EIA’s April Drilling Productivity Report

The EIA just released its Drilling Productivity Report for April. In this report they have post what they expect the shale production data will look like through May 2015.

DPR Total Shale

 

The EIA is expecting a rounded top for shale production. They are expecting a big drop of total shale production in May to the tune of 56,673 barrels per day. In April they had total shale production down 2,098 bpd.

DPR by Basin

The EIA has Bakken, Eagle Ford and Niobrara down but still has the Permian up by 10,647 bpd.

DPR Change from Previous Month

The EIA has total shale up over 100,000 bpd November thru February, dropping to up just66,000 bpd in March and not going negative until April and May. But that is not the way it will eventually turn out.

DPR Total Shale

Here I have the North Dakota Industrial Commission data for North Dakota through January and the EIA’s total Bakken through May. The EIA’s data includes Montana’s share of the Bakken. But the point I want to make is the EIA eventually inserts the correct data but only after a lag time of 6 to 8 months. Here they have the correct data through September. But really the Bakken was flat in October and November, had a really good month in December then a terrible month in January. The January production was only 4,000 bpd above September production.

The NDIC February data will be in in a day or two and I think it will show another decline in Bakken production. That should have the NDIC Bakken February production about 100,000 barrels below what the EIA’s DPR report has.

Bakken RegionEagle Ford RegionNiobrara RegionPermian Reigon

The above four charts are the EIA’s estimate of what the four major shale producers are expected to do in May. The Permian outperforms the other three because the Permian is only about 55% shale and 45% conventional. It therefore has a lower percentage legacy decline rate than the other three. However I think all four of these charts are well off the mark. For instance they have the Bakken new well production at 61,000 bpd in May. It would take between 150 and 155 new wells for that to take place. That is about 20 to 30 wells more than will likely be brought on line in May.

Also they have May total shale production at least 200,000 barrels per day too high. US shale production peaked in December 2014.Intl Rig vs. Barrels

This chart is unrelated to anything above but I thought it important. This compares international barrels per day to rig count. *International, in this case, does not include USA, Canada or FSU. Baker Hughes, to my knowledge, does not track FSU rigs.

But the point is that the rig count increased from under 700 in 2005 to almost 1100 in 2014 with no increase in production. In fat production. In fact 2014 is averaging over 1.7 million barrels per day less tan 2005. All those extra rigs are just not keeping production up.

U.S. on track for record oil production in 2015

American oil production is booming — despite the crash in crude oil prices.

Rystad Energy estimates U.S. oil production will average 9.65 million barrels per day in 2015, exceeding the previous all-time record set in 1970.

And that bit of news just came out today. Amazing!

Notice: There may be another post tomorrow or the day after. I will have a new post it the Bakken data comes out tomorrow or Wednesday, if it does come out tomorrow or Wednesday. I like to keep a post up for three or four days before posting a new one but sometimes I make an exception when fresh data comes out.

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154 Responses to EIA’s April Drilling Productivity Report

  1. BC says:

    Even with matching the 1970 production high, per capita production is down ~35-40% and below the levels of the 1960s when adjusting for population and money supply.

    • But that won’t happen. It is very likely that US production peaked in December 2014. The folks spouting this nonsense about US production continuing to boom are in for a rude awaking.

      • BC says:

        Yes, Ron, I suspect you’re going to be correct.

      • Han Neumann says:

        “It is very likely that US production peaked in December 2014. ”
        And what if oilprices recover to about $80/barrel this or next year and stay there for some time; isn’t there enough fracklog or new sweet spots left to overcompensate for falling production in producing wells ?

        • Jeffrey J. Brown says:

          An important point to keep in mind is the volumetric decline from existing wells.

          Let’s assume that the decline rate from existing US crude oil and condensate wells was about 7%/year in 2008, when US C+C production averaged 5.0 mpbd. In order to offset the declines from existing wells, the US would have to put on line about 0.35 mbpd per year of new production, to maintain 5.0 mbpd, assuming a 7%/year decline rate from existing wells.

          In my opinion, it’s quite likely that the current decline rate from existing crude oil and condensate wells in the US may be on the order of about 20%/year. At 9.0 mbpd, with a 20%/year decline rate from existing wells, the US would have to put on line 1.8 mbpd of new production every year, just to maintain 9.0 mbpd of C+C production.

          To put 1.8 mbpd of C+C production in perspective, this is more than Norway’s C+C production will be for 2014.

          • Han Neumann says:

            Thanks Mr. Brown for clarifying. If a high % of wells are past peak production, maybe decline is less than 20%/year. But even with a 10-15% decline/year it will be difficult to go above 9 mbd.

            “Citi analysts also said uncompleted wells in the U.S., or DUCs (drilled but uncompleted wells) weigh on the market. These inactive wells could total 600 to 2,200 for oil. They say if these wells were cleared across the span of a year, the annual impact could be another 0.12 to 0.44 million barrels a day in production.”
            That is nowhere near the possible 1.8 mbd needed. For that a lot of new wells have to be drilled which will happen only if oilprice stays above $70-75 during many months.

            • A. Yeats says:

              I think it costs about as much to complete a well as to drill it. The smaller companies will have to borrow to allow this and they might either a) already be bankrupt and/or b) not have access to quite as much easy money as in the recent past. If they’ve already been taken over by larger companies then funding would probably be through normal cash flow and would need to compete with other in-house developments. Even if the service companies were able to get back to last year’s resource level fairly quickly there must have been some limit for the rate of completing wells and they (and their creditors) might be equally wary of growing too fast after recent events. So overall maybe the inventory of wells could only be worked off at (plucking a number out of nowhere) 10 to 20 per week?

            • Jeffrey J. Brown says:

              I frequently cite a Citi Research report which estimated that the gross underlying decline rate from existing US natural gas production is on the order of 24%/year.

              In support of this Citi Research estimate, the observed net decline rate in Louisiana’s marketed natural gas production was 20%/year from 2012 to 2014, from 3.0 TCF/year to 2.0 TCF/year (EIA). Note that this is the net decline rate, after new wells were added. The gross year over year decline rate from existing wells in 2012 and 2013 would be even higher.

              Consider the upslope of the Louisiana gas production curve. At the 2009 to 2012 rate of increase in Louisiana’s shale gas production (0.4 TCF/year to 2.1 TCF/year, EIA), by the year 2020, Louisiana’s shale gas production would have been up to about 170 TCF per year.

              Current global dry natural gas consumption is probably on the order of about 120 TCF/year, so at the 2009 to 2012 rate of increase in Louisiana’s shale gas production, by the year 2020, Louisiana’s shale gas production would have met total global gas demand, plus about 50 TCF/year. Of course, the purpose of this exercise is to point out the problem with extrapolating short term rapid increases in US crude + condensate (mostly condensate) production.

              The primary contributor to the decline in Louisiana’s total gas production was the decline in drilling in the Haynesville Shale Gas Play, but in any case, it’s when, not if, that the contributions from new wells can no longer offset the declines from existing wells. In other words, Peaks Happen.

              Louisiana gas data:

              http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_sla_a.htm

        • Han, it depends on the oil price forecast, and not necessarily on a given price level. It also depends on the response time to gear up for drilling and facilities construction.

          What I’ve found is that, once development activities are suspended, it takes a huge amount of work to get back to previous production levels. This is a screening trick I’ve used in the past, to judge whether plans being submitted for my review were sound. If they show a return to an earlier peak, I tend to distrust the work, and set aside time to take it apart to see if it’s close to being achievable.

    • Jeffrey J. Brown says:

      Based on Texas data, I suspect that 40 API and lower US crude oil production was probably in the vicinity of 8.0 to 9.0 mbpd in 1970, while the EIA estimates that 40 API and lower US crude oil production will be about 4.8 mbpd in 2015. (And as I continue to point out, when we ask for the price of oil, we get the price of crude oil with an API gravity of less than 40.)

      Global Crude Oils, in terms of API gravity versus sulphur content:

      • BC says:

        Yes, the oil energy cost of oil extraction per capita and in the same currency units is at a supply lower than 50+ years ago and at a lower quality.

        Therefore, seen in this way, US Peak Oil II is occurring at a dramatically lower level of currency-adjusted and per capita supply and quality, which not surprisingly is the primary reason why the US deindustrialized and financialized the economy beginning in the 1970s, the result of which was no increase in real, after-tax wages for the vast majority of Americans and unprecedented debt to wages and GDP that can never be serviced to term.

        Now world oil production per capita has peaked and slightly declined, which is where the US was in the mid- to late 1970s, again, at the onset of deindustrialization, financialization, and peak in real wages.

        With debt to world GDP at a record high, unlike in the early 1980s, real industrial production and real GDP per capita have likely peaked (as anticipated by LTG’s World3 BAU scenario) with growth of real GDP per capita and trade decelerating to well below 1% since 2007-08.

        Conservation, recycling, reduction in auto miles traveled, debt jubilee, and redistribution at a sustainable steady-state level are imperatives hereafter. But the rentier and technocratic elites remain locked into the perpetual growth- and debt-based zeitgeist, enjoying the outsized reflationary rentier gains from asset bubbles encouraged and supported by fractional reserve banking, ZIRP, NIRP, and QEverywhere, and by favorable tax treatment of unearned income vs. punitive, regressive taxation of labor, including self-employment.

        There is no viable constituency advocating for alternatives to BAU. In fact, most policies are exacerbating conditions, including QE pumping up larger asset bubbles and gov’t subsidizing costly medical insurance and services when “health care” spending is at 18-19% of GDP, $10,000 per capita, and $26,000 per household.

        • Caelan MacIntyre says:

          There is no political solution to our troubled evolution…” ~ The Police

          “There is no viable constituency advocating for alternatives to BAU. In fact, most policies are exacerbating conditions…” ~ BC

          But did you and Dennis ever interact on this point? How does he reconcile this with his ‘government will step in’ and ‘read some economics’ constructs? Or with a knowledge of previous civilizations’ predicaments? Dennis? When does government step in exactly, and/or are they? How? When? Where?

          Or does ‘stepping in’ mean the enrichment of the elite to the impoverishment of the rest; a bubble here; a war there?

          And after 10+ years or so of Nick et al’s EV’s, where are all their fleets, charging stations, and happy motorers, or solar panels on everyone’s rooftops?

          Kid: “Mr. G? (tugs on bottom of jacket) Hey, Mr. G?!”

          Parent: “What do we tell the children?”

          EV Driver (pulls up, rolls down window):
          Hey, kiddo, ‘U.S. on track for record oil production in 2015
          American oil production is booming — despite the crash in crude oil prices’
          .”

          Kid: “ALLRIGHT!”

          Driver (reaching out):
          “Here, have a lollipop. There’s some bubblegum in the middle. You can blow bubbles too. But you’ll have to suck to get there.”

          • old farmer mac says:

            Hi Caelan,

            Your story reminds me of one popular in other political circles sometime back.

            Very nice car pulls up in front of hillbilly shack , and asks hillbilly for directions . Hillbillies don’t reveal much info about their neighbors to strangers and asks the occupant who he is.

            ”I’m with the War on Poverty”.

            Hillbilly takes a good long look at the car and sez ” Looks like yer winning.”.

            I have GREAT NEWS.

            A neighbors kid is teaching me about computers in exchange for me taking him fishing and last night he showed me how to copy and paste.

            Now I can post comments even FASTER. 😉

            I posted this one over at Resilience under an article about Texas having such a big wind industry.

            Since it relates to peak oil I will post it here as well.

            Texas has some advantages that the author does not emphasize ENOUGH.

