Global oil markets are facing down a “decade of disorder” if long-term supply projects aren’t put into the pipeline, a former chief of the Energy Information Administration (EIA) said Tuesday.
Adam Sieminski, who headed EIA from June 2012 until January, discussed global supply trends during a panel discussion in Houston on the second day of CERAWeek by IHS Markit. He now is the James R. Schlesinger Chair for Energy and Geopolitics at DC-based Center for Strategic and International Studies, a bipartisan, nonprofit policy research organization.
A wave of global populism, evidenced by the United Kingdom’s potential exit from the European Union, geopolitical events and trade wars, create “a lot of uncertainties…in a lot of different areas,” Sieminski told the audience.
An uplift in oil prices has encouraged U.S. unconventional producers to raise rigs and ramp up output. However, those short-term supply projects aren’t enough to compensate for depressed conventional oil production, which is the bulk of worldwide supply, he said.
The expected shortfall in conventional output “might bite us at some point,” he said.
ConocoPhillips CEO Ryan Lance told a CERAWeek audience that to avoid the crush that followed the recent oil price debacle, energy operators should be “prepared for longer, more frequent declines in prices.”
Prices have stabilized, and operators are becoming “a lot more efficient,” but market volatility could cause oil prices to “snap back” within a couple of years, said Lance, who runs the world’s largest independent producer.
Many U.S. operators claim their breakeven costs to produce U.S. unconventional oil have fallen to around $50/bbl. Sieminski puts the average price today at closer to $55-60/bbl.
Even so, current breakevens may be enough to secure profits for U.S. operators, but prices still aren’t high enough to build global supply to meet demand into the 2020s, he said.
What’s also unclear is the impact of what Sieminski called an “experiment” by the Organization of the Petroleum Exporting Countries (OPEC) to temporarily reduce global oil supply.
OPEC’s decision, which is to be reviewed in May, has been the talk of the conference, both in plenaries and in the hallways. Saudi Arabia’s Khalid Al-Falih, minister for energy, industry and mineral resources, who also spoke Tuesday, said the formal agreement was not a permanent pullback nor a signal that U.S. unconventional operators should turn up the dial.
Hess Corp. CEO John Hess, who spoke at CERAWeek on Monday, also warned that a significant worldwide oil supply crunch could be looming because many global projects, particularly long-term deepwater facilities, have been delayed or canceled.
“As an industry we’re not investing enough for supply growth to keep up with demand growth,” Hess said. Decreasing spend, particularly in the resource-rich (but expensive) offshore, may cause supply to plateau or decline as global demand is rising, he said.
A supply deficit is possible as soon as three years and within five, when the reductions in capital investments should begin to show up in falling offshore supply, Hess said.
“We’re not investing enough to keep the offshore investment pipeline full,” Hess said. While shale operations are “back in business and starting to grow again,” the same is not true of more capital-intensive projects.
Many executives at this week’s conference expressed support for Trump administration proposals to scale back energy regulations and speed infrastructure build-out. The administration could enable higher domestic oil and gas production if tax reforms are done, and if federal regulations are eased for infrastructure, Lance said.
“I think we’re looking for smart regulation that has a definable cost and benefit,” the ConocoPhillips chief said.
penury on Wed, 8th Mar 2017 4:57 pm
I do not think that this would be a suprise to anyone who has visited this site more than once. i just question, Do you really need to tell a room full of experts this? or was it strictly to keep the public informed?
Sissyfuss on Wed, 8th Mar 2017 5:07 pm
An economy or an environment. Hmmmmmm, let’s flip a coin.
paulo1 on Wed, 8th Mar 2017 5:24 pm
regarding: “I think we’re looking for smart regulation that has a definable cost and benefit,” the ConocoPhillips chief said.
Ha ha. Sounds like a set up for an emergency bailout and price regime when market forces + geology come short in a few years.
makati1 on Wed, 8th Mar 2017 5:37 pm
No profit = NO investment = No energy
Headline should read:
‘A Future of Disorder and Chaos Looms Without Global Energy Investments.’
There! Fixed!
onlooker on Wed, 8th Mar 2017 5:51 pm
Yep, it with all mysteriously work out. Few want to concede to true level of doom
Midnight Oil on Wed, 8th Mar 2017 6:11 pm
Not worried..practicing my rock banging and going barefoot with shone head to reflect the sunlight. Now all I need to do is acquire a taste for tree bark and soil grubs. My raising meal worms will carry me over till the herd thins out.
