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What Happened to My 13 Billion Barrels?

May 22, 2014 in EIA, EV News, Oil

By Richard Heinberg, Post Carbon Institute

Richard Heinberg Photo courtesy of Post Carbon Institute

Richard Heinberg
Photo courtesy of Post Carbon Institute

In 2011, the Energy Information Administration (EIA) of the US Department of Energy commissioned INTEK Inc., a Virginia-based consulting firm, to estimate how much oil might be recoverable from California’s vast Monterey Shale formation. Production of tight oil was soaring in North Dakota and Texas, and small, risk-friendly drilling companies were making salivating noises (within earshot of potential investors) about the potential for an even bigger bonanza in the Golden State.

INTEK obliged with a somewhat opaque report (apparently based on oil company investor presentations) suggesting that the Monterey might yield 15.4 billion barrels—64 percent of the total estimated tight oil reserves of the lower 48 states. The EIA published this number as its own, and the University of Southern California then went on to use the 15.4 billion barrel figure as the basis for an economic study, claiming that California could look forward to 2.8 million additional jobs by 2020 and $24.6 billion per year in additional tax revenues if the Monterey reserves were “developed” (i.e., liquidated as quickly as possible).

Image courtesy of Post Carbon Institute

Image courtesy of Post Carbon Institute

We at Post Carbon Institute took a skeptical view of both the EIA/INTEK and USC reports. In 2013, PCI Fellow David Hughes produced an in-depth study (and a report co-published by PCI and Physicians Scientists & Engineers for Healthy Energy) that examined the geology of the Monterey Shale and the status of current oil production projects there. Hughes found that the Monterey differs in several key respects from tight oil deposits in North Dakota and Texas, and that currently producing hydrofractured wells in the formation show much lower productivity than assumed in the EIA/INTEK report. Hughes concluded that “Californians would be well advised to avoid thinking of the Monterey Shale as a panacea for the State’s economic and energy concerns.”

On May 21 the Los Angeles Times reported that “Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California’s vast Monterey Shale deposits, deflating its potential as a national ‘black gold mine’ of petroleum.” The EIA had already downgraded its technically recoverable reserves estimate for the Monterey from 15.4 to 13.7 billion barrels; now it was reducing the number to a paltry 0.6 billion barrels.

What happened to all those billions of barrels of oil? Of course, the resource is still there. The Los Angeles Times article quotes Tupper Hull, spokesman for the Western States Petroleum Association, as responding, “We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt. . . . As the technologies change, the production rates could also change dramatically.”

However, technology comes with costs. The current tight oil boom in North Dakota and Texas would not have happened absent the context of historically high oil prices. But even with oil at $100 per barrel, the EIA now thinks only a very small portion of the Monterey formation’s oil resources can be produced profitably. Maybe with oil at $150 or $200 per barrel that percentage would change. But how high an oil price can the American economy bear before it falls into recession? Evidence suggests that $100 per barrel oil is already acting as a brake on economic expansion.

The new EIA estimate is a welcome note of realism in a California energy discussion that had veered into hyperbole and wishful thinking. Can we now begin a reasoned discussion about our energy future? It’s late in the game, but better late than never.

This article is a repost, credit: Post Carbon Institute.

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Gov’t Slashes Calif. Oil Estimate

May 21, 2014 in EIA, EV News, Oil

U.S. Department of Energy Agency Reduces Monterey Tight Oil Estimate by Over 95%

Oakland, California (May 20, 2014) In an article released this evening, the Los Angeles Times reports that the U.S. Energy Information Administration (EIA) has drastically reduced its estimate of recoverable oil in California’s Monterey shale formation from 13.7 billion barrels to just 0.6 billion barrelsa reduction of over 95%.

The downgrade has major implications for California’s energy and economic future, as well as the debate over hydraulic fracturing (“fracking”) and other forms of well stimulation-enabled oil development. The perception of an impending oil boom has dominated energy policy discussions in California since the release of a 2011 report by the EIA which had estimated up to 15.4 billion barrels of recoverable tight oil64% of the nation’s totalin the state’s Monterey shale formation. The estimate was widely cited by drilling proponents, and economic forecasts based on it projected millions of new jobs and billions in new tax revenue.

