Tuesday, August 13, 2013

Age Of Inexpensive Oil Is Over -- SeekingAlpha; Natural Gas Will Be The Bridge To Coal

This article follows an earlier article in which we discussed Berkshire's Charlie Munger's thoughts on the price of oil.
We hear all the time from the talking heads on CNBC that China is slowing and oil prices may collapse. The key word though is slowing. It is still growing, and so is its demand for oil. In fact demand for oil is growing in almost all of the world's most heavily populated countries. The International Energy Agency's most recent growth projections for 2014 are for an increase in daily demand of 1.1 million barrels per day.
That rise in demand of about 1 million barrels per day year-on-year is likely what we can expect going forward as China, India and the billions of people in the emerging economies consume more oil. And at a high level, that does provide some context as to how significant the tight oil ramp up in the United States will be to global oil prices.
Every year, the world needs to raise its daily global oil production by 1 million barrels per day in order to keep up with demand. EOG's Mark Papa is forecasting that by 2015 tight oil production can increase by 2 million barrels per day. That is 3 years from now, which would mean that daily global oil demand will have increased by 3 million barrels per day and outpaced the growth in tight oil production.

A note I sent to Don regarding this article in reply to his thoughts on the article:
Munger's thoughts about the missed opportunity of buying cheap Saudi oil back in the 1950's/1960's -- hindsight is 20/20.

I thought natural gas would be the bridge to nuclear energy.... that was before the Japanese debacle.

Now it appears that some people think natural gas is the bridge to renewable energy (wind and solar). The numbers don't work out. There is not enough surface area on earth for wind or solar to supply all the energy needs, and there are fewer and fewer places where "wind" economics work.

I think some folks are going to rue the day 30 years from now, when they look back, and learned O'Bama and company invested in wind technology when they should have been investing in nuclear technology. It takes ten to twenty years to bring a nuclear power plant on-line.

  • before the Japanese debacle: natural gas was going to be the bridge to nuclear energy acceptance
  • after the Japanese debacle: natural gas is the bridge to renewable energy (wind and solar)
  • reality in 30 years: natural gas will be the bridge to coal

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