Nony on Wed, 8th Mar 2017 7:36 pm
What a moron. The solution to low prices is low prices. And the converse. And companies investing now do so based on the strip. And the strip is flat. And if he has some special knowledge that says there will be future short supply and prices will spike, he should bet against the market. Really disappointed to see such a senior guy make such silly remarks. That show a lack of Econ 101.
rockman on Wed, 8th Mar 2017 8:17 pm
Nony – So right. “Adam Sieminski, who headed EIA from June 2012 until January…” You have to wonder how negative he would have felt if he had been running the EIA in the early 80’s when the rig count (and thus capes spending) fell from 4530 in Dec 1981 to 963 in Dec 1986.
Sometimes Econ 101 appears to be difficult to appreciate even for the “experts”.
Nony on Wed, 8th Mar 2017 8:33 pm
That was the most screwed up boom ever. You all had 4000 rigs and didn’t really boom the production much. This past boom, they added 4.5 MM bpd with 4 years of 1600 rigs.
Northwest Resident on Wed, 8th Mar 2017 9:47 pm
‘Decade of Disorder’ Looms With or Without Global Energy Investments — fixed it.
The oil companies really do WANT to find and develop new oil sources. Truly they do. It isn’t as if they are all taking a break or being too cautious. The reason WHY they aren’t expending the capex is because there is nothing left that is worth the investment, not at current and realistically projected prices.
I’ll bet the oil company executives and their financiers know for a fact just how expensive the remaining undeveloped oil sources would be — they just aren’t letting on.
No problem. The cure for low oil prices is low oil prices. Right? Squeeze the supply and drive the price up. Works every time — pure Econ 101.
But there probably is a problem with that. Fact is, shrinking energy usage directly equates to a shrinking economy — shrinking wages, shrinking jobs, shrinking profits, shrinking tax revenues, etc.
Good luck starving the economy of sufficient energy to drive up the price that people can afford to pay for oil.
One more point. Adam Sieminski warns about global energy shortages in the future. But the fact is, we have global energy shortages now, and that situation has been going on for years.
NOT a shortage of oil per se (more like a glut), but a shortage of oil that is priced low enough to keep this global economy humming. Lots and lots of too-expensive oil, hardly any inexpensive oil.
In short, we have a shortage of AFFORDABLE oil, and that situation is growing incrementally worse as the days and weeks progress, as it has been for years. In fact, the situation is probably approaching red-alert, if not already there.
GregT on Wed, 8th Mar 2017 10:14 pm
NWR,
Thanks for your usual well thought out and intelligent post.
On an entirely different note. How has your winter been so far this year? As completely fucked up as ours has been a few hundred miles to the north?
Or some semblance of normalcy?
Thanks
Northwest Resident on Wed, 8th Mar 2017 10:31 pm
Hi Greg,
I learned some painful lessons this winter. We had a 2 – 3 week period of intensely cold weather, far below the normal temperatures. I suffered two losses.
One, most of my “fall” potato crop got turned to mush. My fall crop I just leave in the ground, then go out and dig them up as needed. That worked great the first two years. But this year, the ground froze solid down to 4 – 5 inches, which ruined probably two thirds of my crop. I could have (and should have) prevented that by putting hay over the planters then covering it with tarp. Live and learn.
By far my most devastating loss this year was my two bee hives. They were super star bees, awesome producers, and totally immune to mites and other critters. Going into winter, they each had a full hive box of honey and a very large cluster. But then the cold weather hit, I often thought about them, but I figured they were “tough enough” to make it — I thought their clusters were large enough to keep them warm. Turns out, they only ate the honey off the two middle frames, and never made it to the outer frames no doubt due to the cold. So they probably combination starved/froze to death. I was totally bummed out. I could have (and should have) insulated those hives — big mistake, but one I’ll never make again.
Thanks for asking! How’s your self-sufficient farming activity going in your new setup?
makati1 on Thu, 9th Mar 2017 2:09 am
This week in the news:
“U.S. slips to seventh best country in the world after Trump election, Switzerland tops the list”
“GM will lay off 1,100 in Michigan after domestic production shift”
“TSA’s new “pat-downs” are so invasive, airports are pre-emptively warning cops to expect sexual assault claims”
“U.S. Airports Say They Need $100 Billion Over Five Years” (Crumbling infrastructure)
“Commentary: The looming crisis for US tritium production” (Useless nukes)
“USNS Invincible Spy Ship Forced To Change Course By Iranian Fast-Attack Vessels”
“Solar reached 1.4% of U.S. electricity in 2016” (Only 98.6% to go!)
