If you have not noticed yet, those guys thinking(hoping?) Mad Max was just around the corner are gone. You are preaching to the choir here.meemoe_uk wrote:Has the world ended a thousand times because of all these peaks? No.
You are correct here as well, the end consumer does not care were his oil comes from, as long as it powers his car.meemoe_uk wrote:Oil is oil, it doesn't care if you stick it in a barrel using an 8000 year old mesopotamian pot or with a fracked pressurized horizontal fishbone drilled well with polymer injection plugs.
It's here where you are getting lost. If we can get cheap oil out using new fangled technology, great. But if we have to spend shit loads of money/energy on getting that oil out, that DOES matter.meemoe_uk wrote:We can therefore conclude conventions don't matter. As long as the oil supply continues, we'll be ok. Otherwise according to your rational, peak oil happened at least 150 years ago when the old convention of using a bucket and spade on surface seep oil was being replaced with the new fangled dig thru rock with a pick axe oil
Recession risk unless oil prices fall furtherIf history is any guide, another oil-induced recession may be just around the corner, at least for the United States and some of the other developed economies. Every time that the cost of oil relative to global economic output has hit current levels -- and that's even after sharp falls in spot prices this month -- it has heralded a slump. And while economists and analysts say a serious slowdown can still be avoided, many add that unless oil and energy prices fall much further and -- most important -- stay down, the world economy could be in serious trouble.
You can see that during the C&C plateau period since 2005, about 1mpd in additional total supply has come from a long standing trend in the increase in natural gas liquids (NGPL), while another 1mpd has come from "Other Liquids" and appears to be specifically a response to the plateauing of conventional oil. This is mainly biofuels. Note that the increases in "Other Liquids" appear to have leveled off in 2011. The world has very limited capacity to produce more biofuel without causing severe increases in food prices.
You calculation is incorrect. The correct formula for Oil Expense Indicator is: (oil price * world oil consumption) / world GDP). So roughly:meemoe_uk wrote:But what make you think the human race is spending a significant amount on oil production?
World GDP = $78 trillion
World oil industry annual investment = $0.5 trillion = 0.6% of world GDP.
Has the Global Economy Become Less Vulnerable to Oil Price Shocks?Historically, 4% of world GDP appeared to be a dangerous threshold. Whenever the world oil spending rose above 4% of world GDP for a sustained period of time, global economy had suffered from major instabilities.
From 1974 to 1985, the world oil spending stayed above 4% of world GDP for about a decade. During the decade, the global economy suffered three deep recessions: 1974-75, 1980, and 1982 (when world economic growth rate falls below 2%, it is commonly considered to be a deep global economic recession).
World oil spending entered into this dangerous territory again in 2006 and 2007 and hit 5% of world GDP in 2008. In 2009, global economy contracted in absolute term for the first time after the Second World War. Based on preliminary estimate, world oil spending again rose above 5% of world GDP in 2011.
If one assumes that the world economy will grow at 3.5% a year from 2012 to 2020 and world daily oil consumption will grow by one million barrels a year. Given the observed world oil supply curve, suppose the oil price rises by 10 dollars a year. Then, by the end of the decade, world oil price will rise to 200 dollars a barrel and world oil spending will rise to 7.7% of world GDP.
Given the historical evidence, it is almost certain that the global economy will not be able to survive such a dramatic increase in oil spending burden without suffering from some major recessions.
Thus, unless the world oil supply curve becomes flattened in the coming years, the world oil supply does not seem to be able to sustain a global economy expanding at a rate of 3.5% a year or above.
Conclusion
This paper finds that oil price rises have had significant negative impact on world economic growth rates. These findings suggest that if the world oil production does peak and start to decline in the near future, it may impose a serious and possibly an insurmountable speed limit on the pace of global economic expansion.
Are you suggesting you would be ok with 80% of those people employed in "useless jobs" suddenly becoming unemployed? That seems pretty cold hearted to me. Not to mention a recipe for economic disaster. Do you really want to see a society with 80% unemployment? An economy where the only people employed are those working in a primary and secondary sectors like energy, agriculture, mining, etc and the other 80% are unemployed? Zimbabwe has an economy like that. It is not pretty.meemoe_uk wrote:thats 80% on 'luxurys' i.e. waste. I think the waste value is higher. I see so many people with so many useless jobs burning up so much energy. People involved in energy extraction are rare. This is what you consider 'shit loads of money/energy'?
