More David Archibald on LTO plus Net Imports

David Archibald has recently revised his peak date for shale oil. The below was contained in a recent post I received from him:

Ron,

For what it is worth, just to let you know that I have recanted on my estimate of US LTO production.

This is from reading the presentations put out in September by the US independents.   I started with the EOG presentation and then worked through the others that EOG referred to.  If Hubbert-type analysis works for LTO, it may be too early to apply it.

The rig count for the Bakken etc may be down to flat but the fraccing units are pumping a lot more sand and the economics of fraccing have improved a lot over the last two years.  That in turn means that the resource is larger at a given IRR cutoff.  This is currently my best guess of the three major plays:

David New 3

Others are appearing such as SCOOP in Oklahoma.

 I tried to make the graph useful by putting in the cumulative production to 2035 so that people can mentally adjust it for what they think EUR might be.  The Permian has a lot of NGLs and natural gas which means that the energy produced is about twice as large as the oil component.    The reason I didn’t make the Permian as peaky as the Eagle Ford for example is that there at lot of stacked plays in the Permian.  Once companies have got acreage and got one horizon working, they don’t have to be in a rush to develop the others.

 The US LTO boom is worth about two to three years of conventional oil decline:David New 4

With further demand destruction, the US will become energy independent.

David revised his opinion on LTO after reading presentations by LTO drillers. I am not so sure this is a reliable source… However, eyeballing his first chart, he has LTO increasing from about 3.35 mbd today to about 4.1 mbd in 2019. That is an increase of only about .75 mbd over the next 4 to 5 years or so.

Looking at his second chart it looks like he is predicting the peak of world oil production to be this year, 2014. That falls within my prediction of a peak in 2015, give or take one year.

The EIA’s International Energy Statistics export data is pretty poor, with data only through 2010. But their data on imports is much better, updated through April 2014. The data used to make the charts below are in thousand barrels per day through April 2014. Unfortunately they only give import data for OECD nations. We have no data for India, China, Brazil or many other World nations. The OECD members are the following countries:

Australia                 Hungry                 Norway            
Austria                     Iceland                 Poland
Belgium                   Ireland                 Portugal
Canada                     Israel                    Slovakia
Chile                         Italy                       Slovenia
Czech Republic      Japan                    Spain
Denmark                 South Korea        Sweden
Estonia                    Luxembourg        Switzerland
Finland                    Mexico                  Turkey
France                     Netherlands         United Kingdom
Germany                New Zealand        United States
Greece

OECD Imports

 

Net OECD imports are down about 9 million barrels per day since 2005

But the chart is misleading. It includes not just producers but net exporters as well. Exports are subtracted from imports to get net imports. Sometimes it is a negative number. So the below chart excludes all major producers except the USA. That is the chart includes USA’s imports.

OECD Imports less Producers

So OECD net imports, excluding major producers but including the USA, are down about 10 million barrels per day since 2005. But what if we exclude the USA also?

Major OECD producers are the USA, Norway, United Kingdom, Mexico and Denmark.

OECD Imports less Producers

OECD imports less all major OECD producers are down about 3 million barrels per day since 2005.

USA Net Imports

 

That means that USA net imports are down about 7 million barrels per day since 2005 and 2006.

This is important: Were the USA still importing what we did in 2005 and 2006 the world would be short another 7 million barrels per day. About half this reduction in imports has come from new shale oil and the other half from demand destruction due to high prices. At any rate the USA’s effect on World oil supply and demand is very significant.

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286 thoughts to “More David Archibald on LTO plus Net Imports”

  1. “With further demand destruction, the US will become energy independent.”

    With further credit destruction the US will become … like, totally bankrupt, dude! LOL!

  2. So by 2020 the US will be experiencing peak oil and the ROW will already be several years into it. I assume efforts of increased efficiency and transforming other fossil fuels to liquids will be the first response to the crises. Increased pricing will probably put a tailspin to the world economy which will then decrease further drilling and exploration. Not going to be a happy time if you depend on outside resources and a job for income.

      1. And it is happening again when the continuous fields tap out.

        That first graph shows a descent of 1.5 million bpd/yr, that means that in 12 years the total US consumption of oil will be missing from the world. Basically 1/5 of production gone.

        1. To which graph do you refer? 1st graph shows LTO dropping from 4 to 2.5 mpd over about ten years. Don’t see 1.5 mpd/yr drop in another graph…?

          1. The 1.5mbpd/year decline is in the second chart, world production. This is broadly in line with what other experts have presented as how much decline one needs to make up annually to stay even.

  3. Distillate fuels are required for modern Life both Global and Local. Wonder if it’s possible to estimate percentage of US diesel requirements met with imported vs domestic streams. Gov reporting liquids such as LTO and moonshine as crude really confuses the situation.

    1. Distillate fuels are required for modern Life

      Not really. EVs of various sorts work for passenger transportation. Rail works for ground freight. Synthetic fuels will work for aviation and long-distance water shipping.

      Rail is dirty, dangerous and expensive. It’s time to kick our addiction.

      1. Rail is the cleanest, safest form of mechanised land transport when measuring CO2 emissions, and fatalities per mile traveled. High speed rail is less efficient than sub-100mph. It uses a tiny faction of the energy of aviation and kills fewer people. For moving bulk freight containerised shipping is by far the most efficient, but slow. The slower it goes, the more efficient it is.

        Passenger ferries are, worldwide, by far the most dangerous public transport method. They sink with monotonous regularity, they have inadequate life rafts, badly trained and reckless crews, are often unseaworthy and almost always dangerously overloaded.

      2. EV are dirty, dangerous, and expensive, unless one wears blinkers in some sheltered urban environment and ignores the crumbing roads and industrial insanity and strip mines and hey is that a coal plant that the “green” whale-road Danes are certainly not phasing out? But, slumped out over some wheelwell (merely a lost opportunity to exercise) paying orders of magnitude greater costs than walking (my transportation costs this year to date are $0, what are yours?) for the privilege of being stuck in traffic with all those other traffic drivers is how some y’all seem to want to try to roll, so best of luck with that. An alcoholic switching to less dirty hooch does not impress.

        1. Wow.

          Well, 1st, wind and solar can certainly power EVs. Wind tends to be a bit stronger at night, which is a nice synergy with charging. Both wind and nuclear tend to have surplus power at night. Works nicely.

          If you want to walk and bike, more power to you. But it’s misleading to suggest that they’re *necessary*.

        2. While walking or biking to the local farmer’s market or to the local drug store is admirable, food still has to be transported from farm to table or from train depot to food store. Powering an EV to provide that service is one way to go.

          I suspect the Rockefeller Fund sees this happening. GM announced a breakthrough with Lithium Sulphur batteries with 5 to 8 times the energy density of Lithium Ion batteries. Instead of a 100 mile pack, this would be a 500 to 800 mile pack. With the Tesla, this could be over 1300 to over 2000 miles on a charge.

          The other shoe to drop are solar photovoltaic cells with efficiencies in the greater than 45% range. There are a number of companies working on solutions.

          The idea is to replace our usage of FF with these type of renewables. My array generates an average of about 22 kwhrs/day. This is enough to power an EV 66 miles a day. More than enough to visit a local farm and return.

          A 45% array would supply about 70% of my needs in the coldest month of the year. By adding solar thermal to our home, we could get by quite nicely using solar and have some surplus left over.

          My angst is due to my “Saudi-America” acquaintances, who are like the grasshopper of the ant and the grasshopper parable fame. The catch to all of this is the ability of our fellow countrymen and women to accept our predicament and all of us do a triage on what is essential, what is nice to have, and what should be discarded.

          I suspect that some faux news outlets will steer them into a Rockefeller Store of Renewables. It’s their patriotic thing to do.

          1. 22 kwhrs/day. This is enough to power an EV 66 miles a day.

            3 miles per kWh used to be a standard assumption. OTOH, someone who owns both a Leaf and a Volt posted the other day that they’ve been measuring their consumption at 4 miles per kWh. I haven’t seen more general numbers lately – it would be interesting.

            1. EV range and energy is highly dependent on driving conditions – air temperature, hills, speed. I have a 2013 Volt and average 12 kWh of charging energy to drive 40 miles electric in “average” weather and driving conditions and not hypermiling. In ideal weather and easy country road driving, I can get 45 miles on a charge, or closer to 4 miles/kWh. Hyper mile it and it can get 4.5 miles/kWh. In the winter, I get 2.5-3 miles/kWh, as I have to run the heater and the battery isn’t as efficient. So it all depends….

          2. The +45% efficiency is for concentrator photovoltaics. Although it is good news, you should currently have a solar tracker to obtain the best efficiency and optimise the cost. In the future, with reduced price and/or greater efficiency, this solution will be a key player for electricity production.

      3. You do realize that every alternative form of energy still has hydrocarbon inputs, right?

        1. No, none that are essential.

          EVs may be delivered by diesel trucks today, but they can go by electric rail.

          The first oil wells were served by horse transportation. The first coal mines were served by biomass: wood and grass-fed horses.

          1. But surely you realize that all this horse stuff served us when we were but a small fraction of the population we have today. But in a way you are correct, none will be essential after the population crashes back to about one billion people. That is about all the earth can support without fossil fuels.

            1. The horse stuff illustrates that each energy source builds the infrastructure for the next energy source. Wood built coal mines. Horses built oil wells. Oil builds wind turbines, and then eventually wind turbines are manufactured, transported and installed with wind-generated electricity.

              There’s more than enough affordable wind, solar and nuclear (if needed) to power whatever we might do. Of course, we’re mostly talking about oil here: EVs can be powered by coal and gas, if desired. And, sadly, peak coal and gas is nowhere in sight.

            2. “peak coal … nowhere in sight”

              Citi says “[China power sector] … possible flattening or peaking before 2020”
              https://ir.citi.com/z5yk080HEXZtoIax1EnHssv%2Bzm4Pc8GALpLbF2Ysb%2Fl21vGjprPCVQ%3D%3D

              US ENERGY from coal PEAKED in 1998, at 598 million toe.
              http://en.wikipedia.org/wiki/Peak_coal

              German hard coal peaked in 1958,
              British coal peaked in 1913.

              A good discussion of coal reserve downgrading is found in:
              http://energywatchgroup.org/wp-content/uploads/2014/02/EWG_Report_Coal_10-07-2007ms1.pdf

              Note that specific productivity per miner has been decreasing in the US and elsewhere for a while.
              http://www.platts.com/latest-news/coal/washington/power-river-basin-producers-finding-it-more-costly-21402408

              A lot of powder river basin coal is likely too deep to be strip mined, and most of the coal is in seams too soft and thick to do underground mining anywhere near cost-effectively. It’s SUB-bituminous coal, meaning we’re run low on higher grades. (Sound familiar? How much light sweet Brent is actually on the market these days?)

              There’s a zillion tons of kerogen shale in the world,
              but how much will ever be turned into syncrude, due to lack of water, energy, capital, etc.?

              Remember the “thousand years of natural gas” the shale bonanza was to give us?
              Then the DOE cut reserve estimates in the Marcellus by 2/3rds…
              Same kind of reality check is going on with coal.

              This paper by David Rutledge gives a good history of the historical overestimation of coal reserves and his 90% depletion date of 2070. (It’s open access).
              http://www.sciencedirect.com/science/article/pii/S0166516210002144

              I think this is a big issue – among economists and policy wonks, and even among some peak oil cognoscente, the feeling is “well, we can always go to CTL or GTL – sure it may cost more, but…”,
              but many reasonable people think the (excess) coal (for CTL) just won’t be there in 10 – 20 years. Opps!

              I don’t agree with Patzek and Croft that peak coal is so soon that it constrains climate change significantly (though I think the IPCC does overestimate coal’s ultimate contribution), but the “200 years of coal” crowd is even further off base.
              http://www.sciencedirect.com/science/article/pii/S0360544210000617

            3. I was wondering if anyone would raise that issue – it’s an important one.

              I’d like to think that Peak Coal is close – it would be far better for the world, including humanity – sadly, I don’t think that it’s the case. I’d say that we have far more coal than is needed to cook the planet, and we as a species will have to make a conscious choice to limit it’s use.

              I’ve written two discussions of the issue – I’ll just link to them, because copying them seems excessive. Please take a look:

              http://energyfaq.blogspot.com/2008/06/are-we-running-out-of-coal.html
              http://energyfaq.blogspot.com/2009/02/are-we-running-out-of-coal-part-2.html

            4. 1 billion may be optimistic.
              The last time we were fossil fuel energy free was around 1700, and the population was 700 million, and we had oceans and continents to plunder, intact ecosystems.
              None of that is available today.

            5. Since then, we’ve developed cheap and effective ways to harvest the vast amounts of wind, solar and nuclear energy around us.

              The 2nd century Romans didn’t know how to use the coal in the ground. The 19th century Britons didn’t know how to use wind, solar and nuclear.

              Things change.

            6. The problem here is someone doesn’t understand what 745 watts per horsepower means in a cold, harsh mathematical way.

            7. That’s a mighty cryptic comment.

              Don’t forget that some of the very largest “engines” in the world are electric. Diesel locomotives are electric. Diesel submarines are extended-range EVs, just like the Chevy Volt.

              EVs are very well tested in the real world. They’re better than ICEs: higher torque, cheaper, smaller, etc.

            8. Technology is not energy.
              And each new energy gain has been to more concentrated forms.
              Wind and solar is going back down to the bottom of the list.
              Humans have never done this before.
              While nuclear is good idea, humans build and run them– with the observable results.
              Plus we still haven’t solved the “waste” problem.

            9. Technology is not energy.

              No, but electricity is. That’s what wind turbines and solar panels produce, and quite a lot of it, too. I”m puzzled that’s not clear: lot’s of people, companies and utilities are installing them, and are quite happy with the power they produce.

              And each new energy gain has been to more concentrated forms.

              Electricity is as concentrated as it gets.

            10. PV panels at the point of production recover the energy put into manufacturing them in 2-8 years.
              Now if you put the externalities in (rare earth minerals, extruded aluminum, transportation, etc) one may never recover the energy invested.
              This is going backward (I’m all in favor of PV, don’t get me wrong, lets turn that energy into something useful, rather than just burning it).
              But basic thermodynamics says we will be going backward to get that electricity.
              If we could replace 20% of out needs, that would be a bonus.

            11. >And each new energy gain has been to more concentrated forms.

              I think that this is the big change that is coming in the 21st century. You hear a lot of talk about baseload power and the need for a stable energy supply, but maybe that may be an artifact of 20th century technology.

              Maybe we are getting better at exploiting marginal energy sources. It is certainly true that we are getting better at exploiting non-marginal energy sources.

              Of course the same logic could apply to the oil industry.

            12. Dave,

              That EROEI ratio is out-dated. Think about it: panels cost about $.70 per watt (and falling fast), and Germany is installing it for $2 per watt. Over the 30 year life of an average US installation with 15% capacity factor that panel will produce about 40 kWhs (costing about $4.50 at retail utility prices in the US). Given that labor is always the largest component of cost for any manufactured or built item, how could there not be a good EROEI (aka net energy gain)?

            13. Nick-
              You are confusing price with energy.
              The price has nothing to do with energy invested, it is a function of the market.

            14. The cost of panels, and the overall installation, are closely related to the cost of the inputs. In turn, the cost of the inputs gives us pretty good guidance about the volume of the inputs.

              Generally, labor accounts for most of the cost of manufactured items: energy (both electricity to power equipment, and process heat) is around 5%. If we make an outrageously high assumption of 25% for PV panels, then we’re looking at $.15 of energy input: that can’t be more than 3 kWhs.

              You might ask, why estimate in this way? Well, the kind of detailed, academic analyses that we might want for PV are out of date. Roughly 10 years ago PV achieved around and EROIE of 5-10 to one, and everyone recognized that was good enough. No one was interested in publishing such work – it wasn’t needed. Now, PV costs, and energy inputs, have fallen by about 75% since then, but proprietary protection of IP and the lack of need for such studies means no one is looking at the changes.

            15. You are still confusing money and energy.
              You are not alone, it is hard to shake the idea that money is energy.

            16. Not at all. Did you read my comment??

              I’m using prices to *estimate* actual energy inputs. Actually, to demonstrate upper limits.

