Guest “I couldn’t make this sort of schist up if I was trying” by David Middleton

Apr 5, 2020,07:06pm EDT
After COVID-19, The Oil Industry Will Not Return To “Normal”

Wal van Lierop Contributor
Energy

The coronavirus pandemic has shuttered the world’s economies, overwhelmed healthcare systems and taken loved ones from us. Politicians have promised their citizens a “return to normal” following the pandemic. However understandable, this longing for “normal” will lead us to a mirage. Worse, our recovery from COVID-19 could be a short-lived victory if we aspire only to have a “normal” economy again.

Normal created a climate change timebomb that may make the economic consequences of coronavirus look mild by comparison. Normal would give two brutal dictators the power to topple North America’s fossil fuel industry whenever they feel like it.

Normal also caused the mass destruction of ecosystems, human desperation for animal protein and increased human-wildlife contact. Combined, these factors led to Ebola, Hanta, bird flu, SARS, MERS and now COVID-19 to find a new, more plentiful host in human beings.

Stimulus spending around the world has already eclipsed the 2009 recovery measures and “New Deal” programs of the 1930s. And more spending is inevitable. Will your taxpayer money be wasted on a return to normal? Or, could it be used to…

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Let’s not misuse taxpayer money to rebuild an economy that survives COVID-19 and then succumbs to climate change. Instead, let’s create a future economy with good jobs, a habitable earth and reprieve from the whims of erratic dictators. There is no path back to normal. And we can do much, much better than normal if we refuse to waste this crisis.

Forbes

I called this dude a “futurist” because I couldn’t figure out what he was…

For more than 30 years, I have devoted my career to sourcing, investing in and helping to commercialise breakthrough innovations for energy intensive industries. During this time, I have gained unique industry insights and deep operational experience as a venture capitalist, corporate executive, international consultant and university professor. For the past nearly 20 years, I have been President & CEO at Chrysalix Venture Capital, an award-winning VC firm focused on innovation, sustainability and cleantech, where I have helped raise more than $250M and participated in more than $1B in venture capital funding. Our investments include breakthrough technologies like 3D printing of steel, fast charging electric vehicle infrastructure, emissions-free solar steam, smart mining and nuclear fusion. Before officially joining the corporate world, I spent several years as an Associate Professor at the Vrije Universiteit Amsterdam, where I obtained a PhD in Economics, and consulting to the World Bank and European Union.

Forbes

This has to be the single dumbest sentence ever written by a human being:

Let’s not misuse taxpayer money to rebuild an economy that survives COVID-19 and then succumbs to climate change.

It’s as if the Bozo is saying, “Don’t save the economy from ChiCom-19, because we have to save it from the weather.”

The title of the article was:

After COVID-19, The Oil Industry Will Not Return To “Normal”

“Normal” is boom & bust. Low prices eventually cause high prices and high prices eventually cause low prices.

This is as close as he got to actually discussing the “oil industry”…

There is no return to normal for the shale and oil sands producers. From now on, the fate of the oil industry is tied to the whims of two egomaniacal autocrats. Demand will continue to decrease as low-cost renewables keep pushing the energy transition.

I filled up my Jeep the other day for the first time in three weeks, and paid $1.19/gal (with my $0.20/gal Albertsons/Safeway/Randalls/ Tom Thumb discount). I normally fill it up twice a week. When the ChiCom-19 hostage crisis ends, demand will not continue to decrease; nor will “low-cost renewables” push any sort of transition, much less an energy transition… If for no other reason than the fact that there has never been an energy transition – We convert more biomass into energy now, than we did before we started using fossil fuels.

The ChiCom-19 hostage crisis has caused demand for crude oil to drop by 20-30%. This has caused about a 50% drop in the price of crude oil. At $20/bbl a lot of producing oil fields become uneconomic. Guess what happens when a producing oil well can no longer cover its own lifting costs?

Legacy oil & gas production has dropped rather sharply in every tight/”shale” play in the Lower 48. The drop has been particularly steep in the Permian Basin. Production from new wells was still up, but will soon begin to decline. The legacy production drop in the Permian Basin was so steep that overall production dropped for the first time in a long time.

How long will demand be suppressed? It depends on how long the Fire Marshal Gumps of the world keep us under house arrest. This is the EIA’s latest forecast (which has to be better than a futurist waving his arms)…

Global production will probably dip more the the EIA forecast, but it’s anyone’s guess as to how quickly the over-supply will be worked off.

If oil prices track the current futures market and STEO forecast, the industry will still be in “bust” mode through at least next year. “Shale” players, particularly the smaller ones will be filing for bankruptcy at a record pace. If oil prices track a little above that, $50-60/bbl, the industry will be back to “normal” (somewhere between boom & bust). If prices move toward the upper bound of the confidence interval, the industry will be in “boom” mode (as opitmisic as I am, I don’t see how this can happen in the 2020-2021 time period). If prices, track the lower bound of the confidence interval, we will be in a deep “bust” mode…

Many, if not most oil companies, particularly independents, “hedge” a significant percentage of their production. They effectively sell the oil in advance at a fixed price.

McConn and his team at Enverus and RS Energy Group Intelligence estimated there is 2.5 million barrels per day of aggregate 2020 oil-hedge volumes among public traded North American exploration and production companies at an effective hedge price above $50 West Texas intermediate. Their analysis estimates most oil-weighted E&P companies have hedged between 25 and 90 percent of their anticipated production for the year. They estimate the value of these financial-derivative assets exceeds 10 percent of respective enterprise values for the majority of E&P companies.

Midland Reporter-Telegram

Some companies even have a portion of 2021 production hedged. This buys time for most companies to lower their spending to the point that they can be cash flow-positive at $30/bbl. If oil prices evolve along the lines of current futures contracts, the oil industry will, indeed, return to “normal.” Apparently “futurists” are clueless about what’s “normal” for the oil industry,

Day Whatever of America Held Hostage by ChiCom-19

I’ve lost track of what day of the week it is, so, keeping up with what day of the hostage crisis it is seems pointless.

Fire Marshal Gump was at it again yesterday.

Dallas County to require people to wear masks at essential businesses, on public transportation
An upset Price says Jenkins didn’t consult fellow commissioners on the plan. Meanwhile, the county also reports seven more coronavirus-related deaths.

People in Dallas County will soon be required to wear face coverings when they work or shop at essential businesses and use public transit.

The mandate goes into effect at 11:59 p.m. Friday, County Judge Clay Jenkins announced Thursday.

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Dallas Morning News

Gump needs to look at his own fracking data:

4/17/2020
Dallas County	CHICOM-19
Population	Cases	Deaths
2,637,772	2,190	55	2.5%
% of population with	0.08%	0.00%
% with, rounded	0.1%	0.0%
% without	99.92%	100.0%
% without, rounded	99.9%	100%
Menodoza Line (.200)	5/31/2035		0.200

Thankfully, it appears that the Dallas County Commissioners Court has slapped Gump down again…

Dallas County commissioners vote to scale back countywide mask order, reopen craft stores
The 3-2 vote was made to give county residents access to mask-making materials.

Dallas County commissioners voted Friday to reopen craft stores and partially scale back an order requiring residents to wear masks in public.

County Judge Clay Jenkins issued the order Thursday that requires county residents to wear face coverings when working, riding public transit and running essential errands, effective at 11:59 p.m. Friday.

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Dallas Morning News

Just a couple of weeks ago, Gump (Jenkins) made a YUGE production of shutting down Hobby Lobby and other craft stores.