Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on June 16, 2015
A year after the crash, oil markets risk more trouble ahead
A year on from the start of one of the biggest oil price crashes in history, the driving force behind the slide remains intact: there is still too much crude.
While output continues to grow, the economic outlook has darkened in top energy consumer China, where oil demand has been one of the few bright spots in the market.
Add to the mix record output by the Organization of the Petroleum Exporting Countries (OPEC) and the possibility of a return of Iranian crude exports, and further price turbulence looks almost certain.
Oil prices began a seven-month rout this time last year that took Brent crude futures LCOc1 from $116 per barrel to around $45 by January.
While prices have crawled up since, there are few signs yet that OPEC’s strategy of keeping output high in a bid to drive out competitors, such as U.S. shale oil, is doing enough yet to change market fundamentals..
“The real bearish change is OPEC production that has risen from 29.79 million barrels per day (bpd) last year to over 31 million bpd. I think this is the most significant fundamental change of the last 12 months,” said PVM oil analyst Tamas Varga.
U.S. Energy Information Administration (EIA) data published this month shows that global petroleum oversupply, or production versus consumption, has more than doubled to 2.6 million bpd since the end of the second quarter last year.
“We’re not in the clear as far as the supply-demand balance. In some ways, we think this whole situation is getting worse,” said Vikas Dwivedi, global head of oil and gas strategy at Macquarie.
And more oil may yet come to the market.
Major powers and Iran are trying to agree on a nuclear compromise by the end of the month that could allow a lifting of sanctions that have reduced Iran’s crude exports to under 1 million bpd, down from 3 million bpd in 2011.
Should Iranian oil return before the end of the year, traders said that would prevent a seasonal drawdown in stocks that usually happens in the fourth quarter, preventing a re-balancing of the market.
DON’T BET ON CHINA
How the market develops towards the end of the year and into 2016 will also depend heavily on China.
Its oil imports have held near record highs for over six months as its gasoline demand soared on a surge of new cars and as the government built up its strategic oil reserves.
And while some analysts believe China’s demand will remain strong, there are signs that its thirst for oil is slowing as the world’s second-biggest economy grows at the slowest pace in decades.
“Don’t bet on a rebound in China later this year. The government has tried a lot to spur growth but so far it’s not working, and that could also retrain energy demand,” said Frederic Neumann, co-head of Asian economic research at HSBC.
China’s oil imports fell more than 10 percent in May from a year ago, marking the steepest drop since November 2013, while car sales also dipped.
The global economic outlook has also dimmed, with the World Bank cutting its 2015 outlook from 3 percent to 2.8 percent, urging countries to “fasten their seat belts”.
Fuelled by lower prices, many analysts expected production, especially of price sensitive U.S. shale drillers, to fall.
Yet even after producers curbed drilling and shut some production, output has remained high as previously drilled sites started operations and producers slashed costs to stay in business.
At the same time, OPEC is producing near record levels and top exporter Saudi Arabia has even hinted it could increase output further.
The group decided this month to keep its taps open in an attempt to retain market share. With production set to stay high, changes in demand have taken on greater importance.
PERMANENT GLUT?
The EIA expects oversupply to last at least until 2017, but others say that the glut could be more permanent as oil loses its share in the world’s energy consumption.
“I think the overwhelming trend is that oil intensity of developed and developing economies is decreasing rapidly,” said Tom O’Sullivan of energy consultancy Mathyos Japan, highlighting a halving of China’s energy intensity – the amount of energy used to generate a unit of GDP – over the past 30 years close to levels seen in fully developed economies.
BP (BP.L) said in its annual outlook this month that last year may be seen as a turning point for the energy industry.
“In years to come, it is possible that 2014 may come to be seen as something of a watershed for the energy industry…. The big picture remains one of abundant reserves, with new sources of energy being discovered more quickly than they are consumed.”
39 Comments on "A year after the crash, oil markets risk more trouble ahead"
Plantagenet on Tue, 16th Jun 2015 8:29 pm
The oil glut is going to end at some point, but I wouldn’t be surprised if oil prices drift a bit lower from here given the record high OPEC oil production we are seeing.
