Why were oil prices so high in 2005 and 2006?

[darklordoftech]

?

[Blue3]

Dude, use google.

[Benjamin Frank]

It was at a time of fear of 'peak oil' and before the U.S shale boom.

This was also a time, at least in the United States, of the 'baby boom' with every parent thinking they needed to own a gas guzzling SUV.

Edit to add: That is the basic supply and demand side of the equation.  I forget if OPEC had anything to do with the rise in oil prices, however, OPEC tends to favor price stability at a certain level and not necessarily high prices.  I remember though that it was argued that due to concerns over 'peak oil' and 'irrational exuberance' (as Alan Greenspan would put it) that speculation by oil traders added as much as $20-30 to the price of a barrel of oil.

[Coolface Sock #42069]

Katrina also caused a lot of problems by destroying a lot of oil-related infrastructure on the Gulf Coast.

[Okay, maybe Mike Johnson is a competent parliamentarian.]

Katrina also caused a lot of problems by destroying a lot of oil-related infrastructure on the Gulf Coast.

I remember that at the time my mom told me that the then-unprecedented $3 or $4 gas was because of the hurricane, yes.

[Velasco]

It was at a time of fear of 'peak oil' and before the U.S shale boom.

The peak in the production of high quality "conventional oil" was reached in 2006, according to the International Energy Agency. The shale oil production in the US is of very poor quality (low energy return), economically ruinous and environmentally disastrous. From what I heard to some experts in energy,  the fracking oil industry has been heavily subsidized in a desperate attempt to maintain production. The problem is that, even with massive subsidies, it's not possible to perpetuate the fiction, so it's very likely a gradual decline in the world's oil production for the years to come.

[Benjamin Frank]

It was at a time of fear of 'peak oil' and before the U.S shale boom.

The peak in the production of high quality "conventional oil" was reached in 2006, according to the International Energy Agency. The shale oil production in the US is of very poor quality (low energy return), economically ruinous and environmentally disastrous. From what I heard to some experts in energy,  the fracking oil industry has been heavily subsidized in a desperate attempt to maintain production. The problem is that, even with massive subsidies, it's not possible to perpetuate the fiction, so it's very likely a gradual decline in the world's oil production for the years to come.

Conventional oil peaked in 2006, but oil futures are just that, and there was an awareness that production was peaking.  Also, the economy around the world was very strong in 2005/2006 so demand was very high.

In regards to U.S oil production, the EIA disagrees with what you write.

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=a

[Velasco]

In regards to U.S oil production, the EIA disagrees with what you write.

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=a

"Estimates of technically recoverable tight or shale crude oil and natural gas resources are uncertain".

 I think it's wise the EIA is covering its back. From my understanding, the key issue with regards to the US oil production is not only the milions of barrels per year.  It's neccessary to take into account the balance between conventional and non-conventional oil because, as I said before, the latter has a low energy return in comparison with the former

https://www.researchgate.net/publication/227439264_Energy_Return_on_Investment_EROI_of_Oil_Shale

 
The two methods of processing synthetic crude from organic marlstone in demonstration or small-scale commercial status in the U.S. are in situ extraction and surface retorting. The considerable uncertainty surrounding the technological characterization, resource characterization, and choice of the system boundary for oil shale operations indicate that oil shale is only a minor net energy producer if one includes internal energy (energy in the shale that is used during the process) as an energy cost. The energy return on investment (EROI) for either of these methods is roughly 1.5:1 for the final fuel product. The inclusions or omission of internal energy is a critical question. If only external energy (energy diverted from the economy to produce the fuel) is considered, EROI appears to be much higher. In comparison, fuels produced from conventional petroleum show overall EROI of approximately 4.5:1. “At the wellhead” EROI is approximately 2:1 for shale oil (again, considering internal energy) and 20:1 for petroleum. The low EROI for oil shale leads to a significant release of greenhouse gases. The large quantities of energy needed to process oil shale, combined with the thermochemistry of the retorting process, produce carbon dioxide and other greenhouse gas emissions. Oil shale unambiguously emits more greenhouse gases than conventional liquid fuels from crude oil feedstocks by a factor of 1.2 to 1.75. Much of the discussion regarding the EROI for oil shale should be regarded as preliminary or speculative due to the very small number of operating facilities that can be assessed.
  

