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The Set Up For a Collapse of Oil Prices

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: The Set Up For a Collapse of Oil Prices

Unread postby dolanbaker » Mon 22 Dec 2014, 01:51:04

copious.abundance wrote:Haha, thanks for bumping this thread, I'd forgotten about it.

Some people are looking pretty silly right now. :lol:

Especially when you think of why the price has dived!
The growth needed to maintain the high prices simply ran out of momentum due to the high prices.
And so the pendulum swings the other way again...
Ronald Coase, Nobel Economic Sciences, said in 1991 “If we torture the data long enough, it will confess.”
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Re: The Set Up For a Collapse of Oil Prices

Unread postby wildbourgman » Mon 22 Dec 2014, 10:45:42

What made me think of this thread was an article where one of the supposed experts was saying that "no one could have predicted this one year ago". Oh really?

It reminded me of people on CNBC and Fox Business saying the same about the housing bubble. Then you start realizing that there actually were people who predicted the housing bubble and financial crises and it was those same experts that laughed at them.

These expert are trying to get the meme out that "no one could have predicted this" because they don't want to lose position as a wise talking head.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby Subjectivist » Mon 22 Dec 2014, 10:56:19

"As a policy for OPEC, and I convinced OPEC of this, even Mr al-Badri (the OPEC Secretary General) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is," Naimi was quoted by MEES as saying.


http://www.cnbc.com/id/102289037
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Re: The Set Up For a Collapse of Oil Prices

Unread postby Logic » Mon 22 Dec 2014, 11:02:33

Interesting reading the first page of this thread.
It will be interesting to see how many oil drillers (the small guys mainly) go out of business and how sharp the rebound is.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby wildbourgman » Mon 22 Dec 2014, 11:58:43

I think there will be a rebound in drilling along with better oil prices, but it won't be a a boom like before due to the financing concerns. Too many companies drilling with someone elses cash and the someones with the cash will be more careful next time. If this last long enough for the small oil companies to go bankrupt things could get real dicey.

If I were Saudi I wouldn't rush into production cuts, although I also wouldn't have any unnecessary capex either.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby wildbourgman » Sun 19 Mar 2017, 08:44:46

Well I keep getting some of this stuff right.

My next prediction is another dip and not a lot of discipline on OPEC production cuts. OK, the lack of real OPEC cuts is probably an easy prediction. What I see happening is an oil price dip deep enough to really slow US drilling again. If you look at a 1980's North America rig count chart I think we can easily repeat that type of scenario which means Economic chaos for Oil producing areas of North America. Obviously I take the opportunity to give myself some caveats such as war, weather and political actions that could change my forward view.

Take the political possibilities. Can Trump's regulatory regime, tax cuts and possible protectionist tactics cause North American energy to be insolated or insulated from the worlds energy market? Who Knows.

What about war, does falling oil prices and a glut of oil on the market put adversaries in OPEC in further at odds causing proxy wars to turn into full blown shooting wars that shut down the Persian gulf or worse? We'll see.

All in all I feel a glut and I think that OPEC's lack of market discipline will once again cause them to pump as fast as possible just as the always do.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 10:33:57

SeaGypsy wrote:The proposed price crash is based on way too much navel gazing IMO, Anglo-Amerikan- European self absorption and wishful thinking.


..until it becomes reality...
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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 10:39:03

SeaGypsy wrote:There isn't a glut, won't be a glut and if the con job works at all to create the impression of one- price reprieve will be very short lived.


As "short lived" stretches into the years now....
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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 10:49:40

ROCKMAN wrote:"The world’s quest for cheaper crude may well end sometime in the next decade with the fast-improving horizontal drilling and hydraulic fracturing technology, popularly known as fracking, leading to global oil markets being flooded with the relatively inexpensive shale oil, say energy experts."

I hope like heck we don't need to explain the absurdity of that statement to anyone on this site.


Rockman gets into the game!

..oops...

