Peak Oil and The Blibbit Principle

Podunk was a small town Arkansas. Back about a hundred years ago Podunk had no sewage plant, everyone just used outdoor toilets. But a problem soon developed, Podunk’s water supply became contaminated. That’s when they decided to build a blibbit* in which they would store their crap. This blibbit was built out of wood and placed on a hill in a convenient location, right in the middle of town.

The blibbit was almost circular, about 100 feet in diameter. Poles, similar to utility poles, were placed in the ground about 10 feet apart and boards were nailed to them to form the sides up to about 10 feet high. Then every few days everyone in town would haul their crap to the blibbit and dump it in. After a few years the blibbit was full so they added a few more boards to raise the sides higher.

But then someone noticed that the bottom boards were bulging out and appeared about to rupture. “She’s gonna burst” the person shouted to everyone in town. “Nah, maybe it will hold a bit more” was what most people said.

Then a few years later the blibbit was full again so they nailed a few more boards a little higher up on the poles and continued to dump in their crap. The bottom boards became even more strained and looked like they would pop this time for sure. “She’s gonna burst” a couple of more people started yelling. Naw, that’s what you said five years ago you were wrong. So we should not listen to you.

Then about five years later the blibbit became full again. More boards were added and more crap was dumped in. “She’s gonna blow this time for sure. The blibbit has reached peak crap for sure.” “Listen stupid”, was the reply, “that’s what you said 10 years ago, then again 5 years ago, and you were dead wrong. “And because you were wrong in the past means you have to be wrong now.”

Now here is my question: Because the peak blibbit crap people were wrong in the past, does that mean it is more likely they are wrong now? Or, is it even more likely they are right now because the situation has deteriorated even more since the early days of peak blippit crap predictions?

We are all asked, from time to time, what do we think is going to happen to this or that down the road. No one gets asked that question more than peak oilers. And every peak oiler seems to have a slightly different opinion. I have, in the past, reframed from making predictions as to when crude oil extraction will peak. I did so out of fear that I would be wrong and cornucopians would throw it up to me later. But I have now gone out on a limb and now predict that Crude Oil, or rather C+C will peak no later than 2017. I strongly believe the peak will be in 2016 but it could be a year or two earlier but no later than 2017.

World

In spite of all the hoopla about the US shale boom world C+C has been relatively flat for two years.

I have examined every major producing nation in the world. Only two, Libya and Iran, have any significant amount of oil held off the market because of sanctions or war. I expect that these two, combined, could possibly add 1.3 mb/d within two or three years.

Three others,  Syria, South Sudan and Yemen, have a combined total of about .5 mb/d offline due to civil conflict. And all three were in decline before their civil problems. It is unlikely that there will be any significant increase in production from any of these three within the next three years.

Outside political outages there are only four nations that could add significant production by 2017 Iraq, Kazakhstan, USA and Canada. Iraqi production will likely rise to 4 mb/d and possibly 4.5 mb/d within the next few years but is unlikely to go much higher than that. Kazakhstan is a big question mark but even if they ever get  Kashagan’s problems ironed out it will only produce about 180,000 bp/d for many months then eventually ramp up to 370,000 bp/d. Not really a big game changer. Canada can and will increase production from where they are today but not fast enough to make a real difference in world output.

And what about the USA? AEO 2014

Even the EIA is predicting the US will peak or at least plateau in 2016. There is no way that world C+C can show increased production beyond 2017.  Likely the peak will happen by 2016 but after 2017 Peak Oil will be in the rear view mirror. 

Also notice that actual USA production in 2013 was 300 kb/d below what AEO 2014 predicted. Their prediction was made well before the end of 2013.

*Blibbit: The word was dates from back in the days when all shopping bags were made of paper and the weight limit was stamped at the top of the bag. A typical large grocery bag held 20 pounds. A blibbit was officially described as ten pounds of crap in a five pound bag.

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324 Responses to Peak Oil and The Blibbit Principle

  1. Pingback: Peak Oil and The Blibbit Principle » Peak Oil BarrelPeak Oil Barrel | Olduvaiblog

  2. Good idea to plot actual vs estimated AEO 2014 crude oil for the US

    Iraq’s oil production will be limited by OPEC in-fights to maintain level of oil prices

    14/8/2013
    OPEC’s average fiscal break-even oil price increases by 7% in 2013
    http://crudeoilpeak.info/opec-fiscal-breakeven-oil-price-increases-7-in-2013

    Iraq will have to come under the quota system again

    China oil demand is a wild card

    How China Fooled the World
    http://www.abc.net.au/4corners/stories/2014/03/31/3972864.htm

    http://www.globaltimes.cn/DesktopModules/DnnForge%20-%20NewsArticles/Print.aspx?tabid=99&tabmoduleid=94&articleId=828902&moduleId=405&PortalID=0

    If that impacts on the global economy and oil prices go down like in 2008/09, US shale oil drilling will surely drop or stop entirely, exposing rampant decline in legacy fields

    • Patrick R says:

      I agree with Matt; the length of the plateau in the short term rides on demand from China. After that Jeff’s Net Export Math and inexorable decline describe the picture.

  3. Steve Bull says:

    Your post reminds me of Nassim Taleb’s story of not being a turkey in his book, The Black Swan. The turkey, being fed and cared for by the farmer for 1000 days believes in the ever-lasting beneficience of the farmer. He has been secure and comfortable; right up until the day before Thannksgiving. On that day, he experiences a Black Swan event, behind the barn where he is introduced to the farmer’s hatchet.
    I think the consequences of Peak Oil will be a cascade of Black Swan events, but then again, maybe Thanksgiving can be postponed for a year…

    • aws. says:

      Presidential pardon for the turkey?

      I am tempted to search for the video of Sarah Palin pardoning a turkey. I’ll leave that to the curious. 🙂

  4. Calhoun says:

    Charles Maxwell predicted essentially the same date for peak oil in 2010 in this Forbes article.

    A bind is clearly coming. We think that the peak in production will actually occur in the period 2015 to 2020. And if I had to pick a particular year, I might use 2017 or 2018. That would suggest that around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today.

    Just in time for my son to graduate from high school. He should graduate from college in 2022. What kind of world will he be facing then?

  5. Calhoun says:

    ps, that is a great story.

  6. SRSrocco says:

    Maybe several have seen this chart from the Drill Baby Drill presentation done by the Post Carbon Institute, but it’s worth looking at again. Here is a great example of what a SHARK-FIN decline looks like.

    Amazing how expensive this oil is to produce as we use it up like we have decades of supply.

    steve

    • Doug Leighton says:

      Ron,

      I used to think the timing of Peak Oil was irrelevant but it’s not of course and when it arrives, and has been accepted, an important milestone in history will have been established. But I think that Global Warming is the bigger threat facing the animal (which includes us naturally) and plant kingdoms. Apart from a few flat earth types, there is broad agreement that temperatures are increasing at ever increasing rates. This is a very bad sign (Just look at some of Steve’s data and graphs!).

      We don’t know for sure if one or more positive feedback processes have begun yet. If (when) Arctic methane release tipping points are reached, for example, the Four Horsemen of the Apocalypse will be coming across the landscape and no one will avoid the result. Your Blibbit metaphor may metamorphose into a sewage tsunami but at least some of the quicker ones will be able to make a run for it.

      Personally I think the sooner that Peak Oil gets here the better. If we have to wait until 2020, society will be doing the business-as-usual thing, wearing blindfolds and climatic tipping points will be almost guaranteed to arrive — assuming they haven’t already. If Peak Oil arrives tomorrow it’s going to bring a deafening wake-up call that will get a lot of attention. In spite of your generally negative world view, with which I agree, there’s then a slight chance something positive will happen.

      Doug

      • Coolreit says:

        Antarctica off to a cold start
        Last year (dotted line) was the largest ice extent recorded since the satellite era started in 1979. This year we are almost to 1,000,000 sq km over the average and trending well ahead of last year. Pity the poor penguins.

        http://www.investorvillage.com/uploads/20284/images/sh_ice.gif

        No global warming in Antarctica!

        • SRSrocco says:

          Cooreit,

          The Antarctic is experiencing a recent cooling ironically due to the high degree of heating of the Arctic. Paul Beckwith, climate scientist at the University of Ottawa explains this quite well in a recent interview: http://www.ecoshock.info/2013/12/why-is-weather-so-crazy.html

          If you go to the 38 minute Lo-Fi download and fast-forward to 25 minutes he begins to discuss why the Antarctic sea ice is growing in area. Basically, the huge increase in warming of the Arctic, shown by the large methane releases below, forces the a lot of the warm air from the equator to go south instead of north.

          So, as the higher volume of warm air from the equator moves south and it hits the cold air in the Antarctic, is actually speeds up the Jet Stream which makes the air even colder at the Antarctic. Which is the exact opposite taking place in the Arctic as the Jet Stream is slowing, causing the Polar Vortex to collapse to the south… hence the brutal cold temperatures this winter in Canada and Northeast US.

          Beckwith goes on to say that the IPCC actually has the Antarctic sea ice declining in their models, which he states is incorrect. He says they must correct their model to show this higher volume of hot air heading south that used to go north.

          Lastly, Beckwith believes the Antarctic will also reverse this trend at some point in time and then we will see a rapid loss of sea ice at the Antarctic as well.

          steve

          • Coolreit says:

            How contorted must one get to explain increased ice mass by saying alleged global warming is the answer.

            There is always a model available for modifying or data available for distorting as the the East Anglia experience has shown. I am surprised to see the wise men here (No joke) still cling to the global warming mantra when the data points in the opposite direction as the geophysicists point out.

            • SRSrocco says:

              Coolreit,

              I was simply providing what a climate scientist who is studying the jet stream mechanics had to say. I like to share data and analysis from those individuals who I believe are more correct than others. Again 97% of climate scientists agree that humans have caused global warming.

              I gather you didn’t even listen to the interview. I actually listen to all sides. Anyhow, you make an assumption that “you are surprised that wise men cling to the global warming mantra.”

              That same remark can be aimed at those who don’t believe in human induced global warming. We will find out soon enough. And if it is true that the 30 positive self-reinforcing feedback loops in the Arctic are going to push this into OVERDRIVE… it will likely be much sooner than later.

              steve

      • OldTech says:

        I have gone back and forth on peak oil vs global warming and am now back at peak oil.

        At this point I am not convinced that Climate Change/Global Warming is much more than natural variation. For example, research on US southwestern droughts suggest that the medieval droughts in the southwest are nowhere close to being matched by current conditions.

        • SRSrocco says:

          OldTech,

          I can understand your frustration. However 97% of climate scientists agree that recent global warming has indeed been induced by humans. MSM misinforms the public by putting out misleading information on the percentages by lumping in all sorts of scientists.

          And… when we see this sort of methane emissions coming from the Arctic… in the winter, we are off to the RAPID WARMING RACES. This set of methane emission charts are from 2009-2012. I had to make one more comment to include 2014 below.

          Methane is 100 times more powerful as a greenhouse gas on a short-term basis (2-5) years compared to carbon.

          steve

        • SRSrocco says:

          And here is 2013.

          • OldTech says:

            I have seen all of these reports and they show that we are in a warming trend. What we do not know is if the trend is due to conditions similar to the medieval warming period.

            What I would like to see is a discussion of the conditions of medieval warming period in the arctic compared with today. Our detailed knowledge of the arctic is but a blink in the eye in terms of geologic time so how can we trust it to provide long term behavior?

            If you read the US southwestern droughts research it is speculated that the Pacific Oscillation was also responsible for the medieval droughts.

  7. Coolreit says:

    Texas RRC updates Dec.2013 production. It is up 2.1% since May 2013. So much for the Eagleford growth engine
    That increase compares with the prior year period increase of 13.2% and the year before that of 19.4%

    The EIA and IEA are looking for another big year from US shale. LOL!

    And again, I ask where are the missing 500,000 barrels/day of Texas oil production included in EIA data: Remember, some complained that December data was not final. Well, as of 3/25/13 IT IS. So where are the extra 500,000 barrels/day in Texas oil production on the EIA books that the Texas RRC is NOT reporting?

    Also, the EIA added another 48k b/d estimate to January 2014 Texas production. The lie gets bigger Goebbels would be proud!

    Maybe, that’s why the administration is trying to do a 250 million barrel SPR release!

    http://www.rrc.state.tx.us/data/production/ogismcon.pdf

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

    • Watcher says:

      The US SPR is 695 million barrels. A 250 release doesn’t sound right. Maybe 25?

  8. Coolreit says:

    Correction: 3/25/14 not 3/25/13 the data is final

    • Dennis Coyne says:

      Hi Coolreit,

      The data from the RRC is not final for 24 months, every month’s update will change the output numbers for 18 to 24 months into the past. The EIA data attempts to estimate actual output, it is far from perfect, but for the most recent 12 months will be much closer to actual output then the RRC data.

  9. Jeffrey J. Brown says:

    Regarding my recent musings about the magnitude of the increase in the Global Condensate/C+C Ratio from 2005 to 2012, following is a version of a post I made on the Econbrowser blog, based on some RRC production data that Dennis posted (thanks again):

    RBN Energy estimated in early 2012 that condensate as a percentage of global C+C was 11%, presumably based on 2010 data.

    For Texas, condensate as a percentage of C+C was 11.1% in 2005 and 15.3% in 2012*.

    I am assuming a Condensate/C+C ratio of about 10% globally in 2005, which would imply condensate production of about 7.4 mbpd globally in 2005.

    To get to 9.4 mbpd of condensate production in 2012 (thus accounting for the 2 mbpd increase in global C+C from 2005 to 2012) would require an increase in the Condensate/C+C ratio of only 2.4 percentage points, from 10.0% in 2005 to 12.4% in 2012, or a 24% increase in the ratio (as dry global gas production rose by 21% from 2005 to 2012), versus the 38% increase in the ratio that we saw for Texas, from 2005 to 2012.

    Or in the alternative, globally, if we saw a 38% increase in the Condensate/C+C ratio (assuming 10% in 2005), condensate production would have increased from 7.4 mbpd in 2005 to 10.5 mbpd in 2012, an increase of 3.1 mbpd, implying a crude oil production decline of about 1.1 mbpd from 2005 to 2012.

    *44/393 in 2005 to 109/712 in 2012 (million barrels per year)

    • aws. says:

      Nony smackdown watch at Econbrowser.

      Thank goodness you have a sense of humour Nony, and a thick skin. 🙂

      In all the year’s of reading Econbrowser I don’t recall seeing James Hamilton smacking anyone down so firmly!

    • Watcher says:

      I spent a bit of time looking into RBNEnergy’s principals. The resumes are not bad, but not stellar. When they quote other stuff it’s powerful. When they draw conclusions of their own . . . shrug.

      • Jeffrey J. Brown says:

        I was primarily interested in their technical definitions of condensate, and their estimate for the global Condensate/C+C Ratio (about 11%, presumably using 2010 data), which seems reasonable, given the RRC Condensate/C+C Ratio data for Texas (especially in 2005, prior to the tight/shale oil boom).

    • Dennis Coyne says:

      Hi Jeff,

      Your welcome, always happy to help.

      I tried this using your OPEC idea.

      OPEC dry gas (EIA data) 22,700 BCF/year in 2012
      OPEC condensate (EIA C+C minus MOMR crude)=1700 kb/d=620.5 MMb/year
      OPEC barrels of Condensate per MCF dry gas=0.0273
      World dry gas=120,000 BCF
      World Condensate=120,000 times 0.0273=3280 MMb condensate=3280/365=9 MMb/d

      Since 2005 World C+C has increased about 2 MMb/d and based on Jeff’s calculations above (which look good to me) 2005 condensate production was 7.4 MMb/d in 2005 so condensate output increased by about 1.6 MMb/d from 2005 to 2012 using OPEC to guess at the condensate per unit of dry gas produced.

      By this calculation (just an alternative to Jeff’s above) about 0.4 MMb/d was the increase in crude output over the 2005 to 2012 period or 57 kb/d each year (on average).

      • Jeffrey J. Brown says:

        Here’s a summary, from lightest to heaviest hydrocarbons, of the known and unknown data points for 2005 to 2012 volumes and rates of change in global data:

        2005 to 2012 Global Data (EIA):

        Dry Processed Gas: 270 BCF/day to 328 BCF/day (+2.8%/year rate of change)

        NGL’s: 7.6 mbpd to 9.1 mbpd (+2.6%/year rate of change)

        Condensate: ?

        Crude: ?

        C+C: 74 mbpd to 76 mbpd (+0.4%/year rate of change), an increase of 2 mbpd

        As outlined above, using various approaches by different people, in my opinion it seems likely that we have not seen a material* increase in actual global crude oil production**, despite a doubling in the annual price of Brent crude from 2005 to 2012.

