The monthly Baker Hughes International Rig Count came out a few days ago. Baker Hughes international rig counts do not include US, Canada, FSU countries or on shore China. All rig count data here is through December 2015 and includes all rigs, gas, oil and misc.
Total international rig count was down 14 rigs from November to December. From December 2014 to December 2015 rig count was down 218 rigs or 16.6 percent.
Latin America was down 14 rigs from November and down 99 rigs or 26.8 percent since December of 2014.
Europe was up 6 rigs in December but down 34 rigs from December or 23 percent from December 2014.
Africa was up 1 rig in December but down 47 rigs or 34.1 percent since December 2014.
The Middle East was up 3 rigs in December and up 19 rigs or 19 percent since December 2014.
Asia Pacific was down 10 rigs in December and down 57 rigs or 22.4 percent since December 2014.
Baker Hughes Total World is just Total International plus the US and Canada. It still does not include any FSU nation or on shore China.
Total World rigs were down 78 rigs in December and down 1,601 rigs or 44.9 percent since December 2014.
Canadian rigs were down 18 in December and down 215 rigs. or 57.3 percent since December 2014.
Total US rigs were down 46 in December and down 1168 or 62.1 percent since December 2014.
I had to include this chart. The 2016 average is only the average for the first 5 days of 2016. This is a very interesting chart. It shows that the price increase in 2008 was very short lived. Likewise the price crash of 2008 was also short lived. The price increase of 2011 lasted for four years. And the price crash of 2015 has already lasted just over a year. It is far deeper and already lasted far longer than the crash of 2008.
This is Brent premium over WTI. Normally WTI sells at a premium over Brent. What happened in 2011 to cause the sudden differential? And again in 2012 but began to decline in 2013. And now it’s gone.
This chart shows it a bit better. The price of WTI dropped below $80 a barrel in October of 2008 and broke $80 on the upside in October 2009. (Actually 1 year and 11 days later.) WTI broke $80 on the downside again on the 3 day of November 2014 and here 14 months later it shows no signs of broaching that number any time in the near future.
The point I am trying to make is this time it is different. After 4 years of very high oil prices it is quite possible, even likely, that we will have low oil prices lasting that long as well. That is because something other than the oil supply is in play here. Of course the oil supply is a very important part of it but demand just may be falling due to the state of the world economy. I think China is the wild card here.
From an Indian publication, bold mine.
Dark clouds over Chinese economy, world wide impact and what it means for India
Our largest and the most powerful neighbour China is causing tremors in India. The reason is not the Chinese military power. The cause for the worry is volatile Chinese stock market. The Chinese market is continuously crashing and its effects are already being felt all over the world. Will the Chinese markets stabilise? Will they affect the world economy in a big way? Or is it just a temporary phase which can end soon?
Even though the Chinese stock market is one of the largest in the world and the Chinese economy is the second largest in the world, it is not actually a transparent, first world market. In a single party Communist China, the markets are heavily regulated by the Communist government and the manipulation to suit the interests of the select few investors is rampant. Stock market scams are also quiet common in a very corrupt country like China.
It just may be that China is on the cusp of collapse. And if it does other economies around the world will likely go down with it.
_________________________________________________________
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Hi all,
I am not posting often here, but read almost every day to learn.
Back on September 09, I made the prediction here on peakoilbarrel (sorry, I have only limited PC capabilities, so cannot post a direct link) that WTI would fall to $31. This forecast was actually made on August 27 (see attached graph with date and time stamp in lower left corner). The red targets are the most likely, so $35 was most likely to be just a short stopover. As we know now, $35 did not even hold for a week.
As you can see, I also gave three time zones when this would happen. The first two passed without touching one of the targets. So the third one had to be “it”.
What next? It all depends on the next 11 trading days (roughly half a month). If WTI manages to close above $40.99, then the Low is in. If not, $ 25 is the next target area. There are other criteria, but that would be beyond the scope of this post.
Why am I posting this? I am NOT trying to sell anything. I am trying to contribute to this forum and especially to the hands-on-contributors such as shallow sand who have been suffering for a long time now; to give them a heads-up.
How does it work? It is an old system of numerology to connect time and price.
How reliable is it? My experience over eight years is a success rate of approx. 80%. So there still is a 20% risk remaining.
So please take it foremost as another piece of information – and hopefully entertainment…
A bearish technical pattern projects the mid-$20s for WTI if the stop at $29 is taken out.
WTI $57 is currently the CPI- and US$-adjusted price basis 1973, the year the US$ was removed from gold and floated.
Basis the 1960s-1970, the CPI- and US$-adjusted WTI price would be $22-$25, which I suspect is where the price will eventually settle for the cycle, coincident with a global deflationary recession ahead.
My take on the situation is; the number of oil rigs dropping followed oil price dropping (which is still dropping slightly), and later when the over supply has been consumed, price will rise, followed by increasing number of rigs.
Sounds good. Do you think oversupply will be reduced by 2017? So oil price rise starts around then with rigs gradually rising starting mid 2017.
…still drinking that “demand-supply” and business as usual kool-aid” …huh, Dennis?!?!
Be well,
Petro
Hi Petro,
If BAU means constant change, then yes.
Demand and supply, also yes.
Society constantly changes, if you think this will no longer be the case, then we will no longer have BAU, but I think change is inevitable, always has been and always will be.
be well
Economics is simply a religious belief system, designed to compete with other religions and other economic religions such as Marxism and feudalism. That is why it is so difficult, if not impossible, to argue logically against it. It was never created based on logic but rather as a means to channel mans inner urgings and passions.
http://www.greattransition.org/publication/the-church-of-economism-and-its-discontents
Economists themselves have acknowledged the ultimately religious nature of their discipline. In 1932, Frank Knight, the most scholarly and broad-thinking of the founders of the influential market-oriented Chicago school of economics, literally argued that economics, at a fundamental level, had to be a religion, the basic tenets of which must be hidden from all but a few:
The point is that the “principles” by which a society or a group lives in tolerable harmony are essentially religious. The essential nature of a religious principle is that not merely is it immoral to oppose it, but to ask what it is, is morally identical with denial and attack.
There must be ultimates, and they must be religious, in economics as anywhere else, if one has anything to say touching conduct or social policy in a practical way. Man is a believing animal and to few, if any, is it given to criticize the foundations of belief “intelligently.”
To inquire into the ultimates behind accepted group values is obscene and sacrilegious: objective inquiry is an attempt to uncover the nakedness of man, his soul as well as his body, his deeds, his culture, and his very gods.
Certainly the large general [economics] courses should be prevented from raising any question about objectivity, but should assume the objectivity of the slogans they inculcate, as a sacred feature of the system.8
When I show students these passages in my lectures, they gasp, finally understanding why economics is taught so differently from the other social sciences, why it is presented so uncritically, as if it were a science when it obviously is not.
VK, well said.
Economics is politics. War is politics with other means. War is the business of empire. War is good business for imperialists. Therefore, economics is politics is the intellectual, amoral rationalization for the expansion of empire by way of large-scale state violence in order to expropriate resources, exploit cheap labor, co-opt foreign elites, and accept (encourage) genocide and ecocide in the process, all for fun and profit.
The job of eCONomists is that of imperial ministerial sophistry to rationalize the values, objectives, actions, and outcomes of imperial expansion, power, and control.
Same as it ever was . . .
Hey Mac, I saw this earlier today and thought you might be interested since, it might go some way towards answering questions I have heard you raise as to the effect renewables are having on the price of fossil fuels:
U.S. renewable energy mandates bring down fossil fuel use, power costs
29 states and Washington DC currently have RPS policies. These vary greatly in ambition, with Hawaii (100% by 2045) California (50% by 2030) and New York’s 50% by 2030 pledge leading the pack.
A new report by the U.S. Department of Energy’s National Renewable Energy Laboratories (NREL) and Berkeley Laboratory attempts to broadly quantify the impacts of these policies across a range of areas. These include reductions in fossil fuel use and avoided greenhouse gases, effects on wholesale electricity prices, reductions in water use, employment and cost to utilities and ratepayers.
A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards finds that RPS- compliant systems made up 2.4% of nationwide electricity generation in 2013. This created 200,000 jobs, reduced wholesale electricity prices and reduced fossil fuel generation by 3.6%, resulting in 59 million metric tons fewer greenhouse gas emissions.
Thanks, Islandboy
This link certainly appears to support my argument that SOCIETY as a whole experiences a substantial net benefit as the result of supporting the renewables industries.
The sale of coal and gas are depressed, meaning their PRICES are also depressed, the environment is cleaner, there are more local jobs and jobs in more places, associated with the energy industries, etc.
The reduction in VOLUME purchases of gas and coal over time , combined with the savings on the PURCHASE PRICE of these depleting commodities, will be substantially greater than the cost of subsidies, so far as I can see.
WIN for every body except the people invested in the fossil fuel industries, or employed in these industries.
There is a time coming oil, gas, and coal supplies will be tight and questionable, and the prices of them will be UP sharply.
How long, I don’t know, but soon enough that we had best stay after scaling up renewables NOW so as not to get caught with our pants around our ankles later on.
The longer we can stretch out the one time endowment of oil and gas, the longer we have to adapt, both technologically and socially. Given time enough, we have a shot at coping with peak oil, and with peak gas as well, assuming supplies don’t crash too fast, and prices don’t spike too fast.
Personally I find the argument that the world cannot EVER support a present day price of oil of one hundred fifty bucks or more to be absurd. We would be in a hell of a lot of trouble if the price spiked that high in short order of course.
BUT in ten years we can, if we force the issue, get twice the bang out of a barrel of oil, and the world economy did not crash due to seventy five dollar oil.
Ships can slow down, and the bigger they get, the less fuel they use per ton of cargo. Air travel is a substantial contributor to the economy NOW, but we had a viable economy before air travel came of age, and we can have one again without it, given time to adapt. And aircraft probably eventually be made twice as fuel efficient as well.
Houses can certainly be built so as to be heated and cooled with half or less of the energy needed on average today, and for only a very little more in initial cost.
With a huge build out of wind and solar power farms, and lots of new long distance transmission lines, the gas we burn now to generate electricity can mostly be reserved to support generation when the wind and sun just don’t cooperate.
It is not our job to solve the problems of the twenty second century. Our job is to get thru the next few decades, as best we can, without fucking up the planet any more than necessary to survive.
I am not even an engineer but I know of dozens of ways ( mostly worked out by real engineers ) to reliably and afford-ably reduce energy consumption, while still living quite well. As energy prices increase, we will be putting these tricks to work one after another.
Will they enable us to continue to live ” life as we know it”?
NO- and nobody who understands the problem expects us to continue to live life as we know it today. But some of us have a pretty good shot at continuing to live a pretty decent life just the same, with all or most of the things we have come to take for granted still available to us.
A low and narrow fore and aft oriented two seat car can easily go a hundred miles on a rather modestly sized battery, especially if it is PROGRAMMED to never exceed let us say forty mph.
(And forty mph is still four times as fast as a fast horse, which can only run ten miles once in a day, and not very many days at all on a regular basis, and needs the other twenty three hours to recuperate. LOL)
Of course GS will be popping in to ridicule the idea that anybody will ever buy such a car, short of the nanny state holding a gun to his head, but anybody who really believes in peak oil will be a little more open minded about downsizing rather than WALKING.
Collapse may be inevitable. I personally believe it is, eventually, on the basis of chance alone, but that does NOT mean we have no choice but to go quietly into the night.
Some of us, most of us, are going to go kicking and gouging and biting and screaming, and shooting too, at least those of us wise enough to have weapons.
Anybody who believes a new sustainable, low energy, low impact way of life is TECHNICALLY IMPOSSIBLE is scientifically and technologically illiterate, it’s as simple as that.
Some of us have a fair shot at achieving it, and may be able to sustain it indefinitely.
Of course achieving such a society may be impossible, for many various reasons, until utter and absolute necessity forces the issue, and overshoot reduces the population substantially. Even then, it might never come to be, but impossible it is NOT.
oldfarmermac,
Since you invoked my name, I will gladly respond.
The study islandboy cited is a cost-benefit analysis.
This from the cost side of the study:
Question: The various entitites which comprise the United States government have not been very aggressive about forcing the production of renewable energy. But what if they had been? What if they had been as aggressive as, for instance, Spain, Italy, or Germany?
What do you believe would be the political fallout for US lawmakers if, instead of electricty costs increasing by a mere 2%, they had increased on the order of 50% or 100%, similar to what they have increased in countries like Spain, Italy and Germany, which have been more aggressive in forcing the production of renewables?
Glenn,
price per kWh is only half of the truth, you have to check the actual bill which is a product of ($/kWh) * consumption.Then you suddenly find that the monthly electricity bill of an US houshold is not lower than the monthly bill of a German household.
The second aspect you conveniently ignore is, that electricity was always very expensive in Germany or Denmark, to assume that the observed differences are a result of REs is nonsense, REs only contributed ~30%.
I’d like to add that my price for 2016 will be only 67% of the national average listed here.
Simply because I change the supplier every year and always get their discounts for being a new customer. This requires about 5 minutes of my time every year and saves me about 125 € compared to the national average (yes, we only use about 1.700 kWh per year, without any lack of modern comfort!).
Too lazy to invest 5 minutes for a return of 125€? You deserve to be fleeced!
Actually, checking my old bills right now I noticed that my electricity price has decreased from 0.26€/kWh in 2012 to 0.22€/kWh in 2016. Now, where does renewable energy cause higher prices?
If you want to know what electricity costs without the burden of taxes,…
http://www.eex.com/en/
PHELIX -> Germany and Austria
FRANCE -> obvious?
SWISSIX -> Switzerland
Want to know what electricity price to expect as an industrial customer?
http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1&language=en&pcode=ten00117
Compare the price history of France (with their “cheap” nuke power) to the price of Germany and tell me: Do you want your price to increase by 40% (France) or by 9% (Germany), while calculating the future prices you need to charge your customers for your goods and services?
Gerry,
Well that is certainly true. German industry has gotten a free ride when it comes to paying for Energiewende, since residential customers have been forced to pay the entire cost, then some.
Ulenspiegel says:
So let me get this straight.
American households can afford to pay close to 3x the kWh price for electricity, the same price as Germans do, in order to pay for the renewables “transformation.” All they have to do is cut their electricity usage by 2/3, to a level similar to that of German households?
I fully understand that this is part of Energiewende propaganda:
And maybe a majority of Germans do indeed believe they are doing God’s work, sacrificing to save the planet.
Nevertheless, try selling that to American households, and see how far you get.
As Samuel J. Best and Benajamin Radcliff documented in Polling America, very few US households are willing to pay even a very small additional cost for renewables when offered the choice to do so by their utility companies. The customer participation rates in the top 10 utility green-pricing programs have ranged from 3.9 to 11.1 percent.
Instead of making silly statements like “And maybe a majority of Germans do indeed believe they are doing God’s work, sacrificing to save the planet.” you shoulkd work a liottel bit harder to put your data in the correct context. You have failed.
Energy was and still is very expensive in Germany. This has consequences which you do obviously not understand. E.g. the German economy despite running a higher industrial production is at least 25% more emergy efiicien as the US economy.
The situation of German households is quite realaxed, as electricity is only the minor part of the energy bill. For SMEs electricity only contributes 2% of the costs, i.e. is menaingless.
To assume that the price increase of electric energy is a real issue is a littel bit naive, when at the same time wholesale prices DECREASED and as a result energy intensive industry improved their international position.
To use the USA situation to argue against German energywende is not useful.
Ulenspiegel,
Despite all the flowery rhetoric and professions of devotion that issue from the mouths of Merkel and Gabriel, pious declarations about how Energiewende “isn’t just for them, but all of mankind,” about how it is “irreversible” and how “I am convinced that if there’s one country that can master the Energiewende, it’s Germany,” Energiewende is facing some serious political challenges.
And while the political realities in Germany may be different than they are in the United States, the economic, physical and engineering realities are not:
Given that Germany is a country that must import oil and gas, and even good quality coal, Germans have sense enough to understand that their CONTINUED prosperity depends on their taking the lead in renewable energy.
Folks who are sensible are willing to consider the possibility that spending NOW can save many times the current expense LATER.
Consider this:
Countries such as Saudi Arabia that export oil are coming to understand that in is in their best interest to keep the oil at home, and export FINISHED PRODUCTS made from that oil, and are moving in that direction. A country that has little to export other than trees will come to understand that it is much better to export wooden furniture, or paper, or other products such as chemicals, made from wood.
What the FUCK is Germany going to export when the country can no longer IMPORT oil and gas, unless Germans generate their own energy supply?
That time is COMING, and the German people have sense enough to know it, and are sensible enough to prepare NOW for that time.
I doubt there are very many Germans as old as fifty who do not know ALL ABOUT WWII, from talking about it with family that lived thru it.
I doubt there are very many Russians of ANY age that have forgotten WWII in general, and the SIEGE OF STALINGRAD in particular.
Russians have long memories, and an authoritarian government.
Germans are not going to mention this very often, publicly, but you can bet your last can of beans that they are not going to FORGET it, at least not very soon.
OFM,
Judging from the comment by Ulrich Grillo, President of the German Federation of Industries, that I cited above, it looks like the German industrial class disagrees with you.
To wit:
“This places German industry at a serious competitive disadvantage that is only going to get worse,” said Ulrich Grillo, President of the German Federation of Industries, the country’s main industry lobby. “The electricity factor is a burden that endangers industry and therefore the livelihood of companies and their employees.”
OFM
“I doubt there are very many Russians of ANY age that have forgotten WWII in general, and the SIEGE OF STALINGRAD in particular.”
Small historical point.
I believe you are confusing the battle for Stalingrad with the siege of Leningrad.
Ulenspiegel,
Glen is not interested in facts such as this:
The situation of German households is quite realaxed, as electricity is only the minor part of the energy bill. For SMEs electricity only contributes 2% of the costs, i.e. is menaingless.
BTW, I have family in Germany. Both my brother and sister work for German companies are married to Germans and have raised families in Germany. I have been to visit on many occasions.
Nothing that Glen says about Germany or any other topic for that matter, has the slightest ring of truth about it. He is here only to make inflammatory remarks! He is not now, nor has he ever been, interested in any form of honest discussion.
He is best ignored! trying to engage him in a discussion is a total waste of time. He adds nothing of value. If I were Ron, I would permanently ban him from commenting here.
To be clear, before anyone suggests that I am in favor censoring opposing views, that is not at all what I propose. There are others on this site with whom I very strongly disagree on certain topics, however I have always gotten the impression they have arrived at their positions by honest means. I am more than willing to let them have their say and even when I disagree with them they always make me think and examine my own positions with more care.
Glen, on the other hand, seems only to be interested in obfuscation and sowing the seeds of discord.
Fred,
The reason Team Green takes such a keen interest in peak oil is because it believes its hallowed Green Utopia will arise from the death of carbon, just like the Phoenix arises from the ashes of its predecessor.
It’s the resurection theme, the ascenscion theme, taken right straight out of Greek and Christian theology.
“And my bible tells me that Good Friday comes before Easter,” the Reverend Martin Luther King intoned. “Before the crown we wear, there is the cross that we must bear.”
It is a veritably messianic political program, and like any messianic political program that succumbs to the utopian temptation, it does not take kindly to true difference.
Nevertheless, there is precious little factual, empirical evidence that demonstrates that “clean energy” can come anywhere close to replacing, or doing the heavy lifting of, carbon energy.
The only reason Team Green is interested in peak oil is because it believes its hallowed Green Utopia will arise from the death of carbon, just like the Phoenix rising from the ashes of its predecessor.
Team Green doesn’t exist except as your construct. It is a strawman pure and simple!
Strawman
You misrepresented someone’s argument to make it easier to attack. By exaggerating, misrepresenting, or just completely fabricating someone’s argument, it’s much easier to present your own position as being reasonable, but this kind of dishonesty serves to undermine honest rational debate.
https://yourlogicalfallacyis.com/strawman
Fred Magyar said:
Team Green doesn’t exist except as your construct.
Right. It doesn’t exist, except when the need arises to circle the wagons to defend its mythology.
I think Glenn is referring to Team CeeLo.
Hi Webhubbletelescope,
Glenn likes to create myths and then argue against those.
Much ado about nothing.
I has to look up CeeLo, as I didn’t get the reference, most old men probably are unfamiliar with Mr Green.
Ulenspiegel says:
Well again, this is part and parcel of Energiewende propaganda. But is it true?
Since the EEG renewable Feed-in Act took effect in 2000, it has been promised by green energy proponents time and again that the power price would fall in Germany. So what does the reality look like today?
Here are statistics from the Bundesnetzagentur (Federal Network Agency) on the latest power prices.
In 2000, when the Feed-in Act was introduced, Germans paid only 13.94 cents per kilowatt-hour, which at the time had hardly changed since German reunification in 1991. After the liberalization of the power market in 1998, the price of power even dropped some. Today, in 2014, the price is now 29.21 cents per kilowatt-hour, i.e. it has more than doubled in 14 years.
Hi Glenn,
It depends on where you start, on the curve and also where you end.
You like to point out that investment in renewables has declined since 2011, to follow your logic that the renewables are causing prices to increase, we would expect that the reduction in renewable investment would cause electricity prices to decrease. The reverse was the case.
In addition, you blame the price increase on renewables, natural gas prices have increased by a factor of 5 since 1998 in Europe.
This may be the main explanation for increased electricity prices in Germany along with shutting down nuclear power which most of the German population supports. Chart with natural gas prices uses BP data.
Dennis,
Only 11% of Germany’s electricity is generated from natural gas.
http://www.enerdata.net/enerdatauk/press-and-publication/energy-features/germany-increasing-power-generation.php
It takes about .01 MCF of gas to generate 1 kWh of electricity. So the cost of natural gas to generate a kWh of electricity has increased by about 8₡ since 2000.
http://michaelbluejay.com/electricity/fuel.html
But since only 11% of Germany’s electricity is generated from natural gas, this explains less than 1₡ of the more than 15₡ increase in the price of electricity.
Glenn,
The price is determined by the marginal cost of the most expensive electricity, so if your 8 eurocents is correct, that explains quite a lot of the price increase, it doesn’t matter if natural gas only produces 11% of the electricity, if that is the most expensive electricity produced it will determine the price.
Dennis,
Guess again.
The average feed-in tariff that German electric utilities were compelled to pay in 2014 was more than double their full costs for fossil-nuclear power production, and this in spite of all the operational problems forced upon them which greatly increase their fossil-nuclear costs.
Dennis,
Here is a link to a study, in German, which sets out the main factors which have caused electricity prices in Germany to skyrocket since Energiewende began:
http://www.science-skeptical.de/klimawandel/deutschland-strompreis-spitzenreiter-hinter-daenemark-in-der-eu-seit-einfuehrung-des-eeg-im-jahre-2000-hat-sich-der-strompreis-mehr-als-verdoppelt/0013133/
Here is a translation of some of it to English:
http://science-skeptical.de/ does not publish studies. They do propaganda.
Just read some of their stuff, it becomes obvious quite fast.
——————–
You also seem to be confused about the “EEG-Umlage”, thinking this is what’s being paid for electricity production from renewable sources.
It’s not, those 6.xct/kWh contain only 2.6ct/kWh which pays for renewable generation. The rest ist political bullshit and corruption designed to funnel money to those bribing politicians and to provide ammunition to propaganda people like you appear to be one.
http://strom-report.de/medien/eeg-umlage-boersenpreis-indutrierabatte.png
——————–
Seriously, are you trying some propaganda shit against a german native who actually reads details?
Or do you just bask in confirmation bias?
——————–
“American households can afford to pay close to 3x the kWh price for electricity, the same price as Germans do, in order to pay for the renewables “transformation.” All they have to do is cut their electricity usage by 2/3, to a level similar to that of German households?”
Of course they could. This is plain math. Actually, I guess this is about 5th or 6th grade math!
But of course, americans would never do this, as they do seem to think that wasting resources and energy is a god-(or cthulhu- or whatever stupid, invented figure)-given right that every american needs to excercise at any time.
——————–
And you definitively should use up to date sources.
Coal only provides 40% of electricity generation in 2015, not 47 as in 2012 (your source above).
Gas-powered prodution provides only 5% in 2015.
Please do not forget that 7.8% of production has been exported (a new all time record), even though nuclear proponents warned of blackouts due to the immediate shut down of several nuke plants in 2011. (1)
Export equals almost exactly one third of lignite based electricity production!
If our corrupt politicians would not protect coal fired power plants (2), we would already see a massive phase-out of coal plants.
https://www.energy-charts.de/energy_de.htm
(1)
Had coal production be shut down in times of high production of renewables, coal would have provided only 35% of total electricity production.
(2)
The population is quite indifferent to the problems associated with coal based power production, thus creating less incentive for politicians to shut them down.
Quite the opposite is true with nuke plants.
Annex 1:
Definition of “corrupt politician”:
Politicians are corrupt wheny they act to the benefit of themselves or very few people or corporations, despite a majority of the population requesting the exact opposite of that.
Hi Glenn,
It sounds like there is an oversupply of conventional power, do you think they should be subsidized?
Dennis,
You seemed to have missed this part:
…old power plants are being left on because the federal government has made it illegal to shut them down in attempt to keep the supply intact.
What would you say to the US government forcing an oil and gas operator in the US to continue producing a well that the operator wishes to shut in because he’s losing money by continuing to produce it?
Again, you do not analyse which part of the increase came actually from the FIT. We had different parallel developements which contributed to the current situation.
And again, the industry improved their relative competitiveness.
Ulenspiegel says:
And again, you continue to demonstrate that you live in a fact-free world, completely divorced from reality:
And what “had been promised”?
Jürgen Trittin, a former Green party environment minister, in 2004 declared that “subsidizing green energy wouldn’t cost the average German household more than one euro per month, or as much as a scoop of ice cream.”
And here’s more recent data on prices, a comparison of what various European countries pay for electricity.
The French in 2013 paid about half for electricity, on the average, as what Germans did.
BENEFITS
Most of the “benefits” that this study puts a dollar value on are those which are derived from reductions of highly politicized external costs: “GHG Emissions and Climate Change Damage Reductions” and “Air Pollution Emissions and Human Health and Environmental Benefits.”
The benefit you and islandboy singled out, however, is “natural gas price reduction impacts”. Quoting from the study:
The authors of the study of course have some very high falutin mathematical models which they use to justify their claims. But I have created the graph below, using EIA stats, to illustrate exactly what it is the authors are asking us to believe.
https://www.eia.gov/dnav/ng/hist/n9070us2A.htm
For 2013, the blue bar is actual natural gas production for that year. The brown bar is what natural gas production would need to be if it had not been reduced by RPS compliance.
Does it pass the common sense test to believe that such a tiny reduction in the use of natural gas for 2013 would cause a 5₡ to 14₡ reduction in the price of natural gas?
Another highly dubious “benefit” which the authors claim is this:
This harkens back to something which John Maynard Keynes said:
This sort of thinking has become axiomatic in orthodox economics circles, for as Richard Nixon proclaimed back in 1971, “We’re all Keynesians now.”
For instance, in an exchange on the CNN show “Fareed Zakaria GPS,” there’s the following exchange between an economist and the host:
This is one of the key roots of the problem with many mainstream economists. They believe the economy is about money. In reality, it’s about value produced.
After no one challenges Zakaria’s bizarro assertion that Boston’s Big Dig was just swell even though it cost ridiculous amounts of money for the value produced, my favorite economist from the Twilight Zone jumps in to pull out another favorite myth of the Keynesians and their friends.
These people honestly believe that money spent — no matter why it’s spent or the effects of the spending — is the same as creating growth. They don’t understand that if the spending produces nothing of value, the amount of overall value in the economy is lowered and that the average standard of living must go down.
The inestimable GS would make a hell of a fine lawyer, if you needed one to pound on the table, rather than THE facts, because he is extraordinarily adroit at making long pompous speeches about things that may be facts but are not RELEVANT to the argument.
Let me say first that anybody who is stupid enough to make an argument that externalized costs don’t matter is just plain and simple a fucking idiot. He does not QUITE go that far, but he insinuates it.
“Most of the “benefits” that this study puts a dollar value on are those which are derived from reductions of highly politicized external costs: “GHG Emissions and Climate Change Damage Reductions” and “Air Pollution Emissions and Human Health and Environmental Benefits.”
Now as it happens, I am a person who has made a LIFELONG CAREER out of not having a conventional career. I took my degree in agriculture, and my transcripts are heavy on the physical and life sciences. I have taken almost enough courses over the years to hold a couple more degrees, in order to keep up, or just for a change in the intellectual scenery. A few years back I nearly finished a program to earn a Registered Nurses license, but dropped out at the last minute, TWICE, to look after my parents.
So -I KNOW , from the professional study of managing crops and livestock, and managing the details involved in public health issues, that we are paying a HUGE HUGE HUGE penalty in external costs by using fossil fuels as if there were no tomorrow.
Incidentally GS apparently believes there is in effect ” no tomorrow” and that the world is going to hell in a hand basket and so we might as well “party hearty” and continue on our fossil fuel binge, because, hey , we are all dead in the long run anyway right?
Maybe the world IS headed to hell in a hand basket, but I know a few little boys and girls that brighten my heart, and I want them to live as well as they can, for as long as they can.
When responding to a comment posing the question, whether society ( USA society in this case ) derives a net benefit from subsidizing renewables, his total response is plainly and simply a case of misdirection, an attempt to switch the audience’s attention AWAY from the question, or at least from an open minded consideration of the question.
Fossil fuel shills want us to forget how many people die as the result of air pollution, they want us to forget how many resource wars have been and will be fought over access to fossil fuels, and above all they want us to forget that fossil fuels DEPLETE over time. They want us to forget the strip mines, and the mountains flattened and the buried streams, and the dead fish downstream.
His bag of diversionary arguments or tricks is apparently bottomless, but all of them, when you take a close look at them individually, are about as convincing as the car salesman with the oily manner and the mirrored sunglasses and the plastered on shark smile.
“Does it pass the common sense test to believe that such a tiny reduction in the use of natural gas for 2013 would cause a 5₡ to 14₡ reduction in the price of natural gas? ”
Well, now, obviously GS would have us believe that the people who do any studies contrary to his agenda are all idiots, or at least ethically challenged.
But ANY student of business and economics, or anybody with a brain at all, can tell you that a given factor ( in this specific case a reduction in gas consumption used to generate electricty in the USA ) reducing consumption of a given commodity has the effect of lowering the price of it.
Using LESS gas for any given purpose means cheaper gas. PERIOD. FOR EVERYBODY.
So – So far he has not been devious enough, or blatant enough, to claim that the study is altogether in error , and that we are using MORE gas and coal BECAUSE we are using wind and solar electricity now- but I have seen that argument made by other fossil fuel shills in other forums, although not recently.
I believe it is perfectly reasonable to use the figure given in this link to the effect that we used about a percent and a half less total gas, and about five percent less go generate electricity, as the result of deploying wind and solar power. The exact figure is not important, the point is that the reduction is real, that gas depletes, that it will not always be cheap, etc.
Now as to the MAGNITUDE of the price reduction that came about as the result of this lowered gas consumption is involved, anybody who is remotely acquainted with the concept of elasticity of demand understands that in the case of a commodity such as gas, a minor increase in supply, or a minor decrease in consumption, can result in a wild price swing.
His yakking about common sense is pure Koch brothers bullshit.
I have PERSONALLY hauled a truck load of SUPERB quality peaches around for a hundred miles, without being able to sell them to ANYBODY for any price, short of sitting on the side of the road selling them a pound at a time, and brought them home, and dumped them in a gully to rot. SUPPLY AND DEMAND MATTER when it comes to price.
And incidentally, what we have spent on subsidizing wind and solar farms will be having the SAME depressing effect on the price of coal and gas for the LIFETIME of this infrastructure, and hey guys, here is another thought about sustainability. Wind and solar farms are NEVER going to just WEAR OUT. They can be refurbished BETTER than new, piecemeal, as individual equipment fails, for a minor fraction of the cost of a from scratch new farm, because all the costs, except the actual cost of new machinery, is already covered, and will in most cases already be history, paid off.
Permits, surveys, environmental impact statements, access roads, interconnections to the grid, grading, etc, are ONE TIME expenses, they never have to be paid for AGAIN.
Now I have no idea what GS actually knows, but I suspect he knows more than he is able to admit, for fear of admitting his agenda.
But I HAVE personally spent a substantial amount of time in classrooms studying economics and business administration, taking probably more than a full academic years worth of such courses.
Any argument can be taken out of context, and used to make a person or a profession look like a fool, if the audience is gullible enough.
A long rant about digging holes and filling them up again to put people to work is an entirely bullshit diversion, in the first place, and in the second, it is presented as if it were put forward as a deliberate policy pronouncement, rather than a theoretical illustration.
A real economist, in real life, never argues that you should dig holes and fill them up again, as opposed to putting the workers doing something that is actually USEFUL.
Such policy proposals, when they are of the make work sort, are always after some fashion connected to reality, and instead of digging holes to kill time, the proposal is to dig a path for a sidewalk, or beautify a highway, or clear away trash, etc.
GS wants us to react to renewables without thinking, by pressing our hot buttons,and preventing us from thinking. This technique often works like a charm, if the perp is allowed to get away with it.
“Nobody ever went broke overestimating the stupidity of the public. ” I forget who said it , PT Barnum comes to mind.
“Hain’t we got all the fools in town on our side – ain’t that a big enough majority in any town?” Twain,probably off a bit, but close enough.
Fortunately, the audience here is more sophisticated, as a rule, but you never know who has not had the educational advantages of the regulars here, and might be lurking and so fall for his bullshit.
I am among other things a former professional educator, and habitually look out for ignorance and do what I can to stamp it out.I ENJOY stamping out ignorance.
And unlike GS, when I quote somebody, the quote is actually RELEVANT to my argument, rather than hot wind having little or nothing to do with the questions and issues under discussion.
Dressing his comments up with them no doubt impresses people so ignorant they cannot even make sense of them. Big words, and tailored suits, and lots of meaningless certificates on office walls have that effect on people not smart enough to know better.
The beer salesman NEVER allows you to focus on the headaches and the heartaches and the disasters associated with drinking beer, if it is within his power to prevent it. He stays on message, beer is fun, beer is cheap, beer makes you feel good, nothing wrong with beer, no siree, don’t pay no ‘tention to that fool preacher over there burying a couple of people killed day before yesterday by a drunk driver.
Almost everything he ever says is an attempt to divert attention away from relevant facts, and relevant questions, so as to protect and advance the fossil fuel agenda.
I won’t let him get away with it unchallenged.
It is GREAT FOR ME that he is gathering up all the counterarguments for me, where I will eventually be able to quote them, and ” rip them up like a chicken on a dry cow turd” in my book, which I will eventually finish and most likely publish free online.
(I don’t know who said THAT last one first, most likely nobody does, but the first person I ever heard say it was my dear long departed old country woman Momma. LOL She had only a grade school education, which is all most of her generation in this back woods got back when she was a kid during the DEPRESSION, but she had a BRAIN, and plenty of common sense. )
And one last thing-I have great sympathy for the guys who are working hands on in the oil and gas industries, and wish them all the best.
They need not worry themselves with renewable energy putting them out of work, because they will all be retired and most likely dead before we quit burning whatever oil and gas they can scrounge up.Their kids might do well to think about alternate careers though.
The best we can hope for is to get the renewables industries scaled up to the point that we can stretch out our fossil fuel endowment long enough to adapt to a low energy life style and economy as best we can.
Here is a little bit of FUTURE REALITY. The Saudis are going to eventually be building LOTS of BIG solar farms so as to have more oil to SELL, rather than burning it to air condition the desert, assuming of course that they are not politically gridlocked internally and can’t giterdone.
Mac, I found the above post in the trash file. Apparently WordPress software kicked it there because it was too long.
Mac, you just have to cut down on the size of your posts. They are way, way too long. Try to emulate Polonius.
Polonius:
My liege, and madam, to expostulate
What majesty should be, what duty is,
What day is day, night night, and time is time,
Were nothing but to waste night, day, and time;
Therefore, since brevity is the soul of wit,
And tediousness the limbs and outward flourishes,
I will be brief. Your noble son is mad. . . .
Hamlet Act 2, scene 2, 86–92
oldfarmermac,
I’m sorry, but the only way I could respond to that is with an equally long screed, so I’m not even going to try.
