Oil Production Is Going To Drop And Oil Prices Are Likely To Increase

Rystad Energy, an independent oil and gas consulting services and business intelligence data firm in Oslo, Norway, has online, a wealth of information concerning upstream oil production projects and costs. Some of it is a bit dated but some of their charts date from late 2015.

The two below Rystad charts were published by CNN Money on November 23, 2015.

Costs, Overall

This is overall or average cost, not marginal cost. It cost Canada $41 to produce a barrel of oil but only cost Russia $17.20. I guess that is why Canada is cutting back but Russia is not.

Costs, Breakdown Here is the breakdown between capital expenditures and operational expenditures. Why would the United Kingdom’s operational expenditures be two and one half times those of Norway? After all, they are both drilling basically the same oil field.

So why is not the price of oil having a more dramatic effect on production? Well it is, it just takes a while. Here are some plans from about a year and a half ago, when the price of oil was much higher.

Rystad published the two below charts in their US Shale Newsletter in January 2015 but the data dates from the 4th quarter of 2014, just as the price of oil had started to drop.

Cost per Play

At that time Bakken (ND) had a break even price of $53 while Eagle Ford oil had a break even price of $42 and Eagle ford condensate a break even price of $50.

The below chart, from the same newsletter, assumes $90 a barrel oil.

Costs, Startup

Shale oil, at the time, had an average break even price of $65 a barrel, which would have given them a 45% internal rate of return and a payback time of only 2 years. It is amazing how much things have changed in just a little over a year.

But by October 2015 things had changed dramatically.

Exclusive: Offshore oil output to plunge as producers scrap field upgrades

Global offshore oil production in aging fields will fall by 10 percent next year as producers abandon field upgrades at the fastest rate in 30 years, in the first clear sign of output cuts outside the U.S. shale industry, exclusive data shows.

A drop in oil prices to half the level of a year ago has forced producers to slash spending and scrap mega projects that can take up to a decade to develop, but they are also taking less visible steps to cut investment in existing fields that will have an immediate impact on global supplies.

There have been few signs of how cost cuts of around $180 billion will impact near-term production until now. They could erode the glut that has forced down prices, and help balance global production and demand by the middle of next year or earlier, Oslo-based oil consultancy Rystad Energy said.

Data provided exclusively to Reuters by Rystad show a sharp decline in investment to upgrade mature offshore oil fields in order to arrest their natural decline, in what is known as infill drilling.(Graphic: link.reuters.com/xaz75w)

Costs, Infill Drilling Decline

The above chart shows the decline in infill drilling due to previous drops in the price of oil. The data is from the Gulf of Mexico, Southeast Asia and Brazil. The decline in infill drilling in 2009 was the largest… until now. The first half of 2015 saw the largest decline in offshore infill drilling in history.

In three major offshore basins — the Gulf of Mexico, Southeast Asia and Brazil — infill drilling dropped by 60 percent between January and July this year compared with the same period last year, according to the Rystad Oil Market Trend Report, whose data is based on company data and regulatory filings.

For example, according to the data, in the Gulf of Mexico, infill drilling on mature wells dropped from 149 wells between January and July 2014 to a total of 61 wells during the same period this year.

Based on this trend, Rystad Energy estimates that global offshore oil production in mature field will decline next year by 1.5 million barrels per day (bpd), or 10 percent, to 13.5 million bpd from 15 million bpd in 2015.

Costs Infill drilling 1

The above chart is change per operator, just in the GOM. And this was just in the first half of 2015 when the price of oil averaged about $56 a barrel. What is it now when the price of oil is over $20 a barrel lower?

Well, just since June Wood Mackenzie says the latest figures show that the amount of deferred capital spending on projects awaiting approval has almost doubled from $200bn to $380bn, with 2.9m barrels a day of liquids production now not due to come on stream until early in the next decade.

Global liquids cost curve (October 2015)

Costs, Reserves Left

*The break-even price is the Brent oil price at which NPV equals zero using a real discount rate of 7.5%. Resources are split into two life cycle categories: producing and non-producing (under development and discoveries). the latter is further split into several supply segment groups. The curve is made up of more than 20,000 unique assets based on each asset’s break-even price and remaining liquids resources in 2015.
Source: Rystad Energy UCube September 2015

What the above chart tells me is that it now costs a lot more to produce a barrel than it once did. And… unless crude oil hits at least $60 a barrel soon a lot more projects will have to be cancelled. But… all that being said, I think it is now obvious that oil production will drop, rather dramatically, beginning sometime in 2016. And that drop will lead to a rise in the price of oil, at least to $60 a barrel and likely higher.

That is unless some black swan event happens. That could be a collapse in several economies of the world… or a collapse of the economy in one country, China. In other words, it is a given that production is going to decline. So if demand stays constant, or rises, then the price of oil will definitely rise. We know what is going to happen to supply. We have no idea what is going to happen to demand. But if BAU continues as normal, the price of oil is going up.

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279 Responses to Oil Production Is Going To Drop And Oil Prices Are Likely To Increase

  1. Guy Minton says:

    Good info.

  2. likbez says:

    Generally breakeven cost should be


    Where BEP is ( https://en.wikipedia.org/wiki/Break-even_%28economics%29 )

    The break-even point (BEP) in economics, business, and specifically cost accounting, is the point at which total cost and total revenue are equal: there is no net loss or gain, and one has “broken even.” A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk-adjusted, expected return. In short, all costs that needs to be paid are paid by the firm but the profit is equal to 0.[1][2]

    But this is rarely the case as breakeven price has tremendous propaganda value. Typically only a fraction of those expenses is included and due to this there are multiple definitions. See for example several listed in:


    It would be interesting to know what expenses “average breakeven price” that Rystad Energy uses include.

    For example, is return on capital included?

    • SRSrocco says:


      You hit the nail on the head. Breaking even on a point forward basis is nice if an individual is stupid, however most smart investors (if they knew the real facts) wouldn’t put their money in that sort of Ponzi scheme. Unfortunately, many investors don’t realize they are dumping money into a black hole called the U.S. Shale Oil & Gas Industry.

      This has to be one of the biggest CANNARDS I know of. I wrote about BHP Billiton purchasing shale assets back in 2005. Said it was a stupid thing for them to do. Maybe, I should have put together some professional presentation and called myself a OIL GURU and if they listened, they could have saved $10 billion in write-downs. Maybe that info would have be worth a cool few million.

      However, big corporations will continue to do stupid things… so will the small fry investors.

      I am just waiting for the next shoe to drop. While 2016 will turn out to be an interesting year, 2017 will be a real BARN BURNER.


      • TechGuy says:

        SRS wrote:
        “Maybe, I should have put together some professional presentation and called myself a OIL GURU and if they listened, they could have saved $10 billion in write-downs”

        They would never have listened. Its pretty simply: No Project, No paycheck. The people that drive these grand expansions profit from them regardless of the outcome. Consultants and employees collect paychecks and bonuses implementing project. If there is no work to do, then they don’t get paid.

      • Nathanael says:

        The entire business model of Cheseapeake under Aubrey McClendon was based on selling these no-good unprofitable shale fields to big integrated oil companies for much, much more than they were worth. Whole damn thing was a land scam. It’s amazing how many of the big integrated oil companies fell for it.

        I think it’s a psychological thing: they want to believe their industry has a future, so they fall for any scam artist who tells them that it does. The “oilmen” aren’t psychologically able to do what Warren Buffett did with Berkshire Hathaway (he abandoned its original industry completely and put the money into another industry).

  3. VK says:

    The US is dead broke, $210 Trillion in liabilities.


    “Even worse, the budget office raised what’s called the alternative fiscal scenario, the most realistic projection of fiscal outcomes absent major policy changes. Based on these estimates, I calculate that the “fiscal gap” — a yardstick of total government indebtedness that I’ve worked on with the economists Alan J. Auerbach and Jagadeesh Gokhale — was $210 trillion last year, up from $205 trillion the previous year. Thus $5 trillion was the true deficit.

    The fiscal gap — the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts — is, effectively, our nation’s credit card bill. Eliminating it, would require an immediate, permanent 59 percent increase in federal tax revenue. An immediate, permanent 38 percent cut in federal spending would also suffice. The longer we wait, the worse the pain. If, for example, we do nothing for 20 years, the requisite federal tax increase would be 70 percent, or the requisite spending cut, 43 percent.”

    The US Congress knows America is broke,


    “The U.S. has a $210 trillion “fiscal gap” and “may well be in worse fiscal shape than any developed country, including Greece,” Boston University economist Laurence Kotlikoff told members of the Senate Budget Committee in written and oral testimony on Feb. 25.
    “The first point I want to get across is that our nation is broke,” Kotlikoff testified. “Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.”

    • VK says:

      The US may have “200 Trillion” in over priced and over valued assets like suburban sprawl McMansions and a FED sponsored stock boom for the elite, which looks like it has popped. But the fiscal gap liabilities far outweighs any assets the US has.

      17 Nobel Laureates and 1200+ Economists Agree with Ben Carson re U.S. Fiscal Gap : http://www.forbes.com/sites/kotlikoff/2015/05/13/17-nobel-laureates-and-1200-economists-agree-with-ben-carson-re-u-s-fiscal-gap/#1fc16de35931

      “The fiscal gap is the present value of all projected future expenditures less the present value of all projected future taxes. The fiscal gap is calculated over the infinite horizon. But since future expenditures and taxes far off in the future are being discounted, their contribution to the fiscal gap is smaller the farther out one goes. The $210 trillion figure is based on the Congressional Budget Office’s July 2014 Alternative Fiscal Scenario projections, which I extended beyond their 75-year horizon.

      Dr. Carson referenced $211 trillion as the size of “unfunded mandates.” Michelle Lee correctly points out that Dr. Carson was referencing the U.S. fiscal gap, not the present value of mandatory spending. What she knew (because I told her), but failed to say, is that the present value of mandatory spending is far larger than $210 trillion because the fiscal gap is a net, not a gross number.”

      • VK says:

        Anyway in the long run none of this is really relevant and important, we are all living in a hall of doom that entropy will have her way with. Human existence is just about biding the time with socio-cultural games till we pass on, either to a bleak coldness or maybe the pearly gates of a communist Santa Claus.

        “What are we to make of creation in which routine activity is for organisms to be tearing others apart with teeth of all types – biting, grinding flesh, plant stalks, bones between molars, pushing the pulp greedily down the gullet with delight, incorporating its essence into one’s own organization, and then excreting with foul stench and gasses residue. Everyone reaching out to incorporate others who are edible to him. The mosquitoes bloating themselves on blood, the maggots, the killer-bees attacking with a fury and a demonism, sharks continuing to tear and swallow while their own innards are being torn out – not to mention the daily dismemberment and slaughter in “natural” accidents of all types: an earthquake buries alive 70 thousand bodies in Peru, a tidal wave washes over a quarter of a million in the Indian Ocean. Creation is a nightmare spectacular taking place on a planet that has been soaked for hundreds of millions of years in the blood of all creatures. The soberest conclusion that we could make about what has actually been taking place on the planet about three billion years is that it is being turned into a vast pit of fertilizer. But the sun distracts our attention, always baking the blood dry, making things grow over it, and with its warmth giving the hope that comes with the organism’s comfort and expansiveness.” Ernest Becker.

        Is it any wonder we humans are collectively destroying the biosphere of the earth? It is a cold, systematic revenge against creation.

        • Trump the Entertainer says:

          VK – “The US is dead broke, $210 Trillion in liabilities.”

          Didn’t you get the memo ? Superpowers can print as much money as they wish. Now loosen up your underwear. You sound like a conservative on FM radio.

    • SatansBestFriend says:

      The 200 trillion in “liabilities” is the present value of future social security and medicare payments. You see different estimates on this because different people use a different rate to calculate the payments. The rate is obviously just an estimate.

      These are political promises. Not debt.

      Read your social security statement (If you are a yank). You are not guaranteed to get the money.

      The bigger problem is that medical expenses are compounding at 9% per annum due to medical monopoly pricing ( I got this from Karl Denninger if you are interested, read him).

      This will bankrupt the entire country and the only way to fix it is to destroy the medical industry (20% of GDP). If you rip out the legislation that allows these monopolistic practices (which would land you in jail in any other industry) the costs would drop by 80% (Japan levels).

      going bankrupt or destroying the medical industry is guaranteed to happen. Pick your poison.

      There is no escape.

      • Fuser says:

        I used to read Denninger until he lost his mind and full Birther. How can anyone trust his judgement on anything?

        • SatansBestFriend says:

          His birther stuff is stupid. He is a climate change and peak oil denier, which is stupid.

          If u eliminated everyone that fell into that category, u couldn’t trust 97% of the planet.

          The truth is that otherwise talented people can have very foolish views of the universe we live in.

          Darwin figured out evolution by natural selection in the 19th century. Humans with the same brains as denninger and fuser had been on the planet for 100,000 years before that (biologists I am just making a point, not accurate numbers). Most humans can’t understand the world from a scientific perspective.

          He founded one of the first Internet companies and a political party that is still significant (I am not a tea partier, I like science), which is an accomplishment that I doubt fuser has achieved.

          Do u disagree that medical monopolies are destroying the U.S. health care system?

          If u do, u aren’t very smart.

    • Nathanael says:

      This is arrant nonsense from Kotlikoff, who is a moron. The US prints the money. We could eliminate the “fiscal gap” overnight with no effect on anything. US Treasury bonds are basically the same as money — they are not really debt at all.

      Learn some real economics, not this fake economics. The sovereign issuer of money can generate wealth through “seignorage”. As much money as is necessary can be printed until inflation starts going up, and we are a looooong way from inflation.

      (If we have high inflation, THEN we have to raise taxes or cut spending. We’re not even close.)

  4. Theoltd says:

    Ron, very interesting, thank you. Reading your conclusion, we then can expect that markets will do all possible to cause the collapse of one or more countries. So, Oil production will peak, while our economies (US and Europe) could not to.

  5. daniel says:

    How does the shale irr of 45% and paybakc of 2 years line up with the mountain of dede and other info (aka bertman). Does not seem to make sense??

    • Daniel, I think you missed the point. That was a year and a half ago, when it was expected that the future price of oil, 2014 to 2020, would average about $90 a barrel. I thought I made that clear. Things are totally different today. In fact, that chart was meant to show just how much things have changed in a year and a half.

      • daniel says:

        Thanks ron. I get that things are much worse now. But your shale oil players were accumulating massive amounys of debt even before 2015. Which seems hard to understand with such economics.

        • shallow sand says:

          Daniel. LTO production was growing very aggressively, therefore even with high oil prices, producers were outspending cash flow. This is how the mountain of debt was built, despite 2010-2014 strong oil prices.

          I think we get caught up in the idea that production in US is not falling as fast as expected, I know I do. However, if we look at the year over year change, it will likely approach 2 million bopd. Production grew 1.4 million bopd in 2014, and may have fallen as much as .6 million bopd in 2015. (Numbers off the top of my head, and 2015 is still yet to be determined).

          Also, the current price is extremely low, much lower than 2015. If this price holds for several months, look for continued decreases in production from many parts of the world. $10s and $20s is what most oil is selling for in the world at present. That is simply not economic is the majority of the producing areas of the world, and definitely not in North America, where the 2010-2014 production growth predominantly came from.

          • Heinrich Leopold says:

            Daniel, Ron, shallow sand,

            In my view shale economics have significantly changed over the last two years. The monthly decline rate (see below chart) reached in the Eagle Ford oil basin nearly 12%.

            Although Marcellus has somewhat stabilized and Utica, which is still in its infancy, even improved, it is in my opinion just a matter of time when decline rates increase for all shale plays.

            This trend has not been baked into many economic and forecasting models – quietly assuming constant decline rates – and comes now as a surprise for many analysts and investors.

            • Heinrich, what’s the source of your Eagle Ford data?

              • Heinrich Leopold says:


                It comes from the EIA drilling report. Legacy decline is close to 150 kb/d and month since a few months now and production is declining and currently stands at around 1.2 mill b/d. The above decline rate is legacy decline divided by actual production.

                Of course the actual decline is lower as there is also production from new wells, yet my chart shows the internal decline which has to be replaced by companies and is just an indicator how fast the ‘Red Queen’ has to run.

                It is in my view exactly the increasing demand for capital to keep oil and gas production stable, which weakens the bond market, which then spills over to the economy and stock market. As companies did not want to curb production voluntarily, they are forced now to do so over a collapsing bond market.

                As Eagle Ford is one of the most mature plays, it serves in my opinion as a blueprint for more recently started basins such as Marcellus and Utica.

            • gwalke says:

              Interested in this, as North Dakota’s decline rate stalled (i.e. many years stopped declining all together, or even grew) in October and November as operators opened the chokes on their old wells.

              • That can’t be right. Got a link for that bit of information?

                • gwalke says:

                  That’s from the NDIC data. If you split the wells into year of completion, 2006-2009 and 2014 year wells increased production month on month in Nov vs Oct, while 2009-2012 years increased in Oct vs Sept.

                  Lynn Helms suggested that operators re-opened shut-in older wells, but that doesn’t seem to be the full story after comparing the monthly PDF reports to one another – a load of old wells didn’t just appear in the data. Also producing wells fell in November.

                  After we noticed this, Schlumberger’s CEO said in their conference call that recent slower declines were down to operators “opening all the taps” on their old wells, so after this initial surge he expected higher decline rates in future. Search for “taps” in this transcript: http://seekingalpha.com/article/3828566-schlumbergers-slb-ceo-paal-kibsgaard-q4-2015-results-earnings-call-transcript?part=single

                  • North Dakota’s decline rate stalled (i.e. many years stopped declining all together, or even grew) in October and November as operators opened the chokes on their old wells.

                    Naw, you are reading that all wrong. The decline rate has not stopped. The decline numbers are slowing down, but only because production is declining. The Bakken legacy decline was 62,385 barrels per day in October and 61,702 barrels per day in November. But the decline rate held steady at 5.26 percent per month.

                    The EIA is finally getting their act together with their Drilling Productivity report. For months they had the legacy decline still increasing while production was declining. Now they have corrected that mistake and corrected the historical data. The legacy decline is now decreasing right along with production, just as it should.

                  • gwalke says:

                    I’m not sure I am misreading, Ron. As I said, it’s North Dakota Industrial Commission data I’m using, not EIA. And it is actual empirical well data, aggregated by year of completion – it is simply the sum of oil production from wells completed in a specific year, divided by days in the month.

                    Use Enno’s excel file, split the wells up by year, and you will see the same thing – output actually increased for some vintages in these months. I was as surprised as you are to find this.

                    Edit: Even if you do it just by looking at wells completed thru 2014 – those wells decline 31,000 bpd August to Sept, but only declined 1,000 bpd in Oct compared to Sept! Decline rates don’t just drop 97% month to month – and then increase again the next month!

        • Nathanael says:

          “But your shale oil players were accumulating massive amounys of debt even before 2015. Which seems hard to understand with such economics.”

          The business model worked this way:
          (1) borrow money
          (2) wheedle leases by any means necessary
          (3) drill, frack, do a sloppy job, get poisons in the groundwater
          (4) announce extremely high first-year production numbers
          (5) SELL SELL SELL the entire operation to an integrated oil company (or another sucker), at a high price. Hoping the integrated oil company won’t notice that the well runs out of oil in two years.
          (6) Use the proceeds to pay off the debt and make a tidy profit — leaving the integrated oil company with the losses

          This was the business model. Now does it make sense? They were all doing this. They ran out of suckers to resell the fields to.

  6. Lightsout says:


    The reason for the greatly different OE for the UK and Norway is simply due to geology. Although they share the same basin and the reserves for each nation are very similar UK oil sits in many fields and Norway’s oil is concentrated in fewer large fields.

  7. Oldfarmermac says:

    One thing is for damned sure. The oil biz must have been generating UNGODLY UNIMAGINABLE PROFITS up until a year ago, if the figures Ron just posted are even ball park accurate.

    Have they really been making that much money,as a percentage of revenues, even before taxes, royalties, etc?

    It has been my belief , as the result of reading this site, and the old TOD, etc, that it costs a hell of a lot more than the figures listed, to produce oil, as a general thing.

    We all know that tax lawyers and accountants can work miracles, and that the oil industry can afford the best, but ………….?????

