OPEC January Production

The latest OPEC Monthly Oil Market Report is just out. The the data is “Crude Only” production and do not reflect condensate production.

Also the charts, except for Libya, are not zero based. I chose to amplify the change rather than the total. The chats do not include Indonesia. That will be added within the next few months when I am able to get better historical data for Indonesian crude only production. 

All Data is in thousand barrels per day.

OPEC 12

OPEC production, not including Indonesia, was up 130,700 barrels per day in December.

MOMR Secondary Sources

OPEC uses secondary sources such as Platts and other agencies to report their production numbers. These numbers are pretty accurate and usually have only slight revisions month to month. 

Algeria

Algeria peaked in November 2007 and has been in a steady decline since that point.

Angola

Angola has been holding steady since peaking in 2008 and 2010.

Ecuador

Ecuador appears to have peaked last year. It is likely production will be down, but only slightly, in 2016.

Iran

Sanctions were just lifted, in the middle of January, on Iran. I expect their production to be up by about half a million barrels per day by year’s end. However I believe Iran will be the only OPEC nation with any significant production increase in 2016. Most other OPEC countries will, I believe, be flat to down slightly.

Iraq

Iraq increased production more than any other OPEC nation in 2015. However I believe their increase in 2016 will be very moderate, if any.

Kuwait

I expect Kuwait will continue its slow decline from its peak in 2013. 

Libya

Libya is struggling with their own Arab Spring. There is no way of knowing when, if ever, peace will break out there. I think it extremely unlikely they will produce as much as 1,000,000 bpd within the next 5 years or so.

Nigeria

Nigeria is struggling with their own political revolution. But it appears they are in decline regardless of their political problems. However they had the largest increase in January, up 74,000 bpd.

Saudi Arabia

I believe Saudi is producing every barrel they possibly can. They will be lucky to hold this level for much longer.

Qatar

Qatar has lots of natural gas but their oil production has clearly peaked and is now in decline.

UAE

From 2005 through 2010 the oil rig count in the UAE averaged around 12. In November their oil rig count stood at 48,  4 times their average. They have managed to increase their production about 11% above their 2008 peak. I believe UAE production is about to follow Kuwait’s lead and rollover. The UAE’s rig count stood at 44 in January.

Venezuela

Not much can be said about Venezuela. Their conventional oil is in decline but their bitumen production is keeping production relatively flat. They took a hit in January however, down 34,500 bpd.

OPEC Less Saudi & Iraq

The combined production of OPEC, less Saudi Arabia and Iraq, peaked in January 2008 at 19,931,000 bpd and is down 2,778,000 bpd since that date 17,153,000 bpd.

saudi + Iraq

Since the combined production of the other OPEC 10 nations peaked in January 2008, Saudi and Iraq have increased their production by 3,625 bpd, from 10,850,000 bpd to 14,475,000 bpd. That is 33,000 bpd below their peak in June 2015.

Again, none of this data includes Indonesia. Historical crude only data for Indonesia is not available. I will include Indonesia in OPEC charts when I can calculate those numbers.

OPEC Annual Average

OPEC average crude only production in 2015 was 31,152,000 barrels per day. In January their production was 31,628,000 barrels per day.

MOMR Non-OPEC Supply

OPEC expects Non-OPEC liquids production to be down 720,000 barrels per day in 2016. If OPEC manages to hold production relatively flat from January, their 2016 production will be up 475,000 bpd. That is their gain would be about 250,000 bpd short of Non-OPEC’s decline.

However I expect OPEC to be slightly up this year due to Iran increasing production. But the increase will be modest as the rest of OPEC will likely be down. However I believe Non-OPEC will be down a lot more than 720,000 barrels per day.

China, the world’s fifth largest oil producer, has peaked and will suffer a sharp decline in 2016.

Why Declining Chinese Oil Production Is Good for Global Prices

China’s role as a big oil consumer has become a crucial factor in energy markets in recent years. Now, its role as a major producer is gaining attention as well.

China is among the world’s top five oil producers, but its fields are growing depleted and are increasingly expensive to pump. The country’s leading companies are choosing to leave more of their oil in the ground and some analysts now say Chinese oil output may have peaked.

Cnooc Ltd., China’s third-largest oil producer–which produces most of its oil from offshore fields–also said last month it expected output to decline by 5% this year, after years of rapid growth.

As China’s production starts to decline, demand for oil from overseas should remain firm, which would be good news for prices, which have been languishing near multiyear lows amid a global supply glut and weak demand in the rest of the world.

359 thoughts to “OPEC January Production”

  1. Thanks for the info, appreciate you putting this together.

    There is a lot happening to Venezuela now. Do you think they could be headed to a crash in oil exports?

    1. Venezuela is a wild card. They just imported light crude from the USA (a 550,000 barrel load), which they have to use to blend with faja 8 degree API crude. The load was placed by CITGO because pdvsa doesn’t have the cash to pay for diluent imports.

      The country is in terrible shape, with increasing anarchy. Police and armed forces are being robbed of their weapons, in one case soldiers killed each other as one of them tried to steal weapons before deserting. Armed bands are attacking whole buildings to sack their parking areas for car spare parts.

      I have a close friend who lives in a poor neighborhood who tells me she can’t even find iodine or alcohol to put on a burn. She managed to get oral antibiotics from the local Cuban post, but they didn’t have bandages or anything else to give her. Right now she’s boiling some clothes and will dry them to use as a cover for the burn.

      She tells me her nephew, who is in the national guard in southern Venezuela, hadn’t answered his phone when she called to tell him he needed to get help for his seven year old son, who was abandoned by his mother at her doorstep because she couldn’t feed him. This seems to be what is happening to poor people outside of Caracas. As for the middle class in Caracas, they are getting water cut off, and are having serious problems finding food, but I think they’ll get by.

      1. I hope your friend will be ok. Is she trying to get out of Venezuela, or will she stay and deal with whatever comes?

        1. She’s too poor to leave. I get emails and messages via chat services several times a day from different friends. One sent me an email that he was getting out this morning. He’s the son of Portuguese Inmigrants, is heading to the USA to see what he can do. Tells me there were 450 murders in Caracas in January, and he’s afraid they’ll kidnap him or his wife.

          This morning I read there are dozens of military and government officials who are turning information about the drug trade and theft networks over to USA officials, who are mapping out who got what funds where. The idea is to have the means to help the Venezuelan government retrieve some of the stolen money after Maduro falls. The communist faction within the Chavista regime seems to have been directing cash to support extremists in Latin America and Europe. The other factions were simply stealing as much as possible. The total amount stolen may range as high as $500 billion.

      2. Although it’s been awhile, I listen sporadically to The Expat Files (focuses on Latin America) over at PRN, and even some time ago, Venezuela was already looking in bad shape.

        Anarchy, as a particular definition, is not really what it is in or heading toward, by the way, but more like chaos. Anarchy is what it may have after the dust settles and if it is lucky.

        Likewise, what you call communism never really occurred in your contexts. What you call communism is actually more like authoritarianism.

        Best with your friend. Keep us posted and give us some good/best news links to keep track of things there if you’d like. Nice to see the ‘e’ back at the end of your name.

        1. What i call communism is what comunists put in place when they take over. They ARE authoritarian. I think you tend to get lost in theory, while i have lived nearly 60 years fighting against them. I have lived inside their monster, went to their schools, received their education, and learned much more than your book learning will ever teach you.

          I’m not into violence, but it should be clear they intend to destroy society,they are barbarians who do implement terrible dictatorships, and need to be fought to the death if need be.

          There can be no truce, no accommodation, no respite. They are like Muslim extremists, they will metasthize, and will probably never disappear.

          The West needs to keep an eye on two balls at this point, communism and Muslim extremism, both are deadly enemies which really can’t be allowed to exist in a modern society.

          1. Is North Korea communist? If so, why? Because they say they are?

            https://www.quora.com/Is-North-Korea-communist-or-fascist-What-is-the-difference

            North Korea is an ultra nationalist right wing facsist state. They can call themselves whatever they like. A little critical thinking and standard definitions of what communism is and is not would probably lead to a better construction of the problem definition. Attempting to solve inaccurately defined problems is usually not a good starting point.

            A right wing government or a left wing government won’t solve Venezuelas problems. Nor Egypts or Nigerians. It’ll change the structure of the patronage networks and who gets what when they divide up the spoils of power, but as States they’re screwed either way.

          2. The West needs to keep an eye on two balls at this point, communism and Muslim extremism, both are deadly enemies which really can’t be allowed to exist in a modern society.” ~ Fernando Leanm(e?)

            Just a pleasant reminder, in case it’s conveniently slipped your mind/eye, of your ‘The West’ and its covert-and-otherwise wars, infiltrations, weapons and drug dealings, false-fronts (USAid?), military bases, and propping up of dictatorships around the world, including the KSA and various areas in Latin America (Venezuela? Perish the thought.).

            “What i call communism is what comunists[sic] put in place when they take over. They ARE authoritarian.” ~ Fernando Leanme / Leanm

            That’s why I ‘lean toward’ anarchy, which is probably the only social setup that seems to have withstood the test of time and approached its ‘purest form’ in reality in the form of the band or tribe of yore.

            But even so, inside ourselves there can be a struggle against our own little despotic dictatorships over ourselves, which is more or less where everything begins, yes? I guess there will always be hierarchy with the difference being in how it is approached and managed… Beauty hierarchy; strength hierarchy; intelligence hierarchy; height hierarchy; capital accumulation hierarchy; social influence hierarchy; luck hierarchy and so forth…

            “Communists and anarchists are working for the same eventual goal of a society without hierarchy. In one way communism and anarchy are pretty much the same concept: a stateless, classless society in which no one rules over others. Communists just believe that hierarchical means (the state, perhaps ruled by a Communist vanguard) can be used in the transition to this end, while anarchists believe in using only non-hierarchical, decentralized means.

            As an anarchist my personal opinion is that the ends don’t justify the means, and that only non-hierarchical organization can bring about a successful revolution to a non-hierarchical society. I just don’t think it’s very realistic that any government, Communist or not, would voluntarily step down from power. Communists, on the other hand, don’t think it’s very realistic to manage a revolution in a completely decentralized, non-authoritarian manner.” ~ Eleutherios

            1. Anarchism was big in Spain in the 1920’s-30’s.

              Once the civil war started the anarchist forces were the worst performers and as they were generally despised, they were usually taken over by socialist and communist forces in the fight they maintained for supremacy of the government forces. So they basically lost against everybody else.

              This is as close an experiment I am aware of and I would conclude that anarchism is likely to lose against any organized form of government when it comes to competition and conflict.

            2. I am just heading out, but…

              “Bands have a loose organization. Their power structure is often egalitarian and has informal leadership; the older members of the band generally are looked to for guidance and advice, and decisions are often made on a consensus basis, but there are no written laws and none of the specialised coercive roles (e.g., police) typically seen in more complex societies.” ~ Wikipedia

              Relative anarchy is apparently human’s natural or original form of social organization.

            3. One key to an ant colony, for example, is that no one’s in charge. No generals command ant warriors. No managers boss ant workers. The queen plays no role except to lay eggs. Even with half a million ants, a colony functions just fine with no management at all—at least none that we would recognize.” ~ National Geographic

              “Kropotkin’s most famous book, Mutual Aid, maintains that cooperation within a species has been an historical factor in the development of social institutions, and in fact, that the avoidance of competition greatly increases the chances of survival and raises the quality of life. He contended that mutual aid is a factor that is both biological and voluntary in nature, and is an enabler of progressive evolution. Without it, life as we know it could not exist…

              Kropotkin also believed that we have a predisposition to help one another, and we do so without governmental coercion. A centralized government is not necessarily needed to set an example or to make people do the right thing. People were doing so before the rise of the State. In fact, Kropotkin maintained that it is government that represses our natural tendency for cooperation.” ~ Moya K. Mason

              “I once mentioned– perhaps here– that we are not ants and therefore don’t need a queen. But if The Queen– say, Queen Elizabeth– insisted, it might be possible to still run things kind of democratically or at least fairly or equably. But here’s the rub: She would have to behave like a real queen ant and relinquish her disproportionate privileges. She’d have to stay in Buckingham palace all day and night and pop out kids while the workers arrived from the outside to feed and take care of her. And her clone-like offspring would have to be workers, drones or soldiers or somethings like those. They couldn’t fly around the world in helicopters on the taxpayers’ dimes. But the problem with the human queen, and human elites in general, is that they want to eat their cakes and have them too. But nature doesn’t seem to allow, for very long, more complex organisms like us to have elites that eat their cakes and have them too, so [as a likely result] humans seem to collapse their social orders after a time.” ~ Caelan MacIntyre

              I will repeat that inside ourselves there can be a struggle against our own little despotic dictatorships over ourselves. If ‘our little dictator’ wins and we, for example, drink too much too often, then it can threaten our bodies’ (think of our bodies as our social orders) general health (as well as our social relationships outside ourselves).

              List of Anarchist Communities

              See also; ‘Human and Nature Dynamics (HANDY): Modeling Inequality and Use of Resources in the Collapse or Sustainability of Societies’.

            4. Your list of anarchist communities says it all.

              Two of them are Catalonia and Aragon during the Spanish civil war, of which I have already wrote and that I consider them a failure.

              And only two lasted for more than a few months, the Korean and Ukrainian ones, and both were under control of an army, without doubt the most hierarchical organization of all.

              I don’t find any evidence that anarchism is not a failed utopia that cannot work for our species. Perhaps if we were different, but we are not.

            5. I have already written that (stateless, ‘lawless’), relative anarchy has been around for most of our existence, is our natural way, and as already previously written as well– likely on here– ‘failed state’ seems almost a tautology.

              The list of anarchy groups was posted relatively casually and is not meant to support my point per se. Your ostensibly ignoring the historical aspect of our natural anarchy and the ant example (Hey, you do/study biology, right?) and zeroed-in cherry pick with regard to the anarchy group link seems disingenuous and typical, though.

              Anarchy was likely big in Spain long before it was called ‘Spain’ and before the phonetic passage, ‘The rain in Spain stays mainly in the plain.’.

            6. Caelan,

              I ignored the ant example because it is awful. To a biologist, an ant colony is the equivalent of a single individual, with the queen being the reproductive organ. The relationship between individual ants of a single colony is very much similar to the relationship between your cells.

              If you are telling me that natural anarchy took place before organized complex civilization, that also tells a lot about it. Perhaps that is our future, but we are going to be dragged to it kicking and screaming, not as an evolution to a superior state as you imagine.

            7. You seem to have just embellished my point for me, Javier, with regard to the ants as an organism as, up-thread, I mention– twice (and with another ant reference)– internal cooperation and how, if we have some sort of ‘internal dictator’ or some, say, ‘financial organ that is cooking the books’ and not doing what it is supposed to do, it’s going to, potentially seriously, mess with body, the organism.
              The lungs, heart, liver, etc., have to do their work properly, and only their work, otherwise, there may be serious trouble for the organism as a whole.
              So part of my argument is that for complex, specialized civilization to work, it would seem to have to function more like an organism, otherwise, we get… anarchy?

              In other words perhaps, this current system is, at best, transitional, at worst, unsustainable– a lethal mutation— which I have also previously posted a quote about.

              The problem for individual humans would seem that, while they are social, thus, ‘networked’ creatures, they are not organs or cells or ants. They are too behaviorally-complex as individuals, too free. Too anarchic. But they seem to nevertheless be constantly attempting– over and over again throughout history– to compose these ‘casually-networked’ structures called civilization, only, for the most part, to fail.

              So a concern is, is that if we want to have success, we would appear to need a different strategy, which would appear to include being aware of what it is we are doing ‘wrong’; and who and what exactly we are as a species.

          3. “The West needs to keep an eye on two balls at this point, communism and Muslim extremism, both are deadly enemies which really can’t be allowed to exist in a modern society.”
            I’d add to that list Theocracy!!!

          4. What i call communism is what comunists put in place when they take over. They ARE authoritarian. I think you tend to get lost in theory, while i have lived nearly 60 years fighting against them. I have lived inside their monster, went to their schools, received their education, and learned much more than your book learning will ever teach you.

            Yeah! Says the guy who who recently claimed that the ultra right wing fascist authoritarian dictator Augusto Pinochet was preferable to the democratically elected President Salvador Allende solely because Allende was a Marxist. So apparently you have learned nothing! You are an ideologically blinded authoritarian supporter yourself.

            I’m of Hungarian descent and many of my relatives left Hungary after the 1956 revolution so I am definitely not a supporter of the authoritarian communists who controlled Hungary at that time! However I also do not support the authoritarian neo fascists currently in power in Hungary. Furthermore I also lived under a right wing authoritarian military dictatorship in Brazil who were anti communists.
            I have experienced both sides of that coin.

            So I can with a straight face say it’s all the same old shit with different flies!

          5. Kinda slippery, coming from someone who escaped a right wing dictatorship in Cuba (as a privileged member of the elite), and then embraced Fascism in Spain under Franco.
            (who supported Nazi Germany).
            What about authoritarian rule do you not like?

          6. What Venezuela actually needs is 18 years with no leaded gasoline:
            http://www.ricknevin.com/

            The violent street crime waves in Venezuela, and the irrational series of authoritarian leaders (both right-wing and left-wing, though you ignore the right-wing ones because of your bizarre personal biases) are precisely what we’d expect from the historic lead exposure.

        2. Come now Fernando– You escaped a failed right wing dictatorship in Cuba, to go to Fascist Spain under Franco (who supported Nazi Germany).
          Authoritarian rule seems to be your preference.

      1. It’s beyond failed states. It’s a failed continent.

        Don’t worry Donald Trump and Bernie Sanders will form an alliance and they will make America great again and the we will go and save all those failed states from themselves.

        BTW, I think what we are seeing is that BAU is failing everywhere around the globe.
        So in terms of economies we have a failing planet. To make matters worse all the economies of the world are subsidiaries of Ecosystems Inc.

        http://www.overshootday.org./

        August 13th has been Overshoot Day 2015 – the day on which humanity has consumed the resources which nature is providing for the entire year.
        In less than eight months, we have used up nature’s budget, with carbon sequestration making up more than half of the demand on nature, according to data from Global Footprint Network. The Club of Rome is partner of the 2015 Overshoot Day Initiative.

        And, just in case you don’t believe the Economy is a subsidiary of Ecosystems Inc…

        http://www.bloombergview.com/quicktake/negative-interest-rates

        Imagine a bank that pays negative interest. Depositors are actually charged to keep their money in an account. Crazy as it sounds, several of Europe’s central banks have cut key interest rates below zero and kept them there for more than a year. Now Japan is trying it, too. For some, it’s a bid to reinvigorate an economy with other options exhausted. Others want to push foreigners to move their money somewhere else. Either way, it’s an unorthodox choice that has distorted financial markets and triggered warnings that the strategy could backfire. If negative interest rates work, however, they may mark the start of a new era for the world’s central banks.

        Yep, we are in uncharted territory and this is indeed new era for the world’s central banks and most of the economies in the world…

        Poor little oil rich Venezuela is just one of the canaries in the coal mine. (none of the puns are intended).

        Oh, and last but not least these are all clear indications that those who argue that renewables can’t power our economies and therefore SAVE THE WORLD are 100% correct. But what they fail to grasp is that neither can fossil fuels or nuclear or any other form of energy.

        So we are all due for some major resets in our expectations and consumption patterns. We have been spending our resources like drunken sailors. Now we are broke and have a major hangover to boot.

        Cheers!

        1. Wow! Bad day Fred? I expected at least a little optimism there at the end.

          “…renewables can’t power our economies and therefore SAVE THE WORLD…”

          My beef with “renewables” has always been simply that. Now if that was universally understood then we could get down to the real work of doing what actually needs to be done.

          1. Fred: “…renewables can’t power our economies and therefore SAVE THE WORLD…”

            Jef: Now if that was universally understood then we could get down to the real work of doing what actually needs to be done.

            Ron: And just what kind of work would that be?

            1. The unimaginably difficult work of doing LESS!

              Pay people to not consume.
              Huge fines for conspicuous consumption.
              Huge fine for polluters.
              Pay people to farm, relocalize, transition, etc.
              Free tiny houses on rural farming land in trade for farming.
              Destroy big corps.
              Pay people to go to school, learn trades, do art.
              Make low/no carbon travel a universal right and pay people.

              Funny thing is all of this is what most people want anyway. The main thing getting in the way is money, not lack of it, there is 10 times more than it would take to accomplish this given out to 1% of the population over the last few years alone. The problem is too much of it going into the hands of a few allowing them to live like gods on earth. Once that happens everyone wants in on the action.

            2. Hey Jef I think some of your ideas are definitely on the right track there. As things progress and more and more people are no longer employed in so called 9:00 to 5:00 jobs, I think societies will need to find ways to provide for their members while keeping them doing productive and useful things. I would also add free health and dental care to your list. There is no doubt that the current extreme concentration of wealth in the hands of a very few is not something that most people consider just.

              Cheers!

            3. Hi Fred and Jef,

              Many of those ideas sound good.

              The problem is we need to find a way to get people to choose that path. Perhaps a crisis would do it, but sometimes this leads to social progress (US during Great Depression for example), in other cases we get fascism.

              In any case a redistribution of wealth in a democratic society would be positive in my opinion and might be accomplished by proper tax policy.

              Less consumption and other incentives to farm differently and work differently might also be accomplished through taxes, and reducing pollution could be accomplished by high taxes on polluters.

              It is all a matter of convincing people to elect the right representatives who might enact such a policy.

              People should be suspicious of politicians supported by super-pacs in the US because where the money comes from is far from transparent.

            4. “…a redistribution of wealth in a democratic society would be positive in my opinion and might be accomplished by proper tax policy…” ~ Dennis Coyne

              With the key/trick passage being ‘in a democractic society’… (with coercive taxation?)…

              Coercive democracy… (oxymoron?)

              Somewhere… out there… just not here… democracy lurks… It’s waiting… it’s lurking… it’s waiting… it’s lurking…

              Sailing Through The Bardo

            5. Hi Caelan,

              In any society with rules there must be coercion or the rules would not be meaningful.

              Your thinking that coercion will not exist in an “anarchy”, is cute but unrealistic.

            6. Dennis, there is a world of difference between State coercion and the ‘coercion’ behind rules democratically achieved (and ones of the State that are not.)
              Your ostensible notion of ‘government‘ is of course nothing of the sort and is far from cute. It is also highly unlikely to be sustainable and is therefore not realistic.

            7. “The unimaginably difficult work of doing LESS!” ~ Jef

              Alright!
              (And enjoying the planet more, due to leisure that we should have had by now, instead of losing the paradise we’ve inherited in the face of continual multifaceted degradation at the hands of structural violence and privilege.)

