US Needs Alberta After All
Like all dreams, we wake up to reality in the morning
If you have been following me for a while, you know that I study and follow the markets & economy on a daily basis.
It’s something I’ve done for the past 15+ years.
Heads up, I never claim I’m an economist.
I prefer to be called a student of the economy and market.
There’s simply so much to study and topics to explore.
It’s fun for personality like mine where I love to learn and connect the dots.
Looking for hidden risks and uncovering opportunities before others do.
It’s like a giant scavenger hunt or finding pieces of a puzzle to put together.
Nothing more satisfying than figuring these out and taking actions, making money as a result.
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I read around 30-50 news articles / week, and watch around 10-20 videos on various economy & market topics / week.
If you’re interested in what I’m reading or watching, I can look at including some of them in the future newsletters.
When there’s a topic that jumps out from my research, I collect those resources together and present them in a newsletter issue or in a presentation.
Today, I’d like to share with you something I came across recently by accident.
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In a video I was watching, the presenter casually mentioned that the US oil production from many of the shale wells through fracking are in the process of peaking.
That got my attention.
The US is currently the largest oil producer in the world, producing a record amount of oil.
What would be causing the production to peak?
Shale oil well functions very different than the oil sands we know in Alberta
In a research published by Goldman Sachs: The biggest US oil basin is headed for slower – but still robust – growth
You can read it here:
https://www.goldmansachs.com/insights/articles/biggest-oil-basin-headed-for-slower-robust-growth
In the life cycle model of a typical Permian oil well, “production usually peaks a month after the start of production but declines fast afterwards to modest and roughly flat production in three-four years,” Yulia Grigsby, an energy economist in Goldman Sachs Research
There are two key reasons for the Permian’s slowing growth:
Geology: Years of intense exploration and production have had an impact on the rock quality of the basin, leading to geological deformations that limit further improvements in the productivity of oil wells. The most productive wells are also getting depleted. […]
Rigs: The Permian weekly rig count has dropped nearly 15% from last year’s April high, and is down 30% from its 2018-2019 average. […]
Goldman Sachs’ research continues:
What is the future of US crude oil?
Although slowing, the growth of Permian production will remain robust through 2026.
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Another research titled “The Permian Basin Is Depleting Faster Than We Thought” published by Goehring & Rozencwajg Associates, you can read it here:
https://blog.gorozen.com/blog/the-permian-basin
Based upon our original work back in 2018, we concluded the Permian would roll over once operators drilled most of their best Tier 1 locations. Before peaking, per-well productivity would fall as operators drilled lower-quality inventory. This is what has happened. For the first time, productivity per lateral foot registered a 6% year-on-year decline in the Permian. According to our models, this proves the industry has drilled its best wells; basin-wide production decline is likely not far behind.
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Lastly, Art Berman, an 40-year petroleum geologist wrote in “Beginning of the End for the Permian”:
You can read it here: https://www.artberman.com/blog/beginning-of-the-end-for-the-permian/
The signals are flashing yellow if not red about the future of tight oil production. My analysis is not an outlier. In May, Pioneer CEO Scott Sheffield said that Permian output will peak in 5 to 6 years. In November, Continental Resources Chair Harold Hamm suggested that core areas of the Bakken play were reaching their peak, and that deeper “tough rock” objectives would be needed to sustain production.
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What does all this have to do with Alberta?
According to the Government of Alberta:
Using currently available technology and under the current economic conditions, there are 165 billion barrels of remaining established reserves in the oil sands deposits of Northern Alberta. An additional 250 billion barrels could potentially be recovered with more favourable economic conditions or new technology to extract and process.
At a current production of 3.3 million barrels of crude bitumen per day, it will take another 137 years to deplete the “established reserves” and another 208 years after that with “favourable economic conditions or new technology to extract and process.”
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Granted, many of the oil sand plants will need to be upgraded to extend their lifespan.
The point is, if the US Shale production declines in the coming years, the US needs Alberta’s oil.
Even more than they import today!
We have enough oil to last multiple life times and generations.
That’s something the US shale operators don’t have.
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This is why I don’t believe the 10% oil tariff President Trump threatened will be here to stay for a long time (if it ever implemented at all!).
One can dream of “drill, baby, drill”, but like all dreams, we wake up to reality in the morning.
Even his Energy Secretary Chris Wright is starting to drop hints. In a CNBC news article:
U.S. could reach deal with Canada that avoids oil and gas tariffs, energy secretary says
Again, you can read it here:
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This is the type of research I find it interesting.
To separate the noise from facts.
I’m still bullish for Alberta, how about you?
If you like my work, I invite you to share it with others.
Eric Chang
Calgary, Alberta
March 11, 2025
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