            17. Price and energy are not linked by return on energy invested.
              You are mixing two different things.

            18. Ummm, FYI – the Romans in Britain, the Rhineland and a few isolated sites in Northern Italy used coal. Transport was so poor it had to be used locally.

              http://history.alberta.ca/energyheritage/coal/early-coal-history-to-1900/unearthing-ancient-mysteries/ancient-romans-in-britain.aspx

              If you have access to a university library, the following seems to be the big study of Roman coal usage in Roman Britain:
              http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=7868617

              There’s a bit here on Google books:
              http://books.google.com/books?id=N6Y3AAAAIAAJ&pg=PA28&lpg=PA28&dq=webster+coal+use+by+romans&source=bl&ots=UPBkMtSELI&sig=rYyAXweAgLPl_OR1owrJwJS5vH0&hl=en&sa=X&ei=cE8mVK6VC8ivoQTtyIKYAQ&ved=0CEIQ6AEwBg#v=onepage&q=webster%20coal%20use%20by%20romans&f=false

            19. Yeah, Britons (and others) used coal they found lying about. That’s why I mentioned that they didn’t know how to use coal in the ground. It was there, in vast quantities, but they had no idea how to make use of it.

              The English early on called it “sea coal” because it was commonly found on the beach.

        2. Hi Nick,

          I think he was referring to the fact that EVs are made from steel and plastics that have their base formation due to fossil fuels.

          There is a fellow who has built EVs out of wood. The idea is to figure out what needs to be done with the remaining FFs and to devise plans to build what is essential. Hopefully, we will make the adjustments necessary to what we can use and how we live with each other.

          1. Coal is handy for reducing iron oxide, but it’s not essential. And, of course, once you’ve smelted iron once, it can be recycled without using coal at all: almost all US steel consumption is recycled.

            Plastic can be replaced with other things, recycled, or produced from biomass. The first car license plates were made from soy – they stopped that when cows ate them!

            1. I’m not sure where I saw that. Here’s what I found with a little googling:

              “During the Second World War, license plates in several states were manufactured using soybeans, but the cardboard-like material was so flimsy that few survive. ”

              http://www.macsmotorcitygarage.com/2013/04/24/henry-fords-soybean-car/

              “In 1943 several of these jokes were dusted off when a goat actually ate an Illinois license plate made of soybean-derived fiberboard.”

              http://www.soyinfocenter.com/HSS/henry_ford_and_employees.php

            2. There are many chemical processes able to transform wood or biomass to petrol(like). So plastics as we know today can be made from biomass.

            3. Houses, furniture and a lot of other things can also be made from wood. All paper products are made from wood. Wood is the most versatile product on earth. It is also becoming the most scarce products on earth.

              We are cutting down all the trees. We are destroying the habitat for all wild animals. We are destroying the watershed and allowing the washing away of our topsoil. And the water runs off instead of being soaked into the ground allowing the water tables to drop even faster.

              Wood, or rather the lack of wood, is the problem not the solution.

            4. Ron, it depends where you are in the world. Most of the developed world has been accumulating wood on the stump for the last 50 years or so. There is a reason that wood prices have been depressed since the 90s. Demand has been depressed. A lot of timber and biomass in the US isn’t worth enough to pay its way to the mill so just accumulates in the woods.

            5. Ron,

              I wouldn’t get distracted by the wood problem. This discussion started about plastic in cars: cars are 99% recycled, so that plastic can be re-used about 100 times. Biomass isn’t all that scalable, but it doesn’t need to be for plastics: this is a pretty small scale problem.

            6. Ron, you are of course right. As stated by Nick G, the discussion started from plastics. Plastics represent only 2% of the oil consumption and can be recycled.
              Personnally, I prefer wood than plastics.

            7. Woody, I do believe you completely miss the point. I am not remotely concerned with the price of wood or its availability for lumber in the US. My concern was the destruction of rain forest, boreal forest and dry forest around the world. Do you realize that the Amazon is being cleared? Do you realize that Sub-Saharan Africa is being cleared? Do you realize that Borneo is being cleared for palm oil plantations?

              Do you realize that we are destroying the fucking plant and driving into extinction every wild animal that lives in the forests of the world?

            8. Ron,

              There’s no question that destruction of old-growth forests and animal habitat are disastrously bad.

              That’s not what we’re talking about here. We’re talking about farmed tree plantations – they’re reasonably renewable.

            9. Nick, I know all about tree farms. They are all over the south, right where the real forest used to be. They are mostly loblolly pine farms. They are good for making paper, nothing else. The old growth forest, in the US and elsewhere around the world, are being cut for timber. Africa is being cleared for timber. Central america is being cleared for timber. None of these forests are, as you put it, “reasonably renewable”.

            10. This conversation isn’t about timber, it’s about sources of hydrocarbons for plastic & plastic substitutes. Those pine farms, along with lots of other “low quality” ag products would work just fine.

              Now, to start a different conversation: I had the impression that most lumber in the US was farmed. Have you seen stats?

            11. Now, to start a different conversation: I had the impression that most lumber in the US was farmed. Have you seen stats?

              Nick, reply below where the space is wider.

        3. You do realize that all forms of hydrocarbon energy still has hydrocarbon inputs, right?

          And furthermore the EROEI of hydrocarbon energy is starting to look rather worrisome.

          But the point is moot, the only thing we can be 100% sure of is that in the future we will not be living as we have been in the past. If humanity is still able to maintain some form of industrial civilization post peak oil our wants will very likely not be supplied by hydrocarbon based energy. Perhaps it is time to start adjusting our expectations to come more in line with the energy budgets that will be available to us. My guess is that at some point, solar, wind and hydro will no longer be thought of as alternatives…

          1. They aren’t now. Fossil fuels are poison, and we are dead unless we get offa them. I simply can’t believe all these obviously smart guys here still go on about ff’s as if that was a real option. It isn’t.

            All this BS about relative costs, EROEI and all that is empty air when we add the little footnote about all dead.

            Fortunately, a VERY high fraction of energy use today is for totally silly non-essentials. My favorite infuriating example is laws, lawn mowers, lawn feeders and all that. Another one is all and every soft drink, another one is burning 3000 miles of kerosene to visit the grandkids, in the process assuring their unhappy life. And so on.

            And, last lash, Need New Law. Nobody says anything about a Nissan Leaf unless they have driven one a while. What a crock of crap has been blatted about here, like for example, range of 35 miles! When I see 90 miles on the meter, I have no problem, never, winter or summer, driving nearly that far. Scares the hell out of wife, she never goes more that 60 miles anyhow.

            1. I think the 35 miles was the electric range for a volt not a leaf.

        4. This is a common confusion when it comes to renewables — confusing the operation with the creation of the plant. For example nuclear power requires a great deal of cement to make it work, and cement production produces a lot of carbon dioxide.

          I recently read an article saying that in 1016 there wold be record installation of solar panels, but then the subsidy would be lower and the solar industry would “collapse”. In fact if there are record installations in 2016, output from solar panels will hit a new record in 2017 — hardly a collapse.

          It is so easy to get muddled about whether you are talking about increase in output or increase in increase in output. but the bottom line is renewables do not use fuel.

    2. The US actually exports diesel to Europe and they in turn export gasoline to us.

    3. The US has been exporting diesel to Europe for years and importing gasoline from there. I wonder if that’s begun changing. Anyone know?

  4. What is the decline rate used in this stuff for non-LTO US oil fields, and then what is the rate of reduced output from non-LTO US oil fields including supportive drilling in those fields?

      1. Distillate fuels are required for modern Life -… no Diesel, no barge or train = no grid power , Got to have the JIT Coal at the hundreds of plants. Loose coal stream at 2% of sites, Grid collapse without major load shedding. The Diesel exported to Europe is high perecentage ( ?% ) from imported crude. US exported massive amounts of Texas crude during WWI&II and before the US Peak. Hence the Seaway pipeline from Oklahoma fields to buttress the flows.

        1. 1st, let’s be clear about the volumes and timeframes involved.

          Rail & barge freight use a small percentage of overall distillates, and will easily out-bid other uses, such as passenger transportation. Overall oil production will continue to be large enough to supply rail & barge consumption for many decades. Right?

          Second, rail can be electrified. Yes?

          3rd, small volume, high value uses such as aviation and long distance shipping can afford to pay twice as much for fuel, and liquid fuel can be synthesized at roughly 2x the current cost of fuel.

          1. “Rail & barge freight use a small percentage of overall distillates” OK. Compared to Trucking/Air the case at $100 bbl, but at $150+ ? . With LTO lacking in high SG components, One wonders about the slope of % of US domestic essential consumption of distillates fulfilled by imported crude? The US is still the Petro hungriest economy on the planet. Perhaps a ball to keep an eye on may be PODD ” Peak Oil Distillates Dynamics” in addition to Rockman’s POD for All Liquids/Crude. The price drop for liquids and Mexico having little demand for the Light stuff come into play.

            1. The important thing is to compare the volume of “essential” demand vs production. If prices rose that would reduce consumption by passenger vehicles and trucks, leaving more than enough for rail and barges.

              In the longterm, rail can electrify: how much do barges use??

              Also, refiners can shift their balance of diesel vs other products.

              It will be a long time before “essential” consumption like aviation and long-distance water shipping don’t have enough fuel.

            2. Power plants and food freight both have huge pricing power because they are involved with inelastic goods, and will be prioritized by the government if necessary because otherwise you have massive unrest.

              The diesel users that will be clubbed over the head are the pickup drivers and freight that moves elastic consumer goods.

            3. Power plants will be the first to phase out oil.

              Surprisingly, quite a lot of oil & diesel is still used to generate power, in Japan, Saudi Arabia, Hawaii, China, India, Iraq, etc. Solar and wind are far cheaper (a gallon of diesel costs about $3.60, and generates about 12kWs, so that’s about $.30 per kWh – solar and wind are far cheaper than that).

              US military bases are a good example: they’re installing wind and solar fast. Guantanamo installed a single wind turbine that reduced their diesel consumption by a third.

            4. Most oil used for electricity is either in OPEC nations who get the oil for lifting costs, or small diesel generators where they are covering power cuts or are the only available power. Both these are inelastic demands, for different reasons.

            5. I’ve seen estimates that 8M bpd are used for power generation, counting everything worldwide (which is hard).

              Just as a start, have you looked at Japan?

            6. Other thoughts: OPEC nations are quite clear on the concept that they’re losing $100 per barrel of oil they use for power. They’re all planning to ramp up solar to replace it, though they’re being remarkably slow about it.

              Power generation isn’t inelastic: solar is clearly cheaper. Replacing diesel generation is a big reason solar power is growing so fast.

              Diesel generation is everywhere, and is big. Look at Chinese and Indian manufacturing: they’re very dependent on generators because the grid is unreliable and inadequate. Look at almost all of the non-OECD world: Iraq, Jamaica, Chile. Much of the generation is at the consumer side, so it doesn’t show up in national grid statistics, but it’s there, and its big.

              Heck, think outside the box. What percentage of passenger fuel is used to generate “house” electricity for AC, radio, lights, etc? Australian RVs are using PV to generate power – it’s becoming standard. How soon until other transportation does the same? Diesel locomotives use electric motors, powered by onboard diesel generators. Trains are outside all of the time – the containers could be covered with PV, and hooked together to power the train. With oil above $100 for the longterm, it will happen eventually…

    1. I haven’t read that yet, but if the intention is to be so aggressively informative, why present it at an investor and analyst meeting. Why not call in university professors from Petroleum Engineering depts and provide it to them a priori and then make themselves available for questions. If the intention is to be aggressively informative . . . .

      1. In my experience, Professional Engineer (retired) 35 years experience, the WORST possible source of “real” information is Corporate Investor Presentations. Its sort of like choosing a toothpaste by looking at TV ads, but much worse of course.

      2. Okay I went thru it. When you are not a stock pimp and don’t care about CLR or EOG, you have to go thru these things to find technical details that the company hypesters were not sufficiently up to petroleum engineering speed to know that they should not let it appear. Some such matters for the 4 counties’ geology as a whole, which is what we care about here.

        Slide 13 quotes porosity higher than any other source I’ve seen, including wiki. 20% higher, from 5 to 6%. Not an outrage, but a tad surprising this late in the game.

        Slide 18 is profoundly absurd in such low permeability rock.

        Slide 20 IS an outrage laying out recovery for P10 numbers.

        Slide 26 suggests 1320′ spacing is to be standard, and my recall is that will chop down well total. The slide is not altogether clear.

        Slide 29 is then curious, claiming measured frack distances of 340′ “in each direction” which somewhat points at 3D. But hmm, why 1320′ spacing if that’s all the distance the fracturing happens.

        Slide 34 then supports 1320′ is as packed as you can go.

        Slide 40 is deceptive. A celebration of more proppant used per well (stage count ramping up) and then a declining graph that is price PER POUND. This does not say what is implied — that proppant costs are falling. The extra proppant reqd is eating up the price decline per pound. But we aren’t focused on money here, geology/logistics is more important.

        Slide 45 raised my eyebrows. Artificial lift has NOT been on my radar screen at all. Have we seen this spoken of before?

        Slide 48 . . . ominous. CLR is going to drill more of their own disposal wells. Or “HAS” to drill its own disposal wells. Hope NoDak has inspectors there.

        In the entire Bakken presentation, not a single word about flaring management.

        1. Watcher,

          It’s exactly as you say, DECEPTIVE; that’s the key word. But, as long as you realize Corporate Investor Presentations are really just elaborate ads, you won’t go too far astray.

  5. The second chart does seem to support a peak this year.

    Now the question if David and Ron are right is how fast production will decline and how fast we can adapt to the decline. My personal guess is that countries such as the US which have either credit or good stuff to export will get by ok for a few more years and that countries with little or nothing to export are soon going to be up Sxxt Creek without a paddle if not there already..( Sxxt Creek is a legendary stream in the southern mountains that is highly enriched with um doo doo and pee pee.Corn grows well on bottom land irrigated with Sxxt Creek water without much additional fertilizer.)

    But it seems very unlikely to me that we can adapt to lower consumption fast enough to keep prices from rising sharply and staying up. This will for sure lead to demand destruction and then the question becomes how fast the economy goes down hill.

    This would be a good time to remember the classical joke wherein the boss is addressing the rest of management and saying that there is both good news and bad news. The bad news is that the world is coming to an end in a few months .

    The good news is that there are unprecedented opportunities to be taken advantage of for the months remaining.

    This would be a good time to invest in any established company that has plans to build and sell motor scooters and electric bicycles in this country.They ought to sell like ice water in hell for as long as plenty of people who still have jobs are silmantaneously trying to cut back by getting rid of one or two cars.

    But a lot of people who are dependent on their cars and trucks for work are adapting a whole lot faster than might be expected. When I advertise for help occasionally most of the skilled trades men who are younger guys insist that they have to have an extra five bucks an hour to cover gas these days because they have to travel so far. I just laugh and tell them that they are free to get rid of the four by four v8 gas hog and get a car like mine that gets upwards of forty mpg on a good road.

    A surprising number of these young guys have gotten the message already. I know of half a dozen or so who are driving compact four cylinder five speed pickups today that were driving full size trucks with big engines two or three years ago.At least one of them admits or to put it differently brags that he is saving almost enough on gasoline alone to make the payment on his new truck after trading in his old one.It is not uncommon for young guys to have to drive forty thousand miles a year to stay at work in construction.

    For what it is worth

    The Mustangs and Camaros that are driven to work by younger people these days are almost all v6 versions that get better mileage than a lot of yesterdays compacts.I do not know a single young person who has bought a NEW hot rod car in the last few years. They have gotten so expensive as to be beyond the reach of most young people and that is a good thing imo.

    1. The question of adaptation is crucial in this context. Choosing smaller and economic cars (or motor scooters) is easy and would cause a drop in fuel used for transportation. But even if it will work during the first years of decline, the trend is not sustainable. Demand destruction can also come from the use of public transportation systems.
      However if we consider a transfer from fuel to electricity, there is currently no plan/project to build the electric power necessary for the transition. These nuclear power plants or gaz turbine needs at least 10 years to be on line. Solar panels and wind turbines are not enough to provide enough power (but are part of the solution) and needs energy storage.
      The best is a smooth transition. I would like to think this is still possible as people will chose the most economical solutions. Higher oil price, better the trend to choose greener solutions and higher the chance to start the necessary changes in the Society.

      1. Solar panels and wind turbines are not enough to provide enough power

        Actually, they do. To power EVs the US only needs to expand power generation by about 15% over 20 years. Wind and solar can do that easily.

        1. To expand on what Nick has said, my 5 kw array delivers 4.38 kw to my utility meter. This is because the DC power produced is converted to AC. I live in an area where each kw of electricity generated produces 5 kwhrs of electricity on average per day. Thus, my array produces and average of about 22 kwhrs a day.

          An EV sedan uses 1 kwhr of electricity to go about 3 miles. A pickup truck goes about 2 miles.

          My array cost me $28K. Without taking into any of the tax incentives, and using the difference between gasoline and electricity, I expect to pay off my array in about 25 years. I expect to pay for my next battery pack for the most part by not having to pay for fan belts, oil changes, antifreeze, spark plugs (or fuel injectors), etc.