“Electricity Consumption Continues To Fall (US)”
“Bird flu found in Tennessee chicken flock on Tyson-contracted farm”
“L.A. keeps building near freeways, even though living there makes people sick”
“More US adults overweight, but fewer trying to lose it, says study”
“40% of households in Philadelphia can’t pay their water bill”
“A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America”
“”The Reality Is, Half Of Americans Can’t Afford To Write A $500 Check””
“GDPNow 1st Quarter Forecast Plunges to 1.3% Following Vehicle Sales and Factory Orders Reports”
“Violence, Fighting Breaks Out Between Trump Supporters, Protesters In Berkeley”
“The Next Flint? Lead Found in Water In East Chicago, Indiana”
“Could Artificial Earthquakes Trigger Disaster? Oklahoma’s Risk “Now Equal to That of San Francisco””
“”Your Papers Please:” Are We Being Set Up for a National ID System?”
“It’s What’s Happening Beneath the Surface That Matters: Moral Decay and Rising Inequality”
“The Most Desirable Passports On Earth Don’t Include America’s”
“Pension Benefit Guarantee Corporation Running Out of Cash, Millions Affected”
“Is Retirement for the Middle Class about to Go Up in Smoke?”
http://ricefarmer.blogspot.fr/
And the slide gets slipperier…
Davy on Thu, 9th Mar 2017 5:10 am
If our civilization only had an oil problem we may have a chance to adapt and change our fate. The problem is the problems are far too great and diverse. These problems are global and infect all countries through dispersed risk from an interconnected global system. Oil is part of this problem. The more I study peak oil dynamics and other energy issues the more I realize oil and energy is not the problem. Peak oil is not what is going to bring us down. What is destroying us is ourselves. We are investing in arrangements with no future. These investments are unsustainable at the same time we decrease our sustainability with continued population growth and foundational resource over exploitation. We are taking too much from the planet without showing much for it. What we are showing for it today is more entropic waste than real productive investments.
This is a process and has a direction and that direction is decline and eventually failure. Oil is part of this but oil will likely follow this civilizational decline through demand destruction. Demand destruction is another term for a decay of globalism and the end of modern civilization. Yea, we may be still growing per manipulated data. Oil usage may still be growing but all signs are that growth is stagnating. We are in macro stagflation with a tearing social fabric. Globalism is like Lewis Carroll’s Red Queen “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.” That is call insanity and that is what we are now.
Our global economy is mired in debt. This debt is a result of dysfunctional economic arrangements. Our economy is about yield seeking. This yield seeking is now responsible for parasitic activities found in global finance and multinational corporate governance. This is borderline psychopathic behavior at a macro scale. Society is not the focus the individual and profit is. We have entered the moral hazard of disregard for the rule of law and extend and pretend of bad systematic investments. This ruling class is now engaged in Ponzi economics and society a house of cards. We are now engaged in wealth transfer from the many to the few. We are allowing private profit at the social expense. Most of all we are destroying a planetary system without honesty and integrity. Yea, we have a green movement that is farce because it is about a green affluence. An honest green acknowledges poverty and declines in place for his own good and the good of the planet.
Why do I criticize the greens? I do this because they are our one last hope and they too have been corrupted by the failure of liberal democracy and market based capitalism. The markets through progress resulting in the affluence of consumerism is our new gods. All else submits to the rule of the market. The market can break governments. The markets re killing our planet. Too bad we are trapped in this cycle of entropic decay of a mechanization of exploitation. Our civilization has reached the peak and this point is also epochal. It is epochal because it represents the 6th great extinction and the disruption of stable post Ice Age climate. Yea, disorder looms but it is not decadal it is the complete future and it is all downhill from here. If you are smart you will collapse in place and ride the wave of destructive change.
Theedrich on Thu, 9th Mar 2017 5:11 am
The U.S. is a brick-and-mortar dinosaur. It is following the strategy of the past instead, like a cybernetically directed missile, of changing its course to achieve an objective. Mere resurrection of old industries (which are rapidly automating), hoping that indolent, sub-100-IQ microcephalics will work in manual labor jobs like their grandfathers had, is not going to work. We now have Mexican slaves to do that.
Expansion of entitlements (Ø-care-lite, free marijuana, etc.) will keep the Ponzi scheme going for a bit longer. Until the regime decides peremptorily to take 10% of everyone’s bank account, that is. The current inertia will continue as politicoes and their hangers-on suck the system dry, always telling the herd they are bestowing fantasia on it. Forethought and prudence can play no role, since democracy is by definition driven by the reptilian demands of the masses. It has often been said that democracy amounts to crisis management. True, but the coming crisis is terminal. With a population characterized by sloth, lack of manhood, meaninglessness and elite-White genosuicidism, nothing can regenerate the American blob to any semblance of its former self.
