Art Berman: Think Oil Is Getting Expensive? You Ain't Seen Nothing Yet

Authored by Adam Taggart via Peak Prosperity,

After issuing clear warnings on this program that sub-$50 oil prices were going to be short-lived, oil expert and geological consultant Art Berman returns to the podcast this week to explain why today's $70 oil prices will go higher -- likely much higher -- and start materially contricting world economic growth.

Art explains how the current glut of oil created by the US shale boom -- along with high crude output by both OPEC and non-OPEC  producers -- is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of the global demand curve. And at the same time, we're extracting our reserves at a faster rate than ever. That's a mathematical recipe for a coming supply crunch -- it's not a matter of if, but when:

The price of oil has gone up 30%+ percent just here in the last year alone. There are some very good reasons for that.

In the United States, we've been drawing down our reserves, our inventory and the amount of oil we have in storage, consistently since February of 2017. We're going into the 15th month of drawing from storage each week because we're not producing enough to meet the need.

To those paying attention: the United States is right now producing more oil than it ever has in its history. We are a million barrels a day higher than the peak in 1970 -- the one that King Hubbert got in trouble for warning about. We're higher by 50,000 or so barrels per month of production. Yet, here we are, still sucking oil out of storage. What does that tell you? There is only one way to interpret that: We are using more than we are producing

Countries like the United States and western Europe; our demand is pretty much stable. We are not a big growing economy anymore. But the emerging markets – Asia, Latin America, and Africa – they are going full bore. That is where something like 80% of world demand growth is coming from.

Never ever lose sight of the fact that the United States imports a ton of oil. I mean we are importing, on average, 7 million barrels of crude oil a day. I mean that is more than many continents use a day. Why are we importing all that when we are also producing 11 million barrels a day?

We are nowhere near energy self-sufficiency, nor do I think we will ever get there.

We're in deep trouble.

Click the play button below to listen to Chris' interview with Art Berman (60m:06s).

Comments

skbull44 markmotive Sat, 06/02/2018 - 08:16 Permalink

There seem to be two fairly distinct camps: one that believes there are biophysical limits to our exponential growth and those that believe there are no limits. Both groups can draw on various data points to 'prove' their belief.

If you fall into the first group, you believe that there is a shitstorm ahead as we have likely surpassed any 'natural' carrying capacity on this planet; mostly thanks to the leveraging of fossil fuels to push the environment's carrying capacity further and further from what would be deemed 'natural'. The only path left is the eventual 'collapse' that accompanies such an experiment.

If you hold that there are no limits, you tend to believe there are plenty of resources remaining, that they are regenerating quicker than they are consumed, and/or that some future (or 'proven' but conspiratorially suppressed) technology will usher in a revolutionary clean and cheap energy source to save us from any negative repurcussions of the exponential growth curve we have been following the past couple of centuries.

Consider, for a moment, the negative consequences should your belief system be wrong. 

I, personally, hold we live on a finite planet and exponential growth is encountering some real, physical limits. And what could possibly go wrong with such growth on a finite planet? Perhaps nothing. Perhaps everything. And I'd sooner be prepared for an eventuality that may not occur than unprepared. 

And anyone who thinks they know the future is fooling themselves...

 

https://olduvai.ca

In reply to by markmotive

directaction runningman18 Fri, 06/01/2018 - 18:32 Permalink

The era of cheap, plentiful oil is drawing to a close. We all know that conventional oil production peaked worldwide in late ‘04 or early ‘05. Most do not know, however, that the current undulating production plateau is over. 

In a year or two as reserves are drawn down deeper, much higher oil prices and oil scarcities will begin absolutely crushing economies everywhere.

And by 2022 it’s going to be the end of industrial civilization. Three and a half more years is all we’ve got left. 

In reply to by runningman18

Toxicosis vato poco Fri, 06/01/2018 - 19:09 Permalink

Malthus was early not wrong.  The green revolution which used oil and it's specific oil byproducts of insecticides, herbicides and pesticides in addition to chemical based fertilizers led to the ability to mass produce multiple crops that would survive the insects.

Without oil feeding 7 billion plus people would have been a difficult task to achieve. 

And actually people who do primary science for a living are the smart guys as they assess, collate and publish data and observations on the current and projected state of reality.  Too many here on ZH seem to pick and choose which scientists to 'believe'.  And like Matt Simmons stated, "lets leave I believe in a church" as data beats theories every time.  Malthus et al. had their observations correct concerning the data they had then, however, it does not change that oil and natural gas are limited resources and they're ability to satisfy the needs of hydrocarbon consumers will stall and then come to an end.

