There has been considerable dispute over how many new wells required to keep production flat in the Bakken and Eagle Ford. One college professor posted, over on Seeking Alpha, figures that it would take 114 rigs in the Bakken and 175 in Eagle Ford to keep production flat. He bases his analysis on David Hughes’ estimate that the legacy decline rate fir Bakken wells is 45% and 35% for Eagle Ford wells. And he says a rig can drill 18 wells a year, or about one well every 20.3 days.
The EIA has comes up with different numbers. The data for the chart below was taken from the EIA’s Drilling Productivity Report.
The EIA has current legacy decline at about 6.3% per month for Bakken wells and about 7.7% per month for Eagle Ford wells. That works out to be about 54% per year for the Bakken and 62% per year for Eagle Ford. I believe the EIA’s estimate of legacy decline, in this case, is fairly accurate. For instance last month Mountrail County had over 30 new wells completed yet still declined by 6.4%. And in December 2013 North Dakota declined by 5.22% yet had 119 new well completions.
I have examined the last sixteen Directr’s Cuts and gleaned, I think, some important data… I think.
Rig count has averaged 189 rigs per mnth and has been fairly steady while new well completions has averaged 172 wells per month but has been highly erratic.
New well completions depends far more on weather and fracking crews than rigs. In October there was 650 wells awaiting fracking crews. At 172 wells per month that is almost a four months supply. And that is also what the average spud to completion is, 120 days.
The Bakken part of the chart above says the Bakken legacy decline was 77,000 bpd but it was 77 bpd in Octber. This fits perfectly with what I found by looking at the 16 month Director’s Cut stats. They showed an average of 172 new wells per month, an average of 555 bpd per new well, (first month).
That is the 16 month average. Of course every month is different. But if we accept the EIA’s legacy decline data then everything fits perfectly. The legacy decline, in October, was 72,951 bpd. But they had a decline of 4,054 bpd in October. That means new production was 68,897 bpd, or 4,054 bpd less than the legacy decline. There were 134 new wells that averaged 514 barrels per day each.
It would have taken 142 new wells to keep production flat in October. They came up 8 wells short.
The situation in Eagle Ford is a little more dire.
Their legacy decline is 81% of current production. If their new well production declines by only 19% then their production will be flat.
What will light tight oil production look like in 2015? I can only guess. But I expect Bakken production to continue to increase, at least until mid year, but at a much lower rate. I think Eagle Ford will start to decline, slightly, by the second quarter.
Rig Counts from Baker Hughes as of Friday January 2, 2015.
North Dakota at 169, flat for the week but down 28 from the most recent high of 197 in October. Williston Basin, which includes Montana, is at 179. Eagle Ford is dropping but not as fast as North Dakota.
If you don’t know about the web site Desdemona Despair, Blogging The End of the World, you should check it out.
The most surprising image of 2014 came with the discovery of large craters in the Yamal peninsula in Siberia, caused by sudden releases of methane as the permafrost thaws and collapses. This image captures a bit of the profound change that humans have precipitated in the great biogeochemical cycles of the planet, to the doom of all.
Note: I send an email notice when I publish a new post. If you would like to receive that notice then email me at DarwinianOne at Gmail.com.
Good article as usual. I’m a lurker, but there was a small mistake at the end of the post, which was the week-over-week change in ND – it was flat and -5 yoy. the eagle ford is actually dropping rigs faster than Bakken. Keep up the good work, Ron.
Thanks, fixed it.
Didn’t we find already that completions don’t map to production? That fell apart early last year.
Hi Watcher,
The “completion” data by Helms in the directors cut is just a rough guess, after 6 months when most wells come off the confidential list we can get a better idea about how many wells were completed by looking at the NDIC data.
The model matches the data pretty closely, considering its approximate nature. Clearly the “average well” will be slightly different each month so there is no expectation of a perfect match between a simple model and real world data.
In short, no what we saw last winter was a bad estimate of the number of completions by Helms.
That crater is a thawed pingo.
A pingo is a frozen mound. If it thawed it would be smaller, perhaps level to the ground. But it most definitely would not be a huge crater in the ground. And it would not throw debris up around it. And it would not have methane settled at the bottom as this crater does.
What this is is a methane blowout. Ancient methane craters have been found at the bottom of the ocean in many places but to my knowledge this is the first time they have been found on land. Of course they could have many such ancient land craters but they would have weathered away thousands of years ago. The still ocean continental shelf floor does not weather nearly as fast.
The Arctic is undergoing thermal changes caused by warming associated with Holocene sea level rise and warm waters have flooded permafrost areas of the Arctic. A thermal pulse is propagating into submerged sediment which seems to be decomposing gas hydrate (as well as permafrost). Basically, what is happening is gas is venting on the seafloor and on the surrounding land from gas hydrate decomposition at depth. This takes the form of elevated methane concentrations as streams of gas bubbles emerge. Because hydrate deposits exist close to their pressure-temperature equilibrium, an increase, even a small increase, in rock formation temperature (or decrease in pressure), induces decomposition, gas-hydrate-bound methane is released and the gas migrates to the surface and ultimately to the atmosphere. As methane is an potent greenhouse gas, this story of decomposing gas hydrate is of concern. Of course it is an ongoing process and it has been well documented on the Beaufort Shelf and elsewhere, especially in the Russian Arctic, for decades. Yamal peninsula craters in Siberia are believed to be a dramatic example of these degassing phenomena.
Doug L,
I’ve seen collapsed pingos in Alaska and lots of views in the literature. They aren’t pits; this thing is a pit, and it sure does look like splash-out around it, and 9.6% methane is within the explosion range if I remember correctly so that’s a whopping level of methane.
More about this pingo
http://wattsupwiththat.com/2014/08/01/newly-discovered-siberian-craters-signify-end-times-or-maybe-just-global-warming-mystery-of-the-siberian-crater-deepens-scientists-left-baffled-after-two-new-holes-appear-in-russias-icy-wilderne/
Ted, for goodness sake, look at the page you posted. The “mystery crater” is a huge blown out crater with debris thrown all around. Your “thawed pingos” all look like small puddles on the ground, no crater and no debris. They do not remotely resemble each other.
Click on the link Desdemona Despair
(Nature) – A mystery crater spotted in the frozen Yamal peninsula in Siberia earlier this month was probably caused by methane released as permafrost thawed, researchers in Russia say.
Air near the bottom of the crater contained unusually high concentrations of methane — up to 9.6% — in tests conducted at the site on 16 July, says Andrei Plekhanov, an archaeologist at the Scientific Centre of Arctic Studies in Salekhard, Russia. Plekhanov, who led an expedition to the crater, says that air normally contains just 0.000179% methane.
Since the hole was spotted in mid-July by a helicopter pilot, conjecture has abounded about how the 30-metre-wide crater was formed — a gas or missile explosion, a meteorite impact and alien involvement have all been suggested.
But Plekhanov and his team believe that it is linked to the abnormally hot Yamal summers of 2012 and 2013, which were warmer than usual by an average of about 5°C. As temperatures rose, the researchers suggest, permafrost thawed and collapsed, releasing methane that had been trapped in the icy ground.
A company I worked for studied Yamal development possibilities for a while. The whole area is indeed getting warmer. What’s the orifice diameter?
“the 30-metre-wide crater”
Thanks. It could be a pingo crater.
But if one looks at a map where this methane eruption took place,
Yamal map
There are lots of lakes that have formed after similar eruptions.
It seems to be a fairly common occurrence.
Anybody who has ever seen or looked at photographs of bomb craters or craters produced by deliberate underground explosions such as set off by miners or highway builders etc will have seen some that look VERY MUCH like the picture.
The absolutely dead giveaway is that the debris is ON TOP of vegetation and the edges of the debris are pretty sharply delineated. The debris also shows only minor signs of slumping down- piles of soil that are subject to freeze thaw cycles for a few years slump down nice and smooth. These heaps are sharply defined.
Conclusion : Inescapable conclusion — explosion.
Nothing about this indicates a long drawn out gradual process being involved.
Beyond this what possible explanation could be offered for the crater not being full of water- or at least ice? This place is way the hell up north where the permafrost is DEEP. There is no reasonable expectation that such a crater could ever be empty in that sort of climate if it were created by a melted pingo.
It would necessarily have to be full of either water or ice. Else the permafrost would have to have melted somewhere down inside the crater to allow it to drain to – well WHERE could it drain to in a place with a couple of hundred feet of permafrost under it?
And if it WERE a melted ping- well the very fact that it melted fast enough that the vegetation has not had time to start to encroach on the mounds is SOMETHING WORTHY OF HARD THOUGHT.
That something would HAVE to be pretty fast and extremely localized warming.I am waiting to hear any theory as to where the heat could have come from – other than the whole area warming up.
When you make popcorn a few grains necessarily pop ahead of the others.
IF any skeptics want to lay a bet I am ready to mortgage the farm on the proposition that LOTS of ” melted pingos” will be found within the next couple of decades- and that at least a few of them will be found to have” melted” in the space of a few hours or days if enough satellite capacity is available to photograph the general area on a regular basis.
Astronomers find things by looking at pics taken at intervals- they have computer programs that spot a change for them in heartbeat. Cheap with ground based telescopes and automated cameras etc.
Unfortunately it seems unlikely anybody will be able to photograph Siberia at high resolution on a regular short term basis. Too expensive.
Hi Mac,
Pingos are lenses on (mostly) ice. I’ve stood on them when working in the Arctic. What’s wrong with the idea of Ron’s crater being a methane related explosion/sinkhole feature? Several of these beasts have been observed and they are being studied as we “speak”.
I have two main memories of my times in the Arctic: one wonderful the other horrible. Wonderful = Northern Lights displays (aurora borealis). Horrible = goddamned inescapable bugs. Many times I’ve stood on a pingo because a little extra breeze up there reduces the bug population SLIGHTLY. People assume cold is the main enemy in the far north but I disagree. You can dress for cold but if you need to breathe damn, bugs will penetrate any defense. So, pingos are nice.
Meant to say lenses “of” mainly ice: My kingdom (such as it is) for a text editor.
Recently I read a magazine article by Finnish nature photographer/writer who has been in Lapland for tens of years; he wrote that pingos are not forming anymore in the north and old ones are melting away…
Hi Doug,
Some how you seem to have gotten the idea that maybe I disagree with Ron. Absoulutely not so.
The only remotely reasonable explanation for this hole in the ground is an underground explosion. AND the only plausible thing I have seen mentioned as the explosive is decomposing methane hydrate.
I have seen beer bottles with beer capped too soon that exploded in like grenades – fortunately nobody was around.
And kids around here have found out that if Daddy has a he man air compressor in the garage – one capable of 180 psi or more – that you can make a mighty fine firecracker out of a plastic soda pop bottle by using a lot of tape and some ingenuity to secure the air line into the bottle and opening the line valve.
These firecrackers are potentially capable of seriously injuring or maybe even killing somebody but hardly anybody has such an air compressor handy except garages etc or otherwise I would not mention this ersatz firecracker. I have one of these machines because I got it the way I get almost everything expensive- buying one not running dirt cheap and fixing it up.
I have never been fortunate enough to see the Arctic but I spent a day or so reading up on pingos weeks ago when I first read about these craters. Being mostly stuck in the house looking after my old Daddy has a few bright sides the brightest of which is plenty of time to read anything I want.
I expect that most of the time there is no explosion as such because the gas probably LEAKS thru a CRACK in the overlying permafrost rather than blowing it out in one big blast so not very new empty craters will ever be found in relation to the number of small deep lakes that probably are the remains of pingos.
Having pronounced like a tenured professor on these matters well outside my own area of expertise I hereby admit that my only specific training in geology was one sophomore level course back in the dark ages. But I have alway spent my evenings reading history and science books.
When air tanks and other high pressure containers fail they usually fail – in my experience at least- by developing a crack which relieves the pressure gradually rather than explosively.
I have repaired a bunch of air and water tanks that split at a rusty spot or a seam rather than exploding.
Any old farmer will tell you that soil on top of vegetation didn’t get there via any drawn out process – otherwise the vegetation would be on top. 😉
The gas does leak slowly. To get an explosion we need an air filled cavity into which methane leaks, to eventually reach a high concentration. Therefore it appeas this was an ice mass which heaved the terrain. Did you notice it was a neat circle? This implies the cavity underneath was a dome. If the walls are nearly vertical and there’s smooth ice at the bottom then this was a type of pingo. I suppose methane could have leaked into the cavity, and eventually exploded. But I tend to doubt it.
I am probably going out on a limb and sawing it off by contradicting or at least questioning an engineer in this sort of thing but part of my experience on the farm in more innocent times involved ditching with dynamite.
In pre terrorism days we used it so routinely you could always borrow some from a neighbor in case you ran short. The hardware store kept it in stock but not a whole lot – the owner understood that a just a stick or two would destroy his building and kill every body in it – a risk he was willing to run. .
But he was not willing to keep enough to kill a bunch of people in neighboring stores so he didn’t keep MUCH dynamite on hand.
We used to punch holes in boggy ground we wanted to drain and put in half sticks about three feet apart three feet deep down the desired ditch line. If you watched very carefully you could see the explosion travel the line. Plus I have watched a lot of ” shots” on excavation jobs.
We got beautiful ditches in places too boggy to run any sort of excavator- and far cheaper to boot. Plus we got to have some serious fun doing something dangerous. 😉
Rocks and soil flew as far as fifty yards. Now the usual thing in construction is to use just enough to break up the soil or stone. A proper shot heaves the ground up some but nearly all or all of the loosened material remains in the crater.
That soil did not get deposited the way it is by any slow gradual process of ice heaving up and melting. IT was TOSSED. THROWN.
And so far as methane exploding- English is a poor language in some respects. I it would be better to say the methane was RELEASED in explosive fashion when the overlying ice and soil capping the crater failed SUDDENLY like the beer bottle exploding due to excessive CO2 being manufactured by the yeast.
If you look again at the crater the sides slope inward as they slope down in precisely the fashion that a sharp hammer blow will knock out a conical plug from a sheet of brittle material such as glass if the entire sheet doesn’t fail.
Bullets punch tapered holes shaped precisely this way in glass.
Now I must admit that a serious grasp of the chemistry or physics of methane hydrate structure is beyond my modest level of training in chemistry – and that training has been mostly forgotten in the last forty years.
BUT- Everything I read about methane hydrate describes it as an unstable substance that disaccoiates with a rise in temperature resulting in free methane -so if there is hydrate in the permafrost and it is slowly warming up then you have your source of free methane. The pressure would rise steadily until vented.
The air is often (usually) colder during winter than the underlying permafrost ( which freezes only so deep due to heat rising from deeper levels of the earth ) so there could be a very hard frozen layer of ice and soil over a methane pocket.
I believe the overlying layer failed in EXPLOSIVE FASHION just like the aforementioned beer bottle or plastic soda bottle firecracker.The methane need not have exploded in the usual sense of the word of releasing energy from chemical bonds in milliseconds.
There may very well have been a pingo where the crater is NOW.But it didn’t melt. It blew out with a BANG.
Hi Mac,
Mac, Well I’m an engineer (Engineering Physics) and I agree with you. Plus, the arctic is filled with pingos and something called “pingo like structures” (PLS) and these were formed by methane release. The PLS have been studied in great detail by the Canadian Coastguard, and others, including shallow drilling and geochemical work. So, its quite likely that the structure in Ron’s photo corresponds to a methane discharge perhaps with some version of sinkhole erosion. “Explosion” is a relative term.
You would have to derive an equation whereby methane, which is lighter than air, would remain trapped in a perfectly circular cavity and blow a perfectly circular hole at the top. Don’t forget this is supposed to be Yamal. I assume you realize that’s permafrost terrain? To be honest, I don’t really think it matters either way, but I’m having a bit of a difficult time visualizing an underground methane explosion.
Methane is combustible and mixtures of about 5-15 percent (in air) are explosive. When air contains 9.5 percent methane it reaches a perfect oxidation point, meaning the correct quantity of fuel is mixing with exactly the right amount of O2 and this produces water, CaO2 and heat. It doesn’t require much heat to ignite and methane explosion accelerate fast. Heat generated by this process raise the temp. of air (esp. in coal mines) causing expansion. Since hot air cannot really expand underground, pressure builds and if this pressure is high enough, it can cause the air ahead of the combustion zone to compress and cause a shock wave. Ventilation is used to avoid explosions in coal mines but EVERY miner understands this perfectly. No engineering required.
There’s no hot air in Yamal permafrost. I assume you do realize the terrain in Yamal is frozen? These shafts must be caused by really weird geometry, and water flow must have a role to play. I just happen to think the simple minded “methane explosions” aren’t the real story.
Fernando, why are you being so bone headed about this? Methane hydrates (clathrates) are extremely common in shallow marine and near shore environments where they’re continually degassing and creating voids. But if you want to be a prima donna and have the last word, go for it.
Leighton, I have serious doubts a crater like that would be created by a “methane explosion”. It seems you are focused on only one cause, while I´m more curious about the full process.
By the way, I lived in Russia, and my job description included working on Arctic projects in the Russian north. I´m not a permafrost expert, but I spent quite a bit of time working on issues such as pad, well drilling, pipeline, port and infrastructure construction over permafrost terrain. Given what I was taught in those years, I have serious doubts the overall structure was caused by a methane explosion. It sure looks to me like there must have been some sort of thaw bulb in the area if those holes are as deep as reported. Since we lack the full amount of information this is getting a bit silly.
It could be a pingo that melted, and the water ran off. The bottom is probably smooth ice.
Ted,
Just out of interest, do you ever have doubts about any of the articles published on watt’s up with that? I mean, that would be the,er, skeptical position to take wouldn’t it?
By the way I use the word “skeptical” in its traditional sense of “withholding judgement in the absence of sufficient evidence” as opposed to the modern sense of “hostile”
For instance, take the “sea ice” page:
http://wattsupwiththat.com/reference-pages/sea-ice-page/
It seems the 2012-2013 winter was the worst, and that there has been some recovery.
All trends have noisy data. Is the sea ice cover trending, or is it oscillating about a mean?
I suppose only time will tell.
The death spiral…
Here’s the latest version to November 2014… http://haveland.com/share/arctic-death-spiral.png
Nothing in nature moves in straight lines.
WattsUpWithThat is an active propaganda site and shouldn’t be cited for anything.
I’m curious what exactly you would say was propaganda on the “sea ice” page? I didn’t read it all, but it only seemed to contain raw data, with some analysis.
Do you claim the data to be biased, or the analysis of the data?
Of course, it’s all made up by those thousands of scientists sending millions of secret e-mails back and forth all designed to trick the honest God fearing folk into believing a climate change fantasy. Or maybe I’ve got that backward: Need more coffee.
I’m just asking that a theory explain all of the data. The data shows that sea ice cover and volume have decreased in the last 15 years in the Arctic. And that sea ice cover (and volume?) has increased in the antarctic.
Are these trends related? Is it just an oscillation?
One needs to not be passionate about a theory in order to properly test it against the data.
The antarctic sea ice anomaly.
canabuck, the Antarctic sea ice anomaly doesn’t help the cause, therefore it gets very little coverage. But these trends take time. We could see a reversal in both trends, with increased Arctic sea ice, decreased Antarctic sea ice, and so on.
Antarctic ice is all first year ice. Melts in summer and forms in winter. A different beast than Arctic Ice. Look at what happens to Antarctic ice sheets mass . And if you think you will find real science discussion at WattsUpWithThat you are as deluded as the “abundant-tight-oil-will-make-US-energy-independent-forever” and “oil-is-renewable-and-regenerates-in-deep-earth” folks
Antarctic Ice is all 2st year ice??????
Antarctica Ice is 80% of the ice on the entire planet – miles thick in places. Antarctic Ice that melts (land ice) is on the penisula that goes will north of the south pole. It’s lattitude is somewhat similar to Alaska or Canada.
sea ice… Antarctic sea ice ( the graph above…) pay attention
Nice overview. I’m not sure why we are discussing ice, but while we are at it: the way I see it, the extent is important because it changes albedo. The amount of ice being formed can impact thermohaline circulation, and the overall thickness and age impact heat transfer as well as the ability to navigate. Did I forget anything?
The enormous quantity of fresh water being deposited from the ice sheet may well be reducing the salinity of surrounding surface water enough to result in it freezing faster. Less saline water tends to float on top until mixed by wind tide thermohaline circulation etc which all take time.
The geography of the far southern part of the earth is such that there is nothing to impede circumpolar winds and currents there.This makes it a different animal than the Arctic pole.
The key thing that you may be missing about Arctic sea ice is that it is VERY CONSISTENTLY MUCH thinner in recent times as well as being less extensive ON AVERAGE than formerly.
I don’t keep track of numbers personally but if I remember correctly the quantity of Arctic sea ice is only about half or even less NOW with the same surface area as it was a couple of decades ago.
Old farmer, I worked in the arctic and I used to develop computer models for ship navigation through ice infested waters as a personal hobby (I’m a bit nerdy). I saw the thinning ice data before most of these arctic experts were out of high school (we got a hold of usa military data). I summarized the ice issues. Thinning ice isn’t the only important item if you are worried about a bit of warming.
I understand that someone does not want to argue the same point over and over again. And at some point it is easier to just dismiss a website and move onto serious discussion.
I am not at this point (yet) with this website. And am willing to look at other points of view, for when you disagree with someone, then there is real opportunity to learn.
A good article! Thanks. It seems like fresh water due to land ice-mass melt could cause more sea ice.
It does. But the fact that sea water is mighty cold and getting colder sure seems to help. Don’t forget antarctica is a continent. It can have variable climates and circumstances.
WTI at $49.94, Brent at $52.93, Euro at $1.1946.
At these oil prices wich producer is still in profit? Shale oil at ~$34 head well…
I am curious to see production for December 2014.
By the way, anyone has a clue why the WTI/Brent spread has narrowed so much of late?
Greek tanker getting bombed?
Better pipeline capacity out of Cushing to the Gulf coast where most of the US refining capacity is located, several new pipelines have opened over the past 12 months.
There’s a lot of talk about the US lifting the export ban. That might do it.
I just talked to my neighbor who works in the Bakken. He tells me that rigs are being laid down as soon as they finish a well, but insists that this is only a short-term problem, caused by the fact that ISIS is dumping oil on the market, and that prices will recover when that oil is gone. (Well, that’s what they’re saying in Williston, anyway.)
this is only a short-term problem, caused by the fact that ISIS is dumping oil on the market,
I believe that is the most absurd explanation I have ever heard. If ISIS is dumping oil it is oil they stole, oil that would have gotten to the market anyway. So it just went through ISIS’s hands. It would be a wash anyway. But they could not be stealing and selling, daily, that much oil.
Ron,
Be gentle on the man. He is just a messenger, as he is reporting what people are saying, not what he believes. I agree with you that it is an absurd reason, but when nothing else makes sense people try to come up with their own explanations to justify.
I think it says a lot, that nothing normal is making sense, and people need to go these lengths to justify what has happened.
Toolpush, my comment was directed at the worker using that logic, not at Don. I knew anyone on this blog would know that was faulty logic.
On one of the BBC’s flagship current affairs radio programmes this morning there was some “energy analyst” burbling on about the price crash being due to a surge in world oil production. Curiously, he highlighted “all time high” production in Russia”. Well, I suppose it’s a little less deluded than the ISIS theory.
Of course it’s absurd. That was my entire point in reporting on it. I guess I should have used my sarcastic voice.
What is ISIS breakeven price? 🙂
This better then Sainfield 🙂
The statement about ISIS oil is just desperation. When you are getting a pink slip what else are you going to blame it on?
We are at a point where a big chunk of production is underwater on an operating basis, not just new projects not making economic sense. I guess at least 3-4 million bopd of current production. Just a guess.
All you can say is WOW!!
Blaming somebody else or yourself will just aggravate your situation. Blaming is fighting, resistance. It’s like throwing hot coal at somebody. And whose hands would burn first? We can’t change anything regarding the price since it is beyond our abilities. So the right way is just to accept it and let it go.
I agree w you Ves. Just saying why they are saying that. Don’t know why re the crash this far but afraid will go much farther.
3-4 sounds good globally.
I am sort of okay with the ISIS story, in terms of mechanization. The oil they sell is certainly discounted, because buying it is illegal, so to entice people to buy illegally the price is discounted. They aren’t “dumping”. That’s silly. But they probably are priced under market rates and that will drag things a tad.
But a tad ain’t 60% in 6 months.
Some 20-40% of coal extraction is now also “under water”, and coal gives our civilization only little less energy than oil. Is this the ‘this is it” moment?
Don Wrote:
” just talked to my neighbor who works in the Bakken. He tells me that rigs are being laid down as soon as they finish a well, but insists that this is only a short-term problem, caused by the fact that ISIS is dumping oil on the market”
The most likely answer is that the global economy is slowing down. It probably does not take very much excess production to send prices falling. Its likely that falling oil prices is creating a economic feedback loop causing the economy to fall even more since a lot of money was invested into Oil production.
On the economic data side, we definitely see a slow down in China and the US. China raw material imports are way down. The Baltic dry index (loosely tracks raw material shipments) has collapsed to near the 2008 lows. US factory orders are falling and companies are starting to idle Plants. US home sales have also started to tumble and home prices now appear to be falling. Another key indicator is falling Gov’t Bonds in the US and Europe. Usually bond prices fall when investors withdraw money and buy Gov’t bonds for safety.
I doubt the Shale will bounce back. I think Investors are pulling away money. There are a lot of over leveraged drillers that are going to be in trouble and once the bad news starts to leak out, investors are not going to be eager to jump back in. With out investor financing its unlikely that boom will continue. It will likely be many years or never before the shale boom resumes. Sorry for the disappointing information, but its best to be prepared for the worst.
“I doubt the Shale will bounce back. I think Investors are pulling away money. There are a lot of over leveraged drillers that are going to be in trouble and once the bad news starts to leak out, investors are not going to be eager to jump back in. ”
Behold, permanent destruction of shale. This is edging towards genius.
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
Rig Count
Canada still dropping. Down 48 after a 100 plus drop last week. I would have though if it was a Christmas break, that this would have been flat at worst?
US down 29 split fairly evenly between oil and gas
Permian down 6
Eagle Ford down 4
California down 6 after a big fall last week
Bakken steady
So what is going on, the Canadians are responding to normal economics, and the US drillers are on drugs? I think our Watcher would say the drug dealer was the Fed, and he maybe correct.
I see Don’s comment above, the word on the street is for rigs to be laid down as they finish their wells. At 20 days a well and 170 rigs, about 8 rigs a day have the opportunity to be laid down. So things can happen fast once the decisions are made. January is going to be a very interesting month. The quarterly reports are really going to be the test. what ever media hype gets put out until then, can be just hype. The music stops at the end of the month, and then we will see who speaks the truth.
Quoting from a news article published a week or two ago:
“On the Canadian side, it’s determinately the curtailment of capital budgets that’s affecting the drilling programs,” Dinara Millington, the vice president of research at Canadian Energy Research Institute in Calgary, said by phone Monday. “The wells are more costly to drill than the U.S.” because of the remote locations and higher labour costs, she said.”
So Canada is down for the count, and not just on holidays? Oops!
http://www.bloomberg.com/news/2015-01-06/biggest-oil-rig-drop-since-2009-spells-tough-year-ahead.html
The rig count fell by 93 in the three months through Dec. 26, and lost another 17 last week, Baker Hughes Inc. (BHI) data show. About 200 more will be idled over the next quarter as U.S. oil explorers make good on their promises to curb spending, according to Moody’s Corp.
Some how I think I am on a different wave length. I see OPEC and the Shale playing school boy games, and seeing who can piss the highest or should I say who can produce at the lowest price, and the market makers are shorting the hell out of things until someone capitulates.
That capitulation to me will be a 100 to 200 drop in drilling rigs in a week, not a quarter! We do live in an unreal world.
Hi Toolpush.
I see OPEC and the Shale playing school boy games, and seeing who can piss the highest [.]
Okay, let’s say you’re the Saudis. You see that the market is overstocked- let’s guess at 3 million barrels a day.
You could cut your production back by that much- and if that supported the price, lose half of your foreign oil income.
Or you could let the price drop- and maybe lose less. But make every body else lose, too. Doesn’t cost you a cent to share the burden out. Might even save you some money.
There is a third option, however.
What if the Saudis decided that they couldn’t stop it, even if they wanted to?
What if they think that supporting the price would just backstop more shale drilling, offshore projects and tar sand developments, and they’d be faced with this problem again 3 years from now, having lost half of 3 years income?
They’re not the bully pushing your fist into your face and saying “Stop hitting yourself.”
More like the guy looking over and saying “You seem to have some kind of nervous tick causing you to hit yourself in the face, and it’s contagious…but if the rest of you want to keep hitting yourselves in the face, who am I to stop it?”
-Lloyd
Why crash it all the way to $50, or $40 (if it happened) if breakeven is $70-$100 for the rest of the producers? Why leave money on the table?
1) They don’t know where the pain infliction point is for the rest?
2) The need to be done in blitzkrieg so they go all the way to the absolute world breakeven price as fast as they can?
3) or herd of the market shaved that additional $20-$30 more than it was needed?
Lloyd/Ves,
My money is definitely on the side of the Saudis. It is just a matter of time before the shale plays cry uncle. I also feel the Saudis started the price fall to flush out the weak hands, but it is the traders and shorters in the market that are pushing the down now. They don’t care about what is economic to produce, just following the trend, until it bends.
I feel it will bend when the shales put up there hand and have a massive cut back. In 2008 Devon Energy, drilling in the Haynesville paid $40mil in penalties to rig owners not to drill holes. It is going to be a few announcements like these that will get the markets attention and reality will set in that any surplus of oil will only be a short term event.
Now getting production back on track after that is going to be difficult, but that is not the traders worry, and will make Saudi happy.
BTW, where is all the conversation about market manipulators, now the price is going down, rather than up?
As soon as the narrative gets molded to be “foreign influence is inflicting harm on a US industry” then patriotic defense will be offered up.
Y’all still just don’t realize money has lost its meaning in the most macro of aspects. The breakeven can be redefined at a whim.
This is what I am talking about. The way to stop it is to have a capitulation from the shales. Or someone, but I believe the shales will be the weak link. The good news it once the free fall stops and the shorts cover, we should have a short covering rally to out back to reality. But not before a lot of damage will have been done.
http://www.cnbc.com/id/102315032
“We’re divorced from the economics, from the rig economics, so now fear and greed are in the market. Low prices are becoming the excuse for lower prices,” Schork said Tuesday on CNBC’s “Futures Now.” “Trying to pick a bottom here is akin to the old adage of catching a falling knife. So don’t try to pick the bottom, just ride the wave lower.”
toolpush,
I’m not clear about the Saudis starting the price fall. What did they do?
Synapsid,
The Saudis didn’t do as they were expected to do.
They were expected to cut production, they didn’t. So by doing nothing, they did something.
Which turns out to have been a lot.
toolpush,
The Saudis have been burned badly in the past when cutting production to raise prices because the rest of OPEC kept right on producing. This time they said “No more of that.”
That was in response to falling prices though, right? They were asked to cut production because prices were falling.
We’ve all seen the graphs showing that world oil production hasn’t climbed much over the past few years, except for oil from the US and Canada. The Saudis, and some of the smaller Gulf producers, point to that and say There’s where oversupply is coming from so that’s where cuts should be made. That looks a lot like Jeff’s suggestion that the Saudis are taking advantage of a development that has come along that they figure they can ride out but that is going to hit their competitors hard.
All in all, it looks to me like the Saudis are adapting to a situation they didn’t start but that works to their benefit. Canny rascals.
The Saudis didn’t do anything. Aggressive producers elsewhere invested too much and increased production to such an extent it flooded the market.
You are assuming the Saudis knew when this spiral began how far it would go down. The price may have decreased faster and farther than they were projecting. I think a lot of supposed experts have been caught with their pants down with this massive and quick increase. It may be that the Saudis believe there is not much they can do to control the market and so they are just going to try to ride this out. Further, why is it their responsible to protect the U.S. oil industry for over producing?
Perhaps it is time for U.S. producers to revisit whether or not they truly believe in a free market. Right now they are free to produce as much as they want restrained only by certain regulations that might be enforced from time to time.
Perhaps it is time for U.S. producers to revisit whether or not they truly believe in a free market.
I was waiting for someone else to say this.
Toolpush, though he couches his language, obviously believes there is- er, was– a visible hand in the market: the Saudis.
The question is no longer “Will the Saudis step in?”
The new question is “What are we going to do instead?
-Lloyd
Hi Ron,
The 114 rigs would only need to drill about 130 wells per month, it is possible that rig efficiency might increase in this low price environment as only the best rig crews will continue to work. If new wells added decrease to 130 new wells per month by spring and remain at that level then in the Bakken we would have fairly flat output, with a small drop at first, but with output rising back to Oct levels within 24 months. I agree that if wells drilled per rig is unchanged, then 114 rigs will not get the job done, about 140 rigs would be needed.
For the scenario above the legacy decline in kb/d is shown in the chart below.
Jeez, not these charts again O_o
Dennis, one thing we are all forgetting is “production per well”. Fewer and fewer wells in fringe areas will be drilled. The wells that will still be drilled are “sweet spot” wells and it will take fewer of them to keep production flat. I really expect the Bakken to keep increasing production until about mid year, if prices stay low. They know where the sweet spots are and there is still some wiggle room there.
