OPEC Update

All charts are updated through March 2016

The latest OPEC Monthly Oil Market Report is out out. The charts are “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. OPEC is now 13 nations with the the addition of Indonesia.

All Data is in thousand barrels per day.

OPEC 13

OPEC production was up 15,000 barrels per day in March. But there has really been very little change since June of 2015.

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. The big gainer in March was Iran while the biggest loser was the UAE. Notice that the UAE says their production recovered in March, from their big drop in February. But OPEC’s “Secondary Sources” says they did not, they fell another 100,000 barrels per day.

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.

Indonesia

Indonesia has shown an increase in recent months but their oil rig count has dropped from 35 in December f 2014 to 10 today. That does not bode well for their future oil production.

Iran

Sanctions were just lifted, in the middle of January, on Iran. Their production was up 208,000 barrels per day in February and another 139,000 bpd in March. I expect their production to be up by from 500 to 600 thousand 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, after first going over 4 million barrels per day in June 2015, has struggled to hole that level. I think it is very likely that Iraq has peaked, or at least peaked for several years. Iraq still depends on foreign investment to increase production and that seems to be drying up.

Kuwait

Kuwait has increased production slightly in the last three months but I don’t expect that trend to continue. Kuwait will take a huge hit in April due to the strike.

Libya

Libya is struggling. Their political problems are getting worse, not better. 

Nigeria

Nigeria’s problems continue to increase. Their production dropped to 1,722,000 in March, their lowest level since August 2009.

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. Their production was unchanged in March.

UAE

I have no idea what is going on in the UAE. After peaking in January they have since dropped 227,000 barrels per day.

Venezuela

Not much can be said about Venezuela. Their conventional oil is in decline but their bitumen production is keeping production relatively flat. But their political and economic problems are getting worse. I look for them to suffer serious declines in the next year or so.

OPEC World Oil Supply

According to OPEC, World oil production peaked, so far, in November of 2015. I look for this downward trend to continue for at least the next two years.

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256 Responses to OPEC Update

  1. clueless says:

    Carryover from previous discussion.

    From RW – Once upon a time, $2 oil was a good price.

    When in hell was that??

    http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp

    • shallow sand says:

      Clueless. It would have to be prior to WW2 that $2 was a good price. I have read some publications from the 1930s which indicate prices under $1 (I think during the East Texas field discovery in 1930-1931 prices got as low as 10 cents). In fact, I have a publication from the mid 1930s which indicates average prices in the particular field (ours) were 83 cents, and that producers were just able to cover expenses, possibly an early reference to dreaded BREAKEVEN!! Note in the mid 1930s our field was already what would be considered a “stripper” field. In fact, I would say that was pretty much the case by 1915.

      • Oldfarmermac says:

        In Yergin’s book THE PRIZE, there is an account of oil in the early days in the Texas oil fields being cheaper than water.

        This was because oil had to be HAULED OUT, and there was more oil handy than there was a sale for it, and transportation for it, but water had to be HAULED IN.

        I might be wrong about the highest price of petroleum oil ever, but I have read that the all time peak price, adjusted for inflation, occurred during the American Civil War years, when the usual way of getting some petroleum oil was to skim it off the top of water emerging from springs in areas with lots of oil near the surface.

        That extremely limited supply was apparently in extraordinary demand as a lubricant. Trains were just getting to be common at that time.

        I believe this to be true, but I am not sure.

    • Reno Hightower says:

      Looks from your chat that nominal price in 40’s and 50’s was 2-4 dollars

      • clueless says:

        You guys all miss the point. Nominal prices mean nothing. OFM says it used to be cheaper than water. Okay, 2 months ago at $27 bbl, it was equal to 16 cents a quart. I know you cannot buy a quart of water for 16 cents. So, it was cheaper than water in 2016.

        • Oldfarmermac says:

          ONLY at well sites before roads and pipelines were built, lol.

        • Nick G says:

          Water, in large volume, goes for less than a tenth of a penny per gallon.

          Quoting the price of “spring” water in a plastic liter container isn’t really realistic.

    • R Walter says:

      In 1942, circa, oil was at about $1.60 per barrel.

      Gold had a fire sale price at $35.07, when you divide 35 by 1.60 you have a quotient of 21.875.

      An ounce of gold bought 22 barrels of oil.

      Today gold is priced at 1267 USD. Oil is just over 44 USD.

      1267/44=28.7 barrels of oil gold can buy at today’s prices.

      Oil at $1.60 in 1942 was is worth about 60 USD in 2016 dollars.

      1267/60=21.116 barrels of oil

      When oil was bought at $1.60 in 1942 it is about the same as oil selling for 60 USD today.

      The US dollar is worth about 0.04 USD today.

      2 dollar oil way back when is equivalent to 75 dollar today.

      22 dollar oil a few weeks ago is 80 cent per barrel oil in 1942 dollars.

      Just the way it is in the real world.

  2. shallow sand says:

    Ron. Thank you very much for this OPEC post. I hope you are able to keep doing them each month!

  3. Brad B says:

    Thanks Ron, I’ve been wondering how anyone is disaggregating Iranian “Exports” (of stored crude) vs “Production”? Thanks, bb

  4. Looks like an ongoing OPEC shortage …

    (Glut? What glut?)

  5. Rune Likvern says:

    Ron, thanks for your update.

    Since Libya is mentioned, below and FWIIW a link to an analysis from GEFIRA (Global Analysis from the European Perspective.)

    ”Europe is planning on recolonizing Libya, and so it will send in armed forces in the coming months to restore order and stem the flow of migrants coming from Africa. If this expedition army succeeds in securing parts of the country and restoring law and order, Italian and German engineers from ENI and Wintershall will follow suit to help resume the country’s oil production, which will add 1.3 million barrels per day (Libya produced 1.7 million barrels per day before Muammar Gaddafi was toppled in 2011) to the world oil glut 1).2
    http://gefira.org/en/2016/04/18/europe-inevitable-intervention-in-libya-will-add-1-3-million-barrels-to-the-world-oil-glut/

  6. Oldfarmermac says:

    Any discussion of this link should probably be taken over to the last open thread non petroleum as far as the POLITICS of Venezuela are concerned.

    I think anybody who reads it will agree that Venezuelan oil production is apt to fall rather than rise, at least for the next year or two.

    Warning, it is pretty long, but length is necessary for detail and nuance. You can’t learn much from sound bites. Depending on sound bites means you are letting other people do your thinking for you.

    http://www.businessinsider.com.au/venezuela-implosion-2016-4

  7. Watcher says:

    Clueless, previous thread, re KSA threats to liquidate US paper.

    Liquidate means sell. It doesn’t happen without a buyer.

    Analagous to cart before the horse stuff with increased storage meaning the price fall is due to “over supply”. Storage was bought. A purchase is demand. That looks like demand above consumption. blah blah That looks like justification for price increase, not decrease, and you gotta find someone who, over a 2 yr period, decided to keep buying on the way down without having a customer waiting. Don’t look credible.

    • Dennis Coyne says:

      Hi Watcher,

      Only someone who has never sold anything would thing that too much supply has no effect on the price of the good.

      I have asked you this question before. If you had a truck full of apples and no money and you could not find a buyer at a price of $15/bushel, what do you think you might do about your selling price?

  8. Oldfarmermac says:

    Pemex seems to have a chronic fire safety problem.

    http://www.bbc.com/news/world-latin-america-36098260

  9. Greenbub says:

    Hi Ron, I posted this about Saudi Arabia (from Bloomberg) in the last thread:

    “world’s largest oil exporter could increase output to 11.5 million barrels a day immediately and go to 12.5 million in six to nine months “if we wanted to,”

    What is your disagreement with it?

    • The Deputy Crown Prince says this. Saudi also says they have 266 billion barrels of proven reserves, almost as much as all non-OPEC nations combined.

      Many of them also say they will receive 72 virgins in paradise if they die a martyr while killing a lot of infidels with a suicide bombing .

      Why do you think I should express an opinion on the very stupid things they say?

      • Greenbub says:

        So, has it been proven that they cannot physically produce the extra oil and me being the big dummy that I am, missed it?

        P.S.- 72 would represent a huge reduction in the amount of virgins available to the Saudi royals compared to what they have now in their harems.

        • Survivalist says:

          I don’t believe it’s been proven, physical or otherwise, that they can. I tend to think that if they could do it then they would have by now. If KSA says they can do it I don’t believe it’s up to their critics to prove that they can’t. How would you recommend that be achieved anyway, ask for a look at the geological and engineering data sets? It’s up to KSA to prove that they can. I suppose we could take the Deputy Crown Prince at his word but I don’t see any good reasons to take that approach either.

          PS- that’s probably why a Saudi royal has never died a martyr.

          • Oldfarmermac says:

            If somebody, anybody at all, were to bring another two or three million barrels of oil to market right now on a daily basis, without other producers reducing their own production to compensate, the price of oil WOULD go to zero for some producers.

            It seems reasonable to me to assume that the Saudis are willing to tolerate the current low price in order to put a hurting on their enemies, and maybe to also make DAMNED SURE that if and when they do cut, the rest of their OPEC buddies play fair and share in the cutting, not just in the increased revenue.

            Maybe the Saudis could stand a near zero price longer than Russia and Iran, but something tells me the Russians and the Iranians would still be around long after the Saudi royal family found it highly desirable to move en mass to their second homes in western countries.

            I understand that the yankee tight oil industry is in intensive care, and will remain there, so long as the price of oil stays in the pits, but the tight oil industry IS NOT DEAD, and it will make a remarkable recovery, once prices go up again.

            Sure it will take a while for burnt lenders to lend on tight oil again, but the BIG big boys will be able to get financing, or pay as they go, and buy up the tight oil fields from the busted little guys.

            There are plenty of big sharks out there in the investment world, with big teeth, and big appetites, and with the land already surveyed, the exploration already done, the roads and pipelines mostly already in place, etc, and the cost of drilling a dozen or so wells being a piddly hundred million or so…………. a hundred million is hardly any more than pocket change to people with access to ” sure thing” investment money.

            Tight oil will be back within a year or two of the time the price of oil goes up again,

            Tight oil is a pig in a lot of ways, but it’s not a pig in a poke, the oil is KNOWN to be there, and the costs of extracting it are known, the decline rates are known, etc.

            There won’t be many surprises from here on out in the tight oil industry from the “production in the field” point of view.

            • Dennis Coyne says:

              Hi Old Farmer Mac,

              I agree that if the oil supply increased by 2 Mb/d in a few months time, that the oil price would decrease, but to zero, I don’t agree with that estimate. The oil price might decrease to $15/b and the higher cost producers would shut in their wells because the price for some producers would fall below operating costs.

              Remember that the “market price” is at the refinery gate.

              For some producers, transport and operating costs are about $19/b. So those producers are out of the game at any price below $19/b (that is for Bakken /Three Forks output shipped by rail, and I haven’t included royalties and taxes of about 30% of the wellhead price, or capital costs, G+A, land and development costs). In reality $25/b or lower would probably shut down a lot of US output, but shallow sand or Mike can correct me, the price might be higher than $25/b.

              • Dennis Coyne says:

                Hi OFM,

                On rereading your comment, you said,

                “..for some producers…”

                So wellhead price minus cost would go to zero, but the price is likely to remain above zero. When wellhead price reaches the level of lease operating expense plus royalty and tax payments then production may be shut in.

                • Oldfarmermac says:

                  Hi Dennis,

                  Yes, thanks for clarifying my comment, I should have composed it more carefully.

                  Being a hands on guy in ANOTHER industry, I tend to think of the ” out the gate” price producers get, rather than quoted commodity prices from some market hub or another.

                  Every body parks his machine when the costs of running it for a day exceeds the cost of parking it, ALL things considered.

                  For now, the Saudis and Russians and Iranians and lots more folks can still afford to consider MORE things than just their bottom line when making production decisions. But if prices stay low long enough, fewer and fewer things will matter more than the bottom line.

                  Personally I believe the large majority of the people who REALLY run the automobile industry, the ones who set corporate policy, believe in peak oil, and peak oil having a huge influence on the auto industry within the next decade or two. If they didn’t , they would put up a far bigger fight about fuel economy mandates, etc.

                  Anybody interested can read this for insight.

                  http://www.motortrend.com/news/2017-honda-accord-hybrid-clarity-series-show-ev-commitment/

                  • Longtimber says:

                    “Personally I believe the large majority of the people who REALLY run the automobile industry, the ones who set corporate policy, believe in peak oil”
                    99+% are Clueless. Clueless to ELM’s future hammer impact on the North American Auto Industry. Elon’s going to be even a bigger Rock Star.

            • GoneFishing says:

              “Tight oil is a pig in a lot of ways, but it’s not a pig in a poke, the oil is KNOWN to be there, and the costs of extracting it are known, the decline rates are known, etc. ”

              If it was generally a money loser in the first go round, why would it be a winner in the second? Especially, since they have the knowledge now.
              It’s either a con game or someone has to figure out how to reduce the costs.

        • Ves says:

          Greenbub,
          The most interesting part of that paragraph from Bloomberg is not the actual content – if SA can or cannot produce 12.5 mil within 6-9 months. The ability to produce 12.5 in 6 months is irrelevant because it is self defeating measure for Saudis as well. What is relevant to me is that kind of statement is actually allowed to be published in high profile US business paper. Because that is not a simple statement but a threat. That shows you that there is some deep split how this petrodollar relationship should continue within US itself.

      • Mike says:

        You get to paradise, and then the 72 virgins would last for about three months. Then you have all eternity to live. What do you do for the rest of the trillions of years? Sort of Peak Virgin situation, really.

        • 70%H2O says:

          They remain virgins. Like Promoteus liver regrows every day after the eagle picked it out.

          Also, they get 5000 widows, which is far less known. We in the west only know about the virgins.

          • GoneFishing says:

            Do people actually believe they have bodies after they die? Do they really believe they have sex organs, glands and urges to procreate among the dead?

            • Caelan MacIntyre says:

              I just saw the movie, ‘Spring’; a love story, maybe even chick-flick (for those chicks that like this kind of genre) with a light horror twist.

              “Louise reveals to Evan that she’s 2,000 years old… Every 20 years she gets herself pregnant, and then her body uses cells in her embryo to recreate her.” ~ Wikipedia

              Spoiler alert: True love can change her hormonal structure or something like that at her ‘end’ (‘in theory’ for suspense!), so that she can finally become mortal at the last minute and, indeed, that’s what happens at the end as she falls in love with Evan.

              We live on through our children.

  10. Survivalist says:

    An almost 1/4 million barrels per day difference between UAE secondary sources and UAE direct communication. That’s gotta be some kind of record. If secondary is correct UAE is dropping like a stone. Does anybody have any insight? I understand UAE had a lot of drilling rigs on the go for the last little while. I believe BH states up from 30 to 50 or so in the last two years. Are those 50 rigs discernible between oil or gas?

    • George Kaplan says:

      UAE rigs are 40 oil, 8 gas. The production difference could still be a statistical blip, it only represents one large production or processing centre off-line, and we don’t know storage changes. They are upgrading Upper Zakum which will add 90 kbpd to give 750 kbpd by 2017 with 25 year plateau (one of ExxonMobil’s biggest project involvements at the moment), there may need to be some shutdowns for tie-ins for this or just general maintenance. Alternatively maybe they are getting early water breakthrough in Lower or Upper Zakum, each has been on operating for over 35 years and should be about half way through reserves (depending on what numbers you believe).

  11. Sydney Mike says:

    Purely as a thought experiment If we take the current world production of 95.68 Mbd and grow this by 3% per year we would churn through the next trillion barrels of oil in less than 20 years. Most on this site will understand that we will not have 3% growth because it is getting harder to recover the oil. But those who base their thinking purely on economics and not on the hard environmental facts, might argue that we still have half the recoverable oil left, or even more.

    If one assumes that there are 2 trillion barrels left to recover, then at 3% annual growth we would only make it to just over 30 years. Our daily production would have to be 232 Mbd in 30 years if we assume 3% growth.

    It seems our politicians are powering the Titanic at full steam towards the bergs.

    • PonziWorld says:

      Nothing Matters Until It Collapses Completely
      Partial collapse is for those who lack conviction in the impossible…

      Stavros says we have an expanding Empire going here…surely it can’t be based on oil any longer.

      Ponzi Borrowing–>Mass Outsourcing–>Printing Money to Buy Stocks (we are here).

      Looks like a Madoff to me.

      It doesn’t take much fossil fuels to power the Algorithmic Fabrication of Value Empire.

      Just requires a lot of Idiots…hence the Idiocracy.

      Always suspected that Star Trek had it right about everything in the future…

      1. Juvenile Free Energy Hoaxes (Dilithium crystals or “Renewables” or Nuclear whatever)
      2. Computer wars replacing conventional warfare. (Fed Ponzi Computational Machine vs World)
      3. Building the Ultimate A.I. Computer being the desired economic goal. (Google and IBM)
      4. The social paradise of the United Federation of Something or Other (Collective aka The Borg)

    • George Kaplan says:

      Or at a steady 3% decline we’d produce another trillion barrels over a 100 years (most of what is left that isn’t in Canada and Venezuela), so at the moment adding any capacity while discoveries and reserve additions are declining fast will inevitably lead to a rapid collapse sometime later.

  12. Dark Fired Tobacco says:

    Ron, thanks so much for the update. As a retired transportation engineer I am trying to gain knowledge in the area of energy, in particular oil. Your website has been most helpful, especially with the loss of The Oil Drum.

  13. George Kaplan says:

    Ron – thanks for the update, I thought we might have lost it. One piece of pedantry from me – Venezuela don’t strictly produce bitumen, which is normally defined to have viscosity above 10000 cP, but rather extra heavy oil (API less than 10, but viscosity 1000 to 5000 cP).

  14. Silicon Valley Observer says:

    Is it not possible that U.A.E. is voluntarily reducing production rather than sell oil at currently low prices? They don’t have the budget deficit issues or social unrest issues that keep KSA pumping for every last barrel they can produce.

    Also, I believe KSA could produce more than they currently are for a little while, but that doing so would create long term harm and reduce ultimate recovery. So they say they can, and maybe they can, but I don’t think they will.

  15. US C+C production is likely to drop to about 8,200,000 to 8,300,000 bpd by the end of 2016 unless higher prices bring a lot of fracking crews back to work.

     photo Weekly CC.jpg_zpslmrwyulc.png

     photo Monthly CC_zpsaxll9vzn.jpg
    The top chart is from the Weekly Petroleum Status Report and the bottom chart is from the Petroleum Supply Monthly. The projection is mine based on the weekly data.

    The average decline, from the April peak, is just over 60,000 barrels per day per month.

    • Silicon Valley Observer says:

      Ron, thanks again for all you do. Do you have any explanation for the hiatus in the drop from Sept 15 to Feb 16? After the bottom fell out in the middle of last year things started to stabilize and move upwards before falling off a new cliff. I wonder if the “recovery” period was fueled by false hopes of a price rise.

      • It is mostly an anomaly of the weekly reporting data. They do not measure actual production but use an algorithm. They often get it wrong but they never revise their previous data.

        I have inserted monthly corrected data for the same time period. This production data is far more accurate than the weekly data. But now we have almost the same thing except two months earlier. But for this I have no explanation. Perhaps someone else does.

