Oil Markets Continue Precipitous Decline

I don’t normally post about the financial markets here, but I feel the continuing dramatic decline in in oil prices is certainly noteworthy here as we discuss energy topics.

Personally I’m still not sure how much of the slide is due to anticipation in the markets of new superior energy technology coming online, but I would guess that there are at least some people in positions of power and influence relative to the financial markets who are aware of the E-Cat, and who are expecting it to have a significant impact in energy production.

As much as cheap clean energy can be a real benefit to the world in so many ways (my home heating and transportation costs have dropped, which is very welcome), declining energy prices can certainly cause difficulties for many in the near term. Here are a few headlines and excerpts from news stories I’ve heard recently

Amid Recession, Brazil Struggles With the Huge Cost of the Olympics

Rio’s state government gets much of its revenue from oil production. But the price of a barrel is very low, leaving the state practically bankrupt. The most visible sign of this has been at state hospitals.

On a recent day, dozens of people were crowding the entrance of the Hospital Albert Schweitzer, creating a chaotic scene outside the hospital they could not enter.

Oil Plunge Dims Nigeria’s Economic Outlook As Equities Re-Adjusts

Nigeria, Africa’s largest oil producer, is struggling to cope with crude oil prices that have fallen to below about $31 a barrel. Oil accounts for two-thirds of government revenue and about 90 percent of its foreign currency earnings. The slump is weighing on growth, which is estimated to have slowed tolow to 3.2 percent last year, the slowest pace this century, according to a Bloomberg survey of economists.

Low Oil Prices Start A Revolution In Saudi Arabia. Russia Next?

With an estimated 90% of Saudi government income based on oil production the collapse in the price of oil has dealt a painful blow to the country’s economy with the budget deficit exploding to 15% of gross domestic product.

For now, Saudi Arabia can ride out the oil crisis thanks to foreign reserves believed to stand at around $550 billion. The problem, however, is that those reserves stood at $650 billion in the middle of last year.

[…]

If Russia cannot wean itself off a petroleum-only diet it will become an even more dangerous and isolated place that it is at present.

The key to future events is the oil price with Saudi Arabia and Russia praying in their own particular ways for higher prices, but with Russia praying the hardest

These are just a few examples of the economic impact of the oil crash on national economies where petroleum revenues has been the mains source of government funding and employment.

We’ve talked here for years about what could happen if there is a negative price shock in the oil markets — and we are now seeing it happen. Just today, US WTI oil had dropped another five percent and is now trading well below $30 a barrel, and there are respected voices in the financial world saying that we could well see $20 oil and lower.

Where things will go from here is of course unclear, but if we do see big news coming from Andrea Rossi’s E-Cat test in the near future there could be further impacts on the energy markets. With latest hints about the electricity production and high power density from the E-Cat X, it is conceivable that if those predictions pan out, the E-Cat could be suitable not only for electricity generation, but also in transportation.

I think oil prices may well rise again, but in the long term oil may never recover. Even without LENR, energy technology continues to develop in other areas such as energy storage, which makes solar and wind more useful — and there is also the chance of Steorn’s Orbo being confirmed to generate electricity without fuel out of thin air.

It’s a very interesting time. Technological advancement continues to accelerate with little sign of slowing down, making possible things that would have been inconceivable a generation ago (even a decade ago). But technological miracles can have real human casualties, as we are seeing, and I hope it will be possible to extend the benefits of these technologies quickly to those who may caught up in the tumult that this energy shock is bringing in many parts of the world.


  • Andreas Moraitis

    Surprisingly, Warren Buffett has just expanded his engagement in oil:

    http://uk.reuters.com/article/us-berkshire-hatha-phillips-idUKKCN0US2V920160114

    Either he made the mistake of his life, or he is smarter than all the rest. One might think that he speculates on a bandwagon effect, but that would be inconsistent with his conservative investment philosophy.

    • Gerald

      Oil refinery are less affected because of the huge use of heat. They could be the winners. We use oil for much more then energy and gasoil. The real problem in my opinion is they companies who produce oil because we need less and less.

      • Gerald

        I mean they benefit from LERN in the long run.

      • Yes. And they will be well positioned to take advantage of LENR using it when replacing crude for new cheap CO2 neutral synthetic fuels.

        • Gerald

          Yes indeed. With cheap energy we can turn rubble into useable raw materials. The the technology is already there just not affordable.. Yet….

