Game Over for Oil, The Economy is Next

It’s game-over for most of the U.S. oil industry.

Prices have collapsed and storage is nearly full. The only option for many producers is to shut in their wells. That means no income. Most have considerable debt so bankruptcy is next.

Peggy Noonan wrote in her column recently that “this is a never-before-seen level of national economic calamity; history doesn’t get bigger than this.” That is the superficial view.

Coronavirus has changed everything. The longer it lasts, the less the future will look anything like the past.

Most people, policy makers and economists are energy blind and cannot, therefore, fully grasp the gravity or the consequences of what is happening.

Energy is the economy and oil is the most important and productive portion of energy. U.S. oil consumption is at its lowest level since 1971 when production was only about 78% of what it was in 2019. As goes oil, so goes the economy…down.

The old oil industry and the old economy are gone. The energy mix that underlies the economy will be different now. Oil production and price are unlikely to regain late 2018 levels. Renewable sources will fall behind along with efforts to mitigate climate change.

It’s Really Bad

2020 global liquids demand may average 20 mmb/d less than in 2019 (Figure 1). This estimate is really a thought experiment because it is impossible to know what supply and demand are in the present much less in the next quarter or beyond. This is a time of unimaginable flux and uncertainty because no one knows how long economic activity will be depressed, how long it will take to recover or if it will recover.

The estimate in Figure 1 differs from most forecasts in two important ways. First, I believe that supply will fall much faster than most other sources. That is because storage will soon be full and shutting in production will be the only option for many producers.

Figure 1. 2020 global oil demand may average 20 million barrels per day lower than in 2019.
Source: OPEC, IEA, Vitol, Trafigura, Goldman Sachs and Labyrinth Consulting Services, Inc.

Second, I doubt that there will be a demand recovery in the third quarter despite the re-opening of businesses in the second. That is because we are in a global depression. Unemployment will remain high and consumers will be damaged from lack of income over the months of quarantine. The truth is that I doubt that demand will ever recover.

Economies will re-start slowly. A useful analogy is being at a traffic light behind 25 stopped cars. The light will change from green to red before your car begins to move. It may take several light changes before you get to the other side of the intersection.

U.S. consumption has fallen about 30% from 20 mmb/d in January to 14 mmb/d in April. Refinery intakes are already 25% lower than in the first quarter of the year and will fall further as consumption decreases. Refineries will close.

Most U.S. refineries require intermediate and heavy crude oil that must be imported. Few U.S. grades of oil can be used to produce diesel without blending them with imported oil. That is because they are too light to contain the organic compounds need to make diesel. Redesigning refineries will not change this.

The world’s natural resource extraction, shipping and distribution system relies on diesel. As refineries close and less diesel is produced, there will be lower levels of natural resource extraction, less manufacturing and less buying of goods.

Diesel cannot be produced without first producing gasoline. The U.S. has had a gasoline surplus since late 2014 and the current surplus is the highest in 5 years (Figure 2).

Figure 2. U.S. gasoline comparative inventory has increased 30 million barrels since March 20 to a record level of 28.4 million barrels more than the five-year average. Source: EIA and Labyrinth Consulting Services, Inc.

Diesel demand is less elastic than gasoline demand because of its critical role in heavy transport. What will happen to the excess produced gasoline if storage is full? Will it be burned?

Those who see an opportunity for renewable energy in the demise of oil need to think again. The manufacture of solar panels, wind turbines and electric cars depend on diesel all along the supply chain from extraction to distribution of finished products. A world in economic depression will default to the cheapest and most productive fuels. Oil will be cheap and abundant for a long time. There will be little money or appetite for the massive equipment changes that renewable sources require. Climate change will not be high in the consciousness of people struggling to survive.

Figure 3 is another thought experiment in which I use tight oil rig count and output to estimate forward levels of U.S. production. The normal trajectory is an estimate of how production might decline as rigs are idled from lack of capital investment. It suggests that tight oil production might decrease by about 50% from 7 to 3.5 mmb/d by July 2021.

Figure 3. Thought experiment based on rig count through April 2020 and 12-month lagged production.
Source: Baker Hughes, EIA DPR, Drilling Info and Labyrinth Consulting Services, Inc.

The shut-in trajectory suggests that tight oil production may fall below 3 mmb/d by June of this year. Since tight oil accounts for about 55% of U.S. output, total crude oil and condensate production could decline from 12 mmb/d to 5.5 mmb/d by the end of the first half of 2020. This estimate is much more aggressive than EIA forecasts because EIA hasn’t adequately modeled the speed of shut in production with full storage levels.

Energy is the Economy

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.

Figure 4. Gross domestic product (GDP) is proportional to oil consumption
Source: EIA, World Bank and Labyrinth Consulting Services, Inc.

Those who believe that the world will function the same on lower energy density sources like wind and solar should review their old physics text books. You cannot fit 4.5 years of work from sunlight or wind into the 5.6 cubic feet space of a barrel of oil.

Seventeen investment analysts recently estimated that U.S. GDP would contract an average of 30-35% in 2020 (Figure 5) within a range of 9-50%. The correlation shown in Figure 4 suggests it will decrease by about 20-25% based on estimated decrease in U.S. oil consumption. Any value within this spectrum is catastrophic.

Figure 5. U.S. GDP to contract 30-35% in 2020 based on estimates by seventeen investment analysts
Source: Charles Schwab and Labyrinth Consulting Services, Inc.

Economist Lawrence Summers has warned that the U.S. financial system may collapse because of cascading defaults. Approximately 25% of U.S. renters did not pay their landlords and 23% of Americans did not make their mortgage payment in April. When people don’t pay their creditors, creditors in turn cannot pay their creditors. For comparison, a 28% mortgage default rate contributed to the 2008 financial collapse.

