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Shell Warns, Oil Price Recovery To Take 5 Years
Submitted by Andy Tully via OilPrice.com,
Ben van Beurden, the CEO of Royal Dutch Shell, and one of his senior executives envision low oil prices for some time unless energy producers cut production and the demand for fuel doesn’t rebound.
In a wide-ranging interview with Oil & Gas Technology published July 14, van Beurden spoke of competing benefits of the low price of oil for fuel demand, and its liabilities for those who produce it.
“Low prices have big implications for exporting countries like Iran, Russia and Venezuela,” he said.
“But also for shale-producers in the U.S., and even the domestic budgets of producers in the Gulf states. In consuming nations, low oil prices are an economic boon stimulating growth and demand.”
For the near term, van Beurden pointed to one key forecast that this year will see more worldwide demand than in 2014. “Compared to last year, the International Monetary Fund expects the global economy to grow [in 2015],” he said. “So global oil demand is expected to grow as well.”
But he stressed that many oil producers also are reluctant to explore and drill for oil because of smaller profit margins. Therefore, he said, “Supply … may even decline.” As for Shell itself, though, he said, “We’re determined to avoid a start-stop approach to investment.”
As for the global market, Van Beurden said that at best, “a rapid recovery could occur if projects are postponed or even canceled. This would lead to less new supply – not so much now, but in two or three years. Combined with economic growth, the market could tighten quickly in this scenario.”
But he pointed to one major snag in that view: U.S. shale oil. A boom in North American production over the past few years helped to create the glut that led to the steep decline in oil prices that began a year ago. OPEC, under the leadership of Saudi Arabia, decided to fight shale producers with a price war, hoping that keeping prices low would make shale extraction, already costly, unprofitable.
But if shale producers cut costs and take other steps to keep producing, van Beurden said, “With moderate economic growth, prices could stay low for longer.”
Van Beurden qualified his outlook by stressing that “I can’t predict the future,” but his director of oil and gas production outside America gave a more specific view of Shell’s expectations in a separate interview with Reuters, published July 16.
Andy Brown, a top Shell official, said the Anglo-Dutch oil giant forecasts no quick rebound in the average global price of oil, but only a gradual recovery lasting five years. He attributed this sluggishness to a slowdown in China’s economy, leading a drop in demand for fuel, and the continuing oversupply of oil.
The price of oil has fallen from more than $100 per barrel in June 2014 to under $60 today, and Brown said the company has believed for months that it will take until 2020 for the price to rise to a mere $90 per barrel.
In fact, he said, that was a key driver for Shell to offer of $70 billion to buy rival BG Group more than three months ago. This not only supports van Beurden’s insistence that low oil prices won’t cause Shell to trim investments, but also expands Shell’s capabilities in deepwater oil production and gives it immediate entree to markets for liquid natural gas (LNG).
“It will take several years [for oil prices to recover fully], but we do believe fundamentals will return,” Brown said. “Until such time, we, like other companies, will have to make sure we stay robust.”
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5 is the magic number.
Pulled from someone's ass.
Close the Suez or the Straight of Hormuz and see how fast oil prices recover.
The cheapest gas I can find is $2.41.... "Recover" to what, $10.00 a gallon?
Great point Shell is trying to move the goal post just like the US Administration does.
To convince you to expect to get screwed.
I still say Crude Supply has been high since the Recession and 2008 Collapse. Refining may have taken a while, but it was growing the whole time Crude supply was growing.
I'm sure this prediction is as good as Shell's from 5 years ago, where they projected $50/barrel crude..
Gasoline in Southern California is $4.15/gal.
I prefer the term "rectal database".
Let me interpret this for everyone -"It will be five years before we figure out how to raise oil prices so that we can further gouge customers who are already under great stress."
Rather - "We are going to charge the shit out of you at the pump, no matter what. Because record profits need to be record-er. We are too big to be bothered by industrial demand slumps. Also, if you thought investing in an oil price ETF was a clever idea, well, hahahahaha."
what does "gouge" mean?
sounds to me like, "waah! waah! i want cheap oil!"
it's their product, they can charge what they want for it.
if you don't like the price they're asking, don't buy it.
