How much does today's $50 oil have to do with lowest dollar since 2018 ?

[Roch + 537]

The Quant shops and the Algorithms still affect the price of oil .  Can't teach old dogs new tricks.  It will change.  When ? 

The outlook for a dollar rebound in the near term are slim.

So will the Hedge Funds continue their long position for now ?  Or will certain other variables change that ?

 

Edited January 4, 2021 by Roch

[Gerry Maddoux + 3,627]

Roch, your brief tease is very astute. There is no way I can compact a response, but here goes with my particular thoughts. ORO will be able to give you a concise rendering, as would the erstwhile Mr. Van Eck. 

Oil is the "Anti-Dollar," and it's going to be very hard for the dollar to gain strength when it is being actively printed in warlike fashion. It has been estimated that the pandemic took $280B out of the velocity of the U.S. dollar, in American commerce. That was counteracted with a $4.5T stimulus. This has created the Mother of All Bubbles in equities of every stripe except fossil fuels and ICE engines and anything to do with the supply chain of this industry. The Fed now has $7.2T on its balance sheet. And the two largest central banks are still buying $300B/month in bonds. This is one heck of a monetary experiment! 

The dollar is currently being debased in value at a faster rate than at any time in history, including the period just following WWII. Only now, interest rates are at zero. In such a situation, any logical person would assume that inflation would run away, but inflation is related more to the velocity of money than the quantity of money, so with most Americans saving more (from fear) and spending less and also borrowing less, all this printed money has yet to inflate anything . . . . . except the stock market and the real estate market in residential housing. Gold, for example, the ultimate marker of inflation and devaluation of the dollar, has actually had a rather paltry run (barely 20% Y/Y). On the other hand, Bitcoin has enjoyed an enormous run.

It is no accident that this obvious distortion has taken place at this particular time, or that the EV/Solar/Wind/Lithium stocks have all risen in lockstep with Bitcoin--to the exclusion of anything oil and gas, or, to a lesser extent, gold. This market reflects the socioeconomic norm of the younger set, particularly those who have completely bought into climate change precipitated exclusively by fossil fuels, and that includes virtually all of Wall Street and institutional bankers (by fiat).

On the flip side, paradoxically, remains the fact that the almost total pause in exploration and development of large fossil fuel projects that began in 2015 has persisted, creating the greatest drought in E&P since the forties. It is now about a $1.5-2T deficit. Everyone seems to think this massive glut we suffered through will be with us forever: BP even declared "Peak Oil," -- -- -- demand, not supply. This is, of course, nuts! Unless civilization stops in its tracks. 

Just as no one suspected a pandemic on the horizon this time last year, something is lurking out there. But what? War in the Middle East? After all, the Israeli-Arab State Coalition that Trump began has been put on hold; the crown prince of KSA abruptly cancelled his sojourn to Tel Aviv as soon as the election #'s came in. Or will it be an earthquake in California? They're overdue. More likely, not to pick on the Golden State too much, would be a massive energy deficit resulting in large mortality: they've canceled scads of NG-fired utility plants before the Solar/Wind/Lithium energy flow-through system has been adequately tested. Something will happen! Another Black Swan? Or just a swan?

No matter, with this bloated money supply but nowhere to go, along with a ridiculously overpriced stock market and a moon shot on the Bitcoin and renewables, with all the changes in the quest for global hegemony unleashed by this virus, big changes are coming. At this point, anyone other than Rip Van Winkle could see that you just put all your money in EV's and solar/wind, sprinkling a bit in royalty streaming in Li, Ni, Co markets, and wait for it to quadruple, and from there who knows where it will go--the general consensus is to the sky.

And it might--but those equities have already appreciated anywhere from 400% to 4000%. Therefore, it would seem that at some point there will have to be a Big Reset whereby oil and gas, the dollar, gold, equities, real estate, and just about everything else will have to be repriced according to risk and value. If we (the U.S.) keep de-basing the dollar, we stand the risk of losing the status of reserve currency--especially with the parabolic rise and acceptance of all these cryptocurrencies. Be that as it may, the Anti-Dollar, the price of oil should move up, just from the power of the equation. As the global market rebalances, oil should assume a more respectable position. 

In a normal world. But we left that station some time ago.

[Roch + 537]

20 hours ago, Gerry Maddoux said:

Roch, your brief tease is very astute. There is no way I can compact a response, but here goes with my particular thoughts. ORO will be able to give you a concise rendering, as would the erstwhile Mr. Van Eck. 

