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Peak oil price ‘may have passed’ according to oil and gas analysts

Peak oil price ‘may have passed’ according to oil and gas analysts thumbnail

The peak price of oil may have passed, according to industry analysts Gaffney, Cline and Associates.

The firm said the drop in value of a barrel of oil from $145 in 2008 to less than $80 in 2014 was caused by supply significantly outstripping demand.

In a newly-released report, the Houston-based company warned the imbalance could lead to increased price competition among major oil producing nations.

Report author Barry Aling said: “Due to rapid demand growth from developing industrial economies and geopolitical disturbances there has been a five-fold increase in oil prices since 2000.

“It is tempting to assume that further price inflation is inevitable. However, there is growing evidence that the more recent decline in prices reflects changes in the pattern of global energy supply and demand which may mean that the price of $145.61 achieved in July 2008 proves to be a watershed high point.”

The development of unconventional oil in North America has added around five million barrels a day to global output, contributing to a 30% drop in prices during 2014.

But leading Aberdeen oil economist Alec Kemp said that while prices are likely to remain low in the near future, it is more difficult to predict prices further ahead.

He said: “The price of oil depends on supply and demand. Demand has come right down and supply has gone right up because of technological advances so the price has come down.

“The peak has passed so far and it will be relatively low for the next few years, but who knows in 50 years time?”

STV



16 Comments on "Peak oil price ‘may have passed’ according to oil and gas analysts"

  1. rockman on Mon, 24th Nov 2014 10:32 am 

    “…the price of $145.61 achieved in July 2008 proves to be a watershed high point.” As it was the “watershed high point” 34 years ago when oil prices, adjusted for inflation, also topped the $140/bbl level. And as I just pointed out elsewhere we weren’t saved from $145/bbl oil by the shale boom: oil prices collapsed to less than $50/bbl before US production increased from the shales and Deep Water plays. Demand destruction was the obvious cause of the price collapse.

    Yes: production did outstrip demand. But not because of an increase in US production since it was still in decline at that time. The growing gap between production and demand was strictly the result of a decrease in demand. Of course, the recent increased domestic production obviously puts some downward pressure on prices. But any surge in economic growth, and thus consumption, would reverse that trend.

  2. Northwest Resident on Mon, 24th Nov 2014 11:44 am 

    Is the upcoming OPEC meeting a BFD?

    It is. Depending on what decision(s) is/are made coming out of that meeting, the result could absolutely rock this world and shake it hard.

    I think Yahoo tends to reflect the top issues on the minds of TPTB. You have to look in between all the celebrity worship headlines, skip past the sports headlines, try to ignore the always present “how stupid can they get” political headlines. But if you filter out the distractions, a lot of times what you see remaining are headlines pointing to some really important issues.

    Like today. Here, in one scan, are all the links/articles on the Yahoo main page. What do you think? Is oil (or lack thereof) becoming a central issue in our day and time?

    * Oil Stocks: These 5 Drillers Are Sneering at Low Oil Prices
    * Yes, Oil Prices Could Fall Further
    * Why refineries returning from maintenance affect crude oil prices
    * Oil woes for Venezuela
    * Oil at $75 Won’t Shut in Much U.S. Shale, Dow’s Liveris Says
    * Cramer: OPEC in big trouble
    * Some fund managers see oil falling to $60 without OPEC cut
    * No: The U.S. Would Be More Vulnerable To Supply Disruptions
    * Russia puts losses from sanctions, cheaper oil at up to $140 billion per year
    * Look out below! What happens if OPEC makes no cuts
    * Is It Time for the U.S. to Lift Its Restrictions on Oil Exports?
    * Saudis unlikely to cut oil production: Analyst
    * Why falling oil prices have OPEC over a barrel
    * CANCEL THANKSGIVING: The Most Important OPEC Meeting In Years Is Happening On Thursday
    * COLUMN-Oil in Arcadia: John Kemp
    * CIA Economist Warns of 25-Year American Depression
    * Jim Rickards has stepped forward to warn the American people that time is running out to prepare for this $100 trillion meltdown.
    * Iranian nuclear talks push crude oil prices into negative territory
    * OPEC’s Easy Days Setting Oil Production Are Over, Veteran Says; You Need Russia, Norway, Mexico
    * Russia Sees $140 Billion Annual Loss From Oil, Sanctions
    * No: The Economics Simply Don’t Work And Will Get Worse
    * OPEC’s crude realities
    * Iran will lose a potential $1.6 billion a month because of the failed talks
    * Will OPEC cut production to stop oil’s slide?
    * Are markets right to price out an OPEC oil cut?
    * AAA Michigan: Gas prices drop an average 13 cents statewide | Business News
    * Falling oil price costs Russia $100bn
    * Iran to push for Saudi oil output cut at OPEC- Mehr news agency
    * OPEC’s Easy Days Setting Oil Production Are Over, Veteran Says; You Need Russia, Norway, Mexico – Bloomberg
    * Peak Oil Review – Nov 24
    * Iran may propose million-barrel daily OPEC cut in Saudi talks
    * Russia considers joining OPEC oil output cuts in 2015
    * Money Manager Gunderson: Falling Oil Prices Will Lift Economy
    * Oil bottom in: Schork
    * Sasol CFO Says Oil Price No Threat to Bonds as Hedge Considered
    * Research and Markets: Global Oil and Gas Analytics Market Outlook to 2019 – Oracle, SAP AG, Accenture, and SAS Dominate the $19 Billion Industry
    * Strategic OPEC wants to stay competitive
    * On the hypothetical eventuality of no more petrodollars | FT Alphaville