        In a nutshell, it seems likely that crude oil production virtually stopped increasing in 2005, while gas production continued to (so far) increase.

        *Which I would probably define as at least a one mbpd increase, given data uncertainties

        **45 or less API Gravity, per RBN Energy

  10. Coolreit says:

    If you exclude biofuels, ngl’s and other non-crude compounds, I predict late 2014/early 2015 for global peak oil. US shale oil was supposed to be the global savior, but the data shows shale oil production is barely growing in the Eagleford and falling in the Bakken this winter. The Bakken will start growing smartly in the spring, summer and fall, but the decline rates are growing larger every day. The ~70% decline rates in the Bakken will overcome Bakken oil production growth in less than 1 year. Even if Bakken oil grows a little longer than I forecast, it will still be overtaken by roughly 6% global depletion soon enough.

    • Watcher says:

      Predictions unwise. The system will react. Not the oil field or the oil industry. Central banks and world govts.

      If you can’t get oil because it costs too much, then it will be made to cost less. If you are drilling 1000 $8 million holes to get 100 barrel bubbles of porosity, then that will happen.

      It doesn’t stop until it’s physically impossible, and probably above ground, not below ground, because those 10 barrel porosity bubbles will always be there to be gotten. Truck traffic jams or snipers shooting oil workers or China/Russia cutting off the proppant flow are dominant.

      • TechGuy says:

        Watcher Wrote:
        “It doesn’t stop until it’s physically impossible, and probably above ground, not below ground, because those 10 barrel porosity bubbles will always be there to be gotten.”

        if that was true, there would not be a single oil well ever plugged. The lowest oil production can go is probably about an EROEI of 2. Below that it becomes an economic loss.

        Watcher Wrote:
        “Predictions unwise. The system will react. Not the oil field or the oil industry. Central banks and world govts.”

        The Central banks and industrial gov’ts are running on fumes. Printing money does not create wealth or industrial development. it just sweeps the problems under the rug. It will work for a short period but eventually the problems re-appear and can’t be sweep under the rug again. World Gov’t collectively owe over $100 Trillion in debt. And this doesn’t factor in the promised liabilities such as Social Security for retirees and gov’t worker pension plans that have no funding and must borrow to pay recipients.

        Sooner or later the world will reach a tipping point that it can’t be ignored or recovered from. Not only does the world suffer from a pending Peak Oil production, but too much debt, too many people, and declining\collapsing resources (ie ocean fish stocks for example).

        • Watcher says:

          I’m good with an EROEI euphemistic implementation of the metaphor.

          The concept is you can get 10 million bpd from Prudhoe Bay, now, if you apply US govt resources to it, caring nothing about price OR about energy expended (which may be electricity from non oil sources). Enforced at gunpoint slave labor and calling up all drill rigs from everywhere in the US, all sent to Prudhoe, you could get 10 million bpd.

          Only when that is NOT true do you have a “peak”. Otherwise it is a voluntary peak.

  11. aws. says:

    Record Natural Gas Need Keeps Bulls Betting on Advances: Energy

    By Naureen S. Malik, Bloomberg, Mar 31, 2014 2:53 PM ET

    Gas inventories dropped by 2.92 trillion cubic feet from the end of October to 896 billion cubic feet on March 21, making it the fastest pace of withdrawals for any U.S. heating season in data going back to 1995, according to the U.S. Energy Information Administration. A supply deficit to the five-year average widened to a record 51 percent.

    “The market seems to really be counting on this grandiose assumption that we are going to produce our way out of this this summer,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We are going to start refills up pretty soon and if they don’t get off to a good start, a lot of these assumptions with regard to our ability to produce will be called into question.”

    Also, do check out Jim Hansen’s latest Master Resource report for a discussion of how demand for NG has increased since the last time underground storage volumes were as low as they are now.

    http://www.ravennacapitalmanagement.com/mrr/2014/03/2014-03-28/ (click the pdf link at the top)

  12. Patrick says:

    I read somewhere, but I can’t remember where, that Iran’s production was already declining before sanctions. Is that correct?

    • Yes sanctions started to hit in 2011 but as you can see from the chart Iran was well into decline in 2010.

    • Doug Leighton says:

      Patrick,

      So maybe Iran wants power reactors for perfectly good reason? Power!

      Doug

      • TechGuy says:

        Doug wrote:
        “So maybe Iran wants power reactors for perfectly good reason? Power!”

        I don’t think so. Iran is poring money into enrichment and very little into building power plants. Iran also has a long range ballistic missile program that is only really useful with nuclear weapons. Long range ballistic missiles with conventional explosives are useless as a defensive or offensive weapon since the the small payload limit makes it ineffective. You need to launch dozens just to destroy a single target.

  13. aws. says:

    Another energy price increase could be looming for residents of Eastern Ontario

    By Vito Pilieci, OTTAWA CITIZEN March 30, 2014

    For many other Eastern Ontario residents, any increase in the transportation rate would be in addition to the 40-per-cent natural gas rate increase that Enbridge will introduce on April 1, due to approval from the Ontario Energy Board on Friday.

    In a complex 94-page filing, TransCanada has asked to have the proposed transportation cost increase take effect on Jan. 1, 2015.

    The new proposal is being framed as a “settlement” between TransCanada, Enbridge Gas Distribution Inc., Union Gas Ltd. and Gaz Métro Ltd. Partnership, a large gas company that primarily serves customers in Quebec.

    Unhappy with an NEB decision in March 2013 that capped transmission rates for the movement of natural gas through the Canadian Mainline, TransCanada entered negotiations with its largest customers in a bid to present the NEB with a new negotiated solution.

    The settlement sees the major gas companies agree to share costs on new natural gas pipeline infrastructure, which would boost the amount of gas coming into the region. It also proposes that tolls for gas moving through the Canadian Mainline in Eastern Ontario rise to $0.4629 per gigajoule — that’s a 52.3-per-cent increase over the $0.3036 per gigajoule that companies pay TransCanada today.

    The price increase isn’t sitting well with some of the smaller gas companies who use the line to transport the gas they’ve sold.

    NEB rejects TransCanada bid to hike gas transmission tolls

    By Vito Pilieci, OTTAWA CITIZEN March 31, 2014 7:03 PM

    The board found that the submission, which was framed as a settlement between TransCanada, Enbridge Gas Distribution Inc., Union Gas Ltd. and Gaz Métro Ltd. Partnership, failed to consult or include dozens of other companies that use the Canadian Mainline to transport natural gas across Canada.

    “The board relies on an open and fair settlement process where a full range of interested parties are involved to result in a settlement that reflects the public interest,” read a statement delivered to TransCanada from the National Energy Board on Monday.

    “The Settlement was negotiated without the inclusion of parties like Northland Power Inc. and Centra Gas Manitoba Inc. who would be directly and substantially impacted by these changes.”

  14. Old farmer mac says:

    If we were in a casino and putting our money down I would bet the same as Ron- not because I believe he is actually going to hit it on the money but rather because I think he is more likely to do so than anybody else I know of.

    If there was some sort of combo bet that would allow me to pick say 2016,17, 18 I would bet that way.Smaller payoff but more likely to win.

    It is very hard for me to actually envision the reaction of the public in the short term to undeniable peak oil.Half the people I know will not even become aware of it unless some tv network decides to run a series on it. Unless I am mistaken we passed peak oil per capita without any public awareness of this milestone.

    If the decline is gentle and the economy is anemic enough to keep the price from rising quickly there may not even be any serious public reaction.

    But on the other hand the fact of peak oil may capture the imagination of a lot of people who actually make things happen.

    If this meme runs wild it could crash certain industries as people pull their money out- airlines and fly in resorts for instance.

    Other people may go crazy for renewable stocks and if this happens there will be fortunes made in a year or two for those who jump into renewables and pick the right stock.

    My guess is that officially acknowledged peak oil is not going to be an overall short term positive influence on the economy.

    The medium and long term effects will depend on how fast production drops off and how fast prices go up.

    If the supply holds almost steady from year to year and prices at the pump go up say twenty five to fifty cents a gallon annually the effects may not be too awfully bad overall because a lot of people will get motivated to change their ways- trading for a more fuel efficient car for instance and spending money on house to cut energy bills.

    If there is a shark fin drop off in oil supplies the economy will have a heart attack.All I wish to say about that scenario is that I am very glad I live a long way from any big city where people are going to be rioting and looting.

    I guess the economy will still function well enough that Uncle Sam can provide food and water on a charitable basis to just about everybody in this country anyway and keep the lights on for the foreseeable future at least.

    But drumsticks will be the new ribeye and ribeye will be the new caviar.

    That won’t bother me much because I am already used to eating beans and I can get a cow wholesale for the freezer or raise a couple myself.

    I just spent a few minutes watching four whitetails grazing on the new grass in the apple trees near our house. I never saw a deer in this entire county until I was a middle aged man but they are pests now they are so thick on the ground.

    If the economy crashes people without jobs will have plenty of time and incentive to hunt them and they will all be gone within three or four years at the outside again.

    The dozens of summer houses in the woods around here will burn the way the old apple packing houses did when the orchard business crashed back in the fifties and sixties.

    To make a long story short they were insured for more than they were worth by a considerable margin once the supply of apples outran the market for them.

    Even the song birds will end up on the table.This is already common in parts of Europe.

    • Watcher says:

      “But on the other hand the fact of peak oil may capture the imagination of a lot of people who actually make things happen.”

      And that is why predictions can’t work. In 2011 Greece was going to default on debt owed to private banks, all of which were credit default swapped to Jupiter, and the system . . . global society, was guaranteed to explode. Didn’t happen. How? The definition of “default” was changed to preclude swap trigger.

      The same will happen with oil. If you have to drill 1000 holes per month to get enough oil to eat, and the costs of this would bankrupt any company, then the definition of bankruptcy will be changed. Central banks will print money and give it to whoever needs it to pump oil. The definition of employment will be changed. If working conditions are too harsh and you want to leave, your family will be threatened with death.

      The system won’t be allowed to explode until physical limits are reached. Those limits do not involve money, which was created in the minds of people and can be redefined as required.

      • Old farmer mac says:

        Printing money and disbursing it to some particular class or group or industry is certainly a workable means of getting a job done but it comes with a heavy price.

        Most people are too ignorant or lazy to bother to think thru the consequences.

        Printing money is essentially the same action in principle that old time kings took when they called it the coinage and melted it down and sent it back out again with less gold and silver in it. The result is inflation.

        Now as it happens most people are again also to ignorant or lazy to think thru the reason we do not see a lot of inflation at this time despite all this stimulus.

        It is very simple. There are many very powerful deflationary pressures at work as well and these pressures are offsetting the inflation.

        But printing money is not a win win although it does have some aspects of win win about it.

        When the fed prints and distributes money the results painting with a broad brush are either good or bad on an individual basis depending on where that individual stands in the gift or bread line. Very poor people who are living on food stamps and medicaid and so forth are extremely big winners as individuals although the amount they get per capita is not a fortune.

        Nevertheless they are competing in the market for stuff I buy too and nobody is printing any money for me –er, excepting my social security check!

        When money in vast quantity flows to say the oil industry as supplements that means the industry can buy up steel and concrete and engineering and all the other stuff the industry uses such a CPA services.

        I have to buy these things with my ”own” money.

        This makes all the things the oil industry buys more expensive for everybody else.

        There ain’t no free lunch.

        The stimulus money is more like a powerful pain pill that keeps a man able to work even though it is making his underlying condition worse over time although this is a bad analogy in some ways.

        Bottom line we are in for a world of hurt as energy supplies become ever more expensive.

        Pain pills get you great results some times – in the short run. But in the long run you need more and more of them and eventually the cure for the pain is apt to become more of a problem than the pain itself.

        This is where stimulus or ”easing” will eventually lead us in my opinion.

        It is politically cheap and doesn’t seem to hurt anybody in the short term and it certainly makes the pain go away.

        The problem is that the doctor is not able to cut off the pain pills for fear the patient will rob or murder him — in effect.. What will happen is that he will be voted out of office and more doctors who will provide unlimited pain pills- stimulus- will win elections.

        We are damned in the short term if we don’t ” stimulate” and we are damned in the long term if we do.

        I fear there is a runaway inflation baked into the stimulus pain pill habit because oil depletion and the depletion of all other one time gifts of nature are not easily cured diseases of the economy.

        By runaway I do not necessarily mean prices doubling every few months or ever every couple of years. Prices doubling every seven or eight years is runaway in my eyes.

        That is enough to wipe out any long term debt issued at a fixed low interest rate.

        BEWARE if you own such debt.

    • clifman says:

      OFM – A agree with what you say except for the term ‘undeniable peak oil’. TPTB (politicians etc.) and the MSM megaphone will come up with every possible scapegoat and distraction. Dems will blame Repubs and vice versa for ‘bad policy’. Everything will be about finance and politics, and no one will talk about the root causes of declining net (and finally gross) energy. This is already going on. We should not underestimate the ability of those at the controls and with the loudspeakers to aim at the wrong targets (whether intentionally or not).

      I’ve come around to Leanan’s position that PO will likely never be officially or popularly recognized as the cause of collapse – to whatever degree collapse occurs.

      • Old farmer mac says:

        Hi Clifman,

        I suppose the real causes of peak oil may not be acknowledged in the near or medium term for the reasons you mention.

        But the reality of actual shortages at the gas pump cannot be hidden.

  15. I wonder what the curve for net energy production from all forms of oil looks like. Has it already peaked? If so, when?

    • Doug Leighton says:

      Thomas,

      I’d like to see this too, especially if it includes coal and gas (ideally on a stacked plot). Such info is bound to be out there and there’s a good chance someone here will come up with it for you (us).

      Doug

    • Doug Leighton says:

      Thomas,

      Just looked at your web page: You are one cool Dude. Is your e-mail address buried somewhere on your page? We have even more in common than the last blonde I met: steam/music/physics/the kind stuff discussed on Ron’s Blog, etc. What side of the world do you live on? Better stop, if my wife sees this….

      Doug

  16. Philip Backus says:

    It appears that production has been flat since Spring of ’05 and even dips a bit at Winter ’08-’09 then a gain at Autumn ’13 as per your chart of roughly 4 mbpd. If this gain is LTO then would it be a correct assessment that at best conventional C+C has plateaued and possibly is even already in decline? Going by what you have written these last few months it almost looks as though we are already there or at least very close as regards LTO.

  17. Perk Earl says:

    Best to you Ron on the prediction. I follow changes in oil flow and the world economy as it continues to do it’s best with higher priced oil, i.e. lower net energy. Today Yellen apparently changed her mind about raising interest rates about 6 months after tapering QE to zero. I’m also curious to see if her latest diatribe is code for the first installment of a possible decision to halt tapering. Fascinating stuff to follow.

    http://www.bloomberg.com/news/2014-03-31/yellen-says-extraordinary-support-needed-for-some-time-.html

    Federal Reserve Chair Janet Yellen, easing investor concern that interest rates may rise earlier than previously forecast, said the world’s biggest economy will need Fed stimulus for “some time.”

    Yellen said today the Fed hasn’t done enough to combat unemployment even after holding interest rates near zero for more than five years and pumping up its balance sheet to $4.23 trillion with bond purchases.

    “This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers,” Yellen said at a community development conference in Chicago. “The scars from the Great Recession remain, and reaching our goals will take time.”

  18. Paulo says:

    Ron’s opinion has a great deal of credibility and he has been gracious to share his reasoning with us, (based on concrete data), for what seems like forever. To be honest, I am starting to become more than concerned. Have any of you waited for surgery for something serious? I have and probably many of you have as well. You met with your surgeon and you have the facts down and the prognosis seems clear, but as the day approaches there are a few things to deal with. Worry for loved ones. The what ifs? A bit of dread. And that age old feeling of inevitability…it is going to happen and there ain’t nothin you can do about it. That is how I am starting to feel these days. It is looming. To quote George W…..”this sucker could go down.” George was talking about money/credit being available but it is the same for energy. Just substitute, “if we don’t find some more oil or some other kind of affordable energy, this sucker will go down”.

    It seems like we have been waiting for these signs/numbers for years. It’s here folks. Tomorrow is now.

    I have a few things left to do, I guess.

    Paulo

  19. B says:

    Gas costs seen as ever higher

    SEATTLE (AP) — U.S. Secretary of Energy Charles Duncan said Wednesday he has no idea how high the cost of gasoline will rise, but as long as the United States is dependent on imported oil it will continue to increase.

    “Your instincts would tell you the price would continue to go up,” Duncan said during a morning press conference. “We’ve got to move and move aggressively to get the consumption of gasoline and the consumption of crude oil down.”

