*The End of Oil in Near *That is the exact title of the feature article in the latest Sierra Club magazine. Well, since I’m an oilman and a Sierra Club member, I couldn’t wait to read how the oil industry, which I have worked in for nearly 50 years, was going to go kaput. I won’t go into details of how the writer of the article came up with that eye-grabbing title, but let me just say this. The article is long, sleep inducing.....and just plain wrong. The writer is wrong for several reasons, and the first and foremost is the energy replacement for oil is just not here yet. Even the most optimistic scenarios for the use of the alternative energy still has oil and natural gas as the primary worldwide energy source for the next 30 years. The “End of Oil is not Near!” But while we’re on the subject, let’s view the outlook for the oil and gas industry, the price of oil, and what will you pay for gasoline three years from now? The writer of the article correctly points out that the world’s oil and gas industry is going through tough times, and let me add to that. Oil industry analysts are predicting 150 additional oil and gas companies will go bankrupt within the next 12 months. Of course, that sure sounds as if it’s curtains for the industry. But it’s not, and this is why. The pandemic has reduced the overall demand for oil by between 17% and 20%. That simply means instead of 90 million barrels of oil a day the world only needs a little over 70 million barrels a day. A few months back when the worldwide oil consumption was 90 million barrels a day, and the pandemic hit, the demand for oil dropped like a rock, and there was immediately a huge surplus of oil on the market. That actually drove the price of oil down to below $0, and that whopping drop in the price of oil immediately caused the layoff of over 100,000 oil related workers and the scaling back of countless billions of new oil and gas drilling |investments. The oil boom of the American shale oil horizontal wells was over for the time being, and as rigs were stacked and drilling was reduced, worldwide oil production began to drop. It continues to drop. OPEC, by reducing production, has brought the price of oil back up to above $35/bbl, but most shale oil production needs for oil to sell for at least $50 per barrel, or they will lose money. That’s why the job losses and production decline will continue, and a company, which depends on cash flow from new shale oil wells that aren’t going to be drilled, won’t be able to pay their bank notes, and they will declare bankruptcy. Many of the shale oil wells have a first year decline of over 40%, so in order for a company to keep their production levels up, and pay their bankers, they must drill. So while the price of oil is well below breakeven, they are not going to drill, and the wells they have are going to steadily decline. The pandemic, by reducing the demand for oil, has already removed millions of barrels of oil from the market, and because thousands of these shale oil wells are approaching being uneconomical, they will be shut in and never produce again, and millions of barrels more will leave the market. With the current near-term outlook and price of oil, small companies that were active shale oil drillers, won’t be back to drill and the banks who financed them won’t return for another round. The shale plays will return some day, but not until another boom roars through the oil patch. Another boom? Yes, and that’s not my wild dream. It is from Christyan Malek, of JPMorgan Chase who is head of Europe, Middle East and African Oil and Gas research. He said the oil market could be on the cusp of a “supercycle” that sends Brent crude skyrocketing to as high as $190 a barrel in 2025. The rational for higher oil prices says, as a virus vaccine stops the pandemic, the world will quickly ramp up travel etc, and the demand for oil will return to pre-pandemic levels. No one knows how quickly, but it will probably will take most of 2021 to return to pre-pandemic levels. However, the pent up demand to travel for business or pleasure may swell the world market need for oil back up to even higher that 90 million barrels of oil a day by the end of 2022, and that will cause a rush to add oil production to the current 70 million bbls that will be on the market. However, all of that extra 15 to 20 million barrels of oil won’t be readily available, and when demand outstrips supply, the price of oil will rise. The price of oil for the past 40 years or so has been a roller coaster that roared up to nearly $130 per bbl, and down to below $10/bbl. It seems to me that because the supply of oil will be definitively impacted by the crippling pandemic blow, restoring the level of production to keep the oil market in balance will be difficult. It will take years for oil companies to bring their exploration budgets back up to pre-pandemic levels, and years more to discover and bring more oil to the market. The huge 80 mile long Saudi field, Ghawar, the lynchpin of Saudi oil production, has been producing since the 1950s and industry experts believe it can only make up a portion of the needed oil production. Yes, the pandemic gave us a wounded oil industry as it did the travel industry, but the difference is, while the travel industry can recover quickly, the oil industry is just the opposite. It will take years to recover, because banks aren’t going to be standing in line to get burned again after the shale fiascos, and most of the former small shale players are long gone. But that’s not all. Every oil exploration company in the world cut their budget drastically when the pandemic hit, and that means a corresponding reduction in new oil coming on line. That, when combined with the normal yearly decline of existing wells, means there will be less worldwide capacity to make up the demand. In a few short years, we would need over 20 million barrels more of oil a day, when compared to today’s worldwide production, and by late 2021 and even more. Even with the Saudis and Russians cranking up production, it would be hard to reach that level, and OPEC would be in control again. A few years back a Saudi Oil Minister said “I think a hundred dollars a barrel is a fair price for oil.” Would an undersupplied oil market drive the price of oil to a price of $190/bbl, which in turn would drive the price of gasoline to an unheard of $8 to $10 a gallon? Maybe. You Smackover independents with those 5 bbls of oil a day wells hang in there.