          If my next pack is made from the Lithium Sulphur batteries that GM has been working on, the pack should be very cheaper than oil changes and last a lot longer (600K miles vs warranties of 100K today).

          Will there be gasoline in 25 years? probably.
          Will it be cheaper than today’s price adjusted for inflation? Only if a lot of us switch to electric.

          1. And solar has gotten cheaper. That array cost about $5.60 per kWp, and newer residential installations are averaging around $4 (commercial is closer to $3). Heck, the panels only cost about $.70 – the rest is planning, inverter, wiring, installation, etc. In Germany with standardization they’ve gotten the whole thing down to $2!

        2. I agree for transportation (my estimation for Belgium is an increase of 40-50% of the production which could be reached easily by PV, wind, biomass, hydro and geothermal. Indeed this increase in production represents about 15-20% of the current installed production capacity (well, if the 3 nuclear power plants shutdown for sabotage or problems are online again). If we add other usages of fossil fuels (essentially eating), the current electricity production should be increased by 450% except if we increase insulation.
          For the US, the numbers are apparently about the same, with an increase in production of 400-450%.
          There is no plan/project nowhere to build this extra capacity.

          Of course, we have time for this increase of capacity (a world withour fossil fuel). But about half of this goal should be reached by 2030-2035 (after peak oil, peak gas and maybe peal coal).

          1. The US would need to increase power generation by about 25% to handle passenger transportation (2.9T miles / 3 miles per kWh = about 1,000 TwH vs US average consumption of about 4,000TwH).

            The other uses of oil won’t need as much from the grid to replace: rail is far more efficient than trucking, and electric rail uses little power; petrochemical feedstock and road building materials won’t come from electricity, probably.

            Insulation is the best way to reduce space heating needs, and heat pumps are very efficient.

            I doubt the grid would have to increase output more than 50% to dramatically reduce oil and gas consumption.

    2. The next stage will have to be shortening the distances traveled. Urban design people point out that a lot of fuel is used traveling around the “great triangle” between a suburb, an industrial park and a shopping mall. This is caused by zoning laws. I live in a German suburb and I often walk to the grocery store. Building a grocery store that close is illegal in most American suburbs. There simply aren’t any corner stores.

      Another issue is subsidies for building commuter roads and suburban sewers.

      Also American cities allow car traffic to have a huge footprint. Go almost anywhere but Manhattan in America and you see wide high speed roads with no sound barriers and huge surface parking areas. These reduce the land value and population density of the cities, making it harder for them to provide the amenities to make urban life more pleasant, so it is a vicious circle.

      1. Those are great ideas, but they’re not *necessary*.

        Redesigning cities and roads is good, but very slow. It’s much, much faster to replace ICE usage with HEV/PHEV/EREV/EV usage. Vehicles less than 6 years old provide 50% of vehicle miles traveled (in an environment where new vehicles aren’t much different from the old ones). Switching to better vehicles is fast and effective.

        1. City patterns can change in a hurry when something literally isn’t economically viable. Many suburbs don’t have very good incomes to start with; there have been entire books written about how poverty has moved out into the ‘burbs. Really wealthy areas won’t care of course, they have large disposable income and more ability to request pay hikes at work. But your $40k/year suburb dweller with nigh-zero disposable income and two cars rapidly runs out of options – and takes a big hit on the marketability of his house.

          1. Well, hybrids and EVs are cheaper than traditional gas powered cars. Gas prices aren’t going to make poor suburbs poorer, if they’re at all smart about what they buy.

      2. Ilam guy, scope up a few minithreads. The frack distance for our cylinders or boxes have been throttled down.

        1. Yes, and they are flatter too, I think. There seems to be a clear distinction between Bakken and Three Forks wells. That means you usually cannot assume that it’s going to be the whole 308 ft thick.

          1. Still waiting for definitive sizes, but these EUR numbers are getting up towards out calculations of absolute max volume, which of course cannot happen physically.

    3. The country that has the single biggest problem, bar none, is India. Japan and South Korea are much more mature and efficient and they along with China have very strong ability to buy what they need. India has poor (and peaked) oil reserves, no captive supplier and not a whole lot of financial firepower relative to what they would need to develop the way they want to.

      1. Which is largely why these bizarre discussions about imposing behavior on Americans are pointless.

        The oil is not conserved. It’s just sent to China, who will soon become “the enemy”. Or India, who will try to stay off the radar screen while they get their per capita consumption up to civilized levels..

        US consumption is not growing. Theirs is exploding. Why on earth do you want to cause American upheaval when you could spend this wasted time on the enemy.

        1. BTW India just injected its first planetary probe into Mars orbit. Price tag of the mission is about 75 million bux. They used mostly Indian components aboard.

          Some months back we looked at US per capita oil consumption and the fact that China and India are woefully behind — but when they catch up total global consumption will be well north of 100 mbpd, or would be if it existed.

          India is clearly well on their way to raising their technology and if they want a good life for their people they’ll be raising their per capita oil consumption to civilized levels — at which point we get the scarcity show and nuke lobbing underway quickly.

        2. The prices went up and that didn’t stop Chinese demand from increasing, but it cut US demand. In effect the chinese are outbidding the Americans in the oil market.

          There is a simple explanation for this — oil is worth more to the Chinese than to Americans. The reason for that is that Americans do not use oil to grow their economy, they use it for status displays and to prop up a hopelessly inefficient transportation system.

          Of course the Chinese waste oil as well, but not on as grand a scale as America.

          1. US per capita consumption: 19ish million bpd / 320 million people = 0.059 barrels per person per day

            China per capita consumption (using the mazama graph, I remember Ron noted BP (on which it’s based) may not be consistent liquids vs crude in their count, but it’s convenient) : 10.5 mbpd / 1.36 billion people = 0.007 barrels per person per day

            India per capita consumption: about 4 mbpd / 1.29 billlion people =
            0.003 barrels per person per day

            http://mazamascience.com/OilExport/ select the country dropdowns for the quick graph

            Bottom line here is China needs to do a X8 on their consumption to get up to civilized US standards of consumption. That will be 80 million bpd, just about the whole world’s total — and they need to do it fast because every day they delay is a day their people spend at a lower level of civilized living.

            India has to do a X 20, which also will get them to 80 mbpd, for a Chindia sum of 160 mbpd, which doesn’t exist, and they must do this as fast as they can to stop abusing their people with the life lower consumption condemns them to.

            And so, they MUST ramp up as quickly, or MORE quickly, than those graphs show or they are being immoral towards their own society. The nuke lobbing can’t be far off.

            1. China and India would shoot themselves in the foot by raising oil consumption. They need to install solar to reduce their diesel consumption for power generation, and move to HEV/PHEV/EREV/EVs for transportation.

              Oil is expensive, dirty and dangerous: every country is better off reducing their consumption ASAP.

            2. This is the path to misery for the people in question. It’s a profoundly immoral position to deny them the sort of Social Security funded by oil driven GDP that the US has. There is no Soc Sec in India. GDP is the path to it. There is no choice.

            3. That’s the point: imported oil reduces GDP, while HEV/PHEV/EREV/EVs are cheaper and better. They free up more income for other useful consumption.

              India is going bankrupt paying for imported oil. It’s a curse.

          2. US consumption has been dropping because of intense US policy of demanding better vehicle standards combined with changes in living habits. We drive our cars less and they don’t burn as much gas per mile.

            Now, growth in oil consumption is more *essential* to China than the US since the US simply does not need to consume anymore than it currently does, and in fact could consume a lot less. Not really an option for China and India.

            1. Which . . . makes the point? 160 million bpd reqd for them to get up to US standards.

              It doesn’t exist.

              Their choice is to accept inferior life for their people . . . forever . . . or do the moral thing and attack wherever they must to increase their consumption and achieve parity.

              We’ve already done this. The miracle seekers decide that the US in a gesture of community will hold a vote and decide to degrade themselves for the benefit of Chinese housewives.

              The somewhat higher probability is for the Chinese to go after that juicy 5 mbpd importer target called Japan.

            2. Next you’ll suggest they need to smoke and drink more, to emulate our way of life.

              Oil is dirty, expensive and risky. The Chinese will be far better off if they take a different path of industrialization. Kind’ve like countries that go with cell phones, and skip the expensive step of installing landlines.

            3. Oh this isn’t about should.

              This is about likely.

              Humans will not accept subordination. Japan is right there and oil is the path to dominance. It must be sought.

            4. That’s the thing — oil is the path to failure, and economic inferiority.

              Oil is expensive, and imports make your country dependent, poor and vulnerable.

      2. In Western terms India is not looking good. They have only recently elevated their middle class into the consumer model of lifestyle, and they are beginning to find it slipping from their grasp already.
        However, that is also their strength. India has always been poor (with a tiny elite). It still has a strong culture and caste system, at least in cultural memory. They lived through many famines and survived.
        100 years from now India will be very much like the India of 300 years ago, but with fewer people. They will have the same gods, same jobs, the same happiness and misery.

    1. An ethical prognosticator admits their mistakes and corrects them as appropriate. Don’t pay attention to people that can’t.

      1. Wait a minute.

        What is an ethical prognosticator? How does what you just laid out differ from a palm reader that predicts the future, discovers that he or she was wrong, and offers up a new prediction (maybe for pay)?

        Wouldn’t it be better to just crawl under a rock and stay there for the duration?

        1. Hi Watcher,
          It looks like I was getting too cute with my wording. What I was trying to convey was that that it is a good quality for someone to make adjustments to their predictions as better data comes in. At first glance, John B. seems to be criticizing ACE for adjusting his charts.

          1. He was criticizing ACE for always being wrong.

            ACE’s charts always showed a sharp decline, starting at the date of the chart.

          2. Well, when wrong there are three choices.

            1) Wave hands and point out blah blah blah blah this parameter was different for reasons . . . altogether now . . . No One Could Have Foreseen and it caused the overall prediction to slew slightly blah blah blah.

            2) Re-interpret data and say you were actually right and the bad guys changed the definitions. This presumes the definition change would have moved the result in the direction of the prediction.

            3) Stand up and say “I was completely wrong and have no idea about any of this stuff and you’ll never hear from me again in any way.”

            We don’t see too much of #3.

            We should see it almost all of the time.

            1. Less cynically, guys like Nate Silver and Sam Wang say, “Here is my model, and here is what it predicts with the following probabilities”. When they are wrong they tweak the model and try again. Nate Silver even likes to point out that the fact that his prediction is correct is not even solid evidence that the model is correct.

            2. That’s like buying a stock after performing intricate analysis of 80 different parameters, and then it goes up because the president of the primary competing company is killed along with his senior staff.

              Your model meant nada.

            3. I have a book, “Oil in the 21st century,” published 2006, edited by Robert Mabro. It’s a collection of essays on the topic; there are no entries in the index for “tight oil” or “shale oil.” I don’t think anyone has any real clue how things will unfold; my take is that what can be done on a smaller scale with private capital can expand to have greater gains, while macro scale megaprojects (CTL for instance) are more dubious propositions. The ROI is too up in the air for investors to dirty their hands, while the tight oil phenomenon proves that what you want is to get Ma and Pa on something they can bankroll.

              As always I don’t think anyone has any real grasp on how the public at large will handle a bona fide shortfall in supply.

            4. What is the reaction of a shortfall in supply?

              Blame someone. That’s always the path walked, because politicians NEED to have someone or something blamed that absolves policy from blame.

              China is out there with that steep consumption curve. Odds look high they are the target.

  6. Ron/David – In the 2nd graph, what is counted toward “World Oil Production”, as the peak of about 88mbd comes in well above C+C’s 73 or so, yet below the 92 or so typically seen for ‘All Liquids’?

    Thanks for any clarification.

    1. It looks a lot closer to 86 million barrels per day to me. That would mean it includes natural gas liquids.

      In 2014 the EIA will have “Total Liquids” averaging somewhere around 91.4 mbd but that includes refinery process gain. No one in the world counts refinery process gain except the EIA. They will have “Crude Oil, NGPL and Other Liquids” averaging between 88 and 89 million barrels per day. That is all liquids except refinery process gain. But if you only count crude oil and NGLs then the average for 2014 will be somewhere around 86 million barrels per day in 2014.

      1. Thanks for the explanation. And I agree completely that RPG shouldn’t be counted. And of course a barrel of NGL counts less than a barrel of crude, but the EIA isn’t in the business of providing that sort of meaningful Information. Perhaps they should change their middle name to Obfuscation…

    1. Thanks for the heads up. Archibald does seem to push pseudo ideas (won’t call it science). Probably needs to re-read his physics texts. Global warming appears complicated but it is actually quite simple. Decreased emitted radiation from the atmosphere/ocean into space pushes it to a higher temperature equilibrium. Not a lot of discussion needed there. The side effects are where the discussion lies.

      1. Allan,

        Actually, you have to wonder if wacko global climate change theories are really more bizarre that projecting US Tight Oil Production numbers twenty years into the future, based largely on Corporate Investor Presentations. Ah “Pseudo Ideas”: yes, that sounds about right.

        1. Doug,
          I do wonder about the ice age promoters.

          Right now tight oil production is rising so downward predictions are dependent upon known parameters such as field size, number of total wells possible, inhomogeneity of fields, production drop off rate of known wells, etc.
          All parameters show a limit to growth that is not far in the future. Unlike major climate change, long term oil production descent, ocean rise, possible collapse of world civilization and such; most of us will live to see the tight oil fields peak and descend in production. Maybe that will stir some realization that building a civilization upon a finite limited resource is about as smart as Russian roulette. Then again, maybe it will just push people to depend on other limited resources until they run out of all options.

          1. I would hope that “most of us” would live until 12-24 months from now (i.e. when even the industry promo material in the OP is saying they will functionally peak; don’t really care about what the last 200k look like with what the rest of North America looks like…). I guess unless Iceland blows up or something.

    2. Hi WHT,

      I take it that David and Tiny Archibald are the same person ? In your opinion at least?

      We should not say anything much about people who are right about any given subject that is still controversial in the eyes of the public and wrong about another such subject for a very practical reason.

      This involves the nature of the evolved monkey mind that bosses our bodies around. We tend to believe what we want to believe for the most part, rather than what the evidence indicates, no matter how clear that evidence may be.

      We consciously and unconsciously divide the world into ” us ” and ” them”.Any individual is far from likely to listen to anything contrary to his world view coming from a member of his perceived ”them ” camp.

      There is a strong correlation between climate denial and peak oil denial.You will not find too many people who understand peak oil in the climate change denial camp.

      On the other hand a climate change skeptic has the ” us ” credibility to spread the peak oil news within the climate change denial camp.

      This unfortunate aspect of human nature makes it damned near impossible for us to deal with a great many extremely serious problems.

      Liberal democrats for instance just about feel compelled to deny that tea party conservative republicans are right about our country spending itself into a hole that may well swallow us someday.

      Conservative republicans are unable to admit that having millions of people bankrupted and condemned to unproductive lives and early graves because they cannot afford medical care is a grave public policy mistake.

      ( This goes deeper than just paying your own bills. If a person is once disabled or addicted to pain killers etc the public winds up paying to support him ;it would be cheaper to pay for treatment initially. People who are mad with pain and broke self medicate with alcohol and worse and are apt to mug and murder and burgle to make ends meet.This sets up a vicious feed back loop requiring more cops more prison guards more emergency room services on the dole etc.)

      We need to remember the words of not quite so foolish as often assumed RR. If a person is your friend on a truly important issue it is best to ignore his other mistakes to the extent you safely can.

      1. I call him Tiny because by coincidence, many of the more infamous climate deniers on the blogs share names with well-known NBA players. Judy “Dell” Curry, Bob “Wayman” Tisdale, Rob “Pervis” Ellison, Anthony “Slick” Watts, Willis “Reed” Eshenbach, Tony “Downtown” Brown, and others.

        Archibald has the honor of sharing the last name as the great Nate “Tiny” Archibald.

        That’s about the only interesting thing in all this. I never forget their names because I was always a hoops fan.

  7. “the economics of fraccing have improved a lot over the last two years.”

    Can someone please show the numbers that prove this, and not that the infrastructure guys are making more and more money with more and more wells, but that a barrel getting delivered by train to some refinery is now cheaper produced and delivered than it was two years ago? Also not talking about the spot prices, but the “economics.”

    1. JC, like you I doubt that the cost per barrel to produce has declined over the past two years because the cost of the marginal barrel has certainly gone up during the past two years. But what David is likely talking about is the fact that the barrels per rig has improved over the last two years. That is verified by the EIA’s Drilling Productivity Report

      1. I am pretty sure Ron is right and that the cost per marginal barrel of fracked oil has been going up for the last two years.

