With oil trading under $40 and threatening to unhinge the entire industry from Texas to Russia, analysts the world over are working overtime to predict what happens next. Some, like financial investment firm Goldman Sachs, say the price could go as low as $20 per barrel because of a major supply glut evidenced by the scores of full oil tankers anchored off the coast of the United States and elsewhere. At the same time, others suggest the next spike to $100 could be just around the corner.
This week the Organization for the Petroleum Exporting Countries (OPEC), which essentially controls the supplies behind the majority of the world’s oil production and has thus far refused to reduce oil output, released a report indicating that low oil prices are here to stay and that it could be at least two decades before prices return to triple digit levels:
The OPEC published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past. On the one hand, OPEC does not see oil prices returning to triple-digit territory within the next 25 years, a strikingly bearish conclusion. The group expects oil prices to rise by an average of about $5 per year over the course of this decade, only reaching $80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting $95 per barrel in 2040.
Long-term projections are notoriously inaccurate, and oil prices are impossible to predict only a few years out, let alone a few decades from now. Priced modeling involves an array of variables, and slight alterations in certain assumptions – such as global GDP or the pace of population growth – can lead to dramatically different conclusions. So the estimates should be taken only as a reference case rather than a serious attempt at predicting crude prices in 25 years. Nevertheless, the conclusion suggests that OPEC believes there will be adequate supply for quite a long time, enough to prevent a return the price spikes seen in recent years.
Part of that has to do with what OPEC sees as a gradual shift towards efficiency and alternatives to oil.
On the surface the current environment suggests that OPEC’s assessment may be somewhat accurate. Yet, one can’t help but think that maybe OPEC is playing mind games with the U.S. shale industry, which blossomed over the last few years as prices skyrocketed, creating more demand for jobs, housing and arguably being the single biggest economic driver since the crash of 2008.
With the shale industry now in shambles and many companies heavily indebted and holding on for dear life, OPEC may be signaling that they and they alone will control the price of oil going forward. It is quite possible that their intended goal is to force U.S. shale producers to close up shop because it will not be cost-effective for them to continue operations.
That, of course, bodes well for middle east and African producers in OPEC, who have seen some of their market share stripped during the North American oil resurgence in recent years. But as Art Berman recently pointed out via Zero Hedge it appears that the entire industry has lost its mind and the current over-supply could well be a transient event.
All it would take is the right shooting war or geo-political crisis and the tables will turn almost instantaneously:
All oil producers are losing money at current prices but companies and countries are producing at high rates. Indebted conventional and unconventional players need cash flow to service debt so they are producing at high rates. OPEC is producing at high rates to maintain or gain market share. Everyone is acting rationally from their own perspective but from a high level, it looks like they have all lost their minds.
Peak oil is not about running out of oil. It is about what happens when the supply of conventional oil begins to decline. Once this happens, higher-cost, lower-quality sources of oil become increasingly necessary to meet global demand.
Tight oil has bought the U.S. another decade or so of additional oil supply but, as peak oil predicted, at a cost. The technology behind tight oil has also made it the world’s most expensive barrel. As all of this sinks in, perception will start to change. Analysts and investors will begin to see that data points more toward long-term scarcity than toward long-term abundance of oil supply.
The U.S. is far more economically vulnerable and dependent on foreign oil today than when crude oil export was banned 40 years ago. The world has finite oil resources and the production party of the last 5 years has accelerated the timing of peak global production. A shooting war in the world would bring all of this into instantaneous focus if the data presented here has not.
For the astute observer it appears that the price collapse in oil was nothing more than machinations by the global oil cartel. Price swings, even significant price swings, are to be expected. Follow the money and the timing of the most recent oil collapse for example, and you’ll no doubt notice that prices happened to markedly buckle at almost the exact same time the United States initiated economic sanctions on Russia.
To put it in perspective, in July of 2008, just before the crash, oil prices were so high, supplies so tight and the crisis so severe that Speaker of the House Nancy Pelosi called on President Bush to tap America’s Strategic Petroleum Reserves. At the time a gallon of gas averaged over $4 and the price of oil peaked at $145 per barrel.
