Peak Oil 101

[RE]

Service companies certainly lay people off far faster than those who own and sell the oil do. Of course, they also hire far quicker when the price increases.

Sure.  The issue is how long does the low price persist?

If it's short term, say a couple of months, the worker goes on UE and takes a vacation in Vegas until the price rebounds and his old boss calls him up and says "Hey Joe, we need you to leave the hookers and bring your 6-pack here to Eagle Ford to destroy a little more of the environment for your old salary of $100/hr.", or whatever the going rate is for expert Frackers.

If the EIA projections are right though of a decade long Glut and persistently low prices. well Joe's UE runs out after 6 months and he's blown all his savings at the blackjack table and on cheap hookers, so he's either found some other type of work that pays decently or he's flipping burgers at Mickey Ds living in his retired parents basement mooching off their social security, or he's homeless living on skid row in LA in a cardboard box with a 6 pack of used needles next to his sleeping bag.

Far as how much oil is available at what price, this impacts the finance drones who dish out a pile of money so a given service company will start up again to offer J6P Fracker his old job back.  If the prediction is for high prices with plenty of oil available at said prices, the drone sees big profits and $$$ signs flash before his eyes and happily dishes out the money.  If on the other hand the prediction is for low prices with only 3 billion measely barrels available to frack up at a profit, he's not so willing to fork over the money for Joe's salary and leases on equipment etc etc etc.

Thus you get guys like this service company CEO moaning about the price and trying to figure out how he's going to keep his company going ad pay the mortgage on his $1M McMansion and the Tuition for his kids private school.  I feel really bad for him. lol.

RE

[TDoS]

Service companies certainly lay people off far faster than those who own and sell the oil do. Of course, they also hire far quicker when the price increases.

Sure.  The issue is how long does the low price persist?

Always the question that professional economists will pontificate on endlessly. The good news being that if the EIA knows how much oil is available for a given price from a resource perspective, they know all the others in the US, and possibly the world (based on a paper they released some 7 or so years ago).

So then all their economists pontificate like all the other economists, the only difference being they seem to have a better geologically based foundation to match with it.

If the EIA projections are right though of a decade long Glut and persistently low prices. well Joe's UE runs out after 6 months and he's blown all his savings at the blackjack table and on cheap hookers, so he's either found some other type of work that pays decently or he's flipping burgers at Mickey Ds living in his retired parents basement mooching off their social security, or he's homeless living on skid row in LA in a cardboard box with a 6 pack of used needles next to his sleeping bag.

I was laid off for a year during low prices. I didn't do any of the things you have speculated on. And then a call came in one day and it was just back to the races. Only layoff in my entire career. Many of those I worked with when we were called back had similar circumstances. The game is known, and it doesn't involve the behavior of gamblers and addicts. 

Service company folks already know what the future holds for them with lower prices. Because it happens all the time. Covid for example. Happens to drill rig crews same as completion crews, dozer operators, landmen, only when it gets really bad do the owners of the oil themselves start to cut jobs. The number of people, including myself, who left the field for an office job paying 50% less, is innumerable.

When the opportunity presents itself, you make a choice. Leaving the field was the smartest thing I ever did, my paycut was 65%. But it opened up entirely new career paths.

Far as how much oil is available at what price, this impacts the finance drones who dish out a pile of money so a given service company will start up again to offer J6P Fracker his old job back.

Halliburton doesn't "start up again". It never stopped. It just shrunk. Schlumberger sold all its assets to Liberty. Smart cookie, the guy who runs that one, I've had meetings with him in his local office. And Liberty will be doing the same thing. The only question is how fast and thoroughly a company battens down the hatches. Work doesn't STOP....there is just less of it. Hence the layoffs, and occasionally they'll sell off equipment that is multi-use/ Dozers, trucks, cranes, etc etc.  They can always buy more when activity fires up.

If the prediction is for high prices with plenty of oil available at said prices, the drone sees big profits and $$$ signs flash before his eyes and happily dishes out the money.  If on the other hand the prediction is for low prices with only 3 billion measely barrels available to frack up at a profit, he's not so willing to fork over the money for Joe's salary and leases on equipment etc etc etc.

The industry doesn't function on predicted prices from others, they are quite capable of doing their own crystal ball reading. And then they prepare for it. They also use some of those quite sharp tools of stochastic modeling to decide when and how much to cut/sale/buy/hedge  as they have been taught by certain industry experts.  .

Thus you get guys like this service company CEO moaning about the price and trying to figure out how he's going to keep his company going ad pay the mortgage on his $1M McMansion and the Tuition for his kids private school.  I feel really bad for him. lol.
RE

Perhaps I need to contact him to help him through tough times, as it sounds as though he really hasn't reached the level of major operator yet.

[RE]

I was laid off for a year during low prices. I didn't do any of the things you have speculated on.