Oil is the "Anti-Dollar," and it's going to be very hard for the dollar to gain strength when it is being actively printed in warlike fashion. It has been estimated that the pandemic took $280B out of the velocity of the U.S. dollar, in American commerce. That was counteracted with a $4.5T stimulus. This has created the Mother of All Bubbles in equities of every stripe except fossil fuels and ICE engines and anything to do with the supply chain of this industry. The Fed now has $7.2T on its balance sheet. And the two largest central banks are still buying $300B/month in bonds. This is one heck of a monetary experiment! 

The dollar is currently being debased in value at a faster rate than at any time in history, including the period just following WWII. Only now, interest rates are at zero. In such a situation, any logical person would assume that inflation would run away, but inflation is related more to the velocity of money than the quantity of money, so with most Americans saving more (from fear) and spending less and also borrowing less, all this printed money has yet to inflate anything . . . . . except the stock market and the real estate market in residential housing. Gold, for example, the ultimate marker of inflation and devaluation of the dollar, has actually had a rather paltry run (barely 20% Y/Y). On the other hand, Bitcoin has enjoyed an enormous run.

It is no accident that this obvious distortion has taken place at this particular time, or that the EV/Solar/Wind/Lithium stocks have all risen in lockstep with Bitcoin--to the exclusion of anything oil and gas, or, to a lesser extent, gold. This market reflects the socioeconomic norm of the younger set, particularly those who have completely bought into climate change precipitated exclusively by fossil fuels, and that includes virtually all of Wall Street and institutional bankers (by fiat).

On the flip side, paradoxically, remains the fact that the almost total pause in exploration and development of large fossil fuel projects that began in 2015 has persisted, creating the greatest drought in E&P since the forties. It is now about a $1.5-2T deficit. Everyone seems to think this massive glut we suffered through will be with us forever: BP even declared "Peak Oil," -- -- -- demand, not supply. This is, of course, nuts! Unless civilization stops in its tracks. 

Just as no one suspected a pandemic on the horizon this time last year, something is lurking out there. But what? War in the Middle East? After all, the Israeli-Arab State Coalition that Trump began has been put on hold; the crown prince of KSA abruptly cancelled his sojourn to Tel Aviv as soon as the election #'s came in. Or will it be an earthquake in California? They're overdue. More likely, not to pick on the Golden State too much, would be a massive energy deficit resulting in large mortality: they've canceled scads of NG-fired utility plants before the Solar/Wind/Lithium energy flow-through system has been adequately tested. Something will happen! Another Black Swan? Or just a swan?

No matter, with this bloated money supply but nowhere to go, along with a ridiculously overpriced stock market and a moon shot on the Bitcoin and renewables, with all the changes in the quest for global hegemony unleashed by this virus, big changes are coming. At this point, anyone other than Rip Van Winkle could see that you just put all your money in EV's and solar/wind, sprinkling a bit in royalty streaming in Li, Ni, Co markets, and wait for it to quadruple, and from there who knows where it will go--the general consensus is to the sky.

And it might--but those equities have already appreciated anywhere from 400% to 4000%. Therefore, it would seem that at some point there will have to be a Big Reset whereby oil and gas, the dollar, gold, equities, real estate, and just about everything else will have to be repriced according to risk and value. If we (the U.S.) keep de-basing the dollar, we stand the risk of losing the status of reserve currency--especially with the parabolic rise and acceptance of all these cryptocurrencies. Be that as it may, the Anti-Dollar, the price of oil should move up, just from the power of the equation. As the global market rebalances, oil should assume a more respectable position. 

In a normal world. But we left that station some time ago.

Good response !

Who needs ORO or Van Eck when we have GM. 

My main point being recent Brent move over $50 is due mainly to greenback drop even though that is but one variable. 

I have some thoughts on the other variables (some of which you mentioned) but am still analyzing the weighting that should be given each.  

The saying used to be its time to sell when the market growth is in the headlines of the newspapers. People don't read newspapers anymore.  However , I've recently heard people that have no understanding of financial markets saying "You have to buy Bitcoin" .  So maybe that's due for a pullback. But then again maybe Bitcoin is the new International currency.  

I'll be back when I complete my valuation. 

 

 

Edited January 3, 2021 by Roch

[Rob Kramer + 696]

So in essence your saying A) oil has to go up if the stimulus keeps coming. And B) therefor 50$ is the new 40$ so whatever the proper value of oil expect 20%-25% higher?

[Gerry Maddoux + 3,627]

^

Yes.

And then, at some point, I think we'll have a supply squeeze. 

[Gerry Maddoux + 3,627]

1 hour ago, Roch said:

I'll be back when I complete my valuation. 