When it comes to desultory verbosity, you definitely take the prize.
Hi Ron,
Thank you for retrieving it.
I am trying to respond to GS posting half a dozen comments in a row, most of them with charts and lots of long quotes, with a single reply.
I will try to do better.
The problem with dealing with HIS long windedness is that it refuting a simple sounding, easy to swallow whole, partisan talking point that takes only a few words takes a couple of paragraphs AT LEAST to dismantle and expose for what it IS- in the case of GS, the Koch brother’s agenda.
I can break my comments up into smaller parts.
I thought you might find this last long one in spam, but composed another, just in case, in a word processor, so as to save it.
I am going to post it at the tail end of your last new post previous to this one.
Complicated issues simply cannot be debated in a few words, because the person using the fewest words can almost always get away with the biggest distortions of the actual facts, or outright lies.
In the future, I will try to remember to post much shorter comments, even if I must post two or three.
Thank you , Sir GS
I am immensely flattered to be recognized as an expert in your own league.
The biggest difference between us is that my long posts are mostly my own work, whereas yours are mostly bullshit fossil fuel industry talking points and long quotes by various philosophers or other folks- quotes that have very little, or NOTHING, actually to do with the issues under discussion.
Of course as Twain put it in Huck Finn,
“Hain’t we got all the fools in town on our side- and ain’t that a big enough majority in any town?” This Twain quote is from memory,and probably not exact.
You address the fools who are UNABLE to think, or would rather not be bothered. Such people are all to often easily led around by their perceived best short term interests, since they don’t know any better.
Unfortunately most people are very close to technically illiterate, in terms of the life sciences and other hard sciences, and so do not actually understand where their ACTUAL best interests lie.
I write for mostly for people who are willing to do a little thinking, and who have the necessary intellectual background to do so.
BUT I also take the time to explain as best I can to those who are willing to think, but not well enough informed to understand your bullshit, HOW you mislead them.
You write for the soundbite crowd for your obvious masters in the fossil fuel and “business as usual ” establishment.
Picking half truths apart necessarily takes MUCH more time than telling a half truth.
And for what it is worth-I believe people can actually make sense out of my rough and ready stories and homespun philosophy, whereas hardly anybody can see any serious connection between your long stuffed shirt QUOTED remarks and the questions under discussion.
If you have ever answered a direct question with anything other than the old politicians typical non answer, I cannot remember the occasion.
I am posting another reply on the last main open key post at the end, so as not to further hog the space on this one.
See you there, if you dare, I am enjoying myself. Your JOB writing the same old same old bullshit must be getting boring by now.
http://peakoilbarrel.com/confessions-of-a-doomer/#comment-555538
Mac,
I enjoy ur wisdom. I have learned heaps from u.
You now seem like u are arguing with yourself in the shower.
I hope everything is ok. I have been there mate!
Thank you Satan,
I was half asleep and half dreaming, as is often the case, given the situation in the house these days, when I wrote this response. I am also making sure I don’t overlook anything, and doing the best I can to make sure GS does not get the LAST word in.
( My old Daddy needs a LOT of attention some days recently.Uninterrupted sleep, etc, is mostly a luxury I vaguely remember from days gone by.
Given that I am an Honor Thy Mother and Thy Father BAPTIST by culture, even though I am a DARWINIST by intellectual training, I will NOT put him in a nursing home to die of heart break among strangers.
I would as soon as not SPIT on anybody who would do that to their PARENTS.
He will live out his days looking out his picture windows at the orchard and deer and birds, at home, where he is mostly happy.
oldfarmermac,
You always attempt to make the debate about me.
But it’s not about me. It’s about the facts, and the facts speak for themselves.
Only half true. You will only admit facts to the discussion if they make YOUR case.
So the debate will remain half about you, and the audience can decide who has the best mastery of the facts, and is most willing to acknowledge the facts for his position pro and con.
The audience will also decide who is actually making a FACTUAL argument.
I have not denied that renewables are expensive, and that economic transitions are expensive.
You otoh seldom if ever an indisputable fact contrary to your argument, and question the ethics and competence of virtually anybody who questions your ever so righteous pronouncements.
I am not at all PC, and I BELIEVE in being judgemental when judgement is called for.
My judgement is that you display all the proofmarks of a paid mouthpiece. This does not mean I believe you are personally unethical, or dishonest, in the usual sense.
My attorney is a highly ethical man, at the personal level, but he will tell you right quick that when it comes to representing a client, he will say “damned near anything he can get away with”.
That’s his JOB, it’s the way he pays his bills.
I will make sure the debate stays half about you to the best of my ability, because I believe you are a fossil fuel industry mouthpiece, meaning you are willing to say damned near anything you can get away with.
For my part, I am collecting data for a book, and passing the time, and I ENJOY poking sticks at holier than thou, self righteous people who imply every body else is ignorant, naive, or just plain stupid.
I make it a point to acknowledge both sides of arguments. I am for instance a big believer in electrifying personal transportation , but I often mention that I personally drive old conventional clunkers to save money, and that most of the driving public is going to continue driving conventional cars for a rather long time.
You claim or at least strongly imply the choice is between a conventional car, or shoe leather, with maybe a fortunate few being able to get along using mass transit.
My positions are all about acknowledging risks, catastrophes, and possible opportunities to avoid at least the worst of the catastrophes.
Your positions are all about denying any hope of affordable, practical positive solutions.
That makes you an obvious fossil fuel mouthpiece.
Hi Glenn,
Who decides what is valuable, you? When there is a depression and people need to eat, the choice is let people starve or find something “useful” for them to do.
This creates jobs and income and then entrepreneurs are more willing to invest because it creates some “hope”.
Are you arguing that Hoover had it right? Everyone should have just tightened their belts and the economy would have healed itself.
Also note that we can let the free market reign, but then you often have to wait for the long run to arrive before the economy rights itself. When the peak arrives and energy prices spike due to scarcity, we can hope that ingenuity can magically create more oil supply, there are many who believe that this is the case, I am not among them. Either we will have to use less energy ( and I agree that public transportation in urban areas will help) or find substitutes for fossil fuels, it will likely be both.
Spending on wind and solar may seem wasteful, but these industries will not develop adequately if we don’t create some demand through subsidies. The industry does not spring up full blown overnight. Waiting to develop these industries until peak fossil fuels is evident will make a transition exceedingly difficult, if not impossible.
If this is not clear to you, perhaps you believe there will be no peak in fossil fuel output. Is that the case? Explain what you think will occur when peak fossil fuels arrives (let’s assume all subsidies for renewables were eliminated tomorrow to please free market true believers). When do you think we will reach peak output in fossil fuels (if ever)?
Dennis,
So malinvestment in renewable energy can be justified, if we debauch Keynesian economic theory sufficiently?
Keynes must be rolling over in his grave with what is being done in his name.
Here are some more passages from the study in German I cited above, translated to English:
Hi Glenn,
Your premise is not sound. It is a good idea to invest in renewables such as wind and solar.
I noticed you did not answer the question about peak fossil fuels.
Is it your contention that peak fossil fuels will either never occur or will happen so far in the future (say after 2050) so as no investment in renewables is needed? Or is it that subsidies should be reserved for fossil fuels only (and maybe nuclear power as well)?
Dennis Coyne says:
So who is it now deciding what is valuable, you?
Hi Glenn,
Yes, me and others that recognize that energy will be needed when peak fossil fuels arrives.
I will assume because you do not answer the question, that you do not believe there will ever be a peak in fossil fuels. If that position were correct, then subsidizing fossil fuels would be a correct position.
You are wrong to think that renewable energy will not be needed.
I note that you seem to be a little shy about admitting your true position, as then you might be ignored.
This will be my last response to any of your comments.
Dennis Coyne said:
I will assume because you do not answer the question, that you do not believe there will ever be a peak in fossil fuels.
Dennis, since the acolytes of Team Green are fundamentalists at heart, and since fundamentalists generally try to stigmatize their opponents by depiciting them as apostates from the one true way, may I state for the record that I do not deny the existence, or the importance, of peak oil.
The disagreement between us is not about whether peak oil will occur or not.
There exists no doubt, on a finite planet, that peak oil will occur.
Everyone recognizes the existence of certain truths, that is, truths in which the predicate can be derived from an analysis of the subject. Such truths are a priori, because they do not require recourse to experience. The existence of peak oil is such an a priori truth.
The dispute between us is instead over the question: What will life be like in a post peak oil world?
My stance is, as I have stated numerous times on this blog, that when the carbon party is over, the party is over.
There exists no evidence that there can be a green-washed BAU in a post peak oil world. And in fact, there is a growing body of evidence that reveals the very opposite will be the case, that there will be no BAU in a post peak oil world.
Hi Glenn,
First we agree there will be no business as usual. This is also an a priori truth.
The only constant is change, the future is always different than the past, so if you believe that most others believe that there will be no changes in the future, you are mistaken.
So do you agree that fossil fuels will become more expensive when peak fossil fuels arrive? Do you also agree that the costs of wind and solar have been falling dramatically?
If the answer to both questions is yes, then it is pretty obvious that the relative cost of wind and solar will be lower than fossil fuels in the future.
The subsidies for renewables that you consider malinvestment help to drive the cost of wind and solar down as these industries develop.
Without such subsidies we would have an undeveloped wind and solar power industry when the time came that they were needed.
You seem to think the strategy of letting the free market direct this investment is best.
How is that working out in the LTO sector?
The free market is not perfect and neither is bureaucratic control of markets, we need to find a middle ground where investment in alternatives is encouraged or the party will indeed be over.
We can give up and party like its 1999, or we can get to work trying to solve the problems at hand.
°°°°Dennis Coyne says:
So do you agree that fossil fuels will become more expensive when peak fossil fuels arrive?
Yes.
°°°°Dennis Coyne says:
Do you also agree that the costs of wind and solar have been falling dramatically?
No.
This is where your magical thinking comes into play. It’s the same kind of magical thinking the shale guys and the Carbon Utopians use.
The cost of wind turbines, the only technology which comes remotely close to competing with power generated from $10 to $11 per MCF natural gas, are going up, not down.
Dennis,
But the real poison pill for wind and solar is the intermittency problem. There is no viable, scalable solution to the intermittency problem using existing technology (other than maybe in arid regions inside 35 degrees latitude north and south), other than having a parallel back-up fossil fuel or hydro system.
Grids always have some spare capacity beyond average peak load. This safety margin handles unexpected peaks, unplanned outages, and other random fluctuations. How much depends on a grid’s many specific details, but 10 – 20% reserve margins are typical.
For very small wind and solar generation proportions, the ‘normal’ reserve suffices. As the percentage of wind in the generation mix grows, it increasingly does not.
Increasing wind and solar to 10% of pre-existing grid capacity is the easy part. Anything over that and all hell breaks loose. That’s the predicament that Germany, and Texas, find themselves in now. (Germany generates about 13% of its electricity from wind and solar and Texas, on its ERCOT grid, 10.6% in 2014)
UK’s zero wind for three days in December, 2012 during its winter peak load season illustrates the National Grid’s need for wind backup. UK peak load is handled by flexing fossil fuel generation.
Glen says:
Do you also agree that the costs of wind and solar have been falling dramatically?
No.
Ok, that pretty much says it all! At least now I understand where Glen is coming from. Even though the facts absolutely contradict his opinion, he is certainly entitled to it.
Unfortunately it is not possible to have a meaningful discussion with someone who insists that white is actually black!
http://www.bloomberg.com/news/articles/2015-08-31/solar-wind-power-costs-drop-as-fossil-fuels-increase-iea-says
The cost of producing electricity from renewable sources such as solar and wind has dropped significantly over the past five years, narrowing the gap with power generated from fossil fuels and nuclear reactors, according to the International Energy Agency.
“The costs of renewable technologies — in particular solar photovoltaic — have declined significantly over the past five years,” the Paris-based IEA said in a report called Projected Costs of Generating Electricity. “These technologies are no longer cost outliers.”
I guess the IEA must be part of the renewables lobby…
Fred,
It is indeed a true statement that “The cost of producing electricity from…solar…has dropped significantly over the past five years, narrowing the gap with power generated from fossil fuels and nuclear reactors.”
But according to the Union of Concerned Scientists, the gap between power generated from natural gas and solar is still very large.
Why do you believe Germany finally got the message, drastically cutting its subsidies for solar, such that new installations for solar have all but ground to a halt?
That leaves wind.
Fred,
So with the cost of solar placing it completely out of the competition, that leaves wind.
Who do you believe has the sharpest pencil, Warren Buffet, who has invested $15 billion in wind, or the EIA?
The main US federal incentive for wind is the wind Production Tax Credit (PTC), created by the Energy Policy Act of 1992.
The PTC was renewed in December, 2015 and now stands at 2.3₡/kWh for the first ten years of generation.
When the PTC was created in 1992 it was intended to jumpstart the industry, so has expired via sunset provisions several times over the past 23 years. Each time, US wind investment promptly collapsed. Each time, Congress promptly renewed PTC at the same or higher incentive rates. Why?
At Berkshire Hathaway’s (BH) 2014 annual meeting Warren Buffet said:
I will do anything that is basically covered by the law to reduce Berkshire’s tax rate. For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.
Wind, and this is straight from the horse’s mouth, cannot currently compete with electricity generated from natural gas absent government subsidies.
And in addition to the PTC, Buffet also benefits from a smorgasborg of state subsidies for his wind investments.
But that still leaves the intermittency problem. When wind generation on Buffet’s grids grows to the point where it starts giving him headaches flexing fossil fuel generation, do you believe he will continue to invest in it?
Buffet is in it strictly for the money. He’s not out to save the planet, as he demonstrated very clearly last month in Nevada.
Hi Glenn,
Costs have come down since 2011, so look at more recent data for Wind. It is beating natural gas in good locations such as the Great plains (Iowa for example). Last I checked natural gas prices are pretty low in the US and this is unlikely to still be true in 10 years.
For intermittency see
http://www.sciencedirect.com/science/article/pii/S0378775312014759
Abstract
We model many combinations of renewable electricity sources (inland wind, offshore wind, and photovoltaics) with electrochemical storage (batteries and fuel cells), incorporated into a large grid system (72 GW). The purpose is twofold: 1) although a single renewable generator at one site produces intermittent power, we seek combinations of diverse renewables at diverse sites, with storage, that are not intermittent and satisfy need a given fraction of hours. And 2) we seek minimal cost, calculating true cost of electricity without subsidies and with inclusion of external costs. Our model evaluated over 28 billion combinations of renewables and storage, each tested over 35,040 h (four years) of load and weather data. We find that the least cost solutions yield seemingly-excessive generation capacity—at times, almost three times the electricity needed to meet electrical load. This is because diverse renewable generation and the excess capacity together meet electric load with less storage, lowering total system cost. At 2030 technology costs and with excess electricity displacing natural gas, we find that the electric system can be powered 90%–99.9% of hours entirely on renewable electricity, at costs comparable to today’s—but only if we optimize the mix of generation and storage technologies.
Your source is to a large extend nonsense. Electricity is only a small part of the typical energy bill of a German household. Real energy poverty is a result of high heating costs, i.e. not electricity.
Uncriticla Comparison with France are nonsense as the French electricity price is of course subsidized by the French government. Hint: EDF and Avreva are in interesting economic situation.
Or are you happy when the true costs of your energy is disguised?
Ulenspiegel,
You affluent elitists amaze me. You live in your own little bubble world, oblivous to how much of the rest of the world lives.
Obviously, you’ve never had any experience balancing the budget of a working-class household.
I have balanced the budget of a working class household most of my life, and so has most of my family.
The way you get ahead is that you sacrifice in the short term so as to invest in the long term. That is what we have all done, and we are all mostly “middle class” now with some family members earning top one percenter incomes.
We have for instance seldom taken the rent road, other than long enough to get a university degree, etc. Owning is more expensive up front, but generally FAR more economical long term.
I notice you REFUSE to answer Dennis’s question.
Just to make sure anybody paying attention does not forget that fact, I will ask it AGAIN.
Is it your contention that peak fossil fuels will either never occur or will happen so far in the future (say after 2050) so as no investment in renewables is needed? Or is it that subsidies should be reserved for fossil fuels only (and maybe nuclear power as well)?
You haven’t answered it , and I am confident that you will not, except with a politician’s non anwer about some other topic or question.
Dennis,
Who decides what is valuable?
In Germany, when it comes to electricity, it is the state which decides the value.
Back in 2000, when the EEG renewable Feed-in Act first took effect, a kWh of electricity generated by PV was valued at 50₡.
So not only did the German government mandate that the utility companies buy whatever power was offered by the owners of PV systems, but it also required them to pay the 50₡ per kWh price.
At that same time, the full cost of utility companies to generate that same kWh using fossil-nuclear was only 7₡.
So the electric utilities were compelled to pay more than a 700% premium to owners of PV systems over what they could generate the electricity themselves.
Now, 16 years later, that premium has been reduced to only about 220%, the result being that PV installations have all but ground to a halt.
Dennis,
Who decides what is valuable?
In Germany, when it comes to electricity, it is the state which decides what is valuable, and what the value is.
Back in 2000, when the EEG renewable Feed-in Act first took effect, a kWh of electricity generated by PV was valued at 50₡.
So not only did the German government mandate that the utility companies buy whatever power was offered by the owners of PV systems, but it also required them to pay the 50₡ per kWh price.
At that same time, the full cost of utility companies to generate that same kWh using fossil-nuclear was only 7₡.
So the electric utilities were compelled to pay more than a 700% premium to owners of PV systems over what they could generate the electricity themselves.
Dennis,
Who decides what is valuable?
In Germany, when it comes to electricity, it is the state which decides what is valuable, and what the value is.
Back in 2000 a kWh of electricity generated by PV was valued at 50₡.
The German government required the utility companies buy whatever power was offered to them by the owners of PV systems, and required them to pay the 50₡ per kWh price.
At that same time, the full cost of utility companies to generate that same kWh using fossil-nuclear was only 7₡.
Dennis,
Who decides what is valuable?
In Germany, when it comes to electricity, it is the state which decides what is valuable, and what the value is.
Back in 2000, when the EEG renewable Feed-in Act first took effect, a kWh of electricity generated by PV was valued at 50₡.
At that same time, the full cost for utility companies to generate that same kWh using fossil-nuclear was only 7₡.
That’s over a 700% premium the government forced the utilities to pay for PV electricity, over and above what they could generate it themselves.
That premium has now been reduced to about 220%, the result being that new PV installations have all but ground to a halt.
Hi Glenn,
As far as I understand the government of Germany is democratically elected. If the German people think this is a bad idea, they should elect different members to Parliament who will change the laws.
Dennis,
Just give them a little time. The German public is on a learning curve, and they’re getting there.
For instance, the feed-in tariff for newly installed rooftop PV has been reduced from 58₡ in 2004 to 14₡ in 2013, and then to 12₡ in 2015.
Installation of these systems has all but ground to a halt.
Yair . . . .
“the full cost for utility companies to generate that same kWh using fossil-nuclear was only 7₡.”
That’s probably more bullshit . . . . how are the costs calculated to store, transport and reprocess spent fuel and the costs of dismantling the plant and rehabilitating the site when the unit reaches the end of its use full life.
You’re saying those costs are included in the seven cents a unit?
Cheers.
scrub puller,
The 7₡ figure comes from the Fraunhofer-Institut für Solare Energiesysteme ISE chart I posted in my comment above.
http://peakoilbarrel.com/international-rig-counts-2/#comment-555455
Do you believe you have a better source? Then where is it?
You nailed it Dennis. It’s always ‘trimming the fat’ or a good idea to wait when it’s the ‘other guy’ making the sacrifice. Suggest readers watch PBS series “The Dust Bowl”. Sometimes, the right thing to do is help, and subsidize. Roosevelt had it right. Without his actions there would have been even more social upheavel and even revolution as far as I can tell.
I think many are just skipping Glenn’s comments these days.
Paulo,
Yep.
FFS Glenn, answer the actual question Dennis has asked you!
You are more slippery than slime.
Thanks for noticing Dave. Perhaps Glenn should run for political office, he is good at not answering questions, but still says a lot that might sound impressive to the common man.
needs more beating!
Not quite dead yet. 🙂
Dennis,
Oh I think it’s folks like you, ezrydermike, Dave, oldfarmermac, and Paulo who should run for political office.
I can see it now, you guys campaining to double or triple household electricity rates.
I’m sure you can convince folks to be proud that their country is in the forefront of fighting the pending global catastrophe that will result from the overproduction of that nasty, dirty, horrible carbon.
Higher electricity costs is a small price to pay for global adulation, and being mentioned as a shining example of what can be done by keeping one’s eyes focused solely on the glorious future, while ignoring yesterday’s and today’s catastrophes.
And while you’re at it, maybe you can treat your working class to a little bit of this employee compensation action too. I’m sure you, like Richard Nixon, will be able to convince them that it’s what John Maynard Keynes would have wanted:
Dennis asked you some simple questions but you avoided answering them, why?
I will now skip past your posts (and will recommend others do too) as you have shown you are full of hot air and behave like a Koch.
Actually people like Barack Obama have been and ARE running for office in even the somewhat backwards USA, and they are winning, quite often, and they are campaigning on going renewable and getting away from fossil fuels.
And even though I will always be a conservative ( playing by the Humpty Dumpty rules of linguistics and defining the word to suit myself ) I am GLAD environmentalists are making substantial progress politically in most parts of the world. Not ENOUGH progress, but still a substantial amount.
BUT our inestimable GS is as capable of looking the other way as the referee in a tag team pro wrestling match. As a matter of fact, if he were to apply for a pro wrestling referee’s job, his comments here in this blog would be AMPLE evidence he is fully qualified, he would be hired first opening.
OFM,
Folks like myself who are in the upstream oil and gas business actually stand to benefit from the new standards promulgated by the EPA last August.
The principle victim of the EPA ruling is coal (that is if the ruling manages to withstand the numerous court challenges it faces). But even though renewables may stand to benefit from the ruling, it is natural gas, and not renewables, that will pick up most of the slack created by the demise of coal.
Another thing Obama did that helped domestic oil producers was canceling the Keystone pipeline.
These issues are not nearly as black and white as your highly simplistic Manichean construct of the world leads you to believe.
In Germany, to cite another example, coal has done quite well as a result of Energiewende.
The German Energiewende has not resulted in less dependence on the burning of coal to generate electricity and will not do so anytime soon.
“That Man is the product of causes which had no prevision of the end they were achieving; that his origin, his growth, his hopes and fears, his loves and his beliefs, are but the outcome of accidental collocations of atoms; that no fire, no heroism, no intensity of thought and feeling, can preserve an individual life beyond the grave; that all the labours of all the ages, all the devotion, all the inspiration, all the noonday brightness of human genius, are destined to extinction in the vast death of the solar system, and that the whole temple of Man’s achievement must inevitably be buried beneath the debris of a universe in ruins – all these things, if not quite beyond dispute, are yet so nearly certain, that no philosophy which rejects them can hope to stand. Only within the scaffolding of these truths, only on the firm foundation of unyielding despair, can the soul’s habitation henceforth be safely built.”
Bertrand Russell.
In the end does it really matter if civilization collapses today or 5,000 years from now or if the biosphere collapses this century or is boiled to death by an expanding and dying sun a billion years hence? Because eventually every last trace of life and human existence will be snuffed out by the Universe itself. What is the struggle really for? It is all for nought. Nothing will exist, nothing will remain, nothing will be remembered. Just human delusion of self importance, a wishful longing for some meaning in an inherently cold world.
“What is the struggle really for? It is all for nought. Nothing will exist, nothing will remain, nothing will be remembered. Just human delusion of self importance, a wishful longing for some meaning in an inherently cold world.”
Again, well said. We inhabit a small, warm, wet rock orbiting a middle-aged, insignificant star far, far away from the center of the known/unknown universe/multiverse. It is conceivable that we are the only humanoid-like, higher-order lifeforms in the universe, which makes us unique but also highly selectively adapted, and thus highly vulnerable, to the uniqueness of our planet’s atmosphere. Odds are that our existence will last hardly a fraction of a fraction a fraction of the blink of time of the cosmic eyelid.
What is the struggle really for?
We are here, and we are a social species. We should strive to make it as good as we can, for as many as we can, for as long as we can. Isn’t the experience of consciousness reason enough?
And by ‘as many as we can’, I don’t mean just humans.
“For the rest of the earth’s organisms, existence is relatively uncomplicated. Their lives are about three things: survival, reproduction, death—and nothing else. But we know too much to content ourselves with surviving, reproducing, dying—and nothing else. We know we are alive and know we will die. We also know we will suffer during our lives before suffering—slowly or quickly—as we draw near to death. This is the knowledge we “enjoy” as the most intelligent organisms to gush from the womb of nature. And being so, we feel shortchanged if there is nothing else for us than to survive, reproduce, and die. We want there to be more to it than that, or to think there is. This is the tragedy: Consciousness has forced us into the paradoxical position of striving to be unself-conscious of what we are—hunks of spoiling flesh on disintegrating bones.”
― Thomas Ligotti, (The Conspiracy Against the Human Race)
VK,
Nevertheless, how does one square Bertrand Russell’s abysmal pessimism with Richard Norgaard’s cautious optimism in the article you linked in your 01/11/2016 AT 3:13 PM comment above?
http://www.greattransition.org/publication/the-church-of-economism-and-its-discontents
“Achieving a Great Transition” by “projecting hope and working to build a better future,” as Norgaard puts it, is a far distance from “What is the struggle really for? It is all for nought.”
Are those statements not antithetical?
I never thought I would find myself in the Bertrand Russel camp. But now I do, not so much because of the physical realities of our world (which are hardly inconsequential), but because of the political realities. “Sustainability” is a myth which attempts to either abrogate or change human nature, a Promethean undertaking if there ever was one.
The illustration below shows what I believe our current society’s future to be. We’ve fallen into irresolveable squabbling between two camps — the Ayn Rand/Ronald Reagan camp and the opposing camp — as to who the true “freeloaders” are. I don’t see finding a solution to our collective action problem as being very likely.
Evolution “for the Good of the Group”
David Sloan Wilson and Edward O. Wilson
http://www.joelvelasco.net/teaching/167/WILSON%20AND%20WILSON%202008%20gs%20American%20Scientist.pdf
The cautious optimism meme has been around for a a few decades now, it appeals to the notion that we can preserve our middle class lifestyles without having to radically downsize and change in anyway. In the interim period depletion marches on relentlessly and carbon dioxide levels have crossed north of 400ppm.
My own pessimism stems from the fact that the whole human project is all for nought really, it’s just a means to channel our anxieties and delusions of grandeur. Whether civilization collapses now or in the future, whether life has a mass extinction now or in the future, the eventual end is well known – Zero. Nothing. Zilch. Nada. As Ernest Becker put it, “Man is literally split in two: he has an awareness of his own splendid uniqueness in that he sticks out of nature with a towering majesty, and yet he goes back into the ground a few feet in order to blindly and dumbly rot and disappear forever.”
Peggy Lee wrote it all down in a song.
Is that all there is?
Just keep dancing.
Forget about it.
VK said:
Yep.
That abiding faith is the cornerstone of our new secular religion.
Hi Glenn,
The horror writer Thomas Ligotti puts it well below;
“No other life forms know they are alive, and neither do they know they will die. This is our curse alone. Without this hex upon our heads, we would never have withdrawn as far as we have from the natural—so far and for such a time that it is a relief to say what we have been trying with our all not to say: We have long since been denizens of the natural world. Everywhere around us are natural habitats, but within us is the shiver of startling and dreadful things. Simply put: We are not from here. If we vanished tomorrow, no organism on this planet would miss us. Nothing in nature needs us.”
Subconsciously I believe humanity is lashing out at nature, at creation. Because we feel terribly wronged? Wronged by what? Self consciousness of our own mortality. It’s horrifying that nature is so cruel, that she would create such intelligent and complex worm food. That it takes a whole lifetime of investment to develop oneself, only to lose it all in a final instant. That’s why apocalyptic memes are so popular I believe, non-existence never hurt anyone.
VK,
One cannot help but be gobsmacked by the “naive optimism of the moderns,” as Reinhold Niebuhr put it, and the conviction by which they believe, by the sheer force of their intellect and will, they can mold reality so that it conforms to their particular vision of truth and goodness.
This requires waging an endless assault on the very idea of reality.
Some, however, like Bertrand Russell, find the idea of factual reality to be liberating.
Another was James Baldwin. In The Fire Next Time he wrote that “what we think” and “what we do not wish to face,”
Beautiful quote Glenn. And yet what is the correct response to the problem of life?
“No other life forms know they are alive, and neither do they know they will die. This is our curse alone.”
A bit anthropocentric. I’m confident that we are not the only species with mortality awareness.
What does it matter that there is no destination to be found at the end of the journey? What was the point of music before it could be recorded? There is joy in the journey itself.
I don’t fear death, nor do I find it particularly interesting. I miss my loved ones who are dead, but it doesn’t diminish the joy that I, or they, gained from their lives. A lifetime is sufficient.
We must repress our fear of death to be able to function. This repression of reality helps us to function complacently in society but it comes at a heavy price – that of living a lie.
I still fear a painful or violent death, but I’ve no concern about ceasing to exist. Why is it assumed that this means repressed fear or self deception?
We must repress our fear of death to be able to function.
That’s certainly an extremely common form of coping, and it’s a big problem.
My experience, and that of many others, is that repression is a terrible coping strategy, just as it’s a bad coping strategy for many other forms of trauma or stress.
Talking, journaling, meditation, yoga, and many other forms of therapy are far more effective and functional. I urge you to try it, and become less depressed.
Honestly, a lot of people would be a lot less pessimistic if they were less depressed.
Another ‘form of therapy’ is actually attempting to address, change and/or transcend the sources for the depression, like the corrupt status-quo wreck, in ways that are not only truly productive, positive and progressive but also more self-reinforcing, permanent and less token/whitewashed.
Hi Glenn,
If we take the population of the People’s Republic of China out of the equation (their one child policy is unlikely to be replicated elsewhere), about half of the remaining World population in the nations with the lowest total fertility ratio (TFR) has an average TFR of about 1.66, these tend to be the more developed nations with higher real GDP per capita.
A focus on the education of women in less developed nations will lead to a fall in total fertility ratios in the other half of the World. Population is the key and TFR is the key variable affecting population (death rates also have an effect, but many think it is unethical to try to increase the death rate). World TFR decreased from 5 births per woman in 1960-1965 to 2.5 births per woman in 2010-2015, the UN low fertility scenario has World TFR falling to 1.75 by 2050-2055, population peaks in 2049 at 8.34 billion in this low fertility scenario. Population is projected at 8.26 billion in 2040 and TFR is 1.82 in 2035-2040, for those that abhor long term scenarios.
https://www.youtube.com/watch?v=oqeSUAlI5uI
https://www.youtube.com/watch?v=IJbFVJvRqOQ
https://www.youtube.com/watch?v=qzpPy9hJYA8
Thought, i.e., the illusory “self” or “thinker”, cannot perceive of its ending, i.e., the illusory “separate” thinker no longer perceiving itself existing after the demise of the body/brain/mind.
Therefore, thought, i.e., the illusory “self” or “thinker”, must construct and project illusory thoughtforms of “self”, i.e., “life after death”, “reincarnation”, “Paradise”, “Heaven”, “Hell”, etc.
In Zen, there is “no-mind”, i.e., “emptiness”, “no-thingness”, or “The Void”, the “natural state”, all that is empty of all that is not “emptiness”, “no-thingness”, or “The Void”.
All else is illusory and the projection of the human body/brain/mind in “this-or-that”, “I-not-I” conflict with “What Is”, i.e., “Nature” and the “natural state”.
Most of what is “human civilization” is mass-social illusion/delusion and in direct opposition to “Nature” and the “natural state”.
Hi BC,
“Most of what is “human civilization” is mass-social illusion/delusion and in direct opposition to “Nature” and the “natural state”.”
Indeed true. But nature kills what she creates. So isn’t civilization a form of subconscious payback? We seem to be relishing the killing of that which kills us. The earth will consume us, so why not consume it? Isn’t that the general direction we are going towards.
VK, exactly so. It’s perhaps a projection of the mind’s inner conflict or “self”-conflict between the duality of “I” vs. “not-I”, the perpetual process of attempting to become some illusory “thing” in opposition to not becoming its opposite. The “I” that is perceived to be experienced exists in relation to its counterpart.
“I” is “not I” in opposition; one is “believed” to exist because of the other, i.e., good and evil, yin and yang, Heaven and Hell, “Nature” and “humans”, etc.
Humans have evolved to attempt to subdue or control Nature at increasing human scale, but humans are not actually separate from Nature except within the dualistic oppositional state of the human mind. We subdue and consume Nature, which is consuming ourselves at unsustainable scale.
Stepping far enough back, humans will continue to consume Nature and ourselves until the thermodynamic/biophysical limit-bound constraints reduce our numbers and thus our cumulative capacity to consume Nature and ourselves at the current unsustainable scale.
How soon and how much we scale down can be mathematically modeled and estimated, but not with high precision and confidence.
Tomorrow and tomorrow and tomorrow
Creeps in this petty pace from day to day
To the last syllable of recorded time
And all our yesterdays
Have lighted fools the way to dusty death.
Out out brief candle
Life’s but a walking shadow
A poor player that struts and frets his hour upon the stage
And then is heard no more
It is a tale
told by an idiot
Signifying-
NOTHING
W Shakespeare – Macbeth
Yup. Sadly.
Hi Mike,
There are lots of dreary soliloquies such as this in Shakespeare’s tragedies.
My favorite is in Hamlet Act III, Scene 1:
To be, or not to be- that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune
Or to take arms against a sea of troubles,
And by opposing end them. To die- to sleep-
No more; and by a sleep to say we end
The heartache, and the thousand natural shocks
That flesh is heir to. ‘Tis a consummation
Devoutly to be wish’d. To die- to sleep.
To sleep- perchance to dream: ay, there’s the rub!
For in that sleep of death what dreams may come
When we have shuffled off this mortal coil,
Must give us pause. There’s the respect
That makes calamity of so long life.
For who would bear the whips and scorns of time,
Th’ oppressor’s wrong, the proud man’s contumely,
The pangs of despis’d love, the law’s delay,
The insolence of office, and the spurns
That patient merit of th’ unworthy takes,
When he himself might his quietus make
With a bare bodkin? Who would these fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death-
The undiscover’d country, from whose bourn
No traveller returns- puzzles the will,
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all,
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry
And lose the name of action.
Higher oil prices will return, when I do not know.
Hang in there, hopefully summer will bring back $60/b and by Oct maybe $75/b.
“hopefully summer will bring back $60/b and by Oct maybe $75/b.”
summer and October of 2018?
No I am thinking 2016, a price of $30/b will both increase demand and reduce supply, excess inventories will start to decrease which will start a gradual rise in prices perhaps reaching $60/b by July, it will take some time to start the increase in supply in response to higher prices so that we may see $80/b by Oct or Nov 2016. I think in 2018 we will be over $90/b.
I assume this seems too optimistic to you, it will be incorrect if there is another Global financial crisis between now and 2018. Do you expect oil prices to remain below $60/b until June of 2018? Or was that a joke.
With real GDP decelerating to a 4-qtr. average of below 2% and nominal GDP below 3%, at the current oil consumption to final sales/GDP, a doubling of the price of oil by summer would be akin to a tax equivalent to ~1.2% of GDP with the economy already at, or near, stall speed as of late 2015.
IOW, the US economy cannot afford $60 oil today, and perhaps not $40.
Hi BC,
I am looking at the World. Real growth rates are around 2.5% for 2015, perhaps the oil industry will cause another GFC, but I think the odds are very long.
The weapon of the philosopher is his pen, and in the end, the pen, historically speaking, has indeed proven mightier than the sword.
But philosophy is not hard science, never has been, never will be. Hard science informs philosophy, not the other way around.
There is NOTHING outside nature, NOTHING whatsoever. Anybody who can think even a little MUST understand this.
Folks who spend their days in ivory towers, or buried in libraries, generally are worth listening too, but only if taken with a goodly measure of SALT.
I personally rank old Quivershaft as one of the half dozen or so greatest writers of all time, at least among the ones I have read.
BUT….. How many of us have given any serious consideration to the MAN himself?
