How Long Can Low Oil Prices Last?

South Dakota is capping wells…and a lot of off-shore oil wells are being closed as well. It seems that at prices below about $70/barrel, a lot of new oil fields are not profitable.
My understanding is that Saudia Arabia, Iran, and Russia are pumping oil like crazy-Iran because it needs money (to escape the effect of the sanctions), SA is pumping (because they want to deny revenue to Iran), and Russia is pumping because they are also in need of cash.
Obviously, this cannot go on forever…but already there are serious consequences-the Brazilian oil giant Petrobras is bankrupt-they will have to let go thousands of people. The Mexican PEMEX is also having severe difficulties. and (as mentioned) the South Dakota oil boom is over (for now).
Any idea how ling this will last?

Until they don’t. It’s too complicated and variable a situation to know when.

A hundred years from now, the price curve is going to look like a steady wiggle from $2 to $5 or so, with fifty mostly-balanced forces trying to push it one way or the other. Sooner or later, one force will triumph and the price will shoot through the roof in adjusted pricing. What force or combination of forces will push it permanently through this stable ceiling? We can’t know, but reduced availability will almost certainly be in the mix. When? There’s no way to know. For all the solemn predictions about “peak oil” and so forth, every time we’ve nailed down a curve for crude oil use and prices, some new variable enters the mix. We have been supposed to run out, or have prices shoot up 5-100X, several times since the 1970s. The price curve is pretty damned flat and has stayed so despite some huge upheavals and changes. (For instance, I don’t think the SD reserves were factored into the game until maybe a decade ago, maybe two.)

So even knowing that availability is likely to drop and that will almost certainly lead to a sharp price increase (permanently, not for some short spike, although those will certainly precede the final rise)… I’d pretty much call anyone who claims to know a BS artist. One of them will get lucky, but that’s not the same thing as knowing or having enough valid data to exclude other possibilities.

But I can predict the econ chump who guesses correctly will be lauded as a genius, and the rest will proceed as if they knew it was coming, too, published theories to the contrary conveniently forgotten. :slight_smile:

ETA: There’s even a small chance that a major breakthrough in energy tech - say, easily implemented fusion plus ultra-efficiency batteries - could simply kill the market for fossil fuels, leaving them at an ever-decreasing real price.

I suspect part of the glut (and lower prices) is also a attempt to limit the suppliers, and thus maintain control over the market in the hands of a few key players. Once the prices jumped up it looked like a lot more people started to drill and also mine stuff like the tar sands. As posted above some of these are now closing because they are not profitable at these lower prices.

It may be as bad as ‘dumping’ practices. Raise the price, get as much as you can. When other suppliers invest and start to get going, collapse the price and send them all into bankruptcy. Rinse and Repeat.

If the range issue is solved on electric cars, demand will collapse for gasoline, most likely bringing oil prices to an all-new low.

Depends on Middle Eastern and world politics. It’s low now because Saudi Arabia is willing to keep it low. Factors involve Russia, Iran, and ISIS at them moment, keeping the price low is to their disadvantage. Anything that fuels the perception of a reduction in the supply will send it up again.

Not a chance. Not in solving the range issue, but the idea that the demand for gasoline would plummet. Hybrid vehicles only finally went mainstream when gas suddenly shot up in price 7 or 8 years ago. But as soon as the price dropped hybrid sales collapsed and trucks and SUVs came back. The price of oil drives electric vehicles’ future, not the other way round…

I think that’s the historical linkage, but a genuine improvement in e-vehicles could reverse the situation, making them desirable for reasons other than beating gas prices. It would only take a few years of good selection and advantages of e-cars to start a tilt away from gas power, regardless of how low gas prices might fall.

Because, in the end, there are powerful reasons to stop using fossil fuels (in cars, anyway) that don’t have enough economic value to sway most people. Once there is an option that makes lasting sense, I think both regulatory and public pressure would bar a return to gas vehicles.

Economic trends: Always exactly the same until they change. :smiley: ETA: And then, of course, it was completely obvious. :smiley: :smiley:

I can’t figure out if that is a joke, or you believe. I read it both ways.

Which part? Collapse of demand, or fall of prices?

I’ll agree the latter is iffy. More likely, crude oil-based products will rise in price due to far more restricted production. But I could see gas falling to, oh, say, $1 a gallon for a time in a desperate attempt to stabilize a vanishing market.

But collapse of demand? We’re already seeing the beginning of that curve, and it’s as inevitable as oceanrise. Only the time frame is arguable.

The market for oil hasn’t felt any impact from electric cars. So far dropping oil prices just increase consumption anyway, and lower prices make electric cars less economical. It’s going to take a lot of alternative energy sources and far fewer conventional car engines before there will be any effect on oil prices. Speculation about future electric car trends may have some short term effects on oil prices but they’re overshadowed by the control of the supply and pricing.

Nitpick: It’s North Dakota that’s got the oil.

One odd thing that’s been going on this time around is that the retail fuel prices have recovered quite a lot seemingly independently of crude prices, which means that at least in the US consumption hasn’t gone up all that much in response to the low crude prices. Gas prices are certainly lower than they were a year ago, but they’re not totally out of line with what prices have been over the last decade or so. If the refinery bottlenecks and whatever else is causing the disconnect between gas and crude prices are resolved, fuel prices should settle back down closer to $2/gal or less and then we’ll see people making major lifestyle changes that affect consumption.

