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frmrCapCadet
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Oil and the Economy

Wed Apr 29, 2020 2:16 pm

https://oilprice.com/Energy/Crude-Oil/T ... S-Oil.html

I think Berman is wrong, seriously wrong, on numerous quick predictions he makes. BUT ..... He lays out innumerable facts and connections between oil and the economy which need to be taken seriously. While his subject is not aviation what he has to say seriously impacts the entire aviation industry. Petroleum is just not diesel, nor aviation fuel, nor gasoline. Different sources of petroleum optimally produce only certain percentages of specific important fractions of those fuels. This link reads fairly technical, futuristic, and a little difficult, but definitely worth the time.

moderators feel free to move this, but non-aviation really is not the right place, perhaps technical.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
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casinterest
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Re: Oil and the Economy

Wed Apr 29, 2020 6:29 pm

Berman is wrong because he is discussing the US oil production in a temporary state. When the economy opens, demand will increase as will prices of oil which will allow US producers to reopen wells. In the near term, it should be a surprise to no one that the world economy is going to suffer. The velocity of money has slowed considerably, and consumer habits have been altered. Some of which may be permanent.
Where ever you go, there you are.
 
winginit
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Re: Oil and the Economy

Wed Apr 29, 2020 6:37 pm

casinterest wrote:
Berman is wrong because he is discussing the US oil production in a temporary state. When the economy opens, demand will increase as will prices of oil which will allow US producers to reopen wells. In the near term, it should be a surprise to no one that the world economy is going to suffer. The velocity of money has slowed considerably, and consumer habits have been altered. Some of which may be permanent.


At the same time, especially based on your latter sentences there, I really do think this might be a reckoning for US oil production. Things may have changed, but last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable. How many years until we see that again especially as other oil producing nations continue to keep the taps open? Furthermore, investment continues to flee traditional energy in favor of renewable, and emerging consumers, especially China, will continue to be incentivized to embrace renewable energy.

Point being (and I'm not expert), I really do think it's possible that we've arrived at what was an inevitable permanent inflection point for US oil production unless of course technology emerges that can meaningfully reduce the cost of fracking.
 
GalaxyFlyer
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Re: Oil and the Economy

Wed Apr 29, 2020 7:12 pm

winginit wrote:
casinterest wrote:
Berman is wrong because he is discussing the US oil production in a temporary state. When the economy opens, demand will increase as will prices of oil which will allow US producers to reopen wells. In the near term, it should be a surprise to no one that the world economy is going to suffer. The velocity of money has slowed considerably, and consumer habits have been altered. Some of which may be permanent.


At the same time, especially based on your latter sentences there, I really do think this might be a reckoning for US oil production. Things may have changed, but last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable. How many years until we see that again especially as other oil producing nations continue to keep the taps open? Furthermore, investment continues to flee traditional energy in favor of renewable, and emerging consumers, especially China, will continue to be incentivized to embrace renewable energy.

Point being (and I'm not expert), I really do think it's possible that we've arrived at what was an inevitable permanent inflection point for US oil production unless of course technology emerges that can meaningfully reduce the cost of fracking.


Did you read the linked article? Not just skim it to satisfy your own POV.

Those who see an opportunity for renewable energy in the demise of oil need to think again. The manufacture of solar panels, wind turbines and electric cars depend on diesel all along the supply chain from extraction to distribution of finished products. A world in economic depression will default to the cheapest and most productive fuels. Oil will be cheap and abundant for a long time. There will be little money or appetite for the massive equipment changes that renewable sources require. Climate change will not be high in the consciousness of people struggling to survive.


Or this gem,

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.
 
winginit
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Re: Oil and the Economy

Wed Apr 29, 2020 7:14 pm

GalaxyFlyer wrote:
winginit wrote:
casinterest wrote:
Berman is wrong because he is discussing the US oil production in a temporary state. When the economy opens, demand will increase as will prices of oil which will allow US producers to reopen wells. In the near term, it should be a surprise to no one that the world economy is going to suffer. The velocity of money has slowed considerably, and consumer habits have been altered. Some of which may be permanent.


