I found that one really interesting: https://www.vice.com/en_us/article/8848g5/government-agency-warns-global-oil-industry-is-on-the-brink-of-a-meltdown
tldr: the next economic crisis is just around the corner (or has maybe already started), this time because of the fact that getting to the remaining oil resources is unprofitable already now. Mind you, I think this is a wonderful thought, because it means that we might still have a chance to combat the climate catastrophe. Question is, is it true or not ? Anyone with expert knowledge here ?
Pasted the text from the article below: Government Agency Warns Global Oil Industry Is on the Brink of a Meltdown
We are not running out of oil, but it's becoming uneconomical to exploit it—another reason we need to move to renewables as quickly as possible.
by Nafeez Ahmed
Feb 4 2020, 1:00pm
Image: Carina Johansen/Bloomberg via Getty Images
A government research report produced by Finland warns that the increasingly unsustainable economics of the oil industry could derail the global financial system within the next few years.
The new report is published by the Geological Survey of Finland (GTK), which operates under the government’s Ministry of Economic Affairs. GTK is currently the European Commission’s lead coordinator of the EU’s ProMine project, its flagship mineral resources database and modeling system.
The report was produced as an internal research exercise for the Finnish government, which until 2019 held the Presidency of the Council of the European Union.
Signed off by GTK’s director of scientific research Dr Saku Vuori, the report is written by GTK senior scientist Dr Simon Michaux of the Ore Geology and Mineral Economics Unit. It conducts a comprehensive global assessment of scientific research into the state of the global oil industry with goal of determining how the risks of a global supply gap could impact mining and mineral production.
The peer-reviewed report calls for the European Commission to consider oil as the world’s most important "critical raw material." Despite offering a scathing critique of conventional peak oil theory, the report arrives at the shock conclusion that the economic viability of the entire global oil market could come undone within the next few years.
Oil, oil everywhere, too costly to drill
The plateauing of conventional crude oil production in January 2005 was one of the triggers of events leading to the 2008 global financial crash, according to the report. As debt built-up in the subprime mortgage sector, the crude oil plateau drove up the underlying energy costs for the entire economy making that debt more difficult to repay—and eventually resulting in catastrophic defaults. The report warns that “unresolved” dynamics in the global energy system were only temporarily relieved due to "Quantitative Easing"—the creation of new money by central banks. A correction is now overdue, it warns.
The report says we are not running out of oil—vast reserves exist—but says that it is becoming uneconomical to exploit it. The plateauing of crude oil production was “a decisive turning point for the industrial ecosystem,” with demand shortfall being made up from liquid fuels which are far more expensive and difficult to extract—namely, unconventional oil sources like crude oil from deep offshore sources, oil sands, and especially shale oil (also known as "tight oil," extracted by fracking).
These sources require far more elaborate and expensive methods of extraction, refining and processing than conventional crude mined onshore, which has driven up costs of production and operations.
Yet the shift to more expensive sources of oil to sustain the global economy, the report finds, is not only already undermining economic growth, but likely to become unsustainable on its own terms. In short, we have entered a new era of expensive energy that is likely to trigger a long-term economic contraction.
The coming crash
‘Quantitative Easing’ or QE as it’s often known in shorthand, consists of massive programs of money creation through central banks purchasing government debt. But the report warns that the scale of QE could pave the way for another financial crash as oil markets become unstable, most likely within half a decade.
The role of QE in propping up the oil industry and wider global economy was not anticipated in traditional peak oil theory, which failed to predict the low oil prices endangering profitability. The report concludes that: “The era of cheap and abundant energy is long gone… Money supply and debt have grown faster than the real economy. Debt saturation and paralysis is now a very real risk, requiring a global scale reset.”
Although the world therefore needs to urgently transition away from fossil fuels, it may well be too late to do so in a way that avoids an economic crisis. And doing so will require industrial civilization as we know it to be fundamentally transformed:
“To phase out petroleum products (and fossil fuels in general), the entire global industrial ecosystem will need to be reengineered, retooled and fundamentally rebuilt," the report notes. "This will be perhaps the greatest industrial challenge the world has ever faced historically.”
Professor Nate Hagens, a former Vice President at investment firms Salomon Brothers and Lehman Brothers who now teaches ecological economics at the University of Minnesota, said he "finds the report quite plausible."
"But our institutions and policies and expectations are ‘energy blind’,” he told me. He believes that the report’s warning of a coming economic crisis is very likely.
“We optimize around growth, which requires energy which requires carbon energy,” he said. “We have created approaching 300 trillion dollars in financial claims, on a finite amount of high quality resources... All in all, we’ve created too many claims for future energy and resources to support.”
From Saudi peak to shale bubble
The report offers the first independent public government assessment concluding that Saudi Arabia, once the world’s largest oil producer, is now probably approaching (and may already have passed) a production peak.
The study cites accelerating rig counts amid disproportionately low oil output as mounting evidence of the Saudi oil sector’s declining productivity. It also cites data from the recent IPO held by the Saudi national oil firm, Aramco, indicating that production levels from the country’s largest field, Ghawar, is 1.2 million barrels lower than previously claimed, suggesting the field is nearing maturity.
Meanwhile, as Saudi Arabia has been unable to keep up with demand, US shale has stepped in, contributing to the vast bulk of new global oil supply since 2005—71.4 percent of it to be exact.
The rest of the international oil market is dominated by Russia and Iraq, with other members of the OPEC (Organization of the Petroleum Exporting Countries) consortium of Middle East oil producers overall contributing just 22 percent of total supply, barely enough to cover losses from countries whose production has been declining.
A bubble ready to burst
The report warns that global production growth may therefore soon stall due to the dodgy debt-driven economics of the US shale industry. While Saudi Arabia will no longer be able to ramp up production much, the US shale oil sector could be on the brink of unravelling due to massive unrepayable debts, declining production rates, and poor well quality.
While the productivity of shale oil wells has increased at first glance, the report says this has come at the expense of “observable decreases in real productivity.” Increasing production “has come at a cost of increased lateral drilling per hole and the increase of water, chemical, and proppant.”
So while average production from fracked US shale wells increased between 2010 and 2018 by 28 percent, in the same period water injection, chemical and proppant use increased by 118 percent. The report says this indicates the huge spike in extraction costs.
Meanwhile, the report warns that most shale oil companies experience negative cash flow due to mounting unrepayable debt levels. As a result, we are fast approaching a point where investors are losing faith in the industry, which is now running out of money to sustain continued operations amidst declining profitability.
The exact date of a peak in US shale oil production is difficult to estimate, but the report concludes that production “is likely to be in terminal decline within the next 5 to 10 years, with the possibility that it has already peaked due to contraction of upstream capital investment.”
If that happens, it would mean we can no longer rely on the principal source of oil behind global production growth.
According to World Oil, two major oil industry service providers, Halliburton and Schlumberger, already believe that despite production reaching record highs, US shale oil fracking has already peaked and is in a period of sustained contraction.
A global peak?
The report is heavily critical of conventional peak oil theory, which predicted that global oil production would peak and decline shortly after 2000 due to ‘below-ground’ geological depletion, leading to permanently spiralling oil prices. The approach is described as “too simplistic” for overlooking “the complex and dynamic interactions of a number of issues around the oil industry (most notably geopolitical actions and the effect on Quantitative Easing).”
But the report also dismisses the now fashionable rejection of the entire relevance of peak oil. Although there is “plenty of oil left,” it is “increasingly expensive to access”.
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