Good!

I'll be particularly interested in your analysis of the old anti-dollar theory of oil, especially in today's changing world. 

And Bitcoin, too. For the record I think Bitcoin is going to reach for the sky--for a while. However, it's as much a fiat currency as the dollar. It's true that they say the amount will be fixed and limited, so that puts it apart from the dollar, but then again there are new cryptocurrencies coming out almost daily. The Bitcoin miners got rich and the early believers did well, so at this point is this a Tesla currency or pie in the sky?

[Tomasz + 1,608]

The previous printing after the 2008 crisis pushed up the prices of all commodities for several years, reaching record levels in some cases until 2014.

So the correlation between the printing of the dollar and the rise in the price of most commodities is, in my opinion, simply empirically demonstrated after the previous crisis.

In the current situation, I do not expect anything else, which seems to have been confirmed by the largest speculative bank Goldman Sachs, predicting an increase in almost all raw materials, except for wheat, by 2025.

[Tom Nolan + 2,441]

This is a good Thread.

[Tomasz + 1,608]

We can also look on natural gas prices from oilprice.com

Current NG spot price

Europe TTF 6,83

Asia Japan/South Korea 12,80 - 468 $ per 1.000 m3

 

I really dont remember such high LNG prices in Asia from the begining of shale gas revolution about decade ago 

What is the reason for such high prices at the end of 2020 when 6 months ago we had TTF below 2 $ per mmbtu or even about 1 $ per mbbtu

We are in structural bear LNG market and suddenly we have LNG prices in Asia nearly 500 $ per 1.000 m3?

Maybe thats another example of inflanationary efect of helicopter money on commodities prices?

Edited January 3, 2021 by Tomasz

[Gerry Maddoux + 3,627]

1 minute ago, Tomasz said:

We are in structural bear LNG market and suddenly we have LNG prices in Asia nearly 500 $ per 1.000 m3?

Maybe thats another example of inflanationary efect of helicopter money on commodities prices?

Probably. It has been wondered why, with all this money printing, that we don't have inflation. And then an economist said, why, we do have inflation, in equities--the money never left the bank, so to speak. 

If that's the case, the next place for that to leak to is commodities. There should be a particularly strong streak in copper, cobalt and nickel for the lithium batteries. And of course, the overlooked fossil fuels. 

With the spike in EV's, there is going to be a strong bull market in electricity, which should double in demand over the next several months. No matter what the tell you, the bulk of that still comes from NG-fired utility plants. 

[Roch + 537]

15 hours ago, Tomasz said:

 

In the current situation, I do not expect anything else, which seems to have been confirmed by the largest speculative bank Goldman Sachs, predicting an increase in almost all raw materials, except for wheat, by 2025.

Goldman analyst are bias.  The analyst's multi-million dollar year end bonus is based on the amount of investment banking business they bring in.  

It has nothing to do with how accurately they guess the oil price 12 months from now.  

And it is just a guess.

 

Edited January 3, 2021 by Roch

[Roch + 537]

On 1/2/2021 at 7:10 PM, Gerry Maddoux said:

Probably. It has been wondered why, with all this money printing, that we don't have inflation. And then an economist said, why, we do have inflation, in equities--the money never left the bank, so to speak. 

If that's the case, the next place for that to leak to is commodities. There should be a particularly strong streak in copper, cobalt and nickel for the lithium batteries. And of course, the overlooked fossil fuels. 

With the spike in EV's, there is going to be a strong bull market in electricity, which should double in demand over the next several months. No matter what the tell you, the bulk of that still comes from NG-fired utility plants. 

There are funds that still trade on Algorithms that factor anti-dollar.  That won't change for a while. I believe it is a reason for TODAYS $50+ bbl. 

As I said the dollar is but one variable. For example Oil traders still trade on the weekly U.S. inventory number, with complete disregard to gasoline/distillate production, use and inventory or exports or imports.  Makes no sense but it moves markets for now. 

It used to be whereby Saudi Arabia increasing or decreasing production by only 1 million bbl could control the market.  Not so after shale. 

There are many green technologies wind, solar, hydrogen, etc.  The one that you need to watch that will affect oil price is mainly Electric Vehicles uptake.

Last year Conoco CEO Ryan Lance said EVs will not change oil demand until post 2050.  He probably won't admit that he said that now. 

It's all about the uptake of electric vehicles.  When does buying an EV become an economic decision, not a luxury purchase decision.  Once the market gets competitive you will see the switch flip.  Buying "old" tech ICE vehicle will be considered foolish.  