At the same time, especially based on your latter sentences there, I really do think this might be a reckoning for US oil production. Things may have changed, but last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable. How many years until we see that again especially as other oil producing nations continue to keep the taps open? Furthermore, investment continues to flee traditional energy in favor of renewable, and emerging consumers, especially China, will continue to be incentivized to embrace renewable energy.

Point being (and I'm not expert), I really do think it's possible that we've arrived at what was an inevitable permanent inflection point for US oil production unless of course technology emerges that can meaningfully reduce the cost of fracking.


Did you read the linked article? Not just skim it to satisfy your own POV.

Those who see an opportunity for renewable energy in the demise of oil need to think again. The manufacture of solar panels, wind turbines and electric cars depend on diesel all along the supply chain from extraction to distribution of finished products. A world in economic depression will default to the cheapest and most productive fuels. Oil will be cheap and abundant for a long time. There will be little money or appetite for the massive equipment changes that renewable sources require. Climate change will not be high in the consciousness of people struggling to survive.


Or this gem,

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.


Was there a point you wanted to make or were you just here to troll? I read the article, and there are points I agree with and points that I disagree with. As an example, the claim you've quoted that "oil will be cheap and abundant for a long time" backs my hypothesis that US production will suffer given they require HIGH oil prices to be profitable. Obviously.

So again, what's your point? If you have one - state it. If not, shoo.
 
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casinterest
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Re: Oil and the Economy

Wed Apr 29, 2020 7:18 pm

winginit wrote:
casinterest wrote:
Berman is wrong because he is discussing the US oil production in a temporary state. When the economy opens, demand will increase as will prices of oil which will allow US producers to reopen wells. In the near term, it should be a surprise to no one that the world economy is going to suffer. The velocity of money has slowed considerably, and consumer habits have been altered. Some of which may be permanent.


At the same time, especially based on your latter sentences there, I really do think this might be a reckoning for US oil production. Things may have changed, but last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable. How many years until we see that again especially as other oil producing nations continue to keep the taps open? Furthermore, investment continues to flee traditional energy in favor of renewable, and emerging consumers, especially China, will continue to be incentivized to embrace renewable energy.

Point being (and I'm not expert), I really do think it's possible that we've arrived at what was an inevitable permanent inflection point for US oil production unless of course technology emerges that can meaningfully reduce the cost of fracking.



Frackling has never "needed oil to be at 70" per barrel, but boy did it make it profitable when Oil was over 100 a barrel. Most estimate 30-40 dollars is profitable, but I assume it is much lower now that some investments in technology have been made. Okie might have a better idea on this.

I don't think US oil is at a permanent inflection point as much as oil demand itself could possibly be. The advent of Alternative Energy, Fuel efficient/Electric vehicles/ and the possibility of more people working from home will muddy the waters for awhile, but oil itself is going to be a supply demand issue. Many oil producing economies will work hard to find a price production balance, and businesses being businesses they will over compensate and demand will shoot up as will prices and the whole cycle will start again.
Where ever you go, there you are.
 
winginit
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Re: Oil and the Economy

Wed Apr 29, 2020 7:29 pm

casinterest wrote:
Frackling has never "needed oil to be at 70" per barrel, but boy did it make it profitable when Oil was over 100 a barrel. Most estimate 30-40 dollars is profitable, but I assume it is much lower now that some investments in technology have been made. Okie might have a better idea on this.


That would certainly be news to me given what I've previously read, but if true that would obviously change my take completely.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.
 
LCDFlight
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Re: Oil and the Economy

Wed Apr 29, 2020 7:35 pm

It used to be true that the US economy and oil were inextricably linked. We imported a lot of oil, and, for a time, the USA was the _majority_ of the global economy. That will not occur again. The US also is much more energy efficient per dollar of production (less energy-intensive). We can produce a lot of stuff with our computers without using much oil. As a result, oil prices do not have nearly as large effect on the overall US economy as before (see 1973-74 recession). Notice we are basically just talking about the profitability of extraction now. Everybody knows that is cyclical, and it is down right now. But that is not a huge fraction of the US economy. Overall, the US is quite balanced to be happy at either high oil prices or low. For me personally, oil prices are not a big deal in my monthly budget. The price of diesel affects the cost of goods transported by truck, but trucks and trains (and ships) are extremely fuel efficient now. So it is not a very serious effect on the final buyer. It is certainly a big deal for the transport industry.
 
bmartino99
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Re: Oil and the Economy

Wed Apr 29, 2020 7:49 pm

winginit wrote:

That would certainly be news to me given what I've previously read, but if true that would obviously change my take completely.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.



