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Shared Humanity

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Re: Oil and Gas Issues
« Reply #1800 on: October 26, 2017, 04:53:24 PM »

1). Oil prices peaked at $149 a barrel.  What we have now is nothing more than a SMALL "counter trend" rally.  The LONG TERM TREND is decidedly DOWN.  If oil gets to $60......that is still 60 % BELOW its peak at $149.

You should spend a little time understanding the behavior of prices of commodities which all exhibit wild spikes and troughs as a result of fluctuations in supply and demand. This is true for all commodities, foodstuffs, brown paper, lumber etc. Commodity markets have been in existence for years to both take advantage of this and, with the development of futures, to soften the impact of these swings.

The long term history of oil prices will be wild swings with the trend being generally up as oil supplies dwindle relative to demand. The most encouraging aspect of this inevitable price behavior is that it becomes very risky to bet on nonconventional sources of oil like shale oil and tar sands. Companies and investors that bet on these sources are losing their shirts and investors will be far more cautious about pursing such ventures in the future. These wild price swings are the reason Shell shelved its efforts to explore deep sea drilling in the arctic.

This, IMHO, is the single biggest advantage of renewables. The sun is going nowhere and its supply is unlimited. As a result of unlimited supply, the capital costs, production costs and income streams are very predictable, making this a very low risk investment.
« Last Edit: October 26, 2017, 04:59:22 PM by Shared Humanity »

Buddy

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Re: Oil and Gas Issues
« Reply #1801 on: October 26, 2017, 05:48:02 PM »
Sharedhumanity:

The price of whale oil declined for decades.  Just to say that "all commodities go through wild fluctuations in price based on supply and demand.....is ignoring a few things:

1).  Not all commodities are equal (whale oil for instance....asbestos is another). 

2).  You have to understand the CURRENT supply/demand vs FUTURE supply demand....as well as the fundamental factors that affect supply/demand (increased efficiency, elasticity of markets, technological advances of competing products, etc).

3).  The oil market is not going away anytime soon....but it has already set a LONGTERM HIGH....and has not reached a long term low.....and I don't expect a long term low for perhaps several years.  The market for asbestos didn't go away overnight either....but it was a painful ride down for anyone owning stocks related to asbestos.  Oil used for ICE is going away.  That is 60% of the market or so.  THAT is going to hurt more and more over the next 5 (?) years.

4). Markets...including commodity markets.....always overshoot on the high end and low end.  $150 was an overshoot on the high end.  We haven't seen the LONG TERM overshoot on the low end.  It will be much lower than most expect IMHO.

When it does overshoot to the low end....Russia is in trouble.  I wonder why Saudi Arabia is planning a new $500 billion dollar city that will be entirely powered by renewables?

And I wonder why Saudi Arabia is trying to take their oil company.....Saudi Aramco.....public?  From strong hands to weak hands....that is the way markets work.
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Shared Humanity

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Re: Oil and Gas Issues
« Reply #1802 on: October 26, 2017, 06:28:29 PM »
The simple explanation for wild swings in the price of oil which will continue into the indefinite future is the inelastic demand for oil. There are simply few substitutes that can be purchased when prices spike. When you have a supply of a commodity track so closely with demand, these price swings can be dramatic. This is basic microeconomics.

You should not conflate this price behavior with the long term future of oil worldwide which will diminish.
« Last Edit: October 26, 2017, 06:33:46 PM by Shared Humanity »

Bob Wallace

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Re: Oil and Gas Issues
« Reply #1803 on: October 26, 2017, 07:01:45 PM »
Quote
The long term history of oil prices will be wild swings with the trend being generally up as oil supplies dwindle relative to demand.

I don't think so.  I think we are very close to an oil demand plateau followed by demand decay.  Signs are getting stronger pointing to a rapid move away from oil for vehicles. 

Over the last five years global car sales have grown by about 3 million per year.  When we start manufacturing 3 million EVs per year (or an amount equal to sales growth) demand growth for car fuel stops. 

Worldwide plug-in vehicle sales in 2016 were 773,600 units.  Tesla, alone, should soon be adding 400,000 per year to that number.  China is moving to EVs rapidly.  Reaching 3 million per year in the next three years is not out of the question.  After that we should expect low oil prices as the lowest cost providers price their oil at a level to maximize their sales and profits.  Movements upwards are likely to be only in the event of a market/supply disruption (war/weather).

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1804 on: October 26, 2017, 07:13:49 PM »
As a consumer who drives an 11 year old, high mpg, gas powered car, when oil prices and gasoline prices spike, I can choose to consume more of a transportation substitute. I use my car primarily to commute to work. The available substitutes could be walking, riding a bike, perhaps mass transit or carpooling. I commute over 25 miles so bike riding and walking are not a viable option. I could take mass transit but this would turn my 40 minute commute into 3 hours. At some price point, mass transit or bike riding might be an option I choose. I can decide to walk to the grocery store or forgo trips to Wisconsin but this represents a very small portion of my gas consumption and thus I have a fairly inelastic demand for oil. These individual decisions made by consumers across the planet result in the aggregate demand for oil and and the slope of the demand curve, the marginal rate of substitution.

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1805 on: October 26, 2017, 07:18:16 PM »
Quote
The long term history of oil prices will be wild swings with the trend being generally up as oil supplies dwindle relative to demand.

