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Do You Remember The Oil Crisis And “Stagflation” Of The 1970s? In Many Ways, 2019 Is Starting To Look A Lot Like 1973…

April 23, 2019

Do You Remember The Oil Crisis And “Stagflation” Of The 1970s? In Many Ways, 2019 Is Starting To Look A Lot Like 1973…

The price of gasoline is rapidly rising, economic activity is slowing down, the Middle East appears to be on the brink of war, and Democrats are trying to find a way to remove a Republican president from office.  In many ways, 2019 is starting to look a lot like 1973.  For many Americans, the 1970s represent a rather depressing chapter in U.S. history that they would just like to forget, but the truth is that if we do not learn from history it is much more likely that we will repeat our mistakes.  And without a doubt, right now a lot of things are starting to move in a very ominous direction.

“Stagflation” was a term that was made popular in the 1970s, and it occurs when there is a high rate of inflation but economic growth is declining or stagnant.

The U.S. hasn’t had a serious bout with stagflation in quite a while, but it appears that we may be moving in that direction.

Let’s talk about the slowdown in the economy first.  On Monday, we learned that sales of existing homes in the U.S. were way down in March…

Home sales are struggling to rebound after slumping in the second half of last year, when a jump in mortgage rates to nearly 5% discouraged many would-be buyers. Spring buying is so far running behind last year’s healthy gains: Sales were 5.4% below where they were a year earlier.

On a year over year basis, existing home sales have now fallen for 13 months in a row.

That is terrible, and there is no way to “spin” that fact to make it look good.

 …click on the above link to read the rest of the article…

Are We Sleepwalking Into The Next Oil Crisis?

April 3, 2018

Are We Sleepwalking Into The Next Oil Crisis?

Oil

One school of thought is that future oil demand is set to decline because consumers will have better options. Many in this “peak demand” camp believe that the growth of electric vehicles will soon make oil obsolete.

That’s a relatively painless view of the future and is consistent with much of our past experience. Old technologies are frequently replaced by newer, better, and cheaper technologies.

I have written previously on why I don’t believe this version of future oil demand will unfold anytime soon. In a nutshell, if you “do the math,” it becomes clear that it will be years before EVs can take a meaningful bite out of oil demand.

Meanwhile, some organizations are sounding the alarm that rather than a peak demand scenario, we may soon face a peak supply scenario. Or at the least, the loss of global excess spare capacity. The last time this happened, oil prices rose above $100 a barrel.

Words of Warning

In January 2017, Saudi Arabia’s energy minister Khalid A. Al-Falih warned CNBC that he foresaw a risk of oil shortages by 2020:

“I believe if the investment flows that we have seen the last two or three years continue in the next two or three years, we will have a shortage of oil supply by 2020. We know, from what we have seen in the last couple of years, that prices around the current level and below are not attracting enough investment. We know the level of natural decline that existing production is undergoing, and we know that demand is picking up at 1.2 to 1.5 million barrels a year. So between increase in demand and natural decline, we need millions of barrels every year to be brought to the market, which requires massive investment.”

…click on the above link to read the rest of the article…

Why This Oil Crisis Is Different To 2008

July 17, 2016

Why This Oil Crisis Is Different To 2008

Rig

They say history repeats itself, and given the cyclical nature of the oil and gas business, many look to the past when trying to guess what is coming next, but past experience doesn’t always offer an exact model for the present.

Much has changed between the 2008 oil and gas downcycle and the one the industry is currently working through today. The drop in oil prices that started in 2008 took place against the backdrop of the Global Financial Crisis, aka The Great Recession. Economies all around the world sputtered to a halt, and demand for oil dropped. Lehman Brothers filed for bankruptcy protection on September 15, 2008. It was the all-time largest bankruptcy filing.

