Well for sometime now US$40 per barrel of oil has become the 'lets laugh all the way to the bank' number for the shale oil producers. Especially American shale oil producers.
Shale oil is a function of technology. Shale extraction technologies are still maturing. Meaning there is much space to move up the learning curve. And when they move up the learning curve (new technologies) then the production costs will come down further.
Most shale oil generates enough profits when the oil price hits US$40 per barrel. Who knows if there are more technology breakthroughs in shale oil production, that US$40 could drop even further. So oil industry - better watch out.
Folks, there are other things that are and will continue to impact oil prices.
1. One is solar energy. Well what I mean is the cost of producing one watt of electricity using solar panels. The cost of making solar panels is plummeting.
This news below here about 6 US cents per kWhr of electricity from solar panels is THREE YEARS old. This is old news.
6 US cents is about 24 Malaysian sen. This could be cheaper than some of the new PPA prices. Now Tuan-Tuan, compare with the following. Here is part of a TNB bill (August 2020).
Outside Malaysia the wonderful free market is dictating what happens in the solar panels industry. Costs are decreasing and production volumes are increasing.
2. The other thing that will impact upon world oil prices is China's huge and increasing reliance on renewable and non-oil energy.
As you can see the Chinese are increasing their reliance on solar, wind, hydro and nuclear energies. This is an increasing trend.
What this chart does not show are the current capacities that are now under construction in China in solar, wind, hydro and nuclear energies. The investments are huge.
"March 2019, China had 46 nuclear reactors with 42.8 Giga Watts
11 under construction with a capacity of 10.8 Giga Watts"
The Chinese are expanding their nuclear generating capacity by a whopping 25% ! The same goes for China's solar, wind and hydro energies.
Although America is still the world's largest consumer of energy but the Americans are NOT investing as aggressively in renewable energies as China. Hence I believe the impact of Chinese investment in renewable energies on oil prices will be greater than America.
I believe in a few years China's renewable energies will achieve a certain critical mass that will push down world oil prices even more.
So oil industry better watch out.
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