A Guest Post by George Kaplan
Overview
For 2019 BOEM showed a large increase in remaining reserves of 1.3Gboe, 91% of it oil, from newly discovered oil with Appomattox/Vicksburg and Vito the largest contributors at over 400mmboe each, followed by Buckskin and Kaikias, which are fairly large multi-well tie-backs, and smaller, one or two well tie-backs of Blue Wing Olive, Constellation, Claibourne, Red Zinger and Stonefly. These discoveries were made with exploration wells between 2006 and 2016 but were only counted as reserves once firm development plans were put in place. Even given this the year in which BOEM includes the reserves is rather opaque and idiosyncratic, for example some of theses fields started production before 2018, and some developments, notably Kings Quay, are more advanced than Vito but are not included.
Other additions came from revisions to Thunder Horse, Atlantis, Mars-Ursa and Jack/St. Malo, which had major brownfield developments. The fields were not all added as discoveries or adjustments for 2019, but were spread over 2016 to 2019. Some other discoveries under development, such as Anchor, Whale and Ballymore, or in pre-FID studies, such as North Platte and Fort Sumter, will likewise be added against their discovery years as their estimates are finalised. Several of these projects are among the first to use new 20ksi wellhead equipment and it will be interesting to see what teething troubles are experienced.
It is noticeable how the adjustment numbers seem to be much higher than new discoveries – only Vito in 2018 shows up as a large new discovery. This is an artifact of the BOEM method that all discoveries in a lease are recorded against the first field to be found in that lease. Both Appomattox and Vicksberg and some smaller fields were discovered in leases where that had been earlier production from fields discovered several years earlier.
Two of the smaller new fields are probably underperforming with respect to BOEM expectations: Red Zinger produced only 0.8mmbbls of 7.3 estimated by BOEM and appears to have shutdown permanently an Stonefly has produced 2.3mmbbls (of 6.6 estimated) but has rapid decline rates and appears to need frequent work-overs or new drilling to maintain production, which may ultimately limit the economic reserves. Reports last year indicated that Appomattox performance and expected recovery were poorer originally expected so BOEM estimates may be reduced in 2020 and later estimates.
Reserve Replacement Ratios
The reserve replacement ratio for oil has been quite healthy, at least for deep and ultra-deep leases, except for a couple of periods following the oil price collapses of the mid 80s and 2008. The 2015 collapse doesn’t seem to have had much impact. For gas the replacement ratios show all the characteristics of a fading basin.
Reserve History
Many of the larger deep fields had overestimated original reserve estimated that had to be downgraded after the initial well production curves were analysed (e.g. Shenzi, Thunder Horse, Atlantis). Many of these have recovered much of the downgrade, but often this has been because of new field discoveries in the named field’s lease or extensive brownfield work rather than improved recovery. Shenzi has never recovered fully. Holstein carried anomalously high reserve estimates when viewed against the production figures for many years until being downgraded in 2017 (see below for other fields that may need similar re-estimates).
Mars-Ursa basin contains the largest reserves by far and is continuing to grow. It actually contains several fields and three production platforms.
Gulfstar is the total of the Gunflint and Tubular Bells fields that produce through the Gulfstar FPS.
The reserves here are against the year that BOEM reported them (i.e. not backdated). Deep and ultra-deep cumulative production will soon exceed that from shallow water. Production is cumulative from 1975, there was additional shallow production before this, back to 1940 but BOEM does not show reserves for earlier years.
This shows that shallow gas production has really been the most important aspect of GoM resources, and is now effectively finished. The production development for most of this gas was fairly simple with shallow and small wellhead platforms and pipelines feeding several onshore gas plants. Compare that to a monster like the Appomattox floater with its high upfront CAPEX, ongoing OPEX and DRILLEX, low EROI and exposure to various risks like poor reservoir performance (so far not doing so well), variable oil price (catching up this year after a poor start in the projects life) and environment (extensive shutdowns last year but this year it dodged the worst impacts that shutdown some other Shell facilities for months but likely to be increasingly exposed as the Gulf waters warm).
It’s a microcosm of the changes in the industry over the past thirty years and may illustrate why the risks appear now to be too great even for the largest companies like ExxonMobil and Chevron which are choosing to buy back shares rather than invest in new E&P projects.
These charts show who discoveries have affected the backdated reserves. Because of the issues mentioned above some new fields get attributed against older discoveries so the whole curve is skewed slightly to the left.
Major discoveries to be added in future BOEM estimates are Anchor, discovered in 2014 with about 300 mmboe reserves from early reports, North Platte (2012 and 280), Mormont/Khaleesi (2017 and 250), Shenandoah (2013 and 210), Whale (2017 and 336) and Ballymore (2017 and 440); so 2017 should have a high column added at some time. Note that typically around 80% of oil field reserves will be oil with the remainder as associated gas. Exploration drilling is now mostly limited to near field (i.e. infrastructure led exploration, ILX), therefore new discoveries are likely to be booked against existing fields and leases from earlier years (e.g. Shell has significant tie-back opportunities around Appomattox with Dover and Fort Sumter and near Perdido with Blacktip).
Reserve Adjustments
Initial reserve estimates have improved over time so lower revisions and adjustments have been needed for the recent deep and, more so, ultra-deep discoveries that have been developed with the latest seismic, drilling and reservoir modelling technologies. Even the low adjustments shown here are overestimates, as some should be shown as new discoveries in existing leases.
Early shallow and deep discovery reserve estimates were based on the best data available to geologists but often that data came principally from the wellbores that were being drilled in oil and gas E&P activities. Many more wells were drilled in shallow water, which is on the shelf and hence some of the geology extended onshore. The worst estimates therefore tended to be for the deep fields in the 70s and 80s when and where data tended to be sparsest during initial development activities.
Reserve to Production Ratios
The fields shown with solid bars have numbers calculated based on 2019 C&C reserves and total annual production for that year. Those with open bars are calculated from their design capacity and assuming 95% availability as they did not have a full production history for 2019 or 2020.
Several of the fields shown look as if they need a bit of revision to the numbers, some appear to low and some (all of them smaller fields already) too high.
These five fields all have recent production histories that would suggest much higher R/P numbers for the future, i.e. higher reserves, than shown above. If the BOEM reserves were true there would be decline rates above 30% evident. They all have had major recent brownfield projects so it may be BOEM has not yet caught up. Mad Dog in particular has a new platform (Argos – Odysseus’ faithful dog, a bit trite maybe) under construction that will open considerable new reserves, admittedly also adding production capacity as well but overall the R/P number should be around 12 to 15 based on the design producti
on rate.
Gunflint is virtually finished and I have not seen anything to say new drilling is planned. Troika is an intermittent producer at best and Neptune is just a minor producer. I have also shown small producers of Stonefly and Red Zinger mentioned above. All these are likely to have their reserve estimates downgraded in future estimates.
The next post will cover the overall GoM production figures.
Off Topic Finish: River Deltas
River deltas cover only 0.5% of the earth’s land area but include some of the most productive agricultural land and the most densely populated urban areas. Some are also highly bio-diverse with unique mangrove and wetland areas. They are home to almost 5% of the world’s population, mostly in developing countries, and about one tenth of these people are already exposed to severe flooding from tropical storms.
Without human intervention the deltas exist in dynamic equilibrium with silt continually being carried down from erosion in the river basin and deposited as the river stream slows at its mouth while previous deposits are prone to continual subsidence and vulnerable to erosion, either over the long term from normal wave and tidal action or from occasional storms, which can destroy beaches or change channel flows in a single day. Over only a few human generations deltas can move many miles as channel are silted up and new ones open. These dynamics are not compatible with high-density population and intense agriculture so they have to be prevented by building dams, drainage ditches, levees, seawalls etc. This infrastructure needs continual maintenance and upgrade as conditions change, and in many deltas is already ‘mature’ (e.g. most of the 94,000 dams in China were built in the 70s) and therefore not designed for the changes now being experienced, and may be prone to sudden failure (such as happened to the levees on the Mississippi during, or rather immediately after the passing of, Katrina).
By there nature deltas are low-lying and hence prone to flooding: pluvial (e.g. from direct monsoons), fluvial (from river flooding), tidal and cyclonic (i.e. storm surge combined with any or all of the other three causes). Individual delta areas may be at existential risk from a direct super-cyclone impact (or even tsunamis in some cases, though I have seen no analysis of this) especially if the areas become more reliant on artificial defences such as sea walls and pumping. However I think that as economic and environmental conditions deteriorate the opportunities to complete these type of engineering mega-projects will disappear, partly because society will not have the excess energy required to provide necessary funding and resources, but maybe principally because social conditions will not allow decades long projects to be completed and maintained – they become one step too far in complexity that the society can support (due to increasing corruption, lack of trained and experienced personnel, breakdown of global supply chains, continually changing project design assumptions, inter-group trust breakdown as precarity rises, short-term, unstable and weak governing regimes etc.). New country wide electric grids with storage systems, large nuclear reactors, ultra-deep oil platforms, extensive carbon capture and storage infrastructure roll-out and green hydrogen systems all fall in the same category.
Given that the tripping point for Greenland ice cap melting has now probably been passed and that for the West Antarctic ice cap soon will be then a sea level rise of at least 10m (6-7 from Greenland, 3-4 from the West Antarctic) is virtually inevitable over some time frame beyond a hundred years. This would render most of the existing delta area uninhabitable and unproductive for agriculture or industry. The populations would have to move, and as the cities are so large it is difficult to see where they could be accommodated other than in massive refugee camps on the edge of the encroaching oceans. Farming would have to move from the rich deltic earth, and although the rich sediment will start to be deposited further inland, the move will mostly have to be to the already degraded river basins and harvests would decline from up to three a year to one (or none maybe). Rice could probably no longer be so dominant a crop in Asia (and at the moment it provides 20% of calories to half the world), even as heat, drought and parasite reduce yields on other staples. In the shorter term (e.g. by 2100) many deltas may see extensive out migration (which tends to favour the younger population, so leading to aging of the remaining population), reduced crop yields and urban and industrial areas that increasing look like island archipelagos.
There are known mechanisms that would allow rapid retreat of the Antarctic glaciers into the interior, which would allow a three-meter rise (ten feet, which somehow sounds worse) over only a few years. What is not known, and so far has defeated efforts at modelling, is when such an event might be triggered. A couple of mechanisms are known (ice wall collapse and ice shelf melt) but it is suspected that there are others, and accurately predicting the events is looking unlikely because of lack of data (e.g. the condition of the rock to ice interface is virtually unknown) and because the mechanisms involve fracture mechanics that are highly stochastic beyond current modelling capabilities. This talk has more details but it is a seminar so there is no attempt at concession to the layman and the speaker can be quite frustrating, as he doesn’t always finish one sentence before breathlessly starting the next. There is a non-zero but currently unquantifiable risk, which increases with sea temperatures level, that this melt will happen this century; it would be a catastrophe like nothing ever seen, not least for its effect on the world’s deltas
It may be possible for the world to absorb all the climate refugees from one megacity as it becomes submerged over several decades, but all these mega-deltas will be disappearing together, displacing the populations and removing the agricultural output as they go, with occasional major and rapid shocks thrown in to add further to global volatility.
There is a positive feedback associated with the deltas in that as the productive agricultural lands are flooded then important carbon sinks are removed (loss or gain of coastal vegetation as seas rise or fall is an identified feedback mechanism driving previous glaciation cycles). On the other hand as most deltas have extensive wetlands and many of them are rice-producing areas, they might be important sources of methane and the effect could be a negative feedback (who knows).
In addition to external sea level rise the deltas have local issues affecting their stability due to human activity. Silt transport and deposition is reduced by upstream dams and by increased extraction of water in the river basin or the delta itself. The river flow streams need to be maintained above a minimum level in each channel to ensure that salt water cannot inundate upstream. Increased water use upstream and increased variability of rainfall causing more prolonged droughts may make this more difficult. Salinization can extend further inland than high water marks because of intrusion through porous sub-strata. In some deltas the pliable and relatively thin silt deposits overly groundwater aquifers (or in a couple of case oil and gas deposits), which have been pumped out for human use, causing subsidence, usually as a bowl in the land that encourages further flooding.
The agricultural land can support multiple harvests but only one is supportable by monsoon rains, the others need irrigation by extraction directly from the river of from groundwater, where available. The silt that the river brings provides nutrients for rice and fish farms, which partly explains why three harvests are possible in many delta regions. However the practices used for intensive rice and fish farming themselves increase subsidence rates (as does the increased extraction of sand from deltas being seen).
In the recent past deltas benefited as poor farming practices lead to increased erosion and some deltas grew rapidly. Climate change is expected to increase the amount of silt to be transported on average (this is not necessarily a good thing overall as it implies increased soil erosion is occurring in the river basins), but it is likely to become more variable.
The large Asian rivers that are partly fed from Himalayan glaciers may initially experience increased flow as melting rates rise, and hence increased silt transport, but will then start to dry up as the glaciers disappear. The increased variability in monsoons with more floods and droughts will also effect how silt is transported and deposited, as will population density changes and infrastructure construction (e.g. sea walls, jetties, dams, bridges), all in difficult to predict ways.
It would be interesting to see a summary of how many landfills, sewerage plants, refineries, chemical stores and other potentially polluting sites there are in the deltas and at what elevations. I don’t think there are any nuclear reactors although there re a couple just outside (e.g. the recently leaking one near Hong Kong and the one under construction in Bangladesh).
Here are most of the largest deltas, in no particular order.
Nile
The Nile delta contains over 40% of the population and 61% of Egypt’s agricultural land. 18% of the total area is below sea level, protected by coastal walls and sand dunes, with a further 12.7% below 1 meter and 13.1% between 1 and 2 meters, and a maximum elevation of 18 m in Cairo, at the delta’s apex. The biggest immediate threats are not from sea level rise but from loss of sediment (as dams are built or upstream water extraction increases, subsidence and erosion of coastal dunes.
Pearl River (Guangdong and Hong Kong)
The Pearl River is the third largest in China. The population in the delta is 22 million and urbanization has been displacing some fertile agricultural land while newly reclaimed land is less fertile. The whole delta lies below 10 m.
Red River (northern Vietnam, including Hanoi)
The Red River, like the Yellow, is named for the colour of silt it carries. It contains 30% of the population, is the industrial heartland and an important agricultural area. Almost all of it is below 3m and most below 1.5m.
Yellow River
The Yellow River has the highest silt density anywhere and is consequently growing into the ocean at over two kilometers per year. It has a population of over five million and is undergoing significant urbanization and industrialization (some built around the second largest oil field in China). The river used to change course frequently but is now constrained by dykes, levees and seawalls for flood defence. Upstream water extraction is such that the river occasionally dries up before reaching the sea and erosion and salinization have been increasing steadily, and the pattern of sedimentation in low flow periods and the constant upgrading of the levees means that the riverbed can be higher than the surrounding plain, which is therefore highly exposed to flooding. A one-meter sea level rise and two to three meter storm surge would mean inundation of 40% of the delta.
Yangtse River (Shanghai etc.)
The Yangtze delta is the most significant delta economically; it contains many large cities that are almost beginning to encroach and overlap each other. The population is over 120m, and still rapidly growing, it creates 20% of China’s GDP and is a rich agricultural area for rice, wheat, soybean etc. The Three Rivers Dam sits on the Yangtze upstream but there are 50000 other dams affecting the river flow. Over the past fifty years sediment transport has reduced by 80% due to the dams and soil conservation strategies and coastal erosion has accelerated markedly. Shanghai alone has 23m people and its average elevation is four meters; it is protected by an extensive system of rigid sea walls. Sea walls tend to simply deflect wave energy so often just move areas of erosion rather than preventing it. There is evidence of increasing salinization and land subsidence due to pumping of groundwater, which will eventually threaten the delta’s status as China’s breadbasket if they continue. The delta is in he bulls eye for typhoons and, increasingly, super-typhoons that come across the Philippine Sea and East China Sea (where sea surface temperatures are warming twice as fast as average).
Mekong (southern Vietnam)
The Mekong delta population is 18m, but its mean elevation at only 0.8m means that 12m may either need to move or have artificial protection provided over the next five decades.
The delta is shrinking and sinking because it is being starved of sediment by extensive and continuing hydroelectric dam development upstream (over 70 dams and counting in Cambodia, Laos and China). A continuing drought has meant that recent levels of the river have been the lowest in a century.
There has been a net out migration of over one million from the delta this century with at least half attributed to climate change, in particular a severe drought in 2015/16 allowed salt water intrusion up to 80 km inland, proportionally this has particularly impacted sugar cane production. Of the farmers remaining there has had to be a significant switch from rice to shrimp farming.
Irrawaddy (Myanmar)
The population is 3.5m and much of the terrain is below three meters. In 2008 it received a direct hit from a cyclone leaving 2.5m homeless and over 100,000 dead or missing. Population and human activity is rising fast but while upstream dams have reduced coarse sediment increased deforestation and mining has allowed for increased soil erosion and fine sediment load, carried mostly in the monsoon season. It seems unlikely that the current regime in Myanmar will have environmental protection as a major consideration compared to economic growth.
Ganges-Bramaputra (Bangladesh and eastern India)
Sometimes called the Bengal Delta this is the most densely populated region in the world with 130m inhabitants. It is the largest delta and over 10% of the land is below one-meter elevation. It has seen the deadliest storm induced flooding events and is considered the delta most at risk from sea level rise (locally 3mm/year recently), which is exacerbated by subsidence, due to compaction and isostatic effects, that on average is equal in rate of sea level rise but in places can be over twice that and up to 18mm/year has been observed around the main city of Dhaka. The infrastructure is in a poor state, salinization is increasing and agricultural yields are falling. Climate change is causing increased variability in the monsoons and may expose the region to more intense heat waves. India has built a strongly guarded wall to prevent migration from Bangladesh.
Indus (Pakistan and western India)
The Indus is possibly the delta that is most advanced in degradation from human activity. Originally it was rich swampland and mangrove but upstream dam development and over extraction of water has starved it of sediment and allowed salinization so that now nearly 60% is barren and 30% submerged for prolonged periods. Over the last two centuries it is estimated to have lost 92% (sic!) of its area. 1.2m people (over half) have moved, mainly to Karachi, and many remaining would leave if they could.
Mississippi
The delta is subsiding because of oil and gas production from underlying reservoirs and compaction of sediment that is no longer being compensated by silt deposition. Nitrogen and phosphate eutrophication are major issues in developing dead zones in the Gulf of Mexico, though I have found nothing that links this to geography changes in the delta but loss of vegetation would seem likely to be destablising. Coastal erosion mainly occurs during storms and therefore may be growing, as tropical storms seem to be getting more frequent and larger in the Gulf, related to the rising sea temperatures.
Rhine–Meuse–Scheldt (Rotterdam, Hook-of-Holland, Utrecht, Gouda, Delft)
This is an important trading, industrial, agricultural and residential area. It is not at high risk from upstream effects on water and sediment flows (though future drought and flood patterns may change). High tides and storm surges are the main risk and the area is protected by the Dutch dyke system and moveable barriers ate the main river outlet. The Dutch government calls its country is the “safest delta in the world”. The Royal Dutch Meteorological Institute recently raised its estimation for sea level rise to 2100 to two-meters, which will presumably be the design point for upgrading these defences over time.
Ciliwung (and twelve other connecting rivers: Jakarta, Indonesia)
Jakarta with population approaching 11m is the fastest sinking city in the world, mostly due to groundwater extraction from under the delta through thousands of individual wells. The average elevation is eight meters but falling at a rate that would put 95% of the city underwater by 2050. The government has cited a plan to move the capital (i.e. the administration institutions and associated service companies) to a new build city cut out of the jungle on Borneo, but have also promised $40billion to protect Jakarta – mainly to halt subsidence, so leaving the city still exposed to sea level rise.