I agree that there could be some increase in new well EUR, it depends on how much room is left in the sweet spots and whether higher density drilling can maintain the current average new well EUR.
Rune Likvern thinks there will be an increase, Mike is doubtful, I have simply assumed the new well EUR will remain the same in the model above until June 2016. That assumption may be incorrect.
I would expect an increase in well quality, decrease in well drlling costs, more wells drilled away from water, and very hard ball negotiations with contractors, transport companies and others to cut costs to the bone.
I expect that lower prices would lead to fewer wells drilled everywhere, including the sweet spots. Of course the drop in wells drilled would be greater away from the sweet spots.
Hi Frugal,
Not sure if that is correct, I believe that Ron has this right. Only the sweet spots will be profitable to drill so there may be little change in wells drilled there. The less productive areas is where most of the drilling will decrease.
The effect will be that the average new well will produce more since the poorer prospects will no longer be part of the mix.
Someone with actual oil field experience will hopefully correct me if I have this wrong.
Dennis, it depends on available well slots in existing pads in high graded areas. A well slot in an existing pad could be as simple as having the ability to rig up and drill a well somewhere in an existing pad, having a feasible connection to a manifold, and fluid handling capacity in the existing system. I just don’t know how these guys lay out their surface systems. I got the feeling it must be very adhoc and there’s poor coordination between operators?
Who will pay the, say, $10Million for getting a well online? Investors look at the oil price and calculate when the initial cost will be amortized, let alone profit. Not for a long time. Investors will shy away seeing all the market turbulence. And in the meantime another well has to be drilled since the production of the first one will decline rapidly.
Weren’t there discussions that all sweet spots are drilled first? Why going to lesser spots and leave sweep spots for rainy days or what. Why infill later when there is much more profit right now.
Dennis, as I have suggested before, there will be no marked increase in individual rig efficiency. They have it down to a science now, about 13-14 wells per year per rig, IMO. Because of the primary focus on sweet spots, as Ron suggests, there won’t be as much RDMO/MIRU; they’ll walk those rigs on multi slot pads but I don’t think they can get much faster. There is actually little difference in A team and B team rig hands. Its the toolpusher that counts, uh Toolpusher?
If they can get caught up in frac’ing, that will help get wells on line much quicker.
Mike
Mike,
RDMO/MIRU?
I have a suggestion for the pros: The first time you use an acronym in a post, unless it’s one that we’ve seen over and over here, spell it out in brackets as well. Even Google didn’t help with this one.
MIRU = Move in rig up
RDMO=Rig Down Move Off
Don’t Worry Synapsid, these are land rig acronyms, and they don’t come easy to me either, but if Mike had of said Code 1, ( as on the IADC drilling report), then I would have known exactly what he meant , but very few other would, lol.
Mike,
As to your earlier comment, it is all about planning and having things ready, but the amount of paper work required offshore these days, would make you cry.
Codes? What’s the oilfield coming to? Can you guys still swim in the moon pool like we use to be able to?
Errrggg, paper work!!
Thanks, Push; keep a bind on it!
Mike
Mike,
Funny you should mention swimming in the moon pool. I do just have some footage of me recovering a MRT (marine riser tensioner) The water was slightly over my head, it was 2700m deep, and you could say a little rough.
I am not sure if the corporates would like to see it, but I am sure they were happy they didn’t suffer any down time.
Thanks toolpush.
Rig down, move out, move in, rig up. I thought everyone knew that, (lol); sorry. It takes a good bit of time to break down a 15,000 drilling rig, load it, make multiple trips to move it down the highway, and put it all back together again. In sweet spots the focus will be on walking rigs fully erected, 40 feet, to spud another well on the same pad, saves money and time. I never get tired of watching this:
http://eaglefordshale.com/news/typical-eagle-ford-well-start-to-finish-video-marathon-oil/
Mike
Hi Mike,
What is the diameter of that casing/pipe that is being used. How much steel ends up underground?
In the Eagle Ford, a short tin cellar, no conductor pipe, 8 5/8ths or 9 5/8ths surface to 3400 feet, 5 1/2 inch OD 23 pound per foot production casing from surface to the lateral toe. 2 7/8ths production tubing. I guess about 400 tons per shale well, tax, title and license. There will be enough 5 1/2 in shale wells someday to go around the world 9 times; they can recover some of that. For what I don’t know. Maybe they’ll melt it all down and make EV’s out it.
Mike, I’ve used 8 meter spacing with large 2000 and 3000 hp rigs. We put the wells in a tight row, put all the piping and electric lines underground, pave over, and when the rig is over a well the offset wells are shut in and protected with steel cages. It allows for rather small multiwell pads. The biggest I saw had 24 horizontal wells.
Hi Mike,
If there is more focus on the sweet spots at lower oil prices, would you expect MIRU/RDMO time to be reduced?
Dennis, I think there will be far fewer rig moves and more rig skids (walks) on already existing pads, yes. Providing, however, there are that many locations left to drill in very sweet spots; when I look at well numbers being permitted in existing units in the Eagle Ford, I have my doubts. I do not believe those shale guys will be doing anything that does not essentially guarantee them success. Experimenting with new toys, or down spacing, that’s all gone for awhile unless it is 100% proven to make money. BTW, moving one of those big mama jamma rigs down the highway can add a half mil to costs, all the more reason to stay on a short leash.
I stand by my 13-14 wells per rig per year. Twenty days per well happens, about as often as 30-40 days per well. Murphy likes to practice law in the oilfield.
I’ve lost some credibility lately, lol, but rig counts will not come down significantly until mid March, IMO. I am hearing a lot of “one or two more” from hands. The only permits being filed anymore here are by the big 5, EOG, COP, CHK, those guys. Even some strong ones, so I thought, like Penn, are slashing budgets. Landmen doing what little leasing is left and curative title work before units can be formed, one of the leading indicators of things to come, are all going to the house out of work.
I hope this helps, Dennis.
Mike
ROFL.
Mike, do you have any good references, especially video, of rig walking/skids for us non-oil people to get an appreciation of what is involved?
Thanks
NAOM
NAOM,
A couple of quick references.
http://www.patenergy.com/drilling/technology/apexxk1500/
https://www.google.com.sg/search?q=walking+rig&es_sm=93&tbm=isch&tbo=u&source=univ&sa=X&ei=ZditVL3LLomLuATV4YGgDQ&ved=0CCgQ7Ak
That is so cool. I use to have to skid them away from blowing wells with a dozer, a couple of traveling blocks, 18 lines and a deadman buried to China, but we could do it.
That’s amazing technology. H&P Flex rigs can walk just about as fast as I can these days.
Mike
Thanks, that really does walk! Quite a versatile beasty.
NAOM
The key to a smooth skid is to have the pad laid out to allow the rig to move, drill the next well, and have the ability to (eventually) work on the prior wells with a workover rig and a coil tubing unit. In large developments these pads can have two dozen wells. For example a Bakken pad could be built for three different zones, using a fork pattern, three tines, two sides, total 18 wells. These don’t have to be drilled at the same time, but it’s important to remember that wells require workovers. And I’ve seen engineers design pad layouts which precluded doing a workover unless the offsets had their trees removed. I prefer 8 meter centers to give us more room, with the wellheads recessed to allow all the casing spools to be covered by a metal hatch if required. It’s just a personal preference.
Thanks Mike.
Yes that helps a lot. Where I misinterpreted your earlier comment was that you suggested there might be less MIRU/RDMO, but no difference in rig crews. I thought less time spent moving rigs might lead to more wells drilled per rig per year.
I think in your comments you are suggesting that companies are already focusing on sweet spots for the most part and that any such changes will be marginal.
If that is correct (and your guesses would be far better than my own), then we may not see much change in new well productivity,except in those cases where rigs are stacked because they were working in the less sweet areas.
Hi Mike,
Thanks. What is RDMO/MIRU? I would think some toolpushers are better than others, but you would know better than me. So you would agree that we should expect an uptick in average new well 6 month cumulative output?
Sorry, question answered. So more holes will be drilled per rig, if I understand correctly. And the focus on sweet spots should increase average new well EUR as Ron (and Rune Likvern) suggested.
dood, no one said that. Mike specifically said technique was at its best and shift A was no better than shift B and there was explicitly no reason to think rigs could drill more holes than they have been.
Hi Watcher,
He also said the focus on the sweet spots would mean there would be less MIRU/RDMO (move in rig up/rig down move out) so that the natural conclusion would be greater rig efficiency as in more holes drilled because the rig would not be put up and taken down as much, but just walked from one location to the next. You are correct that he said there is little difference between crews and that is not an important effect. The fact that MIRU/RDMO time may be reduced is the important effect and a focus on the sweet spots will tend to reduce that. Or I misinterpreted Mike’s comment and there will be no change in the number of wells drilled per rig even though the companies are likely to focus on the sweet spots due to low oil prices.
I don’t know about the USA industry, but in other countries I’ve seen improvements. For example, if we have six rigs under contract and have to drop two, we drop the worst performers. The drilling companies will keep more experienced hands. Our company engineers have more time to chase little details, service companies use their better operators, the mud company keeps guys who know how to make really good mud, and on and on. But that’s in areas where we have higher prices and personnel isn’t as good as it is in the USA. So who knows, I may be wrong.
It seems that maybe the six months to a year guesses about how long it would take oil companies to cut back on drilling were a little on the long side at least in respect to tight oil.
Does anybody have any good info on how much drilling is being curtailed NOW in conventional oil fields? I am guessing that the bigger companies operating in conventional fields are not able to reverse course so quickly as the small tight oil companies.
Another question- given that it is just now hitting the hardest and toughest part of the winter season how long might it be until the fracking crews either catch up and work out their backlog – assuming the well owners are willing and able to pay them?
With drilling slowing down so fast it looks as if the Fracking guys ought to catch up pretty quick if the weather cooperates. Does fracking usually come to a near halt in January in ND?
With about half the total cost of a well being the Fracking expense some well owners just won’t be able to raise the money – or might choose not to until oil prices recover.
Anybody with the cash to buy up distressed leases will probably also have the cash to wait out the worst of the price slump.
But maybe anybody buying up such leases with wells already drilled ( or not) will be compelled to complete at least a few of them in order to meet the terms of the lease?
I am finding it hard to believe that the production increases are going to continue in the Bakken. The high here in Minot on Sunday was -10. No matter what you are doing things slow down at that temp. In the last couple of weeks we have had a major blow out and some large Enbridge oil tanks caught fire. So I think it is reasonable to think that you may see a slow down for the rest of the winter and then a slight bump in the spring. Also, does anybody know if there is any well degradation if a drilled well in not fracked right away. Other than financial motivations I can’t see a reason all those drilled wells need to be finished anytime soon. I also wondering how many companies have wells listed as waiting for completion that they don’t ever really intend to complete.
Nick,
If the well is drilled, cased and cemented, then it can live there unaffected for a very long time. I cannot give you a complete answer as, I do not have a good handle on there fracing methods on land. I hear stories 10 to 20 stages being fraced in a day. Now that is nothing that I have experienced, impossible to perforate and then frac at that rate. So they obviously use different methods. Slotted liners, bare foot completions, open hole packers and the like. All I can say is if the completion fluid is in contact with the formation for any length of time, then the shale could swell, but as for the time scale, it would depend on the shale and how much inhibition is afforded by the completion fluid.
Push, there are Bottom Hole Assembly Tools like those from Baker Hughes (Opti Port) and NCS Multistage that are deployed on coiled tubing and open pre-set sleeves on production liner and can frac stages in under an hour and set up in ten minutes for the next stage. NCS touts a world record 40 stages frac’d in 24 hours. Demo videos are viewable online.
Of much more significance, however, is the out put from those wells as Whiting – in the Bakken – had the two highest 24HR IPs there @7,100 and 7,800 boe. Those two wells produced 55k and 60k their first month production.
As a former diver, I did more working dives in moonpools than I can count. Hope you had your union card handy when you were splashing around that tensioner.
Thanks Coffee,
I must admit we were only doing double and triple frac packs in Africa. They were fairly long drawn out affairs, Heaps of rig up, and it was only one frac at a time. Pull it all out and clean up and run it all down there again. Screen outs were the plan, and it got exciting when the sand did not want to move. Cost? Once we took the hose from the frac boat, it was $250k per day. Needless to say people wanted things done in a hurry. Two wells at most out of an Annular element, as our “sliding sleeve” was functioned by stripping through the element.
They obviously have there act together a lot better these days.
Just to get things clear, the liner is cemented, the sliding sleeves are opened exposing pre-set perforations in the liner, and sand is pumped per program. Stop pump, unseat packer, pull out to next sleeve, set packer pump, etc?
I find it interesting, that they pump sand down the annulus, and only if they sand out do they pump down the coil tubing. where as we pumped sand down drill pipe, and on sand out we pumped down the annulus. and reversed out.
As for my little moonpool job. No I didn’t have my union card, and I got most of the job done when my head was underwater, which I suppose would have got me into trouble. But offshore Brasil it is real hard to find the union rep to pay. Insert Smiley face here.
Hey, push, we had a Canadian toolpusher inspecting the pontoons in the Campos field off Brazil one time. He slipped off and quickly went towards Africa in the swift current. Miraculously, the Zapata boat found/rescued him bout ten miles off almost an hour later. We were in the mess when he came splohing in, still bug-eyed and in a state of shock. Like Mike has said, stay safe.
There is a huge technological push to enable the frac sand to be more expeditiously placed far from the well bore while avoiding all the ‘guar/gumming’ issues. One promising route is Resin Covered Sand (RCS) that makes the sand more ‘bouyan’ . Lottsa rapid, ongoing developments continuously arising.
I hear another thing continuously arising is demand for repayment of loans.
Thanks for attempting to answer. This article from CNN, http://money.cnn.com/2015/01/06/news/economy/oil-jobs-gas-prices/index.html, seems to confirm what I thought I was hearing and that is that fracking companies are laying off workers pretty fast. That leads me to think that these wells that are waiting completion will be waiting for a long time.
Maybe this might be of interest. It carries no weight, but maybe some of you can read something into it.
http://dealbook.nytimes.com/2015/01/05/right-price-for-oil-not-the-current-one/
Quote from the article: The price could be much lower if more production came from the most efficient fields. No one really knows how much lower, because Saudi Arabia and some other producers with low-cost unused resources have decided not to exploit or explore them aggressively. Still, there is no good reason to think that more than $30 a barrel is needed.
No good reason? Think again. Even if SA can produce $30 oil, they need a $90 per barrel to pay for public spending programs. Where are the few fields that can do it? Are they able to supply the 93Mbd world consumption. This show how simple-minded this article is.
If people weren’t willing to spend that $90, the Saudis would just have to do without their social programs. The Times is right. There is a huge gap between production costs and the price consumers are willing to pay.
If a replacement for oil is found in the near future, the price will certainly fall.
There is no doubt that there is plenty of room in the Saudi economy to absorb some pretty steep declines in oil income. The royal family isn’t referred to as ROYAL for nothing.
If it comes down to losing their kingdom or keeping it the royals may find it expedient to cut back a bit on the personal jets and yachts and so forth rather than flee the country.
That would likely be enough to tide things over for a while. Not that they are worried about the short term- they have PLENTY of money in the bank.
I wonder if they are smart enough to realize that all those pieces of paper real or electronic facsimiles are subject to being inflated right up the chimney- or that they may just be ignored when they present them for payment some day.
I am not a gold bug but it is very easy to see why a LOT of people believe in gold.
I wouldn’t be reading the ny times to learn about the oil industry. Their writers are lost in this field.
I posted it because Watcher is always saying that the government will do what it can to protect the US oil industry. So I thought this guy’s ideas fit with that.
What the Obama administration will do for the oil industry will be identical to what the Reagan administration did in 1986. Or maybe he will do even worse. Obama is now pandering to groups he thinks will help the democrats in 2016. This explains his deal for illegal aliens, the weak knees approach towards Cuba, delays on approval of oil pipelines, rather stupid hostility towards Russia and the rather silly approach to reducing co2 emissions via a 2000 page EPA document we know won’t get very far in really reducing worldwide co2 emissions. He’s almost as bad as bush.
Obama is now pandering to groups he thinks will help the democrats in 2016.
Actually Obama is finally doing many of the things those who voted for him wanted him to do all along. He was more conservative before the midterm elections and it didn’t help. So he now seems to be following an agenda many in his party have wanted him to do. Rather than caving, they are giving him credit for showing his backbone.
If this will help the Democrats in 2016, so much the better.
Time will tell. I voted for Obama, but I don’t like his current emphasis on pleasing the left. I guess he risks having the middle of the road types like me vote Republican. But in general I tend to dislike most politicians.
What the hell is a self-described Libertarian doing voting for Obama? Do our semantics for Libertarian jive?
Because he’s a so-called ‘lame duck’, yes?
But whatever… this whole government/state nonsense is just that- nonsense. We are a tribal species grossly out of scale, out of synch, and out of touch.
Obama doesn’t know us and we don’t know him. It’s all a mirage.
Perhaps the kingdom knows what it’s doing. A comment of Extreme Interest from the Seeking Alpha article.
“Exactly saratogahawk, I keep seeing these “little picture” analyses, but the reality is the world has a 2% oversupply problem with a 50% price response that is going to result in a 20% supply reduction, followed by a 300% price response.” Now that’s a casino even the TBTF Banks can envy. Economic whiplash ?
The ” imbalance” between current supply and current demand might be a lot less than two percent and still result in a fifty percent crash in price..
I doubt we will ever have good enough figures to know for sure just how INELASTIC oil demand is in the very short term – weeks to months. There is too much noise in the supply data to be sure with real precision exactly what the supply actually is. Hell we don’t even have a well accepted definition of what OIL ITSELF IS anymore.
The guys with hands on experience want to define it as less than some specific arbitrary value on a scale but they aren’t in charge of the media or the banks or the bureaucrats or even the companies they work for.
After following the peak oil issue on an almost daily basis for years now I am still not sure what oil really is in terms of the difference between crude and condensates and ngl liquids and so forth in terms of what they are good for with any real degree of confidence..I know the technical definitions but with a little processing… things that were not called oil a few years ago can come out of the delivery end of a refinery as unquestioned oil products.
With these things being interchangeable to a large extent depending on how they are processed at the refinery HOW COULD any definition of oil be anything but ARBITRARY?
A good case can even be made for calling soybean oil OIL and palm oil OIL since both can be used in the place of ordinary crude.
Trucks Triumph in the Year of Filling Up Cheaply
By David Welch and Mark Clothier, Bloomberg, Jan 2, 2015 12:01 AM ET
I wonder how many of them will come back to the dealership once fuel prices go back up to previous levels?
Or maybe we should look at where the sales were. If they were in energy boom areas, maybe the trucks will be going back to the dealership as layoffs happen.
Given 6 of the 12 months didn’t have that cheap gas, and the trucks were still bought, no reason to bring them back.
Make that 9. WTI was still 94 at the end of last quarter. Declining – yes but wasn’t crashing yet. The Mayhem started in the first week of October.
This said sales surged in December.
http://www.npr.org/2015/01/05/375201451/car-sales-surged-in-december-capping-a-good-year-for-the-industry
And this one said lower gas prices did influence purchases.
http://www.latimes.com/business/la-fi-auto-sales-20141104-story.html
Another attributed sales increases to lower gas prices.
http://www.cnbc.com/id/102309096
I won’t bother to check more, but sales of everything (including Leafs) seemed to be up in December.
FWIW: Car Sales are up because Subprime auto loans are back.
http://www.slate.com/articles/business/moneybox/2014/09/the_return_of_the_subprime_loan_believe_it_or_not_it_s_a_good_thing.html
“Five years after the worst of the financial crisis, subprime loans are creeping back, this time primarily in the form of auto loans. As U.S. auto sales have surged, credit standards have moved lower, with more than a quarter of all auto financing now classified as subprime.”
Its very unlikely falling oil prices have much to do with increase vehicle purchases.
Yes, I said maybe people would be turning in their cars/trucks if gas prices rise again. They may be doing that, but not for the reason I thought.
http://www.post-gazette.com/business/money/2014/12/12/Americans-car-payment-delinquency-rate-rises-with-subprime-loans/stories/201412120017
An increasing number of Americans are falling behind on their car payments following a jump in lending to borrowers with poor credit, according to two credit tracking companies.
Do we know that the trucks were bought in months with high gas prices?
“Consumers bought more pickups, minivans and sport utility vehicles than cars in every month of 2014. “
10,556 oil tank cars were shipped by BNSF in week 52.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/pdf/20141227.pdf
Must be buyers of some of the Bakken oil out there somewhere and I’ll bet they are buying all they can. Buyers might even pay a premium just to insure that the oil will be there in the future, which would mean more business for the BNSF. It is a buyers market if there ever was one.
At 49.50, Bakken producers are probably capturing even more market share, more demand for oil that is a day away from the refinery, higher ipo numbers translates to fewer wells drilled and just as much oil. It probably can be done at even forty dollars. At thirty dollars it might be a catastrophe, by then the investors or whoever is throwing the money at the Bakken developments will be heading for the exits and to the Fed’s doorstep with hat in hand. JP Morgan and Goldman Sachs won’t be holding the bag.
At this point in time, 25 dollars for one barrel looks like a real possibility. Buy ten barrels, get one free. Might as well give it away. Aliens from the Orion Belt will be flying fleets of spacecraft with cargo bays to fill up on earth. The least expensive oil across the universe right here on earth.
There is nothing new under the sun.
I did an Eraserhead thing kind of dedicated to or inspired by you, but I’m on a different computer so I can’t retrieve it just yet.
Oil Below $60 Tests Economics of U.S. Shale Boom
http://www.bloomberg.com/news/2015-01-05/oil-below-60-tests-u-s-drive-for-energy-independence.html
I thought this comment at the end of this article was interesting:
”I live on the Bakken. Outside the 4 core counties the breakeven is $76 according to the ND Dept of Mineral Resources (DMR). Of the 4 core counties nearly half the lease acres have already been drilled. All remaining rigs have poured in to these 4 counties. The third “tranche”,ie, the next 25% of the lease acres will be drilled in 2015 and the final 25% of the lease acres drilled in 2016. Using a 75% first year depletion rate that means within 3 years virtually all drilling and the vast majority of fracked oil will have been produced.
The Bakken is over. ”
Source article: http://seekingalpha.com/article/2798525-shale-oil-boom-uncertain-in-wake-of-falling-oil-prices
From Argentina:
In May there was this:
Exxon Mobil Corporation (NYSE:XOM) announced today that its affiliate, ExxonMobil Exploration Argentina jointly with Gas y Petróleo del Neuquén, has discovered oil and gas in an unconventional shale well in Neuquén Province of Argentina.
Located in the liquids-rich area of the Vaca Muerta play, the Bajo del Choique X-2 well was drilled to a total measured depth of approximately 15,000 feet (4,570 meters). The horizontal leg of the well extends for 3,280 feet (1,000 meters).
The well was completed in the Vaca Muerta formation and flowed at an average rate of 770 barrels of oil a day on a 12/64 inch choke in its first flow test. Data analysis and additional studies are being conducted to fully evaluate this discovery. Appraisal wells will also need to be drilled before a commerciality decision can be made.
2 weeks ago, this
http://latino.foxnews.com/latino/news/2014/12/18/exxonmobil-makes-new-shale-oil-gas-find-in-argentina-vaca-muerta/
U.S. energy super-major ExxonMobil said Thursday it has made a new shale oil and gas discovery in the massive Vaca Muerta formation in southwestern Argentina.
Exxon said in a statement that it made the find with the La Invernada X-3 well, which was drilled to a depth of 4,686 meters (15,364 feet).
The well, operated by ExxonMobil Exploration Argentina and drilled at the La Invernada block in the southwestern Argentine province of Neuquen, produced a flow rate of 448 barrels of oil and 1 million cubic feet of gas per day in an initial test.
“Analysis of additional information and studies is being conducted to completely evaluate the discovery,” the company said, adding that “more wells must be drilled before decisions can be made” on commercial viability.
After 60 days of output, the well has produced a total of 31,400 barrels of oil equivalent.
This latest find was made at a spot 20 kilometers (12 miles) from an earlier Exxon discovery, announced in May, at the Bajo del Choique block.
That don’t look like much.
Watcher, those production numbers are not particularly high, but the fact that they have drilled and successfully produced a 12,000 foot deep well is what is significant. In the early days of these new shale plays, the laterals are always short – relatively speaking – as that is where the most trouble can arise. As successful wells are repeatably drilled/completed, an entire array of enhancements start to incrementally appear, such as the precise (as within one to five feet) placement of the lateral in the payzone), increasing length of lateral, number of stages/placement of same, number of perforations, type of fracturing process to apply, and many other ongoing components.
Sinopec is just past this phase now in Fuling with over 100 producing wells and is ramping up with pad/batch drilling.
The Tuscaloosa Marine Shale is probably near this stage of development with 55 or so VERY difficult wells drilled these past couple years and the last dozen showing repeatable success, even at a relatively low output as is the case in Argentina. The TMS guys, which right now is almost exclusively Goodrich, are absolutely screwed at low WTI pricing. However, the proven process/technology is there for whoever in the future chooses to run with it.
Process matters a lot less than financing. The defaults are coming and that spigot will be closed forever to avoid being burned again.
It took only five years for the free and easy money to return to the personal auto market.
Forever may mean anywhere from a year or two to five or six in the tight oil business. It seems pretty likely that SOME tight oil is profitable at a hundred bucks or less- I think we can accept this as a fact.
The lenders will be more careful and insist on more equity money or maybe a profit share but tight oil WILL be financed again – some of it anyway.
The lenders will also insist on a faster repayment schedule so as to minimize their risk from another price crash as well as declining output.
I wouldn’t consider 700 bopd in a 1000 meter lateral a low output. The Gas to Oil ratio does look very high, and they didn’t report the oil density. I worked in Argentina and they will require significant NGL infrastructure if this is a fairly large extra light oil or a very rich condensate.
so the devil will be in the details, but Gov Brown isn’t a moonbeam any more…
“Toward that end, I propose three ambitious goals to be accomplished within the next 15 years:
Increase from one-third to 50 percent our electricity derived from renewable sources;
Reduce today’s petroleum use in cars and trucks by up to 50 percent;
Double the efficiency of existing buildings and make heating fuels cleaner.
We must also reduce the relentless release of methane, black carbon and other potent pollutants across industries. And we must manage farm and rangelands, forests and wetlands so they can store carbon. All of this is a very tall order. It means that we continue to transform our electrical grid, our transportation system and even our communities.
I envision a wide range of initiatives: more distributed power, expanded rooftop solar, micro-grids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution and millions of electric and low-carbon vehicles. How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels.”
http://www.latimes.com/local/political/la-me-pc-brown-speech-text-20150105-story.html#page=1
If Moonbeam succeeds at this (and I suspect he may), it will blow a big hole in the oil market.
I think the renewable part will be achieved. Arnold already started that with 33% by 2020.
I’m not sure how we will achieve the reduction in oil use
although we did start on the 1st leg of the high speed rail today
Reduction in oil use?
Two hints:
1) ‘Best car we ever tested”–AN ELECTRIC CAL
2) “Lowest cost car to operate”–AN ELECTRIC CAR.
may be true, but people have to buy them as replacements for ICEs. We do that in CA a bit, but not to meaningful scale yet. I wonder what Brown has up his sleeve to promote a huge change in car sales and/or operations.
http://www.greencarcongress.com/2015/01/20150106-umtri.html
The average fuel economy (window-sticker value) of new vehicles sold in the US in December was 25.1 mpg (9.36 l/100 km)—down 0.2 mpg from November and down 0.7 mpg from the peak reached in August,
We all knew that was coming, didn’t we?
http://www.greencarcongress.com/2015/01/20150106-leaf.html
Nissan sold 30,200 LEAF electric vehicles in the US in 2014—the first time any plug-in has sold more than 30,000 units in a single year. The LEAF results also represented a 33.6% increase over 2013 LEAF sales (22,610 units).
Now we will have to wait and see if the sales can hold up with cheaper fuel?
I was in San Francisco the last couple of weeks and I think higher density living arrangements will be one way forward. I remember when I 80 was 4-6 lanes. Now it’s 10 lanes, overcrowded and there’s no room to expand. So they are investing in higher density, not to save oil but to reduce commute times.
I live in an european city, and I agree. I retired here because life is actually less complicated, everything is closer, and one gets to talk to neighbours in the morning when we hang around the bakery or the coffee shop.
I read someplace Moonbeam started disbursing money for the long delayed super fast commuter train yesterday or maybe the day before.
This is going to be one of the biggest boondoggles ever – the most expensive single public works job in American history that will so thoroughly piss off working class people who can’t afford to ride it- and don’t live or work near the stations anyway- that it will probably cost the Democrats a couple of decades worth of elections.
Keystone ”déjà vue all over again.”
I am all for mass transit and energy efficiency but such projects have to make financial sense to at least some degree. This one is a solid gold turkey in terms of costs versus utility.
Now FAST trains that could be built at reasonable cost and go places where people really need to go on an every day basis just don’t seem to be sexy enough for anybody right or left.
I doubt if any body really knows but I would bet that ninety percent of the trips between cities three or four hundred miles apart in this country are of highly questionable value to put it mildly.
There must be a hundred ways that the money could be better spent to improve the lives of Californians while silmantaneously safeguarding the environment.
People are going to have to get used to the idea that if they want to visit frequently with friends and family that they are going to have to live closer together in the future – the way we did in the past.
Businesses are good at figuring out way to trim unnecessary expenses and the number of people riding such a train between cities on business trip after trip is going to decline sharply with further advances in cheap electronic communications.
Of course the elite know how to get some socialized goodies for themselves. It’s not just the poor folks on welfare.
We have a new community recreation center in my county. The annual membership fee is high but not outrageous if you live if live close by and can go often- but — totally unaffordable if you don’t – as is the individual admission fee.
So a couple of thousand of the better off folks who live in or very near the county seat have themselves a defacto indoor country club paid for by the other thirty thousand residents of the county.
Subsidies for things like renewable energy will eventually benefit all of us and thus justifiable.
But it is extremely unlikely that more than a very small percentage of us are ever going to ride bullet trains.
OFM, You have no idea how accurate your statement is regarding this ‘Crazy Train’ being the biggest boondoggle in the history of the country.
One can hop a plane, fly round trip to LA or San Diego from SF for a couple hundred bucks and barely 60 minutes time. The ‘Crazy Train’ will cost more and take WAY longer travel time.
With the latest cost estimates ranging from $70 billion to $150 billion, many people doubt it will ever be fully built.
yeah, it is depressing to me how far into the weeds this project has gone.
But 20 yrs ago there was basically 1 rail station in LA and look how far that has changed.
wrt climate change, air travel is one of the bad actors, so it would be nice if we could put a dent in that.
http://www.hsr.ca.gov/
One can hop a plane, fly round trip to LA or San Diego from SF for a couple hundred bucks and barely 60 minutes time.
Sounds good in theory, but in practice it took me twice as long to go from Contra Costa County to SFO the day before yesterday — total distance 45 miles. I can get from my Düsseldorf suburb to Frankfurt airport faster using high speed rail — total distance 220 km. And I’m counting my three minute walk to the train station.
Airports, like cars, take up to much space to be viable for fast transportation in regions of high density population. San Francisco’s population stagnated for thirty years until they started narrowing the roads with bike lanes, cleaning up the neglected downtown, removing the Embarcadero Freeway etc. Now it is booming. It’s a city, not an interchange.
Also keep in mind that your plane won’t be able to make any stops between SF and San Diego, so the economics make less sense. California, like Florida, Japan, Egypt, Java and Italy, is ideal for high speed trains because the population is mostly strung out like beads on a string.
Using less oil is just a side effect.
Yes, it is faster to take the train from NYC to DC or Boston than to fly. And trains can take you from downtown to downtown, which planes can’t.
http://www.citylab.com/commute/2014/11/why-more-northeast-us-travelers-take-the-train-than-a-plane-in-2-charts/383158/
“In 2000, passenger rail captured about 37 percent of this market between New York and Washington, and 20 percent between New York and Boston. By 2012 those figures had reached 75 percent and 54 percent, respectively.”
Ah yes- But the REAL Question is why all those people are so dead set on traveling back and forth from city to city.
I am NOT convinced such a mad flood of people running back and forth serves any real goal that cannot be reached in some other fashion.
Bullet trains are ok in principle. So are top of the line automobiles. But you can get five times the utility out of five Fords as you can one BMW that costs five times as much.
The money should be spent on REASONABLY fast trains if it is going to be spent on trains. Such trains are actually almost as fast in an urban corridor anyway if you want to start and stop them every little bit.
The bullet train is a luxury for people who can afford it and need or want to do the whole trip- just as the hundred grand beemer is a luxury that could be replaced with five cheap new Fords-making five times as many voters happy.
The repuglicans are not much smarter than cave monkeys but they are smart enough to figure this out.
They are going to beat the holy crap out of the democrats with this issue when the working folks finally come to understand how much a ticket is going to cost and how few the stations are going to be and WHERE they are going to be.
I haven’t paid any attention to this train plan other than an article in the New York Times in the last day or two.
Perhaps it won’t get built. I don’t know. I’m not in California, so that part of their plan doesn’t really matter to me one way or another.
“Sounds good in theory, but in practice it took me twice as long to go from Contra Costa County to SFO the day before yesterday — total distance 45 miles.”
