Could the U.S. energy revolution fall prey to the law of diminishing returns?
Oil depletion, or the rate at which a new production is sapped from existing wells, is a hot topic in energy circles. It was common fodder during the years where some analysts ominously warned about demand outstripping oil, but is rarely mentioned in the context of America's budding energy boom.
At least for now, depletion is not an immediate risk for a country that has only begun to scratch the surface of its oil and gas potential, and in an environment where global demand is expected to remain tame. Yet as the momentum toward U.S. energy independence accelerates, the depletion effect looms as a potential speedbump, some say.
"You've definitely experienced a slowdown in global production growth.It hasn't peaked but it's close to plateauing," said John Hummel,president and chief investment officer at AIS Capital Management. In addition globally exported oil is on the decline due in large part to higher consumption in exporting countries.
Given high depletion rates with tight oil production, Hummel is skeptical that the U.S. will achieve its stated goal of energy independence.