        But as I see it this would be because the drillers are always working the sweetest spots first and so the production of given wells of a given size ( depth amount of fracking etc length of laterals etc) is constantly falling.

        BUT unless the cost of rigs crews and chemicals is going up noticeably the cost of drilling wells must be coming down noticeably.There is no doubt the drillers are getting more done with a given rig these days.

        Of course the question could boil down to increased drilling efficiency versus increased costs of rig rental crew wages and purchased materials from pipe to sand to diesel fuel.This could be a wash or play out either way.

        But if the drillers could find enough new sweet spots then the cost of producing fracked oil MIGHT actually decline .

        I am personally highly skeptical about very many such new sweet spots being found but a few lucky companies will find and get control of some good unexploited ground and thus make excellent profits..

        In any case not enough tight oil is going to be brought to market to offset the decline of conventional crude and if the price goes down it will be because the world economy is desperately sick with the high energy cost flu.

        If I have got it wrong I am always ready to learn why.

        1. Mac, I think there is a misunderstanding about the term “sweet spots”. Sweet spots is actually a misnomer, it should be “sweet spot”, singular not plural, or that is the case for the Bakken anyway.

          There is actually only one big sweet spot in the Bakken and it occupies most of four counties in North Dakota. Production from wells drop off considerably as drillers move further and further away from that one big sweet spot.

          When I say that the marginal cost per barrel is going up I mean around the world, not just fracked wells. Fracked wells, especially in the Bakken are a different animal altogether. That is because as “downspacing” is now the order of the day in the Bakken, they are drilling more and more wells from the same pad. That is the primary reason production per well has been increasing, they don’t have to break the rig down, move it, and set up again. They just start drilling again immediately after the well is complete. Well, in many cases anyway.

          1. ..they are drilling more and more wells from the same pad. That is the primary reason production per well has been increasing, they don’t have to break the rig down, move it, and set up again

            This doesn’t make sense to me. Maybe I am a little confused about the distinction between well, pad and rig.

            I imagine a rig sits on a pad and creates a well. Multiple wells per pad would increase rig productivity, but how would it affect well productivity? The only thing I can imagine is that more wells are drilled on pads that already have successful wells on them, making them more likely to be successful themselves.

            1. Sorry, my mistake. I meant to say “production per rig” not production per well. Obviously downspacing will reduce production per well but not enough to offset what they gain from multiple wells per pad/

            2. The rigs walk . . . on the bad . . . from wellsite to well site.

              But too much is being made of this whole rig issue — because it was a traditionally important metric — and should not be.

              The equivalent or analagous count now is proppant carrying trucks and water carrying trucks. The fracking process is far far more definitive of well spud-to-first-oil duration than the drill count.

              There are holes stacked up in inventory waiting for proppant and water and big pumps.

          2. Hi Ron
            With this clarification I am with you all the way.

            And on my part I should have said good new tight oil fields rather than sweet spots.

            It seems likely that if there are going to be more new highly productive tight oil fields found in the US at least we would have heard about them by now.

      2. Right, but saying the “economics” is implying the costs, as its repeated in all the financial press. It was like Ed Crooks in FT piece a couple weeks ago, with some cherry picked report that shale was going to be profitable next year, without naming companies and basically concluding loss per piece would be made up in volume.

        Anyway, Im opened at this point into what they may still get out of various places, but the real mover that’s undeniable at this point is cost, as even the old majors cant hide it in their quarterly reports. And just as importantly, debt has become the major pillar of the entire economic status quo, no more so than with shale, and this becomes especially important if it wasn’t making money at 100, whats happening at 90 or 80?

        Thanks for the work, from long time old TODer.

        1. If my name were CROOK I believe I might write puff pieces under an alias.LoL and no offense intended of course.

  8. One caveat to all this additional production is the cost of transportation. Railroads are handling around 75% of Bakken production and will handle all future increases in production, even if Keystone XL is built up north. Capital investment by the RR’s to handle this oil, including in the Permian basin is $$billions per year, especially after having to build 10,000 or more new tank cars that meet current DOT regulations. They are putting in double track, building more transload facilities, upgrading their signals systems (including new PTC mandated by Congress).
    All these improvements cost money and the RR’s will get a return on this investment which most aim for about 15 to 20% per year. Since no easy or cheap alternatives exist for rail transport of this oil, the railroads enjoy “pricing power”. Rail haulage rates will climb from current $10 to $14 ber barrel to $15 to $20 per barrel within a year or two, IMO. DOT has also mandated that oil train speeds be reduced, thus further adding to cost (labor paid by the hour and track occupancy costs are by the hour). Unless oil prices can rise much faster than inflation I don’t see these production predictions reaching these levels as cost to the consumer (high prices) will limit demand.

    1. As has been mentioned before, Buffett bought BNSF for a reason, and don’t know if it’s still true, but it was recently . . . Bill Gates largest non MSFT holding is Canadian National Railroad.

      1. Gates and Buffett… and the Shock Doctrine.

        I have a hard time taking them seriously as philanthropists.

  9. FWIW the US Net imports of crude and products this week were 4.783 mmbod. That is the first time I’ve seen it under 5. Let the bon temps roulee.

    1. Maybe. It’s 97 degs in Williston. Rain due again this weekend, and 45 degs.

  10. I am generally not as cynical as Watcher and a few others about government interventions and management and MISMANAGEMENT of problems but the ones of us who believe that we cannot count on government for a rational and vigorous response to peak energy and other resource problems do have some very strong arguments on their side.

    We have gotten to the point that crooks own the Gxxxxxxxd justice department.Had any of the regular authors or commenters here pulled the tricks pulled tens of thousands of times by the big banks involving mortgages we would have gotten a long sentence and pulled most of it.

    http://www.theguardian.com/money/us-money-blog/2014/sep/25/eric-holder-resign-mortgage-abuses-americans

    It is hard to imagine that when the fecal matter hits the fan in terms of energy that big time crooks and market manipulators will fare any worse than the bosses at these big banks.

    1. Farmer guy, here’s the thing.

      Had anyone of us, those of us who have some understanding of swaps and excess reserves, been in charge in 2008, we would have done the same thing. Remember, this was GW Bush who advocated TARP and huge government intervention. The “bailout” bill was rejected by the House once and then passed. It was Bush that pushed that absolutely non conservative option, and the GOP in the House signed on because There Was No Choice.

      The entire system teetered on oblivion because Lehman was the swap central player. Bernanke . . . if we want to go back and find who was to blame for it all . . . it was Bernanke. I don’t mean vague questions about his rate management and whatever. I mean the specific decision he made as regards Lehman. If he had essentially backstopped Lehman, the swaps would not have frozen everything with fear about counter parties not fulfilling obligations. Banks and finance houses would have still traded. The mortgage problem wasn’t even addressed until the next year — by Bernanke, finally. The problem was Bernanke misjudged the systemic effect of Lehman and all the swaps they triggered.

      And so, we would have done the same thing because there was no choice.

      Next time, even that choice won’t be available.

      1. As for what happens when oil scarcity asserts itself, let’s watch Ukraine and gas over the next several months. The Russian energy minister today said that gas to Europe will be restricted if gas sold to various countries is then transshipped somehow to Ukraine.

        I’m pretty sure the back flow capacity of the pipelines that usually go east to west will not come close to providing Ukraine what they have to have this winter.

        And so one would expect to see Kiev make defiant noises about resisting Russian aggression while cutting a deal under the table. That would be what to expect when oil scarcity arrives. Someone must be blamed and someone will be blamed, and then whatever must be done to make food roll on trucks will be done. Then when spare parts are denied transport fuel because of food priority, things will start to break fast.

        The internet uses spare parts, btw.

        1. If the authorities just stay out of it, then things will work ok. If, when oil is a problem, prices are just allowed to raise a bit, less-valuable consumption will decline, and food trucks will keep rolling.

          Now, we’re talking about gas, here, right? If Russia stops natural gas that will probably affect power generation first?

          They should be installing local supply, like wind, but instead they’re futzing around insisting that wind farm developers buy their turbines within Ukraine!

        2. hahah ZH commenter:

          What’s the most endangered thing in Ukraine?

          Forests.

          Run, Forest! Run!

      2. My opinion of the ethics of the Bush administration is no higher than my opinion of the Obama administration.

        But I think maybe Bush would have put at least one or two big wheels in jail simply as a matter of good politics next election time. Obama is about the worst as far as actually ignoring the law during my lifetime.

        Bush was out before the time came to prosecute and my comment is not about swaps and derivatives but about mortgage fraud pure and simple. If your or I had done just one of those robosignings we would have gotten five years and been sold out to make our victim good.

        AND I am not deliberately focusing on Obama and Holder except that they happen to be the latest in power. The next administration is highly likely imo to be republican and I expect as bad or worse but to throw more sops thrown to the public in such affairs to save face among old time conservatives most of whom would gladly lock up the robosigning bankers and throw away the keys.

        Obama and Holder have so much contempt for us that they did not throw even one of their own under the bus to make it at least appear that they are ethical.

        Our political system has always been corrupt. Politics are always corrupt at any level above the local village or township where things are decided by people who all know each other face to face and even then the petty cash has a way of getting spent on beer and pizza.

        The corruption seems to be running noticeably deeper from one administration to the next since back about Carter. Before that I was not paying as much attention to politics and have no firm personal opinion but government was smaller back then and there were fewer opportunities for corruption with the smaller size.

    1. Government has been growing at least all my adult life as a percentage of the population of the country and the number of people dependent on it. Medicare alone for instance is a simply mindboogling program in terms of size and cost. There have been extremely few programs of any size done away with but there are new departments of one sort or another one after another such as the federal dept of education.

      The bigger it gets the harder it is too keep an eye on it and government is like every other human endeavor. If you don’t keep a close eye on the people involved they will be sleeping on the job in short order and stealing soon after that in one way or another.

      The revolving door between the banking industry and the govt for instance is a super duper opportunity for people to steal without actually breaking any laws in ways that can be proven in criminal court.

      Farmer band together and steal from each other and the public by getting marketing laws passed that keep out competition from other farmers- I could never have raised any tobacco legally and sold it for instance for lack of an ”allotment”.Such laws increase the cost of food .

      Barbers and hairdressers in my state have gotten a law passed that requires a student barber to spend the same amount of money and time in class as is required to get an associate degree in nursing -two academic years- and a registered nurses license in this state. In nursing school you learn about infection control and clean instruments in a few hours and you get two hours of practice shaving and cutting hair which the instructors consider more than ample time in terms of the health and welfare of a patient.

      I am not argueing that more government is an all bad thing. It is certainly necessary these days that we have more people enforcing more environmental laws than in the past for instance.I am in favor of publicly operated clinics and hospitals where people without the means to pay for it can get essential health care free or nearly free.

      But to have prison guards and court employees and lawyers and cops doing make work by the tens of thousands locking up people for smoking pot when beer is legal……………. well there is a superb opportunity to spend the tax payers dollar more wisely.

      Putting a tax dollar thru the Washington wringer does nothing to improve the quality of education overall so far as I can see. I know one retired school superintendent who used to say at every opportunity that fifty cents in local money was worth more than a dollar in federal money.

      1. Hi Mac,

        I think we are talking past each other here. Look at the charts–government has not grown. Government expenditures are growing with the aging of the population, but not government. One way or the other we have to pay for the aging of our population. I would rather not see for-profit market forces involved with attempting to care for my parents. There are things that nonprofit public entities simply do better….for instance:

        When it comes to issues of law enforcement I agree we lock way too many people up. I am for legalizing drugs and handling it as a public health issue. Perhaps if we outlawed the free-market involvement with crime we could actually have a chance in this regard. https://www.aclu.org/prisoners-rights/private-prisons

        No other expenditures of money in the history of civilization have had the impact on economies than government dollars have had and continue to have. It is not even close. As very very small examples:

        http://www.nasa.gov/externalflash/economic-impacts/Summary_NASA-Economic-Impacts.pdf

        http://sciencecoalition.org/reports-and-resources.php

        Your friend was simply wrong.

        Best,
        Tom

  11. Nick wrote: Now, to start a different conversation: I had the impression that most lumber in the US was farmed. Have you seen stats?

    Nick, while it is true that lumber companies do replant, in most cases, where they clear cut, it is doubtful that many have harvested any of these replanted trees since it takes many decades for a tree to grow to lumber harvesting size. Tree farms are mostly owned by paper companies. A loblolly pine can be harvested, for paper, in as little as 14 years.

    I googled it and found that only a tiny fraction of our lumber is grown in the USA.

    Where did your house grow?

    Where did all that wood come from? In this age of globalization it is very likely that the lumber and other wood products that make up your house came from all over the world. It is also possible that the harvesting of the wood and manufacturing the products took place in different countries. Generally, the more processed a product is the more difficult it is to determine exactly where the wood was grown. However, looking at the flow of wood products into and out of the United States provides some clues as to where these finished products were manufactured and where the wood for these products might have been grown…

    [T]he U.S. also imports approximately $4.5 billion worth of softwood lumber from Canada, accounting for 83% of total softwood lumber imports by value. That’s over ten times as much as the U.S. exports to other countries. Another 13% of our total imports in this category come from Chile, Brazil, New Zealand, Germany and Sweden, collectively.

    Again, your house is made mostly from old growth forest, and I would bet that only a tiny fraction of that is ever replanted.

      1. Here’s total value:
        Forest Products Industry Values Statistic
        Total employment in the U.S. forest products industry
        887,100
        Details →
        Total value of industry shipments of the wood and paper manufacturing industry in the U.S.
        $238,795,560k
        Details →

        Here’s domestic timber production vs consumption:
        Main Timber Products Values Statistic
        Total U.S. industrial roundwood production
        11,244m ft³
        Details →
        Total U.S. industrial roundwood consumption
        11,882m ft³
        Details →

        1. I saw all that, what I meant was this:

          roughly 90% comes from domestic production.

          Now I fully understand that 90% of US wood pulp production comes from US domestic production. What I am talking about is lumber. That is the stuff that homes are built from. The stuff that comes from old growth forest, not the stuff that comes from 14 year old loblolly pines. What percentage of that is grown and harvested in the USA.

          But I guess it really doesn’t matter, every old growth tree lost is an old growth tree lost, it really doesn’t matter where it comes from.

          Oh, one more thing. You quoted “roundwood”. I thought “what the hell is that? So I looked it up:

          Definition of ROUNDWOOD

          : timber used (as for poles) without being squared by sawing or hewing

          Naw, houses aren’t made out of poles. You are quoting timber made into utility poles.

  12. about lumber and timber and old growth forests:::

    Everybody you ask has a different definition of what an old growth forest is.
    There is very little old growth forest being logged in the US these days except maybe in the Pacific Northwest – according to the technical definitions used in forestry textbooks- because there is very little left to be logged.

    Most of the timber harvested for lumber in most of the country is what is referred to as second growth forest meaning it has been previously logged within the past hundred years or so depending again on which definition you use.

    I have traveled extensively in the south east and have never seen more than a few acres of real old growth for except for parklands and nature reserves and a few tracts up to a few hundred acres owned by old money rich people who have never had any need for money.

    Most timber land , just about all of it actually , that is harvested in this country these day is replanted after one fashion or another due to state and federal laws mandating replanting. The only common exceptions are land that is cleared for farming or development.

    Some land is managed under plans that are designed to provide more food and cover for wildlife and may be managed in a substantially different manner. An example would be national forest land that is clear cut in relatively small tracts ( fifty acres or less in any one given spot) and allowed to simply revert to brush and eventually back to forest land. This sort of undergrowth is prime habitat for deer and a lot of other game animals.

    In Virginia for instance the state sends a forester around to make sure you are in compliance with seed tree laws and set backs from streams and that you build bridges or put in culverts to cross streams and so forth.Failure to comply can result is some very stiff fines and failure to pay the fines results in being shut down as a business if you are a professional logger.Eventually you will be hounded into bankruptcy court or jail if you don’t pay up.

    Timber companies have been around long enough to be harvesting saw timber on a huge scale on tree farmed land for a while now. The way this is done in southeast Virginia for example is that the land is planted with loblolly pine and thinned at about fifteen year for pulpwood and maybe a few poles. This takes out every second or third tree depending on several factors. A second thinning is sometimes done. The remaining trees are still close enough to more or less close the canopy which means the ground is shaded and the farmed trees get most of the water and sun. This also causes the lower limbs to die and fall off and thus creates much more valuable logs since there are not many knots.

    I once watched a good sized tract of company owned saw timber harvested and fed into the chippers at a paper mill just because the price of pulpwood got too high to suit management and lumber prices happened to be down at the same time.Timber companies are often vertically integrated.I have two first cousins who are professional foresters – professional tree farmers actually but there is no point in trying to convince THEM of that.

