saw an addition to stocks that made this withdrawal seem somehow more important. A price increase of that magnitude makes no sense especially since U.S. stocks are more than 125 mm barrels above the 5-year average. That is the power of perception.

Energy and oil in particular underlie everything in our global economic lives. Oil prices reflect our collective emotional response to the circumstances of the world. Fundamentals are the vital signs of oil price’s body but perception is the key to its psyche.

The more-than $3 per barrel increase in WTI prices last week is an example of a very short-term reaction to some event or circumstance. Oil prices also reflect longer-term longer term price responses that involve considerable lags. For instance, a global production surplus appeared in January 2014 and continued for 6 months before prices responded downward.

Climate change and peak oil are long-term perspectives that many prefer not to think about or to reject as frauds. That is because they force us to consider that there may be real limits to growth. That is anathema to the economic and cultural paradigm that much of the world embraces. They suggest that energy will cost more and that we may have to live with less in the future than we have in the past. That means extreme changes in both our behavior and our expectations.

The prevailing perspective–lower for longer–is that oil prices will remain low for many years.

This is reasonable based on vital signs. The global over-supply of oil persists after a year-and-a-half of lower prices. Iran and Libya could potentially add another 1-2 mmbpd to the existing over-supply. U.S. production has not declined as much as most experts anticipated, and there is considerable if unknown spare capacity in drilled, uncompleted wells. China’s economic growth has slowed and the global economy is weak. Demand for oil will continue to grow but at a slower rate than in 2015.

What Lies Ahead in 2016

In another week, the world will go back to work after the holidays. The bleeding in the oil patch will get worse and prices will plunge again. Year-end results for oil and gas companies will be the worst so far. The Federal Reserve Bank and Standard & Poor’s have issued warnings about bad debt in the U.S. oil and gas business. The tight oil companies have put the best face they can on a desperate situation.

But investors and their bankers should be out of patience. They should be tired of phony economics and tall tales about giant new reserves when the companies they invested in are losing billions of dollars every quarter.

The lower-for-longer perception will begin to change in 2016 barring a global economic collapse. It is, after all, founded on the simultaneous occurrence of every possible negative outcome. The long-awaited response in the economy to lower oil prices will begin to emerge. Demand for oil will increase. Concern about lower growth in China is largely accepted already. U.S. production will continue to fall 100,000 barrels per day every month as predicted, just later than expected. Drilled uncompleted wells will not deliver as much new oil as many now fear.

None of this will happen overnight. Market balance will likely return more slowly than it unravelled. The oil bubble took 5 years to inflate but the world is impatient and expects a quick return to normal. All of the signs are right–lower rig counts, distress for overly leveraged companies, lower budgets for crucial exploration and development projects–but it all takes time.

Energy is the economy. Lower oil and gas prices will be a huge benefit to the global economy but that takes time also. And the longer prices are low the better, although it doesn’t feel that way in the oil business right now.

Tight oil has bought the U.S. another decade or so of additional oil supply but, as peak oil predicted, at a cost. The technology behind tight oil has also made it the world’s most expensive barrel. As all of this sinks in, perception will start to change. Analysts and investors will begin to see that data points more toward long-term scarcity than toward long-term abundance of oil supply.

The U.S. is far more economically vulnerable and dependent on foreign oil today than when crude oil export was banned 40 years ago. The world has finite oil resources and the production party of the last 5 years has accelerated the timing of peak global production. A shooting war in the world would bring all of this into instantaneous focus if the data presented here has not.

It is a curious paradox that peak oil should manifest in the midst of over-supply and low oil prices. That is certainly not how I thought things would happen. Perceptions will change and oil-market balance will be restored in ways that few of us thought likely. Peak oil will be part of that change.

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Bill of Rights's picture

Peak oil to match the Peak idiocy.

Bumpo's picture

Peak Oil is Bullshit

Rockatanski's picture

IMO, oil is abiotic but we might be able to pump it faster that is can be made my mother earf.

how anyone can argue that its from plants and dino's is just amazing but we have already witnessed just how stupid that are becoming or atleast how stupid they think we are.

Bumpo's picture

Exactly ...

"In 1970, the Russians started drilling Kola SG-3, an exploration well which finally reached a staggering world record depth of 40,230 feet. Since then, Russian oil majors including Yukos have quietly drilled more than 310 successful super-deep oil wells, and put them into production. Last Year Russia overtook Saudi Arabia as the world's biggest single oil producer, and is now set to completely dominate global oil production and sales for the next century."
troubledasset's picture

The Kola SG-3 did not produce oil.

Wulfkind's picture

"In 1970, the Russians started drilling Kola SG-3, an exploration well which finally reached a staggering world record depth of 40,230 feet. Since then, Russian oil majors including Yukos have quietly drilled more than 310 successful super-deep oil wells, and put them into production. Last Year Russia overtook Saudi Arabia as the world's biggest single oil producer, and is now set to completely dominate global oil production and sales for the next century."