I have not ignored this point, I addressed it in our last debate. 99% of our economic activity would become uneconomical if oil were to rise to $16,000 a barrel. Oil is the blood of our economy, if you raise its cost over 100 fold, it's like asking someone to live on only 1/100th of their blood supply. That might be enough blood to keep some finger wagging going, but that's about it. At $16,000 per barrel, the cost of oil alone would exceed the ENTIRE world GDP by a factor of 10! Surely you see this is a ridiculous assertion?!?!meemoe_uk wrote:The other measure, which I've pointed out to you before but you've chosen to ignore- the price of oil vs the energy in oil suggests the 'real' value of oil is about $16000pb, while we get it for $100, about 0.6% of its 'real' value.
That price might be close for some of the ancient, giant Saudi fields. But the price of oil is set at the margin. The most expensive barrel of oil sets the price. So you have to look at that expensive article drilling, deep water drilling, steam cleaning tar sands, etc. If prices fall below these guys' profitable point, production will start to get shut in, reducing supply.meemoe_uk wrote:I prefer to believe companies are looking at oil that costs no more than $30pb to extract.
The cost of new oil supplyThe new floor for oil prices is being set increasingly by the production cost of these unconventional liquids. A few decades ago, we could produce conventional oil profitably in the U.S. for under $15 a barrel. But those days are long gone for the U.S., and for most of the world (except a few old fields in places like Saudi Arabia). As every major oil company has admitted in the past few years, the age of easy and cheap oil has ended.
As the cheap oil from old mature fields is depleted, and we replace it with expensive new oil from unconventional sources, it forces the overall price of oil up. This is because oil prices are set at the margin, as are the prices of most commodities. The most expensive new barrel essentially sets the price for the lot.
Research by veteran petroleum economist Chris Skrebowski, along with analysts Steven Kopits and Robert Hirsch, details the new costs: $40 - $80 a barrel for a new barrel of production capacity in some OPEC countries; $70 - $90 a barrel for the Canadian tar sands and heavy oil from Venezuela’s Orinoco belt; and $70 - $80 a barrel for deepwater oil. Various sources suggest that a price of at least $80 is needed to sustain U.S. tight oil production.
Those are just the production costs, however. In order to pacify its population during the Arab Spring and pay for significant new infrastructure projects, Saudi Arabia has made enormous financial commitments in the past several years. The kingdom really needs $90 - $100 a barrel now to balance its budget. Other major exporters like Venezuela and Russia have similar budget-driven incentives to keep prices high.
Globally, Skrebowki estimates that it costs $80 - $110 to bring a new barrel of production capacity online. Research from IEA and others shows that the more marginal liquids like Arctic oil, gas-to-liquids, coal-to-liquids, and biofuels are toward the top end of that range.
As production costs push ever closer to the retail price ceiling, profit margins fall. Consider Canada as an example. Oil production there will likely turn a mere 5 to 8 percent annual return on equity for the next several years, according to analysis by ARC Financial. Under $60 a barrel, they note, “the industry is broadly unprofitable” and would not be able to attract reinvestment.
“Unless and until adaptive responses are large and fast enough to constrain the upward trend of oil prices, the primary adaptive response will be periodic economic crashes of a magnitude that depresses oil consumption and oil prices,” Skrebowski concludes. “These have the effect of shifting consumption from incumbent consumers — the advanced economies — to the new consumers in the developing economies.”
So by all means, we should celebrate the ability of high oil prices and truly miraculous technology to bring us oil from under two miles of water and another five miles of rock in the Gulf of Mexico; from previously inaccessible deposits in the Arctic; and from low-grade resources like tar sands and tight oil shales. That technology will mean that we won’t literally run out of oil in the coming decades as depletion takes its toll. But we should not imagine that it will bring us energy independence or bring back the good ol’ days of $2 gasoline. What it will bring, eventually, is oil for Asia as the U.S. and Europe are forced to park their cars for good.
Pops wrote:Personally I like the fifth chart
It shows what is actually going on. Even with the amazing Sizziling Bakken, tar washing in Canada and happy frackers providing a veritable cornucopia of "new" oil, C+C is still flat after 5 years, or is that 6?
You calculation is incorrect. The correct formula for Oil Expense Indicator is: (oil price * world oil consumption) / world GDP). So roughly:
($93 * 90,000,000 barrels/day * 365) / 72,485,000,000,000 = 4.2%
Are you suggesting you would be ok with 80% of those people employed in "useless jobs" suddenly becoming unemployed?
99% of our economic activity would become uneconomical if oil were to rise to $16,000 a barrel.
