$400 A Bbl of Oil is this possible

(edited)

On 12/5/2018 at 12:18 PM, James Regan said:

 

 

Edited by A/Plague
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Iran may indeed be able to effectively attack and win a battle or two, but the regime won't survive to revel in glory (look out virgins!).  $400 oil?  Nah.  But I think a short drive up to $200 for a very short while could be seen.  If our climate change choir are to be believed by half, there won't be that many speculator's dreams left to cash in on, so why not go all out?  It's only speculation.  Waterways can be cleared of rubble and rulers can be taken out.

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1 hour ago, Dan Warnick said:

climate change choir

This member of the choir would love to see a very temporary $200 a barrel. That would kill fossil fuels, no enterprise using energy would want to bet on a future like that.

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5 minutes ago, DA? said:

That would kill fossil fuels.

Indeed, a sustained $200 oil would move renewables along at a quickened pace. Low oil prices are a boon for fossil fuel demand for sure--at least those who can get it out of the ground at a profitable price. FF demand is not terribly elastic, either. Once things migrate away from fossil fuels, they are unlikely to return after sinking money into something else.

This of course is a Catch 22. OPEC has power to restrict output in a severe way. They would lose some market share, sure. But if Russia and OPEC were in cahoots, who could ramp up without much notice to step in and pick up the slack? No one, at least not immediately. The result would be higher prices. Much higher, if it were an unexpected dip in production. Everyone would be getting more $$ per barrel, softening the blow of selling fewer barrels. But of course, this would kick renewable technologies in the butt as people balked at the higher prices. OPEC surely doesn't want that. Nothing (and I do mean literally nothing) could make an EV sound more appealing than $7 per gallon gasoline.

Of course that isn't going to happen, so renewables will just have to trudge along.

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(edited)

12 hours ago, James Regan said:

In short, "No because supply and demand."  That doesn't really answer your question though.  

We can get a rough idea of what's going on by asking a few questions & informally applying game theory: 
1) How much oil can the world produce at a given price? (Higher prices --> More oil is economically viable)
2) What's the worst that could happen to the world's oil supply?
3) How long would it take to replace lost supply in an emergency?  (emergency reserves? New production?  Weeks? Months? Years?)
4) Who are the players in this game? 
5) How would those players react? 

Run through that, and a few points stand out: 
1) In the long run, the world could produce all the oil it wanted at $100/bbl.  Between demand destruction, fracking, lower break evens for conventional/deep water oil, upcoming waste/biomass/coal-to-oil technology, and electrification, we have powerful options that didn't exist even 10 years ago.  We could even replace the Middle East if we so desired.
2) In the short run, catastrophic losses of oil supply are unlikely.  Graceful declines like we've seen in Venezuela, sure - but the immediate loss of entire countries?  We have the firepower to prevent that.  Even in the event of the immediate, irreversible loss of, say, 10MMbpd, world oil reserves could make up the difference until the supply/demand gap was bridged. 30MMbpd for a month would be trivial.  
3) The vast majority of the world would suffer under high prices.  Politicians would mobilize everything they had to bring them back down - and probably eradicate whoever caused the problem.  

It's possible Iran could close the strait for a time, but that would be short-lived - and the entire world would come down on them.  Even the rest of OPEC would be angry because the world, tired of the risk/cost associated with OPEC's dickery, would get serious about alternatives.  It would be the end of the Middle East, and they know it.  

Personally, I hope they try; it would be nice to be done with OPEC once and for all.  

Edited by mthebold
Removed the word "catastrophic" because it added nothing to the sentence.
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4 hours ago, DA? said:

This member of the choir would love to see a very temporary $200 a barrel. That would kill fossil fuels, no enterprise using energy would want to bet on a future like that.

I think we both want a price spike, but for different reasons.  Regardless, it's good we can find common ground, however small.  

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4 hours ago, DA? said:

This member of the choir would love to see a very temporary $200 a barrel. That would kill fossil fuels, no enterprise using energy would want to bet on a future like that.

I doubt anything will kill fossil fuels entirely, but it would be interesting to see $200/bbl oil's effect on CO2 emissions.  My bet is that coal-to-oil (which is viable around $100/bbl) would dramatically expand, causing the exact opposite of what you're hoping for.  