The oil bulls believe after the pandemic that the demand will go back to 100 mm bbl/day and grow 1 mm bbl a year for 10 to 15 years. 

I think the EV inflection point will happen between 2023 to 2025.  There will be hundreds of models available, price of batteries will drop another 25% to 30% (Battery #1 cost of EV) . 

As for charging stations ? People will install a charging station in their garage.  Today it costs between $1000 to $1200.  Approx 80% of driving is within 25 miles of home. The rest of the charging infrastructure will be built out over time.  

You don't have to replace all ICE vehicles to reduce the price of a bbl of oil.  Would 3% EVs (3 mm bbl/day) hurt oil prices.  Maybe 5% (5 mm bbl/day).  Less than 10% easily.

$ Trillions will be spent by EU , U.S. and Asia for pandemic economic recovery and a very healthy % will be applied to green research, green infrastructure projects, investment and tax credits.  $Trillions. 

Besides all the cash poured into green initiatives you will see legislation forcing the transition . Metro bus service , taxis (Uber), delivery vans (Amazon, UPS , Postal Service, FedEx, etc) , State and Federal vehicles, will all be legislated to go electric.  States will increase gasoline taxes substantially (the new "sin" tax) and so much more.  

Any squeeze on supply will be very short lived. I see it happening at the turning point post pandemic and between a huge demand increases as people make up for pent up travel ,vacations and get out of the house demand and before the inflection point of EV uptake.  Probably, end of 2021 thru to beginning of 2023.

Remember, as of today the U.S. is reportedly down 2 mm bbl/day and OPEC+ about 7 mm bbl/day. If you believe these numbers that 9% of pre pandemic volume.  And oil is now trading at pre-pandemic prices even though they have cut back production 9% ?  

Every single OPEC member wants to increase production over pre pandemic levels.  Many substantially.  

Iraq, Iran, Libya, Guyana, Brazil , etc want to at minimum double oil production. 

The need for Trillions of dollars for oil development/discovery to meet future demand is a canard.  It's promoted by OPEC to justify charging their desired $70 bbl or to justify a world cooperation for fixed price for oil.  Not gonna happen.  Too late.  The dye is cast.

Remember I believe as little as 3% of EV vehicles on the Road can hurt oil prices. What happens at 10% EVs ? 20% EVs ?

Will be interesting to watch how individual Auto companies make the transition.  It will be very costly.  Companies like Tesla, Rivian , others have different patented technology.  Like most technology the software /Algorithms that run the car systems , the electric motors had a very high development cost.  May take a while to standardize or for an OEM market to develop.  You can be assured as always when the technology matures the price drops substantially.  Keep an eye on RIVIAN.  They are the one Tesla is worried about.  They have been secretly developing their platform at their skunk works in Michigan.  They will be shipping their EV pickups and SUVs layer this year.  

Re Natural Gas.  You say a majority of electric utilities use natural gas. In the U.S. true.  Europe is transitioning. A majority of China is Coal and they are still building Coal powered power plants at a good clip.  

China has to ration electricity in some regions as a result of trade dispute with Australia and their boycott of their thermal coal.

As for future electric I'm hopeful for Fusion Nuclear.  There are current  12 projects that I know of at this time.  Most are very protective of their technology and progress, except for Commonwealth Fusion out of MIT.  Their angle is the advanced superconductor magnets developed at MIT.  They should have a prototype built in 5 years , a compact (size of a tennis court) reactor built my 2030 with commercial production before 2035.  IF it goes as planned. On paper looks great, but nobody knows.  It always seems to take longer then originally planned.  If their or others fusion becomes commercially available unlimited anywhere inexpensive clean electric power for all. 

 

 

Edited January 11, 2021 by Roch

[Gerry Maddoux + 3,627]

45 minutes ago, Roch said:

I think the EV inflection point will happen 2023 to 2025.  There will be hundreds of models available, price of batteries will drop another 25% to 30% (Battery #1 cost of EV) . 

Well, maybe. Everyone was hung up on lithium. Now, with "Lithium Alley," that's no longer a concern. 

The chokepoint for battery production may well be copper, cobalt and nickel. Cobalt--frequently a blood rare earth mineral--is being phased out but nickel is the hangup now, no matter how you design the battery. Nickel for battery use has to undergo smeltering, and that releases lots of sulfur oxide--the seed of acid rain. 

It sounds easy. However, when you get closer to that inflection point, the cost of Cu, Co and Ni are going up in a major way. QuantumScope may or may not have a breakthrough with the solid-state battery. 

