North America To Flood The World With Cheap & Abundant Fossil Fuels
North America, once a sponge that sucked in a significant portion of the world’s oil, will instead be supplying the world with oil and other liquid hydrocarbons by the end of this decade, according to ExxonMobil’s annual long-term energy forecast. In a forecast that might make economists happy but environmentalists fret, Exxon’s two chief products, oil and natural gas, will be abundant and affordable enough to meet the rising demand for energy in the developing world as the global middle class swells to 5 billion from 2 billion and buys energy-hungry conveniences such as cars and air conditioners. — Jonathan Fahey, Associated Press, 9 December 2014
The world’s largest oil company sees emissions in the developing world surging 50 percent, a forecast that suggests the diplomatic push to draft an accord to curb global warming stands to fall short. Even as the most advanced economies cut energy use by almost one tenth through 2040 and add hundreds of millions of fuel-efficient vehicles, booming growth in places like India, South Africa and Thailand will boost demand for fuels 36 percent, the Irving, Texas-based company said in its annual outlook. Emissions will surge as an expanding middle class in poorer nations demands electricity, schools and hospitals. –Joe Carroll, Bloomberg, 10 December 2014
Low oil prices and the inaction of OPEC may well result in a shale crash next year. Many analysts now expect falling oil prices to throttle the US shale boom. The theory goes that, if high prices helped create the oil boom in USA and Canada, then low prices will inevitably result in a shale crash. That’s certainly what Saudi Arabia, the leading member of OPEC, are hoping. However, according to The Economist, ‘adversity will make shale stronger.’ The success of North American shale has been recognised globally and now many other countries are now hoping for similar success (Mexico
and the UK being two of the most prevalent). And, when oil prices recover, new wells can be purchased within weeks – it won’t take long to get North American shale production creaking back into action again. –Jeremy Coward, Shale World, 10 December 2014
A $200 million government backflip on an international green climate fund will come at the expense of Australia’s foreign aid budget. In a bittersweet victory for green groups, Foreign Minister Julie Bishop today announced to a UN climate change conference in Lima that Australia would now contribute to a $10 billion fund that aims to help developing nations tackle global warming. The decision is a reversal of its stance at the G20 summit in November. Mr Abbott said money from the fund would be “strictly invested in practical projects in our region” including energy efficiency, better infrastructure, reforestation and carbon offsets. –Dennis Shanahan, The Australian, 10 December 2014
Tabulation from Dr. Benny Peiser and the GWPF
Wanna see an economy in recovery ?, cut the price of oil in half.
Hang onto your britches, while it lasts.
Wanna see the unemployment rate skyrocket in North Dakota? cut the price of oil in half. Hang onto your britches and watch the exodus of despondent roughnecks.
Wanna see the unemployment rate skyrocket in the USA? cut the price of oil in half…
The unemployment rate has already skyrocketed; a direct byproduct of Obama’s economic policies. Just look at U-6. And even that understates true unemployment.
Get a grip…..more people are working today than on January 20th, 2009
But not on November 30th, 2007. Now why is employment less today than under Bush? With an additional 20 million people in the country to boot?
Socrates
Yea, and the population is 13,000,000 higher than it was then…
Re Australia’s $200 million.
In my opinion this is a better approach for Australia to take. Do what many countries are doing: pay lip service, contribute a little but carefully channel its use, and move very carefully and await further data and further developments.
It is no good barrelling out in front of everyone on a great white charger when you are a tiny warrior with few weapons, not sure where the battle is, who the exact enemy is, who is really on your side, and what the outcome might be.
I am sure my remarks will draw some fire but I think there is more to be concerned about than just the price of oil. This kind of cycle has happened before. In 1970 my buddy was drilling oil wells in western Pennsylvania at a rate of a well every 10 to 12 days. Not one of those wells was put into production in more than a year of work. Practically all of them hit either oil and/or gas. Mostly they found gas. The wells were logged and capped and left. At the time, the value of the well was to simply prove the production capability. There was enough money available from oil prices to invest. Here we are more than 40 years down the road and all of the area where he was drilling is now poised to produce oil and gas yet again. However, at a higher cost. Every other former gas and oil producing formation has been proven to offer the potential to produce more, but it will require additional cost. In Colorado and West Virginia,Wyoming and Ohio, without even having to mention North Dakota or Texas, a steady revisiting of former areas that boomed from the 1920’s and later is showing that they are far from played out. All it took was for the price of oil to reach the investment payback point.