            One, the state is so big that it has it’s own utility regulatory apparatus that does not have to interact very much with other states in order to permit and build transmission lines. The importance of this fact simply cannot be overemphasized in that it keeps the naysayers at the national level out of the Texas briar patch when making renewables policy.

            There is quite a lot to be said for people who are hard core conservatives when it comes to wind power. Hard core conservatives are not much inclined to insist that their scenic view of somebody else’s property trumps the property owners right to build a wind farm. Beyond that of course there aren’t very many people living in the areas the wind farms are being built in the first place.

            Two , people there are very knowledgeable about energy and also about playing the games associated with collecting subsidies , given the reality of the oil and gas industries.

            They know how much the wind is worth NOW and in the future in terms of AVOIDED purchase costs of gas and coal to be used to generate electricity.

            Ask a Texan what he thinks about the LONG TERM prospects for fossil fuel prices and he will likely tell you they will continue to go up .. and up.. and up some more….the lows at every price cycle tend to be higher than the lows at previous low points and the highs at each price cycle tend to be higher than previous highs.

            Given that oil and gas and coal come out of holes in the ground and that we have been cherry picking the best spots for centuries it could hardly be otherwise.

            Locking in zero fuel costs for decades at a time is an EXTREMELY CONSERVATIVE thing to do, given the realities of ff depletion, deliberate inflation of the dollar, and the likelihood of higher taxes on the fossil fuel industry in the future. Such taxes are of course virtually always passed on to the customer in the form of higher prices.

            Personally I would not be at all surprised if the nominal prices of coal and natural gas double every ten years for the next thirty years. Don’t forget that the people who own the gas are doing everything within their power to get the permits needed to export it – because the price in the rest of the world is double to triple the domestic price here in the USA.

            I expect that in a few more years Texans will also be building solar farms at a pretty hot clip, given that the price of solar electricity is dropping and will continue to drop.

            The solar resource in a lot of this giant state is as good as it is anywhere.

            There are plenty of people in this country who have bought houses with thirty year mortgages that have locked in ridiculously low housing costs compared to renting in the same place over the long term. Some of them are making piti payments that are only a quarter or less the cost of renting a similar nearby house.

            I hear a lot about the LACK of inflation these days but not much about the fact that the Coke I used to buy for a nickel costs a buck and a half at the SAME store these days.

            Peak oil is here and peak gas will be a reality a long time before the wind farms being built today need their first major overhaul, which will consist mostly of replacing the turbine and genset. The towers and the transmission lines will last indefinitely and can be replaced piecemeal as necessary.

          • BC says:

            Caelan, I suspect that without a kind of r-evolutionary mass-social shift in consciousness and the emergence of a universalist- or techno-humanist zeitgeist among Millennials and younger Xers (and a sufficient plurality of younger Boomers/Jonesers), “Manna” for the bottom 99-99.9% and “Elysium” for the top 99-99.9% are not altogether unrealistic scenarios for a post-Oil Age and LTG scenario.

            On a finite planet on which the primary energy resource for the global complex, high-tech, high-entropy economy and society is declining in per capita terms, no individual, community, firm, or state can “pull its own weight” in terms of fossil fuel “energy slaves” per capita/household, let alone effectively and efficiently dispose of associated waste in a manner that maintains health and well-being of the human population, other species, and the ecological system as a whole.

            But no political constituency is advocating for necessary conservation, recycling, ecological remediation, highly progressive net energy taxation, dramatically reducing hours worked and auto miles driven, reforming the tax code to eliminate taxes on labor, production, savings, etc., redistributing income with a basic income guarantee (to replace all existing social welfare programs), eliminating fractional reserve banking, a digital net energy credit as the medium of exchange to replace debt-money, and debt forgiveness/jubilee.

            Most, if not all, of these and related proposals that I perceive as necessary to transition successfully and less traumatically to where we are most likely heading by default are virtually universally considered anti-business, anti-growth, and just plain bats#&t crazy.

            But if we have entered a permanent structural era of net energy constraints per capita to growth of (un)economic activity, i.e., LTG, as I am convinced has occurred since 2005-08, then perpetual growth of population, resource consumption per capita, production, employment, profits, capital accumulation, and waste production is no longer possible and thus cannot be a viable objective for a fully informed, enlightened financial/economic, sociocultural, political, and technocratic elite and for society as a whole.

            Resistance really is futile. We will be absorbed.

        • Dennis Coyne says:

          Hi BC,

          I think Real GDP per capita has been growing more than 2% from 2010 to 2014.

          Chart below has World C+C per cap per year (EIA and UN population data) on right axis and World Real GDP (PPP) per capita annual growth rate on left axis (Using IMF data for real GDP and UN Population data).

          • Dennis Coyne says:

            Hi BC,

            Your numbers for income distribution and healthcare spending are for the US, I think.

            I would definitely be in favor of changing the tax code in the US (I am unfamiliar with tax policy in other nations) to tax all income at the same rate (no special treatment of dividends or capital gains) and to have a more progressive tax code (though this has improved somewhat during the Obama administration) and eliminating all tax loopholes (including those used to avoid estate taxes.)

            I would also be in favor of a national healthcare system which would reduce per capita healthcare spending due to better access to routine healthcare which tends to reduce overall system cost.

            Where we part company is on a steady state economy, we should aim for this in the future (20 to 30 years), but for now, slow growth may help to achieve a demographic transition. I agree that real GDP growth per capita will slow to 1% worldwide once peak fossil fuel arrives, but based on IMF data through 2014, we are not there yet.

            • BC says:

              Dennis, thanks for sharing that.

              Yes, I do not disagree with the steady-state transition, which I suspect will be the default outcome.

              WRT to “health care”, 50% of spending is on the sickest 5%, 65% on the sickest 10%, and 80% on the sickest 20%, i.e., Pareto.

              The vast majority of the sickest 5-20% have conditions resulting from unhealthy diets, smoking, alcohol abuse, and lack of exercise and then reaching middle age and late life with the resulting chronic metabolic and cardiovascular conditions that in turn result in prohibitively costly hospital stays, treatments, and procedures. 20% of spending is on obscenely costly late-life care for elders in their 70s-80s, including cancer treatments, knee and hip replacements, and cardiovascular procedures.

              Were there to be a two-tier system of gov’t-sponsored care for the sickest 5-20% and for the healthiest 80%, the costs in insurance and services for the 80% would be a fraction of today’s costs.

              What we have in the US is actually for-profit “disease care” for the sickest 5-20% (who cannot afford the costs), not actual “health care” for all, including education, prevention, and cost-effective intervention.

              “Disease care” is now a net drag on economic activity and will be among the sectors that will experience the largest scale of disruption from the convergence of robotics, biometrics, bioinformatics, the cloud, telepresence, and personal health monitoring devices and services in the years ahead.

              • ChiefEngineer says:

                An ounce of prevention is worth a pound of cure

                BC, I think your post hits the nail on the head. I’ve been a health insurance broker for the last 20 years. This is a much more difficult problem to fix than our fossil fuel transportation problem. I can see our transportation switching to a solar based format over the next 10 to 15 years. Nick, god bless him, is an insightful voice on our future means of getting around. But, to do what is needed to fix our heath care system reaches deep into peoples personal lives and corporate profits. Look how much blow back has come about from the passing of the ACA or the first lady promoting healthy eating and exercise . Which one could say only scratches the surface.

                I’m not sure how this problem can be addressed on a national level. But on a personal level, this could be one of the few times Republican rhetoric is well advised. If you care about yourself and family. You need to take “personal responsibility”. Don’t depend on sitting in the doctors office waiting room for self infected problems.

                Eat healthy, exercise and proceed with safety. Educate yourself, the answers are out there. We only get one chance to do it right. Father time will call our number soon enough.

              • Dennis Coyne says:

                Hi BC,

                Regular visits to the doctor and a focus on healthy lifestyles would help some. Maybe insurance discounts for people that keep their bmi below some threshold would help.

                I am no health care expert but my understanding is that a national healthcare system tends to keep costs down. Perhaps this is just an urban myth.

                • BC says:

                  Yes, Dennis, the only way to keep costs down in the long run is to ration high-cost treatments and procedures to elders at end of life when the care does not increase longevity and desirable quality of life.

                  Obscenely costly and uncomfortable chemo, radiation, MRIs, and slicing and dicing tissue and organs for hundreds of thousands of dollars in the last 5-10 years of average life expectancy is a luxury only the top 0.1-1% can afford, not the rest of us, neither out of pocket nor pooled sharing via insurance, only to reward an infinitesimally small share of those at the top of the occupational strata for their skill and effort.

                  • Nick G says:

                    I have to say, that makes me mighty uncomfortable.

                    1st, if eldercare is only 20% of the budget, then reducing it in half will only save 10%. That’s not much “return on the investment” when you consider how painful such rationing would be.

                    2nd, the analysis of pre-death costs is 20/20 hindsight: unsuccessful treatment will always cost more, but you don’t know who is going to die when you start treatment.

                    3rd, comparisons between the US and the rest of the world are difficult. In particular, the US subsidizes drug development for much of the rest of the world, whose health systems refuse to pay the same rates as US payors.

                    4th, and perhaps most important:

                    If “the care does not increase longevity and desirable quality of life”, then it’s just a waste. It’s cruel, and exploitive on the part of the “provider”. Perhaps we should focus on reducing such exploitation, rather than trying to ration care.

          • BC says:

            Dennis, thanks.

            http://data.worldbank.org/indicator/NY.GDP.MKTP.KD/countries/1W-CN?display=graph

            Ex China, the trend rate of real GDP per capita since 2007-08 is near 0%. China’s economy is likely growing unprofitably (after inventory accounting and depreciation) no faster than 4% rather than 7%.

            http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.KD/countries/1W-CN?display=graph

            GDP PPP per capita since 2007-08 ex China is growing at a trend rate of ~0.9% vs. 2% or more historically.

            World C+C is down ~4-5% per capita since 2005.

            World total oil supply has not grown per capita since 2005, and has grown 0-0.3% since 1994-2000.

            Peak Oil is in the rear view mirror in per capita terms and LTG have arrived, although most of us have been conditioned not to perceive the manifest signs and effects.

      • shallow sand says:

        Jeffrey. Should light sweet crude API 30-39 be sold at a premium to WTI? Is there more demand for it in US refineries than there is US supply?

        • Jeffrey J. Brown says:

          Based on the above chart, WTI historically averaged about 39 API, and I believe that the upper limit for WTI is 42 API gravity.

          Of course, the recent Reuters article that someone posted, and which I have reposted several times, discussed the “Imitation WTI” crude blends of heavy crude + condensate that technically fall within the WTI API gravity parameters, but that are deficient in distillate yields.

          As I have discussed many times, in my opinion it’s quite likely that late last year US refiners reached the limit of how much more condensate and crude/condensate blend inputs that they could take, because they didn’t want to further decrease their distillate output. The Reuters article documents case histories of US refiners increasingly refusing to buy what US producers are selling:

          http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

             Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste. . . .

          Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. . . .
            
          While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.

          The blends tend to produce a higher proportion of fuel at two ends of the spectrum: light ends like gasoline, demand for which has dimmed in recent years, and lower-value heavy products like fuel oil and asphalt. What’s missing are middle distillates like diesel, where growing demand and profitability lies.

          As I said in a previous post, if US refiners are telling us that they increasingly don’t want to buy what US producers are trying to sell them, perhaps we should believe them.

