5 ms·

Aren't OPEC essentially trying to starve out the competition (shale, fracking, solar, wind, etc.)? They are basically flooding the market with cheap oil and the

by rubyfan 11y ago

Aren't OPEC essentially trying to starve out the competition (shale, fracking, solar, wind, etc.)? They are basically flooding the market with cheap oil and thereby making all the alternatives economically unattractive? Western oil interests are probably right to spend on discovery then, since they'd believe OPEC can't pump forever and non-OPEC sources will be profitable in the future and will take years to develop. This is probably where the author and oil executives differ in their belief, that there will be a market for oil in the future. However the author doesn't present any evidence to suggest non-oil sources will be sufficiently more profitable, less expensive and widely available in the future. Further, there is no evidence presented that a non-binding climate change agreements will destroy the oil market.

mschuster91 11y ago
> since they'd believe OPEC can't pump forever In 50 years, OPEC will still have oil even at current consumption. But consumption is shrinking as energy production is already shifting to renewables and cars will have converted to electro/hydrogen by then.
- ams6110 11y ago
  Cars won't convert in large numbers if oil-based fuel is a cheaper option.
  - mschuster91 11y ago
    You can always convert an Otto-engine car to gas fuel, and by 2050 we will be able to mass-synthesize gas from hydrogen - actually we are able to do so right now, we just don't have large scale plants for that.
  - derekp7 11y ago
    Doesn't it take something like $5 of electricity to "fill up" a Tesla (250 miles or so?) That would be like buying gas at $0.50 a gallon. The other side of the coin is the high cost of the battery pack (something like $30K), but that should come down drastically once the Gigafactory is online.
    - Spooky23 11y ago
      Everyone prefers to pay more over time vs make a larger capital investment.
      - justincormack 11y ago
        No. That's why we have credit markets because some people like the opposite. These can then be converted to rentals.
  - _ph_ 11y ago
    Only if you do not count in the environmental impact of burning oil.
  - alkonaut 11y ago
    True, but once cleaner cars are even remotely close In cost they will no longer be subsidized, instead the dirty ones will be taxed or banned. The yearly road tax for a "dirty" car where I live is about $1000. If that was 2k or 3k they would be off the roads within the year...
- thematt 11y ago
  Maybe in certain countries, but the big picture is that worldwide barrels/per/day consumption is continuing to increase: 2014: 92,086,000 2013: 91,243,000 2012: 89,846,000 2011: 88,974,000 2010: 87,864,000 Almost all that increase in consumption is attributable to Asia. Any downturn in the curve will be attributable to the economy of China slowing, not renewables taking the place of oil. I don't disagree that the consumption of renewables is growing rapidly, but that doesn't mean they're making a dent in oil consumption. They may down the road at some point, but right now they're a spit in the ocean.
- rubyfan 11y ago
  Indeed that is the expectation, but to be more specific however they won't keep over producing forever. Oil prices won't be low forever and western oil interests should be claiming rights on new wells that will produce for a long time to come. Also I am curious, do you have evidence that suggests consumption is shifting away from oil to renewables?
  - mschuster91 11y ago
    Yeah of course, just look at the rise of solar e.g. in Germany. Thanks to Chinese price dumping, solar cells are cheap as f..k now. Already, gas plants are shut down in Germany and only kept alive as "backup plants" (of course by the consumer who pays extra fees)
    - rubyfan 11y ago
      Any citation? Since I'm not in Germany the anecdote is lost on me.
durkie 11y ago
If you're looking for evidence that non-oil sources will get more profitable, less expensive and widely available in the future, Ramez Naam has a series of excellent blog posts (with lots of cited data) that are a good starting point. The first is from mid-August of 2015, and the last in mid-October, so they are timely as well: 1. http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very-cheap-indeed/ http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very... 2. http://rameznaam.com/2015/08/30/how-steady-can-the-wind-blow/ http://rameznaam.com/2015/08/30/how-steady-can-the-wind-blow... 3. http://rameznaam.com/2015/10/14/how-cheap-can-energy-storage-get/ http://rameznaam.com/2015/10/14/how-cheap-can-energy-storage...
- rubyfan 11y ago
  Great analysis. Everything there points to realistic challenges that put a renewable energy led future at least 50 years out (imho). This is great for the future and clean energy technology companies but I'd suspect oil executives to be sizing up their slice of the world energy pie. I'd guess the future looks pretty good for oil for a few more decades.
nordsieck 11y ago
> Aren't OPEC essentially trying to starve out the competition (shale, fracking, solar, wind, etc.)? My understanding is that OPEC has largely been a tragedy of the commons. The members all gain by limiting sale volume, but each member has an incentive to cheat and overproduce their quota. Historically, Saudi Arabia has underproduced to make up for the cheating and to hold the price line, but it sounds like they got fed up with doing that, and decided to show the other OPEC countries what life without OPEC would be like. In regards to the competitors you mentions, you really have to split them into two groups: auto fuel and electric power generation. OPEC really has no effect on electric power generation, mostly because no one burns oil for electricity. The main hydrocarbons people burn are coal and natural gas, and they're already really cheap. It may be that Saudi Arabia wants to harm the shale-oil businesses, particularly the debt financed ones. I don't really know much about the business, but the thing to remember is that even if a business goes bust - its asses don't disappear. They get bought up by someone else. The high prices may discourage discovery work. The effect on currently producing wells is more difficult to predict.
bd_at_rivenhill 11y ago
This is a common misconception. OPEC isn't unified and the Saudi strategy is far more ambitious; they aren't trying to choke out the frackers and other high-price producers, they're trying to choke out the environmentalists. 5 years of prices at this level will put millions more SUVs on US highways and will make maintenance of existing oil-fired infrastructure appear more economical than investment in new clean energy alternatives (solar, wind, etc as you said). Additionally, they get to kick the Iranians in the nuts, which is in line with their stategic goals, squeeze the Russians and the Venezualans, which makes them more popular with the US government which will already be happy about the economic boost from low prices, and yes, they would hopefully be one of the strongest producers standing when oil prices rise again.