?1) Is this the same Shell CEO that announced they wouldn't continue the Alaska venture, as they would be going for "more proven returns" aprox 2 yr ago?
?2) Does anybody really believe that our Fascist, shill Gov officials will NOT start/continue woars in order to bring about a "recovery" in oil prices/supply?
You can't blame the Shell guy, he was waiting for McKinsey to tell him what he thinks
Not "blaming" anybody. (Besides, I love the downtics, they prove that we don't all think alike, which is a good thing)
But I still believe, no matter who our new POTUS is, that we can expect new/continued woar, to "help the recovery".
Sure as hell doesn't mean I like it, just means I expect it...
Why five years and not eight or four?
"Five" is where his BS dart landed.
When people pull guesstimates out their ass they tend to go for nice round figures its a human trait. Half a decade is their best shot in the dark. Personally I reckon it will be contiguous with a real interest rate rise, and half a decade sounds about right.
Now there's a famous consultant weasel word-"robust". Must have used the children from McKinsey to put this together
Measuring anything in US dollars is a lost cause anyways.. Shell CEOs should know that
- Slimy
Here's the run down, commodities have been priced too low to counter inflation caused by the central banks. Only way Oil goes back up at this point is because it runs out and that's pretending that the fiat being printed hand over fist is going to still be around in five years...let alone Europe or the USA. Because the way this is planned isn't where it's going to end up. Shell and the rest of them might as well just give up. Pronostications on the future economy, presidents, prime ministers or federal/central anything past 2015 are going to be a crap shoot at best.
To see that just stop, and observe (grab some popcorn if you want). This will happen, because that's the only possible outcome of with how it is built. Doubly so for the oil industry because they've let themselves be used as the hedge in abritage so often, price action (like PM's) is broken permanently.
Robust is corporate speak euphemism for manipulation.
High price = "Recovery"
Keep beating that theme into people's heads, as if the NAR wasn't bad enough here come the oil 'experts'.
When Shell spoke about being robust...it meant that profits would be squeezed and one way to keep stock prices high...let's do some "robust" corporate stock buybacks...
But I thought low prices were going to lead us to the consumer promised land?
Yeah, no shit! We all remember the grocery prices skyrocketed as fuel prices were ramped up, anybody seen a fuckin price drop to match the falling fuel prices?
Sorry, uh, a LOW price is recovery in my book.
But, but, but, but....PEAK OIL!!!!! Aaaaaaaahhhhhhhhhh!!!!!!
Oil isn't a fossil fuel.
Second to water in abundance.
Water is the new oil.
if oil is so abundant, why are oil companies going after lower and lower producing sources, as well as more expensive and dirty and risky ones, like deepwater horizon, like fracking, like tar sands?
there might be trillions of barrels of oil, but the real question is how cost effective is it to get at that oil?
all the easily extracted oil is gone. now we are left with the dirty, dangerous, and expensive oil to get at.
An excellent time for more consolidation in the oil business.
Maybe China will buy Houston?
It matters not. Even if oil plunges sub 40- the retailing cartel will still be charging us 3 bucks a gallon for this shit. Remember when there was actually some price competition among retailers? I do.
Big oil and retailers simply price fix their product today- while the FEDS and the state hang more gas taxes on us. Here in Idaho they just snuck another 7 cents a gallon in on us.
Four states so far. Strike while the iron is hot you parasites. http://www.transportationinvestment.org/2015/04/22/idaho-governor-approv...
They will control supply by closing refineries.
It's how Rockefeller made his fortune.
Buy your competition, then shut them dowm.
Keep prices high.
Closing refineries results in a glut of oil and lower oil prices
You really think some gas station owner on the corner is controlling the price of gasoline? Those prices are fixed by Wall Street traders and the big refiners.
In years we will be Greece.
Greeks need weapons now.
Send a Greek a gun.
My theory is that Russia will "help" the Greeks.
Send "aid" now.
With amo.
"It will take several years [for oil prices to recover fully], but we do believe fundamentals will return,"
I thought high supply and low demand was fundamental.
Confused...
Wash your trunk.
