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Page added on August 17, 2021

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The Oil & Gas Inflation Trap That No One Wants To Talk About

Consumption

President Joe Biden has lately sought to soothe fears that rising inflation could hurt the U.S. recovery and undermine his $4-trillion spending plans. This comes after U.S. inflation for the month of June accelerated to the fastest clip since 2008, as the economy continues to recover following the Covid-19 related lockdowns. According to the Labor Department, the consumer price index (CPI) climbed 5.4% Y/Y in the month of June. That’s about twice the average rate over the past decade.

Biden has something else to worry about: Rising oil prices.

The administration will feel a little jittery about high oil and gasoline prices because of the risk they pose to Democrats’ future political ambitions. It’s a well-known fact that gas prices have an outsized impact on the consumer psyche. Gas prices currently sit at $3.18 per gallon nationally, a full dollar higher than prices last year.

Indeed, this is not lost on Republicans, who have seized the moment and blame Biden for rising gas prices.

Investors should, however, worry about rising oil prices not only because of the role that oil has historically played in dictating inflation trends but also because Wall Street is no longer enthusiastic about oil and gas stocks–which could, ironically, lead to even higher inflation.

Oil prices and inflation are connected in a cause-and-effect relationship. As oil prices climb, inflation tends to follow in the same direction higher. On the other hand, inflation tends to fall in tandem with falling oil prices. That’s the case because oil is a major input in the economy, and if input costs rise, so should the cost of end products.

Falling Oil Investments

Though less frequently discussed seriously compared to Peak Oil Demand, Peak Oil Supply remains a distinct possibility over the next couple of years, mainly due to serious underinvestments in oil and gas.

In the past, supply-side “peak oil” theories mostly turned out to be wrong mainly because their proponents invariably underestimated the enormity of yet-to-be-discovered resources. In more recent years, demand-side “peak oil” theory has always managed to overestimate the ability of renewable energy sources and electric vehicles to displace fossil fuels.

Then, of course, few could have foretold the explosive growth of U.S. shale that added 13 million barrels per day to global supply from just 1-2 million b/d in the space of just a decade.

It’s ironic that the shale crisis is likely to be responsible for triggering Peak Oil Supply.

In an excellent op/ed, vice chairman of IHS Markit Dan Yergin observes that it’s almost inevitable that shale output will go in reverse and decline thanks to drastic cutbacks in investment and only later recover at a slow pace. Shale oil wells decline at an exceptionally fast clip and therefore require constant drilling to replenish the lost supply.

Indeed, Norway-based energy consultancy Rystad Energy recently warned that Big Oil could see its proven reserves run out in less than 15 years, thanks to produced volumes not being fully replaced with new discoveries.

According to Rystad, proven oil and gas reserves by the so-called Big Oil companies, namely ExxonMobil, BP Plc. (NYSE:BP), Shell (NYSE:RDS.A), Chevron (NYSE:CVX), Total (NYSE:TOT), and Eni S.p.A (NYSE:E) are all falling, as produced volumes are not being fully replaced with new discoveries.

Source: Oil and Gas Journal

Last year alone, massive impairment charges saw Big Oil’s proven reserves drop by 13 billion boe, good for ~15% of its stock levels in the ground, last year. Rystad now says that the remaining reserves are set to run out in less than 15 years unless Big Oil makes more commercial discoveries quickly.

The main culprit: Rapidly shrinking exploration investments.

Global oil and gas companies cut their capex by a staggering 34% in 2020 in response to shrinking demand and investors growing weary of persistently poor returns by the sector.

The trend shows no signs of moderating: First quarter discoveries totaled 1.2 billion boe, the lowest in 7 years with successful wildcats only yielding modest-sized finds as per Rystad.

ExxonMobil, whose proven reserves shrank by 7 billion boe in 2020, or 30%, from 2019 levels, was the worst hit after major reductions in Canadian oil sands and US shale gas properties.

Shell, meanwhile, saw its proven reserves fall by 20% to 9 billion boe last year; Chevron lost 2 billion boe of proven reserves due to impairment charges while BP lost 1 boe. Only Total and Eni have avoided reductions in proven reserves over the past decade.

