JODI, Iraqi Reserves and Ghawar

The JODI data just came in with production numbers for January 2015. I really don’t like JODI all that much but they are about two and one half months ahead of the EIA with their world data. And their data is incomplete so I have to substitute the EIA data for the countries that do not report to JODI. So the data I use is about 95% JODI and about 5% EIA. The last data point is January 2015 and is in thousand barrels per day.

JODI World

We peaked in December at 75,342,000 bpd but dropped 356,000 bpd in January to 74,986 bpd.


JODI has the US at 9,226,000 in December but dropping 34,000 bpd in January to 9,192,000 bpd. The US did not start its grand ascent until the summer of  2011 when the shale oil boom exploded.


Without that shale surge in the USA here is what World C+C production looks like. Less USA production is down just over 1.3 million barrels per day from its July 2008 peak and down just over 1.2 million barrels per day from its April 2012 peak.

JODI Russia

The only other JODI chart of note is Russia. Russian January production stood at 10,110,000 barrels per day. Expect Russia to be slightly down for the rest of the year then down a lot more in 2016.

Iraqi Dreaming

In late 2009 Iraq held a series of auctions for production service contracts at the largest fields. The Iraqi oil minister, Hussain al-Shahristani, estimated that Iraq will be able to produce 6m barrels a day by 2017 based on the deals announced to December 2009.  However, the country hopes to raise production to 12 million barrels per day over this period based on all deals it was negotiating at end 2009. 12 million bopd is around 15% of 2008 oil demand, and almost as much as the #1 producer, Saudi Arabia, could provide. These production forecasts seem optimistic, but significant increases remain possible. 

Imagine that, 12 million barrels per day. This announcement prompted Stuart Staniford to announce that Iraq Could Delay Peak Oil a Decade, and he created the below graph to show what just might happen.

Iraqi Dreams

According to that graph Iraq should be producing about 9.7 million barrels per day right now. However they are just a tad over one third that amount today, they were at 3,320,000 bpd in February according to the OPEC MOMR. And it will never happen. Iraq will, very soon, begin to decline.

But according to the EIA, the IEA, BP and just about everyone else in the world, Iraq has vast, vast reserves. Wiki has this to say about Oil reserves in Iraq quoting the EIA:

Iraqi Proved Reserves

As a result of military occupation and civil unrest, the official statistics have not been revised since 2001 and are largely based on 2-D seismic data from three decades ago. International geologists and consultants have estimated that unexplored territory may contain vastly larger reserves.

The problem is that “international geologists and consultants had nothing to do with it. Iraqi officials in Bagdad decided that Iraq had far more reserves than was originally reported. Below is a field by field of Iraqi reserves.

A better view of Iraqi oil reserves can be found in this 2003 paper: GIS in an Overview of Iraq Petroleum Geology. And the entire caption to Table 1 turned out to be a link with every stat on every Iraqi field you would want. That is the location, depth, discovery year, type of trap, lithology, and a few other stats which I have no idea what they mean.

Table 1. Database of giant fields in Iraq, showing basic geologic features and estimates of ultimate recovery and reserves (from Horn, 2003 [with minor revision]). Basic data sources for Horn (2003): Halbouty et al., 1970; Carmalt and St. John, 1986; I.H.S. Energy Group, 1998, Selected giant field data (with kind permission to publish granted 2002); supported by 35 additional sources.

Here below is that chart.

Iraqi Reserves Full

Of course the data is too small to read here but just click on the “Table 1” link and it becomes very readable. I have copied the pertinent data below and added a few calculations.

Iraqi Reserves Left

In 2003 Iraq was 51% depleted. In the 12 years since the end of 2002, Iraq has produced about 10.5 billion barrels. That means they have about 31.225 billion barrels of reserves left.

Every OPEC nation is in about the same position as Iraq including Kuwait and Saudi Arabia. In January of 2006 Petroleum Intelligence announced that Kuwait only had 48 billion barrels of remaining reserves. But it said the data it had seen show that of the current remaining 48 billion barrels of proven and non-proven reserves, only about 24 billion barrels are so far fully proven — 15 billion in its biggest oilfield Burgan.

Saudi has the world’s largest oil field, Ghawar, and it is severely depleted. This 2004 paper, Selected Features of Giant Fields, Using Maps and Histograms, has a wealth of information on the discovery and depletion of giant oil and gas fields.

Ghawar Reserves

Do the math, this 2004 chart says Ghawar started with 97 billion barrels of oil and was, in 2004, over 81% depleted. Of course the rest of Saudi is not that depleted. They have three fields that have been producing only a few years, Khurais, Manifa and Shaybah. These three fields, along with their other old giants, have enabled Saudi to keep production between 9 and 10 million barrels a day. But it is highly likely that they are about two thirds depleted.

Ghawar 6

Western flank cross section of North ‘Ain Dar. Source: Figure 9 of Alhuthali et al, Society of Petroleum Engineers Paper #93439, March 2005.

 The above was posted by Stuart Staniford The Status of North Ghawar. The the legend on the right is “percent water”. Ain Dar is the north most section of Ghawar. Saudi, along with every other Middle East, North Africa OPEC country, has only one third or less reported reserves remaining.

But how can this be so? How can so many countries be way past 50 percent depleted and still be producing at or very near their peak production. The answer is simple, massive infill drilling with horizontal wells right at the top of the reservoir. From a 2009 Seeking Alpha article Alex Burgansky: Russian Oil and Gas Industry Surprises Analysts:

Russia is a very mature producer. If you exclude all the drilling activity taking place every year, then Russian organic decline in production is close to 19%. To compensate for that organic decline, Russia drills somewhere between 5,000 and 6,000 wells every year.

And from a 2006 Saudi Article:

• Without “maintain potential” drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

Massive infill horizontal well drilling has made it a new ball game. They enable a country like Russia or Saudi Arabia to keep production from declining any great amount until its fields are around two thirds depleted or more. But then when decline finally does set in it will be steep, very steep. Their production profile will resemble a Seneca Cliff.

How many countries are approaching this Seneca Cliff? I have no idea but I would guess most of the big produces like Saudi and Russia are very near hitting that point.


Note: If you would like to receive an email notice when I publish a new post, then email me at

This entry was posted in Uncategorized and tagged , , , , , , . Bookmark the permalink.

678 Responses to JODI, Iraqi Reserves and Ghawar

  1. Thomas says:

    If this is true, and a steep decline is really imminent, then all those countries pumping like crazy are really stupid, because by holding onto their oil they could be making so much more money a few years down the road. Could it be that the old data you quote is in fact outdated and actual recoverable reserves are way higher than what people modelled 10 years back? I just find it hard to imagine that the Saudis wouldn’t simply cut back on production if they know for a fact (and surely they must know the status of their oilfields, and the status of their Kuwaiti and UAE neighbors) that supply shortages are just a few years down the road.

    • Ilambiquated says:

      I really liked that book Twilight in the Desert, but in the last chapter the author definitely underestimated the Saudis’ ability to increase production on the Southern in of Ghawar.

      The Saudis apparently had a plan to get oil out faster back in the late nineties, executed on it and are getting the oil out. It is very expensive and involves lots of drilling and pumping brine underground. And it worked.

      I don’t think it was coincidence. I think they had a good idea how much oil was under there. Ithink they are just lying about how much it is.

      Anyway their claim has been absolutely flat for a generation. It’s not even a little bit credible.

      • Johnny says:

        Simmons didn’t exactly have much credibility back when he wrote that book, and obviously had never been to the LA Basin and Wilmington field to understand how thoroughly the oil industry understands water handling.

  2. Coolreit says:

    Awesome work as usual!

    What is the source for % depletion in your tables and article?

    I post your work with links of course on BRY’s investorvillage. Many are highly suspect of your work (not I), only because they think unconventional oil is so large that we don’t have to work about peak conventional oil. I would be very curious about your thoughts on their critique.

    Thank you!

    • Jeffrey J. Brown says:

      Tar Sands Production to the Rescue?

      Inclusive of rising net oil exports from Canada, the combined net oil exports from the seven major net oil exporters* in the Western Hemisphere in 2004 fell from 5.9 mbpd in 2004 to 5.2 mbpd in 2013 (total petroleum liquids + other liquids, EIA).

      *Canada, Mexico, Venezuela, Trinidad & Tobago, Colombia, Ecuador and Argentina

    • Coolreit, I always post links as my source. The links are the source or the source of the data is provided at the links.

      Unconventional oil, Canadian oil sands and the Venezuela bitumen, is quite large. But that oil will never be extracted at a high enough rate to make a real difference. Also, like shale oil, it is quite expensive and depends on a robust economy to make this oil viable.

      The economy of the world is really quite fragile right now, and it is likely that it will get worse. The affordability of unconventional oil will very likely decline along with conventional oil. Unlike a few people on this list, I do not see oil returning to and maintaining a really high price again. It could spike to well above $100 a barrel but the economy will not support such a high price for very long.

      Unconventional oil will never be produced in large enough quantities to make a real difference. Ditto for so-called renewables.

      • Dennis Coyne says:

        Hi Ron,

        I agree that unconventional oil cannot be ramped up quickly enough to stop world output from declining. Jean Laherrere estimated 2010 reserves at about 850 Gb, and he accounts for the OPEC reserve inflation, he also expects reserve growth and future discoveries to be about 250 Gb (from 2011 forward), so that is a total of 1050 Gb of C+C, excluding extra heavy oil remaining at the end of 2010 and roughly 950 Gb remaining at the end of 2014.

        When I use Hubbert Linearization to estimate future URR of C+C less extra heavy oil, I get 2500 Gb of C+C less extra heavy oil, in my view this is the minimum likely URR unless a social collapse causes oil extraction to cease. Though I admit this is possible, I do not think it is the most likely scenario, note that I do not consider a second Great Depression to be a social collapse, that scenario is in my opinion quite likely after the peak arrives, probably within roughly 10 years of the peak.

        It would be interesting to see a comparison of Jodi and EIA data, I believe the EIA data is more accurate than Jodi data.

        • Doug Leighton says:

          Hi Dennis:

          Quick note from Val d’Aosta: My opinion is you’re wrong to employ URR C+C less extra heavy oil (WITHOUT QUALIFICATION) for your analyses because these reserves are weighed so heavily toward those that will be difficult to exploit and therefore may never see the light of day. More important, would you be able to create a table-of-assumptions and attach it to your projections in the future? It’s difficult for me to visualize projections separate from assumptions even though I realize you typically explain them somewhere. I (we?) would particularly like to see your price assumptions attached because whether or not URR resources are developed (and when) will depend mainly on future prices. Right?

          And, Jeffery:

          Would you give us the benefit of your (considerable) expertise on how natural gas will come to the fore, VIS-À-VIS oil; as oil reserves become increasingly exhausted? I keep hearing reports about substantial gas reserves in the Arctic, Australia, Russia, etc. but have never seen a creditable analysis as to how this will likely impact our future energy supplies/usage. Of course I know nothing whatsoever about natural gas other than substantial reserves exist in places such as Alaska’s and Canada’s North Slope.

          Thanks in advance. Now, back to tonight’s workshop: “Topological K-theory and vector bundles” or maybe I should just head for the closest bar.

          • Dennis Coyne says:

            Hi Doug,

            For my world models there usually are no price assumptions though recently I tried to look at what the economy could afford, by assuming that oil prices which result in prices that cause oil expenditures to be more than 3% of total world GDP, will cause a recession (this is conservative in my opinion) so that oil prices cannot rise above this.

            I am not sure if you are talking about the Bakken Model, Eagle Ford Model or the World Model, in the Bakken and Eagle Ford I will do what you ask in the future. For the World, I do not have the data to estimate costs for all the fields in the World ( a nearly impossible task). It is assumed that prices will rise to a level that will make the model’s future output levels possible, clearly if the economy will not support oil prices that make the marginal barrel (most costly to produce barrel) profitable, then the model will be incorrect and extraction rates will be lower.

            In several of my scenarios I predicted lower future extraction rates, this would mean that some of the costly barrels would be left until later and only the less expensive oil would be produced. It is impossible to say with certainty what future extraction rates will be as we do not have either future production costs or future oil prices.

          • Jeffrey J. Brown says:


            An interesting approach for estimating future natural gas exports would be to look at the rates of change in some production to consumption ratios (what I call the ECI Ratio).

          • Dennis Coyne says:

            Hi Doug,

            I created a scenario for World C+C output assuming a URR of 3000 Gb based on a Hubbert Linearization of C+C less extra heavy (URR=2500 Gb) and an extra heavy oil (Canadian oil sands and Orinoco belt) URR of 500 Gb (based on Jean Laherrere’s estimate in 2013).

            There is no price assumption built into this scenario, it is simply assumed that oil prices rise enough to allow oil companies to make a profit, but no oil prices are included in the oil shock model.

            Then I used a simplistic analysis (which is not based on Hamilton’s analysis, that analysis is far more complex) asking the question:

            “If the oil shock scenario output is produced, what oil price level can the economy afford without a recession resulting from the high prices?”

            I looked at World Real GDP per capita growth (using IMF and UN data) over the 1990 to 2014 period, as well as C+C output (EIA data), oil price data (BP data), and consumer price index(cpi) data from the Bureau of Labor Statistics(BLS). The major assumption here is that if the spending on C+C output in constant 2014$ rises to too high a percentage of World Real GDP (using the purchasing power parity [PPP] method) then a recession will result.

            The World seems to be badly affected by an oil spending level that is higher than 3.25% of World Real GDP (in 2008 the spending on C+C output was 3.26% of World GDP). So I assumed oil spending must be 3% or lower to prevent a recession induced by high oil prices.

            I also looked at the growth in real GDP per capita for the World from 2005 to 2014 and the average was about 2.6% over those 10 years.
            I conservatively assumed that the 2015 growth rate would be 2.2% and that the annual rate of growth would decrease by 3% each year until 2030 (1.4%). I used the UN’s medium fertility population scenario until 2030 and combined it with the assumptions above to create a World Real GDP scenario from 2015 to 2030.

            Using the assumption that world oil spending is 3% of World real GDP we can create a scenario for World Oil spending in billions of 2014$ per year. This is combined with our original C+C output scenario to find oil prices (oil spending divided by output is equal to the oil price).

            These prices are the maximum oil prices that will not create a recession due to high oil prices (if the multiple assumptions are correct).

            I will leave it to oil industry experts to judge if these oil prices are sufficiently high to enable the oil to be produced profitably.

            A final note, in 2013 Jean Laherrere estimated that there were 850 Gb of technical proved plus probable reserves remaining at the end of 2010 (excluding extra heavy oil reserves).

            My output scenario has 500 Gb of C+C less extra heavy oil produced from 2011 to 2030. There are also 36 Gb of extra heavy oil produced in the scenario over the 2011 to 2030 period. It is also possible that there will be some new discoveries and reserve growth in the future as oil prices rise. Chart below.

            • Doug Leighton says:

              Thanks Dennis.

              I’m too busy attending talks to respond properly but please note I do appreciate your approach. Meanwhile, my simplistic view is that URR depends primarily on the balance between average world-wide depletion rates, oil prices, and effectiveness of EOR efforts. I think depletion rates are generally under-appreciated in the big reservoirs that matter (owing to extensive infill drilling) AND I’m ALWAYS “under-appreciating” EOR effectiveness extending life/productivity of important reservoirs. So perhaps your approach (and result) is as good as any but I really hate to admit that. 🙂 More later; conference here lasts another week.

              • Dennis Coyne says:

                Hi Doug,

                Thanks, no doubt my scenarios will be wrong. So far oil production has held up better than I have expected, but perhaps many fields will water out at almost the same time, I think this is not likely, but I also didn’t think oil prices would fall to nearly $40/b, if oil prices remain at low levels (less than $50/b) over the long term, my scenario will be incorrect, I expect $100/b by 2017 at the latest.

            • Haven’t we just learned that already $100-$110 is too high for the world economy?

              • Dennis Coyne says:

                Hi Matt,

                That is by no means clear. The only World recession since oil prices went above $100/b was in 2009 from 2011 to June 2014 average annual real oil prices(2014$) were over $100/b(BP data) and World Real GDP growth was around 3% over that period (based on IMF data).

                The current low oil prices are a story of excess supply rather than weak demand in my opinion.

                Europe is doing badly due to poor macroeconomic policy during the Great Recession which caused an anemic recovery, the lack of control of Eurozone countries over their individual nation’s monetary policy doesn’t help.

                • Nick G says:

                  The analysis of demand is being confused by the assumption that the primary driver of demand is “affordability”.

                  That’s really, really not the case. Instead, increasing efficiency and (secondarily) desirable substitutes are greatly reducing demand growth. For instance, the US is using less oil than in 1979, while GDP is 2.5x as large. That’s efficiency, driven by CAFE regs and sensible industrial/commercial energy management.

                  Really, increasing efficiency and substitution is more important than production growth. “Affordability” isn’t a significant factor in the US or most of the OECD, where we’re seeing substantial reductions/slowing growth in consumption.

        • Thirunagar says:

          There was an article in Seeking Alpha today which uses the convolution model of yours.

          I think that guy has a pretty good handle on the demand supply and the storage situation.

          • He’s ok, but the model is a bit too simple. World oil production capacity and demand are very hard to predict, and that’s what controls international oil prices.

      • clueless says:

        Ron – Free advice is probably what it is worth – Zero. But, with all of the “just printed” money washing around the world, I would advise anyone who is predicting future numbers to qualify them as “adjusted for inflation.” So, maybe not $100 in 2015 $’s, but who would be surprised if inflation starts to increase dramatically? We are in the midst of the lowest inflation since the deflation of the 1930’s depression. Personally, I do not see deflation with the current world-wide governments, so ????
        PS: If the economy goes down, Which would you rather give up – gas to get to work, doctor, etc. or a smart phone with unlimited texting? Winter heat? Or eating out? Food [it all comes by truck] or new clothes?

      • BC says:

        Ron, your work is exemplary. Thanks.

        Note that if one takes into account population growth (as the LTG modelers did for many variables for their World3 model’s reference run), the peak per capita for JODI world C+C occurred in 2004-05 when Deffeyes, et al., called Peak Oil at the time.

        Since then, JODI world C+C is down 6-7%, and JODI world C+C less the US is down 10-11%.

        This is particularly important in that the world is now where the US was in the late 1970s to early 1980s in terms of oil production per capita, the point at which US real wages peaked and deindustrialization and financialization of the economy commenced with the real, US$-adjusted price of oil in the $70s-$100s. The recession of the early 1980s, oil discoveries, and peak of the US$ in 1985 (Plaza Accord) resulted in the real, US$-adjusted price of oil crashing to the $20s-$30s. As part of deindustrialization and financialization of the economy, the US offshored production and goods-producing employment and replaced wage growth with 25-30 years of increasing debt to wages and GDP and females entering the labor force en masse, reducing average real wages until the debt cycle’s bubble peaked and burst in 2008.

        However, the rest of the world does not have the luxury of financializing and deindustrializing their economies via offshoring production (and ecological destruction and pollution) as the US did. Moreover, much of the rest of the world has already taken on unprecedented debt to GDP, especially China, which has created the largest fixed investment and credit bubble as a share of GDP in world history.

        So, the world is facing Peak Oil and falling oil production and net energy per capita; unprecedented private and public debt to wages and GDP; real GDP per capita and trade decelerating to a stall; obscene wealth and income inequality, massive financial bubbles, and wealth hoarding at zero velocity, dragging on money velocity; labor’s share of GDP at a record low; “illth” care spending at $10,000 per capita in the US and $26,000 per household; and real wage growth for the bottom 80-90% working class that barely permits subsistence after taxes, debt service, and “illth” care costs.

        Therefore, if one properly perceives the emerging conditions in per capita terms, Peak Oil is in the rear view mirror and LTG are already bearing down on us.

        • Boomer II says:

          And what we hear from many politicians on the right are more and more reactionary statements. As times get tougher, they don’t deal with it in a logical manner. As they perceive threats, real and imagined, I expect them to lash out even more.

          • BC says:

            Yes, I suspect that will be a given, and many on the left will be self-satisfied in their presumption that their institutional embeddedness and sense of security (including pensions and retirement benefits) will insulate and protect them from the attacks from the right and the larger global structural fallout from Peak Oil, overshoot, LTG, etc.

        • BC, thanks for a very informative comment that, in my opinion, spot on.

          Yes peak oil is in the rear view mirror and limits to growth is already hitting us pretty hard. Sometimes when things happen slowly they are not perceived as happening at all.

          But things might just start happening very fast in the future. If the China bubble burst then the dominoes may start falling all over the world.

          I read something interesting the other day about fertility rates. Of course fertility rates are falling sometimes by choice. But in overcrowded and very stressful times fertility rates naturally fall. That is it is an involuntary thing that nature causes. It happens in all species including the human species.

          • Dennis Coyne says:

            Hi Ron,

            Thanks, that is very interesting. It would seem that fertility rates would fall rather fast if collapse hits, so that the UN’s low fertility scenario or perhaps even lower would be more likely. In addition overall mortality rates would also rise so that population pressure would be relieved to some degree.

            Now if humans breed like rabbits as some people assume, any population reduction would be reversed if conditions ever improved, I think humans are somewhat more intelligent than rabbits (or yeast 🙂 ).

        • Dennis Coyne says:

          Hi BC,

          In the developed world (or at least in the US) median incomes have been plat since the mid eighties and income inequality has grown.

          Part of this is the explanation you have given (though we need to look at all energy costs and the net energy of all inputs into the economic system, not only oil) I agree with. A second part of the story in the US, is the active policy to try to undermine unions and, more importantly, a big change in the income tax code to make it much less progressive over the last 35 years.

          As far as real GDP growth per capita, it has grown for the World based on IMF data for real GDP in purchasing power parity terms since 1990. Part of this may not be true growth, but just more people being involved in the market economy, this effect is difficult to measure. Chart with real GDP growth per capita in % from 1990 to 2014 and C+C per capita per year (b/year/person).

          • I wonder what happens if you layer in natural gas? And then coal?

            • Dennis Coyne says:

              Hi Fernando,

              The chart would get pretty messy, I think, you are thinking of one of those stacked charts with oil, natural gas and coal on a per capita basis? Good idea. That way we can look at all fossil fuels, or we could just use primary energy data from BP. Chart below for primary energy per capita.

            • Dennis Coyne says:

              Fossil fuel per capita in tonnes of oil equivalent per person. Data from BP (energy) and UN (population).

              • Bingo. It seems oil is being replaced by other energy sources.

                • Dennis Coyne says:

                  Hi Fernando,

                  Also interesting is that the oil plus natural gas level of energy per capita is quite flat over that period, most of the increase comes from coal.

                  When all three of these energy sources peak in 2028+/-5 years, we will need a combination of greater efficiency, wind, biofuels, solar, hydro, and nuclear power to keep society functioning.

                  Prices of all fossil fuels will become more expensive.

                  • Yep. I just sent a Twit to Moises Naim answering his comment about the Saudis wanting to keep people thinking that prices will stay below 100. But I didn’t want to get in a Twitter debate with Naim. I figure the best option is to use $90 after 2016 and start going beyond inflation after 2026. You know, one of those curves you use would do fine.

                  • Allan H says:

                    People use a lot more energy dependent appliances and devices now, but they are more efficient. The houses have been better insulated and furnaces are a little better. Cars are improving in mpg.
                    All in all, even though we are a more device, computer and appliance driven world, and devices have even penetrated into the third world, it is evened out by efficiency changes. There are now more cars than ever in the world. Still, fuels remain fairly level.
                    The gain in coal is probably mostly due to China’s huge industrial rise. I wonder when that will level out.

        • walter says:

          Very interesting analysis BC. Have you got blog, where you flesh this out? I look forward to reading it.

          • BC says:

            Walter, thanks. A blog is on my to-do (or bucket) list. (I maintain anonymity for professional reasons at present.)

            One of these days. 🙂

      • Johnny says:

        Shale oil in the US was produced in large enough quantities to scare the panties off the Saudi’s, I think that qualifies as “enough to make a difference”. Also made it possible for a depleted, over the hill, peaked decades ago country like the US to increase oil production rates faster than at any time in its’ history, and these fields are now the largest producing oil fields in the western hemisphere. Sounds like another measure of “difference” that is significant.

        • Boomer II says:

          … US to increase oil production rates faster than at any time in its’ history, and these fields are now the largest producing oil fields in the western hemisphere.

          I don’t follow oil history closely, but is any of that actually true?

  3. Jeffrey J. Brown says:

    Circa 2009, we read similar hype about the outlook for Brazil’s oil production. One of my favorite all time Bloomberg columns, in 2009, discussed the outlook for Brazil’s oil exports taking market share away from OPEC. In reality, Brazil in recent years has been a net oil importer with a track record of increasing net imports, even counting biofuels as production.

    The combined increase in Brazil + Iraq’s net exports from 2009 to 2013 pretty much rounds to zero (an increase of 0.1 mbpd).

  4. islandboy says:

    Ron, while I appreciate the data and the analysis, something just does not seem right to me. Surely the people with the best knowledge of the state of the reserves in Saudi Arabia would be the Saudis themselves? If as you suggest, they are facing an imminent, steep decline in production, precipitated primarily by the exhaustion of Ghawar, would it not be incredibly and extremely stupid for them to be pumping flat-out at the current low prices? I cannot belive the Saudis are that deluded. They have a quantifiable inventory of a non perishable, non renewable resource, are in fact facing rapidly diminishing stocks and yet they persist in selling off what little they have left at rock bottom prices? Either they know something we don’t or as Thomas suggested in his top post, they are stupid beyond belief!

    Do they believe that high prices would trigger a rapid shift away from the oil consuming machines that make up the vast majority of the planet’s transportation fleet? While I understand and appreciate the ideas of Tony Seba, one of whose videos I have posted links to in these forums before, it appears to me that, the new ball game that has been brought about by massive infill horizontal well drilling, will eventually result in a production decline that it will by hard for Tony Seba’s “Clean Disruption” to keep up with. Think of it as a race between transition and depletion. If transition wins that would produce a more desirable out come but if depletion wins, modern civilisation is toast!

    Does anybody here think that, if the Saudis cut production to prop up prices, allowing the shale oil boom to continue but, holding back more of their reserves for the day shale oil production starts to peter out, they would be doing harm to their long-term interests? As it is, they could be looking at a future similar to the present conditions in the UK, rapidly rising consumption coupled with rapidly declining production, placing before them the prospect of having to import oil at a much higher price than they sold most of their good stuff for! Who on Earth would they be looking to buy oil from by the time that happens?

    Alan from the islands

    • Alan, take a look at the rest of the world. Alaska for instance. They are already in decline yet they are producing flat out. Are they stupid beyond belief? And Mexico, and Norway, and Great Britain, they are all in decline yet they are all producing flat out. Are they stupid beyond belief by producing all they can while oil prices are so low? Do you think Saudi Arabia should be the only nation that uses logic and saves their oil for a few years down the road? Why do you think they are that much smarter than the rest of the world?

      Indonesia, a former OPEC nation, kept producing flat out even as they transitioned from a net exporter to a net importer. That is just how the world operates. Politicians want it all now, while they are in power. They are far more concerned about today than a few years down the road when someone else will be in power.

      I don’t know who Tony Seba is but there is no real race between transition and depletion. Transition is a pipe dream believed by people who really does not understand the magnitude of the problem.

      • islandboy says:

        Good point about everybody else doing the same thing. I guess I was thinking that maybe some people would learn from the experience of others but, I have enough examples of other situations in my neck of the woods where people go about repeating the mistakes of others. When questioned the typical responses range from, “my situation/circumstances are different” to “I’m smarter than them. They didn’t know how to do it properly”.

        I am leaning more and more towards the thought that “the invisible hand” is just that, a hand with no brain controlling it. As a result the “invisible hand” has produced repeated cycles of booms and busts in many areas of economic activity, as tons of players rush in to fulfil a demand resulting in an oversupply that brings about price declines that kill off more of the supply than the market demands that leaves an unfulfilled demand, rinse and repeat.

        The pack rat in me, cannot understand those who consume wantonly, thinking that somewhere, somebody will come along to provide whatever it is that they want/need whenever they want/need it.

        Alan from the islands

      • islandboy says:

        The video linked to above is the 4 minute video trailer for his book “Clean Disruption of Energy and Transportation”. He made a 40 minute keynote address at the AltCars Expo and Conference,Sept 19, 2014. His ideas require being able to continue the BAU growth paradigm into the foreseeable future, for what it’s worth.

        From this page at the website

        “Tony Seba is a lecturer in entrepreneurship, disruption, and clean energy at Stanford University. He is the author of “Clean Disruption of Energy and Transportation – How Silicon Valley Will Make Oil, Nuclear, Natural Gas, Coal, Electric Utilities and Conventional Cars Obsolete by 2030”.

        At Stanford, he has created and taught the following courses: “Anticipating and Leading Market Disruption”, “Clean Energy and Transportation – Market and Investment Opportunities”, “Strategic Marketing of High Tech Products and Innovations”, “Finance for Entrepreneurs”, and “Business and Revenue Model Innovation.” He has also taught at top business schools such as the Auckland University Business School, Singularity University, and at some of the world’s top high tech companies such as Google, Inc. ”

        Alan from the islands

        • Stephen Hren says:

          All those electric cars will be recharged in hubs, probably located every few miles apart in urban areas. As these autonomous cars near empty, they will pull into these hubs and await recharging. These hubs have the potential to absorb a great deal of the variability in renewables. All the electric cars wired together in these hubs for recharging will act as a vast reservoir of stored energy, and when intermittency makes this electricity unavailable, cars further down the recharging line can have their juice cut, or, if necessary, supply power to the grid. This way, the smart grid need not extend to every household, only directly to these charging hubs. They may even be owned by the utilities in some cases.

          • Jef says:

            You know why your car battery last on average 2 to 5 years (which is good)? Its because you are only using about 10% of its potential. The most you can ever use is 50% potential and still you might get 5 years. Anything over 50% and your battery potential degrades rapidly.

            Batteries will never replace ICEs.

            • wake says:

              Lithium Iron Phosphate technology is totally different from lead acid. The analogy just is not meaningful

            • Nick G says:

              And yet, EVs are already replacing ICEs: the Nissan Leaf is the cheapest car on the road, and has more than enough range for most commuters. The Volt is cheaper than the average car, has ICE range but uses 10% as much fuel, and it’s battery will last for the life of the car. The Tesla is a far better car than all of the luxury cars in it’s price range.

              The lead-acid starter battery in your car isn’t really a useful benchmark.

              • Jef says:

                Yes but they cost way more and the elements neded to Mfg are no where near available in quantities needed to replace even 10% of the current auto #s

                • islandboy says:

                  Says who?

                • Nick G says:

                  they cost way more

                  And, one more time:

                  EVs are the cheapest cars on the road even without tax credits. With tax credits, they’re insanely cheap. Let’s see. The average car costs about 58 cents per mile to drive.

                  IRS Average New Car Cost per mile: 57.5 cents per mile.

                  The Leaf, without tax credit, is the cheapest car you can find to own and operate:

                  Total Cash Price $25,327

                  5 Year True Cost to Own: 28,079

                  Cost per mile: 37.4 cents per mile.

                  A typical small car like the Honda Civic Sedan is more expensive:

                  Total Cash Price $21,644

                  5 Year True Cost to Own: 36,154

                  Cost per mile: 48.2 cents per mile.

                  And a Chevy Volt, a car without any compromise because it can run on gas, is less expensive than the average car even without the tax credit:

                  Total Cash Price $31,500

                  5 Year True Cost to Own: 40,129

                  Cost per mile: 53.5 cents per mile.


                  If we subtract just the Federal credit of $7,500 (and several states have credits as well), that subtracts 10 cents per mile. The Leaf costs less than half of the average car, and the Volt is substantially less expensive than the Civic.

                  And, you very rarely go to the gas station, and it’s much more fun to drive!

                • aws. says:

                  Part of Nissan’s Thank You Canada sales event!

                  $300 a month minus what it would have cost you to fill up a similar ICE powered car.


                • islandboy says:

                  This story from starts out, “Despite the fact that Bolivia alone has enough lithium reserves for 4.8 billion electric cars and that lithium can be recycled from old batteries (it doesn’t disappear after use like oil), some people are concerned about our civilization’s increased dependence on the soft silver-white metal.” Bolivia might have the largest known reserves but they are not the only game in town and in fact, it is believed that there are deposits in Afghanistan that may be even larger than those in Bolivia. This web page shows the countries with the largest lithium reserves worldwide as estimated in 2014 and another page depicts the countries with the largest mine production of lithium worldwide from 2010 to 2014. Bolivia and Afghanistan aren’t on either page.

                  As far as rare earths go, they are not necessary for making EVs, despite the fact that many do use them. The Tesla Model S uses plain old induction motors in it’s drive train, not a rare earth to be found in those motors.

                  Might you be a troll by any chance?

                  Alan from the islands

              • Watcher says:

                They are also among the least bought. Great quality to have as revolutionary thingamabobs.

                • Ilambiquated says:

                  I recommend you read “The Innovator’s Dilemma”. Revolutionary thingamabobs always start out in a niche for early adopters. Low sales volumes don’t prove anything.

                  One niche where electrical vehicles are taking over is small municipal utility vehicles.

        • Brian Rose says:

          This is an excellent area for discussion at the moment.

          The world is in a race to build a strong enough base of renewable energy capacity AND, critically, infrastructure that makes renewables feasible.

          I could be wrong, but I suspect that everyone here agrees that if we had another 20 years of slowly rising oil production alongside stable, $80 barrel oil our civilization would successfully make an energy transition.

          There are 2 central issues we’e all concerned with:

          1. When will oil production begin to decline – with the likely outcome of a sustained, albeit bumpy, decline in global GDP, and as a consequence a collapse of debt/interest/financial systems putting a halt to the capital intensive energy transition.

          2. When will we have a strong enough base network of renewable capacity, electric vehicles, and autonomous vehicles to allow for our global system to survive a permanent decline in liquid fuel supply.

          I’d be quite curious what Robert Hirsch would have to say at this point. We’ve technically been transitioning for 10 years now, and by 2025 will be 20 years into a renewable, EV, autonomous world.

          Apple is working on an autonomous electric vehicle. They’ve already invested capital in hiring numerous high salary engineers. Apple only commits money to things once they’re dedicated.

          I’m no Apple fanboy, but let’s face it, for some reason when Apple releases a product the entire populace, from all political and financial spectrums, rallies behind it. Apple Pay came out, and all of a sudden paying with your phone was a thing! Except every Android phone could already do it a year prior.

          When Apple gets behind an idea it changes the landscape. Every hurdle and constraint we imagine for the legal hurdles of autonomous vehicles will be significantly diminished the moment Apple reveals this “product”. It will happen around the same time that the Tesla Model III begins production – a vehicle that will have fully autonomous capability.

          We truly are converging rapidly on a new world of transportation. By 2020 if oil goes to $250 barrel many Americans will not be as affected. They will simply open an App, request a pickup from an autonomous EV, and be charged the same price they were when oil was $50 barrel.

          The thing about autonomous vehicles is that they will be incredibly cheap to run. Insurance will be radically cheaper without a monkey behind the wheel, maintenance is radically cheaper also.

          Since this revolution is being propelled by silicon Valley I would venture to guess Elon Musk’s Tesla and SolarCity will find ways of partnering with Apple, Google, App makers, and others to bring about an ecosystem of PV hubs where these autonomous vehicles charge.

          I think big change will happen in transport from 2017-2020. Individual ownership of vehicles will transition over time as being more a luxury than a necessity (something long predicted by us doomer peak oil folks). HOWEVER, the other option won’t be walking or biking – it will be scheduling and ordering cheap, affordable autonomous EV transport through a smartphone app.

          With Big Data it will be very, very easy to discover how many vehicles will be required for any given area. Within 2 years of collecting data the systems for autonomous EVs will be able to have “pick-up guarantee” windows of 3-5 minutes.

          Getting your check? Order a ride, it’ll be there when you walk out. Need to get groceries? Order a ride before finishing that email and putting on your shoes, it’ll be waiting when you step out the door.

          No paying the price tag of owning or leasing, tags, insurance, tires, brakes, oil changes, gas, timing belt, etc.

          I mean, look, here’s the real point: in our bodies are billions of erythrocytes (red blood cells) constantly circulating and transporting the goods and wastes of our bodies economy. Industrial civilizations current model of transport is like having 90% of our red blood cells just sitting around the vast majority of their existence.

          In evolutionary terms our civilizations transport system is unfathomably wasteful. Merely the product of a short period of time where energy conservation didn’t matter. I am of the firm belief that the forces governing the evolution of economies are identical to the selective forces governing the evolution of organisms.

          If we avoid the pitfalls of a collapse scenario until 2020 it is my hypothesis that the roots of this transportation and energy transition will be strong enough to carry us through any ensuing calamities.

          I feel as though many here see such a vision as cornucopian. I can’t blame them as a few short years ago I would be the first to rail against such a vision. I embrace the ability to evolve my thoughts as information accumulates for or against my presuppositions. I am wrong more often than not, and I don’t think that will change.

          I do think all the pieces are gathered for the making of a surprisingly fast evolution of transport between 2017-2022. The presence of smartphones, the literal “go for broke” dedication of Elon Musk, and the considerable cultural and monetary resources of Apple throwing themselves into the autonomous EV race make too compelling a road for me to fight against.

          That being said, wack the energy mole and next thing you approach is the population mole, the water scarcity mole, and the irreversible climate change mole. Regardless, life in 2015 is far more pleasant than I could fathom just a few years ago. I’m beginning to suspect that in 10 years I will face the same realization.

          Thoughts anyone? If you roughly agree, why? How do you think it may go slightly differently? If you completely disagree, then I’m also excitedly curious why

          • I could be wrong, but I suspect that everyone here agrees that if we had another 20 years of slowly rising oil production alongside stable, $80 barrel oil our civilization would successfully make an energy transition.

            Yes, you could be wrong and you are.

            • Junior says:

              Hi Brian,
              I have to agree with Ron about your statement- “I could be wrong, but I suspect that everyone here agrees that if we had another 20 years of slowly rising oil production alongside stable, $80 barrel oil our civilization would successfully make an energy transition.”

              For such a rosy scenario to be possible, I think the key element aside from innovation, is a massive downsizing in global population to a more sustainable level, such as 2-3 billion of the wealthiest of all. This would enable the rosy future to be a possibility, but I don’t see us getting there intact. I say wealthiest because the rosy innovation path is very expensive.

              • Dennis Coyne says:

                Hi Brian,

                We are unlikely to have $80/b oil for beyond 2015, but the economy can support higher oil prices, I think they may be able to go to $140/b by 2020 without causing a recession, the decline in oil output from 2015 to 2020 will be very low (output of 76 Mb/d in 2020) and output decline will remain less than 1% per year through 2025 (72 Mb/d), at that point oil prices will be able to rise to $168/b without causing a recession.

                These higher oil prices may allow some of the transition to occur that you foresee, but I am doubtful that it will happen as quickly and easily as you have imagined.

                My expectation is that oil prices will be very volatile unless governments step in to regulate oil output in an attempt to smooth the boom bust cycle, this will lead to recession as oil prices rise too quickly for the economy’s ability to adjust. The recession in turn is likely to slow down technological progress in the transportation system.

                I could also be wrong, Ron really is the only one who knows what will happen 🙂

                • Ed says:

                  And least we forget, in those ten years World population will have increased from our current 7.2 to 8.1 Billion (U.N. projections for 2025). If we can transition and “renewables” be made to “renew” themselves: then what ? Population of 12 or 15 or 20 Billion. Goody.

                  • Dave P says:

                    Monkeys (naked apes) be breeding!

                  • Dennis Coyne says:

                    Hi Ed,

                    Population will peak between 2050 and 2100 and will then decline. UN population scenarios below.


                  • Caelan MacIntyre says:

                    If population is predominantly FF-‘fed’ and FF’s go in an orca or shark-fin decline, then I suspect the human population to follow suit if alternatives cannot be ramped up fast enough for offset.

                  • “The world needs to wake up to “the ticking timebomb” of youth unemployment.”

                    A spokesperson is quoted as saying “complacent assumptions about population growth slowing are being proven wrong” and that the global youth unemployment situation must be tackled with the fervor of children’s vaccination campaigns or humanitarian emergencies. As the article goes, it get’s less impressive, wandering off into vague notions and feeble hopes of status quo “economic growth” as somehow being able to ride to the rescue (probably mirroring the report itself).

                    Sooooo… population growth is not slowing at all.

                  • Dennis Coyne says:

                    Hi Caelan,

                    Why would the fossil fuels go into steep decline? Does collapse cause the steep decline in fossil fuel output? Or does the steep decline in fossil fuel output cause collapse?

                    I can see a depression resulting from high fossil fuel prices, which would reduce oil demand and perhaps oil prices and might lead to an up and down cycle. The shark fin decline often posited is based on not looking properly at net energy. As long as the system as a whole has enough net energy from all sources, then lack of net energy will not be a reason for collapse.

                  • Nick G says:


                    If you pursue the source of that comment, you find “2012 the UN revised its population estimates upwards, stating
                    Compared with the results from the previous revision, the projected global
                    population total in this revision is higher, particularly after 2075, for several
                    reasons. First, fertility levels have been adjusted upward in a number of
                    countries on the basis of recently available information. In the new revision,
                    the estimated total fertility rate (TFR) for 2005–2010 has increased in several
                    countries, including by more than 5% in 15 high-fertility countries from sub
                    Saharan Africa.”

                    So, this isn’t anything new. Fertility rates are still plummeting in most of the world, including China, India, and S. America, due to improving education and careers for women. Stubbornly high fertility rates are pretty much a problem in Africa and the ME, mostly due to…a lack of education and careers for women.

