Peak Expensive Oil

[GRG55]

Re: Peak Expensive Oil

As I have posted before, oil is the most political of commodities. And it is absurd to suggest anybody can actually consistently forecast global political events (one might be better off believing in the Tooth Fairy)...hence one of the reasons predicting oil prices movements is a mugs game.

However, there are times when politics are not the dominant factor in the major directional changes of oil prices, and fundamentals re-assert themselves. This was one of those times. And that is why it was a reasonable proposition to expect that directional change well in advance, in spite of the fact that half the Middle East is in flames. The Saudi reaction to it was also predictable if one cuts through the hype surrounding OPEC and looks at its actual multi-decade track record and member behavours.

The price movements have been exacerbated by some of the factors you list, but there was no orchestration and none of what you suggest "caused" the price of oil to start collapsing.

As to what happens next? Oil is still rather expensive to find and develop...but F&D costs were falling in all the important plays, including the North American shale trends, before the oil price fell out of bed. Unless and until we see a strengthening of global growth rates a quick and sustained rebound in oil prices is highly unlikely.

The overthrow and ousting of the House of Saud might be the one political outlier event that could pump prices, but I am skeptical that even that will be able to sustain a significantly higher price in the current circumstances.

Nine months later...

Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure

December 28, 2015

In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well.

Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high.

The problem? Oil’s no longer at $50. It now trades near $35...

...The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great...

...“You are going to see a pickup in bankruptcy filings, a pickup in distressed asset sales and a pickup in distressed debt exchanges,” said Jeff Jones, managing director at Blackhill Partners, a Dallas-based investment banking firm. “And $35 oil will clearly accelerate the distress.”...

...Shale drillers aren’t the only ones hurting. OPEC’s strategy is causing pain for its members. Saudi Arabia is said to be considering selling stakes in state-owned companies to help stem a budget deficit that reached 20 percent of its economy. Venezuelan Oil Minister Eulogio Del Pino said the industry is “at the door of a catastrophe” if crude production outstrips storage capacity...

...“Most companies have gone into shrinkage mode, saying their goal is to stay flat and make it through this market,” Raoul LeBlanc, an analyst with IHS Inc. in Houston, said. “The current price is unsustainable. Unfortunately, we have to sustain it for a while longer.


First U.S. Oil Export Leaves Port; Marks End to 40-Year Ban

January 1, 2016

The first U.S. shipment of crude oil to an overseas buyer departed a Texas port on Thursday, just weeks after a 40-year ban on most such exports was lifted.

The Theo T tanker has left NuStar Energy LP’s dockside facility in Corpus Christi, Texas, along the western shore of the Gulf of Mexico, Mary Rose Brown, a spokeswoman for NuStar, said in an e-mail. The ship is carrying a cargo of oil and condensate to Italy from ConocoPhillips’s wells in south Texas that was sold to Swiss trading house Vitol Group.

A campaign by oil explorers including Continental Resources Inc., Chevron Corp. and Exxon Mobil Corp. to lift the 1970s-era export prohibition culminated in a Dec. 18 congressional decision to end the ban.

Vitol, which owns stakes in refineries from northern Europe to Australia, has a second cargo of U.S.-sourced crude scheduled to depart a Houston port within days.




Saudi Arabia Executes 47 Including Prominent Shiite Cleric

January 2, 2016

Saudi Arabia has executed 47 men for various bombings and attacks, the interior ministry said on Saturday.

The punishments were carried out in 10 provinces, according to a statement by the official Saudi Press Agency. While most of the convicted men were Saudi citizens, the number included one Egyptian and one Chadian national, it said. Some executions were carried out by firing squad and some by sword, a ministry spokesman said on Al-Arabiya TV...

...The kingdom is cracking down on domestic terrorists, who have staged multiple attacks since Saudi Arabia joined the U.S. coalition against Islamic State in 2014. Saudi security forces arrested 377 people for joining Islamic State, Al-Jazirah newspaper reported in December...




Russian Oil Industry Could Begin Deteriorating in 2017

22 December 2015

So far, Russia has managed to maintain generous oil production despite OPEC’s persistent refusal to cut its own output.