When is this quote from? I've spent years in the upstream side of the business before switching over to the terminal business. The technology is changing rapidly. I'll stick to what I know best, but only 5 years ago drilling a horizontal well in West Texas required a 4 man directional service crew. The crew consisted of a day and night directional driller and a day and night MWD hand. Obviously these technical positions were well paid back then, with a senior directional driller making $1500+ USD a day. Most of these jobs now are ran with one directional driller onsite with the rest operated remotely. One remote operator can monitor 4-8 drilling jobs depending on complexity. A directional crew is only one part of making a well happen, so similar savings may be present throughout the operation.

Automation like this has a high up front cost to implement, but once implemented it is much cheaper than paying large crews. Some companies today still operate under the assumption oil will recover back to $100/bbl and resist the up front cost of automation. As more companies accept that $50/bbl may be the new oil reality, they'll be forced to invest further in automation to reduce costs or they won't be competitive.
 
winginit
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Re: Oil and the Economy

Wed Apr 29, 2020 7:51 pm

bmartino99 wrote:
winginit wrote:

That would certainly be news to me given what I've previously read, but if true that would obviously change my take completely.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.



When is this quote from? I've spent years in the upstream side of the business before switching over to the terminal business. The technology is changing rapidly. I'll stick to what I know best, but only 5 years ago drilling a horizontal well in West Texas required a 4 man directional service crew. The crew consisted of a day and night directional driller and a day and night MWD hand. Obviously these technical positions were well paid back then, with a senior directional driller making $1500+ USD a day. Most of these jobs now are ran with one directional driller onsite with the rest operated remotely. One remote operator can monitor 4-8 drilling jobs depending on complexity. A directional crew is only one part of making a well happen, so similar savings may be present throughout the operation.

Automation like this has a high up front cost to implement, but once implemented it is much cheaper than paying large crews. Some companies today still operate under the assumption oil will recover back to $100/bbl and resist the up front cost of automation. As more companies accept that $50/bbl may be the new oil reality, they'll be forced to invest further in automation to reduce costs or they won't be competitive.


Quote is from August 2019, but interesting that things continue to change at a rapid clip based on what you've said.
 
bmartino99
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Re: Oil and the Economy

Wed Apr 29, 2020 7:58 pm

winginit wrote:
bmartino99 wrote:
winginit wrote:

That would certainly be news to me given what I've previously read, but if true that would obviously change my take completely.




When is this quote from? I've spent years in the upstream side of the business before switching over to the terminal business. The technology is changing rapidly. I'll stick to what I know best, but only 5 years ago drilling a horizontal well in West Texas required a 4 man directional service crew. The crew consisted of a day and night directional driller and a day and night MWD hand. Obviously these technical positions were well paid back then, with a senior directional driller making $1500+ USD a day. Most of these jobs now are ran with one directional driller onsite with the rest operated remotely. One remote operator can monitor 4-8 drilling jobs depending on complexity. A directional crew is only one part of making a well happen, so similar savings may be present throughout the operation.

Automation like this has a high up front cost to implement, but once implemented it is much cheaper than paying large crews. Some companies today still operate under the assumption oil will recover back to $100/bbl and resist the up front cost of automation. As more companies accept that $50/bbl may be the new oil reality, they'll be forced to invest further in automation to reduce costs or they won't be competitive.


Quote is from August 2019, but interesting that things continue to change at a rapid clip based on what you've said.


We face the same challenges in the pipeline and terminal side of the business. While most pipelines are operated from a central control center, most terminals still have operators on site working 24/7. A terminal operator may make only one or two tank lineups during a 12 hour shift and these aren't usually low paid folks. At some break point, it makes more sense for a company to invest in the communication and control equipment to automate that individual's job. On the terminal side, we are far more regulated than upstream and that's mainly what holds us back at this point. Government regulators write regulations like automation tech is still back in the 90's.
 
