THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017.  And to make matters worse, world oil investment has dropped 45% from its peak in 2014.  If the world oil industry doesn’t increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe).  To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent.  In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:

In the article, All-time low for discovered resources in 2017, Rystad reports, it stated the following:

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%.

The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012.  However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006.  So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.

As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most.  In the EIA’s International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:

In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production.  However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017.  So, even though more money is being spent, the world isn’t finding much more new oil.

I believe we are going to start running into serious trouble, first in the U.S. Shale Energy Industry, and then globally, within the next 1-3 years.  The major global oil companies have been forced to cut capital expenditures to remain profitable and to provide free cash flow.  Unfortunately, this will impact oil production in the coming years.

Thus, the world will be facing the Energy Cliff much sooner than later.

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43 Comments on "THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline"

  1. Steve, i’m not an oil person but what’s the difference between the first chart “total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe)” and another chart where you showed in a graph that in 2016 the world consumed 25.1 bb per year and there was only 2.4 bb that year of new discoveries?

    Kinda of confused between both charts.

  2. Michael Kohlhaas | June 30, 2018 at 5:49 pm |

    We are screwed! Big time!!!

    • Not so fast. Bix Weir said that the proven oil deposits in Alaska and Grand Canyon are enough to fulfill the global oil demand for the next 200 years.

      • Arnold Ziffel | July 1, 2018 at 9:00 am |

        Bix is always good for a hearty laugh.

      • Bukharin,

        As you are aware, Bix’s analysis on Grand Canyon Gold is nothing more than the RE-READING of a 1912 article OVER & OVER & OVER again. In his last video, he reread it once again. If this is logical based analysis, then we should start looking for the end of the earth as it is FLAT… correct?

        steve

        • Paul D Anders | July 1, 2018 at 3:49 pm |

          Do you at least give him a thumbs up when you watch his videos…lol

        • It has been worse, SteveR. Bix’s recent statements are more bombastic and surreal than what he said last year. One of his recent statements is that Satoshi (the creator of Bitcoin) is Alan Greenspan. I almost fainted when I heard that.

      • Spanky Bernanke | July 1, 2018 at 9:27 am |

        HA! I love LOVE Bix, but he rarely has any premise to support his arguments. I like Steve’s arguments because he uses real statistics, rather a newspaper article from some rag back in the early 20th century. Anyways, I heard this regular bubblehead over on CNBC on Friday talk about he don’t believe in cost of production dynamics (he was talking about bitcoin), alas, he had zero premise to support his ideology. What I suspect will happen is the government will step in overtly and manage the shale oil industry. Yes, just like Venezuela. We might as well, we have become communistic since 2008. Realize, you can still buy gasoline in Venezuela super cheap. LMAO. Hey, Steve, maybe that would be a great stat comparison? The price of fuel in Bolivar compared to gold in the last 5 years! LMMFAO

  3. MASTERMIND | June 30, 2018 at 6:18 pm |

    As M. King Hubbert (1956) shows, peak oil is about discovering less oil, and eventually producing less oil due to lack of discovery..
    https://imgur.com/a/6dEDt

    Oil discoveries in 2017 hit all-time low –Houston Chronicle
    https://www.chron.com/business/energy/article/Oil-discoveries-in-2017-hit-all-time-low-12447212.php

    Extra peak oil references
    https://imgur.com/a/rBtIrfg

    Check out that first link Steve..

    And great another great article!

  4. When we get the polar shift and the melting ice in Antartica you will see huge amounts of reserves there.

  5. MASTERMIND | June 30, 2018 at 7:25 pm |

    We’ll be full on ‘Handmaids Tale’ in a few years.. This country is fucked, escape while you still have the chance..

  6. Richard Nanes | June 30, 2018 at 7:51 pm |

    MASTERMIND,
    I want to thank you for recommending the book “The end of more” a good read. Just finished reading “Sapiens” a shot history of mankind by Mr. Herrari. I highly recommend this book as it gives a broadview of human evolution along with our increasing use of energy. I think everyone on this blog site would enjoy it.