“I will tell you when Russian companies are for sure going to decrease production – when oil costs $0,” Deputy Energy Minister Kirill Molodtsov said recently in Moscow.

The reason is that Russia, whose economy relies heavily on commodity exports, has been pumping oil at record rates to fight off a recession caused in large part by the steep decline in oil prices that have contributed to its first recession since 2009. Its economy also has suffered from Western sanctions imposed since 2014 because of Moscow’s involvement in the conflict in neighboring Ukraine.

Moscow’s annual budget also relies on oil production for half its revenues, so you can expect Russia to keep up record production through 2016, according to Lauren Goodrich, a senior Eurasia economic analyst at Stratfor Forecasting Inc. in Austin, Texas.

“Russia will maintain its current oil production levels within the bandwidth of 525 million to 533 million [metric] tons next year, as the federal government’s budget is set on such production levels,” Goodrich told Bloomberg in an email.

All that could change by 2017 unless Moscow goes through with a plan to reduce its export duty from 42 percent to 36 percent, Russian Energy Minister Alexander Novak said in an interview published Tuesday in the country’s daily business newspaper Kommersant.

The duty is now frozen at 42 percent, and Novak said there is concern within Russia’s oil industry that the freeze will continue beyond 2016, leading to “risks of output decline [in Russia] starting from 2017.”

“If this decision [to cut the duty] … actually lasts for a year and the companies believe it, they will continue taking loans and invest, and this will allow them to keep output steady in 2017-18,” Novak said. “But if the companies now get a signal that this decision not to cut the oil export duty is for longer, they will not take loans and won’t make investments.”...

...Novak said Russia needs such stimulus to develop new oilfields in the Russian Arctic, given Moscow’s tax plans. “Today we have some deposits that have become almost unprofitable under the existing tax regime,” he told the Russian broadcaster RT on the sidelines of the London conference. “It’s [in] Western Siberia, Krasnoyarsk region, the north of our country.”...

[touchring]

Re: Peak Expensive Oil

repeat

[touchring]

Re: Peak Expensive Oil

“I will tell you when Russian companies are for sure going to decrease production – when oil costs $0,” Deputy Energy Minister Kirill Molodtsov said recently in Moscow.

There's no need for $0, China will be more than happy to buy over all of Russia's and Canada's oil production (less domestic consumption) at $20 a barrel for the next 50 years or until oil in that country runs out, whichever comes earlier).

[lakedaemonian]

Re: Peak Expensive Oil

Saudi Arabian Embassy in Tehran, Iran has been seized and burned.

[GRG55]

Re: Peak Expensive Oil

There's no need for $0, China will be more than happy to buy over all of Russia's and Canada's oil production (less domestic consumption) at $20 a barrel for the next 50 years or until oil in that country runs out, whichever comes earlier).

China has already purchased large quantities of Canada's oil. All of it in the ground, and virtually all of it at prices much, much higher than $20.

Two years in, Nexen deal still a tough swallow for state-owned CNOOC

December 13, 2014

...As the last to get in under the wire for SOE takeovers, Nexen shareholders did well in the deal — the bid amounted to a 61% premium over Nexen’s July 20 stock price. But CNOOC seems to be struggling to get value out of its new assets — particularly the long-troubled Long Lake oil sands project...

The article above is from a year ago. Now they have a new Provincial government and have to deal with royalty increases and the new carbon tax.

But the Chinese are still buying...only now it's land-locked Canadian natural gas, and the Chinese SOEs aren't the buyers any more.

Unnamed Chinese buyer offers $100M for Long Run Exploration shares

December 21, 2015 5:54 PM MST

Debt-laden Calgary producer Long Run Exploration Ltd. is replacing a $100-million lifeline injection of Hong Kong money with a $770-million deal to sell the company to an unnamed group of Chinese investors.
The Calgary intermediate announced Monday the Chinese group has agreed to pay 52 cents per share or $100 million total for its shares while also taking over Long Run’s net debt of $679 million as of Sept. 30.
Long Run chairman and chief executive Bill Andrew said Monday the buyers want their identity withheld for now but it will be released at a later date. He said they have current large oil and gas investments in Canada and, though they refer to themselves as a group, they operate as a corporation...