GalaxyFlyer
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Re: Oil and the Economy

Wed Apr 29, 2020 9:21 pm

winginit wrote:
GalaxyFlyer wrote:
winginit wrote:

At the same time, especially based on your latter sentences there, I really do think this might be a reckoning for US oil production. Things may have changed, but last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable. How many years until we see that again especially as other oil producing nations continue to keep the taps open? Furthermore, investment continues to flee traditional energy in favor of renewable, and emerging consumers, especially China, will continue to be incentivized to embrace renewable energy.

Point being (and I'm not expert), I really do think it's possible that we've arrived at what was an inevitable permanent inflection point for US oil production unless of course technology emerges that can meaningfully reduce the cost of fracking.


Did you read the linked article? Not just skim it to satisfy your own POV.

Those who see an opportunity for renewable energy in the demise of oil need to think again. The manufacture of solar panels, wind turbines and electric cars depend on diesel all along the supply chain from extraction to distribution of finished products. A world in economic depression will default to the cheapest and most productive fuels. Oil will be cheap and abundant for a long time. There will be little money or appetite for the massive equipment changes that renewable sources require. Climate change will not be high in the consciousness of people struggling to survive.


Or this gem,

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.


Was there a point you wanted to make or were you just here to troll? I read the article, and there are points I agree with and points that I disagree with. As an example, the claim you've quoted that "oil will be cheap and abundant for a long time" backs my hypothesis that US production will suffer given they require HIGH oil prices to be profitable. Obviously.

So again, what's your point? If you have one - state it. If not, shoo.


Point is you’re riding your hobby horse of renewable energy when the article clearly states the economic case for renewables will be deeply hobbled by the collapse of oil prices. But, those with an agenda would rather ignore inconvenient facts and intimidate opposing views. Typical.
 
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Tugger
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Re: Oil and the Economy

Wed Apr 29, 2020 10:14 pm

I don't know why anyone thinks "renewables" are hobbled by oil prices any more than the oil economy (companies and countries) itself is hobbled by low oil prices. Everyone that depends on oil is threatened by the current price plunge, and I would say they suffer more harm than any harm to renewables.

For better or worse oil prices will not stay low any longer than it takes demand to recover. Oil needs to be over $45 and really can't go to far above $85 anymore without risking increasing demand for renewables (and really for OPEC the risk of that price is more fracking).

Tugg
I don’t know that I am unafraid to be myself, but it is hard to be somebody else. - W. Shatner
There are many kinds of sentences that we think state facts about the world but that are really just expressions of our attitudes. - F. Ramsey
 
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Aesma
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Re: Oil and the Economy

Thu Apr 30, 2020 1:31 am

Shale is supposedly cheap, yet oil companies take hundreds of billions of credit to drill, to the point of risking the collapse of the whole US financial system now.

As others have said, I don't believe China or Europe will change tack regarding renewables. In fact I'm fairly sure Europe at least will double down, now that we're printing money, might as well print it for that. Nobody is going to print to save oil companies, except maybe Trump, that man is firmly stuck in the past.

The article makes the point I was making a couple of weeks ago in another thread, that the US was producing too much oil for its own good, and caused this collapse. I knew that there was also an issue with refineries and the various qualities of oil, but I didn't know it was that bad. Basically US oil is useless without imports.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
winginit
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Re: Oil and the Economy

Thu Apr 30, 2020 6:24 pm

GalaxyFlyer wrote:
winginit wrote:
GalaxyFlyer wrote:

Did you read the linked article? Not just skim it to satisfy your own POV.



Or this gem,



Was there a point you wanted to make or were you just here to troll? I read the article, and there are points I agree with and points that I disagree with. As an example, the claim you've quoted that "oil will be cheap and abundant for a long time" backs my hypothesis that US production will suffer given they require HIGH oil prices to be profitable. Obviously.

So again, what's your point? If you have one - state it. If not, shoo.


Point is you’re riding your hobby horse of renewable energy when the article clearly states the economic case for renewables will be deeply hobbled by the collapse of oil prices. But, those with an agenda would rather ignore inconvenient facts and intimidate opposing views. Typical.