Northwest Resident on Tue, 16th Jun 2015 8:33 pm
And Plant’s constant inane usage of the phrase “oil glut” will also end at some point, but not soon enough.
Northwest Resident on Tue, 16th Jun 2015 8:52 pm
Here you go, Plant:
Biggest Glut in Recorded Crude-Oil History Taking Shape
“US shale producers can’t afford to keep production level. They’re loaded up with debt that is getting more expensive, creditors are getting antsy, cash flows are negative, and so they have to produce more to get more money and stay alive.”
They’re all producing as fast as they can while they can. Desperation so thick you can cut it with a knife.
Not the result of amazing technology. Not the result of awesome production techniques. Just the result of free and easy money combined with ZIRP — overcapacity to the max. That’s the Oil Glut.
Tell us about it, Plant!
http://wolfstreet.com/2015/06/16/biggest-glut-in-crude-oil-history-takes-shape-us-russia-opec-saudi-arabia-production/
Apneaman on Tue, 16th Jun 2015 8:55 pm
Lil old Planter had a computer
E-I-E-I-O
And on it’s computer it ran amok
E-I-E-I-O
With a glut glut here
And a glut glut there
Here a glut, there a glut
Everywhere a glut glut
penury on Tue, 16th Jun 2015 9:13 pm
I seem to be in a minority position but, I will continue to say that a lot of the “oil glut”can be blamed on a “money” shortage. Industry is down around the world, shipping is at the lowest point in years, trucking firms in the U.S. are having problems getting cargo’s, unemployment is at high levels throughout the world. Retail sales are way short of expectations,lower gas prices did not help (joke). The truth must be told THE PEOPLE HAVE NO F^^^^^^^ MONEY.
BC on Tue, 16th Jun 2015 9:36 pm
The average 5- to 10-year price of WTI will be $40-$60 in the next 2-5 years from the current $95-$100 price.
No profits in the shale oil industry, which means an associated decline in production of 2-3Mbd and a proportionate decline in consumption, the majority of which will be a decline as a result of the shale sector’s consumption to produce the unprofitable supply at the lower long-term trend price.
This is a given under the emerging supply-demand dynamics, although the vast majority of observers don’t yet see it, whereas the PE and hedge funds types (1) neither see it nor (2) do see it but are trying to front run the greater fool so as to lever up in the meantime and then sell to the greater fools.
Thus, it’s not so much a “glut” of oil but a surplus of credit fueling unprofitable production at a price that cannot be sustained at the current demand, i.e., “Peak Oil” by definition.
Duh.
GregT on Tue, 16th Jun 2015 9:58 pm
Thanks BC.
Why is this so difficult for some people to understand? This isn’t rocket science. Duh is right.
Makati1 on Tue, 16th Jun 2015 10:17 pm
The “glut” would disappear at $20/bbl. Oil has not dropped to a price that the Western consumers can afford. It appears to be a race to the bottom in which there is no recovery possible.
Perk Earl on Tue, 16th Jun 2015 11:46 pm
“Thus, it’s not so much a “glut” of oil but a surplus of credit fueling unprofitable production at a price that cannot be sustained at the current demand, i.e., “Peak Oil” by definition.”
That’s it, BC. Feedbacks in the economic system brought the price back down to an affordable one for consumers but to the detriment of those borrowing funds to go after questionable resources. It is another face of peak oil.
At some point tar sands will become uneconomical, then Venezuela heavy oil, then Artic oil, then deepwater until all we’re left with are mostly conventional sources with sufficient net energy to power the economy. Then suddenly we’ll notice we’re down the other side of the peak. Whoops!
GregT on Wed, 17th Jun 2015 12:06 am
“Feedbacks in the economic system brought the price back down to an affordable one for consumers”
Gasoline was always affordable for consumers, at least for most of them. I personally had no problems with paying $1.49/L, and could easily afford much more than that. It isn’t so much the affordability to the consumer that is the issue, it is the affordability to the economy overall. When economic growth returns, interest rates have risen back to normal levels, and financialization ends. Only then will we know that oil prices are once again affordable.
