US Energy Security

I wrote this two years ago but very little has changed. If anything because of shale depletion we are more vulnerable than when this was first written. Proven, producing oil reserves in the United States increased 16% year on year (2020-2021) to 44.4 billion barrels, according to the EIA; today these PDP reserves are down to 41 G BO. Believe that at your own risk. Almost all of those reserve were "reported" by tight oil companies themselves via internal audits. Because of decline rates most of those reported reserves in 2021 are already depleted. Same for 2022. With the onslaught on longer laterals for quicker cash flow most wells now decline 73% the first 14 months of production life. So about the time they are reported to the EIA, or SEC, they have all but declined to nothing. The PSP reserve to production ratio of shale is about 3.5 years.

In 2023 the US consumed 7.9 billion barrels of crude oil and condensate (EIA), meaning our proven, producing reserves to consumption ratio, if you trust reserve reporting at all, is only 6 years.

The Strategic Petroleum Reserve, America's emergency stash of oil, our oil 'savings account,' has been drained to a 40 year low. There are no plans to replace the 270 MM BO that has been taken from it and only a few days ago Trump signed a bill to spend $1.5 B to put oil back in the SPR. His DOE head says it will take $20 B to put it back where it was.

Our country is now exporting over 50% of its total shale oil production to foreign countries... over 1.5 billion barrels per year !

The US is the largest crude oil consuming nation in the world by a significant margin, has only has 4% of the worlds proven reserves, yet produces more than any other country in the world, mostly for exports:

For anyone that buys the propaganda about how US oil exports to foreign countries helps reduce the price of gasoline in Pittsburg, or enhances America's long term energy security, in January 2023 our nation exported more crude oil to China than we did the United Kingdom (EIA). Of our five biggest tight oil importers only Canada and the UK have an actual military presence that could help in the US in time of need.

Russia, Iran, the KSA and the rest of Middle East are now all in alignment with each other to supply China with very long term oil supplies. China essentially has sewed up the Eastern Hemisphere's entire oil supply.

The Saudi's animosity towards the US and the Biden Administration has reached epic proportions and on April 2 the KSA announced a shocking 1.0 MM BOPD decrease in OPEC production, an intentional boost to Russian oil revenue and an intentional message to the White House about who's the world's true oil boss. Trump is in the Middle East this week begging OPEC for cooperation to raise its production and lower prices.

"China now has effective control of two out of three top oil crude oil exporters – Russia and Saudi Arabia (with the other being the U.S, itself). In addition, China, via Saudi Arabia’s leadership position in OPEC, has considerable influence over that organization's oil as well." Bloomberg

In the West, Canada has reduced its oil exports significantly, in large part due to the canceling of Keystone Pipeline, Mexico is set to stop all exports by 2024 and the US has sanctioned vast Venezuelan oil potential and won't allow it to export.

The only venue for oil production growth in the US, indeed the entire world the past 14 years has been shale oil and it declines 70-90% the first 32 months of production life. Two of America's most important shale oil basins are in obvious states of depletion and well productivity in the Permian Basin is declining at about the same exponential rate that water to oil ratios, and gas to oil ratios, are increasing. Every major tight oil player in the Permian Basin is warning Americans that its oil production is going down.

Nobody is even paying attention.

In a world starving for hydrocarbon investment, lowering crude oil prices may meet campaign promises, and soothe the savage ego, but it is NOT good for America's long term energy security. Oil and gas prices need to be high to help ensure a stable supply long past 2028. Shale oil companies see the writing on the wall; Continental Oil is in Turkey looking for new things to do, EOG in the Carribean doing the same thing.

This energy independence, energy dominance dog dookey is dangerous political rhetoric. If we have not almost completely transitioned to renewable energy sources in the next 15-18 years our kids are going to be in deep doo-doo.