      • Andreas Moraitis

        You are right. I had not noticed that this company is not directly involved in petroleum extraction.

        http://www.smh.com.au/business/energy/oil-refiners-thrive-amid-rout-in-brent-crude-market-20160113-gm4pkl.html

      • nietsnie

        I think that everything is economics. When the price of oil rises above certain points it becomes profitable to invest in producing it in more expensive ways. Saudi has realized that the biggest advantage they have over most of the other sources is that theirs is relatively cheaper to produce. By flooding the market with oil they have lowered the price for oil below that which allows those producing it in more expensive ways to make a profit. They are essentially driving their competition out of business. When that has been accomplished, the ready supply of oil will diminish which will drive the price back up. At that point the Saudis will have cornered the market.

        Similarly, the high price of oil has driven interest in alternative energy sources. Wind power, sun power, switch grass, more efficient engines – all of these are only profitable because oil became so expensive. Here in the US we are experimenting with electric automobiles. Global warming is driving some of our consumption decisions. By lowering the price of oil the Saudis are attempting to drive them all out of business as well – or, at least, delay their inevitable onset. And – it has been working. Just look at the increase in the purchase of gas-goozling vehicles since the price of oil dropped. Some of the new US fracking concerns are closing wells.

        I think Saudi recognizes the long term trend and wants to make sure that they have maximized their potential profit from the oil business before it goes bust and leaves them with a bunch of worthless crude in the ground that could have been lucrative had they used their ability to control the market more intelligently. This is going to happen at the expense of oil fields and alternative industries that only became Saudi competitors when the price went up. I don’t think their strategic move has anything to do with LENR. Until the day that even Rossi retires F9, no-one in the position of controlling billion dollar industries is going to make decisions based on LENR. However, unlike all the other alternatives, LENR will price oil out of consideration when it actually hits its stride. Saudi may not be reacting to LENR yet but a day will come when oil will become its victim in the same way that Russia and Brazil are victims of cheap Saudi crude.

        • Pekka Janhunen

          If LENR comes, the Saudi strategy does not look stupid in retrospect. If LENR does not come, the Saudi strategy does not look stupid in retrospect. Without LENR, it makes sense to Saudis to every once in a while to push prices down and remove competition, as you said. In the no-LENR scenario, the “purge” operation can be done at any time, basically. In the yes-LENR scenario, the right time to lower prices is now. It’s possible that they are aware of LENR and that’s why they are doing exactly now what they were going to do sooner or later anyway.

        • nietsnie

          I just read that Iran, in it’s first nuclear post-paraiah move, will shortly ramp up it’s crude production by 500,000 barrels a day – this in a market that already consumes less than is produced, with storage for more running out. I think we can expect the price to go down and stay there for awhile. This only exacerbates the situation most of the rest of the oil producers face of surviving in the industry at all. But, Saudi is still in the drivers seat as it already produces over 8 times more than Iran per day.

  • If the E-Cat test is positive and gets 60 Minutes style attention in the television media, then oil will be under even more pressure. I think LENR has had a slight influence on Saudi Arabian paranoia that oil will be replaced some day, but I don’t think LENR has had any significant effect as yet on the price of oil. It’s still too speculative and there is too much doubt about its validity. The Saudi Government just wants to kill off the American shale oil industry, so they are drowning us in oil.

    • At this point the Saudis need the cashflow for domestic reasons more than anything else.

    • Anon2012_2014

      Oil is a high carbon fuel that is dead in 40 years anyway. The Saudi’s see the writing on the wall. If LENR is successful, it may hasten that, but in 40 years any crude you haven’t sold is only a source of specialty chemicals for plastics and lubricants. That would be worth $1/bbl. Saudis know this.

      • Billy Jackson

        Our world is on the verge of fundamental changes in the next 20 years that are greater than the past of all human history. We are not talking about technologies 50 or 70 years out. No we are talking technologies that are in testing phases now that can be put into operation in the next few years. The amount of technological acceleration in these next few years is going to change not just the items we use but our social structures, ourselves and how we define life itself.

        Several of the top Futurist in the world, some who have a very high rate of success at predictions have made a list of things they think will happen in the next decade or near future.

        http://futurism.com/images/heres-what-todays-experts-think-the-future-will-be-like/?src=home

        while some of it seems far fetched even to me.. i cant say i completely disagree as predictions are not always 100% correct as we get the minor details wrong..that still leaves us with a high rate of success that these predictions or some form of them will take place.

        LENR and OIL is but one cog in the machine. a large one. but by no means the only one. below is a list of significant changes coming our way that will severely impact the way we do things that will affect almost every aspect of our lives.