 

*That is the exact title of the feature article in the latest Sierra Club magazine. Well, since I’m an oilman and a Sierra Club member, I couldn’t wait to read how the oil industry, which I have worked in for nearly 50 years, was going to go kaput. I won’t go into details of how the writer of the article came up with that eye-grabbing title, but let me just say this. The article is long, sleep inducing.....and just plain wrong.

            The writer is wrong for several reasons, and the first and foremost is the energy replacement for oil is just not here yet. Even the most optimistic scenarios for the use of the alternative energy still has oil and natural gas as the primary worldwide energy source for the next 30 years. The “End of Oil is not Near!”

But while we’re on the subject, let’s view the outlook for the oil and gas industry, the price of oil, and what will you pay for gasoline three years from now? The writer of the article correctly points out that the world’s oil and gas industry is going through tough times, and let me add to that. Oil industry analysts are predicting 150 additional oil and gas companies will go bankrupt within the next 12 months. Of course, that sure sounds as if it’s curtains for the industry. But it’s not, and this is why. The pandemic has reduced the overall demand for oil by between 17% and 20%. That simply means instead of 90 million barrels of oil a day the world only needs a little over 70 million barrels a day.

A few months back when the worldwide oil consumption was 90 million barrels a day, and the pandemic hit, the demand for oil dropped like a rock, and there was immediately a huge surplus of oil on the market. That actually drove the price of oil down to below $0, and that whopping drop in the price of oil immediately caused the layoff of over 100,000 oil related workers and the scaling back of countless billions of new oil and gas drilling |investments. The oil boom of the American shale oil horizontal wells was over for the time being, and as rigs were stacked and drilling was reduced, worldwide oil production began to drop. It continues to drop.

OPEC, by reducing production, has brought the price of oil back up to above $35/bbl, but most shale oil production needs for oil to sell for at least $50 per barrel, or they will lose money. That’s why the job losses and production decline will continue, and a company, which depends on cash flow from new shale oil wells that aren’t going to be drilled, won’t be able to pay their bank notes, and they will declare bankruptcy. Many of the shale oil wells have a first year decline of over 40%, so in order for a company to keep their production levels up, and pay their bankers, they must drill. So while the price of oil is well below breakeven, they are not going to drill, and the wells they have are going to steadily decline. The pandemic, by reducing the demand for oil, has already removed millions of barrels of oil from the market, and because thousands of these shale oil wells are approaching being uneconomical, they will be shut in and never produce again, and millions of barrels more will leave the market.

            With the current near-term outlook and price of oil, small companies that were active shale oil drillers, won’t be back to drill and the banks who financed them won’t return for another round.  The shale plays will return some day, but not until another boom roars through the oil patch. Another boom? Yes, and that’s not my wild dream. It is from Christyan Malek, of JPMorgan Chase who is head of Europe, Middle East and African Oil and Gas research. He said the oil market could be on the cusp of a “supercycle” that sends Brent crude skyrocketing to as high as $190 a barrel in 2025.