Proof, Pictures, and Links to Data, please.

Or your lying and it is not happening.

Bumpo's picture

Do your own fucking home work, asshole. Live in a cave for all I care. 

Wulfkind's picture

You're the expert, douchenozzle.  You puked this little nugget of so called "fact" out of your ass pretty easily.  You should be able to back up your claim just as easy.

You won't because you can't because you and your claim are full of shit.

Bumpo's picture

Can you not google these words? Lol

theallseeinggod's picture

There have been studies made that suggest oil doesn't come from living things. Nobody knows for certain where oil comes from, so I wouldn't flatly dismiss the possibility that it is generated by some chemical processes in the mantle

Apply Force's picture

So you've read up on Russian oil production... What exactly is thier per well output compared to the past? 

Red Queens all around.

Wulfkind's picture

IMO, oil is abiotic but we might be able to pump it faster that is can be made my mother earf.


Pictures and links to data where all this abiotic oil is and who is pumping it out and at what rate and cost.......

Or your lying and full of shit.

Wulfkind's picture

For all the downvoters......still waiting on the proof, pictures, data, links, pdf's......etc....etc.


Mayer Amschel Rothschild's picture

Vladimir Kutcharov et al

A) Abiotic oil has already been created in a lab. Hypothesis is proven. Where is the proof of dino to hydrocarbon fuel conversion?

B) Grade school indoctrinated dunskies can't explain how the dino to hydrocarbon converted fuel can migrate miles through stone against literally all the pressure in the world and then pool together.

When carefully examining the requirements of two models, the dino graveyard juice model is the more absurd of the two.

Escrava Isaura's picture



Rockatanski, IMO (In My Opinion)…….


Who cares about an opinion from someone that has NO clue about oil. Go do some research before writing nonsense.


I browsed through the article and I can’t believe that Berman did not touched, unless I missed it, that US shale is not real oil; so, many US refineries cannot process shale, and that’s why some of the shale is going…… I guess Canada or Venezuela. Anyway, it doesn’t matter.


Now, about oil formations:

Most oil formed between the beginning of the Jurassic and the end of the Cretaceous period, from 180 to 65 million years ago. There were two particular periods of intense global warming during those times. I don't remember the exact dates of these two periods but I have heard Colin Campbell mention them several times. Of course there have been other periods of oil forming plankton blooms but they do not compare to these two periods.

It is during these two periods on intense global warming that we had enermous plankton blooms. Oil is created entirely from phytoplankton.

When phytoplankton die, they sink to the sea floor where they begin to accumulate. The deposited phytoplankton is covered by other sediments and pushed deeper into the crust of the Earth, where it is subjected to higher pressures and temperatures. Only then will phytoplankton change structure and become kerogen, heavy oil and finally light oil, which is used for petroleum. This complex process means that not all formerly marine environments will yield petroleum.



Mayer Amschel Rothschild's picture

Well inculcated you are. You must be very proud.

Escrava Isaura's picture



If someone comes here and say that the world is about 6 thousand years old because he/she saw it at pages of the Bible at the Creation Museum in Kentucky, it yours and mine obligation to correct and tell that’s nonsense.

However, if someone comes in here and tell us that, before every meal, he/she does the sign of the cross to bless his/her food, I think that’s great. I am not gonna tell him/her if wasn’t for oil we would probably all die.


The Dogs of Moar's picture

You can bet Jurassic on that, EI.

troubledasset's picture

Is it bullshit when you look at it in terms of energy produced vs. energy consumed?

After all, if it takes more energy within the full cylce of finding, developing, refining and delivering the newly created energy haven't you created negative returns?  

Apply Force's picture

Yes - all playing out economically now.  Whipsawed all the way down.

Wulfkind's picture

"Peak Oil is Bullshit"

Perhaps in your narrow definition based on the assumption that oil is ever going to run out completely.  But we are at Peak Cheap Energy with the largest part of that cheap energy mix being Oil

No my is you who is full of bullshit.

Wulfkind's picture

To all the downvoters.......tell me how the Shale boys feel right about now at $35 per barrel ?    Also....tell me how the economy ran at $145 per barrel.

*ahem*.....that's Peak Cheap Energy, bitchezz.

Bumpo's picture

Im so tired of the Liberal 'Scarcity' meme

deflator's picture

 Not tired of the, "infinite abundance" meme? 

 Creators of debt based economic models never tire of that.

Bumpo's picture

This isn't about creating money out of thin air. This is about creating a false scarcity that convinces us to pay through the teeth for what the Earth provides effortlessly. Prices seem to support someone producing oil at these prices. But go ahead and pay your carbon taxes. I'm sure it will save the world.

Dr. Engali's picture

Sits back and eats popcorn waiting to read the comments.

tonyw's picture

If it is "misinformed and distorted thinking that " allows the US to export oil what is it that allows other countries to export oil?

HowdyDoody's picture

Anything to reduce the price of oil to crush Russia - destruction of the US shale industry, destruction of the US strategic reserve ....


