Oil prices will never return to $100 a barrel

[REWahoo]

A current thread on hybrid cars reminded me of a "click bait" headline I saw a few days ago: Why oil prices will never return to $100 a barrel, in one chart

The bottom line of the article is...

A persistent global glut of oil that has dogged markets for around two years may never truly subside, says one industry expert.

According to Spencer Dale, chief economist at oil giant BP, the global oil market suffers from an abundance of oil that’s going to add pressure on the industry for decades. ... BP estimates that there are about 2.5 trillion barrels of technically recoverable oil resources left in the world, enough to cover the world's entire oil demand out to 2050—twice.

So much for "peak oil" - at least for a generation or two.

 

[audreyh1]

I always thought it was crazy that the price got above $100 AGAIN after 2010 when the US was well into our fracking boom and was becoming the top crude oil producer.

IMO it just goes to show how markets can become incredibly inefficient. Not to mention that they can be manipulated over some periods like the Saudi moves in 2015.

 

[dixonge]

So much for "peak oil" - at least for a generation or two.

There seems to be a lot of vagueness hidden behind the phrase "technically recoverable." Expensive recovery doesn't work when prices are cheap. And as demand shifts to cheaper renewable sources (for both transportation and power generation) that will further suppress price. It's a tricky situation.

 

[MichaelB]

So much for "peak oil" - at least for a generation or two.

+1

Seems all the "peak" fears have followed suit. Just another confirmation that financial media can be hazardous to your financial health. Too bad there's no "Peak BS"...

 

[Chuckanut]

I tend to agree, though one should never say 'never'. One good war that knocks out most oil production in the Middle East for a few years is possible and I don't think fracking can replace Middle East oil

OTOH, when I bought my hybrid four years ago, I figured the breakeven on the extra cost was about 60,000 miles. Today, I figure it is closer to 80,000 miles. Since I plan to keep it well over 100,000 miles I will still have my payback, just not as much. And getting 600+ miles driving range on a tank of gas is especially nice when driving out West.

 

[calmloki]

Did I miss the memo? "there are about 2.5 trillion barrels of technically recoverable oil resources left in the world, enough to cover the world's entire oil demand out to 2050—twice"

So if we use up all the technically recoverable oil resources left in the world we are devoid of any oil in 66 years or so? Man first landed on the moon 48 years ago. Does anyone have some sort of George Jetson super car? The 1969 VW bug got mpg figures 48 years ago that compare well with the average cars of today. Sure, today's cars are more comfortable, safer, perform better, have more nifty doodads. Sure, there is talk of landing on Mars in the next 5-10 years - but are we all going to fly away to that barren rock? Are we really likely to develop something that takes the place of oil in the next 66 years? Does our progress indicate that as a possibility?

 

[street]

Greed was part of the $100 a barrel price. OPEC were not all to blame for the price and over supply of oil in the world. US drillers hit a mother lode and drilled like there was no tomorrow. US drillers have helped OPEC for the low prices now but the fact is US was the one that has caused the low prices. They are vary much to share that result.

Greed it was called and it is or can be very good for economy but in the end someone will get hurt.

As for "peak oil" this will delay the Kings of OPEC to last a lot longer to be in control of oil. They actual are in the stage of peak oil but greed of US oil companies have benefited them. Saudi Arabia/OPEC can pull oil from the ground a lot cheaper then the US can. They can survive a lot easier when prices are down and they like that in hopes to have companies go under.

With oil low and looks like it will be for a while not sure it will be good for economy and for markets.

 

[DEC-1982]

Never say never - the price moves are like a sine wave with ups and downs, adjusted for inflation probably.

 

[mountainsoft]

So much for "peak oil"

"Easy to get" oil peaked years ago. The majority of today's new oil is coming from places that are harder and harder to access. Drilling in deeper ocean water, drilling in the frozen arctic, etc. Much of the rest comes from countries consumed by wars.

Yeah, there will still be oil for decades, but it's getting more expensive and difficult to extract. Not to mention all the environmental impacts of oil; climate change, oil spills, fires, etc.

If they can bring down the price of electric cars, I would love to own one.

 

[Lsbcal]

The last sentence in that article might separate the responders here.

Who is betting on higher crude prices?

Not me.

 

[Car-Guy]

I tend to agree, though one should never say 'never'. One good war that knocks out most oil production in the Middle East for a few years is possible and I don't think fracking can replace Middle East oil

I think a middle east war is the mostly likely event to cause a world oil supply disruption/depletion but I can think of others. You just don't know what's going to drive a disruption or depletion.

Did I miss the memo? "there are about 2.5 trillion barrels of technically recoverable oil resources left in the world, enough to cover the world's entire oil demand out to 2050—twice"

And at what cost?

 

[W2R]

I agree with Chuckanut, that one should never say "never" (or "always"). This is something that was drummed into my skull in junior high school homework assignments.

There are so many factors affecting price that I think predicting it for all eternity in advance is a fool's errand. But that's just my opinion and we all have one.

 

[Midpack]

Yeah, that's a macro trend I had dead wrong. I wasn't a peak oil disciple, but I didn't think we'd see a glut again so soon. I was so certain I own the VG Energy Sector fund, only good for a CG offset when needed (soon). $100/barrel oil is probably a long way off, at least sustained if not real. One of several significant bad calls I've made.