The academic establishment has insisted for centuries that he was a simple man of the people, uneducated, living among the masses…………. at a time when most people were illiterate, mass media and libraries were essentially non existent, except for libraries possessed by the rare rich man and a few universities, etc.
Yet Shakespeare was supposed to somehow magically in spite of this know all the stuff he would have had to know to write what he did?
Hell, a common man of the time would not even have had the VOCABULARY NEEDED to READ Shakespeare.
The MORAL of this story is DON’T forget to add plenty of salt to your philosophy!
Philosophy has a great deal to do with the overall culture, and truly can be said to have determined the course of culture, historically, to a substantial extent.
While I will agree that all the comments in this thread involving various philosophies are in an of themselves worthy of serious consideration, in actuality ……. they have little bearing on what is going to happen over the next couple of generations of men.
GS says:
“One cannot help but be gobsmacked by the “naive optimism of the moderns,” as Reinhold Niebuhr put it, and the conviction by which they believe, by the sheer force of their intellect and will, they can mold reality so that it conforms to their particular vision of truth and goodness”.
I will have a little bit to say about this after taking care of some chores, in a separate comment, in order to keep this one short.
http://www.brainyquote.com/quotes/authors/r/reinhold_niebuhr.html
This man was a brilliant man, and worthy of respect, and he has mine. But he was a theologian, and theologians are not scientists, in any REAL sense, although the most modern ones are incorporating real science into their work, at least to some extent.
This link to quotes is a great short read, and a great introduction to who Niebuhr really was, and what he really thought- and the key to understanding where he may well be WRONG. It is worth every forum readers five or ten minutes to read it, and hours of thought.
I will be back to comment about “gobsmacked ” Niebuhr.
Niebuhr lived well into the last half of the twentieth century. I have no idea when he made the gobsmacked quote, but it is perfectly obvious he was always talking about the spiritual realm, or else that he was as blind as any of the three blind men examining the elephant.
GS says
“There exists no evidence that there can be a green-washed BAU in a post peak oil world. And in fact, there is a growing body of evidence that reveals the very opposite will be the case, that there will be no BAU in a post peak oil world.”
Now it might be fairly accurate to say that there is no evidence that WE WILL achieve a happy, sustainable, renewably based way of life.
But talking about a greenwashed BAU is more of GS’s usual diversionary bullshit.
continued next.
I have never heard a serious scientist of any sort say that BAU as we know it today can last.
But a new generation BAU can and will be born, out of the chaos, when the current generation passes, and while it may be based on sticks and stones, it may also be based on wind, solar, tidal, geothermal, small scale and safe nuclear, or even fusion power, complimented by recycling virtually everything, and changing the way we live.
To say there is NO EVIDENCE that such a transition to a new generation BAU, greenwashed or otherwise, is more pure and simple diversionary bullshit.
Now let’s take a FAST look at what Niebuhr must have seen with his own two eyes, unless he was physically blind.
The beginning of the end of epidemic contagious diseases.
Computers.
The GRID.
THE PILL.
Nuclear power ( as well as nuclear war)
Organ transplants.
One farmer feeding over fifty other men, so that they can do other things.
The early stages of the recycling industry, which is now out of short pants, when it comes to metals, at least.
We obviously CAN and HAVE bent so called nature to our will, to a substantial extent, and we will continue to do so, even in the face of collapse, and afterward.
I am sitting in a very comfortable armchair, keeping exactly as warm as I want to be having pushed a button making it so months ago, playing with my super crystal ball, communicating with people on the other side of the planet, observing what is happening in real time in thousands of places as I so please. I ate tropical fruit for breakfast, although I have never even BEEN to the true tropics.
If circumstances permit, I will fly about a third of the way around the planet soon to visit an old friend whose internet moniker is known and fondly remembered by all the old TOD hands here.
Philosophers have a way of ignoring the obvious.
SURE we are all dead in the long run, but life is about this generation, and creating the next generation.
Scientists, engineers, and businessmen are going to determine what happens, over the next century or so, for the most part. Theologians and philosophers will be catching up, but they will never be in the lead.
The pill is going to eventually be recognized as the one of the most important “count’em on your fingers” inventions in all of history, right up there with the taming of fire, the creation of writing, or any others.
The population is going to peak, perhaps rather abruptly, due to overshoot if not for social change, and there WILL STILL BE PLENTY of resources in the ground, and in landfills, for the use of the survivors in transitioning to a “new generation” business as usual.
It won’t likely include very many HUMMER’s or F 250 trucks used solely for fetching beer, and most of the larger species will be gone.
There is a REAL possibility this scaled back , low population, low energy world WILL include micro cars driven by renewable electricity, etc.
We need to think in terms of reality, rather than running scared from reality. A collapse is almost for sure built in, but this does not NECESSARILY mean the end of the socalled “good life” for everybody for ever.
“Your Tupperware Lady
Has the freshest ideas
For locking in
Freshness”
Fixed it for you:
… the USSA economy is the largest in the world, it is not actually a transparent market. In the bankers’ single party (with two fake groups of actors playing politicians) USSA, the markets are heavily regulated by the bankers’ government and the manipulation by the Federal Reserve and primary T bond dealer banks (Goldman Sachs and JP Morgan) to suit the interests of the select few oligarch investors is rampant
Yes, Joy, the US has evolved into an imperial, rentier-socialist corporate-state (descriptive, not disparaging), for better or worse . . .
brainpimp, Peak Oil is not a Liberal, Conservative, socialist, communist, or libertarian issue, i.e., thermodynamics is not ideological. If one actually understands Peak Oil and LTG, the current outcome is the anticipated normative case. The energy and all-in costs of energy extraction, population overshoot, and resource depletion will limit growth of oil production per capita and real GDP per capita permanently hereafter, along with US oil production per capita down 45% since 1970, excessive debt to wages and GDP, a record low for labor share, extreme inequality, decelerating productivity, wages, sales, and profits, and looming hard fiscal constraints per capita.
Not understanding Peak Oil is the typical condition for the vast majority of us, and it’s not a happenstance. We’re not supposed to understand Peak Oil or LTG; otherwise, we might be compelled en masse to change our behavior and demand alternatives from business and political leaders, which would challenge BAU and the hierarchical system of income, wealth, and power distribution to the top 0.001-1%.
Rumor Houston office of Dallas Fed met with banks, told them not to force energy bankruptcies; demand asset sales instead
————
Federal intervention?
duh
Asset sales were always available but the sticking point is huge gap between “ask” and “bid” price like in very rare sale case of Canadian Oil Sands/Suncor deal.
I think that’s behind what Watcher’s been suggesting on here for quite some time.
Don’t think you guys are aware Peak Oil is substantially a conservative concept, not liberal.
Drill (or die) is the only thing that can delay the Peak.
PO isn’t a conservative concept.
“Drill or die” is an oil industry concept. In other words, it only applies to the oil industry. Sadly, the conservative movement is dominated by oil interests like the Koch’s, which has made it a conservative concept.
“Don’t think you guys are aware Peak Oil is substantially a conservative concept, not liberal. ”
Damn Watcher, I wouldn’t trust you to babysit a hibernating groundhog.
This is about as absurd a comment as you could ever make. The establishment ” conservative” camp absolutely does not believe in peak oil, except in the abstract as something that might come to pass at least a couple of generations down the road.
Now if you mean conservative in the sense that an engineer uses the word, I agree and apologize.
Can anyone refute this post by someone over at Investor Village:
In response to a post by Coolreit
Re: All US shale oil production is defunct at more than twice today’s oil price: 5 million b/d of US oil will disappear
(All US shale oil production is defunct at more than twice today’s oil price: )
Reply:
Hum, many of the shale produces will make in the 30% IRRs at $50, which is less than twice today’s price, lower costs from faster drilling and higher WERs with newer frac techniques.
(5 million b/d of US oil will disappear at today’s oil price, 2.5 million b/d will disappear after but 1 year (5 million b/d *72% first year decline rate*70% rig rate reduction ~ 2.5 million b/d).)
Much of today’s shale production is not at first year decline rates, or even second year decline rates. Out of the 5 million barrels a day coming from the shale perhaps only 1.5 million a day is less than two years old. The other 3.5 million a day may have a decline rate less than 10% a year.
Ron, much depends on how long prices here, or lower, last.
The posted price for ND sweet on the Flint Hill Reaources bulletin is $20.25. I’d say the big boys are probably getting $23-25. Knock 10% off for severance and extraction taxes so lets say the crude run check pays $22. Subtract LOE of $8 and G & A of $2. So net of $12 per barrel before interest. Whiting is at about $5 per barrel interest, so now we are at $7 after interest.
After deduction for royalty, in years 1-5, a good well will have 200,000 of net oil sold.
So if we have the oil price constant above, and are able to keep LOE at $8 (which might be very tough in years 4-5), there would be net, post interest of $1.4 million on a well costing over $7 million. So I am doubtful re the IRR, unless other shale basins are markedly better AND cheaper, which I doubt. IRR is not useful to me, it is utilized to make things look better than they are. To me, if the well cannot payout in five years, it is a failure. My example pays back 20% in five years. I didn’t factor in gas, it probably adds $400-500K at current prices. Again, my example well is in at least the top 35%, maybe higher
I don’t think US production falls 5 million bopd, but with no new wells it falls hard. I think Rune and Enno have more than adequately demonstrated this for Bakken. Isn’t far less than half of current production from 2013 and earlier vintage?
In our area, preparations are being made for a massive production shut down. It is like a gnat on an elephant in the grand scheme of things, but onshore US conventional is likely about all underwater now on an operating basis. Persistent $20s or lower in the field is a catastrophe. Rockies are almost all teens.
As I stated earlier, invest in cement companies, and say goodby to 1 million plus barrels per day of US stable, low decline oil production, absent a quick reversal.
I have anticipated for a while now that an eventual decline of 3Mbd or more for US production is not inconceivable, along with a 2Mbd decline in consumption in the next 2-3 years.
This would occur coincident with another global deflationary recession, albeit larger and more persistent than in 2008-10, another debt crisis, and US, EZ, and Japan’s post-2007 nominal GDP per capita, large-cap firms’ top line revenues, and bank lending and money supply (ex banks’ cash assets/reserves) decelerating below 2% and real GDP per capita at 0% or negative.
The foregoing would be consistent with the implied conditions of the Schumpeterian depression and debt-deflationary regime of the Long Wave Trough.
I am thinking that the wells have to cover capex for shale at close to the first year to survive. Waiting years to recoup capex means overall borrowing. Ain’t going to happen much in today’s economy. That can be done at $30 in limited areas. Which, of course , limits production. Only the companies with the best leases are surviving now. Need to get around 250,000 barrels, overall, the first year to survive.
Hmm! Total completed oil wells in Texas for both 2014 and 15 was 23,521 in 14, and 14,292 for 2015. That equals 37,813. Wells that are producing more than 100 barrels a day are 8042. Less than 100 barrels and greater than 10 is 45,303. Total of these two is 53,345, which is not that far off from 37,813. Some of the ones over two years ago are still producing more than 10 barrels a day. Wells producing less than 10 barrels total 131,484. I don’t have the same mathematical acumen as EIA or other experts, as I am only a CPA. I might buy that 1.5 of the 5 million total is older than 2 years, but not 3.5 of the 5 million. I am tending towards thinking the majority of those 8042 wells are in the first year, and make the bulk of the total.
Considering Texas production is around 100 million barrels a month. However, I think production is not that high, anymore.
Hi Ron,
For the Bakken in Oct 2015 about 79% of C+C produced is from wells that are 2 years old or less. If no new wells are completed (an unlikely scenario) after Oct 2015, the decline will look like the chart below. Note that no wells are added until Jan 2017 and then the new wells completed increase by 5 wells each month until reaching 140 new wells per month in 2019 and remain at that level until 2030.
The chart says this model is based on Rune Likvern’s work, but there are some differences, I also use data provided by Enno Peters to develop the well profiles. I assume new well EUR starts to decrease in June 2017 and the rate of decrease gradually increases to a maximum rate of 2% per year 12 months later, this is speculation on my part and is not included in Rune Likvern’s Red Queen model.
Eventually the sweet spots will get fully drilled and new well EUR will dcrease, but clearly we do not know in advance when this will start or how quickly the EUR will decrease. The numbers I have chosen are consistent with profitable wells (under the oil price scenario I have created) after Jan 2017 and a USGS estimate for TRR of the Bakken Three Forks of about 10 Gb. Cumulative output is about 9 Gb through 2040.
For the Eagle Ford we have the following, where I assume wells completed falls to 75 new wells per month for most of 2016 with a gradual rise starting in 2017, new wells per month on right axis.
An interesting fact is that the RRC reports 10,140 oil wells on schedule in the Eagle Ford on Jan 1, 2016. On Nov 1, 2015 there were 9655 oil wells on schedule in the Eagle Ford according to the RRC. I missed the report for Dec 1, 2015, but we have an increase of 485 oil wells on schedule over a two month period. If we assume an equal number were added each month we might have 242 oil wells completed in November and 243 oil wells completed in December 2015.
I don’t have output data for the Eagle Ford after Sept 2015, but the scenario for the Eagle Ford presented above may be too conservative based on this data.
An alternative North Dakota Bakken/Three Forks scenario where new wells completed falls to 50 new wells per month in 2017 (instead of to zero in previous scenario), I believe this is somewhat more realistic. Chart below.
I don’t have a model for the Permian basin, but output had been increasing there through September, for the Eagle Ford and Bakken output falls a combined 800 kb/d from Oct 2016 to Jan 2017, so a total US fall in C+C output of 1 Mb/d may be realistic. Note however that average output for US C+C will likely be about 9.4 Mb/d in 2015. Average output for the Bakken and Eagle Ford falls about 600 kb/d from 2015 average levels in these scenarios, so the 1000 kb/d US C+C output decline guess assumes net declines from the rest of the US (besides Eagle Ford and ND Bakken/Three Forks) are about 400 kb/d.
Thanks Ron for the great charts, especially the Brent WTI spread.
One question (for everyone). Does rig count even matter when supply was at an all time high in Q3? (IEA: Q4 numbers out on the 19th).
This leads to a second question. Do IEA supply numbers include product going into storage? They have a ‘balance definitions’ page and a glossary page but neither define supply and demand.
I think rig count always matters.
Question 2. Yes, the IEA as well as the EIA production numbers are just that, production numbers. It does not matter where it goes, if it is oil produced then it is counted as oil produced.
Which means the producer had orders for it to fill.
As we and others shut in our production, our crude purchaser is becoming concerned about not having enough oil to buy.
I have never heard of anytime in our area when we couldn’t get oil hauled because there were no buyers. I have asked old timers who go back to the 1960s, they say never happened.
At this rate Canada could be at zero rigs come the melt season of March/April/May. However I saw somewhere last week that the ice roads hadn’t formed properly in some places because it had been too warm, so maybe the weather is having an effect already.
Art Berman:
Big Drop In Rig Count Points To Capitulation By U.S. Shale Drillers
I am not convinced. we shall see soon if the support at $29 holds or not.
I understand what you are saying Javier, but I would not call $29 a barrel much support. Even if that holds, or it goes a little higher from here. Today’s prices are devastating to drillers everywhere.
Right, Ron. As I earlier posted, WTI $22-$25 (give or take) is (1) a technical projection and (2) the CPI- and US$-adjusted price basis the 1960s-70, which the commodity/Juglar/Kuznets/Long Wave cycles imply is conceivable, if not likely.
Note also that commercials/producers/hedgers are fully hedged even at WTI $31 in anticipation of the potential for lower prices as Iran brings new supply to market as soon as this month AND slowing global growth implies no sign yet of imminent global supply-demand balance.
Today’s prices are devastating to drillers
This is why I think prices will go up from here rather than down. How can you have everybody who’s drilling a marginal barrel going broke, an yet keep production high enough to keep prices low.
In the U.S. companies can and certainly do go broke and then continue business without so much as a hiccup. Investors in common stock are wiped out, secured bond holders are the new owners, management typically stays in place, and business goes on pretty much as usual.
The smart money remains overwhelmingly short the oil stocks and with good reason.
But why would anybody invest in a company with no assets that will continuously lose money unless prices go up?
Yes, lots of the shale assets will have to be abandoned – but you can be sure the vulture investors have their sights on anything that might make money. Many are looking for asset sales a pennies on the dollar as well. I believe Devon sold some property to BP recently, so the bottom is likely in for the good assets. The short-term bottom anyway.
Hi Javier,
My reading of Berman’s article is not that he expects further oil price decline, but that the current level of prices will finally slow down the level of LTO output, his guess is maybe the first half of 2016 (maybe March or April) for the low prices to bite hard and start to reduce US LTO output significantly.
He says:
My guess is that we will continue to see a see-saw of indicators including rig count in the near-term but the trend is clearly down. Perhaps the big drop in U.S. tight oil production will finally materialize in the first half of 2016.
Short Term Prediction
There will be a upward price spike in crude Wednesday 1/13/16 @ 10:30 eastern time when the EIA releases the “Weekly Petroleum Status Report”. There is a good chance the low price of the year will be in before the release. Last weeks report was short of information because it’s report ended on Friday, 1/1/16. The errors in last weeks report misguided the market.
You heard it here first
Interesting. But you left us hanging. What will be the reason for the sudden spike upward, a big drop in inventory numbers or a big drop in production numbers?
Ziggy returned to stardust. 🙂
RIP Ziggy. 🙂
Perhaps. What you likely left out is that before the “spike” of say a modest 10% or so, those stocks may likely drop 20%.
Rig count is one thing – whats about the really expensive deep sea drilling and other big projects? Or cash strapped countries overpumping and damaging their fields to scrap out as much dollars as possible.
This all smells like a big rebound in prices in my opinion. We have 1.2 – 2 million barrel / day overcapacity at the moment – if many projects will be cancled that would come online the next years, and are needed to replace the decline of old filds, prices can be up very fast the next years – and start the next cycle.
Someone wake me up when you guys figure out this has nothing to do with supply and demand. The deep capture and collusion now so pervasive in markets is sickening. And yes the EIA is right in the middle of it. My guess is that this was planned to fleece the sheep and Saudi is protected by derivatives. America has lost her rule of law so God help us. Same crap as in 2008.
Well said.
The takedown was well-planned though – have to give them that.
There is information from iraqi oil ministry: Iraq is ready to cut production by 200 kb/d to stabilise oil market
Here we go Sarko. Capitulation.
ND sour posted price $1.50. About to go negative?
Iraq Warns of New Drop in Oil Prices Without Agreement to Cut Production
11.01.2016
http://sputniknews.com/business/20160111/1032954003/iraq-oil-prices.html
Assem Jihad, a spokesman for the Iraqi Oil Ministry, said that Iraq was planning to cut oil production from 3.8 million barrels per day to 3.6 million in an attempt to prevent further price downfall as the country’s oil revenues have diminished by 70 percent from $8 billion monthly to less than $3 billion due to the continuing global price drop.
BAGHDAD (Sputnik) — Iraq is expecting further reduction in global oil prices that will harm all oil producers if a general agreement to cut production is not reached soon, Assem Jihad, a spokesman for the Iraqi Oil Ministry, told Sputnik on Monday.
“Stubborn efforts by some countries to keep oil production at high levels are harming all oil producers. It is necessary to reach an agreement between countries-producers, withing the OPEC and other players outside the organization,” Jihad said.
Note: According to OPEC monthly report (direct communication, i.e. official data), Iraq produced 3.75mb/d in November. However “secondary sources” table from the same report shows Iraqi production at 4.3 mb/d. The IEA also shows that Iraq was producing at record level of 4.3mb/d in November.
From the same article:
“The Department of Energy said Friday it’s considering buying 5 million barrels of oil for the Strategic Petroleum Reserve (SPR) in a move that could signal a government plan to bolster an industry suffering from collapsing prices.”
Last week there was a similar signal from Iran:
Iran may moderate oil output to avoid further price slide
NEW DELHI | By Nidhi Verma
Tue Jan 5, 2016
http://www.reuters.com/article/us-iran-oil-idUSKBN0UJ1NM20160105
Iran could moderate oil output and exports once Western sanctions are lifted to avoid putting prices under further pressure, a senior Iranian oil official said on Tuesday.
Iranian officials have repeatedly called on OPEC to make room for a supply jump from the Islamic Republic while pledging to ramp up exports as soon as sanctions on its oil industry are lifted in the next few months under a nuclear deal with world powers.
A pledge to moderate exports would be a major shift in Iran’s policies in an environment when most OPEC and non-OPEC producers are fighting for market share despite a growing global oil glut.
“We don’t want to start a sort of a price war,” Mohsen Qamsari, director general for international affairs of the National Iranian Oil Company (NIOC), told Reuters in a telephone interview.
“We will be more subtle in our approach and may gradually increase output,” Qamsari said. “I have to say that there is no room to push prices down any further, given the level where they are”.
He did not give detail or the scale of how much Iran would be prepared to moderate its shipments.
Iran has repeatedly said it plans to raise oil output by 500,000 barrels per day post-sanctions, and another 500,000 bpd shortly after that, to reclaim its position as the Organization of the Petroleum Exporting Countries’ second-largest producer.
Iran’s most senior oil official, oil minister Bijan Zanganeh, said over the weekend Iran would not seek to distort the markets but will make sure it regains its market share.
I actually think that Iran is not able to increase production by 1 mb/d this year.
According to the IEA, the country’s oil production capacity is 3.6 mb/d (in line with output before the latest round of sanctions in 2012).
Production in November amounted to 2.87 mb/d, so spare capacity is 0.73 mb/d.
The IEA expects “that Iranian oil fields are capable of returning to that higher level within six months of sanctions being eased.
Before it ramps up output, Iran is expected to start to release substantial volumes of oil stored at sea. At the end of November, roughly 36 mb of oil, of which 67% was condensates, was floating in 18 tankers. ” [IEA OMR Dec 2015]
Potential output increase beyond 500-600 kb/d is dependent on new projects, which are unlikely to start in the short term.
AlexS, the available evidence supports your inference.
You Infer, he Implied.
$31.41
A bit of an avalanche of unfamiliar names presuming Ron’s traffic can move markets?
http://www.chinaknowledge.com/Newswires/NewsDetail.aspx?Cat=INV
http://finance.yahoo.com/news/caixin-china-manufacturing-pmi-deteriorated-152929776.html
http://www.cnbc.com/2015/12/07/chinas-november-yuan-denominated-exports-down-37-on-year.html
At least 55% of China’s GDP is in contraction, implying that the economy growing NO FASTER THAN 3.5-4%, and 40% of net growth is attributable to unsustainable state-directed lending and spending for Potemkin Village-like gross overcapacity without western-like depreciation and accounting for inventory builds in the non-gov’t sector.
Adjust for depreciation and inventories, and there has been no profit in China’s non-gov’t sector since 2009-10; therefore, there is no justification for further growth of non-gov’t investment and production at wages growing 10% and consumer spending of 35% of GDP.
This implies that productivity is contracting along with China’s labor force contracting for three years running, which by definition means that China’s potential real GDP per capita is 0% or perhaps slightly negative.
This explains the collapse in commodity prices, world trade decelerating to 0%, and world real GDP per capita decelerating to stall speed or an historically recessionary rate as of mid- to late 2014 to date.
China’s reported real GDP growth has contributed to 40-55% of world real GDP per capita since 2008-09, but China’s growth rate has been overstated, i.e., a CCP fiction.
That is, the world entered another deflationary recession in late 2014 to early 2015.
Hi BC, global credit growth has turned negative according to RBS. First time since the credit crunch. So boom she goes.
http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html
Yes. In fact, the acceleration of the velocity of so-called Austrian Total Money Supply (TMS) returned to a recession-like deep contraction in Q1 2015, which historically presaged an equity bear market and recession.
This is supported by real growth of US demand and time deposits turning negative YoY late last fall and the real Baa-1o-year yield spread widening coincident with the tightening of liquidity. In fact, the real spread is as wide as in 2008 before the GFC began in earnest and at a similar spread during the 1930s.
All the signs implying another global deflationary recession and equity bear market have been there for anyone who chose to examine them.
According to the Seeking Alpha website, Warren Buffet’s investing heavily in Phillips 66 stock as of the last few days. Phillips 66 is mostly or entirely in conventional oil so far as I know, but I might be wrong on that point.
Buffet is known as a value investor, and this indicates his management team thinks oil companies are at or near the bottom right now, and that oil will go up soon.
Meantime ( same source ) rail traffic is down sharply mostly due to the collapse of shipment of oil by rail, but nevertheless there has also been a significant drop in intermodal traffic involving consumer goods, which is considered to be a good indication that the economy is going downhill.
OFM. Phillips 66 is a refiner, spun off from COP because, at the time, downstream was holding upstream back in the way of share prices.
Marathon Oil and Hess also both spun off downstream. In hindsight, a tremendous mistake.
Refiners should do well with low oil prices. They made a lot of $$ in 2015.
By the way, the upstream segment, being COP, has been divesting assets overseas and off shore in order to focus on NA shale and tar sands. They announced they are ceasing new deep water projects by 2017.
shallow sand,
I don’t understand COP’s thinking. Do you? They’re concentrating on what are generally thought to be the efforts with the poorest expectations, as I understand it.
They’re thinking very long indeed or they know something no one else does or they figure the Rapture is near.
Syn Fernando’s response to OFM is pretty much in line with my view.
Deep water is costly plus fear of another Horizon.
They are getting burned badly owning an interest in Libya.
Shale and tar sands are in stable countries, home or close to home. I know a COP engineer who was lead out of his office in Venezuela at gunpoint, had 12 hours to pack one bag and flee Libya and hunkered down during riots in Indonesia.
Shale and tar sands are about all that’s left in large scale with low political risk. We can debate low environmental risk.
Marathon Oil is in a similar, yet weaker situation. Same with Hess.
Shallow Sand,
Yeh, stability and relatively low risk are key, I guess. I was overlooking those because that’s the way I think and I don’t expect agreement, as a rule.
Thanks.
Mac, here is what Buffett’s Berkshire faces for the cycle:
https://app.box.com/s/tjhpz4wangfyjeqs4qmjwayytf9sdeua
Buffett’s Berkshire is among the best proxies for the hyper-financialized US economy and mega-cap equity market. The implication is for a 60% decline peak to trough for the cycle, including the S&P 500 and Wilshire 5000, similar to the bear markets in 2000-03 and 2007-09.
https://app.box.com/s/2ro37wgw55iipnhheetpw1scmz8zjhix
Buffett will get to prove his value-investor bona fides in the months ahead when PSX falls to the mid-$50s. Should it break that level on a monthly close, the next technical support/stop is in the $20s-$30s.
Place your bets as to whether Buffett goes begging to Uncle Sam for another bailout as he got for insurers and banks during the previous crash.
Buffett personifies the exemplary model of the rentier-socialist corporate-statist.
Everyone is capitalist on the way up, socialist on the way down.
Brilliant. May I quote you on that, Arceus? 😀
Sure, but not mine. Read it or heard it somewhere (not sure where).
Yes, perennial. Thanks.
Oh snap
LOL
Thanks guys,
I am not into the stock market personally, and don’t pay it much attention. I won’t be surprised if the economy goes down hill the next few years.
COP getting out of deepwater and moving into shale and tar sands indicates to me that the management believes deep water is going to be too expensive to produce, and that the best bets remaining are shale and tar sands.
I don’t pretend to know how long it will take, but unless everything I read here and elsewhere about the cost of PRODUCING oil is wrong, the price is going to go up again, and go up rather sharply.
We hear a lot of bullshit about supply and demand and cost and prices being irrelevant , and it is true that power politics and defacto economic warfare can trump the old profit and loss consideration FOR A WHILE.
But if the last ten or fifteen million barrels of oil coming to market costs around X dollars per barrel to produce , then the price WILL go back to that level, or higher, once the folks deliberately running at a loss run out of money.
As Margaret Thatcher famously said, the problem with socialism is that you eventually run out of other people’s money. When you sell at a loss, or at breakeven prices, you eventually run out of your OWN money.
The Saudis and a few other producers are super rich, and may be able to sell for thirty bucks or so for a long time, but it seems pretty obvious that most producers have costs well above that level, and will eventually bleed out.
Mac, the problem with USA deep water is the lack of quality finds at reasonable costs. The oil is there, the water depth can be handled, but the rocks are lower quality. The overseas prospects are a hodge podge, but the better prospects are in areas with high taxes and low security. Many years ago, around 1990, I saw the way this would evolve and suggested the better option was to secure molecules, worry later about the technology. But I didn’t see the way the cost structure would skyrocket. So now I’m wondering where a sound oil company can position itself to survive 20-30 years.
Real monthly-average oil prices in today’s dollars
Hi AlexS,
I doubt we will see oil prices stay at these levels for 16 years like they did from 1986 to 2002.
I never get oil prices right, so maybe oil prices stay at $30/b (2015$) until 2031, seems unlikely to me.
Dennis,
I totally agree with you for several reasons:
1) Unlike the 1980s-1990s, OPEC spare capacity currently stands at low levels:
3.2mb/d, or 2.3mb/d ex. Iran, Iraq, Libya and Nigeria, according to the IEA, and 2mb/d, according to the EIA. This equals to only 2.5-3.5% of global demand.
Meanwhile, in 1985, OPEC spare capacity amounted to 11-12mb/d, or ~20% of global demand. This excess capacity has been gradually declining until late 1990s, but still remained at elevated levels for most of this period.
2) Both operating and capital costs per barrel were much lower in late 1980-s and 1990-s than today. Therefore, low oil prices still covered full-cycle costs. Now large part of future projects and some of the current production is uneconomic at $30-35.
3) The average field decline rates are currently much higher than 25-30 years ago, when production was dominated by giant fields with long output plateau.
Now large part of global output comes from old fields with declining production, relatively small new onshore conventional fields (with higher decline rates), deepwater fields (with even higher decline rates of up to 15% p.a.), and LTO (with very high decline rates). That means that increasing share of current output should be replaced with new (generally, higher cost) production.
AlexS Our 2014 OPEX was right at 4 times our 1998 OPEX on a per barrel basis.
I would note the same was true for ExxonMobil.
We have been able to knock this down some in 2015, and hope to again in 2016, but we are near the cost reduction limit.
I would also note Continental Resources’ horizontal wells in North Dakota and Montana cost around $1.5 million each to drill and complete in the early 2000s. Did not have the big completion costs back then.
SS,
I apologize for an insensitive question and you can simply ignore it if you wish so: but why are you still producing? Isn’t your breakeven much higher than what you’re currently able to fetch for produced oil? If you are producing with a view that oil prices will be higher in the future, wouldn’t all your competitors be it conventional or LTO have the same view and produce until everyone is bankrupt?
We just shut in 14 more leases. That is in addition to five previous. The remainder are difficult to shut in water floods or have extremely low costs.
The other reason is we have extremely good, loyal employees with plenty of experience. We dont want to lay them off.
We have no debt, had plenty of cash as of 6/2014, took almost zero money out of the company since and built up even more cash once we saw the price was really heading down.
Yet we are now in a pickle, despite the above preparations.
90+ percent of the industry is being kept alive by borrowing money (debt).
I have been thinking that if the credit markets lock up like 2008, the result could freeze up the North American industry.
See my note below about the 12%/year rate of increase in long term debt for 134 publicly held oil companies in the US and Canada.
I suspect that more and more oil & gas companies will be looking at salary cuts. Would you rather take a 10% to 20% salary cut, or have a 10% to 20% chance of being laid off? I suspect that most employees would choose door #1 in the current environment.
In regard to Alex’s chart above showing oil prices in current dollars, note that the low point on the chart was 1999, when the Economist Magazine published their $5 Oil cover story, where they asserted, because of improved technology, that we were looking at an extended period with oil prices in the $5 to $10 range:
At the time of the story, annual Brent crude oil prices were then in the early stages of three approximate price doublings (nominal dollars):
From $13 in 1998 to $25 in 2002;
From $25 in 2002 to $55 in 2005;
From $55 in 2005 to $110 range for 2011 to 2013 inclusive (about $99 for 2014).
Hi Shallow Sand,
I assume at $30/b in 1998 you were making money, what was your breakeven price in 1998 when OPEX was lower? It seems with costs 4 times lower in 1998 you would have been better off then (with oil prices at about $30/b) than in 2013 (with oil prices around $100/b). A simpleton like me would think you would need $120/b in 2013 to be in as good shape as in 1998 (with oil price at $30/b and costs 4 times lower).
Anyway, here’s to $120/b oil in the near future (maybe 2017).
Dennis, the problem was in 1998 we were getting $8-13 per barrel for oil, depending on the month. But total expenses were around $10 also, so not much in the way of losses.
As the price went up, expenses went up. Now the price is down over 2/3, but not expenses. Down maybe 10-15% overall, electricity has not dropped as it is not industry based, but a regulated monopoly. However, deregulation of that industry has maybe kept down rate increases?
Also, part of the decrease is not service providers lowering costs, but foregoing work overs, etc, which is really CAPEX.
But we tend to focus on what is going out and coming in, regardless of category.
Hi Shallow sand,
Interesting. So if OPEX was $40/b and royalties and taxes were 30%, when oil was $80 at the wellhead, you had a net of about $16/b, not sure what your capex was, but if we assume the wells had been paid off, you would be in good shape. When WTI averaged $98/b for the year in 2013, were you getting around $70/b after royalties and taxes, then with OPEX of around $40/b your net (not sure if I am using this term correctly) was about $30/b on average that year? You may also pay a transport fee so your price at the wellhead may be about $10/b less than WTI.
I don’t need to know if I have the exact dollars correct, but it would be helpful if you fill in what I am missing conceptually (though if it requires a book, you can say no, totally wrong or nothing at all.) 🙂
Dennis. OPEX is based on net oil sold, at least the way I calculate it.
So if we sell 100 barrels from a tank, and assume for this example the royalty is 20%, 80 barrels are the operators. If OPEX is $40 per barrel on the oil produced in that tank, it was $3,200.00, 80 x $40.
In May, 2014, we sell the tank for $100 per barrel, we net $8,000 – $3,200 = $4,800, not including severance taxes.
Today we sell the tank for $25 per barrel, we lose $2,000 – $3,200 = -$1,200, not including severance.
I must admit I am adding OPEX, G & A and all taxes, except income, when I make the statement that costs of $10 per barrel in 1999 were $40 in 2014.
Also, keep in mind, leases in all areas are not uniform concerning costs, and therefore cost increases were not uniform either.
I assume OPEX/LOE per BOE is reported on company BOE, net of royalties.
Thanks Shallow sand for the education.
I always do the OPEX on all oil produced so for your example above at OPEX of $10/b (or $800 for 80 barrels), I would have calculated OPEX of $8/b (because you actually produced 100 barrels). I thought the royalties were paid in cash, so I figure this as 20% of revenue at the wellhead so if you sell your barrels at $25/b and there are 100 barrels in the tank, you pay 20% of $2500 or $500 to the lessor. It amounts to the same thing, but the OPEX is different the way I think of these things (20% less than the correct way of doing it.)
This may explain why my OPEX numbers may always look low to you (probably 20% too low).
Hi Shallow sands,
I was thinking about your OPEX increasing by a factor of 4 since 1998. My guess is that you are thinking in terms of nominal dollars. In 2015$, $10/b OPEX in 1998 would be $14.50/b in today’s dollars (adjusted for inflation), so in real dollars your OPEX has increased by a factor of 2.75 rather than a factor of 4, if today’s OPEX is $40/b. If the oil price rises to $43/b on average for 2016, you will be in about the same shape as you were in 1998 (financially).
Hopefully it will be more like $50/b. Remember that the EIA short term forecasts move with the futures markets which can turn on a dime.
Dennis. You are correct. No adjustment made by me for inflation.
Thanks AlexS,
Nice summary. I think we will need at least $80/b by mid 2017 unless GFC 2 that many here predict occurs in the interim, anything is possible, but I think a severe recession (like 2009 or worse) is not that likely, less than a 33% chance in my view over the next 3 years.
Dennis,
Folks like Gail Tverberg and Art Berman have predicted that world oil demand would crater. They were doing this some time ago, at least a year ago.
Thus far, this hasn’t happened.
https://www.iea.org/oilmarketreport/omrpublic/
Here’s to hoping that you continue to be right, and they continue to be wrong!
I do not relish the thought of GFC 2.
