Suffices it to say that the oil and gas industry in the U.S. will never again have the same breadth and depth, ever. This statement of fact has some interesting connotations when it comes to operating in the ultra-difficult, super-inhospitable environments, which seem to enter into our future. In fairness to McKinsey and several other consulting outfits, they acted as expensive mercenaries used by management to execute (no pun intended) the already agreed upon plans, as in: "What do you want me to conclude, boss?"
But I digressed. So here is how the research arm of McKinsey, their Global Institute (MGI), sees potential benefits from a variety of technologies:
|By 2025, these 12 technologies identified by McKinsey have the
potential to deliver economic value of up to $33 trillion a year
worldwide. Source: The New York times. Image based on Exhibit E3 in McKinsey's 178 page report, "Disruptive Technologies: Advances that will transform life, business, and the global economy."|
|Among others, Exhibit E2 in the MGI Report claims that the efficiency of U.S. gas wells has increased by a factor of three between 2007 and 2011.|
Since I do not have the resources of MGI to carefully analyze the entire gas production in the U.S., let me focus on Texas, the largest gas producer in the U.S. Luckily, the Texas Railroad Commission provides easily accessible well production data which allowed me to construct the following plots:
One might argue that this plot is not definitive, because the production decline in tens of thousands of older gas wells more than offsets the new production from the fewer new, more productive wells. So how about plotting an increment of production in a given year, divided by the number of new wells that were put on production in the same year? Well, here it is:
But wait, there is more of more insidious nonsense. Let's look at the MGI claims that the mobile internet, automation of knowledge work (as in layoffs of professionals), internet of things (as in shutting down small stores around the world), cloud, advanced robotics (as in layoffs of industrial workers), etc., will increase the current global GDP of roughly 70 trillion USD by 50%. Just think about it: MGI hopes to increase the world's GDP by 1/2 by replacing people with technology. How exactly will these people retain their buying power to gorge on the new Internet of Things?
What do these technologies have in common? Oh, yes, they all use astronomical quantities of electricity and other forms of mostly fossil fuel power, as well as clean water and rare-earth metals. Without the cheap, reliable, uninterrupted fossil fuel power, ample clean water, and more rare metals than exist on the Earth, the projected growth of these resource-devouring technologies will remain on the glossy pages of MGI reports. So how does one square their estimate that the fundamental enabling technologies (oil and gas exploration and production) will contribute a measly 0.6 trillion of U.S. dollars, but their high-order derivatives will contribute tens of trillions of dollars? Isn't it all upside down? Like an inverted pyramid of the increasingly imaginary activities of our society, such as insurance and financial services?
P.S. Unnoticed by MGI, but a truly disruptive technology that has just surfaced is the illegal, genetically modified wheat with the glyphosate (Roundup)-tolerant genes. My other old friends from Monsanto introduced this wheat to the West Coast, and totally disrupted U.S. wheat exports to Japan and South Korea. They also disrupted lives of thousands of farmers and agricultural service workers in Oregon and Washington State. Oops! But these temporary difficulties might be considered as necessary sacrifices needed to arrive at a futuristic supply of truly inedible food in the U.S. In the long run, this new food supply will make us die faster and thus stimulate the new economy of things.
P.S.P.S. The smart people from the uppermost shelf in the figure above have now figured a way of manipulating resource prices. Goldman Sachs is in the food commodities, aluminum and oil business, and J.P. Morgan is in the copper business. All banks derive huge profits from keeping the oil price as high as possible and loaning money to the oil companies to start projects that would be impossible if the oil price were lower than, say, $70-80 per barrel. Have you noticed that price volatility has all but disappeared from oil trading since that summer of 2008? The big boys are making sure that no one disturbs them from making money quietly. Many tens of billions of dollars per year. This is how wealth is transferred even faster from the base of the pyramid to the top. Now, that's a truly disruptive technology! Sort of like the invisible Ethernet of Things that translates physical goods into electronic cash to do even more damage. Or like a 3D printer to print money from nothing.