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Old 03-10-2014, 10:40 PM   #26
LozColbert
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Re: Oil majors dumping capital expenditures...

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Originally Posted by JiggsCasey View Post
Are you the guy who thinks - with time - oil from algae is a viable process on a mass commercial scale?
Research suggests that it could be there soon, as the cost curve keeps bending down.

Look, I get it, you have a religious devotion to Peak Oil because you want us to throw billions and billions more at green energy projects that so far have yielded nothing.

The much smarter thing --and much less risky -- is just to keep improving our technology to pull hydrocarbons out of the ground, especially ones like natural gas that burn quite clean and make America energy independent.
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Old 03-10-2014, 10:56 PM   #27
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Re: Oil majors dumping capital expenditures...

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Research suggests that it could be there soon, as the cost curve keeps bending down.
Research suggests it suffers from painfully obvious logistical and economic roadblocks. Just stop.

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Originally Posted by LozColbert View Post
Look, I get it, you have a religious devotion to Peak Oil because you want us to throw billions and billions more at green energy projects that so far have yielded nothing.
Holy straw man argument!

"Religious devotion?" ... "Yielded nothing?" OK dude.

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Originally Posted by LozColbert View Post
The much smarter thing --and much less risky -- is just to keep improving our technology to pull hydrocarbons out of the ground, especially ones like natural gas that burn quite clean and make America energy independent.
LOL @ "independent"... you realize we're still a net importer for over half our consumption needs, yes? You realize shale gas wells have an annual decline rate of around, oh 25-45%? ... You also realize foreign investment in our unconventional oil and gas plays is plummeting?

http://www.resilience.org/stories/20...l-review-jan-6
The large deficits being run by the US shale oil and gas industry are starting to be reported in the financial press. Last week the Wall Street Journal ran a story that large foreign investments in US shale oil and gas leases are drying up rapidly. In 2013, foreign companies spent only $3.4 billion on stakes in US shale formations which was less than half 2012 investments and a tenth of what they spent in 2011.

The reason for this decline is that while some wells may be profitable, overall drilling and producing shale oil and gas is simply not. In 2012, 80 big energy companies in the US spent a combined $50.6 billion more than they brought in from energy operations. This was twice as high as in 2011 and four times as high as 2010. For 2013, the deficit is on track to reach roughly $25 billion.

With losses like these it is no wonder that foreign investors are bailing and staying out of the US shale market. Exxon says it has lost in shirt in shale gas, Shell has written down the value of its US shale properties by $2 billion, and BHP has written down its US properties by $2.8 billion.
Yeah... "the smarter thing."

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Old 03-10-2014, 11:11 PM   #28
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Re: Oil majors dumping capital expenditures...

Just a bit more perspective, before we dispense with the "U.S. energy revolution" fantasy:

Dr. Sadad Al-Husseini, former VP of Saudi-Aramco:
In the long term, given the severe declines in shale oil productivity, the limited prospects for major new basins, and the plateau in US capacity starting in 2016, improved access to markets and so forth, domestic US oil prices are bound to make a strong recovery starting in 2016. This and the maturity of major fields across the world, the high cost of deep offshore and Arctic production, and the continued violent turmoil in many oil producing are bound to keep oil prices at historically high levels for decades to come.
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Old 03-10-2014, 11:34 PM   #29
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Re: Oil majors dumping capital expenditures...

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Are you the guy who thinks - with time - oil from algae is a viable process on a mass commercial scale?
Heck no. I'm the guy who is smart enough to say idfk and who thinks that the $0.398 cents we spent on it for the youtube video was well-spent.

Quote:
That's because the forecasting operates on a supply-constrained model. We've known the unconventional gas and oil reserves have been there for quite some time. We're only turning to it now out of desperation. Doesn't change the equation.

Any way you slice it, the consumer eventually can't afford the marginal costs of oil, and demand is destructed. It has little to do with the consumer "preferring" NGPLs.
WTF?!? Of course the ****ing supply is constrained. That is how supply and demand works!

With energy, it doesn't matter at all whether the money goes to wind or solar or oil or gas or corn or child labor.

