Is $60/Bbl WTI still considered a break even for Shale Oil

[ceo_energemsier + 1,818]

17 minutes ago, Mike Shellman said:

A hypothetical break'even oil price is the worse metric ever invented to analyze the future of US shale oil. It discounts completely the cost of paying back long term debt and all those tens of thousands of shale oil wells that were drilled in America 5-6 years ago that now can never be paid back. It implies that nobody entering into their 2nd marriage has baggage. Every shale oil company in America is racked with debt. 

Break'even changes regularly with regard to product prices, hedging, debt maturities, interest rates, slowing production and associated decline in revenue streams, market availability, market deductions, the quality of LTO and where, and if, it can be utilized, the value of the dollar, American energy policy, unrest in the Middle East and a host of other issues; the longer legacy debt is deferred, the harder it gets to pay it back and the higher "break'even" prices get.

Break'even was invented by the shale oil industry just a few years ago for a reason...it implies that any price over break'even means the shale oil industry is kicking ass. Its good news and no body in America likes bad news; the US shale oil industry is a master of deceit. The truth about shale oil profitability is in the current financial condition of the US shale oil industry and the SEC filings it must lawfully make, every quarter;  whether it is profitable, or not, and how fast it can get out of long term debt before its assets no longer cover its liabilities. Everything else is essentially just...bullshit. Don't be conned by break'even. Its meaningless. The MSM loves it because it is not capable of understanding well economics or doing its SEC homework.  

 

Hope you feel better now after you rant and rave against shale oil, wow, it seems some one must have burnt you really good with shale oil. People are making hundreds of millions of $$$ in the shale industry from employees to mineral owners, to service companies, to refiners, to traders, to exporters, to the hundreds of thousands of employees directly and indirectly employed, suppliers, royalty owners, override owners, so all that is just bullshit according to the world renowned oil and gas supreme investment expert and number 1 oil and gas expert in the world, billions of dollars paid out to states and individuals is all bullshit!!!!

[Mike Shellman + 548]

15 minutes ago, ceo_energemsier said:

Hope you feel better now after you rant and rave against shale oil, wow, it seems some one must have burnt you really good with shale oil. People are making hundreds of millions of $$$ in the shale industry from employees to mineral owners, to service companies, to refiners, to traders, to exporters, to the hundreds of thousands of employees directly and indirectly employed, suppliers, royalty owners, override owners, so all that is just bullshit according to the world renowned oil and gas supreme investment expert and number 1 oil and gas expert in the world, billions of dollars paid out to states and individuals is all bullshit!!!!

The subject matter was break'even prices. Unless you are intent on controlling the content of the forum, which you most certainly appear to be, don't attack me personally, provide some evidence, some facts, contrary to my opinion.  No cut and paste links off the internet, some of your own analysis, with some numbers; that would be good. For instance find us some SEC data that suggests all these magical break'evens are actually occurring. Or does that not matter to you? Are you just cheerleading for it to make some personal bucks?   

I never got "burnt" from shale oil; I made a lot of money from it. In the process I saw, first hand, that it is not the fix for America that people like you want people to believe it is. Show us, for instance, what the total return is on all shale oil investment from ten of the largest independent shale oil producers in America is over the past decade.  

 

[William Edwards + 708]

5 hours ago, Refman said:

You really think crude will drop to $25? If so, why?

The lessons of history and the pricing mechanism are the two main reasons for my assesssment. On an inflation-corrected basis, world crude price has averaged less than $40/B for the past 160 years. The 30-year cycle in vogue since 1970 swings above that average and then swings below that average. It has been above the average for 15 years. Time for the "below $40"for the next 15 years. $25/B is my guess of the rough lined-out bottom.

IMO 2020 could chop another $10/B off of that number if Canada, Saudi Arabia, Iraq Venezuela, Russia and Kuwait don't wake up soon.