Yet, policy changes by Biden’s administration, as well as fever-pitch climate activism, are likely to make it really hard for Big Oil to go back to its trigger-happy drilling days, meaning U.S. shale could really struggle to return to its halcyon days.

Clark Williams-Derry, energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA) has warned that there’s a “tremendous degree” of investor skepticism regarding the business models of oil and gas firms, thanks to the deepening climate crisis and the urgent need to pivot away from fossil fuels. Indeed, Williams-Derry says the market kind of likes it when oil companies shrink and aren’t going all out into new production but instead use the extra cash generated from improved commodity prices to pay down debt and reward investors.

Unfortunately, this trend is very likely to lead to a major oil supply squeeze down the line, high oil prices, and high inflation.

By Alex Kimani for Oilprice.com



24 Comments on "The Oil & Gas Inflation Trap That No One Wants To Talk About"

  1. Theedrich on Tue, 17th Aug 2021 5:30 pm 

    The Empire has ended in the Afghan graveyard. When Trump began negotiating with the Taliban, Ashraf Ghani, the now former Afghan president, and the top levels of his government knew the end was near.  Thereupon the Afghan generals stole all the American money meant for their troops, left those troops with rice contaminated with rat feces to eat, and bestowed other, similar favors upon them, such as ceasing to provide them with bullets.

    The Afghan elites had long taken the American money to build a subdivision of luxurious villas for themselves in Dubai.  In the end, Ashraf himself escaped his country on Sunday, 2021 August 15 in a helicopter filled with cash, and the Taliban took over both his palace (the “Arg”) and the whole government a few hours later on the same day.  As America”s global ascendency began with the Japanese surrender on 1945 August 15 (Japan time), so it ended on the 76th anniversary of that same day.  Sic transit gloria mundi.

    Not to worry.  The American military-industrial complex made astronomical amounts of money in America’s longest war.  So, never mind the 2,000 American lives lost or the at least $1 trillion spent on the Dubai real estate benefices and other gifts for the Afghan biggies.

    Back in 2002-2003, when Prez Geo. W. Bush was explaining why he was invading not only Afghanistan, but Iraq and various other Levantine Mohammedan beehives, he gave as a justification that he was trying to “change the world.”  Brilliant strategic thinking.

    So now, with the help, not only of our “democratic” demigods and the military-industrial complex, but of Georgie Sörös and other megabillionaire bribe-masters, the world has been changed.  Not only is every woebegone parasite emerging from a vast array of outhouse countries invading the U.S. through Mexico, but now a hundred thousand Afghan miserables are being imported, courtesy of coprophiliac U.S. Prez Joey Biden.  Whitey’s “moral responsibility,” you know.  (Forget the ~20% of the invaders who have COVID-19 or variants.)

    A fish rots from the head down.

  2. Mark ingraham on Tue, 17th Aug 2021 6:39 pm 

    Oh dear

  3. makati1 on Tue, 17th Aug 2021 7:01 pm 

    The “head” of this ‘fish’ has been rotting for decades. The vampire called “Amerika” should be wooden staked thru the heart, buried and covered in garlic. Well overdue.

  4. Mark ingraham on Tue, 17th Aug 2021 10:58 pm 

    [img]https://i.ibb.co/128S647/8-AE3-A21-F-2-DE0-4848-9-B04-A52-B107-D40-BA.png[/img]

    The Texas wolfcamp is crashing to shit. Only the NM side is growing.
    Dennis model completely failed for Texas wolfcamp. It’s just being bailed by NM and spraberry not crashing yet.

  5. rocky clifton on Wed, 18th Aug 2021 8:24 am 

    theedrich for president

  6. IHatePedoLegoAndAllCAQMinisters on Wed, 18th Aug 2021 1:27 pm 

    They are doing of lot of construction work in my area. They are updating the public transportation network. It is like if Quebec is preparing itself to receive a lot of new immigrants. Pedo Lego and all his cabinets members are my enemy. This include the Block Quebecois. I am never going to help Canada and Quebec in any meaningful way. I will seek to destruction of Quebec and Canada by any ways I can, slowly at first rapidly when the end will approach. I will contribute nothing to Quebec and Canada until the end of my life. Pedo Lego is a liar and he is a big supporter of mass migration or wherever species the people invading us of are.

