And Just Like That, Everybody Stopped Talking About $100 Oil

For anyone panicking about oil prices, chill out.  Here's a slide from the BP's annual Statistical Review earlier this year, for some perspective:

BP Crude Oil Prices 1861 - 2017.png

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I've seen a lot of people point to the fact that oil was $20-$30 for a long time and insinuate that this is therefore the "natural" price and even $50-$60 is "high". They fail to realize that this price was with easy-to-get oil in a world with much lower demand. Meeting the world's demand today requires a lot of (previously) unconventional sources that aren't actually profitable at that low oil price.

At the same time,  fuel economy is double what it was in the 1970s, so you're getting twice the mileage for the same price.

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1 hour ago, JC1 said:

I've seen a lot of people point to the fact that oil was $20-$30 for a long time and insinuate that this is therefore the "natural" price and even $50-$60 is "high". They fail to realize that this price was with easy-to-get oil in a world with much lower demand. Meeting the world's demand today requires a lot of (previously) unconventional sources that aren't actually profitable at that low oil price.

At the same time,  fuel economy is double what it was in the 1970s, so you're getting twice the mileage for the same price.

JC1,

Salient points there, I would add with inflation how much is the $20 of the 1970s worth in todays money ? 4- 5 times is my approximation.

Do you have any figures that fuel economy is now double what it was ? In Europe there are still a lot of manufacturers with 5 and 6 litre V8s on offer. Cars now are often heavier and more powerful than the 1970s. In 1975 a Ferrari 308 had 252 HP now some family cars with 400 to 500 HP. A 2015 Ferrari F12 had 730 HP

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2 hours ago, JC1 said:

I've seen a lot of people point to the fact that oil was $20-$30 for a long time and insinuate that this is therefore the "natural" price and even $50-$60 is "high". They fail to realize that this price was with easy-to-get oil in a world with much lower demand. Meeting the world's demand today requires a lot of (previously) unconventional sources that aren't actually profitable at that low oil price.

At the same time,  fuel economy is double what it was in the 1970s, so you're getting twice the mileage for the same price.

Good points.

My own preferred range is somewhere in the area around $65 - ish for Brent.  In my opinion, that seems to be a fairly sustainable oil price.  Not too high to hurt global economies, and not too low to inhibit oil companies from doing long-overdue new Exploration & Production activities.

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On 11/18/2018 at 5:06 PM, Auson said:

JC1,

Salient points there, I would add with inflation how much is the $20 of the 1970s worth in todays money ? 4- 5 times is my approximation.

Do you have any figures that fuel economy is now double what it was ? In Europe there are still a lot of manufacturers with 5 and 6 litre V8s on offer. Cars now are often heavier and more powerful than the 1970s. In 1975 a Ferrari 308 had 252 HP now some family cars with 400 to 500 HP. A 2015 Ferrari F12 had 730 HP

"Double" often understates the improvement. For example: 
Around 1975, a full-size truck with a small-block engine making approx 180HP would get 10-11mpg.
Around 1975, a full-size truck with a large-block engine making 250-350HP would get 6mpg.
In 2018, a full-size truck producing 250-350HP gets 20-30mpg.

There are exceptions to this. Compact cars that got 30mpg in the 1970's are barely at 40mpg today, with the lack of improvement resulting from larger size, greater weight, and phenomenally improved features.  Still, the trend is higher efficiency, and we've only just begun to implement efficiency technology.

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5 hours ago, mthebold said:

"Double" often understates the improvement. For example: 
Around 1975, a full-size truck with a small-block engine making approx 180HP would get 10-11mpg.
Around 1975, a full-size truck with a large-block engine making 250-350HP would get 6mpg.
In 2018, a full-size truck producing 250-350HP gets 20-30mpg.

There are exceptions to this. Compact cars that got 30mpg in the 1970's are barely at 40mpg today, with the lack of improvement resulting from larger size, greater weight, and phenomenally improved features.  Still, the trend is higher efficiency, and we've only just begun to implement efficiency technology.

mtthebold,

I won't argue with that at all I was just trying to challenge the view that mpg has in improved in all cases across the board. With the other side of the arguament.

Also the 1975 figures are probably a lot more 'honest' than the fiddled manufacturers mpg figures quoted today. A bit like the emissions. Also more traffic these days which means your 2018 truck 20-30 mpg is well back around the 10mpg figure.

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9 hours ago, mthebold said:

"Double" often understates the improvement. For example: 
Around 1975, a full-size truck with a small-block engine making approx 180HP would get 10-11mpg.
Around 1975, a full-size truck with a large-block engine making 250-350HP would get 6mpg.
In 2018, a full-size truck producing 250-350HP gets 20-30mpg.

