Will oIl prices continue to fall or will they rebound?

Danilo Anton

Oil prices are rebounding from the lowest level in a long time. On January 20, 2016, WTI petroleum barrel dropped to less than 27 dollars. It seems that this acute slump was related to the crude oversupply. On the one hand the United States kept high storage levels and fracking production remained high. Saudi Arabia and other petroleum producing countries did not cut pumping and Iran is starting to export very soon. The glut also relates with the abundance of hydrocarbon fields in continents and ocean platforms. No peak oil production is forecasted in the near future.

However, these are not the only factors that influence prices. There are technological and financial limitations to what can be extracted, there are political issues, and of course there are speculations

We must remember that some producing countries such as Russia, Venezuela and Iran do not have friendly relations with financial markets. Low prices are weakening their economies and political strength. Obviously, many big buyers are not worried about that.

However, if we remember what happened in past price slumps in the past is very likely that prices will rebound and will reach the 50 dollar mark per barrel very soon.

The reason for this future increase that can be predicted is a very likely decrease in investments in expansion of existing fields and a stop of exploration in peripheric regions.

This cyclic changes in prices appear to be normal every 5-10 years and are not related to actual abundance of the crude in the depth of the Earth,

In fact, according to the abiotic theory on the formation of oil and natural gas, there are enough hydrocarbons for many centuries, perhaps millennia.

There are limits, of course. Some fields are in unreachable locations with present technology. Although in the most productive areas it has been observed the recuperation of some wells, due to recharge from deeper levels, intense pumping may exhaust the oil existences. Finally, there is competition from other sources of energy. Probably in the near future oil will substituted by eolian, solar, hydro or nuclear or other sources of energy producing methods.

The complexity of the subject makes difficult to predict the future development of the petroleum extracting and consuming industry, but one thing we can say. Although at a human scale, hydrocarbons are inexhaustible,  new technological procedures may reduce their importance in the future and, perhaps, also their prices.

In summary, the development of petroleum and natural gas and their prices are unpredictable and will continue to be so for a long time.
"Unexhaustible, Petroleum and Natural Gas", Danilo Anton, Piriguazú Ediciones. 

Slump in oil prices

Oil prices are not related with its middle and long term availabillity

D.Anton

Rollercoster petroleum prices, oversupply,  wars, geopolitical issues, speculation and short term unpredictability

When the chart of mean oil prices is analyzed it is clear that the pricing trends do not relate with exhaustion of oil fields. The variations are such that other causes should be considered. One important cause was the agreement of oil exporting countries to limit production in 1973. The price of the barril rose from US$ dollars 19 to 50 (March 1974) in less than one year. However, six years later (March 1980) rose again to 115 dollars, probably in relation with the war between Iran and Iraq, The rollercoster continued, in 1986 the price went down to 28.08 dollars (oversupply?) and up again in May 2008 to 145.31 dollars A number of events occurredmm, Venezuela cutted sales to Exxon Mobil, two main pipelines were blown up in Iraq, strikes of oil workers in Nigeria and Scotland, etc. However, these facts do no explain completely the acute drop in prices. Most probably the speculation played a more important role.

Eight months later in February 2009 prices fell to 44 dollars (probably again because of oversupply led by the huge production of Saudi Arabian oil fields).

After two years it increased to 109 dollars remaining high up to December 2013 (103 dollars). The last drop took place during 2014 and 2015 (linked to production of shale oils in Uniiter States and Canada) reaching 29 dollars in January 2016.

As it can be seen it is difficult to predict future prices due to the dramatic changes in short periods of time.

There are many factors that influence this variations. Some we mentioned already: oversupply, decrease in production in high production countries due to wars, strikes, political situations, etc,

And of course the everpresent specuation manoeuvres.

In the background, there is always something we can define as a “ghost”, a peermanent threat in the immediate or no so immediatefuture. It is a threat not confirmed in practice that oll fields will be exhausted in the future. It is argued that, because they are “fossil” fuels they can be found ONLY in sedimentary basins. And sedimentary basins average only 1/20000 of the diameter of the Earth.

Because, according to the biotic hypothesis, hydrocarbons are not found in all sedimentary formations, and when they are they are contained only in the pores or voids in sedimentary basins they probably would represent less than 1/1,000 of all mass contained in sedimentary formations and therefore less (or much less) than 1/10,000,000. of the Earth mass.

However, according to the abiotic hydrocarbons are much more abundant. If we compare the Earth with other planets, satellites, comets and meteorites, we may assume that hydrocarbons can at least be 1/100 of the Earth mass and probably much more (up to 10/1000). This means that, even acceping low porosity levels, the petroleum and gas contained in the Earth crust and upper mantle (not counting the lower mantle and nucleus), could reach up to 1/1,000 to 1/10,000 the mass of the Earth.

Conclusion: according to the theory of mineral origin of hydrocarbons there are much, much more oil and gas than the “fossil” theory accepts.

Those levels are enough to keep supplied humankind for several millennia. For sure that in less time the technology will change and hydrocarbons utilization may become totally different. From the point of view of hydrocarbons as sources of energy we can safely state that oil and gas are unexhaustible.

Danilo Anton, in "Unexhaustible, Petroleum and Gas", Second Edition.

Unexhaustible oil and natural gas?

Increased worldwide petroleum production explains lower prices and supports the abiotic theory about its origin

D,Anton

There is a widespread belief in the world of energy policy and petroleum geology that mineral fuels, usually considered as "fossils", are nearly exhausted.

