The “Oil Age” is doing just fine, Bloomberg New Energy Finance notwithstanding

Guest smack-down by David Middleton

Hat tip to Clyde Spencer…

The Oil Age Is Coming to a Close

Noah Smith
Bloomberg October 29, 2019

(Bloomberg Opinion) — The oil industry faces an uncertain future. The world is rapidly waking up to the severity and immediacy of the threat from climate change. At the same time, electric vehicles are getting cheap enough to compete with internal-combustion engines. BloombergNEF expects electrics to begin taking over in about a decade:

[…]

Yahoo! Finance

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

Bloomberg

Which is it?

Does “the oil industry face an uncertain future”? Or is “the Oil Age coming to an end”? “The Oil Age is coming to an end” doesn’t sound very uncertain to me. Or maybe Former Professor Smith listened to too many Doors albums in college (I know I did)…

The future’s uncertain and the end is always near…

Jim Morrison, The Doors, Roadhouse Blues, 1970

Before “electrics begin to take over,” they first need to top Ford F-Series pickup trucks.

Figure 1. Sales data from Inside EV’s and Car Sales Base
Figure 2. Looks like Ford F-Series pickup trucks will still be outselling all EV’s in 2050. (US Energy Information Administration)

EV’s may be taking over in the parking lots of the ivory halls of academia and LaLa Land of BNEF blogging, but the developing world likes SUV’s.

Oct 23, 2019
SUVs: A Reality Check On Oil Use And CO2 Emissions

Jude Clemente Contributor
Energy
I cover oil, gas, power, LNG markets, linking to human development.

The never-ending spirit of wanting a more enjoyable and easier life is a constant reality that far too many of us involved in our energy-environment discussion unwisely choose to ignore.

A perfect example of this is SUVs: gas-guzzling Sport Utility Vehicles that are increasing both oil demand and CO2 emissions.

Much bigger, much safer, and much more fun to drive, the harsh fact for some is that people love SUVs.

The Paris-based International Energy Agency gives us a much-needed reality check on SUVs, oil demand, and the corresponding CO2 emissions.
SUVs are becoming more popular in the emerging economies of the world, where urbanization and expanding middle classes are giving more people more access to buy.

Many see SUVs as a symbol of wealth and status.

And why not?

Even environmentalists Alexandria Ocasio-Cortez and Mayor De Blasio love oil-swilling SUVs.

[…]

Forbes

Figure 3. “Share of SUVs in global car salesDATA SOURCE: IEA; JTC” Forbes

Jude Clemente actually understands the energy industries… as opposed to the to the former professor of finance, who seems to be clueless about… everything…

Meanwhile, concerns over groundwater pollution are leading to growing calls for a ban on hydraulic fracturing, the main source of increased U.S. production during the past decade.

Former professor of finance

The former professor of finance is almost half right. Frac’ing is the leading “source of increased U.S. production during the past decade.” The second-leading source is the deepwater of the Gulf of Mexico, where “shale” scale frac’ing isn’t a factor (1)(2)(3).

However “concerns over groundwater pollution” are only “leading to growing calls for a ban on hydraulic fracturing” from left-wing (Marxist) politicians. There is no evidence whatsoever that frac’ing is any threat to groundwater.

Can anyone guess how many times I’ve heard this sort of thing the past 38 years?

Reduced demand for crude will send prices plunging, cutting into profits at oil extractors and refiners. Share prices of oil majors have drifted lower in recent years:

[…]

Workers in the energy industry need to be prepared for this shift. For knowledge workers, such as geologists, chemists and software engineers, this means cultivating technical skills that can be useful in other fields such as information technology, pharmaceuticals, health care or finance. 

Former professor of finance

Clearly, this former professor of finance doesn’t know Jack Schist about the oil industry. The oil & gas business follows a “boom & bust” cycle. High oil prices reduce demand relative to supply. Low oil prices reduce supply relative to demand, ad nauseum. Shares of most oil companies have been beaten down since 2014-2015 because the price crash destroyed a lot of equity. If “reduced demand for crude” sends “prices plunging,” it will spur an increase in demand. That’s how business works. Maybe they don’t teach this in former professor of finance school.

While the oil industry certainly employs some chemists and software engineers (although, I’ve never worked for a company that did), the “knowledge workers” primarily consist of petroleum engineers, geologists, geophysicists, accountants, lawyers, petroleum land management professionals and compliance specialists. At least he mentioned geologists. Cyclical downturns have led to several episodes of layoffs since 1986 and the voluntary exodus of many “knowledge workers”. Most of the geoscientists (geologists and geophysicists) I started out with at Enserch Exploration in 1981 left the industry in the late 1980’s through 1990’s. Most went into hydrology/environmental/engineering geology, a few became schoolteachers, one became a NASA astronaut and is currently the Director of the USGS. I know of maybe 2 or 3 who went into finance… And none who went into pharmaceuticals or health care. Otherwise, no schist Sherlock… Back up plans are sort of de rigueur in this business.

This is where the former professor of finance went full Tropic Thunder.

Lower-skilled workers and fracking boom towns, however, will have a much harder time landing on their feet.

[…]

The problem will be compounded for those who live in the small towns and cities that grew up around oil-extraction sites. Americans have been less willing to move from place to place in search of work in recent decades, and big cities are no longer lands of opportunity for those without an advanced education. The decline of the oil industry may leave the country dotted with yet more decaying half-empty ghost towns, unable to pay for the upkeep on their infrastructure, afflicted with drugs and alcoholism and suicide.

Governments at the local, state and federal levels should work to prevent this unhappy future. People in decaying oil towns can be given vouchers to help them to move, perhaps to a nearby thriving college town.

Former professor of finance

Did I mention that this former professor of finance doesn’t know Jack Schist about the oil industry? What does he think Houston, Midland, Tyler and a whole lot of other oil towns looked like in the late 1980’s, early 1990’s and other bust cycles?

Did he seriously suggest giving hard-working blue collar workers “vouchers to help them move to… a nearby thriving college town”?

But… Then he sped right on past full Tropic Thunder.

The march of technology means oil’s days are numbered.

Former professor of finance

The oil industry is a helluva lot more high tech than wind and solar. Due to advances in seismic imaging technology over the past 40 years, we can literally “see” oil & gas accumulations more than 30,000′ below sea level in geological settings that couldn’t even be imagined, much less imaged, just 10 years ago. Due to advances in drilling technology, we can now drill highly precise directional wells in over 10,000′ water depths, through thick layers of salt, to hit pinpoint targets we didn’t even know were there just a few years ago.

The “march of technology” means that “oil’s days are numbered in decades, if not centuries.

Figure 4. Demand for 110 to 130 million bbl of petroleum liquids in 2050 will require “all hands on deck,” rather than vouchers to move to “a nearby thriving college town.” (US Energy Information Administration)

I have read a lot of truly idiotic articles about the demise of the oil industry, often sponsored by Bloomberg New Energy Finance, but this one takes the cake. The former professor of finance earns a Distinguished Ron White Cross with a The Stupid it Burns Service Device and a Billy Madison Lifetime Achievement Award…

How about some Morrison Hotel?

via Watts Up With That?

https://ift.tt/2BY5qFl

October 31, 2019 at 08:56AM

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