Problem is, for prices to return to those goldilocks levels of ~$20-$25/bbl a good percentage of that oil will no longer be profitable to produce.
This is what peak oil looks like, and it is already here.
Northwest Resident on Wed, 17th Jun 2015 12:28 am
Perk — “Then suddenly we’ll notice we’re down the other side of the peak.”
Imagine the looks of surprise on their faces! It will be a special moment. I’ll have to remember to snap a few photos to capture that surprise, to document the transition from stunned wide-eyed surprise to agonizing looks of horror and panic as the realization settles in and thoughts turn to inevitable consequences.
I agree with GregT though. I think we’re already at peak oil. Actually I think we’re over the peak and well on the way down, a fact that is obscured and hidden by barrel count of all the stuff they’re counting as “oil” these days.
The stuff that really powers the economy? In decline, and has been for a while. But sure, let’s keep that fact a secret for a while longer and pretend that we have a lot more oil than we do. It buys time, and we could all still use a little more of that.
Ralph on Wed, 17th Jun 2015 3:19 am
Most people will never recognise peak oil even after it is controvertible. The decline in supply will always be due to the collapsing economy, not the other way round.
I would not be surprised if half the remaining oil stays in the ground. By the tine that the price has risen far enough to sustain high tech big budget developments like Arctic oil the economy will have run out of credit to fund such high risk high capital projects, and the trained staff will have long since moved on.
Davy on Wed, 17th Jun 2015 6:54 am
NR we are at peak oil in a dynamic systems sense. We are also at a point where growth is not enough to create the inertia that maintains the momentum that keeps the deadly entropic monster at bay. Our system has grown so complex and dispersed with so much interconnectedness relying on energy intensity and that complexity. It is all tied together by trust from a people that hate each other above the level of family, tribe, and small community.
We are a global society with delocalized locals. A global society that in not resilient nor sustainable. What could be worse than that? We destroyed our natural sustainability of multiple locals for a global complexity. What a stupid hairless ape we are.
We are at a dynamic system condition of limits of growth and diminishing returns to our efforts of battling entropy. The only question for our dysfunctional oversized brain is the time frame. I personally think BAU can bounce along with a condition of societal wealth transfer and the fact we have peak resources now. How long I don’t think more than 10 years with anytime a possibility of collapse to a much lower level of complexity and economy.
The rebalance of consumption and population is happening now but this condition is just the prelude. The song is being played now for what is ahead. The music is giving the tone for the opening of the show. Very soon the effects of an economy in dysfunction at multiple levels and resources at peak are going to derail even a manipulated faux growth. This will happen with the leadership following the same policies and choices that got us to the trap we are in. We have been conditioned down to the individual to follow these dysfunctional activities and ideas.
Peak oil is here because there is not enough energy or volume to propel society through the challenges ahead. How long? well soon that is all I can say. What we are also at is peak bullshit. This is the worst part of it. It is the lies, deceptions, and the destruction of good. I will be glad when this evil is swept away into the dustbin of evolution. I am not sure what is ahead but the lies will be over when hunger strikes. There will be no time for lies when you are struggling to feed yourself.
paulo1 on Wed, 17th Jun 2015 8:00 am
Gas went up 10 cents a litre here, on Vancouver Island. It went up that high, overnight. It is now, 1.279/litre. Luckily, I have been using my MC which gets 70 miles per Imperial….around 4 litres/100k. Crude barely budged!!??
I bought some soft sided saddlebags (Nelson Riggs dry bags) and can put an insane amount of supplies in them and in my carrier. Two weeks ago I had a load of welding cables and rod. This week I need some 10 lengths of abs pipe so may have to use the truck.
The future as it unfolds. One day I may do town runs on my Honda Trail 110. I use it on the property and made a trailer for it out of scrapped aluminum walk-way chunks and lawn tractor wheels. PO in action.
