# The end of the oil era: The fall of civilization, or just a bump in the road? **URL:** \ **Category:** Great Debates\ **Created:** [June 24, 2003, 5:11pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075 "2003-06-24T17:11:42Z")\ **Posts on this page:** 20\ **Page:** 27
**Author:** ![Precambrianmollusc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/precambrianmollusc/32/63_2.png) [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)\ **Post date:** [November 5, 2016, 12:23am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/521 "2016-11-05T00:23:30Z")
> [@ralfy](#): > > The news from Bloomberg supports my arguments. Prehaps you could tell us what you think the article is saying and why that supports your opinion. Although the oil price dropped due to excess capacity, the first thing to get cut was exploration and reserve additions,the oil however is still there. Due to massive reduction in activity the costs of drilling and completion activities have dropped through the floor, and those who funded high cost leases have taken a bath. People have picked up leases for pennies on the dollar, along with rig rental and frac fleet rental If the price picks up , expect drilling and DUC work to pick up with it. The world will continue. . ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [November 7, 2016, 6:55am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/522 "2016-11-07T06:55:15Z")
> [@Precambrianmollusc](#): > > Prehaps you could tell us what you think the article is saying and why that supports your opinion. > > Although the oil price dropped due to excess capacity, the first thing to get cut was exploration and reserve additions,the oil however is still there. > Due to massive reduction in activity the costs of drilling and completion activities have dropped through the floor, and those who funded high cost leases have taken a bath. People have picked up leases for pennies on the dollar, along with rig rental and frac fleet rental > > If the price picks up , expect drilling and DUC work to pick up with it. The world will continue. > > . The article refers to diminishing returns and supports my argument concerning peak oil. Peak oil refers to a peak in production due to the fact that oil is a limited resource. References to reserves don’t reverse that point as the energy cost of obtaining oil that is deeper is higher, and thus negates whatever gains are achieved from extracting it. That’s why even with “vast” reserves of crude oil we are still resorting to shale. The costs have not dropped at all, which is why oil has has to go up (as pointed out in your last paragraph). The catch is that the global economy needs low oil prices, not high. Otherwise, it has to incur more debt, which leads to the threat of another financial crisis. Another problem is that the oil industry also needs to borrow more money each time in exchange for less new oil produced. That’s why it has to make debt repayments of over half-a-trillion dollars during the next five years: [http://www.bloomberg.com/news/articles/2015-08-26/oil-industry-needs-to-find-half-a-trillion-dollars-to-survive](http://www.bloomberg.com/news/articles/2015-08-26/oil-industry-needs-to-find-half-a-trillion-dollars-to-survive) And for that to happen, prices have to go up. To increase oil production further to meet the demands of a growing global middle class > **[The rise of the global middle class](https://www.bbc.com/news/business-22956470)** > > Hundreds of millions of people have been lifted out of poverty but can the middle class continue to grow? it will have to borrow even more money, and prices have to go up further. Again, this is an example of diminishing returns which is explained here: > **[Global Oil Market Forecasting: Main Approaches & Key Drivers - Center on...](https://www.energypolicy.columbia.edu/events/global-oil-market-forecasting-main-approaches-key-drivers)** > > The Center on Global Energy Policy hosted a presentation and discussion with Steven Kopits, Managing Director,... (video and PDF presentation included) That is, more money needed each time for less new oil needed. The global economy needs the opposite of that in order to thrive. Thus, the world will continue. It’s just it won’t continue in the way most imagine. In order to support that growing global middle class which everyone needs (including all forum members who earn from wages from businesses that engage in competition and that need to satisfy investors or who earn from investments and want the best deals), more cheap oil will be needed. But that’s not what we’re seeing. ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [November 7, 2016, 7:06am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/523 "2016-11-07T07:06:31Z")
