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The Saudis Are Lying About Their Oil Production? (oilprice.com)
329 points by olivermarks 24 days ago | hide | past | web | favorite | 280 comments



Comment by Dr Mamdouh G Salameh, International Oil Economist Visiting Professor of Energy Economics at ESCP Europe Business School, London is also interesting. No way of verifying accuracy.

'Having done a lot of research and analysis for years about Saudi proven oil reserves, I reached the final conclusion that Saudi reserves couldn’t be more than 55 billion barrels (bb) rather than the 266 bb the Saudi have been claiming for years.

Moreover, the Saudis haven’t been transparent enough about their production capacity. Their oil production peaked in 2005 at 9.65 million barrels a day (mbd) and has been in decline since. In my estimate, their production capacity doesn’t exceed 8.5 mbd. Moreover, they never had a spare capacity of 2 mbd as they have been claiming because to have such a spare capacity would mean that their production capacity is 12 mbd and this figure has never been tested. When they say they are producing 10 mbd, at least 1.5 mbd come from their stored crude.

With estimated stored crude oil of 130 million barrels , the Saudis could continue to meet their customer needs for less than a month after which their stored oil would have been totally exhausted. The proof they aren’t telling the truth about the timetable for repairs is that they have been telling their customers that some lighter grades would likely be replaced with heavier crude grades.

The truth about Saudi oil potential and reserves will eventually come out. And when it does, the global oil market will get the shock of its life with a horrendous global oil crisis to match.'


>the global oil market will get the shock of its life with a horrendous global oil crisis to match.

It won't.

There is a very large amount of oil production on hold or at low capacity in North America because the prices are currently too low and very much expected to go higher in the future.

Prices will rise up to 50% but that isn't much of a crisis or unprecedented.

Renewables will become more attractive and their growth will accelerate a little.


> "Prices will rise up to 50% but that isn't much of a crisis "

If a 50% price increase isn't a crisis, then what is?


Oil prices are VERY VOLATILE in the last 50 years the number of times the price of oil has either halved or doubled with a year is not uncommon. It has occurred at least a dozen times.

And more importantly, oil prices are less important to the economy than most people believe.

TL: DR - Oil prices are not that important


"And more importantly, oil prices are less important to the economy than most people believe."

ROTFL

https://oilvoice.com/Opinion/24972/Our-Finite-World-Why-We-G...


[flagged]


This just isn't true at all. Developed economies rely more on oil than less developed ones. Plus, more of that is driven by prices at source because in undeveloped countries delivery effort is a big price component. Here is some context on the volatility of oil: https://www.thebalance.com/oil-price-history-3306200

10y ago we were at almost twice the price and developing countries weren't "on strike full-retard" or seeing oil driven defaults.

The closest to a country really being screwed recently by oil prices have been exporters, especially Russia which depends on higher prices to balance its budgets and had been harmed byow prices.

That's not to say that oil prices "aren't important". It's just that every industry/economy/etc had been forced to learn to weather price volatility. That's. Why there is such a developed futures etc market.


Depends on how you define "on strike full retard", at least where I live (Indonesia), it is spot on.

Some context: Indonesian govt. subsidizes fuel to quite a large degree, up to ~50% of relative to petrol prices. Over the years, they've been trying to draw down, but it's a touchy subject.

Last year, ~10% of state budget was spent on fuel subsidies (to give us a sense of scale).

sources: indonesian Ministry of Finance state budget 2018 https://www.kemenkeu.go.id/apbn2018

CNN indonesia post saying fuel subsidies was over the alloted budget: https://www.cnnindonesia.com/ekonomi/20190102172609-532-3580... - sub)

edit: some posterity


Thanks for cluing me into the interesting history of Indonesian subsidies. Here's a good analysis for English readers [1]. It looks like fuel subsidies were very high 5y ago, when oil was at 2x today, and have come off significantly since.

I'd argue that this is exactly the sort of price stabilization mechanism that makes oil volatility less scary it sounds on its face. The government is centralizing (and, more controversially, socializing) the financial cost of creating internal price stability. This is actually pretty common, and I'm not sure 10% of budget (at peak) is as outsized as it sounds. In the USA, this takes the form of buying and releasing oil from the strategic reserve, but also in a mountain of foreign policy (read: military) spending on maintaining stable supply lines for energy trading.

[1] https://worldview.stratfor.com/article/indonesia-energy-refo...


Fuel subsidies in a lot of developing countries are politically weird. They mostly benefit wealthier people, but are most ardently supported by poorer people. It's difficult to disentangle.


People like free stuff, and after some time, it becomes expected.

Moreover, think of it in the opposite direction. Imagine a getting hit with a 10% tax increase even if a richer guy gets 15%. Him being taxed more doesn't necessarily make that 10 feel much better.


Some data:

https://www.macrotrends.net/1369/crude-oil-price-history-cha...

Oil prices were double what they are today in 2014, and triple in the depths of the 2008 recession (before falling to roughly current levels in 2009). They were roughly half current levels in the 2000 recession. They were roughly equal during the oil crisis in the 1970s.

Sudden shocks to oil prices seem to be able to cause recessions, like the 250% increase in 1973 or the 200% increase from 2007-2008, capping off a 500% (!) increase from 2002-2008. But these are a lot bigger than the 50% increase postulated here. We've withstood 50% increases (1994, 2004, 2016) or even 150% increases (dot-com boom) with no ill effects.


But don't the overall price just increases (on a long scale), and makes oil harder to buy over time ? See https://www.macrotrends.net/1369/crude-oil-price-history-cha...


Oil prices were 50% cheaper not too long ago, and the food wasn't significantly cheaper, so I can't see how more expensive oil will make the food prices "skyrocket".


Depends if the whole industry decides to take advantage of the opportunity to increase prices and blame the cost of oil or not.

It's the prisoners' dilemma, but applied to exploiting consumers!


Yes, and in a prisoners' dilemma with thousands of players, someone is surely going to defect and sell their stuff cheaper to undercut the competition. I don't think I've ever heard about large scale collusion to fix prices in food industry, and I won't hold my breath for it this time.


Any basis for your claims?

Oil prices were about 2x of what they are today in early 2010's, and I recall nothing of the sort.


So, it's a coincidence that oil prices peaked during the 2008 crisis?


Once the housing crash occurred, demand plummeted and the price of crude dropped. So yes?


I remember a high school policy debate in early 2009 when my opponent prepared an argument that horrible things would happen if the price of oil dropped.

Fortunately for me, they hadn’t read the newspaper lately.

It was a lot of fun to quote the collapsed oil price from a newspaper I found lying around and then relax the rest of the debate.


You're proving my point that they are tied ?


Correlation does not equal causation.


You don't think that steeply increasing gasoline prices, and the resulting squeezing of discretionary (and not so) income could have popped the US housing bubble ?

https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-a...


2011-2015 the price was around $100, peaking at $110

2015-present the price has been around $50-60 with some points below 30 and above 70

Has that 50% drop been some kind of miracle?

We would just be returning to prices of the previous decade.

https://www.macrotrends.net/2516/wti-crude-oil-prices-10-yea...


Somehow petrol and fuel oil [in the UK] doesn't seem to have fallen barely at all since 2011-2015?

[Actually petrol is down about ~7%, 140p->130p per litre https://www.racfoundation.org/data/uk-pump-prices-over-time; and fuel-oil about ~10%, £300->270 per 500 litres https://www.cheapestoil.co.uk/articles/trend. But, compare that to https://www.macrotrends.net/2480/brent-crude-oil-prices-10-y... showing 2012 prices at 4 times 2015 prices.]

I think when people are thinking of "oil prices", as consumers they're converting that to "petrol prices" (and fuel oil if they use that) and thinking "if petrol/heating prices rise >50% that's going to be very hard".

Petrol prices only falling by four-twelths when the crude price fell by nine-twelths suggests that petrol costs a lot on top of the crude price and that a 50% crude increase might lead to, say a >100% petrol price increase.


UK petrol prices are ~65% tax, with the bulk of that being the fixed fuel duty. Prices in the US swing much more dramatically with oil prices.


There are considerable refining costs and transport costs from the refinery to your tank. Especially so because in the UK I don't believe you have considerable refining industry so I assume much of it is imported and then FOREX comes into play. Fuel taxes, at least in the US, are constant per volume and not relative to price and in California make up currently about 15% of the cost.

On top of all of those factors I would only guess that at high prices profit margins fell by ratio which was recovered (or just increased) when prices fell.


UK consumption is 1.7 mbd while domestic refining capacity is 1.2 mbd.


> Petrol prices only falling by four-twelths when the crude price fell by nine-twelths suggests that petrol costs a lot on top of the crude price and that a 50% crude increase might lead to, say a >100% petrol price increase

Why? If petrol price is fairly inelastic to crude price (for reasons siblings note) that means it would increase a little, not a lot.


The previous decade the prices went from 20$ to 160$, culminating with the start of the Great Recession... https://www.macrotrends.net/1369/crude-oil-price-history-cha...


Oil prices have always been all over the place[1]. A 50% bump isn't great but it's not really much to be worried about.

