If oil producers leave the oil in the ground to wait for a better price, how will they have any cash flow at all? And why are the oil producers not following your advice? Why are they currently pumping as hard as they can?
---Futilitist
Apocalypse Soon?
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---Futilitist
Nobody suggested that was a posibility.
Have you paid no attention to the news whatsoever? Most companies always pump what they have available to pump and the current climate hasn't changed that: it has mostly just decreased new drilling. What has changed is that Saudia Arabia has - for now at least - decided to keep-up its production rate instead of modulating it keep prices high, which they had been doing for decades. It's an artificial manipulation of the market that happens to be the opposite of the artificial manipulations they've always done in the past.
In either case, none of this has anything to do with Peak Oil. It's temporary and it wasn't caused by any of the Peak Oil effects you and yours predicted because -- there is no Peak Oil issue right now and there won't be for decades.
It's different for different types of wells and different companies based on their size and health. But a good estimate would be that the short term is 1-3 years, since 3 years is how long it takes a fracking well to produce most of its oil. My suspicion though is that this game Saudia Arabia is playing isn't going to last longer than about a year. They may even reduce production after their meeting this June. Since they are playing games right now, it is mostly a guess what they'll do next though. But again, none of this has anything to do with Peak Oil and none of it signals a general health problem in the oil market.
And yet exploration is still going on. How do you reconcile reality with your theories?
Of course they're not - they want as much money as possible for their product, like any company.
That could explain a lot about your posts!
Wrong. brucep said:
"You're a nitwit. Which oil producers and refiners are going bankrupt? On the rare occasion that the profit margins are challenged they'll leave the oil in the ground while they cut refining rates."
I was answering him, which you are fully aware of. Why do you have to keep playing stupid rhetorical tricks? If your argument is strong, it should stand on it's own without resorting to cheating and name calling all the time.
That is a very complex rationalization based on politics. My physics based explanation is simpler and better. Occam's razor.
So, what you are saying is that we used to get mad when the Saudis made the oil price too high, and now we are mad that they didn't keep the price up!?!
Ha ha. Your explanation is just silly. You must be high. The Saudis could not do anything to stop the oil price plunge. By the time of the Saudi non-decision decision, the oil price decline was already well underway. The Saudis simply didn't have any choice but to pump like everyone else. They couldn't realistically choose to make their situation much worse by volunteering to give up market share and revenue to the American frackers and their very expensive tight oil. Like every other oil producer in the world, the Saudis were forced into this price war.
Those sound like desperate rationalizations. They are just belief statements, and nothing more.
Peak oil sure seems to be causing some serious problems, like the basic theory predicted. Do you have any proof (other than your opinion) that peak oil is not an issue right now and won't be for decades?
If there isn't a "general health problem in the oil market", why is the oil price too low to pay the full cost of oil production, including investment in future oil production? That sure sounds like a "general health problem in the oil market" to me.
---Futilitist
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Kondratieff
Registered Member
Well, here is the answer to that question:
http://gulfnews.com/business/sector...00b-cancelled-due-to-low-oil-prices-1.1456716
http://www.wsj.com/articles/crude-oil-fall-squeezes-megaprojects-1418086469
http://www.theguardian.com/environm...r-tar-sands-project-in-face-of-low-oil-prices
http://www.bloomberg.com/news/artic...eans-canceled-projects-as-investment-declines
http://www.naturalgasintel.com/arti...s-face-wipeout-on-low-oil-prices-says-analyst
http://www.platts.com/latest-news/oil/london/bp-to-cut-exploration-spend-postpone-upstream-27083848
http://business.financialpost.com/n...l-us1t-projects-on-price-fall?__lsa=bf5f-5815
On the other hand, prices cannot rise again to the 100 $ level since consumers cannot afford to pay this price. Consumers can afford to pay 80 $ this year, according to this ETP model. I guess we will have the opportunity to see if that level is really true in the next months.
Before the author of this model developed it, another economist who has his own blog forecast the 2014/2015 oil price collapse.....MORE THAN TWO YEARS AGO.