There are exceptions to this. Compact cars that got 30mpg in the 1970's are barely at 40mpg today, with the lack of improvement resulting from larger size, greater weight, and phenomenally improved features.  Still, the trend is higher efficiency, and we've only just begun to implement efficiency technology.

Huh? 2018 trucks that get 20-30 mpg, which is, on average, 25 mpg? You talking optimum cruise efficiency or average?

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9 hours ago, mthebold said:

"Double" often understates the improvement. For example: 
Around 1975, a full-size truck with a small-block engine making approx 180HP would get 10-11mpg.
Around 1975, a full-size truck with a large-block engine making 250-350HP would get 6mpg.
In 2018, a full-size truck producing 250-350HP gets 20-30mpg.

There are exceptions to this. Compact cars that got 30mpg in the 1970's are barely at 40mpg today, with the lack of improvement resulting from larger size, greater weight, and phenomenally improved features.  Still, the trend is higher efficiency, and we've only just begun to implement efficiency technology.

Where do you find a truck that gets this kind of mileage? I can't find a van or midsize SUV that has AWD and does much better than about 21.

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@BillKidd @Delton Witte

Talking about avg MPG - obviously depends on whether you're driving in city / highway. 
However i've seen many of the newer trucks getting around 20-25 MPG. 

Top Best Gas Mileage Trucks
  • 2018 Toyota Tundra - 19 MPG.
  • 2018 Nissan Frontier - 23 MPG.
  • 2018 Toyota Tacoma - 24 MPG.
  • 2018 GMC Sierra 1500 - 24 MPG.
  • 2018 Chevrolet Silverado 1500 - 24 MPG.
  • 2019 Honda Ridgeline - 26 MPG.
  • 2018 Ford F-150 - 26 MPG.
  • 2018 GMC Canyon - 26 MPG.
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in my opinion, regardless of small details, oil will continue to rise. little dips here and there are one thing, but the bigger long term picture,i believe reveals a long term bullish trend. The most important factor not being fuel economy, or supply and demand, but straight up TOXINS. The future price of of oil is going to consider pollutive elements of the energy. This is a price factor not considered in the past 100 years.  Poisonous energy is not destined to be a cheap source of energy for long.  Im not talking 100 dollars a barrel. More like closer to 200 by 2030.   Demand is consistently rising and this will stress our important ecosystem as we burn more and more. The only natural economic outcome is ridiculously expensive prices... LONG OIL

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10 hours ago, mthebold said:

"Double" often understates the improvement. For example: 
Around 1975, a full-size truck with a small-block engine making approx 180HP would get 10-11mpg.
Around 1975, a full-size truck with a large-block engine making 250-350HP would get 6mpg.
In 2018, a full-size truck producing 250-350HP gets 20-30mpg.

There are exceptions to this. Compact cars that got 30mpg in the 1970's are barely at 40mpg today, with the lack of improvement resulting from larger size, greater weight, and phenomenally improved features.  Still, the trend is higher efficiency, and we've only just begun to implement efficiency technology.

There might be a couple of configurations that fit the bill, but all have combined mpg closer to 20 than 30 and actually closer to 20 than 25. I get the point he was making, just seemed a bit of an exaggeration for a comment that started out talking about underestimation/accuracy.  

Top Best Gas Mileage Trucks
  • 2018 Toyota Tundra - 19 MPG (15-19 & 381hp) 16 combined
  • 2018 Nissan Frontier - 23 MPG.(not full size) (19-23 & 152hp) (17-22 & 152hp) (16-22 & 261hp) 
  • 2018 Toyota Tacoma - 24 MPG. (not full size) (20-23 & 159hp) (19-24 & 278hp) 
  • 2018 GMC Sierra 1500 - 24 MPG. (18-24 & 285hp) 20 combined (18-24 & 355hp electric motor)
  • 2018 Chevrolet Silverado 1500 - 24 MPG. (18-24 & 285hp) 20 combined (18-24 & 355hp electric motor)
  • 2019 Honda Ridgeline - 26 MPG. (19-26 & 280hp) 22 combined
  • 2018 Ford F-150 - 26 MPG. (19-25 & 290hp) (20-25 & 325hp) (18-25 & 375hp) 22 combined
  • 2018 GMC Canyon - 26 MPG (not full size) (22-30 & 181hp) (20-26 & 200hp) (18-25 & 308hp)
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6 hours ago, Auson said:

mtthebold,

I won't argue with that at all I was just trying to challenge the view that mpg has in improved in all cases across the board. With the other side of the arguament.