Joseph Stiglitz recently explained that the current pandemic will affect the developing world more severely than it has developed countries. It might lead to mass migration problems that could dwarf the dislocations of the last six years out of Africa and the Middle East.

Slouching Toward Bethlehem

Many will probably find my analysis overly pessimistic. Crude oil markets do not. Negative WTI futures prices last week could not have sent a stronger signal for producers to cease and desist.

Large segments of the U.S. oil industry will have to be nationalized before the year is over. The price of oil is too low to justify the cost of extraction even if storage were available. The value of a barrel of oil, however, is 4.5 man-years of work and that productivity multiplier will be essential if the U.S. economy is to avoid collapse or for it to recover if collapse is unavoidable.

The United States has engaged in the foolish practice of draining America first since the beginning of tight oil production a decade ago. There was value up to the point that domestic oil substituted for imported light oil but exporting more was dumb. That is true especially now that someone else’s oil will be cheap to buy for years.

There are few moments when we may truly say that things are different now. This is one of those moments. We do not know what awful form the future may take, what rough beast slouches toward Bethlehem to be born.

The game is over for oil. We should place all of our attention on saving the economy.

I hope that we learn to view what is happening as a chance to simplify and to learn to be satisfied with no more than what we need. It is unlikely that we will have much choice.


  • I have the answer. But don’t expect anyone to like it.

    Long ago, when the three major western religions all forbade charging interest on debt, the clergy understood the immoral nature of debt, and once a lifetime or so, the Pope would declare a “debt jubilee,” whereby all debts were cancelled.

    Then, there’s the story of the small, destitute village. It was in severe depression. Everyone was in debt.

    One day, a tall, well-dressed stranger came into town. He went to the only hotel and asked to see the very best room, and placed a $100 bill on the counter.

    The hotel manager quickly gave the stranger the key to his best suite, and as soon as the stranger left, he took the $100 next door to the butcher, to whom he owed $100 for meat he served in his restaurant. The butcher took the $100 to the bar, where he had run up a $100 tab. The bar owner gave the $100 bill to his waitress, who had been working for free for some time. Since she was working for free and needed to hook on the side, she ran over to the hotel and put the $100 bill on the counter of the hotel, where she owed for the room in which she entertained clients.

    About that time, the stranger came down and said, “Sorry, but that room is not to my liking.” He picked up the $100 bill and left.

    Now, everyone was out of debt, and the village felt prosperous!

    First thing we do, is get rid of the entire financial industry, which is the major driver of the growth that is killing this planet, and a parasite on the productive labour of ordinary people.

    • art.berman


      Yes, I’ve heard that story before about the small village. It’s cute but not very helpful.

      I disagree that we should get rid of the financial industry. Blaming others is part of our tribal behavior inherited from hunter-gatherer days. We are all complicit in what has happened to us collectively.



      • Art, do you envision the collapse of modern society, from the ISS looking down, what has changed since January of this year? Our systems and economics are based on one thing, trust. We trust that each recognises that we can provide for ourselves better by specializing in a certain field and we trust that collectively we can build a society and civilization that prospers. If these are truly unique times then a global debt relief program seems to be a logical conclusion. Or teach me how to skin a deer and plant potatoes to feed four outside a suburban home?

        • art.berman


          Collapse of the financial system seems likely in the near future but I imagine society will muddle through albeit not without some profound and scary dislocations. I see a much smaller population out several decades. Everyone will be bailed out in the end–people and companies. If not, society will be in peril. I have not become a survivalist but I sure understand those who are.

          All the best,


    • jim

      ” when the three major western religions all forbade charging interest on debt”

      Sorry, don’t follow you. Christianity yes, but what other western religions are there?

      Judaism most certainly does not forbid charging interest to gentiles, and Islam is not a western religion.

    • David

      Looks like the Hotel Manager got an interest free loan from the Stranger in this cycle……a debt Jubilee!!….everybody’s debt is erased. Too bad there is usury……………..In any event a fine example.

    • DB

      Amen! …Matthew 21:40-44

    • Howard Beale

      There was no money to “pick up.” So the “tall, well-dressed stranger” went home and printed another bill…

    • Alberto

      I do advocate eliminating the financial economy, making money only with money. Spending energy not to produce a material good or tangible service.

      Having said that, that story, although it has some truth, cannot be applied as a general rule. That story describes a circular economy while today’s economy is a spiral: old debts are paid off with new debts because of interest. That story does not consider interest.

      • art.berman


        This financialized economy cannot be undone without a collapse. Collapse is inevitable and may come sooner than later.



  • The Didipuss

    I’ve fallen in love with Art Berman. ( I’m a woman, lol! ). His analysis is undoubted, but I especially value his common sense applications to the statistics. In one interview he said ” We need to live better with less”. I could not agree more, even as I sit here in my province of Alberta. My father was a driller, beginning in 1947 during the great fire. My brother was a driller till in dried up rather suddenly in 2015. I am grateful he was ready for retirement.
    Thank you Art for everything you do. Hoping you will guest on Peak Prosperity or Kunstler’s site soon.

    • art.berman

      Many thanks. Your family has lived the dream and the disillusionment. I’m in regular contact with Chris. This post may get Jim’s attention!

      All the best,


  • Robert Downey

    Art, thanks for the article. You made a lot of good points but I don’t share your gloomy outlook on the oil industry. I think the US economy is starting to open up and will return to pre-virus activity levels within the next six months. And when it does, oil in storage will get refined and demand will increase to previous levels. There will be a lot of pain along the way but the world needs oil and that wont change for a long time. And nationalizing large segments of the US oil industry? Not gonna happen. Well get thru this and maybe faster than you think. Cheer up!