What will have to happen is for production to adjust back to demand which we passed when everyone who could get a lease and a rig to drill, did so, and in so doing blew past the market requirements. The big companies will kick back on their heels because they can afford to. They know the price of oil will go back up. It is just a matter of time. They have always been able to do that, but the little operator can’t. Everyone who has ever been in the oil business knows it operates in horrific wide swings of boom and bust. It will always be that way. The big companies know this and operate accordingly. The little operations have no choice but to produce and follow the price down until they are so far in the hole they go bankrupt, assuming prices stay low.
Compounding the situation is the possibility that even the big operators misread the demand as a result of other issues. Middle East oil is easy to get and therefore highly competitive but even they may be seeing something to worry about. I think we will know pretty soon. The last time I saw gasoline at $2.50 a gallon was just before the economy hit the wall in 2008. We are now poised to go that low again. The economic activity that low fuel costs should support, if this was simply a supply and demand issue, isn’t happening that I can detect. That makes me think there are other constraints in the US and world economy. Cheap fuel is good. In my opinion, however, this is an abnormal looking situation that I believe indicates a sick economy on a world wide scale.
Compounding the situation is OPEC, they seem to think they/we let them set the price.
When market forces override their manipulations, they are just along for the ride, like the rest of us.
Cheap petroleum frees us to spend time researching the next energy source, all of us, it seems the solution might be very near.
Then what ?, we’re predisposed to warfare, is that gonna change ?
Maybe in my next life, I’ll see that play out.
The problem is that supply / demand has not changed 40% in the past three months.
But the price has changed 40%.
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So, tell me……has the law of supply and demand been suspended in the past three months?
I’m not knowledgeable enough to answer your question precisely, but the market forces (bettors) seem to think they are on the right side of that bet.
A lot of bettors thought they were on the right side of the market on October 28th, 1929
Exactly !!
Now where would you put your money ?
On the US which just found 50+ years worth of oil and gas, or China which steals our technology (they don’t really steal it, we give it to them).
U.K..
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I would put my money in China, as they seem to be investing a lot more money into non-fossil fuel energy sources.
Socrates
Price change is never linear with “supply & demand” change. Ie: you don’t need a 40% change in supply/demand to get a 40% price change.
David Socrates, out of curiosity, what are the actual changes in supply and demand in the last three months?
Agree with your comment – China and India are slowing, the whole world that supplied their economies are slowing. Hopefully we have a soft landing but with so many countries deep in debt, this could cause some serious damage. The companies around where I live are already shutting wells in, laying off people, and cutting their Capital budgets for 2015. Since every primary industry job spins off 5 or 6 other jobs in secondary and tertiary industry, the snowball effect may be pretty big.
If those subsidies went to oil wells, instead of expensive wind & solar, the result would be much more positive. Good luck with getting subsidies for oil wells with this administration.
They already have an “oil depletion allowance” …..are you suggesting that we INCREASE oil subsidies?
Sure, why not? Better than wind and solar…
Socrates:
Bogus argument.
“oil depletion allowances” are not subsidies; this topic been thoroughly vetted in prior WUWT discussions. Depletion allowances recognize the decreasing value of the original capital cost of the right to extract oil. Nothing more, nothing less.
LMAO…..Solar is now so cost competitive with current prices of electricity, that the electric utilities are now demanding that grid connection fees be increased to prevent their financial ruin ( Courtesy of ALEC )
Then why is Germany building coal fired generation? Oh yeah. No sun in the winter or at night.
Last time I checked a map, Germany was on the right hand side of the Atlantic Ocean….
Not if you are looking down from the north pole.
Untrue.
Solar, after politically forced utility rebates and 30% federal tax credits may be competitive, but unsubsidized solar isn’t. “Competitive” depends on how you count the beans.
