Title: Why oil under $30 per barrel is a major problem | Our Finite World
Headings: Why oil under $30 per barrel is a major problem
Why oil under $30 per barrel is a major problem
1. Oil producers can’t really produce oil for $30 per barrel.
2. Oil producers really need prices that are higher than the technical extraction costs shown in Figure 1, making the situation even worse.
3. When oil prices drop very low, producers generally don’t stop producing.
4. Oil demand doesn’t increase very rapidly after prices drop from a high level.
5. The sharp drop in oil prices in the last 18 months has little to do with the cost of production.
6. One contributing factor to today’s low oil prices is a drop-off in the stimulus efforts of 2008.
7. The danger with very low oil prices is that we will lose the energy products upon which our economy depends.
8. The economy cannot get along without an adequate supply of oil and other fossil fuel products.
9. Many people believe that oil prices will bounce back up again, and everything will be fine. This seems unlikely.
10. The rapid run up in US oil production after 2008 has been a significant contributor to the mismatch between oil supply and demand that has taken place since mid-2014.
Conclusion
Note:
Like this:
About Gail Tverberg

Content: This is not really the case. 4a. When oil prices rise from a low price to a high price, this generally means that production has been inadequate, with only the production that could be obtained at the prior lower price. The price must rise to a higher level in order to encourage additional production. The reason that the cost of oil production tends to rise is because the cheapest-to-extract oil is removed first. Oil producers must thus keep adding production that is ever-more expensive for one reason or another: harder to reach location, more advanced technology, or needing additional steps that require additional human labor and more physical resources. Growing efficiencies can somewhat offset this trend, but the overall trend in the cost of oil production has been sharply upward since about 1999. The rising price of oil has an adverse impact on affordability. The usual pattern is that after a rise in the price of oil, economies of oil importing nations go into recession.