There is no doubt the much-more-expensive-to-extract tar sands industry is expanding. But more out of desperation than anything else.

Because for all the mess it creates, I've seen no one suggest 1) production volume can expand much more than 5-7M barrels per day, nor 2) global oil price drop as a result of that expansion (barring global recession).

Last thing, and I'll let this thread die. Unless others wanna keep it going:

Here is the EIA openly admitting that conventional production 1) is STILL at 2005 levels, and 2) has actually been in decline since Feb. 2012. Two years' trend. Not a blip.

We've maintained tepid global production growth based 100% on exceptionally expensive US shale. And the tight oil industry? It's now buckling.

World crude production 2013 without shale oil is back to 2005 levels

Summary

Since end 2010, the group of still growing countries (+1.2 mb/d) can’t offset decline elsewhere (-2.4 mb/d), giving a resulting decline of 1.2 mb/d or 400 kb/d p.a. This is mainly oil-geologically determined decline.

OPEC, which is usually called upon to provide for the difference between demand and non-OPEC production, has got its own problems (geopolitical feed-back loops caused by peaking oil production) and was not able to fill that gap. Global crude oil without US shale oil declined by 1.5 mb/d since its most recent peak in Feb 2012.

Conclusion

While the mainstream media lulls the public into believing that US shale oil is a revolution, peaking oil production in many countries eats like a cancer through the oil supply system. The big problem is that more oil dependent infrastructure is being built which will not be needed when US shale oil peaks and the underlying decline is revealed.

((Incremental production for each country is calculated as the difference between total production and the minimum production between Jan 2001 and Oct 2013))

Three simple questions.

1. Why do you take this seriously and not the many EIA projections, opinions and costing of production that say there is no chance of peak oil? Surely if this was as serious as you believe, the EIA would be trumpeting it, so that things like coal/gas liquefaction and increased oil sands mining projects could begin on a large scale, saving the US from disaster.

2. Surely, if this was as serious and obvious as you say, speculators who know all of this as well as you would have put the price of oil up to $300/barrel, not where it's been for the last 5 years?

3. How are you making money from this view? For posterity, please let us know what trades you have made and what you would make today, so we can come back in a couple of years and see how you did.

Thank you sir!

Dozens of large companies aren't making multi billion dollar bets out of desperation. Why would you be desperate when you're sitting on vast reserves of a commodity that's going to become increasing scarce and expensive? I'd be ecstatic.

Try to follow me here. There is a vast land area with extractable oil sands, 180 billion barrels of which which can be produced with current well known technology for < $80/barrel.

Given that oil sands are completely unlike liquid fields (they are solid, in a fixed place that's widely dispersed (like a vast peat bog), not constrained by flow parameters, and able to be accessed from any point on their land area), what possible reason could there be for this not being able to scale up?

If a vast reserve of something can be produced for $80/barrel, for a long time (while light crude still makes up the bulk of the volume for decades and is produced for $10/barrel), what fundamental reason will oil have to stay well north of $100?

So while the world economy is still in the doldrums and the US became self-sufficient the rest of the world cut production? Do you think there's a possibility you're cherry picking what you want from that report?

Every IEA/EIA/OPEC report states that the global market is well supplied; and this is while Iran is under sanctions and Libya is pumping next to nothing. Opec has about 6m BPD in spare production.

Conventional production is at 2005 levels because it makes prudent financial sense, not because of production problems.

You seem to be conflating projections for the future with recorded data of the past. I take seriously the past and present recordings of production and what they mean going forward. They're verifiable up against USGS and BP figures. ... Conversely, I often don't take seriously the EIA forecasts that 1) don't make mathematical sense based on the current data trends, and 2) have a long history of being dead wrong.

And, try not to make the mistake of asserting what the EIA "would be trumpeting" regarding a reality that would easily spook global markets.

They would? Link please. Sounds like an instant global economy killer to me ... Regardless, many of these speculators adhere to flawed demand-constrained forecast models, just like you seem to be doing.

Again, the price remains "low" because it's all the public can bear, as has been shown every time it flirts with going past $100.

Largely irrelevant. But if you want investment hints for short-term gain, sign up for the daily Energy & Capital newsletter. It's deceitful in a lot of ways for the sake of short-term profit, but as an entity, those guys know the peak of conventional crude is here.

The global economy, starving for energy consumption, is what's desperate. The companies themselves are scaling way back on their "billion dollar bets," as the OP clearly conveys. Pretty obvious to me they're no longer "ecstatic" when their profit margin is plummeting because the price of oil is too low.