Edited May 27, 2019 by William Edwards

[Old-Ruffneck + 1,239]

2 hours ago, ceo_energemsier said:

Hope you feel better now after you rant and rave against shale oil, wow, it seems some one must have burnt you really good with shale oil. People are making hundreds of millions of $$$ in the shale industry from employees to mineral owners, to service companies, to refiners, to traders, to exporters, to the hundreds of thousands of employees directly and indirectly employed, suppliers, royalty owners, override owners, so all that is just bullshit according to the world renowned oil and gas supreme investment expert and number 1 oil and gas expert in the world, billions of dollars paid out to states and individuals is all bullshit!!!!

I think the point your missing is in fact that there was tremendous losses in the 2014 to 2016 period in shale. Surely when all the rigs dropped liked flies and bankruptcies were an everyday ordeal from housing on up the chain to drilling companies. I like to call it a RESET and truth be known they are back at it and people being greedy thinking this new fangled tech is going to make everyone wealthy it's probably likely to collapse again. Lenders being Lenders I can understand as it's not their money they are throwing away. It's the investors money getting pissed away. Sure there is some money being made but not what a lot of folks in here think. If one lived in the oil-patch enough years you see the ebb and flow and the mechanics of it all. I do believe the tide is going out as too much money is loaned and a lot of companies at the moment have no way of paying back. More will be revealed in the next 90 days.

[Mike Shellman + 548]

 

7 hours ago, Old-Ruffneck said:

If one lived in the oil-patch enough years you see the ebb and flow and the mechanics of it all.

That is correct, sir.

The question the gentleman asked was whether $60 is still considered a good number for break'even prices. I rendered my opinion of that based on many years of operating and owning working interest in oil and gas wells and actually writing checks to participate in the oil business, not observe it from a computer. Break'even prices are meaningless. 

The shale oil phenomena has provided great high paying jobs to people, temporarily lowered our trade deficit and has put a lot of money into the economic system. People that have actually been in the oil business understand its all great, and it is all very much temporary, just like any other play has been in oil and natural gas history. When boom begins to turn to bust the ramifications of it are horrible...people lose their jobs, people that borrowed money to service the boom get ruined, crime goes up and all the economic benefits of the boom are lost, etc. Up and down, up and down, so the cycles go; the oil industry never learns. This stuff in the Permian is going to end up exactly like the stuff in the Eagle Ford; its just the oil business. And shale oil is a business, first and foremost. That business is not doing very well. It can't make a profit and is up to its hard hat in debt.

Why does the likelihood of it ending terrify people so much?  Because this shale thing is a great re-distribution of wealth in America...the government prints money, Central banks loan that money to others, who then loan it to the shale oil industry and make money, CEO's make millions from the process, as do royalty owners and everyone else in the middle, supposedly so the American consumer can benefit from lower prices at the pump. People in the middle never want it to end. Its a gravy train. They could care less whether it is all occurring on credit/debt. They'll have theirs all boxed up and will be long gone when shit hits the fan. 

Shale oil is unique because of its short investment cycle. Its the perfect social security system for America's oil future. Exporting it away and wasting natural gas is stupid. Old oilfield hands know this shale oil thing will end. In some basins it already is ending. I for one would like to see it managed better, for the long term.  

 

[William Edwards + 708]

42 minutes ago, Mike Shellman said:

 

That is correct, sir.

The question the gentleman asked was whether $60 is still considered a good number for break'even prices. I rendered my opinion of that based on many years of operating and owning working interest in oil and gas wells and actually writing checks to participate in the oil business, not observe it from a computer. Break'even prices are meaningless. 

The shale oil phenomena has provided great high paying jobs to people, temporarily lowered our trade deficit and has put a lot of money into the economic system. People that have actually been in the oil business understand its all great, and it is all very much temporary, just like any other play has been in oil and natural gas history. When boom begins to turn to bust the ramifications of it are horrible...people lose their jobs, people that borrowed money to service the boom get ruined, crime goes up and all the economic benefits of the boom are lost, etc. Up and down, up and down, so the cycles go; the oil industry never learns. This stuff in the Permian is going to end up exactly like the stuff in the Eagle Ford; its just the oil business. And shale oil is a business, first and foremost. That business is not doing very well. It can't make a profit and is up to its hard hat in debt.

