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The ETP model was wrong - But is there a top for oil prices?

Discuss research and forecasts regarding hydrocarbon depletion.

Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Thu 05 Jul 2018, 17:11:04

vtsnowedin wrote:Perhaps we are about to explore what the maximum price really is.
https://www.spglobal.com/platts/en/mark ... -opec-deal

I don't understand why a piece of bad short term geopolitical news would be very relevant re the "maximum" price for oil over the longer run.

It seems to me that the big picture factors like global oil demand growing in strong correlation to overall global GDP is a huge and highly persistent reality. And given just the growth in the non-BEV car fleet globally, that reality will persist for a good couple decades or so, at the minimum (IMO).

Even if Iran causes a brief war in the Strait of Hormuz which closes the strait for a week or a month, and a NASTY spike in oil prices follows (call it $200 or even $300 as a possibility in that worst-case scenario), that problem looks like child's play to me -- at least relative to global oil demand driving consistently higher as third world growth and demand for better living standards (including massive additions to the middle class lifestyle), year after year.

The only way I see that being wrong is if massive producing formations like the Permian turn out to be relatively common over time in oil fracking. Aside from the true hard core cornies, I presume the vast majority of folks don't want to count on that bullish a forecast for longer term oil production.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby vtsnowedin » Thu 05 Jul 2018, 17:51:13

Outcast_Searcher wrote:I don't understand why a piece of bad short term geopolitical news would be very relevant re the "maximum" price for oil over the longer run.

If you read it closely (or perhaps one of the other accounts I've read of this interview) you see him say that 2mbpd difference which is less then two percent of current production is enough to set the market on a tear. Now maybe people can and will sort it out this year and produce that two percent and keep prices stable, but what about next year and the year after that etc. Will we be able to meet the growing demand and if so how? More likely the price will have to rise enough to bring demand down to what is actually available. When that happens those with any real excess capacity will once again be in the drivers seat.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Thu 05 Jul 2018, 18:05:51

vtsnowedin wrote:
Outcast_Searcher wrote:I don't understand why a piece of bad short term geopolitical news would be very relevant re the "maximum" price for oil over the longer run.

If you read it closely (or perhaps one of the other accounts I've read of this interview) you see him say that 2mbpd difference which is less then two percent of current production is enough to set the market on a tear. Now maybe people can and will sort it out this year and produce that two percent and keep prices stable, but what about next year and the year after that etc. Will we be able to meet the growing demand and if so how? More likely the price will have to rise enough to bring demand down to what is actually available. When that happens those with any real excess capacity will once again be in the drivers seat.

I'm just seeing a relatively short term single event (even if the ripples affect prices for, say, a few years) as a MUCH different thing than the massive threat of relative shortages over decades due to significantly increasing global demand -- re reaching a "maximum" oil price.

I'll be the first to admit any of my opinions or forecasts for future oil prices could be very wrong. I just don't see ANY single event comparing to the whole market over time -- not even close.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby vtsnowedin » Thu 05 Jul 2018, 19:03:13

You have to consider that an approaching world wide shortage will first become apparent during a time of politically caused market disruptions. The root causes are already present and ever moving forward. Among them are the decline in existing fields, the steady rise in the world population, the desire for better standards of living,and the declining number of likely new places to drill etc..
That steady push forward to a supply less then demand situation will get us there sooner or later and I expect it will be sooner rather then later.
The question then becomes will the rising prices do more to increase supply or will most of the balancing be done by decreasing demand?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Fri 06 Jul 2018, 01:52:45

Cog

The Etp Model gives the status of the worlds conventional oil reservoirs: Peak production in 2005, the energy half way point in 2012 and the falling net energy from petroleum production.

There is no need to abandon the Model. It gives the best assessment of the worlds conventional oil production.

The economies around the world are on governments and central banks life support through QE, ZIRP, credit/debt expansion and fiscal deficits. Without the life support we would have been in a deep depression today.

The political and economic turmoil is increasing by the year.

OS

The MAC is the curve that goes through the MAP the annual prices.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby tita » Fri 06 Jul 2018, 05:06:37

Pops wrote:hey, Kub
oh, yeah I see, obviously didn't read far enough, lol

Hey Pops, welcome back! Hope you're doing well.

Nice to see your charts. Yes, there is not an automatic collapse of consumption right after some price threshold, except for round numbers (like 3$) that have some psychologic pressure (people try to waste a little less). Also, prices have an effect on consumption, but it takes years to appear.

Anyway, this has been debated in lengths, somewhat parasiting a lot of topics. Stubborn positions that won't be give up for some time IMHO.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby pstarr » Fri 06 Jul 2018, 11:34:48

When do we see a return to $4.00 gasoline. Can we stand $5.00? $6.00?
Image

July 6, 2018; There Are Fears About an Oil Spike Above $150

"Oil investors may regret urging companies to cough up cash now instead of investing in growth for later as the dearth of exploration is setting the stage for an unprecedented crude price spike, according to Sanford C. Bernstein & Co."

