Bakken Production Data and STEO Predictions

The Bakken Production Statistics and the ND Production Statistics with June production numbers has been published.

Bakken & ND BPD

Bakken production was up by 10,887 barrels per day to 1,152,455 BPD while all North Dakota production was up by 8,565 barrels per day to 1,211,180 BPD. Bakken production is still 11,068 bpd below their December high while all North Dakota production is still 17,240 bpd below their December high.

Bakken BPD Per Well

Bakken barrels per day per well dropped by 2 to 116 and all North Dakota barrels per day per well dropped by 1 to 97.

From the Director’s Cut, bold mine.

May Producing Wells = 12,679
June Producing Wells = 12,864 (preliminary)(NEW all-time high)

May Permitting: 150 drilling and 0 seismic
June Permitting: 192 drilling and 0 seismic
July Permitting: 233 drilling and 1 seismic (all time high was 370 in 10/2012)

May Sweet Crude Price = $44.70/barrel
June Sweet Crude Price = $47.73/barrel
July Sweet Crude Price = $39.41/barrel
Today’s Sweet Crude Price1 = $28.50/barrel (lowest since December 2008)(all-time high was $136.29 7/3/2008)

May rig count 83
June rig count 78

The drilling rig count dropped 5 from May to June, 5 more from June to July, and remains unchanged this month. Operators are now committed to running fewer rigs than their planned 2015 minimum as drill times and efficiencies continue to improve and oil prices continue to fall. This has resulted in a current active drilling rig count that remains 5 to 10 rigs below what was operators indicated would be their 2015 average if oil price remained below $65/barrel. The number of well completions rose sharply from 116(final) in May to 149(preliminary) in June as a large number of NC status wells reached the 1 year deadline for completion, or TA approval. Renewed oil price weakness anticipated to last well into next year is by far the main reason for the continued slow-down. There was one significant precipitation event in the Williston area and a separate one in the Minot area, 5 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F.

At the end of June there were an estimated 848 wells waiting on completion services, 60 less than at the end of May. The current rig count plus NC well inventory is sufficient to maintain 1.2 million barrels of oil per day for 24 months.

This does not jive with the EIA’s latest predictions for US production through 2016, data below.

The EIA’s Short Term Energy Outlook came out a few days ago. There was one big surprise.

STEO August 15

The EIA has, quite dramatically, downgraded its future US production expectations. The average C+C production, for the of 2015, had been revised downward by only 120,000 bpd but the average production for 2016 has been revised down by 360,000 bpd. The largest change, in future expectations, was December 2016 which has been revised down by 430,000 barrels per day.

STEO Aug Price

The EIA predicts the decline continues through the third quarter of 2016 then production will start to surge upward again. I have no idea why they think this will happen as they are expecting no such increase in the price of oil.

STEO Total Liquids

The EIA does not think 2015 will be the peak as far as non-OPEC total liquids are concerned. They have 2014 non-OPEC total liquids averaging 58.38 million barrels per day and have 2016 total liquids averaging 58.48 million barrels per day. Well that’s this month’s projection anyway.

STEO Change

This chart is Total Liquids, not C+C like the two charts above it. While the EIA lowered its 2016 average US C+C expectations by 360,000 bpd they only lowered their Total Liquids averaged expected production by 330,000 bpd. But that does not mean they lowered World or Non-OPEC Total Liquids or  by the same amount.

The above chart shows all changes in the EIA’s Total Liquids predictions from the July STEO to the August STEO. Only the nations in the chart above had any changes July to August. They increased their Total Liquids prediction for Mexico and Russia by 100,000 each and decreased their total Non-OPEC Total Liquids prediction by 70,000.

All this just shows that the EIA can, rather dramatically, change their outlook for oil production, for any nation, from month to month. Who knows what their outlook next month might look like?

My point is not to knock the EIA for their changing predictions but to point out that we should not put too much value in them because they are mostly just wild ass guesses, subject to change from month to month.

All the following text and graphs were posted by Enno Peters:

I have updated several charts, and will mostly let them speak for themselves.

Enno 1Enno 2

Lynn Helms mentioned during the last webinar that wells starting in May 2015 produced about 25% better than wells starting in May 2014. I can’t find support for this in the data:

Enno 3

The most important improvement during the last years was a (slight) increase in initial production, while production after a year of operation is trending remarkably similar with earlier years.

Enno 4

In the following graph we can see the average production for new wells, for the full calendar month (as no accurate information is available regarding the number of producing days). The blue line shows the average production during the 1st month of production, while the green line shows the average production during the first 3 months of production. This graph shows more clearly that 2014 wells produce initially a bit more than 2013 wells, but from 2014 onwards there has been no significant improvement any further. This is surprising, as some high grading effects since the price drop should be visible by now.

Enno 5

The following chart shows the new number of well spuds (red), and wells starting production (green), per month. Also the average rig count per month is shown (purple), which tracks well with the number of wells spud. Only recently the number of new wells spud per rig is going up, probably because better rigs/crews are still working, and because of improved operations due to fewer rigs. The blue line tracks the wells that are spudded, but not yet producing (=uncompleted wells). Maybe not all of these spudded wells will be completed, but so far their status does not indicate otherwise. This uncompleted well inventory includes normally a working inventory of about 4-5 times the wells spudded in a month (the typical lead time from spud to production). Therefore, I estimate that about 450-550 wells from this inventory are in excess of a normal inventory, and may have to come on line in the coming year.

Note : the completion numbers from the Director’s cut are highly unreliable, as can be seen by comparing them from the Director’s cut with the numbers from the annual statistics report. A much more reliable way is to use the number of wells having first production, which historically (comparing them with the annual statistics reports) also tracks the actual completed wells very closely.

Enno 6

The following graph shows the monthly contribution to the overall oil production in ND from new wells (growth during first 2 months of production), and the decline in older wells (> 2 months). The difference is the monthly growth/decline in total ND oil output. A small difference with the actual numbers is caused by service wells and wells not individually reported. What this chart shows is that after May (in which there was quite a large growth in production ), the growth in June has almost stopped, due to less growth from new wells, and more decline from old wells.

Enno 7

The following graph shows that oil production from the Middle Bakken formation peaked in December. I belief it is likely that this will proof to be the final peak, as the absolute number of new Middle Bakken wells already peaked in 2012, and recently the ratio of Three Forks wells vs Middle Bakken wells is going up. This is important as, historically, Three Forks wells produced on average about 15% less than Middle Bakken wells, and the Middle Bakken formation has been the major driver behind ND production so far.

Enno 8

Finally, a projection of what kind of oil production can be expected from North Dakota, based on 4 different scenarios, shown by the number of new wells per month, from July onwards until end of next year. Currently about 100 wells are spudded per month, and in the current price environment I find it hard to belief that wells are drilled without plans to complete them. This number may drop, but there is still an inventory of not completed wells. Therefore, I think the most likely projection is between the green and blue line, at least for the coming 6 months, which means that by year end ND should produce between 1.1 and 1.2 million bpd.

Enno 9

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554 Responses to Bakken Production Data and STEO Predictions

  1. Boomer II says:

    Don’t they have to put in something optimistic somewhere in their projections or be forced to admit the future of oil doesn’t look so good?

  2. shallow sand says:

    ND June report is bearish for oil prices, as if any further bad news were needed. Flat production through June, 2017 will be financially bad for all US producers.

    Note current posted price of $28.50 is the lowest since 2008.

    It appears rig count in ND has stabilized at about 72-75. I think CLR and WLL both indicated they may pull a couple each.

    Just too much backlog, plus too many rigs still running.

    I know where we will be at with another 24 months of realized oil prices in the high 30s.

    Where will the Bakken drillers be financially?

    Well put on in June (we will assume it is a good one, cost just $7.5 million, including all equipment, and 100% gross working interest, 80% net working interest. Further assume differential is just $8. Also assume gas is $2)

    182,500 gross oil barrels sold, 182,500 gross gas sales.

    182,500 x .80 x $34 =$4,964,000.00
    182,500 x .80 x 2.00= $292,000.00

    Less:
    Severance taxes = $525,600.00
    OPEX at $6.00 BOE= $1,021,998.00
    G &A at $2.00 BOE = $340,666.00

    Pre tax and pre interest net $3,367,736.00

    Assume 1/2 financed with cash flow from other operations, 1/2 financed from debt at 5%.

    Interest expense = $375,000.00

    Deficit after two years, exclusive of income taxes.

    $3,367,736.00 – $375,000.00 = $2,992,736.00

    $7,500,000.00 – $2,992,736.00 = $4,507,264.00

    I will bet I am painting a very rosy scenario. It is likely far worse for most wells and companies.

    The state of ND really needs to relax the one year completion rule and possibly limit both drilling and completions. I think it would be in their citizens best interests at this point in time.

    That, or pray for an OPEC cut.

    • SFJ Synfuels says:

      Thanks for this very helpful math exercise. What percentage of the total lifecycle production do you figure comes in the first 2 years? I presume a hefty majority given the decline curves.

      • shallow sand says:

        Really do not know what an accurate EUR is for Bakken. Companies say 775-800K BOE. On this site I read 350-450K BOE.

        Keep in mind, those EUR assume well life of 30-50 years.

        I think the guys here who are on top of things are showing 190K to 220K oil first 60 months. So I have set forth a very strong well.

        I think first five years is most relevant. After that, will be lucky to sell more than 15-20K BOE per year. OPEX likely to range between $15-$60 per barrel of oil.

        This is a real cluster, isn’t it?

        • AlexS says:

          Distribution of crude oil EURs in North Dakota Bakken (kbbl/well)
          Source: EIA Annual Energy Outlook 2014

          • shallow sand says:

            Thanks AlexS. I knew I was being very generous.

            Pretty bad when a top 10% well is an economic train wreck.

        • Shallow, look at the graph showing oil, water, and gas within the post. It shows gas continuing to increase, water seems to be increasing as well. This is a reasonable behavior for a depletion drive in a very low permeability dual porosity system.

          If we move forward in time individual wells will tend to have increasing water cut which may eventually remain steady, but gas to oil ratio should increase to such a high level that pumping the well becomes very problematic (the pump starts compressing gas an overheats or locks). There are solutions but they don’t come cheap and there’s nothing we can do to keep rates up. Wells like this just seem to come down to 5 to 20 BOPD and are a hassle to produce.

          I’m pretty sure most of you know this problem, and I was wondering if there’s something new over the horizon. I’m afraid that a low productivity well like this will just have to be shut in periodically to allow fluid build up. The implication is a very low marginal rate for a long time.

          This means somebody ought to get their behind in gear and explain to North Dakota state authorities they really shouldn’t be ordering well abandonments for marginal wells. Once oil prices increase these wells maybe can be milked slowly.

          • shallow sand says:

            Fernando. The big problem will be handling the produced water economically.

            Elm Coulee field in Eastern Montana was developed primarily between 2004-2007. The wells there produced like you describe, 5-30 barrels of oil per day. The wells in Elm Coulee tend to produce very little water, 1-5 barrels per day. Therefore water disposal does not appear to be a big issue.

            In ND Bakken, it appears that produced water rates in older wells tend to be higher, and more variable. There appear to be few wells tied into salt water disposal wells by way of piping. Therefore most produced water is truck hauled, which is not cost effective if oil prices are low. For example, a well producing 600 barrels of oil and 2000 barrels of water, per month, which is truck hauled, has a tough time at $28 oil prices.

            Of course, the tough part will be paying for down hole failures on these wells. It appears pulling the rods and changing the pump costs $30K and pulling the tubing adds another $40K, so $70K to repair a tubing leak. These prices may come down, but I am sure 10,000′ wells get expensive.

            I think economics for a 20 bopd ND Bakken well could look like this, assuming 20 mcf gas is sold, $34 oil price, $2 gas price, .80 net revenue interest (NRI)

            Oil sales. 5,840 x $34 = $198,560
            Gas sales 5,840 x $2 = $11,680

            OPEX (excluding down hole failures) $120,000
            Down hole failures 80,000
            Severance taxes 21,024
            G&A 42,048

            Loss (pre interest). $52,829

            Of course, if oil goes back to $80, this well can be very profitable.
            It depends greatly on down hole failure rates. None or one per year, maybe ok. More than two will make things tough.

            The question, of course, is how do companies pay billions of principal plus interest off the backs of these wells.

            Furthermore, at the present strip, these wells have no PV10 value unless one just plugs in $6 per BOE for OPEX. I’d like to see the engineering at year end on these wells.

          • Mike says:

            Fernando, thank you. I hope your post is not lost in obscurity. Please see my remarks to Enno down hole about increasing GOR.

            I have suggested many times in the past here on POB that I am suspicious of shale oil EUR tails and that much of that suspicion has to do with the practical problems associated with producing low fluid entry, high GOR wells on rod lift at 9000 feet TMD 20 degrees from vertical. It is a nightmare. You have to have done that sort of thing to know how much of a nightmare. It will be interesting to see if it can even be done, period.

            If WOR continues to increase in these Bakken wells then it becomes an economic nightmare and very oil price sensitive as to how long those wells can go before reaching economic limits.

            As these wells get older, operating expenses will go up and oil prices will have to be much higher than they are now to avoid economic limits. If 70% of the well’s total UR is recovered within 5 years, the remaining 30% is questionable to me. That creates a real big, fat question mark on equity and just what there is to “sell” to be able to get out a bind. Or who might want to buy the stuff. To quote Fernando, this is all very un yahooey.

            Fernando’s post is a perfect example of how difficult it is to analyze data, or model data, or make predictions about the future without understanding what is actually going on in the field.

            Mike

            • Synapsid says:

              Mike,

              Congratulations: you got your Blue back.

              Things will only get better!

              • Mike says:

                Syn, it’s not a promotion, I assure you. Actually, its weird; it gets blue above $42.00 a barrel and black below $41.67. I probably ought to be worried, now that you mention it.

                Mike

      • shallow sand says:

        It looks like 120-130 barrels of oil in the first 24 months. So if we plug in 130K barrels of oil and adjust down severance taxes accordingly, after 24 months in the above example, the operator is still behind $5,792,464.00.

        • coffeeguyzz says:

          A significant portion of the water increase is due to the more frequent use of slickwater fracs. Whereas 80k/100k barrels of water was common in the past, newer completions regularly use 200k/400k barrels, and even after the flow back, this elevated amount of water re surfaces.
          Since the stabilization policies were implemented in the Bakken a few months ago, the removed volatile components both reduced the amount of ‘oil’ and added to the ‘gas’ figures.

          • Where are the NGL removed from the oil? The last time I worked in the USA we stabilized at a plant, fed the stabilizer overhead to a plant where the C2 plus was reported as NGL. We kept separate NGL reserves. The difference between oil as found in the reservoir and the stabilized crude was the oil formation volume factor.

            Does North Dakota keep a separate NGL record the operators use to estimate royalties and other taxes?

            • coffeeguyzz says:

              Fernando

              Your questions just prompted me to do a lot of digging as I have not been keeping too close a watch on this stuff the past several months. What I found (subject, perhaps, to some error) …
              Big distinction between ‘conditioning’ (which is what is happening) and ‘stabilization’.
              Process is occurring on site or nearby centralized storage area.
              Only 7% (hard to believe) of a Bakken wells do not yet have gas gathering lines.
              Oneok is the big dog in the area with gathering lines, takeaways, and processing plants.
              Oneok started ethane recovery in June and now transports over 100,000 barrels a day of NGLs from the Bakken. (That number seems extremely high, but Oneok stated the number should increase to 105,000 bbls by year end.
              Oneok is connecting several hundreds of new Bakken wells to their gathering system on an ongoing basis.
              Although I looked, I could find no distinction regarding NGLs either in a financial context nor production categorization.
              If the numbers are truly that large (1.6 Bcfd gas, 100k bbls NGLs, some separate description will likely be forthcoming.

              • The #s sound ok for rich gas. I find 7 % of wells to lack gas connections to be borderline criminal. As I mentioned before, North Dakota seems to be run below the lowest standards I’ve seen in over 15 years. That place is like the USSR or the old Middle East when it comes to gas handling and facilities layouts.

    • The state of North Dakota seems to have a very yahooey government. They need to tour Angola, Gabon, and Azerbaijan to get an idea of how to keep their chaos in better shape.

      • The beauty of democracy and bureaucracy is gridlock.Gridlock keeps things from changing very fast.This is probably good over time and on average- but not so good when the ship of state is headed directly for the rocks at full throttle.

        Then it’s almost every body in the bureaucracy working feverishly to preserve his little bit of turf with only a handful of guys trying to reverse engines.

        There is a saying in secretary land- businesses run in spite of management, rather than because of it.

      • Wake says:

        Rock man on the other forum used to say they should all have just copied texans’ regs from start to finish

        Were states companies ND could have just hired away a few top folks for a few tens of millions and presumably saved their t citizens multiples of that

  3. Glenn Stehle says:

    The EIA’s prediction for Mexico is pretty wild, given that PEMEX says their crude production for June averaged only 2.247 million BOPD, and on July 31 PEMEX lowered its production forecast this year to 2.288 million bpd from 2.4 million bpd.

    So PEMEX is revising downward, while the EIA is revising upward.

    Maybe the EIA is counting on all that massive new private foreign investment in the indudustry that Hillary Clinton promised if Mexico would change its laws so as to allow for private investment in the business?

    Clinton Emails and The Privatization of Mexico’s State Owned Oil and Gas Company
    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=14465

    Given that the first lease sale was a total bust, it looks like all Mexico’s gonna wind up with is what the little boy shot at.

    • I keep seeing the EIA as a politically driven entity. Most USA government agencies should be considered suspect when it comes to forecasts. And this goes no matter who is in power.

      • Nick G says:

        Have you seen any sign that private forecasts (e.g., BP) are any better??

      • Glenn Stehle says:

        By now it should be pretty obvious to all that the price of oil is politically driven, and has very little to do with all that silly mythology about “free markets” that Adam Smith dreamed up over two centuries ago.

        It’s been that way since FDR signed the Connally Hot Oil Act on February 22, 1935. For almost four decades after that, the U.S. government set the price of oil. It did this by limiting the supply of oil so that the forces of supply and demand would act to keep the price of oil up.

        Then, sometime in the 70s the U.S. reached peak conventional (read “cheap”) oil. After that the baton passed to Saudi Arabia, and the Saudi government has set oil prices since.

        Politics, in other words, and not markets have determined oil prices for the past 80 years.

        This political power to set oil prices, however, is not absolute. Volcker demonstrated that, by raising interest rates to almost 20%, he could engineer a prolonged worldwide recession. This caused more destruction of oil demand than the Saudis could cut supply. The Saudis finally threw in the towell, opened the valves, and flooded the world with oil, precipating the oil price crash of the 1980s.

        Saudi Arabia will continue to have great political power to control world oil prices until it too reaches peak conventonal oil.

        Then oil pricing will enter a completely new paradigm.

        • SW says:

          Paul Volker

        • By now it should be pretty obvious to all that the price of oil is politically driven, and has very little to do with all that silly mythology about “free markets” that Adam Smith dreamed up over two centuries ago.

          With all due respect Glenn, I don’t believe you know what the hell you are talking about. The price of oil can be manipulated if and only if you can manipulate supply or demand. Of course OPEC could alter supply and drive the price up. But how does one manipulate demand? Yes, the Fed does have some control over interest rates but that affects everything from beans to automobiles, not just oil. No one in their right mind should suggest that the Fed changes interest rates just to manipulate the price of oil.

          People are always spouting off about the government manipulating the price of oil but no one has yet explained how they can do that? Well they have given no explanation that makes any sense anyway.

          • Watcher says:

            Suppose there were excise taxes or tarrifs.

            And looks to me pretty clear that Argentina’s government defines their price of oil. They aren’t the only subsidy out there either.

            You’re somewhat backed into a corner here. There is nothing sacred or pure about a man made substance — money.

          • Nick G says:

            how does one manipulate demand?

            The US eliminated about 10M bpd in demand by creating fuel efficiency standards (CAFE).

            The US kickstarted hybrids with the PNGV program in the 90’s. The California CARB did the same for EVs soon after.

            It doesn’t happen overnight, but consumption can be reduced. In the long-term, it can and should be eliminated.

          • Strummer says:

            “Yes, the Fed does have some control over interest rates but that affects everything from beans to automobiles, not just oil. No one in their right mind should suggest that the Fed changes interest rates just to manipulate the price of oil.”

            They don’t do it because of oil specifically. But the purpose of ZIRP (zero interest rate policy) is to distort the price mechanism to create the illusion of abundance. Interest is the price of money. Money is the claim on future resources and real capital. When you set the interest rate to zero, you are effectively communicating to the market that the price of money is zero, therefore that there is an infinite amount of future resources and real capital to claim. And the result is quite predictable, you get a frantic wave of “investment” into any kind of bullshit that can generate even the slightest financial profit. And if it doesn’t, just borrow more money at zero price and buy more steel, machines, water and all the other stuff you need to drill more. Why not, when the market now thinks all of those things are infinite and therefore free. And now the economy is eating itself from the inside, wasting away decades of accumulated capital and the last reserves of resources, because someone artificially set the price of all those things at zero.

            • Nick G says:

              And the result is quite predictable, you get a frantic wave of “investment” into any kind of bullshit that can generate even the slightest financial profit. And if it doesn’t, just borrow more money at zero price and buy more steel, machines, water and all the other stuff you need to drill more.

              If only that were true. That’s what the Fed was hoping, but it hasn’t turned out that way. Sure, there’s some stupid investing going on, but not enough, or we wouldn’t be seeing zero inflation.

              • Glenn Stehle says:

                Nick G,

                That’s correct. The Fed has cut the Fed Funds rate to just a tad over 0% for the past 7 years and has implemented quantitative easing, but to no avail.

                The private sector is still not lending/borrowing.

                I hardly believe that mal-investment, however, is the way out of our economic malaise.

                • Glenn Stehle says:

                  I made a typo on the title of that graph. It should read:

                  “Total Private Credit Market Debt Outstanding (tens of trillions of dollars) & Federal Funds Rate (%)”

                • SW says:

                  The fact is that the fed has acted out of desperation because the political system is broken. The logical the sane way to increase demand at the zero lower bound is infra structure spending (and any idiot who suggests that the crumbling infrastructure in this country isn’t in need of immediate attention needs to be institutionalized), yet this obsessive crazy focus on public debt at a time when it is private debt that is the problem and the government could never borrow money cheaper is most destructive impulse, the dumbest possible response ever foisted on a gullible public.

                  • Nick G says:

                    Sadly, it’s not stupidity, it’s a deliberate strategy to cripple democratic government, on the part of the wealthy who want to maximize their power.

                    It’s called “starving the beast”, and it includes deliberately creating large deficits with massive tax cuts, and then using the deficits as an excuse for cutting spending on regulatory agencies, benefits, anything except corporate welfare and the military (which are pretty close to the same, it’s true).

              • Glenn Stehle says:

                Nick G,

                As Galbraith explains:

                Consistent with Fisher’s formula…was a terrible possibility. It was that the supply of money could not be increased. The largest part of the supply of money, as by now will be adequately understood, is deposits in banks. If business is sufficiently bad, profit prospects sufficiently dim, gloom sufficiently deep, businessmen may not borrow money. Then no deposits are created, no money comes into existence. The banks can be provided with cash for reserves by purchases of government securities (or agency-issued securities in the case of QE) by the Federal Reserve Banks from the banks of their customers. This cash will then lie fallow in the banks. Without borrowing and deposit creation there is no effect on prices or through prices on production. This, it now developed, was not a hypothetical possiblity but one that was intensely miserably real.

                • Galbraith is like most other professionals who know every damned last little detail about the SYSTEM they specialize in as it is currently organized and regulated- but apparently NOTHING about the BIGGER picture.

                  Economists tend to be like that more so than any other sort of professional imo.

                  They can’t imagine any sort of monetary system other than a central bank of some sort operating under the rules they are familiar with, with the banks being able to loan out money they do not actually HAVE.

                  OR MAYBE I should say they ARE capable of thinking outside their conventional box but simply refuse to do so and maintain that their box is the only one possible.

                  There is no reason at all that the government – Congress and the executive – cannot do away with the current system and create a new one.

                  The government could for instance simply print some greenbacks – WITHOUT ANY BANKING involved except plain old clerical bookkeeping – and declare them legal tender. Such money could circulate just as well as checks and in fact could be held in bank vaults to be used to redeem checks anytime somebody wanted to do so.

                  I have NOT claimed such a system would WORK very well- there are plenty of reasons it would not. But the system we have now does not work so awfully well either- does it?

                  The government could actually print dollars -physical dollars on paper- and use them to pay for all or most government purchases and services in instead of collecting taxes and spending the taxes.

                  The biggest temptation would be to print too much- but sometimes existing banks create too much money. No REAL difference there, other than who is in the drivers seat.

                  I could take as this legitimate cash to a bank and deposit it and write checks against it- and the checks could circulate without most of the people writing and cashing them ever actually asking for actual physical dollars.

                  The supply of dollars could be as large as deemed necessary.

                  There is nothing fundamentally sacred about fractional reserve banking and lending – although many people tend to think of it as holy writ.

                  • Glenn Stehle says:

                    OFM,

                    I think that’s right.

                    But one has to remember that Daddy Galbraith (he has a son who is also a famous economist) operated in the Keynsian tradition, and the reality is that Keynsians, despite all the charges to the opposite, came to save capitalism, not destroy it.

                    A monetary system which you describe, whereby the government just prints money and spends it into circulation, is advocated by some, but not all, of the various monetary reform movements. Most are still very much entrenched in banking school teachings, but a few are not.

                    But would such a system — where the preponderance of the money creation power resides in the state and not the private sector — still be capitalism?

                    Some assert that those who have the money creation power have the most powerful positions in a society. I tend to agree, at least when it comes to the modern societies in which we now live.

                    Is it democratic, or moral, to give an institution like the Fed, which operates completely in darkness and in the interest of only a select few, this inordinate power over society?

            • Anonymous says:

              Strummer,

              What you’re saying is strictly true if an economy were operating at or near max capacity. But it’s not. That’s why we aren’t seeing runaway inflation.

              The real resource crunch will be obvious when inflation spikes up and not before.

            • Ves says:

              Strummer,
              Plenty of BS jobs with added word “consultant” in description, car traffic bumper to bumper, everybody on cell phones looking busy, circling like ants whole day with occasional work of separating white copy invoice from the yellow but nothing to show at the end of the day. That is economy in the 0% environment.
              Fly fishing tour for 2 hours for 4 people is $600! I beg your pardon? Yup. How is the business? Meh. Turn around, see no line up. I am thinking let’s try this supply & demand thing. Can we make a deal? Nope. There is a cluster of 6-7 fly fishing shops in 2-3 miles radius. Same price everywhere and no budging on a price and no customers in sight. These guys are like mini fly fishing cartel 🙂 The only thing I am wondering how long this supply of funny money will last.

              • This peculiarity of sticky prices is something that puzzles me.

                I am in the process of making a decision to clean up thirty acres of overgrown and forested land to convert it to pasture and hay- the preferred sort of old geezer farming around my parts, much less labor intensive and lower pressure compared to orchards.

                The local guys hiring out dozers and tracked front loaders have been raising their prices ( supposedly on the basis of their own costs going up !!! for fuel and parts) for the last eight to ten years and are now charging a hundred bucks an hour or so. They were charging eighty two years ago.

                It is damned near impossible to explain to one of them that ten thousand dollars in hand today is better than maybe twelve thousand in hand three or four or five years from now, the extra two thousand being hopefully gained by business picking up.

                They seem to think that my only choice is to pay THEIR price or just abandon the job.

                But as Nick and others point out,I DO have options.

                At the moment the most likely one seems to be to just buy an old track loader of my own and hope it runs for thirty days without a major breakdown. The odds of that are actually pretty good if I am a very careful buyer. At the end of a months work I can sell the machine- if it is still running- for about what I paid, maybe more.

                Running a dozer thru the woods knocking down trees is great fun if you have male redneck streak as wide as mine. Plus I get to show those acquaintances who accuse me of being a whale loving tree hugging commie democrat video of my mad maniac grin as I knock down the trees with nasty black smoke rolling out the exhaust. 😉

                The women will gasp with indignation- but later on a couple of them will maybe seek me out given my demonstration of male prowess knocking down trees. Women’s mid brains aren’t any better than mens. DOUBLE 😉

                Instead of dude ranching with horses and trout I can maybe open a dude ranch specializing in the white collar customers who buy Harley Davidson motorcycles by the millions getting their rocks off running a dozer. Say TWO hundred bucks an hour, they can knock down some trees in the way ANYWAY. OR just dig a hole and fill it up again.

                This business works very well for some Nascar outfits. Take a ride in a detuned but genuine race car for a couple of hundred bucks or actually DRIVE it for a few laps for a few hundred more.

                The big picture looks REALLY bad but I am not going to run short of beans and cornmeal so long as I am able to get around.

          • Glenn Stehle says:

            Ron,

            How can one manipulate oil demand?

            The best book I’ve found that explains how monetary policy works is John Kenneth Galbraith’s Money: Whence It Came, Where It Went.

            “The miracle of money creation by a bank, as John Law showed in 1617, could stimulate industry and trade,” Galbraith explains.

            And conversely, a tight monetary policy has the opposite effect, dampening industry and trade.

            And this is not controversial. I know of no economic school of thought that disputes this.

            Now granted, as Irving Fischer discovered, there are times when banks stop lending and a liberal monetary policy will not get them to lending again, or people to borrowing again, and the economy remains in the doldrums despite a loose monetary policy.

            However, I know of no historical instance where a sufficiently tight monetary policy did not slow the economy. And if the economic policy is tight enough, such as Volcker’s was in 1979, 1980 and 1981, it can drive the economy into recession.

            I have no idea if breaking the back of Saudi Arabia was one of Volcker’s motives. He certainly had other targets, like labor, and the destruction of oil demand could have been collateral damage.

            I do know, however, that the demand for oil is inextricably tied to overall economic activity. If overall economic activity declines, then there is going to be demand destruction for oil.

            This is very elementary economic theory, none of which is all that controversial.

            • Glenn Stehle says:

              And to put those almost 20% interest rates into historical perspective.

              • SW says:

                Volker’s target was inflation. End of story. Its not complicated.

                • SW says:

                  That is why the crazy fear of inflation now is just that. Crazy. Volker proved that the Fed always has the power to crush inflation. It will cause collateral damage. But the Fed can crush inflation by raising interest rates.

                • Glenn Stehle says:

                  Oh I think Volcker had a few more deamons he wanted to slay other than just inflation. Life’s not so unidimensional as that, and Volcker had a plethora of goals he wanted to acomplish.

                  For instance, what about Volcker’s jihad on labor?

                  As Volcker told the New York Times: “The standard of living of the average American has to decline… I don’t think you can escape that.”

                  In 1981 as the recession was reaching new depths and many in Congress were calling for relief, Volcker again explained to obedient lawmakers the utility of his artificial economic disaster: “in an economy like ours with wages and salaries accounting for two-thirds of all costs, sustaining progress [in price reduction] will need to be reflected in moderation of growth of nominal wages. The general indexes of worker compensation still show relatively little improvement [towards the goal of lowering wages].”

                  According to Harrison and Bluestone,

                  the deep recession did precisely what it was designed to do. With more than ten million people unemployed in 1982 it was impossible for organized labor to maintain wage standards let alone raise them. Reductions in wages rippled from one industry to the next and from the center of the country outward. The real average weekly wage fell more than 8 percent between 1979 and 1982, and failed to recover at all in the next five years. Essentially with wage growth arrested by unemployment, what growth occurred during the Reagan period rebounded mostly to the profits side of the capital-labor ledger.

            • Boomer II says:

              I do know, however, that the demand for oil is inextricably tied to overall economic activity. If overall economic activity declines, then there is going to be demand destruction for oil.

              But cheaper oil should also stimulate those industries that use more oil. Up to a point. If the economy tanks, overall consumption should go down, which would reduce oil demand.

              Seems to me that controlling the price of oil through the economy or controlling the economy through the price of oil is too complicated to be the best approach stimulate or dampen economic activity. The price of oil may go up or down as a result, but I can’t see too many policy makers using oil itself to control the economy.

            • Glenn, here you are talking about the entire economy, not just the price of oil. You are talking about the stock market, the inflation rate, the housing market, the commercial real estate market, the currency market, the price of hogs and pork bellies and everything else that has any connection to the state of the economy.

              I am talking about manipulating the price of oil by manipulating demand. If you want to include everything else in the whole world wide economy in your “manipulating strategy” then you are working with a mile wide brush to paint a bicycle.

              I ain’t buying it and it should be obvious why.

              • Glenn Stehle says:

                Well Ron, certainly Volcker had a number of deamons he was trying to slay.

                But I can’t for the life of me figure out why you rule out the possibility that the high price of oil might be one of them.

                When these powerful people like Volcker operate — and the Fed president is undoubtedly is one of the most powerful men in the world — they operate with purpose. They operate with intent. And they didn’t come riding into town yesterday on the back of a hay wagon.

                So, to begin with, lowering the price of oil from $38 to $14 a barrel struck a mighty blow against inflation.

                But more importantly than that, geopolitical considerations may have played a significant role.

                As the NY Times reported today in ‘Oil prices: What’s behind the drop’: “Dropping oil prices in the 1980s did help bring down the Soviet Union, after all.”
                http://www.nytimes.com/interactive/2015/business/energy-environment/oil-prices.html?_r=0

                When the Saudis finally did completely throw in the towel in 1985, the collapse of oil prices cost the Soviet Union $20 billion a year in the following years, which in those days wasn’t pocket change.

                Here’s how Michael Reagan put it:

                “Oil was the only thing the Soviets had in the 1980s that anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren’t for sale.

                “Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire.”
                http://www.politifact.com/punditfact/statements/2014/mar/13/michael-reagan/ronald-reagans-son-says-his-father-got-saudis-pump/

                And here’s how Wikipedia explains it:

                The dramatic drop of the price of oil in 1985 and 1986 profoundly influenced actions of the Soviet leadership….

                The USSR’s trade gap progressively emptied the coffers of the union, leading to eventual bankruptcy. The Soviet Union finally collapsed in 1991….

                US President Reagan also actively hindered the Soviet Union’s ability to sell natural gas to Europe whilst simultaneously actively working to keep gas prices low, which kept the price of Soviet oil low and further starved the Soviet Union of foreign capital. This “long-term strategic offensive,” which “contrasts with the essentially reactive and defensive strategy of “containment”, accelerated the fall of the Soviet Union by encouraging it to overextend its economic base.
                https://en.wikipedia.org/wiki/History_of_the_Soviet_Union_(1982%E2%80%9391)

              • Glenn Stehle says:

                Well Ron, certainly Volcker had a number of deamons he was tryig to slay.

                But I can’t for the life of me figure out why you rule out the possibility that the high price of oil might be one of them.

                When these powerful people like Volcker operate — and the Fed president is undoubtedly is one of the most powerful men in the world — they operate with purpose. They operate with intent. And they didn’t come riding into town yesterday on the back of a hay wagon.

                So, to begin with, lowering the price of oil from $40 to $10 a barrel struck a mighty blow against inflation.

                But more importantly than that, geopolitical considerations may have played a significant role.

                As the NY Times reported today in ‘Oil prices: What’s behind the drop’: “Dropping oil prices in the 1980s did help bring down the Soviet Union, after all.”
                http://www.nytimes.com/interactive/2015/business/energy-environment/oil-prices.html?_r=0

                When the Saudis threw in the towel in 1986, the collapse of oil prices cost the Soviet Union $20 billion a year in the following years, which in those days wasn’t pocket change.

                Here’s how Michael Reagan put it:

                “Oil was the only thing the Soviets had in the 1980s that anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren’t for sale.

                “Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire.”
                http://www.politifact.com/punditfact/statements/2014/mar/13/michael-reagan/ronald-reagans-son-says-his-father-got-saudis-pump/

                And here’s how Wikipedia explains it:

                The dramatic drop of the price of oil in 1985 and 1986 profoundly influenced actions of the Soviet leadership….

                The USSR’s trade gap progressively emptied the coffers of the union, leading to eventual bankruptcy. The Soviet Union finally collapsed in 1991….

                US President Reagan also actively hindered the Soviet Union’s ability to sell natural gas to Europe whilst simultaneously actively working to keep gas prices low, which kept the price of Soviet oil low and further starved the Soviet Union of foreign capital. This “long-term strategic offensive,” which “contrasts with the essentially reactive and defensive strategy of “containment”, accelerated the fall of the Soviet Union by encouraging it to overextend its economic base.
                https://en.wikipedia.org/wiki/History_of_the_Soviet_Union_(1982%E2%80%9391)

                • Volcker had a number of deamons he was tryig to slay.

                  But I can’t for the life of me figure out why you rule out the possibility that the high price of oil might be one of them.

                  Glenn, of course Volcker would have liked to control a lot of prices. The only goddamn thing he had control over was the Fed. He could finagle interest rates and the money supply. Every Fed chairman since its creation has done that. That, by no stretch of the imagination, can be considered “manipulating” the oil market.

                  • Glenn Stehle says:

                    Ron,

                    If US policymakers 1979-1989 would have been interested in taming inflation across the board, then they would have implemented a contractionary fiscal policy to go along with the contractionary monetary policy.

                    But they didn’t.

                    Instead they implemented an expansionary fiscal policy at the same time they implemented a contractionary monetary policy, racking up a mountain of public debt as a consequence. Despite all the hype and extravagant “inflation fighter” claims to the contrary, these were no “hard money” men. They were spendthrifts to the extreme, at least when it came to spending money on the sectors of the economy they favored.

                    How do you explain this?

                    It’s pretty obvious that policymakers intended for certain sectors of the economy — like labor, manufacturing, and the oil and gas sector — to pay the price of bringing inflation under control, while other sectors were spared.

                    If this were not the case, then how do you explain the regulatory forebearance policymakers showered on the S&L industry between 1979 and 1989, and then the subsequent bailout of the S&L sector in 1989-1992?

                    How do you explain the relief package the Fed crafted in 1982-92 to avoid the domino effect from the Mexican, Argentenian and Brazilian debt crisis from befalling U.S. banks?

                    How do you explain the $4 billion Fed, treasury, and FDIC rescue package of Continental Illionois Bank in 1984?

