6 ms·

If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage

If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected. There might be some semi-permanent change in people's behaviors if the epidemic continues for many months. Many people will form a habit of doing more things at home/online: more takeouts, more online shopping, live/recorded video classes, virtual meetings, telehealth, etc. Better online services will also spring up to support the habits/practices. Since online activities often save time, the new habits could become a new equilibrium: people/companies who adopt them will often have an economic advantage, influencing others to do the same. Thus, oil demand could be significantly diminished long-term as well.

yingw787 7y ago
If this comes to pass, I'm all for it. If we could take the demand we saw for oil, and put it into demand for high-speed Internet, we could see completely new, blue ocean markets. Imagine a surgeon being able to control a robotic surgery tool from the comforts of his/her home, where you have to have extremely low-latency or guaranteed low-latency networks. Or imagine mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together. All these have been possible to some degree with existing technology, but now we have a paradigm shift and market acceptance that unlocks new business possibilities.
- bluGill 7y ago
  Nice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.
  - yingw787 7y ago
    If last-mile network is too much, you could have a colocated office park / operations center next to a hospital with a dedicated high-speed network. Then each surgeon can schedule / manage a patient without having to walk to a different OR, change scrubs, or be exposed to contagious viruses. Mecheng tasks could be async / queue-based and latency wouldn't matter too much. Regardless, I think it's really important to keep your bias for action high during this period of time.
    - pythonaut_16 7y ago
      How common are robotic surgeries today? Are there benefits to having a machine do the cutting?
      - Retric 7y ago
        It’s common enough not to be a gimmick, but the real advantage is allowing surgery to be done by a limited pool of specialists that can cover wide areas.
        pythonaut_16 7y ago
        So potentially the next step is specialists covering whole regions where the latency of fiber is still acceptable. Then as the equipment and training for telesurgery becomes more available/costs come down, you might see it used for smaller benefits of sterilization and travel/cleaning time within a hospital, even for more common/less specialized surgeries, and even if it's just a surgeon located at the same building or facility.
  - deleted 7y ago
    [deleted]
  - xoa 7y ago
    >Nice to imagine, but the speed of light is too slow for a lot of low latency applications. Is it? Looking around, it seems average visual reaction times (VRTs) are on the order of 250 ms, and even the fastest VRTs are well over 100 ms. A study looking specifically at medical students for auditory and visual reaction times ("A comparative study of visual and auditory reaction times on the basis of gender and physical activity levels of medical first year students" [1]) also seems to support those numbers in the medical context, and while experienced surgeons could be expected to be somewhat faster that paper also links to research indicating hard biological minimums: >"Researches by Kemp show that an auditory stimulus takes only 8–10 ms to reach the brain, but on the other hand, a visual stimulus takes 20-40 ms." If we want to be quite conservative and aim to keep latency to single digit ms, so sub-10ms, then the speed of light in standard fiber gives us an RTT limit of around 1300 miles. Going more conservative and assuming actual route having to essentially follow the legs of a right triangle, that still gives a radius of around 460 miles, with a set of reasonably conservative assumptions. That seems plenty good enough to cover an enormous amount of work-from-home (or at least work-from-different-location) when it comes to actual existing medical practices, where I doubt most doctors at hospitals live >460 miles away. I would agree that there are real issues with the idea, but more in terms of the risks events like network disruptions than the speed of light. ---- 1: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4456887/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4456887/
    - hailwren 7y ago
      I think you've mixed up your logic a bit. A slow visual reaction time means that surgeons are already reacting slower in the real world. Any latency added (!!) by a network further adds to the delay between surgeon reaction and real world stimulus. You argued that when we compare the average VRT additional latency is not large. But you should have argued that there was enough buffer between average VRTs and the time needed for a surgeon to react to allow adding to average VRT. i.e. If we imagine driving a car with a video camera, we don't really care about latency vs reaction time. We care whether latency + reaction < accident threshold.
      - xoa 7y ago
- oldsklgdfth 7y ago
  > mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together that's totally a thing. worked on low-latency, high resolution remoting software for this purpose exactly. Buy a bunch of beefy servers and have scientists remote in from a laptop to run graphic intensive simulations, rather than buy a workstation for everyone.
  - yingw787 7y ago
    I never understood why as a company you wouldn't prefer an on-premises computer cluster with some overhead and give employees thin clients, rather than give everybody MacBook Pros. Thin clients + servers make much more sense to me from a business perspective. They seem much easier to secure (just revoke some keys if you need to fire somebody), much easier to give everybody a reproducible dev env and avoid a lot of shenanigans, and saves money. I wonder how much this costs: https://aws.amazon.com/outposts/ https://aws.amazon.com/outposts/
    - oldsklgdfth 7y ago
      One recurring issue was the customer's network latency. A corporate vpn that bounces traffic around adds enough latency to make a really good solution feel comparable to using vnc. Reorganizing the network adds to the cost of the solutions. I'm currently experiencing this. I live near my office and have sufficiently fast home internet. But connecting to the company network and attempting to work on a machine remotely is very painful. Working locally and commiting or accessing mail is still painful, but managable.
    - hermitdev 7y ago
      I worked for a financial company that ran a private cloud. They provided everyone with beefy workstations (16 physical cores, 32 GB of RAM). 3/4 of those resources were allocated to a VM that ran a custom compute platform that took jobs off of a queue. The explanation was simple. it was easier/cheaper to leverage the workstations than it was to build out the same compute in the datacenter. Granted, there was about a 5 degree temperature differential between under and over my desk, but I didn't complain. Kept me nice and toasty while I worked. This was +10 years ago. Each workstation had 2 Intel Xeons plus an nVidia Quadro for GPU work. Not sure if they've kept up with the tech, but I imagine they have. $10k/workstation wasn't a problem then, and from what I hear, it's probably not a problem now.