              “If I’m rich, what do I do with money? Buy lots of land and resources out from under everyone’s feet? Then what? Charge them rent and have them work for me to pay the rent? Take my business overseas and do the same thing there? What good is that?”

              Kid: “Daddy? Why are there rich people?”
              Dad: “What do you mean by rich? You mean like in spirit?”
              Kid: “No-o-o-o-o… Like they have lots of big houses and cars and money!”
              Dad: “Ohhh, you mean those kinds. Well, you see, sweetie, our society allows some people to make more money than other people, working no harder than anyone else. Society then allows those with more money to acquire more land than others. Over time, this creates the dynamic for most, if not all, problems we have in society today, like landlessness, homelessness, poverty, social unrest, war and civilizational collapse.”
              Kid: “Why does society allow that?!”
              Dad: “Corruption. Society uses force to uphold unethical laws that say that one person with more money can have more land than another with less money.”
              Kid: “Why can’t we stop that!?”
              Dad: “Corruption again: This setup is upheld by people with guns and weapons, or access to them, like cops, security guards and military people– people who often don’t understand this basic and very simple immoral core of our society.”
              Kid: ” 🙁 ”
              Dad: “Ya; 🙁 “

              Vancouver’s Multimillion-Dollar Rotting Homes, or; China Exports Invaluable Ghost City Knowledge, or; Westernization, Chinese-style, Comes Home to Roost, or; China’s Ghost Cities’ Ghostly Refugee Crisis Overwhelms Vancouver’s Overpriced Heritage Housing Market, or; Remember The Leaky Condo Fiasco?, or; Never Mind East Hastings’ Gentrification, Here’s The Rotting Houses…

        2. And just a bit further south than that soon to be failed state of Mexico are three countries that arguably constitute the most violent region on the planet and are already failed states; the Northern Triangle. All just a relatively short boat ride from US southern shores. The overland distance from Guatemala to Texas is about 2/3 that of Syria to Germany. Given recent events I now suggest that can be considered “walking distance”. Unregulated mass migration has historically speaking been a hallmark indicator of collapse.

          http://www.insightcrime.org/news-analysis/the-northern-triangle-the-countries-that-dont-cry-for-their-dead

          1. You’re probably ignoring the US-backed coups which keep creating instability in the region. Of course you are.

            Mexico, meanwhile, is more stable than the US, which is probably the #1 most likely to become a failed state in the world, based on a large number of predictors — our political system is completely dysfunctional;Presidential systems generally collapse. Net migration is now FROM the US TO Mexico.

      2. Actually South America has been on the upswing for over a decade and is probably a model for the future.

  2. A Tale of Two Oil Price Declines

    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 (last $100 month was 8/08).

    Annual OPEC crude only production fell from 31.1 million bpd in 2008 to 28.6 million bpd in 2009, a decline of 2.5 million bpd. (US C+C production increased by 0.4 million bpd over same time period.)

    In contrast, annual OPEC crude only production increased from 30.8 million bpd in 2014 to 31.8 million bpd in 2015, an increase of 1.0 million bpd. (US C+C production increased by 0.7 million bpd over same time period.)

    Using the same metric as above (number of months below $100, until a sustained price recovery), we are at 17 months and counting (last $100 month was 8/14).

    On the demand side, global total liquids consumption fell from 87 million bpd in 2007 to 86 million bpd in 2008 and fell again to 85 million bpd in 2009.

    Regarding the current decline, global total liquids consumption rose from 91 million bpd in 2013 to 92 million bpd in 2014 (BP consumption data), and I believe that consumption increased in 2015.

    US total liquids consumption hit a seven year high in 2015 (the highest since 2008), and recent data indicate that the US is becoming increasingly dependent on net crude oil and total liquids imports:

    http://peakoilbarrel.com/oil-production-is-going-to-drop/#comment-558945

    Based on most recent four week running average data (week ending 2/5), US net total liquids imports were running at 5.5 million bpd, versus an average annual level of 4.7 million bpd for 2015.

    1. 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 (last $100 month was 8/08).

      Kinda needs fleshing out some? http://www.fedprimerate.com/crude-oil-price-history.htm

      Says crude was $100+ late Sept/08. Got back to $100 in 2011. I guess you mean when the upturn started . . . that was Jan 09 and the Fed started QE of only MBS in late 2008 — but just MBS to bailout banks. It wasn’t until later that Treasuries were being bought and of course that sort of began the process of destroying the definition of a dollar — so the time frames in question, particularly the 4 months alluded to, are probably legit in that the yardstick was still a yardstick then.

    2. Anyone have an annual global total liquids consumption estimate for 2015?

      To answer my own question, the EIA puts 2015 global total liquids consumption at 94 million bpd:

      https://www.eia.gov/forecasts/steo/report/global_oil.cfm

      So, global consumption fell by 2 million bpd from 2007 to 2009 (87 to 85 million bpd), but global consumption rose by 3 million bpd from 2013 to 2015 (91 to 94 million bpd).

      1. Jeff: I read your article this morning on Condensate production. It was my understanding that EIA Condensates referred to those API fractions above 42 that came out of oil wells. I further thought that NGPLs were those same API fractions that were extracted from NG at the NG processing plant. I gathered/inferred this information from looking at the weekly EIA numbers where they separately list NGPL.

        A clarification would be appreciated.

        1. Ovi, no, I don’t think that is the case at all. The below is from the EIA’s glossary. Bold mine.

          GLOSSARY

          Condensate (lease condensate): Light liquid hydrocarbons recovered from lease separators or field facilities at associated and non-associated natural gas wells. Mostly pentanes and heavier hydrocarbons. Normally enters the crude oil stream after production.

          The condensate in the EIA’s Crude + Condensate data includes condensate that comes from gas wells as well as from oil wells.

          Qatar is a good example. Most of Qatar’s condensate comes from gas wells. In October the EIA says Qatar produced 1,537,000 bpd of C+C. But the OPEC MOMR says that, in October, they produced 675,000 bpd of crude only. That means that from their massive number of natural gas wells, they produced 862,000 bpd of condensate. And the EIA counted it all.

  3. BTW Ron it would be nice to see the latest . . . absolute latest reserves estimate for all OPEC (and non OPEC) countries, hopefully of a non economic sort, though I suspect all sources quote in terms of reserves price-wise.

    Though if we held about $30 for years and companies just stop operating (until nationalized) we might see some real live geologic reserves data. Reserves before nationalization. Reserves after nationalization.

    Non economic reserves tells us when the food stops moving.

    1. Watcher, proven reserves are mostly unproven. And it depends on who you ask. According to the EIA the world has 1,650 billion barrels of proven reserves. But that includes the Orinoco bitumen and the Canadian oil sands. Subtracting out the bitumen and oil sands would leave you with about 1,200 billion barrels.

      But everyone, including the EIA, is basically taking the OPEC countries word for how much they have. I don’t believe a damn word of it. My guess is that Non-OPEC reserves are about 400 billion barrels, and OPEC reserves are slightly less than that, about 350 billion.

      OPEC Share of World Crude Oil Reserves 2014
       photo OPEC Proven Reserves_zps1kmxahwx.jpg

      The below chart is every country with 2 billion barrels or more of proven reserves. There are several countries with less than 2 billion barrels of reserves that are not included in this chart.

      EIA World Crude Oil Reserves

       photo Proven Reserves_zpsduvbncj0.jpg

      1. Not bad. The reserves numbers probably have economics AND technical stuff in them.

        It would be really nice to know what the MTBF is on parts on already producing oil wells. The point would be disruption of shipping of anything but food would stop production from wells already drilled, not really addressing inability to ship the oil itself, but rather the spare parts for the pumps and whatever.

        This would serve to redefine reserves somewhat. Economic, technological AND no spares production. Anyone know how long stripper wells can operate with zero repairs? This would have to reduce your 700B estimate further.

        1. Not bad. The reserves numbers probably have economics AND technical stuff in them.

          No they don’t. The numbers are just what these countries say their proven reserves are. There is nothing in them but their word.

          It would be really nice to know what the MTBF is on parts on already producing oil wells.

          Errrrr, yes, but I don’t get the connection between “Mean Time Between Failures” and proven reserves. And I understand that you tried to explain the connection in the rest of your post. But I still don’t see any connection.

          Proven reserves are just what oil producing countries say are their proven reserves, nothing more, nothing less. There is no algorithm or survey that the EIA, IEA, or anyone else uses to calculate proven reserves. Just their word, that’s all.

          And that is why any estimate of world proven reserves that uses “the countries word” as their estimate is not worth a bucket of warm spit.

          1. Can’t argue with that. Adding MTBF to numbers pulled out of the air doesn’t change anything in those numbers.

            But if they were based in something meaningful, MTBF will affect them — in a world where you can’t repair wells for lack of parts.

      2. It’d be interesting to see The Oil Shock Model expressed with 750Gb URR.

        1. HI Jimmy

          URR is reserves plus cumulative production.

          That would be about a 2000 Gb URR.

          See simplified shock model at oilpeakclimate

          1. Hi Jimmy,

            Your welcome. I was on a cell phone and couldn’t reply properly sorry.

            Cumulative C+C minus extra heavy (oil sands) output through the end of 2015 is about 1260 Gb. So if there are 750 Gb of proven reserves excluding oil sands in Canada and Venezuela, then the URR would be about 2000 Gb, if no new proven reserves are added and there are no new oil discoveries in the future.

            Jean Laherrere estimates 2200 Gb for the URR of C+C less extra heavy(XH) oil and 500 Gb for the XH URR.

            Link below to an oil shock model using those assumptions (which are too conservative in my opinion).

            http://oilpeakclimate.blogspot.com/2015/02/the-oil-shock-model-with-dispersive.html

            Chart below with URR=2700 Gb scenario(including XH oil) which peaks in 2015. Note that a Hubbert Linearization suggests the C+C less XH URR will be 2500 Gb and the USGS estimates 3100 Gb, my medium scenario splits the difference at 2800 Gb.

            Those scenarios are at

            http://oilpeakclimate.blogspot.com/2015/07/oil-shock-models-with-different.html

            1. Thanks a lot Dennis! I really appreciate it. I tend to be pessimistic on future production. It seems to me that the highest decline rates are in tight oil fields, in second place is off shore, and the lowest decline rates are conventional on shore fields. As we proceed into the future I feel the new production is unlikely to come from conventional on shore fields. A larger and larger portion of our oil supply going forward will come from the types of fields that suffer the higher decline rates. I’m hoping for the best and planning for the worst. Thank you for helping me understand the information you have.

            2. Hi Jimmy,

              The observation on decline rates is correct, but LTO is not really a huge player, probably 50 Gb worldwide at most and maybe 5 Mb/d peak output. Deep water may become a bigger player and that concern is valid.

              One thing missed by many is that new proven reserves are continually added. From 1980 to 2005 US proved plus probable reserves grew by about 63% in 25 years.

              Let’s assume proven reserves are 600 Gb (for World C+C les extra heavy oil), 2P reserves would be 70% higher or 1000 Gb and if these reserves grow by 50% over the next 50 years, we would have 1500 Gb, add that to cumulative production and we have 2750 Gb for a URR, close to my medium scenario for C+C less extra heavy (oil sands).

              As an aside, Fernando thinks that is reasonable, he has forgotten more about the oil industry than I know.

  4. The last few years have been very interesting in that when prices were high we saw non OPEC producers going as hard as they can to produce oil, and now that prices are low we’re seeing OPEC members going as hard as they can to produce oil. In the non OPEC group it was Canada and USA with the big gains. In the OPEC group it’s Saudi Arabia and Iraq. This gives us a rough indication of whose got what in their hand. Perhaps what a competitive card player/gambler might call ‘a tell’. Based on estimates of decline rates from existing fields and in consideration of who can raise production levels if needed it seems to me that we are at an inflection point, and perhaps have been for sometime.

    The oil market is in chaos in many ways. For example it’s probable that US storage is filled with condensate and it suppresses the price of crude. The Gulf Region/Middle East hasn’t seen this much turmoil since WW1 yet geopolitical risk premiums on oil don’t seem to register. Saudi Arabia is making money but nowhere near enough to survive as a State. It could be said that Saudi Arabia is facing an existential crisis yet nobody in the oil market seems to feel energy supplies are at risk anytime soon.

    US/NATO/The West/Whatever you want to call it has tried three distinct ways of dealing with Middle East foreign policy over the last decade and a bit. As Tony Blair puts it; “We’ve tried intervention and putting down troops in Iraq. We’ve tried intervention without putting in troops in Libya. And we’ve tried no intervention at all but demanding regime change in Syria.”

    When US/NATO acted in Iraq with an all-in strategy, it failed; when US/NATO sort of acted in Libya with an air campaign and no troops, it failed; when US/NATO refused to act in Syria, except for perhaps supporting proxies via arms supplies, it failed.

    Unknown unkowns. Where we go from here is gonna be great history one day.

    1. The troops on the ground option has not exactly FAILED in the usual sense of the word. It would be more accurate to say it has not achieved long term success.

      Personally I believe troops will be sent hither and yon , again, and yet again, in pursuit of a steady supply of oil, for the easily foreseeable future. The powers that send them will bring them home whenever they can, and send them back whenever they must.

      Troops are expensive, in both blood and treasure, but not so expensive in treasure as doing without that oil, and a few hundred or a few thousand troops are a price that this country will pay, if necessary, to keep the economic apple cart greased and upright, and rolling along.

      It won’t matter much which party is in control, except maybe close to election time. Neither the R nor the D party will burden itself with the issue of sending troops , if doing so can be avoided, in the run up to an election.

      I am a big a believer in renewables and other new tech, but I try to be realistic, and I can’t see the world, or the USA, or our friends and allies, freeing ourselves of our oil addiction in less than twenty to thirty years, and that is an OPTIMISTIC estimate imo.

      1. My belief is that the policy in each case did not achieve its objective. To me that’s the definition of failure. Close enough anyways. To ask what policy would have achieved that objective is hypothetical and not really worth debating but from the three basic policy options/concepts of operation I/Tony Blair kinda pointed out in my comment above it seems likely no policy option would achieve the hoped for objective. Let’s assume for the sake of argument the objective in each case (Iraq, Libya, Syria) was stability and a pro-west regime. So damned if we do and damned if we don’t. For the sake of the costs involved I think we’re better off at the end of the day if we don’t.

        Alternately we could support one side until they’re in the lead, then switch and support the other until they’re on top. Do this back and forth several times bleeding both sides as much as possible, then leave a damn mess of failed states full of radical fundamentalist psychopaths on Russia and China’s periphery and undermine the possible creation and organization of any Eurasian continental economic empire that might one day pose an existential threat to America. That’d be the Machiavellian thing to do I guess. If a Eurasian continental economic empire was on your radar I mean.

      2. OFM:
        “Troops are expensive, in both blood and treasure” Even more so I think that after a while troops become expensive in the credibility of the government. Vietnam comes to mind. The greatest cost to the US of that war (and some other concurrent policies)was the general destruction of the relatively blind faith that most Americans had in their govt. Mideast policy that includes decades of military intervention will exact a similar toll.

    2. Jimmy,

      I think this is a very apt observation:

      The last few years have been very interesting in that when prices were high we saw non OPEC producers going as hard as they can to produce oil, and now that prices are low we’re seeing OPEC members going as hard as they can to produce oil. In the non OPEC group it was Canada and USA with the big gains. In the OPEC group it’s Saudi Arabia and Iraq. This gives us a rough indication of whose got what in their hand. Perhaps what a competitive card player/gambler might call ‘a tell’.

      A real “tell”. Why they are increasing production if the world is already full of unused (and already delivered somewhere) oil? Because they are still able to sell it despite “glut”.

      If we believe EIA and friends it is impossible to consume all this oil. So it’s the customer who pays and then is hoarding all this cheap oil.

      But the problem is that the cost of private storage is pretty high those days, especially in the USA and ordinary companies and refineries can get only losses out of such strategy: “…limited crude oil storage facilities caused crude oil storage costs to rise to $0.90 per barrel on February 9, 2016—compared to $0.10 per barrel in August 2015. ” ( https://marketrealist.com/2016/02/crude-oil-storage-costs-rose-9-times-us-crude-oil-tests-new-limits/)

      If we believe that world has on average 2 Mb/d surplus for at least 18 month that’s one super-large tanker full of oil/condensate a day. 30 tankers a month, 365 tankers a year (over 700 Mb a year). In other words for the total duration of oil glut period 1000 Mb or more — a billion barrels of oil — should now be stored somewhere on customer sites.

      Where on the globe such a huge oil inventory is located. And where you can store such amount physically. Not of the ground — storage costs way too much and data about ground shortage does not show such a huge built-up of inventories. Not in tankers — cost of storage is even more (~1% a month if we assume $30 per barrel average price) and number of tankers of such a size is very limited and they are very expensive.

      USA is the primary “glut country”, but “glut oil” somehow definitely did not landed here. EIA does not see any increase in storage in the USA since March 2015:

      http://www.eia.gov/forecasts/steo/images/Fig14.png

      Europe is the same. Only China remains — it did bought some oil for strategic reserves “The IEA says that in the first quarter the gap between China’s measure of demand and supply stood at 650,000 barrels a day – equivalent to storing 58m barrels over the three-month period.”
      OK. let’s assume that china absorbs 0.5 Mb/d from this glut. So we still have 1.5Mb/day glut left.

      Where are those volumes? Does this make the hypothesis of 2 MB/d “oil glut” completely absurd? That means that all this period of sharply dropping oil prices supply and demand of physical oil were pretty finely balanced and Iraq and Saudis were recruited to avoid shortages of physical oil, which would spoil the whole game. If this is true, then “oil glut” existed only in “paper oil”. In other words it was artificially created. Or I misunderstand something ?

      BTW Russians now feel they were taken for a ride by “casino capitalism” sharks. Below are laments of hapless Rosneft top honcho Igor Sechin:

      Oil price forecast as an instrument for oil price manipulation
      Edited Google translation. Originally from http://izvestia.ru/news/603843

      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 who are engaged in the game of artificial suppression of oil prices.

      According to Sechin, financial market players are ready to “test” any and all levels of oil 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 the major banks. But this is nothing but “an irresponsible game” designed to fleece oil producers said Sechin.

      In the morning on the London stock exchange the price of barrel of Brent crude fell $2.5 to $30,5 for barrel.

      1. “If we believe that world has on average 2 Mb/d surplus for at least 18 month”

        According to the EIA, the surplus exceeded 2 mb/d only in 2Q15.
        The average surplus for 2015 was 1.85 mb/d, for a total of 675 million barrels.
        The accumulated surplus since the beginning of 2014 is 995 million barrels.

        World oil stock change & balance (global liquids supply – global liquids consumption), mb/d
        Source: EIA STEO February 2016

        1. “EIA does not see any increase in storage in the USA since March 2015”

          According to the EIA, from March 2015 to January 2016, the U.S. commercial inventory increased by 125 million barrel.

          Over the period 2014-2015, the OECD commercial inventories of crude oil and refined products increased by 493 million barrels, including 277 mbbl in the U.S. and 216 mbbl in other OECD countries.

          In January 2016, total OECD commercial inventories amounted to 3066 million barrels, of which the U.S. acounted for 1342 million barrels.

          The U.S. Strategic Petroleum Reserve remained flat at around 695 million barrels.

          So the OECD in-land storage absorbed about a half of total estimated global surplus over the period 2014-2015.

          The rest is the increase in commercial and strategic inventories in China, other oil-importing non-OECD countries, oil exporting non-OECD countries, floating storage, and the so called “balancing items”.

          OECD Commercial Inventory (million barrels)
          Source: EIA STEO February 2016

          1. Hi AlexS,

            If the EIA estimate is correct, it looks like there is only 500 to 600 million barrels above Dec 2013 storage levels.

            If the Dec 2013 level is “normal” or close to the 5 year average and supply falls to 1 Mb/d below demand, then it would take 2 years to get back to normal storage levels.

            1. Dennis,

              The EIA, IEA and others expect the global excess supply to gradually diminish, but supply will still exceed demand until 3Q17 (according to the EIA).

            2. Hi AlexS,

              I think the EIA forecasts will be wrong, supply will be lower and demand will be higher than they predict, especially at $30/b or less. If the supply and demand forecasts are correct, why would oil prices rise? I would expect if those forecasts are correct, that the oil price would fall further so that supply and demand will balance.

            3. Dennis,

              The EIA’s projections may be wrong, like any other forecasts.
              But if you say they are wrong, I would like to know, where exactly their supply or demand projections are wrong. This should be based on detailed analysis by country, region, resource type, key projects, etc. Otherways, these are only empty words.

              BTW, as I remember, about 2 weeks ago you said that the EIA may the overestimating the decline in the US production this year. Meanwhile, it is the US LTO output, which is expected to decline the most this year.

              As regards global demand, the EIA, IEA and OPEC are projecting growth of about 1.25 mb/d this year, which is close to long-term average. The effects of low oil prices are offset by slowing economic growth. In fact, demand growth has already been slowing in 4Q15.

              For 2017, the EIA projects global demand growth of 1.4 mb/d, which is above LT average.

              “I would expect if those forecasts are correct, that the oil price would fall further so that supply and demand will balance.”

              As the EIA (and other) numbers show, supply and demand are in the process of rebalancing since 3Q15, but this will take some time. The EIA (and apparently IEA) expect the market to rebalance by 3Q17.

              I have seen some forecasts that the balance will be reached by the end of 2016. But, unlike the EIA’s STEO or IEA’s OMR, these forecasts were not supported by detailed supply-demand numbers.

            4. Hi AlexS,

              Low oil prices might be offset by lower growth, the demand for oil tends to correlate with GDP much better than price, but demand may be a little higher than the EIA forecast. I expect World supply will be lower and that at current oil price levels the market will rebalance faster than the EIA forecast, if their oil price forecast is correct.

              The most recent STEO has Brent rising from $33/b in Q1 to $42/b in Q4 2016.

              The Brent price rises to $56/b in Q4 2017.

              I am not convinced that these oil prices will result in the increase in liquids output forecasted by the EIA. Perhaps the lag time is greater than I believe, but low prices from 2015 should affect investment by mid 2017 and I would expect oil output would start to fall by that time.

              What kind of time lag do you expect between low prices and lower oil output?

            5. Dennis,

              I think the impact of low prices on oil production was already very significant in 2015. If priced remained at $90-100, U.S. oil production in December 2015 would be about 1-1.2 mb/d higher.
              Outside the U.S., the supply-side response to low oil prices was more modest (probably a few hundreds of kb/d).