Quote:
The problem is that Hubbert's core thesis hasn't gone awry, just delayed about 7-10 years. Conventional production still reached peak in 2005. And the refined and nuanced forecasts of the many analysts since then have been largely spot on as well:
No one cares whether things are conventional or not. My brother married a guy. Quite unconventional, but people got laid. I don't like thinking about it, but "conventional" and "unconventional" doesn't matter.

As far as Hubbert goes, he (RIP, he seemed pretty nice) his thesis has been delayed for 44 years, not 7-10.


Natural gas isn't oil, doesn't do most of the things oil does, and doesn't burn nearly as efficiently as oil. It's a petrol-dollar. Not a NGPL-dollar. Crowing that NGPLs resurgence (which are showing more signs of buckling rather than expanding into the mid-term) counters the general thesis behind peak oil is, well, flat wrong.[/quote]

Yes, you are of course correct. You can't catch natural gas on fire to release energy

Quote:
Actually, it kinda does, considering every oil price shock (cept one?) has been followed by recession.
I've got you beat. Every single price shock where a segment of the economy was massively over-bet has been followed by a recession. Given that energy companies are not overpriced (by any means), they aren't going to be a problem for quite a while.

Quote:
Which is basically another way of saying it cares very much about the price of oil. Modern capitalism has always had to "bet" on oil. Ultimately, it's the only thing (the promise of more tomorrow) keeping the entire ponzi scheme in place.
You should look up the phrase "Ponzi scheme". I'll help you out so you sound a bit less silly.
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Old 03-10-2014, 11:40 PM   #30
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Re: Oil majors dumping capital expenditures...

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Originally Posted by JiggsCasey View Post
and the plateau in US capacity starting in 2016
[Citation Needed]

Chatter has it that 2016 is when we surpass Saudi Arabia to assume the #1 spot for oil producers, but where's the math that says we top out in 2016?
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Old 03-11-2014, 12:47 AM   #31
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Re: Oil majors dumping capital expenditures...

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With energy, it doesn't matter at all whether the money goes to wind or solar or oil or gas or corn or child labor.

No one cares whether things are conventional or not. My brother married a guy. Quite unconventional, but people got laid. I don't like thinking about it, but "conventional" and "unconventional" doesn't matter.
Holy ****, dude. Your brother aside, of course it matters, because it matters how much is spent bringing it out the ground, refining it, securing it and delivering it.

All those forms of energy you mention have very, VERY different rates of EROEI. Those rates matter as much for the company's balance sheet as it matters for the public's ability to afford their product.

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As far as Hubbert goes, he (RIP, he seemed pretty nice) his thesis has been delayed for 44 years, not 7-10.
WTF are you talking about? In 1956, he asserted U.S. production would peak and start decline in 1970. He was dead on accurate. We're on a brief cessation on that decline slope , but we're not past our 1970 peak, still to this day. And it's highly doubtful U.S. unconventional production will pass that 1970 peak, unless they change the definition of "total liquids" again, like they did for the shale boom, which is a lot like pretending peat is coal.

Or, are you conflating world production with U.S. production, and pretending he was wrong on world production peak?

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I've got you beat. Every single price shock where a segment of the economy was massively over-bet has been followed by a recession.
Semantics champion. Why do you think segments of the economy "bet" on commodities in the first place? Why do you think futures prices matter more than spot prices?

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Given that energy companies are not overpriced (by any means), they aren't going to be a problem for quite a while.
I'm not exactly sure what you're trying to convey here. "They" refers to who? A probelm for who? ... In any event, the biggest companies - as detailed in the OP - are slashing capital expenditures to an alarming degree. And not because of natural gas, nor algae.

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You should look up the phrase "Ponzi scheme". I'll help you out so you sound a bit less silly.
Irony. Maybe you should.

If markets are largely based on confidence to remain stable, what do you think happens to ballooned asset value and over-leveraged bankings' liquidity when it truly because clear that global conventional oil production is set to decline?

Oh, wait ... It's no problem because natural gas.

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Old 03-11-2014, 01:17 PM   #32
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Re: Oil majors dumping capital expenditures...