Hi Glenn,
When we look at oil demand on a yearly basis (there is a seasonal cycle) it correlates quite well with real GDP. No main stream institutions tend to forecast a recession (as BC has pointed out) there are pundits who forecast 5 out of every 2 recessions. There will be a recession in the future, my guess is 2030 to 2035 for the next big one, as the World struggles to deal with peak fossil fuels and the high energy prices that will accompany that peak.
Note that my guesses about the future are just like all the rest, they are very likely to be incorrect.
No, really!?
(Clutches head/hair with both hands; face full of confusion, disappointment and bewilderment, eyes dart aimlessly around the room…)
Say it isn’t so!
Hi Caelan,
Just pointing out to everyone the obvious, no scenario of the future is likely to be correct.
I hope you are not crushed 🙂
Just a playful jab, Dennis. ‘u’
Chart of World C+C output vs Real GDP
There is no denying a correlation. The question is whether or not we can reduce the slope. I think the answer to that question is yes.
Hi SW,
I agree the slope may be reduced, but we will need higher oil prices to accomplish that. It will not be easy to do, but peak oil will force things to change, we will probably see slower growth as the economy attempts to adjust to higher oil prices (above $100/b long term).
I would like to officially go on record as one who believes that all Global Warming discussion be banned from peakoilbarrel. The denial has just gotten to be too much. I seriously enjoy and require the FF situation information that goes on here but I can’t stomach all the lies, misdirection, and propaganda wrt climate change. The burden to dig up factual responses to the denial crap is overbearing. I pledge to never bring it up here. Obviously if there is a high profile, mainstream, global event or development that is undeniable it should be widely disseminated but that is all.
Just a thought.
Hi Jef,
If nobody posts about it, then nobody talks about it.
Ron has no problem with CC posts. Just ignore stuff you do not like.
So if someone makes an inaccurate comment about FFs you just ignore it?
Jef, for once I agree with you.
It takes me a lot of effort to dig up factual scientific information to dispell the myths and unjustified alarmism that some people post on climate change. It is difficult when I see so many inaccurate comments being posted, and I would very much like to see those comments out of at least the posts that are about oil.
I have nothing against discussions about climate change taking place on open threads and climate change posts, as I understand people want to discuss these issues and they are very relevant to the continuation of the exploitation of fossil fuels.
Hi Jef,
There are many comments I try to ignore. If you would like to comment on anything feel free to do so.
The comments you do not like are usually in response to climate change comments that are posted by others.
Sensible suggestion, Jef, thank you. And I do agree that we need to stop the global warming talk, as global warming or its cousin climate change are just too divisive of topics to be discussed among friends. Not to mention that I’m a native Floridian who’s had to deal every summer with what we locals like to refer to as “global warming” – well, it hasn’t killed us yet. 😉
WSJ: Oil Plunge Sparks Bankruptcy Concerns
Crude’s plunge to near $30 a barrel fans worries that it could sink a third of U.S. oil producers
(Do Google search for access to article)
The WSJ article has a chart showing the total long term debt for 134 publicly held oil companies in the US and Canada, as of late 2015: $353 billion, up from about $190 billion in 2010 (a 12%/year rate of increase).
This “long read” piece at Wired offers a lot of insight into the birth of the mass marketed Chevy Volt and now the Bolt which is expected to be in production soon.
It is well worth the time to read it.
http://www.wired.com/2016/01/gm-electric-car-chevy-bolt-mary-barra/
Just read it it. Thanks Mac. Recommended. Maybe Detroit can beat Silicon Valley?
I suppose engineering talent is for sale just like professional athletes are for sale, and once a LEVIATHAN of any sort,a nation or a giant corporation, is finally awakened from a long slumber, it can react furiously to a new threat or challenge.
GM,FORD, NISSAN etc already have dealerships in just about every town with more than two traffic lights. Being a year or two behind in marketing is not going to kill them when it comes to electric vehicles.
Almost everybody I know who CAN buy a new vehicle is VERY likely to buy it from a company they know and trust, or at least from a company they know a lot about, from talking to other owners of that make.
This situation is not going to change overnight.
Hi Old Farmer Mac,
It is encouraging that Chevy is coming out with the Bolt so soon. Unfortunately my wife’s first car was a Chevy Chevette that was so bad she refuses to consider another GM car ever. So I will have to wait a few years for the Tesla Model 3, maybe the news on the Bolt will speed up the development process at Tesla.
Sadly, there are a lot of people who will never again buy a Chevy, or almost any domestic US brand.
For them, an equivalent Tesla (or Nissan, VW, Toyota, etc) would be their only choice.
Hi Nick,
Yes it is too bad. My guess is there are a lot of previous Chevette owners who never bought another GM car. My first Japanese car was a 1980 Toyota Tercel (roughly the Toyota competitor for entry level buyers), got it used with 68k and drove it to 250k, a clutch and a timing belt were the only major repairs that I remember. I have mostly bought Toyotas (and one Honda) ever since. One used Corolla was a bit of a problem, but nothing like the Chevette. Oh well.
I had one Honda Accord that ran very well for 20 years until a tree fell on it (really!). My first new car was an 85 Corolla. It ran beautifully and cheaply for 22 years, when the bottom rusted out. I like Toyota/Honda in general, though I’m frustrated with their avoidance of EVs.
I’d have a hard time buying most US domestic cars, but there are exceptions, like the Volt and Bolt.
Many Chevy Volt sales were “conquest sales”, purchased by people who had never owned, or said they would never own again, a GM product. Those people are now some of the Volt’s – and GM’s – biggest fans.
Hi Dennis,
Yeah, Chevettes and Vegas were about the most troublesome cars ever sold in my working lifetime in the USA. A car has to be BAD to make a Yugo look ok. Vegas were that bad, a lot of them had rust problems even before leaving the new car lot.
You reinforce my point. People spending money for new cars are going to spend it on a brand name they know. Fortunately for GM, just about everybody has forgotten Chevettes and Vegas .
Personally I would not buy a car made in China until I had seen them on the road for ten years. GM is fixing to bet the excellent rep of the Buick on a Chinese car.
One of my neighbors just bought a brand new Hyundai after holding off on that make for ten years to see how they hold up.
OTOH ……….A good friend who runs a garage and used car biz is utterly convinced that the biggest bargains on the road, in terms of dollars and cents, taken all around, are older full size GM cars such as the Chevy Impala. These cars run ” forever”, as long as any Toyota, but sell for a third as much, same mileage and condition, when they get some age on them.You can buy one for a couple of thousand bucks with two hundred thousand miles on it and VERY likely drive it four or five years without a major repair and sell it for a thousand. They get thirty mpg plus on the road, comfortable, more than fast enough, plenty of room for an American family of fatso’s AND their luggage, all the major improvements such as antilock brakes, dual airbags, etc, parts and fully trained mechanics in any small town.
Every company makes stinkers.GM makes some winners. MY old Chevy four by four is still chugging faithfully along while Toyota and Nissan pickups of the same vintage are mostly all rusted in HALF , even though old Chevy trucks are legendary for rusting out compared to Fords.
The old Oldsmobile diesels were so bad I can’t ever remember seeing one that was actually roadworthy.
I believe the Volt is going to be a BIG winner for Chevy and GM the next time oil prices spike.Virtually all the current owners of Volts are very happy campers, and the word is gradually getting around, like it got around about the Toyota Prius.
How the oil collapse stole Russia’s Christmas
Many Russians will return from the holidays only too aware that life is about to get harder. Civil servants’ salaries will be frozen for the third year, pensions are to rise less than inflation; foreign goods and vacations will become even more expensive.
Oil price plunge hits Calgary companies; 7 Generations cuts capital plan by $200M
Pat Carlson, Seven Generations’ chief executive, said commodity prices have fallen to “unsustainable levels.”
“We are financing part of our development with debt and when the prices go down, the cash flow goes down and when cash flow goes down, to do the same program, we have to borrow more money,” he said in an interview.
“This chart shows it a bit better. The price of WTI dropped below $80 a barrel in October of 2008 and broke “$80 on the upside in October 2009. (Actually 1 year and 11 days later.) WTI broke $80 on the downside again on the 3 day of November 2014 and here 14 months later it shows no signs of broaching that number any time in the near future.
The point I am trying to make is this time it is different. After 4 years of very high oil prices it is quite possible, even likely, that we will have low oil prices lasting that long as well. That is because something other than the oil supply is in play here. Of course the oil supply is a very important part of it but demand just may be falling due to the state of the world economy. I think China is the wild card”
wow!!! Congratulations.
Rystad Energy recently released estimates for the total, all-in production cost for one barrel of oil across major oil-producing countries.
According to Rystad, “this chart was compiled using data from more than 15,000 oil fields across 20 nations. The production costs were calculated by including a mix of capital expenditures and operational expenditures. Capital expenditures included the costs involved with building oil facilities, pipelines and new wells. Operational expenditures included the costs of lifting oil out of the ground, paying employee salaries and general administrative duties.”
Note that these numbers apparently do not include interest payments and taxes.
Furthermore, these are full-cycle costs rather than breakeven price, as Internal rate of return (IRR) is not included.
Also note that these are median costs, which does not represent the whole picture, as there are significant differences in production costs within each country.
In any case, the chart shows that at today’s price of $31/barrel (Brent and WTI), most of oil from the already producing fields can still be extracted profitably. There are, however, notable exceptions, including U.S. stripper wells, several deepwater projects (incl. Brazil), some fields in the North Sea, etc.
As regards new projects, they are already unprofitable in a number of countries, including the U.S., Canada, U.K., Norway, Brazil, and West Africa.
Median Total Cost of Oil Production per Barrel
Source: Rystad Energy
[ http://money.cnn.com/interactive/economy/the-cost-to-produce-a-barrel-of-oil/index.html?iid=EL ]
Alex,
I was wondering about these low full cycle costs in the Middle East & Russia.
During several years of high oil prices, why weren’t more high-cost projects started in these area’s, like what happened in the US & Canada? If the costs are really as low as indicated in your above chart, couldn’t they have earned much more by starting slightly higher cost projects? Is it that except these low-cost fields, there are not that many, even higher-cost, projects available? Or is there less of a capitalistic spirit/access to financial markets?
To me it would make sense if everywhere around the world costs have increased to a much higher level, given several years of high oil prices, reflecting the incentives to try to bring us much oil to the market as long as costs are (significantly) lower than the price.
Effective oil price for Russian oil companies was always the same, around $30 per barrel. Everything above was taxed. Some fields, especially in Eastern Siberia, were exempted from the tax, but there aren’t that many of them.
Enno: ” reflecting the incentives to try to bring us much oil to the market as long as costs are (significantly) lower than the price.”
There are no incentives to bring as much oil to the market in the environment of high prices, same as there are no incentives to bring less oil to the market in the low price environment like today.
Hi Enno,
Not sure about Russia, but the Middle East knows if they go all out and produce as much as they can they will just drive the oil price lower and reduce their profits.
Lately OPEC seems to have forgotten this, but they must have other motives besides profits. If they were concerned about profits they would cut production as they have almost always done in the past (except when Saudi Arabia decides to punish other OPEC members (or the Soviet Union) by flooding the market and driving down the oil price.
If the Saudi aim was to drive the high cost producers out of business, I think it has taken longer than they expected, now that they have chosen this road they may stubbornly stick to it until high cost producers go belly up and supply from non-OPEC decreases to the point that oil prices rise.
This will be a valuable lesson to the rest of the World, that always assumed they could produce as much as they wanted and OPEC would cut back to keep oil prices high.
In the future non-OPEC producers will not be so sure that this is the case and may be a little more careful about expanding output too quickly.
On re-reading you comment above, I think I see better what you are asking.
The chart AlexS posted is a snapshot of current costs, it could be that these costs have increased as expensive projects have been started, but the chart is median cost rather than marginal cost. There may be some expensive fields in Russia and several OPEC countries that have come on line recently, but there are also older less expensive fields producing which brings the median cost lower for many countries.
Enno,
I guess average unit costs in the Middle East have risen at least twice over the past 10-15 years, reflecting input cost inflation in the global oil industry. But costs are still very low as:
1) Most of the capex is in brownfields (infill drilling, water floods, etc.)
2) Most of the fields that start production now were actually discovered several decades ago, so exploration costs are close to zero. These fields are located onshore and a few of them in shallow waters. Geology is generally favorable. There is no ice, no winter cold, and high temperatures are not a problem. The necessary infrastructure is already in place. The fields are huge, with very high production per well and low decline rates. Therefore, average development costs are also very low.
As regards Russia, most of the current upstream capex is also in lower-cost brownfield developments in Western Siberia and Volga-Urals regions. This includes infill drilling, development of satellite fields, previously undeveloped zones or deeper horizons of the old producing fields (such as Samotlor). There are also a number of new fields in these old regions. They are much smaller, but unit costs are not too high, as the necessary infrastructure, including roads and pipeline, is already in place.
Costs in newly developed regions, such as Eastern Siberia, Timan Pechora, far north of Western Siberia (Yamal peninsula), Northern Caspian (shallow water fields), Far East (Sakhalin), are higher, sometimes much higher. But not prohibitively high even at current prices, as the key infrastructure, such as large pipelines (Eastern Siberia–Pacific Ocean oil pipeline), terminals ( Varandey on the Barents Sea), roads, etc. was already built during the years of high oil prices. There are a number of new projects at later stages of development, which will not be postponed or delayed and are scheduled to begin production in 2016-18.
Important to note that average unit costs in Russia were much lower than global average even before 2014, but they have significantly declined in dollar terms due to the depreciation of the ruble (see the chart below). The tax component of the costs was also significantly lowered thanks to the Russia oil tax system.
Low oil prices have however significantly delayed high cost offshore Arctic and tight oil projects. There is a significant dollar-denominated component in capex (imported equipment, services and technologies), which is exacerbated by the effect of the sanctions. The only producing offshore Arctic project is Prirazlomnoye oil field on the Pechora Sea shelf (developed by Gazpromneft). Rosneft has postponed further drilling in the Kara Sea and is now only exploring new blocks using 2D seismic. Gazpromneft, Lukoil and others are still working on pilot projects in the Bazhenov shale, but commercial development will not start before next decade.
Comparative lifting costs: Russian oils vs. global majors
Thanks for all the excellent info Alex.
2) Most of the fields that start production now were actually discovered several decades ago, so exploration costs are close to zero.
Well that was true a few years ago, especially for Saudi Arabia. But I just don’t believe that is the case anymore. Perhaps there are some very small fields that didn’t seem worth developing back then. But I don’t think there are any large, long ago discovered fields, that are still undeveloped.
Ron,
most oil projects in Iraq are for expansion or development of fields discovered several decades ago
Key oil projects in Iraq
I am sure that is true Alex. And most of these fields have been producing for many years. Decades in most cases. They were all producing in 2014. What we are talking about here is infill drilling projects. That is the story with almost every major oil producing nation in the world.
Infill drilling, sucking the oil out of those old oil fields a lot faster.
You will not get any argument from me on that front.
I was under the impression that you were talking about fields that had never produced before, not old brownfields that had been producing for years. Sorry I misunderstood.
These charts are too coarse grained. Many of you are familiar with a particular area, and you know there’s a wide spread even within a basin (for example the Permian or the USA Gulf of Mexico). In Venezuela’s case the range is huge.
I’m also not sure how useful it is to mix opex and un discounted CAPEX. For example, if Venezuela were to change government, move to an Angola style Production sharing contract system, the majority of new developments require $80 plus per barrel.
That’s exactly what I have said in my post.
Rystad’s median costs do not reflect wide range of costs not only within countries, but also within basins and even fields.
“That’s exactly what I have said in my post.”
Yes you did and very clearly too. Excellent post: thanks.
BC Govt officially pulled support for an expanded Kinder Morgan pipeline from Alberta to BC. This would have doubled dilbit volume and trippled tanker traffic through Burrard Inlet and Georgia/Juan De Fuca Straits.
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/british-columbia-to-oppose-kinder-morgans-pipeline-expansion-report/article28106524/
Hey, we don’t allow silly sports bullshit on this blog. If your team won some kind of championship, tough shit, take it somewhere else.
However… Roll tide!, we won. We are the national champions. WE WON! ALABAMA!
Hey, this is my fucking blog and I will celebrate our win if I fucking want to…. Okay?
Ron 😉
If they tied then how come they won?
Hi Fernando,
I think a typo and a lack of familiarity with American college sports tripped you up.
The team is the” Crimson Tide”,
and supporters cheer the team on by saying “Roll Tide Roll ” and “Roll On” and so forth.
So “Tied” should have been spelled “TIDE”. The Tide is Ron’s “home town” college team.
Ron, how can you be a doomer when your team is Alabama? LOL!
Hey Ron,
Congrats, I went to bed after the first half. You definitely have the most dominant college football program in the US, 10 national championships, Wow!
Thanks Dennis, it’s really 16 but six are in dispute. They date from a time when the National Championship was awarded before the bowl games. The reasoning was that so many universities, in those days, refused to participate in bowl games because it took so much time away from their studies.
Yeah, in those dark days when some “academic” universities professed that their heavily-recruited, grade-and-SAT-score-exempt football players were actually there to study and earn a degree, not a professional sports contract and $ multi-millions for the university. Now they know better.
Hi Ron,
Well in Alabama, I am certain it is 16, but elsewhere (where there may be more objective observers) it is 12 not 10 as I said originally.
Anyway congratulations on this years championship which is not in dispute.
Alabama football history goes way back. One Alabama halfback became a movie star. https://en.wikipedia.org/wiki/Johnny_Mack_Brown
One question for the experts here
What is the average cost of producing a barrel of oil in today’s dollars. For the world ? For US ? For Middle East ? For Russia ?
Can I get that data somewhere ?
Yes you can. Depending on how much detail you want a semi reliable data base costs about $10 million. I used to consult for an outfit that owned a huge data base like that. We used it to give advice to customers on how their costs compared to their peers’.
AlexS has an excellent post on this above.
For those of us that don’t have 10 million to spend on a reliable database AlexS posted this chart upthread.
http://peakoilbarrel.com/international-rig-counts-2/#comment-555186
Here’s a link to a similar chart:
http://knoema.com/rqaebad/cost-of-producing-a-barrel-of-crude-oil-by-country
Nice documentary on a Canadian island’s fracking dilemma:
https://www.youtube.com/watch?v=wlbhx3WNXmQ&index=25&list=PLDbSvEZka6GHk_nwovY6rmXawLc0ta_AD
It’s a bullshit video. Propaganda.
Just curious, what exactly about that video is propaganda? BTW that is a gorgeous island… too bad some people think it needs to be exploited for what probably amounts to a very short term and imaginary gain. If it were up to me, the one thing I would do is work on drastically reducing the deer population because sooner or later it will crash anyway. Perhaps they should introduce wolves…
Extracting every last drop of fossil fuels to try and maintain our unsustainable lifestyles is no more useful or productive than trying to sustain that same lifestyle or a facsimile of it with alternative energy. Ultimately neither method will work. What needs to happen is that we need to change our lifestyles and expectations of what a good, happy and healthy life style should be. What we are doing now just isn’t working!
Hi Fred,
I agree. Hopefully higher energy prices and a reduction in Total Fertility Ratios (TFR) for the world as more women become more highly educated will result in a change in the social structure as well as a change in human priorities, education in ecology will also help (maybe ecology should be a required science course before high school graduation).
(maybe ecology should be a required science course before high school graduation).
It was part of my high school biology course way back when.
But it should at the very least be part of the basic curriculum for getting any university degree. Especially, MBAs, economists, and any and all engineers! And no one should be allowed to hold any political office if they cannot demonstrate they have taken and passed such a course.
Fred, 2009 had a winter that killed off about 90 percent of the deer in my neck of the woods. Numbers were 30 to 35 deer in my farmyard , they are now two or three. It has me worried. Coyotes are shot. Anytime of year, no license needed. The numbers of wily coyotes are high. Yes, they do get shot.
Since 2009, I have seen one deer herd of about 20.
Dead deer everywhere out there are the words that were spoken.
It is not good.
R Walter,
Recent events, such as the die off you describe, shape our perception of the world, and the mythologies by which we conduct our lives.
We are very fortunate to have won the billion dollar Powerball in the historical lottery, and to have lived in the place and time we did. Not everyone has been so fortunate. Fortuna definitely smiled on us.
In the 14th century, nominalism tore the rationalistic veil off the face off of the scholastic enterprise, revealing a capricious, fearsome, unknowable, and unpredictable world, unconstrained by reason, and indifferent to good and evil.
But, as Michael Allen Gillespie explains:
Chronic wasting disease is making its way toward my neck of the woods, and might wipe out most of the local white tails.
We most definitely have a problem, since the countryside is now so full of houses and subdivisions, and small farm fields kept open but no longer actually cultivated, that the local country side is basically like a never ending banquet for the deer. They come and go into and out of pastures as they please, and eat with the cows. They live in tool sheds, and unused barns, when the weather is rough. And they have babies, because that is what they do, when there is plenty to eat.
Unless somebody develops a reliable deer contraceptive, this is not going to end well. There is not much hope of a reestablished wolf or mountain lion population in this part of the country, and coyotes are just a little to free with livestock and pets for farmers and country folk to tolerate them being numerous enough to control the deer population.
So for now it boils down to hunting- and every year we have more new arrivals scared silly every time they see somebody with a gun, and posting all the property they control not only no hunting, but generally no trespassing at all.
One of my cousins has erected a six foot high fence around his new cherry orchard which seems to be about the minimum that will keep the deer out. Such fences are extremely expensive, in relation to the value of farm crops, and can only be justified to when enclosing substantial acreage.
I would like to put in an acre or so of cherries and nectarines, just to pass the time and keep my hand in, but this will mean spending a ton of extra money.
Actually R Walter, it is not as bad as you think. This type of things have been going on forever and natural populations, unless overhunted by humans when they are low, naturally recover from this overshoots. For the survivors it as feast when good conditions return, and they reproduce a lot better. As they are a small fraction of the original population, their genetic frequencies are usually different, so the new population has evolved, and perhaps is a little more resistant to those bitterly cold conditions.
If the deer population is 10 to 1 before die-off, the coyote population is going to be too great afterwards. It will be a deer population at one versus many, not 10 versus the natural balance. Too many coyotes preying on too few deer, not enough viddles for the coyotes to eat. Cattle begin to look mighty tasty to a hungry coyote. Not good for the deer, pray for them.
One pack of wolves in Yellowstone tolerated coyotes, let them have the scraps. Didn’t bother each other.
A more wild wolfpack drove out the existing pack, terrorized the first pack, an attack, won the battle, and, after a coyote tried to have some of the scraps, ruthlessly killed the filthy coyote.
We don’t need no stinking coyotes said the big, bad wolves.
It’s a dog eat dog world.
Too many coyotes preying on too few deer and vulnerable cattle herds are an ecological threat to the stability of the ecosystem, including the presence of humans engaged in agriculture.
Coyotes will bear the brunt of the consequences. They become a white listed species to the locale, an ecosystem in turmoil can be a negative feedback. There they were, gone.
Believe me, they’re an incredible animal and have spotted one in the farmyard hunting for squirrels and maybe feral cats. When there are too many of them, the calves in the spring will need some careful attention. The coyotes will be a wolf at your door. Man enters the picture and hunts down and kills coyotes. It isn’t fair, but that is a part of life, how it is out west of the Pecos. One shout after they’re spotted and they’re on the run. Will never run broadside, they’re a sitting duck. FYI, I have never killed one, although, I have had only one chance, it was slim to none. Never got a shot off. They’re sly dogs, those coyotes.
When you trap, you can use a dead cat for bait. Ring the dead cat with traps and you might get lucky.
Knock a hole through the top of a muskrat hut and place a spring trap at the entry point, bingo, one muskrat’s hide to tan. har
If you want a healthy deer population, coyotes will pay the price.
The moose population is on the rise however. One tough critter. Bullwinkle would be proud!
The new drilling productivity report is out:
https://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf
Does anybody here have an estimate of the percentage of world oil production that is currently underwater in terms of day to day operating costs?
And of the percentage that is underwater in terms of total production costs?
OFM,
An interesting question. I suspect at least 10% or 10Mb/d fits this criteria.
Probably most of Canadian sands as this is a pretty expensive process of conversion of tar sand, natural gas and junk bonds into oil. The estimate for Feb 2015 was that the production cost for synthetic crude from the major open pit mine projects was $31 to $39 a barrel (conversion rate changed, so now it might be cheaper). That’s around 4.8 Mb/d that fits this criteria (http://www.nytimes.com/2015/02/03/business/energy-environment/lower-oil-prices-strike-at-heart-of-oil-sands-production.html)
Add to this some deep sea (especially Arctic) and tight oil and you probably can reach 10 Mb/d.
But this is a Catch 22 situation. With high debt load for many oil producing companies and nations, the dynamics no longer is determined by how many of them are underwater in terms of day to day operating costs.
You need to pay interest on your loans and the only way you can do it is to continue production no matter what (for non-US players a large part of maintenance costs is in local currencies) unless you are a cartel that can act together as one player. But OPEC was effectively dissolved by Saudis and each player in on his own now.
So the natural course is to run off the cliff with cheerful help from the Wall Street.
The system is destabilized by positive feedback loop consisting of “naked” futures (when you can sell future contract but has no oil to sell), options, derivatives, HFT trading, various mechanism of hedging, you name it. In a way oil now is “virtual currency” and all tricks of currency traders are applicable to it, but there is no central bank to counteract attacks on such a currency.
That was already discussed before: http://peakoilbarrel.com/opec-2015-world-oil-outlook/comment-page-1/#comment-552688
Lessor of oil, here, and I am quite happy to have the idiots keep promoting $20 to $10 oil as what the cost should be. Trade it low, and keep going. We only have a couple of wells producing, and 50 or more to go. The only cure for low oil prices is low oil prices. I know 10% of the worlds production is now in unconventional oil, such as horizontal shale and tar sands, and reports are that it is closer to 30% when you add in deep water and other international efforts that are far more expensive than shale. Production doesn’t turn on a dime, and the ultimate price is yet to be determined. I disagree with Citicorp, WTI should be at $10, not $20.
If we want to see global growth, which is the only way we know to get money in peoples hands so they can live, then I agree with you 100%.
I just hope the waste stream doesn’t show up anymore.
If we want to see global growth, which is the only way we know to get money in peoples hands so they can live, then I agree with you 100%.
The Federal Reserve created $4.1 Trillion dollars via Quantitative Ease since 2009. That is about 20% of US GDP. Back in the old days money was created by central banks to support growth already in place, providing enough currency for economic activity.
Now, money is created to in some fashion generate economic activity. This is not the procedure followed for 80 years or so. This is a new invention born of desperation. That money didn’t go in people’s hands. It went into bank excess reserve deposits at the Fed, but it was intended to go into people’s hands.
Watcher – I understand and I believe that the same results will happen with TPTB printing oil, iow putting a gun to the heads of producers to make them produce.
There is nothing anyone can do to force the economy to grow at this point and China proves it.
Yup.
Simply that.
Yup.
$30.30 WTI and going….
$30.10 current intra-day min…..forget it ..I am done updating.. 😀
http://www.bbc.com/news/world-latin-america-35287291
The Maduro regime stacked and packed the country’s court system, and now wants to play by their own rigged game rules.
Fernando seems to be the only person in this forum who has any personal connections with people on the scene.
How about it,Fernando?
MEXICO OIL PRICE DROPS BELOW PRODUCTION COST
“Pemex is losing 93 cents for each barrel sold, as it costs $23 to produce, the Financiero news portal said Monday. In December, Mexican authorities announced that Mexico oil revenues decreased by 38% in the last 10 months compared to the same period in 2014. The decline in the country’s state revenue is due primarily to a drop in international oil prices, an 8% decrease in oil production, and a 34% drop in gas prices.”
http://sputniknews.com/latam/20160112/1032979153/mexico-oil-price-drops.html
So economics may not matter.
Imagine that.
Not hard to imagine that. All one need do is make nationalization more common.
29.93 intraday low for the day….the barrier has been broken
Per Flint Hills Resources bulletin:
ND light sweet $19.25 per barrel.
ND sour 50 cents.
I guess we have to wait tomorrow to see if ND sour just drops to $0 or actually goes negative.
The further the price drops, the more contrived things look to me.
We now have Ecuador selling oil in the low 20s that costs them in the high 30s to produced.
Per Doug’s post, Mexican production is operating at a loss.
I am sure that 10 million bopd plus is underwater world wide.
Just few days ago I wondered about oil going negative and actually oil producers paying consumers to consume their product 🙂
Frighting situation – for the jobs and anyone that gets the importance of the Master Resource.
http://www.zerohedge.com/news/2016-01-12/after-noble-here-are-next-18-us-energy-companies-be-junked
“Oil and Gas Rust – an evil worse than Depletion” The Late Matt Simmons – Who would have guessed Fin- REDOX? Financial oxidation and reduction.
A company on the list that makes me take notice is Marathon Oil.
Marathon Oil traces its history back to 1887. It’s stock price has been dropping, falling below $9 at one point today.
dropped almost another dollar..$30.72
piece over at TomDispatch from Michael Klare. He leaves out a the turmoil in the US LTO industry.
He doesn’t think demand growth is going to push up oil pricing anytime soon.
http://www.tomdispatch.com/post/176089/tomgram%3A_michael_klare%2C_the_look_of_a_badly_oiled_planet/
North America Energy Producers Facing Layoffs, Capital Spending Cuts
13.01.2016
http://sputniknews.com/us/20160113/1033025863/north-america-energy-layoffs-spending-cuts.html
According to a report by the British consulting firm AlixPartners, North American Oil and Gas producers face a cash-flow deficit of $100 billion in 2016, with layoffs and deep cuts in capital spending needed for many of the continent’s exploration and production companies to survive.
WASHINGTON (SPUTNIK) — North American Oil and Gas producers face a cash-flow deficit of $100 billion in 2016, with layoffs and deep cuts in capital spending needed for many of the continent’s exploration and production companies to survive, according to a report by the British consulting firm AlixPartners released on Tuesday.
“Largely because of the success of unconventional drilling in North America and the economic slowdown in China, this downturn could be one of the most severe and prolonged ever,” AlixPartners Managing Director Dennis Cassiday said in a press release accompanying the report.
The major challenge will be to generate cash, said the seven-page report, which covers 130 publicly traded exploration and production companies operating in North America.
“While companies can go a long time without profits, they can survive only a short time without cash, the lifeblood needed by any type of company to pay its bills,” the report noted.
Moreover, the report recommends multiple survival strategies focused on cash generation, including reductions in capital spending of up 50 percent, and aggressive efforts to further reduce labour costs, including layoffs.
The report predicts an increase in global oil and gas demand of just 1 percent to 1.5 percent for the year, with oil prices in the $45 to $65 range over the next several years.
Layoffs and human tragedies connected with unemployment are the worst part of this story.
BP to cut 4,000 jobs in 2016 amid oil rout http://fuelfix.com/blog/2016/01/12/bp-to-cut-4000-jobs-in-2016-amid-oil-rout/#32133101=0
As for EIA forecast, while it is based on futures and as such is meaningless (futures are gambling, aren’t they?), it essentially means $51-54 dollar per barrel at the end of the year. You need to add around $6 each quarter to get this average ( $30+24)
Nate Hagen‘s doing a talk tonight at the University of Hawaii. Depending on the time zone there, it may have already happened. In any event, there may be, or have been, a recording of the talk. Nate, if you’re reading this, can we locate a recording please? Thanks.
Also, Arthur Berman did a podcast apparently for Chris’ Peak Prosperity, entitled, Why The Price Of Oil Must Rise.
I am curious about the two talks (and found them) in part because of my interest in thermodynamics (i.e., exergy, emergy, entropy) as it relates to oil, oil price, and the economy.
Incidentally– and initially, courtesy of our very own robert wilson (who ostensibly prefers lower-case [but maybe not my italics])– International Society for the Advancement of Emergy Research (ISAER) is supposed to be ‘stepping out’ onto the world stage this year. So let’s give them a warm welcome, shall we?
So, my fellow ‘chimps’, let’s give it up for Nate too.
Banana
Memo to Shallow Sand –
Maybe you and I and Jeffrey Brown [maybe Ron,] are the only one’s out here on a limb –
1. Go see the movie the Big Short. [The people who were right had to suffer huge losses for the first year.]
2. If real the price of oil should be $20 a barrel, because the greedy oil companies have been ripping us off for years [equal to a quart of bottled water at 12 cents/quart], stop reading.
3. If you believe that the Mideast, the world’s source of 33% of all of the world’s oil wants to move back into the desert and return to living in tents [from the most lavish living in the entire world], stop reading.
Otherwise, great opportunity.
My bet is that the laws of physics will prevail. Virtually no increase in global crude oil production* since 2005 + Catastrophic decline in global upstream capex is supposed to = Perpetually low oil prices?
*45 API and lower crude oil
Hi Jeffrey Brown,
Often we do not agree (such as whether we can estimate the amount of World crude produced with API less than 45 accurately), but I agree that oil prices (WTI) less than $40/b for more than another 6 to 9 months seems unlikely, but I am going to refrain from trying to call any price bottoms this year.
Clueless, I agree with you, but the issue, as always, is the timing.
My suggestion for a buyer would be to wait until asset prices have collapsed to the point where they can be almost paid for by use of put options on crude oil (or gas). To me, that is the sign of a long term bottom. This was the situation 1999-2004.
Could you expand on that?
Watch the commercials/producers/hedgers and their hedging activity in the futures market. They will give the big tell when they perceive that the global supply-demand balance has returned. So far, they remained hedged for lower prices (or at least no sustained increase for H1 to summer 2016).
But things do change . . . and sometimes quickly . . . 🙂
Here is a great article on what Shallow Sands has been hammering on about for ages.
The story is starting to get out at last!
http://oilpro.com/post/21427/solving-2016-dilemma-part-two-cascade-effect-here
A coupleof points of interest.
SEC averaged prices- SEC Regulation SX defines parameters to be used by public reporting energy companies in quantifying, pricing and valuing oil and gas reserves. Originally, the price the company was receiving at December 31 of the reporting year was held flat. The SEC subsequently amended its pricing policies to a basis of an average of the prior four quarters oil prices. The concept was to give a more realistic look at prices for a volatile commodity by averaging prices for the year. For yearend 2015, the average benchmark price for WTI will be $49, adjusted for quality and basis differentials. This compares with yearend prices of $93 in 2014 and $98 in 2013. The current market is a $33 WTI price
Finally, as lower prices will render a large number of wells uneconomic, plugging liabilities for those wells becomes an important hidden liability. While those obligations may be phased in over time, the liability remains and can readily breach senior debt covenants resulting in additional hard defaults. Qualified audit opinions on Going Concern, might well follow, and those are also generally considered a hard default.
It appears the Shale companies have another close escape, as they can value their oil in ground at $49 in the annual reports, instead of $30, But even at $49 a lot of cracks must still appear in their armour, and start to raise a many questions from Wall St and the bankers on the shale players real financial position.
Great post, great link…. super great link. Thanks Toolpush.
Ron,
You may recognize a certain “Mike” in the comments section!
Toolpush.
This is likely the best article on the financial aspects of the shale debacle that I have read, and I have read many.
I encourage all here to read not only the article, but the comments, many of which the author responds to.
Our Commander in Chief made a quip tonight about how wonderful sub $2 gasoline is. He and his cabinet have no clue what is coming, absent OPEC saving our bacon. After our Iran deal, don’t expect the House of Saud to come to our rescue.
$265 trillion of derivatives. Good Lord!!!!!!
I might expound on an important point.
OPEX per BOE on shale is very low in Y1, increases exponentially. As less wells are put online, look for OPEX per BOE to increase.
I bet at $19.25 posted a very large percentage of 2013 and earlier vintage Bakken wells are negative on an operating basis, and thus have negative NPV.
Also, finally an author, besides Mike, who addresses P & A. That liability for 20,000′ horizontals is huge, definitely more than salvage in this environment. The SEC reports handling of P & A will be interesting. I can’t believe they can get away with the short shrift they’ve given it in prior years.
Shallow,
Not sure if I am correct or not, but it appears to me they can hide behind the $49 /b number. I would say it would be only wells that can’t cover OPEX at $49, will need to be covered under the P&A provision, even though they are only getting around the $20 mark.
I would like to hear second opinions on this from accountants.
Toolpush. I admit I’m not sure what the rules are. However, I always see the statement that, “plugging and abandonment costs are assumed to equal salvage”.