        LENR
        EMDRIVE
        GRAPHENE IMPACT ON ELECTRONICS / COMPUTERS
        ROBOTICS & AI / AI ASSISTANTS
        VERTICAL FARMING
        SELF DRIVING CARS
        GENE MANIPULATION
        MEDICAL FIELDS (REJUVENATION / LIFE EXTENSION / DISEASE ERADICATION and more)
        3D PRINTING VIA ORGANS / TISSUE

        PHYSICAL CONSTRUCTION VIA 3D PRINTING
        RESOURCE HARVESTING VIA ROBOTICS IN SPACE USING REMOTE VR/AR
        FARMING VIA ROBOTICS: AUTONOMOUS / VR / AR
        COMMUNICATIONS
        VIRTUAL REALITY/AUGMENTED REALITY
        PROSTHETIC MANIPULATION OF ARTIFICIAL LIMBS VIA IMPLANTS.

        Almost everyone of these has the potential to be destructive and eventually beneficial to us unless we are not prepared to handle the changes and impacts that happen socially, politically, or economically. these next several years may just be one of the most exciting times to be alive. You may not see it now. but we can see the start of it by just looking at whats happening with LENR and its impact on OIL…

        • Agree. I’ve been trying to get the message out for years as a speaker. This last year, for the first time, there’s a broader understanding of that some big changes are upcoming, but people are still overwhelmed when they get the real picture, and few believe that the changes will come so fast and be so big.

          • Billy Jackson

            Unfortunately Mats i dare not go much further on that list as your average individual simply will not believe whats in the pipeline for our future.. some of it is nothing short of science fiction come to life…you start getting funny looks at that point like they think you are off your rocker… 🙂

          • Omega Z

            Most predictions never pan out.
            However, the few that do will make a substantial difference.

          • Billy Jackson

            I would normally agree with you except for one caveat .. these technologies listed seem to be a lot closer to when, than if. while minor details can and more than likely will be different than what we expect.. i think that they will be with us in some form.

      • As Jed Rothwell points out in ‘Cold Fusion and the Future’, also the market for chemicals and plastics might disappear for oil producers. If energy is very cheap it makes more sense to produce hydrocarbons from CO2/carbon and water locally, than to pull it out of the ground and transport it over large distances.

        • Anon2012_2014

          Mats,

          I think it will always be cheaper to make plastics and lubricants from the petroleum constituents, or from recycled plastics. Energy won’t be free, it will just be very very cheap. Transportation cost will be much lower than they are today.

          Overall, if we can eliminate the use of petroleum for all transportation fuels (even aviation which requires it to be light yet energy dense), I think petroleum usage could fall to 2% of current levels; or even less if we recycle efficiently.

          I like the idea of extracting CO2 from the air to keep the level of CO2 optimal for the overall ecosystem. It will be very energy expensive to do as it is literally reversing the entropy that was created when the carbon products were burnt. We just might have to rely on plants as had originally happened in the primordial atmosphere.

    • Ophelia Rump

      One Month 13 days.

      I just thought it deserved mention in the thread, even if you can see the writing on the wall.

      • artefact

        The gas price is decoupled from the oilprice. And about one year ago for Germany over 42% on the electricity production was from coal, 5% from others where oil is included. So the price is not much influenced by the cheap oilprice.
        For people just the gasoline and the heating oil went down as far as I realised.

      • GreenWin

        Its a great opportunity for President Obama. Introducing LENR will give whoever is in the White House a legacy for centuries.

        • psi2u2

          Look for it. He has to know.

    • Buck

      Tom Wipple of the Falls Church News-Press adds a layer of perspective to the challenges and changes in the global energy market for 2015.

      For those who are unfamiliar with Tom Wipple, he has been following and writing about LENR, Rossi/IH, Brillouin, etc. for some time.

      link>> http://fcnp.com/2016/01/04/top-10-energy-stories-of-2015/

  • bfast

    I actually see a sunny side to the low price of oil in light of LENR. When LENR becomes a phenomenon (as early as February) every smart energy producer will want to sell as much product as they can because keeping it in the ground will no longer make sense. Therefore, LENR will produce a precipitous drop in the price of oil, and will do so just as soon as the world realizes how revolutionary LENR is. (That’ll take at least 6 months from when it becomes known IMHO.)

    Now for the sunny side. By bringing lower oil prices to the scene early, the slope of decline will be more gradual. I know it feels awfully steep right now, esepecially for oil producing nations such as mine, Canada. However, any effect of making the shock more gradual will exponentially reduce the severity of the shock.

    I know that oillprice.com has been following LENR rather well. As such, the oil producing world has been told. I do not know if the Saudis see LENR coming as a factor in their decision to abandon the OPEC “reduced production” strategy. It may be. In any case, lower oil now means less shock later.