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Thread: Oil is at a 12-year low

  1. #121
    Padishah Shahanshah Senior Contributor xerxes's Avatar
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    Quote Originally Posted by astralis View Post
    OPEC agreed to continue production as is to drive down the price of oil-- in part to shutter US shale oil production. to some extent, it worked-- numerous US shale oil lines were shut down. however, the Saudis et al (and quite a few US observers) were surprised to find out that the surviving shale oil lines already had most of their costs sunk already, and are still profitable at the $35 per barrel point.

    moreover there's a double whammy, OPEC was surprised by the extent of the Chinese downturn. i think OPEC was trying to get oil to fall down to $60-70 a barrel, where they'd be comfortable; they didn't foresee the huge drop past that.
    Astralis,
    The sunk cost concept applies to all producers: shale, tar sands, Big Oil and national producers. it is not unique to shale as you say. What is unique to shale is its rather short lead-time of 2-3 years of output before very rapid drop in output. As oppose to the long cycle tar sands project in Canada that go producing for years on, never mind prices. Suncore for instance has a operating cost near $30 and most people don't know that as they assume that because it is operating in the tar sands so it must have high cost. Fact is, after the initial CAPEX has been sunked what remains is the very low operating cost needed to run the operation.

    What make shale the swing producer is its short lead-time of 2-3 years, which gives it flexibility to adapt to the whims of the market (much like how the Saudi were doing by closing the valve). No matter how huge the tar-sands were they could never become the swing producers. For them closing the valve, is like turning a super-tanker.

    Lastly, given the shaky nature of shale producers, banks (back in the day) mostly insisted the producers to hedge their production. Those hedge that were placed by the shale producers (the ones that did) has infact delayed their day of judgment and gave them a year or so time.
    If we contrast the rapid progress of this mischievous discovery of gunpowder with the slow and laborious advances of reason, science, and the arts of peace, a philosopher, according to his temper, will laugh or weep at the folly of mankind. - Edward Gibbon

  2. #122
    Official Thread Jacker Senior Contributor gunnut's Avatar
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    February 18, 2016 6:28 PM

    Feds to open 45M more acres in Gulf for energy development

    By Tony Pugh

    tpugh@mcclatchydc.com

    WASHINGTON —

    The federal government will hold lease sales next month to open up 45 million acres in the Gulf of Mexico for oil and gas exploration, the Obama administration announced Thursday.

    The sales mark the ninth and 10th offshore auctions as part of the administration’s five-year Continental Shelf Oil and Gas Leasing Program.

    More than 60 million acres were offered in the first eight auctions, which drew $3 billion in high bids, according to the federal Bureau of Ocean Energy Management.

    The new auctions – Central Planning Area Lease Sale 241 and Eastern Planning Area Lease Sale 226 – will be March 23 in New Orleans.

    “These lease sales continue the president’s commitment to create jobs through the safe and responsible exploration and development of the nation’s domestic energy resources,” said a statement from bureau director Abigail Ross Hopper. “As an important component of the U.S. energy portfolio, the Gulf of Mexico holds vast energy resources that can continue to spur economic opportunities for Gulf-producing states as well as further reduce the nation’s dependence on foreign oil.”

    About 44.3 million acres will be offered in Sale 241, ranging from 9 feet to more than 11,115 feet of water off the Louisiana, Mississippi and Alabama shores.

    Sale 226 covers nearly 600,000 acres from 2,657 feet to 10,213 feet deep. The location is south of eastern Alabama and western Florida, with the nearest point of land some 125 miles northwest in Louisiana.

    The sales follow a public comment period and extensive environmental analysis. Sales terms will require lease purchasers to protect biologically sensitive resources, reduce potential adverse effects on protected species and avoid possible conflicts related to energy development in the region.

    The Gulf Restoration Network, a New Orleans environmental group, opposes the plan, citing a failure by the oil and gas industry and government officials to improve the safety of offshore drilling and production, said executive director Cyn Sarthou.