My comment is in a commodity bust, all that iron isn’t usually worth a lot. To start it all has to be pulled out of the ground and moved off location. On deep wells like these, a significant expense.
Not great demand for 640 pumping units in a bust.
Transporting all that from a remote location in ND, not cheap.
Then there is the possibility of NORM (radioactivity). I think this is a big problem, have heard about service companies getting a wrist slap for improper disposal of radioactive material, I think.
Otoh, these wells may be allowed to sit idle many years, in hopes of a price rebound, especially if the operator has BK and the wells become orphans. TX and other states already have thousands of orphan wells.
Push, that is the indeed the same Mike and I would love to hear from you, sir.
Mr. Harrington’s editorial is a stark and painful reminder of how deep the ramifications of LTO failure will be on our industry and our country’s energy future. Goodonya, mate, for posting it here.
Essentially everything that Shallow sand has been posting on POB for a long time regarding the failure of shale oil and shale gas economics was true and is now coming to fruition. Unconventional shale resources in America are not profitable, and not sustainable. Everyone on POB is fortunate to have Shallow’s insights.
This shale thing is all going to get very ugly over the ensuing months. Technology is not going to save it, not bigger frac’s and monster IP’s, not even 75 dollar oil can save it now, I don’t believe. Unconventional shale resources will be important to us someday in the future but we’re going to have to have a plan B to produce them.
You guys keep fighting the good fight.
Mike
G’day Mike,
I had my suspicions that was you. I see you had a good time with Boots & Coots in the past. The company I was working with, finally welded the doors shut and I got a bit of free time. Things looked rosy, as I had a job lined up in Qatar, P&A old wells on a brand new jack-up. Then the manager, an old back to back, and I found out that in Qatar it is illegal to employ over 60. I was a few month shy of that mark. So what was going to be a short break has turned into a long break from the industry. I may have to change my name on here to Ex-toolpush, lol.
Anyway, I have been keeping my self busy working around town, waiting for you folks over there to sort out this shale mess, and then things have a chance to get back to normal. But you had better make it snappy, my clock is ticking away, lol.
The shale player didn’t take the hint at $50, but I feel they may wisen up at $30 and below. Unfortunately, it is going to be the collateral damage that will be the main problem as described by Mr. Harrington that will be the problem.
I am sure things are tough at your end, but history has shown the small US oil producer has survived times where the big flash companies have not.
PS I had sent you an invite on Oil Pro a few months ago, under the name of dickson
Yes, I had a good time with Boots and Coots; saw some stuff, brother. Please resend the invite, we have much to yak about.
Be patient, you’ll be back to work in two years; these shale guys are all walking stupid dead. And remember, once a toolpusher, always a toolpusher. Until there are no more tools to push.
Tool,
Thanks for the article. I would just add regarding his comparison with the housing bust that in this case problem is way more severe because what happened with housing was partially artificial increase in pricing due to selling the same houses to each other multiple times. It was just paper game. And even when everything crashed maintaining the houses did not require much of the funds. On other hand oil industry is extremely capital intensive to start with let alone trying to maintain the infrastructure in any shape and form with limited funds after the bust. I am not sure that the magnitude of this fiasco is well understood yet.
Holy API Batman – Worth posting a comparison of a tale of 2 subprime crisis:
From:
http://oilpro.com/post/21427/solving-2016-dilemma-part-two-cascade-effect-here
“Sound familiar? That’s because it is. There is a very important difference—When housing prices declined 61% over three years, the house still had a $ value. By stark contrast, oil prices have declined 69% over two years and in a not small number of cases, there are now leases and wells on the books as collateral that because of high operating costs have no value. Very significant on those leases and wells, they must not only be written off on the books, but will morph from an asset to an unexpected cash liability. Here is why.” 🙁
Similar to some Utilities have negative worth considering decommissioning costs of retired Nuclear plants, waste, fuel assemblies.
I’ve previously commented on the similarities between Net Cash Flow Math and Net Export Math:
http://peakoilbarrel.com/us-oil-production-finally-starting-to-decline/comment-page-1/#comment-530205
This article is worth a complete post – sums up the whole enchilada!
Comment from MVV. “Regarding reducing cost, the use of junk debt wouldn’t have been considered by Rockefeller so I have been advocating from the beginning that issuing junk debt by DEP’s to produce a cyclically price commodity like oil is beyond insanity and anyone that has ever advocated doing so regarding DEP of oil should not be permitted in management of a DEP let alone a member of the board.”
what about BEYOND insanity do we just not get.
Hi Toolpush,
To me the article reads like an investor’s sales pitch. The author is selling his services as a hedge fund manager to take advantage of the crisis that he foresees.
A big problem with the analysis (much of which seems very good) is the assumption that oil prices are likely to fall and remain low long term. Why?
If the crisis unfolds in North America as the author proposes, we should see a huge drop in US C+C output, possibly 2 Mb/d if the ensuing crisis is as bad as he hints at. I suppose if this triggers GFC 2 then demand for oil will also fall and unemployment will rise. In that case 2016 looks like 2009 with a fall in World real GDP and oil prices remain low.
What is the likely response of various governments around the World? Fiscal stimulus is likely on infrastructure (roads, bridges, railroads, public transportation, water systems, and the grid.) Oil prices recover in 2017 in that scenario.
Hey, we could impose a tax on imported oil and boost the price of WTI, or the Federal government could work with the RRC and NDIC to regulate oil output in the US and boost prices by restricting supply. Neither would ever happen, though from 1931 to 1970 the RRC essentially regulated US output (by controlling Texas output which was, so there is a precedent. In 1970 Texas produced at least 34% of US C+C output, so control of Texas’ output by the RRC controlled US output.
Dennis,
I really don’t understand why it’s necessary to impugn Harrington’s motives or character. Does it make any difference what his motives are? Isn’t it the message that matters, and not the messenger? And talking about the messenger, IMHO Harrington looks to be one fucking sharp cookie, a seasoned oil and gas operator who actually knows something about that which he speaks. And most importantly, he’s willing to tell it like it is.
Furthermore, I don’t see where Harrington spent a great deal of time predicting oil prices. Mostly he dwells on the past and present when it comes to oil prices, not the future. He is very much focused on what he believes the situation to be in the here and now, with current oil prices.
I for one thought that his analysis might even be too optimistic, especially on two points:
1) When he speaks of finding costs. To wit:
Per-barrel finding and development costs, however, are based on EURs. And I’ve noticed that a great many of the oil and gas companies lie about EURs. This certainly was the case with many of the operators in the Austin Chalk horizontal play which began in 1989, and also with the Barnett Shale, the first major shale play which got underway in 2001. It seemed to be standard operating procedure for operators in these plays to inflate EURs by at least 100%, and sometimes more.
More realistic EURs would make those F&D costs higher, maybe much higher, not to mention what they would do to reserve estimates.
2) Harrington notes that oil and gas companies currently owe about $3 trillion, $1.4 trillion in bonds and $1.6 trillion in loans. He does not mention, however, another sector with heightened loan risk, and that is developing countries which rely on oil revenues to service thier debts. For example, just look at how the external debt of a couple of these, Mexico and Brazil, has balooned over the past few years.
As Harrington states in the comments section, the credit markets are highly interconnected, and there is much risk of contagion, especially with hundreds of trillions of dollars of unregulated derivatives floating around, with nobody knowing where the risk for these lies.
High leverage and high debt levels greatly increase risk.
There is no guarantee that oil prices will quickly rebound, and if they don’t there’s going to be a lot of folks in deep, deep doo-doo.
Hi Glenn,
I guess you don’t think very highly of hedge fund managers. It read like an oil investment newsletter which can provide excellent information and is meant to impress the reader with the insight of the investment manager. I don’t think the man has any ulterior motives unless impressing others with his knowledge is considered underhanded.
I think the picture he paints is one of impending doom and another Global Financial Crisis, and I believe he overstates the case.
Things are bad, some oil companies will go bankrupt, oil supply will decrease and oil prices will recover, maybe there is a recession or maybe low oil prices eventually boost the economy which then increases demand while supply is falling and the market balances sooner.
On future Oil prices (which is not his focus) he says:
This begs the question of how a corporate entity creates a value accretive model from its own free cash flow which, as noted earlier, may be a price at the wellhead of between $24-29, assuming no further declines in prices (highly unlikely in the near term).
So he thinks it highly unlikely that there will not be further price declines.
As I read the piece I thought ok, things are bad so oil supply decreases, but then won’t oil prices rise in response? So I was looking for something about future prices and you are right there was not much there.
To me that is a glaring omission, nothing to do with the man’s character, I just don’t follow his reasoning for why oil prices must remain low (which he at least hints at in the quote above.)
In another place he says the price direction is obvious. To me if the industry is in such bad shape the oil supply goes down and prices go up. I believe he meant the reverse however.
The reserve valuations in the company financial statements for the most part are not tied to any loans. The banks have a lot of flexibility as to how they value the reserves and determine borrowing bases. Yes, there will be write downs in the financial statements but they might not affect the lending against the reserves very much. Most of the bonds issued have very little in the way of covenants and very few of those covenants are related to the book values or reserve values found in SEC filings from what I’ve seen.
The EIA has sharply lowered its oil price forecasts for 2016:
for Brent from $55.78 to $40.15;
for WTI from $50.89 to $38.54.
In 2017, Brent is expected to average $50, and WTI $47.
I used to work at Conoco, a wholly owned subsidiary of DuPont. After the merger of the 2 companies, a Conoco executive VP was cross assigned to work at DuPont for several years in Wilmington, DE. His name was Archie Dunham. Archie later became President and CEO of Conoco and drove the merger between Conoco and Phillips Petroleum which became ConocoPhillips which has evolved into ConocoPhillips( upstream) and Phillips 66 (refining).
Archie’ executive skill set consisted primarily of selling assets and firing employees. He is now chairman emeritus of Chesapeake’s Board of Directors. CHK’s fate is pretty obvious to me.
https://en.m.wikipedia.org/wiki/Archie_W._Dunham#Early_life_and_education
You may or may not remember DuPont’s role in the “Ozone Hole” caused by chlorofluorocarbons. Archie Dunham while at DuPont took a leading role in the banning of freon as one of the primary contributors to the problem.
The point of all of this is that a common urban Conoco corporate myth at the time was that DuPont’s real motive behind its activism in the Ozone Hole solution was that its patent on Freon was about to expire. Since DuPont didn’t want to lose its business to generic competitors. DuPont “voluntarily and humanely” set out to fix the Ozone Hole and find new and environmentally harmless replacement for freon.
Oh…..Archie’s son also worked for a time at Conoco. I’ve lost track of him over the years.
Hi AlexS,
I had not seen that, now I understand your comment about 2018. I just don’t see how supply does not drop at those prices. Does this new price forecast seem reasonable to you?
The forecast is based on the futures market, chart below shows forecast and the 95% confidence interval, also an average of the upper and lower limits of the 95% confidence interval is shown. I think the forecast for output is too high at the oil price forecast they give, either the price needs to be higher for the output forecast or output will be lower, which will drive up prices. I think it will be a little of both, lower output and higher prices than the EIA has forecast.
Just a little something (well, a bit more than a little) to read and consider: http://www.nytimes.com/2016/01/10/magazine/the-lawyer-who-became-duponts-worst-nightmare.html
Anyone here live in the affected areas?
One wonders what other great things are out there in our environment.
Ah… Modern life. Ain’t it grand?
It’s quite a good article. A long read worth reading.
Oil at $10.
It’s turning into a Dutch auction. Might we get down to $5?
Sell everything ahead of stock market crash, say RBS economists
Royal Bank of Scotland warns of ‘cataclysmic’ year with slumps in shares and oil and advises clients to shift to bonds
Nick Fletcher, the Guardian, Tuesday 12 January 2016 10.42 GMT
Given that no fundamental relationship is currently driving the oil market …
I believe this statement is wrong — supply and demand is always driving the oil market — 10$/barrel ain’t gonna happen in my opinion.
Frugal,
Agreed, if we see $10/b it will be for one day (around the time when Greenland is glacier free).
The problem, of course, is $10 WTI means $0-5 in many onshore locations in the US, likewise $20 means $0-15.
I wonder if any sour crude in the US is operating at profit, and how many bopd is out there?
So let me get this straight … this is the same RBS that just went bankrupt and had to be bailed out by the British government, and now they think they should advise me about investments?
A lot of these projections should be viewed as just “click bait” and not taken seriously.
California Methane well leak:
http://www.motherjones.com/environment/2016/01/california-methane-leak
Recession? What recession? Chinese oil imports soared to an all time high of 33,4 mill t per month (see below charts). although the dollar value of oil imports is still low, the actual amount in tons is huge and represents a month over month increase of 21.4 % (9.6 % yoy). Moreover, product demand according to IEA is outstanding at LPG of 23 %, jet fuel of 17,2% and gasoline of 9.6% year over year growth. These are truly surprising numbers and indicate a surging economy in China in the months ahead. It seems that low oil prices finally trigger strong economic growth in emerging countries.
Hi Heinrich,
Can you remind us what your thinking is on oil prices? At one point you thought my predictions were much too optimistic and you were far closer than me, though I forget what you predicted. At the beginning of 2015 I thought we would be at $75 (maybe higher I forget) by now, so I was off by almost a factor of 3, did you expect $30/b? What do you see for 2016 and 2017, does the EIA oil price forecast in the Jan Short Term Energy outlook look reasonable to you?
Dennis,
As you probably can remember, I have been always saying that the oil price will only go up until shale production declines. Lower US production will weaken the USD and thus decrease supply and increase demand at the same time. This is a kind of catapult effect for oil. Of course it works on the downside as well and high US oil production decreases demand and increases supply. Until US production does not come down significantly, there is little chance that oil prices are going up. As US companies did not cut enough voluntarily, they are now forced to do so through a collapsing bond market, which started in earnest in December when the FED raised interest rates. It is simply US policy style to let things go to the extreme and than – until the consequences and the damage become obvious – do the right thing. Churchill famously said: The US is doing always the right thing – having explored all other wrong options before. This perfectly fits also to the current situation in the oil market. The shale option has been explored to the extreme until the huge damage to the bond and equity market as well as to the economy became obvious. US policy makers have saved the USD through shale, yet created at the same time a bond market crash, which is increasingly spilling over to the economy. The bond market forces now US shale producers to cut dramatically and this will pave the way for a new rise of the oil price. It is important to observe the bond market, yet the rise in oil prices could come as early as at the end of 2016.
Hi Heinrich,
Thanks. If you don’t remember your price predictions that is fine, I am not sure what either of us was predicting 12 months ago, but I am sure you were much closer than me.
Is your expectation that oil prices will remain around $30/b until December 2016? This seems low to me, but you have not really given us much guidance, a rise as early as the end of 2016, is consistent with $30/b until Dec 31, 2016, which seems unrealistic. Or maybe you like the EIA forecast of less than $43/b until Jan 2017?
I can’t tell you how tired I am of reading about sluggish oil demand.
Where is all the oil?
I went through the last OPEC report from December and tallied the OECD stock changes vs. the stated supply/demand imbalance and I cannot make any sense out of this.
From page 100 I took oil storage on land and oil on water and calculated the differential to the previous quarter, so we get a stock builds of
Q1/15: 20 MM BBL
Q2/15: 144 MM BBL
Q3/15: 67 MM BBL
In contrast, OPEC states an supply/demand imbalance of (page98):
Q1/15: 2.12 MMBBL/DAY -> for 90 days = 191 MM BBL
Q2/15: 2.67 MMBBL/DAY -> for 90 days = 240 MM BBL
Q3/15: 1.45 MMBBL/DAY -> for 90 days = 130 MM BBL
The above is obviously extremely simplified, but we seem to have overproduced 560 MM BBL in 3 quarters, but stocks have “only” built by 231 MM BBL; where are the other 330 MM BBL (and this does not even take into account the ±100 MM BBL of condensate in the US which nobody seems to want)?
Since the whole world “knows” that we are swimming in oil, I wonder where I am going wrong and would appreciate your feedback.
Tanks Daniel
Daniel,
The difference lies within storage of small consumers/vendors, which are significant. As an example I want to mention my personal storage of heating oil. When oil prices are high, storage in my heating oil tank is as low as possible – waiting for lower oil prices. As I have been waiting for lower prices for over one year, I will soon filling (and storing) up to 6000 l of heating oil. As many consumers have already done so, the storage tanks of many small consumers/vendors are filling up quickly, albeit unnoticed by official data.
Thanks Heinrich – not sure if you are 100% serious or pulling my leg here…. But even if the above is true, your consumption still would run through the normal channels – i.e. supply – storage – demand, thus would need to show up in a demand uptick and storage draw…
Daniel,
What I want to say is, that there is a difference between production and supply as well as demand and consumption. If someone buys oil, it creates immediately demand, yet the oil is consumed probably over a long time span. The same for production and supply. As most oil companies have in some cases huge working inventories in their supply chain, they can supply more oil even when production is going down for a limited time span. So, producers and consumers have vast ‘shadow’ storage capacity, which is not counted by official data.
It’s a pretty safe bet that just about every farmer and small contractor in the country has stocked up on about as much diesel as he could conveniently pay for and store.
Barring so called Acts of God, I will be burning probably a couple of thousand gallons extra this year, taking advantage of the low price to get a couple of long delayed projects off the wish list and onto the ” to do ” list.Being fully retired now, except for hobby scale farming, means I finally have the time available as well.
Incidentally that is a LOT more than I ever used actually farming. Orchardists don’t use all that much diesel fuel in relation to their production and sales.
I might also put a thousand gallons of heating oil into storage,if I can find a great deal on another large tank. Our back up oil furnace will last long enough to burn it, over the next five to ten years, and the longer I delay installing a heat pump in the house we live in, the better the heat pump will be, in terms of efficiency per dollar.
I am personally willing to bet a couple of thousand bucks that heating oil is not going to STAY cheap very long, and the best I can get out of the bank is a couple of percent.
Companies should declare production and stocks, so I expect supply being the sum of production and storage build (or decrease). However there could indeed exist storage that is not (yet) reported.
China is building a Strategic Petroleum Reserve, so increase in China’s oil import could simply be related to the opportunity of building this reserve at a lower cost, not from a strong economic growth. Did you check that point? I don’t have the information.
Did you check the numbers for China’s consumption?
Chris, I only performed a very low level exercise with the OPEC monthly report at hand – I only have access to public data. My above numbers do include strategic reserves (I excluded finished product, but that did not seem to make a huge difference in the big picture; i.e. stock in this seems to be fairly flat with a decrease earlier this year and stock built up now).
I can see Heinrichs and oldfarmers point, but the official stock numbers to be off by 100% seems quite extreme. To put this in context 330 MM BBL is equivalent to 1,482,250,000 ft3
I am sure the amount of oil stored by farmers, homeowners, and small contractors is only a drop in the bucket, considering the size of the oil market.
A million commercial farmers might have for a wild assed guess as much as twenty or thirty million more barrels of diesel on hand than usual, having made a bet on buying early to save later. Some big time farmers have five gallons of storage, and may still get a delivery every week or two in the busy season. Others get by the whole year with a thousand gallons or less, depending on what they produce, if they are small operators, and that sort typically gets a two to three hundred gallon delivery two or three times a year.
Daniel,
Even if there are worldwide just 100 mill farmers, home owners, small vendors …. they just need 3.3 barrels each to hide 330 mill barrels.
Chris,
In my post I have also cited the soaring demand for oil products in China ( double digit rates for jet fuel and LPG as well 10 % for gasoline yoy gasoline consumption). In addition iron and copper ore are at all time highs and refined copper imports are 4.8 mill tons per year, just shy of the record high in 2014. December refined copper imports are at 530.000 t per month, just 6000 tons lower than the record from January 2014. January 2016 will very likely show a new all time high for refined copper imports. China actually benefits very much from low commodity prices. Yet also India (oil products consumption growth close to 20% yoy), Vietnam, Philippines, Myanmar, Laos, … are booming. We are at the start of a global boom – in volume terms and not yet in prices.http://www.bloomberg.com/news/articles/2016-01-13/china-imports-record-crude-oil-as-price-crash-accelerates-buying
http://news.yahoo.com/commodity-price-falls-160-billion-bonus-china-071758902–finance.html;_ylt=A0LEVjTpWJZWFr8AmgcPxQt.
Hi Heinrich,
thanks for the news and the links. Very intersting!
Curious to see the impact of low commodity prices on the global economy. I also expect a boom this year in contradiction with doom predictions.
Behold the contortion of thought to make things fit a narrative.
Daniel,
The discrepancy between the supply/demand imbalance and the increase in OECD stocks can be explained by:
1) an increase in inventories in non-OECD countries (particularly, in China)
2) significant floating storage outside OECD
3) various balancing items, which basically mask inaccuracy in the supply and demand data
Are you sure about this Alex. The info I have is that commercial inventories in China are dropping. And oil-on-water as per OPEC is included in the numbers. Also 330 MM BBL of balancing items seems a lot…
Yes I am sure.
oil-on-water as per OPEC only includes floating storage in the OECD countries.
China’s inventories are increasing, which clearly makes sense given the current oil prices. Inventories in oil-exporting countries may also be increasing.
I would also note the third point. It may actually mean that global demand is higher and/or global supply lower than estimated by OPEC and others.
A bit off topic but the Ebola outbreak in West Africa is to declared officially over on Thursday, after two years.
I was really panicked by that one, as I felt the risk of it escaping into a global pandemic was extremely high, and if it had got out of Africa and into the megacities of the third or developing world, it would have killed millions. I am glad I was wrong, and the first world woke up in time to the risk, and finally invested in the medical research that makes a future pandemic from this virus a lot less likely.
As it is, many thousands died, and the local medical services were overwhelmed and decimated, causing many more people to die from malaria and other diseases because there was no more resource to treat them.
There will be another pandemic soon. There is no guarantee on the downslope of peak oil that there will be adequate medical response to prevent another 1918 or worse.
I was not afraid the least from all the alarmism surrounding the possibility of Ebola spreading to the rest of the world and causing a pandemia, even though there were two cases in my country. I did my best to calm down everybody around me. Yet another example of the MSM promoting unjustified alarmism. To anybody with a slight knowledge of biology and medicine it is clear that a virus like Ebola is not a very serious problem to a country with a modern health system and developed society. It has too long incubation time and you have to get really close to the patient to caught it. It is not too hard to isolate everybody around every case before it gets out of hand. Only countries with a very poor health system, with very isolated communities and badly organized have serious problems.
Now a killer strain of influenza, that would be a very different thing. That is almost unstoppable.
PXD raised money the other day, now Diamondback! Someone must still be putting money into the shale plays. It seems to be centred around the Permian!
http://www.noodls.com/viewNoodl/31648425/diamondback-energy-inc/diamondback-energy-launches-common-stock-offering
Diamondback Energy Launches Common Stock Offering
MIDLAND, Texas, Jan. 13, 2016 (GLOBE NEWSWIRE) — Diamondback Energy, Inc. (NASDAQ:FANG) (‘Diamondback’ or the ‘Company’) announced today the launch of an underwritten public offering of 2,250,000 shares of its common stock, subject to market and other conditions. The underwriter will have an option to purchase up to an additional 337,500 shares of common stock from Diamondback. –
Diamondback intends to use the net proceeds from this offering to repay the outstanding borrowings under its revolving credit facility, with the remaining net proceeds to be used to fund a portion of its exploration and development activities and for general corporate purposes, which may include leasehold interest and property acquisitions and working capital. –
http://www.noodls.com/viewNoodl/31648427/diamondback-energy-inc/diamondback-energy-inc-provides-interim-q4-2015-operationa
Do NOT read this if you have even the faintest tendency to worry about environmental pollution and your health, it will keep you awake at night.
http://www.nytimes.com/2016/01/10/magazine/the-lawyer-who-became-duponts-worst-nightmare.html
I am a long way from a fully qualified environmental scientist, but I know enough to know that I have a considerable number of family members, friends, and co workers who died younger than necessary, and in some cases , a LOT younger than necessary, due to low level pollution in the environment.
How do I know? Because they have died of causes that kill very few people in places where these pollutants are not present in amounts comparable to the concentrations we experience here in the Home of the Free.
Every body who knows a little bit about public health issues know this is true.
And I have had a part myself, in killing some people, without a doubt at all, because for years I used some very nasty chemicals that are now banned here in the US. Why?
Because I didn’t KNOW ANY BETTER back then. Because if I were to remain solvent as a farmer, I had no choice in the matter, they lowered my production costs substantially, and back then, nobody would pay double or triple for an organic apple or green bean or tomato.
I am not TOO worried about it, but the chemical load I am toting around as the result of applying pesticides for half a century may put ME in my final resting place before my time. One of my sisters died of an extremely rare type of cancer, and there is reason to believe that the victims of that particular cancer are grossly over represented among people who have been exposed to the chemicals used in textile industries. She worked in the textile industry for a long time, and she was exposed to that sort of chemical most of that time.
But she could have died as the result of living in and around the orchards where we all used the aforementioned nasty chemicals.
WHO knows?
The companies that manufactured them aren’t about to say anything. The county agents are honest people, who live among farm families, and come from farm families, and got the same basic training I got. These chemicals APPEARED to be safe.
And when the whole truth is told, they in the grand total scheme of things have been an incredible bargain in the short to medium term for the human race- I KNOW.
Because speaking as a professional real life farmer, I know we have produced food enough by using them to save many, many, many times as many people from gross malnutrition or outright starvation as have ever died, or will ever die, as the result of low level environmental pollution from pesticides.
Minor correction,I USED to have family, friends etc who died young from environmental pollution. Editing a long comment may result in it going into the spam file.
Now I see that somebody else beat me to this link. Sorry about not giving them credit in my comment but afraid to edit it for fear of putting it into spam.
Hey, no worries OFM.
I thought it was a great article too and I’m glad I wasn’t the only one who thought it was worth passing on.
EIA’s outlook for the global oil market:
Crude oil prices to remain relatively low through 2016 and 2017
http://www.eia.gov/todayinenergy/detail.cfm?id=24532
The Short-Term Energy Outlook released on January 12, which is the first STEO to include projections for 2017, forecasts Brent crude oil prices will average $40 per barrel (b) in 2016 and $50/b in 2017. West Texas Intermediate (WTI) crude oil prices are expected to be $2/b lower than Brent in 2016 and $3/b lower than Brent in 2017.
Crude oil prices are expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage. EIA estimates that global oil inventories increased by 1.9 million b/d in 2015, marking the second consecutive year of inventory builds. Inventories are forecast to rise by an additional 0.7 million b/d in 2016, before the global oil market becomes relatively balanced in 2017. The first forecasted draw on global oil inventories is expected in the third quarter of 2017, marking the end of 15 consecutive quarters of inventory builds.
EIA expects non-OPEC production to decline by 0.6 million b/d in 2016, which would be the first decline in non-OPEC production since 2008. About two-thirds of this forecasted decline in 2016 comes from the United States.
OPEC crude oil production is forecast to increase by 0.5 million b/d in 2016, with Iran accounting for most of that increase. Iran is expected to increase its production once international sanctions targeting its oil sector are suspended. Although uncertainty remains as to the timing of sanctions relief, EIA assumes this occurs in the first quarter of 2016.
EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in both 2016 and 2017. Forecast real gross domestic product (GDP) for the world, weighted by oil consumption, which increased by an estimated 2.4% in 2015, rises by 2.7% in 2016 and by 3.2% in 2017.
Note that the EIA data (similarly to the IEA and OPEC) shows that the imbalance between global supply and demand has peaked in the second quarter of 2015 and has been declining since then.
The problem is that supply still outpaces demand until the second half of 2017, meaning that global inventory levels will continue to increase, putting additional pressure on prices.
Several months ago the EIA was forecasting that the balance between global demand and supply would be reached by 3Q16, a year earlier. As demand projections have not changed, the longer than previously expected period of oversupply reflects the resilience on the supply-side.
In any case, I do agree with the EIA that we are facing two more years of low oil prices, but prices should start to improve by the end of 2017.
Hi AlexS,
I disagree that we will see low prices for two years, although we may disagree what “low” oil price means. Do you expect that the EIA oil price forecast through 2017 will be correct? I doubt oil prices that low will keep demand low and supply high, so that low prices will continue. I expect the higher cost producers everywhere to either cut back production or go bankrupt if they continue to produce at such low oil prices. There just is not enough oil in the World that can be produced at a profit at $50/b or less to keep oil supplies up. Oil companies cannot keep producing oil at a loss for another 2 years, I believe they are close to their limit and oil supply will decrease noticeably by summer. Then oil prices will gradually rise as inventories fall back to normal levels. It will be interesting to see how this plays out, I certainly have been wrong on prices before. You agree it seems with the EIA forecast. You think 2018 will be when oil prices rise, I think 2016, maybe it will be 2017. When I say rise I mean above $60/b and remain above that level, gradually rising to $80 (over 6 to 24 months).
Hi Dennis,
You nailed it: “This time is different”… It looks to me that the current situation is unsustainable beyond the first half of 2016 unless we see tanking of world economy.
Let me repeat key points so more people pay attention to what you said.
>I expect the higher cost producers everywhere to either cut back production or go bankrupt if they continue to produce at such low oil prices.
It’s worse that that. Due to debt load they can’t cut and they can’t continue. This is a Catch 22 so they will walk directly into bankruptcy court or short gun wedding with a stronger player. North America oil drillers will likely come up $102 billion short on the cash they need to operate this year http://fuelfix.com/blog/2016/01/13/oil-drillers-face-102-billion-cash-shortfall-in-2016/
> There just is not enough oil in the World that can be produced at a profit at $50/b or less to keep oil supplies up. Oil companies cannot keep producing oil at a loss for another 2 years, I believe they are close to their limit and oil supply will decrease noticeably by summer.
The main source of financing tight oil and tar sands boom dried out and those two were major drivers of world production. Arthur Berman in his “Why The Price Of Oil Must Rise” interview noted that most US oil producers can’t break even below $65 a barrel. And that some shale/tight oil producers used to have negative cash flow at prices close to a 100. They survived only due to unlimited access to cheap financing via junk bonds. This junk bond bonanza is over so they need to cut drilling and to sell assets to survive.
> You think 2018 will be when oil prices rise, I think 2016, maybe it will be 2017. When I say rise I mean above $60/b and remain above that level, gradually rising to $80 (over 6 to 24 months).
It’s unclear and unpredictable when prices will bounce but what is clear that the longer low prices stay law the more violent bounce we might get. Probably coupled with a short squeeze. And the earliest we can get is March 2016 if OPEC calls emergency meeting and decide of cuts. Then we have June 2 OPEC meeting which also can serve as a trigger.
Growth of consumption in 2016 probably will be higher then expected as people splurge on cheap gas like in 2015. US and Canada were two major sources of new supply. They are now shrinking. Other then Iran everybody else will be either flat or shrinking due to cuts in capex. Iraq is talking about cutting production by 0.2 Mb/d in 2016.
I’d say its going to take a major OPEC cut, but I say that because I am a believer in history repeating itself.
One in our family said, “The hell with it, I’d just like to see the price of oil crash immediately to zero, just to confirm that this is trading BS, just like 2008”
I am beginning to move into that camp myself.
The EIA has significantly revised upwards its estimate of U.S. C+C output in 2015 and the first half of 2016, but has made downward revisions for 2H16.
The January STEO also for the first time includes U.S. C+C output projections for 2017.
Upward revision for 2015-1H16 mainly reflect higher estimates for Lower 48 excl GoM. The biggest revisions in monthly numbers are for February 2016: + 174 kb/d; January 2016: 170 kb/d; and November 2015: 153 kb/d
From the report:
“According to the latest survey-based reporting of monthly crude oil production data, U.S. production averaged 9.5 million b/d through the first 10 months of 2015, about 0.2 million b/d higher than in the fourth quarter of 2014. The estimates include EIA survey-based monthly crude oil production data for Oklahoma for the first time. These new estimates are roughly 0.1 million b/d per month higher than those generated by the previous methodology for Oklahoma, which was based on state-reported data that was later adjusted by EIA. The recently expanded EIA-914 survey now collects oil production from the largest oil producers in 15 states (including Oklahoma) and the federal Gulf of Mexico.”
The new full-year estimate for 2015 is 9.43 mb/d vs. 9.33mb/d in December 2015 STEO. The EIA has been increasing its estimate for the U.S. C+C output in 2015 since September 2015 STEO, when the forecast was 9.22 mb/d. In other words, the estimate was increased by 210 kb/d, despite much lower than previously expected oil prices.
According to the EIA, “U.S. production began falling in May 2015, led by Lower 48 onshore production that has fallen nearly 0.5 million b/d [by October]. These declines have been tempered by production growth of 0.1 million b/d in the Gulf of Mexico since April.”
“With WTI prices falling below $40/b in December 2015 and projected to remain below that level through mid-2016, EIA expects oil production to decline in most Lower 48 onshore oil production regions. The expectation of reduced cash flows in 2016 and 2017 has prompted many companies to scale back investment programs, deferring major new undertakings until a sustained price recovery occurs. The prospect of higher interest rates and tougher lending conditions will likely limit the availability of capital for many smaller producers, giving rise to distressed asset sales and consolidation of acreage holdings by more financially sound firms. The retrenchment in onshore investment is anticipated to push the count of oil-directed rigs and well completions in 2016 and 2017 below current levels.
The focus of drilling and production activities will be on the core areas of major tight oil plays. Despite the significant decline in total rig counts in 2015, rig counts have largely stabilized in the core counties of the Bakken, Eagle Ford, Niobrara, and Permian. In these areas, falling costs and ongoing technological and process improvements in rig, labor, and well productivity are anticipated to lead to faster rates of well completions and less-rapid production declines relative to other Lower 48 onshore areas. The ongoing gains in learning-by-doing, cost reductions, and rig and well productivity are expected to enhance the economic viability of these areas as well as to be disseminated to other regions, incrementally reducing the breakeven costs of production in more marginal areas.
EIA expects U.S. crude oil production to decline steadily from 9.2 million b/d in December 2015, reaching about 8.5 million b/d in November 2016. Production is expected to stay near 8.5 million b/d for most of 2017. This level of production would be 1.2 million b/d below the April 2015 level, which was the highest monthly production since April 1971.”
U.S. C+C output (mb/d): STEO January 2016 vs. December 2015
From the report:
“Productivity improvements, lower breakeven costs, and anticipated oil price increases in the second half of 2017 are expected to end over two years of falling Lower 48 onshore production.
Onshore production averaged 7.6 million b/d in the second quarter of 2015, and it is forecast to fall below 6.2 million b/d in September 2017 before increasing modestly in the fourth quarter of 2017. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators.”
Lower 48 ex GoM C+C output (mb/d): STEO January 2016 vs. December 2015
Estimates of C+C production in the Gulf of Mexico have also been revised upward. The EIA now expects output there to increase from 1.3 mb/d in January 2014 to 1.93mb/d in December 2017. The numbers for Alaska are unchanged.
From the report:
“Projected crude oil production in the Gulf of Mexico rises during the forecast period, and oil production in Alaska falls. Production in these areas is less sensitive than onshore production in the Lower 48 states to short-term price movements and reflects anticipated growth from new projects in the Gulf of Mexico and declines from legacy fields in Alaska. Several projects in the Gulf that came or will come online in 2014-16 will push up production from an average of 1.6 million b/d in 2015 to 1.9 million b/d in the fourth quarter of 2017. It is possible some projects will start production later than expected, potentially shifting some of the anticipated production gains from late 2017 into early 2018.”
C+C production in the GoM: STEO January 2016 vs. December 2015
Monthly-average WTI oil price forecasts: STEO January 2016 vs. December 2015 vs. July 2015
Annual-average C+C production estimates
Interesting, they claim same fall in USA production, average, for 2016 even if they cut price forecast much more and that previous forecasts price spike in second half of 2016 was reason for jump in production in second half 2016 in previous reports.
All things considered, it is some kind of a black swan event.
Real time, here and now.
50 dollar futures for oil in Dec of 2022.
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html
Can somebody to clarify me this EIA data from today weekly report:
Oil production flat
Demand falling in yoy basis
Inventories full or build up
and
Import of oil rising on weekly and yoy basis.
I must admit, there is no sense for me. How is possible to import more oil if or other data don’t point for that?
Sarko,
The reason might be export of processed by refineries products. So some oil enters the USA purely for processing and the products are shipped back.
