Falling oil prices could spark global turmoil?

[gloom111]

God the ignorance. The US isnt anywhere near energy independent. We still produce only half of what we consume and thats not going to change despite the crack pipe being passed around in the media. Oil prices arent falling either. The only reason imports are falling is because total US consumption has fallen around 10% in the last 5 years. Our economy has contracted significantly... Imports have dropped far more than production has risen. Outright collapse is not a bad word to describe what is happening, at least from a historical sense.

US oil production will not return to where it was in the 1970s or even the 1980s. All the sweet spots in places like the bakken have already been peppered with ridiculously expensive wells.

There are other sources of oil being exploited in the US outside of liquid crude, and while I will agree that we aren't likely to reach previous records of oil production, it doesn't mean that our oil production which is up, isn't having an effect. The stagnant economic recovery and engineering have continued to keep consumption down since 2008 like you said, while US oil production rose in 2012 by 14%, which is a very large increase.

http://money.cnn.com/2013/06/19/news/economy/us-oil-price-opec/index.html

Should we continue to increase our production above the global demand, prices will fall. Yes, I know, they just jumped $.25 in two weeks because of political instability in yet another middle eastern country, but Egypt only contributes a bit more than half a million barrels a day as opposed to 30 million collectively produced by Saudi Arabia, Russia, and the United States every day.

http://www.indexmundi.com/g/r.aspx?v=88

The United States produces about half as much oil as we use. We use about 20 million barrels a day, and are currently only producing 10 million barrels a day.

http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6

So you're correct, we have some ways to go before we reach energy independence.

 

[Doppel]

God the ignorance. The US isnt anywhere near energy independent. We still produce only half of what we consume and thats not going to change despite the crack pipe being passed around in the media. Oil prices arent falling either. The only reason imports are falling is because total US consumption has fallen around 10% in the last 5 years. Our economy has contracted significantly... Imports have dropped far more than production has risen. Outright collapse is not a bad word to describe what is happening, at least from a historical sense.

US oil production will not return to where it was in the 1970s or even the 1980s. All the sweet spots in places like the bakken have already been peppered with ridiculously expensive wells.

Yes the US imports a lot of oil. However before we call others ignorant let us realize that US oil production is up steeply in the past few years (your graph fails to note this). Let us also promise to never again use the term energy independence as a synonym for oil production. Your second sentence is wildly incorrect.

US oil production up 14% in the last year. In feb of this ear Citigroup said within five years the US may need to import oil only from Canada.

 

[cubby1223]

Cubby's numbers are a bit off--CIA says 45% of GDP and 80% of gov revenues are from oil but even those numbers spell doom for the country should prices drop much or for long.

I pulled them off of the wikipedia page on Saudi Arabia's economy, take it for what it is.

 

[dud]

http://money.msn.com/now/post--booming-us-oil-production-may-be-just-beginning


Excerpt:

"Leonardo Maugeri, a former senior executive at Italian oil giant Eni (ENI +1.02%), is a fellow at the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government. Last month he issued a paper on the U.S. oil shale boom after analyzing data from more than 4,000 shale wells and from about 100 oil companies involved in shale oil exploration.


According to his findings, the U.S. may end up producing 5 million barrels of shale oil daily by 2017, becoming the world's largest oil producer as it churns out up to 16 million barrels of oil per day, including shale, conventional, liquefied natural gas and biofuels.


"The nature of shale oil production makes it particularly suited for the United States' industrial, financial, demographic, and geologic landscape," notes a Belfer Center policy brief on Maugeri's paper. "These same characteristics make the expansion of the shale phenomenon to other parts of the world improbable -- at least in the short term."


Indeed, Sieminski noted in his recent testimony that the rate of onshore oil production in the lower 48 states has been remarkable, rising to more than 2 million barrels a day, an increase of 64%, just between February 2010 and February 2013. During that period, Texas more than doubled its oil production, while North Dakota nearly tripled its output.


But Maugeri acknowledges that oil production will always depend on oil prices and that his forecast assumes the price will hold steady or perhaps decrease slightly. "If the oil price drops to below $65 per barrel," the brief says, "production could drop off substantially.""

 

[moonbogg]

Calm down. Everything is fine.

 

[lothar]

How did these countries survive when oil was $30/barrel during the Clinton years?

 

[dud]

Calm down. Everything is fine.

I agree. I just found it ironic how much things quickly things had changed. It is diametrically opposite to this thread ... that has over 4,500 postings:


http://forums.anandtech.com/showthread.php?t=2126754



My guess is that as more oil "floods" the market the price will fall, eventually settling somewhere in the $60 - $90 range. Those countries that depend heavily on oil revenues will have to reconcile these reduced prices with their fiscal domestic obligations. Will there be domestic instability in these countries due to reduced revenues (and payouts)??? Perhaps, but only time will tell.

 

[desy]

Wishful thinking
"Just how much crude oil comes into the U.S.? The country in April was importing around 7.7 million barrels per day, according to the U.S. Energy Information Administration."


All this optimism is based on EIA projections which are WRONG way more often than right

http://energypolicyforum.org/2012/12/06/department-of-energy-new-reports-on-exportation/

For instance, EIA, by its own admission, states that they had overestimated crude oil production 62% of the time; they had overestimated natural gas production 70.8% of the time; and they had overestimated natural gas consumption 69.6% of the time. Not the best track record by anyone’s estimation except perhaps EIA’s.

It is also noteworthy that EIA had overestimated the energy intensity ratio a whopping 96.5% of the time. This is a ratio of total energy consumption and GDP. They tended to overestimate energy consumption and underestimate growth in GDP.

In short, EIA is not very good at forecasting. But what is even more interesting is that Dr. Montgomery, the lead author of this new study, was once in charge of models and forecasts at EIA. Both NERA and Deloitte used EIA forecasts as the basis of their report models. Deloitte even stated that they considered EIA’s forecasts to be too conservative in spite of the fact that EIA has not projected natural gas demand accurately 70% of the time.

As any student of economics soon learns, economic models are only as good as their inputs. In fact, it is neither difficult nor unusual for models to be designed to favor one outcome over another. In other words, models can be essentially reverse engineered. This is especially true when the models have been commissioned by industries that stand to gain significantly in monetary terms. Or government agencies which are perhaps pushing a political agenda.

 

[desy]

http://www.ft.com/cms/s/0/ec3bb622-c794-11e2-9c52-00144feab7de.html#axzz2ZiENmknU

Fine don't believe me how about the head of Total? Peak oil is cheap oil, what's left isn't cheap, period

"Christophe de Margerie, chief executive of Total, the French oil producer, last month warned that technology is not reducing marginal costs in the oil industry."

“Net income margins in the sector are now at the lowest in a decade,” the firm said after reviewing the economics of the world’s 50-largest listed oil companies. “This is not sustainable. Either prices must rise or costs must fall,” it added

Sanford C. Bernstein estimates that the marginal cost of oil production has increased about 250 per cent over the last decade, rising from just under $30 a barrel in 2002 to a record of $104.5 a barrel last year. At the same time, cash costs have risen from $9.70 a barrel in 2002 to $44.20 a barrel last year.

 

[Engineer]

How did these countries survive when oil was $30/barrel during the Clinton years?

$30? How about $10.25 (and $0.49 gas here in parts of Kentucky)!!!

(yes, the above is accurate - filled my car up with 14 gallons of gas in Corbin, KY for $7.00 - $0.49 per gallon. Gas in Lexington dropped to $0.59 at the same time).