Despite the list price of crude oil averaging around $35 barrel, much oil is selling for far less in the world. Some Mexican crude is going at less than $28 a barrel, an 11-year low. Iraq is offering its Basra Heavy crude to some Asian buyers at $25 and in Western Canada some oil is going for $22. The well-head price of Bakken shale oil in the US state of North Dakota oil was at $27 a barrel last week.

It is becoming clear that there will be a major shake-out in the oil and gas industry in 2016.  With crude prices now in the mid-$30s, hedging with futures contracts no longer profitable, and the opportunities for cost-cutting and other efficiencies running thin, many oil production and service companies will be closing their doors in the coming year. In short, crude oil production is going to have to decline a lot more before supply and demand comes back into balance. Many oil production companies were not profitable even when oil was above $100 a barrel and survived by heavy borrowing at low interest rates. Some analysts are now saying that it will take two years to eliminate the excess crude stockpiles after supply and demand are brought back into balance.

Russia’s chief finance official said that his country must prepare for $30 a barrel crude oil which will wreck havoc with the country’s already weakened economy.

India’s Petroleum Minister said his country’s energy demand will more than double by 2040 as the economy will grow over five times its current size. Between now and that time India’s economy is expected to grow faster than any other country in the world. 260 million new passenger vehicles are projected over this period and the demand for oil will rise by 6 million barrels per day. Liquid petroleum gas (LPG) will replace firewood as the primary cooking fuel.

Algeria’s state oil producer Sonatrach Group plans to increase crude oil output by 5% next year and offer energy-exploration rights to foreign companies by the end of March. These steps are likely to add more barrels of oil to an already oversupplied global market.

Tullow Oil has found about 2.3 billion barrels of crude oil in East Africa, with discoveries in Kenya and Uganda. The oil remains undeveloped as the London-based company and its partners debate the route of an export pipeline amid the low price of crude oil on world markets.

Nigeria’s government said it would begin a gradual withdrawal of its fuel subsidy next year, for purchasers of liquid fuels, due to its high budget deficits.

The future of Canada’s vast oil sands are now in question. With world oil prices below $40 a barrel, oil-sands growth has already ground to a halt. Hopes of a return to the boom years are fading amid looming limits on CO2 emissions and the uncertainty of future fossil fuel demand.

The US Geological Survey says the Barnett shale, located in the state of Texas, has twice as much shale gas and oil as initially forecast back in 2003. The new estimate for undiscovered, technically recoverable resources is 53 trillion cubic feet of shale natural gas and 172 million barrels of shale oil. The substantial increase in potential resources is largely due to the oil and gas industry’s switch to horizontal drilling and hydraulic fracking.

In Japan, the restart of nuclear reactors, growing renewable sources of energy, and a slow economy are expected to push down the country’s liquefied natural gas (LNG) consumption by 2020 by as much as 10.5% from 2014 levels.

Seattle-Tacoma International Airport in the US state of Washington has started a long-term plan for aviation biofuel to power all flights. It is the first US airport to adopt this renewable energy source as the basis for all future aviation.

The legal marijuana market in the US is using a lot of electricity. Growing facilities require high-wattage lights and powerful cooling systems. In 2012 a study by the Lawrence Berkeley National Laboratory found that legal indoor marijuana growing facilities accounted for 1% of US electricity use at a cost of roughly $6 billion per year. This compared to just $1 billion in energy costs for the pharmaceutical industry. Some of the larger growing facilities can use up to $1 million in electric power every month.

 

 

with h/t Tom Whipple

 

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