Guest “I couldn’t make this sort of schist up if I was trying” by David Middleton
Apr 5, 2020,07:06pm EDT
After COVID-19, The Oil Industry Will Not Return To “Normal”Wal van Lierop Contributor
EnergyThe coronavirus pandemic has shuttered the world’s economies, overwhelmed healthcare systems and taken loved ones from us. Politicians have promised their citizens a “return to normal” following the pandemic. However understandable, this longing for “normal” will lead us to a mirage. Worse, our recovery from COVID-19 could be a short-lived victory if we aspire only to have a “normal” economy again.
Normal created a climate change timebomb that may make the economic consequences of coronavirus look mild by comparison. Normal would give two brutal dictators the power to topple North America’s fossil fuel industry whenever they feel like it.
Normal also caused the mass destruction of ecosystems, human desperation for animal protein and increased human-wildlife contact. Combined, these factors led to Ebola, Hanta, bird flu, SARS, MERS and now COVID-19 to find a new, more plentiful host in human beings.
Stimulus spending around the world has already eclipsed the 2009 recovery measures and “New Deal” programs of the 1930s. And more spending is inevitable. Will your taxpayer money be wasted on a return to normal? Or, could it be used to…
[…]
Let’s not misuse taxpayer money to rebuild an economy that survives COVID-19 and then succumbs to climate change. Instead, let’s create a future economy with good jobs, a habitable earth and reprieve from the whims of erratic dictators. There is no path back to normal. And we can do much, much better than normal if we refuse to waste this crisis.
Forbes
I called this dude a “futurist” because I couldn’t figure out what he was…
For more than 30 years, I have devoted my career to sourcing, investing in and helping to commercialise breakthrough innovations for energy intensive industries. During this time, I have gained unique industry insights and deep operational experience as a venture capitalist, corporate executive, international consultant and university professor. For the past nearly 20 years, I have been President & CEO at Chrysalix Venture Capital, an award-winning VC firm focused on innovation, sustainability and cleantech, where I have helped raise more than $250M and participated in more than $1B in venture capital funding. Our investments include breakthrough technologies like 3D printing of steel, fast charging electric vehicle infrastructure, emissions-free solar steam, smart mining and nuclear fusion. Before officially joining the corporate world, I spent several years as an Associate Professor at the Vrije Universiteit Amsterdam, where I obtained a PhD in Economics, and consulting to the World Bank and European Union.
Forbes
This has to be the single dumbest sentence ever written by a human being:
Let’s not misuse taxpayer money to rebuild an economy that survives COVID-19 and then succumbs to climate change.
It’s as if the Bozo is saying, “Don’t save the economy from ChiCom-19, because we have to save it from the weather.”
The title of the article was:
After COVID-19, The Oil Industry Will Not Return To “Normal”
“Normal” is boom & bust. Low prices eventually cause high prices and high prices eventually cause low prices.
This is as close as he got to actually discussing the “oil industry”…
There is no return to normal for the shale and oil sands producers. From now on, the fate of the oil industry is tied to the whims of two egomaniacal autocrats. Demand will continue to decrease as low-cost renewables keep pushing the energy transition.
I filled up my Jeep the other day for the first time in three weeks, and paid $1.19/gal (with my $0.20/gal Albertsons/Safeway/Randalls/ Tom Thumb discount). I normally fill it up twice a week. When the ChiCom-19 hostage crisis ends, demand will not continue to decrease; nor will “low-cost renewables” push any sort of transition, much less an energy transition… If for no other reason than the fact that there has never been an energy transition – We convert more biomass into energy now, than we did before we started using fossil fuels.
The ChiCom-19 hostage crisis has caused demand for crude oil to drop by 20-30%. This has caused about a 50% drop in the price of crude oil. At $20/bbl a lot of producing oil fields become uneconomic. Guess what happens when a producing oil well can no longer cover its own lifting costs? Wells get shut in.
Legacy oil & gas production has dropped rather sharply in every tight/”shale” play in the Lower 48. The drop has been particularly steep in the Permian Basin. Production from new wells was still up, but will soon begin to decline. The legacy production drop in the Permian Basin was so steep that overall production dropped for the first time in a long time.