True Blue's picture

It has little or nothing to do with Russia, and everything to do with crushing the American Owned shale oil industry. Notice, they also lifted the ban on foreigners owning oil producing land at the same time.

Saudi Arabia (among others) owns our government, and soon they will own the majority of oil production here as well. Why else did the Crown Prince of the House of Saud (or was it the King himself who rented out the Four Seasons and had it redecorated in Gold?) visit his puppets in Washington a couple months ago, if not to give them their marching orders re: the oil export ban and the ban on foreign investment in farm, oil, and mineral producing land?

Escrava Isaura's picture



Jesus f@$%ing Christ. Will you all ever learn?


True Blue, nothing to do with Russia, and everything to do with crushing American shale


So, how do you explain the 80’s? And why that the Saudis didn’t buy US oil companies back then?


You can’t, because you have no clue about what you’re talking about.


Get this over your head: Petrodollar. And Russia, with the help of China (Eurasia), if put into action, without dollar loans, the dollar will no longer be needed. GOT IT?


"Give me control of money and I care not who makes it's laws." — Mayer Amschel Bauer Rothschild .



True Blue's picture

Because it was against American Law until last week for foreigners to own valuable farmlands etc. without paying Huge taxes

any other questions brazilliatroll?

Escrava Isaura's picture



You missed the point. It’s not what’s bought or sold, it’s what money is used.

Also, shale oil companies and real estate are small potatoes and can be easily taxed or confiscated, especially if owners are foreigners.


Learn from US history. America used the British Empire blueprint, but in steroids.


ZippyBananaPants's picture

Is Tight Oil used to make KY-Jelly?

Sudden Debt's picture

Aren't those storage tanks full yet? They where running over almost 6 months ago... so they said...

KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) Dec 28, 2015 2:59 PM

Never go Peak FULL RETARD

Duc888's picture





Peak oil is a fucking joke when the world eCONomy goes into the shitter.  It's self correcting.  We can boil off the fat of the banksterz bloated bodies and use it like whale oil.

Wulfkind's picture

Peak Oil, or better yet Peak Cheap Energy is NOT self correcting.  Economies and societies built AROUND cheap energy WILL self correct.  But the results will not be pretty.

Bumpo's picture

Global Warming will destroy the World, too .. Still waiting

Sturm und Drang's picture

First question I had when I read about the ban being lifted was "who's the buyer?"

Second question was "why the fuck are they allowing the selling of a strategic asset AT ALL, much less now?"

Treason my friends, plain and simple.

True Blue's picture

Funny, now that nobody could possibly afford to export American oil, the ban is lifted.

Strange, the ban was lifted the same week they decided to also lift the ban on foreigners owning American farmland and (gasp) oil producing lands.

Odd that Saudi Arabia almost single handedly told the rest of OPEC to stuff it as they overproduced to push the prices so far down that overextended American producers are teetering on the edge of bankruptcy.

Next, the House of Saud will buy up half of N. Dakota then 'magically' cut Arabian production, allowing the market price to rise again; making those wells they buy in the US at firesale prices suddenly -hugely- profitable again; with the proceeds going offshore.

And our bought and paid for Government will cheer them on whilst the MSM trumpets the 'benifits' and 'economic recovery' to Americans...

Funny old world...

debtor of last resort's picture

There's not enough cheap to extract oil to support the system as we know it. First deflation, then hyperinflation.

Herdee's picture

I like the overlay of Alfred E Neuman and George W. Bush Jr.There's a striking resemblance.(and similar intelligence level)

DaveyJones's picture

So Peak oil is "a joke"...?

thus the last 150 years of Middle East history, territory redrawings, CIA topplings, terroist labels, 911 flags, Hussein killings, Libya liberations, pipeline pulpits and petro-dollars are just an oily coincidence?

There is a lot of shit the bad guys are now calling "oil" but very little of it is anything like the easy high quality shit we first unearthed in the Penn

This has nothing to to do with "price" and everything to do with EROEI. If you recall, the bad guys have fucked up the price of everything. Oil is unlike any other "commodity" it runs the world and it moves the armies of the more ways than one.

ElixirMixer's picture

Stopped reading after "peak oil." 

There might be peak cheap oil, but there is no such thing as peak oil.

I AM SULLY's picture
I AM SULLY (not verified) Dec 28, 2015 4:32 PM

People will keep believing magical shit about reality until reality comes along and slaps them in the face.

But, by all means - believe there is a magical cornucopia inside the planet ...

(some place)

(where Hitler fled after WW2)

samsara's picture

So while we are producing shale oil in the hundreds of Thousands barrels per day, we are importing 6-7 Million barrels per day.

Shale will save us... Not

Wulfkind's picture

According to the Main Stream Wall Street Press and CNBC we will soon be, if we are not already, "Energy Independent".

Happy Days are here again. /sarc

SelfGov's picture

Best post on ZH since Gail T's last.