GregT on Wed, 17th Jun 2015 8:12 am
Ya Paulo,
$1.399/L on the mainland. Has been since last week. The station down the street from me hit $1.499 twice since 2007. That’s the highest it has ever been there. We’re only 10 cents off of all-time record highs here.
shortonoil on Wed, 17th Jun 2015 9:29 am
“there is still too much crude.”
These guys keep getting the whole thing backwards. There is not too much crude, there is too little economy! The world is now producing 93 mb/d, which should be good news. The bad news is that as recently as 2001 it would have required just 63 mb/d to have driven the same amount of non oil production economy. Oil production has been growing faster than the non energy producing sector of the economy. The reason is that it takes more, and more oil to produce a $1’s worth of goods, and services in that sector of the economy. It is called depletion, and its impact is growing.
There is no oil “glut” there is an economy with insufficient growth to pay for the increasing amount of oil required to service it. The world is going bankrupt in an attempt to produce that oil, and the more oil the world produces the worse off it will become. Since 2012, increasing oil production, has changed from an asset to a liability:
http://www.thehillsgroup.org/depletion2_022.htm
and prices will keep going down.
Economists will remain bewildered as to why prices are declining. They will keep trying to apply supply/ demand analysis using the wrong metric, and without understanding that supply/ demand only works if the value of the supply is not changing. The value of oil is declining. The world has now reached the point where it can no longer afford additional oil production at any price. The world’s producers will keep attempting to increase production to compensate for declining revenue brought about by declining price. They are pushing on a string!
If economists want to know why their supply/ demand curves are no longer working they will need to understand the energy dynamics of petroleum. We supply a complete analysis of it.
http://www.thehillsgroup.org/
BobInget on Wed, 17th Jun 2015 9:57 am
EIA Weekly Petroleum Status Report
Summary of Weekly Petroleum Data for the Week Ending June 12, 2015
U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending June 12, 2015, 294,000 barrels per day less than the previous week’s average. Refineries operated at 93.1% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 5.0 million barrels per day.
U.S. crude oil imports averaged about 7.1 million barrels per day last week, up by 444,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 6.9 million barrels per day, 5.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 682,000 barrels per day. Distillate fuel imports averaged 147,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.7 million barrels from the previous week. At 467.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 0.5 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 0.1 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 1.9 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week.
Total products supplied over the last four-week period averaged about 19.7 million barrels per day, up by 5.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged almost 9.4 million barrels per day, up by 3.3% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, down by 2.1% from the same period last year. Jet fuel product supplied is up 4.9% compared to the same four-week period last year.(30)
I don’t like consumption numbers as much as last week because of less jet fuel burnt comped to last year.
It will take the oil industry a minimum of two years to recover from a six month (artificial)
“correction” caused by the current, ongoing,
Mideast holocaust….. with no end.
The worst part, as perfectly represented on this ‘energy board’ the full realization of a nation at war, with all its attendant needed sacrifices yet to come close to reality.
For no extra charge, ‘The New Cold War’ with Russia and China.
Moe said to Curly in “Plane Nuts”;
“Now when the music plays The Gates of Hell Are Open, that’s where you walk in.”
Baptised on Wed, 17th Jun 2015 10:31 am
I am paying $2.59-2.79 per gallon all over the southeast. Paid at the very highest in 07-14 $3.79. So a barrel of oil was $116 and is now around $60. Somebody is making more profit. Is it 1 or more links in the oil/gasoline business?
BobInget on Wed, 17th Jun 2015 10:46 am
China, China, China. Never India. India is where China was ten years ago. India has enormous environmental problems, it’s true.
Dogs also enjoy chasing cats, squirrels.
India is growing at three times US rates.
(6.5%) Ignore India until they too try for a
‘soft landing’. Then and only then can we write
“India’s economy, headed lower”.
Whenever someone wants to short oil the argument is always the same, :China’s economy is slipping’… How many times have we read this over the years? As for Asia in general, no here pay attention.
