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Page added on December 13, 2014
Energy Crunch: Oil Slide
hree things you shouldn’t miss this week
- Chart: Oil production break even prices:
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Image source: Energy tracker via FT
- Article: Oil price plunge means survival of fittest – Crude at $70 puts at least 1.5m b/d of projects for 2016 at risk
- Article: Fracking could carry unforeseen risks as thalidomide and asbestos did, says report produced by Government Chief Scientist – Historic innovations that have been adopted too hastily with grave unforeseen impacts provide cautionary examples for potential side effects of fracking.
The price of oil crashed below $65/barrel this week, its lowest level since 2009. The speed of the fall, from $100/barrel as recently as September, has caused mayhem in the financial markets. The price drop may be seen by some as a Christmas present for motorists, but for oil companies already struggling with spiralling costs, and oil producing nations trying to balance state budgets, this is a crisis in the making.
Some commentators gloated that the price plunge signalled the death of OPEC, since the oil producers’ cartel is apparently ‘unable’ to stem the slide – implying low oil prices for the long term. But this seems wide of the mark; it’s much more likely Saudi Arabia is happy to see the oil price slide and put upstart US shale producers out of business.
And it may well work, because current prices are below the break-even price for many new shale oil projects – not to mention the Canadian tar sands and a lot of deepwater offshore. If shale drillers start to fold, and big international oil companies defer major production projects, the oil supply could soon tighten once again. Reuters reported this week that new permits for US wells fell by 40% in November – a sign of things to come?
Not according to Exxon, the world’s biggest energy company, which anticipates a fracking bonanza out to 2040 as demand for energy soars in the developing world. Exxon anticipates that North American unconventional gas production will nearly triple by 2040. This forecast is in conflict with new research reported this week from the University of Texas which found that EIA forecasts for growing shale gas production to 2040 are based on future wells being as productive as past wells – an unlikely scenario given that the best resources are typically exploited first.
Exxon’s vision of the future was also in stark contrast to statements coming from the latest UN climate talks in Lima this week. President of the World Bank Jim Yong Kim called for zero carbon energy emissions by 2050 and Ed Davey warned pension funds of the risk of investing in fossil fuels that may need to left in the ground, saying that they could become “the sub-prime assets of the future”. The Bank of England is to conduct an investigation into this so-called carbon bubble. Good news then that the alternatives are growing in strength – wind power in the UK hit a new record on Sunday, powering 43% of our homes on that day.
5 Comments on "Energy Crunch: Oil Slide"
Kenz300 on Sat, 13th Dec 2014 9:52 am
” Saudi Arabia is happy to see the oil price slide and put upstart US shale producers out of business.
And it may well work, because current prices are below the break-even price for many new shale oil projects – not to mention the Canadian tar sands and a lot of deepwater offshore. If shale drillers start to fold, and big international oil companies defer major production projects, the oil supply could soon tighten once again. Reuters reported this week that new permits for US wells fell by 40% in November – a sign of things to come?”
” President of the World Bank Jim Yong Kim called for zero carbon energy emissions by 2050 and Ed Davey warned pension funds of the risk of investing in fossil fuels that may need to left in the ground, saying that they could become “the sub-prime assets of the future”. The Bank of England is to conduct an investigation into this so-called carbon bubble. Good news then that the alternatives are growing in strength – wind power in the UK hit a new record on Sunday, powering 43% of our homes on that day.”
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Climate Change is real……. we can deal with the cause or deal with the results……….
The sooner we transition away from fossil fuels the better…
Buy your bicycle now before demand exceeds supply and prices rise for bicycles…….
Northwest Resident on Sat, 13th Dec 2014 10:19 am
“Exxon’s vision of the future was also in stark contrast to statements coming from the latest UN climate talks in Lima this week.”
I would be very interested to know what Exxon’s vision of the future really is, as opposed to the one they publicly profess to.
I get the impression that there are a lot of oil company CEOs, financial bigwigs and governments that do indeed have a very clear vision of the future, which is why they are lying their collective asses off right now, trying to spin events to put on a brave face as if all is well. They are continuing to do what they have been doing for some time now — attempting to postpone the inevitable for another day.
Any vision of the future that is not based on less oil, less economic growth (if any) and all the chaos that comes with that is not really a vision of the future, it is a pipe dream — or a lie. Or both.
Rodster on Sat, 13th Dec 2014 12:14 pm
“I get the impression that there are a lot of oil company CEOs, financial bigwigs and governments that do indeed have a very clear vision of the future, which is why they are lying their collective asses off right now”
That’s probably why the US Gubmint recently ordered $200,000 worth of survival kits for top bank employees.
Kenz300 on Sat, 13th Dec 2014 2:19 pm
“Reuters reported this week that new permits for US wells fell by 40% in November – a sign of things to come?”
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How fast is the decline in production rate at shale wells?
How many wells need to be drilled just to keep production even?
Makati1 on Sun, 14th Dec 2014 4:51 am
Exxon stock down 17% from it’s 52 week high and still sinking.