...The Long Run deal is reminiscent of the purchase of private Calgary producer New Star Energy Ltd. earlier this year for $215 million, including about $45 million in assumed debt.
In that case, the initially unnamed Chinese buyer was revealed later to be Sinoenergy Pacific Corp., a Beijing-based supplier to the natural gas transportation industry in China. New Star was its first Canadian purchase and it vowed to use it as a base to grow production.
In other recent Chinese purchases of Calgary companies, Novus Energy Inc. was sold to Yanchang Petroleum International Ltd. for $320 million in 2013, China Oil and Gas Group Ltd. bought private Baccalieu Energy Inc. for $236 million in 2014 and Hyperion Exploration Corp. completed its sale to Tri-Win International Investment Group Inc. for $32 million in January 2015...

I think it's just a way for private money to escape from China without the owners being arrested.

[touchring]

Re: Peak Expensive Oil

Of course this is a joke. The larger SOEs won't come in unless they have a sure profit deal guaranteed by the government of that country. There are so many African and Middle Eastern countries such as Iraq that can offer a better deal than Canada.

China has already purchased large quantities of Canada's oil. All of it in the ground, and virtually all of it at prices much, much higher than $20.

Two years in, Nexen deal still a tough swallow for state-owned CNOOC

December 13, 2014

...As the last to get in under the wire for SOE takeovers, Nexen shareholders did well in the deal — the bid amounted to a 61% premium over Nexen’s July 20 stock price. But CNOOC seems to be struggling to get value out of its new assets — particularly the long-troubled Long Lake oil sands project...

The article above is from a year ago. Now they have a new Provincial government and have to deal with royalty increases and the new carbon tax.

But the Chinese are still buying...only now it's land-locked Canadian natural gas, and the Chinese SOEs aren't the buyers any more.

Unnamed Chinese buyer offers $100M for Long Run Exploration shares

December 21, 2015 5:54 PM MST

Debt-laden Calgary producer Long Run Exploration Ltd. is replacing a $100-million lifeline injection of Hong Kong money with a $770-million deal to sell the company to an unnamed group of Chinese investors.
The Calgary intermediate announced Monday the Chinese group has agreed to pay 52 cents per share or $100 million total for its shares while also taking over Long Run’s net debt of $679 million as of Sept. 30.
Long Run chairman and chief executive Bill Andrew said Monday the buyers want their identity withheld for now but it will be released at a later date. He said they have current large oil and gas investments in Canada and, though they refer to themselves as a group, they operate as a corporation...

...The Long Run deal is reminiscent of the purchase of private Calgary producer New Star Energy Ltd. earlier this year for $215 million, including about $45 million in assumed debt.
In that case, the initially unnamed Chinese buyer was revealed later to be Sinoenergy Pacific Corp., a Beijing-based supplier to the natural gas transportation industry in China. New Star was its first Canadian purchase and it vowed to use it as a base to grow production.
In other recent Chinese purchases of Calgary companies, Novus Energy Inc. was sold to Yanchang Petroleum International Ltd. for $320 million in 2013, China Oil and Gas Group Ltd. bought private Baccalieu Energy Inc. for $236 million in 2014 and Hyperion Exploration Corp. completed its sale to Tri-Win International Investment Group Inc. for $32 million in January 2015...

I think it's just a way for private money to escape from China without the owners being arrested.

[GRG55]

Re: Peak Expensive Oil

Of course this is a joke. The larger SOEs won't come in unless they have a sure profit deal guaranteed by the government of that country. There are so many African and Middle Eastern countries such as Iraq that can offer a better deal than Canada.

The Chinese energy SOEs have a well deserved reputation for paying too much and making stupid deals. Just look at the real track record. After 2009 they displaced the former winner of this dubious title, Petronas.

That's what happens when too much cheap money, institutionalized internal corruption and no capital investment discipline intersect. Same old story as the rest of the miracle Chinese economy, capital misallocation on a breathtaking scale never before seen.

I expect as things settle out, Canadians (and others including Australians) will be able to selectively buy back the better assets at a steep discount to what they were sold for.