Why does the likelihood of it ending terrify people so much?  Because this shale thing is a great re-distribution of wealth in America...the government prints money, Central banks loan that money to others, who then loan it to the shale oil industry and make money, CEO's make millions from the process, as do royalty owners and everyone else in the middle, supposedly so the American consumer can benefit from lower prices at the pump. People in the middle never want it to end. Its a gravy train. They could care less whether it is all occurring on credit/debt. They'll have theirs all boxed up and will be long gone when shit hits the fan. 

Shale oil is unique because of its short investment cycle. Its the perfect social security system for America's oil future. Exporting it away and wasting natural gas is stupid. Old oilfield hands know this shale oil thing will end. In some basins it already is ending. I for one would like to see it managed better, for the long term.  

 

Better management by the industry is the key hope, Mike, but maybe not so likely. First, the industry leaders would have to understand your message and, then, abandon short-term gain visions and replace them with soundly based strategies. Probably won't happen. More boom and bust!

Edited May 27, 2019 by William Edwards

[Mike Shellman + 548]

Just now, William Edwards said:

Probably won't happen. More boom and bust!

No, it will never happen; you are correct. From 1935 to 1976, approximately, the boom to bust cycle was managed beautifully because the Railroad Commission of Texas was willing to regulate the industry...in the name of long term conservation, to prevent waste. It controlled the rate of oil and gas development in Texas, preserved reservoir pressures and EUR's and kept the price of oil stable,  our employment base stable, by sticking to its guns on well spacing and well densities, thru use of allowables.

What's different now than in the 1930's? Nothing except that we have even less resources that need preserving and managing properly now than we did then. Allowables cannot be used when frac'ing shale or shaley carbonates but the rate of growth can be controlled by going back to Statewide spacing and density rules. That in turn would stabilize prices, employment rates and would control fiscal irresponsibility. As it is the shale industry is over-drilling sweet spots on sometimes 40 acre spacing, wells are bashing into each other, GOR is rising, gravity of liquids is increasing and is less usable downstream, groundwater sources are being drained and we are now wasting an estimated 2BCFGPD up flare stacks. All this on credit. To facilitate more exports. 

That makes sense only to people in the middle of the shale oil gig making money from it all. Approach those people on the basis of regulating the shale oil industry and managing our last oil resources for the long term, for our children, and they start whining like little girls. 

 

[wrs + 893]

12 hours ago, Mike Shellman said:

A hypothetical break'even oil price is the worse metric ever invented to analyze the future of US shale oil. It discounts completely the cost of paying back long term debt and all those tens of thousands of shale oil wells that were drilled in America 5-6 years ago that now can never be paid back. It implies that nobody entering into their 2nd marriage has baggage. Every shale oil company in America is racked with debt. 

Break'even changes regularly with regard to product prices, hedging, debt maturities, interest rates, slowing production and associated decline in revenue streams, market availability, market deductions, the quality of LTO and where, and if, it can be utilized, the value of the dollar, American energy policy, unrest in the Middle East and a host of other issues; the longer legacy debt is deferred, the harder it gets to pay it back and the higher "break'even" prices get.

Break'even was invented by the shale oil industry just a few years ago for a reason...it implies that any price over break'even means the shale oil industry is kicking ass. Its good news and no body in America likes bad news; the US shale oil industry is a master of deceit. The truth about shale oil profitability is in the current financial condition of the US shale oil industry and the SEC filings it must lawfully make, every quarter;  whether it is profitable, or not, and how fast it can get out of long term debt before its assets no longer cover its liabilities. Everything else is essentially just...bullshit. Don't be conned by break'even. Its meaningless. The MSM loves it because it is not capable of understanding well economics or doing its SEC homework.  

 

So how is it without actually working in a shale company or for a shale company and never having operated, frac'd or drilled a shale well, you are the expert?  Your opinion is stated as fact and yet I have heard these same things said of many industries that were built on debt prior to this.  How do you think the telecom industry was built back in the 90s?  Debt and stock that went to zero.  Did the telecom industry survive?  It absolutely did.  So will shale.  The word is consolidation and the weak players will fall to the stronger ones.  It's a normal business cycle, bad operators will be washed out.

