Category Archives: Oil producers

Oil Industry, Oil prices, Oil producers

Gravy Train Derails for Oil Workers Laid Off in Slump

Repost from Bloomberg News

Gravy Train Derails for Oil Workers Laid Off in Slump

By David Wethe, Jan 15, 2015
A Halliburton Co. worker walks through an Anadarko Petroleum Corp. hydraulic fracturing (fracking) site north of Dacono, Colorado. Halliburton said last month it was laying off 1,000 staff in the Eastern Hemisphere alone as it adapted to a shrinking business. | Photographer: Jamie Schwaberow/Bloomberg

The first thing oilfield geophysicist Emmanuel Osakwe noticed when he arrived back at work before 8 a.m. last month after a short vacation was all the darkened offices.

By that time of morning, the West Houston building of his oilfield services company was usually bustling with workers. A couple hours later, after a surprise call from Human Resources, Osakwe was adding to the emptiness: one of thousands of energy industry workers getting their pink slips as crude prices have plunged to less than $50 a barrel.

“For the oil and gas industry, it’s scary,” Osakwe said in an interview after he was laid off last month from a unit of Halliburton Co. (HAL), which he joined in September 2013. “I was blind to the ups and downs associated with the industry.”

It’s hard to blame him. The oil industry has been on a tear for most of the past decade, with just a brief timeout for the financial crisis. As of November, oil and gas companies employed 543,000 people across the U.S., a number that’s more than doubled from a decade ago, according to data kept by Rigzone, an employment company servicing the energy industry.

Oil Prices

Stunned by the sudden plunge in the price of oil, energy companies have increasingly resorted to layoffs to cut costs since Christmas, shocking a new generation of workers, like Osakwe, unfamiliar with the industry’s historic boom and bust cycles.

Workers who entered the holiday season confident they had secure employment in one of the country’s safest havens now find themselves in shrinking workplaces with dimming prospects.

Short-lived Salvation

Sean Gross, 35, was over the moon when he secured a job in March last year at Schlumberger Ltd. (SLB), the world’s largest oilfield service company. He’d been laid off from a technology company and saw the oil business as his salvation.

“I was happy. My life was starting to take shape. Life was really, really, really, really good,” he said.

Oil prices started drifting down after hitting a high of $107 a barrel on June 20, but were still at $91 at the end of September. In the next few weeks the market buckled, falling to $80 by the end of October, to $66 by the end of November, and to $53 at the end of the year.

After hitting an intraday low of $44.20 on Jan. 13, oil traded higher today, rising to $49.62 at 9:15 a.m.

By December, Gross said talk was spreading through his Houston office about people losing their jobs “left and right.” Old-timers were suddenly retiring. Yet Gross still thought he’d be okay working in information technology far from the oilfield.

Not Again

As a newcomer to the energy industry, he didn’t realize how crashing oil prices would ripple through the company. He’d made it through another unsettling day and was in the parking lot, buckling on his motorcycle helmet for the ride home, when he looked up to see his boss running after him. “Hey Sean, I need to talk to you in my office.”

“Oh God, here I go again,” Gross recalled thinking as his boss delivered the news that he was getting laid off.

There’s no firm number yet on how many oil industry workers are losing their jobs, or how many more cuts might be coming. Halliburton said last month it was laying off 1,000 staff in the Eastern Hemisphere alone as it adapted to a shrinking business. Suncor Energy Inc., a Canadian oil company, said this week it will cut 1,000 jobs in 2015, a day after Royal Dutch Shell Plc (RDSA) said it would cut 300 in the region. Other companies have announced layoffs, but many are making the cuts without public fanfare.

The effects are being felt beyond the oil companies as cutbacks trickle down to suppliers and other companies that thrived along with $100 oil. The biggest drilling states — Texas, North Dakota, Louisiana, Oklahoma, Colorado — are expected to feel the most pain. The Dallas Federal Reserve bank estimates 140,000 jobs directly and indirectly tied to energy will be lost in Texas in 2015 because of low oil prices.

More Coming

Halliburton said it will continue to make adjustments to its workforce “based on current business conditions,” according to an e-mailed statement from Emily Mir, a spokeswoman. “While these reductions are difficult, we believe they are necessary to work through this challenging market,” she wrote.

Joao Felix, a spokesman for Schlumberger, declined to comment on the company’s layoff plans.