  3. shortonoil on Mon, 24th Nov 2014 11:44 am 

    Bloomberg, FT, WSJ, and every Tom, Dick and Harry out there has some reason why petroleum prices are coming down. A lot of them contradict each other, and some of them are using completely ridiculous excuses. One guy even suggested it was because the Saudis thought the price was too high; even though for the last three years the Saudis have been saying $100 was a fair price.
    Oil prices have been buoyant for the last couple of years because of a flood of cheap money provided, curtsey, of the Central Banks; that mirage is now fading, and commodities are dumping. But the fundamental reason driving petroleum prices has nothing to do with a lesson to be found in Econ 101. It has to do with a little aspect of reality that economists just don’t quit seem to able to get their head wrapped around. It is called depletion. It doesn’t show up in economic texts, therefore, it doesn’t exist. According to their theory when the oil depletes out it will be no problem, it will be replaced by swamp gas, camel farts, or dilithium crystals. Nothing will stand in the way of an economist, and his can opener.
    We’ve got a page here that describes what is happening. Unlike the economists with their Ouija boards, and dried chicken bones we use a different approach; it’s called mathematics and thermodynamics. There is no supply and demand curve used of something that is never defined, and changes by the minute. Its energy.

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

    Next week expect Bloomberg to drag Bugs Bunny, and Daffy Duck into the argument. That pesky rabbit is probably driving down prices by playing the carrot/ oil spread.

    http://www.thehillsgroup.org/

  4. Northwest Resident on Mon, 24th Nov 2014 11:50 am 

    If Porky Pig doesn’t at least make a cameo appearance, taking a few ill-aimed shots at our waskally wabbit, I’ll be severely disappointed.

  5. Perk Earl on Mon, 24th Nov 2014 1:24 pm 

    What if this is the moment oil begins it’s descent from peak? I ask, because if lower production doesn’t translate into the kind of price increase expected, will further cuts be needed? Let’s say for example a 1mbd OPEC cut only drives price up to 87 for Brent. Then Russia chimes in and drops production 300kbd but price only goes up to 90. Yet both of these players now rely on and expect an oil price north of 100.

    That would mean the final squeeze would be on, in which oil exporters and majors are not getting what they need in effect because the consumer has also been squeezed to the point of having not much to throw towards increased consumption, and the spiral down intensifies.

  6. dave thompson on Mon, 24th Nov 2014 1:49 pm 

    Merry happy consumer daze. We have another six weeks or so of lower crude, till the party ends, after the January rush to buy and consume, when the almighty big box temples of wor$hip have been satisfied. The master priests of oligarchy will then ratchet crude back up for the spring/summer pilgrimage of summer vacation mecca. The energy gods are pleased, now go forth and grind.

  7. Northwest Resident on Mon, 24th Nov 2014 2:14 pm 

    Perk — There probably are a lot of people in Russia and OPEC countries not getting much sleep these days, worrying about exactly the problems you describe.