People do strange things.  Back in 2011-2013 the Eaglebine was going to be a big deal.  We were getting offers to lease our acreage in East Texas all the time.  I told my sister that we needed to close one of these before the free money went away and we almost closed a pretty good deal on about 2000 acres with Range Resources at $450/ac bonus which was OK but not great. That deal fell through in the fall of 2012 and I thought we missed the window but free money continued to flow and a small startup ZaZa ended up paying us $700/ac for 3400 acres of minerals on a number of disparate tracts because they thought they could flip it to EOG which never happened.  We took the free money and never looked back.  No wells were drilled, it was all some kind of financial game.  The leases expired and  ZaZa no longer exists but they had a nice office in downtown Houston when they leased our Eaglebine holdings.  We cashed their checks and I made some improvements to my home with the free money and banked the rest.  

The long run will tell if shale is profitable or not.  I think it is but the dynamics are different than conventional because of the massive initial flow rates.  The wells can pay back a large part of the initial costs up front but the key is the lifespan of the wells.  I think that is what we are waiting to see and you don't know what that will look like any better than the people in the industry.  It's all guessing at this point and your crystal ball isn't any better than the rest of them.

I would tend to agree that breakeven is a marketing term made up to sell investments though.  Beyond that, what really matters is drilling good wells that will produce for years to come.  If that turns out to be the case with shale then it will be profitable and perhaps well after you and I are underground.

Edited May 27, 2019 by wrs

[Old-Ruffneck + 1,239]

1 hour ago, Mike Shellman said:

The question the gentleman asked was whether $60 is still considered a good number for break'even prices.

Seems a lot of folks have difference of views on break'even prices. I tend to go to the higher side of 50's as end product. A lot goes into the end product, not just spud, drill, complete. Each well is it's own beast. Loving County wells might be in the 40's, Reeves County in the 30's, Pecos County in the 70's. There is no real truthful numbers out there but as rigs are dropping that's a tell the money end isn't getting what they paid for. Frac'ing is a useful way to get oil, but mismanagement yet again seems to be par for the course. I'll be back in Ft. Stockton in September and I can bet half the RV trailers will be gone. 

[AcK + 50]

On 5/26/2019 at 6:22 PM, William Edwards said:

Apparently I try to be more objective than you, Auson. The chart does not read -- we do. The numbers are what they are and the spin is what we make it to be. Ofttimes that spin merely reflects the pre-conceived notions of the spinner. 

My reading continues to be that we are still declining, based upon a 30-year cycle, from the 2012-14 bubble. My assessment is supported by both historical data and logic. Can you make a similar case for your "spin"?

I might also caution that reactions to daily, hourly or weekly "world falling apart" attitudes are probably not reliable.

>> we are still declining, based upon a 30-year cycle, from the 2012-14 bubble.

Agree - we were hoping for WTI US$65 to cut our trades. It kissed but went downhill pretty quick from there.

>> The chart does not read -- we do.

This I disagree. The oil trading market has grown by leaps and bounds globally (including many regional offshoots). This reflects both hedging and speculative demand from (many) thousands of participants. That buy-sell information is worth a lot. Of course also the inherent ability of the trader /analyst reading it.

[Mike Shellman + 548]

13 minutes ago, wrs said:

We took the free money and never looked back.

Okeedokee.

I am not an expert on anything, just opinionated. The shale oil phenomena is a decade old; seldom in history has an uneconomical play like shale oil lasted this long without failing entirely. Why hasn't it? Because of borrowed money and cheap capital. Because it is too big and too important to fail and shale oil is now a handy foreign policy tool that this particular administration needs and will not allow to fail. Yes, there will be a few companies survive this mess and find a way to keep producing shale oil. Lets hope so. I don't get the reference to the telecom industry and debt; if you understood well economics, reserve replacement, the cost of debt and the role of decline/depletion in oil finances you would understand there is no comparison whatsoever. Again, the topic was breakeven prices. Not how much money you make, now how dumb or unethical stripper well operators are... breakeven prices. If you and the other man with no name want me to stop questioning your gravy train and not post here anymore, say so. Otherwise, find me some financial data that suggests the shale oil industry is healthy, can get us to the promised land, and nobody in America needs to ever worry about anything oily ever again.  