It has shit all over it.
Superpower Status needs war.
War eventually needs Petro Dollar, Low Interest Rates, Low Gasoline Prices and/or Cheaper Weapons... or wars closer to home... like Home Grown Terror/Civil War/Mass unrest/Local Enemies.
So say 5-6 more years of War??!!
And say 5% Annual Increases in Federal Spending over the next 5-6 years!!
We already have our Military-Finance-Communications-Intelligence-Prison-Security Conglomeration Relationships all picked out, Zaibatsu/Kirestu (Probably is 25%-30% of US Economy paid through Federal Dollars)
New on the Horizon would appear to be substitutes for Military personnel through awesome robots, Drones & Computers... this reduces the need for conscripts/slaves/draft of cheapest labor available.
- yeah, war is much more affordable if it is a Regional or World War if you have Cheap Crude Prices.
The German Army crunched the numbers and came up with a prediction that worldwide oil production would reach permanent decline somewhere between 2015 and 2020. This was an internal study that was leaked by Der Spiegel. Shell knows this. Their prediction of resurging prices is to calm the herd going forward into the collapse. As long as the return to growth fantasy can be perpetuated, the relative calm remains and the lights stay on. When hope is lost, then it is every man for himself and Gotterdammerung is upon us.
http://www.spiegel.de/international/germany/peak-oil-and-the-german-gove...
How many geologists and petro-engineers does the German Army employ?
They have been predicting peak oil since the 1920's.
Actually, you fucking dumbass, fundementals in oil have returned. You must be referring to the other fundementals, the lies and manipulation that get it priced too high.
OPEC, under the leadership of Saudi Arabia, decided to fight shale producers with a price war, hoping that keeping prices low would make shale extraction, already costly, unprofitable.....
An oil price war with the world reserve currency nation?? No no no... What we are witnessing is a war on the Earth, the Environment, paid for by us the citizens of the world, - Even if the cost of a gallon of gas goes to $0.50c it is our responsibility to still use the smallest amount possible of this commodity.
Check out what this guy did in Greece:
https://www.youtube.com/watch?v=S42PR75MXjc
I don't know of many people or businesses that purposefully waste money on energy.
Seems to me crude prices are becoming normal. However, the pump tells another story.
By historical standards, $50 per barrel of WTI is high. It's about $30-35.
From 2003-2008, oil went from 30 to 150. From 2009 to 2014 oil went from 30 to 110. A total of 10 years - that's all.
Most other times in history, oil has been around 30 or less.
But since that fucking Fed thing keeps bidding contracts and selling off deliveries to some unknown entities we have fraud-flation - and yellen doesn't need to make a profit, only create a perception that inflation actually exists.
Somehow they fooled people into believing that $100 oil is normal and $50 oil is too low. The price of oil adjusted for inflation the past 100 years has been in the $40 to $50 range
if you're aware of the fed and their fraud-flation, then you're aware that the dollar is constantly dropping in value over time (lost 98% of its purchasing power since the fed's creation in 1913), and therefore you should be aware that oil priced in dollars should be increasing over time.
that being the case, how can you possibly talk about "historical standards"?
the historical standard is for the price of oil to go up over time, and the value of the dollar to fall over time.
The oil price is what the manipulators determine it to be and nothing else. See July 2008 and July 2014.
Oil is abiotic and we will never run out of oil.
Oil is cold pressed dinosaurs and they aren't making any more dinosaurs.
Global malaise = global oil glut
If Plasma Gasification and associated syngas production really take off as they should, crude value should continue to collapse to realistic prices.
If all the annual waste in Britain went through Plasma Gasification, just the ultra clean diesel from the syngas unit would be about 4 times what America uses a year. In addition there would be gasoline, jet fuel, and fuel gas.
Shouldn't we have multiple tiers of gas pricing for the underprivelged former slaves to get a discount. Get to work Barry
Drowning in oil and NG for the next 5 or even 10 years would be great but don't count on it. The shale boom would have never occurred if not for the era of the ponzi scheme. The debt load of all of the shale companies are carrying on a front loaded investment would've been the first red flag. High production costs and decline rates oh my!
