Oil Guru Sees Return to $100 Crude

38 Comments on "Oil Guru Sees Return to $100 Crude"

Davy on Tue, 21st Jul 2015 6:48 am 



Rigzone said “The magic of prices works.” Good to know prices will kickstart demand. I was worried with all that has happened recently. They told me cheap oil prices will help the economy but it didn’t. I guess high prices are the answer! These guys are brilliant!

shortonoil on Tue, 21st Jul 2015 6:52 am 



“The oil guru who predicted last year’s rout said $100-a-barrel crude is likely to return within five years as faltering supply fails to meet demand.”

This “guru” failed to mention where an economy can be found that can afford $100 oil. He must be spending a lot of time on Mars recently because it is not planet Earth.

We passed the $100 affordability point in 2012, and from there going forward it goes down:

http://www.thehillsgroup.org/depletion2_022.htm

No matter how much you want, or need something if you can not afford it – you don’t get it. That simple realization (that most people have grasped by the age of five) seems to have escaped this “guru”. He apparently still believes that oil is a magical substance that comes for the land of Unicorns, and Tinkerbell. Reading too many fairy tales to children may have long term consequences?

“Petroleum production is a process which provides for the delivery of energy from a liquid hydrocarbon.”

http://www.thehillsgroup.org/

Jimmy on Tue, 21st Jul 2015 7:52 am 



Plenty of folks can afford $100 oil. They just have to learn to decrease their spending on discretionary consumer items like a new iPhone every 2 years and tickets to the game and all that drugs and alcohol and a new wardrobe every season. Energy is what people need more than anything else and the ups and downs of a volatile economy over the next few years will teach people/modify behavior so that they won’t spend money on non essential consumer goods. All discretionary spending will eventually cease and the only thing people will buy is oil. At any price.

ghung on Tue, 21st Jul 2015 8:07 am 



Jimmy: “All discretionary spending will eventually cease and the only thing people will buy is oil. At any price.”

What percentage of our economy is based on discretionary spending? Those who’ve lost their jobs due to reduced spending on non-essentials won’t be buying much $100 oil either.

BobInget on Tue, 21st Jul 2015 8:11 am 



Thanks Gary,
“and don’t forget that geopolitical risk”..

“low end of the range”
“No Spare Capacity”
“ISIS is a clear and distinct danger to oil”
” Surge capacity in 90 days”
“Iran’s storage mostly condensate”
“Long lead times for shale”
“Production rate of growth sloing”
“20% reduction in drilling”
Crude stocks declining on-shore\
“The higher the oil prices the higher the cost”
“Lower price, lower cost”
“Stronger demand in US and Europe”

BobInget on Tue, 21st Jul 2015 8:24 am 



I agree with Jimmy.
We can afford $100 oil today for important reasons.

1# $100 ain’t what it was in 2008
(see how far a hundred bucks goes at your grocery store)
2# Wages, thanks to Obama are slowly rising.
3# Automobiles get better milage today.
4# Google gasoline prices worldwide.
Now Google incomes. Have you ever wondered
how Europeans could afford nine and ten bucks a gallon for for gasoline when we were paying two? Were their incomes that much higher?
How come they get a month’s vacation when we two weeks? Why do ‘they’ get single payer health care when we need to wait till 65?

shortonoil on Tue, 21st Jul 2015 8:43 am 



“Plenty of folks can afford $100 oil.”

Oil no longer supplies enough energy to drive an economy that can afford $100 oil. Just because Bill Gates can afford $10,000 oil doesn’t mean that an oil industry will exist to provide it to him when it reaches that price. The same can be said for $100 oil; not enough people can afford it to support our modern oil industry. Since the world’s petroleum industry composes 38% of the world’s GDP, when it goes so does the rest of the economy. After that you are back to trading chickens for a wagon wheel.

There is no direct correlation between what “someone” can afford, and what the economy can afford. Roman’s later day Emperors though they could afford 50 legions; Roman’s economy couldn’t.

ghung on Tue, 21st Jul 2015 8:48 am 



Not so sure, Bob. My thinking is more along the lines of Steve’s take on things. Saying “WE” can afford $100 oil is simplistic. Many can’t, or will make hard choices that affect their neighbors’ ability to afford $100 oil, and/or the overall system becomes bogged down in even more debt. Whatever returns that oil provided in a real macro sense becomes untenable over time; borrowing from Peter to pay Paul’s fuel bill. We’ve already racked up tens-of-$trillions in unrepayable debt to keep this scheme going. Think it can continue forever?

penury on Tue, 21st Jul 2015 9:13 am 



I am not an “oil guru” but I can make predictions. The price of “energy” will go up, the price of energy will go down. More people will be unable to afford the energy regardless of price. People with higher incomes will always be saying that things are “normal” and the poor will continue to serve in their niche. The price to obtain the product will continue to rise, both in currency and societal costs and the discussion will continue until the end.