Image courtesy of Post Carbon Institute

Image courtesy of Post Carbon Institute

“The oil had always been a statistical fantasy,” said geoscientist J. David Hughes, author of Drilling California: A Reality Check on the Monterey Shale, an influential report critical of the EIA’s original Monterey estimates. “Left out of all the hoopla was the fact that the EIA’s estimate was little more than a back-of-the-envelope calculation.”

Hughes’s report, published by PSE Healthy Energy and Post Carbon Institute in December 2013, was the first public analysis of actual oil production data from the Monterey Shale and the formation’s geological characteristics. The report found that all data suggested that the EIA estimates were wildly over-optimistic. INTEK, Inc., the source of the EIA’s original estimate, has since admitted that its Monterey figures were derived from technical reports and presentations from oil companies rather than hard data.

“We’re pleased that the EIA has corrected what was a groundless and highly misleading over-estimation of the potential of the Monterey,” said Asher Miller, Executive Director of Post Carbon Institute. “We hope that everyonefrom the EIA to policymakers and the mediawill learn a cautionary lesson from what transpired here in California as we wrestle with questions about what the future of American energy policy can and should be.”

“Now that Californians have a more accurate idea of what promise the Monterey Shale does and does not hold,” added Dr. Seth B. Shonkoff, Executive Director of Physicians, Scientists and Engineers for Health Energy, “we must carefully weigh the benefits against the costs associated with fracking and other forms of well stimulation-enabled oil and gas development.”

ABOUT J. DAVID HUGHES
J. David Hughes is a geoscientist who has studied the energy resources of Canada and North America for nearly four decades, including 32 years with the Geological Survey of Canada as a scientist and research manager. Over the past decade, Mr. Hughes has researched, published and lectured widely on global energy and sustainability issues in North America and internationally. He is a Fellow of the Post Carbon Institute and a board member of Physicians, Scientists & Engineers for Healthy Energy.

ABOUT PSE HEALTHY ENERGY
Physicians, Scientists & Engineers for Healthy Energy provides a multi-disciplinary approach to identifying reasonable, healthy, and sustainable energy options for everyone. PSE Healthy Energy empowers citizens and policymakers by organizing and supplying objective, evidence-based information.

ABOUT POST CARBON INSTITUTE
Post Carbon Institute provides individuals, communities, businesses, and governments with the resources needed to understand and respond to the interrelated economic, energy, and environmental crises that define the 21st century. PCI envisions a world of resilient communities and re-localized economies that thrive within ecological bounds.

This article is a repost (5-20-14), credit: Post Carbon Institute.

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The Peak Oil Crisis: The Middle East in Context

September 5, 2013 in EV News, Oil, Politics

MENA  Map courtesy of US EIA

MENA
Map courtesy of US EIA

By Tom Whipple

Post Carbon Institute

While awaiting further developments in the Syrian poison gas crisis, it is a good time to review the general deterioration going on across the Middle East and the outlook for oil production from the region.

Hardly a month goes by without some new Middle Eastern crisis arising with implications for the region’s oil exports. Last week we had the Syrian poison gas; a few weeks before, the Egyptian coup; and for September it is starting to look as if the cessation of Libya’s oil exports will be in the fore. Then we have the ongoing Sunni-Shiite terror bombing war in Iraq which is taking about 800 lives a month; the insurrection in Yemen which periodically halts oil exports; Al Qaeda in the Algerian desert which is slowing foreign investment; and Lebanon on the verge of yet another civil war.

This does not even get to the big issues such as how long the hereditary rulers in the Gulf can hold on in the face of uprisings across the region or Iran’s quest for nuclear weapons. Just the run-up to this seemingly endless crisis has already taken a million or two barrels of oil off the world markets.

Moving beyond all these geopolitical disputes, which in the long run may turn out to be of only minor significance, we have some real issues: excessive population growth, climate change, food and water growing short, and medieval cultural practices that are out of tune with what takes place in most contemporary cultures.