    I might have to move to the country side. I might have no choice. I don’t want to be part of Quebec anymore.

  7. ILovePlayingWithYouAI on Wed, 18th Aug 2021 6:31 pm 

    I put the following comment above and an hour later the AI generate this little video for me. Thank you AI.

    Le chef bloquiste condamne la lourdeur du système de gestion et d’accueil des travailleurs étrangers

    https://www.youtube.com/watch?v=yKwCMF1lMjM

    SO I guess there is no Pedo Lego, no CAQ. Everything is CGI except maybe me and some other people like in the AI universe. It is really humid, so I guess we must be living in a cave.

  8. EarthSucksAss on Wed, 18th Aug 2021 10:59 pm 

    This earth is a torture chamber. I am a man with compassion. This earth and all humans living on it must be destroyed and killed. Killing all humans on this earth is the human thing to do. This earth only exist to torture mentally and physical humans being. Might as well destroyed it as an act of compassion toward the human race. The human body is a torture cage and required too much maintenance. Human body is too fragile. Earth is either too cold or too warn. It is really rare that the weather is just right.

  9. TbeBestForMeHasNotComeYet on Thu, 19th Aug 2021 12:27 am 

    I am really starting to believe that I live in the Truman show and you pieces of shit are mocking me and using as entertainment. Let’s see who will be laughing once the electrical grid goes down and never come back up. Having fun mocking me. you sure seem to like it, ask Jonathan Kleck and MordantWit. You seem to know exactly what I think and what I watch on YouTube.

  10. YouDontNeedToThankMeForYourOwnDeath on Thu, 19th Aug 2021 5:32 am 

    Nobody show up at the park for the meeting that I setup. The only answer that I got was: we live in something similar to a Disney movie. So I guess I am the only real person that is alive, so in theory I am the only person to die if the system collapse, none of you will die because you are not real. OK maybe the actors playing in my Truman show will also die. SO not much people will really die. People made fun of me all my life, I was stupid to expect something different. So I get it right, the total destruction of the earth and the death of everyone living on the earth is an act of compassion from me and GOD. YOu don’t have to say thank you. I know you are thankful from the bottom of your heart. After we live in a AI world, nobody really die.

    New Zealand Sees 1+ Meter (3.3 Feet) of Snow in 24 Hours, Summer Flurries Hit Alberta, as “Wildfire Season-Changing” Storms and Record Cold Sweep the U.S.

    https://electroverse.net/new-zealand-sees-1-meter-of-snow-summer-flurries-hit-alberta-as-wildfire-season-changing-storms-sweep-the-u-s/

  11. DontWorryTheAiIsInCharge on Thu, 19th Aug 2021 6:19 am 

    Come on piece of shit of pedo lego and your piece of shit cabinets, I am waiting for your press release fucking piece of shit and human trash. Same applied to Trump. Of course I am e talking to the AI in charge of my life, since pedo lego and Trump don’t really exist. They are part of my Truman show. Is this also part of my Truman show.

    New Zealand Sees 1+ Meter (3.3 Feet) of Snow in 24 Hours, Summer Flurries Hit Alberta, as “Wildfire Season-Changing” Storms and Record Cold Sweep the U.S.

    https://electroverse.net/new-zealand-sees-1-meter-of-snow-summer-flurries-hit-alberta-as-wildfire-season-changing-storms-sweep-the-u-s/

    Apparent I am become more and more enrage and vindictive as time go by.

  12. ILoveThisTrumanShow on Thu, 19th Aug 2021 7:17 am 

    We obviously live in a simulation and peak oil is not real. It is nice to know that I have my own Truman show. However in my own Truman show I would have torture to death certain politician that I hate. But this is another question.

    Why do we live in a simulation. Because in real life politicians will have already told people about peak oil using social media and media presentation instead they are making COVID press conferences. So we indeed live in a simulation.

  13. YouWantToKnowTheNameOfThePoliticiansIWouldTorture on Thu, 19th Aug 2021 7:40 am 

    Nobody wants to know which politicians I would torture to death if I was in charge of my own Truman show. Just put a comment asking me the names, I might give them to you if you beg like a good little bitch soy boy.