Whether you accept that reality is on you.  Good luck in rejection of it.

In reply to by vato poco

FBaggins Toxicosis Fri, 06/01/2018 - 21:36 Permalink

Toxicosis is likely a troll for the population-reduction lobby or for the oil industry, or for both. He likely sides with the Western establishment anxious to justify an elimination of the underclasses everywhere and at the same time conquer nations like Iran and Venezuela which have about one half of the proven oil reserves of the world. Anyone who opposes their views somehow is a church-going idiot bound by archaic moral laws prohibiting killing and pillaging and knowing nothing about science or reason.   

The neo-Malthusians are as FOS as the old ones who were so avid to reduce the world’s population based on their limited foresight with respect to advances in technology and agriculture.

The US has about 4.3% of the world’s population but consumes 21% of the world’s oil production. The US also uses proportionality way more oil for electrical energy production than the rest of the world.  

If Toxicosis is concerned about the limited number or resources for too many people, why not then reduce the number of Americans to make the resources last longer? Of course he would not suggest changing Western transportation methods or other wasteful habits.

A very small percent of the world’s oil production is used to produce, insecticides, herbicides and pesticides.  We will never run out of oil for fertilizers because it is not used for such.

“I had thought that worries over the supplies of oil based fertilizers (or fertilisers) were confined to the kookier ends of the Peak Oil conspirators along with the weirder part of the environmental movement. Sadly, I find that it has invaded the editorials of seemingly respectable newspapers like London's The Guardian. The point being of course that as we don't use oil-based fertilisers, have never used oil based fertilisers, we're most unlikely to ever run out of oil based fertilisers.”

Tim Worstall , April 7, 2012

https://www.forbes.com/sites/timworstall/2012/04/07/were-not-going-to-r…

 

At the rate the world is wasting oil on inefficient human consumption habits, most of the 700 to 800 billion barrels of proven oil reserves could be gone in a few generations, but that does not mean there will not be enough for relatively small percent used for insecticides, herbicides, and pesticides.  

Today, oil meets 36 percent of US energy demand [i], with 71 percent directed to fuels used in transportation – gasoline, diesel and jet fuel.

57% of all oil consumed in the U.S. is imported. 71% of all oil consumed in the U.S. is used for transportation, of which

 

Petroleum products consumed in 2016

Product

Annual consumption (million barrels per day)

Finished motor gasoline  9.317

Distillate fuel oil (diesel fuel and heating oil) 3.877

Hydrocarbon gas liquids (HGL) 2.536

Kerosene-type jet fuel 1.614

Still gas 0.697

Asphalt and road oil 0.351

Petroleum coke 0.345

Residual fuel oil 0.326

Petrochemical feedstocks 0.323

Lubricants 0.130

Miscellaneous products and others 0.096

Special napthas 0.049

Finished aviation gasoline 0.011

Kerosene 0.009

Waxes 0.006

Total petroleum products

19.687

Source: U.S. Energy Information Administration, Petroleum and Other Liquids—Product Supplied, as of September 13, 2017

https://www.eia.gov/energyexplained/index.php?page=oil_use

 

Distribution of oil demand worldwide in 2016 by sector

Share of demand

50.21%            Road

14.26%            Petrochemicals

8.94%              Residential/commercial/agricultural

7.45%              Aviation          

3.4%                Marine bunkers

2.55%              Electricity generation

1.7%                Rail & domestic waterways

11.49%            Other industry

© Statista 2018 

https://www.statista.com/statistics/307194/top-oil-consuming-sectors-wo…

 

 

In reply to by Toxicosis

Toxicosis FBaggins Fri, 06/01/2018 - 22:10 Permalink

Nice try.

Nope I work for myself but graduated in chemistry/organic chemistry.  Have always been well aware of the limits to growth, and the you can't get something for nothing mentality. 

And yes we will and do need a reduction in population, which will happen one way or another.  Resources are not forever, but obviously the desire to keep consuming in extraordinary amounts is.

Despite our use of oil and natural gas in minute amounts compared to the whole such as roads and transportation and other related machinery, the cost of extraction has been skyrocketing over the last 10 years.  Eventually this will send the cost of ALL goods and services dependent on oil.  VIRTUALLY ALL OF THEM! To go up in price. 