Takes as much as an hour to go from downtown SF to SFO. SFO suggests you show up 2 hours early for check-in. Figure another hour from LAX to downtown.
Let me describe how it’s for me: I can take a tram downtown, time 24 minutes. I walk to the high speed train, 6 minutes. Time my arrival 15 minutes ahead of departure. Total time to departure about 45 minutes. Train travels to Madrid at up to 200 mph, total distance 250 miles. I’m at Atocha station in the center of the city in less than three hours. Total cost about $100 round trip. But it must be subsidized, I suppose.
Yeah, I think it is subsidized, but it just works. I think this is one place we see eye to eye.
But it must be subsidized, I suppose.
And airports, highways, ports, bike paths and sidewalks aren’t?
It’s a question of priorities, planning and how those godless commie tax dollars are spent to influence behaviour.
And they got you with a simple blend of convenience, high technology and good service… that would never fly in the US.
-Lloyd
-Lloyd
good series of articles wrt the dam train!
http://www.theatlantic.com/business/archive/2014/07/the-california-high-speed-rail-debate-kicking-things-off/374135/
Actually, the vehicle part of it looks pretty simple to me. Even on a domestic scale. I am having fun working on the following ways of keeping my Leaf well fed rain or shine.
First, of course, is just plain PV -battery charger. Works when sun shining fairly bright or more
Second is biogas to IC engine-genset. All totally proven, cheap, works if you have wood or garbage.
Third is wind, IF you design it right from get-go, meaning forget the light wind, and go for the occasional real strong ones. Then your wind harvester is much smaller, cheaper, and pretty well guaranteed to work with no fuss.
All of above, if in excess of immediate need, pump a tank of compressed air. Very simple, not efficient, but better than just wasting an opportunity. Compressed air can do lots of useful things, including running a battery charger. If you put the air thru a hot stove, you can easily double power out from expansion motor.
Good at domestic scale, much better at town scale. Never at a loss to charge up the EV’s.
All that in 15 years? And: “It will require enormous innovation, research and investment. He is a dreamer or just plainly one of the politician that must make statements like this to impress part of the people. Similar to Obama who announced in an address to the congress that the US has NG for the next 100 years.
We have to be at 33% by 2020. Currently,
California’s three large IOUs collectively served 22.7% of their 2013 retail electricity sales with renewable power.
Pacific Gas and Electric (PG&E) – 23.8%
San Diego Gas and Electric (SDG&E) – 23.6%
Southern California Edison (SCE) – 21.6%
http://www.cpuc.ca.gov/PUC/energy/Renewables/
=
California Groundbreaking Marks The True Beginning Of High-Speed Rail In America
On Tuesday, California’s bullet train, which will truncate commutes across the state and forever change how people get around, breaks ground in the Central Valley hub of Fresno.
http://thinkprogress.org/climate/2015/01/06/3608428/three-hour-train-ride-from-los-angeles-to-san-francisco-bullet-train-groundbreaking/
But why, some say, the moon? Why choose this as our goal? And they may well ask why climb the highest mountain? Why, 35 years ago, fly the Atlantic? Why does Rice play Texas?
We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.
JFK
Rat is damn proud to be a Californian
Don’t forget Hydrogen.
http://www.bloomberg.com/news/2014-05-20/toyota-bullish-on-hydrogen-cars-with-california-station-plans.html
That’s what I am thinking.
Look, why is solar a waste of money and the space program isn’t? Or does one think it is?
What about super colliders?
There are projects that are done that may not be immediately profitable, but contribute to the general knowledge and other values long-term.
For that matter, is it time to take away tax status for churches?
Really, there are reasons to support renewable energy even if one thinks they are “too expensive” or can’t survive without subsidies.
I support solar power research,but oppose subsidies for commercial deployment.
U don’t think the electric industry has been massively subsidized for almost its entire existence? If so, you need to learn some history.
And then what are you going to say, the US electric industry, the most widespread and pretty much the most stable in the world, is another example how subsidies don’t work and government shouldn’t pick technologies?
I oppose subsidies for solar energy deployment. Is there something else you wish me to add? Like I don’t think its money my taxes should support?
Taxes are theft. I oppose theft.
Hi Caelan,
So you prefer anarchy?
Hi Dennis,
It’s not so much that I prefer it, but that we are all anarchists— in effect, small-scale ‘direct-democratic’ tribal in nature, and that the monopoly-on-violence large-scale centralized nation-state is an exceedingly dangerous sociotechnologically-complex construct that a(n often Cronymedia™-dipped) glazed-over-many accept, like the prisoners in Plato’s Cave accept the shadows on the wall– some hereon too, apparently…
“I voted for Obama.”
It’s really quite terrifying when one thinks about it. But then, the nation-state is the superset terrorist, and taxes, stolen on the backs of the working/wage-slaving, population, support their terrorist operations (“Operation Enduring Freedom”/”Bringing democracy”/drones, etc.) against the general populations overseas.
IS (ISIS/ISIL) is the almost self-similar ‘Eraserhead child‘ of the US/UK/EU parent. The orange jumpsuits of those apparently beheaded look like, and maybe are, some particular prison-issue garments of the US, leftover, perhaps, along with weapons and military equipment, etc., to help power IS.
Is it really any wonder how and why civilizations collapse?
Hi Caelan,
If we were all anarchists there would be no government of any form. No taxes=no government, it really is that simple.
Hi Fernando,
I think it is money well spent. There are lots of things that our taxes get spent on which we may or may not like. When should government subsidize things? You seem to be in favor of public transportation (and I am as well), are you opposed to government subsidies to mass transit in cities? What about roads and bridges and public parking?
We can remove subsidies to wind and solar when all subsidies to the oil and natural gas industry are removed (including roads, bridges, parking, and any special tax breaks given to the oil industry). These subsidies exist in part to level the playing field, oil and natural gas have been receiving subsidies for a long time.
me too Rat
California is not #1 per capita.
Washington State produces over 75% of it’s electricity from renewables.
The island of Hawaii produces over 40%.
Forgive me if I am wrong, but if I recall correctly Washington state is blessed with significant hydroelectric capability. In other words, its large renewable % is primarily because of geography.
In that sense, a better measure would be the rate at which renewables are increasing. I’d imagine a chart would show California is progressing faster Washington, and that Washington has likely had a lot of hydroelectric contribution for quite some time.
I should just do a quick Google search to confirm this, but I’m willing to feel like a fool in my wrongness instead.
No, you are correct. Washington State has a lot of hydro, and the Island of Hawaii has a lot of geothermal.
However, the solar power potential of California is many times greater than both. Yet California ranks 4th in the US, in per capita solar.
Brian R,
You’re right, and one result is that Seattle City Light announced last year that they are the first US carbon-neutral utility.
Renewables are always geography based, like oil and coal.
Wharf, are you a musical Rat?
I play harmonica from time to time; spoons, too.
no worries.
wondering about your virtual id.
has a specific meaning in some circles I frequent
https://www.youtube.com/watch?v=J3lQuOcx-1E
yep. felt like you’re grateful.
Typical people’s republic of California grandstanding. They’ll kill the state economy but they’ll keep on chugging for a while.
What makes you think the California economy will be killed? Its tech industry is doing well, and these look like projects that are appropriate for a tech driven economy.
It’s electric power supply. Deep renewables penetration is a technical impossibility. The California legislature is run by incompetents. They need much more high quality engineering analysis, but they are married to nearly religious beliefs. I’ve dealt with politicians like that in the third world, and it seems to me that California is headed the way of Africa or Latin America. In 15 years we should see mass flight of firms and educated people.
well this is just nonsense Fernando. Sounds more like a personal axe to grind? What did California ever do to you?
Seems to me that it is California’s business what it does, and shouldn’t really be Fernando’s concern. If California succeeds, it becomes an example for other states. If not, it’s California’s problem, not Fernando’s.
We probably wouldn’t have hybrids in the US if California hadn’t taken action first. We NEED California to do these things, because the rest of the country isn’t as innovative.
California did nothng to me. I do find their politicians to have more mental delusions and lack of common sense than politicians in other states.
The “nonsense” you mention is based on sound scientific, engineering, and economic analysis. The renewables drive will fail miserably and the watermelons will blame a conspiracy. Did you read my “interview with an oilman”? It’s intended to poke fun at enviromentalists, but it has some loaded comments about everybody.
Renewables, energy efficiency, and public transportation improve the quality of life for many people.
Less air pollution, for one.
If a community wants to do that to make itself more attractive to people, that is well within the community goals to do so.
The same with zoning. That changes the mix of buildings within a community. It’s not a pure free market system, but that’s how people influence what kinds of activities they live next to.
New York’s decision not to have fracking now makes sense given that some people don’t want to live next to fracking operations. If you’re in the tourism business, it’s in your best interest not to have drilling right next to your hotel or the tourist attractions that people come to visit.
Here’s some economic analysis for you. 5.98 cents/kwh
http://www.renewableenergyworld.com/rea/news/article/2015/01/dubai-utility-dewa-procures-the-worlds-cheapest-solar-energy-ever
I know. But what about the dust? And what about the clouds? And what about those Africans who want refrigerators? 🙂
That analysis is wrong. Try again.
Fernando,
Your last reply doesn’t tell us anything. Why do you think the analysis was wrong?
I’ve given you several studies that show that renewables can indeed provide a major input to the grid. You didn’t appear to read them.
If you’re just going to repeat simplistic denials, well…what’s the point of that?
The grid, too, seems like yet just another form of governpimp people-control, what with metering/monitoring/taxing/skimming/inflating people’s (supposed) power-usage, and cutting it off if they don’t pay the bills or maybe get too ‘politically-motivated’.
“Control the oil and you control entire nations; control the food and you control the people.”
~ Henry Kissinger
http://trailblazersblog.dallasnews.com/2014/02/texas-surpasses-california-as-top-tech-exporter.html/
http://www.newsmax.com/Reagan/Companies-California-Texas-Perry/2014/04/04/id/563795/
http://venturebeat.com/2013/03/05/why-austin-is-techs-new-destination-of-choice/
http://www.macroinsider.com/business/californiaaposs-high-housing-costs-drive-out-poor-middle-income-workers-h25839.html
http://www.statesmanjournal.com/story/news/2015/01/04/oregon-top-relocation-destination-study-says/21253237/
“Looking at it nationally, a lot of those people are coming from California, which is characterized by high housing costs,” Stoll said. “Moving to Oregon is a lower-cost state, but it also has all those amenities and it’s less congested. I would think that pattern will continue into the foreseeable future.”
http://www.mysanantonio.com/news/local/article/Jobs-leaving-California-coming-to-Texas-5607094.php
“Other companies that are relocating, expanding to Texas include Apple, eBay, Dropbox, LegalZoom, Motorola, PennyMac and Visa. Most of the jobs in the report are heading to Austin, Houston, and the Dallas-Forth Worth metropolitan area.”
http://www.westernjournalism.com/californias-golden-goose-getting-throttled/
“In case you’ve been asleep for 30 years, California’s economy is not what it used to be. A generation ago, California had the sixth most productive economy in the world as compared to other nation states. That position has slipped to ninth; and for anyone with an inkling of knowledge of economics and the indispensibility of free markets, it’s not difficult to understand why.”
It would be great if more tech jobs did leave California. Better for everyone.
However, Silicon Valley and SF still get far more tech startups than the rest of the country. That’s where the money is and that is where the networking is.
The companies and people who want to be there continue to move there (and are driving up housing prices in the process). There are more than enough reasons to leave CA now if they wanted to. I sincerely doubt that adding more renewable energy, energy efficiency, and public transportation are going to be the reasons people leave the state.
I live in a place that is putting more focus on renewable energy, energy efficiency, and public transportation, too. Lots of people want to live here, which is driving up property values. That’s good for those who already own property. Not so good for those looking to move or rent here.
In 15 years California will probably lead the nation in Organic Tomato Gardening and marihuana retail start ups.
we already do
“In 15 years California will probably lead the nation” in everything.
Things continue to look up in California.
Republican-led states like Kansas, Wisconsin and Arizona are suffering mightily because of their addiction to tax cuts (which, it turns out, are actually not paying for themselves at all). The flip side of that coin? The latest news from California, which is getting revenues that are much higher than expected:
California income and corporation tax collections surged in December, pushing estimated tax revenue since July to about $3.6 billion above what lawmakers projected when they approved the current budget, according to preliminary totals compiled by the nonpartisan Legislative Analyst’s Office.Preliminary income tax totals in December came in about $1.5 billion above what the budget projected for the month. Net corporation tax collections topped budget estimates by $500 million, according to the LAO. That total – for just one month – is almost as much as the $2.5 billion that the LAO recently projected state revenue would exceed budget estimates for all of 2014-2015.
Remember how Republicans used to mock California as a failed state? Greece on the Pacific? Well, a few years ago, voters kicked Republicans out of power and changed the absurd supermajority budget requirements that had given minority conservatives veto power over state government. The result? With voter approval, the state raised taxes on the highest income earners to fund education. It started to reinvest in water and transportation infrastructure and rebuild the social safety net. It completed the implementation of a robust cap-and-trade program to restrict carbon emissions and fund sustainability projects. And the result? A rapidly growing economy and surging tax revenue.The results are in: one way of governing works. The other doesn’t.
http://m.dailykos.com/stories/1356177
Yes, if you starve the budget and don’t pay for much in your location, you have a place people don’t want to live in.
Quality of life is important, especially for people who have the money to live where they want. Why do you suppose they are willing to pay outrageous prices for housing in certain areas? Because they want to live there, want to vacation there, or assume properties there will be a good investment.
“In 15 years California will probably lead the nation” in everything….
if we get rain.
Too much Fox News. You can tell by the name calling and ad hominem. It’s addictive.
Like my brother’s “Ten signs you may be an alcoholic”. #2: Sparks on the guardrails. Sometimes little things tell a big story.
Who me? Fox News? I’m a radical pro Palestinian european dwelling supporter of marihuana legalization atheist anti communist libertarian.
Not bad, but if you are libertarian, or, anarchist, such that we may all be if we really think about it, weed legalization is a moot point.
I’m no anarchist, I’m a qualified libertarian. For example,I don’t think people have the right to own 105 mm howitzers.
If there is a(n illegitimate?) use of weapons to control weapons, then we have a problem, maybe a paradox. (Unsure how stable paradoxes are in nature.)
Libertarian seems about the same as anarchist, depending on who/what is consulted. What’s your take?
BTW, and speaking of ‘weapons’, Nuclear power does not seem to ‘work’, except maybe in the sense that the green revolution/industrial agro ‘works’. Neither appear to work in the long run as they currently are. Whoever is spouting this nonsense would do themselves and others well to employ some rigor with qualifications, rather than mere PR sound bytes, (maybe from their own industry-cum-governpimp they ‘work'[soft-shill] for).
Lastly, society is not equivalent to a ‘basketball game’, so to suggest that it follow some sorts of illegitimate rules, such as imposed by a more or less self-elected/subscribe elite group of cronies and their own rules is quite misguided.
In 15 years we should see mass flight of firms and educated people.
And where do you expect them to go?
Ron thinks in 10-15 years there will be martial law everywhere.
Ok, Let’s jump ahead 15 yrs to 2030. I am safely dead, so don’t worry about it a bit. But what about California? Where did all those tech savvy billion types fly off to?
Well, just look around. What! They are all still here, and now have multiples of billions and are totally insufferably arrogant and proud of themselves, For what? For seeing the obvious, of course, that being that a new tech based on an essentially limitless resource is gonna go down in price, and an old tech based on a diminishing extractive resource is gonna go the other way, real fast, esp when people are forced to face up to the fact that it happens to be poison to boot.
So California is all solar, is selling its clever new ideas all over the world, and has pushed the ff power companies right over the cliff they climbed up on by not recognizing that same obviousness.
Now, back down in the deep dark dungeon of 2015, where smart people spend real time doing microscopic exams of deep holes in North Dakota –who woulda thought it??
Some of course uphold a kind of greenwashed BAU(-lite) mode.
If we are talking about ‘Usual’, greenwashed or otherwise, then it is not likely going to work for the simple reason that it is not being run democratically, and I am not talking about so-called representative democracy either.
It is suspected that if we could get all “our” industries run as relatively-laterally-hierarchic cooperatives, then it would be a step outside the Usual and toward something closer to workable, but that seems a tall order and against what might be a fundamental nature of the animal that is human.
It’s this fundamental nature that many seem to completely ignore when they spout talking points about this or that technology, EROEI, etc., and so in a sense, it’s all kind of meaningless, even ridiculous, without this crucial context.
Technology without ethics, without democratic control is garbage.
That’s an excellent question. If California keeps turning into a mixture of third world politics with very expensive energy? I would expect those businesses which can to move elsewhere. I’d have to research their prospects, taxes, airports, and other matters, but Texas, New Mexico, Missouri, and states like that look like attractive alternatives. I don’t expect martial law by 2030 in the USA. I expect to see a lot of problems in the Middle East and Africa, Indonesians trying to flood Australia. I don’t think Israel will exist as such, and I’m not sure the European Union will be run as it is now. By then they should have closed their borders and be begging for Russia to help them out.
I’d have to research their prospects, taxes, airports, and other matters, but Texas, New Mexico, Missouri, and states like that look like attractive alternatives.
If they had wanted to move to those states, they would have done so already.
I’m not sure why you think there’s going to be this massive opposition to California’s energy plans.
Remember I wrote in 15 years. Have to give your watermelon party ideas time to wreck the economic environment and for companies to give up hope.
Have to give your watermelon party ideas time to wreck the economic environment and for companies to give up hope.
If companies give up hope, they aren’t moving anyway. Why would they move is there is no hope?
Give up hope on California’s return to normalcy.
We don’t want California to return to normalcy. That’s another way of saying Business As Usual, which most people here believe is a doomed approach. The fact that they are thinking of trying something else is a good thing.
I suppose they could try something else and name King Fernando I.
“There was something in the air that night, the stars were bright, Fernando…” ~ Abba
“…They were shining there for you and me, for liberty, Fernando…”
Germany seems to doing alright, and they’re where California hopes to be in 10 years.
Germany’s unemployment rate is 4.9%, they have a budget surplus (declining debt/GDP ratio). It is estimated that the renewable energy sector in Germany created 370,00 jobs in 2013 (and we’re not talking minimum wage retail jobs…).
Maybe it makes more sense for Germany though since natural gas is triple the U.S. price in Europe. However, my bet is that fossil fuel prices will tend to rise over time, which would make people flee TO places with high renewable capacity, not AWAY from them.
Germany isn’t doing alright. Their renewables program is a funky mess. And Germany isn’t California. Bad comparison on many counts.
Providing Germany with energy is a nightmare. Our country’s only “advantage” is that we’re densely populated so you need few “electricity highways”. If you follow German politics you’d know that this is holding us back most lately. The grid is too old now.
Anyway, for renewable energies our geological situation sucks balls. We have very little coast (like only 1000km) and open sea (thanks to Denmark, UK, BeNeLux). We are hundreds of kilometers further north then Washington or Maine.
Yet we can sustain ourselves, and no we don’t buy nuclear power from France, that’s a common myth. It has been debunked every single year. Nuclear energy usually stops sounding great anyways when companies have to pay to store the waste for thousands of years.
Yes transforming our energy to renewable costs a lot. But part of the cost is that the technology isn’t there, and you know what happens after that? We export the progress like no other country.
If we can make it work with our poor geographical position, you’d think the USA having areas where solar energy is 30-60% more efficient than literally anywhere in Germany could make it work much easier. Especially now that the technology is there.
And well, at the end of the day all saving helps nothing if it ruins the planet.
Thanks much for all that. This place needs that kind of comment very badly.
ESPECIALLY THE LAST SENTENCE!
>
The grid is too old now.
<
This is what many who criticise solar are missing when they talk about the cost of upgrading grid. The grids need upgrading anyway, they have fallen behind the times and are wearing out. How close is the US grid to crumbling just with BAU? Solar near to the user eliminates the need for expensive long distance transmission. Adding rooftop solar to a town can help smooth the daytime peaks without the need to pipe in more electricity from fossil fuel stations.
NAOM
Radio Ecoshock just had a podcast on some of that kind of thing and as a response to Ozzie Zehner’s previous R.Ecoshock podcast and the battery thing was mentioned, and if recalled, subtly handwaved away– like, ‘they’re working on it.’
The serious need for cooperative-run businesses and community-ventures aside, in the show, they did ask if things could be run off the PV’s without batteries, and the answer was of course about smooth flow, but it still didn’t seem to answer the question. I mean, candles flicker, so why can’t light bulbs do so, or microwave ovens? Might be fun. ‘u^
Germany isn’t energies ends work. It makes offset countries’ grids unstable, and has been building coal plants like crazy. Germany has a very irrational policy which is about to end. Unknown to some Germans, the electric power system they have either crashes soon, or they all move to France.
Here´s a link to a very thorough article on the German renewables blunders:
http://www.dissentmagazine.org/article/green-energy-bust-in-germany
I have a keen interest in understanding how we can get off fossil fuels. However, strategies such as Germany´s are clearly the wrong way to fix the problem. Germany´s program isn´t really viable.
I’ve just started that article. It looks like it is trying to make a case for nuclear rather than renewables. Some of us are open to nuclear (I didn’t used to be, but now I think we do need options besides carbon-based fuels). However there are economic issues with nuclear.
http://www.nytimes.com/2014/12/23/science/nuclear-carbon-free-but-not-free-of-unease-.html?partner=rss&emc=rss
Electricity from generators fueled by low-cost gas is priced so low that nuclear plants cannot compete, industry analysts say, and the markets also offer advantages to new power sources, especially wind turbines, over existing sources like nuclear and coal.
“The markets are quite simply not working,” said Richard J. Myers, the vice president for policy development at the Nuclear Energy Institute, an industry group.
Popular journalism, with some misleading claims, and some accurate ones.
The criticism of wind & solar is misleading: much of the expenditure that is criticized is sunk cost: FIT expenditure incurred to bring down their cost. The claim that the European grid has been made less reliable is unsupported by any detail or source.
The argument that German wind & solar are relatively expensive compared to other countries is correct. Germany has poor sunshine and relatively little coastline. But, Germans are willing to pay a premium for domestic energy.
The claim that elimination of nuclear has caused CO2 emissions is correct: Germans are more concerned about the safety of nuclear than they are about CO2. Perhaps that’s a mistake, but they feel very, very strongly about it.
This may happen but only if they do not recover from the drought.
“Deep renewables penetration is a technical impossibility.”
What do you mean by this?
What is going on in Scotland?
http://www.wwf.org.uk/about_wwf/press_centre/scottish_press_centre/?7432/2014-a-massive-year-for-wind-and-solar-power-in-Scotland—new-data-published
What do I mean by this? That renewables suffer from intermittency problems galore.
Try readng this
http://21stcenturysocialcritic.blogspot.com.es/p/intermittency.html
Then go to the MIT servers and pull the original report.
nice Fernando. you make a statement about “technical impossibility” and then send me to your blog.
I don’t recall anyone here saying that there aren’t problems with intermittency.
Surely, the free market disaster capitalists can solve these problems
I sent you to my blog because it has a brief cut out from the mit paper, and you can use it to go get the original. Additional secretarial services cost €1 an hour.
Well said.
Match intermittent supply to intermittent demand. Problem solved.
NAOM
Right on! I put in a lot of solar. When all batteries are full and the Leaf is totally sated, I just dump the juice into the hot water tank, which is big enough to take almost anything. Now I have nice hot water heat anywhere the thermostat asks for it,
The wood stove dumps its hot water the same place, so I have a more or less bullet-proof heating system, no matter what the weather, with no fossil fuel input.
Like right now. It’s cold as ever gets around here outside the window in front of me. I am near the point of taking off my nice 50 yr old norway sweater.
Yair . . . . there has been some discussion about solar refrigeration
Intermittency for household refrigeration is not a problem . . . I stress refrigeration not freezing.
I have a 12volt sixty litre freezer that runs off my truck or solar panels and each day I can freeze at least eight litres of water. these ice blocks are transferred to well insulated cool box . . . under normal circumstances I can put down about a hundred kilograms of ice per week . . . this is with ambients running up to over 40C
This is ancient technology, the freezer is close to thirty years old and would have in excess of ten thousand hours run time and has had zero down time or breakdowns.
wimbi, I have a 3.4kw solar grid tie pv, a solar hot water heater and hot water heat pump. It cost a lot of money. I looked into batteries at the time I was contemplating the installation. Could not justify the cost for backup power in the event of power failures which we get periodically. . The batteries would also be pretty useless in the winter when electricity production drops off dramatically. You are describing a very expensive system which most people, who don’t even have money saved for an emergency, can afford. It is a nice hobby if you have the funds for it but does not scale up.
As has been pointed out, you can transfer solar energy to a form of storage using very low technology, like freezing water when solar is abundant and then using it for cooling when the solar isn’t working.
Not right, anony- I spent a hell of a lot LESS for all my stuff than my neighbor did for all his stuff that gobbles ff’s to keep going.
I am talking here about CHOICES. People do pay money, and do use up carbon, to get things. The things they get make a world of difference.
I bought a Leaf, my neighbor bought a ford 250, or whatever it is. I go around in my Leaf for near nothing more after the initial layout. He goes around in his pickup, and worries about what will happen to gas prices.
If we only talk about people who can’t buy anything, plus or minus, then we don’t have to worry about their effect on the environment-or anything else.
Boomer..like this…
http://www.ice-energy.com/
When your Nissan Leaf-blower is unoccupied, can some of us sleep in it? Or do you have a trailer that we can hook up to it for some smooth-current applications? Do you have wireless? That would be a bonus. The lumpens could surf the net all day while quietly laughing to themselves at all the bullshit job wage-slaves toiling in their cubicles and factories.
And it’s merely a shot of low-proof snark in my main drink.
…Because I like the idea of technology for the so-called have-nots, rather than just the so-called haves (that depend on a system of land and resource grabs and violence and ideological [-legal-] indoctrination to uphold it.).
But what fun is that? The so-called haves don’t get to beat their chests and make excited-gorilla sounds/grunts in front of the so-called have-nots.
Now we are visiting fantasy land. This is the reason why greens don’t get traction with renewables in real life. Ignoring problems doesn’t get you very far.
It’s an interesting paper – I’ve read parts of it, and I don’t see any indication that the authors don’t believe that wind/solar are viable. From page 4:
“This paper will not question the basic premise that a large penetration of intermittent renewable sources of electricity generation will take place in existing power systems over the next two decades and further. The drivers for this change could be varied, but they will not be disputed here. Instead, the paper will examine the implications on capacity expansion, operation and control of power systems and the technical and (mostly) regulatory measures that will be needed to successfully integrate these new technologies in an efficient and secure manner.”
https://mitei.mit.edu/system/files/intermittent-renewables-whitepapers.pdf
Again, to reiterate, California exports its pollution by importing electricity generated from fossil fuels in places like Wyoming. He ain’t fooling anybody except for the fools who are dumb enough to swallow his tripe.
Governor Moonbeam, now deserves the title of Governor Sunbeam. He’s an idiot. Just calling a spade a spade.
Again, to reiterate, California exports its pollution by importing electricity generated from fossil fuels in places like Wyoming.
Except that it doesn’t appear to be true. An excerpt from the article linked below:
“California’s massive electricity in-state generation system generates more than 200,000 gigawatt-hours each year and is transported over the state’s 32,000 miles of transmission lines. In 2011, California produced 70% of the electricity it uses; the rest was imported from the Pacific Northwest (10%) and the U.S. Southwest (20%). Natural gas is the main source for electricity generation at 45% of the total in-state electric generation system power.”
http://energyalmanac.ca.gov/electricity/
If they aren’t importing coal-fired power plant electricity, I’ll eat my hat.
http://energyalmanac.ca.gov/electricity/total_system_power.html
So you’re saying you don’t believe these numbers from the link you posted:
Total imports from the Northwest and Southwest decreased by 6 percent from 2012 levels due to a decrease in net power imports by California balancing authorities. Balancing authorities control power flowing across transmission ties between different regions within the Western Electricity Coordinating Council. The following four California Balancing authorities report their annual net energy imports to the California Energy Commission: Balancing Authority of Northern California, California Independent System Operator, Los Angeles Department of Water and Power, and Imperial Irrigation District.
Energy imports from the Northwest decreased by 11 percent in 2013, however, specified claims by California utilities of renewable wind, biomass, and small hydro generation improved compared to 2012. Net imports from the Southwest dropped by 3 percent in 2013 to 61,759 GWh. Overall specified claims by California utilities showed increases in coal, large hydroelectric, and solar power imports. The result of improved utility claims to specific out-of-state power plants (renewable and non-renewable) helped to reduce the Unspecified Sources of Power category to 12.5 percent of total system power in 2013 from 16.4% in 2012. Unspecified Sources of Power generally include spot market purchases, wholesale power marketing, purchases from pools of electricity where the original source of fuel determined, and “null power”. Null power is the generic electricity commodity that remains when the renewable attributes (renewable energy credits, or RECs) are sold separately.
Jan 24, 2007 2:13 p.m. ET
SAN FRANCISCO (MarketWatch) — California utility regulators on Thursday plan to end the state’s financial support for building new coal-fired power plants in other states until technology is developed to capture greenhouse gas emissions from such plants.
As decided by the California legislature and Gov. Arnold Schwarzenegger four months ago, the state’s electric utilities will be prohibited starting Feb. 1 from investing in traditional coal-fired plants or signing new long-term contracts with such plants in an effort to combat global warming.
http://www.marketwatch.com/story/california-moves-quickly-to-block-new-coal-fired-power-plants
I guess they must be signing short term contracts?
I will be out of pocket until very late tonight or early tomorrow, so any posts directed at me will have to wait.
Ron
Some on the ground Oil Patch stories about the impact of the oil price crash:
http://money.cnn.com/2015/01/06/news/economy/oil-jobs-gas-prices/index.html
I have to lay off a couple of kids today that have been with me for 5 years, one just got married. As an operator I have to always have all the answers for everything. I am as old a dirt and so everyone asks me, constantly, how to fix this and how to fix that. They need answers. I honestly don’t know what to tell my people, or anybody, what has caused this precipitous oil price collapse. Somebody up thread said to just relax and accept it. Right. That’s an easy thing to say. Try living with it.
I think the domestic shale oil industry is responsible for getting the supply/demand equilibrium out of whack; there is so much oil everywhere now along the Gulf Coast its hard to even sell crude oil, regardless of price. There is no place to put it anymore. LTO surplus has got a lot to do with the worldwide price decline. The Saudis need to regain market share and they would like to see expensive unconventional LTO hurt, badly. I understand that, actually. In a sense I blame the shale oil industry for that also.
Is shale oil extraction a resounding success story in America, a benchmark for free-market enterprise? Bullshit. The debt those guys has accumulated would choke a big horse; its begged, borrowed and essentially stole money from grandma’s all around the county that bought their stock based on propaganda. It has not made a dime of profit yet. The wealth of retired people who invested in the shale oil business, even people that didn’t, is now being decimated because of the shale oil industry. Every stinking shale well drilled uses sufficient fresh water for 168,000 humans to consume in one day and nearly 400 tons of steel. The crop and ranch land that is lost to shale well pads and roads is heart wrenching. All that for a couple of months of $ 2.00 gasoline?
The shale oil industry will not survive 50 dollar oil and is spite of all the crap that gets tossed around about big IP’s and new technology, its just that, crap. We had the technology 50 years ago; I was “stage” frac’ing wells in 1978; whooptie doo. Sliding sleeves, ceramic proppant; its all been done before. Its not about toys, its about making money. LTO oil development occurred because of high oil prices and cheap money to borrow. Now oil prices are low, and getting lower, and the money tree is going to fall over. Anybody promoting the shale oil industry at this point must be getting paid to do so.
These tight oil resources in our country were not developed with any forethought for the energy future of our country, IMO. It was all about manufacturing as many wells as possible as fast as they could drill them. The shale industry did not care where the money was coming from, it did not care how much it wasted, it thought it was invincible. They were like sharks feeding on a big school of tuna. Now, incredibly to me, the shale industry wants to export our countries resources to other parts of the world so it can stay on the drilling treadmill… and buy new corporate jets. Lets sell it now so we can buy it back 5 years from now, for twice the money. Right. Hey, lets get Keystone done so we can get nasty Canadian tar sand oil to blend with LTO from shale, and export that too!! Yahooo!!
The shale oil industry shot itself in the foot. Along the way it shot me, and thousands of other operators in America, in the back. It is helping to facilitate a train wreck around the world, actually. I have been to West Africa, the ME, all over S. America, everywhere in the world there is oil production and I am telling you straight away, there are now lots of very, very afraid people out there in the world. Hungry, thirsty, sick people whose countries cannot help them any longer. Why? In part because of stinkin’ shale oil industry greed. I am mad at them sumbitches this morning.
I gotta go let some good kids go. Damn, I hate that.
Mike
Having seen other oil busts, I’ve been one of those who hasn’t wanted to see fracking in places that didn’t need fracking. Like in places where it would screw up farms, housing developments, and tourism.
The oil industry has lobbied hard to overturn or stop zoning laws, but I think it has been wise for some towns to avoid having the frackers come in, drill wells, go bankrupt, and leave the mess for the locals to clean up.
With the problems hitting the Bakken, I hope in reinforces some communities in their pursuit of slow-go or no-go fracking restrictions.
