{"id":5103,"date":"2015-01-09T15:48:54","date_gmt":"2015-01-09T14:48:54","guid":{"rendered":"http:\/\/www.theoillamp.co.uk\/?p=5103"},"modified":"2015-01-27T16:00:06","modified_gmt":"2015-01-27T15:00:06","slug":"one-thing-learnt-week-oil-prices-2","status":"publish","type":"post","link":"https:\/\/www.theoillamp.co.uk\/?p=5103","title":{"rendered":"One thing we have learnt this week &#8211; falling oil prices"},"content":{"rendered":"<p><a href=\"https:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-medium wp-image-5108\" src=\"https:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart-300x229.jpg\" alt=\"oil price chart\" width=\"300\" height=\"229\" srcset=\"https:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart-300x229.jpg 300w, https:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart.jpg 487w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Who would believe it but falling oil prices are as a big a crisis as high oil prices!\u00a0 In 2008 the UK government hosted an international crisis meeting in London on the oil price (then at an all time high).\u00a0 A few months later with the global financial crisis once again we had falling oil prices.\u00a0 They then recovered (see graph) as a financial stimulus helped the global economy to recover and from 2011 were remarkably steady until August 2014.\u00a0 Since then they have plunged and show little sign of stopping.\u00a0 This week stock markets have been falling in sympathy which is the opposite to what we expect.\u00a0 Various theories are being put forward to account for these almost totally unexpected falling oil prices.\u00a0 Just to recap here are some of the main ones going around;<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>Global economic slowdown particularly in China has lowered demand.\u00a0 This is undoubtedly true, the Euro zone inflation has gone negative this week.\u00a0 Almost all the main economies in the world with the exception of the US\/UK are not doing that great.\u00a0 All global booms have happened at a time of low energy prices and visa versa.<\/li>\n<li>Plenty of supply, again true.\u00a0 OPEC refuses to cut production and shale oil is almost at a peak in the US.\u00a0 Added to this the US will start exporting again and a whole heap of other countries are increasing their production.<\/li>\n<li>Saudi Arabia wants to kill off fracking in the US.\u00a0 Whether this is true or not &#8211; its widely believed by analysts.\u00a0 Could this fracking be the next sub prime with about $200 billion in loans tied up in an industry which can now not be profitable?\u00a0 Could this explain the fall in stock markets?\u00a0 As evidence the Saudi&#8217;s refuse to contemplate any increase in production even though their economy needs much higher oil prices.<\/li>\n<li>The US has persuaded Saudi Arabia to maintain production to hit Iran and Russia.\u00a0 Again widely believed.\u00a0 Evidence as for the last point also Ian supports Assad and the Saudi&#8217;s the Sunni opposition.<\/li>\n<li>Peak demand &#8211; mentioned in one article this week.\u00a0 Obama has mandated better fuel efficiency for US cars\/trucks.\u00a0 Whilst these are poor by EU standards, they along with less people driving could mean demand at least in the developed world might have peaked.\u00a0 Counter argument &#8211; not so China and other BRIC&#8217;s.<\/li>\n<\/ul>\n<p>Here are a few of my own relating to OPEC&#8217;s attitude.<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>What better way to knacker the crucial climate talks than to have very low energy prices&#8230;\u00a0\u00a0 If this theory is true we will see a cut in production in December followed by soaring oil prices.<\/li>\n<li>Kill off electric cars.\u00a0 Electric cars have three shortcomings at the moment, one of these is the price of the batteries.\u00a0 This is set to plunge with massively increased battery production.<\/li>\n<li>Just maybe Saudi Arabia knows something about its oil supply we don&#8217;t.\u00a0 If production cannot be maintained much longer at current levels then killing off the alternatives and other sources of supply would be essential.\u00a0 It would at least allow high oil prices to benefit Saudi Arabia for some years.\u00a0 Evidence?\u00a0 Thin.\u00a0 Ghawar is the largest field in the world and has been in production since 1948.\u00a0 It must be close to peak production.\u00a0 Also the wikileaks which suggested Saudi Arabian oil would peak about now.