Additionally, not to be a naysayer because I believe your post to be accurate, but this is not all going to be smooth-sailing. There will be another Black Swan somewhere. And the Saudi fields are requiring more water-flooding every day, not to mention that the North Sea Field has petered out. It's possible that we strike a pretty good balance sometime about two years from now with supply=demand. 

[Rob Kramer + 696]

7 hours ago, Gerry Maddoux said:

Well, maybe. Everyone was hung up on lithium. Now, with "Lithium Alley," that's no longer a concern. 

The chokepoint for battery production may well be copper, cobalt and nickel. Cobalt--frequently a blood rare earth mineral--is being phased out but nickel is the hangup now, no matter how you design the battery. Nickel for battery use has to undergo smeltering, and that releases lots of sulfur oxide--the seed of acid rain. 

It sounds easy. However, when you get closer to that inflection point, the cost of Cu, Co and Ni are going up in a major way. QuantumScope may or may not have a breakthrough with the solid-state battery. 

Additionally, not to be a naysayer because I believe your post to be accurate, but this is not all going to be smooth-sailing. There will be another Black Swan somewhere. And the Saudi fields are requiring more water-flooding every day, not to mention that the North Sea Field has petered out. It's possible that we strike a pretty good balance sometime about two years from now with supply=demand. 

I'm with you.  If we remember earlier the new money has made the price oil will be 20% higher ... in 2 years whats fair price at balanced market? 70$brent? Now x1.2=84 $ and thats on the conservative side. I'm thinking 100$.  But you can calculate the EV sales and figure 7L/day 160L/barrel . So takes alot of vehicles to make a dent. Shale lost 2.1mm (million) barrels this year so how many EV is afforded there ? Or is this an exchange for Iran oil. Not like we had 2.1mm decline from demand via cars in USA. Don't forget colombian oil is 15% lower production.  Peru just stated they'll restart the ONP pipeline in the week coming.  Mexico has had some decline same with Canada . Everyone cut growth to near zero. So let's be real that production globally will be flat at best from 2019 as 2020 is down decline,hurricanes and opec + cuts.

My final statement is population growth and vehicle sales growth. Look at total vehicles over the last 15 years say . And population that takes energy . Going forward this is big demand in itself . Long oil 😆.  But i dont doubt sin tax and EV sales. 

[Gerry Maddoux + 3,627]

^ Good points.

If the multiple vaccines work as expected, the recovery in air, maritime and land travel is going to go absolutely parabolic. Everyone has his/her dream destination point. With all the talk, for example, I'm becoming more interested in visiting Taiwan, the Republic of China. 

Population growth is going to be absurdly high: <40, you had to do something during lockdown. 😉

One out of every four dollars in circulation was created in the mean year 2020. I believe $100 Brent will be a massive bargain in a newly inflated world that is once again spinning on its axis.

It took the world one-million years at just the right pressure and heat (about the same as a good cup of coffee) to make oil. Too low a temp/pr and you have kerogen--teenage oil--and too high and it's cooked. That's about as strongly as one could define a "precious commodity." 

When I sit and dream and imagine a world powered by solar/wind/hydrogen/nuclear, I see hundreds of millions of cars, planes, ships that were constructed with that energy source in mind, and a wasteland of dug-up land looking for lithium and nickel and cobalt, and then filled in with debris. There will be collateral damage in that Green New Deal enterprise. 

But surprise of surprises, the world doesn't care: it is on an unalterable climate change cycle. When you read John McPhee's wonderful tome, Annals of the Former World, the world has done this before. In fact, there are about 54 massive climate changes written into geology, and they all occurred without a single exhaust pipe spewing out carbon. So to me, the biggest surprise of the new decade is that all this change in the energy business is going to be good for Elon Musk, Mr. Li in China, and all the solar/wind advocates, but likely won't make a calculable difference in seasonal ambient temperatures and the violence of storms. 

Still, the thing that hits me the hardest is that there are all sorts of imponderables out there. Not all of them will happen but one or some of them probably will. It's easiest to pick on California so I'll use it for my illustration: The Hayward Fault runs from just off the coast directly through downtown San Francisco and precisely bisects Memorial Stadium. In fact, if a player took a punt on the five-yard-line and ran it back for a touchdown, he would have run through 400-million years of geologic history. The suture line where the Pacific Plate hit the North American Plate is almost precisely at the fifty-yard-line. Just south of the city of Hayward, that suture line runs tangentially into the north-south running San Adreas Fault Line, and then spiderwebs all across the southern half of the state. Not only that but the Monterey Canyon--three to four miles deep--runs north and south just ten miles off the coast of the Monterey Peninsula, underneath the proposed site of offshore wind. The giant plan is to harvest that wind and funnel it into the lithium battery complex at Moss Landing, just north of Monterey, and also funnel the wind from giant wind farms in the Central Valley into the same battery dump. The stored energy will then be emitted as electricity for the Bay Area Grid. On the wind side one has the potential for a massive tsunami if a lip of the canyon comes loose and on the wind side is always the potential for a very large earthquake. Since the large Moss Landing natural gas utility plant will be decommissioned at the same time the new experiment is going in, it is pretty easy to imagine an energy catastrophe of biblical proportions. 