Why would you think a company’s bankrupcy means the wells will stop producing?
Because no one would exist to write checks to the truckers.
Assume the bankruptcy trustee would appoint a firm to manage the debtor’s leases and that firm would employ contract firms to operate the wells assuming can be done so for a profit. Eventually the leases would be sold by the bankruptcy trustee.
On pubco I am aware of that went BK during last price meltdown was Cano Petroleum. I think a lot of that BK case can be found online.
Had some good shallow leases in Nowata Co., OK. They were never shut down.
That’s not the way it works. Why don’t you study what happens when a company goes bankrupt under US law?
This is the perfect opportunity for me to point out where two obviously experienced oil people (above) are offering insight into the practical aspects of operational matters, and nobody listens. I think a lot of people would rather research links on the computer all day, and speculate, than listen and learn. Folks get stuff in their heads about rig efficiencies, or truckers, or wells being shut in, bankruptcy, the sky is falling, whatever, and it is more fun to wander around in a make believe world than wanting to understand the real world.
If I have my drilling program on hold, theoretically, I can operate a 150 shale wells with a staff of fewer than 12 people. Hauling my oil off location, hauling water, pulling rod lift wells, lease work, whatever it takes to service those wells and keep them producing I can achieve thru 3rd party contractors. Those wells will NOT get shut in. Nobody in the oil business believes this price collapse is going to last very long. Based on incremental lift costs I am aware of, and believe in for the Bakken, if I am hedged anywhere above 60 dollars I can still pay my staff, service my debt, and limp along. It is potentially harmful to shut in wells, even pumping wells, I think because of fracture closure and other issues. But most importantly…North Dakota is not Kuwait; America is the land of private mineral ownership. Those wells cannot be shut in or the mineral lease that allows the Lessee to even own those wells in the first place, terminates and nobody then owns anything, save the mineral Lessor, who all of a sudden is stuck with wells he does not know what to do with. No operator, or bankruptcy trustee, or lien holder can allow those wells to be shut in. IT WILL NOT HAPPEN.
Mike
I will also say, however, that I saw instances, in 1998, where wells were shut in due to financial issues. In those instances, it appeared the creditors did not want to have to force the issue, hoping that prices turned around. Unfortunately, the companies which owned and operated the leases got distressed to the point that when a well went off with a mechanical failure, it was just shut in. Could not afford to “fix” it. That, however, was in an instance where oil was $8-$11 for most of the year, below the OPEX or LOE of many of the leases at issue.
There could very well be conventional production that ends up being shut in as a result of current prices, or if they go even lower. There has been a lot of mature conventional production that has changed hands for in excess of $100,000 per boe, much of which was financed. In many instances, LOE or OPEX ranged from $15-$60 per bbl. Not a problem servicing debt when price is near $100. Problem if price stays low for long period of time and/or not hedged.
I note upstream MLP’s have been cutting distributions, despite being hedged on a good part of production. MLP share prices, surprisingly to me, have tanked more than shale co prices. Will admit each situation is different.
In the case of the Bakken, EFS, etc. shale wells, the debt issue results from drilling and not OPEX being higher than well head crude/nat gas prices. The company may very well have positive cash flow from merely operating the wells, but runs out of cash due to CAPEX or inability to service the debt ran up by the CAPEX. It seems that OPEX for shale wells runs $5-10 per bbl. In my view, those numbers will go up over time, unless the crash results in lower OPEX due to service co concessions. The reason I say they go up is due to high decline. Many OPEX costs are relatively fixed, and therefore per bbl increases when boepd decreases. Further, it generally costs more to rod pump or use a submersible pump than to operate a flowing well. Do admit have little experience with flowing wells in my neck of the woods, darn it!
It would appear to me that shale co would do everything they can to conserve cash right now, and would cut down on drilling. Hedges make a difference, but would not think would want to increase production past number of bbl/mcf hedged right now.
Also, do not want to shut wells down because may violate lease terms or state regulations. Can get interesting. Unfortunately not the kind of interesting any operator wants to deal with.
I wish I had more than sympathy to offer but even that is in short supply these days.
You have run face first into the Mighty Mighty Market and the Invincible Invisible Hand. IT is true that the market and the hand have given us the cheapest bread and circus in the world but it is also true that they are totally blind and totally heartless.
Words such as morality and justice and brotherhood mean nothing at all to non living forces.
AND so far a rich people are concerned – they usually mean so close to nothing that nothing is a good enough approximation.
A sad aspect about people getting burnt in such investments as tight oil is that they get afraid to invest in other things that are perfectly safe.
Now I cannot borrow at a bank- insufficient income. So – I have a neighbor who has 200 k in savings accounts paying one or two percent- and no intention of spending a dime of it. I offered him a small piece of land he is interested in for twenty grand- worth about forty- and he jumped on it like a duck on a june bug.
But I didn’t really intend to sell it to him- I just wanted to prove to him that he is a fool when it comes to managing his money- because he refused to loan me twenty at ten percent on this same property secured by a first mortgage with title insurance and all the other ribbons- he said he was AFRAID he would lose his money.His trouble is that he has been brainwashed by the banking industry until he thinks the bank where he keeps his money is his FRIEND instead of a business making a fool of him. When he is finally ready to spend his money he will find that just about everything he might want to buy with it is going to cost a lot more than he expects and that he has lost purchasing power.
We are not supposed to be experiencing any inflation for instance but rents around here are up at least five percent annually in recent years . Ditto real estate and meals in restaurants.Ditto a doctors visit. Ditto getting your car tuned up. Ditto a casual laborer worth hiring. I could get bananas for thirty nine cents two years ago on special. Forty nine on special now.
The prices of serviceable older cars and trucks have doubled in the last ten years at least.About the only thing that is actually DOWN is gasoline and diesel.And some stuff sold by farmers maybe but cows and hogs are thru the roof.
“I have a neighbor who has 200 k in savings accounts paying one or two percent- and no intention of spending a dime of it”
2% is pretty good if it’s short term
“2% is pretty good if it’s short term”
Not when inflation is running higher than 2%. Food, Medical, electricity, etc are all running higher than 2%. Only for a short time will energy prices will sink.
OFM Wrote:
“because he refused to loan me twenty at ten percent on this same property secured by a first mortgage”
Probably because he feared real estate values would tank. Which they did. Investing in real estate is trickly and its can be very difficult to liquidate assets. Since the 1970’s, home prices have not kept up for inflation except for the bubbles fuel by cheap & easy credit. The periods been the bubbles can last more than 10 years which means you have to sit on that property for perhaps a decade before you can cash out. All along you must pay property taxes and maintenance.
“When he is finally ready to spend his money he will find that just about everything he might want to buy with it is going to cost a lot more than he expects and that he has lost purchasing power.”
I am sure he realizes it. The issue is that is very difficult to find good investments that are tied to fraud or high risk. Real estate is very risky, and so is the stock market, the bond market, and just about everything else. Better to have Negative Interest rates loosing 2% on savings than loose all 200K in one year! The more risky the economy becomes the more people that will continue to save even as real negative interest rates rise. FWIW: Almost all my savings are in non-interest bearing accounts. I have no interest in risking decades of savings in risky and fraudulent investments. People told me I was not getting into the Stock market bubble of the 1990’s, Then they told me I was a fool for not loading up on real estate. Two years ago, I was an idiot for not investing in energy stocks!
“We are not supposed to be experiencing any inflation for instance but rents around here are up at least five percent annually in recent years ”
Looks like a rental glut is building and rents are poised to tumble in 2015. The Hedge funds have continued to load up on rentals since 2009, and have fueled an over supply (Just like the fueled the Shale boom). I think Medical costs are going to tumble because of Obamacare. The high deductibles are going to crush medical services this year and doctors & hospitals are going to have to reduce costs to get customers. There will be huge layoffs in the medical services in 2015. I think food prices may rise in 2015 because of the drought. I am expecting another recession for 2015 as the junk bond bubble pops. The only investment pop I see is in the Health insurance industry because 1. Less outlays due to higher patient deductibles, 2. Rising premiums, 3. No Risks because Health insurance companies just raise premiums to match outlays. if your medical expenses exceed the premiums + deductiable, they just raise your premiums. There are people with pre existing conditions that see their monthly premiums increase as high as 25K per month (or $300K per year) Stay healthy or get on Medicare.
If he was worried about property values declining he would not have wanted to pay the twenty in cash. ‘ Nuf said.
But I am not busy and feel like some gossip.
IF the property value were to crash — let us say five years from now- then I would have paid him upwards of ten grand in interest and a thousand maybe two thousand on the principle – and if the property were sold on the court house steps with me still owing him eighteen thousand – then he could have it for the balance .
Both the attorneys and the court would look to me first and seize any other assets assuming I were to have any to make up any deficit. If it brought more he would get the loan balance in full.
Further more he knows I have honest intentions of spending any loan on putting in a well driveway electric service etc- all of which would substantially increase the property value.
His money would be about as safe as it is possible for money to be.Safer than for sure losing purchasing power drawing less than two percent interest.
I used to know a lady back in the Carter era when inflation was running at twelve or fifteen percent who was an accountant and eventually got to be a CERTIFIED PA. She now has a six figure job with the state.
It was impossible to explain to her that money in federal paper at four or five or six percent was in danger of disappearing and was IN FACT disappearing at eight or ten percent annually after taxes and inflation.Brainwashed.
Engineers post here that renewables are boondoggles but they have nothing to say about the problem of fossil fuel depletion. Brainwashed. BRAINDEAD?
Economists post that eternal growth is possible on a finite planet. Brainwashed.
I just recently bought a place for six figures owner financed from a relative that paid only fifteen grand for it fifty years ago.
He has a hell of a profit on paper but after capital gains tax on the sale and AFTER INFLATION he lost his ass. Every single thing he needs to buy now costs at least five or six times as much as it did then and some things cost ten times as much.
Actually about the only thing I can think of that is cheaper is electronic gear such as televisions and computers.
OFM wrote:
“IF the property value were to crash — let us say five years from now- then I would have paid him upwards of ten grand in interest and a thousand maybe two thousand on the principle ”
That’s assuming you didn’t simple default and declare bankruptcy. Perhaps you wouldn’t, but thats not the norm. Most home owners that got deep underwater and lost their job, simply walk away. A lot of people sold cow-patty homes for big $$ and used that money either to buy a better home or something else. I recall that a former co-worker bought a piece of junk (old home built in the 1920s with a leaking roof, water damage, mold, no insulation, termite damage, with a driveway with a 5% grade for about $500K. A real “fixer upper” on the cheap! The home should have been condemned it was so bad. I would have assessed the land (0.5 acre) less than 50K. He ended up walking away from it in 2009 when his planned potential million dollar dream home turned out to be outhouse full of you know what. He was planning to put $25K into and flip it for double his purchase price.
OFM wrote:
“Both the attorneys and the court would look to me first and seize any other assets assuming I were to have any to make up any deficit. ”
Not always easy to do, if the debtor declares bankruptcy and in many cases there are no assets to seize. Few people have any sizable savings (most pour ever dime saved into the down payment). Plus once the lawyers get involved there goes another boat load of money since lawyers don’t work for free!
OFM wrote:
“He has a hell of a profit on paper but after capital gains tax on the sale and AFTER INFLATION he lost his ass.”
That all depends on what he did with the money after the sale. Perhaps he invested in PMs, or equipment, or used it to start up a business, or perhaps he is using for payment for his kids (college, down payment on a home). I doubt land prices will stay on top of inflation. Its likely that as jobs disappear demand for land will disappear too. It may be better to unload while there is a market to sell into, and use the cash for something useful, assuming the land is idle and has no immediate or long term use.
Of course you would be crazy to offer 10% in interest since you could just go to a bank and borrow at 4%!
OFM Wrote:
“Engineers post here that renewables are boondoggles but they have nothing to say about the problem of fossil fuel depletion. Brainwashed. BRAINDEAD?”
No, the answer is that civilization as we know it will collapse. Renewable have too low energy density and have too much intermittent output to be a replacement. As I’ve stated. the world burns through about 400 years of stored solar energy every day in the form of fossil fuels. you need to get about 40 Suns orbiting the Earth to make renewables work and maintain energy consumption levels. In addition the cost of renewable is equivalent to about $150 to $300 bbl oil. People can’t afford anywhere near that and they can’t afford the higher costs associated with renewables. Most jobs depend on cheap energy and most will disappear when energy prices spike back up.
In my opinion the best plan is not to wait for some pipe dream of renewable energy to replace fossil fuels. Become self-reliant and distant yourself from dependence on collapsing infrastructure. Most people don’t want do that because it means a radical lifestyle change, as well as a loss in living standard and loss of a cushy office job, using their ass to wax a chair.
I very much doubt any proponents of renewable systems here have a complete off-grid system, because its too expensive and to complex for them. Most will have a hybrid car or perhaps an electric car and perhaps a few KW of solar panels with a grid-tied system that installed by someone else because they don’t even understand how these systems work. They think that is sufficient and that every American can also afford do the same, even if they personally earn 2 or 3 times the median wage.
Ok, techguy, fair enough. I agree with what you say about renewable energy people- mostly way out ignorant of anything with wires on it.
But NOT all! I have started up an Academy for the Promotion of Non-Carbon Energy Widgets, and I take the young enthusiastic ignorant folks who show up and pay them to learn how to do all this stuff, working on real living working examples of simple PV, gasifier gensets, pyrolyzers, biogas /portapotty biogas generators, super simple widmills, and whatever else anybody can think up.
Sure, it’s a hobby, and I have some money to spend, but only a couple of hundred K is more than enough, and lots of people at my stage of life have that, and are looking for places to put it.
Where else could I get a greater real return on investment than that?? I know people who spend that much on golf, fergodssake!
Hi Mike,
The analysis is spot on. Few things:
You said: ” Somebody up thread said to just relax and accept it. Right. That’s an easy thing to say. Try living with it.”
I said that. I am living it. My environmental budget was cut in half in 2015. I can’t change that fact. Why I should be angry since I cannot do damn thing to change it?
If somebody is angry it is result of fear the bubbles up as emotional formation. If you mindfully look at things you will see that fear is just an emotion. The goal is not to be controlled by that emotion by constantly watering the seeds of fear. In this case you water the seeds of faith. Everybody has seed of faith.
So what I would tell that kid that got married and you have to let him go:
“Hey kido, the fact is that the price of oil is $50 and I can’t operate and employ people with this price of oil. But something good happened to you. You found the woman with whom you will make a family and spent the rest of the life. You are the LUCKY one. With your hard work ethic you will find a job if not here then somewhere else. And don’t forget what is important: family. You only need to provide the food and roof over the head. The rest of the staff you don’t need: F-350, wake board boat, skidoo or whatever. The rest are just cravings and clinging that make you suffer. You suffer during the process to obtain it and you suffer equally when you are in position to lose it. So the best is not crave for those.”
So if this makes sense you call that kid and tell him that. I am quite positive that this will have positive impact on him. And you don’t need to give the reasons for the $50 oil. It is not going to make any difference to him.
I’ve been hiring and firing for over 50 years, though not much on the firing. When I have to do that sort of thing I leave the kido stuff out, and the phone calls, and do it face to face. Its not my place in life to judge people what they want or need to do with their money; it they work for it that is good enough for me. It does of course make a difference why you lose your job; young men thinking of a career in the oil and gas industry need to understand anything I can teach them about it, including why often the business is volatile and unpredictable. I owe them that.
I am not too much into the zen stuff and today it feels pretty good to be pissed off at the shale oil industry, the dickheads.
Mike
We second that motion. Please quit making bogus claims about lower break even. Eventually WTI will be at zero.
Sorry about your guys. I hate that too. Never easy.
US oil industry. One of the few where even a debt free company can go bankrupt.
Either use of oil is ending or there will be a super spike that will make 2008 look like child’s play. Which is not good either.
Will be happy to see a bunch of oil shorts get squeezed
Two powerful somewhat unattributed quotes of the last 5 yrs:
1) You don’t like oil at $110? Trust me, you won’t like what the world looks like with oil at $40.
2) I am reluctant to predict the Bakken or Eagle Ford. The reason why is that in 2009 I didn’t think either would amount to much at all. — Yes, and if the price was what it was in 2009, you would have been right.
Read in USA Today that $20 is break even for GOM deepwater oil.
http://www.usatoday.com/story/money/markets/2015/01/06/deep-water-oil-production-gulf/20752155/
So it must be true 😉
Break even is such an undefined term. Break even on OPEX, I can understand, but to have Chevron racing out and commit CAPEX to a deepwater oilfield, at $50 /b, and going south, I doubt it. The only reason to go ahead, is if the project has reached it point of no return.
2008 I was working in Africa, the oil company was a big one, and on our desk top we had the current OPEX and a few other numbers. It was around $6. The project was costed out when oil was $20 per barrel, and they were selling it $100. Needless to say they were very happy.
OPEX in deep water is often low, it is the CAPEX that will kill you.
Mike, the best day to do it is Monday. It reducs their suicide and accident rate. I assume they get the Texas unrmployment payments?
So what you are going to tell him?
1)because Fed QE-ed because of greed?
2) because some shale investors were greedy?
3) because some banks are greedy?
4) because some Oil Sands investors are greedy?
5) because Saudi oilmen are greedy?
6) because Russian, Norwegian and Texan oilmen are greedy?
7) All of the above.
It is not the first time and it is not the last time that this happen.
And tell me one private business that is not volatile and unpredictable ?
Mortuaries, hospitals, elevator maintenance and jails.
With easy money and debt you can build enough of those that marginal player in those businesses will always be unstable and volatile = New Normal.
Maybe. His point is pretty good.
The glaring example is GE. That is a giant process wheel that percolates along earning what it earns. They have a procedure manual for everything. Some guy working in a cubicle develops a peanut allergy and has to be shipped to the hospital just before a Congressional briefing? Don’t you worry none. GE has some procedure in the manual for that.
And so, what happened? Why did they almost get vaporized in 2008/9? They weren’t managing the bizness any different then than other years. Without the bailout they got, they would have folded.
Because nothing is immune to a supernova.
GE Financing
Yo Mike:
“They were like sharks feeding on a big school of tuna. Now, incredibly to me, the shale industry wants to export our countries resources to other parts of the world so it can stay on the drilling treadmill… and buy new corporate jets. ”
http://www.aircraftone.com/aircraft.asp?tn=N301L
Date of Registration 2012
Registrant Name Continental Resources Inc
Aircraft Manufacturer & Model Cessna 560XL
Engine Type Description Turbine-Fan
Seats 13
Light end exports offset by heavy end imports is a very efficient alternative. But we really can’t expect rational behavior from politicians.
Here is Arthur Berman’s take on the oil price drop and the economics of shale oil.
http://oilprice.com/Interviews/The-Real-Cause-Of-Low-Oil-Prices-Interview-With-Arthur-Berman.html
I give Berman a B minus. Needs a bit more educatin’
It’s the system, Mike. The system is shooting everyone and the rest of the planet in the feet, head and thorax.
Crescent Point Energy to cut capital spending by 28%
Crescent Point Energy Corp said it would cut its capital spending by 28 per cent in 2015, becoming the latest Canadian oil and gas producer to trim its spending plans in the face of a sustained fall in global oil prices.
Interesting, the Canadian drilling rig count is down approx 50%, Alberta, is just short of 50%, some states have gone to zero, with BC the best at a 20% fall. And this lot a making a 28% cut and it is news. It seems like their have been a lot larger cut that have been made, that hasn’t been news?
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY1NDMwfENoaWxkSUQ9MjY1NjM1fFR5cGU9MQ==&t=1
Last thread I was making the case that this has never happened before. Jeffrey noted he had personal experience in 1986 of a 50% price cut in 6 months. We’re now well beyond 50%, and that occasion in 1986 didn’t quite equal 50% and derived from spikes from wars, Israeli and Iran/Iraq.
Unprecedented looks like the correct word, and signing onto supply and demand as causative is simply not supported. It’s a big lie being told a lot on TV. That isn’t doing this and isn’t what did this.
It is way too much coincidence that the dollar has exploded in exactly, damn near to the day, the same time frame. In contrast, we struggle to find a big supply surge or demand fall in exactly the same time frame.
Of much more significance than the reality of the smash is its potential for permanence. The oil is there — is a position to take. My loans got defaulted on and fool me once, shame on you — is another position to take. THAT is the matter of the moment. If the Fed won’t act, shale can be destroyed permanently.
The late 85 to early 86 crash was similar, and I don’t recall a war going on. The crash took place when Saudi Arabia refused to cut production in the face of surging production elsewhere. It was the same, but the extra oil coming on line didn’t have the hellacious high decline rates, and we had lots of large projects we couldn’t stop.
Iran and Iraq were at war much of the 80s.
Hi Watcher,
You are correct that the war lasted until 1988, but you are not really thinking this through. What is important is how the supply of oil from Iran and Iraq changed over this period. The big shock was in 1979 to 1981, then oil output gradually increased. There was a decrease in output from Iran and Iraq of about 5 million barrels per day from 1978 to 1981, after that output gradually increased. The high oil prices of the early 80s brought a lot of new output online in Texas, Alaska, Gulf of Mexico, Soviet Union, and the North Sea.
By 1985, Saudi Arabia got tired of all the other OPEC members cheating on quotas and opened up the taps to drive prices down and increase market share.
This had the benefit of possibly helping with the breakup of the Soviet Union and there is speculation that the Reagan administration asked Saudi Arabia to do this (unproven as far as I know).
So the Iran Iraq war was no longer that important in 1985-6, any more than current war in Syria and Iraq are a major influence on World oil markets.
The 1979 oil price spike was caused by the ayatollah khomeini’s revolution. By the time Iran and Iraq tangled we didn’t see a spike. By 1984 Saudi arabia was cutting back, losing market share and also their engineers were forecasting a gas shortage due to an excessive production cut to prop up prices. I think you really do need to study what went on if you want to draw conclusions.
Hi Fernando,
I think the prices spiked later than you think. In the US prices peaked in Jan 1981 on a monthly basis. The Iran Iraq war started in Sept 1980.
There was a spike in 1979 as well, the reason for the spike was the drop in Iran-Iraq output which was a combination of both the revolution in 1979 and the war which started in 1980 and affected both countries.
I have read that spare capacity in 1986 was 13 million barrels per day. Much lower world wide production and consumption then too.
IMO a year or two at these levels will set up a pretty bad super spike.
Why is there so much volatility? I assume this volatility won’t be leaving us soon?
I have often said that economists given their extensive background education are fools. to believe some of the things they accept as holy writ.
But anybody who does not believe a market for a commodity that is highly inelastic in price cannot crash by fifty percent in price is fooling himself.
It happens quite frequently in agricultural markets and stuff such as grain is far more easily stored than oil- grain can be and often has been piled up anyplace outside with good drainage. Try THAT with a barrel of oil.Or a trainload.
Some things can be stopped on a dime- a guy running a business painting new houses for instance can lay off his crew and shut down his business in a matter of days. A big company that has contracted ahead the purchase of raw materials and the delivery of finished goods may need a year or more to substantially reduce production- or to increase it for that matter.
It takes a grain farmer in temperate zones from six months to a year to make the changes necessary to either increase or decrease his production. It takes me FIVE years or so to bring new apple production to market and even then only a few per tree – it takes seven years for a tree to get big enough to have a substantial crop.Now in the worst case I can abandon my orchard after any harvest- but that does not affect the quantity of apples in the market at all for a full twelve months. The stores will be selling out of warehoused stock from the end of October until September except for a few summer apples and a few imported from the southern hemisphere.
When there a crash on the freeway it does not bring traffic to a halt instantly all over town and when the crash is cleared up it takes an hour or two sometimes more for the associated traffic jams to clear up.
Fast ocean going ships and express freight trains are as nimble as cats compared to an industry such as oil.
If more oil is coming to market than the end users want ( and there is absolutely no question this is true if you take the words of guys such as Mike that there is nowhere left to put any more oil – that you can hardly sell any oil on the gulf coast at ANY price.) the end user , the customer who actually burns oil SIMPLY DOES NOT BUY the excess just because it is cheap. The typical end user has about ten or twenty to a couple of hundred gallons of storage if he is an individual- up to twenty in a car and a couple of hundred in a big truck. Contractors and farmers may have storage for ONE truckload on average – having more storage is not generally economical.
You just don’t start burning a more gasoline or diesel just because the price crashes. You are too DAMNED busy and not many people are going to rush out and trade for a gas hog on the basis of a couple of months of cheap gasoline.
Many a time I have hauled a beautiful pickup truck load of peaches or apples up and down the highway and had the owners of local markets tell me as gently as possible they cannot buy them at ANY price- because they are stocked up to the gills and selling dirt cheap already.This past year they started out buying local peaches at twenty bucks. At the peak of the season they were offering ten bucks and growers were taking it.. Some years they will not buy at any price at peak supply periods.
ONCE I have invested a year of my life in growing them I would rather take a dollar over harvest and hauling cost than let them rot- but if the price offered is less than the cost of harvest and shipping – they rot in the field.
The people selling oil just aren’t going to close up their businesses and send all their employees home and bring on riots in places that depend on oil money to keep the wheels from falling off. They are going to hang in there and hope for the price to go back up soon and if it does not then they will shut down in as orderly a fashion as they can.
It seems the tight oil people are able to shut down within a few weeks of making the decision to do so. If there are any truly high variable cost producers out there -producers who spend seventy or eighty bucks to get a barrel out of an existing well- they will be shutting down as soon as they are convinced prices are going to stay down a while unless they cannot AFFORD to shut in such a well- maybe due to not having the money to plug it.Running it at a loss might be their best option- bankruptcy court is the end of the line and it is my understanding that if a well owner can’t plug a well the government does it for him and seizes such assets as he may have.
Well over three quarters of the small orchard operations in my area have shut down over the last twenty years and the bigger ones all taken together are not running much more than half the acreage in total we had in trees twenty years ago.
IT took MORE than a COUPLE of bad years to convince all these orchard guys they had to quit. A lot of them went to town and worked night shift a lot of years to make back what they lost farming.
Now if individuals who have to answer to nobody but the bank and their immediate family do everything possible to hang on rather than shut down why should anybody expect a corporation with a lot more to answer for to just padlock the doors?
The people running at a loss will quit as soon as they can if they want to or when they have no choice if they don’t want to quit.A traffic jam takes a few hours to clear. A fast freight takes a few miles to stop. An industry such as oil is going to take a few months to change its ways at the absolute minimum.
You will buy as much formula as the baby needs no matter the price up to the limits of your purse and ability to borrow. You might buy one more can a week or a month at half price and use it more carelessly – leave some out on the counter instead of refrigerating it maybe.
But in order to get you to buy two or three extra cans – it has to be cheap enough to feed it to the cat.
Cats won’t drink either gasoline or diesel fuel no matter how cheap it is.
This is not to say that countries such as Saudi Arabia don’t have some very good reasons to maintain production even at a loss. They do have such reasons – but they are probably still making money even at current prices.
The price will go back up when producers reduce deliveries enough to clear out excess inventory. SO long as a few people are willing to sell for forty bucks every body has to sell for forty. This is what is quaintly referred to a price competition.
It seem safe enough to bet that enough producers are losing their shirts at forty or fifty that the price will go back up pretty soon. The losers can’t hang in there but so long. Maybe a year at the most would be a reasonable guess.
The most realistic answer is likely that it is not the dollar, not supply, not the effects of the demand drop that happens every winter, and not OPEC.
It is likely a confluence of every one of these things. It’s not “which factor caused this”; it is “every factor contributed and exacerbated the price fall”. I suspect it is a sum is larger than the parts effect.
That being said, the pie chart of causes would probably leave the rise of the dollar as the biggest slice with no single slice being more than 1/3 of the total pie.
There is certainly a certain threshold where enough factors combine to create a feedback loop that amplifies it, a feedback that wouldn’t occur with the loss of even a single factor. Especially since several factors are related – like higher U.S. supply impacting U.S. trade imbalance, which helps the dollar; or U.S. supply creating high paying oil field jobs, which increases GDP and tax revenue, both of which, you guessed it, help the dollar.
I personally feel that dollar valuation has been strongly correlated to the U.S. production/consumption ratio for decades. U.S. production peaked, and Nixon just happened to take us off the gold standard that year. When U.S. production peaks again I think we’ll see another long slide in the dollar.
Brian is absolutely right in terms of a more fine grained analysis than just ” supply and demand”.
In more general terms the things he mentions TAKEN IN THE AGGREGATE delineate or determine ”supply” on the one hand and ”demand” on the other.
Any body that paid attention in class will remember that the instructor always emphasized that the text book description of supply and demand are only ” snapshots” like still frames out of a movie. Just about everything is constantly changing at least a little bit and everything that changes changes a bunch of other things via feedback loops some positive some negative.
My professor who was a very good one said the best way to picture supply demand and price of any given commodity was as three bugs circling a light- with the light itself moving slowly – the light being overall economy. Sometimes a bug is closer to the light sometimes farther away. There are so many factors in play in times of overall economic change that predicting supply demand or price can be pretty tricky to impossible.
You can know about where the bugs are in general terms all the time and their position at any given instant is easily observable. But predicting where they will be with real precision five minutes from now is a tough to impossible job.
Beyond that what we generally refer to as demand is not a point value but a function describing how much the market will absorb at any given moment at any given price.Supply is likewise properly defined not as a point value but as a function.
The language of supply and demand is much abused.
I was discussing the concept of “Price is what you pay. Value is what you get” with my sister today. It’s funny how that applies to what you’re talking about OFM.
The oil today that is priced at under $50.00 has the same value (not quite of course, as the API may be somewhat different) in terms of utility as the oil that cost $110.00 8 months ago. The price is wildly different though.
So for drivers, this is great. The value of a gallon of gas is much cheaper because the price has fallen. However, the value of that gallon of gas hasn’t changed. You still get X miles / gallon as determined by your car. The gas still has a fixed number of BTU/ gallon, but the price is all over the place.
The difference between these two (price and value) lead to some of the weird or irrational behaviour we see (e.g. let’s export all our shale oil, despite the fact we’re running out, because the price is high! Or urban sprawl, or whatever other wasteful oil consuming activities one engages in that one might not if value was better reflected in the price).
Can’t really blame an oil company for developing a resource to make money, no matter where that resource is located. Can’t blame Bakken shale producers for doing what everybody else wants to do, make money.
All the Saudis had to do was cut back production by a million barrels per day and let the market perform like it was going to be a hay day every day, but no, the Saudis just continued to open the oil spigot all the way to full flow and the market tumbled. By doing nothing, they’re still culpable. Russia could have cut back 500,000 barrels per day to market, but no, they’re in it for the money too. They won’t generate any sympathy for anybody, they’re there to make money just like everybody else. A little cooperation by those two oil exporting countries would have reduced the rhetoric and a favorable rapport would have been the result.
Competition for the almighty dollar has had a devastating effect, esp in the oil bidness. You can’t have your cake and eat it too.
Could it be that the price was just too high and no one can really afford to buy gas at 4.00 per gallon? Everything else strains and creeks and cracks while the oil bidness rides the high hog. Had to know that it couldn’t last forever.
Regardless if gas should be worth four or ten dollars per gallon, if it can’t be afforded by consumers no matter how much oil there is out there for sale, something has to give.
The only thing that will give is the price, it will free fall as it has. The world cannot afford 100 dollar oil and that is just the fact of the matter.
It’s too bad, but that’s the way it goes moving west.
A more accurate formulation of your conclusion (“the world cannot afford $100 barrel oil”) might be the world’s economy, stripping out the oil industry, isn’t growing fast enough to accept $100/barrel. There is nothing magic about the $100 level, but when ZIRP and QE can no longer goose the global economy, $100/barrel oil is going to a hit a brick wall. $50-60 barrel oil will suck the oxygen (access to junk credit) out of the high-cost oil extraction business. Without growth in the other segments of the global economy, the only thing that $100/barrel oil can support is more drilling.
“All the Saudis had to do was cut back production by a million barrels per day and let the market perform like it was going to be a hay day every day, but no, the Saudis just continued to open the oil spigot all the way to full flow and the market tumbled. By doing nothing, they’re still culpable. Russia could have cut back 500,000 barrels per day to market, but no, they’re in it for the money too. ”
Maybe they’re in it to destroy their enemies.
“….. the Saudis just continued to open the oil spigot all the way to full flow and the market tumbled.” That is false! In 2013 SA had the highest crude oil production of 10.04 Mbd and since decreased to 9.693Mbd. Export also decreased from 8.864Mbd to 8.675MBd.
I agree with what Watcher said “…signing onto supply and demand as causative is simply not supported.”
Hi nGass,
Exchange rates had an effect on the oil price, but it does not explain all of the change in price. If market supply and demand are not the explanation for the rest of the change in price, could you explain the rest of the change in price?
Chart below with Brent Oil Price in Euros. We see about a 38% fall in the price of oil in Euros. Explain please, without using changes in supply or demand for oil that is shifts in the supply curve and/or demand curve for oil.
Forgot chart
To be fair, you should also add “All the USA had to do was to cut back production by a million barrels per day and let the market perform like it was going to be a hay day every day, but no, the USA just continued to open the oil spigot all the way to full flow and the market tumbled.”
Saudi Arabia just don’t want to be the only one to support a cut in production. Why not Russia, why not USA, why not another country? This depends on the point of view.