Cloud9 on Tue, 21st Jul 2015 10:03 am 



As we are drug kicking and screaming back to the 19th century with flat screens, oil may get cheaper. In 1925 my Pop was shaking peanuts for fifty cents a day. Of course, that fifty cent piece was silver. As the full force of deflation sets in, wages will drop like everything else. Oil may get cheaper unless you count the man hours needed to earn it.

shortonoil on Tue, 21st Jul 2015 10:19 am 



“Not so sure, Bob. My thinking is more along the lines ofSteve’s take on things. Saying “WE” can afford $100 oil is simplistic.”

It now takes 3,210,000 BTU to extract, process, and distribute a barrel of oil which contains 5.88 million BTU. That is not simplistic, it is a calculation. Unless there is some radical change in the dollar’s relationship to a BTU which is now, according to the World Bank and the EIA, 5680 BTU per dollar,

http://www.thehillsgroup.org/depletion2_008.htm

and factoring in thermodynamic required waste heat a barrel of oil can not exceed $100 unless energy is input from another source. Considering the magnitude of the energy required to accomplish that, it seems very unlikely that such a transfer will occur. If it was attempted the world would most likely return to trading chickens for wagon wheels. Most of the modern day global economy would undoubtedly collapse. So much energy would have to be taken from other essential processes that they would cease to function.

Direct calculation of very well known properties of petroleum give us a very good reason to believe that prices can not exceed $100 at this point in the process cycle. There many people with many opinions on the subject, but we will continue to rely on the Laws of Physics for the best assessment of the situation.

http://www.thehillsgroup.org/

rockman on Tue, 21st Jul 2015 10:24 am 



“We can afford $100 oil today for important reasons.: What do you mean “we”, white man? LOL. It matters little if some folks can afford $100/bbl. There are some folks today, like the Rockman, that could easily afford $200/bbl. So why isn’t oil priced much higher?

The key metric is how much oil can be sold at $100/bbl. The KSA is dumping as much oil as possible into the market place at the current price level because they need to generate $X revenue whether oil is selling for $50/bbl or $150/bbl. If they could generate enough income (i.e. sell enough oil) at $150/bbl then they would cut production and sell oil for $150/bbl. So even if there are economies that could handle $150/bbl they can’t sell enough oil at that price to generate the income they require to keep their natives from getting restless.

Boat on Tue, 21st Jul 2015 10:51 am 



Let’s take Greece for example. Don’t retire at 45, don’t take 36 days off paid. Have the spouse and the husband work full time.

Now you know why there isn’t much sympathy for problems in Europe. They simply don’t work as hard and long.

Tip: Buy a bigger house and have 4 wage earners. Then it doesn’t matter what the price of oil is. Make it zero energy. Car driven with the most amount of miles should get at minimum 35 mpg.

ghung on Tue, 21st Jul 2015 11:23 am 



Boat gives us a nice description of life as a worker drone/slave to an oil-based economy. Helluva way to waste a life in my book, but maybe Boat can explain what the point is to being consummate consumers, compromising their soulless lives in order to afford $100 oil while thoroughly trashing the planet.

Many of us are busy making other arrangements, but thanks, just the same.

Davy on Tue, 21st Jul 2015 12:31 pm 



G-man, Sounds like the description of a heathen used years ago by the missionaries describing the Native Americans. Life comes full circle. Now we know who the real heathens are. All we need to do is look in the mirror and out the window.

Boat thinks it is normal to be a nouveau heathen because Boat has been normalized to the rape and pillage of modern life. Boat epitomizes the modern progressive man.

Me, I am just a hypocrite stuck in BAU unable to free myself from its evil. Trying to use BAU to get out of it. Preaching doom and prep like a fool. Talking the spirituality of less with less and appearing a nutter. It’s just my nature and I guess it’s just Boat’s nature.

Apneaman on Tue, 21st Jul 2015 12:32 pm 



Hey Boaty, take a good look at the future of commuting in America. The combination of poorly maintained infrastructure and the ever growing consequences of climate disruption are starting to hurt. Last week it was burning commuter cars from wildfires. I have long maintained that climate disruption will tear apart our glorious modern infrastructure like a child’s Meccano set. Even if the money was there it would make no real difference because we pissed Momma off and now she says play time is over little apes.

