Economy 52,861 Posted October 7, 2015 Share Posted October 7, 2015 http://www.ft.com/intl/cms/s/0/a6226c44-6c1a-11e5-8171-ba1968cf791a.html#axzz3nqlZ3z8o Shell is warning that OPECs decision to raise oil output when there was already a glut of oversupply to begin with could send oil prices surging in a few years In this case for 8 years we had really high oil prices between 2006 to mid 2014 which led to tones of investment in energy projects which eventually led to a huge oversupply and oil prices crashing by 50% to 60% Now with oil prices so low and OPEC forcing it to stay low to squeeze out competition, a huge drop in investment could in a few years time create a shortage that will cause oil to spike again. Link to post Share on other sites More sharing options...
freebit 6,264 Posted October 7, 2015 Share Posted October 7, 2015 http://www.ft.com/intl/cms/s/0/a6226c44-6c1a-11e5-8171-ba1968cf791a.html#axzz3nqlZ3z8o Shell is warning that OPECs decision to raise oil output when there was already a glut of oversupply to begin with could send oil prices surging in a few years In this case for 8 years we had really high oil prices between 2006 to mid 2014 which led to tones of investment in energy projects which eventually led to a huge oversupply and oil prices crashing by 50% to 60% Now with oil prices so low and OPEC forcing it to stay low to squeeze out competition, a huge drop in investment could in a few years time create a shortage that will cause oil to spike again.That last part would be actually be a good thing for the oil industry, right? I'm not getting why this would be a bad thing. Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 7, 2015 Author Share Posted October 7, 2015 That last part would be actually be a good thing for the oil industry, right? I'm not getting why this would be a bad thing.it would be good for oil industry but it wouldnt be good for everyone else Also its good but bad at the same time... if high prices come when they are producing less, their profits still wont be the Highest Many high cost producers with long term projects like deep sea drilling take years to set up a project and about 10 years to run each well dry... it can be frustrating cause when the industry is profitable they invest to grow but by the time the project is up and running prices fall and they have no more money to invest... and once well starts to decline production thats when prices finally rise Conventional oil producers (normal liquid oil), and shale producers dont have this issue because they cant get stuff up and running much faster but Deep Sea drillers have this issue of missing the cycles and Shell does a lot of sea drilling Oil Sands like in Canada also dont have this issue because the projects are so long that short term swings dont matter over a projects lifetime as each oil sands field lasts 20-50 years Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted October 7, 2015 Share Posted October 7, 2015 Makes the problem of oil dependence even more obvious imo. like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Miker 5,683 Posted October 7, 2015 Share Posted October 7, 2015 Everything I buy goes up and down in price. It isn't any different for oil. It's supply and demand pricing, economy 101. Shell isn't saying anything people already don't know. Mars..........or bust! Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 7, 2015 Author Share Posted October 7, 2015 Everything I buy goes up and down in price. It isn't any different for oil. It's supply and demand pricing, economy 101. Shell isn't saying anything people already don't know.true but dynamics of comodities are different than any other product... there is a log lag to respond to market changes. A company wants to produce more bags of chips you hire more people and buy more machinery and done. Resource extraction often takes years of planning and upfront investment causing a huge lag in response to market changes for example prices have been low for 1 year now yet production is still rising from projcts that were payed for years ago and still only coming online now. Theres this massive oil project here in Canada in the oil sands from forthills that was started in 2011 but wont start pumping out oil until 2017 and once its up and running will yield oil for 50 years some types of oil extraction have long cycles and supply-demand equilibriums are slow to adjust energy and comodities also have historically had bigger booms and bigger busts than most things. Theres not many types of business where prices can fall 60% in a period of 6 months then surge 3-5 years later for example Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 7, 2015 Author Share Posted October 7, 2015 Makes the problem of oil dependence even more obvious imo.well oil consumed for every unit of GDP has fallen considerably over past 10 years due to efficieny that could explain why the sharp rise after the temporary drop in 2008 didnt slow 2009/2010 innitial recovery and why the collapse in prices 1 year ago havent helped the economy. As a % of our economy, we no longer consume enough for the price of oil to affect economy considerably of consuming nations one odd thing is that oil demand has barely changed its growth rate since peices collapsed last year... In all other oil downturns in the past there was a quick uptick in demand which is not happening right now Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted October 8, 2015 Share Posted October 8, 2015 one odd thing is that oil demand has barely changed its growth rate since peices collapsed last year... In all other oil downturns in the past there was a quick uptick in demand which is not happening right nowThe global economy is in a recession, regardless of oil prices. The cold/hot war in the middle east is