> [@Lemur866](#): > > So because of the oil glut, oil producers aren’t working very hard to open up new development. And this is a disaster, because since we’ve got too much oil this means we’ll produce less oil in the future, which means less oil, and less oil is a world economic disaster. > > See, it doesn’t matter if production is going up or down, prices are going up or down, exploration is going up or down, consumption is going up or down. It’s all bad news and will lead to global economic collapse. It’s not just a glut but a glut of expensive oil. New development also requires increasing debt (and high prices) to get new oil. A global capitalist economy needs the opposite of that in order to thrive. What we need is cheap oil. By that, I don’t mean oil at lower prices, but oil produced at low energy costs because it is readily available and near the surface. In short, light crude like that from Texas and Saudi Arabia decades ago, not oil from Manifa or deep sea or shale, biofuels, etc. What we are seeing now is a combination of problems including and connected to peak oil. That is, peak oil has taken place because production costs have gone up. A world already saturated with credit creates even more to fund production of more expensive oil, but increased debt also leads to financial crashes. Thus, we have crashes with oil prices for oil that is more expensive because of peak oil. Meanwhile, oil companies have to keep selling at lower prices because they have to keep paying for debt and operating costs. Will investors who were promised high returns for investments in shale continue to lend? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 7, 2016, 4:11pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/524 "2016-11-07T16:11:15Z")
Good grief. :rolleyes: [QUOTE=ralfy] Another problem is that the oil industry also needs to borrow more money each time in exchange for less new oil produced. That’s why it has to make debt repayments of over half-a-trillion dollars during the next five years: [/QUOTE] From your link (do you actually read any of these things??): > [@](#): > > At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it. > > The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades. > > If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 3.8 percent to $40.06 a barrel at 8:13 a.m. in New York. > [@](#): > > And for that to happen, prices have to go up. To increase oil production further to meet the demands of a growing global middle class This is just a BBC article on the global middle class. They don’t seem to take the same gloom and doom view that you do, however. It’s also an article that over 3 years old (and still the world hasn’t ended or even substantially declined…and that global middle class is, you know, still growing. Even on ‘expensive’ oil, which has glutted the market). > [@](#): > > it will have to borrow even more money, and prices have to go up further. Again, this is an example of diminishing returns which is explained here: This is a link to two videos which I’m not inclined to watch, especially as the site is flagged questionable where I’m at right now. If someone else wants to slog through them and see if they back up Ralfy’s assertion I’ll leave that to them…I’m not sanguine though, based on the past history, including the overall theme which seems to me to be contridicated by his first link and seems based more on his own theories of capitalism than any sort of reality. It seems in his world view the price of oil can never go up or the entire economy fails, so he’s shifted the goal posts from ‘we are running out of oil!!’ to ‘we are out of cheap oil and the expensive kind doesn’t count, so doom is on the way!’. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [November 8, 2016, 3:12am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/525 "2016-11-08T03:12:23Z")
It’s ridiculous to say that without cheap oil the world economy is going to collapse. As has been stated many times in the life of this thread. Some people have this sort of quasi-mystical belief that the world economy is completely and inextricably liked to energy. Shovel more energy in one end, get more economic output out the other end. And if the flow of energy slows even by a little bit the whole system grinds to a halt in an out-of-control feedback loop of destruction. Except that turns out not to be the case. If I want my house to be warmer, I can crank up the furnace and burn more sweet sweet energy. Or I can install insulation and consume less energy. But consuming less is impossible! Less energy use can only mean lower quality of life! Except when it doesn’t. We’re going to eventually have to get used to paying higher prices for liquid fuels. That doesn’t seem likely to happen in the next few years though, since oil producers have to pay the bills, and lower prices seem to mean they have to produce even more oil to make their budgets. ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [November 8, 2016, 10:06am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/526 "2016-11-08T10:06:19Z")
