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The break even price is estimated at current pumping rate vs gross profit; but Saudi Arabia can relatively easily increase their pumping rate. The cash cost for

The break even price is estimated at current pumping rate vs gross profit; but Saudi Arabia can relatively easily increase their pumping rate. The cash cost for the Saudis per barrel is sub $5. So they can up their production rate to handle the difference; they are incentivised to do so if they truly believe that their reserves will become a stranded asset. In contrast after running and royalties cash costs in the US are up towards $30/bbl and Canadian oil sands towards $40/bbl. But, the size of wells using these technologies are smaller. And, those wells cost more to discover, and tap. This means US / Canadian oil is more affected by marginal cost, both in terms of price flexibility and liquidity (both cash and oil). And the biggest threat, in the medium term, to oil prices is some of the range of alternative energy sources. Solar costs are coming down quite rapidly. Wind is coming down but more slowly (a chunk of this is in real rather than nominal terms; depending on currency). And nuclear in time will probably come down if increasing investment leads to predicted efficiency gains. Oil isn't going to disappear overnight, but it does have a bordering on existential threat in the medium term. The only largely protected part of this market I can see here is large scale transportation, i.e. sea and air transport.

justincormack 11y ago
Qatar did have a gas to aircraft fuel conversion process, but not really cost effective.
nimos 11y ago
Oil, even at current prices, is significantly more expensive than natural gas and coal for generating electricity. Apart from remote communities oil isn't really used to generate electricity. Oil is valuable because of gasoline. Solar/Wind/Nuclear are competing in a completely different market. The real threat to the medium/long term value of oil is a good battery.
- deleted 11y ago
  [deleted]
- netcan 11y ago
  It's a problem to consider these separate. All energy and certainly all carbon fuels are fungible to a degree. Oil is easier to transport and bottle. Gas is more location and infrastructure dependant. If Gas prices rise or oil prices drop, we'll use oil for electricity generation too.
hueving 11y ago
Solar, wind, and nuclear don't provide a threat to fuel used for transportation, which is a major percentage of how it's used.
- iofj 11y ago
  Until battery tech gets within a decent percentage of a gas tank. Commercial batteries are currently worse than gas tanks, but catching up fast. If they get to 20% volume/weight/price of a gas tank I would predict a switch is going to happen very very fast. Currently commercial batteries are price limited (about the price of a gas tank + filling up the gas tank 400 times, which would keep a normal car moving for 5-10 years), and weight limited at about 5% of the energy/weight of a gas tank. Given how it's evolving, I'd expect another 2-3 years before the necessary technology becomes available. I think 20% will be about the turning point because while gas tanks provide a 1000km range, if you can charge at home, then what's the problem with 200km range, decreasing to 160km over 2-3 years ? Especially if you can solar charge (and combined with a house battery ... watch out) And Teslas don't count. Anything over 20000$ starting price just isn't going to start the migration.
  - _nedR 11y ago
    Its not just the batteries and cars. Can the grid really handle the huge increase in demand ? How much investment needs to be done to upgrade it? How long will that take?
    - semi-extrinsic 11y ago
      And not just the main grid, which is not that hard to upgrade, but we're talking about also upgrading the grid and transformers on every street in the western world.
    - danans 11y ago
      The grid should be fine with a few upgrades and implementation of charging strategies: "The short-term impacts for most utilities should be minimal and localized. There is a possibility, however, of isolated impacts on some distribution transformers and secondary drops, particularly in neighborhoods with older distribution systems including underground systems." http://et.epri.com/Communications_Potential_Impacts_of_Vehicles_on_the_Grid_2011.html http://et.epri.com/Communications_Potential_Impacts_of_Vehic... Edit: added quote.

justincormack 11y ago

Qatar did have a gas to aircraft fuel conversion process, but not really cost effective.

nimos 11y ago

Oil, even at current prices, is significantly more expensive than natural gas and coal for generating electricity. Apart from remote communities oil isn't really used to generate electricity. Oil is valuable because of gasoline. Solar/Wind/Nuclear are competing in a completely different market. The real threat to the medium/long term value of oil is a good battery.

deleted 11y ago
[deleted]
netcan 11y ago
It's a problem to consider these separate. All energy and certainly all carbon fuels are fungible to a degree. Oil is easier to transport and bottle. Gas is more location and infrastructure dependant. If Gas prices rise or oil prices drop, we'll use oil for electricity generation too.

hueving 11y ago

Solar, wind, and nuclear don't provide a threat to fuel used for transportation, which is a major percentage of how it's used.

iofj 11y ago
Until battery tech gets within a decent percentage of a gas tank. Commercial batteries are currently worse than gas tanks, but catching up fast. If they get to 20% volume/weight/price of a gas tank I would predict a switch is going to happen very very fast. Currently commercial batteries are price limited (about the price of a gas tank + filling up the gas tank 400 times, which would keep a normal car moving for 5-10 years), and weight limited at about 5% of the energy/weight of a gas tank. Given how it's evolving, I'd expect another 2-3 years before the necessary technology becomes available. I think 20% will be about the turning point because while gas tanks provide a 1000km range, if you can charge at home, then what's the problem with 200km range, decreasing to 160km over 2-3 years ? Especially if you can solar charge (and combined with a house battery ... watch out) And Teslas don't count. Anything over 20000$ starting price just isn't going to start the migration.
- _nedR 11y ago
  Its not just the batteries and cars. Can the grid really handle the huge increase in demand ? How much investment needs to be done to upgrade it? How long will that take?
  - semi-extrinsic 11y ago
    And not just the main grid, which is not that hard to upgrade, but we're talking about also upgrading the grid and transformers on every street in the western world.
  - danans 11y ago
    The grid should be fine with a few upgrades and implementation of charging strategies: "The short-term impacts for most utilities should be minimal and localized. There is a possibility, however, of isolated impacts on some distribution transformers and secondary drops, particularly in neighborhoods with older distribution systems including underground systems." http://et.epri.com/Communications_Potential_Impacts_of_Vehicles_on_the_Grid_2011.html http://et.epri.com/Communications_Potential_Impacts_of_Vehic... Edit: added quote.