  2. Jeffrey J. Brown says:

    EIA confirms that revised 2005 Saudi total petroleum liquids + other liquids production number is 11.5 mbpd (versus the 11.1 mbpd that they showed until very recently):

    http://peakoilbarrel.com/the-eias-international-energy-outlook-2014/comment-page-1/#comment-511744

  3. Rune Likvern says:

    Hello,
    I just put up a post/analysis looking at the recent US crude oil stock building which has been fueled by the contango spread.
    A short glimpse into developments in US total petroleum consumption with a closer look at some selected products.
    A brief status on oil rigs and total rigs in Saudi Arabia and Kuwait (March-15 data) with EIA production as of October-14.
    http://fractionalflow.com/2015/04/13/the-contango-spread-supports-the-oil-price-and-results-in-strong-stock-building/

    • BC says:

      Rune, nice work. Thanks.

    • billd says:

      Great thanks Ron &Rune
      Hope you keep blog going Ron after the shale play dries up in a few months.lol

    • Han Neumann says:

      Good article. Weighting all the factors together it seems that the oilprices will be stuck between $40 and $60 for quite some time.

      • And they will be around $100 per barrel by January 2017??? That’s what I derived from Rune’s work.

        • Dennis Coyne says:

          Hi Fernando,

          Interesting. Rune made no prediction about future oil prices as far as I could tell.
          My reading of Rune’s blog post (which was excellent as always) was that the future oil price is unknown. The storage build may keep prices down for some period, though we do not know how long, at the same time low prices will reduce supplies and increase demand. Financial forces and a possible slow down of debt growth may act to decrease oil demand if a financial crisis occurs.
          So it is not a simple matter to predict what will happen to oil prices in the future.

          Your guess looks good to me, Steve Kopits thinks we may see a price spike in a similar time frame or possibly a year earlier (late 2015 or early 2016).

          I expect $80/b before Nov 2015 and $100/b by 2017, if a financial crisis hits before 2017, I will be wrong and prices will be back to $50/b or lower after the crisis hits. Financial crises are more difficult to predict than oil prices, at least for me.

          • Coolreit says:

            That is not true. Kopits is expecting a spike about NOW. Check prienga.com for two blog posts he wrote in late December for details.

            • Dennis Coyne says:

              Hi Coolreit,

              Steve Kopits says,

              In the view of the agencies, supply runs ahead of demand for the balance of the year. On the other hand, if we apply the Lessons of ’86, this surplus evaporates around mid-year, setting the stage for major reversal of outlook heading into 2016. Were this scenario to be realized, the world would be heading into an oil shock in the first half of next year.

              I stand by my comment that Kopits expects oil prices to rise in 2016 or possibly late 2015. Kopits also says:

              On the other hand, the Prienga scenario envisions both a strong supply and demand response to low oil prices. This is consistent with the historical record, which may or may not prove applicable to the current situation. If it does, the effects will be visible by mid-year. In such an event, a deficit appears and excess inventory is consumed in short order. By the last quarter of the year, prices have recovered to a level sufficient to bring forth incremental supply.

              Link to blog post is here:

              http://www.prienga.com/blog/2015/1/20/supply-minus-demand-explained

        • Rune Likvern says:

          See also my reply to Sam below.
          I think predicting the oil price in the near term, next few months may be anyone’s guess as there are a lot of moving cogs in the oil demand/supply equation that drives the future oil price formation.

          • SAWDUST says:

            Looking at oil futures technically we need a close above 55.00 for a run back into 67.00. If that don’t happen soon look for drop back to 46.00-47.00 which would carve out the right shoulder of an inverse head and shoulders pattern. Only a new low would negate this. Target is 67.00 weather or not it breaks 55.00 in the next few days or a week or so from now so long as the low holds.

            • SAWDUST says:

              Daily chart.

            • Han Neumann says:

              Sawdust, oilprices are more than technical analysis of a chart. Of course you have a good amount of speculation, but in the end it is about supply and demand (expectations). Low oilprices lead to more demand and supply destruction, like Dennis wrote, so imho and many others, oilprices will not go much lower than $ 45-50/barrel. Barring financial crises and world economy depression.

              • SAWDUST says:

                Han Neumann,

                I understand oil prices are more than technical analysis of a chart. The chart actually is a recording of events.

                You can lock me in a room, bar me from any knowledge any news about anything that goes on in the world. I can sit back and do technical analysis of charts, make trades and make a few $100,000 a year doing it or i can try trading the news about what i hear which may or may not actually be true or not, then try to determine how market will react to the news given or news that will be coming out. Having some knowledge of the news helps. If you know how to use it properly. If you know a certain event might push prices to a boundary it helps with timing of the entry or the exit of a trade So i don’t total ignore whats happening in the world.

                If you know how to read the technicals then you don’t get faked out by the news.

                Market charts will tell you where price is going if your patient enough to wait and read the signals.

                • BC says:

                  Having done for more than 20 years what Sawdust describes, I fully concur.

                  Further, the more those trading securities and commodities, cash or futures, at the margin using technical analysis, and now with HFT increasingly dominating pricing at the margin having incorporated every conceivable technical analysis scheme in the dark, 24/5, and at the speed of light, the more technical analysis schemes become the dominant price-discovery mechanism for “the market”.

                  We’re all either unwitting targets and victims of HFT bots’ sniping or going with the trend flows they collectively influence, for better or worse.

                  In some respects, the “Singularity” has already arrived, but it requires thinking (not thinking?) like the increasingly self-referential, intelligent-systems algobots to realize it.

                • Han Neumann says:

                  “I understand oil prices are more than technical analysis of a chart. ”

                  SAWDUST,
                  Also, every stock is more than that. Much more.

                  ” i can try trading the news about what i hear which may or may not actually be true or not, then try to determine how market will react to the news given”

                  That reaction (in part a Pavlov effect) is more reliable for determining stock movement.
                  Indeed there are people who seem to be very good in technical analysis and from that “guessing” future price movement. But one good or bad company news headline can spoil it, which happens a lot of times. Multiple (or even one significant) insider buying can reverse an almost certain drop in stockprice based on technical analysis.

                  “Looking at oil futures technically we need a close above 55.00 for a run back into 67.00. If that don’t happen soon look for drop back to 46.00-47.00 which would carve out the right shoulder of an inverse head and shoulders pattern.”

                  For oilprices this sounds just too technical for me. For a decrease to $46, the drop in U.S. shale oilproduction and Middle East unrest doesn’t help. Of course it can happen, because of news headlines. If it happens the chart readers will say: you see, perfect head and shoulder pattern analysis.

                  • SAWDUST says:

                    That head and shoulders pattern doesn’t have to complete it’s self. I said if it breaks above 55.00 in the next day or two it’s targeting 67.00. If it pulls back to the 46 or so handle it will carve out the right shoulder of an inverted head and shoulders pattern which also would target 67.00 when it’s neckline which is at 55.00 is over come. I also said the only thing that would negate this is a new low below 42.00.

                    I’ll even tell you how to trade it just incase your curious into how it’s done. Note i’m not trading oil futures cause thats not where the moneys at. But if i were i’d buy a close above 55.00 or i’d buy half a normal size position on a pullback to 46.00 then buy the other half on a close above 55.00. Stop loss would be set below the previous low around 42.00

                    This trade is based on technicals without giving a shit about rig counts and production numbers. Or issues in Iran or whatever. This trade is money too. Just watch it as it takes place.

                  • Han Neumann says:

                    “This trade is based on technicals without giving a shit about rig counts and production numbers.”

                    I understand, it is trading without connection with any news or what is happening (supply/demand).

                    “Stop loss would be set below the previous low around 42.00”

                    Under 42 I would buy much more, not based on trading but on fundamentals of ‘the crude oil world’.

                    By the way SAWDUST, did you learn in the past from a teacher like Zanger or Nathan Michaud or by yourself ? I never traded based on technical analysis. Can I follow your trades somewhere ?

                  • SAWDUST says:

                    Han Neumann,

                    I don’t blog so there is no place to go to view my trades. I’ve been trading about 15 year. Self taught read a lot of books at first but spent countless hours in front of the screen learning how to do it. What makes markets tick and why what happened just happened. Markets don’t always react the way you think they should to news. I might only make a hand full of trades all year. I keep up with big important news issues but i trade the technicals. Might keep a trade open for three months or more, sometimes maybe only a month it just depends. Technical analysis is the only thing that allows me to do what i do successfully. I sometimes use fundamentals as long as they line up with what i see technically going on.

                    Currently the only position i have is a short USD/CAD. I opened this trade round March 17 when USD/CAD failed at range highs. Interesting enough oil bottomed out that day. CAD has fallen right along with oil since oil headed south. I’m currently 300 points in the money. Up about $45,000. Fundamentally if oil rebounds here which it looks like it’s going to. Thats positive for CAD (Canadian dollar) Dollar Index is trading in a large triangle. It will be a few weeks before it breaks out of this triangle. It will be a big move when it does about 600 points from the point it either breaks support or resistance. So I’ll have to watch the dollar index closely. If it drops out the bottom USD/CAD is headed south and this trade i’m in will be good for a few more months and a lot more money. If the dollar index break higher I’ll have to exit.

                  • Han Neumann says:

                    “Currently the only position i have is a short USD/CAD”

                    I only can find the symbol CAD/USD (CADUSD =X) which went from 0.78 on March 17 to 0.8012 now.

                  • SAWDUST says:

                    Han Neumann,

                    Your looking at Forex futures, thats why your seeing CAD/USD. I’m trading spot market USD/CAD

                  • SAWDUST says:

                    I don’t know how well you’ll be able to see this but it’s the Daily USD/CAD chart. If i can figure out how to blow up this chart so it can be seen i will.

                  • SAWDUST says:

                    Zoomed in

                  • Caelan MacIntyre says:

                    For SAWDUST’s image, or most any image, for the real size, just right click on the image and open it in another tab or window.

                    Here is SAWDUST’s image link for example

                  • Han Neumann says:

                    “All the professional traders of the world are all looking at the same charts. Price is kind of a self fulling prophecy.

                    Trading in not luck or speculation. It’s skill.”

                    SAWDUST,

                    I will follow oilprice very closely to see if it goes to 67. You wrote that f.e. Iran news doesn’t matter, but two weeks ago when there were nuclear deal hopes, price went down and after the optimism disappeared, it went up again. After the start of SA attack on Yemen, price soared. All coincidence ?

                    As far as ‘trading is skill’: yes, but of course even the best (professional) traders have a % of losing trades.

                • Han Neumann says:

                  “I don’t know how well you’ll be able to see this but it’s the Daily USD/CAD chart. ”

                  Yes, it is possible to see the chart. Why the big difference between future and spot price movement ? The CADUSD =X stayed almost the same since March 17. Oilprices rose today above $ 55, so technically you would say it goes to 67. CNBC gives as reason the bullish EIA inventory report, and there is the Middle East wars and rising demand. Surely a lot buyers are looking at that also ?

                  • SAWDUST says:

                    All the professional traders of the world are all looking at the same charts. Price is kind of a self fulling prophecy.

                    Trading in not luck or speculation. It’s skill.

                    Forex futures are not traded as heavily as spot and they are used for two different things. People or in a lot of cases businesses hedge their currency exposure in the futures market. While spot is not meant to be used to currency hedge. Spot is trading at current prices. If you invert the CAD/USD chart place it on top of the USD/CAD chart they are very similar but not the same. Overall direction is the same but total points moved is always greater in spot market.

