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Gail Tverberg: This Is The Beginning Of The End For Oil Production

With the recent collapse in the price of oil, Gail Tverberg, returns to discuss the likely impact on the US shale oil industry, as well as the global market for oil. Gail is a professional actuary who applies classic risk assessment procedures to global resources: studying issues such as oil & natural gas depletion, water shortages, climate change, etc. These days, she writes at her website OurFiniteWorld.com . While as an actuary, Gail is one to avoid hyperbole and the let the numbers speak, her analysis of the outlook for future oil production is nothing short of dire: What we need is cheap energy. We need cheap, liquid oil. When it’s high-priced it really messes up the economy. We need oil to run our cars and to operate our trucks and such things, but it needs to be cheap. And it suddenly is today. But, you have to be able […]

Posted On : Published By : ASPO-USA
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BP PLC, Shell PLC And Petrofac PLC: Why Peak Oil Theory Was Wrong

Photo: Berardo62. Cropped. Licence: https://creativecommons.org/licenses/by-sa/2.0/ During the 1990s, the oil price was around $10-20 a barrel. Petrol was cheap and SUVs and gas guzzlers were selling in record numbers. Oil company share prices were low and there was next to no oil exploration. Yet wells from the North Sea to Saudi Arabia were still producing oil — after all, once an oil well has been drilled, the costs of actually pumping out hydrocarbons are marginal. A perfect theory? But since there were few discoveries of oil, and as current reserves dried up, production inevitably fell. Round about the turn of the century, inventories started to slide and oil prices began to rise. These rises gathered momentum and soon the oil price was reaching all-time highs, peaking at $147 a barrel. The effects of these high commodity prices rippled around the world. The shares of companies like BP (LSE: BP.), Shell (LSE: RDSB) and Petrofac (LSE: PFC) soared. Lord Browne, at that […]

Posted On : Published By : ASPO-USA
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U.S. Department of Energy: Our forecasts aren’t really forecasts (or are they?)

Put this in the category of things that can’t be true, but that are nevertheless affirmed with a straight face: The U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, does not issue forecasts, at least not long run forecasts. So says Howard Gruenspecht, deputy administrator of the EIA,  in a letter  to  Nature , the respected science journal. Gruenspecht was responding to  recent coverage  of an alleged EIA forecast which paints a rosy picture of U.S. domestic oil and natural gas production through 2040, a view challenged by the article in question. Here is the bureaucratese from the letter: "Contrary to the presentation in the  Nature article, EIA does not characterize any of its long run projection scenarios as a forecast." Long run projection scenarios….huh. What could those actually be if not forecasts? And, why is the deputy administrator making such a big […]

Posted On : Published By : Tom Whipple
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Dumb and Dumber: U.S. Crude Oil Export

Exporting crude oil and natural gas from the United States are among the dumbest energy ideas of all time.   Exporting gas is dumb.   Exporting oil is dumber. The U.S. imports almost half of the crude oil that we use. We import 7.5 million barrels per day.  The chart below shows the EIA prediction that production will slowly fall and imports will rise ( AEO 2014 ) after 2016.  (click image to enlarge) This means that the U.S. will never be self-sufficient in oil. Not even close. What about the tight oil that is produced from shale?  That’s included in the chart and is the whole reason that U.S. production has been growing.  But there’s not enough of it to keep production growing for long.   Here is a chart showing the proven  tight oil reserves  just published last month by the EIA. (click image to enlarge) Total tight oil […]

Posted On : Published By : Tom Whipple
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Get Ready For Life Without Oil

Photographer: Chris Ratcliffe/Bloomberg Saudi Arabia isn’t the nicest ally to have. The desert kingdom just handed out   a sentence of  1,000 lashes to a blogger for running a website devoted to freedom of speech. Not exactly the kind of regime we want to have in our circle of friends, especially once you figure in their financial support for Islamic State and other radical Islamist groups. But you go to war with the allies you have, not the allies you wish you had. And in the global oil price war against Russia and Iran, Saudi Arabia is the U.S.’s indispensable ally. By continuing to pump the black stuff at an undiminished rate, the Saudis are repeating the trick they pulled in the mid-’80s, allowing oil prices to plunge in response to Western supply increases, thus depriving their rival (Iran) and ours (Russia) of revenue — and, in the process, […]

Posted On : Published By : Tom Whipple
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What’s So Bad About Cheap Oil?