Oh, I follow you. I just don't agree that it can be consistently harvested for <$80. We can get into a link war on that aspect if you like. You'll rely on industry PR claims. I'll stick with independent geologists and economists who don't ignore "externalities."

I'm sure it smells like ice cream too, from that kind of rosey spin. Anyhow, the reality is quite different.

Besides the logistical and financial impediments, you seem to be ignoring refinery and delivery costs. Worse, do you want to get into the C02 argument as well?

Tar sands planned growth is 3X climate limit

Care to double and triple an industry that looks like this?



So it's a conspiracy? The price is artificially elevated? Please link, and include an explanation for the slides in the OP whereby the majors all need the global price of oil closer to $120-150.

Obviously, you're missing something. It probably starts with your flawed base presumption that tar sands development is that cheap.

A Slowdown At The Tar Sands?

Natural Resources Minister Joe Oliver recently estimated the oilsands would need $650 billion in capital investments in the next decade alone — almost five times what's been spent there over the past 50 years.

Total to Take $1.65 Billion Loss on Canada Oil-Sands Project

Alberta oil sands are beset by rising labor costs and a shortage of workers as well as a discount for the price of Canadian heavy crude as U.S. oil output exceeds expectations. Suncor yesterday canceled the Voyageur venture after Chief Executive Officer Steve Williams said in December the profit margin for processing Alberta bitumen was “disappearing.”

Have the Canadian Tar Sands had their Day?

Add an upgrader, the “pre-refinery” that transforms heavy oil into a lighter crude that can be further refined into diesel and gasoline, and the needed break-even rises to above $100. ...

These mining breakeven prices are very high. Right now, WTI crude is trading at about $97/barrel and Brent is trading at about $111/barrel. New mining developments, including an upgrader, have a breakeven of about $100/barrel, which makes the economics very marginal indeed.

I was talking about the general Rockies area, including the 4 or 5 states I mentioned.

And it appears I was wrong. There's actually estimated to be 3 trillion barrels in CO alone.

http://abcnews.go.com/Business/ameri...ry?id=17536852

And most of it will stay in the ground because it's cost-prohibitive to extract. Write it down.

Cost kinda matters. Both for the companies that bring it to the surface as well as for the average consumer, who hasn't seen a wage increase in 5-6 years.

Again, I can pretend I've found 10 trillion barrels of crude behind the moon. That says nothing of the logistics of bringing it to market, nor the public's capacity to afford the price.

A long history of being dead wrong? No, the EIA is one of the few that is correct so far. Half of the models from 2005 are already far below current production.

You keep asserting this like a religious mantra, but have provided zero evidence. I see no reason why oil going up 300% in five years would not destroy the global economy, where oil going up another 20-30% would destroy the global economy. It's a bizarre theory at odds with reality.

I'm not adhering to anything. I get the concept of peak oil very well, as you noted earlier. I'm trying to get at the truth. So far your theory seems like a whole heap of crap; you avoid any hard question that sticks a hole in your theory.

So the demand curve for oil is highly elastic? Is that your claim? Your post is entirely at odds with how markets work.

Largely irrelevant? What a cowardly out. This is Business, Finance and Investing man, not politics, where you couldn't convince anyone of your thesis either. If you don't have an investment-relevant thesis, please GTFO. Let's lock this thread.

You believe in a global oil shock that the market has completely missed and you have no idea how to make money from it. Amazing, considering that there will be hard times if there is a global oil shock.
What the OP conveys is that the free cash flow of these companies requires a higher oil price to stay free cash flow positive despite huge capex - not long term profitability. Do you see why declining capex is a sign of low confidence in global oil scarcity?

So the price of something that's becoming scarce is too low, causing margins to plummet? You don't see how that works against your thesis?


Everyone, from investment banks to consultants to the companies themselves to government bodies agrees with these claims. Multiple independent sources have been quoted. And the other side, you've got a handful of retirees. What's more, oil is already produced for these price levels - in fact lower - and the nature of the reserve is such there's no reason it can't be scaled.

Externalities, lol. As if that's relevant to supply, which is all that matters for your peak oil theory. Coal has a bunch of nasty and expensive externalities, but you know what? It's been supply cheap reliable fuel for decades and will do so for decades more.

I'm not ignoring refinery and delivery costs. $80/barrel includes that. You can get it out of the ground for around $10, further processing adds another $30. At $40 you have heavy unconventional crude. The rest gets you to refined light crude.
Who gives a **** about CO2? Your head is entirely in the wrong place. This is about supply limitations and whether it's a threat to the economy.