I don't think so.  I think we are very close to an oil demand plateau followed by demand decay.  Signs are getting stronger pointing to a rapid move away from oil for vehicles. 

Over the last five years global car sales have grown by about 3 million per year.  When we start manufacturing 3 million EVs per year (or an amount equal to sales growth) demand growth for car fuel stops. 

Worldwide plug-in vehicle sales in 2016 were 773,600 units.  Tesla, alone, should soon be adding 400,000 per year to that number.  China is moving to EVs rapidly.  Reaching 3 million per year in the next three years is not out of the question.  After that we should expect low oil prices as the lowest cost providers price their oil at a level to maximize their sales and profits.  Movements upwards are likely to be only in the event of a market/supply disruption (war/weather).

You are confusing aggregate demand with the marginal rate of substitution. As consumers make choices to purchase EV's or live closer to work, this shifts the demand curve to the left so that, at a given price, less oil is consumed. It has little to no impact on the marginal rate of substitution and demand remains inelastic. Because of this, price swings continue to be a feature.

My inelastic demand for gas is not affected by my neighbor's decision to buy an EV.

Economics is a social science, an attempt to quantify the behavior and choices made by individuals and this is why I love it.

With regards to the substitutes available to me when gas prices rise, I actually have more than what I originally listed. I could choose to find a job closer to home or, at a certain gas price, I could choose to consume more leisure.

A rowboat and fishing rod consumes very little oil.
« Last Edit: October 26, 2017, 07:39:34 PM by Shared Humanity »

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1806 on: October 26, 2017, 07:43:04 PM »
When there are readily available substitutes, demand can be highly elastic. I really like a good piece of tuna or salmon but, if prices spike, a nice flaky piece of haddock will do just fine. If seafood in general goes up in price, organic chicken will do the job. If all forms of meat prices skyrocket, then it will be beans and rice.

Bob Wallace

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Re: Oil and Gas Issues
« Reply #1807 on: October 26, 2017, 08:40:37 PM »
Quote
You are confusing aggregate demand with the marginal rate of substitution. As consumers make choices to purchase EV's or live closer to work, this shifts the demand curve to the left so that, at a given price, less oil is consumed. It has little to no impact on the marginal rate of substitution and demand remains inelastic.

I think you are assuming there is pent up demand which is suppressed by high oil prices.  Not likely to any great extent. 

If prices drop then people tend to take that long distance trip to Yellowstone, Disney World, wherever.  But those are largely one time events, not things people will do multiple times per year.  People are not going to go out for lots of long drives, time is the likely constraint and not fuel price.



Shared Humanity

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Re: Oil and Gas Issues
« Reply #1808 on: October 26, 2017, 10:23:32 PM »
I've run out of ways to explain it.

Oil demand is highly inelastic, insensitive to price movements because there are few substitutes to choose when prices rise. This is why we see wild swings in the price of this commodity without a complete collapse in demand at peak prices or drastically higher demand at low prices. Currently the worldwide supply of and demand for oil is very closely matched. Any disruption in production can drive rapid increases in prices as can moderate growth in the economy. A slack world economy can cause violent plunges in the price as well. Bringing large quantities of nonconventional oil (oil shale and tar sands etc.) can quite comically drive price decreases so large as to render these investments big money losers.

If you look at the chart below, you see wild swings in the price for a barrel oil, exactly what you would expect to see for a commodity with a highly inelastic demand curve. If you click on the link below, you can compare the worldwide production of oil over the same period. Consumption of oil is little affected by these wild swings. Take for instance, 1973, when the oil embargo was set in place by OPEC. The price for a barrel of oil nearly tripled while oil demand continued to rise. This is the very definition of inelastic demand. The price of oil, a commodity with an inelastic demand curve, will continue to display these wild price swings into the indefinite future.

http://tools.bp.com/energy-charting-tool.aspx?&_ga=2.185913705.1356938686.1509048386-1110440603.1509048386#/st/oil/dt/production/unit/KBD/region/NOA/SCA/EU/MIE/AFR/AP/view/area/
« Last Edit: October 26, 2017, 10:35:26 PM by Shared Humanity »

Bob Wallace

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Re: Oil and Gas Issues
« Reply #1809 on: October 26, 2017, 10:44:41 PM »
Quote
Currently the worldwide supply of and demand for oil is very closely matched. Any disruption in production can drive rapid increases in prices as can moderate growth in the economy. A slack world economy can cause violent plunges in the price as well. Bringing large quantities of nonconventional oil (oil shale and tar sands etc.) can quite comically drive price decreases so large as to render these investments big money losers.

OK, it looks like we agree that there is not a lot of pent up demand.  You call it a lack of elasticity which is lack of pent up demand plus a significant drop in consumption if prices rise.

Now step outside your economics book at take a look at what is happening in the real world.

There is plenty low cost oil to meet demand.  Demand is about done rising.  EVs are going to cap demand and  then lower demand.

There is no value in the low cost suppliers cutting production in order to drive up price.  The game now is to sell as much as possible before there's a significant demand decay.  That requires adjusting asking price high enough for profits but low enough to freeze large portions of supply out of the market.  Oil sands are almost certainly dead.  As is new oil field development. 

I'm assuming that the low price suppliers are not lying about their reserves and are about to run dry.