[1]https://www.macrotrends.net/1369/crude-oil-price-history-cha...


I don’t have a car. How does this affect my life? I’d assume the prices of commodities go up mildly. What else could I expect?


Food prices in general tend to follow hydrocarbon prices. Not just because of the tractors and trucks, but also because of fertilizer. The Haber process is essentially a method of turning natural gas into corn and wheat (and then beef, pork, etc.)

Something like 5% of world natural gas consumption is to drive the Haber process to create fertilizer that then drives everything else in modern agriculture. Now, natural gas and oil prices are not as correlated now as they used to be (due to fracking) but there seems to be some residual connection between the two, so that could be something to look out for.


In the USA, oil represents about 17% of manufacturing pricing. It obviously hits some industries much harder than others. Agriculture is particularly vulnerable. Large-scale farmers have tight margins and fertilizer is essential to factory farming.


Food prices rise and fall with oil.

That’s probably it.


Nothing much. Cost of liquid fuel is not the constraint on economic activity in the developed world.


People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable. (I don't foresee any scenario where we get to that point, but if it happened it would be a crisis.)

A 50% price increase would be bad for people who have to drive and are in a financially precarious situation, but it's not any more a catastrophe than all the other various things that affect people in financially precarious situations, which upper-middle-class people can shrug off as a mild annoyance.


> People being unable to get to work, trucks being unable to deliver food to stores because gas is unavailable.

The only times gas has been unavailable for a sustained time is when the government fixed prices or otherwise prevented the market from working.

For example, when there's a natural disaster and anti-gouging laws kick in, gas becomes unavailable.


What did the governments do in the West during the 1970's oil shocks ?


Nixon put price controls on oil.

Later, the DoE started allocating (i.e. rationing) gas to gas stations.

Reagan abolished these by executive order as one of his first acts as President:

https://www.nytimes.com/1981/01/29/us/president-abolishes-la...

and the gas lines disappeared overnight and never returned.


Thanks for the reference, albeit paywalled - was the disparition of gas lines an immediate consequence of the order, or did it just potentially prevent future gas lines ?


It was immediate. I remember it.

I'm surprised it isn't talked about more. During the gas allocation times, there'd be a glut of gas in Florida and long lines in California because the DoE would allocate gas based on the previous year's usage patterns. Things change constantly, and the DoE was unable to adapt.

I had a friend who bought a gas station. It took him months to get a gas allocation from the DoE because the gas station across the street challenged his allocation, for obvious reasons.

When the market decides where to put the gas, the tanker trucks take gas from the glutted areas and move it to the shortage areas as a natural action. Any reasonable business moves product to where it is selling.


Not having enough at any price. The "peak oil" nightmare scenarios are where demand truly outstrips supply. Price eventually becomes irrelevant as physical access to the resource matters more than cash.

I personally don't think that will ever happen. The increased adoption of renewables means oil demand will not outstrip supply.


"Running out of oil" is an economic criterion, where demand outstrips achievable supply (where the cost of extracting the oil is not so high that it becomes an economic net negative). There's no material difference in outcomes between this and your "doomsday" version, but the former is actually something that's going to happen, while the latter probably never will.


idk. Global oil consumption has been steadily ramping up 1-2%/year with little regard to renewables or climate crisis.

The increasing penetration of renewables is dwarfed by increased population + raising living standards.


Oil consumption has been increasing primarily because the price has been declining. If the price was higher then more people would use alternatives that are currently more expensive but wouldn't be against higher oil prices.

If the Saudis are under-reporting their reserves, that's why. They don't want oil prices to be higher because it makes alternatives more competitive. It doesn't help them to sell oil for 50% more for a few years while that spurs everyone to buy electric cars and charge them with solar panels, only to have that demand reduction cause oil prices to decline below their current level and stay there forever. Or worse (for them), for consumption to decline to the level that consumers no longer strongly oppose a carbon tax, which would naturally cause consumption to fall off a cliff (as intended) as even more people switch to alternatives.

On top of that, the alternatives need volume to build economies of scale which make them more competitive. This is already happening but would happen faster with higher oil prices, and as it does the result is a permanent reduction in alternative energy costs, making oil less competitive even at lower prices.


Saudi has a lot of sun and a lot of room. You’d think they’d be investing heavily in solar, and large (TW) interconnects to Europe (via Iraq/turkey or via Egypt/med), or in large scale electrolysis to hydrogen


You’d think they’d be investing heavily in solar

They are (kind of), or at least talking loudly about it. They just don't seem to be very good at pulling off these sort of ambitious large scale projects.

https://www.bloomberg.com/news/articles/2018-12-16/why-saudi...

https://www.greentechmedia.com/articles/read/saudi-outlook-r...


Cars are only a part of oil consumption. Also, it's going to take decades to switch rich countries to electric cars, if that is even economically possible...


Transportation is 71% of US oil consumption:

https://www.eia.gov/energyexplained/oil-and-petroleum-produc...

Moreover, you don't have to replace all cars to significantly reduce oil demand when each replacement with an electric vehicle reduces that driver's oil consumption by 100%, particularly when the vehicles most likely to be replaced as a result of higher oil prices would be the ones that drive the most miles. On top of that, the non-electric vehicles sold during periods of high gas prices would tend to be high fuel economy vehicles as well, and the vehicles in the existing installed base most likely to be junked would be the most inefficient ones.


How much of that is personal cars (probably the easiest to electrify after rail and city buses) ? And for the world, rather than just US ?


The US is somewhat lagging "the world" right now in personal electric vehicle adoption. There are more brands/models/sales in both the European and Asian markets than the US is currently seeing.

The Chinese market in particular is fascinating from an EV perspective. Particularly because it seems to indicate that non-personal vehicles (especially buses, delivery trucks, and semi-trucks) are either going to be not far behind in electrification or even possibly slightly ahead.

It is starting to look like in the US it will be the case that commercial vehicles may electrify faster than the personal vehicle market (at least partly because manufacturers aren't really selling EVs for personal auto sales in a tautological fallacy that they think they won't sell in the US). Amazon's big recent deal with Rivian, for instance, should put a lot of commercial EVs on the streets. UPS' similar older, quieter deals with multiple companies pushing them to hybrid trucks only already and an entire EV fleet supposedly in the next several years. Proterra seems to be making great headwind in the US bus market, as another example.


Well, that's nice, but what is the estimated time to reach, say, 50% electric for worldwide transportation ?


Faster if oil prices go up, certainly. The problem with estimating time is there are too many factors. We might only be "one big disruption" away from a surprisingly quick transition. We might just continue a gentle slope transition.

I think there are some interesting possible big disruptions on the horizon:

- Oil prices go up (as this article is about)

- EVs become the cheapest powertrain option for any new vehicle. VW's ID.3 is already cheaper than all comparable Golf models, and most of the other German manufacturers expect to hit that switchover (due to efficiencies of scale) for almost all their models no later than 2023. (Chinese manufacturers seem to have mostly hit the switchover point already. Most other Asian manufacturers aren't far behind. Traditional US manufacturers GM and Ford are idiots and lagging everyone else again.)

- Somewhat similar to above, a small disruption in the complex web of internal combustion engine supply chains could potentially domino to greatly increase new ICE vehicle costs, and even potentially have similarly drastic consequences to ICE vehicle repair/maintenance costs. Internal combustion engines (especially compared to EV motors) have a lot of little, very specialized parts. Even just one supplier pivoting could have fascinating consequences. (With perhaps the only counter-disruption being something like 3D printing hitting certain machining specifications that seem currently unlikely.)

The middle one is definitely happening. The article here suggests the first one is maybe closer than people expect. The third one is one I'm amusedly watching, and I think is going to be a quick accident after the middle one happens. If German manufacturers move to certain sales benchmarks, that definitely affect global suppliers that are Germany-based such as Bosch, as just one example of many, and GM/Ford certainly have plenty of Bosch pieces in their supply chains, whether they admit it or not.


If we're talking about a global shift from oil to electric in transportation :

What about the issues with lithium and coltan supply for batteries ?

What about the ~+33% increase required in electric power generation to replace oil in transportation ?

I just don't see how it could be a "surprisingly quick" transition... even if we had started it early !


> What about the issues with lithium and coltan supply for batteries ?

Lithium is in large supply (Atomic Number 3, right, third place on the Periodic Table), and is easily recyclable from current batteries.

Cobalt is a miniscule portion of current battery compositions. Most battery companies have been working to minimize or remove it. It should be recyclable, but it's never been economically feasible to recycle it from current battery compositions because a) it is such a minority component of current batteries, and b) Cobalt is cheap. (Cobalt is a "waste product" or by-product of Nickel mining today. The threat to Cobalt supply is that most Nickel mines today are in politically questionable regimes such as Columbia and the Democratic Republic of the Congo. But Nickel mining is likely something that continues to happen regardless of politics.)

> What about the ~+33% increase required in electric power generation to replace oil in transportation ?

If every car on the road today switched to EV tomorrow, but made sure to charge only during the "bathtub" of off-peak (evening) hours, there's absolutely no increase in power generation needed. Our culture's day-time peak generation capability, which has to account for most of our industrial use, is more than sufficient so long as consumers are smart about when they charge.