    • art.berman


      I hope that you are right.

      I obviously disagree and presented strong evidence to support my view. Hope and mantras of affirmation may make you feel better but do not change the substance of the analysis.

      I remember a discussion with the Chairman of the Amoco Board about 6 months before the company was bought by BP. We were talking about all the useless remedies and slogans that McKinsey and Booz-Allen had given us to improve our processes. He said, “We’re going out of business but we sure feel great about it.”

      All the best,


  • Thank you for this analysis. I am wondering how things will look with a massive influx of government cash to the oil and gas industry in the U.S. and potentially what form that would take? Another Fed injection or perhaps something else? Also I would appreciate your analysis on Canadian tar sands projects and recent pipelines to tide water to service other markets than the US with Canadian oil. Thank you.

    • art.berman


      As I said in the post, I believe nationalization is the inevitable step for much of the U.S. oil and gas industry. Canadian oil sands remain an important and necessary component of oil supply for blending with lighter crude. An economically depressed world will need relatively cheap oil more than ever.



      • JP Blangy

        Thanks Art,
        Thought provocative and insightful as usual.

        I agree that this downturn is really bad and that the financial industry seems to be living in their “own bubble”, not fully comprehending that access to sustainable energy drives progress in direct proportion, whether up or down (the well know GDP/Oil consumption relation). Agree that the forces of supply and demand are not in equilibrium (lack of demand) and therefore, the economy will fall further.

        In a depression, those few barrels that will move will be the barrels “at the margin”. Nobody will make a decent profit from energy and the globe will be in subsistence mode. There will not be any green concerns for a while (a true luxury really) just pure survival.

        But hope will come through advances in the area of science and technology.
        That is what differentiates our human race from others.
        Unfortunately, I cannot offer a timescale. Maybe you can?

        • art.berman


          Despite my fascination and daily use of technology, it is not a solution to our energy needs. Technology is how we convert energy into work but it does not create energy, nor is it free. In fact, it requires additional energy input to the process of energy conversion and, therefore, requires that even more energy be converted to accomplish the same amount of work.

          The solution to most of the world’s problems over the last century is a smaller population. That may happen quickly through war or pandemic or more slowly as it becomes clear that growth through population and debt increase can no longer be supported.

          All the best,


  • dan psych

    Art as an electronic engineer of 40 years I can assure you solar won’t work when you go thru the numbers. Only oil products permits cheap solar panels, I find that very humorous! The conversion to electric cars will use more, yes more, oil. I have done the numbers many times but I keep quiet because it causes people to change color and I don’t want to be shot. Give it 5-10 years or so and look at Ca the problems will be obvious then people will understand. And maybe even talk about bringing back coal…….

    • art.berman


      I completely agree. The physics are simple. Energy inputs for solar & wind are higher than for fossil energy. There’s nothing surprising about that because of energy density differences. People, however, have been mislead by renewable promoters just as they have by fossil energy promoters and believe what they want to believe. Renewable promoters have been quite effective in spreading the lie that wind and solar are cheaper than fossil energy. Of course, it’s only true if you exclude all the embedded fossil energy costs!

      I’m all for renewables but its promoters will have to tell the truth eventually, just like fossil promoters.



      • Electric energy from renewables will be more expensive than oil absolutely but they are the only way forward on climate and the eventual depletion of viable oil reserves. I don’t see permanent demand destruction for oil, I see the undermining of investments in both oil and renewables leading to extremely volatile prices. This does no one any good and makes the transition to renewables just that much more difficult as well as having whiplash impacts on economies as a whole.


    Art – thanks for your insight – I think that there are many optimistically deluded people who think that we can just come out of hibernation like a bear in the spring. These folks think that we have effectively gone on a 6 week vacation at home , in their cases they may well have – look at all the celebrity lock-down videos boasting about their mansions, large gardens, Jacuzzis etc

    However in the real world, people are suffering and will suffer more. I can envisage a bad case situation analogous to Russia in the 1990’s with a long term 30 to 40% GDP collapse which would take a generation to recover. This led to many social problems. One difference in the western world however is that 1990’s Russians had no debt and housing was essentially given for free to the occupants, many modern westerners particularly in the Anglosphere are in debt up to their eyeballs and many folks might lose their homes. Unfortunately this is not looking good

    • art.berman


      I share your view, unfortunately. I recommend my friend Nate Hagens’ recent presentation.



    • Tony B. Wolf

      Alan, you make a great point when comparing the situation with post-Soviet Union aka Russia. The difference is huge but not really comprehensible to people who did not make the experience of both systems – which was possible to make in the 1980-1990 period. The comparison is vivid in this free piece, the part that happens in Moscow:

      Unfortunately, Amazon does not provide free distribution for paper products but the above link is of course free.


      Thanks for all the time and brainpower you invest into your analyses.

      There is much truth that we can do more with less, it is hard for every one used to a broad consumer society platform of values. But life can be lived and then with joy in far less consumer-based circumstances.

      But it takes a while, takes discipline to get there. In most cases, one is forced by circumstances and then accepts and starts to enjoy the new reality.

      Kind regards

    • jon wright

      Alan, the situation is apt to far worse than the collapse of the Soviet Union for the fact that we are now in a global situation. In the case of Russia, the other drivers of the global economy remained intact. A simple analogy might be an individual in a good job market losing their job versus the same individual losing the last job in town. The first case scenario involving hardship that viewed through the lens of the second case scenario looked like a nice walk in the park. Or indeed a bear hibernating – good one.