Spiky stuff is just noise.  Big price movements upward would require a major supply disruption. 

Obviously there's a wildcard.  A major war could both disrupt supply and drive up demand. 

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1810 on: October 26, 2017, 10:58:38 PM »
Quote
Currently the worldwide supply of and demand for oil is very closely matched. Any disruption in production can drive rapid increases in prices as can moderate growth in the economy. A slack world economy can cause violent plunges in the price as well. Bringing large quantities of nonconventional oil (oil shale and tar sands etc.) can quite comically drive price decreases so large as to render these investments big money losers.

OK, it looks like we agree that there is not a lot of pent up demand.  You call it a lack of elasticity which is lack of pent up demand plus a significant drop in consumption if prices rise.

Inelastic demand means the exact opposite. Prices could quadruple and demand would drop very little. Prices could drop by 70% and demand would rise only slightly.

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1811 on: October 26, 2017, 11:06:18 PM »


Spiky stuff is just noise.  Big price movements upward would require a major supply disruption. 
 

Take a look again at the history of oil prices charts and production charts. The wild swings in prices occur while there has been a steady rise of oil production and consumption. This is not noise. This is the way prices for commodities with inelastic demand behaves and it is not economics textbook stuff. People make and lose billions of dollars betting on these price behaviors.

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1812 on: October 26, 2017, 11:09:25 PM »


There is plenty low cost oil to meet demand. 

If this were the case, no one would be investing in nonconventional sources of oil. Since the first gushers, oil companies have had to invest in increasingly expensive sources (deep sea drilling before oil shale and tar sands).

Bob Wallace

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Re: Oil and Gas Issues
« Reply #1813 on: October 26, 2017, 11:14:05 PM »
Quote
Currently the worldwide supply of and demand for oil is very closely matched. Any disruption in production can drive rapid increases in prices as can moderate growth in the economy. A slack world economy can cause violent plunges in the price as well. Bringing large quantities of nonconventional oil (oil shale and tar sands etc.) can quite comically drive price decreases so large as to render these investments big money losers.

OK, it looks like we agree that there is not a lot of pent up demand.  You call it a lack of elasticity which is lack of pent up demand plus a significant drop in consumption if prices rise.

Inelastic demand means the exact opposite. Prices could quadruple and demand would drop very little. Prices could drop by 70% and demand would rise only slightly.

Can you not understand what I wrote?  You simply took what I wrote and put it into different words.



Bob Wallace

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Re: Oil and Gas Issues
« Reply #1814 on: October 26, 2017, 11:16:32 PM »


There is plenty low cost oil to meet demand. 

If this were the case, no one would be investing in nonconventional sources of oil. Since the first gushers, oil companies have had to invest in increasingly expensive sources (deep sea drilling before oil shale and tar sands).

First, you'd have to see if there is significant investment in new supply. 

Second,  you'd have to assume that all players are rational. 


TerryM

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Re: Oil and Gas Issues
« Reply #1815 on: October 27, 2017, 12:20:08 AM »
Is everyone ignoring the American/Saudi oil price manipulation that broke, and broke up the Soviet Union?


Strange that just as Russia was again seen as the existential enemy, the Saudis again began pumping like there was no tomorrow.


https://www.linkedin.com/pulse/after-dinner-stories-from-prince-reagan-doctrine-aka-simpson-obe


Or any number of sites that google will direct one to.


Economics certainly, but economics that were politically manipulated.
Terry


oren

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Re: Oil and Gas Issues
« Reply #1816 on: October 27, 2017, 12:41:36 AM »
I think this forum is suffering from a recent abundance of political issues, including the Trump stuff, Democratic party issues, and the "russian" threads, which tend to polarize posters and lead to slinging matches, without anyone being convinced of anything. I skip all these threads as noise, but the resulting personal animosity has been migrating to the more scientific threads. A bad long-term trend.

Neven

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Re: Oil and Gas Issues
« Reply #1817 on: October 27, 2017, 07:32:46 AM »
I think this forum is suffering from a recent abundance of political issues, including the Trump stuff, Democratic party issues, and the "russian" threads, which tend to polarize posters and lead to slinging matches, without anyone being convinced of anything. I skip all these threads as noise, but the resulting personal animosity has been migrating to the more scientific threads. A bad long-term trend.

This is off-topic, but I agree. This was never my goal when setting up the Forum (it was meant to direct the noise away from the ASIB comment sections). It's disappointing in a way, but maybe to be expected. We'll see what happens, going forward.
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Re: Oil and Gas Issues
« Reply #1818 on: October 27, 2017, 03:54:00 PM »
Shared Humanity:

When talking about ANY market, whether it is commodities, currency, equities.....or widgets.....you have to keep in mind the TIME FRAME that you are talking about.

In the oil market.....there are 3 things that are NEGATIVE over the intermediate term (WITHIN 3 years or so.....plus or minus):

1). Too many speculative traders are BULLISH on oil right now.   I NEVER want to bet on something that too many people love.  And although not at historic highs....the number of traders BULLISH on oil is high.  At some point you run out of people who will buy....and that's when that market heads SOUTH.  Now....they don't "ring a bell" at the top or bottom of any market....but when a market gets too overcrowded at either the top or bottom....I want to be on the OTHER SIDE of that market.  Now...this is more of a shorter term phenominon....but it is a negative for oil over the next few months.