(The difference between Peak demand during the day and off-peak evening hours really is huge. "Filling in the bathtub" that the off-peak hours create in the demand chart is considered something of a holy grail for decades in utility grid planning because it would mean more base load generation that doesn't have to shut down every night and can run more continuously/smoothly every day.)

Smart Grid solutions exist and are being planned where cars can even help solve demand problems by acting as sitting batteries (as owners allow them to) that utilities can "loan" power from a car during peak demands, and pay back with "interest" during off-peak (and potentially doing so at an incredibly granular level).

All of which is to say that there are already market solutions to the increased electricity consumption of EVs. Peak rates might go up, perhaps, but the natural tendency of most EV owners is already to charge during off-peak (at home on the evenings), even without the extra incentives of big cost differentials between peak and off-peak utility rates. Most EVs today already have okay off-peak hours selection tools built-in, even without the detailed electricity price-sensitivity options that Smart Grids might eventually bring to the market. (But Smart Grids are certainly on utility road maps because there's a lot they could do with that extra demand sensitivity.)

I've yet to hear a worst case for EV electricity demand that would need 33% more capacity at Peak demand. That's an interesting and presumably unlikely scenario.


Yes, there's a lot of potential with basically using car batteries to smooth out the intermittency issues... I guess that this might be relatively easy (still, despairing about the slow pace of changes...)

Being at the 3rd place in the atomic table isn't a guarantee of availability - after all hydrogen is first, is 75% of the mass of the universe, and yet isn't directly available to us ! (at a low cost) And recycling batteries won't help much when the goal is to massively increase production...


Battery production doesn't seem to be the bottleneck in EV production a lot of people seem to think it is. The major battery companies (LG Chem, Panasonic, et al) have all been ramping up to meet the demands they've been contractually asked to meet, and we generally haven't seen shortages or massive price spikes in either direction.

The only EV producer that's outright complained about battery availability is Tesla, and it's very easy to wonder how much of that was marketing spin to cover other production issues (and the accusation of the traditional car manufacturers that car production is hard and has huge startup hurdles), and maybe even PR/marketing spin to their own investors to explain insourcing battery production (building the "gigafactory") rather than partnering with an existing battery manufacturer.

Tesla probably has scaled faster than most other car companies, but yet it has also scaled much less comparably (to say Renault or VW just signing delivery or plant contracts in partnership with existing battery manufacturers rather than building their own factories from 100% "scratch").

I'd love to see a better analysis of the battery market right now. I'm betting the catch-22 that car manufacturers don't feel a lot of consumer demand for EVs has more on bottlenecking EV production than batteries in the current term.


>Oil consumption has been increasing primarily because the price has been declining

Not arguing, but here's the data that should be reconciled:

https://ourworldindata.org/grapher/world-crude-oil-price-vs-...


It's fair to say that oil consumption has been increasing both because the price has been declining and because of increasing industrialization. But you can see pretty clearly on that graph that whenever the price spikes, consumption then drops. Supply and demand is in effect.

And for most of the period on that graph, we didn't have the alternatives we do today. When oil prices spiked in 1979, people bought smaller cars that got better mileage, but they still ran on petroleum and used gas stations, and then people started buying petrol SUVs when gas prices came back down. If that happens in 2020 then people buy electric cars rather than econoboxes, and then we get more charging infrastructure and more battery research and economies of scale, and there would be no obvious advantage in ever switching back even if oil prices subsequently declined to their current level.


> Not having enough at any price.

No such thing. Prices will always hit a point where demand decreases. Inelastic isn't 100%.


If the price rises enough global markets will break down as state actors attempt to seize or hoard oil resourxes for internal consumption

So, it’s true, right up until it’s not


I recall that the oil price was 100% higher for several years at the start of the decade. And it was considered normal. There was no crisis at all.


Yeah, sure, no recession whatsoever...


I remember $4/gal gas. Seeing my pump price go from $2.30 to $3.50 would be unpleasant but it would still feel like the end of a lovely grace period, not the beginning of a crisis.


Shit, it's around $3.80 here in Seattle if you naively go to shell which seems to be highly priced here everywhere. Granted, I always go to safeway and arco where I can get it for 3.10 but for some reason I see tons of people at the expensive ones when you can easily find stations on google maps with their pricing listed for much cheaper.


The 1973 and 1979 oil crises had peak increases of 400% and 100%, respectively


The price of crude isn't a 1:1 correlation with the price of gas.


I believe around 10 years ago, the price per gallon of gas was around $4. It's now around $2.50, so we have dealt with prices that high in the recent past.


I can't remember anything bad economically that happened about ten years ago, can you?


Hurricane Ike put most of the oil processing plants in the Houston area offline, which led to a US-wide spike in gas prices. I've been there when it happened and it wasn't pretty.


He's probably implying a correlation with the 2008 recession.


I'm not implying a correlation--there is one, along with a very longstanding correlation between oil consumption and GDP. What I'm implying is the much more contentious claim that this relationship has a strong causal component, too.


Weird. I thought it was common opinion that recession occured from housing mortgage defaults and the subsequent credit crunch.


What started the mortgage defaults though ? (And, also, couldn't cheap oil have maybe helped with the overbuilding of houses in the first place ?)


> What started the mortgage defaults though?

Good old-fashioned fraud. Oil prices had nothing to do with it.

Source: acquaintance who spent three years in court testifying about the rampant fraud in the mortgage industry. He worked for an investment bank which is no longer with us.


I'm well aware of the structural fraud. My point is that the reason that the bubble popped at that point (and not some years later) were the skyrocketing oil prices, themselves a consequence of (conventional) peak oil.

But I guess that it's a bit academical, as that bubble would have popped soon enough anyway...


"There is a very large amount of oil production on hold or at low capacity in North America because the prices are currently too low and very much expected to go higher in the future."

You realize that this is the clusterfuck? no? We are looking to a Jojo effect. Oil prices too high? Recession. Oil prices too low? Oil producers can't afford to invest and produce (what is already happening now).

This is actually the reason why we will never run out of oil. No kidding. I assume most of the oil will stay there, where it is. In the ground!

https://ourfiniteworld.com/2019/07/10/why-stimulus-cant-fix-...


> This is actually the reason why we will never run out of oil.

Which is how the free market prevents shortages. Whenever there's a sustained shortage or glut, look for government interference.


> We are looking to a Jojo effect.

Why? Why would it not simply stabilize at say 20% higher than now?

> This is actually the reason why we will never run out of oil.

That is either word games or nonsense. People will keep extracting oil and there is only finitely much available at reasonable prices. Note that "run out" here does not mean there is no oil left. Just like a country "running out of food" does not mean that there is nothing edible anywhere in the whole world.


"Why? Why would it not simply stabilize at say 20% higher than now?"

How about 100 or 150%? Above 100 USD you may be able to afford gas. Many people can't.

"That is either word games or nonsense. People will keep extracting oil and there is only finitely much available at reasonable prices."

There are two points you ignore. Falling ROEI (return of energy invested) on energy invested. Good oil has a ROEI over 20 (over 100 AFAIK for the first wells long time ago). This is sinking. It is 1:2 ROEI for shale gas. At 1:1 if does not make sense to try extracting.

The same with money. Energy and money are interlinked. www.declineoftheempire.com/2012/01/wealth-and-energy-consumption-are-inseparable.html

Have a look of the money invested for further exploitation by big oil companies. Constantly sinking. The problem is you need high oil prices to justify investments. At the same time running an economy above 100 USD for oil is tricky. People can simply not afford it. Maybe you can, again, many people cant.


> How about 100 or 150%? Above 100 USD you may be able to afford gas. Many people can't.

This has nothing to do with what you quoted or what we were discussing.

> At the same time running an economy above 100 USD for oil is tricky. People can simply not afford it. Maybe you can, again, many people cant.

Exactly my point.


"Let’s do a thought experiment. Say the world’s proven oil reserves are 400 million barrels. And say world oil consumption is 20 million barrels a year, growing at 5 percent annually.

Question: when will earth’s oil reserves be 100 percent depleted?

OK, timeout. Before you grab a pencil and break out the scratch paper, I should warn you — the answer isn’t 14.2 years. Or 20.4 years. Or any other number of years.

It’s never."

https://medium.com/@andrew.chamberlain/why-well-never-run-ou...


>most of the oil will stay there, where it is. In the ground!

Of course it will, because we have mroe than enough oil to burn to put out enough CO2 to take us to +20 deg warming or more. So unless we get cheap CCS (carbon capture and storage) it's a good thing that most of the oil stays in the ground.


I don't even think they'll even rise 50% in the long term. Gasoline ICEs are trivially convertible to natural gas, of which the US has a darn near inexhaustible supply. Natural gas is cheaper even today, but not cheaper enough for drivers to bother. If gasoline is $6 and natural gas is $2 per equivalent gallon, people with longer commutes will reconsider. Current price in the US is between $0.79 and $1.50 per equivalent gallon btw.


