Today’s soap box rant is different. Taking the high road today, no names. I’m going to talk about a senior political figure and not talk about hemorrhoids or Rasputin or political virtuosity. I’m going to talk about a geopolitical oil/energy/climate expert professor/CNN commentator from a prestigious US university, and I won’t argue about how many angels can dance on a pin’s head not will I speculate on what a theoretical building would turn out like if engineers, plumbers, and tradesmen were banned from construction participation.
No need to name them; what is important is that their views are perfectly in sync with common political energy intelligence. They are both prominent mainstream media players who rank extremely highly in North American energy policy dialogue, and both happened to drop some social media posts that speak volumes about why we are in such an energy disaster.
The line of thinking on display from both is highly relevant, like when driving through fog and two little red glows in the mist rapidly take shape as the back of a truck.
The commonality of their thinking, the part that aligns with consensus media view, can be summarized by recent unrelated social media posts. Both of these characters, let’s call them Exhibit A and Exhibit B, maintain an endless stream of commentary that disparages the oil/gas industry and calls for acceleration towards renewables.
One voiced strong support for Germany’s recent plan to accelerate their green energy transition to all-renewables by 2035 (made within days of the country announcing plans to build two new LNG import facilities; German energy policy forums are now home to some of the worst thinking the industrial world has ever seen), the other points out the need to advance wind/solar installations to solve the energy crisis.
Beyond those staples, both have found a new and common key message: a scornful demand that oil companies step up and produce a lot more oil and quickly. “Do the right thing,” one of them said. Exhibit A tweeted that Russia’s oil exports equal 4 percent of global oil production and that other producers could replace that capacity “without breaking much of a sweat.”
Presented as evidence were a number of charts showing the variability of US and Saudi oil production – US production is shown to have peaked at about 13 million b/d, falling briefly to about 10 million barrels per day before rebounding, with the accompanying message: “That’s [Russia’s lost 4 million b/d] about the US oil production range since 2018.” A similar chart is shown for Saudi Arabia.
Exhibit B follows a similar path in an online thread about how the oil industry should quit whining and just crank up production. That didn’t sit well; a petroleum industry member asks why the industry should after being vilified, belittled, and de-populated by social stigma. The petroleum person went on to ask, validly, why the industry would re-allocated capital to growth if in 2-3 years the industry would be punished again.
Exhibit B fired back snottily that Dutch companies didn’t “say that kind of shit” with respect to increasing production; they “just went out and did it.” In another tweet she lamented the stupidity of the oil industry, stuck in the past and looking backwards.
The message from both: Hydrocarbon industry, just shut up and raise production, we know it is easy and you just choose not to. We don’t want to hear from you, you have no future, and you are outdated dinosaurs that are still wrecking the planet. But due to an unforeseen war, we just need to use you for a few more years, and if you don’t ramp up production immediately well, that means you just don’t support the people of Ukraine.
Where this gets really interesting is in the frightening depths of ignorance underpinning the thought processes of both. The disconnect between the way the world really works and what is going on between their ears is truly disturbing.
Exhibit A’s thought – that because US production has fluctuated by 3-4 million b/d over the past few years, the US can add that much to current production at will – is just so bizarre and vacuous that there is nowhere to even go with it. Every knowledgeable industry observer points out that raising production levels substantially within six months or so is virtually impossible (logistics, material/personnel shortages, lack of transportation options, etc.), and within a year or two would still be incredibly challenging for an industry that has just pivoted to the low/no growth model that virtually everyone has been asking for (including most vocally the likes of Exhibit A and B).
Exhibit B’s reference to Dutch producers’ instantaneous production increase “in support of the current emergency” is even more outlandish, because the proof provided in support of this statement does not even say anything of the sort. The lazy academic just found a supportive-sounding headline (“Netherlands nearly doubles estimated Groningen gas output to secure supply”) without even reading the article, which stated that “The Dutch government expects to increase the amount of gas it allows to be produced” from the field, and, far more critically, that the Dutch ministry “does not currently expect to produce any more gas from Groningen from mid-2022.” You read that right: the field is to be shut down entirely by the middle of the year.
Furthermore, the Dutch government had announced that Groningen output would be higher in this current period back in November 2021. The meat of the story is that Groningen production will be allowed to increase for a few months before being shut entirely a few months thereafter. The academic idiot classified this as instantaneous action to increase production that US producers are too stupid and backward thinking to emulate.
