[onlooker]

Hi, I am not a regular poster on this forum I have been here on this website since 2005. My question is from my reading here I gathered that we reached a peak in light sweet crude back in 2005, from my understanding that is the most desired type of crude and the easiest to extract. So we have since increased effort to get at more difficult to access crude such as Tarsands. Yet that supply is it not very energy intensive to extract? My basic question though is considering that we are now in 2015 and considering that oil prices have recently fallen, when do you think that oil prices will once again skyrocket upward about what year?

[dinopello]

Short answer is nobody knows. And, there are a lot of threads discussing this from various perspectives.

Personally, I think the factors are in place for a big surge in demand. While the US hasn't explicitly had an austerity policy, spending is way down and there is a backlog of projects and desire to spend. It's a great time to be building infrastructure because the price of materials, energy and labor is low (although most governments are not taking advantage I think). In the private sector there are mountains of cash stockpiled available for investment. People are tired of being malaisical and are ready to loosen up. When the desire and stockpiled capital gets released and turned into physical realizations, crude and other commodities will rise.

But, it is possible the exact opposite will happen. So, Diversify.

[Pops]

Prices can only skyrocket to the extent that consumers can pay. Once it "attempts" to go higher, consumers most price sensitive reduce their consumption. When demand falls so does price, until supply is balanced.

Not that that isn't bad enough, we've just experienced 4 years of average oil prices higher than at any other time since oil and the global economy arguably may be showing the strain. It is just that the earlier forecast of perennially skyhigh prices didn't take ability to pay into consideration.

Personally I'd expect prices to return to their former range fairly quickly - within the year or perhaps 2 years at most, since much of the newfound oil wells decline in production 50-60-70% in a year and the current price prevents new drilling from taking place.

[Pops]

Oil tops $60 for first time in 2015,

$this->bbcode_second_pass_quote('', ' ')Oil rose above $60 a barrel on Friday for the first time this year, bringing gains this week to almost 4 percent, supported by signs that deeper industry spending cuts may curb excess supply.

Also supporting oil, euro zone economic growth accelerated unexpectedly in the final quarter of 2014 as the bloc's largest member, Germany, expanded at more than twice the expected rate.

The price of Brent crude collapsed from $115 in June to $45.19, the lowest in almost six years, in January due to oversupply. Since January, mounting signs of lower industry spending have helped prices rally by more than 30 percent.

[ROCKMAN]

Looker – “Yet that supply is it not very energy intensive to extract?” Yes…but all extraction requires a certain amount of energy. And the energy requirement will never be the determining factor it what gets produced. It will always be decided upon the economic analysis and the energy component of the extraction processes is much lower than most folks realize.

Consider the decrease in Eagle Ford Shale drilling we’re experiencing. The energy input for such efforts hasn’t changed so why less drilling? Easy answer: lower oil prices mean the lower return on investment doesn’t justify drilling as many wells as once envisioned. And in the case of the Canadian oil sands there’s one aspect of lower oil prices that actually benefits those operations. As much as 1/3 of the oil delivered from Alberta to US refineries is light oil (much of it imported from the US) that has to be mixed with the oil sands production in order to transport it. Consider a Canadian producer that has to buy 3 million bbls of light oil to ship his 6 million bbls of oil sands production. Last year he had to pay about $270 million for the light oil he had to mix with his production. Today it’s going to cost him $150 million. IOW while he’ll get a lower price for his 6 million bbls of production he’ll also spend $120 million less for the light oil he requires to transport it.

[onlooker]

Thanks for that primer. Rock. So the economic considerations outweigh right now EROI. Yet if I understand will not EROI take precedence sometime in the future as extraction becomes more and more difficult and expensive? I mean like drilling wells deeper and deeper in the ocean and deeper underground on the land.

[sparky]

.
The EROEI is the price , that's what pricing does
it capture all the cost in one single number , including the cost of doing business as taxes

that's why communism economics had so much trouble
....prices , especially of resources were arbitrarily fixed by the Gosplan and gave no indication of cost / value

the economic rationalism school of though hold that government services are not reflecting their real cost /benefit
it get tricky because it is very difficult to cost /benefit some welfare or lifestyle program .