    These days, so much depends on China for oil and commodities “demand”. But what we see in China is a giant balloon that has been pumped with debt to full capacity and has no choice — it must deflate or pop.

    In case you haven’t already read this — speculation that $30 per barrel of oil is not all that far fetched:

    http://www.theautomaticearth.com/where-is-china-on-the-map-exactly/

  8. rockman on Mon, 24th Nov 2014 2:49 pm 

    dave – “We have another six weeks or so of lower crude, till the party ends, after the January rush to buy and consume…” Not that it won’t happen eventually but I would be shocked to see it happen anywhere near that quickly. There might be occasional short spikes but long term trends take just that to change: long terms. In the case of oil/NG prices and development it hinges on consumption. And those trends do not change quickly. Lower fuel prices will lead to higher consumption. Always has…always will. But slowly. Lower oil prices will decrease drilling activity…slowly. Higher oil prices increase production…slowly. Look how long it took $80+/bbl prices to increase domestic production: years.

    After 40 years in the oil patch I’ve learned that the system changes. Yeah: short term high NG prices for a couple of months in the middle of winter as we just saw. And now we’re looking at some of the lowest prices we’ve seen in a long time. Over 4 decades I’ve seen one crippled management team after another count on higher oil/NG prices to save their bacon. And have not seen it happen once.

  9. Perk Earl on Mon, 24th Nov 2014 3:02 pm 

    Yeah, read that article last evening, NWR. China doing similar shenanigans as the West.

    Personally I think we are a ways off of 30 a barrel just yet. I figure it to be a stair-stepped affair, as the old high for oil gets replaced by a new lower high. Brent was at 110 or so, then dropped to just a bit under 80 and is now back up to 80+. So I would expect a price rebound as I mentioned in a post earlier in our exchanges at some point to go back up to 90-95. Then later drop down below the current 80 and so on until s starts to h the f. And that makes sense from the standpoint of diminishing returns, as they chip away at consumer affordability.

    Things never fail immediately. It’s like Seinfeld’s analogy of ending a long term relationship using a vending machine. It must be rocked back and forth until it falls.

  10. Northwest Resident on Mon, 24th Nov 2014 3:31 pm 

    Perk — I’m just a spectator to world events, same as everybody else — well, most everybody else. I’m just sitting in the nosebleed bleachers section, trying to figure out what is going to happen next.

    I think your slow-mo unwind with little peaks and dips makes a lot of sense. But then, I also consider the other point of view to be highly probable, that being, that we’ll go slow-mo up to a certain point at which a spark of panic sets off the herd in a massive stampede. It is the “herd mentality” and the rapid spread of fear/panic that is the worst enemy we face, I think. There will come a point when no matter how loudly and how calmly that voice over the loudspeaker says “please proceed orderly for the exits”, the actual result will be sheer terror and mayhem. Like the Bank of International Settlements said:

    BIS warns on ‘violent’ reversal of global markets

    A violent reversal could result in billions, perhaps trillions of dollars of “lost” net worth, leaving the sickly and diseased global economy standing naked for all to see, just a weak and pathetic shell of its former self. If that happens, $30 per barrel *could* come a lot quicker than many people think possible.

    http://www.telegraph.co.uk/finance/economics/11162217/BIS-warns-on-violent-reversal-of-global-markets.html

  11. bobinget on Mon, 24th Nov 2014 3:53 pm 

    So far, no comment on our multi front wars for Mideast Oil.

    1) Press reports ignore IS substantive advances in Libya.
    2) Why did the White House can Chuck Hagel.
    3) Iran wins yet another seven month nuclear extension.
    4) Israel refuses to accept anything less then surrender of all Iranian nuclear ambitions.
    5) Will Russia manage to subvert dissident OPEC members away from Saudi Arabia and Kuwait.
    6) No funds for US bridges, roads, in danger of collapse.
    7) Drones in short supply for multiple missions in
    at minimum, ten countries.
    (Iraq, Pakistan, Afghanistan, Yemen, Mali, Libya,
    Syria, Sudan & South Sudan, Nigeria). (Boko Haram)

    Today, Israel declared itself a “Jewish State”.
    Israel joins the League of Religious Exclusivity made popular by ISIL.

    While Special Forces have come from a half dozen nations to crush ISIL. Have we heard a peep from
    masters of the most powerful army in the region? (IDF) Willing to enter a nuclear war with Iran over nuclear ambitions, when will “JS” mix it up with “IS”?