    • sam Taylor says:

      Rune,

      A good read, thanks. Do you have any ideas on how much potential upside Saudi production might have? As far as I can see, their current strategy of increasing production right now (above 10.3 mpbd recently I think?) only really appears to make sense if they think that there’s going to be a strong demand recovery, dropoff in non OPEC production, or some combination of the two which appears most likely in the data we currently have. If this is the case, then the question about potential Saudi capacity becomes quite important, because it determines to what extent they will be able to control the market. They’re playing a dangerous game, because if they get things wrong and there’s a price shock it could well end up doing some serious economic damage.

      • Rune Likvern says:

        Sam,
        I have no idea about what production upside KSA may have. The media cited a KSA supply of 10.3 Mb/d for March – 15, what is this supply made up of, production + stock draw downs?

        We know based on Baker Hughes data that KSA (Kuwait and UAE) has increased the number of oil rigs considerably. The causes for this rig increase appears poorly understood, we are guessing here.
        EIA and IEA have some estimates about KSA supply potential that are somewhat higher than 10.3 Mb/d.

        It is hard to know what KSA/OPEC real objectives are. Scores of analysts point to a fight for market share for OPEC. And I hold that to be part of the answer. To me this appears as much as a power game whereby OPEC may strengthen their position if they have the stamina to weather low (and lower) prices for some time.

        For what it is worth let me involve you in a thought experiment.
        The stock build from those playing the contango spread (that is adjusting for seasonal stock building to meet demands for the upcoming driving season) was by me estimated to 0.8 Mb/d during Q1 2015 using EIA data for the US. That is a lot, and is for US only.
        Commercial crude oil stocks are primarily a OECD thing (experiences from previous oil crisis), so if we assume that globally demand for stock building originating from those playing the contango spread (this is ex building strategic storage and seasonal storage build) during Q1 2015 has been running at say 1.5 Mb/d.
        The incentive for playing the contango spread disappears as the contango flattens for whatever reasons.

        The above mentioned demand of 1.5 Mb/d for stock build from players using the contango would then disappear.
        This would result in supplies of 1.5 Mb/d suddenly looking for buyers and has the potential to really drive the oil price down.
        In 2008 an about 3% reduction in demand took the oil price down 70%.
        Ask yourself what would happen if oil prices in the near future came down say 50% (around $30/Bbl) , and remained there for some time?

        Would some non OPEC producers fly in to Vienna, where OPEC has their headquarters, and offer their cooperation to adjust supplies to support the price?
        I do not know, but just offers the above as food for thought.

        Perhaps we myopic focus on the price for the short term which blinds us to see other long term objectives.
        If OPEC drives other producers to cooperation to support the oil price I would consider that a successful outcome from a power game and OPEC would have gained on several levels and strengthened their position.

        • Sam Taylor says:

          Rune,

          It really is quite astonishing what a complex system this is. So many feedbacks and moving parts.

          I agree with what you mean about the long term objectives. It strikes me that the increase in Saudi Arabian rig count could very easily be seen as quite an aggressive move by other producers, who might indeed worry about what their long term marketshare might end up looking like vs a Saudi Arabia which is prepared to drill a lot of holes.

        • Han Neumann says:

          “We know based on Baker Hughes data that KSA (Kuwait and UAE) has increased the number of oil rigs considerably. ”

          Rune, important is to look at the last graph published by Ron. Rig count last 10 years versus oil production. We had some posts and comments on TOD about this years ago.

      • Rune Likvern says:

        FWIIW and as we speak (or write)
        ”It is probably premature to say the two-week outflow marks a sustained sell-off that could trigger another slide in crude prices given the ETFs saw their biggest ever weekly inflow of $818 million just weeks earlier.

        In any case, the funds have become an unpredictable irritant for Saudi Arabia and other OPEC producers, first slowing the slide in prices that could force higher-cost producers such as U.S. shale drillers to curb output, and now blurring the outlook.

        “Passive investors have become a problem,” Philip K. Verleger, a consultant and energy economist, said in a note on Monday. ETF inflows are “denying those in the Middle East the decline in non-OPEC output they hoped to achieve”.
        http://www.reuters.com/article/2015/04/14/oil-etf-outflow-idUSKBN0N50C320150414

        • Han Neumann says:

          “ETF inflows are “denying those in the Middle East the decline in non-OPEC output they hoped to achieve”.”

          Strange. Decline in non-OPEC output is supply destruction, giving support to oilprices. And since when an ETF, like USO or UWTI, determines the price of oil, rather than following it ?

    • Jeffrey J. Brown says:

      I just put up a post/analysis looking at the recent US crude oil stock building which has been fueled by the contango spread.

      Rune,

      To clarify slightly, the stock builds you are discussing consist of actual crude oil* + condensate (C+C), while the contango spread refers to the price of actual crude oil (with an average API gravity of less than 40).

      The EIA’s own data and projection show that 40 API and lower US crude oil production only increased by about 0.3 mbpd from 2011 to 2014 (4.2 mbpd to 4.5 mbpd). To show this increase, it took about half of the global (oil & gas) rig fleet.

      *Generally defined as 45 and lower API gravity crude oil, although the two principal price indexes refer to crude oils with an average API gravity of less than 40 API gravity

      • Dennis Coyne says:

        Hi Jeff,

        Where does the EIA break out crude from condensate? I had not seen that data.

      • Jeffrey J. Brown says:

        EIA data and projections for US C+C production by API gravity (light blue and lower is 40 API and lower):

        • Jeffrey J. Brown says:

          Of course this chart has some bearing on our frequent discussions regarding the composition of the post-2005 increase in global C+C production, since the EIA projected that about 4 mbpd of the 2011 to 2014 increase in US C+C production consisted of 40 API + very light crude (roughly 40 to 45 API) and condensate (45+ API).

          It appears that the EIA is going to show that global annual C+C production increased from 74 mbpd in 2005 to about 78 mbpd in 2014, an increase of 4 mbpd.

          As I have frequently noted, it seems very likely to me that actual global crude oil production (45 and lower API gravity crude) and especially quality crude oil production (40 and lower API gravity crude, which corresponds to the price indexes) have been below the 2005 production rate, since 2005.

          • Dennis Coyne says:

            Hi Jeff,

            Thanks.

            If we define crude as 45 API or lower, the results are different. In that case there would be a 2 Mb/d increase from 2011 to 2014.

            In the Wikipedia for API it says:

            Generally speaking, oil with an API gravity between 40 and 45 commands the highest prices

            Looking at EIA price data, this does not seem to be the case, the grades with API between 30 and 40 have the premium prices, though the over 40 API usually commands a higher price than crude less than 30 API.

            I know nothing about refining, does extra light crude between 40 and 45 API have poor distillate yield?

            • Jeffrey J. Brown says:

              Here’s the refinery yield chart (which refers to 42 API as “Condensate”):

              • Dennis Coyne says:

                Thanks.

                I wonder if 42 on that chart means more than 42, usually anything less than 45 API is still considered crude, though the definition may vary. I found the chart below at link below (slide 40). I don’t know if it is correct.

                http://petrofed.winwinhosting.net/upload/25-28Aug10/2.pdf

                • Jeffrey J. Brown says:

                  They get distillate from both distillation and catalytic cracking, but there is still a discrepancy between the two charts, and I am perplexed as to how 44 API gravity crude could have 20% “Heavy products.”

            • Dennis, the API gravity isn’t enough. Other factors could include the vapor pressure (which serves as a proxy for the presence of very light hydrocarbons), and of course Sulfur, acid content, and other parameters.

              Reservoir engineers have a very clear definition: condensate is a liquid which is found in the gas phase at initial reservoir conditions, but which condenses when the reservoir is produced, and remains in the liquid phase to be marketed as a condensate.

              Note I stated remains as a liquid to be marketed as a condensate. A condensate produced to be marketed in a tanker has to meet vapor pressure specifications. This doesn’t necessarily apply to a condensate being blended with crude oil, or shipped at high pressure via pipeline.

              I would use the simplest approach and cut at 45 degrees API. The fine grained detail to discriminate with more precision just isn’t available in a public data base. Large companies have this data for most crudes but it’s kept confidential.

              • Dennis Coyne says:

                Thanks. I realize it is much more complex than simply API gravity, there is not a lot of public data on this aside from the EIA chart posted by Jeffrey Brown.

  4. old farmer mac says:

    So -If production peaks this year according to EIA and other government agencies, how long will it take for the average man on the street to become acquainted with this state of affairs?

    The hands on guys who work in the industry are mostly older if I am not mistaken. Old guys who are near retirement are not apt to come back to the industry after a long layoff.

    Getting US production back up to recent levels might be quite a job considering that most of the tight oil sweet spots have already been cherry picked and that skilled labor and capital will be scarce.

    Considering the relatively low energy density of ng liquids and ethanol and the extra production and processing and distribution expense involved in using these substitutes for honest to Jesus crude, we have not only passed peak oil per capita— We have likely also passed peak net liquid fuel energy as well.

    Maybe oil production will hold up well enough after peaking so that we will have enough to dodge an oil supply heart attack for the next two or three years given the sorry state of the economy.

    • Anonymous says:

      Mac,

      The production doesn’t matter. We’ve had “peaks” before that people will dismiss. Price does.

      The average joe will feel it when an oil-induced financial crisis hits.

      • David P says:

        That might take a while if we enter a depression-like event where loss of jobs etc. manages to hold the price down for some time through demand destruction.

        • Fred Magyar says:

          So you are saying that the average Joe isn’t going to be affected by a depression-like event where loss of jobs etc. manages to hold the price down for some time through demand destruction?! Forgive me for being extremely skeptical about that statement. To me that sounds like the very definition of an oil induced financial crisis. If such a scenario should come to pass, and I think it highly likely that it will, I can’t imagine how it wouldn’t negatively impact all nations that depend on oil production to maintain political and economic stability. Sounds to me that this would set in motion a rather rapid toppling of dominoes. But hey what do I know?

      • islandboy says:

        Sunday (April 11) was the Grand Finale of Jamaica Carnival, an event that was brought to Jamaica by a Jamaican of Chinese descent who was involved in the local music industry and who fell in love with the Trinidad Carnival and the culture and music of Trinidad at carnival time. He wanted to replicate the experience in Jamaica and was supported by a throng of wealthy Jamaicans that started a tradition of going to Trinidad for their Carnival, held at the same time as Mardi Gras celebrations in other parts of the world. In order to allow the late businessman to take his band to Trinidad and participate in the Trinidad Carnival and to allow Jamaicans to participate in both the Trinidad events and the local ones, Jamaica Carnival was organised to culminate on the Sunday after the Easter holidays rather than on Fat Tuesday as is the case for most of the other carnivals. This gives Jamaica carnival the distinction of not having any religious connections unlike the events in Brazil and Trinidad where carnival is the last indulgence before giving up all sorts of pleasures in observance of Lent which starts on Ash Wednesday, the day after Fat Tuesday.

        My impression is that while the chief architect of Jamaica Carnival was alive, it was growing but, since his passing it has been slowly loosing steam. It may just be that the increasing cost of oil has made it a less affordable for patrons and thus less lucrative for the promoters. I’m not sure if it’s contribution to the local economy has been measured but it certainly presents an opportunity to increase the sale of alcoholic beverages and most events seem to attract ample “sponsorship” from the sellers of said beverages.

        For participants of this blog, the relevance is that here is one form of entertainment that from my perspective revolves around the use of energy. Many premises and parking lots along the parade route were converted into locations from which people could view the parade while participating in a little or not so little, party of their own before and after the parade goes by. The parade consisted of half a dozen or so converted 40 foot flat-bed trailers (semis), with speaker boxes galore pumping out Trinidadian carnival music, with the massive sound systems being powered by equally massive diesel generators and the trailers being hauled by diesel tractor heads. Then there were the support trucks, couple of reefers and a couple more of the converted 40 foot flat-bed trailers, with a supply of water and other liquid refreshments to keep the revellers hydrated in the 85 degree (29C) tropical heat.

