Oil Demand May Never Recover, Green Fantasy Part Deux

Guest “bwahaha!!!” by David Middleton

The world may never recover its thirst for oil

Analysis by Julia Horowitz, CNN Business

Updated 6:59 AM ET, Wed April 29, 2020

London (CNN Business) The world is learning to live with less oil.

It may never look back. The coronavirus pandemic has destroyed demand for gasoline and jet fuel as billions of people stay home, and there’s no guarantee it will ever fully recover despite rock-bottom prices.

The oil industry is bracing for the effects of the crisis to linger. Employees keep working from home. International travel stays scarce. And citizens in once polluted cities, having become accustomed to blue skies, demand tougher emissions controls, encouraging governments to redouble efforts to tackle the climate crisis.

Such changes would come on top of a push for investors to dump oil assets that had been gaining momentum before the recent price crash. Sustainable energy investments, by comparison,appear to have held up relatively well despite stock market volatility.

[…]

Darth Vader: This is CNN!

I don’t know which is funnier…

Analysis by Julia Horowitz, CNN Business

2016 BA in Political and Social Thought (LinkedIn Rocks!)

Or…

London (CNN Business) The world is learning to live with less oil.

London? Source: BP Statistical Review of World Energy, 2018 if I remember correctly.

The dumbness of the CNN “analysis” is dumbfounding. (Yes, I know it’s the exact opposite of dumbfounding; I just liked the sentence.)

This is as bass-ackwards as a green fantasy can get:

The world is learning to live with less oil.

2016 BA in Political and Social Thought

The “world” is putting up with being under house arrest, creating a situation where there is too much oil. On the other hand, the oil industry is learning how to already knew how to deal with this sort of situation.

Six US oil firms are expected to shut 300,000 barrels per day of production in May and June
PUBLISHED WED, APR 29 20209:18 AM EDT UPDATED MOMENTS AGO
Natasha Turak

U.S. energy companies are taking an axe to their rig numbers, deepening production cuts for the industry that in the last few years made America the world’s number one oil producer.  

Six major U.S. shale producers are expected to shut some 300,000 barrels per day (bpd) of crude for the months of May and June, according to an analysis of the companies’ early communication by Rystad Energy. 

“Analyzing communication by Continental ResourcesCimarex EnergyConocoPhillipsPDC EnergyParsley Energy and Enerplus Corporation, we estimate that oil production cuts in May and June 2020 could amount to 300,000 bpd, an increase from about 100,000 bpd of cuts projected for April 2020,” Rystad wrote in a report Tuesday. 

In March, American producers were still pumping at record highs, according to the Energy Information Administration, even as prices plunged due to the loss of demand from the coronavirus pandemic. The latest weekly government data shows production at 12.2 million bpd in the third week of April, the lowest level since July and a stunning 900,000 bpd less than its record peak of 13.1 million bpd in early March. 

[…]

Artem Abramov, Rystad’s head of shale research, estimates a further production decline of “900,000 bpd, 250,000 bpd and 400,000 bpd in Permian, Eagle Ford and Bakken throughout 2Q20 respectively,” referring to the biggest shale formations in the U.S., with shut-ins accounting for 60% of that initially.

As rigs disappear, US is set to return to ‘net importer’ status

When OPEC and non-OPEC producer countries including Russia, Canada, Norway and Brazil joined forces to implement a coordinated oil production cut to put a floor under prices — by a historic 9.7 million bpd from May 1 — the U.S. did not technically join, relying instead on market dynamics to force production down. That’s happening now, both in the form of companies shutting in their wells and cutting investment and projects for new wells.

[…]

And with production costs much higher than most of its global competitors, the EIA actually expects the U.S. to “return to being a net importer of crude oil and petroleum products in the third quarter of 2020.” 

[…]

Market watchers are now questioning whether the U.S. shale industry — fuelled for years by cheap money and drowning in debt — will ever be able to attract investors again, save for the large-cap companies whose balance sheets will allow them to survive this downturn.  

[…]

CNBC

With US production set to decline by 2 million bbl/d (or more) in the second quarter of 2020, OPEC+ and other producers cutting production by about 10 million bbl/d is coupled with a resumption of demand growth, guess what will happen?

Oil Up on Cuts and Early Signs of Demand Recovery
by Bloomberg|Sharon Cho and James Thornhill|Thursday, April 30, 2020

(Bloomberg) — Oil advanced for a second day on signs fuel consumption is starting to recover in the world’s biggest economies, while global production cuts also begin to offset the demand destruction caused by the coronavirus.

Futures in New York rose around 10% toward $17 a barrel. They surged by more than a fifth of their value on Wednesday as Energy Information Administration data showed a surprise drop in American gasoline stockpiles and a jump in demand. In China, traffic is returning to the streets, supporting a boost in fuel consumption and refinery processing rates.

U.S. output will fall by 2 million barrels a day in May compared with March and the price of crude has likely bottomed out, according to the head of trading house Mercuria Energy Group Ltd.

[…]

RigZone

We may still see repeats of the May contract price collapse, but the rebalancing is well under way. Many oil companies will file for bankruptcy. Smaller, “shale” players will be particularly hard hit. Some companies won’t survive at all, “but rocks don’t go bankrupt”…

When the dust settles in the Permian Basin and other American shale fields, the survivors will be leaner and more tech savvy, according to Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd. That means lower production costs and a greater ability to respond to the next price rebound with the last thing Moscow and Riyadh want — another boom.

“Companies go bankrupt, but rocks don’t go bankrupt,” Yergin said in an interview. “When this all shakes out, there will be other people to develop shale.”

World Oil

“Inertia” will eventually cause production to fall behind demand growth. Production will fall until demand rises enough to push oil back over $40-50/bbl. Then production will start rising again, US producers will layer on hedges… “Same song, different verse”… But, what if?

The oil industry is bracing for the effects of the crisis to linger. Employees keep working from home. International travel stays scarce.

2016 BA in Political and Social Thought

Yes… The “oil industry is bracing for the effects of the crisis to linger,” that’s why most of us are feverishly working on being cash flow positive at $30/bbl and those with solid hedge positions are thankful for having lost money on hedges when prices were rising. Been there, done that, got a closet full of T-shirts.

“Employees keep working from home”… until they’re directed to come back to work. According to a recent survey, over half of Americans who still have jobs have been forced to work from home over the past month.