    If the oil industry has TRULY been making this kind of money, how is it that oil stocks weren’t going up FAST?

    My seat of the pants impression is that the production cost figures given are highly slanted so as to make the industry look better during this downturn, and keep people for selling oil stocks, etc.

    • The drillers haven’t been making money, they have all be losing/underwater.

      Even the bigs and nationals have been losing: they have been throwing away value for some useless ‘numbers’ … numbers which are all borrowed.

    • Schinzy says:

      Don’t forget Jeffrey Brown: when you ask the price, you get the price of top sirloin, when you ask the quantity you get the amount of meat. Not all oil sells for the price of Brent or WTI.

    • Nathanael says:

      “he oil biz must have been generating UNGODLY UNIMAGINABLE PROFITS up until a year ago,”

      How do you think the backwards, medieval, theocratic Saudi Arabian *aristocracy*, with no skills whatsoever, managed to become so rich? Yes, they were making ludicrous amounts of money on oil. And still are actually.

      Oil companies were insanely profitable in the US until the mid-1970s, too.

  8. How are prices going to increase? Everyone is broke (except for a handful of Richie-Riches).

    How will oil shortages make anyone richer? Even the Richie-Riches are getting hammered by the ongoing bloodletting as driller defaults spill into credit markets and banking. The (only) outcome is some will be less poor than others, those who are less poor will be those who do not waste their ‘wealth’ on petroleum consumption.

    Oil industry has lost $100 trillion dollars. How are the poor, hapless customers going to fix that? Where are they going to get that kind of cash? (They aren’t, they never will get it.)


    Peeps need to understand the reason why prices have declined, not put lipstick on the decline and call it a pig.

    • Oldfarmermac says:

      Maybe I ought to be sitting in a corner, wearing a clown suit and a dunce hat, BUT I have been buying and selling in commodity markets, as a small business person, for over half a century, and I THINK I know a couple of things.

      ONE thing I know is that graded products, manufactured and marketed to reasonably well defined standards, compete on price. When I buy two by fours, or diesel fuel, I buy by grade and price. I am not about to pay the lumber guy closest to me more for a load of two by fours, if the next guy down the road has them in the same grade a little cheaper. I buy diesel fuel and gasoline, wholesale and retail, the same way.

      I don’t know more than a couple of fools who will pay significantly more for gasoline , because of the brand name on the pump.

      You can pay double for your car, so as to impress other fools, but you just don’t hang around it front of the gas pump impressing people with the brand of gasoline you use.

      People in general, the whole world full of people, are buying MORE OIL THAN EVER BEFORE, at least up until the last few months, when production might have started to decline. ( I personally think production has been declining recently but not by much, not yet .)

      In some ways people are awesomely stupid, but this stupidity does not extent to paying more for gasoline , diesel fuel, fertilizer, heating oil , gas for heating the home, etc, than necessary. Even rich people pay attention to prices, which is in large part why they get rich and stay rich.

      BUSINESS MEN are ESPECIALLY quick to buy what they need to run their businesses at the best price they can, because a penny saved is worth ten pennies in new gross revenue, as likely as not. The penny saved goes directly on the bottom line.

      The fucking price of oil is low because oil producers are bringing enough to market that people can and DO HAVE MORE THAN EVER, basically as much as they can USE, at the current low price.

      WHY SHOULD anybody pay more, when they can get it for less?

      I have a bottle of premium sipping whiskey for anybody who can provide me with a RATIONAL answer to this question.

      Times may be tough, but tough times do not explain the low price of oil. Production in excess of the collective end users’ DESIRE for oil at HIGHER prices explains the current low price.

      It is a very common thing for commodity producers to have a string of good years, and increase production to a point that the price of their product falls significantly, until somebody or everybody producing cuts back production.

      The real question is why it is taking so long for the industry to cut back production. THAT’s what we ought to be talking about.

      It is obvious the world oil industry necessarily moves at a glacial pace, which explains a lot.

      But I am coming around to the pov that economic warfare has as much or more to do with the industry reacting so slowly. A privately owned business, owned by individuals, or share holders, may be UNABLE to respond any faster, for many reasons.

      But a country such as Saudi Arabia, or Russia, could cut production in VERY short order, thereby getting MORE revenue for LESS product, with the double bonus of having the product still in the ground for later sale AND spending less on current operations. Laid off men and stacked machines are cheaper than working men and running machines.

      • Jon Kutz says:

        Question? What is the difference between the “f–king” price of oil and the price of oil? I don’t see how the adjective “f–king” relates to price at all.

        {The fucking price of oil is low because oil producers are bringing enough to market that people can and DO HAVE MORE THAN EVER, basically as much as they can USE, at the current low price.}

      • Amvet says:

        My opinion is that there is no global oil glut. The US and the Saudis are playing economic warfare on Iran and Russia. A study in 2014 by the IEA claimed that 1,600 oil fields that product 70% of global oil had an average yearly decline rate of 6.2%. If true, (90 mpd)x(0.7)x(0.062) = 3.9 million bpd. Global demand usually increases about 1 million or more a year. So the world needs about 5 million bpd of new prod per year to stay even. Where is the data to support this ?

      • Nathanael says:

        “But a country such as Saudi Arabia, or Russia, could cut production in VERY short order, thereby getting MORE revenue for LESS product, with the double bonus of having the product still in the ground for later sale AND spending less on current operations. ”

        Saudi Arabia’s oil minister specifically said that the end of the age of oil was coming. (Why? Electric cars are superior to gasoline cars and cheaper to operate, industry is already switching away from oil as a feedstock, heating with electricity or NG is cheaper than heating with oil, etc.) He wants to sell Saudi Arabia’s oil *while people still want the damn stuff*. He figures that it’ll be worthless in 20 years.

        And he’s right. How’s the coal market doing these days? Owning huge coal reserves is worthless now. Anyone sitting on that stuff should’ve sold it while it was still worth something (economically speaking, I mean — environmentally it’s good if they’re sitting on it).

    • OFM- it’s a world market, not just a USA market.

      It’s a flyover USA market isn’t just NYC, LA or DC (or Silicon Valley) market.

      Price of anything speaks for itself. If a price is low it is because there is no bid to drive it higher.

      • Oldfarmermac says:

        The f word is for emphasis.

        There is NO reason to go around like a bunch of Monty Python characters wondering about why oil is cheap.

        Oil is cheap BECAUSE there are people in the production business who are willing to sell it cheap, and it will STAY cheap until producers quit selling at current prices.

        Witch doctors and astrologers talk about spirits and stars making people sick or well. Folks who know better talk about germs and poisons.

        People who actually took and passed an elementary econ course do not find it necessary to invoke spirits and stars, and international conspiracies, etc, to explain the price of oil.

        The price of oil is determined by the willingness of the collective customer to buy and consume the collective amount produced.

        Nobody pays more for a commodity than necessary. WHY should they?

        The collective producer is bringing enough oil to market that the collective user will buy the full quantity only at the current low price.

        It’s as SIMPLE as falling off a log.

        The real question is why producers are not cutting back.

        Part of the answer is that some producers ARE cutting back as fast as they can.

        But other producers are apparently determined to sell all they can produce, for reasons not well understood, at least not well understood by outsiders.

        We can’t know specifically why some producers are willing to sell at a loss, or at least at a price that severely reduces their profit margin, when they could cut back deliveries and get more money for less oil.

        But we CAN be fairly sure we know the GENERAL answer. It’s a combination of desire to maintain market share, national pride, domestic politics in producing countries, economic warfare between countries such as Russia and Iran versus Saudi Arabia, desperation sales to generate SOME cash so as to keep the company in business, etc etc.

        Some producers may believe they can run some of the competition out of business.

        Other folks can add more possible reasons, I am sure I missed some.

        For Steve,

        “Price of anything speaks for itself. If a price is low it is because there is no bid to drive it higher.”

        I agree absolutely.

        BUT you don’t need to bid higher when you can get ALL YOU WANT at the CURRENT price.

        Is there anybody in this forum fool enough to argue that the collective consumer is not getting all the gasoline and diesel fuel,heating oil, etc, he WANTS at the CURRENT PRICE?

        IF the neighborhood store where I buy gasoline starts rationing my purchase at the current buck seventy per gallon, or runs OUT, I will go on down the road and buy at a store that is not out, and not rationing my purchase, at a buck eighty or however much MORE I have to pay, to get as much as I want at “their” price, whatever their price might be.

        There really is such a thing as a market, and in a market, the price of a good is determined by the quantity sellers will supply at a given price, and the quantity customers will buy at a given price.

        There really is an oil market. It is a COMPETITIVE market.

        Anybody who believes otherwise has his head up his butt, unless he can offer a reasonable explanation as to who has the power to control the supply coming to market.

        Right now there is no cartel able to control oil supply, and no single individual company big enough to have pricing power, with the possible exception of Saudi Aramco. That company is government property or more accurately the property of the Saudi royal family and for reasons uncertain, they are not cutting back production.

  9. Oldfarmermac says:

    Iran is hoping to get paid mostly with Euros rather than dollars or other currencies, and the Iranians appear to have a good shot at getting what they want.

    In any case, it appears to me that two countries as big and diversified gegraphically and economically as Iran and India ought to be able to work out a deal strictly between themselves, bartering let us say so many barrels of oil for so much by way of industrial equipment or food etc. Relatively small amounts of any well accepted currency ought to suffice to grease the wheels of such potential barter deals.


  10. Sydney Mike says:

    I would like to know how much oversupply or undersupply causes how much price change. Is a 5% oversupply enough to get a price drop like this or is it 10%? And looking forward, how much would a short supply of 10% mean in price hike?

    We know that our civilization needs oil to function, in fact it exists because of oil. Much of our consumption is inelastic. I think the current oversupply is relatively small. Producing nations are pumping like mad because they need the cashflow. They cannot make long term decisions to wait out a higher price.

    We are adding some 40-50 Million motor vehicles to the world’s fleet every year. There is a finite amount in the ground with ever increasing cost and decreasing Energy Return on Energy Invested. We also have declining net exports.

    The current fool’s paradise cannot last long.

    • likbez says:

      Sydney Mike,

      I would like to know how much oversupply or undersupply causes how much price change. Is a 5% oversupply enough to get a price drop like this or is it 10%? And looking forward, how much would a short supply of 10% mean in price hike?

      You asked a very difficult question. Oil oversupply/undersupply are not only economic but also political categories as oil is a strategic product. Almost everybody in 2014 and 2015 underestimated the severity and the length of the current drop of oil prices. Despite the fact that oversupply was minor (2 Mb/d or less) and partially fictional (see condensate vs oil issue below). So there might well be no any solid correlation between those two in view of “casino capitalism” effects on oil price.

      Here some general “cause-effect” considerations:

      1. There is no way to detect “oil glut” or deficit less then 1Mb/d based on accuracy of world oil production/consumption data. So any deficit or glut less then 1Mb/d reported by MSM or agencies is pure propaganda. The four meaningful digits reported by EIA (aka “Energy Disinformation Agency”) is also pure propaganda. Their data does not allow more then two meaningful digits.

      2. Price of oil in “casino capitalism” is detached from producers and is determined via “paper oil” bought and sold in financial casino. See http://peakoilbarrel.com/the-ieas-oil-production-predictions-for-2016/#comment-558670

      So tail is wagging the dog. That means that price is detached from the situation on the ground and only shortages of “physical oil” that can’t be hidden can move the prices either way. So the regime of “suppressed price” might well last longer then most of us expect, and definitely longer then some hypothetical point in time at which balance of world supply and demand is achieved. You need shortage not a balance to move the price. So oil price moves probably overshoot as they will be accompanied by “short squeeze”.

      3. There is a strong institutional bias of all major Western agencies including EIA and IEA as well as mass media toward low oil prices as it is plausible that high oil prices cause “secular stagnation” in world and, especially, Western economies. That’s why “Fuser law” of predicting breakeven price of oil (BEPO) reported by MSM (BEPO=0.8 * current_WIT_price ) works so amazingly well.

      4. Recent oil glut was by-and-large “condensate glut” (aka “Great condensate con”, the effect discovered by Jeffrey Brown http://www.resilience.org/stories/2016-01-17/the-great-condensate-con-is-the-oil-glut-just-about-oil ) caused by tremendous increase of gas production and extraction of associated liquids and “false equivalence” reporting by major agencies which overstated the real supply picture.

      As condensate processing facilities were insufficient and some refineries refused shipping of blended oils that caused growth of condensate storage which was interpreted as oversupply of oil.

      5. Dropping of the price of oil was probably a political decision. A join decision of USA and Saudis governments among other things. Also it looks like that the point of lifting sanction from Iran also was chosen strategically.

      Obama explicitly stated that he intends to crush Russian economy via low oil prices. ( https://www.rt.com/usa/218731-obama-npr-interview-russia/ )

      Obama said that Russian economy “was already contracting and capital was fleeing even before oil collapsed.”

      Obama revealed that it was a “part of our rationale” that the “only thing” keeping Russian economy “afloat” was the price of oil.

      Sanctions only made Russian economy more vulnerable to the “inevitable” oil price disruptions. “They’d have enormous difficulty managing it,” Obama said.

      The US should be “firm with the Russians” when it comes to issues like Ukraine….

      That suggest that low oil price regime might well last for the duration of Obama administration unless Russia folds.

      6. It might well be that the decision to crush oil prices was also in part caused by the desire to save Western economies from the new recession as there were sign that they started sliding into recession earlier and that bought the USA and G7 almost two years of relative prosperity.

      In any case shale oil boom was one of the main factor of lifting the USA from the Great Recession and it probably served the same role as subprime mortgage boom in lifting the USA economy from dot com crisis of 200-2002. It also improved exports/imports ration and all produced oil (by virtue of decreasing imports) and most equipment used can be counted as manufactured in the USA product creating a short-lasted revival in the USA heavy machinery manufacturing.

      7. Depletion of world oil deposits is now an undeniable fact and the impression that we entered “post peak oil” period (true or false) creates pressure to move oil price up (as Ron explained in his recent post)

    • clueless says:

      Sydney Mike – I will give my illustration again. The problem is that almost nobody understands commodity pricing. So here is my analogy, again.

      A group of very wealthy individuals are playing a game of musical chairs. With unusual rules. There are 20 people playing and only 19 chairs. The rule: when the music stops, the person without a chair is executed. However, there is one chair for sale, so if you buy it in an auction, you will not have to worry. The price of the guaranteed chair – probably pretty high, especially if some are billionaires.

      Next game, same rules, 20 players, only difference is that there are also 20 chairs. The auction for one guaranteed chair gets a high bid of ZERO. It has no value. 20 players, 20 chairs. So, a 5+% increase in the number of chairs causes the value of a guaranteed chair to drop from millions of $’s to zero.

      If there is a shortage of a commodity, the price can skyrocket. Take oil. Do you want the fire department to say that they will not buy gas because it is too expensive? How about ambulances? How about police? How about people that have to get to work? How about an offshore drilling rig that costs $500,000/day to lease without considering the cost of diesel fuel. Are you going to shut it down because the fuel costs $5000/day more and you still have to pay the daily lease? Well, hopefully, you get the picture.

      • Sydney Mike says:

        Very well put Mr. Clueless. That is exactly what I am thinking. A relatively small change in supply can cause a major change in price.

        • George Kaplan says:

          You could also look at it from the other direction – between 2005 and 2014 prices increased four fold but supply went up not at all in the short term and only slowly longer term, and this might have as much to do with low interest rates as price. Now prices have crashed supply is declining equally slowly short term. There is an intrinsic time lag in the supply balance of at least one year to eighteen months for companies making investment decisions and about five years for most project development cycles. Any system with pure time lags is inherently unstable, and for oil the financial system seems to act as a positive (enhancing) feedback in the short term rather than helping to smooth things out.

      • Watcher says:

        What does price mean when it is measured in printed pieces of paper the value of which is defined only by agreement between counterparties and no innate, inherent integrity for the paper itself?

        When the yardstick itself has no integrity, how can you explore the validity of a mere theory like supply and demand with it.

        • Our currency is based on the full faith and trust of the US Government.

          Watcher, that’s just the way the world works. And I do mean world because every national currency in the world is based exactly the same thing. We keep harping on our “fiat currency”. But there is no such thing as a “non-fiat currency”.

          Again. That’s just how the world works. And if the fiat currency collapses then the world’s economies crash. So your only hope is to put your full faith and trust in our fiat currency. There is no alternative other than total collapse.

          • SW says:

            It is a form of Ludittism. In the evolution of primitive exchange systems you had direct barter, then an advance when a valuable exchange medium like wampum was used and in modern technological societies we have money which is issued by a government. The transition from wampum to money was done gradually, with the money initially being backed by wampum so that it would be accepted by the more primitive backward members of the species.

            • Caelan MacIntyre says:

              The problem with money is that it is a symbol. It is therefore decoupled from reality by its very nature as a symbol.

              “Money today is fiat money, a symbol of value created by the human imagination with no intrinsic value of its own.” ~ Wikipedia

              When something like money is subject to the ‘human imagination’ (LOL) all kinds of effects can happen with it and many of these effects are far from funny.

              “Our currency is based on the full faith and trust of the US Government.” ~ Ron Patterson

              Did you type that with a straight face, Ron? I can’t even read it with a straight face. ‘u^

              (I might be tempted, if I could, to edit your passage to add the word, ‘force’, after ‘full’.)

              • Nathanael says:

                Money is *inherently* a matter of trust and faith. Basically, I trust that other people will give me real goods and service in exchange for the money. *And that is why I accept the money in exchange for my goods and services*.

                Money is a social convention. ALL money is.

    • Sydney Mike says:

      It looks like we have our answer:

      The surplus of supply over demand at the start of the year is “even greater” than initially expected, the International Energy Agency said in its latest monthly report.”With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.”Supply may exceed consumption by an average of 1.75M bpd in the first half of 2016, compared with an estimate of 1.5M last month, and the excess could swell if OPEC members bolster production.

      A miserly 2% or so of excess supply can tank the price of oil. Imagine what a 10% shortfall can do.

  11. dolph911 says:

    In our world all governments have a tool called the printing press (or its electronic equivalent) than can conjure unlimited amounts of fiat currency out of nothing. This currency can then be lent to banks at 0% who can then lend out into the economy at any percent greater than 0, and make profit from the spread. Alternatively, the fiat currency itself can be used to pay back loans denominated in that currency. The central banks can just create currency and transfer the loans onto their own balance sheet. In effect, the public pays back the loans by inflation.

    Yes, that is correct. All loans in existence worldwide, every last one, can be paid back by the issuance of more currency.

    Doesn’t mean we won’t face a shortage of all sorts of things. But currency is not one of them. By definition, there is never a shortage of currency. Therefore, if you make the claim that everybody is broke and doesn’t have currency, that is incorrect. Currency is infinite, and infinitely substitutable. At last resort, they can just start crediting your accounts directly.

    Think this is incorrect, or perhaps unfair? Think long and hard before you reply to this post and say I’m wrong. What do you guys use to buy stuff? Gold and silver coins?

    • Watcher says:

      Not only that, but simultaneous with that governments could declare price freeze. And then require production of whatever, the refusal of which would be a criminal offense.

      Economics is not physics. It is a whimsical “science” at the mercy of all government decrees.

      • SatansBestFriend says:

        Economics isn’t physics. But it can’t violate the laws of physics or math ( which might be the same thing).

        You can print money all day long and all u do is dillute the value of the currency in existence.

        That may fool the markets for awhile, but not forever.

        No such thing as a free lunch.

        • Nathanael says:

          Incorrect. When the government prints money, it is usually actually *creating economic activity*. Activity which would not have happened without the money, because it was too hard to arrange all the barter transactions.

          Most of the time there is a *shortage of money* in the economy and the government needs to print more in order to keep trade happening. Not enough money and people have to try to barter instead, which is hard and doesn’t work and causes trades to not happen.

          If you print *too much* money then you get inflation, which means “diluting the value of the currency”. But as long as you don’t have significant inflation, you CAN and SHOULD print more money.

          Basically, money is used as a sort of “lubricant” to make trading possible. If there isn’t enough money in circulation, the economy freezes up. The government’s job is to print and inject enough money so that people can make trades.