How long will demand be suppressed? It depends on how long the Fire Marshal Gumps of the world keep us under house arrest. This is the EIA’s latest forecast (which has to be better than a futurist waving his arms)…
Global production will probably dip more the the EIA forecast, but it’s anyone’s guess as to how quickly the over-supply will be worked off.
If oil prices track the current futures market and STEO forecast, the industry will still be in “bust” mode through at least next year. “Shale” players, particularly the smaller ones will be filing for bankruptcy at a record pace. If oil prices track a little above that, $50-60/bbl, the industry will be back to “normal” (somewhere between boom & bust). If prices move toward the upper bound of the confidence interval, the industry will be in “boom” mode (as opitmisic as I am, I don’t see how this can happen in the 2020-2021 time period). If prices, track the lower bound of the confidence interval, we will be in a deep “bust” mode…
Many, if not most oil companies, particularly independents, “hedge” a significant percentage of their production. They effectively sell the oil in advance at a fixed price.
McConn and his team at Enverus and RS Energy Group Intelligence estimated there is 2.5 million barrels per day of aggregate 2020 oil-hedge volumes among public traded North American exploration and production companies at an effective hedge price above $50 West Texas intermediate. Their analysis estimates most oil-weighted E&P companies have hedged between 25 and 90 percent of their anticipated production for the year. They estimate the value of these financial-derivative assets exceeds 10 percent of respective enterprise values for the majority of E&P companies.
Midland Reporter-Telegram
Some companies even have a portion of 2021 production hedged. This buys time for most companies to lower their spending to the point that they can be cash flow-positive at $30/bbl. If oil prices evolve along the lines of current futures contracts, the oil industry will, indeed, return to “normal.” Apparently “futurists” are clueless about what’s “normal” for the oil industry,
Day Whatever of America Held Hostage by ChiCom-19
I’ve lost track of what day of the week it is, so, keeping up with what day of the hostage crisis it is seems pointless.
Fire Marshal Gump was at it again yesterday.
Dallas County to require people to wear masks at essential businesses, on public transportation
An upset Price says Jenkins didn’t consult fellow commissioners on the plan. Meanwhile, the county also reports seven more coronavirus-related deaths.People in Dallas County will soon be required to wear face coverings when they work or shop at essential businesses and use public transit.
The mandate goes into effect at 11:59 p.m. Friday, County Judge Clay Jenkins announced Thursday.
[…]
Dallas Morning News
Gump needs to look at his own fracking data:
| 4/17/2020 | |||
| Dallas County | CHICOM-19 | ||
| Population | Cases | Deaths | |
| 2,637,772 | 2,190 | 55 | 2.5% |
| % of population with | 0.08% | 0.00% | |
| % with, rounded | 0.1% | 0.0% | |
| % without | 99.92% | 100.0% | |
| % without, rounded | 99.9% | 100% | |
| Menodoza Line (.200) | 5/31/2035 | 0.200 |
Thankfully, it appears that the Dallas County Commissioners Court has slapped Gump down again…
Dallas County commissioners vote to scale back countywide mask order, reopen craft stores
The 3-2 vote was made to give county residents access to mask-making materials.Dallas County commissioners voted Friday to reopen craft stores and partially scale back an order requiring residents to wear masks in public.
County Judge Clay Jenkins issued the order Thursday that requires county residents to wear face coverings when working, riding public transit and running essential errands, effective at 11:59 p.m. Friday.
[…]
Dallas Morning News
Just a couple of weeks ago, Gump (Jenkins) made a YUGE production of shutting down Hobby Lobby and other craft stores.
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It seems DM is echoing the British House of Lords line – normal being the “special relationship”.
No, it is highly likely the House’s fears will be confirmed – the new normal will be The USA, Russia and China cooperating with COVID being a good impetus. After all that is President Trump’s stated intention.
Why a US oil-man toes that British line is seemingly incongruous.
Just wondering if some here follow the British Scoop Jackson Society effort to sue China for $3 trillion?
Aside from that, the recent WallStreet loosey-goosey money pumping into shale sure made that oil “boom-bust” cycle a real joy-ride?
The loosey-goosey money was pre-2014.
Informative and informed— as is always the case with Middleton-authored WUWT pieces.