What varies is the deadline of its exhaustion. Some people think that in 10 or 15 years the shortage is going to be noticed.  
There are other people arguing that mineral fuels will last more than 50 years, and even a century.

Uncertainties about future supply prospects are very important from the technological,  economic and political point of views. However, these different forecasts are demonstrative of the lack of a single model to analyze the issue.

In the 1950s, a Texas geologist, M. King Hubbert developed a curve as an analytical tool to predict the performance of oil fields from discovery to exploitation, depletion and abandonment. This curve, now known as "Hubbert curve", allowed to analyze all oilfields and to forecast production capacity. Some of Hubbert's predictions were fulfilled.

His curve was quite effective during the last decades of the Twentieth century in predicting disability of  US oil fields to meet the growing demand of the country. According to the curve it was expected that from 1970 the country would cease to be self-sufficient.  This actually happened. In recent years several specialists in oil issues have attempted to apply the Hubbert curve in the U.S. and throughout but they were not successful. It does not seem to fit anymore. 

During the last 15-20 years new technological developments, drilling and fracking methods reversed the previous trends, the United States became self-sufficient again and an oil glut affected the market 

Hubbert's forecast was based on the widespread belief that oil has a "fossil" origin and can only be extracted from sedimentary basins. As the sedimentary basins have limited volumes (they are not found everywhere and they don't extend beyond 8-10 km), "fossil" fuels would also be limited to these areas.

This "fossil" petroleum scenario would imply accelerated increase in oil prices, massive economic imbalances related to energy production, and growing social and political instability.

This situation had no apparent solution in sight because it would be very difficult, even impossible, to achieve a substantial reduction of energy world consumption, and there were no alternative sources within a few years to meet the growing needs of an overpopulated planet whose economies are intensive energy based.

If, however, we accept the theory of abiotic oil, including planetary degassing processes and hydrocarbon evolution through the deep biosphere (Thomas Gold, 2001), the conclusions would be very different.

First, due to the presence of hydrocarbons in all geological formations, including igneous and metamorphic rocks, the inventories (reserves) of oil at regional and global level must be recalculated..

Moreover, as the formation of oil and natural gas occurs in depth, there would be much larger volumes of hydrocarbons contained in the deep layers of the Earth crust and even in the upper mantle.

According to the abiotic hypothesis it is possible that the amount of oil available in the planet is several orders of magnitude greater than those  predicted. Perhaps there is oil and natural gas in sufficient volumes to supply humanity for many centuries, even millennia.

As oil (according to Gold) is derivative from gaseous hydrocarbons their quantities are only limited by the physical-chemical conditions necessary for its formation.  However, considering the available natural gas stocks (particularly methane) which are enormous, actual reserves of hydrocarbons are thousands or hundreds of thousands of times higher than those usually considered. To these reserves we should add the content of methane hydrates in the oceanic bottoms which are also extremely abundant and contain high proportions of gas (168 liters of methane gas per liter of solid methane hydrate,  at ordinary pressure).

For all these reasons we shouldn't be surprised that the oil prices have decreased substantially during the last few years from a maximum of 140 dollars per barril about 5 years ago to the present price of 35 dollars (2016). 

The above data are showing that the biotic theory does not explain the sustained worldwide increase in production during the last years. The theory of mineral origin of petroleum may provide the needed answers.

From "Unexhaustible? Petroleum and Gas", Danilo Anton, Piriguazu Ediciones.

Petroleum  is practically unexhaustible and prices will remain  low

 Danilo Anton

In the 1970's it was believed that petroleum would be exhausted very soon, probably in 10 or 20 years. This trend was based in a theory called “Hubbert's Peak” according to this point of view for any given geographical area or for the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve and therefore its exhaustion will take place on a short term. Thhis prediction was well described in a recent article of “The Wall Street Journal”.

For decades, it has been a doomsday scenario looming large in the popular imagination: The world’s oil production tops out and then starts an inexorable decline—sending costs soaring and forcing nations to lay down strict rationing programs and battle for shrinking reserves.

U.S. oil production did peak in the 1970s and sank for decades after, exactly as the theory predicted. But then it did something the theorydidn’t predict: It started rising again in 2009, and hasn’t stopped, thanks to a leap forward in oil-field technology¹ 

What is not said in this article is that Hubbert's prediction was based on the belief that oil had a “fossil” origin and was formed through the accumulation and chemical transformation of organisms, and its migration up to appropriate sedimentary traps (i.e. clay layers).

However, this theory, which is still considered correct by many scientists and engineers does not explain many facts and processes that occur in the main oil fields worldwide.

The alternative hypothesis, developed by Russian and Ucranian geologists and the Austrian astrophysicist Thomas Gold, states that liquid and gaseous hydrocarbons are originated in the Earth upper mantle and lower crust. Therefore, there was no reason for high prices because petroleum, which IS NOT A FOSSIL FUEL can exist practically everywhere, and exploitable oil fields have developed (and will develop) in many places throughout the world. As a result the very high prices of petroleum (which were above 100 U$S dollars the barrel, up to 140 U$S in June 2008) started to fall to U$S 40 dollars or less.

Obviously, there are other factors that influence the prices of the oil barrel: political, infrastructural, logistic and financial issues. However, the bottom line is the actual geological availability of hydrocarbons. Because the abiotic theory predicts increased production and lower prices it seems that the reality is showing that petroleum has mineral origin and the fossil fuel theory is not correct.

1 Russell Gold, Updated Sept. 29, 2014 4:26 p.m. ET;

http://www.wsj.com/articles/why-peak-oil-predictions-haven-t-come-true-1411937788