  • Markus Schellenberg

    Can only agree with the interpretation of the Numbers. Now, what is needed to be done? As the Financial situation of the median american (and any world Citizen) will undoubtly dwindle over the next years, we need to ask ourselves how we can assure a minimum quality of life to all (not living standard). I think we will need to think and discuss about economic systems. The actuall wealth transfer from the bottom towards the very rich will not stand anymore as the last trickle down has now ended.

    • art.berman


      I suggest that you listen to my friend Nate Hagens’ Earth Day presentation.

      The government needs to bail out everyone–people and companies. The partisan BS between Democrats and Republicans is typically infantile.

      All the best,


      • Peter Davis

        Art. How exactly can governments bail out companies and individuals. With what exactly. Government does not create but spends. Where are the funds coming from. This is essentially promoting Bernake’s helicopter money scenario. The long term implications of this are surely as disastrous as not doing it. As Peter Schiff famously said its time to remove the punch bowl. Thanks

        • art.berman


          I don’t see a choice in the present situation. The process of getting to where Schiff and others recommend would involve a complete break-down of society.

          All the best,


    • Ian Porter

      With a long history in the oil and gas industry, I learned that predicting the oil price is akin to fortune telling (Eg: Who could have ever predicted the -$40/bbl price last month?)

      We are in the middle of a disaster the modern world has never seen contemplated predicted or forecast. For us to be determining what’s next is simple crystal ball gazing.

      One thing is for sure: we are in for an economic rout. No one will be exempt from its reach. Let’s prepare and find good ways to cooperate and peacefully coexist on this fragile planet with too many people on it, not taking care of it. Time for long hard thoughts about how to forge our way forward in a very different world we are about to enter.

  • HubertRightHandSideCurve

    “GAME OVER FOR OIL” has been predicted now for very long time – there is no more of it in the ground that we haven’t already extracted since 1858.

    In the last few days, Micheal Moore has turned the table against Renewable Energy, Climate Change and Green Growth.

    In a documentary that seems some of it shot with cheap cameras, poor audio and second class production – the trillions of dollars the Western Civilization has put all the last 4 decades, since The Limits of Growth, along the seas of fossil fuels burned in propagating the ‘Green’ message – have all been announced – gone.

    With the best of our machinery cannot run for 60000 hours in one piece without extensive maintenance and overhaul, there is no more oil left in the ground to keep our industrial base running – as if we are starting building it from scratch in repairs and lubrication every morning.

    This pandemic has come a no less impact on the global Energy market than the Green paradigm-shift above – a surprising coincidence overlapping with the end of the age of abundant crude oil – by physics.

    There is no enough oil left for air travel for the masses (see Colin Campbell, David Hughes and Art Berman), . The pandemic has made us ceasing that – quietly.

    There is no enough oil left for private-driving for the masses. The pandemic has made us ceasing that seamlessly.

    This far, this pandemic can be considered nothing other than peak oil-disguised!

    There is no right hand side to Hubert Curve, but a cliff owing to wear and tear internal to matter.

    No matter how storage is seemingly full of over-supply today, from now on oil would never be sold like before – for money.

    It will be valued and exchanged by other metrics – priceless!

    Game over for the masses with abundant Oil!

    • art.berman

      I’m confused by your comments that there is no more oil left in the ground. That’s untrue and I don’t believe that any Hubbert curve indicates that.




    Hi, thanks for the honest analysis.
    Question: what’s next after the economy?

  • Antoinetta III

    Observing Figure 3, I see that peak shale production occurred in November, 2019, several months before the Saudi-Russian price war on shale, and the virus and shutdowns happened.

    Am I correct in thinking that November, 2019 is global peak All-Liquids?

    Antoinetta III

    • art.berman


      November 2019 was the peak of U.S. tight oil production and of U.S. crude + condensate production. The global peak was November 2018.



  • tim supple

    you probably don’t remember this, but several years ago I met with you to discuss the business. I was in the land/lease management software business and was concerned that PUD’s were overvalued do to lease contract clauses, like pugh clauses, vertical segregation clauses and shut in clauses. I agreed with you conclusions that cheap money created drilling and production which was increasing short term production growth, which in turn lead to lower commodity prices and distortion of balance sheets on financial statements. All of which would eventually lead to the demise of company values. I asked the question, “but wouldn’t continued growth of production and thus prices lead to a sharp decline in shale drilling and thus lead to a sharp decline in production, which in turn will lead to under supply, and thus higher commodity prices.” Your answer at that time, which was right, was that they just keep drilling with more unsustainable debt. Obviously no one actually saw the double existential threat, price wars and pandemic, coming so quickly or at all. But, if we have weak demand, we will have low oil prices, So my question isn’t cheap oil is good for all economies? Low oil prices stimulates all economies. So in the long term, doesn’t that solve the problem the GDP of every country? Now I must confess, I am a believer that the strength of free market capitalism is based on creative destruction, which only then leads to creative efficiency for economic growth. While this will hurt, badly, if we allow the free to make the adjustments, we will come out of this with a stronger economy more efficient economy. So your statement “Large segments of the U.S. oil industry will have to be nationalized before the year is over”, not that I think you are proposing this, would be the biggest mistake we could make. Joining OPEC, or giving the policitians any control over capital allocation or debt, is not a solution. Like you say.

    • art.berman


      I remember you well and our meeting at my office a few years ago.

      I am neither for nor against nationalization of the companies that will fail. It is inevitable. The US financial system has been nationalized at least since 2008 so it’s really hard to make a case that a free market existed before CoV-19. Going forward we will be socialist and a managed economy, not just in the US but around the world. Again, not my choice but acknowledging reality.

      I recommend you watch Nate Hagens’ recent presentation:

      All the best,


      • I’d say the governments have been bought by the finance sector much more than the governments have nationalized the finance sector. The financial tail really does wag the national dog.