                    How do you explain the Fed’s discount window bailouts of 350 weak banks in the late 1980s?

                    “Finance became the chosen sector of the U.S. economy — the one that would be protected and promoted,” Kevin Phillips concluded in Bad Money. “Manufacturing would receive no such help.”

                    The 1980s was the time when the US began making the transition from industrial capitalism to finance capitalism, and it was no accident.

                  • Glenn, you’ve got to be kidding. I don’t need to explain any of that shit. None of this has anything to do with your assertions that the fed could and does manipulate the price of oil. Can you show that all this was done to manipulate the price of oil. Of course not, that would be a totally absurd claim. That means your whole argument is totally absurd.

                  • Glenn Stehle says:

                    Ron,

                    Of course you have to “explain that shit,” at least if you want to have any sort of coherent theory as to how all this data you generate fits into the larger economic and political scheme of things.

                    The amount the US spent on importing oil plummeted by a whopping 63% from 1980 to 1986, from $62 billion to $22.7 billion.

                    And yet both the federal budget defict and the trade deficit shot into the blue empyrean. The trade deficit increased by over 600% between 1980 and 1987!

                    Those are not the policies of policymakers interested in controlling inflation.

                    Where did all that money go?

                  • Glenn Stehle says:

                    .

                  • Glenn Stehle says:

                    And we see something very similar happening now, though not to the same degree as in the 1980s.

                    The amount the U.S. spends on imported oil, due to both the decline in quantity and price of imprted oil, has plummeted by 70% , from a high of $31.2 billion in June 2011 to $9.5 billion in February 2015.

                    And yet, the U.S. trade deficit has not experienced a similar decline.

                    How does one explain this?

                    The $20 billion a month the U.S. is saving on oil imports is just being used to import other stuff.

                    Why would policymakers allow this? Why would they not implement policies which encourage that $20 billion per month in oil savings to be used to buy domestically produced goods?

                  • Nick G says:

                    the U.S. trade deficit has not experienced a similar decline.

                    Extend your chart further back in time. I think that will make it clear: trade deficits tend to grow during economic recoveries. If that’s not happening this time…falling oil imports is a sensible explanation.

                  • Glenn Stehle says:

                    Nick G,

                    Do you believe that running a trade deficit — as long as the capital flows used to pay for it are denominated in a sovereign currency controlled by the sovereign — is a good thing? And I acknowledge that some schools of dissident economic thought, such as MMT, as well as our current crop of orthodox economists, believe this.

                    And such a belief does have its own logic. After all, a nation is receiving something for essentially nothing. It is receiving material goods produced by another country for a commitment to pay at some future date, and when that future date arrives the nation always has the option to pay with more fiat money — more promises to pay sometime in the future — which itself can create with a few entries on a keyboard. Such a system allows a nation to consume more than it produces. It sounds like a great deal, no?

                    The problem with such a system is that it destroys the productive might of the nation.

                    Creditor nations like China and Germany reject the logic. They believe that the priority should be to build the productive might of the nation, not the financial might. As Joseph Chamberlain put it to a group of English bankers towards the end of the 19th century: “Are you entirely beyond anxiety as to the permanence of your great position? Banking is not the creator of our prosperity, but is the creation of it.”

                    The US first ran a trade deficit in 1971, and has pretty consistently ran one ever since. Do you believe this is a good thing?

                  • Nick G says:

                    I agree: exporting currency causes Dutch Disease.

                    But, we were talking about a narrower question: is a declining oil deficit causing a decline in the wider deficit, all else being equal? It looks likely to me.

                  • Glenn Stehle says:

                    Ron,

                    In response to your question — “Can you show that all this was done to manipulate the price of oil?” — what I can show you is that it has been known for a long time that, when the US implements a tight monetary policy, commodity prices go down.

                    This has been common knowlege amongst economists for a long time. And as far as I know is not at all controversial, as the conclusion is grounded not only in theory but in a considerable amount of empirical data as well.

                    For instance, in an article recently published by three IMF economists, they state that

                    Frenkel (1986) documents that US monetary easing – usually related to a more depreciated dollar – results in higher commodity prices, and vice versa.

                    http://www.voxeu.org/article/strength-dollar-and-emerging-markets-growth

                    And if we go look up Frenkel’s article, we see that he in turn refers to articles published in the 1970s.
                    http://www.hks.harvard.edu/fs/jfrankel/overshootingmodel.pdf

                    So what evidence do we have that US policymakers deliberately manipulated the price of oil down in the 1980s?

                    1) A motive to manipulate the price of oil down,

                    2) The means to do so, and

                    3) The testimonies of any number of actors at the time (and a like number of historians) who assert that the US policymakers did indeed manipulate oil prices lower.

                    Concomitantly policymakers threw lifelines to those sectors of the economy they considered to be important and which they knew their monetary policy would also devastate (e.g., finance, defence, the wealthy, etc.) while allowing manufacturing, domesitic oil and gas producers and labor to sink.

                  • Glenn Stehle says:

                    Nick G,

                    I’m still trying to get my head around the role oil plays and how it interacts in the bigger economic and political scheme of things.

                    It’s complex.

                    Here’s what John K. Galbraith had to say about oil in the 1970s and its impact on the larger US economy:

                    In the autumn of 1973 came the Yom Kippur war, the oil embargo and a very large increase in petroleum prices. These were widely blamed by the Administration economists, among others, for the inflation. Around three-fourths of the price of 1973 occurred before the war and before the oil prices went up appreciably….

                    Everywhere the higher oil price was considered highly inflationary; in the United States it served invaluably as an exercise for official inadequacy in the control of inflation. In fact, it was deflationary. Especially in the Arab countries but also in Iran and elsewhere, the revenues accruing from the higher prices were far greater than could immediately be spent for either consumers’ or investment goods. So they accumulated in unspent balances. Thus they represented a withdrawl from current purchasing power not different in immediate effect from that of levying a large sales tax on petroleum or its products. The effect, increasingly evident as 1974 passed, was the predictable effect of fiscal astringency. As demand faded, prices in competitive markets — those for food, commodities, services — began to weaken. Prices subject to corporate market power continued to rise. So did unemployment. The oil-producing countries had provided the industrial countries with a surrogate tax increase. Its effect, like any general or monetary action against inflation, was to increase unemployment well before acting to arrest inflation.

                    So if what Galbraith is saying is true, then under the same circumstances falling oil prices should have the opposite effect: the same as fiscal stimulus. But, as Galbraith explains it, this would only happen if the revenues accruing from the higher prices were not immediately being spent for either consumers’ or investment goods.

                    Was that the case in the 2010-2014 period of high oil prices? What do the dollar holdings of various governments around the world look like during this period?

                  • Nick G says:

                    This is a classic case of market “friction”. When things change, markets take time to react. That lag causes problems for the economy.

                    When prices rose in 2004-2008 most of the increase in revenues for oil exporters did indeed get spent. And now that revenues are falling, those governments are still spending: they’re drawing down savings. This should stimulate the world economy, all else being equal. One of the things that needs to stay equal is spending in oil importing countries, including government and consumer spending. Oil importers need to not do “austerity”, and consumers need to spend the oil “dividend”.

                • SW says:

                  Please anyone who quotes Michael Reagan as an authority destroys their credibility.

                  • Glenn Stehle says:

                    Is that sort of ad hominem attack what passes for argumentation these days?

                    Don’t you think a more legitimate argument would be to attack the message, and not the messenger?

                  • ”Please anyone who quotes Michael Reagan as an authority destroys their credibility.”

                    There is a distinction to be made between being an authority and being a witness to authority and history.

                    I mention the laws of physics often but I am not a physicist and I quote history often but I am not a historian- except the armchair amateur variety.

                    The quote is pretty much dead on. The old soviets were dependent on oil revenue and had almost nothing else to sell. The bombs were not for sale.

                    There was a somewhat sudden and unexpected glut of oil on the market with the price falling dramatically.

                    Was RR responsible ? Personally I believe he worked to that end, along with the Saudis.

                    The commies certainly had a very hard time making ends meet without the oil revenue.

                    Most political observers accept this basic outline, excepting perhaps a few hard core leftish leaning folks who will forever refuse to admit RR ever succeeded in ANYTHING at all , even tying his own shoelaces.

                • Ves says:

                  Hi Glen,
                  More likely those Soviets saw the writing on the wall little bit ahead than the rest. You have to remember that they know what is available in terms of resources at least in their backyard. And that is pretty big backyard. They pulled their horses, throw the satellites to the wolfs, regroup and short 23 years after we have different picture.
                  Europe’s periphery is energy and financially getting starved and debt rot is getting closer to the core, North Sea Oil is terminal decline, Canada & US are counterfeiting $50 to get $20 of oil with shale & oil sands as that one guy said. That is logical way of looking in review mirror. Other explanations with “opening the oil flood gates and bankrupting” is Hollywood type of simplistic way at looking at things.

                  • Glenn Stehle says:

                    Then how would you describe this?

                  • Ves says:

                    Glenn,
                    Nobody is disputing that SA increased production. What I am saying is that price of oil itself did not bankrupt country. What caused the hardships is “keeping up with the Joneses” aka: flying to Cosmos, war adventures, supporting satellite states,…once that is removed they are pretty much sustainable, for now. So it was their rational decision to dismantle money draining structure.

                  • Glenn Stehle says:

                    Ves,

                    So let me get this straight.

                    Are you arguing that depriving Russia of oil revenues, through engineering lower oil prices, was not part of the Reagan strategy?

                    Are you arguing that the 70% drop in oil prices between 1980 and 1986-89 was not one of the principle causes of Russia going bankrupt?

                  • Ves says:

                    Glenn,
                    What I am arguing is that Russia is in better spot now than it was in the 80’s. If you want to thank Reagan for that than that is okay with me. In this world everything is relative and sometimes things turn out different than what we expect.
                    Bakken honchos mapped out to drill out 70.000 wells, but everything got stalled I think at 10k. Who is bankrupting them? I would argue mostly themselves. Is this good or bad? Who knows? It could be good for conventional players wherever they are in few years. That is the paradox of life.

                  • Glenn Stehle says:

                    Ves,

                    I agree that Russia is in far better shape these days. This is not 1979-1989, and after what the US did in the 1980s much of the world swore “Never again” and has taken measures to prevent such a thing from ever happening again.

                    Therefore, I’m not convinced by the claims that U.S. policymakers are maneuvering for a repeat of the 1980s.

                    Nevertheless, I’m pretty convinced that US policymakers want low oil prices. They seem to be intent upon talking oil prices down, and lose no opportunity to do so. Why? I’m not at all sure. Maybe in a decade or two we will find out what the method behind their madness was.

                    It also appears that both Saudi Arabia and Russia want low oil prices. Why? Each surely has its own reasons. But we at this moment, just as is the case with the US government, can only speculate as to what those reasons might be.

              • I am with RON in this little dogfight.

                OF COURSE markets can be manipulated. OF course money can be tight or loose. Of course cartels exist. Of course regulations can be put in place to reduce or stimulate demand.

                But at the end of the day all these ” Of courses” apply just as much to a truck load of apples or lumber or steel or beer as they do to oil.

                When it comes to the basics of supply and demand you are either a seller or a buyer..

                You either sell for the going price or you buy for the going price. If consumption starts picking up while production remains stagnant, that price will start going up. If consumption starts falling, with production constant, the price will start downward until balance is restored.

                It’s as simple as that.

                People tend to forget that classical economic theory is taught in the VERY FIRST course at university as a THEORITICAL SPECIAL CASE – a SNAPSHOT of a market for a given good or service- with all factors FIXED ( Everything else HELD EQUAL) for purposes of the discussion of supply and demand EXCEPT production and consumption. In the raw original theory demand IS DEFINED as equal to consumption- this being the instantaneous special case. The word in general use has morphed into a something different.

                ALL THE MANIPULATIONS of the markets mentioned by the naysayers certainly DO affect production and certainly DO affect consumption.

                But in the end, consumption matches production and the price moves to keep the two in approximate balance.

                Consumption, production , and price are conjoined triplets and CANNOT be separated except by playing word games.

                The word ”demand” is one of the words in English that brings on endless misunderstandings. It ought to be banished except in context of describing factors AFFECTING consumption. DEMAND as the word is typically used trips up ninety nine point nine percent of the public.

                CONSUMPTION is a meaningful word that is reasonably easy to quantify. It equals production plus or minus storage and draw down. Demand as the word is used MAY mean consumption but it may also be a xxxxing abstraction that includes endless abstractions such as future expectations.

                Some people will argue that a subsidy reduces prices.

                BULLSHIT except as a special case. Nick may have the taxable income needed to get the subsidy provided for a LEAF. I am not broke, I have a FEW assets worth enough I am not in any danger of ever missing a meal , lol, but no current taxable income. Nissan gets the same price but Nick and I pay a DIFFERENT price? Then price has no mathematical or logical meaning.

                A subsidy may reduce the PERCEIVED or purchase price the INDIVIDUAL CUSTOMER pays for a new LEAF or VOLT or TESLA but the TRUE or REAL PRICE remains the xxxxing same.

                The price paid by the COLLECTIVE CUSTOMER, the individual PLUS the taxpayer, the REAL price , remains the same.

                NIssan’s price equals the collective purchasers price.

                Logical absurdity disappears, words mean something again. Math is ALWAYS logical.

                A subsidy just shifts part of the price onto the back of the government which provides said subsidy. All taxpayers (Taxes are FUNGIBLE .) are tapped to contribute to the true price , as reflected by what the PRODUCER sells for, which remains the same.

                IF the PRICE is DIFFERENT at any given moment in respect the buyer and seller, then PRICE is a contradiction in terms, a term without a definition.

                It is a logical absurdity to say that Nissan sells a LEAF for thirty thousand but that Nick buys it for twenty four(?) , if discussing price supply and demand in basic theoretical terms.

                ( Folks who have studied economics more recently or at a higher level may use different terminology but I have never seen any of this overall argument refuted in understandable terms. )

                If I were getting paid to make this argument I would organize it better. 😉

                • Nick G says:

                  no current taxable income. Nissan gets the same price but Nick and I pay a DIFFERENT price?

                  Not really. Get a lease, and you get the value of the tax credit. If you want to own the car at the end of the lease, then you can buy it for the residual value. If the new Leafs have gotten way better, just let the lease expire and then you can buy the used Leaf for the current (lower) resale value, or you can just lease the new one.

                  • The government is still paying part of the REAL COLLECTIVE price, funneling it thru the leasing company to NISSAN.

                    The car still costs ALL OF US COLLECTIVELY what I pay plus the government contribution even if leased.

                    IF government could provide goods and services for free there would be no need for taxes.

                  • Nick G says:

                    I know you don’t buy new cars, but I wanted to clarify for those that do, that you don’t need to have taxable income to get the value of the tax credit as a buyer.

                    As far as leasing goes: it seems to me that leasing it is pretty much the same as buying, except that you have more flexibility: you can choose whether not to buy the second half of the car at the end of the lease.

                  • Nick G says:

                    Mac,

                    Google Pigovian taxes and subsidies.

                • MarbleZeppelin says:

                  Old Farmer, you talk about price as if it is real. Cost is real. Price is a means to shift money around. How about the real cost of oil that runs that ICE. Include the cost of oil wars, pollution, disease, death, and the huge bill coming up from global warming inducing climate change. I bet the fuel would then cost 5 to 10 times what the car cost. Also include the cost of not reducing oil use because of the oil consumer funded media denial campaign and lobbying that goes on to make people believe using the stuff is just fine.
                  You talk about the poor taxpayers paying to subsidize something that will help solve a problem. Instead of subsidizing their own demise.
                  Just like public works, subsidies are supposed to aid the public, not suck it dry and leave it to rot when the oil runs low.

                  • MZ, I am pretty much in agreement with you as far as your first paragraph goes, in the broadest terms. Nick is right about oil being dirty and extremely costly and we need to get away from it asap.

                    But we must part ways when it comes to price being ” a means to shift money around”.

                    We could argue forever about the meaning of such an ambigious definition.

                    My whole argument above was to prove exactly what you are saying, that price does not mean anything unless we know who is paying.

                    A goddamned Leaf does not cost twenty four K if government kicks in another five or six K.

                    In casual conversation price and cost are usually interchangeable. In a purely technical discussion hardly any laymen know the distinctions between basic economic terms. I used to know most of the more elementary ones.

                    We are not far apart at all, maybe not on the same line but on the same page or at least in the same chapter.

                  • MarbleZeppelin says:

                    OFM, price is the money exchanged in a single transaction. Price is set to move the goods or services and make some profit (although that is sometimes debatable). Too high a price and the transaction does not occur, too low and the goods or services eventually cease to be provided by that business or person.

                    Cost is the overall cost in money, time, effort.and an assortment of non-monetary states, occurrences and qualities both present and future. It is not just the cost to the individual that is making the transaction but to society and the environment in general. Cost is the total effect of a transaction or group of transactions.

                    We do not live in a vacuum or on an isolated island, everything we do has costs. These are balanced against benefits and if viewed in a wide enough scope should ripple benefits across the society and environment as well as the individual.
                    Taking smaller subsets all the way down to the level of just price is a self-centered hedonistic narrow-minded set of actions that may have short term benefits for the individual and the business but will have uncontrolled effects upon the greater system, often negative.
                    To make it simple, price is the small narrow view, cost is the big inclusive view.
                    Such as “What was the price of the car?”
                    or “What are the real costs of that car”.

                    Possibly, those first 13 years of education should spend a little time explaining the difference and defining our duties to society and the world. Most education seems to be centered around the three R’s and a minor amount of discipline. Very little to do with actually having people learn how to think and act responsibly through realization of what those actions will really cause in the larger picture.

                  • Nick G says:

                    Leaf does not cost twenty four K if government kicks in another five or six K.

                    Leaf dealers don’t get the credit. They just get the very roughly $30k.

                    At $30k (in other words, not including the credit) the Leaf is the cheapest thing on the road. With the credit (and credits from a few states), it’s insanely cheap.

                    see
                    http://www.edmunds.com/nissan/leaf/2014/st-200674102/cost-to-own/

            • wiseindian says:

              I have read that US CPI is around 4% if the the formula used to calculate it is from Volcker era. Is it true ?

          • Danlxyz says:

            BP has apparently figured out how to manipulate the NG market:

            BP Plc faces millions of dollars in penalties and surrendered profits after a Federal Energy Regulatory Commission judge concluded Thursday that the natural gas producer manipulated markets in Texas in 2008.

            http://www.bloomberg.com/news/articles/2015-08-13/bp-manipulated-natural-gas-market-in-houston-ferc-judge-says

            • Arceus says:

              Yes, and this was just a year removed from BP being convicted of manipulating the propane market. It seems to be a fairly well known “secret” the extent to which commodities can be manipulated. It all started when he money center banks became heavily involved in hedging commodities – prior to their involvement, of course, only actual buyers and producers of said commodity were allowed to hedge.

        • “By now it should be pretty obvious to all that the price of oil is politically driven … “

          It is the customer who sets the price of oil. As long as he (she) can borrow the price is stable or increases. As the customer falls insolvent — in Greece, China, Japan, Brazil, Canada, USA — he (she) cannot borrow and there is no bid.

          The more the drillers borrow the more the customers must also borrow to repay (the drillers’ debts). This is a gigantic problem because the drillers’ can only borrow at the expense of the customers!

          Say what you like about finite oil supply: at any given time there is a finite amount of credit, this is divided between customer and driller (with the parson’s share going to the lenders themselves). The more the driller borrows the less funds remain for the customer.

          That’s why prices are low and declining. Customers have been bankrupted by their oil suppliers.

          • Caelan MacIntyre says:

            We start with who we are as a species, and with such outgrowth manifestations as symbolic language; the making of spears; and money…

            That we are even having these arguments is testament to increasing overcomplexity and undercontrol.

            Zero interest rates do this… The fed does that… Money means this… BoJ did that… Yes they did… No they didn’t… Well not exactly…

            Little islands in a large archipelago on a vast sea…

  4. AlexS says:

    Thanks, Ron

    It is clear that the increase in the Bakken oil production in May and June was due to WTI hovering around $60/bbl.
    There were more wells completed than spudded.
    Note that Bentek said that June production was higher both in the Bakken and EFS.
    Not sure about July, but August production should be lower
    I also noticed that the Bakken wellhead/WTI spread has widened again in July

    The EIA DPR team apparently decided to be more conservative in their estimates, and they were wrong again.

    North Dakota DMR (Bakken ND) vs. EIA Drilling Productivity Report (Bakken ND + Montana) production data (kb/d)

  5. Dean says:

    U.S. shale firms turn to private equity as market funding tails off

    “A torrent of $44 billion in high-yield debt and share sales in the first half of this year has slowed to a trickle with oil now at just above $42 a barrel, 30 percent below its June levels and 60 percent down from June 2014, and a more pessimistic view taking hold that global oversupply could keep oil cheap for years.
    The number of high-yield bond and share issues has tumbled more than two-thirds from levels seen in May, Thomson Reuters data show.”

    http://www.reuters.com/article/2015/08/14/us-oil-usa-financing-idUSKCN0QJ0BH20150814

    • Boomer II says:

      From the article:

      “It didn’t solve people’s problems, so now when you roll to 2016 …there will be an opportunity for private equity-backed companies with plenty of capital in place to go out and start buying.”

      But will some of those assets be worth buying even at reduced prices?

      • Watcher says:

        Ya this theory would be stating that the reason the wells can’t make money is too much was paid for the lease.

        That’s not the cost that makes them uneconomic.

  6. houtskool says:

    “My point is not to knock the EIA for their changing predictions but to point out that we should not put too much value in them because they are mostly just wild ass guesses, subject to change from month to month.”

    They lie about inflation, money supply, job numbers, debt ceiling etc etc.

    They WILL lie about future oil production. That’s why i come over here in the first place, to see what really happens!

    • Glenn Stehle says:

      Yep.

      Hear No Evil, See No Evil, Speak No Evil.

    • The EIA is a branch of the Department of Energy which means the workers are government employees. But they have nothing to do with job numbers, inflation, the debt ceiling or anything else outside the energy department.

      The EIA may be guilty of being overly optimistic at times or overly pessimistic at other times. I see no reason to believe that they lie however. I think they are doing the best job they can with the budget they have.

      Hanlon’s razor: Never attribute to malice that which can be adequately explained by stupidity.

      I would change that a little: Never attribute to malice that which can be adequately explained by ignorance. Ignorance has a somewhat different meaning than stupidity. We are all ignorant of the future and our guesses about tomorrow are usually off by a country mile. But our missed guesses do not make us stupid, and they certainly do not make us guilty of malice

      • Watcher says:

        Yeah, way too many people involved in government for some non systemic conspiracy to maintain. No one goes to work every day intending to lie as their mission.

        The way this is or will play is via definitions. All those folks doing their sophisticated counting of this or that will count something with a new definition just the way they counted things with the old definition. Doesn’t have to have a whole agency of liars. Just requires someone in some meeting to make a strong case for a redefinition. That would start the ball rolling.

        WTI itself was changed about a year ago. Never did get the specifics on that. Just the Bloomberg article saying it was about to happen to deal with the influx of LTO to Cushing.

        • clueless says:

          Watcher says: “No one goes to work every day intending to lie as their mission.” Clueless says: “Unless they are going to fill out an expense report that day.”

      • SatansBestFriend says:

        I’ve done energy (future electricity demand) forecasting for a government agency before.

        There may be some parallels with peak oil forecasting.

        No one had an agenda. No one wanted to be wrong.

        There was a legacy algorithm that was used to do the forecast. You can’t just willy nilly change it because you felt you had a better idea. It had been used for years.

        It was the algorithm that was approved.

        After the initial cuts of the results were produced, they were sent to the local managers of the areas you had produced the forecasts for and they provided their feedback., which may or may not get incorporated into the forecast.

        Sometimes the data you were given was absolute shit…missing records and you had to compensate.

        By that time, the deadline was fast approaching and you were scrambling to just get the damn report produced!!!! and you knew it wasn’t 100% perfect.

        I suspect the EIA and other groups due their constraints are wiping the sweat off their faces after the report get produced. Then it’s time for the next one.

        BTW, on our team that produced the report only 1 guy understood electrical engineering, the rest were software guys.

        my 2 cents.

        • “No one had an agenda. No one wanted to be wrong.”

          VERY CLOSE but not a ringer 😉

          Everybody had at least a two item agenda. One finish the report.

          TWO do not turn in a report that makes the boss who approved previous reports or may have actually written them personally look foolish.

          Bringers of bad news or composers of such reports are seldom actually SHOT in western countries these days but they are often banished to the unemployment office or transferred to Podunk to be in charge of cleaning the toilets – PERSONALLY.

          • SatansBestFriend says:

            Good point, Mac!

            Yes, everyone has an agenda, likes getting paid, going home at night to eat a hot meal with their kids and watching internet porn…lol!

            I’ve worked in forecasting in a number of industries (never oil) and I have never met a single person who generated a report based on their poilitical views. In fact, how could you program that into software?

            At the pion level that I am at, guys just want to do their job, go home to their family and feel good about themselves.

            Maybe at the higher ranks the political stuff gets thrown in, and I agree at private companies things will get changed if it doesn’t align with an executives view of things (have seen that). But that executive has to pay for that and wear the risk that decision creates.

            The guys doing the grunt work ( data management, analytical modeling, reporting, etc) are usually in it for the right reasons.

            Remember, the executives can’t produce the reports. They can only express if they like them or not. How do you express someone’s opinion in software code without getting caught?

            The reports are produced by software (maybe excel on simpler ones).

            To change the outcome of a report, you need to get the guy who created the report (software programmer) to change it or manipulate the input data the created the outcome.

            That’s tough to do without exposing yourself to fraud.

            In government, they do audits, including data audits. You have to explain why the number in your spreadsheet is different from what is in the source system.

            Not as easy as it sounds. Conspiracy theorists be damned.

            thanks!

            • I know nothing at all about the nuts and bolts of hands on programming but I do know and understand the principle garbage in garbage out.

              SOMEBODY generally has the power to decide what goes in and that determines what comes out.

              The best place to look for hanky panky is in the selection of the data you are TOLD to use.

              I know a school board member who believes diesel fuel will eventually hit eight or ten bucks a gallon and for that reason, among others, favors small neighborhood schools and opposes larger consolidated schools.

              But as a responsible public official he is compelled to abide by the official guidance provided by management consultants hired by the county to estimate the costs of running the transportation system in the future.

              These engineering types are in turn pretty much compelled to rely on forecasts of the price of diesel fuel provided by the federal government. If they go off the reservation they will not get more consulting work from local governments. They go along to get along.

              We all know how accurate these forecasts have been in the past.

              One tentacle of the monster or another is always generating data which other tentacles use to make forecasts and write reports. A HUGE portion of this generated data at some level is generally pure bullshit.

              The county board of supervisors DOES NOT KNOW how many people will move into or out of the county ten years from now.Nor do I.

              In MY estimation the county has underestimated local future population growth by a hundred percent or more- I foresee TONS of people moving here to live on their accumulated savings and pensions and welfare checks aka social security as the boomers hit their stride in retirement numbers.

              Unfortunately we have been DISCOVERED. The county management has not yet acknowledged this reality- in my opinion.

              Incidentally I DO have a respectable income- in the form of property appreciation which is non taxable until I sell -eventually- if I need the money -and I have my affairs organized so almost all of my property taxes are deductible.

              It does not pay to shut a farm down altogether. It works a lot better to keep it running to some extent due to tax law.

              But you do not have to do the work PERSONALLY – you can hire it out or get it done on shares and that cuts the time element down to next to nothing if you so choose .Now I work at it as much as I WANT to WHEN I want to.

      • OFM’s version:

        Do not attribute to malice that which can be explained by ignorance or stupidity unless in possession of EVIDENCE of malice. Malice is SELDOM in short supply in this old Darwinian world.

        (By the way some people use bold instead of caps. How to you do bold in this blog?)

        Short term economic forecasting seems to work reasonably well so long as the assumptions made by the forecasters hold.

        The problem is that such assumptions are so many and so diverse that even a minor deviation from the current business as usual status quo may result in rather wide variations in conditions a few months or a year or two down the road.

        Putting any faith in the predicted price of oil a year from now based on economic modeling is hardly any better than guessing. I guess employment projections used in predicting oil price are accurate. I guess air travel predictions are accurate. I guess political predictions of events in Mexico and Iraq and Venezuela are accurate. I guess I guess I guess I guess …….. ENDLESSLY.

        When conditions are unusually stable such forecasts are actually fairly accurate. UNLESS you use a forecast produced with MALICE AFORETHOUGHT. There are plenty of that sort around as evidenced by some well known examples of some of the bigger banks doing the exact opposite of what they advise the public to do.

        Conditions ARE NOT stable these days.

        • Fred Magyar says:

          (By the way some people use bold instead of caps. How to you do bold in this blog?)

          Hey OFM, right above the ‘POST COMMENT’ button you will find a list of all the allowed HTML tags on this Blog.

          To bold something you need to use the STRONG tag, looks like this:
          <STRONG >TEXT YOU WANT TO BOLD </STRONG >

          Displays like this: TEXT YOU WANT TO BOLD

          • Thank you Fred, the width and depth of my ignorance of computers is astounding to a couple of ten year olds who occasionally help me out.

            Adults describe it as approaching ZERO but I managed to avoid computers like a sexual disease until well after my brain fossilized.

            • Boomer II says:

              I’ve found it is a little hard to demonstrate code as a comment because the code disappears.

              Here’s the basic format:

              before the text and
              after the text.

              Inside those brackets (or whatever they are called, you can put in an i for italics or a b for bold. Put it after the / mark. So it would look like /i or /b.

              Edit.

              Never mind. I had the same problem again. I can’t show you the code because it disappears.

      • houtskool says:

        Oil is of systemic importance, as you know. As soon as numbers become inconvenient, those numbers will be ‘managed’; the final numbers that come in will be gathered by people who are under control, and published accordingly.

        You too, mr Patterson, will experience the way of the truth, as it comes closer to home.

        With many thanks for your time, your efforts, and your warning signals for a large public.

        Best regards from 10 feet below sea level.

      • Javier says:

        Never attribute to malice that which can be adequately explained by ignorance.

        Yet we have to explain why most of the lying is done when things get dicey.

        I remember from the British humor series “Yes minister” the following phrase:
        – First rule in politics: never believe anything until it’s officially denied.

  7. Ovi says:

    Does the steady decline in the average Barrels per Day per Well chart indicate that the sweetest spots in the Bakken have been picked off and it is down hill from here on? How does the IP of this latest batch of wells compare to earlier months?

    • No, I don’t think it means that at all though the sweet spots may indeed be drying up. But the new wells coming on line right now are, on average, more productive than previous new wells. They are only fracking the sweet spot wells right now so production per new well is increasing, not decreasing.

      The reason production per well is decreasing is the fact that total production is flat while the total wells producing are increasing. Therefore if production stays flat and the number of producing wells continues to increase, production per well will always decline.

      It is now taking fewer wells to keep production flat than it once did. But the legacy decline is still there.

      • Watcher says:

        The latest graphs from I think FreddyW showed newest wells producing just like older wells after 4ish months. But far worse than that was info over the last week or so indicating widespread use of chokes.

        We have no idea what areas can yield what IP. The companies have different choke philosophies.

        • FreddyW says:

          The latest graphs from I think FreddyW showed newest wells producing just like older wells after 4ish months.

          It´s more like 12 month. I have posted an updated graph bellow.

  8. islandboy says:

    I looked back a couple of Ron posts at the one about international rig counts and US rig counts barely started falling last December with the decline starting in earnest in January. Before rig counts started declining, my understanding is that they were drilling flat out and drilling roughly 50 more wells than were being completed each month. Until wells drilled equaled the amount completed the inventory of uncompleted wells kept growing. It seems to me that slowing down the rate of completions has resulted in this situation where the there are an increasing number of wells that are reaching their one year deadline for completion.

    Can anyone get a handle on how many wells will be reaching their one year deadline for completion for each month from now going forward? It could well be that this number is what decides whether production goes up down or sideways and based on the pace of drilling up to last December, that does not bode well for production declines. My take is that significant production declines will not materialize until one year after the month that wells spudded was the same as wells completed.

    In hindsight, the regulators should never have allowed the industry to drill more wells than they were completing since, the fracklog is now threatening to stymie any attempts at a timely market response to lower prices.

    • Enno Peters says:

      It seems that the one year deadline is not from the date that a well is spudded, but another date ( I guess when the well has been completely drilled), and that date is not public. I did see that the average number of days since spudding to first production has gone up, from 114 in June 2012, to 156 in June 2014, to 197 in June 2015. There are probably several reasons behind this increase, such as pad drilling (where wells are first drilled, and afterwards completed in a batch), and maybe also an effect from this 1 year deadline: older wells are completed before newer wells.

      When a larger inventory is available, such as now, this number no longer is a good indication for the typical lead time from spud to production.

      Using data from early August, I see that still about 450 wells in ND have the status “NC”, which was a new status to designate wells that were being hold off from completion. This number has dropped from close to 500. As I mentioned just below, I don’t think the 1 year deadline will be very important, companies can easy complete older wells, instead of new ones, as already seems happening. Also it looks as if a 6 month extension is basically for free, while operators that have some cash left may prefer to pay the $50 k to bet on a better price environment a year later. Lynn Helms however did indicate that they don’t like operators delaying completions, as of course it reduces tax income.

    • The better solution is not to have a one year deadline to complete the well. Such a requirement isn’t justified. It’s micromanagement. The legal aspects can be resolved by having a clause requiring monthly penalty payments to the royalty owners for delays beyond x months if the well was drilled to hold a lease.

  9. Rune Likvern says:

    For all
    LTO extraction in Bakken (ND) grew from 1,142 kb/d in May 15 to 1,152 kb/d to Jun 15, a growth of about 10 kb/d.

    Looking at Slawson it takes some guesses to understand what has been going on with LTO extraction from their wells.

    Some have suggested it was a response to hold back production while waiting for higher prices.
    LTO extraction from Slawson operated wells increased 8 kb/d from May to June.

    Other thoughts/observations.

    • FreddyW says:

      Some have suggested it was a response to hold back production while waiting for higher prices.

      I think that sounds plausible. They probably thought the oil price would go up during the second half of the year. Now that it does not seem to happen they increase production again because they need the money.

    • Enno Peters says:

      I agree, I see that the average number of producing days for Slawson’s non-confidential wells were:
      April : 20
      May : 22
      June : 24
      In May and June, WTI rose to $60 again, so that was probably an important factor.

  10. Longtimber says:

    Update from the core of Eagle Ford.
    “With the amount of oil we’re sitting on top of, it’s devastating that we can’t go get it,” said Matt Kibodeaux, the local project manager for Energy Maintenance Services, a Houston company. The company, which lays pipes to connect well pads to larger pipelines here, employed 186 people here a year ago but is now down to 18.”
    http://www.nytimes.com/2015/08/15/business/energy-environment/low-oil-prices-pose-threat-to-texas-fracking-bonanza.html?_r=0

  11. HVACman says:

    This ND one-year deadline for completions. I guess I slept through that part of the ND well-development process. Please fill me in on what happens if that deadline passes without a well-owner completing a well. Are they fined? Do they lose their lease? Are they forced to immediately P&A the well, thereby rendering the drilled hole worthless?

    • Enno Peters says:

      Lynn Helms talked about it in the last webinar. In short, I belief operators receive a letter, and have to do something within 6 months. They can either then start the wells, or pay $50 k to have the well inactive for a year (or abandon the well, which is unlikely). I therefore have the impression the 1 year deadline is not that much of a deciding factor.

      • Fifty thousand bucks out of anywhere from six to ten million is not even beer and cigarette money, in terms of daily life.

        ” Not that much of a deciding factor” is a classic understatement bordering on dry English humor.

  12. Jean Laherrere posted the following along with five graphs. I will post the graphs in my next Bakken post which will be in about a week:

    my interpretation for ND is as follows:
    Bakken ultimate = 3 Gb

    non Bakken ultimate = 2.2 Gb

    ND ultimate 5.2 Gb

    detail
    quite symmetrical
    like the EIA drilling productivity data, but in contrary to EIA/AEO2015 with a peak in 2020

    It will be interesting to see the evolution in the next few months

    best regards
    jean

  13. andy hamilton says:

    Samson Resources in the process of seeking bankruptcy (chapter 11) protection. They would be one of the larger privately held US O+G operations?
    Last I looked they had $4bn worth of debt.

    The iceman cometh….

  14. Rune Likvern says:

    NOTE; The estimates are without any well additions post October 2015 and not adjusted for other liabilities.
    WTI now around $42/b ($50/b used in the lowest trajectory)

    This is where it gets crazy, the companies are adding wells (from operating cash flows) that cannot recover their CAPEX by the first redemption, thus lowering the net income profile (the added production does not recover all spent CAPEX before the wall is there) and making sure they hit the first of many proverbial brick walls.
    Bondholders are …….trapped.

    • So they need prices at $90 per barrel by 2022, and possibly convert debt to equity. I think they got a chance to scrape by.

      • Rune Likvern says:

        Fernando,
        One hurdle at the time.
        The chart I posted is conservative. Adding wells while the oil price is low just increases the odds for not clearing the first hurdle. Converting debt to equity may happen.

        • I would only drill to hold quality acreage.

          You know, im not sure hoy they operate nowadays but I would try to set up joint ventures and operate fields in a very coordinated fashion. Set up to lease rigs using a single shared contract, unitize, and get rid of small share non working interest properties. The consolidation approach allows the little guys to become more of a monopsony. And this allows squeezing service companies, building joint processing plants, and making all sorts of higher efficiency moves.

        • shallow sand says:

          SD, which should be BK, was able to swap a bunch of debt yesterday.

          They have a market cap of $267.6 million, long term debt over $3 billion, share price of .52.

          If they can extend and pretend, I assume OAS and most others can also.

    • shallow sand says:

      Rune, repayment of loan principal in aggregate requires positive cash flow, not just net income.

      Shale companies hope to hold production flat and remain cash flow neutral, that comes from a few conference calls. They admit they need at least $60 WTI. I think they need $78-100+ WTI.

      No debt principal will be repaid, just extended.

      Shale companies are, and likely will be permitted to continue to operate with negative cash flows.

      This will depress oil prices, and me personally, for many years.

