[Pops]

This is what I'm getting at

U.S. shale firms hesitate to pump – or hedge – more, despite oil high prices
Posted On : 7 Jul 2021 Published By : Tom Whipple
OPEC’s sudden disarray would seem to be an opportunity for U.S. shale producers to lock in profits, with oil prices near multi-year-highs, but sources at those companies say they are not taking chances with the market’s volatility. Shale producers are famous for boosting output whenever oil prices surge. However, the shale industry has been notably restrained so far this year even as oil surged past $70 a barrel. They have maintained a lower level of production after vowing to investors that they would hold the line on spending to boost returns. Oil prices , are above $73 a barrel, near three-year-highs.

Tom Whipple

Which puts OPEC in the spot to either let the price run and encourage EVs and frackers or open the spigot and kill the profit. They want to open up but UAE wants to pump more than KSA.

[Plantagenet]

OPEC wants to restrain production and the UAE wants to break free from OPEC and pump all it can.

Goldman Sachs thinks oil supplies remain right and oil goes higher to ca. $80/bbl over the next few months

goldman-sachs-lifts-crude-price-forecast-as-it-sees-opec-driving-a-tight-market-strategy-

Cheers!

[vtsnowedin]

A question to consider:?
For the average commuter what difference does it make between a dollar a gallon increase in gas price due to changing government policies. (keystone pipeline, leases on Federal land etc.) and an increased gas tax of perhaps even a $1.00 a gallon that goes to pay for the rebuilding of the transportation infrastructure.
My take is the dollar a gallon increase is sending that money directly to the middle East including Iran and a gas tax at the same level would be an investment that yields jobs and an improved transportation system that would be useful for years if not decades.

[Tanada]

A question to consider:?
For the average commuter what difference does it make between a dollar a gallon increase in gas price due to changing government policies. (keystone pipeline, leases on Federal land etc.) and an increased gas tax of perhaps even a $1.00 a gallon that goes to pay for the rebuilding of the transportation infrastructure.
My take is the dollar a gallon increase is sending that money directly to the middle East including Iran and a gas tax at the same level would be an investment that yields jobs and an improved transportation system that would be useful for years if not decades.

Not to over emphasize the point, but with fracking a lot more of that price increase stays in the USA paying oil field workers and mineral rights holders thus stimulating the economy wherever those domestic wells are located. My last surviving aunt has two wells on her property that pay quite handsomely when prices are high. All that money will soon be passed down via inheritance, but it will be spent mostly by US people on goods and services in the USA. Compared to the totally insane spending the government is doing on projects I am a lot happier to see the American mineral rights holders and workers in the industry getting the money than the sticky handed government bureaucrats that couldn't find their way out of a dark room with an open door.

[AdamB]

Fracking isn't drilling.

If one were giving a seminar outlining extraction techniques it would, but the 6 guys reading this know exactly what I'm talking about, as do you.

I THINK I know what you mean. Your language indicates you don't know the first thing about the difference between drilling and completions. And when you pretend others understand EXACTLY what you mean, and its horseshit, then their KNOWING the same horseshit is just the blind leading the blind.

If you don't have anything to say on the point, it's OK. Attacking my semantics is just a distraction.

Didn't attack your semantics Pops. Attacked the idea that you haven't taken the time to even learn the words for what you want to say, because the ones you used were wrong. And so was your concept, the drillers aren't making or losing the money because the service companies doing the completions aren't making or losing money because what you meant to say was that the E&Ps were making or losing the money, and them? They didn't do the drilling or the completion, they just paid for it to be done!

LTO hasn't returned profit to investors.

And I'll ask again, as you've avoided it in pretending that not understanding the processes and how the money is made is a semantic problem.

Who cares except the investors? We as a country have greatly benefited from the US owning the marginal barrel, and the geopolitical advantage of becoming the world's largest producer of oil and gas, as well as a net energy exporter.

So...were you heavily invested in E&P stocks? And if so, how unfortunate. But as an American who consumes petrochemicals and fuels, are you seriously crying over some foolish companies losing money? That you BENEFITED from? Cry me river.

Private money is hesitant to go back. Companies are finally concentrating on cash flow.

I know. I provided a link already.