There are approximately 150 million people in the US workforce. Extrapolating the results of our survey out to the larger population, we can estimate that around 85 million people are now working from home due to Coronavirus.

WaveForm

Prior to the ChiCom-19 Hostage Crisis, only about 8% were working from home. Let’s do some math using the WaveForm numbers (I have no idea if their numbers are right)…

 Pre-ChiCom-19 Hostage Crisis
Work Force          150,000,000     150,000,000
Office/Workplace          133,860,000       18,860,000
Home             11,640,000       96,640,000
Unemployed               4,500,000       34,500,000

Assuming their numbers are in the ballpark, somewhere around 120 million Americans are currently driving or taking mass transit a lot less than normal, because they are either unemployed or being forced to work from home. As the economy reopens, will these people choose to stay home? Or will they choose to go back to work or back to their offices/workplaces? Only about half of those working from home during the hostage crisis wish it was permanent.

https://www.waveform.com/pages/coronavirus-and-remote-work-april-2020

However, the choice will mostly be up to employers, not employees. Bureau of Labor Statistics data indicate that those who worked at home only put in about 3 hours per day, while those who worked at a workplace put in slightly over 8 hours per day. Most employers would prefer 8 hours per day, or more, from salaried employees.

And citizens in once polluted cities, having become accustomed to blue skies, demand tougher emissions controls, encouraging governments to redouble efforts to tackle the climate crisis.

2016 BA in Political and Social Thought

That’s not what the “citizens” are demanding. This is the Hockey Stick that has Americans taking to the streets, demanding an end to the hostage crisis…

“A Staggering Toll: 30 Million Have Filed For Unemployment”

…encouraging governments to redouble efforts to tackle the climate crisis.

2016 BA in Political and Social Thought

It was either Dr. Evil, Tommy Lee Jones, Larry the Cable Guy or Ron White… Dr. Evil seemed most appropriate.

Such changes would come on top of a push for investors to dump oil assets that had been gaining momentum before the recent price crash. Sustainable energy investments, by comparison,appear to have held up relatively well despite stock market volatility.

2016 BA in Political and Social Thought

Why would any sane person, who has ever had a real job, expect the green schist industries to be immune to ChiCom-19 and the hostage crisis?

Apr 16, 2020,

Covid-19 Lockdown Could Kill 500k Cleantech Jobs

Ken SilversteinSenior Contributor
Energy

The coronavirus caught the United States flatfooted, rolling over the cleantech sector in the process. It employs 3.4 million people in this country but it lost 106,000 jobs in March — a number that is expected to rise to 500,000 by summer.

Those are real people: electricians, welders, plumbers, installers and construction workers — tied to everything from energy efficiency to mechanical trades to manufacturing plants. They are not just America’s bread-and-butter but they are also the country’s voters and they are based in several states that are up for grabs in the 2020 presidential election.

[…]

And now they are at risk. CMC Services weatherizes and retrofits homes and businesses to make them more energy efficient: In the last month, its revenues have fallen by 85% and its technical field staff has been idled, says its president, Tina Bennett. “Many of our peers have furloughed or laid off their workforce,” she said, on the call. “These industries are challenged by and vulnerable to the lock-down.” 

[…]

Forbes

In the Gulf of Mexico, where I work (I don’t actually work in the Gulf), we acted proactively to keep as many production platorms and drilling rigs operating as possible…

Gulf of Mexico operators move proactively to keep oil flowing during pandemic
By JENNIFER A. DLOUHY AND DAVID WETHE on 4/7/2020

WASHINGTON – Inside more than a thousand offshore drilling rigs and oil production platforms that dot the Gulf of Mexico, workers navigate narrow corridors, sleep in shared rooms and dine in crowded mess halls.

It’s an environment designed for efficiency — not for keeping a lethal coronavirus at bay.

“There’s no way to do social distancing on a rig,” said Tim Tarpley, vice president of the Petroleum Equipment and Services Association.

That’s led to worries about the safety of the sites, the biggest of which resemble mini-cities with as many as 200 workers, and the nation’s dependence on their output. Oil wells in the U.S. Gulf of Mexico supply about 2 million barrels of crude a day, or 15% of U.S. production.

Similar coronavirus concerns are affecting other energy businesses that rely on employees sleeping in cramped conditions on site — from oil worker camps in North Dakota and Alaska’s North Slope to an aluminum smelter in Canada and copper mines in the Chilean desert.

There have been notable outbreaks in other close quarters too, including the aircraft carrier USS Roosevelt and cruise ships, underscoring the challenge of containing a virus that spreads easily.

The practical complication of extracting oil amid the coronavirus pandemic is only the latest headwind for an industry already reeling. Oil prices have crashed as Russia and Saudi Arabia engage in a price war even as the virus causes demand to plummet.

In response to the outbreak, offshore operators have stepped up screening and cleaning, lengthened job assignments and subjected workers to isolation periods. Some officials have even gamed out hypothetical scenarios that include shutting down operations if the pandemic spreads.

For now, the focus is on staying “fully operational,” Interior Secretary David Bernhardt told industry representatives in a conference call Friday, according to two people familiar with the discussion. Bernhardt also said he was deploying Interior’s top offshore drilling regulator, Scott Angelle, to Louisiana, in an effort to keep outer continental shelf oil operations running and ensure a nimble agency response.

There have been at least 23 positive coronavirus cases tied to offshore oil and gas facilities, according to the National Ocean Industries Association. That may correspond with a rapid rise in cases in Louisiana, the home base for many Gulf oil operations and offshore workers.

“The only option is you’ve got to clear everybody before they get on,” the petroleum association’s Tarpley said. “You’ve got to make sure you don’t get positive folks out on the rig.”

[…]

World Oil

This demonstrates that it is possible to keep a business running, where social distancing is not possible, by taking proactive measures to inhibit the spread of the Chinese Communist virus. The Federal government supposedly did consider shutting this in due to a few positive tests on offshore personnel…

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfp3fm2&f=m

Production from the Gulf of Mexico recently exceeded 2 million bbl/d for the first time in its 70+ year history. While production will soon start to decline until prices recover, it won’t decline nearly as quickly as the “shale” plays… Very different “rocks.”

De oppresso liber!

Sgt. Muldoon says, “Get back to work, America!”

