Origins of The Global Oil Price Collapse

Posted in Audio/Video & Articles, Presentations, Presentations & Publications on February 25, 2016

Origins Oil Price Collapse 25 FEB 2016


10 comments on this entry


  1. Great analysis. As usual.


  2. Hi, Art, Is there a reason you didn’t include the entire presentation of slides here? 14 slides are here in what appears to be a 22 slide presentation. Just wondering what we might be missing. But, having said that, GREAT ANALYSIS and thanks for sharing it! Razz


  3. Razz,

    WordPress limits the size of an uploaded image or file to 2 MB so I had to delete some slides to stay under that limit. It seems like a silly limitation of the software but that’s how it is for now.

    Best,

    Art


  4. Your view that oil price (and presumably consumption) will be back up to commercial levels of some sort, at least above $50/barrel in a few years.

    During those years, the alternative energy industry will be continuing its growth, aiming to supplant fossil fuels.

    What effect does that have on your forecast for oil and gas production?


  5. Dwain,

    I strongly support alternative energy and believe it will become increasingly important in our energy mix. It is important to be realistic at the same time. Solar PV and wind represent less than 3% of U.S. primary energy consumption. Moving from 3% to 25% of anything in a meaningful time line is unrealistic (25% is arbitrary).

    Americans have wildly unrealistic expectations of technology. We look at advances in micro-electronics and see no reason why Moore’s Law shouldn’t apply to everything. I’m not sure it even applies to electronics anymore. Everything has a growth curve that flattens before very long. An old extractive industry like oil production has real limits to what technology can do when cost is part of the evaluation.

    When I get questions about the miracle of shale production, I ask how the miracle has affected the unit cost of a barrel of oil. It is amazing that we can produce more than 3 million barrels of oil per day from a non-reservoir, but the technology comes at a cost. Those barrels cost considerably more than conventional barrels (despite the propaganda that they do not).

    The history of energy use has been a progression from less dense forms of energy to more dense forms. Renewable energy will be the first step in the opposite direction. That doesn’t mean it won’t work and, over the longer term, it has to work. Still, in some ways it means getting by with less.

    That’s the problem with all energy discussions. We want energy to allow us to live in the same way we have always lived and rarely consider that may not be realistic going forward.

    So, my answer to your thoughtful question is that I do not consider renewable energy an important factor over the term of my discussion of the present oil-price collapse and possible rebound of 1-3 or 1-5 years. I will be glad to be wrong but that’s how I see it.

    All the best,

    Art


  6. Excellent slide show. Only some minor points:

    (1) OPEC decided not to reduce production
    (2) Low interest rates were introduced intentionally because in the oil crisis years of the 70s high interest rates (the normal response to high inflation due to higher oil prices) killed the economy and therefore oil demand. Bernanke thought he had learned a lesson from that and did the opposite when it was becoming clear that high oil prices had caused the US recession end 2007. Here is the Federal Funds Rate curve starting in 1954:

    https://research.stlouisfed.org/fred2/series/FF

    The real problem is now:
    If the high oil price period 2008-2014 has irreversibly damaged the financial system (more debt) and the economy (business closures, job losses) then oil demand may remain weak and the oil industry is forced to dismantle itself along the natural oil decline path.

    The closure of 3 refineries in Australia (Shell, Caltex, BP) may be a sign of this although it is sold to the public as a problem of no longer being competitive against new super refineries in Asia

    Why the closure of BP’s Brisbane Bulwer refinery reduces Australia’s energy security
    http://crudeoilpeak.info/why-the-closure-of-bps-brisbane-bulwer-refinery-reduces-australias-energy-security

    Of course IOCs’ production has peaked so it hits the weakest first


  7. Hi Berman,

    It is a nice presentation but I can’t see anything on investment opportunities. I get a feeling you might have taken out some of the slides conflicting with copyright stuff.

    Thanks
    Ishtiaq


  8. Art – This error has probably already been pointed out, but on Slide 11, peak US production was April 2015 (not April 2014). Regards, and thanks for your work. Daniel.


  9. very nice work


  10. Volker,

    Thanks for your comment.

    Art