> [@Lemur866](#): > > It’s ridiculous to say that without cheap oil the world economy is going to collapse. As has been stated many times in the life of this thread. > > Some people have this sort of quasi-mystical belief that the world economy is completely and inextricably liked to energy. Shovel more energy in one end, get more economic output out the other end. And if the flow of energy slows even by a little bit the whole system grinds to a halt in an out-of-control feedback loop of destruction. > > Except that turns out not to be the case. If I want my house to be warmer, I can crank up the furnace and burn more sweet sweet energy. Or I can install insulation and consume less energy. But consuming less is impossible! Less energy use can only mean lower quality of life! Except when it doesn’t. > > We’re going to eventually have to get used to paying higher prices for liquid fuels. That doesn’t seem likely to happen in the next few years though, since oil producers have to pay the bills, and lower prices seem to mean they have to produce even more oil to make their budgets. One of the reasons why the global economy crashed in 2008 and experienced slow growth to the present is high oil production cost. That was coupled with increasing debt, which led to financial crashes for various countries, volatile commodity markets, a major drop for the BDI, and weak global trade. The need for energy in the global economy is not an “quasi-mystical belief” but based on common sense. Many goods that we use require extensive supply chains across mining, manufacturing, and shipping, and these require significant amounts of oil, iron ore, copper, phosphorus, and many other resources, not to mention the energy to obtain them. Here’s a lengthy but very detailed explanation for mining from a mining professional: The gist is that like many other aspects of business, mining faces diminishing returns. In the case of copper, decades ago one could find nuggets of high-grade copper in river beds. Now, heavy equipment has to be used to find less copper at lower grade. That's diminishing returns: increasing amounts of energy needed to extract less resources each time. The same can be seen in oil: > **[Global Oil Market Forecasting: Main Approaches & Key Drivers - Center on...](https://www.energypolicy.columbia.edu/events/global-oil-market-forecasting-main-approaches-key-drivers)** > > The Center on Global Energy Policy hosted a presentation and discussion with Steven Kopits, Managing Director,... It’s also a lengthy lecture but detailed and includes a PDF presentation. The gist is that the oil industry has to spend increasing amounts of money and energy to find less new oil each time. Again, that’s diminishing returns. Why is that bad for the global economy? Because the same economy is capitalist, which means it can only thrive if it keeps growing, and given not only a growing population but a growing global middle class: “The rise of the global middle class” > **[The rise of the global middle class](https://www.bbc.com/news/business-22956470)** > > Hundreds of millions of people have been lifted out of poverty but can the middle class continue to grow? Everyone who is part of that global economy is dependent on growth, and that growth means increasing consumer markets for goods and services, especially given competition. Those increase in wages, those great deals in investment, those new jobs for every batch of graduates (yes, our children and grandchildren), and more are dependent on increasing wealth each time, and ultimately just increasing credit won’t cut it. More people worldwide will want cars, houses, appliances, medical equipment and services, and more. And all of those things will obviously not be created out of thin air. The problem is that even more energy and material resources will be needed to manufacture increasingly complex goods and services for growing number of people. Just think of the difference between horse and buggy more than century ago and passenger vehicles with computer components today. And then consider the global population back then and the population today. Given that, it is painfully obvious that incredible amounts of resources and energy will be needed to sustain not just a growing human population but one becoming more prosperous. That’s why we need cheap oil: the global capitalist economy in which we live requires it. Simply increasingly credit won’t help, as more money will obviously not defy physics. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 8, 2016, 3:22pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/527 "2016-11-08T15:22:28Z")
For anyone following along but who hasn’t slogged through this over a decade old thread, these are the same arguments Ralfy has been making, literally, for years now (this does not include Ralfy, since he has stated I’m on his ignore :p). They have all been addressed up thread, and, frankly, they looked better years ago than they do today. [QUOTE=ralfy] One of the reasons why the global economy crashed in 2008 and experienced slow growth to the present is high oil production cost. That was coupled with increasing debt, which led to financial crashes for various countries, volatile commodity markets, a major drop for the BDI, and weak global trade. [/QUOTE] But, as with most of what you say (when it isn’t flat out wrong), you are spinning things here. Sure, it’s ONE reason…but it wasn’t the primary reason. The primary reasons were that too much money was created, loaned out (mainly in the housing sectors) and that the loans weren’t secured, creating a debt bubble that eventually burst. Compounding all of this you had banks swing totally the other way and stop making any loans or even transfers, causing a liquidity crisis. Trillions were lost. Somewhere in all of that you had the price of oil over $100 a barrel which had some impact on all of this…but the impact was tangential at best, and really was more a factor of exacerbating the crisis, not a prime cause. Since you’ve been through this dance previous and since better