      Only an OPEC cut or major supply shock will change things.

      • Rune Likvern says:

        shallow, thanks you are right, I will revise the text to reflect this. (It’s been a little hectic around me the last few days.)

        Lots of options for extend and pretend.

  15. FreddyW says:

    Hi,

    Here is the updated production profile graph. The “bakkenwells” webpage was updated with a lot of old wells from 2013 and later. I use the page to find out which wells are Bakken wells so it has affected my graphs a bit. The average production is generally up a bit compared to before as I can see it. I don´t know why they have not been added until now. But good anyway that we finally got them. First three month of 2014 is now up a bit compared to last month graph because of this. It still declines faster than earlier years and is slighty bellow the other graphs after 14 month, but not as noticable as before.

    • FreddyW says:

      And here is the one month after first production graph. Oil, gas and water cut is up a bit in June. So a bit more of everything. Confidential wells are not included (EOG wells are usually confidential for example).

      By the way, the number of new wells put on production was 126 in June compared to 139 in may.

      • Enno Peters says:

        Thanks Freddy. Your graphs also show that so far the improvement that Lynn Helms talked about (25% improvement in 1 year) is not supported by the data.

        Note that some wells are service wells (e.g. in the 50.000 and 90.000 series). A good way to filter them is to use the the well spud information (the well type field is very useful) from the wells.zip file, located in the “Download shape files” in the GIS map server.

        • FreddyW says:

          Thank. Yes I agree. I don´t see any 25% improvement in oil production at all. It looks quite flat.

          I cut out the service wells from the monthly report before parsing it. So there shouldn´t be any included.

    • FreddyW says:

      One more graph. It shows oil and gas production and water cut 9 months after production started. You can clearly see how water and gas production has increased over time while oil production has stayed nearly flat.

  16. The post has been updated with text and several post from Enno Peters. Hope you like it.

    Jean Laherrere has also sent me five graphs. I will post them in about one week when I do a post on Bakken by county.

  17. shallow sand says:

    I know just a guess but maybe a few could do so at to the four questions:

    1. How many bopd in the US is being operated at a loss at current prices?

    2. How many bopd worldwide is being operated at a loss at current prices?

    3. What US basins have locations that are still profitable at current prices?

    4. Same as 3., except for world wide?

    Almost all production is being sold for below $40 per barrel. A healthy percentage is below$30, including heavy oil and tar sands.

    My guesses.

    1. 1.5 million bopd.

    2. 10 million bopd.

    3. None.

    4. Gulf OPEC, a few Russian, due to rouble collapse, a few Norway.

    • Glenn Stehle says:

      There’s the study that clueless linked in the last post:

      http://peakoilbarrel.com/us-shale-declining-and-opec-still-climbing/comment-page-1/#comment-531983

      The study concludes that, over the four year period 2010-2013, the U.S. upstream business (including both conventional and non-conventional, since the analysis is of the US’s 50 largest oil and gas producers, regardless of whether they operate in conventional or non-conventional plays) was losing about $10 for every barrel of boe it produced, and those losses with an average WTI price of $95 and a NYMEX natural gas price that looks to be about $3.75. Those oil and gas prices resulted in revenues of about $50 per boe produced, with full-cycle costs per boe of $60, thus the $10 per barrel loss.

      So the upstream business was already operating at a loss before the price rout.

      So now with WTI at $42.36 and NYMEX natural gas at $2.81, if we plug in the same gas/oil production split of 55/45, instead of $55 we’re talking $28 per boe produced, or about 50% the 2010-2013 average.

      • Watcher says:

        So the upstream business was already operating at a loss before the price rout.

        The key point from the E&Y study. I extracted their paras last ronpost and blah blah.

        It doesn’t matter.

        If you have to have the oil, you’ll wave your hands and redefine dollars and do whatever you must to get it.

    • Jeffrey J. Brown says:

      Copy of one of my previous comments:

      And don’t forget global production, especially high cost heavily depleted fields like the North Sea, where a lot of fields are still producing because the abandonment costs are so high, and companies are kicking the P&A costs down the road.

      Net Cash Flow math is actually quite similar to Net Oil Export math, to-wit, given an ongoing decline in gross cash flow from production sales, unless total costs (lease operating expenses plus G&A overhead) fall at the same rate as, or at a faster rate than, the rate of decline in gross cash flow, the resulting rate of decline in net cash flow will exceed the rate of decline in gross cash flow and the rate of decline in net cash flow will accelerate with time.

      As noted below, this has “Interesting” implications for the remaining cumulative net cash flow from developed producing properties. Of course, the gross cash flow from producing properties can decline when (not if) that production declines and/or if the price declines. This implies a tremendous mismatch between remaining cumulative net cash flow and debt levels.

      • Some of you financial geniuses tell me.

        I am not referring to JB or insulting anybody at all but merely acknowledging I am not well versed in the obscurities of commodities trading.

        Could we figure out a way to lock in the price of new LEAF and VOLT automobiles using a newly created futures market , say a two to four or five years down the road?

        I would be willing to buy some options in such a market. 😉

        When the price of gasoline spiked like crazy a few years ago, lots of guys willing to make the bet bought nearly new four by four trucks and similar vehicles for peanuts , relatively speaking, and drove them or let them sit in used car lots and made handsome profits after the public got used to higher gasoline prices.

        The opposite scenario ought to play out just as well. Gasoline prices are damned near sure to spike for one reason or another. A newish Volt still under warranty might sell for more than you paid for it even after driving it a couple of years. There is simply NO WAY production of such cars can be SHARPLY increased in the space of a few months. Getting production up takes a while even if the assembly plant is operating at low capacity. The battery supply would be the biggest single hold up most likely.

        Nobody keeps much inventory these days. It’s mostly off the end of the assembly line onto a truck to the next customer in line all the way back to the farm and the mine and the sawmill.

        Elon Musk is going to look like the business genius or maybe simply the luckiest business man of the last twenty years if he gets his battery factory on line in time for an oil price spike.

        Eighty percent of the public may delay buying a new car in hard times but the remaining twenty percent will be the ones capable of buying Teslas.

        I wonder if he is giving any thought at all to a pickup truck or van. The current day running gear in a Model S would serve just fine in a pickup or van used as a local delivery vehicle, even hauling a heavy load. A hundred miles is a typical day running local deliveries or repairing appliances etc.

        • Nick G says:

          You’d be surprised. GM and Nissan have substantially over built capacity, particularly in battery production, and could double production very quickly.

          • Hi Nick,

            Going from even five thousand each to ten thousand each in a market for a million plus cars a month wouldn’t help much in a short term scenario.

            Even bumping production from current levels twenty times wouldn’t necessarily mean you could find a new Leaf or Volt on a dealer lot at the MSRP in the event of a REAL oil shortage such as one brought on by a war preventing blue water shipping .

            • Thanks Clueless,

              I am familiar with the standardization of commodities as in lumber grain etc.

              So I was thinking about something new – maybe some sort of derivative that takes into account the difference between the MSRP of the very most basic model and what you can actually buy one for????

              For instance suppose the very cheapest LEAF minus sales tax , shipping etc, lists for thirty thousand. You want to buy one three years from today during an oil crisis and the cheapest one is forty five thousand due to the dealer marking it WAY UP. You could place your bets on the spread.

              Just a passing thought.

              • clueless says:

                In any trading market, prices have to be transparent down to every tenth of a second. Have you ever had the experience of dealing with a car dealer that was transparent? I think that they are the least transparent of any industry. So, starting a market that traded the spread is very likely impossible.
                But, as I have always believed, it never hurts to ask a question. Further, the person that answers may not be right.

                • Such a market IS probably impossible playing by the current rules under the current regulatory system.

                  BUT – Basically unless you are hedging you are simply gambling in futures markets of any kind.

                  So – let the seller gamble as he sees fit. Buyer likewise.

                  Why could HE the seller not sell ME an option to buy a base model LEAF for a certain sum, brand new, delivered to a specified location, for a fixed sum on let us say August 16 2019?

                  With a suitably sized refund if the car is no longer manufactured.

                  I could care less what HE has to pay. I am anteing up MY money to get the guaranteed agreed on price.

                  Dickering with the dealers would be part of HIS gamble.

                  Such a contract would not NECESSARILY have to be traded under EXISTING regulations .

                  I could probably have one drawn up that would stand up in court for a couple of hundred bucks tomorrow, to be executed between two individuals, given that my attorney is an old buddy.

                  Thinking outside the box is the name of the game in this thought experiment.

                  • Nick G says:

                    You could go ask a Nissan dealer if they’d be willing to put in a order of this kind, for future guaranteed delivery at a certain price.

            • Nick G says:

              Yes. They could double in a few weeks, but after that the doubling period would likely be a year or two, so getting to 50% of the car market might take 10 years.

              In the meantime, people might have to carpool. That would be hard for a small percentage of people who’s lives are complicated: multiple jobs, living in small towns, etc. But think about what can be done with smart phone apps these days to connect people together: we’re no longer living in the 1970’s, when the only way to connect potential carpoolers was through clumsy programs at work.

          • Longtimber says:

            Don’t recall source

            • Longtimber says:

              Img Post

              • Longtimber says:

                Gigi-Production.

                • Nick G says:

                  Tesla has said they may do several gigafactories by 2020. Their home and industrial/commercial batteries seem to have almost unlimited potential for utilizing that capacity.

                  • Nick I must say I admire your incurable optimism – and I actually share it to a substantial extent.

                    But let us not forget that on any given day any given ball team might beat any other given team.

                    I believe that given time enough the Mighty Mighty Market and the ( sorta kinda ) Invincible Invisible Hand can work near miracles.

                    Time enough may or may not be available depending on the issue.

                    When it comes to energy I am pessimistic that enough time is available to avoid a MAJOR crisis- quite possibly extending to the outright collapse of ” Life As We Know It”.

                    So help me Sky Daddy I am more than ever convinced you are absolutely determined NO MATTER WHAT to STAY one hundred percent on message, that message being eternal optimism based on good luck, good management , and technical progress.

                    I will grant the progress if you grant the time.

                    Luck is not to be taken for granted.

                    Anybody who observes politics must take a cynical view of the LIKELIHOOD of good management prevailing over bad.

                    I have never yet encountered any body who stays on message so well except exceptionally skillful politicians and professional public relations people.

                    We will NOT be solving our problems by car pooling in the event of a severe long extended oil crisis, although car pooling would help quite a lot.

                    People would be thrown out of work by the tens of millions and the people who still have jobs and incomes would suddenly get to be EXTRAORDINARILY tight fisted when it comes to spending even a dime above essential living expenses. Car pooling can’t fix that sort of troubles.

                    Unemployment would spread like a brush fire in dry windy weather, not just here but all over the interconnected world.

                    So far you have NEVER to the best of my memory ever acknowledged that the oil shit might really hit the fan so hard and so fast that the consequences will be catastrophic for the economy.

                    I am not predicting that such a critical oil supply crisis WILL come to pass but I have NO GOOD REASON to believe such a crisis WILL NOT OCCUR.

                    I would bet on such a crisis coming to pass within twenty years and be happy with one to one odds.

                    I spend most of my evenings reading a wide variety of history and science books.

                    I am beginning to suspect you read only cornucopian literature- or that you otherwise are so good at staying on message like a politician or pr guy that you have an agenda based on something other than a sober consideration of the ALL the FACTS.

                    Some people will notice that I argue both sides of a lot of issues. This is because I recognize there is evidence on both sides and do not KNOW which side will prevail short, medium, and long term.

                    So far as Tesla being able to build a bunch more battery factories near term I hope they succeed.

                  • Nick G says:

                    I admire your incurable optimism

                    It’s not optimism – it’s realism. When I say that the Leaf is the cheapest new or used car on the road…that’s just reality. When I say that Tesla is planning a very big increase in battery production – that’s reality. Of course, their plans might not come to fruition – I didn’t say they would. But they do have those plans.

                    on any given day any given ball team might beat any other given team.

                    Sure. It’s an artificial system, designed to keep the teams roughly equal (draft picks, etc.).

                    Remember the difference between competitiveness and viability: many EV companies, and many battery chemistries, and many forms of wind and solar power will try and fail. 97 out of 100 car companies failed between 1900 and 1950. The car business was viable, but very competitive. There’s a very, very big difference.

                    you are absolutely determined NO MATTER WHAT to STAY one hundred percent on message, that message being eternal optimism based on good luck, good management , and technical progress.

                    No. I occasionally acknowledge that we could easily see major mismanagement. That’s what caused the Great Depression. It’s what caused the Great Recession. It’s what causing the current Euro-zone problems the Iraq war, etc., etc., etc.

                    I’m just pointing out the reality. For instance: if the US had pushed much harder for EVs 35 years ago, we very likely could have avoided spending $2T on Iraq and Afghan wars. If we push hard now, we might avoid future oil wars.

                    That’s just reality.

                    We will NOT be solving our problems by car pooling in the event of a severe long extended oil crisis

                    I think you understimate the power of social networking, and the extraordinary under-utilization of our current car infrastructure.

                    The average light vehicle is driven about 1 hour per day (4% time utilization) and carries about 1.2 people (about 20% capacity utilization). So, overall, cars are about 1% utilized. There’s a very big resource there, which is available if we choose to use it. In an emergency caused by a very large oil shock, some of it would be used.

                    If utilization was raised to only 4% for the 50% of light vehicles that have 50% higher MPG (IOW, carry 2.5 people on average, and use cars that consume 60% as much fuel as the average), you could reduce passenger fuel consumption by 70%. That alone would reduce overall fuel consumption by 35%.

                    People would be thrown out of work by the tens of millions

                    How do you know?? That seems to be a common idea on POB, but it doesn’t really make sense. You can’t extrapolate from previous smaller oil shocks like that. Look at WWII: we reduced fuel consumption by what, 90%? The economy boomed, because we spent money on other things.

                    James Hamilton points out that in the Great Recession, people stopped spending money on fuel hogs, and that hurt the economy. But…that’s temporary. The car companies would gear up for better fuel efficiency, and when it became clear that the oil shock wasn’t temporary, people would start buying again, just buying EVs and hybrids this time.

                    Could politicians and central bankers screw things up? Sure. If they really screwed things up, we might have another Long Depression, like in the 1870’s. But…we’d almost certainly recover eventually.

                    On the other hand, I try to avoid forecasts, and stick with hard realities that point to clear policy recommendations. The only reason to deal with forecasts is to point out that we have some choices that will have consequences, and that excessive pessimism is fatal to good planning.

                    So, are we agreed on this?

                    We’ll be far, far better off if we transition away from oil and other FF’s ASAP.

                    Right?

            • Longtimber says:

              40k jpeg

              • I bet I can beat them when I start marketing my “Pet Battery”. It’ll be 2000 pound lump of scrap steel USA renewables fanatics can install in their homes. The Pet Battery includes a high quality built in safe at no extra charge, all for $3500.

                • I will go you one better and make mine out of stone and concrete which are a lot easier to mold into a pretty shape and cost a lot less to boot. Scrap steel is actually quite valuable.

                  Every modern house ought to have a few such THERMAL batteries built right in during construction given that they can serve as walls and floors and foundations.

                  They do not store electrical energy but they work great storing heat in either direction.

                  If mandated by revised building codes and some embedded wiring and ventilation passages are included , this one step alone could solve ten or twenty percent or maybe more of the problem of intermittency of wind and solar power when used to heat and cool living and working spaces.

        • clueless says:

          OFM asks: “Could we figure out a way to lock in the price of new LEAF and VOLT automobiles using a newly created futures market , say a two to four or five years down the road?” A commodity futures market requires a “commodity.” That is, the specifications are down to the minutest detail. In addition, there must be a fixed delivery point, and those setting up the market must have strict delivery specifications. For oil, in general, it is WTI [a Specific definition of the API gravity, sweet (amount of sulfur) etc.] The delivery point for the Oil Traders is Cushing, OK – which has maybe 80 million barrels of storage.
          Cars are not a commodity. You would have to specify color, trim, horsepower, – virtually every detail. Car companies intentionally make their cars different so that they can always compete on varying factors – the salesman points out that his car has a backup camera, and the other model you are comparing does not. So, long answer to confirm to you, there will never be a futures market in auto’s.

        • Brian Rose says:

          An EV futures market would exist if the product were consistent over time.

          A ton of corn, or a barrel of oil have strict definitions that can be traded upon. Those definitions change over time, but at any given moment all futures are traded upon a strict current definition.

          Volt or LEAF futures would be a nightmare to offer as a broker. If oil prices trend to $100 or more, then the value of the EV increases due to demand impacts.

          The known unknowns relate to new model years having higher range and faster acceleration for LESS than “old” models.

          At least in the U.S. there will be potential fortunes being made on betting when the $7,500 Federal Tax Credit will begin phaseout for various manufacturers.

          Between 2018-2020 all auto manufacturers in the U.S. will hit their 200,000 EV limit and the tax credit will phase out on a company by company basis. Buying a used vehicle just before that phaseout will yield a huge appreciation after just 1 year. Battery tech will not advance in 1 year as fast as the benefit of a $7,500 discount.

          There are too many variables to predict when to pounce on this upcoming opportunity now. Each manufacturer will have a different phaseout period, and the relative benefit in buying the last full tax credit EVs will vary depending on sales data, new model years, and each companies cycle of model generation.

          Depending on Tesla’s cumulative U.S. sales the first Model IIIs sold could qualify only for phaseout credits. That difference alone could be the beginning phase of a robust “EV futures” market where prices are determined by complex calculations of what manufacturer can provide what credit on what date.

          The average person on the street will know nothing – they’ll look up prices for new/used EVs and the market will seem pre-determined. At the moment a 2013 Chevy Volt sells for $8,000 less than an equivalent 2013 Prius. Driving both, side-by-side, no one would pay more for a Prius than a Volt. This is a harbinger of what is to come in the hybrid, EV, tax credit market.

          A futures market for EVs will exist. It doesn’t yet because the many variables are too sensitive – effected unpredictably by small changes. By 2018 the phaseout period of various manufacturers will be more concrete, and a sort of futures market will naturally emerge.

          The average person will not realize a specialized futures market has emerged. All they will know is the price range that appears as they research vehicle prices.

          For now the average person STILL thinks EVs are a sacrifice. Eventually considering an ICE will be the sacrifice, but the mass acceptance will not happen this year. A non-scientific guess says 2017 will be a year that EVs get attention, but not acceptance. 2018 will be the year more cosmopolitan folks regard EVs as superior. 2020 will be when the skeptical fence-sitters decide “EVS were inferior, but now are cheaper, faster, and all around better than ICEs”.

          By 2020 EVs will be accepted as the default. Not because they are better, but because a NEW issue will dominate. It is my belief old issues are resolved only when the next big thing grabs attention, and reduces focus on “old” issues.

          The progression of autonomous vehicles will, by 2020, be the next cultural debate. Autonomous ICEs simply wouldn’t work. Too many moving parts. EVs need not even plug-in to “fuel”, they can drive over a wireless charger. Each city has a maximally productive fleet of vehicles available through Big Data algorithms regarding population and hourly, weekly, monthly, and yearly demand cycles.

          An ICE autonomous vehicle simply wouldn’t work due to its, frankly, awe-inspiring complexity of moving parts. An EV that is simply a drive-train, a battery, and a cooling system is is what makes an autonomous vehicle a viable business opportunity. It “re-fills” itself, has significantly less maintenance, and much lower insurance costs.

          This could actually make used EV prices go DOWN if autonomy is cheap enough to rapidly revolutionize the idea of owning a vehicle, paying insurance, maintenance, car payments…

          Just like we wonder why on Earth we still get bills in the mail we will wonder why some people own their own vehicle. Autonomous EVs will be so cheap and convenience that we will wonder why we ever owned vehicles in the first place.

          People fail to understand that auto-EVs will take over more rapidly than we think. It is not about replacing ICEs with EVs over 50 years. It is about a company coming along that offers on-demand, irresistitably cheap auto-EV service.

          Financially speaking autonomous EVs will win. Decreasing battery costs, and development of autonomous tech will eventually revolutionize the very idea of owning a vehicle. It will happen slowly; much like the internet revolution.

          • “Between 2018-2020 all auto manufacturers in the U.S. will hit their 200,000 EV limit and the tax credit will phase out on a company by company basis. Buying a used vehicle just before that phaseout will yield a huge appreciation after just 1 year. Battery tech will not advance in 1 year as fast as the benefit of a $7,500 discount.”

            Thank you for this insight Brian.

            My daydreaming about impractical or impossible futures marketing schemes paid off handsomely. Thinking outside the box this way costs nothing and has paid off on other occasions.

            I might actually buy a new hybrid or pure electric pickup truck a few years down the road to offset taxes on some potential income. This would be my first ever brand new vehicle.

            ( There are other ways of displaying status, such as owning a nice little spread. Strangers on the street in town may think I am a busted hick but my neighbors know better. LOL)

            You may be a bit on the optimistic side in respect to the change in public perceptions time wise but hybrids and pure electrics will own the road within the easily foreseeable future.

            I don’t buy the arguments YET about the cost of an electric versus the cost of a conventional comparable car. IMO the figures used in such comparisons are not all that good, especially in that they do not take into account the opportunity cost of money. My own maintenance costs have always been FAR less than outfits like Edmund estimate – and would have been far less even if I had hired EVERYTHING done.

            I have known numerous people who have not spent a DIME on maintaing a new car for five years except oil changes, car washes, and maybe a set of new tires. This is actually pretty much par for the course these days- tuneups intervals are many tens of thousands of miles in lots of cases and if you CAREFULLY select the make and model you buy you can just about rest assured it WILL NOT break down within five years in such a fashion that you must pay out of pocket as opposed to having warranty coverage.

            “Rust and Depletion never sleep. ”

            With a hybrid in every driveway, we could actually manage ok using synthetic gasoline or diesel made from coal or natural gas or maybe even from scratch- CO2 and water at some future time using wind and solar power.

            There are tons of reasons to think we are headed for very hard times but with some luck we could all be driving ( or just riding in self driving ) pure electrics or plug in hybrids within twenty years instead of walking. It is a LONG way to town from MY house even on an electric bike.

            • Nick G says:

              I don’t buy the arguments YET about the cost of an electric versus the cost of a conventional comparable car. IMO the figures used in such comparisons are not all that good, especially in that they do not take into account the opportunity cost of money.

              They include the cost of financing, so it’s only the opportunity cost of the downpayment that’s not included. That’s not really going to be a large difference.

              My own maintenance costs have always been FAR less than outfits like Edmund estimate

              Look closely: Edmunds understates the difference in maintenance costs.

              They suggest that the difference is only 464 bucks over 5 years between a Leaf and a Versa. But, brakes last about 3x as long in an EV. There’s no oil change, no coolant or transmission fluids, etc.

        • islandboy says:

          I wonder if he is giving any thought at all to a pickup truck or van.

          Short answer, yes.

          Long answer.

          Using google, I searched using the following search term “tesla truck site:http://insideevs.com/” which restricts the search for “tesla truck” to the insideev.com web site. The results page contains a wealth of articles that mention a Tesla truck and this particular story contains the following quote from Musk:

          “If you’re trying to replace the most gasoline miles driven, you have to look at what people are buying. That’s the best selling car in America. If people are voting that’s their car, then that’s the car we have to deliver.”

          Here is another story with another choice quote from Musk:

          “I have this idea for a really advanced electric truck that has the performance of a sports car but actually more towing power and more carrying capacity than a gasoline or diesel truck of comparable size. That could be really cool, and I think that would probably make sense to do that at a new plant.”

          There is a ton of stuff on the internet about a speculated Tesla truck but, based on the quotes from these articles, Musk appears to have seen an opportunity to advance his goal for creating Tesla, by expanding into the very popular light truck market. He has quite wisely IMO, chosen not to mess around with the company’s short to medium plan and instead, tack on truck development to the end of the current development cycles. As the crossover (Model X) approaches the final production stage, it appears that work on the “mass market” is well under-way. I saw a video last week, showing what appears to be a clay model of the next model with the left rear quarter peeping out from under a cover ( https://youtu.be/GiG6z_H2m4M?t=322 ). Once that model enters prototype and preproduction stages, probably next year, work on the truck might start.

  18. Toolpush says:

    The number of well completions rose sharply from 116(final) in May to 149(preliminary) in June

    Interesting with 149 wells completed in June they only had a 10,000 bpd increase in production, while last month with 116 wells completed, they had a 30,000+bpd increase.
    Are they completing poorer wells, or is the director just getting posting some confusing numbers?
    Note, there has been some discussion here that the directors, when referring to completions don’t always tally up well.
    Note 2: Summer in normally the time where completions catch up with wells drilled, as trying to complete wells in freezing temperatures, is more challenging and more expensive. If they can’t get in front of the “frac log” in the next few months, there will be no need to drill many wells during the winter.

    • Rune Likvern says:

      Tool,
      ref my chart further up on LTO extraction from Bakken for Slawson. The changes in production comes with several factors.

      • Mike says:

        Please tell us what they are, Rune. It’s very important. I would have said something but the last time I speculated I got overrun with high density frac’ing stuff.

        Below, what is the correlation to increasing GOR and oil prices? I have an idea, but I must have another scotch to understand if it flies or not.

        Mike

        • Rune Likvern says:

          Slawson and some other companies I suspect curtailed some of their LTO extraction in anticipation of soon to arrive higher prices. When higher prices did not materialize the need for cash came over in the driver’s seat.

          To me when I see such a rapid increase in the GOR (Enno’s and FreddyW’s charts shows the average for Bakken) means wells are being pulled much harder as a response to the decline in the oil price.

          Reservoir (rock) management is thrown overboard [sacrificing long term EUR, and it is all good for the well models and their hyperbolic factors] as the need for cash (flow) becomes paramount.

          Gas (expansion) is THE important driver in (oil) source rock.

          • Mike says:

            Rune, exactly, sir. Increasing GOR is a very, very big deal; only people like yourself know how big. These shale folks need the money and they are literally gutting these wells, IMO. Increasing GOR over time is the wart on LTO production that cannot be covered up.

            I think perhaps what we are seeing is the perfect storm with regards to shale oil production in the United States.

            Mike

    • FreddyW says:

      Are they completing poorer wells, or is the director just getting posting some confusing numbers?

      Helm is always posting confusing numbers :). I think it´s better to just ignore them. The number of new wells put on production was 126 in June compared to 139 in May. From Enno´s graph above I see that he has a similar number.

    • Enno Peters says:

      Toolpush, as I mentioned, the number of completions mentioned in the Director’s cut are highly unreliable. Examples:
      Month; Director’s Cut; From the DMR annual statistics
      2014-Jan; 60; 122
      2014-Feb; 70; 155
      2014-Nov; 48; 195

      A lady from the NDIC specifically told me that they are not more than estimates, and pointed to the disclaimer in the Director’s cut.. I do find it surprising that they did no improve this yet, which seems so easy to do.

      Better is to ignore them, and look at the number of wells that produce for the first time instead. Those were about 135 in May, and just over 120 in June. The number of wells spudded in May, June and July was just above 100 per month.

      There seems to be a 2 month lag time between the response of rig count to oil price, so I think it is likely that by September we will start to see the effect of the recent oil price drop.

      Edit: Freddy and I had the same thoughts at the same time..

      • Toolpush says:

        Thanks Enno and Freddy,

        Your number make a lot more sense than the director.

  19. sunnnv says:

    http://www.nytimes.com/2015/08/14/business/breakdown-at-bp-refinery-strains-midwest-gas-prices.html?_r=1

    “A breakdown at a BP refinery outside Chicago is sending jolts across the energy markets of the Midwest and Canada, pushing up gasoline prices even as oil prices over all reached a six-year low. …”

    “The price of Western Canada Select, the benchmark for diluted bitumen from Alberta’s oil sands, sank to roughly $23 a barrel this week — about half the price of an American barrel of crude. ”

    Some more links at:
    http://www.manufacturing.net/news/2015/08/refinery-shutdown-wreaks-havoc-on-midwest-gas-prices

    “…The shutdown could last a month and potentially remove of up 240,000 barrels of crude production per day from the regional market during peak driving season. …”

    So given an oversupply of oil in the Midwest, what’s that doing to Bakken prices/profitability?

  20. Mike says:

    Enno, your second graph is a very stark indication of depletion, i.e. increasing GOR. So if Helms, or whatever his name is, says “production” is going up its not oil, its BOE, at 6:1 gas to oil ratios.

    Another cool slight of hand by the shale oil industry.

    Mike

    • Rune Likvern says:

      About a 30% increase in the GOR since the oil price collapsed.

    • Enno Peters says:

      Thanks for your comments Mike. In my mind, the best way to understand what is going on is to combine data analysis with expert knowledge. This is what Ron has done so well to cultivate here.

    • shallow sand says:

      I have heard that shortly after the Whiting refinery news was announced, every single gas station in Terre Haute, IN, and in a radius of at least 50 miles around it, raised gasoline prices to exactly $2.99 and 9/10.

  21. Toolpush says:

    Enno,

    Only recently the number of new wells spud per rig is going up, probably because better rigs/crews are still working, and because of improved operations due to fewer rigs.

    I suspect most of the rig productivity improvements will have come from pad, aka batch drilling. Where as before most of the drilling was a single well, to hold the lease, and the drilling process was a linear operation. Now the approach is pad or batch drilling. It appears 4 wells at a time is the popular number, where one rig can drill a section, run casing, move to next well, and cement offline. This way drilling tools do not need to be laid out between sections, even the drill bit can stay on if it is still in good condition. Also from a personnel point of view, all the service hands are in place and set up, minimizing any disruption to normal operations, and it becomes a production line process.

  22. AlexS says:

    According to the latest data from Baker Hughes, U.S. oil-directed rigs increased by 2 this week (to 672), while gas rigs declined by 2 to 211.
    The Eagle Ford added 5 oil rigs to 84, Permian basin was flat at 252, and Williston fell 2 to 70.

    U.S. oil rig count: 2014-15 vs. 2008-09 (weeks from the peak)

  23. Rune Likvern says:

    One more.
    The total is the sum of all parts.
    The chart below is for Oxy USA.

    ”US-based Occidental Petroleum could eventually divest its Bakken Shale asset in North Dakota, which “can’t compete” for capital with its growing Permian Basin asset in West Texas and New Mexico, the company’s CEO said Thursday.”
    http://www.platts.com/latest-news/oil/houston/occidental-could-eventually-divest-its-bakken-21444368

    Note this was published at Platts 23 Oct 2014!

    Oxy has not added any producing wells since Mar-15 according to NDIC records.
    Oxy as of now has no rigs drilling in Bakken ND according to NDIC web site.

  24. Enno Peters says:

    A few more comments relating to my graphs:

    Rune noticed very sharply that in the 3rd, and 4th graph (average production by vintage), the tails are not always ending with the same number of data points. I tried to make the graphs as representable of reality as possible, but still leave enough data to give an impression on what seems to be going on. In the 3rd graph (cumulative production by vintage), I show the well profiles for 2008 – 2013 only for the part where all data points are in, e.g. for 2013 only 19 data points are shown ( 6 for this year, 12 for last year, and 1 for the month before the peak). For 2014 I cut the last 6 data points, which means even at the end of the tail at least half a year of data is reflected. For 2015 I didn’t remove any data, as the trend seemed to move very much in line with 2014, and it allowed to see based on the preliminary data where the profile is headed.

    In the 4th graph (average daily production by vintage), except for 2015, I cut several data points at the end of each tail. It would be more accurate to remove also here 11 data points for each vintage well, but the trend is so clear, and the difference between different years so little, that I don’t think much accuracy is won in this way. Still, for those who are following these graphs very closely, these notes may be important.

    Regarding the uncompleted well inventory: I created this as an alternative to the numbers mentioned by Helms, as they so far have not always been so reliable (e.g. y-o-y increase of 25% in well output in May, 2 wells per rig per month, and the completion numbers). The spud and first production data seem very reliable on the other hand. The uncompleted well inventory I derived, is just the maximum possible of wells still to be completed, as the typical lead time of 5 months would remove about half of those. I have noted the 450 wells with status NC. I have no idea about how well these numbers reflect reality. Objectively, the data just shows these numbers, and just last year when almost 200 rigs were working, the 1000 spudded but not completed wells would be a very normal working level. It is also not clear which percentage of these wells are uneconomically to be completed in the current price environment, so probably not all of these well can be expected to be completed within the 1 year deadline. What is clear however is that the maximum number of uncompleted wells has been dropping since Nov, and that the current level is the same as early 2014. Also, if we assume that a normal working level right now would be about 500 wells, the drop from 1250 to 1000 already shows that at least 1/3rd of this “fracklog” has been consumed.

    Regarding the projection: I belief that the projections themselves are pretty accurate, with the stated number of new wells added per month. I used different decline profiles for wells starting production before 2014, and after, and applied these to all ND wells, depending on their age in months. That is not the same as saying that this is what is going to happen. Operators have shown to have quite some influence to change production on a monthly basis by either choking or going all out. I agree with Shallow, Mike, Rune and others that the economics in general are pretty bad, so it is surprising to see that still more than 100 wells were brought online each month, and that still more than 100 per month are being drilled. From a profit and debt point of view, it seems more reasonable to expect a significant slow down in activity. Recent history however has shown that operators may have other considerations as well. Also, as always, a lot will depend on price. But the projections do make clear in my mind that getting above 1.2m bopd will be quite unlikely, as will be a drop soon below 1.0m. I do think that these projections show that Helms, again, is too optimistic in his projection that ND output will stay at 1.2m until end of next year. I don’t have a strong opinion on where it will be instead.

    • Dennis Coyne says:

      Hi Enno,

      Your projections agree with my projections. If prices remain low we might see lower numbers of wells added such as 50 wells per month (maybe lower) in the ND bakken. I do not see how we end up with 3 to 4 Gb from the ND Bakken (Jean Laherrere’s estimate) unless oil prices remain under $50/b forever.

      Below I present a scenario with 50 wells per month added from Nov 2015 to Dec 2035, oil prices gradually increase to $133/b (2015$) by 2020 (about a 20% annual price increase each year from a $53/b oil price in July 2015).

      I also assume that by Dec 2015 the average well productivity of ND Bakken/Three Forks wells begins to decrease at an increasing rate, gradually rising to a 10% annual rate of decrease by Dec 2016. So if the average well produces 204 kb over 5 years in Dec 2015, this productivity will fall to 198 kb (over 5 years) by Dec 2016 and fall by 10% every following year that has 600 new wells added for the year.

      Economically recoverable resources (ERR) from the ND Bakken/Three Forks are 6 Gb through Jan 2040. I think we will produce at least this much oil, though your scenarios (100 wells per month) seem more reasonable and would result in higher output. I also think it is likely that oil resource depletion will result in higher prices than I have used in this scenario. The scenario is a minimum expected output, unless there is a total economic collapse, it could be consistent with a financial crisis on the order of 2008/2009.

      Note that very conservative technically recoverable resource(TRR) estimates were used to develop this scenario based on USGS Bakken Resource assessments. I used the low end of the USGS range (F95 estimate of 8 Gb for the ND bakken/Three Forks) and then reduced this by 1 Gb, so that I have assumed only a 7 Gb ND Bakken/Three Forks TRR.

      The economic assumptions used to develop the ERR use 26.5% royalty and taxes, $14/b transport cost, $12/b OPEX and other costs, with OPEX costs(6$/b initially) assumed to rise by 3% per year as the well ages, the discount rate is 13%/year in nominal terms (assuming a 3% annual inflation rate). Well cost starts at $8.5 million and is assumed to rise to gradually rise to $9.7 million by 2021 (about a 3%/year increase in constant 2015$).

      • Dennis Coyne says:

        An alternative scenario with all the same economic assumptions as above, but with 100 wells per month added initially and then being reduced as shown on the right axis. The higher rate of new well completion increases the rate that the EUR decreases from 3% in the scenario above (for a 7 Gb TRR at 50 new wells per month) to 9% in the scenario presented below. New well EUR5 (5 year) falls from 204 kb in Dec 2015 to 194 kb in Dec 2015, and by 9% every year that 1200 new wells are added (until 2021 in this case), by Dec 2021 new well EUR5 has fallen to 121 kb. In this scenario output falls gradually until 2022 and then rapidly because oil prices are assumed to rise no higher than $133/b (same assumption in both scenarios), the more rapid fall in new well EUR in the second scenario reduces profitability so that the rate of new well additions falls rapidly to 10 per month by Sept 2022.

        • DC, interesting that we have an analysis from a few years ago that is standing up pretty well. Wonder why Laherrere is going high with his estimates? I don’t think he is applying any of the convolution approaches that you have perfected.

          • Dennis Coyne says:

            Hi WHT,

            Jean Laherrere knows far more than me about the oil industry. Perhaps he thinks that the hyperbolic type curves should not be applied to LTO production. Mike seems very suspicious of the fat tails leading to a 320 kb EUR over 25 years, based on his experience in the oil industry.

            Fernando Leanme seems quite competent at oil industry analysis and has not indicated any glaring mistakes in my analysis. I only use the hyperbolic out to a 10%/ annual decline rate and then switch to exponential decline beyond that (after 5 years or so) at 10% per year. I also assume well abandonment at about 7 b/d of output which is pretty conservative.

            I have looked pretty closely at the USGS assessment from 2013 and believe it is sound. Clearly Jean Laherrere disagrees citing in part the use of Monte Carlo approaches by the USGS as being unreliable.

            Another possibility is that Laherrere expects the new well EUR will crash hard as the sweet spots get drilled up. I believe we would need to see the new well EUR decrease at an annual rate of 30% or so to get the URR down to about 4 Gb. Perhaps this is the scenario Laherrere envisions.

            Below is a chart with 100 wells initially and an EUR decrease of 30% in Dec 2016. With the same economic assumptions of my previous scenario we get an ERR of 4.1 Gb.

          • Dennis Coyne says:

            Hi WHT,

            I may have misunderstood. What do you mean by going high? Jean Laherrere is estimating 3 Gb for the North Dakota Bakken/Three Forks which is on the low side in my opinion. So I would say he is going low rather than high, but he no doubt has good reasons. I fully expect that the new well EUR will decrease in the future, but I don’t know when this will begin or how rapid the decrease will be. I have asked the oil industry experts for their opinion on this, but either they do not understand the question or they have no idea what the answer is.

            The question:

            As the sweet spots run out of room for more closely spaced wells that are profitable, what annual rate of decrease in the average new well EUR would you expect?