This might sound like pedantic nitpicking, but it’s not. These high-profile/well-connected/government-friendly commentators have no clue what they are talking about with respect to hydrocarbon production. Zero. (What supports that assertion of ignorance? Well, how about the head of OPEC saying that the world has not invested enough to meet demand? He did say just that, and that was before the world lost Russia’s sizeable output.)
That underinvestment is a result of the global “divest fossil fuels” movement, underperformance of US shale companies, and the general well-orchestrated animosity generated against the hydrocarbon industry. That last function should not be underestimated. Many employees are fed up with being disrespected simply for working in a specific industry, particularly when that industry is the fuel source for the world. They are leaving in droves so that they can dine in restaurants in peace again, and not get in shouting matches with half-witted social contacts that have been brainwashed to bully fuel providers.
Production cannot be increased at will. It takes years. Many of us have been warning of a global shortfall for years, because of a collapse in upstream investment after the 2014 oil price crash. The Russian situation has simply brought the issue to a head much quicker than it otherwise would have.
Part of the problem is the legend of OPEC spare production. Many commentators spend a lot of time analyzing OPEC claims, challenging them, and coming up with their own numbers. But in reality, no one knows what it is. Bison Interests has done some great analysis of what OPEC spare capacity might be, and they are to be credited for challenging the numbers in the first place since everyone else just seems to take them at face value.
The Saudis have fluctuating rig counts just like every other jurisdiction, which implies they actually have to drill just like everyone else. It may be true that they can ramp up waterflood output, but Saudi Aramco is a very good operator, having stewarded fields for decades with incredible levels of understanding (the largest field, Ghawar, apparently has a trillion cell reservoir simulation model). It can be safely assumed that they are maximizing field production for the good of the field, and taking advantage of these prices however they can.
Over on this side of the world, there are other hurdles to increasing oil production. First, the industry has been kicked in the teeth for a few years now for chronic overproduction that cratered prices. The relentless drive to increase production – a perfectly predictable outcome given how management teams were incentivized – destroyed a lot of capital as prime drilling locations were brought online in low price environments, year after year. (Broadly speaking, those grow-at-all-costs incentive plans are disappearing, replaced with rewards for returning cash to shareholders. Incentives work.).
Even more significantly, no one likes to hear that they are ‘killing the planet’ very much either, particularly when children are parading through the streets bearing such messages. It gets tiresome. That attitude, combined with relentless commentary about how hydrocarbons will be ‘stranded assets’ very soon, begs the question: is it any wonder producers are reluctant to plow significant cash flow back into the ground to grow production? Only an idiot would expect that.
Speaking of which, some go even beyond that level of incompetence. Trudeau (ok, busted, using one name), in Europe to discuss the European energy crisis, had a golden opportunity to show support right where it is being demanded -the world is desperate for more hydrocarbons, and Canada can supply them in copious amounts. Germany has announced plans to build new LNG import facilities, and Europe in general is fearfully short of natural gas.
What does Trudeau say? That Canada will be there to support Europe and, as the world moves “beyond fossil fuels,” to “have more renewables in our mix.” If you’re perplexed by that statement, you should be; it doesn’t make sense on any level. But that’s what happens when a leader like that takes advice from the Exhibits exhibited above.
The energy situation continues to get more surreal by the day. The world is desperate for hydrocarbons, and the vested anti-hydrocarbon people, the thousands of Exhibit x’s, are starting to openly say this, but have somehow found a path in their brains that allows them to think they can demand more production from an industry while continuing to vilify, threaten, and belittle it, with the implicit promise that as soon as possible they will be stomping that industry out of existence. In the meantime, all you stupid grease monkeys just produce what we tell you to.
The hydrocarbon sector is not, to my experience, a slave organization. Neither is it shying away from supporting a anti-Putin war effort. The issue is much simpler than that: production simply cannot be materially increased quickly. It is a tragedy that the world is going to suffer because of that – through sky high prices and possibly food shortages – but the geopolitical wunderkinds that steadfastly maintain hydrocarbons are a dead end must ultimately bear responsibility for the fact that those hydrocarbons are not going to be there when the world needs them most. Sad days indeed.
Slava Ukraini! Find out how the world got into such a calamitous energy state, and how to get out – pick up “The End of Fossil Fuel Insanity” at Amazon.ca, Indigo.ca, or Amazon.com. Thanks for the support.
Read more insightful analysis from Terry Etam here, or email Terry here. PS: Dear email correspondents, the email flow is wonderful and welcome, but am having trouble keeping up. Apologies if comments/questions go unanswered; they are not ignored.