 

[wrs + 893]

30 minutes ago, Mike Shellman said:

Okeedokee.

I am not an expert on anything, just opinionated. The shale oil phenomena is a decade old; seldom in history has an uneconomical play like shale oil lasted this long without failing entirely. Why hasn't it? Because of borrowed money and cheap capital. Because it is too big and too important to fail and shale oil is now a handy foreign policy tool that this particular administration needs and will not allow to fail. Yes, there will be a few companies survive this mess and find a way to keep producing shale oil. Lets hope so. I don't get the reference to the telecom industry and debt; if you understood well economics, reserve replacement, the cost of debt and the role of decline/depletion in oil finances you would understand there is no comparison whatsoever. Again, the topic was breakeven prices. Not how much money you make, now how dumb or unethical stripper well operators are... breakeven prices. If you and the other man with no name want me to stop questioning your gravy train and not post here anymore, say so. Otherwise, find me some financial data that suggests the shale oil industry is healthy, can get us to the promised land, and nobody in America needs to ever worry about anything oily ever again.  

 

The reference to the telecom industry is that it was sold the same way as shale.  They were talking about fiber to the home back in the 90s and companies that made anything related to fiber were hot.  They mostly all went bankrupt because capacity was overbuilt and there was a lot of dark fiber left sitting in the ground at the time.  Now we have used all that bandwidth up and are clamoring for more.  There is fiber to the home now but it's 20 years later and probably not as profitable as it was originally claimed to be.

Free money is available in lot's of industries when they are getting started, money is made by hyping investments.  I watched this play out in high tech during the 90s right in my own back yard.  I was very involved in the high tech industry and never got any free money back then, just earned money selling tools to those that did.  As it was, their free money was my hard earned living.  I suspect that is true of what you perceive are  the malinvestments in shale.  Plenty of people making an honest and good living in shale right now.

Edited May 27, 2019 by wrs

[Old-Ruffneck + 1,239]

11 minutes ago, Mike Shellman said:

I am not an expert on anything, just opinionated. The shale oil phenomena is a decade old; seldom in history has an uneconomical play like shale oil lasted this long without failing entirely. Why hasn't it? Because of borrowed money and cheap capital. Because it is too big and too important to fail and shale oil is now a handy foreign policy tool that this particular administration needs and will not allow to fail.

BINGO!! 

This style of drilling is not that new, was too expensive 15 yrs ago and we had enough oil as we were helping the KSA and Venezuela to literally by the mmb's per day. Once pricing started to rise for no real good reason other than fear/geopolitical, and there was a lot of money in the investment sector. People's folks dying off, the WW2 generation that saved, their kids were like kids in a candy store. I am sure someone could come up with a graph relating to that. As an old rough-neck a lot has changed, but has it really?? 

[William Edwards + 708]

21 minutes ago, Old-Ruffneck said:

BINGO!! 

This style of drilling is not that new, was too expensive 15 yrs ago and we had enough oil as we were helping the KSA and Venezuela to literally by the mmb's per day. Once pricing started to rise for no real good reason other than fear/geopolitical, and there was a lot of money in the investment sector. People's folks dying off, the WW2 generation that saved, their kids were like kids in a candy store. I am sure someone could come up with a graph relating to that. As an old rough-neck a lot has changed, but has it really?? 

You identified the root of the problem with your statement "pricing started to rise for no real good reason".  Price eventually determines both consumption and production levels. If the price signal is distorted, by whatever means, the industry responds accordingly. And prices that are too high can cause ridiculous investments.

[Ward Smith + 6,615]

3 hours ago, Old-Ruffneck said:

Seems a lot of folks have difference of views on break'even prices. I tend to go to the higher side of 50's as end product. A lot goes into the end product, not just spud, drill, complete. Each well is it's own beast. Loving County wells might be in the 40's, Reeves County in the 30's, Pecos County in the 70's. There is no real truthful numbers out there but as rigs are dropping that's a tell the money end isn't getting what they paid for. Frac'ing is a useful way to get oil, but mismanagement yet again seems to be par for the course. I'll be back in Ft. Stockton in September and I can bet half the RV trailers will be gone. 

