A possible future for oil.

therenoguy

Inspired Forum Member
Registered
I recently had lunch with a friend who's a 25 year oil man. In spring 2016 he lost his small oil company. Even though it's all he knows, he has walked away from O and G.

I asked, "what is REALLY the motivation behind OPEC keeping prices low?"

The following is not his exact wording, but the gist of it is as close as I remember it.

He said:

A few years back, OPEC let the price of oil get to 80, 90, 100. This allowed high cost projects, like the Canadian Oil Sands, and more importantly, shale deposits in the US to be exploited to unprecedented levels. Production rose, along with investment in the sector. The Americans were producing some serious oil, and we in Alberta were more than happy to swim in the money, assuming it would never end.

OPEC saw this as an erosion of their market share, and their power. So they reacted the only way they knew how: open the valves.

Their goal is to knock out the high priced producers-especially the US.

And as we can all see first hand, their plan has been a resounding success. True, OPEC aren't making the kind of money they used to, but they only need $10-12 to make money, so they can hold out indefinitely to kill the producers that need 50-60 to bust even.

I asked him, "will it ever bounce back anywhere near where it was?"

No. OPEC has learned their lesson. They will allow the price to creep up, but it will never be high again(80+). They want to keep the high cost producers-especially the U.S. out of the game; on their knees.

So *if* he is right, and OPEC has really decided that this is the "new normal," then Alberta is going to be hurting for a very long time, maybe decades. And those who are waiting for the Alberta Advantage to kick in soon, should hook their wagon to a different star, maybe even in a different place. This has huge implications for those of us who own real estate in Alberta.


Your thoughts? And please, no whining about how it's all the current federal and provincial governments who are at fault for our woes. Neither has a lick of control over oil prices.
 

therenoguy

Inspired Forum Member
Registered
As I understand it, the only way to send oil from 90 to 30 in a few months is to flood the market with the stuff. And the only people who have the resources to flood the market with enough product to cause that drastic a change is OPEC. So in this instance: yes.
 

Thomas Beyer

Senior Forum Member
REIN Member
Yes a new normal.

Keep in mind that Alberta was a booming place with $30-50 oil a decade ago.

The issue is out of control wages in both the private and public sector. Those are coming down in the private sector but not before 2020 in the public sector, if ever.

Assuming sustainable oil in the $50-70 range Alberta will be like most other Canadian provinces: poorly led by excessively spending socialists but similar to slightly better than most. Of course with the only NDP government remaining in Canada expect unsustainable spending and massive debt accumulation until 2020 at least. Some sensible party might even introduce a PST. Which one I have no idea as all parties are lieing in this regard at the moment.

But yes the historic Alberta Advantage is gone and replaced by normalcy. You can make a killing in real estate in utterly normal markets !!

Oil will be in demand for a century at least and someone has to supply it and make money on it. Might as well be us. Oilsands too will be developed further but at a more measured pace. More pipelines and less appeasement of first "nation" indigenous people would help, of course.

With 250 million of BOE ( barrels of oil equivalent) of energy used daily on this planet - 100 of oil and 150 of other energy sources notably coal, natural gas, hydro, nuclear and alternative sources - we cannot rely merely on more windmills or solar panels for quite some time, if ever ! With 140 million vehicles sold annually worldwide electric cars won't make a major dent for decades, either !

Of course we want a cleaner planet and more energy efficient consumption and the low hanging fruit is not more e-cars or absurd investments into clean tech but more energy efficiency as practiced in Europe, for example. The NDP is actually on the right track here in Alberta !

People are howling about 5c to 10c more for gas, give me a break. How about $1/liter and mandated solar panels on 50% of any new roof built in Alberta ? Replacing a coal plant with natural gas will actually reduce CO2 production by 75% per GWh produced !

Required reading: End of Energy Obesity by Peter Tertzakian ( member of royalty review panel and author of A Thousand Barrels a Second). Alberta will be ok. Just keep those excessively paid civil servants ' salary and benefit packages in check and introduce a 10% HST. Problem solved.
 