  12. Davy on Mon, 24th Nov 2014 3:58 pm 

    NR, some days I am a Perk and some days I am an NR. The days I am a Perk is when there is enough optimism and momentum to make me think this process will role one for a while. I call it a bumpy descent as opposed to the bumpy plateau we have been on. But other days I am a NR and I scratch my head and say how the frig is this going to hold together when the Ponzi dies and panic sets in. There is so much notional debt per physical. There is so many dependents depending on a far flung global system. The complexity of it all is beyond me. Yet, there is some resilience in this complexity that may carry over for a time. There is always martial law as the next QE rabbit. I am in the bleachers also waiting and wondering just like you. Every day I get up and check the news I wonder what is up today knowing normal could evaporate when the computer boots up.

  13. Northwest Resident on Mon, 24th Nov 2014 4:41 pm 

    Davy — Yeah, we’ve discussed this several times. You know my POV. The long slow descent doesn’t make any sense to me — it is illogical. It burns too much good oil that could be used for reboot and maintenance of high-tech civilization in a post-collapse world. It kills off too many species. It puts us way over the carbon “budget”, beyond which the climate scientists say there is no hope. And it doesn’t really gain anything, except of course to allow a little more time for preparation. Seeing that TPTB have implemented nothing but pure short-term strategies to keep BAU going for a little while longer, combined with all their military/police/security preparations for massive civil unrest, convinces me that there will be no long slow “managed” stepdown to a sustainable level. But I could be wrong, of course. So, I’m going to grab another bag of popcorn, order another beer and just sit up here in the bleachers with my friends on peakoil dot com, waiting to see what the hell each new day brings. The suspense is world-class entertainment, I can say that, at least. Better than any movie I ever watched or any book I ever read. How this story plays out is going to be carved in stone. We are spectators to intense historical developments. So, kick back, enjoy, and be ready to run like hell for that fire exit (as needed).

  14. Perk Earl on Mon, 24th Nov 2014 5:17 pm 

    “There is so many dependents depending on a far flung global system. The complexity of it all is beyond me. Yet, there is some resilience in this complexity that may carry over for a time.”

    That’s a good summarization, Davy. I think one way to look at the resilience is it’s a moving set of goalposts. As this problem arises, things get shifted to avoid too much fiscal damage, then another situation arises and a fire brigade of top notch number crunchers roll out some new desperate fiscal folly an the goalposts move again. I describe it as shape shifting.

    Sure, we know the final coup de gras will take place because ultimately it’s unavoidable due to the energy predicament civilization has placed itself in. So dodgeball it is until something cracks that cannot be avoided, altered, patched, written off, hypothecated or otherwise and humpty dumpty takes a great fall.

    I’ve watched this debacle unfold since 05 when I got introduced to the topic, so like many others got caught thinking things are descending faster than they really are, so I hedge my bets now. But even if we are in a stair stepped dropdown mode, that really ought to be bad enough. It’s the biggest vending machine ever but once it falls, look out!

  15. Schinzy on Mon, 24th Nov 2014 5:32 pm 

    Peak oil is a low price problem not a high price. I prefer to use the language of Turchin and Nefedov: the oil business cycle grew until 2005, then it went into stagflation. Soon it will go into contraction and many people will be disappointed by how low the price of oil will be. Lower than expected prices and shrinking volumes will spell tough times for the oil patch.

    See
    http://www.math.univ-toulouse.fr/~schindle/articles/2014_rant.html for more.

  16. Perk Earl on Mon, 24th Nov 2014 7:39 pm 

    “I’m going to grab another bag of popcorn, order another beer and just sit up here in the bleachers with my friends on peakoil dot com, waiting to see what the hell each new day brings. The suspense is world-class entertainment, I can say that, at least. Better than any movie I ever watched or any book I ever read. How this story plays out is going to be carved in stone.”

    I’m right there with you on that one, NWR. It’s the biggest train wreck ever and it’s happening in slow motion so far. No doubt there is a limit to resiliency and the whole shebang will detonate at some threshold, but it’s endless loads of entertainment to speculate about various aspects and watch as it gets more and more pressurized with each passing day. I mean there isn’t a day that goes by without some new wrinkle. Buckle up and have your snacks handy – this is going to be a crazy, wild ride.

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