Since then, Steve Ludlum has been updating the so-called "Triangle of Doom" until the event finally occurred:
You can follow his updates in the Economic-undertow blog. So far, he has hit the nail on the head.
http://www.economic-undertow.com/
Wellcome to Sciforums, Kondratieff
Yes the steep fall in the price of oil hits especially hard the drilling supplies companies. Unlike the oil producers, they can not keep pumping even at a loss. They depend upon orders coming in. One of the biggest, Schlumberger will fire 11,000 workers - reducing it employee count by 15%. Read more here:
http://247wallst.com/energy-business/2015/04/17/why-schlumberger-will-fire-11000/
Even exploring does not contract as much - The owners of drilling rigs and ship, will take lower rent to get work but want some work even if it does not fully cover their costs, as they have mortgages to pay, work or not.
Shale oil producers going out of business is, IMHO, a step in the right direction.* Petroleum based gasoline is not needed. Sugar cane based alcohol, slightly CO2 net negative, (and many other virtues I have often listed, including lower cost per mile driven if oil is priced at a break even price for most producers.) is what needs to be the fuel for cars needing liquid fuel. Converting a standard IC engine, cost less than 1% of a Musk's planned lower price EV.
Cane based alcohol's price per gallon is static of slightly declining in real terms as genetics improves the yield per acre and unlike petroleum, it is renewable and greatly expandable in volume, just using now abandoned pasture. (Cane is a grass - grows most any where with ease, but with best yield per acre in the tropics. Its alcohol is stored solar energy, so get more of that where there is more sun annually.)
* Petroleum is too valuable, especially to future generations, as a petro/chemical feed stock to be burned for heat with CO2 released.
If I were King, every gallon burned would earn you a week in jail (or planting sugar cane).
Yes the steep fall in the price of oil hits especially hard the drilling supplies companies. Unlike the oil producers, they can not keep pumping even at a loss. They depend upon orders coming in. One of the biggest, Schlumberger will fire 11,000 workers - reducing it employee count by 15%. Read more here:
http://247wallst.com/energy-business/2015/04/17/why-schlumberger-will-fire-11000/
Even exploring does not contract as much - The owners of drilling rigs and ship, will take lower rent to get work but want some work even if it does not fully cover their costs, as they have mortgages to pay, work or not.
Shale oil producers going out of business is, IMHO, a step in the right direction.* Petroleum based gasoline is not needed. Sugar cane based alcohol, slightly CO2 net negative, (and many other virtues I have often listed, including lower cost per mile driven if oil is priced at a break even price for most producers.) is what needs to be the fuel for cars needing liquid fuel. Converting a standard IC engine, cost less than 1% of a Musk's planned lower price EV.
Cane based alcohol's price per gallon is static of slightly declining in real terms as genetics improves the yield per acre and unlike petroleum, it is renewable and greatly expandable in volume, just using now abandoned pasture. (Cane is a grass - grows most any where with ease, but with best yield per acre in the tropics. Its alcohol is stored solar energy, so get more of that where there is more sun annually.)
* Petroleum is too valuable, especially to future generations, as a petro/chemical feed stock to be burned for heat with CO2 released.
If I were King, every gallon burned would earn you a week in jail (or planting sugar cane).
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No, he stated "The biggest oil companies are are not currently profitable enough to fund future exploration and production." However the facts are that oil exploration is still being initiated (and funded) by large oil companies. So his post is factually incorrect. I was asking how he reconciled that error with his theory.
[QUOTE="Futilitist, post: 3292786, member: 248569"Peak oil sure seems to be causing some serious problems, like the basic theory predicted. [/QUOTE]
A few years ago you were adamant that peak oil predicted $16 gas by 2015 and $32 gas by 2016. Now you are saying that peak oil means underpriced gas. It's a great theory - no matter what happens, it predicts it!
A few years ago you were adamant that peak oil predicted $16 gas by 2015 and $32 gas by 2016. Now you are saying that peak oil means underpriced gas. It's a great theory - no matter what happens, it predicts it!
Why can't they? I wasn't excited by 4 dollar a gallon gas a couple of years ago, but it wasn't crushing me. Now I make more money than I did then -- so why would 4 dollar a gallon gas be any worse for me today than it was then?