If one ignores the propaganda and looks at our overall energy situation we are entering mile 20 of Shit Creek. Loss of demand and pent up supply will help some but energy shocks are coming down the road regardless (see Alaska SPR, Monterey Shale and well.... all of it).
If you look beyond the shale flash in the pan ponzi the maturity of America's petroleum fields is alarming. We do have plenty of coal but the central planners are fixing that by shuttering at least 15% by this year alone. Nuke plants are becoming a pariah and the western water crisis will decrease hydro. Alternative sources are not a viable replacement at this point.
If one looks at the geopolitical situation from this perspective it becomes no mystery why the goons have targeted Iraq, Iran, Russia and Venezuela. See chart http://www.resilience.org/stories/2014-03-26/world-crude-production-2013-without-shale-oil-is-back-to-2005-levels
The shocks will start with NG. If you are dependent on gas it may be a good idea to diversify in every way that you can while prices are cheap. Estimates are all over the place for when this will occur, this time frame could be decreased by exportation bills or staved off by Mad Max 2.0, certainly it wont be the 100 years that has been touted by the industry shills.
However long we have, rest assured there are forces determined to burn off excess NG (and oil) as soon as possible. This is why NG has been labeled "clean" by the central planners. Currently there are equipment conversions, shipping conversions, flaring and possibly export bills.... you get the idea.
Oh man, I wish they would hurry up. I can't wait to pay more for gas.
Geopolitical objectives of regime change in the oil producing countries of Russia, Iran, Venezuela, and now Iraq once again, are destroying the world's petroleum based economies in the attempt to preserve a rapidly collapsing Western empire. It has long been known that uncontrolled oil production not only reduces price, but also reduces reserves which then leads to much higher prices. The US is now reprising the Bush strategy in the 1980's that destroyed the Soviet Union by depriving it of currency reserves earned through it's oil exports only now the additional targets are Iran and Venezuela. All that needed to be done is to order the US puppet states of Saudi Arabia, Kuwait, and the UAE to maximize their production and down goes the price to wherever they want to take it. The problem with this strategy today is that Saudi and the Gulf states, by pumping full bore, reduced their reserves by 90% in the decade of the 80's and this second oil war will most certainly leave these countries destitute before it is over. It is a pretty stupid strategy anyway because China, as the largest oil consumer, is just recycling much of the reduced price into Russia, Iran, and Venezuela in exchange for future production.
There is no doubt that this geopolitical strategy will collapse US domestic oil, especially shale, because the nature of these wells and how they are financed require maximum production that is unsustainable. The vast majority of shale wells have a one year depletion rate of 75% and must be produced full out to cover their financing. Now with a 60% decline in shale drilling activity and the 75% depletion rate of existing wells, then the great shale boom is over without vastly higher prices to get it started again.
As the late Matt Simmons told us that 90% of Saudi production was out of their giant Ghawar field and that field was depleted down to producing 90% water ten years ago, they are just about done and when it happens prices will go through the roof. No wonder after this revelation Matt was found drowned in his hot tub.
"“It will take several years [for oil prices to recover fully], but we do believe fundamentals will return,” Brown said. “Until such time, we, like other companies, will have to make sure we stay robust.”"
Recover? You mean where we're paying four or five dollars a gallon for gas? Yes, they will "recover", but not from moves in oil itself. It will come with more inflation from the central banks.
+100. and how about the statement:“It will take several years [for oil prices to recover fully], but we do believe fundamentals will return,”. wtf? Isn't fundamentals that are driving the oil price/supply glut presently? What other fundementals might he be talking about?
This kind of talk is what any value investor like myself loves to hear. The pros did not see oil dropping 50% and they won't see the rally, either. Chevron is down 35% and yields a safe 4.6%. Helmrich and Payne is down 55% and yields 4.5%. Chesepeak Energy is down 65% trades below book value. If more people pile on that we have "years until the price turns"... I plan to start buying.
So how does Queen Beatrix (or her heir) explain things when the pump price gets to the real market level of $1.00 or less, after Iran and Russian oil reenter the market? Someone needs to learn to restructure their profit model. Perhaps fire some top excecs?