Oil at $10/Barrel: Not if, When

October 16, 2017

Caution: Not too long ago we were talking about oil at $100/barrrel and up. Times have changed. Listen for the phrase “Moore’s law for Solar energy”. Something investors can understand.

CNBC:

Why the oil price will plummet to $10, according to one strategist  

Oil prices are poised to crash to just $10 per barrel over the next six to eight years as alternative energy fuels continue to attract more and more investors, Chris Watling, chief executive of Longview Economics, told CNBC on Friday.

When looking ahead to 2018, Watling acknowledged that a key catalyst for the oil market would most likely be Saudi Aramco’s initial public offering (IPO) in the second half of next year. And when he was asked about Saudi Arabia’s state oil group being launched on the international stock market, he replied, “Well I think they need to get it away quick before oil goes to $10 (per barrel).”

While Watling explained that he did not necessarily expect such an intense decline in oil prices over the coming weeks or months, he did argue that over the long term “what happens with electric vehicles is really, really important” given that around 70 percent of oil is used for transportation.

On Thursday, the International Energy Agency (IEA) said the global outlook for oil markets in 2018 could put a dampener on hopes for higher prices. In its closely-watched report, the IEA said global stock builds, rising non-OPEC production and static oil demand could weigh on the oil price.

The IEA’s latest monthly report was published amid optimistic forecasts from the major oil producer group OPEC, with the cartel arguing there was evidence of the global oil market rebalancing following several years of low prices.

The price of oil collapsed from almost $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.

Below: Ray Kurzweil on the approaching Solar Singularity:

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7 Responses to “Oil at $10/Barrel: Not if, When”

  1. Jerry Falwel Says:

    Oil used to be 10 dollars a barrel before OPEC, we had 25 cent gas at the pump and the economy was booming. Cheap oil will end the fracking boom which should make some happy who claim the world is ending thanks to fracking. That will also make OPEC happy as they will have less competition. As to the claim electric vehicles will force down oil prices that neglects to mention all those cars and truck and busses will need recharging. Since turning fuel into energy is not 100 percent efficient, 75 percent is a number bandied about a lot, transmitting the power loses another 15 percent, charging and discharging the battery uses up another 5 percent one winds up putting just over half the total energy on the road. That means you need more energy producers, a lot more than if you went directly with fuel driven transportation. Solar could fill that during part of the day, Wind part time, nuclear full time, Water most of the time which means you are going to built a whole lot of capacity at a great cost you never actually use except for a small part of the year.

    • wpNSAlito Says:

      “Since turning fuel into energy is not 100 percent efficient, 75 percent is a number bandied about a lot, transmitting the power loses another 15 percent, charging and discharging the battery uses up another 5 percent one winds up putting just over half the total energy on the road.”

      More EVs, of course, increase the demand on electric power generation, and largely use an infrastructure independent from combustion vehicles, so it’s hard to predict the timeline of the *structural* transition.

      However, there are many advantages–both infrastructural and social–that EV transportation have over combustion vehicles:
      – it takes a lot of energy to extract/transport/refine hydrocarbon molecules
      – ICE/diesel vehicles emit toxic gases where people live
      – EVs have an alternate function as household energy storage
      – EVs need no tailpipes, mufflers, catalytic converters, oil filters, etc.
      – isolated communities (islands, remote mountain towns) can save on more expensive fuel transport (think Kauai, Puerto Rico)


    • Consider as the costs of your path escalate in every area of life on the planet, there WILL be a powerful move to limit Pty Ltd, and make that amendment retrospective. In other words, the companies, individuals and INVESTORS that brought this about will be held liable for all costs, that is if civilisation and the rule of law survives, in which case they will still be losers as ammunition will run out eventually.
      There will be no safe place and no winners, especially as the volcanic and geological monsters we are aggravating do there thing

    • mbrysonb Says:

      Jerry, why do you list all the losses along the electrical path while ignoring efficiency at the last step? Thermodynamic losses in gas/diesel engines are higher than the losses in battery storage and electric motors (in effect, electricity ‘temperatures’ are much, much higher, hence more thermodynamically efficient).

      • Gingerbaker Says:

        Why? Because he is a troll spewing disinformation. He has zero interest in learning anything, or actually contributing anything useful to any conversation.

        He is basically a political dirty trickster. Why Peter allows him and his buddies to post here is a mystery to me, but this ain’t my blog.

  2. sheilach2 Says:

    I don’t know of any “alternative energy fuels” that can be produced without using more energy than what can be recovered in the final product. Biofuels are a loser, electric cars cannot replace our current personal transportation system, there won’t be enough energy, resources or electric generation to manufacture or charge them all.
    Electric transit in cities is doable in wealthy areas of the world but for most people, electric cars are too expensive to buy.
    For electric cars to make any kind of penetration into the mass market, they will need to be CHEAPER, smaller, lighter, fewer gadgets that use electricity, current models are too BIG, TOO HEAVY, TOO MANY ELECTRIC BURNING & UNNECESSARY GADGETS, & TOO DAM EXPENSIVE, manufacturers need to stop copying current ICE cars, that’s old school, we need to see electric cars in a new light.
    Something more in line with todays electric trikes is needed, their small, their light, their enclosed, they use battery assist as well as peddles to get about, they are cheap, their batteries are small & easy to repair or replace & their faster to charge with solar panels.

    I don’t see oil plummeting down to $10. a barrel because of electric vehicles, oil is a major player in far more than just cars, trucks, aircraft, ships & trains, it is essential for manufacturing the metals so crushal to our civilization + millions of other products made from it’s raw materials like plastic, solar panels, wind turbines, batteries, electric generators, ceramics, synthetic fibers etc.

    Without oil we could not feed 7.5 billion humans let alone the 10 billion expected in the future, that number will never arrive, we will collapse from overpopulation, climate change & resource decline well before then.
    “Renewables” are only renewable in their source of energy, those devices that capture that energy & turn it into electricity are as dependent upon OIL as our computers, our cars & us, like oil, they are TEMPORARY.

  3. andrewfez Says:

    If you look at a timeline aggregate of all past oil crashes, the price should be recovering right now, historically speaking. My proxy into mid term oil futures is NOV (national oilwell varaco) which makes parts and software for rigs. This stock has not recovered one bit from the 2014 crash but i haven’t check in on the state of rig cannibalism for a while (using already existing rigs for parts for other rigs, putting downward pressure on NOV revenue) . Investors are skeptical. Meanwhile REGI (renewable energy group) a stock that has to do with biofuel has started to recover. The mechanics of biofuel revenue are complicated as they partly rely on a finite government tax credit, but the overall picture is still there.


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