posters than I have pointed all of this out I’m sure this is nothing new. You just keep bringing it up, I presume, hoping for posters who haven’t slogged through a thread started in 2003 and seen these exchanges already. > [@](#): > > The need for energy in the global economy is not an “quasi-mystical belief” but based on common sense. Many goods that we use require extensive supply chains across mining, manufacturing, and shipping, and these require significant amounts of oil, iron ore, copper, phosphorus, and many other resources, not to mention the energy to obtain them. I agree (though ironically you’ll never know since I’m on ignore :p)…there certainly is a correlation between the global economy and the price and availability of energy. It’s just not the 1 for 1 correlation you try and push. Certainly the price and availability of energy has an impact on the global economy, but you can have positive economic growth with high energy prices. > [@](#): > > Here’s a lengthy but very detailed explanation for mining from a mining professional: Yeah, I’ll let someone else slog through it. Just based on your previous ventures into drive by links the only fun I’d derive is if, once again, the linked video either doesn’t have anything to do with your point or contradicts you. > [@](#): > > The gist is that like many other aspects of business, mining faces diminishing returns. In the case of copper, decades ago one could find nuggets of high-grade copper in river beds. Now, heavy equipment has to be used to find less copper at lower grade. That’s diminishing returns: increasing amounts of energy needed to extract less resources each time. And yet, the real price of copper in adjusted dollars has actually gone down 50% over the past 100 years, and the global demand for copper is actually down right now. It’s part of the reason there isn’t a lot of extensive exploration for new copper sources. Old mines might be playing out, though still operating because they are still economically viable, but copper is also a material that can, is and has been heavily recycled. > [@](#): > > Why is that bad for the global economy? Because the same economy is capitalist, which means it can only thrive if it keeps growing, and given not only a growing population but a growing global middle class: Except the price of energy is only one factor in the global economic equation and that capitalism itself has mechanisms (those ‘market’ thingies) that factor in those changing prices. As to the ‘global middle class’ (a theme that, again, you’ve been on about for years) it continues to, you know, grow. > [@](#): > > The problem is that even more energy and material resources will be needed to manufacture increasingly complex goods and services for growing number of people. Just think of the difference between horse and buggy more than century ago and passenger vehicles with computer components today. And then consider the global population back then and the population today. Given that, it is painfully obvious that incredible amounts of resources and energy will be needed to sustain not just a growing human population but one becoming more prosperous. Well, let’s think of them. When we were in the horse and buggy days and oil was first being discovered and methods to extract it were first being developed to today we’ve had many instances where there were fears that oil would run out. The early technology used for extraction and production weren’t viable, economically, when the first fields began to diminish in productivity. Instead, new technology was needed to refresh those fields, discover new ones and exploit resources that weren’t viable at the earlier price points. This has been the trend literally since the first wells. Many untapped resources were left in the ground, either undiscovered or basically not economically viable for extraction. As prices and demand changed, however, those resources that were un-viable before become viable…and as the prices rise there is more funding for R&D and for new exploration. This opens up new resources. Of course those resources cost more to extract and process…that’s natural. But as long as the market can bear the costs it’s not a major issue. Eventually, what will happens is that the cost will rise to a point where it’s price point exceedes that of alternatives that we already have but aren’t used, or are niche products…making those alternatives viable for a more mass market and distribution. > [@](#): > > That’s why we need cheap oil: the global capitalist economy in which we live requires it. Simply increasingly credit won’t help, as more money will obviously not defy physics. Your assumptions and assertions defy standard economics. Capitalist economies do not require cheap oil or they collapse. ---
