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Oil soars 6 percent as OPEC reaches deal to limit output in November

reuters.com

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Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#11

Post by yessql »

jseliger wrote: post #2

Possible corollary: "Tesla stock rises in response." We may be heading towards a world of permanently low oil prices, as rising prices will cause more people to switch to electrics or plug-in hybrids. Car buyers exhibit amazingly lemming-like behavior, switching to more fuel-efficient cars as prices rise and switching away from those fuel-efficient cars as prices fall. That process is likely to become more pronounced…

Yes, we saw people switch to more efficient transport in the US at $4/gallon. I think this is the long term ceiling, where people will switch to at least a plugin hybrid and cover 90% of their driving on electricity.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#12

Post by the_economist »

yessql wrote: post #9
maxander wrote: post #8

Earlier quoted context omitted.

What kinds of car people use is irrelevant as long as the power grid is predominantly powered by fossil fuels. The number to watch is percentage of "green" power generation, which changes far too slowly to respond to market lurches like this.

Oil is not a big part of electricity generation in most places.

Major energy sources and percent share of total U.S. electricity generation in 2015

Coal = 33% Natural gas = 33% Nuclear = 20% Hydropower = 6% Other renewables = 7% Biomass = 1.6% Geothermal = 0.4% Solar = 0.6% Wind = 4.7% Petroleum = 1% Other gases = An electric fleet (powered by coal, natural gas, and nuclear) will reduce demand for oil, so movement in that direction is likely cause falling oil prices. Which could lead to more people buying oil-powered cars again.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#14

Post by CyberDildonics »

chollida1 wrote: post #5

The game theory on this is awesome. You've got OPEC a collection of countries that don't all like each other, trying to agree to lower their individual production knowing that they can't trust each other. At the same time this exact group of countries are running deficits and any cut's they make will increase those deficits in the short term. Keep in mind these are countries who can't be described as stable. In many…

Putting these countries in difficult situations is why the deal with Iran was so valuable.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#15

Post by Retric »

strictnein wrote: post #10
chollida1 wrote: post #5

The game theory on this is awesome. You've got OPEC a collection of countries that don't all like each other, trying to agree to lower their individual production knowing that they can't trust each other. At the same time this exact group of countries are running deficits and any cut's they make will increase those deficits in the short term. Keep in mind these are countries who can't be described as stable. In many…

> "...love to see the price of oil rise so they can expand their production of oil that's more expensive to produce" Yeah, it's a weird dynamic. For example, the higher the price of oil, the less dependent the US is on the rest of the world. Lots of oil in that $60-$80+ range in and around the US.

The 60-80$ range US Oil only lasts for a few years at US consumption rates, but that's plenty to influence OPEC. The real issue is Expensive Oil has a lot of competition but Cheap Oil does not. Further, it takes years for substitutes to get onto the market. So, OPEC is better off with large price swings than a steady state which causes long term demand to fall off a cliff or uses up their supply at very low prices.

On top of that, politics can make price swings a useful weapon. Cheap Oil makes Russia for example far weaker.

PS: IMO, small scale Russian aggression actually fits as a 'wag the dog' distraction from how bad things are going for them.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#16

Post by drcross »

the_economist wrote: post #12
yessql wrote: post #9

Earlier quoted context omitted.

Oil is not a big part of electricity generation in most places.

Major energy sources and percent share of total U.S. electricity generation in 2015 Coal = 33% Natural gas = 33% Nuclear = 20% Hydropower = 6% Other renewables = 7% Biomass = 1.6% Geothermal = 0.4% Solar = 0.6% Wind = 4.7% Petroleum = 1% Other gases = An electric fleet (powered by coal, natural gas, and nuclear) will reduce demand for oil, so movement in that direction is likely cause falling oil prices. Which could…