    Duncan is in the Northwest to meet with state and local government and industry leaders to urge conservation.

    One of his stops will be at the Hanford Nuclear Reservation. Duncan said Hanford is only one “of as many as a dozen sites” being examined as a permanent nuclear-waste disposal site for the nation.

    The energy secretary also:

    — Urged businesses to set a goal of having at least 20 per cent of their employees commute by public transportation or ride-sharing.

    — Expressed support for a bill in Congress that eventually would require auto manufacturers to build cars that get a minimum of 40 miles a gallon.

    — Announced the Department of Energy is re-examining a controversial provision in the federal standby gas-rationing plan that would restrict recreational weekend boating.

    Duncan warned that national conservation rates are far from adequate and added that efforts to discover new sources of petroleum would only stop recent declines in production.

    “Within 20 to 30 years, at today’s conservation rate, we’re just not going to have it (enough oil),” he asserted.

    New technology, such as solar energy, Duncan said would lean heavily on private enterprise for development. But he stressed that the government would look to local communities for conservation plans.

    The Spokesman-Review, Spokane, Wash., April 17, 1980. Page 11.

  20. Fred Magyar says:

    Seems that bulge at the bottom of the blibbit tank is just going to keep being ignored by everyone…
    The comments on this Yahoo news post are typical of the way the vast majority think.

    http://news.yahoo.com/exxon-highly-unlikely-world-limits-fossil-fuels-201858328–finance.html

    Cheers!
    Fred

  21. 17 years ago yesterday, the temperature outside was 75 degrees for the high of the day.

    Yesterday, March 31, 2014, the temperature was 9 degrees in the morning. This morning, the temp outside is 6 degrees.

    Just the way it is.

    Rudolph Diesel built the diesel engine before diesel fuel. The original diesel engine was fueled by peanut oil.

    Diesel built the engine for farmers. They could grow their own fuel.

    With some thought and planning, peak oil can be managed, but not avoided. Oil from a different place, from the top of the ground instead of in the ground is a return to the original reason for the diesel engine’s existence. The intelligence we possess is what we need most, not oil.

    I have changed my mind. I can do that, I’ve done it before, so I can do it again. Looks like peak oil now, just my 2 cents.

    When I see plastic bags on the dispensing hose at the gas station because the gas is gone from there, it is a clear sign.

    It is simple, really. Reduce the amount of oil available for consumption. Create demand destruction, price increases will do that. Maybe not nice, but necessary.

    Tragedy of the commons comes to mind.

    “I do not feel obliged to believe that the same God who has endowed us with sense, reason, and intellect has intended us to forgo their use.” – Galileo Galilei

    • TechGuy says:

      Ron W Wrote:
      “It is simple, really. Reduce the amount of oil available for consumption. Create demand destruction, price increases will do that. Maybe not nice, but necessary.”

      Unfortunately politicians have a very bad habit of making promises they can’t possible keep. When rationing returns (either because of policy or high prices). You will see politicians demanding war to secure new resources for consumption. I’ve never seen an elected politician that wasn’t willing to send men (and women) to war for their own political gain. This time will not be different.

      “With some thought and planning, peak oil can be managed, but not avoided”
      I don’t think so. Too many mouths to feed using infrastructure that is only suitable for cheap and abundant oil. We destroyed most of the Rail infrastructure (in the US) and replaced it with highways. Perhaps if migration began 30 years ago there would have been a chance. All I see for the future is war and collapse, which is exactly what is now occurring. There is no effort to transition accept to go to war to secure overseas resources.

      This has already begun as the West, Led by the US has attacked/invaded many of the weak oil producing nations. This is a trend that continues to day.

      • Woody says:

        In a free trade world, new resources are not secured. They are made available through a combination of demand destruction both within your own economy and by wrecking other countries economies through military and/or economic means. At the same time, military might is used to encourage exporters to pump in excess of their physical needs and deposit the excess profits in developed world debt instruments.

        Securing resources is very last century.

        • Calhoun says:

          Securing resources is not so “last century” for China. They’ve been at it full steam for ten years now with admirable results.

        • Old farmer mac says:

          Hi Woody

          I basically agree with you but I must remark , speaking as an armchair historian, that those with muscles have acted and will continue to act about the same way more or less since we have any records to go by.

          This won’t change barring a miracle.

          • Watcher says:

            Yup. Exactly.

            It’s a pretty common attitude among the peak oil folks to presume that humans are all poised to act in non human fashion.

            Humans seek advantage. They are competitive, just like race horses. The whole concept of free trade and everybody wins derives from the pie getting bigger. When the pie doesn’t grow and you want a bigger slice, because you NEED a bigger slice — that’s going to come from someone else.

  22. Didn’t mean to spell his name like the reindeer’s. Rudolf is the correct spelling.

  23. A revealing Comment OPEC March Oil Output Falls in Survey Led by Angola, Libya Drops

    Saudi Aramco restarted its Yanbu refinery this month after maintenance work shut the plant on Feb. 1, according to two people with knowledge of situation who asked not to be identified because the information is private. The plant processes about 240,000 barrels of crude a day, data compiled by Bloomberg show.

    The comment is revealing not because of the refinery details but because the two people who gave the information asked not to be identified because the information is private. They could get fired even for revealing the fact that the refinery was about to restart after being down for maintenance. When such basic information is a state secret you can imagine what kind of security they place on such things as field production levels or production capacity.

    Anyone who claims to know what Saudi’s spare capacity is, or even whether or not they have any at all, is just blowing smoke.

    • Dennis Coyne says:

      Hi Ron,

      I agree. Only the Saudis know how much spare capacity they have. Anyone else is just guessing.

  24. Dennis Coyne says:

    Hi all,

    Edit: Day after April Fool’s Day – see comment below
    http://peakoilbarrel.com/peak-oil-blibbit-principle/comment-page-3/#comment-17279
    and my apologies for my poor sense of humor.

    I have a new post up at my blog

    http://oilpeakclimate.blogspot.com/2014/04/bakken-and-eagle-ford-revised-scenarios.html

    A brief excerpt:

    “I have revised my thinking based on the continually upbeat predictions by CEO’s of successful oil companies such as Harold Hamm of Continental Resources. In addition, there have been several encouraging pilot projects suggesting that well spacing might be dramatically reduced. This will allow many more wells to be drilled than the 40,000 wells that I have often used in previous scenarios.”

    Chart below (41 Gb cumulative output):

    • Dennis Coyne says:

      A mistake on that chart modelCC(kb/d) in the legend should be EF(kb/d).

    • You write on your blog:
      For the Bakken I assume wells are added at about 2400 wells per year until about 2037 and then the rate that new wells are added begins to decrease, a total of about 69,000 producing wells are added by 2041.

      That comes to 200 additional wells per month. I think they had better step it up a bit.

      • Dennis Coyne says:

        Hi Ron,

        The wells added (based on your 12 mo avg) have been about 150 per month since Oct 2012, but the rate that wells were added roughly doubled from Oct 2011 to Oct 2012, it is possible that the rate that wells are added could increase by 33% (from 150 to 200) over the next 12 months. We shall see. So far (in Feb and March) it looks like wells have not been added very quickly, it could be May before we see the rate increase due to the brutal winter.

      • Watcher says:

        200 wells per month X 3 million pounds of proppant per well is 600 million pounds per month. No idea of shipping restraints. Maybe I’ll look into them. What was the well total drilled and fracked in 2013? Looks like 125ish/mo over the entire year. At 2000 truck trips per well, this will remind me of a commute from Fort Worth to DFW.

        The guy driving said a recent news report indicated the total length of all vehicles in the area exceeded total road length in the area.

        It was a slow drive to the airport.

    • “I have revised my thinking based on the continually upbeat predictions by CEO’s of successful oil companies such as Harold Hamm of Continental Resources.

      What you really should do if you take at face value Harold Hamm’s press release about the outlook for his company is go out and buy some stock in Continental Resources. After all, that is why he released his optimistic opinion, his upbeat predictions. But that is what all CEO’s are supposed to do and what most of them do. That is just part of their job. Would you expect them to release a pessimistic outlook and drive their stock price into the dirt?

      Dennis, do you really place such value on the press releases by the CEO who is trying to increase investor confidence. Investor confidence is everything because they have an ever growing need for cash. Every shale oil company will rise or fall on investor confidence.

      Lynn Helms in last month’s Director’s Cut: Investor confidence appears to be growing.

      Yes I hope it would be growing. Harold Hamm is doing everything in his power to pump it up.

    • TechGuy says:

      The Debt level for LTO drillers which continued to rise as fast as drillers put in new wells. Eventually servicing the debt will consume any profit margin, forcing drillers to cut expansion. if interest rates rise or the banks pull out it’s game over for the Drillers. My guess is that it LTO expansion ends this year or in 2015. Perhaps Harold Hamm is looking to find another source of cheap capital as lenders as the banks have already begun pulling back.

      As I discussed in previous threads LTO drilling is probably a fraud. Drillers make money only by using cheap debt to finance operations. When they lose their source of capital, or when operating margins go negative they will simply go bankrupt, leaving the investors with empty pockets. I bet if interest rates were not at near zero, because of Fed Policy (ZIRP), there would never have been a shale boom.

      Damning article for LTO expansion:
      http://www.ogj.com/articles/2014/03/financial-questions-seen-for-us-shale-gas-tight-oil-plays.html

      “According to the Energy Aspects analysis, total capital expenditure nearly matches total revenue every year, and net cash flow is becoming negative as debt rises”

      “Unless financial performances improve, capital markets won’t support the continuous drilling needed to sustain production from unconventional resource plays, “

      • This is indeed a damming article, thanks for posting it. And it was not written by a CEO or anyone else pushing oil company stocks. It was produced by the Oxford Institute for Energy Studies and published by the Oil & Gas Journal. The last lines of the article goes:

        “Parts of the industry will have to restructure and focus more rapidly on the most commercially sustainable areas of the plays, perhaps about 40% of the current acreage and resource estimates, possibly yielding a lower production growth in the US than is currently expected—but perhaps a more lasting one.”

        I think that’s pretty well what is happening right now. All successful drilling is now in the sweet spots which is even less than 40% of the acreage.

        It is articles like this which leads me to believe that growth in production in both the Bakken and Eagle Ford will slow quite a bit this year. They may or may not peak this year but that point is not too far down the road.

        • Watcher says:

          I keep telling y’all Hamm is going to be spending most of his time trying to keep 1/2 the company out of his wife’s hands in the divorce.

          In fact, maybe he’s working on lowering the net equity of the balance sheet.

          • Watcher says:

            And for that reason you should largely ignore money. If desperation is high enough, the US govt would fund anything it takes to drill 4000 wells per month in the Bakken 50 feet apart and have the entire Air Force fleet of C5As and all other nationalized airliners flying continuous routes hauling proppant. To say nothing of every bus and truck in the country.

            “Can’t happen” has definition limits. It is truly limited only by physical impossibility, not by money.

            • Woody says:

              Watcher,

              Why would the federal government bother with all that when the US has the ability to purchase all the oil it needs and can afford? Until the dollar is no longer the reserve currency, the US has the ability to purchase commodities on the world market.

              • Watcher says:

                Ya, the point is macro, not specific.

                A desperate situation would demand desperate measures. You can get 10 million bpd out of the Bakken if you take those steps. Don’t know how long it would last, but if you had no proppant limits, no labor limits and no tanker truck limits you can get more oil out than any imaginable peak. Hell, you could get 10 million bpd out of Prudhoe Bay if you took those steps, without the proppant limits. Not for long, but you can physically do it.

                If you need the scenario fleshed out, presume all our import orders were outbid. Or maybe the world sanctioned the US for consuming 24% of annual flow with 4% of the population and decided to shut the US off. Maybe that’s the simplest way to get past the questions and grasp the concept that the only limit is whatever is impossible physically, not financially.

      • Doug Leighton says:

        TechGuy,

        “As I discussed in previous threads LTO drilling is probably a fraud.” You may be overstating this a bit and I wouldn’t use the word fraud but there’s a lot of truth in what you’ve been saying. These resource plays are situations where a lot of people see a way to make a buck. But things go in cycles and after the first two or three years, as stocks get diluted, money still has to be raised, and it becomes harder and harder. CEOs, of course, spend most of their time promoting their companies but it is in many respects a sort of shell game. But like all salesmen these guys believe in what they are saying, they have to. True, some really are downright crooks but a lot are on the level but without perpetual optimism they’re dead. My point is, it’s hard to imagine projections re these high flying companies beyond a few years having much validity. In my experience the resource business is a feast or famine scene, and its not likely to be different with LTO. For this reason I think Ron is more likely to be right with his predictions than Dennis who takes a more theoretical approach. Time will tell.

        Doug

        • Watcher says:

          Factoid. Ceramic proppant costs 25% more than proppant quality sand. However, initial production of wells fracked with ceramic is apparently 100% higher than sand fracked wells.

          And so, I guess we should start sniffing into total global ceramic proppant production, especially if the Chinese are getting ready to frack a field, as has been reported.

          • Watcher says:

            Data. 2013 proppant consumption (production), global, 45 million tons. 90 billion pounds. Ceramic is now dominant in the US, though claimed by a ceramic trade group.

            At 3 million pounds per well that’s enough to do 30,000 wells globally, oil and gas. Quite a few other countries have been fracking for a while, almost all for gas.

            Do we have a total 2013 fracked well count, oil and gas, all places in the US?

        • TechGuy says:

          Doug Wrote:
          “You may be overstating this a bit and I wouldn’t use the word fraud but there’s a lot of truth in what you’ve been saying. These resource plays are situations where a lot of people see a way to make a buck”

          It is a fraud if they are not making any money from it and are just using debt to pay for salaries. Its like the dot-com bubble where the majority of internet companies didn’t make any money, but used debt and stock sales to pay for operations. When they ran out of credit and couldn’t sell anymore stock to investors, they closed up shop. The stole money from the creditors and the investors. Although the the old saying “A fool and his money soon apart ways” applies.

          “But like all salesmen these guys believe in what they are saying, they have to.”

          Actually most salesmen know when its a fraud, but they want a paycheck more than they want honesty. I’ve had some candid discussions with many salesmen over a beer over the years. The only situation where people honestly make a mistake is usually in the scientific group as many have poor understanding on business operations and profits. They tend to be very focused on developing solutions and ignore costs and profit margins. Very rarely have a met an executive that is willing to be honest with their investors when they have a problem. Most do their best to hide problems under the rug and either try to delay or hope and pray they can’t fix it before anyone notices. This is partly do to short term demand results on Wall Street created by people like Stephen Cohen of SAC capital by ditching the buy and hold investing and switching to 10 minute trades, trying to squeeze trading profits out of minute-by-minute news releases.

          • Doug Leighton says:

            TechGuy,

            Goodness gracious, aren’t you prickly today? Alas, I admit that you’re right on (almost) all your points. If the average shareholder had a clue about how the system works he would be a lot slower reaching for his checkbook.

            Doug

      • Dennis Coyne says:

        Techguy,

        Excellent article thanks. I think the original paper by Ivan Sandrea is more comprehensive than the Oil and Gas Journal summary. It can be downloaded here:

        http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/03/US-shale-gas-and-tight-oil-industry-performance-challenges-and-opportunities.pdf

        The Oil and Gas Journal gives an accurate summary in my view if you are more interested in a quick read a chart from the paper on tight oil is below, but there are several other good charts in the longer paper for those with some time (paper is 10 pages, maybe 15 minutes to read if you skim).

        • aws. says:

          Dennis, Thanks for digging up the original source. Well worth reading the 15 pages.

          US shale gas and tight oil industry performance : challenges and opportunities

          Ivan Sandrea, OIES Research Associate, March 2014, Oxford energy

          It is true that the majors and international companies had less capability to fully appreciate what type of business they were getting into and what assets and acreage positions would work. The same might be said for several medium – sized and smaller players that have reset their strategies to this new business and have limited capital to fully evaluate and exploit their assets. In a recent industry event 9, the former CEO of another major shale player, who sold the company for several billion dollars to a foreign player in 2011, noted that the only day his company was cash flow positive was the day it was sold!

        • aws. says:

          Figure 1b

        • aws. says:

          Figure 2

        • aws. says:

          Figure 5

    • Wes453 says:

      Hello Dennis,

      The other day we were discussing EURs from investor presentations. I have since found an interesting slide from a WPX Energy presentation (attached below) showing how industry-produced EURs vary across the Bakken. As usual, the numbers are quoted in terms of BOE. With regard to that, the companies seem to be assuming that about 15-20% or so of total production will come from gas, with the remainder being oil. There have also been suggestions in the past that, as the wells age, gas begins accounting for a greater share of monthly production.