Take Egypt as a prime example. Here we have a civilization that has survived for thousands of years. Their underlying problem today, however, is that there are now about 84 million Egyptians, up from the 2 million or less that got along so well for all those millennia. The Nile simply can’t support a population of this size and the country is already dependent on imported food while continuing to grow at a breakneck pace. This was OK for a while, except that Egypt can no longer afford to pay for their imported wheat, or their oil for that matter, and are dependent on the richer Gulf Arabs for handouts.

Now Egypt is no longer an oil exporter as 84 million people are more than enough to consume the 700,000 b/d the country produces. As the country no longer has much income, except for Suez Canal tolls, Egyptians are becoming dependent on the rich Gulf Arab states to keep the lights on and the tractors harvesting.

Over the weekend, somebody took a shot at sinking a container ship in the Suez Canal. This attack did not work, but 1500 ships go through the canal each month so there will be plenty more opportunities to block the canal, stopping canal revenues, and seriously disrupting the flow of 400 tankers through the canal each month.

Egypt’s water crisis has not attracted much attention, but Ethiopia is hard at work building a giant dam to harness the Blue Nile which supplies about 60 percent of the Egyptian Nile’s water. Although the Ethiopians deny that Egypt will have any problems, it is obvious that a lot less water is going to be coming down the river should the dam get built. Another reason for yet another crisis in the Middle East.

The region’s cultural problems may turn out to be worst of all especially if Sunni-Shiite hostility spreads. When Egypt’s Muslim Brotherhood was voted into office following the Arab Spring uprising, instead of making the country’s manifold and life-threatening economic problems a top priority, they launched an effort to turn Egypt into a fundamentalist Islamic state complete with a new constitution that would ensure Islamic rule in perpetuity.

This of course, led to the events of the last two months in which the crowds took to the streets, the Army moved in, the Brotherhood’s leaders were tossed into jail, and we are off on another round of military dictatorships or perhaps chaos that will close the canal or set off a mass migration of millions of Egyptians across the Middle East looking for food.

Other countries in the region are facing problems similar to those of Egypt, though perhaps not as dramatic. All are facing global warming, which in mostly desert nations can mean some very uncomfortable temperatures and increasing demands for energy to keep cool and treat water. The oil resources in many countries are starting to run thin or are being kept at home to meet the needs of increasing populations. Cultural patterns ranging from the status of women to endemic intolerance of other religions or even other flavors of Islam are leading to conflicts that seem mindless to much of the world.

Few of the Middle East’s manifold problems are so dramatic that they warrant much media attention, but taken together they are slowly taking a toll on the world’s oil supply. Last week the US’s Energy Information Administration reported that unplanned production and export outages, mostly in the Middle East, are now up to 2.8 million b/d and this was before the recent Libyan crisis took another 500,000 b/d off the market. Despite all the hype about America’s shale oil production, it still amounts to well less than half the unplanned drop in Middle Eastern production.

The International Energy Agency reported that production shortfalls this summer resulted in the world consuming about 2.2 million b/d more than it produced with the remainder coming from inventories. These are now thought to be down about 95 million barrels from recent levels.

World oil prices are now about $115 a barrel. Some of this is due to concerns about what will happen if we start bombing Syria, but the rest is due to slowly tightening supply/demand situation around the world. The Chinese are still growing their demand at prodigious rates and the world is still adding about 70 million new “oil consumers” to its population each year. Anyone who thinks that a short-lived burst of shale oil fracking in North Dakota and Texas is enough to counter the tides of history flowing across the Middle East simply does not understand the situation.

This article is a repost, credit: Tom Whipple, Post Carbon Institute, http://www.postcarbon.org/.

Tesla, Federal Reserve, Hyperloop and Oil

August 15, 2013 in Electric Vehicles, EV News, Hyperloop, Oil, Tesla

The US stock market took a dive due to interest rate concerns.  The Dow closed down 225 points as interest rates rose; the 10 year Treasury yield is now 2.77%.  Digesting interest rate concerns will be a tough slog for the stock market moving forward.