Thank you !!
For the haters in the audience, DM is vastly more knowledgeable in things involving producing “Non-Virtual Energy,” Virtual Energy being that supposed energy production which disappears, much like a Fata Morgana, when it is really needed. I “enjoyed” Virtual Energy in June 2003, in Sausalito, California. Temperature 102 degrees Fahrenheit, zero point zero wind over the Altamont Pass, none of the wind turbines rotating, and an ongoing brown out.
Rock on David!
From a “South Dallas”, far North Houston fan.
I’m kind of missing my weekly Dallas-Houston commute… Although saving 500 miles/week on my Jeep and ~$100/week in gasoline is kind of nice. Commuting from the bedroom to the kitchen is easier. Plus, since I tend to eat breakfast and lunch at my desk, the food is better here. Unfortunately, I have to pay rent on a Houston apartment than I probably won’t see in April. Truly interesting times.
If oil production is uneconomic , guess what ,this makes renewables even more uneconomic. Without subsidies no renewable power generation can compete with weak fossil fuel prices . Ironically it will the likely drop off in enthusiasm for renewables and inability of governments to justify propping up renewables that will help fossil fuels to bounce back. With major financial commitments having been made to fight the economic impact of a real emergency the enthusiasm to expend future resources on a fake crisis emergency is likely to wane.
Dave,
“Futurist” is a euphemism for no nothing, generally speaking. I once listened to some oil industry futurist, fifteen years ago, speaking of the near term death of Saudi production because they were already water flooding their fields and had been since day one.
At any rate, your Figure 4 contains a future prediction with error bars. This is exactly what should accompany all projections, as it allows a person to understand, at a glance, how meaningful the projection is. It is what was missing from Neil Ferguson’s projections of COVID deaths. He provided tables of numbers, precise to six figures, of what to expect if certain strategies were followed. Error bounds on each might have made people think for a moment about other important consequences, and come up with more robust plans.
Sorry, “know” not “no”….
Peak Oil took place in late 2018. Peak Car took place in 2017. The coronavirus has just certified it. Many low producing wells will be shut for good in the North Sea, North American shale plays and everywhere else and it won’t make sense to open them again. There is no new discoveries to make up for lost production and decline. We are in for a long and deep economic crisis and globalization has been unraveling slowly since 2013. You will have to reassess everything you thought about this. Eventually oil prices will be high, but by then production destruction will have been profound and we won’t be able to reach previous highs.
Whether solar cycles or peak oil –
“It’s tough to make predictions, especially about the future.”
― Yogi Berra
It’s even tougher when the predictions are based on “what’s happening now.”
How many times have you called Peak Oil so far?
What makes you think this call is any more accurate than your previous ones?
They never give up with the watermelon dribble-
https://www.msn.com/en-au/news/australia/the-worlds-energy-order-is-changing-—-and-china-is-set-to-reap-the-strategic-benefits/ar-BB12QkZ3
Not much of a cartel if your prices crash with demand but economics isn’t their strong point and flog capitalism with a feather with cheap energy. Presumably why they’re so keen on their unreliables for the Revolution to begin and fawning over China all the time.
Now with Covid they’re fretting the deplorables won’t want to jump on their pet public transport system again-
https://www.msn.com/en-au/news/australia/to-avoid-a-return-to-pre-coronavirus-traffic-congestion-experts-want-to-talk-about-change-right-now/ar-BB12Qu9i
They’re getting worse by the day with Covid and relevance deprivation syndrome.
There are two institutions of higher education in Amsterdam: the University of Amsterdam (where yours truly did his PhD research) and the Free (Vrije) University of Amsterdam. The latter institution was founded in the 19th century by strict Protestant groups who were wary of all those new things being discovered and wanted to have some control over the curriculum. The ‘Free’ has a good dose of irony in it. For instance, Darwin was rather ‘problematic’ even far into the last century. It appears that the writer of the Forbes piece was a graduate of that institution.
David,
Your Dallas County CV-19 Hospitalizations and Intensive Care graphs (Figures 2 & 3) indicate how bad CV-19 could have been if the outbreak had occurred at the beginning of flu season – as happened in China.
It probably would have been a lot worse if the peaks were coincident.