A cut of one million barrel per day at $100 per barrel means USA would produce one million barrel per days more than today in 2015. Saoudi Arabia just did nothing or exactly the same as other countries: produce the same amount of oil or the most they can.
You should remember that mainly USA is increasing oil production. Other countries are just stable or in decline.
“To be fair, you should also add “All the USA had to do was to cut back production by a million barrels per day and let the market perform like it was going to be a hay day every day, but no, the USA just continued to open the oil spigot all the way to full flow and the market tumbled.””
Thank you! And at any rate, SA can afford to produce at dropping prices much more than US wells. Why should they be the ones to cut?
pssst.
Suppose production is cut and the price still doesn’t go up. Gonna raise your eyebrows?
Prices will go up unless China goes into a depression.
Suppose production cuts, demand increases and the price still doesn’t rise?
”Suppose production cuts, demand increases and the price still doesn’t rise?”
THAT will be the day pigs sprout wings and fly. 😉
well it is possible.
This is capped X price for the barrel of oil and I want Y on the top of it. Y can be anything. Price does not have to be always in monetary units especially if you have oil trade between the countries through national oil companies. You would be surprised how soon this could come. Actually I think it is already happening.
Or decides to start taxing gasoline.
http://www.bloomberg.com/news/2014-12-12/china-cuts-gasoline-price-raises-consumption-tax-from-tomorrow.html
Thousands of jobs already being lost in US oil patch and related industry:
http://money.cnn.com/2014/12/30/news/economy/oil-job-cuts-civeo-stock/index.html?iid=SF_INV_River
I notice in the past few weeks US economic data has been weaker than expected (today both the non manufacturing ISM data/industrial production data was considerably weaker than predicted) and the unemployment claims data seems to have turned. Co-incidence? I think not…..
But wait there is more….
http://wolfstreet.com/2014/12/30/oil-bust-contagion-hits-hedge-funds-supplier-layoffs-begin/
Civeo seems to be the canary in the oil well.
Here are some layoffs announced at a steel company which supplies the oil industry/.
http://www.foxbusiness.com/industries/2015/01/06/us-steel-lays-off-756-workers-citing-low-oil-prices-update/
This is the stuff that is the BIG DEAL.
Shale is so new the Fed’s econometric models may not have captured its influence/contribution to the country’s GDP. A smashola can hit the numbers and be considered as “coming out of nowhere”.
But . . . if it’s true and seen to be true, that’s when the bailout planning starts.
“low oil prices is good for the economy” narrative is wrong in very simple way. the money spent on energy products is already included in GDP either under consumer spending or business spending. Any cut in prices will actually lower GDP by that amount. Now the hope is that consumers and businesses will spend all of this saved money on other things. so it is zero sum game.
But during this process you are actually replacing pipeline manufacturing with buying of imported clothes or shoes or necklaces or other junk in GDP. you are destroying 80-100k job and gaining 30k job.
Often times the price doesn’t matter as much as how quickly prices change.
In ecosystems species and communities of species can adapt to moderate changes over time; it is rapid environment change that destroys ecosystems.
A rapid change in prices may be beneficial for some industries like hospitality and airlines, but the oil industry and every industry that supplies or services LTO activity may experience a change in their economic environment so large they cannot adapt (at least temporarily).
Overall, the impacts will probably be fairly isolated. Those inside the industries most severely impacted will likely feel like it’s all unraveling while their neighbor can afford a 2nd vacation, and the store down the block saves enough on shipping to start a 2nd store.
In a world with literally free energy the economy would grow in leaps and bounds (obviously this is impossible); in a world where all energy sources cost 10,000 times more than now there would be no economy. When taken to its limits it becomes obvious that even though lower oil prices have both positive and negative effects depending on the sector, the overall macroeconomic impact is tremendously positive.
You are not considering death of shale to be permanent. If it is, that’s 3.5 mbpd gone, absent stimulus.
And if you stimulate, you lose the normalcy narrative.
Hi Ves,
Only domestically produced oil is included in GDP, we also import about 6 million barrels per day of crude oil.
On the zero sum game, I am assuming you have learned about the multiplier effect in Economics, if all extra consumer spending is not on imported junk and some is spent on goods and services produced in the US, then jobs and income will increase from that spending. This is counteracted by the reduced spending in the oil patch to some degree and it might be a wash, but most economists think the net effect will be an increase in income.
Hi Dennis,
The only thing that I am saying is this:
Destroying higher paid manufacturing jobs and creating extra part-time, minimum wage, retail/service jobs are not bringing prosperity for the most of us.
So I am not sure who are these economists that say that this solution will increase income for the most of us.
Hi Ves,
The people who work in the oil industry have valuable skills, I doubt many will moving from the oil industry to working at McDonalds. These transitions are always difficult and the volatility in oil prices is a real problem. That is what the Texas Railroad Commission, used to take care of in the 1950s and 60s, and that OPEC took care of from 1985 to 2013, maybe the US Government needs to step in and do what the Railroad commission of Texas used to do for the whole nation to reduce oil price volatility.
The boom/bust cycle in the oil industry is destructive and maybe a completely “free” market in oil is not the best thing for the industry.
Never going to happen though. It is amazing that it ever happened in Texas(controlling oil output by a government agency). All the commies must have moved to California in 1970 🙂
Controlling oil output made sense from both an economic and technical point of view. The controlled out put really helped fields such as the giant East Texas Woodbine. But I suspect it was mostly an interstate cartel.
http://headlines.ransquawk.com/headlines/us-white-house-says-there-is-no-change-in-policy-on-crude-exports-when-asked-if-us-would-consider-exporting-crude-oil-to-mexico-06-01-2015
http://headlines.ransquawk.com/headlines/brazil-oil-output-up-13-y-y-in-november-according-to-regulator-06-01-2015
That dood is off the higher price narrative reservation.
futs settled at $47.93, not that it matters since breakeven is now $15.
Mr Patterson – I was a bit disappointed when Oil Drum folded but I think the new sites that have since sprung up from some of the main contributors and commentators there, with yours at the head of the list, have turned out to be an improvement. Many thanks and keep up the good work.
“Heavy” competition?
https://ca.news.yahoo.com/high-noon-gulf-coast-canada-saudi-oil-set-120357826–finance.html
The heavy competition is very complex. The main players in the USA gulf coast are Mexico, Canada, Venezuela and Saudi Arabia. The extra heavies are blended to make an 18 to 20 API mix. The mix qualities are quite variable, and can fetch very different prices. I worked on a project to send a synbit from Venezuela, and we engineered it to be fairly competitive. But my guess is the Canadians will win the market if they come in with a 20 degree API dumbbell crude and the USA opens an export system for the light ends. Venezuela sure looks like the looser, they are buying Algerian blend and mixing it with 8 degree API high sulfur high metal junk crude from the Faja.
I have a copy of D Coyne’s spreadsheet from a few weeks ago that calculates the NPV of a well. Given the comments about perhaps not fracing a well that has been drilled, do we know the split in total well costs of $9M between drilling and fracing?
At $45 oil, the NPV of a well per the model is $4.5M (vs the $9M cost) and the year one NPV is $1.3M. Year one total revenue at $45 oil is $3.9M.
The common wisdom is that drilled wells will be frac’ed for the cash flow, but at $45 oil it looks like the fracing will be cash flow negative. Cash will be tight for the drillers and if they have to pay say $3M – $4M to frac a well and they will get back $3.9M, before paying operating costs and royalties, in year one, I might just not do it.
Or you might write a letter to your Congressman.
Hi Gerd,
Some areas have better wells than others. That spreadsheet uses an average well for all wells drilled in the Bakken/Three Forks, if we break things out into specific counties or “pools” we find that some areas are more productive than others (the “sweet spots”). Some of those areas may still make money at Brent prices of $50/b. I will take a look at Mountrail and McKenzie for 2011 to 2014 and see what I come up with. Note that some of the oil guys have suggested that well costs may fall in this environment, I would use $8 million per well and assume a 50/50 split between drilling and fracking costs.
I decided to prepare a spreadsheet to check what I was reading. I’m used to running non financing rate of return calculations, and to assume that tax losses canbe used because they’re covered by profits elsewhere. Using those asumptions it seems to me the business looks very iffy unless oil prices go above say 85 per barrel WTI. These Bakken plays are very marginal.
Chart with well profiles for all Bakken, Mountrail and McKenzie counties for 2010 to 2014.
Amazing,
And there is currently 30 rigs working in Mountrail and 60 working in McKenzie. I could make a knee jerk reaction, the oil field is good at those, and suggest Mountrail is running short on drilling locations?
Surely not but it should make a good talking point as we have been told all the rigs are racing to the better locations and Mountrail appears to be the better location.
There must be a logical explanation under lying this. Anybody know?
Hi Toolpush,
Based on comments below, I broke out McKenzie county, looking for the better pools with more than 65 wells completed between Jan 2010 and Oct 2014. For comparison the average McKenzie and Mountrail well for all pools are shown. There are 735 wells in the selected pools, the idea is to show that there are some sweeter areas in McKenzie county, these are where the drilling will be focused.
I’m learning a lot reading your material. I wonder, do they have a good blog or site where people chit chat about the Bakken geology or petrophysics? I saw a Bakken core a while back and it seems calling these rocks shales sure isn’t appropriate.
It seems I have read the upper and lower Bakken zones are shale while the middle bakken, which is the productive zone, is more like a conventional formation. I am sure many who read and post here could give more accurate and detailed info.
Thanks. I went and read a few papers and a masters’ thesis, and now I understand a bit better Whats going on.
At an 8 million dollar well cost, breakeven is $54/b for the average Mountrail county well from Jan 2010 to Oct 2014.
Thanks Dennis.
Push, I’ll take a quick stab at addressing the Mountrail/McKenzie rig status. The entire Bakken ‘sweet/not-so-sweet’ spots can be grasped at a glance by viewing one slide from ND’s DMR site , last contained in the 9/18/2014 ‘County Update’ presentation. It is slide #7 and it is a color-coded map of all the Bak’s 60 day IPs as per their output. It is an extremely informative graphic.
In a nutshell, while Mountrail has the best rock, it is in a highly concentrated area in the southwest corner. Of the 30 rigs there, 16 are being run by 3 companies, EOG, Slawson, and Hess.
McKenzie does have some great fields, but they are spread over a much, much larger area as can easily be seen on that slide #7.
If anyone wants to spend the time, there is an outstanding analyst from ND who frequently posts on Seeking Alpha – Mike Filloon – whose body of work these past few years is highly educational.
That map of the 60 day average production by well is a good one. Btw, the original source of that is the North Dakota Geological Survey. The stand-alone map is at https://www.dmr.nd.gov/ndgs/bakken/GI%20SERIES/GI%20_149_Jul2014_36.pdf. That version is clearer than the one in the presentation you reference.
The NDGS has two other good map publications:
https://www.dmr.nd.gov/ndgs/documents/Publication_List/pdf/geoinv/GI_168.pdf
https://www.dmr.nd.gov/ndgs/documents/Publication_List/pdf/GEOINV/GI_174/GI-174.pdf
Thanks Coffeguy.
I could break this down further into some of the different pools in McKenzie, no doubt some are better than others and at these prices they will focus on the sweeter areas in McKenzie.
Another note is that a breakeven calculation on Mountrail assumes oil prices remain at $54/b for 20 or 30 years which is not very realistic.
If we make the more realistic assumption that prices will remain low for 6 months and then gradually rise at 3.5% per year for 20 years (still under $100/b in real terms after 20 years), then the NPV of future revenue at a 7% real discount rate (10% nominal) assuming that well cost, taxes, royalties, transport costs, OPEX, and other costs are all unchanged in real terms per barrel over those 20 years will be equal to the $8 million well cost in 2015$ at a starting oil price of $45.60 per barrel for the average Mountrail county well.
Hey, Dennis, you sure put a lot of time and effort into your work, and most everyone here is most appreciative. I certainly am.
Brief observation for you going forward … There is a significant distinction between the Bakken formation and the underlying Three Forks, even though they seem to be regularly ‘lumped together’. Going forward, there will be more comprehensive delineation and development of TF1 and TF2 especially, with TF3 bringing up the rear. Although there is a TF4, only a half dozen or so wells have been yet drilled.
Long way yet to go in ND … but not at 30 bucks per.
Thanks coffeeguyzz!
I have some data on the difference between Bakken and Three Forks, but there are a fair number of wells that don’t have that information (or I don’t have access to it). I also don’t know whether Three Forks wells are TF1,TF2, or TF3 or 4. Chart below based on 6808 wells with formation specified (middle bakken of three forks) from Jan 2010 to Oct 2014. Bak/TF is well profile for all 6808 wells and a separate well profile for middle bakken and three forks.
At 48 months from first output middle bakken wells have an average cumulative output of 188 kb, three forks 158 kb and all Bak/TF wells 179 kb. There were 4483 middle bakken wells in the sample and 2325 three forks wells over the Jan 2010 to Oct 2014 period. Confidential wells are not included.
Dennis. Thank you for all of your work! It seems there should be some wall street types who should be paying you a good amount for your info and insights.
I really appreciate what both you, Ron, and anyone else who compiles this info.
I’ve been following the fracking discussions for several years now and as many of you know, the mainstream media hasn’t been of much help.
I have wondered about the possibility of a boom/bust in fracking and of course it is playing out now. But I figured the decline rates would hit to cause that, rather than a severe drop in oil prices.
Hello Dennis, I’ll echo the appreciation given to you above for all these graphs you have produced from the Bakken production data.
I just though I would point out, although maybe you have already noticed, that when all else fails with determining whether a well is Bakken or Three Forks, sometimes a low-tech approach is to simply look at the name of the well, especially if the well was drilled in the last two years or so. Many companies during this time frame have begun using obvious qualifiers like TF, or T near the end of the well name to designate Three Forks wells. Bakken wells, on the other hand, may be distinguished by a B, MB, or nothing but an H (for horizontal). For the Three Forks wells, some companies also put numbers next to the T or TF to designate the different Three Forks benches.
Continental is a bit different, in that they now use a pretty consistent system of having the Bakken wells end in H and Three Forks wells end in H1, H2, H3, or H4, with the number designating the Three Forks bench.
Another exception worth mentioning is Whiting, which not only generally seems to use no designation (other than H) for Bakken wells, but also uses P to designate the wells drilled in what they call the Pronghorn member of northwest Stark County and adjacent areas of Dunn and Billings Counties.
Every company has a different naming convention, so you just kind of have to look around and see if you can find a connection. Sometimes, unfortunately, there is none. I think XTO and OXY are two of the more notable companies using a naming convention that does not seem to give away whether the well is Bakken or Three Forks.
Thanks everyone! Great thanks should also be given to Ron of course for hosting all of us,
and to Enno Peters who complies the NDIC data monthly, without that data most of these charts on the Bakken would be impossible.
I also appreciate all I have learned from Rune Likvern and Paul Pukite (aka Webhubtelescope) who have taught me much.
If I owe $3,000 on my credit card, I have no money, but the monthly payment is only $50. I may very well borrow $70 to pay the $50, especially if my other choice is bankruptcy. After all, I only have to keep it going until the next lottery ticket puts me back in the green.
A cracking company would gladly pay $4.5 million to drill $3 million worth of oil, so long as it covers the minimum payment of existing debts to stay solvent.
Rationally it seems absurd to pay $4.5 million to get $3 million back, but the lovely realities of finance and debt reveal that one would gladly take a $1.5 million lose if that’s what delays bankruptcy.
That is exactly why no one is freaking out yet. That minimum payment game can go on for a bit. At least until that new $4.5 million, which was loaned at a higher interest rate, starts to come due.
They’re hoping prices rise before that happens. If these prices stay low through the Spring we may see some genuine (albeit isolated) panic. I personally think that is only possible if Greece goes all retro and leaves the Euro, which is, frankly, possible.
I think companies with healthy cash reserves will delay wells knowing that higher prices are inevitable. It is those that have no cash on hand that will drill as fast as possible. Ironically, if drilling slows it will be a sign of health, not worry.
Coffee,
When i get some time I will have a look at the slides, but I agree with you about slowing drilling will be a sign of strength. Maybe for a different reason though. I feel the market makers are looking to see a drop in production, and the only way to get that will be a decrease in wells drilled. Once the rig count drops significantly they will feel confident the bottom is in and cover their shorts. The price can then go to somewhere where production cost has some sort of reality. Until then, we are in cuculand.
This just flashed on RanSquack: ” UAE Oil Minister says market oversupply may last months or years and…and depends on non-opec output”
Brian, when you read something like this that means only one thing and that is they did not get what they want yet. And I am not really sure if “the market share” is the main thing that they are after.
So if I am CEO of shale company or any high cost producer I would be convinced that shuffling minimum payments between credit cards accounts will not work.
“I think companies with healthy cash reserves will delay wells knowing that higher prices are inevitable. It is those that have no cash on hand that will drill as fast as possible. Ironically, if drilling slows it will be a sign of health, not worry.”
hahahahahahahahahahahahahahahahhahahahahahahahaha
dood, who do you think is going to lend more money. Those lines of credit will be cancelled IMMEDIATELY. hahahah this is hilarious.
Who has healthy cash reserves? The Wells Still Owe Money. They were drilled at $8-10 million and maybe 5 years maturity. That’s 2 million a year. There Are No Minimum Payments. Pay 2 million a year or you’re in default — and the laws are if you are in default on the smallest, most insignificant piece of paper on your balance sheet you are immediately in default on ALL the liabilities on your balance sheet and they are due in full immediately.
You can’t kite checks to stop a supernova.
It does seem unlikely at first glance that a tight oil company can in essence borrow on one credit card to make payments on another but it may not be impossible.
Other businesses have done it sometimes for years before eventually going bankrupt.
You know what they say- if you owe the bank ten grand and can’t pay you are in trouble- but if you owe the bank a million and can’t pay the bank is in trouble.
So long as the company is making all payments on time and has some cash in all the usual accounts and maybe some other business – other than tight oil – that looks ok a lender might not realize what is going on.
In any case it is not the loan officers money. It is merely his JOB on the line unless somebody can prove intentional misconduct. There is a great little book titled The Peter Principle which in essence boils down to this.
People in management tend to rise to their level of incompetence and remain at that position- not good enough to get another promotion but not bad enough to get fired. They are just THERE sometimes mucking up the work..
Sometimes people paper over their mistakes and succeed in keeping them papered over long enough to find new jobs.And sometimes a lender can be convinced to carry a customer just on strength of character and reputation.
Faced with slamming the door on a customer and forcing him into court and knowing I might lose ten million I might choose to loan him another five on the prospect of his business recovering and paying it all back.
Almost everybody seems to think oil prices are going to go back up again in the fairly near future- a year or two at the outside.
So -Just maybe the lender WILL continue to extend credit sometimes to some tight oil operators.
“Faced with slamming the door on a customer and forcing him into court and knowing I might lose ten million I might choose to loan him another five on the prospect of his business recovering and paying it all back.
Almost everybody seems to think oil prices are going to go back up again in the fairly near future- a year or two at the outside.
So -Just maybe the lender WILL continue to extend credit sometimes to some tight oil operators.”
———————————————————
There is a logic in what you say. But my guess is that the banks will lend them just enough to survive and pay back old loans, but not to expand.
I don’t recall Ron posting anything about martial law everywhere in ten or fifteen years. He talks about collapse happening fifty years or so down the road.
I mention martial law quite frequently as it is sure to be an integral part of the government’s response to the the inevitable Mother of all Depressions that is now baked in – this Mother is going to morph into collapse in the sober opinion of the life sciences community. I differ from Ron and other hard core dormers in that I think the US and a few other countries will make it thru the near and mid term more or less whole when collapse happens.
By more or less whole I mean no mass starvation or lasting wide scale Somalia scenario. The grid will mostly stay up and the water will mostly flow as will the sewage.
Not a whole lot of people will get shot( in relation to Somalia except in places such as Newark and Detroit) unless they are foolish enough to fuck with MP’s toting assault rifles and wearing armor who are not worried about losing their pension or even their day off sitting in civil court.
Sheriffs are going to go from having fifty deputies to five hundred in rural counties. It won’t cost much more to pay them a pittance than it cost to feed and shelter them on welfare ANYWAY. Ditto city chiefs of police.
ONE bright spot in the dark cloud of collapse is that manpower unskilled , skilled, and professional is going to be dirt cheap.
IF the fecal matter does get into the fan to the extent that people have to fort up any investigation of a dead body not known to a local guy or girl is going to be err um ah shall we say cursory or casual?
Just about every body recoils from any serious discussion of what is actually going to be happening in most of the world when Mother Nature takes the overpopulation reality club to the side of the head of about five or six billion people.It will be as bad as war except not so well organized and as fast to be over with.
And yes SOMETHING will get us yankees too – sooner or later.
I do not maintain that Fortress America is going to last forever. I just think it CAN AND MIGHT last at least another century or two even in the face of resource depletion that will depopulate vast tracts of the planet.
Ron posted this.
4) Eventually, perhaps over the course of 10 to 15 years, every country will experience chaos an anarchy from rioting mobs. Martial law will be declared by every country that has a standing army… and can afford to pay them. But a lot of countries will not have the resources to support a standing army.
Maybe he didn’t mean martial law in 10-15 years, but that is what I took it to mean.
Some extra data:
Apparently I forgot the link
Some extra data
Look at all that red. The narrative is — the big boys will weather the storm. They will slow down, yes, but they’ll still have production increases. The entire fields will still have increases, just slowed down a little. Nothing to worry about. We’ve all seen this before and it will all be okay. That’s right, you can quote me. [click] [dial] Hey Joe, turns out I’m not going to be able to proceed with that apartment complex deal. Right. I’ve got family problems and can’t invest that kind of money in Williston real estate right now. Penalty? Yes, I know. Maybe you can waive that if I agree to reconsider in a few years? No? Well, then I guess I pay the penalty. No, don’t take it from escrow. I’m closing that today. I’ll send you a seperate check. Sorry it didn’t work out.
Hi Watcher,
I do not expect that output will increase in the short term unless average new well EUR increases as drilling slows down and there is more focus on the sweet spots. The winter tends to slow down output anyway, and there tends to be lower demand for oil in the winter as well (less driving) so prices may stay low until May. I expect Bakken output will fall to 900 kb/d by then and new wells added per month to fall to about 130 new wells per month. What happens next depends on oil prices. If they remain low ($50/b or less) then Bakken output may continue to fall if no EUR increase occurs as only the sweet spots are drilled, but if new well EUR increases, then 130 new wells per month would be enough to increase output a little.
I have less recent data on the Eagle Ford, but something similar may happen there.
Drilling has ramped much more quickly in the Eagle Ford and as it slows down we might see output decrease, harder for me to guess with the limited information from Texas. About 195 new oil wells were added to the Eagle Ford in November, December data is not yet available. The 11 month average for 2014 was about 210 new wells per month, so not much slow down so far. Mike’s comments indicate that things have slowed down a lot, so we may see a decrease in Eagle Ford output soon.
Citi is trying to do their part:
http://headlines.ransquawk.com/headlines/analysts-at-citi-say-usd-jpy-could-fall-to-113-50-on-drop-in-nikkei-and-ust-yields-06-01-2015
aka the dollar will weaken
Interesting article, thank you for writing it. I think to get a good handle on production estimates and rig counts, would be to use what you’ve started with here and factor in 3 more things: the aggregate (available) oil hedge info for drillers in Bakken/3F and the EF; the average length of contract for currently in use rigs; and, available borrowing capacity in aggregate based on new reserve calcs & borrowing limits by lenders to the oil patch. Pretty sure we can call the direction they are moving at the moment, but the velocity and duration or those moves, at current $48 WTI, are the wildcards. I would expect an acceleration of the velocity, and well, duration depends on the other global oil producers spare capacity, as well as the market response, both by oil end user demand growth, and the read-thru on that new balance by the commodity folks in the pit with regard to the commodity price. There are a lot of moving parts, but those stand out to me.
Strange,
All the talk is of rigs drilling the outer areas of the Bakken will stop and everyone will concentrate on the sweet spots in McKenzie and Mountrail. Another little bit of info, Dennis, had QEP as having the best wells out of all the companies he analyzed.
Now looking at the ND DMR site is see this
PATTERSON 318 QEP ENERGY CO JONES 2-15-23TH SWSE 10-150N-95W MCK 29357 33053062480000 12/18/2014 Will be released.
UNIT 119 QEP ENERGY CO P. LEVANG 2-14-23BH SESE 11-150N-95W MCK 29373 33053062520000 12/25/2014 Release
https://www.dmr.nd.gov/oilgas/riglist.asp
The only two rigs with a “release” as their next destination, and they are from the best company in the best county?
Wouldn’t it be nice if some of the other players were this honest.
Good catch.
Watcher, I have said to you in the past that the two largest shale oil plays were primarily a big boy’s game and those boys might be more capable of withstanding lower price structures for a longer sustained period of time. This link that Pusher has provided, above, suggests otherwise. Clearly there are a number of smaller operators working in the Bakken than I thought, certainly more than in the Eagle Ford. It doesn’t matter too much how big, or small they are, at this point they are all refried beans, but I stand corrected. You were right.
Mike
Ahh don’t sweat it. You’re having a bad day. Nothing anyone says here matters anyway. That which is inevitable is inevitable.
Mike, did this impact you?
Pioneer Natural Resources Co said on Tuesday that icy winter weather significantly disrupted its production and drilling operations in the Permian Basin in West Texas, one of the top U.S. oil basins.
“At the beginning of January, the Spraberry/Wolfcamp area experienced heavy icing and freezing temperatures that has resulted in extensive power outages, facility freeze-ups, trucking curtailments and limited access to production and drilling facilities,” the Dallas company said in a statement.
Andrew Arnold, a meteorologist with the National Weather Service in Midland, said much of West Texas had very cold temperatures and a lot of ice accumulation from freezing rain in the four days spanning Dec. 30 to Jan. 2.
It will take several weeks before the weather’s full impact will be known, Pioneer said.
Hi, Gerd, it has not me along the Gulf Coast, no. It is interesting though.
Because the thing about Texas weather is, if you don’t like it, wait a day and it will change. It is cold out there right now in West Texas, we are fixin’ to get the same norther down here, but to be honest, I call foul on this. Truck curtailments? Come on, that is THE oilfield out there and they get cold weather all the time. Nobody quits in the oilfield because it gets cold, I reckon you know that, Gerd. In my mind it has to be freezing, hard, for 24 hours straight to affect produced water production. That means it has to stay down in the mid to low 20’s all day during the day, then get colder at night. It has been in the 60’s out there, the ground is warm, this is BS. Cold weather doesn’t affect the oil side of the three production phases, primarily just water. And water coming out of the ground is way above ambient air temperature for quite a while, actually.
This is preparing folks for some production data changes that don’t have anything to do with weather, IMO. There is a ton of very marginal Sprayberry production out there operated by this company that is likely getting shut in. Why in the hell would anybody make a press release about cold weather affecting production in W. Texas? What a bunch of pussies. Now if we heard this in N. Dakota, I’d buy it for sure. Those guys know cold.
MBP, has it been THAT cold out there in your country?
Mike
I was actually on vacation skiing for most of the big freeze, but it weather did get really bad. Everyone that was here pretty much got 3 days off of work. On the way back I saw probably 20 overturned semis on the highway (all freight). As far as production losses, January tends to be the month where we have our lowest production volumes. We shut in a lot of production in an attempt to avoid spills, and it definitely got cold enough to impact production last week.
Hi ManBearPig,
Before the price crash were you seeing a big move to more horizontal wells with 20 to 30 stage fracking in the Permian? I have heard a lot of hype about the wolfcamp in the Spraberry trend (Wolfberry?), but it would be interesting to hear some info from someone in the know.
Dennis,
That depends if the operators is using geometric fracs or engineered ones. The latter having less than the geometric. In the Permian, the trend started with short laterals and a few stages, ramped up to long laterals and >20 geometric stages, and now I think is turning is just as long or slightly shorter laterals with engineered fracs. I’d say 15-20 stages for a good engineered frac on a 5-7k lateral. I think the Bone Springs in the Delaware Basin probably has more potential than the Wolfberry, but there is so much stacked pay in both basins its anyone’s guess which will produce more.
Thanks. What kind of TRR for Permian LTO is reasonable? Maybe 10 Gb? What kind of split between LTO and conventional output in the Permian, 50/50?
For split, I’d say its somewhere between 60-65% conventional production. As far as TRR, I have no idea. The geology is so complex in terms of the number of unconventional formations that have the possibility to produce oil it is really anyone’s guess. Here are some of the formations that are unconventional targets from Mississippian to Permian in age:
Midland Basin: Clearfork, Spraberry, Wolfcamp (A,B,D), Strawn, Atoka, Woodford
Central Basin Platform: Clearfork, Wolfcamp, Cisco, Strawn, Barnet, Woodford
Delaware Basin: Avalon, Bone Spring (2nd, 3rd), Wolfcamp
I would say 10 Gb is a conservative estimate of technically recoverable hydrocarbon. Price will dictate the rate and ultimate recovery of the OIP.
Hi Manbearpig,
Thanks much for your insights. You, Mike, Doug, and Fernando add a lot to this blog.
A lot of what I read is hype. I doubt you would suggest 10 Gb if it wasn’t feasible. Clearly if prices remain $50/b or less long term, the guess would be different. I doubt oil prices will stay this low for more than 12 months, and your guesses, though they may not be spot on, will be far closer to the mark than any WAGs (wild #@$ guesses) that I come up with.
Mike, in some places we hook up gas engines to our pumps. When it gets really cold we get system pressure drops and engines start puttering. We also see more line packing in our gathering systems. But this is for huge line networks, I suppose we must have over 1500 km of flowlines. I can’t discuss all the details, but we actually take statistical bites from production forecasts to account for the cold weather.
Permian Oil Production Curtailed by Freeze; Market Participants Look to Storage
January 7, 2015
http://www.genscape.com/blog/permian-oil-production-curtailed-freeze-market-participants-look-storage
“Permian production started 2015 on a rather weak note, curtailed by freeze-offs caused by below freezing temperatures. Producers and marketers scrambled to meet sales quotas with the decreasing oil production volumes by drawing from storage in the basin, according to Genscape’s Midland-Basin Storage Report.
Production in the basin for the week ending January 3 averaged lower by approximately 460 mbpd, for a total of approximately 2.3 mnbbls impacted by the freeze-offs.
Production started to show signs of rebound as temperature increased, climbing from a low of 930 mbpd on January 2 to 1.2 mnbpd on January 5. However, with the forecast in Midland, TX, predicting more below-freezing temperatures this week, the impacts on production volumes could continue before fully rebounding.
Last year, a similar occurrence transpired when production was impacted at the end of November by an ice storm, with a total loss in production of approximately 1.4 mnbbls. Producers and marketers again looked to storage to fill the void with withdrawals from storage between November and December 2013 totaling 1.2 mnbbls.
After recovering from the freeze-offs, Genscape is expecting that production will climb through May 2015 to just under 1.8 mnbpd before starting to taper off as a result of the decrease in crude prices and corresponding assumed drop in rig count. Over the course of the next nine months, Genscape is expecting oil rigs to drop by 300 from up around 532 in December 2014.”
While the current drop in Permian production is temporary, it would be interesting to see how the projected 47% decline in oil rig count (from Nov.14 peak of 562 units) could affect output in the second half of 2015.
http://www.wunderground.com/weather-forecast/US/TX/Midland.html. Sales might have been “curtailed” because of ice and the inability to truck oil off lease (Texans can’t drive in ice, we don’t know how), but 460,000 BOPD for a week? Wow. At 160 BO per truck, that’s a lot of loads. A lot of that stuff out there is so prolific it DOES go straight out of tank batteries into pipelines. Production is never “curtailed” when it freezes because without moving produced water (@ 150 plus degrees BHT) tanks, flowlines, separators, etc. do freeze. But OK, I was wrong (and mad at Pioneer yesterday, lol). All that has already been sorted out anyway. Thanks, Alex. Mike
http://www.nytimes.com/2014/06/18/business/energy-environment/18iht-ren-saudi18.html
If the Saudi Arabians can burn oil to generate electricity at a cost of four dollars per barrel, then the buyers of the extra 5.9 million barrels exported daily by Saudi Arabia are doing all of the subsidizing. In essence, all of the rest of the world is directly supporting the Saudi economy by paying through the nose for oil.
If Saudi Arabia would cut back on production to zero exports, they’d be broke in a week.
It’s laughable, a joke, this dizzy oil price business
Upper Rocky Mountain
Spot Crude Oil Prices
WTI and N. Texas: $44.38
Colorado Western: $32.30
CO North Central: $37.21
WB Mixed Sweet: $36.00
ND Light Sweet: $34.91
Wyoming Sweet: $37.14
N Wyo. / S Mont.: $35.49
Spot prices updated Jan. 6
Natural gas Cash prices on 06/01/2015
Natural Gas, Henry Hub-I … … 2.960
Natural Gas, Transco Zone 3, $ per Mmbtu-I … … 2.960
Natural Gas, Transco Zone 6 NY, $ per MMBtu-I … … 17.900
Natural Gas, Panhandle East, $ per MMBtu-I … … 3.090
Natural Gas, Opal, $ per MMBtu-I … … 2.950
Natural Gas, Marcellus NE PA, $ per MMBtu-I … … 1.300
Natural Gas, Haynesville N. LA, $ per MMBtu-I … … 2.940
P.S. Note Marcellus ( and we are in January !)