            My guesses have ranged from 2% to 20% (annual rate of decrease) at a well completion rate of 100 new wells per month. Does that seem reasonable?

            • I meant he was high, like he was on drugs or something 🙂

              Must be ignoring the fat tails.

              • Dennis Coyne says:

                Sorry I asked.

                There is certainly the possibility that the tails are much thinner than I have modelled, which would suggest that the USGS analysis is wrong. As I have said, Laherrere has much less faith in the USGS analysis than I do. In addition,
                Jean Laherrere knows far more about petroleum engineering than I do.

                Often when faced with two expert views which are at odds, I just take the average. In this case that would be a URR of about 7 Gb for the ND Bakken/Three Forks.

                USGS Mean estimate= 11 Gb (TRR)
                Jean Laherrere = 3 Gb (ERR), assume TRR is 4 Gb,

                Average TRR is 7.5 Gb, ERR would be about 6 to 7 Gb if the EIA’s AEO 2015 reference oil price scenario proves correct.

                • Dennis, the issue with fat tails is that even though they are fat, someone could still decide to shut in the wells at a certain rate. This would invalidate the physical model, in favor of a economic model.

                  The model that will truncate the fat-tail to some degree is the Ornstein-Uhlenbeck diffusion model, which is the latest and greatest.

                  I think the truth is somewhere in-between as you say and that is why O-U is a good approach.

  25. shallow sand says:

    Enno. I note that just about 40% of EOG’s 337 non confidential wells in Parshall produced under 2000 barrels of oil in the month of June.

    Are you able to easily create a visual which shows a breakdown of wells by monthly production, for example maybe number of wells below 1000 per month, 1000-2000, etc. For June, 2015.

    It seems from a scan of the data that there are a high percentage of wells under 66 2/3 barrels per day.

    • Enno Peters says:

      Shallow. Not a great visual, but it may answer your question.
      EOG operates 621 wells in ND, of which 339 in the Parshall field. In the below table you can see the number of these wells that produced below a certain level, in June 2015. E.g. 56 wells produced less than 20 bopd.

      Edit: hmm, that came out really ugly, due to auto scaling.

      • shallow sand says:

        Enno. Thanks. Pretty telling in my view. I assume the ones over 200 bopd are all fairly new.

  26. Enno Peters says:

    See here the average well profiles for all Middle Bakken wells in ND since 2007. There has been an improvement in initial production to the extent of about 30.000 barrels since 2008, but after 1 year the monthly production numbers over all years converge. These curves contain most data points, which means that the tails can still wobble a bit, as wells later in the related years increase in age.

    • Enno Peters says:

      And here the same graph for Three Forks wells, starting at 2008.

      There seems to be a small improvement in initial production, but no clear improvement in EUR. The improvement from 2008 to 2011 was pretty large though.

      • Dennis Coyne says:

        Hi Enno,

        By 2012 at 39 months there was not a lot of difference between the middle Bakken (160 kb) and Three Forks wells (150 kb). Very interesting. For 2013 at 28 months there was a larger difference, MB=150 kb, TF=125 kb, and in 2014 at 16 months MB=130 kb vs TF=100 kb, so 2012 seems to be anomolous. At 50 months the MB is about 190 kb vs about 170 kb for the TF, so TF wells going forward may have about 90% of the EUR of the MB average well (based on the data to 50 months).

  27. bbbb

    By Sky Daddy it works. The ten year olds will be amazed I can show THEM something.

    But it takes fourteen keystrokes whereas hitting the cap lock key only takes two.

    Incidentally one of them asked me where gasoline comes from and I told her it is made from oil which in turn comes out of holes in the ground except that it never rains any oil to refill the holes.

    Digesting this info took her about ten seconds including double checking her logic and announce that one day we will have to get along without gasoline.

    I have encountered numerous professors lacking her basic smarts.

    • Ancient Sunshine says:

      She hasn’t been around long enough to be schooled that there are plenty of other places with oil to dig those holes, but the damn greens, gays, atheists and socialists of the World are conspiring to knock America down a few pegs and diminish our non-negotiable way of life.

      I have been reading this blog and TOD long enough to realize I have to go to this trouble:

      /sarc

      • Dennis Coyne says:

        Yep,

        the sarc tag is definitely needed as we might not be familiar with your views. The resource will deplete and become more expensive, as it does substitutes will gradually replace oil and reduce demand. This will limit the amount of oil that can be produced profitably as the reduction in demand due to a combination of a slowing economy and substitution will limit how high oil prices can rise. My guess is the oil price may be limited to the range between $125 and $175/b on the high end, as oil prices get higher society may rapidly transition to electric transportation (trains, light rail, and EVs), then oil prices may fall due to lack of demand.

    • Dennis Coyne says:

      Hi OFM,

      The problem with caps is that they are interpreted as shouting on the internet. So italics or bold are preferred.

      • Bob Nickson says:

        That is generally true, but personally I enjoy Mr. Farmer’s capitalization quite a bit as I shout them out aloud as I read. It kind of livens things up a bit.

  28. Longtimber says:

    Tables and Graphs for O&G Public co’s performance as of May.
    http://www.ogfj.com/articles/print/volume-12/issue-5/departments/ogj150/net-income-for-ogj150-plummets-down-85-yoy-92-from-3q14.html

    Oil&Gas FINANCIAL Journal has a nice Ticker for Public Oil&Gas co’s.
    http://www.ogfj.com/index.html

  29. Ancient Sunshine says:

    A step forward.

    http://www.aol.com/article/2015/08/15/cubans-stunned-by-kerry-speech-but-skeptical-of-change/21223168/

    Maybe one of these days we can help Venezuela climb out of the pit…maybe a sweetheart deal where we guarantee to buy all the oil Venezuela is willing to sell us at a defined premium over an agreed-upon crude oil benchmark, in return for true and substantial democratic reforms, along with agreed-upon environmental standards for the oil production. As long as the Venezuelan government continues to enact open, transparent, democratic governance with appropriate rights for the Venezuelan people, we get a guaranteed supply of oil and they get a guaranteed income stream.

    • Fred Magyar says:

      I think you forgot the /sarc tag…

      • Oskar DiSilvo says:

        Fred,

        Indeed I did not.

        My admittedly far-out idea is scads better than the typical solution involving aircraft carriers, helos, aerial bombardment, snipers, tanks, artillery, and so forth.

        Personally, although my heart goes out to oppressed peoples everywhere, including in Venezuela, I do not think it our (U.S.’s) place/role to fix.

        But, for those folks who get ants in their pants at any thought of dictatorial socialists and who think the U.S. must pay homage to the vaunted Monroe Doctrine, my idea of mutual enlightened self interests/bribery beats the pants off a shooting war any day.

        There are many more levers of national power than a lot of the most simple-minded people think.

        • Fred Magyar says:

          My admittedly far-out idea is scads better than the typical solution involving aircraft carriers, helos, aerial bombardment, snipers, tanks, artillery, and so forth.

          I most certainly agree with that much!

          Personally, although my heart goes out to oppressed peoples everywhere, including in Venezuela, I do not think it our (U.S.’s) place/role to fix.

          The US needs to get its own house in order first and I don’t the US could fix much at this stage even if it wanted to. The global economic system based on oil is the problem and it can’t be, and won’t be the solution going forward. BAU isn’t working any more, it is a dead weight!

          But, for those folks who get ants in their pants at any thought of dictatorial socialists and who think the U.S. must pay homage to the vaunted Monroe Doctrine, my idea of mutual enlightened self interests/bribery beats the pants off a shooting war any day.

          I’m old enough, well traveled enough and have lived in a few countries outside of the US, (BTW, currently trying to set up a business venture in Sao Paulo Brazil), to know that nothing is ever just pure black and white… there are infinite hues of grey! Bribery is a loaded word, I prefer to think of ways to make friends and facilitate business, but call it what you will, it is usually better and cheaper than the consequences of a shooting war.

          There are many more levers of national power than a lot of the most simple-minded people think.

          Unfortunately sometimes the levers of national power get into the hands of some very simple minded people…

          Good luck to the Venezuelans, I wish them well but they need to divest from the oil economy, it will not serve them well in the long term!

        • I look at this subject a little different. Hours after Kerry left the Castro family dictatorship started rounding up youngsters who belong to a dissident group called UNPACU. The report I read said they arrested about 100 after disconnecting their phones so they couldn’t warn each other about the police raids.

          In Havana, same as usual, police and government thugs attacked the Ladies in White as they tried to attend church to pray for their relatives.

          Meanwhile, I heard from an acquaintance in Venezuela whose mother caught tuberculosis, but can’t be treated because there’s no antibiotics.

          I also saw a report leaked from Cuba’s Interior Ministry, warning that Cuban medical personnel being sent to Venezuela are suffering from numerous diseases as several epidemics seem to have taken hold, ranging from influenza to dengue fever to cholera. The epidemics seem to be enhanced by the huge crowds standing in line at markets trying to get food.

          So you see, to me this simply amounts to an effort to inform people about what really goes on, and deny those dictatorships the ability to breathe. Given Maduro’s mindset the better solution to deal with Venezuela is to approve the Keystone XL pipeline, and stop giving preference to Venezuelan heavy oil. Let the Maduro regime fight in the market and we will see how they solve that puzzle.

          Finally, I don’t particularly care for USA involvement in foreign wars. But neither do I support having the USA president smiling at and shaking hands with a butcher like Raul Castro when he really doesn’t have to do it. And the USA really doesn’t have to do anything. Fidel is senile, Raul is old, trying to improve things to have his eldest son Alejandro inherit the job, but Venezuela isn’t the cash cow it used to be, so now he’s hoping for USA agricultural loans and tourism to see if he can scrape by until Alejandro is ready to take over. Alejandro is coordinating the security and spy services and is reported to be a psychopath.

          • Boomer II says:

            Given Maduro’s mindset the better solution to deal with Venezuela is to approve the Keystone XL pipeline, and stop giving preference to Venezuelan heavy oil.

            But there are American property owners who care far more about what goes on their properties than they do about Venezuela. That argument won’t influence them.

            • American property owners whose properties were expropriated aren’t about to get paid. If that were the case we have an interesting issue to consider: many Cuban Americans are US citizens.

              I’d like to quote from the Miami Herald’s pages (article by Oppenheimer)

              Note: here’s info about Berta Soler and the Ladies in White, mentioned in the article

              http://www.europarl.europa.eu/news/en/news-room/content/20130419STO07454/html/Ladies-in-White-Sakharov-prize-is-shield-protecting-our-fight-for-freedom

              Oppenheimer’s comments

              “But Republican critics and many human rights groups say the Obama administration caved in to the Cuban regime, which refuses to participate in diplomatic events attended by Cuban dissidents. In Cuba, the five-decade-old Castro family dictatorship prohibits independent political parties, and brands peaceful opponents as “mercenaries.”

              Some opposition leaders who were invited to the charge d’affairs residence declined to attend.

              “We do not understand how the U.S. administration could accept the conditions of these dictators,” said Antonio Gonzalez Rodiles, one of the dissident leaders who declined the invitation, to the website El Diario de Cuba.

              Bertha Soler, a leader of the Ladies in White who has been arrested more than a dozen times in recent months for staging peaceful protests, told me in a telephone interview that the Obama administration pays lip service to human rights, but keeps a “shameful silence” about ongoing rights abuses in Cuba.

              Since Obama announced the start of normalization talks Dec. 17, there have been more than 3,000 political detentions in Cuba, according to the Cuban Commission for Human Rights and National Reconciliation. ”

              http://www.miamiherald.com/news/local/news-columns-blogs/andres-oppenheimer/article31146758.html#storylink=cpy

              What none of this material explains is the tight relationship between the Venezuelan regime and the Castro dictatorship. The Cuban regime is providing secret police and military control of Venezuela to the Maduro clique.

              • Boomer II says:

                American property owners whose properties were expropriated aren’t about to get paid.

                I don’t get your point. Are you trying to say that because other Americans have lost property, no Americans can be protected from property loss? I don’t think that argument will win many fans.

                • I’m saying that nobody will get paid. That’s the firm Castro dictatorship position. But let’s say they do agree some will get paid.., in that case one would have to assume ALL USA citizens who lost property by expropriation will be entitled to file claims. Or are you going to argue that Cuban Americans gave to go sit in the back of the bus? What’s the matter, you think white folk are superior?

                  • Boomer II says:

                    I’m saying that nobody will get paid.

                    You are not making an argument most people will embrace. You are suggesting that Nebraska landowners who oppose having a pipeline on their property should do so in order to foil Venezuela because Cubans lost property to Castro’s communists decades ago.

                    Do you honestly believe Nebraska farmers care at all about Venezuela or Cuba when their own land is at stake?

                  • What does Nebraska have to do with the Castro family dictatorship and its butchery?

                  • Boomer II says:

                    What does Nebraska have to do with the Castro family dictatorship and its butchery?

                    That’s what I keep asking you. You want the XL pipeline extension to be built so that the US will use Canadian rather than Venezuelan oil. I keep saying that there are some Nebraska landowners who don’t want the pipeline on their property. And then you start talking about property being taken from Cubans.

          • Oskar DiSilvo says:

            I predict changes moving away from the Castro and Maduro criminal regimes in the not too distant future (next 5-7 years). Too much sunshine, too much porosity…neither can credibly pull off a North Korea-like isolation of their people from the outside World.

            • They will if the left wing works hard to give them aid and succor. They, coupled with USA agribusiness, want to keep the commies alive. One characteristic of communism is the sheer incompetence and lack of food production, which forces them to import food. Interestingly, current USA law allows the Cuban regime to buy all the food they want. What the Castros and the agricorps want is the ability to provide soft loans to the dictatorship, all of them backed up by the USA taxpayer. That’s where they screw USA taxpayers.

              • Nick G says:

                I have some sympathy for your argument that the US should not do business with dictators that steal their nation’s resources and oppress their citizens.

                But…wouldn’t that mean immediately ceasing business with Saudi Arabia? A kleptocracy so thorough they’ve even put their family name on the country?

                • Greenbub says:

                  Excellent and well put point.

                • Sure. But Cuba isn’t Saudi Arabia, and the USA doesn’t have three Saudi senators and 6 Saudi congressmen, nor 2 million Saudi Americans and relatives. Nor is Saudi Arabia sitting 90 miles from the USA.

                  USA Middle East policy is largely shaped by the Israel lobby and perceived need to secure oil supplies for client states. It is what it is as a result of lobbying, and evidently neither the USA government nor the USA public gives a hoot for Saudis.

                  Based on the reactions I get from you guys, to you we Cuban Americans and Cubans living under the Castro jackboot are fairly inconsequential. To the American left, we are distasteful. To the rednecks, we are uppity immigrants and a pain in the ass. That’s the immigrant experience, and that’s ok. I got used to being treated like a piece of trash since I was little for this or that reason.

                  But your attitude isn’t really going to stop me, and there are a lot of people like me, who have a really, really personal agenda when it comes to the Castro dictatorship. So we WILL do what we can to lock up any legislation pushed by agribusiness, the cruise ship industry, and American leftists to give aid to the dictatorship.

                  Obama and the other ignorati keep saying the economic sanctions didn’t work. That may be so, but right now Fidel is senile, a mental turnip, Raul is old and getting ready to give up power to his son Alejandro, who happens to be a psychopath. And the dictatorship is seeing it’s cash flow from Venezuela dry up. So this is a critical time for the dictatorship. On the other hand, the USA economy or whatever sees absolutely no impact from the status quo. Which means it is incredibly poor timing for Obama to ask congress to remove sanctions unless the Castro regime ends censorship and agrees to end special privileges for communists.

                  If they do that, we will take them down in due course. and once the communists are out in Cuba the Maduro regime will fold in Venezuela, simply because the Castro machine is what provides him with secret police and military control.

                  • Nick G says:

                    You can take comfort in the fact that the US has treated Castro’s Cuba far more harshly than the average dictatorship.

                    Of, course, Cuba doesn’t have oil…

                  • Stan says:

                    Cuba also nationalized property of U.S. citizens without compensation at rates far higher than the average dictatorship as well.

                  • Nick G says:

                    That’s not a moral argument. That’s an argument from narrow self interest.

                    How fair was the compensation that Saudi Arabia gave for nationalizing Aramco? Look at the harm KSA has done to the US with embargoes and deliberate supply gluts? If we want to retaliate against those who harm us, shouldn’t KSA be first?

                    Finally…have you seen a good, quantitative discussion of US property ownership and Cuban nationalization? I’d be curious…

                  • Boomer II says:

                    We could, in theory, be fighting many countries that have governments we don’t like. We have never done this.

                    The idea that farmers in Nebraska should allow a pipeline they don’t want because it will stop Venezuela oil which is linked to Communist Cuba is so far removed from their self-interests as to be a very hard sell. It also sets up a precedence in terms of property that conservatives themselves aren’t likely to want to see applied in other situations.

                  • Stan says:

                    Nick, I didn’t make a moral argument. Whether driven by self interest or not, it is a clear difference roughly equal in proportion to the response, no? Likewise, fair or not, KSA did “compensate” the U.S. firms during the nationalization of Aramco. In light if this, it is curious that we haven’t seen a discussion of compensation with regard to Cuba.

                  • Nick G says:

                    I didn’t make a moral argument.

                    This discussion started with Fernando, who I believe was making a moral argument.

                    Whether driven by self interest or not, it is a clear difference roughly equal in proportion to the response, no?

                    No. First, we haven’t seen data on the nationalizations. There are a lot of countries that have nationalized the property of their own citizens, as well as those of other countries. How does this compare? For instance, how does it compare to Aramco?

                    2nd, it’s not clear why the US government should care about these nationalizations. What does international law say? What has the US done in other situations? How was this property acquired in the first place? Was it a part of a land nationalization that treated citizens and foreigners the same? We don’t know, and we haven’t seen any detail.

                    fair or not, KSA did “compensate” the U.S. firms during the nationalization of Aramco.

                    The fairness of the compensation is essential to the question. Wikipedia says S. Aramco is the most valuable company on the planet. If Aramco’s foreign owners were paid one penny on the dollar, it’s the same as no compensation. Would that make the nationalization unfair? I don’t know – we’d have to look at the history of the formation of Aramco. But, it looks like an enormous “taking” of foreign property.

                  • The Castro dictatorship confiscated $7 billion worth of US entity owned properties which it stated it would not compensate. In addition, it confiscated a larger amount from Cuban citizens who eventually moved to the USA and became USA citizens.

                    I realize that to many leftoids and rightoids we are subhuman, or have lesser rights. But from a practical standpoint I’m not sure the USA can sit down and work on a compensation for SOME U.S. Citizens and not for others. It will make an interesting case as it moves to the Supreme Court.

                    From a moral standpoint Obama’s move has the APPEARANCE of being eminently immoral, cowardly, and mercenary.

                    The president says nothing has changed, but that’s not really true. Fidel Castro is senile. They try to disguise it with mock appearances. Raul is in his 80’s and trying to set up a power transfer to his son Alejandro, a well known psychopath. Also, there’s a growing movement which seems to be eroding the system from below.

                    What Obama is apparently doing is giving the dictatorship breathing space and an endorsement at a moment when it’s really wobbly.

                    Most of you don’t know Cuba from Ceylon. Try reading this to get a sense for what those who are brave enough to write and get their material out are expressing:

                    http://translatingcuba.com/the-trembling-of-the-shepherds-claudia-cadelo-redux/

                  • Boomer II says:

                    But from a practical standpoint I’m not sure the USA can sit down and work on a compensation for SOME U.S. Citizens and not for others. It will make an interesting case as it moves to the Supreme Court.

                    What is going to move to the Supreme Court?

                    As for compensation for some and not for others, it happens quite frequently because the situations are on a case by case basis. There isn’t, as far as I know, a universal rule that all people in the US (and especially the world) will be compensated and particularly fairly compensated for property taken from them.

                  • Stan says:

                    Nick, politics is the art of the possible. Pennies on the Dollar or not, compensation occurred. The fact that so many harmed directly have passed away probably makes this new movement possible.

          • clueless says:

            Fernando – I am pretty sure that you could produce a birth certificate from Hawaii. If you do, I hope that you run for President.

    • Arceus says:

      I believe China may have already made this deal – minus the democratic reforms and environmental conditions

      • The Chinese must be getting a bit worried. They keep propping up the Maduro regime with cash but the economy keeps tanking and chaos is increasing. The emerging epidemics may signal the beginning of the end. And in that case the Chinese can bend over and kiss their hind ends goodbye. All of the agreements with China violate Venezuelan law.

        • Hi Fernando,

          When it comes to Cuba I am with you all the way in terms of values and sentiments. Whether easing relations NOW will help or hurt is not clear to me. Once information is freely flowing INTO Cuba via more tourism and more commerce it MIGHT result in the Castro regime’s removal sooner rather than later.

          Now here is a thought.

          It is at least possible that Uncle Sam has all along been keeping the heavy oil flowing from Venezuela preferentially to Canadian tar sands oil for the express but unstated purpose of reducing Chinese power and influence in this hemisphere.

          • Information won’t flow MORE via tourism. Cuba gets hundreds of thousands of tourists from Canada, Europe, and Latin America. Tourists are isolated in tourist only hotels, and don’t really bring anything to the picture.

            This is part of the misinformation and propaganda you get from the USA media, which seems to be playing ball with Obama and the multinationals which focus on their particular profits.

            The way I see it the key benefit Obama seeks for the dictatorship is the soft loans and a slight increase in tourism (tourism is somewhat limited by availability of hotel beds and infrastructure, to get that off the ground given their bureaucracy and standards will take many years).

            I don’t want to get too convoluted, but this seems to have started as part of USA efforts to rescue Alan Gross, a USA visitor who was caught by the Cuban secret police distributing cell phones to the Cuban Jewish community. They jailed Gross, and this seems to have impacted the USA Jewish community which began to pressure for a prisoner exchange. But the prisoner exchange had to be covered up with a broader context, so the policy emerged.

            The other reason the Israel lobby seems to be keen on getting Cuba “fixed” is their perceived need for USA to get more diplomatic support when it acts in unpopular ways regarding Israel. They think they will get this support from Latin America, where the Castro dictatorship still has many admirers and supporters.

            I think we just happen to be expendable in the broader picture of USA foreign policy, which is always treating Israel as the paramount concern.

            • Nick G says:

              Or, perhaps oil is the paramount thing, and Israel is a convenient “aircraft carrier on land”.

              After all, the UK knew it was critically dependent on M.E. oil before it issued the Balfour Declaration.

              • Israel is a millstone around the American neck. That “best ally” and “aircraft carrier” bullshit has been used to brainwash Americans for decades. But Israeli soldiers have never joined USA soldiers in any wars. We got more help from El Salvador and Kiribati. They didn’t show up in Korea, Vietnam, Desert Storm, Kosovo, Somalia, Iraq 2003-2010, Afghanistan…never. These affairs have to be looked at objectively. If you do, Israel is a minus. It makes more sense to move them all to California. The idea that a few million Jews can stay in one piece as a Jewish state with privileges for Jews based on religion and ethnicity, after invading and colonizing Muslim territory, is reality stupid.

            • My sympathies lie with both the Israelis and the Cubans.

              Both in my estimation deserve our whole hearted support.

              Now as a practical matter one risks being called an anti Semite or worse for pointing out the power of the Israeli lobby in the USA but the fact is that on a per capita basis they have produced successful politicians and businessmen of all sorts by the ton.

              A lot of these businessmen are in Holly Wood and the mainstream media as well.

              Reality is reality. Cuba IS small potatoes in Washington compared to Israel.

              Hopefully the Cuban people will benefit from a more open relationship with the USA because it seems to be an accomplished fact.

              Maybe tourism will not be the means of lots of free and unfettered information getting into the country but maybe commerce will.

              If there is going to be a lot of commerce then there will be a lot more contact between local Cubans and outsiders.

              My own gut feeling is that the Castro regime is not too much longer for this world.

              I pray that it will fall soon enough that Fernando can go home again.

              • Boomer II says:

                Hopefully the Cuban people will benefit from a more open relationship with the USA because it seems to be an accomplished fact.

                It worked with Vietnam and China. We accomplished more by normalizing relationships with both countries than continuing to treat them as hostile countries.

                • It didn’t work with Vietnam nor China. Both are neofascist capitalist states with serious human rights abuses where workers are treated like garbage.

                  It worked if your vision of the future is a world where an upper elite runs society with an iron fist and the people get to be robots dipped in filth. Hitler would be proud of such a vision.

                  • Boomer II says:

                    It didn’t work with Vietnam nor China. Both are neofascist capitalist states with serious human rights abuses where workers are treated like garbage.

                    Trading with Vietnam is preferable to killing them and destroying their country with napalm and Agent Orange.

                    As for China, the country is better than during the Mao years.

                    You keep wanting foreign policy to be a certain way, but I don’t think you have a solution that will actually work better than what has happened before. How do you plan to transform the world into something you want? Wars haven’t worked. Trade embargoes don’t seem to be all that successful either.

                    Do you want the US to occupy all offending countries? Do you want the UN to become an effective police force?

                    In the US we’ve got our own share of problems we don’t seem to be fixing, especially if you are a young black man.

                  • Boomer II says:

                    I’ve been following US foreign policy and defense since the 1960s. There’s a lot of hawkishness on the right, but we haven’t yet figured out what will work.

                    Their solution is to bomb countries. And when that doesn’t work, they want to drop more bombs. That’s costly both for those on the ground and for our own country.

                    We haven’t “won” a war since WWII. Communism is fading and yes, it is being replaced by elites running the world. What I see happening is their realization that they don’t need much of the world’s population to maintain their lifestyles. So between resource depletion, overpopulation, income inequality, and automation, a lot of people in the world are likely to see a declining quality of life while the elites will amass more control.

                    I don’t see that you have proposed any solutions for that.

                  • Don’t be silly. I’m not advocating bombing Cuba. Establishing diplomatic relations is fine, but removal of economic sanctions should require the dictatorship agree to reimburse the regime victims, and the introduction of reforms to end censorship and human rights abuses.

                  • Boomer II says:

                    Establishing diplomatic relations is fine, but removal of economic sanctions should require the dictatorship agree to reimburse the regime victims, and the introduction of reforms to end censorship and human rights abuses.

                    Do you believe we should refuse to trade with any country that imposes censorship and has human rights abuses?

                    If so, how do you plan to get Congress to do that?

                    I’m not opposed to having the US set high standards for other countries (and our own), but given the state of domestic and international affairs, I am not optimistic that substantial progress will be made.

                    In the push for expanding global trade, we have made countries more dependent upon each other. Now that can be seen as a good thing if you believe global trade makes countries less likely to be ruled by dictators and become more repressive. A bad thing if you believe countries that depend on each other for trade are more likely to overlook each other’s flaws.

                    I’m all for having every country be successful and treat its citizens well. Given that, I am distressed at trends I see in the US, so I don’t have lots of hope that our country will transform the rest of the world.

                  • Nick G says:

                    The thing that puzzles me is: AFAICT you feel that Cuba is being treated less harshly than other dictators. OTOH, AFAIK Cuba has been treated far more harshly, for far longer, than other comparable countries.

                    Many countries have nationalized much larger amounts of US property, including KSA, Mexico, etc., etc. Heck, the US has forgiven Germany, Japan and Italy for attacking and causing untold deaths. The US has even forgiven Vietnam for a more recent war.

                    The US has held Cuba in an embargo for 75 years, while the rest of the world is baffled.

                    You seem to feel that Cuban exiles have been disrespected and ignored, while they seem in reality to have had enormous, disproportionate influence over US policy towards Cuba.

                    ???

                  • Boomer II says:

                    The US has held Cuba in an embargo for 75 years, while the rest of the world is baffled.

                    ???

                    Recent posts from Fernando have clarified a few things for me. His main passion appears to be getting repaid for property taken by the Cubans. So anything that appears to prop up or sustain Cuba works against his cause.

                    The fact that some Nebraska farmers and ranchers don’t want the XL pipeline is less important to him than making it harder for Venezuela to sell oil. And if Venezuela falls, that’s one less Communist-leaning country in the Western Hemisphere.

                    However the rest of the US has a multitude of interests and getting property back to certain former Cubans is pretty far down on the list.

                    I mean, there are people passionate about all sorts of things. But their passions do not necessarily dictate major US policy.

                    Fernando tosses out stuff about Communist threats in the US and around the world. But it’s the same stuff that triggered McCarthyism, unnecessary wars, lots of surveillance, etc. Using those arguments to get property back from Cuba is risky because we have already seen what decades of anti-Communism policy has done in the US.

                    Whipping up the American public about foreign enemies worked during WWII (although not so well if you were a Japanese American), but at other times it seems to encourage a massive military build up and bigotry rather than using resources to improve American lives.

                  • Boomer II says:

                    Also, if an embargo/boycott is the desired way to end Communism in Cuba, wouldn’t we have seen results by now?

                    I think that’s why there is a push to normalize relations with the country now. What we have been doing for decades doesn’t appear to have been all that effective. It has limited resources in Cuba, thus punishing the citizens, but it hasn’t gotten rid of Castro.

                    So why not try something different? It’s pragmatism. Why continue with more of the same when it hasn’t accomplished what it was supposed to do?

                  • islandboy says:

                    I can understand Fernando’s acrimony towards the Castro regime, there are many Jamaicans who sold their property at very low prices in the seventies and fled the island, fearing that the Michael Manley led government might do a Castro on them. At one time there was even a suggestion that wealthy people living in large houses, should have their houses taken from them to provide housing for less well off people (the masses), badly in need of decent housing.

                    Having said that, many of the affected individuals are now dead and one would have to be over 55 to even remember feeling threatened by Manley’s revolutionary rhetoric in the seventies. In the case of Cuba, the revolution was over by 1959 so, I would guess that to experience the extremely strong feelings that Fernando displays, he would have to have been at least ten years old at the time, making him at least 65 now. If he is older the feelings will be stronger.

                    As it stands, Fidel cannot live too much longer, being a frail old man. Raul is not too far behind him. In a few more years they will both be dead as will their 1959 adversaries and Cubans, both those in living in Cuba and those outside, will have no memory of the events surrounding the revolution other than what has been related to them.

                    The softening of the US stance towards Cuba is simply a reflection of the fact that Cuban Americans, with a first hand experience of the revolution, specifically those who lost fortunes at the hands of Castro, are a dying breed. Once they are all gone, their descendants are unlikely to feel quite as strongly as Fernando’s generation.

                    One could take the view that US isolation of Cuba has helped the Castro regime maintain power rather than hindered them. Aesop’s fable of the contest between the sun and the wind, to get a traveler to remove his coat, comes to mind.

                  • Boomer II says:

                    The softening of the US stance towards Cuba is simply a reflection of the fact that Cuban Americans, with a first hand experience of the revolution, specifically those who lost fortunes at the hands of Castro, are a dying breed. Once they are all gone, their descendants are unlikely to feel quite as strongly as Fernando’s generation.

                    I know people who are still pissed off at Jane Fonda for comments she made about Vietnam. They continue to encourage boycotts of her recent films.

                    Jane said some dumb things back then, but she’s not the same Jane these days, plus boycotting her films is not something most people want to bother with.

                    The fact that some people feel strongly about something that happened decades ago does not mean everyone does, especially events that never affected them personally. There are so many potential things to be against that we all focus on what matters to us personally.

        • Nick G says:

          All of the agreements with China violate Venezuelan law.

          Could you expand on that?

          • Venezuelan constitution and law require bid rounds before acreage are awarded, and National Assembly debate and approval before funding agreements are signed. Don’t forget I worked for a large multinational in Venezuela. Most oil company legal departments felt the Chinese were relying on diplomatic muscle to make the Fondo Chino agreements. If the government falls a large chunk of the Chinese debt can be considered illegal. What a new government would do is hard to tell. The Chinese think they got senior debt.

  30. Watcher says:

    There’s been plenty of time now. Why do we only have “typical decline rate” graphs? Should we not be able to know at this point the average decline rate of the field for each year of production?

    Like . . . the decline rate for the average Bakken well in year 1 is 65%. In year 2 this is 40% . . . . that sort of thing. All we ever see is a graph of a typical well. Std deviation would be good, too, showing the effect of either geographic area variance or choke variance.

    We get the occasional quote of decline and then some company shill jumps up and says “well, some wells may do that but OURs blah blah blah.” An average for the field would tell the story and eliminate equivocation.

    • If you want to get really picky the best information you can get would be the hyperbolic curve fit parameters, and the associated equations so you can build your own models. This would have to be tied to a nodal analysis model to try to understand how the hell those wells will behave as they produce higher GOR with lower bottom hole pressures. With that in hand you can sound like a real shale guru.

      • Watcher says:

        But that’s the point. There has been enough time to accumulate data. There’s no need for model.

        The decline rate of the average 1 year old well in the Bakken is XX%/year — doesn’t have to come from a model. Should be able to average all the year 1 wells together for the most recent 12 months. What were they all in month 1 and what were they all month 12.
        Compute avg.

        Then 12-24, etc.

        • shallow sand says:

          Look at Enno’s and Freddy’s comments. I think they have provided the data.

        • A hyperbolic model does a much better fit. It’s not your field, but I’m sure these guys do the fits in two-three hours. But I assume you’ll have to pay for the goodies.

        • Rune Likvern says:

          Watcher, below is the average decline for all Bakken wells started since Jan 08 based on Jun 15 data.
          From month 2 to 12; 61%
          From month 12 to 24; 36%
          From month 24 to 36; 21%
          From month 36 to 48; 18%

          So for a well at 100 in month 2, the flow in month 48 is 16.

          • Watcher says:

            Excellent. That is ALMOST the definitive answer. And “Almost” would only be maybe 5% remaining information desired.

            Specifically, “Almost” in that 2008-2014 is a period of time of improvement, so one would like the average of all 12, 24 etc month old wells, starting backwards from now (or whatever the most recent data would be).

            Probably 2014. What is the decline rate of the year 1 wells 12 months back from most recent data. If it’s still 61% then there is no indication technology improvement is going to do much for EUR, yes?

            And more importantly, the numbers you just gave are compelling. They are the FIELD’s average. They ask a lot of the shills to claim some huge divergence in their particular wells from the average.

            Last point, month 2 to 12 is only 10 months of pressure drop. I can see how it would be harder to do month 1 to 12 or day 1 to month 12 because of what data you can reach, but in general that 61% is probably low for “year 1”. Overall tho, this is compelling information. Hard to dodge quoted field average.

            • Rune Likvern says:

              2014 vintage (not complete) the decline from month 2 to month 12 is 64%.
              Month 2 to month 14 (2014 vintage) decline 69%.

              For ALL from month 2 to month 14 decline 65%.

              • Watcher says:

                Excellent. You understood the point.

                And . . . it’s getting worse.

                Science triumphs.

                • Doug Leighton says:

                  “Science triumphs.” Is this good, bad or something different? Actually, that was a useful exercise you initiated. You made your point.

                  • Watcher says:

                    Science triumphs . . . derisively notes that 4-5 yrs of technology advance is yielding a faster (worse) decline rate.

                    Critical information and I knew Rune or someone would 1) have the data on spreadsheets already and 2) would realize this is important data. Not prediction. Data. He was on top of the matter like white on rice.

            • Dennis Coyne says:

              Hi Watcher,

              The field decline rate will not be the same as the decline rate for a single well. If we assume 120 new wells were added in July 2015 and no new wells are added after July 2015, the field decline peaks at about 35% per year and falls to 14%/year by Oct 2018 and to 10%/year by July 2020, the minimum is reached by Sept 2030 at about 6%/year. After about 2038, decline rates will rise as old wells get shut in (assuming no new drilling) the decline rate rises to 10% by 2041.

              • Dennis Coyne says:

                Revised well profile, 340 kb @30 years, 200 kb at 5 years, other assumptions same as above no wells after July 2015.
                Maximum field decline rate is 38%, falling to 7% by 2030, then rising back to 32% by 2037. As many wells stop producing after 23 years the decline rate rises until reaching 100% in April 2044 and all production stops in May 2044.

                This assumes wells get shut in at output of 6.7 b/d because they are no longer economic, if they produce to lower levels (say 3 b/d) due to high oil prices, then output will continue at low levels slightly longer (maybe 5 to 10 years). Cumulative Bakken/Three Forks output from North Dakota is 3.3 Gb in this scenario.

                I have not taken account of the rising Gas oil ratio (GOR) as I do not know how this affects output. I have the impression this will reduce output so the scenario presented is undoubtedly optimistic.

                If the rising GOR causes well abandonment at an output of 10 b/d for example, field decline rates would be different.

              • Dennis Coyne says:

                Chart with revised field decline

                • Watcher says:

                  How about you assume the data you have. And btw maybe 1 sigma is tiny.

                  • Dennis Coyne says:

                    Hi Watcher,

                    The well profile is based on the data we have.
                    If you want to know the field decline rate ( the rate that the field declines when no new wells are added), only a model will do it.

                    The point that you do not seem to understand is that the field decline is different from the well decline rate. See http://oilpeakclimate.blogspot.com/2014/06/oil-field-models-decline-rates-and.html

                    for an explanation of why this is the case.

                    Perhaps if Fernando or Mike say it you will believe it. The field decline rate will only be 65% if the field has a single well.

                    As far as the decline rate increasing, from an oil companies perspective that is a good thing. The perfect well would produce 300 kb in one month and decline immediately to zero, this is not usually physically possible and in order to maximize output the well’s output needs to be carefully controlled. Pushing output at the beginning is preferred as long as it does not reduce overall output too much, the point is to maximize profits, decline rates are of minor importance from an oil company perspective, profits are the key.

                  • In the name of the Geologist, the Geophysicist, and the Mighty Engineer, I bless what Dennis says.

  31. What the man and woman on the street is hearing about peak oil:

    http://www.usatoday.com/story/money/columnist/2015/08/14/loveless-north-dakota-oil/31733073/

    One thing you can definitely say for USA Today is that they do a good job spreading the business as usual gospel.

    The thing that is so irritating is that they might actually be right about production on ND holding up for the next year or two but for almost entirely wrong reasons.

    • Boomer II says:

      “What we’re observing is U.S. producers are not indicating any decrease in U.S. oil production,” Lynn Helms, the director of the state agency, told reporters Friday. “Even if the price has dropped, they are finding ways to cut costs and to be a lot more efficient with their drilling and completions, and they’ve built up a very large number of non-completed wells.”