The job-hunting website Indeed.com has filled up with thousands of newly posted resumes from oil industry workers over the past six weeks. Among them is Scott Brewer, another industry transplant who had been working for big-box retailer Home Depot Inc. (HD) before jumping into the Texas oilfield four years ago with plans to bulk up his savings.

Burning Money

Brewer felt sure the boom times would churn along for at least another decade. “It was just consistently getting better,” he said.

His confidence was boosted by watching all the money the oil companies threw around. “They’d spend $20,000 like you and I spend $10 at McDonald’s,” he said, recalling catered meals at the drilling site featuring catfish, shrimp and lobster. “It was insane.”

The downturn hit everyone by surprise, said Brewer, who worked on wells mostly in South Texas for a small, private drilling technology company called Leam Drilling Systems LLC. After sitting at home a month waiting to be called to his next job, Brewer got a phone call at the end of December telling him he was no longer needed.

Jean Chapin, director of human resources, declined to say how many jobs Leam has had to cut.

‘Right Sizing’

“We are constantly in the process of trying to right-size our company,” Chapin said in a phone interview. “We do anticipate a continued downturn in domestic drilling activity.”

Like many in the industry, the oil business runs in the family for Svetlana Mazitova, 39, compounding her anxiety. A third-generation oil veteran, her Russian roots and two masters degrees in science and business helped her secure a job in June with a Houston-area company selling drilling equipment around the world.

Her husband, a native Texan, works for a company that sells the material drilling companies use to prop open the cracks in rock that allow oil and gas to flow. Her son is planning to start college in August to study engineering.

Mazitova’s company was hit first by U.S. and European economic sanctions against Russia, related to the nation’s conflict with Ukraine. The sanctions eliminated an important market, and when oil prices fell, the company had to lay off workers, including Mazitova. Now she’s worried for her husband’s job, too, and wondering how they’ll put her son through school if both are out of work.

Shrinking Future

“It’s terrifying,” said Mazitova. “I’m upset. I don’t know what to do for a future.”

For 31-year-old Australian engineer Adam Beaton, the oil crash has dashed hopes of returning to work in the U.S., where he lost his non-energy job — and his work visa — during the 2009 recession.

Beaton has been working back at home in Australia helping develop huge offshore oil and natural gas projects, hoping to transfer to the U.S. when his current project ended. Instead, he was laid off, with no prospects for getting more work.

“When the oil price goes down, everything happens quickly,” Beaton said.

As industry analysts and consultants increasingly predict that low oil prices could linger for years, laid off workers face a workplace where their chances of getting rehired by an energy company are remote. Many don’t plan to even try.

“I’m pretty much decided I’m not gonna do this oil thing again,” Brewer said.

New Reality

Osakwe is thinking of going back to school to broaden his physics training with an eye toward looking for “something that’s hard to do without.”

Scott Richardson, 47, of Longview, Texas, is still trying to get an energy job back. It’s what he knows best after 10 years in the oilfield, spending 300 days a year on the road bouncing from drilling site to drilling site. He drives a $120,000 Jaguar XFR-S, bought with the bounty of his well-paying job as a supervisor of an oilfield equipment operator.

That decade of prosperity made Richardson so complacent that he hadn’t been paying attention to the price of oil in early December when he quit his job in frustration over equipment problems.

“I honestly didn’t give it any thought,” he said. “The oilfield’s been good to me for 10 years.” When he cooled off and asked for his job back, his boss told him the position had been eliminated. Now he’s pounding the pavement looking for anything he can get, resigned to making a third of his old salary just to sign on somewhere.

“That car payment still comes around,” said Richardson, who now checks oil prices more than four times a day.

Crude By Rail, Oil prices, Oil producers, Rail industry

ABC News: Low Oil Prices Unlikely to Hurt Railroads Much

Repost from ABC News
[Editor: Significant quote: “…even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.”  – RS]

Low Oil Prices Unlikely to Hurt Railroads Much

By Josh Funk, AP Business News, Jan 5, 2015

The stunning collapse in oil prices over the past several months won’t derail the railroads’ profit engine even if it does slow the tremendous growth in crude shipments seen in recent years.

Carloads of crude oil spiked well over 4000 percent between 2008 and last year — from 9,500 carloads to 435,560 — as production boomed and the cost for a barrel of oil soared into the triple digits.