Six months later oil was trading at $30.
So, the question remains, is OPEC’s analysis legitimate or are the low price estimates intentional with the goal of scaring non-OPEC producers out of the market?
Whatever the case, we find it difficult to believe oil prices have finally stabilized, especially considering geo-political tensions and the disheveled state of the global economy.
One crisis is all it will take for oil to hit triple digits again and there is a strong likelihood that such an event will take place well before OPEC’s 2040 target date.
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Endgame? Pushing Point Where “Exporters No Longer Able to Fund Their Welfare States”
U.S. Makes Excuses for Not Bombing ISIS Oil Wells: “Didn’t Want To Do Environmental Damage”
Easy money from central banks made this possible and now the U.S. oil industry and even the Saudis et. al. are feeling the pain.
Texas was leading the charge on economic growth but they are about to experience the fall out. If prices don’t rise and SOON a lot of these companies will go belly up and thousands of jobs will be lost. The direct effect on the economy especially in real estate is going to be measurable.
2016 is going to be a rough year for anyone associated with this industry.
I’m hearing from folks in the oil industry in Texas that things have REALLY slowed down, especially in the peripheral industries that support the majors. People are already hurting and at under $40 it is only going to get worse. One CEO of a small company that employs about 50 people said that their phones have totally stopped ringing, whereas just two years ago they could not keep up with demand for their equipment.
Could have serious economic implications going forward. The person I spoke with basically said that they are going to have to let go of more than 50% of their staff — these guys have been in business for 30 years and have seen all sorts of financial and economic swings, but this time seems to be pretty severe — according to this person the small and mid size producers are so broke they can no longer make payments on the loans they took out, nor can they pay the suppliers for monies owed on equipment they purchased or leased in the last year.
If prices stay here or go lower everyone is going to hit – and hard.
Once the Saudis feel that they have damaged enough of the US production, low and behold, the prices will rise again.
Anyone claiming that the Saudis are being controlled by the dreaded and awful, horrible, nefarious, evil NWO?
If so, what’s the smoking gun of irrefutable evidence?
And our so called elected officials don’t view this price manipulation as a threat to national security, why?
now that you have told us what the saudis did in 1985, how ’bout enlightening us on present day.
It’s a perfect ploy. When prices are high get people to develop into production then bankrupt them and take their outfits for pennies on the dollar. Same with a lot of commodities pump it up then break them and scoop up the infrastructure for pennies.
If you want to see where the oil tankers are off the Port of Houston and Galvestion, then check out this website:
Walking the streets in a constitution-free state, I see niglets causing all kinds of trouble. Destroying public property, disturbing the peace, sexually harassing white women, and being ignorant little shits in general. That is what most people of color really are.
Mostly I choose to ignore their misbehavior. I say that I fear the pork would put a case on me for upholding the constitution or for deservedly cracking one of those little bastards, plus I tell myself there is no sense exposing myself to risk unnecessarily. One of those bootlips could well be strapped, plus some liberal cunt social worker could construe god knows what about me for the crime of disciplining “minors”. Do you see the “minors” and the knockout game?
But I also think myself half a pussy for not standing up for decency and confronting those little shits. Am I a coward? I climb mountains. It’s a piece of self-doubt.
What do you all think?
Acid, good point, fair question.
If you had some backup with you, it’d be fair and fun to teach punks a lesson.
But nowadays I think keeping the low profile and being the invisible one is the better option, in order to keep your powder dry, so to speak.
You don’t want to go to jail or court for the small stuff.
George Zimmerman tried to call in on a thug and look at the reward he got.
Best thing you can do is remain anonymous on any action you do.
Shoot, Shovel, and Shut Up.
You’re no coward Acid.
What if it was you they were trying to bully?
Whatever, the oil companies will continue to wallet rape American consumer sheep. They have bought everybody worth buying to continue the wanton destruction of the world’s environment without any concern for any living thing. They are well on their way to destroying the entire Earth. Better technology exists under hidden cover that can make oil use near obsolete. The gigantic floating plastic garbage dumps in the ocean are oil produced. Most all of the Earth’s contaminates are products of the oil and chemical industries. Look what has been left in their wake. Greedy people stop all progress beneficial to the greater good. Bunch of outlandishly greedy mofos.
