Oil Prices

[BlueKelah]

As of writing oil prics has plunged back to where it was before news of Opec agreed cuts.

The problem with oil is simply due to insufficient real demand to meet the supply. Until that is resolved, oil prices will remain this low. Either countries have to agree to a production cut or hope the world demand grows large enough. The past year's demand has been artificially inflated by countries buying more to stock up as reserves.

Till then many oil support industries will struggle and it will be interesting to see how many such o&g companies will be propped up by their financial backers

yah it seems the problem is not just supply but also on the demand side as well. Plus on top of that the shale oil also comes with a bonanza of natural gas since both get released at the same time during fracking process. In fact it is projected this may hit natural gas prices quite a bit as well. Permian basin with lots of new found oil/gas should be a high production place in the near future so long as costs makes sense and should cap oil at $50 since frackers can profit at $40 and maybe even $35 soon if there is enough volume and improved technology.

World demand might even dip future this year if EV are successful and catch on. Definitely China is aiming towards E.V with their local "green company" ramping up production of battery powered cars and buses, I think their gov is also leaning more heavily towards renewable now that their cities are dying from the pollution.

though OnG has cycles, this could very well be near the end for OnG plays, and once the financial backers realize this, they could just pull the plug en masse. Scary thought but it could very well happen.

[karlmarx]

Electric vehicles are powered by electricity from wall sockets. And to produce this electricity, we still rely on burning fossil fuels. So instead of a vehicle's combustion engine producing power, we will have to build more power plants to support growing electric vehicle demand; perhaps fossil fuels will be used more efficiently in this more centralised electricity production and distribution manner? I don't think electric vehicles will significantly reduce the demand for oil.

But since electric vehicles does not have a combustion engine, this means vehicle engine manufacturers will be negatively impacted. Without engines, there won't be engine oil to change, so vehicle lubricant manufacturers will also be negatively impacted.

[BlueKelah]

Electric vehicles are powered by electricity from wall sockets. And to produce this electricity, we still rely on burning fossil fuels. So instead of a vehicle's combustion engine producing power, we will have to build more power plants to support growing electric vehicle demand; perhaps fossil fuels will be used more efficiently in this more centralised electricity production and distribution manner? I don't think electric vehicles will significantly reduce the demand for oil.

But since electric vehicles does not have a combustion engine, this means vehicle engine manufacturers will be negatively impacted. Without engines, there won't be engine oil to change, so vehicle lubricant manufacturers will also be negatively impacted.

The US EIA website is a good source of energy information.

Major energy sources and percent share of total U.S. electricity generation in 2015:

• Coal = 33%
  
  
• Natural gas = 33%
  
  
• Nuclear = 20%
  
  
• Hydropower = 6%
  
  
• Other renewables = 7%
  
  • Biomass = 1.6%
    
  • Geothermal = 0.4%
    
  • Solar = 0.6%
    
  • Wind = 4.7%
    
• Petroleum = 1%
  
• Other gases = <1%
  

As you can see Gas and Coal and Nuclear make up the bulk of energy generation. Petroleum only 1%.

Hence with more uptake of EV, means more energy needed from :
more coal (theres plenty supply) , 
more gas (plenty as well, supplemented by shale gas), 
more nuclear(plenty but growth likely limited as shown by recent toshiba near bankruptcy from setup costs overrun due to regulations/etc.)

Solar is now profitable to set up and with new battery Tech like from Tesla, can actually store gigawatts of excess daytime electricity for night time use. 
It is now growing rapidly though may take at least a decade for expansion to be anywhere near even hydropower. A surprise though could be if all new homes start coming with solar panels roofs that Tesla is selling which could become cheap enough for mainstream in a few years time.

It will be interesting to see the latest energy generation  figures for end of 2016. 

another useful link
PETROLEUM & OTHER LIQUIDS Refinery Yield

so 47% of a barrel of oil becomes gasoline==petrol.
28.4% becomes Distillate Fuel Oil == mostly diesel.
Some of the diesel goes to running things not in the transportation sector but a lot of it goes into transportation (trucks/buses/shipping)

So if EV end up with 50% share of all cars/trucks/buses(assuming its successful and govs supports, we can roughly expect a drop in demand of each barrel oil by maybe 25-30%(a third?) 

So where will all those extra barrels go?

this drop in demand is unlikely to be taken up by petroleum power plant generation expansion. more likely EV electricity demand may cause more increase in coal and natural gas plant expansion and home solar / energy co. solar and other renewables. 