North American consumption keeps rising.
Were it not for imports there would be no
2% surplus. In the last so called ‘glut’ 1986,
a 20% surplus caused oil prices lower. Recovery in those times was a piece of cake. Virgin oil fields everywhere a person looked.Today, we are being held hostage to
stressful Saudi Arabian overproduction.
Live for today, to Hell with the future.
‘
Apneaman on Wed, 17th Jun 2015 10:56 am
“we are being held hostage to
stressful Saudi Arabian overproduction.”
How so Bob? Who is forcing anyone to buy their product? Are we not capitalists? Free market and all that good shit.
rockman on Wed, 17th Jun 2015 11:05 am
Baptized – As a general rule the lower the price of oil the refiners make a better profit margin. So just a guess but that’s where much of that differential might be going.
BobInget on Wed, 17th Jun 2015 11:05 am
OIL,WATER, FOOD.
All inextricably connected.
If we (as a nation) could stop wasting fossil fuels, wealth, on warfare, we might have been able to deal long term with the world’s water crisis. Is it too late? This poster believes it is.
10WaystoCreateWaterasWorldFightsDrought
The recent reboot of the “Mad Max” movie franchise portrays an apocalyptic future in which civilization has collapsed and leather-clad crazies, who’ve apparently never heard of alternative energy, are battling over the supply of gasoline. But judging from a pair of just-released scientific studies, the resource that we actually may be fighting over in the future is groundwater.
The new research, led by University of California, Irvine scientists, reveals that humans are rapidly draining water from about a third of the world’s biggest underground basins, or aquifers, more rapidly than they can naturally be replenished.
What If California Runs Out of Water?
Worse yet, we don’t have a clear idea how much water is left in those natural reservoirs, which in the U.S. alone supply drinking water to about half of the population and are a key source of water for the agricultural irrigation systems that help put food on our tables. That means we may well be in danger of running out, and not even realize it.
“Available physical and chemical measurements are simply insufficient,” UCI professor and principal investigator Jay Famiglietti, who is also the senior water scientist at NASA’s Jet Propulsion Laboratory, said in a press release. “Given how quickly we are consuming the world’s groundwater reserves, we need a coordinated global effort to determine how much is left.”
We’re already seeing the effects in California, which remains desperately parched due to a brutal extended drought.
Californians have been draining water so rapidly from underground aquifers that tens of thousands of square miles of land reportedly are sinking — so drastically that the shifting surface is starting to destroy bridges and crack highways across the state, according to a recent report by the Center for Investigative Reporting.
The two studies, which are being published in the journal Water Resources Research, represent the first effort to use satellite data to look at groundwater loss all over the planet. The researchers utilized data collect by NASA’s twin Gravity Recovery and Climate Experiment satellites. The latter measure dips and bumps in the Earth’s gravity which are affected by the weight of groundwater.
The scientists examined the planet’s 37 biggest aquifers over a 10-year-period ending in 2013. Of those, eight were overstressed, with no natural replenishment to offset human use. Another five aquifers were extremely or highly stressed, meaning that even though they still had some water flowing into them, it wasn’t enough to maintain their water levels.
The most critically endangered water supply in the world was the Arabian Aquifer System, which supplies water to 60 million people in the Middle East. Next on the list was the Indus Basin aquifer of northwestern India and Pakistan, while the Murzuk-Djado Basin in northern Africa was third.
Other institutions that participated in the study included NASA, the National Center for Atmospheric Research, National Taiwan University and the University of California, Santa Barbara.
Apneaman on Wed, 17th Jun 2015 11:10 am
Oil and gas drillers may face wave of bankruptcies this year
http://www.cnbc.com/id/102759162
Perk Earl on Wed, 17th Jun 2015 1:33 pm
“It isn’t so much the affordability to the consumer that is the issue, it is the affordability to the economy overall.”
GregT, what’s the difference between the affordability of the (average) consumer and the overall economy?