What an ignorant moron. That computer or smartphone you just typed your comment on, the shoes on your feet, the house you live in, the car you drive, the food you eat, and just about EVERYTHING else in your life are all possible because of the energy and materials provided by fossil fuels. You could not survive 1 month without the things provided to you through the use of fossil fuels.
25 cents per gallon at the pump in the KSA…1997 to 2000 when I was commuting to the KSA….might be a nickel
Gas here in eastern NC is $1.76 today.
2040? No.1- By then I’ll be dead. No.2- Living at “Shady Pines” nursing home sitting in my wheelchair with a stupid grin on my face and chocolate milkshake dribbling down my chin. No.3- The earth will be one huge pile of cinder and ash and neither of us will give a shit.
Your kids will kill you for the inheritance long before then…..
Screw the Saudis,don’t import any of their oil,buy our own. why should we go down for their benefit. They are not our ally. An ally does not treat their friends this way. Buy it from us,Canada and Mexico. If our economy tanks so does everybody else. Cheap gas is nice but not at the expense of our economy and national security.
This!!! I work in the New Mexico oil field, and we could supply most of the needed oil just from the Permian Basin. The reserve under this field is deep, but there is more down there than the Saudi’s have. Stop importing!! I’ll gladly go back to paying $3 a gallon if it means the economic engine will start firing on all cylinders again! There’s THOUSANDS of people here who are really worried that if this continues for much longer, we are going to have entire cities go belly up.
And your last sentence is just what that commie bastard POTUS and his handlers want.
With the way things are going in the world does anyone really believe we’ll be here to worry about the price of oil in 2040.
I cannot believe the U.S. Dollar will survive until 2040 – the total debt could easily pass $50 trillion by then – well beyond any hope of being re-paid.
I really thought this sham would be up by now. The landscape of this planet will be unrecognizable by 2040.
In 25 years maybe technology will have advanced to the point that we are powered by something else.
Niglets that’s what I say haha. Acid I consider myself to be a mans man and I want to put my foot down but it’s just not smart to expose yourself at this time. Being white and male I choose to be an oppertunist and when the time is right the tight rope will come out. It does make one feel like a pussy for tolerating this shit though hang in there. Never let a good crisis go to waste. Every nig has his day and it’s coming to a close soon.
The gas prices are also being kept low to make us all feel better about being ass-raped by obamacare. We are not supposed to notice the increased premiums. Well we noticed. I have insurance for 2 more days, then I get to pay the fine and go without. We are not going to pay $1500/month for shit insurance here in NC for my family of 6.
“One crisis is all it will take for oil to hit triple digits again and there is a strong likelihood that such an event will take place well before OPEC’s 2040 target date.”
One could only hope…..this stuff effects my mortgage payment.
As a horse, hear it from my mouth, it’s getting rough out there, very rough even the oil majors are stoping production plans, but luckily keep up exploration. The small companies are falling off he cliff. The big guys are tightening the belts at an unheard of pace and level of aggression. When / if the folks come through this on the backside, I for see profits moving up very fast with the new level of “efficiency” ( PC word for fast but safe and with less man power by oil majors) being the new standard, so if you get a chance to make it through, you’ll be worth a fortune in experience.
For all the jerks/haters that say damn the oil industry, that’s damning thousands of hard working, self sacraficing folks that are putting themselves in crappy situations to make a good living for thier families. So the fall of a few big wig execs, means the fall of thousands of oilfield works and thier familes. There’s a lot of fat to be trimmed I’ll be the first to admit that, but there’s a whole lot more good strong workers that believe in keeping up with a timeline and getting there guys home safely at the end of thier hitch at work.
Drill baby drill
Here’s one for the OPEC soothsayers. I had a vision a couple of years ago concerning the full on economic collapse. The year that appeared in the vision was 2016.
