Oil is now used a little more prudently than in the past, this means that higher prices are affordable in some applications at least.
There is little difference between a car that gets 30 miles per gallon of $100 oil, or one that gets 60 miles per gallon of $200 oil.
Oil can be burnt at less than 1% efficiency to produce light in an oil lamp, or at 35% efficiency in a diesel generator that powers electric lamps that are 10% efficient, giving an overall efficiency of 3.5%
If oil for oil lamps is affordable at $100, then even at $350 it should be affordable for electric lights.
"Installers and owners of emergency diesels must assume that they will have to run for a week or more"
I was more thinking about the seemingly expensive oil last time at $147, which helped bring the economy and the price back down and then we settled back up at around $100 while developing countries (eg China) were happy to pay these prices and also allow the oil industry to get the fracking and hard-to-get oil extraction going.
IOW $100 oil was not going to let us (eg the West / importing countries) do any growing
Oil has jumped nearly a dollar, so am wondering if we have now seen the bottom? DOW has slumped by just over 350 points so would have expected the oil price to have dropped in concert.
AutomaticEarth wrote:I was more thinking about the seemingly expensive oil last time at $147, which helped bring the economy and the price back down and then we settled back up at around $100 while developing countries (eg China) were happy to pay these prices and also allow the oil industry to get the fracking and hard-to-get oil extraction going.
Generally speaking, developing economies can afford higher prices than developed economies in that the marginal barrel in China goes into a household's first car, an increased truck etc... whereas in the US that same marginal barrel goes into the households 3rd car or jet ski.
Also note that very few barrels ever sold for $147. A lot of oil is used indigenously, never touching the international market, yet more oil is supplied in medium to long term bilateral agreement, more is bought on the futures market etc.
...the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. Uh Oh…
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
...the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. Uh Oh…
Already a bit dated that as this has happened since
A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools - Douglas Adams.
If you or I set out to defraud people in this way we would be locked up and the key thrown away when it went tits up. This is similar to the wrapping up and selling on of sub-prime mortgages in CDOs in the Naughties which led to the 2008 crash. People all over the finance industry were conning others, not least the Credit Rating Agencies, but again no one was prosecuted.
They're a bunch of criminal gangsters who us stupid taxpayers bail out over and over again.
...the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. Uh Oh…
Already a bit dated that as this has happened since
Yeah, such stuff moves on quickly, as the very first line of that blog post said.
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
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
WTI dips below $44 for the first time in years on rising US oil inventories, now at 80 year high.
Trouble is, most of those 'oil' inventories are condensate from shale, which the refineries cannot efficiently process, and the oil companies cannot legally export.
PS_RalphW wrote:WTI dips below $44 for the first time in years on rising US oil inventories, now at 80 year high.
Trouble is, most of those 'oil' inventories are condensate from shale, which the refineries cannot efficiently process, and the oil companies cannot legally export.
US Shale 'oil' is such a busted flush.
And we have Shell going all hoopla about going into the Arctic to drill. 24bn barrels of potentially very hard to get oil when BP expects the price of crude to remain about $50 for the next 3 years......
Re WTI - what they're getting out is pretty much the consistency of lighter fluid isn't it?
Shale oil varies a lot from well to well, but the only reason a lot of it is called oil, is because they keep changing the API value that separates oil from condensate. This is partly so that they can ship it in oil trains (no pipelines) that have lower safety standards, and as a result explode rather than burn when they crash. (Killed 40+ people a couple of years ago).
The US is also importing a lot of extra heavy oil as well, and this is the other end of the spectrum. They have the heavy plant needed to break down the heavy stuff into usable grades, but at the expense of the asphalt market, which has gone up a lot in price in the last couple of decades. What they lack is traditional crude oil, in the middle.
The oil industry in the US is huge. They have (had) more drilling rigs and more oil wells than the rest of the world put together. They produce on average less than 10 barrels a day.
In a few decades, when the millions (really) of old, plugged and forgetten wells start leaking, they are going to have a very poisoned water table and massive methane emissions.
PS_RalphW wrote:I think in the Torygraph, there is s piece which reports that 2 big UK banks have $50B invested in US oil shale.
That is $50B they won't have next year. Liquidity crisis?
They don't happen to be bailed-out banks by any chance, do they?
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
AutomaticEarth wrote: Oil has jumped nearly a dollar, so am wondering if we have now seen the bottom?
Unlikely I think. First we need a few high profile bankruptcies to reduce production. Once the price starts going up it may quite high quickly, i.e. above $100, as the losses may restrain investors for a while. Admittedly not for long since appear to me memorially challenged.