2). You seem to give the technological advances in BOTH the oil market (via fracking....and their continued ability to drive down costs of getting oil) as well as the technological advances in the renewables market that are happening at warp speed in battery's, cars, solar, and wind.  Industry's that have ignored technological advances of competitors are no longer in business (Kodak, Polaroid are a couple old examples.....and pick your retailer to see the thousands of retailers either cutting back or going out of business due to Amazon).  Coal....except for coking coal to make steel....is heading further south from an already low level.  Next up for renewables to kill is oil.....and natural gas will be the last batter in the fossil fuel lineup to be crushed in future years.

Right now the frackers are opening the wells that they had closed down when oil dropped to sub $40 and sub $30.  They have been opening those back up + drilling new wells.  They are more than happy to fill in while OPEC cuts back.  They will....once again....over produce.  Greed.  Psychology.

3). There will still be a market for oil for many decades....but it will be a diminished market.  Peak oil demand is likely to hit sometime between 2022 - 2025.  By that time EV's will have a much larger base...and by 2025 you will have some/many car makers that won't be making ICE vehicles.  Why buy an ICE vehicle that (a) will cost more than an EV on initial cost (b) have much higher maintenance costs than an EV (c) much higher running costs.  It won't be global warming that knocks out ICE....it will be economics. 

They are already working on battery's that have a 6 - 15 minute charge time....and the range will keep getting better.  Some of those will be coming out by 2019.  And they will only continue to get better.  By 2025 you will likely have a choice of buying an inexpensive tier car with 250 - 300 mile battery range....or modeals at the top of the range with 500+ miles of range.

4). We are more and more likely to hit a " rough patch" in the economy.  When that happens....commodities will drop.  Recessions haven't been cured as far as I know.  Although both Obama and Clinton are the last two presidents that served an 8 year term that didn't have a recession start when they were in office. 

So....that is why I say that the price of oil has not yet bottomed out.  The long term trend is still very much DOWNWARD.  I expect it to change in the future....but certainly not yet.
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Re: Oil and Gas Issues
« Reply #1819 on: October 27, 2017, 04:56:27 PM »
Oren:

What you say about the "political threads" is no doubt true.  There is certainly some "harsh speak" on both sides.  In fact I certainly am guilty of "harsh terms"....although most of those are directed at Moron Don and his administration.

Here in the US....we have to deal with the effects of his policies as well as his temperament.....day in and day out.  We don't have the luxury of living in another country like Israel, Canada, Australia, or even Austria (just to pick out four countries at "random"😉).

When you have a bully like Trump....you have to resist EARLY....STRONGLY....and CONTINUALLY.  History has not been kind to those that sit back and hope that things get better.  They usually don't.  And in most cases they get much worse.

I think it is likely very difficult to put yourself in our shoes.....just as it would be difficult for me to put myself in your shoes in Israel....even though I have both Jewish and Palestinian friends.  I just know that living in your shoes is something that I can't honestly do, because I don't live that life day in and day out.

Here in the US we are at a VERY DANGEROUS place in history.....and it behooves us to speak up strongly against an administration and its policies that are HELL BENT on:

1). Taking away protections against the CURRENT and future ravages of global warming
2). Taking away protections for the environment in general
3). Taking away the freedom of the press.......as Trump continues to use FOX as his mouthpiece to lie
4). Using the Oval Office in the most corrupt manner in US history
5). Continuing to divide the country instead of bringing it together

So while I have tried to not take my ABSOLUTE HATE AND DETESTATION for an administration that LIES ON A DAILY BASIS into other threads......I have no doubt that some of that passion is carried over to threads that do not deal DIRECTLY with Trump and his policies.

So....I would ask those that are NOT LIVING IN THE US.....to maybe consider what those of us in the US have to deal with 24/7/365.  Not that it is an excuse.....but rather a reason. 
« Last Edit: October 27, 2017, 06:02:00 PM by Buddy »
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Shared Humanity

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Re: Oil and Gas Issues
« Reply #1820 on: October 27, 2017, 05:28:08 PM »
I will try one last time.

Wild price gyrations for a commodity is caused by inelastic demand (price insensitivity), not aggregate demand which only changes very slowly. Demand for a commodity like oil is fairly fixed over the short term and all of the long term trends that are mentioned here do not change this fact. Yes, the long term trend for oil will be inexorably lower but price volatility will remain.

Lets step away from oil for a second and talk about food which is also a commodity. Food has a highly inelastic demand curve. No matter the price, I need to eat and the amount I eat does not change much due to price changes. It does not matter if the price drops by 50%. I don't suddenly double my consumption. If the price doubles, I don't suddenly reduce my consumption by 50%. By definition this is highly inelastic demand.

Now lets look at a 40 year history for the price of a bushel of wheat. Keep in mind there are still quite a few short term substitutes for wheat (corn, rice etc.) that don't currently exist for oil. (I cannot plug in and charge my gas powered car.)

