Rapid drop in Petroleum prices could be a warning....

[ralfy]

This is just nonsense. It's a supply side cause not demand. The economy is doing pretty good, at least in the US.

The problem is lower demand. More details are explained in the link found here:

http://forums.anandtech.com/showpost.php?p=36956739&postcount=30

 

[OverVolt]

Are you talking about shorting oil futures? You would lose a lot of money. If not, are you saying our country depends on high oil prices? If so, that's not true. There are certain sectors that definitely benefit from high oil prices, but there are far more sectors that benefit from low ones.

The only downside to lower oil prices right now is that we are trying to increase inflation in the US overall right now.

Nope! Talking about deflation and making it more difficult to pay off loans.

 

[feralkid]

Two words: American Shale.

We're crushing the Middle East right now.

Watch how short lived "right now" can be.

 

[cabri]

Nuclear power has low energy returns and quantity:

http://www.theoildrum.com/node/3786

and isn't a source of petrochemicals, which we also need.

If power that is generated by nuclear energy is available, then that oil is now available for non energy needs.

 

[desy]

The fix is to exploit all alternatives
Nuclear solar wind hydro and potentials like hydrogen or geo thermal and then build an adequate electrical storage system as we have many ways to produce electricity just crappy ways to store it.
Fossil fuels are awesome storage and have been for millions of year.

 

[Fern]

The problem is lower demand. More details are explained in the link found here:

http://forums.anandtech.com/showpost.php?p=36956739&postcount=30

I think it's a function of both.

IIRC, global oil production has been increasing.

The global oil consumption data I've seen suggests it has continued to rise. However, it may be that for various reason (better gas mileage, slower economies) consumption is not rising as rapidly as could be expected.

Fern

 

[charrison]

Technology can increase production, but what is being employed has been known since the 1980s. In fact, shale oil is being used now not because it is a newly discovered resource but because crude oil production costs are now as high as that of shale oil.

Well if you mean fracking, that is been around for about 60 years. If you mean horizontal drilling with fracking, that was not really successful till about 2005 in the barnett shale. Horizontal drilling with fracking does cost most, so it does need prices to be higher to support it being a viable option.

If it is true that technology will help, then we should be seeing crude oil production ramped up considerably and marginal costs dropping. Neither is taking place. In fact, crude oil production barely went up even as oil prices tripled.

Horizontal drilling and fracking costs have fallen over the past 10 years and recovery has been increased as well. Costs for fracking are in fact dropping and extraction has increased. Texas has gone from producing 1Mbarrels/day a few years ago to over 3M barrels a day today. Texas now produces more oil than Iraq.

Finally, peak oil isn't about reserves but the effect of the cost of production. That's why even with large reserves of crude oil, we are now resorting to shale oil.

[/quote]

No peak oil is in fact about the decline of a reservoir. As new technology advances, what we can extract changes.

 

[ralfy]

If power that is generated by nuclear energy is available, then that oil is now available for non energy needs.

The energy requirement for the future is equivalent to one Saudi Arabia in new oil every seven years. I think the source has to provide both energy and petrochemicals plus an energy return equivalent to that of 1970s oil. Otherwise, one SA will be needed every three years or so:

http://www.theguardian.com/environm...um-geologist-peak-oil-break-economy-recession

 

[ralfy]

I think it's a function of both.

IIRC, global oil production has been increasing.

The global oil consumption data I've seen suggests it has continued to rise. However, it may be that for various reason (better gas mileage, slower economies) consumption is not rising as rapidly as could be expected.

Fern

The increase in oil production comes from shale, which with crude now have high marginal costs. That why capex together with debts have been rising considerably.

Also, efficiency in capitalist systems usually leads to continued consumption, as unused oil is sold to others for profit.

Given that, at least for the U.S. it's likely not better mileage but fewer miles traveled due to economic crisis that has been leading to lower demand:

http://ourfiniteworld.com/2013/01/31/why-is-us-oil-consumption-lower-better-gasoline-mileage/

 

[ralfy]

Well if you mean fracking, that is been around for about 60 years. If you mean horizontal drilling with fracking, that was not really successful till about 2005 in the barnett shale. Horizontal drilling with fracking does cost most, so it does need prices to be higher to support it being a viable option.