At $16,000 per barrel, the cost of oil alone would exceed the ENTIRE world GDP by a factor of 10! Surely you see this is a ridiculous assertion?!?!
The most expensive barrel of oil sets the price.
I did not make up that formula, I took it from the definition of oil expense indicator. That is the cost oil consumers have to pay to get the oil.meemoe_uk wrote:You've calculated the gross sales income of the oil industry. That's not the same as the expenses. If it were, the heads of the oil industry would be as poor as street cleaners as there would be no profit margin.
Ironic. For your example of jobs that waste oil, you picked the profession that probably has one of the lowest oil uses in the world. Sorry to break it to you, but even in Roman times they had coliseums with people kicking a ball around to entertain the masses. If you had hopes high oil prices would kill this job, I would not get my hopes up if I were you.meemoe_uk wrote:it wouldn't be hard to find a better job than kicking a ball round some grass for £1million. So you wouldn't be able to kick a ball for £1m a year anymore? How terrible. At high oil prices, jobs would gravitate away from waste and towards energy sources.
Sure printing money could radically alter the dollar cost of a barrel of oil. But I am saying in today's dollars, it will never get that high. Spitting out a nonsense $16,000 a barrel figure without qualify what dollars you are talking about really is not saying much. A loaf of bread could go to $16,000 with rampant money printing. But at today's dollar value, it is impossible for oil to go to $16,000 a barrel. That would result in an oil bill that is an order of magnitude larger than the entire GDP of the world.meemoe_uk wrote:Not really. Money is fiat. The amount in circulation can rise and fall to match the needs of the economy. Conversely, the cost of the economy can rise and fall to match the amount of money.
I don't think you understand how commodity pricing works. It's true enough that if the price of oil falls below the marginal cost, the high cost producer cannot compete and has to stop production if prices stay below the marginal cost for an extended period. But what you seem to be missing is the guy producing oil for cheap is not going to sell his oil for his cost if the guy next to him is selling it for 10x as much. He sets his oil at the marginal cost of the highest selling oil, even if his oil is much cheaper to produce.meemoe_uk wrote:Not really. The cheapest price is the most competitive. If your well can only produce expensive oil you aren't going to hack it in a cheap oil market.kublikhan wrote:The most expensive barrel of oil sets the price.
Oil Price Likely to Stay Buoyed by Marginal CostsThe marginal cost of oil production, defined as the cost of pumping the last and most expensive barrel required to satisfy demand, is fundamentally linked to long-term oil prices. If the oil price falls below the marginal cost, there is no incentive to produce that last barrel of oil, so demand will remain unsatisfied until consumers are willing to pay more.
The close relationship between the two was demonstrated from 2001 to 2010, when the average annual price of international oil benchmark Brent crude rose 228%, while analysts at Bernstein Research estimate the marginal production cost of the world's 50 largest listed oil companies increased 229%.
In 2011, the marginal cost of oil production was $92.26 a barrel for the 50 largest listed oil and gas companies and will reach $100 a barrel next year if it continues to follow the long-term trend, said Bernstein in a research note.
Costs are rising because much of the extra oil added to world supply has come from more technically challenging areas such as deep water or the Arctic, Bernstein said. This has led to "a combination of higher material costs and reduced productivity per well," it said.
Oil prices at set on marginal costs. IE, oil prices are set by how much it costs to produce one new barrel of oil. If the market refuses to pay this cost, supply destruction occurs and that barrel of production oil is shut in. It's basic economics. You don't have to conjure up scenarios of cackling oil execs controlling the price of oil. If oil is priced at a cost below a producer's marginal cost, production is shut down for that producer.meemoe_uk wrote:At the mo, TPTB have set the market value of $100pb. This is to promote investment in the oil industry. It's not a true marker of the extraction cost per barrel. ( i.e. it's not costing say $80 to extract oil so the industry can get $20 profit pb ).
So we have all these alternative methods of oil extraction being considered as profitable at $100 market price.
No. Big oil is turning away from cheap fields in the middle east and africa and turning instead to expensive fields in the OECD. At first this seems counter-intuitive. Why would you develop and expensive field if a cheap field is available? The truth is there are other costs associated with these "cheap" fields. Political risks like nationalization. Security risks like civil wars and pipelines getting blow up. Etc. Oil execs concluded it was more profitable to develop expensive oil than to deal with these risks. I tabulated all of the new oil coming online between 2003 and 2018(oil megaprojects database). More oil is coming online from non-OPEC sources than from OPEC sources.meemoe_uk wrote:The truth is though, the big players are all in the middle east oil bonanza setting up cheap oil extraction from conventional sources. When they've finished setting up in a few years, they won't need anymore extra support from inflated market prices. It's possible the market price will be dropped on purpose to cull the competition from all the new oil companys that have prospered in the high oil prices, and the market for alternative oil sources will either be bought out and subsidized or die off.
