6 ms·

Wow, if you told me just 10 years ago the US would become a net exporter of petroleum, I'd have laughed at you. The long-term prospects of oil in the US are poo

Wow, if you told me just 10 years ago the US would become a net exporter of petroleum, I'd have laughed at you. The long-term prospects of oil in the US are poor, however. In the next 2-3 decades, renewables and electric cars will start exerting significant downward pressure on prices. US producers, especially frackers, are high-cost. Fracked oil usually costs $50/barrel or more. For this reason, fracking has only become widespread in the last decade, despite the fact that fracking has was invented in 1947. Saudi makes oil for less than $10 a barrel. They and other low-cost producers are the only ones that will be able to compete after significant demand destruction occurs.

einarvollset 8y ago
Saudi may make oil for less than $10, but they need prices to stay about $80 in order to sustain their massive internal subsidies. Shale breakeven on the other hand has only gotten lower and lower. It’s not long ago that people were predicting break even at $75, now it’s probably $35-$40.
- lenticular 8y ago
  They won't be able to sustain their subsidies, but that does not mean they will stop producing.
  - einarvollset 8y ago
    Stop? Probably not, but my point is rather that oil production by Aramco is dependent on the political regime, which imply that there are additional costs that do not apply to US shale.
mrep 8y ago
We will see. Saudi through OPEC keeps cutting supply to increase prices to maintain their margins/profit. I believe they went in a full price war with the US a few years ago which caused oil to reach record lows but then gave up? I'm not really sure what their long term strategy is considering they keep reducing supply to raise prices while the US is soaking up that supply and their total profits have to be going down since oil prices are not increasing drastically while their production drops while still selling at the presumably the same margin.
Diederich 8y ago
Break even prices for the Permian basin: https://bioage.typepad.com/.a/6a00d8341c4fbe53ef022ad3566378200c-popup https://bioage.typepad.com/.a/6a00d8341c4fbe53ef022ad3566378... Some of them are in the low $20s. On the other hand, Saudi Arabia needs oil to be >$80 in order to balance its budget: https://www.reuters.com/article/us-saudi-arabia-imf/saudi-arabia-needs-oil-at-85-87-a-barrel-to-balance-budget-imf-official-idUSKBN1I30H7 https://www.reuters.com/article/us-saudi-arabia-imf/saudi-ar...
- enraged_camel 8y ago
  The main issue with shale oil is that many (most?) refineries in the US can’t refine it, so it has to be exported, basically. Whereas Saudi oil is “sweet” and pretty easy to refine.
  - einarvollset 8y ago
    That cannot possibly be true. Up until very recently US oil was barred from being exported.
  - howlingfantods 8y ago
    That's patently untrue. Saudi crude is primarily heavy or medium and sour (high in sulfur), the complete opposite of what you're saying.
  - MR4D 8y ago
    You are rather misinformed. For instance,the Exxon refinery in Baytown can refine darn near anything. The EIA has a page to track it and he different types of crude oil here: https://www.eia.gov/opendata/qb.php?category=1292755 https://www.eia.gov/opendata/qb.php?category=1292755
  - souprock 8y ago
    I recall this being the other way: We can refine anything, but other places can not, so they pay more than we would for the nicer oil. We used to mainly get oil from Venezuela, which is extremely sour. Saudi Arabia affects our prices due to the world market, but we have never gotten much oil from there because of the long shipping distance.
genericone 8y ago
Hey if things work out, oil could just become the long-term storage solution for excess renewable energies. Too much wind/solar/nuclear in the grid? Shunt that power towards oil operations equipped for on-demand oil extraction... /s
toomuchtodo 8y ago
> In the next 2-3 decades, renewables and electric cars will start exerting significant downward pressure on prices. "Oil Demand for Cars Is Already Falling: Electric vehicles are displacing hundreds of thousands of barrels a day, exceeding expectations." https://www.bloomberg.com/opinion/articles/2018-11-16/oil-demand-for-cars-and-transportation-is-already-falling https://www.bloomberg.com/opinion/articles/2018-11-16/oil-de... "China just re-shaped the future of the global car market" (the sales growth of ICE vehicles has now peaked in China) https://threadreaderapp.com/thread/1086274497156546560.html https://threadreaderapp.com/thread/1086274497156546560.html China produces enough electric busses to replace London's entire fleet every 5 weeks. https://www.theguardian.com/cities/2018/dec/12/silence-shenzhen-world-first-electric-bus-fleet https://www.theguardian.com/cities/2018/dec/12/silence-shenz...
chkaloon 8y ago
Alaska is screwed