This. Every single well is different. There's no monolithic "break even" point for an industry, it's just a notion. Back at the beginning, they just went down a mile and out a mile on the horizontal. They were trying to stay in a target zone that was only 17 feet thick, and they were trying to drill as fast as they could at the same time. How successful do you think they were? Nowadays they do logging while drilling with sophisticated analysis gear, and the drills are vastly superior. We'll have to wait and see how the new approaches shake out. Technology marches onward. 

Here's a counter hypothetical. What is Saudi Aramco's break-even price? 

[Old-Ruffneck + 1,239]

1 hour ago, Ward Smith said:

This. Every single well is different. There's no monolithic "break even" point for an industry, it's just a notion. Back at the beginning, they just went down a mile and out a mile on the horizontal. They were trying to stay in a target zone that was only 17 feet thick, and they were trying to drill as fast as they could at the same time. How successful do you think they were? Nowadays they do logging while drilling with sophisticated analysis gear, and the drills are vastly superior. We'll have to wait and see how the new approaches shake out. Technology marches onward. 

Here's a counter hypothetical. What is Saudi Aramco's break-even price? 

There IS NO monolithic being my point. Back when I was ruffneckin' we drilled to specific footage set by the loggers, case, and move to next hole. Slumber would then come in an complete, or Halli. But we were drilling from 13500 to 21k and was a totally different style. Mud change from brine to inverted mud around 15k and didn't get any extra pay for it. Back then the derrickman took the visc readings and added accordingly. I personally liked working derricks, peaceful and whole lot safer. But I was motorman couple years, and actually I didn't care where I worked as long as I worked. I worked Tom Brown drilling outta Odessa last 4 years when Reaganomics killed the fields for awhile. In West Texas in 84-85 ya couldn't buy a job. Boom/Bust the cycle still goes on. Gotta commend @Mike Shellmanhangin' tuff all them years.

[David Jones + 84]

On ‎5‎/‎26‎/‎2019 at 12:54 PM, James Regan said:

I think there is some truth that we have definitely hit the peak. In my lifetime in the E&P sector working all corners of the globe for US Companies with US Hardware we would constantly ask the question WTF are we doing here, be it deepest darkest Africa, Arctic East, Arctic West, Baku or Patagonia. The common denominator was the fact we were working for US IOCs and the reason was that in order to protect the USAs regional oil reserves for a later date, how much later we did not know “ never in your life time son” I was told, I’m now 52 at 20 you believe anything! So after seeing convoys of VLCCs round tripping from Offshore Angola to Galveston and oil wells being produced at negligent and reckless rates in order to rob as much oil as possible as fast as possible, I have come to the conclusion that we have reached that time and the plan seems to be working that plan to take the worlds oil and then fall back on untapped regional oil (Shale) and try to exact world domination. 

I just thought it would never be in my lifetime.....🤔

Only that these shale reserves seem to be rather flaky and the idea of "global domination" is likely untannable at this point. The world seems to be even messier than it has been in the past which suggests any sort of long term "domination" plan is likely to backfire in unfortunate ways. We also have much greater issues to worry about than the above, regardless of whether many here acknowledge them. There's certainly no effective protection from AGW that any country might think of deploying other than actually reducing GHG emissions substantially over the next 30 years. The effects are broad spectrum and they can't be contained by borders or armies.

Edited May 28, 2019 by David Jones

[David Jones + 84]

On ‎5‎/‎26‎/‎2019 at 7:10 PM, Ward Smith said:

I'll admit I called a congresswoman Occasional Cortex. That might be an insult and it's certainly amusing (at least to me), but the reality is probably closer to Rare-if-ever Cortex. You I called a genius, perhaps that was an insult? Were you really there on oildrum, beating the drumbeat of Hubbert's Peak? The oil is there, the will to produce it? Who knows? 

Will we see $100 oil again? Absolutely, guaranteed. But does that indicate Greater value? Or will it indicate a devaluation of our currency? Could be a bit of both. 

