Bring Out Yer Dead

Bloomberg claims, Here’s One Sign That ‘Peak Oil’ Is Dead

Peak Oil: gone and forgotten? Google Inc. searches for the idea that once helped propel oil prices to nearly $150 per barrel have dwindled to almost nothing, according to a Sanford C. Bernstein analysis.

Bloomberg’s Tracy Alloway asserts that a dearth of google searches proves that no one – except maybe Bloomberg – cares about Peak Oil anymore. But another way of looking at it is that Peak Oil already happened, and we’ve all moved on. The peak in production of conventional oil reached a plateau in 2005. Prices increased rapidly, but instead of the Mad Max scenarios predicted by energy depletion gurus, civilization instead endured a Great Recession, reduced its demand for oil, and stumbled on, albeit with great pain and suffering for many. Meanwhile, energy companies continued their shift to alternate methods of extraction.

In places like Athabasca, Canada, companies mine bitumen from sandstone deposits, called tar sands, and use natural gas to heat and process it into a high quality synthetic petroleum. The environmental cost, though, is comparable to removing mountaintops to mine coal. The risks of transporting Dilbit led to the Keystone Pipeline controversy, and other dirty byproducts, such as Pet Coke, are sold as fuel to countries with less stringent environmental regulations.

In America and other countries, companies use hydraulic fracturing to extract so-called “Tight Oil”, or “Shale Oil” from shale or sandstone deposits. Fracturing, though, pollutes enormous quantities of water, seems to cause earthquakes, and has been banned in some areas.

America also extracts kerogen from what is called “Oil Shale” – a mix of sedimentary rock and organic matter – and converts it to synthetic crude and various dirty, lower-grade fuels.

These extraction methods were and are, however, expensive, and only made economic sense when oil was also expensive. Energy companies accumulated a great deal of debt using these techniques, only to find that the bottom had dropped out of the market. Moody’s Investor Services described US Oil bankrupties as “catastrophic”:

Oil Bankruptcies Leave Lenders With ‘Catastrophic’ Recovery Rate

Creditors are recovering an average 21 percent of what they lent, compared with about 59 percent in past decades, the credit-rating agency said Monday in a report that looks into lending to 15 exploration and production companies that filed for bankruptcy protection in 2015. … High-yield bonds recovered a mere 6 percent, compared to 30 percent in previous years going back to 1987.

Defaults in the oil and natural gas industry have been rising through a market slump that has exceeded two years as companies lacked the cash to make interest payments on their debt. Bankruptcies among U.S. producers so far this year are about twice the number among companies rated by Moody’s in all of 2015, the report said. The oil and gas figures have helped propel U.S. corporate defaults to the highest since 2009.

Less than half of the companies that negotiated distressed-debt exchanges in 2015 to try to stave off bankruptcy succeeded …

If Peak Oil is dead, why is the Oil Industry now coughing up blood?

Update 20160922: Robert Rapier has a post claiming that conventional oil did begin a decade long production plateau in 2005, but that there was a slight increase from that plateau in December of 2014.

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