    • Dennis Coyne says:

      Hi Ron,

      I only see one chart not two. Do I need new glasses? 🙂

      • Dennis Coyne says:

        Hi Ron,

        Below is a chart for US C+C from Feb 2015 to Jan 2016 (12 months of monthly data from the EIA). Average output was 9146.5 kb/d, average decline rate was 4.2%. If that decline rate continues we would see 384 kb/d of decline in the next 12 months.

        The weekly chart is not very useful because the data is very bad and as you pointed out is never revised. Also the EIA may be underestimating US output based on Dean Fantazzini’s estimate for Texas output.

        • daniel says:

          Looks like a pretty linear and steeper decline since last september

        • Dennis, you are drawing your line in the wrong place, starting it at a point where US production was still on the upswing. If you would just start your line one year earlier and project it forward then you could predict that US production would increase this year.

          It matters where you start the decline. You cannot just pick any arbitrary point and start it there, which is what you did. Decline has to be measured from the peak.

           photo Monthly CC_zpsvthf9zk1.jpg

          • Doug Leighton says:

            Dennis drew a best fit line through your points which is what I would have done. I don’t think he can be faulted for this: tons of stuff but not this. Strictly (mathematically) speaking there should have been some qualifications attached but, given the context, I don’t fault him for this.

            • Dennis drew a best fit line through your points which is what I would have done.

              No he did not. My points started in December 2014, his “best fit” chart started in February 2015. If he had used all my points then the decline rate would have been much smaller.

              • Doug Leighton says:

                True Ron, that’s why I said there should properly have been some qualifications attached. But, the fact is, it’s hard to determine a trend in noisy time series data. I’d guess the trend line, in this case, should be determined from April 15 and should be a best fit line up to the most recent data point. Maybe not.

                • Dennis Coyne says:

                  Hi Doug,

                  Due to the noisy data it seems to me that picking the high point is similar to what some “skeptics” do with temperature data. I then accuse them of cherry picking. To avoid this, I think it is better to take a little wider data grab, I started with two months more, went to one month extra, going to the peak seems unsound from a statistics perspective.

                  I also prefer to use more data rather than less, as it tends to give a more robust estimate.

        • Dennis Coyne says:

          Hi Ron,

          One does not have to pick the peak point as that data point may have been an anomaly, I chose the previous 12 months, if we use 11 months instead and do a best fit through those 11 points we get a decrease of 490 kb/d over 12 months, the average output over those 11 months was 9413 kb/d so the average decline rate would be 490/9413=5.2%. If that rate of decline continues for the next 12 months, output would fall by 480 kb/d by Jan 2017 to 8700 kb/d.

          • daniel says:

            Hi denis. From a statistics point of view this might make sense, but when one considers that we have lost 300 kb/d in the last 5 months then it is hard to imagine how we should not have a bigger decline (unless oil prices recover significantly).

            • Dennis Coyne says:

              Hi Daniel,

              Rates can change, decline tends to be steep at first and then tends to moderate, it usually is not linear but tends to be hyperbolic in shape. I am using linear trendlines because people get all bent out of shape if I use a logarithm. Before the steep section the previous 4 months had very little decline. This is due to changes in offshore and Alaskan output.

              For US lower 48 onshore (L48OS) C+C and replacing the EIA Texas C+C estimate with that of Dean Fantazzini we get the following if we fit an exponential trend line to the March 2015 to Jan 2016 data, the decline rate is 7.6%, this will be offset to some degree from increased output from the Gulf of Mexico (about a 250 kb/d increase is expected).

          • Dennis, my point is simple. You just cannot pick a number of months to average the decline if some of those months are well before the decline even set in. The decline rate starts when the decline starts, not when production is still increasing.

            Production increased for several years until it peaked in April 2016. Before April 2016 US production was on the increase. If you pick your “Start Decline Rate Here” point, well before the decline actually started, while production is still surging upward, then your numbers will be worthless.

            That’s all I am saying. And I think that point should be quite obvious. It just seems so damn simple. I don’t understand what the problem is.

            • Dennis Coyne says:

              Hi Ron,

              And I don’t understand why someone who follows the data so closely does not recognize that the data can be noisy so picking a high point that could be anomalous can lead to suggestions of cherry picking, I chose a point two months before the peak, and one month before the peak. If I use the data from one month after the peak to Jan 2016, I also get a 5.2% decline rate. I don’t hang my hat on a single data point.

          • Dennis, the average decline for the last seven months has been just over 71,000 barrels per day per month. If that seven month trend continues we will reach your 8,700,000 bpd level by mid July. Seven months is definitely a trend and the decline is just as likely to be greater than that as less than that.

             photo Decline Rate Projected_zps7bcobfbg.jpg

            The last three months data in the chart above, Feb, March and April 2016, was taken from the EIA’s weekly data.

            • Dennis Coyne says:

              Hi Ron,

              I don’t trust the weekly data, it is often very far from the mark.
              April to Jan, the least squares fit indicates a decline rate of 5.2 % and based on Dean’s estimate, the EIA estimate may be too low, it might be as low as 3.1% for US C+C output from April 2015 to Dec 2015 (I throw out the Jan data point because Dean thought that point might be anomalous, the decline rate is 3% if January 2016 is included.)

            • Dennis Coyne says:

              Hi Ron,

              We don’t have data for all of April yet, so that should definitely be dropped. Feb and March are also suspect because weekly data is so bad.

      • Doug Leighton says:

        New glasses, no Dennis, stick with your rose-colored pair, we wouldn’t recognize you otherwise. 🙂

      • No, you should see two. Is anyone else only seeing one chart?

        • Enno Peters says:

          No Ron, I see two, thanks.

        • Dennis Coyne says:

          There are two now, I guess I just needed to refresh the page.

          I would ignore the weekly data, it is very bad, for example in Sept 2015 the monthly data was 9452 kb/d, the weekly average over that month was about 9126 kb/d, or 300 kb/d too low, in other cases such as June 2015 the monthly data was 9315 kb/d and the weekly data was 9600 kb/d for that month (average) so 300 kb/d too high in that case. So the error can be as much as 3% for the weekly data.

  16. Don Westlund says:

    Corelabs comments from earnings release…
    https://www.webcaster4.com/Webcast/ListenPage?companyId=1000&webcastId=14289

    The net decline curve has stepped up to 3.30%

    The Company continues to anticipate a “V-shaped” worldwide commodity recovery in 2016, with upticks expected to start in the third quarter. Global demand for hydrocarbon-based energy continues to improve, while worldwide crude oil supply peaked in the second half of 2015 beginning a decline that Core believes will continue through all of 2016 and 2017. The Company has observed that U.S. onshore oil production peaked in March 2015 and has fallen since then by over 600,000 barrels of oil per day (“BOPD”), some of which was offset by new additions to production in the Gulf of Mexico (“GOM”) as a result of eight deepwater legacy-field developments coming on-line in 2015. This new production, from deepwater fields that includes Anadarko’s Lucius and Heidelberg and Shell’s Stones, offset significant declines in existing GOM fields.

    At current U.S. activity levels, Core predicts 2016 U.S. onshore oil production will fall approximately 1,100,000 BOPD, somewhat offset by GOM gains of approximately 200,000 BOPD, yielding a U.S. net decline of 900,000 BOPD and net decline curve rate of 10.1%. Based on currently available worldwide crude oil production data, coupled with internal Core Lab data, Core has increased its estimate of the net worldwide annual crude oil production decline rate to 3.3%, as supported by recent International Energy Agency (“IEA”) reports that worldwide crude oil production fell 300,000 BOPD in March from February 2016 levels. March was the third consecutive month of global oil production decreases.

    The increase in the net worldwide decline rate is predicated on sharper decline curve rates for tight-oil reservoirs and the significant decline in maintenance capital expenditures for the existing crude oil production base. This, coupled with the continuing decline in global production and the continuing increase in global energy consumption, should create a tight crude oil supply market for the second half of 2016, and that should lead to increased crude prices and industry activity levels worldwide.

    • Enno Peters says:

      Interesting piece, thanks Don.

    • Dennis Coyne says:

      Hi Don,

      Perhaps decline has accelerated. Using Dean Fantazzini’s estimate for Texas C+C output rather than the EIA estimate, I get a decline rate for US lower 48 onshore output of 7.6% from March 2015 to Jan 2016, if that rate continues for the next 12 months L48 onshore C+C falls by 546 kb/d and C+C output in Jan 2017 for L48 onshore would be 6635 kb/d. The average C+C output for the past 11 months was 7379 kb/d (L48 OS) and the trendline has a slope of 562 kb/d, 562/7380=7.6%.

    • Dennis Coyne says:

      There is a significant difference between Dean’s TX estimate and the EIA’s Texas estimate for C+C in Dec 2015 and Jan 2016. Core Labs perhaps used the EIA estimate which for L48 onshore (OS) gives a 9.9% decline rate over the past 11 months (March to January), the average of the two estimates is about an 8.7% decline rate, which would be about a 620 kb/d decline from Feb 2016 to Jan 2017 and about a 1.2 Mb/d decline from the peak in March 2015 to Jan 2017 (if the rate of decline does not change from Feb 2016 to Jan 2017).

  17. Hickory says:

    I am wondering if there is good data for oil export trends, rather than for overall oil production?
    It seems that it is the global trade in crude that is so critical to the volatility, and is so important for the economy of the big consumers of crude, such as the EU, USA, Japan, China, rather than the overall production numbers of the producing countries.
    We have been presented info previously that crude export has peaked in year 2005 (Jeffrey Brown?).
    Is that still the case, and if so how far down the export curve are we?
    Thanks to anyone who has that kind of info.

    • Heinrich Leopold says:

      Hickory,

      There is an excellent article at crudeoilpeak.com about net exports:

      http://crudeoilpeak.info/net-crude-oil-exports-the-shrinking-commodity

      However, the article is from 2011. You probably can contact the author if he has an update.

      • Hickory says:

        Thanks Heinrich and Dennis.
        Looks like the data is considerable delayed.
        This will remain very interesting to track.

        • Heinrich Leopold says:

          Hickory,

          In my view net exports did not change very much over the last five years. However, net imports declined considerably. Especially net imports from the US declined from 12 mill b/d towards 6 mill b/d. As the increase of net imports from China and India could not compensate for the US decline, the oil price fell and the surplus went into inventory.

          Nevertheless, this is about to change as US net imports increase again and China and India have combined 1 mill b/d more net imports per year. The balance reverses quite slowly and this is the main reason, prices are slow to recover.

  18. Longtimber says:

    On April 25 the prince is scheduled to unveil his “Vision for the Kingdom of Saudi Arabia,”
    ……
    “We’ve been screaming for alternatives to oil for 46 years, but nothing happened,”
    …….
    “Last year there was near-panic among the prince’s advisers as they discovered Saudi Arabia was burning through its foreign reserves faster than anyone knew, with insolvency only two years away. Plummeting oil revenue had resulted in an almost $200 billion budget shortfall”
    ……
    ‘If women were allowed to ride camels [in the time of the Prophet Muhammad], perhaps we should let them drive cars, the modern-day camels,’ ”
    ……
    http://www.bloomberg.com/news/features/2016-04-21/the-2-trillion-project-to-get-saudi-arabia-s-economy-off-oil

  19. Where should one start measuring the decline when trying to figure out what the decline rate actually is. Should you start five months before the peak, four months before the peak, two months before the peak or at the peak? Dennis’ example starts two months before the peak. I am of the very strange opinion that the decline rate should be measured from the peak. 😉

     photo Decline Rate_zpsqqeieu0k.jpg

    • George Kaplan says:

      A first order trend won’t work when second order derivatives are dominating, as at a peak. That is partly why logistics curves are used.

      • Dennis Coyne says:

        Hi George,

        Often hyperbolics are used or an exponential can be used for a simple fit.
        The fit is not very useful as the curve will change when the price changes and as demand changes over time due to changes in economic output and changes in the structure of the economy.

        There is no particular reason for using a logistic, it is simply a functional form which gives the approximate shape that Hubbert was looking for.

    • Dennis Coyne says:

      Hi Ron,

      If we substitute Dean’s Texas estimate for the EIA Texas estimate we get a different result.

      In the chart below the blue line is EIA data and the Red line uses EIA for everywhere in the US except Texas where I substitute Dean’s TX estimate for the EIA TX estimate.

      The trend line is an exponential fit from April 2015 to Jan 2016 (the weekly data should be ignored in my view). For the EIA data the decline rate is 5.2% and for EIA+ Dean TX it is 3%.

    • Heinrich Leopold says:

      Ron,

      Your above chart tells me that the rate of decline gets faster at the tail end of the curve. This is a classical case of a differentiation equation. It is the same situation as a stone falls and the longer it falls it picks up more and more speed.

      You could call it also the process of a self feeding move like a stock market crash (self full-filling prophecy). This happens very often in nature and makes the anticipation of future trends so difficult, as moves go very seldom in a linear fashion.

      • Dennis Coyne says:

        Hi Heinrich,

        Only until it hits the earth or reaches terminal velocity due to friction from the air.

        If we removed the Earth’s atmosphere, your example would match reality, until the rock hit the ground. Also note that the line would never become vertical as the velocity is limited by physical laws. The rock is not going to go faster than light. If we think of the slope of the curve as velocity, a vertical slope implies a velocity of infinity.

        • AlexS says:

          The decline in production is driven by the decline in prices. If prices rebound, the trend in production will also reverse, with a several-months lag.
          Therefore, any extrapolation of the current trend does not make sense

          • Dennis Coyne says:

            Hi AlexS,

            I agree. Let’s assume oil prices remain low for the next 2 years. (Note that I think that is a bad assumption, but it is not far from the EIA oil price scenario.) In that case the decline may continue as it has for the past 11 months.

            • Heinrich Leopold says:

              Dennis,

              If prices stay low over the next two years, the production decline will almost for sure accelerate as all the hype, which still exists, is coming out of the oil and gas market. There will be no expectation of ten fold increases for investments gains anymore.

              Capital will flee the oil and gas companies as they did not earn anyway a lot of money and even the expectations for future profits will evaporate.

              The longer the oil price stays low, the more hot air is coming out of the bubble.

              • Dennis Coyne says:

                Hi Heinrich,

                There may be increased decline for a few months, but drilling will not stop completely. If North Dakota Bakken/Three Forks completions fall from 65 to 40 over the next 9 months, the average Bakken/Decline from July 2015 to July 2016 will be about 20% at most, then it will moderate to about 10% if completions remain at 40/month.

                Remember there are about 1000 SPUCs (spudded but uncompleted wells) in the ND Bakken/TF, of the rig count falls to 20 rigs, they can drill 25 wells per month, so only 15 SPUCs are needed to get to 40 wells per month, let’s say they use 20 SPUCs per month (cheaper to complete), that means there are 50 months worth.

                L48 onshore decline is already 10%, it might temporarily reach 15% during the first half of 2016, but then is will return to 10% or less.

                I think you are being fooled by the RRC data, look at Dean’s estimates or the EIA estimates for Texas output and decline rates are not as high as you believe. So far the decline rate in Texas (since the peak in March 2015) has been about 8% (using the average of the EIA and Dean’s estimate from March 2015 to Dec 2015). Possibly this will accelerate, but Texas LTO is closer to refineries and has lower transport costs as well as better infrastructure than North Dakota so decline in Texas may not reach the 20% level of the ND Bakken/TF.

        • Heinrich Leopold says:

          Dennis,

          The falling stone has been just an example for how the process works. Nature very often works on a self feeding mechanism – on the upside or the downside. Linear processes or ‘undulating plateaus’ are very seldom. Any trend cannot go on forever and ends like a stone by crashing on the floor – or topping out on the top.

          In the case of shale oil and gas, the downward spiral could work like this:

          1. As companies drill less, they add less reserves, thus have less collateral and get less money for new drilling.

          2. The consequence of less drilling is less production, less added reserves, lower capital expenditures……

          This is exactly the opposite what we have seen when shale went into an upward spiral over the last several years.

          In my view there is probably also a political element here. Bernie Sanders has promised to ban fracking – if elected. Who knows, maybe he is really elected and bans fracking. Who in earth wants to spent capital when the company is not allowed to exist anymore by next year? So, it is better to wait until the political situation is resolved.

          This all contributes in my opinion to a veritable crash in shale production. In my view the chances are high that the decline accelerates even more in the fall of 2016 and production will crash through 7 mill b/d in 2016 as I have already envisioned last year.

          The writing is already on the wall:
          http://oilpro.com/post/23930/non-opec-production-to-see-largest-annual-decline-since-1992-iea

          • Dennis Coyne says:

            Hi Heinrich,

            Prices can only go so low, as the weaker players go bankrupt, stronger players with deep pockets (XTO and Statoil come to mind) will buy up assets on the cheap. They will be able to complete the SPUCs and maybe drill a few wells if they think the economics works in certain locations.

            You said above:
            This all contributes in my opinion to a veritable crash in shale production. In my view the chances are high that the decline accelerates even more in the fall of 2016 and production will crash through 7 mill b/d in 2016 as I have already envisioned last year.

            What “production” do you mean? USL48 onshore is likely to fall below 7 Mb/d in 2016, you don’t mean US C+C output, I hope.

            At the end of 2015 US C+C was 9.2 Mb/d, so a drop to 7 Mb/d by Dec 2016 would be 2.2 Mb/d lower or a 27% annual decline rate.

            Is that your prediction?

            • Heinrich Leopold says:

              Dennis,

              We had this discussion already last year.

              Yes, I mean US C+C and I mean the production will be down around 30% from its peak last year.

              I cannot see any reason why the decline should stop in September 2016, as there is no price recovery yet and drilling did not go up and it will take at least half a year until production can go up again after drilling went up.

              US C+C production will crash through 7 mill b/d by the end of this year and could fall even much further in 2017.

              • Dennis Coyne says:

                Hi Heinrich,

                And how low do you expect US output to go in 2017?

                I do not think the decline will stop. I have pointed out to you that even if drilling stops completely in all the US LTO plays, the decline rate for the US will not approach the level that you are forecasting.

                There is a chance that the EIA’s forecast of 8.1 Mb/d in Sept 2016 might be correct (I think this forecast is too low). US C+C output of under 7 million barrels per day in 2016 is not going to happen, even pessimistic observers might agree with me.

            • USL48 onshore is likely to fall below 7 Mb/d in 2016, you don’t mean US C+C output, I hope.

              Dennis, this statement… or question… is confusing. Are you saying US lower 48 onshore is likely to fall below 7 mb/d… or not?

              Please clarify.

              The US lower 48 onshore is already well belw 7 mb/d and is very likely to go below 6 mb/d.

    • Dennis Coyne says:

      Hi Ron,

      Rather than eyeballing it you can use excel to put a trendline which automatically does a least squares fit on the data in the series. Us math types prefer to use statistics to fit a line to the data.

      We can use March to Jan, April to Jan, or May to Jan, for all three the best fit to the data has a decline rate of about 5.2%. So the point is not worth arguing April to Jan is fine with me, the weekly data tells us very little. The weekly numbers can be off by up to 300 kb/d.

      • Dennis, I would bet that the EIA also has some of them “math types” working for them. Anyway, the EIA’s “math types” comes to the same conclusion as I did, that US production will reach 8.7 million barrels per day in July 2016, not January 2017 as you project.