Chao Phraya (Bangkok)
Bangkok has an average elevation of 1.5m and a population of 10m. It sits on reclaimed swampland, is subsiding because of groundwater extraction and prone to flooding that can last two months or more.
South East Asia Impacts
The two maps below are from Climate Central and show the effects of 2 and 7.5 meter sea level rises on South East Asia, which has five mega deltas with the red colouring showing the affected areas. Most damage, relatively, is done by the initial 2 meter rise, which some recent research suggests is now the minimum commitment within this century, with much of the deltas’ areas and most of the populations at risk of inundation. The main effect of the additional rise to 7.5 meters would be to push the refugee camps further back. The maps are based on current land topography; subsidence and erosion will make things worse, any increased sedimentation would improve things and sea defences may temporarily ameliorate the impacts. Salinization would move upstream beyond the flooded areas.
Fascinating posting as always George.
One note of emphasis on the delta flooding issue- many of the world busiest port facilities (and rail termini) are at the margins of big deltas, and are extremely vulnerable to episodes of inundation. And it is not the baseline sea level that does the big damage, rather it is the occasional storm surge that can wreak havoc. Example for the US readers- Houston Ship Channel or Naval Station Norfolk (the biggest naval station in the world).-
https://nationalinterest.org/blog/reboot/climate-change-threatens-us-navy’s-main-base-norfolk-virginia-178817
Also your comment about the ability of countries to get big projects done is very important- “as economic and environmental conditions deteriorate the opportunities to complete these type of engineering mega-projects will disappear” The US has pretty much lost its ability for big domestic projects since the about the time of the Viet Nam war (or peak domestic conventional oil production).
Western countries don’t get big projects done anymore – the richer they are the less.
It’s more a combination of enviromental laws and people protection laws – to get the paperwork done for a big project here it takes 10-20 years normally. There are lot’s of time windows where the project can be sued.
Think at your Keystone pipeline – building it wouldn’t be a big deal for the US industry. It would even be done really fast if someone would pay – but the society doesn’t want any changes anymore. It’s the eat the cake and have it mentality of mature societies on the brink of decadence.
I have to agree with Eulenspiegel.
We are increasingly blind when it comes to the cost benefit ratio of new development in too many cases, and unfortunately, this is a far bigger problem on the American political left than on the right.
The D’s are right on environmental issues nine times out of ten, lol, but once in a while…… utterly childlike. Ask one about China and empires, and you will typically get a response indicating that China is and has always been a peaceful country, and will CONTINUE to be a peaceful country uninterested in expansion and conquest.
Nothing could be farther from the truth. Anybody who actually pays attention to the news in this respect knows better. China wasn’t in a position for expansion until recently…… industrialization had to come first for expansion to work for China… just as control of the seas had to come first for English expansion.
History ain’t over folks.
Consider that recently cancelled pipeline. Cancelling it was a slap in the face to our best friend and next door neighbor.
Cancelling it did not and will not prevent the world from burning that oil, although it may delay it for a decade or so.
Ask the typical man or woman on the street what the Monroe Doctrine is, and you’ll get a blank stare, and I don’t even see it mentioned in the mass media these days.
So ….Pretty soon half of South America is going to be on far better terms with the Chinese than they have ever been with us. GOOD BUDDY terms.
So….. Sooner or later the younger people on the lands in Canada controlled by the indigenous folk who there FIRST will decide in favor of roads, cars, trucks, schools, snowmobiles, washers and dryers, central heat, televisions, hospitals, big box stores, all the goodies (good and bad ) associated with development……… all to be had just for granting a pipeline right of way………
And the end result will be that China will be tickled pink to pay for pipelines to the Pacific, in exchange for favorable terms buying the oil…..first dibs at market prices for instance, or even fixed prices.
What the Democrats SHOULD have done is to put the pipeline permit on the table in exchange for some SUBSTANTIAL oil industry funding for environmental projects…….. such as buying up tracts of sensitive and often still relatively pristine land along or near the route ….. with that land being added to the state and federal park systems. That would have been a big win for the people of this country, and for the environment.
But we’re running our lives these days on the basis of sound bites.
All of my environmentally literate friends are convinced that since we’re old and headed for Mother Nature’s recycling bin anyway, it’s good that we will be dead before we have to personally face the consequences of overshoot.
There’s a lot of velocity in the oil price the last days – looks something is broken.
Eulenspiegel
The rumours have been around for the past week that Biden would release oil from the SPR to drop the price of WTI. The rumours became more reliable and widespread yesterday. So WTI continued to pull back yesterday. The announcement was made today to release 50 M barrels from the SPR. So what happens, the market responds by driving the price of WTI up by $1.50/bbl.
The old rule “Buy on the rumour, sell on the news”, worked again.
Gasoline stimulus checks coming ??? Laugh but with the current administration this is within reach .
https://adventuresincapitalism.com/2021/11/23/gas-stimmys/
Twin peaks: Whether it’s supply or demand, oil era heads for crunch time Bold mine.
Oct 25 (Reuters) – Energy transition and peak demand predictions have spooked investors in oil, putting the prospect of peak production sooner than anticipated accompanied by wild price spikes.
Key climate talks are set to begin at the end of this month in Glasgow, Scotland to tackle global warming under the 2015 Paris Agreement, with fossil fuel in policy-makers’ crosshairs.
But as it stands now, mobility curbs which hollowed out both spending on upstream oil projects and oil end use may already be set to permanently rein in the growth of both supply and demand.
“On current trends, global oil supply is likely to peak even earlier than demand,” the research department of bank Morgan Stanley said in a note this week.
Three of four scenarios show oil supply has already peaked.
Good find, Ron!
The grey case looks quite brutal, but not impossible, my bet would be on a “mid-orange” case, with a dip first along the “top-green” case, followed by a scramble that reaches around 80-82 mbpd (C&C) by 2025-26, so still lower than 2018.
The blue STEPS case, which relies heavily on ME expansion seems unlikely to me, as a fairly well read armchair analyst at least…
Laplander , the grey area is reality . All the rest is ” fill in the blanks ” . Brutal ? Absolutely . Not impossible ? Absolutely .
P.S ; I like the way you have used the double negative ” not impossible ” instead of “possible ” .
Hole in head,
So 40 Mb/d for all liquids seems reasonable to you, from about 97 Mb/d in October 2021?
Now that is an absurd prediction. Somewhere in the middle of the blue range is realistic up to 2030 falling to the top of the yellow range in 2040 and then into the middle of the yellow range by 2050.
Dennis , I did not make the prediction . Please take this up with IEA or Morgan Stanley . I only expressed my POV , just like you have done yours .
Hole in head,
The grey area is supply with no investment in the future. You seemed to be suggesting this was the most realistic scenario, though now you seem to be backing away from:
Laplander , the grey area is reality .
Can you explain what your thinking is, maybe you have a different definition of “reality”?
My guess would be somewhere in the orange. I think that would be by far the most likely future for oil production.
Ron,
I mostly agree, except I think we will be a bit above the orange area around 2023 to 2032.
After 2032 I agree the orange area is the most likely scenario.
The grey area is supply with no investment in the future.
Yes, but that is the position of a lot of world governments and investment groups.
Dennis, eyeballing your chart, it looks like you have production at or above the 2018-2019 level in the middle of next year, 2022 June of July. That just blows my mind. Are you serious?
Note: The chart is obviously total liquids. I do not deal in total liquids, only C+C. So anything I write, I am speaking of C+C only.
Ron,
For total liquids yes, it would be roughly 2022 to 2023. I only did this to compare with IEA as I also focus on C plus C. For C plus C my scenario has World output surpassing 2018 in 2023, peak is in 2026 for this scenario at 87.3 Mb/d, URR is 2800 Gb.
Note that the extraction rate (on right axis) is for conventional C plus C only. Tight oil and oil sands use separate models that are then added to the conventional C plus C oil shock model.
Dennis, I could not help but notice that your world peak is now 2026, not 2028 as you previously posted. In the old South, we would call that “crawfishing”.
A crawfish is a small crustacean that always crawls backward. 😂
Dennis , my ‘reality ‘ is ‘ supply without investment ” . All want to exit and with ESG plus everyone eager to show moral superiority have nailed the coffin . A few investments that will happen are going to be for squeezing the last drops of existing projects -, These extra drops will not be enough to overcome the loss by decline and depletion rates . Here is ‘reality ‘
https://oilprice.com/Energy/Crude-Oil/Why-US-Shale-Is-Refusing-To-Reinvest.html
Hole in head,
The grey area is no investment at all, even in existing fields, that is no new wells drilled for oil or natural gas anywhere in the World.
Does that seem like near term reality?
That might be the case after 2040 or so when supply of oil might be plentiful. From now until 2035 this scenario (the grey area) seems a fantasy.
Ron,
Whether it is 2026 or 2028 matters little, it could easily be a plateau from 2025 to 2030, much will depend on both supply and demand and the resulting price. Note the small difference in output from 2024 to 2028 in this scenario, 86.27, 87.12, 87.30, 87.05, 86.51, so a minimum of 86.3 and a maximum of 87.3 over a 5 year period. Part of the difference is I chose a medium tight oil scenario rather than a more conservative low completion rate tight oil scenario with a peak in 2027 at 9.6 Mb/d for this scenario, any year from 2025 to 2027 could be the peak, the three years are within 250 kb/d of each other ( a difference of 0.3%).
Also note that I expect extraction rates and development rates to fall so the URR for the scenario is 2500 Gb rather than 2800 Gb (all of this difference is from 2035 to 2300).
Long term it looks like chart below with average annual decline rate from 2035 to 2150 of about 3.85%. Chart uses a log scale to show decline rate slope.
Click on chart for larger view.
Dennis , the answer to your question was already given in advance in my post of 12:15 am . However just for your satisfaction a copy paste “A few investments that will happen are going to be for squeezing the last drops of existing projects -, ” .
Hole in head,
The fact remains that the grey area is “no investment” rather than some investment. Your reality would be in the green area, though NZE means net zero emissions (that is the green area), that seems a highly unlikely scenario. Just because some environmentalists want this to occur does not make it reality. The APS scenario seems the minimum that is reasonable.
About the IEA World outlook analysis, Antonio Turiel is really doing a great job every year (especially tracking how they present the numbers).
On his blog in Spanish, but quite readable for me (towards French) through google traduction.
Link to his 2021 WEO analysis :
https://crashoil.blogspot.com/2021/10/world-energy-outlook-2021-aqui-tienen.html
Above pic is the oil part of figure 6.18 also presented by Antonio T
Thanks for the link.
The EIA Monthly Energy Review is just out. The data is through October 2021. However, the September and October data are just estimates and will likely be revised later. But it shows October production recovering from the hurricane that caused August and September production to decline. They have October production 61K barrels per day above July.
About a violent retreat of West Antarctic Ice Sheet, the scientists such as Eric Rignot who are studying the withdrawal of the grounding line of Twaithes glacier are quite skeptical about this. They estimate that it will take at least one hundred years to happen but effectively unstoppable (?) if triggered. But, you are doing well to emphasize this aspect. Indeed, the equilibrium state of a world with 415 ppm of carbon dioxide in the atmosphere is a world where sea level is higher of 10-15 m : look at Piazencien periode, subdivision of Pliocene (gallery of PRISM IV, USGS) : the Greenland ice-sheet is reduced to nothing, no more West Antarctique ice-sheet and the East Antarctic ice-sheet is less thick and absent from several areas. To me it is quite clear that with just this problem, people of the next generations will be motivated to remove carbon dioxide from the atmosphere and oceans. And they will be helped in this by the use of the energy coming from molten salt fast reactors. I think that at this stage, mentally ill anti-nuclear activists will have disappeared or will be completely ignored by the majority. And even if people remove efficiently carbon dioxide from the atmosphere, they will not be able to remove the heat accumulated in the oceans which will take time to dissipate. That’s going to be curious to see.
I think I remember reading someplace that Antarctic ice was observed at record high levels during the winter this year in Antarctica (winter there is opposite of our summer because of earth’s tilt, so they have already had this year’s winter). Will the science need to be reevaluated again in light of this?
MYBEANO,
The science always has to be reevaluated in light of new data. That’s what science is. If what you meant to say is “Would a record high ice extent in 2021 invalidate the science supporting global warming?” then the answer would be “no”. And I suspect that is what you were trying to imply.
Further, not at all sure where you read that, but anarctic sea ice extent in October was the 8th lowest on record. Further, the extent was well below the 1981-2010 average.
http://nsidc.org/arcticseaicenews/2021/11/winter-is-settling-in/
OK, I guess what I actually read was that this year Antarctica experienced it’s coldest winter ever. I must have thought that implied the ice would be at a record high level.
https://www.accuweather.com/en/weather-news/antarctic-records-low-temperatures-never-seen-before/1028237
There are strange things going on with polar cells that led to the Beast from the East of 2018 in Europe and the cold spell in Texas this year. The Antarctic has also been seeing some crazy temperatures which I do believe are down to the shenanigans ongoing with tropospheric and other such phenomena.
Niko
The comment you are quoting regarding eight lowest ice extent is for the Arctic Ocean, not the Antarctic.
Ovi,
If you scroll down on the page you get a report on Antarctic ice.
From that page I got to page below
https://nsidc.org/data/seaice_index
and from daily tab you can get this
https://nsidc.org/data/seaice_index/images/daily_images/S_stddev_timeseries.png
At least half of the melting of the glaciers which are in contact with the ocean is coming from the undercutting of the ice-front or the grounding line by the ocean : 1 or 2°C of ocean temperature rise is enough to promote the withdrawal of the grounding lines. In the area of Twaithes glacier, the grounding line is retreating at a speed between 0.5 and 2 km/year. The fact is that the bedrock of the glacier is on a retrograde slope promoting Marine Ice Sheet Instability (MISI) or Marine Ice Cliff Instability (MICI). 30 km behind this grouding line, there is a submarine ridge on which the glacier could stick for a while, during a few decades at most, or slow its withdrawal. But, beyond this submarine ridge, there is no obstacles to prevent the retrat and the disappearance of the glacier in 100 years, as long we are maintening the thermal forcing with our carbon dioxide emissions. Which means for the Twaithes glacier, 3 m of sea level rise and as the rest of ice-sheet will collapse (disappearance of the butressing effect between the different ice currents) in the process, 5 m of total sea level rise. Lessen the answer given to the question about the timing of the disappearance of the Twaithes glacier at 44 min 10s, the ”trillion dollars question” in this seminar of E. Rignot. https://www.youtube.com/watch?v=CnkH2_RMxY4
And they will be helped in this by the use of the energy coming from molten salt fast reactors.
At the moment, wind and solar power is dramatically cheaper than nuclear. New installations of wind and solar are often a bit cheaper than the marginal operating cost of nuclear, so that even older depreciated nuclear plants are in danger of being replaced by wind & solar: all it takes is a large prospective investment needed for safety or simple periodic maintenance to push investors to decide to scrap nuclear plants. It’s hard to imagine large investments in new plants in such an environment.
The newest data (version 15) on 30 yr LCOE price for new electricity in the USA shows unsubsidized utility scale solar and on-shore wind both to be less than 4 cents/kWh.
See the summary at
https://www.lazard.com/perspective/levelized-cost-of-energy-levelized-cost-of-storage-and-levelized-cost-of-hydrogen/
or the detail for generation at
https://www.lazard.com/media/451881/lazards-levelized-cost-of-energy-version-150-vf.pdf
Wind and solar will eventually need storage, but many locations don’t need storage yet, and every new installation increases manufacturing experience & knowledge, and reduces the cost of future installations: this kind of virtuous cycle is very hard for nuclear to compete with, as nuclear inevitably has much longer R&D cycles. Even now wind & solar are often cheaper than all of the alternatives even with storage, and this advantage will only grow.
I suspect nuclear is like Betamax vs VHS, videotape vs DVR, CD vs streaming, diesel vs EV, etc. Even though advocates are correct when they point to certain technical advantages, overall nuclear has simply passed a tipping point and with time will only become less competitive.
Wind and solar not only need storage but also backups.
As to numbers, I don’t believe in the above ones (or let’s say comparing wind/solar without backup and storage prices, to pilotable sources isn’t really meaningful), neither below statement :
“Hydrogen applications which require minimal additional steps (e.g., conversion, storage, transportation, etc.) to reach the end user will most likely achieve cost competitiveness sooner than those that require greater site or application-specific investments.”
And these hydrogen application have one thing in common with thorium reactors and fusion plants: They only exist in small test installations at the moment. And with a lot of power point presentations.
Rolling out big is a difficulty for everything.
Additional – China does it right with their plan for thorium reactors. They plan them middle sized, to be constructed in a factory and transported to the plant site. So they get the same scale of mass production as with wind turbines. They are factory produced, too.
Current atomic and fusion test reactors are build in site. This is kind of stone age and is always expensive.
For laughs, the first 3 MW wind turbine ( a mid size for today ) much before their time:
https://en.wikipedia.org/wiki/Growian
It costed 87 million mark in 1988, – an easy 150 million $ in today currency after inflation. For a single 3 mw turbine not working at all. That’s the power of mass production and industrial research. 20 years after they shut down this you could build them again, much cheaper and better.
Big problems of solar and wind energy are 1) the extent of the installations. What can be done on a country like USA or Algeria can’t be done in a place like Bangladesh (they are building a new nuclear power plant unit, by the way) or Viet Nam. 2) the amount of ressources to build these facilities is colossal in regard of what is needed for the construction of a nuclear power plant producing the same amount of energy. That’s the reason why the construction costs of a nuclear power plant is less than for a wind turbines field producing the same amount of energy. Thus, the installation cost of the MWh of nuclear energy is less or equivalent to the installation cost for wind power for example. For example, Morocco built a facility (Noor 1, Noor 2, Noor 3) producing 1470 GWh for a cost of 2,5 billion $. They want also two nuclear power unit of 1000 MWe (probably, two VVER-1000) and the cost of installation can be estimated to be 3,2 billion $ (based on the Tianwan project). That makes for the Noor facility, 1,7 million $ of installation cost/MWh and 1,5 million $/MWh for installation cost of the VVER-1000. 3) You forget to mention the problem of ,intermittency which has probably decided Algerians to chose the construction of a nuclear power plant instead of the construction of a solar facility south of the Presaharian Atlas and the Aures. 4) Contries are unequally endowed with wind and solar power. Look the wind and solar atlas. https://globalwindatlas.info/ and https://globalsolaratlas.info/map?c=35.38905,47.988281,3
Ouuups. The cost of installation per MW is for peak power and not for power.hour. Therefore, the installed power in Noor is 510 MW. That makes 4,9 million $/MW. To be compared to the cost of two VVER-1000 : 1,6 million $/MW. for the 4) you must read countries and not contries.
Jean-François Fleury,
I think the anti-nuclear sentiment is likely to disappear already by 2030.
A 2021 seminar of subject matter experts, as.I referenced, probably represents the latest thinking with much of it yet to be published.
It’s going to be four or five times cheaper, maybe ten times cheaper, to build wind and solar and maybe tidal farms out the ying yang than it will ever be to build any kind of nuclear reactor, barring actual miracles on the technology front. Fusion power as a practical matter is still, as it’s always been, the magical answer to our power problem…. forty or fifty years down the road.
Wind, solar, and tidal farms can be tied together with HVDC transmission lines, and WILL be so tied.
