Mercian63 wrote:There was a time when it seemed as though oil might simply start to run out - "peak oil" was the phrase - pushing prices ever higher, and giving us the impetus to move to a clean, renewable economy.
In fact, oil is being discovered far more quickly than it is being consumed.
Is the latter point about discoveries true? It's a while since I did much reading on PO, but my recollection is that oil discoveries peaked about 50 years ago.
Is the writer getting confused with "recoverable reserves" growing more quickly than consumption? And is even that claim safe?
Plantagenet wrote:Mercian63 wrote:There was a time when it seemed as though oil might simply start to run out - "peak oil" was the phrase - pushing prices ever higher, and giving us the impetus to move to a clean, renewable economy.
In fact, oil is being discovered far more quickly than it is being consumed.
Is the latter point about discoveries true? It's a while since I did much reading on PO, but my recollection is that oil discoveries peaked about 50 years ago.
Is the writer getting confused with "recoverable reserves" growing more quickly than consumption? And is even that claim safe?
I started a thread on this very topic here at peakoil.com some years ago. The issue is how to account for shale oil deposits like the Bakken or the Permian Basin in Texas.
When companies like Pioneer began to recover oil in the Permian basin through horizontal drilling and fracking, suddenly there were huge new resources that were exploitable. The Permian Basin alone may still hold ca. 70 billion bbls of oil----comparable to Ghawar, the largest known "conventional" oil field in KSA. Put all the US oil shale deposits together and over 100 billion bbls of oil was "discovered" in the US alone in last couple of decades.
These huge new shale oil resources don't normally appear in lists of new oil discoveries, however, because people always knew the oil was there. It was just a matter of developing the technology and spending the big bucks to enable the oil to be recovered.
Cheers!
Mercian63 wrote:I always felt the weakness in the "simple Hubbert peak" anticipation of peak oil was not taking enough account of price rises + technology.
Mercian63 wrote:That said, governments nowadays are to a large extent legitimised by the "cheap oil" lifestyle they facilitate, and expectations grow by each generation. I grew up in quite comfortable circumstances in the 60s and 70s, but few of my peers then expected to enjoy a foreign summer holiday more than once or twice during their adolescence. Few families had more than one car, and it was probably a pretty basic car like a Cortina or a Viva (this is UK). Nowadays a winter and summer holiday abroad every year is taken as virtually a divine right by the vast majority in employment, as is driving to work (alone) in the second or third sophisticated, powerful car of the family. I won't even start on the "right" to cheap clothes, food from the far side of the world, amazing digital gadgets etc etc.
Behind the scenes, the whole pleasuredome is kept inflated by an every-increasing heap of debt.
In the UK, we are taking on more and more debt, but national productivity has not increased in ten years. That's crazy!
It's no mystery that governments are dragging their feet over Climate Change. To act decisively would hack away at their own legitimacy to rule. Cheap oil is inherent in the social contract.
I'm becoming a bit ponderous here, but what I'm getting at is a subtle but potent cocktail of rising expectations clashing with steadily rising (real) oil prices, against a backdrop of rising debt, generation by generation. This would undermine public faith in democratic government, unless there were leadership powerful enough to alter the above-mentioned "cheap oil" expectations. Personally, I don't believe it will happen. Since when did governments balance the books?
I foresee progressive stratification of societies into what amount to caste systems, as the Haves (essentially, the rentiers and their expert servants) continue to exploit positions of commercial power to sustain their "cheap oil" lifestyles whilst the Have-nots (salaried employees and semi-employed contractors) lose status. This has already been going on in the US for decades and the trend has spread.
In this scenario, nation-states would decline in influence relative to corporate power. This is dangerous, as the lack of government direction in a crisis like 2008 would likely be curtains for all concerned.
What makes this scenario plausible to me is the gradualness of it, plus, it's already happening and has been under way for decades.
There is a last factor, the chile sauce you might call it - overcrowding. The frustration of the Haves that wherever they go on their globe-trotting lifestyle, or wherever they try to distract themselves in their 12-cylinder cars, they are hindered by plebs, waves and waves of plebs. A hatred of crowds will grow across the arrogant classes. They will have a powerful collective interest to exert their private power against any collective power to draw as much wealth up to their level as possible to strangle the overcrowding problem. Perhaps this is how Climate Change will be "solved"? Then comes the big debt avalanche, and it all falls into history...