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Developer

New Forum Member
Registered
The oil price collapse was a supply and demand issue but I wouldn't say it is all OPEC's fault. Global oil supply is about 96.5 million barrels per day and OPEC currently produces about 32.5 million barrels per day of it. From the trough of 2009 to peak 2015 production OPEC increased their production from 29 million barrels per day to about 32.5 million barrels per day. The US on the other hand went from producing 5.2 million barrels per day in 2009 to 9.6 million barrels per day.

http://peakoilbarrel.com/opec-crude-oil-production-charts/ - opec production chart
http://www.tradingeconomics.com/united-states/crude-oil-production - US production chart
 

Thomas Beyer

Senior Forum Member
REIN Member
The oil price collapse was a supply and demand issue but I wouldn't say it is all OPEC's fault. ..
Indeed.

It was mainly NOT OPEC's fault, but OPEC's intention. The US increased production 70-80% the last 5-6 years from the low 5M to over 9M barrel a day. Iran's sanctions got lifted and it is increasing supply. Libya and Iraq are producing more.

The intention of OPEC was to reduce investment into heavy oil, shale oil and oil sands, thus lowering supply eventually. This is now happening (less investment in Canada, Norway, Brazil, Venezuela, ..) . We will see oil going above $50 towards $60 this year and into the 70's in 2017, but at that price we will see more fracking again. I expect oil to oscillate in the $50-70 range for many many years. Far lower oilsands investments, but some still, more nimble, smaller, lower cost, not the mega multi-billion $ projects of yester-year: (see here http://www.albertaoilmagazine.com/2015/09/mining-project-oil-sands/)

More here at: http://business.financialpost.com/n...-downs-a-toast-to-future-oil-price-volatility

Why electric cars won't make a big dent: http://www.cbc.ca/news/business/oil-pipelines-electric-car-1.3496071
 

Matt Crowley

Senior Forum Member
REIN Member
Electric cars are very likely a big part of future solution. Hydro cars probably not.

One of the best environmental discussions I have found that proposes "numbers, not adjectives". http://www.withouthotair.com/

Even the synopsis is powerful: http://www.withouthotair.com/synopsis10.pdf

Solar panels might end up being part of a development requirement but hopefully the gauge will be more towards carbon footprint per unit. Building science is still a relatively new in Canada when it comes to translating the understanding we have into building code. Lot of buildings are overbuilt and mechanically oversupplied. Right now, we are in an advocacy war: private development says that the demand isn't there and public administration says the greenfield subdivision model is constraining our long term sustainability: financially and from a quality of life standpoint. Consumers on the whole have been slow to adapt behaviors. With only the rare exception, neighbourhoods are not walkable or safely bikable.
 

Thomas Beyer

Senior Forum Member
REIN Member
Electric cars are very likely a big part of future solution.
With 140M cars produced annually it will take a long LONG time for them to be all electric, or even 10% of them. And that is just the new cars. A car lasts 30 years, and given its high expense will not be replaced as quickly as an iPhone every 3-4 years !

Tesla makes what, 100,000 cars right now per year and may do 500,000 in 2021 ? That is less than 0.3% of all cars produced annually !

So even IF in 10 years, by 2026, 25% of all new cars are electric (highly unlikely in my opinion, more like 10%) 95%+ will still use gasoline.

Yes, we will see more and more e-cars and energy efficient, smaller cars. But even in Europe, where gasoline is twice as much as here you see few. Why is that ? Because electric energy is so much more expensive too. It is not cheaper to operate an electric car than an efficient gasoline (or diesel) power car ! I have some pictures of these unusual vehicles on a publicly viewable facebook album here.

Suggested reading: End of Energy Obesity by Peter Tertzakian ( member of royalty review panel and author of A Thousand Barrels a Second). Alberta will be ok. Just keep those excessively paid civil servants ' salary and benefit packages in check and introduce a 10% HST. Problem solved.
 
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Matt Crowley

Senior Forum Member
REIN Member
Thomas, a few notes:
  • Electric cars don't have to only be powered by electricity from a plug in the wall
  • Useful life of cars is probably less than 30 years on average
  • Somebody built the last lighthouse before we switched to radar
From pages 131: http://www.withouthotair.com/c20/page_131.shtml

Some questions about electric vehicles
You’ve shown that electric cars are more energy-efficient than
fossil cars. But are they better if our objective is to reduce CO2
emissions, and the electricity is still generated by fossil power-
stations?

This is quite an easy calculation to do. Assume the electric vehicle’s
energy cost is 20 kWh(e) per 100 km. (I think 15 kWh(e) per 100 km is perfectly
possible, but let’s play sceptical in this calculation.) If grid electricity
has a carbon footprint of 500 g per kWh(e) then the effective emissions of
this vehicle are 100 g CO2 per km, which is as good as the best fossil cars
(figure 20.9). So I conclude that switching to electric cars is already a good
idea, even before we green our electricity supply.

