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The Forum > Article Comments > Today's downturn sets markets up for a dramatic oil price spike > Comments

Today's downturn sets markets up for a dramatic oil price spike : Comments

By Nicholas Cunningham, published 8/8/2016

Another oil price downturn threatens to deepen the plunging levels of investment in upstream oil and gas production, which could create a more acute price spike in the years ahead.

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The various reactions to a falling oil price surely reflect the different time horizons of different players. In the real world of producers and explorers, the patterns of investment in production and exploration have been repeated over and over for pretty much the full range of resource commodities. The world has survived. Of course there will be overshoots and undershoots but in the medium term supply and demand will return to their normal balance. Drama? That’s for journalists.
Posted by Tombee, Monday, 8 August 2016 9:27:38 AM
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The fact BP is drilling 300 km offshore in the Great Australian Bight shows that the long term supply situation is parlous. I suspect many of those who attended the weekend protest rally got there in cars not bicycles, though the irony may have escaped them. Those cars would be just a few of the 1.2 bn in the world. Cars have been with us for a century burning the black gold yet we blithely assume this can go on indefinitely.

A recent article on the Euarn Mearns website suggested the 97.8 mbpd of combined liquid fuels in July 2015 may be the all time high never to be repeated. The combination of depletion and more expensive extraction must mean fuel prices will increase in relative if not absolute terms. For example petrol still under $2/L but far fewer cars on the road since underemployed people will be taking the bus. Too bad for tourism and farming both utterly reliant on cheap fuel.

I think the answer must be electric cars and synthetic fuels either powered by or made from a low carbon power source. The need should be very apparent by the 2020s.
Posted by Taswegian, Monday, 8 August 2016 9:43:34 AM
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Nice try Nick, but we've been down this road before, where you made the same (wishful thinking) predictions.

Since then and as prices slowly rose, oil production picked up as it will do again! Given many small producers are held by the financial short and curlies, and even at break even results have little other choice than to reactivate, mothballed projects in the hundreds!?
Alan B.
Posted by Alan B., Monday, 8 August 2016 11:04:30 AM
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The elephant in the corner of this is the falling net energy of oil.

http://cassandralegacy.blogspot.it/2016/07/some-reflections-on-twilight-of-oil-age.html

We do not seem to have as much time as generally understood.
Posted by Bazz, Monday, 8 August 2016 11:26:44 AM
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Taswegian: I think you could be onto something, and that something is likely to be hydrogen produced by the old, cheap as chips, water molecule cracking technology?

And given the product is significantly less volatile than several refinery products, at least as safe as they have been in various near city locations. Production could be sited safely in similar locations, if desirable?

This method relies on superheated steam, which automatically decomposes into its constituent parts, oxygen and hydrogen, in the presence of an appropriate catalyst. A little Co2 can be added in the flow sheet, before the catalyst to avoid creating an explosive mix, is customary and the method the ancient used also, with mixed success?

Recent advances have enabled three different lasers aimed at the same point to create subzero temperatures at the intersecting junction of the beams! This juncture could be the newly created hydrogen stream which would immediately create liquid hydrogen and a little dry ice!?

I believe the heat source could be several in line relatively easily controlled industrial microwaves that could turn a flow of demineralised water into precisely controlled superheated steam in a matter of seconds, without ever exposing the product to a naked flame? The problem for the oldies and their reliance on gas.

The energy requirement could be very large scale solar thermal, which given recent advances, successfully competes with similar sized coal fired projects, on roll out costs and as a 24/7 provider of peak demand power.

The real difference would be the solar thermal option runs on forever free fuel and could power the process from its site, thereby reducing the cost of producing endlessly sustainable hydrogen to just a few cents per litre?

As a point of interest, around a cubic litre of hydrogen gas has the same calorific value as a litre of standard unleaded petrol and is slightly less volatile. However, storage of it as a sub zero liquid presents some problems not present in highly compressed gas!

The stone age didn't end for a lack of stone!
Alan B.
Posted by Alan B., Monday, 8 August 2016 12:04:33 PM
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Alan B, have you seen any figures on ERoEI for the process ?
Posted by Bazz, Monday, 8 August 2016 12:20:50 PM
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...cheap as chips, water molecule cracking technology? The only thing right about Alan B's sentence is the question mark. Hydrogen can certainly be produced, by a variety of technologies, but the laws of thermodynamics guarantee that the product will offer less energy than used in its making. Hydrogen may have some useful properties as a special fuel. It is certainly not a solution to an energy shortage.
Posted by Tombee, Monday, 8 August 2016 12:50:00 PM
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Tombee, it goes without saying that hydrogen on its own is not the solution to an energy shortage. But when combined with an overbuild of solar panels and wind turbines (or maybe even nuclear power) it could well be the solution.