The rational for higher oil prices says, as a virus vaccine stops the pandemic, the world will quickly ramp up travel etc, and the demand for oil will return to pre-pandemic levels. No one knows how quickly, but it will probably will take most of 2021 to return to pre-pandemic levels. However, the pent up demand to travel for business or pleasure may swell the world market need for oil back up to even higher that 90 million barrels of oil a day by the end of 2022, and that will cause a rush to add oil production to the current 70 million bbls that will be on the market. However, all of that extra 15 to 20 million barrels of oil won’t be readily available, and when demand outstrips supply, the price of oil will rise. The price of oil for the past 40 years or so has been a roller coaster that roared up to nearly $130 per bbl, and down to below $10/bbl. It seems to me that because the supply of oil will be definitively impacted by the crippling pandemic blow, restoring the level of production to keep the oil market in balance will be difficult. It will take years for oil companies to bring their exploration budgets back up to pre-pandemic levels, and years more to discover and bring more oil to the market. The huge 80 mile long Saudi field, Ghawar, the lynchpin of Saudi oil production, has been producing since the 1950s and industry experts believe it can only make up a portion of the needed oil production.

            Yes, the pandemic gave us a wounded oil industry as it did the travel industry, but the difference is, while the travel industry can recover quickly, the oil industry is just the opposite. It will take years to recover, because banks aren’t going to be standing in line to get burned again after the shale fiascos, and most of the former small shale players are long gone. But that’s not all. Every oil exploration company in the world cut their budget drastically when the pandemic hit, and that means a corresponding reduction in new oil coming on line. That, when combined with the normal yearly decline of existing wells, means there will be less worldwide capacity to make up the demand. In a few short years, we would need over 20 million barrels more of oil a day, when compared to today’s worldwide production, and by late 2021 and even more. Even with the Saudis and Russians cranking up production, it would be hard to reach that level, and OPEC would be in control again. A few years back a Saudi Oil Minister said “I think a hundred dollars a barrel is a fair price for oil.”

Would an undersupplied oil market drive the price of oil to a price of $190/bbl, which in turn would drive the price of gasoline to an unheard of $8 to $10 a gallon?

            Maybe.

You Smackover independents with those 5 bbls of oil a day wells hang in there.

 