Those prices have tumbled severely, to just above $50 per barrel Friday, and that has rattled some of the investors who have plowed money into companies like Union Pacific, Norfolk Southern and CSX.

All three of those companies have seen their stock prices slip over the past month, along with major U.S. stock markets.

But even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.

Crude oil shipments remain less than 2 percent of all the carloads major U.S. railroads deliver. Sub-$60 oil might force producers to rein in spending but railroads ? which spend hundreds of million of dollars every quarter on fuel? will see their costs fall away.

Those falling energy prices have also proven to be the equivalent of a massive tax cut for both consumers and businesses, and railroads stand to benefit from that as well.

Fueled by a rebounding employment as well as rising consumer and business confidence, U.S. economic growth reached a sizzling 5 percent annual rate last quarter, the government reported this month. The rebounding economy is likely to drive even greater demand for shipping.

Edward Jones analyst Logan Purk says the importance of crude oil shipments by rail seems to have been inflated by investors.

“It seems like whatever loss in business they see will be offset by the drop in fuel costs,” Purk said.

The crude oil business has provided a nice boost for railroads at a time when coal shipments were declining. Profits at the major U.S. railroads have been improving steadily along with the economy, reaching $13.4 billion in 2013, up from $11.9 billion in 2012 and $10.9 billion in 2011.

Officials from Union Pacific Corp, Norfolk Southern Corp., CSX Corp. and Canadian Pacific all tried to reassure investors about crude oil shipments during their latest investment conferences.

“I don’t think that we are going to see any knee-jerk reaction. I don’t think we are going to see anything stopped in the Bakken,” said Canadian Pacific CEO Hunter Harrison said of the massive oil and gas fields that stretch from North Dakota and Montana into Canada.

The Bakken region is one of the places where railroads are hauling the majority of the oil because pipeline capacity hasn’t been able to keep up with production.

Through the fall, North Dakota oil drillers remained on pace to set a sixth consecutive annual record for crude oil production.

Justin Kringstad, director of the North Dakota Pipeline Authority, said the lower prices will prompt oil companies to look for ways to reduce costs, but he’s not yet sure how much of an effect it will have on production in the region.

“It’s still a little early to make any firm assessments,” Kringstad said.

Bakken Crude, Oil conditioning, Oil industry subsidies, Oil prices, Oil producers, Radioactive waste, State regulation, Volatile gases

Bakken outlook: Oil industry faces hurdles in 2015

Repost from The Dickenson Press, Dickenson, ND

Bakken outlook: Oil industry faces hurdles in 2015

By Mike Nowatzki, Dec 26, 2014
Brothers Dusty, left, and K.C. Sutton of Nine Energy Service prepare to install a blow out preventer on a new well on July 7 south of Stanley that has been fracked and needs to be cleaned out before it produces oil. FNS Photo by Michael Vosburg

BISMARCK — With oil prices slipping to their lowest point in more than five years, new state regulations slated to take effect and lawmakers proposing major investments in oil country, 2015 is shaping up to be a critical year for the oil and gas industry in North Dakota.

Here’s a look at some of the top issues.

New rules resonate

Rules adopted by the North Dakota Industrial Commission in 2014 will continue to resonate in 2015.

Gas capture goals adopted in July will require operators to reduce the percentage of natural gas flared from oil wells to 23 percent by Jan. 1 and to 15 percent by 2016.

Statewide, operators already met the first goal of 26 percent by Oct. 1, beating it by 4 percentage points.

But eight individual operators didn’t meet the gas capture goal, and several postponed completion work on wells to achieve the goal, Department of Mineral Resources Director Lynn Helms said.

North Dakota Petroleum Council President Ron Ness said substantial amounts of gas are being “held hostage” in negotiations over pipeline easements. He estimated well over one-third of the flared gas is the result of three or four easement hang-ups on private, tribal and federal lands.

“Those few bottlenecks are holding up a substantial amount of connections,” he said.

Oil conditioning required

Starting April 1, oil conditioning rules adopted by the Industrial Commission this month will require operators to use equipment to separate butane, propane and other volatile gases from crude oil, and to run the equipment within certain temperatures and pressures to lower the oil’s vapor pressure to 13.7 pounds per square inch.

State officials say the rules will improve the safety of crude-by-rail shipments. Critics contend they’ll do little to prevent the kind of explosive train derailments that spurred their creation.

