Gail Tverberg always provides a lot to think about in terms of resource depletion and economic growth. She references Steven Kopits’s presentation which can be found here: http://energypolicy.columbia.edu/events-calendar/global-oil-market-forecasting-main-approaches-key-drivers
Steve Kopits recently gave a presentation explaining our current predicament: the cost of oil extraction has been rising rapidly (10.9% per year) but oil prices have been flat. Major oil companies are finding their profits squeezed, and have recently announced plans to sell off part of their assets in order to have funds to pay their dividends. Such an approach is likely to lead to an eventual drop in oil production. I have talked about similar points previously (here and here), but Kopits adds some additional perspectives which he has given me permission to share with my readers. I encourage readers to watch the original hour-long presentation at Columbia University, if they have the time.
Controversy: Does Oil Extraction Depend on “Supply Growth” or “Demand Growth”?
The first section of the presentation is devoted the connection of GDP Growth to Oil Supply Growth vs Oil Demand Growth. I omit…
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Interesting piece. I wonder how much this story would change if you included capex on all energy related projects and the prices and revenues of these industries as well. Is another reason for prices oil prices having trouble cracking $110 for WTI because of the Shale boom and significantly cheaper solar? Gail’s narrative is compelling, but it would be interesting to see this in a broader context. From a strategic perspective for the oil companies, would it make more sense to use the proceeds from oil divestitures to acquire energy companies in the non-oil space? Given this story, it seems inevitable that some form of industry consolidation will take place.
On a side note, one hypothesis is that oil prices reveal the cracks in the armor of a credit growth driven monetary structure. As long as oil prices, the fuel of the economy remains low, debt repayment and debt growth remains sustainable. But there are various price points for oil that create tipping points that grind down credit growth.
On your first point, BP’s old CEO, Lord Browne, tried to take BP “beyond petroleum” while his successor, Tony Hayward, steered it “back to Petroleum.” There is an old guard of chemical / petroleum engineer that sees the future of oil and gas companies as carbon based always given the energy intensity of the former so we may not expect forward thinking there.
On your second point, you may find the work of Robert Ayres and Benjamin Warr interesting: http://www.correlationmatrix.ca/2013/09/economic-growth-fprice-of-exergy-inputs.html?view=magazine