whiteowl

The Oil Shortage, and Other Fairy Tales

Okay, maybe it's time for the "it has to be a bubble" crowd to have their moment in the sun. Surely there is a speculative element to today's oil prices, and it is entirely possible that the ultra short term future of crude prices is down. But it is obvious that few here have studied the industry in depth. Only one commenter here even mentions the inexorable bulldog of decline, a fact of life in the production of oil & gas which seems to have escaped the writer of the article as well. Folks, it's not as if you have a well and it keeps producing at a certain rate over its lifetime. Nominal industry-wide decline rates of 6% (much higher in some of the giant fields such as Cantarell) mean that if we are producing 85 million bpd today, next year we must bring on 5.1 million bpd of new production simply to stay even. This is why estimates of excess OPEC capacity, even if true, don't change the long term picture. It's good that people have learned something from the tech bubble, but the uninformed assumption that energy is tech all over again is unfortunate. Go light on those shorts if you want to stay alive.