        It is less than a five minute walk from my apartment to the parade route so out of curiosity I took the walk. There was also a fairly strong contingent of Police and private security personnel to keep regular traffic off the parade route and maintain order. I was aware of what appeared to me to be an unusual amount of dirt bikes and ATVs zipping around before the parade passed and after it had gone, for no apparent reason other than to “have a good time”. A lot of these rides appeared to be used for recreation only as I noticed that they did not have the license plates required for use on public roads, something that seems to have escaped the notice of the police.

        All in all, a grand time appears to be had by all with a fair amount of fuel, electricity, food and drinks consumed all in the name of good fun. Watching it all, I couldn’t help wondering how traditions like this are going to fare after Peak Oil. Will people still be able to do all the stuff associated with such events in the face of scarce/expensive liquid fuels? Another thing I couldn’t help noticing was the small proportion of very dark skinned people, both among the observers and the revellers. In an island where 90% of the population are of East African descent, this suggest that this was an indulgence of the one percenters. Yes, an unfortunate reminder of the fact of life that, in Jamaica the racial segment that makes up the bulk of the population, is not well represented amongst the ranks of the rich and powerful.

        Another experience where I feel like I’m in the Twilight Zone, walking amongst the throng, the throng being totally oblivious of the shitstorm that could engulf us when a decline in world oil production becomes apparent. Ah well, I now return you to your regularly scheduled program.

        Alan from the islands

        • Fred Magyar says:

          Hey Alan, you are probably familiar with this movie ‘Life and Debt’
          http://www.snagfilms.com/films/title/life_and_debt

          I think that the feeling you have of being in the Twilight Zone, is something I feel as well when I’m down in Brazil, well even when I’m at home in South Florida. The fact is that the perspective we have, we being those of us who are peak oil aware, is so far removed from what the average person thinks is reality that it is almost impossible for us to relate on any level.

          I am again about to descend into the belly of the beast in few months time, the belly of the beast in my case being São Paulo a city of 20 million inhabitants, a city bursting at the seems in every way imaginable due to the incessant promotion of the infinite growth paradigm. A city that is hanging on the edge of the precipice, if for no other reason than the fact that it’s population is still facing severe water shortages due to drought. Yet everyone I encounter still talks about how they need more growth to solve all kinds of problems.

          I’m sure this twilight zone world feeling is symptomatic of societies all over the globe.

          But hey next year the Olympics will be held in Rio de Janeiro and I’m sure that just like the world cup it will be heavily sponsored by the major global corporations and financial institutions of BAU with all the blessing of many Nation States.

          But I have been digressing, the question I keep asking myself is when will all of these kinds of events just simply stop being possible. I would have thought that should have already happened but I keep being surprised at how resilient BAU is. Though I have zero doubt that the other shoe will drop sooner or later!

          Cheers!

          • islandboy says:

            That moment, when one is in dire straights but, not yet aware of how deep the poop you you are in is, comes to mind!

    • People return. Some of them are new hands. For example, I have a son finishing college, told him to work an angle to get a hitch with an oil company. In his case he will have me to show him the ropes. But I assume this will happen a lot in the old oil producing states.

      If we are about to go through an oil shortage the going will be good for about 10 years. After that the young ones can take the money they saved and start a company installing solar panels.

      • Sam Taylor says:

        I think we’re more likely to enter a period of high volatility than anything. Which is going to suck because high volatility makes it harder for companies to invest, which ends up hurting everyone in the long run. Of course this depends on whether or not the shale tap could be turned back on at a similar speed if another shortage develops. If refracking turns out to be something which could repeat the same trick once or twice (and given how much the shale boys surprised everyone once I guess we shouldn’t rule them out a second time) then it could be a fairly lean period. And, indeed, how much extra oil OPEC are able to crank out if they really go for it.

  5. Paulo says:

    Good point Mac, regarding attracting new hands or returning hands after a long downturn and layoff. People move on and seek stability if they can find it. Where I live logging companies have had a very hard time attracting new employees after the latest downturn and Weyerhauser’s cut and shaft employee relationship strategy last decade. Everyone is now a contractor and out for themselves.

  6. old farmer mac says:

    I just ran across this link and read enough of it to know that the regulars here will want to look at it time permitting.

    We might get some discussion going on it.

    http://www.brookings.edu/~/media/Research/Files/Papers/2015/04/2-falling-oil-prices-gause/Falling-Oil-Prices-English.pdf?la=en

    The paper is about international politics with the emphasis on the Saudis and the possible consequences of low oil prices .

    Top shelf quality in my opinion.

    • Dennis Coyne says:

      Hi Old Farmer Mac,

      I agree, the paper is very good.

      I did not realize that some non-OPEC nations had reached agreements with OPEC in the past on cutting production to support oil prices.

      To reduce oil price volatility it would probably be good if the US government tried to regulate oil output in the US in concert with the RRC of TX and NDIC and other state agencies. The US could also enter into tacit arrangements with OPEC and other major oil producing nations in an attempt to reduce oil price volatility which is really not good for the oil industry.

      This idea seems unlikely to be put into practice, but it would be interesting to hear the perspective of the oil experts (Fernando, Rune, Mike, MBP, Sam, Doug, Ron, and others) on such an idea.

      • I don’t think the Feds will try to control production, but it makes eminent sense for Txas and North Dakota to try to manage their oil industries to avoid the excesses and the flaring. But I don’t think they have governors or state legislatures with the brains and the genitals to do what it takes. They sure haven’t shown it in the last decade.

        The only non OPEC nation with a swing capacity at this time is Russia, but I think they realize the weak players are the USA light tight oil drillers and the other marginal outfits (I know several companies in South America which drill and produce very marginal plays). This tells me the Russians will hold fast. Any Russian cuts will be caused by poor economics. That’s my guess.

      • Lloyd says:

        Hi Dennis.
        I like it when big think tanks agree with me (the gist of the paper is that the Saudis are not conspiring to bring down oil prices, and they’ve got a lot of reasons for this opinion.)
        However, by eliminating the idea of a Saudi master plan, it brings up bigger questions, and we end up somewhere beyond Watcher territory- a place where the rules no longer work, but where there may be hints why.

        The problem with the use of oil for political leverage in North America is the issue of
        multiple constituencies. On the one hand, you have the oil companies, who need to be able to sell their oil for more than it costs them to produce it. Then you have the consumers, who want cheap oil. Finally, you have whacky sovereignists who want the unlikely chimera of BAU and oil independence.

        I think it is telling that we don’t have these factions fighting it out in the media.

        Instead of a battle of ideas around which of these issues is most worthy and what should be done about it- and things could be done if there were not political costs to pay : for example, raise taxes on gas and give the proceeds to Bakken producers, a bad idea in about 3 different ways, but it could be done if you wanted to help the oil industry, appease the oil sovereignists, and didn’t care if prices went up for consumers (and I could do one for each point of view, but that’s not the point.) Instead, all we hear is “the Saudis are screwing us!”

        Which leads me to wonder if oil is not the point. (I’m sure somebody else here (Watcher?) has started down this road, but writing this is helping me think.) The report suggests that low price conditions do not lead to greater instability in the Middle East; however, they don’t speak to the idea of instability continuing at the current rate.

        The point being, it could be all about the US ponzi scheme to remain the world reserve currency. Who benefits from the Middle East and Russia being in turmoil? Why, the US does- currencies of Middle East countries are too unstable to allow transactions to happen without being in US dollars.

        So, in the US:
        – oil price is a political hot potato with no dominant constituency
        – a logical understanding of the issue by the public doesn’t benefit those with real power
        – nothing is more important than being the world reserve currency.

        Do I see a conspiracy?
        No.
        When something is this hard (and boring) to describe, why would those who it benefits (the .0001%) even bother to mention that they have a dog in this fight? Especially when that dog is eating all the other dogs and getting larger?

        And when right-wing blowhards make statements that, while incorrect, illogical, and prejudiced (It’s the Saudis!) work to the advantage of the powers that be on so many levels.

        -Lloyd

  7. toolpush says:

    Looking at the EIA rig counts from the graphs in the Productivity report.

                           EIA           BH date           Current BH    Difference
    Bakken                100           20 Mar             89             -11%
    Eagle Ford            150           6 Feb/27 Feb       110/125        -17%
    Niobrara Region       55            2 Jan              20/28          -49%
    Permian Region        300           13 Mar             260/264        -12%
    

    I can’t argue about the increase in well productivity that they claim. But I will point out the spectacular well productive increase in the Permian, that found its way into the numbers last month, is still there.

    The numbers did not fully align but I tried to correlate the EIA rig counts to the Baker Hughes rig count data for the oil shales only. The Bakken and Permian looked logical, with the EIA rig numbers matching BH mid March rig count. Add 6 to 8 weeks to this “should” give you the number of wells available to produce oil, subject to a wells/rig/month correction. .
    The number of rigs the EIA have drilling in the Eagle Ford and the Niobrara Region do not match to BH very well at all. The EIA has much higher numbers of rigs than BH or relate to an earlier date than what would be expected. To match the two numbers together, we need to go back to Jan and Feb, which would make a very long completion period.

    One point I don’t believe these number will include, is the practice of delayed completions? Also the well count in the last month, we have had at least another double digit drop in rig count in the important oil producing areas.

  8. ezrydermike says:

    THE ISSUE TO ADDRESS

    The accuracy of climate change journalism and commentary can be distorted by an author’s ideology, conflicts of interest, or simple misunderstandings. Non-expert readers can find it difficult to determine whether specific information is grounded in scientific fact.
    HOW WE’LL PROCEED

    OUR GOAL

    Our goal is to improve the scientific accuracy of climate change coverage, by presenting feedback from accredited scientists directly alongside original online texts.

    WEB ANNOTATION…

    Hypothes.is is a new web browser plug-in that allows anyone to annotate information presented on the Internet (see figure below).

    … BY SCIENTISTS

    Climate scientists will use Hypothes.is to annotate target articles sentence by sentence, evaluating their accuracy based on the best available thinking in climate science.

    WHY THIS PROJECT?

    CONTEXT

    We are now at a crucial time in history, when we must make critical decisions about climate action. The availability of accurate information is essential to choosing the right path.

    EXPECTED BENEFITS

    The annotation process provides authors with feedback that will encourage them to improve the scientific rigor of their writing. Our project will also increase awareness and understanding of climate issues, promote scientific reasoning and make scientific information and resources more accessible to general readers.

    http://climatefeedback.org/

    • The “accredited scientists” requirement does weaken the site’s usefulness. For example, here’s feedback I gave to a couple of American Physics Society members (one of which is at a meeting tomorrow with a U.S. congressional committee).

      http://21stcenturysocialcritic.blogspot.com.es/p/message-for-us-congress.html

      • ezrydermike says:

        The accuracy of climate change journalism and commentary can be distorted by an author’s ideology, conflicts of interest, or simple misunderstandings.

      • old farmer mac says:

        Something tells me very very few of the membership here are reading Fernando’ s blog.

        I assure everybody that some of his stuff is a real hoot and that he could have made a career as a social pundit or comedian as easily as he did as an engineer, if he could have found audiences well enough informed to appreciate his stuff.

        Just about all of it would be over the head of Joe Sixpack.

        The piece he wrote about interviewing the Illuminati is good for a steady string of chuckles and a couple of belly laughs as well as a little thought provoking.It’s been a while since I ran across anything else new as good for both a laugh and a raised eyebrow.