From the other point of view it looks like you are a perfectionist, aren’t you ?
This is just another government agency. Mixture of Bureau of Economic Analysis and a propaganda outlet. Some of their data are based on sampling. The fact that they provide more then three meaningful digits in their forecasts suggests that they are not very good in mathematics as accuracy of their data might well be less then +-1%. Like the Department of State they do not need to be consistent in their figures or opinions 😉
For example their short term price forecast is based on futures (which means it is based on opinions of gamblers).
The key issue in the current situation (as shallow sand pointed out) is that now there are major producers which at this price level are underwater. So this can’t last forever.
On the other hand as Keynes noted “The market can stay irrational longer than you can stay solvent.” and “There is nothing so disastrous as a rational investment policy in an irrational world.”
OAS,Oasis Petroleum, is 5.94 USD. Institutions own 102 percent of the stock. Oasis has boe daily production of ~ 48,000 and has an eps of 1.40 USD.
139 plus million shares, take that times $1.40 per share, about 195 million in earnings each year.
48,000 boepd, times 365 times 30, that amounts to 525,600,000 dollars annual income. 195,000,000 of them appears to be some money in the bank.
Must be doing something right.
The BNSF report for this week has a drop of about 2,200 petroleum cars and a drop of approximately 13,000 coal cars. For the fiscal year, the total drop in petroleum cars is more than 60,000.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/
Just another hard day on the planet.
Petrobras Reduces Output Estimates on Deeper Spending Cuts
http://www.bloomberg.com/news/articles/2016-01-12/petrobras-reduces-production-estimates-on-deeper-spending-cuts
Petrobras further cut spending and reduced estimates for its production growth amid the worst oil market in a generation and a massive corruption scandal.
Petroleo Brasileiro SA slashed its business plan for the five years through 2019 to $98.4 billion, the latest adjustment to the original $130 billion announced last year, it said Tuesday in a filing. The Rio de Janeiro-based company reduced its 2020 target for Brazilian oil production by 3.6 percent [from 2.8] to 2.7 million barrels a day.
Petrobras’ shares fell as much as 8.7 percent to 5.56 reais in Sao Paulo, a 12-year low and the biggest drop on the benchmark Ibovespa stock index.
Petrobras will have to sell $43 billion in assets in the coming years and oil prices need to recover to $80 a barrel by 2020 to justify current equity prices, the analysts said. The exchange rate also needs to remain stable and domestic fuel prices need to rise, they said.
The world’s most-indebted oil company said it plans to invest $20 billion in 2016, up slightly from its most recent estimate of $19 billion. Petrobras still plans to divest $14.4 billion this year to help fund its spending plan. The company expects Brent crude prices to average $45 a barrel this year, down from its previous estimate of $55 a barrel.
“Petrobras plans to spend the same amount it should generate in cash this year, leaving no margin to reduce its massive debt,” Flavio Conde, an oil analyst at WhatsCall consultancy firm, said from Sao Paulo. “The company is now 100 percent dependent on asset sales to reduce leverage.”
Petrobras production targets (mb/d)
Petrobras’ capex
They have a lot of debt to roll over. I think something like $15BB a year for the next few years. I don’t know how they are going to do it.
problems in the coal patch?
One of the nation’s largest coal companies, Arch Coal, filed for bankruptcy Monday, making it the second company with large Western mines to seek Chapter 11 restructuring in recent months.
http://www.hcn.org/articles/huge-us-coal-company-declares-bankruptcy?utm_source=wcn1&utm_medium=email
maybe some retraining is in order?
The Solar Foundation’s National Solar Jobs Census 2015 is the sixth annual update of current employment, trends, and projected growth in the U.S. solar industry. Census 2015 found that the industry continues to exceed growth expectations, adding workers at a rate nearly 12 times faster than the overall economy and accounting for 1.2% of all jobs created in the U.S. over the past year. Our long-term research shows that solar industry employment has grown by 123% in the past six years, resulting in nearly 115,000 domestic living-wage jobs.
As of November 2015, the solar industry employs 208,859 solar workers, representing a growth rate of 20.2% since November 2014.
http://www.thesolarfoundation.org/national/
cue Javier..
2015 Unambiguously the Hottest Year on Record
According to new Berkeley Earth analysis, 2015 was unambiguously the hottest year on
record. For the first time in recorded history, the Earth’s temperature is clearly more
than 1.0 C (1.8 F) above the 1850-1900 average. 2015 was approximately 0.1 degree
C (about 0.2 degrees F) hotter than 2014, which had tied with 2005 and 2010 as the
previous hottest years. 2015 set the record with 99.996% confidence. The analysis
covered the entire surface of the Earth, including temperatures from both land and
oceans. The warming was not uniform, and for the contiguous United States, it was the
2nd warmest year ever (+1.33 C), surpassed only by 2012.
http://berkeleyearth.org/wp-content/uploads/2016/01/2015-Hottest-Year-BE-Press-Release-v1.0.pdf
Irrelevant. We are in a very strong El Niño year. That is the cause. We talk again in 2017 when we have a La Niña to see what you have to say.
1 hour and 19 minutes to respond. Are you ok?
and it’s not what I have to say, it is Berkeley Earth.
“1 hour and 19 minutes to respond.”
It was actually 1 hour and 09 minutes. Same problem with some surface temperature data sets. They keep adding warming while nobody is looking.
Meantime, Central England Temperature shows cooling since 2004.
http://www.metoffice.gov.uk/hadobs/hadcet/index.html
No wonder the Brits are complaining about their winters lately.
Its all good, I just stuck my finger in my mouth, held it up and it feels cold.
Hi Javier,
And relevance to Global temperature?
Just curiosity. After all CET shows a good level of agreement with global temperatures in the past.
And it is not only regional databases that show cooling. One of the best global databases also shows cooling, ECMWF ERA also shows it.
There is no 97% agreement on the evolution of temperatures on Earth. GHCN based databases show warming, satellites show not warming, and a few databases are starting to show cooling.
You are free to deposit your faith on BEST, I have no use for faith. The evidence clearly shows that something funny is happening to GHCN based databases.
It is the warmest El Nino year.
Only if you have a narrow understanding of El Niño.
Temperatures not anomalies.
Where, in 3.4 area? Temperatures are not higher in areas 3, 4 or 1+2.
Multivariate ENSO Index (MEI) measures six different variables, and ranks this El Niño as third.
NOAA Multivariate ENSO Index (MEI)
I guess this means the ‘hiatus’ or ‘pause’ since 1998 (another large El Nino year) is over.
Not necessarily. El Niño gives us three warmer than average years, 2014-2016, then the probable La Niña gives us two cooler than average years, 2017-2018, then we will need two to three more years to know if the pause is continuing or not. We will know by 2020-2021.
My guess is that given that AMO has turned negative for the next couple of decades, and current and next solar cycles are kind of weak, the pause is going to continue at least until 2030. We may even see some cooling, like it happened between 1950-1976.
If I am right, this means the end of the CO2 hypothesis as we know it. The role of CO2 in global warming will have to be reassessed. Big hassle. But Peak Oil could put an end to all that as we might not care too much about climate.
The “ace in the hole” so to speak for the temperature keepers is the arctic and antarctic. Look at all the warmth displayed around the northern polar region in your link and the white in the southern polar region. Now there’s very little data and lots of surface area in those areas, so those experts must do a little creative homogenizing and extrapolating from urban heat island locales like Point Barrow, Iqaluit or Ushuaia, which of course any rational person is going to see will make the entire Arctic and Antarctic region display as extremely hot blobs on the top and bottom of the Earth (in terms of anomalies only – in real degrees, it’s still and always going to be deadly cold there). The GHCN/NCDC/NOAA/NASA crew has had decades to perfect the adjustments they need to make to keep their methods going.
So yes, of course they will claim last year was the hottest, but the citizen scientists who know how these maps are really put together are already holding the GHCN/NCDC/NOAA/NASA crew to the fire due to the years of infilling data into Antarctica and Arctic because there is no actual data available for that area, or not enough to draw any sort of conclusions without having to make numerous adjustments.
As Stephen McIntyre has said on many occasions, you have to pay special attention to the pea being placed under the shell. Eventually I have to assume that the climate organizations will have so many spinning plates up in the air that breaking the lot of them is inevitable. You know, that’s the problem with deceivers…merely maintaining all the deception becomes exponentially difficult.
‘citizen scientist’! Priceless. You just hold your head high.
troll alert
I flew WC 135s back in the 70s at McClellan AFB. Our airplanes flew at 2500 ft (not a typo…2 thousand five hundred feet) for up to 20 hours at a time on highly classified missions, with 2, sometimes 3 of the busiest navigators you’d ever see. One mistake and we’d be another Korean Air 007. We relayed many pireps and aireps during every mission over the arctic icecap. Pireps and aireps are weather reports including winds and temperatures. So the data in that polar region was actually quite accurate seeing how we had the latest digital technology on board. Therefore I don’t completely agree that there’s no actual data for the region. but I would say missing from the research of the climate scientists getting the public funding are the additional ingredients of warming including the effects of the Earth’s core which affects ocean currents as well as ocean temperatures. Then there’s the effects of solar activity on the Earth’s weather. Quite simply there’s just so much that we don’t really know about how our wonderful World functions.
Any way you look at it, 2015 is the hottest. Any way you look at it, there was no “pause” in global temperature.
It’s now becoming so obvious, that deniers are having a hard time. They’ve become desperate, reverting to some of their more foolish arguments (when it comes to foolishness, this is hard to beat). They’re trying hard to blame 2015’s heat on the recent el Niño — which only begs the question, why is 2015 so much hotter than other el Niño years?
https://tamino.wordpress.com/2016/01/13/hottest-year-on-record/
Except that if you look at satellite temperature data sets, 2015 is neither the warmest year nor the warmest El Niño. If it is a question of choosing weapons, then it is not “undeniable proof”.
For 26 years global temperature surface data sets and global temperature satellite data sets agreed remarkably well. It all changed after 2005, when the pause continued in satellite data sets, but was erased from surface data sets due to modifications introduced. Since then both type of data sets are diverging, and the situation is becoming ridiculous. It is important to know that according to AGW hypothesis the troposphere should warm more than the surface.
why don’t you post some of these comments over at Tamino? Aren’t you the least bit curious to see the responses there?
I find those alarmist places very boring and full of zealots. They are like religious places were only the acolytes are welcomed, and any dissenter ends in the altar of sacrifices. You probably feel like at home there.
We find your absurdities extremely boring. Most of us just skip over. If we know the science we might feel some guilt in not correcting your nonsense. But all of us know that evidence will not dent your preconceived assumptions.
Have you conducted a poll between the readers of Peak Oil? You seem to be following assumptions in your opinions, not evidence.
I tell you what. You set up a poll in a webpage of yours, and then you and your buddies can go vote there that you skip over my posts. Then we compare the number of votes with Ron’s traffic, and after a little adjustment you can claim that 97% of those that responded oppose my posts. That’s how scientific consensus is built these days.
Javier, I have just been speed reading or scanning your crap to get to what I want to read. However, my summary impression is that you lose virtual every argument that you start. Are you ever going to take that experience as a hint that you should be reevaluating the polemical extremism that you bring to your interpretations?
Your summary impression doesn’t look impartial enough to give it any value.
Berkeley Earth has just released analysis of land-surface temperature records going back 250 years, about 100 years further than previous studies. The analysis shows that the rise in average world land temperature globe is approximately 1.5 degrees C in the past 250 years, and about 0.9 degrees in the past 50 years.
http://berkeleyearth.org/summary-of-findings/
So what caused the 1°C warming that took place in the first 200 years between 1750 and 1950? Surely not CO2 as the change was small.
0.6 C and didn’t we use oil and coal before 1950?
No, 1°C according to Berkeley Earth.
We did use coal, but very little. Over that period CO2 went only from about 280 ppm to about 310 ppm.
Good point, Javier. I have lost all faith in global warming now.
Obviously, all those 99% of climate scientist who confirm global warming are lying to us to get grants and publish books.
It is good that you have enlightened us.
400 Co2 is just good for the golf game, especially in Nome.
January 12, 2016
401.97 ppm
NOAA-ESRL
January 12, 2015
399.73 ppm
Scripps CO2 UCSD
Hi Javier,
I think using the average temperature from 1750 to 1850 makes more sense than cherry picking the low points, do you see the error bars on that early data, it is not very good. Also your chart is for land temperatures not land-ocean. The data before 1880 is very rough, from 1880 to 2012 the 5 year average data shows about a 1.7 C change for land only.
A simple carbon model based on a regression of land only temperature data and the natural log of atmospheric CO2 gives a pretty good agreement with the data considering its simplicity.
From 1880 to 2012 the correlation coefficient is 95% beteewn the model and the 5 year average temperature, Chart below.
January 12, 2016
401.97 ppm
NOAA-ESRL
January 12, 2015
399.73 ppm
Scripps CO2 UCSD
In 2014 growth in CO2 emissions was only 0.5%.
European Commission Joint Research Centre: Global growth in CO2 emissions stagnates
Looks like mission accomplished. Little emissions and little warming.
Dennis,
It is not too difficult to superimpose two growing curves even if one is continuous (CO2) and the other goes up and down (temperature), choosing the appropriate Y axis scale.
The fit becomes perfect if you use a sine function to represent the known 60 year cycle in temperatures plus a growing trend.
Hi Javier,
It would be nice to have an explanation for the 60 year cycle. One can consider the southern oscillation index, aerosols, changes in the length of day (reflecting the earth’s angular momentum), and changes in the total solar irradiance (TSI), along with the natural log of atmospheric CO2.
This is Webhubbletelescope’s CSALT model see
http://contextearth.com/2013/10/26/csalt-model/
A simple attempt by me to reproduce the model using BEST land data, correlation coefficient is 98%. One could use an arbitrary sinusoid or use data based on known factors that will influence global land temperature.
Getting a fit between the model and the data is the first step. The model has to show predictive powers to have any value.
CO2 based models show no predictive value:
The hicks in the sticks weather almanac says -45 degrees Fahrenheit in 1916, the record high was in 2006 with a temperature of 52 degrees. A general cooling trend during the late 90’s did occur, a temp of -42 Fahrenheit was recorded.
The years 1913 to 1918 had extremely cold winters. Might be, in part, a cause of the flu epidemic ca. 1918.
On this date in 1914, New York City had a record low of -5 degrees fahrenheit. In 1932, the temp was 70 degrees.
Accuweather stats. accuweather.com
Much warmer now than in the second decade of the twentieth century. A general warming trend in a 100 year time frame, definitely.
Again, the glaciers in Glacier National Park are still in retreat. Plenty of photos out there, plenty of proof of global warming.
http://nrmsc.usgs.gov/repeatphoto/overview.htm
A warmer earth gets greener,
Of course there is plenty of proof of global warming. There is also plenty of proof that it does not proceed linearly. There are periods of intense warming, like 1910-1945 or 1975-2000, and periods of little warming or cooling, called “hiatus” like 1945-1975 or 2000-present.
All together indicates that temperatures follow a ≈60 year cycle, and that we may not have gotten the causes of the warming completely right.
There is nobody that thinks only carbon dioxide effects climate change, if you are trying to convince us of what every climate scientist already agrees on. Then you win.
You agree with me (who is not a climate scientist) and all the climate science I have read.
Oh and it is a logarithmic relationship, not a linear one.
So you got that right as well, it does not proceed linearly. 🙂
Nice job.
“There is nobody that thinks only carbon dioxide effects climate change”
IPCC does. IPCC believes that GHGs explain >100% of recent temperature changes. That’s right, more than 100%. I already showed you but you keep forgetting it. You do that with things I demonstrate that you don’t like.
“Oh and it is a logarithmic relationship, not a linear one. So you got that right as well, it does not proceed linearly.”
Don’t play word games with me. A continuous increase in CO2 should give you a continuous increase in temperatures. The rate of the temperature increase should be proportional to the increase in CO2. The temperature graph doesn’t show anything of that sort.
Are you trying to reduce the level of the discussion to kindergarten?
We have put one third of the CO2 that humanity has put on the atmosphere in the 21st century. Temperatures however do not show the corresponding increase. The CO2 hypothesis all that has to respond is temperature database tweaking to defend that the pause is not continuing.
Javier says:
IPCC does. IPCC believes that GHGs explain >100% of recent temperature changes. That’s right, more than 100%. I already showed you but you keep forgetting it. You do that with things I demonstrate that you don’t like.
Since you are such a stickler for supposedly sticking to the facts only, then you need to admit that you are wrong on this one. The IPCC doesn’t believe, (BTW, believe is the wrong word to use here) what you say.
So Dennis is 100% correct when he says that:
“There is nobody that thinks only carbon dioxide effects climate change”
Human vs natural causes
According to the new report, there is now “incontrovertible evidence” that atmospheric concentrations of greenhouse gases have increased in the last 200 years, causing the average temperature of earth’s atmosphere and oceans to rise.
So much evidence now exists that the draft says scientists are “virtually certain” human activity is the main driver of climate change , which means they are at least 99 per cent sure. In AR4, the figure was lower – 90 per cent – so scientific certainty has increased.
There is “very high confidence” – which means that there is lots of evidence in agreement – that natural forcing affects the climate much less than human activity. Solar activity has had a cooling effect since 1980, the draft report suggests. (Bottom blue bar, below.) Compare this to the total warming effect from human activity, shown by the orange criss-crossed bar.
So no, the IPCC definitely does not say that GHGs explain >100% of recent temperature changes. What they do say is that GHCs are almost certainly having a significantly greater effect than all natural forcings put together! That contradicts your statement.
OK, Fred,
Now I will demonstrate this to you, but I hope that if you read this, you will not forget, because I have posted this already three times at least.
IPCC
Climate Change 2014
Synthesis Report
Summary for Policymakers
Figure SPM3. page 6.
The best estimate of the human-induced contribution to warming is similar to the observed warming over this period.
The IPCC believes that Greenhouse gases (green bar) have contributed more than 100% to the observed warming (black bar) between 1951 and 2010. They believe that natural variability contributed zero.
(you can right click in the graph to see it bigger or you can go to the linked document)
Ok, let’s think about this one for a moment ezrydermike, just take a look at the climate where you live. I live in Kansas and the hottest summer on record, at least here, was 1980. We had OVER 60 consecutive days then of 100+ degrees, with many of those days close to even 110 degrees. So then my question to you and the the other climate experts would be this: What should be the “normal” temperature for every location on the planet at any given time? Well, no one can answer that question, obviously. And therein lies the problem: A system as large as the earth’s weather with as many variables as it has is IMPOSSIBLE to predict, no matter how far back you look at the data. Daily temperatures are going to do as they do, no matter the external inputs.
On another note, according to the fossil and ice record, CO2 was as high as 7000 ppm during the Cambrian Period, yet life here on earth flourished, as witnessed by the enormous amount of dinosaur and marine plant life remnants we recklessly burn through for fuel now. The science has even proven global temperatures were about the same then as now. Please explain how this could be true, for no one has been able to do so at present.
We also must turn our attention in this discussion thread to the ice at both the north and south poles that has “smashed” through previous records here in the last few years, in spite of the official data showing last year as the warmest, warmer than the year before, which had been the warmest, and so on and on. These are things that cannot be questioned, as we can see what’s going on by witnessing the enormity of the ice fields in NASA’s own satellite imagery or in the number of polar bears in the wild, up to over 25,000 now from only about 5,000-10,000 in the 1950’s.
And lastly, no, I don’t watch Fox “News,” which shouldn’t require much intelligence to see is mostly paid propaganda supporting special interests, I instead read and study MANY different citizen science sources to get my information and I fact check it all.
Hi Jason T,
The temperatures of the past are estimated as best we can using proxies. The planet is very different from millions of years ago. The continents are not in the same places, the sun is emitting more energy and the carbon dioxide levels are not as well known prior to 800,000 years ago when there was no ice on Greenland or Antarctica. There are other possible factors such as Volcanoes, methane, different ocean currents, and albedo all which could affect the analysis.
We have a pretty good idea what global temperatures have been since about 1880, with the data getting better over time.
There are good explanations for increasing ice at the south pole with Arctic ice decreasing.
For Global sea ice see
https://www.ncdc.noaa.gov/sotc/global-snow/201511
The record for global sea ice extent was 1980 at 28.39 million square kilometers, in November 2015 the sea ice extent was 26.55 million sq. km. or 1.84 million square kilometers less than the record.
Where are you getting your information?
I would argue that as time and temperature database corrections go by we can be less and less certain about global temperatures during the instrumental era.
Case in point: The temperature difference between January 1910 and January 2000 in the GISS release of May 2008 was +0.45°C. This release had a 95% confidence interval of the order of ±0.1°C.
By November 2015, only 7 years later with a warming in the real world of less than 0.1°C, January 1910 and January 2000 were now separated by +0.70°C. The database had received 0.25°C of virtual warming in just 7 years, blowing the previous confidence interval out of the sky.
You can place as much trust on those databases as you please (just choose which version you trust as they change so much). I rather wait a couple of centuries to see what the proxies say about 20th and 21st centuries warming as surface temperature databases have become completely unreliable.
Source for the graph: http://www.Climate4you.com
Hi Javier,
I use the BEST data, there have also been corrections to the satellite data, should we also not trust that data because corrections to past errors have been made?
BEST doesn’t mean best.
You are assuming the changes correct errors, while it is perfectly possible that the changes are producing the errors.
I just don’t think you can add 0.25°C to the 20th century warming from one day to the next and don’t explain the basis for that drastic change. Perhaps I missed it. Do you know where are those 0,25°C coming from?
How can we trust those 95% confidence intervals with such rewriting of temperatures history? They are meaningless, just a statistical game on unreliable data or procedures.
The single most common fossil fuel topic on this blog is unconventional oil produced by fracking. Other fuels get less attention. I would like to present some info with the intent to broaden the discussion. The Baker Hughes rig count data breaks out data by trajectory. If we presume that vertical rigs are used primarily for conventional oil and gas, this data gives us a measure of the drilling for conventional resources. It seems that vertical drilling is rapidly diminishing. The last total was 81 vertical rigs. This is down from 300 at the start of 2015 and 409 at the last peak in May of 2014. This suggests a decline of 80%. Is it really possible that land based conventional drilling is down by this amount?
The BH report also break out directional and horizontal counts. We know that horizontal rigs are used for fracking of unconventional resources. I don’t know how the directional rigs are used but an understanding of that usage might add to our understanding of US investment in exploiting conventional resources. The last count for directional rigs was 64. This is down from 175 at the start of 2015 and 229 at a peak in June of 2014. This is a more modest 72% decline. The horizontal rig count is down by a still more modest 61%.
The last Drilling Productivity Report examines production from seven major unconventional basins. I totaled the data for natural gas expected across those seven basins. February 2016 is expected to be 43.7 bcf/d. This is down from the peak of 45.4 bcf/d in June of last year. This is a decline of 1.7 bcf/d. More importantly, their model expects 0.75 of that decline just in two months of this year from the December total. That rate suggests that we might see a decline 4.5 bcf/d or more over the next year. Obviously, I am not saying that this will happen. It is a simple extrapolation from the decline rate projected for the most current two months.
I read a report saying that withdrawal of natural gas from storage for heating is down 65% so far for this heating season. We are nearly certain to have a record amount left in storage at the end of the heating season. The last BH rig count targeting gas was only 148. This is down 55% from the start of 2015 and down 58% from the earlier 2014 peak. This is less than the declines we have seen for the oil directed rigs but the nat gas directed EP industry may be catching up with the oil side declines. It is likely that the counts will be continuing down for the near term future which may project an increasing rate of future production decline. We will see.
Per ND, rig count at 51.
I wonder how many are going to stack after finishing the current well?
The Director’s cut should be coming out any day. Wonder what Mr. Helms will have to say?
As to US onshore conventional, that production has been tanking since 12/14. Down about 200K bopd 12/14-6/15. That is a big drop considering it went from 2.6 million to 2.4 million. (This is ex-Alaska).
I suspect if these prices continue, US onshore conventional falls below 2 million bopd in 2016.
Shallow,
The ND govt site has drilling rigs at 51, as you say.
If we convert that to BH, we remove the 5 on MIRU, and the number of rigs on re-entry or work overs, (unknown to me). That puts the BH number of actively drilling rigs into the mid 40’s or less.
If you project that across the country, the BH number will be a real shocker. But that is what we need, capitulation from anybody drilling and completing, and a little time for those high decline rates to do their work.
You are only referencing shale production. Total gas production is dropping .6-.8 BCF/Day every month currently. When the latest drops in rigs start hitting, production is going to fall much faster.
John,
I do realize the gas numbers have been falling lately, but due to the large amount of gas that gets stored during the off season, the numbers get a bit muddy. The gas storage this year hit record numbers and the price hit record lows. There are reports of many companies choking production, Once demand finally increased in late December, in conjunction with more takeaway capacity out of the Marcellus, supply did increase.
We will have to wait a little longer to see if supply can maintain these increases, or if the producers struggle to refill storage over the summer. The gas players are reportedly have a greater number of DUCs, than than the oil players, so who knows!
Of course we all know Heinrich is predicting $20 mcf in six months. One of the problems with his prediction,is that the it is always the “next” six months!
Toolpush, John, Shallow Sand,
During all the years in the commodity business I have realized that money is the most important driver – and not the underlying technical concept. If the money is there, you have to do it, no matter how crazy the technical concept sounds. Shale oil and gas is here no exception. As equity capital and revenue from oil and gas is just a minor component in shale, the bond market is here the main driver. As long the bond market supplies the capital, production is growing. Below chart depicts the strong correlation between bond market and oil production. As the bond vigilantes just awoke in earnest during December, production starts to decline seriously over the next months. It is difficult to predict how far this goes, yet my gut feeling tells me that this is just the beginning. A spike of natgas can only occur over the winter months as then the demand curve is very stiff. So, the spike of natgas will happen either this year or next winter. Or we will get a smaller spike this year and next year the big one. However, natgas has in any case started a long term trend towards much higher prices as the bond market simply does not allow higher production.
Push
Companies in the Appalachian Basin are actually shutting in enormous amounts of gas from producing wells. Stone and Seneca alone are removing quarter billion cubic feet a day from existing producing wells.
Googling ‘Marcellus production shut in’ will pull up reports from several other companies. All this is in addition to merely restricting output from ongoing producers.
Slightly off topic, in a few days, Consol should report the much anticipated results of the most recent Deep Utica well (it is being flared/tested right now). It is located four miles away from EQT’s Scotts Run well – that has been flowing for several months at 30MMcfd on restricted choke.
This Consol well, the GH 9, is the deepest Utica yet at 13,400′ vertical with a 6,000′ lateral – twice the length of the SR’s lateral.
With the exception of Range’s Claysville’s Utica well with dramatically poor decline profile, the handful of other Deep Utica wells are showing exceptionally strong results.
Should this Consol well prove effective, and considering the fact that Shell has a dozen producing Utica wells well to the northeast in Tioga county, the Utica may yet show to be bigger than the Mighty Marcellus.
coffee,
Over the last decade I have seen many gas plays in the US going from extreme hype to complete depression. It started with Barnett and Fayetteville, then Haynesville, Marcellus and finally as the last man standing Utica. It is the nature of a bubble that the beginning looks fantastic. There is low debt and interest payments, no legacy decline rates and no impairments. Over time when legacy decline rates and depreciation kicks in, the going gets tough and tougher. And the legacy rates are extremely high for shale gas. So, shale has different rules than conventional gas and the shale rules let shale look very favorable at the beginnings versus conventional, which requires high upfront costs. However over time shale fundamentals look worse and worse. the collapsing bond market for shale and oil bonds is a serious indicator for the bad economics of shale. As a consequence it is just a matter of time until Utica will look not as good as it is today. The share price of shale companies and their bonds are waving the red flags. Hopefully you are not doing (investing) what you are saying.
Mr. Leopold
There is no question whatsoever that there is enormous financial stress affecting shale-related operators, the oil and gas industry globally, and governments throughout the world that rely on hydrocarbons for revenue.
Extremely low pricing will do that.
30 buck WTI/Brent is pretty low.
59 cent/mmbtu – as was the pricing at the Dominion South transfer point last week – is ridiculously low.
My observations regarding the size and recoverable potential of both the Marcellus and the Utica (not even talking about the shallower Upper Devonian with 100 Tcf recoverable according to Wrightstone Energy) is based on a whole slew of sources, not merely the ever optimistic E&P boys.
Rather than throw out speculation, one can offer the proven track records of recent production from wells in the Appalachian Basin.
The drop in pricing for natgas, and the follow on impact on the operators is a result of a SURPLUS of product.
How big and for how long this remains is to be seen, but incorporating extensive studies into the mix, such as the multi year long West Virginia University study on the Utica, might prompt one to recognize there exists many, many decades of natgas supply in the Basin.
I do not invest in any of this stuff, but a far seeing investor might incorporate the reality that a mini frenzy is underway to build several huge electricity generating plants in Ohio an Pennsylvania. The ultra low cost of fuel along with the latest iteration of combined cycle gas turbines (over 60% efficiency) enables providers to offer very low cost electric power.
This, coupled with the fact that three or four ethane crackers are projected to be built in the area in the coming years , may lead one to foresee an industrial renaissance in the northeast USA in the future.
Setting aside the hype and the montery aspects, their exists a near unfathomable amount of gas beneath the ground up there.
And, yes, I’m still wearing my life jacket around … waiting for the flood.
As I periodically note, the observed rate of decline in Louisiana’s total marketed gas production was 20%/year from 2012 to 2014, after drilling declined significantly in the Haynesville Shale Gas.
Woohoo… A new record. If the size of the quakes is anything to go by it is clear that fracking technology is improving.
Fox Creek fracking operation closed indefinitely after earthquake
Magnitude 4.8 quake rattles area, but no injuries or damage reported, energy regulator says
CBC News Posted: Jan 12, 2016 2:14 PM MT
I am looking at a three well non operated package of horizontal Wolfcamp wells in the Permian Basin.
What is interesting to me is how one well is much superior to the other two, despite being in the same zone.
Wells 1 and 2 were completed 3/15. Thru 10/15, cumulative oil barrels are 60,246, with 10/15 averaging just 67.95 BO per day. Gas cumulative is 128,577, with 10/15 average of 222.73 mcf per day. These numbers are for wells 1 and 2. First full month was 260.27 barrels of oil per day, 446.16 mcf gas per day.
Well 3 was completed 6/15. Thru 10/15, cumulative oil barrels are 108,157, with 10/15 averaging 675.68 barrels of oil per day. Gas cumulative is 327,100 mcf, with 10/15 average of 1,576.32 mcf per day. First full month was 1,017.06 barrels of oil per day, 3,101.35 mcf gas per day.
Looks like per AFE’s that the wells cost about $9 million per. Net revenue interest appears to be .80817744. The average of 7/15-10/15 OPEX (LOE) is $59,959.37 per month the entire working interest, or close to $20,000 per month per well. Calculating OPEX per BOE, assuming $20K per month per well comes to $6.34 per BOE for wells 1 and 2, but just 71 cents per BOE for well 3, for 10/15. I note that OPEX excludes non-recurring expenses.
Looks like oil sells at a discount to WTI of $6-$7 per barrel. Gas brings a slight premium to Henry Hub.
See how much LTO wells can vary, even on the same lease?
Further, see how a new, high IP well could really skew companywide OPEX per BOE? Stop adding those new, high IP wells, see companywide OPEX per BOE $ increase, IMO.
Again, anecdotal, but at least its real.
$6.34 vs 71 cents! And from the same lease. That’s mind boggling. Seems like IP is all important to economics of a well. But if drilling on even the same lease is a roll of the dice, what does that say about the future of LTO development? I guess they just count on having a certain percentage be really good to make up for the others.
They only talk about the good wells in the investor presentations IMO.
There are never guarantees when a well is drilled. Incredible mispriced risk IMO.
I think maybe people are getting it now?
shallow sand,
Without knowledge of the specific intervals the wells are completed in, comparisons are difficult.
In the Permian Basin, there are about 2,000 vertical feet of Wolfcamp shales. In order to make comparisons, one would need to know if all the wells are completed in the same Wolfcamp shale interval.
Perhaps you are privy to this sort of detailed completion and geological information, but from your comment I was left unsure.
What are the black lines in the Left Table?
It’s from Pioneer’s 2013 DUG Conference presentation.
See how much LTO wells can vary, even on the same lease?
Different number of stages.
Different choke setting.
Watcher
That is both the most accurate and yet understated comment of the day.
Factors such as landing of the lateral, placement throughout its 3,000’/10,000′ length, number of stages, distance between and placement of same, natural fissures and orientation of same, heterogeneity of formation, TOC/permeability/porosity, on and on.
Then there’s the fracturing process which includes amount/type of fluids, amount/type/size/quality of proppant, pressure obtained/maintained/varied throughout the several day process, number/placement/type of perforations or sleeves.
The skill of the personnel of a small army of professionals is relevant from start to finish and beyond as the performance/maintenance for several decades is crucial for the viability of each and every well.
All for thirty fucking dollars a barrel.
Sheesh.
shallow sand,
in your opinion, would OPEX of $20,000 per month be an average cost of operating an LTO well during flush period of the first six months or can it be projected to remain at similar levels two-three years forward?
B.C. government failed to properly consult First Nations on Northern Gateway pipeline, court rules
Gitga’at celebrating ‘huge victory’ after court rules province failed in duty to consult
CBC News Posted: Jan 13, 2016 1:12 PM PT
Off the immediate topic, but highly relevant to the larger sustainability issue.
The average age of women at the time of they have their first child is increasing, steadily.
http://www.npr.org/sections/health-shots/2016/01/14/462816458/average-age-of-first-time-moms-keeps-climbing-in-the-u-s
There are other links embedded in this one.
In a lot of countries the age at first birth is very close to thirty years, and my expectation is that most of these new mothers will not choose to have a second or third child, as they will be in their mid thirties by the time the first one is well out of diapers and into kindergarden.
With a little luck, population in most countries will peak a little sooner than most demographers expect.
Oldfarmermac,
I remember reading an article about birth rates and fertility in 17th century Spain. There were periodic bad times during that century that marked the end of the Spanish domination, with economical crisis and severe epidemics. The researchers were able to tie fertility to social crisis through parish records of marriage and births. When the times were rough women delayed marriage (probably they had trouble finding suitably prosperous mates) and had less children. These results look more solid because they are supported by similar findings in several other places and crisis, going into present time, like the Soviet Union crisis.
What it is interesting is that the same phenomenon is taking place in the present in many prosperous countries. As you say women are delaying having children (marriage and child bearing is now decoupled through birth control) so a relevant question is what is going on now.
It can be argued that even in prosperous countries like Spain, fertility has plummeted because women and couples face a similar situation. To have a child and push him or her through education into adult world and the job market requires a disproportionate amount of a couple resources to a point that every child detracts as much, proportionally, of a couple resources as during a crisis period of the 17th century. While a modern couple is not risking starvation by having more children, they are certainly risking their standard of living in a way they did not only 50 years ago. This argument is reinforced because the lower class dedicates a lot less resources to child rising and thus can afford to have more children without compromising their lower standard of living. It is also in agreement with social experiments like the British incentive to single mothers that has pushed single mothers birth rates to the highest levels in Europe.
Also we know that fertility rates are sticky. Once they change, they change for a very long time even if the conditions that provoked the change are lifted, and only return to pre-crisis levels very slowly. It is possible that daughters copy reproductive strategies from their mothers unless harder conditions discourage them from doing so.
Hi Javier,
Thanks, I am highly intrigued by the possibility that the daughter generation may copy the mother generation strategy and hope it turns out that way.
If OLD MAN BUSINESS AS USUAL were in robust health, we probably wouldn’t have any long term worries, as a species, because we would gradually just about do away with ourselves via lower than replacement birth rates.
It’s just too bad that the one time gifts of nature are going to be exhausted before that can happen, and that we are fast destroying so much of the biosphere as well, before it can happen.
My own professional background, and my personal studies as an individual, indicate that it is very unlikely that the current world wide population can survive the next century without a major dieoff.
It is not that we can’t produce enough food, etc, from a farmers perspective, but more a question whether the necessary inputs such as nitrates, phosphates, fuel for machinery, etc , can be supplied in adequate quantities TO farmers. It is also a question of the fast, ongoing loss of farmland due to mismanagement, the probably lack of water clean enough for irrigation in too many places, etc.