This Is What Crumbling Infrastructure Looks Like

After a bridge collapse in Southern California, “Interstate 10 is closed completely and indefinitely.”

http://www.popularmechanics.com/technology/infrastructure/news/a16532/america-crumbling-infrastructure-interstate-10-bridge-collapse/

Motorists flee as wildfire races across California freeway

http://www.sandiegouniontribune.com/news/2015/jul/17/wildfire-sweeps-across-s-california-freeway-burns/

shortonoil on Tue, 21st Jul 2015 1:04 pm 



“Hey Boaty, take a good look at the future of commuting in America.”

http://www.popularmechanics.com/technology/infrastructure/news/a16532/america-crumbling-infrastructure-interstate-10-bridge-collapse/

This an example of the on going cannibalization of the infrastructure. It is happening to keep the oil flowing. In simpler terms, we can no longer afford to maintain it. Our complex integrated social structure (the “they” in they will think of something) is running out of gas. Or, more specifically, running out of energy. Oil is no longer supplying the economy with the energy it requires to grow. It is not even supplying the energy it needs to maintain what has already been built!

Boat on Tue, 21st Jul 2015 1:05 pm 



ghung,
I worked 35 years in plastic PVC pipe factories providing water transportation to the masses. Does that make me a bad guy? I enjoyed it, became very good at it. Along with coworkers cut scrap form 13% back in the 80’s to 3%. Cut overweights from 3% to 1 1/2%. Those numbers were industry leading. Does that make me an environmentalist? Did those improvements make more of an impact than growing a few gardens? Millions of lbs. of plastic were saved. At one factory I had a home that had 6 acres that I mowed 6 acres around 150 trees. Was that drone like activity bad? At the same we has a 1/4 acre garden which took care of most vegetables for the year. Was that drone like activity good or bad because it required me to buy a huge freezer. Some of you doomers just live in a alternate universe world and don’t think of the big picture. I look back at my life as most of us do. I am happy with the trip.

ghung on Tue, 21st Jul 2015 1:06 pm 



From Ap’s second link:

“In the midst of the chaos, fire officials said aircraft sent to douse the flames were briefly delayed after five drones were spotted above the blaze.

It was the fourth time in a span of a month that a drone disrupted efforts to suppress a wildfire in Southern California, U.S. Forest Service spokesman Lee Beyer said.”

Clusterfuck Nation? Anyone?

Boat on Tue, 21st Jul 2015 1:34 pm 



Short,
I will agree with one thing in that article. The will to keep up with infrastructure isn’t there.

Apneaman on Tue, 21st Jul 2015 2:58 pm 



Engineering in an Age of Limits
Post #17. The Red Queen Dilemma

https://peakengineering.wordpress.com/2015/07/21/17-the-red-queen-dilemma/

Apneaman on Tue, 21st Jul 2015 3:12 pm 



Why America is Falling Behind the Rest of the World

http://time.com/3965586/12-signs-america-decline/

idontknowmyself on Tue, 21st Jul 2015 3:25 pm 



Canada and US, two countries that benefit a lot from cheap oil are fast becoming shit holes. More people in Alberta are now using food bank because of the layoff in the oil industries.

With twice the debt of California, Ontario is now the world’s most indebted sub-sovereign borrower

http://business.financialpost.com/news/economy/with-twice-the-debt-of-california-ontario-is-now-the-worlds-most-indebted-sub-sovereign-borrower

idontknowmyself on Tue, 21st Jul 2015 3:35 pm 



Sorry, I could not resit populating the comments section with more doom and gloom porn.

Alberta food bank surge: sign of bad times for all?
Food banks across Alberta are overrun with demand — perhaps a bad sign for many Canadians

http://www.cbc.ca/news/business/alberta-food-bank-surge-sign-of-bad-times-for-all-1.3160641

antaris on Tue, 21st Jul 2015 4:05 pm 



New truck, boat and snowmobile parked in front of the new house and then relying on the food bank.

idontknowmyself on Tue, 21st Jul 2015 4:17 pm 



Yep. Typical Canadian, not bright and care more about hockey score and being politically correct instead of understand, learning and becoming more knowledgeable about the world.

Canada the land where political correctness is everything, where you should not say anything negative that could offend people emotional well being.