These same geological mysteries are present in variable forms throughout the world. This hasn't even addressed various geopolitical conundrums that have built up equal pressure around the planet--particularly in the Middle East. Nor has it addressed food-shortages and the necessary new disease states that go along with massive overcrowding. I'm not pulling for it and I'm certainly no Nostradamus, but something big is going to happen. 

[Roch + 537]

On 1/3/2021 at 11:10 AM, Gerry Maddoux said:

^ mysteries are present in variable forms throughout the world. This hasn't even addressed various geopolitical conundrums that have built up equal pressure around the planet--particularly in the Middle East. Nor has it addressed food-shortages and the necessary new disease states that go along with massive overcrowding.

 

 

 I'm not pulling for it and I'm certainly no Nostradamus, but something big is going to happen. 

We just had a really BIG disaster in 2020.  We're not due for another for a while.

    _______________________________

You still dreaming of $100 bbl oil ? 

J.P. Morgan is projecting $100+ bbl oil.  But they have to if they want the Investment Banking business. 

Edited January 11, 2021 by Roch

[Gerry Maddoux + 3,627]

1 hour ago, Roch said:

You still dreaming of $100 bbl oil ? 

J.P. Morgan is projecting $100+ bbl oil.  But they have to if they want the Investment Banking business

What's your excuse ? 😉

HaHa, yes I am. My excuse is that I'm 76 years old and watched the very first deep well gush out of control in Beckham County Oklahoma in 1951. As a seven-year-old boy I walked around my grandfather's porch examining drill bores, he coaching me--Mississipian, Permian, etc.--until I could identify all the geologic zones by their composition, weight, color and so forth. Then I watched him turn down an enormous sum of money only to watch his well go from a gusher to a whimper. During all that, his mantra still was don't sell the mineral rights. 

I have since watched many booms and busts. I methodically read M. King Hubbert's thesis on "peak oil" in 1972, then followed Mathew Simmonds for years, reading his great 2005 book Twilight in the Desert, again on peak oil. Finally, I have long admired Kenneth Deffeyes, an oilfield brat who grew up to become one of the world's foremost geologists. His first book, also in 2005, was Hubbert's Peak. 

All of those failed prophesies have served me better than might be expected. For example, Mr. Simmonds was an absolute genius in the oilfield history of Saudi Arabia, and also the potential failing of its reservoirs. We have been told so many times that the Saudi reserves are drying up, only to see them spike production, that we no longer even pay much attention. However, it is a well-known fact that the Saudis are waterflooding their reservoirs with more copious amounts of seawater in order to maintain production. It wouldn't seem that this can go on forever . . . and for a simple reason. 

The connate water that was trapped within their Aramco and Alkhafji sandstone formations is unbelievably salty. Some of the guys who occasionally write on this forum would know for sure but it used to be thought that in order to avoid formation damage, brine >20% had to be injected. That's because the connate water possesses something like 230,000 ppm. Seawater, which they're stuck with as an injectate, only possesses 38,000 ppm. I'm sure they're monitoring their valuable formations as closely as they can, but I would guess that a tremendous amount of formation damage has been incurred by waterflooding with massive quantities of much less briny seawater than connate. 

Actually, the only reason we didn't reach the peak oil that M. King Hubbert and Matt Simmons worried about was . . . shale oil. Shale oil represents about the end of the spectrum of "findable" oil. Were it not for shale oil, we would have been looking at $200 oil prior to the pandemic. 

As it is, we're ending the oil epoch. At some point oil supply will tighten up. The renewables people are riding high right now, and for good reason, but just how comfortable are they that they can actually deliver the goods for a 100% renewables energy world? And when we get through the oil epoch, we'll be a totally different people. As M. King Hubbert wrote in his preface in 1972, "It is difficult for people living now, who have become accustomed to the steady exponential growth in the consumption of energy from the fossil fuels, to realize how transitory the fossil fuel epoch will eventually prove to be when it is viewed over a larger span of human history."