 

[Lsbcal]

Yeah, that's one I had dead wrong. I wasn't a peak oil disciple, but I didn't think we'd see a glut again. I was so certain I own the VG Energy Sector fund, only good for a CG offset when needed (soon). One of several significant bad calls I've made.

You deserve credit for owning up to this. One attaboy!

Every once in awhile I'm tempted to buy something like a sector fund or individual stock again. Was just talking to our son yesterday who asked about Snapchat which I know zilch about. I just mentioned to him about generalities of buying a growth stock. Found I'm a bit rusty as I haven't done this sort of thing in many years but was reasonably successful in stocks like Starbucks ... or maybe I'm just remembering the winners.

 

[NW-Bound]

Did I miss the memo? "there are about 2.5 trillion barrels of technically recoverable oil resources left in the world, enough to cover the world's entire oil demand out to 2050—twice"

So if we use up all the technically recoverable oil resources left in the world we are devoid of any oil in 66 years or so? Man first landed on the moon 48 years ago...

+1

People have very short memory. This is just another proof.

The article does not say how they project the demand out into the future. Will renewable energy make a big enough dent to push out the day the world runs dry? Or will people use more oil now that it is cheaper? But it does not really matter. The earth does not produce more oil.

One thing for certain is that the supply of oil is like cash under a mattress, not like stocks or bonds that generate dividends. A dollar bill does not give birth to a quarter. Hence, no matter if your WR is 4% or 1%, your stash will run eventually run out if it is in cash. It is that simple.

... there is talk of landing on Mars in the next 5-10 years - but are we all going to fly away to that barren rock? Are we really likely to develop something that takes the place of oil in the next 66 years? Does our progress indicate that as a possibility?

Oil is used for more things than filling gas tanks of cars. It is used to manufacture plastics, and a lot of everyday goods that we take for granted.

 

[NoiseBoy]

"Easy to get" oil peaked years ago. The majority of today's new oil is coming from places that are harder and harder to access. Drilling in deeper ocean water, drilling in the frozen arctic, etc. Much of the rest comes from countries consumed by wars.

Yeah, there will still be oil for decades, but it's getting more expensive and difficult to extract. Not to mention all the environmental impacts of oil; climate change, oil spills, fires, etc.

This is not true. The reason prices are at the levels they are at today is because fracking matured as a technology, and it is way cheaper to get shale oil out than it is to drill offshore. Lots of people entered the game because oil was above $100/bbl so you saw tons a new producers show up. Eventually supply outpaced demand (China cooled off too) and now we have $50/bbl oil.

I tend to agree with BP's chief economist because fracking has change the marketplace. War in the middle east or earth quakes caused by fracking could alter things of course, but even at that, the trend towards using more renewable sources of energy will put pressure on the demand for oil. Also, $50/bbl oil is good for the consumer, but not so good for the producers, so you can't say that it's bad for the economy. When last I checked Exon et al, were still making a profit!

 

[Lsbcal]

I tend to agree, though one should never say 'never'. One good war that knocks out most oil production in the Middle East for a few years is possible and I don't think fracking can replace Middle East oil
...

Haven't heard much about the US emergency oil reserve storage. Anyway, am not loosing any sleep on war fears.

 

[Johanson]

I sold off my holdings in oil (but I still own two VLCC companies) over a year ago because I believe oil will be "lower for longer". I think it's going to be a long time before it hits $75/bbl even.

When the price goes up, they pump more here in the US, which lowers the price. Another thing I've discovered recently is that some depleted wells actually refill over a short period of time which lowers the cost of getting it out of the ground. The industry has known about this for a while but I only heard about it recently. Oil Fields Are Refilling...Naturally - Sometimes Rapidly There Are More Oil Seeps Than All The Tankers On Earth

 

[Midpack]

5 year graph Brent

 

[NW-Bound]

What the article tries to say is that oil price will not return to $100/barrel any time soon, and imply that one should not pile money in it expecting to make a killing. This I agree.

They don't really mean that oil will never ever get that high, only that they may not live long enough to see it. This, I am not so sure.

Too hard to look out to next year, let alone 10 years, or 20 years into the future. I may live that long yet (knock on wood).

I am not making any investment bets here, so it does not really matter to me at this point.

 

[Nemo2]

I tend to agree, though one should never say 'never'. One good war that knocks out most oil production in the Middle East for a few years is possible and I don't think fracking can replace Middle East oil

"Aye, there's the rub."

 

[Lsbcal]

If investing in the energy industry I'd imagine one should understand the dynamics of all the competitive choices.

We were watching a great documentary about battery technology. There is a lot of development now to get energy storage systems (and there are several competitive technologies) built out in the US. Seems to just be getting started. One cannot use all that hydrothermal, wind, or solar without being able to store some of it. So there are lots of areas to improve and reduce the need for oil.

We took a trip recently to Death Valley and saw plenty of wind farms. Saw solar grids in the desert. Will be even more useful when storage technology improves.

 

[6miths]

I didn't think that the two big spikes in oil prices that I can recall (1980, 2008) had much to do with the supply in the ground. So I would be with the never say never crowd.

 

[Tetto]

The electricity used to charge every battery is mostly derived from fossil fuel. This will be a long time when fossil fuel isn't involved any longer. Possibly well over 100 years.....the scientists are finding out just how difficult it is to replace an efficient device like internal combustion engine. We will get there though!

 

[Lsbcal]

Lots of smart people out there and lots of energy, E=mc^2. Maybe not in our lifetime's but I'm not worried at all.