        Does he have an agenda? Sure. Who DOES NOT?

        In this piece he throws out the idea that the Obama administration is opening up to Cuba in order to gain some influence in Venezuela, based on the idea that the Castro regime is THE power behind the Venezuelan regime. I doubt that the Castro regime has actual control but it does have a substantial amount of influence there.

        I can’t remember who exactly but some relatively respectable American politician not too long ago had these things, more or less, to say about American foreign policy from the federal governments pov.

        ONE , anything done or advocated has to be in the perceived interests of this country. Two, it has to be something that has a chance of success or it will not be attempted. Three it must have good bang for the buck potential because there is never enough money and manpower and political capital to take advantage of all the opportunities. Four, if a proposed activity is actually morally laudable then it is icing on the cake , as well as much safer politically in the event things go wrong. In other words telling lies and all that sort of thing is ok but to be avoided if it is not too much trouble.

        The opening to Cuba is consistent with these criteria. Good for Cuba probably, thus morally defensible, not to expensive in terms of manpower or money, politically safe in the long run , a good use of the outgoing administrations remaining political capital, etc etc.

        And if it results in Washington gaining some leverage in Venezuela , so much more to the better from the Washington pov , regardless of which party controls the government.

        Anybody who is intellectually honest and really wants public policy debated on the basis of facts rather than steam roller consensus – and who BELIEVES in peak fossil fuels- will find that his very short message for congress link in his comment an five fourteen am is dead on target.

        A lot of regulars here are suspicious of Fernando’s politics , which is understandable.

        But anybody who is able to set his politics aside and just listen to what he has to say will find his blog both enlightening and entertaining.

      • Fred Magyar says:

        First, thank you OFM because I certainly am absolutely guilty of avoiding Fernando’s blog due to my own personal prejudices against him. In my defense of why I have been thus inclined I have to say, he hasn’t exactly helped his case any by continuing to come across as an arrogant know it all and a self proclaimed genius to boot. Having said that I went and read what he has to say and I found his arguments to be quite reasonable.

        Fernando, that’s not to say that I complete agree with what you say. Case in point:

        Second, I want to toss the politicians and the climate expert community a curve ball: what if our fossil fuel resources aren’t as large as you think, or have assumed? I see lectures, articles, blog posts and speeches in which the experts assume we have an endless fossil fuel supply. But that’s a fairly naive, and unsupported belief.

        I find it rather naive if not disingenuous to suggest that competent climate scientists are completely oblivious to issues such as peak fossil fuel use and are not in the habit of reexamining their previously held assumptions and models.

        If you go over to a site such as realclimate.org and search on the key words ‘Peak Oil’ you will find quite a few hits and I believe that climate scientisst have addressed and continue to address these concerns. They don’t exist in a vacuum.

        To illustrate my point, let me give an example of an interview of a NASA scientist by Global Media way back in 2009 posted by the Post Carbon Institute.

        http://old.globalpublicmedia.com/transcripts/2909

        NASA research scientist on peak oil and climate change (transcript)

        Media
        NASA research scientist on peak oil and climate change (audio)
        Transcribed by Brian Magee

        David Room: This is David Room for Global Public Media speaking with Pushker Karecha on Dec. 17, 2007. Well, thanks for being with me, Pushker. Tell me about the paper you wrote with James Hansen and how it came about.

        Dr. Pushker Kharecha: Right. Well, it came about from a simple idea that I pitched to Jim just a few months after I started here, which was a couple years’ ago. Basically, the question that we are looking at is, what are the implications of the peak in global oil production in terms of future atmospheric carbon dioxide levels and, therefore, future global climate. And, so the upshot of our paper is that we can actually keep, with some reasonable and technically feasible mitigation measures–that is, emissions reduction measures–we can keep CO2 from exceeding what we, and many others, consider a dangerous level for global climate, and that is about 450 ppm. But that’s very dependent on what choices are made in terms of energy production and energy use after the peak in global oil production. So we look at peaks in the other two fuels, too, the other two fossil fuels–natural gas and coal–and we realize that conventional oil and natural gas by themselves, even if we take what are considered the highest, and what many people consider unrealistically high estimates of the Energy Information Administration, even if we take those as an upper limit, they by themselves–oil and gas by themselves–don’t seem to be plentiful enough to take us past this CO2 threshold of 450 ppm. The minute we add continuing emissions from coal use or unconventional fossil fuel use the situation changes. That is to say, it’s very, very likely that 450 ppm would be exceeded. In fact, it seems inevitable, if emissions from coal and unconventional fossil fuels are unconstrained.

        You can read the rest of the interview there.
        My point being: SCIENCE. IT WORKS, BITCHES
        http://xkcd.com/54/
        Not sure if hot linking works here
        http://imgs.xkcd.com/comics/science.jpg

        Edit: It doesn’t >;-)

        • Fred, the IPCC IS in lala land when it comes to issues such as resource limits. This is reflected in their work methods, and eventually in their results.

          A single paper by a tiny group isn’t going to cut it if their work method doesn’t get used by the IPCC, and/or the major groups doing this type of work. And it just doesn’t. Yesterday I sat and watched a video by “famous professor” and he went on and on about humanity burning gazillions of teragrams of carbon, as if we were living on Titan. The end result was a completely useless talk about a world in which we emitted somethng like double the most optimistic fossil fuel resource estimates. I guess he has zero faith in renewables and a rather childish vision of economics.

          I have supervised professionals. They were usually very good, tops, because we usually recruited top of the class and weeded out the weaker ones. And this experience showed me the work methods, the way the path to the end product, how people relate to each other, and whether the young ones are free to express themselves are very important.

          Pachauri (IPCC head) lacked the ability to put the puzzle together. This is reflected in the way he presumably abused that young lady who worked for him. His shortcomings have been evident, but he hung on to the job. And this tells me the people making the decisions in the ipcc structure are also incompetent and should be replaced.

          I also hope that your rather lame insistence that some of us lack competence to critique, or that we should be silenced, is typical, and ineffective. It is a display of weakness.

          • Fred Magyar says:

            I also hope that your rather lame insistence that some of us lack competence to critique, or that we should be silenced, is typical, and ineffective. It is a display of weakness.

            Sigh! That is NOT at all what I said…

            • That’s how you and friends cone across.

              • Nick G says:

                Fernando,

                I have no question that you have a lot of value to contribute.

                On the other hand, you often say things that you haven’t really thought out or worked with or researched in depth, apparently just to have fun.

                If you’re more careful to “telegraph” when you’re joking, or…do something different to deal with this discrepancy, there will be far fewer unproductive arguments.

        • Sam Taylor says:

          Big ‘if’ there is whether or not peak in coal turns out to happen within the next few decades or not. I seem to recall a paper by tad patzek that suggested peak coal was about 4 years ago. As far as the data from last years BP stat review goes we don’t appear to have peaked yet. Coal is very much the big one with respect to carbon emissions, and since we’re currently emitting along the “worst case scenario” I’m starting to err on the side of thinking that peak fossil fuels might not be the panacea to keeping CO2 levels sufficiently low.

          • Fred Magyar says:

            Yeah, that’s my thinking as well.

            The reason science works is because even if there are climate scientists who are oblivious to the possibility of peak fossil fuel availability many of their peers will indeed be aware and will end up calling them out on it.

            Scientists love proving other scientists wrong but they tend to use data and empirical evidence to do it. If the data is available it will be incorporated into the forming of the consensus view.

            So far from what I have seen, the IPCC consensus has tended to be on the conservative side in its scenarios.

            I also think it is unfair to characterize them as all living in a Fantasy La La land. There are thousands of scientists from all over the world contributing to the work of the IPCC. I have friends and family who are scientists and while it is possible that my acquaintances are the exception to the rule most scientists that I know are pretty grounded skeptical ethical individuals who have invested many many years in their studies and careers.

            • old farmer mac says:

              Hi Fred ,

              I AM NOT a scientist myself although I might have been had things worked out a bit differently for me.

              I do have enough training in the sciences to know without a shadow of a doubt how science works WHEN it works and it does work properly almost all the time.

              Most of the time the vast majority of scientists do actually do what they are trained to do and honestly report their results.

              But they are naked apes just like me and all the rednecks and deadbeats and working stiffs and preachers and moochers and saints I have met over the years.

              Given that your are a biologist of one sort or another or at least well trained in biology I am sure the odds are pretty good that you are acquainted with the basics of evolutionary psychology.

              So am I – at least to the extent of having read a dozen or so thick books written by some of the more prominent people in the field.

              All the great dramatists, poets, and novelists , all the PRACTICING psychologists known by other names such as PRIEST , ChIEF , KING , GENERAL have always understood one of the key tenets of evolutionary psychology , namely the us versus them divide – a divide as deep and broad as the one between the CONCEPT of east and west.

              NOW let us REMEMBER that I am personally a firm believer in anthropogenically forced climate change, resource depletion, human overshoot, etc.

              I was also a professional educator at one time.

              One of the last times I was in a classroom as a STUDENT (RN) talking after class to a nursing professor I tried to get her to clarify her statement during lecture that nursing a child is does not significantly reduce the odds of the mother getting pregnant again.

              I happen to know damned well that women who are nursing are less apt to conceive even if young and extremely healthy and very well nourished etc.

              There is little doubt in my mind that this professor also knows this to be true. I shudder to think she does not. I believe she simply wanted me to take her word at face value and teach future nursing clients the same thing- for the laudable reason that if a nursing mother and father BELIEVE that nursing is NO protection against an unplanned pregnancy they are more apt to use birth control.

              Extrapolate to scientists who deal in public policy and public debates and remember that they MUST GO ALONG TO GET ALONG in their departments and careers whether academic or government.

              Scientists have an inborn tendency to close ranks and defend each other just like cops, just like every class of human being for whatever reason – religion, social class, professional ties, shared cultural values -EVEN HAVING THEIR HEARTS AND HEADS in the RIGHT PLACE and STAYING ON MESSAGE.

              When I talk to some young kid helping me work for a few hours about drinking or smoking pot I am generally honest BUT BUT BUT I AM NOT HONEST about the risks of driving and drinking.

              I EXAGGERATE THE SHIT OUT OF THE RISKS.

              HOW? By relating every true story I know about kids who killed or crippled themselves or somebody for life by driving drunk – and I know lots of true stories of this sort.

              I DO NOT TELL THEM that back when I was their age I was prone to drinking and driving occasionally and never had an accident – or that I have ridden in cars with a drinking driver at least oh say a couple of thousand times in my life – and nary an accident.(Been in a couple when the driver was sober though.)

              Telling the whole truth is NOT staying on message. I have discussed this situation face to face with some working scientists and numerous instructors or teachers and while just about all of them will admit I have a legit argument in private they also tell me that they feel MORALLY and PROFESSIONALLY COMPELLED to emphasize which ever side of an issue seems to them to be in the public interest while ignoring the other side to the extent possible.

              I am with Fernando one hundred percent when he says the establishment is apt to conveniently overlook pertinent evidence in order to make the desired case.

              This does not disprove the argument for forced climate change nor does it mean climate scientists are immoral. They are just realists with their hearts in the right place and doing the right thing by telling some little white lies by omission.

              Doing otherwise would be to supply ammo to the enemy – and the fossil fuel industries and the big banks and their ilk are not burdened by such niceties as concern for the public welfare.