It's been employed not because it's cheap but because crude oil production has gone up. What the global economy needs is production cost lower than $30 a barrel.

Horizontal drilling and fracking costs have fallen over the past 10 years and recovery has been increased as well. Costs for fracking are in fact dropping and extraction has increased. Texas has gone from producing 1Mbarrels/day a few years ago to over 3M barrels a day today. Texas now produces more oil than Iraq.

My understanding is that it has gone up because new oil is becoming increasingly difficult to extract. That's why capex and debt levels have been rising considerably:

https://www.youtube.com/watch?v=dLCsMRr7hAg

No peak oil is in fact about the decline of a reservoir. As new technology advances, what we can extract changes.

Peak oil is not about reservoir decline but a drop in production due to lower energy returns:

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

and technology cannot catch up. That's why we're now resorting to shale oil even with considerable crude oil reserves.

 

[charrison]

It's been employed not because it's cheap but because crude oil production has gone up. What the global economy needs is production cost lower than $30 a barrel.

Completely missed my point on timeline of the technology....

My understanding is that it has gone up because new oil is becoming increasingly difficult to extract. That's why capex and debt levels have been rising considerably:



https://www.youtube.com/watch?v=dLCsMRr7hAg

They did not start horizontal fracking until prices on oil where above $80. Today companies can be profitable in the $40-60 range.

Peak oil is not about reservoir decline but a drop in production due to lower energy returns:

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

and technology cannot catch up. That's why we're now resorting to shale oil even with considerable crude oil reserves.

the first paragraph from your link....
Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which the rate of production is expected to enter terminal decline.[1] Peak oil theory is based on the observed rise, peak, (sometimes rapid) fall, and depletion of aggregate production rate in oil fields over time

 

[desy]

Yes it says decline in production and max flow rate, no reservoir will get completely empty because it just becomes to hard to get there is still oil there
Thye have also changed what is considered an oil reservoir, tar sands is bitumen not oil
Condesates from Natural Gas are not oil, Ethanol is not oil all those things + shale oil are what is combining to the increase.
Considering how quickly shale decrease and combined with the fact they have cherry picked the best drill sites in those formations

New U.S. oil and gas well November permits tumble nearly 40 percent

(Reuters) – Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.

Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.

The pullback was a “very quick response” to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info.

New permits, which indicate what drilling rigs will be doing 60-90 days in the future,showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota’s Bakken shale.

The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.

“To a producer in Wyoming, if Brent’s $70 then I’m at $50, then I have to start asking does it economically make sense to keep drilling,” Auers said yesterday. “They might start reallocating capital, you might see projects slowed or shut down.”

 

[Fern]

I think it's a function of both.

IIRC, global oil production has been increasing.

The global oil consumption data I've seen suggests it has continued to rise. However, it may be that for various reason (better gas mileage, slower economies) consumption is not rising as rapidly as could be expected.

Fern

Wanted to add that I read the Saudi's dropped the price of their oil again today.

So, aside from any supply/demand effects on prices we've got some unique 'business plays' affecting it. I.e., the current price is affected by more than just supply and demand.

Fern

 

[dmcowen674]

Wanted to add that I read the Saudi's dropped the price of their oil again today.

So, aside from any supply/demand effects on prices we've got some unique 'business plays' affecting it. I.e., the current price is affected by more than just supply and demand.

Fern

Ya think

 

[ElFenix]

i think OP's article gets the timeline wrong. the financial collapse had already started before the price of oil started falling (though it didn't peak until after the price of oil started falling).

Wanted to add that I read the Saudi's dropped the price of their oil again today.

So, aside from any supply/demand effects on prices we've got some unique 'business plays' affecting it. I.e., the current price is affected by more than just supply and demand.