      Seems like comments like this give continued justification for low oil prices. Is that a consequence he’s comfortable with?

      • Nick G says:

        He (and everyone around him) almost certainly thinks of his job as primarily facilitating production, not limiting it. He’d be very surprised by the question.

        • Furthermore he would look like a fool if he were to execute an abrupt change of course in his predictions. The governor would be VERY pissed and very apt to use him as a scapegoat to deflect some political flack aimed at him. Ditto a bunch of bankers and other local politicians.

          In LH’s situation if you know what is good for you ( continuing to collect your check and bennies at least until you can find a new comparable position ) you downplay bad news and break it as gently and as slowly as possible and try like hell to stay on the good side of the executive and legislative bodies which have been operating based on your rosy reports.

          He is in little danger of actually getting shot- at least LITERALLY shot. Otherwise- he is in hot stinky DOO DOO right up to his nose.

          It is ironic that the DOO DOO is in the form of an excess supply of the oil which put his little bureaucratic kingdom into the catbird seat. Now he is in the hot seat politically.

  32. Oskar DiSilvo says:

    Does anybody have recommendations for modern adult tricycles?

    Such as: Terratrike, Cattrike, ICE, etc?

    The application would be daily commuting, ~ 12 miles each way, moderate grades, paved streets.

    • TonyPDX says:

      Test ride all of them. I like Catrike: not really high tech, but a very serviceable, solid trike. There is a range of models for riders of different needs (personally, I like the 559, but that’s just me). If you would like a lower gear, your dealer could install the Wolf Tooth cog on the cassette for serious hill climbing. For those who don’t know, the main drawback of recumbents ( trikes and bicycles) is that you can’t stand up to pedal when going uphill.

      • wimbi says:

        I have and like both territrike and greenspeed. Greenspeed has rear derailleur far too close to ground for anything but nice flat pavement, but there is exceptionally comfortable.

        Neither one has a gear low enough for this weak old geezer in hilly country.

        I have had great fun this summer putting my auto-infinitely variable transmission on both of these. This trans eliminates any worry about hill climb since it goes down and down in gear ratio, all the way to zero at very high wheel torque. There is never any feel for a need to stand on the pedals, since there is a good impedance match at all ratios.

        Of course you want to see details. My business son is paranoid about people stealing his opportunity before he gets his money out of it— streng verboten to give out any detail.

        I have to agree with his argument that as soon as we put out a product, we and anybody else could start cranking out improvements made obvious by actual road experience.

        I myself don’t like patents-my preference- toss out the ideas, which after all are dirt cheap to think up, and the people putting out the best embodiment deserve the rewards.

        .

        • Fred Magyar says:

          Hey Wimbi, can’t wait to try one of your auto-infinitely variable transmissions!
          Maybe when they are ready for prime time I can start installing them on my bamboo Brazilian bike frames…

        • TonyPDX says:

          Similar to the NuVinci hub?

          If I could afford it, I’d have a Rohloff hub on at least one bike. They are incredible.

          My wife (Mrs TonyPDX) just couldn’t deal with derailleur gearing. For the past few years she has been riding an e-bike with an eight speed internal gear hub. It has been a good choice for her. Not having a car, we do most of our errands by bike.

          • wimbi says:

            I hate derailleurs. They are fine when right, but get not right too easily and then do nasty things like jumping the chain during a long hot hill climb.

            That’s why I thought up my IVT, which has no relationship whatsoever to a NuVinci. Mine has a very wide gear range, and is efficient, light, rugged and cheap. So it says here. Road tests will tell the truth.

            The Bike Friday cargo bike is great for commuting. Has huge load carrying ability, and comes with whatever gear set you may want.

            My son got one for me to fit with my transmission, which fits beautifully in the same place as the derailleur.

            • TonyPDX says:

              I hope to see your hub in production! While I like the notion of the NuVinci hub, for less money you can buy a Shimano 8 speed with about the same overall range. As far as cargo bikes, we both use trailers. Over 90% of time, my BOB trailer (with a Rubbermaid bin) will suffice. With a pannier or two, the vast majority of shopping trips are easily accomplished. My larger trailer is hauled out for lumber, sacks of fertilizer, community “move-by-bike” events, etc.

              Growing up in Southern California, I always had this nagging suspicion that, maybe, we didn’t need to drive everywhere as everyone said that we must do. I really enjoy seeing so many young people, young families (at least here in Portland) doing just fine via pedal power.

              • wimbi says:

                My son is in Portland too (“bike capital of USA”), and is thinking of putting out that transmission as a drop-in replacement for the standard things.

                He likes Bike Friday and might do it first on that.

                My problem- sure, can crawl up a really steep hill ok, but can’t keep balance–wham!

                So, trike or outrigger. Or little electric motor- probably best.

                • TonyinPDX says:

                  How cool! I will look for your son’s invention. I assume that he is a reader of BikePortland.org. If your son is involved in the bike community rides and events, I’m sure that we have crossed paths! Will he be going to the SE Parkways Ride on the 23rd?

                  I like Bike Friday a lot. My wife and I ended up with a pair of Bromptons, though. Not my main “ride”, but I sure like it.

    • Oskar DiSilvo says:

      Thank you all for your comments. My city seems to only have one bike shop that carries trikes, and perhaps only 2-3 brands, and likely a limited selection of those. I am 50, not in the best shape, and some low gear ranges would be a big plus to ‘get over the hump’.

      Are there any mass-produced e-trikes? A little assist from some trons at the right times and places would be a welcome capability.

      • Bob Nickson says:

        Oskar, the Rolls Royce of electric trikes is the http://outriderusa.com/

        You could probably buy a used Nissan Leaf for less money, but the Outrider would be a lot more fun.

        • Oskar DiSilvo says:

          Wow, looks like the Tesla of three-wheeled electric bikes!

          Too rich for my blood I’m afraid.

      • Techsan says:

        There are a lot of electric trikes on the market, starting around $1500. I don’t know that market, but a Google search brings up a lot of them.

        I have electric bikes (Tidalforce M750X, it’s a shame they are no longer made) and can recommend them. An electric is going to be hard to pedal in non-electric mode; helping the electric drive by pedaling some is probably a good way to start getting exercise.

        • BEWARE any high tech mechanical product that is manufactured in small quantities by small manufacturers unless money is a minor consideration.

          MOST of the companies manufacturing such items as electric trikes are SURE to go out of business and keeping one of them running very long is apt to be a chancy undertaking indeed.

          If you are willing to consider a compromise involving an internal combustion engine then a Japanese make fifty cc scooter is probably the cheapest possible satisfactory option if you can ride on two wheels.

          You can get a brand new Honda for around two grand that is almost for dead sure to last twenty to forty thousand trouble free miles. It will get a hundred mpg flat out – thirty to forty mph – and if you ride it at BICYCLE speeds it will get a hundred and fifty. Very quiet , EXTREMELY dependable.

          Probably cheaper to maintain than most electric bikes.

          Recently I am seeing some no name fifty cc trikes on local roads, imported mostly from China. They are very pretty but extremely unreliable.

          Chinese scooters will be ok once you can get a well known, advertised name brand at a franchised dealership with a real service department and real mechanics. That time is not yet.

          Speaking from the perspective of a person who has tried to fix some Chinese scooters, I would rather have ONE new Honda than SIX new Chinese scooters with no name brand names on them. The one Honda (Yamaha, Suzuki etc also ok) will outlast all six given that getting parts for them SO FAR at least has proven to be just about impossible.Break downs are the rule rather than the exception.

          • wimbi says:

            Bikes are a different kind of critter than scooters. Scooters are what you say, hard to get parts for if out of production. But I don’t see anything on my one-off Bike Friday that I could not get fixed easily at the local bike shop. Steel frames are easy to repair, and gear sets are just a generic item available in great variety for any bike at all. Ditto with brakes.

            As for electric motors, I put one right out of McMaster-Carr on my trike, and it works just fine. I could get a replacement in two days.

            In Africa, I saw villagers making serviceable bikes out of a bunch of random bits and pieces, welded with a hammer over a charcoal fire.

            Then there’s the religion aspect. A lot of true believing bike types consider it a deep sin to burn any ff at all, even at 150mpg.

            • Nick G says:

              A lot of true believing bike types consider it a deep sin to burn any ff at all, even at 150mpg.

              I can understand that. Do they feel better about electrics?

              • wimbi says:

                The ones I know think of solar charged ev bikes as the solution to all the sins of mankind. and, who knows, womankind too.

      • Stephen Hren says:

        Check out Organic Transit’s ELF

  33. MMercury says:

    This sounds pie in the sky getting shale costs down to 20 per barrell but who knows?
    http://www.manhattan-institute.org/pdf/eper_16.pdf

    • sunnnv says:

      ““Shale 1.0,” was sparked not by high prices—it began when prices were at today’s low levels—but by the invention of new technologies.”

      Mills is too clueless to get that “today’s low levels” were considered sky high in 2004/2005.
      And that fracking is decades old.

      Tripling the frack proppant only adds 2% cost to the well? Dream on.
      An extra 5,000 tons at $100/ton delivered (cheap price!) is a half million dollars, or 5% of a $10 million dollar well (old cost), and more of the newer 7 to 8 million dollar wells.
      Don’t worry though, big data will solve all. That, and high-powered lasers. /sarc

      If you look at figure 4 in Rune’s
      http://fractionalflow.com/2014/10/19/world-crude-oil-production-and-the-oil-price/

      you’ll see that LTO didn’t really take off until the $100/bbl prices of 2010/2011.

      Mills is co-author of:
      The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy
      in which they claim that energy price doesn’t matter very much.
      (the reprint was in 2006 – before oil spiked to $147 and destroyed the world’s economy).

      I agree with a one-star reviewer on Amazon: “insane and sad”.

      I note a 5 star reviewer glowing about abiotic oil.

    • I know. The author is writing about a subject he knows very little about.

  34. shallow sand says:

    Above there is good discussion about gas to oil ratio increasing in ND.

    It also is increasing in KS. I would note that KS is a totally different situation with the state having the vast majority of wells as stripper and having a large, mature and declining gas field in Hugoton.

    Here are the numbers.

    Statewide oil production 2014: 49,512,238. 135,650 per day

    Statewide oil production through April, 2015: 15,930,166 132,751 per day

    Statewide gas production 2014: 288,081,814. 789,265 per day

    Statewide gas production through April, 2015: 101,922,567. 849,355 per day

    SD oil production 2014: 3,332,591. 9,130 per day

    SD oil production through April, 2015: 1,188,431. 9,904 per day

    SD gas production 2014: 27,447,303. 75,198 per day.

    SD gas production through April, 2015: 11,196,347. 93,303 per day.

    I haven’t drilled down further, nor do I know anything about the geology. Just wondering if maybe Sand ridge is doing the same thing with their production, especially given their dire financial situation.

    • shallow sand says:

      I do note another thing re KS. The Hugoton gas area, which has had declining gas production every year since 1995, is up on a daily production basis from 2014 to 2015.

      Linn Energy is the largest gas producer in the Hugoton gas area, having acquired from ExxonMobil and others. Their daily gas production appears to be up quite a bit from 2014 to 2015. Like Sand ridge, they are also greatly distressed financially.

    • Mike says:

      Shallow:

      When you are in a pickle there are two things that don’t work and two things that do:

      Hoping for a miracle (100 dollar oil and 8 dollar gas) does not work, nor does borrowing more money to “drill” your way out of trouble.

      The two things that do work are cutting costs and increasing production.

      Mike

      • You can also try selling an undeveloped property to a silicon type from Austin. Dress like Jed Clampett, put a bit of oil on the ground, and tell him you found it shootin’ at varmints.

        • Techsan says:

          We silicon types from Austin are much smarter (and less gullible) than Fernando seems to think. I run my cars on silicon (PV), much more efficient than that oily stuff.

    • Doug Leighton says:

      Shallow,

      With utmost respect, please include units with your numbers. I greatly appreciate your input on Ron’s Blog, and maybe it’s just me being a fuddy old man, and perhaps it’s a result of spending many decades working with numbers, but it upsets me seeing so many numbers without units attached.

      Doug

      • shallow sand says:

        Doug, sorry about that.

        In the Kansas post above, oil is in barrels and gas is mcf

        Don’t know why I left them off. I’d go back in and correct, but an hour has passed.

  35. Alexander Ac says:

    What do people here think about this comment from Dave Cohen?

    You probably don’t know this, but years ago I was affiliated with the peak oil people. I wrote a weekly column for ASPO-USA for a couple of years, and attended (at least) 3 of their annual conferences. I started out at The Oil Drum (now defunct).

    Well, the peak oil people were wrong, and I was wrong, though we might prefer the term “premature” because the oil supply will not rise forever.

    As I came to grips with my error later, I realized I’d been barking up the wrong tree. As Jim said, the timing of these catastrophic events remains uncertain. If you try to forecast that kind of stuff, you will always be wrong unless you get lucky, which is very unlikely.

    But I was barking up the wrong tree in a deeper sense too. I had underestimated human technological cleverness, which is a more profound error. In fact, I am still surprised that U.S. shale oil production is maintaining despite these falling oil prices. Shale operators were able to make big leaps in the efficiency of production, which is a remarkable achievement.

    So in the end I was wrong about Human Nature. If you have read the Flatland essays or DOTE itself for some time now, you will notice that this blog is about how humans characteristically behave. It is not about making doomer predictions about this disaster or that one.

    And of course when doomers do make those “doomed” predictions, they are simply illustrating the human nature I have described.

    http://www.declineoftheempire.com/2015/08/a-global-minsky-moment-1.html

    Best,

    Alex

    • All that cleverness wouldn’t do a hoot for production if prices had stayed like they were in the 1990’s. What enables all those “smart” technologies is higher prices. Back in the early 1990’s some of us saw that and argued we needed to look for lots of stranded molecules and wait for prices to enable and fine tune technology we could use to get those molecules to market. But if you look at what we do today ALL of it was figured out many years before. We improved because we could do it, observe results, repeat with a slight improvement.

      The only significant improvements I’ve noticed are SAGD, CHOPs, and LNG tanker load cells. And even those are variations of older ideas.

      • DCB says:

        Oil production went up @$100+ per barrel and also the debt created to keep the economy going to afford the $100+ oil.

        Divide debt added per year by barrels of oil consumed,DPB. Globally it’s about $100 per barrel,US is about $200.

        Where would US production be if it weren’t for the $200 DPB?

        And that’s just national debt added, not private.

    • Glenn Stehle says:

      I had underestimated human technological cleverness, which is a more profound error. In fact, I am still surprised that U.S. shale oil production is maintaining despite these falling oil prices. Shale operators were able to make big leaps in the efficiency of production, which is a remarkable achievement.

      It sounds like something right straight out of Rex Tillerson’s future oil and gas Shangri-La: “The Outlook for Energy: A View to 2040.”
      http://corporate.exxonmobil.com/en/energy/energy-outlook

      Nevertheless, time alone will tell. As the wicked witch said: “All in good time, my little pretty. All in good time.”

    • Anon says:

      The problem is that shale production *isn’t* sustainable. At least not at prices that make sense for the larger economy. It’s a Wall Street-funded illusion (most frackers were losing money at $100) with a vicious treadmill problem.

      The stuff about how the frackers are surviving just fine at lower prices is also Wall Street fiction. Bunch of hedges and short-term accounting tricks that were never meant to last this long. This fall will be a reckoning for these Ponzi economics. The whole enterprise does not make money from operations.

  36. Doug Leighton says:

    Hi Alex,

    “If you try to forecast that kind of stuff, you will always be wrong unless you get lucky, which is very unlikely.”
    I’m no expert though I worked in exploration for 35 odd years and certainly agree with the unpredictable part of his argument: too many variables floating around. That said, depletion marches on and the current low oil and gas prices will likely just speed up the depletion (and global warming) part of the equation.

    • Dennis Coyne says:

      Hi Doug,

      Low prices may increase the amount of energy consumed, but they will not last. Depletion will reduce the rate that energy can be produced and prices will rise. When that happens the rate that fossil energy is consumed will be reduced. As some have pointed out in the past the solution to low prices is low prices.

      • Doug Leighton says:

        Dennis,

        “Low prices may increase the amount of energy consumed.” Actually, low prices increase the rate that energy is consumed (increasing depletion rates). The net result is that more energy is consumed while decreasing the speed with which alternatives are incorporated into the system. This is a big problem (possibly short term) for a planet trying to shift to cleaner energy sources.

        • Nick G says:

          But, that delay is exactly what the Saudi’s want.

          If importers were smart, they’d take this opportunity to transfer the profits from high prices from exporters to importers: raise fuel taxes, and keep the price high for consumers to maintain the pressure to transition away from oil.

        • Dennis Coyne says:

          Hi Doug,

          Correct, I should have said rate rather than amount. Also correct that depletion rate increases as the rate of consumption increases and low oil prices will make renewable energy less competitive.

          My point is that as resources deplete more quickly and cause oil to become more scarce, oil prices will rise. There will only be a problem (of high oil depletion and low build-out of renewable energy) if oil prices never rise, that scenario seems highly unlikely to me.

          Also, if there is an economic crisis, the rate that oil is consumed will be reduced as the rate of oil consumption correlates much better with World GDP than with World oil prices, and as before less renewable energy projects will be built. When such an economic crisis will occur is not predictable.

          Problems are very likely, but I think they can be overcome once the problem of energy resource depletion is widely recognized.

      • TechGuy says:

        http://www.cnbc.com/2015/07/10/global-oil-demand-to-slow-in-2016-iea.html
        Global oil demand will slow in 2016, the International Energy Agency (IEA) said in its latest monthly report, as it warned that the rebalancing of supply and demand in oil markets “has yet to run its course.”

        Oil prices are falling because of declining global demand. Its not just the price of Oil had has collapsed, but many commodities, Copper, iron Ore, and even Coal. I believe this is largely to caused by an economic contraction in China, but also contributed to a weakening economy in the US and EU. US retail sales have been declining during almst all of 2015.

        The issue with collapsing oil prices is that it also means a collapse in CapEx. Sooner or later depletion will outstrip declines in demand. Since many large scale new oil projects take 5 to 7 years to complete its likely to send oil prices soaring again, creating huge price spikes, that later results in demand destruction. Oil CapEx won’t restart until prices recover, but it will take considerable time before CapEx can be turned into real production increases. Thus triggering price spikes and likely demand destruction.

        The global economy is very weak and buried in debt. It won’t take much to send the global economy into a tailspin that may not be recoverable.

        Odd favor another significant market retraction this fall. This will likely send energy prices even lower, and cause a stampede for Bankruptcies in the energy industry. When the dust settles, and depletion kicks up prices again, there will likely be fewer energy companies and fewer investors willing to loan money to drillers.

        • islandboy says:

          I’m beginning to think of Watcher when I read posts like the above. If all that stands between a collapse of the world economy and the avoidance of collapse is some QE, what is to stop that from becoming the accepted practice? So far it seems the huge amounts of QE that have occurred in the US have not made it on to main street yet and have not yet triggered the inflation that some people feared.

          Actually, that might not be so true according to the stories we are hearing around here for the cost of certain (recreational) services! In my own experience, an airline ticket from Jamaica to South Florida does not cost any less now than it did in November of last year, when oil prices were 50% higher! When I think of what I paid for the same ticket a year ago, the reduction in the price of oil has not been passed on to airline customers, suggesting that demand was rather weaker back then than it is now. Maybe the way QE money has made it into the economy is through all this stupid (desperate?) money that has poured into the LTO business. If QE had not occurred would any of the money that is currently financing shale operations have been available? All those truck trips, rigs and workers in ND must have injected a fair amount of liquidity into the US economy.

          The trick will be to do QE in a way that averts collapse and transitions away from a FF based economy at the same time. Maybe generous tax breaks and/or subsidies for the purchase of EVs and renewable energy might be one way. Massive government spending on oil free transport infrastructure (electrified light rail/trams) might be another. Who knows? It seems the previous round of QE has been blown on one more puff on the FF joint. Hope the high was worth it!

          • Aws. says:

            QE was the second best option. Bernanke and other world central bank heads would have preferred that the political leadership in their respective countries had stepped up and invested in infrastructure (financed with very low interest rates). Instead Boehner (and the Tea baggers), Cameron in the U.K., Harper in Canada, and Merkel in Europe (the chancellor of Europe) chose austerity.
            It was, and is, a failure in leadership of those with legislative power that has us in the present predicament, not the likes of Bernanke or Carney.

            • Nick G says:

              Not exactly a failure. Rather, a capitulation to the wealthy of the world, who would prefer to strangle government, rather than allow it to expand with the necessary infrastructural and other stimulus spending.

            • SAWDUST says:

              Yeah China did investing in infrastructure on a massive scale. Don’t think it worked too well. Matter of fact the whole world is paying for it now.

              First thing you need to understand is there was never any way out of the present and on going predicament. You can’t spend your way to prosperity by issuing more debt and using more resources in a world with limited resources. Politicians on either side can’t fix this no matter what they say or do. It don’t matter what actions or legislations they pass they can’t fix it.

              Central Banks have only bought us a short amount of time before total global financial collapse. Which will be followed by a population collapse to more sustainable levels. There was never a way out that the leaders of the world could have taken to avoid present predicament. We just reached the limit of what our resources would provide us.

              • Nick G says:

                Which resource limits are you thinking of ?

                • SAWDUST says:

                  Top of the list is a financial resource call debt which has clearly reached it’s limits. But also the limits of all our natural resources as well. You can be at the limit of what resources can provide and still have a lot of resources left.

                  Once the limit of debt and natural resources is hit your in a zero growth world and there is nothing you can do to change it. Collapse will happen fairly quick now.

                  • Nick G says:

                    Be specific. Which natural resources have hit their limits?

                  • SAWDUST says:

                    Nick,

                    I know you believe that we can just kick the oil habit and switch everything to electric and we will all be ok and be better off for doing so.

                    Well if you live in the US and there is no longer a petrodollar since oil is no longer used then your going to be living in a third world country.

                    Electricity is nice but it don’t make our life what it is today and what life has been for the last 100-150 years or so. Only oil and the dollars connection to oil has allowed the abundance we have experienced.

                    Thats all coming to an end. More electric stuff is not going to change anything. Though more electric stuff is the future.

                    If resources were currently available in sufficient amounts to support growth and all the debt we wouldn’t even be having a conversation cause there wouldn’t be any issues. Growth would be everywhere and life would be good for everyone.

                  • islandboy says:

                    Rather than watch millions being pissed away on this LTO fiasco, I would prefer to see it spent on R&D in renewable energy technology or oil free transport options or energy efficiency retrofits. Unfortunately for me, the people pissing away the millions do not give a rat’s ass what this island boy would prefer they did with their money!

                    Incidentally, how can you say debt has “clearly reached it’s limits”, with the amount of debt that continues to be racked up by the LTO Ponzi scam?

                  • Nick G says:

                    if you live in the US and there is no longer a petrodollar since oil is no longer used then your going to be living in a third world country.

                    Could you expand on that, and clarify the logical steps in that argument?

                    Electricity is nice but it don’t make our life what it is today and what life has been for the last 100-150 years or so

                    I’m not quite sure what you mean. An EV won’t take you to work? A train won’t take freight to market? A truck with swappable batteries won’t do the same? A heat pump won’t heat and cool your house?

                    If resources were currently available in sufficient… Growth would be everywhere

                    Have you looked at historical growth rates, versus current ones? Could you show us the evidence that economic growth has stopped?

              • SW says:

                China only got half of the equation. They did the infrastructure spending but they never moved beyond the kleptocracy to create a true consumer based economy. They tried to do that through the freaking stock market! Step right up! Everyone’s a winner! Insane. No decent social safety net in a former socialist country! Crazy.

  37. ezrydermike says:

    Renewable Portfolio Standard (RPS)

    Renewable energy is as cost-effective as fossil fuels and produces much less pollution. According to the International Renewable Energy Agency, renewable power generation costs in 2014 were either as cheap or cheaper than coal, oil, and gas-fired power plants—even without financial support and despite drops in oil prices. Solar-powered energy has had the largest cost decline, with solar PV (rooftop solar) being 75% less expensive than it was in 2009.

    Fifteen years ago, California enacted the nation’s first law requiring energy companies to buy 20% of their power from renewable sources. Prior to this mandate, renewable energy comprised less than 8% of the overall electrical mix in the state. Within 5 years of implementation, most energy companies were close to, or had purchased under contract, enough power to meet or exceed 20% RPS.

    In 2011, Governor Brown signed legislation to increase RPS to 33% by the year 2020 [SB 2-1X chapter 1 Statutes of 2011]. Currently, most energy utilities have bought or have built enough energy resources to meet the 33% RPS before the target year. Also, according to numerous studies, California’s RPS standard has created hundreds of thousands of new jobs, millions of new investment and tax dollars, and significant clean air and climate benefits.

    This legislation increases the RPS to 50% by the year 2030.

    For a description of one pathway to achieve the 50% RPS please see the following fact sheet issued by the California Energy Commission.

    Reduction in Petroleum Use
    According to the California Air Resources Board (CARB), production, refining, and the use of petroleum accounts for nearly half of greenhouse gas (GHG) emissions, 80% of smog-forming pollution, and over 95% of cancer-causing diesel particulate matter. CARB also notes that oil dependence costs the state $33-55 billion annually, and that reducing petroleum use and improving vehicle efficiency will cut costs and improve California’s economic productivity and competitiveness.

    Over the last two decades, in the effort to improve air quality, California has made cars vastly more efficient and less consuming of petroleum fuels. Using less petroleum in transportation fuels saves money, creates jobs, and reduces pollution. Over 100,000 miles, a 40 mpg car saves $16,668 in fuel costs compared to a 15 mpg car over 100,000 miles (assuming $4/gallon fuel costs).

    This bill seeks to reduce petroleum use by 50% by the year 2030. In a CARB analysis, one pathway towards this goal could include reducing growth in vehicle-miles traveled to 4%; increasing on-road fuel efficiency of cars to 35 mpg and heavy-duty trucks to 7 mpg; and at least doubling the use of alternative fuels such as biofuels, electricity, hydrogen, and renewable natural gas. One pathway to achieve this goal can be found on the ARB Website.

    http://focus.senate.ca.gov/sites/focus.senate.ca.gov/files/climate/505050.html

    http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB350

    • Glenn Stehle says:

      Renewable energy is as cost-effective as fossil fuels….

      I don’t know who’s got the best BS artists, the carbon utopians or the green utopians

      After Saudi Arabia reaches peak conventional oil, though, the greens might have a point, and renewable energy may very well be as cost-effective as fossil fuels.

    • ezrydermike says:

      International Renewable Energy Agency

      http://www.irena.org/home/index.aspx?PriMenuID=12&mnu=Pri

    • ezrydermike says:

      Working at IBM alongside some of the computer giant’s most advanced systems, Hamann and his team seek a breakthrough in cloud-cover forecasting. They’re aiming to help ease the introduction of solar electricity into the nation’s major power grids, as solar-generated power is increasingly being loaded onto the grid, propelled by government mandates and solar-technology price declines.

      http://www.latimes.com/business/la-fi-0816-cutting-edge-solar-20150816-story.html

    • ezrydermike says:

      Google’s Project Sunroof.

      https://www.google.com/get/sunroof/about/

    • I wish we had an economist posting comments here more often.I often ridicule the profession but economists do actually know a hell of a lot and a hell of a lot of what we generally take for granted on the basis of common sense or experience was first figured out by economists.

      Given that we know the price of oil is extremely inelastic ( meaning a small increase or decrease in production can result in a major drop or increase in the price of it ) the fact that we have mandated fuel economy standards might actually be the one key factor that has kept oil at least somewhat affordable for the last fifteen or twenty years and especially for the last ten years.

      I can’t remember where but I have recently seen it claimed that mandated fuel economy standards are saving us as much as eight million barrels of oil A DAY.

      The ever higher price of oil over the last few decades resulted in electricity generation being switched over almost entirely to cheaper coal and gas, except in a couple of Middle Eastern countries.

      Given the extreme price inelasticity of oil, I am wondering if getting plug in hybrid and pure electric car production up to just one or two percent of new vehicle sales won’t have a measurable and meaningful impact on the price of oil.

      This effect could actually turn out to be substantially larger in money terms, meaning money saved by the retail oil customer, than the subsidies that have been paid out to help get the electric car industry up and running.

      Given that a LEAF uses no gasoline at all and a VOLT usually uses less than a third as much as a comparable conventional car, a million new ones hitting the road ( including other makes and models of electrics and plug ins) would result in saving maybe ten million barrels of gasoline and or diesel on annually. That wouldn’t amount to much in terms of ninety million barrels a day for the first million of these cars , but a million new ones every year would soon add up to enough to enough to matter. Keep in mind that these cars will all be new and will last a long time. After a decade they could save us collectively a billion barrels or more of oil annually if they become very popular and sales increase fast.

      My gut feeling is that oil prices will spike within the next few years just as the pure electrics and plug ins are really first coming into their own in terms of price and acceptance on the part of the general public.

      A Leaf will probably save its owner at least ten thousand bucks in gasoline alone over a hundred thousand miles and ten years even after allowing for the cost of electricity to keep it charged up.

      If gasoline goes up to four or five bucks, or more , and stays up , the savings could be closer to twenty thousand than ten.

      Twenty bucks a week, a thousand a year,doesn’t buy a whole lot of gasoline even at two fifty per gallon.

      A lot of people are going to figure out that they can get half or more of the juice needed to keep an electric car charged from a personal home scale pv system. Plenty of people are retired or work evenings or nights and will thus have daylight to burn charging up their electric.

      Savvy employers and stores will install charging stations – and a lot of them will be solar powered when the sun is shining bright.

      There will be coin or card operated charging stations at just about any big store or restaurant eventually, once electrics become very popular. Nice places such as high dollar restaurants will probably provide complimentary charging while you are spending big bucks inside.

      • Stan says:

        Oil demand is only inelastic in the short term. It is extremely elastic in the long term. The only issue with peak oil is the rate of decline.

  38. A question for anybody who knows:

    When we talk about storing energy in thermal mass we talk about storing either heat or the LACK of heat, the best short handy term I have heard so far being ” COOLTH” which I detest and is not widely used in any case.

    So the question is a simple one.

    Is there a readily understood shorthand term, widely known to non professionals , that covers stored heat AND OR stored ” cold” as for instance in the form of heated or chilled concrete?

    Thermal mass is not quite the answer as it indicates the medium rather than the energy itself.

    • Doug Leighton says:

      Do you mean heat sink and cold sink? If so Google Heat Engine.

      • Thanks heat sink and cold sink are ok if you understand from context what is meant -storage- but not ideal- because the term “sink” among semi knowledgeable such as yours truly laymen and a lot of trades people implies getting rid of heat rather than storing it.

        I am wondering if there is an accepted short hand term which I have not heard which is less ambiguous.

        For example some wiring circuits I have worked on have some small masses of lead solder or copper that are there solely for the purpose of absorbing excess heat and dissipating it into the ambient air.

        It seems likely to me that as time passes the storage of both heat and ” coolth” will be very common at the residential and small business level using a thermal mass with embedded wiring or plumbing and air passages. Heating it could be accomplished very using nothing more than high resistance wire and any available wind or solar or other low cost off peak power.. Cooling is going to be more expensive- that will require some sort of refrigeration system.

        Some years ago I read about a very deep man made lake with a surface area of an acre or two being constructed in a northern city , the intent of constructing it being to circulate the water in such a fashion that it would freeze during the very cold winters- and then the ice would be used to cool nearby buildings during the very hot summer months using a district cooling system.

        Maybe it got built, maybe not.

        Such a lake if it were large enough could be filled with the warmest water available during summer months – maybe from a nearby river- and used very effectively as thermal storage for a gigantic heat pump serving a bunch of nearby buildings- but it might never be cost effective.

        • Doug Leighton says:

          Mac,

          Maybe you’re talking about something else but:

          “A heat pump is a device that provides heat energy from a source of heat to a destination called a “heat sink”. Heat pumps are designed to move thermal energy opposite to the direction of spontaneous heat flow by absorbing heat from a cold space and releasing it to a warmer one.”

          https://en.wikipedia.org/wiki/Heat_pump

          Half the people I know have these things which seem to be used mainly for cooling their houses in the summer (and heat in winter I suppose). I think they’re called geothermal heat pumps.

        • Toolpush says:

          OFM,

          Heat storage heaters have been used in Australia and Britain. I lived in a house in the late 70’s in Oz and installed the same, though much improved system in a house in the mid 1980’s in Britain.
          The benefit was to have a good off peak discount. By luck the place in London, we were lucky enough to have the have a few extra hours on off peak. as the complete house went on the off peak rate, and we were a bit of night owls, it allowed a few of the major high energy operations in the house to be transferred to off peak rate.

          Off peak electricity, these days may not be the same, but with solar and wind being intermittent, then it may operate under different parameters, but should work.
          https://www.cse.org.uk/advice/advice-and-support/night-storage-heaters

        • TechGuy says:

          Heat pumps can be connected to ground loops. These can either be laid out horizontally or vertically. The ground temperature usually remains between 50F and 60F, and can be use to provide a near constant temperature to reduce energy inputs.

          Another common system is thermal mass storage, where excess heat can be stored in mass and then used a heat source when the heat source is turned off. There are two types of storage: One that use dense mass (dense rock) or a phase change mass (typically wax). When the wax changes from solid to liquid it absorbs heat and when it changes back to a liquid it gives off heat. There is also passive thermal which the sun is used to heat wall or floor made up of dense material. The rock absorbs solar thermal energy and releases it when the sunsets. Solar Passive system aren’t terribly efficient since the building needs to have a lot of window area to let the sun in, even multi-panel glass windows are not very good insulators and the cost of glass isn’t cheap either.

          Active thermal mass systems require pumps to distribute the stored heat and either need a heat pump or radiant heat system since the water temperature provided by a thermal mass system is too low for convection (ie baseboard) heating systems. I believe Dupont or 3M makes a phase change drywall system (wax is embedded in the gypsum).

          As far as the cooling system you describe, is referred as ice storage air condition.
          https://en.wikipedia.org/wiki/Ice_storage_air_conditioning.

          Typically these are used for commercial building to take advantage of off-peak electricity prices. It would pretty expensive set up a system that could store a full summer seasons cooling in an underground storage system. The land would also have be the “right” conditions to trap the water, and also not degrade the structural integrity that leads to sink holes.

          For my personal residence (still in planning) stage, I plan to use a large ground loop system and ceiling mount “fan coils”. I don’t expect it to get as cool as regular air conditioning, but it should help moderate temperatures. It also possible to insert a refrigerant system in the loop to lower the transfer fluid temperatures if necessary. That said, I am not really a big fan of AC. A window fan is sufficient for me as long as the temperature is below 100F.

          For heating, I am going with a radiant heating system using a combination of solar thermal, outdoor wood/coal furnace, and propane. Solar thermal should work on sunny days, and the outdoor furnace will augment it. Propane for domestic hot water when (outdoor furnace isn’t running or if I am away traveling for business), and I also like propane for cooking. I plan to install a gypsum radiant floor on the ground floor which should carry it through the night. I don’t think I will include a gypsum floor for the second floor (bedrooms) due to issues with weight. The outside walls will be 2×8 and 2×10 construction with rigid foam insulation which should make it very efficient. Outdoor furnace will also be used to heat out buildings, and also provide electricity. I also don’t like the idea of handing wood and ash inside of the home and it removes the risk of fire.

    • Techsan says:

      The University of Texas has a very large (building size) chilled water tank (Google 2500 San Jacinto, 78712; the tank is the round thing to the right of the marker). This allows them to chill water at night for air conditioning during the day, reducing the size of chilling equipment needed and allowing it to run 24/7.

      • What I am looking for- if it exists – is a popular name for any mass of material used to store heat in either the positive or negative sense- the positive sense being heat to be used later and the negative sense , the mass being CHILLED to ABSORB heat later.

        The proper name for these things are no doubt heat sinks but ” sink” as I pointed out earlier implies a device for getting RID of heat instead of SAVING it in the vernacular among many laymen and some tradesmen.

        Allow me to try another approach. Suppose the accepted and PROPER name for wheeled self propelled vehicle used for personal transportation is AUTOMOBILE. We also commonly refer to AUTOMOBILES as CARS..

        I am simply looking for any OTHER name that might be familiar to the public for the devices known as heat sinks- which incidentally is very nearly a contradiction in terms of clear and unambiguous communication if the device is operated to ” store ” ”cold”.

        English is a piss poor language in some respects. The chilled water tank Techsan mentions might technically properly be called be a heat sink but I will bet five bucks the people who maintain that system don’t call it that in day to day conversation.

        It is not actually storing HEAT energy but the exact opposite of heat energy – it ”stores” a LACK of heat energy and works by allowing heat to flow INTO it rather than OUT of it.

        Such a device ought to have a nick name. The nick name is what I am looking for.

        The term heat pump is generally used in the trades to indicate the entire system , compressor, evaporator, coolant lines etc rather than ONLY the storage medium – in the event storage is part of the design.

        • Stan says:

          Why not just say “thermal storage” and add cold and hot if you need to reference which you are trying to store?

        • scrub puller says:

          Yair . . .
          OFM.
          One such devise in the Australian context is called an “Esky” . . . I believe in the ‘States they are known as “Cambro’s” (wry grin)

          Cheers

        • Danny says:

          thermal energy resevoir or just thermal resevoir?

        • ezrydermike says:

          “I am simply looking for any OTHER name that might be familiar to the public for the devices known as heat sinks- which incidentally is very nearly a contradiction in terms of clear and unambiguous communication if the device is operated to ” store ” ”cold”. ”

          Ice? 🙂

          http://www.concretecentre.com/technical_information/performance_and_benefits/thermal_mass.aspx

        • TechGuy says:

          OFM Wrote:
          “The proper name for these things are no doubt heat sinks but ” sink” as I pointed out earlier implies a device for getting RID of heat instead of SAVING”

          “Thermal mass storage system”

          https://en.wikipedia.org/wiki/Thermal_mass

          Applies to both heating and cooling.

          • How about ” reversible thermal battery” which would be known as a RTB in three letter acronymese?

            This would specifically indicate a thermal mass that is so contrived as to be useful for both heating and cooling purposes.