einarvollset 8y ago

Saudi may make oil for less than $10, but they need prices to stay about $80 in order to sustain their massive internal subsidies. Shale breakeven on the other hand has only gotten lower and lower. It’s not long ago that people were predicting break even at $75, now it’s probably $35-$40.

lenticular 8y ago
They won't be able to sustain their subsidies, but that does not mean they will stop producing.
- einarvollset 8y ago
  Stop? Probably not, but my point is rather that oil production by Aramco is dependent on the political regime, which imply that there are additional costs that do not apply to US shale.

mrep 8y ago

We will see. Saudi through OPEC keeps cutting supply to increase prices to maintain their margins/profit. I believe they went in a full price war with the US a few years ago which caused oil to reach record lows but then gave up? I'm not really sure what their long term strategy is considering they keep reducing supply to raise prices while the US is soaking up that supply and their total profits have to be going down since oil prices are not increasing drastically while their production drops while still selling at the presumably the same margin.

Diederich 8y ago

Break even prices for the Permian basin: https://bioage.typepad.com/.a/6a00d8341c4fbe53ef022ad3566378200c-popup https://bioage.typepad.com/.a/6a00d8341c4fbe53ef022ad3566378... Some of them are in the low $20s. On the other hand, Saudi Arabia needs oil to be >$80 in order to balance its budget: https://www.reuters.com/article/us-saudi-arabia-imf/saudi-arabia-needs-oil-at-85-87-a-barrel-to-balance-budget-imf-official-idUSKBN1I30H7 https://www.reuters.com/article/us-saudi-arabia-imf/saudi-ar...

enraged_camel 8y ago
The main issue with shale oil is that many (most?) refineries in the US can’t refine it, so it has to be exported, basically. Whereas Saudi oil is “sweet” and pretty easy to refine.
- einarvollset 8y ago
  That cannot possibly be true. Up until very recently US oil was barred from being exported.
- howlingfantods 8y ago
  That's patently untrue. Saudi crude is primarily heavy or medium and sour (high in sulfur), the complete opposite of what you're saying.
- MR4D 8y ago
  You are rather misinformed. For instance,the Exxon refinery in Baytown can refine darn near anything. The EIA has a page to track it and he different types of crude oil here: https://www.eia.gov/opendata/qb.php?category=1292755 https://www.eia.gov/opendata/qb.php?category=1292755
- souprock 8y ago
  I recall this being the other way: We can refine anything, but other places can not, so they pay more than we would for the nicer oil. We used to mainly get oil from Venezuela, which is extremely sour. Saudi Arabia affects our prices due to the world market, but we have never gotten much oil from there because of the long shipping distance.

genericone 8y ago

Hey if things work out, oil could just become the long-term storage solution for excess renewable energies. Too much wind/solar/nuclear in the grid? Shunt that power towards oil operations equipped for on-demand oil extraction... /s

toomuchtodo 8y ago

> In the next 2-3 decades, renewables and electric cars will start exerting significant downward pressure on prices. "Oil Demand for Cars Is Already Falling: Electric vehicles are displacing hundreds of thousands of barrels a day, exceeding expectations." https://www.bloomberg.com/opinion/articles/2018-11-16/oil-demand-for-cars-and-transportation-is-already-falling https://www.bloomberg.com/opinion/articles/2018-11-16/oil-de... "China just re-shaped the future of the global car market" (the sales growth of ICE vehicles has now peaked in China) https://threadreaderapp.com/thread/1086274497156546560.html https://threadreaderapp.com/thread/1086274497156546560.html China produces enough electric busses to replace London's entire fleet every 5 weeks. https://www.theguardian.com/cities/2018/dec/12/silence-shenzhen-world-first-electric-bus-fleet https://www.theguardian.com/cities/2018/dec/12/silence-shenz...

chkaloon 8y ago

Alaska is screwed