  • tim supple

    to finish

    Like you say, “what rough beast slouches toward Bethlehem to be born.”

  • Don Stewart

    Are we looking at a peak diesel situation, a Alice Friedemann described in When Trucks Stop Running?
    Thanks…Don Stewart

    • art.berman


      I believe that all crude & refined product production will be lower going forward including diesel. That is because of lower demand/depression and lack of investment capital.



  • John Day

    Art, you should engage with the 100% renewable energy crowd even though it will be distasteful to you. They need to hear all this.


  • Mary Stewart

    I’m very appreciative of your analysis, and all you bring to it. Simple question (though I doubt the answer is simple): what about value, market, economics of natural gas going forward, near-term and beyond? I’m thinking here of natural gas from U.S. sources, particularly from wells NOT associated with oil extraction.

    • art.berman


      That’s a topic for another post. Simple answer: there’s way too much of it. Whatever amount is reduced from tight oil shut ins will be added back in decreased exports. It’s not quite that simple but I’m not holding my breath for much higher gas prices. The January futures contract is about $3. Where’s the champagne?

      All the best,


  • Tom Hewett

    Art, You really have me thinking – as you are prone to do. For me, you saved the most thought-provoking comment for your reply to TIm “The US financial system has been nationalized at least since 2008 so it’s really hard to make a case that a free market existed before CoV-19.”

    I believe you’ve made a good case for oil, and by extension, nearly the entire economy will be nationalized. While history indicates we should deplore nationalization, I can’t extrapolate that to imminent societal collapse. We’ve limped along for 12 years with a nationalized financial system and I’m perhaps more confident than you that we can limp along decades longer with nearly everything nationalized. And I believe you are perhaps discounting rapid technological advancements.

    Despite change being upon us, I can envision scenarios that are not as bleak as you’ve portrayed in today’s article. Now I’ll listen to Nate Hagen’s latest – perhaps that will put me solidly in your camp!

  • Mary Stewart

    To be transparent, I own mineral interests in leased natural gas wells, and want very much to liquidate this asset in as wise a way as possible (i.e., do I wait or do it asap). I want to use that money, in part, to fund initiatives that support sustainability / food sovereignty and community-building locally.

  • Steven Swanson

    Art, you have made the strong case regarding oil but have left out a discussion of natural gas. As we have seen, natural gas prices has been stronger as crude prices have collapsed. The mainstream argument is that with less oil production (especially Permian shale) there is less associated gas and, therefore, smaller supply. However, we are also experiencing less demand for LNG shipments so, in theory, that supply will stay in the US and offset the loss of associated gas. How do you see natural gas fitting into your thought experiments? Steve

    • art.berman


      I left nothing out that I wanted to address in this post. There are thousands of topics remaining but people can only absorb a few new perspectives at a time, including me.

      All the best,


  • Lauryn

    Hi Art,

    I found your post today via Twitter & think it’s excellent. One thing I didn’t quite understand is in the supply for refining diesel.

    You said. “Most U.S. refineries require intermediate and heavy crude oil that must be imported.”

    How much are we currently importing? Why would these grades/types not be cheap like the other incoming crude? Are there no substitute countries from our current importers from around the world?

    I guess I just don’t understand heavy vs. Intermediate, vs. Lighter you described, or the market dynamics that would lead to the impact you described as a result. Can you clarify?

    A New Reader

    • art.berman


      The US imported approximately 7 mmb/d of foreign crude oil in 2019. The different grades of crude oil reflect its density. The denser oils generally contain more complex, longer-chained hydrocarbon compounds; less dense oils only have simpler, shorter-chained hydrocarbons. It’s not possible to make heavier refined products like diesel without the complex, longer-chained hydrocarbons. You can’t make wine from apples. If you like apple cider, that’s great but it’s not wine.



      • Lauryn

        Hi Art,

        Thank you. I still don’t understand – are you saying that the complex, longer-chained hydrocarbons are going to become less available for import? If so, why would those become more expensive when other oils are less expensive?


  • Jonathan Edan

    Great summary! With oil demand dwindling for some time – keeping prices low. Will there be a great opportunity for storage facilities such as tankers profiting from the contango ?

  • Rebecca Jones

    Essential reading Art. In your presentation early April slide 2 (Hot Topic #12 with Nate Hagen) you show oil markets returning to balance 2H 2020 – this differs from your prediction here – could you expand on what has changed between early April and the situation now ?

    • art.berman


      It is the simple case of more data. The depth of the economic depression has become clearer and the hopelessness for most E&P companies seems more compelling.

      “When facts change, I change my mind. What do you do, sir?”
      —John Maynard Keynes



  • David

    Does nationalising the oil sector really solve anything? To me it simply shifts the losses caused by bad investment decisions in the private sector from the people responsible for them onto others (eg. taxpayers). (Granted that government -promoted zero % interest rates have probably contributed to the current predicament).

    If anything, the current crisis seems to be bringing us closer to the collapse of the top-down, centralised nation state. The US Government now has more than $24 trillion in debt and very few assets other than a printing press. Many countries in history have tried to solve their problems by printing money and it has always turned out badly. Perhaps Trump is smarter than all others who have tried it and “this time it’s different”. I’m sceptical. Collapse of centralised indebted western countries into more localised government seems more likely to me – like the Soviet Union or Yugoslavia when their economies were collapsing.

  • Iver

    It’s amazing to see air travel down by 95%. I wonder if it will continue? It seems like this is a chance to simplify our economy, but it may not be easy in a place without much good mass transit. Local agriculture needs to be encouraged. I don’t think we all need to be self sufficient, but we need to support the local food supply as it will be more and more apparent that it’s necessary.