I'll reiterate my point on $100 oil (which is for the moment assumed with adjusted dollars for inflation but even a hard value of 100 without adjustments is not out of the question at this point), the only way to get there is likely with a far smaller industry. As the industry begins to shrink the prices can increase but that would indicate a death spiral so not exactly a rosy situation. Any other +100 buck hit will likely be short lived assuming it ever occurs, as the various oil market manipulators will undoubtedly act to contain higher prices in order to safeguard demand. Especially since most of the demand growth is coming from less wealthy nations that are at high risk to AGW damages. Whether you believe the issue or not, those countries are likely concerned about the effects and will act as best they can. Certainly the fact that their investments relative to GDP are considerably higher than in developed nations would suggests the above. High oil prices would give them the perfect opportunity to accelerate their transition efforts and the greater oil industry is no doubt very aware of this fact regardless of what they might say in public.

[Ward Smith + 6,615]

10 hours ago, David Jones said:

I'll reiterate my point on $100 oil (which is for the moment assumed with adjusted dollars for inflation but even a hard value of 100 without adjustments is not out of the question at this point), the only way to get there is likely with a far smaller industry. As the industry begins to shrink the prices can increase but that would indicate a death spiral so not exactly a rosy situation. Any other +100 buck hit will likely be short lived assuming it ever occurs, as the various oil market manipulators will undoubtedly act to contain higher prices in order to safeguard demand. Especially since most of the demand growth is coming from less wealthy nations that are at high risk to AGW damages. Whether you believe the issue or not, those countries are likely concerned about the effects and will act as best they can. Certainly the fact that their investments relative to GDP are considerably higher than in developed nations would suggests the above. High oil prices would give them the perfect opportunity to accelerate their transition efforts and the greater oil industry is no doubt very aware of this fact regardless of what they might say in public.

The single best corollary to the petroleum industry is the whaling Industry. It had its ups and downs, its price and supply fluctuations, its own diminishing returns. If nothing else, the petroleum industry saved the whales long before narcissistic actors got on that particular bandwagon. Interestingly however, whale oil is still sold today at comparatively stratospheric prices on a per bbl basis (BTW whale oil was typically sold in 30 gallon barrels, not the 42 gallon blue barrel of the standard oil company fame). You can buy an ounce of it for about $20 today. Imagine oil selling by the ounce? 

[Enthalpic + 1,496]

2 hours ago, Ward Smith said:

The single best corollary to the petroleum industry is the whaling Industry. It had its ups and downs, its price and supply fluctuations, its own diminishing returns. If nothing else, the petroleum industry saved the whales long before narcissistic actors got on that particular bandwagon. Interestingly however, whale oil is still sold today at comparatively stratospheric prices on a per bbl basis (BTW whale oil was typically sold in 30 gallon barrels, not the 42 gallon blue barrel of the standard oil company fame). You can buy an ounce of it for about $20 today. Imagine oil selling by the ounce? 

It is true that replacements for whale oil products did a lot to save them.  As for "narcissistic actors" do you hate everyone who attempts to care for environment by default?  Maybe you need to go for a hike...

Vaseline does it, and its invention came from the death of the whaling industry.  

https://en.wikipedia.org/wiki/Petroleum_jelly#History

 

 

 

[Auson + 123]

14 hours ago, David Jones said:

I'll reiterate my point on $100 oil (which is for the moment assumed with adjusted dollars for inflation but even a hard value of 100 without adjustments is not out of the question at this point), the only way to get there is likely with a far smaller industry. As the industry begins to shrink the prices can increase but that would indicate a death spiral so not exactly a rosy situation. Any other +100 buck hit will likely be short lived assuming it ever occurs, as the various oil market manipulators will undoubtedly act to contain higher prices in order to safeguard demand. Especially since most of the demand growth is coming from less wealthy nations that are at high risk to AGW damages. Whether you believe the issue or not, those countries are likely concerned about the effects and will act as best they can. Certainly the fact that their investments relative to GDP are considerably higher than in developed nations would suggests the above. High oil prices would give them the perfect opportunity to accelerate their transition efforts and the greater oil industry is no doubt very aware of this fact regardless of what they might say in public.