As a rough indication of fossil fuel cost benefit , get a bit of the stuff and set it on fire , if it sustain combustion
it just might be worth exploiting , then consider the cost of extraction

[ROCKMAN]

Looker - "Yet if I understand will not EROI take precedence sometime in the future as extraction becomes more and more difficult and expensive". You sort of answered your own question: "...as extraction becomes...more expensive." It's just a rough estimate but somewhere around an EROEI of 5 or 6 the $RO$I becomes negative. IOW on analysis a well might use the equivalent of 100,000 bo to produce 300,000 bo...a positive EROEI. But if the analysis shows the well will return only $.90 for every $1 invested it won't get drilled even though the EROEI indicates a net gain in energy. Of course, EROEI is related to well cost. But there is one fact that cannot be disputed: drilling decisions are made by oil company management and not economists. And no drilling decision has ever nor will ever be made on the basis of EROEI. In fact the vast majority of management couldn't tell you what that acronym stands for. Essentially it's a meaningless statistic to them.

[ralfy]

Related?

"The Price of Oil Is About to Blow a Hole in Corporate Accounting"

http://www.bloomberg.com/news/articles/ ... n-reserves

[DesuMaiden]

$this->bbcode_second_pass_quote('Pops', 'P')rices can only skyrocket to the extent that consumers can pay. Once it "attempts" to go higher, consumers most price sensitive reduce their consumption. When demand falls so does price, until supply is balanced.

[onlooker]

Yes Desu, most here are aware of the disastrous effects of lack of cheap oil. All you said here has been reiterated by others on other sites. It is both predictable and pretty much inevitable at this point given that we have not developed alternative energy sources to replace FF and that we have continued so reliant on cheap oil.

[DesuMaiden]

$this->bbcode_second_pass_quote('onlooker', 'Y')es Desu, most here are aware of the disastrous effects of lack of cheap oil. All you said here has been reiterated by others on other sites. It is both predictable and pretty much inevitable at this point given that we have not developed alternative energy sources to replace FF and that we have continued so reliant on cheap oil.

[onlooker]

thank you Desu, All your saying makes much sense to me. We also must remember that even as this peak-oil collapse is happening simultaneously we are also experiencing and will more so experience environmental collapse. I have in all my posts on this site been consistently pessimistic on our collective fate in terms of humanities ability to avoid this great collapse. However, I have a couple of times pointed out that their exists another possibility that does not depend wholly upon us. I have noticed no interest on this site in exploring this possibility or even entertaining it. So I will not discuss it. If anyone does wish to discuss this please do send me an email, I will respond. I wish you Desu the best truly as well as everyone here and may you all be able to maintain some peace of mind in these ominous times.

[sparky]

.
The price of crude is cruising in the mid 50$/b a barrel range after lifting itself from the low 40$/b
the contraction in the industry is starting to bite the big boys R& D ,
it seems the Northern campaign of drilling in the Arctic is going to be a very poor thing .

[DesuMaiden]

$this->bbcode_second_pass_quote('sparky', '.')
The price of crude is cruising in the mid 50$/b a barrel range after lifting itself from the low 40$/b
the contraction in the industry is starting to bite the big boys R& D ,
it seems the Northern campaign of drilling in the Arctic is going to be a very poor thing .

[onlooker]

ditto Desu

[DesuMaiden]

$this->bbcode_second_pass_quote('onlooker', 'd')itto Desu

[onlooker]

I mean I agree with what you say, it seems just too late to deal with the coming peak oil. Just wondering if you live outside US as maybe this word is mainly used in US

[DesuMaiden]

$this->bbcode_second_pass_quote('onlooker', 'I') mean I agree with what you say, it seems just too late to deal with the coming peak oil. Just wondering if you live outside US as maybe this word is mainly used in US

[sparky]

.
Peak oil is not, by itself ,going to crash modern civilization
it can be managed to a large degree
the big unknown is that problems don't come alone
a world financial system akin to a circus high wire act ,
economic competition following the end of two hundred years of West European supremacy ,
degradation of the Citizen /governance relationship
exhaustion of a wide range of resources
geo-politic brush fires in an increasing number of countries
a food situation at the mercy of a serie of disastrous harvests ( we are OK this year , so far )
an unknown black swan coming to visit

Any one of those can be dealt with , somehow , with a bit of police state and media massaging
if they come in bunch that could get a bit hairy
but don't worry , law and order will be maintained , the last people to loose their pay check will be the police