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Originally Posted by JiggsCasey View Post
Holy ****, dude. Your brother aside, of course it matters, because it matters how much is spent bringing it out the ground, refining it, securing it and delivering it.

All those forms of energy you mention have very, VERY different rates of EROEI. Those rates matter as much for the company's balance sheet as it matters for the public's ability to afford their product.
EROEI doesn't matter except as one of the inputs into cost.

Total system levelized cost per unit of energy is what matters.

http://www.eia.gov/forecasts/aeo/pdf...generation.pdf

Quote:
WTF are you talking about? In 1956, he asserted U.S. production would peak and start decline in 1970. He was dead on accurate. We're on a brief cessation on that decline slope , but we're not past our 1970 peak, still to this day. And it's highly doubtful U.S. unconventional production will pass that 1970 peak, unless they change the definition of "total liquids" again, like they did for the shale boom, which is a lot like pretending peat is coal.

Or, are you conflating world production with U.S. production, and pretending he was wrong on world production peak?
We aren't above the 1970s peak because it has been cheaper to import oil, massive gains in efficiency have taken place, and decreased costs of other sources of energy, not because we reached a Hubbert peak. If we had reached a Hubbert peak, we'd be experiencing continuing declines, not a massive pick up over the last few years.

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Semantics champion. Why do you think segments of the economy "bet" on commodities in the first place? Why do you think futures prices matter more than spot prices?
Funny, but the oil futures are laughing at you:

http://www.cmegroup.com/trading/ener...eet-crude.html

2020 futures are sitting at 78.59.

Quote:
I'm not exactly sure what you're trying to convey here. "They" refers to who? A probelm for who? ... In any event, the biggest companies - as detailed in the OP - are slashing capital expenditures to an alarming degree. And not because of natural gas, nor algae.
'They' referred to the oil companies. They are cutting capex because demand didn't grow as fast as they were expecting.

Quote:
Irony. Maybe you should.

If markets are largely based on confidence to remain stable, what do you think happens to ballooned asset value and over-leveraged bankings' liquidity when it truly because clear that global conventional oil production is set to decline?

Oh, wait ... It's no problem because natural gas.
It is no problem because total energy production has kept up with demand and because US demand has barely increased! No one cares about one input cost to the economic engine unless there is a fast and unexpected shock.

Again, no one (other than specifically those companies that rely exclusively or primarily on conventional oil production) cares.
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Old 03-11-2014, 11:17 PM   #33
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Re: Oil majors dumping capital expenditures...

Again, it should be a supply driven forecast model. Period, end of story. You're adhering to a tired old demand-driven model, which is what Kopits mocked for an hour.

there is so much dead wrong in this post above, I don't really know where to begin... and, much like your "algae can be oil!" thread, I doubt this is a gap of agreement that can ever be bridged. But do maintain your current investment strategies, no doubt.

I will say that a $78 price point in 2020 does far more for my argument than it does yours. The majors admitted they need almost twice that just to maintain stasis. Meanwhile, natural gas from rock formations and deep under sea bed sub-salt deposits isn't gonna save the day for a world that will need over 95M bpd of total liquids, sorry.
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Old 03-11-2014, 11:41 PM   #34
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Re: Oil majors dumping capital expenditures...

you sound so silly, Jiggs. Perhaps there are people here who will be persuaded by your shrill repetition ad nauseum of assertions, but I certainly hope not.
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Old 03-12-2014, 12:21 AM   #35
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Re: Oil majors dumping capital expenditures...

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you sound so silly, Jiggs. Perhaps there are people here who will be persuaded by your shrill repetition ad nauseum of assertions, but I certainly hope not.
If you could articulate what is "silly" or "wrong" about anything I've said, you would. You can't, so you don't.

Instead, I'm wasting time dealing with a poster (you) who believes the "safe thing" is to keep fracking.
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Old 03-20-2014, 04:02 AM   #36
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Re: Oil majors dumping capital expenditures...

interview with Dr. Sadad Al-Husseini, former executive vice president of exploration and development for Saudi-Aramco, has been at the helm of Saudi Arabia’s largest oil and gas discoveries and developments. Referred to by the New York Times as “one of the most respected and accomplished oilmen in the world” and by the Wall Street Journal as “one of Saudi Arabia”s most powerful oilmen” one can argue that his knowledge and expertise in the industry is unrivaled.
Q. How vulnerable is world oil supply to a drop in price to $60 or $70, which some economists are predicting?