    Most soft wood species in the southern part of the country grow big enough to be harvested for lumber in forty years. The logs are on the small size but they cut the trees anyway if lumber is up.

    It is common nowadays to take everything including the brush wood and branches and leaves off to be burned or mulched or whatever in the deep south.

    The last time I sold a tract of pine was twenty years ago and the loggers never set foot on the ground except at lunch time unless something broke. They harvested the trees and dragged them out with a big machine called a buncher feller with a saw on one end and a big grapple on the other and put them on the back of a tractor trailer mounted machine that stripped off the limbs and cut the trees to truck length with a swivel boom loader similar to a construction crane . The tops went into another machine that took the crown and ground it down round and smooth and spit the new born fence post out the other end to be hauled to processing plant where it would be pressure treated to prevent decay.

    The only thing left was stumps and a big pile of mangled branches and needles.

    And all this was twenty years ago.

    Today they would take the branches and needles too if close enough to a power plant to burn them as a coal substitute.

    Even the most miserable looking tree is likely as not to be run thru a debarker and a chipper and the chips hauled to a pulp mill or particle board plant these days if there is one within a seventy five miles or so.Longer hauls are practical if the roads are good.

    Tree farms are a mixed bag like everything else. Some people refer to them as ecological deserts which is certainly an exaggeration but one with a real kernel of truth in it. But on the other hand a thousand acre tree farm produces a lot more – twice as much or more – pulp and lumber as an unmanaged woodland.

    This means that for given level of pulp and lumber production a whole lot more woodlands can be left undisturbed by loggers.

    The same point applies to industrial farming with chemicals and machinery. Modern farming industrial style produces yields that are commonly four or five times as great as the methods used by my great grand parents.If we were to quit this sort of farming we would have to plow every possible acre and we still wouldn’t be able to afford dog food or steak. We would be eating beans and bread and damned glad to get even beans and bread.

    ( The sort of farming advocated by ill informed but well intentioned environmentalists and sustainability advocates works on small scale with plenty of labor and lots of inputs that are not often acknowledged by people advocating such farming.It does not work on the scale necessary to feed the world as yet and may never work on the scale necessary without totally disrupting society and sending a substantial part of the population back to the land.

    Who wants to live on the plains and grow wheat by hand out in the boonies where there is nothing to do except to grow wheat and nothing to see except wheat fields?Plowing on a modern tractor is not hard or even necessarily boring work but so called sustainable farming is a hell of a lot of hard work and small compensation on top of the work.

    Walmarts are a hundred miles or more apart in that sort of country. Housing and schools and roads exist only as necessary to support the small local population. Houses are typically half a mile to a mile apart.And that is along the road! The next road over running more or less parallel left or right may be five or ten miles away.)

    These remarks are not intended to imply that we can’t do better in terms of feeding ourselves and so forth and taking better care of the environment as well . There is plenty of room for improvement and improvements are constantly being made.The quantities of pesticides and fertilizer used per unit of yield are growing smaller for instance.Less fuel is being used per unit of yield and soil erosion is not nearly as pressing a problem as it used to be since the adoption of no till planting .

  13. Yellow poplar also grows pretty fast on good ground in the south and can be harvested for lumber at forty years of age or maybe less sometimes. It is actually a soft wood in terms of the quality of the wood when working it but it is technically a hardwood tree and classed as such in statistics.

    Just about all the other hardwood trees require three generations of men to make a sawlog even in the hot wet south and in colder and drier climates it may take a couple of hundred years.

    But except for flooring and decorative trim or custom made cabinets and bookshelves etc very little hardwood such as oak and maple is used in building houses except maybe million dollar houses. It’s too expensive and has been too expensive for a long time.Good oak and maple and other such species are so expensive that even solid wood furniture made from these trees cost a fortune these days.

    The usual way nice looking affordable wooden furniture is made these day is to laminate a very thin layer of hardwood veneer to a cheap substrate species or even chipboard.

    1. Poplar is a hardwood? When I was a kid there was a woods on my dad’s place. I loved to build things in the woods from small trees I would cut down. I would always build them out of poplar because it were so easy to cut down and so light to handle. They were the softest wood in the entire woods. I don’t understand how they could be classified as a hardwood.

      1. If evergreen it is hardwood even if it is soft. English Oak is softwood even thogh it can be tough as nails.

        NAOM

      2. I was taught that wood from angiosperms, flowering plants, is classified as hardwood. Wood from gymnosperms, conifers, is classified as softwood. In terms of density, there are soft hardwoods (balsa) and hard softwoods (some pines used for flooring can be quite tough). Perhaps they (whoever “they” were) should’ve chosen other terms.

      3. Ron,

        Yellow poplar is not a poplar. It’s the tulip tree; it has big, beautiful yellow magnolia-looking flowers.

        I seem to remember that it grows taller than any other angiosperm in North America.

  14. http://www.inforum.com/content/dayton-wants-north-dakota-make-oil-safer-0

    Bakken oil conditioning.

    “North Dakota officials are in the process of deciding what to do about oil conditioning, which removes gas from crude oil. Some people blame those gases for recent explosions of railcars carrying crude oil that originated in North Dakota.”

    Look, people, no one is putting gas into the truck as a separate event. It’s in the on site tank along with the “oil” waiting for the truck to come get it. (And btw, if the liquid was API 43 without the gas, what is it with the gas?).

    If it’s filling the tank along with oil and then goes into the truck and then the railcar — NoDak’s measurement of oil production cannot be correct.

  15. The actual technical definitions of hardwoods and softwoods are pretty technical but they happily boil down to something easy to remember. If a tree sheds it’s leaves on an annual basis it is a hardwood species. If it is an evergreen and maintains green leaves (needles) year round it is a soft wood species.If there are any important exceptions to this rule of thumb I am unaware of them.

    I am not sure how these definitions came to be accepted as industry standards but it probably came about merely as a matter of convenience.Softwoods are generally full of sticky sap and thus must be handled differently from hardwoods in many respects from felling to sawing to drying to finishing.

    In my neighborhood for instance I can cut a white oak and leave it for months if necessary before hauling it to the mill. If I leave white pine on the ground for three months (except in mid winter ) it will have so many borers in it as to be utterly worthless and entirely unsalable even as pulpwood.I could still sell the white oak log for the going price after six months or even a year.

    In most cases hardwoods are actually harder and usually stronger than softwoods but there are exceptions such as yellow poplar which is actually a rather soft wood that is exceptionally easy to sand and saw and so forth.Since I am not a forester if anybody wants to know about the other exceptions they can look them up themselves. I can name a few that are not commercially important that are local to my area but know very little about species from other areas and countries.

    Farmers in parts of the country where timber grows know the basics of forestry as it is practiced locally and the basics are taught in introductory general ag classes at university level to all majors. Foresters thus usually know quite a bit more about fruit trees and corn than most people would guess. Some schools have combined programs thru the freshman and maybe sophomore level which was the case at my university back in the dark ages.

    This situation is actually much easier to understand and remember than all the various definitions of condensates used in the oil and gas industry depending on where they are captured and separated from the rest of the oil or gas as the case may be. I remember Rockman writing it up for us and it took him close to a whole page to point out the distinctions.

    By the way has anybody heard from him recently? He must be getting on in years by now.He was a mainstay at TOD and I always looked forward to his comments.

      1. OK,but why not here ? Does he have an axe to grind with Ron ? As of this date I would say that this the forum to be on for peak oil and allied issues . Rockman please HELP .We old timers(plus new) from TOD can use your sage viewpoints .

        1. Rockman seems to prefer peakoil.com.

          If you have a question for him, just find a thread there of relevance where he has posted and he will answer your questions, or at least respond to your questions, in most cases.

    1. OFM,

      Live oaks are evergreen; I’d consider them hardwoods but I don’t know if foresters do.

      Rockman? He considers himself monogamous although his spellchecker ensures that the word comes out as some other one. He posts at PO.com all the time, so he won’t post elsewhere. I expect that he reads this site but I don’t know; many’s the time I’ve wished he would weigh in here, too.

    2. Spruce, which is classified as a soft-wood, is far and away the tree used for lumber in the U.S. and Canada – from the western boreal forests of Canada. Always kiln-dried. Some fir is used, but less so now that so much of it has been harvested over the last century. It is the better of the two for home building lumber. (Our old house, built in 1931 (old is relative!), was built of fir – very difficult now to put a nail into, and a screw must have a pilot hole first – spruce is much softer, more prone to damp-rot, and will not last as long).
      Tamarack is also a conifer, thus a soft-wood, but it loses its needles every year. Decent for firewood and snowshoes, but not for construction purposes.

  16. I think I’ll begin collecting and hoarding cow chips and buffalo chips. It’ll be a great investment and I’ll corner the market. Who knows, when the chips are down with forests, oil, coal, solar, wind and nuclear, I’ll be in like flint. I’ll be able to charge an arm and a leg for that precious commodity, cows can make a lot of it and it can pay, I just know it. Isn’t there a power plant in Texas that burns cow dung for power? Near Hereford? Cow shit I know?

    If you want to see pristine forest and land, visit British Columbia. You have to go north of Prince George to see what I mean. Incredible scenery and it is a sight not soon forgotten. A night at the Rancheria campground in the Yukon will give you an idea of what frontier is. I was astounded that across the creek all there was was land and trees, nothing else. Although, there were bear tracks in the sand of the creek, so I knew I wasn’t alone. One look into the wilderness and you know nobody is out there because it is out there. Not until you arrive at the Peace River Valley do you know you are back into civilization, farms and ranches, not just outposts and recreational businesses. Huge amount of forest yet to be tapped up there and if and when you see a forest fire, nobody is going to go and fight it, it is a lost cause, too far away to bother with it. The sign read ‘our BC is not for sale’, so there is resistance to development. Athabasca tar sands are the way to go for now.

    That was eons ago, oil was at 40 dollars per barrel and a price for a liter at the pump in Canada was 75 cents. I was appalled when the price hit 44 dollars in August of that year, 2004. How could it possibly be so expensive when there is so much oil? It can’t all be burned in a day, it takes at least 100 years to burn all that oil. There it was, gone. 100 dollar oil is better, encourages theft and drive-offs, lol.

    If you drive to the Yukon, don’t use an electric vehicle to travel the distance, have a vehicle with an ICE and a large gas tank. Don’t break down, it’ll cost an arm and a leg. When you go through Canadian customs at the border crossing into the US, you drive for another 20 miles or so before you reach the US border station and the real border.

    Oil will get you there. Electricity is for buildings and such, not vehicles that need to travel long distances.

    1. Hang in there RW you are getting better all the time and I am beginning to really enjoy your comments rather than just speculate on what combination of drugs you are ingesting.;-)

  17. Interesting comment by “Short On Oil.”

    Link to Forbes article:

    Long And Wrong In The Oil Market
    http://peakoil.com/business/long-and-wrong-in-the-oil-market

    Short On Oil Comment:

    “International oil prices have remained relatively flat over the last few years thanks, in large part, to a massive and unexpected increase in U.S. production.” (Quote from Forbes article)

    That’s what we thought was happening also; shale production was keeping prices down, but after taking a closer look at the data it turns out that is not what has been happening. Oil has been approaching its maximum supportable price. In regard to this article, Hall is half right, and Forbes is totally wrong. Hall thinks that shale production will crash, and in this respect he is right. We already see this happening in the Eagle Ford as condensate production from the formation is in steep decline. These mini reservoirs are hitting their dew point in increasing numbers.

    As this effect hits an increasing number of older shale condensate fields around the country, there soon won’t be enough rigs on the planet to compensate for their decline.

    Hall’s estimate that prices will go to $150/barrel is not likely to happen. If it does it will look like the 2008, $147 bounce, which immediately fell back to $30. Gail Tverberg published a report a few months ago where she stated that the economy could not support prices much above a $100/barrel. After rerunning some numbers we have now substantiated her estimate. We came to the conclusion that $117/b is the maximum price that the economy can afford to pay for petroleum. Prices can not go above that for any sustained period of time. If Hall gets his $147/b bounce, he had better sell his positions fast, before the bottom drops out again.

    Forbes, of course, is having its usual love affair with the technology genie. Drilling more wells from one pad occurred because she waved her magic wand, and presto. It had nothing to do with the fact that engineers have spent the last 60 years developing, and improving this technology. And presto, in the flash of an eye, she will come up with another wonder just in time to save the day.

    Forbes is back in fantasy land, and Hall is walking one mighty flimsy tight rode. If Hall pulls this one off, he will have earned it.

    http://www.thehillsgroup.org/

    1. Thanks for posting this Jeffrey. Short On Oil of the Hills Group reflects my sentiments exactly. I was once among those who believe that oil prices will continue to go ever upward as supply slows and demand increases. However I learned my lesson in 2008 but it is shocking how many people did not.

      Short’s comment can be found at: Peak Oil.Com

    2. Not a good idea to use Eagle Ford condensate decline as evidence of anything at all. Per Rockman’s tidbit of redefinition as a function of how a well is labeled — if a gas well, the liquid is condensate, if an oil well, the liquid is oil.

  18. ZH has picked up the Kara Sea announcement. I’ve dug a tad deeper and here’s my read.

    There is Rosneft talk (and no particular denial from Exxon) of 1-9 billion barrels with “additional similar geology all around this area.”

    I cry wait a minute. The first well drilled hit so conclusively? I don’t think so. Not with 1:4 dry hole ratio for ONSHORE exploration drilling. I’m gonna bet these guys hit hydrocarbons and have not completed analysis for anything more than that.

    But let’s not evade reality here . . . if it’s there Russia is going to win and your grandkids and maybe kids will clean Moscow toilets as a pinnacle life ambition.

    I’m searching to find geology specifics of the Kara Sea. Doug, you got ’em?

    1. Oh btw, there are proposals around, I swear to God, of building submarine LNG carriers for the Kara Sea gas that will accompany any oil output.

      1. The Russian press is going whole hog. Those additional areas of similar geology are adding up to serious tens and hundreds of billions of barrels numbers.

            1. btw that USGS link does confirm “similar geology around”.

              The Russians have no reason to evenly distribute this. As shale dies and desperation rises . . . only countries that disallow alternate energy research and use are provided oil, and the cutoff is immediate. Any transshipment also forbidden.

              It can get ugly. If I were them and I were playing for keeps, it’s what I’d do, too. Why fuel your enemies’ efforts to defeat you?

            2. only countries that disallow alternate energy research and use are provided oil

              Russia only provides about 1/4 of total oil exports, so that would never work.

              It would certainly accelerate the transition away from oil!

        1. Ultradeepwater Arctic off Siberia. That’s what, $150/barrel breakeven? More?

          I put Russian Arctic in the same basket as Brazil. Thoroughly dubious government claims based on analog, main company is in bed with government, and giant development costs.

          1. Doesn’t have to cost a penny if you put a gun to the heads of the production workers and demand they drill or die.

          2. btw not deep. < 10,000 feet total. < Bakken depths.

            Have a look at what the French forced ammo plant labor cost Germany in WW II. Payscales weren't good.

    2. Watcher,

      “I’m searching to find geology specifics of the Kara Sea. Doug, you got ‘em?”

      Have some info but just arrived home from screwed up flight from Norway and I’m jet lagged up the yin-yang. Will come back to this after my brain decides on the continent its residing in. Meanwhile I might just shoot my wife between the eyes: People who waltz of a plane, smiling, after a long totally fucked up journey REALLY piss me off — even when I’m married to them.

      1. I’ve been to about 70 countries, including Antarctica, and I am close friends with jet lag.

        Drink a lot of water.

        Careful body temp (body temp variance induces yawning, yes, weird), and get yerself some melatonin.

        And if it’s cloudy, stare at light bulbs in the daytime. Nothing . . . NOTHING worsens jetlag more than rainy days that can’t reset your clock.

  19. It seem pretty obvious that most of the regulars here believe in peak oil now or in the near future.I certainly do.

    A billion barrel field here and another there doesn’t change the calculus much- maybe a few months grace for each such field found and put into production.

    Now as to how high the price can go-I think Ron and people with similar opinions are right in the short to medium term. By medium term term I mean the next few years but not more than five or six years.After that even with demand destruction I think depletion of legacy fields will be such that there will be a market for such oil as IS AVAILABLE at prices exceeding one hundred twenty bucks per barrel.

    I would not be surprised to see oil selling in todays dollars at a hundred thirty or forty or even fifty bucks in a decade or a little longer. As I have often said before I would gladly pay twenty dollars a gallon for diesel rather using draft animals and human muscles on my little farm.