**Author:** ![Precambrianmollusc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/precambrianmollusc/32/63_2.png) [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)\ **Post date:** [November 17, 2016, 11:22pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/528 "2016-11-17T23:22:24Z")
So after Alpine High led the way with oil running out with 3billion bbls contributing to the end of the oil era, the USGS announces another step closer to peak oil > **[USGS Announces Largest Oil And Gas Deposit Ever Assessed In U.S.](https://www.npr.org/sections/thetwo-way/2016/11/16/502337471/usgs-announces-its-largest-oil-and-gas-discovery-ever)** > > The agency says the so-called Wolfcamp shale in Texas contains 20 billion barrels of oil and 16 trillion cubic feet of natural gas that are recoverable by hydraulic fracturing and other means. I think I read it correctly. We are doomed. Although by we I mean anyone hoping for \>60$/bbl oil. . ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 17, 2016, 11:33pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/529 "2016-11-17T23:33:08Z")
> [@Precambrianmollusc](#): > > So after Alpine High led the way with oil running out with 3billion bbls contributing to the end of the oil era, the USGS announces another step closer to peak oil > > [USGS Announces Largest Oil And Gas Deposit Ever Assessed In U.S. : The Two-Way : NPR](http://www.npr.org/sections/thetwo-way/2016/11/16/502337471/usgs-announces-its-largest-oil-and-gas-discovery-ever) > > I think I read it correctly. > > We are doomed. > > Although by we I mean anyone hoping for \>60$/bbl oil. > > . Yeah, but what about the capex?? The money to exploit this sort of discovery doesn’t grow on trees, you know??? Plus…have you read back through the Ralfster’s previous drive by posts with links?? There is undoubtedly something in there that says that, though the estimates on this are 20 billion barrels and 16 trillion cubic feet of natural gas, this is UNCONVENTIONAL oil, so it doesn’t count. Oh, plus we will only be able to take a thimble full at a time out due to…well, shale deposits and…rise of the global middle class! To paraphrase Monty Python: Look, that rabbit’s got a vicious streak a mile wide! It’s a killer!..He’s got huge, sharp… er… He can leap about \<--------------\>. Look at the bones, man! ---
**Author:** ![Precambrianmollusc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/precambrianmollusc/32/63_2.png) [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)\ **Post date:** [November 17, 2016, 11:38pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/530 "2016-11-17T23:38:25Z")
Well Tim did have a good point based on the end of that scene. Run away! . ---
**Author:** ![Siam\_Sam](https://avatars.discourse-cdn.com/v4/letter/s/d78d45/32.png) [@Siam\_Sam](https://boards.straightdope.com/u/Siam_Sam)\ **Post date:** [November 19, 2016, 5:41am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/531 "2016-11-19T05:41:07Z")
[Biggest-ever oil discovery in the US to date](http://edition.cnn.com/2016/11/17/us/midland-texas-mammoth-oil-discovery/index.html) 20 billion barrels of oil and 1.6 billion barrels of natural gas. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [December 13, 2016, 9:00pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/532 "2016-12-13T21:00:01Z")
The end is nigh…repent, repent! The price of oil is set to skyrocket (for certain definitions of ‘skyrocket’) in 2017 as oil producers are going to be in [deficit production territory](http://money.cnn.com/2016/12/13/investing/oil-market-glut-iea-opec/index.html), according to the IEA! Read the whole story to see how, once again ralfy predicted all! > [@](#): > > The huge surplus of oil that’s been sloshing through global markets is set to evaporate. > > The International Energy Agency said Tuesday that it expects the global crude oil glut to start disappearing in the first half of next year, much earlier than it previously predicted. > > There is one major condition: OPEC and its partners must stick to their agreement to slash production. Er…well, ok, that doesn’t sound too bad. But it’s a deficit in production! This could be a new trend in ever skyrocketing price and higher and higher demand that just can’t be met by the oil producers leading to dogs and cats living together as human societies collapse and we go back to the joys of hunting and gathering! > [@](#): > > The cartel has agreed to cut its overall production by 1.2 million barrels a day starting in January. A group of non-OPEC nations – including Russia, Mexico, Kazakhstan and Oman – have also committed to slash output. > > The collective action helped push prices to a new 2016 high above $53 per barrel on Monday. > > Paris-based IEA said in its monthly report that if all parties stick to the agreement, “the market is likely to move into deficit in the first half of 2017 by an estimated 600,000 barrels a day.” > [@](#): > > But the IEA also warned that the oil market outlook remains uncertain in the longer term. That’s because the production cuts were only agreed for six months, with a review due in May. > > “This can be seen as prudent given the underlying uncertainties in the oil market and the global economy but also a warning that production restraint might not be extended,” said the agency. > > OPEC producers want to cut production in order to push prices higher – but only within certain limits. If prices rise too far, high-cost producers including the U.S. shale industry could start pumping again. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [May 11, 2017, 8:45pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/533 "2017-05-11T20:45:03Z")
