Arthur Berman: "BRICS+, Strategic Petroleum Reserve & Metaphysics”
Oct 11, 2023
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Oil expert Arthur Berman joins Nate Hagens to discuss the state of global oil, including BRICS+ and shale oil. They delve into the Strategic Petroleum Reserve and its misuses, as well as the current dynamics affecting oil prices and future availability. They also touch on geopolitical relationships, oil profits, and the importance of adopting abundance mindset. Lastly, they explore the history and significance of the Strategic Petroleum Reserve, and the importance of valuing oil for future generations.
The Strategic Petroleum Reserve (SPR) serves as an important reserve of oil in case of supply disruptions, but its drawdown should be viewed in context of the larger volume of crude oil exports by the United States.
Despite a decline in productivity, oil extraction remains profitable, especially with high oil prices, highlighting the need to understand the economic realities of the industry.
The podcast discusses the concept of peak oil and the long-term decline in oil production, emphasizing the importance of considering renewable energy sources as a solution to future scarcity.
Deep dives
The Origin and Purpose of the Strategic Petroleum Reserve
The Strategic Petroleum Reserve (SPR) was established in 1975 in response to the Arab oil embargo. It was created to ensure a domestic supply of oil in case of supply disruptions. The SPR consists of underground salt caverns primarily located in Texas and Louisiana and currently holds around 360 million barrels of oil. It serves as an insurance policy for the United States against potential oil shortages.
Drawdown of the Strategic Petroleum Reserve
Recently, the SPR has been drawn down, reducing the inventory from about 700 million barrels to its current level. This drawdown was initiated by President Biden's administration in an attempt to mitigate rising oil prices and alleviate pressure on consumers. While some critics view the drawdown negatively, the amount taken from the SPR pales in comparison to the quantity of crude oil the United States has exported in recent years.
Debating the Impact and Significance of the Strategic Petroleum Reserve
The media's attention on the SPR drawdown is somewhat exaggerated when considering the scale of crude oil exports. In essence, the Strategic Petroleum Reserve serves as an important reserve of oil, but the disapproval it receives should be tempered in light of the larger volume of crude oil exported by the United States. While the drawdown can be viewed as a less than ideal decision for long-term energy security, the focus should also center on the impact of crude oil exports on the nation's future.
Geological decline and profitability of oil wells
According to the podcast, there is a plateau in geological oil reserves, with newer oil wells in the Permian region being 15-20% less productive than those drilled in 2017-2018. Despite this decline, the economics of oil extraction still allow for significant profits, especially when oil prices are high. Shale companies, for example, can make considerable profits with break-even prices in the mid to upper $40 range. However, the podcast also addresses the pushback against high oil prices and the perception that oil companies are taking advantage. Overall, the episode highlights the importance of understanding the geological decline of oil and the economic realities of the industry.
Peak oil, decline rates, and renewable alternatives
The podcast explores the concept of peak oil and the long-term decline in oil production. While temporary peaks may occur, the overall trend is a decline in oil supply. The host shares a forecast similar to BP's projection, suggesting a possible 20-25% decline in oil production over the next 15-20 years. This decline is driven by a combination of geological limitations, lack of investment, and potential environmental factors. Additionally, the episode discusses the potential role of renewables as a solution to the scarcity of oil. However, it also raises questions about the feasibility of renewable energy sources and the need to consider broader systems education and psychological healing in navigating the complex challenges ahead.
On this episode, Art Berman returns to give a broad update on the state of global oil - from BRICS+ and shale oil to the Strategic Petroleum Reserve and oil investment. As Art says, ‘oil is the economy’ and understanding the complex dynamics of the oil market provides insight into the entire economic system. How do geological luck and foreign policy create the global stage for oil markets? What is the Strategic Petroleum Reserve, have we been misusing it, and does it matter in comparison to larger energy policy blunders? What are the current dynamics affecting oil prices and how will this affect the long term out-look of oil availability?
Please note: this episode was recorded prior to the Israel/Palestine events of last weekend.
About Arthur Berman
Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He is an expert on U.S. shale plays and is currently consulting for several E&P companies and capital groups in the energy sector.