114 thoughts on “Oil Demand May Never Recover, Green Fantasy Part Deux

  1. Thanks, David, for another entertaining and educational post.

    Stay safe and healthy, all.
    Bob

    • After this is over it’ll be interesting to see if the urban gentrification fad continues OR if that fad ends considering that reliance upon mass transit and close-together urban living was a far bigger driver of infection then anything else. There couldn’t have been a more miserable place to quarantine than any of the nation’s urban cores. Will these people continue to live like this OR will they finally see the sanctuary of living two hours out and driving when they have to? Will the workers-at-home continue to live-work in their cramped $4,000 apartments when they can live two hours out and do the same job? This changing of fads could prove to be a big boon for the Big Three and oil.

    • David I haven’t seen any notification in these pages that a Chi-Com investment firm spent $1.5 billion on TEXAS FRACKING FIELDS—this is got to stop. The same goes for the Commies buying our FOOD CHAIN!!

        • Chi Coms in the CONUS oil patch? Sollee dudes and dudettes, that ship’s sailed. I’m guessing that Mr. Middleton, with his GOM experience, knows much more about the legacy Nexen operations than me. I jumped ship to the Austrians before the Nexen/CNOOC sale, but we are mercenaries and I suppose that I would have gone along if the price was right….

          https://cnoocinternational.com/operations/americas/united-states

          • CNOOC initially targeted Unocal. The US government blocked the transaction. CNOOC then went after Nexen (formerly Canadian Oxy, CXY). The US government couldn’t block this transaction; but they forced Nexen to relinquish operatorship of its Gulf of Mexico assets.

            CXY, when Digger Gray was there, was a good company. After becoming Nexen, the bigger they got, the goofier they became.

    • Der Witz is standard German, not slang, Ed.

      But I guess you mean Horowitz translates to horrible joke?

  2. David,
    Strange how demands for desired resources outweigh the wishes of people who dislike them. The whingers really need a taste of doing without until they plead for relief, as they would.
    Thank you for you analyses. Geoff S

  3. It is utterly bizarre how the liberal left green leaning loonies are just fundamentally unable to think in a ‘dynamic’ sense. Decades, even centuries of observations and learning and yet they still don’t get the basic market principle behind supply and demand.

    The world is always moving, adapting, and self-correcting.

    • Most leftists aren’t capable of doing anything without extensive and explicity directions.
      So it’s natural that they assume that something as complicated as an economy can’t possibly work unless there is someone in charge of telling it how to work.

    • Our congress is guilty of the same thing. Imagine being the person in the room when they dreamed up the medical device tax. “Oh you know those manufacturers will never leave or change their production strategies when you just hit them with another 6% tax. Oh no, new taxes or expensive regulation NEVER causes people to change their business behavior.” Then they enact them and the Chicoms are building all our medical equipment. Same with budgeting, we want more money, “I know, let’s raise taxes! It has never worked before, but surely we smart folks can make it work this time.” It would be funny, but over half the public buys it EVERY STINKING TIME!!!!

      • Raising taxes most definitely can raise money, but after a certain point, it can drive away business and investment and people.

      • The left always prescribe walletectomies, whatever the circumstances!

    • This clearly made the price war look like a spitting contest in a tsunami… 😆

      Texas officially began reopening Friday, the traffic in Dallas was noticeably heavier than it has been in weeks.

      • State declarations of “reopening” or not, based on the increased traffic this truck driver has been seeing in the Midwest, people are taking the initiative themselves. Yesterday I went to Menards to restock on full propane bottles for my grill for the summer. It was every bit as busy as it would have been on any typical fine sunny Saturday despite their requirement to wear a face covering if entering the building. This despite two new cases of COVID-19 being announced in Madison County, in Indiana. A lot, perhaps a majority of the people have had it with this shutdown and won’t be held back any longer by any government edict from any level.

        Had to laugh at events in California. Their Governor orders all the beaches in the state closed and then backs down and only orders that those in Orange County be closed. And so 2,500 people show up at Huntington beach, the vast majority without face masks and not observing the required 6 feet of social distancing, to vehemently protest that the Orange County beaches are closed?
        This, after decades of Californians allowing their government to make one law after another that tramples their liberties.

        This in a state where just last year government and state University authorities allowed gangs of masked ANTIFA thugs to attack people of opposing political/social views in multiple instances, and then provided cover for those acts of violence. This in a state which just last year the government passed a law requiring that all new homes have solar panels. This in a state where they can’t go a year without the government passing some new gun law to try and strangle their citizens 2nd amendment rights. This in a state where they take environmental laws to the absurd and can deny a property owner a permit to build a tool shed on their property because there is a mudpuddle in their back yard. This in a state where they allow certain communities to pass laws banning smoking tobacco even inside your own house, but at the same time it’s ok to light up a joint and the state will defend your right to do so! This in a state which is only one of two in the lower 48 that retains a 55 mph speed limit for big trucks even on Interstates (Oregon is the other).

        But closing some beaches? Well by God THAT is going to far!!!

        • All it takes is one push to start the ball rolling. In this case it is those going to Huntington Beach implicitly telling the government that the governed do not consent that cause others to also refuse to consent. Who knows how many changes that the governed can force on the government?

      • After this is over it’ll be interesting to see if the urban gentrification fad continues OR if that fad ends considering that reliance upon mass transit and close-together urban living was a far bigger driver of infection then anything else. There couldn’t have been a more miserable place to quarantine than any of the nation’s urban cores. Will these people continue to live like this OR will they finally see the sanctuary of living two hours out and driving when they have to? Will the workers-at-home continue to live-work in their cramped $4,000 apartments when they can live two hours out and do the same job? This changing of fads could prove to be a big boon for the Big Three and oil.

        • The cool thing about Dallas is that we have a big house on a 1 acre lot, 8-9 miles from downtown… Which would be great if my office wasn’t in Houston (when it’s not in our kitchen).

    • Read the article. One thing I am not sure I agree with is that Iron Age life for Celtic peoples was “nasty, brutish, and short.” The thing is that people back then knew a lot more about how to survive in those conditions. Surviving in conditions like that though for long-term takes like a Ph.D level of knowledge, and the fact that those people were struggling so badly shows that they didn’t know nearly as much as they needed to.