                  • Caelan MacIntyre says:

                    “Why would the fossil fuels go into steep decline?” ~ Dennis Coyne

                    Maybe in part for the reason that Ron mentions(?):

                    “Massive infill horizontal well drilling has made it a new ball game. They enable a country like Russia or Saudi Arabia to keep production from declining any great amount until its fields are around two thirds depleted or more. But then when decline finally does set in it will be steep, very steep. Their production profile will resemble a Seneca Cliff.” ~ Ron Patterson

                    I am not necessarily talking about collapse though. That seems more between you and Futilitist.

            • SRSrocco says:




            • Brian Rose says:

              I don’t think we will have 20 years before peak (or even 5 years), much less a stable oil price. I’d say it’s an impossible scenario. Only used it as a reference point for the idea that a relatively smooth transition would be possible under that scenario.

              Why do you think a transition would be impossible under such a scenario?

              I’m speaking purely in terms of energy transition. Population overshoot, sea level rise, water scarcity, and a host of other consequences of overshoot will inevitably cause a population collapse followed by GDP and financial collapse, but in terms of energy availability alone I’m wondering what your reasoning is.

              EROEI of PV and wind are high enough to sustain our current civilization, especially in a world where energy is being used more efficiently.

              I haven’t burned a gallon of gas in months with my Volt, and soon I’ll have solar panels and won’t be burning natural gas by proxy through the grid. This is a real world impact, and it does make a difference.

              Vehicle miles traveled is down year after year after year in the U.S., which makes sense to me since people are moving into cities and even more people are using Amazon instead of driving to and fro from stores.

              Every gallon I don’t burn is picked up and burned by some person in a growing city in India, China, Indonesia, Africa, wherever. I get that, and it is valid, but it ignores the fact that PV and wind are approaching economies of scale large enough to make them cost competitive with fossil fuels.

              Throw me a loaf of bread here Ron! Why is it impossible, under any and every circumstance, for us to make an energy transition? Do you think autonomous EVs are a pipe dream? That their impact will be minimal compared to the scope of the issue? If so, why?

              I think a lot of people underestimate the magnitude of the impact of the release of the Model III around the same time that Apple, a company with bigger cash reserves and cultural influence than most countries, will have once it releases its autonomous EV. 2017-2020 will be a watershed moment for autonomous EVs. Perhaps that is where you’re skeptical. Maybe you doubt Elon Musk’s ability and go for broke dedication to a world of solar panels, EVs, and autonomous vehicles.

              Throw me a bone, I beg you!

              Do I think 2020 will be all rainbows and butterflies? Absolutely not. I think 2020 will be a lot like 2012, the world will be fragile and rocky, but will still be held together as the transition marches forward.

              • Brian, too many people are destroying the world. The world can support, long term, no more than two or three billion people. And even they will still wipe out most of the animals. Our water tables are dropping and will drop further. Rivers are running dry, lakes and inland seas are drying up, topsoil is blowing and washing away, deserts are expanding and forests are being clear cut. And I could go on and on.

                And you think some kind of energy transition is going to save us? Even if that were to happen it would only make things worse.

                The only thing worse than peak oil would be no peak oil

                • Stephen Hren says:

                  It is ironic that oil contains the remnants of dinosaurs – perhaps one day they will be able to make more of it from the smug curmudgeons who are certain that collapse is all but inevitable. Did you have so much foresight that you saw the creation of the Internet? Of smart phones? If you didn’t, then what makes you think you know the future of transportation?

                  Look, we’re starting with a system of transportation that uses an internal combustion engine, about 20% efficient. Then we’re using a 3,000 lb. car to move around a 150 lb. (5% efficiency) average payload, but only using it about 3-5% of the time, all other times parking it. That means that our current transportation system is only .2 x .05 x .05 = .0005 or 0.05% efficient. Do you really think there are no possible revolutions possible with a system that is only one twentieth of one percent efficient at accomplishing what it’s suppose to do.

                  I’ve been following peak oil since reading Deffeyes back in 2002, I’ve written books about it a decade ago – the fact is that everything is in place already for a clean energy transportation revolution, even if peak oil happens last December. In fact, the sooner it happens, the better – the faster the transition will be. Here’s the reason – they’ll be too much money to be made.

                  Also, the world already produces enough food to feed nine billion, but two massive boondoggles (ethanol and meat-eating) keep it from going to the right places. Here’s the thing about seven or nine billion people, many with access to the Internet and it’s treasure trove of human knowledge. We’ve all heard about black swans, events out of the blue that cause damage and disruption. But opposite that are green swans, breakthroughs that will occur with great rapidity over the next several decades as the most complex computers ever built (the human mind) all connect in one giant computer together on the Internet. At this point it’s probably equally worth worrying about being taken over and enslaved by robots as civilization collapsing because of peak oil.

                  Thanks, Brian Rose, for your well-thought and written posts, and to everyone for the thoughtful conversation.

                  • Boomer II says:

                    While I think there will be many bumpy roads ahead, I prefer reading about this scenario than about the collapse scenario.

                    Since I have been told by the collapse advocates that there is nothing I can do to stop it, then it doesn’t matter what I choose to focus on. Therefore I choose to focus on the more optimistic predictions.

                  • It is ironic that oil contains the remnants of dinosaurs –

                    That’s only the first thing you got wrong. There are no dinosaur remains in oil. All oil is aquatic in nature, the remains of plankton blooms that died and sank to the bottom of a shallow sea where little free oxygen existed.

                    – perhaps one day they will be able to make more of it from the smug curmudgeons who are certain that collapse is all but inevitable.

                    curmudgeon – noun – a bad-tempered, difficult, cantankerous person.

                    And that is how you view all those who believe the world is in deep overshoot and that a natural correction is inevitable.

                    I would have a much kinder word to describe people who think the future of human life on earth is nothing but a bed of beautiful roses – Pollyannas.

                    Pollyanna – noun – an excessively or blindly optimistic person.

                  • Dennis Coyne says:

                    Hi Ron,

                    Imagine Pollyanna and Henny Penny had a child with a viewpoint somewhere between the optimistic and pessimistic point of view.

                    That child’s view of the future would be more realistic.

                    No everything will not be sunshine and pretty flowers, nor will it be only darkness and thorns. There are both good and bad things that will happen, reality will be a mixture of both.

                  • Futilitist says:

                    “Imagine Pollyanna and Henny Penny had a child with a viewpoint somewhere between the optimistic and pessimistic point of view.

                    That child’s view of the future would be more realistic.”

                    That would be an example of fallacious averaging. There will only be one future regardless of anyone’s views (wishes).

                    Besides, Dennis, you have a child’s view of the future, but that doesn’t make it realistic. 😉

                  • Dennis Coyne says:

                    Hi Futilitist,

                    It has been proven that only bad things can happen. After all it is futile to argue with Futilitist because he has an old man’s view of the future, death, destruction, those have been written in stone.

                    Nothing is known about the future. Reality will be different than the most pessimistic and the most optimistic points of view.

                    Collapse is not a foregone conclusion.

                  • Caelan MacIntyre says:

                    The irony, Dennis, as I’ve already mentioned, is that a so-called optimistic view that ostensibly upholds such things as wage-slavery/vertical hierarchy/etc. (i.e., not much in the way of purely-democratically-run egalitarian business cooperatives); coercive governance, and ‘technocracy’ is actually pessimistic, so to speak. In part because it keeps us in prisons, in binds.

                    With regard to going with the current narrative, to ‘what is’, I would respectfully recommend that you at least attempt to push the narrative along more ethical lines.
                    Your ‘government will step in’ or ostensible faith in industry is against that and upholds the narrative that may get us all killed and/or without that smooth and orderly decline you seem to want.
                    This is precisely in part why I posted the corporations and capitalism comments yesterday by the way.

                  • Futilitist says:

                    Hi Caelan.

                    So what I think you are saying is that Dennis’ uniquely annoying style of hyper optimistic tone-deafness might actually have some sort of more sinister, ulterior motive or underpinnings. Do I have that about right? Are you suggesting that Dennis’ arguments, and style of argument, might suffer from an ethical defect similar to that of the typical climate change denier? Do I need to fill out another indictment? 😉

                  • Dennis Coyne says:

                    Hi Caelan,

                    I would be happy if society magically transformed into a democratic utopia, where all humans behaved ethically.

                    I live in the real world, I am not so optimistic to think that human nature will change so that all humans are well behaved.

                    The humans that inhabit the real world are far from perfect.

                    I do not foresee BAU continuing, I think there will be many social changes to try to make society as just as is possible.

                    I have no childlike illusions that human nature will change appreciably, the current system of representative democracy (I think as practiced in Western Europe before the Eurozone nonsense is best) is about the best we are likely to do.

                    No government would be a disaster at present, maybe in 300 or 500 years humans will be better behaved, but I doubt it.

                    Note that egalitarian business cooperatives would be fine, in fact I would encourage them. Do you think these should be forced upon people?

                    People are free to organize into collectives, for the most part they choose not to.

                    Wage slavery is a choice that people make, should they not be free to make that choice?

                  • Caelan MacIntyre says:

                    All you seem to be doing is rationalizing away the system that you don’t even agree with. It is hardly a representative democracy– whatever that really means– either.
                    It is also a system that determines in large part how humans behave– your ‘human nature’.
                    I am not suggesting you hack your arm off, just make at least some effort in shifting the thinking/narrative and/or at the very least make genuine attempts at avoiding supporting and/or making rationalizations for this system.
                    That is, if you truly want a smooth transition and to avoid anarchy.
                    Every effort counts.

                    Are you familiar with permaculture, incidentally? They are making those kinds of efforts.
                    And their illusions are hardly childlike. They are, rather, grounded in reality such that this system, ironically for your case here, is far from.

                  • Caelan MacIntyre says:

                    @Dennis: Wage slavery is not precisely a choice people make. You might want to make that claim to the so-called 99%, for example, and see what they tell you.

                  • Message from: CentCom says:

                    To: “Dennis Coyne

                    We have reviewed your latest work and have determined that your character:

                    Dennis Coyne

                    has grown stale. Your sunshine level is set *WAY* too high to present a plausible argument anymore.

                    You are now in breach of contract. This is a serious offense.

                    Please report immediately to central control for a total character rewrite.

                    [as usual, destroy this message upon reading]

                    ————:END TRANSMISSION:————

              • DuaneX says:

                >>and even more people are using Amazon instead of driving to and fro from stores

                I have been thinking about this, Brian. Is it more energy efficient to drive to your local Target and buy a box of lego? Or to buy it on Amazon, have it shipped out by plane and delivered via courier to your doorstep?

                For this exercise I am assuming that the backend up until the distribution warehouse of either Amazon or Target is similar (18 wheeler from Mexico).

                I don’t have an answer. But this much is for sure, just because you eliminate the personal driving to and fro, doesn’t mean there aren’t energy inputs and that they might not be equal to or greater than the individual in his Toyota.

                These days I’ve been seeing the latest buying off AliExpress, where you can shave still a couple more dollars off that $49 drone. Individualized purchases, all the way from the factory in freaking China, I say, shaking head with both marvel and disgust.

                • Brian Rose says:

                  Short answer: Buying from Amazon is far more efficient.

                  Long answer: Amazon has numerous hub warehouses that are impressively large. These giant hub warehouses are specifically located to be maximally efficient in terms of shipping.

                  How many thousands of products are shipped to each individual Target that are never bought? Where do they go after? How efficient was it to sent 20 ironing boards to each of hundreds of Targets?

                  There are ~1800 Targets in the U.S.

                  There are ~96 Amazon Fulfillment Centers

                  The efficiency is in the centralized distribution aspect of Amazon’s operations. Big Box stores must use a shotgun approach and send too many products to too many places. Amazon uses a sniper rifle, and has the advantage of swaths of data about every customer that makes a purchase to fine tune that sniper rifle.

                  So not only is Amazon far more fuel efficient on its end of the product delivery equation, but you as an individual get the ultimate fuel efficiency savings – you get to burn zero, zip, zilch fuel in the process.

                  A USPS truck delivering an Amazon package to your door isn’t adding any substantial fuel cost to its already predetermined daily route. That gas was being burned anyway because USPS has a truck driving right by your house either way. Where as you as an individual will be burning fuel specifically for your trip to Target.

                  Hope this helps give a better real time visual of the significant differences between something like a Target store and Amazon.

                  • Nick G says:

                    This analysis has been done for food, and the answer is that the trip to the grocery store and back takes *far* more energy than any of the shipping before that point.

                    The home (mostly refrigeration) turns out to be the big energy consumer for food.

            • Petro says:

              “Yes, you could be wrong and you are”

              -You certainly made my night Ron……..
              …shaken, not stirred….and very dry!

              Be well,


              • Stephen Hren says:

                “Old, cranky, and more than a little stubborn, a curmudgeon is the crusty grey haired neighbor who refuses to hand out candy at Halloween and shoos away holiday carolers with a “bah humbug!” ”

                You may be right, collapse may be the end result. All I know is the future is unwritten, with more variables than you can shake a million sticks at. Are you some great predictor of events? A modern day Nostradamus? If so, can you enlighten me as to any of your previous predictions, when they were made, and how accurately they came to pass?

                Insisting without any possibility of salvation that everyone will die I do believe qualifies you for the above 😉

                Sorry to be the bearer of bad news.

                  • nate says:

                    When you can make and operate this with renewables i might think you are on to something

                  • Nick G says:

                    They do.

                    Electric arc furnaces are…electric. They can and do operate with wind, hydro and nuclear power. Almost all US steel production is electric.

                • Stephen, when water tables are dropping by meters per year, when rivers are running dry, when forests are being clear cut, when species are going extinct by the tens of thousands per year, when most fish have already disappeared from the ocean and when the human population of the earth is about three times the long term carrying capacity of human flesh, it don’t take a Nostradamus to figure out something has to give.

                  And for the record Mesozoic marine reptiles were not dinosaurs and oil is not the remains Mesozoic marine reptiles. Oil was created from dead plankton, not ancient marine reptiles.

                  It was thus becoming apparent that nature must, in the not far distant future, institute bankruptcy proceedings against industrial civilization, and perhaps against the standing crop of human flesh.
                  — William Catton, Overshoot page 172

                  • Nick G says:

                    when water tables are dropping by meters per year, when rivers are running dry

                    How much water for agricultural production comes from irrigation?

                    IIRC, it’s only about 10% in the US. US farmers could reduce water consumption by 10% by just eliminating waste, like rice production in deserts…

          • Boomer II says:

            Most politicians haven’t been dealing with declining fossil fuels, environmental issues related to fossil fuels, and transitions to renewable energy because their support money has come from industries and individuals that benefit from the status quo.

            However, there are some very wealthy people in Silicon Valley and some companies with big piles of cash. At some point that money and influence will trump the fossil fuel money. DC will get the message.

            Silicon Valley sees opportunities in moving to new forms of energy generation and distribution and to new forms of transportation. They have no reason to maintain the status quo.

            • I guess they are already buying up politicians to get subsidies. But as they gain power the economy will suffer. I can see a benefit for the chinese to have a huge surge in renewables, they build the expensive components. Maybe this debate is already influenced in the USA by the YENGLI Green corporation?

              • Boomer II says:

                But as they gain power the economy will suffer

                But haven’t we already established that if we continue to be dependent on BAU the economy will suffer as well?

              • Yes. But I’m worried a poorly thought investment will hurt the economy and render us unable to make wiser investments. I’m starting to see so much bs about solar and wing I think there’s Chinese money behind it.

                • Dennis Coyne says:

                  Hi Fernando,

                  The transition cannot happen overnight. What is your alternative to fossil fuels? You love throwing cold water on alternatives, do you think efficiency improvements alone will get the job done? Or nuclear and biofuels along with efficiency? Do you envision making the transition with no wind or solar? Or do you like to say it can’t be done because it has not been done before.

                  Use a little imagination.

                  • Junior says:

                    I heard a recent conversation.
                    One said ‘we could just burn our way through coal and as much fossil fuel as we can afford over the next 50 years while we massively downsize (due a conscious choice, or perhaps just to much debt to replace our ourshoot), and continue to innovate and deploy a more energy efficient culture.’
                    But ‘what about global warming?’ another says. The first replies ‘we just could deploy carbon sequestration chemistry, such as iron seeding of the ocean, on a massive scale’.
                    The second, third and fourth say “No thanks! That is just a reckless experiment that we will wreak havoc on mother nature!”.
                    The first replies “Sorry to be the bearer of bad news, but we are already far into that little mother nature killing experiment. For example, wild animals now comprise less than 2% of the global total animal biomass! And there are many rivers that no longer reach the sea. I could go on…”
                    And the others just quietly reach for their brew.

                  • Dennis, go read my Interview with Ebenezer Rabbet and tell me what you think about my imagination.


                    I think the solution is a little bit of everything. I’m also quite concerned by the sheer amount of unsound baloney I read all the time.

                    I have the faint suspicion I’m a lot more optimistic than Ron, but I’m also fully aware that we need to find options that REALLY work. And I don’t see politicians approaching this with commn sense. We got the full gamut, from Merkel shutting down nuclear plants and building coal to Obama innocently thinking we have endless natural gas reserves. This crap ought to stop.

                  • wimbi says:

                    And just do it, quit all the blabber.

                    I represent not the 1% and not the 99%, but maybe, in the USA, 10%. Every one of ’em could have merely diverted what they did buy to what they could just as well have bought, and then they too could go around bragging that they spent nothing for electricity and nothing for gasoline last year.

                    Sure, they put up some money to do that, but absolutely no more than they did already for those lazy days in the islands, and those fancy restaurant meals, and those goddam water jets. Not to mention that most popular car- the F-150 with jazz on it, slurping up what the scientists tell us we gotta get off of entirely -AND FAST.

                    Now, calm down, wimbi, go take a break and check if that water bucket solar tracking widget is working right again.

                • Boomer II says:

                  But I’m worried a poorly thought investment will hurt the economy and render us unable to make wiser investments.

                  What wise investments should they be making and will they?

          • wimbi says:

            Brian. Thanks for that! It mirrors a very advanced version of what we had cooked up with my saturday science seminar kids about 25 years ago, when I gave them the task of redesigning transportation.

            One of those bright pre-teens constructed a computer simulation of our little town with such an on-demand go-anywhere transport system, and went on to win a big prize at the state level.

            And with the passage of time, those kids are now beginning to run the world, and by chance that kid’s brother is now the town transportation manager, and is enthusiastically pushing all those ideas.

            We are having a show and tell on electric vehicles this sunday, and I hear that a too-big crowd has signed up for it.

            I have arranged a PR stunt photo with my home brew electric tractor lined up alongside a Tesla, both drivers eagerly leaning forward to hit the pedal to the metal at the drop of the drag race flag out front.

            I am thinking of the newspaper caption saying-
            “Electric utility tractor outruns Tesla for the first 20 microns of the race.”

          • Ilambiquated says:

            You are barking up the wrong tree. Cars, autonomous or not, electrical or not, are terrible transportation in densely populated areas. As the population increases, they will disappear by themselves, because they aren’t economically viable.


            The speed is low on this street, but the throughput (passengers /hours) is extremely high by any standard. The cost of building and maintaining this infrastructure is tiny by road standards.

            Cities have to pay for infrastructure with the taxes they collect. Low density means lots of infrastructure and a low tax base. Roads and parking lots are an incredible waste of space and expensive to maintain. That is why hard up cities all across America are introducing “road diets”.


            The result will be reduced oil consumption, regardless of the supply issues.

            This illustrates the problem American cities are facing pretty well.


            • Ilambiquated says:

              One good solution to the problem is for cities to tax surface parking. Or course they need to change their zoning laws as well to allow businesses to open without off street parking. Anyway it would encourage businesses to build on underused lots. That kind of infill would reduce average driving distances as well, reducing the need for roads and ICEs.

          • aws. says:


            I am broadly in agreement. There is a lot of momentum now behind solar PV, distributed storage and EVs that I don’t think can be held back.

            My sense is that continuously rising and cumulative efficiency gains, as well as straight out substitution of systems (transportation, home energy) that required petroleum products to electric, will weaken demand for fossil fuels to a point that it makes the marginal barrel uneconomic to produce.

            If efficiency gains and EVs, can keep the average price of oil below the break-even cost to produce it than things will get interesting.

            Yes, depletion will eventually cause the price of oil to spike again, but that would just increase the incentive for even greater EV adoption and efficiency gains.

            A reminder of how expensive it will be to produce what’s left. From Carbon Tracker

            • That’s from Carbon Tracker. They blew the numbers for the project listed at the top, Foster Creek. That project is in its sixth expansion on the way to produce 200,000 bopd. The bulk of the CAPEX was spent, it comes in at about $15 per barrel CAPEX.

              I have evaluated these heavy oil projects for years, and they do need about $110 per barrel, but that’s caused by cost and schedule risks for the most part. The industry has been way too active and costs escalated too much. The Alberta Provincial authorities have been quite stupid in this area. They need to consult with the Norwegians or Angolans to understand how to slow down things.

              But in conclusion, that chart is bs. It’s just stuff they throw out to see what sticks.

          • dolph says:

            Brian Rose, I appreciate your thoughts and I am not going to dismiss them out of hand.

            Remember, there are alot of boomers (and older) people out there who are projecting their own fear of decline, disability, and death onto the world system as a whole, which is an incorrect thing to do.

            The young fight for life, the adults live, and the old die. It will always be this way.

            I’m 34 years old. I’ve looked at this from every possible angle, and I think we are going to crash. And it doesn’t have to do with technology or innovation, which will always continue to some extent. It has to do with the way our system operates. The entire global economy, is, basically, one big ponzi scheme. When this realization starts to hit home, billions of people worldwide are going to try to opt out and when they do they are going to realize they really don’t have that many chips. As this process moves along, trust in governents, banks, etc. worldwide will fail, and as the unpayable debts disappear, so will go savings and investment. Which will, in time, take down any attempt to really build a new infrastructure. The global financial system will fail, wars and resource shortages will emerge, and America will probably fall to civil war.
            Truly I ask you…when you see this happen, where is the famous Silicon Valley optimism going to be?
            Having said that, you still have to live your life, and doing whatever you can and being optimistic about it is important.

            • wimbi says:

              dolph. I appreciate what you have said. I myself am in my last years and visibly deteriorate almost daily, so the future holds for me no personal fears, but my 50yrold offspring live in the world as it is, and are seeing the things you say.

              So what do they do here and now, and what do they do for their offspring, who will surely see the whole mess happen?

              Well, what I see actually happening, very surprising and encouraging, is those folks really getting together, not in a civil war but a very civil discussion of reality and what to do.

              And they do see the ponzi scheme, which I myself didn’t until way late.

              They are pulling together, setting up food and transport cooperatives, and even consulting geezers like me on stuff we happen to know about.

              They know the real investment opportunity, and the real ROI, is right here.

              “Make here the place I would rather be.”

              Of course, this is a small town. People know each other. They know who is effective and who isn’t.

              I don’t know what’s going on in cities.

              • Caelan MacIntyre says:

                Yes, the real ‘investment opportunity’ is in true community and a genuine interest and preoccupation with all the planet’s living inhabitants and their well-being.

                The current culture is in adolescence, with its preoccupations with material objects (EV’s, etc.) and the self (‘techno-narcissism’), to the relative neglect, exclusion or ignorance of the other, the spiritual, the ‘world outside’, except where it may somehow, like through a manufactured need, pretend to fulfill the self.

            • Brian Rose says:

              I told myself that every day from 2005-2008. When the global financial crisis hit I said “this is it”it, this is the world’s wake up moment.

              I’d been warning close friends and family for years, and figured surely everyone would get it… And once everyone understood they’d bail on the system; panic and collapse would ensue.

              In 2008 we were literally one day from complete financial collapse. Had TARP not passed the 2nd time it would have been game over. That just shows how much whim can change events.

              Here’s the thing though, people immediately went back into their previous world. Even those I’d spoken to about peak oil for years leading up to 2008 lost any scrap of concern by late 2009. The high oil prices abd slow growth of the last several years? Not an inkling of an idea that the two Could be related. Everything BUT oil, thermodynamics, or the impossibility of infinite growth were cited as the reasons for a stagnant global economy.

              After seeing all that unfold I am convinced that the General public, especially if they don’t have a degree in the sciences, and incapable of understanding the interconnectedness between economic growth, wealth, employment, and energy availability. To most people the only obstacles to a growing economy are human created, the laws of physics are not a part of the “science” of eeconomics, and it remains that way because most people are simply incapable of accepting that the global economy is the product of physics, not humans.

          • thrig says:

            Completely disagree.

            Charles Marohn of Strong Towns considers road funding insolvent at all levels of government; New Jersey is looking at a gas tax hike or sending 100% of their transport revenue to debt service. Ooops? Other such state examples are trivial to find, with majorities of state DOT budgets going into new road construction (maintenance? Uhh, yeah, let’s just kick that can down the crumbling road…). The Highway Trust Fund is likewise insolvent, and is being bailed out, perhaps illegally, from the General Fund. Meanwhile, check out the dreadful revenues from car sitting mandated development:


            , ouch, and I do recall reading something about Ferguson and the efforts taken there to try to close their revenue gap. Pity they blew so much on costly stroads? Maybe they should have invested in walking and bicycling infrastructure, instead of breaking the banks, and not a few lives? And it’s not just Ferguson:


            Mmm, the suburban poverty trap. Now, all is not lost, for the American Society of Civil Engineers recently asked for a cool $2.2 trillion over ten years to continue splurging on even yet more roads, or a nice $700 a year tax hike per person. Higher, doubtless, given that the average Walmart worker can in no way eat such a cost. But what are these roads made from, and with? Oh, right, that liquid that per your post will be in permanent decline.

            • Nick G says:

              Has anyone seen good data for car maintenance costs?

              I’d like to find detailed data that shows cost per year, over say 20 years, by year, for our familiar, conventional internal combustion engine vehicles. A breakdown by component (including engines and transmissions) would be nice, to allow a good comparison between new and old cars (as well as ICEs and EVs, eventually).

              I’d like to find averages for broad categories, like compact cars, family cars, SUV’s, etc. That would do. AAA and provide a little information like that, but it’s just for the first 5 years of ownership.

              If I had to choose a model, I’d choose a Toyota Corolla. That seems to be a generally accepted example of a high quality, low cost compact car.

              • thrig says:

                Don’t much see the point behind specific numbers; a car is something like two orders of magnitude more expensive than walking (~$10000 per year vs. ~$100), and that’s just for year-to-year operating costs. Probably even higher, if one includes health problems from excess sitting and the shellacking the biosphere is taking. Meanwhile, despite having shoveled billions into the (largely unmaintained, hence bridging the gap taxes) roads, a single fishy truck turned brings the cars to a near complete standstill in Seattle.


                Resiliency will be gained from advancing options walking, cycling, and public transport, and at the expense of cars (tolling, congestion fees, etc).

                • Nick G says:


                  I absolutely agree with you about cars and fossil fuels paying their way. Trains and walking are my main form of transportation. I only drive about 850 miles per year.

                  Nevertheless, there are some people and purposes that need personal cars, due to disabilities and a need for point to point transportation.

                  For them, it’s useful to know what the car options are, especially new vs used.

        • orbit7er says:

          Like all the other Auto Addiction personal car enthusiasts Tony Seba ignores the vast infrastructural costs of Auto Addiction. New Jersey had to spend $130 Million in 2013-14 just for plowing all the snow on State roads. In 2014-15 so far the cost is over $100 Million and the season is not over yet. $70 Million had to be spent on emergency pothole filling. The costs for Rail snow removal? $0 according to a friend and neighbor who is a supervisor for track maintenance for New Jersey Transit. Feb 10th there was a 41 car smashup injuring 61 people and killing 1 person on new lanes added to the New Jersey Turnpike which did not have snow removal. The 170 lane miles added to the NJ Turnpike as driving declines cost $2.5 Billion and now will require 21 people just to maintain these added lanes at an estimated cost of $3 million per year. A few weeks ago 12 cars were virtually wrecked in a giant pothole on another section of the New Jersey Turnpike. This is just a small part of the costs of Auto Addiction in Winter for New Jersey as Counties, and Towns also had their own snow removal costs, parking lots to clear and now potholes to fill…
          The problems with Auto Addiction are not just the energy to drive the 2 ton car but the waste of 10 times the Green space and land of Rail, the paving over of a football field of asphalt for every 5 cars for parking…
          The true electric solution to Transportation are Grid Controllled electric vehicles which do not suffer the 30% costs of batteries and their weight – ie
          electric trolleys, LightRail and Rail…

          • islandboy says:

            “Like all the other Auto Addiction personal car enthusiasts Tony Seba ignores……”, huh? Orbit7er my friend, you obviously have not watched the longer video of Tony Seba’s keynote to the AltCars Expo and Conference! He states he does not own a car and is big on the idea of the car as a service along with self driving (autonomous) cars. May I invite you to watch his video Clean Disruption of Public and Private Transportation – Auckland, where he spends 48 minutes talking about his ideas and at about 41 minutes in, talks about the problem with horse manure before the advent of the car. He then goes on to talk about how the car and, get this, the electric streetcar (mentioned at 46 min. 5 sec.) turned out be a solution to the horse poop crisis.

            Today was the first time I watched this particular video and the last 7 minutes or so included material I had not seen before. Part of the last 7 minutes that I have seen him talk about before included his ideas about 80% fewer cars and self driving shared cars eliminating the need for huge amounts of parking spaces. He is definitely not an”other Auto Addiction personal car enthusiasts”!

            Alan from the islands

          • Caelan MacIntyre says:

            Hey, orbit7er. Nice to catch you here.

            islandboy, sure, technology can be great, only somehow we are far too often unable, or unwilling, to see beyond it. As such, we can miss or ignore its consequences, unintended or otherwise.

            • islandboy says:

              The only reason I keep bringing this Tony Seba guy up is that, despite his technological slant, he definitely is not pushing BAU. To the contrary, his main focus seems to be disruptive technology. In the case of the videos I have linked to (and others that I have watched but not posted links to) he talks about technology that will disrupt some of the very industries that are seen as a source for concern in many discussions on this very site.

              For example, for those who can’t be bothered to waste 40-50 minutes listening to this guy babble optimistically about EVs, batteries and self driving cars, his main point is that the market by cars will shrink by 80%. 80%, is that BAU? I don’t think anyone in Detroit is amused by his predictions.

              He also is not making his projections based on any technological breakthroughs like cold fusion, high temperature superconductors, fairy tale batteries but, just a continuation of small incremental improvements of technology that exists today. Having had a keen interest in solar PV since I became aware of the concept of Peak Oil, I can testify to the reductions in cost and improvements in efficiency in that technology over the past decade or so and we all know about the improvements in battery technology for portable devices.

              As far as solar PV and batteries go, he boldly predicts that by 2030 all new electricity generation will be solar, based on current cost trajectories. If one extrapolates current growth trends, the only thing that can stop solar PV from becoming the dominant source of electricity world-wide, within the next fifteen years, is a shortage of raw materials (definitely possible), some sort of collapse of civilisation (likely?) or WWIII. To use his words, “it is inevitable”. Note that there are lots of corporations in the US and in fact, the world who will not find his ideas on energy amusing either!

              The point is, from the web page for his book it says “Exponentially improving technologies such as solar, electric vehicles, and autonomous (self-driving) cars will disrupt and sweep away the energy and transportation industries as we know it.” Isn’t that what we discuss here all the time, except it is how Peak Oil “will disrupt and sweep away the energy and transportation industries as we know it” and modern civilisation along with it?

              Many here are forecasting the demise of the automobile and petroleum industries because of Peak Oil, while this guy is forecasting their demise because we will switch to something better. He gives me a slightly less depressing future to look forward to.

              I am acutely aware of other problems related to population overshoot, with the capital city of my island having been blanketed by smoke from a fire at the local landfill that burned for about ten days. The powers that be can’t even figure out how to deal with the 800,000 tons of residential waste generated annually, despite having had studies and proposals for a modern recycling and waste to energy facility to reduce the volumes of waste by up to 85%. See Wasting time on waste management, an article in one of the local papers last Sunday.

              So yeah, I know the future is grim but, these ideas give me hope that I will be able to use my skills and training towards a future that is less bad than it otherwise would be.

              Alan from the islands

              • Caelan MacIntyre says:

                Understood, Alan. Time will tell how everything shakes out. Myself, the grimness as you say, is with regard to the present, as opposed to the future, at least per se. It is a concern for how things are being done today and how some seem to want to continue it. So I’m quite looking forward to the future and the trip there where the present conduct encounters novel forms of disruption.

                What do you need electricity for in Jamaica, or anything else by the way? Can you not simply run around nude all day, swim and then philosophize on the beach, eat bananas and coconut, have sex and sleep under the stars? Anything else and it seems you are just etching out your foundations for the good life and survival, yes?

                • islandboy says:

                  “Can you not simply run around nude all day, swim and then philosophize on the beach, eat bananas and coconut, have sex and sleep under the stars?” That is what the commercials you see on TV would have you believe, “Jamaica, no problem!” right?

                  Fact is many people want to live the lifestyles of the rich and famous as portrayed on US television and the above activities will not afford you that unless you spend a little time trafficking narcotics or running phone scams which, unfortunately, quite a few of my fellow countrymen have been known to do. Many of them that have got caught over the years have been guests of the US government, spending time at some it’s finest (penal) institutions.

                  Oh, and about those televisions, they all run on electricity the last time I checked. >;-)

                  Alan from the islands

                • Dennis Coyne says:

                  Hi Caelan,

                  I do not wish to see BAU continue, I hope there will be significant positive changes in the future.

                  The problem is that often in the past attempts at positive change have resulted in negative changes so we need to be careful.

                  I do not think this is an argument for not attempting to change society for the better.

                  It may well be that I lack sufficient imagination in this area. I would love to see a society where worker cooperatives for business and permaculture for farming were the dominant forms of activity in those areas.

                  I just don’t see clearly how we get from here to there. I may seem to be a defender of the status quo, but that is only because anarchy seems rather a bad idea from my perspective in comparison to say the style of government in the UK, France, or Germany (particularly before the Eurozone was instituted in 1999).

                  I do not believe the current system is perfect and if I were a benevolent dictator of the World there are many changes I would make. All of these changes would no doubt result in further problems that I did not foresee, I would attempt to correct those mistakes.

                  The harping on oil and other fossil fuels and the likelihood that they will not deplete as quickly as many pessimists assume is that this may allow time to transition to alternative sources of energy and allow time to further transition agriculture, water use, and land use so that humans can reduce their impact on the planet.

                  Widespread free availability of modern birth control and access to education for girls will help to reduce population.

                  Once population gets to more reasonable levels (1 billion or less) a utopian society may be more achievable.

                  Bottom line, not everyone agrees on what utopia looks like and how we would get there from here is by no means clear (at least to me.)

              • my parents used to keep my growth chart, and would extrapolate how tall I was supposed to be at 20. Being professionals, they used one of those charts with a humpy rise, a plateau and then a down turn or height reduction. I think most of these technologies behave the same way. What causes a real leap is a major discontinuity.

        • Ilambiquated says:

          The number of cars on the road is going to be reduced by 80%-90% because they are going to be driving 80%-90% of the time instead of being parked

          This is a boneheaded statement. It is commonly cited to prove self driving cars will reduce congestion. Parked cars aren’t on the road. He is confusing total fleet size with cars actually be used at any given time.

          • Brian Rose says:

            Seems like it was just poorly worded. By “cars on the road” I at least hope he meant “registered vehicles”. Cars on the road will indeed be approximately the same. Really it is cars not on the road that will be reduced.

          • Dennis Coyne says:

            Hi Brian,

            The idea is that self driving cars can travel more closely spaced on highways, so the flow of cars can be improved. Self driving cars will not do the boneheaded things that many humans do, like staying in the left lane until 200 feet before their exit or continually changing lanes to try to get through traffic congestion which causes more congestion.

            In the future people won’t drive their cars, they will be automated and fewer highway lanes will be needed.

            • And we’ll have criminals introducing malware to create multiple car pileups. I guess we’ll just learn to live with it.

              • Dennis Coyne says:

                Hi Fernando,

                A potential problem with every technology. I suppose we could just walk if we wanted. Or move to a place where there are no risks of any kind. Not sure there is such a place.

                • I have a better alternative. Buy “Norton-for-Vehicles”, from Symantec. It includes a cangaroo leather body suit and a padded Kevlar helmet, all for €1399 including shipping and handling.

        • Petro says:

          -This guy – Tony Seba – knows a lot of details and statistics from countless hours spent staring at an iPhone and/or a macBook screen (the narrative nowadays goes pretty much like this:
          one takes a student loan…goes to university…buys an i-Gadget…starts staring at the screen for hours, days, years….regurgitates what Steve Jobs, Elon Musk, etc, etc (you put the name here) said or did ….dreams of doing it him/herself…. starts writing on blogs…..becomes a PhD…. becomes an all-know professor… gets grants and starts paying down his student loan… plus interest… starts to lecture future all-know professors and writes books about the most important problems facing humanity- assuredly and confidently stating that he/she has the solution to those problems …makes others dream and blog (sometimes on well respected forums like this….sadly!) in a detailed manner on how what he/she wrote in the book can actually be done practically, even though most of them (bloggers) know next to nothing about the details they are blogging about… which were non sense to begin with, ….for the all know professor (Tony Seba, etc) learned about them by regurgitating blogs he/she read by staring at the iGadged screen ….which completes the Circulus Vitiosus and makes my point redundant and mute….. which in return makes…..blah, lah, la, a, …..

          -He (Tony Seba) however, knows very little about/of Thermodynamis and its laws as they were written on Physics’ books….let alone how NOTHING he knows about Complex Systems ….and, most importantly, he knows nothing about finance, energy and environment and their deterministic relationship with/upon energy and society at large.

          -I bet Tony an iGadged of his choice now that by 2030, if Tony would like to barter with me – he would need to give me a lot of his computer/iPad cars to get a piece of bread and non irradiated shelter for a night from me, if I (or anybody!) had one (piece of bread to share -that is) by then….hypothetically… or not so hypothetically…


          -Great article as always Ron.
          Thank you!

          Be well,


          • Brian Rose says:

            To be fair, Tony Seba may know nothing about thermodynamics, but Elon Musk knows quite a lot about it.

            Elon Musk consistently mentions that any time he gets an idea he starts from what he calls “the first principles of physics”. His primary focus on any idea or project is on whether the laws of physics allow it to be a cost effective product. His track record is pretty good so far.

            He basically asks himself “How could this sector or product type be more thermodynamically efficient”. That is what he begins and ends his day with. This thinking led him to create Zip2 (the first online “yellow pages”, far more efficient than printing and shipping books every single year), PayPal (the first successful online payment system, opening the internet for the sale of goods and services), SolarCity (largets owner and distributor of PV in the U.S.), Tesla (no need for detail here), and SpaceX (in his interviews he talks about how his #1 goal is rocket reusability because destroying your transport every time you blast off is like destroying your car every time you travel, no wonder space is inaccessible).

            His desire to branch into such diverse sectors was and is driven purely by physics and thermodynamics. By starting with physics he has revolutionized multiple well insulated industries (vehicles, space industry, energy industry) and even invented entire industries (Zip2 and PayPal).

            Tony Seba might very well know nothing of Thermodynamics, but Tony Seba isn’t the one transforming the world. The people he claims as his idols are the ones inventing the future, and, at least for Elon Musk, the focus is PURELY on physics and thermodynamics.

            • Petro says:

              Hi Brian,

              “His (Elon Musk) desire to branch into such diverse sectors was and is driven purely by physics and thermodynamics”

              …I beg to differ.
              Musk’s Tesla has an EROI (ROI) that would make oil shale and tar sands look like Texas in the 1930s and Ghawar in the 1980s.
              According to my understanding of physics, those two things do not go well together….
              Tesla is possible ONLY because of free money grants and not Musk’s genius. Without free money, tesla or solar city would never exist and/or compete with toyota, nissan and alike.

              Tesla (the person) had a fundamental understanding of physics, thermodynamics, etc. He was a genius who functioned without free money.
              Tesla(the car)’s maker – not so much!

              -I do not mean the following as an offensive assertion – believe me, but you seem to not have the correct and /or complete understanding of energy, efficiency, EROI, ROI, finance, money and a lot of other things.
              No need to feel bad, nobody does!
              It is prudent and reasonable however, that one does not make grandiose and assertive statements regarding profound matters one knows (at best) little about.

              Be well,


              • Nick G says:

                I didn’t know cars HAD an EROEI. How would you calculate that?

                Tesla is possible ONLY because of free money grants

                What grants do you have in mind? And how do they compare to the trillions spent on oil wars?

                • Petro says:

                  -You seem to not know a lot of things, Nick (your extensive and assertive commenting on them notwithstanding…) and I left the schooling business a long time ago.

                  Be well,


                • Boomer II says:

                  I think when one starts to complaining about various tax benefits and write-offs an industry gets, you have to look at some of the biggest ones, like being able to deduct interest on housing.

                  The US tax system has always had various incentives to encourage certain behavior and investments. It’s fair to say that the entire system could use an overhaul, but to single out renewables for whatever tax advantages they may get overlooks the widespread use of tax laws to benefit other industries.

                  If you want to eliminate any tax advantages for renewables or increased energy efficiency use, fine, but do an across the board tax overhaul to eliminate them everywhere. And see how far you get in doing that.

              • John B says:

                Tesla, and Solar City investors bought their stock with real money, not grants.

                Like Matt Simmons, you have no idea what you’re talking about.

                • Petro says:

                  “Like Matt Simmons, you have no idea what you’re talking about.”…

                  …ah, but you most certainly do!
                  Especially when it is about “real money”- as you so eloquently put it.