Also the 1975 figures are probably a lot more 'honest' than the fiddled manufacturers mpg figures quoted today. A bit like the emissions. Also more traffic these days which means your 2018 truck 20-30 mpg is well back around the 10mpg figure.

 

3 hours ago, BillKidd said:

Huh? 2018 trucks that get 20-30 mpg, which is, on average, 25 mpg? You talking optimum cruise efficiency or average?

 

3 hours ago, Delton Witte said:

Where do you find a truck that gets this kind of mileage? I can't find a van or midsize SUV that has AWD and does much better than about 21.

 

2 hours ago, CMOP said:

@BillKidd @Delton Witte

Talking about avg MPG - obviously depends on whether you're driving in city / highway. 
However i've seen many of the newer trucks getting around 20-25 MPG. 

Top Best Gas Mileage Trucks
  • 2018 Toyota Tundra - 19 MPG.
  • 2018 Nissan Frontier - 23 MPG.
  • 2018 Toyota Tacoma - 24 MPG.
  • 2018 GMC Sierra 1500 - 24 MPG.
  • 2018 Chevrolet Silverado 1500 - 24 MPG.
  • 2019 Honda Ridgeline - 26 MPG.
  • 2018 Ford F-150 - 26 MPG.
  • 2018 GMC Canyon - 26 MPG.

 

1 hour ago, Delton Witte said:

There might be a couple of configurations that fit the bill, but all have combined mpg closer to 20 than 30 and actually closer to 20 than 25. I get the point he was making, just seemed a bit of an exaggeration for a comment that started out talking about underestimation/accuracy.  

Top Best Gas Mileage Trucks
  • 2018 Toyota Tundra - 19 MPG (15-19 & 381hp) 16 combined
  • 2018 Nissan Frontier - 23 MPG.(not full size) (19-23 & 152hp) (17-22 & 152hp) (16-22 & 261hp) 
  • 2018 Toyota Tacoma - 24 MPG. (not full size) (20-23 & 159hp) (19-24 & 278hp) 
  • 2018 GMC Sierra 1500 - 24 MPG. (18-24 & 285hp) 20 combined (18-24 & 355hp electric motor)
  • 2018 Chevrolet Silverado 1500 - 24 MPG. (18-24 & 285hp) 20 combined (18-24 & 355hp electric motor)
  • 2019 Honda Ridgeline - 26 MPG. (19-26 & 280hp) 22 combined
  • 2018 Ford F-150 - 26 MPG. (19-25 & 290hp) (20-25 & 325hp) (18-25 & 375hp) 22 combined
  • 2018 GMC Canyon - 26 MPG (not full size) (22-30 & 181hp) (20-26 & 200hp) (18-25 & 308hp)

The 1975 figures come from actually driving these vehicles & talking to people who did.  The small ones got about 10mpg.  The ones with power equivalent to modern engines got about 6mpg.  

The 2018 figures come from the EPA ratings and discussions with people who actually drive these trucks.  These numbers are more accurate than old EPA ratings because the tests were updated to reflect real-world driving conditions.  20mpg is easily accomplished.  When you compare that to 6mpg for a 1975 vehicle with comparable power, you end up with a 3.33X improvement. If your average is 25mpg, it's a 4.17X improvement.  So no, I'm not exaggerating.  

25mpg average is possible depending on which truck you buy and how you drive it.  If you buy racing V8 4WD with all options, brush guard, and gigawatt spotlights over the cab, your economy will suffer.  If you buy a normal half-ton with the most efficient engine & options, 30 highway is now achievable.  Of course, efficient options don't matter if you drive like a jackass.  Drive reasonably, and you can match EPA numbers. With practice, the hypermiling community regularly beats those numbers.  

Y'all will notice that in the list Delton & CMOP provided, the smaller, weaker trucks appear less efficient.  There are two technical reasons for this: 
1) Smaller trucks are cheaper, which means they come with older, cheaper, less efficient technology. You don't buy these for fuel economy; you buy them because you can't afford the hefty price tag of a full-size truck. 
2) Automakers are in the process of updating truck designs for maximum efficiency, starting with the most lucrative: full size trucks.  New designs & technology haven't trickled down to the mid-size truck market.  