Dean,
Was that CASH price or CRASH price?
Natural Gas, Marcellus NE PA, $ per MMBtu-I … … 1.300
and on the 5/1/2015 it was even worse : 0.800 $/MMbtu
Wow
The price is going up fast, a 62% increase in two days. Talk about inflation?
Seriously, this can’t last. This trend ain’t going to bend, it is going to snap in two.
^_^
The Crash In Oil Prices Raises Questions And Opportunities For A Lifetime http://seekingalpha.com/article/2798185-the-crash-in-oil-prices-raises-questions-and-opportunities-for-a-lifetime
“Conflicting information makes this perhaps the most intriguing topic of the decade.” “perhaps we are witnessing the “REAL peak oil” phenomenon”
Or maybe is just Obama grab for the the Oil Patch now that he’s finished with Health Care. :-<
North Dakota Rig Count falling fast. I checked it a few moments ago and it was at 165. Checked it ten minutes later and it was at 163.
Ron,
Quick question. Do you still believe U.S. will peak in oil production 2015 (or was it 2016)? And how about global oil production?
steve
I think it extremely likely that US will reach peak production this year, 2015. Global production will have reached peak production in 2014, or 2015 at the very latest.
I think September 2014 will be the peak month. October will be pretty high also and there is an outside chance that October will be a few barrels higher. But by November 2014 world production data will start to show a decline. Whether world C+C production in 2015 will be below 2014 or not will be a close call.
Of course I am talking about Crude + Condensate. I make no predictions about bottled gas, (NGLs), or biofuels.
The EIA expects crude+condensate production to peak in May at 9.42 mb/d
This is their forecast from December 2014 STEO.
http://www.eia.gov/forecasts/steo/
Dec13 7,81
Dec14 9,10
Jan15 9,19
Feb15 9,28
Mar15 9,34
Apr15 9,39
May15 9,42
Jun15 9,32
Jul15 9,32
Aug15 9,26
Sep15 9,20
Oct15 9,32
Nov15 9,40
Dec15 9,36
The EIA expects C+C production to increase by only 260 kb/d in Dec 2015 vs. Dec 2014.
Year-on-year change (mb/d)
Dec14/Dec13 1,29
Dec15/Dec14 0,26
Note that their average WTI price forecast for 2015 is $62.75/bbl.
If price stays at around $50, I am sure production will be down.
The question is, if oil prices rise to some $75-80 in 2016, how quickly US oil production will rebound
Alex, thanks for this. Would you mind posting the final URL where these figures are, or where they give the Excel link? I cannot seem to locate it. I can find the liquids predictions but not the Crude.
Ron, the data is from the excel file STEO-m, Table 4a. “U.S. Petroleum and Other Liquids Supply, Consumption, and Inventories”.
The table also includes separate C+C numbers for Alaska, the Gulf of Mexico and Lower 48 States (excl GOM), as well as NGPLs, Refinery Processing Gain and Renewables and Oxygenate Production (incl. Fuel Ethanol) Thereare also numbers for export and imports of crude and petroleum products, Commercial Inventory Net Withdrawals and various adjustments.
Unfortunately, there is no data for tight oil. but the closest proxy is Lower 48 onshore ex Alaska. Here, the slowdown is even more visible, although I guess it reflects some declines in conventional offshore production from marginal wells
Dec13 5,98
Dec14 7,14
Jan15 7,18
Feb15 7,25
Mar15 7,31
Apr15 7,33
May15 7,35
Jun15 7,36
Jul15 7,37
Aug15 7,37
Sep15 7,36
Oct15 7,35
Nov15 7,34
Dec15 7,28
2013 average 5,67
2014 average 6,70
2015 average 7,32
Year-on-year change
2012 / 2011 0,94
2013 / 2012 0,97
2014 / 2013 1,03
2015 / 2014 0,62
Dec14/Dec13 1,15
Dec15/Dec14 0,15
Regards,
Alex
You can find US crude oil production in the Table 1. “U.S. Energy Markets Summary”, and total liquids in the tables 3a and 3b in the same excel file.
Got it, thanks. I may do a post on this. Got to give it some thought. But the new STEO will be out Tuesday the 13th. May wait until then.
The link to the excel file is here http://www.eia.gov/forecasts/steo/
click “All Tables” in the top of the page
Ron,
If that is what unfolds in 2015 would we likely see a slow rise in prices in 2015, and then a spike in the Spring to Summer of 2016?
Seems as though prices would rise calmly as supply acquiesces, and global demand hypothetically picks up. Shale would be rising until after the demand peak for the year, and to anyone gawking at a chart all would seem quite nice – prices stabilizing in a Goldilocks “not too cheap, not too expensive” spot for producers AND consumers.
As the March-May 2016 period passes a faint warning light would blink – prices are rising again, global production hasn’t reached new highs in 18 months, and U.S. LTO is dropping.
As Summer 2016 passes demand continues its typical seasonal rise as it becomes obvious that new shale wells aren’t and can’t add enough to fight the Red Queen. Prices spike as the demand/supply mismatch is both felt, and predicted to get worse.
The OECD begs OPEC to raise production, but they don’t, making a statement about the market being well supplied and high prices being temporary. A data trickles in the months following it would be clear the global economy is grinding toward recession, and people are becoming uneasy as an election approaches in the U.S.
Brian, sounds like a pretty good scenario. I have no idea what oil prices will be. But if I were forced to predict I would say that oil prices are near their bottom right now. By early next year it will be obvious that production is not increasing. So I guess it all depends on demand. But unless we are in the first stages of a recession I expect prices to start rising by spring.
Hi Ron,
I still see 165. On Jan 7, 2011 it was 163. Last year it was 189 so down 24 rigs from Jan 7 2014.
Yeah, it changes all during the day. It is updated on the fly. Down then up then down again. Check late this afternoon and it may change.
166 now. Up 3 wells in just a few hours.
Ron,
I gather you didn’t like my table on rig counts as it seems to be gone?
The funny thing about the race to sweet spots, today the count dropped 3 rigs, but 4 rigs left the famous four counties of , MTL, MCK,DUN and WIL.
It should be interesting to watch and see where the rigs end up.
I saw your table at the end of “Bakken, A Tale of Two Counties” comment thread.
Thanks Reg,
I must have had the wrong page open when I posted, lol. I need someone to look after me.
Taken from ND DMR page 8 Jan
County………………BPD …….. % production… #Rigs…% rigs
Dunn……………….182988…….16…………………. 27……..16
McKenzie ……… 378584…….34………………….60 ……..36
Mountrail………..258350……23…………………30………18
Williams ………..160808……..14………………..37……….22
Divide…………… 41163……….4…………………. 5………….3
So Dunn has 16% production 16% rigs, even
McKenzie has 34% production and 36% rigs about even
Mountrail has 23% production and 18% rigs, most likely to see a decline in production if rig count does not go up.
Williams has 14% production and 22% rig, poor area and rig count will drop, or will see increase in production.
Divide, doesn’t count
Since then
MTL down 2
MCK down 1
DUN down 1
WIL down 2
In time the rig counts should show us where the sweet spots are?
It does seem that the sweet spots in Mountrail county may be running out of room, otherwise we would not see rig counts dropping there. Most rigs (159 total) are operating in those 5 counties. It might be good to track this week to week as it seems to fluctuate so quickly.
The other problem is that there are different pools within counties and some are more productive than others so some rigs may just move from less sweet areas to more sweet areas within a county and we would not see this in the data. In percentage terms we see a pretty big drop in Williams rigs, it might be worthwhile to report the % change in rigs in a county.
Dennis,
I agree it will be noisy to begin with. It just looked funny that the sweet spots were suppose to be in the big four, and early indications seemed to contradict the assumptions. Today McKenzie seems to be back at 61, an increase of 3 since yesterday.
Just a note when counting the wells, I find the easy way is to do control F. Works great for all except Williams. “WIL” also appears in other columns, so you need to subtract those. i came up with 154 for the 5 counties.or 149 for the big four.
Toolpush, you can just copy and paste the list into Excel, then you can sort on any column and make everything easy to count. If you copy from Internet Explorer it will copy and paste with no problem. Copying from another browser you might have some problems.
I use Google Chrome for everything except when copying and pasting into Excel. There I always use IE.
Hi Ron,
Thanks for the tip.
Splashed on ZH:
“on Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money.”
This is how the world works, boys and girls. The flow from already existing wells isn’t segmented from the business. If you declare bankruptcy, that’s supposed to protect assets from creditors, but it doesn’t guarantee you can continue to operate. If you can’t pay the truckers, up front (you can be sure after you file), then they ain’t gonna haul oil. These companies owe money on 4 year old wells. They can’t pay the truckers and not make their loan payments. That’s fraud, when in bankruptcy.
Now, if the gubmint comes in and does another GM style bankruptcy law change and says screw the creditors and pay the truckers (labor), that oil can flow. But if you’re a creditor and you want your money, and you see money being paid another creditor (truckers) without a bankruptcy judge’s order, you request an injunction and maybe ask for criminal proceedings. The presumption that the only impact on flow is reduction in drilling is not how the world works.
It’s for reason such as this that I think that low oil prices won’t last long. If the picture of the shale oil industry that has been painted here is correct, once the oil hedges expire, a big slice of the shale industry goes bye bye in short order, that production drops off the world market, and prices go back to the new normal of $100 a barrel.
I could be wrong of course for any number of reasons, but that’s my guess. I thought it would happen in 6 months to a year, but I forgot about hedges so now I’m saying 18 months to 2 years.
Time shall tell. It always does.
That presumes price fell because of too much oil vs demand. Suppose that’s not so. If not, loss of flow would not affect price. And if you really want to commit to that theory (there are no economic laws), then loss of economic activity from shale and its multipliers could suppress consumption and take price lower.
Accelerating Depletion Rates
For purposes of illustration:
Assumptions:
Cumulative Global C+C Cumulative Production through 2005: 1,000 Gb
Low Case for Post-2005 Global Cumulative C+C: 1,000 Gb
High Case for Post-2005 Global Cumulative C+C: 2,000 Gb
Global C+C averages 75 mbpd for 2006 to 2015 inclusive (versus 74 mbpd in 2005)
Cumulative Global C+C Production for 2006 to 2015 inclusive: 274 Gb
Low Case Global C+C Depletion Rates:
2005: 2.7%
2015: 3.8%
High Case Global C+C Depletion Rates:
2005: 1.3%
2015: 1.6%
In other words, we are in all likelihood seeing an accelerating rate of depletion in remaining post-2005 Global cumulative C+C production, the only question is the rate of depletion.
In regard to exports, I estimate that post-2005 Global CNE* (Cumulative Net Exports) are on the order of 470 Gb. I estimate that CNE for the 2006 to 2015 time frame inclusive will be about 160 Gb (an average of about 44 mbpd for 2006 to 2015, versus 46 mbpd in 2005), which would put estimated post-2005 Global CNE about 34% depleted at the end of 2015.
The estimated rate of depletion in Global post-2005 CNE in 2006 would be 3.5%, and the estimated rate of depletion in remaining Global post-2005 CNE in 2015 would be 4.8%.
*Combined net exports from (2005) Top 33 net exporters, total petroleum liquids + other liquids; post-2005 CNE estimate based on 2005 to 2013 rate of decline in the Top 33 ECI Ratio (ratio of production to consumption)
Hi Jeff,
Are your cumulative net exports based on your low case URR or the high case of 3000 Gb World URR?
Neither one. As noted above, the CNE estimate is based on the 2005 to 2013 rate of decline in the Top 33 ECI Ratio. This method of estimating CNE was too optimistic for the Six Country Case History.
Regarding the Global C+C scencarios, my point is that it’s not whether, but to what degree, that we are experiencing an accelerating rate of depletion in remaining recoverable C+C reserves.
Jeff,
When do you think you will update your 2013 ANE-GNE Charts?
steve
I want to update all the charts, and I’ve been waiting on the global gas production number from the EIA for 2013, for a global gas, NGL and C+C chart, but I’m beginning to think that the EIA may not update the data base. I’ll probably go with the BP data for global gas.
GNE fell from 46 mbpd in 2005 to 43 mbpd in 2013, and ANE fell from 41 mbpd in 2005 to 34 mbpd in 2013.
Jeff,
Thanks for the update.
steve
Hi Jeff,
Note that Jean Laherrere estimates a World URR of 2700 Gb of C+C if “extra heavy” oil is included, my estimate is about 3000 Gb, and McBride estimates about 4600 Gb (if kerogen oil is excluded from his estimate). So your high estimate may be a little on the low side. Steve Mohr’s central estimate for C+C was also about 3000 Gb. Hard to determine which of these estimates is correct, maybe 2000 Gb to 4000 Gb would cover the range of estimates better. I may revise my estimate upwards based on McBride’s work to about 3400 Gb with 900 Gb from Oil sands and 2500 Gb from conventional C+C.
Depletion is definitely increasing, by how much depends on URR as you showed.
ooh, uptick via Germany, making nice noises about renegotiating Greek debt (while saying they won’t take any haircuts). The euro bounced just a tad, weakens ye olde dollar and helps oil 3/4 of a tidbit.
Of course the subtext is Germany must have seen some Greek polling.
http://headlines.ransquawk.com/headlines/white-house-adviser-podesta-says-sees-no-further-pressure-to-ease-us-policy-on-crude-exports-considers-issue-resolved-for-noe-07-01-2015
For what it is worth the EIA say US oil production has gone no-where in the past 5 weeks, range between 9.118- 9.137mbd. In the previous 2 years in December production had remained firmly in an up-trend and had gained 70,000-100,000bpd over this period so this does look a tad different……..
and also expected when oil prices are half of their previous level.
http://wolfstreet.com/2014/12/07/bloodbath-in-oil-patch-junk-bonds-leveraged-loans-defaults/
http://www.theguardian.com/environment/2015/jan/07/much-worlds-fossil-fuel-reserve-must-stay-buried-prevent-climate-change-study-says
Possibly already posted here. If so, please excuse.
“Much of world’s fossil fuel reserve must stay buried to prevent climate change, study says
New research is first to identify which reserves must not be burned to keep global temperature rise under 2C, including over 90% of US and Australian coal and almost all Canadian tar sands”
Hey, SP, people around here can’t hear that ! It would kill their fun chatting endlessly about microscopic variations in anything (anything= nothing) having to do with sipping soda thru a straw in ND.
Hi Wimbi,
The argument runs like this. Until peak oil is widely recognized, most people will not take the kinds of actions that are necessary to reduce oil consumption. Currently the Light tight oil (LTO) success(or disaster depending upon one’s perspective) in the US (which was unexpected 5 years ago) is what has kept peak oil at bay for the last couple of years. Once peak oil (on an absolute vs per capita basis) has arrived, we will see oil prices increase and we can begin the transition to other energy sources in ernest.
The LTO URR of C+C is likely to be less than 30 Gb in the US, and I doubt it will amount to more than 10 Gb outside the US. Total World URR may be as high as 4000 Gb (with about 1000 Gb from oil sands in Canada and Venezuela) so the LTO contribution is less than 1%, a drop in the bucket as it were.
Hopefully fossil fuel prices will rise enough (or taxes are imposed) so that non-fossil fuel energy will rapidly replace fossil fuels, but this is by no means assured.
I share your concern, though it may not be apparent.
Just for reference, the EIA has estimated tight oil reserves to be between 335 to 345 billion barrels.
http://en.wikipedia.org/wiki/Tight_oil
Hi johnb
eia estimates are not good usgs estimates about 30 gb for the USA there will be little produced elsewhere.
DC, Hard to imagine processing 1000 Gb of tar sands oil.
I think about all the effort that has gone into extracting and processing the over 1000 Gb of crude oil that mankind has used so far. And then to consider something on the same quantitative scale but much more difficult to handle.
Hi Paul,
I would not expect it to happen quickly and certainly not at a low oil price.
In my mind these are long term estimates of what is technically (or will become technically possible), Jean Laherrere estimates about 500 Gb from Canadian and Venezuelan oil sands (he calls this extra heavy oil).
I am hopeful that a rise in oil and natural gas prices in the future and a fall in the relative price of wind, solar, EVs, trains, public transportation, heat pumps, HVDC transmission, and demand management will result in much of the “extra heavy” oil and coal being left in the ground because it is too expensive because many humans seem unable to grasp the potential damage due to climate change. High prices are likely to be the only thing that saves us from ourselves, unfortunately.
At high oil prices, a large amount of oil sands could potentially be developed over the next 85 years, only a lack of oil demand will prevent it.
What URR for natural bitumen from Canada and extra heavy from Venezuela seems reasonable to you?
Supposedly there are about 435 Gb of proven reserves plus production of oil sands, there will be reserve growth as there is more experience developing the resource, Laherrere has a URR of 500 Gb, Mohr has 700 Gb for his low case and 800 Gb for his central estimate, McBride has 850 Gb for his low case and 1360 Gb for his central URR estimate for natural bitumen plus extra heavy oil.
As far as Canada is concerned (and the rest of the world I’m quite sure) the carbon will never stay in the ground. Never. It will not happen. It is not possible.
It’s worthwhile to point it out (perhaps like the sages on Easter Island who said don’t cut down the last tree, but were ignored anyways), but it simply isn’t going to happen. The thinking and frame of mind that dominates the entire world will not allow for it. We are going to run this massive carbon input into the atmosphere experiment no matter what, and people will be seeing where it goes for the next few centuries. There’s no turning back. I hope it doesn’t go too badly, but we’ll see in time. And anyways, I might like having the chance to paddle around the north pole in July. It should be quite something.
Folks, thanks for the good responses to my provocative outburst.
“Not possible”! ? If it does not violate the laws of physics, it is possible.
Keeping the carbon in the ground is not only possible, it’s way easier than digging it up.
Just think of what we could do right now and here with the totality of the monster efforts all around the world to dig up what the science is yelling for us to leave right where it is.
gimme a tiny sliver of that and BINGO, I get my entire little town into nice warm insulated houses, replete with PV and EV’s, and young people who have just called off their class action lawsuit against my generation for robbery and murder. Of which we are guilty as hell.
So, everybody feels real good about their newly reunited community, and happy to meet all the cheery folk when they put in their time in the community garden and nut tree farms.
“Won’t do it” is another matter altogether.
And now I lay me down to sleep, and if I die before I wake, cut me up and stuff me into the biogas digester.
That’s a fair criticism. Canada won’t leave the carbon in the ground. The rest of the world won’t leave the carbon in the ground. Why? The narrative doesn’t allow for it and people are just stupid. That’s why. Economic growth uber alles and all else be damned.
Do you really think the Chinese would be poisoning themselves with pollution (the directly harmful kind that you can see with your own eyes) if it wasn’t economic growth uber alles. They’re trying to change course, but that’s because of literal rioting in the streets over the matter. No one riots over carbon dioxide increasing and likely never will, or if so, they won’t riot until it’s far too late.
Furthermore, with respect to the switch-over to renewables, there’s a massive installed base of energy infrastructure that would need to be replaced. That will take decades of uninterrupted rapid change. Does anyone reasonably believe that decades of uninterrupted rapid change will occur? I sure as heck don’t.
We’re going to run the CO2 test and find out what will actually happen. There’s no getting out of it. Short of a near term full scale nuclear war which ends civilization as we know it, massive injection of CO2 into the atmosphere and burning every fossil fuel we can is going to be the way forward. We have as much chance of choosing otherwise as we do of choosing not to kill each other in wars. It’s super easy to choose not to kill one another, but that has, for all intents and purposes, literally never happened. I fear we are in the same bind with fossil fuel usage. Technology might actually save us, if we could find some magical substance which doesn’t require the switchover of existing infrastructure, but I’m not seeing that in existence at this time.
I hope the experiment turns out to be less bad than predicted. My children and grandchildren will see. In any event, no one knows exactly what will happen but time shall tell. It always does.
Furthermore, with respect to the switch-over to renewables, there’s a massive installed base of energy infrastructure that would need to be replaced.
That’s why it would be a great jobs program. Not saying that anyone will do this to give people jobs and boost the economy, but installation and infrastructure jobs would have to happen in this country rather than being outsourced, which would be good for putting people back to work.
Prices may rise enough so that some is left in the ground.
Or, — quite possible and maybe even inevitable– solar/wind will get so cheap that the bad stuff will be left in the ground for simple reason that nobody will want to pay for it.
Looking at prices/year, seems to me it is in fact inevitable- and way quicker than people here want to admit, despite everybody here being quite friendly with trends and stats.
Hi Wimbi,
That is what I meant, as oil and natural gas prices increase the relative costs of alternatives falls and there will be substitution.
I agree that the trend in wind and solar prices has been downward at a rapid rate, but eventually these may level off, we cannot assume that an exponential trend will continue forever. We tend to get to a diminishing returns point where costs will level off. Hopefully the US can get installation costs for solar down to German levels.
Higher prices for natural gas will help to jump start wind power in the US. Higher electricity prices by enforcing pollution standards on old coal fired power plants, will help boost solar installations.
Carbon taxes would be better, but the higher fossil fuel prices will be here within 5 years and then we may see solar and wind take off.
That assumes there’s a solid commitment to keeping surface temperature from rising 2 degrees C above a set point they picked in the past. It also assumes a well established link between co2 concentration changes and temperature changes. Those assumptions are iffy. In any case, neither China nor India nor other large nations pay attention to it in real life. We will either have to do geoengineering or we will run out of resources, but the drive to stop fossil fuel use isn’t very effective.
Fernando your lack of knowledge about biology shows. The physics of the greenhouse effect is pretty basic stuff. Water vapor feedback is also well understood. Clouds and aerosols need work.
My guess is that we’ll do the geoengineering thing. I think we’ll find ourselves pushed into a corner at some point (Arctic sea ice gone, Greenland ice sheet dramatically disappearing, massive climatic disruption, i.e. the kinds of disasters that finally can’t be ignored) and then because the moment to avoid the problem has passed, we’ll latch on to any band aid solution that presents itself.
As for the solid commitment to keeping surface temps from rising, the evidence on that is 100% clear. No such commitment exists (in Canada or the U.S. at any rate). There’s been plenty of yakity yak on the commitment, but little overall action on the matter. There’s some brights spots in Europe to be sure, but the world as a whole? Nope. We’re committed to frying this rock (or at the very least dramatically increasing the atmospheric content of CO2) come hell or high water, all else be damned. That isn’t the aim of course, it’s economic growth, but that will be the result regardless. And then we’ll see what happens.
Aren’t basic science experiments fun? This one should be “fun” on a planetwide scale. I look forward to pouring over the results (well, I’ll actually probably be dead, but maybe not, they say things are proceeding far faster than expected, so we’ll see).
Iran Accuses Saudis of Oil Conspiracy
http://www.voanews.com/content/iran-accuses-saudis-of-oil-conspiracy/2587985.html
I wonder if we might see Iranian sponsored attacks on Saudi oil infrastructure.
North Dakota issued 24 new drilling permits today. One of the highest number of permits issued in one day ever there. https://www.dmr.nd.gov/oilgas/dailyindex.asp Slowdown? What slowdown? LOL. 😀
A few of those permits are in SM’s Gooseneck Divide county acreage. They said today they will sell off the gas stuff they operate in Oklahoma, ArkLaTex area and focus exclusive on the Goosneck Divide County in Bakken and the Eagle Ford acreage by Carrizo Springs and north of Laredo. Thinking of accumulating a few shares of them myself, upside potential on the symbol is enormous. They do good wells that are cheaper then the others. The Gooseneck wells are around 5 Million for example since the Bakken/Three Forks is so much closer to the surface in that area. And most of what they’ve done up in that corner is Three Forks, the Bakken potential there is going to double the possible number of wells and amount of oil in place. In their Eagle Ford stuff, they operate in the thickest part of the field so they have more hundreds of locations than the other companies.
instead, if you look at the completed wells for January 2015, they have awful 24h oil production data: almost always < 1000 bopd and the ratio bopd/bwpd is almost lower than 1
If a permit is issued, it doesn’t mean it gets drilled right away, right? They can treat it as an option and drill when they think the price is more favorable, possibly a year or more down the road, right?
A delay is possible and typical. Years? Probably not.
Yesterday there were 24 permits issued and 2 new wells started. Here are the lowest 10 permit numbers of wells being drilled right now:
16439
21385
21607
21788
21833
21877
22229
23159
23517
23846
The last permit number issued was #30452. About 2500 permits are issued each year.
However only 23 of the 165 rigs working today are working permit numbers below 28000 and 109 of the rigs are working permit numbers 29000 or above. 17 rigs are working permit numbers above 30000.
So to answer your question, most rigs are working wells permitted in the last few months but some rigs, well over a dozen, are working permits that were issued at least two years ago. And one, permit #16439, was issued several years ago.
About that permit #16439, Ron, that well was actually drilled in 2007. It’s showing up on the active rig list because Marathon has re-entered it to re-complete it with the “modern” methods of 30+ frac stages and millions of pounds of sand. As originally drilled, that well was likely an “open hole” design that has since been found to be inferior to the wells now being drilled.
Marathon has taken the lead among all the other Bakken producers in going back to their oldest wells, re-completing them, and, in turn, getting and increase in production out of them.
The operators have one year from the date the permit was issued to start drilling the well. But, for only $100 a pop, they can give themselves another year to drill the well. They can keep on obtaining additional years indefinitely.
The oldest active permit in North Dakota that has not yet been drilled was issued in 2005.
Wow, I’m gonna go buy this company before they realize what they got.
Mr. Wald, the increase in output from a few of those Marathon wells has gone from about 1,000bbl/ month to 10,000bbl/ month.
Hi coffeeguyz,
It the average increase that matters, pointing out a couple of successes is silly, how many of these refracks have been done in the Bakken? Just because it works on a couple of older wells (there were only about 500 wells producing in 2008 when multi-stage fracking took off in the North Dakota Bakken) does not mean that it will be successful on the post 2008 wells.
It is doubtful that the cost of the refrack will be justified by the extra oil output for most of the Bakken. Eventually the field becomes fully developed and there is little further drilling, the Bakken will be there at 40,000 wells or less, even if 60,000 wells are drilled the average EUR of those last 20,000 wells will be much lower than the 2010 to 2014 average of 350 kb, probably around 200 kb on average, oil prices will need to be very high to justify drilling such wells.
Bloomberg: U.S. Oil Exports Jump to Record as Shale Production Booms
http://www.bloomberg.com/news/2015-01-07/oil-exports-from-u-s-jump-34-to-record-as-shale-output-booms.html
My comment:
Meanwhile, US net oil imports, on a total liquids basis (four week running average), rose from 4.7 mbpd in early November to 5.9 mbpd in early January:
http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm
The recent 1.2 mbpd increase in US net imports is equivalent to about one and a half times Mexico’s 2013 net exports, but why let data get in the way of a good story?
That rise in imports from Nov to Jan has mostly corrected itself and appears to be mostly be within the typical range of variance for the system.
3 out of 5 Americans don’t have enough savings to cover a $500 repair bill or $1,000 ER visit:
https://twitter.com/Reddy/status/552871246049071104/photo/1
That is scary. Looks like many people are relying on their credit cards to get them through. Which means two or three events in a row puts them in a very bad position.
Actually Jeff I find that so-called “statistic” to be unbelievable. Maybe 3 out of 50 or 500; unless you’re talking dirt poor 3rd world desperate? Perhaps it’s my Scottish ancestry, but not having a very healthy “rainy day fund” doesn’t wash. My (Norwegian) wife feels exactly the same as do I: That it’s an utterly a unbelievable statistic!
I believe it! It’s a number a little higher but in the same order of magnitude than here in Belgium (i.e. core Eurozone area.) For the entire EU things will be about the same compared to US. Wake up Dough! 🙂
Here’s a link to an article on a study that puts median US savings at zero:
http://www.foxbusiness.com/personal-finance/2014/05/14/median-american-savings-0/
That’s too depressing for words. And, there are people, even here on Ron’s Blog, who seem to think mankind will “see the light” and revise lifestyles to arrest global warming, etc. If the majority of citizens in the world’s richest economy can’t plan out their own “economic lives” beyond the next paycheck why would they concern themselves with Peak Oil. Maybe Bread-and-Circuses really is the best solution or is it Beer-and-Football nowadays?
I think from a purely investment standpoint, when the interest rate on savings is less than the inflation rate, you’re better off investing in assets that can appreciate.
John B Wrote:
“I think from a purely investment standpoint, when the interest rate on savings is less than the inflation rate, you’re better off investing in assets that can appreciate.”
Unfortunately that isn’t happening. It appears that a lot of people are tapping savings to meet ends. Wages are not rising but costs are (food, Taxes, and healthcare). For the most part, Americans have avoided the stock market, having been burned twice (2001 & 2008). Instead, most piled into the junk bond market, chasing yield, which just happens to rest on a precipice of collapsing oil prices (A lot of junk bonds is tied to the shale oil boom).
2001 – Stocks – Strike One
2008 – Housing – Strike Two
2015 – Junk Bonds/Oil bubble – Strike Three!
You’re Out! (American Baseball for those unfamiliar with three-strikes)
Unfortunately, Finance, Money and Risk Management is not taught in school and Americans are largely ignorant. They invest very poorly.
Plus there is very little sound investments avail. The few available sound investments get crowded driving up valuation to extremes that make them risky. For instance sound investment will get over-subscribed driving the price sky-high so that it becomes a speculative investment driven on crowding and how much further the crowding will drive up prices. This isn’t investing, its mob swarming mixed with musical chairs.
In addition the jobs aren’t there. There are two trends that are preventing job growth:
1. System automation. Task and processed that use to be performed by workers are now being replaced by machines. Companies need to hire fewer workers and can increase production and quality. In the 1990’s and 2000’s it was manufacturing that switched to automation (and off-shoring). In the 2010’s it reached office jobs (ie white collar jobs), as software automation is rolling out.
2. Overseas Outsourcing. As local/state/federal regulations and taxes increased it drove companies to move operations overseas. Manufacturing went to China, and Services (IT support, call centers, etc) went to India and South America.
What’s left is jobs that can’t move overseas: Blue collar maintenance jobs (Plumber, Electricians, construction, etc) and for White Collar: Engineering, IT, healthcare, management, etc. The rest of jobs are low paying service jobs (retail stores, waiter, bartender, hospitality) and these types of jobs compete with illegal and low wage foreign workers (work visa).
The only way the US economy can recover is if the outsourced jobs return, which seems unlikely. Jobs will continue to remain under pressure of elimination as automation continues to improve. Companies would much rather install a machine than a worker to perform a job. Even if the gov’t makes the correct changes, its still not going to prevent companies from rolling out even more automation. Re-shored manufacturing will be highly automated requiring very few workers.
Even if energy depletion wasn’t here, companies will be cutting office jobs by 25% to 30% over the next ten years as the machines replace workers. Energy depletion will increase job cuts and consumers and business consume less and companies need to produce less. I also think manufacturing is going to take a big hit in 2015. I see a lot of US manufacturing for the Oil drilling and there will be lots of machine shops closing their doors when the drilling stops. I also expect healthcare to take a big hit because of ACA (ie Obamacare) as higher premiums and deductibles cause consumers to spend less on healthcare. Patients will likely to avoid extra tests and other procedures now that there $20 co-pay is now a $3000 deductible.
Someone must be investing in stocks in order for the market to reach these levels. Also, real estate prices in many areas have rebounded. And real estate in some areas is hitting new highs. This takes investment.
It doesn’t really make sense to have money in a savings account that now pays less than 1%. Maybe it did in 1981 when savings accounts paid 12%.
Energy production is not depleting, it is increasing.
Automation frees up workers for new industries.
Foreign competition improves products, and lowers prices.
John B Wrote:
“Someone must be investing in stocks in order for the market to reach these levels. Also, real estate prices in many areas have rebounded. And real estate in some areas is hitting new highs. This takes investment.”
Yes, Corporations buying back there own stock using cheap credit supplied indirectly from the Fed. Corp Debt is soaring with the buybacks, and its not sustainable. Other buyers are pension funds and other large institutional investors. That said almost none of the capital is being invested in non-financial products. Companies are not hiring, they are not retooling, they are not building new domestic factories. Capital just sloshes from one financial instrument to the next.
Real estate rebounded for similar reason. Hedge funds loaded up on foreclosed properties to rent or flip them, causing prices to rebound. They are now stuck with illiquid assets that are over priced. They bought them using investor money (the easy part) and they now have to either sell or find a renter (the hard part). They can’t unload them to consumers because they are tapped out and the banks don’t provide them with no-money down mortgages. The Federal gov’t via Freddy and Fanny just lowered the downpayments to 3% in order to get people to buy real estate. Eventually they will probably lower it so that they virtually pay people to buy homes. The only way this system can continue is by printing money, but that isn’t sustainable.
The only bright spot in the US economy had been Oil production, but now that the oil bubble has popped. (Strike Three!), We’ll see QE4 soon.
John B Wrote:
“Automation frees up workers for new industries.”
Tell that to 100M+ no skill/low skill workers. Only a very small number of people have the appropriate skills to accommodate employment changes. I am even seeing skill workers losing there jobs. Lots of big companies have begun to downsize IT as software automation and outsourcing has taken over.
John B Wrote:
“Energy production is not depleting, it is increasing.”
Your confused. Energy Production is completely different than energy depletion. Production is the the extraction of energy resource. depletion is a loss of resources that are consumed. As extraction increases so does depletion. However at some point (ie 2005) depletion causes prices to rise and prices rise to the point that it causes demand destruction (2015) and the extraction rate falls (2016)
John B Wrote:
“Foreign competition improves products, and lowers prices.”