                  Be well,


          • islandboy says:

            Petro, Your consistent negative line on this subject leads me to wonder what your motives are and what the basis for the assertiveness with which you express yourself is , especially in light of much of what you assert to be objective facts being more likely consistent with opinions held by many people with a right of center political bias. I would be very surprised for example. if you claimed to believe that the planet was getting warmer as a result of human activities.

            I take the following statement personally, “makes others dream and blog (sometimes on well-respected forums like this….sadly!) in a detailed manner on how what he/she wrote in the book can actually be done practically, even though most of them (bloggers) know next to nothing about the details they are blogging about”, since there are only a small number of people who participate here that you could br referring to and at any rate, I was the person who introduced Tony Seba to this discussion.

            My take on Tony Seba is that he has studied how disruptive technology transforms the economic landscape. Have you? He is certainly bold with many of his predictions and with our modern civilisation staring down the barrel of Peak Oil, many of them may never materialize. The point is that, if current trends continue, electric cars will become less expensive and superior to ICE powered cars and PV will become one of the least expensive forms of electricity, within the next fifteen years. Can you point to any flaws in his reasoning in that respect?

            You have thrown dirt on Tesla, Elon Musk and Tony Seba and in doing so have made claims about free money that I am pretty sure have been rebuffed by Elon Musk in other forums. What exactly is your angle? A lot of what Tony Seba talks about in his videos is history, it happened. Are you denying that? Are you trying to say that those industries he has predicted will be disrupted, cannot be disrupted for some particular reason. Is it that, for reason best known to yourself, you do not want to see them disrupted?

            In other threads on this site, I have posted links to news articles that imply further reductions in the cost of PV are just about guaranteed by increasing the amount of solar cells that can be obtained from a given block of Silicon raw material. Am I dreaming to suggest that these developments will probably materialise? I don’t get it.

            Please enlighten us with some of your superior knowledge of “thermodynamics and its laws as they were written on Physics’ books”, “Complex Systems” and, most importantly, “finance, energy and environment and their deterministic relationship with/upon energy and society at large.” If you believe that Saudi Arabia will experience a shark fin decline within the next couple of years and throw a wrench in Seba’s predictions then I agree that it is entirely within the realm of possibility.

            My position is that seven years ago, having just become aware of the concept of Peak Oil I thought that, following the arguments of Simmons, Campbell, Defeyes et al, by now we would be on the downslope and that has not been the case. A frantic and in my view, desperate attempt to stem the decline has kept the party going but, made the prospect of a shark fin decline even more likely IMO. If you buy into Seba’s line of reasoning, we are close to a tipping point with both EVs and Solar PV that will cause demand for oil and other fossil fuels to fall rather dramatically. Am I certain that the tipping point will be reached before world oil production goes into a tailspin? Hell no! All I am saying is that, if a Peak Oil related collapse can be averted untill affordable 200 mile range EVs appear on the market and the price PV produced electricity with battery storage drops below the lowest electricity prices in the US, we could see demand fall faster than supply when Peak Oil results in rapidly diminishing supplies.

            Alan from the islands

            • Brian Rose says:


              You said everything I want to say, but much more clearly and concisely.

              Especially concerning the mental teeter totter I incessantly whipsaw through – oil production could begin its decline before PV and EV have enough capital stock, or oil could peak just as or just after they have sufficient availability.

              Regardless I feel both peak oil and the PV/EV transition will happen within just a few short years of each other. We face two starkly different futures depending on which occurs first IMO.

              When talking about how long it will take to replace the current fleet of 800 million vehicles worldwide us peak oil folks forget that this autonomous EV world will not depend on consumers purchasing EVs, but instead companies like Apple, Tesla, and Uber mass purchasing autonomous EVs and making them available through smartphone apps.

              A traditional company in the past would take decades to create a truly global network for its products. Uber reached every corner of the world in just 2 years because downloading a free app costs neither the company nor the consumer anything (or nearly nothing).

              If us consumers had to slowly replace the worlds 800 million ICEs through purchasing an EV for our next vehicle it would take several decades. That is not the case, and that is what these naysayers miss.

              Apple WILL release an autonomous EV that can be summoned by a click, and it will completely eliminate the idea of personal ownership of a vehicle. In a world where we summon an autonomous Apple, Tesla, Google, or Uber EV we would not need to replace 800 million ICEs. A city of 2 million personally owned non-autonmous vehicles could make a radical transition with just 10,000 autonomous vehicles due to Big Data. As a company Apple can easily afford to produce enough autonmous EVs to make this happen, and I suspect that is exactly what they are planning on doing; Elon Musk has clearly stated it is his ultimate plan, and I think it is crystal clear that Uber’s ultimate end game is to do exactly the same thing.

              That allows this transition to occur far, far, far faster than I’d ever imagined just a year ago. I am truly astonished at how quickly EVs and especially autonomous vehicle technology has developed. Frankly, if it weren’t for Elon Musk I don’t think we would be anywhere near that point until 2030, but he has made it happen and all of Silicon Valley has woken up to the possibility of it happening before 2020.

              The game has changed, and very few here seem to understand what is on the horizon. It’s not that it might happen, it’s that it is already a certainty. A 100% guarantee. If someone told me this just 1 year ago I’d say they were being manic, but the progress over the last 12 months has been breathtaking as all these pieces come together.

              Happy to see someone else here understands this. Cheers buddy!

            • Petro says:

              Dear Alan from the islands,
              “My position is that seven years ago, having just become aware of the concept of Peak Oil I thought that, following the arguments of Simmons, Campbell, Defeyes et al, by now we would be on the downslope and that has not been the case”

              We definitely would be on the downslope except……wait for it….
              TARP1, TARP2, QE1………QE99….
              Simmons and Campbell did not predict that!
              We are there now and, for we brought demand forward due to QE-infinity, when the Peak happens will be very
              Simmons and Campbell are correct. Their timing was altered by QE which shall make the down-slope far, far steeper.

              You wrote:
              “Please enlighten us with some of your superior knowledge of “thermodynamics and its laws as they were written on Physics’ books”, “Complex Systems” and, most importantly, “finance, energy and environment and their deterministic relationship with/upon energy and society at large.””

              …that will be a long, long enlightenment process, and unfortunately I do not have that much time!
              -We should have had guys like you and Brian Rose after US peaked in the ’70….you (no fault of yours!) are too late.
              Rubicon has been crossed!
              Whatever we do now shall change only timing – NOT the events!

              Be well,


              P.S: no “dirt” (whatever that means?!) intended on your friend Tony Seba and/or anybody here!

      • Jon Kutz says:

        Another thing that has to be considered when thinking about oil exporting countries is that in most cases the income from the oil exports is the main source of income for the governments of those countries. They are not really in a financial position to slow down production to save oil for the future. They NEED the income from oil exports TODAY to keep their CURRENT bills paid.

      • Cave Bio says:

        Hi Islandboy,

        I asked this question six months ago and I was basically told that I was an idiot for asking it. Six months later and it is a much better question today than it was then, but the answer you have received seems much worse than the derogatory ones I was given.

        Let’s do a little math–I will keep everything at whole numbers to keep it easy.

        The Saudis are producing around 9,500,000 barrels per day at around $55 per barrel. That is $522,500,000/day (I am ignoring their internal consumption here). If they took 2,000,000 barrels out of the market today that would cost them $110,000,000/day. However, that reduction in supply could be enough to balance the market and in a short time the price could spike. Let’s assume it spikes to a modest $75 per barrel. That means the Saudis would produce 7,500,000 x $75 which is $562,500000 per day.

        To bring Alaska, the Brits and Indonesia (or virtually anyone else) into this conversation is so obviously nonsensical that I can’t believe I would even need to explain it, and so I won’t. I will, however, point out the obvious. One does not have to go back very far in history (2008-2009) to see the Saudis respond to demand and price drop by significantly cutting production (over one million per day)–so yes, they do use logic and cut production when necessary.

        Your question stands Islandboy. It is an excellent question and one that begs a response.


        • Gerd says:

          At $100 oil the US, Canada, Iraq and others would continue to increase supply. as a result the Saudi 7.5M could be 6.5M the year after and 5.5M the year after that. They foresaw a downward spiral of their exports and they didn’t want that, at any price.

        • Okay, don’t bring anyone into the conversation except Russia. Russia produces about half a million barrels per day more than does Saudi Arabia. The exact same math as you applied to Saudi Arabia also applies to Russia.

          I can believe you need to that. And the point is not so obvious as to why you won’t.

          To even imply that this situation applies to Saudi and Saudi only is unbelievable. The same principle applies, not just to every nation but to every producer of every commodity. The exact same math that you applied to Saudi applies to any other producer of any commodity when there is a glut and a huge cut by any producer would make that glut disappear and prices would rise. That you would imply that this is a Saudi thing and your math applies only to Saudi is… is… is so obviously nonsensical that I can’t believe I would even need to explain it, and so I won’t.

          • Cave Bio says:


            Russia is the only other player for which this scenario could potentially apply–or even make any sense. I did not mention them because of the current geopolitical complications that, in my opinion, may make it harder for Putin to enforce a reduction in production.

            The exact same math that you applied to Saudi applies to any other producer of any commodity when there is a glut and a huge cut by any producer would make that glut disappear and prices would rise.

            Ron, do the math. If you look at my initial argument the only real push back is that the Saudis are not exporting all of their production. If you do the math again, using export numbers that are closer to Saudi Arabia’s average exports (depending on the assumptions you make) they could theoretically lose money on the deal (although it is close to break even).

            Surely you know why it would not work in Alaska or the North Sea or anywhere else but Russia. There is not a hegemony in any of these regions and the overall production of each region is too low to have enough of an impact to affect global pricing. I really had to say that?


            • No, it has really happened many times before. Dairy farmers have poured out their milk rather than sell it into a market they thought was too low.

              But you miss the point entirely. Saudi wanted to cut production but non the other OPEC nations would go along. Al-Namai wanted to come to an agreement but the other nations were so sure Saudi would act along and they would take advantage of Saudi carrying the entire load that they refused.

              So Saudi said “fuck you guys, if you are not going to cut then we are not going to cut.”

              End of story, that’s what happened.

              • Cave Bio says:

                Milk, seriously Ron?

                Six months ago I pointed out that the Saudis were acting like it is 1984 and that they can pump an empire to its knees. They had/have an opportunity to reduce pressure on their over worked fields without hurting their bottom line, and yet they continue to pump all out.

                So Saudi said “fuck you guys, if you are not going to cut then we are not going to cut.”

                So what you are suggesting is that 10 years after Twilight in the Desert they have the ability to pump all out in the face of collapsing prices just to spite their fellow OPEC members? Okay.


                • Petro says:

                  …Twilight in the Desert brings back memories. I had the opportunity to work with Mr Simmons a couple of times….
                  -Anyway, perhaps you have not visited this forum for long Tom and perhaps you missed the part of the article where Ron presents how depleted Saudi fields indeed are, but Ron ( and Ron please do correct me here if I am wrong!) has been one of the very few that correctly (in my opinion) and based on factual numbers has pointed out that Saudis have (almost) NO spare capacity.
                  You are miss reading Ron, I think.
                  As to why I think you are miss reading him, I let Ron explain (even though I think he did already!)

                  Be well,


                  • Cave Bio says:


                    Perhaps you missed the fact that the data Ron presented is many years old–nothing new there. Which, if you think about it, (please, somebody, put 2 + 2 together)is exactly the point.


                  • Dennis Coyne says:

                    Hi Cave Bio,

                    I think the explanation that Ron gave is correct. Saudi Arabia is making a political statement. Perhaps when OPEC decided not to cut output it was because they expected that the LTO output in the US would be reduced very quickly and prices would stabilize at $70/b or so.

                    At $50/b less income and about 9 million barrels per day of net exports (total liquids), that is $450 million per day less revenue for the Saudis or about $164 billion per year.

                    Russia has never tried to act as the swing producer and has always pumped all the oil it could, the Saudis have cut output on several occasions, but I guess in this case they could not convince other OPEC members to share in the cuts.

                    In 2013 the Saudi GDP was 748 billion dollars so 164 billion in lost revenue is significant, 20% of GDP is a big deal.

                    Russia has about 7.3 Mb/d or 2.66 Gb/year of net exports. If we assume $50/b of lost revenue that is about $133 billion dollars of lost revenue for Russia.
                    Russia’s GDP is about $2000 billion, so their economy only sees a 6.7% hit (not including any multiplier effects).

                    From an economics standpoint it looks like the Saudis are shooting themselves in the foot.

                    As an example lets say they cut output by 0.5 Mb/d, and this makes prices increase by $10/b to $60/b. They lose $30 million dollars per day on the 500 kb/d cutback, but they gain $85 million on the $10/b increase in price on the 8.5 Mb/d of net exports that are still produced.

                    They come out ahead by $55 million per day, in a year that is $20 billion or 3% of GDP (not including multiplier effects).

                    I don’t run Saudi Arabia, they must have reasons beyond money that are driving their output decisions.

                    Maybe they think the high oil prices are allowing too much development of EVs and such or they have been watching Tony Seba videos and find him convincing 🙂

                  • Brian Rose says:

                    I would point out that Twilight in the Desert goes in-depth into infill drilling, water cut, and the double edged sword of preserving current production rates at the expense of faster future declines.

                    Problem is, Matthew Simmons, in all his technical brilliance, and use of GSE info was utterly wrong. According to Twilight in the Desert Saudi Arabia could not possibly be producing as much oil as it is today.

                    Simmons went over potential production from infill drilling, pumping water and gas to maintain pressure, and even the potential of the fields recently brought online. His conclusion was that there is no way, in any scenario, that Saudi Arabia would be capable of producing 10,000,000 bpd and maintaining that production up to 2015.

                    Frankly, it was the convincing nature of Twilight in the Desert that convinced me 2008 was the peak. The broad applicability of declining production in mature super giant fields around the world would throw us past the peak.

                    Simmons was wrong about how long these water injection programs could go on for, and he was wrong about what it meant for global production.

                    There’s two parts to the current oil market story. One is the obvious U.S. fracking boom, the other is the fact that global production has been surprisingly resilient even after 10 years of these water injection, siphon off the top programs.

                    No one here, or in The Oil Drum ever thought for an instant that global production would be where it is today. Without North America production is down slightly, but it is laughably far from the apocalyptic declines many here, myself included, predicted as a consequence of water injection programs.

                    The data was convincing, but it was wrong. We are supposed to be deep into the accelerated decline that infill drilling creates by now. Period.

                    Matthew Simmons, and many others, basic premise was that only 50-60% of a reservoir can ever be extracted. This was true in a low price environment, but at higher oil prices you can keep sucking out “oil” with a 90% water cut until the reservoir is significantly more depleted.

                    Oil per well will decline rapidly, but so long as it is profitable you can just drill thousands of wells. Lo-and-behold this is exactly what has happened, and this is precisely why we have all been wrong time and again.

                    It doesn’t matter if something is inefficient or has lower EROEI when it comes to total production. All that matters is if it is profitable. At $20 oil it was not. Raise the price 500% and suddenly you can keep producing, regardless of diminished EROEI.

                  • Futilitist says:

                    How will we raise the price of oil by 500%?

                  • Petro says:

                    Hi Brian Rose:
                    “Problem is, Matthew Simmons, in all his technical brilliance, and use of GSE info was utterly wrong”

                    I worked with Mr. Simmons. He was a brilliant energy guy (among other things), but first he was a financier and economist. He knew numbers like few, very few others.
                    He became an energy/oil man after reading, fully comprehending and going beyond Dr. Campbell, Hubbert , Laherrere et al.
                    He is NOt wrong!
                    He just did not predict that we would bring demand forward by printing trillions upon trillions in 2008-present.
                    But that is ending now!
                    Debt has reached saturation point and is collapsing.
                    Peak will never come from supply constraints – THAT IS WHERE YOU AND 99% OF THOSE WHO COMMENT IN THIS FORUM AND OTHERS LIKE THIS ARE WRONG!
                    This time peak will come BECAUSE we CANNOT AFFORD energy anymore, NOT because we will run out of oil.
                    If we can grow debt and afford it, we can drill on the MOON and never run out of oil. We will never run out of oil.
                    We are running out of AFFORDABLE oil.
                    This time is a DEMAND/AFFORDABILITY issue, NOT an “oil has run out” issue.
                    MATT was NOT wrong – YOU (and those who think that wind and electric cars will solve the predicament we are in) ARE!

                    You (and most who write and comment here!) do not understand what peak oil means. Before commenting like an expert, learn.
                    Perhaps this will help…perhaps:

                    Minute 8:00 of the video is especially enlightening for you – watch it carefully!

                    Be well,


                  • Dennis Coyne says:

                    Hi Futilitist,

                    How will we raise the price of oil by 500%?

                    Did you forget the smiley face?

                    Oil was $20/b, then increased to $120/b.
                    That is a factor of 6 increase, aka 500%.

                    He was talking about the past. In 1998 the price was about $19/b and in 2011 about $117 (both prices in 2014$) about a factor of 6 or 500% increase.

                    In the future you believe the oil price will continue to decrease, time will tell us if you are correct.

                  • I wonder if anybody is familiar with a large oil reservoir which has achieved 60+ % recovery factor?

                  • John B: that link explains Statoil wants to take recovery factor to 60%. But they don’t say they have achieved it. That figure, 60, is sort of a magic barrier. I’ve seen 56% but I never saw 60.

                  • Nick G says:

                    We are running out of AFFORDABLE oil.

                    EVs are less expensive than oil-fueled vehicles.

                    Oil is indeed expensive, risky and polluting. Time to kick the habit.

                  • Petro says:

                    Dear Nick,

                    This is the last time I am going to engage in debates like this.

                    I do not know you, but judgeing from what you write here you are a bright visionary fellow!
                    I wish (believe me: I TRULY DO!) we had a lot more fellows like you after we peaked in the US oil production in 1970 and certainly, after the unraveling of the oil embargo.
                    If we had more of you back then we probably would be in a different (better – I might argue!) place by now.
                    At no fault of yours, I am afraid you are 40 years late.
                    -The die has been cast!
                    -Alea Iacta Est!

                    The next 5-10-20 years are going to be unlike any you envision!
                    Instead of electric vehicles, I truly hope you think of having a good, strong wheelbarrow and axes and mattocks, etc.
                    -I truly do!
                    I also, encourage you to become emotionally strong and as inert as possible, as well as pray that ICBMs are left in their silos and do not start to fly.
                    I wholeheartedly do hope I am wrong and you are right!

                    All the best to you. I truly mean it!

                    Be well,


                  • John B says:

                    Hi Fernando,

                    What that article says is that they’re targeting an “average” recovery rate of 60 %. I believe (according to Noe Van Hulst) they have already achieved that on some fields.

                    Here’s another article for you.

                    “some of these fields are now operating at close to 70 percent recovery”


                    I’ll post the Van Hulst interview below where you can see it.

                  • Futilitist says:

                    How will we raise the price of oil by 500%?

                    Dennis Coyne says:

                    He was talking about the past. In 1998 the price was about $19/b and in 2011 about $117 (both prices in 2014$) about a factor of 6 or 500% increase.

                    You are also talking about the past, Dennis.

                    Did you forget the smiley face?

                    Did you forget your mask?

                  • orjncf says:


        • Ovi says:

          Try this scenario. OPEC plus Russia produce 40 Mb/d. The oversupply was 1.5 Mb/d. So if everyone O and R were to only cut 2%, i.e. 800 kb/d, then the oversupply is 700 kb/d. Where does the price settle in this scenario. I think it would be in the $60 to $70 area. This would slow down some of that ever increasing supply from the US and the economic impact on O + R would not be as severe as it is today. It might take a longer time than 1 yr to arrive at a new supply/demand equilibrium but it would not be as severe as things are today.

          However, I think SA is sending a simple message to the other producers. Learn to suck on the straw a little slower, the juice will last longer and will taste better for longer.

          • Ovi, that was part of the problem, not everyone in OPEC was cutting when they were supposed to. In 2008 most all of them did cut but less than one year later everyone was producing flat out except Saudi, Kuwait and UAE. I think that really pissed Saudi off and that is one reason the held so firm this time. They wanted to send a message to the rest of the OPEC group that everyone had to pitch in or no one would.

            • Ovi says:

              Yes Ron that was the problem, they took advantage of SA and that this why Al-Namai went to a lot of those countries to try to come to a deal. Unfortunately for them, they all said no and they did not understand the consequences of not cooperating. I read somewhere that someone in OPEC is running around again try to get some limited cooperation. I am not sure how they would deal with the independent US operators.

        • John B says:

          Hi Tom,

          Perhaps the Saudi’s and other producers are looking at the rise of alternatives. They might figure that in the future, the oil market will be reduced, so they should sell as much oil as possible now, while the market still exists. That’s what I would do.

          To some extent, it may be the exact opposite of what Peak Oil proponents have been predicting. Instead of supply declining, it’s demand that’s declining. This would also explain the drop in prices, and increased inventory levels.

          • SW says:

            The Saudis are positioning themselves to control the supply of sand.

          • Demand is indeed declining, but it is because of a sick economy in Europe and parts of Asia not because anything is replacing oil.

            • nNgass says:

              “Demand is indeed declining…..” No it is not. Only demand growth is slowing. The EIA reorts that February world liquids production was flat but consumption increased 1.1 million barrels per day. Also, in the outlook for 2015, the IEA increased demand by 0.7% over 2014.

          • Dennis Coyne says:

            Hi John B,

            If total demand was declining then oil consumption would be lower. It is not, the problem is excess supply at $100/b, at lower oil prices, the quantity of barrels demanded will increase and the quantity of oil supplied will decrease until the market is in balance.

            Possibly demand was growing too slowly at $100/b, (or supply was increasing too quickly, or a combination of those two,) at $50/b growth of oil demand will increase and the growth in oil supply will decrease.

            • John B says:

              Hi Dennis,

              I was referring to the last data point on the graph at the top.

    • Jeffrey J. Brown says:

      Net export declines tend to show an accelerating rate of depletion in post-export peak CNE (Cumulative Net Exports).

      I estimate that remaining post-2005 Saudi CNE were down to about 60% at the end of 2013. By definition, it’s not whether the Saudis have depleted their remaining post-2005 CNE, it’s only a question of by what percentage.

      The Saudi Export Capacity Index (ECI, the ratio of production to consumption) Ratio fell from 5.7 in 2005 to 4.0 in 2013. Based on the eight year rate of decline in their ECI Ratio, I estimate that their post-2005 CNE are on the order of 60 Gb (billion barrels), with 25 Gb having been shipped from 2006 to 2013 inclusive, putting their estimated post-2005 CNE at about 40% depleted in only 8 years.

      Based on the foregoing, I estimate that Saudi Arabia shipped about 5% of remaining CNE in 2006 and I estimate that Saudi Arabia shipped about 8% of remaining CNE in 2013, i.e., an accelerating rate of depletion in remaining CNE.

      • A. Yeats says:

        Are there any estimates on what proportion of the increase in internal consumption for Saudi, and other exporting nations, comes from: 1) Increased internal domestic use (from increasing population or increasing living standards); 2) Decreasing EROI requiring increased internal use by the oil producing industries; 3) Growth of local refinery and petrochemical industries; 4) Changing energy content in produced oil (e.g. for condensate or light tight oil); 5) Others?

      • Kam says:

        LOL. You have an agenda, don’t you 🙂

    • Allan H says:

      To Islandboy March 21 9:25. The more the Saudis and others try to keep things status quo, the more they are tied to the hamster wheel of having to produce and sell a lot of oil. They are adding natural gas and solar to their mix, but it is too little yet to make a big difference. Before they are totally hamstrung by internal use and lower prices, they need to shift away from oil internally to protect their long range future. They could become a major supplier of electricity for the region.

      High prices will push the world away from oil use, so producers are getting steadily boxed in. Make enough money to access unconventional sources and permanent loss of market occurs. Sell oil at a low price for long enough and production falls, causing shortfalls in availability and more demand destruction through the pressure of rationing (remember how many 80’s cars got better mpg).
      So wandering around in the middle ground of pricing will at least slow the demand destruction.

    • svayambu says:

      > I cannot belive the Saudis are that deluded. They have a quantifiable inventory of a non perishable, non renewable resource, are in fact facing rapidly diminishing stocks and yet they persist in selling off what little they have left at rock bottom prices?

      I think they plan long term, but they like also stability, maybe the decline is imminent, what if they sell a few 100 Mb at top price, they risk ruining the flow and installations by pausing the industry, also if they decrease production and save the tar / shale industry, in the future oil dip will have even lower revenues. I think the shale revolution surprised even them.

  5. Allan H says:

    Excellent work. The sharp decline of oil fields will mean that we should start seeing CO2 output restrictions (financial of course) placed by governments. This in turn will lead to subsidized CO2 to liquid fuel conversions at power plants. Along side this will be the increase in solar and wind as well as a shift to more electric and high efficiency transport. The oil companies will be making money hand over fist producing and leasing the conversion technologies and will probably move into other areas involving power generation and distribution (through spin-offs).
    The next two decades will certainly be quite exciting as civilization (business) attempts to convert to other means of running an energy intensive system. Who knows what is waiting in the wings to be rolled out when the cliff is approached and big fields go belly up.
    Of course it won’t be all roses and excitement, rationing and travel restrictions will be applied to the general citizenry. Food is going to be more expensive too. We all know what we need to do to prepare for this new and exciting time. There are several other downsides that will occur but they will also provide opportunity at least for a period of time.

    • Junior says:

      Allen H- “This in turn will lead to subsidized CO2 to liquid fuel conversions at power plants.”

      I must have missed the news of the century. What is this, and how does it not violate the basis rules of thermodynamics?
      Like Ron Patterson said- “Transition is a pipe dream believed by people who really does not understand the magnitude of the problem.”

      • A. Yeats says:

        Fusion (or lots of big fission) reactors -> thermal (or electrolytic) break down of water to give hydrogen -> mix with CO2 and compress -> Syngas Fisher-Tropsch reaction -> sweet diesel. Easy to write down, just always fifty years away

      • Allan H says:

        Yes you did miss it. The various catalysts are ready, the energy needed will come from the heat of the exhaust gas itself. Beware of throwing around the word thermodynamics. The 2nd law is only for closed systems. Since when do we operate in a closed system?

        Transistion has happened many times historically, so join the crowd that said airplanes would never fly. Transistion is already started or haven’t you been awake in the last 50 years or so?

        • Really now? We built flying machines in spite of people who thought we would never fly. Therefore we can infer that we will transition to renewables when fossil fuels go away? Are you joking or does that really seem like an apt analogy to you?

          • Allan H says:

            Merely illustrating the effect of a closed and unimaginative state of mind. Oftentimes they are wrong.

            And yes, if you look at all of the other “impossible” and improbable achievements since then, it is a good analogy.

            We live in an impossible situation, that has led the world out toward a dead end. Does everyone here think that no one else has noticed this? Do you really think that there are not plans to deal with the obvious changes coming down the line?

            Why is it so impossible to believe that people, who already re-invented the world, cannot and are not re-inventing it again. Why is there solar PV? Why is there wind power? Why are electric cars in existence? Why are there numerous research and commercial projects into fuel conversions, new battery technology, high mpg cars, high efficiency commercial flight, higher temperature super-conductivity, and much more? Why would all that time and money be spent if a lot of very bright and visionary people did not see what is coming? Who knows what the large private concerns have up their sleeves for when oil becomes depleted.
            Isn’t it obvious that transition is already occurring? I see it every day. I use it every day. There are houses that produce electricity, there are zero carbon houses. None of these things existed when I was born. It’s happening and it will cascade upon pressure.
            BAU will not die without a big fight! BAU will transform to a new version but it will not go down just because the obvious and the known is going to happen.

            • No, it is an absolutely terrible analogy. You are simply naming something that some people thought impossible and saying “see, they thought that was impossible therefore what you are saying is impossible is therefore possible. If you seriously believe that is sound logic then… then… Oh good grief!

              Similar logic: They said cold fusion was impossible and it was. Therefore your scheme about renewable is impossible. My analogy proves it.

              • Allan H says:

                Thanks Ron, your focused attack on my analogy is quite telling. Guess the rest wasn’t in question.

                • No, the rest was seriously in question. But I just could not get around your analogy. It was just so illogical that I could not go any further with anything you said.

                  • Allan H says:

                    Guess that is one way to exit the real discussion.

                  • Caelan MacIntyre says:

                    Allan, BAU has to go down. The more it fights, the harder it will be for everyone.
                    Much of BAU has little to do with what people really need.

            • TomTomsen says:

              There won’t be any transition because of many converging problems. Resource depletion, human overpopulation/overshoot of carrying capacity, pollution of all sorts, climate change, diminishing returns of research and complexity in general and so on and so forth. No amount of human ingenuity, technology or visionary people will ever change that. All atempts of those category aka technology will probably worsen all of the mentioned issues.

              • John B says:

                There already is a transition.

                Renewable Energy production in the US is @11%, and has already exceeded Nuclear Energy, and is only 9 points behind Oil.


                Worldwide, Renewables provide 22% of total power production.


                Those are significant numbers.

                • TomTomsen says:

                  Those numbers are misleading. Oil is not only important for generating electricity directly. It is used for everything indirectly. Also it is not only this one issue but all of them combined.
                  The only transition that is underway is from fossil fuels and industrial society to an agrarian or maybe even other forms of society. That will neither be smooth nor come by voluntary means…how long it may take is anybodys guess.

                  • John B says:

                    Where I live, I can see more and more solar panels on rooftops every year.

                    I also see more and more Electric and Hybrid Electric Vehicles on the roads.

                    I also see FF plants being shut down, because there is so much growth in Renewables, they are no longer needed.

                    So I guess I’ll believe my own eyes, thank you.

              • dolph says:

                TomTomsen, I agree. That’s what the technophiles don’t understand or perhaps have lost the ability to see.

                For example, in the very same breath they will talk about an electric car or solar panel and then talk about “saving the world” as in keeping human population growth going forever, fed on industrial agriculture and distribution powered by fossil fuels.

                They will say, buy this or that product, but in the same breath say, save money for retirement, don’t consume, think about the environment!

                Is there any wonder that everybody seems to be going insane. There is simply way too much cognitive dissonance in the modern world.

                In a sense, collapse is corrective, but it’s still going to be something really painful to go through. On the other end, hopefully humans can either culturally change, or evolution might do the trick over thousands of years.

                • Caelan MacIntyre says:

                  “That’s what the technophiles don’t understand or perhaps have lost the ability to see…

                  For example, in the very same breath they will talk about an electric car or solar panel and then talk about ‘saving the world’…” ~ dolph

                  What is it they say? ‘If you repeat a lie often enough, it becomes the truth.’?

                  Evolution may work along similar lines to the myth of progress; more complex perhaps, but apparently still subject to the same laws as the proverbial petri-dish yeast– manifest, I suppose, in our case, as ‘crony-capitalistm’. 7+ billion and counting…

                • Dennis Coyne says:

                  Hi dolph,

                  I don’t hear anybody saying that solving the energy problem solves all other problems. The total fertility ratio (average number of births per woman over their life) has decreased from about 5 in 1965 to 2.5 by 2005, if it falls to 1.5 in the next 40 years, that would be lower than the UN’s low fertility scenario where population starts to fall by 2051. Water is used very wastefully and if priced appropriately many of the water problems would be alleviated. Soil problems can be solved with better agricultural practices.

                  I do not think any of these problems can be easily solved, nor do I think the problems have no solution. A peak and decline in population would help to solve many of the existing problems. All other problems that cannot be solved can be mitigated as much as possible while a transition to a lower population level occurs.

                  Soap operas should probable feature wealthy families with one child rather than two, maybe that would help. 🙂

                  • wimbi says:

                    No kidding, soaps are enormously addicting. I remember as a school kid I was sick with something for a week, and did indeed get addicted to three at once, and had an awful time getting back to the real world.

                    Yep, make the rich people have just one kid, who is a total brat suing them for ruining her world.

                  • Dennis Coyne says:

                    Hi Wimbi,

                    I have read that in China there are many couples from single child families who are allowed to have 2 children. Many of these couples (perhaps most) choose to only have one child though they are allowed to have two.

                    You imply that a single child must be a brat whose world has been ruined. The Chinese do not see things in quite the same way.


                    see page 1149-1150

    • Javier says:


    • Alan, I don´t think we can afford to use CO2 to make liquid fuels.

        • Watcher says:

          Jeffrey, from inside that:

          Coal liquefaction has remained a niche market, although there are oil-poor areas (e.g. South Africa) where a large fraction of liquid fuels are produced in this manner.

 says 600K bpd for South Africa, that’s consumption, with zero production.

          The BP data mazama uses excludes coal liquefaction, went and looked up what that Sasol claims.

          They’ve been doing this coal to liquids stuff for 60 years. SIXTY YEARS. They are THE poster child for coal to liquids. They are the ultimate doer of the deed.

          And after 60 years . . . a lousy 160K bpd. Less than 1/3 the country’s needs, which ain’t large. 27% . . . always distrust english for numbers . . . “a large fraction”. hahahahahhah

          fyi sasol is so confident in scalability that they are in a joint venture with ENI to explore offshore the east coast for oil.

      • Allan H says:

        Even from concentrated CO2 off of coal and natural gas burning? Wow! How in the world will we fly our aircraft?

        • Junior says:

          Hi Allen, My reaction to your statement about making fuel from CO2 is based on the following basic science. We derive energy from carbon in its reduced state (that meaning the carbon is bound to hydrogen such as in all the fossil fuels and in wood), and we add oxygen and burn it- breaking those bonds and releasing a good amount of energy. After a burn you have carbon as CO2. It is like you took carbon at the top of the stairs and pushed it to the bottom of the energy stairs.
          To then make that carbon again useful as a source of fuel requires the input of energy to again make the carbon hydrogen rich (“reduced” in chemistry terminology). That is exactly what plants do to make all of their photosynthetic products, including wood today, and fossil fuels from the past.
          So to say that there is energy to be derived from CO2 is like getting an F in chemistry. You can add energy from coal, or nukes, or the sun to accomplish that reduction of carbon, but you’ve got to be extremely rich in energy to do that on a scale that is affordable to human beings. For example, to use high yielding crops, or photovoltaics- it would take you many prime acres to come up with enough energy to do the basic things in life we take for granted, like running the dishwasher, driving to the grocery store, etc. There surely isn’t enough of those low yield sources to supply reduced carbon for anywhere close to the current world population/demand.
          Sorry if I made this too simple, but the original comment about CO2 and liquid fuel was simply wrong at an extremely basic level.

          • Allan H says:

            I didn’t say that there was energy to be derived from CO2, I said that CO2 could be transformed into liquid fuels. You misinterpreted my statements. I also stated that the energy was from an external source, so where do you come up with your interpretation?
            Catalytic conversion of CO2 into methanol is a reality, not a dream.

            • sunnnv says:

              Allan H – I’m leaning toward Fernando on this one, though there may be some niche markets for CO2 derived methanol.

              ‘Tis true that one can catalytically make methanol from CO2 (and hydrogen), but from whence do you get the hydrogen (renewably)?

              Oh – from electrolysis.
              Well, then – how efficient is the electrolysis?
              Oh – 80% or so.
              And how efficient is the use in an Internal Combustion Engine?
              Oh – about 35% or so for a very VERY good small spark ignition engine.
              .8 * .35 = .28, or 28% efficient, electricity to wheels.

              And how efficient are lithium-ion batteries, round trip?
              About 90%
              And how efficient are decent electric motors in automobiles?
              About 90%
              .9 * .9 = .81, about 80% efficient, electricity to wheels.

              OK, so why should I pay a 2.85 x (285 %) penalty to use MeOH vs batteries?

              They already have electric airplanes.
              Airbus is not known for being completely clueless:

              BTW – your comment about getting the energy to synthesize methanol from the hot exhaust gas tells me you need a reminder to look at the:

              You might do a calculation of the efficiency you’d get from some exhaust gas at a bit less than water boiling temp, using the air (on a hot day) as the heat sink. Do remember to use Kelvin or Rankine.

              • Allan H says:

                BTW Sunny – you need to learn about catalysts.

                I agree, of course, that electric personal vehicles are far more efficient than ICE’s.Your car is not the primary vehicle needed to keep civilization operating.
                20 percent versus 80 percent efficiency is a no brainer. Although new diesel technology and hydraulic hybrids are giving electrics a run for the money.

                Liquid fuels will mostly be used for aircraft, railroads, trucking and shipping. The largest single corporate users of liquid fuels are railroads and it will take several decades to transistion from diesel-electric to fully electrified and/or fuel cell or battery electrics. Both fuel cell and battery locomotives are in the testing stages.

                So until all these important systems of transport are changed, liquid fuels will be in demand and synthetic fuels will be produced by numerous means. You can’t just look at end points nor can you apply simple thermodynamic analysis to complex chemistry.
                Remember, most complex chemical reactions on this planet occur well below the boiling point of water.

                How about those diesel producing algae, they need CO2?

              • sunnnv says:

                It’s worse than my first glance.

                The CO2 has to turned into CO (some processes do it prior to the methanol synthesis, others in the same reactor as the synthesis step).

                So it’s: CO2 + 3H2 —> CH3OH + H2O
                in the “old” direct process using copper-zinc catalysts at 200-300 degrees C,

                CO2 + H2 —> CO + H2O,
                then: CO + 2H2 –> CH3OH.

                With very strong bases as a catalyst, this (2nd step) will work at only 100 C and 10 atmospheres, but of course any CO2 impurity will turn the strong base into carbonate.
                The common ICI process uses copper-zinc-alumina at 250 C and 50 atmospheres.

                Or recently people have done work with electrochemically reducing CO2 to CO.
                CO2 + 2 e- —> CO + 1/2O2

                So, in any case, one needs 6 electrons, and two of them get tossed getting rid of the extra oxygen, so there’s an extra factor of 0.66, so methanol synthesis to wheels is:
                .8 * .66 * .35 = .18, or 18% efficient, electricity to wheels.

                Allan H – catalysts don’t magically make things happen, they just lower activation energies and/or provide conformational support for reactions. Even in methanol formation reactions, which are slightly exothermic, you need some preheat and to compensate for the flow of hot products out of the reactor.

                But the big energy sink is where to get the free hydrogen.
                That’s what I thought you meant at first – that enough energy can come from the power plant flue gas.
                Note that many plants have flue gas desulfurization, often using sprays of water solutions, so after that step, the flue gas temp will be below boiling (100 C).

                Note that if it were economical to get much heat energy out of the flue gas at this stage, the power plant would already be doing that.

                So the hydrogen would likely come from renewables via electrolysis, but why burn the electrons INefficiently when one can load them into batteries (or pumped hydro) way more efficiently?

                New infrastructure/vehicles will be needed soon, either to make methanol (or other gasoline/diesel replacement) and modify vehicles, or to have electric vehicles. Why are people going to pick the less efficient option? If the methanol plant is dependent on CO2 from fossil fuels, that’s a dead-end. When my coal plant shuts down, so does my methanol plant. Now I need to go get an electric or a horse or a bicycle.

    • It´s more like this, I think. Maybe.

      • Dennis Coyne says:

        Hi Fernando,

        Interesting. Your Oil Price and dates need some work Future is a pretty big window anywhere from 2020 to 3020 (or beyond), no scale on the oil price so though it looks reasonable, that depends on the low point and high point of your oil price curve, with no values attached it is meaningless.


        I think I understand now, you probably did that chart in 2000 and the high oil price was $75/b, a price that nobody ever thought we would see (at that time). Maybe if we thought of that oil price curve as 2 or 2.5 times the scale on the left axis it might match your expectation in 2015, roughly.


        And maybe the date at the right side should be 2120? Each block is 10 years?

        • Yep. I started using 2120. But then I took the little labels off (it’s a powerpoint doodle I did yesterday). I know I can’t pin down those axis values, nor can I draw the right curves. When I was at work I used to make sure we had a white board, lots of color crayons, and three erasers. We used to debate shapes and diagrams, then each team member would go out and prepare his input for the overall whatever we were doing. Yesterday I got the urge to doodle so I did it. It took me about 10 minutes.

          • Dennis Coyne says:

            Hi Fernando,

            So you only expect the oil price to go to $78/b, that seems pretty low to me? Also your vertical axis scale is kind of funky, 50, 75, 80? Not a linear scale it seems. Are both prices and output (Mb/d?) on the left axis?

  6. Alberto says:

    I remember reading somewhere that the Ghawar field has been producing at 5mm bbl/day for the past several years. I’m almost certain I read it in the most recent edition of Peaking at Peak Oil. I agree the field is living on in-fill drilling – the substantial rig increases in the field needed just to sustain production seem to make that indisputable. However, I’m not sure its possible that the field was 81% depleted in 2004 or even close to it based on the production that has occurred there since. Again, I’m pretty sure the most recent edition of Peaking at Peak Oil has much more recent info regarding reserves and production out of Ghawar specifically as well as the other “giants”. End result is the same….

    • Alberto, no one outside the very inner circles of Aramco has any idea what Ghawar’s daily production really is. Somewhere around 2005 Saudi stopped allowing their engineers to post anything in trade journals or international data bases. They locked everything up tight. and even before that Saudi field by field production was not available.

      All we have to go by is Saudi’s actions.
      2009 Saudis eye CO2 injection at Ghawar
      2011 Saudi Aramco to use CO2 to boost Ghawar oil field output by 2013
      And this from 2009 Aramco boosts drilling in seismically tough Red Sea
      Aramco is seeking reserves in anticipation of global economic growth and increasing demand for oil. The Red Sea is two kilometres deep in places with a 7,000-foot thick salt sequence which can distort seismic images, according to the magazine.

      I’ll tell you that looking for oil under two kilometers of water and 7,000 feet of salt is a tough task. They have to be really desperate to try that.