Picking up Kids and Losing Power I have two items I want to write about. Getting kids to school and back and underground utilities, and from what I have observed, both items need our attention. First, getting kids back and forth from school. I have noticed in this pandemic, it has become a nightmare. Lines to drop off kids and pick them up stretch around the block, and if you have been in one of those lines, I feel sorry for you. This pandemic has caused simple things to become very difficult, and all of a sudden just getting a kid back and forth from school is a real headache. There should be a better way, and there is. First, let’s look back...way back to when I was in grade school. I lived a little less than a mile from school, and you couldn’t ride the bus unless you lived over a mile from school. Yes, we had a car, but I was never driven to school or picked up from school, and at age eight, I just walked. Now let’s fast forward to our today’s endless lines to drop off or pick up kids. Surely we can come up with a better way to get kids to school and back. Of course, safety is a primary concern, but with extra police patrols in our school neighborhoods, and organizations such as Parent’s Patrol, hundreds of kids can walk to school, or ride a bike to school, or carpool or meet in an off school parking lot to drop off or pick up kids. The problem is not that difficult to solve, and it would save thousands of moms and a few dads hundreds of hours a month. Or why don’t we do what some colleges are doing, which is to encourage electric scooters. It seems, in El Dorado, that teens and preteens are renting them as an entertainment item to buzz around downtown. However, that’s just the tip of the iceberg when it comes to their uses. The University of Arkansas has seen the number of scooters on campus mushroom, and these aren’t joy riders who rent one for an hour or so. These students own their electric scooters, and they ride them because they get to class quicker and parking is easy. Traffic around the campus is terrible, and there is never enough parking for +20,000 students. Scooters, ebikes, and regular bikes have seen a huge percentage increase in sales over the past year. Our cities, states, and the rest of us need to realize it’s not 1965 and get with the programs. Last year, before the pandemic hit, we were on vacation in New York City and watched as tie-wearing businessmen zipped by, weaving through traffic on scooters—-why? Because scooters are a better way to get from one place to another when there is heavy traffic and no place to park. Or you can get your kid a motorized skateboard or just let them use a regular one. My granddaughter and her boyfriend commuted to work when they lived in San Francisco, on a skateboard for two. To say we’re a bit behind the curve is an understatement. No, I don’t think we’re going to see a swarm of El Dorado students zip by on motorized skateboards, but we sure have the ability to get kids to school without lining up in a string of cars a half mile long. I wouldn’t sit in a car and line up thirty minutes ahead of when school lets out, because there’s a better way, and if it meant putting my kid on a scooter so be it, and if my kids had to walk a few or maybe 10 blocks, I would put good walking shoes on them and shoo them out the door, and if I had safety concerns, I would walk with them. A couple of miles a day walk will do you a world of good. When the new El Dorado High School was under construction, I met with the Superintendent of Schools and asked that sidewalks be built to link the school to the residential areas nearby. I was told no. What should have happened was a six foot wide sidewalk from the school to a monitored traffic walkway on Hillsboro Street, then let the city continue up Timberlane with a new sidewalk to Main Street. Every city should connect schools, shopping and recreation areas, with sidewalks and trails. El Dorado’s trail plan has already been done. Fifteen years ago Dr. Glasser and team from the U of A worked a year on a city plan, and the result was breathtaking. A detailed plan for the city, and part of it was to create a network of trails that would be wonderful today, but we didn’t construct one foot of trails. What if your child could just walk down a sidewalk that connected to a trail and walk on to school. Well, considering the snail’s pace of city governments it may be a while before we see a lot of either trails or linking sidewalks. But it doesn’t have to be fifty years from now. Tell your mayor to form a committee to recommend a series of new linking sidewalks and trails that would connect every school in the city. If you want an example check, the sidewalks and trails that are already active in Seattle. Today, 30% of Seattle downtown workers walk, bike, or use scooters. El Dorado, as late as the 50s, had sidewalk crews who added sidewalks from downtown into the various neighborhood, and if you live where these old sidewalks are still present, your kids can walk at least part of the way to schools. Most cities stopped putting in sidewalks in the early 60s, and in residential areas, they stopped repairing them. Today progressive cities are building sidewalks and trails. Are we doomed to always be 25 years behind the curve? Sidewalks and trails to shopping areas and schools should be a priority in every town in the state. & And now to the other gripe I have, and it is a simple one. Its past time to ignore the need to put electrical utilities underground, and it can be done without breaking the bank. Of course, downtown El Dorado never has a power outage, and we didn’t have one when Laura came whistling by. Why? We have underground utilities! Arkansas needs, just for starters, a mandate for underground utilities in all new construction, and a statewide plan to gradually, over the next 25 years, to add a percentage of the state with underground utilities each year. In every town and city in the state there are thousands of electrical lines hanging from poles, and the odds of a thunderstorm taking one of them out or an ice storm or just old age guarantees some Arkansawyers will be without power when it rains or storms or ices. Yes, it can be done, if we have elective officials who have enough backbone to demand it. Kids getting kids to school easily, and houses not losing power every time a thunderstorm roars though the state, is not too much to ask.

Fantasy Hog Football

 

          Fantasy Hog Football

My columns have been way too serious lately, so going to pick some Hog football wins and losses. It’s SEC Fantasy Football with a Hog look, and while I’m at it, I have a few pointers to give our cheerleaders, bands, and mascots.

Let’s start with the overall schedule, and according to most of the pundits, it’s the toughest schedule ever in the history of football, and if the Hogs played in the NFL it would be a step down. Well. I’m not bothered a bit with the omission of the “Little Sisters of Mercy” schools being dropped. Course, I’m not coaching or playing, but heck, if you knock off one of them it’s a “so what?” and God forbid, if they whip up on the Hogs, its coach changing time.

The season starts September 26 with Georgia, the team with ugliest mascot in the SEC, a fat, squatty dog named Uga. Being the ugliest is hard to do ‘cause you have to be uglier than a hog. Georgia will probably be suiting up walk-ons, but since Hog Coach P. knows all the Georgia secrets, and the overconfident Georgia team has already written up a win, the Hogs will surprise the Dogs, and will win in a squeaker 14 to 10. And Asa will designate September 26 as a state holiday.

Well, the Hogs won’t be underdogs when they head for cowbell country, which is Mississippi State. Yes, ringing those cowbells can get on your nerves, and I would imagine the sale of hearing aids in Mississippi is pretty lucrative. However, the Hogs will still be celebrating the big Georgia victory, and won’t be at the top of their game. It’s going to be a close game, but another dog team in the SEC will pull it out and Mississippi[RM1]  State will take a 20 to 17 win. Say Mississippi State folks: four dog teams are three to many in the SEC. Get another mascot. How about the Cows---you know like cowbells?

