The global oil market is broken, drowning in crude nobody needs • Hacker News Board

Re: The global oil market is broken, drowning in crude nobody needs

#131

Post by stoneman24 » Sun, Mar 29, 2020, 2:50 PM UTC

throwaway_pdp09 wrote: post #73

Arnt wrote: post #44

Earlier quoted context omitted.

The $10 barrels are for delivery now, not next year. If you can store the oil you can earn a lot of money now. But most people can't store much oil, compared to the volumes that are being pumped out of the ground. And for many of the producers, slowing down production by more than a few per cent is also difficult — once you turn off the tap you don't really know whether the oil is going to start flowing again later.…

> once you turn off the tap you don't really know whether the oil is going to start flowing again later You mean it can actually physically stop if the flow from the ground is blocked for a while? Can you expand if possible. Edit: I understand it comes out of the ground quite hot (I've heard of 200 C) and if it flows into cool pipes and stays still maybe it would 'congeal'.

While there can be a great deal of pressure pushing the oil up the well, there is also resistance to that flow up a narrow pipe (perhaps 4 inch pipe). The balance of forces can be very close but the momentum can keep the flow going. In some fluids, there can be methyl hydrates (or wax) that can cause problems with maintaining flow. There can also be particles that are moving in the fluid (sand), slowing or stopping the flow can cause these particles to settle, preventing future fluid movements. There is a temperature and pressure gradient which can allow dissolved gas to bubble out the fluid as it ascends the well which can lead to added complexity. And we haven’t yet discussed oil recovery methods like gas/water injection or electrical sub surface pumps. Getting a well restarted after shutdown, may not be possible. I worked with some petroleum engineers, getting the best from your wells can be a very complex simulation problem followed by expensive engineering solution.

Re: The global oil market is broken, drowning in crude nobody needs

#132

Post by lstodd » Sun, Mar 29, 2020, 2:50 PM UTC

trentnix wrote: post #49

gregorymichael wrote: post #9

What happened to "Peak Oil"? Was there some assumption in those projections that proved to be wrong?

"Peak Oil" was the idea that the demand for oil would exceed the supply we are able to access. Yet we keep finding more and increasing our ability to access more thanks to technological progress. But mostly, "Peak Oil" fears were ginned up by a press who love to promote tales of doom and destruction. Those trumpeting the threat of "Peak Oil" demanded broad governmental and social intervention to avoid what was assure…

No, it's a mistake - oil most certainly does not have anything like a fixed supply that is going to run out.

The supply grows alongside with the price people are willing to pay for it. As you yourself pointed out.

Nowadays the demand falls, the prices fall, this would be followed by a fall in production. But whatever happens oil will be available at an affordable price because world just doesn't work without it. If oil gets too pricey, reserarch into digging up more oil more cheaply will be funded. As it happened with shale. And it will end up in one more oil price crisis same as the one we're witnessing. And the one after it.

Re: The global oil market is broken, drowning in crude nobody needs

#133

Post by toomuchtodo » Sun, Mar 29, 2020, 2:55 PM UTC

wyxuan wrote: post #123

toomuchtodo wrote: post #29

Earlier quoted context omitted.

The price war was unintentionally started just as demand began to be wholesale destroyed by the response to the COVID pandemic. Supply was reduced, but demand was reduced even more by a halting of the global economy. Saudia Arabia was trying to bring Russia in line with OPEC+ price targets, but Russia has enough state cash reserves and a much lower state budget break even point (~$40/barrel vs Saudi Arabia's ~$80/bar…

Saudi Arabia has a much lower break even point: around 20 dollars. Hell even deepwater only costs 80 dollars to break even.

For production, not supporting their generous benefits to their citizens. They’re going to burn up their state reserves on the gravy train.

Re: The global oil market is broken, drowning in crude nobody needs

#134

Post by csours » Sun, Mar 29, 2020, 2:59 PM UTC

It's easy to say "we live in a Just-In-Time Economy", but it's things like this that really demonstrate the implications.

The supply chain is set up to flow, so when demand drops or spikes up you get a flood or a shortage.

If there's a flood, some companies will go out of business, leaving the survivors with a bigger slice of the pie.

If there's a shortage, companies will respond, and some will over-react and build over-capacity and then fail when the shortage evens out, leaving the survivors with a bigger slice of the pie. I think this may happen with ventilator companies. After this event, there may be an over-supply of ventilators, leading to failure of some companies or lines of business.

Re: The global oil market is broken, drowning in crude nobody needs

#135

Post by JBReefer » Sun, Mar 29, 2020, 2:59 PM UTC

eyegor wrote: post #116

bpsh wrote: post #79

Earlier quoted context omitted.

Unfortunately the goal is to drive out US Shale ...

I believe it's more to bankrupt Alberta's oil sands. US shale is barely a competitor on a global scale.