          (Incidentally this specifically means the government needs to hand that money to *poor people* so that they can make trades like buying food. Rich people already generally have enough money to make trades. When the economy freezes up, it’s the poor people who drop out of the economy and can’t make any trades except barter — money needs to go back to them in order to get the economy moving. Stupid Puritan morality prevents us in the US from doing this, although it is correct by the cold calculating laws of economics.)

    • BC says:

      The shortage is not currency or reserves but lack of growth of after-tax and -debt service income and purchasing power of the bottom 90%+. We have been seeing this manifest in demand for commodities, contracting profits, investment per employee, industrial production, and final sales less the fiscal deficit, which is decelerating below stall speed and toward recession-like conditions.

      Peak Boomer demographic drag effects, extreme inequality, and health care, education, gov’t spending, and net flows to the financial sector exceeding 50% equivalent of GDP are exacerbating the decline in velocity and contraction of the acceleration of velocity. The more central banks print, the worse asset bubbles become and inequality encourages hoarding by the top 0.001-1% of overvalued financial assets at no acceleration of velocity in the productive economy.

      Negative interest rates are an effect, or response to, deflation, which is caused by excessive private debt to wages and GDP, which results in slower GDP per capita, which in turn causes deficits and public debt to rise thereafter to prevent nominal GDP per capita from contracting.

      We’re in the early phase of a debt-deflationary regime against which central banks and gov’ts are desperately leaning to prevent outright debt and price deflation.

    • Jef says:

      Typical hyperinflation ignorance.

      First off all money is LOANED into existence not printed with a press or a keyboard.

      No loans – no new money. Pay off loans – money disappears

      This is what is happening right now.

      Does the future look so bright that everyone is going to start taking out trillions in loans? NO!

      Does the future look so bright that banks is going to start loaning out trillions to everyone who asks? NO!

      • anonymousfink says:

        Thanks Jef…

        If all debt were retired all money would disappear.

        You also have the interest on that debt that has to be paid by someone else taking out a loan to create the interest.

        It’s exponential as they say.

      • Nathanael says:

        Money can be printed into existence. Just ask the Bureau of Engraving and Printing, which does so.

        Money can also be “loaned” into existence but *that’s a choice*. If we pay off loans with *newly printed Greenbacks*, we are replacing one form of money with another.

    • Nathanael says:

      You actually can have a shortage of currency — that is in a very real sense what causes a “Great Depression”.

      However, such a shortage of currency is a *choice made by the government* who issues the currency. A functioning government can always produce enough currency if it wants to.

      Other people can produce currency too. But it can be hard to get people to accept it, so it can be hard to make it work. For instance, banks produced “money market funds”, and people accepted them as equivalent to currency *until 2008* when suddenly they weren’t currency any more. The sudden “demonetization” caused an economic crash.

  12. Javier says:


    In other words, it is a given that production is going to decline. So if demand stays constant, or rises, then the price of oil will definitely rise. We know what is going to happen to supply. We have no idea what is going to happen to demand.

    Your analysis is perfect. 2016 is going to see a bigger reduction in oil production than the second half of 2015. That is the effect of oil price reductions that have already taken place, so not even a recovery in oil prices could prevent it. Now we should take the analysis a little bit further in the two possible scenarios:

    1. Oil demand does not decrease. This means that the global economy is stable. Oil price will increase. As long as oil price doesn’t get too high, the decline in oil production will be slowed and with luck halted or even reversed. We buy some more time.

    2. Oil demand also decreases. This means that the global economy enters recession. Oil price will remain low and the decline in oil production will continue and probably accelerate. We might enter a tail spin oil/economy situation that could produce a hard crash getting us much closer to civilization decline.

    Peak oil in 2015. We will have to watch the global economy as we already know what the oil production is going to be doing. Thanks for sharing your knowledge and view.

    • BC says:

      I expect #2, which I suspect is already beginning.

    • clueless says:

      Javier says: “could produce a hard crash getting us much closer to civilization decline.”

      When in doubt, bring out the chicken little (the sky is falling) again.

      • When in doubt, bring out the chicken little (the sky is falling) again.

        Clueless, bullshit! It is not a danger that civilization will decline, it is a lead pipe cinch.

        I am a little shocked. Such a silly cornucopian remark is not usually expressed by on of the regulars on this site. What I mean is, the regulars, when they disagree, usually try to make some kind of logical argument, not just through out a silly cliche that is without any logical argument whatsoever.

        Please feel free to refute my claim that the eventual decline of civilization is a lead pipe cinch. But please don’t try to do it with some silly one line cliche.

      • VK says:

        Of course civilization is toast. Entropy always wins. Fossil fuels just accelerated the demise while misleading us into thinking we were entering some sort of a techno utopia.


    • Nathanael says:

      It’s been very hard for me to predict oil demand. But I can predict a lot of related stuff. There are a number of interlocking features.

      (1) Demand for oil for heating is down permanently, on the death spiral to zero, and pretty close to zero already.
      (2) Demand for oil for industrial feedstock is down permanently, on the death spiral to zero.
      (3) Demand for oil for lubricants and plastics is insignificant.
      (4) Demand for oil for airplanes will probably rise with the economy and drop with the economy.

      Which gets us to the key one, which dominates all others in terms of volume:
      (5) Demand for oil for land vehicles is on a *permanent* decline due to the rise of battery-electric vehicles, but I couldn’t tell you the *timing* on this.

      Low oil prices mean it takes longer for the demand destruction to take place. High oil prices mean it happens quicker. Battery price declines are the main determining factor. Electricity prices are another.

      (Electricity prices will remain roughly flat in most areas, but areas with high prices will see electricity prices drop to 14 cents/kwh and eventually 11 cents/kwh retail, and half that wholesale. That I’ve figured out.)

  13. Caelan MacIntyre says:

    “…unless crude oil hits at least $60 a barrel soon…” ~ Ron Patterson

    How soon?

    “But if BAU continues as normal, the price of oil is going up.” ~ Ron Patterson

    How high?

    “That is unless some black swan event happens.” ~ Ron Patterson

    Price volatility and thermoeconomic issues (lower price glass ceiling?) to help it along?

    In any case, China, international shipping and Nick G comments on POB all seem to be in decline, if not outright collapse…

    • How soon?

      This year, by September or October.

      How high?

      $70 dollars or so.

      Hell, nothing is certain here. Anything could happen. All I am doing is just making a wild ass guess, a guess that is just as likely to be wrong as right.

      • Trump the Entertainer says:

        Nick G is out driving around the country in his new Tesla with free lifetime solar charging. What are you doing doomer ? Growing potatoes and raising rabbits

        • Caelan MacIntyre says:

          Speaking of cars, your ‘buddy’ posted this down-thread.

          Potatoes grow, and rabbits raise, themselves, respectively, which frees up valuable time for real community living, rather than working in some relatively-useless mind-numbing capacity in some vertical hierarchy neofeudal social disorder for some slavemaster. This is pretty much where this culture is at this point.

      • Caelan MacIntyre says:

        Agreed and fair enough. We’ll see what happens and how close you get.

  14. Anton Koffield says:

    Interesting article about the slowdown of the oil biz in North Dakota:


    This was completely predictable; I just didn’t think it would slow down by 2015/2016…I thought the head of steam might have lasted till ~ 2018-2021 or so.

    Will the boom times come roaring back, bigger and crazier than ever?

    None of us know.

    What we do know: The Earth is finite, the amount of FFs in the ground is finite, and depletion never sleeps, and the distribution of FF deposits (size, frequency) seems to follow the power law…and the cost to raise each bbl of oil and mcf of methane and ton of coal will continue to rise.

    Barring a breakthrough which produces inexpensive, compact, ubiquitous ‘Mr. Fusion’ power reactors, the outlook looks bleak. Even with a ‘Mr. Fusion’ breakthrough, other source and sink limits would end up eating humanity’s lunch if population increase was no slowed, stopped, and reversed at some point, and the seemingly endless increase in per capita consumption slowed and then reversed as well. But a ‘Mr. Fusion’ breakthrough would sure give us some breathing room to mature as a species and figure out how to bring our existence into some kind longer-term sustainable future, one in which we do not exterminate many of the other species on Earth.

    I would bet that Ron’s “lead pipe cinch” prognosis will turn out to be correct.

    • Nathanael says:

      We already have a “Mr Fusion” reactor. It’s called the sun. So isn’t that convenient?

      It’s ubiquitous — it shines on the whole earth; solar panels are inexpensive and getting cheaper (and are becoming ubiquitous); and solar panels are about as compact as you get for power generation.

      Our major problem is CO2 emissions, which will kill us all if we don’t stop it, thanks to ocean acidification and global warming.

  15. Hickory says:

    Does anyone here buy into the idea that both N. and S.America could both be energy independent for the next 20-30 years- if managed carefully?
    Here is a case for that. In N. America we have plenty of coal, nat gas, oil sands and various oils to keep us rolling, warm, powered and fed, if we cut back something like 30% on transport, and keep rolling out things like LED’s, transit, solar, wind, electrification of the car fleet, and a big HVDC electric infrastructure. Oil at $100 a barrel would keep the drillers busy. I seriously believe we could keep the GDP at close to par while cutting back on oil for transport by something like 30%.

    In S.America, they too could make due with the production from the continents oil sands, other oils, sugar cane ethanol, hydro, solar, etc.

    The key is effective management. But I fear we are a combination of too short-sighted, ignorant, greedy, and stuck in our ways to pull it off.

    • Anton Koffield says:


      I admire your can-do attitude…I still think those dreams sometimes.

      But…no, I don’t see your scenario happening.

      Politicians won’t tell the truth…we won’t elect ones who would tell the truth, because we can’t handle the truth and want to hear the reassurances that the BAU party will roll on, and that the majik will happen. It someone in power told us the truth, that person/those people would not be in power much longer…voted out, recall elections, impeached, marginalized. It is in our nature to be so.

      Volvo740 (below) has the right of it…declining EROEI…tick tock.

      I would love to be proven wrong…for my kids’ sake…

      • Hickory says:

        I guess what I’m saying is that it is theoretically feasible to achieve this (the 30% liquids reduction goal is just a wild guess), kind of like safe nuclear energy.
        But the human element of poor decision making, poor foresight, partisanship, lack of discipline, and outright contempt for others- makes achieving these these energy security goals highly unlikely.

        Also, a side effect of the trillions of paper wealth that has evaporated in past 6 months [multiple $70/barrel x’s the proved reserves of companies, countries, stockholders]
        is the unfortunate inevitable resultant drop in funds available to flow towards solar/wind deployment- ie the negative wealth effect.

  16. Volvo740 says:

    As grim as the depletion curves from Campbell et al looked like, those were best case scenarios.

    The real wall is when it takes 1 unit of energy to get 1 unit of energy out. Ehh – no – that can’t be. What equipment would they use to get that out? So we need a functioning steel industry. We actually need a bit more than that. An oil platform incorporates pretty much everything modern in this world, engines and motors of all kinds. Computers. And we might want to get to the platform. So we need some helicopters. A complicated machine.

    And even if we have all of that, we still done have any energy left for the rest of the conomy.

    Depletion never sleeps.

    • Caelan MacIntyre says:

      Civilizational decline is starting to feel palpable now.

      • Trump 2.0 says:

        Sorry to hear your view of the world is so blue. Ask your doctor if you could try serotonin. It is popularly thought to be a contributor to feelings of well-being and happiness. Also, once your able to hold down a job. Your self esteem will increase for the better.

        Don’t give up buddy !

        • Caelan MacIntyre says:

          “Sorry to hear you can’t get it up. It’s just you.” ~ Trump 2.0

          You sure? (*kiss*) Try harder. ^u’

          • Trump 2.1 says:

            Just give that free Canadian big government health care a try. If not for you, everybody else.

            • Your Buddy says:

              Don’t you just hate it when someone quotes one of your lame older edits?
              …Ok, here, let’s get rid of it once and for all:
              “Sorry to hear you can’t get it up. It’s just you.” ~ Trump 2.0

              There. All gone. ^u^

              “The main notion of Ivan Illich is the concept of counterproductivity: when institutions of modern industrial society impede their purported aims. For example, Ivan Illich calculated that, in America in the 1970s, if you add the time spent to work to earn the money to buy a car, the time spent in the car (including traffic jam), the time spent in the health care industry because of a car crash, the time spent in the oil industry to fuel cars…etc., and you divide the number of kilometres traveled per year by that, you obtain the following calculation: 10000 km per year per person divided by 1600 hours per year per American equals 6 km per hour. So the real speed of a car would be about 3.7 miles per hour.” ~ Wikipedia


        • Fred Magyar says:

          Also, once your able to hold down a job. Your self esteem will increase for the better.

          Like all the lazy slackers in the oil industry who got canned in the Dakotas recently? Yeah, some happy pills will solve all their problems. Maybe therapy will help them. Sooner or later they will wish they had some health care a la Canada as opposed to no health care a la USA. (Trump 2.5)

          Of course they always have the option of suicide, that helps solve the problem by reducing the population. I would have suggested a minimum wage job as a greeter at Wallmart but they have been closing stores.

          The US has 40% real unemployment!
          Donald Trump is right: America’s real unemployment rate is 40%

          • Paulo says:

            For Trump 2.0

            To add to Fred’s statement re Canadian healthcare: (Single Payer)

            “In 2015, total health expenditure in Canada is expected to reach $219.1 billion, or $6,105 per person. It is anticipated that, overall, health spending will represent 10.9% of Canada’s gross domestic product (GDP).”

            And in USA:

            “No other advanced country even comes close to the United States in annual spending on health care, but plenty of those other countries see much better outcomes in their citizens’ actual health overall.

            A new Commonwealth Fund report released Thursday underscored that point — yet again — with an analysis that ranks 13 high-income nations on their overall health spending, use of medical services, prices and health outcomes.

            The study data, which is from 2013, predates the full implementation of Obamacare, which took place in 2014. Obamacare is designed to increase health coverage for Americans and stem the rise in health-care costs.
            Jason Butcher | Getty Images

            The findings indicate that despite spending well in excess of the rate of any other of those countries in 2013, the United States achieved worse outcomes when it comes to rates of chronic conditions, obesity and infant mortality.

            One rare bright spot for the U.S., however, is that its mortality rate for cancer is among the lowest out of the 13 countries, and that cancer rates fell faster between 1995 and 2007 than in other countries.

            “Time and again, we see evidence that the amount of money we spend on health care in this country is not gaining us comparable health benefits,” said Dr. David Blumenthal, president of the Commonwealth Fund. “We have to look at the root causes of this disconnect and invest our health-care dollars in ways that will allow us to live longer while enjoying better health and greater productivity.”
            Heart surgery
            How’s your heart doing? You may want to read this

            The U.S. spent an average of $9,086 per person on health care in 2013, which translated to more than 17 percent of gross domestic product, the fund noted.

            That level of health spending relative to GDP is about 50 percent more than any of the countries studied for the report, which are Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, New Zealand, Norway, Sweden, Switzerland and the United Kingdom.

            The kickers are as follows:
            *Health Outcomes in Canada higher
            *Some Provinces no premiums….mine (BC $136/month) highest family rate based on income…reduced for low income families
            *No co-pays or deductibles.
            *My pension health plan (Private) pays for 1/2 premium and 80% pharm

            For example….5 years ago I was diagnosed with cancer. It required surgery and rehab. No bill for me and I missed just 5 weeks work. Regular follow-ups and I am cut loose from the surveillance regime this October to be declared cancer free.

            My wife was diagnosed type 1 diabetic at age 13. She is now 56. She has led a robust work and personal life and is in excellent health. In the States her diabetic supplies would cost us about $500/month, plus extras. Until the sub-standard Obama care was introduced, she would never have qualified for coverage. I would assume she would have died young in poverty having to pay for her supplies and for missing work due to complications.

            In this time of diminishing returns, the only constant is the intrusion of the Coropocracy in all facets of American life, plus the propaganda protecting the insider staus quo. My sister, who lives in WA is now old enough for Medicare. Nevertheless, she and her husband purchase a private insurance policy to ensure proper care. For her supposedly free Medicare, they still pay an extra $600/month to ensure they are covered by necessary procedures.

            Vote Bernie, imho. Apologies as it is none of my business who you vote for. However, Good luck.

            • clueless says:

              For the second time in one month, I am fearful of a contract being put out on me.

              Paulo notes: “That level of health spending relative to GDP is about 50 percent more than any of the countries studied for the report, which are Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, New Zealand, Norway, Sweden, Switzerland and the United Kingdom.”

              Which of those countries have a minority population of 50% like the US? If you combine the results from Idaho, Wyoming, Montana, South Dakota, North Dakota, Minnesota, Maine, Vermont, New Hampshire, Kansas, and Nebraska, you get results like those countries.

              He further notes: “Until the sub-standard Obama care was introduced” Well, it covers EVERYTHING – even a pregnant male. And it is FREE, if your income is low.

              He further notes: “Nevertheless, she and her husband purchase a private insurance policy to ensure proper care.” No!! Since medicare is not TOTALLY free, [there are small deductibles plus Medicare only pays 80%] most people purchase a Medicare supplement policy [which I do – My cost for my wife & me is $385/mo] which pays for the deductible and the Medicare co-pay of 20%. She and her husband are NOT paying for “proper care.” As Ron would say: I am calling Bullshit on that. PS. I have been on Medicare for 10 years. MRI [for anything, back, shoulder, etc] – one day wait. Surgery – usually scheduled within 3 days. See a doctor – one day. Need lab tests – can you go to the lab NOW?

              • Trump 3.0 says:

                Hello Clueless,

                I’m an independent insurance broker in the state of California that specializes in health coverage. What I’ve learned over the last 20 years is that most people(maybe 98%) don’t understand their coverage. Also most brokers bad mouth the ACA and the reason is because it has forced insurance companies to cut overhead expenses. The largest portion of that overhead are commissions to brokers. Over the last few years, commissions under the ACA have been cut from about 30% to 60% from prior years. I’m one of the few brokers that supports the ACA because a lot of the good things it does to fix the broken medical system.

                You are correct by calling a Ron Bullshit here. The ACA is not “sub-standard coverage”. In fact, it make better coverage available than what an individual could purchase prior and helps medium income people with financial help. Also, here in California there is no primary carrier available that sell to 65+ seniors except Medicare. The private carriers only offer Supplements like the “F” plan you describe for yourself and wife. Medicare isn’t free except for very low income individuals which get help from Medicaid. Most people have to pay $104 per month for their Medicare part B coverage in addition to deductibles and co-insurance(20%).

                Here is what I see as the biggest problem with the ACA currently and it is self inflicted by “Red” state governors who refuse to accept Medicaid for low income individuals(example: single people with less than about 15k annual income). During the first 3 years of the ACA(years 2014,2015,2016) the Federal Government pays 100% of the Medicaid expense to the state. After 2016, the Fed’s will pay the state 90% of the expense. There are about 6 to 8 million low income people in Red states that governors have refused to cover. Besides the fact of not getting coverage for these people. The emergency rooms still have to cover the expenses for these people and the states are missing billions of dollars that could stimulate their economy. All because of politics, ideology and 10% cost starting in 2017. Also, keep in mind that Medicaid is the lowest cost system to cover health care because it uses the lowest cost doctors, hospitals and drugs.

                If I were Hillary Clinton, I would “Trump” Bernie Sanders by offering to cover 100% of all future Medicaid costs to the states to get everyone covered. The “Red” state governors would not have any “Ron Bullshit” excuse to not cover the poor. This would be a lot cheaper than Medicare for all and do we really need the cost of a premium plan for the low achievers ?

                If I had sold you your supplement plan. My commission would be somewhere between $38.50 to $50.05 per month depending on which company covers you. This is a commission that didn’t get reduced by the ACA.

                Thank you and others like you

                • old hermit says:

                  THANK YOU

                  • Paulo says:

                    All I know is my American niece and nephew pay over $6000/yr premiums and $8,000 year deductible. When they had a rabid bat in the house they had to pay $7,000 per injection.

                    ’nuff said.

                    I call your bullshit and raise you reality.

                    Commision of $50.00/month for selling a policy? Priceless. What’s in your wallet?

                • Hickory says:

                  Of course Medicaid is poor coverage. Most hospitals/nurses/doc’s will avoid taking medicaid patients if they can control the doors to their facility because the reimbursement rate for service doesn’t pay well enough to pay the wages, let alone keep the facilities up.
                  I know because I work primarily emergency medicine and the ER gets all the medicaid patients that can’t find others places to get their care.
                  A medicaid based system would work if the reimbursements were at Medicare rates, but as Hillary keeps asking Bernie, where you going to get the money for that?