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1 hour ago, mthebold said:

Even the rest of OPEC would be angry because the world, tired of the risk/cost associated with OPEC's dickery, would get serious about alternatives

image.jpeg

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15 minutes ago, mthebold said:

I doubt anything will kill fossil fuels entirely, but it would be interesting to see $200/bbl oil's effect on CO2 emissions.  My bet is that coal-to-oil (which is viable around $100/bbl) would dramatically expand, causing the exact opposite of what you're hoping for.  

As a major industry, even if the $200 was only for a short time, no energy user would want to stay with it. Companies pay extra for stability, even anything over $150 would set panic in and todays massive increases in renewables would be dwarfed. Why would anyone invest in setting up coal to oil, it's just to dam expensive, it'd be cheaper to go an alternative road.

Honestly just $80 a barrel would do me that's higher enough to give incentive to change over from oil in a progressive manor, without coursing vast amounts of hardship onto many people (although energy is still to expensive for many).

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31 minutes ago, DA? said:

Why would anyone invest in setting up coal to oil, it's just to dam expensive

Because some one will pay for it.  There are few things we can count on with people, but desire to provide for their family will always be there.  Some refer to it as "greed" . ... I like to think some of us are greedier than others for good reason, but despite the motivator Greed is constant and predictable.  Conversely, concern for your neighbor, and empathy are also there, it just doesn't seem to be consistently there.

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1 hour ago, DA? said:

Honestly just $80 a barrel would do me that's higher enough to give incentive to change over from oil in a progressive manor, without coursing vast amounts of hardship onto many people (although energy is still to expensive for many).

Amazingly, we seem to sort of agree on a concept, but for totally different reasons.

You are hoping for $80 oil, to help nudge the world away from oil and toward renewables without imposing too much financial hardship on ordinary people.  Fair enough.

In 2018, I was hoping for $65 oil, which I viewed as a relative balance between oil producers and oil consumers.  $65 is high enough to provide sustainable profits to most oil producers, and not too high to be a burden on most oil consumers.  (Additional burden of high carbon taxes totally distort this, though.)

And for 2019, I'm still hoping for $70 oil.  I think the US$ will lose a bit of value next year, so $70 oil in 2019 would be relatively the same as $65 oil in 2018.  And perhaps a bit more to spur new Exploration activities by oil companies.

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6 hours ago, Rodent said:

Nothing (and I do mean literally nothing) could make an EV sound more appealing than $7 per gallon gasoline.

Of course that isn't going to happen, so renewables will just have to trudge along.

It is already happening... in Norway !

The current fuel price in Norway is around $7 per gallon and every second car sold in the country is electric.

In 2018  battery electric vehicles (BEVs) reached a 30 % market share in Norway. Plug-in hybrids (PHEVs) have a market share of 19 %.

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1 hour ago, NickW said:

I doubt Irans 'Fairline' Navy will be winning too many battles with this assembly

 

bahrain-fifth-fleet.jpg

Beware of not being too overconfident... It could open the door to unpleasant surprises.

In a combat exercise off the coast of Florida in 2015, a small French nuclear submarine, the Saphir, snuck through multiple rings of defenses and “sank” the U.S. aircraft carrier Theodore Roosevelt and half of its escort ships. In other naval exercises, even old-fashioned diesel-electric submarines have beaten carriers.

All told, since the early 1980s, U.S. and British carriers have been sunk at least 14 times in so-called “free play” war games meant to simulate real battle, according to think tanks, foreign navies and press accounts. The exact total is unknown because the Navy classifies exercise reports.

https://www.reuters.com/article/us-usa-trump-carriers-specialreport/special-report-aircraft-carriers-championed-by-trump-are-vulnerable-to-attack-idUSKBN16G1CZ

In 2002, a joint war game exercise, known as Millennium Challenge 2002 (MC02), took place to gauge readiness in the event of a conflict with a hostile Middle Eastern nation. The results were disastrous for the U.S., with over a dozen ships destroyed and thousands killed or wounded as a result of asymmetric and unconventional naval warfare. 14 years later, Iranian asymmetrical warfare can still have a devastating effect on U.S. and allied forces in the Middle East. Unconventional warfare has been the Achilles Heel of the U.S. military for decades

http://cimsec.org/learning-curve-iranian-asymmetrical-warfare-millennium-challenge-2002-2/11640

https://www.wearethemighty.com/articles/that-time-a-marine-general-led-a-fictional-iran-against-the-us-military-and-won

https://en.wikipedia.org/wiki/Millennium_Challenge_2002

 

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Of COURSE it's possible. Right after leaving a store and having had paid eighty dollars for a loaf of bread and a hundred fifty for a gallon of milk, I have no idea where some of you folks got your economics education but I suggest perhaps laying off some of your relaxation favorites.