It seems that instead of disagreeing you actually reiterated what I stated in a different way. Now we’re both getting redundant.
shortonoil on Wed, 17th Jun 2015 2:47 pm
“GregT, what’s the difference between the affordability of the (average) consumer and the overall economy?”
Well Perk, there is a difference, but it is a slim line of differentiation. You have probably noticed that at times I use the two interchangeably, which is not correct, but it reduces confusion sometimes. The end user is the one who is not part of the petroleum production system. They are not involved in the extraction, processing or distribution of petroleum. In actuality it is a hypothetical line drawn to define a thermodynamic boundary condition. As an example, the gas that the rough neck pours into his truck to get to the drilling site is part of the overall energy cost of production. But, he is diffidently an end user. That is kind of obvious; but what about the RRC employee who processes production reports for the State of Texas. They have to also put gas into their cars to get to work. What we do to get around such sketchy determinations is to define any thing above the Etp curve as end user, and everything below as production energy costs. That way we can say that the end users above the curve are ultimately paying the full cost. Anyone below is somehow passing it on to the ones above. Mathematically it works out beautifully, but in real life it can get pretty difficult to decide what goes where. No model is perfect; some are just better than others!
shortonoil on Wed, 17th Jun 2015 3:16 pm
“Oil and gas drillers may face wave of bankruptcies this year”
That is kind of what we have been saying is going to happen. Hopefully, the FED can print enough funny money to keep it at bay for a year or two; although it appears that they are running out of rabbits for their magic hat trick. Once the oil industry itself starts to unravel, things will get pretty bad, pretty quickly.
Northwest Resident on Wed, 17th Jun 2015 3:47 pm
“Once the oil industry itself starts to unravel, things will get pretty bad, pretty quickly.”
Or, more likely, VERY bad, VERY quickly!
gulp…
Perk Earl on Wed, 17th Jun 2015 4:12 pm
“The end user is the one who is not part of the petroleum production system. They are not involved in the extraction, processing or distribution of petroleum.”
I never suggested they were, but then again they don’t have to be to have a feedback influence on oil price.
John Keller on Wed, 17th Jun 2015 4:38 pm
The fact that every article today mentions glut and focuses on supply tells you it is time to buy oil. Oil demand is up over 2mm b/d currently and will head higher into the second part of the year. Non-Opec production including the US will be down by 1mm b/d by the end of the year. Capex cuts that actually began back in 2013 will show up next year and the year after. Only 6 major projects started up in 2014. That’s the lowest in about 15 years. This “glut” will not last long.
BobInget on Wed, 17th Jun 2015 5:16 pm
Eighty Bucks or Nothing Doing.
Oil Bottomed for Oman Wealth Fund as $80 Needed to Assure Supply
By Claudia Carpenter and Anthony DiPaola
(Bloomberg) — Crude oil is heading back to the $80 level
needed to assure enough production to meet global demand,
according to Fabio Scacciavillani, chief economist of the Oman
Investment Fund.
“We’ve seen the lows,” Scacciavillani said in an
interview in Dubai on Wednesday. “Eighty dollars should be a
sort of equilibrium price.”
Brent crude, the global benchmark, has advanced 13 percent
this year to as much as $65.47 a barrel today as demand
strengthened and a record decline in U.S. rigs fanned
speculation that the nation’s production will slow from its
highest pace in three decades. Prices collapsed almost 50
percent last year as Saudi Arabia led OPEC in maintaining
production to defend market share in the face of a global glut.
How long it takes oil to reach $80 “depends on the speed
of the adjustment” of supply and demand for crude, according to
Scacciavillani, who worked formerly as an economist at both the
International Monetary Fund and European Central Bank and as an
executive director at Goldman Sachs Group Inc. “It will be a
volatile adjustment process fraught with uncertainty.”
Brent for August settlement was 1.9 percent higher at
$64.90 a barrel on the London-based ICE Futures Europe exchange
at 2:20 p.m. local time. Oil last traded at $80 on Nov. 25, two
days before the Organization of Petroleum Exporting Countries
maintained its production target of 30 million barrels a day.