Hyperloop design Image courtesy of Tesla

Hyperloop design
Image courtesy of Tesla

Tesla stock (TSLA) eked out a gain despite the slump on Wall Street.  TSLA closed at $139.67, up .22% on the day.  With rail projects being considered across the country, the Hyperloop must have caught the attention of many state and city transportation professionals.  It would not be that surprising to hear of interest to trial the technology outside of California.  After all, the Hyperloop could prove to be an enormous economic boost for states and cities willing to construct it.  California should consider itself lucky that Mr. Musk would even consider the LA – SF Hyperloop.

The oil market rose again today due to continued unrest in the Middle East.  News reports and photos from Egypt were disturbing with many dead from various clashes.  Bloomberg reported: “At least 525 people died, including police, and more than 3,700 were injured in yesterday’s violence, according to official tallies.  The Muslim Brotherhood, which backs Mursi and led the protests, said the death toll was many times higher.”  Brent oil has now climbed over $111 per barrel.

China is expected to be the largest net oil importer at the end of this year, according to the US Energy Information Administration, which necessitates that China have a strong currency to pay for the oil.  Certainly, China is not going to rely on the US Dollar forever.  When the Yuan freely floats on international currency exchanges, economic power will tilt to Asia.  China did sell US Treasuries in June.  Bloomberg reported: “China’s stake dropped by $21.5 billion in June, or 1.7 percent, to $1.276 trillion, according to Treasury Department data released yesterday.”

Imagine a Model S tour through Europe via Supercharger!

August 6, 2013 in Electric Vehicles, EV News, Model S, Tesla

Model S Europe  Image courtesy of Tesla

Model S Europe
Image courtesy of Tesla

TSLA is one impressive stock.  It closed (8-5-13) at $144.68 per share, up 4.84%, making another record close!  If Tesla did a secondary offering at these levels, the company could greatly accelerate its growth plans.  For starters, Tesla stations across Europe.  Imagine a Model S tour through Europe via Supercharger!

TSLA has been having a party on the NASDAQ.  However, the Fed is back with warnings that it is going to take away the punch bowl, which has many worried about the bear coming out of hibernation. 

The Federal Reserve made business headlines again about its plans to taper its purchases of treasury securities.  Interest rates moved up a bit on the news; the 10 yr. Treasury yield is now 2.65%.  Overall, the market reaction to the Fed was rather muted, which is not that surprising since the stock market has had an extended upward bias.  At times, the stock market seems more like a ship slowly turning its sentiment / course.

Everybody knows that the Fed has to stop its purchases, but the world is not fully readied for the change. 

The oil market appears to be waiting for the Energy Information Administration’s report on inventories for any new direction.  The report comes Wednesday.  WTI oil is trading around $106 – $107 per barrel.  Bloomberg reported (8-6-13): “West Texas Intermediate swung between gains and losses after declining for two days before government data that may show crude and fuel stockpiles shrank in the U.S., the world’s biggest oil consumer.”

About EV News Report

EV News Report is a news and information service on electric vehicle news with a focus on the campaigns, events and star leaders shaping the EV revolution.

Electric vehicles are driving the change to a clean green sustainable future for the United States and the world. Tesla CEO Elon Musk and other EV stars have launched a revolution. At EV News Report, you will see daily updates on the new electric era, including Tesla news, LEAF news, and all the leading players in the electric transportation movement.

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Triple Digit Oil Helps Electric Car Sales

July 16, 2013 in EIA, EV News, Oil

Courtesy of EIA

Courtesy of EIA

The EIA graph above clearly illustrates that the future price of a barrel of oil is highly uncertain.  City, state and federal governments need to make a greater effort to educate the public about the long-term benefits of electric transportation. 

The Energy Information Administration (EIA) weekly oil inventory report will be under scrutiny tomorrow morning since the two previous reports showed strong draws.  WTI oil is trading near $106 per barrel, and Brent is over $109.  The API oil inventory report today was slightly bearish for oil prices, but it is the EIA data tomorrow that is more closely watched.  Overall, triple digit headlines should help electric car sales.