    Doc Rich

  7. Joe Lindell | June 30, 2018 at 8:05 pm |

    Steve: You’ve been saying things about “Peal Oil”; EROI since I met you,about 8 years now, but you never have a definitive timeline. As an investor, one needs info that is relevant now or the next at least the next few years. You’re info has no effect on silver or gold. Therefore, using these two commodities as a guide,you’re info is 20 years too soon to be relevant. Plainly put, I should be a silver buyer in 2020 or later not in 2011 when we met.

    • Joe,

      I believe you have the timeframe a bit off. My mother heard me talk about Peak Oil when I was in the womb.

      steve

  8. Petedivine | June 30, 2018 at 9:05 pm |

    The oil end game is already playing out in Mexico. There are several articles on oil related crime in Mexico. I don’t just mean theft. I mean they are going mad max for blackmarket gasoline.

    https://mexiconewsdaily.com/news/pemex-pipeline-loss-160bn-pesos-in-7-years

    https://mexiconewsdaily.com/news/pipeline-thefts-soar-51-cost-10-9bn/

    https://mexiconewsdaily.com/news/two-cartels-linked-to-pipeline-thefts/

  9. Reading between the lines, only a government bailout for energy exploration or a debt jubilee allows for new energy exploration searches.

    I tend to think we’re screwed.

    • You mean like the energy bailouts provided by both Bush’s in the middle east?

      • Thomas Malthaus | July 2, 2018 at 8:47 pm |

        No, I’m talking about the total collapse of the world’s financial system-period. Wipeout of all entity’s debt and creation of new national currencies–preferably with a metal backing.

        I’m not saying it will happen at all. As it is, estimates from some say only 20 years of fossil fuel exists before “lights out.”

        Unless a deus ex machina cure comes to fore.

        That little saying about being dead in the long run.

  10. One thing to keep in mind is that the oil discovery technology has rapidly improved over the last 30 years..And the body of knowledge in rearguards to where oil has been searched for in the past has expanded as well..According to Collin Campbell they have technology now where they can see all the way down to the earth’s inner crust to search for oil..

    And another thing to consider is the largest oil field discovered in the last forty years was back in 2000..Called “Khzastan” which is located in the Caspian Sea, right behind Afghanistan..And it took 14 years to finally bring that one field online..So even if we were to get lucky and discover a few more super giants (not likely)..By the time they were able to bring them online it would likely be too little too late..

  11. Steve: If the investment in energy falls globally and if any productive work requires the direct or indirect use of energy … does it have any future to invest in anything else? … precious metals may be refuge values like convents for classical culture?

    • … I think I fell short before: energy is necessary for any productive work and for any active consumption. Energy is necessary both in production and consumption, both in supply and demand. So energy should not be included in the law of supply and demand. If there are problems with energy, then there are problems with supply and with demand.

  12. Another brilliant post ! Thank you mr. St. Angelo !
    It seems to me astonishing how the LIMITS TO GROWTH people foresaw the downfall of the oil industry already in the 70s. In this video you can see dr. Donella Meadows explaining a System Dynamics model about the way the oil industry takes decisions. In the video she already sees how a destructive loop will appear when less findings and higher costs will lead to less investment, which of course will result in even less findings and even less profits and on and on.
    Starting at minute 26:
    https://www.youtube.com/watch?v=XL_lOoomRTA

    If we had understood the System Dynamics logic and we had payed more attention to the LIMITS TO GROWTH message we wouldn’t find ourselves in dire straits.

  13. Dow will crack and the funds will flow into crypto currency not gold and silver. Gold and Silver will have their day but later than most think which could/will mean financial hardship to all those who continue to listen to these “experts”. Don’t be like the poor people who bought silver 10+ years ago only having to cash them in now to pay their food and health cost bills. I woke up in 2013 when I realize TPTB were going to keep the metals just above the mining cost. Liquidity is flowing all over the planet…just figure out where that liquidity is going to flow next….figure that out for yourselves……

    • So did you buy into bitcoin at $10 and did you cash out at $20,000? If not, then your opinion is less than useless to anyone here. Or put another way, you are going to be an even poorer person 10 years from now and you will look in envy at those stupid idiots who bought silver back in 2008. But go on, keep fantasizing about your virtual shitcoins going to the moon.