              • Fred Magyar says:

                I agree with most of what you say. My beef with Fernando is that he seems to want to throw the baby out with the bath water >;-)

              • Nick G says:

                Mac,

                I know what you mean, and I’m sure that happens sometimes. OTOH, there’s enormous aggressive pressure to deny Climate Change – think of US, Canadian and various US state governments not allowing anyone to mention climate change, newspapers providing false balance (“Scientists say earth is round….others object…”).

                My guess is that climatologists, and others, are more often excessively conservative about their assumptions and arguments, than they are exaggerating.

                • old farmer mac says:

                  Hi Fred, Nick

                  This business of government associated organizations having to toe certain lines is one hell of a tough problem.

                  I will try to illustrate by way of example. Some years ago I was talking to a school board member about the future costs of transporting kids to a centrally located county high school as opposed to having three smaller high schools.

                  This man is a very well educated REALIST who buys a lot of diesel fuel personally and is peak oil aware in that he snorts if asked and says something to the effect that any damned fool knows it comes out of holes in the ground that run all eventually run dry. If asked today what he personally thinks it will cost in ten more years he will say twice as much.

                  BUT in planning for the school system he is more or less COMPELLED to go with what hired professional transportation consultants have to say.

                  If he does not use such figures then he opens himself up to having a lawyer someday rip him a new rectum for lack of professional competence.

                  If he does and the price of diesel triples in defiance of these GOVERNMENT AGENCY oil production projections then he is well covered.

                  CPA’s are well covered when they tell people to put their money in bank accounts that pay substantially less interest than is lost to inflation , thereby GAURANTEEING a loss in purchasing power.

                  And guess what? These consultants do not get on approved lists of people whose bids are taken seriously UNLESS they in turn use GOVERNMENT SOURCES in making their own projections. The whole damned system looks after itself first and the public second or maybe third with well connected businesses in second place.

                  No matter what they might THINK these consultants will use oil supply numbers provided by the EIA or another establishment source when they estimate the price of diesel fuel for the next thirty years.

                  When you work in the government you use the figures supplied by OTHER government agencies or else you are PRETTY MUCH OUT ON YOUR ASS in terms of career.

                  We all know the last energy secretary ,Chu, is a brilliant man. There is no way in hell he doesn’t understand peak oil and the reality of it– in my estimation at least.

                  But did he in his official capacity ever say that he thinks (knows) the official oil supply scenarios are basically pulled out of a magic hat designed to keep business as usual humming along as long as humming is possible?

                  Any body at the IPCC who wants to seriously take peak oil into account in making climate projections is going to be out on his ass if he doesn’t listen the FIRST TIME his boss explains the REALITY of POLITICS and the REALITY of staying ON MESSAGE.

                  THIS IS POLITICS NOT SCIENCE I am talking about.

                  Now as far as Fernando and warming goes I have not yet been able to quite get my head around where he thinks the excess heat is going.

                  I haven’t seen that he denies the incoming radiant energy exceeds the outgoing by a substantial margin and being an engineer he cannot deny SOMETHING must be getting hotter.

                  Maybe he thinks the excess heat is finding its way into very deep water where it will stay for centuries before making its way back to the surface due to S L O W ocean turnover.

                  If this turns out to be the case then he is probably right about warming not being as big a problem as expected. He does obviously understand that fossil fuels are going to be mostly used up within the next half century or so.

                  With fossil fuels depleting substantially within the next half century or less co2 emissions will fall off as well , in proportion. So the upper limit predictions MAY be too pessimistic.

                  OTOH- The projections are based on lots of assumptions that may be off a bit or a lot and there will be some new feedback loops discovered both positive and negative.

                  SO -EVEN IF co2 emissions fall off dramatically the climate may warm MORE or LESS than predicted . I take such predictions as guesses or estimates when it comes to PRECISION. Of course they ARE estimates but SO many people take them as givens that I mention this in passing.

                  The actual calculations involving climate are over my head. I could have made some of them – perhaps with serious errors – half a century ago. Now I have to just take the establishments word for the numbers.

                  The basic physics are crystal clear. If incoming exceeds out going the atmosphere and/ or the continents and the oceans ( certain PARTS of the oceans ?) are heating up and this will continue until balance is restored- with lots of less than desirable consequences.

                  • Boomer II says:

                    What I continue to hope is that at some point the economics will favor weaning away from oil and therefore the politics will have to follow. Right now the political money continues to come from those who made their money from the older industries.

                    But there are some very wealthy people in Silicon Valley and they have no interest in propping up oil, coal, or centralized utilities.

                    My main concern is how fast the transition will occur. The longer people count on BAU, the harder the transition is likely to be.

                    But then again, often the pattern of innovation and disruption is slow at first and then reaches a tipping point where the older industries can no longer compete and the newer ones take over. The status quo money may be telling governments they can’t talk about certain topics, but behind the scenes, others are pushing forward and may even catch the status quo folks by surprise.

          • Kam says:

            Coal extraction rate is falling for over a year now. I follow this more closely than once a year in BP stats. But it could be temporary drop. It depends on price, just like with oil.

            • Fred Magyar says:

              For sure! Though the question remains whether or not coal consumption will start to increase again if and when oil and gas should peak. After all, as many here have been wont to say, it is pretty nigh impossible to run an industrial civilization of the kind most of us have come to accept as the norm, on renewables alone.

              And since it is becoming increasingly apparent that very few societies are capable of, let alone willing to voluntarily give up BAU, it seems highly likely that if one doesn’t consider external costs, then coal is the cheapest and most available fuel for maintaining the status quo.

              Albeit, in my opinion, that would be a prescription for an unmitigated disaster.

              • Nick G says:

                Fred,

                EVs work awfully nicely with wind and solar: you can charge when power is available, and that helps soak up the variation in generation.

                The problem isn’t that society as a whole can’t handle the transition, it’s that the vested interests (cough, Kochs, cough) fight the change.

                OTOH, change is happening, even if it isn’t as fast as it should be. Wind, solar, and EVs are all growing, and faster than FFs and ICEs.

                • Boomer II says:

                  The problem isn’t that society as a whole can’t handle the transition, it’s that the vested interests (cough, Kochs, cough) fight the change.

                  I have wondered if tar sand economics will foil their plans.

                • Fred Magyar says:

                  Nick, I’m actually on board with the idea of solar powered EVs just that my idea of a practical EV is more along the lines of an electric bike or velomobile. I don’t see 7 billion people driving Leafs and Volts.

                  • Nick G says:

                    Yeah, there really isn’t enough room for all those cars.

                    I like the combination of rail and car-sharing: zipcar, uber, etc.

  9. billd says:

    European stocks look like the swiss alps..black swan ?? has to happen sometimehttp://www.allstocks.com/markets/World_Charts/European_Stock_Markets/european_stock_markets.html

  10. Caelan MacIntyre says:

    Last time I looked, Allan H (and Whom It May Concern) this was a peak oil blog, by and for adults, though ‘post-adolescents’ are presumably welcomed, irrespective of some of their nagging sandbox vestiges of peer-pressure, conformism or general naivete, etc..

    The very fact that we even have peak oil issues means that a whole lot of adolescent fairy tales just don’t, have not and/or will never materialize, with some doing the rest of us big favors not to see the light of day. These things are what are discussed, sometimes presumably to the chagrin of some of the post-adolescents. Which is not to necessarily suggest that’s anyone here of course.

    By the way, where’s this ‘dn_girl’? Has ‘she’ decided to twerk it back to California and have babies on the dole like what she mentioned her friends wanting? I think it’s a great idea and beats the hell out of twerking it with the frackers, many of whom are busy twerking it back to wherever they came from anyway.

    The Roach Motel At The End Of The Universe

    “Sometimes you don’t have to look far to find something to talk about. You don’t have to wait for the voice in your head; it just shows up and throws it in your face. Like the North Dakota oil debacle. Part of your mind, or someone’s mind says that every one of these creatures should be rounded up and put on trial, followed by the quick and speedy execution of capital punishment, or life in prison, without hope of parole. That includes the oilmen performing it; the politicians permitting it, the oversight and enforcement agencies ignoring it, those explaining it and those…
    …those only concerned with milking the greatest rent from their railroad flat apartments, greasy spoons and whatever side of the road, cash hijacking machines they’ve set up to wring some temporary vermin profit from it, can be left to the fate of vermin, once the plunder leaves town and all that remains are wide wastes where nothing grows and deep pits of wet, stinking, death assured, hot weather swimming pools for their stunted, hillbilly heroin addicted, children.

    Corollary incidentals always appear in tandem with these things and even members of the socio-political retard army can see the connection …but what’s the fun or profit in that?

    Isn’t it just better to let this shit go on and get all righteous and weepy about the back-end, drowning in a rain of hypocritical tears, as you bemoan the loss of so many things, caused by global hand-warmers at fixed football games?

    The people doing these things are the spiritual offspring of serial killers and mass murdering psychopaths. They know what they’re doing and they know what happens but it just doesn’t matter and… maybe, at this point it doesn’t.

    Most of the population is in bed with it on some level; some are just sleeping in better accommodations, some of them even have their own idea of environmental awareness and a love of Nature and some of them are into consciousness improving retreats, where they can take a few minutes to rationalize it all and come to peace with it. Of course, whether it comes to peace about it, with them, is another story…”

    • dn_boy says:

      Mr Macintyre,

      Why are you always picking on my dn_girl? She is doing the best she can. You liberal watermellon types are mean. Don’t you have anything better to do?

      • Allan H says:

        Mr.? I thought Caelan was a girl’s name.

        • dn_boy says:

          “Mr.? I thought Caelan was a girl’s name.”

          Oops. Caelan is a girl? Seriously? With a mouth like that, I just assumed IT was a he! What the hell is the world coming to?

          • Caelan MacIntyre says:

            Little dn_boy ~^u^

            I can be whatever you want me to be, honey.

            • Damn, Caelan, that’s enough of that please.

              • Caelan MacIntyre says:

                Hi Ron, I just sent you an email about this.
                Looks like it might be a good idea to get the nickname registration back.

              • Someone is trying to be a comic here. Caelan posted me that he did not make the comment above. And I did not make the reply telling him ” that’s enough of that please.”

                I really don’t know what’s going on here but it is not funny.

                I have changed the settings so that to comment you must be logged in. This kind of stuff scares me. I really don’t want people pretending to be me posting anything. And I am sure everyone else feels the same way.

    • Allan H says:

      Hey Fred, you need to come up with an angry headless killer monk, maybe with a rabid rat on a leash.

    • Ronald Walter says:

      That video is pure unadulterated propaganda.

      The noosphere is quite a place, don’t abuse it.

    • Fred Magyar says:

      Caelan, I tend to agree with a lot of your positions and I think I understand where you are coming from and also how frustrating it can be to be surrounded by people who are oblivious to what you perceive as self evident truths.

      I’m not for a moment going to pretend to have answers or really any idea as to what will come to pass. I do however have quite a bit of experience in dealing with people from all walks of life and multiple cultural, ethnic and linguistic backgrounds. You seem to be coming across as becoming angrier and angrier and are lashing out at many of the readers and commenters here.

      I’m certainly not for a moment suggesting you not take people to task when they make blatantly ignorant or false comments. But I do think you might want to take a step back and take a deep breath and chill a bit. Go for a hike in the woods or take a canoe out on the lake for a paddle… Yeah the world is probably going to go to hell in a hand basket but it isn’t all gone quite yet…

      http://www.paulchefurka.ca/

      Awareness that the predicament encompasses all aspects of life. This includes everything we do, how we do it, our relationships with each other, as well as our treatment of the rest of the biosphere and the physical planet. With this realization, the floodgates open, and no problem is exempt from consideration or acceptance. The very concept of a “Solution” is seen through, and cast aside as a waste of effort.