I live in a cold place. How could I drive an electric car? I demand
power-hungry heating!


The motor of an electric vehicle, when it’s running, will on average use
something like 10 kW, with an efficiency of 90–95%. Some of the lost power,
the other 5–10%, will be dissipated as heat in the motor. Perhaps electric
cars that are going to be used in cold places can be carefully designed so
that this motor-generated heat, which might amount to 250 or 500 W, can
be piped from the motor into the car. That much power would provide
some significant windscreen demisting or body-warming.​

And from page 8: http://www.withouthotair.com/synopsis10.pdf

electric vehicles use ten times less energy: 20 kWh per 100 km or even 6 kWh per 100 km. Electric vehicles are far better than hybrid cars. Today’s hybrid cars, which are typically at best about 30% better than fossil cars, should be viewed as a brief helpful stepping stone on the way to electric vehicles.
Electric energy is coming for vehicles and will make more sense economically. Part of this is likely to be pushed through by legislation to penalize over-consumption for luxury. In 10 years, vehicles will be smaller and drastically more energy efficient.


It is difficult to make a modal shift in transportation but life in a luxury vehicle stuck in traffic is constraining cities growth and leading to more social isolation. These attitudes are changing...slowly. Public and active transportation in Edmonton and across cities in Canada are going to become much more of a viable and economic choice. Slowly, attitudes will change from subsidizing car traffic to charging users what it actually costs society.
 

Thomas Beyer

Senior Forum Member
REIN Member
Indeed. The key word being "Slowly" .. Due to there being no major business case and as such, just coercion through government mandated restrictions, artificial surcharges or extra levies .. Or sheer bribery i.e. subsidies of the rich by the average to lower income folks.

Battery capacity, energy density and recharging for long distance still a major issue before mass adoption can be achieved !
 
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Rickson9

Senior Forum Member
Registered
"The renewables sector employed 8.1 million people in 2015, up five per cent in a year, the report said, while oil and gas lost some 250,000 jobs by the end of 2015. And for the sixth year running, more money was invested worldwide into expanding renewable energy production than into oil and gas production."

http://m.huffpost.com/ca/entry/10441636
 

Thomas Beyer

Senior Forum Member
REIN Member
"The renewables sector employed 8.1 million people in 2015, up five per cent in a year, the report said, while oil and gas lost some 250,000 jobs by the end of 2015. And for the sixth year running, more money was invested worldwide into expanding renewable energy production than into oil and gas production."

http://m.huffpost.com/ca/entry/10441636
Conveniently in the low low oil year. It is already up this year worldwide.

Conveniently missing are salaries paid as oil & gas pays on average far higher ( perhaps double ) the salaries.

Conveniently missing is the fact that many countries are not as fortunate as Canada and do not have massive oil and gas reservoir as we do.

Why produce electricity at 25-50 cents with renewables if you can do it with gas at 10 and with coal at 5 in a cold country with ample space and even more CO2 offsetting ( but usually unmentioned ) forests ?

Loads of government services such as hesitates, schools, universities, roads, LBGT support centers or libraries are Lau from Canada's huge taxes and royalties levied onto oil & gas firms. We want to do away with that why ?

Expect a massive pickup in employment in 2017 & 2018.

Another inconvenient truth ...
 
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Rickson9

Senior Forum Member
Registered
"And for the sixth year running..."

Apparently everyone needs to make assumptions about the future. And I love the physical keyboards on smartphones too.
 

Thomas Beyer

Senior Forum Member
REIN Member
Note everything that glitters is gold:

Germany, the 'high priest of this movement, had installed the equivalent of a million barrels of oil a day of renewable capacity, between solar and onshore wind.

"Solar is working at 50,000 a barrels a day and 10 per cent utilisation, wind is at 70,000 barrels a day - 17 per cent utilisation - so that million barrel a day field is working at a 130,000 barrels a day. You cannot replace baseload with intermittent and promise the people it's going to work."

"The Germans were promised this would all be worthwhile because it would reduce carbon dramatically. Yet their carbon emissions per capita are 40 per cent above the UK, France and Italy."

https://notalotofpeopleknowthat.wor...rn-of-dangers-of-relying-on-renewable-energy/
 

Rickson9

Senior Forum Member
Registered
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