That’s because electric vehicles can’t yet compete on features like range with oil vehicles, so the people buying them are primarily people who are willing to compromise to save money long term. When the price of oil goes down, electric vehicles and hybrids look like less of a long-term win, and people are less willing to compromise.

But if the electric vehicle wasn’t a compromise because it had increased range + quick battery swaps (or something), then even relatively cheap gasoline is still going to be more expensive in the long run, and people will overwhelmingly choose electric vehicles.

All true, except I have yet to see a real-world equation where an EV presently on the road saves any money, or even breaks even against an equivalent gas vehicle, unless electricity rates drop or gas prices jump by quite a bit.

EVs are bought by people willing to compromise and gain a few slight advantages, even though the economics are against them… for now, and likely the lifespan of the battery box they’re driving.

That will change. Can’t say when, is all.

It probably wouldn’t make much difference at all, according to the numbers I found. The US uses about 9,000,000 barrelsof oil per day in gasoline transportation, while the world uses 93,000,000 barrelsper day. If every passenger car and light truck in the US converted to electric we would only see a 10% decrease in world demand (less, actually, since more fossil fuels will still be needed to generate the additional electricity). If we started today giving away electric vehicles to replace every oil based car and light truck, demand growth in Chinaalone would quickly offset our decrease.

You’re kind of muddling the arguments, but maybe it’s on top of my muddling.

Will EVs lower oil prices worldwide? Probably not in any short run, in part for the reasons you name.

Would EVs that can match equivalent fuel cars likely take over the US market, with a little regulatory and other pushing? Very likely, because there are some huge, if vague to the average person, motivators for us to do so. It’s not just a case of “hey, new tech, let’s go with that.”

I think a US that went EV would drag much of the rest of the world with it, industrialized nations first. There will always be Chinas and Indias and Mexicos holding on to old, cheap tech. Can’t let that be a reason not to to anything.

I think what Amateur is really saying is that at some point, electric vehicles may end up being cheaper than gasoline cars for most purposes. This isn’t totally unreasonable - right now, the primary cost is the battery. If you want an electric car with lithium-iron batteries, it’s going to cost about 25k for enough cells to match the capacity of a Tesla model S. That’s what you need to match, though - lithium iron batteries can be rapidly charged, and they have extreme longevity - if you discharge them halfway on average, you’d get about 800k miles before the pack is below 80% of new capacity.

Lithium iron batteries contain much cheaper raw materials than the batteries most commonly used, just the current market prices for them are high.

When the price for the batteries is closer to their raw material cost(kind of like LED light bulbs. They were $50 each and a toy of the rich like 3 years ago. Now they are $2.50 and you’d be an idiot not to use them), they probably will cost 5-10k for a pack with the capacity of a Tesla. This would allow you to make an electric vehicle in the 20-30k range, possibly sub 20k if everything else were build cheaply. The DIY electric vehicle motors are a grand or 2, and the power controllers are another grand or 2 - it’s the battery that costs all the money, everything else is cheap. Auto manufacturers obviously would get a discount over DIY prices.

I’m hoping that someone will make a future car where all the parts are modular. The actual electric vehicle battery cells look like gigantic D-cells, and, while they do go bad, I’m thinking you could build a car where the in-car display would show you a diagram of which cell it is and an order page to order a new one from Amazon or something. You wouldn’t need any tools but a screwdriver to swap the bad cell.

The motor drivers would similarly be installed by brackets held down with ordinary screwdrivers, and swapping them would similarly be easy - unscrew the bracket, disconnect the big connectors, plug in the new one, done. The brakes and A/C and power steering would all use electric pumps and would be nice neat easy to swap modules. You’d never need to swap the actual brake pads over the lifetime of a vehicle because of regen.

I think a car that was both reliable, electric, looked pretty nice, and super easy to fix would have a market advantage over cars that cost a fortune to fix. The advantage would especially be pronounced in somewhere like China.

Also, you’d get free or very cheap fuel if you charged your electric car using your solar array or put it in a parking space in the daytime where it charges when power is cheap at midday. (you know, once solar keeps exploding like it is doing right now, eventually, the cheapest power will be when the sun is brightest)

So it’s a convergence of several technologies. Cheap lithium-iron batteries. Cheap solar panels. Electromagnetic induction vehicle chargers (this would let you stick a charge pad in your garage and one in the parking spots at work, so no more having to remember to plug the car in)

This is kind of a tangent, but how are EVs doing in Europe, where range is less of an issue, and gas prices have been way higher than the US for ages? Seems like if the US goes electric, it would be after Europe, not before.

Missed the edit:

I LOVE** Habeed’s **idea of a modular, DIY car. I’d be all over that.

I wonder if the safety regs would kill it, though.

It would still be a professionally manufactured car - it would just take advantage of the fact that electric vehicle components are inherently much more modular. Every battery cell is a separate part, in parallel or series to all the others. The power controllers use a massive array of parallel FETs, which you could technically put on separate circuit boards to make it possible to fix them partially. (I had in mind it being a single monolithic sealed box like the current designs, and you’d just turn in that box when it fails and get a replacement). The electric A/C compressor systems are now a separate unit plugged into a high current accessory bus, the electric power steering are several modular subsystems, the electric brake booster + master cylinder can be a module, etc.

One of the reason Japanese car manufacturers ate the lunch of the Americans is they offered reliable, relatively easy to fix cars in the 80s and 90s. Today, there’s also a huge amount of cheap aftermarket Chinese parts. I think a manufacturer that design an easily and cheaply fixable car would win out, especially in the Chinese auto market.