Oil prices are struggling to stay at $100. This is almost certainly due to slowing demand as the economy slowly tanks. Originations are down, sales are off and prices remain so high many buyers are on the sidelines awaiting prices falling...and fall they will I believe. Ultimately it is the monthly payment that limits the price. And supplying certain things is still problematic. The lithium shortage is going to limit production of EVs. And without upgrading the electric grid and building new power plants, we won't be able to charge them. Texas is asking EV users to stop recharging them. Locally we've had several outages. Most relate to grass fires burning into electrical lines.
Nigeria is unable to benefit from higher oil prices due to graft, corruption, and theft of the oil between the well and the port. The government is simply incompetent and corrupt. OPEC is near the max they can produce and Russia is in the catbird's seat - and we try to virtue signal and achieve nothing.
There were no additional rigs added to the count this week. I had a long visit with a long time operator I know. The business is in chaos. Large companies are focused upon refining, where the most profit lies. The explorers (Devon, Chesapeake, etc. sized) have standing orders for pipe. But the small operators are frozen and on the side lines. Horizontal drilling is confined to exist area of known production. They do not depend upon much geology, rather on past geology gathered. That's why the Permian is so popular. It has been heavily drilled for decades. They don't use open hole logging trucks, only cased hole logs - a sort of different animal from traditional evaluation methods. As a result, small drillers or anyone drilling a vertical well or wildcat, simply cannot find a logging truck or have to wait, often days for rig to come from hundreds of miles away. Drilling rigs are still short of parts. Cable is very short supply. And pipe. 7" oilfield casing is now $65 a FOOT... on a shallow well of say 4,000' which often can be drilled in a week or less, the pipe is often more expensive than the drilling rig rental itself. And if you order pipe today, you pay for it, and wait 90 days or longer to get it. Supply chain issues. Ramping up drilling is simply going to remain a slow process and we are only about 90% of the rigs running in 2019, which that number had declined from 2016 or so due to low prices. Many rigs lain down in the past 3 years will never be raised and used again. They will be scrapped.
As long as Biden threatens to end all fossil fuel that situation is not going to be better and oil prices may or may not rise but certainly are unlikely to get cheaper gasoline for some time, perhaps several years. The Russian situation has also created demand for liquid natural gas (LNG) and that is driving natural gas prices in the US up by a factor of 4 over prices only 2 years ago. Despite this, natural gas basins that produce mostly gas and little oil, are still dead in the water. Both the Barnett and Fayetteville Shale plays are mute. No well has been drilled in the Fayetteville for nigh 6 years. Not one.
All this dovetails with N. N. Taleb's book on anti-fragility. He pointed out the weakness in "just in time" supply and sure enough, "just in time" meant we ran out of materials almost immediately with the lockdowns. Further, those shut downs meant everything else in that chain was halted and done so quickly. A robust system needs redundancy and we don't have it. We don't have excess electrical energy to fuel EVs, we don't have enough of anything and when that hits food (which it will with the loss of nitrogen fertilizer) we are going to see high food costs and for the 3rd world, real starvation.