            This word ” coolth” is the one that really irritates me and got me started on this rant. There ought to be a better one.Somebody here might be the inventor of it.

            • MarbleZeppelin says:

              Old farmer, I know most people get at least a secondary education and can understand that mass can be cooled as well as heated. So thermal storage is as good as it gets. If they can’t look things up or understand it on their own, they will get the picture as soon as the contractor/installer or a neighbor explains it to them.
              Battery is just going to confuse them since the term has become synonymous with electrical storage or generation. Also battery means several, as in several electrical cells or a group of guns. In this case it could just be one storage unit.
              Everybody understands things can be chilled and things can be heated. They have those magical things in their houses called furnaces and refrigerators. Even if they don’t know the details, people understand the concept. Heck, they use ice cubes.

            • It’s thermal storage. The best medium by far is water. If you want to store heat the best solution is a water thermos. This can be hot or cold, as you wish.

              For example, if you want to have the cold of the night stored in a building wall, the best solution is to line it with copper pipes filled with water. Copper is an excellent heat transfer medium, and water has the best heat capacity per mass unit. If you want the system to have more inertia use steel pipes filled with water.

    • ezrydermike says:

      heat capacity

  39. ezrydermike says:

    from Kurt Cobb….

    As the world’s central energy commodity, oil is a good indicator of economic activity. With the nearly universal conviction that the previous bounce in oil prices to around $60 signaled a stronger economy and thus stronger oil demand, logic would dictate that we now consider the opposite: That the new slide in oil prices is signaling new weakness in the world economy. If so, it’s the kind that ought to frighten even the optimists this time.

    Having said all this, it might be wise to take any day’s price reports in the same way as the low or high temperatures on a particular day. A cool morning in summer does not mean winter is right around the corner. Nor does a hot day in mid-winter spell the end of the season. What’s more important is to look at the overall picture to see if the season is changing–or even more important, if the climate itself has shifted, both literally and metaphorically.

    That takes a lot more analysis than the daily market reports can provide and than most people–even those whose job it is to follow markets–have patience for.

    In that regard the long view suggests that the acute investment slump in oil which is unfolding will lead to tight supplies in a few years (because of all the wells that are not going to be drilled to replace the depletion from existing wells). That would set us up for a price spike at some point as it takes a considerable amount of time to ramp up new drilling after a long period of decline.

    All this assumes that the current seeming weakness in the economy doesn’t morph into something that would cause a long-term economic decline or stagnation which would keep oil prices low for a much longer period.

    http://resourceinsights.blogspot.com/2015/08/what-is-price-of-oil-telling-us.html

    • I for one am a fervent believer in a major and long lasting price spike that will be brought on by growing population and declining investment in new production even as depletion gnaws away at legacy production.

      The only likely reason to believe otherwise imo is that the economy will be on life support and barely holding its own if not actually shrinking from now on – or so long as we have an oil based economy.

      The price of oil is extremely inelastic meaning only a small change in production -downward- can result in a major move in price – upward. Ditto an increase in production resulting in a major price crash as currently.

      • TechGuy says:

        OFM Wrote:

        “Ditto an increase in production resulting in a major price crash as currently.”

        Price crash is occuring because demand is falling, not directly because supply is increasing. Prices increased during the housing bubble years even as supply increased (just not fast enough to meet demand). Not only is the price of oil declining, so is just about ever major commodity (Copper, Iron Ore, Coal, etc)

        • Tech Guy you have a good point.

          Consumption does increase as price falls everything else held equal, consumption decreases as price increases, everything else held equal.

          Demand is another word that ought to be junked. It is almost always misused to indicate consumption in the msm and most casual communications.

          We read here day after day that production is still INCREASING – and thus CONSUMPTION IS INCREASING unless the difference is going into storage- which might be the case. But something tells me storage ought to be pretty much full up by now.

          I agree price has crashed PARTLY because ”demand” is weak enough that all the production will not sell at a higher price.PARTLY because of higher production in and of itself –in my opinion at least.

          Personally I believe that oil would still be selling at around a hundred bucks except for the fact that production has been increasing faster than so called demand.

          Demand properly defined is a function that relates price production and consumption everything else held equal.

          There is no way in basic theory to definitively attribute a crashed price to weakened demand in the case of increased production. In the theoretical case increased production indicates a lower price.

          If production has actually been flat you would have an airtight case.

          In actuality given the slow economy you have a good case, about as good as mine.

        • Javier says:

          It is actually the relationship between demand and supply.

          The demand/supply ratio correlates extremely well with the yearly rate of change in oil futures price, and thus governs oil prices.

          This explains why the situation is much worse than in 2008 and why the solution is not at sight. Changes in supply are slow to react and clearly the demand is not picking up yet despite low prices.

          A recession now would be a black swan for the global economy, the global oil industry and many countries. It could very well mean peak oil, The Peak Oil.

  40. shallow sand says:

    I am looking at an 11 well lot for sale, Middle Bakken and Three Forks wells.

    With one exception, major operators.

    Well completion dates range from 2012 to 2014.

    Completed 8/14 83,844 barrels of oil
    Completed 8/14 56,881 barrels of oil
    Completed 12/13 125,407 barrels of oil
    Completed 9/14 42,863 barrels of oil
    Completed 10/12 140,484 barrels of oil
    Completed 9/13 67,615 barrels of oil
    Completed 5/13 81,626 barrels of oil
    Completed 2/12 117,254 barrels of oil
    Completed 4/12 99,705 barrels of oil
    Completed 8/12 65,042 barrels of oil
    Completed 6/12 58,884 barrels of oil

    OPEX looks to run anywhere from $3,000 to $17,000 per month, with water disposal being the major expense.

    However, many CAPEX expenses, which include down hole repairs (which I think of as OPEX). These can cause monthly expenses to run as much as $80K. Example, tubing hole repair of $63K.

    If anyone is interested in well specific economics, I encourage you to look.

    Funny thing, seems like the larger the company, the more difficult to read the joint interest bill. The small company JIB is just one page. LOL!!

    • Doug Leighton says:

      Shallow, bbl is OK 😉

    • Mike says:

      Shallow, there is no logical explanation for categorizing OPEX as CAPEX; OPEX is a direct expense. If a remedial workover is considered CAPEX, what portion of that workover can be depreciated and why in Gawd’s name would anybody do that? Once the well is on line and IDC’s declared, everything associated with its minute to minute operations becomes an operational expense, even for instance, new pumping units, down hole pumps, changing out tubulars; everything.

      This to me is yet another sleight (Watcher) of hand by the shale oil industry. By shuffling OPEX to CAPEX the well becomes magically more profitable than it actually is, and can be reported as such, IMO. It’s deceptive accounting. What am I missing?

      Mike

      • Watcher says:

        Nothing (it’s sleight, not slight).

        And it also has to run afoul of accounting rules. Unless they make a case to accounting firms like “but this is shale. Not conventional oil. You CPA folks don’t understand this technology. This money we’re spending to flush fresh water down the well to dissolve salt is CAPEX, not OPEX, because it increases flow!!!”

        You’re absolutely right, Mike. That would be crapola, but they will do it anyway.

    • shallow sand says:

      Doug, LOL!! I will always make sure and include units in some form or another.

      A little more analysis while eating my lunch today.

      The above referenced 11 wells produced 18,020 bbl. of oil and 17,383 mcf of gas for the working interest owners for the last month reported, being 5/15. 10 of the wells have a net revenue interest of .83333333 and the other has a net revenue interest of .87500000. These are very good in that I am finding out many shale wells have royalty burdens of 1/3 to 1/4 of the oil and gas sold.

      The total OPEX for the 11 wells in 5/15 was $308,947.00. It appears 3 wells had down hole workover/repairs and same is included in the OPEX figure.

      Using a 6/1 gas to oil ratio, I come up with production of 674.74 BOEPD in 5/15, with 581.29 BOPD and 560.74 mcfpd. These wells are below the monthly Bakken average, so full disclosure in that regard.

      OPEX per BOE is $14.77 for 5/15.

      Assuming $34 oil and $2.50 gas, and assuming 10% severance tax, I arrive at net income per month, using the 5/15 OPEX, of $281,576. Annualized, this would be $3,378,912.

      I do not know what each of these wells cost to drill and complete. Given the pre-bust time frame, I do not think $10 million per well would be out of the question.

      So, assuming 5/15 is a representative month for OPEX, and assuming near current oil and gas prices, the estimated $110,000,000.00 invested would be generating net income, pre-interest and pre-income tax of $3,400,000.00 (rounded) annualized, at current production rates. All of the wells are declining at various rates, with the high barrel per day wells declining much faster as they were just completed in 2014.

      Rounded oil production to date for the working interest owners would be 790,000 barrels. At $34 oil, this would have produced gross oil revenue of $26,860,000.00 to date.

      Possibly these wells could now be drilled for $66 million to $88 million dollars.

      I do not think some of these wells are in the “core”. However, I presume money was borrowed to drill them. Again to illustrate, if all of the net income from these wells was used to fund newer drilling, and 1/2 of the funds to drill these were borrowed, at 5% interest, the annual interest burden for these 11 wells would be $2,750,000.00.

      It is very possible that the interest burden on these wells is more than the net income, at 5% interest it would take just $68 million rounded to cause interest to be more than net income on an annual basis. If interest is 11%, just $31 million rounded causes interest to be more than net income on an annual basis.

      Again, just attempting to use some real numbers to show just how crazy this whole thing is. I just cannot see how debt principal will be repaid.

      If people who visit here are getting tired of these examples, I will stop. I guess it just seems so out of whack to me for anyone to claim that at current oil and natural gas prices, the Bakken is not a massive economic failure.

      Given that it appears to me our investment is being punished, in part, due to shale overproduction which is adversely affecting prices, just seems relevant to show the shale overproduction makes no economic sense.

      • Doodlebugger says:

        Shallow:
        From one who plays the game with his own money: Keep it coming. The spin doctors from that camp need to be countered with truth. I appreciate you very much.

        Doodleburger

  41. Dean says:

    Pennsylvania natural gas data for June 2015 are out:

    Jan 12.59 bcf/d,
    Feb 12.67,
    Mar 12.75,
    Apr 12.52,
    May 11.90,
    Jun 11.92

    May 2015 production revised down from 12.03 to 11.90.

    Except for May,all past months did not change (only extremely small revisions).

    Data here: http://www.depreportingservices.state.pa.us/ReportServer/Pages/ReportViewer.aspx?%2fOil_Gas%2fOil_Gas_Well_Historical_Production_Report

    • coffeeguyzz says:

      Dean

      Tnx for the link. As per the latest (June) PA results, there are over 6,700 producing unconventional wells in the state, and slightly more than 2,700 wells either being drilled or drilled but not producing.
      The operators there are still drilling to hold acreage, but with realized prices as low as 71¢/mmbtu six weeks ago, there are few economic justifications to bring their product to market.

      • Dean says:

        I think the Marcellus shale will pass in history as one of the worst examples of capital allocation in the energy industry. Yesterday, the official realized price was 0.840 $ per MMBtu

        http://www.wsj.com/mdc/public/page/2_3023-cashprices.html

        • MarbleZeppelin says:

          Dean, that is horrendous. I notice that Marcellus gas is selling at a huge discount compared to the other sources in the US. Why would that be? Is it over-supply?

          Of course the nearby residential customer pays $8 to $13 per Mcf, what a rip.

          • Dean says:

            poor capital allocation and lack of infrastructure –> over supply

          • Toolpush says:

            Zepp,

            The neighbours you refer to paying, $8 to $13 per Mcf, are in the NE, I presume. These same neighbours have fought tooth and nail, every pipeline expansion and every new pipeline in the area. As the price differential is solely attributed to the lack of pipelines, I would not waste too much sympathy on them as they have reaped what they have sowed.

            • coffeeguyzz says:

              Push

              If you have not noticed, Shell – operating as SWEPI – is producing an increasing number of high output Utica wells over in Tioga county, PA. The most recent (Lotaposki?) averaged 25MMcfd first month.
              As for resistance to infrastructure build out, there are now armed sheriff’s deputies accompanying pipeline surveyors in Ohio for their protection.

            • MarbleZeppelin says:

              Not true, most are not part of a NIMBY or eco movement.

              I think the price problem might be that the public utilities are price rate controlled.

  42. Heinrich Leopold says:

    In another sign how the current dangerous investment climate harms small investors, Samson Resources SSN files for bankruptcy September 16. http://www.highyieldbond.com/bankruptcy-samson-resources-revamp-sees-chapter-11-filing-by-sept-16/. Investors have lost here billions. There is little evidence of more efficient oil and gas production. I have been consistently warning small investors not to invest into the current shale patch. The oil price will not go up in the near future. Despite peak production, the oil price is determined by short term factors (US current account defcit, interest rates….) and not by the long term trend of falling production.

    • shallow sand says:

      Yes, I really do not see how it would make any sense to be drilling these $7 million dollar wells unless you were pretty confident of producing 500K+ barrels of oil in the first 60 months.

      If one looks at Bakken wells, it is not easy to find 500K barrel wells outside of Sanish and Parshall.

      In fact, in a quick scan of Middle Bakken, I only find one in Twin Valley, one in Clark’s Creek, CLR’s monster Whitman 2-34H in Oakdale, that have topped 500K. I assume there are a few more, but I don’t think many. I think Hunt has a tremendous Three Forks well, and maybe Whiting also?

      Also, interesting to note that all of those 500K+ wells from Sanish and Parshall, which are almost all Whiting in Sanish and EOG in Parshall, are now down to 1500-4000 barrels per month. Maybe not bad, but even the big dogs rarely have durability long term.

      When looking through the records, find tons of wells that have not hit 100K barrels. So we are talking about not even getting to $2.5 million of REVENUE, let alone, NET INCOME.

      Imagine drilling one of those wells that makes 25K barrels in year one, after borrowing $7 million to drill it, in 2015. About $200K of income in year one!!

      It is happening. Crazy.

      • Watcher says:

        A guy mentioned over the past year or so that shale activity was the bulk of core organic GDP growth since the Apocalypse.

        He might not be the only one to know it. The loans flow. From Wall Street. Who got bailed out.

        • Javier says:

          We never recovered from 2008. A lot of stats show it. We just printed a lot of money and pretended we had recovered. But that doesn’t really work. It never has.

  43. clueless says:

    OFM – From discussion above. I wish you luck with your $200 legal fee LEAF futures spread contract. I think that publicly traded futures contracts are 50 pages or more, but I am sure your your attorney is more competent/concise than those Wall Street types. But, let us know how much time and effort you spend finding someone to take the other side of the “bet” [since neither of you will be “hedging”]. And let us know how much you had to pay for the future. If the current spread is $2000, and you want to “lock” that in for the future, you will be buying the contract. The person who will agree to lock in a $2000 spread will be selling a contract to you. Since you used 2019, he/she may want $500 – $750 upfront premium [which will amortize to zero by the end of the contract period (I think that they call that theta, but ask Ron)] to lock that amount in. Also, let us know how you put in place guarantees that each of you perform in 2019. That is, if at that time, your side of the contract is in the money by $10,000, you want to be sure that you collect. And, vice versa. Probably some type of escrow account can be set up whereby you each put in enough money to ensure performance. Probably some atty can draft that for $100, and a bank may manage it for free if they get to invest the escrow funds and keep the return. Just a few legal documents should do that – maybe $50 worth. Once again, good luck!
    PS: Make sure that the contract spells out what will happen if an act of God prevents performance. Like if the guy dies, is his estate obligated to stand in his place? Or, do you get the escrow? Probably under 100 minor details to cover, but it should be no problem for the attorney.

    • I DO appreciate that any sort of TRADEABLE contract would be very complicated – just as you describe it.

      But this would work in my experience. I pay YOU X dollars to guarantee delivery to me of a new LEAF on a certain day, with the penalties for you failing to do so clearly stated. All the risk on my end is that I might lose the money I give you if I can buy the car cheaper than the agreed on price. The risk on your end is that the car will cost you more than I am going to pay you for it. We are both gambling.

      This really would not be different in any fundamental way-from your pov- from you guaranteeing to deliver oil to me under the same basic terms on a given date. You don’t have any real way of knowing what you will have to pay for the oil – OR the car.

      I don’t know how much better or worse the car might be than the current model, or what comparable cars might be selling for. But by the same token I don’t really know how much a given quantity of oil is going to be worth to me at that date. Oil might be extremely expensive or extremely cheap.

      My attorney is on old buddy and probably wouldn’t even charge me – or you- but he would laugh at both of us and recommend we just go on a gambling junket.

      Now enforcing such a contract , or making it negotiable , is another thing altogether. He would be licking his chops over suing you for me if you fail to deliver. He WOULD put in a line or two about attorneys fees.

      The whole idea is or WAS to think outside the box in terms of a thought experiment.

      Gambling is gambling and if you are not hedging after some fashion then so far as I can see when you buy or sell futures options you are gambling pure and simple.

  44. Ronald Walter says:

    I have often wondered why the Rocky Mountains were named the Rockies, and out of curiosity, I traveled there to find out the answer for surely there had to be one. Much to my surprise, there are rocks in the Rockies.

    Then my curiosity was satisfied, before that, I had no idea there were as many rocks in the Rockies as there are. I thought they were just some mountains, but there’s also billions of rocks.

    Something to see and not to be forgotten.

    The infrastructure being built to haul oil out of the Bakken must be growing.

  45. HR says:

    Shallow, Mike, et all
    It looks to me that we are looking at these prices for at least a year and probably more. From what I’ve looked at, the frackers debt was around half junk rated when oil was at 90 a barrel. Now that we are at 40, it’s in reality all junk debt or should be rated that way at the end of the year. Their hedges will be gone at the end of the year or end of third quarter. So when they report in 2016 for fourth quarter 15 should be ugly. I mean coyote ugly. And then it gets worse. The banksters use some kind of ridiculous three year running average for frack financing instead of mark to market so no relief there.
    Let’s just hope that we aren’t involved in some kind of world political oil war here and the Feds haven’t ordered the banksters to finance these guys come hell or high water.
    So here’s to you lads, this is not gonna be fun. I’m digging in for trench warfare at this point.

    • shallow sand says:

      Shale bankers price decks are much higher than the WTI futures strip?

      Never heard that.

  46. Mike says:

    HR, I already feel like I’ve been shot at and missed, shit on and hit. Three months of mid 30 oil and I’ll be looking for a Dairy Queen to work in.

    The next shale CEO I meet I am pickin’ a fight.

    Mike

    • Jeffrey J. Brown says:

      If you visit the Dairy Queen I’m working at, I’ll give you a free dip cone.

      • Mike says:

        I appreciate the dip cone offer, Mr. Brown, but truthfully, if you have some contacts with Dairy Queen I rather get a referral from you. I can easily apply my talents with a 36 to frozen meat patties.

        HR, when things get real bad Mr. Brown here has some good recipes for beans. They call him Pinto so they must be good.

        • Doug Leighton says:

          Been where you are Mike. Seems as though the business goes through cycles: five good years, three disastrous years….. All the guys (obviously smarter than me) who I went to school with took the bad years to become lawyers, accountants or something. And, the few who stuck with it had wives who preferred to have a guy at home and wound up divorced. Somehow I managed to kept my wife: maybe we’re both masochists. I was lucky and retired at a good time but certainly don’t forget those lean years. Hang in there dude.

          • Mike says:

            Thank you, Doug. You are kind, sir. I know you’ve been thru these things too. I hope this is my last. It’s a lot of heartache the internet, data driven folks simply do not get. Most folks don’t get. Anyway, I hope people understand my Texas humor, laughing about this stuff keeps me from jumping head first into a shale shaker.

            Mike

  47. shallow sand says:

    Thing we are trying to figure out is how much cash to burn as we watch prices head toward the 20s.

    At some point I guess maybe you try to pump intermittently? Really not good to do with a water flood though. Permanent damage I’m afraid.

    Seems really strange that we are trying to map out company survival plans with no debt payments while mega debt laden public companies still have over 800 drilling rigs running.

    HR may unfortunately be onto something.

    We should be down to rigs in the gulf and maybe 50 tops on land.

    • Mike says:

      Yes, I believe we are about to see another slew of drilling rigs go to the barn and another quarter of a million hard working men and women go to the house. So does the CEO of H&P, google it. I don’t know how long this is going to take to shake out but when it does the worldwide oil and gas industry is going to be decimated, in shreds, and will not be able to respond properly, fast enough, and oil prices are going to spike very, very high.

      • Fred Magyar says:

        I don’t know how long this is going to take to shake out but when it does the worldwide oil and gas industry is going to be decimated, in shreds, and will not be able to respond properly, fast enough, and oil prices are going to spike very, very high.

        I think you are right! But isn’t that exactly what you would expect to happen when ‘Peak Oil’ hits the fan? The fossil fuel based, infinite growth economic paradigm, always was, a deeply flawed concept from the get go. It is basically the ultimate ponzi scheme and has been fostered upon the public at large by our politicians, bankers and economists.

        I really do feel bad for the next quarter of a million hard working men and women who as you say are going to the house. However, the writing has been on the wall in big bold red letters for all to see, for quite some time now. I myself got sent to the house way back in 2008 and today they won’t even hire me at the Dairy Queen, due to my advanced age /Sarc… even though most young uns 20 years my junior couldn’t keep up with me physically or mentally even if they tried. I had to hire myself!

        And this is precisely why I just roll my eyes when certain petroleum engineers who are in deep denial and living in the past denigrate the alternatives such as solar, wind, hydro, geothermal etc… especially when they keep saying that batteries and EV can’t work because they aren’t cost effective. IMHO they aren’t even wrong. They just can’t wrap their heads around the truly profound paradigm changes that are currently underfoot.

        Case in point.
        https://medium.com/the-wtf-economy/the-wtf-economy-a3bd5f52ef00

        WTF?! In San Francisco, Uber has 3x the revenue of the entire prior taxi and limousine industry.

        WTF?! Without owning a single room, Airbnb has more rooms on offer than some of the largest hotel groups in the world. Airbnb has 800 employees, while Hilton has 152,000.

        WTF?! Top Kickstarters raise tens of millions of dollars from tens of thousands of individual backers, amounts of capital that once required top-tier investment firms.

        WTF?! What happens to all those Uber drivers when the cars start driving themselves? AIs are flying planes, driving cars, advising doctors on the best treatments, writing sports and financial news, and telling us all, in real time, the fastest way to get to work. They are also telling human workers when to show up and when to go home, based on real-time measurement of demand. The algorithm is the new shift boss.

        The sooner all of us start to embrace the new world we are all living in the better, and this new world, is a world that has no choice but to be powered by electricity produced by wind and sun and stored in some way shape or form maybe even inefficient batteries! But not fossil fuels. Deal with it!

        Also watch these two videos of Tim talking to a reporter:
        http://goo.gl/qD5zNA
        http://goo.gl/LS18DV

        • Mike says:

          The problem with the “oil is dirty, risky, expensive and we need to get off of it immediately” EV gang is it really doesn’t have a plan. Lofty yes, workable no. The world still consumes 95 million barrels of oil per day; this notion that if we all buy lime green Leaf’s, problem solved, is exhausting.

          Besides, I am in the oil business and understand the role that hydrocarbons play in the real world we live in today. I also understand the role that hydrocarbons will play in the future. So, I AM dealing with it! The EV gang needs to hope the entire oil industry “deals” with it (!) because you guys can’t get where you dream the world needs to be without hydrocarbons helping you get there.

          Mike

          • Javier says:

            +1

          • Nick G says:

            this notion that if we all buy lime green Leaf’s, problem solved, is exhausting.

            I don’t mean to be insensitive, but why is it exhausting besides the obvious fact that it’s your competition?

            No question: horses hauled oil away from the first oil fields. So, we’ll need some oil for a while.

            Conflict between old and new isn’t absolutely necessary. We will use oil for a long time – there’s plenty of time for people in the work force now to have a dignified retirement. The current problems in the oil patch are only partly due to EVs – much of the problem is a lack of good planning on the part of other oil drillers, right?

            The sooner we transition away from oil, the better!

            • Mike says:

              Nick, I don’t feel threatened by EV”s and neither does anyone else in the oil business, I assure you. Absolutely none of the “problems” facing the hydrocarbon industry today have anything to do with lime green Leafs. That’s a goodun.’

              The EV gang’s message is exhausting to me. It does not stand on it’s on merits so you must constantly trash risky, stinky, dirty, sweaty, subsidized (as though wind, solar, battery research etc. is not subsidized), expensive (formerly inexpensive) hydrocarbons to prove your point. On a peak oil site, no less. You must have these anti-oil sayings in your computer’s memory; F3 for one, F5 for another.

              Trust me, if there was an Earthlings for EVs blog somewhere you wouldn’t catch me on it yaking about frac radiuses and liner hangers hoping to “convert” someone.

              We are transitioning away from oil, Nick. Relax, man; the world you imagine is going to happen some day. I hope it does. But to get there we are going to need all the oil we can get and the sooner the EV gang can get their heads wrapped around that, the better!

              Mike

              • Nick G says:

                Absolutely none of the “problems” facing the hydrocarbon industry today have anything to do with lime green Leafs.

                Sure they do, in a general sense.

                US vehicles use half as much fuel per mile as they did 40 years ago, due to greater efficiency of various sorts, including electric hybrids. That means a reduction in consumption of about 9M bpd. That’s enormous. That makes all the difference in oil prices.

                That difference will only increase, in the US and around the world, as we inevitably become more efficient.

                EV gang’s message is exhausting to me. It does not stand on it’s on merits

                Heck, we have ICEs now. If ICEs were cheap, clean and were entirely powered by plentiful domestic supplies we wouldn’t need to worry about EVs. But…they aren’t.

                if there was an Earthlings for EVs blog somewhere you wouldn’t catch me on it

                That’s where you are, right now. This is a blog about energy and related issues. EVs are a big, essential part of it. There’s no escaping them, no matter how hard you try.

                to get there we are going to need all the oil we can get

                No. We could and should use much less than we do now. We would use much less if the oil and car industries hadn’t distorted the transportation industry in many, many ways. Those distortions include “free”ways, enormous military costs to protect supplies, dismantling mass transit, etc.

                We can and should reduce oil consumption far more quickly than we currently are. That would start with much higher CAFE regulations and stiff fuel and carbon taxes. That would reduce fuel consumption quickly, and reduce the overall cost of transportation (when all costs are included).

                We are transitioning away from oil, Nick. Relax, man; the world you imagine is going to happen some day.

                Every casket I see returning from the Middle East makes me angry. Every veteran with PTSD or another disability makes me angry. There’s no time to waste in getting rid of our dependence on oil.

          • Fred Magyar says:

            The problem with the “oil is dirty, risky, expensive and we need to get off of it immediately” EV gang is it really doesn’t have a plan. Lofty yes, workable no.

            Well, what’s the oil business folks plan? To just keep on drilling forever despite production declines, increases in capex and bottom of the barrel prices, no pun intended? For the record, I still think you are missing my point. The changes are happening whether you like them or not. I would love to still be back in 2007. Life was quite comfortable for me then. It didn’t last and there was no one to bail me out.

            Go back and check out the links I included up thread about the WTF economy. There is massive disruption going on all over the place.

            As for a plan, you guys are sitting on the Titanic and it has hit an iceberg and there are only so many lifeboats available… I suggest you stop saying that those life boats won’t work because they are not as comfortable as your first class cabin. They may be the only thing between you and that ice cold ocean… 5 mins to death by hypothermia.

            What I’m saying about a lot of businesses of the old paradigm and especially the oil business is that it is akin to a game of musical chairs.
            after each cycle there are fewer chairs and the people left out have just about zero chance of getting back into the game even if there is an upturn in the economy. That’s just the nature of the beast.

            Yeah the world still uses 95 mbd and it would be using 120 mbd if it were still available at low cost. It isn’t available.

            See Oil Supply and Demand Forecasting with Steven Kopits: http://www.resilience.org/stories/2014-02-25/oil-supply-and-demand-forecasting-with-steven-kopits

            I’m not for a moment suggesting that the oil age will end in a fortnight, I think we all agree that there will be an oil industry for a very long time to come. And while you might still be a part of it for the duration a heck of a lot of others will be out in the cold without any hope of ever getting back in.

            • Mike says:

              I understood you very well, Mr. Magyar. I was joking with a fellow colleague about how bad the oil business is getting and you told me to deal with it. I have been dealing with it for a half century. I am not “you guys,” and am not asking anybody to bail my Texas ass out of anything.

              I agree that things are changing and they need to change. I embrace that change. We agree. I am not the enemy because I am in the oil business. Pass that on to everybody in the gang, please. I don’t have an agenda here other than occasionally trying to help people better understand a very complicated business that cannot be learned on the internet. I stay out of all the political bullshit but occasionally I get pissed off at being lectured about how “nasty” my business is. And the constant little Fred Flintstone car thing has worn me plumb out.

              Mike

              • Nick G says:

                Well, try not to take it personally.

                We all know it’s a very, very tough business (especially now), and the guys doing the daily work are just trying to make an honest living.

                And, I guess we know it’s just frustration speaking when you talk about the “little Fred Flintstone car thing”, but still…some people reading this may take you seriously.

                So, look away for a moment while I tell those readers: don’t take the Flintstone thing seriously: electric motors are much more powerful then ICE’s, pound for pound, and EVs have much better power, performance and handling than ICE’s.

                • Mike says:

                  Its hard not to take you personally, Nick. You make it personal, that’s part of your anti-oil agenda. Very clever, you are. You are not my enemy, but I am definitely yours. You loathe what I do to feed my family, and the 15 other families I have to care for.

                  But here’s the deal, mate…I’m just trying to help you get where you want to be. You, on the other hand, want me to cease to exist. Now. Does that make sense to you? Not to me. Its an old, essentially baseless, stupid, debate that I trust most people are smart enough to think through on their own.

                  Tell you what, I’ll stay out of your EV kitchen if you stay off my rig floors. Someday you can thank my industry for getting you where you lived most of your life, in comfort, or not. Matters little to me, one way or another.

                  Mike

                  • Nick G says:

                    You, on the other hand, want me to cease to exist.

                    No, I really don’t. It’s the nature of the oil industry to be boom and bust. The current deep pain the oil industry is experiencing is primarily just the way this industry has always operated. EVs will gradually reduce it’s market, but experienced people like you won’t be hurt by that. No, it’s the boom and bust that does the harm.

                    I’ll stay out of your EV kitchen if you stay off my rig floors.

                    You’ll notice I’ve never disagreed with anything you’ve said about the internal operations of the oil industry. So, that’s fine with me.

              • Fred Magyar says:

                I understood you very well, Mr. Magyar. I was joking with a fellow colleague about how bad the oil business is getting and you told me to deal with it. I have been dealing with it for a half century. I am not “you guys,” and am not asking anybody to bail my Texas ass out of anything.

                Hey Mike whether you believe me or not I most certainly do not consider you to be the enemy! And I, like everyone else who is a part of this global civilization, I have enjoyed all the comforts oil has provided me.

                On the other hand I personally had the rug pulled out from under me back in 2008 and I didn’t ask anyone to bail me out either and I never blamed anyone for my misfortunes. I’m only saying I know first hand what that feels like. I’ve had to completely reinvent myself since then and that process is not over by a long shot.

                But what happened back then, while not exclusively a consequence of ‘Peak Oil’ certainly was the consequence of an economy that depended on infinite growth running out of resources. Physical limits are real and we have been hitting them for a while now and I think things are going to continue to get much worse than they are now.

                Which, I think, is also going to make transitioning to a steady state economy based on renewables that much harder. I also think the only EVs that most of the 7 billion people on the planet are ever going to own are electric bicycles. Actually I wish I had one today. I walked 3 miles to a business appointment today and then walked 3 miles back. I’m in Sao Paulo right now and if you’ve ever complained about a traffic jam in the US then come pay me a visit to see what a real traffic jam is like. BTW I walked because public transport would have taken me longer than walking. And also note I’m 62 years old…

                To me, seeing what is happening in Sao Paulo today gives me an inkling as to what will happen in other cities around the world. It is very clear here that the old paradigm just ain’t working anymore! And the protests happening in the streets aren’t going to fix it either.

                Greenbub posted this link down thread and it does hint at some level of bail out for the oil based economy and an attempt at prolonging BAU a bit longer, I don’t think that will work either. Might just be me. Here’s an excerpt…

                As the OCC noted, oil prices dropped more than 50 percent from June 2014 to the first quarter of 2015, as increased production from the United States and OPEC nations coincided with weaker global demand. OCC said the oil price decline does not represent a “systemic supervisory concern from direct exposures at this time, but the OCC is monitoring the effects.” Rather, it’s “the duration of the price decline, degree of leverage at oil and gas production companies, and the expense and sophistication of each company’s production operations [that] will determine the severity of the impact on local economies. The potential spillover effects could be greatest in residential and nonresidential construction, retail and wholesale trade, accommodation and food services, and local governments (through declining tax revenue). Colorado, Louisiana, North Dakota, Oklahoma, Pennsylvania, Texas, and Wyoming previously thrived from oil exploration and development activities and are likely to be the states most affected if companies pull back, cancel significant projects, or lay off employees.” Indeed, 2015 has been dire for many of those in the energy business. Almost a dozen U.S. oil and gas companies have filed for bankruptcy protection during the first half of the year. And, a recent report from Swift Worldwide Resources indicated that the total number of oil and gas job losses worldwide is more than 150,000 – a course that shows little sign of slowing down.

                – See more at: http://www.rigzone.com/news/article.asp?hpf=1&a_id=140142#sthash.3dVmOfTy.dpuf

                • Glenn Stehle says:

                  Fred Magyar,

                  I see no evidence in that article that the Fed is considering bestowing regulatory forebearance on banks with exposure to domestic oil and gas producers. In fact, what I read in the ‘Rigzone’ article was the very opposite. To wit:

                  As a result, senior bankers are concerned the feds’ involvement could limit the approaches that banks may take to assist its borrowers. One investment banker in Houston told Rigzone that when the regulators criticize loans, the banks have to put up more capital against those loans, and that impacts the banks’ bottom line….

                  If a company needs more capital because its borrowing base has been impaired, most banks aren’t going to be willing to place capital with an entity with substandard credit. That starts to reduce the banks’ ability to help their clients “because the ringleaders have viewed it’s not where the banks ought to be putting regulated capital.”

                  The decision by banking regulators as to whether or not to bestow regulatory forebearance is, more often than not, a political decision.

                  It is the banking regulators who, in a crisis, have the ultimate say in deciding who lives and who dies.

                  For instance, in the early 1980s a FDIC study explains that “The prevailing view was that S&Ls should be granted regulatory forbearance until interest rates returned to normal levels, when thrifts would be able to restructure their portfolios with new asset powers.”

                  And, as the study goes on to explain, the “prevailing view” was purely political, and had nothing to do with sound or rational banking regulation. And, more importantly, this political decision had profound consequences:

                  The savings and loan industry changed swiftly and dramatically after the deregulation of asset powers and interest rates. The period from year-end 1982 to year-end 1985 was characterized by extremely rapid growth, as the industry responded to the new regulatory and legislative climate. Total S&L assets increased from $686 billion to $1,068 billion, or by 56 percentmore than twice the growth rate at savings banks and commercial banks (approximately 24 percent).
                  https://www.fdic.gov/bank/historical/history/167_188.pdf

                  And trust me, it ain’t the Mikes and Shallow Sands of the world who have the political power and have the banking regulators in their pockets. It’s the Rex Tillersons and Patrick Pouyannés of the world.

                  So why is it that Tillerson never misses an opportunity to talk the price of oil down? Why would Tillerson and Pouyanné want to see a crackdown on lending to independent oil and gas operators at this particular moment? Why would they, in other words, want to see blood in the streets?

                  Could it be that they want a consolidation in the industry, to buy up depressed assets at fire sale prices?

                  It’s clarion that China and Russia, given their large investments in Venezuela (Orinoco), Brazil (subsalt) and Argentina (oil shale), believe that expensive oil has a future.

                  Could the IOCs, who have staying power not too inferior to that of the NOCs, also believe there is a future in expensive oil?

                  If you want more evidence of this, it doesn’t get much more explicit than this:

                  French oil giant Total SA plans on buying up assets….

                  “It’s a bit early for me,” Total’s CEO Patrick Pouyanne said, providing a bit of insight on Total’s strategy. “The opportunities will really come if oil prices remain low over a longer period. Then you will see real opportunities for major companies like Total.”
                  http://oilprice.com/Energy/Oil-Prices/How-The-Majors-Are-Playing-The-Oil-Price-Slump.html

                  • Fred Magyar says:

                    I see no evidence in that article that the Fed is considering bestowing regulatory forebearance on banks with exposure to domestic oil and gas producers.

                    To be clear, I meant that the oil producers might see a little leniency, NOT the banks…

                    In any case it is just a hunch on my part based on my interpretation of what I could read between the lines. I certainly could be misinterpreting what I think they are hinting at.

                    We shall see!

          • wimbi says:

            Can’t get where you dream without hydrocarbon help! Man, how many times have I heard that, over and over and over. Sure, WE LIVE ON HYDROCARBONS NOW. Everything we do NOW is propped up with ff’s.

            We DON’T have to do that in the very visible future. How much ff do we really need to use, even right now? My guess is maybe 30% of what we are using. Real simple to rattle off topofhead that much saving from right now. Example- private car, A goddam idiocy. What we need is transport, not some lazy petrogobblemonster sitting doing nothing most of the time.

            I and my friends could get into a transport club this week, get better service and save at least 70% of what we are at this moment blowing out into the breeze without a thought in our head.

            And so on. I am spending time right now whittling down my domestic ff footprint. I have got it way down. The leaf is only one thing, lots of others.

            My wife drives that leaf like she did out honda, and we run it 100% on solar. Sure it took ff’s to do it, about 1/7 as much, lifetime cradle to grave, as my friend’s F-150.

            I spent ff’s, he spent ff’s, we both got our bananas. Which one “NEEDED MORE FF HELP TO GET THERE”?

            My guess- when we actually put our heads to it, we will find getting off ff’s will be EASY and CHEAP. And fast.

  48. Ronald Walter says:

    When there is oil to burn, you might as well burn off the volatile gases right onsite.

    Hells Bells, might as well flare that natural gas with thirty foot wide by thirty to forty foot high flames licking the sky and can be seen for miles.