  4. I don’t know about oil and gas, but the coronavirus crisis just might finish off movie theatres. I went to three movies in theatres last year, and the biggest audience I sat in was less than fifty people. Modern televisions are spectacularly good, and you can watch movies at home in your underwear, pause the movie whenever you want, and watch the good parts over again. And it costs less than half what you’d have to pay to see it in a theatre. I don’t see how movie theatres can compete with that. Now movie studios are putting their movies on pay-per-view in response to the shutdowns of the theatres, and they may never go back to the old model.

    As for oil and gas, driving is not going to go away, nor are electric cars ever going to be cheaper to operate than ICE cars, You can buy a perfectly good ICE car in Edmonton for about $2000, and gas it up anywhere. Tesla can’t sell its care for more than it spends to make them. Electric cars just can’t make it.

      • With playgrounds up front, and a lot of pickups facing away from the screen.

      • I hope so- I had my first acid trip at one- in 1969- to watch “2001 Space Odyssey”. I’ve yet to come down. :-}

    • Don’t go by Tesla if you’re lookig for an inexpensive electric car. Those will shortly be provided by VW and other Asian brands. And electric cars CAN compete today against ICE cars that are equivalent. Even Henry Ford knew that electric cars are intrinsically cheaper, simpler and far more reliable than gas powered jobs.
      Tesla’s semi trucks will have a million mile warranty on the drivetrain.

      • Aside from battery limitations and problems, you are correct.

        Henry Ford invested a lot of money for the time working with Edison and eventually gave up on electric cars because of battery issues. The same fundamental problems are being worked on.

      • A diesel big truck isn’t really broken in until it hits at least 250,000.

        Get back to this OTR trucker when an electric big truck can haul 44,000 lb. of freight without going over the 80,000 lb. GVW limit and do so on one charge which takes 15 minutes or less, with a minimum range of 1,200 miles on that charge hauling that 44,000 lb over hilly or mountainous terrain and can run the heater/defroster in -20 F temps while doing so. Hell, I haven’t even seen an all electric refer trailer being used yet though we do have five hybrids which nobody likes because they’re so heavy.

        The company I drive for bought an expensive electric spotter truck for their terminal at Vandalia, OH (Right by the Dayton Airport). I asked one of the spotters there about it and he said they all hated it. Drew lots each day to see which spotter would have to use it. Underpowered he said and that was during the summer time.

        Granted the single greatest operational cost for a trucking company is fuel but time is money and the trucks have to be able to haul the freight that is available which means those heavy loads. So it seems we’re a long way from electrics being suitable for OTR and general use purposes and their utility is currently limited to local types of uses, such as hauling freight from the docks of LA to warehouses and terminals or perhaps hauling light loads such as potato chips and Fritos on single day line hauls.

      • RE Tesla competing against ICE cars …. not yet ready for prime time in the winter …. what Car & Driver had to say about their test during Michigan’s winter: “So, where have we driven our Model 3? Not very far. We’ve mostly stayed in our home state of Michigan as we’ve soldiered through winter. Its logbook is full of anxiety-ridden comments about near misses on range, which we’ve been chewing through at a rate that’s roughly 50 percent higher than predicted”.
        From this article https://www.caranddriver.com/reviews/a30209598/2019-tesla-model-3-reliability-maintenance/
        Tesla’s semi is a joke and won’t likely ever be delivered due to the battery issues. More of Musk’s over promising and under delivering.

      • They are simpler, but the reliability angle has been vastly over sold.
        As for the cost, thanks to batteries, electrics are still way more expensive, both to own and operate.
        1) Let’s talk about what the warranty is going to be once someone actually starts making and selling these beasts. Until then it’s just talk. Musk is has a long history of telling people all the great things he’s GOING to do, but never actually delivering on the talk.
        2) Let’s wait to see how heavily pro-rated those mythical warranties are.

      • PS: I’m still waiting for an electric that can operate in the desert heat and the N. Dakota winters.
        For the last 100 years electrics are niche cars for people’s who don’t drive much and have lots of time on their hands, and there no evidence that they will ever be anything else.

        • I thought we gave up on electric cars(along with the Stanley Steamer)a hundred years ago.WE also figured out that windmill were only good enough to pump water up to the stock in various paddocks and to the house.Other than that their useless.If you lived any where other than the big cities,the electric cars wouldn’t be a viable proposition.

      • ColMosby: “…electric cars can compete today…”
        Not according to MIT’s Nov 2019 report on non-truck vehicle comparisons [BEV, PHEV, FCEV vs ICE where BEV=battery electric, PHEV=plug-in hybrid, FCEV=fuel cell EV]
        Bottom line (per MIT) – BEV are not cost effective vs ICE and likely won’t be for ~10 yrs [mainly due cost of Li batteries]. And even if Lithium drops enough to break even with a comparably equiped ICE one of the assumptions is that you never have to replace the Li battery in the first 15 years.
        https://energy.mit.edu/insightsintofuturemobility
        Having said all that, a Tesla is a lot of fun to drive!

  5. WHF is the biggy, When firms, and they are already, can see how much they can save on costs with WFH, then you have an ideal union of forces. In fact Germany is looking at making it law, many London companies are looking at making it permanent. And the benefits are staggering. We will have so much more free time, spend so much less on petrol and car running costs. We wont need new roads. We can work anywhere in the country/world. It is win win all round.

    • -“It is win win all round.”-
      Well it might be , but only if you ignore that pesky individual, the bane in the life of all employers and employees, otherwise known as the customer.
      We all, as customers, know the frustration of dealing with utilities who have outsourced their inormation and enquiry centres to India , where it is almost impossible to explain one’s problem ( a big plus for the company of course) and dealing with any Govt dept in the UK has a mobidity attached to it that rivals that of COVID -19. And these are centralised offices , imagine the situation when office workers cannot easily consult each other on procedures or the location of files .
      Each country has established standards that serve to protect the customer and those standards are subject to inspection. Can such a system be maintained with a workforce spread out over 1000 different home offices?
      Recently, I had , as treasurer of a local charity , to deal with an administrator of an utility company that went into bankruptcy. They lost track of a final payment cheque before the lockdown , although it had been received and cashed, but trying to find the right people, with everyone working from home, to convince them that it had been paid was a lengthy and time consuming business because interpersonal communication was so difficult – they admitted that.
      One of our children was involved in the paperwork to set up the Nightingale Hospitals . Doing this from home , in a small house, not much outside space , 2 boisterous children, having to take over the daughter’s bedroom as an office and being subject to enormous stress to get results had me worried about his mental and physical health.
      Not always win-win.