        Edit: Sorry I made a mistake. The EIA has US C+C production at 8.7 million barrels per day in June 2016, not July as I predicted. It seems the EIA’s math types are a bit better at math than I. The EIA says June 2016 C+C production will be 8.62 million barrels per day.

         photo STEO_zpslh7vy8xn.jpg

        Look at the drop they are predicting for August 2016, over a quarter of a million barrels per day.

        EIA Short Term Energy Outlook. Click on “All Tables” then on “Table 4a”.

        • Dennis Coyne says:

          Hi Ron,

          Interesting. An exponential trendline on April 2015 to March 2016 has a decline rate of about 5.7% per year. The change in trend after March is mostly due to Alaskan summer maintenance and the GOM hurricane season (August and Sept).
          The trendline almost meets the STEO in 2018.

        • Dennis Coyne says:

          Hi Ron,

          For the US Lower 48 onshore (L48OS) C+C output in the EIA STEO the annual decline rate steepens from 10.4% in 2015 to 18% in 2016. I think a combination of too low an estimate for TX C+C through Jan 2016, poor weekly C+C estimates, and a flawed DPR model are leading to a poor forecast by the EIA.

          Time will tell.

  20. AlexS says:

    EIA’s US C+C output projections for 2016-17.
    The numbers are from the April STEO, but with some additional details.

    Source: http://www.eia.gov/todayinenergy/detail.cfm?id=25892

    In response to continued low oil prices, onshore crude oil production in the Lower 48 states is expected to decline from an average of 7.41 million barrels per day (b/d) in 2015 to 6.46 million b/d in 2016 and to 5.76 million b/d in 2017.

    The number of active onshore drilling rigs in the Lower 48 states fell 78% (from 1,876 to 412) between the weeks ending on October 31, 2014, and April 15, 2016. The decline in active rigs and well completions is projected to result in month-over-month onshore oil production declines of 120,000 b/d through September 2016.

    EIA projects that the number of operating rigs in the Lower 48 states will continue to decrease through mid-2016 before beginning to slowly increase. However, expected Lower 48 production will continue to decline—although at a slowing rate—throughout 2017.

    EIA’s April STEO forecasts Brent crude oil prices averaging $35/b in 2016 and $41/b in 2017, with the December 2017 price averaging $45/b.

    • AlexS says:

      continued

      In contrast to the forecast of declining Lower 48 onshore production through 2017, federal Gulf of Mexico oil production is projected to increase from 1.54 million b/d in 2015 to 1.66 million b/d and to 1.82 million b/d in 2016 and 2017, respectively. Alaska’s oil production is projected to slightly decrease from 0.48 million b/d in 2015 to 0.47 million b/d in 2016 and to 0.46 million b/d in 2017.

      Increased production from the federal Gulf of Mexico (GOM) is not enough to offset those declines, with total projected U.S. production falling from 9.43 million b/d in 2015 to 8.04 million b/d in 2017.

      • Enno Peters says:

        Great intel Alex, thanks for posting.

        Eyeballing the decline of Q1 2015, onshore : it appears to drop from about 7.5 to 5.0 in 1 year time (33%). That’s an even higher decline rate than I expected. Looks like not only the production I’m tracking is declining at a rapid rate.

        I’m curious to see if we indeed will see the projected pick up in rig count this summer already.

        • AlexS says:

          Enno,

          Your charts for the Bakken and some other sources show that LTO output drops by some 35% in 12 months if no new wells are completed.
          Given that the EIA chart for Lower 48 onshore includes conventional production and still assumes that new wells are drilled and completed, a 33% decline indeed looks too big.
          Apparently, they assume continuing decline in conventional output, primarily due to shut-down of the stripper wells. BTW, according to the EIA, between April 2015 and January 2016, US conventional onshore production was down 300 kb/d (bigger in relative terms than the drop in LTO output).

          In addition, the EIA’s oil projections are too low, in my view. Therefore, they may assume a small number of well completions

          • Heinrich Leopold says:

            AlexS,

            In my view we will see actually a massive decline in wells due to plugging of wells. The latest RRC report for March 2016:

            http://www.rrc.state.tx.us/oil-gas/research-and-statistics/well-information/monthly-drilling-completion-and-plugging-summaries/

            shows already a net decline of 1000 wells per month.

            So, a 33% decline of production is realistic and probably even too conservative.

            • Dennis Coyne says:

              Hi Heinrich,

              The plugged wells are stripper wells with output of 5 b/d or less.
              So if 1000 of these wells are plugged each month that’s 5 kb/d lower output each month or a 60 kb/d total decrease over 12 months. Not really much of a factor.

              • Heinrich Leopold says:

                Dennis,

                It is difficult for me to check how big these wells are. However, the main point here is about a huge sea change (see below chart) in net wells. Add the dramatic decline in use of proppant, the drop in rig counts (natural gas rigs are just at 88 versus 1600 in 2008)….. I can see the writing on the wall.

                US production will be declining dramatically over the next months. Even the CEO of Pioneer and the IEA admit the decline. The only difference is that I think the decline will last much farther than Sep 2016 and will last well into 2017.

                • Dennis Coyne says:

                  Hi Heinrich,

                  Everyone agrees there will be some decline.

                  Some estimates are more reasonable than others.

                  So far decline in Texas has been relatively modest at an annual decline rate of 8%.

                  There are still a lot of horizontal oil rigs operating in the Texas Permian Basin (over 100), and the horizontal wells produce much more oil than the vertical wells in that Basin.

                  I am talking about oil only here, I don’t follow natural gas as closely, at some point gas output will fall and natural gas prices will rise, no idea when that will happen though.

                  The permits minus plugged is not really very useful. Oil wells completed relative to wells plugged is of greater interest. Every well completed (average of about 250 kb/d for first year) covers about 50 plugged stripper wells (with an average of under 5 b/d). So about 20 completed wells will make up for 1000 plugged wells.

                  The first 3 months of 2016 there were 2482 new drill oil completions in Texas and 1453 oil wells plugged. The plugged wells are equivalent to taking away 29 of the new wells drilled, so the net new wells would be 2453 new wells or about 818 new wells per month for the first 3 months of the year. In March about 300 of these wells were in districts 1 and 2 (Eagle Ford most likely) and about 450 wells in Districts 7C, 8 and 8A (Permian Basin).

                  There has continued to be quite a lot of activity in Texas at least through March 2016.

                • Dennis Coyne says:

                  Hi Heinrich,

                  You suggested in an earlier comment that US C+C output would fall to 7 Mb/d in 2016 and “much lower” in 2017. I asked what your 2017 estimate was, but you didn’t answer. Seeing as 2016 decline is expected to be 2.2 Mb/d, I assume much lower means at least as much as 2016, so would 4.8 Mb/d be about right for the low point of US production in 2016?

                  Note that I expect US output will remain above 8 Mb/d until 2020, or possibly even 2022 (if oil prices remain above $90/b from 2020 to 2022.)

        • Dennis Coyne says:

          Hi Enno,

          Are you accounting for possible incomplete data in Texas?
          Are you seeing 33% decline rates outside of Texas?
          I am talking at the field level, rather than individual wells or counties. So for the Niobrara, or New Mexico Permian, the decline is certainly not 33% in the north Dakota Bakken, or not through February at least. Based on Dean’s data for Texas and even the EIA data for Texas, the statewide decline rate is not anywhere close to 33% per year.

          Using EIA data, TX decline rate is 9% from March to Jan 2015. Using Dean’s data from March 2015 to Dec 2015 the decline is 6.1% (Jan was anomalous so I threw it out, if it is included the decline rate is 4.2%)

          • Dennis Coyne says:

            Looking at the Bakken, the decline rate from June 2015 to July 2016 will be close to 20% per year if the completed wells fall to 50 new wells per month on average for the rest of 2016, so decline is pretty steep, just not 33%/year. After July 2016 if the completion rate levels off at about 40 completions per month the decline rate moderates to about 10% per year for July 2016 to July 2017.

      • Dennis Coyne says:

        Hi AlexS,

        I think the EIA is overestimating the decline because they are underestimating the oil price. With the DUCs available, the decline for the rest of 2016 in the LTO plays could be as little as 350 kb/d. The EIA is estimating almost a 1 Mb/d drop for the rest of 2016,
        the conventional L48 onshore was about 3300 kb/d in Jan 2016, a 650 kb/d drop in output from L48 onshore conventional would be a 20% drop, if we assume an 8% drop, that would be about 270 kb/d, for a total of 620 Kb. The EIA is also underestimating Texas output, if Dean’s estimates are correct. If we assume no acceleration in the decline rate for L48 onshore, we get the following, with 2017 output about 6200 kb/d for L48 onshore.

        • AlexS says:

          Dennis,

          The EIA has a long record of underestimating US oil production, not only during the shale boom, but also during the current downturn.
          In particular, they have been underestimating volumes produced in Texas.
          But I think that the most recent Dean’s estimate for Texas may be too high.
          TRRC is now receiving production data from operators in electronic form, which may have shortened the reporting time. Hence, the underreported volumes for the most recent months are probably less in relative terms than previously.
          My conclusion is that historical numbers are somewhere in between Dean’s and the EIA’s estimates.

          As regards projections for the rest of this year and 2017, I agree that the EIA’s price assumptions are too low. Higher prices may result in higher volumes.
          That said, I do not expect a quick rebound in drilling/completion activity as most shale companies are in a difficult financial situation and will not rush to increase capex. And even in the shale industry, with its short investment cycle, there is a time lag between a decision to increase capex and first production.

          The EIA’s projections may be too low, but I still do not expect a quick rebound in the US C+C output.

          • shallow sand says:

            AlexS. Although maybe not moving the needle much, I think US stripper well production may not decline as much as it has recently because of:

            A. If prices continue to stay above $40 WTI, wells shut in may be put back on production.

            B. As winter is over, it is more likely that low volume wells will be returned to production.

            Actually many times both A. & B. apply. We have some wells that must be shut in when the temperature drops below a certain level. Shutting in requires some work, as does resumption of production. When oil prices were high, we would only shut in during the cold weather. This past winter, we just shut in at the first sign of cold weather, and did not start up until winter was over.

            I do think, however, US conventional will continue to drop because there are very few vertical oil rigs running, far lower than even in 1998-1999. Also, I do not think a price increase will result in many conventional rigs coming back to the field this year. Balance sheets must be healed first. Conventional producers do not have a shocking decline like the LTO companies, so skipping another year of new wells is not as big of a problem.

            • AlexS says:

              Thank you shallow sand,

              I actually wanted to ask you if you expect a return of shut-in stripper wells with higher oil prices

            • Dennis Coyne says:

              Hi Shallow sand,

              What would you guess is the average output of stripper wells being shut in in Texas. I have suggested 5 b/d, but in reality it is probably more like 2 b/d.

              For the wells that you run that you might consider for shutting in (or those you have shut in recently) what is their average daily output over an average month.

          • Dennis Coyne says:

            Hi AlexS,

            Agree with all you have said above, I like the average of the EIA and Dean’s estimate for TX C+C and think the rebound in LTO output will take 12 months or so maybe mid 2018 there will be a gradual ramp up in LTO output. It will depend on many factors, especially the price of oil.
            When oil hits $85/b or higher and remains there for 6 months (maybe we get there in Jan 2019), LTO may ramp up more aggressively.

  21. Oldfarmermac says:

    The folks who predicted dirt cheap oil at The ECONOMIST don’t look quite as dumb as they did a few years ago, lol.

    There is an old saying that the alarmists , pessimists, optimists, who ever, are always right, if you give them time enough.

    This link may or may not reflect well on the judgement of the authors and editors of the Economist, but it is worth reading for insight if nothing else.

    http://www.economist.com/news/leaders/21697221-impetuous-prince-rattling-middle-east-may-also-bring-bold-reform-new-oil

    The biggest takeaway for me is that the pressure is rising in the Saudi pressure cooker, and that there is a significant chance the lid will fly off within the next few years, or maybe even the next few weeks or months.

    The kid seems to be reckless sure enough, but he also seems to UNDERSTAND that the Saudi economy must be diversified before the oil runs out. I think maybe he DOES believe the oil will run out, or that the world will move away from oil, or both, otherwise he would not be pushing so hard for change.

    Some commenters will disagree with me, but I don’t think all people in positions of great power are short sighted, ignorant, or stupid. Many people, maybe most people , are wise in some respects but stupid or ignorant in other respects.

    I will not argue ( for instance ) that the engineers who design automobiles are much interested in the environment, but it is very hard for me to believe that they don’t understand such a simple proposition as peak oil. They know it comes out of holes in the ground, and that it does not rain oil on this planet.

    The fact that EVERY major manufacturer is working feverishly on alternatives to the ice cannot be laid ENTIRELY at the feet of the environmental movement in my estimation.

    ( Of course expecting auto companies or their senior management to say much if anything at all about unobtainium oil is absurd. Some of the engineers and executives will have some things to say after they retire, but for now………. expect zipped lips. )

    I sort of doubt they were smart enough to get thru engineering school and yet too stupid draw the correct conclusion in respect to the long term future of the petroleum burning internal combustion engine, lol.

    The bean counters have enormous power in modern corporations. I doubt that the ones at the top of the heap at GM,FORD, NISSAN, HONDA , etc overlooked the fact (as Jeffrey Brown has so often pointed out ) that oil prices went up about five times over a decade without the production of REAL oil going up more than a pittance.

    One of this kid’s top goals will be to cut back as fast as he can on the export of crude,in favor of processing it at home and exporting finished products. It might take him a good while to consolidate his power and put such plans into effect, and he might not succeed.

    Yogi sez predictin’ is hard.

    But I wouldn’t want to have much money invested in an oil company dependent on importing crude a few years down the road. All the larger exporting countries are likely to go this same “process it at home ” route so as to provide local employment and stability. A man is more grateful for a job than he is for a welfare check.

  22. Frugal says:

    Ron, am I reading this right. Would OPEC be down 700,000 bpd if Indonesia wasn’t added to the club?

    • AlexS says:

      I guess OPEC-13 includes Indonesia for the full period

    • No, that is not right at all. Without Indonesia OPEC production would be 725,000 barrels per day less but not down by 725,000 barrels per day. Indonesian production is added to the entire history of OPEC production.

      Actually OPEC production is down about 200,000 barrels per day because of Indonesia. That is because back in 2005 Indonesian production was averaging about 200,000 barrels per day higher than it is averaging today.

      Look at that first peak in September 2005. Today OPEC production is at about that same level. But OPEC less Indonesian production, current production is about 200,000 bpd above that point.

      OPEC 13 peaked in July of 2008 at 32,525,000 bpd. OPEC less Indonesia peaked in November 2015 at 31,724,000 bpd.

       photo OPEC Less Indnesia_zpsexnmb9v8.jpg

  23. simon oaten says:

    still no mention of “if” any partial float would include reserves ?
    potentially – this could enable the game to be played a little longer ?

    Saudi Aramco IPO Could Be 5% of Value

    22/04/2016 03:05AM AEST

    PARIS—Saudi Arabian Oil Co., the largest energy firm in the world, is considering listing up to 5% of its value on a stock exchange in New York within the next year, a top Saudi oil official said Thursday.

    By listing even a tiny fraction of the company, known as Saudi Aramco, the offering would create one of the world’s most valuable energy firms. Estimates of Saudi Aramco’s value have varied, but using a conservative number of $2.5 trillion, a 5% listing would give it a potential value of $125 billion—bigger than BP PLC and French oil titan Total SA.

    The Saudis are considering listing Aramco at a time when the kingdom is trying to raise cash during a period of sharply lower oil prices and transition to a world that is less dependent on oil. Deputy Crown Prince Mohammed bin Salman is overseeing a “National Transformation Plan” to promote private-sector growth and reduce government reliance on petroleum revenues.

    New York has emerged as the leading place for an Aramco listing, but London and Hong Kong are also being considered, said Ibrahim Muhanna, a top adviser at the Saudi oil ministry. Mr. Muhanna said the kingdom wouldn’t list the company only on Saudi Arabia’s bourse, the Tadawul, because it was too small.

    “The Saudi market cannot take a company like this,” Mr. Muhanna said on the sidelines of a conference in Paris.

    He didn’t disclose which firms were working on the listing for Aramco. He said a price for the stock was still being determined and that it may take another year for a listing to be completed.

    Pricing “has to be decided by international markets,” Mr. Muhanna said. “It has to be competitive.”

    An unresolved question remains whether a listing will include the division of Aramco that includes its vast reserves of crude oil. It manages, but doesn’t own, the kingdom’s 260 billion barrels of reserves, the most in the world.

    Saudi Aramco Chairman Khalid al-Falih has sent conflicting signals about whether the reserves will be include. Mr. Muhanna didn’t address the issue.

    A number of Saudi experts and insiders have said Saudi Arabia wouldn’t include its production assets in any listing. Aramco is essentially an instrument of state policy, and its methods and reserves tantamount to state secrets.

    The company produces more than 10% of the world’s oil supply every day and controls a large chain of refineries and petrochemical facilities to complement its exploration and production operations.

    Summer Said in Dubai contributed to this article.

    Write to Benoit Faucon at benoit.faucon@wsj.com

    (END) Dow Jones Newswires

    April 21, 2016 13:05 ET (17:05 GMT)

    Copyright (c) 2016 Dow Jones & Company, Inc.

    • I don’t think it will ever happen, not even 5%. 5% of ARAMCO would have to include 5% of reserves. And there would have to be confirmation that those reserves actually exist. And of course they do not exist, not 266 billion barrels of reserves anyway.

      Therefore it will never happen.

      • TechGuy says:

        Ron Wrote:
        “I don’t think it will ever happen, not even 5%. 5% of ARAMCO would have to include 5% of reserves. And there would have to be confirmation that those reserves actually exist. And of course they do not exist, not 266 billion barrels of reserves anyway.”

        I think they will fangle a way around the reserve reporting problem. Didn’t Brazil’s Petrobras over state its reserves, yet was able to raise over $100 billions in capital.

        Petrobras slashes oil reserves to lowest level in 14 year
        http://www.reuters.com/article/brazil-petrobras-reserves-idUSL2N15D165

        Jan 29, 2016:
        “Brazil’s state-controlled oil producer Petrobras slashed its oil and natural gas reserves 20 percent on Friday, hit by a plunge in energy prices, a heavy debt load, high costs and a corruption scandal.”

        if Petrobras can lie, so can SA.

      • Silicon Valley Observer says:

        I have had exactly the same thought. How can KSA “cash in” on ARAMCO without the public disclosure required? But maybe they will find a way. Maybe they can sucker investors into believing their reserve numbers? Maybe they can do their offering in a country with less stringent regulations? I don’t know much about how that works and I could be way off base, but I do know that where there’s a will (and tons of money) there often is a way. And KSA has a BIG TIME desire to cash in, which should tell anyone all they need to know about the state of their economy.

        There are people with money willing to believe just about anything.

        • TechGuy says:

          SVO wrote:
          “There are people with money willing to believe just about anything.”

          I think you meant to say there are people with other peoples money to invest, willing to believe anything. 🙂 For the most part, investments these days are institutional investors and hedge funds. The retail investor left stocks back in 2008.