Leaving aside carbon emissions and environmental damage, the increasingly higher proportion of non-conventional oil means that it's needed a higher increase in overall oil production to produce the same amount of energy.  Mind that economic growth is based on the increase of energy production. The decline in conventional oil production is a certainty. The future of the non-conventional oil production is uncertain. Consider technical difficulties, low energy return and the lack of profitability. I'm not an expert, but it's not difficult to realize that's not sustainable by any standards.

[True Federalist (진정한 연방 주의자)]

Velasco,
It's important when considering the costs (both economic and ecological) of shale oil that the term encompasses two rather different production methods. Both synthetic crude (which uses thermal methods to get the oil out of the shale) and tight oil (which uses pressure methods, i.e, fracking) are produced from oil-bearing shales and thus get called shale oil. The increase in U.S. oil production since the mid-2000s has primarily been from tight oil, not synthetic crude.

[Benjamin Frank]

In regards to U.S oil production, the EIA disagrees with what you write.

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus2&f=a

"Estimates of technically recoverable tight or shale crude oil and natural gas resources are uncertain".

 I think it's wise the EIA is covering its back. From my understanding, the key issue with regards to the US oil production is not only the milions of barrels per year.  It's neccessary to take into account the balance between conventional and non-conventional oil because, as I said before, the latter has a low energy return in comparison with the former

https://www.researchgate.net/publication/227439264_Energy_Return_on_Investment_EROI_of_Oil_Shale

 
The two methods of processing synthetic crude from organic marlstone in demonstration or small-scale commercial status in the U.S. are in situ extraction and surface retorting. The considerable uncertainty surrounding the technological characterization, resource characterization, and choice of the system boundary for oil shale operations indicate that oil shale is only a minor net energy producer if one includes internal energy (energy in the shale that is used during the process) as an energy cost. The energy return on investment (EROI) for either of these methods is roughly 1.5:1 for the final fuel product. The inclusions or omission of internal energy is a critical question. If only external energy (energy diverted from the economy to produce the fuel) is considered, EROI appears to be much higher. In comparison, fuels produced from conventional petroleum show overall EROI of approximately 4.5:1. “At the wellhead” EROI is approximately 2:1 for shale oil (again, considering internal energy) and 20:1 for petroleum. The low EROI for oil shale leads to a significant release of greenhouse gases. The large quantities of energy needed to process oil shale, combined with the thermochemistry of the retorting process, produce carbon dioxide and other greenhouse gas emissions. Oil shale unambiguously emits more greenhouse gases than conventional liquid fuels from crude oil feedstocks by a factor of 1.2 to 1.75. Much of the discussion regarding the EROI for oil shale should be regarded as preliminary or speculative due to the very small number of operating facilities that can be assessed.
  

Leaving aside carbon emissions and environmental damage, the increasingly higher proportion of non-conventional oil means that it's needed a higher increase in overall oil production to produce the same amount of energy.  Mind that economic growth is based on the increase of energy production. The decline in conventional oil production is a certainty. The future of the non-conventional oil production is uncertain. Consider technical difficulties, low energy return and the lack of profitability. I'm not an expert, but it's not difficult to realize that's not sustainable by any standards.

This article is from 2011.  My understanding is that shale oil extraction has become much more efficient since then.

http://euanmearns.com/the-efficiency-of-us-shale-oil-drilling-and-production/

[Velasco]

This article is from 2011.  My understanding is that shale oil extraction has become much more efficient since then.

http://euanmearns.com/the-efficiency-of-us-shale-oil-drilling-and-production/

The efficiency of oil extraction and energy returns are different matters. It's logical to assume the higher efficiency of extraction methods implies an increase in production, providing the shale or tight oil deposits are not depleted in a short period of time (I heard to an energy expert in my country that wells get depleted pretty fast, so it's necessary to open new ones). Energy return is the key issue. Unless recent research says otherwise, it's clear that the energy returns of unconventional oil are inferior to conventional oil (I get figures may vary depending on calculation methods, but the fact is that they are clearly inferior). I don't know how much increase in oil extraction efficiency is neccessary to balance energy returns, but it's hard to believe those improvements are going to be enough. In the end, the main goal of oil extraction is the production of energy. My point is that, with the increasing share of unconventional oil, the oil production needs to increase at a higher rate to produce the same amount of energy. It's hard to imagine that the continued increase in energy production, necessary for a continued economic growth, can be sustained on unconventional oil. I'm not even mentioning the catastrophic environmental consequences and the need of massive subsidies to support the industry. Unconventional oil is not energy efficient