                  • Trump 3.5 says:

                    If “Medicaid is poor coverage” meant your doctor drives around in a Buick and doesn’t own a Porsche Panamera or BMW 750Li. You might get me to feel sorry for him.

                    There is no reason anyone should be turned away at an ER in this country. Period !

              • Nathanael says:

                No, our expenditures in states like Vermont and New Hampshire are WAY WAY WAY WAY out of line — much higher — than expenditures in Canada and Europe. For worse results.

                Medicaid is actually pretty good coverage. The nasty expensive coverage is what people who are stuck buying insurance on the “individual market” who aren’t poor enough to be on Medicaid get.

                If we had Medicaid-for-all we’d probably have outcomes as good — and as cheap — as Canada has.

    • George Kaplan says:

      Volvo740 –

      “As grim as the depletion curves from Campbell et al looked like, those were best case scenarios.”

      That was pretty much my thought as well. This is one of the more depressing posts here. I’ve been thinking we’d muddle through for a good few more years even as oil depleted but if these figures are born out I’m not so sure.

      The 10% decline rate without continuous infill drilling is particularly worrying. Mostly infill drilling accelerates production but does little for overall capture (sometimes a bit of increase in recovery, but sometimes it can have the opposite effect) so the more they are used the more the decline rate will increase after the peak. I know the 10% figure is for offshore fields but a) this is not encouraging for the prospects of deepwater development b) there have been recent large infill drilling programs in Russia and ME – if the result is that their declines tend towards 10% rather than 2 or 3 in the near term then look out.

      In addition for the ME – I cannot see how the ruling regimes can be maintained once serious decline sets in and is recognised as such by the populace (i.e. that there will be no recovery). As the cradle to grave social programs have to be continuously cut then there must be some kind of uprising, which you’d expect would lead to significant, and maybe permanent, disruption of production (and therefore less overall recovery).

      The export issue is also relevant to consider. Say a 10% reduction in production would likely be a 20% reduction in export availability (maybe a bit more because of EROI issues and growing domestic use, especially if wars and social unrest escalate) – which would crush most European and a good few developing countries’ economies even if they were looking reasonably healthy, which they obviously aren’t, and without the ever increasing waves of refugees coming their way.

      • 70%H2O says:

        For offshore I do not worry so much about decline rates as I do about the fact that there are no offshore stripper wells. If the platform cost 50 000 $ a day to rent and run, then they need to make those 50 K every day. In other words, offshore wells run their decline rate of say 10% a day, and then one day there are a 100% decline in one single day. There are fields from 1900 still producing, but I doubt any producing offshore field of today will survive me.

  17. shallow sand says:

    Ron, I appreciate your thoughts of $60 oil later this year. My concern is what happens to North American producers if that doesn’t occur.

    I looked closely at ConocoPhillips earnings release over the weekend. Remember they produce as much oil per day as some of the small OPEC nations.

    They are in serious trouble at $30 WTI and $2 gas. The one thing which somewhat helps them is they do sell a decent amount of gas internationally. On the other hand, they also sell a decent amount of condensate and bitumen, and sub $10 per barrel really hurts them.

    This got me to thinking about the transition from oil. The $10 per barrel tax proposal stunned me. I understand it wont pass a Republican congress. However, it was proposed by a two term President elected by a majority of those citizens who chose to vote. The proposal has to be taken seriously.

    I look at the state of the US coal industry. Is oil next? I have no answers. I do think this transition is going to be very messy, and those, such as President Obama, do not understand the ramifications of the failure of both the US coal industry and US oil industry within a fairly short period of time.

    I am not trying to start another fossil v alternative discussion with this comment. I just don’t think transitioning away from coal and oil will occur without a large amount of economic pain.

    If prices do not go up, ConocoPhillips will fail. I don’t know when, but they will. So will almost all others in the industry. So will the exporting countries. Again, don’t know when, but they will.

    I am just looking at this based upon the financials I am reviewing. The losses are truly staggering for 2015, and we are now so much lower in early 2016. We are relying on 15-20K foot wells with huge fracks, and selling the product at inflation adjusted prices which are at or lower than in the 1940s and 1950s. During that era, oil was coming from shallow, vertical wells.

    People in the industry are either scared to death or in complete denial. Our politicians are neither, they appear to be without a clue. I am not an Obama hater. He is a very intelligent man. I just don’t think he understands the economic upheaval if the US oil industry goes BK. Maybe it is necessary for the world’s long term, I’m not commenting to debate that. I commenting because his successor needs to understand that the US economy will be in bad shape if the entire industry goes under.

    One small example. The quick end of US oil refineries will mean a huge loss of very high paying, stable jobs. It will also mean billions of dollars of remediation and clean up, all that will be paid for by the US taxpayer. The BK refiners wont pay that bill. What is the plan? Again, not arguing good or bad, just pointing out reality.

    How about the hundreds of thousands of US gas stations? What is the plan to deal with them?

    I may be too close to this, but just my view. Again, it may be necessary, but those who are chomping at the bit to quickly end US fossil fuel industries need to have a plan to deal with the ramifications, or at least be cognizant of them.

    I hope this is just another cycle, and transition will be slow and smooth. Right now, I am doubtful.

    • likbez says:


      This “doom and gloom” situation will not last forever. The US elite already is worried about ramifications of “low oil prices for too long”. They are not stupid, even if “a very intelligent man” Obama in this particular situation is (judging from his statements). Bush clan is oilmen.

      ” My concern is what happens to North American producers if that doesn’t occur.”

      Think about major US producers as a part of the USA military industrial complex and you will understand that they will not fail. Small fish will be fried. Majors will be saved.

      “So will the exporting countries. Again, don’t know when, but they will. “

      I respectfully disagree. Only weaker countries might fail. This BTW is a perfect way for Western oil majors to grab some resources for pennies on a dollar. Countries with more diversified industries or huge foreign reserves will be the last man standing. Nor GCC, nor Russia, nor Iran will fail anytime soon. KAS is the weakest link here but it might last another 6 to 10 years just on foreign reserves. Russia and Iran are mostly self-sufficient and in areas were they are not, they can use China as supplier for barter or local currency. They probably can live without oil dollars with dropped standard of living for a long time, if not forever. Russia has problems due to religious and ethnic diversity but the level of hate toward the USA for the Ukrainian coup will probably keep Russia together politically. At least in a short time perspective.

      • shallow sand says:

        likbez. WTI has again breached $30. RBOB breached 97 cents.

        I do not know what the future holds.

        I do know that if prices do not improve there will be serious problems.

        I also know if a $10 per barrel tax were imposed now, barring a significant price increase, most North American oil producers will fail.

        I personally know several small oil producers. One example, one who produces 20 bopd, net, works 365 days per year, by himself. He tells me he breaks even at $25, he works for free at that price. He will receive $24 per barrel when the 1/16 oil check comes later this month. He is living off savings and his wife’s income. He has no debt, yet is in a bind.

        A $10 per barrel tax would cost him $73,000 annually, despite the fact that he will show a loss at $24, doing almost all the work himself (he contracts electrical and pulling only).

        That is the math.

    • Jeffrey J. Brown says:

      Here’s the link to the EIA’s Annual (US) Energy Review data, through 12/15:


      Note that total product supplied for 2015, 19.5 million bpd, was up by a million bpd from 2012 and it was the highest since 2008 (also 19.5 million bpd).

      Annual total liquids net imports were down year over year, from 2014 to 2015, but monthly total liquids net imports were up from 4.5 million bpd in 12/14 to 5.1 million bpd in 12/15 (as we saw a 100 million barrel increase in US C+C inventories).

      US net crude oil imports rose from 6.9 million bpd at the end of 2014 (four week running average data) to 7.3 million bpd at the end of 12/15.

      Here’s a link to the most recent four week running average Weekly Supply Data (ending 1/29/16):


      Based on the four week running average weekly data (through end of January, 2016), total product supplied was up to 19.7 million bpd, and the pattern of increasing net imports continued. Net crude oil imports were up to 7.5 million bpd, and total liquids net imports were up to 5.7 million bpd.

      In other words, it would appear that the US is becoming increasingly dependent on imported oil, especially imports of actual crude oil, as total product supplied last year was at a seven year high.

      As I have occasionally opined, I suspect that US refiners (and perhaps global refiners too) in late 2014 hit the upper limit of how much additional condensate that they could process, if they wanted to maintain their output of distillates and of heavier products.

      And I suspect that much, if not all, of the build in US and global C+C inventories in 2015 consisted of condensate. Therefore, IMO, oil traders are acting on fundamentally flawed data when it comes to the inventories of the product that actually corresponds to the price indexes, i.e., WTI and Brent crude oil.

    • wimbi says:

      To be fair and balanced – USA is HUGELY wasteful in energy and everything else to boot. We could do what we have done in the past- go to wartime emergency and do what we know how to do. At the end of that process we are off FF’s for good and all, and on to a society better in EVERY way than what we have now.

      And nobody gets fatally hurt. Simple example right here on my ridge. A dead end road. 11 ordinary cars being used in an ordinary way, and in the process gulping gulps of gasoline.

      Take ’em all off, put everybody on my EV, one trip after another all day. Everybody gets where they NEED to go, and they do it on already paid for PV. NO gasoline at all. Howzzat for energy reduction!

      Sure, “Politically Impossible”. Euphemism for stupid.

      So be it. You get what you don’t pay to not get.

      Ride into town, anybody? Kurt here will be glad to take you, makes him feel less useless.

    • Nathanael says:

      You look at the state of the coal industry. You ask, “Is oil next?” The answer is yes. It is.

      The gas stations will become Kwik-E-Marts. They already make most of their money from convenience store sales, not from gas.

      The oil company employees should go retrain now. Their training is useless and their business is dead. Put a fork in it.

      Meanwhile, we can’t hire solar panel installers fast enough, and electricians have waitlists measured in years. Electrician training will be very very useful.

  18. aws. says:

    With a little thought, and a few considerate cash crop farmers, the amount of energy (diesel for now) needed to grow food crops can be greatly reduced.

    And there is the 40% of corn production that is used to produce ethanol, that is just a plain stupid waste of energy. The transition won’t be easy, but incorporating pre-petroleum age agricultural practices can reduce energy demand.

    If you give it some thought this is an example of more oil “demand destruction”.

    Cover Crops, a Farming Revolution With Deep Roots in the Past

    By STEPHANIE STROM, NY Times, FEB. 6, 2016

    Modern farming practices like applying fertilizer and herbicides and not tilling their fields, or “no till,” have helped farmers increase yields and reduced labor, but they have also unintentionally interfered with root systems, increased erosion and disrupted underground microbial activity and insect life that are vital to plant and soil health. (Many farmers deploying cover crops continue to use herbicides, although often less than they did in the past, but they often can do without fertilizers.)

    “We’ve concentrated on the physical and chemical aspects of farming but not the biological,” said Dan DeSutter, who farms 5,000 acres near Attica, Ind.

    Mr. DeSutter began fooling around with cover crops about 17 years ago, after Purdue University used one of his fields for research trials. One spring he was repairing a drainage tile in the test field and came across the deep, webbed root system that some Oregon ryegrass had put into the soil.

    “I thought to myself, I have been pulling the guts out of my tractor to remove compaction 14 inches deep with a ripper,” Mr. DeSutter said, “and this plant has just bored a system of micropores four feet deep between cash crops all on its own.”

    Today, all 5,000 acres he farms are sown after the harvest of corn and soy with a mixture of as many as 12 different crops, including sunflower, sorghum, buckwheat, turnips and hairy vetch, each of which delivers a different benefit. Most die off in the winter and decompose, leaving behind a rich layer of organic matter that gradually sinks into the earth. Farmers use a planter or seed drill to punch the seeds for their cash crops into the decaying cover crop.

    • The transition won’t be easy, but incorporating pre-petroleum age agricultural practices can reduce energy demand.

      AWS, have you ever given any serious thought as to what a return to pre-petroleum age agricultural practices would entail? That would mean going back to farming with draft animals. But of course that was not what you meant. You meant going back to pre-petroleum age agricultural practices but still using lots and lots of petroleum… like the farmers in the article you quoted.

      Cover crops is not something modern day farmers only recently re-discovered. Farmers in my neck of the woods have never stopped using cover crops. They work great but they are no panacea. They still have to use lots of chemical fertilizers.

      • farmboy says:

        Ron Do the farmers in your area plant their covercrops as polycultures (say 6 way+ mixes) or just simple monocultures? Diversity is the key to health, in plants, which supports diversity in soil organisms, which in return feeds those plants. Diversity and a balance of the organisms in our own digestive systems is key to our health as well. There is a conection.

        Do they interseed their taller crops such as corn, sunflower, and sorghum, wheat, rice etc., with lower growing legumes, buckwheat etc., to feed beneficial insects, to fix nitrogen,and so that their livestock can utilize more of the crop aftermath as feed?

        Do they refrain from damaging the homes and food of their soil microbes by not tilling their soil?

        Do they leave a good layer of mulch on top by rolling the covercrop?

        Or even better do they use livestock to graze those covercrops to fertilize the soil with dung and urine and manage the livestock to trample the stems and stalks so that the field is ready to be notill seeded ?

        If they utilize all or most of these practices they can reasonably expect to build up their soils to a level where they can wean their farm off of fertilizers, pesticides and fungicides.

        The farmers that are doing this stuff are still using some herbicide(not even close to what most of their neighbors are) and most are using Diesel tractors combines, trucks and no till drills etc, some on thousands of acres, but others do it all by hand. Depends on the scale and other values. The bottom line is to utilize plants to maximize the harvest of solar energy and work with nature to maximize the quality of the food and fibre, that none of us can do without. At the same time, we are also rejenerating our soils, and taking the co2 out of the air ,and sequestering in some instances, up to 2 tons of carbon into our soils, per hectare per year. Soil that is loaded with carbon also infiltrates rain water faster and will hold on to that same water for much longer or until the plants need it.

        References; for starters just search on youtube; Gabe Brown, Ray Archuleta, Allan Savory, or Tony Lovell

        Thanks for this great website, I share most of your pessimistic outlook, but I am younger and will atleast try.

        As Petro would say
        Be well

        • Farmboy, I have no idea. I was raised on a cotton farm but we grew corn and hay crops for the cows. I hated it. I swore I would never be a farmer and I was true to my wishes.

          My dad would plant a cover crop called “vetch”. It was a legume and he usually plowed it under in the spring. I still see it on farms today where they plan on planting cotton or corn in the spring. But on the rest of their land they have winter wheat, alfalfa and fescue over the winter… But I am not a farmer anymore so I am not sure exactly what they do.

          No till farming is something that seems to be catching on here in a big way. That saves the soil but I don’t think anyone is really trying to get away from chemical fertilizers. Everyone is concerned with just making a living. As long as they can do that then everything is fine with them.

          But I left the farm over half a century ago and have never looked back.

          • Doug Leighton says:

            I have one fond memory of farms: Farmer’s Daughters.

          • likbez says:

            Can you please release one my post from the spamfilter. Thanks.

          • Stephan Becker says:

            Ron, the list of names to search on youtube from farmboy is very good. One more name and a direct link to a speech (from Dr. Elaine Ingham, Soilfoodweb) which you really should watch entirely:

            The Roots of Your Profits (1h36min)

            She explains why and how organic farming works (by using all the millions of micro- and macroorganisms in the soil). That’s possible within one year! REAL organic farming (no plowing, no artificial fertilizers, no pesticides) reduces the need of energy drastically!

            Another very good example for using mixed cropping respectively intercropping (from a german professor for ecology and renewable energys) – i think this information is till today not available in english anywhere on the web:

            Are energy crops reducing cultivation of foodstuff?
            by Prof. Dr. Ernst Schrimpff, August 2003

            The result: The yields of the two grain type (wheat and barley) are – in comparison with their particular cultivation in monoculture – more or less the same (300-400 kg/ha), but the quality of the flower for making pastries is better (4-6% higher share in gluten), so better prices can be realized.
            Furthermore there are 80 to 150 Liter of false flax oil per hectare in grain-false-flax cultivation produced, with pea-false-flax cultivation were even 270 Liter false flax oil achieved (Kramerbräu farm, 2000).

            These amounts of false flax oil are produced ADDITIONAL to the usual yields of the grains/crops! So you can harvest food AND energy on the same field at the same time (oilseeds and e.g. grains or peas are separated directly in the harvester or later in a seed sorter)!

      • robert wilson says:

        The first time that I saw a threshing machine on my grandfathers farm – circa 1937 – I was astonished. More than a dozen neighboring farmers brought a wagon and team of horses so that all of the wheat could be handled in one day. I was water boy. Not exactly sanitary but everyone used the same ladle. My grandfather either paid the neighbors for a days work or bartered his own team. He was actually something of a scientific farmer, even in the thirties. Post WWII the combine became popular.. http://www.livinghistoryfarm.org/farminginthe20s/machines_06.htm
        My mother’s sister wrote about these times. http://www.goodreads.com/book/show/3416809-life-was-simpler-then

      • aws. says:

        Hi Ron,

        I don’t think we’ll be going back to draught animals. 🙂

        One of the things that I hope people will have gotten out of the article I linked too was that with a little ingenuity, and rediscovery of the benefits that natural systems can provide agriculture, a farmer may be able to run lighter machinery, less often over the land.

        Doing my best to remain optimistic… for my kids’ sake.

        • Nathanael says:

          There are already electrically powered tractors. Some have been running for decades, under wires.

  19. Oldfarmermac says:

    HI SS,

    “I hope this is just another cycle, and transition will be slow and smooth. Right now, I am doubtful.”

    You can bet your last can of beans that barring catastrophic black swan events, THIS IS just another cycle.

    Price wars happen, and the end game in a price war consists of the high cost folks and the folks without staying power going broke.

    It is impossible to say how long this one will last, or how many companies and countries will go broke.

    This is the first grand scale price war, in an industry that is mostly nationalized, world wide, with easy transportation of the product possible, world wide, which in effect makes it economic WAR BETWEEN COUNTRIES.

    They say history does not repeat , but that it does rhyme, and that there is nothing new under the sun in the affairs of men, but this situation appears to be a new one.

    Some producing countries are pretty close to broke themselves, and probably will not be able to borrow money to keep producing oil that loses them money too much longer.

    But they will be able to hang in there running at a loss a lot longer than an independent business. HOW long is anybody’s guess.

    The Limeys for example can probably run their North Sea fields at a loss for quite a while, and most likely WILL, for political reasons, even though the companies actually RUNNING the oil platforms are private. The government will likely subsidize them one way or another.

    History tells us that economic transitions are just about always slow and painful, and often violent as well.

    The transition from fossil fuels to renewables will be slow, painful, and violent. The pain and violence are already perfectly obvious, and will get a lot worse. A LOT worse.

    The American oil industry might change hands, and a lot more men in it may find themselves unemployed before things settle down, but it is NOT going away due to any politically driven change. The coal industry is NOT going away due to political pressure. The gas industry is NOT going away due to political pressure.


    Coal will come roaring back, world wide, once the cheap gas is mostly used up. It will come roaring back here in the USA.

    You can bet your last bag of dried beans on it, because renewables are simply NOT GOING TO SCALE UP far enough and soon enough to more than SLOW DOWN the rate at which we use up the last of our cheap fossil fuel reserves. IF we manage a transition to a renewables based economy, we will be at LEAST a couple of decades getting HALFWAY THERE.

    The greenest of the green young women who are at the leading edge of political change are all for Hillary and Bernie ( gonna vote for Bernie myself I hope) but the first day the transition to renewables inconveniences them PERSONALLY they will morph into republicans.

    They will vote for the Koch brothers before they give up their lifestyles.

    I have no daughters of my own, but a number of men who do, and know their idealistic daughters very well indeed, have ALL assured me this is absolutely true. These successful young women are just not going to live in cramped apartments and share buses with smelly, foul mouthed people, the people they love to love at a distance, but avoid like the plague, at the personal level.

    Renewables are irrelevant to the current oil price problem . Ten or twenty years from now, this will no longer be true.