      Anyway, what I find most interesting about the slide is not so much that estimated EURs differ according to location within the basin, as we have long known that some spots are “sweeter” than others, but that an investor presentation points this out. All of the other presentations of this nature I have seen contain one average EUR curve intended to represent all of the company’s acreage, no matter how widely scattered across the basin that may be.

      Speaking of sweet spots, the North Dakota Geological Survey has a newish presentation (poster actually) that does the best job I have seen to date of delineating the sweet spots of the Bakken. There are also a number of interesting production statistics, making this work well worth checking out. https://www.dmr.nd.gov/ndgs/documents/Publication_List/pdf/GEOINV/GI_174/GI-174.pdf

      • Dennis Coyne says:

        Wes,

        Very interesting, thanks. I imagine that if these numbers for the EURs in the various areas are accurate that the better areas will be drilled up pretty quickly (if they haven’t been completely drilled up already.) For me the 960 day chart (roughly 3 years) is most interesting, the areas of the sweet spots are quite small.

      • Wes453 says:

        You can get a rough sense of how much more drilling within the sweet spots is possible by taking the outline of the spots depicted in the poster and locating them on the GIS Map Server (https://www.dmr.nd.gov/OaGIMS/viewer.htm), which shows the current locations of rigs within the state of North Dakota as well as, when zoomed in, all the wells that have been drilled to date.

        One thing to notice is that the majority of the rigs have more or less converged onto the sweet spots depicted on the poster. More important, however, is how many individual wells are presently located within each spacing unit, which is generally a rectangle two miles by one mile in dimension, or two square miles, or 1280 acres, or two complete sections of a typical Midwestern township. Initially, and this was primarily in the 2010-2013 time frame, but still continuing somewhat into this year, the oil companies drilled one well in each of these spacing units in order to hold onto the lease granting them the right to drill in that unit. After this initial well, they might have come back to drill one or two other wells, likely testing the potential of different zones (one well for the Middle Bakken and two in different benches of the Three Forks, for instance).

        The next step, beginning by all accounts in earnest this year, to this progression is to come back to each of these spacing units and begin filling them in to a saturation point, if you will, with wells. The optimal number of wells to use geologically and economically speaking is still open to debate, and so that is why we are seeing companies like Continental test out both 16-well and 32-well spacing units in different areas of the Bakken-Three Forks.

        One of the 32-well tests is depicted in the picture below obtained from the GIS Map Server. The spacing unit consisting of sections 16 and 21 of the township in question (T152N R99W) is where the test is being conducted. Currently 14 wells are present in this unit, so 18 more will need to be drilled to get to the 32 total. Even without these 18 wells yet on the map, the obvious thing to note is that when all 32 wells are operating in this unit, the two sections are going to completely filled, or saturated, with lines, which represent the individual horizontal wells within that unit.

        Now if this 32-well unit is successful according to whichever standards Continental uses to define success in this particular case, the clear next step is to go “next door” to sections 17 and 20 and drill an additional 29 wells there (that unit currently has three wells; although hard to see, there are two orange circles representing two confidential wells whose horizontal legs will not be visible until the wells come off the confidential list). After that, time to go to the next “next door,” sections 18 and 19, where 30 wells would be needed to accompany the two initial ones in that unit.

        As this process could theoretically continue on for years throughout the sweet spots, this is what the industry and NDIC predictions/assumptions of tens of thousands of new wells still left to be drilled are based upon.

        Now if we want to discuss potential downsides to this progression, one I feel could have major implications is that the number of well completions could become extremely variable from month-to-month simply because for the most part in the tests conducted so far, I do not believe the wells in a multiple-well unit have been allowed to begin production until all the wells in the unit are drilled and completed. I am not even certain placing these wells online one at a time rather than waiting for all to be drilled and completed is even technically possible given the proximity of the wells to each other.

        If the case is that the individual wells in these multiple-well units cannot be brought online until all of their brethren are also drilled, and a single rig needs many more months to drill, say, 32 wells in a single unit rather than just one or two, we could see, for example, something like 6 32-well units (192 wells) brought online one month, followed by 10 32-well units (320 wells) the next month, followed by 3 32-well units (96 wells) the next month, and so on. As decline rates make the net number of wells brought online each month a critical metric, the overall production could fluctuate rather greatly on a monthly timescale. I have wondered, especially considering the rig count actually increased by a small amount, if this could partially explain more than weather alone why such an uncharacteristically low number of wells were added in both December 2013 and January 2014. Weather-wise, January was not even particularly snowy or cold, having been 3.8°F above normal in Williston and 0.8°F above normal in Dickinson.

        • Watcher says:

          Helms said that wind velocities exceeded fracking regulation maximums often in January. Fracking materials are the far longer pole in the tent than drill rigs.

          • Wes453 says:

            Yeah he did, but he did not indicate if there are normally any too-windy-to-frac days in a given month. Having lived in North Dakota and neighboring areas of Minnesota, I have to imagine this was not the first time where wind has prevented the frac crews from working, since extremely windy days are basically a constant threat year-round. I will concede, though, from looking at the weather data, that this past January did have a relatively high number of especially windy days, so indeed that could have been a huge contributor to why well additions were on the low side.

            Just what are the regulations with regard to wind, anyway? How much wind is too much?

            • Watcher says:

              Don’t know, really good question.

              Re your thinking about one at a time vs all at once, reminder, 3 million pounds of proppant per well. If you try to do it all at once, you’ll have 96 million pounds sitting on site at a time rather than 3. Truck trip total also would grow.

              Another point, fracking is vertical as well as horizontal. Diagrams made clear some of these wells are trying to get Three Forks oil and Bakken oil with the same well. We should probably give this some thought because particularly high IP might not mean sweetspot. It might just mean the vertical fracture found weak rock and extended farther.

              • Dennis Coyne says:

                Hi Watcher,

                I think there is some control over the direction of the Fracking. In a horizontal pipe along an imaginary x -axis (with y perpendicular to x in the horizontal plane and the z axis in the vertical direction (running from the center of the earth to the sky and perpendicular to x and y), the holes in the pipe though which the hydro fracking occurs can point along the y axis only, they can frack in the z direction if they choose, but in these high density set-ups I think they will frack in the horizontal plane.

                Upon further reading I am unsure, some sources suggest fractures ten to occur mostly in the vertical direction.

              • Dennis Coyne says:

                Link to good post on fracking

                http://www.theoildrum.com/node/5961

                Note that I misunderstood this picture when I first saw it, the grid shown is a horizontal slice through a grid network of vertical fractures. (In the x-z and y-z planes where z is a vertical axis).
                Caption for picture below is:

                Simplified picture showing two joint sets (the grid) as they could be intersected by a vertical and a horizontal well. (From Heading out at TOD, link above)

              • Wes453 says:

                My thinking about “all at once” was based more on how the wells in a multiple-well unit have been getting designated as being completed and having their first production totals reported all around the same time as each other (though not necessarily the exact same time, but more like over the course of a week or two). Honestly, I’m not sure how the logistics of proppant and other supplies are handled in multiple-well situations, but look at, for instance, the Hawkinson unit being tested by Continental. Here are the cumulative production totals for each well within this unit. Hopefully the formatting works out. The date that each well was reported as completed is in bold.

                File No Well Name Operator Field Completion Date Cum Oil Cum Water Cum Gas Last Prod Rpt Date Target

                20211 HAWKINSON 3-27H CONTINENTAL RESOURCES, INC. OAKDALE 9/6/2011 291844 69426 341453 2/1/2014 Middle Bakken

                24283 HAWKINSON 8-22H CONTINENTAL RESOURCES, INC. OAKDALE 10/17/2013 70565 15415 58246 2/1/2014 Middle Bakken

                24455 HAWKINSON 13-22H CONTINENTAL RESOURCES, INC. OAKDALE 10/16/2013 90245 7324 60216 2/1/2014 Middle Bakken

                24456 HAWKINSON 14-22H2 CONTINENTAL RESOURCES, INC. OAKDALE 9/20/2013 61082 24421 52871 2/1/2014 Middle Bakken

                18275 HAWKINSON 1-22H CONTINENTAL RESOURCES, INC. OAKDALE 2/6/2010 576118 102277 549293 2/1/2014 Three Forks

                20208 HAWKINSON 2-27H CONTINENTAL RESOURCES, INC. OAKDALE 9/7/2011 309634 89202 348752 2/1/2014 Three Forks

                24223 HAWKINSON 4-22H2 CONTINENTAL RESOURCES, INC. OAKDALE 9/19/2013 61750 27052 79780 2/1/2014 Three Forks

                24225 HAWKINSON 6-22H3 CONTINENTAL RESOURCES, INC. OAKDALE 10/16/2013 42243 25053 54130 2/1/2014 Three Forks

                24282 HAWKINSON 7-22H2 CONTINENTAL RESOURCES, INC. OAKDALE 9/25/2013 43502 19433 53913 2/1/2014 Three Forks

                24284 HAWKINSON 9-22H3 CONTINENTAL RESOURCES, INC. OAKDALE 9/26/2013 35578 12684 24015 2/1/2014 Three Forks

                24285 HAWKINSON 10-22H1 CONTINENTAL
                RESOURCES, INC. OAKDALE 10/17/2013 59714 24778 69184 2/1/2014 Three Forks

                24286 HAWKINSON 11-22H2 CONTINENTAL RESOURCES, INC. OAKDALE 9/30/2013 36900 35964 40979 2/1/2014 Three Forks

                24350 HAWKINSON 12-22H3 CONTINENTAL RESOURCES, INC. OAKDALE 9/24/2013 17647 11317 17153 2/1/2014 Three Forks

                So six of the wells were reported as completed within about a week and a half last September, while four others were completed over the course of two days in mid-October.

                With regard to specifically targeting more than one formation with a single well, 76 wells in the NDIC database are listed under a “Middle Bakken/Three Forks” designator while one indicates “Lodgepole/Middle Bakken.” The remainder are listed as solely “Middle Bakken” or “Three Forks.”

                • Watcher says:

                  Good data in the final para and 76 sounds like a lot for a new technique. Lodgepole is up in the northeast of McKenzie and it’s interesting that is there because the USGS assessment unit for that area lumped Lodgepole in with the Middle Bakken for that surface geography and reported a total that was not promising.

                  A hyper bullish guy posting here last week thought he had heard talk of Lodgepole being a bonanza. Not what USGS said, but do you have numbers on that well?

                  Re Fracking logistics, text says things like “When you have everything you need at hand, fracking can be done in a few hours. It’s hauling everything into place that takes time.” So it is conceivable that they take over a month (or 2) to make the proppant hauling trips, and the water hauling trips, and once it’s all there, do the wells quickly.

                  Of course another logistics issue is tanker trucks. The more wells feeding the parking lot, the more trucks have to park there . . . and there IS no parking lot. It’s all dirt.

                  • Wes453 says:

                    The “Lodgepole/Middle Bakken” well was completed by Continental in 2009 and is in Mercer County. Overall the well has been quite poor and certainly uneconomic, producing just 12,021 bbl in four and a half years. The production history is easy to obtain, as there have been no other productive wells in Mercer County since 2009, so all you have to is load the county production table and look at the Mercer column.

                    Excitement about the Lodgepole began in the mid-1990s following the discovery that the formation produces oil from a conventional pool within a limited area of Stark County. A small number, less than 50, of productive Lodgepole wells were drilled here during this time. Several were excellent in their heyday, able to sustain 1,000-2,000 bbl/d and go on to produce 2 to nearly 5 million bbl to date (most are still active).

                    In the most recent few years, a handful or so of new Lodgepole wells have been drilled near where the ones from the 90s are, but only a couple have been successful. Elsewhere, where the Lodgepole would be an unconventional resource, another handful of wells have been drilled horizontally and frac’d in the same manner as Bakken and Three Forks wells. Only two (one in Dunn County and one in Williams County) have been productive to date, but not in currently economic quantities.

                    There was a lot of hoopla in the 2008-2011 timeframe over the possibility of the Lodgepole and the Three Forks containing so much oil that the oil companies could simultaneously target the Lodgepole, Bakken, and Three Forks within an individual spacing unit. The enthusiasm ended up being warranted for the Three Forks, but not, so far, for the Lodgepole. A lot of the hoopla has since shifted to the possibility of the Tyler formation being the next big unconventional resource in the region.

                  • Watcher says:

                    Good info. Consistent with USGS, and that well would have been complete before their re-evaluation. Probably part of it.

                    Re logistics, the top weight for the heaviest weight trucks come in around 70,000 lbs payload. They will NOT all be that high. So if you’re moving 3 million lbs of proppant X 32 wells on the pad that’s a minimum of over 100 trips, and the more severe limit is the roads are not paved so you likely can’t do anywhere near 70K lb payloads.

                    This doesn’t include water and pipes. The 2000 trips for year 1 of just one well really does make sense.

                    The dirty little secret here is the “boom” is for truck drivers. Probably not really for others.

        • Dennis Coyne says:

          Hi Wes,

          It will also be interesting to see what happens to new well EUR when the wells are so closely spaced, I am pretty confident that even if well costs decrease due to the closer well spacing (due to economies of scale) that EUR per well is likely to decrease by a greater extent.

          This is why my April Fool’s scenario for the Bakken which is based on no decrease in new well EUR is a joke. And as Ron suggested I would be foolish to believe the sales pitch of Mr. Hamm and others.

          So there are actually two separate reasons that new well productivity (EUR) will decrease in the future:

          1. the higher well density will reduce EUR per well in the sweet spots
          2. the sweet spots will run out of space and wells will be drilled in less productive areas.

          Thank you for the cogent analysis.

          • Wes453 says:

            Kodiak actually brought up the economics of filling up the spacing units with wells at a recent energy conference. See the slide below.

            Companies like Kodiak are obviously going to have to figure out whether they want to stuff the unit full of wells in order to maximize overall EUR, to the detriment of individual well EUR and payout time, or go with a lower number of wells, decreasing the total cost and increasing the individual well EUR, but decreasing the overall unit EUR.

            • Dennis Coyne says:

              Hi Wes,

              I would think they would go for the faster payout.

              It is kind of funny how all these companies drill wells that are better than average. When you look at the data for all Bakken wells (not only the really good wells) the average EUR is about 350 kb per well. I realize this is BOE, but if we assume 20% higher to include the BOE of the nat gas produced that only gets us to 420 kboe.

              For the high density plot (16 wells per DSU) profits are $24 MM (NPV minus well cost). For the low density (8 wells per DSU) profits are $38 MM (NPV minus well cost). Not a very difficult decision (if the EUR estimates are correct), as Rockman likes to say the aim is to make money, the oil is just the means to that end.

              Low density drilling wins hands down.

  25. 69,000 wells at 80 bpd is going to be 5,520,000 barrels of oil per day. If I were to make a better guess, the total would be about 35 bpd. After 50 years, a Bakken well does just that.

    However, the Dickinson State No. 1 did pump 8000 bpd initial production, so there are going to good wells in the future that surpass better than 400 bpd, which deplete to 80 bpd in a very short time period, even less. The numbers I see don’t lie.

    If Leigh Price was correct, the Bakken will generate oil as the pumping of the oil continues, so the estimates are based on that postulate. Maybe an assumption more correct than not, but the bpd will decrease with time. That is what happens.

    2007 was the first year the Bakken became a serious play. It is 2014, 7 years.

    2400 x 7 = 16,800

    There isn’t the manpower nor the machines to complete such a number in the next 7 years. It is not in the cards.

    The well total is at approximately 9700, or about 6300 more since 2007. January of 2007 shows a well count of 3449 wells, not all Bakken. February of 2014 has a well count of 9734. February of 2013 has a well count of 8211. 1523 wells in a year’s time. February of 2102 has 6460 wells producing.

    There has been more in the past 2 years, but the increase is on the average of 800 to 900 wells per year. Probably will continue to rise and probably will level off at 1500 wells per year.

    An additional 60,000 wells will take 40 years to drill.

    It might happen, but 2400 per year is unrealistic unless there are another 50,000 people working in the Bakken.

    Not saying it won’t happen, but I won’t stand on one leg or hold my breath.

    All of those numbers were impressive at the beginning, but they are no longer all that great.

    • Dennis Coyne says:

      Hi Ronald,

      There have been months where 200 wells were added, the 12 month average has been about 150 per month since 2012, so in your opinion 1800 wells per year is the limit?

      I did this as a quick and dirty estimate, I doubt they will be doing 2400 wells per year this year, but this scenario goes to 2040. Are you saying the wells added per year will never rise above present levels? You may be correct, but I think if we think of it in terms of the average number of wells per year added over the next 10 years, we might get to 2400 wells per year.

