Shock Model Applied to USA lower-48

The Minnesotans for Sustainability compiled a bunch of interesting oil depletion charts on a single page. I decided to test out the oil shock model on discovery data from the USA lower-48. This contains good historical information of an oil depletion profile past the peak (if you haven't paid attention, our own!).

I used exactly the same base parameters as I used for the fit to the world data, namely each of the fallow, build, maturation phases set to a mean of 8 years, and the average Markov extraction rate set to 0.07 of volume/year (~14.2 year 1/e time). The "unshocked" fit to the data turns out to match the observed production quite nicely.

But the fit can get better. First, ignore the poor fit during the 1930's (depression era). Next, as Laherrere has noted, we can likely account for the perturbations. The first one occurred during the late 1950's:

The initial "voluntary imports quota" of 1957 did not worked and President Eisenhower made them "mandatory" in 1959. The US were disconnecting their domestic oil market from that of the rest of the world, leaving to the large foreign producers the responsibility of managing the market, what they did by creating OPEC the following year, in September 1960.

So that clearly a quota-driven reduction in extraction occurred in the late 1950's, in other words, the first local USA shock. During the 60's, with the quota in place, the oil industry carefully modulated extraction (note that a big dependency on foreign oil did not exist), yet with a peak quickly approaching, extraction rates had to increase to make up for the continuing economic expansion at the time (and to feed the Vietnam War/Great Society guns&butter machine). Once the peak hit, the prorationing reached 100% and the oil industry moved to supplant domestic oil with that from foreign sources.

In March 1971, the balance of power shifted. That month the Texas Railroad Commission set proration at 100 percent for the first time. This meant that Texas producers were no longer limited in the amount of oil that they could produce. More importantly, it meant that the power to control crude oil prices shifted from the United States (Texas, Oklahoma and Louisiana) to OPEC. A little over two years later OPEC would through the unintended consequence of war get a glimpse at the extent of its ability to influence prices.

Actually, 1970 marked another turning point:

The transition. It started in 1969 when the Santa Barbara oil spill triggered some important US environmental laws (Clean Air Act, Clean Water Act). They slowed down the development of domestic energies (mostly coal) at the very time when the US indigenous oil production was going to peak (1970) before decline (see graph 1416). US net imports, which since 1959 were kept at about 20% of US consumption, were relaxed and grew by 25% each annum from 1970 (3.15 Mb/d) to 1973 (6.02 Mb/d), a growth perfectly matched by Saudi net exports. World oil market became tight, as revealed by the successive upwards price revisions in Tehran, Tripoli and Geneva before the October 1973 oil price explosion. The "Club of Rome" was right, oil was unable to fulfil all energy needs, but it was wrong because oil was only scarce in the US 48 lower states but abundant elsewhere.
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Transport demand in the US was hardly affected by the first oil shock because the oil quota put in place by President Eisenhower in 1959 isolated the US oil pricing system from the international oil market However, demand fell strongly at the time of the second oil shock because its timing coincided with the liberalisation of the US oil prices.

I used the following perturbation profile to try to fit to this evolving scenario.

Which gives this shock fit:

What does this prove? I don't have all the answers, but it does show that the oil shock model demonstrates good scaling properties. If we can use the same properties on USA data as I did for the global data, it suggests that the rates have a universal property. It makes a lot of sense, if we consider that a few companies own the state-of-the-art in oil drilling technology and use the same expertise worldwide.

It also gives substantiating evidence for us to once again reconsider the traditional Logistic model to understand oil depletion.

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This presentation (PDF), provides some good background on the interaction of the quota system with energy economics. And this one gives some history on the politics behind the Texas oil men and the rise of Halliburton.