    • Hickory says:

      Agree about the cycle, coal, and renewables timeframe.
      Someone with very deep pockets is going to buy some very cheap coal, gas, and oil proven reserves this year.
      I hope its not foreigners, so at least some of the eventual earnings and btu’s stays onshore.

      • R Walter says:

        Don’t forget water, water is going to be a big deal in the coming years.

        Coal mining companies sign 99 year leases for coal deposits. A utility that generates electricity did buy a coal mining company to capture the leases. The coal mining company is a subsidiary and operates on its own.

        That is what happened to the coal mining company that is now owned by a utility.

        The coal mining company had thousands of acres of land in Texas that were leased for 99 years. Coal mining companies have to protect their business operations in order to continue to mine coal. 99 year leases eliminates any anxiety about where to get some more coal.

        99 year leases for coal on federal lands has since been recently changed.


        Mr. Market is tripping and falling today.

    • Donn Hewes says:

      Seems to me the window for “just another cycle” is closing. One lurkers WAG. Consumption stays neutral while production falls some. 6 – 12 months prices rise to $50 – $70 as storage drops slightly. Production doesn’t go up; but consumption falls a little and storage quickly returns to its current levels. Prices fall to current levels again with in 12 – 18 months with a lower level of production than today. Just a WAG.

    • Nathanael says:

      Oil is mostly used for cars. The US car market is about 8 million cars per year (declining generally). My projections put battery-electric cars at 10% of the market minimum in 2026. Importantly, they will be eating the high end of the market — this is so important to auto manufacturers that I may have underestimated the speed at which they will adopt electric car technology — so they may accelerate the transition. This is enough to make a major bite in the oil market.

      Around the same time, nearly all electricity in the US will be produced by renewables.

      “Renewables are irrelevant to the current oil price problem . Ten or twenty years from now, this will no longer be true.”
      Less than ten. Renewables have already killed coal and are very relevant to the collapse of the coal price. (New wind is cheaper than old coal. New solar is cheaper than new coal, and closing in on old coal.) Oil is up next.

      (NG is gonna take longer and I haven’t figured it out.)

  20. Javier says:

    Preliminary estimates indicate that global CO2 emissions have declined by 0.6% last year, after growing only 0.6% the previous year.

    This reduction was achieved despite fossil fuel energy prices being lowest in 2015 since 2009.

    Looks like 2014 was the year of Peak CO2 Emissions.

    Now climate scientists can take all those RCP 8.5 based studies and toss them to the recycling bin, or try to sell them as scary science fiction.

    • SW says:

      You say that as though it is a bad thing or as if Climatologists will be disappointed by progress in reducing CO2 emissions. Do you really believe that? Don’t you think that a far more plausible interpretation is that the warnings emanating from those quarters have been an effort to encourage precisely this result? Even if you believe that the projections have been overstated wouldn’t you at least concede that the intent was to achieve precisely this sort of change in behavior? It seems to me to be a supreme act of projection for those on the right to assume that the goal in this effort is simply to increase the pool of research dollars. Like Ben Carson’s run for the Presidency or something.

      • Javier says:

        Who cares what the US right thinks or what I think. The data indicates that we are reducing our global emissions. We have a very moderate warming (El Niño permitting), and we are reducing our emissions. If some people were afraid of climate change they should put aside those fears.

        • Sophisticated Peasant says:

          No actually, two things:

          1. Because of the latency of any system, but this one in particular, we are currently witnessing the effects of greenhouse gas emissions from 30 years ago, and, if we were to halt all emissions TODAY, a fantasy of the Nth order, the planet would continue to warm for at least 30 years.

          2. Particulate air pollution, i.e. sulfur, has played the role of limiting the amount of solar radiation to enter and then be trapped in the atmosphere. This is known as Global Dimming. If we were to halt all forms of particulate pollution TODAY, a fantasy of the Nth order, the clearing of Global Dimming would allow significantly more solar radiation to enter and be trapped in the atmosphere. We would experience a rapid and sudden shift into an entirely new and terrifying climate regime, something along the lines of +4-6C literally within only 5 years time.

          For the second scenario above, I believe this is the reason a highly secretive, international, aerial spraying program has been on-going since the early-to-mid 90’s, also known as “Chemtrails” (a mixture of aluminum and other metals used to reflect UV radiation back into space, confirmed with water testing at ground level after heavy spraying).

          They know this and we have already been deploying geo-engineering schemes in an vain attempt to prevent the 4-6 C temperature rise in under 5 years.

          How would the temperature 4-6 C in only 5 years with the clearing of Global Dimming?

          The Methane Clathrate Gun, as professor Guy McPherson has rightly point out. Massive deep-sea stores of frozen methane would be released all at once.

          Currently there are 29 auto-catalytic processes currently in play or waiting to go off, Global Dimming, the melting of Permafrost and sea-bed Methane clathrates only two among them.

          In other words?

          We are fucked.

          I would post links but everyone here can copy and paste into their search engine of choice.

          • Petro says:


            while you are Sophisticated enough to be on the right track, I would urge you to study and learn (…and it might take a while…) a few things (…well, maybe a few more than a few…) BEFORE (that’s the key word: before!) assertively commenting about what enlightened minds such as prof. McPherson say and/or write.

            -One more thing: prof McPherson is quite the evidence/numbers based fellow and it is best not to mingle scientific minds akin to him in the same sentence as :
            “… I believe this is the reason a highly secretive, international, aerial spraying program has been on-going since the early-to-mid 90’s, also known as “Chemtrails” (a mixture of aluminum and other metals used to reflect UV radiation back into space, confirmed with water testing at ground level after heavy spraying)…”

            Just a thought, just a thought…

            Be well,


          • Javier says:

            Sophisticated Peasant,

            “1. we are currently witnessing the effects of greenhouse gas emissions from 30 years ago”

            I dispute that. CO2 molecules are produced instantaneously when you burn fossil fuels, and the moment they are in the atmosphere they are absorbing and emitting radiation and heat exactly the same as any other molecule. The latency you speak about is from a hypothetical feedback effect that has not been neither observed nor measured.

            The committed warming hypothesis has a very rough time because all the evidence points that it doesn’t exist. We have trouble to explain why we get so little warming from so much CO2 since 2000 as to entertain the idea that there is a significant amount of committed warming not showing up.

            “2. Particulate air pollution, We would experience a rapid and sudden shift into an entirely new and terrifying climate regime”

            Another fantasy hypothesis that doesn’t even take into account the amount of warming coming from coal black soot in the atmosphere. Nor does it take into account that sink removal of CO2 is increasing proportionally to the concentration of CO2 in the atmosphere, not to our emissions. If we reduce our emissions by 50% atmospheric CO2 should start going down, if we understand the carbon cycle, as scientists claim.

            “I believe this is the reason a highly secretive, international, aerial spraying program has been on-going”

            Now we get into the conspiracy theory realm. Well done.

            “The Methane Clathrate Gun”

            Scientists don’t believe so. It has not fired even in significantly warmer interglacials, like Eemian.

            “We are fucked.”

            You can be as fucked as you want. That’s a personal option.

        • 70%H2O says:

          “We have a very moderate warming”

          Very? Moderate? Really?

          This snippet: http://utsikten.blog.se/files/2016/01/2015-1.png

          Comes from here: http://data.giss.nasa.gov/gistemp/tabledata_v3/GLB.Ts+dSST.txt

      • George Kaplan says:

        Report says: “Emissions are projected to decline by -0.6% in 2015 (range -1.6% to +0.5%).”

        And from that one, projected point which may not even show a reduction, we decide everything is great?

        The Keeling curve is actually showing accelerated CO2 build up over previous years at the moment so released CO2 from wildfires or reduction in take up in the warming oceans is more than compensating for possible reduction from human use. Or the projected figure is wrong. I think there is more chance politicians deliberately misreport this in COP21 year than that there is a conspiracy amongst climateologists. However by some measures the world was in recession last year (e.g. manufacturing, which I’d guess is a bigger FF user than service industries, in USD terms) so the number might be correct.

        Either way we need to keep the scientists who know what they are doing on the case.

        • The keeling curve is juiced up by El Niño. That measurement is taken in Hawaii, just north of the Equator. The curve will come back down on trend when we go through the La Niña swing later this year.

          Ron: Norwegian fields are in much better shape than uk fields. They produce less water, have higher oil rate per platform.

        • Javier says:

          Hmm, I don’t get it. It was supposed to be super duper important to reduce global CO2 emissions, we have been told. Since 2010 global emissions have been increasing less and less. Increase in 2014 was only 0.5-0,6%. The EU said:
          European Commission Joint Research Centre: Global growth in CO2 emissions stagnates

          Now we finally get a reduction for the first time without being in recession in 2015, right after Paris meeting. And you tell me it is for nothing?

          We just keep doing it until temperatures abate and we get some serious cooling or our economy goes bust, whatever comes first. I really have a problem understanding climate alarmists. This is supposed to be success.

    • Jef says:

      I guess I will go out and buy down parka after all.

      “Looks like 2014 was the year of Peak CO2 Emissions.”

      Looks like methane has more than made up for any decline and with record warmth in the arctic it looks to increase rapidly.



      This is for all the marbles so stick it up your A$$ets Javalina.

      • Javier says:

        Oh yes, methane looks so scary from IPCC scenarios. Not even making it to the lowest.

        Unless you happen to live near Aliso Canyon, that is.

        • I think they like to use methane to juice up their forecasts. The only thing we need here is Leonardo do Carpio quoting All Gore.

          • wharf rat says:

            “The only thing we need here is Leonardo do Carpio quoting All ”

            We’ve got better; we have Rat quoting people quoting a semi-ubiquitous internet climate denier by the name of Fernando . I ran across this one a few weeks ago….

            “I know it will sound selfish…

            Oh, rest assured, it doesn’t just sound selfish.

            It’s also myopic, ignorant, logically fallacious, geographically/intergenerationally/interspecifically elitist, cognitively scotomatic, and a whole bunch of other adjectives.
            Fernando, you set yourself up as a human pinata. Do you ever read what you post. I think not. You are more than selfish. Yo are stupid.
            No FLea has said this sort of sociopathic nonsense all over the place not least Grauniad CiF, demonstrating an over inflated ego, self worth and general Dunning-Kruger effect. This includes claims to help bring down the USSR, a greater capability on scientific subjects than Michael Mann etc etc.

            Funnily enough, as a refugee himself, Flea, will also be against the climate refugees caused by the continued denial of climate science.

            • Rat, do you come up with the attack content or do you copy and paste?

              • wharf rat says:

                It appears your peer reviewers have rejected you.

                • Another Starry Night says:

                  WR – great rant! Almost worth the continual scrolling to avoid J&F stuff on every post.

              • Caelan MacIntyre says:

                Fernando, why are you now dropping the ‘e’ at the end of ‘Leanme’? Is it to slowly inch your way toward your new ‘FLea’ moniker?

      • Co2 content isn’t the same as cumulative emissions. The carbon sinks remove about half of emissions. My calculations show that after we hit the peak emissions we will start seeing a large reduction in concentration increases, and after we hit about 40 % of peak we will see concentration start to come down.

        As it turns out it really isn’t such a big deal. Atmospheric water vapor isn’t increasing as much as predicted. And theory says that’s the real nasty greenhouse gas.

      • Javier says:

        Why? The level at which CO2 is disposed by sinks keeps growing fast, and we just put 35% of all CO2 ever since 2000 and have seen very little warming for it.

  21. Doug Leighton says:


    “Chesapeake, which has more than $10 billion in debt, has been hit by a steep fall in both oil and gas prices. Many energy-related companies have hired financial and legal advisors to help them manage heavy debt loads.”


    • shallow sand says:

      Question. How many of the rigs still left in onshore lower 48 are contracted out to companies that have filed for BK protection in 2015 or 2016?

      For example, how many rigs does Samson have running? Magnum Hunter, etc?

      • Ptero says:

        your question is misguided.
        Do not pay attention to links above, for they don’t know how the stock market works (with regard to a listed company: i.e. chesapeake CHK)

        CHK is the second largest gas producer and the 12th largest oil producer (if I’m not mistaken).
        CHK stock closed at $3.06 on Friday. At one point it reached $1.50 today before closing at $2.04.
        That is more than 50% decline (even though it closed with 33.33% decline)
        Per NYSE/ARCA/NASDAQ/NYMEX rules (…that’s what people posting links above do not know…among other things!), if it would have closed below %50, it would have AUTOMATICALLY triggered margin calls (unavoidable and immediate insolvency! That is why you heard : “it hired Attorneys…” calls only when CHK reached $1.50) and – judging from the size of the company and its significance for the LTO revolution (read: junk bonds!), heaven help us all involved in the oil/energy business what would have come next (with regard to other LTO/high yield financed companies) .
        Do not listen to fundamentals and people who post links they saw on Bloomberg/CNBC and know little to what they mean.

        Be happy “somebody” bought CHK in the last hour of trading and took it to $2.04, otherwise….well, I do not want to say it…
        It is coming, but hopefuly not today or tomorrow…but unfortunately it is coming.

        And that is the main reason why the $60-$70 oil might be a dream….
        Well, I do not want to sound like a broken record…you know where I stand.

        Be well,


        • Caelan MacIntyre says:

          Petro, you don’t have to fill in the ‘website’ part of your comments, incidentally. You can leave it blank. Just your name and email are required.

        • shallow sand says:

          Petro. I was wondering who stepped in and bought. TBTF applies to shale, and the $10 per barrel tax is pure political grandstanding?

          • Petro says:


            I try to stay away from thinking that is not based on evidence (aka: conspiracy staff), but at this point it does not matter as long as the stock of a company as important as CHK is to LTO plays and high yield financing (aka: junk bonds), is not left sinking below 50% at, or around 2 pm (time when margins are calculated and settled).
            If investors do not have enough cash to settle margins, they will panic and sell everything and anything at any cost… which at this point will repeat Lehman but times 10000…000…000…

            Plus, since Rubin/Summers/Clinton et al repealed Glass-Stegal in 1999, all banks including what you call TBTF are techically and legally allowed to do what you imply they do.
            As I wrote before, at this point we should all pray things are stable at ALL cost: legal, ilegal, too big or too small to fail or succed it does not matter.
            The alternatives are so horrible that no amount of gold and “non-fiat” “honest” money , or whatever – will be able to carry us through…

            Pray that grammy Yellen and TBTF keep it stable…pray.
            I do everyday…
            Whoever tells you otherwise (at this point) knows very little of how economy truly works.

            Be well


          • Petro says:

            …my comment got stuck somewhere….

            be well Petro

          • Petro says:

            …about the $10 tax:
            while do not put anything past the clowns who govern us (all shades and colours of the spectrum: I do not want some moron here start the libs vs. cons and republicrats vs. democlicans BS…!),
            I think all of them know that will never pass and is thrown out there as noise to cover up, or stir up something else…

            The consequences of passing the $10 tax are nothing short of suicide and the clowns might be homicidal, but I doubt very much they are suicidal.
            That is only my opinion however…
            Be well,


            • Nathanael says:

              The $10/bbl tax won’t pass the Republicans, but it’s a great idea. It’s good to kill the oil industry now while it’s on the ropes anyway. It’s a mercy killing. Kill them now, rather than letting them slowly suffer as they die like the coal industry did.

              Renewables have already won. Solar and wind are already scaling up so fast (solar deployment doubles every 2 years, wind every 3 years, solar costs drop in half every 2 years on average) that anyone who hasn’t been paying attention is way behind. Battery prices are dropping about 7% per year which is fast enough to handle clouds and low-wind nights. Production of highway-range electric cars is doubling roughly yearly.

          • Petro says:

            …and I almost forgot the cherry on top, Shallow:

            Next week CHK has a big scheduled debt payment…

            Ouch, let us hope that goes “smoothly”, or a solution is found.

            Be well,


      • Watcher says:

        Not until the executives have configured themselves to the extent possible within insider trading regs. After that, maybe they’ll have “plans”.

    • AlexS says:

      U.S. Companies at Risk of Default Near Crisis Peak, Says Moody’s


      The number of U.S. companies that have the highest risk of defaulting on their debt is nearing a peak not seen since the height of the financial crisis.
      With the energy industry crumbling amid record low oil prices, the number of companies with the lowest credit ratings reached 264 as of Feb. 1, just shy of the high of 291 set in April 2009, according to a report by Moody’s Investors Service Wednesday. That’s a 44 percent jump in the past 12 months, Moody’s said.
      “The majority of new additions came from oil & gas ….
      A total of 74 energy companies, including Energy XXI Gulf Coast Inc. and Halcon Resources Corp., are expected to have significant difficulties sustaining their debt, according to the report.”

      BTW, Halcon is down 12.8% today, 67.5% year-to-date, and 96% in one year.

  22. George Kaplan says:


    I fear we might see more of this as production facilities age and companies cut margins.

  23. Watcher says:

    The nature of the upcoming Apocalypse has likely rec’d considerable light shone on it these past 18 mos or so.

    We have learned that there is oil underground and because you MUST have it, you get it, and you jettison capitalism along the way, because oil is more important than capitalism. In fact, capitalism is minor collateral damage in the bombing society takes. Debt will lose meaning, too, because you MUST have it and debt may stand in the way.

    So . . . civilization will die in a way quite a bit different than simply having no oil. People in large groups will lose any other goal in life other than to have oil to carry food. The purpose of life will be to feed cities.

  24. Pingback: News highlights, Feb. 8 at Forget the Rest

  25. Silicon Valley Observer says:

    Ok, climate change skeptics. You all enjoy pointing out that the evidence of climate change is either trumped up or exaggerated. So please explain how the documented change in arctic temperatures and the reduction in sea ice is not an indication of climate change. I really do want to hear what you have to say.

    • Watcher says:

      How about you ask that on a climate site. Hear it there.

      • Silicon Valley Observer says:

        Because you and others post here. I want to hear from YOU.

      • Dave Hillemann (Texan) says:

        Careful there. I tried suggesting as much in the previous post and got lined up by the firing squad for it. Talking about climate change is just too irresistible for some here.

    • Andy Fishburn says:

      Silicon Valley Observer,

      Well the North Pole is still up there, icy and snowy, and growing all the time. Here’s a slight oldie of an research article, but still relevant since the science hasn’t changed in the meantime anyhow…http://dailycaller.com/2013/12/16/global-warming-satellite-data-shows-arctic-sea-ice-coverage-up-50-percent/

      BBC News reported in the fall that data from Europe’s Cryosat sensor indicated that Arctic sea ice coverage was nearly 9,000 cubic kilometers (2,100 cubic miles) by the end of the year’s melting season, up from about 6,000 cubic kilometers (1,400 cubic miles) during the same time in a previous year.

      This came as a shock to researchers who saw Arctic sea ice coverage shrink to a documented low in 2012. However, now sea ice coverage has expanded to reach the sixth record low, according to AFP.

      “We didn’t expect the greater ice extent left at the end of this summer’s melt to be reflected in the volume,” said Rachel Tilling of the Centre for Polar Observation and Modelling in a statement. “But it has been, and the reason is related to the amount of multi-year ice in the Arctic.”

      • wharf rat says:

        “growing all the time”
        That’s denial speak for “Look, it wasn’t a record low again.” Deniers are the only people who expect temps to go up every year, ice to go down every year, etc. Back-to back yearly records are about as rare as back-to-back Super Bowl wins, and, when it comes to temps, there has never been a threepeat.

        “science hasn’t changed in the meantime ”
        The ice has. Might have something to do with the fact that the NP was briefly above freezing in the sunless days near the end of Dec.

        Absurd January Warmth in Arctic Brings Record-Low Sea Ice Extent
        By: Bob Henson , 7:23 PM GMT on February 04, 2016

        This winter’s freezing season in the Arctic is falling short. The extent of Arctic sea ice this week is hovering near record-low values for early February, based on observations that extend back to the start of satellite monitoring in 1979. Data from the National Snow and Ice Data Center (NSIDC) shows that last month had the lowest overall Arctic sea ice extent of any January in the satellite record (Figure 1). As detailed in an NSIDC report on Thursday, the total extent of 13.53 million square kilometers (5.2 million square miles) was 1.04 million sq km below the 1981-2010 average and 90,000 sq km below the record from January 2011.