[touchring]

Re: Peak Expensive Oil

The Chinese energy SOEs have a well deserved reputation for paying too much and making stupid deals. Just look at the real track record. After 2009 they displaced the former winner of this dubious title, Petronas.

That's what happens when too much cheap money, institutionalized internal corruption and no capital investment discipline intersect. Same old story as the rest of the miracle Chinese economy, capital misallocation on a breathtaking scale never before seen.

I expect as things settle out, Canadians (and others including Australians) will be able to selectively buy back the better assets at a steep discount to what they were sold for.

I wouldn't pay too much attention to MSM as they cherry pick their reports.

Unless you're on the ground, it's impossible to know the real situation. The Chinese companies are already everywhere in South East Asia. I'm not referring to the local ethnic Chinese that already dominate 80% of the South East Asian country economies, but businessmen and businesswomen from China. They are very rich (much richer than the latter and way more than even Forbes report) and powerful (in terms of political connections and networking). For obvious reasons, these people keep a low profile and setup local companies and hire natives to run and front their businesses. Unlike American, Korean and Japanese firms, it is often not possible to know whether a firm is Chinese owned from the name of the company. A lot of them even use Japanese names or European like surnames for their company names.

They come in all forms, some rose from nothing, some were construction or factory workers, even janitors only 5 or 6 years ago to become bosses of firms with hundreds of workers, some even came as prostitutes and run small million dollar businesses after 5 years. A couple are SOEs, many of which we never heard. Then there are the rich and politically connected, the China billionaires - at last count there are more than 500 of them just in China alone, not even counting Hong Kong and Taiwan. These people deal at the ministerial and royalty level and often partner with local ethnic Chinese billionaires.

The new breed of businessmen from China are of a different breed from the usual Hong Kong and Taiwanese businessmen that you see in Chinatown in Canada and Australia. They are from places like Zhejiang, Jiangsu, Sichuan and northern China. They not just merely hardworking, but innovative and idealistic as the places they come from are the cultural, economic and financial centers of old China.

The "economic and political filtration" by China companies throughout the South East Asian is the real reason why Obama's China containment foreign policy is a sham and just a show.

Notice how the resistance to China's claim over the South China Sea is dying down? Despite all the call for China's bubble bursting in the MSM, but in actual fact, China is becoming more influential by the day.

Imagine this scenario - a politician in the Philippines condemning China's actions in the South China Sea in the day, while at night he hosts Chinese SOEs bosses to discuss JV project with his own private company.

[Chris Coles]

Re: Peak Expensive Oil

Of course this is a joke. The larger SOEs won't come in unless they have a sure profit deal guaranteed by the government of that country. There are so many African and Middle Eastern countries such as Iraq that can offer a better deal than Canada.

Not many nations as safe as Canada.

[astonas]

Re: Peak Expensive Oil

D,

I am sure that you are an honest individual and that your own opinions are based upon a lifetime of hard study and subsequent work. All that I have done is open the door to an alternative view of what is the reality and I am equally sure that I have never implied any special place in that debate; the implication is yours alone.

But let me give you a very simple challenge, both intellectual and physical.

Why are planets round? http://www.scientificamerican.com/ar...planets-round/

The answer given:

Derek Sears, professor of cosmochemistry at the University of Arkansas, explains. Planets are round because their gravitational field acts as though it originates from the center of the body and pulls everything toward it.

All I ask you to do is to go out into your garden and take a shovel and dig into a pile of sand or soil; and turn the shovel over. If gravity is a mono directional force, in the one direction only, towards the centre of the planet; then there will be an observable difference in the physical attributes of that shovel full of sand, when you turn the shovel over. (Or you would observe every particle rotating to re-establish that "towards the centre" field).

Except that we all know that there is no difference.

Please, think about that.

What I had the temerity to do is place into the debate that every particle of a mass has a gravitational force towards the particle from every direction. But that once we accept that possibility, then when we observe gravity within any body of mass, our observation is entirely dependent upon the location of the point of observation and the direction we face at that moment of such observation.

