'Peak Oil' far, far away


#2848

China will ‘compel’ Saudi Arabia to trade oil in yuan

cnbc.com/2017/10/11/china-will-compel-saudi-arabia-to-trade-oil-in-yuan–and-thats-going-to-affect-the-us-dollar.html

Will be interesting to see if SA folds.
The Chinese may become their largest export market, but will they fight their wars for them too ?


#2849

Maybe this is why they want to buy the S-400 from the Russians


#2850

I don’t know if the petro-yuan will replace the petrodollar, but by coincidence I had been just about to post about China’s increasing demand. Oil demand globally has been increasing because of the low price and OPEC has revised demand growth forecasts upward for 2017 and 2018, with demand increases driven by OECD Europe (quite surprisingly) and China.

China is the big growth market. Apparently SUV sales there are rocketing, up 17% in a year. In OPEC’s most recently released Monthly Oil Report, Chinese demand is up 690,000 bpd – a 6% year on year increase. Its total demand is now 11.67 mbpd. While still considerably short of US demand, it does not have the indigenous oil supplies of the US and has edged it out as the world’s biggest oil importer at 8 mbpd. They have also been buying oil from non-OPEC producers, which I guess (and I am only guessing) might make OPEC more receptive to the idea of a petro-yuan in return for market share.

It’s also good news for anyone who wants to see an increase in oil prices, as the world wide glut has been slowly reducing. The only possible blot on the horizon is that as China’s demand grows so does its need for a strategic petroleum reserve, like the one in the US. So China has been building stocks in its SPR and nobody’s quite sure if that’s why demand growth is so high, and is only temporary.


#2851

Oil will crash to $10 a barrel with electric vehicle revolution

cnbc.com/2017/10/13/oil-will-crash-to-10-a-barrel-with-electric-vehicle-revolution-strategist-says.html

Interesting reasoning behind the sale of Aramco.
The question is, by what margin does oil use/demand have to slip before it collapses to $10 ?
If you can double the mileage from a car, would that cause oil to drop so much ?


#2852

Wrong question, I think. Short-term changes in oil efficiency tend to be self-correcting. At $10, SUV sales will rocket. All of the post-1970s oil crisis improvements in vehicle mileage were gone by the 90s. Building insulation changes etc. tend to “stick”.

A large scale shift to EVs could be a different sort of impact. But in 6 to 8 years? Not a snowball’s chance in hell. Consider switching the US infrastructure over to an all-EV fleet. Would require a doubling of current electricity output. Easiest (though unlikely) way to produce the electricity needed would be to burn the oil we use at present. Would probably cost $10 trillion and take a hundred years. Maybe less with a “Manhattan project” type of effort. Six years? LOL.

Though I presume the guy is talking from an investment POV. If enough people get the mad idea that oil use is going away, energy shares could plummet alright. I would imagine reality has to bite sometime though.


#2853

But what happens when all the SUV’s are 50mpg hybrids ?
A number of car manufacturers have publicly stated they are giving up on pure ICE.
The era of the gas guzzler is over, especially as hybrids boost power & speed.


#2854

I suspect that any “collapse” in oil prices will be countered by vast increases in taxation to avert the return of the gas guzzler!
More likely, cities will start to restrict access to pure ICE vehicles within the next decade, so hybrids (the type that can run solely on batteries in urban areas) will become the vehicles of choice for commuters.


#2855

That logic sounds backward to me. If government faces the loss of oil revenues it has to tax the thing that is being used: electricity. Incentives to use EVs will be rapidly withdrawn, leading to a slowdown in adoption.


#2856

It only needs a very small reduction in the consumption of oil to cause a collapse in price, so taxing oil will be a quick win. In the long term, it is certain that taxation of EV consumption in one form or another will increase to replace losses in ICE taxation.

I suspect that to be a decade or so away, otherwise they will delay adoption of EVs.


#2857

Brent crude is at over $59 on the New York Mercantile today, the highest level for over two years. WTI is above $52. US demand is very robust at the moment and inventory draws are high. Demand last month was at its highest September level for ten years, at over 20 mbpd. And while the US rig count has more than doubled since its low after the oil price crash, the number has fallen for nine out of the last twelve weeks (latest figures due out today).

A huge amount of investment in new oil has been forgone since 2014, and the results of that can be expected to kick in over the next couple of years. Marginal plays fare worst – Canadian oil sands projects have been severely curtailed and no new investment is expected before 2020. Meanwhile, OPEC and Russia are managing to maintain their pact to constrain output. Supply and demand are gradually coming into alignment and I’d expect to see prices ease upward for the next while, barring unforeseen circumstances (which are, of course, a regular occurrence :smiley: ).


#2858

Brent broke through $60 yesterday, and is above $60.5 this morning, its highest level since July 2015. WTI is at $54. Apart from robust demand, the main driver is OPEC limits which have now been extended through March 2018. All eyes will be on the November 30th Vienna meeting to see if resolve remains strong.


#2859

OPEC meetings are almost irrelevant though.
The problem is not necessarily setting what each member can supply (which is finalised at the meetings), but how compliant each member is thereafter.

Take Venezuela for instance.
The only limit to their supply of oil is incompetence and inefficiency.
google.ie/amp/mobile.reuters.com/article/amp/idUSKBN1AH589
Given a choice, they would prefer to open the taps.
Eventually, one assumes, they’ll get their act together, although that may take a new administration.


#2860

That goes without saying, but this time around it is not just OPEC but a group of allied countries who have agreed to cuts and managed to stick to them. Of the big OPEC producers, Saudi, Kuwait and Venezuela have met their agreed cuts, and in the non-OPEC world, Russia, Mexico and Azerbaijan have led the field. The only really big miss has been Iraq which has not cut nearly as much as targeted. The other dirty little secret is that - apart from Venezuela which, as you note, has other woes – the countries are using the opportunity to do field maintenance. Things may not look so compliant when they all come back on line.


#2861

I thought Iraq had been excluded from the cuts until they were back on their feet?


#2862

No, not any more. They have very substantial targeted cuts of over 200 kbpd. And it is very much in their interests to get the supply glut sorted as they are so totally dependent on oil revenue. However, they appear to want to let the other members take most of the hit. Such defection is always the Achilles heel of OPEC agreements (as Mr. A noted) but the overall compliance is still holding up for now.


#2863

Even Iran appears to be onboard for the moment


#2864

Any following the Vanadium Redox-⁠Flow Battery development. Seems like it has real potential, excuse the pun.

spectrum.ieee.org/green-tech/fu … ow-battery


#2865

From the article.

A 20 year lifespan should make them a viable intermediate grid storage system, i.e. located at substations to soak up the surplus energy from home generating systems as well as commercial solar & wind farms.


#2866

Makes Tesla’s solution look rather primitive.


#2867

It needs a big dedicated facility, low energy density. You can stick a powerwall anywhere.