IMHO oil will be in trouble even if we dun go full EV and just start driving hybrids as a standard (lol notice a lot of hybrid vezel recently?)

[karlmarx]

This data from U.S. is interesting but should not be extrapolated for all countries. I believe this data may perhaps be explained by the availability of the different fossil fuels in U.S.. U.S. has plenty of coal and hence relies on it heavily as a source of power supply; they are a net exporter of coal. On the other hand, U.S. has been a net importer of oil for many decades. In Saudi Arabia, half of its electricity is generated from gas and the other half from oil. While circumstances for each country differ, I do agree however, that most (large) countries rely on coal and gas for electricity generation.

My assumption is that most power plants use coal and gas instead of oil because oil is used primarily to power transportation. Since only petroleum can be used to power transportation, I suppose power plants will not want to further drive up demand (and hence price) for oil by also using petroleum for electricity generation. Furthermore, the prices of coal and gas are less volatile compared to oil.

I suppose when the demand and price of oil falls sufficiently, power plants may find it to be a choice substitute for coal or gas as a source for electricity generation. It is also a cleaner fuel compared to coal.

[BlueKelah]

This data from U.S. is interesting but should not be extrapolated for all countries. I believe this data may perhaps be explained by the availability of the different fossil fuels in U.S.. U.S. has plenty of coal and hence relies on it heavily as a source of power supply; they are a net exporter of coal. On the other hand, U.S. has been a net importer of oil for many decades. In Saudi Arabia, half of its electricity is generated from gas and the other half from oil. While circumstances for each country differ, I do agree however, that most (large) countries rely on coal and gas for electricity generation.

My assumption is that most power plants use coal and gas instead of oil because oil is used primarily to power transportation. Since only petroleum can be used to power transportation, I suppose power plants will not want to further drive up demand (and hence price) for oil by also using petroleum for electricity generation. Furthermore, the prices of coal and gas are less volatile compared to oil.

I suppose when the demand and price of oil falls sufficiently, power plants may find it to be a choice substitute for coal or gas as a source for electricity generation. It is also a cleaner fuel compared to coal.

yes should not be extrapolated. Would probably need figures but from what i read 

Saudi energy production capacity is around 60GW (my estimate). Source is mainly oil as you said, though i cant find exact recent percentage but if as you say its half, that means around 30GW is from oil source. USA oil source capacity alone is already 40GW. natural gas source is 470GW. https://www.eia.gov/electricity/annual/h...04_03.html 

(though have to keep in mind capacity is not the same as energy produced in KW hours.)
[According to the BP Statistical Review of World Energy 2014, Saudi Arabia generated 292.2 billion kilowatthours (kWh) of electricity in 2013]


[In 2015, the United States generated about 4 trillion kilowatthours of electricity(EIA)]

that's around lets say for simplicity sake,  at 2015 ,  0.4Tkwh (Saudi) vs. 4Tkwh(USA) and if half is from oil for Saudi, then only 0.2T vs 4T which is like 2.5% of total US production using oil. IMHO hardly significant when considering bigger picture and heavyweights like China and USA.. 

Saudi is also planning for massive investment into solar aiming for 9.5GW capacity by 2023. Other sun rich arab countries are also making similar plans.
https://www.bloomberg.com/news/articles/...power-cost


Obviously with the energy source mix from USA figures, its more economical for them to be running coal and gas as feedstock for their power plant. Hence any increase in energy demand will likely see an expansion of gas/coal. 

AFAIK, Gas and coal can also be very volatile. Coal prices arguably not so volatile as Natural gas or oil. but still pretty volatile.

Thermal coal has dropped from $100/ton 2012 to like $60/ton early 2016 and spike to $100/ton (end 2016) again and just past couple months falling back to $80 range and looking to retreat further as China has lifted their coal mine 276 working days cap. 

Natural gas has gone up and down even more from 2USD/BTU to 6USD/mmBTU and back down and now around $3usd/mmBTU. 


The problem with using oil is the switching cost from older coal and natural gas plants which may already have their initial fixed investment recouped. As well as oil production costs, which might make it not as economical as just adding on renewables power plants like solar (pretty sure they dont just take a barrel of crude oil and chuck it in to burn)

I reckon for every EV added to the roads, there will be corresponding addition of solar power generation. there is high possibility of drop in global demand for oil for transportation without a corresponding rise in demand for oil as power feedstock and this will impact oil prices in the near future as well as the fates of all our local OnG companies.