In which case, at the centre of the mass, gravity must be towards the mass, and thus towards the surface of the mass in every direction and in which case, at the centre of the mass, all those, towards the surface, negative, forces must meet at a point of balanced equilibrium. That once you step forward, towards the surface in any direction, away from that point of balanced equilibrium, gravity will be towards the surface, relative to that proportion of the mass in front of the observer. If that is correct, then as we move away from the centre of the mass and move towards the surface, we will experience a further point of balance of the forces, between the centre and the surface; where there is at least one point between the centre and the surface, where there is an equal distribution of the mass both behind, and in front, of that point of equilibrium.

In which case, gravity is towards the centre at the surface of any mass object, yes; but towards the surface at the centre and that between the surface and the centre there must a point where the forces again balance. I use that explanation to describe why this planet has a very distinct density change between the inner and outer core. I believe that is caused by balanced gravity effects. That such balanced forces create a shell of very low gravity right at the interface between the inner and outer core.

The problem arises because if I am correct, then it is quite impossible to create a singularity, where gravity is presently believed to compresses a substantial body of mass down to a minute dimension. For if my explanation is correct, what we get is a body of mass with gravity towards the surface at the center, towards the centre at the outer surface; with balanced gravity effects between the surface and the centre.

I am quite certain that I have given very detailed explanations of the evolution of the structure of M51 the Whirlpool and perhaps of even greater importance SN1987A which has a central body that has been observed to supernova, surrounded by a ring of objects that took some 20 years to "light up". Under my theories, the inner object is the central core object, the distance between the inner object and the outer ring of mass is the result of a very slow expansion of the outer ring of mass and that the outer ring of mass is a balanced mass equal to the mass of the inner core that has, as it expanded, broken up into pieces. That the two are locked together by the gravity of the entire mass of the object.

The two smoke rings surrounding the object are, under my theory, caused by the collapse of the inner object when the supernova occurred causing an very short term emission of mass from an annular ring orifice caused by the same balanced gravity effects within the inner mass; and why those smoke rings are out of line with the rest of the structure of SN1987A.

http://heritage.stsci.edu/1999/04/sn1987anino.html

If gravity is towards the centre at the surface and towards the surface at the centre with an area of balanced forces between the surface and the centre; then it is impossible for any object to form a compressed mass such as to underpin the theory of big bang.

That was the central core of the debate I started in the first edition; there are other aspects not covered herein, particularly with regard to another simple mistake about the event horizon. All I have done since is create an explanation of why particles of mass exhibit a force we describe as gravity, towards each particle, from every direction. More recently discovering what I believe, that the mistake goes right back to three words written by Isaac Newton in his Principia.

If making simple debate, using plain language, without any "flourishes" is always to be treated as though the rantings of a mad man; then how are we ever going to move forward?

Go on, go get your spade out and think about that.

Just for comparison, some actual research in the field of gravity waves may have just borne fruit!

While one must of course be careful to wait for validation of the technical details in the publication, and also for independent experimental confirmation, before celebrating too much, this work appears to show a real effect.

Here is one popular-media description, in the New York Times:

Gravitational Waves Detected, Confirming Einstein’s Theory

Here's the publication link.

And the pdf of the paper.

If the measurement turns out to be real, this is the sort of research that can be said to be advancing the state of mankind's understanding of gravity.

[DSpencer]

Re: Peak Expensive Oil

Just for comparison, some actual research in the field of gravity waves may have just borne fruit!

While one must of course be careful to wait for validation of the technical details in the publication, and also for independent experimental confirmation, before celebrating too much, this work appears to show a real effect.

Here is one popular-media description, in the New York Times:

Gravitational Waves Detected, Confirming Einstein’s Theory

Here's the publication link.

And the pdf of the paper.

If the measurement turns out to be real, this is the sort of research that can be said to be advancing the state of mankind's understanding of gravity.

Very exciting discovery. I remember reading about the original LIGO years ago. It appears that once the advanced LIGO went online it did not take long to detect gravitational waves. Hopefully this means they will continue making observations on a regular basis.

[peakishmael]

Re: Peak Expensive Oil

Very exciting discovery. I remember reading about the original LIGO years ago. It appears that once the advanced LIGO went online it did not take long to detect gravitational waves. Hopefully this means they will continue making observations on a regular basis.