Even the CO2 argument is irrelevant nonsense. Extraction of non-liquid oil is marginally more expensive in terms of CO2. It costs 5-20% more CO2 per barrel, depending on the technology. That's a lot of energy, but a drop in the ocean in the scheme of things. Let's take the worst case, 20%. If unconventional rises to 20 million barrels/day - which is enough to offset conventional light crude decline for decades even in the worst case - that will increase CO2 emissions from oil by 6%. 1 part in 16!! In terms of total energy, that means around a 2% increase in total global emissions. 1 part in 50. Utterly meaningless. If we're spewing out 33.0 billion tons of CO2/year, with 20 billion barrels/day of unconventional added to the mix, in the worst case, we'll be spewing out 33.7 billion tons of CO2. You think anyone will bring the global economy to a standstill for the sake of the difference between 33 and 33.7 billion tons? LOL

CO2 is irrelevant as an "externality" in the global scheme of things, and irrelevant to supply. Stop with this externality bull****, it just makes you look silly.

Why not? We mine 7 billion tons of coal each year, which looks exactly like that, and have for decades, which is 30 billion barrels - or equivalent to rate of supply of all oil currently.

Clearly, we have the means at this scale. Clearly, we accept the externalities at this scale (coal has a list of externalities not much better than heavy crude, and on a much larger scale). Clearly, we can do it quite cheaply. Yet you somehow think doing a fraction of this with oil is impossible, or unacceptable? Pass the pipe, please, I want some of what you're smoking.

Apart from that, extraction doesn't need to use strip mining. Steam injection and gravity draining technologies:

a) work
b) have far less environmental impact
c) bring down costs even further

I only mention strip mining because it's something we already competently do on a global scale far exceeding even oil production (and exceeding by 10x the level of unconventional we need to do to offset conventional decline for decades). I also mention it because it has similar externalities, and it's something you can easily grasp, and not wiggle away from. In other words, it completely destroys of your argument.
This is for free cash flow given new capex, not long term profitability, according to your own post. I know you're not an investment guy, but please try to understand what these terms mean. New industries of any kind, but especially mining, involve massive upfront debt. You can't stay free cash flow positive - not for years - in any industry while building a new industry. Your entire premise is a total red herring, when what matters is long term profitability and supply.

No, it starts with you missing the very basics of capex investment and free cash flow.

Go have a look at the fundamentals of the iron ore industry. It's very similar - the price has risen a huge amount in a 10 year bubble - more than oil!, and recently pulled back quite a lot. The investment decisions of various iron ore producers have been governed by this - first a massive capex boom to get in the new prices, then, as their free cash flow and concerns about a dropping price longer term makes capex less desirable, a decline in capex.



Hopefully, you agree there is no "peak iron ore" imminent and driving these numbers - it's a highly abundant substance - yet they look exactly like the oil industry!

So hopefully you can see that your OP is just worthless trash that establishes nothing, even though it might look plausible.

The only way to provide evidence for peak oil is to provide evidence that there is a limitation of supply. The existence of large extractable reserves that merely require higher prices - and not much higher than today - is proof that there isn't, and that peak oil won't happen. Slightly more expensive oil? Maybe. Massively more expensive oil? No. Peak oil? No.

To cover this scenario, the second plank of your conflated thesis is that oil can't go much above $100 without wrecking economies. All the evidence (and all of common sense and economics) suggests that this view is ******ed.

If you wish anyone to take you seriously, you're going to have put forward a meaningful case. I don't see how you could, though, given that it goes against absolutely everything we know.
(My bold). So more plentiful supply is dropping the price of heavy crude, which is making the marginal producers unprofitable in the short term as their their large capex costs catch up with free cash flow.

And that sounds like peak oil to you?

You are confusing peak oil (completely inelastic - supply can't be made at any price close to current level, which would be an economic disaster) with non-peaking oil that has elastic supply curve.

Everything you've posted points to non peaking oil with an elastic supply curve. You've failed to make a rational case for peak oil.

/thread

I promise to respond to each passage soon. Looks like it will take a bit of time to sit and provide relevant links and summation for all that you've offered here. But I will do it.

The coal comparison was especially rich, as if a barrel of coal burns at the same BTU rate as a barrel of oil.

Anyhow, I'm in the process of moving, and time will be limited until Monday or Tuesday.