        • Andy Fishburn says:

          You’re really going to reference something written in Jeff Masters’ blog (by his climateering accomplice Bob Henson, no less)? Wow, unbelievable given that it’s common knowledge that the government pays good money to nuts like them to come up with lies and exaggerations that support the global warming paranoia. And naturally (but sadly) arrogant leftists like them go around waving their high levels of education in everybody’s face saying “trust me, please?” so as to gain public research money because their precious college degrees were unable to give them any other usable skills to feed their families…pathetic!

          • Jiimmy says:

            Tin foil hat alert. The guvmint is participating in a conspiracy again. Andy, you might fit in better commenting over at peakoil.com

            • Marty says:

              Are any of you lot aware of what the name “weather underground” references? Search it on wiki if needed and tell me it’s not one of the most chilling names possible for a climate change focused website.

              • Fred Magyar says:

                Yes, Marty, some of us were already around back then.
                What’s your point?

                And BTW, do you think the Vietnam war was more, or less chilling, than what the ‘Weather Underground’ did?

                Perhaps the owners of the blog didn’t think that, ‘The Anti Military Industrial Complex Climate Blog’ was quite as catchy a name, eh?

                So yeah, the reference and the political leanings of the blog owners are quite obvious. Considering we are now well into the 21st century and I don’t believe the blog owners are currently promoting any form of domestic terrorism, I think your comment is pretty stupid!

                • wharf rat says:

                  We don’t need a weatherman to know which way the wind blows. Even plants and animals are smarter than the deniers.

                  Climate change driving species to the Earth’s poles faster than predicted, scientists say


                • Marty says:

                  Many parallels between the weather underground’s philosophies and antics and those of the climate change promoters. Why would you name a weather-climate website after a group like that unless you sympathised? All a load of bollocks at any rate. Enough said.

                  • Caelan MacIntyre says:

                    “Why would you name a weather-climate website after a group like that unless you sympathised?” ~ Marty

                    Tongue-in-cheek? Specifically, perhaps, for those who might need a weatherman to know which way the wind blows?

                    “An association fallacy is an inductive informal fallacy of the type hasty generalization or red herring which asserts that qualities of one thing are inherently qualities of another, merely by an irrelevant association. The two types are sometimes referred to as guilt by association and honor by association…

                    An example of this fallacy would be ‘My opponent for office just received an endorsement from the Puppy Haters Association. Is that the sort of person you would want to vote for?’ ” ~ Wikipedia

                    “Enough said.” ~ Marty

                    Be our guest.

            • Marty says:

              BTW, I found this blog due to peakoil.com, as the postings made by Ron get republished to the crowd over there.

          • Caelan MacIntyre: The Climate of The Generic-No-Name Drive-By Snipes? says:

            Humans’ crushing footprint on planet Earth includes Anthropogenic Climate Change/Anthropogenic Global Warming (AGW) or relative anthropogenic effects on the climate, but goes way beyond– way beyond the remarkably cookie-cutter -formulaic ‘canned comments’ of the ‘generic-no-name’ drive-by snipes that disappear almost as soon as they arrive.
            This seems to strongly suggest that there is very little real, sincere interest in the truth and/or discussion thereof surrounding AGW, and more about, ironically, peddling their own vested/political/myopic/monied (conflicts of?) interests.

            “Some political scientists have suggested that the classifications of ‘left’ and ‘right’ are no longer meaningful in the modern complex world. Although these terms continue to be used, they advocate a more complex spectrum that attempts to combine political, economic and social dimensions.

            Libertarian writer David Boaz argued that terms left and right are used to spin a particular point of view rather than as simple descriptors… Boaz asserts that arguments about the way the words should be used often displaces arguments about policy by raising emotional prejudice against a preconceived notion of what the terms mean.” ~ Wikipedia

            • Oldfarmermac says:

              hi Caelan,

              You are DEAD ON about the terms left and right now being used mostly as spin words.

              People at the bottom, at the nitty gritty level, are all about US and THEM.

              Tell me where a man or woman stands , on just a couple of points, and I can tell you where he or she stands on a LONG list of points that have little or nothing to do with actual reality.

              I know some redneck union guys who are big time gun enthusiasts who absolutely believe that the left wing does not want to collect their guns. Why? Because of cognitive dissonance and their political allegiance as union members to the D party.

              Farmers who believe they are upstanding examples of self reliance, and vote R straight thru, are some of the biggest babies in the country, having grown fat on the government welfare provided farmers. A close relative got a huge loan at a trivial rate of interest to buy his farm, with the result he is now a multimillionaire. He has NEVER farmed the place he bought with the loan, but he did continue to farm a LITTLE bit for a while.He also got a humongous tax write off on his new fully tricked out pickup trucks, as a small businessman. Biggest goddammed republican you ever met, and believes anybody who gets a free school lunch for their kids is a BUM- even if that person works for him full time and he pays peanut wages.

              I could go on all day.

              People who are utterly ignorant of the physical sciences are easily and accurately classified as either believers or non believers in forced climate change, depending on their politics.

              A Democrat will generally believe anything the D party wants him to. Ditto a Republican. The folks in both parties who are smart enough to know better just keep their mouth shut and go along with the party line.

          • Fred Magyar says:

            The problem with comments like yours is that you always attack the messenger, in this case Jeff Masters and Bob Henson.

            Why don’t you try arguing with the actual data and analysis of that data in NSIDC report which they reference? To answer my own question, because you can’t.


            BTW, anyone who makes comments like this:

            And naturally (but sadly) arrogant leftists like them go around waving their high levels of education in everybody’s face saying “trust me, please?” so as to gain public research money because their precious college degrees were unable to give them any other usable skills to feed their families…pathetic!

            Is suffering from very severe Dunning Kruger effects!

            “One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision.”
            ― Bertrand Russell

            Just curious, what qualifies you to opine on this research? Have you even looked at the data and the analysis or are you just toeing the party line and spouting your own ideologically biased bullshit. I’m going to bet that you have neither read that article and don’t have the qualifications to understand it! Now go ahead and prove me wrong! Tell us what is wrong with data and the analysis.

            • D. Graham says:

              “Tell us what is wrong with data and the analysis.”

              The thing that’s wrong with the data and analysis, as I see it and discuss with friends and neighbors is that the guardian of all the climate information always ends up being Big Government, and there’s not a damn thing the majority of the American pubic is willing to trust Big Government to say or do these days that doesn’t have a clear ulterior motive.

              Look at them unemployment numbers, they are routinely considered by conservative media to be a myth, doctored to make people believe the economy is getting better. Same with them healthcare figures ever since obamacare passed. They have to be made to look good so that the administration can say o-care is a “success”. Even look at them EIA oil numbers, they routinely get questioned by a few here for being suspicious or fudged in some way.

              So in light of all that why in the world are we supposed to take the climate data and analysis at face value? Whenever Big Government gets involved, advancing a designated agenda seems always to get in the way of integrity.

              • Caelan MacIntyre says:

                Big pseudo-government is in a symbiotic relationship with big pseudobusiness, and the whole mess is a racket, an inbred conflict-of-interest, and it’s dragging its heels with regard to Anthropogenic Climate Change/Anthropogenic Global Warming anyway.
                This may be in part because, while emissions are still continuing, they appear to be in tandem with peak oil, so peak emissions. This may also be because they know they are likely toast if they do anything spectacular to avert a toasty climate, but then, they are likely toast with peak oil anyway.
                So they may be taking the ‘just going along for the ride’ approach with a sprinkle of pseudorenewables; a battery factory in the US desert; assorted distractions; and a little bit of war here and there to in part keep the military industrial pseudoeconomy fueled, and what little quality oil there’s left, flowing.

                So I guess they, along with their cronies, along with maybe you and whoever else– as vested-interest-efforts are made to maintain the illusion of business-as-usual and that pseudogovernment know what they are doing better than you do– are going to continue to run the prospects of humanity’s survival toward the precipice.

                Superhero: “Unless we can stop ’em!”

      • Jiimmy says:

        @Silicon Valley Observer

        You weren’t really expecting an intelligent well referenced answer to your question were you? Please tell me you weren’t. You might as well have gone to a Trump rally looking for a person with a post secondary education (Associates Degree from University of Phoenix doesn’t count).

      • Jason T. says:

        Arctic ice and wild polar bear population is indeed growing according to the newest high accuracy satellite images being put out by the US Gov’t (NASA). But whether that sea ice grows or decreases seems mostly irrelevant because I don’t think it’ll mean anything regarding climate change effects. That’s because during the late Cretaceous Period when dinosaurs were alive evidence suggests no North Pole ice at all, yet life obviously flourished, else we wouldn’t have all the fossil fuels we’re burning through like crazy right now.

        On another note, interested readers should Google “The Colville River Bone Bed”. Fossils being found on the north face of the Denali Range in Alaska suggest the climate there way back in the past was very temperate, probably similar to the region of modern Wash. state or British Columbia. Fossil cores they find in that region are all “honeycombed” but not “ringed” as one would expect from reptilian species that must hibernate because the outside temps are too extremely cold for a cold-blooded animal to survive.

        • wharf rat says:

          “Arctic ice and wild polar bear population is indeed growing ”

          Global sea ice area record minimum

          Okay, we can remove the question mark of the earlier blog post concerning Cryosphere Today Global SIA, as the record was broken yesterday:
          Posted by Neven on February 09, 2016

          • Doug Leighton says:

            Stop confusing the discussion with facts. Shit man, if you attend a flat earth society meeting carrying a globe they’ll toss you out the back door. It’s sort of like that here.

          • Javier says:

            If 2015 is the warmest year on record (or close to it), it stands to reason that there should be less sea ice. I don’t see what is so strange about something that is to be expected. A big part of this year’s melting is due to El Niño and likely to be reversed by a La Niña.

            What surprises me most is how little ice is actually melting. According to surface records we have warmed a lot (not according to satellite records), yet global sea ice and ice in general is holding up rather well for such a warming planet, specially with all the polar amplification.
            I am not the only one in being surprised by ice resilience, scientists are also:
            Sea Ice Might Be More Resilient Than Thought
            Increased Arctic sea ice after anomalously low melting in 2013
            Arctic Sea Ice Loss Likely to Be Reversible
            Predicted slowdown in the rate of Atlantic sea ice loss

            So while it is clear that as long as there is warming, there is going to be ice loss, the process appears to be slow and reversible, so no reason to panic. This year we are probably going to have the lowest maximum in sea ice since we measure it, thanks to El Niño, but I seriously doubt that we are going to have the lowest minimum below that of 2012. And the sea ice situation without doubt will improve after El Niño, next winter.

            • Doug Leighton says:

              Fortunately we have REAL climate scientists we can rely on so we can ignore amateurs who are prone to cherry pick data and who don’t, in fact, understand science they continue to babble on about.

              • Fred Magyar says:

                You mean if I’m suffering from a cranial aneurysim I should consult an actual neurologist, as opposed to a proctologist?

                • Doug Leighton says:


                  Of all the people here you’re the one, only one, I (might) trust for his views on AGW. I say this because you’re a truly balanced dude.

                  For the record I have degrees in Engineering Physics, Geophysics and Geology plus 35 years working experience in the earth sciences and I’m am not REMOTELY qualified to have creditable views on climate science. Armchair experts go home.

              • Javier says:

                That’s what I do also. I rely on real climate scientists findings. All my links are based on peer-reviewed scientific literature. Not my fault if scientists keep finding things that don’t fit the official line.

                • Fred Magyar says:


                  Here’s a listing of the scientists who are actually engaged in the research at The National Snow and Data Center. None of them seem to agree with your assesment of what is happening with the sea ice in the Arctic and the Antartic. So what should we conclude? 1) That you are way smarter than all of them put together. 2) They aren’t ‘REAL’ scientists. 3) They are all part of the vast AGW conspiracy and therefore on the take?

                  So please give us some reason why we should take your word over the word of These scientists who are dedicating their careers and lives to this field of research.

                  Every link is a bio of one of the scientists and it gives their educational background, their specialties, the projects they are working on, their past research and links to their published and peer reviewed papers.
























                  • Doug Leighton says:

                    Fred, stop. Don’t waste time butting heads with goats. Would you argue the existence of God with a Jehovah’s Witness? No. You are probably the smartest (best informed) guy here. Your arguments should be spent on receptive brains so we can all benefit from your knowledge and insight(s).

                  • GoneFishing says:

                    I have noticed that the most active deniers (skeptics?) writing style and use of language changes. Rather suspicious.
                    No actual discussion of climate is possible under these circumstances.
                    However, I am interested in the tumorous sea turtle problem showing up in Florida.

                  • Fred Magyar says:

                    Hey Doug,

                    Tks for the votes of confidence and compliments. Sometimes I wish I were even half as smart as you say I am. The only thing that I might have over most other people is the ability to think critically and see that claims such as Javier’s about scientists in general simply do not add up.
                    Sure, there might always be a few bad apples in every bushel but the chances that all the apples in every bushel are bad is infinitesimally small…

                    Javier on the other hand keeps citing the same half dozen or so climate scientists such as Judith Curry who most other climate scientists have strongly disagreed with in their own peer reviewed rebuttals to her claims.

                    Again, yes, upon occasion new scientific paradigms promoted by a single visionary scientist, completely overturn what has been the accepted view by the so called scientific consensus in a field. Plate Tectonics comes to mind. However this kind of occurrence is also increasingly rare!

                    So my responses to Javier are intended more for any intelligent laypeople who might be passing by and reading some of the discussions on this site. If they should be so inclined they can go and read the bios and some of the peer reviewed research from scientists who come to very different conclusions than Javier does. The data and the analysis are also available at the links I have provided. Anyone who so wishes can examine it.

                    I am under no illusion that Javier will ever admit that that he might be wrong.

                    In closing, the way I tend to navigate through life at this juncture is based on my 62 plus years of experience in dealing with people. Which has taught me that if I am suffering from severe headaches over a long period of time it is probably a better idea to consult a team of neurologists as opposed to one proctologist…


                  • Javier says:


                    You continue focusing this in the wrong way as I have already told you. Faith has no place in science. There is no reason to believe me nor to believe anybody, climate scientist or not. Science is about evidence, not trust. And the evidence is published and available so anybody with a brain can check it.

                    Scientific disputes are everyday business and there are scientific battles going on constantly in the scientific literature because different scientists, all very bright and very honest, reach different conclusions from the same evidence. These battles are never a question of trusting one side more than the other. One is right and the other is wrong (or both are wrong) but there is insufficient evidence to conclusively decide at the time.

                    Now let’s check some scientific predictions of an ice-free Arctic:

                    2007 Nobel prize laureate Al Gore predicts North Polar ice cap falling off a cliff seven years from now by 2014 based on scientific studies.
                    Al Gore Nobel lecture.

                    2007 Prof. Wieslaw Maslowski from Dept. Oceanography of the US Navy predicts an ice-free Arctic Ocean in summer by 2013, and says that prediction is conservative.
                    Arctic summers ice-free ‘by 2013’

                    2007 NASA climate scientist Jay Zwally predicts that the Arctic Ocean could be nearly ice-free at the end of summer by 2012.
                    Arctic Sea Ice Gone in Summer Within Five Years?

                    2010 Mark Serreze, director of the NSIDC predicts summer ice free Arctic by 2030.
                    Arctic ice could be gone by 2030

                    2012 Prof. Wieslaw Maslowski from Dept. Oceanography of the US Navy predicts a nearly ice-free Arctic Ocean in summer by 2016 ± 3 years.
                    US Navy predicts summer ice free Arctic by 2016.
                    Scientific article: The Future of Arctic Sea Ice

                    2012 Prof. Peter Wadhams, head of the polar ocean physics group at the University of Cambridge, predicts a collapse of the Arctic ice sheet by 2015-2016.
                    Arctic expert predicts final collapse of sea ice within four years
                    Peter Wadhams impressive Arctic scientific CV

                    Those predictions have been made by Arctic ice experts yet they have failed or are going to fail spectacularly. You can go about placing your trust on whoever you want, but I rather look at the evidence.

                    The evidence is that Arctic ice melting is a cyclical phenomenon. The previous Arctic ice melting scare took place in the 1930’s and 40’s (see figure). Old science is difficult to access as it is not scanned so you have to walk to the library, and anything older than 10 years is usually not taken into consideration. It is a lot easier to consider only the past 40 years of data and simply extrapolate as most people, scientists included, only think in linear terms.

                    So Mark Serreze, director of the NSIDC whose bio you have put first and who decides who works and who doesn’t for NSIDC, has got it wrong when he talks about the Arctic ice “death spiral”.

                    This is my prediction. I hope you remember it. We are going to see quite a lot of Arctic ice melting in the 2015-16 period, but all that and perhaps more is going to be made up by 2017-19 gains, and come 2020 Arctic sea ice experts will have to come to terms with the fact that there will not have been any significant Arctic sea ice melting in the 21st century and thus the Arctic will not likely become ice free in the 21st century. No doubt some will stick to their guns as too much credibility has been invested on melting and will talk about not enough time and longer trends while still ignoring entire 20th century trends.

                    Now you can trust whoever you want, or you can check the evidence yourself.
                    Northern Hemisphere sea ice anomaly dropped fast between 1992 and 2007, but since then it has become stable again:
                    Arctic sea ice is linked to AMO, a periodic oscillation:
                    A signal of persistent Atlantic multidecadal variability in Arctic sea ice. M.W. Miles et al. 2014. Geophysical Research Letters 41, pg. 463-469.
                    You should take a look at its figure 2 if you really want to know what is going to happen to Arctic sea ice in the next decades.

                    The figure below shows that Arctic experts were already worried about a dangerous melting of Arctic ice in 1947, during the previous phase of Arctic melting 70 years ago.

                    NSIDC Serreze’s death spiral is going to be wrong and you should learn a lesson about science having nothing to do with trust.

                  • Fred Magyar says:

                    However, I am interested in the tumorous sea turtle problem showing up in Florida.

                    That is a very serious and nasty problem. I’ve been following this story for years and have visited the Sea Turtle hospital in the Florida Keys where they treat these turtles.

                    While there is no conclusive way to link this outbreak to anything related to climate change it is certainly linked in many ways to human impacts on the marine ecosystem.

                  • Cracker says:


                    Thanks for making the effort to again rebut J. with facts and data.

                    He won’t be confused by facts. His agenda must be paid for by someone to be so antagonistic, dogmatic, and so much smarter than anyone else. typical corporate denial tactic.

                    I personally called B.S on J. long ago and don’t bother reading his posts. There is nothing there but crap. I suspect anyone of open mind will conclude the same after reading two or three posts. Just a denier, paid or intentionally keeping head up ass.


                  • wharf rat says:

                    Javier says:

                    “Faith has no place in science.”

                    Faith is all that the deniers have; faith that 99% 0f climate scientists are wrong, faith that governments are conspiring, faith that Arrhenius was wrong, etc.
                    That’s why they stick to self-publishing comic books; they have faith that they won’t be able to survive the peer review process if they submit their nonsense to actual journals.

                  • Javier says:

                    wharf rat,

                    So called “climate change deniers” and “climate change alarmists” are equally wrong. They are taking political sides on a scientific issue and both are ignoring important parts of the evidence.

                    Global warming is real and anthropogenic GHG emissions contribute to it. It is just not dangerous nor is it going to be catastrophic. That is what available scientific evidence supports.

                  • wharf rat says:

                    “It is just not dangerous nor is it going to be catastrophic. ”

                    For many people around the world, and even in the US, it’s already both, and it’s only gonna get worse. Unfortunately, many think it’s not catastrophic unless it happens to them.

                    America’s climate refugee crisis has already begun

                  • Doug Leighton says:

                    Cracker, Rat, et al,

                    The best buttress against Javier and the crap he espouses is the scroll bar: works like a dam for me anyway.

                  • wharf rat says:

                    Doug: I think somebody around here said that they weren’t willing to let the denier crap go unchallenged, just in case a passing stranger unfamiliar with the argument wanders thru here. That goes for me, too. My granddaughters are counting on me.


                  • Doug Leighton says:

                    Mike, you’re right of course.

                  • Javier says:

                    wharf rat,

                    You let yourself get carried away by irrationality. Global climate is as good as it gets, much better than pre-industrial climate by far. You should check how the climate was prior to 1850 before wishing we return to that. We are much better now.

                    And you have disproved nothing of what I have posted, besides entering name-calling and ad-hominem attacks that get you nowhere.

                    If you don’t know enough about Arctic ice melting to know what science and evidence really show, you should at least refrain from attacking those that do know, as Doug does.