[AdamB]

A question to consider:?
My take is the dollar a gallon increase is sending that money directly to the middle East including Iran and a gas tax at the same level would be an investment that yields jobs and an improved transportation system that would be useful for years if not decades.

Avoid the Jihadi support stations. Wife went to the office for the first time in 17 months today. Came back with a free full tank of made in the USA electrons baby!

[Pops]

Who cares except the investors?

As I said before the digression into semantics (over which literally no one cares), LTO has been a money pit but it kept the price low for 6-8 years while most conventional production plateaued. The upshot is the price signal that slow or no growth in conventional production would have sent to consumers —had been sending in fact between say '06 and '14 —went away.

If PO comes along anytime soon, we'll miss the additional renewables deployed, EVs manufactured, charging infrastructure and electric distribution that would have been built, spurred on by $100+ oil.

If there is change in frackers' operating attitude from Drill Baby to Profit Baby it could take the price higher and that would hopefully bring back the daily incentive to transition... all other things being equal of course, LOL

[AdamB]

Who cares except the investors?

As I said before the digression into semantics (over which literally no one cares),

Say what you mean, or you'll never mean what you say...that isn't semantics.

LTO has been a money pit but it kept the price low for 6-8 years while most conventional production plateaued. The upshot is the price signal that slow or no growth in conventional production would have sent to consumers —had been sending in fact between say '06 and '14 —went away.

Absolutely correct. And this can continue, as long as there are resources that for a price, can continue piling in, mitigating decline in older producing regions. Hundreds of billions here, trillions there, and presto... scarcity isn't the problem in your lifetime. Scarcity at A PRICE YOU PREFER might be an issue, but not outright scarcity.

This is an observation that follows logically from the last time peak oil believers thought "gee just because I don't know geology there must not be any oil left" and fell for Simmons and Deffeyes in 2005, because they didn't know a thing about Resource Economics 101. Or source rocks. Or shales. Or hydraulic fracturing. Or horizontal drilling. You apparently do. You should have been ringing alarm bells over basic economic ignorance back then, it was just as obvious then as it is now. You would have gotten banned for knowing things, but hey, you would get to yuck it up later for having known all along.

And interestingly, you have just explained why the last couple of peak oils were defeated (1979 and 2008), while discounting the same concept happening again. Again again I mean.

If PO comes along anytime soon, we'll miss the additional renewables deployed, EVs manufactured, charging infrastructure and electric distribution that would have been built, spurred on by $100+ oil.

No objection here. Saudi America was an EFFECT of the last $100/bbl oil. I've got no objection to basic supply and demand forces continuing to spoil the party for McPeaksters out into the back half of the 21st century.

[Pops]

Scarcity at A PRICE YOU PREFER might be an issue, but not outright scarcity.

Cold comfort. Price and availability are two sides of the same coin, at $1,000 bbl there is an eternity of oil.

There are huge deposits of greasy stuff—you forgot to mention oil shale, there is 4 trillion plus in the Green River formation alone!
But, the key is rate of flow.

So yeah, lots of oil-ish stuff out there, hundreds, if not thousands of years worth— at 5 or 10MMBD

That kind of is the peak oil argument.

[vtsnowedin]

If you define "peak oil" as the point in time where actual production and consumption reaches a a maximum and thereafter declines you will not have to get to $1000/Bl to get there. At even $200/Bl much of the world will not be able to afford it and will seek alternatives or just plain due without it.
It looks like we are headed to $100+/Bl in the coming months and even more if the climate change fanatics have their way. That will push the search for alternatives ahead rapidly and once those become practical and cheaper then using oil at the then prevailing price the use of oil will decline.
I expect using oil or gas products just to create heat as in home heating and to fuel ICE engines in vehicles will decline which will remove about half of the demand for oil.
Flying jet planes however will probably hang on a lot longer based on the energy content of jet fuel by weight vs. weight of batteries.
I see the real problem we face now is a government bent on reducing fossil fuel use without getting the needed replacements in place prior to shutting off the oil supply.
That rambles a bit but is where my thoughts are this evening.

[Outcast_Searcher]

I expect using oil or gas products just to create heat as in home heating and to fuel ICE engines in vehicles will decline which will remove about half of the demand for oil.
Flying jet planes however will probably hang on a lot longer based on the energy content of jet fuel by weight vs. weight of batteries.
I see the real problem we face now is a government bent on reducing fossil fuel use without getting the needed replacements in place prior to shutting off the oil supply.
That rambles a bit but is where my thoughts are this evening.

