IEA: Shale Boom is Only Temporary, We’ll Soon be Relying on the Middle East Again

Yves here. We’ve written repeatedly about how short-lived shale gas wells are compared to conventional oil wells. The fact that the much-touted shale gas play will in aggregate abate relatively quickly is not something its proponents want the greater public to hear. And for this short-term expedient, we are destroying potable water supplies, which are a much scarcer resource than fossil fuels.

By Joao Peixe, a writer for OilPrice. Cross posted from OilPrice

Claims that the shale boom in the US will eventually see the country become energy self-sufficient seems to have received its biggest blow yet after the International Energy Agency, in its latest World Energy Outlook report, stated that shale oil will only be a temporary trend, and very soon the world will return to rely on the Middle East for its oil.

The World Energy Outlook admitted that shale had transformed the global oil industry, and that the light tight oil produced was helping to usher in a new abundance of oil. High oil prices will drive further exploration and production of tight oil “but, by the mid-2020s, non-OPEC production starts to fall back and countries from the Middle East provide most of the increase in global supply.”

Maria van der Hoeven, the executive director of the IEA, said that “there is a huge growth in light tight oil, that it will peak around 2020, and then it will plateau.

We expect the Middle East will come back and be a very important producer and exporter of oil, just because there are huge resources of low-cost light oil. Light tight oil is not low-cost oil.”

An earlier report released by the US Energy Department’s Energy Information Administration, also suggested that US tight oil production will be high until the end of the decade, and then quickly fall off.

The NY Times wrote that the energy outlook has attempted to make predictions about the energy industry up until 2035, expecting no new energy breakthroughs, although it believes that costs will continue to fall for renewable energy.

The report states that solar and wind power will peak and then see investment sharply drop off as it remains difficult to connect them to the grid due to the inability to predict or control the varying amounts of power that they produce.

Supposedly by 2035 renewable energy will account for 18% of global energy produced, up from 13% in 2011, and that the growth would be even higher if it were not for the fact that many households are replacing wood (considered a renewable source) stoves for cooking or heating in favour of fossil fuels such as natural gas.

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19 comments

  1. John Jones

    I guess the U.S and Europe are still gonna be involved in the middle east and central asia for some time still.

  2. jjmacjohnson

    Replacing wood stoves for cooking? Only in the cooperative farms or houses my family has lived in with no modern conveniences have i ever come across this. Especial in the United States. I am sure people have met one or two folks but i can not believe besides folks living in the woods that this is even a tiny percentage of americans.

    1. Fluffy

      The article she cited was discussing worldwide energy consumption, not U.S-only. Much of Africa and rural India & China still relied on wood fire for cooking and heat until quite recently. Their ongoing switch to “modern” fuels is what is accounted for in this prediction.

    2. anon y'mouse

      we had a combo woodstove/gas in our Calif. ghetto urban place that had quite obviously been built in the 1950’s, and used it up until the early 90’s. we used to burn newspapers in the winter to keep warm in it.

      another apt. that I was in had a stove that was part gas/ part wood from the 1920s, but we didn’t use that one (had little faith that the landlord kept the flues or chimneys clean, and didn’t want to burn the building down.)

      they exist, but since they’re not as luxurious as a wood fire (also had fireplaces in both rentals above) most people don’t bother using them, instead turning on the forced air gas or electric heaters.

  3. jfleni

    RE: Shale only for now.
    We won’t be relying on the ME IF we get the PUBLIC transportation system we need and that nearly everybody wants.

    A pox on hugely expensive “gas buggies” that depend on odious princelings and their harems

  4. washunate

    Agreed that shale gas is overrated, but I’d quibble a bit with US reliance on Middle East oil.

    The US actually gets a lot of its oil from outside the Middle East. And more fundamentally, less oil would be a good thing. There is way too much trucking and auto commuting in our country.

    It’s the national security state that is dependent upon meddling in the Axis of Evil. The living standards of average Americans is not reliant upon Middle East oil. Most Americans would be better off with more wind turbines and passenger rail and organic farming and less authoritarian workplaces and pollution and war.

  5. Eureka Springs

    I just paid 2.40 a gallon for propane. That’s an increase of .70 in a year! At least .50 above the highest I ever paid. Cooking on a wood stove at least eight months a year sounds real good to me right now.

  6. MarcoPolo

    Yves, shale gas or shale oil? You may have conflated the two. Shale gas is abundant. Shale oil, maybe not so much. Sr. Peixe is writing about oil.

    And the shorter production cycle from a shale gas well, as opposed to a conventional gas well, is a benefit to the industry as the well cost is returned sooner.

    1. Nathanael

      Absolute nonsense.

      Shale gas is where the wells run out after 5 years, and there isn’t that much of it. Shale gas wells are *uniformly unprofitable*. They are *so* unprofitable that the business model of the major shale gas companies is “lease, drill, frack, sell before anyone notices how little gas there is”. This is *explicitly* the business model of Cheseapeake Energy.

      Shale oil is actually profitable, although there’s not taht much of it.

  7. JGordon

    This is pretty disheartening. I’ve recently come to view shale gas fracking as an extemely positive thing, simply because the financials of it are driving so many nuclear plants out of business. Hopefully we’ll still get a number of them shuttered before the boom is over.

    1. OpenThePodBayDoorsHAL

      Have you checked out the financials behind fracking? It’s a Ponzi. Wall St moves in, offers to finance the upfront costs which are very high. They make projections on the cash flows, then package the debt and sell to the muppets. Then when the returns don’t materialize they’re long gone. It’s perfect: bankers get a(nother) private island, Mom and Pop landowners get water that’s flammable, and Wall St clients get the shaft. Go Team America!