      • Watcher says:

        If you were KSA and you knew you were going to see a over-the-cliff-edge decline in Ghawar and overall oil production in 1 year, be it a choice to save it for the grandchildren or just plain old going empty, you would tell no one.

        You would tell no one at all.

        The US (or Europe, or China) will never ever accept any arbiter’s decision of what is “fair share”. There would be no selling to the highest bidder. If you HAVE to have it, and you do HAVE to have it, you get whatever you can regardless of price (because you can print all the money you need, or if you can’t . . . you still HAVE to have it, so whatever it takes).

        If you’re KSA and you know that no one will accept a fair share, then you also know your country will be invaded as part of “whatever it takes” and your people will be killed by the hundreds of thousands in that war.

        It’s far better, far wiser, far more moral, to tell no one. To act as if all is well.

        There will be no warning. They’ll just announce that they are empty and going out of business, and there will therefore be no point in a war. The grandchildren situation . . . more dicey.


        In fact, extrapolating, if KSA wanted to focus on the grandchildren, they probably should start importing oil. Their sovereign wealth fund (752 billion) probably can pay for it from interest.

        hahaha that would be pretty cool. Sort of the ultimate burn up everyone else’s first scenario.

        • Boomer II says:

          hahaha that would be pretty cool. Sort of the ultimate burn up everyone else’s first scenario.

          That’s what I have thought the US should do rather than have a “drill, baby, drill” policy. Use other people’s oil first.

        • svayambu says:

          > save it [Ghawar] for the grandchildren

          probably is very messed up, and I imagine that if there are some pumps and currents sending the last bit of oil out, they need to continue, if not all the oil mixes with whatever is there and is irremediably lost.

      • Sam Taylor says:

        ” a 7,000-foot thick salt sequence which can distort seismic images”. That’s an understatement. Thick salt sections are an absolute nightmare to image, especially if the traps are on the side of the salt dome, as is the case in some plays in Brazil, I think. 2 kilometers of water is less bad from the perspective of the seismic, much less waterbottom multiple!

        • It takes patience but it’s possible to image under the salt. The key is to have an idea of what that salt looks like. They’ll need to do gravity and at least teen wells to get a rough sketch. The play is under thick salt, this means they’ll have to look for gentle rolls with the salt bumping a bit. The trap will be away from the basin edge, about 1 km horizontally from the local top of the salt (my guess).

      • Synapsid says:


        I recall from some weeks ago that the Saudis have shelved the Red Sea stuff. No source to hand, though.

  7. Hillson says:

    Posted this late in the last thread. Putting it up early to try to get a legit response from Futilitist to see if it sates him for the time being.
    There’s not much to refute without more details of how the Etp model is derived and the actual data used to support it (peer review and all that). At first glance, it looks like the exergy calculation may not have properly accounted for the heat and entropy of combustion; the gas expansion of the products is an important component of the calculation and actually brings the theoretical max exergy above the heat of combustion (thus, surprisingly, more work than heat, but this is the theoretical max and in reality heat exchangers have fewer irreversibilities than engines since Carnot limits the efficiency but there is no max temperature for the max exergy – (Th-Tc)/Th goes to 1 as Th goes to infinity). Without the derivation, the Etp model can neither be confirmed nor denied, and you should not expect anyone to blindly accept its divine truth like you have.

    Bottom line, get permission to write up a blog post on your own site that provides enough info for real scrutiny or please stop being such a nuisance.

    Ps: I appreciate the author attempting to bring a bit more scientific rigor to EROEI analyses and would like to know what he’s actually proven, if anything. Hopefully you’re successful in getting permission to make public the results.

    • Watcher says:

      Why don’t you guys continue whatever it is you’re doing back on the previous Ronpost comments — you know, the one no one goes back to.

      • Futilitist says:

        Hi Watcher.

        If you don’t like this discussion, you don’t have to watch it.

    • Caelan MacIntyre says:

      The oil glut and low prices reflect an affordability problem

      For a long time, there has been a belief that the decline in oil supply will come by way of high oil prices. Demand will exceed supply. It seems to me that this view is backward–the decline in supply will come through low oil prices

      The oil glut we are experiencing now reflects a worldwide affordability crisis. Because of a lack of affordability, demand is depressed. This lack of demand keeps prices low–below the cost of production for many producers. If the affordability issue cannot be fixed, it threatens to bring down the system by discouraging investment in oil production…

      The way the economy is bound together is by a financial system. In some sense, the selling price of any product is the market value of the energy embodied in that product…” ~ Gail Tverberg

      Value cannot be measured in units of energy… The demand for oil in your model looks like you are trying to equate energy to value. There is no objective measure of value… Physics cannot be used to determine the value of a barrel of oil (or any petroleum product) to a consumer.” ~ Dennis Coyne

      “Apparently you feel that the World Bank, and the EIA are wasting their time. To say nothing of the tax payers money! All economic activity requires energy [Energy? Or work?] to be performed
      [There is] …a very strong relationship between energy consumption, and GDP.” ~ B W Hill, Peak Oil Barrel

      “Most people normally equate energy, and work. They are not the same thing, although they are measured with the same units, such as BTU. Energy is a property of matter, it can be neither created nor destroyed. Work is not a property. Work is created when energy is transferred. That process ALWAYS results in losses. One BTU of energy never results in one BTU of work. It takes work (goods and services) to produce petroleum, and its products, not energy

      Since the work to produce petroleum has been increasing since the first barrel was extracted, and will continue to increase, without rapidly growing production to compensate, its negative impact on the economy will continue to intensify.” ~ BW Hill, Our Finite World

      …So what the hell is going on?

      • Futilitist says:

        Denial and stonewalling.

        I think that Ron should address the issue. A debate on the validity of the Etp model between Ron and bwHill would be very enlightening.

    • bwhill says:

      Hillson said:

      At first glance, it looks like the exergy calculation may not have properly accounted for the heat and entropy of combustion; the gas expansion of the products is an important component of the calculation and actually brings the theoretical max exergy above the heat of combustion

      The Etp Model is the solution of the “Entropy rate balance equation for control volumes” as applied to petroleum production. The “Entropy rate balance equation for control volumes” is a Second Law statement. Since the Etp Model is derived from it, it is also a Second Law statement. Since neither Einstein, or Hawkins ever attempted to “prove” the Second Law we didn’t feel really qualified to do so. We just take it on faith. The values output by the Model are generated numerically, and it is those values that offer substantiation for it. The Model has been reviewed by over 500 people around the world, and no serious criticism has concluded that it is in error. Your objections lack any serious substantiation!

      • John B says:

        Your theory is in error because EIA/USGS estimates of URR are about 3 times higher than what your model estimates.

        Also, as you claim there is only 500 billion barrels of oil left to recover, it’s hard to believe we wouldn’t be seeing any declines by now (Hubbert Theory), if that were the case. In fact, production is still increasing.

        You’re just trying to scam $60 out of stupid people (E.g. Futilitist) by selling snake oil.

        As someone once said “There’s a sucker born every minute”.

        • Futilitist says:

          Seriously, John?

          This has nothing to do with Hubbert, or how much oil might or might not be theoretically left in the ground! Please stop talking about URR.

          UUR driving me nuts! 🙁

          This is about physics (and physics based economics).

          The Etp model is not saying that there’s only 500 billion barrels left in the ground. It is saying that we can only afford to recover 500 billion barrels. It takes energy to produce energy.

          It doesn’t matter how much oil is in the ground. It takes the energy of the oil that has already been lifted from the ground to keep lifting any future oil from the ground. The oil already produced must support the entire economy and pay for the production of more oil into the future.

          Oil production must be paid for by the economic return on it’s energy content. This worked great when the ERoEI of oil was high, but it has been declining entropically since the very beginning of the life cycle of oil production. Entropy finally overtook the system when oil consumers could no longer afford to pay for the total cost of oil production.

          Oil and the economy are thermodynamically coupled.

          From here on out, the price of oil can never rise high enough to pay for the economy, plus current oil production, plus investment in future oil production. The oil industry will begin to wind down. So will the economy. How could it be otherwise?

          • Futilitist says:

            🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁

            Hey, wait a second! It just occurred to me.

            Is it just possible that the reason for such desperate arguments, (like those made by John B and Dennis Coyne), is that the oil industry doesn’t want people to know about the Etp model because it might affect financial investment in the oil sector?

            After all, who wants to invest in a dying industry? 😉

            🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁 🙂 🙁

      • Caelan MacIntyre says:

        Hi bwhill,
        Thanks for dropping in and offering a voice to this important issue.

        (Please don’t bother about some of the responses here, as they seem to prefer merely trolling and offering up all manner of nonsense, apparently to help confuse the issue.)

        • bwhill says:

          Caelan MacIntyre says:

          Hi bwhill,
          Thanks for dropping in and offering a voice to this important issue.
          (Please don’t bother about some of the responses here, as they seem to prefer merely trolling and offering up all manner of nonsense, apparently to help confuse the issue.)

          Hi Caelan,
          I have been preparing, and writing engineering reports on various subjects for a very long time, including reserve estimates for a variety of extractive industries. It is amazing how upset people can become when you tell them that the reserves that they have are not what they think they have. That happens even after they have employed you for your analysis. People, generally, just what to hear that their option was correct in the first place. A manager a few years ago actually threw the report that I had sent to him across the room at me. That was after my determination came out to be much less than what his geologists had predicted. Incidentally, the geologists were wrong in that case; by a whole lot. In my business you get used to wailing, gnashing of teeth, and people who hold their breath until they turn blue; it all comes with the territory. You can’t let it affect your determinations, and remain honest to your clients, and profession. Otherwise you become an educated, professional paid whore.

          While on the subject, report HC3-433 is an engineering report. Engineering reports are not expected to be per reviewed. They are accepted, or rejected by other engineers. They are working documents intended to pass information to organizational managers who need the expertise of a specific discipline. They are not scientific studies that can go through decades of arguments about point, and counter point. If engineers used the same fact finding methodology as scientists we would still be living in caves. Engineering reports are not intended to “prove” anything, we accept the “proofs” of science, and apply those statements with a set of mathematical tools. The conclusion of the report stands until an error is found in its construction. That has not yet occurred to report HC3-433.

          BW Hill
          The Hill’s Group

          • Caelan MacIntyre says:

            Hi BW,
            Thanks, and that seems to make sense.
            In any case, Gail Tverberg and others seem to agree with you, and I have commented on some of that, as does what seems to be currently unfolding in the economy as a whole.
            In today’s day and age, it is more important than ever to get different opinions.
            I can also empathize with responses to telling people information they don’t want to hear, so it helps to be bulletproof.

          • Futilitist says:

            Hi BW.

            Thanks again for stopping by.

            It seems it is hard to get old oil horses to drink new thermodynamic water.

            Above, I was editing my comment to John B, and I suddenly found that I had typed this:

            Oil and the economy are thermodynamically coupled.

            That is what your Etp model essentially is, right? So, if everything in your model balances thermodynamically, it would seem to me that it should be possible to extract other important data from the model. For example, a reasonable estimate of the rate of decline in overall net energy should be trivial using IMF data to factor in other energy sources. And also, of course, the predicted oil depletion rate itself, which I haven’t heard you discuss specifically, though it is obviously implied by the price curve.

            More intriguingly, would it be possible to use your model to derive an estimate for future GDP decline? It seems to me this data might already be embedded in the Etp model. Have you attempted to quantify any of these kinds of metrics from the economy side of the model?

          • Hill, geologists are man’s best friend. I wouldn’t put them down this way.

      • Hillson says:

        Hello BW Hill,

        Your objections lack any serious substantiation!

        This is because I need more substance, which you have still not provided. If you think your model has truly discovered something groundbreaking, submit it to a journal and get it published. The fame and publicity you would acquire by proving that peak oil is HERE and NOW would quickly dwarf any proceeds you get from a few schmoes on the internet (not to mention that $69 bucks here and there ain’t gonna get you much in a future solely reliant on legacy oil production).

        “Entropy rate balance equation for control volumes” … Since the Etp Model is derived from it, it is also a Second Law statement.

        Prove it. Show us how Etp model is derived. What assumptions do you make in the equation? What data do you use to numerically calculate it? I’d love to know, I can handle the math (as many others here can too). If you’re right, it’s revolutionary and humanity can just give up the industrial experiment tomorrow. That’s all we’re asking, that you (and Futilitist) stop barking platitudes and back up your claims with evidence.

        A simple request, will you answer it?

        • bwhill says:

          Hillson said:

          If you’re right, it’s revolutionary and humanity can just give up the industrial experiment tomorrow.

          There is nothing revolutionary about the Etp Model. It is simply the application of a hundred year old thermodynamics equation to an area where it had not been previously applied. The revolution occurred when computers advanced to the point that a bunch of engineers could carry around in their brief cases the computing power of the entire human race just a few decades ago. Being non deterministic the solution to the “Entropy rate balance equation for control volumes” as applied to petroleum production must be solved numerically. We solved the equation, wrote the software, tested it, and ran the results. Nothing miraculous occurred. The report was originally prepared for a Canadian client.

          As far as $69 per copy, the price of the report was reduced to $39 almost six months ago. Where that $69 screen shot came from is quit curious; that screen shot was gone a long time ago, and is not likely to be something that someone would copy, and achieve. Unless, of course, they were in business of copying everything on the internet. It is also curious that almost everything I have ever posted about the Etp Model has popped up here, correlated and ready for rebuttal. Convenient indeed, although the rebuttals have been pretty weak. Probably a bunch of Chinese kids who have gotten in over their heads. Hate to tell them but they are wasting their time. Almost all of our work, and communications have avoided the internet since day one. Things on the internet seem to have a tendency to “disappear” from time to time.

          Fame, and fortune? I have all the fortune that I will ever need, and I am fabulously famous to my dog. He thinks I am the best thing that has come along since canned Alpo. If there ever is a collapse of the modern industrial system we would have to do a lot more rabbit hunting than we do. As petroleum phases out as one of the world’s primary energy sources many parts of the present system will disappear, but that is really nothing new. Petroleum has been declining in importance for at least the last 15 years, and will continue to do so into the near future. The petroleum industry will continue to shrivel up and die as it is now, and has been. But, people will continue to do what they do until they can’t do it any longer. Industrialization was here long before oil appeared on the scene, and it will remain after it is gone. We know a lot more about how to make things today than we did 150 years ago. Many industries will perish, many sovereign nations will disappear, centralization will become limited, globalization will shrink, and the population will decline. The oil age will end, and a new one will take its place. If you are a young person starting out in life, good luck finding out what that will be.

          BW Hill

          • John B says:

            Industrialization was here long before oil appeared on the scene, and it will remain after it is gone.

            Well, at least we can agree on one thing. But I’m afraid you’ve lost the hearts and minds of the Luddites with that comment. I’m sure Futilitist was looking forward to eating more worms.

            With regards to the new reduced bargain basement price of $39.99, no thanks. There’s plenty of failed Peak Oil theories I can have for free. I don’t need to be wasting money on another one.

            • Hillson says:

              That statement was meant to be hyperbolic, sort of. I’m not sure what would happen if society/industry were about to enter a world where we rely on just legacy reserves, but it would definitely be revolutionary (in the civil unrest interpretation).

              Looks like BW Hill just wants to hock his paper and not actually back it up. Too bad, would been nice to see if the Etp thing had any validity. I hope Futilitist shuts up about it now (doubtful, he might be BW Hill’s stooge to antagonize people into buying it).

              I know I’m done with it (this being my 3rd comment).

              • John B says:

                That’s like saying, I wanted to see if they found a real Bigfoot.

                Suggesting that a complex real-world problem such as URR, can be solved with a simple mathematical formula, or computer algorithm, is not a serious conversation.

                • Futilitist says:

                  Hi again, John.

                  Either you don’t understand the physics, or you are pretending really hard not to understand the physics. Either way, it isn’t working.

                  And don’t rag on Hillson like that. He is taking a slightly less ridiculous position than you are. He has a slicker, more sophisticated approach to sowing the seeds of doubt. You could learn a lot from Hillson. He probably gets a bigger paycheck than you.

                  • Futilitist says:

                    “I know I’m done with it (this being my 3rd comment).”

                • Hillson says:

                  I’m more interested in the exergy/EROEI aspect, not URR. In fact, I haven’t mentioned it once (besides now). I think you’ve mentioned it several times though, so who’s the one chasing Bigfoot?

                  • John B says:

                    Exergy, EROEI, Bigfoot, all mythical monsters.

                  • Futilitist says:

                    Hi Hillson.

                    This is now your fourth comment, but who’s counting.

                    Hi John B.


                    Attention readers: This is just a useless side argument between two co-conspirators. It is fake, much like professional wrestling.

              • Futilitist says:

                “I hope Futilitist shuts up about it now (doubtful, he might be BW Hill’s stooge to antagonize people into buying it).”

                Ha ha. And you might be a shill for the oil industry. You sure act like one.

                Attention readers:

                It’s really a one two punch technique being employed here. John B makes the lowbrow argument, and Hillson makes the highbrow argument. Textbook. They even argue their stupid positions against each other. Very nice. They are hoping (expecting?, engineering?) others will join this distracting side thread, resulting in what is called a “forum slide”, which creates lots of noise that splits and dilutes the serious discussion, making it hard for readers to follow.

                These guys are working overtime to convince people not to look at the Etp model. It shows that they are very afraid of it. That makes me think the Etp model must, in fact, be valid! 😉

                PS — It should also be noted here that Ron Patterson still has not weighed in on this very important discussion. Nor has Jeffrey Brown. Nor Rune Livkern. Nor Watcher. I wonder why?

                • John B says:

                  It’s a conspiracy against Futilitist, bsHill, and the Etp Model.

                  • Futilitist says:

                    “It’s a conspiracy against Futilitist, bsHill, and the Etp Model.”
                    ~John B

                    Surprisingly candid confessions of an industry shill.

                • Rune Likvern says:

                  My take on this subject has for some time (as in several years) been and still is as summarized below;

                  Any forecasts of oil (and gas) demand/supplies and oil price trajectories are NOT very helpful if they do not incorporate forecasts for changes to total global credit/debt, interest rates and developments to consumers’/societies’ affordability.


                  Complete oil (energy) supply considerations should include the health of the oil companies’ balance sheets, their resource portfolios and their requirements for return.

                  I also described this in the post

                  • Futilitist says:

                    Hi Rune.

                    Any forecasts of oil (and gas) demand/supplies and oil price trajectories are NOT very helpful if they do not incorporate forecasts for changes to total global credit/debt, interest rates and developments to consumers’/societies’ affordability.


                    Complete oil (energy) supply considerations should include the health of the oil companies’ balance sheets, their resource portfolios and their requirements for return.”

                    So, why not use the very accurate Etp model to forecast a possible price range constrained by physics, and then use your expertise in all the details to fine tune that forecast? That would make sense to me.

                    After all, the Etp model’s output seems counterintuitive to you, yet it is derived from the laws of thermodynamics, and has been very accurate to date. This means that you could make some fundamentally wrong assumptions when applying only your more detailed methodology that could potentially lead to far less accurate forecasting.

                    You are not suggesting that economics can override physics, are you? That would lead to a looping Schrödinger’s cat problem, since the system is driven by physics, and our free will must, in the end, remain with us (the cat), forever trapped in Schrödinger’s box.

                    We can only pretend to be Schrödinger.

                    Humans are not smarter than yeast.

          • Fred Magyar says:

            Hey there BW Hill,
            As far as $69 per copy, the price of the report was reduced to $39 almost six months ago. Where that $69 screen shot came from is quit curious; that screen shot was gone a long time ago, and is not likely to be something that someone would copy, and achieve.

            For the record I had never even heard of your Ept model until a few days ago and I got that screen shot from a link that was posed on this site in the past few days.

            But to be clear the issue isn’t the price of the report. And most of the people posting here tend to be on the extreme right slope of the bell curve when it comes to knowledge about Peak Oil and they also tend to be slightly above average in scientific and mathematical literacy so when they hear extraordinary claims they usually expect some actual evidence other than a simple claim that the model is derived from the entropy rate balance equation for control volumes.

            Perhaps your model is all that you claim it to be, if so great! However most of us here might be a little bit more jaded, skeptical and demanding than you typical audience.
            Fred Magyar

    • Futilitist says:

      Hi Hillson.

      “At first glance, it looks like the exergy calculation may not have properly accounted for the heat and entropy of combustion; the gas expansion of the products is an important component of the calculation and actually brings the theoretical max exergy above the heat of combustion (thus, surprisingly, more work than heat, but this is the theoretical max and in reality heat exchangers have fewer irreversibilities than engines since Carnot limits the efficiency but there is no max temperature for the max exergy – (Th-Tc)/Th goes to 1 as Th goes to infinity).”

      I am not sure what you are suggesting. The efficiency of internal combustion engines can sometimes be improved a bit by the addition of some sort of heat exchanger to gain some small amount of useful energy from the exhaust heat. So what?

      In a perfect world, all internal combustion engines would make the absolute best possible use of any potential wasted heat. But we don’t live in a perfect world, so they currently don’t. The problem is one of diminishing returns for the widespread adoption of such efficiency improvements.

      Theoretical efficiency doesn’t matter in the end. The Etp model uses the current average efficiency of internal combustion. That makes sense since we certainly can’t respond to our current dilemma by madly retrofitting heat exchangers onto internal combustion engines. And we aren’t likely to power the world on Stirling engines, either. We are out of time.


      I did not see that bwHill had answered your question before I made my attempt. He is the authority on the Etp model, not me, so his answer should be seen as the more definitive answer to your question. There is no need to continue this line of inquiry any further with me. Thanks.

      • Dennis Coyne says:

        Hi BW Hill,

        It is the net energy of the entire economic system that is important, all energy sources must be included in your model for it to be valid, unless you are asserting that only oil is used to produce oil.

        The value of a good is not related to the energy embodied in that good, any more than the value of a good is determined by embodied labor. Marx and Ricardo were wrong about the labor theory of value, your energy theory of value is also incorrect.

        Energy does not determine value. The physics has to be applied to the entire economic system to be valid, you cannot separate out individual products or industries. Just because the net energy of a product is negative does not mean it has negative value, liquid fuels are energy dense and convenient, their value is determined by the cost of production (in dollars) and consumer preferences (the price that consumers are willing to pay.)

        • Caelan MacIntyre says:

          Hi Dennis,
          It seems that oil is unique as an energy source and utilized by, and affects, the economy in specific and unique ways to other forms of energy, so while I can understand your concern that all energy forms be included, I wonder if isolating the oil component in some calculations for some kinds of answers would make sense.

          “The value of a good is not related to the energy embodied in that good, any more than the value of a good is determined by embodied labor.” ~ Dennis Coyne

          “It’s not physics, but it’s true: money equals energy. Real, liquid wealth represents usable energy. It can be exchanged for fuel, for work, or for something built by the work of humans or fuel-powered machines. Real cost reflects the energy cost of doing something; real value reflects the energy expended to build something.

          Nearly all the work done in the world economy — all the manufacturing, construction, and transportation — is done with energy derived from fuel. The actual work done by human muscle power is miniscule by comparison. And, the lion’s share of that fuel comes from oil and natural gas, the primary sources of the world’s wealth.” ~ Peak

          “Money… flows in the opposite direction of exergy and embodied energy (emergy) flows. Money is used to purchase labor energy which is how money gets recycled even while all energies flow in only one direction, out to the environment as waste heat.

          In this view of an economy, each downstream process must signal the providers of materials and exergy of their needs/desires. They do this by using a very abstract message token called ‘money’. When anyone buys a product or service they are signaling the producer that there is a continuing demand for that product or service. The producer then signals his suppliers by buying the goods and services he needs to produce his output. The flow of money, represented in the figure by thin black curvy arrows, runs exactly counter to the flow of exergy and emergy, including labor energy (which we might label lexergy). Since people provide the lexergy in the system, money then recycles through the economy.” ~ George Mobus

        • Futilitist says:

          “The value of a good is not related to the energy embodied in that good, any more than the value of a good is determined by embodied labor. Marx and Ricardo were wrong about the labor theory of value, your energy theory of value is also incorrect.”
          ~Dennis Coyne

          That might sound like a convincing argument to some, but it certainly is not. It is a meaningless statement, a false analogy. Let’s break that down a bit, shall we?

          “The value of a good is not related to the energy embodied in that good, any more than the value of a good is determined by embodied labor.”

          This first sentence is just a declaration that attempts to create a false logical relationship where none actually exists. In this case, you conflate how two very different perspectives (old failed economic theory vs modern energy physics) each separately address the concept of value. Having accomplished this neat trick, you attempt to tie the loose ends of your argument into some sort of gordian knot:

          “Marx and Ricardo were wrong about the labor theory of value, [therefore] your energy theory of value is also incorrect.”

          There is a word that you intentionally left out, Dennis. That word is implied but not spoken in your argument. That word is therefore. When you properly include it, as it should be in a proof, [as I did above in brackets], it exposes the sham. There is obviously no real connection between Marx and Ricardo, and the Etp model. Give me a break.

          The type of illogical construction you used here is a common, transparent trick. Where did you learn how to do this? It is almost impossible to do by accident. It is really a Freudian slip of deception. This amounts to evidence of intentional deception being used in a serious discussion here in the peakoilbarrel community. And it is not the first time, either. It’s really your MO.

          Shame on you, once again, Dennis. I’ll include this little incident in your upcoming indictment. 😉

          • Dennis Coyne says:

            Hi Futilitist,

            I did not intend any therefore, you can make up anything you would like.

            When you quote someone, you do so accurately, or don’t bother.

            Hill argues that net energy determines the value of a good, or possibly just some goods, maybe it is arbitrarily applied.

            There is no objective measure of value, end of story.

            If there were, we could choose any object as our measure of value, an ounce of gold, a brick, or a unit of energy. So either there is no objective theory of value or there are an infinite number of them.

            • Futilitist says:


              “I did not intend any therefore, you can make up anything you would like.

              When you quote someone, you do so accurately, or don’t bother.”

              I did quote you accurately. Then I properly pointed out the word that was implied, yet somehow missing from your argument. Marx and Ricardo clearly have nothing to do with the Etp model. If you keep insisting they do, you are either amazingly ignorant or intentionally deceptive. Either way, this not so good. This was the problem the press had with George Bush.

              Dennis, sometimes your arguments are just very carefully (i.e. not accidentally) constructed bullshit. I feel it is good to point that out to people sometimes.

              For one thing, a poorly constructed false analogy should never be allowed to stand in a serious debate.

              For another thing, you use techniques like this all the time. And that constitutes a pattern. A pattern of deception and obfuscation, i. e. you knowingly attempt to cheat! Although these deceptive arguments of yours are laughably weak, if I don’t occasionally highlight your word game fraud for the casual reader, you might even get away with it.

              “Hill argues that net energy determines the value of a good, or possibly just some goods, maybe it is arbitrarily applied.

              There is no objective measure of value, end of story.”

              Speaking of deceptive arguments, how about not building a straw man. The Etp model does not suggest an objective value in any economic sense, only a thermodynamic one.

              You are intentionally making a twisted argument. Once made, and endlessly repeated, arguments like this are a huge hassle to untangle. This tends to result in someone insulting you, and you making a manners complaint. Lather, rinse, repeat. When your opponent is thoroughly worn out and leaves the building, you restate your stupid argument again and declare victory.

              The Etp model correctly suggests that the total cost of oil production must be born by the end consumers of oil. The model employs a methodology that usefully quantifies how the energy content of oil must create enough economic return to make a self sustaining loop to maintain production. We are at peak oil and entropy has overtaken oil production. This is not (and should not be) a big surprise to anyone.

              Instead of proclaiming over and over that something just can’t be done, please focus on finding something wrong with the specific methodology used to create the Etp model. Stop cheating.

              • Did you read the $39 report yet? If not, how do you know what the Hill Group’s model entails at the detailed level? I will get a copy but it will be awhile because they only ship and can’t get it via download.

                I agree with DC that anyone trying to predict price is on shaky ground.

                It would be nice to see a plot of energy used to extract and produce oil over time alongside a plot of energy provided for end-use by the same amount of oil.

            • robert wilson says:

              As Elgin Groseclose, Robert Park, and others have pointed out, money wears several hats. These include its use as a medium of exchange, a measure of value, a standard of deferred payment and a store of value. Theories involving one use would not necessarily apply to a different use.

        • bwhill says:

          Dennis Coyne said:

          It is the net energy of the entire economic system that is important, all energy sources must be included in your model for it to be valid, unless you are asserting that only oil is used to produce oil.

          You are making the evaluation a lot more complicated than necessary. To have value petroleum must act as an energy source, otherwise it becomes nothing more than feed stock for the production of plastic pipe (or something). To act as an energy source the energy output must be greater than the energy input. We are only counting BTU, and since all BTU where created equal (1 BTU = 778.17 ft*lbf, 1 BTU = 0.2930 Whr, 1 BTU = 1.0551 KJ) and etc. once the total BTU input becomes greater than the BTU output, it is no longer an energy source, and becomes an energy sink.

          “So long as oil is used as a source of energy, when
          the energy cost of recovering a barrel of oil becomes
          greater than the energy content of the oil, production
          will cease no matter what the monetary price may
          (M. King Hubbert)

          BW Hill

          • Dennis Coyne says:

            Hi BWHill,

            Energy is not the source of value, it is a necessary input to the production process, but just one input of many. Hubbert was also wrong in that statement.

            As long as it is profitable to produce oil, it will be produced, end of story. There is no objective theory of value, or there are an infinite number of them. Piero Sraffa showed how linear algebra can be used to value any product in terms of its embodied labor. This is often referred to as Neo-Ricardian Theory. We can do the same exercise with energy, iron, copper, corn, or any other good and value all goods in terms of some single good. That does not give that good, whether it is energy or corn any special status in “creating” value. The choice is entirely arbitrary and meaningless.

            Modern Walrasian Theory is what is used by most economic theorists to explain how the value of goods is determined in a market economy.

            If you are going to try to use Econophysics, it must be applied on a macroeconomic scale to the entire economy where net energy must indeed be positive. There is no physical reason that the economy cannot operate just fine with oil as a net energy negative energy carrier as long as other sources of energy make up the difference in net energy.

            • More food for thought. Consider that an entire West Virginia mountain-top is removed to get at the coal. What is the net energy if at some time in the future we wanted to put that mountain-top back in place?

              Subtract (Mass*Gravity*Height + more).

              This would very easily make the net go negative. These externalities are swept under the rug.

        • bwhill says:

          Dennis Coyne said:

          It is the net energy of the entire economic system that is important, all energy sources must be included in your model for it to be valid, unless you are asserting that only oil is used to produce oil.

          You are making the evaluation a lot more complicated than necessary. To have value petroleum must act as an energy source, otherwise it becomes nothing more than feed stock for the production of plastic pipe (or something). To act as an energy source the energy output must be greater than the energy input (Ein < Eout). We are only counting BTU, and since all BTU where created equal (1 BTU = 778.17 ft*lbf, 1 BTU = 0.2930 Whr, 1 BTU = 1.0551 KJ) and etc. once the total BTU input becomes greater than the BTU output, it is no longer an energy source, and becomes an energy sink.

          “So long as oil is used as a source of energy, when
          the energy cost of recovering a barrel of oil becomes
          greater than the energy content of the oil, production
          will cease no matter what the monetary price may
          (M. King Hubbert)

          What other metrics get thrown into the calculation are irrelevant; BTU/sq-ft, furloughs per fortnight, $ per KWhr are superfluous. All that is needed is Ein < Eout to determine if a hydrocarbon is going to be extraditable. If it can not power the economy it reduces to paint thinner, and plastic pipe. Of course, some producer can make a profit selling paint thinner if someone else is producing the oil than can power the economy that can buy it. If there is more paint thinner than economy to use it, it becomes a problem rather than a solution.

          BW Hill

          • Dennis Coyne says:

            Hi BWHill,

            Part of what you seem to be missing is that the form of the energy matters and its other qualities, how dense it is, how cleanly it can be burned, if it can be used in an internal combustion engine. Coal has a very high EROEI relative to oil sands, but it cannot be easily used to power a car or truck, unless first converted to electricity and then used to charge a battery in an EV. To convert coal to liquids is also a very expensive process, though possibly the EROEI would be higher than for oil sands oil processed into diesel or gasoline.

            Natural gas burns very cleanly but its energy density is low unless cooled and kept at very high pressure, the delivery system for personal transportation is challenging, so again though the EROEI may be better for the marginal unit of natural gas (most expensive natural gas to produce) than the marginal barrel of oil, it is not a convenient fuel for personal transport.

            The point is that as long as the oil can be produced and sold at a profit the EROEI of that single product makes no difference.

            It is only the EROEI of all forms of energy produced, and whether the net energy is enough to power the economic system as a whole, that matters.

            • bwhill says:

              Dennis Coyne said:

              Part of what you seem to be missing is that the form of the energy matters and its other qualities, how dense it is, how cleanly it can be burned, if it can be used in an internal combustion engine.

              Since petroleum is used to power 83% of the world’s transportation equipment it is important that it can be burned in an internal combustion engine (after processing). That unfortunately has absolutely nothing to do with the equivalency of BTU, which is what I was discussing. Since there is no distinction between BTU it only processes one form. So the statement, “the form of energy” is an oxymoron. What you are talking about are the specific characteristics of various energy sources. Some of it comes as a lump, some as a liquid, and some as a gas, and for any of it to be used as an energy source Ein must be less than Eout. Otherwise the lump, liquid or gas becomes and energy sink, and has no ability to power economic activity.

              So why are you belaboring the obvious? Perhaps this discussion could be raised to something above the kinder garden level, which it appears to have degenerated into?


              • John B says:

                I think you meant “kindergarten”.

              • Dennis Coyne says:

                Hi BW Hill,

                Yours, and Hubberts assertion that for oil to be produced the net energy must be positive is false.

                Is the net energy of electricity that is delivered to a customer positive? Let’s say it is not (certainly if the electricity was produced by oil) or that the net energy of some electricity is close to zero (electricity produced by shale gas might be close to zero or even negative).
                Would we expect that electricity would no longer be produced by natural gas if its net energy were close to zero?

                If not, why would we think that producing oil with a net energy of close to zero or even with a negative net energy could not occur?

                I submit that as long as it is profitable to produce the oil in dollar terms, the net energy of any individual barrel of oil makes no difference whatsoever.

              • John B says:

                It could be argued that corn Ethanol is a net energy negative. However, it is still being produced, and production is expanding.

                As long as the value of the finished product is more than what it costs, it will likely continue to be produced. EROEI doesn’t matter.

          • So how do you estimate the energy required to produce oil? Assume I know a lot about oil production.

            • Dennis Coyne says:

              Hi Fernando,

              I assume he uses an energy return on energy invested (EROEI) type of analysis. For the Canadian oil sands this has most recently been estimated at about 6 GJ out per 1 GJ in at the wellhead. Then there are losses in the pipeline (or rail car) and at the refinery, and distributing the energy to the final consumer at the gasoline or diesel pump. Let’s say this brings the EROEI down to 5 GJ out per 1 GJ in. Now if we assume the car is about 20% efficient we only get 1GJ at the axle for every 1 GJ spent by the petroleum processing system and the net energy is zero.

              Here’s the kicker, according to Mr. Hill, this means the gasoline has no value as an energy source because it has taken just as much energy to produce this gallon of gasoline as the gasoline delivers to move the car down the road.

              By all accounts the price should be zero, because an “energy” source must have positive net energy or it has no value.

              If that makes sense to you, it certainly makes no sense to me.

              Physics applies to the macroeconomy, because we cannot produce goods with a system where total energy inputs have negative net energy. The physics does not apply however to the value of goods in a microeconomic sense. The utility of a good is a subjective matter based on individual consumer preferences. What is “affordable” to a consumer is based on a combination of their income and their personal preferences, it has nothing to do with the net energy of the good in question.

              • I see. We do use natural gas in our field operations. I’m pretty familiar with the energy balance for the extra heavy oil using SAGD, upgrading and refining. It’s positive, but the key is to have natural gas.

                We couldn’t make it fly economically burning the oil itself to make steam. But some options do make it using a gasifier to burn the asphalt molecules.

                There are also some tricks we can apply to reduce energy use. For example adding a teensy amount of butane to the steam.

                But not all the oil is extra heavy.

              • Futilitist says:


                “I assume he uses an energy return on energy invested (EROEI) type of analysis.”

                You have made an ASS out of you. The Etp model is not based on ERoEI anaysis. The actual methodology used to create the Etp model is pretty well described in the links bwHill provided.

                “Physics applies to the macroeconomy, because we cannot produce goods with a system where total energy inputs have negative net energy. The physics does not apply however to the value of goods in a microeconomic sense.”

                Read the methodology, Dennis. The physics is being applied to the entire world economy based on the energy content of a barrel of oil and it’s power to create economic growth. The total economic value of a barrel of oil declines over the life cycle of oil due to the entropy inherent in all physical processes. Simple.

                Dennis, your approach to serious debate is massively deceptive, and childishly irritating. You really are:

                • Futilitist says:

                  Hey, if I don’t Ketcham, nobody will! 😉

                • You have made an ASS out of you.

                  Goddammit Futitilist stop talking to people like that. If you cannot talk to people without insulting them then stop talking to them altogether.

                  What is it with you that you feel you must use insulting language. That is not necessary so stop it right now or I will ban you.

                  • Futilitist says:

                    Maiori forsan cum timore sententiam in me fertis quam ego accipiam.

                    And I feel that open sarcasm is appropriate in Dennis’ case. His style of debate is to wear a person out with obfuscation and repetition. He constantly employs deceptive tactics as I have pointed out before. I can’t believe you let him get away with the anti-science bullshit he does here every day. He makes a mockery of the truth.

                    When I employ some harsh (but pretty damn creative and funny) sarcasm to help readers understand the level of bullshit Dennis is operating at, you threaten to ban me. Wow.

                    I thought I was doing you a favor.

                    Never mind.

          • Dennis Coyne says:

            Hi BW Hill,

            I understand perfectly that you think that the net energy of the individual barrel of oil matters, but it does not matter if the oil is a net energy source or a sink, as long as it can be refined into a usable liquid fuel (gasoline, jet fuel, or diesel mostly) that can power an internal combustion or jet engine.

            If that process can be done profitably by the petroleum processing system then the net energy does not matter. The physical qualities of the fuel, its liquid form, its energy density and its utility to the consumer in providing transportation are what matter.

            The net energy analysis should be reserved for the entire economic system and all forms of energy used within that system.

        • No one knows the equivalence between energy and money because if they knew that relationship, they could use that knowledge to “game” the market. That is the idea behind game theory as applied to economics. It also goes by the name of the Lucas critique, Goodhart’s law, and Campbell’s law in various situations. It all boils down to applications of reverse psychology in determining which way a market will go. So why do prices go down and not up with dwindling oil? It has everything (and nothing) to do with how to apply game theory.

          NN Taleb of Black Swan fame just tweeted that actually trying to apply Game Theory is total BS. He recognized the fact that John Nash just got awarded the Abel prize for his work in not game theory, for what he is best known for, but for something else. Trying to actually applying game theory is an intractable mess.

          The bottom-line is that no one knows what is inside this $39 report except for the people that wrote it or read it. If it amounts to an energy balance analysis based on EROEI that is fine, which is what DC is getting at, though not exactly revolutionary. On the other hand, if they are predicting prices, then everyone will try to understand the theory, and if it is anywhere near valid, will try to use the model to subvert its mechanisms and thus take advantage of the market. Got that? That’s game theory. It will have the effect of then completely invalidating the model.

          Tough nougies, and that’s why Taleb keeps his distance from anyone selling the BS and warns others about making that mistake. That is essentially why I keep my distance from the Wall Street angle. I know enough to know where not to go.

          If the Hills Group report is about EROEI, then fine, but as DC said, all energy sources should be included, as well as natural resources such as water, spherical sand grains, etc.

          • Futilitist says:


            “That is essentially why I keep my distance from the Wall Street angle. I know enough to know where not to go.”

            If you know enough not to go to the Wall Street angle, then why is that exactly where you go in your comment?

            “No one knows the equivalence between energy and money because if they knew that relationship, they could use that knowledge to “game” the market. That is the idea behind game theory as applied to economics. It also goes by the name of the Lucas critique, Goodhart’s law, and Campbell’s law in various situations.”

            The Lucas critique is very sensible. It correctly describes a paradox that applies to overly complex, bullshit, mathematical economic models because these models violate some basic tenets of game theory. But the Lucas critique has no application with respect to thermodynamic models.

            Fiscal and/or monetary policy changes in economics amount to rule changes in game theory as applied to economics. But the thermodynamics of oil production is far more all encompassing. Thermodynamics is like the playing field on which the whole game is played.

            “…if they are predicting prices, then everyone will try to understand the theory, and if it is anywhere near valid, will try to use the model to subvert its mechanisms and thus take advantage of the market. Got that? That’s game theory. It will have the effect of then completely invalidating the model.”

            You cannot “game” the laws of thermodynamics. The Etp model is derived from the first and second laws of thermodynamics. The Etp model is the most accurate pricing model ever made. If you try to game the price of oil, you may have a temporarily effect, but the reversion to the mean will be vicious. The price of oil is driven by the laws of physics. Got that?

            “If the Hills Group report is about EROEI, then fine, but as DC said, all energy sources should be included, as well as natural resources such as water, spherical sand grains, etc.”

            A grand unified model that accounts for each grain of sand may sound tantalizing, but it is really just anti-science bullshit. Such a model can never be made. We cannot attain perfect knowledge. But the fact that we can’t does nothing whatsoever to invalidate the Etp model. It has accurately predicted the price of oil since 1960.

            To invalidate an actual working model with that kind of accuracy, requires more than to just propose a hypothetical (imaginary) substitute model that might be better. Take a stab at understanding the model. Then critique the methodology intelligently. Anything else is just a “game”.