I think the genie is out of the bottle with regards to electric cars. They've proven they work and can compete with internal combustion cars on most metrics that people care about and exceed ICEs in a number of ways. Battery capacity generally increases 8% per year, and battery production is ramping up in ways never seen before. The mindshare has already left Gas cars, it's just a matter of time before sales slip to electric, a bit like Nokia compared to the smartphone, Nokia were still shipping millions of units but consumer demand was waiting for cheaper smartphone units, once it did Nokia was destroyed.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#17

Post by jorblumesea »

Is it possible that oil prices will never be that high again due to renewables? Part of me feels like the games OPEC members are playing will be to their long term detriment. Renewable cost is only going down year after year, really the oil states have a limited time to extract as much money as possible before alt energy kicks into high gear. By the time they're done fighting with each other it may be too late to get the money that they are banking on.

Also bets on whether any member countries actually follow this?

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#18

Post by nnq »

Retric wrote: post #15
strictnein wrote: post #10

Earlier quoted context omitted.

> "...love to see the price of oil rise so they can expand their production of oil that's more expensive to produce" Yeah, it's a weird dynamic. For example, the higher the price of oil, the less dependent the US is on the rest of the world. Lots of oil in that $60-$80+ range in and around the US.

The 60-80$ range US Oil only lasts for a few years at US consumption rates, but that's plenty to influence OPEC. The real issue is Expensive Oil has a lot of competition but Cheap Oil does not. Further, it takes years for substitutes to get onto the market. So, OPEC is better off with large price swings than a steady state which causes long term demand to fall off a cliff or uses up their supply at very low prices. O…

> small scale Russian aggression

Let's hope they keep it small and don't try to covertly start a big fire that will drive oil prices back up. It's scary to see a world economic situation where starting/fueling wars starts to make more and more economic sense... I can almost imagine a future "WarEnron" selling the future profits indirectly caused by future wars :)

We should find a way to make sure we have profits aligned with peace and abolish the concept of "wars that make economic sense"! The US and EU at least do this (more or less unintentionally) by keeping weapons and military operations very expensive. Russia probably has more practical means for "cheap destruction" and this is dangerous because at some point some will start placing bets on this and then try nudging world events in the direction of their "win".

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#19

Post by _FKS_ »

jorblumesea wrote: post #17

Is it possible that oil prices will never be that high again due to renewables? Part of me feels like the games OPEC members are playing will be to their long term detriment. Renewable cost is only going down year after year, really the oil states have a limited time to extract as much money as possible before alt energy kicks into high gear. By the time they're done fighting with each other it may be too late to get…

Renewables depend on oil. You can't make renewables with renewables energy, because their overall EROI is insufficient to both maintain the current standard of life, and make them. The other issue is mobility, oil has the best volume/energy content ratio of all energy sources we know (except uranium). Renewables can only make electricity and you need about 10x the same battery volume (and weight) to move a vehicle, compared to oil. Unfourtunately for all of us, fosil fuels are here to stay for a while, until they run out. Or until the economy crashes. Or until climate change kicks in real bad.

Re: Oil soars 6 percent as OPEC reaches deal to limit output in November

#20

Post by philipkglass »

jorblumesea wrote: post #17

Is it possible that oil prices will never be that high again due to renewables? Part of me feels like the games OPEC members are playing will be to their long term detriment. Renewable cost is only going down year after year, really the oil states have a limited time to extract as much money as possible before alt energy kicks into high gear. By the time they're done fighting with each other it may be too late to get…

I'd say say that transport electrification is going to be more directly responsible for reducing oil demand. It's very important to the climate that electric vehicles get charged with low-emissions sources, but the petrostates are equally in trouble whether people are driving EVs charged with wind power or coal power.

It's hard to tell when electrification is going to kick into high gear. Projections for numbers of EVs sold ten years from now vary widely. I'll say that if oil did go back over $100/barrel that would provide an incredible tail wind for PHEV and BEV adoption in the US. Cars last 20+ years but buyers are oddly sensitive to recent pump prices.

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