    • Matt_S,
      Except that most companies know something that you apparently do not: most people are not as productive as home. Even people with very high professional standards and work ethics can experience declining productivity after a few weeks of working exclusively at home. I have a home office (with a door) that is nearly ideal for working from home, but I am still struggling to keep from being distracted by family, pets, and the call of outdoor chores this time of year (I have 2 acres to take care of). Personally, I will welcome a return to the office, although I wouldn’t mind the ability to work from home one or two days a week on a semi-regular basis.

  6. I’ve been sitting at home now for six weeks anxiously waiting for businesses to reopen. I want to go somewhere, do something, spend some money; anything to break the monotony of staring at the same walls. I have a real emotional need to burn some gasoline on the open road in one of my many vehicles. I’m planning on doing a lot more driving when this overblown pandemic faux crisis is over with just to get rid of the pent up tension I’ve accumulated since being driven inside out of the sunlight.

    Americans wants to be out and doing something.

    • “overblown pandemic faux crisis”

      That has been my exact opinion of this thing since the beginning, but when I express this opinion to my friends I am called names and shouted down.

      Even Chris Moncton effectively told me to be silent, on this very website, for suggesting such a thing. (It didn’t work, btw)

      At least now I know I’m not alone in this view. I’ll wager there are plenty more out there.

      Thanks, SMS.

      • Oh you are not alone.

        I’ve been eviscerated on a forum I used to frequent for even suggesting I *gasp* plan our family vacation! How DARE I, I’m putting the world at risk just by even thinking about it. I am “irresponsible” and they are there to bring me “tough love” so that I can “see the light”. So I’m a reprehensible human being that is the new Typhoid Mary for simply planning a vacation. And worse for “thinking I could plan a vacation” (yes those are actual quotes from the 30 replies I got to a single 1 line post I made which was, “Well the kids and I have decided to go back to Universal Studios this year”–that was in Feb. Notice there was not a timeline on WHEN we’d be taking our vacation. I quit posting on that forum, don’t even read it anymore. It was made pretty clear that all you could see of these people were the whites of their eyes. And I had supporters who were also beaten down for even expressing a desire to plan a vacation.

        My family on the other hand are like…what are the sheeple and Karen’s going off about now? Don’t say anything, keep your head down and wait for the mob to pass.

        Meanwhile…..the people that can do simple division are protesting. As of right now the infection rate in my county is up to .01%, my state is sitting at .1% and when we were locked down it was at .04%. Yet NONE of the numbers that are released daily so you can get your dose of fear never say the percentage based on the population….go figure.

      • Klem,
        You are not alone. In the end, when it finally dawns on everybody just how destructive these lock-downs have been and how the risks from the virus were completely overstated, we will be vindicated. In the meantime, I just don’t say much anymore to the fearful masses. Rational discussion is not possible with them.

        • Me too Paul. With each day of continued flattening the curve I shake my head in disbelief. Before we needed to be ready for a surge, but now hospitals are furloughing and the rest of the non essential deplorables still sit idle 🙁

          Friends and co-workers tell me need to be patient.

        • How do you know though that the reason for the virus not being as bad isn’t because of the isolation?

          • Isolation will not affect the death rate, and it keeps going down as we collect better data on the actual infection rate. And the thing about isolation is, all it does is prevent people from being infected. And while that sounds like a good idea, keep in mind that the only way to “beat” this virus is either to get an effective vaccine, or herd immunity (enough people get it and recover that it makes it difficult/impossible for the virus to spread). A vaccine is at least 9 months away, but probably further out than that. If everybody continues to isolate, we won’t get to herd immunity before the end of the year. Do you really think all the unemployment funds will last until then? There are already disruptions to the food supply chain; these will only get worse as time goes on.

            I wish there was a magic bullet that could get us out of this without anymore deaths, but there isn’t. We now have to make decisions on what actions will cause the least amount of deaths: letting people go back to work and deal with the increases in virus deaths, or let the supply chains collapse and risk food riots and potentially massive civil unrest. Already the damage to our economy is great enough that as a nation, even if everybody got back to work tomorrow, we would be unable to stop the mass starvation that is almost certain to happen in Africa this year due to the massive locust infestation they suffered. Why? Because we won’t have any excess food to send them, and most of us will be to financially devastated to donate much money. That goes for the government too, after spending over $2T on domestic aid this year.

    • I should clarify. It is not a crisis for those of us who are not old or obese with health problems. It is a crisis for those with health issues. And those at most risk need to be isolated; just not the rest of us.

    • Could it be that the virus hasn’t been as bad precisely BECAUSE of the lockdown?

      • There is little or no correlation between the timing/severity of the lockdowns and severity of the infections, the lockdowns didn’t prevent nursing homes from being ravaged and the increasing evidence that the virus is up to ten times more widespread than previously thought because the vast majority of infections are asymptomatic or mildly symptomatic.

        That said, social distancing measures appear to have been very effective. Most of these measures could have been implemented without the “one size fits all” lockdown.

      • Isolation was meant to flatten the curve, not minimize the number of those eventually affected. Another reason to believe we’ve overreacted to the Wuflu. There will be more outbreaks when the doors are opened. Are the states at a point where they can identify those who need protecting and take steps to protect them? Unless you are willing to wait 18 months in isolation with the economy shut down until an effective vaccine is developed, opening up now, with protections for the most vulnerable, is the best way to get the economy up and running.

  7. The elephant in the Greenie room is public transport. Work from home may exert downward pressure on oil prices, and production will decrease in response. But those with cars won’t give them up.

    What will take a hit is public transport.

    At the moment buses in many cities are circulating empty on Sunday timetables and cities that subsidize it will not only be hemoraging costs, but facing reduced rate incomes as well reduced cross subsidies from fuel taxes.

    This is a great time to challenge doctrine that public transport is greener than private.

    • Since I live in Dallas and work in Houston, I routinely was putting 500 miles/week on my Jeep. I routinely rode the Houston Metro bus from my apartment on the west side into downtown, where our office is, just to avoid putting another 100+ miles/week on the odometer.

      When we reopen the office, later this month, I probably won’t be riding the bus… I know my Jeep is ChiCom virus-free.

