6 ms·

I have no idea how it can be sustainable, the low prices have frozen all investment on new fields/fracking/exploration, and when we will have a production slump

by seren 11y ago

I have no idea how it can be sustainable, the low prices have frozen all investment on new fields/fracking/exploration, and when we will have a production slump in a few years, it will be followed by a sharp rise, that will be really painful.

danieltillett 11y ago
That is the Saudi plan - knock out the frackers and renewables then jack up the price. Let's hope they don't succeed. They are racking up a lot of debt right now trying to keep a lid on their population problems so they might find their ability to borrow breaks first.
- simonh 11y ago
  Completely agree, to be honest their current strategy is probably the right way to go but that's just because the alternative strategies are even worse. The problem with knocking out fracking is that the frackers can ramp production back up again fairly quickly. Also because the frackers aren't a state run operation and aren't a systemic risk to the Us economy, if the current fracking companies go bust the damage is contained to those companies shareholders. In fact that's largely already happened. Other companies and investors will just move in, take over their operations at a market adjusted discount, and be ready to start producing again when the conditions are right. This will likely put a much lower long term cap on the oil price than we've seen in the past.
  - danieltillett 11y ago
    The history of the airline industry would suggest you are right. A long term low oil price is not very compatible with intent of the Paris accord though.
    - matt4077 11y ago
      According to a friend who works in politics & energy, the general consensus is that almost all oil will eventually be used. The real battle is over coal, and wether the world will manage to leave some of it in the ground.
      - danieltillett 11y ago
        Oils ain't oils these days. Fracking and oil sands have broken down the division between what is oil and what is not. God help us if we get close to burning even half the coal.
  - ksec 11y ago
    Sounds like fracking companies are very agile. And assuming technology continue to improves fracking will continue to get cheaper. Which means we may never see oil in their 50 - 60s again. I wonder if it would also make sense to build a massive Oil Reserve now and store as much as possible at the low price.
    - pjc50 11y ago
      massive Oil Reserve now and store as much as possible It's called "the ground". Seriously, the virtues of having a policy of "fracking, but not yet" are really under-discussed. Oil is not a crop that will rot in the field if left unpicked.
      - VLM 11y ago
        "Oil is not a crop that will rot in the field if left unpicked." Kind of. You can almost draw contour lines of "your economy must be this healthy at this time to pull this much oil out of the ground at this contour line five years later". That can turn into an optimism vs pessimism thing very quickly. Also note that we're not talking about attitudes toward the american economy in that most of our resources have been drained and burned... After you burn the easy oil you go after the less stable suppliers. Will the Saudi Royal Family still be in power in a decade, for example? Is Iraq a stable oil supplier and if so how much longer? And so on.
        pjc50 11y ago
        Oil drilling expertise is globally mobile. If the oil is there and economically extractable, companies will supply the capital and equipment to get it out. The interesting thing about the US is that it has run out of cheap oil, but was becoming self-sufficient in more expensive fracked oil (plus Canadian tar sands). The middle east has a colossal delayed-Malthus problem in that some countries have populations that are entirely economically dependent on oil+gas revenue. Yemen would be fine if it had enough oil; as it is, it's running out of water and the civil war will continue until enough people are dead or fled that it's sustainable again. I wouldn't bet on Saudi Arabia avoiding a civil war in the next 20 years.