The sharp drop in oil prices will benefit American consumers, many of the nation’s businesses and the economy as a whole. So why are stock market investors behaving as though oil under $50 a barrel and gasoline prices hovering around $2 a gallon are bad news? The overall market’s recent decline reflects more than just the free fall in oil prices. Overseas economies are struggling; last week, the World Bank cut its forecast for global growth to 3 percent from 3.4 percent. But fears about losses emanating from a devastated oil patch have weighed heavily on broad stock indexes, investment strategists say. This response appears to be a case of investors seizing on the industry’s highly visible losers while ignoring the far larger number of winners. “The stock market has reacted negatively, and some of that comes down to the fact that you can see what the impact is […]

Posted On : Published By : Tom Whipple
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Oil Prices Rally on IEA Comments

Oil prices rallied Friday in a rare respite from their six-month collapse after international energy monitors lowered their forecast for supply increases this year, potentially alleviating the growing glut of crude sloshing around the globe. Still, analysts said the new outlook was only modestly bullish and attributed the day’s gains to traders buying futures to close bearish bets against the market ahead of a long U.S. holiday weekend. The U.S. benchmark contract ended the day up $2.44, or 5.3%, at $48.69 a barrel. The gains helped U.S. oil futures rise 0.7% for the week, ending seven consecutive weeks of losses, the longest such streak for since 1986. The global Brent contract rose $1.90, or 3.9%, to $50.17 a barrel on the ICE Futures Europe exchange. Crude has lost more than half of its value since last summer as a combination of ample supply and lackluster demand spooked the markets. […]

Posted On : Published By : Tom Whipple
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IEA Slashes 2015 Forecast Increase in Non-OPEC Oil Supply

ENLARGE OPEC’s decision in November to abandon its traditional role of stabilizing the market and maintain its output in the face of falling prices has proved divisive even within the group. Associated Press LONDON—The collapse in oil prices is expected to slash growth in non-OPEC oil production this year, bolstering demand for the producer group’s own output, the International Energy Agency said Friday, indicating the Organization of the Petroleum Exporting Countries’ strategy to defend its market share may be working. The decision taken by the oil cartel in November to abandon its traditional role of stabilizing the market and maintain its output in the face of falling prices has proved divisive even within the group. Oil prices, already under pressure from surging U.S. production and sluggish demand, tanked following the group’s decision and are now down more than 50% since June. Oil prices ticked higher Friday , following steep […]

Posted On : Published By : Tom Whipple
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Oil Heads for Longest Weekly Losing Streak Since 1986

Oil advanced in New York , paring an eighth weekly decline, as the International Energy Agency lowered forecasts for supplies from outside OPEC and said prices could recover. West Texas Intermediate futures climbed as much as 3.6 percent. The grade’s loss of 1.3 percent this week caps the longest run of weekly declines since March 1986. Non-OPEC oil producers will increase output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the IEA said in its monthly market report. “The market is very over-sold and has been looking for signs for a pick-up,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd., said by phone from London. “The IEA has very clearly come out and said there will be an impact from price. They’ve lowered Canada , Colombia production-wise, they’ve talked about shale as well.” West Texas Intermediate for February delivery climbed […]

Posted On : Published By : Tom Whipple
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The Cruel Oil-Market Math Conspiring Against ETF Bulls

The $2.3 billion that has poured into funds that track oil since December would seem like a logical enough investment. After crude dropped more than 50 percent to a five-year low, the thinking goes, prices are due for a rebound. There’s just one problem. And it’s a big problem. The market is stuck in something called contango, an exotic term that really just means that prices on crude contracts to be delivered in coming weeks are lower than those on contracts due later. Exchange-traded fund (USO) managers, as a result, are left to sell the cheaper expiring oil contracts and re-invest the proceeds in the more expensive ones due the following month, creating a vicious cycle that erodes returns. Consider these numbers. From 2009 to 2012, crude prices soared twofold, yet, because contango conditions existed then too, the biggest U.S. oil fund gained less than 1 percent over that […]

Posted On : Published By : Tom Whipple