This is a good example of Canadian political correctness.

https://www.youtube.com/watch?v=LKkAL1AEam8&list=PLq6pbQUzThcTY-WwrJco2jtqifo7Vy_vh&index=6
https://www.youtube.com/watch?v=Lx2A7b50Xog&index=7&list=PLq6pbQUzThcTY-WwrJco2jtqifo7Vy_vh

yukonfisher on Tue, 21st Jul 2015 4:35 pm 



Short, according to the numbers you supplied, a barrel of oil would be worth $470- dividing the 5680 but/dollar into the net btus/ barrel.This seems to leave a lot of value after deducting for all the other energy sinks associated with using oil.

BC on Tue, 21st Jul 2015 7:16 pm 



@rock, short, et al.,

The value of US oil production adjusted for the growth of M2 (money supply 1970 = 100) and population (per capita) is at the level of the mid-1980s to early 1990s and the mid-1960s to early to mid-1970s.

M2-adjusted oil production per capita is down 80% since the 1980 peak and down 51% since 1959.

The US is producing the same or less than the amount of oil produced 25 to 40-50 years ago, even though the US economy is 17 times larger, M2 has increased 19 times, and total debt has increased 40 times.

IOW, the foregoing is the result of US having reached peak oil production per capita in 1970 and the resulting deindustrialization, decapitalization, and financialization of the economy because we could no longer afford an industrial economy after 1970-85.

We offshored goods production and employment (and pollution), imported cheap oil, and ramped debt to wages and GDP to make up for the inability to sustain an industrial economy with falling oil production per capita (oil depletion regime)

And now the rest of the world is at peak oil production per capita since 2004-08 where the US was in the mid- to late 1970s. When we commenced deindustrialization and financialization of the economy, debt to wages and GDP was much lower and the constant US$ price of oil was $12-$25. The rest of the world, including China-Asia and the rest of the emerging and “frontier” markets, do not have this luxury of cheap oil or the capacity to financialize their economies, as the world is already at record debt to wages and GDP. (China’s CCP elites are DESPERATELY trying to financialize and create a dubious “wealth effect” by overtly promoting an equity market bubble and then resorting to blatantly panicked means to prop up the market as it inevitably crashes. Amateur-hour tragic comedy.)

Therefore, QEternity, ZIRP, NIRP, and increasing debt-money reserves will no longer result in growth of oil production and real GDP per capita, and the data are absolutely unequivocal on the point.

It requires ever-increasing debt-money supply at a 0% discount to produce costlier, lower-quality crude oil substitutes at an unprofitable price and a end-user price that does not permit growth of real GDP per capita after debt service and energy costs of energy extraction.

This is the definition of the Red Queen Race and the fall off the Seneca cliff (see Ugo Bardi).

This is so obvious from the data that I am being occasionally strident about it because it is virtually unknown by even 10% of the population, and perhaps no more than 1-5%.

I personally know petrobanksters, hedge funds, private equity, sovereign wealth fund, and Wall St. types who look askance and don’t actually understand the concept and implications. The funding practices, convenant structures, and expectations by these same types are evidence of their lack of understanding; but “the market” is about to send them to school.

idontknowmyself on Tue, 21st Jul 2015 7:30 pm 



Yep I agree with everthing.

Specially like:
China’s CCP elites are DESPERATELY trying to financialize and create a dubious “wealth effect” by overtly promoting an equity market bubble and then resorting to blatantly panicked means to prop up the market as it inevitably crashes. Amateur-hour tragic comedy.

Japan that has admitted manipulating the stock market.

Makati1 on Tue, 21st Jul 2015 8:47 pm 



“Oil Guru Sees Return to $100 Crude”

…which will last one day until you hear the atomic-like explosion of the world economy and financial system…lol.

More Rigporn…

BobInget on Tue, 21st Jul 2015 10:02 pm 



And here are some imports from the east coast.

http://www.hellenicshippingnews.com/us-atlantic-coast-gasoline-imports-slide-as-european-arbitrage-window-closes/

in Freight News 20/07/2015

A bounty of supplies in the US Atlantic Coast gasoline market and a recent surge in European gasoline values shut an arbitrage window for shipments from Europe this week, sources say.

Atlantic Coast gasoline stocks totaled 62.1 million barrels in the week that ended July 10, up 1.6 million barrels week on week and 1.5 million barrels higher than a year ago, according to US Energy Information Administration data.

Meanwhile, imports of gasoline into the region, which have been strong all year and peaked at 797,000 b/d in the week that ended July 3, are starting to fall.