There aren’t very many kinds of infrastructure that actually HAVE to run around the clock around the calendar. All the rest can be finessed to run intermittently, or run by load shifting to times of day and year when wind and solar electricity are super cheap and super abundant.
So much for mentally ill pronuclear activists, lol.
I used to defend nuclear power myself, in this very forum and its predecessor, for environmental and economic reasons.
But that was before it became obvious than wind and solar juice are the way to go.
I’m one of the one in a hundred people who are willing to admit they were wrong on a major issue.
Most people would rather die than admit a serious mistake, lol.
Most people would rather die than THINK.
So you think rolling blackouts are the solution?
We have 55 GW installed wind capacity here in Germany already.
Current power usage is 69 GW, 7 from this from wind. 0 from solar, we have sunset. Even the north sea has low wind at the moment. So interconnectors don’t help. All backup power plants are running, even the gas peakers and pumped hydro storage.
Even if you overbuild to 150 GW wind capacity, this would mean rolling blackouts. No loading of Teslas, no heating, no industry, just some basic infrastructure.
And with the overbuild it wouldn’t be cheap anymore – with good wind most of it would need to be switched off.
Interconnections won’t help in this situation, only a very expensive backup storage system. There are only concepts for such things at the moment.
I may think that the German Greens are going to have a bad winter : the gas from Russia is not arriving with the Nordstream project, the electricity production with wind is low, there are perhaps problems of coal shortages here and there and nuclear power unit are being closed. As a result, some people are forecasting electricity shortages this winter, if it is cold, in Germany and German industrialists are worried by their supply of electricity. Some are saying that if it is the mess for electricity supply they will go away from Germany. By the way, where do you find the data concerning the consumption of electricity and the share in the production?
Germany only produced about10% of its electricity with gas.
https://energy-charts.info/charts/energy_pie/chart.htm?interval=year
Finally, I found a website with the share of the sources of electricity production. I am reading 16% and not 10% on the chart you shared. By now, the share of all renevable in Germany has fallen to 20%. The wind turbines are producing 9 GW while there are 55 GW of installed wind turbines in Germany. The capacity factor of French nuclear fleet is of 70% on average. The nuclear sector is reliable in providing electricity on a regular basis. Wind turbines are not. https://www.agora-energiewende.de/en/service/recent-electricity-data/chart/power_generation/21.11.2021/24.11.2021/today/
JEAN-FRANÇOIS FLEURY
I was looking at the annual numbers.
Here you can see the current production:
https://energy-charts.info/charts/power/chart.htm?l=de&c=DE&stacking=stacked_absolute_area
Gas is low on year usage – should be higher because it is more efficient than coal. But the empty storages…
When the wind is blowing, everything is fine – 50%+ wind and solar are possible, even on a busy work day. But there are still no storages besides the pumped hydro from the 80s.
At the end of the year half of nuclear will be switched off forever, next year the rest. More work for coal and gas I think. And some brownouts when we have these 7 GW wind days as yesterday.
funny enough I used to be in the wind and solar camp but once I got a good handle on costs as the UK have built , married to the costs of “rust” batteries ( could still be a game changer ) then to actual praticalities for the UK to build the offshore like on the Dogger Bank when space is shared for shipping lines ( cutting space needed for generation ) . Factor in costs of maintenance , then intermittancy ( currently nat gas backed) .
one just has to look a gridwatch uk to see the hurdles to be over come.
These days I’m kinda in the nuke camp* but not with pressurize water reactors , even AGR have issues . Can we in the UK build enough molten salt types?
who knows , we’re committed to 33GW capacity of more offshore wind anyways.
The USA has a much better chance I’ll agree , maybe eventually you’ll follow the UK and really get energy independance if politics doesn’t get in the way.
just my tuppence worth . Feel free to disagree , this is one of the better sites to get roasted on (!)
Forbin
* the other foot is in the doomer >collapse > death camp
“So you think rolling blackouts are the solution?”
Does not matter what anyone thinks the solution would be: It would take 25+ years for a nuclear building program, if it started today. The US tried to build new nuclear power plants about 25 years ago, and so far we got two new reactors (1GWe each) for cost of about $30B ($15B per 1GWe).
Rolling blackouts if you are really lucky, but Europe & the US will likely be in the same boat as Venuela (worse considering VZ has major oil reserves). Debt, Demographics (Boomers retiring), money printing (QE), and COVID will prevent any chance of energy mitigation.
Welcome to the decline & collapse of Western civilization.
I made the reverse process. I began by thinking that all would be OK with enough wind turbines and solar panels. I found the numbers for the primary energy consumption in France. I made the calculations to have an estimation of the number of wind turbines (3 MW for instance) or the number of solar panels (the extent, to be more accurate). And … it was the cold shower. The numbers I found were demential : physically and financially impossible to have such a number of wind turbines or solar panels in France. We are not well endowed with wind or solar power in France. You can do this in USA : you have arid areas where you can settle solar facilities or great extents of windy grasslands and agricultural lands to settle wind turbines.
As in everything in life, the best thing will be a mix. You won’t even have the time to build everything solar, everything wind or everything nuke until gas gets serious expensive.
There are ramp up times – build factories to build the factories to build the elements needed, and ramp up mining for something, while closing the coal mines. As I wrote before, copper will be a hard limit when you plan to only do solar, wind and electric car everything.
I think investing in copper industry is no error if you plan to put aside a few $.
Something on the SPR release .
https://www.oilystuffblog.com/single-post/nothing-burger?postId=7afd8756-1e06-4a6a-bdab-5cdb2d2508cb
The rule is ” Buy low , sell high ” . It seems for the Biden administration it is ” Sell low , buy high ” .
Quite impressive :
https://twitter.com/JavierBlas/status/1463265503162605568
(US Energy Secretary not knowing US daily barrel consumption)
The Department of Energy is not the Department of Oil. They are mostly interested in nuclear power.
Of about 4 Gb of crude oil exported from Gulf Coast (PADD 3) from Dec 1981 to August 2021, about 0.43 Gb has been exported to China, roughly 10.5%. Generally the oil is sold to the highest bidder.
We could ban exports (some Democrats favor such a move, but I don’t think there are many Republicans who would support such a measure). A former energy advisor to George W Bush suggests an export ban would tend to raise oil prices further, see link below.
https://www.pbs.org/newshour/show/how-tapping-strategic-oil-reserve-will-affect-u-s-gas-prices-opec#transcript
An excerpt, Bob McNally is quoted (former Bush energy advisor and currently President of Rapidan Energy Group, an energy policy and consulting firm):
You hear a lot of discussion of banning crude oil exports. Six members of the House Democrats and 11 Senate Democrats have called for that.
That would be an authentic policy error. It would actually, we think, cause gasoline prices to go up and do nothing but hurt shale oil production. But that is on the table. And it’s been reported it’s on the table.
We could ban exports (some Democrats favor such a move, but I don’t think there are many Republicans who would support such a measure). A former energy advisor to George W Bush suggests an export ban would tend to raise oil prices further, see link below.
It would make little difference, except for refineries. Banning exports would just screw things up. They import the types of oil they need and export the type they don’t.
Basically, it is a wash. We import as much as we export. For the first ten months of 2021, we were a net oil importer by 96,000 barrels per day. It makes no sense to ban exports when you are a net oil importer.
EIA Monthly Energy Review
Hey Ron, I read the posts from time to time (for years) and my understanding of the USA production/consumption numbers in MBD is that the USA produces around 11-12 MBD and the USA consumes about 19 MBD. Is my understanding of the consumption-production numbers correct? When I hear the politicians chat on TV and say that the USA was a oil production self sufficient nation (due to shale oil) it drives me crazy because the numbers don’t seem to be anywhere near being self sufficient. Also what is the decline rate of USA production per year – maybe 1-2 MBD/day/year? Thanks.
Izzy, the numbers used in the Monthly Energy Review are total liquids while the numbers you quote are C+C. That makes for a really bad confusion factor.
The decline rate of shale is likely a lot more than 1-2 million barrels per year. But they keep drilling and drilling and the red queen keeps running faster and faster. But I think she is getting quite tired by now. 🤣
I don’t actually understand any of these rationalizations for crude oil exports, certainly not the “alignment” with certain political idealism. Who cares about THAT? This one: ‘what would the US do if other countries stopped exporting’ is really stupid. That’ll happen anyway; soon. In the mean the US is the single largest oil consumer in the world. Why in the hell are we exporting any of our hydrocarbon resources?
US tight oil, in spite of all the models, is a finite resource, its limitations are already becoming quite obvious to the trained eye. In the short term, slowing down oil exports might cause gasoline prices to rise, the goal of course is to ensure that America even HAS gasoline in 5-8 years. At the moment we’re on a course to ensure we don’t, all to the benefit of Asia.
Current exports to China are about 500K BOPD; if folks are good with that, under the auspices of “free trade,” I can’t help you. It seems like aiding and abetting to me.
Limiting HZ tight oil production (exports) commensurate with what American refineries CAN actually use, ( /- 4.8 MM BOPD) would conserve our remaining hydrocarbon resources and ensure a more affordable transition to renewables, would prevent waste, such as flaring, preserve bottom hole pressure and improve recovery rates of OIP, stabilize prices, stabilize employment, and improve the financial health of the sector in charge of squeezing the stuff out of the ground. ALL of that would ultimately benefit the American consumer and our long term energy security.
That’s the issue with US crude oil exports, the ability to see a few years down the road, to be able to think past next week.
Relax, ceasing exports won’t happen; we’re on a mission in America to drain ourselves dry as fast as possible.
Well said, Mike.
Oh I get it now. The problem isn’t the 600 pound host who sat down at the Thanksgiving table first and put all the food on their plate. It’s that the guests didn’t bring large enough side dishes.
Mike,
I agree a ban on crude oil exports is not likely to happen. Yes the resources could be produced more slowly, but in this case I think the allocation of capital should be left to the market. There are cases where the government should be involved (mostly in the case of positive or negative externalities where the market either provides too little of a good (in the case of positive externalities) or too much (in the case of negative externalities such as goods that result in pollution that is not regulated).
As to the concern over exports to China, I don’t really see the problem, Chart below is PADD 3 crude oil exports to China, trailing twelve month average (TTMA) from Sept 2017 to Aug 2021.
China would simply import oil from elsewhere if it were not imported from the US. Generally free trade is a good idea in my opinion.
How do we compensate the tight oil producers in the Eagle Ford and Permian basin who would be stuck with 3000 kb/d of tight oil with no place to sell it?
It seems unfair to those oil producers to change the rules of the game at halftime.
How do you propose this be done in a way that is fair to those producers?
Dennis.
Mike knows more than me about this, so I will defer to him.
The TRRC would merely need to enforce spacing requirements to prevent waste. That’s really it.
The TRRC has allowed companies to drill on way too tight of spacing, which has likely stranded millions of barrels of oil in the EFS and Permian Basin (Texas side).
Other states have also been lax in this regard, but TRRC has been the worst, with the far largest resource under its regulation.
We cannot drill our little stripper wells wherever the heck we want, we have to follow spacing rules.
From what I read, TRRC has done practically nothing regarding tight hz spacing requirements. They just let the industry do whatever.
They let them do this so they could drill wells as fast as they could. You have heard to the “rolling” drilling rigs, where they just have to move them over a few feet each time. Of course, those laterals deviate out, but not enough. It looks like probably max of 4 laterals per section (mile) should have been allowed when some companies have slammed in 16.
I have seen hz wells in the Permian drilled on 330’ spacing. That is tighter than we can drill 900’ stripper wells.
Shallow, thanks; apparently the financial benefits of drilling fewer wells, for higher recovery rates, at higher prices, and lower costs, is hard for some to grasp. China’s oil imports stopped, from everywhere, not just the US, in April because its SPRS were full and oil prices became too high. I know you know that I understand the difference in net imports and net exports and that my concern is for the conservation of tight oil for our long term energy security. We have wasted hundreds of billions of dollars, and will, as you point out, leave behind billions of barrels of oil stranded, and completely immobile, in crummy rock, because of over-drilling…all under the false narrative of “free market” principles. Free shale oil markets started and stopped on Wall Street, who would now dearly like all that money back, by the way. The ability to dump this lousy light tight oil on the world market, below costs, will cost America dearly.
Paying down government debt with free enterprise revenue from exports, I don’t know what that’s about. If you wish we can discuss this important issue elsewhere, not here. Happy T-Day, hand.
Thanks shallow sand,
Mike tends not to focus on spacing in his posts, but you are likely correct that this is what he means.
I agree if a certain spacing is best, that is what should be done. It would seem that most wells would be spaced appropriately by a company that wanted maximize profits.
Mike tends to focus on no oil exports, but to me if we export 3000 kb/d of oil that refineries cannot use and import the appropriate weight oil from elsewhere it is not a problem.
I do not have information on well spacing, what proportion of tight oil wells do you think are at 330 foot spacing? My understanding that a few trial areas were done at such a spacing and found to be a financial mistake. I doubt many wells are being drilled today at that spacing, most are probably spaced at 1000 to 1500 feet. According to LTO survivor about 1300 feet is optimum in the Permian basin.
>Why in the hell are we exporting any of our hydrocarbon resources?
For money. The country’s foreign debt is insanely high, cumulated from 60 years of running a trade deficit in the oil business.
Once more, so far this year we are a net importer of hydrocarbons, not a net exporter. Why in hell do so many people find that hard to understand? Actually, it is pretty much a wash, our imports and exports are almost the same. Some months exports are higher and some months imports are higher. 2020 was the first year in history where we had slight net export over imports. Check it out here. Look under Net Imports. A minus sign means we had more exports than imports.
EIA Monthly Energy Review
And we are not exporting in order to pay off our foreign debt. The US government does not export oil. Oil companies export or import oil.
Yeah, this year. But that doesn’t compensate for the fifties, the sixties. the seventies the eighties the nineties the two thousands or even the teens.
Also it is clear that you don’t understand the concept of foreign debt. I am not talking about federal debt. America’s debt is nearly all private debt. Equating debt with the federal government is just Republican propaganda.
I am talking about redressing America’s chronic current account deficit. For generations, America has been importing more than it has exporting, and accruing foreign debt in exchange. The biggest item by far has been oil. Despite George Bush’s lies about America being the land of plenty, we will end the oil age as a net importer, nowhere near an net exporter of oil.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRNTUS2&f=A
Yeah, this year. But that doesn’t compensate for the fifties, the sixties. the seventies the eighties the nineties the two thousands or even the teens.
Errr… are you confused or what. My whole point that we are a net importer of oil and have been for decades. Your link proved that in spades. What is your point?
Yes, I know our trade balance is atrocious. That is not debt. What we buy from China, or India or wherever is paid for by the importers then by the consumers in turn. The imbalance of trade is not funded by borrowed money. Yes, it is a very serious problem but not because of private debt.
Any private overseas debt would be in the form of bonds issued by private companies. I just don’t understand why that is such a serious problem. We now have a global economy. Exxon, BP, Shell, and all the other multinational companies invest in the US as well as everywhere else in the world.
Here’s the chart. There was a suggestion a couple of days ago that these statistics double counted exports. Does everyone agree these numbers are correct?
I see no reason anyone would fudge these numbers. What would anyone have to gain by doing that?
Ron,
I agree, but Paul raised a strong objection on the last “oil” post:
https://peakoilbarrel.com/opec-update-november-2021/#comment-730382
Nick,
The numbers are correct, except for refinery gains when looking at crude plus petroleum products.
However Mike Shellman posted a chart for crude exports, when we focus on crude imports and exports only (and leave refined petroleum products out of the analysis as the export of petroleum products has not been part of the law at least since 1981.)
Note also that if we import 1000 barrels of crude and then export 1000 barrels of products, it is a wash on the net import number (for crude plus petroleum products) except for any refinery gain.
It would make a lot more sense to promote oil exports and tax oil consumption. America could start paying off its foreign debt.
And Americans should drive smaller cars like in Yurp, but it ain’t happening. If anything, the move from 2008 onwards was back towards bigger cars as things picked up.
As soon as the SPR nears “E” on the storage gauge, you know that is when it will be needed the most. Bush Jr got it up to nearly 1B and all of the following admins drained it After the 50M release is over, the SPR will be about 380M or about 25 days of total US consumption.
All are pumping their exhausted fields .
https://www.reuters.com/markets/europe/us-wants-more-oil-opec-cant-turn-tap-much-harder-2021-11-23/
Won’t say this – there’s still a lot of oil in the Opec.
We discussed that here, and it’s in the article: The Opec hasn’t done their homework in the corona time. Infill drilling and field expansion was skipped – so the natural decline did it’s work. It was shown by the declining rig count in the Opec.
It’s like in the good old gold rush age: When you throw the pan and the pick in the corner, you won’t get any nuggets…
And my bet: They will take the SPR as an excuse to stall increasing rates even more. They need the time to do all the field maintainance. They are right – they need all the $, high oil prices > market share for profit.
Hugo Duterne (in French) on peak China coal: https://www.lemondedelenergie.com/chine-croissance-economique-charbon/2021/11/19/
How does peak China coal relate to peak oil? Well perhaps peak China coal means China’s industrial production will fall. This could mean that China’s exports fall decreasing China’s access to dollars which would make it harder for China to buy oil damping the price of oil.
China also has a public relations problem (where is Peng Shuai?) and the fallout of the Evergrande problem is not yet known.
Peak chinese coal won’t matter when they settle their political battle with Australia.
There they can get enough coal when they want. This whole gas and energy crisis is worsened by much from this quarrel.
Investment from the financial sector (OPM) is different from investment from free cash flow. The latter will extract less oil at higher prices in my opinion.
https://www.rystadenergy.com/newsevents/news/press-releases/shale-getting-stingy-reinvestment-rates-in-the-US-hit-historic-lows-in-Q3-shaping-record-free-cash-flow/
Schinzy,
About 50 billion in debt was paid back by 39 of the largest non-major tight oil producers in 2021Q3.
Schinzy,
Correction to 8:10 am, 2021-11-24 comment above, it was 21 large publicly traded tight oil producers who are expected to produce about 40% of 2021 US output rather than 39 companies also I incorrectly remembered the net debt number as being the change in the debt level, only third quarter net debt was reported at 51 billion, about 1 billion less than the average floor over the past 8 years of 52 billion.
See
https://www.rystadenergy.com/newsevents/news/press-releases/shale-getting-stingy-reinvestment-rates-in-the-US-hit-historic-lows-in-Q3-shaping-record-free-cash-flow/
From the chart in the article it looks like free cash flow (cash flow from operations minus capex spending) was about 7 billion for this group of companies. Some of this money was used for increased dividends and some was used for reducing debt.
It seems they suggest dividends to capex ratio was 26%, capex was about 6 billion, this suggests dividends were 1.56 billion, free cash flow was about 7 billion, so net debt would have been reduced by 7 minus 1.56 or by 5.44 billion in the third quarter of 2021. If those kind of results continue for 9 quarters, most of the 51 billion in debt for these 21 companies would be paid off (49 of 51 billion).
Dennis,
Unfortunately, I doubt the Shale Industry results from Q3 2021 will continue ad infinitum. I see bigger problems for the Shale Industry in 2022 and 2023 as they run out of DUCs and high-quality drilling locations in the Bakken, Eagle Ford & Niobrara. While there is some growth in the Permian for a while, I see that peaking by 2025 or sooner.
As for the subject of DEBT, the Shale Industry did another HOCUS-POCUS this year and refinanced $42 billion of HIGH-COST DEBT, with LOWER COST DEBT pushed back into the future:
https://www.worldoil.com/news/2021/8/10/shale-drillers-leveraging-42b-in-new-bonds-to-retire-costlier-debt
You got to love World Oil News use of the term, “RETIRE” instead of “ROLL-OVER” or even “PONZI FINANCE.”