Yes, they will. Adding another detector facility (already coming soon) will enable scientists to map events precisely on the sky, by triangulation. Near-term improvements in sensitivity may increase detections to perhaps 100/year. Moving to space-based observations, as the Europeans and NASA hope to do, would eliminate many sources of noise in the ground-based systems, further increasing sensitivity. The announcement really is analogous to the first time Galileo pointed a scope at the sky; gravity wave observations will continue to improve, just as telescopes did.

[vt]

Re: Peak Expensive Oil

Riding Gravity Waves To The Big Bang, And Beyond






By MICHIO KAKU

Feb. 12, 2016 6:16 p.m. ET


Champagne bottles were uncorked in physics labs around the world this week when a team of scientists announced they had finally achieved a long cherished dream, detecting the elusive gravity waves predicted by Albert Einstein 100 years ago. This remarkable discovery, which confirmed the last major prediction of Einstein’s theory of general relativity and opens up a whole new way to explore the universe, will almost certainly merit a Nobel Prize in Physics.
In 1916 Einstein himself didn’t believe these faint gravity waves could be detected in his lifetime. A century later, the devices that finally detected them are so enormous that they can be seen from outer space. The two Laser Interferometer Gravitational-wave Observatories, or LIGO detectors, one in Washington state and the other in Louisiana, operate like massive horizontal antennas allowing scientists to detect the gravitational waves.
On Thursday, in an article in Physical Review Letters with more than 1,000 authors, the LIGO scientists revealed that on Sept. 14 they had detected the collision of two black holes in deep space more than a billion light years away but it then took five months to analyze and confirm the results. The black holes were about 36 and 29 times the mass of the sun, and the colossal shock wave caused by their merging into an even larger black hole sent violent ripples of gravity hurling throughout the universe.
Each LIGO detector consists of two pipes, each 2.5 miles long, creating the shape of an L. Each pipe contains a laser beam of light bouncing between perfectly positioned mirrors. If a gravity wave from outer space hits the L, it causes a tiny disturbance, which is then measured by analyzing how the two laser beams interact. As an added treat, the LIGO scientists have converted the gravity waves they detected to sound waves so one can hearthe ripples in space-time that Einstein predicted.
All this has once again confirmed Einstein’s theory of general relativity, which he developed almost entirely on his own between 1907 and 1915. Einstein’s great insight was to realize that space-time is not empty, but more like a fabric that can bend and stretch and cause the path of objects to bend, giving us the illusion of gravitational force. But if the fabric of space-time can stretch, thought Einstein, why can’t it also create ripples?
Think of throwing a rock in a pond. Ripples will gradually radiate away from the splash and fill the surface of the pond. This is similar to what the LIGO scientists detected for the first time: Gravity waves rippling outward from the collision of two black holes a billion light years away.
The LIGO discovery also answers a question commonly asked about the sun. Many people have asked a deceptively simple question: If the sun were to suddenly disappear at this instant, how long would it take for us to notice? Newton thought gravity acted instantaneously, so the earth would instantly be hurled into space.
Einstein thought otherwise. If space is a fabric, then shock waves traveling along this fabric should take eight minutes to reach the earth, traveling at the speed of light. The LIGO breakthrough confirms Einstein’s hypothesis, and has profound cosmological implications. The next generation of gravity-wave detectors might be put into space, and might eventually be sensitive enough to detect the most revealing radiation of all, the radiation from the instant of Genesis. One can calculate that the next generation of space-based gravity wave detectors might eventually be sufficiently sensitive to detect gravity shock waves from the big bang.
If true this, in turn, would open up an entirely new chapter in astronomy. Each time a new wave was discovered, it changed human history. When Galileo used light waves to create his telescope four centuries ago, it profoundly altered our view of the universe and even shook the Catholic Church. Then, around the time of World War II, radio waves were harnessed to create radio telescopes capable of detecting quasars, colliding galaxies and even black holes.
Now we are witnessing the third great revolution in telescopes, the use of gravity waves to open a new chapter in astronomy. For the first time, waves from the very instant of creation might be observed, giving us “baby pictures” of the universe as it was born. High-school textbooks may have to be rewritten to incorporate the new discoveries coming from this third generation of telescopes.
This may also have philosophical implications. Right now the big-bang theory doesn’t tell us what banged, why it banged, and what caused it to bang. It only tells us that there was a bang. But if space-based gravity-wave detectors similar to LIGO’s detectors can measure the radiation emitted an instant after the big bang, then, using mathematics, one can run the equations backward to determine what set off the big bang in the first place, in effect answering the biggest question of all: What banged and why?
When Einstein postulated gravity waves a century ago, he not only opened up an entirely new chapter in astronomy, he also opened the door to answering the most important philosophical questions of all time, including the creation of the universe.
Mr. Kaku is a professor of theoretical physics at the City College of New York and the author of “The Future of the Mind: The Scientific Quest to Understand, Enhance, and Empower the Mind” (Doubleday, 2014).