Wheat prices display the same volatility that oil prices do and this has nothing to do with aggregate demand but everything to do with the inelastic demand for wheat. Very small changes in the supply of wheat can drive wild changes in the price. Commodity futures markets serve to soften these wild price swings for producers and consumers and those who play in futures markets can make a fortune but you had better not have a weak stomach. You can lose a fortune as well.
« Last Edit: October 27, 2017, 06:00:03 PM by Shared Humanity »

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Re: Oil and Gas Issues
« Reply #1821 on: October 27, 2017, 05:52:50 PM »
Oren
 I do think that politics, particularly American politics at this particular time is important to any discussion of global warming, arctic ice, and our way forward. I agree that keeping these discussions separated from more scientific musings might be helpful and have advocated for keeping the politics "below the line", OFF TOPIC,in THE REST Section.


I don't follow this 100% myself, as this post demonstrates, but it should make it easier for those uninterested in politics to ignore those of us who are.


While life sustaining gardens, bicycling and roof top solar all make a difference, convincing the city council to purchase E-Buses, convincing your state or province to dump coal, or pressuring a particular federal government to return to the Paris Accords might be just as important.
Political participation is important to our cause, and politics can get nasty, quickly. Personally I feel that atomic warfare is the most immediate threat we face, and you'll find most of my politics is aimed at reducing this threat in some manner.
1st we return to MAD, even as we cooperate to slow global warming.
If we get #1 wrong, the other numbers don't matter.
Terry

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Re: Oil and Gas Issues
« Reply #1822 on: October 27, 2017, 05:58:37 PM »
I never said there wouldn't be price volitility.  I NEVER SAID oil was not volitile.  Saying that oil is volitile is like saying the sun rises in the east.  Everyone and their cat knows that.  I said the following:

1). Oil has NOT reached a long term bottom in price.

2). Long term....the oil market will be SMALLER.  Peak oil PRODUCTION will likely occur between 2022 - 2025.

3). The long term peak oil PRICE already occurred at $150 ish.  That price may not be seen again.  If it is....it will be decades in the future....

I think I have beat this horse to death......and tried to make myself quite clear.  I don't think I can make it any clearer. 

FOX (RT) News....."The Trump Channel.....where truth and journalism are dead."

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1823 on: October 27, 2017, 06:21:31 PM »
The price volatility of any commodity is directly related to the elasticity of demand. Lets look at pork bellies.

The 1st thing evident is the fairly consistent range the prices move in over the 20 year history. This stable trading range is caused by the demand curve (inelastic versus elastic) and the ability for supply to adjust to rising prices. It takes about 1 year to bring a pig to market, from gestation to market ready. There is also less volatility for pork bellies because there are a lot of substitutes, a relatively elastic demand as compared to wheat. (Looks like no bacon for breakfast kids but I'll treat you to a steak for dinner.)

Another feature of this chart is a slow trend upwards which is being driven by increased pork consumption worldwide as meat consumption rises in third world nations due to income rising. (Those middle class Chinese like their moo shoo pork.)
« Last Edit: October 27, 2017, 06:40:24 PM by Shared Humanity »

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Re: Oil and Gas Issues
« Reply #1824 on: October 27, 2017, 06:30:54 PM »
As far as elasticity goes, it was a part of the debate at TOD (TheOilDrum)  till it died.  I formed my views years ago.

For a review of the last 50 years of Tar Sands extraction from The Pembina Institute. (maybe someone posted the first part)

http://www.pembina.org/blog/real-ghg-trend-oilsands

http://www.pembina.org/blog/tailings-ponds-worst-yet-come

I find things like this via DeSmogblog.ca and DeSmogblog.com but am being overwhelmed by caring for parents and their aging house and new job back in the usOfa.





Shared Humanity

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Re: Oil and Gas Issues
« Reply #1825 on: October 27, 2017, 06:37:20 PM »
I never said there wouldn't be price volitility.  I NEVER SAID oil was not volitile.  Saying that oil is volitile is like saying the sun rises in the east.  Everyone and their cat knows that.  I said the following:

1). Oil has NOT reached a long term bottom in price.

There is no such thing as long term prices (top or bottom) for any commodity. Prices will continue to fluctuate to the extent that demand is elastic or inelastic.

2). Long term....the oil market will be SMALLER.  Peak oil PRODUCTION will likely occur between 2022 - 2025.

Peak oil production, as we squeeze every last drop using unconventional methods, will actually constrain the supply of oil to adjust to small changes in demand. This will actually increase the volatility of prices.

3). The long term peak oil PRICE already occurred at $150 ish.  That price may not be seen again.  If it is....it will be decades in the future....

We could set a higher peak next year...or not...or the year after that...or not, but don't be surprised when it happens.

I think I have beat this horse to death......and tried to make myself quite clear.  I don't think I can make it any clearer.

Shared Humanity

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Re: Oil and Gas Issues
« Reply #1826 on: October 27, 2017, 06:54:48 PM »
The size of a market has little to do with price volatility of a commodity or the range in which it trades. It has to do with the elasticity of demand and the ease for which the supply of a given commodity can adjust to price swings.

Let's say the U.S. government decides that everything would be better if we could simply get rid of the 3 billion people who are the most troublesome on the planet. (With Trump and the idiots he has surrounded himself with, this is not as far fetched as it sounds.) So we bomb them out of existence. (In the case of those icky brown people, we will 1st have to deport them.)