FYI I live in Fl and just installed 11,000kWh of PV solar:
(1) Full retail cost $36,000
(2) Florida Power & Light rebate $20,000
(3) Federal tax credit 30% of $36,000 = $10,800
(4) Apparent net cost to me = $5,200
You are an idiot or a salesman if you believe solar is competitive. The two giant solar thermal plants built in southern Arizona are offline half the time or worse due to maintenance problems. They can’t even break even with the production costs plus the water has to be heated in the morning to jumpstart the generation process. This was known by the contractor at the time they were installed, but he was too busy getting paid to worry about it
I did my homework for putting solar panels on the roof of my house in that same desert both for leasing and purchase. I would have lost money leasing, and the panels would not last long enough to reach break even if I paid for them even with state and federal government subsidies. Desert heat lowers a panel’s efficiency when you need the electricity the most and degrades the panels over time. I spent my money on making the house and big appliances energy efficient.
Ivanpah!!!!!!!!!!!!
Next items that will help the world energy supply and continue to lift millions out of poverty are Methane Hydrate gas and Thorium Fluoride salt reactor. The energy future is very exciting.
There aren’t any commercial thorium salt reactors in operation as of today.
Can you please give us a projected date when a commercial implementation will go online?
..
” Its ultimate target is to investigate and develop a thorium based molten salt nuclear system in about 20 years” ( http://en.wikipedia.org/wiki/Liquid_fluoride_thorium_reactor#Chinese_thorium_MSR_project )
You just gave it up with that perfectly worded statement.
You’re playing with us.
Be careful 🙂
Don’t have to be “careful” just relating the facts
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The Chinese don’t expect significant returns on R&D into thorium until well beyond 2020
While we keep dreaming about thorium salt reactors, the Russians and others have quietly been making progress with fast neutron (“breeder”) reactors. About two decades ago there was a mass abandonment of fast breeder research programs by the USA, UK, Germany and a few other countries. But not Russia.
It became dogma that liquid metal coolant was simply too difficult an engineering challenge. I well remember working for 6 months at the Dounreay nuclear plant in Scotland and several times every week hearing the high pitched screech of vented pressurized gas signaling another shut-down due to coolant leakage. Every time it was the same thing. Welded joints in pipes carrying liquid sodium weren’t up to the job. No-one apparently considered any alternatives to welded pipe joints. I guess in our culture that would have been “putting on airs above one’s station”.
So no-one seems to have noticed that the Russians have apparently completely solved the problem of liquid metal (sodium or lead) coolant in metal pipes. They have fast breeder reactors that have been more or less continuously providing electricity for their national grid since 1980 – i.e. into their 4th decade of uneventful operation:
The Russian BN-600 fast breeder reactor – Beloyarsk unit 3 of 600 MWe gross, 560 MWe net – has been supplying electricity to the grid since 1980 and is said to have the best operating and production record of all Russia’s nuclear power units. It uses chiefly uranium oxide fuel, enriched to 17, 21 & 26%, with some MOX in recent years. It is a pool-type, with heat exchanger for secondary coolant inside a pool of sodium around the reactor vessel and 3 steam generators outside the pool. The sodium coolant delivers 525-550°C at little more than atmospheric pressure. Russia plans to reconfigure the BN-600 by replacing the fertile blanket around the core with steel reflector assemblies to burn the plutonium from its military stockpiles and to extend its life beyond the 30-year design span.
Russia are not forging ahead with advanced 4th generation fast breeder designs, and exporting them to China and maybe India. A good overview of fast neutron / fast breeder research, which France, Japan and even the USA are belatedly returning to now, is given at:
http://www.world-nuclear.org/info/Current-and-Future-Generation/Fast-Neutron-Reactors/
erratum, last para
“Russia are now forging ahead – not “not”.
Interesting link.
No need for liquid-metal reactors yet — go w/proven designs.
Socrates,
The law of supply v demand is exactly what you are seeing. When supply exceeds demand, inventory accumulates, then prices fall until demand increases or supply decreases, or both, until once again equilibrium is reached.
There has not been a 40% change in either supply, demand, nor any combination of the two that equals 40%
You keep saying that…
Sorry for the source but Wiki says:
“The 1979 (or second) oil crisis or oil shock occurred in the United States due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher than justified by supply. The price of crude oil rose to $39.50 per barrel over the next 12 months and long lines once again appeared at gas stations, as they had in the 1973 oil crisis.[2]”………
Mr U.K.
…
Please look at current oil market stats.
The current price has hit < $65 per barrel. It was $100 a barrel about three months ago.
…
PS, you should know better than to cite Wikipedia
I qualified that quote (per Wiki).