              There is no doubt that the EIA forecast for 2016-17 largely reflects the effects of low oil prices. But if oil prices stay at $25-35 levels for several months, the decline in non-OPEC and in some OPEC countries will likely be bigger than they are projecting.

              As I had said earlier, I view $40 as an important threshold. At or above this level, a vast majority of current production remains profitable (albeit only marginally profitable in most countries). At >$40, most conventional producers have enough cash for maintenance capex and relatively inexpensive brownfield projects, although they are cutting spending and delaying or canceling new capital-intensive projects with long lead times..

              Prices below $40, and especially around $30 are a completely different territory. At these levels some of current production becomes loss-making and much less cash is left for investments. Oil companies may continue to produce at loss for a few months due to high costs of shutting down production. But if these prices stay for longer, we will see a severe impact both on conventional and unconventional production.

              Let’s discuss it in more details in the new thread.

              As regards global demand projections for 2016, I see the risks both on the upside and on the downside. And a slowdown in demand in 4Q15 suggests that the EIA, IEA and OPEC projections are not too conservative.

            6. As a result, the OECD inventories will continue to increase, albeit at a much slower pace.
              The EIA expects total OECD Commercial Inventories to peak in August 2017, at 3196 million barrels, 130 million barrels above January 2016 levels.

              OECD commercial inventories (million barrels)
              EIA STEO February 2016

            7. The EIA expects the OECD commercial inventories to decline from September 2017, but the pace of the decline will depend on how demand will exceed supply.

              In any case, the EIA projections imply that the OECD inventories will remain above the upper limit of the historical range well into 2018. And it will decline to the mid-range no earlier than 2019.

        2. Alex,

          I am confused.

          Can you please explain discrepancies between this graph and the data extracted from http://www.eia.gov/forecasts/steo/tables/pdf/3atab.pdf

          Date Inventories Delta
          2015 1st 1,217
          2015 2st 1,277 60
          2015 3st 1,306 29
          2015 4st 1,319 13
          2016 1st 1,309 -10

          That’s 92 Mb (or 104 Mb if we limit ourselfes to the 4Q of 2015), but in no way it is 125 Mb. Is not the size of the difference a little bit funny ?
          Looks like it is slightly higher then 1% error margin we assume inherent in EIA data.

          And those figures are different (absolute numbers almost twice smaller) from commercial inventories data from
          http://www.eia.gov/forecasts/steo/images/Fig14.png

          Jan 29,2016 502
          March 31, 2014 460

          Why inventories are twice smaller? Were they use using special slimming diet for them ?

          And they, in turn, are also different from http://www.eia.gov/dnav/pet/PET_STOC_WSTK_A_EPC0_SAX_MBBL_W.htm

          Jan 29,2016 502.712
          March 31, 2014 380.092

          Still assuming your average 1.85 mb/d for ten month we have 1.85*30*10 = 555 Mb of “extra”, glut oil. That’s a lot of oil to store.

          And all mighty USA absorbs, by your estimates, only around 120 Mb or it, punching well below its category and none if we believe EIA data from http://www.eia.gov/forecasts/steo/tables/pdf/3atab.pdf

          BTW who you think made such a huge blunder paying quite a lot of money for useless stock (for at least another two years) plus storage fees and why ? We need to know the names of our heroes.

          Even more interesting question is who paid for other 430 Mb ? With their set of financial problems (which include Greece, and other Southern states) all money in Europe are needed to bail out banks. Europeans now are scroogy as hell and they definitely are not inclined to buy useless oil. They have reliable supplers. Only Germany has some money but they don’t do such stupid things. They have a direct pipeline from Russia. French? This would be a good joke. They barely found money for barter with Iranians 0.2Mb/d supplies (or less) in exchange of Iran buying several Eurojets. GB? They have their own production which is suffering huge losses and no money.

          Something is fishy here. Looks like we have several agencies under one roof in EIA each of which produces its own set of data. In humans such condition is a symptom of schizophrenia

          1. Likbez,

            STEO February 2016, excel file, Table 3A

            Commercial inventory in OECD countries

            1. OECD Total stocks (commercial+government) by country,
              September 2015
              source: IEA OMR, January 2016

            2. The numbers below are from the EIA STEO February 2016

              What may seem really suspicious is the difference between the global surplus liquids supply accumulated during 2015 (675 million barrels) and the increase in OECD commercial inventories (308 million barrels).

              This difference, which amounts to 368 million barrels (rounding effect), includes the increase in non-OECD inventories (both commercial and strategic), in floating storage, and the so called “balancing items”

              I do not know exactly what was the increase in non-OECD inventories and floating storage, but the number looks too big.

              The “balancing items” are also called “the missing barrels”. In that particular case they actually mean that the global excess supply may be overestimated, i.e. demand is higher or supply is lower than estimated by the EIA.

            3. Alex,

              In no way this is “Commercial inventory” for the USA.

              Those figures from EIA include strategic reserve (which is around 695 Mb; nobody knows exactly as caverns might be leaking).

              Commercial inventories as of today are around 500 Mb. So we should have around 1200Mb as of today. Why EIA reports higher numbers I do not know.

              On November 13, 2001, President George W. Bush ordered the SPR to be filled to approximately 700 million barrels by continuing to use the royalty-in-kind program carried out jointly between the Department of Energy and the Department of the Interior. The royalty-in-kind program applied to oil owed to the U.S. government by producers who operate leases on the federally-owned Outer Continental Shelf. The producers are required to provide from 12.5 percent to 16.7 percent of the oil they produce to the U.S. government. Under the royalty-in-kind program, the government could either acquire the oil itself or receive the equivalent dollar value. (Note: in September 2009, the Department of the Interior announced the cancellation of the royalty-in-kind program but honored its commitments in existing contracts. The SPR’s final cargo of December 25-27, 2009, was royalty-in-kind crude oil.)

            4. likbez,

              The numbers below are from the EIA STEO February 2016, excel file, tab 4A

              US Commercial and strategic Inventory (million barrels)

            5. likbez,

              see the chart from the IEA OMR above

              They have total U.S. inventories (commercial +SPR) at 2002 million barrel as of September 2015

              The EIA data shows 2001 mbbls for the same month.

            6. likbez,

              For some reasons I didn’t become speechless

              This table represents commercial inventories of crude oil:

              http://www.eia.gov/dnav/pet/pet_stoc_wstk_a_EP00_SAX_mbbl_w.htm

              And this one of crude oil and petroleum products
              http://www.eia.gov/dnav/pet/pet_stoc_wstk_a_EP00_SAX_mbbl_w.htm

              And this one the commercial stocks of crude oil and petroleum products + SPR:

              http://www.eia.gov/dnav/pet/pet_stoc_wstk_a_ep00_sae_mbbl_w.htm

              some ликбез for likbez 🙂

            7. Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof. So I am not surprised at your reaction.

              Let’s begin from the very beginning.

              1. There is a claim that there is a hugee, unpalatable oil glut around 2Mb/d or 60 Mb/month or 700 MB/year, give or take 100 Mb. And that this glut caused sharp drop of oil prices due lack of “price elasticity” — the theory taken from neoclassical economics bible.

              2. Due to this we need to see a rapid increase of commercial oil inventories which somehow currently in the USA are around 500 Mb and did not grow substantially from March-April 2015.

              As the USA was the country that caused “oil glut”, this effect should be pronounced in the USA crude oil inventories (moreover there was an export ban on raw oil until recently).

              3. If we assume that some idiot bought this oil and stored commercially that does not mean that there are bigger idiots who refine this oil losing even more money. So refined products, ethanol, etc which are included in EIA figure 1,337,939 ( Total Crude and refined products excluding SPR) for Feb 05 (which you love so much) are of no interest here. We should use only Crude oil commercial inventories which are, I would like to stress again, around 500Mb as of 02/05/2016. And they were already 471.444 MB on Mar 28, 2015. Rising only around 29 Mb for 10 month period or 2.9Mb/month or 0.09Mb/d. And God knows how much of this oil was bought for arbitrage.

              4. So logically most of the “oil glut” should result in a rapid growth of commercial oil inventories.

              5. This is not the case.

            8. Likbez,

              I really cannot understand what you want to say.
              Are you saying that:
              1) I am not correctly interpreting the numbers from the EIA, IEA and other source?
              2) Or that their numbers are wrong?

            9. Hi Likbez,

              Isn’t it possible that less crude oil was imported by the US than before the increase in LTO output. See chart below, US crude imports dropped by about 2 Mb/d from 2012 to 2016.

            10. I would like to know why the OPEC report data is so different compared to STEO for OECD inventories. It shows little or no growth in inventory since August 2015. The numbers are 2982,2982 and 2974 MM barrels for the last three months ending in December 2015.

  5. The last few years have been very interesting in that when prices were high we saw non OPEC producers going as hard as they can to produce oil, and now that prices are low we’re seeing OPEC members going as hard as they can to produce oil.

    You have a choice here. You can immerse yourself in economic thinking and twist and turn and contrive to make some contorted explanation within the context of what you think economics is supposed to mean.

    Or you can realize the world disappeared in 2008/09 when printing got underway globally and none of that stuff has any underpinning anymore and from THAT perspective try to understand why frantic production is still ongoing. And btw, you didn’t need to delineate OPEC and non OPEC. It would still be right.

    1. Thanks for the reply to my post. Looks like it got taken for spam and disappeared. It seems to me that frantic production of oil only results in increases in two locations. One OPEC and one non. One North America, the other The Gulf. One when price is high. The other when it is low.

    2. Do you think those that run central banks and others understand and agree with you, Dont understand but are doing things that have the same effect anyways, or neither?

      1. Do I think those that run central banks and others understand and agree with me that frantic production of oil only results in increases in two locations. One OPEC and one non. One North America, the other The Gulf. One when price is high. The other when it is low?

        I don’t know. I have insufficient evidence to draw a conclusion. It’s a moot point anyway. I’m not so much concerned with what other people think. I have no ability to determine what others think unless they choose to honestly inform me. I’m more interested in what the future/my future holds and how I can best prepare to prosper. My visits to Ron’s fine blog are part of my effort to understand that and not much more.

    1. Everyone and their brother keep saying how crud(ish) prices are going to be higher after ____ months/years. Salvation: when enough drillers fail and get out of the business. There will be shortages and … higher prices!

      What these experts don’t ever say is HOW the prices are going to be higher!

      Where is the money going to come from?

      Money is credit: what group/organization/banking sector/finance is going to lend to ordinary end users when these same users cannot earn a penny by burning their fuel?

      Leave out farmers, deliverymen, bus drivers and bulldozer owners. 90% of fuel use is simply waste. A person does not fly to Disney World to pay for the fuel used in the airplane, he does something else. The commuter does not drive back and forth to work in order to pay for his commute, he does something else. A businessman does not waste fuel to pay for it; all of these folks borrow, either directly from their own lenders, indirectly by way of their bosses’ companies’ lenders or their customers’ … or governments borrow in their place. No borrowing, no fuel buying.

      Somehow or other a shortage of fuel is going to render these hapless deadbeats able to borrow when a ‘glut’ of fuel cannot.

      What Jeffrey Brown points out over and over is the so-called ‘glut’ is simply another finance industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply is declining, that purchasing power is declining along with it and that no easy solutions to these declines exist. (The only solution is stringent conservation — getting rid of the cars).

      Underway is a structural breakdown of the fuel financing regime. It is not going to ‘unbreakdown’ itself, any shortages will make matters worse.

      1. The fuel supply may be declining,but we don’t know that for sure , not yet.

        It is not yet declining at a rate high enough to cause serious problems, and improving efficiency can probably mostly offset decline for a while, assuming the decline is gentle, say one percent or so annually.

        It’s not written in stone that the economy WILL go downhill short to medium term. I am not saying it won’t , but rather that nobody KNOWS for sure that it WILL.

        If the economy really does get worse and worse, in the near term, then the amount of oil the end users can afford WILL decline, and it is altogether possible that the decline in purchasing power COULD BE great enough to more than offset the decline in marginal cost supply , so that prices WILL stay low.

        But prices WILL NOT and CANNOT STAY BELOW PRODUCTION COSTS, medium or long term.

        The costs of production simply MUST be paid, in order for production to become a reality, rather than a possibility.

        Methinks this assertion is as iron clad, in economic terms, as any law in a physics text.

        Production can be paid for via oil selling for enough to cover the costs of production, with a profit.

        Production can be paid for via a formal subsidy, with the customer paying part of the cost, and the rest borne by government, but it will STILL BE PAID FOR.

        Production can be paid for, short term maybe into the medium term, by a producing company burning thru it’s capital, but it still gets paid for. When the capital is gone, production stops, unless loans are to be had.

        Production can be paid for via a producer borrowing money, and then going broke, but production still gets paid for. When the borrowed money is all used up, and no more loans are forthcoming, production stops.

        There is nothing wrong with the abc’s of economic theory, when it comes to such elementary matters.

        Assertions to the contrary are nothing more than smoke and mirrors.

        Oil will not be produced, in substantial quantity and over the medium or long term, unless the costs of production are PAID.

        SOMEBODY pays.

        I don’t give a crap how tough times get. OIL will go up, unless the economy goes down hill fast enough that enough oil can continue to be produced, so as to keep the wheels turning, at the same price- today’s price.

        So far as I can see, most current oil producers are bleeding money. If I am right about this, they WILL EVENTUALLY QUIT producing until the price goes up again. I might be wrong, but I don’t believe there is enough production, world wide, that costs thirty bucks or less, which is roughly the current price, to meet demand even in an economy contracting at a fairly fast pace, at least not for very long. Depletion never sleeps.

        If they continue to produce, by way of subsidy, the REAL price of oil will still be UP.

        My best one hundred percent redneck hard core republican buddy, who died about three years back, often had this to say, paraphrased.

        “I don’t want to hear no more bullshit about the fxxxxxg price of gas when every damned store that sells gas sells sugar water for a buck a pint. ”

        Now times may actually BE sort of tough, but METHINKS the people who obsess about how tough times are blind themselves to just how GOOD times actually ARE.

        A few observations about how tough times REALLY are , here in the backwoods of APPALACHIA, where unions are scarce, and jobs few and far between:

        Well over half of all the kids have personal phones. Well over half of the people thru the country side who rent have dsl internet and or satellite tv. The parking lot at the local high school has a third as many parking spaces for STUDENT’s cars as there are students. Another quarter of the students are dropped off by parents, picked up by parents.

        Fast food restaurants are jammed three times a day, and there are dozens of better restaurants all doing ok to great.

        There are over a hundred new Chevies on the parking lot at the nearest Chevy dealer. With the exception of the high performance models, and a half a dozen pickup trucks kept on hand for the old timer who wants a new truck with a stick shift , EVERY LAST ONE of them has an automatic transmission, air conditioning, power brakes, a nice am fm radio, carpet, clear coat paint, etc. If you want a bare bones Chevy, you have to ORDER it from the factory that way, and you will find that it is generally impossible to delete features such as automatic transmission, etc.

        It is actually pretty common for common people to fly hither and yon these days. I know three or four myself who have flown coast to coast to visit family and goof off who drive fifteen or twenty year old thousand dollar cars because they can’t afford nicer cars.

        We spend billions and billions on all sorts of foolishness, such as loaning fifty grand to doofus kids to major in basket weaving or writing poetry for four years. I use the word doofus judiciously because they are dumb enough to believe they can make careers out of basket weaving and writing poetry.

        What I am getting at is that we CAN and WILL pay more for oil, over the coming years, even if the economy is declining, because we have PLENTY of income that can be diverted to oil when necessary. .

        I don’t pretend to know how long this will continue to be true, but it seems likely it will hold true for a good while,maybe a couple more decades, barring the economy having a heart attack.

        For what it is worth, I do expect the economy to eventually fail in catastrophic fashion, but just not any time soon, although “soon” is not out of the question.

        1. You are right, Mac, extraction will not last long when the returns are less than costs.

          The price is not going to go up. It can’t. End user-customers are flat broke. Nothing will make them ‘un-broke’. To say that prices will rise without demonstrating how is an act of faith. If customers were not broke the price would be higher. It’s that simple. There is nobody to buy oil products except customers; gasoline and diesel aren’t being sold to Martians.

          It isn’t just fuel that’s taking the hit: the trucking, overseas shipping, retail are flopping. So are non-fuel commodities such as copper, iron, nickel, grains, etc. China is cutting back but that is because China’s customers are broke and cannot afford the crappy Chinese products.

          In the meantime the wells have been paid for along with the plumbing, the drillers pump what they can because they know what will happen when they stop.

          Of course fuel supply is declining, there is nothing else for it to do! We started with everything back in 1858 … and are half-way to nothing. Every gallon burned brings us a gallon closer to oblivion.

          http://www.economic-undertow.com/2016/01/04/a-look-to-2016/

          1. I’m from europe, and gas is dirt cheap in the USA – either it is at 1 or 3$ / Gallon.

            If gas prices would be pressing people, they would buy smaller cars, and that I can’t see on my visits in the USA. A few Prius, but not the big number of very small cars like in europe.
            And for commuting a small car is enough.

            1. Eulenspiegel,
              Yes you are right that broke people don’t buy SUV if they are broke in conventional terms.
              Confusion arises because Steve does not make distinction between “broke with cash” and “broke with credit”. Majority of population in NA is/was “broke with cash” for the last 20 years but not broke with a credit.
              In other words in exchange for your labour you get credit/debt but not cash in order to keep up with built in price inflation in the current monetary system. That is all to it. So yes majority of population is broke in conventional terms but still can “afford” to drink $6 lattes and to drive expensive and big $100k SUV’s. Well that is the consequence of US$ reserve currency status. How long that will last? It is being determined in ME at this very moment.

            2. Ya right, the 2016 edition of the 1956 Ward Cleaver’s live in a house twice as big, four times more well appointed, with 2.2 cars in the double car garage and spend less for energy per dollar of wages.

              Heh, Wally, Beaver here. I want the transistor radio with the flashlight under my covers tonight!

            3. So are you saying that 2016 edition of Ward Cleaver is happier than 1956 version? Do you ever wonder why consumption of anti depressant drugs is probably 1000x greater today then in 1956?

              2016 edition of Ward Cleaver are never going to have ENOUGH because he is never “Good enough”. After buying house with one car garage he needs to buy house with 2 car garages, and when that is not “Good Enough” poor Ward has to buy house with 3 car garages. That is example of suffering and not of well being.

              But if you really want to do some math exercise you can calculate how many jobs/working hours Ward and his wife had in 1956 to keep up with payments. His wife probably did not work and he worked 40 hours. Today both, he and his wife have to work, and on the top they have to have even extra job on the weekends. You can also calculate how much Ward earned in Defined Pension Plan in 1956 and compare that with his company pension non-existent earnings today. Then you can compare how many paid weeks of vacation he had in 1956 and how many days of paid holiday he has today.

              Then when you add all this up you will know if Ward is really better off today or he and his wife just work waaaay more to pay for things that are not really making him happier than his 1956 edition.

            4. Thanks, marmico!

              …Hey kids! What’s wrong with this picture that marmico has put forth? Would anybody like to volunteer? Can we get a show of hands?

          2. Anybody with a brain understands that fossil fuels will not last forever. If you are talking about the LONG TERM, in terms of the BIG picture, yes potential or actual fuel supplies are decreasing.

            But it seems to me the discussion is mostly about CURRENT reality. I was certainly talking about current reality.

            If you think the world wide economy is going to decline at a faster rate than marginal high cost oil production is going to decline, thereby reducing the REAL TIME demand for oil , FASTER than the supply falls, you are a doomer indeed.

            I do not know how long it will take, but barring catastrophic economic collapse and or miracles on the technology front ( enabling us to give up oil quickly) the supply of cheap oil is going to decline pretty fast.

            Price involves TWO basic factors. You are obssessed with just one of them, affordability, while apparently refusing to understand that producer costs are EQUALLY important in determining price, over the longer term.

            Oil producers simply CANNOT run at a loss, long term.

            The price WILL go up as the high cost producers and high cost production leave the market.

            The question is this:

            Will the economy go downhill faster than high cost oil production?

            I do not believe that it will. Apparently you do, as a matter of faith.

            Maybe you are right, but MY opinion is that people will reduce purchases of other goods and services FASTER than they reduce purchases of oil , and that efficiency will continue to improve.

            In the VERY long run, the last marginal barrels of oil will damned near priceless unless technology enables us to substitute other energy sources for oil.

            I expect I could trade a couple of barrels of diesel fuel for a good looking virgin daughter in a heartbeat, if oil production were to suddenly come to a halt.

          3. Hi Steve from Virginia,

            The resources of oil in the ground are not considered oil supply, oil that has been produced and is ready for sale to oil refineries is “oil supply”.

            Ron thinks this “supply” of crude plus condensate peaked in 2015 and will never be higher on an annual basis in future years. I don’t agree, I think supply will decrease in 2016, but the 2015 output level will be surpassed by 2019 when oil prices have risen.

            As to the oil price being low because people are broke, no I don’t think so. It is a simple matter of more oil being produced than people want to consume at a high oil price. Do you think the World is 3 times worse off today than during the 2011 to 2013 period when oil was over $100/b? If so, I would disagree. I would agree the World economy is not doing well, but the World can easily afford $75/b oil and when oil supply falls due to low profitability at $30/b, you will see that my guess is correct.

            We will see $75/b by June 2018 (and probably before this).

      2. I feel a lot of discretionary expenses i.e. six dollar latte and a muffin, a new Apple Ithing every time they make one, extensive clothing and fashion purchases, etc etc will all diminish and those funds will be redirected towards the most important consumable of all, energy. The kind that goes in your mouth and the kind that goes in your tank. I see a lot of people wasting all kinds of money on Star Wars crap, conventions where you pay to get your picture taken with some actor who plays a vampire on TV, and on and on. I see a lot of people pissing away a lot of cash all the time. I don’t think all the debt is generated to pay for oil. It’s generated to pay for lifestyle. In the future the stupid stuff will go unpurchased. The important stuff will not. Nothing is more important than food and energy. I forecast inflation in food and energy. Deflation in everything else.

        1. The problem with a declining economic environment is that it can be liner until it isn’t. At some point a critical mass of people decide to change things outside of the existing paradigm…and that never turns out well.

