265 comments on DrumBeat: October 6, 2008
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265 comments on DrumBeat: October 6, 2008
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A lot of people thought the spread was too broad on the last oil price poll. (Low of $85.) Doesn't seem so silly now, does it?
I scoffed at my brother's prediction of $80 oil. Now I'm wondering if the number is low enough.
Unlike me, he's an industry professional.
I suspect the $80 is a number he thought they could live with.
When it falls below that, (if it falls below that), I can almost guarantee you'll see drilling prospects scuttled or put on hold.
Kind of like watching a snake eat its own tail.
Iran wants more that $100
http://www.rigzone.com/news/article.asp?a_id=67461
Iran has been talking about peak oil and pushing for higher prices for years. But it's all talk. They need the money from oil production.
But I think if oil starts showing anymore downwarn momentum the other gulf states really will jump on the bandwagon. Especially in light of things like that new giant 1km high tower in Dubai I posted about on the economic thread. How the heck they are going to fund that if oil drops any more?
Marco.
By pumping more oil?
Pump more oil?!? Like that Abiotic stuff they've got growing in their back gardens:-)
I guess they will just have to start getting those casinos, strip bars and drinking establishments ready for the tourists.
On a more serious note: is OPEC suddenly innefectual?
Marco.
Well, before America peaked we had a little thing called the Texas Railroad Comission that had controled the oil price by controlling supply. Once Amrica peaked, they really didn't have a way to control supply anymore and became ineffectual with respect to that.
Once global supplies peak, OPEC is probably in the same boat.
Leanan,
do you have some links of Iran talking about peak oil? I'd like to learn a bit on this.
Don't have any links on hand. They were talking about peak oil back in 2003 and earlier, so many of the news links would be dead by now. They were often dismissed as "just trying to talk up the price of oil."
However, Samsam Bakhtiari was a National Iranian Oil Company official.
May he rest in peace (though I'm afraid he will turn around in his grave)
Peak oil and Bakhtiari's 4 phases of transition
http://www.energybulletin.net/node/19701
Thanks PaulusP and Leanan.
As he appeared in The End of Suburbia
Well Undertow, I've just finished a day and night with electrical engineers in Vancouver about innovative energy and the majority at the table were displaced Iranians.
Now I know why Dr. Bakhtiari settled in Vancouver after leaving Iran. Here he had the support of an academic and professional system of ex-pats.
Iran's loss, our gain - phfff!
I'm wondering if NYMEX oil price will be the criteria used to decide whether to lay the rigs down or not.
If money is limited, and one can either acquire reserves through buying them or drilling for them, and it becomes cheaper to buy reserves through mergers and acquisitions than to drill for them, perhaps the companies with money to spend might opt for buying reserves instead of drilling for them.
This would mean that the rigs will be layed over, even though the current oil price would justify the drilling projects.
Actually DS, production acquisition (of both individual fields and corporations) has been THE game in the domestic oil patch for over 15 years. We recognized the general inability for most corporations to grow substantially by the drill bit long ago but have referred to it as the "reserve replacement issue" and not PO. It doesn't garner the headlines as big oil strikes off Brazil etc. (about 6 weeks ago XTO bought Hunt OIL for $4.2 billion and no one even noticed). For the last couple of years most of the major oils have been unable to prevent y-o-y reserve base declines. But buying reserves has been far from cheap even before the run up in prices. Typically selling for 4 to 5 years pay back. These days even more. The acquisition is usually made with a combo of stock and borrowed money. You see the large independents making big acquisitions because of their inability, in general, to increase asset base volumes through the drill bit. Even if an acquisition isn't especially profitable it does grow the asset base. And this growth is the primary tool Wall Street uses to value these companies. Given credit availability issues and declining economic value of drilling, we may begin seeing major devaluation of many oil companies. This would likely cause a slump in drilling which would probably go a long way towards letting out the potential NG bubble that has been developing.
This cycling is nothing new. It has been running since the beginning of the oil patch. The only noticeable difference seems to be the shortening of the cycle periods. If this does turn into a significant slow down I suspect it will last only a couple of years or so. This would be especially true for NG. All those unconventional NG wells that have given rise to production rates are declining rapidly.
Does this mean I should look at reinvesting my Exxon-Mobil (XOM) stocks elsewhere, before the company gets "nationalized?"
All those new supplies of unconventional oil, oil sands, oil shale, deep sea, ung, will be adversely affected and new drilling will be cut back to make the business models work better. Some assets will be sold to pare down debt and highly leveraged companies may be toast in a lower oil market that is still 300% higher than 4 years ago. The cost of new oil supplies have gone through the roof in the past 3 or 4 years all around the world. If oil and ng prices are not high enough to cover costs, who would want to increase supplies if they think prices may not recover quickly?
The cost of new projects is high mostly because of steel and labour being expensive.
They should both become much cheaper in a major Depression.
They will become cheaper but not necessarily more afordable.
You could be right.
During the last Depression, some major projects like the Hoover Dam were started. We'll have to wait and see what this Depression produces (wind farms maybe?).
see what this Depression produces
More demogaugery.
http://economics.about.com/cs/businesscycles/a/depressions_2.htm
I've also seen it defined as four consecutive quarters of economic contraction.
I don' theng tha' (demagoguery) mens wha you theng it mens... (especially since you can't spell it, either...)
One, is the poster a leader here? Two, what power is to be gained? And, three, how is predicting a depression demagoguery? I'd be surprised if we didn't hit both definitions.
Cheers
last great depression also produced the holocaust and nuclear bombs going off.