      • In some east European countries the authorities have limited the amount of people allowed in buses and trams.

        This makes me think of when I was in East Berlin in 1974 with my family. On our walk across Unter Den Linden, which in the 1930’s hummed with life, we saw no cars, many trams occupying only the driver and four soldiers marching in a funny way in front of the National Museum.
        Are we on hour way back to the good old DDR days? – The Green Dream!

    • Early last summer I had to go downtown in the fairly early morning to report for jury duty. I hadn’t ben in that area (many government buildings) for more than 30 years so I don’t know about developments over time but it certainly didn’t currently seem to be “sustainable”.

      I was mostly consumed by trying to find my way from the freeway exit to where I needed to go, so it is possible I missed something significant but there seemed to be more buses than automobiles everywhere I turned, sometimes four or five closely following one another. None of those I could seen into seemed to have more than a few passengers.

      I strongly suspect the bus density was due to this being the legislative and judicial center of the city. I’ve never seen anything even remotely like that anywhere else, not even near an interstate bus terminal. Regardless, the operating costs must have been huge relative to receipts from paying customers.

  8. Good posting, David. Notice how “Social and Political Thought” conflate actual pollution and atmospheric plant food? One of their crowd can even see unicorn farts! The oil bust will Shirley turn to a boom, and the survivors (watch for some M&A activity) will ride the next wave all the way to the bank. As soon as possible I will jump in my pickup and drive to the golf course and get back into the golf/vacation in Florida/see my brother in Oregon cycle. Stay sane and safe (extended family barbecue today, with glass of Malbec! Working on the sane part!)

    • Yep… It will be a “target rich environment” for M&A opportunities. There’s also natural gas. With so many oil wells being shut in, associated natural gas production will drop. This will eventually push natural gas prices up. It’s the reason that Cabot Oil & Gas and other Marcellus players have been cruising through this goat frack.

      https://seekingalpha.com/article/4341394-oil-crashes-opportunities-abound-on-opposite-side-of-this-crisis

      The “funny” thing is that back in the late-1990’s to early-2000’s, companies used to report production and reserves as BCFE instead of MMBOE… Because natural gas was worth as mus as or more than oil.

      • “It’s the reason that Cabot Oil & Gas and other Marcellus players have been cruising through this goat frack.”

        They’re worth half of 5 years ago. EQT? Much worse. As for hedging, good idea. I just hope that there’s no force majeure weasel words in your contracts.

        Folks, geoscientists are OPTIMISTS. A good thing, until victimized. An oilfield tale:

        25 years ago, some Yanquis got hired to add a pro patina to a bad production sharing agreement in Azerbaijan. 3 geoscientists, one engineer. They were innocents, and thought it was more than a show and go. After a few months, it started to smell, with missing paydays. The geoscientists told each other, “We’re patient”. But the scroungy engineer, whined, got on a plane home, and threatened to sue the US based PSA head. Guess who finally got paid. Guess who didn’t.

        David, get those goodies out of the office, and to home, if you have not yet done so. I’ll guarantee you that most of your co-workers already have….

        • bigoilbob, I’m feeling good today, otherwise I would start telling tales about engineers. Sure, Geologists are optimistic, otherwise they would have trouble working at the pointy end of the spear all of the time. Axerbaijan? Pay me in advance, thank you. Stay sane and safe (and keep engineers away from your children).

        • Everyone was “worth half of 5 years ago” before this goat frack started. Oil & gas were ~$100/bbl and ~$4/mcf in late 2014. Cabot’s stock price is up 1000% relative to 2004.

    • Got the 5th wheel, got the diesel. We did 6200 miles over 2 months last fall, 800 miles in February. We planned a 8 to 9 thousand mile drive around the country to visit family and 5 or 6 different 6 flags parks. The trip was to start mid April and run till the beginning of June. Now we will leave as soon as the 6 flags in Texas reopen. First stop is to be Fiesta in San Antonio. We are getting older and NEED to ride all those roller coasters while we still can stand in the lines.

      Every time I drive the truck I get aggravated that I can see the road behind me in the rear view mirror. I want to see the trailer following me down the road. And with the price of fuel, we will save a bundle!

  9. When this is over there will be a huge budgetary hangover. There isn’t going to be government money to continue subsidizing green energy fantasies.

    • “There isn’t going to be government money to continue subsidizing green energy fantasies.”

      That is true but will the politicians care as long as they can keep running up larger and larger deficits?

        • True, but the Federal Government can so that is where the State and Local politicians will attempt to get money for their “Green” stuff (Green New Deal etc.).

  10. The header is certainly hyperbolic. But most CONUS production is mostly doomed for quite awhile. It’s going to take at least a decade to produce off the lower CAPEX and OPEX/boe mideast and FSU oil. And demand won’t approach 2/20 levels for at least another 2 years.

    The TRRC, BOEM, and other reg bodies need to either get new regs, or quit enforcing current, on plugging out SIUE production. They should also staff up to better monitor the many additional shut in wells.

    The servicers need to try and sell whatever still casts a shadow to the Saudi’s, for their shale gas campaign. That project will enable them to air condition more with gas, and sell the oil. That will also give a few dozen engineers and company men contract work.

    Also a good time for us to admit that we are stuck with the E&P’s 13 figure asset retirement obligation After all, they have next to no cash in fist to pay for it. All in the great American tradition of communizing extraction industry external costs. Make getting started on that an infrastructure project.

    Finally, good time to save ~$50B/year and mothball/early out the 5th fleet. Let our “Partners in Peace” the Princes and Emirs pay for their own security/military costs of protecting their oil and gas production/transportation. And PULLLEASE, no “Freedom of the Seas” BS on this. Our bloated presence in Bahrain is is a stinking perversion of that concept.

    More than happy to drop the relatively tiny green start up helps if we can, at least point forward, make the extractors pay for their FULL costs.

    Time to retire, David. Spend the rest of your life spendin’ and bloggin’. Even the Saudi “consulting” and exec ed hippy jobs through the big gravy trainers like BCG are mostly gone. Silly, but lucrative way to end a career….

  11. Such proclamations as, “the world is learning to live with less oil”, can only arise in the mind of someone who has achieved a level of comfort offered by oil, and from someone who is so fragmented from the reality of the foundation of such comfort that she has grown stupid in her privileged, cushy, intellectualized la la land of story making.