          • clueless says:

            “The retail investor left stocks back in 2008.”

            Not all of us.

            • TechGuy says:

              The retail investor left stocks back in 2008.”, “Not all of us” –clueless

              Ha! With the S&P500 PE ration at about 27? Its at the third all time high, behind 1929 and 1999. The odds are better at a casino, and at least the drinks are free at the casinos.

              Clueless asked:
              “I would also add, what type of investor would want to own a minority stake in that asset?”

              The same investors that bought Continental Resources (CLR) & and the rest of the Shale companies now in or near bankruptcy. Investors been doing stupid investments for a very long time: Pets.com @1999 , Chipotle ($442), Panera Bread ($215), twitter, and the rest of the ridiculous investments.

              Most of it it is driven up by hedge funds and institutional investors using OPM (Other peoples money). The managers collect huge fees as well as profits, but they don’t give back the money when their investments collapse. Its a “heads I win”, “tails you lose” con game.

              Do you know what most fund mangers invest in: Cash and US treasuries. It’s odd that they don’t put their own money into the same investments included in their funds. I wonder why!/sarc.

              As far as investing in SA. The majority of people think they have an unlimited supply of Oil. People will gladly hand over money to SA. We (Peak Oilers) are a tiny minority. The rest of the world thinks we are nothing but a bunch of mad tinfoil hat wearers.

              • Greenbub says:

                “The majority of people think they have an unlimited supply of Oil.”

                This is why their threat to pump a gazillion extra barrels is nothing to scoff at. It would lend credence to the idea that they have unlimited supply right before the IPO. Would it damage their wells? I don’t doubt it, but does that mean they won’t do it?

      • clueless says:

        Ron – I think that you are 100% right. I would also add, what type of investor would want to own a minority stake in that asset? I know that I would not. And, I expect most would rebel if they owned a mutual fund that invested.

        To give an example: Would anyone want to own a 5% interest in Buckingham Palace? You could go there and, from a distance, take a picture of it and say “I own 5% of that.” But, that would probably be the extent of your benefit. You could probably go to SA and take pictures of oil wells also – just be careful not to pack a bible, or a crucifix, or a copy of Playboy, etc. And definitely do not talk about 911.

      • Synapsid says:

        Ron,

        The article mentions that the question of whether or not any of the reserves will be included in the offering is still not settled. The initial announcement a couple of months ago said that only midstream and downstream assets would be included. The story has bounced around since then.

        • AlexS says:

          “The initial announcement a couple of months ago said that only midstream and downstream assets would be included.”

          This is one of the options to not disclose oil reserves number.

          They can also list the company on the local exchange where disclosure rules are not the same as in the western countries. I am sure a lot of local wealthy individuals, as well as people from other GCC countries, from Asia, and risky investors from the West would be willing to buy shares in Aramco even if its reserves are not disclosed.

          Finally, they can separate the listed subsidiary from the parent (100% state-owned) company. Similar model was used during the privatization of the oil industry in China (CNPC/Petrochina and Sinopec parent/Sinopec listed).
          The listed company may own some upstream assets, while most of the fields (including Gwahar) will be owned by the parent company.

      • Lightsout says:

        Ron

        Colin Campbell always used to say he believed the 266 billion was total discovered taking no account of historic production.

    • Longtimber says:

      Prudent to expose other skin in the game.. A few stray Bullets can make a mess out of an operating Petro-Chem Complex. The HCC Disaster was one of the Top 10 Global Insurance claims of all time for many years. https://en.wikipedia.org/wiki/Phillips_disaster_of_1989

  24. aws. says:

    The dependency on petroleum revenues makes it exceedingly difficult for petro-states, even ones with progressive governments, to transition to a post carbon economy.

    Many Canadian politicians that talk up their plans for reducing emissions have no real sense of how fast and how soon the transition has to happen. There isn’t the time, capital, or carbon budget available to be squandered on building out petroleum infrastructure.

    The federal NDP’s ‘Leap’ of faith advocates and Alberta’s right-wing opposition: strange bedfellows?

    albertapolitics.ca, David Climenhaga 1 week ago

    Why, one might wonder, would NDP proponents of a vague document proposing our country confront a real environmental crisis with simplistic solutions that are simply impossible in a democracy wish the same fate on our NDP government as our hopelessly far right opposition?

    Premier Notley may very well have nailed it in her speech to the NDP convention Saturday morning, when she told delegates that the last Alberta election “did something very evil to all of you from our fellow provinces and territories …

    “In electing a progressive NDP government last spring, the people of Alberta took away one of your favourite enemies. There’s no climate change denying, science muzzling Tory government here any more.

    “So it’s time” – for you, NDP delegates from the rest of Canada, she meant – “to start thinking differently about the 4.4 million fellow Canadians who live here.”

    The Leap Manifesto’s most enthusiastic advocates weren’t about to do that. Indeed, from their perspective, there might be something to be said for having an easy-to-hate environmental villain back in charge in Canada’s oilpatch again.

    The Leap: Time for a reality check

    By Naomi Klein, Rabble, April 14, 2016

    Well, the Leap is certainly in the news. Many articles have been filled with errors and misrepresentations, which isn’t surprising. It makes perfect sense that right-leaning publications and competing political parties would seek to bury the NDP at a time when it is engaged in a process of open soul-searching. We should expect more, however, from commentators on the left.

    One article from David J. Climenhaga, an important progressive analyst on Alberta politics, echoes much of the criticism heard in recent days from friends in that province. Because of this, I have decided to respond, point by point, to his attack on the Leap. While Climenhaga’s piece does not contain a single quote from our document, I am leaving most of the text of his article in my response below.

    Alberta wildfires on the rise amid hot, dry spring weather

    By Robson Fletcher, CBC News Posted: Apr 19, 2016 3:16 PM MT

    Dozens more wildfires started in Alberta forests overnight, according to the province, bringing the number of such blazes so far this year to 157.

    That’s an increase from the 106 wildfires reported at the same time last year, which is being attributed in part to the warm and dry conditions so far this spring.

  25. aws. says:

    The $2 Trillion Project to Get Saudi Arabia’s Economy Off Oil

    Eight unprecedented hours with “Mr. Everything,” Prince Mohammed bin Salman.

    Peter Waldman, Bloomberg, April 21, 2016

    For two years, encouraged by the king, the prince had been quietly planning a major restructuring of Saudi Arabia’s government and economy, aiming to fulfill what he calls his generation’s “different dreams” for a postcarbon future.

    • Greenbub says:

      VERY interesting, aws.

      from your link: “The likely future king of Saudi Arabia says he doesn’t care if oil prices rise or fall. If they go up, that means more money for nonoil investments, he says. If they go down, Saudi Arabia, as the world’s lowest-cost producer, can expand in the growing Asian market.”

      • Greenbub says:

        Bloomberg does seem rather cozy with the Saudis lately.

      • Eulenspiegel says:

        Smoke and mirrors … they are burning massive amounts of money today, they have about 3-4 years left at the current burn rate.

        And Saudi invests have been such great things as growing wheat in the desert, destroying their aquifers.

        • Oldfarmermac says:

          I try to think about things, everything, at the very most basic level, so as to UNDERSTAND why they might work or not work, whether they will last or fail.

          Take the German industrial export model economy for instance.

          As I see it, it COULD last and MIGHT last so long as the world wide “business as usual ” economy lasts. But if it does last, one essential condition is that Germany must maintain that country’s current front runner status in terms of the skill and knowledge of the German people, not just for a year, or a decade, but PERMANENTLY.

          There is no real reason, other than LACK OF human capital and built industrial capital, that the people of Bangladesh can’t build luxury automobiles just as good as the ones in Germany.

          What I am trying to say is that the whole world cannot forever continue to exist on the imported ( exported ) raw materials, exported ( imported ) business model, for a couple of basic reasons.

          One, wannabe exporters can win the export game by undercutting the wages and environmental standards of the winners, for example China.

          Two, the raw materials are going to become increasingly scarce, so that the exporters of the same cannot obtain enough finished goods in exchange for their exports.

          Importers that don’t exercise sufficient foresight in planning for the time when they CAN’T import sufficient raw materials at affordable prices must cease to export. You can’t export what you can’t build at all, and you can’t export stuff so expensive only one percenters can afford it, at least not on a nation sustaining scale.

          Hardly anybody ever says so in so many words, but I am personally convinced that Germany is pedal to the metal on the renewable electricity front for two entirely sufficient reasons that have little to do with the environment in DIRECT fashion. One, sufficient and affordable fossil fuels will not always be available, TWO , with changing conditions, old markets die and new ones are born, the new one being renewables. Germany hopes to export renewables expertise and hardware.

          Now with this background in mind, WHAT can Saudi Arabia export once the oil is gone? I just can’t see the people of that country ever competing in the way Germany competes.

          They are starting from TOO FAR BEHIND to have a snowball’s chance on a red hot stove of catching up, and they are handicapped by too many other shortcomings. Germany does not have an IDEAL climate, or LOTS of good farmland, etc, but compared to Saudi Arabia, Germany is a physical paradise.

          It’s extremely hard to come up with an even remotely realistic scenario wherein the Saudi PEOPLE aren’t up shit creek without a paddle.

          At some point in the not far distant future, the elite will start emigrating by the tens of thousands, and life for who ever can’t get out is going to be extraordinarily hard and dangerous.

          The country is basically a powder key with a fuse hanging out, and there are lots of characters in the wings with matches in hand.

          The regulars here who own oil in the ground WILL find themselves in cotton so tall they can’t see over the top when the keg inevitably,finally, blows. Oil will go way past a hundred bucks when that happens.

          When? Any year now.

  26. aws. says:

    Dilbit Dogma? The Myth of Tidewater Access

    Pipeline cheerleaders often employ this rationale. But it no longer applies.

    By Eugene Kung, Yesterday, TheTyee.ca

    In the last year, the WCS discount has shrunk to the $12 to $14 range to account for the unavoidable quality and geographic considerations discussed above.

    In fact, there is now surplus capacity that, according to the International Energy Agency, would allow for additional Canadian exports to Asia without the construction of either Kinder Morgan’s Trans Mountain expansion, Enbridge’s Northern Gateway or TransCanada’s Energy East pipeline. Instead, they could follow existing routes including pipelines to Oklahoma and the existing Trans Mountain line to access Asian and OECD (Organization for Economic Cooperation and Development) markets.

    But accessing those markets would not necessarily get Canadian producers a better price. In addition to paying the transportation costs, there would be additional costs of shipping the crude to Asia and elsewhere.

    The Oil Change International brief concludes that “if sent to Europe or Asia, tar sands crude would fetch notably lower prices than in the U.S.” It reaches this conclusion by comparing the prices achieved by a similar heavy sour crude benchmark, Mexican Maya, which over the past 15 months was priced, “on average $3.70 less in Europe than in the U.S. Gulf Coast and $8.73 less in the ‘Far East.'”

  27. Oldfarmermac says:

    Times are hard for almost everybody in the oil biz but I think the people who are preaching the industry’s funeral are, as Twain put it, exaggerating.

    I am about as big a techocopian as anybody who posts regularly in this forum, except NICK who seems to have dropped out recently. But I can’t see us breaking our oil addiction in less than two or three decades, and that’s with the best of luck and steady work.

    Unless somebody finds a few new supergiant fields, oil HAS to go up, unless the economy goes down. Matt Simmons was a man a little ahead of his time, but he knew a thing or two.

    “Rust and depletion never sleep.”

    If we are VERY lucky, the oil endowment will last long enough that we can learn to live with less and less of it from one year to the next.

    And it could be that we WILL learn how to do that.

    Researchers at the University of California have apparently discovered a way to construct a battery using gold nanowires and a gel electrolyte that can be cycled over a hundred thousand times. It seems there is hope of using nickel and possibly some other metals for the wires, meaning that there is at least a theoritical possibility such a battery could be a practical undertaking.

    • Silicon Valley Observer says:

      The only way we will learn to live with less is to have less to live with. Oil is just too good, too easy, too essential to give up voluntarily. I don’t expect that technology will fill that gap in any way that will avoid mass suffering around the world — less so in the United States perhaps.

      Ten years ago the graphs that were making the rounds showed a sharp peak and steep decline. According to Ron’s graph of World C+C Annual Production, the upward trend has been solidly in place since 1983. Will that continue? I don’t think so. But if Dennis is correct, the fall will not be so steep. I have my doubts. But regardless, even a small downward trend will be sufficient to send the world into economic trouble. Anything exceeding 2% a year decline will be catastrophic after five years in my opinion. I don’t see how it could be otherwise.

      On the other hand if the decline is as steep as the growth over the past 30 years has been, then we are in deep deep trouble. So those are the choices. Bad or worse. I just don’t see technology coming to the rescue, though I know that many here do. For some, like many here in Silicon Valley, life will go on relatively unchanged. But for the vast majority, both in the U.S. and the world, I see only pain.

      • Dennis Coyne says:

        Hi Silicon Valley Observer,

        The scenario I think most likely is and undulating plateau in C+C output to about 2021 and then gradual decline of under 1.5% though about 2027 and by 2030 that declining output will cause an economic crisis and a World recession.

        By that time it will be clear that peak oil has been reached and perhaps policy measures will be aggressively implemented to alleviate the problem.

        Oil prices will be high and this will help make alternative forms of energy for transport more attractive. Perhaps it will be clear to the cornucopian crowd that coal and natural gas will also peak and that aggressive policy should be followed to address those problems as well.

        An economic crisis (such as the 1930s in some parts of the World) can lead to positive social changes, they can also be very negative.

        Hopefully we will not forget our history.

        • Silicon Valley Observer says:

          Well the economic crisis of the 1930s led to the rise of Hitler and a world war that killed over 50 million people. And it was only that war that pulled us out of the depression. But I digress.

          Your prediction is reasonable and informed. But I see it as a best case. Consider a 1.5% yearly decline from 2021 to 2027 — that’s close to a 10% decline. What shape do you think the world economy would be in at that point? Do you think we would have the ability to build out alternatives forms of energy? I don’t. The infrastructure of this country is falling apart — roads, railways, buildings — and many of our people are just barely getting by paycheck-to-paycheck. And that’s now. What happens when oil prices again reach the point of crushing the economy? We don’t have any slack left. It’s all bone now.

          According to the New York Times today, suicides have reached a 30 year high. I think perhaps that indicator more than any other sums up where we are as a country today.

          http://www.nytimes.com/2016/04/22/health/us-suicide-rate-surges-to-a-30-year-high.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

          • Dennis Coyne says:

            Hi Silicon Valley Observer,

            Yes the rise of Fascism and World War 2 were the negative consequences of the Great Depression.

            Remember that Classical Economics did not understand that a lack of aggregate demand was possible, and the understanding of money and banking was also not very good. Today our understanding of economics, though far from perfect, is much better than it was 97 years ago.

            Yes it is absolutely true that the massive government deficit spending undertaken by the nations of the World to fight and then rebuild after World War 2 is what pulled the World out of the Great Depression.

            In principle there is no reason that an equally massive amount of private and public spending on solar, wind, hydro, nuclear, public transportation, rail electrification, and high voltage DC grid infrastructure couldn’t pull the World economy out of a deep recession.

            Knowing history might enable us to avoid the mistakes of the past.

            Yes this is a best case scenario, it will be difficult, but not impossible, the earlier we get started, the better.

            In the scenario below, the annual decline rate remains under 1% until 2025 and from 2026 to 2030 is between 1.2% and 1.8% (1.6% on average over these 4 years). From 2025 to 2030 World C+C output declines by 5.7% (79 Mb/d to 74.6 Mb/d). I would expect a recession some time between 2025 and 2030.

            • Fred Magyar says:

              In principle their is no reason that an equally massive amount of private and public spending on solar, wind, hydro, nuclear, public transportation, rail electrification, and high voltage DC grid infrastructure couldn’t pull the World economy out of a deep recession.

              Yes, Interesting!

              http://www.cnn.com/2016/04/22/opinions/rockefeller-fund-divesting-fossil-fuels-opinion-heintz/index.html

              Rockefeller Fund CEO: We’re getting out of fossil fuels investments

              The Rockefeller Brothers Fund used to invest in fossil fuel. Created by the grandsons of Standard Oil founder John D. Rockefeller, fossil fuel was a familiar space.
              Yet we’ve recently decided to sell all our shares in fossil fuel companies — not just coal, as has been fashionable of late — but oil and gas as well.
              For us, it’s not just a moral imperative, but it makes good financial sense…

              …We are in the midst of one of the largest transitions history — the transition from dirty energy to clean. There’s a lot of money to be made, and a lot of money to be lost.

              • Silicon Valley Observer says:

                “In principle there is no reason that an equally massive amount of private and public spending on solar, wind, hydro, nuclear, public transportation, rail electrification, and high voltage DC grid infrastructure couldn’t pull the World economy out of a deep recession.”

                The problem with that approach is that we are already over our heads in debt. That wasn’t the case prior to WW II. Also, it wasn’t only the deficit spending that pulled us out of the depression — it was also the destruction of much of the industrialized world’s production capacity. After WW II the U.S. was the only game in town.

                But even if we could put forth a WW II – like effort towards renewables, it won’t happen. We don’t have a Pearl Harbor to pull us together for that. No, much more likely we will respond to the energy crisis the way we have responded to pretty much every crisis in the past 50 years — by military force.

                • Dennis Coyne says:

                  Hi Silicon Valley Observer,

                  It is only a matter of redirecting investment. There were a lot of changes prior to Pearl Harbor, and the reason for the New Deal not pulling us out of the Depression was that the policies were not aggressive enough.

                  Keynesian economics was very new at the time, the General Theory wasn’t published until 1936 so policies were too timid relative to the problem at hand.

                  Even 80 years later when faced with the GFC, economists were still too timid (in the OECD especially) in using economic policy to combat the crisis. Perhaps by 2030 we will do better as we have the clear comparison of the EU, which followed very poor economic policy in response to the GFC and the US which did better, but still was not nearly aggressive enough in its fiscal policy response to the GFC.

                  It also should be pretty clear to all that Monetary policy is not adequate in a low interest rate environment, once real interest rates approach zero monetary policy is ineffective.

                  On military force, in response to the GFC no military force was used, better economic policy could have been used though.

              • Dennis Coyne says:

                Hi Fred,

                People get tired of hearing this, but proper economic policy, such as taxing externalities, and minimal government regulation would allow the economy to solve many of these problems. There also needs to be a recognition that there are “public goods” that require government investment or the amount of investment will not be adequate for the most efficient economy. Some of this can be done on the local level, but in some cases a national policy makes more sense (where interests cross state, county, and city boundries a larger government entity may need to set policy).

                • Caelan MacIntyre says:

                  People might get tired of hearing some of that maybe because it isn’t true and never will be.

                  People continue to talk about government and economics as if we have true government and economics. We do not.

                  The commodification of reality, of labor and resources, doesn’t make sense in the face of uneconomics-as-economics and pseudogovernment-as-government, despite the ongoing and remarkably-resilient and obstinate dogma.
                  Hey, let’s take a look at the word…

                  “Dogma is a belief or set of beliefs that is accepted by the members of a group without being questioned or doubted. It serves as part of the primary basis of an ideology or belief system, and it cannot be changed or discarded without affecting the very system’s paradigm, or the ideology itself.” ~ Wikipedia

                  The State, the so-called Government, and the so-called economy are just such dogmas, and, as such, there’re a whole lot of pontiffs blowing and handwaving it around and along like holy smoke.