That’s causing reserves at major producers to fall and the industry’s reinvestment ratio to plunge to the lowest in a generation, paving the way for oil prices to surpass records reached last decade, according to Bernstein.


New drilling worldwide is at a virtual standstill, including the the United States. The oil industry has run out of new discoveries and so there will be no new oil. Welcome to a world of 6.7% year-on-year decline.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Cog » Fri 06 Jul 2018, 11:40:19

Westexas tried to pedal that 6.7% world wide decline back in 2006 on the Oil Drum. He even had fancy charts and stuff you doomers love. Guess what? It didn't happen.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby rockdoc123 » Fri 06 Jul 2018, 12:51:09

Westexas tried to pedal that 6.7% world wide decline back in 2006 on the Oil Drum. He even had fancy charts and stuff you doomers love. Guess what? It didn't happen.


while it is true that individual wells have a general decline curve that varies through time but can be characterized by anywhere from 6% - 10%, when you upscale to the field level or country level this no longer becomes meaningful given new wells are brought on stream, new fields or field extensions are brought on stream and probable and possible reserves become proved producing reserves etc.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby vtsnowedin » Fri 06 Jul 2018, 12:54:47

pstarr wrote:
New drilling worldwide is at a virtual standstill, including the the United States. The oil industry has run out of new discoveries and so there will be no new oil. Welcome to a world of 6.7% year-on-year decline.

You have a serious problem with the truth. Actually the number of drilling rigs in operation has more then doubled sense its spring 2016 low of 407 rigs to 1046 this year in May.
https://www.eia.gov/dnav/ng/hist/e_ertr ... nus_cm.htm
What are you bucking for? A job in the Trump administration perhaps?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Pops » Fri 06 Jul 2018, 12:56:33

tita wrote:Stubborn positions that won't be give up for some time IMHO.

Hey tita
Beliefs are indeed hard to change. Early on I bought into the so-called industry experts who seemed as dead set as any barstool doomer that there simply was no way technology could improve enough to increase supply regardless of price— heck I wrote that into the "What is PO?" primer back in '04 or whenever. Back then I full expected to be at 60-70mmb/d supply by now, yet we're passing 100

Image


After a few years of denying that fracing would ever amount to anything, that reserve growth is a mirage and accounting trick, that I alone knew what reality looked like, I gave in to the reality that I know nothing, lol. Humans can dream up lots creative arguments to protect their psyche from confronting reality.


Here's a Peaker Rorschach test, what do you see when you look at this image?

Image
http://crudeoilpeak.info/latest-graphs
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
-- Abraham Lincoln
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby vtsnowedin » Fri 06 Jul 2018, 13:07:20

rockdoc123 wrote:while it is true that individual wells have a general decline curve that varies through time but can be characterized by anywhere from 6% - 10%, when you upscale to the field level or country level this no longer becomes meaningful given new wells are brought on stream, new fields or field extensions are brought on stream and probable and possible reserves become proved producing reserves etc.

But don't the fields eventually get totally drilled out and then decline as the cumulative decline of all the still producing wells?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby rockdoc123 » Fri 06 Jul 2018, 13:14:09

But don't the fields eventually get totally drilled out and then decline as the cumulative decline of all the still producing wells?


theoretically but in practice everything is staged. It's not like everything was discovered at once and then completely drilled up and produced. Doesn't happen that way. There are still fields being brought on today and there is still drilling happening in very old fields. And what is decline based on....1P, 2P or 3P?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby pstarr » Fri 06 Jul 2018, 13:27:31

rockdoc123 wrote:
But don't the fields eventually get totally drilled out and then decline as the cumulative decline of all the still producing wells?


theoretically but in practice everything is staged. It's not like everything was discovered at once and then completely drilled up and produced. Doesn't happen that way. There are still fields being brought on today and there is still drilling happening in very old fields. And what is decline based on....1P, 2P or 3P?

The short answer; no. Oil regenerates itself like money. It's an endless cornucopia of riches tnx to oil academics like rockerandroller

Plus it is all staged as per oil industry bs
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Pops » Fri 06 Jul 2018, 13:31:43

I think...

Decline is just a simple change in flow (of a well or the world)
50 year old stripper wells making a barrel a day don't decline much, frac'd shale wells initially decline a lot.

Depletion, is the rate at which the estimated resource remaining (of a reservoir or area) is changing.
Depletion takes new discoveries, reserve growth, changes in tech, I guess even selling price etc into account and in reality can be either negative or positive tho positive is called reserve growth?
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby pstarr » Fri 06 Jul 2018, 14:38:10

vtsnowedin wrote:
pstarr wrote:
New drilling worldwide is at a virtual standstill, including the the United States. The oil industry has run out of new discoveries and so there will be no new oil. Welcome to a world of 6.7% year-on-year decline.