Of course you didn't.  World class experts like yourself can shift gears, take a desk job, lecture at a college for a year, take a sabbatical and cruise the Grand Canyon on your Harley with your genius kids before sending them off to college, the world is your oyster!  You really should give the  poor despondent CEO a call and tell him how this is probably the greatest thing to ever happen to him, he can be just like you and be a big success in any career at all!  Your greatness and resilence knows no bounds!  Yellowstone could blow and you would forge a new career as a volcanic ash salesman. 

Really, is there any topic you can't turn into an opportunity to brag about how great you are?

You are back in the cooler for violating the no bragging rule.

RE

[RE]

Currently at $68.  I wonder who still makes a profit when the price drops into the $50s?

https://oilprice.com/Latest-Energy-News/World-News/WTI-Breaks-Below-70-as-Demand-Concerns-Drive-Bearish-Sentiment.html

WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment

RE

[K-Dog]

Currently at $68.  I wonder who still makes a profit when the price drops into the $50s?

https://oilprice.com/Latest-Energy-News/World-News/WTI-Breaks-Below-70-as-Demand-Concerns-Drive-Bearish-Sentiment.html

WTI Breaks Below $70 as Demand Concerns Drive Bearish Sentiment

RE

Socialization for the rich.  Taxes will subsidize the extraction of every last drop.  The crisis of 2008 showed what the FSOA is willing to do to keep the gravy train of our elite going.  As long as there are proles too stupid to wonder about the big picture, and rich narcissists to exploit them.  The game goes on.

Global fossil fuel subsidies on the rise despite calls for phase-out

It is capitalism and die.  The decision has been made.  Fundamental changes that could save the day will not be made.

[RE]

Old newz.

https://www.dw.com/en/what-is-peak-oil-and-when-will-we-reach-it/a-70645124

What is 'peak oil' and when will we reach it?

RE

[K-Dog]

Old newz.

https://www.dw.com/en/what-is-peak-oil-and-when-will-we-reach-it/a-70645124

What is 'peak oil' and when will we reach it?

RE

A collection of opinions without science of any kind.  Feel good propaganda.

Renewables are not replacing fossil fuels, all you have to do to blow these dumfucks away is cite this.


Atmospheric CO2

October 2024     422.38 ppm
October 2023     418.82 ppm

Annual change:     +0.85%

Fossil fuel use is accelerating.  This article is propaganda to put the sheep asleep.

[RE]

Renewables are not replacing fossil fuels...

Fossil fuel use is accelerating.  This article is propaganda to put the sheep asleep.

Indeed.  The collective Energy Jones of the Post-Industrial AI Dependent Techno-Futuristic Billionaire Wet Dream* society is so insatiable in its demands for ever more gigajoules of energy it requires not only every drop of oil that can be fracked out of rock but also paving over entire ecosystems with PV panels and wind turbine arrays turning flocks of geese into airborne sushi.  The idea that there really are limits to energy consumption on a finite planet still is not grasped by the smartest guys in the room as they lead the sheeple on the yellow brick road to inevitable collapse and Everlasting Doomnation*.

Each day now as we move forward, there's some location where the city looks like it just had a fly-by Close Encounter of the Third Kind.

It won't be long before were all Cubans.

*- I'm claiming Coinage on these phrases.  You heard 'em here first. 

RE

[RE]

Not many frackers making a profit at those prices.

https://www.investing.com/news/commodities-news/brent-to-average-65-wti-to-average-61-in-2025-bofa-3742319

Brent to average $65, WTI to average $61 in 2025: BofA

RE

[K-Dog]

Not many frackers making a profit at those prices.

https://www.investing.com/news/commodities-news/brent-to-average-65-wti-to-average-61-in-2025-bofa-3742319

Brent to average $65, WTI to average $61 in 2025: BofA

RE

I won't call the article interesting, that is too generous. To me it is a large mathematical equation put into words.  It this happens, that happens and so on.  No real info.

[TDoS]

Not many frackers making a profit at those prices.

https://www.investing.com/news/commodities-news/brent-to-average-65-wti-to-average-61-in-2025-bofa-3742319

Brent to average $65, WTI to average $61 in 2025: BofA

RE

+6 years, about to be +7 years past peak oil....and DAMN are low prices not part of the Happy McPeakster program!!

But those kinds of prices will likely bring about lower drilling activity, lower US production...and we'll all get to revel in another US peak oil!

Good thing all us geriatrics probably don't need to worry about it much, having lived through all the other peak oils it is just a bit difficult to get excited about yet another one. 

[RE]

Well, that's a good deal higher than the BoA estimate.  Who is closer to the mark?  $74.53 for Brent according to the Reuters pol of expert analysts or the BoA analyst's price of $65 for Brent?  That's nearly a $10 difference. WTI @ $70.69 or $61?  Since we have our own world class expert, finally here's something we can hear a worthwhile opinion from him about. 

A difference this big obviously has a huge impact on how many holes will get drilled and how much money the banksters will dish out.  If BoA thinks the price is gonna be $65, they're not gonna float loans to anyone who needs $75 to make money.  This indicates that the Reuters experts are the SUITS sitting on the driller's side of the loan officer's table and the BoA expert sits next to the loan officer on his side of the table. The expert the driller's hired has to convinmce the loan officer that the expert they hired is wrong. lol.