Either way… I don’t see Rainbows and Sunshine for the Shale Industry, even at higher oil prices because the COST OF BUSINESS doesn’t stay constant. Thus, I would imagine as companies start to add more drilling rigs, lease rates are going to go up considerably as well as the cost of PIPE, SAND, WATER, LABOR (if they can find it), and everything else to squeeze profit margins on an industry that suffers a near 50% annual decline rate.
Steve
Steve,
Eventually you will be right, in about 9 or 10 years. In the mean time, if oil prices are high ($80 to $100 per barrel), tight oil producers will continue to do well.
When we reach peak demand (2027 to 2028) and oil prices fall, then tight oil output might fall rapidly as the completion rate crashes. The scenario below has output falling rapidly after 2033 (an early transition scenario had peak oil demand reached in 2033), if peak oil demand is earlier in 2028 the scenario would see the rapid decline happen in 2029 and tight oil URR would be lower, perhaps 57 Gb instead of 74 Gb as in chart.
” While there is some growth in the Permian for a while, I see that peaking by 2025 or sooner.”
I believe water (ie Drought) will be a problem for Permian. Another issue for the US is what happens when the major reservoirs run dry in the next 5 to 10 years. Not sure how the western US is going to cope. I expect food prices to continue to rise as a lot of Western US farms that depend on irrigation get cut off. It might help if the US removed its ethanol fuel mandates so the ~5M bushels of corn isn’t needed for ethanol.
Almost all oil produced in Russia will be hard to recover in a decade — official
MOSCOW, November 24. /TASS/. Quality of oil produced in Russia will decline in a decade to the extent that it will be almost entirely categorized as hard to recover; its lifting cost will be much higher than for conventional reserves, Deputy Energy Minister Pavel Sorokin said on Wednesday.
“Almost 100% of our production will be hard to recover over the term of ten years,” the official said.
Worsened quality of reserves means the need to incentivize exploration and oil production in Russia, Sorokin added.
source: https://tass.com/economy/1365623
Thanks, Alex for the link. However, your link apparently did not carry the whole story. A much deeper and detailed analysis can be found here:
Russia’s Oil Reserves Are Becoming Increasingly Hard To Recover
Nearly all of Russia’s oil production will consist of the so-called hard-to-recover crude reserves unless the country speeds up and incentivizes exploration, Russia’s Deputy Energy Minister Pavel Sorokin said on Wednesday.
“Almost 100% of our production will be hard to recover over the term of ten years,” Sorokin said, as quoted by Russian news agency TASS.
The hard-to-recover reserves will have much higher lifting costs than conventional reserves, according to the deputy energy minister.
This is a problem for Russia, one of the world’s biggest oil producers, as it would see the quality of its reserves decline and make the extraction of oil much more expensive than it is now.
Russia needs to incentivize exploration in order to replace the hard-to-recover reserves with new, potentially lower-cost, discoveries.
In May this year, Russia’s Natural Resources Minister Alexander Kozlov said that oil reserves would last until 2080 at the current pace of annual production. Russia’s actual oil and gas reserves could even rise if it steps up exploration in hard-to-drill areas, the minister added, noting that Russia needs to develop exploration, including in hard-to-reach areas.
Russia’s oil and gas discoveries fell to the lowest in five years in the first half of 2021, after last year’s crisis resulted in steep cuts in capital expenditures for exploration, data and analytics company GlobalData said earlier this month.
In the first half this year, Russian companies found oil and gas at six very small fields, adding just 36 million barrels to reserves, which is equivalent to fewer than four days of Russian daily oil production, according to GlobalData’s estimates.
While Russian oil production and revenues have benefited this year from the much higher oil prices due to the OPEC+ cuts and rebounding global demand, exploration has continued to suffer from the COVID-inflicted crisis in 2020, which forced companies to slash capex for exploration drilling, Anna Belova, Oil & Gas Analyst at GlobalData, said.
“To retain its place as one of the top oil and gas producing nations, Russia needs to ensure a steady pace of discoveries to replace produced reserves. Otherwise, the effects of COVID-19 and reduced investments will be felt by the Russian oil and gas sector well after the pandemic subsides,” Belova said, commenting on GlobalData’s findings.
In May this year, Russia’s Natural Resources Minister Alexander Kozlov said that oil reserves would last until 2080 at the current pace of annual production …
Russia currently produces about 10 million barrels/day, which is around 3.6 billion barrels/year.
3.6 billion barrels/year x 59 years = 212 billion barrels of reserves.
But Russia’s current official reserves are only 80 billion barrels or 22 year worth of current production.
Frugal, as I understand it, this sentence says it all “Almost 100% of our production will be hard to recover over the term of ten years”. Basically most of the “easy” oil is gone, and the additional production will come from yet undiscovered and/or “hard to reach” fields in remote areas without infrastructure and/or the arctic.
It scares me a little bit that we can just do very basic math’s to see that their numbers simply don’t add up.
Alex,
There are contingent resources and expected discoveries that need to be added to reserves, also there are “possible reserves” some of which become “probable reserves” over time. The real number will be somewhere between 80 Gb and 212 Gb, perhaps around 150 Gb. This assumes there is demand for the oil resource, if demand and oil prices fall after peak demand is reached in 2030 or so, then the 80 Gb estimate will likely be correct (or perhaps too high if the middle east trakes most of the World market share as oil prices decline).
Dennis, I guess we will find out. I hope it’s higher than 80, but I doubt a almost doubling to 150 Gb as the fields in Russia are pretty old, and if I am not misinformed most mayor discoveries were made by the soviets. However I also realize that there is a political aspect to all of this on all sides, so I guess we just have to wait and see.
On a side note, I appreciate the modelling you do, it gives perspective.
Alex,
Thank you. You would probably make a better guess than me. The US saw its reserves grow by 63% from 1981 to 2005. In 1981 the US was a very mature oil province.
Let’s say Russian reserves grow by 63% over the next 25 years, that would be 130 Gb with no new discoveries. Of course Russian reserve growth might be less than the US, or more, only time will tell. Falling oil prices may stunt reserve growth after 2030, so potentially Russia might only see 20% reserve growth, that would be about 96 Gb of reserves. Do you have any data on contingent resources in Russia?
I have to believe the ME is close to running on fumes soon. They been using advance Oil recover for 30+ years and been chasing pockets of trapped oil for more than 10 years. If I am right than we might very well see ME oil production drop like a rock.
Thanks George!
It seems to be a trend that there are more oil discoveries overall being pursued in the GOM, Norway and Brazil (also Nigeria, Angola). The oil quality is often better than onshore maybe, and it is easier to logistically find solutions for the fields compared to natural gas. As higher oil prices now are coming, so is the costs for materials and labour. So I guess oil prices almost have to overshoot to stimulate more supply. With a major recession and demand destruction baked in for western countries. But, why kick the can down the road with this SPR release for example? With no demand destruction, no energy transition can happen in the form of switching to renewables or increasing austerity.
GOM, Norway and Brazil are expanding because new production areas have opened up: GOM has new 20ksi completions, Norway has the Barents Sea and Brazil has pre-salt. However in all three the recent boom in new developments has been petering out. Brazil exploration success and lease sales have been dissappointing, Norway discovery rates have dropped significantly over the past five years and GoM only have two discoveries left big enough to support hubs not already in development (after that it will only be a few tiebacks to the newer hubs without new discoveries). Nigeria and Angola are in serious and obvious decline with no major new projects for years now, or planned, so I may have misunderstood your post.
https://www.mintpressnews.com/katie-report-australia-oil-shale-reserves/171401/
Everyone seems to have forgotten about the Coober Peddy.
Me has been watching it like a hawk.
And the silence is deafening — have they extracted any oil out of the Coober Peddy basin yet?
A great attitude, back breaking labor (not by me), and we will squeeze 4 billion barrels out of that deposit.
That’s 10 years of chill-axing in OZ.
You heard it here first!!!
AUKUS , it’s a nothing burger . As they say in Texas ” All hat , no cattle ” . You were warned here first .
Just for your reference from the article itself .
“While Young says it is still early to fully assess the quality of the resource, and how much can be extracted and exported, he think’s it’s best to not focus too much on the size of the oil that could be extracted from the basin. ”
Shale is exclusively a US phenomenon , Hey they also say they have no equipment as all required is special and no mention of WATER in a water starved country and maybe you have the special sand but not the special manpower .
Don’t waste your time ” watching like a hawk ” , take flight and hover to find a better a target .
Best for the last , Australia closed its only refinery this year . What will you do with this LTO ? Drink it . ROFL
You’re just jealous.
When peak oil bites, Hydrocarbons that are technically recoverable are going to become VERY valuable.
Australia is full of them. And a population less then Florida.
And just added 12 nuclear subs to the arsenal.
$500 dollars a barrel
“Australia is full of them. And a population less then Florida.”
Ask the American Indians what happened to their great nations after Europeans came.
Oz is a prime target for take over by China.
As far as Oz subs. well Good luck building them on your own as the US shipyards have about a 10 year backlog if sub already under construction or under contract. Oz should have stuck with the French. Also Nuclear subs are pointless unless you have nuclear weapons to arm them with. I believe Oz is looking for a fleet of attack subs and not boomer (missile) subs that would provide real deterrence. OZ would be better off with some land based nukes as a deterrence since its a lot more cost effective than boomer subs a US Boomer sub costs over $3B USD.
Once Oil prices get above $150\bbl The Oz economy will collapse. issue is that the bulk of Oz’s economy is resource exports to Asia (Ore, & Coal). I doub’t Asia will be importing much Ore or coal from Oz once the energy crunch takes off.
“Ask the American Indians what happened to their great nations after Europeans came.”
This is the 21st century “Einstein”. Us Aussies celebrate the Queen’s birthday and watch American movies.
Australia has been a part of the US Navy for decades.
“Also Nuclear subs are pointless unless you have nuclear weapons to arm them with”
Uhh…what?
Nuclear subs can travel vast distances for long periods of times……
“You don’t know what you don’t know”
Do you know what nuclear subs are off your countries coastline? I F***ing doubt it.
They are a mindf***
I believe Australia is buying already built subs and a consultation on how to build more…
Who should me trust “Hole in Head” or the US and Brittish Military?
The AUKUS military pact was not about drinking cans of beer at Bondi Beach
Australia USA UK is about FOSSIL FUEL in exchange for MILITARY PROTECTION
Hole in Head = Mr. Negative
He seems to want everything to fail
DUH!!
AUKUS , why should I be jealous of you ? I don’t even know you . Anyway , I have everything I need .
What is technically possible will become valuable BUT will not be recovered because it will not be economically feasible . Recovering gold from the sea is technically possible but I don’t see any country making an effort to recover this wealth .
12 nuclear subs are not drilling rigs . They are used by defense forces . Irrelevant and immaterial .
$ 500 oil ? Why not $ 5000 ?? Shooting in the skies .
So you trust AUKUS military for your information on oil resources . Whom do you go to when you have a toothache ? Your barber or your tailor ???ROFL.
An opinion . Watch less of mainstream media .
The Real Reason Why OPEC Won’t Open The Taps
The Biden Administration wants the OPEC alliance to pump more oil to lower gasoline prices
The group dominated by Middle Eastern oil producers and Russia can’t do much more than it’s already doing
Spare production capacity of OPEC members is dwindling
Analysts say that the spare capacity is even lower than official estimates
Thanks, Frugal. From your link:
Analysts say that the spare capacity is even lower than official estimates.
You think? Hell, I have been singing that song for years.
Spare Oil Production Capacity Is Shrinking
Of course it is. It’s called depletion. Some folks seem to think that OPEC nations are immune to depletion. Nope, their oil fields are finite just like the oil fields in the rest of the world. The problem is that the world has depended on OPEC for so many years to make up for any shortfalls in world oil supply, that they fail to realize that this dependence cannot last forever.
I’m surprised the Biden administration doesn’t realize this. Or maybe they do but don’t dare telling the American people that the days of sustained cheap oil are over?
If you were in power and wanted to stay in power, would YOU tell the people something that would get you ejected instantly? I can’t see ANY of today’s politicians doing that!
So you expect Republicans to do that instead?
It is a brazenly symbolic and political move.
Which I am willing to forgive, because the alternative- telling the truth- is far more dangerous to all of us.
Consider: no one will be able to tell if the SPR release has any effect- even in hindsight. It has the positive effect of seeming to do something.
Whereas telling the truth- saying there’s not enough oil, we’ve had a 150 year run, tighten your belts, etc…..means having to have idiotic discussions with Republicans about how Joe Biden used up all the oil in his first year in office.
“Since 2015, Congress has been selling the oil in the reserve to fund the deficit, in unpublicized sales. The U.S. Department of Energy has run seven sales since 2017, selling more than 60 million barrels, or about 8.6% of what had been in the reserve” WSJ
Their energy secretary does not even know how much crude oil they consume per day. I am surprised at your surprise.
Think about that statement. The US Secretary of Energy was asked how much oil does the US Consume daily and her reply was: “I don’t know that number, let me get back to you on that”.
It is stunning the level of incompetence running this country now and actually since post world war 2. Every President since Jimmy Carter and the Arab oil embargo in the 1970’s has been against Big Oil or hydrocarbons. Since that time the level of expertise in Washington regarding energy is overwhelmingly underwhelming. The post has been given out as a thank you for helping the winning team. One of the most important Cabinet positions since the Embargo when it was first established has never appointed a person from the Oil & Gas Industry. Think about that.
The energy department is not the oil department. That is the same mistake Rick Perry made when he was running for president. He thought we didn’t need a government department for oil and promised to abolish it. Well he would have, but he forgot the name of the department.
The DOE is mosty interested in nuclear power.
Since that time the level of expertise in Washington regarding energy is overwhelmingly underwhelming.
Obama’s appointment: Steven Chu, a Nobel laureate and the 12th United States Secretary of Energy.
Ph.D., U.C. Berkeley, 1976. Postdoctoral Fellow, U.C. Berkeley, 1976-1978. Member, Technical Staff, AT&T, 1978-83. Head of Quantum Electronic Dept., AT&T Bell Laboratories, 1983-87. Professor of Physics and Applied Physics, Stanford University, 1987-2008. Co-recipient of the Nobel Prize for Physics, 1997. Director, Lawrence Berkeley National Laboratory, 2004-2009. He is currently the William R. Kenan Jr. Professor of Physics and Professor of Molecular and Cellular Physiology at Stanford.
And, the next guy:
Ernest Moniz
Term of Office: May 21, 2013 – January 20, 2017
President: Barack Obama
B.S., Boston College, 1966. Ph.D., Stanford University, 1972. Professor of Physics, Massachusetts Institute of Technology (MIT), 1973-2013. Associate Director for Science, Office of Science and Technology Policy, 1995-1997. Under Secretary, Department of Energy, 1997-2001. Director, MIT Energy Initiative, 2006-2013.
And under Carter (a nuclear engineer):
James Schlesinger
Term of Office: August 6, 1977-August 23, 1979
President: Jimmy Carter
Ph.D., Harvard, 1956. Chairman, Atomic Energy Commission, 1971-73. Director, Central Intelligence Agency, 1973. Secretary of Defense, 1973-75.
hah hah- funny to hear someone who voted for Trump
claim to care about competence in government!!!
With Trump loyalty to his brand/power always came over competence.
Granholm is extremely well qualified to serve as Energy Secr.
Ron
Some people still believe in abiotic oil.
An interesting take on peak oil.
365 Days of Climate Awareness 88 – Peak Oil
The peak oil dynamic, as described by Rockman, includes the drive for ever-harder-to-find, ever-harder-to-produce types of oil. It involves the economy being forced to subsist on previously unthought-of prices per barrel (over $150/bbl in the mid-aughts, and over $100/bbl before the oil crash of 2014). Financiers who pronounce oil unlimited—regardless of the “externality” of environmental damage—due to unlimited creation of capital, take into no account the real effect on small consumers’ domestic budgets of unlimitedly expensive oil: they reduce consumption and the market fails. That is now part of the peak oil dynamic: too much demand causes oil prices to rise to an unsustainable level, leading to the oil market’s collapse. There is now an economic ceiling on oil’s use.
As far as the “economic ceiling” on oil’s use. The chart below has real US petrol (gasoline) prices on both a monthly and annual basis in 2021 US$ per gallon (3.785 liters) from Jan 1976 to November 2021. Today’s gasoline prices in the US are about $3.32/gallon (3.26 in 2021 $), the peak monthly price was $5/gallon in 2008 and peak real annual average price was $4.27/gallon (2021$) in 2012.
The economic ceiling on oil price in the USA is a very important concept.
There are a series of ceilings that can be imagined, or described.
The big ceiling is the price of fuel beyond which the economy is in depression, but there are other ceilings that come much earlier/lower- what price will cause stagnation or contraction in optional or discretionary activities and sectors? for example.
And lets acknowledge that
-we have lots of optional oil consumption in this country. Less in Europe and much of Asia, but lots here in the States. Sure we will bitch and moan with $6 gas, but we will still get to work. Its a bargain.
-the ceiling that affects the common person will not affect the wealthy. They will still travel and indulge at a whim
-and of course some will always party (waste) as if there is no tomorrow
-higher prices will certainly result in renewed efforts at production of oil that has been marginal at less than $100/b. Not insignificant reserves at high pricing.
A big variable is how quickly prices of petrol products rise. People adjust to higher prices if they happen gradually. The sudden escalations are harder to digest.
And if the price escalations are gradual it will give people by the millions enough time to switch out to electric vehicles. I expect the EV purchase waitlists to be a frenzy at some point, like walmart on black fridays.
[My wife’s midsize AWD EV takes less than $10 to get 300 miles range charged up at home].
It will be interesting to watch the utilities/grid operators scramble to keep up with electric demand.
Got copper?
disclosure- Biased viewpoint since I have been/am/will be heavily invested in ‘all things electric’
” Less in Europe and much of Asia, but lots here in the States. Sure we will bitch and moan with $6 gas, but we will still get to work. Its a bargain.”
The US infrastructure is built upon cheap energy: We have little infrastructure in the form of passenger rail, US house are poorly insulated (and poorly constructed). The US also has a service economy & most of those jobs are low wage. Wages in the US have fallen since 1970 and continue to fall (adjusted for inflation).
I suspect EU & the US are in deep trouble. if Europeans are paying $6 for fuel they are probably not going to cope when it s $12 to $15. I think when Oil sustains at about $120 bbl in the US, most of the US economy will start to collapse. Just about everything is imported overseas.
Techguy —
One of the advantages of a high taxes on fuel is that they protect consumers from price volatility. Doubling the price of a barrel of oil hits American consumers much harder than it does European consumers, because the price at the pump is mostly taxes in Europe, and taxes don’t change (much).
Building sprawled cities that can only be navigated by car and keeping taxes on fuel low has left America uniquely prone to oil price volatility. The current public discussion in America about prices is barely a peep in Europe, because it doesn’t really matter that much.
American politicians left, right and center promise consumers cheap fuel, but have no real leverage to deliver on that promise. European politicians don’t make that promise, and some (the Greens) openly advocate increasing prices. This gives them the ability to deliver on their promises instead of just hoping for the best.
One of the biggest victims of low fuel taxes is the airline industry. Airlines seem like an no-brainer, but they often fail. One of the most important shocks that kill airlines is sudden increases in fuel costs. This could be reduced by taxing fuel, so that oil price would have a smaller impact on fuel costs. Airlines demand low taxes, but it makes the industry much riskier.