CNG for consumer vehicles is really inconvenient. CNG tanks take a lot more volume than gasoline tanks, tanks are supposed to be inspected every 3 years, and they expire 20-30 years after manufacture (and the tanks may have been manufactured much earlier than your vehicle). Some fuel stations (notably, PG&E's) require proof of recent inspection. And, replacing the tanks when they expire isn't economically feasible, leaving you with a lump of coal.

Non-obviously, only about half of the price of filling up is for the natural gas, the other half is electricity cost to compress it to pressures way beyond the pipeline pressure. This makes home based filling impractical, and CNG filling stations are fairly sparse.

Source: In 2017, I _really_ wanted to get a CNG Crown Vic/Town Car for HOV access, part of which was planning for a purchase in Los Angeles and driving to the Bay Area, refueling on the way; with the limited range, and without access to PG&E stations, I'd need to go up the coast, because I wouldn't make it on the 5.


It's all matter of regulatory climate. In Poland, there are millions of cars driving on LPG every day. Most gas stations offer LPG in addition to gas and diesel fuel. Stations don't require any proof of inspection, and moreover most of them are self-serve. There are plenty of shops that will retrofit any car (even diesels!) for LPG for about $500-1000. This is just a mundane, everyday thing.

I owned an LPG-fueled car and it was really no different than gas-fueled one, other than more frequent need for refuel (I had a small tank installed where the spare tire used to be, and it only had around 100 miles of range).


LPG != NG. Natural Gas has to be stored as a gas, and has less energy than propane, so NG tanks have to be much larger.


Natural gas contains propane as one of it components, so it can be filtered out. You can also refine shorter chains of hydrocarbons in natural gas to make propane.


Is that cost effective though?


LPG is used in Poland because it's significantly cheaper than gasoline, so... yes?


What you're describing are combined side effects of the lack of demand, and the current regulatory climate, which is particularly ridiculous in your state.

In the 90's (!) much of the taxi fleet (and a good number of trucks) in Moscow, Russia was powered by CNG. Everything worked fine, in spite of a much lower level of technological advancement. If gasoline were to permanently go to $6+/gal, and the industry was deregulated a little, you'd see CNG retrofits that cost sub $1K and last for the lifetime of the car in basically no time at all. All the tech has been in place for decades, it's just a matter of demand now.


don't have an opinion either way, but:

> tanks are supposed to be inspected every 3 years, and they expire 20-30 years after manufacture (and the tanks may have been manufactured much earlier than your vehicle). Some fuel stations (notably, PG&E's) require proof of recent inspection. And, replacing the tanks when they expire isn't economically feasible, leaving you with a lump of coal.

wouldn't all of these problems be addressed more adequately by a larger potential customer base & supporting infrastructure? (e.g. annual car inspection==tank inspection, cost decreasing due to bigger market, etc)


The tank inspection is not a quick visual inspection. It’s take it out, empty it, fill and pressurize with water in a protective enclosure, measure the expansion strain, drain, dry, stamp the inspection date, reinstall, purge, and refill.


did not know this.

broader point still stands I think - if this was required of everyone every year, a secondary market like propane tanks for backyard grills, etc would probably emerge or it would be part of mfg warranties.

side note: no, I don't think market solves everything.


I think we'll see a significant ramp up of EVs long before we see widespread CNG/LNG adoption.


Italy is full of CNG vehicles. There's a big push for them in Belgium right now, and I'm probably missing a lot of places...


Maybe in the wonderful HN bubble, where everyone has $40K+ to plop down for an EV every 4-5 years, not in the real world.


The efficiencies of scale switchover point is probably a lot closer to hand than you think. VW's ID.3 is already cheaper than all comparable gas models of the (outgoing) similar Golf, and just about all of the German auto manufacturers have been not-so-subtly saying that they expect that all of their EVs will be cheaper than their comparable models with other powertrains in the next couple years.

China has sub-$15k equivalent EVs today. Cheap EVs are certainly physically possible even with today's scales, and partly it's just the catch-22 perception hump of "EVs are only for early adopters and luxury cars" (for both consumers and manufacturers) keeping EVs from hitting some scale benchmarks to push them cheaper.

The used market still isn't showing a lot of EVs, but that seems to be that statistically most EV owners keep their cars for longer. That's an interesting statistic, that maybe points to reliability on one side, and a possibly very different replacement rate on the other side. Which is to say that the average EV first owner is currently keeping their vehicle for 7-10 years rather than the 4-5 year replacement rate that has been of typical of ICE vehicle sales. (If EV owners were only keeping their cars for 4-5 years, as you suggest of some hypothetical "HN bubble" that would be a lot more of them on the used car market, and in turn fewer complaints of the high cost of EVs. The long first life of an EV is also keeping the costs up and affecting depreciation rates.)


Could be. I'll believe it when I see a $15K well equipped EV with 150mi+ range, no subsidies, no "fuel savings", no bullshit. We aren't there yet, to put it mildly, and given that battery production capacity can't keep up with demand, it's unlikely that we'll get there in the near future. But CNG is doable today. Pipelines are already there, fuel production capacity is basically inexhaustible for all intents and purposes, and existing manufacturers could easily adapt existing models of cars to the new fuel while they keep using the same facilities, equipment, workers, and dealer network as before.

I'd love to get an EV one day, when the pricing is less nutty than it is today. But it has to be economically viable for me. Right now it's not.


Ah yes, I'll just pop down to my local car dealer and pick up a $15k natural gas vehicle...


That's actually far easier to do (if there's demand) than $15K EVs. For an auto manufacturer, very little cost: replace the gas tank with a CNG cylinder (cylinder can be manufactured cheaply if economies of scale are in place), use the piping able to withstand the pressure, use slightly different injectors. Done.


Why every 4-5 years?


Beats me. How old is your car?


One is about a year, the other is close to five years.


Supply and demand are going to squeeze batteries and electric energy too...


Yeah, and batteries and electric energy will actually get cheaper as a result.


Not if you are expecting to replace most of oil in fairly short order...


Batteries, perhaps, but it does not actually take very long to start up a cell production line (and other aspects, such as raw materials). If given the certainty of policy, accommodating regulators, and federal financing support, the lag between demand outstripping supply and new supply coming online may only be 2 or 3 years.

And for electricity, the utilities actually need the extra demand because of energy efficiency reducing lighting costs and distributed solar and subsidized wind providing occasional gluts. Since EVs can fairly easily be set to charge (most the time) on a schedule when electricity is most abundant, this is good for everyone.


Worldwide power consumption is 109 GWh/year, only 24 of which are for electricity. Oil is 31% of that (34 GWh/y), but only 4% for electricity (~1 GWh/y).

EDIT : Whoops, my bad, somehow forgot that we were talking about transportation, which is "only" a quarter of power use...

So you need to go from 24 to 24+(34-1)/4 = ~32 Gwh/year, a 33% increase, and you expect to be able to do that in 2-3 years ?!

(Napkin calculations, not taking into account various (in)efficiencies and intermittency issues, but the order of magnitude should be roughly this one...)


? Your energy units are weird. 109 Gigawatt-hours per year is just 12.4 Megawatts. Worldwide average primary energy consumption is 18 Terawatts, or 157,000,000 Gigawatt-hours/year (GWh/year). Electricity (which is higher usable energy than "primary energy) is about 3 Terawatts average globally, a lot more than 4%.

US average electricity is ~475 Gigawatts. But there's a huge difference between average electricity and nameplate capacity. Natural gas peaker plants have about a 200GW nameplate capacity in the US but only produce about 25GW average. If we ran just the peaker plants all-out, we'd generate an additional 175Gigawatts.

US gasoline consumption is about 400 million gallons per day. I drive a Volt, and typically I get about the same range in 10 kWh that I would in a single gallon (Model 3s do even better, however). So roughly speaking, We'd need about 4 TWh per day, or about 167 Gigawatts average extra. Technically, averaged over the year, then, our peaker plants would have enough extra capacity to produce enough electricity. But natural gas combined cycle plants would also generate about another 100GW if ran all-out. (None of this is terribly realistic as there will be local transmission constraints and weather-related demand spikes which the peaker plants are needed for, but it is instructive.)

However, it'd take a good 10-15 years to mostly turnover the whole gas car market in the US even with a revived "cash for clunkers" program, so the capacity expansion would have plenty of time to sort these things out. We can expand solar and wind over this time even while phasing out gas.

The main thing, however, is the battery production.


Blame Wikipedia('s sources) for the weird energy units. (I didn't want to bother with conversion when most of the sources seem to be in Wh/year anyway...)

It's 4% of electricity coming from oil, sorry for the confusion. (Hmm, I might have made another mistake here - eh, it's smaller than the uncertainty anyway...)

167/475 = 35% Nice to see that the math seems to check out with your data too. The issue of intermittence would warrant whole books of studies, hard to do it properly in comments here...


While an individual vehicle is trivially convertible to natural gas - modifying enough of a countries fleet to make a measurable difference fast enough is a completely different matter. It is unlikely that more than a trivial fraction of a total nations vehicles could be converted in a single year unless a significant amount of contingency (training, facilities and parts) is established.