30%+ of in-state power generation in states like California (you know, tiny little California) already come from renewable and that's a trend that will only grow, in some places rapidly, over time regardless of what the price of oil does. But by all means if you'd like to consider that a hobby horse you're entitled to your opinion. Now shoo.
 
GalaxyFlyer
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Re: Oil and the Economy

Thu Apr 30, 2020 9:10 pm

And that’s why you’re paying 60% more than the national average per KWH, I guess. Do you think that can triple solar generation over the next decade to meet the law?
 
nitrohelper
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Re: Oil and the Economy

Thu Apr 30, 2020 9:50 pm

last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable


You must have heard that a long time ago - now it's profitable at $35 - the fracking technology has greatly improved over the last 5-10 years - the biggest problem in west Texas has been the lack of pipeline capacity to move the volumes to the refiners...
 
winginit
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Re: Oil and the Economy

Fri May 01, 2020 12:23 am

nitrohelper wrote:
last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable


You must have heard that a long time ago - now it's profitable at $35 - the fracking technology has greatly improved over the last 5-10 years - the biggest problem in west Texas has been the lack of pipeline capacity to move the volumes to the refiners...


Again I cited my August 2019 source that backs my previous claim. I welcome being proven wrong but haven't yet seen a source saying that in aggregate $35 per barrel is profitable for most fracking operations. If you have one I should like to see it.
 
frmrCapCadet
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Re: Oil and the Economy

Fri May 01, 2020 1:04 am

And of course oil is far below $35 a barrel. And that 'profitable' as I understand it does not include paying off one boatload of debt the industry has accrued.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
LJ
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Re: Oil and the Economy

Fri May 01, 2020 5:06 am

winginit wrote:
nitrohelper wrote:
last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable


You must have heard that a long time ago - now it's profitable at $35 - the fracking technology has greatly improved over the last 5-10 years - the biggest problem in west Texas has been the lack of pipeline capacity to move the volumes to the refiners...


Again I cited my August 2019 source that backs my previous claim. I welcome being proven wrong but haven't yet seen a source saying that in aggregate $35 per barrel is profitable for most fracking operations. If you have one I should like to see it.


The article acknowledge that there is a cost price of USD 40 for some wells.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.


Therefore, the range is USD 40 - 90, whereby the article states that capital investment and additional cost to production are higher for shale oil than conventional oil. Thus whilst the actual cost price of running a shale operation can be as low as USD 35, the total cost of the entire chain and investment are ensuring that the total cost price can be higher.
 
olle
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Re: Oil and the Economy

Fri May 01, 2020 11:37 am

When the world recovers from this disaster in 3-4 years time the main importers EU27 and China will have most new transport and persionalnewvehicles be some kind of electrical, with an increasing rate until 2030 when a major part will be electrical. EU27 will in the same time force a major part of Diesel and gasoline to be from renewable sources in the same period.

The oil exporters, USA, ME etc will by then either reduce production or increase its consumption.

In some way the only oil producer ready for this seems to be Iran ,UK and perhaps Norway.;-)
 
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Aesma
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Re: Oil and the Economy

Fri May 01, 2020 12:36 pm

In July my 4 years old diesel company car gets renewed, I get the same one with a gas engine. I expect this to be my last new liquid fuelled car. I could already get an electric one, but since all my colleagues have the gas one, it was deemed better to get the same as them.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
bmartino99
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Re: Oil and the Economy

Fri May 01, 2020 1:27 pm

nitrohelper wrote:
last I heard fracking needed the price of oil at something to the tune of $70 per barrel to be profitable


You must have heard that a long time ago - now it's profitable at $35 - the fracking technology has greatly improved over the last 5-10 years - the biggest problem in west Texas has been the lack of pipeline capacity to move the volumes to the refiners...


And this will be solved quickly as a Exxon/Plains joint venture is building a 650 mile pipeline from West Texas to Houston. 36" pipeline which will be able to flow 1 million bbls/day.

I don't know if construction has been paused due to COVID-19, but Exxon is still saying this project will be online Q1 2021.
 
winginit
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Re: Oil and the Economy

Fri May 01, 2020 5:39 pm

LJ wrote:
winginit wrote:
nitrohelper wrote:

You must have heard that a long time ago - now it's profitable at $35 - the fracking technology has greatly improved over the last 5-10 years - the biggest problem in west Texas has been the lack of pipeline capacity to move the volumes to the refiners...