    The industry already has over 23 million acres under lease in the Gulf of Mexico’s federal waters, but only 18 percent are currently producing oil or gas, Sarthou said. That leaves more than 19 million acres of unexploited leases, which Sarthou said was enough to fuel the industry.

    “As a region, the Gulf needs to reduce the risk posed by oil and gas development and move away from our reliance on the oil and gas industry by diversifying our economy,” Sarthou said.

    The terms and conditions for both lease sales are available for viewing.

    Offshore drilling remains controversial among the Gulf states. Sen. Bill Nelson, a Florida Democrat, made a floor speech this month blasting a Republican proposal to increase revenue-sharing opportunities for states that allow drilling in the Gulf of Mexico. The proposal, from Sen. Bill Cassidy, R-La.,would boost revenue-sharing for Louisiana, Alabama, Mississippi and Texas.


    Tony Pugh: 202-383-6013, @TonyPughDC
    http://www.miamiherald.com/news/nati...e61166657.html

    More land for oil exploration....
    "Only Nixon can go to China." -- Old Vulcan proverb.

  3. #123
    Official Thread Jacker Senior Contributor gunnut's Avatar
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    March 1, 2016 4:11 PM

    Low oil prices don't matter: Gulf of Mexico output to hit record in 2017

    By Tony Pugh

    tpugh@mcclatchydc.com

    WASHINGTON —

    Oil production in the Gulf of Mexico is expected to increase next year even as new offshore development and exploration have slowed to a crawl, weighed down by a drastic drop in oil prices.

    The increased production – the Obama administration expects a record high of nearly 1.8 million barrels per day in 2017 – won’t be driven by new projects. And it has nothing to do with the president’s latest plans to open an additional 45 million acres in the Gulf of Mexico to oil and gas exploration.

    Instead 14 Gulf of Mexico drilling projects in various stages of development and expansion will fuel the increased output for this year and next.

    That makes perfect sense, said Phil Flynn, senior market analyst at the PRICE Futures Group in Chicago.

    He said the long slog from discovery to permitting to construction and, finally, to production can sometimes take more than a decade and require billions of dollars of capital investment. So companies aren’t likely to stop a deepwater project even when oil prices bottom.

    “There’s a point where you pass the rubicon,” Flynn said, “and even if prices collapse, you’ve already spent so much money that you’ve got to complete the process. Even though I think a lot of these companies are remorseful that they started them a few years ago.”

    Tom Floza, global head of energy analysis at the Oil Price Information Service in Wall, N.J., agreed.

    “These (projects) were sanctioned and were funded back when oil was between $80 and $100 per barrel, so I’m sure they would like to have a do over,” Floza said.

    As prices remain low, Gulf operators have cut deepwater exploration and the number of active rigs. The turbulence has created labor market uncertainty along the Gulf coast, where new oil-patch jobs for geologists, engineers and general laborers are harder to find.

    Seventeen percent of crude oil produced in the United States comes from federal offshore drilling in the Gulf of Mexico. And nearly half of the nation’s oil-refining capacity is based along the Gulf coast, making it a powerful economic force in the region.

    But despite the industry depression, the Obama administration expects Gulf oil production to average more than 1.6 million barrels per day in 2016 and reach a record high of nearly 1.8 million per day in 2017.

    In fact, daily output in the Gulf could top 1.9 million barrels per day in December 2017, according to the U.S. Energy Information Administration.

    The backlog of under-development projects in the Gulf of Mexico is testimony to the once-strong demand for Gulf oil exploration following the moratorium on deepwater drilling that was imposed after the Deepwater Horizon spill in April 2010. The ban lasted nearly six months until October 12, 2010.

    After slowly rebounding through 2013, the number of new deepwater drilling projects in the Gulf rose to eight in 2014 and eight more in 2015. But new deepwater projects will fall to four this year, and only two are expected in 2017.

    The slowdown reflects the “decreasing profit margins and reduced expectations for a quick oil price recovery,” according to a recent report from the U.S. Energy Information Administration.

    But as new Gulf projects are scaled back amid the worldwide oversupply of oil, the Obama administration will hold lease sales on March 23 in New Orleans to open up 45 million acres in the Gulf of Mexico for oil and gas exploration.