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Alan B, it is quite easy to split water into hydrogen and oxygen, either electrically or thermally. But the process you've described seems very dubious - it seems implausible that the addition of a little CO2 would prevent an explosive mix.

What is this three beam laser cooling technology to which you refer? And how much gas is it able to cool? Laser cooling is a well established method of achieving ultra cool temperatures, but not a practical refrigeration method at high temperatures.

I don't think hydrogen was known about in ancient times. If they did manage to produce it, it would've been by reacting iron with acid.

And by "cubic litre" I guess you could've meant a nine dimensional quality or a litre constrained into the shape of a cube, but due to hydrogen's relatively low calorific value and very low density, I'm guessing you really mean a cubic metre, aka a kilolitre.
Posted by Aidan, Monday, 8 August 2016 2:30:46 PM
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Yes the energy used can be considerable for the hydrogen produced, but if that energy comes free from the sun and from a large scale solar thermal project large enough to completely power a small city, then we can create copious, very low cost, endlessly sustainable fuel, and still recover all the build costs inside the (50 year) life of the project!

Catalytically produced hydrogen, by the way, implausible or not, works quite well in conventional combustion engines, and seriously better in fuel cells.

I'm wondering if using magnetic bottling to produce liquid plasma, might not be adapted in some catalytically assisted process, to combine some carbon as a new compound or liquid fuel?

I'm not sure the energy input, wouldn't be less than that needed to recover and refine fuel?

Biogas (methane) can be easily and endlessly produced from currently problematic biological waste.

Every family produces enough to power their domiciles, along with endless free hot water.

However, if the slightly modified diesel engine is replaced with the Aussie invented ceramic fuel cell, which I'm assured, works nearly as well with (scrubbed) methane, as it does on hydrogen the energy coefficient (@80%) is literally doubled.

This vastly superior, smell free, closed cycle process, still produces endless free hot water! Moreover, the addition of food scraps or waste, markedly increases the available surplus!

Passing pure methane through an appropriate catalyst, knocks off a few hydrogen molecules, to then produce petrol replacing liquid methanol. It's a patented process Aidan, However implausible it seems to you? Further, there's no conventional combustion engine that can't be tuned or slightly modified to run quite happily on CNG! (methane)

Aidan, You come across, if not a St Petersburg Troll, like a stay at home juvenile or very immature adult, who has as they say, failed to launch?

Should that be the case, some free advice.

Grow up, move out, get a job, pay bills, now while you still know everything?
Alan B.
Posted by Alan B., Monday, 8 August 2016 6:35:36 PM
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It is true that if you already have the solar system then you can
produce hydrogen at "zero" cost.
However as usual the "IF" is the problem.
A solar installation has a high energy input and as Aidan said every
energy conversion costs energy.

Sorry Alan B there is no free lunch.
It is this inbuilt energy cost that has torn down the dreams of a lot
of greenies who think solar is all wonderful and just put up enough
panels and the world will be lovely with the birds twittering in the trees.
Your scheme has so many energy conversions that not much will appear at the wheels.
Posted by Bazz, Tuesday, 9 August 2016 9:33:34 AM
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Bazz,

It's the cost of labour input, not energy input, that's likely to be the dealbreaker.

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Alan B.,

If I thought I knew everything, I wouldn't've asked you abut the 3 beam laser cooling process.

You yourself seem to me to be very immature, but I'm intrigued by the St Petersburg Troll reference. Whose agenda do you think I'm pushing?

There is nothing remotely implausible about hydrogen produced catalytically from methane or other hydrocarbons. What is implausible is producing hydrogen catalytically from steam but not getting an explosive mixture.

Not all combustion engines can be modified to run on methane, though most can.

You also overestimate how much methane can be produced from biological waste.

BTW, plasma is one state of matter. Liquid is another state of matter. Liquid plasma is an oxymoron... unless it refers to the biological (not the physical) meaning of "plasma", but you don't need magnetic bottling for that!
Posted by Aidan, Tuesday, 9 August 2016 2:38:07 PM
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