      Hey with global warming, they’ll be in shirtsleeves in January 🙂

      • Dennis Coyne says:

        Hi Ronald,

        I looked at data from the NDIC on older wells (45 years old or more).
        Of the 2100 wells that ever produced Oil that were initially drilled in March 1969 or earlier only 350 of those wells are still active or about 17%.

        So although it is true that some wells produce for 45 years or more, it is less than 1 in 5 wells.

        In my April fool’s scenario where new well EUR (estimated ultimate recovery) never decreases, at peak output in 2037 each well produces an average of 37 barrels per day.

        The reality is that less than 69,000 wells are likely to be drilled and that new well EUR will decrease.

        It is much more likely that average daily oil will fall to 8 barrels per day (as it was in 2004) and that only 40,000 to 50,000 wells (at most) will be drilled.

        If we have 45,000 producing wells at 8 barrels/day we would have about 360 kb/d. This is what we are likely to see 10 years after the peak (likely in the 2015 to 2019 time frame.)

    • Dennis Coyne says:

      Hi Ronald,

      Also currently wells are being added in North Dakota at about 1800 wells per year so 60,000 wells takes 33 years so that would be 2047 with no increase in the rate that wells are added.

      • SRSrocco says:

        I don’t know… I got my money on Jean’s graph here.

        steve

        • Dennis Coyne says:

          Hi Steve,

          I usually agree with Mr Laherrere. In this case, the EIA estimates North Dakota proven reserves increased by 2237 million barrels from 2006 to 2011.

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

          Cumulative ND Bakken production (based on NDIC statistics) to the end of 2011 was 348 million barrels for a total of 2585 million barrels or 2.6 Gb.

          The chart of proven reserves over time is at the link below:

          http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCRR01SND_1&f=A

          My assumption is that most of the new reserves since 2006 were from the Bakken/Three Forks, probably about 99% of the 2.2 Gb of reserves added from 2006 to 2011 were Bakken reserves.

          The question I would ask, “Do you think that there will be no proven reserves added in the Bakken/Three Forks after Dec 31, 2011?” If the answer is yes, the Mr Laherrere’s Jan 2014 scenario based on a Hubbert linearization should suit you. I will be very surprised if Bakken output is at 250 kb/d in 2020 as Mr. Laherrere’s scenario suggests.

          • clifman says:

            Well, your revision above has the Bakken @ 1.75mbd in 2020. That’s quite a discrepancy btwn your forecast & his, and quite a departure from where your past forecasts have been – esp. with the plateau going on for 15-20 years, wow! I guess we’ll see, but halfway between your forecast and Jean’s is a cool million. I’ll take the under.

            • Dennis Coyne says:

              Hi Clifman,

              I think both forecasts (Laherrere’s and mine) will be wrong, Ron is probably closest, though Ron limits his prediction to a date, saying little about TRR, ERR, or peak output, so when you limit your guesses, you are more likely to be correct.

              So you think no more proven reserves will be added and that JL is correct? I am confident that the ERR is more likely to be 6 Gb than 2.5 Gb for the ND Bakken

              • clifman says:

                “So you think no more proven reserves will be added and that JL is correct?” – No, not what I was saying. Just that I thought reality would be nearer to his forecast than to your (now revealed to be AF joke) revised one with a 41 GB ERR.

                a) I guess this is what happens to those of us who live largely oblivious to the day of the week and certainly to the date.

                b) If I had paid closer attention to that ERR number in your graph above, I would more likely have know something was afoot.

                You got me.

  26. The data doesn’t support such a reversal of fortune in total production in North Dakota.

    If 69,000 wells are are to be the total drilled and produce 30 barrels per day, the amount is going to be in the 2 million per day range. The history of the Williston Basin is a gradual increase in production each year over the past 63 years with many years of 30 to 40 bpd without fail. Some years, the bpd is as low as 25 bpd. The newer wells do produce more and the bpd is now in the 95 to 100 bpd range on a consistent basis. Best prediction is 100 bpd with 69,000 wells would be 6.9 million bpd, which is probably too optimistic. I’ll stick with the 2 million bpd stat for the long haul. 10 years from now, there will be at least another 15,000 wells if all goes as planned. 26,000 wells at 50 bpd, if the daily production gradually halves, the total will still be 1,000,000 plus per day.

    It will take a long time to change those statistics.

    The oil does flow.

    If the Navy would reduce their diesel fuel consumption by half, the world would have 8 percent more diesel fuel for use in tractors for the ag industry.

    It really is a misdirected allocation of resources and especially labor.

    https://www.dmr.nd.gov/oilgas/stats/historicaloilprodstats.pdf

    • Here I fully agree. There is much ‘misallocation’ of liquid fuels, especially [but not only!] in North America, and as the price signal gets back to communicating more clearly much that was considered to be inelastic demand will find a bunch of bend in it. Change is what we will get.

      To be a catastrophist you must have no idea that things can be other [essentially this is a failure of the imagination]. Catastrophe is merely change with a negative value, and therefore assumes an unbending point of view. There will be catastrophes for many and opportunities for others, but to assume that there can only be catastrophe for all is to misread history and to be overly wedded to the status quo as the only possible human order.

      I am not a catastrophist regarding the outcome of oil supply peaking [which it has; conventional and soon will; all liquids].

      Climate Change, however, is a whole other order of challenge….

  27. aws. says:

    Energy executives turn pessimistic about industry’s future

    Posted on April 1, 2014 at 6:56 am by Ryan Holeywell, Fuelfix

    The quarterly survey included 13 energy industry CFOs, but Deloitte doesn’t disclose their names or companies.

    The findings contrast with the recent surge in U.S. oil and gas production. But Paul Horak, U.S. audit leader for oil and gas at Deloitte, notes that energy companies are faced with low natural gas prices and flat oil prices at a time when they’ve been spending big.

    “Revenue is not on the upswing, costs have gone up generally, and therefore, margins have been squeezed,” Horak said.

    The energy industry CFOs forecasted earnings growth of 4.1 percent this year, less than any other sector. Their sales growth outlook of 1.9 percent was the second-worst. And the energy executives believe industry payrolls will decline 0.3 percent in the U.S., while most other executives surveyed planned on adding staff.

    • Calhoun says:

      CFOs will give you a very different picture for CEOs, especially if they are reporting anonymously.

      • Watcher says:

        Earnings are a bad measure. Prefer profits. Earnings can be polished by share buybacks.

  28. aws. says:

    A point of information for what it’s worth…

    Report: Marcellus growth not peaking any time soon

    Posted on March 3, 2014 at 12:40 pm by Ryan Holeywell, fuelfix

    The report indicated at least 1,000 wells will need to be completed annually to hold production in the formation flat. But the Morningstar forecasters estimate 1,600 wells will be completed each year, with the extra production more than compensating for declines from older wells.

  29. Political Economist says:

    I look at the statistical relationship between oil production per rig and annual growth in oil production per rig (for the US crude oil production). For the monthly data from January 2011 to January 2014, simple regression leads to the following result:

    Annual Growth in Oil Production per Day per Rig = 1747.7 – 0.233 (Oil Production per Day per Rig)

    The result implies that the average incremental daily oil production per new rig is 1747.7 barrels per day and the average decline rate from oil production produced by old rigs is 23.3%. The two numbers imply the peak (equilibrium) oil prduction per day per rig being 7488.9 barrels (1747.7/0.233).

    In January 2014, the US crude oil production was 7.9 million barrels per day. The US rigs in operation in the oil sector is about 1400. The regression result suggests that the US crude oil production per day could eventually rise to about 10.5 million barrels per day (1400 * 7500). Alternatively, for the US crude oil production to peak at a lower level, the total rigs in operations will have to fall from the current level. This could happen if sweet spots are depleted and oil producers find it no longer plausible to employ so many rigs.

    • Watcher says:

      Delineating gas and oil rigs?

    • Dennis Coyne says:

      When this analysis is performed on data from 1988 to 2013 we can arrive at a peak of 18 million barrels per day. The analysis is flawed. There is no reason to assume that the relationship between annual change in production per rig and monthly output per rig will remain fixed over time (if such a relationship is not just a spurious statistical result.)

      The results are very sensitive to the time period chosen indicating it is not a stable result.

  30. Frugal says:

    Now here is my question: Because the peak blibbit crap people were wrong in the past, does that mean it is more likely they are wrong now? Or, is it even more likely they are right now because the situation has deteriorated even more since the early days of peak blippit crap predictions?

    This question goes to heart of the cornucopian logic that continuously denounces peak oil — it goes something like this: “Those doomers have been predicting the end of the word since time immemorial but they’ve always been wrong. Therefore, they will always be wrong in the future, and this applies to all kinds of doomer stuff like global warming and peak oil.”

    The key flaw with this type of logic is that people having been wrong is completely immaterial. It has no predictive value whatsoever. The second coming of Christ won’t happen because god probably doesn’t exist, global warming is happening because carbon dioxide is a proven greenhouse gas, peak will happen because oil is finite and we extract the easy stuff first, and the blibbit will burst when the yield strength of the boards has been exceeded and not a minute sooner.

    Also forgotten is the fact that being wrong about the timing or scale of peak oil,
    simply means that he/she was wrong about timing or scale of the peak. It does not in any way debunk the concept of peak oil.

  31. Political Economist says:

    Now consider the US marketed natural gas production. For the monthly data from January 2012 to January 2014, simple regression leads to the following result:

    Annual Growth in Natural Gas Production per Day per Rig = 9.3774 – 0.0315 (Natural Gas Production per Day per Rig)

    The result implies that the average incremental daily natural gas production per new rig (natural gas rig only) is 9.38 million cubic feet per day and the average decline rate from natural gas production produced by old rigs is 3.15%. The two numbers imply the peak (equilibrium) natural gas prduction per day per rig being 297.5 million cubic feet per day (9.3774/0.0315).

    The regression result is weaker than that for oil. The R-square for natural regression is 0.17, compared to 0.28 for the oil regression.

    In January 2014, the US natural gas production was 197.4 million cubic feet per day. The US rigs in operation in the natural gas sector was 362. The regression result suggests that the US natural gas production per day could eventually rise to about 108 billion barrels per day (360 * 300/1000), corresponding to an annual production of 39 trillion cubic feet (1100 billion cubic meters, 1000 million tons of oil equivalent).

    Alternatively, the US natural gas production could peak at a significantly lower level as the incremental productivity of new rigs decline and the number of rigs falls in response to depletion of profitable drilling sites.

    • Jeffrey J. Brown says:

      I’m a little confused by some of your numbers. In any case, US dry (processed) natural gas production has been right around 66 BCF/day since late 2011. Following is my standard comment on US natural gas production:

      It’s interesting to look at some regional declines in US oil and gas production, e.g., marketed Louisiana natural gas production (the EIA doesn’t have dry processed data by state).
       
      According to the EIA, the observed simple percentage decline in Louisiana’s annual natural gas production from 2012 to 2013 was 20%. This would be the net change in production, after new wells were added. The gross decline rate (from existing wells in 2012) would be even higher. This puts a recent Citi Research estimate in perspective.
       
      Citi estimates that the gross underlying decline rate for overall US natural gas production is about 24%/year. This would be the simple percentage change in annual production if no new sources of gas were put on line in the US. In round numbers, this requires the US to add about 16 BCF/day of new gas production every year, just to maintain about 66 BCF/day of dry processed natural gas production. To put 16 BCF/day in perspective, dry processed natural gas production from all of Texas was probably at about 18 BCF/day in 2013.
       
      Based on the Citi report, the US would have to replace 100% of current natural gas production in about four years, just to maintain a dry processed gas production rate of 66 BCF/day (24 TCF/year) for four years.

      Or, based on the Citi report, the US would have to put on line the productive equivalent of the 2013 natural gas production from the Marcellus Play–every six months–just to maintain current production.

      Or, based on the Citi report, the US has to replace the productive equivalent of all of the 2012 dry natural gas production from the Middle East, in a little over three years (3.3 years), in order to maintain a dry production rate of 24 TCF/year. Over a 10 year period, we would need to put on line three times the 2012 production rate from the Middle East.

      Or, based on the Citi report, in the next four years, the US has to replace the combined productive equivalent of the 2012 dry natural production from Canada, Norway, UK, Iran, Qatar and Indonesia, just to maintain a dry natural gas production rate of about 24 TCF/year.


      • Political Economist says:

        There was a mis-print. I meant the linear trend implies the US natural gas production per day would eventually rise to 108 billion cubic feet per day. The US natural gas production has resumed growth over the past few months.

        • Jeffrey J. Brown says:

          Their initial estimate are for a year over year increase from January, 2013 to January, 2014, but here are the annual data for dry (processed) US natural gas production: 24.1 TCF for 2012 and 24.3 TCF for 2013, which would e 66 BCF/day for 2012 and 66 BCF/day for 2013, rounding off to two significant figures.

          Note that its appears, based on the initial data (on the international data base, linked below), that dry US production was 25.3 TCF in 2012, which suggests abut a 5% downward revision from the initial estimate to current data (24.1 TCF). If we see a similar downward revision for 2013 (which in my opinion, seems likely), it would mean be a year over year decline in production from 2012 to 2013.

          http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=3&pid=26&aid=1

  32. Calhoun says:

    An r square of .17 shouldn’t even be reported. And what is the significance level of beta?

    • Political Economist says:

      Well, we’re trying to consider every possible information to evaluate the likelyhood of a near term peak of US oil and natural gas production.

      Don’t have the regression information with me now. Will let you know the beta significance tonight.

    • Political Economist says:

      For a bi-variate regression, R-square 0.17 is actually not bad. In some economics papers, even results from multivariate regression with low R values are reported.

      Any way, the significance level is actually reasonable. For the natural gas regression, the standard error for the slope is 0.0144, compared to the coefficient of -0.0315, with a degree of freedom of 23. P-value is 0.039, or statistically significant at 96% level.

      For the oil regression (on the previous page), the standard error for the slope is 0.0633, compared to the coefficient of -0.2334, with a degree of freedom of 35. P-value is 0.0012, or statistically significant at 99.9% level.

      • Watcher says:

        FYI the proppant norm seems to have changed in 2012 from sand to ceramic so the wells are not fracked the same pre vs post and so some data is not consistent with other data.

  33. Calhoun says:

    This quote from Financial questions seen for US shale gas, tight-oil plays cited previously really deserves attention.

    Still, shale-gas and tight-oil development remains “a fledgling industry” with hope for “a positive inflection point for cash flow and a full-cycle risk-adjusted return.” Some operators see that point as still 5 years away.

    Meanwhile, the industry will remain challenged.

    Sandrea says “above-ground reasons” include the need to constantly acquire and drill leases, infrastructure needs, transportation costs, increasing costs to manage environmental considerations as operations grow, and “the fact that drilling and hydraulic fracturing costs respond to fluctuations in gas and oil prices as well as demand, leaving little excess profit for long.”

    Below ground, he says, rapid production declines and low recovery rates, despite technical improvements, remain problems in many plays and might worsen as operators move into increasingly challenging acreage.
    Unless financial performances improve, capital markets won’t support the continuous drilling needed to sustain production from unconventional resource plays, Sandrea suggests, asking, “Who can or will want to fund the drilling of millions of acres and hundreds of thousands of wells at an ongoing loss?”

    This neatly sums up the situation. There is no way I can see the industry maintaining recent drilling levels with these kinds of issues. Add to that the many recent complaints by oil executives about costs being out of control and you can just smell a contraction in the making.

  34. Dennis Coyne says:

    Hi all,

    There is an update to my blog post from yesterday.

    Edit: April 2, 2014 This post was a failed attempt at humor on April Fool’s Day. When a “joke” has to be explained, clearly it is not funny. I apologize to those who took this seriously.

    Essentially I was trying to see what it would take to arrive at the 24 billion barrels of Bakken oil that Harold Hamm often claims. It takes 69,000 wells (at 2400 new wells per year) and no decrease in new well EUR (up to 2041) to accomplish this with a realistic well profile (similar to USGS estimates). I really thought that people would realize (given the date), that this should not be taken seriously.

    I was incorrect and again my apologies.

    Dennis Coyne

    Link to my original comment at peak oil barrel is below.

    http://peakoilbarrel.com/peak-oil-blibbit-principle/comment-page-2/#comment-16989

    Sorry, humor was never my strong suit.

  35. Calhoun says:

    What the heck is happening to Brent? $104.45 at 11:30. I confess that I will never understand what drives oil prices.

    • Doug Leighton says:

      I’d of thought it was pretty obvious. With the tsunami of US exports arriving soon clearly prices will drop. Don’t you watch the news man?

      • Old farmer mac says:

        I lack the proper terminology to explain my ideas about oil price fluctuations as well as I would like but I see prices as varying over a relatively small range in an almost random fashion depending on whatever is in the headlines and internal corporate reports over the last few days.