A. The prospect of a severe oil price drop can only happen as the outcome of another economic collapse. On the other hand, an upward spike in oil prices is far more credible given the military tensions across the world that could disrupt oil supplies and the limited elasticity in supplies. Dysfunctional governments and failed states are now a pervasive syndrome across the world. There is little evidence that the collective global leadership is able to contain or to stabilize these many crises.

My base oil price forecast in 2012 dollars still ranges between $105 and $120/barrel Brent with a volatility floor of $ 95/barrel and more probable upward spiking to $140/barrel within 2016/2017.
Dip to $60. Say goodbye to the tight oil "revolution" and production quotas. Spike to $140? Say goodbye to demand growth. ... Either way, the industry is f'd and the economy in great peril.
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Old 03-20-2014, 04:21 AM   #37
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Re: Oil majors dumping capital expenditures...

I know there are a few jointly owned Oil Sands projects in Canada that are putting off CapEx. Investments were to be evaluated this year for projects that woulds start producing oil in 19-20.
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Old 03-20-2014, 07:06 AM   #38
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Re: Oil majors dumping capital expenditures...

Haven't read through all of the bickering but I would think big parthernships w/ NOCs probably drive down Capex as well as the fact that major capex plays aren't necessarily equally distributed every year. So looking at some sort of like 5 year rolling average prob makes more sense. I would also think shift to fracking would have lower capex nums and higher opex nums, in terms of capital outlay, no?
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Old 03-20-2014, 06:19 PM   #39
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Re: Oil majors dumping capital expenditures...

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Haven't read through all of the bickering but I would think big parthernships w/ NOCs probably drive down Capex as well as the fact that major capex plays aren't necessarily equally distributed every year. So looking at some sort of like 5 year rolling average prob makes more sense. I would also think shift to fracking would have lower capex nums and higher opex nums, in terms of capital outlay, no?
Considering the cliff-like decline rates of tight oil wells, it stands to reason that capex has been (until this announcement) trending steadily upward, year after year after year. The third graphic in the OP bares that out. The majors are forced to spend trillions in order to merely stand in place, let alone maintain production growth.
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Old 03-20-2014, 07:44 PM   #40
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Re: Oil majors dumping capital expenditures...

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Considering the cliff-like decline rates of tight oil wells, it stands to reason that capex has been (until this announcement) trending steadily upward, year after year after year. The third graphic in the OP bares that out. The majors are forced to spend trillions in order to merely stand in place, let alone maintain production growth.
First column is upstream, which is what you are freaking out about:

http://uhy-us.com/portals/0/Energy/o...%20changes.png

Standing in place doesn't appear to be happening:

http://www.eia.gov/dnav/pet/hist/Lea...s=mcrfpus1&f=m
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Old 03-20-2014, 08:39 PM   #41
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Re: Oil majors dumping capital expenditures...

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Originally Posted by JiggsCasey View Post
Considering the cliff-like decline rates of tight oil wells, it stands to reason that capex has been (until this announcement) trending steadily upward, year after year after year. The third graphic in the OP bares that out. The majors are forced to spend trillions in order to merely stand in place, let alone maintain production growth.
I thought capex has been trending upward because of Bakken and recovery methodology changes that required retooling?
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Old 03-20-2014, 11:25 PM   #42
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Re: Oil majors dumping capital expenditures...

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First column is upstream, which is what you are freaking out about:

http://uhy-us.com/portals/0/Energy/o...%20changes.png
First of all, I'm not the one freaking out. That appears to be you guys in the denial camp.

Second, show some integrity and link to the page that vague chart is hosted on, not just the graphic itself, which doesn't credit anyone.

