Thanks for the excellent article Robert. I’ve worked in the oil and gas industry since 1979. In my humble opinion, there has been and always will be cycles of increasing and decreasing prices. You might show a plot of prices since 1979 to illustrate that point. I’m not smart enough to attach it in substack. Keep up the good work. You are a voice of reason shouting into the wind of unreasonable and unscientific voices.
One of the most interesting aspects of this entire debate to us will be watching how the production declines predicted by Goehring and Rozencwajg, Martenson, Berman and others stand up over time against techno optimists like Doom and others with the opposing view.
If we were asked to bet, the depletion pessimists are right in the long run (75+ yrs) but the optimists are right for at least 25 years.
The next 10-15 years in the Permian and Marcellus and Bakken are gonna be really interesting. It will be fascinating then to replay recent podcasts and revisit recent articles and studies.
Thank you Robert - informative and entertaining - kept my attention all the way.
I confess I find some of the energy figures bandied about for AI a bit frightening, so I just hope it's worth it and we don't hit a paradox where we ask some fantastically clever AI system: "How can we best use AI to solve humanity's problems?", only to receive: "Stop trying to rely on AI to solve humanity's problems".
It looks like the AI data centers are not entirely staffed by children who still know everything. Otherwise, they'd all be using their definition of the cheapest form of electricity: Solar power. I think it was Dick Feynman who said "In any battle between platitudes and physics, physics always wins."
A short and probably inadequate search tends towards Doomberg as the originator of the quote, but here's Feynman: “There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”
I hadn't heard of Cathie Wood before reading your article. A quick google showed that she supports Tesla stock at $2600 within 5 years. How can that valuation be compatible with the impossibility that you previously wrote about, of EVs replacing ICE vehicles in the US market?
Your issue is with your imagination. I am no fan of Cathie Wood, but if your analysis of Tesla is that it is a "car company", you will never begin to be able to understand its valuation in the past, present, or especially future.
Well said, Swoopy Boi. Tesla is a "future proofing" company. That we know of right now, they are into EV's, AI, solar (especially the solar roof), batteries, and probably most interestingly, personal robotics. Tesla is an innovation company dedicated to making a profit while benefiting and advancing the interests of mankind, not necessarily in that order. Assuming the company is able to transition leadership (when appropriate) and keep it's core values, ethic and penchant for innovation, we should expect it to be a major disruptor and dominant player in several future industries that are either nascent or non-existent currently.
As a young reservoir engineer, I was frustrated when Exxon would not drill my projects. Why? The president said, "Oil prices will never be sustained over $20 per bbl nor gas above $1/mcf (1988 $). It turns out that Julian Simon was right... commodity prices will always go down in constant dollars.
Per Mr. Hill's comment about copper and commodities, it goes beyond production capacity. In the late 1980's a technological revolution allowed oxide coppers to be mined at huge profit and suddenly Peru and Chile competed against Arizona and Utah for copper supremacy. Never bet against human creativity.
Question, do we still mine for copper even though the ore grades have continuously declined? No thru advance in mining & refining process and recycling, copper is produce more and more each year. The same it true to most other commodities, in fact, their is not a single commodity that is known to have been exhausted. Certain country and locations my exhaust their resource but globally, nope. The issue at hand is the inability to account for technology and refining, all of which has improved so we keep find more and more. Think about this we flare or vent enough natural gas to replace all of our-U.S.A-coal fleet capacity of 200,568 megawatts (MW)-enough for 38,000 homes, someone check that for me. That's every year! Production slow down is excepted as the resource play continues to evolve, infrastructures get build, and regulatory efficiencies kick in.
It's a straw man to write "copper is produce more and more each year. The same it true to most other commodities [etc.] so we keep find more and more [etc.]" since you ignore 'externalities' such as wot I rote above and as explained further in the link! In other words you are incanting 'magic spells'.
We are causing economic havoc by not using more natural gas - electricity generation, space heating, cooking, fuel for transportation fleets. LNG can only carry the market so far.
If you want to be taken more seriously by the casual reader, type out "natural gas" instead of "natty". Just the same way that using "Cu" in writing to mean copper is too chatty and chummy.
At least that's my feeling. The thoughts you present are good ones, but sometimes they come across as something a used car salesman might say. You come across too strong and that robs you of some persuasive power.
Thanks for the excellent article Robert. I’ve worked in the oil and gas industry since 1979. In my humble opinion, there has been and always will be cycles of increasing and decreasing prices. You might show a plot of prices since 1979 to illustrate that point. I’m not smart enough to attach it in substack. Keep up the good work. You are a voice of reason shouting into the wind of unreasonable and unscientific voices.
The ultimate in “Greenwashing” Saudi Arabia signed a joint venture with Hyundai for EV technology to, meanwhile they use crude oil (which generates more CO2 than coal) to generate electricity. https://koreajoongangdaily.joins.com/news/2024-06-12/business/industry/Hyundai-Transys-seals-22-billion-EV-parts-deal-with-Saudi-Arabias-CEER/2066871. https://www.bloomberg.com/opinion/articles/2024-06-17/saudi-consumption-not-production-is-key-to-peak-oil. https://www.eia.gov/tools/faqs/faq.php?id=74&t=11. @doomberg
Great piece, Robert.
