Guest blog by S. A. Shelley: In Part 1 of this blog on Oil Supply, l examined the supply-demand history of oil over the past decade, which has set the stage for the dramatic changes in the industry that are just beginning. In this blog I’ll explore some of the likely consequences and will venture to predict some of the dramatic events to come and some of the likely irreversible impacts recent events will have on the world oil industry.Continue reading Oil Supply – If Everyone Produces, Everyone Goes Bust Part 2
Guest blog by S. A. Shelley: A few years back, I wrote that at some point in the future (now-ish) oil produces may need to resort to providing incentives for ICE buyers, or undertake more extreme measures to ensure sufficient oil demand. Well, oil producers have not yet undertaken either of those steps and, as noted in a recent blog, we’ve now hit peak oil demand. So producers were resorting to the next best means of balancing the supply-demand equation by curtailing supply in order to support oil prices. At best this was a short term solution to a growing long term problem. Now with the beginning of the oil supply war, we see that curtailing supply has failed completely, and, as predicted in my February 2, 2019 blog, somebody has decided to produce the hell out of its reserves while there still is a market for oil. This will not be a short war; it will be long and drawn out, and the eventual winners will not be who everyone now thinks they will be. In Part 1 of my blog on this topic, I’ll examine the supply-demand history of oil over the past decade, which has set the stage for the dramatic changes in the industry that are just beginning. In the upcoming Part 2 I’ll explore the likely consequences.Continue reading Oil Supply – If Everyone Produces, Everyone Goes Bust – Part 1
Guest blog by SA Shelley: (Note from your OWOE editor: This demand blog was written a few weeks before the oil supply war started. The oil supply war and corresponding drop in oil prices will be discussed in an oil supply blog in a few weeks. However, the author firmly believes that COVID-19 and a likely economic recession are short term demand shocks. Long term demand decline resulting from shifts in technology and consumer behavior, key issues addressed in this blog, is inevitable.)
The world has hit peak oil demand. I wrote it, I’m standing by it, and no apologies to anyone for this.Continue reading The World is at Peak Demand
Guest blog by SA Shelley: I try to avoid writing about oil too often for three reasons: 1) the oil markets are well observed by more than enough highly paid analysts, 2) the changes in energy technology and distribution are more interesting (and still largely misunderstood by highly paid analysts) and 3) I try to build anticipation for my oil industry supply and demand blog in January of each year. But because of some recent peculiarities that have arisen in the oil markets, a short blog about oil now seems warranted.Continue reading Who is hiding all the oil?
Guest blog by S. A. Shelley In the previous blog about energy in Canada, I presented evidence that Canada has abundance of energy, ranging from hydrocarbon to existing renewable energy supplies. In essence, Canada has similar potential to Norway and even at a larger scale. Norway, like Canada, has been a prolific producer of oil and gas and continues to be so, but Norway is already in a position to be able to transition fully to renewable energy and has undertaken steps in that direction and to curtail fossil fuel consumption (see Independent.co.uk, and Fortune.com).
But where Norway has long term vision and broad social and political consensus, Canada has acrimony, mismanagement and corruption.Continue reading Canada and Energy: Part 2 – The Bad
Guest blog by S. A. Shelley If there is a poster child in the world for energy wealth, it’s Canada. Folks are dumbfounded by what the Europeans are achieving with renewable energy and decarbonizing, folks quake at the vast untapped oil and gas reserves of Russia, and folks are stunned at how technology and finance combined to bring about the prolific U.S. tight oil and gas production which is upheaving world energy markets. Wow, eh?
Instead, folks should be looking at Canada, that half frozen land of log drivers, curlers and exporter of Hollywood A-listers, and be awestruck by the energy resources that have somehow fallen under the Dominion of Canada.Continue reading Canada and Energy: Part 1 – The Good
Guest blog by S. A. Shelley In my previous two blogs I have offered views on oil supply and the (macro) social changes that are resulting in a slowdown of growth in oil demand. In this blog, I’ll look at some of the technological (micro) factors that that will contribute further to a drop in demand. This combination of oversupply and drop in demand will have significant and far-reaching impacts on oil companies, petro-nations, and all the companies and people who are a part of the industry.Continue reading The Great Oil Slump of the 2020s – Part 2b, Demand and Technology
Guest blog by S. A. Shelley Surf into any news or finance website and one can find almost everyone commenting about oil demand (see Reuters, OilPrice.com). It can be contradictory and confusing at times, especially when variables are changed and data is parsed in a myriad of ways. I will try to clarify things by separately looking at societal changes (this blog) and then technological changes (next blog). But there is one thing that I have to make clear right away: Oil demand is not going to zero any time soon. The end of the oil age is nigh upon us, but not quite yet, though there are foreboding changes in society (this blog) and technology (next blog) that will affect oil demand in the most unpleasant manner for producers.Continue reading The Great Oil Slump of the 2020s – Part 2a, Demand and Society
Guest blog by S. A. Shelley Many readers are probably wondering what is happening with oil prices, especially with all the efforts by OPEC+ to curtail supply and all the efforts by various trade groups and governments (e.g., Denmark and China) to affect demand. Every year in January, big companies (BP, EXXON) and big organizations (OPEC, EIA, IEA, OECD) release their energy reports. I don’t have quite the scale or resources that they do, but I try my best. Back in 2016, when I wrote about oil demand peak, I included a chart of a possible oil price path for the next few years (Fig. 1). I was under on the demand and supply a bit, and relied upon the 2016 futures prices to guide my price thinking, but I was damn near bang on with the timing of the most recent collapse of oil prices, Q3 of 2018.Continue reading The Great Oil Slump of the 2020s – Part 1, Supply
Guest blog by S. A. Shelley
Revenue Trap: ” A focus on revenue at the expense of weakened strategy and reduced profits.”
Oil prices seeming to whipsaw back and forth, weekly, daily, even hourly is the result of many oil and options traders clearing trades at whatever slim profit they can eke out. Of course, multiply that slim profit by the huge volumes traded and well, Wall Street still makes a hefty profit whether oil is up or down.
Other folks are starting to talk about oil supply and demand hitting a new equilibrium, or that shale production has peaked. Fair enough. In fact, I agree that efforts to constrict oil supply are starting to have some effect. I doubt however that restricting oil supplies will be effective in the long run. OPEC claims that compliance with the production quotas is strong, but on the other hand, some OPEC members have recently vowed to opt out of the quotas and to even increase production. Don’t forget about some of the African members of OPEC who were free to pump and sell as much oil as they could. Continue reading It’s a Trap!