Once it becomes prohibitive by price alone to extract oil, many oil projects will be mothballed.  And then there will the closure of chemical plants and the abandoning of farmer's fields and Big Ag controlled fields.

Oh and don't forget about the economic collapse which will destroy production as well.  No money, no debts allowed, and close to a collapse of oil extraction.

I thought this was funny - "The point being of course that as we don't use oil-based fertilisers, have never used oil based fertilisers, we're most unlikely to ever run out of oil based fertilisers.”

Another uneducated moron.  So exactly how would we have synthesized these chemical products without crude rock oil, natural gas and ethane present.  We wouldn't.

And the US uses more NATURAL GAS and COAL not oil in the production of electricity.

What is U.S. electricity generation by energy source?

 

https://www.eia.gov/tools/faqs/faq.php?id=427&t=3

 

In 2017, about 4,015 billion kilowatthours (kWh) (or 4.01 trillion kWh) of electricity were generated at utility-scale facilities in the United States.1 About 63% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases). About 20% was from nuclear energy, and about 17% was from renewable energy sources. The U.S. Energy Information Administration estimates that an additional 24 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2017.2

U.S. electricity generation by source, amount, and share of total in 20171

Energy sourceBillion kWhShare of total

Total - all sources4,015

Fossil fuels (total)2,49562.7%

  Natural gas1,27331.7%

  Coal1,20830.1%

  Petroleum (total)    21   0.5%

    Petroleum liquids    13   0.3%

    Petroleum coke     9   0.2%

  Other gases    14   0.4%

Nuclear   805  20.0%

Renewables (total)   687  17.1%

  Hydropower   300   7.5%

  Wind   254   6.3%

  Biomass (total)    64   1.6%

    Wood    43   1.1%

    Landfill gas    11   0.3%

    Municipal solid waste (biogenic)     7   0.2%

    Other biomass waste     3   0.1%

  Solar (total)    53   1.3%

    Photovoltaic    50   1.2%

    Solar thermal     3   0.1%

  Geothermal     16   0.4%

  Pumped storage hydropower3     -6   -0.2%

Other sources     13   0.3%

 

In reply to by FBaggins

FBaggins Toxicosis Sat, 06/02/2018 - 15:06 Permalink

You help prove my point. Instead of citing the scientific and technological advances which made the fears of Malthus fade from sight and his argument invalid, you just say he was too early and that the threat of overpopulation is upon us, using finite oil reserves as a justification. There is no reliable scientific evidence to prove that without our present rate of oil consumption the earth cannot sustain its present level of population or even more people. However, if you want to play the man-made global warming card along with your neo-Malthusian nonsense then you are likely relying on fake science which has already been debunked.  

Oil is just one resource and after it is gone we will use others. Also, we do not need it for making fertilizers. We waste most of it in the West in our worship of auto transportation and roads, and for this idolatry I am also guilty for I am a great lover of cars.  

If in fact there is only about 1.2 trillion barrels of proven oil reserves left, then at a rate of 35 billion barrels a year in world consumption there is about 65 years of oil left. If the annual consumption increases, then it will last fewer years. We are already transitioning in North America. When the oil is gone there is no evidence to say we are all going to freeze in the dark or become housebound. This is no argument for population reduction. As for fertilizers there or organic ones and synthetic ones like ammonium nitrates. For the ammonium we now rely mostly on natural gas and not oil, but it can be made from other substances as well. We are in no way “dependent” on petroleum to make synthetic fertilizers. So please stop the globalist over-population scaremongering.

“Petrochemical, in the strictest sense, any of a large group of chemicals (as distinct from fuels) derived from petroleum and natural gas and used for a variety of commercial purposes. The definition, however, has been broadened to include the whole range of aliphatic, aromatic, and naphthenic organic chemicals, as well as carbon black and such inorganic materials as sulfur and ammonia. In many instances, a specific chemical included among the petrochemicals may also be obtained from other sources, such as coalcoke, or vegetable products. For example, materials such as benzene and naphthalene can be made from either petroleum or coal, while ethyl alcohol may be of petrochemical or vegetable origin. This makes it difficult to categorize a specific substance as, strictly speaking, petrochemical or nonpetrochemical.

https://www.britannica.com/science/petrochemical

 

The biggest threat to humanity and life on the planet right now is not running out of oil but our greed for it. Witness the threat of nuclear war with Russia over Iranian oil.