The war continues...

http://resourceinsights.blogspot.com/20 ... -that.html
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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 10:59:42

ROCKMAN wrote:"...technologies for extracting petroleum, like hydraulic fracturing, have sparked a boom in production". Once again, the great LIE. Or, if I'm feeling generous, the great MISCONCEPTION. I'm sure most here are as tired of hearing it as I am saying it: it was high oil prices that caused the boom in oil production. The high oil prices that justified the use of known technology in known oil producing trends. Anyone who honestly believes that our production increase can be maintained if oil prices tank is beyond hope IMHO.

Which isn't to say there isn't a potential for a collapse in oil prices. It would happen for the same reason oil prices fell 70% the last time: a severe global recession as we had in the mid 80's.


More oopsy! Didn't you say Rockman that things were clicking right along in Texas? Obviously the global economy is still clicking along as well..and no recession being seen.

Let's hear it for American technology and exceptionalism I guess, seeing as how it was oversupply by industry (they NEVER have been able to quit while they are ahead) and not recessions or collapse or decreased demand that gave us what folks have been enjoying for years now.

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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 11:06:29

wildbourgman wrote:Wow, looking back in time, some of us were right and some were wrong. Toot toot!

I wish I had the conviction and the extra cash back then to put my money where my mouth was.


Your claim was that prices were headed down, because of economic factors (as compared to industry providing more supply than was required), and then would soon go back up. So any money you made on calling the downswing would then have been at risk on your upside bet. This means your success would have been predicated on how much of an upswing you would have bet on, the price did recover from a low near $30 to $50, but it can barely sustain $55 for any length of time before fundamentals bring it back to closer to $50. So if the expectation was it would have returned more towards $75-$100, you would have lost your shirt when it didn't. For years now, because you supposed a shirt term drop, more akin to the 2008 drop. You weren't specific earlier in the thread how high it would return, so it is difficult to know if you would have made any money on your idea without you having provided those particulars, which you didn't.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby wildbourgman » Sun 19 Mar 2017, 12:09:31

by wildbourgman » Tue 16 Jul 2013, 08:45:08

Guys, I'm just going from article to article and chart to chart and then looking at my career and oilfield experience since I was a child in South Louisiana in the 1970&1980's. In my experience and my gut feeling that Rockman could probably explain it better, I feel a sharp slowdown in United states drilling activity coming. It's well over due! I can't explain it.

It doesn't take a massive glut of oil to cause a price collapse, it takes a percieved future glut to cause panic. On the otherhand price increases can happen in the same way.


AdamB, I feel like there were many factors and all or them were Economic, but maybe not in the way you mean it. I didn't make any money speculating on what I thought would happen and my price points were way off when I first started thinking about this. But like I said in the above post that I quoted it was more of a "gut feeling", something in the oilfield from a workers standpoint seemed way too good to be true and normally when that happens, TSHTF! I personally believe that the study of history, ethics and sociology is more important to economics than math.

Let me expand, I know guys that do a certain job in the oilfield (deep-water) that didn't even exist 10 years ago and could probably go away today and no one would really blink and eye. High school grads in their early 20's doing this job were making $250,000 or more per year, that's just not normal. So when you see things like that you might feel a top is near.

Now, I did believe that our demand growth in the west didn't comeback from 2008-2009 periods. That's just from some charts that I was looking at back then. I also believe that QE and debasing currencies in the west could have had something to do with artificially high prices. Along that same line I think we now know that cheap money lured or even forced money into the "Shale Miracle" that otherwise may have not went there if we would have had higher interest rates and no QE. But mainly my gut told me something was wrong, that's about it and I'm way to risk averse (chicken shit) to make the kind of bets that make people rich.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby AdamB » Sun 19 Mar 2017, 18:01:15

wildbourgman wrote:Let me expand, I know guys that do a certain job in the oilfield (deep-water) that didn't even exist 10 years ago and could probably go away today and no one would really blink and eye. High school grads in their early 20's doing this job were making $250,000 or more per year, that's just not normal. So when you see things like that you might feel a top is near.


Circa 1983 or so, before the bottom fell out in 1986, I was making about 110K a year gross. As a 20 something (albeit with a college degree) and it seemed perfectly normal to those I worked with who were also 20 somethings, working offshore in the GOM. In today's dollars that's about $270G, so I wouldn't all tied up over it, it is the oil field, and unlike many other industries nowadays doesn't suffer those who don't want to work, can't pull back to back towers, I'm sure it has become more sissifed but that is the way of the world seems like. Now, it took a few years before that top was reached, but why the top was reached had nothing to do with recession or collapse or whatever the story of the day is now, all these years after peak oil.