      For those who arrive at Stage 5 there is a real risk that depression will set in. After all, we’ve learned throughout our lives that our hope for tomorrow lies in our ability to solve problems today. When no amount of human cleverness appears able to solve our predicament the possibility of hope can vanish like a the light of a candle flame, to be replaced by the suffocating darkness of despair.

      How people cope with despair is of course deeply personal, but it seems to me there are two general routes people take to reconcile themselves with the situation. These are not mutually exclusive, and most of us will operate out of some mix of the two. I identify them here as general tendencies, because people seem to be drawn more to one or the other. I call them the outer path and the inner path.

      If one is inclined to choose the outer path, concerns about adaptation and local resilience move into the foreground, as exemplified by the Transition Network and Permaculture Movement. To those on the outer path, community-building and local sustainability initiatives will have great appeal. Organized party politics seems to be less attractive to people at this stage, however. Perhaps politics is seen as part of the problem, or perhaps it’s just seen as a waste of effort when the real action will take place at the local level.

      If one is disinclined to choose the outer path either because of temperament or circumstance, the inner path offers its own set of attractions.

      In any case lashing out in anger at those who aren’t there yet, IMHO is counter productive.

      Yes, I am self aware enough to realize that I too live in a glass house and tend to toss a few stones around which really isn’t very useful, though it can be a ways of venting my frustrations too.
      I need to get out on my kayak a bit more while I still can!

      Cheers!

      • Sam Taylor says:

        Chefurka is mostly active on facebook these days, which is quite bizarre I know. I think his views in some areas have moved on a fair bit from some of the stuff on his site, though he still thinks we’re long term screwed obviously.

        • Fred Magyar says:

          As time goes on people do change. I don’t do much Facebook and I haven’t followed him so I wouldn’t know but whatever his positions are today I would still be very surprised to find he is seething in anger and lashing out at people by telling them they are wrong. That would be radically out of character for him.

      • Caelan MacIntyre says:
      • Fred Magyar says:

        Oh, yeah!

        The solution is economic growth. When lifted out of poverty, most people can afford to avoid infectious diseases. China has pulled more than 680 million people out of poverty in the last three decades, leading a worldwide poverty decline of almost 1 billion people. This has created massive improvements in health, longevity, and quality of life.

        The four decades since The Limits of Growth have shown that we need more of it, not less. An expansion of trade, with estimated benefits exceeding $100 trillion annually toward the end of the century, would do thousands of times more good than timid feel-good policies that result from fear-mongering. But that requires abandoning an anti-growth mentality and using our enormous potential to create a brighter future.

        Bjørn Lomborg

  11. Ovi says:

    Ron, is it possible to do the same thing with the fields in Texas that you did with North Dakota, i.e. add up the EIA Texas fields and compare it to the RRC data?

    • Not really. The I do that every month but with the Texas RRC incomplete data. Texas does estimate what the final production will be but for “Crude Only”. The EIA does not publish estimates for Texas crude only, they only do C+C.

  12. scsnospam says:

    It looks like sentiment has turned. Suddenly, today, everyone(!) is touting what has been posted here by Ron and others. Bakken down in May, and investment bankers saying could be down more than 57kbpd that EIA says. I think everyone has been reading this blog, and knew exactly what the score is, but kept the charade going while shorting oil. Now, they probably want to ride up, after buying into oil at the lows.

    http://www.bloomberg.com/news/articles/2015-04-13/shale-oil-boom-seen-ending-in-may-after-price-collapse

    • Jeffrey J. Brown says:

      To his credit, it looks (so far at least) that Dennis called the price low in January of this year, when Brent averaged $48.

      And (so far at least), the current short term rate of increase in monthly Brent prices (relative to January, 2015) exceeds the short term rate of increase in monthly Brent prices , after they hit a low of $40 in December, 2008, the low point of the 2008/2009 price decline.

      • Dennis Coyne says:

        Hi Jeff,

        I am wrong much more often than I am right, the Jan oil price call for the Brent Crude low was just a lucky guess. In August 2014 I had no idea that oil prices would crash as far as they did and expected an eventual OPEC cut. For every occasional lucky correct guess on oil prices, I am wrong on about 99% of my other guesses.

        A wise person simply ignores those who think they can guess the future price of oil.
        Steve Kopits and Rune Likvern do great analyses in understanding the underlying economic forces in the oil market. People should pay attention to them, and Jeffrey Brown and Ron Patterson.

      • BC says:

        Jeffrey, a technical buy signal occurred in Dec-Jan (weekly) and was confirmed at the end of Mar (monthly). Technical resistance is at the mid-$60s to low $80s.

        A similar scale of decline (CPI and 2015US$ adjusted) occurred in 1981-85, 1991-94, and 1997-98 as we have had today, but the 5- and 10-year average price of WTI is 60-75% higher than in 1985 and 3-4 times higher than in 1994 and 1998.

        Historically, the 5- to 10-year rate of real GDP per capita has decelerated to 0% or negative with the 5- and 10-year adjusted price of oil above $40. Therefore, the US (and global) economy will remain structurally energetically/exgergetically constrained at a 5- and 10-year trend rate of real GDP per capita of ~0-1% indefinitely hereafter.

        At the recent CPI- and US$-adjusted low, WTI was at the price of 1973-76.

        • Dennis Coyne says:

          Hi BC,

          Using IMF World outlook Real GDP Data (PPP), UN population statistics, BP Statistical Review Brent Spot Prices, and CPI data from the EIA Real Prices viewer, I found 5 trailing 5 year average brent oil prices (right axis) in 2014$ and real GDP per capita 5 year trailing average growth rates. GDP per capita has grown slowly since the financial crisis, but fell to 1.5% for the 5 year average only in 2012 and 2013. The 10 year trailing average GDP per capita growth rate has been above 2% since 2004 and the trailing 10 year average Brent oil price has been above $40/b since 2005. Chart for 5 year average is below.

          • BC says:

            Dennis, my results are clearly different from using FRED, World Bank, and UN data. I’ll revisit the data. Thanks.

          • BC says:

            Dennis, BTW, I use 2007-08 as a particularly relevant point of comparison as it is the date at which the cumulative differential rate of growth of US private debt to wages and GDP reached the critical order of exponential magnitude from the early 1980s, which historically has been the “jubilee” threshold after which growth of private debt to GDP can no longer increase.

            However, in our fiat debt-money-based Keynesian system in which central bank QEverywhere and gov’t spending is being deployed to prevent nominal GDP from contracting, gov’ts are running unprecedented deficits to GDP directly and indirectly funded by central bank printing of bank reserves/cash assets.

            However, as of 2008-10 in the US, total public debt to wages and GDP reached the “jubilee” threshold, implying that future growth of fiscal deficits to wages and GDP will no longer result in growth of real GDP per capita, especially real “private” GDP per capita.

            This is another unambiguous historical marker implying that growth of debt, gov’t spending, and real GDP per capita has peaked.

        • clueless says:

          BC – “exgergetically” ??? Exegetically??

          • BC says:

            clueless, see below:

            http://www.eolss.net/sample-chapters/c08/E3-03-31.pdf

            https://gcep.stanford.edu/research/exergy/resourcechart.html

            https://gcep.stanford.edu/pdfs/DyUMPHW1jsSmjoZfm2XEqg/1.3-Hermann.pdf

            Energy is often used to mean exergy when the latter is not understood in the context of the necessary rate of change of growth of global systemic exergy, i.e., the affordable, sustainable capacity to do work per capita.

            The critical inference is that, as per LTG, the world as reached the critical exergetic log-linear limit bound of growth of population and per capita low-entropy resource extraction and consumption in order to grow and sustain our oil- and debt-based, high-tech, high-entropy global economy and civilization.

            That is, increasing “money” (and thus price “information” to “the market”) in the form of bank reserves and debt-money and its attendant debt service costs in perpetuity no longer results in the affordable, profitable growth of net energy supply per capita and thus growth of exergetic capacity to do the necessary work for growth per capita.

            Shale and tar sands extraction requires an accelerating rate of growth of lower-quality, costlier consumption of same to produce an increase in supply but at a higher cost and thus lower exergetic capacity for both future real GDP per capita growth and growth of lower-quality, costlier crude substitutes.

            Further, because of the net exergetic limit bound constraints, neither can we afford to build out to anything close to the necessary scale of so-called “alternative” or “renewable” energy, simultaneously sustain the liquid fossil fuel infrastructure indefinitely hereafter, AND maintain real GDP per capita growth.

            This and other aspects speak to Jeffrey and yours truly’s past assertions that an infinitesimally small share of the population actually understands Peak Oil, net energy, exergy, ELM, ECI, ANE, and CNE.

  13. Ronald Walter says:

    Been reading some other info on oil production, oil development, and found this:

    Bakken Update: The Red Queen Is Just A Fairy Tale

    Kind of picking on The Oil Drum and Rune Likvern’s work, but I guess that is how it goes in the world of oil and investing and all that nonchalant jazz.

    I wonder if Fernando has ever heard of Mother Bloor?

  14. Jeffrey J. Brown says:

    Greece prepares for debt default if talks with creditors fail
    http://www.ft.com/intl/cms/s/0/c5964f9c-e1ef-11e4-bb7f-00144feab7de.html#axzz3XIFE9hww

  15. toolpush says:

    https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-04-14.pdf

    Jan Oil 36,927,131 barrels = 1,191,198 barrels/day
    Feb Oil 32,958,640 barrels = 1,177,094 barrels/day

    I am sure Ron will give us a detail analysis in time.

    • AlexS says:

      Bakken ND oil production was down 12 kbd in February from January levels and 47 kbd from December 2014 levels

      Dec 2014 1163330
      Jan 2015 1128266
      Feb 2015 1116325

      • Dennis Coyne says:

        Hi AlexS,

        I realize that the NDIC publishes all those digits, but I doubt the data is that accurate.

        I would say (in millions of barrels per day)
        Dec 1.2
        Jan 1.1
        Feb 1.1

        Output decreased in Jan and was flat from Jan to Feb.
        In fact, ND Bakken/Three Forks output has been pretty flat since August 2014 at about 1.1 Mb/d.

        • Dennis, in this case you are very wrong. Those NDIC numbers are extremely accurate. Of course they are revised every month but the revision is usually very small, and hardly any revision at all in the data more than two months old. The January data was revised about 700 bpd in February. And the EIA always eventually post exactly what the NDIC posts.

          Here is the change in production for the last three months for all North Dakota. I always try to post the all North Dakota data instead of just the Bakken data because it is the total amount that is most important.

          All North Dakota
          Nov-14	1,188,399	Change from the previous month
          Dec-14	1,227,529	39,130
          Jan-15	1,191,198      -36,331
          Feb-15	1,177,094      -14,104
          
    • Dennis Coyne says:

      Thanks Toolpush,

      Between 107 and 157 new wells were added in Feb 2015, I am estimating 130 new wells and if we assume the number of new wells added each month decreases to 110 new wells per month by May 2015 and that new well estimated ultimate recovery(EUR) starts to decrease in June 2015 and the rate of decrease gradually increases to 6.5% per year by June 2016, then if 110 new wells per month are added until Jan 2017 output is flat at around 1100 kb/d. Chart with scenario below.

  16. The Wet One says:

    BTW, OFM, I’m glad to see you’re back.

    The place was starting to get rather drab without you.

    Cheers!

  17. Ron Short says:

    https://twitter.com/MiddleEastEye/status/588903553386864640/photo/1

    So is the Middle East all about the ideology , or oil and water?

Comments are closed.