Lithium & The Future, page-27

The reason why electric vehicles will be THE transport of the future is not always understood by people. For me it isn't just climate change, global warming or whatever you want to call it, but the more pressing issue of peak oil, that has been hidden away for now by low oil prices at present.

I frequented a site called 'The Oil Drum' for many years until it closed a couple of years ago, worked on numbers and posted in the comments section thousands of times under a different nic to the one I use here.

Peak cheap oil is upon us around now, possibly has already happened, so the developing countries all having a western type lifestyle was never going to happen, it just isn't possible with the amount of oil able to be dragged out of the ground. At some point soon, even the largest producers like the Saudi's will reach a peak in production and start to have falling production. We need the disruptive technology of EVs, then at some point we will need electric trucks,tractors, ships, interstate trains etc.

Only because of high oil prices were the US able to ramp up fracking to increase supply, but of course all the best spots have been used. The technology they use for the horizontal fracking has been known and used for over 30 years, yet most people think it a new technology that will save the American way of life. The problem is it needs $80-90/bbl to make money on average, there are always dud wells. Each individual well can cost up to $9m to drill, case, and frack, with completions of wells drilled last year when oil prices were high, still being completed. Drilling of new oil wells in places like the Bakken and Eagleford, the 2 main areas of fracking (they are actually layers in the ground rather than areas, but most people call the general areas where they occur by the layer name), is like starting a new iron ore mine, it just isn't worth it at current prices.

Oil production from these areas is already plateauing and will start to fall rapidly in the next year or so, as high oil prices will need to be assured for them to take the risk of starting up again, plus the best spots have already been used (flow rates, total produced, accessibility etc) so prices will be higher than last time for companies to take the risk of starting up again.

This creates the problem that these areas have been the main reason why oil is down in the $40's/bbl now, they have added about an extra 3-4m bbl/d to the world total oil supplies, which created a glut, but now the drilling has stopped, the production from these areas will fall, and could fall rapidly over the next 2 years as a horizontal fracked well has a high depletion rate. On average the oil flow from one of them decreases by 40% per year, to increase production was actually taking more wells per month to be completed every month for total production to increase. The Bakken was averaging 200 new wells per month up until recently. Last month saw the first significant fall in the number of completions, down to 127, with every month from now on likely to be lower. 127 new wells was not enough to stop total production from falling, as the depletion rates from older wells overcame the new production.

All the while that the US had increased oil production due to fracking, the largest oil field in the world, Gwahar in Saudi Arabia has been pumping out about 4.5mbbl/d. To keep Gwahar producing at that rate, they have been using horizontal wells and pumping 7mbbl/d of sea water into the oilfields exterior to raise the pressure of oil to sustain the flow rate, since 2005. That's 10 years now. You don't have to be Einstein to work out that at some point these horizontal wells are going to start flowing water instead of oil, in fact that was already starting to happen to the conventional wells at Gwahar in 2005. Most of the horizontal wells are much higher in the aquifer.
When, not if the water reaches those horizontal wells, the fall in production from Gwahar will be dramatic, and likewise the Saudi's overall production.

At some point the price of oil will go high again, and probably stay high, very high as demand will be outstripping supply. It will easily get to the point where some importing countries will just not be able to get supply, though that is a few years further away.


As soon as consumers latch onto the potential lack of petrol/diesel for their machines, probably the next price spike, the demand for EV's will catch most off guard. Why buy a product (car) that you may not be able to use because of possible restrictions/rations/lack of fuel when you can buy an EV?
Governments and car makers are aware of this problem, they know the future is EV, or the alternative is anarchy, especially if you are a net oil importing country.

Australia was around square with production of oil and consumption in 1998, today we are net importers of 2/3ds of consumption. Even the US still imports 1/2 it's consumption. In Europe only Norway and Russia are net exporters of oil. Great Britain went from net exporter of around 1mbbl/d in 1998 to a net importer today as their section of the North Sea oil production declines.

The demand for Lithium batteries will absolutely explode when the next oil price spike hits, and it will happen, hopefully later than sooner so that it is possible to ramp up production of EV's quickly as there is a good base. We are not there yet.

Sorry for the long post.