Imports fell to 634,000 b/d in the week that ended July 10, a total which remains strong by historical standards — imports averaged 514,000 b/d in 2014 — and reflects an average of two cargoes a day. And looking forward, market observers expect import levels to slip yet further.

Data from Platts cFlow ship-tracking software shows four vessels — carrying 1.3 million barrels of gasoline — scheduled to arrive on the Atlantic Coast in the next 10 days. Earlier in July, as many as 10 ships carrying 3.5 million barrels of gasoline were plying the same routes.

The glut of inventory has dampened demand for imports, but it is a surge in European gasoline prices that slammed the arbitrage window shut.

European prices have risen — Northwest European Eurobob gasoline barges climbed as high as $718.25/mt in June after starting 2015 at $485.75/mt — in response to regional supply tightness and a scarcity of blending components.

But the closing of the arbitrage to the US Atlantic Coast this week imposed a bearish turn on the European market, with EBOB barges falling over the past few days, but not sufficiently to re-open the arbitrage window.

EBOB barges were assessed at $653.75/mt Thursday, down from $674.50/mt Wednesday, with the premium to the front-month EBOB swap at $20.25/mt Thursday, steady on the day.

While EBOB barges have dropped quite rapidly — with the premium of the physical EBOB barges to front-month swap decreasing almost $50/mt in the past week — they still remain relatively high, with the premium for physical EBOB barges well above the year-to-date average of $4.20/mt, Platts data show.

“Relatively strong recent US gasoline imports may have depleted European stocks and so prices in Europe have jumped to levels that may choke off that flow to the US in the weeks ahead,” a European market observer said.

Rising freight rates have also helped close the arbitrage window for cargoes sailing from Europe.

Starting the week at w170, freight rates on 37,000 mt UKC-USAC/USGC runs increased steadily this week. By Thursday, the UKC-US Atlantic Coast and UKC-US Gulf Coast assessments, basis 37,000 mt, had firmed to w207.5.

Tight tonnage for the third decade of the July fixing window has sent medium-range clean tanker rates in the UK Continent region to seven-month highs, sources said. At the moment, relatively few ships are available to ship refined products from Europe.

With few vessels ballasting from the US Atlantic Coast, the tonnage list became tight for July UK Continent loadings, taking the market by surprise and boosting rates, sources said.

apneaman on Tue, 21st Jul 2015 11:16 pm 



U.S. banks prepare for oil and gas company loans to worsen

http://www.reuters.com/article/2015/07/21/us-usa-banks-credit-insight-idUSKCN0PV0C120150721?feedType=RSS&feedName=businessNews

BobInget on Thu, 23rd Jul 2015 2:11 pm 



Iraq cuts back.
https://www.iraqoilreport.com/beyond-the-headlines/west-qurna-1-budget-slashed-by-500-million-15087/

Benny on Sat, 25th Jul 2015 2:45 am 



By the end of 2015, there will be around 55000 Tesla car being driven around the world. All of them will not go back to the gas station, I am sure they never will. I have been test drive a Tesla, god it is good. I will definitely be my next car. Who knows how many Teslas will be there in 5 years time. I think that will have a big impact on the oil price and demand.

Davy on Sat, 25th Jul 2015 6:19 am 



Come on Benny, do a little research. Tesla’s impact is not even on the radar screen with the oil situation. They are nothing but a rich man’s diversion with zero impact on the real situation of oil depletion.

Benny on Thu, 30th Jul 2015 10:35 pm 



Ahh, something to support my view!

http://www.greencarreports.com/news/1099344_even-the-oil-industry-asks-does-tesla-mean-the-end-of-hydrocarbon-fuels

Apneaman on Thu, 30th Jul 2015 11:44 pm 



Benny how many passenger cars can Tesla build? How many internal combustion passenger cars are on the road the world over? What about all the big delivery trucks that bring us our endless consumer goodies? Tesla planning on building big battery powered tractors? Tesla cars are about as useful as putting a band-aide on a point blank shotgun wound.

Davy on Fri, 31st Jul 2015 5:51 am 



Benny, Tesla is a 1% toy is about the extent of the picture. Ev’s are a niche that will likely never amount to a significant alternative. Currently EV’s are a CO2 emitter and not particularly green because AltE is at such a low percentage of total energy contribution to the global energy mix. BTW, AltE is not clean and renewable as the greenie weenies say. Plenty of fossil fuels go into construction and AltE’s will likely never drive an economy that can produce and maintain them without significant fossil fuels component. IOW AltE and EV’s are extenders of the fossil fuel age by a couple years at best.