In 2011 the US (including Alaska) had about 26.5 billion barrels of “proven” oil reserves, which at the US rate of consumption would last about 8 years. Hence, the US and the UK control Saudi Arabia which has 268 billion barrels. However, the US and the UK establishments are not interested in conservation for their own survivals, or they would not be exporting such oil to other foreign nations through OPEC. These moguls are simply interested in money and power and controlling the market for that end. Iran like Iraq is next on their hit list. Iran has about 150 billion proven barrels and Iraq, already a victim, has about 140 billion. The US-led Western axis has mainly used Saudi oil over the past 10 years in an attempt to bankrupt Russia, with SA producing oil at less than $50 a barrel so Russia could not compete. Russia stands 8th in the world with about 80 billion barrels. If Putin had not nationalized Russian oil from the Western banksters and oil giants there would have been no such trade war or even the harsh sanctions.

If oil was so limited and so critical to our survival, then surely we would not be so wasteful with it and we would not be exporting so much to other nations which we already control. In addition to Saudi Arabia, my own nation, Canada, is very much a puppet nation controlled by American-based economic interests. Canada has the second greatest oil reserves in the world, and if the US or the West really thought that oil was essential for continued human survival, they would not be building pipelines in Canada to the Pacific Coast to ship the stuff the China.

The next major war will likely be over Iranian oil or over Venezuelan oil, or both. Like in Syria which was a war mainly over pipelines and Zio expansionism, what is most threatening to real human beings is not some future end of oil but the crimes we in the West in our greed allow our governments to commit to get it.

In reply to by Toxicosis

Northern Flicker FBaggins Sat, 06/02/2018 - 16:35 Permalink

Another Canadian who would agree with you. Anyway, world population growth is already decreasing, except in Africa... small parts of Asia. Also don't forget coal and especially thorium  http://www.thoriumpowercanada.com/. Even solar might do something and abiotic oil.  Nobody really knows how much oil is still available in Russia and now new discoveries in the Mediterranean, etc.  Peak oil is still long way off yet. PS - my power bill in NS was higher in May than March - I'd really appreciate a little Global Warming.  

 

 

In reply to by FBaggins

Faeriedust FBaggins Sat, 06/02/2018 - 19:24 Permalink

Well, you're right about one thing: we don't use oil-based fertilizers.  Fertilizers are made from natural gas, which is of course co-produced by many oil wells and fields.  The Haber Process uses natural gas as both fuel and feedstock to produce ammonia from atmospheric nitrogen, thus fertilizer.  It also allows us to produce virtually unlimited supplies of chemical munitions such as TNT (N stands for Nitrogen). Prior to the use of natural gas via the Haber Process, all gunpowder and other nitrogenated explosives as well as fertilizer had to be based on organic sources such as guano.

Natural gas, of course, is produced by the same companies from the same fields with most of the same tools as they use to produce oil.

In reply to by FBaggins

Toxicosis Meyer Blinder Fri, 06/01/2018 - 20:03 Permalink

So if over 99% of poultry, essentially factory farmed chickens and turkeys all died of an infectious agent, would the price of their byproducts not go up if people still demanded them?  The amount of resources matter, money is a figment of our imagination.  Resources are what we as humans consume. 

Thus "Oil is going up because the physics of oil extraction is reaching limits and the demand for it's products is reckless and deemed to be infinite."  The reality is different, whether you like it or not. 

In reply to by Meyer Blinder

Ignorance is bliss Toxicosis Sat, 06/02/2018 - 08:44 Permalink

What happens when gasoline is limited  or becomes prohibitively expensive? The economy enters a depression. In a depression people lose their jobs and their ability to consume declines significantly. Portfolios of stocks, bonds, real estate decline, and energy demand declines too.  Energy prices decline as a result. In such a scenario we would be in the mother of all depressions. Think it can't happen? Its happening now. Go read the news on Brazil and Mexico.

In reply to by Toxicosis

Toxicosis Ignorance is bliss Sat, 06/02/2018 - 11:27 Permalink

In a depression people still need to eat, and products do become scarce if unavailable.  And no amount of fiat money, or gold or silver can conjure up something that doesn't exist.  There would still be oil in the ground but who's gonna pump it.  If people are not being paid by a major corporation who owns the rights on the oil and gas fields nothing happens.  And when the chickens and hogs are not fed in Brazil or they die on the highway does it mean that demand for those products disappeared?  I don't care about stocks or portfolios but I do care to eat.  Products can still move around without money but there has to be incentive.