OPEC re-affirmed that limit on June 5.
Saudi Strategy
Demand for oil is picking up and supply is slowing, Saudi
Arabia Oil Minister Ali al-Naimi said earlier this month. Saudi
Arabia shaped OPEC’s strategy last year to defend market share,
arguing that cutting output to boost prices wouldn’t address the
threat from the U.S. shale boom.
“Eighty dollar crude could potentially derail OPEC’s
outlook for rising demand and slowing non-OPEC supply,” Ole
Hansen, head of commodity strategy at Saxo Bank A/S in
Copenhagen, said by e-mail on Wednesday. “While $80 will be
reached, I do not think the supply-demand outlook for the
remainder of the year can support $80 crude.”
A price of $80 would assure sufficient production to meet
demand of about 93 million barrels a day, Scacciavillani said.
Global oil demand will average 94 million barrels a day this
year, the International Energy Agency estimated in its monthly
report in June.
The surge in U.S. shale oil output has provided enough cash
to fund “the retirement party of the American extractive
industry,” he said. U.S. producers have made great strides in
boosting output, but “there’s only so much you can do before
those deposits are going to run out.”
BobInget on Wed, 17th Jun 2015 5:56 pm
I’m betting the ‘farm’ that ‘Saudi Strategy’
is as thoughtful as their Yemen bombing campaign. Which, BTW continues apace.
IMO the biggest reason KSA needs to increase production, not exports mind, is to keep their ‘coalition’ bombing campaign afloat. With all those balls in the air, I’m betting one or two hit the sand.
Even if KSA unilaterally quits bombing,
they are in constant, real danger of a counterattack. Moving from proxy war to
first person was a dangerous move for no good reason at all. For this alone, I’m calling KSA leadership doomed to failure this calendar year. It’s too soon to tell but there must be a baker’s dozen groups looking to cop all that oil.
On another front.
Not since WW/2 has the world experienced a refugee crisis as devastating as the one
hitting Europe today, tomorrow and for years to come.
Needless to say, a mixture of proxy oil wars and Climate Changes are at root cause.
Lebanon has accepted one million two hundred thousand.The USA, five hundred.
Unless the US and Europe begin to permit millions of displaced persons in there will be
social unrest wild enough to overturn any government. Or, we could just open more camps and fork-over food & water, fuels and funds.
Feeding and housing this vast ‘army’ of destitute became more and more dramatic as
climate and oil-wars intensified.
Just thought I would let you-all in on this open secret. We take care of a billion climate refugees (in ten years) or they take care of us.
At the end of the day I’ll stick by my January
oil prices predictions. ($200. inter day. Close
year, $140/$150)
GregT on Wed, 17th Jun 2015 6:11 pm
Perk,
“GregT, what’s the difference between the affordability of the (average) consumer and the overall economy?”
I’m sure that we’re probably on the same page here, but maybe not.
The price of oil does not only affect the price of gasoline at the pumps, it affects every layer of the economy. For most of us in our day to day lives, gasoline is more or less a necessity. It isn’t the affordability of that gasoline per se, as it is how much of our disposable incomes are left over to chase other goods and services. If I own a campground, for example, and I don’t even use fossil fuels in my day to day, my bottom line is affected from higher oil costs. Not because oil prices are too high for the consumer to afford, but rather less people have the disposable income to visit my resort.
Make sense?
BobInget on Wed, 17th Jun 2015 6:41 pm
Shortonoil tells us, with a straight face I presume, we are NOT getting as much bang from our oil as we did ‘back in the day’.
Back when the fleet milage was closer to ten MPG then today’s twenty, soon thirty. Back before heat pumps, LED lighting, microwave ovens, electric hybrid or pure electric autos, before induction cooktops, economical freezers, ground sourced heating, affordable
solar, high milage tires, computerized ICE engines, transmissions, Elon Musk’s home batteries,
Honda’s CNG powered Civic. Even power hungry desk-tops gave way to tablets and lap tops.