If taxes on airline fuel were higher, the industry would be smaller, but more stable, and less dependent on government bailouts. When profits are high, investors pocket them, and the government bails the companies out when they go bust. Those guys demanding low taxes don’t bear the risk. So there is a strong argument for raising taxes.
There’s a very old saying in the airline industry: It’s easy to make a small fortune in Aviation…Just start with a large fortune.
This is as old as Howard Hughes (who made his real money in an oil service industry), but here’s a summary of some recent experience:
https://www.livemint.com/companies/news/how-billionaires-become-millionaires-investing-in-airlines-11594813714307.html
Techguy,
US economy did fine from 2011-2015 when oil prices averaged about $110/bo in 2020 US$. Currently real GDP (and income) is higher in the US than in that period.
See
https://fred.stlouisfed.org/series/GDPC1/
In 2014Q2 real GDP for US was 16.86 trillion chained 2012 $ and in 2021Q2 real GDP for US was 19.37 trillion chained 2012 $, so $126/bo would be similar to $110/bo in 2014.
OPEC considers pausing oil production increase after Biden releases more crude
Top oil producers Saudi Arabia and Russia are considering pausing their planned efforts to ramp up oil production, according to The Wall Street Journal, after the U.S. and other energy-consuming countries said they would tap their national strategic petroleum reserves in an attempt to bring down gasoline prices.
The release of SPR oil seems perfectly timed to mask the lack of OPEC+ capacity.
Biden can increase OPEC capacity by about 1300 kb/d by getting a deal done on JCPOA (Iran nuclear agreement).
Not sure why the US is dragging its feet on this. Maybe Biden is waiting for just before 2022 midterms, probably July or August might be soon enough to educe prices at the pump, though May or June might be safer as it may take some time for Iran to ramp up output.
The SPR release is a nothing burger, it will have very little effect,
world liquids output is about 97 million barrels per day, the total relaeae will happen over a 3 month period or longer and 100 million barrels over 90 days (in fact the release will likely take longer) is about 1.1 Mb/d, about 1% of World consumption, this is a rounding error.
Biden can increase OPEC capacity by about 1300 kb/d by getting a deal done on JCPOA (Iran nuclear agreement).
This is assuming that Iran isn’t under-reporting its production. We talked about Iran selling unreported oil through intermediaries on a previous thread.
Dennis
While the press headlines are for a 50 M bbl release, I think it is closer to 18 M bbls.
“The SPR release will consist of a 32-million-barrel exchange solicitation to be open to the public on Wednesday, November 24, 2021, and an 18 million barrel Congressionally-mandated sale that will conclude all sales under the authority of the Bipartisan Budget Act of 2018 during Fiscal Years 2022-2025.”
My understanding of that statement is that 32 M bbls are an exchange program. ” I’ll give you 32 M bbls over the next few months but you have to give them back to me at some future date”
What oil company, knowing there is a good chance that oil prices will be rising would take oil today, knowing it will cost them more to replace it tomorrow. It is all about making it sound good to the public.
It will be interesting to see how much oil the refineries will accept from the SPR release. Why not just buy the oil on the open market?
Frugal, the oil released from the SPR will be placed on the open market. That is the whole purpose of the release, to put the oil on the open market and lower the price of oil on the open market.
The oil was bought by the US Government on the open market and placed in storage. Now the oil is pulled out of storage and placed back on the open market. Since the oil was very likely bought at a much lower price, the government will likely make a bundle on this deal.
So anybody can buy the SPR oil, including non-American refineries?
Non American buy US oil every day. And American refineries buy foreign oil every day. So yes, the oil is on the open market, just like oil that is pumped from the Permian every day. It is just oil added to the market in hopes that it will bring the price down.
Actually, I find that reassuring. A 50MB release of emergency supplies for a non-emergency price increase seems irresponsible. 18M is still silly, but it’s better…
Nothing like the scare of a new virus variant to slam markets down during a holiday. Well if all else fails a new variant will surely slam inflation down.🤣
Oil is down rather large at the moment. I’ll be very interested in what close looks like tomorrow. If we get some type of bounce during the day or if markets keep falling and close at the low.
HHH.
This isn’t the first time that the oil has massively moved the day after Thanksgiving.
A cynical person might believe that government actors are involved in these kinds of moves when trading is very thin.
No, oil is not down because of any conspiracy dreamed up by the Biden Administration. All markets are down this morning, not just oil. They are down because of the new Covid variant out of South Africa. The fear is of another worldwide lockdown that will clobber demand.
Coronavirus variant fear sparks Africa travel curbs
Travellers arriving in England from several southern African countries will have to quarantine amid warnings over a new coronavirus variant.
UK Health Secretary Sajid Javid said from 12:00 GMT on Friday six countries would be added to the red list, with flights being temporarily banned.
One expert described the variant, known as B.1.1.529, as “the worst one we’ve seen so far”, and there is concern it has the potential to evade immunity.
No cases have been confirmed in the UK.
Only 59 confirmed cases have been identified in South Africa, Hong Kong and Botswana so far.
I didn’t say Biden.
Doesn’t the Japanese government trade equities now? Why not commodities also?
It can work both ways, of course.
I am just posting that it is very possible that governments trade commodities.
Japans central bank buys equities that are priced in yen. Problem I see with what your suggesting is. Governments outside US or central banks outside the FED need US dollars to buy commodities.
China’s whole economic model is about obtaining US dollars to buy commodities to turn into finished goods to sell to the world. China can’t print money to buy commodities though.
That’s why China goes wind, solar, nuclear, thorium and fusion energy all at the same time. And electric car and bus and high speed train (to replace internal flights).
Every bit reduces the import bill for hydrocarbon, and frees $s. And they need less military power to secure oil.
I think you are mistaken. Japanese Central Banks are allowed to trade equities. I am pretty sure the Japanese Government does not buy or sell equities. That is unless you consider the central banks to be part of the government.
Relationship between government and business in Japan
The US Government does not buy or sell equities or commodities. Of course, they do buy or sell oil from the SPR. And other governments have a strategic petroleum reserve (SPR) as well.
However you now know why the price of oil dropped, it was the new Covid variant.
Ron,
Yes the central bank on behalf of government buys equities in Japan. And your talking physical commodities. I’m talking paper commodities in first example Japan.
And I’m talking physical commodities in second example China.
Government via their central banks can’t print money to control prices in future markets. But they also can’t print money to buy physical commodities either might be a better way to state it. They have to either obtain US dollars by trade or borrowing.
It’s not just oil. This is a total risk off move. Bonds are bid big time. Stocks are down big.
The timing of the news release doesn’t surprise me. Markets close and on a holiday evening. Lol
Oil down over 6% now it was barely down 2% when I posted last night.
I’m good though. I shorted oil and US stocks within week of each other. Trades are going my way currently.
I’m not anti vaccine. I’ve been vaccinated against more things than most people. But rolling out this type of vaccine in the middle of pandemic was completely idiotic. They know damn well it’s going to causes mutations. The so call science that they ignore is very clear about it.
The timing of the news release doesn’t surprise me.
Really now? Do you really believe this news was held back until the timing was right to have the proper influence on the markets?
Yes, I can’t count how many times I’ve seen bad news released when markets are closed on the weekend.
Think about why. Banks and other large institutional investors that trade in futures markets get a jump on the move.
HHH, is correct . I have observed the same over a period of 20-25 years . Following moves especially demonetisation , big devaluation , currency reset ( removal of zeros in a hyperinflation e.g Zimbabwe, Venezuela etc , drastic change in trade policy e.g ban of imports , confiscation of certain assets etc are all announced on Friday after the market has closed . His reason is also correct , plus it wants the system to absorb the news over the weekend to prepare the security forces (police etc ) in case of riots , agitations . Standard practice worldwide .
Your forgetting something. Thanksgiving is a US holiday only. This news was first reported in South Africa, then Great Britain, then around the world including the USA. This news was released when markets around the world were wide open.
Ron,
Come on. They could have released this news a week ago.
Were all taught that the world works a certain way growing up. But reality is much different than what we are taught.
“But rolling out this type of vaccine in the middle of pandemic was completely idiotic.”
Clearly you have no understanding of science and public health issues.
But a big opinion nonetheless. Par.
Ron , I agree with you that other markets were open but it is Wall Street that is the whale , the rest are minnows . They all take their cue from Wall Street , If an announcement is made when Wall Street is closed the other markets will react but in a small way and all are going to wait what happens when Wall Street opens on Monday to see for some major reaction .
Sorry HH, you are mistaken. If there is news that affects the price of oil when the NYMEX is closed, but other world markets are open, that news will immediately swing the price on all world markets that are open.
Really now, do you think traders on the ICE, (International Commodities Exchange), or the Tokyo Exchange, with full knowledge that the price of oil is about to tank, would wait until the NYMEX is open, to see what traders there are going to do, before dumping their long contracts? Or buying short contracts? Not on your life would that happen. Also, the electronic exchange is open around the clock. Except on weekends, there is always a market open somewhere.
But rolling out this type of vaccine in the middle of pandemic was completely idiotic. They know damn well it’s going to causes mutations.
Oh my God, do you think it was the vaccine that caused the mutation? Did you just fall off a turnip truck?
It science fact Ron. Do your homework before you challenge me on world subjects. Because I do mine before I open my mouth.
HHH,
Where is your research from, facebook? Conspiracy websites?
South africa is vaccined only 24%. That is nothing. The virus will mutate,too when enough people had it. See the flu, new Variants every year. And a nwe vaccine every year.
By the way, China has a conventional vaccine. It falls down much faster than the RNA vaccines.
The vaccines will never work for corona type viruses, Humans lose immunity after about 6 to 8 weeks for corona type viruses. There aren’t any long term vaccines for any corona type viruses. You have to roll out booster shots at least every 2 months, and they are only effective on the alpha strain.
Issue with the vaccines is that they have significant risks. Blood cloths, and organ inflammation because the spike protein is cyto-toxic causing cell damage. The issue I see is increased risks of ADE which the antibodies make an infection worse. At some point there might be a strain that triggers ADE. Each booster shot increases health risks because they trigger a flood of the spike proteins causing inflammation.
Basically the vaccine rollout is one giant experiment since there is no long term data on risks when they started rolling them out.
I doubt this virus is ever going away. Its going to flare up every winter season with new strains. The US will never get rid of it since its infected the wild life population (about 40% of the US deer population has it). Its just a matter of time before it starts infecting cattle & pigs). Because it can jump species it will also continue to rapidly mutate, just like the flu.
My guess is that the world will see permanent supply disruptions as it flares up and disrupts global production & transport. That said, It does not appear the SA strain is mild (but time will tell). But I suspect the US & the EU will have its hands full with the current strains which is infecting the vaxxed just as much, if not more than than unvaxxed.
TechGuy wrote: The vaccines will never work for corona type viruses, Humans lose immunity after about 6 to 8 weeks for corona type viruses. There aren’t any long term vaccines for any corona type viruses. You have to roll out booster shots at least every 2 months, and they are only effective on the alpha strain.
Okay, I am going to need a link for that data, all of it. And the source cannot be Facebook or Twitter or, as I suspect, your posterior.
https://www.msn.com/en-ie/news/other/study-finds-that-efficacy-of-pfizer-vaccine-begins-to-wane-after-three-months/ar-AAR7p6M
It’s long been known that such vaccines do not inculcate long term immunity, hence the booster shots now being rolled out. The mRNA ones seem to hold up better than the traditional inactivated virus AZ variant (though there are other advantages to what AZ did, such as the cost and storage and the T-cell training conferred). The best immunity will always be natural humoral and cellular based in combination, though this obviously has one massive drawback.
NPIs are probably the best we can do unless, of course, Omicron is actually the big super spreading weak variant, which pretty much hailed the end of the 1918 flu pandemic too. If it out competes Delta and is also milder in virulence, then we have our out of this.
HHH comment on mutation and vaccination-
Its a great example of Willful Ignorance…
at least I assume it is willful.
Go do your own damn research. It’s very well documented that leaky vaccines cause virus mutations.
Do your own research! I thought that was just joke high school kids made about the internet.
Alimbiquated
This is why using different search engines displays – unequivocally and virtually immediately – the fact that information is filtered to the wider public.
Yandex, as just one alternative, regularly links to info that challenges what the un/mis/dis informed ‘already agrees with’.
Hence, the ubiquitous, irreconcilable nature of these ongoing discussions.
Decades ago, Yuri Bezmenov attempted to shed light on this extraordinarily successful, toxically pernicious process, but no one paid attention.
And now, here we are.
The Delta variant arose in India at a time when the vaccination rate in that country was among the lowest in the world.
Probably the same with this new variant from S.Africa,
The leaky vaccine mutation scenario is of theoretical interest, but the risk of it is many magnitudes less than the risk of mutations among the trillions of viral replications happening among the un-vaccinated.
And the risk of serious illness, and transmission to others, among those who have been un-vaccinated is roughly 90% higher than in those who have been vaccinated (with the better vaccines).
These are not complicated concepts folks.
It takes willful ignorance to miss the big points.
The nexstrain covid data shows the virus to have been remarkably stable for something that crossed species – at least at first.
https://nextstrain.org/ncov/gisaid/global
Mutations arise all the time in all infections , however natural selection picks out the fittest, the extraordinary burst of evolution that occurred post vax roll out is exclusively in the spike S1 protein coding.
Trevor Bedford explains in this video, 20:45 mins in
https://www.youtube.com/watch?v=VErVD_H1BZ0
The S1 spike protein coding/non coding mutations are happening at a remarkable rate, not seen even in influenza strains. The virus is being pushed towards having a spike different to the original Wuhan strain used in the vaccines. Is this unexpected?. Perhaps HHH has a point?.
Ron , the point is not only the price of oil ( commodities market ) but also the bond market and the equity market . All three are important in the big picture and all three will react to the Covid mutation . Oil moved down 8 % on other exchanges when Nymex , S&P , DJI and the US bond market are closed . Would it have moved lower by 12% or only 4% if the US markets were open and the minnows were taking their cue from US ?. Let put this to rest temporarily and wait to see what happens as the US markets open on Monday when the ” pull and push” between the three markets will play out .
Might get a hell of a bounce Monday. I exited my short oil futures position when I seen 12% down on the day.
There will be other entry points in this mess of a market. Both on the long and short side.
I’m out for now.
Let put this to rest temporarily and wait to see what happens as the US markets open on Monday when the ” pull and push” between the three markets will play out .
The US market is open right now. I have been watching it all morning at: https://www.bloomberg.com/energy
The price has been dropping all morning. No sudden spurts, just a gradual decline. I don’t know what percentage of the oil is traded on the NYMEX but I am sure it is less than 50%. Foreign traders are not minnows. And the spot market swings also. I
Hi Ron! If this helps, it seems approximately 80% of the world’s traded crude is priced relative to Brent, including Dubai, Urals, and West African crudes.
Yet the mutations, especially the latest, have arisen in places with very LOW vaccination rates. Not in places with high rates. If the vaccinations are a cause of mutations, shouldn’t the inverse be the case?
It has absolutely nothing to do with % of people who are vaccinated or not vaccinated.
The virus mutates to overcome some vaccinated individuals which is causing new variants. Mutations can absolutely pop up anywhere .
Science says you vaccine after the pandemic is over not in the middle of a full blown pandemic.
Go ask a virologist that you trust. Because this is a sensitive subject that completely goes against narrative.
This will be my last comment on virus subject. Since it so upsetting to everyone.
HHH,
You seem to lack much understanding of science.
The vaccines do not cause mutations, it is the lack of vaccines and higher infection rates that occur as a result of hoarding of vaccine by wealthy nations that causes the higher level of mutations.
Most of Africa is unvaccinated due to a lack of access to vaccine doses, the infection rate is higher due to the low vaccination rate and the more infections that occur, the higher the chances are that mutations will occur.
Basically the reality is the opposite of what you claim.
the infection rate is higher due to the low vaccination rate and the more infections that occur, the higher the chances are that mutations will occur.
Data please? Show me how Africa has a higher infection rate than Europe or North America. Africa has one of the lowest infection and deathrate per 100k. When you research it Dennis and it doesn’t fit your world view, you can come back and say, this is due to the lack of data or transparency coming out of Africa.
‘Leaky’ vaccines put selection pressure on viruses to mutate. This has been research sufficiently and is considered a fact.
‘Leaky’ vaccines put selection pressure on viruses to mutate. This has been research sufficiently and is considered a fact.
Data please?
And just what the hell is a “leaky” vaccine?
Ron: I would imagine that Iron Mike is talking about non-sterilising vaccines, of which all the COVID ones are. They do not confer a blocking of transmission advantage, only a reduction in severe symptoms leading to hospitalisation.
Additionally, this can lead to the prospect of Antibody Dependent Enhancement, which vaccines can have trouble with in large populations allowing for new variants to be selected for.
Ron,
What Kleiber said. Here is an article with the respective paper in the reference if you wanted to read it.
https://www.huck.psu.edu/research/center-for-infectious-disease-dynamics/article/leaky-vaccines-promote-the-transmission-of-more-virulent-virus
That article about “leaky” vaccines has nothing to do with Covid.
This theory that vaccines make things worse would require two things: that the vaccines not reduce transmission, and that the death rate for unvaccinated folks be very, very high, so high that their deaths materially reduce the rate of transmission. Neither is true!
“People who are fully vaccinated against covid-19 are far less likely to infect others, despite the arrival of the delta variant, several studies show. The findings refute the idea, which has become common in some circles, that vaccines no longer do much to prevent the spread of the coronavirus.
“They absolutely do reduce transmission,” says Christopher Byron Brooke at the University of Illinois at Urbana-Champaign. “Vaccinated people do transmit the virus in some cases, but the data are super crystal-clear that the risk of transmission for a vaccinated individual is much, much lower than for an unvaccinated individual.”
Read more: https://www.newscientist.com/article/2294250-how-much-less-likely-are-you-to-spread-covid-19-if-youre-vaccinated/#ixzz7DM4GNH00
‘Leaky’ vaccines put selection pressure on viruses to mutate. This has been research sufficiently and is considered a fact.
The horseshit on the internet knows no bounds. Viruses need no help mutating. (“Pressure” on virus to mutate? What the fuck is that?) Selection pressures are everywhere, and unvaccinated people spreading variants around only ensures that a more adapted mutant will sweep through.
Nick G,
As usual things are not black and white as you make it.
Transmission of viruses is a complex topic and it is not “super crystal clear”. But data shows viral loads not much different between vaccinated and unvaccinated.
https://www.ucdavis.edu/health/covid-19/news/viral-loads-similar-between-vaccinated-and-unvaccinated-people
Leaky vaccines – wrote that up in May:
https://wentworthreport.com/leaky-vaccines-runaway-virus/
The low deathrate in Africa is due to the more effective immune systems of African people and furthermore, the rural people are more resistant to the virus than the urban people. Rural people are more in contact with animals and their diseases, with dust and so on. Therefore, a supplementary virus is no match for their bodies. But this has the result to change them in healthy carriers of the virus and become virus reservoir populations providing regularly new variants to the others.
Iron Mike,
Not a lot of data from Africa, it is possible the mutation occurred elsewhere, but was first detected in Southern Africa.
All vaccines are leaky. Mutations will occur with or without vaccines.
https://www.market-ticker.org/akcs-www?post=244342
All people who fly must be vaccinated. Therefore it is safe to say, this new variant can beat the vaccines.
Also 32 mutations in strategic locations is astronomically improbable.
Botswana or Bust is a a false news source (and likely someone who has been here before but is ashamed to post under their prior identity)-
“All people who fly must be vaccinated.”