    About 44.3 million acres will be available off the Louisiana, Mississippi and Alabama shores. Nearly 600,000 more acres will be available south of eastern Alabama and western Florida, with the nearest point of land some 125 miles northwest in Louisiana.

    The sales follow a public comment period and extensive environmental analysis. Sales terms will require lease purchasers to protect biologically sensitive resources, reduce potential adverse effects on protected species and avoid possible conflicts related to energy development in the region.

    But Glenn Compton, chairman of ManaSota-88, an environmental protection group in the Bradenton, Florida, area, said the federal government should cancel the upcoming lease auction.

    In a public comment letter to the federal Bureau of Ocean Energy Management, Compton said the federal government’s environmental analysis supporting the lease sales was not thorough; that an oil spill could cause severe economic and environmental damage to the gulf coast region and that the federal government lacks the staff to ensure drilling is done safely.

    Compton also said that low oil prices and the glut of oil worldwide would deflate the selling price for the gulf drilling rights.

    “The American taxpayers will lose out on billions of dollars of oil revenues,” Compton wrote. “The glut of oil leases already offered has provided the oil industry an opportunity to lease large blocks of submerged lands at bargain basement prices.”

    Energy analyst Floza said he expects oil prices to rebound to more than $50 per barrel in the next few years. But the current slowdown in new Gulf drilling projects will be felt in future years, he said.

    “That’s going to mean Gulf of Mexico (oil) production will be quite slow as we start the next decade,” Floza said. “It’s going to be sluggish.”


    Tony Pugh: 202-383-6013, @TonyPughDC
    http://www.centredaily.com/news/nati...e63380167.html

    Gulf oil production is set to increase, in addition to more land for oil exploration.

    This is getting better and better.

    I seem to recall there was a very intelligent person who said something about "drill here, drill now" back when oil was $130, in order to drive down prices. Was it The Obama? Certainly only the smartest president in the history of this republic could have the intelligence and wisdom to foresee the future. I can't imagine anyone but him to come up with such a brilliant yet simple market solution to a supply problem.
    "Only Nixon can go to China." -- Old Vulcan proverb.

  4. #124
    Former Staff Senior Contributor Ironduke's Avatar
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    This is a bit of a necropost - but the subject matter is just as valid now as it was a year ago.

    Personally, I believe high oil prices are a good thing. It drives research and development for new technologies - whether to replace oil or to make technology more energy efficient. The pain high oil prices cause is only temporary. It may last several years but that is a blink of an eye as far as all of the history yet to unfold is concerned.

    Some day, we will have to transition away from oil. England transitioned away from wood to coal back in the 1700s, when what remained of England's forests were set aside for national security purposes (to build and maintain Royal Navy ships) - prior to that the primary form of energy in the country was charcoal, which is made from wood.

    The wood shortage in England caused the world's big leap in using coal, which then led to industrialization - I believe likewise that an oil shortage, relative scarcity, and/or high prices would do the same thing - accelerating the world into a new technological age with regards to energy. It would shorten the curve vastly.

  5. #125
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    I am afraid I disagree with this thinking. Firstly there is the short term consideration of who benefits from high oil prices? Iran and Muscovy are two would benefit and I am not sure I wish either regime to benefit at my expense when filling up my car. The second main beneficiaries (after countries) are naturally the oil the companies and how do you think they will invest their increased profits? Exxon asked for a waiver from sanctions recently I heard to invest in Muscovite Arctic exploration - not in renewable's. Thirdly low oil and gas prices makes the newer renewable forms of energy supply more cost effective for investment - if oil extraction provides super returns investment will go there if not there is more chance investors seeking long term returns will chance solar, wind, wave or even geothermic.

    The current low(ish) price will not last forever and the Iranian 'deal' while not putting much more oil of the market - the sanctions were largely bypassed in regard to oil - will put alot more gas on the market. To some extent I was very surprised that the Muscovites let the 'deal' happen as it evidently opens competition to their supremacy of supply (particularly to Europe). The question is whether the Iranian gas will exported as LNG or by pipeline and that is one of the reasons why the Syrian is occurring.
    Last edited by snapper; 25 Apr 17, at 19:03.