Same goes for the oil producers: In 2007, they were fine with 70 dollar a barrel oil. Why now do they require it to be more expensive to produce?
What, exactly, is the basis for this claim? How exactly were those lines drawn the way they were drawn?
Please provide the source for this claim: I want to read what this economist wrote 2 years ago.
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The way I read that he was talking about new production, but I may have misunderstood. I'll leave it to him to clarify.
What Saudia Arabia did is a simple fact and what it caused is an obvious consequence of supply and demand economics.
You don't have a physics based explanation, you have random scribbles you drew on a graph that don't mean anything. I agree that makes it simple, but it certainly isn't better than real economics!
No, I don't think anyone is mad that the price is low -- maybe just you, since it crushes your predictions.
The point - the fact - of the matter is that they didn't try to stop it, they purposely allowed it/caused it to accelerate.
Yes, it is a price war: the Saudis are forcing the price down. You're trying to play it both ways.
Well if you think what you are saying has something to do with Peak Oil, then say something that connects them to peak oil! As others have pointed out, what is happening and what you are now predicting will happen directly contradicts your previous predictions/those of peak oil. Such as they are: this new prediction is just gibberish. At least Peak Oil made sense. It was logical, it just happened to be based on too pessimistic of an assumption.
So....did you just forget that Peak Oil predicted shortages and high prices, not gluts and low prices? Or are you just full of crap here?
That's obvious: Peak Oil predicted oil shortages and instead we have a surplus. It predicted "terminal decline" for US oil production, but instead US oil production is surging. What is happening today is exactly the opposite of what Peak Oil predicted!
You can't possibly be this dumb that you don't remember what Peak Oil is about.
There can be no proof for that, it's just a prediction. But prediction based on the current market trajectory, so a pretty safe one.
Repeating your fantasy over and over will never make it true. I know you don't have any source for that, but will nevertheless ask again: where did you get that idea? This claim of yours is a fact/data based claim and needs to be referenced to actual facts/data. Cite a (reputable) source that says what the requried price of oil is for production and future investment to break even.
But after that, why don't you tell me what, exactly, you think is going to happen next? What will the market look like in 5 years? Even lower prices and more surplusses of oil? Please explain how what we see today leads to the collapse of society and die-off of 90% of all humans. Because while I could at least see some logic for running out of oil being a big problem, too much oil and too low of prices are what I call "good problems".
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Your silly argument is very weak, billvon. Kondratieff just posted a whole bunch of links proving that my comment above is factually correct. Investment in future oil production is down sharply, even by the largest oil producers.
The price of oil is currently too low to pay for the full cost of oil production, including investment in future oil production. That is just a fact. Try to accept reality.
Straw man. You are just misinterpreting what I said. A few years ago, I was saying that the oil price trajectory was heading for levels that consumers would soon not be able to afford. I was absolutely right.
What I projected a few years ago was based on the best information available to me at the time. New information has come to light since then. It would be stupid not to take this new information into account today.
This discussion has moved past you. You really need to catch up a little, billvon.
---Futilitist
That is a good idea.
Saudi Arabia didn't do anything.
The Etp model is my physics explanation. You know that. Stop playing word games.
I think all of the oil workers who are getting their pink slips might disagree with you.
The point - the fact - of the matter is that the Saudis didn't do anything because they couldn't.
The Saudis are doing the same thing that every other oil producer is doing. You are just trying to find someone to blame for the oil price drop. Accepting the truth is harder.
I am not dumb. I am the one who studies peak oil theory. You just deny it. Everything I have ever said here has been consistent with peak oil theory. Your misunderstanding of peak oil theory and your intentional misinterpretations of everything I say do not amount to a serious argument. You are being vexatious.
Okay, here are a few:
http://knoema.com/vhzbeig/oil-statistics-production-costs-breakeven-price
http://www.businessinsider.com/citi-breakeven-oil-production-prices-2014-11
http://graphics.wsj.com/oil-producers-break-even-prices/
http://www.reuters.com/article/2014/10/23/idUSL3N0SH5N220141023
http://www.ogfj.com/articles/2014/04/fiscal-break-even-oil-prices-for-major-opec-members.html
The price of oil will generally not exceed the Maximum Consumer Price.