      3. “The price that consumers are willing to pay for a good has to do with its relative utility and less to do with the net energy of the product.” ~ Dennis Coyne

        “I pointed out before that oil is not just another commodity. It is our primary energy source. It’s use is responsible for a large percentage of overall GDP. That explains why the oil price must have a maximum limit. The net energy in a barrel of oil must be sufficient to produce enough economic activity to pay for the total cost of current oil production plus investment in future oil production…” ~ Futilitist

      4. This is not exactly for you, steve from virginia, but for those who may suspect that progressive efficiencies will ‘save us’:
        The potential problem with this rationale is that past oil production paid for and created the infrastructures, the ‘complex wiring, piping, filters’ and vested interests– the particular type of ‘sociopoliticeconomic engine’– we have in place that still, for the most part, requires past oil production and energy levels to be maintained. This includes other forms of energy infrastructure, such as nuclear, and hydro.

        My point doesn’t even touch on how humans have maintained a fundamentally-unethical crony-capitalist plutarchy system (which doesn’t actually work for people in a fundamental sense) and what happens there when energy-levels start diving; or how humans (mis)manage complex systems when they start to become overcomplex and chaotic. Overcomplexity and chaos of course imply mismanagement.

        To embellish part of my points; people in this economic system are going to have to step down or accept getting axed and this is exactly what is happening right now in the oil industry, thanks to low prices, and as this happens, there’re domino effects, and there are no real alternative/alternative energy industries setup to take up the slack, to take up those that fall off the map.

        “The price that consumers are willing to pay for a good has to do with its relative utility and less to do with the net energy of the product.” ~ Dennis Coyne

        “I pointed out before that oil is not just another commodity. It is our primary energy source. It’s use is responsible for a large percentage of overall GDP. That explains why the oil price must have a maximum limit. The net energy in a barrel of oil must be sufficient to produce enough economic activity to pay for the total cost of current oil production plus investment in future oil production…” ~ Futilitist

        1. ^^ This is not the correct edit. Read at your own risk ^^ 😀

      5. This is not exactly for you, steve from virginia, but for those who may suspect that progressive efficiencies will ‘save us’:
        The potential problem with this rationale is that past oil production paid for and created the infrastructures, the ‘complex wiring, piping, filters’ and vested interests (i.e., excess jobs created by excess energy)– the particular type of ‘sociopoliticeconomic engine’– we have in place that still, for the most part, requires past oil production and its energy levels to be maintained, if not perpetually increased (debt-based economics). This includes its inputs into other forms of energy infrastructure, such as nuclear, and hydro.

        This doesn’t even touch on how humans have maintained a fundamentally-unethical crony-capitalist plutarchy system (which doesn’t actually work for people [or the environment that supports people and other forms of life] in a fundamental sense) and what happens there when energy-levels start diving, or how humans (mis)manage complex systems when they start to become overcomplex and chaotic. Overcomplexity and chaos of course imply mismanagement.

        To embellish part of my points; people in this economic system are going to have to step down or accept getting axed and this is exactly what is happening right now in, for example, the oil industry, thanks to low prices. As this happens, there’re domino effects, and there are no real established economic alternatives, alternative industries, or alternative energy industries setup to take up the slack, to form a safety-net to catch those that fall off the map.

        It is unlikely that large-scale centralized ‘government’ is going to step in and take care of things in these regards– at least nowhere near adequately, if at all– in part because that kind of government we know and may take for granted is part of the sociopoliticeconomic machine that was built, and built to run, on cheap high-energy oil.

        “If you still have a job, get everything in order, and quit. Do it as soon as you can, because we’ve never had a more important work to do.” ~ Kyle Chamberlin

  6. Do you believe the third party gatherers of information can differential Iranian production vs drawdowns in inventories? Clearly, we knew that they had excess barrels in both floating and onshore storage, so if we are counting “exports” it gives us little insight into what their production capacity is.

  7. Ron, so far the data seems to confirm every one of your predictions. For 7 months Saudi Arabia has been unable to increase or even maintain production, and all the rest are behaving as expected. OPEC does seem to be flat after a lot of effort from Middle East OPEC which seems to indicate that the potential for surprise is more towards the downside. My only question is regarding Iraq. Seen how much Iraq has increased production despite civil war and terrorism during 2015, why do you think Iraq will increase very little or nothing in 2016?

    1. There is no indication that the war is hindering Iraqi production. I think it would be about the same without the war. On the other hand, the war has a great potential to affect Iraqi production in the future, and it likely will.

      With or without the war, I think Iraqi production is nearing its peak. Their downside potential is now just as great, or greater than their upside potential.

      Of course, I could be wrong. But I believe strongly that the odds are with my estimate here.

      1. Looks correct. Basra is where most of it comes from and where most growth is sought (probably to keep the workers away from bullets) so no war impact.

        1. Even Basra has some potential for chaos.

          http://rudaw.net/english/middleeast/iraq/180720151

          Iraq is pretty much 3 countries now and even the bit ‘controlled by the government’ is really having its security secured by various Shiite militias. The Iraqi military basically does not exist. It’s a vast array of militias and patronage networks. A house of cards. No doubt thoroughly infiltrated by various Iranian security elements, and special forces, which themselves are not exactly a homogenous organization. From the Levant to the Hindu-Kush; it’s never been so insecure since the Ottoman Empire fell. It seems to me that most States in the region are decentralizing,

          1. The Iranians are simply helping out their Shiite cousins in Iraq. The Iraqi Shiite core from Basra to Badghdad provides a means for them to link by land to the Syrian Shiite (Allawite) faction, and in turn to Shiites in southern Lebanon. They are only missing a link to the Shiites along the Persian Gulf on the Saudi side. The Russians are helping cement this blocking position, and create a corridor they can use to access the Mediterranean. And the bulk of oilfields are in Shiite territory except for Kirkuk, which is being claimed by the Kurds. Interesting how Bush helped redraw the strategic map with his blunder, isn’t it?

            1. Democracy in Shiite majority Iraq. Who woulda thunk the Iranians would gain from that?

              Personally I find it interesting that prior to 2001 Iran had two big problems; Taliban to the east and Saddam to the west. Then USA came and cleaned up both those problems for them, all the while providing Tehran with an opportunity to conduct an anti-armour weapons lab courtesy of their proxies in Iraq, who field tested some amazing advances in anti-armour weapons technology, and the American tax payer, who footed most of the bill.

              https://wikileaks.org/wiki/Talk:US_M1A1_tank_penetrated_in_Iraq_by_mystery_round,_Oct_2008

              I blame Wolfowitz. It was his baby.

  8. Iraq is above its supposed “peak”, what is the peak estimation for Iraq?

    1. Iraq is above its supposed “peak”

      – what is/was its supposed peak?

      IMO Iraq is impossible to forecast. Too many geopolitical factors. Too much unkown geological data. Nobody can predict the political stability or the domestic policy decisions in even the near future. Nobody has peer reviewed geological data on what’s under the surface of the country. Throw a dart.

      1. Welllllll, there are some things we do know. We know that the more oil a country has to produce, the more oil they do produce. Therefore the oil that a country does produce, when they are producing flat out, gives us some indication of the oil they have in the ground that they can produce. True, it is not an exact science but it is definitely a rough estimation.

        We also know that if their production is not currently hindered by war or political strife, the war or political strife could only hinder future production, not enhance it.

        At least we are not reduced to throwing darts. We are able to make an educated guess here. Again, not an exact science but we can most definitely make an educated guess.

        1. Ron,

          You are right.

          Iraq government is out of money to pay foreign companies for oil extraction, based on previously signed agreements.

          At current oil prices it is essentially bankrupt. In such a state, there are only two ways the situation with oil production can evolve.

          1. Iraq gets a loan from IMF — production is either down or stable.
          2. Iraq does not get a loan from IMF — production is down.

          Azerbaijan and couple of other oil producing countries without large foreign currency reserves countries (or with the civil war on the ground) are in a very similar situation.

  9. David Demshur, CEO of Core Labs had a lot to say in their earnings release of Jan. 28, 2016.

    Regarding US oil production.

    Core estimates that the current production decline curve rate for U.S. production is approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016.

    Regarding World oil production.

    Core estimates that crude oil production decline curve has expanded to 3.1% net, up some 60 basis points from year earlier estimates. Applying the 3.1% net decline curve rate to the worldwide crude oil production base of approximately 85 million barrels a day means that the planet will need to produce approximately 2.6 million new barrels by this date next year to maintain current worldwide production totals.

    With the long-term worldwide spare capacity nearing zero, Core believes that worldwide producers will not be able to offset the estimated 3.1% net production decline curve rate in 2016, leading to falling global crude oil production by the second half of 2016.

    Therefore, Core believes crude oil markets rationalize in the second half of 2016 and price stability followed by price increases return to the energy complex. Remember, the immutable laws of physics and thermodynamics mean that the crude oil production decline curve always wins and that it never sleeps.

    1. Dclonghorn, it would help if you provided a link to your text so we could read the entire text of the article.

      However I found this link: Z4 Energy Research

      CLB U.S. Comments Watch:

      1) “Core believes that the worldwide crude oil supply and demand markets will balance in the second half of 2016.”,

      2) “U.S. unconventional production peaked at approximately 5.5 million barrels of oil per day in March of 2015, has since fallen by over 600,000 barrels a day owing to high decline curve rates associated with tight oil reservoirs” (offset by unsustainable adds of 250,000 bopd (we had noticed the adjustments in the data stream).

      3) “The sharp declines from U.S. land production will continue into 2016 and Core believes these decreases could reach 900,000 barrels a day by the year-end 2016. Lower levels of new wells and delayed production maintenance will exacerbate this 2016 fall in U.S. land production.”

      4) “the short gains from legacy deepwater Gulf of Mexico projects will not materialize in 2016 to offset the significant decreases in U.S. land production as they did in late 2015.”

      5) “Core estimates that the current production decline curve rate for U.S. production is approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016.”

      Very interesting.

      1. Am I correct in assuming that the significant decrease in U.S. land production will put even more downward pressure on the price of oil, given that with decreased U.S. land production there will also be a proportional decrease in demand for oil? My other assumption is that the U.S. land production that will be shutting down has added very little if any “net” energy to the global economy — am I wrong there? It would seem that if these soon-to-be-shutdown U.S. land operators were producing actual net energy, then they could translate that into net profit — something that most U.S. land producers are having difficulty with these days. I know I’m late posting on this article, but wondering what your take is on all my assumptions?

        1. No, that is not at all what Core Labs is saying. No one is saying that a decrease in land production will create a decrease in demand. All Core Labs is saying is that falling production will bring production and demand back into balance, eliminating the huge surplus we now have.

          They didn’t say so but it is implied that prices will increase when supply and demand is back in balance.

    1. Toolpush, note long term debt of $7.1 billion and PV10 is all categories. I wonder what PDP PV10 is?

      WTI below $27. I am going to hazard a guess and say if $95 WTI to $50 WTI dropped PV10 from $22 billion to $8 billion, the drop to sub $27 would probably put all categories PV10 sub $3 billion.

      PXD, who I criticized two months ago for saying they were going to add rigs, announced they are dropping from 24 rigs to 12 rigs for 2016. Pulling all rigs from EFS. Pulling all rigs from Southern Permian. Dropping from 14 to 12 in Northern Permian. State production will still be up 10%, with prolific Permian wells to offset 25% decline in EFS due to complete halt of well completions.

      Gut wrenching times.

      1. Do one of you guys have a feel for MTBF of an oil well already producing? Meaning, if zero spare parts are available for it, how long before it stops producing?

        1. I don’t but I think what you are enquiring about is interesting. I’m just spit balling here but I’d like to ad though if I may that parts could be canabalized from lower value units to preserve higher value units. It’s not as common as it used to be but when I was younger I spent a lot of time at ‘pick a part’ scrap heap businesses pulling car parts of old junkers to take home and instal on my vehicle. The water pump on my ford broke but the scrap heap had a Ford just like mine that was totalled. Had a good water pump though. As well the old story in the service battalion was that if the lead truck busted an axle and the convoy couldn’t get around it for whatever reason you pull the axle of the truck at the back of the convoy, install it into the one at the front and leave the truck at the back behind.

        2. Watcher. Just like many other things in the oilfield, it varies.

          A problem well may have a down hole failure as much as five times annually, theoretically there is no limit. OTOH, I am aware of time clock wells that produce small volumes of straight oil that have had no failures for 10+ years. These wells pump just a few strokes per minute, for as little as a few hours per week.

          Of course, on the surface, routine maintenance is required, such as replacement of belts, grease, replacement of stuffing rubbers. Electric motors have to be rewound.

          Of course, down hole chemical treatment is required on a regular basis, if that were to run out, most wells wouldn’t last one year IMO, many just weeks. A lot of wells have to be flushed with fresh water.

          There are few places like the intro to the Beverly Hillbillies where the oil flows without some effort.

          1. Nod. Cannibalization of something nearby, but what I’m hearing here is friggin’ months? MONTHS?

            The magnitude of reserves that NEVER come up becomes huge. Nuking the Shanghai coast will send that fallout over Texas a few weeks later and now you’re evacuating a good chunk of the US, and weeks later the Middle East. Same approximate latitude.

            Stuff stops moving. Every government in the world is going to prioritize feeding cities. Parts for oil wells Not Even In Your Own Country are going to get zero priority.

            This whole thing has avalanche written all over it. Once the parts stop moving, reserves underground (which are of the non Beverly Hillbilly type, aka difficult oil) are never going to flow from a downshifted global technology. The N word. Never.

            If they never flow, they don’t exist. If you prefer to not consider zero spares transport to be a new influence in the evaluation of reserves total, you could instead just consider it a loss of technology.

      2. So if US company PV10 have fallen 60-90%, wonder what that percentage is worldwide?

        Has anyone ever seen an estimate of worldwide oil and gas PV10?

        If 200,000 BOEPD, half oil, half gas has PV10 of $22 billion 12/31/14 and drops to $3 billion today, does that mean if world wide PV10 is say $22 trillion, it is now $3 trillion, and $19 trillion in asset value has been “lost” since 12/31/14?

        My numbers are just hypothetical. But think about how many trillions of dollars of asset values have been wiped away, with all the debt used to build that “value” now crashing in value too?

      3. SS – I remember well when PXD recently went to market and sold stock to “finance” even more drilling in 2016. We thought that it was insane to dilute the stockholders in order to produce even more oil at breakeven prices. Well, now in hindsight, I think they went to market just to ensure that they had funds to sustain a longer downturn. I believe that they always knew, baring something unforeseen, that they were going lay down a bunch of rigs.

        Also, do you know how prolific some of their wells are? I ask, because in early 2014 IIRC, their CEO was talking about future wells producing from like 3 different zones, with like total daily production of 5,000 bbl. from each well. At, the time, I thought wow – this WAS like Saudi Arabia. So I started following their production for the next year, and it seems like it was always less than the market was expecting. Maybe even some declines. So, just wondering if that projection was just pie in the sky, or is there some validity to it?

      4. Thanks Shallow for fleshing that out.

        When is a company considered insolvent?
        When liabilities is greater than assests, if I remember correctly. Please correct me if I am wrong.
        So the only thing saving CLR, and many others no doubt, from being insolvent, is the changing of the practice of using the price of oil at the end of year, to using the average price of oil for the whole year!

        Isn’t it lucky the SEC changed that rule last year! sarc off

        1. “Isn’t it lucky the SEC changed that rule last year! sarc off”

          Talk about criminality of this financial system that actually is making whole swat of profitable/conventional oil producers a collateral damage in order to fight some delusional geopolitical war abroad. CLR and rest of their shale comrades should be bankrupt a year ago and oil market would rebalance within 6 months. But hell no, let the bankers play an oil war game that is taking everyone to the abyss.

        2. Toolpush,

          “When is a company considered insolvent?
          When liabilities is greater than assests, if I remember correctly. Please correct me if I am wrong.”

          From Wiki (sorry for a long quote)

          “Insolvency is the state of being unable to pay the money owed, by a person or company, on time; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
          Cash-flow insolvency is when a person or company has enough assets to pay what is owed, but does not have the appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough liquid assets to pay a debt when it falls due. Cash-flow insolvency can usually be resolved by negotiation. For example, the bill collector may wait until the car is sold and the debtor agrees to pay a penalty.
          Balance-sheet insolvency is when a person or company does not have enough assets to pay all of their debts. The person or company might enter bankruptcy, but not necessarily. Once a loss is accepted by all parties, negotiation is often able to resolve the situation without bankruptcy.
          A company that is balance-sheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let the company pay that bill unless it will directly help all their creditors. For example, an insolvent farmer may be allowed to hire people to help harvest the crop, because not harvesting and selling the crop would be worse for his creditors.
          It has been suggested (for instance by Graeme Pietersz of Moneyterms) that the speaker or writer should either say technical insolvency or actual insolvency in order to always be clear – where technical insolvency is a synonym for balance sheet insolvency, which means that its liabilities are greater than its assets, and actual insolvency is a synonym for the first definition of insolvency (“Insolvency is the inability of a debtor to pay their debt.”).[1]
          While technical insolvency is a synonym for balance-sheet insolvency, cash-flow insolvency and actual insolvency are not synonyms. The term “cash-flow insolvent” carries a strong (but perhaps not absolute) connotation that the debtor is balance-sheet solvent, whereas the term “actually insolvent” does not.
          Technical definitions[edit]
          Cash-flow insolvency involves a lack of liquidity to pay debts as they fall due.
          Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy, which is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency.
          Accounting insolvency happens when total liabilities exceed total assets (negative net worth)”
          ———————————–
          As for Continental, its net assets were positive in 3Q15, and I think will remain positive as of Dec 31, 2015, although the surplus has most likely diminished

          Continental Resources assets and liabilities (in million dollars)

          1. Thanks Alex,

            You are a great researcher, (that is a compliment) and I could have done to same thing as you, but you have provided the information to prove my point.

            A company that is balance-sheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let the company pay that bill unless it will directly help all their creditors.

            So we are talking balance sheet insolvency and it is illegal to continue trading if a company is “insolvent”.It is in Oz at least!

            The number you have provided is based on approx $90 oil, ave for 2014. The new numbers provided by CLR are based on $50 oil, ave for 2015. Under the rules pre 2014, the price was a date in Decemeber, which would have meant CLR would need to declare assets in the $30 range. I believe this would have made them “technically insolvent”

            They and many other have been saved by a simple rule change, at the stoke of a pen.

            I believe Watchers chest will be inflating at this very moment!

          2. Toolpush,

            PV-10 is not equal to total assets, a GAAP accounting measure.

            From CLR website:

            “The Company’s PV-10 value, a non-GAAP financial measure, is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable financial measure computed using U.S. GAAP. PV-10 generally differs from Standardized Measure because it does not include the effects of income taxes on future net revenues. The Company believes the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to proved reserves held by companies without regard to the specific income tax characteristics of such entities and is a useful measure of evaluating the relative monetary significance of crude oil and natural gas properties. Investors may utilize PV-10 as a basis for comparing the relative size and value of the Company’s proved reserves to other companies. PV-10 should not be considered as a substitute for, or more meaningful than, the Standardized Measure as determined in accordance with U.S. GAAP. Neither PV-10 nor Standardized Measure represents an estimate of the fair market value of the Company’s crude oil and natural gas properties.
            The Company has not provided a reconciliation of its PV-10 to Standardized Measure in this release because final income tax information for 2015 is not yet available.”

            As of December 31, 2014, the company’s PV-10 was $22.8bn, while total assets were only $15.1bn.
            The table below compares CLR assets, PV-10 and the Standardized Measure.

            The big question is if the company’s “crude and natural gas properties” as in the balance sheet are adjusted in accordance with the changes in oil prices in the same way as PV-10. If so, CLR’s total assets as of December 31, 2015 should be even lower than $8bn and much lower than total liabilities. In that case, the company would be considered “technically insolvent”.

            In real life, however, I doubt very much that such technical insolvency would lead to bankruptcy. My guess is that the company would not be considered bankrupt as long as it is able to pay the debt owed this year.
            And the large players, like Continental, generally have debt with long maturities and significant undrawn credit facilities.

            CLR’s assets and PV-10

            1. When CLR issues its financials for 12/31/15, what you need to do is to take “Total crude oil and natural gas properties” off the balance sheet and replace it with “total proved reserves (PV-10).” Then see if that leaves them with any equity, which will give you a snapshot idea of their position on 12/31/15. Then recognize that prices have declined from the $49 which was used in the 12/31/15 calculation – you can then guess at what the PV-10 would be using say $30 barrell.

            2. Clueless,

              Thanks, I was hoping you would chime in with your accounting knowledge.

    2. “The 9 percent year-over-year reduction in our proved reserves during 2015, compared with an approximately 50 percent reduction in crude oil prices, clearly validates the premier quality of Continental’s inventory of assets” said Harold Hamm.

      Although he might just have easily said: “clearly validates the money we spend on accountants.”

      1. Accountants have nothing to do with figuring out what proved reserves are either from a quantity perspective or from a valuation perspective. Just because reservoir engineers use numbers does not make them accountants.

        1. I stand corrected, strike “accountants”, insert “reservoir engineers”. Point being: given the analysis Rune Likvern has done, which we have been able to replicate, independent reservoir engineers were overstating CLR’s reserves handsomely at year end last year, never mind now after a huge price collapse. All perfectly legal, no doubt.

          Work is here ICYMI:

          http://fractionalflow.com/2015/08/03/are-the-light-tight-oil-lto-companies-trying-to-outsmart-mother-nature-with-their-financial-balance-sheets/#more-1063

          1. Note CLR $8 billion PV10 at $50 oil, PXD just $3.2 billion at $50 oil.

            Yet PXD plans on growing production in 2016 and has a higher enterprise value than CLR, who plans on seeing a significant fall in production in 2016.

            The companies have similar production in BOEPD, although CLR is somewhat more oil weighted.

            PXD is much better hedged. I wonder if the superior hedge book, and not the geology, is why PXD has held up so well?

            1. I looked closer at PXD and CLR press releases.

              PXD proved reserves in MBOE

              Sprayberry Wolfcamp 462
              Raton. 93
              EFS 69
              Other 40

              89% PDP

              Full year 2015 production 204K booed. 53% oil

              2016 guidance 10% production growth, 30% sprayberry wolfcamp offsetting 25% decline in EFS and 10% elsewhere.

              $879 million in derivative gains in 2015.

              2016 98-112 bopd hedged, $72-76 ceiling, $62-65 floor, $43-47 short put.

              40% gas hedged, some $4.06, some three way collars.

              CLR

              Only 43% PDP re PV10

              $4.4 billion of PV10 in Bakken, OK $2.5 billion.

              663 MBOE reserves in Bakken, 413 in OK.

              2015 production 222K boepd

              2016 60% oil, midpoint 2016 exit rate 185K Boepd.

              Interesting difference in % of PDP PV10 between these companies.

            2. Could be the hedges – Harold famously lifted his. That CLR boepd decline is also something of a fudge. As they complete more OK wells and defer ND wells, more of those boepd will be gas going forward.