    The world is not “learning”, but suffering from lack of access to oil-enabled operation.

    Somebody wake me up from this bad dream.

  12. “Got too many brownfield opportunities that work at $20-30/bbl to even think about retiring.

    A lot of greenfield deepwater opportunities even work at $30/bbl.”

    Ok, and I think I should apologize for thinking I know more about your career than you. But let me know when (1) you expect more than $30/liquid bbl, and (2) what you think of the sustainability of service costs when that industry is eating it’s seed corn. If you think that your outfit will continue to pay you to write the geo part of well justifications that will get shelved unit – ? – then KYSO. But I’m sure you are following the hallowed petroleum geoscientist practice of keeping your best stuff in your home office desk/hard drive. This will work for you when the office fire alarm goes off, and you find the doors locked when you return from Starbucks……

    • 😆 LOL!

      We have 70% of our 2020 production and some of our 2021 production hedged at an average price of ~$50/bbl. If there’s one thing I’ve learned since 1981, it’s that the best way to predict oil prices is through hedging. Being criticized for losing money on hedges when prices are rising is a small price to pay for not only surviving crashes, but being able to take advantage of M&A opportunities.

      I think we’ll exit 2020 with Brent near $40 and WTI near $30. Gulf of Mexico production (LLS, Mars, etc.) tends to get a premium to WTI
      The way our drilling budget was scheduled, 2020 was already going to be a year of development drilling from deepwater platforms.

      • David:

        “If there’s one thing I’ve learned since 1981, it’s that the best way to predict oil prices is through hedging.”

        Can’t argue. Also my 1st engineer year, but we were going for $9 gas in Okla. and a hedge was between houses as far as I knew.

        ” We have 70% of our 2020 production and some of our 2021 production hedged at an average price of ~$50/bbl.”

        Again, good. But you also say “The way our drilling budget was scheduled, 2020 was already going to be a year of development drilling from deepwater platforms.” So, either your development wells have good development eco’s, even if only producing thru the hedged period, and including the prorated hedge costs, or you have a price deck beyond. If you need post “some 2021” production to meet your hurdle rates, then I wonder what that price deck is, and the medium term thinking behind it.

        Not dissing you or your outfit. I’m just trying to flesh out the 5/3/2020 eco rationale for ANY new drilling, exploitation, development, whatever, by you and yours, there, or anywhere in the CONUS, on or offshore. Except for obligations and the very infrequent ES&H relief well, of course….

        Thx for your indulgence so far….

        • Some of the platform rig work may get deferred. Right now, we are going through the inventory to see what works at $30/bbl and $1.75/mcf.

    • Geezus King Nimrod,

      Take it from an economist – consult data before opining. Two seconds later, I find on NYMEX the answer to your question is 10 months – current priced in expectation.

      Now to opine … the $30 mark will be coming “forward” along the futures curve as SPR sucks another few to tens of millions of barrels into the salt dome. So … I’d put the over/under on SEPTEMBER, and be be ready to trade when EIA comes out at 10:30 Wednesday … could be August depending on the SPR build.

      (Hey David … you wouldn’t happen to have a contact to front run that report, eh? There’s a hella case of whiskey in it LOL …)

  13. The oil pricing economic warfare perpetrated by Russia and Saudi Arabia to kill the North American (Mexico, Canada and USA) oil industry by flooding the globe, driving prices to totally unsustainable levels is despicable and unacceptable.

    This situation calls for a major re-thinking of the North American oil market to address price, availability, and stability. The newly ratified and enacted USMCA could be the right tool for the job.

    This North American market could have its own pricing. ( $15.00 oil is not profitable but $65.00 is; giving a fair price for gasoline, aircraft fuels and diesel to consumers.)

    Being held hostage by the likes of OPEC+ and its leaders is unacceptable. Talk of tariffs may have some salutary effect in negotiations, but only until the next time when the Saudis go off half-cocked in another ill-thought hare brained scheme.

    Saudi Arabia mused in early 2014 of the need for $85.00 oil to be able operate its country, and then promptly drove the oil price to unheard of lows, and again doubled-down in the last few months.

    To me the only manner by which to deal with these irrational actors is to form a North American price where there is plenty of supply and refining capacity. The NAOM (North American Oil Market) would trade with rest of the world, but would retain its own capacity to pump and price

    Breaking the stranglehold of OPEC+ on our economic stability and security, by distancing ourselves – North America – would be a way to avoid the slaughter of companies, jobs, prices and capacity as witnessed recently in Canada, Mexico and USA.

    Refusing foreign/non-NOAM oil until its price rose to that of North America could bring a broader discipline and rationality to the world market. Saudi Arabia may actually be thankful for such a move by the globe’s largest market.

    Recent reports of Irving looking to source east coast, and western Canadian oil by shipping through the Panama Canal for its Saint John refinery there may be reason to believe the concept of a North American oil market separate and apart from current world pricing is doable.

    Time to break the current mould. And use our collective power to set our agenda. Not dance to the Saudis tune.

  14. Methinks (knows) you are poking fun at the degree: 2016 BA in Political and Social Thought – but you must not overlook the institution: UVa (Jefferson’s mistake). Lol

  15. Quite a bit of our news and analysis is generated by 23 year olds with like degrees.

    • Don’t underestimate an angry 16-years old with a long record of truancy.

  16. The risk from Middle East turmoil is finally out of the pricing market. Perhaps the region can go back to being called “Asia Minor”.
    Also, the price premium due to the comfort of the supply management, marketing board also known as OPEC is finally gone.
    Our research in 2014 noted that the technological revolution that got natural gas was about to hit oil production. Also noted that technological revolutions had very much lowered production costs in mining.
    In 1910, it was copper at Bingham Canyon in Utah. It is still operating.
    Then in the 1970s miners learned how to operate relatively low-grade gold deposits.
    Starting in Nevada.
    In 2104 with crude at 105 our call was for a decline to 1/3 to 1/4 of the price in 2014.
    That worked out to 37 or 27 for WTI.
    This was repeated in December with the note that the 27 would be on “annual averages”.
    So with WTI now at 20, I guess it makes me a “bull” until late in the year.
    But after August financial markets could start the next decline.
    In which case, the financial world will have confirmed the possibility of another post bubble contraction.
    Previous examples have been lengthy.
    Such as post-1929, or post-1873.