- badrabbit 7y ago
  This also means depending on the internet. In the near future even isolated regional ISP outages would have bigget impacts on the economy
bdcravens 7y ago
You'll also see the economy in the fourth largest city in the US - Houston - collapse. It's not just the large energy companies here, but the entire ecosystem of companies that support the energy industry here.
- nugget 7y ago
  Are there any signs of this starting to happen given how low prices have gone?
  - deleted 7y ago
    [deleted]
  - drone 7y ago
    Yes, most of the major oilfield service companies have started layoffs, and they're starting to ramp up. During the last oil downturn, 2015-16, it wasn't just the O&G upstream/downstream companies, it heavily impacted manufacturing (Houston is a big manufacturing center) companies, real-estate, etc. We're already starting to see some of this, but it's also getting swept up with the pandemic lockdown, so it's hard to tell one apart from the other ATM, except that oilfield services are shedding employees quicker than other large firms, anecdotally. Edit: it's worth noting that while the last downturn was heavily impactful on the energy, manufacturing, and real estate sectors, the recovery was pretty quick as the overall impact to the economy was about 1.6% down, and the rest of the overall economy was booming.
  - asdfman123 7y ago
    I used to work in the industry. In the near term after a price drop, companies will still have projects they need to work on, and they have cash buffers on hand so they don't have to axe their whole staff after a bump in the road. However, those cash reserves will quickly burn though. And the worst part is a lot of Houston's economy is buttressed by oilfield services companies, which make all their money off drilling new fracking wells. Right now, it makes 0 sense to drill new fracking wells (-40 sense, to be more accurate), and they have big loans on billions of dollars worth of equipment. It's gonna hurt soon, and it's going to hurt very bad.
ardy42 7y ago
> If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected. Even if they all declared bankruptcy, their infrastructure would still be there. I'd imagine someone would buy it and bring it back online if/when prices recover.
- nopinsight 7y ago
  I agree. It depends on long-term demand change, if any. New investors might be quite reluctant for a while regardless.
- marcosdumay 7y ago
  Depreciation exists, and for mining investments, it's quite fast. Without extra investments, in 3 years most of that infrastructure won't be there anymore.
  - fragmede 7y ago
    Fascinating. Is crude oil extra corrosive or is it something in the environment? Ocean salt water is highly corrosive but then what about equipment on land? Is there something that could be done to make an idled investment last longer?
    - marcosdumay 7y ago
      Not so much corrosive as it is finite. A wheel will gather some oil, and then it's gone, and you need to dig another one.
clomond 7y ago
Factoring in as well impact to air travel (business & leisure), cruising and the likelihood that it will take some time for certain sectors of the world (Travel and Tourism comes to mind) years to reach back to 100% of 2019 levels even in a post vaccine world. This not factoring in the structural changes to demand like electrification, and who knows what kind of energy transition stimulus money could be deployed in the coming quarters to kick start things back. I am thinking it is of ever increasing likelihood that the “most oil consumed in a day ever” in human history could actually behind us.
BurningFrog 7y ago
This was at least originally about a strange oils price war between Saudi and Russia. It just happened to coincide with the pandemic. Though I'd guess by now the pandemic adds fuel to the non-fire.
- manquer 7y ago
  Not really , Chinese demand had dropped sharply in late January due civoid shutdowns . The original production cut discussions were influenced by that significantly. Saudi/Russia likely did not anticipate a global lockdown and decided to get into a price war to keep their absolute revenue numbers stable albeit by increasing production under reduced prices ,that has of course backfired spectacularly.
  - alvah 7y ago
    If the whole situation wasn't so serious, it would be hilarious just how badly-timed the oil price war was!
asdfman123 7y ago
But a key part of this is simply how much Russia and Saudi Arabia want to pump. The whole purpose of the price war was to drive high cost producers out of business, but that combined with the severe drop in demand sent the price to oblivion. Also, this could catalyze a shift to people doing more things remotely. But will that reduce oil consumption significantly? Don't forget about induced demand. Right now, I can head down the freeway in what used to be rush hour without any traffic. If that persists for any length of time, people will start buy McMansions on former farmland until the freeways get packed back up again. They will perhaps order their products that will be produced with petroleum in China, and shipped on container ships, and trucked to Amazon facilities, and then delivered in gas-burning vans. I think as long as the economy keeps growing oil consumption will keep growing, until something cheaper than oil comes along (either through technological breakthrough or subsidy).
- nopinsight 7y ago
  Low traffic won't persist long-term, so most people with a job in a city will not move, unless they and their partner both get stable remote jobs. Increased use for transporting goods is plausible, but generally it is more efficient than transporting people. For most products, lower oil price might not contribute much to lowering its manufacturing cost, only for logistics, so it's unclear how much induced demand will apply to finished goods. Transportation accounts for 69% of US petroleum consumption. https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc... Energy use (from all sources) per unit of GDP has slowly declined over the years.
  - hermitdev 7y ago
    Not to mention people that can't relocate. I, for one, cannot relocate on account of proximity to my step children (whom I've not seen for months due to quarantine). I'd be perfectly happy to work remotely from a site in Montana, given I had decent internet. But, because of my step children, I can't for at least another 7 years. Until all of my step kids are in college, at least, I'm stuck being in the Chicago area (otherwise, my wife would divorce me if she couldn't see her kids).
Shivetya 7y ago
the danger is some of these countries will see no reason to not start something with their neighbors or others