        Some of the short term variation is no doubt due to traders hedging and speculating and to high speed institutional trading.

        Some more is no doubt due to political considerations that may influence supplies.

        But there can be no doubt that fundamentals determine the basic range of oil prices from month to month and year to year.

        As I see it the cost of production of the last marginal million barrels and the ability of the world to pay that price are the fundamentals that are truly fundamental.

        So- the little things can make oil go up or down a few bucks over the short term.

        But except for a long term upward trend in the price of it oil generally stays in a fairly narrow range of about ten bucks low to high over just about any month or even three or four months or longer.

        I am not an economist but this explanation is basically the same one as a good many economists use except it is in every day language.

    • Watcher says:

      Libyan rebels have been paid off. For now.

    • aws. says:

      Izabella Kaminska at FTAlphaville has a couple of posts on the topic…

      The ‘Crude Wall’ cometh
      Apr 02 11:53

      Deblocking Cushing
      Apr 02 19:20

  36. Cave Bio says:

    Hello everyone,

    I have not gone through every single comment for this post and so I apologize if this has already been mentioned. Weekly petroleum production for the lower 48 states remains relatively flat since the beginning of the year. If I am correct there has only been one week with substantial production growth (~100,000 barrels) and I think that was in early march. This week marks another with flat production.

    U.S. Petroleum Balance Sheet, Week Ending 3/28/2014

    • Cave Bio, I follow the EIA’s Weekly Petroleum Status Report pretty close. I have noticed that there has been a slowdown in production growth lately. This week was 71 kb/d higher than the last week in December. If that holds up it will mean less than a 300 kb/d growth for 2014.

      However the EIA’s weekly numbers are just an estimate. They are always revised later on when the monthly numbers come out and those monthly numbers are revised as the actual data starts to come in. But the revision is down about 9 times out of 10.

      Bottom line, I think it is an indicator but not one we can rely on because it will almost certainly be revised later on down the road.

      • Cave Bio says:

        Ron, I think you are absolutely correct on all counts. At the very least these data are very interesting to follow on a weekly basis.

        Best,
        Tom

  37. The OPEC MOMR does not come out until next week but there are two reports out on the web as to what their crude oil production was last month. Here is Bloomberg’s take:

    OPEC March Oil Output Falls in Survey Led by Angola, Libya Drops
    Production by the 12-member Organization of Petroleum Exporting Countries slipped by 117,000 barrels a day to an average 30.293 million from 30.41 million in February, according to the the survey of oil companies, producers and analysts. Last month’s total was revised 533,000 barrels a day higher because of changes to the Saudi Arabian, Iranian, Iraqi and Nigerian estimates.

    Angolan output dropped by 167,000 barrels a day to 1.52 million, the biggest decline for any member this month, the survey showed. Production tumbled because of maintenance at the Plutonio offshore field operated by BP Plc.

    And the Arab Times gives Reuters take:
    OPEC Crude Oil Output Falls On Iraq Exports Setback And African Outages
    OPEC’s oil output fell in March to its lowest since December, a Reuters survey found on Tuesday, as Iraq’s oil revival suffered a setback and outages cut output in African producers. Supply from the Organization of the Petroleum Exporting Countries averaged 29.72 million barrels per day (bpd), down from a revised 30.06 million bpd in February, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants. The survey highlights the impact unrest and outages, rather than voluntary cutbacks, can take on supply from the group which pumps a third of the world’s oil. Still, with output rising outside OPEC in countries such as the United States, there is no global shortage, analysts say.

     
                 March    February
                output    output
    Algeria      1.15    1.16
    Angola       1.55    1.72
    Ecuador      0.53    0.52
    Iran         2.84    2.82
    Iraq         3.05    3.3
    Kuwait       2.81    2.8
    Libya        0.23    0.3500
    Nigeria      1.9     1.86
    Qatar        0.74    0.73
    Saudi Arabia 9.73    9.65
    UAE          2.77    2.75
    Venezuela    2.42    2.4
    OPEC        29.72   30.06
    R = Revised.
    • Watcher says:

      Blink. That cut the Iraq celebration in half. There is lying going on here.

    • Watcher says:

      Ron what are the typical revision norms for these OPEC reports. Trying to look behind the headlines. Obama went to KSA recently and that was presumably to try to punish Russia, who countered with destroying the Iranian sanctions today, about which the Saudis will not be pleased.

      “Waiting for the sanctions to work” only makes sense if they are in place, and if they are not, Iran can resume development, right across the Gulf from Ghawar.

      • Revisions of 150 kb/d is not unusual. The Bloomberg report says February OPEC production was revised up by 533 kb/d. I have never seen a revision that much before.

  38. Watcher says:

    BTW ZH forwarded a Reuters report of Russia doing an explicitly non dollar based deal with Iran for 500K bpd. It didn’t seem to dawn on Reuters that this would just about all of what Iran can pump that’s not already still getting around sanctions.

    But they did notice that this goes to the heart of the wait-for-sanctions-to-work strategy and destroys it.

  39. Political Economist says:

    US weekly oil production, 2008-2014
    (Including the data for last week in March released by EIA today)

    • Dennis Coyne says:

      Nice chart. 33% rise over 2 years. If it continues new peak in 2 years, I think 8.5 to 8.8 will be as high as we go.

      • SRSrocco says:

        Dennis,

        Really…. that I find surprising coming from you.

        Steve

        • Dennis Coyne says:

          Hi Steve,

          The comment was just based on my impression of the chart. The weekly data may be flawed (see Ron’s comments below).

          Let’s use EIA annual data:
          2011 C+C=5.7 MMb/d (avg for the year)
          2013 C+C=7.4 MMb/d (avg for the year)
          On an annual basis this is a 14% average annual rise in C+C output over the past two years. If we extrapolate this exponential rise for two more years we would be at 9.6 MMb/d for a yearly average in 2015 matching the 1970 peak.

          I also said I did not believe that we would reach this level.

          Basing my projections on monthly data, In Jan 2014 US C+C is at about 7.9 MMb/d, I think we may get another 300 kb/d increase in the Bakken and about 200 kb/d in the Eagle Ford, so about 500 kb/d if the peaks coincide. If we figure that I will be incorrect by +/- 200 kb, that would give us 8.2 to 8.6 MMb/d for the tertiary peak in US C+C.

          I am actually not sure if you are surprised on the high or low side.

          In fact my expectation is that the Eagle Ford will peak in 2015 at about 1.4 MMb/d (about 1.2 MMb/d at present) and the Bakken in 2017 at about 1.2 MMb/d, I don’t expect a lot more increase in the Permian basin, but am guessing more here, there might be another 200 kb/d increase there, but it might be pretty flat (no increase).

          If the Permian if flat and the Bakken is also pretty flat over the 2015 to 2017 time frame, then my best guess would be an overall peak in 2016 near the range I gave above.

          Clearly there are about a 100 different reasons (at least) why these scenarios will be incorrect on either the high or the low side.

      • Anonymous says:

        Note that the (so far) absolute US C+C annual peak was 9.6 mbpd in 1970.

        The (lower) secondary peak was at 9.0 mbpd in 1987 (due to North Slope production).

        If Dennis is right, and I suspect he is, we would be looking at a still lower tertiary peak.

        My term for what we have seen, and are seeing, is an “Undulating Decline” in US C+C production since 1970.

        And one of life’s little ironies is that the Cornucopians are using the example of what is still a post-peak crude oil production region, the US, to claim that the “Peak Oil Theory” is dead.

        • Jeffrey J. Brown says:

          Just realized I wasn’t signed in.

          • Anonymous says:

            No need. I recognised you in the first six words. Err, I’m not entirely sure that is a compliment.

          • Dennis Coyne says:

            Hi Jeff,

            The increase surely was unexpected, and it is unlikely to last, though an upsurge in output from “other LTO” (Permian, Niobrara, etc) as the Eagle Ford and Bakken run out of room in the sweet spots could keep us on a plateau for a couple of years or at least make the decline less steep.

            I am not claiming the probability is high (I would venture 33% or less), but we have been surprised by the level of output from the current LTO plays and could be surprised yet again.

            It depends a lot on prices and if the economy falls apart (more than it has already) as real oil prices rise. My guess is that the annual rate of increase of 12% or so since 1998, will be too fast, but that the economy may be able to handle a 6% average annual increase in the real price of oil.

  40. Political Economist says:

    US weekly crude oil production growth (defined as the average weekly crude oil production over the last 52 weeks less the average weekly crude oil production over the previous 52 weeks) peaked in the last three weeks of 2013 and has since then declined for 13 consecutive weeks.

    From the last week of 2013 to the last week of March 2014, the weekly crude oil production growth declined from 1241 thousand barrels per day to 1187 thousand barrels per day, with an average decline rate of about 4 barrels per week. At this rate, it would take about 310 weeks from the beginning of 2014 before the US crude oil production peaks. The peak year will be 2019, and the implied peak production level is about 10.6 million barrels per day (an increase of 3.1 million barrels per day from the 2013 level of 7.5 million barrels per day).

    • Political Economist says:

      The implied peak production level is interesingtly similar to what is derived from the oil regression shown in the privous page.

      The previous page’s regression result says that given the statistically observed incremental oil production per new rig being about 1750 barrels per day and declining rate from oil production produced by existing rigs at 23.3 percent, the expected peak (equilibirum) oil production per rig will be about 7500 barrels per day. If the current number of oil rigs in operation (1400) is maitained indefinitely, this implies a long-term peak (equlibirum) oil production of 10.5 million barrels per day.

      • Political Economist, the Weekly Petroleum Status Report is just a rough estimate and this time they are off further than they usually are off. I mean they usually are way too high but this time they beat their record. Using their data the average for the four full weeks of December they have US production at 8,091 kb/d. The Monthly Energy Review has December US production at 7,864 kb/d for December while the Petroleum Supply Monthly has US production at 7,871 bp/d for December.

        So in either case the Weekly Petroleum Status Report’s wild ass guess is over 220 thousand barrels per day too high for the month December 2013. That is not at all surprising because their guess is usually always way too high and the monthly reports are usually pretty close. Though the closer in monthly numbers are usually revised they are usually revised very little.

        • Andy Hamilton says:

          One assumes then Ron that they revise down the weekly data at some point in the future to marry up with what the monthly tally is telling them? I keep an infrequent eye on the weekly data page but not sufficient to notice whether they revise totals at any stage.

        • Political Economist says:

          Ron, thanks for the explanation. I noticed that the weekly data were never revised after they were posted.

          However, it would still be interesting to see how this rough “first estimate” has evolved over time.

          The regression graph shown in the previous page was based on monthly data. I’ll also show a monthly production growth graph.

          • Andy and P.E, Actually though I check the weekly data every week I have never noticed whether they revised it or not. The other two monthly data bases are definitely revised however.

            But now I will save the current monthly data and see if it is revised a couple of months down the road.

            • Political Economist says:

              You mean you’ll save the “weekly data” and see if they’re revised?

  41. Political Economist says:

    US monthly crude oil production growth (defined as the total crude oil production over the last 12 months less the total crude oil production over the previous 12 months) peaked in the 12-month ending in September 2013 at 363 million barrels and declined to 343 million barrels for the 12 month ending in December 2013. However, for the 12-month ending in January 2014, the monthly production growth increased slightly to 344 million barrels per day.

    Thus, right now only the weekly production growth (for crude oil) has given relatively strong evidence that the US oil proudction GROWTH may have peaked.

    It is also interesting to note that after reaching a low of 1318 in January 2013, US oil rigs in operation rose to 1466 in February 2014. Unless this is offset by a decline of incremental production per new rig or an increase in decline rate from existing production, rising rig numbers will lead to further growth in oil production (and possibly a temporary acceleration of growth) in the coming months.

    • However, for the 12-month ending in January 2014, the monthly production growth increased slightly to 344 million barrels per day.

      Sure you meant growth in barrels per year. US production grew by 363 million barrels per year in 2012 and by 343 million barrels per year in 2013.

      It would be clearer if you broke everything down in barrels per day. We are all used to reading everything in barrels per day.

    • Dennis Coyne says:

      Political Economist,

      Although the total number of rigs is not fixed, it changes somewhat more slowly than the move from oil to gas and back. Euan Mearns has pointed out that if natural gas prices begin to rise some rigs may be moved out of oil and back to natural gas.

      The current low storage levels and the demand peak for summer air conditioning may drive up natural gas prices and draw rigs away from the oil patch and back to gas.

      At some point we run out of room in the sweet spots and as the rigs move to less productive areas or wells are more closely spaced, then the output per well drilled starts to decrease.

      Extrapolation can be a handy tool and works well, except when it doesn’t.

      Consider the 2.5% annual increase in US C+C output from 1948 to 1970 where annual output increased from 2 BBO (billion barrels of oil) to 3.5 BBO over 22 years. If we had just continued that for another 43 years we would be producing 27.8 MMb/d in 2013.

      So the “if current trends continue” analysis is somewhat interesting, a more interesting analysis might be oil consumption vs real GDP vs real oil prices or how oil supply has responded to prices since 1998 (or 2000 to make it a round number). Something seemed to change in the oil supply vs prices relationship around 2005, I am unsure on the income vs oil consumption relationship and if the coefficients on that function also changed of late (in the 2000-2013 time frame.)

  42. Political Economist says:

    US natural gas production is currently experiencing a moderate acceleration of production growth. US monthly natural gas production growth (defined as the total marketed natural gas production over the last 12 months less the total marketed natural gas production over the previous 12 months) peaked and collapsed after February 2012. After reaching a low of 242 billion cubic feet in November 2013 (equivalent to only 3.3 days of the US current daily natural gas production), US natural gas production growth re-accelerated. For the 12-month ending in January 2014, the growth relative to the 12-month ending in January 2013 was 426 billion cubic feet (equivalent to 6 days of daily production).

    However, the natural gas rigs in operation had fallen from 933 in October 2011 to 333 in February 2014. The peak level happened in September 2008, when the natural gas rigs in operation reached 1585. In the natural gas case, peak production growth happened about three and half years after the peak level of rigs in operation. The current natural gas regression indicates the natural gas production could peak at level that is about 50 percent higher than the current level (see the top graph on page 3).

    The oil rigs in operation have not yet peaked. But the weekly data tentatively suggest oil production growth may have peaked. The oil regression indicates the peak production level may be about one-third higher than the current production level (see the graphs on page 2).

  43. Old farmer mac says:

    http://www.reuters.com/article/2014/04/02/us-iran-russia-oil-idUSBREA311K520140402

    It seems the Russians have little doubt that they can sell as much oil as they please regardless of what Uncle Sam may think about it.

    And there is little doubt that they manufacture first class industrial machinery such as trucks. They are going to have the inside track for a long long time with the Iranians.

  44. B says:

    Rigzone just had an ‘aha’ moment with regard to the EIA production reports.

    Musings: Does EIA Drilling Productivity Report Reflect Real World?

    Despite the old joke that the EIA’s estimate miss is “good enough for government work,” we think that large a miss raises questions about the forecasting model. If we question the forecast for one shale basin in the EIA’s report, shouldn’t we question all the basin forecasts? The Bakken exercise was the easiest to undertake ‒- as it is not easy to secure the state production data for the other basins.

  45. B says:

    Report: 2014 Bakken Oil Output 1.1M Barrels a Day

    “We’re very confident on the future of the Bakken,” said Jonathan Garrett, an analyst at Wood Mackenzie. He added that the expected lifetime of a Bakken well is 25 years to 30 years.

    Wood Mackenzie projects that $15 billion will be spent on drilling and completion of wells by Bakken participants in 2014.

    The research firm also said there is close to $118 billion in remaining value in the American portions of the Bakken and Three Forks formations, which also stretch into Canada’s Saskatchewan and Manitoba provinces.

    “Those aren’t terms that go along with boom and bust,” said Ron Ness, the president of the North Dakota Petroleum Council. “Those are elements that show you that the Bakken is a very unique and world-class resource.”

  46. B says:

    Bakken Oil Output Seen Growing With Improvements in Drilling

    The research released today by Wood Mackenzie, an energy consulting firm based in Edinburgh, comes amid increasing concern in the industry over potential hurdles of shale wells. Their output declines by 60 to 70 percent in the first year, according to Austin, Texas-based Drillinginfo Inc. Traditional wells take two years to fall by about 55 percent before flattening out.

    “Even if the rig count stays flat, drilling efficiencies will grow and operators will continue to downspace their plays,” Garrett said by phone yesterday. “Even with steep decline rates, you should still be able to add production.”

