Friday, December 14, 2012

Global Oil Production Booming; Demand is Softening

Oil prices have remained remarkably stable over the past few years, considering the impressive price boom and bust of 2007 - 2008 - 2009. Peak oil doomers have been particularly disappointed at the failure of their predictions of near-term global collapse -- made so gleefully in the heady days when it was still possible for a halfway intelligent person to believe that oil production had permanently peaked in 2005. But the real world still holds a lot of surprises for people who believe they understand its energy complement -- or even its climate, for that matter.
The reason for the oil price softness is slowly but surely being revealed. Oil and gas production is booming globally but particularly in the US to the point where just last month, the International Energy Agency projected that “extraordinary growth in oil and natural gas output in the United States will mean that … the United States becomes a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035.”

According to the EIA, the average cost of production is lowest in the Middle East at around $US17 a barrel, with a global average around $US25 a barrel. This suggests the low will be a little above that, barring a demand free-fall. In the US, the cost of production is in the mid $US30 range, all of which suggests a level as low as $US40 is possible.

Add to that the tepid growth phase of the global economy and price trends should be down. _BusinessSpectator
There is a lot more oil to be discovered, particularly around the great underexplored areas of the planet. Even the Persian Gulf is underexplored compared to North America, by a factor of roughly 1,000.
“We see an easing of oil prices [in 2013] as demand remains weak,” explained Peter Kiernan, lead energy analyst for the Economist Intelligence Unit, adding that even fast-growing emerging markets and non-OECD nations will experience a poor economic performance next year.

...A “shale revolution” in the U.S. promises to change the market landscape. “U.S. production of shale gas has exploded with a nearly 50% annual increase between 2007 and 2011,” a report by the National Intelligence Council noted, while shale oil production, still in its infancy, could bring anywhere from 5 to 15 million barrels per day by 2020 at a break-even price as low as $44 to $68 per barrel. “By 2020, the U.S. could emerge as a major energy exporter,” the report added. _Oil 2013
This is bad news all around for aging peak oil doomers, who sit wanking in their circular echo chambers.

It is also bad news for many supporters of US President Obama. Obama has backed dozens of failed or failing big green energy startups at taxpayer expense, to please green political backers and to enrich the bank accounts of campaign bundlers and other crony supporters.

Obama favours intermittent unreliables, but it is the hydrocarbons and nuclear power -- both of which Obama dislikes -- that deliver reliable energy, power, and fuels. Obama was the accidental beneficiary of an unplanned US shale boom. But he is happy to take the credit for an economic boom that only happened because his EPA was too slow to kill it before it bloomed.

And now that the US oil & gas boom is proceeding ahead, despite Obama, the UK and the EU may be next. And don't forget China. If Australia can dump its foolish green "energy suicides", it might wish to join the global party.

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Blogger Benjamin Cole said...

I predicted this all along.

Oil at near $100 kills demand and encourages new production and substitution.

The longer is stay even near $100, the longer the down cycle will be. My guess is another 20 years of soft prices, and then another oil scare.

But hey it could be 30 years of soft prices or maybe forever, given what is happening in rival fuels, or PHEVs.

1:24 AM  

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