              Also interesting to note what CLR think their DUCs will produce in the Bakken: 125 net wells at an average of 728kboe EUR (91 million boe total). That makes them on average in the top 3% of all wells in the Bakken, where the average well will produce maybe 450kboe lifetime. So their new wells will be spectacular, whereas their existing wells are pretty average. Hmmm.

              Again, this is why we should be very sceptical of those reserve figures. Our suspicion was that they were just upping EUR in line with increased IP.

            3. I have an error in the above post.

              The 43% figure is PDP reserves in BOE, not the PV10 value. I reread the company release.

              For example, Oasis Petroleum gave more detail

              147.6 MMBOE PDP = PV10 $1.8121 billion.
              70.6 MMBOE PUD = PV10 .2106 billion.

              So even though PDP makes up 2/3 of BOE, it carries 90% of PV10, which makes sense as many costs are already incurred with PDP.

              Note OAS last reported long term debt of over $2.3 billion, so at $50 WTI they are technically insolvent.

  10. The global economic news seems to be indicating a greater probability of recession than has been forecast to this point, at least that how I read it. In fact, the chances are growing that it may be a big one.
    I’m leaning towards the possibility that demand stagnation may precede production decline for several years.
    If so, this will exacerbate the supply shortfall once the global growth restarts.
    One scenario, but one that looks like its picking up steam.

    For example, the risk of a hard landing in China is pretty high. Kyle bass was one of the few who foresaw the subprime mess and made huge $’s as a result-
    http://www.bloomberg.com/news/articles/2016-02-10/bass-says-china-s-banking-losses-may-top-400-of-subprime-crisis

  11. Some names and numbers of some bankruptcies. One of them – BPZ – the creditors got 3%.
    And these were the early ones.
    Would be interesting to know what percentage of Light Tight Oil production costs get “laundered” through bankruptcy court, so the new owners can produce and at least cover costs.

    http://www.bloomberg.com/news/articles/2016-01-20/some-bankrupt-oil-and-gas-drillers-can-t-give-their-assets-away

    “… Last year [2015], 42 U.S. energy companies went bankrupt, owing more than $17 billion, according to a report from law firm Haynes & Boone.

    Dune went belly up owing $144.2 million. Its assets sold for $20 million. In May, American Eagle Energy Corp. filed for bankruptcy with debts of $215 million. Its properties sold for $45 million in October. BPZ Resources Inc. owed $275.2 million. Its assets fetched about $9 million. Endeavour International Corp. went into bankruptcy owing $1.63 billion. The company sold some assets for $9.65 million and handed over the rest to lenders. …”

  12. If you believed everything you read in the news, imagine just how stupid you would be.

    US to Be Self-Sufficient by 2019 as Crude Oil Production Rises

    U.S. oil production for 2015 from shale formations is expected to reach 5.2 million barrels of oil equivalent per day. By 2020 the shale total is forecast to reach 8 million barrels a day. By sometime around 2019, the United States is expected to be self-sufficient in liquids production.

    The compound annual growth rate production from shale plays calls for a 2015 to 2017 increase of just 2%, but that rises to 12% for the period to 2020. From total hydrocarbon production of around 15.2 million barrels of oil equivalent per day in 2015, U.S. production is expected to grow to around 22 million barrels a day…

    To reach these levels, Rystad forecasts that investment in shale plays will rise from less than $100 billion in 2015 to reach about $170 billion in 2020. That is about equal to the investment level in 2014. The researchers expect 2016 investment to fall by about 35% to around $60 billion before beginning to rise again in 2017.

    In 2016 Rystad predicts investment will be greatest in the Eagle Ford play in South Texas ($11 billion) followed by investments of $7 billion in each of the Permian Midland, Bakken and Permian Delaware shale plays. The Marcellus play in Pennsylvania is expected to see $6 billion in 2016 investment, the Niobrara will get $4 billion in new investment and Canada’s Montney shale should also see new investment totaling $4 billion.

    Here is what Rystad predicted back in April 2014

    PERMIAN IS BECOMING THE LARGEST TIGHT OIL PLAY IN THE US

    The Permian Basin, known for its vast conventional resources, has experienced over the past years an activity renaissance targeting unconventional formations. More recently, unconventional activity in this basin has shifted from vertical to horizontal wells yielding more recoverable volumes and higher D&C costs per well. Hence, both tight oil production and spending are expected to grow in this area, possibly surpassing other mature shale plays such as Eagle Ford and Bakken.

     photo Rystad Shale_zpsm1vlgzpm.jpg

    1. The most recent four week running average net total liquids import number (5.5 million bpd) is 17% above the 2015 average annual net total liquids import number (4.7 million bpd).

        1. US net crude oil imports rose from 6.9 million bpd in 12/14 to 7.3 million bpd in 12/15, as US C+C inventories increased by 100 million barrels.

    2. “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re mis-informed.” ~ Mark Twain.

  13. Price of gold is 1228 USD. Price of oil is 26.44 USD per barrel

    1228/26.44=46.4447 barrels of oil to an ounce (Troy) of gold.

    When oil was 1.60 per barrel and gold had a value of 35.07 usd, you received 22 barrels of oil for an ounce of gold.

    Looks priced less than half the value it had when it sold for a whole dollar-sixty per barrel, that is just the plain old fact of it all. 80 cents per barrel and less in 1940 dollars, about two cents per gallon for gasoline.

    http://crudeoilpostings.semgroupcorp.com

    Twenty dollars per barrel today for US oil wholesale.

    1228/20=61.4 barrels of oil when you use gold’s price to compare and contrast.

    About 55 cents per barrel in 1940 dollars.

    Those lying figures tell the story.

  14. Watcher, this sounds a lot like you.

    MARKETS ARE IN TURMOIL – HERE’S WHY

    “……. as the Japanese central bank has found, the introduction of negative interest rates raises the question – what are central bankers so worried about they are writing new chapters of the Alice in Wonderland economic playbook many believe the world is now following.”

    http://www.bbc.com/news/business-35549264

    1. No one is going to extrapolate extreme eventualities if their job is in an industry for which death looms.

      And no one is going to extrapolate extreme eventualities in a world post 2009 where government (central bank) intervention is guaranteed to take place.

      What you WILL get is a lot of people who are immersed in a normalcy narrative who will point out how everything has worked out before and it will again, ignoring that 4.1 Trillion dollars of whimsically created money is all that has bought time in this current . . . “cycle”. The normalcy narrative types LOVE to talk about cycles.

      You see, a cycle perspective means everything will eventually be okay.

  15. Some interesting charts on tight oil wells IP rates from the EIA.

    http://www.eia.gov/todayinenergy/detail.cfm?id=24932#

    “As drilling techniques and technology improve, producers are able to extract more oil during the initial months of production from new wells. … The average new well in each of these regions produces more oil than previous wells drilled in the same region, a trend that has continued for nine consecutive years.”

    The trend was less visible in the Bakken, which concurs with the data from Enno Peters

    1. By contrast, first-month production rates for an average Eagle Ford well have significantly improved in 2015. But the decline rates of new wells are also higher, so by the fifth month production rate is already below than for wells drilled in 2014. My guess is that EUR for the new Eagle Ford wells are at least not higher, and probably lower compared with the wells drilled in 2014.

    2. IP rates for the wells in the Permian basin were much higher in 2015.
      Decline rates during the first year of production were also steeper, but absolute output volume per an average well remained higher that in previous years.

      1. Alex,

        My guess is that the seemingly big improvement in the Permian can be explained by having a larger portion, until rcently, of (cheaper) conventional wells in the data as well.

        1. Enno,

          I agree. Baker Hughes statistics show a significant increase in the share of horizontal rigs in the Permian. That means that the share of shale wells in total number of new oil and gas wells is increasing.
          That also explains higher IP rates and slightly steeper decline rates for new wells vs. wells drilled in previous years.
          But as there is still a large number of old conventional wells, total decline rates in the Permian are much lower than in other shale basins

        2. Agree. These global analyses require a comprehensive look. We tend to have a learning curve. And we need to factor in well design, including number of frac stages, amount of sand, and other factors.

    3. The production curve for new wells in the Niobrara shale is similar to the Permian

      1. Alex

        The Niobrara guys are just starting to increase the length of their laterals from 5,000′ to 7,000′ or more.
        Not sure, but I believe the Permian guys are also extending the lateral length beyond 5,000′ more frequently now. Longer laterals equal higher IP.
        In addition to being more comfortable/familiar with the added length, the DSUs in Texas and Colorado are one square mile, thus encouraging those operators to drill shorter laterals.
        The DSUs in North Dakota were changed to two square miles early on (2008) prompting operators to employ 10,000′ long laterals there.

    4. Alex,

      Interesting, thanks for the link.

      Looking at the Bakken curves (esp 2007), it is clear that they have included wells from all formations, not only MB and TF, and therefore not only horizontal wells. That is a little strange as the title of the article says “tight oil formations”.

      Still interesting though. I also hope to get the Permian and EF on my site. Maybe next month.

      1. Enno,

        Do you agree that the Bakken chart for the most recent years looks very much like yours?

        1. Alex,

          Yes, it looks exactly like the data I use, if you include all ND wells.

          Just click on the “Well quality over the years” box here to compare.

          If you just want the horizontal wells, you can select only the Middle Bakken and Three Forks formations. You will see that the chart still looks the same for recent years, but not for 2007.

            1. Watcher

              (Hope you continue to inhale after the exhale), if your question about stage count increase was directed towards my comment, yes, naturally the stage count is apt to be higher in a 7,500′ lateral versus 4,000 footer.
              However, the graphs shown by Alex are for wells only, regardless of the length.
              The Permian guys are increasing their lengths (as well as in Colorado) and they tout this in their presentations.
              The West Texas operators are a little late to this unconventional dance and their learning curve reflects this.

              In Appalachian based drilling, the lateral length is all over the place, 3,000′ to 9,000+.
              The operators depict their output, their cost, in terms of ‘per 1,000” to keep some apples to apples perspective when making comparisons amongst wells.

    5. The EIA explains why oil production in the Permian basin was not declining in the past few months, unlike the 3 other major LTO basins. Still, the agency expects output volumes to start declining in 2016 in the Permian as well.

      “High decline rates over the first year or two of production from tight oil plays mean that more new wells are required than in non-tight formations to offset production declines from legacy wells. As the rig count in these regions continues to decline because of low oil prices, there are not enough new wells to overcome the decline from legacy wells. Tight oil production in three of the four most productive regions (Eagle Ford, Bakken, and Niobrara) began to decline during 2015 as rig counts have fallen near or below the relatively low levels during 2009.
      Only in the Permian region has the significant reduction in rig count not resulted in lower production. This outcome is because most of the rigs that left the region were vertical rigs, whereas the remaining active horizontal rigs continue to target low-permeability formations similar to those in the Bakken and Eagle Ford. Additionally, unlike the other regions discussed, the Permian has a large number of nontight (conventional) wells. Although these wells do not produce as much as horizontal wells, they have slower production decline rates and thus do not need as many new wells each month to compensate for legacy declines. However, the most recent DPR shows the total rig count in the Permian falling below 200 rigs for the first time since 2010, and production declines are likely to occur in the near future.”

        1. Alex, Enno

          Thanks, as always, for your contributions.

          The most recent iterations (2015) of many fracs have involved shorter distances between stages – 150’/200′ – more stages (50 seems to more the norm) and way more proppant and water.
          Many of the operators are including, in a timely fashion, diverting agents in the proppant supply to temporarily block fissures so pressure buildup will create new ones.
          Overall, there is a trend to ‘rubbilize’ as thoroughly as possible the near wellbore formation to enable maximal connectivity as well as longer term conductivity.
          Jury is out if this is merely pulling production forward or actually increasing EURs (Seems like the former to me).

          As far as I know, there is still no universal consensus as to the primary reason why the production drops off so dramatically.

          Factors such as proppant embedment, crushing, movement (and ‘clogging’). Insufficient initial stimulation, pressure drawdown, ‘shifting’ of the matrix are only some of the reasons, but – even at this stage – this is still a work in progress.

          With these wellbores increasingly being located within a few hundred feet of each other, the prospects of field repressurization via water or gas is looking more viable.
          There are a few companies in the early stages of doing this.

          Enno, quick question if you see this … Your early dataset with refracs had, I believe, 750 wells you thought may have been refrac’d. Rysted’s numbers indicated, maybe, 250 or so Bakken refracs.
          Thoughts on the production increase from the remaining 500?

          1. coffeeguyzz,

            Yes, higher IP rates are largely due to longer laterals, more frac stages, more frac sand, etc.
            Another factors is asset “high-grading”, as companies are mostly drilling in sweet spots and abandoning the peripheral zones of the shales.

            But, as we are already seeing, the first factor is contributing to higher decline rates, or as you say, pulling production forward.
            And the second factor means that the sweet spots will be depleted sooner.

          2. Coffee,

            > Thoughts on the production increase from the remaining 500?

            I don’t dare to say, I hope others with field experience may be able to provide some answers on why well output may sometimes jump in later years.

            1. Hi Enno,

              I believe that Fernando Leanme has said in the past that a well that is temporarily shut in (for maintenance usually) will see pressure build in the well during the shut-in. When the well is brought back on line the output will increase for a few months due to the higher natural pressure relative to before the well was shut in.

              No doubt it is far more complex than this, I will let the oil professionals correct me.

            2. Dennis,

              I belief this reason is indeed one important factor, as many of those wells had a relatively bad year before the increase (which is why they slipped through the rule I was using).

            3. It depends a lot on how oil and water are distributed around the well bore. When flowing there is a continuous pressure gradient through the rock to the well.

              When flow stops the gradient equalises and therefore when the well is restarted there is higher initial pressure that allows higher flow. However the usually flowing wells depend on there being low density fluid (oil) in the well bore to allow the reservoir pressure to provide enough force to allow flow to surface (to a first approximation the initial reservoir pressure will be that of a water column of the same depth – although there are lots of exceptions to this). If the well bore fills with water, as can sometimes happen in a shut down, then there often isn’t enough initial force to allow flow and getting the well going again (i.e. so enough oil is in the well bore to reduce static head and allow flow) can be difficult.

              My experience is with conventional oil wells (gas and water flood) and pressure drive gas wells but I think the same principals will apply to all. Horizontal water flood wells, probably the most common these days, can be more complicated as in prolonged shut in the water migrates to different parts of the well – I have known wells show about 30% reduction in oil productivity after a prolonged shut-in and some never fully recovered to previous levels.

  16. Some people here think that the end of oil is the end of the energy necessary to make the world function. Assume that they are right. Then why aren’t there riots and protests all around the world protesting the billions of $’s spent every year searching the stars and the universe for radio signals, signs of life, planets that are like earth, etc.? Even Musk is being hailed for establishing a private rocket company. What the hell for? It will take some other form of energy for humans to ever explore space [rocket fuel will not suffice].

    Likewise, if you believe in aliens, or even the possibility of aliens, then “they” have necessarily discovered a virtual unlimited source of cheap energy. Shut down NASA totally and use the money to fund more food debit cards. I wonder how much time and money [including priceless brain power] has been spent trying to understand black holes, the formation/destruction processes of stars, the size of the universe, etc., if it all is of no use because we ARE going to eventually run out of enough fossil fuel to sustain the present.

    1. Some people here think that the end of oil is the end of the energy necessary to make the world function. Assume that they are right. Then why aren’t there riots and protests all around the world protesting the billions of $’s spent every year searching the stars and the universe for radio signals, signs of life, planets that are like earth, etc.?

      Because clueless, though some people are aware of what is happening, the vast majority of people are totally clueless as to what is happening. At any rate the money spent on listening for signals from space is a very tiny pittance when compared to what it would take to replace oil as a fuel. There are many thousands of things the government spends more money on than SETI.

      As to “around the world”? Do you really believe hungry people in Africa or Asia is really upset because the US spends a few bucks on SETI?

      Shut down NASA totally and use the money to fund more food debit cards.

      NASA is one hell of a lot more than SETI. That is likely less than one tenth of one percent of NASA’s budget.

      I wonder how much time and money [including priceless brain power] has been spent trying to understand black holes, the formation/destruction processes of stars, the size of the universe, etc., if it all is of no use because we ARE going to eventually run out of enough fossil fuel to sustain the present.

      Oh good grief. Scientists around the world, not just NASA, are just trying to understand how the universe works. And they should stop trying to figure everything, or anything, out just because fossil fuel is finite?

      But of course they don’t know what is really going on. Haven’t you gotten the word? Peak oil is a myth. Or at least that’s what I read in the news almost every day.

      Hey, the world works the way it does because of human nature and the myopic nature of human reasoning. Questioning why the human population of the world does not act in a way you think they should is a useless exercise.

      1. Ron – I do not think that you understand what I write. It is kind of like reading poetry – WTF is the poet trying to say. And, what I was trying to say was that I am VERY, VERY, VERY, sceptical, that the end of fossil fuels will be the end of the world as we know it. I am totally in favor of the expenditures that I noted.

        And, my point was somewhat directed at you! You are positive that a collapse is coming. I am not. If you are POSITIVE, then you should be one of the people protesting the wasted efforts for the projects that I noted.

        1. If you are POSITIVE, then you should be one of the people protesting the wasted efforts for the projects that I noted.

          Really now? And just why would I be protesting? Make no mistake, I am one of NASA’s biggest supporters. Not the manned stuff, but the unmanned stuff like the Hubble Space Telescope and all space observation work. I think the knowledge they, NASA, has made possible is just fabulous. I love it and it has made my life much richer than it would have been without it.

          And I should be protesting, rioting in the streets because of the Hubble Space Telescope and other NASA work? Good God almighty, why on earth would I do such a stupid thing?

          Perhaps it’s because you think, that I should believe, that if that money was spent elsewhere then the collapse could be prevented? Is that why you think I should be protesting?

          1. Yes, your last paragraph would be my view. I have the opinion that IF a collapse is really coming, then NASA type expenditures [including energy used] is a waste of valuable resources.

            1. Of course not. Since recorded history, a fraction of the species has been engaged in the higher functions, and the rest of us have tagged along watching with slack jawed wonder. It is an intrinsic part of what makes us human. Give that up and we may was well be dead. Even if the exact time of our demise were known with precision I would predict that we would continue on with this behavior right up until the end. Its what we do. Its who we are.

    2. A species that understands the physics of black holes, pulsars, etc., has a much better chance of tackling practical issues than one ignorant of high energy physics. Pennies spent on SETI potentially could result in the greatest discovery in human history. If you really want to help the starving in Africa (or the US) perhaps you want to evaluate how many aircraft carriers or F35s or atomic bombs are really needed first.

      1. And, maybe when NASA spots that giant asteroid targeting Earth and actually has the technological capability of doing something about it you won’t be quick to dump their budget into a shredder.

    3. From casual observations it seems to me most folks are racing home after work at breakneck speeds to see who on reality TV is the next greatest karaoke singer or see which team can move a ball or puck around better than the rest. I haven’t done a survey but by paying attention to the topics de jour around the water cooler and the lunch room where I work I have come to the firm conclusion that most people, many of whom seem rather bright, don’t have the slightest f*cking clue what is really going on in this world, and they probably never will. But hey, I’m synical.

      To paraphrase Winston Churchill; the greatest argument against democracy is a five minute conversation with the average voter.

      1. Jimmy, I do not think that you are synical!! I think that you are cynical as am I.

  17. Two good summaries of Gravity Wave confirmation news for anyone interested:

    GRAVITATIONAL WAVES DETECTED 100 YEARS AFTER EINSTEIN’S PREDICTION

    http://www.sciencedaily.com/releases/2016/02/160211103935.htm

    GRAVITATIONAL WAVES FROM BLACK HOLES DETECTED

    http://www.bbc.com/news/science-environment-35524440

    And, if you’re a purist: B. P. Abbott et al. (LIGO Scientific Collaboration and Virgo Collaboration). Observation of Gravitational Waves from a Binary Black Hole Merger. Physical Review Letters, 2016; 116: 061102 DOI: 10.1103/Phys Rev Lett.116.061102

    1. Besides providing final evidence for an old theory that had already been proven correct decades ago, the importance of this discovery should be emphasized. This is a technological break-through that will allow to look at the Universe in an entire new spectrum, gravitational waves, that can reach much farther back in distance and time than light. It is like opening a new set of eyes to look at the Universe.

      Astronomical physics moved beyond the human realm long ago, but it still has the power to make us dream, and question ourselves about the big questions. Only for that it is totally worth it.

      1. Yes. They used $1.1 billion of laser/mirrors equipment inside 2 1/2 miles long tunnels in Europe to detect a gravitational wave from 2 giant black holes that collided. The size of the wave detected – 1/10,oooth of the size of a single proton.

        1. Not just Europe. The LIGO Scientific Collaboration involves the US-based detectors in Hanford, Washington and Livingston, Louisiana, as well as the GEO 600 detector in Sarstedt, Germany. Members also have access to data from the Virgo detector in Pisa, Italy.

  18. ANY research into the nature of physical reality, and the physical or natural sciences, has the potential to pay HUGE dividends.

    Since there is no way to know WHICH particular research will hit a jackpot, we need to finance all the research we can, in the safe and sure knowledge that the return on the investment will be generous, on average, over time. When it comes to research, we own the casino, in a manner of speaking, and satisfactory results are basically guaranteed. .

    Now as to whether we COULD come up with a way to deflect an asteroid on a collision path with the Earth, I suspect there is at least a good possibility we could do so, since we would most likely have a substantial window of opportunity to do so. That possibility would depend mainly on the time available, and the size of the asteroid, I guess.

    A couple of dozen full grown hydrogen bombs built like bunker busters, capable of penetrating fairly deep before exploding, might be enough to do the trick. Just one or two might do it, depending on the size of the asteroid, the composition of it, and the distance at which we could hit it. A very modest deflection in it’s orbital path would be enough, if we could hit it hundreds of thousands of miles out. We might be able to do that a decade or two down the road.

    A SMALL asteroid is not going to bring about the end of life as we know it, and most of them ARE small. So knowing just when and where one will hit would mean we could evacuate the people in that immediate area, and maybe do some other useful things as well, such as removing spent fuel from storage at any nukes in the area, draining reservoirs to prevent flooding in case of dam failure, etc.

    1. Wikipedia has a long and very interesting and informative article on the Tunguska Event, which almost for dead sure was either an meteor or asteroid impact.

      There is substantial evidence that such impacts are not all THAT rare, with some estimates than they occur perhaps on average about every three hundred years. Most would occur in oceans, or remote areas where there were no people capable of recording them, of course.