The oil industry will wind down from here on. GDP will fall drastically as the world economy begins to shut down. Unemployment will rise. At some point, the world economy will simply collapse, leading to die-off.
Low oil prices are great.
Until you lose your job. ---Futilitist
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Sigh. So Saudia Arabia didn't do anything...except engage in a price war?! You're thrashing about light a fish flopping out of water.
Do you not see that those two sentences contradict each other? If the price of oil is too low to pay the full cost of oil production including investment in futue production, then how can they still be investing in future production?
What truth? You haven't explained the price drop. And my explanation is what basically the same as what every other economist is saying:
Notice the quote starts with a simple statment of supply and demand. That's all this is.Some Random Economist said:
Then say something about Peak Oil theory! You still haven't said why what we are seeing today is consistent with Peak Oil Theory, when Peak Oil theory predicts lower production and higher prices (AKA: supply and demand)!
That shows a break-even price of 35-80 a barrel, for different wells. Quite contradicting your claims that the breakeven prices is 80-100. Are you even listening to yourself?
I'll let you try and explain why that one is different from your previous graph, especially considering the big oil producing countries are generally considered the ones with the cheapest oil (they don't frack, they just drill a hole and oil shoots out).
Please provide the equation for that.
"Wind down" how? I asked you for economic specifics: is the price of oil still going to be low and production still going to be high in 5 years? (and, of course, why?)
So are you acknowledging that what you are saying now is totally different than what you said a few years ago?
Lol, really? You're actually claiming you didn't say oil prices were going to rise? Lol.Straw man. You are just misinterpreting what I said. A few years ago, I was saying that the oil price trajectory was heading for levels that consumers would soon not be able to afford. I was absolutely right.
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He drew a straight line on graph showing in less than 8 years how busted the consumer would be by 2020. I.e. In about 2013 he could afford more than $100/ barrel oil but in 2020, only $10/barrel oil is the max affordable! - how idiotic can you get? But his "physics" proves all this nonsense.
Yes, it is down. However, you didn't say it would be down - you said that ""The biggest oil companies are are not currently profitable enough to fund future exploration and production." That is both false and misleading, since companies are currently funding exploration. Now you are trying to backpedal and say "well, I meant that they're not profitable enough to do as much exploration as they used to." And backpedal if you like, just have the honesty to admit you were wrong.
This is reality:
=======
Giant Shell drilling rig arrives in Port Angeles
Posted on April 17, 2015
seattlepi.com
The 400-foot-tall, 292-foot drilling rig that Shell Oil plans to use this summer in the Arctic dropped anchor at 7:10 a.m. in Port Angeles for what is expected to be a two-week stay.
Curtis Smith, a Shell spokesman, said the Polar Pioneer will spend two weeks at a federal anchorage in Port Angeles, getting ready for a planned tow into Seattle.
“Specifically, we will offload the Polar Pioneer and prepare for the planned tow to the Port of Seattle,” said Smith. “We will be re-installing some equipment that had to be removed for the dry town.”
Shell was originally planning to operate one rig in the Chukchi Sea, about 75 miles northwest of the Alaskan village of Wainwright. A second rig would have stood by at Dutch Harbor, a six-day sail away.
But the oil giant has decided to maximize return for its investment —Shell has now put up to $6 billion into its Arctic plans — by operating both rigs. It aims to drill a half-dozen exploratory wells during the brief “window” after Arctic pack ice recedes, and when it returns.
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You predicted $16/gallon gas by 2015 and $32/gallon gas by 2016. Lying about that just makes you look foolish and desperate.
No, you misinterpreted the information available then, leading to a poor and ultimately failed prediction. You were wrong then and you are wrong now.