- ksec 11y ago
  Isn't it another thing they are trying to sell as much as they possibly can? Let's assume in 2030 we could cut our oil demand by half, then if they have more inventory then wouldn't it be the best thing to sell as fast as possible? Frackers are limited in resources because every drill and money they spend on frackers gets them very little oil compared to Saudi who has lots more to go for.
  - seren 11y ago
    The oil consumption has been steadily increasing for years. For transportation, there is no alternative. Even if Tesla is making headline every day, this is really a marginal contribution that is really meaningless (at least now) in the grand scheme of things. In the best case, it could plateau in 2030 but it won't be cut by half. (Unless someone invent a compact fusion energy device next year)
    - diafygi 11y ago
      An alternative for transportation is actually starting to happen: self-driving vehicles. Recharging times don't matter when you have a fleet of self-driving electric Uber cars that can phase vehicles in and out of service automatically[1]. Plus, with fleets, you replace normal oil-consuming vehicles at a 2-to-1 rate. It's looking like peak oil will happen sooner than you think. [1]: http://www.govtech.com/fs/perspectives/Ubers-Plan-for-Self-Driving-Cars-Bigger-Than-Its-Taxi-Disruption.html http://www.govtech.com/fs/perspectives/Ubers-Plan-for-Self-D...
      - andys627 11y ago
        Could just be a trend, but walkable neighborhoods are on the rise in the US. Their residents use less oil.
      - seren 11y ago
        There are about 1 billion vehicles in the world, we are producing roughly 50 millions a year. I am skeptical than, in as soon as 15 years, self driving fleet will have that a massive impact. In some area of the world, like SF and some major city, sure, but as a global trend I am not so optimistic.
- golergka 11y ago
  > Let's hope they don't succeed. I'm no fan of Saudis — but if they don't succeed, we'll have a country with a lot of young males, who are used to social welfare that can't be continued, right in the center of Middle East, with stockpiles of different weapons. That's not a situation I would really "hope" for.
  - danieltillett 11y ago
    Well I don't think any problem like this is made better by leaving it until tomorrow. The Saudi's have to join the 21st century at some point and the sooner the better.
  - revscat 11y ago
    The alternative is worse. The US and China produce more CO2, but SA is certainly an enabler of vast environmental damage. They also fund fundamentalist Wahabiism throughout the world, which is not only destructive to the environment but to secular governments and people throughout the globe. Given the current negatives of the Kingdom i have come to believe that destabilizing it over the long term is probably better for humanity, even if there is some tangential regional (or even local) effects. ISIS complicates this analysis.
    - danieltillett 11y ago
      I feel for the average Saudi person, but as a government I have as much desire to see it continue as I do North Korea.
- lukasm 11y ago
  I'm sceptical that this is Saudi's plan. Is the investment really worth it? fracking is highly automated and the cost is going down. Fracking is strategic for many governments, so subsidy is very likely. I don't remember exact numbers, but cost of drilling in Saudi Arabia is 2$, cost in Syberia is 30$.
  - danieltillett 11y ago
    I don't think the cost is quite that low in Saudi Arabia, but they are definantly the lowest cost producer. Their only hope is to drive out the higher cost producers and then increase prices - it is monopoly 101.
fulafel 11y ago
We can't afford to have that production rise (or current level of oil production). We will have to leave most oil in the ground to mitigate climate change.

