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The End Of Oil? I Think Not!

April 18, 2017

By Paul Homewood

 

h/t Patsy Lacey

 

image

http://www.telegraph.co.uk/business/2017/04/17/market-fossil-fuels-burnt/ 

 

From the Telegraph:

 

‘I usually put a £5 bet on the oil price – and I’m collecting,” smiles Prof Dieter Helm.

It’s not difficult to imagine his tally of modest wagers adding up. The highly regarded Oxford University economics professor is a long-time industry observer. Today, he is in central London after taking meetings with major oil executives. He is also a familiar face in Whitehall and Brussels, where he advises – both formally and informally – on the trends reshaping the global energy markets.

Still, his stakes will be trillions of dollars lower than the energy leaders he advises

If Helm is to be believed the oil market downturn is only getting started. The latest collapse is the harbinger of a global energy revolution which could spell the end-game for fossil fuels. These theories were laughable less than a decade ago when oil prices grazed highs of more than $140 a barrel. But the burn out of the oil industry is approaching quicker than was first thought, and the most senior leaders within the industry are beginning to take note.

In the past, the International Energy Agency (IEA) has faced down criticism that its global energy market forecasts have overestimated the role of oil and underplayed the boom in renewable energy sources. But last month the tone changed. The agency warned oil and gas companies that failing to adapt to the climate policy shift away from fossil fuels and towards cleaner energy would leave a total of $1 trillion in oil assets and $300bn in natural gas assets stranded.

For oil companies who heed Helm’s advice, the route ahead is a ruthless harvest-and-exit strategy. This would mean an aggressive slashing of capital expenditure, pumping of remaining oil reserves while keeping costs to the floor and paying out very high dividends.

“They’d never do it because no company board would contemplate running a smaller company tomorrow than today. It’s not in the zeitgeist of the corporate world we’re in, but that’s what they should do,” Helm says.

http://www.telegraph.co.uk/business/2017/04/17/market-fossil-fuels-burnt/

 

I sometimes wonder where supposedly intelligent “experts” park their brains where climate change is concerned.

This is of course the same load of drivel that we have had on many occasions from Ambrose Evans-Pritchard, Mark Carney and co. And as usual, it contains the same fallacies:

 

 

1) The low oil price is certainly leading to reduced capital expenditure, but what will that lead to?

As with every other boom and bust in oil and mining sectors, a shortfall of supply, followed by a spike in price.

This will inevitably lead to a mad dash to open new reserves, followed by a market glut, etc etc etc.

 

2) While oil companies profits are affected by the downturn in revenue since prices peaked, great strides in technology have also reduced costs.

There is no reason at all why the industry cannot remain profitable at current prices.

If it cannot, supply and demand will simply find a new equilibrium.

 

3) Low oil prices have conversely made electric cars even less attractive than they already were before.

Continued low prices will encourage greater consumption. This is particularly true of natural gas, which has transformed energy markets in recent years, supplanting coal in power plants.

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20 Comments leave one →
  1. April 18, 2017 6:20 pm

    Dieter Helm is usually worth listening to, but he seems to have fallen for the climate change and renewable energy scams.

  2. CheshireRed permalink
    April 18, 2017 6:25 pm

    Question: when oil and gas are so abundant and therefore absurdly cheap, what’s the commercial incentive to develop less reliable and costlier alternatives?
    Answer; there isn’t any.

  3. April 18, 2017 6:54 pm

    There were well over 22 million vehicles running on natural gas [not LPG=propane] by 2015.
    http://en.wikipedia.org/wiki/Natural_gas_vehicle

    Electric cars have many issues: high price, short range, slow recharges, limited battery life, use of ‘rare’ materials, lack of ‘non’-fossil’ electricity, etc. etc.

    • Broadlands permalink
      April 18, 2017 7:07 pm

      And our inability to manufacture, transport, sell, and maintain them using only “alternative” energy, especially after we reach zero carbon emissions in the year 20???

  4. dangeroosdave permalink
    April 18, 2017 8:25 pm

    When I visit a steel mill running on solar power all day and all night I suppose I’ll have to take this issue more seriously. Pass me another Kool-Aid please…two straws…

  5. Joe Public permalink
    April 18, 2017 10:17 pm

    ‘This is particularly true of natural gas, which has transformed energy markets in recent years, supplanting coal in power plants.”

    Not just ‘ordinary’ natural gas, but fracked natural gas. The ‘unconventional’ means of exploitation, transformed into what is now the conventional means.

    BTW – more bad news last week from the US Geological Survey – their original prognostications underestimated by a factor of 10.

    https://www.usgs.gov/news/usgs-estimates-304-trillion-cubic-feet-natural-gas-bossier-and-haynesville-formations-us-gulf?utm_content=buffercedf7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#pq=x0lGqT

  6. Les Johnson permalink
    April 18, 2017 10:19 pm

    An old saying in the oil industry: The best cure for low oil prices, is low oil prices.