making everyone edgy who has an economic stake in the region. Russia is getting more militarily aggressive again, the US is starting to go broke amazingly. Lastly there are real efforts by the EU and the U.S. to reduce oil consumption thru green energy. like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 8, 2015 Author Share Posted October 8, 2015 The global economy is in a recession, regardless of oil prices. The cold/hot war in the middle east is making everyone edgy who has an economic stake in the region. Russia is getting more militarily aggressive again, the US is starting to go broke amazingly. Lastly there are real efforts by the EU and the U.S. to reduce oil consumption thru green energy. global growth has been slow for 7 years now tho. but price seems to have affected consumption almost nothing And i didnt know the US did things to reduce oil consumption. I know theres talk on reducing coal usage in power generation i hadnt heard about oil consumption If oil becomes obsolete for transportation though which makes up over 80% of oil consumption... oil products and other uses will leave us consuming less than 20 million barrels a day. That would leave only OPEC producers (lowest cost producers) able to compete for market share. Even they alone produce 30 million barrels a day (10 million more than is used if you strip out transportation sector) Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted October 8, 2015 Share Posted October 8, 2015 And i didnt know the US did things to reduce oil consumption. I know theres talk on reducing coal usage in power generation i hadnt heard about oil consumption If oil becomes obsolete for transportation though which makes up over 80% of oil consumption... Fuel mileage regulations for auto manufacturers initially had little effect until the auto's where actually purchased and used by consumers. So that alone took 20 plus years to impact consumption because population growth and increased autos on the road negated initial improvement. Now more cars and SUV's trucks ect. all combined have much higher mileage than 20 years ago with few autos on the road. Secondly, many metropolitan mass transit operations have been switching to natural gas buses and electric trains, with again had minimal impact at the onset 20 years ago, but now is catching up as there are few diesel powered buses used anywhere, save school districts who can't afford to replace their older equipment. Older oil powered electric generating plants have been systematically deactivated and taken off line. like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 8, 2015 Author Share Posted October 8, 2015 Fuel mileage regulations for auto manufacturers initially had little effect until the auto's where actually purchased and used by consumers. So that alone took 20 plus years to impact consumption because population growth and increased autos on the road negated initial improvement. Now more cars and SUV's trucks ect. all combined have much higher mileage than 20 years ago with few autos on the road. Secondly, many metropolitan mass transit operations have been switching to natural gas buses and electric trains, with again had minimal impact at the onset 20 years ago, but now is catching up as there are few diesel powered buses used anywhere, save school districts who can't afford to replace their older equipment. Older oil powered electric generating plants have been systematically deactivated and taken off line. ah ok cool. Most developed Nations have done simmilar things. I thought u meant more recently Some of that transit stuff is defective though. Like here in Toronto they are using hybrid busses that use electricity and diesel and their batteries life span are shorter than they bargained for and on average costs Toronto $1 Billion more on transit costs than they bargained for just because of the busses alone (excluding other transit) In My city we didnt do any hybrid shenanigans with our transit thankgod. Just plain old diesel My biggest worry though is that electric bateries require other substances that arent very ample either... we may not feela shortage now but what if the whole world goes electric than what? lithium and alternatives for bateries are not exactly super abundant and recycling never saves 100% of original material Link to post Share on other sites More sharing options...
Luc 4,776 Posted October 8, 2015 Share Posted October 8, 2015 I don't know if Shell can be trusted, because they have a profit from saying something like this. Link to post Share on other sites More sharing options...
Woolfsmck 2,763 Posted October 8, 2015 Share Posted October 8, 2015 http://fortune.com/2015/10/07/oil-saudi-shale/?xid=yahoo_fortune Title is misleading, considering the oil price spike has more to do with Russian intervention in Syria than oil shale production. Besides, a price increase helps the U.S. too . like a cat in a sil, I observe life, moving and still. My words give a clue,look inside to see whats true Link to post Share on other sites More sharing options...
Economy 52,861 Posted October 8, 2015 Author Share Posted October 8, 2015 http://fortune.com/2015/10/07/oil-saudi-shale/?xid=yahoo_fortune Title is misleading, considering the oil price spike has more to do with Russian intervention in Syria than oil shale production. Besides, a price increase helps the U.S. too .instability always has short term impacts on prices. But any reduction on shale will be bulish fir prices as investors see low oil prices begin to affect supply but shale can recover quickly if prices rebound. Some have suggested instead they are now going after longer term producers such as deep sea drilling from North Sea Link to post Share on other sites More sharing options...
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