Climate change may or may not be a huge issue before the century is out, but it might also be a wash, as the climate in more northerly countries might actually improve in relation to agriculture. Or it might not even happen, to any real extent, for the next hundred years, although I personally believe it WILL happen, and sooner.
Supplying farmers with all the necessary inputs IS probably possible, from a technical point of view, but personally I very strongly doubt we can cooperate well enough on a global basis for this to happen.
I just don’t think we richer folks are going to be willing to extend THAT MUCH charity to the many countries with no means of paying back loans.
The better off people in richer countries may be willing to go along, because they will still live just about as well. There is essentially no real difference between the diet, or the day to day life, of a person in this country who makes seventy five thousand dollars, and one who makes several times more than that.
But when you get down to the people who live paycheck to paycheck, asking THEM to pay, individually, as tax payers, to support poor people they have never met and never will meet, is a different matter. When meat prices go up ,pay check to paycheck people have to eat more beans and rice, and less meat.
I just don’t see us rich Yankees, Germans,Limeys , etc, being willing to accept a substantially lower standard of living in order to save Egyptians, or any body else, from the FOUR HORSEMEN.
Oldfarmermac,
I adopt an opposite opinion to you on Nature’s one time gift, and I think maybe Ron is also going to agree with me on this one.
Nature’s one time gift (fossil fuels and mineral resources) is the curse that has allowed us to spread like a cancer, contaminating, degrading, and driving the entire biosphere closer to extinction. It has allowed us to evade Nature’s natural defenses (diseases) and limits.
If Nature’s one time gift had been a hundred times larger we probably wouldn’t have stopped until equally finished, but it would have allowed us to cause the extinction of so many living species and degrade and poison the environment so much as to jeopardize our own survival as a species.
Even though its ending spells death for a large part of humanity and a return to what we consider abysmal living conditions for the rest, the sooner it ends the better for every species on the planet, including ours. We should not be allowed to continue doing what we are doing. We lack the necessary restrain to limit ourselves from doing so much harm.
I don’t know what we will do with our intelligence but without the means to a material culture. Perhaps we will become more philosophical.
Hi Javier,
You may well be right , I would not even TRY to prove you wrong.
“If Nature’s one time gift had been a hundred times larger we probably wouldn’t have stopped until equally finished, but it would have allowed us to cause the extinction of so many living species and degrade and poison the environment so much as to jeopardize our own survival as a species.”
Only a person without any understanding of nature and human nature would argue otherwise, in terms of probabilities. But sometimes individuals and whole societies draw the right card to fill a nothing hand out into an “inside straight” to put it in terms familiar with the card game called “poker”.
BUT the wealthiest of all of us ARE reproducing at rates well below replacement level, and the richer countries, with the unfortunate exception of the USA, are mostly paying a LOT of attention(better late than NEVER!) to environmental issues. The USA is lagging, but even so, we are making some progress here.
Given that birth rates have fallen below replacement level in so many places, and continue to fall, it is POSSIBLE that the richer countries with falling populations, and EVER BETTER EDUCATED citizens, might collectively come to truly understand the grand scale environmental issues, and ” do the right thing”.
I argue that this is at least a theoretical possibility, but I think the odds of it actually HAPPENING are slim to approaching zero, for now at least.
Cultures do change , and sometimes they change so much as to be hardly recognizable. We got rid of slavery in the USA in the space of just four years. If our population were to fall to say one hundred million BEFORE we wipe out the environment, in North America, we MIGHT possibly by then have enough collective sense to preserve the REMAINDER of whatever is left.
” We should not be allowed to continue doing what we are doing. We lack the necessary restrain to limit ourselves from doing so much harm.”
I agree totally, with the caveat that IF we happen to be VERY lucky, the cards might fall in such a way that there is at least a slim chance our future offspring MIGHT develop the necessary restraint to save a substantial portion of the larger wild species etc.
It is good to remember than even the worst of the plundering rich one hundredth of the top one percent, often do things for THEMSELVES that sometimes in the end play out well for the rest of us.
The old noble and royal families of Europe for instance maintained private reserves for their own pleasure of the chase and the table, and so there are at least a half a dozen or so larger species still around in Europe that would no doubt otherwise be extinct.
I do not have any trouble envisioning a Bill Gates , or a KOCH brothers type, preserving a few square miles in the deep American south as a personal zoo, or hunting preserve, and keeping let us say orangutans , or tigers, or both, there for generations, maybe even for centuries.
But I would not BET on any of this coming to pass.
Hi Javier,
No doubt there is a correlation between energy and GDP, it is far from clear which way the causation arrow points, I can see reasonable arguments in both directions. The correlation does not answer this question.
If we consider Real GDP per capita in 2005$/person per year (horizontal axis on chart below) and Primary Energy per capita in boe/person/year (vertical axis). It is interesting that from 1977 to 2002 energy per capita was relatively flat( from 10.9 boe/person to 11.3 boe/person) while real GDP per capita increased from $6260/person to $9290/person. Perhaps such a plateau will be repeated while we transition away from fossil fuels.
Energy data from BP
http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
and GDP per capita data from FRED
https://research.stlouisfed.org/fred2/series/NYGDPPCAPKDWLD
Hi Javier,
The chart above used energy data that I could not find the source for (downloaded months ago), the correct chart is below and uses data from the sources linked above. The energy per capita is relatively flat from 1976 to 2000 (10.4 boe/person to 11.3 boe/person) while GDP per capita rises from $6000/person to $9400/person (2005$).
Dennis,
The graph I put was not energy versus GDP, but energy versus population growth.
I agree that the correlation between GDP and energy does not clarify causation. Probably at any time one of the two, usually GDP (the economy) is the limiting factor.
That the curve flattens, might indicate financialization and globalization, that can increase GDP in certain countries while reducing energy consumption. Energy consumption does not rise because it moves with the industry from one country to another, while the economy grows with the international trade.
Hi Javier,
Population and energy use are also highly correlated probably because more people use more energy and more energy allows more people to thrive. I showed energy per capita vs GDP because typically more income will also allow people to thrive (though income inequality is also relevant).
The trade does not matter on a World basis, it happens to reduce costs, if it increased costs it would reduce profits and the trade would not occur. Energy use would tend to increase rather than decrease due to transport of goods.
Also remember World trade is measured in dollars so the crash in commodity prices reduces world trade even if the same quantity of actual commodities is traded.
On services, your point is correct, a part of GDP increase is simply more services for health care and other services provided to consumers because more families have 2 full time workers and less time to prepare meals, clean the house, take care of the yard, etc and now some families pay others to do these tasks (where before they were not part of the market economy). Health care is the much bigger effect, and most of these effects occur in advanced economies. It is not clear how large this effect is, but numbers on World healthcare spending over the last 40 years would give a rough sense of this effect. There is also financial sector GDP which is a factor as well. Growth in GDP is probably not very large when all these factors are taken into account, but measurement is difficult.
What an outrageous claim.
No Javier it is not outrageous.
The claim is that as goods are produced in China, somehow on a World basis less energy is consumed. I don’t see it, if we take two identical cars, one produced in Japan and the other in Kentucky and each is sold in the US for $25,000 dollars, there is no reduction in energy consumed. In fact if the purchaser of the car is in Kentucky, there is a big difference in transportation cost for the car that is manufactured in Japan so I would say this results in more energy consumed rather than less.
To me the World trade argument for less energy being consumed is the outrageous argument.
As in most cases we will just have to disagree on that point.
World trade does not reduce energy consumed, if anything the energy consumed would tend to increase as production is offshored to less developed nations. In addition energy use tends to be less efficient in less developed nations, also tending to increase the energy used per unit of real GWP(gross world product) produced
I meant to say we are not going to be willing to save them by the tens and hundreds of millions. One man is a tragedy, a million is a statistic.
20,020 yen for a metric ton of oil in Japan today.
Divided by 117.69 yen per dollar, 170 dollars per metric ton. 170/7.3=23.30 USD per barrel in Japan today.
Okay, let us set the record straight:
2015: 57 GW of solar PV installed, clean energy investment hits highest ever levels
Clean energy investment
BNEF’s calculations also show investment in clean energies like solar and wind soared in 2015 to reach $329.3 billion, up 4% on the previous year, which attracted $315.9 billion. In addition to setting a new record, the figure is particularly impressive given the presence of four factors which could have acted as impediments to growth, says BNEF, namely: declining solar PV costs; a strong U.S. currency, EU economic weakness; and plunging commodity prices for fossil fuels….. [snip]
Michael Liebreich, chairman of the BNEF advisory board commented, “These figures are a stunning riposte to all those who expected clean energy investment to stall on falling oil and gas prices. They highlight the improving cost-competitiveness of solar and wind power, driven in part by the move by many countries to reverse-auction new capacity rather than providing advantageous tariffs, a shift that has put producers under continuing price pressure.”
I leave it up to readers of this blog to figure out why certain posters here find it so important to disparage renewable energy and perpetuate the myth that investment in renewable energy is declining. In another twelve days or so I expect to update my graphs on US electricity production up to November 2015 and in another six weeks or so I expect to update the annual totals to include 2015. It is possible that we may see something unprecedented that, may help to explain the behavior of certain people.
Graph below: Global clean energy investment 2004-15, $bn, Source: BNEF
Thanks Islandboy! Curious to know how much did renewables contribute to US total electricity in 2015.
It looks stalled to me on a global basis, and when you look with a little bit more of detail the growth in renewable energy investment by developing countries is compensating the fall by developed countries. Looks like on the long term they are not going to grow much more.
I am not disparaging at renewable energies, I just look at the facts to avoid wishful thinking. If you choose to believe that a successful transition is going to take place you will be disappointed when it doesn’t.
Hi Javier,
As many have pointed out the cost of renewable energy is decreasing so you get more for your dollar today than a few years ago. In addition coal prices have decreased in the past few years, making renewable energy less attractive (especially when pollution is not considered). Finally the important fact is how much energy is being produced with wind and solar, from BP data we get the following chart.
Dennis I distinguish perfectly between money and kW/h, but if you are transitioning you use maximum money for it, and thus at the very least maintain or raise the investment, with the increase in energy yield a bonus to transition faster.
The problem is that once a country reaches about 30% energy from intermittent sources, it becomes so difficult and expensive for the grid to handle the intermittency, that usually countries stop there.
Some countries, like Scotland, appear to be decided to go all in with renewables. We will see how that goes, but my impression is that they are setting themselves for huge problems when the weather decides not to cooperate.
Yair . . .
Javier
“but my impression is that they are setting themselves for huge problems when the weather decides not to cooperate.”
What problems? The world will learn to adapt. I used the welder and ran the shop flat out when the sun was shining and did less energy intensive tasks at night or in cloudy weather.
The forecasts are pretty good when it comes to wind and sunshine . . . you can plan ahead to some extent, what part of this don’t you understand?
Cheers.
This is the part that I don’t understand:
The Destruction of Scottish Power
It seems to me that Euan Mearns knows pretty well what he talks about there.
“In 2006, Scotland’s electricity system was amazingly robust. We had about 100% redundancy and ability to stand alone through almost any scenario – nuclear trips, drought, coal or gas shortages. Come next year Scottish Government policy has created a fragile system and one where we may be dependent on others to keep the lights on. The probability of pan-European cold and calm weather occurring in any winter is high, I’d guess close to 1. I do not have the data to estimate probability of nuclear trips, that is perhaps a question to be answered in comments. But the Scottish Government are aware of the risks their energy policy has created [1]:
However, there remains a low probability although credible risk that during periods of low wind and hydro output combined with low availability of the large thermal plant, the winter peak demand may not be met.
It is astonishing that the Scottish Government is taking risks with the well being of the Scottish people and economy in pursuit of renewable energy dogma.”
Perhaps you know more than he does about the Scottish energy situation, but you haven’t proved it.
The world will learn to adapt. I used the welder and ran the shop flat out when the sun was shining and did less energy intensive tasks at night or in cloudy weather.
Exactly! Why do people keep saying that it is a problem to use power when you have it available? What’s wrong with doing things by being more in tune with nature’s rhythms?
As any old time farmer could have told you that only an idiot would try to make hay when it was raining…
“Make Hay While the Sun Shines”
Yeah, why is this so hard to understand?
Hi Javier,
When the World gets to 30% power provided by wind and solar, fossil fuel energy will be more expensive than wind and solar.
If we have widely dispersed wind and solar connected by a grid, with the grid connected between nations, we simply need excess capacity to solve the problem of intermittency up to about 99% of load hours. The very occasional times when wind and solar do not provide adequate power, backup by batteries, fuel cells, vehicle to grid,or natural gas can fill in.
Or demand management through instant pricing can handle the problem, a display in the home shows the current price and consumers can set their thermostats to be turned back when the price is above some threshold.
There are solutions, though some people do not think things can change.
There is always change, this is a given.
I am not in the no change camp. There is going to be change, that much is true. Just not the change you are envisioning, because you are oblivious to the complexity of our civilization and how little it can adapt to serious disruptions before it starts to simplify itself with terrible consequences.
“…because you are oblivious to the complexity of our civilization…” I will have to either laugh of barf at that kind of shit statement. Talk about trolls, you really take the cake Javier.
I love your constructive comments, Doug. I have to recognize how much you add to discussions. Keep up.
Hi Javier,
Yes you assume there can be no transition to something different that includes renewable energy. I believe human society is more adaptable than you. As fossil fuels deplete their prices will rise and wind, solar, and nuclear power will become more competitive and eventually cheaper than fossil fuel because the price of all these alternatives will fall as they become more mature (thinking of pebble bed nuclear that is still experimental).
If we don’t assume that society cannot adjust to these changes, then there is a gradual increase in alternative energy used due to the change in relative prices as fossil fuel output gradually decreases.
As far as problems for the World as a whole, the problems with the transition will be ironed out in advanced economies first, then the technological solutions will be exported to the rest of the World.
None of this will be easy, the transition will take many decades and society will change, perhaps it will become less complex, my foresight is not that good. Perhaps less complexity will be chosen for resilience.
Javier said:
Various studies indicate it’s a good bit less than 30%, probably about 10%. That’s where Texas’ ERCOT grid began experiencing serious problems.
This explains the phenomenon:
As this does:
Hi Javier,
The common retort to the impressive gains in wind and solar power produced is that the total is about 1.5% of total primary energy consumed.
From 1900 to 1979, oil and natural gas output increased at an average annual rate of 6.6%/year. If wind and solar match that rate of increase for 66 years they will replace current levels of primary energy. This does not consider energy efficiency, declining population after 35 years (in 2050), and the fact that recent growth rates of wind and solar power (from 2008 to 2014) are about 25% (rather than 6.6%).
Scenario below assumes growth rates quickly decline from 24% to 8% over 9 years, then remain at 8% for 15 years and then fall to 6.6% until 2065. The high fossil fuel prices after the peak is reached and declining fossil fuel output will make wind and solar power very competitive and it will be ramped up as quickly as needed to meet demand for energy. In the future it will be wind and solar power that will be the low cost energy provider.
Dennis,
You are just extrapolating. A known cause for failed predictions. In this case you appear to ignore that intermittent sources of electricity create very serious problems to the grid. In Europe there is a big issue with Germany dumping electricity to their neighbours every time the wind blows hard and the sun shines. Essentially Germany has preempted her neighbours from further developing their renewable energies by getting there first, as they would be adding to a problem, not a solution.
Most countries are not capable or willing to interconnect as Europe, so the practical limit on renewables might be lower than most think.
In this case you appear to ignore that intermittent sources of electricity create very serious problems to the grid.
So what? This is an engineering problem that can be solved.
http://www.pri.org/stories/2015-04-07/when-grid-says-no-wind-and-solar-power-companys-technology-helps-it-say-yes-again
But it’s a different story in Germany, which gets a much bigger percentage of its electricity from wind and solar.
There, Triebel says, as the percentage of wind and solar-generated electricity on the European grid approaches 10 percent, there are “two systems fighting against each other.”
The old system of big fossil and nuclear plants is fighting against the new system of renewables and it’s actually putting something of a brake on Germany’s ambitious energiewende — its national transition from fossil fuels and nuclear power to renewables.
The problem is that the grid was built for that old system — a few big, predictable sources of electricity. Renewable sources, on the other hand, are relatively unpredictable. They come and go on nature’s rhythms, not humans’.
I’m sure I’ll get plenty of flack from the anti renewables folk for posting a link from http://www.treehugger.com/renewable-energy/germany-proving-renewable-energy-naysayers-wrong.html
However this paragraph pretty much sums up exactly what the anti renewables folk consistently fail to mention!
They say that the most dangerous lies have a grain of truth in them, and that’s the case here. Intermittency is a real issue that must be addressed, just like many issues had to be addressed to to make coal, oil, and natural gas viable sources of energy (the book The Prize by Daniel Yergin is a good history of the oil industry — we don’t always realize how much was invested in the industry, how many huge problems they had to solve, and how long it took to become mature).
So the people who are invested in an old way of doing things keep telling us that we can’t change and do things differently. Gee what a surprise!
Perhaps it can be solved. We don’t know. Our civilization has been built to work with high density, reliable energy sources, not with low density, unreliable ones. Clearly it is not an easy problem to solve or it would have been solved by now.
In any case solving it is certain to require time and have a cost. We don’t know if we are going to have that time, and we don’t know if we are going to be able to afford the cost. We are talking about a global solution, not a solution for the very rich.
As these are issues that are unresolved, I find it difficult to place my trust into a timely transition to renewable energies before fossil fuels are incapable of fulfilling their role. I must accept that perhaps it won’t happen, at least as a global solution.
Javier, your comments begs the question, with the situation being what it is, what are we to do?
Do we just party on, using all the technology available to extract all the remaining oil in an attempt to maintain BAU?
While we are speeding towards the cliff, do we just accept that alternatives will never suffice and since they are “too costly”, ignore whatever potential they have to produce at least some electricity some of the time?
In the event that we cannot expect “a timely transition to renewable energies before fossil fuels are incapable of fulfilling their role” is your attitude and that of those that oppose incentives for renewable energy, a self fulfilling prophecy?
It strikes me that if both of us had houses on the banks of a river that was undermining the ground on which the houses stood, you would get busy trying to reinforce the river banks and save your house while I would get busy trying to build a new house far away from the river!
Javier, your comments begs the question, with the situation being what it is, what are we to do?
Do we just party on, using all the technology available to extract all the remaining oil in an attempt to maintain BAU?
While we are speeding towards the cliff, do we just accept that alternatives will never suffice and since they are “too costly”, ignore whatever potential they have to produce at least some electricity some of the time?
In the event that we cannot expect “a timely transition to renewable energies before fossil fuels are incapable of fulfilling their role” is your attitude and that of those that oppose incentives for renewable energy, a self fulfilling prophecy?
It strikes me that if both of us had houses on the banks of a river that was undermining the ground on which the houses stood, you would get busy trying to reinforce the river banks and save your house while I would get busy trying to build a new house far away from the river!
Our civilization has been built to work with high density, reliable energy sources, not with low density, unreliable ones. Clearly it is not an easy problem to solve or it would have been solved by now.
Agreed!
So I see no reason why we can’t create a civilization specifically designed to work with less energy consumption and one that is more in tune with natural rhythms. There are lot’s of people I know that are working on precisely that. Most of them are under thirty. I happen to have a lot of faith in these people.
Javier, your comments begs the question, with the situation being what it is, what are we to do?
Do we just party on, using all the technology available to extract all the remaining oil in an attempt to maintain BAU?
While we are speeding towards the cliff, do we just accept that alternatives will never suffice and since they are “too costly”, ignore whatever potential they have to produce at least some electricity some of the time?
In the event that we cannot expect “a timely transition to renewable energies before fossil fuels are incapable of fulfilling their role” is your attitude and that of those that oppose incentives for renewable energy, a self fulfilling prophecy?
Hi Javier,
Nothing in life is guaranteed, except that it will end at some point.
What do you propose as an alternative to trying to solve the problems that are recognized?
We can grin and bear it. (Essentially stoicism.)
Or we can work towards finding solutions to intractable problems while maintaining a positive attitude.
There is no point, in my view, of giving up while the attempt at transition has barely begun.
Fred,
From the PRI article:
Much more here on what’s going on with battery technology:
“The Good, the Bad, and the Ugly Truth about Batteries”
http://debarel.com/blog1/2015/11/08/the-good-the-bad-and-the-ugly-truth-about-batteries/
I’ve also run across some references to Euan Mearns on batteries and what he believes to be their future feasibility, though I can’t lay my hands on them right now.
And from the Tree Hugger article:
Batteries seem to be the basket Team Green is placing all its eggs in.
We’ll see if that miraculous new breakthough in battery technology happens or not, or if it ends up being like waiting around 2000 years for the second coming of Christ.
Without a major breakthrough in battery or other electricity storage technology, Energiewende has pretty much gone as far as it can:
Simply use a mix of wind and solar, wind output is stronger in winter, in addition use heat pumps and better insulation to reduce heating demand in winter and raise prices during winter so people choose to set their thermostats to lower temperatures. Germany is not ideal for solar power, southern Europe is better, and North Africa better still, maybe HDVC undersea cables to Europe from Africa is a potential solution in the future. In the meantime, natural gas and nuclear can back up the solar and wind, it is not as if sunsets are hard to predict and weather forecasts are good enough to predict cloudiness.
Dennis,
Right.
So what do you do during a 9-day period like ocurred January 17 to 25, 2015, when electricity production from wind and solar fell to almost nothing?
Just sit at home in the dark and freeze?
Wind and solar require almost 100% backup from some other, more reliable source of power generation.
Hi Javier,
The extrapolation is a reasonable one, if one assumes there will be a peak in fossil fuel output. Every scenario of the future is an extrapolation of some sort. Assuming no growth would be an extrapolation at 0%.
Every scenario of the future makes assumptions about growth rates. I have used the past experience from 1900 to 1979 for oil and gas as a guide.
You can claim the oil and gas resources were plentiful. I would claim the wind and solar resource is plentiful as well.
Exponential growth is never a reasonable scenario as the physical realities soon impose limits.
Hi Javier,
Eventually there are limits. Oil and natural gas output grew at 6.6%/year for 79 years from 1900 to 1979.
So my scenario simply matches what happened in the past when we had far worse technical and engineering abilities.
You can claim it is not reasonable, I disagree.
I am not disparaging at renewable energies, I just look at the facts to avoid wishful thinking.
Actually Javier, it has never struck me that you “find it so important to disparage renewable energy and perpetuate the myth that investment in renewable energy is declining.” In the same way that you challenge almost every single post that refers to Global Warming as if it is a settled matter, there are one or two individuals who it seems cannot bear to see anything that is even remotely complementary of renewables.
I am also just looking at the facts and trying to discern the trends as they relate to the growth in the use of renewable energy. At some point renewabes may begin to make a discernible impact on fossil fuel use and in fact this may already be the case. We just have to continue to examine the data as it rolls in.
My county (Monterey ,CA) is getting a $850 million photovoltaic plant, courtesy of Apple.
http://www.ksbw.com/news/central-california/monterey/apple-building-massive-solar-energy-farm-in-monterey-county/31198622
The more the better. These expenditures will only give incentive for more innovation and mass production. I believe that most of those who na-say solar are those who live in very cloudy or far northern climes. I have quite a lot of shade at my house, so I am jealous also.
Total solar installation – 46 GW in 2014, 57 GW in 2015. Thats 24% growth. I am sure wind had similar numbers too. Its good that it required only 4% more money.
Gold to Brent ratio just went above 36, a new high, I keep weekly data going back to 1987 and the previous high of 35.37 was set back in 1988. The mean over this time is 16.43 and the median is 15.49. The correlation is .89. If Gold stays put, reverting to the mean brings oil up $70.
jimi dean,
A high gold/oil ratio indicates in my opinion distressed capital markets despite low oil prices. In 1987 the markets have been distressed due to the crash in 1987. However, this time financial markets are distressed due to the collapsing bond market for oil and gas bonds. In my view the ratio can go much higher this time as oil probably goes down more and gold will be soaring due to a complete breakdown of the shale bond market.
If the Japanese are paying 23 dollars for a barrel of oil and gold is 1085 today, you can buy 46 barrels of oil for one ounce of gold.
In 1910 gold dollars, 20 dollars per ounce, 46 barrels of oil would sell for about 45 cents per barrel to equal 20 gold-backed dollars in 1910. Actually, it is less than 45 cents per barrel.
So, in 1910 dollars, oil would have sold for 45 whole Indian Head pennies back then.
Go figure. har
Oil is selling at rock bottom prices or not?
But on the other hand empty 42 gallons barrel is several times more expensive than actual oil content that supposed to be stored in that same barrel. So the oil price is not at the bottom but even worse – negative 🙂
If anybody is interested, I posted some additional remarks involving GS and his arguments at the tail end of the Confessions of a Doomer key post.
“Obviously it’s been a rough road for U.S. Coal companies and the railroads transporting it” – New train infrastructure –
http://seekingalpha.com/article/3810376-csx-snapshot-for-the-long-haul?app=1&auth_param=5ufhh:1b9fh94:6aa5f9597cf5ae7b36f2ddfc155062fb#alt2
—–
The Donald was here in Pensacola last night and he’s going to get Mexico to pay for the wall and move all
auto plants Back to the US soil …. Mr Ford – BTW – you now have a 30% tax on imported cars.
Also The Donald went off on sanctions deal with Iran. How stupid it is to give them 150 Billion that we don’t have for making Nukes. On and on about lack of competency in State dept AND We will charge the Saudi’s for Protection. Sold out, Thousands of people were turned away at the door.
The environmental situation is VERY BAD, on the planetary scale, and going to get a LOT worse before it gets better.
It will get better, eventually,of course, maybe anywhere from a thousand years from now on up into the millions of years.
Orcas are now longer able to reproduce in European waters due to PCB’s accumulating up the food chain and poisoning them.
http://phys.org/news/2016-01-chemicals-threaten-europe-killer-whales.html
It is not out of the question, although it is VERY unlikely, that a large part of the human race may sooner or later find it self poisoned to such an extent it can’t reproduce either.
Hardly any of the tens of thousands of industrial chemicals have ever been well and truly safety tested, and virtually NONE have been tested in combination to check for synergistic effects.
Sometimes a small amount of two substances that are harmless in and of themselves become killers when both are present.
I cannot PROVE IT , personally, but I believe virtually every regular in this forum has lost several family members, friends and coworkers to early deaths basically due to pollution of various sorts.
Professionals in the field of public health, however , are putting together what appears to be a copper sheathed iron clad case that this is reality.
Speaking of humans being unable to reproduce, there’s this: http://www.independent.co.uk/news/science/scientists-warn-of-sperm-count-crisis-8382449.html
And this: http://andrologysociety.org/getattachment/2d3132da-b376-43e0-80e5-1ba52c158936/chapter-26.aspx (a more rigorous discussion of the matter)
Maybe, the human male will be so devastated by modern life that he won’t be able to procreate in the near future. The trends certainly don’t rule it out. I recall one researcher suggesting that this might actually cause humans to go extinct. Given what’s happening and at what level (few things are as fundamental to continued survival as successful reproduction which requires sperm), well, it’s worth taking somewhat seriously.
Anyways, whatever. BAU is awesome. All bow down before BAU.
😉
“I believe virtually every regular in this forum has lost several family members, friends and coworkers to early deaths basically due to pollution of various sorts.” I totally agree, many, many family members from Western Pennsylvania area died way too young.
Just some stories from the utilitydive.com web site that have some relevance as to the effect renewables may be having on the demand for gas and coal in the utility sector.
Solar moves ahead of wind, hydro in California fuel mix, toward 10% of state’s power
California Independent System Operator (CAISO) data shows solar is now the top renewables provider of electricity to the grid that delivers about 80% of California’s power and serves Southern California Edison (SCE), Pacific Gas and Electric (PG&E) and San Diego Gas and Electric (SDG&E).
Calculations from CAISO data show utility-scale solar power plants produced 15,591,964 MWh, 6.7% of the 231,965,326 MWh system total in 2015. Wind provided 5.3% percent. Drought-diminished hydropower was at 5.9%.
Distributed solar is not counted by the CAISO but if the estimated 467,200-plus privately owned smaller installations representing 3,655 MW were included, solar would likely be nearly 10% of the state’s electricity.
Solar and wind comprise 61% of 2015 capacity additions, gas contributes 35%
New capacity additions are slowing as efficiency and demand management techniques make new generation less necessary nationwide, and the new plants that are added are largely cleaner than in years past, SNL Energy reports.
A combination of wind, solar and natural gas made up the overwhelming majority of new capacity additions last year: Some 96%, according to SNL’s data. Coal and oil combined for less than 1%.
Those figures are similar to what EIA noted last year: that renewable power made up 70% of new generation in the first half of 2015. But SNL’s data appears to show gas additions made up some ground, ultimately consisting of more than a third of additions last year.
In the end, gas and wind together totalled 11,848 MW of the 14,468 MW installed in the U.S. last year — 82% of the total. 2,010 MW of solar made it the third largest resource in capacity added in 2015, with 14% of the total.
What utilities need to know about solar growth after the ITC extension
Cost-competitive solar: Utility-scale solar projects are increasingly being procured not because utilities have to meet renewables mandates but because they are beating the competition. It has become a driving force in the almost 19 GW utility-scale solar pipeline.
“We are tracking well over 7 GW that have been procured because they were competitive with natural gas alternatives,” Honeyman said. In areas where incentives, the solar resource, the cost to build solar, and the price of electricity come together, “we are very much in an era of cost parity for utility-scale solar as a hedge against natural gas price volatility,” Honeyman added.
For utilities facing potential generation shortfalls due to the need to retire coal plants that do not meet EPA pollution regulations, the appeal of cost-competitive utility-scale solar as a hedge will be accentuated, he said.
As solar becomes more cost-competitive, observed Solar Electric Power Association (SEPA) President/CEO Julia Hamm, it will “accelerate the deployment of other distributed energy technologies – such as storage, demand response and energy efficiency – which will provide even more opportunities for creating value for both individual consumers and the grid as a whole.”
I can see how, taken together, these stories could be the foundation of a great deal of concern among fossil fuel interests, especially coal. Renewables will set a ceiling for the price that can be charged for fuel in the electricity sector. If that ceiling is below the cost at which the fuel can be profitably produced, the business will eventually fail.
Texas is now more than 11% wind and growing very fast. Around 4 GW of solar is coming online in 2016 and 17 alone. Coal is dead already in the US and natural gas would also meet the same fate if the prices start to rise from the unbelievably low levels currently prevailing.
What an incredible set of innovations that allow one who lives in a sunny zone, to install photovoltaics on the roof, and charge up a passenger vehicle to give them perhaps 10-30 miles per day! Its taken along time to get here, but people are doing this now, more and more in places like California.
Check out this tool-
https://mapsengine.google.com/18248310654516396318-11002111014623044374-4/mapview/?authuser=0
And this one (still in development)-
https://www.google.com/get/sunroof#p=0
Maybe this is more relevant to the peak oil post from last week but I think the comment section there is probably moribund now, so:
New Wood Mackenzie study indicates 68 major oil and gas projects deferred, highlights are as below (note the numbers probably don’t include impacts from recent announcements of further cuts from PetroBras).
• $380 billion of total project capex deferred (real terms), from the 68 projects
• Of the $380 billion capex, delayed spend from the 68 projects from 2016 to 2020 totals $170 billion
• Deepwater hit the hardest: more than half of new project deferrals up from 17 to 29; 62% of total reserves; and 56% of total capex
• 2.9 MMbpd of liquids production deferred to early next decade, up from 2 MMbpd
• Oil most impacted: deferred liquid volumes up 44%, versus 24% for gas
• Average breakeven of delayed greenfield projects is $62/boe.
2.9mmbpd for $380 billion seems low to me – should be more like 5 mmbpd – so maybe the $170 billion “delayed spend” is the more relevant figure.
http://www.worldoil.com/news/2016/01/14/toll-of-oil-price-slump-mounts-as-68-major-projects-delayed
Armitage Shanks,
Thanks for posting this. It’s a look at what’s waiting down the line, and important.
$170 bn – is the amount that was expected to be spent in 2016-2020.
Another $210bn – in the next decade.
” 2.9mmbpd for $380 billion seems low to me – should be more like 5 mmbpd ”
They have calculated this number based on detailed analysis of the delayed projects, including planned investments and production volumes by year.
In fact, given the time lag between FID (final investment decision) and first production, these project delays will have zero impact on 2016 production and very limited impact on 2017-18 volumes. Even in 2019 the impact will be only about 200-250 kb/d. See the chart below:
(Source: http://www.woodmac.com/analysis/PreFID-2016-USD380bn-capex-deferred )
Hi,
Thanks for the link.
“Our tally now sits at 68 major projects containing 27 billion boe. This equates to US$380 billion of capex deferred by total project spend in real terms”
I know some of it is gas and some of it is oil and we should make separate calculations but am i right to assume the average capex per boe is $14 (380/27)? Does this ratio and result seem right?
http://www.marketwatch.com/story/cheapest-crude-oil-on-the-planet-can-be-found-here-2016-01-14?dist=afterbell
Cheapest crude oil on the planet can be found here
“The cheapest oil on the planet right now, with the possible exception of some very low-quality crudes, can be found in the Canadian oil sands, said Tom Kloza, global head of energy analysis at Oil Price Information Service. ”
[That’s so misleading, I can’t express my disbelief!]
http://www.marketwatch.com/story/shale-billionaire-says-oil-to-rebound-to-60-a-barrel-by-year-end-2016-01-14
Shale billionaire says oil to rebound to $60 a barrel by year-end
“Shale-oil billionaire Harold Hamm is calling for oil prices to double by year-end to $60 a barrel, a call in contrast to analyst projections that have crude sliding toward $20 or below.”
[Except that Shale drillers need $80 bbl, just to break even! Losing $20 per barrel or losing $50 bbl is still a loss! I suspect that he’s estimate will likely be right (about $60 by Dec 2016), due to a combination of more QE, and driller bankruptcies that cut production.]
“Hamm also reiterated his charge that Saudi Arabia and its partners in the Organization of the Petroleum Exporting Countries, or OPEC, are making a costly mistake in flooding the world with oil in an effort to force higher-cost producers, including those in the U.S. shale regions, out of business.”
[KSA reasons has nothing to do with trying to drive western oil drillers out of business. It about their widening proxy war with Iran. Hamm probably thinks everything in the world is about him and the shale industry.]
http://www.reuters.com/article/us-global-markets-idUSKCN0US03020160114
Bounce in oil prices lifts energy shares, U.S. stocks
[Oil prices barely increased at all today, and actually fell lower after the US stock market closed. Markets jump today was probably do to Bullard comments. I figured sooner or later the Fed would speak to slow down the sell off. I think if the S&P falls near 1800, Fed will start speaking about doing more QE. However, until the Fed starts injecting liquidity, the economy is going to continue to sink. There is simply too much debt, regulation, and offshoring for a true US recovery. As soon as the Fed ended QE, the US economy flat lined. ]
Mr. Hamm is still spewing his “GMO” type of opinions who is really flooding the market 🙂
$60 per barrel by year-end is wishful thinking (unfortunately)
Mr. Hamm is playing his record since day one and his CD is quite a bit scratched by now so any discussion on what he says is just “no added value” discussion 🙂
AlexS
“$60 per barrel by year-end is wishful thinking (unfortunately)”
FWIW: I going on the assumption that we will see a lot more QE before December 2016 that drives commodity prices back up. For instance if we look at 2009, Oil prices bottomed out around $34 in Jan 2009, but ended the year in December 2009 at about $74. The Fed started QE in March of 2009 and Commodities quickly rebounded. My guess is that will see a bunch of driller bankruptcies and significant decline in global production as lack of drilling takes a toll taking the slack out. My best guess is that the Fed begins QE4 between Feb and June.
TechGuy,
This time is different:
1) There was a significant output cut by OPEC members in 2009 (4 mb/d officially agreed, more than 2.5 mb/d actual), which I do not expect this time.
2) Global demand started to recover in 2H09 after a sharp drop during the the Great recession. This year demand continues to increase, but at a slower rate than last year, and growth in global supply continues to exceed global demand
3) I may have missed something, but I didn’t heard about QE in 2016.
On the contrary, there are talks about Fed rate hikes, which is not positive for oil prices
We know in advance the rate of growth for 2016?