In the depression that is coming the ability to grow food will plummet for the majority as they depend on the trucks getting to the grocery store and the system of oil and gas to get everything there.  Price eventually doesn't matter if the product doesn't exist or is brutally unavailable as people will desperately look for alternatives.  However, there is not an alternative to hydrocarbons and the energy bonanza they have provided for us.

In reply to by Ignorance is bliss

Faeriedust Toxicosis Sat, 06/02/2018 - 19:27 Permalink

Well, there are alternatives, but we haven't invested in developing them.  And now it's really too late.  We could use up the last of our oil building alternative energy schemes while people went hungry . . . or we can use up the last of the oil feeding people, and then when we run out of oil they'll go hungry.  But you know and I know which will happen.

In reply to by Toxicosis

paulbain Meyer Blinder Fri, 06/01/2018 - 21:09 Permalink

===================

 

 

"Oil is going up because there is not a currency in the world backed by anything!"

 

Yes, Meyer Blinder, this is probably the best, and briefest, comment in this thread-of-discussion.  We know that all of the world's central bankers are printing money as fast as they can, and we all (on ZH, at least) know that, ultimately, that means hyper-inflation, sooner or later.

 

 

=======================

 

In reply to by Meyer Blinder

itstippy directaction Fri, 06/01/2018 - 19:05 Permalink

The ability to make petroleum products from coal has global warming worriers very concerned.  Scientists have improved upon the process Nazi Germany used, making it considerably cheaper than it was.  South Africa is using the process on a commercial scale.  It works.  The World's coal reserves are vast.  Here's an article from 2009:

https://www.wired.com/2009/03/coaltoliquids/

 

In reply to by directaction

peippe itstippy Fri, 06/01/2018 - 19:20 Permalink

yes of course.

why do we have people idling in fast food drive thru lanes waiting for others to cook their food?

surplus energy, yesterday, today & for the rest of our lives.................

gasoline prices are manipulated & we should never have let the politicians pay for anything but 

roads & maintenance from the taxation thereof. 

But we didn't so we suffer.

In reply to by itstippy

directaction lakabarra Fri, 06/01/2018 - 21:22 Permalink

Many elements are merging together right now. Here are a few: 

* The production of unconventional liquid energy has peaked. It has been a flash-in-the-pan era that will soon be entering terminal decline and drawing to a close.

* Oil consumption in traditional oil exporting nations is inexorably increasing thereby reducing the number of barrels available for export. We see this in all oil exporting nations.

* Increasingly fierce competition for these ever-declining exportable barrels od conventional oil is already causing prices to rise.

* Conventional oil production cannot increase to bridge the growing gap between world demand and oil producer's consumption.

* Demand for oil in China, India and throughout Asia is increasing. 

* In Asia there is no longer a single oil exporting nation.

The date is an educated guess based solely on my interpretation of this data and the geopolitical and economic risks potentially impacting it. Any one of these risk elements could cause a severe and terminal breakdown in the increasingly fragile world energy scenario. I give it 3.5 years and then it all crashes down. I hope I'm wrong.   

 

In reply to by lakabarra

Singelguy directaction Fri, 06/01/2018 - 20:11 Permalink

More doom porn. It never ceases to amaze me a) how lnear most people think. It is always “based on the current trajectory...” They do not stop to think that there might be some disruption along the way, and b) how people forget how creative and ingenious human beings are. Following basic economics, as oil becomes more expensive, other forms of energy become more economically viable and/or research and development efforts kick into a higher gear and the problem will be solved. Don’t be so quick to write off mankind. 

In reply to by directaction

shortonoil ShorTed Fri, 06/01/2018 - 21:45 Permalink

Art is wrong about prices going up because of declining reserves. The price will go down. Its an energy function, not a volumetric one: http://www.thehillsgroup.org/

 

The emerging markets are primarily oil importers. Nations like India, who import 80% of their oil, are seeing higher oil prices increasing their current account deficits, which drives down their currency, which is driving foreign bond holders to liquidate and move their decaying money out of the country. High oil prices are creating huge capital flows from the emerging markets to the developed economies. Almost all of the increased demand for oil has come from the emerging markets over the last two decades. Large amounts of fleeing capital is putting an end to that. Demand for oil will fall faster than production will fall. The price will go down.

In reply to by ShorTed