    • art.berman


      All of those things are sensible but time is limited to make changes and it won’t happen fast enough spontaneously.



  • christopher baynas

    You are a pessimist, I am an optimist. That’s alright. Just like there are conservatives and liberals. I am a retired geologist. I’ve learned you can do anything with numbers. You paint a good case, but the prove will be in the future result. Many variables involved. Everything will work out.

    • art.berman


      I am a scientist, neither a pessimist not an optimist. It’s true that everything will work out but I have not yet found anyone who guarantees an outcome that we like.

      All the best,


      • Chuck.Joseph

        Much of this dialog reminds me of my working definition of an optimist.

        Optimist: an uninformed pessimist.

        • art.berman

          Optimism and pessimism are emotional states. Scientific analysis is neither optimistic nor pessimistic. The true objective of science is to describe the present state of things and to identify key patterns that may help anticipate the next state of things.



  • Günter Weber

    Great analysis! Thank you!

    However, I am optimistic that most governments around the world will realize that under current conditions the market economy is simply failing and as a result most means of production need to be nationalized for a certain amount of time. If this is done a lot of totally unnecessary damage will be avoided and in one to two years we will be back to normal more or less. Public debt to GDP ratio will have increased by 50% to 100% – but who cares.

  • Eric

    I find your perspective far too bearish and dark. There will be restructurings, mergers, acquisitions. Demand has fallen off a cliff for good reason. The oil is there, the ownership will change. Natural gas will thrive in my opinion as the demand has not fallen so far (overall demand down by less than 10%). Oil may find equilibrium in the 30’s or 40’s. Other countries will coalesce to reduce supply as their budgets will be strained. You also are well aware of how volatile Natural Gas pricing can be so looking out a year from now shouldn’t necessarily give us an entirely accurate picture. There seems like there will be a deficit coming through in 2021 (maybe earlier).

    • art.berman


      I have said at least a dozen times to others with your optimist vs pessimist perspective that science is not about an attitude or disposition. It is about objective observation of data. “Dark”, “pessimistic”, etc are feelings. No place in objective analysis for how you feel. That’s why so many analysts get it wrong.

      Most of your comments are pure “what-if-and-maybe” statements in other words, how you FEEL things MAY work out. Enjoy your happy thoughts. I will stick with the data. I mean that respectfully but somewhat didactically as well.




    Terrific article.

    I’m puzzled by one thing. At one point you state that a barrel of petroleum equals 4.5 years of some unknown quantity of solar or wind energy. Later, you state one barrel equals 4.5 man – years of labor. Can you let us know the quantities, maybe in kilowatts, you were using to represent 4.5 years of solar, wind, or human energy?


    – R. Matt

    • art.berman


      Read it again. I said twice that a barrel of oil is equal to 4.5 years of human labor and gave a link. Follow the link. It’s an earlier estimate that was higher but it explains the reasoning.



  • peter

    Good Morning,
    “It’s game-over for MOST of the U.S. oil industry.”

    It is understood that the deeply indebted shale drillers and other “less-than-efficient” (uneconomical?) oil producers are toast.

    Which parts of the US oil industry do you see surviving? Only the ultra large like Exxon and Chevron? Or will there be “specialists” in small niches who will survive long-term?

    Regarding “heavy crude” needed for diesel production: Does Venezuelan crude oil fit the “heavy crude” requirements for refining of diesel fuel?

    Regarding government efforts (around the world, but especially in North America) to mandate the exclusive use of ultra-low-sulfur diesel in transportation, how do you see this sulfur requirement effecting oil production? Or maybe I should say “how will oil production effect the ABILITY of governments to enforce this requirement?

    The ultra-low-sulfur fuels have already caused engine damage, premature wear, and ocean vessels adrift without power and they require (according to what I have read) significant additional energy during refining to remove the sulfur. The country of Malaysia has already announced that they will not be enforcing this ultra-low-sulfur requirement for ocean-going and local vessels.

    I look forward to your response.

    • art.berman


      The companies with access to refining are most likely to survive. Seems like much of the conversion to low-sulfur marine fuel occurred before CoV so it’s more likely to remain as long as supply is there. It’s hard to know on any of this because it depends on whether or not the financial system can be saved. If not, it’s Mad Max.



  • brent beakley

    Art, I love the way you challenge my thinking, thank you for that. However I believe (hope) you are underestimating what Trillions of QE around the world will do to stimulate economies, at least for a time. The average American (and politician) has no tolerance for economic hardship and will tolerate the Fed Gov’t spending an almost unlimited amount of money. Whether it lasts or fades like a sugar high, that will be the tell. Thanks again.

    • art.berman


      I don’t think that you understand the depth of the problem. In order to support all during the hard times, the government will have to write a check of ~$1000/week to every household in America. Do you see that happening? I don’t. The alternative will be economic collapse. Do you see that happening? Choose your awful option.



  • Patrick McGarry

    Art- I appreciated your candor and thoughts in the article. In regards to coal, do you think Covid-19 is the final nail in the coffin and that natural gas will completely replace coal & nuclear in the U.S. generation fleet?

    • art.berman


      Low cost will rule in a depression.



      • Robert Jarman

        I respect your opinion Art, but from my brief examination of IEA data, over the last 15 years the world has consumed at least 5 times more oil annually than it was discovering. Surely this means that even if we drop to a consumption of 70 mmb / day, we still run out of oil unless more is discovered. And the only incentive for more to be discovered is price! It must rise. I agree with the earlier contributor Eric; mergers, acquisitions and ownership changes will come thick and fast. Sure, some companies are finished, but oil ain’t!