      Such an impact if it occurred in a densely populated area would result in millions of deaths.

      Back when I was a kid, reading sci fi as well as science, I read a book about this event which convinced me that intelligent alien life is either real or a very real possibility. The author’s premise was that the event was the result of a nuclear explosion, which at that time could only have had an extra terrestrial origin, meaning a space ship crash. This sounded very plausible , since there were no fragments found of an asteroid, and no impact crater, up until that time.

      1. Well, the generally agreed theory is a space rock, about 120 feet across, entered the atmosphere over Siberia and then detonated in the sky. This is wrong. What really happened is Thor had one dozy of a fight with his lovely wife (Sif), thundered, yes thundered, out of their house and tossed his hammer towards Siberia resulting in one god almighty crash; they made up shortly thereafter but as for his hammer – gone.

  19. Now here is one for the REAL engineering guys, as opposed to back yard amateurs such as myself.

    Would it be prohibitively expensive to retrofit some existing gas turbine generating plants to burn some condensate, or build some new ones capable of burning either condensate or a mix of condensate plus methane?

    If condensate is going to be in perpetual excess supply, compared to heavier crude, this might prove to be an economical use for some of it.

    Otherwise, it appears that instead of refineries built to break up large petroleum molecules, as in the case of heavy oil, we are going to need some designed to assemble heavier molecules out of condensate.

    If the bean counters are satisfied that condensate enough to justify the investment is available, and will continue to be available, how hard would it be to build a refinery designed to convert condensate into diesel fuel, etc?

    At first glance it also seems likely to me that LARGE stationary diesel engines can be built to run on condensate as easily as on conventional diesel fuel, and getting the condensate to them might not be a big problem. Such engines could be used to power peaking plants for instance, with the plant located along side a pipeline used to transport condensate. If the condensate is cheap enough, such plants could even be used for some baseload power, especially in a places where they still burn MORE VALUABLE conventional crude to generate electricity.

    So far as using condensate as a diesel fuel goes, there has been plenty of talk of running over the road trucks on compressed gas. Handling and storing condensate would appear to be MUCH simpler, and therefore cheaper and more practical, than going the compressed gas route.

    Dual fuel diesels are a commercial reality. You can satisfactorily run a stationary diesel on a LESS diesel fuel than usual by injecting some gas into the intake air.

    1. not hard at all, there are a ton of processes and a ton of patents out there for exactly that (e.g. reforming –> syngas –> large molecules (methanol, DME, hydrocarbons, lubes). It’s just a lot of CAPITAL, so not very economical )

    2. There are plenty of dual fuel engines around especially for marine use (e.g. Wartsilla, GE LM2500). They usually are tuned for natural gas with option for diesel in case of upsets e.g. for offshore oil production platforms during start up there won’t be any gas available until oil production ramps up. The burner system might have to be reconfigured for lower calorific value condensate, and it would also need to be sweet I expect.

      But ultimately it comes down to economics – on an energy basis if NG price times six is less than oil price then it’s cheaper to use natural gas. Condensate has about 70 to 75% of the energy of diesel so it would need to be proportionally cheaper (e.g. NG at $2.5 per mmscf is cheaper unless condensate is down to about 2.5 * 6 * 0.75 = $11 per barrel).

      1. Right, it all boils down to the dollars and cents.

        Condensate is apparently selling for peanuts so it might be cheap enough to just BURN it as generator fuel, even compared to gas, rather than process it into lubes or a heavier liquid fuel.

        You can’t just dump the stuff to get rid of it, not any more. It might be possible to reinject it in some oil fields, the way produced gas is sometimes injected back into wells to increase oil production.

        Maybe one of the hands on guys will know whether that will work or not.It seems more likely to be it would be better to sell condensate even at a very low price.

        1. OFM

          Your curiosity may be more relevant than you think.

          Last few weeks, two ‘happenings’.
          Love’s Travel Stop bought out Trillium CNG in an ambitious plan to expand into personal CNG retail versus their heretofore emphasis on commercial (think OTR trucking).

          Huge, potentially, tie-in to the above, is the announcement from United Technologies of a new method of storing CNG using an adsorbents directed process utilizing activated carbon.
          The science is way over my head, but, bottom line, same volume of CNG can be stored at less than 1,000 psi versus current 3,600 psi.
          The handling procedures should be dramatically cheaper this way.

          1. I may have missed your point but CNG (compressed natural gas) isn’t condensate. It is more a competition for LNG if anything; and if an economic way of storage can be found would open up smaller developments where accessing a pipeline would be prohibitive and for retail use as you mentioned.

            1. Mr. Kaplan

              Yes, my referencing CNG as an alternative fuel rather than condensate use was my focus.
              Ford is extending their program of offering F-150s being able to run on CNG and fleet purchasers, in particular, seem to be receptive.
              Although pricing wars may play a part, right now in the Oklahoma City area, several locations are selling CNG for less than a dollar GGE (Gallon of Gas Equivalent).

              If the economics coincide with an expanding infrastructure, CNG may loom larger as an alternative sooner rather than later.

          1. Am I correct in assuming that condensate can be turned in to standard diesel much more easily/efficiently, than it can be refined into gasoline?
            Thanks.

            1. No, I am not a refinery man at all but I don’t think that is the case. Condensate has, short polymers, mostly pentane or 5 carbon atoms. Gasoline has 8, on average, and diesel 16. Therefore it would be much more difficult to turn very short polymers into very long ones. Or at least that is how my reason sees it.

              Anyway, I think it is very difficult to make heavy hydrocarbons from light or short ones. Cracking long ones into short ones is, as I understand it, a much simpler process.

          2. Toolpush

            that has been done at Merrenie in the N.T. for circa 20 years…..simple filter, and the Toyotas run just fine
            rgds

            1. Simon,

              Thanks for the info, I had thought it would have taken a bit of standardizing the fuel, combined with some tweeks to the engine.

              Sounds like an ideal way to get rid of the US condensate surplus.

          3. I do not understand this at all. Condensate is the lightest of hydrocarbons at room temperature and sea level pressures. If it were any lighter it would be a gas, not a liquid. Condensate has an average polymer length of 5 carbon atoms, gasoline 8 and diesel 16. Meaning it’s a whole lot closer to gasoline than diesel.

            The main reason condensate knocks when you burn it in your car is that you get pre-ignition. It fires before it’s supposed to, before the piston reaches the top of the cylinder, before the spark plug fires. It fires just from the heat created by the pressure in a gasoline engine.

            I would think this problem would be exacerbated in a diesel engine because a diesel engine depends on the heat from the pressure to ignite the fuel. A diesel engine is a much higher pressure engine than a gasoline engine. Meaning it would ignite long before the pressure was reached that diesel fuel requires to ignite.

            So how is it possible to burn condensate in a high pressure diesel engine but not in a much lower pressure gasoline engine? Can someone explain this to me?

            1. Because diesel engines are fuel injected, so there’s no fuel in there to burn until the injector says so. The diesel is built to take the “knock”, whereas gasoline engines are not.

              The problem with condensate as a diesel fuel is low cetane number. (and likely low lubricity, so hard on the fuel pump and injectors).
              https://en.wikipedia.org/wiki/Cetane_number

              Cetane number is the INVERSE of ignition delay, for smoother operation one wants a higher cetane number, and for small chain hydrocarbons, those numbers are low. You don’t get to good (> 50 cetane) until about linear C7. So it would depend on how rich in aromatics and branched chains your condensate was.

              Branched compounds are absolutely horrible for cetane (though great for octane rating). Example:
              C6H14 2,2 dimethylbutane (chain of 4 carbons with 2 methyl groups at the 2nd carbon) is 24.4 cetane rating
              C6H14 n-hexane (chain of 6 carbons, no side branches) is 45 to 50 depending on who did the measurement.
              n-hexane would burn just fine in a diesel; 2,2 dimethylbutane might not run the engine at all (take too long to ignite).

              Compendium of cetane numbers:
              http://www.nrel.gov/docs/fy14osti/61693.pdf

              Thus most “dual fuel” diesel/natural gas engines can only run like 75% natural gas, and have to use a shot of diesel to ignite the natural gas.

            2. Ron,

              gasoline engines “breathe” a pre-set mixture of air and fuel while the piston goes down during the intake part of the cycle.
              When the piston goes up, the mixture may ignite before reaching the peak of compression curve right before the spark – hence: knock!

              Diesel engines “breathe” ONLY air during the intake part of the cycle and the fuel is injected only at the peak of the pressure curve when the piston reaches the top of the cylinder.
              In diesels, pulverized fuel injected by the pump plays the role that the spark from spark plugs plays in Otto/gasoline engines.
              Until that particular moment (peak of pressure curve) there is NO fuel inside the cylinder, therefore no ignition – therefore no knock.
              Hope it helps.

              Be well,

              Petro

  20. UAE/OPEC cut rumor hits, DOW reverses over 250 points and oil bounces $1.

    Just one rumor affects billions or trillions of market value.

    One question, is OPEC or US calling the shots?

    1. Is cheap oil good for the economy overall or not? No one seems to have a clue. I think the markets have simply run out of things that are worth investing in and are grasping at straws. The BRICs have turned out to be a bust. DotCom2.0 seems to be gathering pace – how can Google, Facebook, Twitter, LinkedIn etc. which rely almost entirely on advertising revenue be amongst the biggest companies when the actual productive companies than pay for the advertising are failing?

      1. I imagine the Dutch, some of them anyway, were once just as flabbergasted when they thought about tulip bulbs that cost ten years salary. This will not end well.

    2. One question, is OPEC or US calling the shots?

      I don’t understand what you are talking about. Someone is calling the shots? What shots? Exactly what would be a “shot” in this case?

      Help me out here. I would love to give my opinion here… if I only knew what you were talking about.

      1. Sorry Ron, it was a conspiracy theory post, which I know you dislike and which I shouldn’t jest about.

        Thought crossed my mind, oil tanks, stocks are very correlated to oil, so those markets tank. Oil and gas price at these low levels are not helping, instead seem to be hurting US economy.

        Does the US have enough sway with Gulf OPEC, due to military protection provided to require them to cut production and/or not cut production?

        I agree. Very conspiratorial. Sorry.

        The oil/stock market correlation is so strong.

        1. Not a problem Shallow. I think you really know that someone in the State Department, or wherever, could not call up the King of Saudi Arabia and tell him to cut production by a million barrels per day.

          But it’s fun to entertain such fantasies once in a while.

          1. Ron,

            Yes it is fun to entertain such ideas from time to time, and sometimes I get the feeling someone is trying to make a true believer people.

            I was watching CNBC last night, yes strange hours for me, but the WTI took a wild dive minutes before the close, taking the stock market with it. Within 15 to 20 minutes, the story of OPEC was willing to meet, came out and it allll turned around! Huge money won and lost in less than 30 mins.

            A novelist, couldn’t get away with those sort of co-incidences, but then truth has always been stranger than fiction!

            Edit, Here are some number behind my observations.
            http://www.downstreamtoday.com/news/article.aspx?a_id=51049

            1. Toolpush, just what are you suggesting? This sort of shit happens almost every day. Rumors always leak out before the news actually happens. Always! Well, almost always anyway.

              And because rumors leak out and people make money on those rumors, you think that some conspiracy was at hand? Give me a break.

              I used to be a stockbroker you know. For all of about six months that is. But every broker, and indeed every trader knew, you buy on rumor, sell on news.

              Rumors have always been able to create huge swings in the market. And you believe it was all part of some conspiracy?

              No, shit happens, rumors happen and huge amounts of money is made on those rumors and an equal amount of money is lost on those rumrs.

            2. Ron,

              No I am not saying anything, just showing my shock of seeing it in real time!
              It was the steep decline,combined with the timing of the quick rebound, that got my interest.

          2. Yes. I know that. Just seeing violent moves in oil and stock market based on a one sentence rumor can get the conspiracy juices flowing.
            Couple that with going from $102 to $21 in 21 months! LOL!

            It is noteworthy how much oil price seems to be on the front page. Go back and look at historical oil prices. Nothing quite like this since 1930s.

            Wow, the volatility I’ve experienced since 1997. $18 to $8 to $140 to $26 to $105 to $21 today. Quadrupling of costs from 1997 to 2014 and then a roughly 20% reduction from 2014 to now on service and equipment.

            Clearly makes one question the wisdom of being invested in this sector. But .5% CD’s are pretty boring. LOL!!

            Thanks again for all of your work on this blog Ron. I appreciate it. I’ll try not to do the crazy talk. Oh how I’d love to be a fly on the wall when OPEC meets. I’d also love to be a fly on the wall when the shale honchos talk turkey about what the heck they are going to do.

  21. It appears the rumours of the demise of the Marcellus, have been greatly exaggerated!

    http://www.eia.gov/naturalgas/weekly/

    New Northeast pipelines help boost gas production 18%

    In just the past six weeks, natural gas production in the Northeast has averaged 18% more than the year-ago period, according to Bentek Energy. The area includes the prolific Marcellus and Utica shales.

    New infrastructure additions coming online in the past several months have likely contributed to year-over-year growth. But while Marcellus production has grown rapidly over the past several years, pipelines to move these increasing volumes out of the Northeast to consumption centers have not grown as quickly, largely because infrastructure projects have long lead times. Insufficient takeaway capacity will generally result in lower prices in the producing region and higher prices in the receiving region than would have been expected otherwise.

    1. Push

      Great link. Thanks

      Don’t know if you glanced down screen a bit at the Pricing/Demand section.
      Interesting stuff …

      Due to a cold front, the Algonquin gate (Boston) price went from $1.90 to $6.50/mmbtu in a few days.
      Zone 6 (New York City) – $1.79 to $5.99/mmbtu.

      And these folks are being told they don’t need no stinkin’ pipes.

      Meanwhile, literally, just a few miles to the west, Dominion South pricing ‘shot up’ to$1.53/mmbtu, and the Leidy Line ‘spiked’ to $1.32/mmbtu.

      Sheesh.

      1. Yes Coffee,

        I do believe we can conclude there still pipeline constraints in the NE gas market!

  22. I don’t think anybody is “calling the shots”. This is old military lingo , and slang, for somebody ( somebody in a position to see the shot hit ) telling a gun crew where their shots are hitting, long, short, left or right of the target, and thus being in charge, indirectly, of the aiming and firing of the gun.

    MAYBE , in the beginning, Saudi Arabia, or the Russians, or the mega banks here in the USA, in collusion with the CIA, etc, STARTED this whole oil price collapse mess. I do not believe this is actually the case, but I can’t prove it is not.

    Sometimes shit just happens.

    And once shit starts happening, by chance, feedback loops develop, and the more the people, companies, or countries do to try to protect themselves, the worse the situation gets.

    The way I see it is that the oil producers, working like hell during a prolonged period of high prices, got production up high enough that the world economy really just does not want quite so much oil, at such a high price. On top of that, the overall economy is not going really well, and that dampens demand. These two factors by chance came to be at about the same time.

    The result is that the price of oil took a tumble. The price of oil is extremely inelastic. The end user wants only so much, but he is more or less COMPELLED to buy that much, even at a very high price. The flip side is that he has near zero use, short term, for MORE oil. He won’t buy much if any ADDITIONAL oil even at a peanut price. So the price collapses to whatever price sellers are willing to accept, and the sellers of oil have proven that they will accept a peanut price. This is what extreme price inelasticity is all about.

    Then the feed back loops kick in. Various countries and companies and banks and vendors all hate each others guts, with a passion, and are ready, if they can to put a real hurting on each other, even at the expense of hurting themselves. So maybe the Saudis are willing to take twenty cents on the dollar to stick it to the Russians and the Iranians.Another feedback is that the harder times get for an oil company, the more desperate it gets, in pursuit of cash, and thus it finds itself in the position of selling oil that costs sixty or seventy bucks to produce for half or less that price. So long as ONE company is selling at that price, everybody else must do the same, UNTIL THE LOW PRICE GUY RUNS SHORT OF INVENTORY. THEN and only then will the price go up, barring somebody ( OPEC) deliberately holding production off the market.

    So….. maybe ….. or probably (?)

    Nobody is really calling the shots, but every body is getting hit, as much by friendly fire as enemy fire.

  23. A question to the electric car fans.

    It seems the common agreement, in the electric car circles, the ICE, in generalization are high maintenance, and low reliability, when compared to electric motors.

    Just an observation of my hip pocket. Over the years, I have had to replace 3 alternators in different vehicles that I owned. All in the 10 to 15 year old range, but have never had to replace or major work on the ICE, that is attached to the alternator. As the alternator is really just an electric motor suffering the same conditions as the traditional ICE, and electric motors are so reliable, why so many failures?

    PS Full disclosure, one of the replacements, was most likely cause by over tensioning of the fan belt.

    1. Edmunds has a great website, True Cost to Own:

      http://www.edmunds.com/tco.html

      You can compare maintenance & repair costs for various vehicles. For me, the bottom line is that I suspect that most people grossly underestimate the true cost of owning and driving a car, regardless of whether it’s electric or internal combustion.

      1. Jeff,

        I suspect that most people grossly underestimate the true cost of owning and driving a car,

        I could not agree more, with that statement.

      2. ” people grossly underestimate the true cost of owning and driving a car”

        Here is the process that is happening and it is not exactly where people are underestimating or overestimating the cost. Majority of people are not doing any calculus at all.
        For example if someone see an advertisement showing attractive and happy people having fun because they unlike you are in possession of SUV/Truck/Tesla/whatever is being advertised. The habitualized behaviour pattern of egoic thought is being deliberately stimulated and provoked into reacting.

        The ego wants to be as happy and as attractive as it perceives the people are in advertisement and in this wanting, the thoughts of not having enough are formed, regardless of the fact that the mind was perfectly happy before it saw the advertisement. If the egoic part of the mind is presented with something in a way that is perceived as a problem of lacking it will become active, even if the problem of deficiently is not in the slightest way real.

        1. We used to have streetcars and trolleys…

          Here are some abandoned at a site in rural Pennsylvania…

          https://www.youtube.com/watch?v=TXT8ru9IvdE

          That fella who was the real big train advocate who used to post on TOD (the guy from N’Orleans) would like this…or he would weep.

        2. The WSJ has an article this morning on the weak demand for sedans versus the strong demand for SUV’s and crossovers. As of a couple of weeks ago, the GM plant in Arlington, Texas was working around the clock, three shifts per day, to meet the demand for full size SUV’s, e.g., GM Suburbans.

          1. I am not surprised. But that is a reflection on habitual conditioning of the populace. Measure the number of ads on TV/Print between SUV/Trucks versus Prius/Ford Fiesta type of cars and the result is probably 1000:1 in favour of SUV/Trucks.
            So it is just conditioning that becomes habit that drives the sales. Price of the gasoline does not have huge influence as many would like to think. It is stimulating emotions (e.g. fear for safety (get SUV), pride (get 550HP Mustang) that drive the mind to pick one product over another.

          2. It’s an arms race; cars keep getting bigger as suburbanties can only feel safer/more powerful in ever bigger ‘trucks’ on the insane battlefield that motordom has made out the public realm we used to call streets…

            nutso…

    2. Industrial electric motors have an expected life of at least 15 years according to IEEE. Some last three times that.
      I know locomotive traction motors can have a very long life. Overheating at slow speeds with DC has been solved with AC traction motors that can run at low speeds for extended periods of time.

      There should be an almost unlimited lifespan for personal automotive electric motors, since they spend much of their life sitting still. Industrial and railroad motors get much heavier use.

    3. Most EVs I know anything about, as well as the Prius,
      have active cooling of the sealed motors (and typically the inverter too.)
      So, temperatures are limited, thus insulation decay/corrosion/etc. are limited;
      whereas your typical cheap ICE alternator is left out in the air for whatever dust to get in and
      clog up cooling, grind up bearings, etc.

      It is likely that the control computer of an EV either has direct temperature sensors in the motor(s), or based on other temp sensor and current load can calculate what’s safe for the motor and limit things if needed for reliable operation.

      Many EV/Hybrid motors are permanent magnet motors (“brushless”), so there are not even any slip rings for the magnet excitation field (like an ICE alternator), so no wear there.
      Others, including the Tesla, are induction motors – which don’t have any slip rings/commutators either, so no wear parts other than bearings.
      https://www.teslamotors.com/blog/induction-versus-dc-brushless-motors

      1. ICE – Alternators Killers: High RPM & 12V ( High currents ) . Just 4 blocks from where I sit is a Multimillion dollar goldmine Alternator rebuild business. WTF, Autos were going to 42V a decade ago, Lower costs, decreased maintenance and woops – increase performance and lifespans. Can’t have a car be an energy distribution system! Even when a car is just a few years old, 12V headlights dim due to copper oxidation in the wiring harness. How long is the Headlight conductor? 1.5 m? Power “I Squared R” losses @ 12V for any Energy system is guaranteed planned obsolescence.
        24V is a practical minimum for even tiny loads. “Ironically, Detroit is situated at a latitude of 42 degrees North” http://www.assemblymag.com/articles/83442-the-42-volt-challenge

    4. Probably ninety percent of all cars make it to the wrecking yard without an alternator replacement. When the alternator does fail, it replacing it is quick and easy – on MOST models, and not an outrageously expensive repair. I can replace one on an easy to work on Chevy or Ford for a peanut, and for two or three peanuts ( hundred dollar bills) on most popular cars. Some cost five hundred or more though.

      Any sort of INTERNAL failure of the ICE itself usually means scrapping an old car. An engine rebuild or swap costs more than a fifteen year old car is worth.

      Manufacturers are compelled to build more reliability into the engine itself, in order to prevent numerous engine failures in newer cars from resulting in customers abandoning the make.

      Folks who bought Vegas and Oldsmobiles with diesel engines decades ago are STILL cussing GM, and still won’t buy a GM car in a lot of cases. You can overlook an occasional repair to an old paid for car when that repair costs no more than ONE payment on a new car. Internal engine repairs equal six months or more of new car payments, or more.

      Both , internal combustion engines and electric motors can be built to be EXTREMELY reliable and durable. But horsepower for horsepower, an electric motor of comparable quality costs only a quarter or less as much as an internal combustion engine and the necessary associated parts such as the gasoline tank, exhaust system, etc.

      And the electric motor ELIMINATES the trouble prone transmission in a well designed car. It eliminates the alternator as well. 😉

      The ONE big question mark, in terms of reliability and cost of operation, of a pure electric is the reliability and durability of that BIG battery.

      So far it looks as if the huge and super expensive batteries are going to hold up ok, and they will certainly get to be cheaper and more reliable as time passes.