                  Let’s make every day, Earth Day…

                  …and ease off on the smoke… for Christ’s sake and the pontiffs’ own.

              • TechGuy says:

                FWIW: I am reasonably sure that the reasons the Rockefellers are exiting Fossil fuels because these investments are now losing money, not because they are going green. They want people to believe its for the environment, but I a pretty sure they are doing it as a stop-loss. Of course since green energy companies are also losing money, I doubt we will see them invest going green. What better way to not frighten the public that the Rockfellers are liquidating, than with a green PR release!

                DC wrote:
                “On military force, in response to the GFC no military force was used, better economic policy could have been used though.”

                Well, thats not really true. The West has taken military action in the middle east. We had the Iraq\afganstan war just after the dot com bust, and a wave of regime change beginning in 2008 (Libya, Syria, Egypt, etc). These wars still persist to this day even though the invasion of afganstan happened about 15 years ago. The world is certainly more belligerent today, than it was before the dot com bubble popped.

                Its still early compared to previous economic collapses. the Great Depression began around 1930 after the 1929 crash, and WW2 began about 9 later in 1939. The world has a bit more wiggle room now that currencies are fiat and not fixed to a gold standard. but that is not going to prevent another crisis from happening.

                Currently, arms sales globally are soaring. Any one with capital is pouring money to their military (China, USA, Russia, KSA, Iran, India, Japan, etc). USA, China, Russia are modernizing their nuclear arsenals. Iran, KSA, India, North Korea (possibly Japan too), are build their nuclear arsenals. With the USA destabilizing the Middle East, just about every Middle East nation is probably looking to go nuclear, on the fear it might the USA next target. Once a nation goes nuclear, it gets remove from the USA’s regime change list.

                The economic crisis problem hasn’t been solved. The severe symptoms of the crisis have been post-poned with QE, ZIRP and other central bank gimmicks. We still have all of the same problems (exccessive debt, demographics issues, unfunded/grossly underfund pensions/entitlements) and soaring debt (via China bubble, Trillions in stock buybacks, student loans, etc). Globally, we are in worse financial shape today, than in March of 2009.

                The problem with Keynesianism, is that it often morphs into Miltary Keynesianism after it falls to fix anything.

                if my position not obvious I agree with SVO (Silicon Valley Observer).

            • Silicon Valley Observer says:

              If you believe that our understanding of economics is better today than in the 1930s, I would have to disagree completely. Do you think that the experience of the last 15 years supports your assertion? If anything, the “rules” by which modern macro economics was based have been proved empty. According to Samuelson the low interest rate environment of the last eight years should have increased aggregate demand and fueled inflation. It has done neither.

              There’s no real point to arguing this since you have your opinion and I have mine but I recommend to you “The End of Normal” by James K. Galbraith.

              • Dennis Coyne says:

                Hi Silicon Valley Observer,

                Inflation mostly arises from excess aggregate demand, or very poor monetary policy. It does not matter how low interest rates are if businesses don’t see opportunities, they will not borrow to invest in factories or equipment.

                Some economists expected inflation, clearly their economic framework proved faulty, other economists did not expect inflation in an economic scenario where the economy was operating well below capacity.

                Didn’t I say economics was not perfect, I thought I said it was far from it, but if not I should have.

                So where were we in 1930. Many economists steadfastly maintained that supply creates its own demand and that inadequate aggregate demand was not possible.

                Their explanation for widespread unemployment, I am not sure of, perhaps they believed 25% of the work force decided to take a vacation.

                I have never read the younger Galbraith, I am more familiar with his father’s work (I saw him speak in person in a small conference room as a graduate student, he was impressive.)

                From the brief blurb in Wikipedia, I would tend to agree with James Galbraith’s policies, it is the Keynesian revolution that was the most important thinking developed in economics since 1930. I agree there is too much focus on monetary policy.

                Do you mean Robert Samuelson or Paul Samuelson? The latter know economics, the former, not so much (a government major and journalist).

                • Caelan MacIntyre says:

                  “Economics is the social science that describes the factors that determine the production, distribution and consumption of goods and services.” ~ Wikipedia

                  ^^Well that seems like a no-brainer…

                  To properly understand economics, Dennis, we would seem to need to also factor in and understand democracy, equality, elitism, and government and their lack thereof.

                  If we ignore stuff like that then we don’t properly understand economics…

                  …nor likely have a snowball’s chance on the surface of Venus of implementing it in ways that work for us and the rest of the planet…

                  …as hopelessly and helplessly-trapped in our dogmatic capsules as we are…

                  …as we continue, such as on POB, to track in ‘mathematical precision’, our downfall and demise.

                  Hey, how about them oil prices, ay?
                  Maybe they will rocket up, hit the sky again, like in 2008 (though maybe not as high as 147 kms) and then smash into the ‘economy’.

                  So who wants to cast their bets as to high the rocket will go this time?

          • Oldfarmermac says:

            At first glance, it definitely looks as if it would be impossible for a country to do a whole lot to compensate for declining supplies of ever more expensive fossil fuels.

            But the example of nazi Germany proves otherwise.

            Germany was flat broke, and very short on resources, but managed to build the most formidable war machine in history up to that point, in less than a decade, and if Hitler had left running his empire war up to his generals, Germany most likely would have WON WWII, by avoiding a two front war. Hitler miscalculated and overreached, it’s as simple as that.

            My point is not to say anything nice about nazis, but to point out that sovereign states can under emergency conditions work near miracles, once the shit is in the fan, and the survival of the state is at stake.

            If the USA were to go on a wartime economic and legal footing, it would be possible to cut our gasoline consumption in half easily. This would put tens of millions of people out of work, unquestionably, but under wartime conditions, they would be fed and housed at public expense, and most of them put to work on war time type economic projects.

            It would be as easy as falling off a log for any major car company to build a two seat fore and aft oriented subcompact car that gets a hundred mpg inside a YEAR, if DIRECTED to do so. All that would be necessary would be to kick the safety mommies and pollution mommies and permit mommies and union boss mommies asses nice and hard and get them out of the way. Eighty percent of the necessary component parts could come right off the shelf.

            Stopping the production of three ton suv’s could be accomplished in a DAY. Air travel could be cut ninety percent or more, in a weeks, once everybody has a chance to get home.

            Carpenters could finish up new houses already started, and be put to work upgrading existing houses for energy efficiency within a couple of months.

            A punitive tax could be put on the hauling of beer by the ton mile, which would please the hell out of LOCAL brewers, and save most of the diesel used to transport beer.

            New highway construction, shopping mall construction, office building construction, etc, could be halted, and the skilled manpower and machinery put to work building wind and solar farms.

            Lithium mines could be opened within a matter of months, and the production of batteries capable of running cars could probably be doubled every two years easily enough.

            Leviathan is hard to arouse, and once aroused may do the wrong thing as often as not, but when it comes to survival, LEVIATHAN is the all time champ.

            Modern nation states may be CONQUERED by other nation states, but it is almost unheard of one to simply collapse. If a nation DOES collapse outright, it usually reconstitutes itself in pretty short order.

            Venezuela for instance may collapse into civil war pretty soon, but if so, one side or the other is VERY likely to gain the upper hand within a year or two at the most.

            If busybody outsiders get the hell out and stay out, the Middle East countries constantly at each others throats will settle their differences, with obvious winners and losers, within a few years. Once that happens, large scale fighting in that area would basically be over with for a long time, maybe for generations.

            I am not talking about relatively small countries such as Somalia, or extremely impoverished ones such as Bangladesh, but larger ones with well established governments.

            I could come out of retirement, and put four or five otherwise unemployed convenience store clerks to work growing all sorts of food, and provide them with a roof of some sort over their heads, within the next sixty days, IF we were go on a flat out war time footing. I could put all of them in the truck and take them to town once a month too, lol.

            ONE pair of well made bibs, and ONE pair of work boots WOULD last them a year, easily.

            Dealing with peak oil will be tough, but it won’t be IMPOSSIBLE, so long as we have at least semi competent leadership.

            Easy living is one thing, survival without the lights going out and people starving and shooting each other in the street over the last few cans of beans is something else altogether.

            Let us all pray to the Sky Daddy or Sky Mommy of our personal choice that we get a series of Pearl Harbor Wake Up Events sufficient to get our undivided attention, but not so serious as to cripple us beyond our being able to mount an effective response.

            The best thing that could happen might be for a bunch of terrorists to actually overachieve for a change, and sink about six or eight supertankers all the same day, all loaded to the gunwales, in strategically chosen spots.

            THAT would get everybody’s attention, FOR SURE.

            • Fred Magyar says:

              Let us all pray to the Sky Daddy or Sky Mommy of our personal choice that we get a series of Pearl Harbor Wake Up Events sufficient to get our undivided attention, but not so serious as to cripple us beyond our being able to mount an effective response.

              This particular wake up moment is very personal!! I live in Hollywood Florida and I know this particular 300 year old coral head. I dove on it while it was still alive. Anyone who is still pushing the use of fossil fuels should come visit me and I’ll take you out on our dying reefs. And please spare me the BS about it having nothing to do with global warming. The ocean was extremely warm in Florida last summer. We need to stop burning fossil fuels yesterday!

              http://www.sun-sentinel.com/local/fl-coral-dying-20160424-story.html

              That’s today’s news!

              Off Hollywood, scientists witnessed the collapse of a minivan-sized coral colony that had started growing more than three centuries ago, when the Spanish ruled the peninsula. As recently as September, live coral tissue covered 90 percent of the colony’s surface, making it among the oldest living things in the state. By December it was almost completely dead, said Brian Walker, a Nova Southeastern University research scientist, who found widespread mortality in corals in Miami-Dade and Broward counties.

              • TechGuy says:

                ” know this particular 300 year old coral head. I dove on it while it was still alive”

                Its only 300 years old. Obvious the climate was different 300 year ago. Nothing about nature is static, but humans like to think it is static or can be made static.

                Humans aren’t going to end burning fossil fuels until civilization dies. What one nation doesn’t consume (ie the USA), another will (China and India). For every Coal plant that is shutdown in the USA, China and India build three to four new ones with zero emission controls. Production from the West shifts to the East, where there is no consideration for the environment or long term consequences at all. Just about everything bought in the USA either was made in Asia or has parts or materials made in Asia. What is the environment cost to buying poor quality Asian goods that last a few years before ending in a landfil, and the toxic nightmare created in Asia to produced these goods. Then throw in the transportation impact of imported goods from halfway around the world. What’s your answer Fred?

                On the other hand, we could have retained domestic production. Producing quality American made goods that lasted 10 or more years, and prevented a Asian environmental mess by avoiding moving production over in Asia. Plus, with the capital for production remained inside the USA, more capital could be invested into making more efficient, better quality and avoiding the endless list of financial problems.

                For the most part, I see American environmentalists as hypocrites. As long as they don’t see pollution at home its OK, and they go on buying cheap quality China products that end up getting thrown away in a couple years, which of course are produced in the most pollution generating factories in the world! They spend their money frequently buying $5 Lattes contained in disposable paper cups and plastic lids that end in landfills ten minutes later, They consume 1200 mile salads flown in because the cost is too high to produce them domestically due to the excessive gov’t regulations imposed. There is an endless list of hypocrite follies that they choose to ignore because it does not suite there lifestyle or agenda. They think that buying an electric car that is likely charged from a nuclear, coal, or natgas power plant makes them green and they think they are doing the environment good. On top of that, they go out of their way to tell everyone they’re righteous and everyone else is a bastard.

                I could go on, but I think I made my point. I am sure there will be a lengthy rebuttal trying to justify a a position that can’t be substantiated.

                • Fred Magyar says:

                  Its only 300 years old. Obvious the climate was different 300 year ago. Nothing about nature is static, but humans like to think it is static or can be made static.

                  No asshole, you missed my point completely, which was that a three hundred year old organism, which I knew personally, just got wiped out unnecessarily! Actually the reefs in my back yard are, or should I say WERE, between three and seven thousand years old.

                  http://www.dep.state.fl.us/coastal/habitats/coral/

                  Florida’s coral reefs came into existence 5,000 to 7,000 years ago when sea levels rose following the last Ice Age. Reef growth is relatively slow; an individual colony may grow one-half inch to 7 inches a year, depending on the species. All coral reefs are in a constant state of flux. While expanding with new polyps (the living tissue) on the outer surface, they are simultaneously being ground into sand by storms and animals. During long periods of favorable conditions, the reefs may reach awe-inspiring heights and diversity.

                  Fuck you and everybody who thinks like you!
                  If the site owners want to ban me and my comment should they find it offensive, go right ahead I really don’t give a shit anymore !

                  • Not to worry Fred, I have used such language myself when people just don’t seem to have a fucking clue as to what the hell is going on.

                    Climate changes over thousands of years. If climate changes in only 300 years it is because something dramatic is happening, like human caused global warming and human caused ocean acidification.

                    That being said however, it will not change. Humans will continue to behave as they have behaved for tens of thousands of years. Just explaining to them that they are destroying the world will not change their behavior.

                    I am sorry Fred but the coral will continue to die. They will continue to destroy it. Nothing will change human nature. And it is human nature to put their individual comfort and welfare ahead of anything else in nature.

                  • notanoilman says:

                    We are suffering coral bleaching here too. 32C water is being blamed and they are trying to fight the BAU tourist boats to close Lovers’ Beach.

                    NAOM

                  • Caelan MacIntyre says:

                    I agree and empathize with Fred about the corals, among other good points he makes in general on here, but also with TechGuy in similar fashion, including about a lot of decontextualized and greenwashed techno-naivete, ignorance and/or hypocrisy.
                    Anyway, guys, if we can’t get it together here, how is everyone else going to get it together out there?

                  • Okay, I feel compelled to add something here. Environmentalists are not hypocrites. Some silly people expect them to live like the settlers in those Direct TV commercials, growing their own food and milking their own cows. Environmentalists must live in the world they were born into. People who call them hypocrites because they travel in automobiles and planes are just bitching because they have not a clue as to what is really happening in the world.

                    That being said, though environmentalists hearts are in the right place they are doomed to failure. We will use all the oil and burn all the coal. Though some people see the problem and try to fix things by consuming less, recycling and even limiting their offspring, the vast majority of humanity just goes on doing what they have always done.

                    Humans, just like all other animals, live to the very limit of their existence. They always have and they always will.

                  • GoneFishing says:

                    Fred, you are fighting devolution. Once the human race started to move away from natural selection and toward a destructive growth meme lubricated by money, uncorrected divergence started to occur. Sadly, it appears as if our most precious commodity, brains, are the first casualty.
                    So Rush Limbaugh and his chronies came about, spewing a toxic wasteland of lies. Their minions are numerous and mimic their leaders.
                    Annoying and irritating to the more intelligent, but capable of taking simple steps to wreck and cause havoc.
                    Ron is right, many people will continue to act in horrible ways and they will not listen.
                    Luckily, there is large contingent of at least moderately intelligent people. We just must make sure they don’t mate with the diverged.

                    I must agree with Ron, humans are animals, just another species. Except we do have the capability, if exercised, to recognize that and see we do not have the right to wreck the rest of the world in the name of greed and industrial progress. We also can plan for the future. We have a few special abilities and if properly channeled, the results will be survival for most species.
                    If we just act like animals, as Ron says, the results will be highly destructive, since that is the path we chose and are currently following now.

                    One particular saying is very illuminating.
                    “Idle hands do the devils work”. A truism that is directly intended to aid industrial destructionism. As in much of what we are told, turn it on it’s head and it becomes truthful and realistic.

                • Silicon Valley Observer says:

                  TechGuy,

                  Your comments about the coral notwithstanding, I agree with everything else you said. Resources will be used up by someone. We can do all the happy talk we want about the environment, but it doesn’t amount to anything. I think of my former boss who loved to shop at Whole Foods and buy “sustainable” food, but then took several vacations at remote places around the world leaving behind a huge carbon footprint. Environmentalism is about feeling good. It’s doesn’t do anything.

                  • wimbi says:

                    Aha, you have hit it! Environmentalism doesn’t do anything.

                    Yep, that’s the secret right there. I, one of those hypercritical green tree huggers, will now put in my usual drop in the ocean. I don’t;
                    fly
                    go far from home any way at all.
                    buy shit from china, or from anywhere.
                    eat much of anything we don’t get off our land ( a deer standing by the garden fence is a hell of a big target, hard to miss)
                    use any ff in house – bought a bargain oversupply of PV and run everything, all electric appliances, and car, off it. My electric bill last year was somewhere around minus 4000Kw-hr.

                    Now of course you will ask how I could afford to not do all the usual stuff. Easy, not doing gives gobs of money left over to do it; squander on tree hugs and all those other goodies.

                    Now, compelled by my early exposure to jesuitical mind bending, I am compelled to confess that it helps to not do all that tempting stuff because I am old and tottery and simply can’t do it no matter how much I would crave to.

                    so there’s the real solution, just get the hell off this planet, or more accurately, into it.

                • TechGuy says:

                  Fred Wrote:
                  “#!@& you and everybody who thinks like you!

                  As I feared, a rebuttal with name calling and absolutely no substance!

                  Fred wrote:
                  ” you missed my point completely, which was that a three hundred year old organism, which I knew personally, just got wiped out unnecessarily!”

                  Oh I got your point. Its the same point over and over. Its a point on a single topic that ignores every other problem!

                  A dieoff of coral does not mean its caused by CO2 emissions. Is very likely that other environmental changes, many which are caused by man, such as the pollution: dumping sewage in the oceans, Agriculture runoff ( fertilizer, herbicides & pesticides) , and many, many other factors that have nothing to do fossil fuels. But you want to believe its caused by CO2 emissions, thus it must be CO2! See excerpt from your post:
                  “Anyone who is still pushing the use of fossil fuels should come visit me and I’ll take you out on our dying reefs.”

                  If tomorrow the west stopped using all fossil fuels for energy, it would not end the dumping of pollution into the oceans that will continue the ocean die-off process. It would not shutdown the Asian factories producing a horrific levels of toxic waste and pollution. But it will shutdown well operated and reasonably clean operating factories in the west. Who knows, Fred. maybe it will be your job that gets outsourced to Asia next. Wouldn’t that be ironic? I already know, Fred. You don’t have to say it: “I still don’t get your point!”

                  Its also possible that coral died off caused by other natural factors. such as a shift in the current no longer provides the conditions for coral to thrive. Coral does die naturally and not all die-off events are caused by CO2 emissions or by man made conditions. I really don’t know what caused that particular coral die, off. But the most likely cause is agraculture run off, other pollution flowing into the Oceans and/or localized current flow changes. See link below:

                  http://celebrating200years.noaa.gov/visions/coral/side.html

                  You assume that civilization can just ditch fossil fuels and we can all start singing “happy days are here again.”, just like they did back in 1929. That’s your message, and it repeats like a broken record. Of course there is not a snowball’s chance in hell that the world can support even a fraction of the current global population (~ 7.4 Billion) without fossil fuels. When fossil fuels can no longer fuel the world, the world will fuel itself on war. The day your dream of “no more fossil fuels” comes true, will be the nightmare for everyone else.

