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Sigh. I'm not sure how we are going to get out of this one.
US tight oil producers' income statements are full of red ink. Horizontal drilling, (not exactly new technology), has had some technological improvements that allows us to extract resources more quickly; however, it has not resulted in a profitable industry. In fact, almost every single one of these tight oil producers will likely default on their high yield loans at some point. They are producing at record rates in order to meet their interest payments.
The problem is the US does not have much recoverable oil. It's not technology increases that have lead to lower break even prices, it's the industry lowering its prices more than anything, but it is proving to be unsustainable, as these business are not profitable and overproduction is only contributing to lower oil prices. What is essentially going on is that we are draining a critical US resource, highly important to US sovereignty, at a loss. There is no viable replacement for petroleum and there is nothing close on the horizon that could possibly replace it. The demand for petroleum continues to rise, and will continue to rise in the future as global economies develop.
At some point, these tight oil producers are going to default, and unfortunately, it won't just cause chaos in the $1.9T high yield market, nor in the trillion dollar market of derivatives utilized to protect losses, that will never be recovered. It will cause chaos because it will result in an oil shock of epic proportions that will completely destroy the US economy and most global economies. Furthermore, IOCs have delayed both long term projects and exploration. It can takes years to set up production, which has the unfortunate effect of increasing both the duration and magnitude of the oil shock.
Now, both the ECB and FED are raising interest rates and deleveraging their balance sheets. This will cause yields to rise, which will make the cost of doing business higher. Under normal circumstances, this may not cause a huge problem in the economy; however, rates were so low that it created an artificial economy, driven by speculation.
Those speculators will now leave, so expect almost every single asset class to fall in value, including real estate and the stock market, which by the way have also been artificially inflated by central banks which have been injecting $300B of liquidity every month into markets.
I know a lot of people have been believing the lies, but like Lil Wayne said, "women lie, men lie, numbers don't lie." Look at the 10-k's. Follow the money.
This equates to roughly 5 years of use at the current consumption rate. This is not that much oil, in particular if we export it. And just in case people are under the illusion that we are producing more than we are using, you are wrong. The oil in the US decreased from 39.9 billion barrels to 35.2 billion barrels, which is a decrease of 4.7 barrels or roughly 8 months of use.
"The cheap oil environment has left Exxon under financial pressure. The oil giant has been forced to borrow money to cover massive drilling costs and its generous dividend payouts. Exxon's long-term debt has more than quadrupled to $46 billion and the company recently scrapped shareholder-friendly stock buybacks."
CHEAP MONEY!!!
Unfortunately, not cheap enough, right? You know, since Exxon can't engage in stock repurchases anymore? You know, cuz nothing grows the economy like borrowing money and buying back your own stock, right?
US tight oil producers' income statements are full of red ink. Horizontal drilling
The theme of this thread seems to be after years of warning us about peak oil, and how we would run out. We now due to improvements in technology for obtaining oil. Discover ourselves awash in cheap oil, and it isn't profitable to have so much oil for the big ugly oil companies whom so many despise.
Boom and bust due to supply and demand for oil and other fossil fuels is normal. It is complicated by the OPEC cartel.
Be happy, cheap, abundant, fantastic energy indefinitely into our future.
By the time fossil fuel is running out in the world, really running out, alternatives will be found. Maybe methane from Titan will help us for a few thousand years, after that, maybe we can pump the gas giants for the next few million.
Eventually in a few trillion years, we will run out of energy. Entropy is the enemy.
The theme of this thread seems to be after years of warning us about peak oil, and how we would run out. We now due to improvements in technology for obtaining oil. Discover ourselves awash in cheap oil, and it isn't profitable to have so much oil for the big ugly oil companies whom so many despise.
Boom and bust due to supply and demand for oil and other fossil fuels is normal. It is complicated by the OPEC cartel.
Be happy, cheap, abundant, fantastic energy indefinitely into our future.
By the time fossil fuel is running out in the world, really running out, alternatives will be found. Maybe methane from Titan will help us for a few thousand years, after that, maybe we can pump the gas giants for the next few million.
Eventually in a few trillion years, we will run out of energy. Entropy is the enemy.
Yes, but technology hasn't really been responsible for the lower break-even costs. It's been the industry lowering prices of its services. Maybe 10% can be attributed to technology.
Peak oil is real. At these prices, tight oil producers are bleeding out of their eyeballs. 2 years ago, tight oil producers weren't even profitable at $100/bbl.
This is a lie being told to us by the media. The real numbers don't support the "world is awash with oil" lie being perpetuated by the media. Because sure, there really is plenty of oil, but it doesn't make any difference if it's not profitable to extract it.
Yes, but technology hasn't really been responsible for the lower break-even costs. It's been the industry lowering prices of its services. Maybe 10% can be attributed to technology.
Peak oil is real. At these prices, tight oil producers are bleeding out of their eyeballs. 2 years ago, tight oil producers weren't even profitable at $100/bbl.
This is a lie being told to us by the media. The real numbers don't support the "world is awash with oil" lie being perpetuated by the media. Because sure, there really is plenty of oil, but it doesn't make any difference if it's not profitable to extract it.
Assuming that 100% of this oil is economically recoverable, and it's not, it's only 62 days of oil.
62 days!!!
The largest oil find in Alaska in 30 years is only worth 62 days, except that it's not even worth that.
Look at the numbers.
And I hate the logic being used. Don't worry...we will figure something out.
Really????
If the oil is running out, why is the price not increasing to make it viable for the companies to extract it?
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