Again I cited my August 2019 source that backs my previous claim. I welcome being proven wrong but haven't yet seen a source saying that in aggregate $35 per barrel is profitable for most fracking operations. If you have one I should like to see it.


The article acknowledge that there is a cost price of USD 40 for some wells.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.


Therefore, the range is USD 40 - 90, whereby the article states that capital investment and additional cost to production are higher for shale oil than conventional oil. Thus whilst the actual cost price of running a shale operation can be as low as USD 35, the total cost of the entire chain and investment are ensuring that the total cost price can be higher.


Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.
 
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casinterest
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Re: Oil and the Economy

Fri May 01, 2020 5:47 pm

winginit wrote:
LJ wrote:
winginit wrote:

Again I cited my August 2019 source that backs my previous claim. I welcome being proven wrong but haven't yet seen a source saying that in aggregate $35 per barrel is profitable for most fracking operations. If you have one I should like to see it.


The article acknowledge that there is a cost price of USD 40 for some wells.

Some shale oil wells may have a break-even point of $40 a barrel over their production life despite the higher drilling and fracking costs. However, many sources put the average break-even point for a fracked horizontal well above $60 a barrel with the higher-cost wells coming in at over $90 a barrel.


Therefore, the range is USD 40 - 90, whereby the article states that capital investment and additional cost to production are higher for shale oil than conventional oil. Thus whilst the actual cost price of running a shale operation can be as low as USD 35, the total cost of the entire chain and investment are ensuring that the total cost price can be higher.


Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.


https://www.investopedia.com/articles/i ... barrel.asp
"Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put fracking costs at the $50 per barrel range.

At less than a price point around $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow positive even as prices fall below $50 per barrel. (For more, see: How Fracking Affects Natural Gas Prices.)"


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.
Where ever you go, there you are.
 
olle
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Re: Oil and the Economy

Fri May 01, 2020 5:57 pm

casinterest wrote:
winginit wrote:
LJ wrote:

The article acknowledge that there is a cost price of USD 40 for some wells.



Therefore, the range is USD 40 - 90, whereby the article states that capital investment and additional cost to production are higher for shale oil than conventional oil. Thus whilst the actual cost price of running a shale operation can be as low as USD 35, the total cost of the entire chain and investment are ensuring that the total cost price can be higher.


Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.


https://www.investopedia.com/articles/i ... barrel.asp
"Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put fracking costs at the $50 per barrel range.

At less than a price point around $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow positive even as prices fall below $50 per barrel. (For more, see: How Fracking Affects Natural Gas Prices.)"


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.


Canada oil and deep sea will go away first.

What is the cost in Canada, North sea and Mexican golf?

The problem for USA based oil is the huge debt they have. Oil industry in US could cause a new credit crunch like 2008 it seems.
 
User avatar
casinterest
Posts: 11562
Joined: Sat Feb 12, 2005 5:30 am

Re: Oil and the Economy

Fri May 01, 2020 6:17 pm

olle wrote:
casinterest wrote:
winginit wrote:

Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.


https://www.investopedia.com/articles/i ... barrel.asp
"Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put fracking costs at the $50 per barrel range.

At less than a price point around $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow positive even as prices fall below $50 per barrel. (For more, see: How Fracking Affects Natural Gas Prices.)"


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.


Canada oil and deep sea will go away first.

What is the cost in Canada, North sea and Mexican golf?

The problem for USA based oil is the huge debt they have. Oil industry in US could cause a new credit crunch like 2008 it seems.



The US wells are all capping currently, and letting OPEC go for it with their price war, but at some point it will be profitable to open the wells again. Someone ( whatever bankruptcies and sales happen) will open when the prices is right.
Where ever you go, there you are.
 
winginit
Posts: 2868
Joined: Sat Feb 23, 2013 9:23 pm

Re: Oil and the Economy

Fri May 01, 2020 6:36 pm

casinterest wrote:
winginit wrote:
LJ wrote:

The article acknowledge that there is a cost price of USD 40 for some wells.