                  I never denied that humans are impacting the environment. If you bother to ready my early post it very clear states, that very specific problem, which you choose to ignore because sadly, you have only one point to bring up: Fossil fuels are the only problem.

                  The environmentalists are making the environmental problems worse by promoting moving production over to Asia where there is absolutely no consideration of the environment. Pretty much every environmentalist can’t seem the grasp that. The more regulations are applied to the west, the worse the global pollution problem will get because its all still going to be outsourced to China and India in a far more destructive way. Go Google/Bing for pictures and video in China about pollution, and tell me that western policies have made the world a better place. Global fossil fuel consumption has accelerated since western production began to shift to Asia to bypass excessive western regulation, Westerns have adopted to the cost of cheap low quality imports, where everything is now disposal. if it break, throw it in a landfill and buy a new one from China: “Who cares if its breaks in a year. We’ll just buy a new one”

                  Far Left Climate Activists Leave Mounds of Trash For Cities to Deal With
                  http://www.thegatewaypundit.com/2014/09/far-left-climate-geeks-leave-mountain-of-trash-for-cities-to-deal-with/

                  “The alarmists are worried about global warming. But, they let others worry about their trash.”

                  Would I be wrong if I thought, that perhaps 70% of the stuff you own, consume, dispose of originated from some hell hole factory in China?
                  You never drink coffee out of a disposal paper cup or drink bottled water sold in disposable plastic containers. You never buy environmental unfriendly plastic junk like Kayaks made in China. You grow your own food since you don’t want to support a food chain that use 10 times the fuel energy than the food you consume, and to help avoid agriculture runoff that very likely killed off your favorite coral. That electric car or hybrid does use any fossil fuels, and doesn’t get charged using a fossil fueled power plant? You never eat foods flown in from thousands of miles, burning all that evil fossil fuel. Is that correct Fred, or am I still missing your point?

                  Environmentalists are just another group of people that are permitted to dictate to everyone else how to live, but exempt themselves.

                  Note: not a single name calling, swear word used in this message. Yeah, I know Fred, I still don’t get your point. When you truely have a near zero fossil fuel footprint than you can come lecture us on ending fossil fuel consumption.

                  • Fred Magyar says:

                    As I feared, a rebuttal with name calling and absolutely no substance!

                    Yeah, well tough noogies! Yes, seeing an old friend die was a very personal loss. Not that I would expect you to even begin to understand that! It isn’t about one coral head it is about the entire ecosystem in which it existed.

                    I doubt if you wouldn’t recognize or accept substance if it hit you in smack the face!

                    You aren’t even wrong! You know nothing about me, what I do, or how I live. You are fractally wrong about everything. Your entire world view is profoundly flawed !
                    Your arguments are pure strawman it is you who has no substance.

                    Maybe read this to get an idea as to why you are so wrong! Not that it will change your mind.

                    http://www.bostonglobe.com/ideas/2016/04/16/doubting-climate-change-not-enough/3aBHd9Weo9AxSmzI99LSZJ/story.html#comments

            • Silicon Valley Observer says:

              OFM, Germany built its war machine well after its currency crisis had ended and while it still had access to world oil markets. Once the war started their first targets were to secure oil that had been cut off. That’s why when they invaded Poland their first target were the oil fields in Galicia (which the Soviets got to first, much to the chagrin of the Nazis). That’s why he invaded Romania. That’s why they went to north Africa to try to control the Suez Canal and the oil that went through it. That’s why they tried to grab the caspian sea oil fields from Russia. That’s why they tried to reach the port of Antwerp during the battle of the bulge where their tanks ran out of fuel.

              Nazi Germany had to finally resort to converting coal to oil which was not done because it was a great idea but because they had no choice. Germany was no example of how a country can overcome lack of resources.

            • George Kaplan says:

              The Nazi’s prove nothing. Nothing they did was intended to be sustainable, everything was short term and based on a presumption that they would go to war. Their plan was for around 1942, but they managed to screw their country so completely before then that it got advanced. They were always going to fight on two fronts because the plan was always to take land and resources from the east to make up for any shortcomings at home.

        • TechGuy says:

          DC wrote:
          “The scenario I think most likely is and undulating plateau in C+C output to about 2021 and then gradual decline of under 1.5% though about 2027 and by 2030 that declining output will cause an economic crisis and a World recession.”

          I have serious doubts that infill drilling will hold out anywhere near that long. if it wasn’t for infill drilling scraping the bottom of depleted fields, we would already be in a serious decline, even with the shale bubble. How long can infill drilling last, I don’t know, but its not-sustainable.

          My guess at this point is sometime between 2018 & 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time). The current investment in CapEx isn’t sufficient to prevent much higher depletion rates.

          DC Wrote:
          “By that time it will be clear that peak oil has been reached and perhaps policy measures will be aggressively implemented to alleviate the problem.”

          It will be to late by then. Its already too late now. I expect when production problems develop. the World gov’t will turn to the same old tactics that make the problems worse: Price Controls, Rationing, even more excessive gov’t regulation, cronyism, and of course, more war.

          DC wrote:
          “An economic crisis (such as the 1930s in some parts of the World) can lead to positive social changes, they can also be very negative.”

          I cannot recall a single period in history that an economic crisis lead to positive social change. Its only after a wave of bloodshed and destruction that civilization makes a change. However, never in history did the world experience a economic collapse rife with revolution/social change, armed with nuclear weapons and nuclear power plants. Whatever remains of humanity in the aftermath, will likely be another 1000 years of the dark ages (ie the fall of Rome)

          Also consider in most cases it was war that made the economy better. Since the beginning of the industrial revolution, war has create a rapid progress in technology. For instance, WW1 paved the way for rapid use of machinery (farm tractors, trucks, cars, etc). The factories built to make tanks, trucks, etc during the war, started mass producing consumer goods after the war, and increase worker productivity. WW2 create the electronic revolution (computers, development of broad antibiotics, new materials: Plastics, etc).

          Unfortunately nuclear weapons rules out future tech revolutions since our weapons can now destroy civilization and damage the global environment for hundreds to thousands of years. A nuclear war will be over in a matter of a few days perhaps as long as few weeks, killing billions and there will be time to develop new technologies. Nuclear weapons are the Apex of war developed tech. We’ve become the Suicide race.

          DC Wrote:
          “Hopefully we will not forget our history.”
          We already did! See the rise of socialism in the West as a prime example. The lessons of war and politcican follies are lost after the last generation that suffered the horrors dies off. The WW 2 generation is nearly gone, Thus ushering in a new wave of folly.

          • Dennis Coyne says:

            TechGuy
            Higher capex increases depletion rate. Decline rate and depletion rate are different.

            The reserves will be developed as supply becomes short.

            • TechGuy says:

              DC wrote:
              “Higher capex increases depletion rate. Decline rate and depletion rate are different.”

              CapEx can be used to develop new untapped resources. Without CapEx to invest to replace depleting reserves, production will decline faster. In the context of my earlier posts. Companies will not likely invest in developing new projects to tap new reserves because oil prices are too volatile and the debt saturation will prevent the world from being able to afford expensive oil.
              Its the development of new reserves that offset depletion.

              Without the development of new reserves (ie CapEx), global production will decline much faster.

              • CapEx can be used to develop new untapped resources. Without CapEx to invest to replace depleting reserves, production will decline faster.

                Actually depleting reserves can never be replaced. Once the oil has been extracted it is gone forever. If 30 billion barrels are extracted each year there will be 30 billion barrels less to produce.

                New reserves are discovered each year, about one fourth of what is produced. But that is not new oil, it has been there for millions of years. Its location has only recently been discovered. But that new found oil is getting harder to find each year.

              • Dennis Coyne says:

                Hi Techguy

                Oil prices have been volatile since 1973
                Investment has continued. As long as debt to GDP remains where it is now there won’t be a problem.

  28. George Kaplan says:

    There’s a new parliamentary group in UK on Limits to Growth that had it’s first meeting this week.

    ‘A 2015 analysis of the remaining fossil fuel resources in China, USA, Canada and Australia, which includes unconventional resources, suggests that overall oil production is in fact peaking already’

    I hadn’t heard this before:

    ‘There’s an interesting theory – called the ‘green paradox’ – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. The German economist Hans-Werner Sinn has argued that “if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly” thus pushing their prices down’

    http://limits2growth.org.uk/wp-content/uploads/2016/04/Jackson-and-Webster-2016-Limits-Revisited.pdf

    • Silicon Valley Observer says:

      Wishful thinking in my opinion. As if “suppliers” had the ability to work in concert on such a tenuous premise. Sorry, just don’t buy it.

      • Dennis Coyne says:

        Hi Silicon Valley Observer,

        They do not have to work in concert. If oil suppliers in general think the World is moving quickly to alternative forms of energy, they may worry that their oil will be worth less because less of it is needed. I think that is unlikely to be the case at present, but perhaps in 20 years most vehicles sold will be battery powered or plug in hybrids with relatively long battery range (50 miles). Under those conditions demand for liquid fuels will be considerably less, especially if intensive development of public transportation in densely populated areas occurs as well.

        I too am skeptical of such optimistic visions of the future.

        I also thought smart phones were pretty cool when I first saw one about 10 years ago, but never thought I would own one. I thought cell phones were a dumb idea 20 years ago. I had never even heard of the internet about 30 years ago and didn’t have access at home until about 20 years ago (at a blistering 28 kb/s.)

        My point, things change, often more quickly than we believe possible.

        • Silicon Valley Observer says:

          I’m sorry, but anyone who thinks the energy companies are quaking in their boots at the force of the greenies is just, well, unrealistic. We humans will extract every last bit of fossil fuel we can because it’s just too good to leave in the ground.

          As far as phones and the internet are concerned, creating technologies that use even more energy than before are rather easy to do. Coming up with technologies that actually maintain the current standard of living while reducing energy inputs is vastly more difficult.

          But let’s say renewables do get to a point where they actually make a dent in fossil fuel use. What does that do? It makes fossil fuels cheaper which will just continue the demand for them. Jevon’s paradox.

          • Dennis Coyne says:

            Hi Silicon Valley Observer,

            Of course developing an alternative would reduce demand for fossil fuel, that is the point.

            I agree (and think I stated that) that it is unlikely that fossil fuel producers are concerned about alternative energy today and perhaps that will be true 20 years from now, is that your contention?

            As fossil fuels deplete they will become scarce relative to demand and oil prices will rise. This will make alternatives more competitive and the demand for those alternatives (light rail, rail, bus, EVs, and plugin hybrids) will increase and demand for oil will fall as substitution occurs.

            In addition the increased demand for alternatives such as EVs and plugin hybrids will lead to greater output and reduced cost due to innovation and economies of scale.

            As the demand for oil falls due to substitution and costs of alternatives to oil fall this may put downward pressure on the price of oil.

            That in turn would tend to reduce the oil supply as the higher cost oil such as deep water and oil sands and EOR projects may not be profitable at lower prices.

            You may think that oil will “always” be needed for transportation, but over time less will be used for land transportation.

            The point I was attempting to make about smart phones, and the internet is that there can be rapid technological changes which are hard to foresee.

            Perhaps 30 years ago you imagined that internet use would be as widespread as it is today and 15 years ago envisioned that smartphones would be as widespread as they have become in the OECD at present.

            If so, could you tell us what the World will be like 20 years or 40 years from now? It is not at all clear to me, but my guess is that relative to today we will be using less oil than we do at present, and we will be driving more EVs, and using more wind and solar power than we do at present.

            • Jef says:

              “Of course developing an alternative would reduce demand for fossil fuel, that is the point.”

              When has this ever happened in the history of the world? NEVER!

              “So called “alternatives will, just as it has been throughout history, simply be added to the mix in order to continue growth a bit longer.

              For a rational guy you can make reality disappear really easily.

              • Dennis Coyne says:

                Hi Jef

                The relative amounts will change. Biofuels were at one time about 100% of energy used for cooking and heating.

                Nobody is claiming that fossil fuels will not be used in the future.

                The claim is that the proportion of the total will be smaller.

                The quantity of demand will be equal to supply.

                Unless you think peak oil will not happen oil supply will decrease.

          • Oldfarmermac says:

            There are good reasons to believe that Jevon’s Paradox does not always apply in the real world. I am satisfied with the level of lighting in my home, and even if electricity were essentially free, I would not install more lights. OTOH, I would be less careful about turning them off , lol.

            People that work full time have little time for pleasure driving, and although they ARE prone to buying larger more powerful cars, a new Corvette goes about as far on a gallon of gasoline as a number of economy cars I have owned over the years. We tend to eat MORE expensive foods when we have more money, but once we get up to a certain average daily calorie level, our daily total food consumption levels off.

            It is obvious that renewables are cutting into the demand for fossil fuels already, although the reduction in oil demand is still trivial.

            Wind and solar power however are taking a serious bite out of the market for coal and gas already. We are getting five percent or so of our electricity here in the USA already from wind and solar, and that will likely double to ten percent by the time this decade is out.

            Hopefully the fast growth of the renewable energy industries will have the effect of allowing fossil fuels to last LONG ENOUGH and sell CHEAP ENOUGH to allow us to build out renewables on the grand scale. It IS ironic that the fossil fuel industries ARE ALREADY destroying their own markets by making it possible for the renewables industries to ( potentially at least ) grow fast enough to eventually shoulder the load.

            Dealing with one or two percent less oil per capita per year will not break the backs of the economies of well developed countries, at least not for a good while.

            • Caelan MacIntyre says:

              “There are good reasons to believe that Jevon’s Paradox does not always apply in the real world.” ~ Oldfarmermac

              I looked it up some time ago, and indeed, there appear to be exceptions. But it’s like anything, such as with the questionable forcing of some sorts of questionable education on women thing to get them to have less kids. Look into it and it can become increasingly less cut-and-dried, unlike a good beef jerky, and even then.

            • Silicon Valley Observer says:

              Sorry, OFM, but I’ll have to disagree with you about our economy being able to deal with one or two percent less oil per year. After just five years that could be 10% less oil — do you really think our economy could adjust to that?

              As for Jevon’s paradox, it’s alive and well. Of course you yourself would not be using more electric lights in your house, but that’s not the point. LED’s greatly increased the efficiency of emitting light and as a result commercial use of lighting has exploded. Jumbo LED screens are everywhere including huge billboards. Has electrical demand gone down as the result of the efficiency? No.

              I live in the land of renewables — every high school parking lot has solar panels covering the shade roofs that the cars park beneath, many homes have solar panels, wind turbines are common enough sights. Yet every morning the highways are clogged with ICE vehicles. How fast are they going to change to electric vehicles when the cost of housing here eats up as much as 50% of the household income. And, of course, even at 200 miles per charge, an electric car isn’t going to do you much good if you want to spend a weekend in L.A.

              The patterns of our lives are inextricably intertwined with oil. Undoing those patterns will not happen painlessly on a magic carpet of technology, in my humble opinion.

              ps, I really like your posts so don’t take this the wrong way. I’m a fan.

              • Hickory says:

                USA gets 9% of its crude imports from Venez.
                We should be ready to say adios to that supply at a moments notice, as that country collapses.
                I agree with OFM that a 10% loss of crude consumption in this country would be fairly painless to absorb, especially if it was phased in over 6 months.
                Problem is, at some point we will likely have a scenario where a bigger supply disruption happens over a quick period, likely due to mideast instability.

                • Oldfarmermac says:

                  I was thinking in terms of phasing in a ten percent reduction over a period of five years or longer.

                  Predicting is hard but we have a reg set in place already for cars to get fifty mpg in ten more years. In ten years, ALL the old gas hogs except collectibles will be gone to the scrap yards.

                  Heat pumps and new airliners and heavy trucks will certainly get ten percent better fuel economy in five years. Appliances will use ten percent less too.

                  But you can turn off half the lights ONLY ONCE.

                  There are hard limits to efficiency improvements, after that we have to work on doing without and renewable energy.

                • likbez says:

                  We should be ready to say adios to that supply at a moments notice, as that country collapses.
                  Iraq collapsed as a state, but oil still flow pretty much OK.

            • Silicon Valley Observer says:

              Even if renewables are taking a bite out of coal and gas, that’s for electrical generation. What we’ll be coming up against is a liquid fuels shortage that electrical generation from renewables will not overcome. Sorry, it just won’t. There won’t be enough people who could afford the electric cars assuming enough of them could be made fast enough.

              I take no pleasure in my view of where things are going. My son will have to deal with these issues, plus climate change and over population, and I feel bad. But neither will I allow myself to be lulled into believing technological magic will make a tinker’s damn worth of difference.

              • Oldfarmermac says:

                Hi SVO,

                No problems! Opinions are what make horse races possible.

                We have no way of really knowing today how, or how well, we will deal with resource shortages later.

                In the case of led lights being deployed for advertising and status purposes, when there is no NEED for the light, I am assuming that sort of waste will be handled by way of a high consumption tax on electricity used for that purpose, or that such lighting practices will simply be forbidden.

                I often think about how fast tractors and trucks replaced horses and wagons in my grandparents time. My maternal grandfather was driving HIS dad’s wagon to town, alone , when he was twelve years old, this being a daylight to dark job. He had at that time never had a ride in a car.

                By the time he was thirty he owned a “touring”car converted into a makeshift pickup truck,and a couple of years later he got his first tractor.

                The transition from horse to tractor, and wagon to truck came about not so much because of any shortages of horses or wagons, but more because tractors and trucks were so MUCH cheaper and so MUCH more efficient, in terms of dollars and cents.

                If we stay pedal to the metal on renewables, we can make up most of your ten percent drop in oil over five years via wind and solar power, and by building more electric cars and using more mass transit, building some bike paths, etc. If that’s not enough, consider that higher efficiency standards can be MANDATED, in just about every industry that uses energy or produces things that use energy.

                Nearly every body I know could cut his personal oil consumption by ten percent without suffering any loss of living standard.

              • PonziWorld says:

                What replaces the oil revenue? Nothing imo. A catastrophe.

                Natural gas gets overloaded with too many functions (heating, electricity generation, transportation, feedstock, etc)

                The economics of nuclear reactors has never been worked out and the generation 4 reactors are of no help imo.

                Renewables: same as it was in 1920 – Hydroelectric dams

                Renewables, Alternatives, Diversify the economy, etc. A bunch of meaningless words to cover up that Hydro is about it.

                The banks in the USA, Europe, and Japan are almost certainly insolvent. The interest in environment is just a cover to hide the financial ruin.

                What can science provide that has significance in a hopeless context? Room temperature superconductor that can be easily manufactured?

              • wimbi says:

                My leaf cost me exactly the average paid for a new standard sedan that year. Means lotsa people felt they could afford an electric car, since they did buy one at the same cost.

                The most bought model, F-15o, cost a lot more. Cost more than my leaf AND the PV to run it. The F-150 gobbles yet more gas every mile it goes, my leaf costs me nothing more every day, I have already paid for all the miles it will run.

              • Techsan says:

                Renewables and electric cars can indeed handle it. Some of us are doing it already. A Nissan Leaf (new) costs less than the average new gasoline car. A good used Leaf can be gotten for under $10K. Solar panels on your roof can power your entire home and two electric cars.

                We currently have the solar panels (12 KW) and a Nissan Leaf and Chevy Volt. We are at net zero energy over the last year, powering house and cars from solar.