            And speaking of “games”, people should quit pretending they have never heard of the Etp model before.

          • bwhill says:

            WebHubTelescope said:

            No one knows the equivalence between energy and money because if they knew that relationship, they could use that knowledge to “game” the market.

            If you could get the power company to believe such nonsense you will have accomplished something worthwhile. They send out a very annoying bill every month based on KWhrs, which are energy units. Since there is no equivalence between energy, and money we should start a class action suit against them for public fraud.

            Then there are all those folks trading oil, and gas futures everyday. They must be using a dart board, Ouija board, or a can of dried chicken bones to come up with their determinations since there is no equivalence between money and energy.

            You guys could insult the intelligence of a fruit fly!

            • Dennis Coyne says:

              Hi BWHill,

              The simple point is that the EROEI for a ton of coal, a cubic foot of natural gas, or a barrel of oil has no effect on its value.

              The physical quality of the actual unit of energy is all that matters when it is traded on the market, how much energy was used to produced any individual unit of energy is irrelevant on a microeconomic scale.

              For the macroeconomy the net energy of all energy sources does matter, the net energy of all sources of energy simply needs to be adequate to meet the energy needs of society.

              Note that just as is the case with Futilitist, your insults reflect poorly on you.

              • Futilitist says:


                Your constant whining about manners is incredibly obnoxious. No one just walks up and insults you for no reason. You wear people out by repeating the same weak argument over and over. When someone gets justifiably upset, you call the etiquette police.

                Grow a skin and a sense of humor. Or get out of the kitchen.

                “If you can’t ignore an insult, top it; if you can’t top it, laugh it off; and if you can’t laugh it off, it’s probably deserved.”
                ~Russell Lynes

                • Dennis Coyne says:

                  Hi Futilitist,

                  As I am the only one talking to you, perhaps I should have followed my own advice and just ignored you.

                  Then perhaps you will go away.

                  I will say no more about the ETP model as it is a waste of my time.

              • Dennis Coyne says:

                Thanks weekendpeak.

                Is that your post? If not, did you agree with it?

                I thought it was well done.

                • WeekendPeak says:

                  yes. my post. Thanks.
                  I have spent quite a bit of time on what money is, the connection between the real and the financial economy etc. and started writing about it – for myself – but perhaps I should make it into posts. Unless you understand the nature of money most economic theories fall down pretty quickly because of unspoken assumptions which are frequently either questionable or just plain wrong.

                  • robert wilson says:

                    As Elgin Groseclose, Robert Park, and others have pointed out, money wears several hats. These include its use as a medium of exchange, a measure of value, a standard of deferred payment and a store of value. Theories involving one use would not necessarily apply to a different use.

                  • Dennis Coyne says:

                    Hi WeekendPeak,

                    I have noticed you have not commented on the ETP model, probably a smart move on your part.

                  • Futilitist says:

                    We’ve heard your lame argument over and over, Dennis. bwHill has sufficiently addressed your silly objection. It is time to move on and hear someone else’s critique. Don’t lobby other people to stonewall. That is grossly unethical. Why not let Weekendpeak look it over and make up his own mind? Thanks.

                  • Futilitist says:

                    Hi WeekendPeak.

                    You seem pretty well versed in both economics and physics. Please take a look at the Etp model. I think the methodology seems very sound. I would love to get your informed opinion on anything you can think of that might invalidate the model. Thank you.

  8. JW says:

    Not to analyse the petro-geological situation, but my gut feeling is everyone in the business with deep inside information know what is going on but simply hopes the country losing out first will be someone else but them.

    I have trouble formulating my thoughts here in English, but this is worrysome.

    • Watcher says:

      You almost have it right.

      Yes, many countries hope others will be the ones hurt and not their own citizens.

      Still other countries will take steps to be sure that the ones hurt will not be themselves. It would be immoral not to.

      • Caelan MacIntyre says:

        “Lest anyone protest that the state’s true ‘function’ or ‘duty’ or ‘end’ is, as Locke, Madison, and countless others have argued, to protect individuals’ rights to life, liberty, and property, the evidence of history clearly shows that, as a rule, real states do not behave accordingly. The idea that states actually function along such lines or that they strive to carry out such a duty or to achieve such an end resides in the realm of wishful thinking.
        Although some states in their own self-interest may at some times protect some residents of their territories (other than the state’s own functionaries), such protection is at best highly unreliable and all too often nothing but a solemn farce. Moreover, it is invariably mixed with crimes against the very people the state purports to protect, because the state cannot even exist without committing the crimes of extortion and robbery, which states call taxation (Nock 1939), and as a rule, this existential state crime is but the merest beginning of its assaults on the lives, liberties, and property of its resident population.” ~ Robert Higgs, ‘If Men Were Angels: The Basic Analytics of the State versus Self-government’

        • Dennis Coyne says:

          Hi Caelan,

          Representative democracy is a terrible thing, just better than every other form of government that has existed in the real world.

          Anarchy must seem like a wonderful ideal, in the real world it would be far from that.

          • Caelan MacIntyre says:

            Hi Dennis,

            “A false dilemma (also called black-and-white thinking, bifurcation, denying a conjunct, the either–or fallacy, false dichotomy… [etc.]) is a type of informal fallacy that involves a situation in which only limited alternatives are considered, when in fact there is at least one additional option.” ~ Wikipedia

            Anarchy, incidentally, is what we have ostensibly lived with for most of our existence as a species– our tribal wiring as it were– and may be where we are headed, ironically, if we cannot, or will not, try to arrive at something beyond what you freely admit here is ‘a terrible thing’. Doing so, however, would seem to require at least thinking and speaking about it, and that’s what I am simply suggesting.

            Anarchy is an ideal insofar as we seemed to have actually thrived with it over a very long time, but it may prove to be a simple/small-scale kind of thing that does not scale, certainly not with some kinds of limited, dismissive attitudes in any case.

            • Dennis Coyne says:

              Hi Caelan,

              You are correct that humans existed in hunter gatherer societies for a long time, are you proposing that we return to that form of society?

              We could try that, but I think we might need to wait for population to fall by a factor of 14 to 30, before it would be likely to work well.

              I guess I am just too damn pessimistic to think that it would work. 🙂

              Along the lines of no taxes and coercive government stealing from the masses.

              Let’s say there were no taxes, and the government survived on donations from individuals. Do you see a potential problem?
              Either the wealthy would buy influence through their donations (kind of like today with campaign finance), except it would be more transparent, or there would be no donations and the wealthy would just buy a private army for protection, or the most ruthless and violent might become the wealthy as there would be no government to protect the weaker and/or poorer members of society.

              Hard to imagine how it would play out, but again here guess I tend to see more of the dark side and imagine people would be wishing for the good old days when a coercive government kept law and order. Again I am just such a pessimist I cannot help myself.

              • John B says:

                You are correct that humans existed in hunter gatherer societies for a long time, are you proposing that we return to that form of society?

                That’s exactly what he’s proposing. Only there wouldn’t be any hunting, because everyone would be a Vegan.

                • Proposing that we return to some state or another is to insinuate that we will have a choice. We won’t. Whatever state we return to will be forced upon us by the conditions after the collapse.

                  But there is just no predicting what state we will live in after the collapse. One cannot predict the outcome of chaos.

                  • Futilitist says:

                    I completely agree with you, Ron. People have a deep psychological need to feel that they are in control. It expresses itself in fantasies about solar power, EV’s, carbon caps, and hunting/gathering/permaculturing. It might also express itself in the need to cling to comfortable, familiar, and yet highly ineffective methods of forecasting oil depletion.

                    The Etp model seems pretty revolutionary to me. I have a very strong physics background and I read through the methodology used in the creation of the model. I can’t find a way to refute it. And the Etp price curve is very accurate. It remains consistent and predictive even in this new economic paradigm (end of growth) with it’s new, and seemingly paradoxical, rules of oil supply and demand.

                    The Etp model may yield some very unpleasant surprises concerning the future price of oil and the fate of the oil industry, but that is not a valid reason to reject it.

                    Please take some time to understand the Etp model and join in the discussion with the bwHill. If you have any valid objections to the model, they can be fairly judged in honest, open debate.

          • zeroworker says:

            I don’t know Dennis – representative democracy is trashing the planet, and may yet lead to the extinction of our species. Is there really nothing better?

            If you are right, and I’m honestly not sure, then that really is one hell of a depressing thought.

            Philosophically I find Anarchism quite appealing – why should anyone get to boss me around, just because they were born into the right circumstance (either politically or economically)? Practically speaking, anarchism has a better track record that you likely realize – hunter gatherer societies were essentially anarchic (no government, that’s for sure), and for the most part were sustainable as well, and persisted for thousands of years until some jerk figured out he could farm and started us on the road to civilization, authoritarianism and climate catastrophe.

            Of course, nobody is going back to those days, nor would I argue we should.

            It seems to me our primary focus should be to get our societies to become sustainable, as the alternative only leads to disaster. And personally, I don’t believe democracies are capable of achieving that. Perhaps if everyone was better educated and understood the predicament we are in people would vote for sustainability. Perhaps.

            But people aren’t educated well, and they don’t understand our predicament. So I find some sort of authoritarian structure a much more viable means of getting humanity through this crisis.

            Of course, that assumes the leadership will focus on the right things. China is much more authoritarian than the US, but it’s burning coal like there’s no tomorrow.

            And even if China did start making big changes toward sustainability, the leadership would likely be replaced via revolution before they could make much of a dent.

            So maybe you’re right. Representative democracy is the best there is – enjoy it while you can.

            • Dennis Coyne says:

              Hi Zeroworker,

              I will choose the representative democracy over authoritarian government.

              You are correct that capitalism has resulted in the planet being trashed. Policy changes can help reduce this destruction as birth control and women’s education become more accessible and total fertility ratios decline to 1.5 or so (maybe by 2100). If we get to this level (already attained in many East Asian countries) population declines relatively quickly and the trashing of the planet improves.

              • The Soviets were world class polluters. And talk about waste. You won’t believe the horrors I saw as we entered the former USSR in 1991.

                • zeroworker says:

                  Hi Fernando,

                  True enough – you’ll get no argument from me on that score. Authoritarian regimes can be awful when it comes to sustainability.

              • zeroworker says:

                I would probably prefer to live in a representative democracy rather than an authoritarian regime as well, all things being equal. All things are never equal, however.

                First off, population isn’t really the thing we need to worry about. It’s footprint, or population multiplied by consumption. Even if population growth stops tomorrow, our footprint is already too large, and planet trashing will continue (albeit at a slower pace).

                In western democracies, you have the additional problem that people need to vote themselves a lower standard of living. That is one big reason why I’m so pessimistic about the west ever getting its act together and getting serious about peak oil or climate change.

                The odds are better (note I’m not saying the odds are necessarily _good_) that an authoritarian society can meet those kinds of challenges.

                I’m not speaking out of my a** either. There is historical precedent for this. The Japanese Shoguns put forestry management into place, and that saved the Japanese forests from destruction. I believe the Dominican Republic is another case where an authoritarian regime made a priority of forestry management, and achieved some success.

                I live the the US, so I’m used to having a lot of freedom. I’d rather not give it up.

                But I would also like to see the planet remain hospitable to human life. I would chose to live in an authoritarian regime that saved the planet rather than in a democratic one which trashed it.

                It seems to me that when people say capitalist representative democracies are better than everything else, that already makes the assumption that such a society won’t lead to ruin. And yet it does.

                IMHO, for a social structure to even be considered as a decent choice, it must at the very least be sustainable.

                • Dennis Coyne says:

                  Hi zeroworker,

                  I agree that a sustainable society would be best.

                  It is not clear to me that an authoritarian government would improve things, in fact it might be worse.

                  Better in my opinion to try to effect change within the existing system, to try to create a sustainable representative democracy.

                  Germany, for example, is making some progress in energy and most western European nations are doing a much better job than the US.

                  Still a long way to go however.

                • Today I accidentally found a video about the Isle of Pines prison, located on an island just south of Cuba. I visited my cousin in that prison just before he was nearly beaten to death by prison guards.

                  The video showed the jail complex, and the exact spot where they beat my cousin. He was beaten so bad he was brain damaged, so they released him and the family got him out of Cuba. He died a year later.

                  He had been a medical student. But Castro’s secret police picked him up because he was planning to escape the island. My advice is to fight and die if you have to, but don’t let them enslave you. That life isn’t worth it.

            • sunnnv says:

              “…hunter gatherer societies … persisted … until some jerk figured out he could farm and started us on the road to civilization, authoritarianism and climate catastrophe. ”

              I would recommend reading “The Food Crisis In Prehistory” by Cohen.

              He (and others) detail that hunter gatherers typically work only a few hours a day, while primitive farmers work all day long and are less healthy/well nourished.

              The “agriculture was _invented_” meme is a back-projection from our modern “better living through chemistry, things always just get better, infinite progress forever on a finite planet” meme.

              The reality from archeological evidence is that agriculture HAD TO BE practiced, because the alternative was starvation – due to overpopulation/environmental change/etc.

              A short pdf online:

              Along with “The Food Crisis in Prehistory”, you might also check out:
              War Before Civilization: The Myth of the Peaceful Savage by Keeley
              Constant Battles by LeBlanc

              A short pdf I found from Keeley:

              In it he notes that LeBlanc says it is “theoretically improbable and, in reality, impossible for human populations to be in a long-term balance with the resources necessary to sustain them – that there were no `ecologically balanced’ Edens.”

              • He mentions LeBlanc several times in that article. His book “Constant Battles” is one of my favorites. I have probably read between 700 and 1000 non-fiction books in time and I would put “Constant Battles” on my top ten list.

                I lent my copy out and never got it back, so I ordered myself another copy. It was that good. The point was the “Noble Savage” is nothing but a myth. As hunter gatherers and even early farmers, we fought and killed each other every chance we got.

  9. Jeffrey J. Brown says:

    Interesting comparison of Greece & Spain:

    • The article is right in part. But in part it’s wrong. For example, one reason why Spain has so much unemployment is the extremely generous benefits they have. People here in Spain feel entitled to get cash from the government year after year.

      There’s a serious need to do labor law and regulatory reform. They have done a lot, but they need more action.

      But Greece has chosen to vote for communists and populists. Spain thus far has been taking action. And unemployment is dropping. The main danger to more investment is the commnist party, Podemos, financed in part by the venezuelan dictatorship. Once the elections are over later this year we will see how it shakes out.

      • Fred Magyar says:

        But Greece has chosen to vote for communists and populists. Spain thus far has been taking action. And unemployment is dropping. The main danger to more investment is the commnist party, Podemos, financed in part by the venezuelan dictatorship. Once the elections are over later this year we will see how it shakes out.

        Fernando has it ever occurred to you that maybe, just maybe the reason so many Greeks and Spaniards might be casting their vote for the communists and the populists is because the system as it exists doesn’t work for them any more? That perhaps social unrest is a symptom and not the underlying cause of the economic malaise that in turn is caused by population and ecological overshoot and resource depletion? You don’t for a moment think that Peak Oil is starting to have an affect on the global economy and making participation in it ever more untenable for the masses? You don’t see any connection to these issues and unrest and possible revolution, (not that that solves the real problems) in countries such as Egypt, Venezuela and even Argentina and Brazil. How about groups like ISIS and other so called terrorist organizations in the Middle East or Pakistan and India.

        You don’t think those groups existing might also be symptomatic of deep systemic problems caused by resource depletion? Do you really seriously believe that the wonderful free market capitalist investors of the world would be capable, (assuming they wanted to) of bringing about a utopia for all people in the world if only you could get rid of those evil populists and the communists?!

        You really think the prospects for employment in Spain are getting so much better?! Really?! Well my theory is that the fact that Greece and Spain still have the first and second highest unemployment rates in Europe has a lot to do with fact that the populists and communists are having any traction there at all and that this is symptomatic of the problems and not the underlying cause. Just sayin!

        • Unemployment is high, but it is dropping slowly. And GDP is growing at the fastest rate in the euro zone. Spain suffered because the Socialists (a left wing but not communist party) were in control when the crisis hit in 2008. Their response was really stupid, and things got much worse.

          Then in 2009 the right wing party started gaining control, and by 2011 they had pushed measures to turn things around. The way things work here the ruling party negotiates with the minority to make sure they get a solid vote. This gives assurance that laws won’t be reversed. This is one reason why it took time for things to get turned around, the socialists didn’t want too many reforms.

          As it turns out there were regional elections in Andalucia, and the communists (allied with and financed by the venezuelan dictatorship) came in third. I think the way the Greek commies are wrecking the economy will teach people.

          The socialists are likely to win the next national elections but by then the economy will e growing nicely. The low euro is really pumping up things here. And the communists will be outnumbered, as they should. They will remain a dangerous element, but for now things appear to be fine.

          • Fred Magyar says:

            The socialists are likely to win the next national elections but by then the economy will e growing nicely. The low euro is really pumping up things here. And the communists will be outnumbered, as they should. They will remain a dangerous element, but for now things appear to be fine.

            If you truly believe that the ‘Communists’ are more dangerous than resource depletion and ecological overshoot and that economic ‘Growth is still possible a la the BAU paradigm, as long as the Invisible hand has its way, I think you will be in for a lot of disappointment to say the least.

            Communists et al, are for all practical purposes quasi irrelevant in the big picture. If you really need a bogeyman or a scapegoat to keep you happy, so be it. “We have met the enemy and they are us!” Pogo.


            • ezrydermike says:

              careful Fred, this is a new type of threat, communists, er, socialists that care about the ecosystem. These are the inside out watermelons, red on the outside and green on the inside.

            • Communists are an extremely serious threat because they like to reduce freedom and abuse human rights. They also destroy the economy and have a tendency to wear red outfits. And I hate red, because I used to live in a communist dictatorship.

              • Boomer II says:

                Communists are an extremely serious threat because they like to reduce freedom and abuse human rights.

                That happens in non-Communist countries, too. If you view Communists as the main threat, you are likely to overlook other threats in the process.

                • Nah. I keep my eye stalks turning on swivels. The communist is the main threat, but I also hunt down the others. Hell, I’m an equal opportunity paranoid.

                  • Ronald Walter says:

                    Have you ever read a book entitled ‘The Gulag Archipelago’ by Alexander Solzhenitsyn?

                    It had some information about prisons in Siberia.

                    I do remember reading a few pages of it, 35 years ago now.

                  • Boomer II says:

                    The communist is the main threat, but I also hunt down the others.

                    As I just said in another comment, the US has a massive defense industry that wants the US to fight all real and imagined enemies. We’ve got politicians who would have the national government doing nothing but fighting people overseas and within our borders. Endless surveillance. Lots of wars.

                    In fact, one way to bring down the US is to let the country spend all of its money fighting wars, while other countries use their money for more productive matters.

                    Sure, there are communists in the world. But I don’t think they are the US’s biggest threat. We’re likely to bring down our country via our own efforts and don’t need any help from any communists.

                    Many people in this forum already believe the economic system in the US is doomed, so why on Earth do we even need to worry about communism?

                  • Ronald, of course I did. You may wish to try this


                    It’s “One day in the Life of Ivan Denisovitch”.

                    If you want to read about the prison were my cousin was nearly beaten to death by Castro’s henchmen:


                    Book Description
                    Publication Date: April 1, 2001
                    Against All Hope is Armando Valladares’ account of over twenty years in Fidel Castro’s tropical gulag. Arrested in 1960 for being philosophically and religiously opposed to communism, Valladares was not released until 1982, by which time he had become one of the world’s most celebrated “prisoners of conscience.” Interned all those years at the infamous Isla de Pinos prison (!), Valladares suffered endless days of violence, putrid food and squalid living conditions, while listening to Castro’s firing squads eliminating “counter revolutionaries” in the courtyard below his cell. Valladares survived by prayer and by writing poetry whose publication in Europe brought his case to the attention of international figures such as French President Francois Mitterand and to human rights organizations whose constant pressure on the Castro regime finally led to his release.

    • John B says:

      I can see unemployment getting worse.

  10. Ilambiquated says:

    Those Iraqi numbers remind me of a customer I used to have, a distributor of electronic equipment. They got taken over by an American competitor and suddenly started announcing they were going to increase their sales immensely. So we visited them to see what was up.

    Their presentation was entirely forgettable, but I still remember that the whole time one of their “vice presidents” kept scurrying around the room hitting his fist in his palm and saying excitedly, “All we have to do is hit the numbers! Hit the numbers! It’s easy! Just hit the numbers! Hit the numbers!”

    Six months later they ran out of cash and shut down overnight. They had 42,000 CD ROM drives (about 6 40 ft containers!) I’d sold them still on stock, but they were paid for, so I didn’t mind much.

    • Fred Magyar says:

      I guess they didn’t hit the numbers, so the invisible hand hit them with a KO punch instead, eh?
      Still, I’ve seen that sad little movie a few times myself…

  11. Ronald Walter says:

    Everything at Once *

    81 percent of 97 billion is 78.57 billion barrels burned, less than 19 billion barrels remaining to be burned. At a production rate of 9 million barrels per day, it will take 2000 days to consume the remaining oil in The Ghawar. Of course, that is not how it will happen, but if it has been producing one million barrels per day since 2004 and was 81 percent depleted in 2004, eleven more years, 4015 days, 11 x 365 = 4015, it will be 4 billion barrels lower or approximately 15 billion barrels remaining in the Ghawar. It’ll take another 43 years to empty the field.

    Repeat after me, a low oil price is good for the consumer. Say it again.

    * yes, it’s music, good music.

    • Thomas says:

      I thought Ghawar is producing nearly 5 mn barrels a day, not just one million? If so, it would be depleted completely by now if it really had been 81% depleted in 2004.

      • Thomas says:

        Anyway, a link posted by Ron further up says that as of 2011, Ghawar still had 88 bn barrels left. According to Aramco. That would indeed mean several decades worth of oil, assuming the 88bn figure is right and all of the 88 bn are recoverable.

        • Ghawar still had 88 bn barrels left. According to Aramco.

          According to Aramco Saudi Arabia has 265,800,000,000 barrels of proven oil reserves. If you believe Ghawar still has 88 bn barrels of oil left then you will believe Saudi has 255.8 bn barrels of reserves left. And an awful lot of people actually believe that. After all, we asked them and that’s what they said.

          • Thomas says:

            Fair enough. But the 81% depleted in 2004 based on 97 bn total also cannot be right, because by now Ghawar would be >100% depleted (unless you argue that Ghawar isn’t actually producing 5 mn per day and they get the difference from other fields?).

            • Oh my goodness. No one should believe Ghawar is producing anywhere close to 5 million barrels per day. That is just something MSM picked up somewhere and has been repeating for over a decade now. I don’t know what Ghawar is producing and no one outside ARAMCO’s inner circle knows either. Ghawar’s output is a closely guarded secret. Why? Your guess is as good as mine.

              Saudi has put on three giant fields in the last few years, Khurais, Manifa and Shaybah. That is how they have kept production up. But they have no more giants to bring on line.

              • Thomas says:

                That would be in line with the various facts presented, I guess. No more questions, your honor.

              • Jeffrey J. Brown says:

                Saudi Arabia produced 7.6 mbpd of C+C in 2002, when Brent averaged $25, and they increased production to 9.6 mbpd to 2005, as Brent hit $55.

                As annual Brent crude oil prices averaged $110 for 2011 to 2013 inclusive, Saudi Arabia had average C+C production of 9.7 mbpd.

                A plausible explanation would seem to be that all the new production they put on line only served to offset declines from existing wells, and they were not able to increase production sufficiently to offset increased domestic consumption, resulting in the post-2005 decline in Saudi net exports.

              • Watcher says:

                I don’t know what Ghawar is producing and no one outside ARAMCO’s inner circle knows either. Ghawar’s output is a closely guarded secret. Why? Your guess is as good as mine.

                Why guess? The answer is obvious.

                It’s a closely guarded secret because they have nothing to gain from it not being a closely guarded secret.

  12. MBP says:

    Put this on the last post, but thought I’d share it here since I didn’t get a chance to read the RRC post until today:

    A couple of thing, since I have been out of pocket all weekend and just got to this post today:

    1) I’m confused why the data for TX RRC production has such a lag time. Where is it from? In the data that I’ve looked at ( The January 2015 data is prelim while the December 2014 is listed as final. So the previous month is always listed as final. Is there some difference in these numbers compared to what is used? Maybe its just the final number they will use for this type of report, who knows. I can always track our production the day after from the LACT units (assuming there isn’t an issue with the unit), so its always been odd to me how long it takes to get accurate data from the commission.

    2) I think Art overestimates production in the Permian (that was it’s max production in 1974, I think we are still a little shy of that). If the production in the Permian is actually 1.8 mmbopd, and 45% is vertical conventional production (there is vertical unconventional production, but we will ignore it for now) then 810 mbopd is vertical conventional production. Using the data that I have, which I think is pretty accurate, there is a BIG discrepancy between his number and what I have. For conventional production in the Permian, it should be at most 500 mbopd (I have 463), so either >300 mbopd is from vert. unconventional wells (possible?) or there is a data issue with either his or mine. See below:

  13. MBP says:

    Have you read the C&C Reservoirs Field Evaluation report for the Ghawar? It is a really in depth study on the field. I think it lists their estimate for OOIP at >180 BBO, though I don’t recall what RF they expected from it.

    • With CO2, pumping up to say 20 million barrels of water per day…lots of wells, top absolute end 60 %. That’s obscenely high. But you can use it for a really optimistic figure. That’s about 108 billion recoverable. I suspect it’s just declining a bit each year, but the decline will accelerate. The final decline rate will depend on what they can do with CO2, how much water they pump, and the number of wells they drill per year.

      • shallow sand says:

        Fernando. You asked me a question about acidizing injection wells in the last thread. As I have noted, I am more on the financial end but do pay attention to the field and pick up knowledge as I can. We do not experience packer issues as you described much, if the packer has become dislodged or maybe wasn’t set well in the first place, things can go awry and junk can get past the packer into the annulus. Another way that can occur is through a tubing hole.

        I think what we do you might refer to as an acid frack. We have low down hole pressure, basically dead oil. Injection rates vary quite a bit, but usually 400-600 psi. The acid jobs are fairly simple. Acid truck brought to well has high pressure pump, start with water, build up rate, then switch to acid, pump until breaks down -pressure decrease. Can get up to 2000 psi, I am told, but usually doesn’t take that much.

        Injectors can be a pain. Co-mingled waters are a big problem. Two different majors developed large water floods near us. One drilled twin wells, both producers and injectors, one did not. You can imagine which has been better over the long term.

        Chemical program adherence is a must, much of the injected water is treated. Also have went more to closed top water tanks as opposed to open top with bird netting. Netting difficult to maintain. Also, open top tend to get frozen more quickly in cold weather. Getting ice chunks in injection pump is bad, of course. Also, closed top cuts down on debris possibilities and is simply safer.

        I take it you maybe dealt with heavier oil, API below 25, with lower sulfur?

        Also have found insulating injection well connections, fittings, etc. For winter is a bad idea. Get condensation in between insulation and the well assembly which causes corrosion. In a few places I have seen small buildings built over injectors, with heat lamps on them, like we all do in the injection/SWD plants.

        • Shallow, I spent years in venezuela supervising engineers and geologists producing and operating 10 to 30 degree API. Most of it was around 20. What you do is give the injector a cocktail. You are getting trash in the water, and you probably have bacterial infections. What’s the H2S like in the producers? Does the water have iron sulfide? If this is the case you really should put a lid on all your water system, and see if you can put in more filters. This is an economic analysis topic. Got to weigh the acid cost versus the investment in filters and getting your water system sealed. If you do go with water filters buy nutshells with the system rigged up to backwash and make sure they don’t use the backwash water. That needs to be shoved by brute force into a disposal well.

          I think we may be a little bit off scale, though. The smallest filter I saw in our operations was 20 thousand bwpd.

          • shallow sand says:

            Don’t have to do many acid jobs per yet. Less than 5% of injection wells.

          • Hell, that’s nothing. We used to have a contract with Halliburton, they kept a pump truck at a satellite base inside our acreage, and we kept them pretty busy pumping acid.

            • shallow sand says:

              Fernando. Sounds like you had a big waterflood going. Would be interested in specifics if you can share them. Just interested in that kind of stuff.

  14. dmg555 says:

    Nice work Ron. Well written, concise, too the point, thanks for your efforts. I wish others could learn from your example. Half the posts on here could be edited down to 50% of the words used.

    • Watcher says:

      That’s true.



    • clueless says:

      “too” can be cut down to “to”

      • Futilitist says:

        And clueless could be shortened to clules.

        We could even write a contractionary for the site. This saves syllables as well as letters.

        For example: “We are almost done with that frac job.”
        Becomes: “Romostunwithat frac job.”

        Dyunderstanwairmededwithis? Tzeezy. Sreelobvious fyer paintension. Seowtwerks?

  15. dmg555 says:

    From Wikipedia: on GHAWAR

    In April 2010, Saad al-Treiki, Vice-President for Operations at Aramco, stated, in a news conference reported in Saudi media, that over 65 billion barrels (10.3 km3) have been produced from the field since 1951. Treiki further stated that the total reserves of the field had originally exceeded 100 billion barrels (16 km3)[13]

    The International Energy Agency in its 2008 World Energy Outlook stated that the oil production from Ghawar reached 66 Bbo in 2007, and that the remaining reserves are 74 Bbo. [8]

    Matthew Simmons, in his 2005 book Twilight in the Desert, suggests that production from the Ghawar field and Saudi Arabia may soon peak.[14]

    When appraised in the 1970s, the field was assessed to have 170 billion barrels (27 km3) of original oil in place (OOIP), with about 60 billion barrels (9.5 km3) recoverable (1975 Aramco estimate quoted by Matt Simmons). The second figure, at least, was understated, since that production figure has already been exceeded.[14]

    • Watcher says:

      As I recall we DO have porosity and permeability numbers for Ghawar. They mean much.

      The reservoir has an average thickness of more than 60 m (200 ft), an average porosity of more than 15%, and a permeability up to several darcys


      Cubic meter volume of the field X 15% should be every droplet of oil down there minus what has been extracted?

      • MBP says:

        For a homogeneous reservoir that is the same thickness over the entire area that would work, but this is field is not one. Doing that would have overestimating the volume on he flanks of the field where the reservoir is thinner and underestimating at the crest of the anticline where it is thickest.

        Also, that calculation does not take into account the Sw of the main pay at original conditions. The actual volume of oil will be less then the volume that the rock has.

        • Watcher says:

          Oh I’m okay with that. I just want to put a cap on OOIP upticks in succeeding estimates.

      • Here’s a type log

        Back in the 1970s we used to cut off a bit too high (cut off means setting a boundary for what we think will be drained, even if it’s a minor amount). This tells me the OOIP may have been reported a bit low when compared to what some majors do nowadays.

        The way this works, we can state a higher OOIP but then have to account for the fact that recovery factor is lower in the low quality rock holding the “extra” oil in place.

        This means you can theorize original oil in place was say 200 billion barrels, and recovery will be 60 % of OOIP. Run plus or minus 25 % and you should have reasonable low, medium and high reserve cases.

  16. ezrydermike says:

    Not sure how many here read Tom Whipple’s weekly Peak Oil Review and I don’t know his sources, but this week’s piece has some interesting bits…

    “The debate continues over when the oil price rebound will come. Observers are nearly unanimous that it will take place sometime in the second half of this year but disagree as to whether this rebound will reach three figures or will top out a lower level, below that necessary to support the high cost of producing oil from most shale formations, tar sands, and deep-water wells. The 40 percent drop in active drilling rigs without a noticeable decline in US oil production, has started another debate about how much drilling efficiency has increased of late and just what is happening to the backlog of drilled, but still unfracked wells. Some hold that many drillers are holding off on completing wells until prices are higher.”

    “Beijing’s apparent oil demand in January and February increased by 3 percent year over year to 10.43 million b/d as derived from recently released government data. Beijing does not release data on oil demand or the size of its stockpiles, thereby forcing interested parties to calculate “apparent” demand from import and refinery production data. Much of the increased imports likely are due to ongoing efforts to fill China’s strategic reserve facilities and increased exports of finished oil products from recently completed refineries.”

    “Saudi rig count: As the global energy industry stares transfixed at a spectacular drop in active US drilling rigs, Saudi Arabia is ramping up the number of machines drilling for oil and gas despite a sharp fall in the price of crude. Industry sources and analysts say the Saudis are looking beyond the current oil situation. State oil giant Saudi Aramco used a record 210 oil and gas rigs in 2014, up from around 150 in 2013, 140 in 2012 and some 100 in 2011, according to industry estimates. ”

    “Total US petroleum demand reached an average 19.3 million b/d in February—the highest level for the month since 2008, the American Petroleum Institute reported last week. The amount represented a 1.5 percent year-on-year increase. Greater demand for gasoline and jet fuel and a colder-than-usual February brought total February deliveries back to pre-recession levels.”

    “German hard coal imports reached an all-time record high of 56.2 million mt in 2014, up 6.2 percent on the year, according to statistics released by the German Coal Importers Association Thursday.”

  17. Ronald Walter says:

    For Ghawar, just guessing the production using normal daily production for source systems in the US, the Bakken and Eagle Ford, a million barrels per day for ease of arriving at numbers that might be close enough.

    China is at it already, coal liquefaction/coal to liquids, something China must see as a way out, the handwriting is on the coal seam, the harbinger of things to come. Might be a waste of time and money, probably not, but China doesn’t care, if it produces the intended results, the better it will be.

    The future for coal is not as dark as oil’s grim forecast.

    • Allan H says:

      Yes, it is a logical step to use coal to produce liquid fuels, especially in a petroleum constrained world. China apparently is moving forward in as many directions as possible to maintain their energy mix. Production of liquid fuels is especially important for aircraft and military operations. I wonder if they are converting natural gas to liquids also.

  18. Watcher says:

    ZH just splashed the news of the day.

    Looks like there were no buyers for that precious Whiting property we were assured would be bought.

    They just announced a 35 million share secondary (that’s 23% of shares outstanding diluted, pre price adjustment) and a $1 billion offering of senior convertible notes as a private placement (via JPM), which btw is either FURTHER dilution or suspended payments (because the only way the payments get made is if there is progress, and if there is progress then there will be conversion).

    And what happens if there are no buyers past the underwriters for this crap (as revaluation of reserves approaches)? haha ZH suggests kickstarter.

  19. The Bakken rig count just dropped to 100. That’s a drop of 7 since Friday. A couple are still listed to be stacked. Only 4 are listed as MIRU. That has to be a record low number for rigs rigging up.

    Current Active Drilling Rig List

    • shallow sand says:

      Note that 15 of the rigs are XTO (Exxon) and they say they are going to keep 13 running regardless of price.
      Will be interesting to see if they do that.

      As to Whiting there is no value at the current strip once debt is subtracted from PV10. Any idea what the secondary will be priced at?

      • learner2 says:

        shallow sand, what are your thoughts on OAS and CLR? OAS already did a secondary 10 days ago, for not too steep a discount. It had managed to climb up since then to unchanged. Whats interesting is that OAS and CLR both fell today when oil was up, way more than WLL did during trading day.

        • shallow sand says:

          I really don’t have advice for investing in shale. It appears to me that with CLR, WLL, OAS, they are valued by the market assuming the oil price downturn will be short lived.

          My point is more toward whether they will be extended/should be extended more credit, given the current valuation of their reserves. In other words, if an investor believes WTI will be over $100 in 2016-2020, he or she would likely buy shares of one of the above named companies.

          However, I was never under the impression banks were allowed that kind of leeway when loaning money to drill oil wells. I thought their price decks had to be fairly close to the WTI strip. I did not think they could loan funds to any person or entity by making such speculative assumptions. Try convincing the bank to loan double the FMV of your house, because we all know it will be worth double some day.

          In my view, if the current WTI strip stays where it is till 2020, all of these companies are in big trouble. Admittedly our stripper wells aren’t worth much either if that is the case.

          However, I personally think the present WTI strip is unsustainable in the long term, absent a long term global recession/depression. Additional production of about one million barrels per day, per year, cannot be developed at such low prices.

          So when I say Whiting has no value, I mean by bank parameters, not by speculative views of future oil prices. I would add that these shale companies haven’t proven a price where they can be cash flow positive. What is the endgame? 100,000 20,000 Ft horizontal wells making 5-10 barrels per day?

          • Watcher says:

            If you have to have it, you do whatever it takes.

            • Futilitist says:

              Not necessarily. In some situations you can only do what you can do.

            • Marcus says:

              Watcher, I do grasp your logic & I know where you are coming from. I agree that things are different post 2008, however history is littered with examples of governments ruled by dictators with absolute power, but despite that absolute power and their willingness to “do whatever it takes” not only did they fail in their endeavours often they actually made things considerably worse.

              For example collectivization of agriculture under Stalin caused mass starvation and no matter his apparent psychopathic tenancies I’m sure this was not the intended outcome. Mugabe’s total control of his countries government did not stop the country going from the bread basket of Africa to a country dependent on food aid and a currency that was destroyed by hyperinflation. I could go on and on with examples.

              Whilst there are no outward signs of crisis in the US, Japan & Europe due to their unconventional monetary policies they have not really been tested yet. I would suggest that the real test for all nations will be a rapid sharks fin curve type decline in world oil production and no amount of “If you have to have it, you do whatever it takes” will help them as they undergo collapse.

    • Regex Wald says:

      Change in rig counts from today (100 total rigs) and August 15, 2014 (194 total rigs).

      • shallow sand says:

        Regex. Thanks for the information.

      • toolpush says:

        Great work Reg.

        Great for comparisons.

        SM Energy, seems to be out of step with the rest, with a 50% increase in rigs. XTO does not count as they are in a world of their own and a much bigger cheque book than anybody else.

  20. In the meantime:

    S Arabia ready to take ‘necessary measures’ in Yemen
    Saudi Arabia’s foreign minister has said the kingdom is ready “to take necessary measures if needed” over Yemen’s political crisis, after denouncing Iran’s alleged role in the turmoil as an “act of aggression.”

    Yemen peak oil, map and latest IMF report in:

    • So we see Saudis fighting shiah in the south, Iran defending the Iraqi shiah in the north. The Sunni in Iraq and Syria turning radical, the Syrian regime surviving, an extreme right wing self declared ethnic cleanser leading Isrel, a military autocracy ruling Egypt, Lybia failing as a state, and a bunch of nuts running all over the Sahel. Meanwhile Obama is pushing for war against Russia, and trying to negotiate a deal with the Cuban dictatorship – which largely controls a Venezuelan satrapy supposedly led by an imbecile.

      • Caelan MacIntyre says:

        Confuse/Distract competitors with sanctions, Ukraine fiasco, NATO buildup/military parade; blaze a path (‘arm’ ISIS, etc.) of confusion and destruction through the Middle East to Saudi Arabia, etc.. Ahh, Oil. Mission Accomplished.

  21. Caelan MacIntyre says:

    The doomers and the peak oilers gag

    “…and they call it American denial. Personally, I think it is somewhat unfair to say that most Americans and Canadians are in denial. They simply don’t have a fucking clue about what is really happening to them and their world. Everything they have been taught about working, money and ‘quality of life’ constitutes the planet’s greatest problem — overshoot. Understanding this trashes our most basic assumptions, and requires a complete reversal in contemporary thought and practice about how we live in the world. When was the last time you saw any individual, much less an entire nation, do that?

    Compounding our ignorance and naiveté are the officials and experts, politicians, media elites, and especially economists, who interpret the world for us and govern the course of things. The go-to guys. They don’t know either. But they’ve got the lingo down…” ~ Joe Bageant, ‘Our Plunder of Nature Will End Up Killing Capitalism and Our Obscene Lifestyles’

    • Futilitist says:

      China’s internet ‘spin doctors’

      China is using an increasing number of paid “internet commentators” in a sophisticated attempt to control public opinion.

      These commentators are used by government departments to scour the internet for bad news – and then negate it.

      They post comments on websites and forums that spin bad news into good in an attempt to shape public opinion.

      Chinese leaders seem aware that the internet – the only public forum where views can be freely expressed – needs close attention.

      China’s Communist Party leaders have long sought to sway public opinion by controlling what the media can report.

      Rumours and opinions

      Comments, rumours and opinions can be quickly spread between internet groups in a way that makes it hard for the government to censor.

      So instead of just trying to prevent people from having their say, the government is also attempting to change they way they think.

      To do this, they use specially trained – and ideologically sound – internet commentators.

      Spin machine

      A document released by the public security bureau in the city of Jiaozuo in Henan province boasts of the success of this approach.

      It retells the story of one disgruntled citizen who posted an unfavourable comment about the police on a website after being punished for a traffic offence.

      One of the bureau’s internet commentators reported this posting to the authorities within 10 minutes of it going up.

      The bureau then began to spin, using more than 120 people to post their own comments that neatly shifted the debate.

      “Twenty minutes later, most postings supported the police – in fact many internet users began to condemn the original commentator,” said the report.

      ‘Tens of thousands’

      Internet commentators have now become widespread, according to experts. Some estimate that there are now tens of thousands of them.

      There are also reports that special centres have been set up to train China’s new army of internet spin doctors.

      Their job is more important than it would be elsewhere in the world.

      “Politically, the internet is more important in China than in other societies because it’s the only public space where people can express themselves,” said Professor Xiao.

      That is a point that has not escaped Chinese President Hu Jintao.

      When he chatted online in an internet forum earlier this year he said it was important to set up “a new pattern of media guidance” for the internet.

      China’s teams of state-sponsored commentators have a lot of work ahead of them.