I just keep bumping this thread for my own amusement and just to keep it current with the happenings. My apologies if this is annoying anyone. At any rate, the irony factor in [this](http://money.cnn.com/2017/05/11/investing/opec-oil-u-s-supply/index.html) is just too good to pass up. Basically, OPEC, after several years spent trying to crush US oil production, has now asked (politely it seems) for US producers to please, please ramp back production as the glut of oil on the market continues and the prices have, once again, started to drop (this is only temporary I’m sure, Ralfy! The end is nigh, I’m sure). > [@](#): > > OPEC has asked a favor of other major producers: Please stop pumping so much and help us balance the market. > > The unusual plea was issued Thursday in the cartel’s closely-watched monthly report, which found that global markets are still suffering from too much supply. > > The report said that balancing the market would “require the collective efforts of all oil producers” and should be done “not only for the benefit of the individual countries, but also for the general prosperity of the world economy.” I’m sure shale oil is, as predicted in this thread, just about to dry up (it’s unconventional, after all), but seems that the attempt by OPEC to drive them out of business has only made them more efficient. > [@](#): > > The cartel has in the past fought fiercely for its market share. Starting in 2014, it pumped relentlessly in order to squeeze higher cost American producers. > > The strategy pushed prices well below $30 per barrel and forced many U.S. producers to scale back in 2015 and 2016. > > But it had a disastrous effect on the government budgets of OPEC members, forcing them to implement austerity measures. > > It also forced U.S. producers to become more efficient, and they can now withstand much lower prices than just a few years ago. Analysts at UBS estimate that U.S. producers can now make money as long as prices remain above $40 per barrel, down from $65 in early 2014. Anyway, just wanted to update and share. Be sure to click like and subscribe to The Oil Drum, who will be vindicated in the end! ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [May 11, 2017, 8:56pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/534 "2017-05-11T20:56:34Z")
No, no annoyance. Thanks, XT. ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [August 4, 2017, 12:18am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/535 "2017-08-04T00:18:33Z")
Reserves are based on price. Increase the price of oil, and there are more reserves available. That’s because the oil that needs to be extracted is deeper or requires more processing. The problem is that the world can’t afford high prices in the long run. It can do so in the short run by creating more credit, but doing so leads to greater financial instability and debt. Because of that, credit has to be decreased. That is what we are currently facing. Oil discoveries are now at a 70-year low. The more expensive oil requires $50-90 to access and process, and oil from areas like Manifa $150. In order to access that oil, the industry had to take on up to $3 trillion in debt. It has to pay $500 billion of that during the next few years, and to do that it had to lay off thousands of workers, give up over $1 trillion in investments, and use up more of its cash flows. If oil prices don’t go up, things will get worse. But higher oil prices will require more credit, and that means the opposite of plans to raise interest rates. That may lead to lower credit levels but also lower investments for all other businesses as well as more expensive debt. All of these could have been avoided given cheap oil, but that’s not going to happen for painfully obvious reasons. The fact that oil discoveries have been dropping and oil production costs have been going up due to lower energy returns is proof of such. ---
**Author:** ![Flyer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/flyer/32/7298_2.png) [@Flyer](https://boards.straightdope.com/u/Flyer)\ **Post date:** [August 4, 2017, 1:33pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/536 "2017-08-04T13:33:30Z")
> [@ralfy](#): > > Reserves are based on price. Increase the price of oil, and there are more reserves available. That’s because the oil that needs to be extracted is deeper or requires more processing. > > The problem is that the world can’t afford high prices in the long run. It can do so in the short run by creating more credit, but doing so leads to greater financial instability and debt. Because of that, credit has to be decreased. > > That is what we are currently facing. Oil discoveries are now at a 70-year low. The more expensive oil requires $50-90 to access and process, and oil from areas like Manifa $150. In order to access that oil, the industry had to take on up to $3 trillion in debt. It has to pay $500 billion of that during the next few years, and to do that it had to lay off thousands of workers, give up over $1 trillion in investments, and use up more of its cash flows. If oil prices don’t go up, things will get worse. > > But higher oil prices will require more credit, and that means the opposite of plans to raise interest rates. That may lead to lower credit levels but also lower investments for all other businesses as well as more expensive debt. > > All of these could have been avoided given cheap oil, but that’s not going to happen for painfully