You want some inflation adjusted numbers ?
You can post all of the “inflation adjusted” numbers you wish, but that will not do justice to the 40% price movement in 3 months that is not attached to any significant supply/demand movement.
Socrates
By just repeating the simple phrase “supply and demand”, you are arguing without the full spectrum of factors effecting price in a free market:
(1) current “supply” (which has increased)
(2) future estimate of “supply” (showing credible, substantial & sustained increases),
(3) current “demand” which is declining (at least in the USA),
(4) future estimate of “demand”,
(5) political risk of supply (decreasing due to supplier geographic diversity),
(6) emotional value placed on the commodity (this changes over time; e.g.:not much demand these days for expensive tulip bulbs),
(7) plus other factors.
Pricing moves are never the arithmetic sum of % changes to all of the above, and never move in linear relationship with changes in “supply & demand”. Current world oil demand is about 90BBL/day; an unresolvable 1-2% decline in supply easily & quickly drives price up 30-40%.
You don’t need a 40% oversupply. It only takes a 10% oversupply to send prices plumetting as that 10% seeks its share of the market. This sets the stage for another price adjustment as less profitable production is abandoned and less profitable plays are avoided.
Socrates – study “price elasticity” in economics.
“It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.” – SAMUEL CLEMENS
If it is no longer economical to frack, do you think that fracking will continue?
Your time spent here at WUWT is paying off already – you’re starting to understand the free market.
Kudos to you.
yes.
Absolutely yes – some enterprising guy will find a new technology (or process) to lower cost.
Fracking is an excellent example: most of existing fracking wells came from pre-existing oil wells “tapped out” using old technology.
Current fracking uses water; future fracking may use liquid nitrogen (and little/no water).
Check this reference:
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO2012.pdf
Chapter 7, third paragraph, page 205.
It discusses the crude oil peak, as they see it. They don’t mention the word peak. They refer to gradual replacement by non crude oil liquids. Somewhere in that report they also show a price projection. They expect $150 plus dollars per barrel by 2035. This is what they think is needed to keep production meeting demand. But the demand isn’t met by crude (as opec defines it).
In conclusion, we either hit peak or are about to hit it, condensate helps bump up the refinery feed. The other “crude” we can produce is the extra heavy from Canada. The canadian extra heavy, processed to make syncrude, or diluted so it can be pumped to a refinery, added to the shale or tight rock light crude will make North America a self supplied region. However, the new supply sources require higher prices. And the USA isn’t about to be Saudi Arabia. Getting that oil out will require a huge effort.
Fracking has been going on for over 100 years. The price has not been that high for that length of time. It will continue.
MY APOLOGY, PUSHED THE ENTER KEY INADVERTANTLY.
I’m astonished at some of the comments concerning the imminent demise of shale fracking. Personally, I knew nothing about the vast technology of tracking just a few years ago. The NYT, Bloomberg, CNN, Economist, BusinessWeek, NewsWeek, CNBC… etc, etc, ad nauseam, are now reporting the death of all fracking. I don’t think so. Fracking was founded on technology & technology & American ingenuity will keep the cost learning curve downward for a long, long time.
“Fracking” is old technology. It has been in use for more that 40 years. It will not go away.
Fracking’s been around for more than 40 years, more like 60+ years. But directional drilling, the chemistry of the hydraulics, etc, the techniques of explosively fracturing the drilled layers, etc, etc, has what’s made fracking so practical & economical. And, the footprint & time to make the well pay off has shrunk tremendously… which keeps the GreenGuys off kilter.
I believe in American ingenuity… ahhhh… except for those GreenGuys that are just against everything.
You can believe in “American ingenuity” all you want,but what is happening today is the destruction of the “facking boom” by foreign powers in possession of a heck of a lot more oil than exists in Bakken or Eagle Ford.
Care to explain ?
Yup…
…
Saudi Arabia doesn’t like to lose market share.
A question for an oil expert, “Isn’t it possible that fracking company’s GAAP profit will take a hit at these sub $80 per barrel prices, but their cash flow will do very well?”
All you need to do is to examine today’s current prices for stocks in companies that are heavily leveraged in the shale oil plays.
You’ve seemed to learn a lot about how the money tilts the scales in this thread.
It almost seems like you are showing off.