by seren 11y ago

danieltillett 11y ago

That is the Saudi plan - knock out the frackers and renewables then jack up the price. Let's hope they don't succeed. They are racking up a lot of debt right now trying to keep a lid on their population problems so they might find their ability to borrow breaks first.

simonh 11y ago
Completely agree, to be honest their current strategy is probably the right way to go but that's just because the alternative strategies are even worse. The problem with knocking out fracking is that the frackers can ramp production back up again fairly quickly. Also because the frackers aren't a state run operation and aren't a systemic risk to the Us economy, if the current fracking companies go bust the damage is contained to those companies shareholders. In fact that's largely already happened. Other companies and investors will just move in, take over their operations at a market adjusted discount, and be ready to start producing again when the conditions are right. This will likely put a much lower long term cap on the oil price than we've seen in the past.
- danieltillett 11y ago
  The history of the airline industry would suggest you are right. A long term low oil price is not very compatible with intent of the Paris accord though.
  - matt4077 11y ago
    According to a friend who works in politics & energy, the general consensus is that almost all oil will eventually be used. The real battle is over coal, and wether the world will manage to leave some of it in the ground.
    - danieltillett 11y ago
      Oils ain't oils these days. Fracking and oil sands have broken down the division between what is oil and what is not. God help us if we get close to burning even half the coal.
- ksec 11y ago
  Sounds like fracking companies are very agile. And assuming technology continue to improves fracking will continue to get cheaper. Which means we may never see oil in their 50 - 60s again. I wonder if it would also make sense to build a massive Oil Reserve now and store as much as possible at the low price.
  - pjc50 11y ago
    massive Oil Reserve now and store as much as possible It's called "the ground". Seriously, the virtues of having a policy of "fracking, but not yet" are really under-discussed. Oil is not a crop that will rot in the field if left unpicked.
    - VLM 11y ago
      "Oil is not a crop that will rot in the field if left unpicked." Kind of. You can almost draw contour lines of "your economy must be this healthy at this time to pull this much oil out of the ground at this contour line five years later". That can turn into an optimism vs pessimism thing very quickly. Also note that we're not talking about attitudes toward the american economy in that most of our resources have been drained and burned... After you burn the easy oil you go after the less stable suppliers. Will the Saudi Royal Family still be in power in a decade, for example? Is Iraq a stable oil supplier and if so how much longer? And so on.
      - pjc50 11y ago
        Oil drilling expertise is globally mobile. If the oil is there and economically extractable, companies will supply the capital and equipment to get it out. The interesting thing about the US is that it has run out of cheap oil, but was becoming self-sufficient in more expensive fracked oil (plus Canadian tar sands). The middle east has a colossal delayed-Malthus problem in that some countries have populations that are entirely economically dependent on oil+gas revenue. Yemen would be fine if it had enough oil; as it is, it's running out of water and the civil war will continue until enough people are dead or fled that it's sustainable again. I wouldn't bet on Saudi Arabia avoiding a civil war in the next 20 years.
ksec 11y ago
Isn't it another thing they are trying to sell as much as they possibly can? Let's assume in 2030 we could cut our oil demand by half, then if they have more inventory then wouldn't it be the best thing to sell as fast as possible? Frackers are limited in resources because every drill and money they spend on frackers gets them very little oil compared to Saudi who has lots more to go for.
- seren 11y ago
  The oil consumption has been steadily increasing for years. For transportation, there is no alternative. Even if Tesla is making headline every day, this is really a marginal contribution that is really meaningless (at least now) in the grand scheme of things. In the best case, it could plateau in 2030 but it won't be cut by half. (Unless someone invent a compact fusion energy device next year)
  - diafygi 11y ago
    An alternative for transportation is actually starting to happen: self-driving vehicles. Recharging times don't matter when you have a fleet of self-driving electric Uber cars that can phase vehicles in and out of service automatically[1]. Plus, with fleets, you replace normal oil-consuming vehicles at a 2-to-1 rate. It's looking like peak oil will happen sooner than you think. [1]: http://www.govtech.com/fs/perspectives/Ubers-Plan-for-Self-Driving-Cars-Bigger-Than-Its-Taxi-Disruption.html http://www.govtech.com/fs/perspectives/Ubers-Plan-for-Self-D...
    - andys627 11y ago
      Could just be a trend, but walkable neighborhoods are on the rise in the US. Their residents use less oil.
    - seren 11y ago
      There are about 1 billion vehicles in the world, we are producing roughly 50 millions a year. I am skeptical than, in as soon as 15 years, self driving fleet will have that a massive impact. In some area of the world, like SF and some major city, sure, but as a global trend I am not so optimistic.
golergka 11y ago
> Let's hope they don't succeed. I'm no fan of Saudis — but if they don't succeed, we'll have a country with a lot of young males, who are used to social welfare that can't be continued, right in the center of Middle East, with stockpiles of different weapons. That's not a situation I would really "hope" for.
- danieltillett 11y ago
  Well I don't think any problem like this is made better by leaving it until tomorrow. The Saudi's have to join the 21st century at some point and the sooner the better.
- revscat 11y ago
  The alternative is worse. The US and China produce more CO2, but SA is certainly an enabler of vast environmental damage. They also fund fundamentalist Wahabiism throughout the world, which is not only destructive to the environment but to secular governments and people throughout the globe. Given the current negatives of the Kingdom i have come to believe that destabilizing it over the long term is probably better for humanity, even if there is some tangential regional (or even local) effects. ISIS complicates this analysis.
  - danieltillett 11y ago
    I feel for the average Saudi person, but as a government I have as much desire to see it continue as I do North Korea.
lukasm 11y ago
I'm sceptical that this is Saudi's plan. Is the investment really worth it? fracking is highly automated and the cost is going down. Fracking is strategic for many governments, so subsidy is very likely. I don't remember exact numbers, but cost of drilling in Saudi Arabia is 2$, cost in Syberia is 30$.
- danieltillett 11y ago
  I don't think the cost is quite that low in Saudi Arabia, but they are definantly the lowest cost producer. Their only hope is to drive out the higher cost producers and then increase prices - it is monopoly 101.

fulafel 11y ago

We can't afford to have that production rise (or current level of oil production). We will have to leave most oil in the ground to mitigate climate change.