yingw787 7y ago

If this comes to pass, I'm all for it. If we could take the demand we saw for oil, and put it into demand for high-speed Internet, we could see completely new, blue ocean markets. Imagine a surgeon being able to control a robotic surgery tool from the comforts of his/her home, where you have to have extremely low-latency or guaranteed low-latency networks. Or imagine mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together. All these have been possible to some degree with existing technology, but now we have a paradigm shift and market acceptance that unlocks new business possibilities.

bluGill 7y ago
Nice to imagine, but the speed of light is too slow for a lot of low latency applications. After you allow the infrastructure some latency. A dedicated line might work, but without the network that is expensive.
- yingw787 7y ago
  If last-mile network is too much, you could have a colocated office park / operations center next to a hospital with a dedicated high-speed network. Then each surgeon can schedule / manage a patient without having to walk to a different OR, change scrubs, or be exposed to contagious viruses. Mecheng tasks could be async / queue-based and latency wouldn't matter too much. Regardless, I think it's really important to keep your bias for action high during this period of time.
  - pythonaut_16 7y ago
    How common are robotic surgeries today? Are there benefits to having a machine do the cutting?
    - Retric 7y ago
      It’s common enough not to be a gimmick, but the real advantage is allowing surgery to be done by a limited pool of specialists that can cover wide areas.
      - pythonaut_16 7y ago
        So potentially the next step is specialists covering whole regions where the latency of fiber is still acceptable. Then as the equipment and training for telesurgery becomes more available/costs come down, you might see it used for smaller benefits of sterilization and travel/cleaning time within a hospital, even for more common/less specialized surgeries, and even if it's just a surgeon located at the same building or facility.
- deleted 7y ago
  [deleted]
- xoa 7y ago
  >Nice to imagine, but the speed of light is too slow for a lot of low latency applications. Is it? Looking around, it seems average visual reaction times (VRTs) are on the order of 250 ms, and even the fastest VRTs are well over 100 ms. A study looking specifically at medical students for auditory and visual reaction times ("A comparative study of visual and auditory reaction times on the basis of gender and physical activity levels of medical first year students" [1]) also seems to support those numbers in the medical context, and while experienced surgeons could be expected to be somewhat faster that paper also links to research indicating hard biological minimums: >"Researches by Kemp show that an auditory stimulus takes only 8–10 ms to reach the brain, but on the other hand, a visual stimulus takes 20-40 ms." If we want to be quite conservative and aim to keep latency to single digit ms, so sub-10ms, then the speed of light in standard fiber gives us an RTT limit of around 1300 miles. Going more conservative and assuming actual route having to essentially follow the legs of a right triangle, that still gives a radius of around 460 miles, with a set of reasonably conservative assumptions. That seems plenty good enough to cover an enormous amount of work-from-home (or at least work-from-different-location) when it comes to actual existing medical practices, where I doubt most doctors at hospitals live >460 miles away. I would agree that there are real issues with the idea, but more in terms of the risks events like network disruptions than the speed of light. ---- 1: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4456887/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4456887/
  - hailwren 7y ago
    I think you've mixed up your logic a bit. A slow visual reaction time means that surgeons are already reacting slower in the real world. Any latency added (!!) by a network further adds to the delay between surgeon reaction and real world stimulus. You argued that when we compare the average VRT additional latency is not large. But you should have argued that there was enough buffer between average VRTs and the time needed for a surgeon to react to allow adding to average VRT. i.e. If we imagine driving a car with a video camera, we don't really care about latency vs reaction time. We care whether latency + reaction < accident threshold.