The single most telling factor is that the Permian is increasing in production rate, at $50/bbl, and the USGS just quantified the amount of oil in that basin in a single continuous formation to keep those rigs running for decades.

How that plays out is anyone's guess, but the Saudi's don't appear to be pulling the brakes on their production yet, and the current price moves reflect it.

wildbourgman wrote: Now, I did believe that our demand growth in the west didn't comeback from 2008-2009 periods. That's just from some charts that I was looking at back then. I also believe that QE and debasing currencies in the west could have had something to do with artificially high prices. Along that same line I think we now know that cheap money lured or even forced money into the "Shale Miracle" that otherwise may have not went there if we would have had higher interest rates and no QE. But mainly my gut told me something was wrong, that's about it and I'm way to risk averse (chicken shit) to make the kind of bets that make people rich.


Shale is not a miracle. It is a type of sedimentary rock that has been known to contain oil and gas since early in the 1800's. And money is never "forced" to go spend itself, but as Rockman has alluded to on multiple occasions, the oil and gas business is a great place to attempt to invest it, because when its good, its great, and when its awful, there are people still trying to convince you it is good. Don't know what it is about the business, the TV shows, the idea of old "oil" money, don't know, can't say I care. Capital will flow where it believes it can find the best risk adjusted return. If it doesn't go to the oil folks, they'll do the same thing they've done countless times before when they want to drill a well..they'll sell something, save some cash, and bootstrap themselves into more production. Or not, and go bankrupt. They do that as well. And I think it has been firmly established now that if the global supply/demand balance price is $100, US drillers are going to find the money to make more money, and just as before, will do more of it than they need to, and crash prices, just like they have before. The cure for cheap oil is cheap oil. The worm will turn, the only question i when. After all, the one thing the industry can count on are the normal folks, and the folks right here on this forum who should know better, to keep right on using petro-chemicals in their various forms.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby pstarr » Sun 19 Mar 2017, 18:31:55

Oil prices collapsed and will never see a sustainable rise. Only occasional receding oscillations and jitters. What happens to complex systems, including living beings, as entropic systems break down.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby ROCKMAN » Sun 19 Mar 2017, 18:50:19

"Oil prices collapsed and will never see a sustainable rise." New definition of "collapsed": the current price of oil is higher then the average inflation adjusted price of oil for 20 years from 1985 to 2005.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby pstarr » Sun 19 Mar 2017, 19:05:58

ROCKMAN wrote:"Oil prices collapsed and will never see a sustainable rise." New definition of "collapsed": the current price of oil is higher then the average inflation adjusted price of oil for 20 years from 1985 to 2005.

No doubt. But I define a sustainable rise to $70, the cost for consequential new development
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Re: The Set Up For a Collapse of Oil Prices

Unread postby asg70 » Sun 19 Mar 2017, 20:51:53

This thread represents the sound of hairs being split and goalposts moving.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby wildbourgman » Mon 20 Mar 2017, 10:40:41

asg70 wrote:This thread represents the sound of hairs being split and goalposts moving.


I'm not going to split hairs, although I might move the goal post a little. My prediction is lower oil prices from here that will eventually hurt the United State rig count, that's it for now. I don't care who is right about the why and the how, I just feel that's the outcome for a while. I've already expressed my caveats and I don't have a time horizon on when and how it turns around or levels off at a sustainable trajectory.
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Re: The Set Up For a Collapse of Oil Prices

Unread postby Plantagenet » Mon 20 Mar 2017, 13:00:24

WSJ notes increased rig counts and drilling and predicts a coming surge in US oil production will result in lower oil prices

oil-falls-on-growing-u-s-drilling-activity-

The law of supply and demand is about to work its magic again. :)

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Re: The Set Up For a Collapse of Oil Prices

Unread postby pstarr » Mon 20 Mar 2017, 13:15:24

Is that what they say at Mar a largo?

But you know that surge will depend on either $70/barrel crude or more debt? Neither creates affordable oil. Just a wealthier speculator class.
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