Oil prices dropped from historic highs of $144.29 in July 2008, to $33.87 five months later. OPEC, the world’s traditional “swing crude oil producer,” took its traditional actions, cutting production by 16 percent in eight months to bring stability to global prices, which was led primarily by the group’s largest producer, Saudi Arabia. Crude oil consumption and production dropped by 1.5 percent and 1.2 percent, respectively, before coming back to parity from 2008 to 2010. U.S. producers pulled back on drilling operations until prices began to improve, switching from conventional drilling to horizontal drilling following the 2008 crash. And except for the banks and car companies, there wasn’t much going on at the bankruptcy court house by the E&P or OilService (OFS) companies.

In aggregate, debt-to-EBITDA for the E&P companies was approximately 1.6x, and the average capital efficiency (EBITDA per BOE divided by finding and development costs per BOE) was 230 percent, while for the OFS sector debt-to-EBITDA was 0.9x, while capital intensity (capital expenditures divided by EBITDA) was 62 percent. The companies, in general, had the cash and balance sheet to work through another downward descent in the 7th commodity cycle since 1981.

…click on the above link to read the rest of the article…

 

Libs Need Clearer Energy Security Plan, Says ‘After the Sands’ Author

October 26, 2015

Libs Need Clearer Energy Security Plan, Says ‘After the Sands’ Author

Increased oil patch ownership can help Canada meet emissions goals, says Gordon Laxer.

BuildingPipeline_610px.jpg

Gordon Laxer says Canada is highly vulnerable to another oil crisis. Pipeline photo via Shutterstock.

[Editor’s note: Join Dr. Gordon Laxer, political economist and co-founder of the Parkland Institute, for a free talk about ‘After the Sands,’ a new book for anyone concerned about rising sea levels, pipeline and tanker spills, climate change chaos and Canada’s future in a carbon restricted world. Tuesday, Oct. 27 at 7 p.m., The Hive, 128 W. Hastings St., Vancouver.]

Justin Trudeau has to move beyond his murky energy policy and set out clear plans to reduce carbon emissions and improve oil security, says political economist Gordon Laxer.

And the new Liberal government should take steps to increase Canadian ownership in the energy sector if it wants to achieve those goals, said Laxer, whose latest book, After the Sands, argues that Canada must improve its energy security and become a low-carbon society.

Laxer said Canada is highly vulnerable to another oil crisis, which he expects in the next couple of years. The United States is working to lower oil imports and has created strategic oil reserves, Laxer said. Other countries have also focused on energy security.

“We import 40 per cent of our oil, and we have no program,” he said. “We belong to the International Energy Agency. There are 28 countries; 26 of them have strategic petroleum reserves. Canada and Australia do not.”

Improving energy security will also play a big part in reducing greenhouse gas emissions and reshaping the economy, said Laxer, former head of the Parkland Institute at the University of Alberta.

The Canadian government has focused on increasing energy exports, and the country now exports about four times as much oil as it imports.

…click on the above link to read the rest of the article…

Asia’s oil consumption at record high while production peaked in 2010

June 24, 2015

Asia’s oil consumption at record high while production peaked in 2010

The annual BP Statistical Review has come out, as usual in June. In this post we focus on the Asia Pacific region. This is important because the Australian government has offered the help of “Team Australia” to build the “Asian Century”. The question no one asks (or wants to ask) is how much oil there is to carry Asia through the decades to come. No one can give an answer of course but it is clear that if past oil consumption and production trends continue the region will slide into a huge oil crisis.

Overview

Oil production in the Asia Pacific peaked in 2010 (China offshore!) at 8.4 mb/d while consumption continued to increase to 30.9 mb/d.

Fig 1: Asia-Pacific oil production and consumption

The difference between consumption and production (net imports) is now 73% of consumption, up from 68% ten years ago.

Oil consumption changes

Let’s zoom into the last 10 years. Consumption growth dropped from 6.2% in 2009/10 to 1.5% in 2013/2014 but this is still an annual 440 kb/d. If this reduced consumption growth were to continue an extra 2.2 mb/d would be needed by 2020 and 4.4 mb/d by 2025.

Fig 2:  Asia’s oil production and consumption changes since 2005

Since global crude oil production started to peak in 2005 (base year in above graph), Asia did remarkably well to suck additional oil out of the global market, around 6 mb/d

 

…click on the above link to read the rest of the article…

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