Bad idea. Just say’n.
Currently money rules the planet.
..
If you think otherwise, please tell us all what trumps it these days.
You’re reading it.
You must be kidding
…
An “opinion blog” is not more valuable than a $20 dollar bill
Yet, you can’t help yourself but reply.
It’s worth $20 to me, in fact I contributed $30, a week ago.
So, ya gonna rein it in or what, it’s nuthin personal.
Oh, I see
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You lost $30 a week ago, and that makes me $30 ahead of you.
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I guess this place is a tax on ignorance.
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You win….I’ll buy some beer with my $30
All that proves is you value getting drunk over learning.
I like to think of it as a playground for the intellect.
And well worth the stipend.
Good way to think about it.
Internet panhandlers love you
No holds barred, eh.
That’s cool.
Socrates
I’m calling foul on you answer to Isn’t it possible that fracking company’s GAAP profit will take a hit at these sub $80 per barrel prices, but their cash flow will do very well?”
Share price is the net present of expected future earnings. The question was: can earnings decrease while cash flow increases? The short answer is yes.
Socrates
You are confirming eloquently that the twin pillars of socialism are infantile naivety about, and blind prejudice against, free markets.
Could a moderator turn off David Socrates for an hour or so, please.
Yes, more than two dozen comments (!), none of which has much substance. If one is so knowlegeable, why comment here? He would be out on the French riviera, living large on his astute oil plays.
“none of which has much substance”
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But then, doesn’t compare with your ignorance of the WFT “isolate” function.
Forget the price of oil stocks. It is the price of gas/energy that the poor/middle class will benefit from.
$3 per gal vs $2 per gal will elevate some of the poor to “middle class”.
You think that the poor slob in the heart of Africa cares if gas costs $3 or $2 ???
…
They need to feed their kids, not put gasoline into a non-existent automobile.
Like it or not the United States is still the leading indicator.
Play any others at your peril.
Socrates
You’re damn right he cares.
He cares when he plows his marginal farm by hand (or animal) because he has no mechanization; he cares when his children drink polluted water because of no treatment plant.
Your arrogance of marginalizing “the poor slob in the heart of Africa” speaks volumes.
Chip, if he has no mechanization, he has no use for the gas.
Not highly credible given the report was composed before the recent fall in oil prices.
A lot of the shale and tar sands plays become uneconomic at the present price. Equally the pause in Chinese oil consumption is a huge negative for world economies if it continues.
Fernando
If this is what they have always thought, they have always been wrong.
1885 USGS “Little or no chance for oil in California”
1891 USGS Same for Kansas and Texas.
1914 US Bureau of mines: Total future production limit of 5.7 billion barrels
1939 Department of the Interior: Reserves to last only 13 years.
1951 Department of the Interior, Oil and Gas Division: Reserves to last 13 years.
From Julian L. Simon, Page 165, “The Ultimate Resource 2”
Mod; Two of my comments have appeared out of time sequence.
Watching the Peak Oil debate over the decades provides a glimpse of what it will look like when long cycles in climate undermine the efforts of climate advocates and political climatologists. Depending on the severity of the counter blow from reality, they will run silent for an extended period living off the spoils from prior policy victories. It will be up to new leadership to determine the speed of rollback and recovery in policy, programs, and science process, science education, and science professional societies.
There are plenty of small suppliers/wells in the US that produce regardless of price. They don’t shut off the well just because the price falls, they just get lower monthly checks. Collectively they produce a large amount of oil. Re price sensitivity of frackers, once the well is drilled and producing, they aren’t going to shut it off just because prices drop. What we’ll see over the next few months if oil stays low is a decrease in drilling new wells rather than supply destruction. The small producers are relatively insensitive to price. The huge corrupt bloated petrol-welfare states, on the other hand, ARE sensitive to price. This is going to be interesting.
“price sensitivity of frackers, once the well is drilled and producing, they aren’t going to shut it off just because prices drop.”
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Yes, but they will go out of business when the money they get from the wells they have drilled can’t cover the money they borrowed to drill it in the first place.
OPEC producers will fight for market share and match price declines. Their oil is cheaper to produce and they will ride this out. The frac drilling will grind to a halt and the independents will suffer greatly. The handwriting is on the wall for the frac producers.
You are 100% correct.