I'm not sure what data you are looking at but most NA production is online as the current prices are profitable so most models show little increase in production coming from NA.


And this large amount of oil production the USA is sitting on is light sweet crude, needed for gasoline? Same grade as Abqaid? And we have the infrastructure required to transport it?

(Hint: we don't. It's estimated it would take us minimum of 2 years to complete the required infrastructure build out)


so, finding out that the currently-sufficient production quantity doesn't have as high of a ceiling as previously expected would result in a crisis so big that there would be problems with oil supply for the 2 years needed to complete the required infrastructure build out?

I don't see how this negates the parent w/r/t the parents-parent.


Like others have said, this oil would probably be run to refineries by train. This is inefficient, but until new pipelines are built, it's the best way to get oil from the field to the refinery.


Except we've significantly cracked down on bomb trains and some states are working on banning crude transport by rail altogether

https://www.transportation.gov/sites/dot.gov/files/docs/fina...


Maybe a good time to learn to weld?


I wouldn't bet on it. Just take a look at all the opposition aimed at pipelines. Maybe in the US pipelines have more of a chance but as it stands Canada is unable to complete a pipeline project anymore.


add diving certs and you have a fun (but dangerous) job that takes you around the world


it is light sweet crude. Likely will rely more and more on trains. Which would be a better buy than picking a oil company, since no one is divesting from train companies.


Might be the shock we need to work on renewables and batteries more seriously on a global level.


That's what we thought 20 years ago during the "peak oil" nonsense and they just invented fracking. Talking about oil "reserves" paints a picture that petroleum extraction is like just scooping sludge out of a big underground bucket. Real deposits come in a huge variety of forms and qualities, and extracting them sits on a cost spectrum. All making oil more expensive does is make the more expensive oil worth extracting, prices stabilize at a slightly higher point and the market adapts.

Unfortunately we aren't going to run out of oil anywhere near soon enough to save the planet. We need to do it the hard way.


Peak oil isn't nonsense. Predictions about when are often wrong but the idea is sound.

And it never meant running out. It's exactly what it says on the tin: a peak and a probably very long tail of decline.


There is "peak oil" as the basic geophysical concept, which is perfectly fine.

There is also "peak oil" as the prophecy of imminent collapse of industrial civilization, which was a much bigger thing a decade or so ago. It may still have some loyal believers.

I think that people unfortunately have the means to extract far more oil than we have the means to safely burn in Earth's atmosphere.


I can confirm. My mom is susceptible to internet fear mongering and got on some "peak oil" forums back around 2005. Many of them wanted you to believe that things were going to spiral out of control and that rioting and food shortages were imminent. Of course they could go back and say that they never said that explicitly, but the implication was there and it was clearly meant to scare the shit out of you. It seems that there's a certain type of person that secretly wants society to fall apart because they think it will solve all of their social and financial problems. I'm not sure they've thought it through very well.


Well, there is an alternative.

You are talking about peak oil supply. Instead, what if we run into peak oil demand.

IE, instead of running out of oil, we run out of oil demand, as everyone moves away from oil onto better technologies.


Not likely to happen as we don't have better technologies, and now no time left to develop and especially build the infrastructure for them...


But, we do!

The cost of solar panels and wind has been going down dramatically over the last couple decades, and is only continuing to do so.

The percentage of electric cars is also increasing.

There is a lot of oil in the ground. It isn't going to run out in the next decade. By which time these technologies will have become even better.


I'm talking about today. What are the current energy cost comparisons? And the new infrastructure itself would need a lot of energy to build... https://dothemath.ucsd.edu/2011/10/the-energy-trap/


This was one of the weakest Do The Math entries. Perhaps because it hinged upon human behavior more than physics/math (the author's strengths). The thesis:

In brief, the idea is that once we enter a decline phase in fossil fuel availability — first in petroleum — our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but... energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term - effectively steepening the decline - for a long-term energy plan? It’s a trap!

Yes, "we" would be willing to tolerate the use of increasingly scarce fossil energy to build non-fossil energy resources. Because the "we" investing in new non-fossil energy is largely separate from the "we" who worry about paying this month's bills if gasoline prices go up by a dollar a gallon.

Investors care about what consumers want insofar as they see a way to profit by building things that consumers will pay for. Building non-fossil energy projects in a time of high fossil energy costs counts. Depleting their investment capital to temporarily subsidize retail level prices of fossil-derived energy doesn't count. They were never going to offer to do the latter, and even populist politicians (of the American variety) rarely propose seizing wealth to directly subsidize gasoline/electricity/natural gas at the retail level. American politicians have different approaches to making energy cheaper.

There's a relatively small number of countries in the world that directly subsidize fossil fuels at the retail level for large swaths of the population. If this blog entry were written about e.g. India or Egypt I would find the political/institutional problem with higher fossil energy prices plausible as described. But it doesn't describe most of the world's democracies, nor China (for different reasons), nor most other countries.


There's also a lot of countries having a much less laissez-faire attitude regarding energy - I'd even say that the USA is more of an exception...

For instance, in Europe road transportation fuels tend to be heavily taxed - so they have the option of lowering those taxes to amortize any potential oil shocks (but not too long, and at the cost of taking the budget hit - a bit like India/Egypt in the end...)


Even a more centrally coordinated approach is likely to end up in roughly the same place as a laissez-faire market approach: building replacement energy infrastructure faster rather than slower as a reaction to a persistently declining petroleum supply. As long as that happens, the "energy trap" described by Murphy doesn't materialize. A major French response to the first oil crisis in the early 1970s was a government coordinated plan to build nuclear reactors [1].

It's only people pushed toward bad decisions by short-term desperation (weak government leaders facing rioting, individuals too poor to steer market investment decisions) whose behaviors would set up this "energy trap." Market-driven investors and rational governments alike will invest resources into reducing future consumption of an increasingly expensive fuel even if it somewhat exacerbates the immediate problems caused by higher fuel prices.

[1] Building nuclear reactors as a reaction to high oil prices made more sense than may be obvious now. At the time, France actually did produce a lot of electricity by burning oil. Oil-fueled electricity became much less popular after the 1970s except in petro-states and in isolated locations. Surprisingly, Pakistan managed to make the same mistake in the 1990s of building oil-fired electricity plants, which became very expensive to operate less than a decade later.


Ah, but we don't really have "Market-driven investors and rational governments" in the West anymore, not since the 80's :

https://mattstoller.substack.com/p/why-private-equity-should...

And Macron was really an idiot when he thought that asking the poorest people to pay the most for the ecological transition was going to fly...

But isn't this also a symptom of an energy trap - the government itself not having any slack left for long-term planning ?

http://www.lecourrierdesstrateges.fr/2018/11/04/augmentation... (fr)

(Note that, in the end, the above seems to be very similar to issues in Egypt - government balance taking a hit due to less income from fossil fuels - well except that the Egypt issues are more dramatic, being caused by the country becoming a gas importer instead of exporter...)


But... This whole conversation was about peak oil. We don't need all that stuff right now. We only need to build it before we run out of oil.

And I am saying that it is going to take us a much longer time to run out of oil, than it is to build all that new infrastructure. Not because building the infrastructure is easy, but because there is a whole lot of oil in the ground, and therefore we have a lot of time.

IE, people will stop using oil, because the price of solar, ect has gone down, way before we come close to actually running out of oil.


AFAIK, the US tight oil has nearly peaked (and they still aren't profitable !!), and I don't think that there's much additional production capacity left there, though higher prices will certainly help. (The depletion rate is just too great to sustain the production for long...)

I am indeed unsure (and a bit scared) about the potential from oil sands (and maybe shale oil = kerogen).


As you might know, peak oil is not about literally "running out of oil" (and the article I have linked expands on it), and my point is that we are in the very process of hitting peak (conventional+unconventional) oil - actually those attacks on Saudi oil infrastructure might mark this precise point... (or not, but we certainly don't have decades left...)


Ok, but we aren't currently in that process.

The potential oil production capacity of the world has massively increased, because of fracking.

And if oil prices go up, a whole lot of oil in the US and Canada , become immediately profitable to extract.

I think you are severely underestimating how much non conventional oil there is, that we could start extracting, if it became profitable.


Peak oil is nonsense. All resources on Earth are finite. What’s special about oil? Why not peak aluminum or peak concrete or peak cobalt?


> Peak oil is nonsense

No, it's not.

> All resources on Earth are finite. What’s special about oil?

Nothing; it would be special if it was an extractable resource and didn't have a peak where utility vs. cost of extraction meant that extraction declined from the peak.

> Why not peak aluminum or peak concrete or peak cobalt?

Aluminum and Cobalt, as extractable resources, will probably also have extraction peaks.


The earth's crust is 8% Aluminum.


But not all of it is equally easy to extract. In any case, yeah, “peak aluminum” is far more distant than peak oil.


Here’s Hubert’s peak oil projection and the actual oil production in the US.

https://en.m.wikipedia.org/wiki/Predicting_the_timing_of_pea...

Now there are multiple schools of thought, but one of them holds that when reality diverges so much from theory as in this plot, it’s time to question the theory.