We know forecasts from the IEA, EIA, OPEC and other agencies
AlexS Wrote:
“3) I may have missed something, but I didn’t heard about QE in 2016. On the contrary, there are talks about Fed rate hikes, which is not positive for oil prices”
In my opinion The Fed will reverse course, cut rates back to Zero and start QE4. Today, the NY Fed stated it would switch to negative interest rates if the economy continues to weaken.
Today is appears to be a blood bath, with the S&P falling by 48 pts and Walmart announced 154 store closures in the USA. I can’t imagine it will too long before the Fed begins to act. It would surprise me that the Fed cuts at its next meeting in about 2 weeks.
AlexS Wrote:
“Global demand started to recover in 2H09 after a sharp drop during the the Great recession.”
Yes, As I stated Oil prices began rebounding after the Fed Began QE in March of 2009. I expect more of the same once the Fed restarts QE again.
AlexS Wrote:
“There was a significant output cut by OPEC members in 2009 (4 mb/d officially agreed, more than 2.5 mb/d actual), which I do not expect this time.”
Since Rigs are dropping off the map, I think we could see at least 1 mbpd disappear as Oil Bankruptcies, and lack of drilling cause global output drops, even if OPEC doesn’t cut. Its also likely they depletion will start taking a toll in the Middle East. I believe Saudi Americo has cut CapEx. SA need to spend lots of $$$ to support its massive infill drilling since it needs to target oil trapped in pockets since the its remaining Oil is floating on a sea of water. It wouldn’t surprise me that KSA exports fall do to lack of CapEx.
Perhaps Oil prices won’t rebound all the way to $60, but it reasonably confident prices will be significantly higher in Dec 2016, that they will be in Jan 2016.
Hi AlexS,
Do you think the futures market accurately predicts future oil prices?
I think the EIA short term forecast is simply based on the futures market which is very volatile, $60/b or higher by the end of 2016 seems a reasonable guess.
What is your expectation? Less than $50/b between now and Dec 2016? (this is for monthly average price rather than the entire period and in 2015$.)
Question for Javier
[NOT about climate change]
http://www.fox5ny.com/news/74421079-story
Hurricane Alex forms in the Atlantic
“According to the National Hurricane Center, Alex is the first hurricane to form in the month of January since 1938′
What are the odds that this year will be a major hurricane season? Perhaps surpass 2005, in number of storms and power? Whats your thoughts & opinions? -Thanks
Hi TechGuy,
I don’t know if the odds can be calculated. We are presently enjoying a pause in hurricanes that lasts since 2005, but that pause has to end one year with a return of lots of hurricanes. I just read a very interesting article on hurricanes and sea surface temperatures over Judith Curry’s blog Climate Etc.
ACE in the hole
The author makes a point comparing the situation with a similar pause in hurricanes that took place before WWII, following the famous 60 year cycle in climate, and says the following:
“There is a stronger correlation between ACE [Accumulated Cyclone Energy] and SST [Sea Surface Temperatures] during the two major warming periods of the 20th century than in the plateaux or cooling periods. SST is not the single dominant factor determining cyclone energy…
There is an indication that the drop in North Atlantic hurricane activity which apparently occurred during the pre-WWII warm period is repeating during the current temperature plateau.”
One cannot make much of a single statistical occurrence, but if past is prologue, there could be still a few more years before the Hurricanes return in force, and years as bad as 2005 might not be that common.
Shallow Sand,
These 2 articles oughta make you happy:
http://sputniknews.com/business/20160111/1032954003/iraq-oil-prices.html
http://www.telegraph.co.uk/finance/economics/12100609/Glimmers-of-hope-for-oil-as-Russia-poised-to-slash-output.html
Hey, thanks Kellyb.
I saw rig count in North Dakota hit 49.
Any thoughts on how long Gulf OPEC members will hold out?
Too early to be happy:
Russia plans to repeat last year’s oil production record in 2016 — minister
MOSCOW, January 14. /TASS/. Russian oil producers plan to repeat the last-year production record in 2016, Energy Minister Alexander Novak said on Thursday on the sidelines of 2016 Gaidar Forum. “Our companies say now that production volume in 2016 will be kept at last-year level,” the minister said. Russian oil companies produced record-breaking 534 mln tonnes of oil in 2015, up 1.4% year-on-year, according to data of the Central Dispatching Department of Fuel and Energy Complex.
More: http://tass.ru/en/economy/849744
Based on daily production numbers for the first half of January from CDU TEK, it seems that this month will see another post-Soviet record oil production in Russia.
The article is misleading. Given the current tensions between Iran and Saudi Arabia the likelyhood of any OPEC agreement on output cuts is very low. How can Russia discuss output cuts with OPEC, if there is no accord within this organization.
Are you serious? They only expect production to be flat next year? I would have thought they would expect another increase.
At any rate they are expecting exports to drop rather dramatically.
Russia could cut oil exports by 6%
State-owned oil transportation monopoly Transneft says Russian oil companies have applied for 215 million tons of crude exports in 2016. This is 6.4 percent less than last year, business daily Vedomosti reports.
In 2015, the situation was the opposite for Transneft, which accounts for almost 90 percent of Russian oil shipments. The company transported seven percent more oil than in 2014.
“It’s hard to say what caused the drop in export applications. There is no evident reason for oil production to fall in Russia,” EY’s (Ernst & Young) Moscow oil and gas director Denis Borisov told Vedomosti….
Experts say the fall in Russian exports could nonetheless indicate a fall in production. “With current low oil prices, 2015’s record high oil production will not be continued in the near future,” said analyst Aleksandr Kornilov.
The fight for Europe could intensify even more, once sanctions against Iran are lifted and the country resumes oil exports. Europe is a key market for Tehran, and if it cuts prices Russian companies could lose more market share.
Russia’s willingness to cut oil production could also be a signal to Saudi Arabia. Moscow could be testing to see if OPEC can agree to do the same in order to stabilize sliding crude prices. At this point, Riyadh has been unwilling to cut output despite pleas from other OPEC members.
I am not predicting anything. But I when Russian officials say something to the effect: No we will not increase production in 2016 but intend to keep product at the same level as 2105…., I believe that says enough right there.
A reduction of oil exports from Russia in 2016 is not planned, said the Minister of energy Alexander Novak. “Transneft gives some predictions on the basis of applications of companies for pumping oil. During the year they are changing,” he said. The Russian Ministry of energy also predicts an average annual price of oil in 2016 in the range of $30-50 per barrel. Novak also said that the representatives of the Ministry of Energy of the Russian Federation are ready to hold a meeting with representatives of OPEC to discuss the current situation on the market, however, there were no agreements or contacts with them. “In principle we are ready to meet and to discuss with them the current situation. But we didn’t have any contacts”. Answering the question about a possible meeting of Russian representatives with OPEC in February-March this year, the Minister said: “No, there is no agreement yet”. The Minister added that in the first place, “OPEC members have to decide when they will hold their summit.”
Translated from Russian. Source: http://tass.ru/ekonomika/2587651
In the beginning of last year, the Energy Ministry was projecting 2015 production at 523.5 million tons, generally in line with 2014. Their projections were gradually increasing and the final number was 533.66 mtons.
They are always very cautious in their forecasts.
Alex,
Expected reduction of Russian oil exports via Transneft pipelines is estimated to be 6.4% in 2016 (http://ura.ru/news/1052236495)
==== start of quote (Google translation) ===
Russian companies plan to pump for export via the Transneft system is 6.4% less oil than last year — of 215.8 million tons.
The companies plans to reduce exports in the new year surprised experts. Director, Moscow oil & gas center EY Denis Borisov said that there are no obvious prerequisite for a drop in production of black gold in Russia yet. “It’s hard to say what caused such a drop in export”, — quote “Vedomosti” the words of Borisov.
Deputy energy Minister Kirill Molodtsov noted that these figures are based on preliminary applications, which are compiled according to conservative projections and for the year may change. Couscous preliminary requests by companies is explained by the principle “pump or pay”: if the declared volume of oil is not pumped, they will have to pay a fine.
According to the Director of the “Small Letters” Vitaly Kryukov, the possible reduction of oil exports indicates that companies can reduce production. Senior analyst of “Aton” Alexander Kornilov agreed that at current low oil prices, record oil production in 2015 will not happen again in the near future.
A strong decline is observed in West Siberia (the main mining region), said Vitaly Kryukov: the main mining asset of Rosneft, Yuganskneftegaz, has reduced production by 3.3% to 62.4 million tons, “LUKOIL — Western Siberia” — by 6,1 % to 41 million tonnes.
I have no idea really but my theory is saudi wanted to see U.S. production and investment come down enough, which it certainly has, and cuts were put on hold the last meeting to get Russia onboard. I remembered you saying a few months back that everytime in the past OPEC had always cut xx amount of time into a crash. I think it makes sense, Brents currently at 28.58 the OPEC basket is at $25. A 1 mmbpd cut would probably get us to 45, maybe 50. At $50 I dont see shale ramping up enough to increase production.
I think we’re in a situation where at some point we’re gonna see prices rising and production continuing to fall, which will push prices even higher as talk of a future shortage starts up. That’s assuming demand doesn’t fall, but thus far china and india consumption have been increasing significantly. China was up 10% yr over yr for december and India fuel consumption rose 8.3% yr over yr.
AlexS. I have been surprised by the lack of US demand growth, given I have seen gasoline for sale as low as $1.49 US.
Maybe that will change when spring hits.
As I have said many times, we
are part of a very small minority in the US that want higher oil prices.
My view is the oil war between OPEC, Russia and shale hurts all and helps none. But, of those three I suppose OPEC is damaged most, followed by Russia and then US. US economy is going to take a hit, but likely least of the three.
However, when oil again spikes due to low investment, OPEC and Russian economies will rebound greatly.
Too bad there is so much volatility in all markets. But also too bad there is so much hostility between governments.
shallow sand,
There was actually an increase in US consumption in the first 3 quarters of 2015.
But demand for oil products in general, and gasoline, in particular, has relatively low price elasticity. So the increase in demand was modest in comparison with the sharp drop in prices. Furthermore, in 4Q15, the effect of lower gasoline prices started to fade. Apparently, U.S. consumers are spending their gains from cheaper gasoline on other goods and services.
This year, the y-o-y decline in average gasoline price will be smaller, and growth in consumption will slow further.
U.S. retail gasoline prices (all grades, $/gal) vs. year-on-year increase in gasoline consumption (%)
Source: EIA STEO January 2016
Hi AlexS,
I think the lag is longer than the EIA uses in their model. All of those SUVs that have been purchased will push up consumer demand once the summer driving season hits in May, if the EIA’s price forecast for gasoline prices is correct (I think it is a little low). We will see, the EIA changes its forecasts monthly so by April they might be predicting something very different.
Dennis,
Growth in U.S. gasoline consumption last year (+2.6%) was unusually high compared to previous several years. This year, the EIA expects it to be slower, but still above average (+0.8%). I know about growing SUV sales, but there are other factors: high 2015 base, continuing improvements in vehicle fuel economy, etc.
By 2017, the EIA expects gasoline consumption growth to decline to just +0.2%. This indeed looks conservative, in my view. Probably, their model assumes that the effect of low oil prices will be exhausted by that time.
Below is a quote from January 2016 EIA STEO:
“Motor gasoline consumption increased by an estimated 240,000 b/d (2.6%) in 2015 to an average of 9.2 million b/d, the highest level since the record of 9.3 million b/d in 2007. Although total nonfarm employment and total highway travel since then have increased by 2.9% and 3.7%, respectively, improving vehicle fuel economy continues to keep gasoline consumption below its previous peak throughout the forecast period. Gasoline consumption is forecast to increase by 70,000 b/d (0.8%) in 2016, as employment and population growth offset continuing improvements in vehicle fleet fuel economy. In 2017, motor gasoline consumption is projected to rise by 20,000 b/d (0.2%).”
U.S. motor gasoline consumption
Source: EIA STEO, various issues
In fact, US gasoline consumption has been declining in 4Q15, and year-on-year change entered negative zone since the end of December.
Y-o-y change in 4-week average U.S. gasoline consumption
Hi AlexS,
Well we will see. I have read that US consumers have been saving the extra money gained through lower gasoline prices, perhaps because they believed this was a temporary windfall. The longer gasoline prices remain low, the less tendency for consumers to buy fuel efficient vehicles. I believe the fleet fuel economy may have reversed with the lower gasoline prices, so I believe the EIA forecast may be wrong on gasoline demand.
The winter months tend to be low months for gasoline demand, 2014 was an anomalous year due to the steep fall in gasoline prices the winter of 2014/2015. It will be interesting to see what happens during the summer driving season if gasoline prices remain close to $2/gallon (about $0.5/liter) and the economy is not in recession. Only a recession will keep gasoline prices and gasoline consumption as low as the EIA forecast, in my opinion.
Kellyb,
Brent is at $28.58?
This oil decline is a genius move by the US foreign policy . Had oil stayed over 100 the Fracking fools would have pumped the things dry and the Baaken and Eagle Ford would be looking like the Barnett in a few years. That being said, this part of the strategy engineered to hurt Russia can only last another six months or so. Stripper wells shutting down in mass would be a permanent loss of production and cannot be be allowed. Its better to keep the Fracking oil in the ground now where it can act as a second “strategic petroleum reserve” to keep OPEC from getting too greedy. The Saudis really screwed up. Had they let oil stay over 100 the Emperor would have been truly naked in a few years. This way the threat of a renewed fracking push keeps things tame for a while.
I’m thinking you don’t have much understanding how things work in this world. In other words- intellectually you need to get out more.
“This oil decline is a genius move by the US foreign policy” that is funny.
BHP takes a hit on shale.
http://www.cnbc.com/2016/01/14/bhp-billiton-books-72-billion-writedown-us-shale-assets.html
Oil slides to US$29 a barrel, deepening gloom for global stocks as China enters bear market
International sanctions on Iran may be lifted Monday, allowing for a boost in oil shipments from the fifth-biggest member of the Organization of Petroleum Exporting Countries. Iran is trying to regain lost market share and doesn’t intend to pressure prices with an export increase once sanctions are removed, officials from its petroleum ministry and national oil company said this month.
Or maybe Iran has no spare capacity at the moment.
$29.69 now, down a dollar and a half. The price is a lot closer to 20 than it is to 50.
At 20 dollars, the price of gasoline will be a dollar per gallon and less.
It will be heaven on earth at that price.
49 rigs in the Bakken, two dtermined, 47 undetermined.
https://www.dmr.nd.gov/oilgas/riglist.asp
Coal can be 4 dollars per ton, that will help build more modern power plants using coal, scrubbers sequestering carbon at the source and not spreading it far and wide out the smokestack. Burn coal more efficiently, beats wind and solar, when you pass by a coal-fired power plant, it is easy to see where the real power is, what really does lift the barge and tote the bale.
When you drive by the wind towers and they are not turning, which is at least fifty percent of the time, it is easy to see that they’re not doing a thing to help, it will be a crisis, not enough power, in fact none.
Wind and solar are wholly dependent on fossil fuels. As an energy source that is used for everyone’s benefit, fossil fuels are irreplaceable, nothing is better or even close to better.
Wind and solar can only augment the energy supply, they will never be able to replace fossil fuels. The gear boxes of wind towers need a thousand gallon bath of gear oil, otherwise, the thing flies apart. They need oil to operate. With an inventory of 168,000 wind chargers, you have to have 168,000,000 gallons of oil, divide by 42, 4,000,000 barrels of oil in those wind towers. Not that much, but you still need it just the same. The lubricants need changing, so the total over the lifetime of the wind tower will be several times. It is renewable energy only with the help of fossil fuels, without oil and coal, wind towers are dead in the water. Some say it is superfluous, not needed at all, just giant toys. Need energy in the worst way to be manufactured and installed.
You need fossilfuels everywhere you turn. Period.
Wind power forces coal burning power plants to use more fossil fuels, not less.
Wind turbines con of the century:
http://connexionfrance.com/wind-turbines-con-of-the-century-letter-france-10888-news-article.html
You make hay while the sun shines and at night you burn coal to manufacture more light.
The jury is still out on renewables, the verdict is staring everyone in the face. You don’t need renewables at all and are now a burden to users, consumers. That is the verdict, unacceptable as it is, it is a fact.
Hi R Walter,
If there is never a peak in fossil fuels, then renewables will never be needed.
The premise is incorrect, so the conclusion is also incorrect.
As we overload the atmosphere with CO2 more and more heat is trapped and our planet warms in response. Therefore, endlessly producing more and more CO2 is untenable so your premise that renewables would never be needed is incorrect and your conclusion is incorrect. 🙂
Hi Doug,
Though I agree, I don’t think global warming is needed to prove the argument.
There are many here that agree with the peak fossil fuel hypothesis, but are not convinced that climate change is an issue.
I am going for light, rather than heat.
Hi Ronald,
Generally speaking, I read most of your stuff as sarcasm, or humor, or serious wisdom couched in Oracular terms – meaning the meaning is there, but only if you search for it, and when you find it, it is not usually at all what you expect.
But this time you have posted a link that is just flat out bullshit misdirection after the style of MR GS.
From your link:
”
2. Coal, gas and oil stations produce the most carbon dioxide. Bringing these stations on and off line to match the fluctuations of wind power makes them run less efficiently and use more fuel than if they ran continuously.
3. The more wind power generation capacity that is installed the more reserve generation capacity is needed to cover it. Thus rather than reducing the use of polluting fuels, increasing wind power generation capacity in France will increase the use of other polluting fuels and carbon dioxide production. ”
It is true that a plant running less than flatout runs ” less efficiently” in dollars and cents terms,and a little less efficiently even running steady state at less than capacity and that a plant ramping up or down uses fuel a little less efficiently while ramping up.
BUT it is WRONG and intentionally misleading to say that having wind and solar power on a grid results in the the utility having to use MORE instead of LESS coal and gas. Does the link actually say this? Lawyers could argue this for months.
There is no question in my mind that the IMPLICATION is there, and INTENTIONALLY there.
It is also wrong, and intentionally misleading, as a general rule, to say that as more wind and solar power are added, MORE backup generating capacity must be ADDED to compensate for the variability of wind and solar power.
NO- as a general thing, the utility must be able to manage peak loads, and in the abscence of renewables, that fossil fuel capacity would NECESSARILY EXIST—–even in the COMPLETE ABSENCE of any wind and solar power.
It is true that the mix of coal and gas generation works best with renewables when coal is gradually used less , and gas is gradually used MORE , as wind and solar power are added to the grid, because gas ramps better than coal.
In ANY CASE, a ” hot spinning reserve” IS ALWAYS NECESSARY, because ANY generating plant can go offline at any time due to accident or equipment failure. The only real exception to this rule is if there is some hydro running at less than capacity, because hydro can ramp up really fast.
IT is probably true that it is necessary to maintain a SOMEWHAT larger hot spinning reserve to compensate for UNEXPECTED fluctuations in wind and solar output. But reality is that electrical utilities are CONSTANTLY ramping up and down, day in, day out, forever and ever, even when the sole generating plants are nukes and coal. In that case they ramp the nukes a little, sometimes, and the coal a hell of a lot. NUKES contrary to the perception of most folks CAN be ramped a little, slowly, in order to match the daily demand pattern. In France, they do this routinely.
( Fuel for nukes is so cheap that the usual practice is to run them flat out around the clock if at all possible. This means coal and gas and hydro are RAMPED DOWN to allow nukes to stay on line at one hundred percent, as the usual thing, in the WEE hours, or any other time, when demand is low. The anti renewables folks NEVER mention this of course. )
So , yes a LITTLE more gas is needed while ramping up a gas plant, and it uses it less efficiently, for the duration of the ramp up, BUT OVERALL, the MORE wind and solar power is on a grid, the LESS coal and gas the utility uses.
An exact figure is apparently impossible to come by, but as best I can tell, adding about five percent wind and solar power to the USA grid has resulted in reducing our combined national consumption of coal and gas for electrical generation a little more than four percent. The reduction might be even greater, because a lot of places have suffered from lower than usual hydro generation over the last few years, resulting in the use of a little more coal and gas to make up for the hydro shortfall.
The HONEST bottom line, as best I can tell, is that every five percent or so of wind and solar power we add to the grid reduces coal and gas consumption by around four percent, at least , and probably MORE.The better we get at predicting weather, and the more interconnections are made, and the more wind and solar farms there are, the closer the savings will be to one for one.
An HONEST assessment of the back up capacity problem, and the back up issue from the pov of a utility, is that the utility has a business plan based on running its existing coal and gas ( and maybe nuclear plants ) at a certain level, thus generating a certain amount of revenue. You can’t make money with a restaurant , or a hotel, unless you do enough business, and you can’t stay open without the USUAL amount of business.
There is NO question that renewables cut sharply into the revenue stream produced by legacy coal and gas plants, and that utilities ought to be, and must be, compensated in some fashion for this loss.
BUT- and this is a very big but- this is a political and economic question, as to HOW to compensate them. It is NOT an engineering question.
So far as I can tell, only a technically illiterate fool would argue that utilities CANNOT adapt to substantial levels of intermittent renewable wind and solar power- if properly compensated for the expense of doing so. This obviously requires some serious investment in infrastructure and management, noboby with a brain disputes that.
http://blogs.scientificamerican.com/plugged-in/texas-sets-new-all-time-wind-energy-record/
“Wind provided 40 percent of Texas’s electricity for 17 straight hours one windy day in December. ”
The duration of the record is a big deal because it shows that the rest of the Texas grid can handle a whole lot of wind energy for an extended period of time without suffering instability or brownouts that some predicted. Texas was able to balance the intermittent wind because it has a lot of natural gas power plants, which can adjust their power output more quickly than coal-fired power plants. Considering this fact, it seems like a happy coincidence that market forces are transitioning the U.S. electricity system toward a mix of renewable energy and natural gas.
It can be done, and it WILL be done, more and more as time passes. Wind and solar power CAN be grid integrated.
Texas , that old standby redneck republican state, so often made fun of by snooty liberals, is leading the way in renewables.
They are building new wind capacity on the coast, where the winds are better in the summer time, to help balance the load when the wind farms in the far reaches of the state don’t do so well.
Texas is going to have oil and gas to export to other states, because Texans aren’t going to have to burn it to support the local economy. ( They will have electrified cars as soon as anybody and sooner than most. )
This one is for a laugh for those who believe in renewables.
Suppose GERMANY had a TEXAS climate, at a TEXAS latitude, and TEXAS empty spaces ?
By now the idiots who insist renewables just can’t giterdone would simply HAVE TO SHUT UP.
Yeah, I was all wrong, doubt was cast. Then OFM said it was all bullshit, that hurt so much, I started to cry, was inconsolable, the beer helped a lot, so I got over it. You have to admit, though, it was real nice bullshit, the very best bullshit out there.
Some testimony: https://www.illwind.org/index.php/
Some folks negatively impacted by wind chargers will disagree, they have paid a price, they can’t sleep in their homes, in one instance, ended up sleeping in the root cellar, the only refuge from the infrasound generated by the wind tower blades. Some humans cannot tolerate the noise and flicker. An environmental nightmare for them, literally.
Mankind just doesn’t know when to quit. Hells bells, man drains contaminated water into rivers, turns the river pure yellow. God only knows what else is in the water. If you live in the United States, don’t drink the water.
Been at peak for a while now, the Doubting Thomases are expressing their views, they have their say about it all. Peak Doubters are a new breed of the Peak Oil phenomenon. Dennis is a doubter of the when of the peak, had a whole post about it all.
Hey, I am a full-fledged Peak Oiler, completely stigmatized to the pariah stage.
Those that don’t believe in peak oil think I’m full of shit right up to my ears. Anything about peak oil being controlled by geology, to them, it is all bullshit, there will always be oil and anything else is just pure bullshit. Heard it all too many times. They look at you like you’re full of shit.
I worded it all to be provocative. I don’t have to buy any of the bullshit, I will not submit to any bullshit, nor should anyone else! ?
To be sure, not to be divisive, not to foment discord, just to create some controversy. Have to see eye-to-eye, not all of the time, just some of the time.
I can recognize the fact that wind power does actually produce usable energy in the form of electricity, simply by the numbers, the strength in them, is proof enough. Easy to see eye-to-eye there, with no regard for consequences, it is all good. However, dependence on tax credits, ends up, it costs the consumer more. The consumer is forced to subsidize renewables. It all adds up to more in the long run. That is no bullshit there.
There are human costs as well, humans get tired of hearing all of the bullshit about the benefits of wind farms, once they see what happens, they then know they have been flimflammed. Then ennui sets in, hopelessness, despair, you give up.
Yes, I was wrong, well, maybe, all bullshit, except for the part about the consumer pays more to support renewables. That part is true, a fact, money that was once available but no longer is, it must pay for renewables. Ends up a negative. That is a fact.
I’m just trying to be rational and reasonable, that’s all.
For it to be Glen-esque is over the line!
That means war! har
Old Farmer Mac did pick up on that, have to give credit where credit is due. lol
Hi all,
Others have probably pointed this out, but a couple of articles I have just read suggest the strengthening of the US dollar may drive oil prices lower, to possibly $20/b. I still am skeptical, but let’s consider what this might do to US output. I expect we would see turmoil from the LTO sector and a lot of conventional stripper wells might get temporarily abandoned. Let’s assume the worst and assume a 30% annual decrease in all US onshore output from the lower 48. I believe this is about 7 Mb/d in 2015 (roughly), so this would mean the average output in 2016 would drop by 2 Mb/d from 2015 average output levels (this is C+C output.)
If that estimate is correct for an oil price at $20/b, I believe this would bring the oil market back into balance pretty quickly and this does not consider the effect on other oil producers, prices this low might make OPEC take action or at least reduce investment throughout the World. Without ongoing oil investment decline rates everywhere will increase, so the 1.2 Mb/d decline estimate at the World level for 2016 compared to 2015 (yearly average CC output levels) may be conservative at an oil price of $20/b.
Note 2015 was about 9.4 Mb/d average, so this would be an average 2016 level of about 8.2 Mb, with output falling from 9.2 Mb/d in Dec 2015 to 7.2 Mb/d in Dec 2016 (we will assume a linear decline).
Any guesses out there for the average oil price for 2016? Mine is more than $50/b average for the year for WTI. The EIA guess is $39/b for WTI in 2016 (average price). Note that they also have very wide error bars around this estimate (from $22/b to $82/b for the 95% confidence interval in Dec 2016.)
If we take the average of the high and low estimates for the 95% confidence intervals for March to Dec 2016 and than average these with futures prices for Jan and Feb 2016 we get an average price of $45/b.
I think the futures market will be wrong on the low side by at least $5/b.
Hi Dennis
If Iran does start increasing exports in the next couple of weeks, this will drive prices even lower initially.
http://www.telegraph.co.uk/finance/oilprices/12101289/Oil-price-crash-30-iran-saudi-arabia-russia.html
After that it depends on how resilient the US producers are and what OPEC does.
I think oil could go as low as high teens this quarter and then recover to about $40 by year end as US production falls below Iran and Iraq increases.
We just know them oil cos keep ripping us consumers off again … 🙂
“most barrels of oil sold around the world garner even less than the benchmark price, Nicole Friedman reports. A basket of crude oils sold by members of the Organization of the Petroleum Exporting Countries has fallen to $25.69 a barrel. In Canada, some of the cheapest crude oil in the world costs less than $15.”
http://blogs.wsj.com/moneybeat/2016/01/15/15-oil-is-already-here-in-canada-energy-journal/
Hi Dennis,
Much depends on how Wall street will play Iranian card and whether OPEC can agree on cuts in June (or at the emergency meeting in March, if any), or Saudis will block this move. Those are trigger events for 2016. The key issue is that the system is destabilized, so I would expect wild oscillations. We might be observing one right now.
Even if we assume $40 for 2016 as the average, at $29 oil is more then 25% below the expected (low) annual average pushed by IEA. Which is almost 4 times of annual return on junk bonds. That does not mean that you need to put your money (oil speculation is only for big sharks like Vitol and Mercuria able to buy real oil and store it in tanks while selling futures ), but still this is quite a big deviation from expected for 2016 or multiyear average. Almost like in 2008.
My impression is that this show with sliding oil prices went a little bit too long. The price of oil is now like compressed spring. So with the appropriate trigger event there will be a strong bounce if only because of short squeeze.
We now also can say that all those shale/tight oil propagandists (including EIA) and financiers did a very bad service for the country. The bet was that the price will go above $100 and stay above it forever. Now they are losing tons of “other people money” along with the destruction of the US oil infrastructure including conventional wells, as well as oil industry employment. Which is especially sad.
When I am thinking how many people lost jobs because of this crazy and generally unnecessary and harmful for energy conservation efforts price slide I became really angry at Obama administration. They have had money to save banks in 2008, but no money to help the US oil industry in 2015-2016. They definitely could buy oil for the US strategic reserve on a monthly basis. At this price level around half of it is essentially free, as you can sell the other half at high prices later. So, in essence, it is like short to medium term loan which will be repaid with interest.
I still wonder who benefits from such low prices ( say, below $50 ) other then Wall Street honchos. It’s not the consumers as difference in gas prices is minimal and gas expenditures are not that big part of a family budget in the USA. It’s not even trucking companies and retailers transporting Chinese goods from ports. Both are still shrinking. WalMart just announced that it is closing 154 stores (http://www.foxnews.com/us/2016/01/15/walmart-to-close-154-stores-in-us-10000-workers-affected.html). Even chemical companies are cutting personnel like crazy.
One interesting thing the emerged from this episode is that the laws of supply and demand does not work in heavily indebted environment. Producers can’t cut production despite the price dropping below profitability because they need to pay interest on debt. Such a Catch 22.
BTW according to Reiter in the USA “onshore tanks are barely a third full, with less than 150 million barrels of the nation’s total 439 million barrels of shell storage capacity occupied as recently as October, according to a Reuters analysis of U.S. data.” (http://www.reuters.com/article/us-oil-tanks-analysis-idUSKBN0KL0AZ20150112)
“Almost 40 percent of total tank farm capacity was leased to third parties as of last September, up from a low of just 28 percent in 2012”
So much for the oil glut.
I believe that Shallow Sand referred to this a few weeks ago. Maybe everyone does not know, but Oklahoma has gone from one of the least earthquake prone areas in the country, to the MOST earthquake prone area in the entire world in the last 5 years. Earthquakes are now significantly impacting populated, wealthy, heavily Republican suburbs just north of OKC. Since the first barrel of oil came out of Oklahoma over 100 years ago, salt water has also come up that has to be disposed of. It is now coming up at more than 10 bbl of salt water for every bbl of water. This is being reinjected back into the ground in disposal wells. Fracking has brought more production and more salt water. Billions of gallons are being reinjected each year. The salt water disposal wells [but, not fracking] have been linked to the earthquakes by the USGS.
At a packed town hall meeting yesterday, it was VERY clear. The public wants all of the disposal wells shut down immediately. Lawsuits are being filed as fast as the attorneys are able to file them. If an oil executive had been there, it would have been like the old western movies with the mob scene: “let’s hang-em!” Of course, the problem is that our salt water is like brine – 10 times as much salt as sea water. Not easy to figure out what else to do with it.
The largest element of Oklahoma’s economy is the oil and gas industry. Oklahoma is the only state in the nation where in both 2008 and 2012, not a single county voted for Obama. But, they are ready to change if the the earthquakes do not stop. The legislative representatives promised early action to pass a law, in the first week of the session that starts February 1, if possible, to give the state Corporation Commission the power to shut them all down, at least for a short period of time to monitor for changes in the earthquakes.
So, back to Shallow Sand and operating expenses. It would be reasonable at this point to expect an immediate adverse effect on oil production in most of the state. At a minimum, even with just tinkering, it is going to become MUCH more expensive to dispose of the salt water. This is going to push a lot of people over the edge – possibly including Sandridge which has been delisted and is trading pink sheets at $.06/share.
BHP BILLITON WRITES DOWN $7.2BN OF SHALE ASSETS
“BHP Billiton has written down the value of its US shale assets by $7.2bn (£5bn) as a result of the dive in oil prices. The impairment charge adds to BHP’s recent woes following a fatal dam collapse in Brazil and tumbling commodity prices.”
http://www.bbc.com/news/business-35320918
“BHP’s leasehold position of 487,000 net acres makes it the second-largest Fayetteville Shale operator behind Southwestern Energy Corp. with an average operating stake of 58%. Those pricey assets were originally purchased from Chesapeake Energy Corp. in early 2011 with an average per well drilling and completion cost of $3.5 million.”
“The revised drilling program will benefit from significant improvements in drilling and completions efficiency. Our ongoing shale investment program will remain focused on our liquids-rich Black Hawk (Texas) acreage.”
http://talkbusiness.net/2015/01/bhp-reducing-fayetteville-shale-play-rig-count-to-zero/
ND Nov. out. Assume Ron will have a post on it. More bearish news.
Shallow,
Some very strange numbers in deed!
I will look forward to seeing the number cruncher’s replies.
I believe you will be happier with the BH rig count when it comes out, very shortly, if the ND count is anything to go by.
Behold the choke.
So, will Flint Hills Resources posted price for North Dakota sour be zero or will it go negative today?
the Porter Ranch gas leak just keeps getting worse and So Cal Gas is really clamping down on releasing info. Sound familiar?
Southern California Gas Co.’s effort to plug its leaking natural gas well involves higher stakes than simply stopping the fumes that have sickened many residents of Porter Ranch.
The company also is trying to avoid a blowout, which state regulators said is now a significant concern after a seventh attempt to plug the well created more precarious conditions at the site.
……
California Department of Conservation spokesman Don Drysdale called the possibility of fire “a concern” even without a blowout. The department is the umbrella agency that oversees the oil and gas regulators responsible for well safety.
The chief deputy director of the department, Jason Marshall, and a senior oil and gas field regulator assigned to daily watch at Aliso Canyon, Scott McGurk, told The Times the site and wellhead were made more unstable by the gas company’s attempts to stop the leak by pumping a slurry directly into the well.
The last of those efforts, which stretched over several days beginning Dec. 22, expanded a crater around the wellhead, state and gas company officials said.
The crater is now 25 feet deep, 80 feet long and 30 feet wide, those officials said. The wellhead sits exposed within the cavernous space, held in place with cables attached after it wobbled during the plugging attempt, Marshall and McGurk said. The well pipe and its control valves are exposed and unsupported within that hole, atop a deep field of pressurized gas.
http://www.latimes.com/local/california/la-me-aliso-well-hole-20160115-story.html
Looks like they have an underground blowout going. Which seems to be bad news
Daniel
That is an understatement and a half.
The NDIC data is out for November.
Total oil production is up in ND from 1171 kbo/d (Oct) to 1176 kbo/d (Nov). There were 77 new wells producing (72 in Sep), while 93 new wells were spud (122 in Oct). These newly producing wells do seem to have had a good first month on average.
Still, the biggest surprise is that the decline in older wells (> 2 months) was not more – they should typically decline by about 50 kbo/d per month (for the front month), but in November they just declined by 25 kbo/d. I suspect that the reason is, as Lynn Helms mentioned during the webcast last month, that operators tried to produce as much as possible before the feared OPEC meeting early December. There was a similar low decline in older wells the month before (Oct), while the decline was above 50 kbo/d in every earlier month this year, except in May (30 kbo/d).
Below a graph that shows this. The difference between the green and red line represents the total growth/decline of oil production in ND.
If this interpretation is correct, we may see bigger declines in the following months.
Thank you Enno,
Do your stats show that the number of DUCs is declining? Maybe this is one of the factors contributing to the resilience of ND Bakken production?
Also, how the operators were able to reduce the decline rate of the old wells?
Enno
Good stuff, as always … muchos gracias.
I never got to adequately follow up on your halo effect/refrac’ing comment the other day, time constrained here.
However, I DID stumble upon a way to determine which wells have been refrac’d.
Go to fracfocus.org, click on ‘Find a Well’, enter the API number if you have it, and, bingo, If it was refrac’d just prior to the increase, the well will be there. If not listed there, the halo effect would be the next likely cause. This could be further validated if a surrounding well was initially frac’d – also listed on the Fracfocus site.
You have already done the time consuming work by identifying the wells with increased output.
I think the two hundred well estimate for Bakken refrac’d may be a touch high, but maybe you are correct.
Thanks again for your contributions to this site.
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