In game three the Hogs are on the road to Auburn, and old what’s his name, the Arkansas turncoat coach, will be lying in wait, and it won’t be good day for Hogs. They’ll come back to Fayetteville with two hams missing, and a 14 to 3 loss. But there is light at the end of the tunnel, and it ain’t a freight train, it’s Ole Miss. The Rebels will roll into Fayetteville, and the U of A band won’t be playing Dixie. Actually, I think the band should work up a “Nobody Knows the Trouble I’ve Seen” as a theme song. Well, while I’m talking about the band, I recommend a new 2020 look. Maybe Snoop Dogg could design something, and get rid of those hats. I see a red baseball cap with “Make the Hogs Great Again” on it. Of course, our female cheerleaders might ask Lady Gaga for a little wardrobe help. But it’s a home game for the hogs, and my bet is Razorback Stadium will be packed and roaring for the Hogs. It’s the Hogs by two field goals, 27-21, and Arkansas’s virus cases will spike to 4000 a day for the next two weeks.

Then its head down to Texas A & M. Yeah, I can’t stand those Aggies. The Corp goes over the top even when they are getting killed. When we lived in Texas and went to College Station to watch the Hogs play, and the Corp booed when our band played the U of A’s Alma Mata, was when I put those suckers in my low rent category. And they have another stupid dog as a mascot named Reveille Hey, you morons, we have way too many dog mascots already in the SEC. You need a new mascot. How about the “Lizards?” Well, the Hogs will have found a quarterback by this time in the schedule, and a series zippie passes and a running quarterback will knock off the Aggies, 32 to 17.

Then it’s back to the hill to play another dog team. Evidently, some folks think if you are in the SEC you have to have dog as a mascot. Well, Tennessee has Smokey # 10 a really dumb looking hound dog, and yes they are also called the Vols, since most sportswriters can’t spell Volunteers. But since their colors are a sick orange, and they look a little too much like Texas burnt orange, I developed an immediate dislike for Tennessee. However, the Hogs will roll as our new quarterback will run circles around the Vols, and Arkansas picks up another win. It’s a 21 to 10, Hogs, and for the first time since, only God know when, the Hogs have won three in a row.

Well, with a whopping three game winning streak the Hogs will head for Florida with their heads in the sky, and that’s why they will get their collective asses kicked. My crystal ball says “The Swamp” will do in the Hogs. I’m seeing a gator go, chomp, chomp; Florida 14, Hogs 3.

Now its payback time, and the battered and bloodied Hogs will return to their pen in Fayetteville to face the over-ranked LSU Tigers—well at least they aren’t dogs. Yes, I know there are at least 50 other football teams called the Tigers, but Louisiana isn’t known for being original. I think LSU will be ranked number one. It’s the big upset of the season as I see it, and if we don’t get a forfeit, (Louisiana is also number one in the virus category) a final minute field goal wins it, 24-21.

Yes, by game 9 with Missouri the Hogs will have their game down, and they will roll. Of course, I have a problem with Missouri’s mascot, the Tigers. Come on guys! We already have enough Tigers. When you folks play LSU do you just yell “Go Tigers” and figure you have a winner one way or another. I guess I’m going to have to come up with a name, and it seems Missouri is just up there in never-never land and maybe just the “Nobodies” would fit them. Yeah, the Hogs will take Missouri by two touchdowns, 28-14, but nobody will care.

Hogs are on a roll, and some folks picking them to knock off Alabama, which is rumored to have genetically engineered pom-pom girls, but our Hogs have been reading their press clipping and checking on bowl games instead of getting fired up to meet Alabama, and it will be another slaughter, but not as bad as the really bad slaughters in the past, but the Hogs will lose. As the Hogs stagger off the field a packed home crowd will cheer them as if they had won, (Hog fans reached crowd immunity after the Ole Miss game) and the buzz will be “Coach P. can coach.” Sorry, but my crystal ball sees a 28 to 10 Crimson Tide (at least they aren’t another dog or tiger team.) win.

Those are my Fantasy-Hog Football picks, folks. I believe the hogs will go 5-5, even though the pundit’s consensus says they will get 1.5 wins. I guess they don’t count Missouri as a full win.

 

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 [RM1]