Ness said the Petroleum Council was amenable to safety standards based on science but “we adamantly objected to the micromanagement” maintained in the final order. Some companies will have to make substantial investments in well-site equipment and testing required by the rules, he said, noting one operator believes their cost could range from $10 million to $20 million.

Requiring the equipment to be installed during the winter months so it’s ready by April 1 also was “a significant misstep,” he said.

“Operators are already in the process of figuring out what they need to do on each of their facilities to come into compliance, but I think we’re pretty frustrated with the process,” he said.

Price uncertainty high

Continued lower oil prices will make some drilling activity less profitable in emerging and mature oil plays, but prices are expected to remain high enough in 2015 to support new drilling in the major shale areas in North Dakota and Texas, the U.S. Energy Information Administration said in its short-term energy outlook Dec. 9.

The outlook forecasts average spot prices of $68 per barrel for Brent crude and $63 per barrel for West Texas Intermediate crude in 2015, with lower prices early in the year, the EIA said, citing “high uncertainty” in the price outlook.

Helms is optimistic prices will recover, calling the recent decline “a blip.”

Ness said the industry doesn’t see it that way, noting most analysts are predicting the price slump could last eight to 16 months or even one to two years as U.S. supply stays strong, global demand remains weak and OPEC continues to challenge U.S. production.

“We don’t know what the new normal for oil prices is going to be,” he said. “We’re in an energy war.”

North Dakota light sweet crude oil has dropped below $40 a barrel.

And while some barrels are hedged, “by and large, we’re probably taking $60 less a barrel than we were six months ago,” Ness said.

As a result, companies will deploy less capital and idle drilling rigs or move them from fringe areas to higher-producing areas, he said.

If low prices continue into February and March, “We’re going to see substantial reduction in exploration activity,” he said.

Helms said falling oil prices, oil conditioning and flaring reduction were factors in North Dakota’s drilling rig count dropping by 10 to 183 as of Dec. 12. He expects a 40- to 50-rig reduction by mid-2015 because of soft oil prices.

Oil tax reform?

Efforts to change North Dakota’s oil tax structure failed during the 2013 legislative session, and it remains to be seen whether similar proposals will surface when the Legislature convenes Jan. 6.

Sen. Dwight Cook, R-Mandan, chairman of the Senate Finance and Taxation Committee, introduced a bill last session that would have ended a series of 10 tax incentives designed to help draw oil companies to the state and keep them viable, while lowering the oil extraction tax from 6.5 percent to 4.5 percent for wells built after 2017. The bill failed in the House, as did an oil tax reform bill sponsored by Rep. Roscoe Streyle, R-Minot.

“I will not be introducing any similar legislation this session, and I haven’t heard of anybody else who has,” Cook said Tuesday. “But I guess I wouldn’t be surprised to see something.”

Trying to get rid of incentives – including reductions and exemptions to the extraction tax that take effect when the price of crude drops below a “trigger price” for five consecutive months – could be a tough sell with oil prices as low as they are, Cook said.

“You need to do that when there are high prices,” he said.

Ness said the Petroleum Council doesn’t plan to push any oil tax reform legislation.

“We fully expect that we’re going to sit back and utilize those incentives if they come,” he said.

Legislative proposals

Elected leaders have unveiled big spending proposals to address infrastructure, housing and other needs in oil-impacted areas of western North Dakota.

Chief among them is Gov. Jack Dalrymple’s budget recommendation to increase the share of oil production tax revenue being sent back to oil producing counties from 25 percent to 60 percent for the 2015-17 biennium, while lowering the state’s share from 75 percent to 40 percent. Senate Majority Leader Rich Wardner, R-Dickinson, is spearheading a similar proposal.

The adjusted formula would generate $1.7 billion for the counties and their political subdivisions, or $1 billion more than what the region is expected to receive this biennium, Dalrymple has said.

The governor also wants lawmakers to fast-track $873 million in “jump-start” funding so the state’s oil and gas region can get a head start on construction projects next spring. He’s also recommending $119 million in Energy Impact Grant funds.

Radioactive waste

Several illegal dumping incidents reported in 2014 focused attention on proper disposal of filter socks and other radioactive oilfield waste.

The North Dakota Department of Health has proposed rules that would increase the limit of radioactivity from 5 picocuries per gram to 50, allowing companies to dump the waste at special oilfield waste landfills and industrial waste landfills instead of having to haul it out of state. Companies also would be required to keep manifests to track the waste.

