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It's been buried for 100 million years, I don't think a few months is going to do anything.
Gasoline and other petroleum derivatives are not a stable as their underlying source. However consumer gas will last a few years with proper care and storage, the real issue will be when appropriate storage runs out.
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Oil tankers are being used for storage: https://amp.theguardian.com/business/2020/apr/19/supertanker...
Sure but those are limited as well, and their capacity would probably run out. Those tankers would have to basically be docked and not be able to transport anymore. And then?
Though otherwise agreed: capacity is rapidly being saturated, and this isn't much of a win for shipping companies either.
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UAE and Saudi Arabia imo will be ok. They are trying to build themselves into big entertainment and tourism hubs with their ventures into sports and investment in tourism etc I think though they will definitely suffer they may be able to weather the storm. Kuwait and Qatar on the other hand I'm not so sure about
Probably. I have to say though, their advertisements for tourists were a bit.. out there. 50°C+ outside? Come visit us, you can hang out in the AC mall, or go skiing in our fantastic artificial ski hall (all powered by fossil energy of course). Yeah.. no thanks. It's hard for me to imagine that they can keep up with this level of income with just tourism.
Only Saudi Arabia beats them (barely) in the Middle East, and that's mostly from religious tourism to Mecca
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The limited success of their war on Yemen, despite having the 3rd largest military budget in the world, says otherwise.
So you're saying KSA has a higher military budget than 1) The US, 2) China, or 3) Russia?
2 No.
3 Yes.
The KSA spends 8.8% of its GDP on military expenditure. Seemingly the largest of any country.
https://en.wikipedia.org/wiki/List_of_countries_by_military_...
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Thats WTI, Brent is still much higher.
Brent would not be impacted by storage in America, since Brent is a product of the oilfields near the old Brent oilfield in north Europe. Which brings up the topic of oil prices: there are many. Every blend, every location, has its own price. In fact the same oil can be sold at different prices if the seller so chooses. Of note Saudis have reportadly raised the price they offer americans as part of the deal, while lo…
True but largely irrelevant. WTI is a widely-cited benchmark because all those oil prices are highly correlated and so it's a good general measure.
Does this not make the case for investing in renewables over shale extraction and fracking that has a price floor below which it's not economical?
Different industries, different people. Saudi needs a higher price to pay for their country than frackers in ND and TX need to make a profit regardless of actual extraction cost. We were going to have a drop in price just because of the global slowdown. Frankly, we need to get to the next generation of nuclear because renewables will not be enough.
How close are we to seeing this right now?
I'm a software developer, which translates to being somehow smart, but I'm not that into economics: Will this have a rubber band effect? E.g., the price will skyrocket in the next 2 - 5 years, because of this?
Now we've knocked off some 35m bpd of demand, and have millions of bpd of voluntary and involuntary shutdown, some of which will not return. This is a gigantic variation compared to any other crash in history.
So why won't prices necessarily skyrocket if demand returns? First you have a huge amount of stored oil to work through. Second you have potentially fast response shale to quickly increase production again.
But, shale only increased 1m bpd per year even during good times, so it can only make up for so much supply destruction. Secondly, this time shale companies may be mortally wounded. Even if they get taken over in bankruptcy you can have a lot of displaced workers and service companies.
So it really depends on how long the downturn lasts. If there is a quick rebound, like if a cure to covid-19 is found, then it shouldn't be too bad. But if this drags out through 2020, I think even $100 oil will start to look cheap in a few years.
Does this not make the case for investing in renewables over shale extraction and fracking that has a price floor below which it's not economical?
Generally an increase in oil prices is considered an argument for more renewable investment. You're saying that a decrease in price is too. Is there any oil price movement that doesn't argue for more renewables to you? How about no change, is that a case for more renewable investment?
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Thats WTI, Brent is still much higher.
WTI is what matters most to North American producers.
I realize the above question is naive, but it's clear that the Russians and the Saudis having a pissing match over supply just as demand dries up (because COVID) has caused prices to collapse.
In some places, gas is under $1/gallon.[1]
[1]: https://www.cnet.com/roadshow/news/gas-prices-average-drop-k...