The market for wheat collapses and prices go to near zero. Farmers can't give their wheat away. Aggregate demand, the size of the market, is reduced by 40% and, going forward, will change only slowly. What happens next planting season? Far less wheat is planted and, over a very short period of time, prices rebound to the price that existed before we murdered 3 billion people. Since the demand for wheat is still highly inelastic, (I still have to eat even if my next door neighbor, Joe, is dead. Kind of liked Joe by the way.) the price volatility of wheat remains and prices could actually spike higher than before.
« Last Edit: October 27, 2017, 07:31:54 PM by Shared Humanity »

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Re: Oil and Gas Issues
« Reply #1827 on: October 27, 2017, 06:56:45 PM »
Buddy...

I do agree with you on one item. This horse is beyond dead.

With the ridiculous price of pork bellies, lets take it to market.

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Re: Oil and Gas Issues
« Reply #1828 on: October 27, 2017, 07:10:12 PM »
I would like to go on record as saying that the highly volatile price for oil is a wonderful thing. Unlike soybeans, pork bellies or wheat, it takes decades and billions of dollars to bring additional supplies of oil to market in response to a dramatic spike in prices. This price volatility makes exploration and production of expensive, nonconventional sources a very risky bet and this fact, more than anything, will cause some oil to remain in the ground permanently, irregardless of whether it is technologically feasible to extract it.

If we really want to blow these oil companies up, we should, as consumers, behave in a manner that increases the volatility of oil prices. When oil prices drop, we should all park our cars in our driveways and ride our bikes. When oil prices spike, we should aggressively consume oil so as to encourage very unwise investments in exploration and extraction.

Drive them bankrupt by having them shove tens of billions of dollars into holes in the ground by consuming in a way that causes wild fluctuations in prices.

Viva la revolucion!
« Last Edit: October 29, 2017, 04:41:02 PM by Shared Humanity »

etienne

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Re: Oil and Gas Issues
« Reply #1829 on: October 27, 2017, 11:40:23 PM »
Since oil consumption is related to expensive investments (car, heater...), demand is even more inelastic. Excepted for a PHEV, I have no other choice than buying the energy as defined in the user manual. Same thing to heat my house. Ok, I have a wood stove and an oil heater, but wood won't make warm sanitary water.

But there is another thing with oil, production is also not very elastic. It's very difficult for the OPEC to decide to cut production, and generally speaking, everybody tries to produce as much as possible, so it is mainly technical, regulatory or political problems that can reduce the production. If prices rise, investments take too much time to allow any adaptation to the demand.

If you compare the production and price curves in the US, they really don't match.
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Re: Oil and Gas Issues
« Reply #1830 on: October 27, 2017, 11:46:15 PM »
Here are the graphs

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Re: Oil and Gas Issues
« Reply #1831 on: October 28, 2017, 05:21:22 AM »
"If you compare the production and price curves in the US, they really don't match."

Why would they ? USA imports and exports oil and refined products.

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Re: Oil and Gas Issues
« Reply #1832 on: October 28, 2017, 10:08:49 AM »
What I meant was that for example :
- In 1991, prices go up, and production is only up when prices are down again
- In 1998, prices start to go really up and production do go really down
- In 2014, production stays up even if prices drop.

So there is no direct link between production data and price data.

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Re: Oil and Gas Issues
« Reply #1833 on: October 30, 2017, 01:23:09 PM »
Interesting article regarding PetroChina today.  It went public 10 tears ago.....and was the worlds first 1 TRILLION dollar company in terms of market capitalization (number of shares x share price).

That first day of trading.....was its high.  It has lost $800 BILLION dollars of market cap since then.....and is heading lower still.

The price of oil is down 44% over that time period.  And the US is starting to make bigger inroads into Asia....which will not help PetroChina.

This is what companies do in the public markets as their product loses relevance.  Whether it is coal, mall retail, Kodak and its physical film....

Exxon reached its high stock price in 2014.....and it has a LOT more pain ahead of it over the coming 5+ years as oil will begin to lose relevance and market share via "peak production" in a few years....and the growth of those pesky renewables.

A LOT more pain ahead for oil companies....
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Re: Oil and Gas Issues
« Reply #1834 on: October 30, 2017, 04:30:29 PM »
Interesting article regarding PetroChina today.  It went public 10 tears ago.....and was the worlds first 1 TRILLION dollar company in terms of market capitalization (number of shares x share price).

That first day of trading.....was its high.  It has lost $800 BILLION dollars of market cap since then.....and is heading lower still.

The price of oil is down 44% over that time period.  And the US is starting to make bigger inroads into Asia....which will not help PetroChina.

This is what companies do in the public markets as their product loses relevance.  Whether it is coal, mall retail, Kodak and its physical film....

Exxon reached its high stock price in 2014.....and it has a LOT more pain ahead of it over the coming 5+ years as oil will begin to lose relevance and market share via "peak production" in a few years....and the growth of those pesky renewables.

A LOT more pain ahead for oil companies....

Many will file for bankruptcy and in bankruptcy court the courts will, quite correctly, determine that there is a viable business model going forward and they will exit bankruptcy pumping just as much oil as before. Issuers of debt will take a beating which could, given the size of these businesses, spark another financial crisis. It is going to get ugly.