    Kids joyriding will be a thing of the past unless they have rich parents but people with real work to do will be able to pay five or ten bucks a gallon for diesel and gasoline so long as the work is there either in the form of customers or a paycheck.
    If I were young and ambitious I would try to land a distributorship for the first company that comes out with a truly market ready electric bike- meaning there is going to be a local dealer with local parts department and a local properly trained mechanic in small towns rather than just major cities.

    The eventual upper limit on oil prices may actually be determined by the cost of producing synthetic gasoline and diesel fuel from coal.Good data on the cost of this technology is surprisingly scarce but I am under the impression that with coal at todays prices coal to liquids would work profitably as a business if oil prices were to reach a hundred fifty bucks or so.Other people have thrown around a figure of two hundred bucks a barrel for oil before coal to liquid technology becomes profitable.I really have no good idea about this.

    We should remember that a lot of coal is sitting around with no ready buyers in sight and that the owners of some of it may want to give coal to liquids a try in order to put their hands on the money rather than wait decades for the market to improve.

    1. Coal gasification is as old as the hills now.

      A viable alternative, albeit, all it will do is maintain copious amounts of fuel/energy consumption, it will be nothing more than bau, das ist Verboten at this point in time. Consumption and demand must be destroyed, prices will do that, even if it looks as though it can’t be done with prices 15 to 20 times of what they once were, demand destruction has to happen.

      Also, debt destruction must also happen. Those 223 trillion dollars of debt can expunged rather easily. Divide the price of gold into the amount of debt and multiply the quotient times 20 and you will have the amount of debt that is actually owed, not the amount of fiat clown bux.

      Determine the price of gold via the amount of clown bux, be they the bucks, or Marks, Yens or Pounds in existence and you will have an answer on how much is really owed. If the number used is 1500 clown bux divided into 223 trillions then multiplied by 20, the amount is what is owed.

      223 000 000 000 000/1500×20=(go to Google calculator)2 973 333 333 333,33 or about 424 usd for each human on the planet. Piece of cake to pay off, the bankers will have a hissy fit, but that is just too bad. It won’t go like they want, so they’ll be madder than wet hens, but so what? Who cares if bankers finally lose a buck or two and might finally learn a thing or two about a thing or two? My goodness, what a loss that would be.

      It’s about time. Those billionaires will merely be millionaires. Enough to make a grown man cry.

      It cuts down on the printing madness. Those presses won’t have to go into overdrive. Saves the world’s forests.

      There will finally be some relief. Less energy will be consumed with fewer printing presses spitting out paper fiat money ad absurdum, ad nauseam. A couple of coal burning power plants could be shut down and it will be just a better world.

    2. I would not be surprised to see oil selling in todays dollars at a hundred thirty or forty or even fifty bucks in a decade or a little longer. As I have often said before I would gladly pay twenty dollars a gallon for diesel rather using draft animals and human muscles on my little farm.

      Mac, don’t confuse the upper limit of affordable liquid fuel by what you can afford to pay.

      The eventual upper limit on oil prices may actually be determined by the cost of producing synthetic gasoline and diesel fuel from coal.

      Supply and demand will determine the price of oil just as it always has. The economy is the factor that most folks leave out when trying to figure out how high oil prices can go. The economy, as it presently is, will not go much over $100 a barrel. A robust economy may support prices as high as $125 a barrel. A sick economy will see prices at below $90 a barrel. And that will be the case no matter what you make it out of.

      Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

      Many people have the impression that falling oil prices mean that the cost of production is falling, and thus that the feared “peak oil” is far in the distance. This is not the correct interpretation, especially when many types of commodities are decreasing in price at the same time. When prices are set in a world market, the big issue is affordability. Even if food, oil and coal are close to necessities, consumers can’t pay more than they can afford.

      1. Hi Ron,

        I won’t argue that the economy can support prices above a hundred twenty bucks in the immediate future. It seems to be staggering like an old drunk already with prices around a hundred bucks although not all our economic troubles are due just to the price of oil.

        But the economy will change as oil becomes more expensive.

        The question is whether demand destruction can continuously out pace depletion and rising prices brought about by declining supplies of oil.

        The Joe Sixpacks are already driving a lot fewer new 6000 pound pickup trucks in my neighborhood at least.More expensive oil will put a real hurt on airlines and resort communities but the people who work in such industries will eventually find other jobs or else go on welfare.

        The kids will have to joyride in very small cars and on motorbikes if not in electric cars if they can joyride at all.

        But anyway you slice it most people except the rich and well to do of course will do some things to cut back on oil use if the price of it rises steadily over a few years time as I expect to happen.

        Nearly every car loan written today will be paid off within sixty months.

        The ones starting on such payments this month will likely have learned something about fuel economy and budgeting within that sixty months and buy a car or truck that cuts their consumption in half unless they are raking in plenty of cash.

        People learn slowly but they do learn. I know numerous people who used to laugh at folks driving compact cars with ” rubber band motors” who are driving such cars today.

        I don’t know anybody who has installed an oil furnace within the last ten years or so but I know a lot of people who have installed heat pumps and a lot of people who have started using their oil furnaces a hell of a lot less by burning wood almost every cold day as I do. My oil furnace only comes on occasionally very late at night on very cold nights or if I need to leave the house for a day or longer in freezing weather.

        When it finally croaks I will put in a heat pump but I use so little oil it hardly matters in terms of heating the house with it.

        My next car will be a forty mpg plus car if I ever get another car. The one I drive now is a thirty mpg car on average.

        There are plenty of ads out there for hot rod cars- very hot cars that get pretty good fuel economy actually.

        Going from thirty to forty mpg will enable me to drive for only a little more per mile for fuel even if oil goes to a hundred fifty per.I will make up the difference by driving a little less.

        I know a good many young people who could afford one of them such as relatives recently out of university making good money but I don”t know a soul who has actually bought one.The average new Mustang and Camaro has a v6 rather than a v8 these days and actually gets much better mileage (around 30) than my first car a 64 Chevy Bel Air six three on the tree which got only about 22mpg on the interstate.

        My argument is that we WILL be able to afford hundred fifty buck oil (constant money )in a decade in real money because we WILL HAVE TO afford it and that we will make the changes necessary to afford it.

        Plastic milk jugs keep getting thinner. Farmers will economize on fertilizer and diesel fuel while getting the same yields or better. Big trucks are getting to be streamlined and are running single wheels rather than duals already. The drivers will get bonuses for fuel economy that will be big enough to encourage them to slow down.Trains will replace most long haul trucks within the decade.If hauling beer a few hundred miles in a truck gets to be too expensive then we will go back to brewing it locally.

        Of course I may be wrong and the economy may just roll over and die without being able to adapt to higher prices. In my estimation that is only likely to happen though if prices go up sharply over a relatively short period of time.

        In the end we are in for a world of hurt no matter what.Peak oil is not the only problem we are going to have to deal with within a decade or so.

        1. You would think that aviation would be the sector of the economy that would have the hardest time adapting to high oil prices.

          Aviation fuel prices went up by five times in the last 10 years.

          Airlines cut fuel consumption, cut other costs, and raised the price of baggage.

          There are more people flying than ever.

          1. There are more people flying than ever.

            The data do not bear that out. In Steven Kopits’ presentation
            CGEP: Global Oil Market Forecasting: Main Approaches & Key Drivers
            https://www.youtube.com/watch?v=dLCsMRr7hAg

            He has some stats on that. Basically, in the US Scheduled airline flights have been reduced by 30% since 2005 to present. One out of three flights have been eliminated. The actual number of flying passengers hasn’t significantly been reduced because the airlines have been packing more passengers onto fewer flights. However those numbers have not increased either and I’m willing to bet that they will decrease in the foreseeable future.

            1. That’s the whole point: flights don’t matter, numbers of passengers do.

              Airlines have sharply reduced fuel consumption, as well as labor costs, by raising occupancy of flights. They found a number of other ways of reducing fuel consumption as well, including newer more efficient planes, reduced taxiing, more efficient routes and flight plans, etcetera., etc.

              Some people expected the aviation industry to be killed by high oil prices: clearly that hasn’t happened.

            2. Airlines have sharply reduced fuel consumption, as well as labor costs, by raising occupancy of flights. They found a number of other ways of reducing fuel consumption as well, including newer more efficient planes, reduced taxiing, more efficient routes and flight plans, etcetera., etc.

              Sooner or later that strategy starts hitting the wall of physical limits. I’ll bet they are pretty close to it already. There is only so much more efficiency they can wring out of their planes.

              Tom Murphy growth has an expiration date
              https://www.youtube.com/watch?v=o_8b6ej0U3g

            3. Murphy appears to be a good physicist, but many of his posts show a great lack of knowledge of the economics and engineering issues of energy.

              Greater efficiency of oil consumption is very helpful, but the key is that there are better and cheaper substitutes for oil.

              An efficient EV can go further than a wasteful one, but neither uses oil.

            4. I’ve read most of Murphy’s articles, but I haven’t looked at this video – don’t have the time.

              I’d guess that this is his argument that exponential growth will eventually consume the solar system.

              Again, the possibility of infinite growth of hard goods (or of commodity resource consumption) is a “straw man” – an argument that no one is actually making.

              For instance, the US’ steel and car sectors stopped growing a long time ago as measured by unit growth. Instead, they’re adding features and quality – still growth, but not measured in the number of kilograms of product delivered.

            5. Would you mind posting the link for the video? Because of the nesting of comments (and my iPad?) I can only see have of what’s being displayed. I’d also like to share this with a lot of people.

            6. I meant half! (don’t ya just hate when people like me don’t proof read their own comments!!)

            7. I had the same problem so, I right clicked on the video and selected “Copy video URL” (I’m using Firefox 32.0.3 on Ubuntu 14.04). I then pasted into the addrress box and deleted “feature=player_embedded” from the URL before hitting enter. The “v=o_8b6ej0U3g” part of the URL shows the unique identifier for the video which, if you search youtube for, will bring back one and only one result.

            8. Air transport is the most difficult area in which to eliminate fossil fuels, but on the other hand:

              We’re going to have fossil fuels for many decades, should we want them, albeit at lower levels than today – we have time to find the cheapest and most convenient way to replace aviation FF consumption.

              In the long run, 3x greater efficiency is possible, and synthetic FF-free fuel is unlikely to be more than 3x as expensive per gallon.
              ———
              First, while jet fuel is probably the hardest use for oil to replace, there are a number of ways to use it more efficiently. Short term changes include replacing or reducing use of older, much less efficient planes; filling planes more fully (increasing load factor); longer and more gradual descents, reducing powered flight time; reduced time in the air waiting to land; electric “tugs” on the ground); slightly slower flying speeds; and a long list of others – ( http://www.nytimes.com/2010/10/09/business/09air.html?_r=1&th&emc=th ). A lot of the changes are operational, so they’re very fast. Others, like the Boeing Dreamliner, are being delivered now. This might be expected to reduce fuel costs by roughly 1/3.

              2nd, fuel is only very roughly 40% of airline costs, and oil is only part of the cost of fuel (jet fuel is higher quality, and therefore more expensive). Combined with the efficiencies discussed above, this means that if oil prices were to rise by 100%, airline ticket prices would only go up by 25%. That’s not going to stop people from flying.

              3rd, it’s very unlikely that oil prices will rise by 100% in a sustained fashion. First, oil prices above $150 would slow down economic growth. 2nd, all of the major uses for oil have substitutes that are cheaper when oil rises above roughly $80. If oil prices went to $150 and stayed there for any length of time, consumers would move to carpooling, mass transit, hybrids, EREVs, EVs, rail, heat pumps, etc, etc, very very quickly. Both of these effects would keep prices from rising further, and probably reduce them from that peak.

              4th, in the long term, design changes can reduce fuel consumption by 70%:

              “CAMBRIDGE, Mass. — In what could set the stage for a fundamental shift in commercial aviation, an MIT-led team has designed a green airplane that is estimated to use 70 percent less fuel than current planes while also reducing noise and emission of nitrogen oxides (NOx). http://web.mit.edu/press/2010/green-airplanes.html

              and

              “the team has found that the SUGAR Volt concept (which adds an electric battery gas turbine hybrid propulsion system) can reduce fuel burn by greater than 70 percent and total energy use by 55 percent when battery energy is included. Moreover, the fuel burn reduction and the ‘greening’ of the electrical power grid can produce large reductions in emissions of life cycle CO2 and nitrous oxide. Hybrid electric propulsion also has the potential to shorten takeoff distance and reduce noise. ”

              http://www.boeing.com/Features/2010/06/corp_envision_06_14_10.html

              http://www.wired.com/autopia/2010/06/efficient-new-airliner-design-slows-down-to-match-jet-engines/

              5th, fuel can be synthesized from electricity, seawater and atmospheric CO2 right now, but the costs are high – roughly $10/gallon. The Green Freedom project promises synthetic fuel for $4.50 per gallon, pretty close to where we are today, but if they never fulfill that promise we can still synthesize fuel, albeit at higher cost.

              30 years is enough time for aviation to become more efficient – that will keep it going another 20-30 years. 50-60 years is enough to develop and streamline substitutes like biofuels, synthetics liquid fuels (from renewable electricity, hydrogen from seawater electrolysis and atmospheric carbon), or liquid hydrogen.

              Green Fredom is probably a very, very long-term thing. Things like CTL, GTL and syncrude will continue for a very long time. It would require a very strong commitment to completely get rid of fossil fuels in the medium term.

              The actual balance between efficiency improvements and reductions in synthetic fuel costs remain to be seen, but it’s highly likely that we’ll see synthetic fueled jets with operating costs equal to those of today’s airlines.

            9. What is the difference between a physicist, an engineer, and an economist?

              If an engineer walks into a room and sees a fire in the middle and a bucket of water in the corner, he takes the bucket of water and pours it on the fire and puts it out.

              If a physicist walks into a room and sees a fire in the middle and a bucket of water in the corner, he takes the bucket of water and pours it eloquently around the fire and lets the fire put itself out.

              If an economist walks into a room and sees a fire in the middle and a bucket of water in the corner, he convinces himself that there is a market based solution and leaves.

        2. Mac, your whole post is about people cutting back. That’s exactly what I am talking about. When prices go up on anything people cut back. Everyone cutting back on spending is the very definition of a shrinking economy. The economy shrinks, creating less demand for oil and prices fall.

          What you describe is exactly what will happen. When oil prices get too high, people cut back creating less demand. Less demand puts a cap on oil prices and they fall back down again.

          Hey, keep it up Mac, I think you are beginning to understand the economy. Now if you can just figure out what happens when everyone cuts back their fuel demand then you will have it made.

          Hint: The the economy tanks and the price of oil falls. 😉

          1. Ron, it’s all about people cutting back on *oil* consumption. That’s a good thing, not a bad thing.

            1. Nick, it’s not about the good or bad of it, it’s what it does to the economy. It would be a good thing if everyone on earth had plenty to eat and everyone lived to be 100. But if that were the case the population would double every few years until there were standing room only on earth.

              If everyone consumes less, does less travel, take fewer or no vacations, and spent less on everything then everyone who had a good job would be better off. But everyone who worked in the travel industry would be out of a job. Motels and restaurants would close down. And every company that manufactured the stuff that served those industries would lay off their employees.

              Nick, there is no such thing as an all good thing or an all bad thing when it comes to the economy. Everything has good and bad elements to it.

              After we reach peak oil, everyone will consume less and less. When production reaches half what it is today the world will consume half what it consumes today. Do you think this will be a good thing or a bad thing? The economy will be cut in half, or nearly so. The food supply will drop dramatically. Do you think this will be a good thing or a bad thing.

              But you know, it really doesn’t matter what either of us thinks, it will happen.

            2. “If everyone consumes less, does less travel, take fewer or no vacations, and spent less on everything …..” for example;

              Macy’s CEO Offers An Ominous Insight About American Consumers

              “The consumer has not bounced back with the confidence that we were all looking for,” Lundgren said at the Goldman Sachs Annual Retail Conference earlier this month, weeks after the company reported sluggish second-quarter sales. ….snip

              Lundgren’s insight doesn’t bode well for retailers, industry expert Robin Lewis writes on his blog.

              ” Forget about all of the holiday projections soon to be bandied about by the legions of economists, analysts, pundits, experts and faux experts ,” Lewis says. “There will be no overall market growth this holiday season.”

              Despite recent gains in employment, consumers don’t have the spending power that they used to.

              Every group surveyed by the Federal Reserve Board had a lower mean income in 2013 than they did in 2007.

            3. If everyone consumes less, does less travel, take fewer or no vacations, and spent less on everything then everyone who had a good job would be better off. But everyone who worked in the travel industry would be out of a job. Motels and restaurants would close down. And every company that manufactured the stuff that served those industries would lay off their employees.