[Wildreamz]

Let's not forget: http://oilprice.com/Energy/Energy-Genera...-Push.html

Saudi Arabia’s energy minister, Khalid Al-Falih, said that his country will begin soliciting bids for a “massive” renewable energy push, with spending to be ramped up to as high as $50 billion. The move is intended to source at least 10 GW of electricity from solar and wind by 2023, a rapid escalation of renewable energy installations in order to conserve oil for exports.

[weijian]

This data from U.S. is interesting but should not be extrapolated for all countries. I believe this data may perhaps be explained by the availability of the different fossil fuels in U.S.. U.S. has plenty of coal and hence relies on it heavily as a source of power supply; they are a net exporter of coal. On the other hand, U.S. has been a net importer of oil for many decades. In Saudi Arabia, half of its electricity is generated from gas and the other half from oil. While circumstances for each country differ, I do agree however, that most (large) countries rely on coal and gas for electricity generation.

My assumption is that most power plants use coal and gas instead of oil because oil is used primarily to power transportation. Since only petroleum can be used to power transportation, I suppose power plants will not want to further drive up demand (and hence price) for oil by also using petroleum for electricity generation. Furthermore, the prices of coal and gas are less volatile compared to oil.

I suppose when the demand and price of oil falls sufficiently, power plants may find it to be a choice substitute for coal or gas as a source for electricity generation. It is also a cleaner fuel compared to coal.

hi karlmarx,
you seem to be contradicting between your posts. 1 of the earlier posts mentioned "I don't think electric vehicles will significantly reduce the demand for oil", while the latest one states "My assumption is that most power plants use coal and gas instead of oil because oil is used primarily to power transportation".....

For your assumption, i am not sure if it is right when you relate the "effect" ("we use coal and gas") to be due to the "cause" ("because oil is used primarily to power transportation")....That is definitely not the case. I think thermal coal (the type used in power plants) is a product of the Industrial Revolution that produced the steam engine (thermal coal --> water become steam --> steam drives turbine --> movement creates electricity based on Fleming's rule) and that's why we end up with coal as the dominant source as it was abundant with well established techniques. We should also take note that in the early days of the automobile revolution, 3 kinds of engine were competing to be the engine of choice - electric (battery), steam (water) and internal combustion (oil). It is interesting to note that Thomas Edison once rooted for the electric car (he had skin in the game). Eventually the internal combustion engine proved to be superior in terms of power and reliability and with the proliferation of gas stations, oil came out to be the fuel of choice for automobiles.


Here are some interesting statistics (2014) which should give one a better context for further discussion. I am not able to verify that it is accurate but i understand China's main source comes from coal and France's main source comes from nuclear. The numbers are showing as such and so i would give the site belong the benefit of the doubt.

Breakdown of Electricity Generation by Energy Source: http://www.tsp-data-portal.org/Breakdown...tspQvChart
Countries with highest electricity generation: http://www.tsp-data-portal.org/TOP-20-Ge...tspQvChart
Historical Electricity Generation Statistics: http://www.tsp-data-portal.org/Historica...tspQvChart

[Wildreamz]

EV will displace demand for gasoline (petrol): https://cleantechnica.com/2016/05/15/ev-...rward-yet/
Electricity will be generated by a combination of Renewables + Battery Storage and Natural Gas.

Solar will displace demand for natural gas, coal (in some countries like, Saudi Arabia, crude oil too) : https://cleantechnica.com/2014/02/04/cur...ar-panels/

Crude oil will still be needed to make plastics though.

[violinist]

EV will displace demand for gasoline (petrol): https://cleantechnica.com/2016/05/15/ev-...rward-yet/
Electricity will be generated by a combination of Renewables +  Battery Storage and Natural Gas.

Solar will displace demand for natural gas, coal (in some countries like, Saudi Arabia, crude oil too) : https://cleantechnica.com/2014/02/04/cur...ar-panels/

Crude oil will still be needed to make plastics though.

Not in our life time.

[Temperament]

EV will displace demand for gasoline (petrol): https://cleantechnica.com/2016/05/15/ev-...rward-yet/
Electricity will be generated by a combination of Renewables +  Battery Storage and Natural Gas.

Solar will displace demand for natural gas, coal (in some countries like, Saudi Arabia, crude oil too) : https://cleantechnica.com/2014/02/04/cur...ar-panels/

Crude oil will still be needed to make plastics though.

Not in our life time.

Some already happens right?

Only not much or faster because of Gs' or countries's "self interests"

Just imagine if all cars were EV now!