$100 Dollars can, has been and will be printed in a nano second. Millions of times over. As yet we are unable to print a barrel of oil.

[Ward Smith + 6,615]

6 hours ago, Enthalpic said:

It is true that replacements for whale oil products did a lot to save them.  As for "narcissistic actors" do you hate everyone who attempts to care for environment by default?  Maybe you need to go for a hike...

Vaseline does it, and its invention came from the death of the whaling industry.  

https://en.wikipedia.org/wiki/Petroleum_jelly#History

I don't hate anyone, but I don't suffer fools, hence our disagreements. 

If you believe Hollywood actors are such environment lovers you should indeed take a hike, right through Malibu. Those McMansions aren't there to save the turtles, who used to breed on those beaches. They're there to reflect the blatant narcissism of their owners. 

[Enthalpic + 1,496]

21 minutes ago, Ward Smith said:

I don't hate anyone, but I don't suffer fools, hence our disagreements. 

If you believe Hollywood actors are such environment lovers you should indeed take a hike, right through Malibu. Those McMansions aren't there to save the turtles, who used to breed on those beaches. They're there to reflect the blatant narcissism of their owners. 

By actor I meant "a participant in an action or process" - not everything is Hollywood. 

Insults to me are like a gentle rain on the backside of a mountain.

Edited May 29, 2019 by Enthalpic

[David Jones + 84]

11 hours ago, Auson said:

$100 Dollars can, has been and will be printed in a nano second. Millions of times over. As yet we are unable to print a barrel of oil.

The idea being that we have to produce oil until the end of time or until it inevitably runs dry and society collapses? This may have been true a century ago, it's not really true today and certainly won't be true in another 20 years time as alternatives expand and solidify their capabilities.

[D Coyne + 305]

On 5/26/2019 at 11:06 PM, William Edwards said:

The lessons of history and the pricing mechanism are the two main reasons for my assesssment. On an inflation-corrected basis, world crude price has averaged less than $40/B for the past 160 years. The 30-year cycle in vogue since 1970 swings above that average and then swings below that average. It has been above the average for 15 years. Time for the "below $40"for the next 15 years. $25/B is my guess of the rough lined-out bottom.

IMO 2020 could chop another $10/B off of that number if Canada, Saudi Arabia, Iraq Venezuela, Russia and Kuwait don't wake up soon.

Mr. Edwards,

I just want to make sure I understand you correctly.  You expect the Brent Oil Price in 2018 US$ will be between $25/b and $40/b over the 15 years from 2019 to 2034, with perhaps an average of about $33-$35/b in 2018 US$.  And possibly a bottom as low as $15/bo, an oil price not seen since 1972?  For nominal oil prices, we did see $12/b for Brent centered 52 week average oil price as recently as 1998, so perhaps it is a possibility we might return to that low point, if Iranian, Venezuelan, and Libyan oil production all comes back online at about the time that Canadian oil sands production finds an easier way to refineries.  This seems a low probability (about 5% or less) event.

Note that about 1130 Gb of C+C was produced from 1971 to 2018, of 1380 Gb cumulative C+C produced by the end of 2018.

As the resource becomes more depleted it is likely to become more expensive to produce on average.  At under $40/b there is not enough oil that can be produced profitably to meet World demand for C+C at that oil price, so a 15 year time period with the average price of oil below $40/b is not likely to occur until perhaps 2050 to 2065 when the rise of electrified land transportation and more efficient water and air transport might reduce demand for C+C to relatively low levels.

From 1988 to 2003, the average price of oil was indeed $33/bo in 2017$ and perhaps you believe this will be repeated.  Note that the average oil price from 1971-2017 was about $57/bo, and from 1994-2017 the average oil price was $61/bo with a range in annual average oil price from $19/b (1998) to $121/b(2011) in 2017$.  The earlier 1971-1993 period had average oil prices at $52/b in 2017$.

Note that the chart's linear trend suggests Mr Kirkman's "hoped for" $70/b is about right for 2015, in 2019 the trend line is at about $74/bo.

Edited May 29, 2019 by D Coyne