    • Watcher says:

      Technocopia. The ceramic transition is done. Downspacing would seem to presume fracture distances are not as long as thought. Hard to see how that’s good.

      • Watcher says:

        Another tidbit. This has consultant pitch written on it.

        When you’re even a mid-level executive, and it comes time to do your annual consultant budget allocation, and it’s for a new something your department has recently been assigned to do, you bring a guy in and pay him his first class tix and meals and car — generally $3-5K for travel, plus his fee. Then you pay him for another trip to come deliver his briefing (he usually lumps that effort price tag in with the overall labor so it looks generous of him to make that second trip.

        So he tells you what he saw in his research. If he has bad things to say, you go up to him, thank him for his honesty and get your one level down managers to do the same. Then you examine his bad news and discuss it and . . .probably don’t do much about it because you don’t have budget for that.

        BUT THEN . . . it’s next year. Time to allocate consultant budgets again. He ain’t gonna be called. He was thanked for his honesty and hard work, he was told all were glad that he told you that bad news, but in general he ain’t gonna be called back.

        These guys want to be called back.

      • notanoilman says:

        Two questions or rather 2 1/2

        1 1/2 What is the ceramic proppant and what is its advantage over whatever was used before?

        2 What happens if fracs are too close together and a new frac runs into the old?

        NAOM

        • Watcher says:

          Sand was used before, often of a particular type involving lanolin. Ceramic proppant is little round bits/particles of ceramic that flush into fractures created by the big pressure engine on the surface. When the external pressure is withdrawn the particles hold the fractures open (it’s down 2 miles, the weight of all that rock would crush the fractures closed) as ambient pressure returns.

          The sand . . . seems to have been jagged. Ceramic round. Jagged stuff can push together and close routes. Rounded stuff doesn’t. Think marbles and flowing fluid thru a bunch of them. Now think little cubes. The fluid might not flow very well.

          There’s a lot of talk here about fracking close together, and unlike other subjects here, that particular one need not be presumed to have superior knowledge outside this discussion — because if it did exploratory test wells would not be needed and they are going on right now. In general the thinking seems to be that you don’t know how far your fracture radius is. And to make it trickier, the radius will vary with all variables constant above ground — because the rock is different below ground. So drilling closer together presumes there’s oil there trapped in the tight rock that wasn’t grabbed by the previous well. And . . . if you’re too close together, you wasted $8 million because that oil was already collected by the previous well.

          • notanoilman says:

            Ah, thanks. I was wondering if the new frac could damage the existing well, if it crossed over, or cause contamination problems. I would have thought the original fracs would have been as close together as they dared though.

            NAOM

  47. Old farmer mac says:

    http://www.dw.de/germany-boosts-wind-power-at-green-energy-summit/a-17536470

    Internal politics are playing a big role in the German energy transition but they appear to have the grit to stick it out and keep on building new wind farms.

    Most people especially the folks hooked on the King Coal and Queen Gas brand kool aid just don’t get it.

    But the Germans do.

    They realize they have the choice of going renewable now or doing without within the next couple of decades.

    Very practical people, the Germans.

    It’s a pity the rest of the world , with the possible exception of the Chinese, don’t understand things so well.

    It is hard to know exactly what the Chinese think as compared to what they are actually doing but they obviously have the pedal to the metal on renewables.

    If I had to guess I would say that the top level Chinese leadership knows and not only knows but understands in their gut that the auto industry they are building cannot last unless they can either electrify it or run it on coal to liquids.

    But they also probably don’t think they have any choice in this matter- if the people don’t get what they want to some extent they will revolt.

    The highway system they are building will always be there and useful for truck traffic.

    Maybe they are confident that the battery industry will come thru in spectacular fashion and they can have the worlds largest fleet of pure electric vehicles in a decade or so.

    Or maybe they are fully aware and just hoping the new generation will be able to solve it’s own problems while they hold the fort on a day to day basis.

  48. TechGuy says:

    More Bad News for LTO:
    http://www.bloomberg.com/news/2014-04-03/old-math-casts-doubt-on-accuracy-of-oil-reserve-estimates.html

    Rising reserve estimates gives the U.S. a false sense of security, said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin. “We have deceived ourselves into thinking that since we have an infinite resource, we don’t need to worry,” Patzek said. “We are stumbling like blind people into a future which is not as pretty as we think.”

    The Arps formula is only as good as the assumptions a company puts into it, Patzek said. Estimates can be inflated when Arps is based on limited drilling history for data or on a few high-performing wells to predict performance across a wide swath of acreage. Forecasts can also be skewed higher by assuming slower production declines than Arps observed.

    • The problem is the Arps equation has been twisted to apply to shale technology, which didn’t exist when Arps died in 1976. John Lee, a University of Houston engineering professor and an authority on estimating reserves, said billions of barrels of untapped shale oil in the U.S. are counted by companies relying on limited drilling history and tweaks to Arps’s formula that exaggerate future production.

      They are using a formula designed for conventional oil fields to predict the performance of a shale field. True, they twist it to try to make it fit but I think that would be impossible. A shale oil field is not remotely like a conventional field. Shale is source rock so tight that the oil never escaped. Conventional fields are reservoir rock of either sandstone or limestone.

      One would need to completely sack the old formula and create a new one for a light tight oil field. But, I suppose, the twisted old formula gives a higher prediction of ultimate recoverable reserves which is great for boosting investor confidence.

      • Doug Leighton says:

        Ron,

        Rate-Time analysis “perfected” in the 1980s (initiated many years earlier) has been part of time honoured reserve characterization procedure in every engineer’s tool kit for decades. However, in my view, to think this could be applied to a LTO situation is absurd. An analogy might be using “it” to determine the of yeast going into making a loaf of bread. Or, as my wife is wont to say: Jesus Doug, what in bloody hell are you doing now?

        Jan Arps, who died in the mid-1970s must be smiling — or turning over in his grave. The Bloomberg article is spot on.

        Doug

    • Doug Leighton says:

      TechGuy,

      “Forecasts can also be skewed higher by assuming slower production declines….” It might have more accurate (useful) to say: “are easily skewed higher”. In any case, good eye in picking up on this. It’s a well written and excellent contribution to the discussions here.

      Doug

  49. Jeffrey J. Brown says:

    EIA reports US natural gas storage fell 74 BCF last week, down to 822 BCF:

    http://ir.eia.gov/ngs/ngs.html

    Even the CNBC talking heads are beginning to discuss how challenging it will be for the industry to rebuild storage levels in time for next winter.

    • Old farmer mac says:

      What is the storage situation in the rest of the world?

      I am not much into keeping up with specific numbers but should storage be at least holding steady if not increasing by this time of year ? Is it cold enough that gas demand for heat is unusually high for this time of year?

      If gas storage is not building back towards normal levels then the price of gas is apt to jump sharply next winter if not before.

      • Jeffrey J. Brown says:

        I know that Canadian storage levels are way down too, but I don’t know about other countries around the world.

        In any case, as noted up the thread with my standard natgas comment, according to the EIA, the observed simple percentage decline in Louisiana’s annual natural gas production from 2012 to 2013 was 20%. This would be the net change in production, after new wells were added. The gross decline rate (from existing wells in 2012) would be even higher.

        In my opinion, this 20% year over year net decline in Louisiana’s natural gas production is massive confirmation that the Citi Research estimate of an overall gross underlying decline rate of 24%/year in US existing natural gas production is probably right on the money.

        And as noted up the thread, based on the Citi estimate all we have to do to maintain a dry (processed) gas production rate of 66 BCF/day for 10 years is to replace the productive equivalent of all of the 2012 dry natural gas production from the Middle East–times three.
         

      • Jeffrey J. Brown says:

        In any case, lots of variables, such as production and consumption in the next six months and then what kind of winter we have for 2014 to 2015. However, there is a very real chance that we could face skyrocketing natural gas prices and supply shortfalls next winter.

        • Watcher says:

          No way. It’s an election year. Prices will be frozen by decree for at least a few months. Supply will be via import, maybe subsidized by govt errr Fed spending.

          • Jeffrey J. Brown says:

            As I have occasionally opined, net exporters can only (net) export what they don’t consume, and as noted above Canada has their own storage issues, plus their (dry) natural gas production declined by 23% from 2005 to 2012.

            • sensato says:

              Enbridge consumer gas prices in eastern Ontario went up 40% as of April 1.

    • Calhoun says:

      This is going to be huge, especially if we get anything close to a cold winter next year. Note that the

      • Calhoun says:

        (continued) previous years showed increasing storage by this time. Only a really warm winter will save us.

        • Not really. Go here American Oilman Gas Storage
          This weeks draw has not been posted on the table yet but the five year average shows one more week of draws before it is supposed to head back up.

          • Watcher says:

            Previous ronpost or two I went back and looked at the consumption numbers for this allegedly horrible winter. Only December is on file. Went back to about 2009’s Nov and Dec vs 2013s, and 2010s and 2011s and 2012s.

            Consumption was higher in Dec 2013 than the previous years, but there was a generalized rise in consumption in all the Novembers. Economic growth (such as it is) and pop growth. The Dec 2013 rise over Dec 2010 for nat gas consumption was only 6.7%, that’s with 3 yrs of pop gain and growth.

            This horrible winter wasn’t that much more severe than 2010. Consumption is increasing because it should be increasing.

            • Watcher says:

              Another item.

              Has anyone looked to see if storage is taking place somewhere different than in the past and thus unmonitored? It would not be the first time some huge departure of numbers from a norm was only because the measurement was no longer relevant.

        • TechGuy says:

          “Only a really warm winter will save us.”

          I think if prices moved up it would increase production at least for the short term. The next question should be over a warm winter, but if we have a hot summer since Gas Turbines power the summer AC demand. If we have a hot summer, it will reduce the supply into storage or perhaps even cause a draw-down.

  50. Old farmer mac says:

    http://www.greentechmedia.com/articles/read/Utility-Exelon-Trying-to-Kill-Wind-and-Solar-Subsidies-While-Keeping-Nukes

    This article has some very good data about the impacts of wind on conventional plant operators and nuke operators. There are people in the nuclear industry who are trying to kill the wind PTC and others who say it is no problem at all.

    There is a graph at the very bottom that shows the historical amount of subsidies gotten by the various energy industries that is well worth a look.

    • Dennis Coyne says:

      Thanks OFM. I agree the chart is worth looking at see below:

      • Watcher says:

        Silliness.

        US gasoline (just gasoline, not diesel or JP-X jet fuel) taxes last year were about $65 billion. Far higher in the EU. In most rational worlds, taxes are not a subsidy.

        This whole silliness of oil getting more subsidy than solar is hilarious.

        • Dennis Coyne says:

          Fuel taxes are supposed to pay for roads. The amount collected is insufficient. There is a net subsidy equal to the shortfall.

          • Watcher says:

            There is a net negative subsidy after taxes, and they are not supposed to pay for roads. If they were, Europe’s taxes would be less than US taxes, which has fewer roads.

            That gray bar is actually -80B or so, net of taxes.

            • Watcher says:

              BTW airports are paid for by landing fees. But there is still an aviation fuel tax. It’s steep. This is just not even debatable. There is a net negative subsidy on oil vs solar.

              • Dennis Coyne says:

                Hi watcher,

                The jet fuel taxes pay for the air controllers and the FAA.
                Getting back to gasoline and road diesel, the taxes collected at all levels (federal, state, and local)was $57 billion in 2010 and $100 B of capital spending on roads and bridges, a net subsidy of $43 B to the oil and gas industry.

            • Gasoline taxes are supposed to pay for roads. But really gasoline taxes just go into the general fund. Roads and bridges are built with money from the general fund. There is no separate fund for roads and bridges, neither at the state level or the federal level. It all comes out of the general fund.

              So there is really no way to say this tax pays for this and that tax pays for that. It all goes into the general fund and all road, bridge building and maintenance funds come out of the general fund.

              • Dennis Coyne says:

                It doesn’t matter what fund it goes into. Just look at money collected in fuel taxes and money spent on roads and bridges. The difference is subsidy.

                • Watcher says:

                  If that were so then airline ticket taxes would be part of it and not just aviation fuel taxes.

                  There is no leg to stand on here. Tax magnitude destroys any pretended subsidy.

            • Dennis Coyne says:

              Wrong. In 2010 57 billion dollars were collected in road fuel taxes and 100 billion spent on roads and bridges. That’s a 47 billion dollar subsidy.

              • Watcher says:

                As was pointed out, roads and bridges are general fund expenditures. And what about sales taxes on cars?

                There is just no leg to stand on here. This is just silly.

                • Dennis Coyne says:

                  Cars are a product like every other. If there were no sales taxes on any products, then there should be no sales tax on cars, otherwise its just another subsidy to the oil and gas industry.

                  It makes no difference if the taxes go to a general fund.

      • clifman says:

        A stark illustration of the idea that those who protest most loudly have the most to hide… By which I mean the FF industry and their MSM megaphones love to complain about all the subsidies renewables get, and how the renewables can’t compete on a level playing field in the open market. Pot… black.

  51. If you want to build wind towers, what will you need besides the raw materials to get the job done?

  52. Kum Dollison says:

    Wind provided about 4.5% of U.S. electricity in 2013.

    http://cleantechnica.com/2014/04/03/renewable-electricity-state-5-awesome-charts/

    Non-Large Hydro Renewables, overall, provided about 6.8% of our electricity.

    • Jeffrey J. Brown says:

      AKA the Cashisgone Field

      • Watcher says:

        Can’t be gone. The Fed or ECB or BOJ or PBOC have an infinite amount to hand out when starvation avoidance requires.

        • Doug Leighton says:

          Watcher,

          How can you believe people in government are only motivated by self-interest? Why are you so distrustful of human sincerity? And why do you sound so much like me?

          Doug

          • Watcher says:

            People in government are interested in serving their constituents, which it just turns out can’t happen unless they get re-elected.

  53. Dennis Coyne says:

    Hi all,

    I gave an estimate earlier of my expectations for Bakken an Eagle Ford output, when I put my best guesses together (Bakken TRR= 8.4 Gb= ERR and Eagle Ford TRR=5 Gb, ERR=4.5 Gb) the peak is in 2016 at 2.5MMb/d for the combined output of both plays. Note that currently (Jan 2014) output from the Bakken and Eagle Ford is about 2 MMb/d so I expect the peak will be about 0.5 MMb/d higher. Decline is rapid for a few years and then slows down. Chart below.

    • Patrick R says:

      Oh dear; have we passed Peak Nony? Rather missing his contrary and Benzedrine interjections….. Like a little firework, or perhaps a fracked well; he spouted forth then fizzled….

      DC, can you briefly describe the reasons for such differing profiles for the two fields in your chart above? And thank you for pursuing the fracin’ math so ardently (and I confess you got on April 1).

      • Patrick R says:

        Grrr: edit; ‘got me’

      • Dennis Coyne says:

        Hi Patrick,

        I miss Nony’s comments as well, maybe others found his perspective annoying, but it was nice to have a different perspective represented. I think if we only have a group of people who all agree, the conversation is less interesting. Others maybe found the tone of his comments irritating (I try not to take this stuff too seriously.)

        To answer your question about the difference between the Eagle Ford and Bakken scenarios briefly:

        1. The TRR (technically recoverable resources) are different. Bakken(Bak)=8.4 Gb, Eagle Ford(EF)=5 Gb.

        2. Wells are added to the Bakken at a slower rate (1980 new wells added per year) than in the EF=2700 wells added per year up to June 2017.

        3. New well EUR (or lifetime well productivity) decreases more rapidly in the EF (26% annual decrease in new well EUR from July 2014 to June 2017) compared to the Bakken (10.5% annual decrease in new well EUR from June 2015 to 2036).

        4. The average well profiles are quite different EF EUR=200 kb at 30 years,
        Bak EUR=353 kb at 30 years.

        Chart below

        • Dean F. says:

          Hi Dennis, have you done similar analysis for gas plays, for example for the Marcellus shale gas play? Thanks for the info. Dean

        • Patrick R says:

          Thanks DC. I like a counter factual too, so long as it is informed and well argued. Every group, even outliers like peakers, can fall into the trap of ‘GroupThink’; it’s good to be tested, if only because it can provoke even deeper analysis and argument.

          So in order to play Devil’s Advocate, looking at your curves; the development of a third major Shale play that comes on stream as the combined EF and Bakken output is declining is all it would take to flatten the peak and keep the boosters boosting. And if, as is not at unlikely, oil price firms later this year the profitability of Shalers may well improve. So the question remains how are these other possible Shale plays looking? Though, still Shale is a side show compared to the peaking of the big dogs; FSU and KSA, but very important to the discourse, especially in the US, which dominates the MSM.