We are also in a time of electronics far beyond anything imagined since the origin of the solar system. Given that fact, no one can know how or when the next blow will come. And, in case no one has noticed, our military, equipped with every sort of high-tech weaponry and device imaginable, has been fighting primitive barbarians in Afghanistan and elsewhere, but is nowhere near complete victory after a decade and a half of warfare. Why? Because, whatever else the Mohammedan curs and savages may be, they are MEN, types which exist in America only on TV and movie screens. Instead, we have demonstrating masses of women, cursing and gesticulating at the leader of the free world, as a risible example of Yankee impotence. The North Koreans love it.
onlooker on Thu, 9th Mar 2017 6:38 am
Well said by Davy. We cannot shift away from this ever more disastrous course because we built the basis of our survival on a civilization that is inherently unsustainable. Our problems are simply cues or signals of this underlying unsustainability. The worse part of all thus is we are busy degrading the underlying conditions that allow this planet to remain habitable for current lifeforms
DKB on Thu, 9th Mar 2017 6:44 am
In 1918, field workers from Mexico were in the United States harvesting the crops and were thanked for doing the job. Mexican field workers have been moving back and forth from Mexico for longer than anyone can remember. Pancho Villa was in Arizona before Arizona was Arizona.
Americans were in Europe fighting the good fight.
I like tacos and nachos and burritos. Mexican food is good.
Pinto beans too, they’re good, add some rice, voila, good food.
All that stuff has to be grown commercially if you want a lot of it. Takes some manual labor and that means those who are willing to do the job. Mexican nationals will and can do the job. Nothing wrong with work that pays. Sugar beet growers had Mexican nationals hoeing beets in Kansas.
Tomato growers in Ontario hire and fly people from Mexico to grow tomatoes in Ontario. Spud growers in Idaho bus people from Mexico to work potato fields.
Probably could do without 100,000,000 cars racing up and down I-5 and I-95 every darn day with one driver and no passengers. Probably could cut back on jets tooling along at 550 miles per hour at 35,000 feet.
But then, people have to eat, so the whole enchilada has to be there at all times.
There is a whole helluva lot of activity going on in the world during the living years.
Takes oil. Millions and millions of barrels every day. Oil can’t go away just like that, it will be painful.
peakyeast on Thu, 9th Mar 2017 5:56 pm
“A decade of disorder”?
I wish that would be true that it would only be a decade… I fear it will be much much longer…
makati1 on Thu, 9th Mar 2017 6:43 pm
DKB, it will be painful is the most true statement I have read here in a while. It WILL be painful, even if it is not an abrupt cutoff. We are experiencing the beginning of the contraction and already the pain is being felt all over the West in declining GDP and energy use. The lies governments post, as ‘facts’ about employment and the economy, are beginning to show their true side. The collapse is coming home to Americans especially as they are the least prepared. Interesting times.
Bloomer on Thu, 9th Mar 2017 9:44 pm
Frankly, I believe we are already at the beginning of the decades of social disorder.
As far as the potential of oil supply shortages in the future, new petro is very expensive to get out of the ground and huge development projects have been shelved as a result.
The Saudis are pumping out their cheap crude like there is no tomorrow and when tomorrow comes, we will experience the mother of economic disruptions.
Apneaman on Thu, 9th Mar 2017 11:14 pm
Disorder is guaranteed on all fronts. Deny it or don’t whatever gets you through another day.
Climate Change Denial, Democratic-style
“I turned on the cable news at 3:00 p.m. last Friday. With a massive permafrost melt threatening the release of catastrophic levels of carbon and methane, with sections of the Antarctic ice sheet calving at an alarming rate, with a pandemic of sand mining threatening sea life and waterways throughout the planet, with shocking concentrations of pollutants threatening the delicate web of sea life even in the remotest depths of the world’s oceans, the lead story on both MSNBC and CNN was this: “Arnold Schwarzenegger will not be returning to The Apprentice.”
It’s no different on the nightly network newscasts, where the Big Three (ABC, CBS, NBC) arbiters of public groupthink—along with their print confreres at The New York Times and Washington Post—have been frantically stoking a Hearst-like yellow journalism plague of lurid tales about the Russian Menace, Jeff Sessions’s two meetings with the Russian ambassador, Trump’s fresh round of Twitter storms about phone tapping, real or imagined, and so on, unto terminal stupor, as the world burns.”
http://www.counterpunch.org/2017/03/09/climate-change-denial-democratic-style/
Stupid sad blind scared monkey people.