Oil Makes the World Go Round (not Money)

Posted by Ed 15 days ago
The Biggest Oil & Gas Discoveries Of 2019

Conventional oil and gas discoveries have fallen by the wayside since the shale boom and the subsequent oil price collapse. In fact, they’ve fallen to their lowest in 70 years. But there are still some amazing discoveries in the mysterious deep.

All in all, this year has seen new discoveries of nearly 8 billion barrels of oil equivalent, compared to 10 billion barrels of oil equivalent discovered last year.

But what’s most striking is that new discoveries aren’t even close to keeping pace with the loss of conventional resources.

According to Rystad, the current resource replacement ratio for conventional resources is only 16 percent. In other words, only one barrel out of every six consumed is being replaced with new resources.

So not only has our pace of discovery declined, but discoveries are also in much more challenging geological venues and typically offshore, which means it could take many years just to bring new resources online.


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Ed 15 days ago
Let's do that math: 
The world consumes 35,442,913,090 barrels of oil as of the year 2016, equivalent to 97,103,871 barrels per day.
Call it an even 100M per day (pre Covid).
8B barrels = 80 days of oil.   Sounds like a big number ... but it isn't.
Even when oil was priced over $100 per barrel --- very little new oil was being found:

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Ed 15 days ago
Fortunately shale (smashing up rock and sucking out the dregs) has helped to bolster the supply of oil however, all good things do end:

Jul 12, 2020 - Shale boss says US has passed peak oil. Parsley Energy CEO: 'I don't think I'll see 13m barrels a day again in my lifetime'.
It's amazing shale has lasted this long considering:  U.S. Shale Has Lost $300 Billion In 15 Years 
Fortunately, because of Covid, oil consumption has plummeted...  for example, with airlines barely flying we have reduced the global burn by close to 8%
The aviation industry represents 7.8% of final oil consumption worldwide, while maritime shipping accounts for 6.7%.Jun 20, 2019

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Ed 11 days ago
There is much attention given to the frequent oil gluts creating the perception that we are swimming in oil.
While there are large pools of oil remaining, particularly in Russia and Saudi Arabia, the reality is that we are burning 6 barrels for every barrel we find.  So we are pumping the remaining pools of oil down rather quickly given we burn nearly 100M barrels of oil per DAY.
What causes a glut of oil?
These gluts tend to occur when the price of oil is falling.   The producers have bills to pay so they need to pump more volume out of the ground to make up for the lower price of oil. 
Of course this creates a race to the bottom as the major suppliers battle to sell ever increasing volumes of oil  but fortunately they generally find common ground and agree to control the amounts of oil they bring to market otherwise the price of oil would be in single digits.
Essentially this does not mean their reserves have increased rather it means that they are pumping their reserves faster thereby depleting them more rapidly.
If you had one large tank of petrol remaining and you knew there was no chance of refilling it, would you go on long, high-speed joy rides?   Of would you use the remaining petrol for essential trips only?
The vast majority of air travel involves joy rides to holiday destinations.   And that has mostly stopped.  Business travel has been slashed as well with most meetings now being held using video conferencing software.   
An added benefit is that the skies are clearer and bluer.   

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