                  • Javier says:

                    wharf rat,

                    “America’s climate refugee crisis has already begun”

                    As most things in climate change propaganda, your climate refugee crisis is bogus:

                    The very name of the town reeks of government boondoggle. Tok is the Yupik name for place, thus NewTok is a “new” place.

                    In 1959, the government decided that the Yupik, who were nomadic, needed a permanent place to live. The town site was then selected, not by the Yupik people but by bureaucrats who needed barge access on Ninglick River to haul in westernized building materials. At the time, the English speaking southerners failed to understand that heated structures quickly fail by melting into the permafrost (which is why the pipeline and all buildings in the arctic are elevated). They also had little experience in building roads, landing strips and garbage pits in the delicate arctic environment. The people of Newtok are now paying the wages of all of these sins.

                    If it is climate change….. it is only ten acres of warming.

                    The Army Corps of Engineers, the State of Alaska and Bureau of Indian Affairs have all written extensively on what caused the problems at Newtok and all have concluded it was poor siting and inappropriate construction techniques. The New York Times knows this, The Atlantic knows this. The Guardian know this but they all continue to flog the climate change angle despite the facts.

                    You are being lied, but you seem to like it.

      • Anonymous says:

        Growth in 2013 after a record low is not “all the time”.

    • Javier says:

      Silicon Valley Observer,

      You should try to understand that being a skeptic of the catastrophic AGW hypothesis is in no conflict at all with science.

      Climate change is real and well documented. Global warming has been taking place for 350 years, and more intensely in the last 170 years, while GHG emissions have become significant only in the last 70. Sure they have contributed to the warming, but they have not created it.

      It is obvious and kindergarten level that if the planet is warming, well behaved ice should melt. However the speed of melting does not appear worrisome, and claims of Arctic sea ice demise have proven to be greatly exaggerated. In fact if one looks at global sea ice area since 1979:
      One is forced to conclude that on a global scale sea ice has not been melting significantly for 37 years. Not the type of data that leads one into unbound alarmism.

      Regarding the documented Arctic warming, I do not dispute that the hypothesis calls for polar amplification and probably the Arctic is warming more than the rest of the planet, however I would not go as far as to say that it is properly documented. Much of the Arctic temperatures are adjusted, infilled and extrapolated since we aren’t measuring it on the ground, and with Arctic winter sea ice areas we have a bigger problem, because sea water freezes at -1.8°C and afterwards we have no idea what the temperature is there above that ice. Satellites do a much better job of measuring polar temperatures up to 85° but they show less warming than expected, so those temperatures are not liked.

      But as I said, climate change takes place always, and global warming is real, just moderate and not dangerous at all. We should really enjoy it. This year we are having a really mild winter in Southern Europe, and with plenty of water too for spring and summer, all courtesy of El Niño. Nothing to complain here. We use less heating and produce less emissions while saving money. Obviously demand for fossil fuels is lower and so less pressure on prices.

    • Silicon VO, you simply lack the reading comprehension to understand a point of view which doesn’t match exactly with the bullshit in your head. So why bother?

  26. likbez says:

    An interesting warning from David Stockman. He is a “doomer” but his line about “boomers” sheeple taken to slaughter resonates with my understanding of the situation.

    Looks like now there is an additional positive feedback loop from boomers S&P500/stocks sales to oil market and this loop now helps to amplify moves of the oil prices down.

    “The retail investor waded in again. The sheep lined up and, unfortunately, are heading for the slaughter one more time. I think it is very hard to see how this Baby Boom generation, with 10,000 of them retiring a day, can afford one more devastating crash in their stock holdings.

    That is, unfortunately, what we are heading for. That’s why I say it’s dangerous. When the bubble breaks, it will spill and flow throughout the Main Street economy.”

    This ” spill and flow throughout the Main Street economy” is probably what depressed Shallow so much today.

    Tomorrow is a February STEO day so it might partially reverse today’s drop as data should show continuing deflation of shale bubble.

    So let’s keep the faith…

    • Watcher says:

      One more time: If numbers on a screen say billions will die, then the numbers will be changed. Why would you not change them if all they represent is non physical substance?

    • Nathanael says:

      Average Joes should never have been in the stock market. The stock market is for people who can afford to obsessively pay attention to lots and lots of details of economics, finance, manufacturing, agriculture, corporate management, etc. Like me. None of my friends should go anywhere near it.

      There is a “no fossil fuels” index now — SPYX — which might help some people escape the crash.

  27. R Walter says:

    Wouldn’t a warmer winter decrease demand for fuel oil?

    Wouldn’t a warmer winter decrease demand for natural gas?

    It would decrease demand for coal. Would that mean a decrease in emissions?

    I saw about 100 empty oil tank cars on a branch line of the BNSF today, the cars were getting drifted in by snow. Haven’t moved in a while.

    Three years ago, the winter temps were a good thirty degrees colder than they are this year above the 45th parallel. Three years ago, temperatures were -25 degrees Fahrenheit for a good three weeks. There has been less than two weeks of below zero temperatures this winter and the temps have not been nearly as cold.

    El Nino in action.

    Let’s hear it for a warmer winter, a blessing in disguise!

  28. likbez says:

    Russian Duma deputies proposed to prohibit oil exports for 5 years

    A group of Russian Duma deputies proposed to prohibit for 5 years the sale of raw oil abroad and develop a strategy for the development of the economy of Russia in the direction of reducing the dependence on the fluctuations of world oil prices.

    A letter to the Minister of Economic Development Alexei Ulyukayev was sent by deputies from the minority party “Fair Russia”, informs “RIA Novosti”.

    According to the parliamentarians, the biggest problem is that Russia still sits on an oil needle. So state reforms are needed for the domestic economy.

    “Today we need to summon all the courage to declare the abolition of the raw oil sales to world markets. We must start to turn out economy in the direction of increasing the level of oil processing in domestic petrochemical industry and lessening the priority of oil extraction industries. Russia has repeatedly demonstrated that it can rise from the ashes. The state needs reforms which reallocates currency reserves to ensure this path of development of the domestic economy based on the internal opportunities of economic development ” says deputies’ request.

    According to the parliamentarians, the immediate introduction of such prohibition is impossible, because Russia has obligations to the current trading partners.

    Instead Deputies proposed to adopt a government program “Development of the economy of the Russian Federation in the direction of reduction of its dependence on raw oil sales”.

    “While we procrastinate and endure the slump of oil prices waiting for the rise of oil prices, Russian economy deteriorates and Russian state suffers too. Why do we recklessly waste our precious natural resources depriving future generations?

    To be the world’s gas fueling station is not what Russia wants to be”, they wrote.

    • Building refineries to sell products would be a dumb move. If they want a more diversified economy they need to reduce corruption and bureaucracy.

      • Oldfarmermac says:

        I disagree. With oil supplies inevitably shrinking, and growing more expensive, the Russians will have a lock on the feed stock, the crude oil.

        There is a near zero chance they will have any problem exporting gasoline, diesel fuel, lubricants, oil based industrial chemicals, etc.

        JB’s Export Land and depletion virtually gaurantee they will have markets as long as they have oil enough to export it. Even a big believer in renewables such as yours truly does not believe we can get away from oil in less than two or three decades, under the very BEST of circumstances and assumptions. More likely, oil will get away from US via running short.

        But they could have some really tough problems if they try to sell computers, automobiles, consumer goods………….

        They DO need to deal with corruption and bureaucracy, but then so do other countries.

        • Sorry Mac, you simply don’t get refinery costs or economics, nor do you understand transportation costs out of Russia, where open water ports aren’t easy to build. As you know I worked for a large multinational and worked there for years. The obvious answer for them is to buy a refining company in Germany, or shares in an existing refinery.

          Refining investment within Russia should be focused on improving the existing kit, make it into true refineries. Their Soviet kit is medieval. But they should never bother with a brand new refinery to increase capacity.

          • Synapsid says:


            “The obvious answer for them [Russia] is to buy a refining company in Germany, or shares in an existing refinery.”

            That’s exactly what Iran has been doing. No moss on them.

        • Nathanael says:

          Nobody wants or needs the black stuff — not for much longer.

          Gasoline is obsolete; electric cars are superior and gasoline cars are relics, like horses but not as much fun. Same with diesel, which is inefficient for heating too.

          Lubricants and industrial chemicals are a small enough market to be practically irrelevant, and they’ve found other feedstocks (often methane).

          China’s figured it out and has made it state policy to get off of oil. Will the US do that? Probably not, but some of us individually will.

  29. simon oaten says:

    Ron et al

    if we know that condensates have made up a greater % of the total “oil” reported production numbers, and supposedly – it is taking up a higher than its “produced” % in storage – is there any data showing this effect in the wholesale price of distalates versus petrol in the USA as yet ?


  30. Oldfarmermac says:

    I am not a big fan of Fox News – nor any particular news organization so far as that goes- but Fox is not necessarily as bad, across the board, as most of the regulars here portray it to be.

    This piece about the new VOLT model is actually quite well balanced, and there is not a hint of hard core Trump or Republican party bullshit in it. The author does point out that oil and gasoline are dirt cheap at the moment, but makes no claim whatsover that oil will STAY cheap, by implication or direct statement.

    The average older Republican who believes in inflation, and remembers buying gasoline for twenty five cents will not be discouraged from test driving a VOLT by reading this Fox news. Some will actually BE encouraged.

    • Longtimber says:


      IIRC Limited 2016 Volts will be produced. Perhaps the Superior and simpler design details
      of the Bolt will be incorporated into 2017+ Volts. Designer Bob Lutz is busy on the Bolt to beet Elon to mass market. OffGrid types are drooling bout 60kWh Batteries in mass production. Orphan Tesla Batteries are not east to get yet.

      • HVACman says:

        Bob Lutz was “father” of the Volt concept 9 years ago, but I don’t think that the long-retired Bob Lutz has much sway at GM about the Bolt. GM’s gen-X management team has moved past the Lutz era and baby-boomer management in general. Here’s a link to an interview with fresh-faced Bolt Chief Engineer Josh Tavel.


        A lot of us early-adopters of the Volt are convinced the Gen 2 Volt will be the last of its kind, as it successors – cost-effective long-range pure EV’s like the Bolt – proliferate over the next few years (hopefully in parallel with a more robust public fast-charging infrastructure). The EV world will be very different in 2020 – the earliest that GM would consider a Gen 3 Volt – than it is today.

        And yes, a lot of people are drooling over the future of inexpensive high kW-hr storage, both off-grid and on. Imagine being on-grid with time-of-use metering and buying all your power at low, late-night rates, then using it the next day during peak-rate times. Stationary battery storage demand could easily outstrip EV demand – not just Tesla, but all the major energy storage players (LG, Samsung, etc.) are ramping up products in that realm.

        • wimbi says:

          Right, right, right. So how come all the oil people here wringing their collective sweaty hands about this and that possible effect on oil price while simultaneously ignoring this deadly threat to their biggest market – transportation??

          • Nathanael says:

            Selective blindness? Their mentalities are so focused on being “oilmen” they simply can’t see the energy transition happening right under their nose?

            The GM Bolt comes out at the end of the year. The Tesla Model 3 at the end of next year. That’s the beginning of the end for gasoline as a transportation fuel. It’s hard for me to predict how fast it will go, but since electric cars are *just plain nicer to drive* than gasoline cars, it’ll go as fast as the cars can be manufactured and as fast as people can afford the sticker price.

            It costs about 3.6 cents per mile to drive a Tesla Model S in an area with typical electricity, or if you charge from your own solar panels. *Other electric cars are lighter and more efficient*.

            For a 50 mpg Prius to beat that on price, gasoline has to be below $1.80/gallon, which it isn’t in most of the country *even now*. But a hybrid has a large premium to its purchase price just like a battery-electric does — possibly larger — and high maintenance costs. The best non-hybrids got 40 mpg, which would require gas to be at $1.44, true only in a very few areas of the country now.

            For typical 30 mpg cars, they’re simply more expensive to drive no matter how cheap oil is (since it ain’t going below $20/bbl any time soon), and since they’re also less pleasant to drive than electric cars, the market is going to evaporate as the sticker price of electric cars drops.

            I expect range anxiety will lead some people to keep buying plug-in hybrids…. but people who do that still don’t buy much gasoline; Volt owners drive electric most of the time.

            Cracking the sub-$35K (before tax credits) market will be some work for electric carmakers, but the destruction of the *entire* >$35K car market will happen very, very, very fast. And that’s a huge deal for gasoline sales, because that’s *half of the market* — the median new car price is $33560.

            Furthermore, I think used electric cars are going to eat into the lower-priced new gas car market — because electric cars are *just nicer to drive* and require less long-term maintenance.

            There will be a period when gasoline is still heavily used because electric car sales are production-limited. But I wouldn’t want to bet on how many years it is. Not many.

            Kerosene for airplanes will last a while longer but that’s a much much smaller market.

            Summary: demand for gasoline is going to start crashing. It will probably be visible in oil demand by 2021 — only 5 years from now.

            The Saudis may still be forcing oil prices down that whole time. If they are, then we have already reached the last price gyration for oil. If they let go, we gmay get one more upwards gyration before the big demand destruction crunch starts ~2020.

  31. Daniel says:

    warren Resources

    end 2015 vs 2014 resources: 241.3 Bcfe at Pv10 $96 million vs. 428.1 Bcfe at $609.1 million (down 85%)
    expected production drop for 2016: 10-27%
    2015 Revenue vs. Expenses: 89.4 vs. 97.6 = -8.2 MM USD
    2016 expected Revenue vs. Expenses: 61.1 vs. 89 (with interest payment increasing significant) = -27.9 MM USD

    Scary numbers

  32. Doug Leighton says:


    “A recent rise in oil prices is a “false dawn” and the oversupply of crude is set to worsen, according to the International Energy Agency (IEA)…. The IEA forecast that stock building could continue in the second half of 2016 at a rate of 300 million barrels a day. It said: If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.”


    • daniel says:

      300 mm bbp per day – wow ☺

    • Watcher says:

      This is what happens when a theory is accepted as fact.

      If there’s too much oversupply for storage to exist, well then, the oversupply must have been less than thought. In fact, find how much storage capacity there is, and essentially manufacture that number too, and then derive backwards how much is required to fill it, and then subtract another essentially imaginary number as to how much of the capacity was already filled on some arbitrary date — and you can declare how much oversupply “there must be”.

      They would be laughed out of the room at any physics seminar.

      • Caelan MacIntyre says:

        Speaking of physics, Gail Tverberg’s has a new article, which has yet to be read, entitled The Physics of Energy and the Economy

      • Oldfarmermac says:

        Oversupply, shortage, gluts, etc are all words associated with damned old money grubbing business men unhappy with their bottom line.

        Some of them are bitching because times are tough, and the rest are laughing because that is the way people behave, we laugh at other people’s troubles, ESPECIALLY when we think the “other people” have been taking advantage of us.

        ALL the oil being produced is being burnt, with the exception of some very small fraction that is going into storage, and SOMEBODY is buying that , betting on the price going up later, or putting it into a strategic reserve, in the event oil CAN’T be bought later.

        GLUT is a loaded term, used by people who are telling it from the producers side, consciously or not.

        When oil was a hundred bucks, people in the production end seldom had anything to say about oil shortages causing consumers problems.

        The flip side is that people who buy gasoline and diesel fuel NEVER mention this word.

        The consumers of the world are happy to buy and burn however much oil is being produced and sold, AT THE CURRENT PRICE.

        If producers want a higher price, they will just have to figure out a way to keep some oil off the market, or wait for bankruptcies, depletion, and reduced capex to solve the price problem for them.

        The GLUT exists in the mind of people who sell oil, and in the minds of people, such as myself, who for some reason hang out in peak oil forums, and people who get paid to write up business news.

        Ask anybody who is filling up his 460 cubic inch F250 four by four, towing his boat with twin hundred fifty horse power outboards. 😉

        Guaranteed, somebody will fail to see the smiley face. Or even TWO smileys. 😉

        • Nathanael says:

          Why hasn’t that guy bought himself an electric boat yet? 🙂 There are some gorgeous electric outboard motor / battery systems. 🙂

  33. likbez says:

    EIA STEO (February 9, 2016):

    North Sea Brent crude oil prices averaged $31/barrel (b) in January, a $7/b decrease from December and the lowest monthly average price since December 2003. Brent crude oil prices averaged $52/b in 2015, down $47/b from the average in 2014. Growth in global liquids inventories, which averaged 1.8 million barrels per day (b/d) in 2015, continues to put downward pressure on Brent prices.

    Brent crude oil prices are forecast to average $38/b in 2016 and $50/b in 2017. Forecast West Texas Intermediate (WTI) crude oil prices are expected to average the same as Brent in both years. However, the current values of futures and options contracts continue to suggest high uncertainty in the price outlook. For example, EIA’s forecast for the average WTI price in May 2016 of $36/b should be considered in the context of recent Nymex contract values for May 2016 delivery (Market Prices and Uncertainty Report) suggesting that the market expects WTI prices to range from $21/b to $58/b (at the 95% confidence interval).

    … … …

    U.S. crude oil production averaged an estimated 9.4 million b/d in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.5 million b/d in 2017. EIA estimates that crude oil production in January was 70,000 b/d below the December level, which was 9.2 million b/d.
    … … …

    • Ves says:

      Well here is the thing about what has happened with oil production and where is it going. A year ago I have said when we saw the first glimpse of production stall that for low oil prices the best cure is low oil prices. It took a year to confirm that and sometimes it is like watching the paint dry but numbers are finally confirming that. NA production is the first one to show decrease in oil production since oil crash started.

      Shale Play: Bakken is fallen 13% from December of 2014, EF was steeper, 28% from high March 2015. Total production from the seven shale plays is down 10% since September 2014. With the number of active rigs there is only one way for oil production to go in the near future and it is down.

      Oil Sand/Deep water: These high-cost, low-decline projects are all cancelled meaning that in their absence decline rates are going to increase.

      The rest of the world is little bit harder to determine since I don’t follow very closely. Except few general observations that North Sea production is between rock and hard place. High cost production considering $30-33 Brent and high cost of decommissioning so take your poison pill wisely. Russia’s producers had a silver lining of comparatively lower cost of production and currency exchange rate that helped them show a paper profit but hard to see how with $33 Brent there would be any significant increase in production in the near future.

      OPEC – well Opec got fragmented if not totally disintegrated in 2 blocks: Sunni and Shia + Latino block so any talk about OPEC speaking with one voice is misplaced. So as result every OPEC member produces as much as they can in order to keep head above water.

      • Oldfarmermac says:

        “OPEC – well Opec got fragmented if not totally disintegrated in 2 blocks: Sunni and Shia + Latino block so any talk about OPEC speaking with one…….”

        I have not given this a lot of thought but I am thinking the SUNNI versus SHIA aspect might be THE most important factor involving oil that is usually overlooked.

        Ordinary enemies generally manage to work together, when circumstances leave them no choice except to cooperate or perish.

        But religious enemies?

        It could go either way.

        My guess is that the Saudis will bleed themselves white trying to bleed their ( to them at least ) enemies to death, economically.

        Just about all the governments in that part of the world, plus the Russian government as well, are authoritarian.

        So – The people in position to make policy in these countries don’t have to worry much, when it comes to the next election. They can do as they please, to a substantial extent.

        Knowledgeable people tend to agree that the incessant wars in the part of the world most notable for having plenty of sand and oil are historically rooted in religious animosity, and that religion continues to play a huge role, actually the dominant role, in most of the current fighting there.

        It appears to me that the Russian are the only major participants mainly concerned with plain old issues of empire and national power. Empire and power matter to the others, but not to the same extent.

        Bottom line – The various countries that export oil in large enough quantities to turn the market around MIGHT continue to pursue their current policies for months or years yet – for however long they can hang on.

        • Ves says:

          My Opec split description is unfortunate since in reality it is not due to religion but that is how the split was distributed between “Cut or NOT to cut oil production” between OPEC members. My main point was meant that OPEC is dead and we have passed the point of return in terms of possible “cuts” by OPEC.

          • Oldfarmermac says:

            Hi Ves

            I do not mean to imply that religion is THE driving force in the Middle Eastern countries that have oil enough to export it in large quantities, but rather than religion is one of the MOST important forces involved, along with the history of colonialism, local power politics within countries, the legacy of Western powers establishing arbitrary boundaries, and Sky Daddy alone knows how many other things.

