The cost to extract shale oil is roughly $40/ barrel. Oil sands are similarly expensive to extract. If oil were to stay at a low enough price for a prolonged period, shale oil and tar sands operations would cease production entirely, limiting supply and increasing the prices.
At $40 per barrel, oil is not economical to produce electricity, but remains viable as a vehicle fuel.
It's almost entirely reversed. As more and more vehicles become electric (and less expensive to operate), demand for oil declines.
Also, oil and electricity aren't so much directly in competition with each other while the EV market remains small. Natural gas, yes, but that was already cheap.
Natural gas and oil prices [2] are not tightly coupled [3].
[1] https://economicdashboard.alberta.ca/NaturalGasPrice [2] https://www.macrotrends.net/1369/crude-oil-price-history-cha... [3] https://en.wikipedia.org/wiki/Natural_gas_prices#/media/File...
Only very strict regulations could decouple the prices of oil and renewables.
Thus if renewables were selling into the open market the price for their electricity would indeed be determined by the fossil fuel plants. Yet the vast majority of renewables being installed world wide are doing so under more favorable deals.
Coal is rapidly falling out of the mix [2] [3] [4], and natural gas is complimenting renewables due to its firm dispatchability and throttling speed (evening duck curves). As soon as the price of natural gas spikes, battery storage becomes incredibly attractive financially (its already attractive enough to replace the most expensive single cycle gas peakers).
Electricity when the sun is shinning and the wind is blowing will be incredibly cheap (1-2 cents/kWh), and you’ll end up paying a premium (6-8x multiplier) if you need power when renewables aren’t generating (and your power comes from natural gas or batteries). Market forces working as intended.
Google shifts compute to when and where is the most environmentally friendly based on renewables generation [5], powered in part by Tomorrow/electricitymap.org [6] [7]. Expect to see more large electrical consumers take similar actions in the future, further increasing the rate of renewable deployment. You’ll also see electric vehicles charging when renewables are producing, using market price signaling.
[1] https://www.lazard.com/perspective/lcoe2019
[2] https://www.npr.org/sections/coronavirus-live-updates/2020/0...
[3] https://abcnews.go.com/International/wireStory/austria-shuts...
[4] https://www.independent.co.uk/environment/climate-change-coa...
[5] https://blog.google/inside-google/infrastructure/data-center...
[7] https://www.electricitymap.org/?wind=false&solar=false&page=...
Fun fact: On sunny days, California alone generates more electricity (10GW/hr) from solar than Australia generates from coal across the entire country. There’s a lot of sunlight hitting the Earth each day.
However, I also wouldn't be surprised if we went the other direction as well. The expanse of possibility is so wide that it invokes some anxiety. I have no predictive capability in this environment, which terrifies me.
We're getting pretty close to the point where it's going to be cheaper to run a car on electricity than it is on gasoline or diesel and once this thing tips over it is game over for Alberta. Elon's Semi is coming. The electric cars are coming. Fracking is going to outcompete the oilsands in Alberta. The sooner Alberta can retool to something else the better. I'm not one of those anti-pipeline Canadians, I think they still have a place and they're better for the environment than railcars, but we need to get serious about the timeline here. Both for global warming and for Alberta's economy.
It's doubly frustrating for Alberta, which has a high baseline cost of production and bills itself business friendly and talks a lot about "energy". Imagine for a sec that they used a small part of the Heritage Fund (say $1 Billion) and a set of business-friendly regulations to set up an X-Prize type competition for advanced nuclear? How much private investment could they attract? But it's not gonna happen, all their talk of "business" and "energy" just means oil, oil, oil.
Tar Sands is one of the most expensive and damaging ways to produce oil, yet Alberta is still clinging on and propping up the industry, even a decade after the Middle East players, with much more abundant resources and cheaper production, started to diversify.
A sensible plan is to shift energy production to renewables and save oil to make plastic later. Maybe develop oil sands technology at a slow pace
i've loved watching OPEC twist in the wind over the years because fracking put a price ceiling on a barrel of oil below which the OPEC needed for survival. I never guessed the price would fall completely through the floor and kill everyone though.
In my adult life I've seen the terrorist attacks of 9/11/2001, the financial crisis in 2008-2009, and now this. I've also seen the rise of the Internet, wireless communications, and SpaceX (yes i'm a fanboi). The world is a crazy place.
1) widespread adoption of nuclear power
2) significant battery improvements
Most oil is currently used for transportation. Demand for transportation of people could be affected long-term.
Quoting myself here:
"There might be some semi-permanent change in people's behaviors if the epidemic continues for many months. Many people will form a habit of doing more things at home/online: more takeouts, more online shopping, live/recorded video classes, virtual meetings, telehealth, etc. Better online services will also spring up to support the habits/practices.