I think maybe the hard way will be gene-edited phytoplankton and overcoming efficiency bottlenecks in photosynthesis, such as by introducing bacterical carboxysomes into plants to make RuBisCO more efficient, or by making plants use C3 in the midday leaves higher on the plant and C4 everywhere else, or by replacing chlorophylls with versions that respond to different wavelengths of light.


However the costs of renewable tech is coming down - at some point it's just a better business decision to switch off oil.


Exactly. Which is the "hard way". We need to win this with technology and, where technology alone isn't enough, with government action to curtail emissions. We aren't going to get lucky and run out of oil.


The peak of the peak oil scare was 40 years ago (given that the peak was scheduled for the mid 70s), not 20. This is actually the first time I’ve heard of there being another scare 20 years ago.

For example, Mad Max in 1979 comes from that sentiment.


I think the Carter administration's incident in the late 1970's is more accurately characterized as an "oil crisis" because there were real shortages, serious enough to alter trends in car purchasing habits, warranting economy automobile redesigns (smaller, lighter, more efficient, no more muscle cars). Gas stations actually ran out of gas, resulting in hours long waits on miles long lines, and theft by siphoning forcing the introduction of keyed locks on gas tanks.

These were real problems people faced, although it wasn't exactly a full panic.

Oil "scares" on the other hand were threats that raised eyebrows, and caused dramatic price fluctuations in anticipation potential problems. Each "scare" really only hit the wallet and bank account, without altering real behavior.

In that sense, yes, there were a few other "scares" between Jimmy Carter and present day. Each grouping came periodically, maybe every ten years. Almost all of them were tied to Iraq.

The first was the invasion of Kuwait in 1991. I think gas prices blew past $2/gallon for the first time.

The second was 9/11, and $4/gallon gas starting late 2001. This one was rough. Pretty much everyone I knew was groaning about gas prices, and with Iraq invasion rumors people started thinking $5 would break them.

The 2003 Iraq invasion actually resulted in a downward trend (due to international theft or spoils), but it's ever been below $2 again, and it's been back up to $4 at the pump, here and there, depending on geographic region and state taxes, here and there.

With the 2008 meltdown, oil prices weren't displaying any gouging, and there wasn't much of a scare at the 2001 decade mark, because as others have mentioned, fracking has buoyed domestic production.


Petrol is still cheap when inflation is considered (consider $1 in 1984 is $2.40 in 2018). Also, the first oil shock occurred during Nixon (with a second one under Carter).


Peak oil featured prominently in Al Bartlett's talk about exponential growth. https://www.youtube.com/watch?v=O133ppiVnWY Still a good talk, but it seems he was wrong about peak oil, just like Malthus was wrong about population growth.


How exactly was Malthus wrong about population growth ?


You're confusing peak USA (conventional) oil - which happened circa 1970, with the peak world (conventional) oil, which happened circa 2010 . Next stop : peak world conventional+unconventional oil circa 2020 ?


Don't get your hopes up. There's trillions of barrels of oil resource in the Green River formation (Wyoming, etc)--more than the reserves of the rest of the world combined. It's very unconventional (oil shale/kerogen), but I've seen some estimates that say it's no more expensive to extract than tar sands oil (once you start developing the resource).

We're going to have to do this the hard way, as the other poster mentioned. Decide to keep it in the ground.


If it's "no more expensive to extract" (and process, transport, refine...), why hasn't anyone bothered yet ?


Because there's a large capital (and learning curve) upstart requirement. It's almost like you missed this: "(once you start developing the resource)"

Additionally, tar sands are very marginal economically. Arguably not profitable right now. Fracking tight oil is cheaper, and even that is not being pursued as vigorously as it was when oil prices were higher.

And there are environmental regulations that get in the way of oil shale/kerogen extraction. And for good reason.


That was true too for Oil Sands and Tight Oil. (Heck, any oil play needs capex, starting from the first drilled ones!) And yet we are... P.S.: But we basically seem to agree, so this is nitpicking on my part...


Global peak was scheduled for the mid 70s in the original 1956 paper. USA peak was set for 1970, which actually happened even if it was a false peak.


Have we read the same paper ? It was clearly forecasted for the turn of the century...


> prices stabilize at a slightly higher point

Which encourages renewable development. Renewables would not be as successful today with oil at $20/bbl.


Renewables would be ahead on cost down to USD 9-10/barrel:

https://investors-corner.bnpparibas-am.com/investment-themes...


"Competitive" is a curve, not a point.

Solar can be cheaper for daytime generation before it's cheaper for nighttime generation (when you need to tack on the cost of storage). Electric cars may already have a lower TCO, but if you already have an ICE car, it may not be worth the transaction costs of immediately selling it and buying an electric car instead of waiting until you would have bought a new car anyway, whereas it could be if gas prices were higher. The TCO is also affected by how much you drive, so the gas price that justifies replacing your car depends on how much you drive it.

There isn't a price level where $0.01 below it no one can justify buying an electric car and $0.01 above it everyone can. The higher oil prices get, the more people end up on the other side of the line.


I'm really skeptical of lower TCO for electric cars. My gasoline-powered car is worth $5k. All electric cars with decent range cost more in depreciation alone than my TCO. I think in a few years a Bolt will have a competitive TCO, and maybe a Model 3 will a few years after that.


You're comparing the TCO of a new electric car to a used gasoline car. We all know that used cars have a lower TCO than new ones in general. Nobody is going to crush a perfectly operational two year old gasoline car just because of higher gas prices (though that would obviously cause it to suffer higher depreciation due to the loss in resale value).

The real question is, as the old cars become unreliable and age out of service, how does the TCO compare as between the new cars that will replace them?


I'm comparing the TCO of a good value gasoline car to the best value electric car available (including used models). If you have a ton of disposable income, buying a Tesla could be a good decision, but very few people are in that position. Since we are taking about TCO, I assume we are talking about a financially literate purchaser.

I fully expect that electric cars will have a reasonable TCO in the future.


> All making oil more expensive does is make the more expensive oil worth extracting, prices stabilize at a slightly higher point and the market adapts.

For traders, at exactly which point matters a lot.

> Unfortunately we aren't going to run out of oil anywhere near soon enough to save the planet.

Yes, it's probably a good estimate: It doesn't mean that we won't achieve the "peak" in some decades, eventually even "more expensive" options will be used up, just that that won't prevent having much more CO2 than now.


"Some decades" ? Last time I checked, Laherrere predicted peak conventional + unconventional for 2019 ? (There's always the political uncertainties of course, especially in the Middle East!)


The latest I was able to find from Laherrere is:

https://aspofrance.files.wordpress.com/2018/08/35cooilforeca...

"The main conclusion of this study is this from 2018:

-only 6 countries have not yet reached peak: Brazil, Canada oilsands, Kazakhstan, Iraq, UAE, Venezuela Orinoco

-19 countries (out of 35) have or will have a decline rate of 5 %/a

It means that, excluding the 6 countries before peak, the best and the simplest way to forecast future production is to decrease present production by 5 % per year"

"6 countries have not yet reached peak" and "excluding the 6 countries" surely doesn't sound like "peak" everywhere.

So yes, it seems that, at longest, in "some" decades the global peak will do happen. Laherrere also documents why the exact predictions are hard (see all the graphs there).

My point is more, whoever thinks that "scientists will always find something" surely thinks in short enough frames. There is a finite amount of fossil fuel material on Earth.


No, the price of oil will jump to 80-100/bbl and all of the tar sands extraction will become rather profitable again and North American production will explode.

OPEC had been keeping the prices around 100 until the tar sands extraction became big and they had to drastically cut prices because they couldn't handle the loss of revenue.

There is an enormous amount of oil tied up in those tar sands and it is very extricable, but it is considerably more expensive to extract such that it isn't economical at current prices.


Not to mention actually very inefficient and polluting.


Seriously. Ask some Athabascans about how extricable tar sands oil is.


We are so far out over our skis in terms of the need for oil input to the agricultural sector that the overall economic system will not bat an eye at despoiling everything around it.


Oil prices going back up to $100 a barrel would drive adoption of electric cars at a much faster pace.


It would, but if it's anything like the last time gas was outrageously expensive, people seem to forget the high prices once they go down.

No one bought SUVs in 2008-2010, but now they're one of the most popular types of cars and ford has alltogether stopped making car models


Electric vehicle development has a large hysteresis, every time it’s pushed forward battery and component costs will fall, bringing new classes of vehicle below cost parity with combustion vehicles, that will only be reversed in part if the oil price returns to the same point as before.


Itd actually be a good thing for the environment.

The greater the cost the more conservation makes business sense.

If an efficient fridge is only 15$/month cheaper it's not replacing your current fridge. At 50$/month it quickly pays off.


We have crossed over into the period where renewable energy sources and related required infrastructure is on par or cheaper than fossil fuels.

It is now just a matter of capital costs replacing old infrastructure with new while ramping up the industries that provide the replacements.

Inefficiencies scale with ramp up speed, but if you increase the cost of fossil fuels those inefficiencies are more competitive so you get a faster ramp-up.


