Oil

Shot by both sides
On the run to the outside of everything
Shot by both sides
They must have come to a secret understanding

Remember all those years ago when a new IEA (International Energy Agency) annual report was released and you'd spend hours pouring over it. Remember always repeatedly hitting yourself in the forehead because the IEA never concerned themselves with supply. They just talked about demand, supply it seemed would always magically be there. Remember thinking that sure was a funny way to run what was considered the premier global energy agency, founded by no less than Henry Kissinger in response to the first 70s oil shock.

So, it's more than amusing to stumble across this recent IEA report, The Implications of Oil and Gas Field Decline Rates, and find a clue of self-awareness as the first sentence, "Debate over the future of oil and natural gas tends to focus on the outlook for demand, with much less consideration given to how the supply picture could develop." Much less consideration, or, they should have added, in the case of most of IEA's history no consideration at all. Lord, that's rich, be hilarious if it hadn't helped bestow so much blood and tragedy over the last decades.

Anyway, the report has a few good facts:

"Nearly 90% of annual upstream oil and gas investment since 2019 has been dedicated to offsetting production declines rather than to meet demand growth."

"In 2000, conventional oil fields contributed 97% of total oil output globally, however, by 2024 this share had fallen to 77% as a result of rising output from unconventional fields. In the case of natural gas, around 70% of the 4 300 billion cubic metres (bcm) produced today is from conventional fields, with nearly all of the rest being shale gas produced in the United States."

Read "unconventional" as more expensive.

"If all capital investment in existing sources of oil and gas production were to cease immediately, global oil production would fall by 8% per year on average over the next decade, or around 5.5 million barrels per day (mb/d) each year. Natural gas production would fall by an average of 9%, or 270 bcm, each year."

8% a year would be a decline in total global supply of a third in just five years. It gets better.

"Most unconventional sources of oil and gas production generally exhibit much faster decline rates than conventional types. If all investment in tight oil and shale gas production were to stop immediately, production would decline by more than 35% within 12 months and by a further 15% in the year thereafter. Shale plays in the United States are also becoming “gassier,” raising overall decline rates as oil-rich fields mature.

So, that's saying if tomorrow they quit drilling new shale wells, in just two years total production would decline by 50%.

Most of what's in this report has been known for fifty years, all of it for at least 20. Now, we have IEA, the Tech boys, the stock market, more than a few politicians et al., telling us we need to double or triple electricity consumption in the coming years. Supply? Well, as the Valley is fond of doing, they just make things up. I'm not sure that's worse than ignoring, but it ain't any better.