Quote from: TDoS on Dec 26, 2025, 11:24 AMAs far as "predicting" anything, if he drew the lines with post 2015 data and then stated his conclusion, that isn't a prediction. It is an observation, coupled in this case with a bad conclusion, drawn from historical data. If he used this chart pre-2015 to predict the drop in oil prices, that would be different.

No, this is  just a recent chart, he started producing them back in around 2011-12 as I recall.  They all came before the price collapse.  I find it remarkable you managed to  miss them and him, since I regularly cross posted his blogs and did numerous podcasts with him.  Here's one with me, Steve and Ugo.


As to his current price point of $125 on production,  that has changed, you'd have to ask him why.  I suspect it's a price point for new discoveries, not an average for all production.  $60 on consumption is different as well now, used to be $80 as I recall.  Credit situation has worsened, obviously.

RE

Quote from: RE on Dec 26, 2025, 12:13 PM

Quote from: TDoS on Dec 26, 2025, 11:24 AMAs far as "predicting" anything, if he drew the lines with post 2015 data and then stated his conclusion, that isn't a prediction. It is an observation, coupled in this case with a bad conclusion, drawn from historical data. If he used this chart pre-2015 to predict the drop in oil prices, that would be different.

No, this is  just a recent chart, he started producing them back in around 2011-12 as I recall.  They all came before the price collapse.  I find it remarkable you managed to  miss them and him, since I regularly cross posted his blogs and did numerous podcasts with him.  Here's one with me, Steve and Ugo.

The website url rings a bell, but the name didn't register. I don't recall any of his work independently, or from that website. I tended to hunt far bigger game, in different venues.

Quote from: REAs to his current price point of $125 on production,  that has changed, you'd have to ask him why.  I suspect it's a price point for new discoveries, not an average for all production.  $60 on consumption is different as well now, used to be $80 as I recall.  Credit situation has worsened, obviously.

RE

The mechanisms of how credit works within the overall scheme of capital investment isn't something normally or directly incorported within the economic modeling of resource development itself, but might have a place within a financial overlay dictating the price that E&Ps see and by extension affect the go/no-go decisions.

Straight up changing price delta models are difficult enough, second or third order assumptions of how the maneuvering of capital takes place behind the scenes isn't something I've ever seen integrated in any believable way to deliver a long price to the resource cost side. I have no doubt it can be done with the necessary resources and personnel, but I've never seen it. And if it lacks a stochastic component I wouldn't believe it by default, no one who knows anything about this type of high quality macro-economic modeling can believable do it without including the uncertainties involved.   

There's certainly quite a bit of variability implicit here, not the least of which is there was no way to predict some of the tricks played by the central banks to issue credit and maintain liquidity through the system.  Steve never claimed perfection in his modeling.  The point though is that most of the folks making peak oil claims focused far too much of the supply side without taking into account credit flow to the demand side of the equation.  Over the long term this has had the result that oil never could climb to the stratospheric prices of $200-300 bbl many of the pundits predicted.  With a range bound commodity, there's no incentive to search for or pump the really expensive oil.  For the most part, it will just stay in the ground.

RE

Quote from: RE on Dec 26, 2025, 11:19 PMThere's certainly quite a bit of variability implicit here, not the least of which is there was no way to predict some of the tricks played by the central banks to issue credit and maintain liquidity through the system.

You and I might discuss variability, but certainty is what analysts claim to do...if only because the instant you quantify the variability and present the answer? Normies counter the precise measure of uncertainty with "oh...so you don't really KNOW then". Seen that one a thousand times. After all, Hubbert's curve required no expression of uncertainty, right? In the moment, and for 30 years afterwards, it was GREAT! As opposed to what folks know now, that it was an incomplete expression of US economically recoverable oil resources.

It is quite rare, even in the scientific community, for someone to appreciate the precision of a properly constructed  expression of uncertainty over a point estimate picked (sometimes at near random) from within it. People just naturally crave certainty and that faux precision....even if it is a load of bullshit. 

Quote from: RESteve never claimed perfection in his modeling.

Yet the instant you put a line on a graph and move into the future, that is exactly what you are doing. Even if you caveat it with words. Seen this one a million times as well. And again, it is done because it needs to be done, the words being a CYA because whomever kicked out the graph can't even begin to express it correctly in a visual way.

Quote from: REThe point though is that most of the folks making peak oil claims focused far too much of the supply side without taking into account credit flow to the demand side of the equation.

Maybe. Financing is as much a part of O&G development as anything, but as I mentioned before, O&G companies don't usually have problems with credit when they've got liquid and gaseous gold flowing out of the ground. Credit is nearly a given within the process. Harder to get in low prices maybe, but even in low prices if you can demonstrate the IRR to people with brains and money, it will be there.

Quote from: REOver the long term this has had the result that oil never could climb to the stratospheric prices of $200-300 bbl many of the pundits predicted.

Credit in this scenario is nothing more than a component of the supply/demand/price curve. No need to explicitly pull it out, it is like arguing over the cost of steel when drilling. It is just a variable in the ultimate IRR equation and nothing more. Cost of credit runs 30% per annum? Fine....my IRR needs to be higher to cover it is all.

Quote from: REWith a range bound commodity, there's no incentive to search for or pump the really expensive oil.

Prudhoe Bay was really expensive oil. And far, far away. And guess what? There was incentive to produce it regardless of its RELATIVE high cost of credit (we're talking late 70 into early 80's and high interest rates, American malaise, the entire smack) to ANYTHING in the Permian. Yet they did it anyway. Because the IRR worked.

Quote from: TDoS on Dec 27, 2025, 06:35 AMMaybe. Financing is as much a part of O&G development as anything, but as I mentioned before, O&G companies don't usually have problems with credit when they've got liquid and gaseous gold flowing out of the ground. Credit is nearly a given within the process. Harder to get in low prices maybe, but even in low prices if you can demonstrate the IRR to people with brains and money, it will be there.

Bankers tend to be reluctant to loan for drilling and exploration when the oil is selling for $58/bbl and it costs $80/bbl to get it to market.  Particularly when an oversupply is predicted for the next decade and most OECD countries are in recession and in debt up to their eyeballs.

RE

Quote from: RE on Dec 27, 2025, 10:18 AMBankers tend to be reluctant to loan for drilling and exploration when the oil is selling for $58/bbl and it costs $80/bbl to get it to market.

Depends on the amount of natural gas being sold for $8/mcf to LNG markets that come with it. The world isn't easy anymore, oil or gas, the solution gas reservoirs powering the American oil powerhouse aren't Prudhoe-like fields, but resource plays. And everyone single US LTO play consists of a solution gas drive reservoir. If the remaining peakers would focus on that they'd make a bunch more sense than the "slap a curve" on it routine, or the "no more room to drill!" or whatever the survivors are pitching to the rubes nowadays.

Want to bet that in general they don't even know that alleged "oil" wells are becoming REAL gas wells within 24 months of the start of production? It is almost as though they TRY to be uninformed about how the industry and O/G production works.

Quote from: REParticularly when an oversupply is predicted for the next decade and most OECD countries are in recession and in debt up to their eyeballs.
RE

Oversupply being predicted is like...undersupply being predicted. It is until it isn't. And at any point in time either can be sold to the rubes.

The good news is that when folks who know stuff, like whomever built that chart from the EIA I referenced? You can just glance at that and only need to know where a companies acreage sits without needing to know much of anything except oil price. No authorship was provided, but they do answer their "Ask EIA" email address. Turns out CapX and operating costs were built into it, as well as rate of return (note on Y axis)...the part the bank would be interested in, to make sure the surplus is enough to get back their cut.