          • TechGuy says:

            SVO: +1 🙂 You hit it out of the ballpark!

  29. GoneFishing says:

    For anyone who has not seen one of these, I am attaching a video showing the transport of a LNG cryogenic heat exchanger. This one came out of the Wilkes-Barre, Pa area and was headed to port for shipment overseas.

    https://www.youtube.com/watch?v=VxTXuqh0v4g

    Built by Air Products: http://www.airproducts.com/industries/energy/lng/lng-applications/product-list/natural-gas-liquefaction-lng.aspx?itemId=57A62244AC724328B90250DBF258805E

  30. Silicon Valley Observer says:

    ps, I was in Vancouver recently and was surprised at the large number of oil tankers at a anchor. I wondered how the oil got there since there isn’t a pipeline that I’m aware of.

    Then, driving along the highway past the rail yards, I was again surprised by two things — the large number of oil cars (which explained the ships) and the huge grain elevators. Surely Canada is a primary energy provider for both fossil fuel energy and food energy.

    • aws. says:

      There’s Kinder Morgan’s Trans-mountain pipeline. What you were seeing was export infrastructure.

    • Synapsid says:

      Silicon Valley Observer,

      The Trans Mountain Pipeline brings crude oil and refined products from western Alberta to Burnaby, near Vancouver. Lots of that stuff gets shipped out.

      Before it gets to Burnaby it also sends crude and refined products to other places, including Washington State.

  31. Silicon Valley Observer says:

    http://www.reuters.com/article/us-arabia-oil-kemp-idUSKCN0XA1LA

    “The rig count has increased by 50 since oil prices started to fall in mid-2014 and has almost doubled over the last five years”

    “As a result, the Arabian peninsula now accounts for nearly 30 percent of all active rigs outside North America, up from less than 18 percent when the slump began”

    Does this not sound exactly like the red queen situation? I think it completely supports Ron’s contention that they are producing flat out — and having trouble keeping their current production level up.

    • shallow sand says:

      I do not understand how the OPEC countries add so many new wells every year, yet claim to have so few producing wells.

      Look at the annual OPEC statistical reviews. The only way the well counts make any sense is that new wells must be abandoned within 5-10 years after being completed.

      Is this how it works, or are the well count numbers as bogus as the reserve numbers?

      These countries claim to have only 1500-3000 active wells each, yet they have hundreds of rigs running and are adding hundreds of wells per year.

      I am missing something?

      I’d also like to know more about their water handling. That is where a lot of expenses come in.

      I have discussed here many times before how we have a few wells that make very little water, and therefore LOE is under $10 per barrel, despite them being stripper wells. OTOH, most wells make 90% water as a percentage of total fluid, thus my angst when oil dips below $40 WTI.

      I do not doubt Middle Eastern OPEC countries have tremendous rocks. But so did the US, many years ago. Look at Yates in TX, “caves of oil”. Shallow wells that IP up to 200K barrels. But Yates didn’t go unchanged in terms of production, nor expense. Yates still produces oil, and it will for a long time. But it is now under CO2 flood, and that oil is not cheap.

      So, have to question a lot about Middle Eastern OPEC oil claims, IMO.

      • GoneFishing says:

        I would think that the M.E. is well covered by satellite imaging. Well activity is probably well known to the US government and military, they just don’t share well.

        Here is an interesting site that takes a look at Saudi well activity and changes over the years using available satellite imagery.
        http://satelliteoerthedesert.blogspot.com/

      • likbez says:

        Is this how it works, or are the well count numbers as bogus as the reserve numbers?
        This is like the USSR statistics. They report what the ruling elite wants the situation to be, not the real situation on the ground. Also the question arise, how with all those water flood and CO2 injections their reported production costs are so low ?

      • George Kaplan says:

        Shallowsand – almost a third of the rig count in ME is gas, do the OPEC numbers include these? For 2014 KSA completed 538 wells but added only 34 producers (about 1% increase). I don’t know what is included in the tables for crude but there will be exploration, appraisal, injection and disposal wells drilled as well as actual oil producers. However that figure would be consistent with them continually moving producers higher in the formations as the water contact rises, and abandoning lower wells (which might also explain low produced handling water issues). Overall OPEC completed 3713 but actually shut in net 295 oil producers, mostly because of Libya. Venezuela shut in almost 100, be interesting to see if that number increased last year, and more so this with Schlumberger pulling out.

    • Heinrich Leopold says:

      SVO,

      For me the strategy looks like Saudi Arabia has plenty of resources and prepares for the next upswing in oil prices in about two years. Quite smart and powerful strategy.

  32. Baker Hughes Rig Count still falling despite rising oil prices. WTI near $44 a barrel and Brent over $45 a barrel yet the US oil rig count is still dropping, down by 8 this week. Gas rigs down by 1. The big loser was the Permian, down by 5. Eagle Ford down 2.

    • Dennis Coyne says:

      Hi Ron,

      Of the oil rigs in the Permian basin that were stacked, 2 were horizontal rigs and 3 were vertical rigs.
      Currently there are 116 horizontal oil rigs, 16 vertical oil rigs, and 2 directional oil rigs operating in the Permian basin. The week ending Jan 3, 2014 there were 216 vertical oil rigs and 216 horizontal oil rigs operating in the Permian basin.

      Not a lot of conventional drilling in the Permian basin at present.

      The number of horizontal rigs running in the Permian is 3.4 times the number of rigs in the Eagle Ford. The number of Permian oil rigs in Texas is 116, 101H, 14V and the number in New Mexico is 18 total oil rigs with 15H and 2V.

      All of the stacked Permian oil rigs were in Texas.

    • Oldfarmermac says:

      “Baker Hughes Rig Count still falling despite rising oil prices.”

      If one thing has become obvious to me, it is that the oil industry is almost for sure the SLOWEST industry in the world when it comes to reacting to market forces.

      It took a LONG time for capacity to grow past the point the economy would absorb all the oil the industry could produce,bringing about the recent price crash.

      It is going to take a long time for the industry to ramp back up again, world wide, due to the cutbacks in upstream development.

      The pendulum in most cyclical industries generally swings too far, setting the stage for the next boom or bust, each time the cycle reaches a peak or valley.

      There is an excellent possibility that oil producers will enjoy a sellers market for a good while, starting within the not far distant future, assuming of course that the world economy doesn’t roll over and die.

  33. R Walter says:

    I read the story about Venezuela and how things are not so hot down in those parts of South America. I read about the long lines of people in front of grocery stores. The Ministry of Toilet Paper and how they make their money, that one really reeks.

    Here in the real world, I deliver, when in season, fresh vegetables to soup kitchens in my neck of the woods. I do donate hundreds of pounds of cucumbers not fit for sale at retail grocery stores. Odd sizes that are not presentable on a shelf but still taste good are what the food pantries receive. There are long lines on days the pantry is open to the public to receive free food. Happens here in America too. Plenty of squash too, stomachs go empty and need to be filled.

    When I read the words ‘Running out of beer’, there was cause for concern, those words are bad news, explains a lot right there.

    Worse than running out of oil? Could be.

    • Silicon Valley Observer says:

      Thank you for reminding us of how bad things are for many people even after 8 years of “recovery” from the “great recession”. And tonight the evening news told me how half of all people 55 or older have no retirement savings. Things are bad in the U.S.A. But the pain is not evenly distributed. Here in Silicon Valley you could easily believe that all that is needed to make the world right is another iPhone app. Meanwhile young people can’t afford to pay their rent much less save for the down payment on a house. John Michael Greer gets it better than anyone, in my opinion — the long descent. We are on our way.

      • Nathanael says:

        That’s due to the rise of an aristocracy — the CEO class who bribe Congressmen to cut taxes for CEOs and cut public services for everyone else.

    • Oldfarmermac says:

      Unless Maduro pays in cash, BEER is going to be in extremely short supply within a few days in Venezuela.
      I suppose his reaction will be to lock up some execs of the company that makes most of the beer, but without imported barley…….. which can no longer be bought on credit………… NO BEER.

      Something tells me the END game is approaching in that sad country……….. Pretty soon, Venezuelan oil exports will likely drop like a rock.

      How long it will take for things to settle down to a new “normal” after the final inning is anybody’s guess, but hardly anybody thinks it will take less than a couple of years for the country to get back on its feet once Maduro is out.

      There’s a LOT of wild cards in the oil price deck. Any one of them could result in the price going up, or staying down for some time.

      Rednecks and honest construction and trades guys will put up with a LOT, but deprive them of their beer, and that is ONE DEPRIVATION TOO MANY.

      Down that road lies a worker’s strike by even the most loyal of regime supporters.

  34. daniel says:

    Texas numbers are out and are looking interesting/confusing after last months uptick. Will there be a post on this?

  35. Longtimber says:

    “a dreaded scenario for U.S. oil bulls might just be becoming a reality”
    http://www.zerohedge.com/news/2016-04-22/iea-warns-saudis-russians-pump-much-oil-possible

    • Caelan MacIntyre says:

      From the article:

      “Finally, keep in mind that the current oil rally is – at least so far – a replica of what happened in the summer of 2015 when oil soared for several months only to tumble to fresh lows at the end of the year.”

      “But if you happen to have been ignoring the folks Obama calls ‘peddlers of fiction’ who have been warning us all of an impending economic crisis along the lines of the last financial collapse, you might want to pay attention now, because a disturbing series of events is in motion.
      First of all…” ~ The Organic Prepper

      “Yes, one of the biggest areas of bank troubles is emerging now from defaults in the energy sector that I have been saying will play a major role in birthing this banking crisis. (Translate that primarily oil and gas.)

      BofA’s Michael Contopoulos warned last week, it may be the worst default cycle in history with ‘cumulative losses over the length of the entire cycle could be worse than we’ve ever seen before.’

      ‘According to the Wall Street Journal, these defaults are from ‘massive energy’ loans that most investors didn’t even know about until recently.’ The recovery rate of these bad debts is falling extremely fast…” ~ The Great Recession Blog (where you can find a comment from our own steve from virginia. Hey, steve. ^u^ )

      Uh-Ohh

      • GreaseMonkey says:

        The USA imports about 6 MBD and saves about $60 per barrel since the summer of 2014. That works out to about $360 million per day or about $130 billion per year. In addition, the USA is importing 3 to 4 MBD less than prior to the energy investment made during the Obama administration.

        “one of the biggest areas of bank troubles is emerging now from defaults in the energy sector”

        What is the primary cause of the banking troubles above ?

        A. The Obama Administration

        B. The banks and oil adventure capitalists

        Caelan, this is how capitalism works. The strong will survive. The weak are kicked to the curb. Now it’s time for you to pick yourself up, dust yourself off and fight for your survival. We don’t need any more welfare queens.

        Nothing new here and enjoying the price at the pump

        • Caelan MacIntyre says:

          What would Mike say about that?

          But so I guess no coerced ‘taxpayer’ bailout/corporate welfare this time around then, if we have real capitalism now?

          • Duncan Idaho says:

            Capitalism has always needed a strong Central State to enforces its rules (often violently), from its emergence int he Italian City States in the 15th Century, until it current neoliberal form.
            It is a illusion that State Control is the enemy of capitalism– quite the opposite.

            • Oldfarmermac says:

              True enough, a valid insight.

              But can you think of any real world way of organizing an economy that does NOT depend on government enforcing the rules?

              • Hickory says:

                Certainly.
                But the problem is that the rules (fine print) are such that
                the super rich can sequester vast resources.
                And the government usually protects that.
                And the common person suffers for that.

              • Nathanael says:

                More accurately, I would say that governments arise spontaneously. If you don’t have a government, gangsters with guns will make one for you. The problem is really one of getting/keeping democrtaic control overe the government.

          • GreaseMonkey says:

            “What would Mike say about that?”

            If “Mike” can’t cut it. He can always flip burgers for Mac. I’m sure Mike’s the kind of guy who wouldn’t want America to go deeper into debt because of his failures.

            Real men don’t take handouts

            • Caelan MacIntyre says:

              Do ‘real men’ pimp and parasitize– by law– entire populations, including those who work at McD’s?
              If so, then maybe we may see fit to evaluate or re-evaluate what exactly we mean by ‘real men’.

              • GreaseMonkey says:

                Caelan, you seem a little insecure about your manhood. My point is that humans will rise to their level of economic contribution. As have billions before you. Some are rocket scientist and other are brain surgeons. And for those who struggle at achieving their dream. God created McDonald’s, gardening, anarchist and posting nonsense on blog’s.

                If the shoe fits, wear it

        • likbez says:

          Caelan, this is how capitalism works. The strong will survive. The weak are kicked to the curb.
          You are living is some neoliberal dreamland. Or is totally brainwashed with “neoliberal rationality”.

          Those multinationals which are well connected to the government survive, not the strongest in this neoliberal land. Look at GS, Citi and friends. All survived in 2008 at taxpayers expense. Same is true for the US auto companies. Can you spell “too big to fail”? Nobody else matters and in “dog eats dog” fight multinationals are always winner over smaller guys.

          Actually it is small and medium fish is left to fight and die in “dog eats dog” world, while big guys smile from their offices watching their gladiator fights, while being protected by government coffers and government contracts. And then simply buy the winner. This is how neoliberalism works:

          Neoliberalism does, however, represent a paradox for capitalism. Its relative success as a ruling-class strategy, particularly in weakening the trade union movement and reducing the share of profits going to labour, has helped to disguise that some aspects of this mode of regulation are proving unintentionally detrimental to the system. Serving the interests of the rich is not the same – or at least, not always the same – as serving the interests of capital and may, in certain circumstances, be in contradiction to it. Simply doing what the rich want is unlikely to produce beneficial results for the system as a whole, although it may help increase the wealth of individual capitalists. For not only are capitalists generally uninterested in the broader social interest, which we might expect, but they are also generally incapable of correctly assessing their own overall collective class interests, which might seem more surprising – although as we shall see, it is a long-standing phenomenon, observed by many of the great social theorists from late eighteenth century onwards. As a result, capitalist states – or more precisely, their managers – have traditionally acted to make such an assessment; but in the developed West at least, neoliberal regimes are increasingly displaying an uncritical adherence to the short-term wishes of particular business interests. This is not the only emergent problem: the increasingly narrow parameters of neoliberal politics, where choice is restricted to ‘social’ rather than ‘economic’ issues, has encouraged the emergence of far-right parties, usually fixated on questions of migration, which have proved enormously divisive in working-class communities, but whose policies are in other respects by no means in the interests of capital.

          The self-destructive nature of neoliberal capitalism has nothing necessarily to do with the removal of restrictions on markets. The rise of neoliberalism made it fashionable to refer to Karl Polanyi’s The Great Transformation, the assumption being that neoliberalism is in the process of realising Polanyi’s nightmare: reversing the second part of his ‘double movement’ – the social reaction against markets – and unleashing the mechanisms that he saw as being so destructive of society and nature.

          Leaving aside the fact that capitalism was always capable of producing social atomisation, collective violence and environmental destruction, even in periods when the state was far more directly involved in the mechanisms of production and exchange then it is now, there are two problems with this position. First, rhetoric apart, capitalists no more favour untrammelled competition today than they did when monopolies and cartels first appeared as aspects of the emerging system in the sixteenth century. Second, one would have to be extraordinarily naïve to believe that the neoliberal project has been about establishing ‘free’ markets in the first place, although this myth has been assiduously perpetrated by social democratic parties who, eager to disguise their own capitulation to neoliberalism, emphasise their opposition to the marketisation of all social relationships, even though no-one – except perhaps the followers of Ann Rand – seriously imagines this is either possible or desirable.

          In what follows I will mainly draw on the experiences of the UK and the US, since these were the first nation-states in which neoliberalism was imposed under democratic conditions – unlike Chile or China, for example – and where it has in many respects gone furthest. To understand the real nature of the difficulties inadvertently caused for capital by neoliberalism we have to begin with the role of capitalist states ‘in general’.

          http://salvage.zone/in-print/neoliberalism-as-the-agent-of-capitalist-self-destruction/

          From this point of view, I wonder why shale companies are different and does not deserve the same level of government support as TBTF banks? They also produce currency if we assume that oil is a currency in neoliberal world we live…

          And do it pretty inefficiently much like anything TBTF banks do.

    • likbez says:

      Longtimber,

      That’s yet another article that just confirms that the shadow figures behind Zerohedge are short on oil. Nothing more, nothing less.

      Citing Zerohedge in this forum without providing critique of their simplistic and biased views is form of “low oil price forever” propaganda, IMHO 😉

  36. SatanBestFriend says:

    http://time.com/money/4300900/united-healthcare-obamacare-exit/

    Loosely related topic.

    One of nations largest health providers fears huge losses.

    Remember, insurance companies use bond laddering for cash flow.

    1% interest treasury bonds are killing them.

    The fed will have to back off at some point. Then the market will determine interest rates.

    Are you gonna lend your money for 10 years and hope to get paid back? I won’t either.

    thanks!

  37. Watcher says:

    Reserves.

    Lowered price per SEC regs requires reduction in reserves estimate AND/OR reduction in collateral valuation, a good reason for price bump approaching April 30.

    But Petrobras? I guess Brazil has an SEC.

    But they shouldn’t.

    From a country perspective, all you want to know about is if the oil is there. Price doesn’t matter. If you have to have it you nationalize the industry and get it, because you have to have it and nothing non geological can be allowed to stop you.

    Country reserves estimates should not be price sensitive.

    • Oldfarmermac says:

      Hi Watcher,

      Your “price doesn’t matter” scenarios would sell a lot better if you would acknowledge when you post them that a subsidized price is still THE price, and in fact THE ONLY PRICE that matters to a producer, be that producer the owner of a single old stripper, or EXON, is the price said producer actually gets. It matters not a tinker’s damn to the producers bean counters WHERE the money comes from, so long as more comes in than goes out. Otherwise, the checks start bouncing .

      Nothing what so ever can be produced very long at an actual loss, unless the loss is small, in relation to the riches of the producer. There ain’t no stinking free lunch.

      Having said this much, it IS true that the REAL PRICE of something a society wants or MUST have can be hidden by means of a subsidy or several subsidies.

      Checks written by sovereign governments can bounce IN PART, rather than in the whole, due to inflation. A Venezuelan government check will still clear the bank, but the proceeds buy less every week than they did the week before. Basically what this means is that EVERY check is worth less than the face amount, compared to last week, but no particular government check actually bounces.

    • Lowered price per SEC regs requires reduction in reserves estimate…

      Well yes and no. The SEC does require a company to adjust the value of their reserves according to price. And also…Understanding SEC Oil and Gas Reserve Reporting

      The SEC Final Rule defines the term “proved oil and gas reserves” as “those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain regardless of whether deterministic or probabilistic methods are used for the estimation.

      That is their reported reserves must be economically recoverable. The total amount of economically recoverable oil may or may not change as the price changes.

      Country reserves estimates should not be price sensitive.

      Nonsense! The term economically recoverable does not change just because the oil company happens to be a national oil company.

      • Watcher says:

        Suppose you had a country that had a currency it refused to allow to trade in FX. Or a currency it pegged. Extreme scarcity must necessarily eliminate economics.

        There is no “economically recoverable” if your cities are starving. There is only technically recoverable.

