I often read The Oil Drum blog and pointed readers of the Drum Beat to my most recent post here. Rune Likvern asked a question about how future oil prices will effect my scenarios. This is an excellent question because it is often claimed that the recent surge in US oil output may lead to lower oil prices. I expect there is a little too much optimism about future output from the Bakken/Three Forks and Eagle Ford plays, but let's consider two scenarios proposed by Mr. Likvern.
Scenario 1 considers a slower rise in real oil prices than I proposed in my previous post, real oil prices rise to $120/barrel (Jan 2013$) by Jan 2018.
Figure 1 requires some explanation. Break even oil prices rise to the real market oil price by Sept 2016 at $115 per barrel and the wells added ramp down to zero by Dec 2017. It is assumed that real oil prices continue to rise at 3.29 % per year and that the decrease in well productivity slows to zero as no new wells are drilled. Eventually the real oil price rises above the break even price and it is assumed that when the real oil price is 110 % or more of the break even oil price that new wells are added and well productivity then continues to decrease. This cycle repeats 3 times between 2018 and 2037 and explains the bumps in output in 2021-2, 2027-8, and 2033-4.