Wrong. There is no international rule to this affect,
There should be. But there is not.
Hickory,
What is your explanation for 32 mutations popping up at once in strategic viral locations?
99.999999% of mutations make virusesssss fail. it is is tiny percentage that work.
What airlines are you flying on where you don’t need to be vaccinated?
Karl Denninger is not a fake news site. I don’t agree with all his views, but if you can find flaws in his analysis…I’d love to hear them. I seriously doubt it.
Almost all of the regional and international air carriers rely on the destination countries for vaccination requirement. They do not have their own, and most do not even require there employees to have vaccination. or proof of immunity.
A traveler from S Africa could fly to dozen other airports and connect to Asia, Europe and the Americas without vaccination, and vice-versa.
Whoever told you the opposite is trying to manipulate his/her readers.
Also vaccinations vary in their effectiveness. For example the Pfizer and Moderna are over 90% effective at preventing serious illness and being an asymptomatic carrier.
The Sinovac [Coronavac] which is the most widely used international vaccine is significantly lower in effectiveness, and over 50 countries have relied heavily on it-
far better than nothing at keeping people out the hospital, off respirators and out of the graveyard.
https://www.nature.com/articles/d41586-021-02796-w
https://visaguide.world/news/45-world-countries-recognise-chinese-sinovac-vaccine-for-travel-amid-covid-19/
It is a fallacy to assume that any international travel is safe from spreading any airborne disease.
Any place in the world, no matter how remote, is within 36 hours of an outbreak somewhere else in the world.
Dennis,
According to this article, provided by someone here who appears to oppose vaccination, some vaccines are leaky and some are not. Covid vaccines would not be classified as leaky:
“Not all vaccines prevent infection. Some, known as leaky vaccines, prolong host survival or reduce disease symptoms without preventing viral replication and transmission. ”
https://www.huck.psu.edu/research/center-for-infectious-disease-dynamics/article/leaky-vaccines-promote-the-transmission-of-more-virulent-virus
Nick G,
Thanks for not retorting to name calling/labelling when mentioning:
provided by someone here who appears to oppose vaccination.
I appreciate and respect that.
Just for the record. I am totally FOR vaccinating the elderly and people with comorbidities/underlying conditions.
But i am against mass vaccinating healthy individuals, and children against this particular virus.
Iron Mike- “Just for the record. I am totally FOR vaccinating the elderly and people with comorbidities/underlying conditions. But i am against mass vaccinating healthy individuals,”
That approach is one way to handle the situation, although it would have to be coupled with a few additional measures to be effective at protecting the health care system/workers, the economic health and the overall public health, including
-those choosing to be unvaccinated are not welcome at health care facilities
-those choosing to be unvaccinated are not welcome at public markets/places of commerce/ public events
-those choosing to be unvaccinated are not welcome on public transport [air/land/sea]
Exception would be those who have government sanctioned testing that shows immunity is present, with mandatory jail terms and fines for falsification.
Anyone interested how good Africa is doing with covid-19 compared with Europe and America. With Africa having the lowest vaccination rate, have a read of this interesting article:
https://news.yahoo.com/scientists-mystified-wary-africa-avoids-074905034.html
“But data shows viral loads not much different between vaccinated and unvaccinated.”
Stop with your fucking red herrings. It just says, once infected (which is rare), vaxed people carry similar amounts of virus.
And, oh look! A caveat: “Our study does not provide information on infectiousness,” Michelmore said. “Transmission will be influenced by several factors, not just vaccination status and viral load.”
What is the infection rate between vax and unvax?
What is the hospitalization rate between vax and unvax?
What is the severity of disease between vax and unvax?
What is the death rate between vax and unvax?
From the article you cite: “Vaccines have been shown to be highly effective in preventing severe disease, hospitalization and death from COVID-19. For example, as of mid-September, 41 out of 49 patients hospitalized with COVID-19 at UC Davis Medical Center in Sacramento were unvaccinated.”
I like how they listed staying outdoors more as one of the primary reasons for lower infections in Africa. It is almost never discussed how the fact that we insist on being indoors practically all the time breathing recirculated air even when the weather is gorgeous outside is almost certainly a major reason we continue to suffer so badly during this pandemic
For those who choose to be anti-vaxxers it was akin to adopting a religious mandate handed to them by their partisan leaders and media heroes.
Not based on science.
And so they will present ideas as to why vaccination is bad, just as someone might use their bible to justify killing.
I speak to the US citizens who take that anti-vax approach- any claim to be patriotic to this country is revealed as completely false by those who have not been vaccinated. Its a public health and economic security issue. Partisan belief over country, over community, over family.
Sadly no one wants the oil Biden is releasing:
President Joe Biden’s move to unleash supplies from U.S. petroleum reserves will flood the market with sour crude that refiners are currently shunning.
https://www.bloomberg.com/news/articles/2021-11-23/biden-releases-sour-crude-that-s-out-of-favor-with-u-s-refiners
There was someone here writing about the API and quality of oil before, that person seems to be semi-correct.
I thought that the refineries were set up to take sour sludge from Venezuala and the like, not sweet crudes, hence the lack of a local market for the ultra light LTO?. Have the refineries been reconfigured?. Was the oil sour when put into storage, or did it go sour during storage?.
Alex , Ovi had posted a graph of US production and I had commented on the quality . However Ethanolguy , Liberal and Mustang had posted quite a bit about the quality problems and the lopsided production viz too little of light oil and too much of extra heavy oil (tar sands) and Very light tight oil (Shale) . They said this will be a problem in the near future . Below is the excerpt . The graph was posted by Ovi
HOLE IN HEAD
09/28/2021 at 11:07 pm
Ovi , tks for the graph . My take on this composition .
Other liquids Crap
Biofuels Crap
Conventional NGL Crap
Other crude What the f*** is this ?
Alaska crude OK but declining
GOM crude OK but peaked
Unconventional NGL Crap
Tight Crude For me is Crap being about or above 40 API . Some will disagree . Anyway this has also peaked .
Net result ; 80% is Crap .
A clown show .
Forgot Ovi’s graph .
Regarding SPR , I recall Matt Simmons commenting that the actual figure is much lower after one deducts the volume that is in the pipelines but what was more interesting he calculated that 20- 25 % of the SPR is ” sludge ” and one would literally have to get shovels to scoop it out of storage . Just from old memory .
Thanks for the graphs HiH,
There seems to be some serious contamination issues with the SPR (especially the ones from the salt caverns)
https://www.reuters.com/article/us-usa-oil-contamination-exclusive-idUSKBN1H50GI
https://www.osti.gov/servlets/purl/1096260
Alex
As I posted above, I don’t think quality is the issue. Here is the critical sentence.
“The Department of Energy is offering 32 million barrels of oil in an exchange that will need to be returned to the SPR during 2022, 2023, and 2024.”
The buyer has to replace the oil sometime before 2024. Which company has the crystal ball that tells them what the replacement cost will be one or two years from now. Would a company bet on another world lockdown and oil crashing again as it did last year?
Tight oil data from the EIA for October is out, see spreadsheet at link below
https://www.eia.gov/energyexplained/oil-and-petroleum-products/data/US-tight-oil-production.xlsx
Chart below has March 2021 to October 2021 tight oil data with trend (using OLS regression) extrapolated out to October 2023. The annual trend in tight oil increase over the past 8 months has been about 705 kb/d. This is about a 59 kb/d average increase in tight oil output each month. If the trend continues (which is not very likely), tight oil output would be about 9 Mb/d in October 2023.
Oil down 8% now. Amazing how far and fast prices can fall on fear alone. I’m expecting buyers to come in soon. So might just get a bounce here. Wait and see.
Yes, it crashed my stop loss, so I pocketed the rest of my earning.
I think everything is open now – a new international corona panic with flight travel cancelings and some new lockdowns, or a calm and business as usual when this variant isn’t that bad.
At least, I think shale companies won’t go all out new drilling in this enviroment, dampening the oil supply on the market.
Edit: I’ve read the last weeks many hedge fonds being all in in long oil. I think they now seek the exit door all at the same time. Perhaps some are in on margin.
We are going to close in the $60s on WTI. That’s my prediction.
SS
It just broke through $70
Politically Western countries need it there.
But they can’t control things long term.
Of course, I am just speculating, and before the Biden fans jump all over me, recall I’m no Trump fan.
I also speculated when Biden was elected that his policies would cause oil to rise, and that would cause him a lot of political trouble.
Rig count came out this past Wednesday. For Permian horizontal oil rigs the count increased by 4. The trend for the past 11 months has been an annual increase of about 87 rigs per year. Over the past 12 weeks the trend has become steeper with horizontal oil rigs in the Permian basin increasing at an annual rate of 136 per year. At that rate Permian horizontal rigs would be at about the level at the end of 2019.
https://bakerhughesrigcount.gcs-web.com/na-rig-count
I use the pivot table at the page above to find Permian horizontal oil rig count (the data can be filtered to obtain this result).
Highly unlikely.
Stephen,
I agree the 136 rig per year horizontal oil rig rate of increase in the Permian might not be likely, but the 87 horizontal rig rate of increase is quite reasonable if we assume (as I do) that oil prices are likely to remain at $80/bo or higher on average aover the next 12 to 24months.
If the omicron variant is a serious problem (moreso than the delta variant), then oil prices would be lower and rigs might increase more slowly.
I often say and will repeat, the future is not known by anyone.
In my earlier comment I said
“At that rate Permian horizontal rigs would be at about the level at the end of 2019.”
I meant to say
“At that rate Permian horizontal rigs would be at about the level at the end of 2019 by the end of 2022.”
Volatility will remain in oil prices for some time, possibly for the remainder of our lifetimes. The lower estimate seems plausible given your average oil price scenario. The investment climate for oil and gas remains poor though, especially for longer horizon projects.
Stephen Hren,
Note that I expect that oil price volatility will continue (this has been with us for about 48 years, so most are accustomed to this fact) the demand for oil will soon outstrip supply at current oil prices so my expectation is the volatility will be in the $80/b to $130/b range with average annual oil prices likely in the $85 to $105 per barrel range.
I agree the investment climate for new oil projects is not very good at present, but higher oil prices will make them hard to pass up as they are likely to be very profitable, perhaps they will be privately funded and not depend on borrowed capital. In any case for Permian basin projects the time horizon is short and is less likely to be affected by the investment environment. In fact at $80/bo, my mid-price scenario can be funded out of operating cash flow, there is no need for outside capital.
Yes my guess is almost all new investment goes to the Permian given current investment climate. At the expense of long term prospects of course. I’m not sure but the degree of volatility seems to have increased, at least since Covid appeared. Prolonged spells below $60/barrel even with high average prices will throw water on E&P severely.
Stephen,
I doubt we will see prolonged (more than 3 months) periods where average oil prices are less than $60/bo between now and 2028, but as always the future is impossible to predict so I may well be incorrect.
And then what? a few counties in Perrmian are going to provide oil for the whole world and absorb the global oil production deficit?
Jean Francois,
No it will be US output (from tight oil and GOM), Canadian, Brazilian, Norweigan, as well as oil from Iran, Iraq, UAE, Saudia Arabia, and Russia, and perhaps a bit from the other nations of OPEC plus that will lead to increased World output particularly from 2022 to 2025, then their will be a peak in 2026 or 2027, by 2028 enough land transport will have become electric that demand for oil may be less than supply, we will have an oil glut by 2029 and oil prices will start to fall driving more expensive oil (tight oil and oil sands) from the market.
Stephen , ” The investment climate for oil and gas remains poor though, especially for longer horizon projects. ”
I agree .
Dennis , your post . I think you just returned from Disneyworld and are yet to get over your experience . 🙂
Hole in head,
I call it as I see it. Nobody knows what the future will bring, this is simply my best guess.
“There comes a point when complexity starts to undermine the stability of society. If we have not reached that point, we seem to be very near it. “
HT , you called it correctly . Complexity and connectivity are the Achilles heal of industrial civilisation .
“ANYONE who believes that exponential growth can go on forever in a finite world is either a madman or an economist”
—— remarked (the economist) Kenneth Boulding.
“ANYONE who believes that exponential growth can go on forever in a finite world is either a madman or an economist”
Well, let’s talk about energy: US oil consumption hasn’t changed significantly since 1979, despite US manufacturing output growing by 50%. Electricity consumption has been flat for very roughly 10 years, breaking a long-term trend of roughly 2% growth per year.
US virgin steel consumption is very low: it’s almost all recycled. Again, that’s despite manufacturing growing by 50% in the last 40 years.
No one is arguing that exponential world resource consumption can grow forever. It’s a Straw Man argument.
Again….
NO ONE is saying that world growth will continue forever. Why would it? At some point everyone will have all the goods and services they might want. The US (and much of the OECD) is already there for goods: sales of homes, cars and major appliances has been essentially flat for 40 years. Growth would likely continue as physical goods are improved in function and quality, and as new ideas for new services emerge, but there’d be less urgency about it.
Can an economy can grow with the use of no additional resources?
Sure, as efficiency improves. TVs and phones have gotten smaller. Efficiency can improve exponentially for a very long time.
It will still need some resources, but they don’t have to grow. And, they don’t have be VIRGIN resources – essentially everything (except maybe helium released to the atmosphere) can be recycled.
So, my computer can be recycled forever. That’s sustainable.
High trekker,
All of my scenarios peak and then decline, so it is unclear who you are referring to.
Just announced here in Ontario that gasoline will drop by 11¢/litre over night. Doing the conversation to US gallons and dollars, that translates into a drop of 32.5 ¢/gal.
I would be interested in hearing what the drop for gasoline will be in various US centres over the next few days.
Found this chart with a history of gasoline prices.
This table is a look at gasoline prices in Nevada and the national average on Nov. 22 going back 10 years:
Dennis
What is the 2012 national price of $3.43/gal in today’s dollars?
https://www.nnbw.com/news/2021/nov/24/nevada-average-gas-price-hits-4-according-gasbuddy/
Ovi,
See https://www.eia.gov/outlooks/steo/realprices/
In today’s US dollars the real price of gasiline in 2012 would be $4.35/gallon. Nov 2021 is about $3.32/gallon fro gasoline in the US.
Dennis
Thanks. While people in the US are reminded every day about the price of gasoline, not may would know that in March 20, WTI dropped to zero and below. It put a lot of drillers into bankruptcy. However according to the polls, it’s all Joe’s fault. Hopefully the average price will fall below $3/gal and keep the economy going.
RBOB dropped 29¢/gal on Friday to $2.03/gal. Adding 80¢/gal to 90¢/gal to the $2.03/gal gets close to the national average.
Ovi.
I don’t think the US economy suffers with $3 gasoline and $75 WTI.
Donald Trump seemed to think US E & P’s were doing just great with WTI in the $30s and the $40s.
Jennifer Granholm doesn’t know how much oil the US consumes daily.
US populace and politicians are pretty clueless when it comes to oil. I think most who post here would agree on that.
Shallow sand,
Agree in full.
Must read . Reality . Posted on Mike S blog .
https://www.oilystuffblog.com/news-stuff
“ Furthermore, depletion problems across the shales persist. Our neural network initially pointed to the fact that once a basin has developed 50% of its Tier 1 wells, total production begins to plateau and then decline. We used this to correctly predict the Eagle Ford and Bakken would peak in late 2019. At the time, we stated that Permian production would still be able to grow for the next few years given only 35% of Tier 1 wells had been developed. Our models now tell us that 45% of Tier 1 Permian wells have been developed, implying we are much closer to its inevitable plateau and decline as well. By the end of 2022, we believe the final US shale basin will cease to grow.”
Good read! Not written by Mr Shellman and generally on the pessimistic side of things, but could well be correct. The DUCs are fleeing the coop!
Hole in Head
Completion of DUCs is already slowing. in March 354 wells were completed. By August completed DUCs had dropped to 225 and in October they dropped to below 200 to 191.
In the Permian, a similar slowing trend is developing. From June to September, the average completion rate of DUCs was 129/mth. In October, 124 DUCs were completed. To offset the reduction in DUCS, drilling is increasing. See chart.
in the August to October period, the number of drilled Permian wells increased at a higher rate than in the May/July period. Is this higher drilling rate related to the increasing price for WTI and lack of Tier 1 DUCs?
What is really surprising is the DPR expects the number of completed Permian wells to drop by 6 in October. Will need to wait for a few more months to see if this trend continues.
The evidence is growing, although still sparse, that as the DUC inventory gets towards 6 months then rigs are started to be added to keep the inventory at 3 to 4 months (the article says 5 months has been an average but that was in less capitally controlled times and with fewer labour and supply chain constraints as now). But so far frac spreads (which would allow an increase in the number of completions) are not beng added. It’s significant that the peak completions in the permian was in spring 2019, almost a year before covid and when the oil price wasn’t doing anything particularly strange cmpared to what has come since. It looks like if you continued the gentle decline in late 2019 as a bell curve, ignoring the covid dip, then completion numbers would be about where they sre settling now, suggesting geology rather than economy is currently controlling..
George,
Looking at shaleprofile data for Permian, the completion rate did not decrease significantly until 2020
https://public.tableau.com/shared/WPXYK8289?:toolbar=n&:display_count=n&:origin=viz_share_link&:embed=y
The EIA data is not as good as the shaleprofile data in my opinion.
https://shaleprofile.com/blog/permian/permian-update-through-august-2021/
Also note tht we do not have frac spread data for individual basins, only for all frac spreads operating in the US (for both tight oil and shale gas).
Also frac spreads have more than doubled since the beginning of 2021 from 133 to 274.
From January to March 2020, horizontal wells in the Permian declined by 101 wells. The big covid demand decline started in late April and hit bottom in May. Therefore the new well decline preceded the covid decline.
Ron,
What is this chart? Where does he data come from? The best data is found at link below
https://shaleprofile.com/blog/permian/permian-update-through-august-2021/
For Permian basin horizontal wells producing (number of wells producing each month) we have starting in November 2019:
26140
26565
27093
27576
28002
28287
28479
28663
28868
29056
29365
29587
29866
Link to chart below
https://public.tableau.com/shared/2JXQNNRDP?:toolbar=n&:display_count=n&:origin=viz_share_link&:embed=y
I trust the data from Enno Peters.
Dennis, the chart is clearly labeled “Non-OPEC through April 2020”. The point of the chart was to show when the covid decline began, not to show Permian production.
The whole point of the chart was to show that the new well decline in the Permian began to decline three months before the covid decline began. And it clearly showed that.
Your chart Permian showed the number of new wells in the Permian to be, 527 wells in January, 483 wells in February and 426 wells in March, the month before the covid decline began in April, as my chart shows.
Copy and paste from my post above: Therefore the new well decline preceded the covid decline. Bold added however.
The post had nothing to do with total wells. Total wells always increase by the number of new wells minus wells shut-in that month. That number means nothing. New wells are the only thing that counts.
Ron,
Oil prices were dropping from Jan through March, also there is often a slowdown in winter in completions, even in Texas where it sometimes gets cold and they are not as well prepared to deal with it as the folks in North Dakota. Also the OPEC plus output spike in April probably was likely anticipated by March.
Could you, please, show us this more visually?
Jean- Francois,
It is difficult to tell who is being asked the question. Put the mane of the person you are talking to in your comment and then it will be clear.
Oh sorry. I was asking this to George Kaplan.
Another good read by the same author .
https://blog.gorozen.com/blog/running-out-of-spare-capacity-global-oil-markets
Hole in head,
I agree a good read. I think they underestimate the number of new wells that will be drilled in 2022 as DUC inventory decreases and they also underestimate Permian growth in the future.