Therefore, the range is USD 40 - 90, whereby the article states that capital investment and additional cost to production are higher for shale oil than conventional oil. Thus whilst the actual cost price of running a shale operation can be as low as USD 35, the total cost of the entire chain and investment are ensuring that the total cost price can be higher.


Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.


https://www.investopedia.com/articles/i ... barrel.asp
"Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put fracking costs at the $50 per barrel range.

At less than a price point around $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow positive even as prices fall below $50 per barrel. (For more, see: How Fracking Affects Natural Gas Prices.)"


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.


Exactly what I was looking for. Thank you.
 
User avatar
casinterest
Posts: 11562
Joined: Sat Feb 12, 2005 5:30 am

Re: Oil and the Economy

Fri May 01, 2020 7:35 pm

winginit wrote:
casinterest wrote:
winginit wrote:

Right. But others have made claims in this thread that fracking, seemingly on average, is profitable at $35 per barrel, and I've still not yet seen a source for that. A range of say $40 to $90+ certainly does not back that.


https://www.investopedia.com/articles/i ... barrel.asp
"Fracking is expensive, but still less costly than the methods used to obtain oil from the wells mentioned above. According to Reuters, estimates put the break-even point for fracking at around $50 per barrel, but other estimates put it as low as $30 per barrel. This $30 per barrel figure is much lower than the total cost per barrel more widely published, but there is an important distinction between the estimates that put fracking costs at the $50 per barrel range.

At less than a price point around $50 per barrel, oil and gas companies are less likely to explore and drill for new oil accessible through fracking, but existing operations may still be cash-flow positive. Once the expensive exploration and initial drilling are complete, existing wells can continue to operate and stay cash-flow positive even as prices fall below $50 per barrel. (For more, see: How Fracking Affects Natural Gas Prices.)"


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.


Exactly what I was looking for. Thank you.



I was hoping Okie would chime in with a more nuanced answer, but I guess this is as good as we will get for now.
Where ever you go, there you are.
 
winginit
Posts: 2868
Joined: Sat Feb 23, 2013 9:23 pm

Re: Oil and the Economy

Mon May 04, 2020 10:00 pm

casinterest wrote:
winginit wrote:
casinterest wrote:

https://www.investopedia.com/articles/i ... barrel.asp


So 50 to explore new wells. 30 to continue existing wells. Both well above where Oil stands today.


Exactly what I was looking for. Thank you.



I was hoping Okie would chime in with a more nuanced answer, but I guess this is as good as we will get for now.


I'm not denying what's been said here, but it's worth pointing out that Schwab's Chief Investment Strategist posted this today, reinforcing the notion that shale needs $60 per barrel to explore new wells.
 
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Pellegrine
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Re: Oil and the Economy

Mon May 04, 2020 10:08 pm

I've invested in 6 fracked oil/gas projects in the past 5 years, so that's my experience. Nice royalties and even better tax benefits in the US. I've never seen any profitable numbers below $30, so I think the $30-50 figure is a decent range.

Actually, oil may spike in spring of 2021. With almost everyone shutting in somewhat and cutting capex, available oil capacity is going to shrink through natural declines in wells, because of underinvestment, and because of underproduction. Shutting in an oil well can actually damage it, and prevent it from producing to its full potential in the future. It's one reason why many US producers are resistant to it.
We fly JETS, we don't fly donkeys.
 
Okie
Posts: 4146
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Re: Oil and the Economy

Wed May 06, 2020 12:26 am

casinterest wrote:
I was hoping Okie would chime in with a more nuanced answer, but I guess this is as good as we will get for now.


It just depends on the play. The Permian Basin, The Stack and Scoop plays right off hand can be profitable at $35 bbl if they do not have a bunch of overrides.
Other plays like the Mississippi Lime where I have seen 8 to 1 ratio of saltwater to high viscosity oil not so. Oil is low value and cost of drilling a second disposal well.

The biggest issue is infrastructure.
Power- Just because there is a single phase line providing power to a farm house nearby does not mean the utility/coop wants to upgrade their infrastructure to three phase or have the capacity to even sell on the commercial market, although we have upgraded a bunch of old static inverters to VFD's when supplied with single phase power. Roughly a 100K a mile for service and you may have to run 20 miles or more to buy power plus pay a lot of farmers for the use of their easement.
Saltwater disposal gets expensive especially if you have to truck it to the disposal well and there is no pipeline.
No Pipeline for the oil and pay for truck charges also an issue.