              This is not really true. Driving around the “Great Triangle” from suburb to industrial park to shopping mall doesn’t really add anything to the economy except for road builders and the oil industry. Doing it in a gas hog adds even less. The transition away from wasteful consumption means increased investment in conservation.

              Of course the shopping mall is a dying beast anyway, for reasons not closely related to oil. Cheap oil wouldn’t save the travel agencies either. If productivity increases keep chugging along at 2% a year another thirty five years, worker output will have doubled, and it is questionable that anyone will have a job. I mean, what will they do? Retire early I guess.

            4. Ron,

              What I’m trying to say is that oil hurts the economy. To the extent that the US, and other oil consumers, kicks the oil habit, it will have a stronger economy, happier citizens, etc.

              Oil used to be beneficial, but now there are better and cheaper alternatives. To the extent to which consumers buy vehicles that use less fuel, they will have more money for other things. To the extent to which the US imports less oil, it will have less debt, have less need to waste money and lives on military interventions, and be less likely to lose Florida (among other things).

            5. Nick, oil hurts the environment, it does not hurt the economy. If oil disappeared the environment would get a lot better and the economy would collapse, the world would be in chaos and nine tenths of the population would be dead within a year.

              True, if the US did not have to import oil our economy would be a lot healthier. But it is all that money leaving our economy that is hurting us so much, not the oil coming in.

            6. oil hurts the environment, it does not hurt the economy.

              Environmental harm isn’t what I’m talking about. OTOH, pollution shouldn’t be ignored: health care costs due to asthma, forestry and infrastructural damage due to acid rain – the list of costs go on. Not to mention losing Florida.

              If oil disappeared…the economy would collapse

              Well, sure. But that’s a “strawman” – no one is proposing that. I’m arguing that we should replace oil ASAP with cheaper and better substitutes.

              if the US did not have to import oil our economy would be a lot healthier. But it is all that money leaving our economy that is hurting us so much

              That’s a big part. And that’s very important. The other part is the fact that the EROEI of oil is plummeting: electric transportation is now substantially cheaper, so drilling for expensive oil is an economic waste.

              There’s also the enormous cost of oil shocks: a big price spike is a danger we can and will eliminate. The only question is how fast we’ll do it.

              And, finally, there’s the enormous cost of our military. Trillions spent defending oil supply lines, homeland security, etc. Isn’t that an enormous waste?

            7. I’m arguing that we should replace oil ASAP with cheaper and better substitutes.

              Ahh but there is nothing cheaper, and absolutely nothing better.

              electric transportation is now substantially cheaper,

              No it is not cheaper. Sure electric trains are cheaper but electric cars are not, electric trucks are not, electric tractor’s are not, electric ships and tug boats are not and there are no electric planes.

              so drilling for expensive oil is an economic waste.

              Tell that to the truckers, to all who ship by sea, tell that to the farmers who use diesel powered farm equipment.

              Hey, I am all for getting off oil if possible, I just don’t believe it is at all possible. Well not without a huge die-off first.

          2. Hi Ron,

            I agree that when people cut back in the SHORT TERM the price of oil falls , again, in the short term. But in the longer term two things upset this particular apple cart.

            One is that as Nick and I argue, we learn to do more with less and with more economic utility obtained from a gallon of gasoline we can afford to pay more for it. My old Daddy used to commute to his part time job (Forty Hours ) in town in a Ford pickup that got ten mpg but it had so much muscle under the hood it would climb hairpin curves on steep mountain roads in high gear.The next truck he bought got sixteen and the next one which we still have gets about twenty to twenty two on average.(There is a four by four seldom driven still around that gets ten to fourteen at best.)

            The last truck I bought got thirty but it finally fell apart beyond hope of economic repair and I drive the trucks so little these days replacing it is not a high priority.

            Adaptation enables the economy to resume growth and people start buying more oil again, if not as individuals to put in the auto tank then as consumers at large.There are enough new consumers in the developing world to offset the drop in individual consumption of guys like me.

            The OTHER THING is depletion.Sooner or later -AT SOME POINT DOWN THE ROAD BUT NOT IN THE NEAR TERM- depletion is going to FORCE a drop in consumption.

            I am not argueing that this drop in total consumption will not put a hurting on the economy. BIG TIME.

            What I am argueing is that as oil gets to be more and more expensive more and more uses of it will cease to exist or those uses sharply curtailed BUT not fast enough and to a great enough extent to PREVENT the price from continuing to rise.

            We absolutely as things stand cannot afford twenty dollar gasoline or diesel fuel and maintain business as usual.

            But after the economy suffers a major heart attack as the result of peak oil- and I do agree that such a heart attack is in the cards- there will still be a market for the remaining oil as oil continues to deplete.That market can and will support twenty dollar diesel fuel easily for uses such as farmers and ambulances and cops on motorcycles and in subcompact hybrid cars.( Chasing hot rods won’t be necessary. They will be outlawed and exist strictly as museum pieces.)

            The economy may continue to contract and quite possibly WILL continue to contract largely as the result of peak oil. But reality on the ground means we can and will pay a hundred fifty bucks a barrel in ten years or less because production will ALSO contract .

            I am argueing that even as the production of oil declines and the economy contracts as a result the price of oil can continue to go up.

            I don’t use much oil to grow apples. Twenty dollar diesel on the farm would not necessitate more than a couple of percent increase in the farm gate price of apples in my area.

            Market forces will eliminate the shipping of Washington state apples to Virginia and Virginia apples to Washington state. It is easy to find apples in bags in supermarkets from Washington state here. They are indistinguishable from local apples.

            But if the price of oil doesn’t rise so fast that it causes the economy to have a sudden heart attack from which it does not recover then I expect synthetic liquid fuels and the adaptation of alternate power sources such as batteries in cars to cap oil prices somewhere below two hundred dollars. Plus contraction and changes of lifestyle of course helping in holding down the price of oil.

    3. Kids joyriding will be a thing of the past unless they have rich parents but people with real work to do will be able to pay five or ten bucks a gallon for diesel and gasoline

      But with electric vehicles cheaper than ICE vehicles, why would anyone pay $5 per gallon? Why not buy a hybrid, a plug-in, or an extended range EV?

      The eventual upper limit on oil prices may actually be determined by the cost of producing synthetic gasoline and diesel fuel from coal

      CTL is viable right now, but these are enormous projects and investors are afraid of carbon taxes or limits.

      Synthetic liquid fuels from electricity and water can be produced right now for about $10 per gallon. That’s the cap, and it’s likely to fall somewhat with scale and manufacturing expertise. There’s a pretty good change that large-scale wind and solar will produce large surpluses of cheap power at night and around noon, so that cost could easily fall to $5 per gallon.

      1. I am a big believer in the future of the electric car and while I think that they are going to sell faster every year and eventually be very common indeed I don’t think they will be common enough to really change the energy picture in five to ten years. Conventional cars on the other hand are already built every year by the millions and it will be very easy to change the average fleet fuel economy sharply upward when talking about NEW CARS only.

        Technology is going to add twenty five percent or so in less than a decade.

        If I am right about oil pricing downsizing plus technology will come pretty close to doubling that average fuel economy in 2024 models. The consumer can and will force the downsizing issue with his signature on the loan app or check by selecting cars such that the average fuel economy of 2024 models will be at least 45 to 50 mpg in my own personal opinion.

        The people that buy and drive older cars have already given up on buying cars such as older Ford Crown Vics and Chevy Impalas which are among the most durable cars ever made and relatively easy and cheap to maintain.They can’t afford gas for them and so they have dropped back to Tauras’s and other smaller older models.A Ford Escort in good condition fifteen years old is worth as much or more now as a Crown Vic in comparable condition.Half the car in every respect except one- fuel economy.

        A dozen at least older full size pickup trucks with tags on them are sitting almost all the time in driveways within a couple of miles of my house. They are no longer used except for the occasional trip to the dump or building supply or feed store.When one of them sells at an estate auction it brings either peanuts or if old enough maybe a few bucks as a potential collectible truck.

        Conventional thinkers are missing a critical point about changing economic habits- poor people are the ones who are by necessity forced to do most of the changing and relatively poor people are an ever increasing percentage of the population from here on out.

        Liquid fuels may eventually indeed be manufactured with surplus off peak wind and solar energy but you can bet your last can of beans it won’t be happening for a pretty long time, decades at least.

        I don’t know where you are getting your figures on coal to liquids plants. I haven’t run across any that seem credible to me that make it out that such plants are economically viable today.

        1. Just a little personal anecdote here. Ever since I went to all PV for house and car and tractor, I have had zero outlay for fuel and electricity. And I am WAY MORE comfortable, no sacrifice at all.

          And all of it cost me far less than neighbor and his pickup camper and his trip around the country this summer. And he will be shoveling ff’s into his truck and house forever after.

          Until I actually drove that Leaf, I didn’t really realize how much better it was than the usual “death trap” little cars I have always bought.

          (BTW, those bottom of line cars are lousy as death traps. I have driven many for about 60 yrs and ain’t dead just yet.)

          The locals keep asking how I did it, “given the expense”, and I just say the obvious, it’s a matter of priorities, not cost.

          And, funny to see, the one thing they really go for is the old little tractor I converted to electric as a sort of utility vehicle, which also serves as extra battery in times of need, and carries around the AC power tools to be operated by its inverter.

          We made an inadvertent demonstration of it’s virtues a couple of days ago, Wife took it out to find how to work it, and was surprised to find that the steering took real muscle. Couldn’t turn quickly enough and bulldozed a utility pole before she was able to turn it off.

          Not much power, but gobs of torque.

          Bottom line. Near nobody at the moment realizes how good EV’s are, and when they start to find out, they just might go for them in a real stampede.

          1. There is a chart on deaths per car type. It unfortunately combines death risk to driver PLUS death risk to other drivers.

            Compact and sub compact cars are far more deadly than midsize, large, SUVs, luxury imports, and minivans. Almost all to themselves. Not very deadly to the other guy.

            The numbers seem to be 100-125 driver deaths per million vehicles of the type vs 73 or 74 for midsize, SUVs and large cars. Luxury imports are down around 27. Minvans about 45.

            Sports cars kill a lot of drivers. Way up at 200. Obviously driving fast.

            Pickup trucks kill fewer than subcompact drivers, and a bit more than compact drivers. They kill a lot of the other guy.

            So safety is in the big heavy cars, not driven drunk or fast. Long trips to grandmas at the speed limit with room in the back for the kids and luggage.

            1. “Unfortunately”?

              “No man is an island, entire to itself—”
              Therefor, send not to know for whom the bell tolls,
              It tolls for thee.”

              The only rational estimate of risk includes risk to everyone, over time and space, and that includes global warming.

              It is a logical fallacy to say- this one is safer, since more likely to kill you instead of me. Reason- in any incident, “you” may be me, or anyone else- pedestrian, passenger, grandkid choking in a hellish climate, and so on.

              Safe? How about an M-1 tank?
              Safe? you or me??

            2. Unfortunately.

              The other guy had the same chance to buy a minivan that you did.

            3. Hey, Watcher.
              The central problem with your thesis is the assumption that bigger car are inherently safer.

              You are making this assumption based on limited, cherry-picked data.

              A large car driven by a 20 year old is less safe than a large car driven by a 50 year old.

              If we all drove SUV’s the numbers would look different, just as the numbers would look different if we all drove Corrollas.

              I would posit that those minivans are safer because they are largely driven by a specific subset of parents, and I would go so far as to say the majority of that subset are likely to be female. Which is more important to that low death rate: vehicle size, or the prudence and maturity of the driver?

              The fact is, the difference in actuarial risk is quite small, and becomes smaller every time you reduce your driving by walking, biking or taking public transit (or staying home.) Yet you, being a provocateur, don’t make the suggestion we reduce our risk through means other than buying a Yukon, and instead choose to mess with us.

              Long and short of it: cars don’t kill people, cars with people driving them kill people. Your “deathtraps” diatribes don’t deal with this, and are as suspect as fracking comments by people who don’t understand proppant issues.

              -Lloyd

            4. The big cars are less safe than many people think.

              There was an accident in Austin between a Suburban and a little foreign car. It was basically a fender-bender type accident, but sadly, a child was killed — in the Suburban.

              The Suburban driver swerved to avoid the accident, over-steered, and rolled the Suburban. The child was apparently not strapped in and was killed when it rolled.

              The small car left the scene with minor damage, and the police were looking for the driver.

              I recall seeing a report that a medium-sized passenger car is as safe as an SUV, in large part because SUV’s have high center of gravity and are easy to roll.

        2. Mac,

          I don’t expect synethetic fuels to be manufactured soon: they’re not needed yet, and won’t be for quite some time. But, it’s helpful to know that they’re feasible in the long-term.

          The economics of CTL are fairly straightforward: it’s been used for quite some time.

          $1B for each 10,000 barrel per day plant.

          From the FutureCoalFuels.org FAQ:

          “How long would it take to construct a CTL plant? What is the cost?

          CTL plants are costly to construct, about $1 billion dollars for a 10,000 barrel/day facility, and up to $6.5 billion or more for a world-scale 80,000 barrel/day plant with a five-seven year lead time.”

          http://www.futurecoalfuels.org/faq.asp#9

          The problem is that they’re enormous plants, with a very big price tag and a long lead time. The US has signalled to investors that it doesn’t want CTL because of it’s carbon emissions, and so there’s very little chance that investors will take such a risk. China, on the other hand, takes an “all of the above” approach. They’re not going as large-scale as they might because of the emissions problem, but they’re proceeding with CTL.

  20. About natural gas submarines- I am almost totally lost when it comes to such possible designs but apparently there are some very serious engineers out there who think subs are the way to go for transporting liquid cargo in rough seas.

    For one thing a submerged or almost submerged ship is not subject to much stress from large waves and high winds and floating ice would be no problem at all for a true sub.It could go under any random ice blocking it’s path.

    And then there is the strength to weight ratio and strength to materials needed to be considered. Whales could not make on the land. A submarine cargo ship could probably be made much lighter per ton of cargo than a surface ship.

    Loading or unloading a sub with liquids would be easy.

    1. The Dragon in the Sea, 1956, a novel by Frank Herbert (Dune) was about submarine tankers for oil, during future conflict with USSR.

      1. Had Herbert as a guest Professor in a Future oF Man class at UCSB in 1969.
        He was all bout limits and efficiency even then.

        Also Had BF Skinner and Buckminster Fuller in the same class as guest teachers.

        Herbert was the most interesting.

    2. Subs are ridiculously more complex than surface ships. The Spanish just screwed up the weight on a military one by a fraction and found that it couldn’t resurface. Whoops.

      I’m not sure why people can’t figure out that 90%+ of this STRONG RUSSIAN AUTARKY stuff that comes out of Russia is complete nonsense. The country doesn’t even have interstate highway infrastructure. In 2014. As much as the Gulf States deserve ridicule for making stuff up, they’re better than *that.*

      Russia has never succeeded in having a functional economic system or contemporary modern economy. This secret sauce nonsense is just that.

      1. Other than the fact they are the only way to get people to and from the space station, we think of them as primitive.

      2. They don’t need an interstate highway system or a modern economy in order to thoroughly and totally disrupt business as usual in oil importing countries that do.

        Nor do they need such an economy to survive as a nation given that they are well equipped with a nuclear arsenal so that nobody at all will mess with them in a military way.

        1. They need their customers, as much or more than their customers need them. Without oil exports Russia would be in enormous trouble.

          Oil will be replaced sooner or later, sooner if exporters try to play chicken with it.

          1. Not so at the level of war or survival.

            It is no doubt true that Russia would be very deeply wounded by an inability to export oil and thus buy imported goods.

            But war and survival can be usefully viewed as a sort of inverted win win game. Checkers and chess are war games. Good players generally sacrifice many pieces to win the game.

            I believe Russia can much better survive without oil export revenues that the rest of the world can survive without Russian oil.

            The Russians have a centralized management system in place and they are used to dealing with adversity. Just about all the rest of the world acts about like a bunch of house cats. Herding cats is not totally impossible but it is very hard to do. Oil importing countries are not going to cooperate with each other to any real extent in dealing with an energy crisis unless it is so bad there is absolutely no other choice.

            Having said all this I do not think Russia will actually ever stop exporting oil and gas so long as they have it to export -at least not for more than a very short period to remind the rest of us who is in the drivers seat.But I do think they are going to keep raising prices to the extent they can manage to do so.

            In my estimation Putin and company could care less about the economic problems of energy importing countries. The guys running Russia are veteran managers of the old soviet empire and to them anything that weakens an enemy is considered a good thing so long as it does not significantly harm Russian interests.

            This is not to say that they want to push their neighbors into firm alliances with NATO etc. They will take that sort of eventuality into consideration as self enlightened despots.

            1. “I believe Russia can much better survive without oil export revenues that the rest of the world can survive without Russian oil.”