The best possible outcome for debt holders is that they get broken up and sold piecemeal to healthier companies who, as part of the purchase will assume much of the debt. If the debt they absorb is very high, the actual purchase price could be $0. In this case the equity holders get screwed.
« Last Edit: October 31, 2017, 06:34:09 PM by Shared Humanity »

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Re: Oil and Gas Issues
« Reply #1835 on: October 31, 2017, 05:25:32 PM »
Crude is up, per Bloomberg
Also, long term context:  almost at the 2-year peak; within the 3-year range; not far from the 5- and 10-year low.
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Re: Oil and Gas Issues
« Reply #1836 on: October 31, 2017, 09:23:38 PM »
Wimberly attempts a calculation of timing for peak gasoline:

http://www.samefacts.com/2017/10/energy-the-environment/peak-gasoline/

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Re: Oil and Gas Issues
« Reply #1837 on: November 01, 2017, 07:27:25 AM »
I think Wimberly makes the common prediction mistake of using history to draw lines into the future.

Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios.

Tesla should be manufacturing 500,000k EVs annually by 2020.  China is likely to be manufacturing 2 million.  The rest of the world should contribute another 500,000.  That's equal to the annual ICEV growth.

Earlier than 2026.  Possibly by 2020.

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Re: Oil and Gas Issues
« Reply #1838 on: November 01, 2017, 05:47:06 PM »
I also belive that things will go very fast. When battery costs will have dropped enough, ICE will be just nonsense.
Excepted for the batteries, electrical technology is cheaper to build and to maintain.

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Re: Oil and Gas Issues
« Reply #1839 on: November 02, 2017, 12:31:26 PM »
I think Wimberly makes the common prediction mistake of using history to draw lines into the future.

Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios.

Tesla should be manufacturing 500,000k EVs annually by 2020.  China is likely to be manufacturing 2 million.  The rest of the world should contribute another 500,000.  That's equal to the annual ICEV growth.

Earlier than 2026.  Possibly by 2020.

I think you are right in that Wimberly is erring in using past history to extrapolate future growth.  In all likelihood, the exponential growth cannot sustain itself.  When it starts to level off, however, is difficult to ascertain.  I suspect he is rather optimistic, and the predicted year will be much further into the future.

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Re: Oil and Gas Issues
« Reply #1840 on: November 02, 2017, 01:34:33 PM »
I think Wimberly makes the common prediction mistake of using history to draw lines into the future.

Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios.

Tesla should be manufacturing 500,000k EVs annually by 2020.  China is likely to be manufacturing 2 million.  The rest of the world should contribute another 500,000.  That's equal to the annual ICEV growth.

Earlier than 2026.  Possibly by 2020.

I think you are right in that Wimberly is erring in using past history to extrapolate future growth.  In all likelihood, the exponential growth cannot sustain itself.  When it starts to level off, however, is difficult to ascertain.  I suspect he is rather optimistic, and the predicted year will be much further into the future.

So  you're predicting that car manufacturers won't build the EVs that the say they will build over the next few years?

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Re: Oil and Gas Issues
« Reply #1841 on: November 02, 2017, 03:19:34 PM »
More often than not, emerging technologies experience rapid exponential growth. We are seeing this with solar and wind power generation despite the massive subsidies given to the fossil fuel industry. We saw it with personal computers and cell phones and we should expect this trend to continue with EV's.
« Last Edit: November 02, 2017, 03:26:30 PM by Shared Humanity »

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Re: Oil and Gas Issues
« Reply #1842 on: November 02, 2017, 04:46:10 PM »
PETROCHINA - read all about it. Where PETROCHINA leads the other oil majors will (eventually) follow ?

https://www.bloomberg.com/news/articles/2017-10-29/the-biggest-stock-collapse-in-world-history-has-no-end-in-sight

"The stock has been pummeled by some of China’s biggest economic policy shifts of the past decade, including the government’s move away from a commodity-intensive development model and its attempts to clamp down on speculative manias of the sort that turned PetroChina into the world’s first trillion-dollar company in 2007.

Throw in oil’s 44 percent drop over the last 10 years and Chinese President Xi Jinping’s ambitious plans to promote electric vehicles, and it’s easy to see why analysts are still bearish. It doesn’t help that PetroChina shares trade at 36 times estimated 12-month earnings, a 53 percent premium versus global peers. "
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Re: Oil and Gas Issues
« Reply #1843 on: November 02, 2017, 04:52:09 PM »
I think Wimberly makes the common prediction mistake of using history to draw lines into the future.

Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios.

Tesla should be manufacturing 500,000k EVs annually by 2020.  China is likely to be manufacturing 2 million.  The rest of the world should contribute another 500,000.  That's equal to the annual ICEV growth.

Earlier than 2026.  Possibly by 2020.

According to Wimberly's graph, the net growth in cars is about 40 million per year and expected to go up to about 50 million by 2025. The number of cars removed from the road is roughly half of the number of new cars added. I haven't checked those numbers but they sound plausible.

This means that EV sales will have to reach about 50% of all new car sales before the number of ICE cars starts to go down. I can't see that happening before 2025 but somewhere between 2025 and 2030 is quite possible.

Of course other factors like self-driving cars could change the growth numbers but, again, probably not before 2025.

Wimberly also mentions that the change may be faster in commercial vehicles (busses, trucks, vans) because of their shorter life.

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Re: Oil and Gas Issues
« Reply #1844 on: November 02, 2017, 05:42:25 PM »
Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios: 10 to 20 years from now. If I had to guess a “peak ICE cars” year, I would go for 2032, 15 years ahead.

The total stock of ICE cars is a fair proxy for gasoline consumption. So the same years are possible peaks for that.