They may be right about demand estimates being too low, but note that if they are correct this means oil prices will rise to a level that destroys enough demand so the the oil market is relatively balanced. The higher oil prices will result in more investment by the oil industry (than an alternative scenario with lower oil prices) and lower demand for oil (than an alternative low oil price scenario).
I read the analysis as suggesting higher oil prices in the future and oil as being an undervalued investment opportunity.
“ It is no surprise the US is not seeing a strong rebound in production: the shales are suffering from depletion, a topic we first discussed in late 2019. Every shale basin except the Permian is experiencing outright decline. Over the last 12 months, the Eagle Ford and Bakken have declined by 4,000 b/d per month on average compared with monthly growth of 20,000 b/d as recently as late 2018. The Permian is the least developed of the major basins and we have often predicted it will still be able to grow, albeit at a much lower rate than in years past. Over the past 12 months, Permian growth averaged 35,000 b/d per month – 65% less than it grew in 2018. The remaining shale basins are declining by a total of 13,000 b/d per month compared with 25,000 b/d monthly growth a few years ago. Taken together, shale production is only growing 14,000 b/d per month compared with 160,000 b/d in late 2018 – a slowdown of 90%.”
The three big questions are well summarized here-
““[Currently] we are trying to identify how widely spread this is. There will be a lot of work looking at: Is it more transmissible? Is it associated with any more severity of disease? Does it render the vaccines less effective?”
It will take a month or two to begin to have some accuracy in the answers to these questions.
In the meantime, the uncertainty and volatility in markets will be intense.
““We understand the concern of experts and have immediately initiated investigations on variant B.1.1.529,” the companies said.
Pfizer and BioNTech said they expect more data from lab tests in two weeks at the latest…
data will provide more information about whether B.1.1.529 could be an escape variant that may require an adjustment of our vaccine if the variant spreads globally,” the companies said.
Pfizer and BioNTech said they can adapt their mRNA vaccine within six weeks and start shipping batches within 100 days if an escape variant is identified.”
I’m looking through all the charts. I’ll be absolutely shocked if markets don’t rebound sharply next week.
I think there is a US dollar short on the table. Meaning dollar will likely fall as pressure to tightening monetary policy just disappeared.
Oil may rebound hard. But also could consolidate for a week or two before any direction is taken.
New variant would have to prove itself to be the real deal in order for markets to keep falling.
There is a long EUR/USD set up. Which is a very curious set up. I’m talking technical set up. But if you look back at beginning of the pandemic the euro took off against the dollar. As US bond yields collapsed. Are we getting a repeat of that move?
And is that a signal that US bond yields are set to collapse due to new variant?
And if this is correct. What are the implications for the price of oil?
Yes I’d guess there is a greater than fifty percent this new variant is a nothing burger. But if it’s not, look out below.
Global LNG dynamics starts to impact domestic US NG prices.
https://doomberg.substack.com/p/have-fun-staying-cold
Anyone have a Charts on 2021 US NG Productions and Flows?
US NG $/Volume shows a steady slope upwards.
http://americanoilman.homestead.com/GasStorageGraph.html
I figure we need to see $7 before people start considering solar thermal for hot h2o.
Might be of interest, if only to scratch your head and yet again wonder where people get their ideas
https://www.nature.com/articles/s41560-021-00934-2
and getting picked up here and there
https://www.theguardian.com/environment/ng-interactive/2021/nov/04/fossil-fuel-assets-worthless-2036-net-zero-transition
Abstract:
“A key aim of climate policy is to progressively substitute renewables and energy efficiency for fossil fuel use. The associated rapid depreciation and replacement of fossil-fuel-related physical and natural capital entail a profound reorganization of industry value chains, international trade and geopolitics. Here we present evidence confirming that the transformation of energy systems is well under way, and we explore the economic and strategic implications of the emerging energy geography. We show specifically that, given the economic implications of the ongoing energy transformation, the framing of climate policy as economically detrimental to those pursuing it is a poor description of strategic incentives. Instead, a new climate policy incentives configuration emerges in which fossil fuel importers are better off decarbonizing, competitive fossil fuel exporters are better off flooding markets and uncompetitive fossil fuel producers—rather than benefitting from ‘free-riding’—suffer from their exposure to stranded assets and lack of investment in decarbonization technologies.”
Just guessing , 2036 ?? Much earlier say about 2025 -2030 .
A recent tight oil supply projection from Enno Peters which assumes current rig count is unchanged along with new well productivity and rig efficiency. Note that all three of these are likely to change in th future with new well productivity decreasing and rig count increasing (up to 2025 or 2026), the two factors might offset and the result is similar to my mid-price scenario, about 9.6 Mb/d in 2028 for my scenario and 9.6 Mb/d in Dec 2028 for Enno peters.
https://public.tableau.com/shared/Q5RZXJH8W?:display_count=y&:origin=viz_share_link&:embed=y
So, slow growth to 2030?
Dennis, maybe I have missed it, but what is your most recent prediction of US production (all sources, not just shale) through 2030?
What did you think about Friday’s price collapse?
For us, it is just more of the same, as we prepare to deal with a price range of $30-150.
We haven’t been able to sell a thing. Just extremely low ball offers, so for now we will just keep putting funds back to plug and abandon our leases.
If the labor shortage continues in the oil patch, plugging out our little field would take 10-30 years. It’s taking us months just to get 6 wells plugged due to lack of rigs. So, who knows if we’d ever have to plug it all anyway?
Should the government be permitted to levy fines for not timely P & A if there isn’t the physical ability to get it done due to lack of labor?
This period of time kind of feels like 2000-2003. The major difference is there wasn’t the anti-oil sentiment nor the possibility of alternatives to oil regarding light transport.
Such a volatile time. Back in 2000-2003 never saw a price move like we saw Friday. There weren’t any crude oil ETF’s. No online trading. No crypto. Etc.
Shallow sand,
I have not been following this as long as you, I started following peak oil in 2005 or so (after I read Twilight in the Desert). The drop in price was simply a reaction to the new covid variant.
I think fines should not be issued if an operator can show they have made a good faith effort to get wells plugged or repaired.
As I have pointed out in the past the anti-oil sentiment presents an investment opportunity. Supply may be low and prices will be high from now until 2028 in my opinion with demand falling below supply some time in the 2028 to 2033 time frame (my best guess is 2029).
I hope oil prices stay high and that small oil producers continue to do well and I think that will be the case up to 2028, after that find a buyer or maybe 2027 to play it safe, sell at the top.
My latest US estimate below, peak is 12.99 Mb/d in 2027 (average annual output for the year).
Note that I have used an old estimate by South La Geo for GOM, and use the trend in decline for L48 OS and alaska and have assume that trend continues, by 2028 any increase in tight oil output is more than offset by declines elsewhere in the US.
Dennis every time I see your chart I wonder what world you are living in. The Private Equity and Institutional capital has fled from upstream investing. Without this outside capital, there is no way your chart will ever be a reality. Even if there was enough capital, the lack of tubulars and OFS providers places an automatic governor on production growth.
This is no longer even a question of reserves but in reality now a question of capacity. We do not have the capacity in ancillary services and equipment to get to your 13,000,0000 bopd. Frankly unlike every other past oil boom when capital came flooding in based on higher oil & gas product prices , the political environment is so toxic and anti fossil fuel that I have not seen it happening one iota. In fact, even with higher prices, capital is still exiting.
LTO Survivor,
All future capital financed from operating cash flow in the scenario. It is assumed that 25% of this cash flow is paid out in dividends, some is used for capital spending and some is used to pay down debt, for the Permian basin this is easily accomplished at $75/bo, my expectation is that supply of oil will be short from 2022 to 2028 and that oil prices are likely to be north of $95/bo in 2021 US$.
Perhaps you have a different expectation of future oil prices than I have.
I have output for US growing by 3.4% on average each year from 2022 to 2027. Tight oil output grows at an average rate of 6% per year from 2022 to 2027 in my scenario. This might seem too high a growth rate, but note that tight oil output grew by 25% per year on average in from 2017 to 2019, about four times faster than I assume in my tight oil scenario.
The growth rate in US tight oil output from 2010 to 2015 was an annual average rate of 42% per year.
Lastly note the supply projection a shaleprofile.com.
I am not here to debate anyone and least of all you. I think my frustration comes from my current experience in the Industry. We are drilling wells in East Texas and having a difficult time getting goods and services. I have heard the same about the Permian. Additionally, I have seen the results of child wells where I own minerals and have working interest and they are underwhelming. I am just trying to tell the group what I am experiencing in real time as an Operator and Investor. Based on this experience despite what the IEA or EIA, or Shaleprofile predicts, I don’t see how production grows to 13+ million bopd. Now, of course, things can change but without outside capital coming in to prop up the service side it will be tough sledding.
Thanks LTO Survivor,
In your experience do shortages like we are seeing today continue for many years? My expectation is that things will change (fewer shortages) especially if oil prices remain high.
My scenario has 2022 output at less than 2021, by 2023 I expect we will see growth (note the scenario has annual growth of only 250 kb/d in 2023), of course I may be wrong.
At one point not long ago you suggested that a 5% annual growth rate seemed reasonable for tight oil, clearly your thinking has changed.
Do you have a tight oil annual growth rate that might be reasonable now (assume oil prices remain at $75/bo or higher)?
Tight oil and credit courtesy Mr Shellman .
https://www.oilystuffblog.com/forum/forum-stuff/tight-oil-credit
Hole in head,
If oil price averages $70/bo or less for next 10 years, I would be very surprised.
I expect at least $80/bo in 2020 $.
Also note that Mike uses nominal oil prices, if we adjust for inflation the real average WTI oil price from Jan 2008 to Oct 2021 was $64.30/bo in 2020 US$. In October the average monthly WTI price was $86.49/bo (spot price).
Chart with real WTI average monthly spot prices in 2020 US$/b below. Data from EIA.
Price chart above was done incorrectly, also average real WTI price is wrong.
Sorry, I messed up in my spreadsheet.
Correct number for average real WTI oil price in 2020 $ from Jan 2008 to Oct 2021 is $78.40/bo, Mr Shellman’s estimate was lower at $70/b because he may have used nominal oil prices. Note that much of the damage in the tight oil industry is due to the low oil price environment from 2015 to the present. The average real WTI price from Jan 2015 to Oct 2021 was only $54/bo and this period was when much more of the tight oil was produced (about 76.7% of all output from Jan 2008 to Oct 2021 was produced after December 2014).
Updated tight oil scenario with Permian scenario adjusted for oil prices that rise only to $75/bo (Brent price in 2020 US$, WTI would be $73/bo in 2020 $), prices are assumed to start decreasing in July 2028, at a rate of $3/bo each year. Peak for US tight oil is 9637 kb/d for highest 12 months of output centered in May and June 2028. URR from Jan 2000 to Dec 2052 is 73 Gb (mistake on chart title, my apologies). Note how much lower the model scenario is in Oct 2021 (7097 kb/d) vs reported tight oil in the EIA official estimate (7652 kb/d).
I often say the model is conservative, sometimes the data confirms this.
SS , “What did you think about Friday’s price collapse?”
It is a case of overshoot since the whale (NYMEX) was closed and the Algos (computers) and minnows were in control . My best guess is that on Monday when the traders return to their desk there will be a rebound .
HH, once again, the NYMEX was not closed Friday. They were wide open but with special holiday hours. Also, as Chris posted: If this helps, it seems approximately 80% of the world’s traded crude is priced relative to Brent, including Dubai, Urals, and West African crudes.
WTI does not rule the Crude Oil trading world, Brent does.
Also:
For NYMEX and COMEX products submitted via CME ClearPort Clearing, the hours are: Sunday 5:00 p.m. – Friday 4:00 p.m. CT with no reporting Monday – Thursday 4:00 p.m. – 5:00 p.m. CT
That’s right, the NYMEX starts trading Today, Sunday at 5:00 p.m. CT.
$ 71.44 at 11.50 PM EST . Up 4.47% from closing 68.15 on 26/11/2021 . Europe time now is 6 am Monday .
There will be a rebound unless the whole economy tanks which could easily happen after years of irresponsible behavior by the Fed and Central banks around the world. Printing money out of thin air has its consequences eventually.
The current administration would love nothing more than to have this virus mutate so they can give more stimmy payments to their political base to avoid their currently poor ratings.
LTO survivor,
Money has been printed from thin air since August 1971 when the US left the gold standard agreement set up at Bretton Woods in 1944.
Lack of regulation of the banking system in the US which started to be deregulated in 1980, things have improved a bit since 2009 as far as better bank regulation in the US.
Dennis,
In years past when the price of the product rises, money has come back into the sector but this time is different. The money that propped up the Shale revolution and the accompanying technology came from Private Equity, Pension Funds, and Commercial Banks. For the time being, they are divesting and fleeing the space. Now if we see $300 oil, perhaps they won’t be able to resist and it will because we have truly hit peak oil and are running dry.
This time is different. I haven’t seen many quality projects that I personally would invest in. They are either too small or too risky for the current price environment. Secondly, I have not seen one oil company pay out 25% of their free cash flow in dividends and interest and grow. Not one. The Shale basins will be doing phenomenal to stay at this level for the next five years. Finally the best locations and wells have already been drilled. What is remaining is marginal even at current prices. Oilfield Costs have risen 20% in the past two months. So my answer to you is yes this time is markedly different. Can it change? Sure but the insanity of the political headwinds keep investors cautious and away from the space for right now.
LTO Survivor,
The 25% payout of dividends was simply a model approximation to account for the fact that public oil companies often pay dividends, it was purposely set at a high level to show that the operating cash flow can easily pay for new capital investment, debt service and dividends.
I misspoke earlier, the model uses 25% of free cash flow (operating cash flow minus capital investment) rather than 25% of operating cash flow. Note that in many cases free cash flow is negative (in a low oil price environment) and in that case no dividends are paid out (in my scenario).
Currently what economic growth or GDP we are seeing is just in nominal terms. We all paying a hell of a lot more for a lesser amount of goods and services and calling it growth.
So total value in nominal terms we see growth. But in volumetric terms we are producing less goods and services. And you can see this everywhere in the trade data.
Be it China imports of iron ore at record nominal value but actual volume of iron ore is way less than pre pandemic 2019 levels. Or German manufacturing exports. You can pretty much find what I’m talking anywhere you look. Nominal it looks like we have economic growth but reality is we are just paying more for less.
We don’t have growth in real terms. Bond market absolutely reflects this as yields can’t even make it back to 2% on 10 year treasuries.
Maybe oil can get over $100 on a supply side shock. It won’t ever make it back to over $100 because we are doing great and have an abundance of growth in real terms.
Oil supply is crumbling, too – not much investment, chip shortage and the green agenda in western countries. This works together with natural decline – no steady production without a flow of new projects. You can go some time squeezing the big olds fields some more, it’s cheaper than tapping a new one, but this comes to a limit.
And bonds are a joke – 2% for getting the money back when it is worth much less than before. In the inflation phases of the 70s, when bonds have been a good investment, you got more than 10% on the long running ones. That’s why stocks have been so low this time – dividend yield hat to be > 10% to consider buying a stock. Compare this with Amazon and Tesla today… In an inflation scenario of the 70s stock need to make a 80% correction.
Bond yields are only that low because of QE – the maximum stupid buyer in the market with the deepest pockets. You can see this on the bond market – when one day the FED buys nothing because of technical problems, interrest climbs some base points.
There is a handful of big tech stocks that are responsible for pretty much all the gains over last two years and also are what is holding market up when majority of stocks are trending down.
I’d argue that bond yields crash towards zero as FED attempts to cut back buying. FED has zero control of long end of curve. Long end of curve is telling you there is no growth or inflation. Inflation defined as monetary inflation. Not the supply side shocks we have.
We have a massive asset inflation ($ buys less house), and goods inflation. Food is getting more expensive, cars and eletronics, raw materials, too. It may be short – but it is here.
And the FED controls the long end of the curve – buy buying or not buying them.
In the EU, the ECB litterally buys ALL new bonds – there is no such thing as a normal bond market anymore.
The FED the same, they own already 5 trillion $ in federal bonds of all maturities. They act like a horde of kiddies buying up Gamestop – and so controlling the price.
When they stop QE, they are still the largest holder of bonds.
Tripple A bonds at 0% – that would shoot the stock market into the stratosphere. Big companies could increase their lend + buyback programs. Apple at 5 trillion “worth” – and the FED would have a bigger problem. This bubble must not pop, there is too much US wealth and consumbe backed by these stocks.
I agree with you on asset prices. I was talking to a guy last week who is in real estate. Real estate market is still scorching hot. He works for a firm that does housing appraisals.
Average home is only sitting on market for about a week before getting sold. So a lot of appraisals are being done. He has only had two slow weeks all year. He said he was doing 3-4 appraisals a day 5 days a week in a firm that has 7 other people doing exact same thing in the same market in the lower part of the state we live in.
But the economy isn’t actually growing any. We just paying a hell of a lot more for a lesser amount of goods and services and are calling it growth. Which it’s not.
He also commented at end of our conversation that he is getting all he can before real estate bubble pops again. So real estate professionals are acknowledging that this is a bubble.
I’m an old timer.
We called this inflation in the past… paying more for less and worse quality.
Real estate is scorching hot here, too. Building materials are up up to 100% from last year (everything wood).
I call this inflation, too – even when it don’t show up on the official charts so it is “growth”.
Who controls the inflation number controls growth.
I just sold my house for the highest price per square foot ever of any house in the community where I live. I had no intention of selling my house but a real estate agent knocked on my door and made me a ridiculous offer. I thought about it for approximately 30 seconds and jumped on the offer. If we aren’t at the top, then we are pretty darn close. just sayin’.
Print $ 31 trillion and you can have all the growth you want . Don’t worry , be happy .:-)
What can go wrong ?
https://mishtalk.com/economics/feds-balance-sheet-vs-the-ecbs-balance-sheet-whos-winning-the-race
In 1995 we had the pop of the tech bubble and in 2008 we had the pop of the housing bubble . It was one bubble at a time . Currently we have both the tech bubble and the housing bubble moving in tandem . When they pop then look down below . Powell is juggling chainsaws .
Good move LTO , the insiders are getting out . As Ron said from his stockbroker experience ” Insiders are never wrong only early ” .
https://wolfstreet.com/2021/11/29/microsoft-ceo-nadella-dumped-50-of-his-msft-stock-in-one-day-following-in-elon-musks-footsteps/
HHH,
You said:
We don’t have growth in real terms.
Not based on data.
https://www.imf.org/en/Publications/WEO/weo-database/2021/October/weo-report?a=1&c=001,&s=NGDP_RPCH,NGDP_RPCHMK,NGDPD,PPPGDP,&sy=2015&ey=2026&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
In 2021 the IMF estimates growth for World real GDP growth at market exchange rates will be 5.7%, chart below has World real GDP in billions of constant 2015 US$ (using market exchange rates).
There has been real growth in GDP. The IMF expects that real GDP growth for the World will continue through 2026 with World real GDP in 2015 US$ at market exchange rates to grow from 85.6 trillion to 100.3 trillion in 2015 US$.
Dennis we have growth in nominal terms. But in real terms volume of goods and services are down. I can go country to country showing their trade data is up in nominal terms by a lot. But in volumetric terms everything has shrunk.
IMF is about like the FED. They use mathematical models that aren’t based in real data. China’s growth is negative and will continue to be. But you won’t ever see that in anything that is published by the IMF or released by the CCP.
HHH,
Usually these things are measures in dollars (adjusted for inflation rather than mass or volume.