Since online activities often save time, the new habits could become a new equilibrium: people/companies who adopt them will often have an economic advantage, influencing others to do the same. Thus, oil demand could be significantly diminished long-term as well."
For example the City of Vancouver the other night quietly banned using natural gas for heating and hot water in new developments under 3 stories. They'd already done so buildings taller than that.
This will lower GHG emissions from buildings by 86% by making them 'zero emission' and as well this sort of thing, if adopted widely, will lower demand and prices for natural gas.
Dream on. In Alberta, sweet dreams are made of oil.
The Atlantic provinces are still waiting for the fish to come back.
The fish won't come back to the Atlantic, not soon. Big oil won't come back to Alberta, not soon.
Small plug for https://enviro.work (project I built that aggregates environmentally positive job opportunities)
1) The oil industry has been a source of high-paying jobs here since at least the 60s; and
2) Royalties from oil are a significant portion of provincial govt revenues.
It's also interesting to note that Canada at large makes up about 8% of all oil exports in the world, and almost all of that would come from Alberta:
https://www.nrcan.gc.ca/science-data/data-analysis/energy-da...
Pipelines are a cheaper method of transport that rail and trucking.
Just to be of some use here are some:
The overall oil market was just at or shy of 100 million barrels per day prior to covid19. As of early April we were down into the high 60-something million barrels per day. Roughly a full one third collapse in demand.
US oil production reached a low of about 5Mbpd in 2010, and rose to last month (march) being 13Mbpd. That is overwhelmingly the fracking you hear about, specifically in the permian basin. As of last week that was already down 1Mbpd.
The top 3 oil producers in the world are the US, Saudi Arabia, and Russia. SA and RU have been floating in the 9 - 11Mbpd range for the last few years, and just a few weeks prior to covid had decided to increase their production by ~2 - 3Mbpd each.
So its very simple napkin math from there. Oil sands are effectively over until we have some kind of substantial long term recovery. At least half of fracking wells in the US are being shut off right now.
If this covid crisis drags on for 2 - 3 years globally, and if the shift to wfh/tele-whatever gets advanced quicker than otherwise, and the airline industry doesn't return to its old levels for years and years... then there's every reason to think that oil sands are simply done and (most US) fracking wells will run out their existing investments and also be done.
Lower demand for renewables means... Higher prices? Less output of actual renewable products like solar panels? Less demand for new wind turbines?
Little has changed in the big picture that would not have changed anyways. Shale plays are not cash cows; shale wells have short production span, but are expensive and risky to develop.
Renewables are increasingly the real economic option; they make sense regardless of factors like politics and beliefs.
Also older. Those companies are not equal, though, the ones with the best geologists can still make ok profits with a bit of luck.
> ... price reduction could cause a wave of deeper financial problems
Of course, and shale oil hasn't been a money maker in general below $40-120, depending on geology. I guess most of it makes money at $60. Some wells might be profitable even slightly below $40.
Then again, cash flow is king. Very low prices aside, like right now, at a certain point it makes more sense to produce oil below profitability just to keep the cash flowing.
Might as well light that money on fire to keep warm. Retraining is such a ridiculous and naive idea, especially when you’re talking about turning an oil roughneck into a developer. That’s about as dumb as suggesting that displaced truckers can just learn to code. It’s like whoever came up with that never thought to ask a single person affected if it would be viable.
A lot of the oil field workers hold degrees that required calculus, they should be able to transfer to entry level jobs in other knowledge-based careers quite well. Better for our economy than forcing them to be Uber drivers and bartenders. What's your suggestion for what society should do with oil workers?
I'd imagine many roughnecks would transition just fine to hands-on labor jobs like solar panel installation, wind turbine maintenance, and communication tower work. Possibly quite a few roles in datacenters as well. Several of my friends climbed towers and my cousin runs a tower modification company - the habits/skills/necessary tendencies transfer fairly well. Obviously a good degree of re-training is necessary and the workers need to understand and accept that they'll be down-leveled when they enter a new industry.
Not displace them in the first place by cutting off the supply of conflict oil, raising tariffs so the domestic labor can get paid a fair wage instead of all the profits going to billionaires and hedge funds?
I like to read these words. The oil industry and the government of Alberta, Canada freak out when people say "tar sands" and insist on calling it "oil sands". They think "oil sands" sounds less dirty than "tar sands".
But the truth is that the stuff is really tar (oil, sulfur and sand). That's how all local people called it up until the early 2010's. Once you remove the sand it does look dirty, a dark sticky goo. They're just trying to put make up on a pig.
- Jobs are being cut in the oil industry
- Unemployed workers are looking for other jobs in energy
It's sort of broadly gesturing at the idea that this is a sign of renewables overtaking fossil fuels—something most of us would love, obviously—but it's not really a part of the article's core.
There’s also a mint to be made decommissioning oil rigs. Lot of oil going to be washing up on EU shores as Britain sinks.