[verdo]

Re: Peak Expensive Oil

So i thought I'd bump this just to get a view on what everyone's current opinion on oil is. I feel like the recent push close to the $50 mark was largely fuelled by a few over-hyped news stories versus any real fundamental changes in the supply side of the equation. I still see most of OPEC and Russia continuing to produce as much as they can, with Iran having no intention of slowing anything down. It feels like the current push has been largely fuelled by the massive fire in Canada and the militant attacks in Nigeria, both of which are largely temporary (although the fire in Canada is quite major, but i haven't seen anything yet suggesting a long term decline in production). I mean I'm already starting to see news on some oil firms in Alberta slowly resuming production again. Now the new news in town is all over the potential for a fed rate hike in June which may push the dollar back up for a while and push oil back down to its lows. But I'm wondering what everyone else thinks about it.

Btw, I'm still floored by how wrong analysts got their predictions on that EIA report on May 11th. Most were expecting a supply increase of 300k barrels, when it turned out to be a 3.4 million dollar decline. It's the only significant news I've seen lately supporting higher prices

[GRG55]

Re: Peak Expensive Oil

So i thought I'd bump this just to get a view on what everyone's current opinion on oil is. I feel like the recent push close to the $50 mark was largely fuelled by a few over-hyped news stories versus any real fundamental changes in the supply side of the equation. I still see most of OPEC and Russia continuing to produce as much as they can, with Iran having no intention of slowing anything down. It feels like the current push has been largely fuelled by the massive fire in Canada and the militant attacks in Nigeria, both of which are largely temporary. I mean I'm already starting to see some oil firms in Alberta slowly resuming production again. Now the new news in town is all over the potential for a fed rate hike in June which may push the dollar back up for a while and push oil back down to its lows. But I'm wondering what everyone else thinks about it.

No change in my previous outlook:

- $30/bbl oil is too low to replace reserves being produced out, $65 is higher than the price necessary to achieve that today - equilibrium is somewhere within those bookends;
- The risk adjusted lowest cost source of incremental supply is unconventional oil in the USA Lower 48. Note that through all the price gyrations drilling in the Permian Basin of West Texas has declined but has come no where near being halted. Watch the rig count in the Permian for the first signs of a real turnaround.
- The dramatic reduction in costs to drill in North America is partly due to massive overcapacity in the oil services sector - too many rigs, too many frac pumpers, too much everything. It will take some time to work off the excess capacity, retire/scrap equipment, consolidate players - all the things necessary for the services sector to regain some pricing power. In the meantime the upstream companies will enjoy very low day rates (there will be some initial upward pressure on rates as the services companies cannot keep working at break even, but those initial increases will be modest and muted).
- As always, in the short run oil prices can go anywhere. But I still think production declines, particularly in North America, will become more obvious as this year progresses and that is likely to put a bid under oil during the winter of 2016/17 - but Fed policy effects on the US$ exchange rate could temper that in nominal terms.
- Global consumption of oil will continue to rise during the "low" price phase, and I think could keep rising in years to come as developing economies recover.
- Continued oscillations in the price are most likely, superimposed over a secular uptrend. It is not at all inconceivable we'll see periods with oil cycling over $80/bbl before this decade is out.