        • art.berman


          You are inventing things that I never said and that are beyond the scope of the post. My topic had zero to do with running out of oil or abandoning use of oil.



      • Mark Spohr

        Renewable electricity is cheaper than coal, gas, nuclear and oil. Renewables will prevail.
        BTW, I don’t follow your logic here:
        “Those who see an opportunity for renewable energy in the demise of oil need to think again. The manufacture of solar panels, wind turbines and electric cars depend on diesel all along the supply chain from extraction to distribution of finished products. A world in economic depression will default to the cheapest and most productive fuels. Oil will be cheap and abundant for a long time.”
        How does the cheap oil required for renewable infrastructure production make renewables more expensive?

        • art.berman


          Levelized costs do not include power backup and most embedded fossil inputs. Renewable promoters misrepresent costs just like oil and nuclear promoters because they are all promoters misleading the public for their benefit.

          More importantly, there are important differences between price, cost and value. A barrel of oil contains 4.5 human years of work. That’s unmatchable value regardless of price or cost of extraction. Renewable energy sources simply cannot compete on value.



  • Mike

    Great analysis on a core economic KPI. Could these low oil prices be an opportunity for the US to rebuild efficiently with a $1T+ infrastructure bill at low energy costs?

  • Gabe


    Great Analysis – Thank you.

    I have one question. Why was it dumb to export our oil when it was $40 – $60 per barrel?  Seems like we nailed it.  Now we can buy “someone else’s oil” for cheap.  We exported at high prices and now can import at low – I see that as a feature, not a problem. What am I missing?

  • Thank You for this assessment, Art. I have followed your work for many ears, here and there, but not found your blog. I am not the-other-John-Day, an ecological analyst and author. I am a family doctor in public health in Austin, with a house and garden in Yoakum, just past the Eagleford Shale. It has been vacated for over a month now, probably 6 weeks of just empty slabs, and no trucks or rigs. Pictures of may gardens can be found at . Vegetables. I’m a practical guy. Oh, Ive been keeping up with this lab virus, but I still don’t know what lab it escaped from, or when, or how. I watched Nate’s presentation. It’s good as always. I’ve got his book as hard copy. Good visionary, human.

  • Adam

    This is very well written and for anyone willing to consider the topics the analogies are as simple as they are profound.

  • peter

    Good Morning again!

    Can you comment on where Venezuelan crude oil fits into the refining “spectrum”? Is it mostly heavy crude that would produce diesel? I seem to recall US refiners having difficulties after the US banned import of Venezuelan crude.
    Thank you!

  • […] strange things are happening in the oil market. And, according to Art Berman, they portend drastic and irrevocable social and economic […]

  • Douglas j Gray

    In physics we have the Heisenberg Uncertainty Principle; in mathematics, Godel’s incompleteness Theorem. By the time you get to something with as many variables as economics, there is a huge amount of uncertainty and incompleteness when you attempt to make predictions based on analysis of data. Going forward, airlines may need to have more flights to move the same number of people; hotels may need more space per person, as would restaurants. Let’s see who is resilient. Resilience sometimes just appears in unexpected places. I am not as pessimistic as Mr. Berman. He may be correct in saying that economic growth as we knew it is over, but the post COVID 19 world may provide opportunities we cannot yet see coming. I have a friend who works for DREAMWORKS. He is already saying that COVID 19 has made them realize their business model was much too overloaded with office space, commuting, and meeting together. A much larger portion of their work then they previously realized can be done from home. The new economy will emphasize frugality and efficiency.

  • Jake

    Ever play that board game of “Risk”…


  • […] strange things are happening in the oil market. And, according to Art Berman, they portend drastic and irrevocable social and economic […]

  • Steve Cepeli

    I think we will see a sharp increase of inflation and that will shake the entire economy from bottom to the top. It will be like the 30s all over again. That’s what I really see. Chinese economical dominance will have to be curtailed but that won’t be enough to correct the sick worldwide economy. With dependency on Chinese industries and exports we all had been set up for a grand failure. The phony house of cards called Globalism will crumble and no one will be able to escape the destruction of this gigantic economical tsunami . So fasten up your seat belts friends.

  • Cretins Bezoar

    I didn’t see the term ‘petro dollar’ used even once!

  • Richard

    Germany lost in WW2 because they ran out of oil-based fuels. The USA, with the biggest military in the world, fuels its military strengths with oil derivatives. Great for US military that oil is now cheap. When it is scarce and expensive (shutting-in oil wells is often a permanent closure, not for economic reasons but because after shut-in, some wells can never again produce if shut-in changes the physics of the reservoir), how will the USA wage war, which it has done continuously since it beat the Germans? And how will China take advantage of the USA’s dependence on fossil fuel for its military power? Viruses? Cyber? And how will the USA feed itself with depleted soil, no chemicals to make pesticide etc, and no fuel to run the tractors? A very different world, that has changed almost instantly.

    I am happy to have lived a full life so far, and to be at an age where croaking a few years early does not bother me!

  • Farmer Paul

    Thanks for your insight. You make a pretty good argument for economic collapse. I share your feelings. I’m living my life based on the same belief. We’re all prepped up with more food coming out of the ground than we can eat. My question is this: What will an economic collapse look like in Metropolitan American? Do you see people killing others for their food? I expect to see Americans as poor as the Chinese in the 1960’s. It will be such a shock to go from such wealth to abject poverty, I see terrible upheaval. What will be worth more than food in the future? How long do you guess before Mad Max disappears?

    • art.berman


      Your scenario of possible, people being human. I suspect the growing pressure from mass immigration may be the most disruptive and divisive factor. The developing world is least able to cope with CoV and is already suffering a massive debt load.