    Oil is plentiful and abundant, might as well waste it all like the prodigal son who ends up living with pigs.

    When I see millions of electric vehicles occupying the highways and by ways, I’ll be a believer, until then there will be millions of vehicles using gas and diesel day in and day out.

    Gas is basically free these days.

    Two billion engines using gas and diesel and how many ships and jets all using fossil fuels too. You gotta use an oil bath to cut threads into steel rod. Removing oil from the resource base to support civilization is just plain dumb, ditto for coal, a fool’s errand.

    However, it gets gone, a thing of the past, all at eighty-five to ninety mph averaging 23 mpg.

    There it was, gone.

    Time for a change.

    • Fred Magyar says:

      There it was, gone.

      Time for a change.

      No, the time for a change was a long time ago!

      “The era of procrastination, of half-measures, of soothing and baffling expedients, of delays is coming to its close. In its place we are entering a period of consequences.”

      ― Winston S. Churchill

      • Nick G says:

        Fred,

        I would describe this as a case of excessive pessimism interfering with good public policy recommendations.

        It’s not too late to do the right thing. Sure, earlier would have been better, but the more we move away from oil and other FF’s in the present and future, the better.

        • Whatever says:

          Hi Nick.

          Your excessive, incessant, massively blind optimism is interfering with your ability to reason. It is not too late to seek psychiatric help.

          • Nick G says:

            Reason about what? You need to be more specific.

            I don’t deal in optimism. I deal with reality.

            In this case the reality is that we need good public policy, like transitioning away from oil and other fossil fuels ASAP.

            • Whatever says:

              Reason about what? You need to be more specific.

              Oh, give me a break.

              I don’t deal in optimism. I deal with reality.

              The reality is that we are already in collapse.

              In this case the reality is that we need good public policy, like transitioning away from oil and other fossil fuels ASAP.

              Yeah sure, Nick. Your comment above might have almost made sense — in, like, 1979! It is *WAY* too late for that shit now.

  49. Greenbub says:

    Relevant, but not a huge amount of info: “Fed’s Involvement May Limit Banks during Fall Review of Energy Loans” –
    http://www.rigzone.com/news/article.asp?hpf=1&a_id=140142

  50. shallow sand says:

    I looked up CLR under yahoo finance and there is an article that says the company faces “SEC headwinds”.

    Anyone know anything about this?

    I have been perplexed as to why Whiting is in deep dodo, yet CLR is not. Whiting has by far better wells in the Bakken. Only EOG and QEP compete with Whiting IMO, except for a few outliers. CLR has a ton of non-core wells that don’t really make much. I think Enno, Dennis and Rune have noted this.

    CLR has had no hedges since last fall, yet they are out performing?

    Then, CLR has 28 rigs still running, 18 in SCOOP?

    I pointed out that Poteet project, with the $20 million well, 11 total wells which cost about $140 million, which produce 60 gravity condensate they call oil, they report everything in BOE, when its all gas, etc.

    In less than a year, the Poteet condensate is down to less than 800 BOE per day gross. I now understand maybe they pulled Poteet from investment presentation online?

    I cannot see how SCOOP works, its about all gas, wells make less than Marcellus, yet cost double. It would seem Bakken is better than SCOOP, yet we know Bakken is a train wreck at $30 oil.

    The enterprise value for CLR is over $19 billion, or over $85K BOE, with now around 35% being gas, and rising.

    Look how much less value per BOE the likes of WLL, CHK, QEP, and most others are at compared to CLR.

    I have wondered about some things like this for awhile.

    Could we have some Enron WorldCom stuff going on with shale???

    • Blaine says:

      As far as I can see, they pulled everything from the main online presentation location. I can’t help but wonder if this has anything to do with the SEC rumors.

      CLR burned through more than $1B cash in the last 6 months, with only $1.28B left on their credit line. I suppose this is the down side of delayed payments. Almost cut your investments in half, and you still have to keep up the same level of payments for months.

      I don’t see how they can sell anything, either. They can’t take much of a loss on a sale before they’re in violation of their debt to equity covenant.

      I cannot see how SCOOP works, its about all gas, wells make less than Marcellus, yet cost double. It would seem Bakken is better than SCOOP, yet we know Bakken is a train wreck at $30 oil.
      If they’re really getting eastern Marcellus results, it works just fine. They’re getting near Henry Hub prices, so they’ve been getting ~$3.20 instead of ~$0.75 at the Leidy Hub trading point. Also, the Woodford is known to have generally quite high initial permeability along fractures, which really ought to leave open the potential for some monster wells, if they were well spaced, since you’re potentially approaching crossover into conventional-like performance.

      The problem is that if you take a well with an initial pressure of 21kpsi and run it flat out without a choke, all the rock close to it quickly gets crushed until it has a very low permeability, whether it has frack sand in it or not. Using the industry-standard monkeys as petroleum engineers doesn’t really work.

      Anyhow, didn’t you get the note? CLR’s current long-term plan of the year is to not drill the Springer at this time, or any of the other upper wet gas/oil layers, but to drill only the Woodford, in order to satisfy Held by Production requirements most cheaply. Simultaneously drilling the upper layers also was the long-term plan of the year last year.

      I’m not quite sure why anyone would drill anything now they don’t need for HbP, but they seem to also be going for aggressive core Bakken downsizing/infill.
      ENTERING FULL-FIELD DEVELOPMENT
      • ~60% WELLS TO BE DRILLED ON 660’-880’
      INTER-WELL SPACING WITHIN ZONE

      This was also, I believe, their long-term plan of the year back in 2013. They don’t mention aggressive Three Forks development, which was the long-term plan of the year last year. Don’t worry, last year they reported validating high density in the Bakken in lower permeability rock at Whapeton for 80 days, so it must be time to implement it everywhere they have core Bakken space available.

      Do you have a link to the Poteet data? I can’t seem to find anything on that with results, which is of course the norm if things go badly.

      CLR’s September 2014 data dump remains utterly fascinating. I don’t think I’ve ever seen another release like it.

      As I read that, they’ve shifted towards putting power lift on pretty much every Bakken well soon after it’s drilled. Of course that helps production short-term, but dropping the pressure so quickly can’t be helping the EUR, since it would make the fracked leads close up more quickly.

      They’ve apparently decided that the high-viscosity high-volume fracks they’ve been doing are a bad idea, and reverted back to the use of half a higher volume version of the older slickwater technique, and half both techniques. Apparently this deposits sand farther from the well bore. Progress marches on, in circles.

      The microseismic graphic is fascinating. It shouldn’t be surprising, but the fractures go pretty nearly directly towards the older wells, and they even have some running from the Three Forks wells to the older Middle Bakken wells. I suppose that’s why they generally frack all the close wells simultaneously, which would mean that to get an effective infill you’d need to refrack the old wells simultaneously. I do wonder if we’re getting enough pre-existing pressure gradients in the older and more permeable parts of the Bakken to start messing with new fracks at standard setbacks, since the effect appears to be a bit larger than I would have guessed.

      Could we have some Enron WorldCom stuff going on with shale???
      That was off balance sheet. The shale companies have everything on balance sheet.

      CLR Shareholder’s equity, $4.856B, Net property and equipment $14.169B. Take a 34% writedown due to the poor price environment and overvaluation of out years of production, and shareholder’s equity goes to zero. That’s how leverage works.

  51. Greenbub says:

    From a Reuters article on dropping oil prices: “The long-term outlook also remained bearish, with BMI Research expecting “oil prices will remain anchored until 2018”.

    “The return of Iranian oil to the market, coupled with strong project pipelines in North America, the Middle East, West Africa and Kazakhstan, will see global supply growth outstrip the growth in global consumption for the next two years,” they said.

    • Watcher says:

      Complete crap. No one has any idea.

      Now, that divides into three groups.

      Those who know they have no idea and do not guess.

      Those who know they have no idea, but guess anyway to impress lenders or investors.

      Those who do not know they have no idea and present their number, imagining the guess has value.

      • MarbleZeppelin says:

        I wonder when the US is going to wake up to the fact that oil production here is just another economic disaster.

        • islandboy says:

          As soon as it becomes clear just how much of the money invested int LTO will never be recouped.

          • MarbleZeppelin says:

            It’s already very clear that most wells will not even pay for their drilling/fracking costs. Shale does not look profitable until over $75 bbl.

            I wonder how many loans are being re-negotiated and how many investors are pulling their hair out.

            • Watcher says:

              All investing the past 5-6 years has been frontrunning the Fed.

              That will be true of oil, too. Scroll up a few comments to the news the Fed is sending monitors to watch the re-evaluation of reserves collateral end of Sept — because of concerns about systemic risk.

            • islandboy says:

              “It’s already very clear that most wells will not even pay for their drilling/fracking costs”

              Clear to whom? To the readers of this particular blog? Yes. To Faux News, CNBC, Bloomberg and the like? Not so sure. Check out just about any mainstream news source and it is not clear just how deep this rabbit hole goes! I think you will find that the huge portion of the population that does not follow the financial/stock market news, has absolutely no clue and of the minority that do follow the markets only a tiny fraction take the pessimistic view. To most of them we are all doomers, aliens from the planet Doom!

              • MarbleZeppelin says:

                Clear to me, I was writing the comment. The rest can do simple math and a little thought on their own. If they want to.

                Do you know what CERN is doing now, or NASA, JPL programs, ESA or even the Cornell ornithology department programs? Most people do not look deeply into things nor do they make strong attempts to understand their world beyond what is needed to get along. So what? Unless you are selling something or have political motivations, why be concerned with what the masses don’t think?

    • shallow sand says:

      Mr Filloon provides a lot of production data, but doesn’t get into the economics.

      I wonder how many locations are left in Sanish, Parshall, Grail and Twin Valley

  52. Ronald Walter says:

    Carnot Cycle:

    http://web.mit.edu/16.unified/www/SPRING/propulsion/notes/node23.html

    Get that heat reservoir doing some work.

    At 5.2 billion barrels and the production is one million barrels per day, the time frame would be over 5200 days to reach the 5,200,000,000 barrels.

    5200/365.25=14.2368240931

    14 years, one gone, thirteen plus years to empty the Middle Bakken. 2028 CE when it finally ends and another thirteen trillion in debt.

    Then it’s on to the Lewis and Clark formation along with the Pronghorn.

  53. Ronald Walter says:

    The exploration and development of the Williston Basin should have remained on the drawing board indefinitely, but that is not what happened. Again, it is strategic, it I was done for a reason. Better to have it ready to go than to wait for it to happen.

    As the infrastructure increases the million barrels available each day will all be in storage ready for loading and delivery. The pipe is there ready to be made into the line, the pipeline will be built.

    It will become a piece of cake, which is being eaten voraciously.

    Even if it lasts a measly twenty years, it should have remained undeveloped for another fifty years.

    Not a chance, why wait to burn it when it can be done now.

    • MarbleZeppelin says:

      For a period of time the price of crude looked good enough to make fracking profitable. However, good businessmen should know that boom times turn to bust times and starting at the top there is only one direction to go.
      The other thing is that if the US did not start it’s fracking spree, the price of oil would have stayed high, maybe even gone higher. This would have pushed alternative energy and transport to be developed and implemented much faster, causing a permanent reduction in demand. That is the last thing the fossil fuel companies want. Better to screw up then to let the competition take the market away.
      This is a battle for the market over the next twenty years. After that, I don’t think anyone believes oil will be the big player anymore. It’s efficiency and electric propulsion against oil production being able to keep the price higher but not too high.

  54. HR says:

    But wait, it gets worse. Looks to me that the bond market will crash. If you own any bonds, better see if you can get on bid on them now. Even A rated muni’s, once the market starts to go it’ll take them all down like dominoes. I’ll bet you guys breakfast that governments around the world will default on their debts and there will be a flight of capital to the U.S. Equity markets. And I’ll bet you another breakfast that within a year or two the U.S. will have to default on their debts.
    And I think that they’re trying to take out the petrodollar which should reduce our standard of living by at least half. The Russians and Chinese are playing for economic dominance and our crony capitalism regime is playing for carbon tax credits. As bad as it sounds, it looks like the Obama regime is helping the Russians and Chinese. There is no way that anybody is this incompetent. The Obama regime has backed our allies into impossible corners and forcing them away from us.
    Kissinger worked out the petrodollar deal fifty years ago and it was great for us. I’m only hoping that this will make oil a pricey commodity after the hammer comes down.
    Cheers/better buy more ammo.

    • MarbleZeppelin says:

      With the A&P gone bankrupt, I am getting to see what the future might be like. The local one is staying open, but there are long sections of shelf and freezers empty of food. Prices of some foods have doubled, others are spot sold at low price and disappear almost overnight with no replacement. Overall the number of sale items is way down which means going to their competition is a no brainer since the A&P had higher prices to begin with. Further to travel but much lower cost.
      The local farm markets now have the edge.

      • Watcher says:

        The Apocalypse trade is never profitable. Destruction of the system ensures counterparties can’t pay.

    • wiseindian says:

      And I am going to bet that we will still be in this economic limbo 3 years from now. There will be no large scale default of any kind. There might be another recession but no apocalypse.

      We are all Japan (at least for a while)

  55. MarbleZeppelin says:

    The very idea that the Arctic Ocean can start acting like the lake I view from my window ( I live at 41 degrees north latitude) with ice cover in the winter and ice free in the summer, is a bit mind-boggling. To think this may happen within my lifetime is another event to disturb a world-view.

    This paper published in 2006 discusses some of the aspects of the Arctic warming. Of course there have been occurrences and new knowledge since then, but the trend still continues.

    Does the Arctic sea ice have a tipping point?

    Abstract

    [1] Two IPCC fourth assessment report climate models have Arctic Ocean simulations that become sea-ice-free year around in 1%/year CO2 increase to quadrupling experiments. These runs are examined for evidence of accelerated climate change associated with the removal of sea ice, particularly due to increasing surface albedo feedback. Both models become seasonally ice-free at an annual mean polar temperature of −9°C without registering much impact on the surface albedo feedback or disturbing the linear relationship between Arctic Ocean climate change and that of the surrounding region. When the polar temperature rises above −5°C, however, there is a sharp increase in the surface albedo feedback of one of the models, driving an abrupt elimination of Arctic ice and an increase in temperature above that expected from warming of the surrounding region. The transition to ice-free conditions is more linear in the other model, with ocean heat flux playing the primary driving role.
    1. Introduction

    [2] If a glass is slowly tipped with a finger, it eventually reaches a point where its upright equilibrium becomes unstable and it proceeds rapidly to a new stable equilibrium on its side. Although climate models show that global temperature change is mainly linear in climate forcings over a broad range [Hanson et al., 2005], nonlinear or abrupt change may be more prevalent at regional scales. The nonlinear relationship between ice albedo and temperature has been shown to be a potential source for abrupt climate change in ice-covered regions. Simple diffusive energy balance models, that represent this relationship with a step function, produce an abrupt disappearance of polar ice as the global climate gradually warms [North, 1984]. Cooling from this ice-free state must proceed well beyond the point where the small ice cap was removed before polar ice abruptly reestablishes. The phenomenon is known as the small ice cap instability (SICI) as it disallows polar ice caps smaller than a certain critical size determined by heat diffusion and radiative damping parameters. Roughly, this scale is the scale below which the ice cap is incapable of determining its own climate which then becomes dominated, instead, by heat transport from surrounding regions [North, 1984]. For typical parameters this critical scale corresponds to about 18° of latitude from the pole – a region somewhere between today’s minimum and maximum Arctic sea ice in area. Although a number of aspects of these simple models are subject to criticism, a similar kind of instability was found in an atmospheric GCM by Crowley et al. [1994] in a study of Carboniferous period glaciation.

    The rest can be found at http://onlinelibrary.wiley.com/doi/10.1029/2006GL028017/full

    • Javier says:

      This paper published in 2006 discusses some of the aspects of the Arctic warming. Of course there have been occurrences and new knowledge since then, but the trend still continues.

      No. the trend has not continued. There was a lot of Arctic warming and Arctic Sea Ice loss between 1988 and 2007. Since 2007 both seem to have stabilized.

      http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/seaice.anomaly.arctic.png

      Scientists don’t seem to have a very clear idea on why the trend has stopped, but I suppose we all agree that it is a good thing, unless for people making plans to exploit an ice-free Arctic.

      • MarbleZeppelin says:

        YES, THE TREND HAS CONTINUED

        http://arctic-news.blogspot.com/

        See graph below : Trend has continued. In 2007 the trend line was at -3000 cubic kilometers of ice and currently it is at -5500 cubic kilometers of ice. The value as of July 31 was -6000 cubic kilometers of ice.

        • MarbleZeppelin says:

          The National Snow and Ice Data Center of Boulder Colorado graph of sea ice extent as of August 2015. So even the area is still falling. Of course sea ice cover is called even if up to 85% is actually liquid water.

          • Javier says:

            Your own graphs show what I say.

            The blue line in the first graph is imaginary. If you look at the data you will see that ice is back to 2007 levels.

            2011 and 2012 were below -2σ of the 1981-2010 average, but 2013, 2014 (a record warm year) and 2015 are back within 2σ of the average.

            Since that paper was published the trend has not continued. Neither you nor I know what will happen in the future, but so far so good. The Arctic is holding up.

            Did you hear about the ship of fools? Those warmalarmists that went on an expedition to check on the loss of ice during the Antarctic summer and got trapped in the ice and had to be rescued at great expense. That was a crack up story.

            • ezrydermike says:

              about as funny as the Fennica with a hole in it.

            • MarbleZeppelin says:

              You a funny guy. Don’t know data analysis but quite humorous. But as they say, ignorance is bliss. Keep your head buried in the sand. Try your talents selling used cars.

              • Javier says:

                Better funny than sad and trying to scare people.

                The truth is that the warming of the world does not show in the global sea ice area. Whatever sea ice has been lost in the Arctic, it has been compensated by sea ice gained in the Antarctic. Global Sea Area had a deep in the early 2000s, but has since recovered and is remarkably constant despite the warming.

                This image is from Cryosphere, the page from the Polar research group at the University of Illinois-Urbana. Hardly a non-trusted source.

                It does not look like we are running out of ice anytime soon, so stop sweating over an ice-free Arctic. Al Gore already predicted that for 2014, and here we are with as much ice as when the man got his Nobel price. He should give it back given his predictive powers.

                http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/global.daily.ice.area.withtrend.jpg

                • MarbleZeppelin says:

                  Wow, I looked at that site and apparently you do not know how to read their graphs. The Arctic Basin Sea Ice graph shows a significant downtrend in area of ice since 2005. Not that area is important, every winter it will have 100 percent cover (makes nice flat lines on top). That is a boundary value, a we scientists say.
                  Arctic Sea Ice volume has diminished by over 10,000 cubic km since 1979. How can you ignore that. The fact that the Arctic ocean is a slush pond means little. The fact is the ice is going away. Old ice is getting much thinner and most of the ice is new ice (formed over the winter) now.

                  I will make this as clear and explain it so simply that even a third grader could understand it.
                  I have a lake near me. In the winter it is totally covered with ice (except for a few years in recent history) for much of the winter. Sometimes it is partially covered, sometimes it is covered with ice that is less than one inch thick. For part of the winter it might be covered with ice up to one foot thick.
                  Q: When it is covered 100 percent with 1 inch or less ice is that more or less ice than when it is covered with ice 6 inches thick or more?
                  A: Less ice.
                  Q: If I was to say it is covered with ice when it is only partly covered with ice would that make the ice cover value greater or less?
                  A: Greater ice cover value.
                  Q: Does calling an area covered with ice when it isn’t make the graph more or less valid?
                  A: Less valid.

                  BTW, that Arctic Basin Sea Ice Area graph shows an accelerating situation. It shows a sudden appearance of completely open water on the order of one million square kilometers since the 1980’s and much of that in the last 10 years.

                  • Javier says:

                    The question is not if there has been ice melting in the Arctic, MarbleZeppelin. Of course there has been melting. The world has been warming, and with warming comes ice melting, glacier retreats and so on.

                    The question is if the Arctic melting is in an death spiral and about to get to a tipping point as you claim. It is not. If the warming continues the Arctic ice will continue melting, if the warming stops or turns into cooling the Arctic ice will stop melting or start growing back. That is why since 2007 the Arctic ice seems to be in stable condition.

                    Regarding the tipping point in Arctic ice we have two lines of evidence that it does not exist:

                    -First: The Arctic tipping point is based on low order mathematical models that failed to take into account both latitudinal and seasonal variations. When they are taken into account, “the stability of the ice cover vastly increases with the inclusion of spatial communication via meridional heat transport or a seasonal cycle in solar forcing, being most stable when both are included. If the associated parameters are set to values that correspond to the current climate, the ice retreat is reversible and there is no instability when the climate is warmed. Wagner & Eisenman 2015. Journal of Climate 28, 10, 3998-4014.

                    “Scenarios of a sea ice tipping point leading to a permanently ice-free Arctic Ocean were based on oversimplified arguments”

                    “Our results show that the basis for a sea ice tipping point doesn’t hold up when these additional processes are considered,” said Wagner. “In other words, no tipping point is likely to devour what’s left of the Arctic summer sea ice.

                    https://scripps.ucsd.edu/news/research-highlight-arctic-sea-ice-loss-likely-be-reversible

                    – Second: Evidence that the climate has been warmer in the past, Arctic ice was reduced compared to the present, and yet it came back when the climate cooled:

                    “Multiyear sea ice reached a minimum between ~8500 and 6000 years ago, when the limit of year-round sea ice at the coast of Greenland was located ~1000 kilometers to the north of its present position.

                    our records would correspond in the model to an Arctic Ocean sea-ice cover in summer at 8 ky B.P. that was less than half of the record low 2007 level. The general buildup of sea ice from ~6 ky B.P. agrees with the LOVECLIM model, showing that summer sea-ice cover, which reached its Holocene maximum during the LIA, attained its present (~2000) extent at ~ 4 ky B.P.” Fund et al. 2011. Science 333 747-750.

                    Did you read that? Less than half Arctic ice than in 2007 and yet no tipping point was reached.

                    Now you can sweat all you want about Arctic ice reaching a tipping point, but that is because you need to update your scientific knowledge on the issue instead of using your lake as a model.

                    The truth is that there was a lot less Arctic ice 8,000 years ago and nothing irreversible happened. Nobody knows what the climate of the future is going to be, so nobody knows how much ice the Arctic will have. No point in getting all worried about it.

                  • Javier says:

                    As we seem not to be able to hold our knowledge from the past, we tend to think that everything is new under the Sun.

                    Previous warming in the Arctic was similar in magnitude and duration to current warming, yet it was followed by cooling. Will it happen again?

                    “The Arctic 1920–40 warming is one of the most puzzling climate anomalies of the twentieth century. Over a period of some 15 yr the Arctic warmed by 1.7° C and remained warm for more than a decade. This is a warming in the region comparable in magnitude to what is to be expected as a consequence of anthropogenic climate change in the next several decades. A gradual cooling commenced in the late 1940s bringing the temperature back to much lower values although not as cold as before the warming started.”

                    Bengtsson et al. 2004. Journal of Climate 17, 4045-4056.

                  • MarbleZeppelin says:

                    I am glad you finally see the trend. Maybe you can join me in a few years on a cruise across the Arctic Ocean one September.
                    I just hope the trees are not too tall by then. Ever see the miniature trees in the tundra?

                    I remember being in northern Canada watching the aurora borealis pulsing across the sky during the few hours of darkness.

                    Until then, enjoy the weather and don’t worry about tipping points so much. They happen all the time.

                    BTW I never claimed a death spiral nor am I worried about the Arctic melting other than the idiots tapping the gas and little bit of oil that is up there. But then nature will provide us with a lot more free gas very soon. I watch it bubbling up from my lake now.

                  • Javier says:

                    I talk about science and you talk about lakes and cruises, yet the appeal of alarmism is too large to be fought by rationalism.

                    What good is it to be an expert if your predictions turn out to be junk?

                    This is why it is so important to distinguish between scientific predictions and scientists’ predictions. The second ones are as good as anybody else’s.

                  • MarbleZeppelin says:

                    Climate Science Deniers Unable To Comprehend Scientific Study

                    http://thinkprogress.org/climate/2015/05/11/3656442/arctic-death-spiral-deniers-confused/

                  • Javier says:

                    Nice try. I did understand the article. Did you? My quotes were literal, so any confusion has to be brought to the authors and referees of the article.

                    Name calling won’t cut it, since we are supposed to be adults. It is a slimy tactic to offset lack of arguments. I do deny the Arctic Death Spiral but I deny it based on science and evidence. Do you deny that the Arctic Death Spiral lacks scientific support?

                    Wagner and Eisenman state very clearly in their work that “If the associated parameters are set to values that correspond to the current climate, the ice retreat is reversible and there is no instability when the climate is warmed.” and I defy you to show that they say otherwise. If you have even read the paper, that I doubt it. Perhaps you are not capable of comprehending it.

                    So how do you get around the evidence that shows that Arctic Ice has been a lot more reduced than now in the past without a tipping point? Are you denying the scientific evidence?

                  • MarbleZeppelin says:

                    Climate change denial

                    “Climate change denial, or global warming denial, involves denial, dismissal, or unwarranted doubt about the scientific consensus on the rate and extent of global warming, the extent to which it is caused by humans, its impacts on nature and human society, or the potential for human actions to reduce these impacts.[1][2] Climate change skepticism and climate change denial form an overlapping range of views, and generally have the same characteristics; both reject to a greater or lesser extent current scientific opinion on climate change.[3][4] Climate change denial can also be implicit, when individuals or social groups accept the science but divert their attention to less difficult topics rather than take action.[5] Several social science studies have analyzed these positions as forms of denialism.[6][7][8]

                    In the global warming controversy, campaigning to undermine public trust in climate science has been described as a “denial machine” of industrial, political and ideological interests, supported by conservative media and skeptical bloggers in manufacturing uncertainty about global warming.[9][10] In the public debate, phrases such as climate skepticism have frequently been used with the same meaning as climate denialism.[11] The labels are contested: those actively challenging climate science commonly describe themselves as “skeptics”, but many do not comply with scientific skepticism and, regardless of evidence, continue to deny the validity of human caused global warming.[3]

                    Although there is a scientific consensus that human activity is the primary driver of climate change,[12][13] the politics of global warming has been impacted by climate change denial, hindering efforts to prevent climate change and adapt to the warming climate.[14][15][16] Typically, public debate on climate change denial may have the appearance of legitimate scientific discourse, but does not conform to scientific principles.[17][18] …..

                    https://en.wikipedia.org/wiki/Climate_change_denial

                  • Javier says:

                    Oh I know about climate change denial. I was even a student at John Cook’s Denial101x Making Sense of Climate Science Denial – edX course and I got good grades as I can show below.

                    I think I can spot a science denier if I see one, and I will tell you in that case.

                    But I am a genuine scientific skeptic and there are lots like me. You live in a world of fantasy in which catastrophic anthropogenic global warming is a settled science, a fact of live. I have bad news for you. It is a theory. The preferred theory or dominant dogma, yet there is a lot of evidence that does not support it, and that evidence is all over the scientific literature if you care to look for it.

                    Genuine skepticism is growing as nature refuses to collaborate with climate alarmists. That’s why there are such campaigns to call them deniers and refuse to discuss science with them. You can march on insulting. That won’t make you any more right.

            • not clever says:

    • ezrydermike says:

      Read scientific analysis on Arctic sea ice conditions. We provide an update during the first week of each month, or more frequently as conditions warrant.

      http://nsidc.org/arcticseaicenews/

    • Rick's says:

      that’s what happens when we have the natural induced global climate change. it’s not the local weather but climate is warming because of the sunspots. like we live on a planet that doesn’t care about our concepts of national or local boundaries, it functions on a global scale. that’s why originally the scientists called the ideas global warming but so many people didn’t understand the concept so it was changed to something easier to understand, climate change.

      • Synapsid says:

        Dunning-Kruger alert.

        • MarbleZeppelin says:

          Looked it up, quite appropriate but I think it goes deeper than that. I think it is their feminine side coming out in most of them. Probably happens to some as the testosterone levels diminish. Combine that with a weak persona and voila, a highly argumentative, irrational, emotional, nonsensical creature is born.

          • Cracker says:

            And they can’t be bothered to be confused by facts! Big blind spot in thinking, and eagerly defended at every opportunity. Sanity? Nah. Gotta be paid to act so dumb.

    • ezrydermike says:

      Arctic Sea Ice Volume Rebounds, But Not Recovering

      http://www.climatecentral.org/news/arctic-ice-volume-rebounds-19262

      • Javier says:

        Unless you claim knowledge of the future you cannot distinguish a rebound from a recovery at this time.

        A lot of people are assuming that they know what is going to happen with the climate. They are positioning themselves for a big surprise if things turn out different.

        • ezrydermike says:

          “Unless you claim knowledge of the future you cannot distinguish a rebound from a recovery at this time.”

          another example of your misdirected, faux expert, mumble-jumble bs.

          “The authors of a new study reviewing the volume data, detailed on Monday in the journal Nature Geoscience, are quick to caution, though, that one single year of rebound doesn’t suggest any sea ice recovery, as the overall trend is still downward. Rather, the view afforded by CryoSat-2 will help them get a better handle on the ice’s future.”

          The article clearly states in several places about the limits to this data.

          “Because the data only covers five years, it necessarily limits what conclusions can be drawn. Julienne Stroeve, a sea ice researcher at the National Snow and Ice Data Center in Boulder, Colo., said that while it’s good to see the CryoSat-2 data published, “it’s a bit premature to make big conclusions about volume changes from only five years of data without accounting for all the uncertainties.” Stroeve was not involved in the new study.”

          Shame on you.

          • Javier says:

            Pardon me, but the Arctic sea ice minimum was on 2012, three years ago. And since the previous minimum was on 2007 and we are still above that one too, that makes 8 years on which Arctic sea ice has not trended down. I thought we had that clear already. So it is not a single-year rebound not matter what the authors say.

            All those dire predictions from Al Gore and Arctic sea ice experts like Peter Wadhams have turned out to be unjustified alarmism. But hey, it doesn’t matter, we have to have faith in their next dire prediction. The fact that they are never right doesn’t matter.

    • I think I’ve mentioned I worked on Arctic projects. I’m linking the Shell Burger Prospect environmental assessment summary. Check page 41 so you can see a little bit of what we do when preparing to do work in the Arctic

      http://www.boem.gov/uploadedFiles/BOEM/About_BOEM/BOEM_Regions/Alaska_Region/Leasing_and_Plans/Plans/2015-05-11-Shell-Chukchi-EA.pdf

      There’s a lot more work done behind the scenes, and if they have a discovery they’ll have to do a huge amount of work. Note there’s a comment about a “fresh ice gouge”. Those gouges are a pain in the behind for pipelines.

      Here’s more info on the SHELL Burger discovery
      http://www.doi.gov/news/pressreleases/upload/Shell-report-3-8-13-Final.pdf

      http://www.boem.gov/BOEM-Newsroom/Library/Publications/2004/Burger-Fact-Sheet.aspx

  56. ezrydermike says:

    The Environment Protection Agency is proposing a new rule that would reduce methane emissions from oil and natural-gas drilling by 40 to 45 percent of 2012 levels by 2025.

    The rules would also amend existing regulations and be applicable throughout the oil and natural gas industry, including in production, processing, transmission and storage, the EPA said.

    http://www.theatlantic.com/business/archive/2015/08/epa-methane-emissions-oil-gas-industry/401651/?google_editors_picks=true

    http://www.epa.gov/airquality/oilandgas/pdfs/og_nsps_pr_081815.pdf

    • Not a big deal. But the main methane emitters aren’t in the USA. Remember the methane page I put in my blog? I did it to have a reference whenever the subject comes up. It showed heavy methane concentrations over rice growing areas in India and China. This can be reduced if they were to pant GM rice crossed with a barley gene.

  57. ezrydermike says:

    “WE CALL

    3.1 We call upon the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) and the Meeting of the Parties (MOP) to the Kyoto Protocol taking place in Paris this December, 2015 to bring their discussions to an equitable and binding conclusion, bearing in mind –

    ◾The scientific consensus on climate change, which is to stabilize greenhouse gas concentration in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate systems;
    ◾The need to set clear targets and monitoring systems;
    ◾The dire consequences to planet earth if we do not do so;
    ◾The enormous responsibility the COP shoulders on behalf of the rest of humanity, including leading the rest of us to a new way of relating to God’s Earth.

    3.2 We particularly call on the well-off nations and oil-producing states to –

    ◾Lead the way in phasing out their greenhouse gas emissions as early as possible and no later than the middle of the century;
    ◾Provide generous financial and technical support to the less well-off to achieve a phase-out of greenhouse gases as early as possible;
    ◾Recognize the moral obligation to reduce consumption so that the poor may benefit from what is left of the earth’s non-renewable resources;
    ◾Stay within the ‘2 degree’ limit, or, preferably, within the ‘1.5 degree’ limit, bearing in mind that two-thirds of the earth’s proven fossil fuel reserves remain in the ground;
    ◾Re-focus their concerns from unethical profit from the environment, to that of preserving it and elevating the condition of the world’s poor.
    ◾Invest in the creation of a green economy.

    3.3 We call on the people of all nations and their leaders to –

    ◾Aim to phase out greenhouse gas emissions as soon as possible in order to stabilize greenhouse gas concentrations in the atmosphere;
    ◾Commit themselves to 100 % renewable energy and/or a zero emissions strategy as early as possible, to mitigate the environmental impact of their activities;
    ◾Invest in decentralized renewable energy, which is the best way to reduce poverty and achieve sustainable development;
    ◾Realize that to chase after unlimited economic growth in a planet that is finite and already overloaded is not viable. Growth must be pursued wisely and in moderation; placing a priority on increasing the resilience of all, and especially the most vulnerable, to the climate change impacts already underway and expected to continue for many years to come.
    ◾Set in motion a fresh model of wellbeing, based on an alternative to the current financial model which depletes resources, degrades the environment, and deepens inequality.
    ◾Prioritise adaptation efforts with appropriate support to the vulnerable countries with the least capacity to adapt. And to vulnerable groups, including indigenous peoples, women and children.

    3.4 We call upon corporations, finance, and the business sector to –

    ◾Shoulder the consequences of their profit-making activities, and take a visibly more active role in reducing their carbon footprint and other forms of impact upon the natural environment;
    ◾In order to mitigate the environmental impact of their activities, commit themselves to 100 % renewable energy and/or a zero emissions strategy as early as possible and shift investments into renewable energy;
    ◾Change from the current business model which is based on an unsustainable escalating economy, and to adopt a circular economy that is wholly sustainable;
    ◾Pay more heed to social and ecological responsibilities, particularly to the extent that they extract and utilize scarce resources;
    ◾Assist in the divestment from the fossil fuel driven economy and the scaling up of renewable energy and other ecological alternatives.

    3.5 We call on all groups to join us in collaboration, co-operation and friendly competition in this endeavour and we welcome the significant contributions taken by other faiths, as we can all be winners in this race.”

    http://islamicclimatedeclaration.org/islamic-declaration-on-global-climate-change/

    • Javier says:

      Yet surprisingly, the UN poll MY WORLD, The United Nations global survey for a better world, that has been answered by 7,7 million voters worldwide shows that out of 16 problems that humanity faces that need solving, climate change is the one of least concern.

      weird, huh?

      http://data.myworld2015.org/

      • Evolution equipped us with ape brains wired and programmed to solve short term prelims.

        There is no mystery involved in explaining why most of humanity ignores any problem expected to arise in what to a human being is the REMOTE future.

        None of the young people I used to live around , by way of example, cared a rat’s ass about the state of the city we lived in. Our lives were focused at that time on the university and the university district. We didn’t care about crime- except in the immediate neighborhood- or taxes – we were renters not landlords.

        As soon as we started having kids we all moved away. The city looked like (and in fact proved itself so ) a bad bargain for family living. High taxes depreciating neighborhoods lots of crime , low price appreciation overall on housing, crappy schools full of wild as rabbits kids ( not the kids fault of course ) etc etc.

        That realization took looking only a decade into the future.

        Climate change is as remote as old age to a youngster to any layperson.

        There is no reason to expect most people to take it seriously.

        In terms of issues such as defense of the country, we at least have the memory of past wars to intensify our worries about future wars. A huge part of the people are ready to dismantle the military even though there are a few veterans and countless children of veterans of that war in every city in the country.

        We have no institutional memory of climate troubles comparable to WWII.

        Hence between this lack of actual experience in the past and the expected decades yet remaining before the climate shit hits the fan – the public could care less.

        Young women and men with slim and trim athletic bodies who are enjoying a keg of beer are most definitely NOT thinking about bellies hanging over their belts in middle age.

        • MarbleZeppelin says:

          OFM
          “Young women and men with slim and trim athletic bodies who are enjoying a keg of beer are most definitely NOT thinking about bellies hanging over their belts in middle age.”

          Let them enjoy themselves, no sense in telling them about what it is really like to get old. Time will take it’s toll and give them all kinds of wonderful surprises and rewards for living long.

        • Javier says:

          I am not convinced that many of the governments of those 7,7 million people do not share their views that climate change is a lesser problem.

      • Fred Magyar says:

        out of 16 problems that humanity faces that need solving, climate change is the one of least concern.

        weird, huh?

        Not really, what would really be weird is if they were concerned! Even weirder is the fact that as a scientist you post crap like that. You are supposed to know better. And I think you do, but it seems you like spreading disinformation for some reason.

        https://goo.gl/qmmZ46

        A Psychologist Explains Why People Don’t Give a Shit About Climate Change
        June 9, 2015
        by Bill Kilby

        • Glenn Stehle says:

          Bill Kilby says: “A psychologist and economist, Stoknes draws on the findings of social, evolutionary, and cognitive behavioral psychology to explain why English-speaking people just can’t be bothered to care about climate change.”

          I think Kilby is dead on target with that observation.

          Global warming, for instance, certainly seems to be more salient in Spanish- and Portuguese-speaking Latin America than it is in the US.

          Naomi Klein picked up on this point in her recent interview about the Vatican: “[T]he form of Catholicism in Latin America is one that is more influenced by indigenous cosmology than perhaps in North America, and definitely in Europe, precisely because the genocide of indigenous people in Latin America was far less complete.”