What is "enormous" worth in terms of years of world consumption?


Enough.

Estimates generally exceed the total known amount of in-ground crude oil.

Enough to supply North America for a century.

Enough that it would never all be used, the price of extraction guarantees other renewable sources of energy will be very competitive while petroleum products will remain available near the previous peak raw petroleum prices from a few years ago (prices collapsed when production of this newer source started to ramp up).

It has been a really good foreign policy lever against Russia and unfriendly middle-east countries, limiting their oil profits and always holding over their heads that we could subsidize the shit out of it and drive them into poverty and ruin.


Source for this ridiculous "century" claim ?

(Also, "it would never all be used" is a given, what is the expected "peak gas" date ?)


I didn't look up the tar sands because it is kind of irrelevant considering the green river formation in the US alone has 3 trillion barrels worth of shale oil with half expected to be recoverable [0] and that is being extracted at current prices so no need for prices to go up. At 100 million barrels of oil usage per day for the globe, it could support the world's oil usage by itself for over 40 years. The US consumes about a fifth of global oil so that's 200 years worth of oil for you. There are also other shale oil sources in the US.

[0]: https://en.wikipedia.org/wiki/Green_River_Formation#Oil_shal...


1.) gas is not shale oil (= kerogen)

2.) shale oil is NOT being extracted - you're confusing with tight oil

3.) we don't know whether extracting shale oil even makes sense - for all we know, it might never become economically and energetically viable (IMHO, considering global warming, tight oil/gas & tar sands did not make sense in the first place either - especially since the whole tight oil industry hasn't even shown to be financially and therefore probably energetically profitable !)

4.) even if we did, the (E)ROI (and therefore, the pollution involved) is likely to be dismal

5.) a century ago, world oil production was a few million barrels per day, you can't just both assume business as usual and the consumption to stay flat when taking into account future consumption...


More seriously? I’m not sure it’s a reasonable position to claim that renewables and battery tech are not being “seriously” worked on.

Just looking at solar and battery manufacturing growth, on the order of $100 billion / year is being invested annually in these technologies. I think it’s very reasonable to conclude that doubling the investment would not nearly double the rate of advances, because all the top experts are already fully employed and fully funded.


"World's top banks pour $1.9T into fossil fuel financing since 2015"

https://news.ycombinator.com/item?id=21180826

So that's ~$380 G$/y for "just" the "top banks".


Hmm, how does this compare with money invested in fossil fuels ?


As a percentage of the current market size, the R&D for batteries and renewables is probably an order of magnitude greater than R&D in fossil fuels.

From a public investment perspective, the trend is that fossil fuel R&D is shrinking, and renewables investment is increasing or steady. Renewables public investment was first higher than fossil fuels in 1998, and has been higher than fossil fuel public investment 9 out of the last 10 years. [1]

[1] - https://www.iea.org/statistics/rdd/


But 20 G$ isn't 100 G$... And that's just for the IEA countries, if you aren't counting the big fossil fuel players like Russia and OPEC on one hand and also China on the other - what is even the point of these numbers ?

And I see that the biggest US tight oil firms had a deficit of nearly 7 G$ for 2018, so I'd assume that their development costs (which are the majority of their costs due to the very high depletion rate) are even higher - so where does yours "order of magnitude greater" comes from ?

https://www.reuters.com/article/usa-shale-finances/cash-flow...


If oil prices go up renewables become more profitable, BUT they also become more expensive, since energy is a huge component in their cost.

It's pretty much a wash.

Don't expect higher oil prices to spur renewables, it has never happened, and never will. Instead renewables become profitable (and thus popular) when we become more efficient at making and installing them.


> since energy is a huge component in their cost

I want to see some data to back up this claim.

> It's pretty much a wash.

I guess you'd need energy to make up >90% of the cost to make it "pretty much a wash"?


> I want to see some data to back up this claim.

I'll try to get some, but do a thought experiment: What component of, say, a solar panel cost is not energy?

> I guess you'd need energy to make up >90% of the cost to make it "pretty much a wash"?

Yes, and it is.

Not in terms of you have to pay oil companies all that money, but rather that energy is the multiplier that all prices are based off of.

If oil costs go up, then your suppliers costs go up, all the way down the chain. Including salaries - since the workers need more money to buy stuff, they want higher salaries.

Think about what is costs to make something, every single thing, at it's endpoint costs energy.


You've forgotten all of the other sources we use to produce energy: coal, gas, hydro, nuclear, renewables, etc.. and a fraction also comes from oil.

So oil tripling overnight would not result in a tripling of energy prices. There would be a small increase as load is shifted to other sources.. and there would be an increase in transportation costs of solar panel delivery. But the cost of a panel would barely increase. And those factories near nuclear, hydro, etc plants would see a slight competitive advantage over those in areas where energy comes from oil (but again, coal is a big source of energy.. oil much less so).


> So oil tripling overnight would not result in a tripling of energy prices.

By the very nature of energy, oil prices CAN'T triple without all other energy sources also tripling.

If there was a shortage of oil then the price of oil simply could not go up unless there just wasn't enough energy from other sources. Oil (and natural gas) are the most flexible of all energy sources, most of them are pretty maxed out, but oil and gas can adjust to take up slack.


Oil was 19$ in 1998, and 107$ a decade later (inflation adjusted). That’s over 5x.

https://inflationdata.com/articles/inflation-adjusted-prices...

Here’s retail energy prices: https://www.eia.gov/totalenergy/data/annual/showtext.php?t=p...

Show me where it went up anything close to 5x


> By the very nature of energy, oil prices CAN'T triple without all other energy sources also tripling.

This is false. You can't freely substitute oil with nuclear-generation as price vary. There are a huge number of cars and airplanes and plastics production that depend on oil.


This is interesting. I read a book back in 2009 called "The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel" by Stephen Leeb, Ph.D (2007) [1]

The title is total trash, and it seemed alarmist but IIRC the premise of the entire book is basically what you describe, at least in my very pedestrian understanding of energy / petroleum markets.

Are you familiar with this title, or the author? Your post makes me want to pull it out for a re-read.

edit: maybe not. really spotty reviews. [2]

[1] - https://www.amazon.com/Coming-Economic-Collapse-Thrive-Barre...

[2] - https://www.goodreads.com/review/show/13711731


OPEC has generaly set country targets based on peak capacity and reserves. Everyone has assumed the numbers have been part bullshit for 50 years because there is a huge incentive to lie to have higher OPEC allowances. Frankly, they'd make more total revenue over the long term if they didn't lie.


Why does it matter what their potential production capacity is? That sounds like asking how many money printing machines they have; it seems they could build as many of those as they want, but of course you only do that according to market needs.

And of course oil reserves have had the unfortunate tendency to significantly increase whenever the oil price is high.


>Why does it matter what their potential production capacity is?

Because they're planning to IPO? Surely if Aramco had double the production capacity, it would be worth more to investors because it would be better equipped to handle disruptions.


Capacity is the currency of the industry they're in. Its right in the article itself.

>What Saudi is trying to do by not revealing the true picture is to protect its reputation as a reliable oil supplier, especially to its target clientele in Asia, so we have to take all of these comments with a hefty pinch of salt,


Think of oil in the ground like a sponge, after a certain point it doesn't matter how many wells you have to extract it, its only going to "leak out" at a certain rate that can not be raised.

It isn't necessarily trivial to raise production.


Dr. Salameh doesn't account for advancements in technology or new oil discoveries

https://oilprice.com/Energy/Crude-Oil/Does-Saudi-Arabia-Real...


> The truth about Saudi oil potential and reserves will eventually come out. And when it does, the global oil market will get the shock of its life with a horrendous global oil crisis to match.

I'm skeptical. Maybe the Saudis don't have the capacity they say they do. They have the capacity that they're delivering, though, and that capacity is enough for the needs of the market...

... until some other supplier has a problem. But while the results may be a shock and a crisis, I suspect it won't quite add up to the apocalyptic terms of the quote.


The way oil peaks work, at first production decreases slowly, but then it goes faster and faster. If they're about 1 million barrels per day below the peak after a decade, the next similar decrease will come a lot faster.


IDK, when you're so dependent on others not to screw up like that, sounds like what's necessary for a systemic collapse.


Clickbait title, bad article (completely unsubstantiated/unsourced, openly hostile, ...), and a pretty horrible website in general.

SA inflating their production and capacity numbers is perfectly possible (and probably likely), but that kind of writing is not exactly trustworthy.

But some things to think about:

* With modern drone/missle capabilities, it seems quite easy to severely compromise global oil and gas production with just a few targeted strikes; mainly on the big refineries. Quite scary.

* Is Iran, after years of fighting proxy wars, now moving towards more direct conflict with Saudi Arabia?


> Is Iran, after years of fighting proxy wars, now moving towards more direct conflict with Saudi Arabia?

I mean the Saudis have been commuting war crimes in Yemen, Iran may've supplied some equipment, but I certainly think the Yemenis would be motivated enough themselves.


The proxies in proxy wars always have their own motivations and agency (see also Egypt, Israel, and Syria in the Cold War; or North/South Vietnam). Doesn't change the great-power dynamics of both sides' sponsors.