      Bottom line , around and round whips the ass of up and down on every single detail, assuming you have a good enough battery. It virtually eliminates friction , having only a couple of roller bearings, as opposed to pistons sliding in cylinders plus DOZENS of pressure fit bearings, no vibration, no fire, no complicated cooling system prone to leaks, no high pressure hot gases to escape thru leaky gaskets, no problems associated with corrosion due to combustion gases getting into the lubricant, no corrosion in the non existent liquid fuel system, etc etc.

      You are hearing this from an old gearhead with his own garage who LOVES to mess around inside internal combustion engines.

      1. It seems to make sense to only purchase an electric car that has a easily replaceable battery module (although one that can be locked up securely!).

      2. As a side note on cost of ownership my Volt has over 60,000 miles on it. Still have the original brake pads, and judging by their wear the vehicle honestly may never need new brakes.

        To be fair though, I am very intentional with anticipating upcoming red lights or slow downs and coasting up to it. I often get squeaky brakes because they’re so under utilized.

        The Volt was also one of only a few GM models to have Ferritic Nitro-Carburizing (FNC) brake rotors that double the rotor life span of brake rotors from 40,000 miles to 80,000 miles.

        I say WAS because as of this year every GM product has these brake rotors, but it was an important distinction on all earlier models. Here’s a short article on it:

        http://www.automotive-fleet.com/news/story/2011/11/gm-s-to-use-long-lasting-brake-technology-on-80-percent-of-its-models-by-my-2016.aspx

        The fellow who recently crossed 100,000 electric miles has a TOTAL mileage of 295,000 miles.

        In December he said, “I couldn’t ask for a more maintenance-free vehicle than this,” said Belmer. “The only reason why this vehicle goes into the shop routinely is for tire rotation.”

        He gets an oil change every 38,000 miles. I’d love to see a lifetime log of all the maintenance he’s gotten done. Sometime in March he will have 300,000 miles on his Volt.

        I love the idea of a low maintenance vehicle that is still perfectly reliable after 300,000 miles. Only time will tell if that is to be expected from the average Volt. Then again, for all we know his experience thus far is an outlier.

        1. Brian,

          Regen braking, is what I see as the greatest advantage of electric vehicles. I am not sure what percentage of braking is done by regen, or when the disc brakes actually cut in, but as you say with a little forward thinking, the discs use should be able to be cut to mere parking brakes. Of course driving habits need to change, with regen, as in long down decent, the habit of riding the brake pedal, all of a sudden becomes the correct driving method. I would expect a good driver would never need to change brake pads, on an electric/hybrid vehicle, unless they put a use by date on them.

          I have to say my manual diesel rodeo, still has the original front brake pads, at 90k miles. Large compression braking and a fair bit of freeway driving can account for that, The rear drums on the other hand, have been replaced. Apparently a weak point with the model.

          1. Per Andrew Farah, chief Volt engineer, the Volt is 100% regen braking to about 0.2 g’s deceleration, then starts blending in the rear friction brakes to about 0.4 g’s. The reason is that beyond 0.2 g’s, you have to have braking on both front and rear to maintain good stability. Somewhere between 0.4 and 0.5 g’s, regen is gone and the ABS-controlled front and rear friction brakes take over completely to maintain vehicle directional stability and prevent skidding. 0.5 g’s is a panic stop type deceleration.

            Since the Volt is front-wheel-drive, all regen braking happens at the front and is only through the drive axles. Essentially like engine compression braking by putting the vehicle in “low”.. Individual wheel control isn’t available.

            The Volt has a graphic display on the driver’s instrument panel that shows the approximate deceleration level via a green ball. The ball moves down as deceleration increases. Once it passes 0.2 g’s, it also starts to turn yellow, indicating that you are no longer getting 100% regen. When the ball is full at the bottom and bright yellow, you are at 0.5 g’s, but very likely, your eyes are not checking the ball because of whatever made you brake so hard.

            1. HVAC,

              I like the idea of the re-gen feed back. The only hybrid I have driven, was a Camry, and I do not recall any feed back on breaking at all. It shouldn’t take long to learn the sweet spot to maximise re-gen.
              Re-gen in a 4×4, would it be possible to go to higher braking force with re-gen, or is the ABS still the preferred control mechanism, for control in hard breaking circumstances?

            2. HVAC,

              Thank you for that info. I never knew that the colored ball was literally telling me when I was on full regen, back brakes, and full brakes.

              That is some very useful info. No wonder the forums recommend doing a few hard emergency stops every so often. Need to keep those front brakes clean, so they can do their job once a year when you actually need them.

    5. Toolpush,

      You are 100% correct. A common issue with the Tesla Model S is a humming of the electric motor. Tesla replaces them for free, and incurs only a small cost as the motors are easily removable and cost only a few hundred dollars.

      Tesla’s have more electric motor issues than a Volt or LEAF primarily due to the extreme stress the motor experiences as a part of the Tesla’s acceleration capabilities.

      Elon Musk and Tesla are dedicated to developing a mass produced electric motor in house that will last 1,000,000 miles. In tour videos of the Freemont Factory they show an entire floor dedicated to research and testing electric motors. I have little doubt they will succeed. It’s planned to be the motor used in the Model III when it rolls off the line in 2017.

    6. Having owned a Nissan Leaf and Chevy Volt for 4+ years, I can say that they have been near zero maintenance. I like that. Batteries still going strong.

      I have had the tires rotated and changed the oil in the Volt (just to maintain the warranty, it didn’t need it). Changed the cabin air filter in the Leaf. Zero significant repairs.

      Thirty years ago, with two ICE cars, I would be doing a repair nearly every weekend.

      With 12 KW of PV solar on the roof, we are at zero net energy for both house and cars.

  24. Not sure how reliable this is, but drillinginfo index has the “new US production capacity” (oil and gas) dropping by 24% from January to February; which would be biggest drop since the collapse of the oilprice

  25. This headline shocked me: The Oil Industry Got Together and Agreed Things May Never Get Better

    Thousands of industry participants gathered in London for their annual get-together, only to find a world awash in crude and hardly a life jacket in sight.

    The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message:

    There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.

    No Hope

    Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader. Even refiners, whose profits have held up better than expected, are seeing a worsening outlook.

      1. Perhaps their only hope is depletion?

        Production costs also will come into play at some point. According to “Herbert Stein’s Law,” which he expressed as “If something cannot go on forever, it will stop” the trajectory of oil prices will be up with wild oscillations due to instability of the system. We are living in interesting times 😉

        Production below lifting costs can’t last forever.

        On the other hand “Is not Bloomberg simply a GS propaganda arm ? ”

        I especially enjoyed the following statement

        “As the world runs out of places to store oil, “I wouldn’t be surprised if this market goes into the teens,” said Jeff Currie, head of commodities research at Goldman Sachs Group Inc.”

        I think there should be is a special place in hell for Goldman commodity traders.

    1. IMO, the global oversupply is a house of cards built on an unstable foundation of actual global crude oil production* that requires massive capital investments to keep crude oil production from crashing.

      Qatar is basically the poster child for post-2005 production. OPEC 12 data show that Qatar’s reported crude oil production, despite billions of dollars spent on enhanced oil recovery, fell from 0.8 million bpd in 2005 to 0.7 million bpd in 2014 (OPEC crude only data), while EIA data show that Qatar’s C+C production increased from 1.0 million bpd in 2005 to 1.5 million bpd in 2014.

      Production of condensates rising in Qatar http://www.oxfordbusinessgroup.com/analysis/production-condensates-rising-qatar

      *45 API Gravity and lower crude oil

      1. “IMO, the global oversupply is a house of cards built on an unstable foundation of actual global crude oil production* that requires massive levels of investments to keep crude oil production from crashing.”

        Please provide a scale Jeff. Not that I don’t agree with you; my buddy (petroleum engineer) who works in Kuwait from time-to-time insists their production rate is maintained by massive infill drilling BUT how long will the party last: a decade? Longer? Shorter?

        1. I would think the second half of 2016 for a price recovery, but I thought we were in a price recovery phase this time last year. As for the duration of a price recovery, I don’t have the foggiest.

          As an example of low probability events, two years ago if someone had asked us what we thought the chances were that Donald Trump, in early 2016, would be the most likely GOP nominee, and that oil prices would be in the 20’s to low 30’s, I wonder what we would have said.

          Incidentally as noted up the thread, an interesting difference between the last oil price decline and the current (much more protracted) decline: Global liquids consumption fell by 2 million bpd from 2007 to 2009, whereas global liquids consumption reportedly rose by 3 million bpd from 2013 to 2015.

        2. my buddy (petroleum engineer) who works in Kuwait from time-to-time insists their production rate is maintained by massive infill drilling…

          That is what is keeping two thirds of the world’s oil fields from a 5 to 6 percent decline rate. Massive infill drilling is happening in Kuwait, Saudi, the UAE, Russia, the Gulf of Mexico and just about everywhere else in the world.

          Normally the production profile of a field would resemble a bell curve with the top of the curve being the 50% depletion point. But with massive infill drilling, the top of the bell just levels out with only a slight decline, if any. But the depletion curve, if you could see it, would be dropping like a rock.

          What infill drilling does is delay the decline curve until it too starts dropping like a rock.

          BUT how long will the party last: a decade? Longer? Shorter?

          My guess is about a decade. Saudi began their infill drilling projects over a decade ago and I believe the fields where this began is already dropping fast. But they have managed to keep production up by bringing on three giant fields, Khurais, Manifa and Shaybah.

          But it depends entirely on the size of the field. Giant and super giant fields can maintain infill drilling and keep production up much longer than smaller fields, like those in the GOM.

          But Kuwait’s production has already started to drop and UAE production is just on the cusp. Russia also has, for almost a decade, had a program of massive infill drilling in their Western Siberia fields where about 60% of their oil is produced.

          And folks wonder why I think peak oil is at hand. Geeze, isn’t it obvious?

          1. “Normally the production profile of a field would resemble a bell curve with the top of the curve being the 50% depletion point. But with massive infill drilling, the top of the bell just levels out with only a slight decline, if any. But the depletion curve, if you could see it, would be dropping like a rock.”

            I believe this resembles what Professor Ugo Bardi calls a Seneca Curve, or Seneca Cliff if you’re a little more pessimistic.

          2. Does anyone have any data that shows the production profiles of a regular field vs a field with extensive in-fill drilling in the decline phase?

            I’d love to a real world comparison of the decline rate.

          3. Ecuador has only one rig running at the moment. The rest of the year production profile might indicate what a natural decline without in-fill drilling looks like. I think it is likely to be steeper than the ‘slightly’ that Ron is predicting.

    2. They always fail at predicting future oil prices. Why should they be correct this time?

      1. Hey, all those oil company executives agreeing that their business is doomed, that their livelihood is doomed? Now that is shocking. After all, in the past they have always been extremely optimistic. For them to turn completely in the opposite direction and now say prices will likely stay low for a decade, turning profits into losses for a decade? Knowing that would bankrupt them all? Now that is shocking. And it is especially shocking for them to admit such a thing even if they did fear it was true.

        1. There’s always the possibility that what they are saying is not what they think. After all the markets and sincerity rarely go together, and a capitulation means that the great majority of the players must abandon hope right before the markets turn. So the information that the players receive is that there is no hope.

    3. Ron,

      In my view this is a wonderful sign of a bottom for oil prices, as the last bull has left town. As most people do not understand the true reasons for an oil price rise, the current scenario could not be better for a future rise of oil prices.

      1. Well Heinrich, that is the case in the market. There is a reason for that. If all investors have sold everything and everyone is short, then there is no way for prices to go but up.

        But oil prices are not stock prices. This is a different ball game. These guys are not speculators in the market. They are talking about something entirely different. I just don’t think that rule applies here.

        1. Ron,

          Two years ago people believed that oil will explode upwards and now? The key is in my view the bond market for oil and gas companies. It imploded about two months ago. This will hold down new investments especially in the shale patch. As soon as the market has worked through the over-investments, oil and gas prices will shoot up faster than they came down. The recent rise of gold and the steepening of the yield curve, which are messengers for higher commodity prices in the future, are already a likely sign that oil prices will go up by the end of the year. My gut feelings tell me it could go much higher than most people can imagine.

          1. Hi Heinrich,

            I can imagine $75/b by the end of 2016, possibly $90/b, but it is unlikely the oil price would rise above that by Dec 2016 (monthly average price for Brent crude). As always your guesses seem to be better than mine on future oil price. How high do you imagine the prie of Brent crude might rise by Dec 2016 (average price for the entire month)?

    1. However, I must point out what a trade deficit is.

      Suppose I came to your house and said what would you sell it for and you gave me a figure, and I agreed that it was perfectly acceptable. So, I took a napkin off the table and wrote “I owe you X $’s” and gave it to you and took your house. Then, I said how about your vehicle. And we did that in the same manner. And followed that with everything else that you own. I do not think that you are married, but, if you were, I can see you proudly showing her dozens of napkins with “I owe you X $’s” and she would be thrilled – probably not.

      Well, the Chinese ship us “crappy shit” [your words], like I-phones, TV’s, computers, clothing, tennis shoes, etc. and we ship them napkins that say “I owe you X $’s.” So, we have a trade deficit [ we have tangible things like I-phones, TV’s, computer, clothing, tennis shoes, etc.] and as Watcher points out – they have pieces of paper.

      1. You have absolutely zero idea what the deficit is and how it works…and I suspect not only the deficit.

        Be well,

        Petro

  26. Sorry Ron, I can’t let it go. Ban me, bar me, hang me from a tree; this is just too cool.

    GRAVITATIONAL WAVES: NUMBERS DON’T DO THEM JUSTICE

    “Take something about 150km in diameter, and pack 30 times the mass of the Sun into that, and then accelerate it to half the speed of light. Now, take another thing that’s 30 times the mass of the Sun, and accelerate that to half the speed of light. And then collide [the two objects] together. That’s what we saw here. It’s mind boggling….In that moment of union, the holes radiate pure energy in the form of gravitational waves, and lose mass equivalent to three times that of our Sun. Energy equals mass times the speed of light, squared. Everyone knows the equation; this is it in action…. It is remarkable that nature didn’t add in even more complexity. But the equations are what they are, and they’re beautiful.”

    http://www.bbc.com/news/science-environment-35553549

      1. Peak Oil can definitely take a back seat to gravitational waves any day!

    1. Doug,

      Thank you for posting this…this is a BFD…exciting news.

      I find the expansion of human knowledge a fundamental quest for homo sapiens.

      It is satisfying to see U.S. investment in science pay off handsomely.

      If I had the power I would divert a goodly portion of the MIC budget to funding a slew of science research efforts.

      Excelsior!

  27. I’m looking for redemption:

    THE OIL INDUSTRY GOT TOGETHER AND AGREED THINGS MAY NEVER GET BETTER

    “The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message: There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.”

    http://www.bloomberg.com/news/articles/2016-02-12/the-oil-industry-got-together-and-agreed-things-may-never-get-better

    1. “Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally”

      Doug,
      I don’t see how shale production, with it’s rapid decline rate and high costs, can act as a cap on the price of oil. Wouldn’t it be more likely that foreign producers with lower costs for production will keep a cap on the price of oil?
      I think oil price will remain somewhat volatile over the next decade since it is heavily tied to transport. As that scenario changes, oil production will be in natural descent anyway so alternatives and efficiency might just be playing catch-up for quite a while.
      However, in a way the oil industry people may be correct in the long run. Every time the price of fuels go up, society will make more permanent changes to reduce the use of those fuels. So the long term outlook for the oil industry is downhill. Short term, probably not.

    2. “The State Oil Co. of the Azerbaijan Republic – where a currency crisis has provoked street protests – offered four whole roast lambs, a sushi bar and chocolate truffles to thousands of guests at Park Lane’s Grosvenor House Hotel. 

      “We didn’t cut back,” said Elshad Nassirov, the company’s vice-president of marketing and investments, “in order not to spoil the mood.”

      How nice of them

  28. Just another indicator of economic downturn, CSCL has warned of loss.

    “China Shipping Container Lines (CSCL) has issued a profit warning announcing an expected loss of RMB 2.8 billion (USD 425 million) for the financial year ending December 31st.”
    http://worldmaritimenews.com/archives/181462/cscl-warns-of-loss/

    At least they finally freed the CSCL container ship “Indian Ocean” stuck in the Elbe River.
    http://worldmaritimenews.com/archives/182581/cscl-indian-ocean-finally-freed-bound-for-hamburg/

  29. Rat’s congressman proposes Stranded Assets International Bioreserve

    Rep. Jared Huffman (D-CA) introduced the Keep It in the Ground Act on Thursday. Under the bill, there would be no new leases for extraction of fossil fuels — such as coal, oil, and gas — on all federal lands. It would also stop new leases for offshore drilling in the Pacific and the Gulf of Mexico and prohibit offshore drilling in the Atlantic and Arctic Oceans.

    http://thinkprogress.org/climate/2016/02/11/3748675/house-keep-it-in-the-ground-introduced/

    1. Don’t worry, none of this “keep it in the ground” noise will last very long. When prices go back up, and when peak oil ceases to be called a theory, then the “keep it in the ground” folks will be looking for a hole in the ground to hide.

      1. Ya got it about half right Ron.

        Here, I have fixed it for ya. 😉

        Don’t worry, none of this “keep it in the ground” noise will last very long. When prices go back up, and when peak oil ceases to be called a theory, then the “keep it in the ground” folks will be looking for a hole in the ground to hide.

        1. OFM – What???

          You just quoted Ron word for word, only in bold. What was half right? What did you fix?

          1. He didn’t say it loud enough, or use any cuss words for emphasis. 😉

            I presume you missed the smiley face, so I added another one.

            Generally speaking, I hardly ever disagree with Ron except as a matter of DEGREE.

            In this case, I am TWO hundred percent with him, in poking a little gentle fun at the folks who are in my opinion ( and Ron’s too, unless I miss my guess ) naive enough to think green politics will rule once the shit is really and truly in the fan, and a LOT MORE people are in deep economic shit than at the present time.

            Just a few days ago, I posted my good fishing buddy and attorney’s summary of his two young daughters values and attitudes.

            He spent a small fortune putting them thru snooty universities, and they both have excellent professional careers.

            They are as green as green can get, when it comes to OTHER folks driving very small cars, and living in small crowded cheap apartments, as opposed to the UPSCALE places THEY live.

            Uber and taxis are fine with them, but they both own NICE mid size cars, and avoid riding city buses like they avoid the plague.

            They LOVE poor people AT A DISTANCE, but they generally manage to avoid any contact with poor people close up.

            They buy coffee at a McDonald’s drive thru , but they generally will not go inside a McDonalds unless it is in a rather upscale neighborhood.

            They are FINE with wind and solar power, and cutting back on coal. They may buy a Tesla S or X , a little later on, when they are making even MORE money.

            But he raised those girls ( mid to late twenties women now ) and he says you can take it to the bank that the FIRST time they suffer any inconvenience personally as the result of green politics, they will start voting republican.

            He is exaggerating to some extent, but he is still making a critical point.

      2. Are you sure?

        “The bill that was introduced today is one of the more thoughtful and prudent approaches to addressing the climate challenge that we’ve ever seen,” said Michael Brune, executive director of the Sierra Club.

        I am sure that he would not have said that if there were going to be any problem with this proposal. I think that the goal of the Sierra Club is to save the world from climate change. Surely this would make it much better. As you know, I am all in on that. NOT!

        1. “thoughtful” is a curious way indeed to describe this when it takes very little thought at all to just automatically say no we’re not going to extract resources any more because of our children’s future or whatever other newly imagined threat we’ve come up with this week.

        2. Hi all,

          There really is no need for the green policies.

          There will be a peak in the output of oil , coal, and natural gas. My guess is 2025 for both oil and coal (plus or minus 2 years) and 2037 for natural gas (also plus or minus 2 years).

          When the peak is reached, prices of fossil fuels will increase, in the mean time the prices of wind, solar, and batteries for EVs and plug in hybrids will be decreasing over time and autonomous vehicles may make personal vehicle ownership (except in rural areas) obsolete. The fall in the relative cost of alternatives compared to fossil fuels and transport that relies on them will increase the demand for alternatives even without green policy.

          Raising taxes on pollution makes perfect sense as it will reduce health care costs, even people who attend snooty universities are aware of this. 🙂

          Now we could try to enact policies that would make a transition from fossil fuels to other forms of energy less disruptive (so called green policies), or we can let Mr. Market take care of all of our problems because it worked so well from 1929 to 1933. 🙂

          1. Dennis, is that a flaccid unicorn you’re riding?

            But anyway, unicorn aside, what might you think the break-even oil price for a more robust buildout effort in the pseudorenewables arena might be, and/or is the current price good enough?

            And BTW, who’s ‘we’? Are we in anarchy already?!
            (“Now we could try to enact policies…” ~ you)

            1. Hi Caelan,

              We refers to the people of OECD nations, or better yet the nations of the world.

              Or in your case the tribes of the World.

              The breakeven oil price of the marginal barrel will rise with depletion. It will likely rise to $130/b by 2019, which will make alternatives more attractive, society will gradually replace fossil fuels with wind, solar, energy efficiency, and EVs over the 2020 to 2050 period.

            2. Fair enough, Dennis, thanks. We shall likely see how this pans out in (some of) our lifetimes.

          2. That has got to be one of the all time grandest wave of the hand dismissals I have ever read. I could even hear the ho hum tone with which you made this earth shaking proclamation.

            Make it so!

            1. Hi Jef,

              We agree far more than you seem to realize. None of this will be easy. My point is very simple, scarcity will result in higher prices, this affects the choices that people make.

              I agree the green policies would be better than letting the market do all the heavy lifting as there are likely to be severe shortages because the market does not look very far into the future and most people are unaware that peak fossil fuels will ever arrive (or think there is plenty of coal or natural gas that can substitute for oil through CTL or GTL).

              When the energy transition becomes very difficult due to the absence of green policies in the past, people may learn yet again the lessons of the Great Depression.

              The short version of that lesson, market outcomes are not always ideal and that government policy to improve economic outcomes is a good idea.

              Note that by economic, I mean the economy in a very broad sense that includes ecological concerns.

  30. Canada down by 20. Isnt this the main drilling season? How much does canada produce outside of oilsands?

    1. Canada produces a lot of gas still and some declining conventional oil. They also have offshore production on the East Coast but only one or two rigs at any time. SAGD (steam assisted gravity drainage) is used for increasing amounts of tar sands development compared to mining as the developed reserves get deeper, and requires a lot of wells quite closely spaced. One horizontal one to inject steam and a matching parallel one – below the steam I think but might be wrong – to collect the melted bitumen. The collapse in tar sands developments might be one of the biggest impacts on the rig count, but I don’t know how to interpret the numbers well enough to tell for sure.