              This is pretty much the bottom line.

              They can transport food and don’t get flat screen TVs. The rest of the world can watch themselves starve on TV.

              We spend our lives orchestrating how to manage our budgets and this leads to forgetting that the money is created at a whim by a central bank. When people are starving, money will not be allowed to be the reason why. No government of any political party will hesitate to spend money (and have their central bank create it to spend) to create oil flow.

              The one thing we can’t know is how long it takes for that to fall apart.

              When there is a country with oil and countries without oil and that country with it is offering it in return for non monetary prices (end alternatives research of any kind, disarm) then it probably falls apart quickly and politicians will find a way to cut that non monetary deal while pretending they didn’t.

              If there is big oil under the Kara Sea, rather than condensate or gas, Russia is sitting pretty for global dominance for a very long time.

            2. Watcher, I corrected your post. I think you have a wrong idea about the creation of money. About 95% of all money is created by fractional banking. That money is loaned into existence and is used to grow the economy. That money disappears when the loans are paid off.

              The other 5% is created by the government by printing the debt. That is similar to banks loaning money except it will never be paid back, it will eventually be inflated away. The money created by the government will add to the inflation rate, there is just no other possibility. Therefore if the government does print money to feed more and more people as the economy crashes, then the Federal Monetary System will collapse…. and the government will collapse.

            3. Thanks, gotta be a better option than you having to go back and fix posts. I’ll nose around for some editor.

              As for fractional lending and such, the reserves requirements of banks are defined by the Fed. They are permitted to lend out only up to the permitted reserves ratio. Can’t have assets/liabilities ratio higher (loans outstanding are bank assets). Besides which, back in the late 1800s banks loaned money and there was still a gold underpinning.

              It also doesn’t really hold water if there is no demand for loans. Right now sub prime auto loans and student loans are responsible for just about all loan growth. Mortgage applications are in utter freefall. Cash buyers define housing now.

              It’s bizarre but it’s the way it is. And I don’t have any doubt that funding oil drilling with printed money is not an approach with a bright future (though you can make the case of it happening now), but if Philly and NYC are starving it WILL happen.

            4. Okay Watcher, WP-Editor is installed and activated. I don’t see any difference however. But of course I could always edit any post. The question is, can users edit their posts now?

            5. This comment . . . shows no editor. I’ll read more in that support forum, maybe they explain.

            6. Well when I click my edit button, on my post or anyone else’s post, I now get a completely different, much improved, edit page. It actually has a WYSIWYG editor. So I guess that editor is for the administrator only.

              Sorry about that.

            7. No answer yet. That editor says it’s a Post/Page editor. Maybe that means articles, not comments. Searching now for “wordpress comment editor plugin” and there are hits but nothing clear yet.

            8. Oh wait, if it edited comments for you then it’s a comment editor. There is a screenshot on that download page and it shows options. Maybe one is admin only?

            9. Russia has no economy ex-fossil fuel exports. Besides itself, the oil and gas industry supports the government beaurcracy, defense sector and transfer payments. Most of those wages in turn support their service sector.

              What the world can pay for oil is *very* relevant to Russia. Fantasies about cutting people off or extracting oil that loses money are just that.

            10. Russia has no economy ex-fossil fuel exports.

              Aside from :
              “Russia is one of the world’s richest countries in raw materials, many of which are significant inputs for an industrial economy. Russia accounts for around 20 percent of the world’s production of oil and natural gas and possesses large reserves of both fuels. This abundance has made Russia virtually self-sufficient in energy and a large-scale exporter of fuels. Oil and gas were primary hard-currency earners for the Soviet Union, and they remain so for the Russian Federation. Russia also is self-sufficient in nearly all major industrial raw materials and has at least some reserves of every industrially valuable nonfuel mineral–even after the productive mines of Ukraine, Kazakstan, and Uzbekistan no longer were directly accessible. Tin, tungsten, bauxite, and mercury were among the few natural materials imported in the Soviet period. Russia possesses rich reserves of iron ore, manganese, chromium, nickel, platinum, titanium, copper, tin, lead, tungsten, diamonds, phosphates, and gold, and the forests of Siberia contain an estimated one-fifth of the world’s timber, mainly conifers (see fig. 8; Environmental Conditions, ch. 3).

              The iron ore deposits of the Kursk Magnetic Anomaly, close to the Ukrainian border in the southwest, are believed to contain one-sixth of the world’s total reserves. Intensive exploitation began there in the 1950s. Other large iron ore deposits are located in the Kola Peninsula, Karelia, south-central Siberia, and the Far East. The largest copper deposits are located in the Kola Peninsula and the Urals, and lead and zinc are found in North Ossetia.”

              Pretty neoliberal view.

              We all need a larger box than superstition based neoliberal economics.

            11. The possibility of infinite growth of hard goods is a “straw man” – an argument that no one is actually making.

              For instance, the US’ steel and car sectors stopped growing a long time ago as measured by unit growth. Instead, they’re adding features and quality – still growth, but not measured in the number of kilograms of product delivered.

            12. Nick,

              Yes.

              I’ve wondered for years about Australia and Canada, for this reason.

            13. You believe rather a lot in money.

              Sashay on back to August 1941 when FDR cut off Japan from oil, despite their willingness to pay. Pearl Harbor followed.

              If you have it and you want to dictate another country’s policies, you can. Money doesn’t have to carry the day. The Arabs tried it in the 1970s, despite America’s willingness to pay.

              The US did it to Japan. Russia may do it to others.

            14. Japan was not a nuclear armed nation with plenty of indigenous resources.

              Nobody in the Pentagon is dumb enough (I HOPE ) to attack Russia.

              Russia herself does not need to attack any country not immediately adjacent to her borders to have a huge empire again. Russia is a huge country in and of itself.

              Now if I lived in any of the smaller nearby countries that were a part of the old USSR- I would think seriously about moving elsewhere.

              Russia may eventually put a lot of pressure on these countries again both economic and military. Or she may stop with the Ukraine.

              If I lived in a country highly dependent on Russian oil and gas I would at least super insulate my house and live where I could use mass transit and so forth.

              Russia may morph into the new OPEC in terms of controlling the price of oil and gas on world markets.

              She can’t produce enough to drive prices down but she sure could drive prices up by curtailing some production.

            15. Anon,

              Well, Russia is the second-largest arms supplier in the world, after the US. Lots of money in arms exports. They build nuclear reactors, too (Iran’s, as an example.)

              There’s no question that fossil fuels are the big earner, but Russia’s economy isn’t quite a one-trick pony.

              A surprise for me: a couple of months ago I came across a fellow working on a WW-II-era Ural motorcycle, with side car. I asked him what year it was made and he said “2010”. If it works they keep making it. (Same thing goes for rockets.) And Old Farmer Mac mentioned Russian trucks.

            16. For those of us with a streak of redneck and teenage male left in us:::

              Since they have a very poor to non existent highway system Russia builds trucks to manage roads such as they have.

              This is an an example of a Siberian logger at work.This guy is pretty close to getting bogged down but if he knows his business- and the odds are very high he does- he will make it out with load after load without getting stuck more than once or twice a week.

              The only trucks we build in this country capable of handling such extreme conditions are strictly for off road construction and are virtually always equipped with dump beds and thus are used to haul only soil and stone and such materials to build roads as they go.

              The American trucks of this sort cannot be used on public roads whereas the Russian trucks can.

              Once a road that more or less is recognizable as such is in place then the ordinary American trucks such as Macks are used.

              Their trucks are extremely simple in design and as tough as other countries military gear.

              https://www.youtube.com/watch?v=ium7Cxn3TN4

  21. Oh and as regards crushed economy (demand destruction from this, not price, though price may have crushed the economy) and how the traditional production increase with price, production fall with price decline thing.

    There IS something new under the sun. It’s shale. The response coefficients for whatever equations created to define the response of production to price is different now. Shale oil dies so fast that the response of global production to price is getting faster and faster. No longer any cumbersome momentum. The oil output dies quickly with a price crash.

    Now again, note this is only for nearly BAU conditions. As scarcity gets extreme, money ceases to matter. You HAVE to have the oil. So you WILL have the oil. Money won’t be allowed to prevent it. For a while anyway.

    1. Yeah money can work after a fashion for a little while in dealing with a resource shortage.

      If you have some gold in time of famine you can buy your neighbors seed corn and he will sell you enough that he will not have any left to generate a surplus of salable grain the following year.

      He might even sell you enough that he starves himself.

      ”For a while anyway” is dead on.

      I personally believe that oil will continue to be used less and less per capita in developed countries and that the price will go up rather sharply over the next few years. We may or may not be able to adapt successfully to this expected ( on my part ) increase in price. It depends on how much and how fast the price goes up.

      We are going to be in a world of hurt if prices go up too fast. It that case there will be another very bad recession on top of the last one which is still with us.

    1. I added my two cents worth in the comments section:

      In reality, it’s very likely that actual global crude oil production, generally defined as 45 or lower API gravity crude oil, stopped increasing in 2005.  

      Global liquids production, consisting of crude oil + condensate + natural gas liquids (NGL) + biofuels, has so far continued to increase.   Condensate (basically natural gasoline) and NGL are byproducts of natural gas production.  Actual global crude oil production probably effectively peaked in 2005, but global natural gas production and associated liquids–condensate and NGL–have so far continued to increase.

      Note that when we ask for the price of oil, we get the price of 45 or lower API gravity crude oil, but when we ask for the volume of oil, we get some combination of crude oil + condensate + NGL + biofuels.   Shouldn’t the price of an item directly relate to the volume of that item, not to the volume of the item plus partial substitutes?

      For more info, you can search for:  Did global crude oil production actually peak in 2005?

      What about net exports? 

      When we calculate Global Net Exports of oil (GNE), we have to deal with total petroleum liquids + other liquids (EIA data base).   I define GNE as the combined net exports from the top 33 net oil exporters in 2005.  The EIA shows that GNE have been below the 2005 rate of 46 mbpd (million barrels per day) for 8 straight years, with GNE in 2013 falling to 43 mbpd.

      While falling US liquids consumption (relative to 2005) and rising US oil production have lessened the demand for GNE (and had an effect on global crude oil prices), by definition, this had no impact on the supply of GNE, and the most recent EIA data show that the US is reliant on net crude oil imports for 44% of the crude oil processed daily in US refineries.

      And while we have recently some signs of softening demand in China, the volume of GNE available to importers other than China & India fell from 41 mbpd in 2005 to 34 mbpd in 2013.  

      For more info, you can search for:  Export Capacity Index.

       

      1. It appears that my second comment, regarding net exports, was deleted by the WSJ.

  22. Watcher, (RE KARA)

    The first thing to note is that the Kara Sea is bloody cold, receiving no warming from Atlantic currents so it remains frozen for over nine months a year. The second is that it is primarily a gas province. Beyond that the region is very poorly understood. In West Siberia (and South Kara Sea) nine supergiant fields, 31 giants and 52 other discoveries contain total resources of almost 250 Bbbloe, VIRTUALLY ALL GAS (90%). Traps are anticlines with gently dipping limbs and huge extent. The largest field (Urengoy, 68 Bbbloe) extends over 2400 km2. Also, the fields contain many stacked pools from depths of 1000 to 4000 m, in sandstone: A big plus. The combination of multiple sources with multiple, thick reservoirs and anticlines with extensive, gentle closures created the most prolific hydrocarbon province in the Arctic.

    Respecting the recent hype, one drill hole does not make much of a story. When the area is developed it will require many years and sanctions are a black cloud at the moment. And remember, there are over a thousand holes producing from Prudhoe Bay, an infinitely friendlier environment.

    Please note the above summary came to me last night from a crusty old friend, in Russian, and was translated by my wife in exchange for sharing a bottle of bubbly – a HUGE sacrifice on my part. I don’t trust my Russian any more. So if there are any errors, my wife and the Siberian Dude get ALL the blame.

    1. By the way, “kara” is derived from Mongol and it means “black” + “north” and when a guy who lives in Mongolia says it’s cold up there that’s a bit different then when the guy who lives in Miami tells you that it was cold last night.

      1. Good stuff.

        There is a .pdf of a USGS assessment (I think I linked it above but it may have been a different one) and the USGS say they depended on some consultants.

        Their (or that consultant guy’s) assessment was that there is a ridge line along the shore of Novaya Zemlya, 10,000 feet down — and it was an odd part of the .pdf because the paragraph ended with “I think there may be many oil traps along that geology.” The occurrence of “I think” was distinctly different from the third person narrative of the rest of the text.

        A quick google earth of Novaya Zemlya shows no port structures along the relevant coastline and the entire island has a population less than 3000.

        Also worth noting, it’s the Russian Nevada . . . nuclear test range. Tsar Bomba was set off there.

        Regardless, that is where they drilled their first well.

        My recall is the USGS concurred with your “mostly gas” assessment for the Kara Sea, but they noted that (prior to Thursday) only three wells had been drilled, and found gas, and my impression was they were nowhere near this new one.

      2. Doug,

        “Black” in Turkic languages, too. The Black Sea is Kara Deniz in Turkish.

        “Karamazov” as in The Brothers is “Kara” (I’d guess from Mongol not Turkic, but that’s just me) plus “mazat'”, which I was told by an old Russian means “to smear.”

  23. http://charleshughsmith.blogspot.com/2014/09/the-oil-head-fake-illusion-that-lower.html

    Yes, natural gas can be substituted for vehicles that have been converted to burn natural gas, coal can be converted into liquid fuels, gasoline/diesel vehicles can be scrapped and replaced with electric vehicles–but all of these substitutes require reworking not just the vehicles but the entire infrastructure of extracting and delivering liquid fuels (or sufficient quantities of electricity) to substitute for oil.

    Even with natural gas production soaring due to the fracking revolution (a rise in production many doubt is sustainable), there isn’t enough natural gas being extracted to substitute for oil, except at the margins: the fuel being replaced with natural gas is coal.

    While the Nazi war machine famously ran (at least partly) on liquified coal, fabricating enough plants to liquify coal in quantities large enough to substitute the new coal-based fuel for oil-derived fuels is non-trivial.

    As for using electricity, all the electricity generated by alternative-energy sources such as solar and wind amount to a few percentage points of total energy consumption in the U.S. The percentage is higher in other nations (for example, Germany), but substituting alt-energy for oil-based fuels is not practical without massive, sustained capital investment in new energy production, delivery and distribution infrastructure

    1. substituting alt-energy for oil-based fuels is not practical

      First, that’s not the case. New wind and solar can certainly produce enough power, especially in the unfortunately slow timeframes we’re currently looking at. Heck, the current US generating capacity is adequate to support replacing 75% of ICE vehicles with EVs, with no expansion.

      2nd, that’s a red herring. EVs can run on power from coal, gas, nuclear, hydro: whatever you want. An EV running on coal is a least as clean as an ICE running on oil, so this is a non-issue.

      gasoline/diesel vehicles can be scrapped and replaced with electric vehicles–but all of these substitutes require reworking not just the vehicles but the entire infrastructure of extracting and delivering liquid fuels (or sufficient quantities of electricity) to substitute for oil.

      Not at all. Electric vehicles don’t require reworking anything: most people have access to power outlets, and EVs can be manufactured in existing plants (elg., the Tesla in the old GM/Toyota NUMMI plant).

      EVs are “drop-in”: they can come from the same factories, run on the same roads and charge in your garage. Convenience dictates that we build some charging stations – that’s not a big deal, and is in progress.

      1. In addition, electric vehicles are so much more efficient that they can easily and economically be powered by solar panels.

        For less than the cost of 3 years’ gasoline for a gasoline vehicle, you can buy solar to power an EV for the same number of miles per year for the rest of your life.

  24. Sumitomo’s US shale oil foray turns sour

    By Ben McLannahan in Tokyo, FT.com, September 29, 2014 5:29 pm

    Sumitomo Corp of Japan has drawn a line under its disastrous two-year foray into shale oil in the US, with writedowns connected to the project almost completely erasing its full-year earnings.

    On Monday, Sumitomo, the fourth biggest of Japan’s trading companies by market capitalisation, said that an impairment loss $1.6bnon a “tight oil” project in west Texas would form the bulk of Y240bn of charges for the fiscal year to March 2015.

    In August 2012, the company announced that it had struck a deal with Devon Energy of Oklahoma to pay $340m in cash for 30 per cent of a project in the Permian Basin, saying it would supply another $1bn to fund most of the cost of drilling wells.

    Yet on Monday, Sumitomo said it had decided to sell roughly three-quarters of its acreage, triggering the loss on the assets and the agreement to fund their development. “It is difficult to extract the oil and gas efficiently,” the company said, adding that it could not “expect as much production to recover the investment”.

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