      All the best,


    • Radu

      Hello, Paul. Do you realize that most of the food comes from agribusiness and if you take out the oil and all oil and natural gas byproducts aka fertilizers, pest control substances, fuel for tractors, harvesters and irrigation pumps etc there will be NOT A LOT OF FOOD to feed 7 billion people?
      If you look at all secular cycles that human specie had to endure and if you realize that societies collapsed because of the simple equation “people=food water energy” could not be solved when the carring capacity was overshot, then you would not talk about food as the current status quo can and will be maintened.
      We produce massive amounts of everything beacuse to the energy provided by man and beast we added machines…take machine out and 6 billion die.
      W we will not escape the current predicament by maintening the status quo…we need a radical societal change and a new way of life, a way that does not pursue endless growth on a limited planet!

  • Eddie

    I agree it was a mistake to start exporting our Oil, the whole industry reminds me of a shell game. I do like the idea of filling the Strategic Petroleum Reserve at cheap prices. My only personal solution at the moment is investing in Gold bullion.

    • art.berman


      Good luck with gold. I have never understood what to do with physical gold if currency is worthless.



  • James

    there is no ‘solution’ – the pandemic is a global false flag genocide, period. If people were willing to physically fight it, then… but no chance in hell, the majority of humans cannot think at all outside of media programming. The robots form an unstoppable army – its basically over as once the vaccine comes….

  • […] geologist and consultant Art Berman recently detailed the problem in this piece. Berman is the man who accurately predicted—starting way back in 2008—the persistent losses […]


    Thank you for your insights and I appreciate that you provide these for free. I have not read all the comments to this article but in terms of energy security of the US the biggest supply and supplier of oil lies north of the 49th parallel. No need to nationalize the tight oil industry. Rather the government needs to ensure the continued access to this supply. Or else ensure the overthrow of Maduro’s regime into a more US-friendly government.

    • art.berman

      Canadian oil does not resolve the problem of zero income for most U.S. independent oil companies as storage fills. They will not be able to pay their interest expense and will declare bankruptcy. No one will fund their ongoing operations or buy them in a global depression so the U.S. government will be become the owner of last resort.



  • Conrad Maher

    Another great presentation and analysis Art. Thank you for introducing me to Nate Hagens. I look forward with excitement and joy to catch up with what he has to offer. With over 50 years looking for, appraising and developing oil and gas field, it always a pleasure to read your presentations. Covid-19 will lead more people to understand the connection between energy and human endeavor, but it may not be enough with our inadequate system of education in the US to shift the balance towards the numbers needed avoid a chaotic outcome. Thank you for your great work.

  • […] will hasten the transition to renewable energy. I believe the opposite will occur. As I wrote last month, “A world in economic depression will default to the cheapest and most productive fuels. Oil […]

  • […] ABSOLUTELY ESSENTIAL! – Game Over for Oil, The Economy is Next – Art Berman […]

  • jal

    ” The price of oil is too low to justify the cost of extraction even if storage were available.”

    Why is Canada still extracting oil at a loss?

    Somebody should tell Canada to stop and leave the oil in the sand.
    Its simple thing to do, here is my price. If you don’t want to pay go buy somewhere else.

    • art.berman

      The reason is cash flow–the same for every company that continues to produce. On a point-forward basis, they convince themselves that they are making money at $30 even though that’s not how the economics work.



  • Yes, renewables are problematic. I learned it more than one decado ago from now defunct, including articles by Mr.Berman.
    That problems are Energy Density & Power Density of renewables compared with fossil fuels, also EROI of renewables. EROI=Energy Return on Energy Invested, a concept from Prof Charles A.S. Hall research.
    Energy Density is about how big the energy content; Power Density is about how big the energy flow.

  • […] If overall oil demand remains 20 percent less this year than last, why would oil companies consider drilling for new supplies until capacity dropped nearer to where demand is? The longer those companies wait to replenish supplies in earnest, the more difficult it will be to return to production levels last seen at the end of the 2018. […]

  • […] The impact of the Covid-19 crisis has been covered by a number of writers on the topics of thermodynamic economy and the nature of a deflationary economy which seems permanently perched now on the precipice of another plunge which can happen at any time. For example, Nouriel Roubini has apparently “come out of retirement” to rejoin the team for another season of NFL (National Financial League?). One piece by Karishma Vaswani, Asia business correspondent, on BBC headlines it “Coronavirus: Leading economist warns of 10 years of depression and debt”. Art Berman, who I heavily cited in Part I, weighed in early in the coronavirus crisis when the Saudi Prince took the bizarre step of launching a price war on petroleum against the Russians: “Saudi oil-price blunder: Tipping point for a global depression.”# Berman later elaborated, a month later, “Game over for oil; the economy is next.” […]

  • […] “If overall oil demand remains 20 percent less this year than last, why would oil companies consider drilling for new supplies until capacity dropped nearer to where demand is? The longer those companies wait to replenish supplies in earnest, the more difficult it will be to return to production levels last seen at the end of the 2018.” Kurt Cobb, author and energy commentator […]

  • […] La energía es la economía: no hay producción de bienes o prestación de servicios que no implique consumo de energía fósil. El PIB es proporcional al consumo de petróleo. La globalización no hubiera sido posible sin la potencia energética del petróleo crudo convencional. La economía industrial moderna, de escala global, no puede funcionar sin el suministro de hidrocarburos que mantienen en movimiento a miles de millones de turbinas de combustión y motores diésel. Quien hable del fin de la era de los combustibles fósiles está hablando, lo sepa o no, del fin de la globalización. Sin petróleo no hay globalización. […]

Leave a Reply

This website uses cookies and asks your personal data to enhance your browsing experience.