obvious reasons. The fact that oil discoveries have been dropping and oil production costs have been going up due to lower energy returns is proof of such. So you broke your 8-month hiatus for this? Interesting. Incidentally, you apparently don’t know that there are different types of oil reserves. > [@](#): > > 1. Proven Reserves - There is a greater than 90% chance that the oil will be recovered. > 2. Probable Reserves - The chance of actually getting the oil out is greater than 50%. > 3. Possible Reserves - The likelihood of recovering the oil is significant, but less than 50%. > **[What Are Oil Reserves?](https://www.thebalancemoney.com/oil-reserves-definition-categories-world-s-largest-3305873)** > > Oil reserves are the deposits of oil in the earth. Just a few countries have large deposits, affecting the global economy. I have a feeling that no amount of evidence will convince you, so I’ll post this for the benefit of others who read this. > [@](#): > > The companies themselves have also stated explicitly, to investors who query them, that they are comfortable drilling at these prices. Shell (NYSE:RDS.A) (NYSE:RDS.B) calls its new Permian holdings profitable at $40 a barrel. Exxon (NYSE:XOM) and Chevron (NYSE:CVX) are shifting large shares of their capex into Permian shale. In fact, analysts now consider almost every shale basin to be competitive at $50, with some like the Permian able to compete as low as $35. [https://seekingalpha.com/article/4058457-shale-break-even-prices-servicing-costs-determine-follow](https://seekingalpha.com/article/4058457-shale-break-even-prices-servicing-costs-determine-follow) > [@](#): > > While it’s perfectly true that there isn’t enough U.S. shale to flood the world with oil, a lot of what there is is historically cheap to produce so as to give crude from the Middle East a real run for its money; and a solid proportion of that production has been sold forward at attractive levels in the futures market ensuring financial stability for U.S. producers. This growing price competiveness is nothing new. In the Bakken, for example, the average breakeven cost per barrel was $59.03 in 2014, which fell to $29.44 in 2016, a reduction of 50 percent in just two years. Meanwhile, U.S. oil production has risen to approximately 9.3 million barrels a day and is estimated by the EIA to reach 10 million barrels a day by 2018. > **[As Breakeven Prices Converge An Oil Price Crash Nears | OilPrice.com](https://oilprice.com/Energy/Energy-General/As-Breakeven-Prices-Converge-An-Oil-Price-Crash-Nears.html)** > > Both fundamentals and technical indicators appear to point towards oil prices going downwards as global breakeven costs converge ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [August 4, 2017, 1:46pm UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/537 "2017-08-04T13:46:41Z")
[QUOTE=ralfy] That is what we are currently facing. Oil discoveries are now at a 70-year low. [/QUOTE] I’m not sure whether Ralfy here is being deliberately obtuse or disingenuous, but this is the same theme he’s been on. Basically, say something that is true (sort of…at least, in this case, in 2016) but don’t provide the details so that it sounds scarier than it is. It’s true that in 2016 oil discoveries were at a 70-year low…but the reason for that is because the price of oil was so low that oil companies cut exploration down to the bone. From [here](https://www.bloomberg.com/news/articles/2016-08-29/oil-discoveries-at-a-70-year-low-signal-a-supply-shortfall-ahead): > [@](#): > > Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand. > > With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month. It’s another instance of using the truth to obscure the reality and try and paint a picture through misdirection that conforms to your narrative. The rest of his post is much the same thing. I notice he didn’t address the fact that oil prices continue to be extremely low, or that US shale companies have continued to produce at a profit in current price structure…because these things don’t conform to his narrative so should be ignored or de-emphasized. It’s funny that he comes back to the thread and tries this stuff when much of it’s been addressed already to debunk his narrative or at least to shed light on what he’s trying to do. Almost like he doesn’t see the posts. 😛 > [@](#): > > All of these could have been avoided given cheap oil, but that’s not going to happen for painfully obvious reasons. The fact that oil discoveries have been dropping and oil production costs have been going up due to lower energy returns is proof of such. Maybe it’s just me, but the irony of these two sentences sort of sum up this thread and Ralfy’s participation in it. ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [August 5, 2017, 1:03am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/538 "2017-08-05T01:03:33Z")