Of course, the media won't tell it like it is, it will report it as ' demand destruction '.
Big Oil Heads Back HomeBig Oil is redrawing the energy map. For decades, its main stomping grounds were in the developing world—exotic locales like the Persian Gulf and the desert sands of North Africa, the Niger Delta and the Caspian Sea. But in recent years, that geographical focus has undergone a radical change. Western energy giants are increasingly hunting for supplies in rich, developed countries—a shift that could have profound implications for the industry, global politics and consumers.
Working in the rich world—with its more predictable taxes and investor-friendly policies—removes some of the risks about the big oil companies that worry investors, making them less vulnerable to the resource nationalism of petrostates like Russia and Venezuela. "A company like Exxon Mobil can eliminate the technological risk" of developing unconventionals, says Amy Myers Jaffe, senior energy adviser at Rice University's Baker Institute. "But it can't eliminate the risk of a Vladimir Putin or a Hugo Chavez."
This new way of looking at risk is at the heart of the transformation. International oil companies traditionally face a choice: They can either invest in oil that is easy to produce but located in politically volatile countries. Or they can seek opportunities in stable countries where the oil is hard to extract, requiring complex and expensive production techniques.
Over the past few decades, they have built vast plants to produce liquefied natural gas, or LNG. They have drilled for oil in ever-deeper waters, ever farther offshore. They have worked out how to squeeze oil from the tar sands of Alberta. And they have deployed technologies like hydraulic fracturing, or fracking, and horizontal drilling to produce gas from shale rock. Wood Mackenzie, an oil consultancy in Edinburgh, says that more than half of the international oil companies' long-term capital investments are now going into these four "resource themes"—a huge shift, considering how marginal the companies once considered them.
There are also drawbacks to the new focus on nontraditional kinds of hydrocarbons. Environmentalists strongly oppose shale-gas extraction due to fears that fracking may contaminate water supplies, the oil-sands industry because it is energy-intensive and dirty, and deep-water drilling because of the risk of oil spills like last year's Gulf of Mexico disaster.
There are financial considerations, too. While conventional assets are relatively easy to develop and historically have offered good returns, projects in some more technically difficult sectors—like deep-water and LNG—typically take longer to bring on-stream, and are higher cost, meaning returns are lower.
"The risks in OECD are technical, but they're easier to manage than political risk," says Simon Henry, Shell's chief financial officer. "In the OECD, you have more control of your operations."
The consultancy has identified a "significant westward shift" in oil-industry investment, away from traditional areas like North Africa and the Middle East "towards the Brazilian offshore, deepwater oil in the Gulf of Mexico and West Africa and unconventional oil and gas in North America." "The majors went to Venezuela and lost their property. They went to Russia and had to whisk their CEO off to a safe house. They went to the Caspian and realized they couldn't get the oil out. I for one would much rather invest in a company that had 70% of its spending in the OECD."
Sorry for going off topic, but I could not resist correcting a few points you made. A few of your statements were incorrect and I prefer our posts here originate from accurate information, even if we disagree on how best to interpret that information.meemoe_uk wrote:As usual we've had an interesting diversion away from a new record of oil production. Perhaps we should call this thread the ' talk about anything except oil production record thread! '.
kublikhan wrote:I did not make up that formula, I took it from the definition of oil expense indicator. That is the cost oil consumers have to pay to get the oil.meemoe_uk wrote:You've calculated the gross sales income of the oil industry. That's not the same as the expenses. If it were, the heads of the oil industry would be as poor as street cleaners as there would be no profit margin.
Ironic. For your example of jobs that waste oil, you picked the profession that probably has one of the lowest oil uses in the world. Sorry to break it to you, but even in Roman times they had coliseums with people throwing a ball around to entertain the masses. If you had hopes high oil prices would kill this job, I would not get my hopes up if I were you.meemoe_uk wrote:it wouldn't be hard to find a better job than kicking a ball round some grass for £1million. So you wouldn't be able to kick a ball for £1m a year anymore? How terrible. At high oil prices, jobs would gravitate away from waste and towards energy sources.
kublikan wrote:Sure printing money could radically alter the dollar cost of a barrel of oil. But I am saying in today's dollars, it will never get that high. Spitting out a nonsense $16,000 a barrel figure without qualify what dollars you are talking about really is not saying much. A loaf of bread could go to $16,000 with rampant money printing. But at today's dollar value, it is impossible for oil to go to $16,000 a barrel. That would result in an oil bill that is an order of magnitude larger than the entire GDP of the world.meemoe_uk wrote:Not really. Money is fiat. The amount in circulation can rise and fall to match the needs of the economy. Conversely, the cost of the economy can rise and fall to match the amount of money.
