Byron King - The End Of The Oil Bust - aka The Curse Of $35 Oil - Agora

[hatrack]

EDIT

What do I mean? Well, at $35 per barrel of oil, the incentive for energy efficiency and conservation is not high. Heck, people are back to buying SUVs, if they can get a car loan. And low oil prices are a major stumbling block to building out the next generation of energy systems like advanced windmills, solar, geothermal, tidal power and advanced biofuels. Really, the world needs these items sooner or later. Also, the traditional energy industries need prices about $75 or so to keep up levels of investment in new projects that require several years to build out. That’s just to try and maintain current levels of fossil fuel output, which are declining in any event.

That is, world oil production has already peaked at about 86 million barrels per day. We were probably never going to change that overall fact of energy-life back with oil at $147. But we sure aren’t going to change it now that oil is selling at $37. It’s the Peak Oil argument.

Depletion, of course, is still with us all day and every day. Indeed, we could see swift declines in oil output from some major oil provinces of the world. Mexican oil output is already declining fast. Russia may shock us in 2009 with significant decreases from some older fields. Saudi Arabia is problematic, despite all the happy talk from Riyadh. The problem is that most of the world’s oil comes from giant fields that were discovered more than 25 years ago.

When people say things like “There’s still a lot of oil out there,” they are not necessarily wrong. But they mean that there is a lot of oil out there that is NOT in giant oil fields. It’s oil that you will not drill up with just a relatively small number of high-output wells, like in the big oil fields of Saudi or Russia. The “lots-of-oil” crowd is talking about hydrocarbon molecules (not necessarily light, sweet crude either) in deposits that are more dispersed, further out, in deep water, under more rock or salt layers, with higher temperatures and pressures. Or they are talking about heavy oil, or bitumen in tar sands, or kerogen in oil shales, or even some transformation of coal. When people use the expression “lots of oil,” they mean the expensive stuff. It’s oil that requires many expensive wells or immense processing facilities, drilled or built with technology that we have just barely invented. And it’s the oil that you will never see if prices stay at $35 per barrel for long.

That’s why oil probably won’t stay at $35 per barrel for very much longer.

EDIT

http://www.agorafinancial.com/afrude/

[Why Syzygy]

1. What say all those who bought oil at $180 a barrell?

Are they weeping?

[Warren Stupidity]

2. Most people and governments can't see past $2/gallon:good.

Nothing will be done to change, and as soon as economic recovery pushes up against supply, prices will return to their pre-crash levels. Two or three years we could have spent building the sustainable infrastructure we need will instead be wasted basking in a brief bubble of cheap oil by people and their governments too timid and short sighted to do what needs to be done.

[Trajan]

3. I cant tell ...

Is a DUer promoting the escalation of oil prices ?

Simple support ?

Expression of reality ?

You are on an 'Oil Industry' roll this morning .... I see no specific condemnations of the business or the process in these last threads ...

Do you work in the oil industry ? .... Own stock ?

[kristopher]

4. Hatrack? An oil shill???

:rofl:

Please, scroll down the EE forum threads...

[bhikkhu]

5. The gist of the article is the effect of cheap oil on the peak

If we still had $150 oil, the world would still be drilling and producing like mad and we would see a quick high peak of production, then a steep decline when discovery and development finally played out.

At $35 a barrel there isn't much incentive to produce or develop, but what isn't done right away can always be done later. The peak then flattens out and lengthens.

Ironically, the first scenario was better for the development of alternatives, while it requires some long-term planning and discipline to look beyond oil while it has gotten so cheap.