  7. John Smith permalink
    April 18, 2017 10:49 pm

    If fuels like oil and gas are going to be worthless, why is a new gas pipeline being built between Grangemouth on the Firth of Forth and Ireland. Someone is spending a huge amount of money digging up half of Scotland to move American LPG (to be offloaded on the east coast of Scotland) to the West Coast and across the sea to Ireland. and all in the land of wind farms.

  8. April 18, 2017 11:47 pm

    Reports of oil’s demise have been greatly exaggerated through most of our lives…it’s still not going anywhere soon;

    https://chiefio.wordpress.com/2017/03/29/a-billion-here-a-billion-there-pretty-soon-talking-real-oil/

    • Graeme No.3 permalink
      April 19, 2017 3:01 am

      Production of oil started in 1859. By 1862 at the latest** the coming end of oil was printed.
      John Rockefeller entered the oil business because he wanted to save this valuable resource from uncontrolled exploitation.
      I remember a talk by an veteran oil engineer. In 1927 he won a prize for an essay, the prize being a trip to the new oil refinery in Budapest. The manager showed the 5 or 6 boys around and explained that the oil business was very exciting but that the oil would run out in 20 years. When he graduated in 1932 the only job available was in the oil business and he was told that he would have to retrain in 20 years because the oil would run out then. In 1947 (after what he said was some adventures) he was part of an expert team that advised the USA Congress that oil would run out in 20 years. In 1975 there was concern that the oil would run out in 20 years, as also in 1977, 1979, 1981 etc.
      He concluded that he could say when the oil would run out, in 20 years. All he wanted was a starting date for those 20 years.
      It is now over 20 years since that talk.

      ** I tried to trace the original report which was even earlier but couldn’t find it.

      • April 19, 2017 11:22 am

        I had great, great uncles in that early PA oil business. While they were from Meadville, they had wells all over. Their sister, my great grandmother, kept house for them in the oil fields before her marriage. One brother left his estate to her and my grandmother went to Allegheny College. Beside me is the 2 part desk which was with them in the oil fields. I also have ca. 6 large ledgers with beautiful writing of their oil business. I am going to look for a museum in that PA area which has an oil research library in order to find a good home for them. Finally I recently opened a rolled up newspaper addressed to my grandmother which had been in my way for years in a closet. It was a large Titusville, PA newspaper from August 22, 1934 devoted to the” Diamond Jubilee of Oil.” When I have time, I will look for mention of the “Brawley Brothers.”

  9. John F. Hultquist permalink
    April 19, 2017 4:53 am

    Leaving assets stranded is as old as the Stone Age.
    I stockpiled a few — stones, I mean, and, if you want to, you can unstrand them.
    To preserve them, they are under a bronze sheet.

  10. Tim Hammond permalink
    April 19, 2017 10:37 am

    Somebody seems to have lost the plot. Lower oil prices are the result of more production, not less, and make alternatives less attractive.

    Yet the piece assumes the opposite of these basics. We do live in a bizarre world there days.

  11. Bitter&twisted permalink
    April 19, 2017 10:47 am

    The only “boom” in renewables is for subsidies.

  12. April 19, 2017 1:24 pm

    The over-riding issue is: we are using oil to burn and convert into plastics and other products. We are not replacing that oil and eventually it will run out. Whether there remains unrecoverable reserves or not we will be left without oil and unless alternatives are found the future looks pretty bleak for our childrens’ children’s children..

    • April 19, 2017 7:44 pm

      I think you need to add a couple more “children’s children” into that assessment before anybody need start worrying about oil shortages.

      Our children will be dead and our grandchildren geriatric before there is any serious possibility of oil starting to become scarce. And since we will by that time have recovered from climamania we can start again on the 300 years of coal fhe UK is still sitting on.

      The only cloud on the horizon is the possibility that this snowflake generation will breed another snowflake generation (assuming they can get permission to procreate without being accused of some impermissible conduct!) which will not have the wit or the courage to innovate or do decent research. OR that we and our children waste so much wealth that those 6x removed children won’t have the resources to solve the problems of their generation.

      In which case the eco-idiots will have won — and much good may it do them!

  13. Dung permalink
    April 19, 2017 2:48 pm

    This latest empty headed young bimbo which the Telegraph seems to have an endless supply of, claimed that proof of the demise of oil lay in the fact that there were predicted to be 37 million electric cars on the road by 2035. There are 25 million licenced cars on the UK roads today so she is simply predicting that electric cars are going nowhere.

    • Dung permalink
      April 19, 2017 2:49 pm

      her prediction of 35 million related to the whole world!

  14. April 19, 2017 9:22 pm

    So Dieter used to write about Peak Oil
    and now he’s got a new book.
    “New book on the impending transition of the #oil and #energy sectors
    Burn Out by Dieter Helm ”

  15. April 19, 2017 10:14 pm

    The only thing that has the potential to knock a slight hole in the fossil fuel scene is nuclear.

    Thorium plants have the potential to generate energy cheaper than coal and at a very high safety level with the ability to consume much of the current nuclear waste now being produced by the current technology.
    It appears that not much effort is being put into this potential. perhaps this is due to vested interests and the eternal lightbulb syndrome of yesteryears. And, of course our eco warriors with all their imagined allergies.

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