by rubyfan 11y ago

mschuster91 11y ago

> since they'd believe OPEC can't pump forever In 50 years, OPEC will still have oil even at current consumption. But consumption is shrinking as energy production is already shifting to renewables and cars will have converted to electro/hydrogen by then.

ams6110 11y ago
Cars won't convert in large numbers if oil-based fuel is a cheaper option.
- mschuster91 11y ago
  You can always convert an Otto-engine car to gas fuel, and by 2050 we will be able to mass-synthesize gas from hydrogen - actually we are able to do so right now, we just don't have large scale plants for that.
- derekp7 11y ago
  Doesn't it take something like $5 of electricity to "fill up" a Tesla (250 miles or so?) That would be like buying gas at $0.50 a gallon. The other side of the coin is the high cost of the battery pack (something like $30K), but that should come down drastically once the Gigafactory is online.
  - Spooky23 11y ago
    Everyone prefers to pay more over time vs make a larger capital investment.
    - justincormack 11y ago
      No. That's why we have credit markets because some people like the opposite. These can then be converted to rentals.
- _ph_ 11y ago
  Only if you do not count in the environmental impact of burning oil.
- alkonaut 11y ago
  True, but once cleaner cars are even remotely close In cost they will no longer be subsidized, instead the dirty ones will be taxed or banned. The yearly road tax for a "dirty" car where I live is about $1000. If that was 2k or 3k they would be off the roads within the year...
thematt 11y ago
Maybe in certain countries, but the big picture is that worldwide barrels/per/day consumption is continuing to increase: 2014: 92,086,000 2013: 91,243,000 2012: 89,846,000 2011: 88,974,000 2010: 87,864,000 Almost all that increase in consumption is attributable to Asia. Any downturn in the curve will be attributable to the economy of China slowing, not renewables taking the place of oil. I don't disagree that the consumption of renewables is growing rapidly, but that doesn't mean they're making a dent in oil consumption. They may down the road at some point, but right now they're a spit in the ocean.
rubyfan 11y ago
Indeed that is the expectation, but to be more specific however they won't keep over producing forever. Oil prices won't be low forever and western oil interests should be claiming rights on new wells that will produce for a long time to come. Also I am curious, do you have evidence that suggests consumption is shifting away from oil to renewables?
- mschuster91 11y ago
  Yeah of course, just look at the rise of solar e.g. in Germany. Thanks to Chinese price dumping, solar cells are cheap as f..k now. Already, gas plants are shut down in Germany and only kept alive as "backup plants" (of course by the consumer who pays extra fees)
  - rubyfan 11y ago
    Any citation? Since I'm not in Germany the anecdote is lost on me.

durkie 11y ago

If you're looking for evidence that non-oil sources will get more profitable, less expensive and widely available in the future, Ramez Naam has a series of excellent blog posts (with lots of cited data) that are a good starting point. The first is from mid-August of 2015, and the last in mid-October, so they are timely as well: 1. http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very-cheap-indeed/ http://rameznaam.com/2015/08/10/how-cheap-can-solar-get-very... 2. http://rameznaam.com/2015/08/30/how-steady-can-the-wind-blow/ http://rameznaam.com/2015/08/30/how-steady-can-the-wind-blow... 3. http://rameznaam.com/2015/10/14/how-cheap-can-energy-storage-get/ http://rameznaam.com/2015/10/14/how-cheap-can-energy-storage...

rubyfan 11y ago
Great analysis. Everything there points to realistic challenges that put a renewable energy led future at least 50 years out (imho). This is great for the future and clean energy technology companies but I'd suspect oil executives to be sizing up their slice of the world energy pie. I'd guess the future looks pretty good for oil for a few more decades.

nordsieck 11y ago

> Aren't OPEC essentially trying to starve out the competition (shale, fracking, solar, wind, etc.)? My understanding is that OPEC has largely been a tragedy of the commons. The members all gain by limiting sale volume, but each member has an incentive to cheat and overproduce their quota. Historically, Saudi Arabia has underproduced to make up for the cheating and to hold the price line, but it sounds like they got fed up with doing that, and decided to show the other OPEC countries what life without OPEC would be like. In regards to the competitors you mentions, you really have to split them into two groups: auto fuel and electric power generation. OPEC really has no effect on electric power generation, mostly because no one burns oil for electricity. The main hydrocarbons people burn are coal and natural gas, and they're already really cheap. It may be that Saudi Arabia wants to harm the shale-oil businesses, particularly the debt financed ones. I don't really know much about the business, but the thing to remember is that even if a business goes bust - its asses don't disappear. They get bought up by someone else. The high prices may discourage discovery work. The effect on currently producing wells is more difficult to predict.

bd_at_rivenhill 11y ago

This is a common misconception. OPEC isn't unified and the Saudi strategy is far more ambitious; they aren't trying to choke out the frackers and other high-price producers, they're trying to choke out the environmentalists. 5 years of prices at this level will put millions more SUVs on US highways and will make maintenance of existing oil-fired infrastructure appear more economical than investment in new clean energy alternatives (solar, wind, etc as you said). Additionally, they get to kick the Iranians in the nuts, which is in line with their stategic goals, squeeze the Russians and the Venezualans, which makes them more popular with the US government which will already be happy about the economic boost from low prices, and yes, they would hopefully be one of the strongest producers standing when oil prices rise again.