She went by that handle at TheOilDrum (which stopped being updated in 2013).

Our Finite World:

[...]

The traditional view of the impact of low oil prices seems to be, “It is just another cycle.” Or, “The cure for low prices is low prices.”

I am doubtful that either of these views is right. Falling prices have been a problem for a wide range of commodities since 2011 (Figure 2, above). The Wall Street Journal reported that as early as 2013, when oil prices were still above $100 per barrel, none of the world’s “super major” oil companies covered its dividends with cash flow. Thus, if prices are to be sufficiently high that oil companies don’t need to keep going deeper into debt, a price of well over $100 per barrel is needed. We would need an oil price close to triple its current level. This would be a major challenge, especially if prices of other commodities also need to rise because production costs are higher than current prices.

We are familiar with illnesses: sometimes people bounce back; sometimes they don’t. Instead of expecting oil prices to bounce back, we should think of the current cycle as being different from past cycles because it relates to diminishing returns–in other words, the rising cost of production, because we extracted the cheapest-to-extract oil first. Trying to substitute oil that is high in cost to produce, for oil that is low in cost to produce, seems to bring on a fatal illness for the economy.

Because of the differing underlying cause compared to prior low-price cycles, we should expect oil prices to fall, perhaps to $20 per barrel or below, without much of a price recovery. We are now encountering the feared “Peak Oil,” because much of the cheap oil has already been extracted. Peak Oil doesn’t behave the way most people expected, though. The economy is a networked system, with high oil prices adversely affecting both wages and economic growth. Because of this, the symptoms of Peak Oil are the opposite of what most people have imagined: they are falling demand and prices below the cost of production.

If low prices don’t rise sufficiently, they can cut off oil production quite quickly–more quickly than high prices. The strategy of selling assets at depressed prices to new operators will have limited success, because much higher prices are needed to allow new operators to be successful.

Perhaps the most serious near-term problem from continued low prices is the likelihood of rising debt defaults. These debt defaults can be expected to have a very adverse impact on banks, pension plans, and insurance companies. Governments would likely have little ability to bail out these organizations because of the widespread nature of the problem and also because of their own high debt levels. As a result, the losses incurred by financial institutions seem likely be passed on to businesses and individual citizens, in one way or another.

Interesting.

I don't know if I'm convinced, though. There are various rumored political things behind the fall in oil prices (the Saudis punishing the Russians and US shale oil producers, the US punishing the Russians and the Saudis, the US rewarding the Iranians and letting their oil back on the market soon, etc., etc.). Too much of the world economy still depends on oil for the demand to vanish. It seems unlikely to me that oil is going to be as cheap today in 5 and 10 years. And with as much turmoil as there is in Syria now, having Russia and the other oil producing countries suddenly collapse due to lack of revenue from oil would be an even worse disaster.

If you believe this piece, the Saudis are trying to crush the shale oil industry and will keep prices low until it is destroyed. I don't know if they'll succeed. Saudi's Ghawar field has been rumored to be declining, or near declining for years.

I'm not foolish enough to say that $20/bbl oil is impossible, but it would be shocking and would have dramatic consequences (some good, many bad) if it continued very long.

OTOH, looking at the historical data at FRED, maybe $20 isn't so out of the question...

I guess we'll see what happens.

Cheers,
Scott.