My best estimate has been for years at $60-$65. That causes lots of things to happen.
A. It causes Nat Gas Prices to rise to make that much more clean for industrial heat and processes than oil.
B. It causes Solar and Wind to have to compete for market share and advance their technology and become competitive.
C. $60 oil will allow increased development of a "green" fuel. The large oil companies are seriously invested in that technology. Like it or not there is no replacement for #2 fuel/diesel, Jet A, kerosene range of energy per pound and no Unobtanium to be found to make batteries with enough energy density for long haul travel on airplane or vehicle.

bmartino99 wrote:
When is this quote from? I've spent years in the upstream side of the business before switching over to the terminal business. The technology is changing rapidly. I'll stick to what I know best, but only 5 years ago drilling a horizontal well in West Texas required a 4 man directional service crew. The crew consisted of a day and night directional driller and a day and night MWD hand. Obviously these technical positions were well paid back then, with a senior directional driller making $1500+ USD a day. Most of these jobs now are ran with one directional driller onsite with the rest operated remotely. One remote operator can monitor 4-8 drilling jobs depending on complexity. A directional crew is only one part of making a well happen, so similar savings may be present throughout the operation.
[/quote]

We have been pushing that software for more than a decade and the drill companies were slow to adapt but I am not going to get into that.
The directional driller will become as extinct as a navigator or flight engineer on an airplane.

Okie
 
User avatar
casinterest
Posts: 11562
Joined: Sat Feb 12, 2005 5:30 am

Re: Oil and the Economy

Wed May 06, 2020 6:12 pm

Okie wrote:
casinterest wrote:
I was hoping Okie would chime in with a more nuanced answer, but I guess this is as good as we will get for now.


It just depends on the play. The Permian Basin, The Stack and Scoop plays right off hand can be profitable at $35 bbl if they do not have a bunch of overrides.
Other plays like the Mississippi Lime where I have seen 8 to 1 ratio of saltwater to high viscosity oil not so. Oil is low value and cost of drilling a second disposal well.

The biggest issue is infrastructure.
Power- Just because there is a single phase line providing power to a farm house nearby does not mean the utility/coop wants to upgrade their infrastructure to three phase or have the capacity to even sell on the commercial market, although we have upgraded a bunch of old static inverters to VFD's when supplied with single phase power. Roughly a 100K a mile for service and you may have to run 20 miles or more to buy power plus pay a lot of farmers for the use of their easement.
Saltwater disposal gets expensive especially if you have to truck it to the disposal well and there is no pipeline.
No Pipeline for the oil and pay for truck charges also an issue.

My best estimate has been for years at $60-$65. That causes lots of things to happen.
A. It causes Nat Gas Prices to rise to make that much more clean for industrial heat and processes than oil.
B. It causes Solar and Wind to have to compete for market share and advance their technology and become competitive.
C. $60 oil will allow increased development of a "green" fuel. The large oil companies are seriously invested in that technology. Like it or not there is no replacement for #2 fuel/diesel, Jet A, kerosene range of energy per pound and no Unobtanium to be found to make batteries with enough energy density for long haul travel on airplane or vehicle.

bmartino99 wrote:
When is this quote from? I've spent years in the upstream side of the business before switching over to the terminal business. The technology is changing rapidly. I'll stick to what I know best, but only 5 years ago drilling a horizontal well in West Texas required a 4 man directional service crew. The crew consisted of a day and night directional driller and a day and night MWD hand. Obviously these technical positions were well paid back then, with a senior directional driller making $1500+ USD a day. Most of these jobs now are ran with one directional driller onsite with the rest operated remotely. One remote operator can monitor 4-8 drilling jobs depending on complexity. A directional crew is only one part of making a well happen, so similar savings may be present throughout the operation.


We have been pushing that software for more than a decade and the drill companies were slow to adapt but I am not going to get into that.
The directional driller will become as extinct as a navigator or flight engineer on an airplane.

Okie[/quote]

Thank you for your post. Competition always seems to drive optimization in the long run,
Where ever you go, there you are.

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