      Lucky for us, we have an open, democratic society where the government can be trusted by the people not to try to manipulate what people think on the internet. 🙂

      • Caelan MacIntyre says:

        On the other hand, POB has no such problem. Everyone’s legit here. And if there’s any doubt, we’ll just pretend that there’s none and even leverage that along with other imaginations to weave our own little fable. Right, shallow sand? . ‘u^

        You could even make a little ‘word cloud’ comment, filled with words like climate change, 2 degrees, minimum, maximum, forcing, feedback, negative, positive, sea-level rise, ice-core samples, historic, increase, polar, vortex, dangerous, effects, species, arctic, ice melt, antarctic, C02, and see it it might trip some kind of alarm… Even add a some kind of random climate graphic… something catchy…

      • Futi, five-six years ago I saw a video showing a training class for professional net warriors. The class was was for a group of young people working for the Cuban Interior Ministry. The trainer gave them a pep talk about how the Internet was a battleground against imperialism, yadda yadda.

        I run into these guys posting in newspapers and blogs, they can be identified by their lack of personality, fairly similar commentary, and the hours they write (they seem to be on pretty regular schedules). These commie dictatorships also mobilize supporters, who go protest and catcall individuals trying to discuss what’s going on inside their country. These hecklers are identified because they repeat verbatim, in their native language, the same bs used by the government propaganda machine.

        In the USA they have a network of communist professors in their employment (I’ve seen a list with 100 names). And they also pay for think tanks. Here in Spain a think tank, CEPR in Valencia, has been identified to have received millions of € over the years. As it turns out the Podemos (communist) leadership has members in the CEPR board, and they receive “consulting fees” from the Venezuelan government.

        I identified a small nest of communists working quite actively for the Venezuelan dictatorship, at the University of Michgan Economics Department, and then there’s Mark Weisbrot, a commie who works for an outfit in the usa but writes for The Guardian. There’s a media/Internet battleground for sure. And if you get into it watch out for malware.

        • John B says:

          Hi Fernando,

          A good portion of the American Left considers Communism to be either a utopia, or simply non-existent. You’ll probably get more traction here by replacing “Communism” with “Totalitarianism”. That would probably be a better description anyway.

          • John, the comunist networks I’m discussing are used to evangelize and deliver cover for the Maduro and other dictatorships. I realize they don’t have much influence, but they do bias events. And some nations do have a fertile ground for Marxists. Greece is already in their hands, Spain has an emerging Marxist threat, and of course they are on the process of utterly destroying Venezuela. These guys are like Cancer. They spread.

        • Boomer II says:

          I run into these guys posting in newspapers and blogs, they can be identified by their lack of personality, fairly similar commentary, and the hours they write (they seem to be on pretty regular schedules).

          Sounds just like the folks from the Heritage Foundation and the Heartland Institute who post here.

          • Not at all. They sound like communist bots. The Maduro regime has torture chambers in the secret police satellite office at Plaza de Venezuela. The building used to be a bank, the torture center is the basement, where they kept the vault. This is quite well known, but we have posters defending the SEBIN (the secret police). The Sebin shot Basil da Costa in the back of the head last year. And that turkey Weisbrot slouched down to Caracas and wrote a Guardian article defending the regime’s behavior (a total of 42 got killed)


            • Boomer II says:

              Not at all. They sound like communist bots.

              My point was that we have people or bots on the right doing the same thing. They are spamming the sites they don’t agree with.

              And I am inclined to think that no matter what the political viewpoint, the fact that these folks/machines do this is a sign of their weakness, not their strengthen.

              As I said before, you’ve got a massive military/industrial complex in the US that would like nothing more than to channel most of the US GNP into fighting communism or whatever the enemy of choice is at the moment. If you let the paranoia feed into that, the US is going to be economically drained fighting real and imagined enemies.

              • I’m aware of usa internal problems, I’m a us citizen. I try to vote for the least bad candidate.

                But I’m discussing a broader issue. Right now I consider communists a clear and present danger. The usa is too focused on the Islamist issue. But that’s a problem fueled by usa policies. And it’s not going to be solved being subservient to Israeli politicians.

                • Boomer II says:

                  Right now I consider communists a clear and present danger.

                  Our wars against communists (i.e., North Korea, Vietnam) haven’t accomplished much. We had better luck turning them into business partners (i.e., China, Vietnam).

                  Our country has been willing to become a massive surveillance operation to fight communists.

                  I’m not sure what you think should be done that hasn’t already been done, and less than successfully.

                  As this forum keeps pointing out, the world faces far more serious problems right now that communism. We’ve got too many people, too few resources, and failing economic systems. Maybe we should focus on that rather than looking for communists in every corner.

                  • I don’t look for comunists in every corner. We usually find them in educational institutions, they are the ones who buy the bugged Marx busts we put up for sale at the university bookstore. The bugs give us all the information we need.

                  • Boomer II says:

                    We usually find them in educational institutions, they are the ones who buy the bugged Marx busts we put up for sale at the university bookstore.

                    I don’t think there are too many real communists at universities. But if there are, who are they feeding info to? And what will actually happen with that info?

                    You realize we now have a world of hackers, working for themselves, for criminals, and for various governments. Most of our info is up for grabs anyway. We are being observed and spied upon by many, many different entities.

                    Corporate, personal, and government secrets are being obtained all the time. If anything, the world is awash with “secrets.” So much so that it is hard to process it all.

                    You think these university commies are giving the Chinese and others info they aren’t already getting on their own from various sources? And do you think the US surveillance operations aren’t also working full-time to conduct their own info gathering? It’s a spy-versus-spy, and hacker-versus-hacker world these days done with all the tech savvy that many people have access to.

        • Boomer II says:

          In the USA they have a network of communist professors in their employment (I’ve seen a list with 100 names).

          How about posting it here? I am skeptical and would like to see who is being identified as a paid communist professor.

          • ezrydermike says:

            I have here in my hand a list…….a list of names….

            • Boomer II says:

              I have here in my hand a list…….a list of names….

              Yes, it does bring back memories, doesn’t it?

              • Futilitist says:

                Revealed: US spy operation that manipulates social media


                Military’s ‘sock puppet’ software creates fake online identities to spread pro-American propaganda

                Jeff Jarvis: Washington shows the morals of a clumsy spammer

                The US military is developing software that will let it secretly manipulate social media sites by using fake online personas to influence internet conversations and spread pro-American propaganda.

                A Californian corporation has been awarded a contract with United States Central Command (Centcom), which oversees US armed operations in the Middle East and Central Asia, to develop what is described as an “online persona management service” that will allow one US serviceman or woman to control up to 10 separate identities based all over the world.

                The project has been likened by web experts to China’s attempts to control and restrict free speech on the internet. Critics are likely to complain that it will allow the US military to create a false consensus in online conversations, crowd out unwelcome opinions and smother commentaries or reports that do not correspond with its own objectives.

                The discovery that the US military is developing false online personalities – known to users of social media as “sock puppets” – could also encourage other governments, private companies and non-government organisations to do the same.

                The Centcom contract stipulates that each fake online persona must have a convincing background, history and supporting details, and that up to 50 US-based controllers should be able to operate false identities from their workstations “without fear of being discovered by sophisticated adversaries”.

                Centcom spokesman Commander Bill Speaks said: “The technology supports classified blogging activities on foreign-language websites to enable Centcom to counter violent extremist and enemy propaganda outside the US.”

                He said none of the interventions would be in English, as it would be unlawful to “address US audiences” with such technology, and any English-language use of social media by Centcom was always clearly attributed. The languages in which the interventions are conducted include Arabic, Farsi, Urdu and Pashto.

                Centcom said it was not targeting any US-based web sites, in English or any other language, and specifically said it was not targeting Facebook or Twitter.

                It is a good thing that our military is doing such a good job protecting us from our enemies abroad.

                And since the US constitution completely protects us from these tools ever using their tools against us, we can all feel perfectly safe and secure while posting on good, old fashioned, patriotic American websites like peakoilbarrel.

                What a relief. 😉

                • The US military is developing a colonial master mindset. The next step is to have imperial troopers dressed in white, it signals their freedom loving nature.

                  • Caelan MacIntyre says:

                    POAHF ^u^

                  • Boomer II says:

                    And fear of Communist and more recently Islam have given the US government justification for maintaining a strong military and surveillance operation.

                    You have to keep in mind that by always talking about the threat of Communism, you give the US military even more incentive to pursue this colonial master mindset. What likely keeps us from doing even more of it is the cost. US tax payers don’t want to be stuck with the bill, and their willingness to keep sending young men and women to die is wearing out.

                  • Fred Magyar says:

                    Storm troopers are no match for watermelons!

                  • Boomer II says:

                    This whole watermelon idea is pretty funny if you understand Silicon Valley thinking.

                    The folks there prefer networks without central control. So solar appeals to them because it allows the most energy flexibility. To suggest that these folks are Communists means someone doesn’t have much connection with the culture there.

                    Similarly, to suggest that Republican ranchers in Nebraska who are fighting eminent domain concerning their property are somehow a front for the Venezuelans also discounts their culture.

                    And when you see the world entirely through the lens of Cuban Communism, you can miss a lot of what is really going on in various cultures and economic systems.

                    I am pretty sure that Silicon Valley culture will replace fossil fuel politics in the US before long because they have money and they are younger. They are going to outlive most of the Tea Party supporters.

                  • Mc I tyre, my hatred of communism has nothng to do with usa propaganda. I learned to hate them in cuba, when I was a teenager. Let’s just say you don’t know much about my world, and leave it at that, ok?

                  • Boomer II says:

                    I learned to hate them in cuba, when I was a teenager.

                    And I’m a bit tired of US policy toward Cuba being dictated by Cuban refugees. Sure, I understand why those who escaped hate communists. But we get along fine with Japan, Germany, and Vietnam these days. What happened in the past doesn’t have to dictate current foreign policy.

                  • Caelan MacIntyre says:

                    Fernando, I was just messing around with the Stormtrooper. It had nothing to do with the conversation.
                    We are out of scale as a species, and it seems that no matter what large-scale centralized system we have– Communism or whatever– it is not going to work.
                    Peak FF will likely be the death of those forms, possibly forever.

                  • Boomer, I agree completely. I am 100% behind normalizing relations with Cuba. Bravo to Obama for taking that initiative.

                  • It must be nice to live in the USA and support giving loans to dictators who keep slave workers.

  22. aws. says:

    The Sad Joke of Higher Furnace Efficiency Standards

    Posted by Allison Bailes, Energy Vanguard Blog, on Fri, Mar 20, 2015

    Do you know when the US last raised furnace efficiency standards? It was 1987. Do you know how long the US Department of Energy (DOE) has been trying to change that? At least since 2007. The past eight years have been a sad case of industry heavyweights preventing progress on this important issue. The DOE has just proposed a new rule, so we might finally see some action here. Do you know when it’s set to go into effect, if passed?

    On 10 February of this year, the DOE announced a proposal to adopt a 92 AFUE standard, nationwide. That’s nice. It should be higher and it should have been done a long time ago, but if enacted, it would effectively kill atmospheric combustion furnaces.

    There will be opposition. According to The ACHR News, Stephen Yurek, president and CEO of the Air Conditioning, Heating, and Refrigeration Institute (AHRI), said “Now, even though natural gas and oil prices are lower than they were [three years ago when the DOE issued regional standards] — in the case of oil, much lower — the DOE now feels a 92 percent nationwide standard is appropriate. How can that be? What’s changed?”

    Get involved

    If you’d like to see higher furnace efficiency standards, make your voice heard. The DOE has a meeting next week in Washington. It’s going to be Friday, 27 March from 9:00 a.m. to 4:00 p.m., at the U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW., Washington, DC 20585.

    If you can’t make it, then you can listen in as they’ll be broadcasting the meeting as a webinar.

    You also can submit written comments, which they’ll be accepting through 10 June 2015.

    See the DOE’s furnace rulemaking page for details.

    • HVACman says:

      I like 92% (and better) furnaces. They have been my standard furnace spec for quite a few years now. Lots of benefits and not much more cost on new installations. That said…

      One of the problems with switching to a 92% minimum “standard” is retrofit. 92% efficiency furnaces are “condensing” furnaces. That is, the heat exchanger extracts so much heat out of the flue gas that the water vapor created during combustion process condenses into liquid water. The water combines with the CO2, NO, and trace sulfur in the flue gas to create a wonderful mix of acids. Therefore, the flues have to be either exotic stainless or PVC plastic or it will corrode. You can’t re-use the metal type “B” flue that most 80% furnaces use. Also, condensate drains have to be planned for and installed. Also, if the furnace is installed in a freezing location, condensate drain heaters have to be installed to keep the traps from freezing.

      None of this is a big deal on new installations – PVC flues are cheap and if there is a cooling coil too, the condensate drain system would have to be installed anyway. Beyond the efficiency improvements, condensing furnaces resolve a lot of other problems. Combustion air grilles are no longer required, as you can pipe a 2″ or 3″ PVC combustion air pipe directly from the outside to the furnace. The likelihood of CO poisoning is almost nil, because the burner is all “sealed combustion” and if anything goes wrong, like the combustion air pipe becomes plugged, the internal safety controls of the furnace will shut it down. Also, modulating burners that match the actual heating load and don’t cycle on-off – improving both efficiency and comfort – are viable with condensing furnaces. With non-condensing 80% furnaces, modulation has to be restricted. The burner heat could drop down too low in the heat exchanger and the flue gas will cool down to the point that it condenses – not good if the heat exchanger and flue are not constructed to hold up against all the low-pH acidic condensate noted above.

      Another consideration about tweaking much with furnace efficiency – It’s not like air conditioning efficiency. The standard back in the early 1990’s was 10 SEER. It is now 14 SEER and one can get AC systems up to 25-30 SEER. AC offers huge efficiency improvement opportunities, at the right price point. Furnaces? You’re already at 80%. 100% is the absolute-never-achievable-theoretical limit. Return-on-investment, especially on retrofits and with cheap NG, may be problematic.

      • notanoilman says:

        An off topic question, if I may. How well do on-demand water heaters handle high water input temperatures? For example 50C-70C input for a 80C output. I am thinking in terms of boosting solar hot water temperature when there is not enough solar input or more water is needed than available at the desired temperature.


    • Ronald Walter says:

      A 92 percent efficient home heating system will have a cost savings of fifty to sixty percent.

      It will halve your natural gas consumption, easy. If you don’t have one, buy one.

      A 100,000 btu furnace with a 92 percent efficiency rating is a money saver, period, you’ll have your 92,000 btus.

      A high efficient furnace is much safer than the old 80 percent efficient furnaces by a country mile and they do shut down when there is a problem with intake or exhaust.

  23. aws. says:

    An ugly positive feedback loop of global warming… drought leads to declining hydro-electric production that then leads to more gas burn to make up for lost supply.

    Brazil relies on good neighbours for bailout

    By Chris Noon, InterFax Natural Gas Daily, Posted 17 March 2015 12:19 GMT

    Brazil is using Argentine ports and pipelines to supply its drought-stricken southeastern region with gas.

    Note: First three articles are free at this site.

    • toolpush says:

      I was surprised to see Argentina has LNG import terminals. I had thought they had good reserves of nat gas, as I worked on some projects down in the Magellan Straits. They certainly had some big wells, 9 5/8 tubing and well heads. The flow through the 4″ Schlumberger test line was supersonic and deafening!
      Also of course they have the shale play down there as well. Obviously they have a bit to go before it is producing useful quantities of gas for market?

      • Watcher says:

        I have forgotten the driller, maybe Exxon, but they recently pulled up stakes and said no time soon for Argentina shale.

      • Toolpush, as you know gas runs out. Argentina’s oil and gas industry has suffered because the kirchnerista (left wing populist) regime has been quite obstructive. Problems range from price controls to labor force anarchy to insecurity after the Repsol shares in YPF were taken a couple of years ago (this put Argentina’s largest oil company under the control of regime political appointees, a very rich family, the Askhenazis, completely ignorant of the oil business but allied with the Kirchners, and a US investment fund. I consulted for a smallish company operating in Argentina, and the rumor was the Kirchners extracted bribes from these non state stockholders, but I’m not sure the usa investment fund would dare bribe, whether the locals bribed or not is an unknown, but I do know the YPF dividends had been hiked to help the Askhenazis pay the debt they incurred buying their share. The high dividend rate destroyed YPF capacity to invest, and things look pretty grim. I know a little bit about the Vaca Muerta formation, and the combination of the reservoir and political risk make it a very dicey prospect. I assume Chevron is still goofing around with it. And I hope they choke on it, they got the deal because they put an Iranian in charge of those operations.

        • toolpush says:


          I actually enjoyed Argentina better than Brasil, but corruption is always the common thread that runs through those sort of countries, unfortunately.
          One point of interest was the airport we flew to the rig, was the airport that the Argentine air force used to attack the British ships during the Falklands war. As we waited for the helicopter, we had the joys of looking at the photos of the 55 Argentine pilots that were killed. As a large part of the crew was British, so it did have some effect.

          • It was a stupid war. I used to live there. All Argentina had to do was air drop 100 wolves in cages which opened and set them loose when they hit the ground. The wolves would have eaten the sheep and the Falklands Company wouldn’t have lobbied the government to keep the colony. It was a huge money loser.

            • toolpush says:


              You are forgetting it won the lady the election? What ever the reasons, that the Argentines went in there.

            • I’m referring to British government moves to dump the Falklands colony before the war. As you will recall the British weren’t doing that well, Maggie was a cost cutter. The only reason they kept it was intense lobbying by the Falklands Company, which was the BIG Falklands employer at the time. I know because we were interested in figuring out which government would keep it (in those days we thought they had oil, later, we realized it was non commercial).

    • Allan H says:

      Apparently, the Amazon rain forest may be nearing transistion to savannah as deforestation destroys the hydrological cycle of the natural forest.

      I recall reading about adventurers into the Matto Grosso in the early part of the twentieth century. It was one of the most isolated and dangerous wild areas on earth. Explorers and expeditions frequently disappeared in that region.
      After looking at the Matto Grosso region using satellite views from Google maps, it now has many roads and deforested regions. Didn’t take long to develop one of the last truly wild places.
      The drought risk maps I put up on this site lately show the Amazon region and much of south American peppered with high to medium drought risk areas.

      • Jef says:

        We need to pump some CO2 in there right away so all the rainforest can start really growing.

        • Fred Magyar says:

          Hey Jef, I know your comment was intended to be sarcasm, however, unfortunately it seems that increasing CO2 in the atmosphere while indeed providing a short growth spurt, also speeds up the life cycle of the plants, especially old growth trees and they die much sooner than they otherwise would. Thereby speeding up the desertification process of the rain forests.

          BTW, there is a group among us that might be even more dangerous than the Communists…


        • nNgass says:

          “We need to pump some CO2 …. ” That will become the cheapest solution if Ted Cruz is elected as president. He will sign a law that forbids climate change and thus CO2 will be in abundance when needed.

          • if Ted Cruz is elected as president. He will sign a law that forbids climate change

            Ted Cruz can sign a law that forbids climate change? He can do that? Can he sign a law that also forbids tornados? Or how about hurricanes, can he sign a law that forbids hurricanes? And will tornados and hurricanes obey those laws? I really don’t think so.

            And I seriously doubt that climate change will pay one damn bit of attention to any law that Ted Cruz signs.

            • nNgass says:

              This was just a joke. Before Galileo the catholic church tried this by having a doctrine forbidding that the sun is the center of the solar system. So, why not Mr. Cruz making a law forbidding entropy?

  24. aws. says:

    Overpumping of Central Valley groundwater creating a crisis, experts say

    By Bettina Boxall, L.A. Times, March 18, 2015

    Pitigliano spent $1.5 million in the last two years drilling six new wells, some of which reach 1,000 feet beneath the valley floor, more than twice as deep as his old wells. The groundwater is carrying his family operation through one of the worst droughts in the state record. But it is alkaline and contains more crop-damaging mineral salts than supplies from his old wells. So he had to install a $50,000 treatment system.

    “The cheap water is gone,” Pitigliano said as he sat in his farm office on a day when the valley fog draped his dormant orchards in a ghostly gray. The greeting on his office door proclaims, “Growing peace of mind since 1975,” but Pitigliano says if it weren’t for his children, he’d stake a “For Sale” sign in front of his property.

    • Boomer II says:

      Not enough water is starting to be a problem in states other than California as well. We may find that this will have the most immediate impact on lifestyles. While some people might want to argue about what might happen in the future, the water crisis won’t be subject to debate because it will be evident.

    • Yeah, that’s a real problem all over the world. Wells are running dry all over the world as water tables are dropping to nothing. Some people think an “energy transition” will help. Imagine that!

        • toolpush says:

          Solar desalination could be a good alternative to other forms of desalination. But what is the market for this desalinated water? It certainly is not for cheap water for growing rice, or other water wasteful agriculture practices.
          As has been stated on this site in the past, 80% of the water is used in agriculture, where it has been shown, large saving in water use can be achieved by such simple practices of using black plastic pipe for irrigation and other practices. Of course the farmer may need some encouragement to invest in a more costly irrigation system. Putting a realistic price of the water, is a good start, and of course the farmers will also make some noise, so some cheap money or grants may also be required, but in the end, a lot less water will be used, and it should be cheaper than building desalination plants, as well as kinder on the environment.

          • We have a seawater desalination plant. It’s mostly used in the tourist season, when we get a huge influx of beach goers.

            Lately we are getting a lot of rain, the water comes really cold and tastes very good. But we put in an osmotic filter in the kitchen, to avoid kidney stones.

            As you know the climate models just can’t project regional trends. We are getting weak low pressure areas from the Atlantic side, this is causing snow fall in Morocco and the mountains in the Iberian peninsula, and the mountains west of us are drenched in rain.

            • toolpush says:


              What happen to the line, “The rain in Spain, falls mainly on the plain” smiles

              We also have desal plant. It was built after a long drought. Our wonderful government of the day, promised if the dams got down to 30%, they would build a desal plant. We were lucky, it started to rain when the before the levels dropped to the 30%.
              Unfortunately for the politicians, they got caught red handed, and had to admit they had signed a water tight contract early. So we got our selves a $2b desal plant, with a condition it had to run flat out for the first 18 months.
              It now sits unused with our dams basically full, and the money flushed down the drain.
              A lot of things need to be looked at before going ahead with these expensive desal plants. It reminds me of the stories you read about nuclear power plants in the 60-70’s. Everybody wanted one, whether they needed it or not, and now they are stuck with them.

              • HVACman says:

                TP – but of course they signed a water-tight contract. Don’t want leaky water supply contracts during a drought, do we?

  25. Marcus says:

    To my mind this is one the most important posts by Ron in a long time. I have a couple of questions that perhaps Ron or others might tackle.

    (1) Is the infill & horizontal drilling in the super giant fields analogous to EOR?

    (2) Do we have a rough idea of when this program of infill drilling started?

    (3) Absent the infill drilling would the world have fallen off the plateau & be in serious decline somewhere between 2010 – 2012 even with North American unconventional production?

    • Marcus, if the rock has a discontinuous layering the infills and horizontals can add reserves. Think of these carbonates as a set of sheets of paper, each sheet has a slightly different permeability. The sheets stack up, some sheets are very extensive, others cover a smaller area. This leads to water flowing and displacing oil preferentially through the higher permeability sheets. It’s possible to drill wells to tap the lower permeability zones. But the additional recovery per well can be fairly small.

    • toolpush says:


      In 2005, I was told by a Chevron company man, just back from Kuwait, that the Burgan field required pressure maintenance. The Kuwait govt had commissioned Chevron to plan and build a water injection program to maintain production, which is on going today.
      The fact that Haliburton are working on the northern section of Ghawar with CO2 injection. I do believe we can definitely call that EOR.
      I understand, Saudi are also using steam injection for heavy oil extraction in the Neutral zone.
      Hawiyah, the second most southern section, was drilling horizontals in the early 2000’s.
      Haradh, the most southern section, was drilled with horizontals and water injectors, a short time later. Multi contacts wells were in mid to late noughties.

      • Marcus says:

        Fernando & toolpush,

        Thank you for your replies. It makes me wonder if the predictions of Matt Simons and others both in relation to both Saudi & world production were incorrect not due to a an overly pessimistic view of reserves, but more because they did not take into account the role of infill drilling & EOR in utilizing reserves and pushing production way after 51% depletion. Now the big question is when will the super giant fields hit 2/3 depletion?

        • Watcher says:

          Nah, Simmons knew about infill. It’s not new.

          Shale infill is a bit different from conventional infill, but only a bit. The difference is distance. High permeability rock will drain oil from farther away from the well.

          Lower permeability rock (like in the shale fields) drains from a shorter distance. So you drill more wells closer together. The theory also seems to be that the farther out in frack radius you go from the horizontal, the fewer fracture . . . tendrils occur, so there’s oil there not drained. That’s the motivation to “down spacing” the distance. The problem of course is if you downspace to get every droplet of oil, you pay $9 million for a well that isn’t going to get as much oil in total.

    • shallow sand says:

      Good questions. I agree that focus should be more on middle east and other areas with more reserves than USA. Problem is access to information. Imagine if KSA, Russia, Iraq, Canada, Kuwait, etc. Had public reporting system like North Dakota?

    • MBP says:

      1) I don’t consider infill drilling EOR. You really aren’t enhancing anything, simply downspacing to access more reserves. Sometimes 20 acre spacing will work fine, other times you need 2.5 acre spacing. Depends on the geology. I consider anything beyond secondary recovery to be EOR, like CO2 flooding, steam flooding, or polymer assisted waterflooding.

      2) Early 1990’s for the Ghawar, wells that’s when the horizontals started. The field didn’t have water breakthrough until 1983, which was like 13% RF before any water. Crazy stuff.

      3) Difficult question to answer. The Ghawar was developed much different from how most fields in America are drilled, where 40 acre spacing throughout the entire field is then downspaced to 20 acre and so on. The Ghawar was developed as a peripheral waterflood so “infill drilling” is really stepping up structure and drilling as the structurally lower wells watered out. If only the Almost every field in the world is infill drilled. If only the original spacing in fields was all that was ever drilled then peak in global production would have happened decades ago.

  26. Caelan MacIntyre says:

    Corporations Are Not Going to Save Us From Climate Disruption

    “The events out on the streets in New York this week did provide some hope and inspiration. There were plenty of wishy-washy, nonsense calls (‘100 percent renewable energy, now,’ ‘Go Vegan: Save the Planet,’ ‘electric cars,’ ‘biofuels’ etc.). But there were also many who have dug in deep enough to conclude that our only real chance for addressing the multipronged crises we face is to overcome divisions and disparities to build unity and take action including bold nonviolent direct action targeting the roots of the problem. People are recognizing that all of the various issues, concerns and struggles that we contend with – from tar sands, to fracking, from nukes and uranium mining to biofuels, from oppression and incarceration to poverty, sexism, racism and a lack of basic rights – all stem from a common root cause (named capitalism). With virtually everything at stake, we can and must use our power in numbers to put an end to the utterly grotesque system that currently reigns and which has demonstrated that it is willing to go to any lengths – including destroying our only planet – in the name of endless profitmaking and accumulation of wealth and power in the hands of a tiny few…”~ Rachel Smolker


    • Lian Nemesh says:

      Prosperous cities and towns have never been built by people who reject historical societal norms for Family. Family Values that build community that ‘they will come’ to are taught by Mothers and Fathers who learned them from their Mothers and Fathers. No, the Cleavers on Leave it to Beaver weren’t stupid, we were. Corporations, Governments, Schools and ‘villages’ can’t take the place of the Family. Corporations, Governments, Schools and Villages have never built free and prosperous nations. Men who marry women, who have many children and teach them how to work, how to sacrifice their wants and needs for their families, how to Honor God 1st, their family, ALL Authority, their neighbors build ‘community’ that works and grows. A family’s largest investment is their home. It takes sweat/hours and $$ to keep a home up. Historically, home/property values increase. If people see their largest investment declining, they pull out. Who wouldn’t? They count on their homes for retirement so their neighbors don’t have to rob from what they worked hard for to leave to their children. These formerly nice communities were not built by Corporations. They were built by God-fearing families. More people have been killed in the last 100 years by Corporations who promised to ‘build community’, give jobs, meet all the needs of its citizens by using class warfare than ‘religious wars’, disease, etc. Guess what. That’s what some Gov’ts are doing too, by ‘organizing’ an army. They will wind up starving too. Look at the world. All the formerly robust economies (who used to follow same principles) have succumbed to redistribution and all are in debt out the wazoo. It aint gonna last unless we get back to basics rebuilding this nation. It’s gonna take time. But you have to decide if you are willing to make changes. NOT the fundamental change of ‘all cultures are equal’. If they were, people wouldn’t flock to the US fleeing the destruction caused by their failed governments. (they come either to join in or to destroy by ‘hey lets elect the same kind of folks who will promise us the moon, or lets implement drastic freedom-taking laws. It’s all part of Culture Decline. Blight? Is it too late? We have reached the tipping point. If you can convince businesses and families to move back because you’ve begun to adopt the God-fearing values that build great community, they will come back. This is America. We can do anything we want to WITH AMERICAN VALUES.

      • ezrydermike says:

        What? Over? Did you say “over”? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!

        And it ain’t over now. ‘Cause when the goin’ gets tough . . . the tough get goin’! Who’s with me? Let’s go!

        Let’s do it!

        Go! Go! Go! Go! Go!

        • John B says:

          I’m pretty sure it was the Japanese that bombed Pearl Harbor, not the Germans.

          To be fair, Pearl Harbor was a military target. Firebombing Tokyo, and nuking Hiroshima, and Nagasaki would have put American Officers on trial for war crimes, if the US had lost the war.

      • Caelan MacIntyre says:

        There’s that signature cut-and-paste-no-line-break text & out-of-nowhere moniker again.

        • Futilitist says:

          Yeah, Liam Neeson is a way better actor than he is a writer.

          Oh, wait….never mind.

  27. Caelan MacIntyre says:

    Green Capitalism: The God That Failed

    “Green capitalism proponents often take it as an article of faith that technological breakthroughs will enable us to sharply cut resource use, to ‘dematerialize’ production and, in the words of the Stern Review, to ‘decouple growth from greenhouse gas emissions’ such that production can grow forever while resource consumption declines. While no doubt there are many green technological miracles on the horizon, they cannot save us so long as we live in a capitalist economy. That’s because under capitalism… there is no assurance that greater energy efficiency or materialist conservation would mean less consumption or less pollution so long as there is no extra market limit set to the growth of overall production. Efficiency gains could just as easily enable producers to use saved resources to expand production even more instead of ‘saving’ resources. And, given capitalism, there is every incentive to do just that and every penalty for failing to do so. Secondly, the prospects for ‘dematerialization’ are extremely limited, often completely impossible, outside of a very few industries. Thirdly, in many instances where companies actually adopt clean production technologies or waste minimization, such ‘green practices’ are beside the point because the main causes of pollution are the products the company produces, such as toxic pesticides, not the process of producing them. And fourthly, ‘green’ industries often just create new problems in the place of old…

    To make matters worse, vehicle pollution is not confined to what comes out of the tailpipe. A life cycle study of the automobile done by the Umwelt-und Prognose-Institut of Heidelberg, Germany, in 1993 found that only 40 percent of an average car’s pollution is emitted during the car’s ‘driving’ life stage. The other 60 percent results from other life stages: the extraction of raw materials, the transport of raw materials, the manufacturing of the car and the disposal of the car. Most of the pollution any car will ever produce, 56 percent, is generated in the manufacturing process, before the car even arrives at the showroom – in the production of all the steel, aluminum, copper and other metals, glass, rubber, plastic, paint and other resources that go into every automobile, and in the manufacturing process itself. Cars produce 56 percent of all the pollution they will ever produce before they ever hit the road, and 4 percent after they are retired and junked. So even if automakers could produce dramatically lighter and more fuel-efficient cars, so long as they are free to produce automobiles without limit, more cars will just mean more pollution, even if they are hybrids or plug-in electric cars

    To further confound green hopes for an electric-car tech fix, it turns out that electric cars could be even be more polluting than the current generation of gasoline-powered cars. That’s because electric cars are only as clean as the fuel used to produce the electricity they run on. And in the real world, plug-in electric cars are in most countries largely coal-powered cars and likely to become increasingly so. Thus, paradoxically, in the real world of today, gasoline-powered cars produce fewer emissions than electric cars. Scientists at Oxford University recently modeled projected emissions from battery electric vehicles given different power generation mixes and concluded that if countries like India and China powered their automobilization booms with battery electric vehicles, this would be actually produce more CO2 emissions than if they did so with conventional petroleum-powered vehicles. That’s because coal is the dirtiest of fossil fuels, far dirtier than gasoline. But, according to the International Energy Agency (IEA), the share of coal used for global electricity generation is likely to grow. According to the IEA, in 2006, coal accounted for 41 percent of electricity generation fuel, natural gas 20 percent, hydropower 16 percent, nuclear 15 percent and ‘other’ (including renewables) 2 percent. By 2030, the IEA predicts that coal’s share will rise to 44 percent of electricity generation, gas will account for 20 percent, hydropower 14 percent, nuclear 10 percent, with ‘other’ rising only to 9 percent. And because oil is slated to run out long before coal, coal’s share could rise further. So electricity generation is likely to remain a dirty business for a long time, and, indeed, the share of electricity generated by the dirtiest fuel, coal, is likely to increase.

    Finally, if we turn to the actual production of electric vehicles, it turns out that this process is heavily polluting as well. That’s because producing those nickel and lithium batteries, mining the iron and copper and rare earths that go into the motors and controls, not to mention the barely discussed problem of what to do with all the millions and eventually billions of large, toxic, worn-out batteries that have to end up somewhere, creates somewhat different resource consumption and pollution problems from those of gasoline and diesel engines, but by no means fewer problems. For example, each of the 1 million Priuses that Toyota sells in the United States has a battery that contains 32 pounds of nickel. Just the production of that one car, at current rates, is said to consume fully 1 percent of all the world’s annually produced nickel. And the mining and smelting of nickel is one of the most polluting of all industrial operations. Norilsk Nickel, a Russian company in northern Siberia, is the world’s largest producer of nickel and largest smelter of heavy metals. According to, Norilsk is the seventh-most-polluted industrial site on the planet. The city (founded as a slave labor camp under Stalin), where the snow is black, the air tastes of sulphur and the life expectancy of workers is 10 years less than the Russian average, is one of the most unhealthy places in an unhealthy country. Production at that plant has poisoned the soil for 60 kilometers around the plant. Local adults and children suffer from numerous respiratory diseases, cancer, etc. A Norwegian government study reports that Norilsk’s sulfur dioxide emissions (2 million tons a year) produce acid rain around the Arctic circle. The company also discharges large amounts of copper and nickel – as well as cobalt, vanadium and other metals – into freshwater lakes and streams. And much ends up in the Arctic Ocean. And that’s just the nickel. Lithium mining is another nightmare. And then there’s the ‘rare earths’ nightmare.

    In short, efforts to decrease air pollution by getting ‘old, polluting’ cars off the road only to replace them with new, ‘cleaner’ cars can be misguided because such efforts have typically focused on pollution emitted solely during the driving stage and thus have missed 60 percent of the problem. Also they have tended to overlook the pollution resulting from electricity generation. Seen in this light, I would not be surprised if the most ecological and efficient cars on the planet today are not those Toyota Priuses or Chevy Volts with their estimated 10-year lifespans but those ancient Chevrolets, Oldsmobiles and Fords cruising around the streets of Havana. For even if their gas mileage is lower than auto producer fleet averages today (which is by no means certain), they were still only produced once, whereas American ‘consumers’ have gone through an average of seven generations of cars since then, with all the manufacturing and disposal pollution that entailed. Surely an ecological society has to come up with cars, gas or electric or whatever, that that can be rebuilt, reused, upgraded and completely recycled when it’s most rational to do so instead of just crushed every few years so new ones can be sold.” ~ Richard Smith

    • Allan H says:

      Greed preying on a self-indulgent population has never been a good way to run a society.

      • A very good point Allan, but I don’t really believe society is “run” as if there were some kind of puppeteer controlling things. I think society, more or less, just happens. Society is controlled more by fate than anything else.

        I know such a statement will generate wild disagreements, people telling me about the Capitalist and Communists and all that. But these things just happen also.

        I am not going to argue this point, because it cannot be explained in a world where people believe free will is a given. I will just leave it here and let people disagree to their heart’s content.

        • Caelan MacIntyre says:

          Unsure about others, Ron, but I agree. A natural complex dynamic/emergent property, yes? In which case, we are likely indeed headed for collapse/die-off, bound as we are, to the laws of physics, chemistry, biology, psychology.

        • John B says:

          So the next time someone gets caught robbing a bank, they can just tell the Judge that it was fate, and not free will.

          I doubt if that would go over well with very many Judges.

        • Sam Taylor says:

          Complex systems often spontaneously organise. Life appears to have ‘just happened’, too. For a complex society to also spontaneously self organise is less of a leap, in my book. I’m not sure whether or not we have free will would make all that much difference anyway. Especially when you get into the neuropsychology of it.

          • Doug Leighton says:

            Bull Shit: Life didn’t ‘just happened’. Gaia was our Mother; creator of Earth and the Universe got tossed in later. Subsequent gods were born because she was sleeping with Uranus and we came about ‘way after all that. Didn’t you learn ANYTHING in school?

            • Cave Bio says:

              Doug, this may be the best post I have read on this blog!


            • Allan H says:

              And she will slap us all down for being bad caretakers of her creation. We apparently do not appreciate all she gave us.

            • Fred Magyar says:

              Sorry Doug, you are wrong! What you are saying is pure blasphemy! Repent now and the Rainbow Snake Goddess might let you live, otherwise she will swallow you and then excrete you into the bowels of the earth for all eternity!


              Australian Fertility God/dess
              Also known as ALMUDJ, KALSERU
              The Great Creator Serpent

              In charge of Fertility, Growth and Refreshing Rain.

              The RAINBOW-SNAKE is a bit of a mish-mash, with a kangaroo’s head, a crocodile’s tail and a python’s body, all decorated with water lilies and waving tendrils.

            • Sam Taylor says:

              I stand corrected.

    • John B says:

      Sounds like Havana needs to get with the program.

  28. Ronald Walter says:

    Airbus A320 crashes again. Bad computing, doesn’t know if it is flying or landing.

    When does the mass exodus to Patagonia begin?

    Or, will it be back to Kentucky?

  29. Don Westlund says:


    A quick comment on inventory levels.

    It seems like every day we hear comments in the MSM about US inventory levels reaching maximum levels and crude prices will plunge when this happens. What about global inventory levels? Are they building or decreasing? They have actually been decreasing. Here is research note out today from Energy Aspects which is an energy research firm out of London:

    “The strength in demand that has been visible seen December persisted into February. So, despite the pick-up in supplies, particularly non-OPEC output from the US, global inventories still drew.”

    “OECD stocks drew driven by products, while India and Saudi Arabia destocked heavily, offsetting builds in China as new NDRC guidelines resulted in smaller refineries raising imports to meet the mandate. Heavier than usual refinery turnarounds in India resulted in a sharp compression in imports, which meant crude stocks fell by nearly 0.5 mb/d m/m. Saudi Arabia produced 9.6 mb/d, lower m/m, but raised exports by destocking.”

    Demand is possibly running much higher than people realize!!

    Don Westlund

    • Jeffrey J. Brown says:

      Steven Kopits’ staked out a pretty lonely position regarding the outlook 2015 supply and demand (total liquids basis), and I thought it very interesting that Art Berman has an article on increased consumption that is quite supportive of Steven Kopits’ (January, 2015) article on supply less demand:

      World oil demand increased by 1.1 million barrels per day in February

      This is a potentially important data point that suggests a crude oil price recovery sooner than later. It is also important because it further supports the view that a production surplus and not weak demand is the main cause for the recent oil-price fall.

      The latest data from EIA shows that February world liquids production was flat with January but consumption increased 1.1 million barrels per day. This reduces the relative production surplus (production minus consumption) from 1.68 million barrels per day in January to 0.56 million barrels in February.

      Steven Kopits’ (January, 2015) outlook for global supply less demand:

      Supply Minus Demand, Explained

      Kopits’ chart (Prienga is Kopits’ forecast):

      • Dennis Coyne says:

        Hi Jeff,

        In my opinion Berman’s and Kopits analysis looks very good. This looks more like a problem of excess supply rather than weak demand, I assume you agree as you have posted this several times. You often mention that Kopits or Berman have this or that opinion, but you usually do not explicitly say that you share their view.

        • Jeffrey J. Brown says:

          Steven’s scenario seems reasonable to me, but I with a caveat. Following is a copy of one of my Econbrowser comments:

          Having noted Steven Kopits’ continuing track record of being remarkably prescient regarding global oil supply and demand analysis, I do have one issue with global supply & demand analysis–consumption in net oil exporting countries versus consumption in net oil importing countries, to-wit, to paraphrase “Animal Farm,” in my opinion some consumers are more equal than others.

          Let’s assume a scenario where all oil production and refining operations are in oil exporting countries and let’s ignore things like refinery gains. Total petroleum liquids production is 80 mbpd and consumption in the oil exporting countries is 40 mbpd, and they therefore net export 40 mbpd to oil importing countries.

          Production rises by 2.5 mbpd in the oil exporting countries, so total supply increases from 80 mbpd to 82.5 mbpd. However, consumption in the oil exporting countries rose by 5 mbpd. So, Net Exports = Production – Consumption = 82.5 mbpd – 45 mbpd = 37.5 mbpd.

          My point is that a global supply and demand analysis would not accurately represent the situation in the net oil importing countries, i.e., a 6.25% decline in the supply available to net importers (40 mbpd to 37.5 mbpd), although global supply is up by 3.125%, 80 mbpd to 82.5 mbpd.

          Of course, the crux of what I call “Export Land Model” or ELM, is that for a number of reasons (subsidies, proximity to production, legal restrictions, etc.), consumption in oil exporting countries tends to be satisfied before oil is exported.