A public comment period is open until Jan. 31, and the approval process is expected to take several months. The Legislature’s Administrative Rules Committee must approve the rules.

“That’s going to get a lot of discussion,” Cook said.

 

Oil Industry, Oil prices, Oil producers

Richard Heinberg report: The Oil Price Crash of 2014

Repost from RichardHeinberg.com

The Oil Price Crash of 2014

Museletter 271, December 23, 2014

Oil prices have fallen by half since late June. This is a significant development for the oil industry and for the global economy, though no one knows exactly how either the industry or the economy will respond in the long run. Since it’s almost the end of the year, perhaps this is a good time to stop and ask: (1) Why is this happening? (2) Who wins and who loses over the short term?, and (3) What will be the impacts on oil production in 2015?

1. Why is this happening?

Euan Mearns does a good job of explaining the oil price crash here. Briefly, demand for oil is softening (notably in China, Japan, and Europe) because economic growth is faltering. Meanwhile, the US is importing less petroleum because domestic supplies are increasing—almost entirely due to the frantic pace of drilling in “tight” oil fields in North Dakota and Texas, using hydrofracturing and horizontal drilling technologies—while demand has leveled off.

Usually when there is a mismatch between supply and demand in the global crude market, it is up to Saudi Arabia—the world’s top exporter—to ramp production up or down in order to stabilize prices. But this time the Saudis have refused to cut back on production and have instead unilaterally cut prices to customers in Asia, evidently because the Arabian royals want prices low. There is speculation that the Saudis wish to punish Russia and Iran for their involvement in Syria and Iraq. Low prices have the added benefit (to Riyadh) of shaking at least some high-cost tight oil, deepwater, and tar sands producers in North America out of the market, thus enhancing Saudi market share.

The media frame this situation as an oil “glut,” but it’s important to recall the bigger picture: world production of conventional oil (excluding natural gas liquids, tar sands, deepwater, and tight oil) stopped growing in 2005, and has actually declined a bit since then. Nearly all supply growth has come from more costly (and more environmentally ruinous) resources such as tight oil and tar sands. Consequently, oil prices have been very high during this period (with the exception of the deepest, darkest months of the Great Recession). Even at their current depressed level of $55 to $60, petroleum prices are still above the International Energy Agency’s high-price scenario for this period contained in forecasts issued a decade ago.

Part of the reason has to do with the fact that costs of exploration and production within the industry have risen dramatically (early this year Steve Kopits of the energy market analytic firm Douglas-Westwood estimated that costs were rising at nearly 11 percent annually).

In short, during this past decade the oil industry has entered a new regime of steeper production costs, slower supply growth, declining resource quality, and higher prices. That all-important context is largely absent from most news stories about the price plunge, but without it recent events are unintelligible. If the current oil market can be characterized as being in a state of  “glut,” that simply means that at this moment, and at this price, there are more willing sellers than buyers; it shouldn’t be taken as a fundamental or long-term indication of resource abundance.

2. Who wins and loses, short-term?

Gail Tverberg does a great job of teasing apart the likely consequences of the oil price slump here. For the US, there will be some tangible benefits from falling gasoline prices: motorists now have more money in their pockets to spend on Christmas gifts. However, there are also perils to the price plunge, and the longer prices remain low, the higher the risk. For the past five years, tight oil and shale gas have been significant drivers of growth in the American economy, adding $300 to 400 billion annually to GDP. States with active shale plays have seen a significant increase of jobs while the rest of the nation has merely sputtered along.

The shale boom seems to have resulted from a combination of high petroleum prices and easy financing: with the Fed keeping interest rates near zero, scores of small oil and gas companies were able to take on enormous amounts of debt so as to pay for the purchase of drilling leases, the rental of rigs, and the expensive process of fracking. This was a tenuous business even in good times, with many companies subsisting on re-sale of leases and creative financing, while failing to show a clear profit on sales of product. Now, if prices remain low, most of these companies will cut back on drilling and some will disappear altogether.

The price rout is hitting Russia quicker and harder than perhaps any other nation. That country is (in most months) the world’s biggest producer, and oil and gas provide its main sources of income. As a result of the price crash and US-imposed economic sanctions, the ruble has cratered. Over the short term, Russia’s oil and gas companies are somewhat cushioned from impact: they earn high-value US dollars from sales of their products while paying their expenses in rubles that have lost roughly half their value (compared to the dollar) in the past five months. But for the average Russian and for the national government, these are tough times.