I suspect he is rather optimistic, and the predicted year will be much further into the future.

Later than 2032? That seems a long way off.

If battery prices continue to fall so electric is clearly cheaper, I would expect all high mileage drivers to transition to electric, (really high daily mileage to be done with swap car with empty battery for car with full battery). Lots of ICE cars will hang around a long time as a cheap option for low mileage drivers (really low resale price means little depreciation). So I would expect peak gasoline to occur well before peak ICE vehicle.

IOW I don't agree with stock of ICE cars continuing to be a fair proxy for gasoline consumption.

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Re: Oil and Gas Issues
« Reply #1845 on: November 02, 2017, 06:27:07 PM »
More often than not, emerging technologies experience rapid exponential growth. We are seeing this with solar and wind power generation despite the massive subsidies given to the fossil fuel industry. We saw it with personal computers and cell phones and we should expect this trend to continue with EV's.

The numbers in your graphs seem quaint already. There's twice as much wind capacity now as in 2012, and the pace of installation climbed from 65 GW per year in 2015 according your graph, to 75 GW last year, and 85 GW per year this year.

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Re: Oil and Gas Issues
« Reply #1846 on: November 02, 2017, 06:50:55 PM »
More often than not, emerging technologies experience rapid exponential growth. We are seeing this with solar and wind power generation despite the massive subsidies given to the fossil fuel industry. We saw it with personal computers and cell phones and we should expect this trend to continue with EV's.

The numbers in your graphs seem quaint already. There's twice as much wind capacity now as in 2012, and the pace of installation climbed from 65 GW per year in 2015 according your graph, to 75 GW last year, and 85 GW per year this year.

Did a quick search for graphs to prove my point regarding exponential growth. That you are saying this trend is continuing does not surprise me.

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Re: Oil and Gas Issues
« Reply #1847 on: November 02, 2017, 06:55:49 PM »
The rate of growth falling from 12.5% to 10.4% annually, seems the natural growth slow down as the installed base gets bigger has set in, from the Global Wind Energy Council - forecast for 2017-2021. A doubling rate of 7 years.

« Last Edit: November 02, 2017, 07:01:59 PM by rboyd »

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Re: Oil and Gas Issues
« Reply #1848 on: November 02, 2017, 08:15:32 PM »
I think Wimberly makes the common prediction mistake of using history to draw lines into the future.

Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios.

Tesla should be manufacturing 500,000k EVs annually by 2020.  China is likely to be manufacturing 2 million.  The rest of the world should contribute another 500,000.  That's equal to the annual ICEV growth.

Earlier than 2026.  Possibly by 2020.

According to Wimberly's graph, the net growth in cars is about 40 million per year and expected to go up to about 50 million by 2025. The number of cars removed from the road is roughly half of the number of new cars added. I haven't checked those numbers but they sound plausible.

This means that EV sales will have to reach about 50% of all new car sales before the number of ICE cars starts to go down. I can't see that happening before 2025 but somewhere between 2025 and 2030 is quite possible.

Of course other factors like self-driving cars could change the growth numbers but, again, probably not before 2025.

Wimberly also mentions that the change may be faster in commercial vehicles (busses, trucks, vans) because of their shorter life.

Not 40 million.  In 2014 global car sales were 71.18 million.  In 2017 the number should be about 78.59 million.  Growth of about 2.5 million per year.

https://www.statista.com/statistics/200002/international-car-sales-since-1990/

Only half as many getting crushed as are  sold per year sounds way too low.  That would mean shipping a huge number of 15+ year old cars to developing countries.  And I haven't seen them where I've been traveling. 

What we're likely to see with commercial vehicles is a lower lifespan for the "last generation" of ICE powered buses and trucks.  It will make more sense to move over to battery powered units even before the ICEs units are worn out in order to lower operating costs.

The same will likely hold for fueled cars.  Once there are used long range EVs available for $10k or less then people are likely to dump their well used ICEVs and let fuel savings make most of their monthly payments.

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Re: Oil and Gas Issues
« Reply #1849 on: November 02, 2017, 08:22:35 PM »
Quote
Sales of EVs will pass the net growth in the car fleet in 2026, 2030, and 2037 in the three scenarios: 10 to 20 years from now. If I had to guess a “peak ICE cars” year, I would go for 2032, 15 years ahead.

The total stock of ICE cars is a fair proxy for gasoline consumption. So the same years are possible peaks for that.

I suspect he is rather optimistic, and the predicted year will be much further into the future.

Later than 2032? That seems a long way off.

If battery prices continue to fall so electric is clearly cheaper, I would expect all high mileage drivers to transition to electric, (really high daily mileage to be done with swap car with empty battery for car with full battery). Lots of ICE cars will hang around a long time as a cheap option for low mileage drivers (really low resale price means little depreciation). So I would expect peak gasoline to occur well before peak ICE vehicle.

IOW I don't agree with stock of ICE cars continuing to be a fair proxy for gasoline consumption.

In the US about 50% of all miles driven are in cars 5 years old or newer.  As you say, high mileage drivers are likely to be among the first to move to EVs as they will enjoy the largest economic gain.

A simple count of ICEVs is not likely to be an accurate way to estimate peak oil demand.  And oil demand may peak while EVs are less than 100% of annual sales growth.