  6. #126
    Former Staff Senior Contributor Ironduke's Avatar
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    The idea would be to make oil is as obsolete as charcoal became in England by the 19th century (and eventually the rest of the world as well).

    Countries like Iran and Russia may get a shot in the arm - but once the world transitions from oil to new, viable energy technologies, the development of which would be vastly accelerated with high oil prices, just as happened in the 17th/18th century transition from charcoal to coal - it could potentially unleash a new technological age where oil would simply be used for manufacturing and perhaps aircraft.

    Necessity is the mother of invention - high oil prices would fuel technological advancement in the alternative energy sector. A side bonus is that this would also help mitigate the man-made climate change problem. As Charlie Sheen would say - bi-winning.

    Another side bonus would be after the short-term shot in the arm - all oil dictatorships would be in serious trouble. They would no longer have anywhere near the degree of geopolitical leverage they do today. The world needs badly to transition away from oil - for many, many reasons.

    As far the US is concerned, raise the tax 50 cents per gallon a year indefinitely - and pump 100% of that revenue into R&D programs for alternative and renewable energies.

    I have to say - I also find it quite astounding - that many in politics who claim to be national security hawks are also extremely pro-oil. Being pro-oil and a national security hawk are, in my view, 100% contradictory positions. Continued dependence on oil is the biggest national security threat facing the United States, in my opinion.

    It doesn't matter where it comes from, or even if the US is self-sufficient - oil is a commodity and in a globalized world oil producers have geopolitical leverage regardless of where their oil ends up, or who is self-sufficient or not. Even if the United States, for example, were to import 0% of the Gulf's oil production (it has always imported relatively little historically) - the Gulf is still just as geopolitically relevant to US interests with our current oil dependency.
    Last edited by Ironduke; 26 Apr 17, at 02:26.

  7. #127
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    High oil prices just profit the oil companies - and some abysmal regimes.

  8. #128
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    Quote Originally Posted by snapper View Post
    High oil prices just profit the oil companies - and some abysmal regimes.
    Not true. High oil prices drive development and public awareness of fuel efficiency and renewables.

    Nothing gets people motivated to change like seeing their wallet torched at the pump.
    Far better it is to dare mighty things, than to take rank with those poor, timid spirits who know neither victory nor defeat ~ Theodore Roosevelt

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    it's easy to create high oil prices if the goal is to push renewables-- just tax oil domestically. that way, the money goes to US coffers rather than some mansion in Dubai, Swiss bank accounts, or worse yet, some terrorist organization.

    anyone whom thinks there's a "free market" for oil is deluding themselves. even today's low prices is -still- a result of extensive cartel intervention.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Quote Originally Posted by astralis View Post
    it's easy to create high oil prices if the goal is to push renewables-- just tax oil domestically. that way, the money goes to US coffers rather than some mansion in Dubai, Swiss bank accounts, or worse yet, some terrorist organization.
    Politically unacceptable at best. More realistically, political suicide.
    Far better it is to dare mighty things, than to take rank with those poor, timid spirits who know neither victory nor defeat ~ Theodore Roosevelt

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    don't know if it would necessarily be "political suicide", you could easily pair that with, say, a large tax cut heavily weighed to the poor.

    but yeah, it would still be very difficult politically, and is a completely moot point with this administration.

    in any case i doubt the huge surge in oil demand in the mid-2000s will be replicated...there's only so many new "Chinas" that can be created. moreover, the next cycle of technologies promises to -significantly- cut down on oil usage. AI cars will be hugely revolutionary in that aspect, especially when combined with the enormous improvements in both EVs and solar.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

  12. #132
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    Quote Originally Posted by astralis View Post
    don't know if it would necessarily be "political suicide", you could easily pair that with, say, a large tax cut heavily weighed to the poor.
    You can pair with anything really, but people of every economic level simply won't tolerate a hefty gas tax. Standing at the pump and watching your wallet get lighter and lighter is a hot button for anybody. Knowing the poor are getting a tax cut won't assuage that, even if you're the one getting the cut.