      1. JGordon

        Of course. I’ve been reading about the ponzi nature of fracking for years on Automatic Earth and Testosterone Pit well before the issue ever crossed the radar of NC.

        That does not change the fact that’s it’s currently putting nuke plants out of business though, which is something that trumnps everything else as far as I’m concerned–nuke plants being the existential threat to all life on earth that they are.

        1. Nathanael

          We’ve actually hit the point where solar is capable of driving nukes out of business, in sunny regions. It’s even displacing coal.

  8. steve from virginia

    – IEA proposal is wishful thinking, the US and Brazil will not produce much more if any more oil-like substances than they are producing right now. Look up production data for yourself.

    – The non-OECD increase in consumption is largely due to the massive increase in autos in China and India. Both countries are funded w/ forex debt and wasteful lending in the US and EU. It is very easy to produce more cars, much harder to find oil fields, harder still to extract oil from these fields.

  9. Fiver

    I’ve argued for couple years now that the shale oil and ramped-up enhanced recovery of oil in older existing fields was predicated, as was the Canadian tar sands mega-development, on the minimal development/shutting in of most of Iraq’s, Libya’s and Iran’s potential production of high-quality, much cleaner crude, allowing the Saudis to provide the production leverage to keep prices high for them and the oil majors.

    The stupidity of fracking (or tar sands exploitation) on this scale aside, I very much doubt the industry doesn’t know the true state of play re potential real reserves and production rates. So we have to ask ourselves what calculus was used when comparing the benefits of a change in foreign policy that would’ve allowed for much greater non-Saudi production in the Gulf and Libya, bringing lower prices with assured supply of far cleaner oil, vs perhaps 10-15 years of rising, plateauing, then falling enhanced US oil production and production as a whole.

    We know that Iraq has plans for enormous expansion with US participation, though Saudi efforts, supported by the US, to maintain chaos within Iraq continue unabated. Iran, in turn, is being strangled. Clearly, this cannot work for the US unless Iraq and Iran are able to accelerate their long-standing, ambitious major development programs soon, as Canadian expansion of tar sands to make up just part of the difference involves igniting the world’s dirtiest carbon bomb – the same problem of course challenging any US effort to develop its own enormous tar sands potential.

    The Cheney “Task Force on Energy”, at least those portions made public, envisioned “securing” permanently the world’s great energy reserves (Iraq, Iran, Libya, Arctic Ocean) as well as developing maximum domestic production. Halliburton and other US oil & oil-related companies have made money hand over fist all along the way.

    Can it be that the enhanced techniques “boom” was an incredibly lucky fluke outcome of a policy debacle under Bush/Cheney, or was it an inherent part of the strategy for maximum profiteering all along? It certainly served Cheney, Bush et al for their 20 years “at the top”, but Obama appears no less enthusiastic re fracking and nowhere at all re carbon-free alternatives.

    Did Bush/Cheney believe their energy consultant Matthew Simmons’ “Peak Oil” thesis re Saudi Arabia, or was it all about pursuing the most profitable possible policy start to finish, no matter what went askew along the way?

    Consider how reckless US policy planning would appear absent that enhanced recovery potential coming on line precisely when it did, and how equally reckless for the US to burn every available drop of its own oil on the assumption that high quality oil will be “over there” when it’s needed.

    What will the American people have to say about fighting Gulf War III to again gain access to the oil they could’ve bought happily for a fraction of the cost had the US pursued its interests, not those of Israel, Saudi Arabia and the Bush/Cheney oil complex – right about the time burning any more fossil fuels at all will be palpably suicidal? Why bother with an Energy Department if this is the best they can come up with?

    1. peter de haan

      @Fiver

      Gulf War III will be played out independent from the US requiring access to its oil for domestic consumption.
      The name of the game is control, not access. Control of the region is the ultimate geopolitical and military trump card (for example, you will be able to deny access to your enemies during military conflicts and run their economies to a halt).

      The US took over from Great Britain straight after WWII (when the US was still awash with oil) and it has been so ever since. Btw, Hubbert’s peak oil theory was only presented in 1956.

      So the argument that if the US would be self-sufficient in its energy needs then it wouldn’t venture into middle eastern conflicts, I believe is flawed. The US has been in conflicts even when it was an oil exporting nation and it will continue to do so, no matter what.

      Now, unimpeded access for major oil companies is another motivating force, but that’s quite different from access in the context of securing it for domestic demand. As a side note, it is often claimed that oil profits could not have been a motivating force behind the Iraq war, because as a nation so much money was spent on it that it could never be recouped. I look at it differently, though. Cost is to the tax-payer, whilst the profits are for corporate america. A ‘convenient’ transfer of wealth, so to speak.

      1. Nathanael

        Saudi Arabia, however, is propped up entirely by oil demand. If the demand for oil drops due to (for example) widespread deployment of electric transportation and solar power, then Saudi Arabia’s government collapses.

        The natural regional hegemons have always been Turkey and Iran, who are currently on friendly terms, and the region would probably resume its natural political structure, absent the oil money…. well, there’s also US subsidization of the demented government of Israel to consider, I have no idea how long that lunacy will last.

  10. Lafayette

    Regardless of the provisions, humanity would do better to inevitably unhook itself completely from the carbon molecule as its major source of energy supply.

    And there is much work to be done to achieve that difficult objective. Because achieving the objective (of a pollution free atmosphere) will require not just radical changes in our energy supply but in the way we use energy. Meaning we will have to change some cherished life-style bad-habits.

    Shale gas/oil is simply procrastinating the inevitable, and adding to atmospheric pollution that your children are breathing in daily.

    Is that the future you want for them … ?

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