emordnilap wrote:The only good thing about the price drop is the frackers are dropping like flies.
Should we not look at the price as a reflection of what is happening not a cause of what will happen?
Low price means people don't wan't to (or can't) pay the higher cost that the hard to extract unconventional fossil carbon requires.
While prices are low we will use what's left of the easy oil, undiluted by the hard to get stuff, and hastening and exacerbating the effects of peak-oil.
And the good thing is that global warming will be (a bit) mitigated.
It's part of the roller coaster ride down the slippery slope of doom for our current civilisation. The current oil glut and consequent low prices, caused in itself by a previous price hike and the now incipient recession, will lead to cuts in exploration which will lead to a shortage and high prices in the near future. The high prices will lead to more exploration for higher priced oil but the higher cost of energy to do the exploration will mean that the new oil is even more expensive. That will make the next fuel price caused recession even deeper and so on. Energy costs are bringing our civilisation to an end and a rather abrupt one too!
Mobbsey wrote:Environmentalists should be cheering on OPEC! They're bankrupting the companies environmentalists love to hate!
From the North Slope of Alaska, to tar sands and the Keystone pipeline in Canada, to the fracking patch of the Dakotas, they're curtailing the development of some of the most damaging sources of petroleum operating today.
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
But the falling oil and gas prices are unlikely to affect investment in renewable energy in the long term as the industry continues to be bolstered by government subsidies and support, Energy Intelligence argues. The industry is also well established enough in many parts of the world to be able to see out a short-term price drop. "These technologies are no longer fragile infants", it says.
The oil price may rebound soon anyway, bringing gas prices with it. If the Saudi's plan to squeeze production in other countries works, supply rates may drop, and the price may rise again. That certainly seems to be what most analysts expect to happen.
So renewable power sources are unlikely to be greatly affected by falling oil and gas prices in the long term. In contrast, the data suggests that the majority of the world's oil projects, particularly costly new exploration in the Arctic, are most threatened by oil priced at $50 a barrel.
I experience pleasure and pains, and pursue goals in service of them, so I cannot reasonably deny the right of other sentient agents to do the same - Steven Pinker
Given that a fracked well loses anything up to 80% production in a two year period it shouldn't be long before the shortage shows up. Hopefully it will be long enough to send some dirty frackers to the wall!
I'm surprised by those breakeven prices. I thought the b/e for legacy Saudi oil was in the region of $10 to $20/barrel not $98! I know that Saudi costs are going up as they have to pump water into their formations to keep pressure up but $98 against $40 to $50 for US fracked oil?
kenneal - lagger wrote:Given that a fracked well loses anything up to 80% production in a two year period it shouldn't be long before the shortage shows up. Hopefully it will be long enough to send some dirty frackers to the wall!
Heading Out reckons it is unlikely to be before June 2015 that we can see a significant effect on US production,
Peter.
Does anyone know where the love of God goes when the waves turn the seconds to hours?
No two oil wells will have the same break-even price. You will only know what it is after the well has been drilled and enough oil pumped to actually break even. At each stage of the process of planning and drilling and fracking a well, money is spent that becomes spent cost. Drilling companies contract to hire rigs and buy in fracking sand and over expenses months in advance, and these are all sunk costs as well. The decision to continue the drilling on a given well will then excludes what has already been spent. Cash flow is king. And of course the big unknown is the actual price the oil will sell for when it is finally flowing, not just the current price but the future price curve as well.
The feedback is that the more debt laden companies are already going under, all are cutting back plans for drilling to some extent, and some are paying penalty clauses to avoid drilling. There is a six month backlog of drilled wells waiting to be fracked, so a lot of wells will continue to come online in that period. Some wells may be shut in at the pre-fracking stage, but once fracked the well will be pumped at maximum possible rate, because shutting it in at that stage would damage future production .
I expect peak US production about middle of the year, then slow decline until some months after oil returns to $100+
In the mean time a lot of debt will be defaulted. A lot of Chinese and Russian debt will also be defaulted. The EU is going with QE again, but Greece is 80% likely to default as well, and we may see deepening deflation and global financial crisis again.