That pretty well says it all: his was a cautionary note, and one that has been thoroughly ignored and is now being hopelessly trashed. But be careful what you wish for was never more in vogue. This oil and gas epoch sparked gargantuan leaps in the methods and lifestyles of humankind. 

Yes, I believe we'll see $100 oil again. We would have seen it long ago had it not been that the shale oil is uniformly accompanied by massive quantities of natural gas that have to be dealt with before the oil can be moved. Most modern offshore finds--Guyana, for example--are gassy as well. I have no idea what is to come, but in order to keep living I have to speculate, and my bet is that we will indeed see $100 oil again. The above explanation may be weak but it is my only "excuse."

I am so silly in my dotage that I even think we'll see $100 oil in the not-so-distant future. Maybe 2022? HaHa. 

[Tom Nolan + 2,441]

19 hours ago, Gerry Maddoux said:

However, when you get closer to that inflection point, the cost of Cu, Co and Ni are going up in a major way.

Mining is energy intensive and a major operating cost.   Oil and gas are the major sources of energy for this sector.   This momentum towards "green energy" sure is going to take a lot of fossil fuel energy.

[Roch + 537]

On 1/2/2021 at 8:39 PM, Gerry Maddoux said:

 

 

Quote

Additionally, not to be a naysayer because I believe your post to be accurate, but this is not all going to be smooth-sailing. There will be another Black Swan somewhere. And the Saudi fields are requiring more water-flooding every day, not to mention that the North Sea Field has petered out. It's possible that we strike a pretty good balance sometime about two years from now with supply=demand. 

Gingrich prediction for the next 10 years.

I believe we will see more change in the next 10 years then we have in the last 50 years combined.

What were once black swans could become commonplace.  

Kinda sound like Newt thinks the Chinese have already won. 

https://www.foxnews.com/opinion/future-predictions-for-2020s-newt-gingrich

Edited January 4, 2021 by Roch

[Gerry Maddoux + 3,627]

^

Newt has always been the smartest man in the room. He sees something big happening here: robotics and artificial intelligence. This new revolution will utterly destroy the American way of life. Taxis, Ubers, long-haul drivers will all ultimately be displaced. In the oilfield, computers and robotic operations are quickly displacing workers. My daughter is a white-collar defense attorney, but is she better at picking up mistakes and important clues in a 200-page legal document than a machine? My work was as an interventional cardiologist, but it's nerve-wracking to open coronary arteries in a dying patient, though a robot wouldn't worry about his emotions or the stress of the matter. In short, the next decade is going to witness displacement of millions of Americans. 

China is prelude to this. China is like 1.35M energizer bunnies with no off switch. The Chinese learn how to do something very well, and then can't seem to stop themselves from doing it to excess. There are many quite nice see-through apartment and office buildings in China. Their trains are redundant. Their infrastructure is overbuilt. They're going to build the living crap out of the NIO and the Li Auto.

What are all of these displaced people going to do? Self-esteem is directly proportional to productivity and usefulness. And no matter working remotely this year, people intrinsically seek out other people . . . for advice, to share knowledge, to form a bond. Without meaningful work, what is life? People who are displaced turn to criminal and other nefarious activities. 

Old Newt sees all of this coming. All the renewables plants are going to be built on the format of the Tesla and Apple plants, because every company wants to be Tesla or Apple. They have robots, so the renewables plants will have robots. 

So, Newt asks, what happens when we have a planetary work force of 10B with only 10% of them working? And when the master of the robots--say Elon Musk--is worth $100B but many people in the world are living on handouts? This is the giant push behind basic income theory: the folks who got very, very rich at a young age have immense guilt about the others. 

This has all happened way too fast, and 2020 telescoped a decade into a year, it seems. Now they say renewables are coming on so strong that in three or four years we'll be at an "inflection point" whereby renewables are cheaper than fossil fuel derivatives. And this, they say, will prevent us from superheating our planet and clouding it in so much greenhouse gas that the weather changes. Well, I have news for them: the weather has been changing dramatically for hundreds of millions of years. The equator has shifted as the poles swapped around. Methane mounds in the GOM spew out millions of tons of methane gas each year and have been doing it for millions of years. So have the methane mounds in the Arctic Ice Circle. 

This is going to be a challenging decade, no matter Black Swans. It sure looks like we're going to be running this giant experiment with renewables, AI, robots, and the like. It's going to be the Decade of Electricity for sure, as something has to provide enough reliable electricity to recharge all these things. But it certainly looks like it might become the Decade of Unemployment too. Mr. Biden's promise of unemployment in the age of buildout of renewables is pie in the sky: robots and automation are going to be building solar panels and windmills and we've already disposed of the driving set. In that context, it's hard to imagine a decade without war, isn't it?