For now, in short:

- You seem to be falling into the common cornucopian strategy of redefining (for you) what peak oil means. That its about reserves in the ground, not extraction rates. ... Meanwhile, I'm telling you there's no way the world gets to 100M barrels per day of total liquids production due to economic and logistical barriers. As conventional declines, unconventional won't be able to keep up. ... You're firing back with reserve totals for unconventionals, horribly simplistic cost estimates and rosey extrapolation for an industry that will NEVER get to the levels you (and most flawed economists) naively envision. ...

- If you've already admitted how intrinsic oil is to the global economy, and that nothing is ready to substitute for it, its basic logic that the world will need ever more of it going forward. You know, barring war or a new global recession. Demand forecasts for 100M barrels per day (in a perfect world) aren't very far into the future. You seem to think "no problem." I'm beyond confident there's "no way."

- Economic growth turns to economic contraction as the cost of energy extraction rises. I can't emphasize that enough, and the data overwhelmingly backs that up.

- Climate change has nearly everything to do with global oil depletion, and to summarily dismiss it from context makes me question where you're coming from in your denial that peak is here. To just say <$80/bl over and over again for bitumen, while dismissing all the things that most certainly do cost and put the real price per barrel much higher shows you don't have much respect for the biosphere we all have to live in.

If you assert these technocrats and wildcatters can produce dirtier and far-less-efficient fossil fuel at a profit with a WTI price closer to $60-80, then why isn't it?

PS: Not that it's relevant, but iron ore extraction is not as abundant as you seem to think. There are noticeable shortages and export caps around the world.

I don't really know much about this topic, but I always thought oilprices where higher than what they would be due to speculation?
How come they are lower than what they should be? Regulation?

So, I'm back. The move took longer than I thought, but I'm finally settled in my new place. If you still want me to cover your earlier thread, I will, Tooth. But before I do, could you please summarize an answer for the question above?

You've expounded the wonders of the most dirty and disgusting form of crude (actually a synthetic derived from bitumen, not actual oil), and insist it can be harvested to seemingly endless quantity with oil price >$80 a barrel. If that were true, and the speculators all knew this, why does global oil price seem to keep banging it's head on a ceiling closer to $95-115?

Oil sands trades $30 less than WTI because it's just not very good "oil" at all. Meanwhile, foreign investment for Canadian sands is drying up for a lot of reasons, one of them being the fact that capital investment expenditures are blowing up and they're getting killed.

I think it's all been said.

Nearly everything humans do is dirty and disgusting, if you want to use those words. And we do it on a truly massive scale. Extracting bitumen for an extra 20 million barrels/day is a drop in the ocean of what humans do. Your argument on this point is irrational.

Presumably the same reason oil was $140 (inflation adjusted) in 1980, and $40 (inflation adjusted) in 1987. Oil lost 2/3 of its value in seven years. World reserves didn't change. Extraction technologies didn't change.


Huge amounts of capex are need to bring unconventional online (or iron ore, or gold, or just about anything, really). Prices spike well above long term levels when that capex is ongoing. Your OP sets out exactly that capex expenditure. You don't have an argument here. Look at iron ore, for example...far, far, far above the long term cost of production, for an abundant substance that most definitely isn't peaking.
Yep, it's crap oil. Expensive to refine, requires a different kind of processing. But it works. For < $100/barrel.

You think regular light crude oil is good to refine, though? It's a disgusting toxic black environmentally destructive slime that needs extensive refining and infrastructure. The fact that bitumen is worse than the other misses the point entirely. We can refine it, easily. We do. We can refine 10 of millions of barrels a day for a good price if we choose to. Ergo, supply will not stop as long as the sludge can be pumped, strip-mined, steamed, or coaxed out of the ground in some manner.

Problem solved back in 1977:

Nope. Not really.

I see. So because we already rape the Earth, let's speed it up with an even dirtier process... because we can. Got it.

Speaking of lacking a rational argument, please link to a single peer-reviewed paper or industry claim that asserts we can get tar sands production to 20M barrels per day, a 6-fold increase over today's meager levels of production.

Your amusing hand-wave of destructive human ambitions aside, how do you imagine they'll get it all to Texas to be refined? Or can Canada just build all that's needed?

You're not really answering my question, never mind the fact that you're attempting to compare a man-made crisis (1980s) to a geological one (today). But if you're trying to suggest oil price can and will easily come down to 1990's levels of affordability (presumably not as a result of a deep global depression killing demand), congratulations! You're completely alone in that forecast.

The age of cheap oil is over, as confirmed by the IEA, the IMF and countless other international entities.

Ah yes. The earlier baseless argument that claims that once the infrastructure is in place, expenditures will drop. I guess the infrastructure capacity in place today will get us to the magical 20M barrels per day level, without need for further expansion. ... We covered that for shale oil production, and it's the same rejection here. You don't appear to know what you're talking about, though you sorta admitted that when you entered the thread.

