Whatever happened to Peak Oil?

[justme]

Peak oil means Peak VOLUME extracted, not Peak PRICE.

Hence, it is quite possible that Peak Oil is happening right now, with the price being low and all the producers pumping like crazy. This may be the last gasp before production drops permanently.

[FlyerInHi]

[quote=justme]Peak oil means Peak VOLUME extracted, not Peak PRICE.

Hence, it is quite possible that Peak Oil is happening right now, with the price being low and all the producers pumping like crazy. This may be the last gasp before production drops permanently.[/quote]

Without demand and high prices, it’s irrelevant.

[FlyerInHi]

It was very interesting that Trudeau, on a state visit to DC, is betting Canada’s future on a clean economy. All the more significant because Canada’s economy depends so much on resources extraction.
If Canada can be bold, why can’t we?

[EconProf]

What is the benefit to average families of the decline in oil prices?
One of the many benefits is a $2000+ annual savings via the lower price of gasoline.
This assumes a 2-car family, driving each vehicle 15000 miles per year, and a $1.50 drop in the price of gasoline from the roughly $4 per gallon price peak of the past. Feel free to adjust the assumptions, but this looks pretty close to what happened. Thank you fracking (plus a few other lucky developments).

[paramount]

Oil has been up sharply – looks like we’re being punished for Trump’s surge.

[Anonymous]

[quote=EconProf]Thank you fracking (plus a few other lucky developments).[/quote]

Are you claiming that an increase in fracking in the US is the dominant reason for the global decline in oil prices?

[svelte]

[quote=harvey][quote=EconProf]Thank you fracking (plus a few other lucky developments).[/quote]

Are you claiming that an increase in fracking in the US is the dominant reason for the global decline in oil prices?[/quote]

It certainly had some impact. So did a seasonal decrease in consumption.

[img_assist|nid=25763|title=Oil Consumption vs Production by year|desc=|link=node|align=left|width=400|height=270]

In the last five years, US crude production rose from 5476 thousand barrels per day to 9477 thousand barrels per day.

In the same five years, OPEC crude production rose from 21589 thousand barrels per day to 24377 thousand barrels per day.

[zk]

dup

[zk]

[quote=paramount]Oil has been up sharply – looks like we’re being punished for Trump’s surge.[/quote]

I’d be fascinated to hear what you mean by that – why you think it’s due to Trump’s surge and why it’s “punishment.”

[EconProf]

[quote=harvey][quote=EconProf]Thank you fracking (plus a few other lucky developments).[/quote]

Are you claiming that an increase in fracking in the US is the dominant reason for the global decline in oil prices?[/quote]
As Svelte points out, our oil production has increased because of fracking by more than the total increase by all OPEC nations.
Another result of our fracking revolution has been the attempt by the Saudi’s to kill our fracking by going all out on their production in order to keep world oil prices down. Their thinking is that, since fracking wells start to become uneconomic when prices fall too much, they would drive American fracking operations out of business. In fact, many of our wells that need a $50 or more price of oil to break even have already shut down. Some that have a breakeven point at $40 or $30 are still open. There is a one-time expense to either shut down or reopen such a well, so some are still producing at a small loss in hopes prices have bottomed out and will keep recovering, as they have lately.
BTW, it is nice that we have lots of wells shut down that could reopen if prices climb above $50. That will put somewhat of a damper on price hikes in the future.
Obviously, other factors are also keeping oil prices down, such as weak demand from the worldwide growth slowdown.

[livinincali]

[quote=EconProf]
As Svelte points out, our oil production has increased because of fracking by more than the total increase by all OPEC nations.
Another result of our fracking revolution has been the attempt by the Saudi’s to kill our fracking by going all out on their production in order to keep world oil prices down. Their thinking is that, since fracking wells start to become uneconomic when prices fall too much, they would drive American fracking operations out of business. In fact, many of our wells that need a $50 or more price of oil to break even have already shut down. Some that have a breakeven point at $40 or $30 are still open. There is a one-time expense to either shut down or reopen such a well, so some are still producing at a small loss in hopes prices have bottomed out and will keep recovering, as they have lately.
BTW, it is nice that we have lots of wells shut down that could reopen if prices climb above $50. That will put somewhat of a damper on price hikes in the future.
Obviously, other factors are also keeping oil prices down, such as weak demand from the worldwide growth slowdown.[/quote]

Many of the companies in this space borrowed tons on money to buy equipment and they will likely be bankrupt at some point. What the creditors do with the well assets remains to be seen. Probably Exxon or Chevron will buy them for pennies on the dollar and will be able to produce those fracking wells at $20 or $30/barrel profitably because they bought the assets so cheap.

[EconProf]

Yes, and that’s just fine.
The good thing is that this investment in wells will not be wasted–they will be available to keep producing once prices recover–to the benefit of us consumers.
I don’t think it is bad if big companies buy up the closed wells and produce in the future.
And about that “pennies on the dollar” possibility: the assets of bankrupt producers will sell for whatever supply and demand call for. Some may sell to other small entrepreneurs, some will be kept by those with staying power, some will be bought up by bigger companies. The prices of the wells will depend upon the collective estimates of future oil prices.

[Author]

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