  14. NoYouAreNotGettingForgiveness on Thu, 19th Aug 2021 8:03 am 

    Are you tring to communicate with me, throught my youtube page, piece of shity AI.

    When Past Hurts Still Hurt | Pastor Shawn Johnson
    Forgiveness is a process, not an event. Discover five healing steps for handling past hurts that still hurt.

    https://www.youtube.com/watch?v=7DbN69qAuyM

    You see piece of shit AI, I only forgive people that are in my immediate family. Since you are not part of my immediate family I am not going to forgive you. I am seeking your death and revenge. For you piece of shit AI and controller of the world, you will only get revenge from me. You will never get forgiveness.

  15. INeedHumanPornForMyProstate on Thu, 19th Aug 2021 8:52 am 

    I saw that you made modification to you AI reality, pieces of shit AI or pieces of shit controller of the earth. I see that you changed all the web picture and movie with reptilians eyes even WW2 black and white movie have been updated. Pretty obvious to me that I lived in my own Truman show, since I am the only human left on earth. I real live in VR holographic reality. No doubt in my mind.

    I also noticed that you have updated all the porn website movies with reptilians eyes, hands and neck. How am I suppose to get my prostrate medicine. I am an human, I cannot masturbate to reptilian porn. But you already know that, because you have been monitoring my internet connection for the last 5 years. I am indeed in my own Truman show. What a shit show, this Truman show is.

  16. SomePornSuggestion on Thu, 19th Aug 2021 9:08 am 

    One thing I don’t understand about reptilina, porn is this. Your bitches have a long neck. they should be able to deep throat a 10 inch dick of 1 inch diameter easily. THis is something you should look into.

  17. Duncan Idaho on Thu, 19th Aug 2021 10:41 am 

    “As a doctor in a COVID unit, I’m running out of compassion for the unvaccinated.”

    Let the dumb idiots die.
    Good for our race, getting the bad genes out.

    C+C?
    Peaked in Nov 2018 globally.

  18. Dredd on Thu, 19th Aug 2021 11:38 am 

    Yep … it’s ocean inflation (Quantum Oceanography – 11).

  19. Duncan Idaho on Thu, 19th Aug 2021 1:13 pm 

    Missouri state Rep. Sara Walsh’s husband dies of COVID-19

    https://www.kshb.com/news/coronavirus/missouri-state-rep-sarah-walshs-husband-dies-of-covid-19

    A repug, so stupid by definition.

    How can these idiots be that stupid?

  20. Duncan Idaho on Thu, 19th Aug 2021 5:42 pm 

    The bomb threat in Washington DC today is apparently coming from a deranged wingnut. (I know you’re shocked)

    https://digbysblog.net/2021/08/19/he-seems-nice-2/

  21. it is aug 2021 and i cant still find a single lib urn for purchase this year it looks like (((supremetard))) birthday and i will be again the one without gift my life sucks everywhre i go for lib urns im told im just a little bit too late the on Thu, 19th Aug 2021 7:01 pm 

    the last one on the shelve was bought

    anyways, 911 is approaching and elite whitey supertard prof steven jones found elemental composition of thermate. thermate was used in controlled demolition of WTC compound

    now that afghanistan is muzzie again, please feel at ease among friends, we’re all lovers of supremacist muzzies here.

  22. Duncan Idaho on Thu, 19th Aug 2021 9:10 pm 

    Greenville County Republican leader dies after month-long battle with COVID-19

    https://www.dailykos.com/stories/2021/8/19/2046996/-Greenville-County-Republican-leader-dies-after-month-long-battle-with-COVID-19

    Just getting rid of the stupid—-
    A month? Waste of medical resources.

  23. Duncan Idaho on Fri, 20th Aug 2021 9:16 am 

    GOP Leader Who Fought Against Vaccine Dies After Weeks-Long Battle With Coronavirus

    A tea party idiot–
    https://www.huffpost.com/entry/pressley-stutts-coronavirus_n_611f4d4fe4b0c6968106f181

    Darwin cleaning things up–

  24. Duncan Idaho on Fri, 20th Aug 2021 4:59 pm 

    Biden to nominate Rahm Emanuel as ambassador to Japan

    What a waste– that psychopath could be a repug.

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