Despite the hype about shale oil fields, peak oil is a geologic reality that is here to stay.  The price of a barrel of oil tells us that change is needed.     

AAA states that the national regular gasoline average is $3.64 per gallon, so we are nearing the magic $4 barrier, which has caused demand destruction in the past.  Hopefully, Americans will start ditching the pump for the charger in increasing numbers since there are a number of electric car models on the market today.

Many financial strategists believe that market forces will drive the masses to abandon the pump as gasoline prices rise with time.  Unfortunately, it may not be a smooth transition to the new electric era.  As 2008 showed, the oil market can play havoc on the global economy, and it often starts to show at the fringes where the link is weakest.  India is an example of a country which is struggling with a high oil import bill, a weak currency and rising inflation.

The Middle East is an oil supply wild card, as always.  Egypt is not a big oil producer, but its instability could destabilize other countries in the Middle East North Africa (MENA) region.  Reuters reported: “The United States has avoided calling Mursi’s overthrow a “coup,” because that would require it to halt aid.  Never comfortable with the rise of Mursi’s Brotherhood, Washington nevertheless defended his legitimacy, a position that has attracted outrage from both sides in Egypt.  The crisis in a country straddling the strategic Suez Canal and which has a peace treaty with Israel has alarmed the international community.”

Courtesy of EIA

Courtesy of EIA

About EV News Report

EV News Report is a news and information service on electric car news with a focus on the campaigns, events and star leaders shaping the electric car revolution.

Electric vehicles are driving the change to a clean green sustainable future for the United States and the world. Tesla CEO Elon Musk and other EV stars have launched a revolution. At EV News Report, you will see daily updates on the happenings of the industry, including Tesla news, LEAF news, and all the leading EV industry players.

Plug-in to the electric car revolution by creating a free account with EV News Report and join the forums to discuss your ideas with other EV enthusiasts. We’re just getting the electric motor started. Let’s change the world…

Middle East Instability, Electric Car Stability

July 3, 2013 in EIA, EV News, Oil, Politics

Courtesy of DOE

Photo courtesy of DOE

The price of WTI oil is trading above $101 per barrel, due mainly to the political turmoil in Egypt.  Oil markets always get edgy with signs of instability in the Middle East.  Syria had markets on edge, and the situation in Egypt added a bit of panic, sending the price above $100.  Bloomberg reported: “Egypt’s army ousted Mursi, the country’s first democratically elected civilian leader, saying it sought stability.  The televised announcement yesterday by Defense Minister Abdelfatah al-Seesi drew cheers from the hundreds of thousands gathered in Cairo’s Tahrir Square and across the country the past four days.”

In the United States, the Energy Information Administration (EIA) reported that total commercial petroleum inventories dropped 14.7 million barrels in its latest weekly inventory report.  This drop was enormous, and it is cause for concern.  In general, US oil inventories are in good shape, but this report certainly added pressure to the rising oil market.

The US shale oil fields continue to be a big question mark.  Is this an oil boom?  Bloomberg reported: “U.S. oil output climbed 6,000 barrels a day to 7.27 million last week, EIA data show.  Production reached 7.37 million barrels a day in the week ended May 3, the most since 1992.”  Considering all the shale oil hype, these numbers from the EIA on shale oil supply are not impressive.

There are certainly other options beside oil/gasoline.  Electric car stations across America are far more impressive than a field of nodding donkeys.  As a consumer, you decide.  You can always buy an electric car.  If you buy a home solar system as well, you can power that electric car with sunshine.  Happy Fourth of July!  Happy electric America and world!

About EV News Report

EV News Report is a news and information service on electric car news with a focus on the campaigns, events and star leaders shaping the electric car revolution.

Electric vehicles are driving the change to a clean green sustainable future for the United States and the world. Tesla CEO Elon Musk and other EV stars have launched a revolution. At EV News Report, you will see daily updates on the happenings of the industry, including Tesla news, LEAF news, and all the leading EV industry players.

Plug-in to the electric car revolution by creating a free account with EV News Report and join the forums to discuss your ideas with other EV enthusiasts. We’re just getting the electric motor started. Let’s change the world…