  17. Oil production will come back when demand goes up, and price goes up with demand

    And stocks of stored oil decrease (although predictions of future demand increase may make this factor less important).

    My question goes toward the physical integrity of the oil well structure:

    I’ve read that shutting in oil wells can damage the geological structure decreasing how much oil can ultimately be recovered.

    What percentage of oil wells are at risk for this structural damage?

    How much oil production in terms of barrels per day is at risk of permanent loss in the U. S.?

  18. “Analysis by … …. , CNN Business.”

    No analysis apparent, only uninformed, surficial seemingly wishful thinking. CNN must be going broke and can not afford to pay for skill, knowledge and talent.

    David, bad news, CNN can not afford to hire you and you will have to keep making oil and gas. Sorry.

  19. David,
    I saw an EIA graph on Wolf Street – it seems to show that US oil consumption for gasoline, jet fuel and distillate has dropped 7 mbd or so during the lockdown.
    This seems like a lot higher number than the 2 mbd you note above. Q1 data?

  20. What is “cleantech”? As in “Covid-19 Lockdown Could Kill 500k Cleantech Jobs”?

    Is this some Newspeak lingo that everybody knows but me? I try to keep up but never heard of it before. The author says “electricians, welders, plumbers, installers and construction workers” are “cleantech”. Why?

    Is farming “cleantech”? What about logging, mining, food processing, milling, transportation, smelting, building, frycooking, and janitorizing?

    Is there such a thing as “dirtytech”? Garbage collection?

    If it has to do with producing food, clothing, shelter, and energy is that “cleantech” or not? Is there such a thing as “basicsurvivaltech”? Or is that stuff passe and so last millenium?

  21. The fall in energy demand is one of the symptoms of the ‘problem’.

    Oil companies’ resilience and ability to change is good. That is not however going to solve the energy demand problem.

    Problem 1:

    People are absolutely terrified of the virus. We need real solutions (and there are real solutions) to this problem that enable people to get rid of the masks and to go back to normal life.

    Natural Solution, cheapest. Cuts all total country medical costs by more than 50%
    We have a no patentable drug, solution to the medical problem which is almost perfect. The natural solution, increases the entire population’s resistance to all diseases and to cancer. It is cheap and the research is done. This is just a story/technical problem/solution that needs to be told.

    The problem is it will also reduce our health care costs by more than 50%. Obviously, there are special interest groups that do not want our health care costs to be reduce by 50%.

    ‘Vaccine’ solution. Human trials of two advance ‘vaccine’ technologies has started. If this new technology is success (it worked for Ebola). There will be a vaccine available this fall.

    P.S.
    To keep people scared, the brainless, clueless CNN machine, is floating the idea that there will never be a vaccination for Corvid.

    https://www.cnn.com/2020/05/03/health/coronavirus-vaccine-never-developed-intl/index.html

    Problem 2: Making civilization changing technical changes that hurt special interest groups
    To make the US (and the other developed countries) great again we must stop fighting and get all party support to make civilization breakthroughs.

  22. Warren Buffett’s company Berkshire Hathaway sells all of his US airlines shares
    Mid Feb Delta airlines (WB had 11%) share price was $59, but for last 6 weeks it was moving around $22-$23. He said that he had been wrong to invest in the airline industry.
    I suppose might be a further sharp drop in all airlines shares tomorrow.

  23. Well its a really interesting vision of how things are likely to play out. It does seem that big companies are going to have to change their stance on working from home. Nobody can dispute the benefits of cleaner air and lower oil consumption but then everything’s connected and the economic impact of that etc etc. Anyway, I really enjoyed reading this one. Lots to think about.

  24. The only way that oil demand doesn’t recover is if civilization doesn’t recover, and I don’t even want to contemplate that.

  25. How do you manage to get a high-school diploma and not understand simple economics? When production increase, they will need an increase in transportation to deliver goods. This will drive an increase in fossil fuel consumption (demand), which will drive an increase in prices.

    Unless the world stays in lock down until half of it starves to death, demand will pick back up as the economies reassert themselves.

  26. BA in Political and Social Thought
    ***********************************
    degrees in stuff like that scare me more than the kungflu….

  27. 2016 BA in Political and Social Thought

    4 years?

    I would have thought a weekend would be enough.

  28. David,
    Thanks for another timely article.
    Several facts not mentioned by the media which is real
    1. There is different technology today. I retired about 20 years ago and started consulting via an engineering firm that was bought out by a much bigger firm. The Local office I consulted in was closed about a year ago and I have been consulting from home with no decline in hourly work. Technology today allows work via e mails, google searches for technical resources, Web-ex meetings, telephone calls, etc. The last few months I have probably averaged 5 Web ex meetings every weeks on several ongoing Projects.
    2. While most of my Career I worked in the downstream energy side of the business, today 90% of my business is on the Chemicals side of the business that uses fossil fuels for feedstocks and this is still a thriving business for Oil companies not mentioned by the MSM or the “smart” people on wall street.
    Nobody who understands energy believes we can sustain our economy w/o fossil fuels for many, many decades. I have also worked on numerous failed alternative fuels projects and there is still nothing on the horizon.

  29. I just bought a bunch of oil stock two weeks ago. We will see how stupid that was !!

    Could go horribly wrong.

    • “I just bought a bunch of oil stock two weeks ago. We will see how stupid that was !!

      Could go horribly wrong.”

      Yah. But if you bought into a company that was well managed, you might ask Mr. Middleton (who apparently works for one such outfit) to report back on the initiative of him and his co-workers to relook at their development inventory at $30/bo and $1.75/mcf. If those wells, with good EUR’s and (I suppose) good production schedules, in fields with surface CAPEX mostly spent, can’t make muster, I’d compare that to what you own, and act….

      • The good thing about stock purchases vs shorts and futures contracts, is the fact that a stock price can’t go below $0.00.

        • Very true. Still not much fun for those holding stock that does go to $0.00. Of course, if it was a dividend stock that you managed to pocket some dividends off of before it went bust, then it’s technically not a total loss. Still not much fun though.

  30. Tin hat on! Sarc on… David Middleton. Is it not time to jump to the abiotic theory and bug%%r the greens with ‘Oil is the most renewable of all the energy sources’. Never mind the politics of long established science, is it not time to play these idiots at their own game. Smoke and mirrors!

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