        A truly national oil company is communistic. The workers are fed. They are sent to work at gunpoint. In such a circumstance, which inevitable btw, there is no price sensitivity to oil and the only thing that government needs to know is how much is left, technically.

        Come on, this is obvious. A country with enormous military power and no oil . . . why would an oil supplier sell oil to them at any price at all? They would reasonably require disarmament in return for oil. Or the supplier would have to succumb to overt military threats and provide oil . . . at dictated price.

        • A truly national oil company is communistic. The workers are fed. They are sent to work at gunpoint. In such a circumstance, which inevitable btw, there is no price sensitivity to oil and the only thing that government needs to know is how much is left, technically.

          Watcher, now you are just being silly. You are just trying to make up possible scenarios where your claim would be correct… and failing to do any such thing. Human wages are but a tiny part of the expense of producing a barrel of oil. It costs every oil company a given dollar amount to produce a barrel of oil… regardless of their human labor costs. And if it cost them more to produce that barrel than they can sell that barrel then that barrel is not economically recoverable. End of story!

          Of course they may continue to produce oil at a loss if they only need the oil for their own use, not to export. But such a situation cannot continue indefinitely.

          Also, no nation uses slave labor to produce oil. Positing such a scenario is absurd.

  38. Enno Peters says:

    I have a new post on the Eagle Ford, here.

  39. Point Thompson, Alaska, begins condensate production.

    After decades of failed attempts, oil production begins at Point Thomson

    So far, a trickle of oil is flowing. About 5,000 barrels daily of condensate — the light oil that’s similar to kerosene or diesel — is being dripped from 100 million cubic feet of natural gas. That amount of gas – almost half the gas used in Southcentral Alaska on an average day — will be extracted daily, then pumped back into the ground after the light oil has been extracted.

    • George Kaplan says:

      That’s gas cycling – if it’s not done in the first few years then a lot of the condensate get’s left in the reservoir when the gas is produced (because of retrograde condensation liquids drop out of the gas as pressure is reduced) the well productivity can also be badly affected if a lot of liquids are produced around the well bore where the reservoir pressure is the lowest. Once the gas is leaned out enough they’ll produce it for sale.

      • Well, that’s not the reason they are doing this. They have no way of getting the gas to market. Point Thompson is on the Arctic Ocean, east of Prudhoe Bay, just a few miles west of the Arctic National Wildlife Refuge.

        There is no pipeline to get the gas 800 miles to the south. They have no choice but to pump it back into the ground. They will never produce the gas for market until they build another pipeline. And that may never happen.

        The condensate is piped to Prudhoe Bay, mixed with the oil and then sent south via the Trans-Alaska Pipeline. But Exxon has been trying for years to get a gas pipeline built with no success. And prospects are dim for that pipeline ever getting built.

        • George Kaplan says:

          I thought the plan was for this to feed Alaska LNG? To get the condensate they made need cycling for a many years before the gas is produced.

          • Yeah, that was the original plan but there is no way to ship anything except condensate until another pipeline is built. They cannot ship LNG via the Trans-Alaska Pipeline. The LNG plant was to be built on the south shore.

            Of course if we ever get an ice free Arctic they could build it up there.

            • George Kaplan says:

              The Alaska LNG (on the south coast at Nikiski) has been approved for gas export and the partners are progressing with pre-feed and regulatory submissions for the environmental and local economic impact ($250 million approved from memory). Alaska needs the tax and royalties. I think there is almost no chance that it won’t get approved, only a permanent LNG glut or economic collapse would stop it going ahead. Say two years to get approval. one year design, three or four years construction and commissioning gives seven years of gas cycling, which sounds about right for an 8 tcf field. I don’t think the partners would have invested just to recover the condensate, they must have a high expectation (certainty I’d say) that the LNG plant and pipeline will proceed, and they would pre-invest for gas cycling on that basis so that the gas can be produced as soon as possible, concurrent with the plant development being completed. The new pipeline would be 42” and with the plant would be the biggest construction project by far in USA (I seem to remember a figure of $45 billion but can’t find it now).

              http://ak-lng.com/

  40. Oldfarmermac says:

    This is worth reading for people interested in the way American fuel economy standards are written and gamed by the auto industry.

    http://e360.yale.edu/feature/on_fuel_economy_efforts_us_faces_elusive_target/2980/

    But in the end, the standards DO result in cars being sold that do go farther on a gallon of fuel.

    If the average man on the street really understood the actual costs versus the actual benefits involved, the standards would be tightened up quite a bit in a hurry.

    We are WAY past due for a federal gasoline tax increase, just to maintain the purchasing power of the tax revenue against inflation. I for one don’t drive that much, or go far anymore, but I would still gladly pay another quarter in order to have better maintained and safer roads.

  41. Oldfarmermac says:

    There has been some discussion as to whether the economy can grow using less energy.

    http://oilprice.com/Energy/Energy-General/Will-Demand-For-Electricity-Ever-Start-Growing-Again-The-Wall-Street-View.html

    Some excerpts:

    1. Electricity demand growth has been near zero for past eight years despite rising GDP. What are Wall Street expectations for growth?

    Interviewees expected kWh growth to be slower than GDP growth by a margin of 49 to 6. The mean expectation for future annual kWh growth was a little less than one percent versus a consensus of about two per cent for GDP. In the 2014 survey, I asked, whether interviewees expected growth in kWh sales to continue to be slower than GDP, and they answered yes by a similar 49 to 2 vote. Although the questions were worded differently, the respondents, in effect, gave the same answer.

    “shift from a manufacturing to service economy (a long used response to explain slow electric load growth”

    ” Energy efficiency equipment led with 50 mentions and demand response was second with 23, which suggests a potential new paradigm. Energy efficiency and demand response (and perhaps eventually grid storage) will become the industry focus instead of renewables and state Renewable Portfolio Standards (RPSs).”

    “. Do finance industry respondents see something that might change their weak growth outlook?

    Only the electric vehicle market. This was mentioned by five survey interviewees.”

    “If the question is, “Does the financial community see a trend to higher levels of kWh sales growth?”, a dominant majority answered no. Of nineteen interviewees who offered commentary, six went out of their way to indicate that annual load growth may eventually go negative. One energy economist commented: “Energy efficiency will continue to erode load growth… Five years out, kWh sales may start an absolute decline.”

    These are Wall Streeters talking , and Wall Streeters are not noted for being especially enthusiastic about environmental issues.

    A friend of mine who is an industrial electrician and maintenance man at the last running furniture factory nearest home tells me the factory is shipping twice as much furniture as it did twenty or thirty years ago, without the power supply or plant wiring getting any upgrades. This plant is literally turning out twice the product using about the same number of kWh’s.

    I don’t pretend to know how long this trend toward more economic output per unit of electricity can continue, but it shows no signs of coming to an end for now or for the next few years.

    A similar trend is quite obvious in farm and industrial machinery. New equipment runs on quite a bit less diesel fuel than older equipment, and farmers and builders are constantly finding ways to get a little more done a little quicker using a little less fuel.

    The guys who actually USE their full size pickup trucks for business purposes are literally getting twice as many miles out of a gallon of diesel these days as they got from a gallon of gasoline twenty years ago.

    Peak oil will eventually put a stop to people using f 250 pickups to run errands, but tradesmen will probably still be able fuel them up for a decade or two after that. Adding ten or twenty bucks to the cost of a visit by your plumber due to diesel costing ten or twelve bucks won’t matter much when the bill is going to be a few hundred ANYWAY.

    Peak oil is PROBABLY going to be more like our going downhill due to old age than it is like having a sudden bad heart attack or stroke. There are ways to compensate and adjust , but in the end………….

    We either go renewable, or we go back to muscle power. We have enough oil to last another generation at least IF we get the wake up call and change our ways. That ought to be long enough to adapt without the world crashing around us disaster movie fashion.

    Personally if I last as long as I hope, and can still drive, I can see owning TWO old raggedy assed Volt or LEAF automobiles, each one bought for say three grand, and driving one while the other one is held in reserve so as to be able to keep BOTH of them charged up nearly all the time using my own PERSONAL pv system. I think maybe I can cut my PERSONAL oil consumption by ninety percent at least within fifteen years, at a very reasonable cost. 😉

    If somebody manages to sell a small engine of some sort that runs on external combustion at a reasonable cost, I will buy one and run it on firewood, during heating season, using the “waste ” heat for the usual purpose of keeping the house warm. That small engine can drive a generator to charge up the cars on cloudy short winter days and during long cold winter nights, lol.

    • SatansBestFriend says:

      “Peak oil is PROBABLY going to be more like our going downhill due to old age than it is like having a sudden bad heart attack or stroke. There are ways to compensate and adjust , but in the end………….”

      We don’t know how oil exporters are going to behave when it is obvious to everyone that oil production is in terminal decline.

      For example, look at how Russia is behaving. I read TOD and Peakoil.com and everyone assumed Russia was like Saudi Arabia. They are not. They have 6000 nuclear weapons and may very well play peak oil strategically. Cut off people who disagree with YOU!

      The decline rate may accelerate based on humans that don’t wont to ride on donkeys to the grocery store.

      Big fan of Mac’s posts (when they aren’t too long to read on an IPhone :).).

      That being said, I think Coal to Liquids is basically an ignored topic and the technology is there ( ask SASOL in south Africa where they are doing it economically!).

      USA has huge coal reserves. I’ll bet my mediocre testicles that those will be liquefied.

      Satan is guaranteed to win the battle between good and evil. You heard it here first!!!!

    • wimbi says:

      Small engine of some sort. Here you go,
      http://sunpowerinc.com/wp-content/uploads/2014/08/Doc0076-A-Biomass-Fired-1-kWe-Stirling-Engine-Generator-and-Its-Applications-in-South-Africa.pdf

      These people made a lot of good engine and cooler prototypes, and then got acquired by a cryocooler competitor and dropped all engine work to go for cryocoolers exclusively.

      But the engine tech is just sitting there, anybody could run with it. They scale to much higher power, and efficiency goes up.

      • GoneFishing says:

        When a plant is cut down and burned, it not only stops sequestering CO2 but then releases all of it’s embedded carbon to the atmosphere. It also stops producing oxygen an ceases it’s other services (not just to us but to multitudes of other species).

        A tree can sequester 48 pounds of carbon dioxide per year and will have removed about one ton of carbon dioxide in it’s first 40 years.
        “An approximate value for a 50-year-old oak forest would be 30,000 pounds of carbon dioxide sequestered per acre,” said Timothy J. Fahey, professor of ecology in the department of natural resources at Cornell University. “The forest would be emitting about 22,000 pounds of oxygen.”
        Of course smaller shrubs and plants also sequester carbon dioxide and produce oxygen, as well as manage water runoff and erosion.

        Any use of biomass must be very carefully managed otherwise it’s negative effects will quickly overwhelm any positive gains. Rate must also be considered as well as CO2 atmospheric residence time, loss of oxygen production as well as runoff and erosion control. To burn a tree in less than a season, while it takes 40 to 80 years to regrow that tree is putting a large plume of CO2 permanently into the atmosphere that may or may not be eventually removed. The good news/bad news is that the ocean will sequester some of that CO2. Not only acidifying the ocean further but some of that CO2 will be released in the future as atmospheric levels fall, thus extending the tail of atmospheric CO2 concentration.
        To believe that biomass use will be well managed is likely naïve.

        Selling farm biomass for energy removes minerals from the soil that must be replaced by external means, involving mining and other energy intensive operations.
        Use of biomass on a relatively small scale is viable if well managed, large scale implementation is dangerous and harmful.

        I think our main objective should be to short circuit the current harmful energy system by using as much solid state solar and wind power as possible. Storage can be solid, hydro, thermal or chemical (battery). The use of direct thermal energy from the sun for heating buildings is also a viable scenario that goes around the faults in our current energy systems. Focused solar steam generation for power makes sense in a good portion of the planet. Wind, of course, is viable across much of the planet.
        None of these involve the continuous burning of biomass or fossil fuels.

        Since the generating engine was developed in South Africa, here is a summary of South African solar resources.
        “Most areas in South Africa average more than 2 500 hours of sunshine per year, and average solar-radiation levels range between 4.5 and 6.5kWh/m2 in one day.

        The southern African region, and in fact the whole of Africa, has sunshine all year round. The annual 24-hour global solar radiation average is about 220 W/m2 for South Africa, compared with about 150 W/m2 for parts of the USA, and about 100 W/m2 for Europe and the United Kingdom. This makes South Africa’s local resource one of the highest in the world. ”

        So why ignore such a vast resource and attempt to harness an inefficient, harmful and polluting method of power generation?

  42. likbez says:

    An interesting take on King Salman “palace coup” that happened in January 2015 and led to war in Yemen. Also some information about this young gambler Prince Muhammad bin Salman

    King Salman consolidates the Al- Sudayri “palace coup” By Stig Stenslie
    May 2015
    http://www.peacebuilding.no/var/ezflow_site/storage/original/application/84b813ab2360ba0ea349ab0dead0b8ff.pdf

    King Salman’s reshuffling of top posts might increase the long-term risk of political instability in Saudi Arabia. It underpins the notion that the Al-Sudayri clan of the royal family has carried out a “palace coup”. Although none of the members of the family has aired any discontent publicly, with the exception of a single tweet by the notorious loose cannon Prince Talal, it is highly likely that King Salman’s recent moves have created considerable tension within the royal family. The reshuffling alters the balance between the various family fractions. Historically, feuding within the royal family has weakened its grip on power, and it was familial infighting that caused the second Saudi state’s collapse in the late 1800s.

    It is not surprising that Muqrin was deposed as crown prince – given that he has a weak personal power base and that his mother was a concubine of Yemeni descent. The need for King ‘Abd Allah to explicitly stipulate in the decree appointing Muqrin that the decision could not be altered or changed in the future by any party clearly indicates that the late king was aware that the appointment of his half-brother would be met with resistance from within the family. That said, Salman’s prompt decision to sideline Muqrin challenges established norms within the royal house: it is neither common that a new king sets aside the heir apparent appointed by his predecessor nor that he overrules a royal decree issued by the late king. Neither did it come as a surprise that Muhammad bin Nayif was promoted to crown prince, although his appointment as deputy crown prince in January was controversial within the royal family. He is one of the seniors among Ibn Sa‘ud’s grandsons and has a reputation as a skilled leader. However, what came as a surprise was the appointment of the young wunderprince Muhammad bin Salman as deputy crown prince. The prince – whose age seems to be a well protected state secret, but lies somewhere between 27 and 34 years – has few merits. Through the appointment, Salman violates a number of key royal norms: all previous kings have promoted their own sons in terms of power and wealth, but within reasonable limits.

    In 1964 King Sa‘ud was deposed by his own brothers partly because he sought to amass power in the hands of himself and his sons at the expense of other powerful members of the royal family. Age, experience and kingly qualities have always been the basis for the choice of a successor to the throne. According to the “Basic Law”, which is the closest Saudi Arabia comes to a constitution, each of Ibn Sa‘ud’s grandsons has the right to be king, and they number around 200. By appointing his own son Salman has bypassed numerous other royals who are both older and far more experienced. After Salman became king ‘Abd Allah’s family branch and the former king’s allies have lost political influence. Khalid al-Tuwaijri, the former head of the royal court, was the first one to be deposed. Two sons of ‘Abd Allah, who were deposed as governors of the key provinces of Riyadh and Mecca, followed him. Currently Mitab bin ‘Abd Allah, who is minister and commander of the Saudi Arabian National Guard, is the only one among the late king’s sons who has retained an important position, and it will not come as a huge surprise if he too has his political wings clipped. Muqrin, the now-deposed crown prince, was also among the late king’s closest aides.

    One should not read too much into the replacement of Sa‘ud al-Faysal, who was first appointed in 1975, making him the world’s longest-serving foreign minister, and who has struggled with health problems. Faysal “asked to be relieved of his duties due to his health conditions”, said the royal decree, which may well be correct. However, it is known that there was disagreement between Faysal and the younger princes Muhammad bin Nayif and Muhammad bin Salman over the decision to bomb the Huthi rebels in Yemen, with Faysal arguing for a diplomatic rather than a military approach.

    Salman’s tough and militaristic foreign policy – known as the “Salman Doctrine” – can be seen in light of his consolidation of power.

    The decision to bomb the Huthis was arguable partly driven by the king’s desire to consolidate the position of Muhammad bin Salman, who, besides being deputy crown prince, is the world’s youngest minister of defence. Throughout the military campaign Saudi media loyal to the king have painted a picture of the young prince as a decisive military commander. In Saudi Arabia rumours are saying that Prince ‘Abd al-‘Aziz bin Salman, the fourth son of King Salman, could soon replace the current oil minister, 79-year-old technocrat ‘Ali al-Na‘imi. If this happens, the prince, who was promoted from assistant oil minister to deputy oil minister earlier this year, would be the first member of the royal family to run this important ministry – another move that arguably would strengthen the king’s line.

    Former kings have appointed non-royals to this ministerial post to avoid creating the notion that one family branch controls the country’s main source of income and the source of the royal family’s wealth.

  43. R Walter says:

    If the Saudis are pumping ten million BPD, in a year, it is 3,650,000,000 barrels of oil.

    In four years, it will be 14,600,000,000 barrels of oil.

    5 percent of 266 billion of reserves is 13,300,000,000 barrels.

    60 percent for export, 8 billion barrels, they can hedge that much, write contracts, they become derivatives, sell the contracts on the futures market, price of oil should increase.

    Use the contracts to obtain a ticker symbol for Aramco, sell shares. Share price, backed by the remaining 95 percent of reserves, increases too.

    You can raise more money for direct investment in exploration.

    Might need smoke and mirrors, but it might work.

    Just some hunches. Could be all mindless drivel, try not to agree with that.

    • likbez says:

      You can raise more money for direct investment in exploration.

      A lot is possible in the financial world, but you need full cooperation of Wall Street for all large scale derivative plays.

      The more fundamental question is how well those neoliberal reforms young prince pushes are compatible with the monarchy he is trying to inherit.

      I think it is more probable that Prince Muhammad bin Salman “neoliberal reforms” might destabilized the fragile kingdom much like Gorbachev’s neoliberal reforms destabilized the USSR.

      Also those 7K princes who are now effectively excluded and marginalized by king Salman “coup d’état” are a factor that also endanger neoliberal reforms. The latter mean the full transfer of political power to financial oligarchy, much like happened in the USA and GB. And probably to the US and British financial oligarchy, as Saudi do not have their own.

  44. Frugal says:

    Saudi unveils far-reaching plan to move away from oil

    Riyadh (AFP) – Saudi Arabia said Monday it would create the world’s largest sovereign investment fund and sell shares in state energy giant Aramco under a vast plan unveiled to transform its oil-dependent economy.

    “We will not rest until our nation is a leader in providing opportunities for all through education and training, and high quality services such as employment initiatives, health, housing and entertainment,” Mohammed wrote in an 84-page booklet outlining the plan.

    If it works, Saudi Arabia “can live without oil by 2020”.

    To me it sounds like Crown Prince Mohammed bin Salman is preparing his citizens for the day of reckoning. Why is bringing up this topic right now — probably because Saudi oil production is peaking right now. And whatever “transforming the economy away from oil” entails, the Saudi population won’t like it.

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