<\/li>\n<\/ul>\n<p>OPEC&#8217;s attitude is probably a mixture of the above.<\/p>\n<p>What does this mean for peak oil?<\/p>\n<ul style=\"list-style-type: disc;\">\n<li>Well first it does not mean its dead.\u00a0 Oil is a finite resource (so is Uranium, natural gas and coal).\u00a0 The Saudi oil minister&#8217;s comments this week that we would never see $100\/barrel were in that context idiotic.<\/li>\n<li>Falling oil prices are bad for production.\u00a0 The whole oil industry is set up now for high prices.\u00a0 All the cheap easy to extract fossil fuels are over.\u00a0 The IEA World Energy outlook suggested a huge decline in conventional oil in 2010 that will be very difficult to make up.\u00a0 Exploration will fall leading to higher prices in the long term.<\/li>\n<li>People are focusing on production and not supply.\u00a0 This is the same mistake they made when coming up against Marion King Hubbert.\u00a0 He looked at where the reserves were going.\u00a0 Almost all producers can increase production in the short term.\u00a0 One student has forseen these\u00a0falling oil prices and sees huge <a href=\"http:\/\/oilprice.com\/Energy\/Crude-Oil\/The-Next-Decade-Will-Decide-Peak-Oil-Outcome.html\" target=\"_blank\">price increases<\/a>.<\/li>\n<li>Even at $50-69 a barrel oil prices are high by historical standards (red line on graph).<\/li>\n<li>Peak oil theory does not discount up and downs in production and one theory on price is that we will get huge swings as demand rises and falls in response to price.<\/li>\n<\/ul>\n<p>To conclude to quote the Madagascar penguins out of context, what comes down must go up.\u00a0 At the moment it does not look like there is a floor under oil, so $20-30\/barrel to me seem possible, although economics commentators such as <a href=\"http:\/\/www.theguardian.com\/business\/economics-blog\/2015\/jan\/07\/oil-price-plunge-translate-rising-incomes-stronger-growth\" target=\"_blank\">Larry Elliot<\/a> disagree.\u00a0 Later on this year after the climate talks I think we will start to see strongly rising prices.<\/p>\n<p>We are getting lots of hits on the basis of the search &#8220;oil prices&#8221;, new to this site and a Christian then you might want to consider buying our <a href=\"http:\/\/www.bookdepository.com\/No-Oil-Lamp-Andy-Mellen\/9780232529449\" target=\"_blank\">book<\/a>.<\/p>\n<p>Neil<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Who would believe it but falling oil prices are as a big a crisis as high oil prices!\u00a0 In 2008 the UK government hosted an international crisis meeting in London on the oil price (then at an all time high).\u00a0 &hellip; <a href=\"https:\/\/www.theoillamp.co.uk\/?p=5103\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[29,17,3],"tags":[74,34,57],"class_list":["post-5103","post","type-post","status-publish","format-standard","hentry","category-energy-costs","category-one-thing-we-have-learnt-this-week","category-peak-oil","tag-energy-costs-2","tag-oil-prices","tag-peak-oil-2"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>falling oil prices a new crisis<\/title>\n<meta name=\"description\" content=\"Who would believe it but falling oil prices are as a big a crisis as high oil prices!\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.theoillamp.co.uk\/?p=5103\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103\",\"url\":\"https:\/\/www.theoillamp.co.uk\/?p=5103\",\"name\":\"falling oil prices a new crisis\",\"isPartOf\":{\"@id\":\"https:\/\/www.theoillamp.co.uk\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart-300x229.jpg\",\"datePublished\":\"2015-01-09T14:48:54+00:00\",\"dateModified\":\"2015-01-27T15:00:06+00:00\",\"author\":{\"@id\":\"https:\/\/www.theoillamp.co.uk\/#\/schema\/person\/b6f2831189b0d01294e9672bb540ba6f\"},\"description\":\"Who would believe it but falling oil prices are as a big a crisis as high oil prices!\",\"breadcrumb\":{\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.theoillamp.co.uk\/?p=5103\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103#primaryimage\",\"url\":\"http:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart-300x229.jpg\",\"contentUrl\":\"http:\/\/www.theoillamp.co.uk\/wp-content\/uploads\/2015\/01\/oil-price-chart-300x229.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.theoillamp.co.uk\/?p=5103#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.theoillamp.co.uk\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"One thing we have learnt this week &#8211; 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