Or more likely, they don't even bother going to BoA for a loan, because BoA has telegraphed to everyone what price they will loan money for, so if you can't come in with oil at that price, don't bother coming in for a tet a tet.

In any event, at least we can leave the Peak Oil question behind at last, although I'm sure the term will still pop up from time to time.

https://oilprice.com/Latest-Energy-News/World-News/Analysts-Cut-2025-Oil-Price-Forecasts-Again.html

Analysts Cut 2025 Oil Price Forecasts Again

RE

[TDoS]

If BoA thinks the price is gonna be $65, they're not gonna float loans to anyone who needs $75 to make money.  This indicates that the Reuters experts are the SUITS sitting on the driller's side of the loan officer's table and the BoA expert sits next to the loan officer on his side of the table. The expert the driller's hired has to convinmce the loan officer that the expert they hired is wrong. lol.

Only lol to those who have never played the game perhaps. Both sides pay well, but obviously those with a widely known reputation and past performance to back it up tend to be taken more seriously than Joe Expert. Because not all suits are created equal.   

[RE]

So who's expert do you think is closer to the target?  You're supposed to be the best suit at the table according to you.  Inquiring minds want to know.   If you don't answer or equivocate, you get cooler time.  What good is having an expert here if we don't get expert opinions?

RE

[TDoS]

You're supposed to be the best suit at the table according to you.

I am not a suit. Money handlers, insurance salesmen, bankers and financiers, lawyers. Never done any of that in life.

Inquiring minds want to know.  If you don't answer or equivocate, you get cooler time.

But of course.

So..here we go.

The standard 6 variable model used to do this type of projecting involves 7 main components, requiring they are ranked in order from most important in terms of overall uncertainty for a given scenario to least. Each of the 7 are then assigned a weighting range, the sum of which on any iteration must equal 1.0. This means that in any given run, by the time the probabilities are calculated from most to least uncertain, if that number exceeds 1.0 on any given run, the remaining 1 or 2 might be entirely eliminated from the calculations.

Brent prices in US$ and all underlying variables examine data from both prior model runs and now historical results and project from them forward. One of the most important of the 7 inputs is the squared deviation from the past 12 model runs compared to what is now history...when running the current month and moving forward in time. High detail information like country level production is grouped into logical regions in order to improve overall run times of the simulation. Some parts of the model are data, some are derived more from a delphi approach, for example expectations of world oil balances in terms of production based on data and expectations of demand based on historical patterns which result in forward looking world storage balance changes. Changing storage balances act as a overall gauge of the supply/demand balance. Stated OPEC guidance is within the model, as are what is called "unstated" guidance which is designed to match actions as oposed to just words. Exogenous events can work their way into now and future casting as well using similar modifcations to the appropriate category among the 7. The weighting and order for the 7 can be adjusted as necessary. Expected forward year oil intensity of national economies is a relatively new addition with the growing offset of energy once hydrocarbon based now something else (renewables, substitution of non-hydrocabon based fuels, etc etc).

Prices are the changing variable to reach a required equilibrium point on each iteration. Iteration results in terms of price required to balance all weighting and other conditions results in a single output, 5000 iteration is usually reasonable for the resulting distribution to stabilize.

These are the monthly expectations of price and probability for 2025.



If you look carefully, of note is that the thin white line across the middle (or close to it) of the box part of the plot is a median, and the eye should be able to pick up naturally that more than 50% of the date tends to reside on the lower side of the medium Brent price for any month. Downside risk is more apparent over the coming year than upside. 5% of the data is above and below the visible data, but 90% of all prices lay between the maxima and minima vertical lines. Also of note is the tendency for late next summer after demand tends to slacken as it does seasonally, prices do not look to recover to the same levels as they are expected to enter 2025. Because all the fractiles of these probability constructs are known, they can be compared directly at each 1$ point, and the odds then calculated as to the over/under at any point in time between months if there was an interest.

The question you asked wasn't about sochastic model results for 12 months in 2025, but what is the average price for the entire year. To plenty of people this is a single number. A single number for those who can't handle sharp objects is pretty standard. I'm betting that folks don't show you what is being provided here because I know I am not the only one doing it. But we all dumb it down to single numbers for internet denizens, newspapers, 2nd grade readers and suits and whatnot.

In order to create a reasonable annual average from 12 distinct distributions of probability, you use all 12 monthly distributions to create a single annual average, and just run 5000 iterations to populate another distribution for the annual answer. And then you present that distribution as the answer for annual oil price....while keeping the proper uncertainty contained within all of the 12 months.

So my answer for the most likely price of oil (in this case a mean) in 2025 based on all the individual months and their accompanying uncertainty is $65.83, give or take. Using that as a reference point on the graph you can then eyeball for yourself the accompanying range and probability of 90% of most outcomes for 2025. Only a 3% chance of the price being more than $70, but it does exist.