Yeah and it gives a false sense of how well we are doing economically.
real terms volume of goods and services are down. I can go country to country showing their trade data is up in nominal terms by a lot. But in volumetric terms everything has shrunk.
Yes, please show your data and sources.
WTI opened yesterday at $70.68, up $2.53 from Friday’s close. By this morning it was up another 82 cents. Brent had increased by only 41 cents from yesterday. Prices have oscillated all night but I think they have settled down now. But we shall see.
A couple of factors that affect oil prices will be answered soon:
1. Are the current vaccines effective against the Omicron variant?
2. Will OPEC end their gradually increasing quotas?
My bet is yes to both questions.
Right now oil’s rebound isn’t really holding. Back under $70
Rebound in stocks only about half what I was expecting.
Yeah, WTI is now up only $1.49 from Friday’s close and Brent is up just 41 cents.
It’s that the new covid variant. The news just keeps getting worse. I look for a further decline in all markets.
Here are three headlines today regarding oil companies. The common theme, Big oil Selling.
Swedish oil and gas company Lundin Energy is considering a potential sale, Bloomberg News reported, citing unnamed sources.
Norway’s Equinor has agreed to sell its stake in the Corrib gas field to partner Vermilion Energy, the Norwegian oil firm said, putting an end to its activities in Ireland.
Nigeria’s Seplat Energy along with a partner is in talks to buy ExxonMobil’s shallow-water oilfields in the African nation, the company said, cautioning there was no certainty about the outcome.
Interesting piece I found in the comments at shaleprofile (comment by nuassembly)
https://www.linkedin.com/pulse/tale-two-permians-gors-i-delaware-midland-abnormal-sheng-wu/?published=t
I don’t understand it all, but maybe one of the smart geoscientists here can decipher it for me.
The Alpine high was formed at a deeper depth and uplifted by the mountains to the south and west. The Delaware basin is very unique and we were often surprised at the GORs in some wells being off the chart higher and lower as you moved deeper into the basin below a subsurface depth of 9,200 feet. Additionally this basin is highly faulted due to the mountains as well and I believe there was a lot of communication of fluid through slight faulting most prevalent along the southwestern shelf. This is another reason why the child wells are performing so poorly. Lots of horizontal and vertical communication between well bores.
LTO Survivor,
Thanks.
The geochemistry aspects of the piece were fuzzy for me. The physics I understand better than the chemistry.
“Brent crude prices will reach $125 per barrel next year and $150 in 2023, as OPEC producers won’t be able to crank up production, J.P. Morgan analysts predict.
“OPEC is not immune to the impacts of underinvestment….
“Our bottom-up field-by-field model reveals a total capacity shortfall extending to 3 million barrels per day versus an OPEC target of 49.1 million barrels in the first half of 2024. This underperformance comes at a critical juncture, as other global producers falter.”
I picked this up from the blog “The Oil Crash” . Peak Diesel . Comments please .
https://crashoil.blogspot.com/2021/11/el-pico-del-diesel-edicion-de-2021.html
Comments please-
Head in Hole, get with the times. Your so…….yesterday
https://www.ford.com/suvs/mach-e/
https://www.ford.com/trucks/f150/f150-lightning/2022/
Don’t worry , be happy .:-)
Hole in head,
The author relies on JODI data which tends to be incomplete for recent months and would be unreliable after 2020.
Below is a chart of World consumption of light distillates (gasoline and naptha), middle distillates, and fuel oil from BP Statistical Review of World Energy (Regional consumption tab). Spreadsheet can be downloaded at page linked below.
https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
Oil is at $67.78 this morning. Down $2.17 from yesterday’s close.
The trading hours on the NYMEX runs from 5 PM to 4 PM Central Time. They are open 23 hours a day from Sunday at 5 PM until Friday at 4 PM Central Time. Of course, those electronic trading hours.
Russia failing to meet OPEC oil production quota
According to the quota, Russian oil companies can supply 100,000 barrels per day every month (about 1% of current production). But in fact, in November, the growth was half as much – 0.49%, Bloomberg reports, citing data from the CDU TEK (Russian Federal state budgetary organization “Central Dispatching Department of Fuel Energy Complex”).
Russian oil companies do not produce more oil because they cannot. Their production capacities are almost exhausted, top managers of the three largest Russian oil companies told Russian newspaper Kommersant.
http://uawire.org/russia-failing-to-meet-opec-oil-production-quota
===========================
Increase in OPEC’s oil output in November again falls short of target
The biggest rises in November came from OPEC’s top two producers, Saudi Arabia and Iraq, which both boosted output largely as promised according to the agreement.
Kuwait, the United Arab Emirates and Algeria also made increases as called for by their higher November quotas. Nigerian output, often hit by unplanned outages, recovered in November as a force majeure was lifted.
Output declined or did not increase in Angola, Equatorial Guinea and Gabon, the survey found, owing to a lack of capacity to produce more.
The biggest decline – 50,000 bpd – was in Angola, where exports hit a record low during the month according to tanker schedules. The second largest was in Libya, one of the countries exempt from OPEC supply curbs, due to pipeline maintenance.
https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-increase-in-opecs-oil-output-in-november-again-falls-short-of-target/
Thanks for the link Ovi. Everyone who thinks Russia will help keep peak oil in the future should read that article. Here is the important points, bold mine:
Russian oil companies do not produce more oil because they cannot. Their production capacities are almost exhausted, top managers of the three largest Russian oil companies told Russian newspaper Kommersant.
On November 12, Rosneft Vice President Eric Liron announced that Rosneft’s production capacity had been exhausted. And on November 24, Lukoil’s Vice President Pavel Zhdanov announced that his company had also exhausted potential for production growth.
On November 19, Deputy Head of Gazprom Neft Alexei Yankevich said that the company will reach the limit of its production capacity by the end of the year.
Russian oil companies began experiencing problems in the summer, when OPEC+ approved a plan for a sharp increase in production, industry sources told Reuters.
By agreeing to cut production from historic highs to a 18-year low as soon as possible, Russia found itself in the most vulnerable position among other OPEC+ countries, Goldman Sachs commodity strategist Jeff Curry said last year.
“Old oil fields in the Russian Federation are about to be closed. If oil production at the old Soviet fields is stopped, it will be impossible to resume it,” he warned.
“The current circumstances will push Russian companies to freeze the least profitable wells and fields, but there are no guarantees that they can then be reopened later if needed. Part of the reserves may be lost,” Igor Yushkov, a leading expert at the National Energy Security Fund, agreed with Curry. “I think that mainly the Volga region and part of the fairly depleted fields of Western Siberia, will suffer,” he warned.
It will be really hard for Russia to increase production by 100 thousand barrels per day every month, but there are still opportunities to add 300-500 thousand barrels of daily production, said Dmitry Marinchenko from Fitch.
He points out that in this case it would be necessary to increase the volume of drilling. Simply reopening old oil wells will no longer be enough.
Russia is expected to produce 10,890 K bpd in November, up 47 K bpd from October. They will never again reach their pre covid average of about 11,300 K bpd.
The below chart includes the expected 47K bpd increase in November.
Oh, one more point. Dennis, you can remove Russia from your list of countries that will help keep peak oil in the future. Russia will contribute to the post-peak oil problem, not help prevent it.
Ron,
The comparison I make is with the previous world peak in Nov 2018 when Russia’s output was 11232 kb/d, in Oct 2021 Russia’s output was 10799 kb/d. Even if Russia does not reach it’s output level of Nov 2018, it is likely to be able to increase output above the Oct 2021 level over time. At higher oil prices Russia may surpass the Nov 2018 level of output. Note that the Russian 12 month centered average peak (over the 2013 to 2021 period) was in March 2019 at 11254 kb/d. Perhaps Russia will not return to that peak level, time will tell.
From
https://uawire.org/russia-failing-to-meet-opec-oil-production-quota
we have:
In Russia’s draft federal budget for 2022, the Finance Ministry projected full restoration of oil production to the pre-crisis level – about 550 million tons per year. But it will be impossible to keep it at this level for a long time. Russia’s oil industry has reached “the point of exhaustion of its natural potential,” and from 2027-29 “considering all scenarios, the current forecast is for a decline in oil production,” reads the draft general plan for the development of the oil industry for the period until 2035, which was prepared by the Russian Ministry of Energy of the Russian Federation.
Output of 550 million tonnes is about 11 Mb/d, the Russian Energy Ministry expects a plateau at that level from 2022 to 2027 with decline after that.
Output of 550 million tonnes is about 11 Mb/d, the Russian Energy Ministry expects a plateau at that level from 2022 to 2027 with decline after that.
Dennis, to expect Russian oil production to plateau at 11 mb/d for six years boggles the mind. The Volga fields and Western Siberia fields, 60% of Russian production, are heavily depleted and are entering a steep decline. And they are going to plateau at 11 million barrels per day… for six years?
Dennis, you know better than that. I know you do. Dennis, there is nothing with saying: “Hey, I think I was wrong about Russia’s ability to keep production so high for so long.” I think you would feel a lot better if you just did that.
Ron,
Talk to the Russian ministry of energy, supposedly they expect decline after 2027 and 550 million tonnes in 2022. Not my forecast, I assume the Russians know the potential of their resources.
I don’t know what future Russian output will be.
Some of my thinking is based on the paper linked below published in Sept 2019 by the Oxford Institute for Energy Studies entitled The Future of Russian Oil Production in the Short, Medium, and Long Term
https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/09/The-Future-of-Russian-Oil-Production-in-the-Short-Medium-and-Long-Term-Insight-57.pdf
The authors conclude with this (page 22):
Overall, then, it would seem that Russia does have the opportunity to meet the Russian Energy Minister’s target to keep oil output over 11 mb/d for the next decade. Indeed, if the country’s import substitution strategy is a success then it could even exceed the target, as there is little doubt that the resources are in place. A combination of performance enhancement at existing fields, exploitation of EOR techniques and hard-to-recover reserves, plus some efforts to maintain offshore oil output should be enough to meet the overall goal. Perhaps the more interesting question, though, is what could happen if sanctions are lifted. At that point, the potential of all these resources could be released rapidly, leading to a surge in output towards 12 mb/d or above.
Figure 18 is the last chart they show in the paper on page 22, see below.
They are expecting condensate to dramatically increase, hard to recover to more than double, and enhanced oil recovery to multiply by about 10 fold. And in all that time, 12 years, they expect conventional, that is all those tired old Volga and Western Siberian Fields, to go from about 9.5 million bpd to about 8.5 million bpd. And you think that is a realistic possibility?
Changing the subject, I have a bridge that runs from Manhattan to Brooklyn that I could let you have for about two grand. Let me know if you are interested. 😆
Addendum: Dennis, the old conventional fields in Russia are among the most depleted fields in the world. They are all way past their peak. That chart you posted has them declining by about 12% over 12 years. That’s an annual decline rate of 1% per year.
A 2009 article by:
Alex Burgansky: Russian Oil and Gas Industry Surprises Analysts
http://seekingalpha.com/article/163358-alex-burgansky-russian-oil-and-gas-industry-surprises-analysts
Russia is a very mature producer. If you exclude all the drilling activity taking place every year, then Russian organic decline in production is close to 19%. To compensate for that organic decline, Russia drills somewhere between 5,000 and 6,000 wells every year.
Most of those are infill wells in their old supergiants. But 19% per year? 😲
Ron,
I will defer to the experts on the Russian oil industry, these are not my projections.
US L48 onshore output less tight oil output declined at an average annual rate of 1.25% per year from 2000 to 2019. Those are some mature fields, much more so than the Russian fields. When oil prices were low from 1985 to 2000, US L48 onshore annual decline was higher at 3.8% per year. If oil prices are low we might see higher decline rates in the Russian conventional fields, at high prices they might increase their drilling rate and see lower decline rates.
Some people wonder why others are eager for electric transport rather than petrol based transport.
Sure there is the well known concern over all sorts of pollution and climate disruption associated with the petrol supply chain and combustion, but there is a much more personal factor that is generally not considered.
That is fact of how supply vulnerability, geopolitics, and oil depletion affects the fuel security for a person.
Everyone who goes to the pump knows that the oil comes from either very far away, or is owned by someone you don’t know and who may have very different interests than yours, or is supplied by a company/country that you can’t trust to operate in a way that has you in mind.
You are completely at the whim of factors far far beyond your (or your governments) control.
Putin, Imams, hurricanes, embargoes, failed states, depletion.
This applies whether you live in Indiana, Austria, Mumbai or Kyoto.
You have no idea if international trade will hold up, or if petrol will be affordable next year, or in 5.
Simply, the future of the petrol supply is very insecure, volatile, and perhaps unreliable. And increasingly so as we move into the post-peak period.
Alternatively, people are coming to realize that electrical supply can be different.
It can be local, such as right on your roof if you have a half sunny roof.
Or it can come from your local regional utility, and have stable pricing.
There is potential for stability that we have never had with petrol-
If the local/regional electrical production and distribution system is robust and well managed.
Emphasis on If.
“Helmerich’s warning follows similar commentary by America’s No. 2 provider of fracking pumps, Liberty Oilfield Services, which last month cited “serious” supply-chain issues that have boosted costs faster than they can be passed on.”
Today oil crashs again.
I think this is something technical from traders and hedge fonds. There has been the message they are gathered in big flocks on the “long as possible” side and now they are looking for the exit, all together.
There is still strong selling pressure.
If the emotion and reactive news dies down, brent has strong support at the 20-day monthly moving average @ around $67. Might be a bounce around that price around there as buyers come back.
If we see full blown lockdowns again etc, oil will drop sharply with stocks but tech stocks will still probably do well in that environment. And the Fed won’t have to worry about the inflation can.
The lower oil goes the more likely Ron is correct about peak oil having already occurred.
Shallow sand,
once there is more clarity on the new omicron variant oil prices may rise. I doubt this downturn in oil prices will last more than a month.
Hickory, your point about electricity supply being less vulnerable to foreign supply disruption than oil, does make some (limited) sense. But if you are talking about BEVs, that argument would appear to be rather weak when you account for all of the additional resources that need to be sourced in order to manufacture the BEV and its battery. And oil is storable to a degree. Electricity is not on any large scale. You could generate your own electricity using solar panels, if cost were no object to you. Then you would have to find wa way of dealing with supply disruptions of a different kind. You could also grow biomass and make your own methanol or biogas.
The problem with the BEV idea is that it can only increase the baseline costs of motoring. Regardless of how it is powered, it takes the same amount of work energy to push a car against friction and air resistance. And of course, all else being equal, a BEV will be heavier due to the poorer energy density of its batteries. The argument in favour of electricity being cheaper in this application is basically saying that a unit of electrical work energy is cheaper than a unit of gasoline or diesel work energy. Sometimes at the consumer level, they do appear to be close to even. But only because liquid fuels are heavily taxed and electricity is not. If BEVs ever achieve high market penetration, how long will it be before governments everywhere start taxing electricity used on the road?
Absent the effects of subsidy and taxation, a BEV of similar range will have 3x the capital cost of an ICEV and twice the fuel energy cost. If oil prices really go crazy, then we could reach a temporary parity, though high oil prices usually increase electricity prices, partly due to more expensive natural gas and partly due to the general inflation trend that results. And it doesn’t last long before it pushes the economy into recession.
How likely is it, that in the dramatically poorer world of the future, people that cannot now afford a BEV will suddenly be able to afford one? If EVs are the future, then past experience suggests they will run on rails without any need for batteries. Those types of EV have been the work horses of public transportation for a century. Power doesn’t come from batteries in that case, but from a catenary or third rail.
Tony, there a number of points you raise that I see differently than you, but i will address just one here-
“The problem with the BEV idea is that it can only increase the baseline costs of motoring.”
Keep in mind that the baseline cost of transport with petrol based ICE is going to escalate rapidly in the era of peak oil. EV’s will blunt that trend to the degree that they are deployed and to the degree that electricity generation is prioritized.
In some places the cost of transport will be dropping considerably.
As I mentioned above, my wife has an AWD midsize EV that costs less than $10 for 300 mile charge at home
[more accurately it is right about $8.60 with our fixed rate electric here].
Regardless of the details, it sure beats just sticking with depleting oil and what will become an increasingly precarious fuel to be reliant on.
>Regardless of how it is powered, it takes the same amount of work energy to push a car against friction and air resistance.
But combustion engine vehicles mostly produce heat, not mechanical energy. From an energy point of view, they are heaters on wheels, and pushing through the air is a side show.
>Absent the effects of subsidy and taxation, a BEV of similar range will have 3x the capital cost of an ICEV and twice the fuel energy cost.
VW expects EV production to be 40% less effort than ICE production. We’ll see. china is now the center of the world’s car industry, and they are producing very low priced EVs these days.
You are quite mistaken if you think oil is cheap compared to electricity. Oil is about the most expensive form of energy around, and can only compete in niche markets ( like islands or emergency generators) against others fuels. It is primarily used as a method of storing energy in a moving vehicle, which is why the advent of better battery technology challenges its position.
Released today is KPMG’s 22nd annual Global Automotive Executive Survey
‘More than 1,100 executives in 31 countries expect to see a sweeping transformation of the sector in the next 5 to 10 years’
results including
-Seventy-three percent of respondents expect that EVs will reach cost parity with internal combustion engines by 2030.
-executives expect 52% of new vehicle sales to be all-electric by 2030.
EVs will reach cost parity with internal combustion engines by 2030.
They’re talking about purchase price parity. EV’s have already reached Total Cost of Ownership parity, due to their much lower costs to fuel and maintain.
>Regardless of how it is powered, it takes the same amount of work energy to push a car against friction and air resistance.
Alimbiquated, you’ve made very good points. But, it’s confusing for readers if we don’t also clarify when an argument is presenting false premises. This argument is false.
ICe vehicles waste half their energy accelerating and then friction braking. Hybrids and EVs recover most of the energy of acceleration by using little friction braking, and instead mostly using regenerative braking (this also makes brakes last 3x as long).
Air resistance is also less in EVs, as they are designed to be much more aerodynamic.
That’s why the Prius can get 55MPG even with no plug (vs the US fleet average of 23MPG).
TonyH: “How likely is it, that in the dramatically poorer world of the future, people that cannot now afford a BEV will suddenly be able to afford one? ”
They won’t, but they may be able to afford one much scaled down in size and luxury.
The biggest mistake in forecasting the future is thinking it is just an extrapolation of the present. I don’t need a 3,000#, $50k vehicle to get my 200# corpus from here to there. A small simple EV will save thousands in parts and complexity.
Just my thought.
Affordability of EVs is not a problem. There are plenty of EVs for sale for less than $45k, the average price of new vehicles:
“We’re well into 2021, and last month new car prices hit their sixth record price in a row. In September, the average new car cost $45,031 — the first time this figure crossed over the $45,000 in history, according to the latest data from Kelley Blue Book and Cox Automotive on Tuesday.”
https://www.cnet.com/roadshow/news/average-new-car-costs-price-increase/#:~:text=We're%20well%20into%202021,and%20Cox%20Automotive%20on%20Tuesday.
About this, there is, in France, at least one corporation proposing to convert thermic vehicles with an electric motorization. But the result is that the vehicle (”urban” car type like clio, twingo…) has its speed reduced to 110 km/h and the autonomy is about 100 km. Some are promising this for 5000 euros.
There will be a new post out, possibly late tonight on US Output.
A new string, US oil production has been posted.
https://peakoilbarrel.com/hurricane-ida-collapses-us-september-oil-production/
A new string, Open Thread Non – Petroleum has been posted.
https://peakoilbarrel.com/open-thread-non-petroleum-december-1/