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Standing in place doesn't appear to be happening:

http://www.eia.gov/dnav/pet/hist/Lea...s=mcrfpus1&f=m
LOL... if you think a 2M bpd increase in far-less-efficient unconventional oil production in ONE country accounts for a global equation that must endure a 4-6% decline rate, you're even less informed than I originally thought.

I never denied a temporary uptick in U.S. production. Too bad the oil companies are "losing their shirts" in the desperate process, and now dumping investment.

Just face it, Mick: Total liquids is barely budging in 9 years, while cost has tripled. That's a serious obstacle in your perpetual "no problem" musical.
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Old 03-20-2014, 11:26 PM   #43
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Re: Oil majors dumping capital expenditures...

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I thought capex has been trending upward because of Bakken and recovery methodology changes that required retooling?
Yes, that's the majority of the point. Unconventional exploration, extraction, production and delivery is enormously expensive, and most of it will ultimately stay in the ground because of that fact.
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Old 03-21-2014, 04:06 AM   #44
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Re: Oil majors dumping capital expenditures...

The decrease in capex may be attributable to the fact that the infrastructure required to get at Bakken (and other fracking areas) is pretty much done, yet it will still continue to yield well into the future.
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Old 03-21-2014, 04:30 AM   #45
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Re: Oil majors dumping capital expenditures...

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First of all, I'm not the one freaking out. That appears to be you guys in the denial camp.

Second, show some integrity and link to the page that vague chart is hosted on, not just the graphic itself, which doesn't credit anyone.
First of all, "Don't worry, be happy" isn't "freaking out."

I don't know if I have mentioned it at you, but my job is selling stuff that increases efficiency.

Second of all, don't be lazy: http://uhy-us.com/capex

Quote:
LOL... if you think a 2M bpd increase in far-less-efficient unconventional oil production in ONE country accounts for a global equation that must endure a 4-6% decline rate, you're even less informed than I originally thought.
I already gave the relevant graphs. We can expand energy production and usage until we are positively choking on smog.

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I never denied a temporary uptick in U.S. production. Too bad the oil companies are "losing their shirts" in the desperate process, and now dumping investment.
They aren't "losing their shirts" by any means. Their ROI is perfectly fine. Their ROE is perfectly fine. Their ROA is perfectly fine.

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Just face it, Mick: Total liquids is barely budging in 9 years, while cost has tripled. That's a serious obstacle in your perpetual "no problem" musical.
Cost of production hasn't tripled.

Why the obsession with "total liquids"?!? No one cares about that. I care about whether my car goes vroom and my house stays at a comfortable temperature, and couldn't care less whether that energy comes from grinding up leprechauns or liquids.
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Old 03-21-2014, 04:56 AM   #46
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Re: Oil majors dumping capital expenditures...

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interview with Dr. Sadad Al-Husseini, former executive vice president of exploration and development for Saudi-Aramco, has been at the helm of Saudi Arabia’s largest oil and gas discoveries and developments. Referred to by the New York Times as “one of the most respected and accomplished oilmen in the world” and by the Wall Street Journal as “one of Saudi Arabia”s most powerful oilmen” one can argue that his knowledge and expertise in the industry is unrivaled.
This is one of the troubles with experts. I can find a highly credentialed expert to back nearly any opinion I want to hold, including the most ridiculous. Experts are just people with opinions, though the modern world seem to forget it, and there's lots of stuff they don't know and simply guess at. They're subject to the same stupidities, logical fallacies, prejudices and groupthink as everyone else.

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Spike to $140? Say goodbye to demand growth. ... Either way, the industry is f'd and the economy in great peril.
I follow most of your thesis, but I don't get this. Why is the economy in great peril at $140? It didn't become "f'd" when the price rose from $30 to $120 and stayed there. Why is it going to be "f'd" at +20% where it wasn't "f'd" at +300%?

Moreover, US gasoline is cheap. Most of the world pays far more for a tank of gasoline, thanks to government taxes. Norway pays $10 USD/gallon!!!!! That's $300/barrel, and their economy is doing just fine.

As you can see from this Bloomberg graphic, only 3.18% of income is spent on gasoline. Why is the economy in peril if this rises to 3.5%?