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2 hours ago, David Eidell said:

Of COURSE it's possible. Right after leaving a store and having had paid eighty dollars for a loaf of bread and a hundred fifty for a gallon of milk, I have no idea where some of you folks got your economics education but I suggest perhaps laying off some of your relaxation favorites.

So if I may flick through the irony IYO it is possible that oil could increase by 654% and your trip to the store you would see increases of 1900% on bread and 1263% on Milk. Is there any graph that can show this trend. I hate to think how much the Valium will have increased by. Meanwhile Abu Musa real estate has gone through roof. 👌🏻

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Thanks

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9 hours ago, Guillaume Albasini said:

It is already happening... in Norway !

The current fuel price in Norway is around $7 per gallon and every second car sold in the country is electric.

In 2018  battery electric vehicles (BEVs) reached a 30 % market share in Norway. Plug-in hybrids (PHEVs) have a market share of 19 %.

Gas price in Denmark is about USD 6 per gallon. Only stopping EVs here is the charging infrastructure. Although there seems to be investments into this. 

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11 hours ago, Mike Marcellus said:

Because some one will pay for it.  There are few things we can count on with people, but desire to provide for their family will always be there.  Some refer to it as "greed" . ... I like to think some of us are greedier than others for good reason, but despite the motivator Greed is constant and predictable.  Conversely, concern for your neighbor, and empathy are also there, it just doesn't seem to be consistently there.

Why when there is a cheaper alternative. It's a massive capital out lay that would take many years to start seeing profit made and probably never made because other investors have made better investments.

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21 hours ago, DA? said:

This member of the choir would love to see a very temporary $200 a barrel. That would kill fossil fuels, no enterprise using energy would want to bet on a future like that.

Well, that would mean that there is a technically feasible alternative that works at an equivalent price of $200/bbl.

However, there is none, except nuclear energy, and that would take at least 2 decades to redevelop to become a significant factor again.

Alternatively, the few remaining with adequate survival skills can always go back to romantic indoor cooking: Today, smoke from cooking fires and solid-fuel stoves kills millions every year, more than malaria, and yet little is known about it – and even less is done. Instead the Germans worry about their superb Diesel engines.

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I don't foresee such a catastrophy in my life time.i am 46 .I believe that oil demand is not growing only incremental growth is happening.countries have become much more fuel efficient.energy demand is increasingly met by alternative resources.leave out all this argument if oil hits $100 people will start walking instead of taking vehicle like his ancestors did.

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1 hour ago, Robert Ziegler said:

Well, that would mean that there is a technically feasible alternative that works at an equivalent price of $200/bbl.

However, there is none, except nuclear energy, and that would take at least 2 decades to redevelop to become a significant factor again.

Alternatively, the few remaining with adequate survival skills can always go back to romantic indoor cooking: Today, smoke from cooking fires and solid-fuel stoves kills millions every year, more than malaria, and yet little is known about it – and even less is done. Instead the Germans worry about their superb Diesel engines.

errr, did you see the latest Lazard report? Cheapest thing out there solar and wind, that saving pays for the changes required.

I agree with the smoke from fires been dangerous. Many of my qualifications are in arboriculture which took me in to working for the French government trying to stop forest fires in SE France. Also when I worked in the nuclear industry my emergency job was fire rescue, so I've had an interest about the dangers of smoke for a while (also lived in the bush Australia plenty of fires there and smoke). It's always amazed me the lack of research into the dangers of smoke but over the last year a few papers came out showing the dangers even with cast iron wood burners inside the house. But work has been done on helping people build better more efficient safer wood burning stoves in many countries. Renewables are often also helping to get these people light and power, soon it'll help them cook, although I have seen one charity giving out solar cookers they are great.

Well the cheating on the diesel engine emissions has in fact taken thousands of human life years away. It's not because one thing is worse than another we should ignore the lesser evil. 

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