    - xoa 7y ago
oldsklgdfth 7y ago
> mecheng offices running simulation jobs in the cloud or an on-premises instead of each having a workstation, and being able to cluster that compute together that's totally a thing. worked on low-latency, high resolution remoting software for this purpose exactly. Buy a bunch of beefy servers and have scientists remote in from a laptop to run graphic intensive simulations, rather than buy a workstation for everyone.
- yingw787 7y ago
  I never understood why as a company you wouldn't prefer an on-premises computer cluster with some overhead and give employees thin clients, rather than give everybody MacBook Pros. Thin clients + servers make much more sense to me from a business perspective. They seem much easier to secure (just revoke some keys if you need to fire somebody), much easier to give everybody a reproducible dev env and avoid a lot of shenanigans, and saves money. I wonder how much this costs: https://aws.amazon.com/outposts/ https://aws.amazon.com/outposts/
  - oldsklgdfth 7y ago
    One recurring issue was the customer's network latency. A corporate vpn that bounces traffic around adds enough latency to make a really good solution feel comparable to using vnc. Reorganizing the network adds to the cost of the solutions. I'm currently experiencing this. I live near my office and have sufficiently fast home internet. But connecting to the company network and attempting to work on a machine remotely is very painful. Working locally and commiting or accessing mail is still painful, but managable.
  - hermitdev 7y ago
    I worked for a financial company that ran a private cloud. They provided everyone with beefy workstations (16 physical cores, 32 GB of RAM). 3/4 of those resources were allocated to a VM that ran a custom compute platform that took jobs off of a queue. The explanation was simple. it was easier/cheaper to leverage the workstations than it was to build out the same compute in the datacenter. Granted, there was about a 5 degree temperature differential between under and over my desk, but I didn't complain. Kept me nice and toasty while I worked. This was +10 years ago. Each workstation had 2 Intel Xeons plus an nVidia Quadro for GPU work. Not sure if they've kept up with the tech, but I imagine they have. $10k/workstation wasn't a problem then, and from what I hear, it's probably not a problem now.
badrabbit 7y ago
This also means depending on the internet. In the near future even isolated regional ISP outages would have bigget impacts on the economy

bdcravens 7y ago

You'll also see the economy in the fourth largest city in the US - Houston - collapse. It's not just the large energy companies here, but the entire ecosystem of companies that support the energy industry here.

nugget 7y ago
Are there any signs of this starting to happen given how low prices have gone?
- deleted 7y ago
  [deleted]
- drone 7y ago
  Yes, most of the major oilfield service companies have started layoffs, and they're starting to ramp up. During the last oil downturn, 2015-16, it wasn't just the O&G upstream/downstream companies, it heavily impacted manufacturing (Houston is a big manufacturing center) companies, real-estate, etc. We're already starting to see some of this, but it's also getting swept up with the pandemic lockdown, so it's hard to tell one apart from the other ATM, except that oilfield services are shedding employees quicker than other large firms, anecdotally. Edit: it's worth noting that while the last downturn was heavily impactful on the energy, manufacturing, and real estate sectors, the recovery was pretty quick as the overall impact to the economy was about 1.6% down, and the rest of the overall economy was booming.
- asdfman123 7y ago
  I used to work in the industry. In the near term after a price drop, companies will still have projects they need to work on, and they have cash buffers on hand so they don't have to axe their whole staff after a bump in the road. However, those cash reserves will quickly burn though. And the worst part is a lot of Houston's economy is buttressed by oilfield services companies, which make all their money off drilling new fracking wells. Right now, it makes 0 sense to drill new fracking wells (-40 sense, to be more accurate), and they have big loans on billions of dollars worth of equipment. It's gonna hurt soon, and it's going to hurt very bad.

