Two Old Ladies Wearing Girdles

Cheap oil - it is the death of mankind

Almost every day I hear that oil prices go up due to speculators, and how Once the price of oil falls, the world economy begins to grow again.
Unfortunately it is not. Oil prices rise due to objective reasons.
Let them we consider.

1964-th peak of the explored oil fields

As we have seen in the 1960s were discovered deposits containing nearly 60 billion tons of oil. Since oil are less and less.
finds themselves becoming less and less ...
Extracting oil from new fields becomes harder and harder ...
quality oil in the new fields is becoming worse and worse ...
In practice, you can see proof of principle "first rip best, most mellow and low-hanging apple.

2005 is the peak of oil production in the world

2010go In November, the IEA has recognized that the world has reached peak oil production 2006m. Why then did I write 2005y - because to IEA statistics, a lot of claims, and many authoritative experts, in 2000 talked about the 2005m and 2005m talked about 2005m, so that them more confidence. And the IEA in early 2010go contended that the peak will be reached in the 2035m and after 9 months it was found that the peak will not be in 25 years, and has already been passed five years ago.
Why am I writing about this? Because the world's oil a huge amount of misinformation, and even such authoritative experts as Khazin and Konoplyanik (former deputy) seriously disoriented (drNeuerbauer thanks for the link).

Kashagan - a financial model

Kashagan one of the last found the world's major oil fields. Let's take a look at his example of how much oil should cost.
Baseline.

1. Found in 1997.
2. contains 5.8 billion barrels of oil
3. would begin to give crude oil in 2011, postponed to 2014-2015.
4. Maximum output 1.5 million barrels daily
5. decommissioning in 2040.
6. development costs for 2008 - 138 billion dollars.

Here I sketched a rough draft - a financial model Kashagan.

1. to repay debts to banks in the 2021m it is necessary that the consortium received $ 88 from each barrel of oil produced at Kashagan.
2. These $ 88 need to add taxes, bribes, risks, and many other expenses.
3. Companies that develop the Kashagan intend to make a profit. I remind you that BP has invested in Russia 5 billion pounds, and in 2010 received back 50 billion pounds. Profit consortium in the draft is not considered.

Thus, for Payback need a high, very high price of oil.

Scripts

Let's see how is it possible events will unfold.

1. If the oil price exceeds $ 150-200, the world's oil will be produced, the consortium will invest profits in new projects, but to be profitable, the price of oil should grow continuously.
2. If the price of oil falls, Kashagan, and other projects will be stopped. Mankind will face face dangerous situations - in front of a few years more or less stable life (not yet run out of existing fields giants ), after This comes a terrible ending.

ROI and EROI

Looking at the draft model of Kashagan, it becomes clear that the consortium is interested to obtain as much as possible as much oil as possible in a short time - ahead of instability and need to get the money invested as soon as possible and quickly pay off your debts. Members of the consortium are interested in maximizing ROI.

If you look at the model of the Kashagan field in terms of maximum EROI - this ratio grows with the amount of recoverable oil from the field. Number of recoverable oil is falling, when out of the field as soon as possible try to extract the maximum possible.

Thus, the talk about speculators, low oil prices, nervous about politicians, oil companies, bankers (who invested hundreds of billions of dollars in the oil fields), and force them to maximize ROI. This in turn will lead to deterioration of the already bleak situation of energy in the world. For a brief moment of humanity can get what you want, but it will have to pay for the possible existence of humanity itself.