          “So, the first phrase of the encyclical, the first paragraph of the encyclical quotes Francis of Assisi, referring to the Earth as ‘sister’ and as ‘mother,’ and then goes on to talk about Francis—Francis of Assisi, not Pope Francis—and it’s significant that Pope Francis chose the name Francis, the first pope in history to choose that as his name—how we ministered to plants and animals, and saw them as his brothers and sisters. And obviously, in there, you have echoes of indigenous cosmologies that see all of creation as our relations. And while I was at the Vatican, I did ask and, before and afterwards, talked to different theologians about whether there is any precedent for a pope talking—using this language of Mother Earth so prominently, and nobody could think of a single example of this. So, I think what is significant about it is that it is very much a rebuke to the worldview that humans have been put on Earth to dominate and subjugate nature. That is very clear in the encyclical. And the major theme of the encyclical is the theme of interdependence.”
          http://www.democracynow.org/2015/8/4/naomi_klein_on_visiting_the_vatican

          And just look at the problems this cosmology is causing Dilma Rousseff.

          There are, of course, narratives which cast her dilemma in the typical right vs. left framework, such as this one today in a Mexico City daily:

          http://www.jornada.unam.mx/2015/08/19/opinion/002a1edi

          However, others see her problem as being much more complex.

          Sure, the neanderthal right, backed to the hilt by the US government, wants to turn the clock back and re-impose neoliberalism on Brazil. But in addition to this, Rousseff must also deal with a challenge from the left, a left in Latin America which is deeply divided, as Immanuel Wallerstein explains:

          There was however a much more important problem facing these countries. There are, and have always been, essentially two Latin American lefts, not one. One is composed of those persons and movements that wish to overcome the lower standards of living in the countries of the South by using state power to “modernize” the economy and thereby “catch up” with the countries of the North.

          The second, quite different, is composed of those underclasses who fear that such “modernization” will make things not better but worse for them, increasing the internal gaps between the better-off and the poorest strata of the country.

          In Latin America, this latter group includes the indigenista populations, that is, those whose presence dates from before the time that various European powers sent their troops and settlers into the Western Hemisphere. It also includes the afrodescendentes, that is, those who were brought in from Africa by the Europeans as slaves.

          These groups began to speak of promoting a civilizational change based on buen vivir – a translation from Incan languages meaning “living well.” They argued for a maintenance of traditional modes of living under the control of local populations.

          The two visions – that of the modernizing left and that of the proponents of buen vivir – soon began to clash, and clash seriously. Whereas, in the first elections that the left won, the left forces had the support of the movements of the underclasses, that was no longer as true in the subsequent elections. Quite to the contrary! As time went on, the two groups spoke more and more angrily and uncompromisingly about each other.

          The net result of this split is that both groups – the left parties and the underclasses – moved rightward. The representatives of the underclasses found themselves allied de facto with rightist forces. Their main demand began to be the overthrow of the left parties, and particularly its leader. This was something that would clearly result in rightist governments coming to power, parties that were no more interested in buen vivir than the left parties.

          Meanwhile the left parties promoted developmentalist policies that ignored to a significant degree the negative ecological effects of their programs. In practice, their agricultural programs began to eliminate the small agricultural producers who had been the basis of internal consumption in favor of mega-corporate structures. Their programs began to resemble in many ways the programs of previous right governments.

          In short, the progress of the Latin American left, so remarkable in recent years, is being undone by the bitter struggle between the two Latin American lefts.
          http://iwallerstein.com/the-latin-american-left-moves-rightward/

          • Synapsid says:

            Glen S,

            Please don’t insult Neanderthals. Several percent of my DNA is Neanderthal.

          • Fred Magyar says:

            In short, the progress of the Latin American left, so remarkable in recent years, is being undone by the bitter struggle between the two Latin American lefts.

            I think a lot of that progress is being undone in Brazil, like in most other countries in similar straits, because they are hitting resource limits. Emphasized and underscored by Peak Oil.

            The left’s progress under Lula was funded in large part by monies brought in by the export of oil. Petrobras isn’t bringing home the bacon like it used to so the government is finding it harder and harder to appease the lower class citizens with programs benefiting them. The people are feeling the pinch and they are out in the streets protesting against the government. Unfortunately the government is now between a rock and a hard place…

            Not yet as bad as Egypt or Greece or Venezuela, but the same principles are in action. The government in the past was able to subsidize food and fuel for the lower classes and they got used to it. Those times are gone and the people don’t understand why those subsidies are no longer available. Now there is the piper to pay! And it won’t matter if it is Left A or Left B or Right wing XYZ, nobody will be able to provide the goods anymore and there will be lot’s of blame games and political musical chairs.

            Good Luck to All!

            • Glenn Stehle says:

              The developmentalist governments of Latin America operate under an assumption which is the antithesis of Say’s Law, something along the lines of “If you create the demand, the supply will automatically follow.”

              It now appears, however, that both Say’s Law and its antithesis are flawed.

        • ezrydermike says:

          One month after release of the papal encyclical on climate change, a new poll conducted by The Associated Press-NORC Center for Public Affairs Research and researchers at Yale University finds that fewer than 1 in 3 Americans, and 40 percent of Catholics, are aware of Pope Francis’s efforts to emphasize global warming as a priority issue for the Catholic Church.

          http://www.apnorc.org/projects/Pages/speaking-out-on-global-warming-public-attitudes-toward-the-papal-encyclical-on-climate-change.aspx

          • Glenn Stehle says:

            If one listents to the Naomi Klein interview, I think one will see that the Pope’s allies are working furiously to remedy that situation.

            • ezrydermike says:

              I heard part of it on KPFK out here in LA. I hope it isn’t just herding cats. Did you read her book? She’s pretty fierce.

        • Javier says:

          Why would you say such a thing, Fred Magyar?

          Since when a UN poll with 7.7 million respondents is crap, and since when talking about it is spreading disinformation?

          Are you implying that it does not only not matter what other people think about climate change, but we should not even talk about it? I am really surprised.

          We should know that the majority of the people in the world do not consider climate change to be a threat, even if some of us think that they know better than them. See figure below, from:

          International trends in public perceptions of climate change over the past quarter century. Capstick et al. 2015. WIREs Clim Change
          2015, 6:35–61. doi: 10.1002/wcc.321

          An interesting article if one is interested in climate change perceptions. Much better than that psychologist trying to sell his book to a white anglosaxon audience that you mention.

          I think it is important to know that in China a majority of the population is highly skeptical of the dangers of climate change, because their belief does have important repercussions on China’s climate policies. Correspondingly Chinese journals and Chinese scientists do not share the alarmism of their Western counterparts.

          Should we be convinced by the majority of the human population that rejects the climate change concerns? I don’t think so, for the same reason that I am not convinced by the majority of climate scientists’ climate change concerns. Numbers don’t matter. Only evidence and data. Science has never been a democratic affair.

          • ezrydermike says:

            well for one, it didn’t really have anything to do with the original post, but you knew that didn’t you.

          • Fred Magyar says:

            Since when a UN poll with 7.7 million respondents is crap, and since when talking about it is spreading disinformation?

            Because you know perfectly well that there are very good scientific explanations as to why the vast majority of people don’t give a rat’s rear end about climate change. Hint, it has absolutely nothing to do with whether or not climate change is a serious problem or not!

            Yet by posting that chart you are implying that it is so far down the list of concerns because it really isn’t something to worry about, after all how could 7 million people, polled by the UN, possibly be wrong!

            So yes, it is a way of spreading disinformation!

            • Javier says:

              Yet by posting that chart you are implying that…

              Uhh, now you claim to know my intentions. Is that prescience or mentalism?

              I am not going to defend against what you think I think. Why not take things at face value instead?

              You cannot seriously think that you or anybody else can explain the motives of millions of people, each with different backgrounds, education, culture, religion, etc, to say what worries them or not. Again you must either think that you are a mighty mentalist or that the world is a lot simpler than it really is. A lot of people means a lot of different reasons.

              Since you haven’t ask me about my motives to bring up that poll, I will tell you. It was in response to ezrydermike comment on the International Islamic Climate Change Symposium plead, mainly to show that the world at large does not share such an alarming view of climate change.

              I think it is useful that we reflect not only on the things that we believe, but also on why we believe on them and how much of that belief is due to our background, education, country, religion, culture, political ideas, etc, and how it compares with what other people believe and why they believe differently.

              While it is ok to hold to your beliefs, it is not ok to trash and diminish those that hold a different belief, even worse if they constitute the majority of the world population. It would not be justified even if you were right. But you could also be wrong. The null hypothesis has not been disproven. Most of the warming could be natural. Where would that leave you, that vociferous minority so full of it that you think you have the right to insult and ridicule anybody that thinks different? I would not like to be in your position if that were the case.

              If the Pacific Decadal Oscillation has been able to stop the global warming cold (Michael Mann dixit), just wait to the Atlantic Multidecadal Oscillation to join in on the next years, coupled with a few Las Niñas. You better get some CO2 curtailed before the fun starts and glaciers start to grow, sea ice increases and temperatures drop. It can very well happen because it has happened before. I am not betting against it.

              • Fred Magyar says:

                But you could also be wrong. The null hypothesis has not been disproven. Most of the warming could be natural. Where would that leave you, that vociferous minority so full of it that you think you have the right to insult and ridicule anybody that thinks different? I would not like to be in your position if that were the case.

                You are a scientist, right? So you had to have taken a course or two in statistics. Even if 7 million people have a strongly held opinion about something that doesn’t prove anything about that thing, one way or the other! Your chart does not support your thesis about climate change! And it wouldn’t do so even if 7 billion people had the same opinion.

                http://xkcd.com/925/

                • ezrydermike says:

                  another thing left out of this discussion is unintended consequences. Look what happened after we cracked down on pirates.

                  • Nick G says:

                    hhmm. I think we’d see the same relationship between temperature and number of baths per month.

                    One every 3 months, whether you need it or not…

        • Roy Philip Loel says:

          This is my own personal observation about Global Warming, think about it or don’t, I don’t care.

          I frequently observe that people who worry about man-made Global Warming being a problem usually deny God as their creator and savior.

          On the other hand, people who deny man-made Global Warming being a problem usually accept God as their creator and savior.

          This isn’t always true – but usually.

          People who worry do not understand that worry is not a fruit of the Spirit and therefore comes from Satan. They do not accept that Satan wants to kill and destroy God’s creation. But yet they worry. Worrying causes many physical problems.

          People who accept Jesus as their savior know they can give their concerns to Him and have no need to worry.

          It’s actually kind of ironic if you think about it.

          • Javier says:

            Well, count me as an skeptic both of catastrophic anthropogenic global warming and God’s existence, for your little personal poll. I am also very skeptic of any relationship between religious beliefs and climate change beliefs, but perhaps you can find some scientific literature about it to try to convince me.

          • Bob Nickson says:

            Poe’s Law.

    • I see this group includes the Grand Mufti of Uganda. Quite impressive.

    • ezrydermike says:

      Attendees at the International Islamic Climate Change Symposium in Istanbul from 20 countries produced, and 60 of them signed, a declaration this week warning of the dangers of climate change and urging urgent action to curb carbon dioxide emissions.

      But, I fear the press reporting on this meeting is exaggerating its significance.

      Contemporary Islam is more like Protestantism in Christianity than like Roman Catholicism, in not having a single head or firm church hierarchy. While the message of the symposium is most welcome and one hopes it will be influential, it has to be pointed out that it seems to come mainly from Muslim academics, with only a few clerics joining in, and that there weren’t many representatives from the Muslim world’s big hydrocarbon states such as Saudi Arabia. It doesn’t seem that al-Azhar Seminary in Cairo, Egypt, one of the foremost seats of Sunni learning and authority, was in any way involved.

      http://www.commondreams.org/views/2015/08/19/defying-saudis-and-iran-muslim-thinkers-call-action-climate-change

  58. ezrydermike says:

    anybody know anything about this? Have they started construction?

    Bethel Energy Center

    The 317 MW Bethel Energy Center will be located in Anderson County, within Texas’ ERCOT power market. After completing the final stages of permitting and project finance, we aim to break ground in Spring 2015. When complete, the plant is expected to provide power for over 300,000 homes and generate millions of dollars in tax revenue each year.

    http://www.apexcaes.com/project

    Oncor Electric Delivery Company on July 10 filed an application with the Public Utility Commission of Texas (PUCT) for authority to construct a new 345-kV transmission line to connect the Bethel Energy Center in east Texas to the ERCOT grid.

    http://www.transmissionhub.com/articles/2015/07/oncor-plans-345-kv-new-bethel-transmission-line-project-to-interconnect-energy-storage-facility-in-texas.html

  59. One long time oil pundit’s opinion of five more oil companies that will be in bankruptcy in the very near future:

    http://www.forbes.com/sites/christopherhelman/2015/08/17/as-oil-goes-down-bankruptcies-go-up-these-5-frackers-could-be-the-next-to-fall/

    The outstanding debts of tight oil companies are now on the market – being sold by the debt holders- at breathtaking discounts thereby earning breathtaking yields- in the event these debts are actually paid off.

    It seems quite obvious by now, to me at least as a follower of the guys who post about costs and prices here in this forum, that a very large portion of these debts will NEVER be paid.

    The portion that will get paid probably depends on the oil company involved having substantial assets other than tight oil and gas. At first glance it looks as if most of the tight oil companies don’t have much if anything in the way of other asset such as conventional oil properties.

    So most of these debts are unlikely to ever be paid.

    • shallow sand says:

      OFM. What amazes me is how much “casino money” is out
      there trading the equity and debt of all these companies. As you know, there are many more on the brink.

      Although leases are worth differing amounts, try putting a value of $40K per flowing barrel on oil and $15K per flowing BOE of gas/NGLs. Add the cash, which is not a lot, then subtract the debt.

      This exercise will cause you to find almost all publicly traded independents are insolvent using those metrics.

      Now consider that when oil prices were in this ball park in 2004, leases sold for 10K-30K, with generally lower lifting costs. Also, the basis differential was not as pronounced.

      A lot of gas sells for under $2 per mcf. I don’t know about gas lease sales, but I bet historically when gas was under $2, on a 6/1 ratio for BOE, gas leases sold for under $15K per flowing MCF.

      In 1998-1999 I know of leases that were given away to off load plugging liability. Other sales for less than $5K per flowing barrel.

      This lasts through next year, (30s or below in field) this will be worse than 1998-1999 IMO, given 3-4 times increase in OPEX.

      The collateral is absolutely not there at these levels.

      • Hi SS ,

        I know nothing at all about oil on a first hand basis but you are dead on as far as I can tell.

        Somebody who is in the business of trading stocks or bonds might have some idea of how many companies involved in tight oil have enough other assets to survive.

        Up until I started reading the comments posted by guys like you I had no idea the operating costs associated with oil wells are so high. My assumption was that just about all the money went into getting the well drilled and ready to produce and that operating costs per barrel after that were only a small part of the revenue coming in.

        NOT SO AT ALL- except maybe in places such as Saudi Arabia where wells produce many times as many barrels per day and cost much less to drill.

        It looks as if a lot of small producers are stuck between the devil and the deep blue sea, compelled by geology and or regulatory authorities to produce wells that are not generating any cash at all- wells with operating costs that exceed the value of the oil produced.

        If I understand this matter , you cannot shut down some wells because if you do you can never hope to get them restarted. And others you keep producing because you cannot afford to pay the LARGE cost of closing them up permanently whereas you can somehow manage to cover the SMALL day to day losses.

        If there is any way out except to just wait for depletion and lack of upstream spending to cut far enough into production to force the price up I can’t see it.

        A lot of people in forums such as this one seem to think that Uncle Sam gives a hoot about the troubles of oil patch people and companies.

        My opinion is that given the shaky state of the economy, Uncle Sam is perfectly happy with dirt cheap oil and cares less about the oil industry.

        Now when the foreclosures and debt write-offs get to coming fast enough and in large enough amounts to threaten the banking industry this may change.

        But if any body gets bailed out it will be bankers nearly every time in my opinion rather than actual oil guys and oil companies.

        A lot of people I know have gone broke at one time or another. I have been on the razor edge of broke myself a couple of times but more so to a lack of hustle than a lack of opportunity.

        You and Mike and the other hands on guys here come across as survivors.

        If you have to go to work at a Dairy Queen you are apt to be the manager sooner or rather than later- or the owner of a competing restaurant down the street.

        • Mike says:

          Thank you, Mac; you are always a gentleman and I appreciate that more than you know.

          I make light of Dairy Queens but the truth is, they are important social meccas in S. Texas culture. If I say to anyone in Texas, I’ll meet you at the Dairy Queen, enough said.

          I kissed my first girl in the parking lot of a Dairy Queen when I was 13 (borrowed my dad’s pickup to do it) and years later once told the single most powerful oil and gas attorney in all of Texas to kiss my ass in a booth in a Dairy Queen. If working in one is what it comes to, I’ll be damn proud to flip burgers at the DQ. I will have come, as one might say, full circle. Life is like that, isn’t it?

          As an interesting side note, to you anyway, Dairy Queens were so important in the initial development of the Eagle Ford shale play in S. Texas that it was often the epicenter for leasing activity between rancher and landman, and every aspect of LTO development thereafter. I would venture to say that literally hundreds of billions of dollars have been agreed to in a Dairy Queen. Without question.

          So intense was the need for qualified labor early in the EF boom people providing services to the shale oil industry would literally go into the kitchens of DQ’s and offer burger flippers 120 K a year to drive a vacuum truck, or screw flowline together. I saw this once, personally. DQ’s had no choice but to raise their hourly wages by 5-8 dollars an hour and eventually the competition for labor, qualified or not, English speaking or not, got to be so intense that Dairy Queens began offering signing bonuses to anyone that would come to work for them. Sometimes that bonus was upwards of 5-8K.

          All oil booms in the 145 year old history of the oil business have those kind of colorful stories. This last one is no different.

          God Bless Texas

          Mike

          • shallow sand says:

            OFM. Don’t feel bad for us. We do other stuff and won’t be dead in the water if we have to plug em all out. It would hurt mightily though financially.

            Would like to shut them all down in protest till the price recovers but have employees who dont want to lose and royalty folks would throw a fit. State can jump your but too. Could kill the floods.

            Mike knows more and lives it more. Toolpush and others here do too.

            US oil and gas is unique in that there are tens of thousands of small businesses and hundreds of thousands of small royalty owners. This fact is known by few. Likely due to the fact most are rural people.

            I feel somewhat qualified to comment on the financial stuff. Given the dearth of truth out there, feel some light backed by numbers needs to be shone.

            Obama wants to gut small producer tax items. That’s ok, but I wish he knew they applied to small fries. Instead he calls them big oil tax breaks. I am afraid he knows so little he’s not lying, just without a clue.

            • OBAMA and the CLINTONS do have a certain sense of obligation to the poor people who help put them into power, and keep them in power.

              Some may call it idealism or sincerity on their part. I will not argue that sincerity and idealism are not PART of their thinking.

              But there is no doubt in my mind that both the Clintons and the Obungler are just about as deep in the vest pockets of big business and big banking as any republican- except maybe one such as Trump who WEARS the vest with the pocket from which Hillary and the Obungler peek out.

              My grandparents used to throw the mules a good bait of corn after a hard day in the field. Bill and Hillary and Barak throw the commoners an ear of corn once in a while in the form of socialized medicine or food stamps or free school lunches.

              That is more than Trump would do.

          • Synapsid says:

            Mike,

            When I worked in NW Alaska in the early 1980s we often flew out of Kotzebue. Kotzebue didn’t have paved streets but it had three places to eat: the restaurant at the Nulukvik Hotel, the Arctic Dragon (a Chinese restaurant that I was told was owned by Koreans), and a Dairy Queen.

            Texas wasn’t alone.

            • Mike says:

              In Alaska?! That’s very neat, thanks Syn. To celebrate <41 dollar oil today, I bought the boys chicken fried steak burgers, fries and enough ice tea to float a VLCC at the local DQ for lunch. It was awesome.

              • Synapsid says:

                Mike,

                I’ve been trying to find the perfect chicken-fried steak in the Mountain West since about 1960. Texas, sure, but I want my part of the West.

                Once, at Monarch Pass where US 50 crosses the Continental Divide, I tried ordering it and the waiter said “Sir, that isn’t one of our better items.” He was right.

    • Why wouldn’t it be paid? The bond holders can force the borrower into bankruptcy. The company assets can be sold. The purchaser will be a company with a more optimistic vision of oil prices. These deals can be structured before the borrower does go into default to make things work smoothly. And it would not surprise me the buyers will be backed by Saudi investors. 👹

  60. Longtimber says:

    According to the Gospel of EIA, the U.S. WILL produce and peak out at 14.2 million barrels of oil and oil equivalents per day by 2020. 14.2 million at what price again? Bet they figure how to leave the waste water down the hole. Gotta Loveit it all. Money for Nothing, Chicks are Free. At Least they point out “or oil equivalents.” slideshow here. Absolute-Super-freaky-amazing ?
    http://www.forbes.com/pictures/mef45eheeh/the-united-states-will-r/

    • MarbleZeppelin says:

      Wow, that’s great news, Gasoline will be selling for 50 cents a gallon or maybe a quarter. This is the land of the free.

    • Got to be careful with EIA figures. That particular peak could include NGL, used frying oil from Dairy Queen, ethanol, and recycled milk bottles.

  61. MZ,

    It is well known that somewhere among the penumbras and emanations or whatever that are not spelled out specifically but never the less part of our god given constitutional rights there resides an inalienable right to dirt cheap gasoline. LOL

    I don’t buy the Saudis being out to drive the American tight oil industry into bankruptcy as a primary goal on their part but rather as a secondary consideration.

    My personal opinion is that their real enemies are closer to home.

    Just copied , this by a professional oil analyst of the financial and political breed:

    xxxx

    The oversupply problem may very well be amplified by the Iran nuclear deal. If the historic agreement goes forward, sanctions relief will allow Iran to drastically increase output. That could trigger a reaction from the Saudis, Iran’s longtime rival in the region.
    “The Saudis’ best weapon is the lowest oil price at maximum volume. They have enough financial reserves to have staying power for years,” Kotok.
    On the other hand, Iran has far less financial flexibility and it needs higher prices to turn a profit.
    “With a low price, the Saudis are denying their enemy across the Persian Gulf money. That’s an oil war,” Kotok argued.

    xxxx

    My personal opinion is that the Saudis would rather spend their last dime on an oil war than to see Iran with the bomb. People in that part of the world play for keeps and are not shy about STARTING wars if they think they have a reasonable shot of winning them.

    IF Iran gets the bomb then we can expect the Saudis to go flat out for one of their own immediately.

    Just one actually used anywhere in Sand Country will be more than enough to solve the oil industry’s price problem.

    • The Saudis don’t have that much cash.

      • ”The Saudis don’t have that much cash.”

        If I am right they are willing to spend however much they have, which appears to be enough for them to get by with dirt cheap prices for a couple of years at least.

        After that ????

    • MarbleZeppelin says:

      Old Farmer
      Don’t we own all the Iraqi oil? We won the war, right?

      • If we had acted the way countries usually act after winning a hot fight we WOULD own that oil, title secured by means of the ” strong right arm” as often cited in history books.

        BUT Uncle Sam does not usually act quite like other extremely powerful countries have historically acted. We paid the price of keeping it flowing out of Iraq and Kuwait etc for a few more years at least – just to be made to look like a bunch of goddamned fools for then refusing to PAY for it in the usual Sand Country fashion- meaning ten percent or more of the price goes to kickbacks and bribes.

        The Chinese and the Indians most assuredly are used to doing business this way, no problem at all for them. Ditto a lot of other countries where the rule has been rule by men rather than by law.

        So- the people we put in charge are about as corrupt as the ones we kicked out, if less aggressive, and in any case they have already proven themselves incapable of holding the country together. They will be out on their asses soon. Sky Daddy alone knows who will be in control in another couple of years.

        Maybe I am wrong but I think the Saudis are with plenty of justification scared shitless by every neighboring country big enough to be a potential threat to them.

        Taken all around the entire international oil market is a clusterfuck on the grand scale. We are fighting a desperate rear guard action at high cost to secure oil one year or maybe one decade at a time while everybody else gets their share without sharing in the cost of keeping it flowing.

        This is not unlike the situation of the Saudis paying the entire price or almost the entire price of holding back oil off the market to support the price while the rest of OPEC cheated their own asses off.

        In another decade or maybe even less there will be less and less to flow in any case and so at best all we are doing is buying time.

        My sympathies are with the hands on guys and my brain tells me we are utterly and absolutely dependent on oil for at least a couple more decades. The hands on guys jobs are safe LONG TERM imo for another generation at the longest, after that oil is going to get to be pretty scarce indeed. But as production shrinks, the older guys will be retiring and if they are smart, their sons will go into other lines of work for the most part.

        NICK is dead on when it comes to the long term argument. Oil is expensive and will get to be more so and we need to be actively working to get away from it as soon as we can without shooting off our own toes.Transitioning to a renewable energy economy is going to take a LONG time. We MUST leave oil before oil leaves us.

        We should have gotten started sooner.

        Pray to the god (s) of your choice for Pearl Harbor Wakeup Events.

        Such events are our best and perhaps only real hope of really getting to work fast enough to leave oil before oil leaves us, imo at least.

        Nick may believe the market will solve the energy problem in a timely fashion but I part ways with him on that point.

        • Boomer II says:

          We are fighting a desperate rear guard action at high cost to secure oil one year or maybe one decade at a time while everybody else gets their share without sharing in the cost of keeping it flowing.

          That’s the bottom line for the political hawks. They may want to be the world’s policeman, but they (nor most Americans) want to pay the bill for doing that.

          While I think the Bush administration was dumb to get us into the Iraq/Afghanistan war, they were dumber in thinking they could go in and out without many lives lost and a big military bill. If we are going to fight wars, we should be telling American citizens that there will be rationing, there will be tax increases, and there will be a draft if necessary. If the whole country isn’t prepared to sacrifice, we shouldn’t be starting wars that we don’t need to fight. And if we do need to fight them, then the entire country should be mobilized to do little else during wartime.

        • Nick G says:

          Nick may believe the market will solve the energy problem in a timely fashion

          No, I think we absolutely need public policy action. Much higher CAFE, stiff fuel and carbon taxes. The taxes are indeed relying on the market, but on a well regulated market.

          I have argued that price signals are much better than rationing (though very carefully limited rationing, or price signals adjusted for income might not be a bad idea). Many of the lines to gas stations in the 1970’s were caused by rationing.

          Well regulated markets include internalizing external costs, like the costs of military, security, pollution, etc.

          If the Straits of Hormuz get blocked by war, we’ll definitely need regulation: my favorite is converting all highways into all-HOV lanes (except for EVs).

    • Stu from New Jersey says:

      Actually, Iran has not started a war in almost 300 years.
      Also, if Saudi Arabia did not try to get a bomb in the face of 80-100 warheads in Israel’s possession, why would they react that way to Iran?

      • Nick G says:

        We see a lot of claims that Iran is being aggressive through surrogates in places like Iraq, Syria, Yemen and Lebanon. What do you think?

        • Neocon messaging. The USA seems to be in its own enclosed information bubble.

          Iran isn’t a threat to USA interests, but Netanyahu has a bee in his bonnet because Hezbollah is Shiite, like the Iranians. Hezbollah has a border dispute with Israel over Sheba farms, and has shown they can go toe to toe with the IDF.

          The key is not to confuse USA interests with the Israeli right wing interests. That’s mighty hard for Americans to figure out.

        • Stu from New Jersey says:

          I think *everyone* has surrogates in Syria! I don’t know if their “surrogates” outnumber Israel’s or Saudi Arabia’s. That conflict looks like it was started by Sunni’s, anyway, which would rule out Iran.
          I’m sure they *do* in Yemen, especially now that the Saudi’s have sent in armies and are shelling civilian populations.
          As far as Iraq goes, the US invasion probably looked like an invitation to Iran to get involved, since it removed Sunni rule. Much of the Shia leadership had close ties to Iran out of necessity, so it was inevitable. Also, they would like to ensure they do not get attacked by Iraq again in the future.

      • The Saudis are not much worried about Israel using nukes except in a defensive war.

        Nor is anybody else.

        Israel is not apt to invade any territory not adjacent to and close by to the country’s current borders – at least not to permanently occupy such territory – in the future. Israel does not and never will have the manpower or resources to go a viking so to speak and try to conquer her neighbors. A few square miles is one thing , a big chunk of territory is another altogether.

        The way things look for now, to me at least, is that the country will be lucky to survive if the Israelis lose the backing of the USA. At one time that did not appear to be a serious concern but more recently …..It is hard to say.

        The Israeli lobby in the USA is extremely powerful but there are powerful opposing lobbies, and the opposition is gaining power and membership.

        Nobody really knows what Iran or Iraq might do because nobody knows who will be in power in those two countries a year or two down the road.

        If I were a Saudi I would be paranoid as hell and wondering as in the classic cartoon
        with the king sitting on the royal crapper in his royal robes reading the paper and talking to himself.

        “I know I am paranoid. The question is ‘Am I paranoid ENOUGH? ‘ ”

        The Saudis have more reason to be worried than their neighbors because they are the ones with SO MUCH to lose.

  62. Ronald Walter says:

    95,000,000 bpd, the demand, the supply.

    The money spent to get it was once 147, what people were going to pay, not too willingly though, down to 43, what people can afford to pay, finally, but barely, still too expensive. A couple of bucks per barrel should be enough, the price is right right there. A dime for a gallon of gas will do, fifteen cents at the most.

    You’ll get a Democrat for President if that happens. Hillary doesn’t have a snowball’s chance in hell of becoming President of the USA, she can’t win. Even an idiot like Donald Trump would win against Hillary. She’s yesterday’s news, a has been.

    The Democrats need somebody with a lick of sense, maybe they should ask Donald Trump to run as a Democrat, President Truman holds the record for the mother of all bombing missions. Then President Johnson, a true blue Democrat, bombed targets from ten thousand miles away. Democrats are proficient at bombing. All for a few more drops of black gold. Trump might as well be the Democrat’s choice, they need all the help they can get and the Republicans wouldn’t stand a chance to win the presidency and might as well have another president without a lick of sense just like all of the others beginning with President Harding then right to Hoover.

    Straying away from the topic of how many barrels of oil.

    Times 1000 days, 95,000,000,000 barrels of crude plus condensate.

    Times 20, 1.9 trillion barrels.

    1.25 trillion gone, 20,000 days, 20,000/365=54.8 years to go, the plateau begins a right side decent to the point in time where the oil produced will be much more less than it is now, the supply will control the demand. Oil becomes a thing of the past, but not gone.

    In ten years, everybody is going to have a worried look on their faces.

    It’s a heavy duty deal, can’t be ignored, the burning of oil will continue until the very day arrives when enough is enough.

    Less than two percent of the sun’s energy reaches the earth, so the sun has to waste 98 percent of its energy content just to keep the earth warm enough so humans can do all of the stupid stuff they do each day and can belly ache all day long about it.

    Can’t ignore the sun, it’s 93 million miles away and you can still see it, 500 seconds old light, you’re looking at the past when you see the sun.

    • Don’t confuse your liquids. We don’t add NGL to crude and condensate. Even some condensate is a bit mislabeled because it includes too much light stuff.

  63. Watcher says:

    Sub 41. Threatening sub 40.

    Anyone want to start a bailout countdown?

    • Jeffrey J. Brown says:

      $40 or so translates to wellhead price in low 30’s in our corner of the Oil Patch. One would think that for the two or three companies that survive this crash, things will be pretty good for them.

      Joke from the 1986 oil price crash: What’s the difference between a mockingbird and a Midland oilman? A mockingbird can still make a deposit on a new Mercedes.

      On a recent trip out to West Central Texas, I noticed two large yards full of oil field equipment (owned by creditors I suspect) for sale between Fort Worth and Abilene. IMO, it’s going to take–assuming a price recovery–quite a while to get anywhere close to last year’s activity levels.

      • Doodlebugger says:

        At least one of those auction yards is owned by the Wilks family who built, then sold Frac Tech at near top of the market and has since branched into the auction business.

  64. SAWDUST says:

    Fed’s minute are set to be released in about ten minute. My guess is they are going to indicate that they think it’s time for a rate hike. This is not dollar positive. As US equities will unwind. Oil just dropped to just above $40 but i wouldn’t be at all surprised to see oil bounce if in fact the FED indicates a rate hike for September.

    Those shorting bonds are going to get steamrolled when equities unwind and the 10y yields fall into negative territory.

    If yields on the 10y go negative investors will have to pay for the privilege of loaning the government money. Somehow i think that this is the plan behind the rate hike and has been all along. Getting interest rates into negative yields on long-term bonds that is.

    Fed can’t allow yields to rise on long-term bonds as rising yields mean lower prices and that creates collateral issues as all those bonds are the collateral used thats holding up the stock market, housing market, swaps market. ect.

    • SAWDUST says:

      The one bubble that in their mind has to continue no matter what or at all cost is the bond bubble. Rates and yields have to be always going lower and prices always going higher. Or the show is over. Everything the Fed does it does to protect the value of government bonds.

      • Ves says:

        SAWDUST: “Everything the Fed does it does to protect the value of government bonds.”

        It’s like trying to invent the car that does not have a reverse 🙂 Sometimes we need a reverse.

    • Javier says:

      As I said a few articles before, the FED will find excuses not to hike rates. In my opinion a rate hike in the present economic conditions carries too much risk of precipitating a recession. I don’t think they’ll dare to risk that.

    • Glenn Stehle says:

      So the Fed is going to hike rates on the front end of the yield curve, and that’s going to cause rates on the back end to go negative?

      How does that work? I don’t think I’ve ever heard that theory before.

    • Stilgar Wilcox says:

      Zero Hedge has articles today suggesting the chances of a September Fed rate hike have gone down in light of projections of lower future GDP.

      Meanwhile, oil price has dropped sharply:
      http://www.bloomberg.com/energy
      Wednesday the 19th:
      WTI -1.94 to 40.68
      Brent -1.82 to 46.99
      WTI almost into the high 30’s.

    • Glenn Stehle says:

      SAWDUST said: “Oil just dropped to just above $40 but i wouldn’t be at all surprised to see oil bounce if in fact the FED indicates a rate hike for September.”

      This is not consistent with anything I’ve heard from economists.

      What I’ve heard from economists is that, when the US implements a tight monetary policy, commodity prices go down.

      This has been common knowlege amongst economists for a long time. And as far as I know is not at all controversial, as the conclusion is grounded not only in theory but in a considerable amount of empirical data as well.

      For instance, in an article recently published by three IMF economists, they state that

      Frenkel (1986) documents that US monetary easing – usually related to a more depreciated dollar – results in higher commodity prices, and vice versa.

      http://www.voxeu.org/article/strength-dollar-and-emerging-markets-growth

      And if we go look up Frenkel’s article, we see that he in turn refers to articles published in the 1970s.
      http://www.hks.harvard.edu/fs/jfrankel/overshootingmodel.pdf

  65. HR says:

    Lot of talk at zerohedge.com and rig zone.com about the frackers having no luck with new financing and fed regulators looking over bankers shoulders. Frackers said to be considering deals they rejected not too long ago.
    Private equity interested at much lower prices. I’m not sure if this is all a disinformation head fake or the real deal. And if private equity takes over the wells, will they run flat out with the ball or be smart with it?
    Anybody got inside scoop?

    • What’s the sensible thing to do? Buy the property and invest in water disposal and gas handling facility consolidation to drop OPEX. Drill only to hold leases, defer well repairs of all marginal wells, put new wells on choke. Buy a guy like Mike I and put him in charge, give him a new high quality winter coat and make sure he gets to work by 6 AM.

  66. Watcher says:

    There is a problem with the “private equity can buy these wells very cheap now and have them without the loans that paid to drill them” theory.

    The problem is the decline rate. If you buy a well over a year old, which is most of them, it’s not flowing much. So that cheap price you get it for is just about what it’s worth.

  67. shallow sand says:

    Recently my email has been getting bombed with a lot of oil and gas projects for sale. They used to never list the asking prices, now they are starting to.

    Most stark one was received today. Price reduced from $135 million for the whole thing last year to $5 million for 1/2 interest now. 20,000+ acres, over 5,000 acres held by production, four wells producing over 90 BOEPD.

    Dang.

    • Boomer II says:

      I just got a postcard in the mail with info about oil/gas properties for sale. I didn’t realize my mailing address was on any energy databases. However, I am subscribed to some online energy newsletters so either I listed my mailing address for some of those, or it was easy enough for someone to link my online info with my mailing address.

      At any rate, while I was involved in an oil and gas partnership years ago, I haven’t done anything like that in quite a long time, so someone is throwing out a very wide net to find buyers.

  68. HR says:

    There is all of the sudden a sense of urgency out there. Maybe WTI in the thirties is the catalyst for this. I don’t know. But I do know that when I start seeing articles in all the places that I normally look talking about sudden deal making going on, then something is up. Again, it could be the classic disinformation crap thrown about by “news” orgs, but I doubt it. The whole oil and gas sector is in trouble. Hell, I’m in trouble and manoevering mightily to fight on.
    Something is up. I can smell it. If it’s true that nobody is willing to loan the frackers any more dollars, expect the m&a activity to swing into high gear. What that means on the other side is the unknown.

  69. Ronald Walter says:

    What would probably work would be a fleet of quick change battery stations that can keep an ev going for hundreds of miles. One station every fifty miles would probably be enough. If the lithium batteries are too fickle, then use acid batteries for quick change stations, just needs some more maintenance and care. Drop out the battery for fully charged spare at the station and leave your battery to be charged at the station. Might need a warehouse, so you’ll need electric forklifts, which are the cat’s meow for indoor forklifts.

    It is possible to have electric vehicles doing a fair share of the work that needs to be done.

    There was a regular fleet of battery powered vehicles used for taxis in New York City in 1895, it’s not like it can’t be duplicated and is being done today.

    Electric vehicles do have a future, but don’t tell anybody.

    We’ve got all of the kerosene to light kerosene lamps, but all of this gasoline just sits there, nobody knows what to do with it. Along came Henry Ford and made good use of a oil byproduct that was useless. Now it costs an arm and leg to burn gasoline in your car.

    Funny how that works.

    We’ve got electricity coming out of our ears but nobody knows what to do with it… yet.

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