> [@Flyer](#): > > So you broke your 8-month hiatus for this? Interesting. > > Incidentally, you apparently don’t know that there are different types of oil reserves. > > [Oil Reserves: Definition, Categories, World's Largest](https://www.thebalance.com/oil-reserves-definition-categories-world-s-largest-3305873) > > I have a feeling that no amount of evidence will convince you, so I’ll post this for the benefit of others who read this. > > [https://seekingalpha.com/article/4058457-shale-break-even-prices-servicing-costs-determine-follow](https://seekingalpha.com/article/4058457-shale-break-even-prices-servicing-costs-determine-follow) > [As Breakeven Prices Converge An Oil Price Crash Nears | OilPrice.com](http://oilprice.com/Energy/Energy-General/As-Breakeven-Prices-Converge-An-Oil-Price-Crash-Nears.html) “The Link Between Oil Reserves And Oil Prices” > **[The Link Between Oil Reserves And Oil Prices | OilPrice.com](https://oilprice.com/Energy/Crude-Oil/The-Link-Between-Oil-Reserves-And-Oil-Prices.html)** > > After continuous growth in proved oil reserves in many countries worldwide, low oil prices cause many companies and nations to write down their proved reserves In short, what’s recoverable is based on prices. If prices go up, then more oil can be accessed. But the global economy needs cheap oil. “The Mighty U.S. Shale Oil Industry To Lose Another $20 Billion In 2017” > **[The Mighty U.S. Shale Oil Industry To Lose Another $20 Billion In 2017 –...](https://srsroccoreport.com/the-mighty-u-s-shale-oil-industry-to-lose-another-20-billion-in-2017/)** “WARNING: The Global Oil & Gas Industry Is Cannibalizing Itself To Stay Alive” > **[WARNING: The Global Oil & Gas Industry Is Cannibalizing Itself To Stay...](https://srsroccoreport.com/warning-the-global-oil-gas-industry-is-cannibalizing-itself-to-stay-alive/)** Exxon and others gave similar conclusions years ago. Also, consider the comments in the articles that you shared. Here’s what I’ve gathered so far: According to the BIS, the oil and gas industry has debts of up to $3 trillion, and has to make debt payments of over $500 billion during the next few years. It has been making payments so far by selling off assets, burning more of its cash flows, laying off thousands of workers, and letting go off around $1 trillion in investments to profit. That explains why they are profiting even with low oil prices. Oil prices have to go significantly for them to survive in the long term, especially given diminishing returns on capex (i.e., increasing levels of investments in return for lower increases in production), but higher oil prices have a negative effect on the global economy. That’s why global growth remained weak compared to the previous decade. Meanwhile, consumption has not gone up considerably even with oil prices plummeting, and financial problems persist due to high levels of debt, in turn prompting calls for interest rate hikes. Oil discoveries are at a 70-year old. If any, that shows that what we are seeing is not a mere bump in the road. In addition to that, oil production per capita has never recovered after peaking back in 1979. If any, these two points alone discount any claims debunking peak oil. I just wanted to add the rest of the points above to show its effects. In this case, we are seeing the effects of peak oil and high levels of debt needed to maintain production. ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [August 6, 2017, 3:49am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/539 "2017-08-06T03:49:38Z")
“Oil and debt” > [@](#): > > The total debt of the oil and gas sector globally stands at roughly $2.5 trillion, two and a half times what it was at the end of 2006. The recent fall in the oil price represents a significant decline in the value of assets backing this debt, introducing a new element to price developments. In common with other episodes of retrenchment induced by rapid declines in asset values, greater leverage may have amplified the dynamics of the oil price decline. The high debt burden of the oil sector also complicates the assessment of the macroeconomic effects of the oil price decline because of its impact on capital expenditure and government budgets, and due to the interaction with a stronger dollar. > **[Oil and debt](https://www.bis.org/publ/qtrpdf/r_qt1503f.htm)** > > Part 4 of "International banking and financial market developments" (BIS Quarterly Review), March 2015, by Dietrich Domanski, Jonathan Kearns, Marco Lombardi and Hyun Song Shin.Oil prices fell sharply in the second half of 2014, although the... ---
**Author:** ![ralfy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ralfy/32/600_2.png) [@ralfy](https://boards.straightdope.com/u/ralfy)\ **Post date:** [August 6, 2017, 3:52am UTC](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075/540 "2017-08-06T03:52:16Z")
“People are almost completely ignoring a looming crisis for oil” > **[People are almost completely ignoring a looming crisis for oil](https://www.businessinsider.com/the-future-of-oil-supply-and-demand-2016-9)** > > HSBC thinks that we should be looking at declining supply in the future. In reference to an HSBC report found here: > **[HSBC-peak-oil-report-2017.pdf](https://www.lemonde.fr/blog/petrole/files/2017/01/HSBC-peak-oil-report-2017.pdf)** > > 1895.40 KB Also, “Global Oil Fields in Decline (HSBC)” [![](https://img.youtube.com/vi/7KfVJBNX2U4/hqdefault.jpg "Global Oil Fields in Decline (HSBC)") ](https://www.youtube.com/watch?v=7KfVJBNX2U4) [Previous page](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075.md?page=26) [Next page](https://boards.straightdope.com/t/the-end-of-the-oil-era-the-fall-of-civilization-or-just-a-bump-in-the-road/184075.md?page=28)