As “Oklahoma’s” song goes, “They’ve gone about as far as they can go in Kansas City”
Do you believe there is no more room for
once again doubling again energy outputs
of gas and oil? By necessity, it will happen.
Perk Earl on Wed, 17th Jun 2015 6:50 pm
Here is the part of my original post from which you have been responding:
“Feedbacks in the economic system brought the price back down to an affordable one for consumers but to the detriment of those borrowing funds to go after questionable resources. It is another face of peak oil.”
I don’t see anything in that post about the price of fuel at the pumps, or as fuel price influences consumer affordability, so not sure how you interpreted that.
Just to be clear, consumer affordability was in regards to all products and services that oil price influences. I am certainly aware of that.
So nice by the way now the flittering tape has sent the mocking birds wayward. Didn’t think it would work, but alas a 6 buck roll of iridescent tape did it, who woulda thunk it?
GregT on Wed, 17th Jun 2015 6:59 pm
Perk,
My apologies. We are indeed on the same page.
Glad to hear that you can finally get some sleep!
shortonoil on Wed, 17th Jun 2015 7:27 pm
I never suggested they were, but then again they don’t have to be to have a feedback influence on oil price.
The price of oil is bound by the maximum price that the end consumer can pay for it. The end consumer does not have unlimited funds to purchase oil. Without income increases they would have no additional funds to pay for higher priced oil. Outside of the 1% the rest of the public has not seen an increase in income for several years.
Our methodology is energy based, rather than economic. As the energy to produce petroleum, and its products increases (the Second Law says that it must) there is less available for the end consumer. Oil must be able to power enough economic activity so that the activity it can drive is at least equal in value to the price of the oil; otherwise the money would not exist to buy it. With continually less energy available, the value of oil goes down until to the end consumer it becomes less than its production cost:
http://www.thehillsgroup.org/depletion2_022.htm
The price has now fallen to a level that producers can no longer afford to replace the reserves that they are extracting. When it falls below the lifting cost of existing fields those fields will be shut in.
Higher cost producers are now attempting to compensate for the lower prices by acquiring debt, or liquidating assets. This will further increase cost, and reduce asset values. They are hoping that prices will increase soon enough for them to service that debt. We are 96.5% sure that is not going to happen!
http://www.thehillsgroup.org/
Perk Earl on Wed, 17th Jun 2015 7:54 pm
Yeah, GregT, the silence in the early AM hours to finish off a good night’s sleep makes all the difference. Don’t need as much coffee – lol.
Perk Earl on Wed, 17th Jun 2015 8:34 pm
Short, I don’t know you use parts of my posts to delve further into topics. Why not just write what you want to write without a lead in? Or if you need a lead in why not use something from the article at top?
Don on Thu, 18th Jun 2015 5:05 pm
Short,
I just wanted to point out that while I do like your 2lot methodology I have never seen you mention the other half of 2lot and think that it may be a relevant caveat. Much of the entropic decay in a system can be removed by exerting energy on that system.
For example an engine is a closed system with ever increasing entropy. When I pulled my 283 to rebuild it we dynoed it for comparative purposes and saw ~120 hp, pretty degraded from the advertised 195 that it was supposed to have when made. 2 lobes on the cam were wiped nearly clean, 4 cylinders were ovaled, valves weren’t seating well and their springs were worn out, as well as various other small energy sapping things. After the rebuild I’m now bumping up against 220hp.
Anyway, I’m not trying to rip on your work man, it’s pretty solid and I think much of your assumptions are correct. However I always get a little frustrated that when people use 2lot in an argument they seem to only ever focus on the first half and pretend the second part doesn’t exist, but some entropy can be removed from a given system if the requisite work is put into it. In the case of oil extraction This would likely be R&D money to things like more efficient drilling equipment, more efficient pumping equipment, or better methods for removing water from what is pumped.
I am not saying that any of these things will come to pass, I’m merely stating that entropy can be removed from a system if you are willing to put the work into it, and that it is worth pointing out. The first half of 2lot only applies so long as the system stays closed.