The US is the worlds largest oil producer

Re: The global oil market is broken, drowning in crude nobody needs

#136

Post by digitalsushi » Sun, Mar 29, 2020, 3:01 PM UTC

johnchristopher wrote: post #57

fulafel wrote: post #23

Markets are broken when oil usage develops towards sustainable levels? We have to drastically cut down oil use, let's not pretend that the pre-corona oil consumption was tolerable, much less desireable. Now would be a good opportunity make internaltional agreements to cap oil consumption and extraction to its current level in shutdown, and when the shutdown starts to get rolled back, the shock will be smaller as risi…

From what I read (analysts and decision makers) that's not what's going to happen. Money is injected and more will be to salvage industries and make up the loss (by increasing production after the crisis (or before the end)). This will increase pollution and energy demands in the coming months at a higher level than before the crisis. Well, from what I've read. I am a total idiot in these matters.

You're not an idiot at all, you're just preemptively deflecting ad hominem responses.

I think that it's possibly efficient because it burns one clock cycle of a respondent's thoughts, and lets them remember the human.

Re: The global oil market is broken, drowning in crude nobody needs

#137

Post by toss1 » Sun, Mar 29, 2020, 3:01 PM UTC

snarfy wrote: post #61

9nGQluzmnq3M wrote: post #15

Serious question: how do I invest in some of those $10 barrels of oil? It seems like a contract to deliver oil at $10 in 2021 is likely to be worth more than by next year.

buy a semi trailer for gas and fill it now, sell it in 2021.

I've had the same thought, but counterpoint:

gasoline degrades with a shelf life measured in weeks-months-years, depending on grade and preservative measures

Depending on the curve of the pandemic, 2021 may be too early. The way the US govt is responding, it may drag out much longer

Re: The global oil market is broken, drowning in crude nobody needs

#138

Post by lstodd » Sun, Mar 29, 2020, 3:01 PM UTC

chii wrote: post #110

avvt4avaw wrote: post #3

Earlier quoted context omitted.

Remember that the initial fall in oil price was a supply shock (Saudi Arabia upping production) that was only exacerbated by lack of demand. If demand comes back it won’t push oil back into the 50s/60s.

But what's the saudis' end game? Are they really gonna try to starve out russia, and cause them to capitulate? Game of chicken till one country bankrupts? The saudis are losing money doing this (they have to eat into their reserves to fund the country). Russia at least has other industries, however small it may be.

Russia has just lost about 20-30% yearly income in these first months just from the oil price war.

Saudis cannot care less because they have about three times of Russia reserves nominally. In fact I suspect about five to seven times that, because Russia reserve structure is basically unknown. Saudis can certainly afford a year or three of having no income.

This is on top of the virus panic (which just cut any remaining tax revenues). Russia, Venezuela, Iran for that matter are done for.

EDIT: Which is why I think the whole OPEC+ deal went to the crapper. Middle East is able to weather this, others - not so much.

Re: The global oil market is broken, drowning in crude nobody needs

#139

Post by csours » Sun, Mar 29, 2020, 3:02 PM UTC

fulafel wrote: post #23

Markets are broken when oil usage develops towards sustainable levels? We have to drastically cut down oil use, let's not pretend that the pre-corona oil consumption was tolerable, much less desireable. Now would be a good opportunity make internaltional agreements to cap oil consumption and extraction to its current level in shutdown, and when the shutdown starts to get rolled back, the shock will be smaller as risi…

Even if you drive a BEV or take public transit and bike, a lot of the things you buy are delivered by fossil fueled vehicles (semi trucks). A flood is often followed by a spike in price as supplier companies fail.

Price is a good way to reduce consumption, but price spikes are not.

Re: The global oil market is broken, drowning in crude nobody needs

#140

Post by krapp » Sun, Mar 29, 2020, 3:02 PM UTC

lstodd wrote: post #132

trentnix wrote: post #49

Earlier quoted context omitted.

"Peak Oil" was the idea that the demand for oil would exceed the supply we are able to access. Yet we keep finding more and increasing our ability to access more thanks to technological progress. But mostly, "Peak Oil" fears were ginned up by a press who love to promote tales of doom and destruction. Those trumpeting the threat of "Peak Oil" demanded broad governmental and social intervention to avoid what was assure…

No, it's a mistake - oil most certainly does not have anything like a fixed supply that is going to run out. The supply grows alongside with the price people are willing to pay for it. As you yourself pointed out. Nowadays the demand falls, the prices fall, this would be followed by a fall in production. But whatever happens oil will be available at an affordable price because world just doesn't work without it. If o…

Obviously oil has a fixed supply... there is by definition only a finite amount of it, given that we live on a spheroid with a finite volume out of which to extract it. Supply doesn't grow with demand, as that would imply new oil is somehow being created with demand and that, given infinite demand, there would also be infinite supply.

What does grow with demand is technological innovation and effort, and while we were not as close to the actual limit as we assumed with "peak oil", that doesn't mean the limit itself was fictional.