            I am sure religion is a SERIOUS hindrance to cooperation between Iran, Iraq, Saudi Arabia, and various other smaller less powerful countries in that part of the world.

            It could be the difference, the proverbial straw that breaks the camel’s back, when things are touch and go for other reasons.

            • Nathanael says:

              I actually think the history of lead poisoning due to lead in gasoline is another important factor in the region. We got lead out of gasoline in the late 1970s. These clowns in the middle east didn’t do so until 2008. Lot of lead poisoning there.

  34. Chris says:

    North Dakota Active Drilling Rig List at 40 including one stacking … 137 one year ago (-71%)

  35. AlexS says:

    It is interesting to compare the numbers from the recently released EIA Short-Term Energy Outlook (STEO) and Drilling Productivity Report (DPR).

    In today’s STEO, the EIA did not change its forecast of C+C production in the Lower 48 states (excl. GoM) for 2016-17, although projected output in the Gulf of Mexico was slightly revised down.

    By contrast, in the DPR released Monday the EIA predicts the seven major shale plays to produce 5.02 mb/d in February, 185 kb/d higher than in last month’s forecast of 4.83 mb/d. The anticipated decline between the March 2015 peak levels and February 2016 is now 453 k/d compared with 638 k/d in January DPR. In general, the comparison between the EIA’s DPRs of the past several months shows that the agency has been constantly underestimating the resilience of the LTO production.

    The EIA still projects the monthly decline in 7 key shales oil production to accelerate from 73 kb/d in February to 93 kb/d in March.

    Oil production in 7 major U.S. shales: EIA DPR Feb 2016 vs. Jan 2016 vs. Dec 2015

    • AlexS says:

      The biggest upward revisions were for the Eagle Ford (+77 kb/d for December, +100 kb/d for January, and +127 k/d for February). The EIA’s estimates for the Eagle Ford remain lower than those from other sources, in particular, from Bentek Energy.

      Oil production in the Eagle Ford shale: EIA DPR Feb 2016 vs. Jan 2016 vs. Dec 2015

    • likbez says:


      “In general, the comparison between the EIA’s DPRs of the past several months shows that the agency has been constantly underestimating the resilience of the LTO production.”

      I think you are jumping to conclusions. Two points:

      1. After “carpet bombing” of sweet spots with wells stops you probably need a year to get a substantial decline. So what is are seeing is end of beginning, not the beginning of the end, so to speak. Let’s wait till September 2016 for the latter.

      2. Cited 3.8% difference ( (5.02-4.83)/5.02 ) is to close to measurement error margins to make such a bold statement (more then 1% for each measurement which means that 2% difference is still statistical noise (if the first measurement has an error -1% and the second +1%) ).

      As we are talking about forecasts for all practical purposes those are equal values and difference should be attributed to a chance. Tendency is the same — decline and that’s all that can be deducted. Methodology might change from month to month, or number of areas that were extrapolated from previous month (for which there were no real data for a particular month) changed, or whatever.

      • AlexS says:


        1/ “I think you are jumping to conclusions”

        I’m not jumping to conclusions. I’m just stating a fact: in the past several monthly reports the EIA has constantly underestimated U.S. oil production in general, Lower 48 onshore in particular (in the STEO – see the chart below), and in the 7 major shale plays (in the DPR – see the chart above).

        That refers to their estimates and projections for 2015 – early 2016.
        Did I say something about forecasts for the full year 2016 and beyond?

        2/ “Cited 3.8% difference is to close to measurement error margins to make such a bold statement”

        Cited 3.8% difference, which equals to 185 kb/d in absolute terms, is really big if this is a revision of an estimate made just a month ago. And if we compare the estimates from February 2016 and December 2015 DPR, the difference is 230 kb/d.

        For comparison, last year, Russia’s oil production has increased by only 140 k/d vs. 2014, and yet analysts are talking about resilience of Russian oil output as one of the causes of the current oversupply in the world oil market.

        2% or 3% or 3.8% difference in production or consumption volumes is very significant for the oil market, where relatively modest changes in supply or demand can cause large fluctuations in prices.

        BTW, the current excess supply is estimated at no more than 2 mb/d, or ~2% of global demand, but it resulted in a 3-fold drop in oil prices.

        U.S. Lower 48 States (excl. GoM) C+C production estimates from various issues of the EIA STEO (m/d)

        • AlexS says:

          P.S. As regards the future, I have no doubt that we will see a strong supply-side response to low oil prices from both LTO and conventional oil producers, which in turn will lead to a new up-cycle in oil prices. The only question is timing. As I understand, you (like many other people) expect a relatively quick rebalancing in the market due to rapid declines in oil production. My view is that without an OPEC output cut it will take time, and the rebound in oil prices will be very gradual.

          • shallow sand says:

            AlexS. RBOB on the CME website is 90 cents. I just filled up my truck for $1.259 per gallon, including tax.

            The entire complex just keeps falling. Many US crude postings are below $20.

            Very concerned that the decision to produce full bore, by all, is seriously harming the world economy, and that demand may not do enough to take care of supply overhang anytime soon.

            If that is correct, massive energy BK in North America will result, adding fuel to the fire.

          • Javier says:


            I think your analyses are very good and I trust your views on Russian production more than any other’s.

            I agree that current oversupply could be as low as 2% but then we have the following facts:

            1) Global production is decreasing since summer 2015 and likely to continue decreasing over the entire 2016 year.

            2) Global demand has increased about 1.5% in 2015 and is projected to increase by 1.2% in 2016 by EIA.

            One would conclude that with current trends, without any need for increased decline or increased demand, the oversupply would be largely resolved during 2016.

            To that we have to add that markets react by discounting future changes, not present ones. Once markets perceive that the oversupply is going down prices could go up without waiting for demand matching or over-passing supply.

            A price recovery within 2016 is not only possible but the logical outcome if current trends continue. Of course the future is unknown, and I think the possibility of current trends not continuing is not low.

        • likbez says:

          “For comparison, last year, Russia’s oil production has increased by only 140 k/d vs. 2014, “

          I have problems with this statement too :-).

          Why are you assuming that Russians, producing around 11 Mb/d, can for sure detect 140 k/d difference with any reliability. Russian oil production is split between multiple companies and the only rational here to believe them is that all those companies tend to underreport, not to over report production for tax avoidance purposes.

          But Russia as a country has different priorities and BTW reports everything in metric tons, not barrels, which ensure more accurate reporting.

          But conversion is not that easy. Just games with gravity probably can add 1% error (and was the source of discrepancies and hot discussions as for the “real” volume of Russian production in the past).

          Exports are more or less verifiable, but the total production for the country IMHO is not. And never was. Especially for countries like the USA which are net importers.

          So it might be prudent to be careful with conclusions. 140 k/d might be a real increase, or might be fudging of the data much like members of OPEC constantly do.

          We simply do not know and can’t verify anything.

          But Russians do have some motives for overstating production to prove that sanctions do not work and/or to get better position on the table in negotiation with Saudis about production cuts (which also probably are not truthful; for some reasons internal consumption of oil by Saudis is amazingly high ).

          Oil is a strategic resource, so deception on a country level might well run rampant. Do you agree with me?

          My impression is that the small differences are OK to establish a trend (up/down) but nothing more. And I still stick to this statement.

          • AlexS says:


            1/ “Why are you assuming that Russians, producing around 11 Mb/d, can for sure detect 140 k/d difference with any reliability. Russian oil production is split between multiple companies and the only rational here to believe them is that all those companies tend to underreport, not to over report production for tax avoidance purposes. ”

            The numbers are easily verifiable, as total volumes are transported via the pipeline system belonging to state-owned Transneft, or directly exported via state-owned oil terminals.

            The number of Russian oil companies is many times less than in the U.S. That’s the large number of U.S. producers and inefficiency in oil statistics in some states (Texas), which makes the EIA oil production numbers inaccurate and prone to constant revisions.

            2/ “But Russians do have some motives for overstating production to prove that sanctions do not work …”

            Sanctions have nothing to do with the current oil production. They apply only to the offshore Arctic and tight oil projects.

            3/ “…and/or to get better position on the table in negotiation with Saudis about production cuts ”

            Russia is not negotiating and will not be negotiating any production cuts with the Saudis.

            4/ “Oil is a strategic resource, so deception on a country level might well run rampant. ”

            That’s may be true in the case of some OPEC countries, but I have never seen professional oil experts doubting the accuracy of the Russian oil statistics, or Canadian oil statistics, or most other non-OPEC oil production statistics. The inaccuracy of the U.S. oil statistics is not due to intentional deception.

            • AlexS says:

              5/ “My impression is that the small differences are OK to establish a trend (up/down) but nothing more.”

              As I said before, even relatively small changes in oil production/consumption balance can not only establish a trend, but also cause large fluctuations in oil prices. This is the flip side of what is called low price elasticity of oil supply and demand. All those with long-term experience in analyzing the oil market know this very well.

              It is also important to note that at the extreme points in the oil price cycle the effects of fundamental factors can be multiplied by the speculative buying or selling. This results in “irrationally” high (mid-2008) or “irrationally” low (early 2016) oil prices.

              • likbez says:


                “As I said before, even relatively small changes in oil production/consumption balance can not only establish a trend, but also cause large fluctuations in oil prices. This is the flip side of what is called low price elasticity of oil supply and demand. All those with long-term experience in analyzing the oil market know this very well.”

                If we are to believe neoclassical economics books, then yes. There is only one minor problem with neoclassical economics: it is a junk science.

                A couple of questions:

                1. How this statement correlates with the dominant role of “paper oil” in establishing the spot price ?

                2. Is not oil now trade as yet another currency ? If so then all dirty tricks that are applicable to currency trading are applicable to oil. Did you hear about such term as attack on currency?

                3. How supply-demand model explains continuing production of oil at prices below profitability level, when each barrel is produced at a loss? How the role of debt is accounted for in your “supply-demand” model?

                In other words the key question is: “Is this a casino capitalism or some dreamed up world where “supply-demand” model is the law of the land?”

                See http://peakoilbarrel.com/the-ieas-oil-production-predictions-for-2016/#comment-558698

                • likbez says:

                  Oil price forecast as an instrument for oil price manipulation

                  The mechanism rely on issuing forecast or other way of establishing a “downtrend” along with selling naked shorts for oil in the New York Comex futures market. Short selling drives down the price, triggers stop-loss orders and margin calls, and scares naïve investors out.

                  http://izvestia.ru/news/603843 (edited Google translation)

                  Sechin called forecasts about oil price dropping to $10 per barrel an “irresponsible game to crush oil prices”

                  In his today’s speech at International Petroleum Week in London 2016 the President of the Russian oil giant “Rosneft” Igor Sechin said that panic forecasts are a part of a selfish game of market participants.

                  According to Sechin, financial market players are ready to “test” any and all levels of prices, informs “RIA Novosti”.

                  “I must admit that we underestimated the fact that financial market participants do not know any restrictions in their greed and are ready to “test” any oil price levels — $27 in January and now down to $10 per barrel as recently forecasted by one of banks. But this is nothing but “an irresponsible game” to fleece oil producers said Sechin.

                  In the morning on the London stock exchange the price barrel of Brent crude fell $2.5 to $30,5 for barrel.

  36. Verwimp says:

    The limits to growth surface first in positive interest related businesses. In banks. Since the Eurozone has hit the limits to growth ~10 years ago, the European banking system, connected to the entire world, is in deep trouble. Please watch out for real shocks coming from European banks soon.

  37. Jiimmy says:

    Interesting enough article. Good question. Not much on predictions or answers.


    I feel that Saudi repression/control is not very sophisticated (unlike Russia for example). It’s basically Wahhabism and throw lots of money around. I don’t see it holding up too well for too long if things get strained.

  38. Frugal says:

    Canadian energy companies sell ‘jewels’ to keep oil sands afloat

    CALGARY, Alberta (Reuters) – Faced with record low prices for heavy crude, Canadian energy companies are sacrificing other parts of their business to keep higher-cost oil sands production going and safeguard the billions already invested in these multi-decade projects.

  39. Jiimmy says:

    Here’s a recent one from Roger Boyd. Perhaps OFM will like the hog operation analogy.


    • Oldfarmermac says:

      The link doesn’t work but here is one that will.


      This is standard fare in econ textbooks.

      There is good reason to believe that any commodity market is subject to such swings in price and production, over time, if the market is highly competitive.

      But the cycles may be long enough to be obscured by noise resulting from changing tastes, changing technologies, rising or falling production costs, etc.

      They are certainly real in agricultural markets, and I personally believe they are real in the oil market in more recent times. Decades back, we used to talk about the Seven Sisters and that sort of thing. The big oil companies then were so entrenched and powerful there was not much price competition, and they were able to keep prices and supply remarkably steady.

      But in more recent times, with most oil companies being bought or seized by sovereign governments, the oligopoly fell apart. Now there is real competition.

  40. Oldfarmermac says:

    A rather long and detailed look at the proposed Obama administration budget for science:


    This is a long read, but it is broken into sections for NASA, NIH, etc, so you can read the parts of most interest personally.

    • SW says:

      The morons on the hill aren’t even going to give them the courtesy of testifying about it before they reject it.

  41. shallow sand says:

    Per Flint Hills Resources, ND light sweet $15.25.

    Assume $20 oil price, $8 OPEX, $2 severance taxes, $3 general and administrative. $5 interest.

    $2 profit margin per barrel. Assume net oil of 160,000 in first 60 months. $320,000 on a $7 million well.

    This is why rigs are dropping like flies up there in ND.

    Man, this is bad.

  42. Jeffrey J. Brown says:

    Seems to me that we are approaching a zero US rig count, or at least approaching a zero oil rig count.

    In any case, I previously noted, if we define the duration of the 2008 oil price decline as the number of months below $100, until we saw a sustained oil price recovery, the slump only lasted four months in 2008. But it took about two years for the US rig count to get back to the pre-decline levels, with the benefit of easy financing.

    Using the same oil price decline metric, we are at 17 months at counting, and easy financing has presumably gone bye-bye.

    Meanwhile, as I noted up the thread, US liquids consumption hit a seven year high last year, and the US is becoming increasingly dependent on net crude oil imports:


  43. Longtimber says:

    Herding Sheep over the cliff… KD on CHK.
    “For anyone who has forgotten the “sell side” folks (including Cramer) are experts at leading you into this sort of self-destruction; go back and read this piece if you need to and figure out how much of your money you’d have left if you went into those names at that time, and how fast the destruction came. ”

  44. Jef says:

    Finally some good news on the climate change front right Jav?

    “Supreme Court blocks Obama’s climate change plan”


    • Javier says:

      You still don’t get it Jef,

      I couldn’t care less about US political issues. It is not my country and those are internal affairs.

      Limits and controls of contaminating substances are always welcome and I support them wholeheartedly. We have to keep our environment as clean as possible. Limits to CO2 emissions are useless, as they are not going to have any effect on climate, and unnecessary because our CO2 emissions are already going down on their own.

      If you confuse the political issues with the scientific issues you are not going to understand climate change.

  45. Active Transportation advocates are hoping Ron is right. Being a walk/bike advocate and promoting means of alternative sustainable transportation has been murder in this environment. You would think climate change alone would have folks still trying to limit car use, or turn some of those shorter trips (about 1/3 of all car trips in the U.S. are under 2 miles) into walks, bikes, or transit rides, but it’s obvious that very few care until it’s a direct hit in the pocket.

    During the Arab Oil Embargo, bicycles were like snow shovels on the eve of a snowstorm; couldn’t keep ’em on the bike shop floor. It still holds the industry record for highest single year sales (followed by a mass exodus to the garage hook once over). We started to see some promising signs in 2008, on the approach to $4/gal. People were starting to try again to limit fuel expenditures, and not drive as much. VMT was much lower, and appeared to have peaked that year for good. Now it’s all down the tubes again, for god knows how long. It couldn’t happen at a worse time, especially considering the environment.

    • CaveBio says:

      There have been a few recent studies that have come to similar conclusions as to the one below. It will take a strong price signal to get this moving.

      US electricity could be powered mostly by the sun and wind by 2030: Rapid, affordable energy transformation possible

      The United States could slash greenhouse gas emissions from power production by up to 78 percent below 1990 levels within 15 years while meeting increased demand, according to a new study by NOAA and University of Colorado Boulder researchers.


      • Nathanael says:

        Thankfully, for electricity the price signal is already here.

        Even with coal selling for production cost at the minehead, once you add transportation costs and the cost of operating the coal-burning power plants, wind and solar are both cheaper than coal power. Solar is putting a cap on electricity prices: whenever retail prices rise above the LCOE of rooftop solar, there is *massive* rooftop deployment forcing prices down. Something complicated will happen with nighttime electricity, but wind is continously forcing prices down too, underbidding everything else. Obviously nobody burns oil for electricity (outside Hawaii which is going to stop doing so ASAP); it’s way too expensive.

        Even at current oil prices, fuelling my car with electricity is cheaper than fuelling a typical car with gas. But that’s not a strong price signal, because the upfront cost is higher.

        But that’s not what’s going to drive the switch to electric cars. What will drive the switch is that electric cars are simply nicer to drive. People who can afford it will pay a premium for them. Gasoline cars are what is known economically as an “inferior good” now.

  46. R Walter says:

    Oil is at 27.64 usd over at bloomberg. I paid 7.21 USD for 9.5 gallons of gas along with the use of coupons. I thought I was in heaven. My prayers were answered. har

    Japan buys a metric ton of oil for 21,760¥ today.

    114.6¥ per dollar, 189.87 USD per metric ton, 26 dollars for 42 gallons of oil. Price of oil jumped in Japan yet still a dollar and a half lower.

    The yen was 122 just before the holidays, it has gained in value. When the yen was low, the price of oil in Japan was as low as 22.50 usd range. A price rise for the Japanese, who need oil imports in the worst way. For 100 US pennies, you could buy 122¥. The yen was worth about 8/10ths of a penny.

    When the yen was at 88, the price of oil was 75 USD maybe up to 90. A yen would be worth something like 1.13 pennies. Worth forty percent more. Buy the yen now. If you can buy the yen at 122 for one dollar and wait for the yen to increase in value to 80 yen per dollar, then buy back dollars at 80 yen for one dollar, you will make you some money.

    RIG had a high of 85 in 2011, it is around 8.80 today, closing in on a ninety percent drop.

    The ox is gored.

  47. Ducan Idaho says:

    Homage to Catalonia:

    “I had dropped more or less by chance into the only community of any size in Western Europe where political consciousness and disbelief in capitalism were more normal than their opposites. Up here in Aragon one was among tens of thousands of people, mainly though not entirely of working-class origin, all living at the same level and mingling on terms of equality. In theory it was perfect equality, and even in practice it was not far from it. There is a sense in which it would be true to say that one was experiencing a foretaste of Socialism, by which I mean that the prevailing mental atmosphere was that of Socialism. Many of the normal motives of civilized life—snobbishness, money-grubbing, fear of the boss, etc.–had simply ceased to exist. The ordinary class-division of society had disappeared to an extent that is almost unthinkable in the money-tainted air of England; there was no one there except the peasants and ourselves, and no one owned anyone else as his master.”

    Anarchism seem like hell!
    (at lest according to Orwell)

  48. R Walter says:


    151,423 miles of crude oil pipeline in the US.

    Volume of a cylinder formula pi times radius squared times the height.

    66,350 cubic feet in one mile of pipeline 4 feet in diameter, divide by 5.61 cubic feet per barrel.

    There are 11,827 barrels of oil in every mile of pipeline if the pipe is 4 feet in diameter.

    Multiply those two numbers and the total oil in pipelines is 1,790,879,821 barrels of oil in 151,423 miles of pipeline 4 feet in diameter.

    If the pipeline in one foot in diameter, there will be 111,934,256 barrels of oil in 151,423 miles of pipeline. Needless to say, there is still a lot of oil in those pipelines even if it is a measly one foot in diameter. 739 barrels of oil in a mile of pipeline one foot in diameter.

    If the pipeline is 3 feet in diameter, there are 6652 barrels of oil in one mile.

    1,007,381,320 barrels of oil in 151,423 miles of pipeline 3 feet in diameter.

    Lots of storage in pipelines. I will take some time for them to empty.

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