Kondratieff
Registered Member
Hello Russ, this is the first blogpost where Steve uses this Triangle of Doom. It wasn't really a triangle by then.
http://www.economic-undertow.com/2012/09/page/2/
And regarding your questions:
1- I don't think you should focus only on your experience. I think that we are discussing a broader concept: Aggregate demand. While your wage was improving, a massive economic crisis was ravaging Europe. Italy, Spain, Ireland, Greece... Wages dropped, unemployment soared, debt sky-rocketed. If you look at the aggregate consumption of these countries the result is clear. They consume a way less Oil and petroleum products today than what they did in 2007. I think that both Steve and ETP model are referring to the aggregate demand in their respective models.
2- Oil producers: In my opinion, they will not be fine with lower prices (and they undoubtely were a few years ago, do you remember in the 90´s when the average price of oil was 5-10 $ per barrel?), because production costs are increasing exponentially. Technology plays a big role, because we should expect that efficiency and recovery margins will improve over time. The only problem is that we (technology) cannot keep pace with rising production costs, as good and conventional oil reserves are quickly depleting and only the "bad" oil is left. I think these graphs illustrate the problem correctly:
http://www.zdnet.com/article/the-cost-of-new-oil-supply/
We can see here two graphs: The first one from 2012, the second one represents last year breakeven price. We should notice that the global breakeven price has increased 7 $ in just two years.
The source of both graphs is the Financial Times.
3- Finally, I don't claim that the ETP model is 100% accurate. I don't really know all the details, though I had the opportunity to ask the author some questions during this year in the peakoil.net forum. I haven't read and studied his report, so I cannot confirm that the author is 100% right. However, we need to understand that we will really have a problem if the most expensive oil production is phased out and oil prices don't rise. This will indicate an affordability problem, because it will signal that our society will not be able to pay the cost that is needed to produce one of the most important elements of our industrial civilization.
Best Regards,
Right. They want higher prices, because only higher prices will be able to pay for some of the more expensive extraction methods. Right now oil prices are low due to several factors:
-rising efficiency standards for transportation
-effectiveness in drilling unconventional oil
-increase in oil supply from the Middle East
As cheap oil is pumped, the cheapest wells will start losing production and prices will rise again, making the more-expensive methods available again.
Well, it will always be a mix of cheap wells and expensive wells. Some wells are quite profitable at $50 a barrel; others are not profitable until you hit over $100 a barrel. By this mix of sources, oil prices will conform to demand.
I agree; that would be a disaster, as it was when the government tried to price-fix during the 1970's. However, as long as they don't make such a foolish mistake again, oil prices will continue to rise as they have been since mid-March.
One data point that we do have is that oil is affordable at over twice its current price.
1) Oil prices are low now, but they dropped very rapidly. It would be silly to suggest that slowly rising fuel efficiency standards caused the very rapid drop.
2) Oil supply has not increased from the Middle East. It has remained basically flat.
3) That leaves "effectiveness in drilling unconventional oil".
This is basically true, but by using the word "effectiveness" here, you are kind of implying that you mean frackers have become more efficient. Of course they have, but not nearly enough. You are, though, absolutely correct about rapidly rising unconventional oil production eventually leading to the drastic price plunge.
The frackers weren't all that "effective" at doing anything good. All they did was produce a whole lot of oil very expensive oil, which caused the massive glut we are currently experiencing. Plus, FED policy held oil affordability higher for longer than it could have remained otherwise. Without Operation twist and QE3, the oil price would have started falling in 2012, and kept falling to somewhere around today's current price. By the time the oil price did begin to drop from over $100 per barrel, the economic value of a barrel of oil had already fallen to about $87 per barrel! That is why the price dropped so rapidly.
And, to answer Russ Watters' ridiculously repetitive question, if the Saudis had tried to control world oil prices by pulling back their own oil production, they would have lost even more revenue and market share than they were already losing at the time. The US frackers obviously started the price war. Saudi Arabia's only choices were to commit economic suicide or join the price war. The oil price plunge was clearly not the Saudi's fault. Saying it was the Saudi's fault over and over is just US propaganda to justify a real war in the near future.
Was affordable does not equal is affordable.
If what you claim were really true, Brent oil would be $126.88 per barrel right now. Why isn't it?
---Futilitist
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