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Msg  370961 of 383804  at  11/29/2021 2:53:26 PM  by


The following message was updated on 11/29/2021 2:55:27 PM.

From one of the smartest guys I know and

  I hope he doesn't mind me posting this. Or I hope he doesn't find out. In any event, it's in the public domain. 

In 2011 the U.S. produced only 5 million barrels of oil a day. At its peak in 2020 we produced 13.2 million barrels a day. Today we are producing about 11 million barrels a day. Almost all the gains in U.S. production came from fracking. We have written in the past that we think fracking for oil is a poor business model. Fifty percent of the oil produced from a fracked well is in year one and then it declines dramatically. You are constantly having to drill more and more wells to stay even in oil production. You are NOT finding large pools of oil with fracking. You are taking marginal wells and trying to “squeeze” a few more drops of oil out of it before you move on to the next well.

The world consumes about 100 million barrels of oil a day. It is projected that the world will need around 120 million barrels of oil produced a day to satisfy world demand in the next 20 years. Very few (not us) saw oil production in the U.S. growing by 8 million barrels over the last 10 years to cause an oil glut in the world markets. The U.S. has been the only area of the world that has grown production by any meaningful amount over the last decade.

The environmental, social and governance movement (ESG) has targeted oil companies as evil. They were able to get seats on the Exxon board while only owning 1% of the stock. The Exxon board then announced they were reducing the amount of money they spend on oil and gas exploration. The ESG movement has helped restricted the flow of capital to any energy producing company that isn’t in the wind or solar business. This is going to cause a real problem soon in the energy markets.

Wind and solar (ESG favorites), according to the Energy Information Administration (, produced 3% of the energy consumed in the United States as of 2019. Oil and natural gas represent 69%. By restricting capital to the oil and gas business, we are taking a huge leap of faith that we won’t have oil and gas shortages soon. The ESG movement is assuming we can replace that lost production with wind and solar.

We see no way that happens over the next 5 or even 10 years. What is concerning to us is the next two years. As the world economy recovers from covid, we don’t think there is going to be enough oil to go around. The record lows in oil rigs drilling will start to show up in less production in the U.S. It is our guess that once oil produced in the U.S. goes below 9 million barrels a day, oil will be at least $100 a barrel. We are not sure how our politicians are going to react to this. Will they tell you to turn down your

thermostats this winter to ease the crunch? Will they tell the environmentalists to have some patience with moving from 3% wind and solar production to 10% over the next 10 years? Will they blame the oil companies for restricting drilling and causing a shortage? Will the EPA ease up on methane restrictions and clean-air zones? Will the government make it easier to build solar and wind farms by easing the restrictions on government permitting (stop not in my backyard protests)? We don’t know the answers to these questions today but we are going to find out soon.

Eighteen months ago we had around 900 rigs drilling for oil, which in our opinion was not going to keep us at 13 million barrels a day produced in the United States. With the rig count averaging 400 rigs drilling for the last 12 months, time is ticking for a potential energy shortage to occur. Please remember that around 50% of a fracked well’s production occurs in year one.

The shortages should start to show up in Q4 of this year due to a lack of new rigs looking for oil.


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Msg # Subject Author Recs Date Posted
370988 Re: From one of the smartest guys I know and Nothingtoc 48 11/29/2021 4:15:11 PM

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