One of the most interesting aspects of this entire debate to us will be watching how the production declines predicted by Goehring and Rozencwajg, Martenson, Berman and others stand up over time against techno optimists like Doom and others with the opposing view.
If we were asked to bet, the depletion pessimists are right in the long run (75+ yrs) but the optimists are right for at least 25 years.
The next 10-15 years in the Permian and Marcellus and Bakken are gonna be really interesting. It will be fascinating then to replay recent podcasts and revisit recent articles and studies.
So your brother Wally is to you like a Mycroft is to Sherlock?!
Data centers are driving a huge increase in electricity usage.
Drill baby drill...
Thank you Robert - informative and entertaining - kept my attention all the way.
I confess I find some of the energy figures bandied about for AI a bit frightening, so I just hope it's worth it and we don't hit a paradox where we ask some fantastically clever AI system: "How can we best use AI to solve humanity's problems?", only to receive: "Stop trying to rely on AI to solve humanity's problems".
It looks like the AI data centers are not entirely staffed by children who still know everything. Otherwise, they'd all be using their definition of the cheapest form of electricity: Solar power. I think it was Dick Feynman who said "In any battle between platitudes and physics, physics always wins."
A short and probably inadequate search tends towards Doomberg as the originator of the quote, but here's Feynman: “There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.”
I hadn't heard of Cathie Wood before reading your article. A quick google showed that she supports Tesla stock at $2600 within 5 years. How can that valuation be compatible with the impossibility that you previously wrote about, of EVs replacing ICE vehicles in the US market?
Your issue is with your imagination. I am no fan of Cathie Wood, but if your analysis of Tesla is that it is a "car company", you will never begin to be able to understand its valuation in the past, present, or especially future.
So what exactly is Tesla, if not a car company?
They'd be punting on robots, subscriptions of FSD and megapack batteries. Second toy cars for the rich certainly won't hold up the growth.
Well said, Swoopy Boi. Tesla is a "future proofing" company. That we know of right now, they are into EV's, AI, solar (especially the solar roof), batteries, and probably most interestingly, personal robotics. Tesla is an innovation company dedicated to making a profit while benefiting and advancing the interests of mankind, not necessarily in that order. Assuming the company is able to transition leadership (when appropriate) and keep it's core values, ethic and penchant for innovation, we should expect it to be a major disruptor and dominant player in several future industries that are either nascent or non-existent currently.
Excellent article, and a perfect illustration of why “opinions make a market”…👍
As a young reservoir engineer, I was frustrated when Exxon would not drill my projects. Why? The president said, "Oil prices will never be sustained over $20 per bbl nor gas above $1/mcf (1988 $). It turns out that Julian Simon was right... commodity prices will always go down in constant dollars.
Per Mr. Hill's comment about copper and commodities, it goes beyond production capacity. In the late 1980's a technological revolution allowed oxide coppers to be mined at huge profit and suddenly Peru and Chile competed against Arizona and Utah for copper supremacy. Never bet against human creativity.
The president of Exxon told you that foreccast? Remarkable. It should be noted this has been approximately true.
Question, do we still mine for copper even though the ore grades have continuously declined? No thru advance in mining & refining process and recycling, copper is produce more and more each year. The same it true to most other commodities, in fact, their is not a single commodity that is known to have been exhausted. Certain country and locations my exhaust their resource but globally, nope. The issue at hand is the inability to account for technology and refining, all of which has improved so we keep find more and more. Think about this we flare or vent enough natural gas to replace all of our-U.S.A-coal fleet capacity of 200,568 megawatts (MW)-enough for 38,000 homes, someone check that for me. That's every year! Production slow down is excepted as the resource play continues to evolve, infrastructures get build, and regulatory efficiencies kick in.
Straw man. Arithmetic lower grades = exponential increases in energy and other resources inputs and more pollution.
https://thehonestsorcerer.medium.com/the-copper-conundrum-3b98704602c8
Your point?
It's a straw man to write "copper is produce more and more each year. The same it true to most other commodities [etc.] so we keep find more and more [etc.]" since you ignore 'externalities' such as wot I rote above and as explained further in the link! In other words you are incanting 'magic spells'.
As usual, very good article.
We are causing economic havoc by not using more natural gas - electricity generation, space heating, cooking, fuel for transportation fleets. LNG can only carry the market so far.
If you want to be taken more seriously by the casual reader, type out "natural gas" instead of "natty". Just the same way that using "Cu" in writing to mean copper is too chatty and chummy.
At least that's my feeling. The thoughts you present are good ones, but sometimes they come across as something a used car salesman might say. You come across too strong and that robs you of some persuasive power.
Robert, great article! Thanks for presenting both sides for bull and bear NG prices.