A finite resource supplying a deep market tends to have a production history that is symmetrical around a peak. This is exemplified by the UK’s history of coal and oil production:
The rate of production tends to fall as fast as it rose. In 1956, Shell geologist King Hubbert used that relationship to predict that US onshore oil production in the lower 48 states would peak in 1973, which it duly did. The mathematical process he used to achieve that is now termed ‘Hubbert linearisation’. Another factor to bear in mind is that the operating cost of extraction starts rising once half of a resource has been consumed.
World peak oil production was predicted to peak in 2005. The US was short of natural gas and a few LNG import terminals were built by 2005. Then the tight oil and shales gas booms started and the US supplied all the growth in world oil demand for the last 20 years. The LNG import terminals were repurposed to LNG export plants. US natural gas production of 40 TCF per annum has the energy equivalent of 18 million barrels per day of oil and so has an energy content 38% higher than current US oil production of 13 million barrels per day.
Applying Hubbert linearisation to US oil and gas production has enabled the following forecasts to be made:
Traditionally the natural gas price in the US followed the No. 2 fuel oil price and so tracked the oil price. The oversupply from shale gas had driven the price down to US$2.86 per thousand cubic feet currently. This is the energy equivalent of oil at US$17 per barrel. Cheap and abundant natural gas has been a boon to US industry, displacing coal in power generation and being the glue that holds the power grid together in the face of fluctuating wind and solar power generation.
The US continues to consume about 20 million barrels of oil per day which is 20% of world production. US oil production was down to five million barrels per day in 2007. Tight oil production from the US has provided all the growth in world oil supply since then at an average annual increase of 430,000 barrels of oil per day. From the production peak this year the annual average decline in US production will be 870,000 barrels per day until 2040.
Adding the natural gas production profile to the oil production outlook shows the totality of the energy decline facing the US. It amounts to 1.7 million barrels per annum for 15 years to 2040. Luckily the US has plenty of coal which can be applied to making liquid fuels via the Bergius process.
The decline in US oil and gas supply will coincide with a decline in Chinese coal production. In 2023, China produced 4,400 million tonnes of coal and imported a further 437 million tonnes. This is a daily consumption rate of 53 million barrels per day in energy equivalent terms. They wouldn’t have imported any coal at all if they could have produced it themselves, suggesting that peak coal for China is now in the rear vision mirror. In fact coal production in China appears to have performed exactly as predicted by these Chinese academics:
China is now facing a coal production decline of 75 million tonnes per annum for at least 50 years, equating to 0.8 million barrels of oil per annum in energy equivalent terms.
Now past peak production, the cost of mining coal in China will rise inexorably. So will the cost of everything produced using energy from that coal including solar panels and wind turbines. Production of polysilicon in China, used for making solar panels, has already moved to the province of Xinjiang in far western China because that is where the cheapest coal is.
The oil and gas from shale boom gave the US another 20 years to get its house in order to prepare for the tight energy market to come. Instead of doing that the party continued and we are now on the edge of the energy abyss. Nigh on 70 years ago Hubbert realised the need for humanity to leave oil before oil left us:
In a 10,000 year slice of human history, the fossil fuels are with us for only a brief moment. It is now going to be painful to do the requisite nuclear fleet buildout while our energy supply is contracting.
Support for this view comes from an unlikely source given that he is a big proponent of global warming and the need to eschew fossil fuels. The average size of domestic propane tanks in the US is 500 gallons. Former President Obama has increased the propane tankage on his Martha’s Vinyard property to 2,500 gallons. No doubt he is well informed and would rather be comfortable than virtuous.
David Archibald is the author of The Anticancer Garden in Australia.
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