      1. As I have previously discussed, if it took trillions of dollars of post-2005 global upstream capex (spent on oil & gas projects) to keep us on an undulating plateau in actual global crude oil production*, what happens to actual global crude oil production given the large and ongoing cutbacks in global upstream capex?

        *45 API Gravity and lower crude oil

        1. To quote Private Hudson (maybe) – “We’re on an express elevator to hell, going down”

  31. … Continued from here

    “…a redistribution of wealth in a democratic society would be positive in my opinion and might be accomplished by proper tax policy…” ~ Dennis Coyne

    “With the key/trick passage being ‘in a democractic society’… (with coercive taxation?)…
    Coercive democracy… (oxymoron?)” ~ Caelan MacIntyre

    Where I may part company with some, such as those of the HANDY research, say, or with Dennis Meadows regarding equality, at least alone, relative coercive vertical hierarchy, such that we more or less have in this crony-capitalist plutarchy system, is unlikely going to automagically choose equality (Strip all those vested interests down? Good luck, Mr. Prez.), such as with regard to wealth redistribution.
    That would only likely lead, at best, to token or whitewashed gestures.
    In order to get real equality, it would appear that we need real democracy and lateral hierarchy, and guess where real democracy and equality more or less leads or is?

    Anarchy.

    That you seem to be ‘coming around’ with regard to your comment, Dennis, about wealth redistribution, suggests that we may eventually be in agreement for most part on this issue. You seem to have a ways to go, however, in leaving the lingering or vestigial effects of your blue pill where ‘government’ is concerned. But that’s ok, seeing as you and I were born into these prisons, these sociopolitical constructs we call ‘countries’. It’s ‘what we know’, as it is said. It’s perhaps like becoming codependent in an abusive relationship (and it is abusive) and finding it difficult to leave it and/or to talk about it clearly, if at all. Too much in the way.

    “Codependent relationships are a type of dysfunctional helping relationship where one person supports or enables another person’s addiction, poor mental health, immaturity, irresponsibility, or under-achievement.” ~ Wikipedia

    This is perhaps in part or related to why Chomsky (et al.) calls ‘it’ the ‘Nanny State’.

    Time to lose the diapers, kids, Dennis.

    (Now, I realize you may want to leave them on as an act of defiance, given that I ‘put it that way’, and that’s ok, I understand. But you’ll have to change them yourself and keep doing so until you do come around. Hopefully others’ shit doesn’t hit the fan too hard before you do.)

    “Traditional communities do not often voluntarily give up or sell the resources on which their communities are based until their communities have been destroyed. They also do not willingly allow their landbases to be damaged so that other resources—gold, oil, and so on—can be extracted. It follows that those who want the resources will do what they can to destroy traditional communities.” ~ Derrick Jensen, ‘End Game’

    1. Can you say “Deep Green?”

      A bit chewy for this blog.

      Just saying!

      1. It’s not (just) an oil blog; it’s a peak oil blog. What does that mean? And to you, personally?

        We’re a ‘deep green’ species. We can get by without oil fine, but not without ‘deep green’.

        Peak oil blogs can be somewhat dichotomous affairs perhaps, due to their attractions of people from the oil industry as well as people against the oil industry, if with some crossover, faceting, and periodic, elliptical and rogue elements. ‘u’

          1. No ‘Trump x.x’ nickname this time?

            Your ears are against the business end of a gun (a voice inside your head).

            The one behind the gun (another voice inside your head) is saying,

            “Do as I say and you won’t get shot: Keep reading Caelan’s comments. Including this one.”

            And so you comply. Right?

            Be honest.

            (I’ll expect you to read but not to respond to this comment.)

            (This features immigration/refugees and includes Trump by the way. Peak oil relevant. Enjoy.)

        1. Well it’s Ron’s blog and if memory serves me correct he once referred to it as “a collapse blog”. Perhaps in a comment under one of his less oily articles. I hope I’m not remembering incorrectly. If I did I apologize.

          It seems to me that a collapse blog with a peak oil cornerstone can attract all sorts of different folks with a lot of interesting things to say.

          1. Hey, if you read my pages “Energy and Human Evolution”, “Of Fossil Fuels and Human Destiny” and “The Competitive Exclusion Principle”, then you will know it’s a collapse blog.

    2. Hi Caelan,

      I have always thought wealth redistribution through a progressive tax code is a good idea. So there has been no change in my thinking.

      When human population falls to under 500,000. Then there might be enough space for the kind of society you consider ideal. Your belief that coercion will be eliminated in this idyllic society is utopian at best. Maybe in 500 years we might be at a population level where anarchy would work, but coercion will still be with us.

        1. Hi Caelan,

          It is you who often brings up coercive taxation. You are certainly correct that how we see the world is in large part determined by the society we live in.

          Does the society you envision seem practical in a World with 7 to 8 billion people?

          On your Nanny State comments, we could certainly go back to the good old days when the state did very little to help those in need, you might consider that an improvement.

          We can wish for the World to be different, but the complex vertical hierarchical social structure has both costs and benefits. Many people think the benefits of the kind of social structure found in places such as Canada outweigh the costs.

          The Nanny State is not really necessary, until you get sick or injured and require the care of others.

          1. Dennis, I am simply making the arguments– and with substantial references to boot, (quite unlike you)– that our current setup does not work, and why, and what may be required to make it work. This is a collapse/peak oil blog.

            You appear to be appealing to consensus when you write that ‘Many people think the benefits of the kind of social structure found in places such as Canada outweigh the costs’.

            Check out the link for some problems with this statement.

            For another problem, these kinds of statements– logical fallacies– such that you appear to make on occasion, throw what you may arrive at in other contexts into question, such as in terms of your suggestions, recommendations and/or predictions/forecasts for oil/FF’s, EV’s, so-called renewables, prices and so forth.
            It is one thing to take published information, such as in the form of charts, graphs, newsbites and tables, and yet another to synthesize them in meaningful, undeceptive, undistorted ways.

            In any case, we both should know that it is important to recognize problems ASAP and determine and treat their true causes, rather than their symptoms, in the interests of helping to avoid perpetuating the diseases and wasting valuable time, effort and resources in the process. (BTW, anything you are aware of that does that? The so-called economy perhaps?)

            1. “On your Nanny State comments, we could certainly go back to the good old days when the state did very little to help those in need, you might consider that an improvement.” ~ Dennis Coyne

              In your ‘good old days’, if it was not old enough not to have the State, the State was busy gutting real communities that otherwise helped those in need.

            2. Hi Caelan,

              The State has been with human civilization for a long time.

              I noticed that you did not answer the question,

              Do you think a Stateless society is practical in a World with 8 billion individuals?

              I do not.

    1. The dead cat hath bounced, now the investors are wanting their cut? Ok, let’s raise the cat back up from the dead? Get yer bids in!?

  32. https://www.rt.com/business/332159-us-shale-oil/

    posted this in the wrong thread originally. nothing new.

    The price of shale oil on the US market has fallen by two-thirds while production by 15 percent, according to the head of Russia’s Rosneft Igor Sechin. “Shale oil production in the United States will decline in the long-term and reach bottom by 2020,” Sechin said .

  33. AlexS and likbez.

    Reading with interest your debate about US crude oil commercial crude oil stocks.

    It is interesting to me that those inventories shot up very quickly between 1/1/15 and 5/15 and then have bounced around for the most part since, although somewhat higher now than last spring.

    Going back an looking at EIA historical data, I don’t see a very strong correlation between crude prices and US commercial inventories.

    Further, shouldn’t world inventories be much more important than US commercial? What countries have SPR’s? Couldn’t a country or group of them strategically empty some from a large SPR and store it in this US?

    I think traders make too big of a deal about US commercial inventories. I have never heard of any US oil producer being unable to sell crude oil from a lease because commercial crude inventories were too high.

    Our crude purchaser is not happy we have shut in some wells. They want all they can buy. Further, in our little corner of the world, two more crude buyers have entered drumming up business, which is somewhat helping our basis. This is after several years of the same purchasers, no entrants or exits from 2003-2014, suddenly there are two more chomping at the bit.

    Anecdotal I know, but I still question why have been so volatile. I understand clueless’s musical chair example. But come on, there isn’t hardly anything that works at $10-25 oil. Do the traders have info we don’t re worldwide production and inventories?

    US inventories 2011-2014 were generally higher than 1998-1999 I believe. When it comes to the huge importance of US commercial crude inventory on the worldwide crude price, I am more clueless than Clueless.

    1. Shallow,

      I still question why [oil price] have been so volatile.

      So am I. And I also do not have an answer. But what I suspect is that “glut/deficit” model of oil price volatility based on balance of supply and demand as reported by agencies like EIA is not valid anymore.

      “Casino capitalism” model looks to me more and more plausible: price of oil in short and medium term now is detached from the volume of production and inventories and is determined purely via “paper oil” bought and sold in financial casino. The “glut/deficit” model is still valid in a long run, but “in a long run we are all dead” and there can be multi-year discrepancies between behavior of prices and behavior of supply and demand.

      In other words a sharp drop of oil prices now in possible with zero or minimal glut, or glut in a different category of petroleum products — for example condensate (as “Great Condensate Con” hypothesis suggests).

      That’s what I tried to demonstrate in my discussion with Alex — the dynamics of cruse inventories in the USA from April 2015 to Jan 2016 does not support hypothesis of correlation of oil prices with supply/demand dynamics. We saw a huge price drop with rather stagnant commercial crude oil inventories in the USA.

      Since late 1990th the volume of “paper oil” contracts far (by orders of magnitude) exceeds volume of physical oil and tail is wagging the dog. Oil producers are now hostages of financial casino, pawns, not an independent players like they were in “good old days” before deregulation of financial industry (https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000 )

      See http://peakoilbarrel.com/the-ieas-oil-production-predictions-for-2016/#comment-558670

    2. As I have occasionally opined, you are talking about Crude + Condensate (C+C) inventories.

      As US C+C inventories increased by 100 million barrels from late 2014 to late 2015, US net crude oil imports increased from 6.9 million bpd to 7.3 million bpd (four week running average data for last four weeks of 2014 & 2015). Most people by now know what my explanation is, but here is a link to a post on condensate versus crude that the folks at Oilpro.com asked me to put together:

      http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua

      1. Jeffrey. I read your Oilpro article. I like that website. Has some good content.

        I read a report from the American Oil Pipeline Association that crude oil pipeline mileage in the US increased from 49K miles in 2004 to 61K miles in 2013. I haven’t been able to find 2014 and 2015 mileage statistics.

        I believe EIA includes crude in pipelines as storage.

        Does anyone have information as to how much “crude oil storage” has been added by crude oil pipelines since 2004?

          1. Misha, nice to see you back and thanks for reminding me how rusty my Russian has become. And note that while not universally standardized, 120-140 bbl means what exactly? ?

            1. Sorry for my English
              120-140 million barrels of reserves in oil pipelines.

  34. Clueless. I really wish we could get a handle on the Permian and EFS. I have been studying some Permian based companies. Seems to me maybe the decline is not as steep as in the Bakken? The IP don’t seem to be superior, and gas is a much higher percentage of BOE.

    As I have noted, there have been and are some horizontal Permian packages for sale that make non-core Bakken look strong. I’m talking wells producing under 30 bopd after maybe one year. Wells that were not completed, some plugged. I have also seen weak wells on the same pad as strong ones, at times even in the same zone. Maybe completed differently.

    They plan on cramming over 50 wells in some sections. They aren’t each going to produce 1 million cumulative BOPD IMO. They are not quite on par with KSA or Kuwait.

    I think Enno is trying to crack the code on TX LTO wells. I look forward to when he does.

    1. If this is being a slave…..Let’s get more of it!!! I am currently having a GREAT TIME!.

      We are living like Kings compared to past humans.

      Unfortunately, I have been convinced by Ron P, that we are in deep overshoot, so I fear for my kids future (not that my genes would bias me towards them ;).

      Caelan, your anarchy bullshit is ridiculous.

      Honestly, it is an insult to real slaves of the past/present.

      1. “It is just as difficult and dangerous to try to free a people that wants to remain servile as it is to enslave a people that wants to remain free.” ~ Niccolò Macchiavelli

        “The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.” ~ Albert Einstein

        “NASA-funded study says ‘irreversible collapse’ of industrial civilization likely in coming decades” ~ Nafeez Ahmed, The Guardian, (via DGR)

        I guess if I’m going to insult any way-of-life, it might as well be this one that has the entire planet by the ball.
        Of course some of us are living like kings. It is neofeudalism writ large. But it won’t last, in large part, precisely because of that.

        …But you served your king up on a silver platter for me, so perhaps you did it on purpose (I certainly hope so, for you.), and so here we are– and thank you– and complete with a nice apoco-pic…

        The kings (and queens) are of course on the top floors and the elevators are not working. Other royalty are in their McMansions on the beach and each high-tide is rising ever higher… and there are angry former slaves and former peasants; angry mobs below the highrises and near the beaches…

        In times like these, anarchy, too, would seem to work for– to save– those who would have otherwise wanted to be royalty…

          1. Hi Dennis,

            You MIGHT be right, and FF use might peak and start to decline within the easily foreseeable future.

            I am personally a big believer in renewables myself, and pray that the renewables industries continue to grow at a fast pace. I also believe that barring bad luck, the world population will peak a little sooner than even the commonly accepted “low” projections.

            All the pessimistic opinions published by people in the old TOD lead me to believe oil would peak years ago, but it’s still on a plateau. Oil production WILL start to fall off noticeably imo within a very few years, due to the decline of the legacy giant fields, and paltry new field discoveries.

            The big question in my mind is whether renewables come on fast enough to prevent the world from going back to coal in a big way.

            I believe the coal is THERE, and that it will be burnt in increasing quantities for quite some time yet so as to sustain those two young women’s privileged lifestyle, as well as enabling all the people in the world who do not yet have reliable electricity, or ANY electricity, to get hooked up to the grid.

            The “girls ” will always be girls to me, because I knew them as toddlers. They will support renewable electricity, because another twenty or thirty bucks for their utility bill is a TRIVIAL expense for them.

            But if the economy ever stalls, and the problem can be traced directly to an energy shortage that can be solved by burning coal………………

            This anecdote about these two young women is intended to indicate what all the people in the world living soft lives are apt to do when tehy have to make a choice between short term comfort and their long term welfare.

            Most people are appalling in their ignorance of scientific matters, and incapable of understanding where their own best interests lie, except by taking the word of other people on faith.

            And most people are short of money.

            Electricity in my neighborhood is mostly coal fired, and we are far enough from the mines and the power plants that we do not SEE the damages from mining etc, unless we go out of our way to LOOK.

            My neighbors look around and just don’t believe burning coal causes problems, and they sure as hell ARE ALREADY inconvenienced by their electricity bill.

            Hopefully you are right, and I am wrong.

            1. and pray that the renewables industries continue to grow at a fast pace.

              It is not growing at a fast pace. Transitions take many decades, and we probably don’t have them.

            2. I don’t think you understand exponential growth, which is what’s happening with solar power. Deployment is doubling every two or three years on average (three is the ultra-conservative estimate, two corresponds to the last decade of growth). This brings us from 5% to 100% in 9 to 13 years.

              Obviously the exponential growth has to slow down as the market gets saturated, but the market won’t get saturated until every third-world village currently without power has solar panels, so the exponential growth will last long enough to replace oil and coal and gas.

              I’m very conservative with my estimates so I figure the world won’t be 100% renewables until 2030 due to unanticipated delays.

              The big difference between fossil fuels and solar panels is that fossil fuels are a non-renewable resource. Solar power is renewable; you put up solar panels, they just keep operating (they generally outlive their warranties by a decade or more).

            3. Hi Old Farmer Mac,

              The decline in oil output may not be as steep as many believe.

              The US oil industry was very mature in 1980 (about 121 years old) and infill drilling in the large oil fields had been going on for many decades by 1980, but reserve growth (reserves added from old discoveries) added 63% to proved plus probable reserves from 1980 to 2005. There are a lot of possible reserves and contingent resources that will move to the proved plus probable category as oil becomes scarce and oil prices increase.

              I have asked Fernando Leanme, if my medium estimate C+C less extra heavy oil (which is 2800 Gb) seems reasonable, he has said yes it is a reasonable estimate. Scenarios using that estimate for C+C less extra heavy plus 600 Gb for oil sands (350 Gb from Canada and 250 Gb from Venezuala) or a total of 3400 Gb of C+C do not lead to rapid decline in oil output. See chart below.

              On coal, it will peak and the price of coal will rise while the cost of wind and solar continue to fall, eventually electricity from coal fired power plants will be more expensive and coal fired electricity will become obsolete (just like oil fired electricity today in most places).

              Wind is already competitive with natural gas and coal at today’s prices for coal and natural gas in many places in the US (Texas and Great Plains especially), this will be the case in more places as coal and natural gas prices rise in the future.

          2. Agreed…

            “Tall buildings generate urban pathologies.

            In a paper entitled ‘Theory of the Urban Web’ published in the Journal of Urban Design, Volume 3 (1998), pages 53-71 Salingaros outlined structural principles for urban form. The processes that generate the urban web involve nodes, connections, and the principles of hierarchy. Among the theoretical results derived were multiple connectivity — in which a city needs to have alternative connections in order to stay healthy — and the avoidance of over concentration of nodes. When the second pathology occurs, such as in segregated use zoning, and in monofunctional megatowers, it kills the city by creating a mathematical singularity (where one or more quantities become extremely large or infinite). Many pathologies of contemporary cities are traced to ideas of early modernist planning that appeared in a totally unrealistic context in the 1920s.” ~ James Howard Kunstler and Nikos A. Salingaros, ‘The End of Tall Buildings’

            We live in pathological societies of course.

  35. OFM. It is interesting to me how you reference the two daughters of your good friend.

    It is an generalization, but my view is that women consume much more than men. I have first hand experience with the financials of many, many married and divorcing couples.

    Most guys would live in an empty house, just the necessary stuff. Women fill them up.

    Women don’t think much about whether they really need something or not. The only limit is the credit card limit.

    Men save way more for retirement. Rarely do I see a woman with more retirement savings than a man, even if she has a high paying job with good benefits.

    There are few women that even give oil supply a second thought.

    There are spendthrift men, I agree. But how many women talk about the stock market, oil prices, retirement plans, etc? I sure don’t see it.

    DISCLOSURE. The above are GENERALIZATIONS. Before any women who might come across this get out their pitchforks.

    Since at least one half of the population is female, I don’t see conservation getting traction, at least in the US.

    1. Hi SS,

      I am not sure women are either more or less given to excess consumption than men, but I am damned sure men are given to ENABLING women to consume to the limits of MEN’s ability to pay for that consumption, in exchange for the ULTIMATE prize, getting laid, and having kids.

      ( So far as I can see, the only incontestable “reason ” or “purpose ” of life is to reproduce itself. )

      Most of the younger guys I know personally are pretty much spendthrifts, but a sizable minority dances to the tune of a different drummer, and seek status not by driving a flashy car, but by accumulating money and power. That sort of man ( and woman) generally rises toward the top of the economic heap.

      I know “mill hands” aka factory workers who have made habits of spending it as fast as they get it, and therefore still pay rent in middle age, but they BRAG about all the new cars they have owned. I know others who have bought maybe two new cars and driven them for fifteen or twenty years, or who never bought a new car, making the same money, who now own nice homes and even farms free and clear.

      I chose the example of these two women specifically for two reasons, one they are real rather than imaginary, my attorney their Dad is real, and we fish and drink together. TWO , women in general tend in my opinion to be more idealistic, and more attuned to environmentally sound values, which I find admirable.

      If these two liberal, well educated, prosperous young women are not willing to sacrifice part of their living standards to preserve the environment………….. WHO will be willing?

    2. Sorry Shallow, totally disagree. My experience is the opposite: women scrimping and saving while husbands piss away cash on boy toys. Cars with 600 HP engines, quads, boats, etc. How about we compromise here and say men and women tend to waste money equally? ?

  36. The Road to Hell?

    http://www.houstonpress.com/news/the-big-oil-problem-its-going-to-get-worse-before-it-gets-better-8146857

    “Investors are moving away from putting money into the companies who take risks and explore and find new reserves and will reward companies who play it safe and go with the sure things in the industry. “This is a time of transformation in the industry,” Byers says. “The skill set that allowed the risk-takers, the innovative, go-find-it, lease-it-up, put-the-package-together mind-set to be successful is not the skill-set that will allow them to thrive the same way today.” “

    1. Yetanother Mike,

      The Road to Hell?

      Not yet. Or only in a sense “The road to hell is paved with good intentions”.

      The article is just fear mongering. But the problem is real and quite different: the US elite is afraid to go full force into oil conservation mode and preferred to drop oil price instead, adopting Madame de Pompadour “Après nous le deluge” (“after us deluge”) mentality…

      As Steve from Virginia aptly noted
      http://peakoilbarrel.com/opec-january-production/#comment-559218

      What Jeffrey Brown points out over and over is the so-called ‘glut’ is simply another finance industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply is declining, that purchasing power is declining along with it and that no easy solutions to these declines exist. The only solution is stringent conservation…

      Repeating after Steve: “so-called ‘glut’ is simply another finance industry/media narrative”.

      Another noble lie in best Leo Strauss style, so to speak. See http://peakoilbarrel.com/collapse-of-shale-gas-production-has-begun/#comment-558479

  37. Grim WSJ article on conditions in Venezuela (do a Google Search for access):

    Venezuela’s Collapse Brings ‘Savage Suffering’
    Dying infants, chronic power outages and empty shelves mark the world’s worst-performing economy, turning ordinary life into an ordeal for nearly everyone

    1. “The problem with socialism is that sooner or later you run out of other people’s money. ”

      If the Chavista and Maduro regimes had invested even half of the countries nationalized oil revenues productively, instead of just either stealing that revenue, or giving it away to supporters, thereby buying votes, Venezuela would be a VERY prosperous country today, oil price crash or no.

      It is insane that a country with the agricultural potential of Venezuela should be dependent on imported food, or that the country should be exporting crude, rather than finished petroleum products. It is insane that the government continues to give away gasoline for pennies on the dollar of what it costs to produce it, when most of the people can’t afford a car ANYWAY.

      Of course right winger types might have made just as big a mess out of the country, had they managed to stay in power. But if they had, the farms at least would probably still be producing.

  38. So Saudi, UAE, Iran, and Iraq are the only remotely plausible candidates for increased oil production in the near future. (Or possibly Indonesia.)

    Fascinating. This makes the oil supply highly dependent on a small number of extremely opaque countries who hide their data.

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