Whew! Right, those are a few thoughts for the day.
Do all countries/regions report reserves in a consistent way? You note differences between USA and Canada. Worldwide, do producers report a mess that gets sorted out by analysts at places like IHI and WoodMac? Possibly with the assistance of a little inside knowledge?
How political are these proven reserve numbers? Would there not be a temptation to report the same proven reserves (or years of production remaining) every year? On the basis that rising reserves could set off expectations that could be difficult to sustain, whilst falling reserves have an obvious negative impact on public image.
How thoroughly are proven reserves independently audited around the world?
The reserve life of Venezuela shot up in 2006/08 as the oil price rose. Why did it not fall back as the oil price collapsed in the recession? Similarly, why did other regions not see a large rise in reserve life with higher oil prices? You note that reserves are revised in line with commodity price changes, so the effect should have been seen across the world (surely?).
The rumors of vast unprofitability of shale companies, even at high oil prices, suggest to me that it wasn't some revolutionary tech that allowed shale play to take place, the play was done even if unprofitable.
The timing around the 2005 conventional oil peak, suggests that it was done with the expectation that there'd be no significant competition from conventional oil and there'd be exhorbitant prices. The U.S did quantitative easing and artificial low interest to further lubricate the finances, even so many were still unprofitable.
Darian S wrote:The timing around the 2005 conventional oil peak, suggests that it was done with the expectation that there'd be no significant competition from conventional oil and there'd be exhorbitant prices.
rockdoc123 wrote:The rumors of vast unprofitability of shale companies, even at high oil prices, suggest to me that it wasn't some revolutionary tech that allowed shale play to take place, the play was done even if unprofitable.
The timing around the 2005 conventional oil peak, suggests that it was done with the expectation that there'd be no significant competition from conventional oil and there'd be exhorbitant prices. The U.S did quantitative easing and artificial low interest to further lubricate the finances, even so many were still unprofitable.
I was there working with one of the companies that pioneered shale gas E&P in the US. At first it was not economic due to high drilling and completion costs. Technology and a manufacturing mentality dropped those costs by more than half and it did become economical. At the start we were looking for natural gas because the US had apparently run out of conventional gas and seasonal prices were hitting $10+ /Mcf. With so much success the gas prices dropped but oil rose and the business moved to looking for gas with large liquid volumes which also became successful. People always speculate what might be if say OPEC folded or oil prices rose etc. but in reality oil and gas companies work on the premise of only doing those things that can be profitable at the current price forecast which generally is the average price plus an inflation adjustment. Companies get caught in wild price fluctuations, over spending on land and acquisitions when prices rise and then being caught with high loan payments when prices drop. Predicting price is a mugs game, the successful companies have found a way to over time average out, muddling through the bad times and making hay in the good times. Unfortunately there hasn't been good times for awhile, the industry being a victim of it's own success with potential supply outpacing demand.
I've been hearing for years that most shale companies are unprofitable, even when we had high oil prices.
Also heard that natural gas production from such collapses by like 85% within a few years. So not sure what they're looking for, with that, if that's true.
rockdoc123 wrote:I've been hearing for years that most shale companies are unprofitable, even when we had high oil prices.
a number of times on this forum I've pointed out that those who make this claim seem to be incapable of understanding financial reports. They continue to report on Cashflow figures that show no profits but don't seem to realize those numbers include non-cash items such as DD&A which sometimes can be as large as revenue in any given year. Those non-cash items say nothing about how the business is doing, you need to look at cash in (revenues from sales ) and cash out (E&P costs, operating costs, land costs, interest costs etc) to see what cash is on hand. Also it is important to understand that oil and gas companies that do not pay dividends are expected to grow production and hence corporate value by the shareholders. That means that most of the cash from production needs to be reinvested. Having large amount of working capital at the end of the year is looked at as being a bad thing for independent oil and gas companies, shareholders want to see that reinvested. There are a bunch of metrics that are commonly used by oil and gas financial analysts for looking at companies and those do not show the health issues you point to for most companies. The big problem right now is there isn't a lot of attraction in the market to oil and gas investments.
how about bankruptcies, haven't there been many for the past few years?
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