          Interesting enough, the case histories tend to show that regardless of how oil exporters treat internal consumption, given an ongoing production decline, the net export decline rate tends to exceed the production decline rate and the net export decline rate tends to accelerate with time.

          For example, Indonesia subsidizes petroleum consumption and the UK heavily taxes petroleum consumption, but both former net oil exporters showed accelerating rates of decline in their net exports (in excess of their respective production decline rates).

          Here are the ELM Mathematical Facts of Life:

          Given an ongoing production decline in a net oil exporting country, unless they cut their domestic oil consumption at the same rate as the rate of decline in production or at a faster rate, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with time. Furthermore, a net oil exporter can become a net oil importer, even with rising production, if the rate of increase in consumption exceeds the rate of increase in production, e.g., the US and China.

          The (2005) Top 33 net exporters showed a slight increase in production from 2005 to 2013, from about 62 mbpd to 63 mbpd (total petroleum liquids + other liquids, EIA), but their rate of increase in consumption exceed their rate of increase in production and their combined net exports (what I call Global Net Exports, or GNE) fell from 46 mbpd in 2005 to 43 mbpd in 2013.

          Furthermore, China and India (“Chindia”) consumed an increasing share of a post-2005 declining volume of GNE. What I call Available Net Exports (ANE, or GNE less Chinidia’s Net Imports, CNI) fell from 41 mbpd in 2005 to 34 mbpd in 2013.

          Here’s the Available Net Exports problem:

          Given an ongoing decline in GNE–and it’s when, not if–then unless the Chindia region cuts their oil consumption at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE will exceed the GNE decline rate and the ANE decline rate will accelerate with time.

          From 2005 to 2013, GNE fell at 0.8%year. From 2005 to 2013, ANE–the supply of Global Net Exports of oil available to importers other than China & India–fell at 2.3%/year.

          • Dennis Coyne says:

            Hi Jeffrey,

            Let’s take Saudi Arabia as an example. 2013 GDP was roughly 750 billion dollars. Net exports were about 3.3 billion barrels and the average oil price was about $108/b for revenue of 356 billion dollars or about 47% of GDP.

            For simplicity let’s assume real GDP does not increase or decrease, but that oil consumption increases by 4 million barrels per day, output remains at 2013 levels and that net exports fall by 4 Mb/d so that annual output is now 1.8 billion barrels. If we assume other sectors of the economy have not grown since 2013, then oil prices would need to increase to $198/b in order for Saudi Arabia to maintain its GDP.

            If the oil price was this high Saudi Arabia would be more likely to reduce domestic consumer oil subsidies as the opportunity cost of wasteful oil use domestically would be much higher.

            Or if they did not, and oil prices actually rose to these levels, a transition away from oil would be much more rapid.

            It certainly seems that the export land model also points to an increase in oil prices, perhaps more so than Steve Kopits’ model.

            • Dennis Coyne says:

              Hi Jeff,

              2013 levels and that net exports fall by 4 Mb/d so that annual output is now

              annual output should have been net exports are now….

    • Ronald Walter says:

      The demand for Whiting Oil is extremely low.

  30. SAWDUST says:

    In the US alone something like 10,000 people reach retirement age every day. Not that they all retire the day they turn 65. Globally demographics has got to start eating into oil demand at some point. I’m just wondering if what appears to be the issue of oil being not affordable above $100 or say above $120 is actually just demographics playing it’s roll in demand destruction and maybe oil is in fact affordable at $120 or above but there is just less demand from an aging population. Any ideas, thoughts, information,or any good links to how global demographics is impacting oil demand?

  31. Watcher says:

    Just to avoid an impression of consensus, remaking a case . . . . not a subscriber to supply and demand.

    If you want to believe in supply and demand as definitive of price, you have to address all the many items of evidence in your face to the contrary. You pay specified price for 99% of your purchases regardless of the supply of that item you see right in front of you on the shelf.

    But more powerfully, how can one possibly think that this supposed “law” can mean anything when the measurement device itself (dollar) is not in any way constant with respect to almost anything at all. Not only does it float against other currencies day to day, but it is also printed somewhat whimsically in amounts of 4 Trillion over the past several years with no commensurate measure of what it is supposed to be aligned with.

    Meaning, one used to raise or lower the amounts of dollars to keep pace with growing or not so growing economy. Now it is raised to try to induce reaction of economy. There is no science behind this. This is just smart people flailing and trying things to get improvement.

    So . . . how can you possibly be looking for some meaningful causation for price when price itself is a corrupted word.

    • SAWDUST says:

      True there is no market for true price discovery. All markets and prices are completely distorted by Central Banks. My guess is if true price discovery where allowed to happen. If you live in a $200,000 home you’d fined it to be worth about $50,000-$60,000. S@P 500 would be at around 400 or less. The Dow would be under 3000 and who knows where oil would be in a free market. I have to assume true price discovery isn’t going to happen anytime soon nor will there be free markets anytime soon. Demographics however will have an effect on demand.

      • Watcher says:

        Don’t know how old you are. 40 yr olds do not sell their house and buy an RV and spend their hours driving around the US. This is not as clear as you think.

        • SAWDUST says:

          I don’t believe the average retiree buys an RV and spends their retirement years traveling anymore. Baby boomer gen is a lot larger than the gen-x. Baby boomers don’t have enough people coming behind them to buy all their assets at current prices much less ever increasing prices. Gen-x and millennials aren’t well off enough to do so. They can’t fill the gap with credit either. Central Banks are living on borrow time they can’t print their way out unless the just hand money out the the average people in the gen-x and millennial age groups with no obligations to pay it back. Demographics is what is going to kill demand. Wealth destruction due to demographics will kill demand is a better way of putting it.

          • Watcher says:

            Baby boomers don’t have enough people coming behind them to buy all their assets at current prices much less ever increasing prices.

            No RV funding then. Legit point.

            But there is Africa. 3% pop growth and a burning desire to catch up. Ditto China with their mid 20s million new cars a year bought, and pretty much all of them burn oil. And India.

            And hell, KSA and the other Mid East producers. Their consumption curves are steep.

            I got no connection to mazama but they have evolved to be my fave display site They put everything relevant on one graph. Look at those black lines sloping up for China, India and KSA. Zero recession moderation.

            Oh, and sashay over to Indonesia. They learned NOTHING.

            • SAWDUST says:

              China has a really large older population. Their screwed demographically as well. The one child policy they held for so many years also has a baked into the cake drastic population reduction coming with it as well.

              • Watcher says:

                Maybe. I know some Chinese. The mechanisms for dodging the one child thing are many.

                If you spend a few years in Hong Kong (or Macau), you can have an extra kid or three. If you emigrate to Africa, and a ton are, you can have all the kids you want.

                And if you’re an old dood and never had a car before, and now can have one, you will. And you’ll drive it. A lot.

                • SAWDUST says:

                  I don’t think there are enough resources on this earth for the vast majority of nations,specially the larger ones like China and India to have a middle or even lower middle class lifestyle thats comparable to the middle or lower middle class lifestyle of a US citizen. Lifestyles are going to experience a drastic decline globally.

                  • Watcher says:

                    Their goal must necessarily be to achieve parity. Or superiority.

                    If the pie isn’t big enough for that, they take someone else’s slice. It is the obvious inevitability of intent and makes the goal of parity easier because the target declines.

                  • clueless says:

                    Nobody ever lists the resources that the US has ready access to that China or India do not have. Land? Wood? Iron ore? coal? limestone (for cement)? fertilizer – nitrogen, phosphorus, potassium? water? People (every corporation says our people are our most valuable asset)? Sunlight? Wind?
                    Don’t list fossil fuels since most here think they are being replaced with renewables.
                    Personally, I think that there are more Chinese living a middle class lifestyle than in the US [numerically, not % wise]. Maybe I am the only one who watched the Olympics in China. Check out the number of Chinese taking foreign vacations versus the number of Americans this year. Check out new autos purchased in China the first 2 months of this year. Why is it so much larger than in the US? I guess that is because they are having a disaster this year – only 7% growth. We are hoping for the best year in over 8 years with maybe 3%. What am I missing when I read these things?

                  • John B says:

                    There are more honor students in China, than the total number of US students.

                  • Fred Magyar says:

                    Clueless says:

                    Check out new autos purchased in China the first 2 months of this year. Why is it so much larger than in the US? I guess that is because they are having a disaster this year – only 7% growth. We are hoping for the best year in over 8 years with maybe 3%. What am I missing when I read these things?

                    For starters you are missing what 7% per year growth actually means. It means that if such growth were real and it could continue for the next ten years, then within a decade China will have doubled the size of it’s economy.

                    Which, if you understand what doubling in an exponential function means, is that China, will, in the next ten years need to consume twice as much of everything they have ever consumed to date over their entire economic history.

                    Color me extremely skeptical but I highly doubt that is possible! You can try the chessboard experiment with grains of rice if you doubt what I’m saying.

                    If peak oil is a reality then there is absolutely no way in hell that China or anyone other country for that matter can continue to grow their economy at 7% per year. That just ain’t possible!


      • clueless says:

        Can you even define Central Banks? Like in my area of the country, 90% of the working people have jobs at Central Banks and they make their living trying to screw the few of us that have real jobs. They control housing prices, car prices, food prices, clothing prices – well the price of everything. And the truly remarkable thing is, no one in this area ever met a Central Banker – but they are mysterious: they disguise themselves as teachers, policemen, firefighters, office workers, sales clerks, etc., but we all know better. They are really Central Bankers who’s mission it is to make everything cost 4 times the true market discovery price [they even themselves will pay 4 times what everything is worth just so that they look to us as being regular people]. But, we know that they are out there screwing us every time we pay $1 for a burger at McDonalds. [Okay, enough joking around, they all work at Starbucks].
        From ashes to ashes. From dust to sawdust. (Is that right? Maybe its from Central Bankers to sawdust.)

        • Ronald Walter says:

          If the worms don’t get us, the buzzards must.

        • SAWDUST says:

          Clueless, China’s high growth rate depends on massive, truly massive amounts of money printing or credit creation. China’s credit creation or money printing amounts to more than the FED,ECB,BOE and BOJ combined! China’s banking system has increased from around $4 trillion to around $28 trillion. In seven years! While their economy has only expanded $5 trillion. So they spent about $20 trillion and only got a $5 trillion larger economy for their efforts. If you believe China is actually growing at 7-8% i have some oceanfront property to sell you.

          China’s demand will fall off Seneca Cliff when this bubble pops. If you understand peak oil then you understand these credit bubble created in the wake of 2008 are all going to pop and no amount of credit creation or money printing can change that.

          • clueless says:

            Their wealth creation comes from being a net exporter. They have a sovereign investment fund with hundreds of billions of $. They purchased and own billions of $ of US Treasury bonds. Their consumers are less in debt than US consumers. No 72-month car loans there, and most homeowners have much more equity in their homes. I do not think that your economics computes. In the US you say that Central Bankers are causing you to pay 4 times what a house is worth. Presumably, that occurs because of money printing??? Well if China is printing more than the rest of the world combined, I would guess then that you think the Chinese are paying 10X? 15X? more than what houses and cars there are worth. But, you can go to China and find an equivalent house to yours for less money and have enough left over for a live-in maid? Look at pictures of their major cities circa 1990, and compare them to pictures now. Unbelievable growth. Compare them with pictures from Detroit, Cleveland, St Louis, Buffalo, Gary Indiana, Philadelphia, Pittsburgh, Cincinnati, etc. The US has almost 50 million people on food stamps, about 15% of the population. I wonder if China has 180 million people on food stamps.

            • Fred Magyar says:

              I wonder if China has 180 million people on food stamps.

              You are right. China is a fucking paradise!

          • Watcher says:

            OTOH Japan has held things together via printing for 20 yrs.

            • SAWDUST says:

              Watcher, Just as soon as any of these countries experience not being able to meet their respective oil needs. Be it not enough diesel or, gas or whatever. Anything thats kicked the can and gotten them through the past 20 years isn’t going to work anymore. It doesn’t matter how much debt you create out of thin air. If no supplies are available for you then it’s like the “Soup Nazi” except it’s the “Oil Nazi” NO OIL FOR YOU!!!

              Clueless, They can’t sell their US treasury bonds without blowing up their own economy. Those bonds are the grease that keeps the wheels turning. China’s corporate debt is over 200% GDP. China’s wealth is tie up 75% in real estate. Watch what happen to their real estate market. In order to hold off the bubble bursting for just a little while longer interest rates will be progressively cut to zero. They just getting started. China is experiencing massive outflows of money currently. They will end up devaluing 30% to the dollar before their done. China’s in a situation where credit money can no longer drive their economy forward as their at over capacity in every area of their economy. More credit money would just drive more non productive investing which leads to credit collapse which is where China is headed.

              China and the US are both head for a huge malinvestment bust! Due to easy credit.

              Another point i’m going to add is when these credit fueled bust occur it will be different this time. Every economic downturn before peak oil. The economy always eventually came back. It won’t work that way after peak oil.

  32. ezrydermike says:

    from Deborah Lawrence at Energy Policy Forum…

    “The shale debt redux is yet another indication that this business model has problems. The shale game cannot be kept going without continuous and breathtaking amounts of cash. Kepler Chevreux recently stated that US shale and Canadian oil sands account for about 18% of global production. They also account for approximately 50% of global CAPEX. So if shales and oil sands really are our energy panaceas, then hold on because prices are going through the roof for anything using crude or natural gas in the coming decades. Costs have simply gotten too high and there is no reason to think that they will abate.”

    • Watcher says:

      Which doesn’t have to matter. If you seek to destroy an enemy, you don’t worry about costs. Costs are pieces of paper you can redefine with the wave of a hand.

      Similarly, if you seek to feed your populace, you will also do whatever it takes to get the oil to the refinery. When desperation arrives, and it soon will, pieces of paper will be made to mean whatever someone says they mean.

      • Kam says:

        “When desperation arrives, and it soon will, pieces of paper will be made to mean whatever someone says they mean.”
        You’re talking about confiscation of private wealth? Governments will confiscate private wealth to relocate it into oil extraction? It is possible, but it will destroy the rest of the economy. On the other hand, lack of oil would also destroy the economy 🙂

        • Watcher says:

          It’s not rocket science. If you HAVE to have it, and you do, whatever it takes will be the measures pursued.

    • Sam Taylor says:

      18%? Depending on your definition that’s in the region of 14 (C+C) to about 18(all liquids) mbpd. US shales are putting out maybe 4.5mbpd, canadian tar sands perhaps another 3. Where the hell did the 18% figure come from?

      • ezrydermike says:


        So I did a bit of google research wrt Kepler Chevreux and I’m pretty sure the 18% figure should be 18% of global oil production, not” US shale and Canadian oil sands”, so Ms. Lawrence got that wrong.

        Makes me want to through the rest of the article out.

  33. Cave Bio says:

    Hi Dennis,

    I am responding to your post above here:

    You stated I think the explanation that Ron gave is correct. Saudi Arabia is making a political statement.

    Ron’s argument may be correct. But that begs the question, how can they afford to do it? (I don’t mean just dollars here. You made the same financial point that I made further up thread. They are shooting themselves in the foot financially.) What I mean is they are pumping all out, just to make a political statement, and taking a dollar hit at a time in which we all assume they are on the verge of terminal production decline. Remember when you did the HL for me with data up through 2005 and then data up to 2013? They are behaving as if that HL curve can be extended outward for sometime to come. It is so obvious, and I fear our beliefs are getting in the way of deciphering reality as it plays out around us.


    • Strummer says:

      “But that begs the question, how can they afford to do it?”

      They know that even though they are approaching a terminal decline, everyone else is even worse off with regards to reserves, marginal costs and decline rates. They can afford to make that statement because they know others can’t.

    • Jeffrey J. Brown says:

      Saudi ratio of production to consumption (ECI Ratio), for 2002 to 2012. As referenced up the thread, based on the 2005 to 2013 rate of decline in the Saudi ECI ratio, I estimate that they have already shipped, through 2013, about 40% of their post-2005 CNE (Cumulative Net Exports), with an accelerating rate of depletion in remaining post-2005 CNE.

      • Are you including the crude refined in Saudi arabia to make exportable products? They seem to have a huge petrochemical industry.

        • Jeffrey J. Brown says:

          The ratio shown is total petroleum liquids + other liquids production divided by total liquids consumption (EIA). I’m not sure how petrochemicals per se are treated. However, following is my “Refinery Land” model:

          I’ve used the following example to illustrate the differences between gross and net exports:

          Production Land (P) has 2.0 mbpd of production, but no refining capacity.  Refinery Land (R) has 2.0 mbpd of refining capacity, but no production.

          Ignoring refinery gains and other minor issues, P has consumption of 1.0 mbpd, and R has consumption of 1.0 mbpd. 

          P’s gross exports to R are 2.0 mbpd. R’s gross imports from P are 2.0 mbpd. 

          R refines 2.0 mbpd, consumes 1.0 mbpd, and exports 1.0 mbpd of refined product to P. 

          P’s net exports are production (2.0) less consumption (1.0) = +1.0 mbpd. 

          R’s net exports (actually net imports) are production (zero) less consumption (1.0) = -1.0 mbpd.

          Alternatively, you get the same answer if you define net exports as gross exports less gross imports.

          • Cave Bio says:

            Yes Jeff, I know. I have followed your analysis for years. It is very compelling. We actually had this same conversation back in October. Your analysis only makes the behavior of Saudi Arabia that much stranger.

            First let me say this. It would not surprise me one bit if tomorrow Saudi production began to decline. I am not a “cornucopian”. I am an empiricist and for me data trumps all.

            So, what has surprised me is the fact that Saudi production has not started to decline yet. That is not an easily dismissible fact! So my question to you and Ron and Dennis is, if next year or the year after they are still pumping at close to 10,000,000 barrels per day, do we begin to adjust our thinking that at least some of our underlying assumptions about Saudi Arabia are incorrect. At what point do we revisit our ideas?


            • Caelan MacIntyre says:

              You can find out about a distant planet indirectly, such as by its star’s wobble.

            • toolpush says:


              Saudi seems to be running out of rabbits to pull out of the hat. Manifa is the last of the big known fields to be brought on line. Shaybah, has a 250mbopd expansion to come online next year, to bring it up to 1mmbopd capacity. Simmon’s also claimed that Shaybah would ever reach that level. It may or may not, but it will be the last expansion for Shaybah.
              Khurias, is also in for an expansion, but it is the dregs of the field.
              After that? Shale? Find and produce gas, to free up oil for export?
              Where are those bunnies when you need them?



            • If Saudi started pumping 12 million barrels per day then I would figure I had made some wrong assumptions. But I would not at all be surprised if they were still pumping 9.5 million barrels per day three years from now. They have recently brought on line three super giant fields.

              These fields combined produce somewhere between 3 and 3.5 million bpd and can continue to produce this amount for many years. That only leaves about 6 million barrels per day for all the rest of their other super giant fields combined.

              These other fields will definitely start to decline in the next few years. But they may be able to go with current production for a few more years.

            • Jeffrey J. Brown says:

              Following is a slightly edited copy of one of my comments up the thread. At the 2002 to 2005 rate of increase in Saudi C+C production, they would have been up to about 18 mbpd in 2013.

              Saudi Arabia produced 7.6 mbpd of C+C in 2002, when Brent averaged $25, and they increased production to 9.6 mbpd to 2005, as Brent hit $55.

              As annual Brent crude oil prices averaged $110 for 2011 to 2013 inclusive, Saudi Arabia had average C+C production of 9.7 mbpd, basically the same production level as 2005 (well within the margin of error in the data).

              A plausible explanation would seem to be that all the new production they put on line only served to offset declines from existing wells, and they were not able to increase production sufficiently to offset increased domestic consumption, resulting in the post-2005 decline in Saudi net exports.

              In any case, my continuing point is that a focus on the top line number, production, for oil exporting countries is misplaced.

              As I have noted several times, as the production from the Six Country Case History increased slightly from 1995 to 1999 (by 2%), they had already shipped 54% of their post-1995 CNE (Cumulative Net Exports).

            • Jeffrey J. Brown says:

              And by definition, it’s not whether, but by what percentage that Saudi Arabia has depleted their supply of post-2005 CNE (production data in following chart are total petroleum liquids + other liquids, EIA).

            • Dennis Coyne says:

              Hi Tom,

              As I have explained elsewhere, I do not expect Saudi output will decrease next year, I think they may be able to maintain flat output for a few more years, the longer they maintain this plateau, the steeper the decline when it finally arrives.
              Jean Laherrere’s estimate is roughly 436 Gb of 2P reserves for OPEC (excluding Orinoco belt extra heavy oil) at the end of 2014. This assumes no discoveries and no reserve growth after 2010, an exceedingly conservative assumption.

              If we assume about 50% of the 2P reserves are developed producing reserves, then the extraction rate is about 5% for OPEC. It is likely that this extraction rate could be increased over time to keep OPEC output on a plateau.

              For comparison the US extraction rate in 2014 was about 14% of producing reserves were extracted. (3.15/21.9) For the World the extraction rate was approximately 7% of estimated producing reserves.

              There is still some room for OPEC to raise extraction rates, if they do output will not decline in the near term, for the World I expect decline by 2020. If my URR estimate of 3000 Gb of C+C is too low, and the USGS estimate of 4100 Gb of C+C is correct, then decline may not occur until 2025. I think the USGS estimate is too high and believe the URR will be between 3000 Gb and 3600 Gb with my best guess as 3300 Gb (including 500 Gb of extra heavy oil.)

          • could you sketch that on a piece of paper, take a picture and stick it somewhere? I can’t follow it and be 100 % sure I know what you mean.

            • Jeffrey J. Brown says:

              I assume that you were replying to me. I’ll answer in the form of questions.

              Let’s assume that we only have two countries, and let’s ignore refinery gains:

              Assume that a producing country has production of 2 mbpd, and no refining capacity, with consumption of one mbpd, what are the net exports?

              Assume that another country has no production, but refining capacity of 2 mbpd, with consumption of one mbpd, what are the net imports?

              • Hell I don’t know. It depends on whether you use refinery capacity or not. Are you assuming the refineries are running 100 %?

                • Jeffrey J. Brown says:

                  Yes, and as noted up the thread:

                  The producing country’s net exports are production (2.0) less consumption (1.0) = +1.0 mbpd.

                  The refining country’s net exports (actually net imports) are production (zero) less consumption (1.0) = -1.0 mbpd.

      • marmico says:

        The declining KSA ECI ratio is meaningless. KSA net exports by volume were higher in 2012 than in 2002.

    • Dennis Coyne says:

      Hi Cave Bio,

      There is the possibility that the Saudis and other OPEC members think they should just get the money while they can. They also may believe they can continue to keep their output at present levels for many years, they know better than me what their fields are capable of.

      They also may believe that oil prices at $100/b or higher will speed the transition to other forms of transportation (EVs, rail, light rail, and buses on overhead wires.) I expect that they wanted lower oil prices, but I think they were probably hoping for $60 to $80/b. They probably believed that LTO output would fall faster than it has so far.

      Jean Laherrere has cumulative OPEC output at about 460 Gb in 2010. Through 2010, cumulative OPEC discoveries (excluding Orinoco belt) were about 940 Gb, which leaves about 480 Gb of OPEC 2P reserves at the end of 2010. From 2011 to 2014 roughly 44 Gb of oil was produced by OPEC (at 30 Mb/d each year) which leaves about 436 Gb of OPEC 2P reserves. There will undoubtedly be some reserve growth, but for now we will assume this will be zero (an unrealistically conservative assumption).

      We will assume only half of the 2P reserves are developed producing reserves (218 Gb), about 11 Gb are produced each year which implies an extraction rate of 5% for 2014 (11/218*100).

      If Jean Laherrere’s estimates are accurate (and I believe that if they are not, they will prove too low rather than too high), then a Seneca cliff fall in OPEC output at a 5% extraction rate is highly unlikely.

      A more likely scenario is that OPEC will continue to gradually increase the extraction rate and that output will either remain on a plateau or it will peak within 5 years and then gradually decline.

  34. Watcher says:

    Oh and btw, re conspiracies. Whiting, in addition to its secondary offering, is also doing a private placement of $1 billion+ of refinancing debt, and they are doing it through JPM.

    In March of 2008, JPM worked with the Federal Reserve Bank of NY to lend money to Bear Stearns.

    • shallow sand says:

      Looked at SEC 10K for Whiting for 2013 and 2014. Very quickly can arrive at following BOE per day figures:

      In 2012 Whiting averaged 82,734 BOE per day of production. Their OPEX, production taxes and
      G & A expense was $21.73 per BOE. They spent $67.27 per BOE in CAPEX. Total funds spent per BOE, pre income taxes and interest, $89.00 BOE.

      In 2013 Whiting averaged 93,973 BOE per day of production. Their OPEX, production taxes and G & A expense was $23.11 per BOE. They spent $67.05 per BOE in CAPEX. Total funds spent per BOE, pre income taxes and interest, $90.16 per BOE.

      In 2014, Whiting averaged 114,521 BOE per day of production. Their OPEX, production taxes and G & A expense was $22.18 per BOE. They spent $66.99 per BOE in CAPEX. Total funds spent per BOE, pre income taxes and interest, $89.17 per BOE.

      This is remarkable consistency. Please note that larger percentage production increase from 2013 to 2014 resulted from Kodiak acquisition.

      So it looks to me that Whiting Petroleum needs to realize per BOE prices of about $90.00 to “break even”. Today I estimate they are being paid about $33-$35 per barrel for crude and about $15 per BOE for natural gas and products. So they are realizing about $30 per BOE, or right at 1/3 of what they need to break even.

      However, it appears to me interest expense per BOE is about $6. To retire long term debt at a constant rate over a 60 month term, assuming the production growth of 12 % per year would add another $16 per BOE.

      It should be obvious from the above numbers why no one was interested in buying Whiting Petroleum in the current oil price environment. They are a very stable company in the sense that it appears their track record is 12-15% annual production growth at a cost of $90 per BOE, ignoring the effect of income taxes and long term debt. Throw in those items and the number goes up substantially.

      It is beyond my time available right now to determine what they need to spend per BOE to keep production flat, or achieve a 6% annual decline. That probably could be determined, however, with some time and some skill. My eyeball guess is $80 per BOE to keep production flat, which would mean they need WTI around $95 per barrel if gas stays where it is at. That, of course, ignores income taxes and long term debt retirement, which are obviously real expenses.

      • toolpush says:


        I wonder how long they can last selling their $90 oil for $30? Even with a good recovery in the oil price, with those numbers, it is going to be hard playing Ketchup, with all that money already spent?

        • shallow sand says:

          Toolpush: The shale economics at under $100 WTI have never made sense to me. I have displayed above how I look at the numbers. Seems pretty simple to me. Maybe I am looking at them the wrong way?

          Whiting seems to be a good proxy for what it takes to continue to grow or maintain US production. It looks like we need $100+ over the long haul. Many on here argue our economy cannot afford that, so here we are.

          I guess the way around the problem is to keep interest rates near zero and keep loaning more money to shale producers to drill more wells? I cannot understand how Whiting is able to float more bonds. Will be interesting to see what the pricing is.

          If I can find time, will look up CLR, OAS and maybe some more, does not take too long to figure.

          For all: I am sorry I said I was through here and then almost immediately came back. I am finding maybe a half hour or so here a day is probably not a bad thing for me, my family and the collective sanity of that group.

          • shallow sand says:

            Sanity being descriptive, not actual. Doing fine, just still wondering if and when oil price will turnaround.

            • Dennis Coyne says:

              Hi Shallow Sand,

              I am glad you are back, I wish Old Farmer Mac would come back as well, but the fact that he was being called a Nazi by Futilitist and nobody (including me) called Futilitist out on this.

              Hopefully trying to shut down conversation through grossly impolite behavior will not be the way this blog continues to operate, some behavior should not be tolerated.

              Keep up the good work and I hope oil prices turn around, my WAG is that we should see them start to move in May or June and hopefully we will be at $75/b by the end of August and possibly $80/b before fall refinery maintenance begins (mid October ?).

              I also think that the economy can handle $100/b, it did from 2011 until mid-2014 with the World economy growing at 3% per year, output just rose faster than demand at that price, $80 to $90 per barrel might reduce the ups and downs a bit.

              • I have called Futilitist out a couple of times on his insulting language. But I am not a den mother here. But I can put up with only so much. If things get out of hand I will simply go away myself and take this blog with me.

                I don’t need this hassle.

                • shallow sand says:

                  Ron, I can understand your feelings about the bad behavior. I do not like it either. When I see a post headed the wrong way, I just skip over it. Do not have a ton of time anyway, so I try to focus on the posts that I find useful. Those with information as opposed to back and forth arguments are what I read. So, Dennis, I do feel bad that I have not responded to attacks on others, but in my case I usually scroll down once I see that coming on. Probably not a good excuse.

                  Hope we can all keep it civil to where you keep this blog going. I cannot find another with oil information and informed posters that comes close.


                  • Futilitist says:

                    Hi shallow sand.

                    My behavior is not bad. I was simply responding to Dennis’ bad behavior, and you know it.

                    This is what scapegoating looks like, folks.

                    People here just don’t want to admit that oil prices are never again going to rise above the total cost of oil production, resulting in the extreme downsizing of the oil industry.

                    Well, it isn’t my fault. Stop trying to kill the messenger.

                • robert wilson says:

                  I called him out by invoking Godwin’s Law

                  • Futilitist says:

                    What is the penalty for a breach of Godwin’s law? Death?

                    I plead not guilty.

                    Will there be a proper trial, or just a summary execution?

                  • robert wilson says:

                    My preference would be to ban the unruly children or at a minimum, limit them to one or two posts per day. The highest priority is to prevent the destruction of this valuable resource.

                  • robert wilson says:

                    “What is the penalty for a breach of Godwin’s law? Death?

                    Historically the technical answer was he who screams Nazi has lost the debate. Some might apply this to profanity.

                • Dennis Coyne says:

                  Hi Ron,

                  Sorry. My comment was uncalled for.

                  I just find Futilitist frustrating.

                  I guess I should just remember that resistance is futile…. and join the Borg collective 🙂

                • Futilitist says:

                  Hi Ron.

                  Dennis organizes a little scapegoating meeting about my behavior with respect to his horrific behavior during our debate about the validity of the Etp model. You see fit to immediately (40 minutes) jump in and endorse his position about me, and threaten to shut the site down. This is likely to result in my being shunned and attacked by everyone here. Nice job.



                  WHY DO YOU RUN THIS SITE THIS WAY?



                  It is hard not to notice that this little meeting is taking place where no one is watching, since there is a new Ronpost up and most everyone is there. Nice.

  35. Ronald Walter says:

    I suspect Whiting was buying Kodiak stock at low prices, 1.67, 1.92 usd, then after a while, knocked on Kodiak’s door one day and announced how much they had acquired, then made the offer for the remainder of the stock at x dollars.

    Kodiak said OK.

    Now those Kodiak shareholders who received Whiting common stock are crying in their beer, unless they took the cash.

    Kodiak began at 1.67, in that price range, grew little by little, had some monthly production in the 74,000 barrel range, at 89 in the early part of 2011 or so, can’t remember the exact time frame, doesn’t matter that much, if my memory is correct. Kodiak made some cash to the tune of some probably 7 million per month for a few months anyhow, which allowed the stock to climb to 10 dollars and maybe 11 for a few days, then all of a sudden, Whiting buys them out of the blue. Bought all of the calls, something, who knows?

    Probably didn’t happen that way, but it’s as good a guess as any.

    ‘A small investor is a chicken about to become a broiler’

  36. Donn Hewes says:

    I am thinking about the likelihood of the Seneca Cliff Ron mentioned in the post. I find the best way to consider something that is clearly a “shift” from what most would consider the normal trajectory is to think outside oil production and oil geology. Imagine what might happen to something you make or trade, or know about, if it suddenly experienced the pricing, costs, volatility and ultimately the drop in availability.

    I like to think of the roller coaster milk would be on if it’s prices had done anything like what oil did. Milk production would have sky rocketed. Every Mom and Pop operation would have gotten back in the cow business they love. The big boys would have just gotten bigger (way bigger). Of course the price wouldn’t stay up very long because people can only drink so much milk, but lets pretend it stay up over XXX for three or four years. I might milk a cow, you might milk a cow. Some would even borrow money to join in. of corse the big boys with leverage would borrow even more. No one would quit in a timely manor to preserve the water, the cow, their neighbors, the market, not even to prevent a world war. It seems likely to me that when the train stopped because we ran out of cows; It might stop with a jolt.

    This is what makes me believe some sort of cliff or sharks fin is definitely in our future.

    • candid says:

      Yep. Tight oil would be like milking silicone tits. Btw nd rig count is at 100 with 3 to stack.

    • Dennis Coyne says:

      Hi Don,

      In the real world different milk producers have different costs so the higher cost producers would stop producing and there would be a gradual reduction in milk output.

      What happens to the cows in your example, do they all die of some dread disease?

      A Seneca decline in oil output is very unlikely, chart below with crude plus condensate (C+C) ultimately recoverable resource (URR) of 3000 Gb (including 500 Gb of extra heavy oil). Annual decline rates are 2% per year or less.

      • Cracker says:


        They go where all no longer needed, or old, or sick, or hurt, or not producing enough milk anymore cows go. They go to slaughter for human or animal food. Over population of cows is rather quickly resolved by slaughter.

        One of many ugly truths most people don’t want to know about their food supply.


        • Dennis Coyne says:

          Hi Cracker,

          I just didn’t understand why all the milk producers would opt to quit the milk business at the same time, the example just didn’t seem to reflect the way I think the dairy business would operate, though admittedly I have never run a dairy farm (or even milked a cow).

          • Cracker says:

            I think Donn Hewes knows the dairy business. Production of some agricultural commodities can be ramped up and down quickly (one or two years, buy more cows and contract for more feed, add help, add more milking cycles). Some, like milk, are subject to seemingly rapid price (and cost) pressures that affect a significantly large number of the higher cost producers as a group, which means they change things about the same time.

            They don’t all change, but enough do to create shortages and oversupplies of a perishable commodity, which rapidly affects prices. Perishable products and fairly quick adaptability in the industry make fertile grounds for instability and price swings, unless something controls the reactionary nature of the market.

            In some ways, LTO seems more like one of these commodities, very different from the legacy production of C+C with its long term projects. Maybe the Saudis understand this and know it won’t take low prices very long to reduce LTO production volumes.

    • Futilitist says:

      Dennis Coyne says:

      “A Seneca decline in oil output is very unlikely, chart below with crude plus condensate (C+C) ultimately recoverable resource (URR) of 3000 Gb (including 500 Gb of extra heavy oil). Annual decline rates are 2% per year or less.

      It’s okay, folks, nothing can go wrong………go wrong……………go…..wrong………

  37. ezrydermike says:

    NREL Renewable Energy Data Book

  38. ezrydermike says:

    “Lawyers for the coal and electric power industries go before the Supreme Court on Wednesday hoping to block a strict new federal rule against mercury and other toxic air pollutants.

    Supporters say the rule issued by the Environmental Protection Agency will save lives, but industry groups complain it will cost $10 billion a year to implement, resulting in higher energy bills for consumers.

    The case is a key test of whether the high court will move to rein in the Obama administration’s ambitious regulations.

    At issue is whether the Clean Air Act requires regulators to weigh the cost of regulations against the expected benefit to the public health.

    In the past, neither the law nor the high court had said a cost-benefit analysis is required for new regulations. Congress told the EPA in 1990 to study toxic air pollutants and set emission standards that were “appropriate and necessary” to protect the public.”

  39. ezrydermike says:

    Elon Musk getting hyper-loopey?

    “A company behind the futuristic, high-speed transportation system fantasized by Tesla and SpaceX billionaire Elon Musk has leased warehouse space in downtown Los Angeles and is rapidly adding new workers to a staff of 20 full-time employees.

    Musk’s imaginary Hyperloop would use vacuum tubes to transport freight and passengers at speeds of 750 mph, racing from Los Angeles to San Francisco in half an hour. Until recently, it’s been little more than an idea.

    Now Hyperloop Technologies Inc., one company working on the project, has taken up residence for Hyperloop World Headquarters in a 6,500-square-foot industrial space in a gentrifying section of the Arts District.”

  40. SAWDUST says:

    Oil futures are at 48.20 after this mornings durable goods data showed a Negative 1.4% reading. This points to a bad 1st qtr GDP number on the way. Any bad economic data is dollar bearish going forward. Dollar is still up about 25% against most other currencies which will soon show up in corporate earnings. All those corporate buybacks that have taken place. They depend on good corporate earnings in order to service all the debt used to do them. The strong dollar will eat up the ability for corporate America to service it’s debts. There will be NO rate hikes. The talk is just smoke and mirrors. This is all positive for oil in my opinion. I’m not suggesting oil prices will lunch a skyrocketing recover from here. But with dollar weakness ahead the low in oil may very well be in.

  41. The North Dakota rig count just dropped to 98. More important rigs that are “Moving In Rigging Up” number just 2. It was four yesterday.

    • toolpush says:


      They obviously not “Moving In Rigging Up” , but “Rigging down and moving out?

      I think it maybe two Whiting rigs that have gone down, with another marked to be stacked. I am sure Whiting were 12 yesterday, they are now 10.
      I wonder if that has anything to do with their money raising? smiles


      It looks like they had planned to be down to 10 rigs by mid year in the Bakken. It will be interesting to see if they continue to drop rigs?
      Our rig count will go to 13 rigs by mid-year, 10 in the Bakken/Three Forks

      Whiting Form 8K 25 Feb 2015

      • Watcher says:

        Fairly important issue here.

        My counter theory to “when the price goes back up, output resumes” was “first, maybe it won’t go back up, but if it does go back up and all the lenders got stiffed, then the required price to get started again will be higher.”

        If these companies are going to choose to stiff their shareholders instead of their lenders, that is a whole new dynamic. It’s throat cutting, to pay off debt. Only executives and their salaries benefit from that.

    • toolpush says:

      All I can say is we all should be very grateful to have been born in the country that you were.

      • not clever says:

        Gratitude does not exclude honest reporting of unpleasant truths, nor attempts to change them, does it?

        • toolpush says:

          Not Clever,

          I am not disputing the honest reporting of these unpleasant truths. In fact I supporting them. Though I have not witnessed people being held behind bars, I have personally observed many situations where people may as well be called slaves. Bangladeshis get to work 2 year contracts in Singapore, but have to borrow money from money lenders to pay the agent to get the job. That payment and interest basically takes their normal wages. Leaving only any overtime as profit to live on and send home.

          Basically every country I work in, the agents charge the world for the labour services, yet the men that do the work, are always screwed. Shell tried their hardest to pay safety bonuses to the men.
          1st attempt paid agent, who did not pass the money onto the men.
          2nd attempt, dollar notes in brown envelopes paid on the rig. Customs found out and confiscated the money as the men hit the beach.
          3rd attempt, can’t remember, but they gave up on money.
          One night I visited a squatters camp in Cape Town. I was invited so security was ok. But it was a real eye opener to see how some people are forced to lived.

          None of these things I can change, all I can do is treat the people I meet and work with, with respect. I have no problems mixing and working with all the nationalities I have come across.

          But as I said above, it makes me grateful for the country I was born, as it is only a matter of chance where one is born and the therefore what opportunities are then available to them.
          And it pisses me off when I hear people born and living in first world countries that moan and groan about how badly off they are, when it usually comes down to them getting off their arses and using the resources available to sort themselves out.

  42. dmg555 says:

    Could someone clarify the terms 20 acre spacing, 2.5 spacing and 40 acre spacing for me?

    • shallow sand says:

      How many wells are drilled on a tract. In your example, 40 acre spacing, one well on 40 acres; 20 acre spacing, two wells on 40 acres; 2.5 acre spacing 16 wells on 40 acres.

      Just refers to producing wells, not injection wells. State regulations limit how many wells may be drilled on a particular tract, will usually depend on well depth.

    • MBP says:

      In the Jeffersonian land system, the, smallest “unit” is the section, which is a square of 640 acres, or one square mile. So in 40 acre spacing, there is one well for every 40 acres of land, or 16 wells per square mile. If it is allowed, you can request an increase of density for the wells to decrease it to 20 acre spacing, or wells every 20 acres for 32 wells per square mile.

    • MBP says:

      In the below image, the total area is one square mile. Each black square represents 40 acres and the green squares are the well placements on 40 acre spacing.

      • MBP lovely graph but that’s not the way they space the wells. They would put the pads all in a row and run the laterals, two miles long, all parallel to each other.

        The Million Dollar Way (The Bakken Oil Blog)

        Most wells are spaced at either 640 acres or 1280 acres in North Dakota. I refer to the horizontals as “short laterals” or “long laterals,” respectively. A short lateral is “one mile” long; and, a long lateral is “two miles” long. There are a limited number of super-long laterals (3 miles/3-section-long horizontals).

        • MBP says:

          This is an example of how conventional fields are usually spaced in the US. It was simply to illustrate to dmg555 what I meant by 40, 20 and 10 acre spacing. What is really complicated is when you put a horizontal down the middle of a row of older producers, really messes the spacing up.

        • MBP says:

          This is a 25 sq. mile area of Andrews County, Texas as an example (the lighter areas are well pads)

    • MBP says:

      And this is a section on 20 acre spacing

      • Puffalar (Your Five-Alarm Puff) says:

        Your images are lovely, MBP.

        “EDIT: I made one of the wells up top off center, oops” ~ MBP

        Hahaha, cute! ^u^

    • MBP says:

      And finally 10 acre (you can imagine how densely drilled 2.5 acre spacing is).

      EDIT: I made one of the wells up top off center, oops

  43. robert wilson says:

    Some posters may be unaware that Gail Tverberg is now teaching and traveling in China.