Yes, but causes domestic job losses. An in this generation the lower cost of produces has come with a decreased quality. Virtually all of the products coming out of China are junk. US made durable goods lasted about 10 years. US products generally cost more because they were better quality. The junk coming out of China lasts perhaps three years before its become not-economically repairable. But the cheap junk model satisfies the need for instant gratification that US consumers crave. They would rather own a cheap product that will be discarded within a couple of years for a new model, so they don’t care if it breaks soon. And this is approach of a throw-away product economy, suppose to get us to a renewable and sustainable economy?
Virtually all of the products coming out of China are junk. US made durable goods lasted about 10 years. US products generally cost more because they were better quality.
You know, it just occurred to me that one reason small and large appliances fail so quickly is not that the Chinese can’t build them better, but with these things being shipped across the ocean rather than manufactured in the US, plastics are likely substituted for metal in order to save weight. The construction just doesn’t hold up very long.
Believe it Doug.
ZH splash
“Chicago Fed’s Charlie Evans appears to have decided to flex his voting member status, Bullard-ness this evening. Speaking during a forum in Chicago, after The FOMC Minutes showed data-dependence was the thing… Evans exclaimed “raising rates would be a catastrophe,” and that “housing hasn’t shown the strength he’d like to see”
This goosed S&P futs big in Singapore. FYI in mid October during the only modest decline in equities last year, Bullard did the same thing in a speech, suggesting QE4 might take place. He also is a voting member of the FOMC.
The result of this jawboning tonight was 10 S&P points, 3 bps on the 10 yr T note and about 60 pennies on WTI, now fading.
” Evans exclaimed “raising rates would be a catastrophe,” and that “housing hasn’t shown the strength he’d like to see”
So Watcher it is status quo? 🙂
The Fed and other Central Banks decided in 2009 that keeping the global wheels turning is far too important a matter to leave to free market function. So there will be no free market function, because it remains too dangerous.
Nothing has been fixed. 4.1 Trillion dollars were printed in the US and more elsewhere. That money remains in the system and is not underpinned by activity.
So we will see Fed members make speeches when needed that place on the newswires information the headline reading algorithms want to see, and of course the Fed is informed of the programming du jour in that regard.
But they can’t print oil. They know this. They CAN print the ability to get non economic oil, and they will.
Watcher wrote:
“So we will see Fed members make speeches when needed that place on the newswires information the headline reading algorithms want to see”
Whenever the stock market begins to tank A Fed board member just happens to give a speech or an interview. Your absolutely right, there is no free market and we have an army of Baghdad Bobs putting on a show to hide the real problems. This will continue until it can’t.
Hi Ron
have you managed to updated your 24h oil production data up to the end of 2014?
Thanks, Dean
Europe Is Under Siege
http://www.theatlantic.com/international/archive/2015/01/europe-is-under-siege/384305/
Meanwhile, another medieval backwater exhibits brutally and ignorance:
http://www.reuters.com/article/2015/01/08/us-saudi-rights-idUSKBN0KH1GD20150108?feedType=RSS&feedName=worldNews
An April, 2014 ABC News program on the battles between the far right and Islamic radicals in the UK. At the end of the ABC program, both sides agreed that the battle over enforcing Sharia Law is headed to the US.
London’s Culture War: Inside the Conflict Between Far-Right EDL and Pro-Islamic Radicals
http://abcnews.go.com/blogs/headlines/2014/04/londons-culture-war-inside-the-conflict-between-far-right-edl-and-pro-islamic-radicals/
Anjem Choudary Interview
https://www.youtube.com/watch?v=3jtdK4yKrvY
Excerpt from the article:
The Charlie Hebdo massacre seems to be the most direct attack on Western ideals by jihadists yet. I’ve seen arguments advancing the idea that 9/11 represents the purest expression of Islamist rage at a specific Western idea— capitalism, in that case—but satire and the right to blaspheme are directly responsible for modernity. In the words of Simon Schama, “Irreverence is the lifeblood of freedom.”
“I think we have met the enemy and the enemy is us!” Pogo
And critical thinking is really really hard! Which is probably why so very few people engage in it.
Perhaps this presentation by Jonathan Haidt, an Associate Professor of Psychology at the University of Virginia might shed a bit of light on the true nature of the conflict between our modern western world and the fundamentalist culture of the old Islamic world and all forms of fundamentalism for that matter. These people are at war with us because they feel deeply threatened.
Dr. Haidt’s talk is, IMHO, very insightful, it even helped me understand why almost everyone who calls himself a conservative feels deeply threatened by individuals like myself who self identify as liberals.
So let me raise a glass and toast to a new level of enlightenment and mutual understanding for all.
http://thesciencenetwork.org/programs/beyond-belief-enlightenment-2-0/jonathan-haidt
Happy New Year!
The reported siege of Europe has been greatly exaggerated.
It seems the frequency of incidents like this one is increasing. But the way MSM blows this kind of events up to incredible proportions is escalating too.
I do not want to minimise the horribleness of the events in Paris, but we must look at the proportions. In the first week of 2015 the same amount of people got killed in road accidents in Belgium alone, than with the attack in Paris. Did these accidents change our way of life? No. Will the attack in Paris do so? No.
By allowing unfettered immigration, and taking away the citizens’ right to defend themselves, Europe’s Leftist leadership has doomed their culture. And it’s no big secret that Leftists in the US are trying their best to follow the EU’s lead.
https://www.youtube.com/watch?v=6-3X5hIFXYU
By allowing unfettered immigration, and taking away the citizens’ right to defend themselves, Europe’s Leftist leadership has doomed their culture. And it’s no big secret that Leftists in the US are trying their best to follow the EU’s lead.
Who are these Leftists you speak of? Cold War politics ended quite awhile ago. Seems like politics today, especially in the US, is driven by money.
And if you are a corporation, immigration gives you a bigger pool of people to employ and more people as potential customers.
Oh, as as someone whose grandparents were immigrants to the US (and those immigrants produced a family of five sons who all made careers in the US military) I don’t have a problem with immigrants.
What you said is true. And there are business interests that want cheap labor from immigrants.
I guess the big problem with immigration (especially in the EU), is that immigrants from Muslim countries don’t assimilate. They have their own culture, and their own laws. So you have this culture clash.
Yes, I’m sure that complicates things a lot.
Dozen Journalist .. noise, considering a half a million mega toxic spent fuel rods spread across the US in pools that have to be cooled and baby sat. An unsupervised bundle of fresh rods could do an order a magnitude more damage in minutes than ISIS could dream to do in a century. Tell your Congress critters to get back on track and bury it, while we can. Yucca Mnt wasn’t perfect, but it’s good enough.
Nobody is saying much about the possibility of venture capitalists with big testicles getting into the tight oil business but I would be willing to bet the farm that a whole bunch of them have bright young guys and girls with sleeve garters and green eyeshades doing some dead serious old fashioned research.
The industry may be in the sorry shape it is in now due the price crash and to being able to borrow easily at very low rates.
But it seems to be the consensus opinion that SOME tight oil is profitable all things considered at let us say seventy five bucks just to pull a number out of the air.
IF I were a venture capitalist with money of my own or investors money and not afraid to risk it I would be willing to take a chance on tight oil property that would be profitable with seventy five dollar oil. ESPECIALLY IF I COULD BUY IT AT A FIRE SALE PRICE.
I bought my backhoe at a fire sale price during the last big crash.I don’t even hire it out but I have gotten very good value out of it doing only sweat equity work on my own property. The biggest local apple grower got a million dollar coop cold storage and packing house building for ten cents on the dollar at a fire sale price at the same time. He would not sell it now for five or six times what he paid for it.
The sort of guys who are probably looking into BUYING INTO the tight oil business are the sort who understand the game – They are almost impossible to fool with hot air stories.IF they were gullible they would be broke instead of rich. If they buy they will only be gambling on the future price of the oil they will be selling. They will know with a fair degree of accuracy what their expenses are going to be.
Hi Dennis,
I will post my answer here to your post that is way up.
Here is the thing. When I first sensed that something is wrong with economy I was reading and reading and reading but still I did not get anything. I made several mistakes:
1) Looking at the past in order to explain to myself the future.
2) Looking at the trees and not seeing the forest.
Now I look always the biggest possible picture, like through the lens that makes a panoramic view of city skyline. And I look at the past events but do not automatically apply my habitual thought to gain insight into the future. I always now ask myself why it does not follow the same pattern?
You bring important point about Texas railroad commission and OPEC in smoothing the oil price. But here is my answer.
1) Oil price needs to be stable to benefit everybody (producers, consumers)
2) Too Low and Too High is not good for either of the them (producers and consumers)
I think these two postulates are the main thing.
Now what is happening when there is depletion of oil resources?
You cannot smooth the price. The reason that it worked before as you said 1950-60 with Texas Railroad commission or OPEC is because we as world could adjust the valve of production of oil in order to create PROFITABLE return on OIL CONSUMPTION in the MOST of business. Now that RETURN is diminishing and FEWER and FEWER business can make profitable return. Now in order to get that biggest picture you always have to look at the consumption side. What is consumption side? We, consumer? No. It is our Credit system. That is what QE is for. But QE as a additional boost ONLY for businesses that can actually make diminishing profitable returns.
People are always wondering “They are printing, oh my God hyperinflation is coming”. Yes they are printing but that credit is going only to the ones that can return profit at these current oil prices (and cronies of course, but just forget for them since they are irrelevant) . Population does not get money. If you remember since I don’t follow closely, how much was in Bush administration was given money in term of rebates? It was 6-7 years ago and it was like $300-400? Am I right? Well that is equivalent to giving the bone with little bit of meat to the dog after the lunch. And if I am right let’s just remember this and pay attention what will happen in EU by the end of the month. I will stick my head with prediction. They will QE too (for the chosen ones) and they will give 400-500 euros for every individual. But there is no inflation. It cannot be inflation with that little money given to general population. Credit system is broken because it has to be in equation with real resources.
So you ask why US government does not step in and play the role of Texas commission or OPEC. And by the way you mentioned that OPEC had that role until 2013. I think they lost quite bit of that role actually in 2005-2008 and that is because that is peak conventional oil period. I think few people who follow the numbers mentioned that this exact same the time period. So back to your question. The US government cannot play the role of OPEC. Why? They only have access to one valve – Credit valve and that valve is getting smaller and smaller since as you noticed the world trade is shrinking in US $ between other countries. Did you notice in the last 2-3 years majority of other trading countries are switching the trade in their currency. So US cannot play that role of Texas commission on global scale since oil is global product. Does not have big enough oil production valve and has shrinking Credit valve. That is the reason for these 2 oil boom/ busts in 2008 and 2014. And you know what my gut feeling is telling me if I am right that next spike will last shorter (not 6 years, 2008-2014) and it will not be as high in real dollars (not nominal). And after few of these diminishing boom/bust cycles game is over.
Dennis, If Ron post new article soon, please copy my post in the new thread and have field day (and anybody else) to see if I have some holes in my thinking. Thanks.
Let’s extract some snippets of gold here:
“Now I look always the biggest possible picture, like through the lens that makes a panoramic view of city skyline.”
Unlike most times in the past, central banks can trump everything. Household formation is low. Population is growing? Real estate demand should rise? Not if the Fed doesn’t hold mortgage rates down. Italian bond yields were spiking towards 20%. Their budget was going to explode. Didn’t happen. Super Mario threatened to print money and buy Italian bonds. This stopped traders from selling them (which drives the yield up). So ya, the macro is paramount. There is no free market. The CBs trump command it all. And in the Fed’s case, they are up for election only every 14 years.
“1) Oil price needs to be stable to benefit everybody (producers, consumers)”
Note in the FOMC minutes yesterday . . . “inflation is low because of transitory effects from oil”. This is 100% right. But it isn’t being interpreted correctly. Oil’s effect IS transitory. But that doesn’t mean the price is going to rise. Inflation being low derives from FALLING oil price. Not low oil price. It’s the rate of change of oil that impacts inflation; not its level. If oil gets stable, at $45, shale is wiped out, but inflation stops falling due to oil price falling (it may fall for other reasons).
“And if I am right let’s just remember this and pay attention what will happen in EU by the end of the month.”
Jan 22. Super Mario is to make his next call Jan 22, just 3 days before Greece votes. Greece’s Tsipras has demanded that any QE must concentrate on buying Greek bonds.
But here’s the thing. This isn’t new. There have been demand that Mario Draghi print money for about 2 years. Either Germany has stopped him, or Moscow has. Moscow could redenominate oil if he prints. Germany could leave the EU if he prints. Further, He Has Bought Not A Single Bond and still managed via threats to take Italy, Spain, France and pretty much all bond yields down, to sub 1%, so why buy the bonds? The yields are already low. Answer: because QE somehow has become the Holy Grail. So . . . I’m not sure he’s going to do it, but the proximity of the Greek election might be what is needed to get German approval.
This is delightful, from an ECB board member via ZH:
. . . oil price fall has reduced inflation and
QE should be used to stoke inflation – and thus higher oil prices?) and then said discussions of a Greek exit from the euro are “meaningless,” that “no one is preparing for the exit,” and that “restructuring ECB Greek bond holdings is illegal.” One wonders what he will do when Greece just decides to stop paying…
That restructuring is illegal stuff is Comedy Central material.
Hi Watcher,
Here is my take on Greece. money printing regime always seek to expand its borders as to expand the circulation area of its fiat. on one side they will print print and print. in order to increase the demand for their fiat they have to enlarge the circulation zone. That is why real issue is not if Greece leaves or not. Greeks know as everybody else that once you start contracting the area of circulation the game is over. the next will be Spain, Italy and etc. Then money printers are left with core. But the core cannot prop up demand for their fiat if they want to play with fiat big boys.
So my take is: Draghi prints on 22nd, Sryzia wins, Greeks get their part of QE and extend pretend game continues for another year or two. Did anything really change for average Yanni? No. They have the same poll results as US posted above: “3 of 5 Greeks cannot cover $500 emergency bill.” It is the same story everywhere.
I will get back to you about your second point “inflation is low because of transitory effects from oil”. I have to admit I can’t wrap up my head about that inflation/deflation debate. maybe tonight.
Greece isn’t going anywhere. The claim that the German government is considering the option is based on a very vague, unsourced article in the Spiegel that provides no quote or context but says Merkel might consider an exit “bearable”.
The rest of the discussion is just people with various political axes to grind. The Spiegel has a long history of being annoying to the government, and they don’t like the current coalition at all.
well that is what I said it is not going anywhere. yet. and the reason is mutually and temporarily beneficial printing press for them and the core. that is the essence. the rest is noise.
Hi Ves,
Oil prices will need to increase as oil depletes unless oil demand falls. The government can keep the price of oil from crashing by controlling production in the US, then we could see an orderly increase in prices. The other side of the equation could be influenced by carbon taxes so that demand is reduced to a level that would keep prices reasonable. Prices will need to increase, that is a given.
We can let the market decide on appropriate substitutes and spend some money on research for alternatives to fossil fuel, carbon taxes would make a lot of sense to speed the transition to alternatives.
So Evans did his jawbone last night and got an equities boost.
But oil closed up only about 10 pennies. The Euro is now down to 1.17 and the USD is up further against pound and yen. Hard to move oil when that’s going on.
This smells suspiciously like oil can’t be jawboned. THAT is eyebrow raising.
sadly, to me anyway, the continued use of fossil fuels / BAU vs the renewable energy, lifestyle change, low carbon future debate is rapidly devolving into an us vs them do nothing grudge match.
“Put together, this represents a dazzling vision of a future in which growing numbers of people enjoy the benefits of abundant energy and unlimited growth. You can already imagine the heartwarming TV commercials that will be generated on a massive scale to propagate such a message: pictures of hard-working individuals of all genders and hues enjoying the American Dream globally thanks to Exxon and its cohorts. Needless to say, in such imagery there will be nothing to mar the promise of unbridled prosperity for all — no horrific droughts, colossal superstorms, or mass migrations of desperate people seeking to flee devastated areas.
But this vision, like so much contemporary advertising, is based on a lie: in this case, on the increasingly bizarre idea that, in the twenty-first century, humanity can burn its way through significant parts of the planet’s reserves of fossil fuels to achieve a world in which everything is essentially the same — there’s just more of it for everyone. In the world portrayed by Exxon, it’s possible for a reassuring version of business-as-usual to proceed without environmental consequences. In that world, the unimpeded and accelerated release of carbon into the atmosphere has no significant impact on people’s lives. This is, of course, a modern fairy tale that, if believed, will have the most disastrous of results.”
http://www.tomdispatch.com/post/175940/tomgram%3A_michael_klare%2C_perpetuating_the_reign_of_carbon/#more
The reality is adding CO2 to the atmosphere (from where it originated anyway) will only enhance the biosphere and benefit almost all life and especially humanity. Don’t believe the arrogant meat head climate scientists conspiring with the UN to destroy our free market prosperity and freedoms.
Sent from my Samsung Galaxy S5 powered by Verizon® Wireless
The reality is adding CO2 to the atmosphere (from where it originated anyway) will only enhance the biosphere and benefit almost all life and especially humanity
I’m sure you must have dual doctorates in atmospheric chemistry and biochemistry, right? Could you share some of your knowledge and give us a link to some of your research and scientific papers? We’d all love to learn from such a distinguished individual as yourself! Thank you in advance.
Whatever, buddy. No facts or logic, just bullying. Why don’t you explain why in spite of the extra CO2 global temperatures stopped rising 17 years ago and the ice sheets started growing.
Sent from my Samsung Galaxy S5 powered by Verizon® Wireless
bullying? you mean like this? ” arrogant meat head climate scientists”
Because 1998 was an El Nino year. There is still an upward trend. Looks to me to be about .1 deg C/decade.
http://www.drroyspencer.com/wp-content/uploads/UAH_LT_1979_thru_December_2014_v5.png
Reference
Anagnostopoulos, G.G., Koutsoyiannis, D., Christofides, A., Efstradiadis, A. and Mamassis, N. 2010.
“A comparison of local and aggregated
climate model outputs with observed data.”
“Hydrological Sciences Journal” 55:
1094-1110.
(No Fox Facts required.
No political IPCC Clymatic Horoscopes allowed 😉
A key consideration for
placing CONFIDENCE in climate models
is the extent to which they mimic ACTUAL climate.
SURPRISINGLY FEW ANALYSES of this
critical factor have been performed.
In this study,
55 weather stations around the globe are
analyzed for various monthly and longer-term
aspects of temperature and precipitation,
and the contiguous United States (70 stations
using a gridded Thiessen polygon mean) is
analyzed
for long-term large-scale correspondence.
The stations used were chosen only if
they had AT LEAST A 100-YEAR RECORD
and few missing values.
Six climate models were used for comparison.
For evaluating single stations
to GCModel outputs, the 4 nearest
GCM grid cell model outputs to that station
were combined using a linear weighting
regression that
gave maximum BENEFIT OF THE DOUBT
to nearby similarity of model outputs to REAL data.
So what did the authors find?
For individual stations,
at the monthly time scale the models
reproduced the seasonal fluctuations in temperature
(correlation 0.91) and precipitation (correlation 0.26)
as well as latitudinal gradients pretty well.
However, for maximum and minimum monthly
temperature and precipitation,
and annual values as well,
the correlations fall below 0.1.
So what does this all mean?
It has been argued that
GCMs make effective LARGE scale and
LONG-term predictions, although the authors note that
NO PROOF OF THIS HAS EVER BEEN OFFERED.
To address this issue,
they compared the model output with
the 30 year moving average temperature
and precipitation values
for the continental United States.
WITH RESPECT TO PRECIPITATION,
they found that the temporal pattern of
the 30 year mean does NOT match very well.
Precipitation is much higher in the models at the
continental scale at seasonal and annual resolution.
The annual total is near 700 mm but
the models go over 950 mm (250 mm or 36% higher).
When a model is THIS far over-stating the precipitation,
any slight change in the model forecast will produce
an INORDINATE change in EXTREME values.
Likewise, no prediction of flood frequency distributions
can be made with such outputs.
FOR TEMPERATURE,
the mid-century peak was missing
and the models showed
an acceleration in warming in recent decades
for mean annual temperatures, as well as
for monthly maximum and minimum temperatures,
that is _NOT_ FOUND IN THE DATA.
Additionally, the MODELS ARE
ALL WARMER THAN THE OBSERVATIONS
(by up to 4°C)
for mean annual and minimum monthly temperatures.
According to the authors, this LARGE offset indicates
a MODEL PROBLEM WITH RADIATIVE PHYSICS
because longwave radiation is PROPORTIONAL to
the fourth-power of the temperature of the surface,
so THIS LARGE AN OFFSET IS NOT REALISTIC.
Based on the above findings,
the authors conclude that in
“examining the local performance of the
models at 55 points, we found that local projections
DO NOT CORRELATE
WELL WITH OBSERVED MEASUREMENTS.
Furthermore, we found that the correlation at a large
spatial scale, i.e. the contiguous USA,
is WORSE THAN AT THE LOCAL SCALE.”
These results
DO NOT SUPPORT THE CONTENTION
THAT THE MODEL SIMULATIONS BECOME
_MORE_ ACCURATE AS ONE GOES TO
LARGER SPATIAL SCALES AND LONGER TEMPORAL AVERAGES, A KEY ASSERTION
of climate modeling proponents.
So Faulty RCM’s and GCModels ARE the “science”?
“Climate Models FAIL to Match
Observed Historical Data” or the pause in global
warming beginning in 1998.
Furthermore, if used for evaluating
biotic response (e.g., extinction risk),
the UNREALISTIC TEMPERATURE AND
PRECIPITATION BEHAVIORS AND
ABSOLUTE LEVELS WILL PRODUCE
UNREALISTIC FORECASTS OF IMPACT.
Like the “settled science” of so-called “Consensus View” this is really
Political “leftists science” these global warming activists
are clining to.
I question the technical competence (or reality) of anyone that can’t get their paragraph formatting to work properly.
-Lloyd
A 6 year old paper that tries to show they have a better modelling system and doesn’t really say anything about climate. Can’t even spell the guy’s name right.
NAOM
http://www.rightwingwatch.org/content/industry-funded-cpac-panelists-climate-change-silly-scam-modern-witchcraft
These are not some fringe opinions guys. These are the opinions of the head of the Senate Environment Committee, Jim Inhofe.
Global Warming/Climate Change is politically motivated, slop science. What little “science” it contains has evolved into a social science, driven by the Far Left with the same straw-man villains (i.e. big oil and the Koch brothers) just like the rest of the radical Left’s endless causes. Literally, everything the GW/CC crowd has predicted has turned about to be grossly inaccurate and dead wrong. They claim the science is settled, but in reality there are dozens of different theories amongst the “believers” on why they have been so wrong. How can it possibly be settled when none of it has come true and GW/CC “scientists” can’t even agree on why? And the biggest thing that tells me it is no longer science is the persecution of (the many) scientists that dare to question it. They’re being ostracized, thrown out of professional groups, not invited to important conferences, removed from the peer review process, etc. The people behind this whole GW/CC lie aren’t after the truth, they’re after fame, money, power, and stroking their own egos.
Agreed, its gotten to the point where I trust a scientist about as far as I can throw a politician.
Sent from my Samsung Galaxy S5 powered by Verizon® Wireless
It’s kind of the new Dark Ages, isn’t it?
Can’t trust science anymore. Only the Bible.
Bible page 1:
1. It never rained.
2. There was a thick fog every morning.
3. There was no direct sunlight (never a rainbow).
4. What’s now a desert was then the garden of Eden.
5. Adam and Eve needed no cold weather clothing.
6. Even humans lived longer until the flood of Noah.
7. After first rainbow, the human lifespan was reduced.
So it was GLOBAL WARMING ON STEROIDS from creation until the flood of Noah, and it was a type of paradise on earth until God cursed the earth with the flood, which brought with it a reduction of the greenhouse effect, resulting in a global cooling. Therefore, those of us who understand the inerrant nature of the Bible welcome “increased greenhouse gases,” and even pray for it, as it means God is returning us to the paradise of Eden!!!
Wonder where the Samsung Galaxy S5 and the Wireless network came from? Fervent prayers?
I know. And you don’t want to go anywhere near doctors or hospitals. I’ve heard they have some sort of connection to science.
You guys realize, don’t you, that when you comment whenever there is a mention of global warming anywhere on the Internet, you seem to be either (1) people who do nothing but sit at your computers all day looking for places to comment, or (2) you are robomachines that add pre-written comments based on key words.
Look, economics is going to do you guys in anyway. The fossil fuel industry has problems and no matter what you guys type, those problems don’t go away. You are crusading for a lifestyle that is dying because the economics don’t work anymore.
In fact, you guys are freaking out because the world is changing around you, you find it hard to adapt, and rather than deal with it, you’re looking for people to blame. That means you aren’t making any progress solving problems. You want the 1950s back and those days are gone.
Everybody’s lifestyle is gong to take a hit because we are running out of oil. Global warming rates something like 15 th in surveys of peole’s worries. It’s i credibly slow, and thus far the climate seems to be better, that sure doesn’t help convince Dick and Jane to buy a solar panel to charge their cell phone.
Yes, I agree. I don’t think global warming is going to convince most people to phase out fossil fuels. It feels too far in the future for most people.
I just get irritated with the trolls who post comments everywhere when they see something about global warming. This isn’t the audience for it. I can only assume they post everywhere, without regard to the topic at hand, or they think that if they post enough places and someone Googles global warming they’ll see their comments. It strikes me as a lot of effort not especially well spent. Fossil fuels present their own problems without regard to global warming, so if those trolls here hope to somehow to keep fossil fuels going by they comments, they aren’t seeing the realities of the situation.
They might as well be writing about Satan when they fall back on the “Communists” are doing this.
You’re wasting your time. You not arguing with real people with real opinions.
I know. I guess I can’t imagine what they think they are doing, especially in a forum like this. Do they think they are missionaries, out hoping to convert the heathens?
They can’t possibility think this is a group they are going to win over. So I can only assume either they think their target audience will see their comments here, or they are so blind that they don’t realize their comments don’t fit here. Again, it’s as if they sit (or machines sit) churning out this stuff without regard to any sort of context.
It’s like, whether or not they have anything of value to say, they strike me as stupid for trying to say it here.
I doubt they are regular readers here. This is a site about oil production. It pains me to come to this conclusion .. but I think they are people paid a small dollar amount to surf the net and throw out a ‘copy and pasted messages’ just to sow doubt where and when ever the above topic comes up. If I am correct, the response I am sending to you now will not hit their radar (because I did not use any key words about ‘hotter round thing in the solar system’) and it will not be responded to.
That’s a great point. From now on, in this forum perhaps we can say GW or atmosphere changes or something like that to avoid triggering the troll comments from outsiders.
I most certainly am “real people” with “real opinions”. And I am getting to be an older man completely fed up with the extreme leftward swing the United States has taken over the last few years. If we don’t get back to the free market CONSERVATIVE ideas that shaped this country into the greatest country the world has ever known, there will be absolutely no future left for my grandchildren. When I look into their eyes I can barely contain my sadness for them. The glorious USA that I grew up with is dying before my very eyes, what with the debt bomb, debt burden for each American reaching between $300,000 and 750,000$, the EPA destroying good paying jobs left and right, and so on. The ridiculousness of leftist government funded scientists trying to suggest that humans are capable of changing the weather is simply the final straw for a lot of people like myself, I think. With this global warming baloney, the tipping point has finally been reached where we simply have to say ENOUGH IS ENOUGH, and therefore we recognize that if we don’t do anything about these scientists right now, all our remaining wealth and power IS going to get taken away by the radical leftist globalists who the USA has been caught in a moral war with for decades (since after WWII) with the entire nation slowly but surely marching over the leftist Democrat, political correctness cliff.
The schools are propagandizing our youngsters with radical left ideology, there’s no doubt about that. The result has been the uniquely American ethic of self reliance has been getting smothered, to the extent that the schools are now supporting the inundation of the country with poor from around the world, giving them massive welfare benefits across the board, all the while millions of American citizens are jobless and devastated financially and depraved spiritually.
Slow walking back the massive dysfunction the radical leftists aided through the Democrat Party has inflicted upon America may be a start, but the only way to completely save the country is a massive overturning of the leftists ideology. The only way we are going to come close to that is achieving close to a wholesale eradication of the Democrat party.
How we intend to do this is leave no doubt that we have won the ideological argument, showing how leftist progressive populism destroys nations (see Europe or South America), how it undermines OUR Constitution, OUR government, and OUR freedoms. With that we can prove once and for all how free market capitalism provides the best path to economic growth and real income growth for the most people. Global warming nonsense is simply a well crafted impediment from the left intended to allow them to win THEIR ideological argument wars. And we mustn’t allow that to happen, which is why the leftists side is seeing such a MASSIVE pushback in the face of the global warming fables they are trying to sell.
No, you are posting political BS.
You aren’t taking about oil reserves or the economics of oil, etc.
I suppose from this point on we should just ignore you. You aren’t adding anything to the discussion. As I said, the very fact that you guys are posting what you are posting here makes me discount you even more than I might otherwise. Your thoughts have nothing to do with the topics here.
Are you so desperate that you will post unrelated stuff in random places?
Is “The glorious USA” more glorious than, let me see: Switzerland, Japan, Scotland (not very bloody likely), Norway, New Zealand, or Tahiti?
What brought to to this site about oil production? When do think oil production will peak? Do you know who M. King Hubbert is?
Well Jerry O ,
You have convinced me at least that you are a real live human being.
Now I have lived a long time myself and know a little about how people are convinced to believe in certain things -such as Jesus and Heaven and Hell and eternal life and lots of other things.
Tell ya what. If you are the guy you say you are then it is pretty likely you have some grandchildren or nieces and nephews or at least some young cousins in college- maybe even a few majoring in the sciences and engineering.
Go hunt a couple of them up – preferably science majors. Engineering majors.
Premed students.
Ask them what they believe.
You are in for a rude awakening if you take this advice.
In order to learn some physics and chemistry and biology and engineering and medicine you have to learn the principles involved in science and common to all science.
By the time a student finishes a year or two of basic studies he will know enough to know whether his professors are shameless liars pandering for money.
Go ahead. Ask some young people who are studying science. Ask a guy who expects to design bridges and buildings if he thinks his physics professors are either idiots or shameless liars.
It is ever SO easy to cherry pick facts to fool people like you that enlightening you is damned near impossible.
For instance you probably know absolutely nothing about statistics. IF you did you would understand that the fact than the ten hottest years in recorded history have occurred during the last twelve or thirteen years is EXCELLENT evidence that the world is heating up.
Do you know what the last year was that set a world wide record for average LOW temperature?
I am perfectly sure you will NOT post here again with THAT information!!!!!
It might just let the tiniest bit of light into the pitch black dungeon of your ignorance.
“Global Warming” usually ranks at the very bottom of concerns in various polls in the US. So the Leftists aren’t really making much headway with it are they?
Also, you mentioned “self-reliance”. Wouldn’t an off grid solar system seem more “self-reliant” to you, than connecting to a power grid “collective”?
Also, you mentioned “self-reliance”. Wouldn’t an off grid solar system seem more “self-reliant” to you, than connecting to a power grid “collective”?
That’s what I keep hoping will bring at least some on the right and some on the left together. If you generate your own power (or as much of it as you can) you aren’t dependent on big corporations and big utilities going out and finding the fuel, turning it into electricity, and charging you for it.
What to get out from under the thumb of those oil countries? Well, how about using less oil? Yes, I know you’ve been told we have an unlimited supply here in the US, but the folks here are looking at the numbers and they aren’t so sure that is the case.
Want freedom? Get off grid if you can.
And if you want to blame someone for the end of the coal fired plants, go blame those natural gas people. Damn them for making their plants more cost effective than coal plants.
I just don’t get what these trolls hope to accomplish.
Do they think global warming is killing coal fired plants? No, natural gas is.
Do they think global warming is going to stop fracking? No, economics will do so.
Do they think global warming will keep people from driving gasoline-powered vehicles? No, the price of oil will.
The very things they think are being done in the name of global warming are being done in the name of economics. They are fighting a battle that is going against them and blaming the wrong reasons.
We fight the radical leftist fools in the US because we realize climate change is just another convenient tool for the liberal progressive globalist types to use to put in place global wealth redistribution, which we most certainly do not want, but are afraid will soon be coming to our shores if we just stand by and remain silent……
We fight the radical leftist fools in the US because we realize climate change is just another convenient tool for the liberal progressive globalist types to use to put in place global wealth redistribution, which we most certainly do not want, but are afraid will soon be coming to our shores if we just stand by and remain silent……
There are no radical leftists in the US. And if you are concerned about global wealth distribution, look to the very rich. They are the ones taking all the money in the US.
If you are fighting “radical leftists” you are being distracted from other issues — most likely on purpose.
There aren’t any Communists taking your money, but there are some top folks in the top 1% who are.
Besides, my point again is this:
Why the hell are you commenting here? This is about oil issues.
The whole “Communists are the enemy” doesn’t have anything to do with the subjects at hand.
Don’t you folks realize this? Go somewhere else.