OTOH, while many won't LIKE it and will surely whine about it, we can live without as much flying if necessary. Far less business trips are needed with modern internet communication tools. People don't HAVE to fly for long range vacations. Cargo CAN be sent by ship or train or truck, even if it takes days or even weeks longer, as long as it's not highly perishable.

Now, how much inconvenience is "reasonable" vs. how much CO2 -- that is a point that reasonable people could debate. Unfortunately, given science denial and political point scoring from both sides, how much "reasonable" debate will actually occur is likely to be "not enough", IMO.

Given things like what just occurred in Oregon/Washington with the nasty June heat wave, it's getting much harder to deny that the warming trend is real, no matter how much, say, the AGW deniers point to snowballs, however. Another longer term example is the desertification of the Southwestern US.

https://droughtmonitor.unl.edu/

In general, that huge chunk of scary red stuff is getting all too common in the southwest in recent decades.

[Outcast_Searcher]

Scarcity at A PRICE YOU PREFER might be an issue, but not outright scarcity.

Cold comfort. Price and availability are two sides of the same coin, at $1,000 bbl there is an eternity of oil.

Yes, when the masses really can't use it without, say, sacrificing food, housing, medicine, clothing, etc, then oil IS scarce, re any practical definition we've been using the past 50 years, at least in the US.

However, there is a lot of middle ground there. By DESIGN, Western Europe has had taxes pushing gasoline towards the general area of $10 a gallon in most countries for quite a few years, to incent people to drive less, drive smaller cars, use more public transit, etc. And it has done so to a significant degree, at least compared to the US.

I would argue that, for example, $5 gasoline in the US (due to a fuel tax or a crude oil tax) would induce LOTS of whining and LOTS of politics, but would NOT induce the mass starvation, end of times, implosion of the economy, etc. that the usual fast crash doomer suspects have claimed it would for decades on this site. Especially if we moved to that gradually -- say at 25 cents a year, for example.

Even $10 gasoline (and diesel) could be dealt with, given time to plan for it. Plus, by the time we got there at 25 cents a year, BEV's and PHEV's and possibly FCEV's would likely dominate, so few would have to buy much gasoline.

But of course, at least in the US, MOST of getting to that middle ground and restraining consumption just to SOME meaningful degree is all about POLITICS. To the extent that we don't even have enough gasoline taxes to come CLOSE to proper care of our road and bridge infrastructure in the US, for example.

Some moderation is surely called for. But do ANY major US politicians have the GUTS to actually openly call for that, even if they might not get re-elected?

[Pops]

One of the classic arguments in the peak oil cannon is: sure, we can conserve but all that wasted oil is income for someone.

I don't know how far that really goes, but it has a lot to do with what is "normal." In the US it is normal to drive 15,000 miles per year, in the EU it is about half that. The extra 7,000 miles aren't easily eliminated, they are built in. No matter how wasteful they may seem. They are the result of decades of choices about everything from where to get pizza to how to design cities, run government, employ workers, pick up chicks.

That's the thing, not that this system is so great, because it ain't. But moving away from it will be hard and complex.

[AdamB]

Scarcity at A PRICE YOU PREFER might be an issue, but not outright scarcity.

Cold comfort. Price and availability are two sides of the same coin, at $1,000 bbl there is an eternity of oil.

In what way? It is just a supply/demand/cost curve in action, and it dictates when peak oil will happen, and why, and at what price. I can understand why peakers seem to have completely avoided the economic side of the question (to their own detriment) because economics is just...nasty. Peakers want to believe they are more hard data driven, X oil, Y consumption, divide one by another presto...DOOM. So anyone who studies this topic seriously needs to wrap their mind around the entire problem, just not the interesting, more hard science data driven aspects.

There are huge deposits of greasy stuff—you forgot to mention oil shale, there is 4 trillion plus in the Green River formation alone!
But, the key is rate of flow.

Again, production rate is just a function of price. I left out the Green River shales because they are unconventional development, whereas Venezuela is not, and Canada is mostly not.