ardy42 7y ago

> If the pandemic lasts longer than 6 months, which is quite likely, many high-cost oil producers might not survive. Some would argue this could lead to shortage and a much higher price later on, but long-term oil demand could also be affected. Even if they all declared bankruptcy, their infrastructure would still be there. I'd imagine someone would buy it and bring it back online if/when prices recover.

nopinsight 7y ago
I agree. It depends on long-term demand change, if any. New investors might be quite reluctant for a while regardless.
marcosdumay 7y ago
Depreciation exists, and for mining investments, it's quite fast. Without extra investments, in 3 years most of that infrastructure won't be there anymore.
- fragmede 7y ago
  Fascinating. Is crude oil extra corrosive or is it something in the environment? Ocean salt water is highly corrosive but then what about equipment on land? Is there something that could be done to make an idled investment last longer?
  - marcosdumay 7y ago
    Not so much corrosive as it is finite. A wheel will gather some oil, and then it's gone, and you need to dig another one.

clomond 7y ago

Factoring in as well impact to air travel (business & leisure), cruising and the likelihood that it will take some time for certain sectors of the world (Travel and Tourism comes to mind) years to reach back to 100% of 2019 levels even in a post vaccine world. This not factoring in the structural changes to demand like electrification, and who knows what kind of energy transition stimulus money could be deployed in the coming quarters to kick start things back. I am thinking it is of ever increasing likelihood that the “most oil consumed in a day ever” in human history could actually behind us.

BurningFrog 7y ago

This was at least originally about a strange oils price war between Saudi and Russia. It just happened to coincide with the pandemic. Though I'd guess by now the pandemic adds fuel to the non-fire.

manquer 7y ago
Not really , Chinese demand had dropped sharply in late January due civoid shutdowns . The original production cut discussions were influenced by that significantly. Saudi/Russia likely did not anticipate a global lockdown and decided to get into a price war to keep their absolute revenue numbers stable albeit by increasing production under reduced prices ,that has of course backfired spectacularly.
- alvah 7y ago
  If the whole situation wasn't so serious, it would be hilarious just how badly-timed the oil price war was!

asdfman123 7y ago

But a key part of this is simply how much Russia and Saudi Arabia want to pump. The whole purpose of the price war was to drive high cost producers out of business, but that combined with the severe drop in demand sent the price to oblivion. Also, this could catalyze a shift to people doing more things remotely. But will that reduce oil consumption significantly? Don't forget about induced demand. Right now, I can head down the freeway in what used to be rush hour without any traffic. If that persists for any length of time, people will start buy McMansions on former farmland until the freeways get packed back up again. They will perhaps order their products that will be produced with petroleum in China, and shipped on container ships, and trucked to Amazon facilities, and then delivered in gas-burning vans. I think as long as the economy keeps growing oil consumption will keep growing, until something cheaper than oil comes along (either through technological breakthrough or subsidy).

nopinsight 7y ago
Low traffic won't persist long-term, so most people with a job in a city will not move, unless they and their partner both get stable remote jobs. Increased use for transporting goods is plausible, but generally it is more efficient than transporting people. For most products, lower oil price might not contribute much to lowering its manufacturing cost, only for logistics, so it's unclear how much induced demand will apply to finished goods. Transportation accounts for 69% of US petroleum consumption. https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php https://www.eia.gov/energyexplained/oil-and-petroleum-produc... Energy use (from all sources) per unit of GDP has slowly declined over the years.
- hermitdev 7y ago
  Not to mention people that can't relocate. I, for one, cannot relocate on account of proximity to my step children (whom I've not seen for months due to quarantine). I'd be perfectly happy to work remotely from a site in Montana, given I had decent internet. But, because of my step children, I can't for at least another 7 years. Until all of my step kids are in college, at least, I'm stuck being in the Chicago area (otherwise, my wife would divorce me if she couldn't see her kids).

Shivetya 7y ago

the danger is some of these countries will see no reason to not start something with their neighbors or others