    • GLP,

      While you are free to post comments here, please understand that you can be held accountable for saying something completely ignorant.

      For example, the average gold daily trading volume globally is about $175 billion. Now, the most Bitcoin traded in one day this year was back on Jan 5th when it’s volume was $24 billion based on a price of $17,000.

      Now, compare that to Gold, whose average daily trading volume is $175 billion on a much lower gold price of $1,275.

      Let’s do the math.

      Bitcoin Top Trading Day Jan 5th = 1.4 million BTC traded
      Gold Avg Trading Value ($1,275) = 137 million Gold oz traded
      Gold vs. Bitcoin trading units = 100/1

      However, if we look over the past year, Bitcoin’s average trading volume is approximately $7-8 billion versus $175 billion for gold.

      Lastly, the gold trading volume posted above is based on NET transactions. If we go by GROSS Transactions, then you can multiply that figure by 5.

      So, are you still going to stick to your story that Bitcoin-Cryptos trading will surpass gold during the market crash????

      steve

  14. Steve,

    I don’t make predictions only express my opinion. Bitcoin has not been through a crisis like 2008 so we don’t know how it will be perform or be effected. The premise that cryptos will absorb the trillions of hyperinflation is theoretical as of the moment but since we are in a digital age that premise seems logical. Don’t blame crypto for the digital payment system, blame the creator of the credit card…..

    Now as to this statement:
    “While you are free to post comments here, please understand that you can be held accountable for saying something completely ignorant.”

    Are you willing to be accountable for all the people who followed your advice to buy Gold and Silver and now have to sell them to pay their bills? That number is increasing as I see it. I saw in 2013 that TPTB were going to maintain the price of AU and AG just above the mining cost so I dumped my mining stocks for crypto to generate fiat to help pay my bills. Even with the current correction ( which seems to be ending ) I have gotten 2x my original $$ out and am still up 25X. Imagine how poorly I would have done following the expert advice and staying solely in the PM Stocks. OBYW I will not sell my PMs so I have to find something to make fiat in to pay off debt. What do you Recommend???????

  15. Steve,

    And one more thing. If BTC is anywhere near 100K by the end of the year what will be your explanation ? I will be exchanging 1 BTC for 10 monster boxes of AG. This is so easy to figure out if you are just willing to open your eyes…………..the new Zeitgeist is upon us…the future is difficult to accept when it does not fit our prejudices and expectations.

    • DisappearingCulture | July 2, 2018 at 3:10 pm |

      What on earth would lead you to even think Bitcoin would go to 100k by the end of the year? That’s quite a fantasy.

  16. 11%… and even with some give or take, discoveries have falling off a cliff. Excellent. Thanks Steve.

  17. joe lindell | July 2, 2018 at 1:34 pm |

    Steve: With the Energy cliff approaching, EROI very poor and everything you write about
    including massive debt etc. for once answer me one question without being sarcastic. Why
    is silver under $16 today when production is falling and demand is rising?

    • Joe,

      Simply put, because you and most investors are completely clueless in regards to the details of the dire energy predicament we face. Any other questions?

      steve

    • JL, you keep thinking in currency terms. Did you put your brain in the cloud too? In that case you’re hackef. Everything is distorted when you keep thinking in currency terms within a degrowth environment. And don’t give me the crap we’re still growing. Adding $5,- in debt for every $1,- in so called ‘GDP’ isn’t growth. Its stupidity. As soon as more people can see this your grandmothers silver spoon is worth more than a usb with BTC10.000. Hard assets, get them while you can.

    • DisappearingCulture | July 2, 2018 at 3:12 pm |

      “Why is silver under $16 today when production is falling and demand is rising?
      For one reason only Joe. They did it to piss you off.

    • TheSultanofSnark | July 7, 2018 at 9:33 pm |

      You’re a perfect example of someone who knows the PRICE of everything and the VALUE of NOTHING. Enjoy your oblivious stupour.

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