There is at least a possibility that the oil price crash has important geopolitical significance. The US and Russia are engaged in what can only be called low-level warfare over Ukraine: Moscow resents what it sees as efforts to wrest that country from its orbit and to surround Russia with NATO bases; Washington, meanwhile, would like to alienate Europe from Russia, thereby heading off long-term economic integration across Eurasia (which, if it were to transpire, would undermine America’s “sole superpower” status; see discussion here); Washington also sees Russia’s annexation of Crimea as violating international accords. Some argue that the oil price rout resulted from Washington talking Saudi Arabia into flooding the market so as to hammer Russia’s economy, thereby neutralizing Moscow’s resistance to NATO encirclement (albeit at the price of short-term losses for the US tight oil industry). Russia has recently cemented closer energy and economic ties with China, perhaps partly in response; in view of this latter development, the Saudis’ decision to sell oil to China at a discount could be explained as yet another attempt by Washington (via its OPEC proxy) to avert Eurasian economic integration.

Other oil exporting nations with a high-price break-even point—notably Venezuela and Iran, also on Washington’s enemies list—are likewise experiencing the price crash as economic catastrophe. But the pain is widely spread: Nigeria has had to redraw its government budget for next year, and North Sea oil production is nearing a point of collapse.

Events are unfolding very quickly, and economic and geopolitical pressures are building. Historically, circumstances like these have sometimes led to major open conflicts, though all-out war between the US and Russia remains unthinkable due to the nuclear deterrents that both nations possess.

If there are indeed elements of US-led geopolitical intrigue at work here (and admittedly this is largely speculation), they carry a serious risk of economic blowback: the oil price plunge appears to be bursting the bubble in high-yield, energy-related junk bonds that, along with rising oil production, helped fuel the American economic “recovery,” and it could result not just in layoffs throughout the energy industry but a contagion of fear in the banking sector. Thus the ultimate consequences of the price crash could include a global financial panic (John Michael Greer makes that case persuasively and, as always, quite entertainingly), though it is too soon to consider this as anything more than a possibility.

3. What will be the impacts for oil production?

There’s actually some good news for the oil industry in all of this: costs of production will almost certainly decline during the next few months. Companies will cut expenses wherever they can (watch out, middle-level managers!). As drilling rigs are idled, rental costs for rigs will fall. Since the price of oil is an ingredient in the price of just about everything else, cheaper oil will reduce the costs of logistics and oil transport by rail and tanker. Producers will defer investments. Companies will focus only on the most productive, lowest-cost drilling locations, and this will again lower averaged industry costs. In short order, the industry will be advertising itself to investors as newly lean and mean. But the main underlying reason production costs were rising during the past decade—declining resource quality as older conventional oil reservoirs dry up—hasn’t gone away. And those most productive, lowest-cost drilling locations (also known as “sweet spots”) are limited in size and number.

The industry is putting on a brave face, and for good reason. Companies in the shale patch need to look profitable in order to keep the value of their bonds from evaporating. Major oil companies largely stayed clear of involvement in the tight oil boom; nevertheless, low prices will force them to cut back on upstream investment as well. Drilling will not cease; it will merely contract (the number of new US oil and gas well permits issued in November fell by 40 percent from the previous month). Many companies have no choice but to continue pursuing projects to which they are already financially committed, so we won’t see substantial production declines for several months. Production from Canada’s tar sands will probably continue at its current pace, but will not expand since new projects will require an oil price at or higher than the current level in order to break even.

As analysis by David Hughes of Post Carbon Institute shows, even without the price crash production in the Bakken and Eagle Ford plays would have been expected to peak and begin a sharp decline within the next two or three years. The price crash can only hasten that inevitable inflection point.

How much and how fast will world oil production fall? Euan Mearns offers three scenarios; in the most likely of these (in his opinion) world production capacity will contract by about two million barrels per day over the next two years as a result of the price collapse.

We may be witnessing one of history’s little ironies: the historic commencement of an inevitable, overall, persistent decline of world liquid fuels production may be ushered in not by skyrocketing oil prices such as we saw in the 1970s or in 2008, but by a price crash that at least some pundits are spinning as the death of “peak oil.” Meanwhile, the economic and geopolitical perils of the unfolding oil price rout make expectations of business-as-usual for 2015 ring rather hollow.