Though Iran's role has always been greatly oversold in the conflict, calling Iran a "great-power" in a war against a US backed force is ridiculous.


I was thinking more of the Iran-KSA relationship; in the Middle Eastern context, the defining regional-power conflict is between Iran and the KSA. The anti-Houthi militias are more clearly Saudi and Emirati proxies than American ones.


Come on, call it what it is.

The "anti-Houthi militias" are local branches of ISIS and al-qaida.

Which makes the current US policy even more confusing.


That's complete nonsense. Neither the Hadi (Saudi-backed) nor STC (UAE-backed) types are particularly Islamist; ISIS and al-Qaeda are a third bloc in the rural/desert east that the US periodically bombs, while the Saudis are busy generally bombing Houthi-governed civilians.


That's the official Saudi line and it doesn't take a genius to see its BS:

This whole mess escalated when houthi rebels tried to stop ISIS from taking over the government. Where did those come from? What did the Saudis do? At what point did they started bombing civilians??

Do you see the red line?


The whole mess escalated from fuel price rises, with the help of the former president who had been ousted by the Arab Spring revolt: https://en.wikipedia.org/wiki/Houthi_takeover_in_Yemen

ISIS and al-Qaeda were not involved in any of the maneuvering around Sana'a, and the Saudi intervention kicked off when they realized that a) Hadi still had a power base in the south, and b) the Houthis were about to capture it


>ISIS and al-Qaeda were not involved in any of the maneuvering around Sana'a,

While true, in many countries a group like Al-Islah would probably be described in the Western media as "linked to ISIS" or something similar. They're part of the Muslim Brotherhood also regularly maligned in the West.


Only by Western media that doesn't know what it's talking about.


Or media that views their connection to the Saudi spread of Wahhabism as similar to ISIS'.


>The anti-Houthi militias are more clearly Saudi and Emirati proxies than American ones

They're still being supported by the US military, with billions in arm sales, tactical support, and a heavy involvement in the ongoing blockade. While the Houthi forces can claim rather minor support from Iran.


Just to say: people have known this for absolutely years and OPEC nations have been lying about production/reserves/everything since the cartel was formed.

And yes, it is unsourced...because the point is very much that OPEC is using this data to determine things like production share, so there is a massive incentive to fabricate data which no-one can prove.


Guarding a refinery is at least doable in principle, but most oil is transported there by way of a pipeline. Guarding miles and miles of pipes in the middle of nowhere is going to be prohibitively expensive.

The Trans-Arabian pipeline for example is a whopping 1214 km (754 mi) long[0]!

[0]https://en.wikipedia.org/wiki/Trans-Arabian_Pipeline


Trans-Alaskan is even slightly longer (800mi/1300km) and more importantly totally exposed - it's overground for many hundreds of miles (because you can't bury a pipeline in permafrost, it would melt the permafrost and sink the pipeline, breaking it).

Bottom line is that crazy shit happens. There is no way to mitigate all the substantial risks.


>The Trans-Arabian pipeline for example is a whopping 1214 km (754 mi) long[0]!

FYI it's not in use anymore.


Are you sure that guarding a refinery is doable in principle? One mortar crew in the back of a pickup truck gets within 5km of a refinery for a few minutes and the facility is burning. If someone can get access to a towed artillery piece that 5km goes up to 20km.


754 security guards on dirt bikes with radios? Maybe a helicopter on standby.


Ah yes, "dude on a dirt bike with a radio and rifle" - the supreme air defence asset of our time.

Seriously, this might work for stopping people walking up to the pipeline with explosives - but it wouldn't stop someone with an RPG, recreational drone or (lol) cruise missile.


I think this will prompt other countries on the ME who haven’t yet embraced unconventional warfare, uavs in particular, to begin familiarization and adoption and then use it strategically. SA are overinvested in conventional defense and offense. I imagine they’re looking to ramp up quickly.



A truism at the commodities hedge fund I used to work at was the "the Saudis are always lying" along with "never be long a country's currency if they have their own word for afternoon nap"


I think that says more about the hedge fund you worked at than it does about the wider world, to be perfectly honest.


I thought it was common for everyone to lie about their oil production for all sorts of reasons and everyone knows it.

Half the battle within OPEC was over who lies how much and everyone coming to the table to figure that out and come to guidelines about production that are largely general guidelines in practice. Sort of "Ok everyone we're all way off the agreed numbers way too much let's dial it back for a bit." agreements.

I want to say that I've heard representatives in OPEC have openly say such things plenty of times.



I'm trying to understand what all this means.

The recent attacks are said to have cut Saudi production by 50%.

The Saudis claim production capacity of ca. 12 mbd. 6 mbd lost to attack. Their estimated stores are at ca. 180 million barrels.

To keep a happy face, the Saudis could sell from their stores to offset for the loss of Abqaiq and Khurais, but this can only be kept up a limited time, as the store is empty in roughly 30 days.

The time to fix the damage has been estimated at 8 months.

Does this mean the Saudis face losing 50% of their oil income in about 30 days?


That means they'll be eating King Salmon for dinner in 60 days.


How reputable is the oilprice.com?

I see articles linked quite often on EV forums I follow

I only remember Upstream [1] from when I was briefly in the oil industry ten years ago

[1] https://www.upstreamonline.com/


I'd love an answer to this. The article was very aggressively written and I have no basis for understanding any bias if there is one.


Oilprice.com is kind of like Forbes is today. Filled full of articles written by freelancers. Some of them are good, some of them are terrible. You have to know the writer, primarily, to sift through the rubble of the site.

I've read the site on an occasional basis for years. Usually I only end up there when looking for recent production updates. They often have good industry updates on production, expansion, etc. There is also plenty of quackery, over the top conspiracy writing, mediocre speculation and very questionable pumping & bashing.


Thanks.


Aggressive doesn't mean wrong. It is just a writing style. If you don't agree with the contents, just use facts to refute the article, but your impression of the writing style doesn't mean anything.


>Once the hedge funds, who had handily positioned themselves long some days before the attacks, had taken their profits...

This implication is so far beyond the pale it borders on satire.


Why "beyond the pale"?

Maybe those behind the attacks also went long, and some hedge funds picked up on that. Or maybe they just did a better job of understanding the escalation in recent months.


Unsourced, too.


Ah reminds me of the famous leak on Oil Production here: https://en.m.wikipedia.org/wiki/Contents_of_the_United_State...



question - what do Saudis gain from inflating their production capacity and oil reserves? Do they want to come across as some sort of superpower / critical country based on their reserves -- to continue getting preferential treatment from rich countries?


When OPEC sets production targets they all haggle with each other over what they'll each produce. This is based on things like percentages of reserves, percentages of capacity, percentages of historical rates, percentages of historical revenues, etc. Over the course of decades and dozens of iterations of negotiations the underlying numbers have become, lets just say, very very loosely coupled with reality. They are mostly produced by literal monarchies (I'll never get over this) or military dictatorships with no third party verification. So in addition to being part of an economic/revenue negotiation, they are also part of a regime-stability bluff.

That is why, as a general rule, every year they "discover" approximately the same amount of oil they produced/delivered that year.


Their Aramco IPO valuation will, at least partially, be a function of their reserves. Aramco IPO is critical to Saudi financial circumstances.


Isn't that practically cancelled?


No, they're forging ahead with it. WSJ Today says that MBS wants to float not just 5%, but eventually up to 10%.


What MBS tells the press he wants to do and what actually ends up happening isn't always very well correlated.


Hmm, okay, last time I read anything about it it was a big hoohaa over how they want 800B but it's likely doesn't worth that much, and how much transparency they would need to provide, which they are unlikely to truly commit to, so getting the funds together is so an uphill battle, that they are likely abandoning it.

But maybe they'll "settle" for less. After all there is money to be made, the haggling is just about the price.


Large reserves and production capacity means market control, i. e. they can control, or at least set an upper limit, on price. This allows them, among other things, to scare potential competitors away from trying to compete. It also strengthens their position in OPEC. And, IIRC, there may even be some provisions in international agreements that tie quotas to reserves.

Counterintuitively, a high price may actually be scarier for SA than a low price. It may cause competitors to invest in exploration. And where fixed, initial cost make up a large part of costs, some competitors may continue to produce even if prices fall, and even if the investment was based on wrong estimates and may never actually reach break-even.

SA running out of oil would also hasten efforts to replace oil with renewables.


Aramco IPO


That is the most obvious gain of inflating their reserve numbers. It should ring a warning bell, if a relative old company is going to the stock market. That means, the owners want to cash in at the current value and they don't believe in huge value gains.

The typical reason for an IPO is a company in its early life phase which needs money to grow. There is no lack of cash in SA, so why would they sell off Aramco, if it had a great future?


Specially when oil prices are relatively low. If you're playing poker and can't see who the chump is, that means you are the chump.


Just like all these tech IPOs.


Showing weakness internally and abroad welcomes threats and change. Perhaps their external investments (and IPO of aramco) are being driven by more immediate needs than they admit.


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