Uh, because the Heartland liaisons have identified this blog as being a “high interest” in discussing the whole leftists global warming mantra. Theres A LOT of people here who seem radical leftist/progressive/and Democrat pushing the officially sanctioned leftist global warming bunk, which MUST be countered with the TRUTH of what’s really trying to be sold to the American people by these corrupt government grant aided climate scientists in bed with the “Axis of Evil’ that is the globalists at the UN…..
Yup, you just confirmed what was very obvious. You guys are Heartland folks. YOU are the ones spewing the propaganda. But if you know this site, you’d know that you’re not influencing anyone here.
And likely you are not influencing anyone who pays much attention to what is posted here.
People come to discuss oil issues. I suspect you are making yourself look foolish to the regular readers here. At least we know who you are working for.
But, again my point is this. You’re fighting against economics and oil resources. It doesn’t matter what you want to happen. If the oil isn’t there, you can’t do anything about it.
You can’t make oil where it doesn’t exist.
Jerry, are you a comedian. Let me let you in on a small secret: actually nobody agrees on anything here.
Okay, I have a question for those of you who think we’ll hit a wall in about 10-15 years when it becomes more obvious that oil is becoming more expensive and harder to get.
The people I see freaking out are the Heartland folks. The very idea that they might have to change their lifestyles is making them throw out science and look under the bed for Communists.
Do you think they (not the world’s poor) are going to be the ones rioting in the streets? And if so, who will they be shooting at?
” extreme leftward swing the United States has taken over the last few years”
WTH are you talking about man?
Don’t you have some old tobacco that needs smoking?
Sigh! What a truly limited view you have…
“If we continue to accumulate only power and not wisdom, we will surely destroy ourselves. Our very existence in that distant time requires that we will have changed our institutions and ourselves. How can I dare to guess about humans in the far future? It is, I think, only a matter of natural selection. If we become even slightly more violent, shortsighted, ignorant, and selfish than we are now, almost certainly we will have no future.”
― Carl Sagan, Pale Blue Dot: A Vision of the Human Future in Space
May I suggest you watch it:
http://io9.com/carl-sagans-pale-blue-dot-as-youve-never-experienced-1450195517
The reality is adding CO2 to the atmosphere (from where it originated anyway) will only enhance the biosphere and benefit almost all life and especially humanity.
Are you therefore also advocating protecting the rain forests and re-establishing them where they have been cut down? If you think CO2 is good for the planet, I am assuming you want to see as much vegetation growing as possible. Or do you anticipate that humans and other animal forms will become more plant-like and breathe more CO2 themselves?
I advocate planting trees and making sure they survive for at least a year. For those of you who want to be very environmentally creative, you may wish to paint your houses with a really nice white paint, and use very light color tiles for the roof.
And some rooftop PV.
The Saudis can produce as much oil as they want or can, I don’t care. It’s their choice. I could give them a call on the telephone and ask them myself why they are producing so much oil if all they need for domestic purposes is 3.8 million barrels per day and selling the rest of it on the world market when tall they have to do is keep it in the ground, it wouldn’t hurt a thing, wouldn’t hurt them, help the others in the horse race for dumping oil, but I think my words would fall on deaf ears. They need and want money just as much as any other local yokel, from here to there to Timbuktu.
What if Al Capone had cut back on the booze trafficking in Chicago? He would have been losing money right away, the booze runners from Weyburn to Winnipeg would have been out of a job. Al Capone had no intention of cutting back the flow of beer, wine and spirits at all. The demand was just to great to ignore and Al was working with supply and demand. You can’t let a good thing go bad. Besides, the drinking binge would have come to a screeching halt, there would have been rioting in the streets.
Congress can pass a law outlawing the possession of oil and the demand will still be met, a black market in oil would be born in a New York minute, a nanosecond.
Plenty of supply, plenty of demand, it’s just the price is not what the sellers desire and the buyers don’t mind. Alcohol, oilcohol, doesn’t matter.
The answer is to outlaw oil, the price will rise.
Al Capone could do the math and he added plenty of money to his bank account.
Cut back? No way, Jose.
Watcher has been saying that this ain’t your Daddy’s economy anymore…
“It would also explain why the Obama administration allowed the financial industry the amendment to Dodd-Frank that effectively exempts financial institutions from liability associated with derivatives. Though shale derivatives were not specifically mentioned by the Wall Street lobbyists as they pressured their allies in Congress and the White House, it is becoming increasingly clear that the too-big-to-fail banks were beginning to panic as dark clouds gathered on the horizon in the shale derivatives trade.
Most bank customers and voters don’t know that Congress has already written into finance regulations that, in the case of insolvency, financial institutions could grab the assets of depositors and “bail-in” – which means they can save themselves from their losses in gambling operations at their investment divisions by grabbing cash assets of depositors, even those that are FDIC guaranteed, and legally convert them to bank stocks. That means that in the event of another market crash, Chase and Citi could take their depositors’ cash in savings accounts or CDs, and give the customers back a bank stock certificate (of questionable value) instead.”
http://truth-out.org/news/item/28406-russia-blamed-us-taxpayers-on-the-hook-as-fracking-boom-collapses
Bail ins were limited (in Europe) to amounts on deposit beyond the (EU equivalent) FDIC limit. Haven’t seen anything about access to depositor money under the FDIC limit. Seems unlikely.
For now.
Interesting find just posted that a JPM subsidiary/division has just started loaning second tier money to shale companies for huge interest rates plus other covenants only partially described.
JPM would be an obvious Fed vehicle.
Shale Producers in U.S. Cut Rigs Loose Early Amid Oil Slump
http://www.bloomberg.com/news/2015-01-08/shale-producers-in-u-s-cutting-rigs-loose-early-amid-oil-slump.html
U.S. oil producers are bailing out of long-term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing.
Yesterday, Helmerich & Payne Inc. (HP), the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES), said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove.
Companies are paying to cancel rigs rather than keep drilling in the face of a 55 percent plunge in prices. Mounting rig cutbacks imperil the unprecedented boom in U.S. output that’s contributed to a global glut of oil and helped sustain a price war among the world’s largest suppliers.
“This is just the beginning,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said by telephone from Houston today. “Even the best of the best who continue drilling have balance sheet constraints when you get oil this low. It might make sense to just terminate these contracts and not do anything and wait for a better day.”
New Rigs
Contracts for the 190 rigs that on-land drillers were expected to add this year, known as newbuilds, have the highest risk of being terminated, Cosgrove said by telephone from Princeton, New Jersey. Helmerich & Payne had contracts for 37 newly built rigs terminated early after the last oil rout in 2008, he said.
“Looking back at what happened in 2008 and 2009, I’d feel comfortable saying there’s definitely going to be upwards of 50 to 60 early cancellations,” Cosgrove said.
Terminations aside, less than half of land drillers’ rigs are on term contracts through 2015, data compiled by Bloomberg Intelligence show. Pioneer may be the most exposed, with 75 percent of its fleet up for renewal in the next three quarters, according to the data.
Ensign Energy Services Inc. (ESI) may lay off as many as 700 workers across Kern County and Long Beach, California, after an “early and unexpected termination” of drilling contracts, the company said in a Dec. 18 letter to the state’s Employment Development Department. The Calgary-based field services company was forced to halt production on a number of drilling rigs in California, according to the letter.
Terminations Cheaper
Helmerich & Payne, based in Tulsa, Oklahoma, said in a presentation yesterday that spot pricing for its FlexRig is down 10 percent and the company expects to see 40 to 50 of the rigs idled in the next 30 days. San Antonio-based Pioneer Energy Services said today it would receive about $17 million in termination payments for the four rigs being canceled effective this quarter.
“In a lot of the long, horizontal plays, oftentimes a rig termination clause is equal to the cost of one well,” Dukes said. “Terminating these contracts is really relatively cheap compared to drilling these $10 million wells over and over and over again.”
“Companies are paying to cancel rigs rather than keep drilling in the face of a 55 percent plunge in prices. ”
Think real carefully about what that means. Those already drilled wells that are supposed to be providing cash for other activities? Don’t look like it’s covering anything to the extent that people are PAYING to get out of contracts. Not just choosing not do drill. PAYING not to drill.
The big question is if fracking crews are being cancelled at the same rate? If they are, then tight oil production will definitely decline in the near future.
OK Watcher, hit me. The US in in debt to the tune of $18 trillion plus. Much of this is recent QE or whatever. Where is this going? Remember you’re talking to an old dude who doesn’t know a credit from a debit and you’re not allowed to throw around a bunch of mumbo jumbo acronyms.
Sovereign Debt is illusion because mathematically that debt cannot be paid. Debt that cannot be paid will not be paid.
Douglas, the tendency or even preference to obfuscate and redefine and more or less lie about fiscal budgets predates the 2008 Apocalypse.
Going through the details becomes 1) absurd and 2) political. For example, the Dems love to note that there was a surplus under Bill Clinton. But oddly, during Bill Clinton’s presidency, debt increased. Hard to see how that happens with a surplus in place, but it did, because redefinitions and obfuscation are everywhere.
You even have new terms being invented in the new normal. In Greece, the party in power has tried to celebrate a “Primary Surplus”. Now, I sort of know rather a lot about these kinds of things and “primary surplus” was a new term to me, and for good reason. It doesn’t mean anything. It means, apparently, sum up tax revenue, and deduct expenditures — but leave out some expenditures, particularly interest on debt — and if the number resulting is greater than 0, then that’s a “primary surplus”. There doesn’t seem to be a definition for what you can leave out of the array of expenditures, and thus, it doesn’t mean anything. Might change year to year.
And so, 18 Trillion big ones. The US has its own share of this kind of thing going on. Unfunded liabilities. Social Security and Medicare. Iraq “supplementals”. A supplemental is what you call it when you have a Defense budget and a war is underway and needs to be paid for, over an above the defense budget. So you have a Supplemental resolution. Often, it’s not included in “budget discipline” like “pay as you go” (the original Pelosi policy for budget preparation, that lasted about 2 weeks of her becoming Speaker). Then as soon as one item is “off budget”, other items get off budget too. Hell, if you are going to let a war escape budget discipline, we should maybe have some midnight basketball social programs be also free of that discipline.
And so, you will usually see the US debt total per year climbing faster than that year’s “deficit”, which is computed from the numbers that are “on budget”.
So where did it go? 70% of everything is salaries, in the final analysis. If you want to get really macro, 100% of everything is salaries. Nothing happens if no one is paid.
18 Trillion at 3% is $540 billion/year. If we exclude that, we probably have a primary surplus!!!!!
Heh Watcher,
Sound’s like you’re right. I looked up unfunded liabilities which seems to include: US Federal Budget Deficit (GAAP), Social Security Liability, and Medicare Liability for a Grand Total of $92.5T plus change. Of course I’ve no idea what GAAP means. Luckily, my wife balances our check book.
Notes from Daily Reckoning email “Tech Wreck -> Subprime -> Shale?”
with the following eye popper’s
A. “Ironically, in the shale space, much of the borrowed money wasn’t being spent to drill and produce cash flow. Instead, the shale companies were using debt to acquire more lease rights in the hope that they would continue to appreciate faster than the interest payments went out the door.” OPPS .. Can you say MBS .. Not Again ??
B. “But I guarantee there are major losers out there and they’re going to start to merge and crop up in UNEXPECTED places There are about $5.4 trillion dollars – that’s trillion – of costs incurred in the last five years for exploration drilling and infrastructure in the alternative energy sector. When I say alternative I mean in the fracking sector. These companies issued some equity, but it’s mostly debt”
OPPS Again … Shove the risk to the suckers, much is covered with swap contracts the banks have resold to God knows where.
“This is the case with the global financial system today Y O U N E V E R K N O W where the risks end up ” … until everyone’s toast is burnt.
Whats this last minute push for ” Banks not liable legislation” about anyway ??
Note to Self: 4.5T is a boatload, well at least trainloads of funds were “invested” to squeeze out such volumes of HC. Wonder if anyone really has a handle on how much $$ was thrown down the shale hole to be simply burnt up?
Some companies are cutting upstream spending for the second time. It was Continental, now Halcon:
Halcon Resources Cuts 2015 Spending Again
http://www.reuters.com/article/2015/01/08/halconresources-capex-idUSL3N0UN54120150108
Jan 8 (Reuters) – Oil and gas producer Halcon Resources Corp said it would further cut its drilling and completion budget for 2015, responding to the continuing fall in oil prices.
Halcon said on Thursday it now expected to spend between $375 million to $425 million, down from its earlier forecast of $750 million to $800 million.
The midpoint of the earlier forecast on Nov. 10 was $175 million below the company’s 2014 budget plan of $950 million.
U.S. oil and gas producers have scaled back their capital spending as global crude prices have slumped more than 50 percent since June.
Crude prices have declined nearly 38 percent since Nov. 10.
The company, which operates in the Bakken in North Dakota and Eagle Ford in Texas, said it now planned to operate an average of two rigs in the Fort Berthold area and one rig in El Halcón in 2015, compared with the six rigs planned earlier.
Halcon said on Thursday it expected to produce an average of 40,000-45,000 barrels of oil equivalent per day (boepd). The company forecast production of 40,000 boepd-42,000 boepd for 2014.
Up to Thursday’s close, Houston-based Halcon’s stock had fallen more than 50 percent since Nov.
Looked at their Q3 accounts, and they sure don’t look good: Granted, they showed a very healthy profit, but most of it is due to hedging gains. Stripping out those, their profit margin after interest payments was slim. And that was before the oil price crash in Q4…
I posted this in a thread but I meant to have it be freestanding, so I will post it again:
Okay, I have a question for those of you who think we’ll hit a wall in about 10-15 years when it becomes more obvious that oil is becoming more expensive and harder to get.
The people I see freaking out are the Heartland folks. The very idea that they might have to change their lifestyles is making them throw out science and look under the bed for Communists.
Do you think they (not the world’s poor) are going to be the ones rioting in the streets? And if so, who will they be shooting at?
_____
Also, I will add, I think the Heartland folks are probably older, so I don’t think they have time on their side. It might be harder for them to engage in fighting in the streets. Plus, how radical can you be if you are getting or hoping to get SS and Medicare?
Who will they shoot at? Solar panel installers, windmill manufacturers, basically anybody in a “greenie weenie” energy industry taking all our good-paying jobs in coal/oil/gas. Also univiersity meteorology departments and National Weather Service offices. There’s a reason they all already have bulletproof glass and security you know. Doesn’t Posse Comitatus already have them in there sights?…
Ah, so when the oil runs out, they shoot the solar panels.
Actually, we could use a few more Heartland types turning into preppers. Putting away a bunch of food, learning to live in nature, producing your own food, etc. would be good for them. And then they would have to pay a bit more attention to nature. It could just be on a local level, but if your life depends on what the weather does, I suspect you don’t argue with it.
http://headlines.ransquawk.com/headlines/fed-s-kocherlakota-says-decline-in-oil-prices-will-have-an-impact-on-production-and-drilling-in-bakken-09-01-2015
Kocherlakota is the chief honcho governor of the Minneapolis Fed. Guess what. It’s on their radar screen now.
Watcher.
Maybe the way shale will be bailed out will be similar to the LDP for grain farmers when grain prices were very low a few years back.
LDP stood for loan deficiency payment. There wasn’t a loan, however. If the LDP rate for corn was $2.10 per bushel in the county, for example, and the farmer and/or land owner on crop share sold grain for $1.80, for example, out of the field, the government paid them the .30 difference. Better yet, the farmer and land owner could” price” their corn on a date, receive the LDP, and then store the corn, hoping for a higher price in the spring or summer.
That would be billions of dollars, but LDP payments were too. Just add it onto the 18 tril.
I have no idea what will actually happen, but as a country we are more inclined to help out farmers than oilmen. Even if the farms are big industrial farms, the image of the small, farmer farmer can still be put forth.
Maybe. There are many possible avenues of action.
I do think one major attribute in the selection criteria will be the extent to which the action taken can be made murky. The normalcy narrative is important and they would want to take some action that preserves much of it.
Outright subsidizing price is a little bit too overt, I would think.
Hi Watcher,
The Texas RRC controlled oil output in Texas for a couple of decades, the US Government could impose output quotas in a similar manner for national security reasons. This only keeps oil prices from becoming too low.
To help on the upside a large federal excise tax could be applied now while oil prices are relatively low, if real oil prices get unbearably high (maybe $175/b in 2014$), the excise tax could be reduced gradually to give some relief at the gas pump.
In this way the government could try to control the upward trajectory of real oil prices to something like 8% per year so that the economy could gradually adjust to higher oil prices.
Unlikely to happen, but I bet the oil producers would prefer it.
I believe this link is one that is worthy of a slow careful read. I am not too sure of the agenda and credibility of Truth Out so I am reserving judgement for the moment..
But it looks as if the banks have arranged an involuntary dry sex orgy with their depositors money if the allegations in this article are true.
I would not put this past the banks – or past our politicians. I actually LONG for a president such as Carter or Eisenhower these days. You could trust those guys to some extent at least.
I am hoping somebody who is more attuned to the financial and political news than I am for recently will know more about these shenanigans.
http://www.truth-out.org/news/item/28406-russia-blamed-us-taxpayers-on-the-hook-as-fracking-boom-collapses
http://en.wikipedia.org/wiki/Truthout
I just went looking for more articles about banks and fracking. This explains what the banks have planned in easy-to-understand language. Perhaps it is time for depositors to pull their money out of the big banks.
http://sandiegofreepress.org/2015/01/the-bail-in-how-you-and-your-money-will-be-parted-during-the-next-banking-crisis/
And here is more about the bail-in. It’s a four part series with this being part one. There are links at the bottom of the article for all four parts. Seems like if enough people start picking up this story, there could be a run on the banks.
http://thenextturn.com/bail-ins-local-bank-part-1-stage-set/
You guys just don’t understand.
There doesn’t have to be a bail in. The Fed can print whatever is needed.
Money is completely, entirely artificial. If numbers on a screen threaten complete evisceration, just change the numbers.
And, yes, credit default swaps on HY paper could be a systemic threat to the universe, but as I’ve pointed out in the past, HY paper usually isn’t swapped.
The purpose of a swap is to transfer risk of default from one party to another. In the days before swaps existed, you dealt with default risk by simply jacking up the interest rate.
HY by definition has high interest rate, and that’s why it usually isn’t swapped. Of course, if that’s not true, then back to para 1, it can threaten the universe — and would be grounds for Fed intervention.
That may be, but Congress appears to have authorized a bail-in and people expect it to happen. The fact that it doesn’t need to happen is probably beside the point.
Watcher wrote:
“There doesn’t have to be a bail in. The Fed can print whatever is needed.”
Frank-Dodd mandates bail-ins in the event of another banking crisis. That said. The Fed will probably unleash QE4 (Perhaps QE four-ever) which prevents the need for bail-ins. However, QE only protects gov’t and institutional investor losses. It doesn’t bail out the oil rig businesses, machine shops and other businesses, that are over-leverage. The economy will still suffer.
N.D. oil regulator says lower oil prices spell gloom, not doom
[Except from article]
North Dakota’s top oil regulator told lawmakers crafting the state’s budget Thursday that lower crude prices are spelling gloom but not doom for the nation’s second-leading oil producer.
Department of Mineral Resources Director Lynn Helms said many things about the Bakken oil play haven’t changed. It still contains close to 20 billion barrels of recoverable oil, with another 60,000 wells expected to be drilled during a 25-year development plan, he told the House Appropriations Committee.
“Yeah, there’s gloom, but there’s no doom,” Helms said….
At least 140 rigs are needed to maintain the 1.2 million barrels pumped per day in October, the most recent figure available, Helms said.…
About 700 wells have been drilled but not completed in North Dakota, and signs are “that they’re in no hurry to frack these wells and bring them on at $40 oil,” Helms said, meaning they also produce no tax revenue.
But he said it’s not only prices affecting production. Operators have delayed well completions to meet the state’s new natural gas capture goals that aim to reduce flaring. They also have to adjust to oil conditioning standards taking effect April 1, to make Bakken crude safer for rail transport. Combined, those rules could cut production by 23,000 barrels per day, he said.
Rep. Roscoe Streyle, R-Minot, said he thinks the state has “way overshot” regulations on the oil industry, affecting its ability to compete in the world market.
“I think we’re hammering these guys,” he said.
North Dakota Petroleum Council President Ron Ness agreed.
“Let’s stop kicking the goose here for a while, because the goose is about to go lay down somewhere,” he said.
Streyle asked if delays were being considered for some regulations.
“We have absolutely started having those discussions,” Helms said.
[End of excerpt]
Wow, I get real busy for a couple of days and check back in and crazy trolls have hijacked this board.
This goes on for too long (TBD) and this board will be dead to me.
If you put together a good blog with great articles and analysis you get a lot of traffic. With a lot of traffic comes all kinds of characters. The only way to avoid it is to make people have to register to post comments and that can be burdonsome. Ron’s call.
Or, you delete the trolls as required, without requiring registration.
Or, no one (that is to say: No One) replies to the trolls.
Or, no one (that is to say: No One) replies to the trolls.
I think you are right that we shouldn’t be replying to trolls (although I have been because they irritate me so much).
But I don’t think that, by itself, will stop them. I don’t think they are here to trigger a response from us. I suspect that they post comments whenever there is a mention of GW anywhere on the Internet in order to turn up in Google searches.
Or, they could be so misguided that they think they will influence the regulars here.
Hang in there Shufflin’,
Your contribution is worthwhile.
I can’t speak FOR RON but he is hard core about free speech and open debate and thus he tolerates SOME ignorant bullshit.
My money sez he will delete stuff that starts getting too far out of hand.
Yogi sez predictin’ is hard.
The key in this case is that he doesn’t have to answer to any committees.
If oil were selling for one hundred dollars per barrel, the math would be irrelevant.
Somebody did the math quite some time ago now and decided that the price of oil was a deciding factor in when the math becomes a problem.
If you have employment in the oil field at ninety dollars per hour and receive a termination notice, you begin to worry that your next job might pay one third or less. The math won’t be easy. From ninety to zero is a huge drop. If you are petroleum engineer at a salary of two hundred and fifty thousand dollars per anum and you are terminated, you need to worry about what you’ll have to do and it will be soon, very soon. The math is easy, the predicament difficult.
How can the Bakken possibly be doomed if the oil is flowing at one point two million barrels per day from the location of the depocenter in the Bakken formation located in North Dakota? It won’t be.
The numbers say that it will all be sold, a desirable energy source that is providing large amounts on a regular, reliable basis. The low price guarantees the sales.
If you plant your crop seed in the middle of January east of Edmunton, you’ll need to wait a while before there are any results, it’s going to take some time. The blackest earth you will ever see is cropland in Alberta. Unbelievably rich soil, holy cow. They have oil too, the farmers there will be using it early May or so, price increase in the time frame of spring’s work is a done deal.
Worth noting here that in normal times the HY debt that funded shale would have been 12%, not 5% interest rate.
Thus, don’t focus entirely on price. Were times truly normal and the paper require the frackers to pay 12%, breakeven price would have been much higher.
If the terrorist element that shoots people for making fun of Mohammed shoots a few people here in the US the end result will be another couple of repuglican senators and a five or six more repuglican congress critters. The Keystone waffle and Ocare are history now- history that virtually guarantees a repuglican in the White House in 16 so long as they don’t run a child molester.
It is awesome to think about how little thinking people are willing to do when it comes to getting what they wish for. The things you want tend to come siamezed to things you don’t.
If the anti oil folks had been smarter they could have traded their anti key stone capital for a hell of a lot of support for renewable energy. As it is they have burned that capital in a Pyhrric victory with a lot less than nothing to show for it.
The people who are pushing environmental regulations on the basis of climate change have their hearts in the right place but they are trying to sell their program on the basis of something that just does not matter to Joe Sixpack. If they want to succeed they need to quit talking about invisible harmless non existent odorless absolutely wonderful plant feeding worthless dangerous essential carbon dioxide and start talking about something that Joe understands.
TONS of COAL.
NOT nasty dangerous strip wonderful mined coal that provides jobs and wages and keeps the lights on.
They need to talk about literal three dimensional tons of coal that MUST BE PAID FOR in order to burn them.TRAINLOADS of coal being delivered to power plants day after day that must be paid for year after year FOREVER. DAY AFTER DAY.
The narrative is going to have to be switched FROM dirty greedy businessmen and bankers and plutocrats to the ULTIMATOE ARMERICAN HERO- the BIZNESS MAN who invents new things and makes them WORK and not only gets rich in the process but helps the rest of us get rich and life the life of RILEY in the process.
Joe has been around a long time and remembers gasoline as cheap as a quarter or thirty cents in a lot of cases and dollar gasoline for sure.(I know it is only two bucks at them moment but that is STILL twice the price Joe remembers paying back in the day. Maybe five or six times the price if he is over sixty.
It will not be hard to convince him that wind and solar power will be cheaper than coal and gas before well before a wind or solar farm is middle aged if the story is framed right.
The medium IS the message. I may not have it exactly right in terms of this bit of wisdom but I am way out in left field.
The NARRATIVE – the STORY – that FIRST takes root in the mind of ninety nine percent of all people controls what they will believe indefinitely.Plant the right acorn of a story and with a little luck you have lifetime believer in your cause.
The four essential tricks are that one you must frame your story in a fashion consistent with the world view of your target believer, two , that you must get to him FIRST – meaning when he first devotes significant attention to your issue, three you must tell your story in such a way that he never feels threatened or insulted , four that the presentation must not come across as preachy and bossy. Nobody wants to be told what to do.
I have started making a present of an LED bulb to some of my redneck hard core Fox educated neighbors in exchange for little favors they do us such as bringing by a homemade cake or pie.I absolutely never mention global warming or anything of that nature but I do brag about how my electric bill has dropped off since I got these bulbs for myself and that nobody I know who has them has yet had one to burn out.
They are buying led bulbs.
You got that right. The renewable, clean energy story hasn’t been told very well and it has been a cultural war on both sides.
With fracking, in places where I’d rather not see it go in (because of the boom-and-bust and resulting disruptions), I’ve tried to focus on economics and proven issues. The oil companies keep dodging on environmental issues, but there are some real, observable problems that can’t be dodged, like increased road traffic, dust, noise, etc. Those may not bother people out in isolated areas, but they are a problem when the drilling moves into established neighborhoods.
The Pope has got it right. Climate change is WRONG. A way that the rich steal from the poor, and give them nothing but grief they didn’t cause.
People don’t understand science, but most of them have a pretty good idea of right and wrong, not that they act on it, of course, but when they are doing wrong, mostly, they know it.
I disagree with your first paragraph.
I suggest building 500 foot tall wind turbines in neighborhoods in San Francisco, Los Angeles, San Jose, right there so the power from them will be right there in front of them and see how the Californians like their renewable energy.
One thing about wind turbines located in areas where people live, they cause many problems due to their monstrous look and become a nuisance, unacceptable, people don’t really like them and eventually find them intolerable. Land values decline. Pollution in its finest manifestation. When you see one wind turbine, think mountains of pollution and a polluted landscape that once was pristine.
If oil wells were sticking five hundred feet into the sky, the environmental movement would be breathing down the throats of oil producers.
Nobody is ever satisfied with wind turbines, they cause disastrous amounts of pollution in China, rivers lose fish, land becomes wasteland etc.
Wind turbines are a failure, a boondoggle, and, in addition, they chop up birds, bats, and insects. Insects pile up on the blades. Over time, every single wind turbine will experience failure. Time to move on and work on something entirely different. Drilling for more oil is better, much better.
http://www.windaction.org/posts?topic=Structural+Failure&type=Picture
It is time to face the music.
On the other hand, photovoltaics are a winner. Solar energy, passive and active, has a definite future and the technology should move forward at thrice the pace.
I don’t see any rockets ferrying coal and oil to the space station. Photovoltaics must work up there.
Oil well in Beverly Hills https://images.search.yahoo.com/images/view;_ylt=AwrTcd0bFbBUcjsA7zMPxQt.;_ylu=X3oDMTBsOXB2YTRjBHNlYwNzYwRjb2xvA2dxMQR2dGlkAw–?p=beverly+hills+oil+well&back=https%3A%2F%2Fsearch.yahoo.com%2Fyhs%2Fsearch%3Fp%3Dbeverly%2Bhills%2Boil%2Bwell%26ei%3DUTF-8%26hsimp%3Dyhs-001%26hspart%3Dmozilla&w=324&h=214&imgurl=a.scpr.org%2Fi%2Fddc9c3958b2445e01f4894b5518e35b1%2F7428-small.jpg&size=16KB&name=7428-small.jpg&rcurl=http%3A%2F%2Fwww.scpr.org%2Fnews%2F2011%2F01%2F31%2F23518%2Foil-rig-popularity-dropping-beverly-hills%2F&rurl=http%3A%2F%2Fwww.scpr.org%2Fnews%2F2011%2F01%2F31%2F23518%2Foil-rig-popularity-dropping-beverly-hills%2F&type=&no=7&tt=120&oid=55ea00728410061721a6479fc31fe6c3&tit=Oil+rig+popularity+dropping+in+Beverly+Hills&sigr=12kdv2q4j&sigi=11s5jksu3&sign=10et88urh&sigt=103vg5ole&sigb=132m2jsrd&fr=yhs-mozilla-001&hspart=mozilla&hsimp=yhs-001
I suggest building 500 foot tall wind turbines in neighborhoods in San Francisco, Los Angeles, San Jose, right there so the power from them will be right there in front of them and see how the Californians like their renewable energy.
But of course they aren’t the best energy solution for those locations. Rooftop solar would be better. Off-shore might be a possibility, though.
Best wind power by far- kilometer high kite, pulling winch on ground, works like a yo-yo. Out of sight, out of mind, out of bird.
I am having loads of fun making one, right here, where according to the wind map, there ain’t any power to get. True- if you stay on the ground. Not at all true up there. Heap powerful every now and then.
Wind turbines are a failure, a boondoggle, and, in addition, they chop up birds, bats, and insects. Insects pile up on the blades. Over time, every single wind turbine will experience failure. Time to move on and work on something entirely different. Drilling for more oil is better, much better.
Even if we completely disregard certain facts such as domestic cats killing song birds…
No wind turbine or even entire wind farms come even close to the carnage caused by our kitty cats!
America’s cats, including housecats that adventure outdoors and feral cats, kill between 1.3 billion and 4.0 billion birds in a year, says Peter Marra of the Smithsonian Conservation Biology Institute in Washington, D.C., who led the team that performed the analysis.
As for: Drilling for more oil is better, much better
Sure it is! Especially If you are ignorant about how ecosystems and food webs work and what oil spills can do to them. Case in point: http://ocean.si.edu/gulf-oil-spill
Let’s at least be honest, there are no completely benign ways of generating enough energy to power our current civilization. Just to arbitrarily pick a number, I’ll bet that 100 years from now civilization, if there still is one will not be fueled by oil. I will also bet that if humans are around in large enough numbers they will definitely be using wind turbines for at least some of their power generation.
Cheers!
LA oil wells – another try http://la.curbed.com/tags/oil-rigs-of-beverly-hills
Some juicy upheaval news:
http://headlines.ransquawk.com/headlines/mrb-poll-for-upcoming-greek-general-elections-syriza-33-7-nd-30-1-potami-6-8-kke-5-7-pasok-5-5-goldawn-5-4-indgr-3-1-gpap-2-9-dimar-1-1-09-01-2015
That’s a slight uptick in the 3% lead Syriza has over New Democracy. Cobbling together a coalition will be hard. It will be hilarious if they need Golden Dawn (the alleged nazis).
http://headlines.ransquawk.com/headlines/us-baker-hughes-rig-count-jan-9-w-w-1750-prev-1811-09-01-2015
1750 down from 1811.
New Baker Hughes report…
Complete recovery of Canada: +158 at 366
-61 for the USA at 1750. Larger lost in Texas (-30), North Dakota (-7) and New Mexico (-6).
Number of oil wells is the same as about 11 months ago at 1420…
The number of wells drilled per 1 rig peaked in 4Q13 at 5,35 and declined to 5,14 in 4Q14 (U.S. total)
In the Bakken the peak was in 3Q13 at 4,10 wells/rig. The 4Q14 number is 3,73
Permian basin: decline from 5,08 to 4,87 wells/rig.
In the Eagle Ford the number of wells per rig continued to improve until 3Q14 when it peaked at 5,67. The 4Q14 number is 5,59
Does that reflect the increased share of horizontal wells (longer to drill), of drilling efficiency started to deteriorate?
US oil rigs down 188 units from theOctober peak (-11,7%)
Bakken -27 (-13,6%)
Permian -67 (-11,9%)
Eagle Ford -23 (-11,2%)
DJ-Niobrara -12 (-24,0%)
So the huge jump in Canada means the previous drop is due to some sort of christmas drilling holiday, and Canadian rig count is not drying up after all…?
Thomas,
Correct, there was certainly question marks over the Canadian count on whether is was a Christmas break or a down turn. Looks like the boys get to enjoy Christmas dinner at home and New Years drinking champagne.
Canadian bosses sound so much nicer than American bosses. Smiles
Now we will see how many rigs they lost over the break, and how many continue working until spring, when they all stop drilling again due to the thaw.
More than 10,000 people working at Mexican oil service companies were laid off this week as state-owned Petroleos Mexicanos cut contracts in the face of the global slump in crude prices. More job losses are expected.
http://www.bloomberg.com/news/2015-01-08/mexico-cuts-10-000-oil-service-jobs-as-pemex-funds-fall.html
trala trala
And the price of our LPG jumped up as well.
NAOM