[Dan Warnick + 6,100]

1 hour ago, Gerry Maddoux said:

What are all of these displaced people going to do? Self-esteem is directly proportional to productivity and usefulness. And no matter working remotely this year, people intrinsically seek out other people . . . for advice, to share knowledge, to form a bond. Without meaningful work, what is life? People who are displaced turn to criminal and other nefarious activities. 

Old Newt sees all of this coming. All the renewables plants are going to be built on the format of the Tesla and Apple plants, because every company wants to be Tesla or Apple. They have robots, so the renewables plants will have robots. 

So, Newt asks, what happens when we have a planetary work force of 10B with only 10% of them working? And when the master of the robots--say Elon Musk--is worth $100B but many people in the world are living on handouts? This is the giant push behind basic income theory: the folks who got very, very rich at a young age have immense guilt about the others. 

This has all happened way too fast, and 2020 telescoped a decade into a year, it seems. Now they say renewable

I have been concerned about this for some years.  What parent with any foresight, or just observational skills about the industries affecting their own lives over the last decade, could not?

As it has become more and more difficult for our own generation to maintain long term gainful employment, we see what the future holds for coming generations and it is not encouraging.  We know why the Davos crowd want to drastically reduce the world population, and it IS NOT because of peak oil or any other cheap and easy excuse; it is because they know what you say is going to be true: 9 out of 10 people that are idle and drains on wealth.  THEIR wealth, at least as they see it.

When it was first predicted that the machines would take over the world, I don't think we saw it happening the way that it is happening.  But make no mistake, it IS happening.

Edited January 4, 2021 by Dan Warnick

[Rob Kramer + 696]

^ exactly how I see it. The world (humanity) find issues (because its imperfect) and goes from left to right or in today's time right to left and way overboard. -When riding a donkey you want to be upright as to not fall off or steer the animal. - but here we are drunk able to touch the ground with our right hand. We went from hard times(physically) to abundant energy and food (for thoes with the energy) to soon being in abundant expensive energy with hard times (to find employment with social unrest)  when this green new reset deal gets more mature. Taxes will have to rise to meet our needs. Employment taxes via less employees will fall. Health is deteriorating. Education is costly and is a joke in many ways. Food money and general intelligence is falling fast - for a hi tech age.... I mean its not here yet but were on the cusp of it all. I'm 30 and bought a house young (22) but thoes I know have gotten pushed back mabey forever. Either your making 80k yr or 30k now days. Either your owning or renting. Even thoes making huge money are having a hard time keeping up with real estate prices. And renters are in the same boat property tax and utilities are rising faster than their pay. 

My friend when we were younger 4 yrs ago he bought a new 62k$ truck and I sold my house and bought a different one. Early this year he paid off the truck he makes alot and hates debt. The truck is worth 30k ish and houses over the 4 years went from 170k (mine) to 350k+(mine). So he could have bought my house then taken a loan on the truck and owed 230k or now owe 320k if he sells the truck (the opposite goal of having a house and truck and low debt). He's lucky he lives with his rents and makes alot others i know rent and make less. Good luck they'll never own. My first home I bought for 160 sold to my brother for 180 and he sold it first day on the market 2 years ago for 300k. So its not just current home in particular thats changed in price so drastically. 

Coming back to oil. Why do people always  seem to think it can only go lower? To me if it was 2$/barrel ages ago but the 5yr average is 55$ ... doesn't that imply it can only go up (over the longer term) and even if you take the time when it went negative how long did cheap oil last? Half a year? Even with the world sick and economy closed and travel restrictions demand is what 86% of peak 101mb/d ... that seems to tell me its kinda important.  So I think we'll see a rude awakening . I'd say late 2022 only because the green party is keen to stretch out covid as long as possible . But totally possible to see 100$ oil late 2021. 

I saw on Twitter iraq? Got 2B$ 0% interest from China on a pre sold oil deal at prices above current . So 1 they see oil going up even after buying tons for storage. 2 they see the value of money going down vs the oil. And 3 they still see it as a relevant energy. A commenter said it is likely because moneys value changes vs the energy content of a barrel is fixed. A good insight to value of the barrel. Anyways sorry for the scatter brain . As per the first sentence will humanity fix its perceived problems??? No . But it will die trying. Energy will be used. Population will grow. Environment will be destroyed.  Poor and hungry will be with us to the end. Rich and greed will be a constant. Only God saves.