I don't think you understand how commodity pricing works. It's true enough that if the price of oil falls below the marginal cost, the high cost producer cannot compete and has to stop production if prices stay below the marginal cost for an extended period. But what you seem to be missing is the guy producing oil for cheap is not going to sell his oil for his cost if the guy next to him is selling it for 10x as much. He sets his oil at the marginal cost of the highest selling oil, even if his oil is much cheaper to produce.meemoe_uk wrote:Not really. The cheapest price is the most competitive. If your well can only produce expensive oil you aren't going to hack it in a cheap oil market.kublikhan wrote:The most expensive barrel of oil sets the price.
...Costs are rising because much of the extra oil added to world supply has come from more technically challenging areas such as deep water or the Arctic, Bernstein said. This has led to "a combination of higher material costs and reduced productivity per well," it said.
kublikan wrote:Oil prices at set on marginal costs. IE, oil prices are set by how much it costs to produce one new barrel of oil. If the market refuses to pay this cost, supply destruction occurs and that barrel of production oil is shut in. It's basic economics. You don't have to conjure up scenarios of cackling oil execs controlling the price of oil. If oil is priced at a cost below a producer's marginal cost, production is shut down for that producer.meemoe_uk wrote:At the mo, TPTB have set the market value of $100pb. This is to promote investment in the oil industry. It's not a true marker of the extraction cost per barrel. ( i.e. it's not costing say $80 to extract oil so the industry can get $20 profit pb ).
So we have all these alternative methods of oil extraction being considered as profitable at $100 market price.
Kublikan wrote:No. Big oil is turning away from cheap fields in the middle east and africa and turning instead to expensive fields in the OECD. At first this seems counter-intuitive. Why would you develop and expensive field if a cheap field is available? The truth is there are other costs associated with these "cheap" fields. Political risks like nationalization. Security risks like civil wars and pipelines getting blow up. Etc. Oil execs concluded it was more profitable to develop expensive oil than to deal with these risks. I tabulated all of the new oil oil coming online between 2003 and 2018(oil megaprojects database). More oil is coming online from non-OPEC sources than from OPEC sources.meemoe_uk wrote:The truth is though, the big players are all in the middle east oil bonanza setting up cheap oil extraction from conventional sources. When they've finished setting up in a few years, they won't need anymore extra support from inflated market prices. It's possible the market price will be dropped on purpose to cull the competition from all the new oil companys that have prospered in the high oil prices, and the market for alternative oil sources will either be bought out and subsidized or die off.
Of course, the media won't tell it like it is, it will report it as ' demand destruction '.
kublikan wrote:Sorry for going off topic, but I could not resist correcting a few points you made. A few of your statements were incorrect and I prefer our posts here originate from accurate information, even if we disagree on how best to interpret that information.meemoe_uk wrote:As usual we've had an interesting diversion away from a new record of oil production. Perhaps we should call this thread the ' talk about anything except oil production record thread! '.
pstarr wrote:Kublikan is talking about the Oil Expense Indicator, a measure of the economic stress imposed by our shortages of our chief energy source, a essential major commodity.
Just FYI, I don't care about some infantile notion like 'being right every time'. I am not in this to win some stupid debate on an internet forum with a stranger. Believe it our not, I am trying to be honest here. And if I am understanding you correctly, your proposed scenario is roughly:meemoe_uk wrote:Sorry to break it to you, but you are flipping back and forth between cost to the consumer and cost of extraction to suit you being right every time. 2ndly, if you do want to flip back to cost of oil extraction to suit yourself, you've just failed again. The example of sport as a waste of oil has plenty of examples; moter racing being a pretty obvious one. Seems you aren't trying to understand anything. Just a game of flipping subject and ignoring obvious examples.
The world will effectively never run out of cheap energy, therefore any energy source will never attain its potential highest price.
2005AD dollars if that helps you so much. What did you think, 1812AD dollars?