#2 is particularly interesting.  Right now, some of the offered engines are the old, standard designs and some are the new, efficient designs.  RAM was first out of the gate with their V6 diesel and later added a hybrid option to their gas V8's.  Ford started with turbocharged gas V6's & later added a 6-cylinder diesel to compete with RAM.  GM is introducing the first 4-cylinder in a full-size truck while adopting dynamic skip-fire in their V8's.  All of that is just the low-hanging fruit.  A variety of efficiency technology is trickling into the market; in 10 years, 25-30mpg could be the norm for full-size trucks.  

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On 11/18/2018 at 5:06 PM, Auson said:

JC1,

Salient points there, I would add with inflation how much is the $20 of the 1970s worth in todays money ? 4- 5 times is my approximation.

Do you have any figures that fuel economy is now double what it was ? In Europe there are still a lot of manufacturers with 5 and 6 litre V8s on offer. Cars now are often heavier and more powerful than the 1970s. In 1975 a Ferrari 308 had 252 HP now some family cars with 400 to 500 HP. A 2015 Ferrari F12 had 730 HP

I have a Mustang with a 305 HP V-6 that actually gets around 32 MPG on the highway if I can keep it under 80 MPH. And yes, the cars are more powerful and more efficient, but there are a LOT more of them out there than in the 70's. And that 300 HP Mustang back then would have been LUCKY to average 15 MPG!! And back then a lot of homes still only only had 1 car, and now, most homes have 2 or more vehicles. Mom and Dad both work now and they have to commute to work every day. Back then there were still local bakeries and butcher shops, and mom & pop grocery stores in the area that we could walk to, but no more. You are going to drive to a store and pick up a weeks worth of groceries or more now. Can't do that walking. I used to live right beside a bakery, I remember the smell in the mornings. My barber lived right behind us, so no need for a car to get a haircut. There was a butcher shop right down the road, about three blocks. Didn't need a car to go there either. But things have drastically changed, and not all for the better. Our lives in the US revolve around our vehicles now. Things have changed a lot since the 60's/70's....

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I once owned a 1976 F250 camper special, essentially a one ton. 460 CI V-8 that got about  10/11 MPG loaded or not. Could you imagine that? My Silverado gets an average of about 18, and on the hwy it does easily over 20 mpg. But I still only drive that around occasionally, the Mustang is my go to for most trips. An average of around 24 MPG and that is dealing with the daily stop & go traffic in Houston. My trips to Dallas usually average just over 32 MPG. You have to remember, fuel injection and much better final drive ratios are giving us a lot better mileage now than those carburated engines with 1:1 final drives could ever dream of.

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On 11/13/2018 at 6:06 PM, Tom Kirkman said:

This headline made me chuckle audibly  ( hey, I'm easily amused... )

And Just Like That, Everybody Stopped Talking About $100 Oil

But the point is still being missed here. Without those big projects that can be put in place and pump oil for years are being short changed, and with oil on a down slide they will end up being shelved. We need those projects to keep a steady supply coming in, and those deepwater projects may be expensive, they produce a heavier oil than the WTI that refiners use to mainly make gasoline with. There is an over supply of WTI and gasoline right now, so the prices have slid in the last month or so. But diesel is going up, up, up!!!

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2 hours ago, SERWIN said:

But the point is still being missed here. Without those big projects that can be put in place and pump oil for years are being short changed, and with oil on a down slide they will end up being shelved. We need those projects to keep a steady supply coming in, and those deepwater projects may be expensive, they produce a heavier oil than the WTI that refiners use to mainly make gasoline with. 

Noted and understood.

If you are familiar with my ad nauseum comments hoping for $65 oil [Brent] this year and $70 oil [Brent] in 2019, I've taken into account the lack of reinvestment into new Exploration & Production activities by oil companies.

I still tend to think $80 oil is simply not sustainable long term.  Bumping my *hope* up from $65 to $70 should theoretically be sufficient to spur new Exploration activities, but not high enough to kill demand for oil or hurt global economies.

Here's one of my comments yesterday to Mike Shellman's article over on LinkedIn:

============================

Nicely written, Mike.

I've been hoping for an average of $65 oil [Brent] for 2018 and an average of $70 oil [Brent] for 2019.  WTI is a totally different animal, with its own quirks.

Oil prices that are either too high or too low create global havoc.

● If oil prices are too high, it kills global economies and ends up killing demand (not just killing *oil* demand, it eats up money from the overall budgets of people and governments).

●If oil prices are too low, oil companies (and service companies) cannot reinvest back into new exploration and production, which will cause a supply strain eventually down the road.

In my view, $80 oil is simply not sustainable long term.  Neither is sub-$50 oil.

To me, $70 oil is about the best overall global balance for 2019, to help spur long overdue new Exploration and Production.  The last oil price crash pretty much killed off most new E&P.