Fern

the saudis supplying more because they think its in their long-term business interests to tamp down on US production is still supply and demand.

 

[Attic]

What else makes sense to add to the chart? The crash in Oil prices is a big deal, that's without question. Figuring the result, probably not beyond the scope of our collective make up, but a greased pig is nonetheless the image coming to mind.

 

[Svnla]

I drove to Louisiana earlier today for business and stopped by a fast food place. I saw a few guys in Baker Hughes shirts with to go orders. I chatted with them a little bit and asked them how business. They said business is still going great and they have their orders to go so they can work all night tonight to finish a big job on time. They said natural gas price is still steady and not bad at all.

Good for them.

Look like natural gas is still fine, for now. Oh, and gas was about $2.35/gal for regular in Louisiana.

 

[Zorkorist]

Nuclear power has low energy returns and quantity:

http://www.theoildrum.com/node/3786

and isn't a source of petrochemicals, which we also need.

LOL, no.

Nuclear Energy returns equal or better fossil fuel returns.

http://www.eia.gov/electricity/annual/html/epa_08_01.html

All we are doing is boiling water. If you want to use fossil fuels to boil water, when we can do it by a clean, nuclear reaction, you are sick.

Those fossil fuels should be preserved for posterity, not burned up.

-John

 

[Zorkorist]

What else makes sense to add to the chart? The crash in Oil prices is a big deal, that's without question. Figuring the result, probably not beyond the scope of our collective make up, but a greased pig is nonetheless the image coming to mind.

2008 was when Obama was elected.

-John

 

[sportage]

Not to worry folks.
As I posted in another thread, my family owns 80 acres of oil in ND and leases the land to oil companies to drill.
A few of my relatives actually work the oil rigs on this land.
In the last 3 days the leasing companies have started shutting down wells in attempts to control the pricing of oil.
I kinda doubt this really has much of an impact on gas prices, but what the hey. Give it a try. Right?
To play it safe, I'd fill up on the way home while prices are still fairly cheap.
Can this leak of information considered inside trading?
I know nothing... I see nothing...

 

[charrison]

Not to worry folks.
As I posted in another thread, my family owns 80 acres of oil in ND and leases the land to oil companies to drill.
A few of my relatives actually work the oil rigs on this land.
In the last 3 days the leasing companies have started shutting down wells in attempts to control the pricing of oil.
I kinda doubt this really has much of an impact on gas prices, but what the hey. Give it a try. Right?
To play it safe, I'd fill up on the way home while prices are still fairly cheap.
Can this leak of information considered inside trading?
I know nothing... I see nothing...

Well permits have already fallen 30-40% due to price pressures in the US. Producers are having to realign their targets to drill well that will be economics at lower prices points. This should be a surprise to no one.

 

[Zorkorist]

As someone that has profited from the boom, I'm only surprised by the speed of the collapse.

Totally irrational. Total speculation.

Gambling.

This is our energy strategy. Rape the planet, and hope you can sell your fossil fuel profitably.

-John

 

[OverVolt]

Everybody with 2 brain cells knew ND was going to boom and bust.

 

[Zorkorist]

We haven't seen gas prices this low at retail, in a long time.

I'm happy to see the competition from new technologies (fracking) that are driving it.

North Dakota, is still ready, willing and able to produce oil, just the Arabs, can produce it for a lot less.

We should U-turn, and be on Nuclear Energy.

Talk about energy independence...

-John

 

[ralfy]

Completely missed my point on timeline of the technology....

Recent technologies for fracking are not new. The reason they are being employed now is because the marginal cost for crude oil is high. The reason for that is peak oil.

They did not start horizontal fracking until prices on oil where above $80. Today companies can be profitable in the $40-60 range.

That's my point. And the price went up because marginal costs are high. Marginal costs are high because of peak oil.

the first paragraph from your link....
Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which the rate of production is expected to enter terminal decline.[1] Peak oil theory is based on the observed rise, peak, (sometimes rapid) fall, and depletion of aggregate production rate in oil fields over time

That's right. It's not about reserves.