The way I see it, provided it continues to flow freely to meet demand, the only drag that energy cost will ultimately have on the economy is the percentage of GDP required to get it out of the ground. Currently that sits at around 0.4% of world GDP. This does not seem economy shattering to me. If it doubles, which is worse than worst scenario you've put forward, that doesn't seem economy shattering either.

So I'd like to hear your thesis on why we're in peril at $140. Or even $300/barrel. Europe manages to tick along just fine at those levels.
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Old 03-21-2014, 05:16 AM   #47
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Re: Oil majors dumping capital expenditures...

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...
Not cool, bro.

I found him first, so I've got dibs.

Find your own extremist to play with.
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Old 03-21-2014, 06:50 AM   #48
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Re: Oil majors dumping capital expenditures...

He's all yours, but just going by this thread I think he's winning the argument at this point. I haven't seen you meaningfully refute anything he's put forward. Projection of supply, industry estimates of non-conventional throughput vs cost would be meaningful refutations. Absent that he has a strong prima facie case.

Hubbert Peak Oil Theory is solid, and more than borne out by the evidence. The question is whether unconventional can fill that gap without economic shock. My strong guess is it can, but I have no evidence for that. Capex spending (and oil price moves) on its face looks like it can't.
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Old 03-21-2014, 12:20 PM   #49
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Re: Oil majors dumping capital expenditures...

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He's all yours, but just going by this thread I think he's winning the argument at this point. I haven't seen you meaningfully refute anything he's put forward. Projection of supply, industry estimates of non-conventional throughput vs cost would be meaningful refutations. Absent that he has a strong prima facie case.
(First, I was joking about having dibs. Your point on % of income spent on energy was excellent. You can find the same thing on % of GDP spent on energy)

I gave all that you need in post #23, #32 and #40. You have to be diligent and actually look at and read the links.

[/quote]Hubbert Peak Oil Theory is solid, and more than borne out by the evidence. The question is whether unconventional can fill that gap without economic shock. My strong guess is it can, but I have no evidence for that. Capex spending (and oil price moves) on its face looks like it can't.[/QUOTE]

Hubbert peak oil is just Malthusian Catastrophe theory: http://en.wikipedia.org/wiki/Malthusian_catastrophe

Hubbert peak oil has been consistently incorrect. It assumes no changes in technology (we've increased recovery rates), no changes in efficiency (energy usage in the US has become a smaller percentage of GDP over the years), no allowance for exploration (we keep finding new reserves), and no allowance for other fuels (lng is a source of energy). Where are you getting that it is "solid"? If it were "solid" US energy production would have continued to tail off over the years.

You do know that capex includes everything from purchasing oil rights, to building refineries, to building pipelines, to exploration, etc., right? The capex the last couple years is particularly high and looks unsustainable simply because the companies he happened to mention were spending money hand over fist getting projects started. That is just part of the normal business cycle.
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Old 03-22-2014, 04:32 AM   #50
JiggsCasey
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Re: Oil majors dumping capital expenditures...

Quote:
Originally Posted by WM2 View Post
The decrease in capex may be attributable to the fact that the infrastructure required to get at Bakken (and other fracking areas) is pretty much done, yet it will still continue to yield well into the future.
Unless we're talking about refinery infrastructure (debatable if so), this above is simply not accurate. Certainly for domestic shale, they have to move each of these $10 million dollar wells (or build new ones) every 2-4 years, because the decline rate of the average shale well is around, I dunno 25-45% annually? That's cliff-life in the oil industry. Multiple that by many thousands of wells. If the hype is to believed, we'll be building many tens of thousands more (nope).... Anyhow, that means these wells all shoot their wad up front, and quickly taper off in terms of daily output. That's the case for most of all tight oil extraction, whether fracked or deep water under sub-salt formations. It takes a lot of energy to lift energy to the surface. ... They're learning that with the "vast" resources "found" off of Venezuela and Brazil, now, too.

The infrastructure costs for extraction are constant and enormous, ... and exponential ... certainly if you plan to score some 5M, 10M, 15M, 20M barrels of it each day going forward. It's simply not sustainable.

It's clear to me the oil majors have finally said "no mas."
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