Just my opinion; as always, you are free to disagree.

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 Do any of these pricing perspectives consider a substantial decrease in the strength of the Usd?  Will a drop in usd spur economic activity in developing nations and drive a surge in demand. Possibly  reducing american revenue from oil, not because of  an oil price drop, but because of the usd drop. The world economy is not in trouble in my opinion, mostly just the Usas' inefficient economy. ex pharms, guns/bombs and oil and gas, and might as well destroy the water while your at it. We are doing it up here in northern BC and Alberta with the new 40 billion LNG export plant in Kitimat....Anyways,Output will always be stressed, not by availability and logistics, but simply by nature, either through extreme ocean toxicity, extreme city pollution, wildlife extinction like bugs and sensitive life and general poisons associated with burning carbon. Not to mention WAR... The oil and gas business model, while revenue generating, is such an inefficient machine, most certainly to burn out.   With no sign of political security on the horizon, quarks, bots  traders, speculators and some sheep and who ever else,  with so much volatility and considering the utility value of oil at this stage in modern development,  still much more vauable then bitcoin,  the prices  will be driven up far past their calculated fair value.  

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whats up with all the old dudes thinking they understand the world of today with yesterdays news. most on this board are armchair relics waiting to die from irrelevance. its annoying when you want real information instead of some old coots dream of what the world used to be like. 

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6 hours ago, Tom Kirkman said:

To me, $70 oil is about the best overall global balance for 2019, to help spur long overdue new Exploration and Production.  The last oil price crash pretty much killed off most new E&P.

__________  +1 ... E&P has lagged now for 3-4 years.  Seems like this alone would cause an eventual spike over $100-Brent the longer oil stays under its breakeven selling price of about $70.  If you look at the spike and reversal around 2010, the same thing could happen here.

 

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47 minutes ago, wimposak said:

whats up with all the old dudes thinking they understand the world of today with yesterdays news. most on this board are armchair relics waiting to die from irrelevance. its annoying when you want real information instead of some old coots dream of what the world used to be like. 

Heh heh, so you are the new member downvoting my comments.  This could get amusing...

b0d2c9126f0bd2407d7082557e6893b71c0bad1e645b14ba9580577293d3d9a7.jpg

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50 minutes ago, Tim Turley said:

E&P has lagged now for 3-4 years.  Seems like this alone would cause an eventual spike over $100-Brent the longer oil stays under its breakeven selling price of about $70.  If you look at the spike and reversal around 2010, the same thing could happen here.

Seems we are pretty much on the same page.  Too low of oil prices will eventually result in a spike of oil prices due to lack of new exploration and production.

If Brent could average around $70 - ish for a couple years, to allow oil companies to reinvest in new exploration, then a price spike down the road might be avoided.

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1 hour ago, Tom Kirkman said:

Seems we are pretty much on the same page.  Too low of oil prices will eventually result in a spike of oil prices due to lack of new exploration and production.

If Brent could average around $70 - ish for a couple years, to allow oil companies to reinvest in new exploration, then a price spike down the road might be avoided.

That's the kind of logic that would smooth out the world's energy situation over a longer period of time. Trump begging for 40 dollar WTI, then OPEC+ needing Brent closer to 80, then pressure to lower it, then an oversupply situation to 30-40, then back to 70 Brent, then 90 Brent, again and again.

It leads to wasted capital on E&P projects, jobs lost when companies hire to develop then have to cut losses when oil bottoms out, etc. Low isn't good, high isn't good. There is a right price that should be pursued, and enable more effective transport and infrastructure to be completed,  rather than a crazy pendulum that disrupts the world's energy sources.

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3 minutes ago, NatGasDude said:

That's the kind of logic that would smooth out the world's energy situation over a longer period of time. Trump begging for 40 dollar WTI, then OPEC+ needing Brent closer to 80, then pressure to lower it, then an oversupply situation to 30-40, then back to 70 Brent, then 90 Brent, again and again.

It leads to wasted capital on E&P projects, jobs lost when companies hire to develop then have to cut losses when oil bottoms out, etc. Low isn't good, high isn't good. There is a right price that should be pursued, and enable more effective transport and infrastructure to be completed,  rather than a crazy pendulum that disrupts the world's energy sources.

We are on the same page here.  I've been saying similar things for years.

@wimposak care to comment?

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Boom and bust is not a healthy cycle for employees, citizens, fuel users, E&P's. IT doesnt make any sense, and it wastes so much capital. I honestly think that the US should join OPEC+ and officially coordinate to figure out prices that meet global demand and keep price stable for longer periods of time.

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