I disagree, we should ONLY buy foreign oil. No matter the price we pay now, when those foreign wells finally run dry and the USA still has plenty of American oil, Then the world figures out that our tanks and aircraft still work, and we can charge whatever we want to when we sell them a little oil.. That is when the US gets every cent we ever paid back, and then some.. Our oil in the ground IS our national security and power for all time. Don’t waste it for a few pennies now, Play the power game strategically. let others sell their oil to us cheaply.. If we wait, we get to sell ours for a lot more…
You are spot on mate! The reality is that OPEC is doing everything it can to regain control. They are intentionally trying to break our backs by flooding the oil.
The downside is that we feel the pain now, our companies and the like are taking it hard on the chin.
The upside is that when we finally get the numbers on OPEC sustainability at these or any levels, I suspect the world is going to be shocked beyond shocked that the reality is that OPEC’s twilight in oil was several decades ago.
They may have a few more deeps fields, however in the US, we’ve huge untapped reserves as well as off shore. CRAZY HUGE reserves mate. I saw the numbers on this about ten years ago in a private meeting that was a strategic evaluation of our overall reserves, it’s like 6x what OPEC was 30 years ago.
As well as all this infrastructure already laid out and now fully built out, we are way ahead of the curve. This is a strategic play for sure and OPEC is going all out to flood the world with cheap oil to break our companies. Won’t work! Why? Because we’re Americans and we are used to the protracted fight of attrition.
The premise of this story is bogus, 2040, LOL try 2016 end of or in 2017 but no further. We are one main event away from the triple digit rise in oil again. However this time is will likely be under duress of civil war in the US as well as global theater war. This will not benefit anyone unfortunately except those invested in the black gold or who work in it.
The biggest tell tale warning sign I have put all of my people into and have hit the mark for nearly the past three years running is simple, I warned everyone that when you see the interest rates rise even fractionally, that’s it and the rug is about to be pulled out from all of us.
The TSA and IRS have been militarized, the passport confiscation laws are now firmly on the books, the bail in legalese is all completed, now comes the nukes on US soil.
Oil is the least of our worries mates, but in this case, once the vent happens to run cover for the outright lies of the economy and the health of this nation, you bet your arse oil is going to spike through the roof and demand will be insane. 2040 is simply a nuts statement to make, reality, the next NYC01 is on our doorstep. The wolf is now at the door, and Obama wants the guns etc. Hegelian Dialectic time folks… tick tock tick tock… BOOM NYC again along with a dozen other cities where all the financial records ae kept and back up systems in place!
Hello $180 pb oil. It’s the cover for the crash that spooks me the most that will drive oil through the roof. Mark your time from the day Yellin raised rates last week. We are likely in the 120 day cycle down now to reset. Tick Tock! Peace!
A high stock market ie401k and cheap gas is just to passify us so every one doesnt say hey whats going on
After as many decades as the international oil conglomerates have flaunted “Record” profits in the faces of us gullible conumers, I feel no pity upon them for hurting now. Great for consumers has always meant bad for business, nothing to see here…. may they burn to the concrete of their foundations.
Trouble is, the high oil prices bankrupt the consumer and the low oil prices bankrupt the producer.
Why is DC exporting oil when they still import around 7 million barrels a day? Why are they attempting to sell oil into a buyers market?
They have no choice. Debt needs serviced so the oil must sell at any price. Tight Bakken oil does not make a profit. It is a money sink. Lotsa dollars will be lost on this because of ZIRP.
The refiners are set up for heavy crude so they need to sell LTO overseas…if they can.
Most of the new oil being produced costs more in EROEI terms than it is worth. It takes more embedded energy to drill, pump, refine and ship to end users than the net energy realized by the economy. It is a “loss leader”.
When the LTO oilcos go bankrupt the oil will stay in the ground because the net energy is none. The Red Queen will disappear over the horizon. The economy will never recover and TEOTWAWKI will be here.
Happy New Year…I need a drink.
Oil will exceed triple digits in USD once QEIV begins. Preceding 2040 by perhaps 34 years.
Oil will exceed triple digits in USD once QEIV begins. Preceding 2040 by perhaps 34 years.
I sure hope you are right.