You have a serious problem with the truth. Actually the number of drilling rigs in operation has more then doubled sense its spring 2016 low of 407 rigs to 1046 this year in May.
https://www.eia.gov/dnav/ng/hist/e_ertr ... nus_cm.htm
What are you bucking for? A job in the Trump administration perhaps?

Go Hillary! Is that better?

Drilling rig count is a bit more than half what it was, when tight shale was new and exciting. Baker Hughes put is at 863 July 6 2018, compared to 1609 Oct. 10 2014. Now that the investor community has got smarter, and Bakken in collapsing I think we won't see much more.

https://ycharts.com/indicators/us_oil_rotary_rigs

Don't be looking at the world through the eyes of a clueless American investor dupe. The rest of the world doesn't do eau d'Permian. They don't have the debt machine we do here
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Fri 06 Jul 2018, 15:48:57

pstarr wrote:Don't be looking at the world through the eyes of a clueless American investor dupe. The rest of the world doesn't do eau d'Permian. They don't have the debt machine we do here

Meaning what? That other countries don't have lots of debt?

Totally false. https://en.wikipedia.org/wiki/List_of_c ... ublic_debt

In fact, if you sort the "Gross Public Debt as % of GDP" column, the US is WAY down the list.

Where would you expect the oil related debt to be if not where lots of new oil production is occurring, and where oil production is in fact hitting new all time highs, despite the false claims of oil having peaked by folks like you?

Given how much profit the oil majors, including those doing lots of fracking tend to be making, which "investor dupes" are you referring to? Clowns like yourself who continually make false claims and predictions about how the end of oil and the financial world is coming, and therefore missing out on such profits, perhaps? :razz:
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby ROCKMAN » Sat 07 Jul 2018, 12:06:55

Outcast – What folks outside the petroleum industry don’t understand (especially those that consider themselves “experts”) is that when times are good and drilling activity is high even successful companies increase their debt loads. It is relatively rare for a good drilling project to return 100% of its investment in 12 months or less. A 24 month (and even a 36 month) “payout” can generate an acceptable rate of return. Consider a more common and easily understood investment: the stock market. Who wouldn’t go into debt and borrow $100,000 (if they had could) and buy stock they knew was going pay $200,000 of dividends over the next 24 months…EVEN IF THE STOCK WERE WORTH NOTHING IN 2 YEARS? So what company wouldn’t borrow $10 million to drill a well that produced $20 million in net revenue over the next 24 months even if the well were 100% depleted after 2 years? The interest on that $10 million would be insignificant to the $10 million in gain, wouldn’t it? But that company still initially added $10 million in debt to its books.

The problem folks have with seeing this in the dynamics of a public oil company is that never see the economic profile of individual investments. They just see the aggregate of many projects over many years. And that is further clouded by the impact of the tax laws companies use to reduce those burdens. But trust me: every pubco I worked for knew their individual dogs from the winners. Often the basis for raises and promotions. As well as terminations.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Sat 07 Jul 2018, 20:15:34

ROCKMAN wrote:...
The interest on that $10 million would be insignificant to the $10 million in gain, wouldn’t it? But that company still initially added $10 million in debt to its books.

The problem folks have with seeing this in the dynamics of a public oil company is that never see the economic profile of individual investments. They just see the aggregate of many projects over many years. And that is further clouded by the impact of the tax laws companies use to reduce those burdens. But trust me: every pubco I worked for knew their individual dogs from the winners. Often the basis for raises and promotions. As well as terminations.

Thanks for that input/explanation, Rockman. That makes lots of sense to me and confirms my (inexpert) big picture understanding of the rough profit / cash flow for big oil producers over time (on average, of course).

What I'm certain of is that the entire financial community can't be accepting that the oil industry (including LOTS of oil fracking) is making profits hand over fist recently AND be going bankrupt due to "unpayable oil fracking debt" -- re the fairy tale the fast crash economic doomers cling to.

I suppose now they'll need to circle back to the old standby of "the numbers are all a lie and it's all a grand conspiracy". :roll: Odd how THEY can be the only ones clued into such a vast and complex conspiracy, when they demonstrate nearly COMPLETE cluelessness about most real world economic concepts at the corporate level. 8)
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Sun 08 Jul 2018, 01:40:10

The petroleum conspiracy is a wide concept. The fuels that the petroleum industry produces must have machines on the receiving side that burn those fuels. The fuels produced would have been of no use without the machines that burn them. So when the car industry goes bankrupt and the government bail them out, they are in fact bailing out the petroleum industry.

Trump is targeting the machine producers in the TradeWar. The war is basically an EnergyWar.
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