So yeah, lots of oil-ish stuff out there, hundreds, if not thousands of years worth— at 5 or 10MMBD

That rate might apply to $45/bbl, as Venezuela is a geopolitical problem, and $45 would be fine for 5 million barrels per day alone. Canada on the other hand could do 10 million/day all by itself at $45/bbl, as long as the government doesn't get involved and change the cost equation because of environmental concerns. And at $45/bbl, no one is going to touch the Green River kerogens. When oil was $100/bbl there were sniffings and interest, but not $45.

That kind of is the peak oil argument.

Not really. And the reason why is, they don't provide the price point they are calling the peak oil at. Without it, they are subject to getting it wrong for the same reason they got it wrong all the other times.

[AdamB]

If you define "peak oil" as the point in time where actual production and consumption reaches a a maximum and thereafter declines you will not have to get to $1000/Bl to get there. At even $200/Bl much of the world will not be able to afford it and will seek alternatives or just plain due without it.

And you have just described in words why supply/demand curves are the only way to figure out peak oil. There are two moving parts to the answer, and peakers will never get it right except by accident if they ignore the other mechanisms operating within the problem.

[ROCKMAN]

Adam - "...and peakers will never get it right except by accident..." So true. But why the arguments will continue for decades is that it will take decades for the PROOF to surface given it will take a very long period of time to be confident PO has been reached. Exactly why past claims of PO were EVENTUALLY proven to be wrong.

How long? Look at past periods when the "experts" were proven wrong. And the double or triple that length of time IMHO.

[Pops]

Again, production rate is just a function of price.

You've stipulated that alternatives to conventional oil are all more expensive to produce,

And, since price can't rise indefinitely without killing demand,

It follows that neither will production.

You might say it will peak.

[AdamB]

Again, production rate is just a function of price.

You've stipulated that alternatives to conventional oil are all more expensive to produce,

I couldn't have, because it isn't true. The MODERN well design is certainly more expensive than those of yesteryear, but I was producing shale oil and gas at low prices decades ago. How? Low costs. Shale oil was being produced in the late 1800's, and the largest known accumulation of natural gas back in the 20's was, wait for it! Devonian shale gas in eastern Kentucky. It still lingers in the top 20 US gas fields, all these years later I believe.

The specific, modern and weird resources (certainly not LTO and shale gas) I mentioned, Canadian tar sands, Venezuela extra heavy, the Texas ROZ (a new one I didn't mention before, but there are so many), and the Green River formation kerogens. One is beyond current price schemes, one is marginal and experimental, and 2 are perfectly okay at $45/bbl (Venezuela and Canadian tar sands mining/SAGD). Would you like an estimate of capital and production costs for methane hydrates? That one would currently stump me.

And, since price can't rise indefinitely without killing demand,

Theoretically, prices rise a wee bit kills a wee bit of demand. Continue until supply/demand balance is achieved. It works in reverse as well. So no there is "indefintely" when the counter force to that happening is just as strong. Indefinitely high oil prices mean there is one Swiss watch repairmen left in the entire world, who uses a drop of "100% real rock oil" in every one of his repairs, and pays like 100 Swiss francs for each 6 oz eye dropper.

It follows that neither will production.
You might say it will peak.

Sure production can peak. Again. Would you like to speculate on the price that might match the next peak?

[Pops]

Alternatives to conventional are more expensive to produce.

The cheapest, non-OPEC new oil is $43+ bbl breakeven per Rystad,

That is higher than the $20+ average selling price pre-US conventional peak, or the $30+ pre-world conventional peak price, or the recent $40 average selling price. And about twice the cost of the next barrel from existing, depleting fields.

(Also note that this chart shows more of the resource in production now than remaining)

[AdamB]

Alternatives to conventional are more expensive to produce.

The cheapest, non-OPEC new oil is $43+ bbl breakeven per Rystad,

We've talked about how Rystad does what they do before. Feel free to note the total size of the resource they are discussing as well as cost, and then comprehend that this number is far lower than any comprehensive view of long chain hydrocarbon resources. You are aware that Rystad does NOT incorporate the technical information available in the old PetroConsultants database, right? Have you ever watched one of their presentations? I use their near term information extensively, as they watch some portions of the market like a hawk that I just don't have time for (they are hell on wheels with current trends in the Canadian tar sand sector, for example).