The largely unpredicted drop was caused neither by demand shock—like the drop in consumption that occurred during the Bush economic collapse of 2008—nor by supply shock—like the fall of the Shah of Iran in 1979, Quoyeser said, but by chatter.
Posted on 03/01/2015 8:53:15 AM PST by thackney
Saudi Arabia and OPEC may have dropped oil prices to stifle production in the U.S. and other competing nations, but they didn’t drop it enough to stifle the U.S. oil and gas boom from fracking, a senior expert with McKinsey and Company said in Chicago.
“If the Saudis think they’re going to put U.S. shale players out of business, they’re probably not, although there will be less drilling,” Joe Quoyeser told about 125 people, mostly graduate students, at Northwestern University’s Kellogg Energy Conference on Wednesday. ”But there are other elements of oil supply that are needed to balance the market that will have a hard time competing at $50 a barrel, including oil sands in Canada and much of the deepwater resources.”
Oil sands have to be heated to extract petroleum, a process that requires natural gas. Even at today’s low gas prices, that fixed cost means oil sands become economically viable at about $75 a barrel or more, Quoyeser said.
Beside the inherent costs of drilling at depth, deepwater drilling faces increased regulatory oversight since BP’s Deepwater Horizon disaster in 2010, which delays revenues. (And in fact, Moody’s recently downgraded Transocean’s credit rating to junk status.)
“We think these need prices on the order of $75 to $80,” said Quoyeser, who advises petroleum executives on hydraulic fracturing, lateral drilling, deepwater strategies and supply chains.
Yet U.S. crude oil production continued to rise in February, according to the Energy Information Agency, thanks largely to fracked shale wells.
Oil prices dropped more than 50 percent since June. The largely unpredicted drop was caused neither by demand shock—like the drop in consumption that occurred during the Bush economic collapse of 2008—nor by supply shock—like the fall of the Shah of Iran in 1979, Quoyeser said, but by chatter.
(Excerpt) Read more at forbes.com ...
The largely unpredicted drop was caused neither by demand shock—like the drop in consumption that occurred during the Bush economic collapse of 2008—nor by supply shock—like the fall of the Shah of Iran in 1979, Quoyeser said, but by chatter.
More costly ops will be delayed or shut.
Here on the Bakken, the scuttlebutt is that the drilling will be cut back but the fracing will be expanded on the old wells
Here on the Bakken, the scuttlebutt is that the drilling will be cut back but the fracing will be expanded on the old wells
She says the problem is not the price of crude oil, which is holding steady at about $49 per barrel. The problem is at the refinery.
“In the industry we call this a first quarter climb. Every year around this time, nationally prices go up because we switch over to summer blend gas,” Mac explains. “Summer fuel gasoline is actually more expensive to produce.”
Refineries go through a maintenance cycle during the switch over. That means production is lower.
An explosion at the Exxon Mobil refinery in Torrance, California, last week made things worse and a strike by steelworkers at 12 refineries across the country is impacting 20 percent of oil production.
Nationwide, gas prices had been dropping since April but have now gone up for 32 straight days.
And if you needed one more reason to hate this wicked winter, it’s also costing you money. Extreme cold in the Northeast has slowed production at three refineries that account for more than two-thirds of East Coast oil output.
http://www.cbsnews.com/news/why-are-gas-prices-going-up-again/
What low oil price?
It’s up above 2.20 again, and this is TX.
This article is old.
How long does it take to do the switch to summer blends during this long winter?
a strike by steelworkers at 12 refineries across the country is impacting 20 percent of oil production.
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I need to clarify that quote. First as we know, it has nothing to do with oil production, but gasoline/diesel/etc refined products productions.
Secondly, only one of the refineries are shut down, one in California, making CA’s pricing even worse. But at most (all?) the other refineries operating with non-union engineers, managers, contractors, etc, the production is scaled back and not running full out.
Oil price is not gasoline price. Other factors have driven up gasoline prices in the last month. The article is not old.
Keep in mind, the summer blend is made with more expensive components. I’ll try to find something about the switch over itself. Often this time is used to do other work as well while the units are down. Which means the down time is greater than required for just the switch.
Sorry I phrased that mean. The article is today’s.
However the price of gas has been going up for more than a month.
Is the information still current?
When do you think the price will start dropping again?
But demand for petroleum is down in the USA and in China. When will gasoline prices match reality?
So what’s the difference between summer and winter blends? Well, it’s important to note that butane (4 carbons) is relatively cheap. Molecules with more carbon atoms are more valuable since it’s easier to break molecules down than build them up. Which means that refineries looking to make the most money want gasoline blends that have the most shorter chain molecules while still having a mixture that is stable enough not to evaporate during the distribution process. It’s also important to note that butane has less energy by volume than longer chain hydrocarbons.
In the summer, it’s warm out. Which is nice for swimming, but bad for living in a world where we have tanks of hydrocarbons all over; zipping around us, stored in our garage, buried at gas stations, airports, and vehicle fleet facilities, etc. When it’s warm, things evaporate easier, and shorter molecules evaporate easier than larger molecules (they are more “volatile”). Reducing the volatility of gas cuts evaporative emissions, which contribute to ground level ozone and related environmental and health problems. So regulations were put in place to protect us and dictate that summer blend gasoline have to effectively be heavier (less volatile, more longer chain molecules).
In winter, it’s cold, and so refineries are allowed to produce gasoline that evaporates more easily. So they maximize the cheap, low energy butane in the mix. Any benefit of your car starting more readily is really limited to old and/or poorly maintained vehicles. Current vehicle technology is pretty hardy.
What’s the result? Well, basically, winter blend gasoline has a larger percentage of butane in it. And since butane is cheaper and has less energy, winter blend thus costs less and gives us a lower MPG when we burn it. So it’s a wash, right? Eh, maybe. Your vehicle miles per gallon typically will drop 2-8% when you start filling up with winter blend. Unfortunately, evidence suggests that the common price decline is 2-4%.
https://itisscience.wordpress.com/2011/11/28/winter-gasoline-yes-there-is-a-difference/
Thanks. I was wrong in my impression.
However why is the price of gas going up, if the price of oil is really not?
US demand stopped dropping quite a while ago and started climbing with the price drops.
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