Back here in reality: The giants pick the low-hanging fruit first. The costs never abate ... especially if you're trying to increase flow rates to the laughable estimates you're claiming are possible.

Foreign investment isn't drying up just because "it's all in place already." Are you delusional?

http://business.financialpost.com/20..._lsa=8178-9472

“Capital cost pressures in the oil sands have tripled, operating costs in the oil sands at least doubled, we had a change in the oil sands royalty regime, we had greater environmental regulations, costs of compliance have increased, we had continued delays in pipelines that allow us to move products out to maximize revenue, (there is) negative public sentiment toward the oil sands, plus you have the emergence of other opportunities in the U.S. and elsewhere,” Mr. Ukrainetz told an industry conference organized by the Canadian Association of Petroleum Producers and Scotiabank.

“These are things that impacted our willingness to take on further oil sands spending, more than changes in SOE rules and regulations,” said Mr. Ukrainetz, one of many Canadian executives who are managing the SOE-owned assets.

No. And stop attempting such silly apples to oranges comparisons. Iron is not energy. Metals are a totally different market ... (and, as it so happens, the health of said market being largely dependent on oil price!)

It also burns about 1/3 as efficient (in terms of EROEI) as light crude.

But wait. You seem to be curiously raising your acceptable price ceiling by some 25%. I thought you said <$80? In any event, $90-100 per barrel continues a major drag on the macro economy.

No. Never said "good." Just far less expensive and far more efficient. ... I'm merely trying to remind you that economics of your "no problem" belief system on this issue don't actually add up.

But not nearly as disgusting as an industry you wanna expand 6x.

LOL... Wrong. It IS the point entirely.

If the very worst of liquid hydrocarbons could be produced "for a good price," it would be. It isn't.

And if the price ever got to the point where foreign and domestic investment wasn't running for the hills, who would be able to afford it at the consumer level?

What the OP shows, beyond a doubt, is that 1) continued expansion for tight oil production requires a per barrel price way higher that it already is, and 2) the public can't and won't go any higher than this $95-$110 range.

If there is a lot to be drilled in the parts where people have mentioned, why is off-shore drilling still done?

If there are hamburgers at McDonalds, why is there Wendy's?

Jiggs is there any way to believe in peak oil and not believe that it will cause a global cataclysm and the breakdown of society?

The price they can sell a barrel of oil for is decreasing and the cost to produce a barrel of oil is increasing. It's like when GM produces too many cars or McDonald's builds too many restaurants. There are a lot of conditional assumptions that go into the projections of what it will cost to produce a barrel of oil from a certain area or source. Those projections are not static. Huge concentrated investments can change the conditions that made the investment so attractive in the first place. A massive demand for workers can increase the cost to produce anything that requires workers to produce it.

In my opinion it is not the supply of oil that will peak. It will be the demand for oil that will peak within 15 years.

The base fundamental economy is fine as a system. Only governments can stop the power of strong economies. A sovereign debt crisis, a major war, or some giant cataclysmic event are the only things that can stop the economy as we know it for a substantial period of time.

The world is in a transition period where in unison we are constantly changing out parts of systems and making them more efficient. Massive disruption and re-organization is taking place. Gigantic increases in information are almost choking the world in ideas and opportunity. It's just starting to get really exciting. People are under tremendous pressure to constantly adapt to newness and it's snapping some of them mentally. But I predict that the level of opulence that our economy produces will start to make wages largely irrelevant in regard to standards of living. A 100 years from now parents will be complaining about their kids houses (kids will own entire houses), like parents today worry about their kids having cell phones at 7 years old.

Because nobody lives in the middle of the ocean.

Offshore drilling is very profitable, that's why.

Much of the oil in the gulf is located in formations with a very high permeability. They can often produce oil just off the reservoir pressure without needing to stimulate the well.

The stuff on land typically needs to be fracked, because it's located in formations with a very low permeability. Fracking is basically just artificially creating a high permeability in a naturally low-permeability formation.

itt nobody appears to have a clue about oil and where we're at today and where we're going. Shale oil revolutions, it's happening. There are a few compaines to invest in where it's damn near impossible to strike out. In my area the strike zone is 100%. The costs on drilling some of these wells are recouped in as little as 6 months.

If you want to learn about oil and where the money is. There's 3 places you only need to know about.

The Bakken (ND)
The Eagle Ford (TX)
The Cline (TX)