And no it wouldn't result in such a large oil bill, even if money kept the same value. People would buy less of it, it would be treated very carefully.
The Impact of Global Oil Consumption: OECD vs. Non-OECDOil demand from OECD countries (the haves) has declined for the fifth time in the last six years. It’s on track to decline again this year. On the other hand, demand from non-OECD countries (the have-nots) is up a whopping 15% in just the last three years. That rate of growth is expected to continue.
Economic growth requires energy. Transportation is a big part of economic growth, allowing goods produced to be moved around, and services required to be provided. Most of the world’s goods in countries that are old world (us) or rapidly growing emerging market countries, move by trucks, ships, trains and planes. They all use vast amounts of oil. So it stands to reason that an emerging market country – that’s experiencing rapid economic growth – is rapidly increasing its use of oil. What a surprise; that’s precisely what’s happening.
Many economists figure oil is the culprit creating the global imbalances behind much of the world’s financial woes. If you understand the key role oil plays in any country’s economy, it’s hard to argue the point. Bank of America Merrill Lynch sounded a dire alarm in its 2012 energy outlook, stating the current growth path of crude simply isn’t sustainable:
“Whether a recession in Southern Europe frees up some oil for China and India to grow on, or whether high energy prices rip through energy sensitive emerging markets such as Turkey, we believe the current path for oil is unsustainable and something has to give.”
The bottom line is this: Right now, oil dictates countries’ fortunes. Without it, or if it becomes prohibitively expensive, economic growth grinds to a halt.
So we are in agreement on this point at least? New oil being developed really is expensive? It's not just Bernstein blowing smoke? It is real costs, like technically challenging extraction?meemoe_uk wrote:Meanwhile the Anglo americans develope more expensive oil back home.
And the more expensive guys shut in production when they are no longer making a profit, resulting in less oil available to the market. Supply falls. With falling supply but high demand, prices rise. And the cycle starts all over. Bottom line: if you want new oil production that is going to increase our oil production and/or fill in for declining production from older conventional and cheaper fields, you have to have an oil price where these expensive producers can still eek out a profit. Otherwise when oil prices fall to the level only the cheap producers can make a profit, all of that new oil gets removed from the market. You can't expect oil to fall to $30 a barrel and at the same time expect oil production to increase from technically challenging extraction whos cost are far above $30 a barrel.meemoe_uk wrote:During a bear market the price of commodities go to their lower values, and the expensive oil well owner can't compete, while the cheap guy can lower his prices and still make profit. Over time the cheap oil guy wins.
pstarr wrote:Of course there is a shortage, and that is why oil has quadrupled in price from $20 to $80 in a few short years.
kublikan wrote: Believe it our not, I am trying to be honest here. And if I am understanding you correctly, your proposed scenario is roughly:
1. oil @ $16,000 a barrel in today's dollars
2. Economy roughly at the same level, ~$72 trillion world GDP
3. oil consumption falls to keep the oil expense to the economy at roughly today's level, ~4.2% of world GDP
You are basically arguing for an oil free economy.
< lonng ramble >The bottom line is this: Right now, oil dictates countries’ fortunes. Without it, or if it becomes prohibitively expensive, economic growth grinds to a halt.
So we are in agreement on this point at least? New oil being developed really is expensive? It's not just Bernstein blowing smoke? It is real costs, like technically challenging extraction?meemoe_uk wrote:Meanwhile the Anglo americans develope more expensive oil back home.
Kublikan wrote:And the more expensive guys shut in production when they are no longer making a profit, resulting in less oil available to the market. Supply falls. With falling supply but high demand, prices rise. And the cycle starts all over. Bottom line: if you want new oil production that is going to increase our oil production and/or fill in for declining production from older conventional and cheaper fields, you have to have an oil price where these expensive producers can still eek out a profit. Otherwise when oil prices fall to the level only the cheap producers can make a profit, all of that new oil gets removed from the market. You can't expect oil to fall to $30 a barrel and at the same time expect oil production to increase from technically challenging extraction whos cost are far above $30 a barrel.meemoe_uk wrote:During a bear market the price of commodities go to their lower values, and the expensive oil well owner can't compete, while the cheap guy can lower his prices and still make profit. Over time the cheap oil guy wins.
seenmostofit wrote: in my past 22,000 miles of driving to both coasts, and from the Canadian border to southern Arizona
Nope I'm just happy we actually agree on a few points. After some of our previous debates I had my doubts we would agree on anything Good talk meemoe.meemoe_uk wrote:Any other details you want to go over?
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