    Quote Originally Posted by astralis View Post
    in any case i doubt the huge surge in oil demand in the mid-2000s will be replicated...there's only so many new "Chinas" that can be created. moreover, the next cycle of technologies promises to -significantly- cut down on oil usage. AI cars will be hugely revolutionary in that aspect, especially when combined with the enormous improvements in both EVs and solar.
    Agreed, hopefully you're right.
    Far better it is to dare mighty things, than to take rank with those poor, timid spirits who know neither victory nor defeat ~ Theodore Roosevelt

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    Former Staff Senior Contributor Ironduke's Avatar
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    Quote Originally Posted by astralis View Post
    don't know if it would necessarily be "political suicide", you could easily pair that with, say, a large tax cut heavily weighed to the poor.

    but yeah, it would still be very difficult politically, and is a completely moot point with this administration.

    in any case i doubt the huge surge in oil demand in the mid-2000s will be replicated...there's only so many new "Chinas" that can be created. moreover, the next cycle of technologies promises to -significantly- cut down on oil usage. AI cars will be hugely revolutionary in that aspect, especially when combined with the enormous improvements in both EVs and solar.
    I think the idea of AI cars is quite exciting as well - as it stands now, cars sit, unutilized 95% of the time. There would need to be enough cars, obviously, to account for peak travel times, but utilization rate could be pushed way, way up. I can imagine algorithms automatically plotting people to pick up and drop off - say you have millions of people needing to get to/from work - a computer could automatically sort those people requesting service on the fly to arrive at the most efficient solution with several people riding simultaneously at various points, with a continuous stream of pickups/dropoffs.

    I suppose if you don't care for riding with strangers, you could pay a premium to have an AI car pick you up solo. No different than hiring an Uber right now - you get to decide who gets in the Uber with you. If you want to save money, you could put up with riding with strangers, not really different than the slugline in DC, but automated, where you can be picked up/dropped off anywhere.

  14. #134
    Former Staff Senior Contributor Ironduke's Avatar
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    Quote Originally Posted by TopHatter View Post
    Politically unacceptable at best. More realistically, political suicide.
    Unfortunately - we've thrown so much good money after bad, and continue to throw good political capital after bad, in our decades of oil dependence - at the moment this is an unfortunate truth. It would be political suicide in the US.

    I'm hoping for another supply shock similar to what we saw when oil went over $100 a barrel - and I hope it stays there. Even $200-300 a barrel.

    Oil dependence is such a grave threat to national security - whatever means the price increase were to occur, the ends would justify the means.

    Again - oil dependence, in my opinion, is as ridiculous as burning down virtually every forest in Europe to make charcoal was. They still do this in Africa. Necessary for a time, but we need to move on. The world moved onto coal then, and then onto oil - but we have the technology or the means to create the technology to move past oil.
    Last edited by Ironduke; 27 Apr 17, at 06:13.

  15. #135
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    Quote Originally Posted by Ironduke View Post
    Unfortunately - we've thrown so much good money after bad, and continue to throw good political capital after bad, in our decades of oil dependence - at the moment this is an unfortunate truth. It would be political suicide in the US.

    I'm hoping for another supply shock similar to what we saw when oil went over $100 a barrel - and I hope it stays there. Even $200-300 a barrel.

    Oil dependence is such a grave threat to national security - whatever means the price increase were to occur, the ends would justify the means.

    Again - oil dependence, in my opinion, is as ridiculous as burning down virtually every forest in Europe to make charcoal was. They still do this in Africa. Necessary for a time, but we need to move on. The world moved onto coal then, and then onto oil - but we have the technology or the means to create the technology to move past oil.
    I don't know that I want to see such a huge shock, even while fully acknowledging that the bigger the shock, the bigger and more sustainable the antidote will be.

    You're entirely correct though: We have the technology or are working hard on it, to move past oil.
    Far better it is to dare mighty things, than to take rank with those poor, timid spirits who know neither victory nor defeat ~ Theodore Roosevelt

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