  44. Stavros H says:

    We have been hearing from western sources for decades now, that Russian oil production is about to peak and then collapse into oblivion without this ever materializing. While a small production decrease may take place this year or next (due to the oil price collapse) there are still vast reserves of oil in Russia (eastern Siberia, the Bazhenov mega-shale play and the Arctic)

    This is the reason why Exxon Mobil just acquired vast drilling rights in Russia (the country most difficult for any US corporation to operate in) that dwarf its acreage in any other country on the planet, including the USA.

    This is also the reason why the West is so hostile to Russia, they full well realize that if left alone and quiet, Russia’s vast oil & gas reserves will be further developed to the detriment of the West’s global geostrategic and economic position.

    • Fuser says:

      We’ve been hearing from Russia that Russian production will fall.

    • We have been hearing from western sources for decades now, that Russian oil production is about to peak and then collapse into oblivion without this ever materializing.

      I think that is a gross exaggeration. I have been following oil production in every part of the world for about twelve or thirteen years now. I read world oil production news every day. I have seen predictions of a Russian decline only in the last few years, and most of those predictions come out of Russia. Below it the link to an in depth report by two Russian Government think tanks.

      GLOBAL AND RUSSIAN ENERGY OUTLOOK TO 2040 by The Energy Research Institute of the Russian Academy of Science and The Analytical Center for the Government of the Russian Federation

      This is a very intensive study by these two Russian Government think thaks. Below is their prediction for future Russian production. They show Russian oil peaking in 2015. The second charts shows where they hope this oil will come from. The lions share of future Russian oil production is supposed to come from reserve growth.

      • Watcher says:

        Declining Russian oil production doesn’t have to negatively impact Russia. Their internal consumption is far less. They are also moving away from dollar or even Euro pricing so even cash influx matters less and less.

        They are largely self sufficient. If there was ever a “save it for the grandchildren” place, they are it.

        Which is why this quote from above is almost right:

        This is also the reason why the West is so hostile to Russia, they full well realize that if left alone and quiet, Russia’s vast oil & gas reserves will be further developed to the detriment of the West’s global geostrategic and economic position.

        Not . . . exactly. If nature is allowed to run its course and Russia VOLUNTARILY cuts back production, but still exports some, they will drain their enemies of economic blood. Relentlessly, and there is no way to stop it.

        And so . . . nature cannot be allowed to run its course.

        • Watcher says:

          Okay look guys, here is Russia:

          Balance of Trade, January THIS YEAR, $15 Billion For The Month. This is what selling oil and gas does., even at low price. You run a relentless trade surplus. It runs about 19-20B/month at higher oil price, but it is no danger of going negative.

          They are draining their enemies.

          • Thomas says:

            Of course they have a trade surplus, they even embargoed Polish apples and German cheese…

            • Watcher says:

              We can only imagine . . . I’ll bet that cheese and apples total would have eaten up $15B for the month.

              • Watcher says:

                BTW of what they do import, the primary source is, you guessed it, China.

      • AlexS says:

        Ron, the recently amended Russian Energy Strategy assumes flat oil production at 525 million tons to the year 2035 under the base scenario

        Russia Discusses Amended Energy Strategy
        Thu, Mar 19, 2015

        The Russian government discussed on Mar. 18 an amended long-term Energy Strategy up to 2035 that takes into account Western sanctions and envisages slower growth in natural gas production and possibly in crude output as well if the taxation system is not changed. The final edition will be discussed in September-November, Prime Minister Dmitry Medvedev said.
        The government was supposed to approve the strategy in December but decided to revise it due to Western sanctions (NC Dec.18’14). In response to these measures, which ban exports of technology for Arctic offshore, deepwater and shale projects to Russia, the strategy will focus on imports replacement. Medvedev said the share of imported equipment must not exceed 10% in 2035. By comparison, Russia’s oil and gas industry now imports 60% of equipment. Other milestone targets include increasing oil recovery rates to 40% and the share of hard-to-recover and offshore reserves in total production to 25%.
        According to the amended strategy, which has two scenarios, Russia’s gas production will grow to 805 Bcm-880 Bcm in 2035 from 640 Bcm last year, while previously the strategy had suggested output of up to 935 Bcm by 2035. LNG production is set to increase to 82 Bcm in 2035 from some 14 Bcm currently, Energy Minister Alexander Novak said.
        Oil production will remain at some 525 million tons in 2035, according to the basic scenario, with exports growing 23% to 270 million tons/yr, Novak said. A lot will reportedly depend on whether Russia introduces a profit-based tax, which should be a stimulus to increase production. Otherwise, output might fall to less than 480 million tons in 2035.
        The idea to switch to a profit-based tax has been opposed by the finance ministry, but Medvedev supported the energy ministry’s proposal to launch a pilot project to levy a profit-based tax instead of the traditional mineral extraction tax on several upstream projects.

  45. Caelan MacIntyre says:

    Assigning one thermodynamically obtained value to an economic good

    “A technique proposed by systems ecologists is to consolidate the three exergy inputs described in the last section into the single exergy input of solar radiation, and to express the total input of exergy into an economic good as a solar embodied joule or sej. (See Emergy) Exergy inputs from solar ^ , tidal, and geothermal forces all at one time had their origins at the beginning of the solar system under conditions which could be chosen as an initial reference state, and other speculative reference states could in theory be traced back to that time. With this tool we would be able to answer:

    What fraction of the total human depletion of the Earth’s exergy is caused by the production of a particular economic good?

    What fraction of the total human and non-human depletion of the Earth’s exergy is caused by the production of a particular economic good?

    No additional thermodynamic laws are required for this idea, and the principles of energetics may confuse many issues for those outside the field. The combination of untestable hypotheses, unfamiliar jargon that contradicts accepted jargon, intense advocacy among its supporters, and some degree of isolation from other disciplines have contributed to this protoscience being regarded by many as a pseudoscience. However, its basic tenets are only a further utilization of the exergy concept.” ~ Wikipedia

    • Dennis Coyne says:

      Hi Caelan,

      I do not dispute that a thermodynamic value can be assigned to a good. The fact is that the economic value of a good does not correspond with its economic value.

      Does electricity have economic value? Is it’s net energy positive or negative?

      The form of the energy is an important part of determining that particular form of energy’s economic value. Net energy is only a useful concept at a macroeconomic scale, for microeconomics (analyzing the oil industry for example) a neoclassical economic analysis is more useful.

      • Dennis Coyne says:

        Hi Caelan,

        I said,

        I do not dispute that a thermodynamic value can be assigned to a good. The fact is that the economic value of a good does not correspond with its economic value.

        I meant to say:

        I do not dispute that a thermodynamic value can be assigned to a good. The fact is that the thermodynamic value of a good does not correspond with its economic value.

  46. Ronald Walter says:

    Never mind peak oil and collapse of civilization for the moment.

    An ignorant person is one who doesn’t know what you have just found out – Will Rogers

    Oil related:

    If Jerry Brown, the Californian and governor, would just donate his oil millions to the Salvation Army or some other charitable cause, he just might have some credibility. As it is now, he is just another hypocrite willing to say ‘do as I say, not as I do’.

    Can you say ‘double standard’? You can’t make this stuff up. Greenwashing at its best.

    Attila the Hun had more scruples.

  47. Watcher says:

    Some tidbits about Ron’s direct stuff in the article/post for all these comments.

    From various wikis
    1995 USGS assessment of Iraqi reserves 78 billion barrels.
    EIA 2003 112 billion barrels.

    Iraq pre war oil minister offered up “there may be as much as 300 billion barrels” haha wacko

    The Iraq reserves wiki has a 2013 “proved reserves” chart of 141 billion barrels from EIA.

    Eyeball of a historical production chart says an average of 2.3 mbpd for about 12 yrs since the 2003 numbers of Ron and these bozos above. That’s 2.3 X 365 X 12 = 10 billion barrels burned over that time.

    Ron says they got 31 billion barrels left. Theses other guys raising reserves each year 800 million barrels pumps out . . . a lot more . . . 4X more.

    • Dennis Coyne says:

      Hi Watcher,

      There is this thing called reserve growth, check out the reserve numbers for the United States.

      Now you will claim they are lying, but perhaps the oil guys could explain how the idea that reserves can only decrease over time by an amount exactly equal to output tends to be false.

      • Proved reserves usually increase because we tend to be conservative (SEC and engineering society guidelines dictate it). Proved plus probable should remain about the same, but in the last 15 years they have increased because prices increased. Technology also helps increase reserves.

        There’s also a subtle increase due to people getting older. This increase used to happen before, but it has disappeared. We maxed out on wisdom. You see, we have a ton of older folk who are retiring from the industry. The new ones taking over are weaker (it’s not their fault, we have an age gap). This weakness is quite evident to me, bacause I was consulting and had to rub shoulders with the full gamut, from team leders to presidents. The quality is uneven. They are smart but they just lack seasoning. And some team leaders in large companies are badly chosen, lack proper training, have seen too much emphasis on power point rather than thinking things through. This leads to the inability to extract oil when it’s a challenging environment.

  48. Jeffrey J. Brown says:

    Saudi Arabia Launches Military Operations in Yemen

    *Saudi Ambassador to U.S.: Saudi Arabia Launched Military Operations in Yemen
    *Saudi Ambassador: Strikes to Defend President Hadi
    *Saudi Ambassador: 10 Countries Participating in Operations
    *Saudi Ambassador: Hadi Able to Escape and Relocate in Yemen
    *Saudi Ambassador: Airstrikes Launched Wednesday; Operations Under Way
    *Saudi Arabia, GCC Countries, Other Allies, Participate in Operations, Ambassador Says
    *Saudi Ambassador: Operations Intend to Defend and Protect ‘Legitimate Government of Yemen’
    *Saudi Ambassador: Had ‘Fruitful, Productive’ Discussions With U.S.
    *Saudi Ambassador: Hope Houthis Will Participate in Political Process
    *Saudi Ambassador: U.S. Not Participating in Air Campaign

    • Frugal says:

      So the Saudis are now at war against the Shiites in Yemen who are backed by Iran. How is this going to end and what’s going to happen to oil prices?

      • Watcher says:

        An extremist on this board recently suggested bombing around the Middle East might elevate oil prices and rescue plummeting US GDP. Such thinking should be suppressed.

    • Watcher says:

      Looks a bit like using one’s Air Force to interfere in a sovereign country’s internal affairs.

      I have noticed no one has claimed Russia is doing that in Ukraine.

  49. SAWDUST says:

    I’m looking at the Dow and the S@p 500 charts. Both are sitting on trendlines that go back a few months. If these trendlines break (I expect them too) the next support is over 600 points down for the dow and 140 points down for the s@p. This kind of a move in stocks would take down the dollar big time. Oil would rip higher. All the charts i watch are concurring with one another. I think were at a turning point in all four of these markets and there movement will be highly correlated for the time being. Markets don’t always stay correlated but the fundamentals line up for these four markets to move together at present time.

  50. toolpush says:

    Refiners rebelling against light oil/condensate and Canadian tars sand blend, or commonly called dumbbell oil.

    U.S. refiners turn to tanker trucks to avoid ‘dumbbell’ crudes

    Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste.
    Phillips 66, the nation’s fourth-largest refiner, has added trucks and offloading equipment at several of its refineries to help reduce its reliance on oil coming from Cushing, Oklahoma, the nation’s biggest crude oil crossroads and storage hub. Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field.
    Many executives say that the crude oil blends being created in Cushing are often substandard approximations of West Texas Intermediate (WTI), the longstanding U.S. benchmark familiar to, and favored by, many refiners in the region.

    Typical light-sweet WTI crude has an API gravity of about 38 to 40. Condensate, or super-light crude that is abundant in most U.S. shale patches, ranges from 45 to 60 or higher. Western Canadian Select, itself a blend, is about 20.

    While the blends of these crudes may technically meet the API gravity ceiling of 42 at Cushing, industry players say the mixes can be inconsistent in makeup and generate less income because the most desirable stuff is often missing.
    Magellan Midstream Partners’ Longhorn pipeline, which moves West Texas Permian Basin crude to Houston, raised its gravity cap last year to 44 from 42. And it recently started up its joint-venture BridgeTex pipeline with a cap of 44.
    “If I can run a 44-45 grade and source it at enough of a discount that it makes sense to run it versus a 41 or 42 even if I give up yields, that’s the tradeoff,” he said.

    As Mike was saying a couple of weeks ago, his oil is always picked up, where as some others were not. I believe LTO is gaining some resistance. Either discount it enough, or the refiners don’t want it.

    Hey Watcher, I think they want the diesel?

    • Boomer II says:

      Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field.

      Does this have any ramifications for the Keystone XL pipeline? Is it a pipeline bringing product that refiners don’t want?

      • toolpush says:


        From memory, the Keystone pipeline was to carry about 70% Canadian and 30% Bakken, so there will be a mixed flow. Of course we don’t know if the plan is to segregate these flows or mix them.

        I believe the problem is for the simple refineries, with little to no heavy oil treatment, so they end up with heavy fuel oil and gasoline. For the more complex refineries, they want the heavy crude, where they have the capacity to crack the long carbon chains, down to diesel length, and the LTO component is more for flowing purposes.

        So in short, simple refineries, don’t want too much very light stuff, no diesel.

        Complex refineries want heavy stuff, but not too much light stuff.

        As for the Keystone, the gulf coast wants the Canadian heavy. I think the Bakken oil is more desirable, than Eagle Ford oil. Note, it is only the Eagle Ford that is mention in the article, even though Bakken oil has been making its way to Cushing for a while.

        If the Eagle Ford continues high production of very light oil/condensate, I feel they will be looking very closely at the ruling that allowed a light stabilization and a quick ship for export, as their most reliable sales outlet.

        • Watcher says:

          As Jeffrey has noted, maybe there will be no export customers. It becomes more and more clear just how important Libya (with its reputation for diesel richness) was to . . . lots of people. Perhaps the Administration’s worst disaster.

        • Jeffrey J. Brown says:

          In regard to the “Smoking gun” EIA chart that shows their compositional estimates for US C+C production, as I have previously mentioned it took about half of the global (oil & gas) rig fleet to show a projected increase of only 0.5 mbpd in US 40 API and lower crude oil production from 2011 to 2014 (light blue and lower on the following chart represents 40 API and lower crude oil).

        • Jeffrey J. Brown says:

          As one source in the article noted, if the price is low enough for the light stuff, someone will buy it and refine it, even though they don’t get the distillate yield they want, but the problem is that there is a limit to the percentage of US refining capacity that can be devoted to poor distillate yield very light crude and condensate.

          One can’t help but wonder if the primary reason for the buildup in US C+C inventories is that US refiners hit, last year, the limit of their ability to take more very light crude and condensate. This could also be true for most refiners globally. As I have noted several times, the Pemex CEO last year said they needed to buy crude oil, not condensate.

          • Allan H says:

            Normally the US exports diesel to Europe where they use much more in cars than here and in turn European refineries export excess gasoline to the US east coast.
            Apparently diesel exports to Europe almost doubled in 2014, refineries geared up to produce more diesel. Comes 2015 and the high demand for heating oil due to the northeast having long term below normal temperatures, along with several refineries being hampered by those same low temps forced a reversal of trade. Europe and the Saudi’s were supplying diesel to the US in February.


            So it’s been a roller coaster ride for some refineries, trying to chase the diesel profits while the oil qualities make it easier to produce gasoline.

          • clueless says:

            A little over 10-13 years ago the barrel was getting heavier/more sour and Valero was the first to step out and rebuild their refineries to handle it, and made a fortune. If it is now getting lighter in the US, knowing the way capitalism works, I assume some refiner will announce a huge capex program to handle it.

      • The best blend is around 19 degrees API dumbbell. If they try to load the dumbbell with extra light ends they screw with the refinery’s optimum slate. And if they try to peddle that blend as a WTI they are full of bull dinky. That junk should fetch about a 15 % discount to WTI.

        I’m not sure about keystone, but if it’s blended to displace Maya or venezuelan Faja blends sit should be fine.

    • Byron Walter says:

      Meanwhile in North Dakota the rig count is currently down to 98 (and presumably still falling). Industry officials stated that ND needs a minimum of 115 to keep production from falling. That’s from Rig Zone:

      So much for the good times in ND.

      • Watcher says:

        We also get to see how these industry spokespeople also don’t have a clue about things like how many wells have to complete per month to hold production breakeven, or how many rigs there have to be to hold production breakeven. The backlog and weather stopping trucks can corrupt all such correlation.

        We’ve watched this for years now and seen production quotes largely unrelated to completion numbers.

    • Watcher says:

      Yup, and do we not also think that maybe US consumption hasn’t faded even a droplet, and the reason the storage is filling is the refiners won’t take what is flowing into it. The refiners can get what the public needs from imports, and do.

      Another amusing thing about this is Marathon was quoted in your text and their capline dept are sort of the official arbiter of assays from various sources. It was their assay that was changed just before the Congressional hearings on what was in the tank cars that were blowing up. Their official Bakken assay listed a lot of volatility in the liquid (as I recall) and then just before the hearings they published an assay update to a more safe level of content, and as I recall the media people who caught it and asked about it got a “no comment”.

      So if there is anyone who knows what’s what in the assay, it’s Marathon.

      But overall, macro macro . . . yup, this shale stuff ain’t very good oil.

      Edit: Oh and btw, I harped on how one should not worship at the altar of supply and demand when the parameter being used as a measurement, dollars, themselves change their . . . length.

      Well, let’s add another harp. Not only do we have a corrupted definition of dollar, we also have a corrupted definition of supply itself. It’s not really all or even mostly “WTI”.

      So supply and demand is a joke.

  51. Jeffrey J. Brown says:

    Germanwings Airbus Crash

    The French prosecutor is now describing this as a deliberate act by the copilot to crash the aircraft.

    A Wikipedia entry on the EgyptAir crash, which the NTSB characterized as a deliberate act by the copilot to crash the aircraft (which was disputed by the Egyptians):

    EgyptAir Flight 990:

    • Fred Magyar says:

      Um what does the the crash of Egypt Air Flight 990 back in 1999 have to do with the Germanwings airliner crash?! Did you just misplace a link or are comments on this site being hijacked?!

      • What they have in common is that both flights were deliberately crashed by the pilot or copilot. In fact that crash was what immediately came to my mind when I heard that this flight was deliberately crashed by the copilot.

        Malaysian Flight 370 was also very likely brought down deliberately by the pilot or copilot.

      • Jeffrey J. Brown says:

        As Ron noted, the connection is self-evident. Given the number of recent suspicious crashes, possibly/probably involving deliberate acts by pilots, one can’t help but wonder if there might be a stealth terrorist effort going on worldwide to induce pilots to crash their aircraft. I think that I can guarantee that a lot of intelligence agencies are currently asking that very question.

        • Frugal says:

          Probably just random suicidal pilots.

          • Jeffrey J. Brown says:

            As the French prosecutor noted, there is a difference between suicide and mass murder.

          • Fred Magyar says:

            I agree, even if all three were individually linked to some form of terrorism to say they are connected is stretching it to say the least.

        • Fred Magyar says:

          I find it extremely difficult to draw a link between the Egyptian airline crash in 1999, The Malaysian Airline crash a year ago and this Germanwings crash even if all three were deliberately brought down by suicidal pilots or copilots. To start forming conspiracy theories based on these three crashes is a very long stretch indeed! Sorry I’m not buying it.

          • Jeffrey J. Brown says:

            I wonder if we can think of any instances where terrorists deliberately crashed commercial airliners.

            • Thomas says:

              Sure, 9/11 (or was that a rhetorical question?). As a consequence, they introduced locked cockpit doors, which enabled the Germanwings copilot to lock out his colleague and crash his plane…

            • Fred Magyar says:

              That’s not the point, is it? Connecting the three crashes mentioned and suggesting they are somehow nefariously linked is where I see a stretching of the imagination.

              • cytochrome C says:

                Probably some real nasty parasitic meme’s rewiring their host brains for there own replication.

                Like a lancet fluke does to a ant.

                Religion is a nasty meme.

                • Fred Magyar says:

                  Yeah, all three pilots probably owned cats that were infected with Toxoplasma gondii… which is know to cause psychological problems in humans including increasing depression and suicidal tendencies.

                  Hey it is just as plausible as any other theory…

                  And no I’m not serious for criminnies sake! I just have a very deep aversion to conspiracy theories!

                  • I also have a deep aversion to conspiracy theories. However it is not a conspiracy when a religious nut decides he will kill a bunch of infidels in order to get his 72 virgins right now. Flight 990 and Flight 370 were both flown by Muslims. I have no idea about this latest mass murder. But it is very likely that the previous two did it for religious reasons. The fact that some Muslims would have also been killed could be regarded as collateral damage. In fact the copilot who brought down Flight 990 was muttering something about God all the way down.

                  • robert wilson says:

                    I had a high school friend who died by himself in a single engine airplane crash many years ago in New Mexico. The rumors were that the suicide was related to insurance policies and failure of his oil business. I have read about other similar suicides. A light plane or helicopter might also be used to dispose of a murder victim.

                  • Watcher says:

                    I hear there is a secretive group of folks who debunk conspiracies.

                • Ronald Walter says:

                  Those parasitic memes are in the form of prescribed medications like prozac and haldol.

                  A History of Failure

          • Fred, the link I draw is that both planes, and likely all three, were brought down by suicidal pilots or copilots. That’s enough right there. That is something we never heard of prior to the 1999 crash.

            I don’t think it was a conspiracy either. But it could be that all three were religious nuts who felt god ordered them to do it or some other religious nonsense. Not saying that was what it was but it is a possibility.

            • Jeffrey J. Brown says:

              Gordon Bethune, the former CEO of Continental Airlines, was just on CNBC in regard to the crash, and he said that the first thing he thought of, after hearing that the Germanwings crash was the result of a deliberate act by the copilot, was the EgpytAir crash, where (to quote Mr. Bethune) the copilot could be heard praying in Arabic as he pushed the plane into a terminal dive.

              And as the French prosecutor noted, suicide is what happens where you blow your brains out with a pistol. The Germanwings crash, and similar deliberate crashes of commercial airliners, were mass murder events.

            • SRSrocco says:


              You might want to add “Alien Intervention” to the theories. 🙂


            • Fred Magyar says:

              Hey Ron, I don’t really want to dwell on this topic all that much and I highly doubt the truth can ever be known for sure but I would like to pose one other possibility. This young guy might have taken a hard look at our current reality, snapped and concluded that things were pretty much hopeless and he just said “Fuck it, I may as well just go out with a bang!” Let’s be honest it takes a lot of perseverance to stay optimistic nowadays knowing what many of us already know… Think about it, Peak Oil, Climate Change, Global Economic Collapse, Die Off, Ecological Overshoot, etc…etc.., There is a helluva of a lot of pretty bad news out there! You don’t suppose that there are people out there who might not be able to handle such knowledge? To be clear I’m not saying that this guy was even aware of these predicaments and he might even have been just another religious nut, but…

              Back to that link I posted the other day to Paul Chefurka’s web site.
              Stage 5 Awareness:
              Awareness that the predicament encompasses all aspects of life. This includes everything we do, how we do it, our relationships with each other, as well as our treatment of the rest of the biosphere and the physical planet. With this realization, the floodgates open, and no problem is exempt from consideration or acceptance. The very concept of a “Solution” is seen through, and cast aside as a waste of effort.

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

              Maybe we should all be a little more careful about snuffing out all hope in people who are unprepared for it.

              But I certainly don’t pretend to have the answers…


              • Futilitist says:

                Sometimes the truth hurts, Fred. But covering it up can hurt even more. Catch-22.

                There is no prophylactic against knowledge of the upcoming collapse. It becomes evident to people from cues in their environment. It is very difficult to keep everyone in a state of collective denial. The system is badly cracking, and it shows.

                The knowledge of certain collapse is self evident to me just from the inherent resistance to discussing it here in an even remotely rational way. A good Futilitist knows that the truth is often kept hidden in plain sight, like an elephant in the room.

                I don’t think there is any way to contain people’s emotions when they fully grasp the futility of collapse. Nor do I think it is ethical to intentionally keep people from knowing. It won’t do any good anyway, and the coercion necessary to effectively cover up the truth already causes grave harm to everyone.

                I think everyone has a right to know the truth, and let the chips fall where they may. The people who already own everything else there is to own, always want to own the truth, as well. They need to, in order to maintain control.
                But no one can ever really own the truth.

                The truth is the only thing that is both free,
                and can set you free, at the very same time.

                I think we should all embrace our inner collapse. 🙂

          • Lloyd says:

            Hi Fred.
            To start forming conspiracy theories based on these three crashes is a very long stretch indeed!
            I’m with you. My first thought was that Germanwings is second rank- and their payscales probably are too. Turns out the company is a branch of Lufthansa, and a cursory examination shows that the payscale is considerably lower. I wonder if this is like the situation with American regional carriers, where the pilots are paid far less than was the norm 10 or 20 years ago?

            Put a man in charge of 150 lives and a $30 million plane- maybe not the best bet to go with the lowest price.


          • clueless says:

            Obviously “conspiracy” is the wrong word. And, I agree, so is attempting “to draw a link.” The word “pattern” comes to my mind, as does the word “copycat.”
            It’s kind of like dealing with pit bulls. They do not have a conspiracy to kill children, but they do have a pattern of such behavior.

        • Anon says:

          People are known to copy publicized suicides in general.

  52. Allan H says:

    Here we go again. Apparently Russia is getting revved up over everything now, since the US has poked at them.

    What gets me is the attitude that they have the right to be able to freely attack with nuclear weapons and will pursue further attacks if they feel limited in the ability to destroy much of the planet and kill many of the people. Does anyone see the immensely convoluted and insane logic that is being used at national levels? Truly the inmates are running the asylum.

    • toolpush says:


      Apparently the Russians, or should i say the ex USSR liked pointing nuclear missiles at other people. One of the Russians I worked with, who was a Sargent in a truck mounted nuclear missile unit, was telling me how one night, while tough negotiations were going on with the Chinese, they had to raise and lower the missiles, depending on how the negotiations were going. Apparently the Chinese could tell when the missiles were ready for launch, and would adjust their negotiation stance. The rockets would come down.
      It was a busy night for the troops.
      It makes you wonder how close we came to disaster in the cold war?

      • Tool push, it isn’t that simple. As you know I used to live in Russia and have Russian friends. I’m a usa citizen, and have family in the U.S. armed forces. And my job allowed me to see information most people don’t see.

        Using what I know, I consider the current tension the result of a serious us foreign policy failure. The Russian response to the Danish move is natural. To put it in simple terms, the usa and europeans are goading Russia ever since the USSR fell.

        When the USSR fell I volunteered to work in Russia because I wanted to see first hand what the commies had done, and to help make sure they stayed buried. But the U.S. moves, starting with Clinton, were pretty aggressive and stupid. This situation is going to end in nuclear war if it keeps escalating, and it will be us fault. They are goading a wounded female bear guarding her cubs.

  53. Rune Likvern says:

    Further up Fernando wrote;
    ”John B: that link explains Statoil wants to take recovery factor to 60%. But they don’t say they have achieved it. That figure, 60, is sort of a magic barrier. I’ve seen 56% but I never saw 60.2
    For NCS the Norwegian Petroleum Directorate makes public very good data on reserves and resources.
    Several of the big fields are already past 60% of recovery and expected to go higher and several of these are operated by Statoil, like Grane, Gullfaks, Oseberg and Statfjord.
    The hard data is available so why speculate?

    Extraction rate should read recovery factor.

    • MBP says:

      Are the >45% RF fields under just waterflood or some type of EOR? That would be incredible recovery under primary + secondary.

      • Rune Likvern says:

        There are combinations of water flood and gas injection (WAG) for several of those fields with RF > 45%.

        The average recovery factor for all NCS fields are now expected at 45-46%.
        The general trend is the bigger the field the higher the recovery factor.

    • The chart says expected recovery factor. I haven’t seen a LARGE field close out and abandon at 60+. Are any of these already 60+?

      I’m also interested in their cut off philosophy. I worked with Statoil as partners and I seem to recall they used a standard approach, unlike say Exxon, which was counting almost all the oil (the exxon guys I knew used a very low cut off and this yielded a lower recovery factor).

      • Rune Likvern says:

        I wrote further up,
        ”Several of the big fields are already past 60% of recovery and expected to go higher and several of these are operated by Statoil, like Grane, Gullfaks, Oseberg and Statfjord.”

        As of end 2014, Statfjord had a recovery factor of 66.2%, Draugen of 63.7%, Gullfaks at 58.8%, Oseberg at 57.7%.

        These fields are still in operation, that is why the word “estimated” was used in the chart as that reflects on the amount expected recovered before they are shut down.
        As of end 2014 there were still estimates of remaining recoverable reserves for these fields.

        The second reason for using the word, estimated, is because the OOIP is estimated. There is no way anyone is going to measure the exact quantities of oil originally present in a reservoir as opposed to the amount extracted.

        Cut off philosophy is straight forward, when total revenues do not cover operations.

        • Rune, I’m referring to cut off at the reservoir. It’s not that straightforward. I used to sit in a reservoir technical committee, in which I was pretty junior, and we had long hours discussing how to prepare the detailed geologic model grids, whether to cut off at the geomodel scale, whether to scale up and cut off within the reservoir model, how to cut off, etc. There are really important parameterization issues involved. Cut off is also influenced by the depletion plans. It’s a topic most petroleum engineers don’t really grok very well.

          The fact that you showed me those figures will make me switch the “magic boundary” to 70 % for light low viscosity crudes, that is cases where the oil viscosity is lower than the water viscosity. I’ll use 65 % for the others.

          Ron, this means Ghawar could have had 130 billion barrels EUR (more or less).

        • MBP says:

          Well, I wonder if they use OOIP or MIOP as the basis for RF.

  54. dmg555 says:

    Thanks to all of those who answered my 40,20, 10, and 2.5 spacing questions.

  55. Boomer II says:

    I don’t buy the idea that as soon as the world economy stops growing, it will collapse because debt can’t be paid back.

    However, I have long felt modern day economic theories are inadequate.

    Here’s an interesting article which is relevant to some of the discussions people have had here.

    To Move Beyond Boom and Bust, We Need a New Theory of Capitalism | Alternet: Minsky’s genius was to show that financially complex capitalism is inherently unstable. Under conditions of stability, firms, banks and households will, over time, move from a position where their income pays off their debt, to one where it can only meet the interest payments on it. Finally, as instability rises, and central banks respond by expanding the supply of money, people end up borrowing just to pay back interest. The price of shares, homes and commodities rockets. Bust becomes inevitable.

    Note that this passage talks about bust rather than collapse. I make that distinction, too. I think we will continue to have busts, and likely more frequently. Whether that leads to permanent collapse depends on a variety of factors.

  56. The EIA’s latest Monthly Energy Review is out today. They have US Crude Oil Production, (C+C) down in January but up in February. Below is their production numbers followed by the change from previous month in thousand barrels per day.

    Aug-14	8,757	
    Sep-14	8,923	166
    Oct-14	9,060	137
    Nov-14	9,039	-21
    Dec-14	9,226	187
    Jan-15	9,192	-34
    Feb-15	9,289	97

    The EIA’s Petroleum Supply Monthly, with production data for individual states, will be out Monday the 30th. That will also have a number for US production which will very likely be very different from this, the Monthly Energy Review.

  57. nNgass says:

    Interesting article on the media hype.
    Title: Forget Rig Counts And OPEC, Media Bias Is Driving Oil Down
    We are in an age of propaganda where most people argue viewpoints not based on facts but on selective perception basis. They cherry pick what supports their argument then ignore the rest to make their case. Facts are no longer weighed objectively and in some cases ignored altogether. This has been going on for years as the “talking heads” come on TV and talk about various things and positions they own attempting to sway others to buy or sell based on a TV appearance.
    Kansas City Railroad confirmed once and for all that oil over rail is declining (Reuters in fact last week reported a 25% drop!) which is rather telling given that the Bakken primarily uses rail to move crude from wells.
    However prices aren’t recovering so why shouldn’t rig count be a leading indicator now, as it always has been? To review, since January we went from “rig count does not matter” tied to “wrong rigs being dropped” to “wrong regions’ rigs being dropped” and now “rig count being dismissed altogether with all the focus on Cushing filling up?”
    The lesson here is, don’t get pulled by the nose by selectively perceiving what the media wants you to focus on when the reality is very different. Most don’t even realize this until someone points it out as they are led like sheep.

    • shallow sand says:

      Good article nNgass. Read that while sitting here eating lunch. Also, in about 10 minutes pulled up 10K for EOG, QEP, CLR, OAS and EOX. Did not have time to look at years other than 2014, and did calculations quick, so feel free to check my work, but here is what I come up with that each spent per BOE in OPEX, production taxes, G & A and CAPEX in 2014:

      EOG $52.63 per BOE
      QEP $49.96 per BOE
      CLR $92.93 per BOE
      OAS $ 119.50 per BOE
      EOX $ 248.19 per BOE

      It should be noted that oil/products/natural gas mix is important to the above, and I did not have time to look at that. Regardless, I think the above shows that either prices for oil and natural gas have to rise significantly or the production of same has to fall significantly in the future, as even the best companies cannot stay cash flow positive at current prices.

      If anyone has criticism for analyzing this metric, please throw it out there. I think it may not be a bad idea for someone with more time and skill than me to work up these numbers on several companies for the past 3-4 years, and include production mix. I think this metric shows just how over sold oil and natural gas have become, assuming the world will want at least as much or more of those products in the coming years.

      Private oil and gas companies cannot survive by spending more than they take in year after year, regardless of whether we quantify expenses as CAPEX, OPEX, production taxes, G & A, etc. Toolpush gets credit for getting me to think about this when he stated that maybe we should treat shale CAPEX as OPEX since the CAPEX is continuously required.

      I guess my thought is, “what is the endgame.” Private companies, at least small ones, hope to pay off debt someday. I realize large public companies almost always carry some debt. But do the successful ones continue to increase it every year for ten or more years, with no end in sight?

      • toolpush says:


        Interesting numbers indeed, and thanks for doing the searching. Nice to see my little seed grow into something useful.

        The only saving grace I see for these companies, is that we do not get a breakdown of where their capex is spent. My original thought was, as the shale wells are drilled and decline at such a rapid rate, that they could be considered consumables. But there will be some capex of course spent on traditional longer term item such as pipelines storage etc, but even with these items taken out, I doubt if it would improve their figures enough to make them acceptable.

        I think we could consider this the long term break even price, compared to the short term break even that the companies like to talk about. These long term prices will also look worse if the gas component of the BOE is stripped out, and the fact these would be wellhead prices, not WTI. Thinking about it, now they really start to get scary!
        I suppose the Eagle Ford producers would be similar?

  58. learner2 says:

    CSX CEO came out and admitted that crude by rail shipments are not going to meet forecasts. Maybe because production is falling? I don’t know that the memo has reached wall street yet. Its too busy on the Yemen situation which is seems like it won;t be an easy problem to solve.

    • toolpush says:


      I take your point the rail shipments need to be watched for any downturn, and could be early indicator of a fall in production, but I posted a story the other day where Bakken crude was being priced out of the east coast market by foreign imports, and more Bakken crude was going by pipeline to Cushing. This move would definitely put pressure on CNX rail figures. Not disputing a fall of in Bakken production, but just saying we may need to look at a more complete picture to fully understand to situation.

  59. Ronald Walter says:

    Here the other day I looked at Whiting common stock shares issued and the total number was 167 million, today the total is at 204 million, with 12 million traded.

    They’re going to raise another billion dollars plus with those additional 37 million shares added to the kitty.

  60. brian says:

    According to this Bloomberg article, Mexican production is going to fall by a whopping 7 per cent this year compared to their estimates. dat be a lot.

    • Watcher says:

      Mexico govt spending was about $150B last year. Pemex proceeds/taxes were 1/3 of that or $50B.

      Their budget projections for their new FY are pegged at $79/barrel and Pemex hasn’t forwarded an official production estimate.

      They already cut $8B from planned spending, killing a boondoggle high speed train project of something like $4B. So $4B has already been eaten of the $8B.

      So chop 7% from Pemex production and that should take about 2.5% out of spending. Take the price to the mid 40s and that’s gonna be another 15% out of the total. So call it $150B X 0.82 for this FY.

      That sportsfans is an 18% cut to govt spending. hahahaha like that will happen.

      They can always borrow. And oh look, they have a Bank of Mexico and a budget for ink.

  61. sunnnv says:

    U.S. Steel To Idle Illinois Plant, Lay Off More Than 2,000

    “…Low crude oil prices and subsequent cutbacks by energy companies — which account for much of the demand for manufactured tubing and piping — hit the steel industry particularly hard early this year. U.S. Steel also announced more than 750 layoffs in January due to the closing of two pipe and tube manufacturing plants. … ”

    The job loss contagion is spreading East from the Bakken …

    • Watcher says:

      One does wonder why that stuff isn’t automated.

      One wonders the same about drilling and fracking.

      Edit: In fact, extrapolating, if GDP is heavily dependent on shale and tax revs come from GDP, does that remain so if you automate it? The income tax revs dry up if you automate it. Then you can’t pay unemployment benefits to all the workers you displaced.

      Oh wait. Silly me. Of course you can pay those benefits. Those dollars can be from printing, not from taxes. No problem.

  62. sunnnv says:

    speaking of steel – up thread Nick G claimed “… Almost all US steel production is electric.”

    Scrap steel is often _re-melted_ (along with some directly reduced iron) and refined in electric arc furnace in mini-mills to make shapes for about 2/3 of finished steel production,
    but the actual first production of steel requires some kind of reduction of iron ore to provide the 1/3 that is not provided from scrap. “Rust never sleeps” was one of Matt Simmons adages.

    This requires a blast furnace, which uses coke (from coal, or perhaps charcoal from “renewable” biomass),
    or direct reduction furnaces, which can use coal or natural gas (probably charcoal as well).
    The wiki article is poor IMHO:
    This is a little better, maybe:

    To use pure electricity, one must “electrowin” the iron.
    Currently this is not so economical (coal is still cheap), but several companies are exploring it for a low-carbon future.
    more science in their “press” page:

    Ah, here is the very good perspective article on steelmaking I was looking for, this one is well worth a read:

    One can do this in molten salts at high temps (more efficient, but a pain to deal with molten salts),
    or at lower temps in aqueous electrolytes.

    Or there is this biohydrometallurgical method:

    • Nick G says:

      It’s important to clarify whether we’re talking about the US or the world.

      My memory is that almost all US steel production is recycled. Certainly, 99% of all US vehicle steel is recycled when the vehicle is scrapped.

      In the temporary period in which world steel production is growing (due to China, at the moment) then primary steel production is important.

      And, as you most valuably discuss, coal/FF aren’t essential to reduce iron ore.

    • Nick G says:

      It’s worth emphasizing that Fossil Fuels are not essential to iron or steel production:

      1) recycling will increase as economies mature (e.g., the US gets the majority of it’s steel from recycling), and

      2) iron smelting can be done with renewable electricity. It’s not common right now because coal and natural gas are dirt cheap, but it works.

  63. John B says:

    Hi Fernando,

    This is the Noe Van Hulst interview:

    • sunnnv says:

      Is it something with the Dutch and the IEA, or a bizarre coincidence?

      Noé VAN HULST …
      “He holds a Master’s Degree and a Ph.D. in Economics from the Free University of Amsterdam.
      …In 2003, Mr. van Hulst joined the International Energy Agency (IEA) in Paris as Director for Long-Term Co-operation and Policy Analysis (LTO) until 2007.”
      “Peak Oil is a myth”. No facts given. Just “it’s the end of cheap oil, but [technology will provide]”
      “techno-pessimists [just don’t get it/are being alarmist]”

      Only madmen, cancer cells, and economists believe in unlimited growth.

      “Maria van der Hoeven took over as Executive Director of the IEA on 1 September 2011. Previously, Ms. van der Hoeven served as Minister of Economic Affairs of the Netherlands from February 2007 to October 2010.”
      A school teacher and creationist is head of the IEA – really?

      At least Fatih Birol is going to become executive director of the IEA in Sept 2015.

      • John B says:

        He did say some wells were at 60% recovery rate. That was something Fernando said he hadn’t heard before, and the point of the post.

        With regards to “limited”, or “unlimited”, the quantity of fuel in the Sun is “limited”. We’re just not about to run up against those limits anytime soon. The same could be said for oil.

        The problem with most failed early peak predictions appears to be a simple matter of underestimating URR.

        Some facts:

        • John B, I didn’t write “some wells”, I wrote large reservoirs seemed to hit a magic barrier around 60 % recovery factor (it’s not magic, it’s related to fractional flow and economics). I also stated that in my personal experience the peak I had seen was 56 %.

          There’s nothing particularly magic about the numbers for the Norwegian fields when we think about it. The Norwegians always used the most advanced technology, the oils are very user friendly (the key is thick homogenous rocks with low viscosity oil).

          I also suspect they are encouraged to apply some pretty extreme techniques to extend field life, because it allows them to defer the platform abandonment cost, which can exceed $1 thousand million U.S. dollars.

          And of course the oil price really helps.

          When we look at the issue we also need to consider their oil in place estimating methodology or practice. Knowing the Norwegians, I tend to think they were very sophisticated and the figure is high if compared to the methods used 30 years ago.

      • Fred Magyar says:

        A school teacher and creationist is head of the IEA – really?

        Yep, that’s correct! I don’t think that happened entirely by accident…

    • An economist with a bureaucratic background, he had one gross error and one deceitful statement in the first five minutes, so I stopped it. I’m going to put him on my interviewee list.

      • John B says:

        The whole thing was only 5:40

        What exactly was the gross error, and deceitful statement?

  64. Pingback: Mehr von der Seneca-Klippe

Comments are closed.