          • Dennis Coyne says:

            Hi Patrick

            the scenarios assume oil prices rise starting in 2015 at 6%/year in real 2013 $.

            An earlier scenario considered other shale plays, but this was very speculative. By 2020 even in the most optimistic scenarios lto output will be declining.

            I may try to redo my “other LTO” scenario with higher prices and a higher TRR of 13 Gb for “other LTO” for a grand total TRR of 26 Gb for all US LTO.
            Then I would apply economic assumptions to determine economically recoverable resources (ERR).

            Note that I do not think such a high TRR is likely to occur (I would put the odds at 1 in 20), I am looking for an upper limit as to what is plausible.
            Current USGS undiscovered TRR estimates for “other LTO” are about 3.9 Gb, I have increased this number by a factor of 3.3.

  54. You gotta love this one. Musings: Does EIA Drilling Productivity Report Reflect Real World?

    As the DMR data is reported with a lag of two months, the last preliminary monthly output figure for the Bakken formation is for January 2014 of 871,672 barrels per day (b/d). That estimate contrasts with the EIA’s January 2014 projected output of 1,025,000 b/d made in December 2013. That is a difference of 153,328 b/d, or 17.6% of the DMR estimate and 15% of the higher EIA estimate. If we measure the DMR Bakken production estimate against the EIA’s starting point in January, the difference is 15.2%. –

    A big difference there. The next Drilling Productivity Report will be out April 14th. I will have more to say on this subject then. But it is quite obvious that they are way off. What I am waiting to see is if they make adjustments for the 50 kb/d decline in the (Montana+ND) Bakken. They have the Bakken up 20 kb/d in December. The data is there and has been there for two months. If they do not adjust their data to reflect what Montana and North Dakot says the Bakken produced then there is a serious problem with the Drilling Productivity Report.

  55. Pingback: Erfurt: Eine Stadt, Peak Oil und Resilienz | peak-oil.com

  56. Old farmer mac says:

    Another change of subject – too bad this blog setup does not allow separate threads-
    but with natural gas supplies in the future being questionable at the very least and the price of NG almost for sure going up substantially in my opinion at least the nuclear question is here to stay.

    And the anti nuclear crowd is determined to get away with at least one big lie- that nukes cannot load follow.
    The French have been operating their fleet in load following mode for decades and the new designs under consideration in Europe have load following capabilities built in rather than cobbled on.

    I expect with a little luck to live to see gas cost three or four times what it does now in constant money.

    The per dollar difference in the cost of a gas BTU and an oil BTU virtually guarantees that the trucking industry is going to go to gas in a big way and there are enough trucks that stick close to ” home plate” to get the process well started because they can fuel up once a day at” home” while the driver is off the clock.

    It costs well over three hundred dolls a day now to keep a dump truck rolling just for the diesel.It can run twice that for an over the road truck with team drivers.

    It doesn’t cost that much to build a dual fueled truck new considering the fuel cost savings.

    And once the first few thousand dual fuel trucks are operating in let us say the Charlotte area they can easily make it to Roanoke Virginia without refueling-and refuel there for the return trip while the driver takes his mandatory rest break.

    The fuel stations will appear anywhere there are major highways and natural gas pipelines once the first million dual fuel trucks are on the road.

    It may well be that the only thing holding up this process is that the trucking industry is afraid the cheap gas won’t be there to justify the investment.

    • Woody says:

      OFM,

      The Waste Management fleet in my area has already been converted to NG and I believe UPS is also running some NG trucks. NG for short haul and local utility trucks is already here.

    • Doug Leighton says:

      Mac,

      You seem to champion the use of Natural Gas as a way to wean us off (some) petrol use and it is true this is happening more and more. The buses in Vancouver (Canada) went that way years earlier, and I can remember a program where people could convert houses from Fuel Oil to Natural Gas for almost nothing to “save a bundle” on heating costs. Everyone went for this; a secondary benefit was that Gas burned “cleaner” meaning you escaped from the stench of Oil.

      The other shoe dropped when shortly following all the conversions the government passed an Energy Equivalency Bill meaning you now had to pay the same amount for Gas as you did for oil. Cost savings evaporated. Even so most people were (are) happy with a cleaner fuel but a feeling of betrayal lingers, at least in my mind.

      There is another issue however. Studies’ have demonstrated that an Achilles Heel is attached to Gas – leakage. It’s highly variable of course but from what I’ve been able to determine the net effect of leaking Natural Gas gives it about the same effect as Coal in terms of Greenhouse Gas emissions. I don’t think this should be ignored when people champion Gas. Anyway, that’s my thought for the day.

      There is a paper in Science evaluating the leakage phenomena that has been referenced in Ron’s Blog previously but it has been lost, to me. Steve will have all the facts on this.

      Doug

      • Woody says:

        Doug,

        The gas infrastructure already exists and will leak whether more gas is used or not. As a whole, more gas usage may actually reduce leakage on a percentage basis if it leads to higher utilization rates of the existing gas network. At least where pressures don’t need to be increased to push volume.

        While gas leakage isn’t desirable, there are more issues than just green house gases associated with burning coal. Maybe more effort put into the gas system to reduce losses would help but, anything that drives up gas prices will encourage more conversion to coal so no easy answers.

        Woody

        • Doug Leighton says:

          Woody,

          I just don’t think Natural Gas is a Panacea; the lesser of evils perhaps.

          Doug

          • Old farmer mac says:

            I do not intend to come across as ”championing” the conversion of the trucking industry from diesel to natural gas.

            I am simply pointing out what is basically inevitable if the price of a ng BTU stays so cheap compared to an oil BTU.

            Of course it is possible that there may be some roadblocks thrown in the way of the transition of the political sort but other than that the question is basically a slam dunk no brainer except for one BIG QUESTION.

            The technology is straight forward and already fully commercialized .

            It is not yet possible to build the the natural gas tanks small enough to work well in cars and pickup trucks at reasonable cost.

            But there is plenty of room on large trucks for the large tanks needed.

            I personally believe the only reason the trucking industry is not going whole hog as fast as possible for natural gas is that the people in the industry are afraid the gas will rise in price until it costs as much as diesel fuel, or almost as much.

            Personally I believe the price of natural gas is going to go up and go up pretty fast unless the economy has a heart attack.

            I can’t see the federal government outlawing the export of gas but that is only my opinion and I have been wrong before on political questions.

            What do the rest of you guys think about the political aspects of gas exports?

            • Anonymous says:

              Mac,

              I’m totally unqualified to have an opinion on NG exports but if the depletion info presented by Jeff holds it’s hard to imagine there being a lot available on the short term. Then there’s the matter of time to build/permit export facilities. Perhaps its more likely others (Australia, Oman, etc.) will jump in first and fill the void. Alaska has been talking a lot about building a gas pipeline, which, if it happens, might be a viable export source at some point.

              Doug

  57. Jeffrey J. Brown says:

    The EIA has resumed updating their Annual Energy Review, which has a wealth of US data, back to 1950, and through the first two months of 2014:

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf

    • Their estimate for January is 217 kb/d above December. I don’t really believe that happened. I don’t think the US produced 8,081 kb/d in January. That estimate will likely be revised downward by about 100 kb/d or more.

    • Dennis Coyne says:

      Hi Jeff,

      Ron is correct as usual. Note that I found a different link to the petroleum supply monthly below:

      http://www.eia.gov/petroleum/supply/monthly/pdf/table3.pdf

      At that link the crude output is 7939 kb/d for Jan 2014 (exactly what Ron predicted “100 kb or more, about 140 kb lower than 8081 kb/d actually, so more than 100kb/d was right). Of course there could be further revisions, but “more” will cover it.

  58. Mankind is not going to stop using petroleum products, it will not happen. You can build wind towers that cover the earth, like Benjamin Moore did, but it still will not stop oil consumption. As long as it is available at any price, it is going to be pumped and delivered and sold and used with reckless abandon.

    There are 225,000 wind turbines world wide. There are 14,000 wind turbines in California that have been abandoned. The environmental destruction is far greater than oil ever will be and is devastation that will be catastrophic.

    How many oil rigs are working worldwide today? Answer: 3598. Which energy source has the least impact by numbers and the most return on investment and which energy source has the greatest impact by numbers and the least return on investment? 3 to 4 million dollars cost to install a wind turbine, the total investment looks like somewhere in the range of 225,000 times 3,000,000 is, lo and behold, 675,000,000,000 dollars. You would be able to drill, lemme see here, I’ll figure it out… oh, 675,000,000,000/11,000,000 dollars to drill one Bakken well to the pumping stage, you will have, division time, 675,000/11 is going to be around 61,000 wells. Better than 225,000 wind turbines spread out worldwide with a lifespan of 25 to 30 years; all of that investment is for naught, wasted resources.

    Facts don’t budge.

    Eventually, imo, Wall Street will have to invest ‘slow money’, money given with no expected return, to continue to invest in oil exploration. They essentially do with subsidies, just a different extraction method, from the consumer’s pocketbook, i.e. the consumer must pay more with no return whatsoever, except for Wall Street, of course.

    Electric cars were more popular when the automobile became the preferred mode of transportation and commercial manufacture of them became a reality. Internal combustion engines were more difficult to operate, read mechanical problems.

    At one time, 38 percent of all cars were electric.

    If it weren’t for the electric starter, the ice car would not have gained ground so quickly.

    http://www.earlyamericanautomobiles.com/1902.htm

    You have to have power plants to make electricity to have a manufacturing plant, it won’t happen any other way. Electricity is the most important energy source, bar none. Robotic spot welders function flawlessly with a good source of power.

    Railroads can always return to coal and steam-powered engines, it is not like they are going to all die because oil is too expensive to haul freight.

    Steelmakers aren’t going to broke anytime soon. Plenty of steel still out there in every farmstead you see. Out in the remote parts of Montana, there is iron galore. There is a plethora of steel. You will need oil to move steel to the smelters.

    Peak Oil is not going to be the end of the world. However, the Peak Oil phenomena is very real. Not all will be lost.

    The symptoms are there; harbingers of future problems.

    Problem solving will be a challenge. War will make it all worse.

    • SRSrocco says:

      Ronald,

      Everything you point out makes sense a FACE VALUE. Unfortunately, the one KINK that may throw all of that out the window is the CLIMATE. And of course we have the falling EROI and decline of net oil exports which makes a fun situation even more fun.

      steve

    • Doug Leighton says:

      Ronald,

      With respect, I have read your post three times and still fail to get your point. Clearly you hate the idea of wind energy and you appear to think oil production, subsidized, will proceed more or less forever and at the same time you (seem to) accept Peak Oil, as fact. Isn’t this a contradiction? It’s true that I’m easily confused but “…. You can build wind towers that cover the earth, like Benjamin Moore did…” Really?

      Doug

      • Old farmer mac says:

        Sometimes Ronald makes sense.

        Other times he strings odd facts together in a fashion that makes about as much sense as a train wreck.

        Some of what he has to say this time is just simply flat out wrong.

        Oil at ”any price” will not be used with reckless abandon.

        Twenty bucks a gallon in current money would put a stop to just about all the ”reckless” use of oil although a few very rich people would still be flying and the ordinarily rich would still be driving oil fired cars. The rest of us would be on 50 cc motor scooters or electric bicycles except for the ones with pull enough to get an electric car.

        I doubt seriously there are 14,000 abandoned wind turbines in California-that many may have been scrapped and some of them replaced with newer and larger ones.

        The one blowout of that infamous BP well in the Gulf probably resulted in as much environmental damage as all the wind farms in the world over the last decade.

        His comment today is a train wreck.

    • TechGuy says:

      Ron W. Wrote:
      “Wall Street will have to invest ‘slow money’, money given with no expected return”
      Nope. Never happen. The only purpose of Wall street is to make money.

      “Electric cars were more popular when the automobile became the preferred mode of transportation and commercial manufacture of them became a reality. Internal combustion engines were more difficult to operate, read mechanical problems.”

      Nope, Electric cars are more complex than ICE vehicles and cost considerable more than the small and subcompact cars. As Oil become even more expensive and rationed, job will disappear, and the remaining jobs will keep up with inflation. Credit will also likely disappear as investors and lenders will be less willing to risk capital. People will be forced to keep their existing vehicles (fixing them with Duct tape if necessary) or purchase the cheapest car they can. A lot of resources go into an electric car and seems unlikely that will become significantly more affordable in the future.

      “At one time, 38 percent of all cars were electric.”
      At that time only the upper middle class and rich could afford them.

      “You have to have power plants to make electricity to have a manufacturing plant.. Steelmakers aren’t going to broke anytime soon. Plenty of steel still out there in every farmstead you see”

      Manufacturing plants and steelmakers require customers to purchase their products to stay in business. In the developing world, the middle class is disappearing and this tread is going to accelerate once Peak Oil is breached. Energy prices will naturally rise, leading to demand destruction (as happened in 2008). Millions more will lose their jobs, see their hours cut, or their wages cut. This will trend in a downward spiral until a tipping point is breached causing the entire economy to collapse in a short period. Every month we slowly move closer the tipping point. In complex systems, change is usually slow until a tipping point is breached which results is dramatic change.

      “Railroads can always return to coal and steam-powered engines, it is not like they are going to all die because oil is too expensive to haul freight.”

      This is backwards, and here is why (I don’t want to be condescending but I am trying to be brief). The railroads will not shutdown because of lack of fuel but because of lack of goods to ship. As energy becomes more expensive, prices for commodities and goods will rise, reducing the volume of products people can afford to purchase. As prices rise, there will also be fewer jobs because demand for good and services will decline. Railroads required a minimum revenue to keep their rail and trains maintained. If there is insufficient revenue they will shutdown unprofitable trains. Consider that the railroads dominated passenger travel a mere eighty years ago. Once cars and air-travel became the norm, they shutdown their passenger service. Now only Amtrak (a gov’t owned business) provide very limited services and loses billions every year. Even if the gov’t subsidized 100% of rail frieght operating costs, its sill not going to get people to buy more goods and services, just as people still don’t use Amtrak for long distant travel even with the gov’t subsidies.

      “Peak Oil is not going to be the end of the world. However, the Peak Oil phenomena is very real”

      That may not be correct. Its very likely that energy supply constraints will lead to another World War. Sooner or later ,Oil and other strategic commodities are no longer going to be traded in dollars. This will make it very difficult for the US to import Oil and other strategic commodities. The only thing the US has to offer is its Military industrial complex. We have already seen that any oil exporter that removes itself from the Petro-dollar system is attacked (Iraq, Libya) or santioned (Iran). Just today, Obama when on a rampage because Russia announced a trade deal with Iran on Oil/NatGas sales not priced in dollars. So when oil is no longer priced in US dollar what do you think will happen?

      If not the US then it will be someone else. Yesterday A Chinese General said War with Japan is very likely.

      http://www.zerohedge.com/news/2014-04-03/china-general-says-war-japan-increasingly-likely-russia-conducts-new-army-drill-near

      http://www.zerohedge.com/news/2014-04-04/us-threatens-russia-sanctions-over-petrodollar-busting-deal

      • Watcher says:

        FYI steam powered trains required a water supply about every 50 miles. They didn’t power much refrigeration either.

      • Dennis Coyne says:

        Hi Techguy,

        Remember that as prices rise, incomes also rise.

        When energy prices rise, resources will be allocated differently and energy will be used more efficiently. A price rise does not necessarily imply reduced employment, in fact the times when employment is lowest tends to be in times of deflation, there are exceptions (1980s stagflation), but these are unusual.

        Incomes tend to go up with prices. As oil, gas and coal prices increase with depletion, substitutes become more competitive (wind and solar and possibly biomass), new jobs are created in these industries.

        Real prices for oil have risen by about 12% per year on average since 1998, if this rate of rise reduces to 6% per year to accommodate a 6% per year rise in natural gas prices, then wind becomes competitive and eventually solar will become competitive as well (without subsidies).

        The transition will not be easy, but once it is widely recognized that oil and natural gas (and eventually coal) depletion are a long term problem. Then we can get to work trying to adapt and mitigate the problem.

        If the wealthy choose not to invest, raise tax rates and the government can do the investment. This is not the most efficient solution, but in a great depression or worse scenario, it is better than the alternative.

        • TechGuy says:

          FYI: Sorry If my reply comes across as condescending. I am just trying to be brief.

          DC Wrote:
          “Remember that as prices rise, incomes also rise.”

          Real wages in the US have declined since the 1970’s Please see these charts:
          http://www.washingtonpost.com/blogs/ezra-klein/files/2012/07/hamilton2.jpg
          http://jaredbernsteinblog.com/wp-content/uploads/2011/05/wg2.png

          DC Wrote:
          “Incomes tend to go up with prices. As oil, gas and coal prices increase with depletion, substitutes become more competitive (wind and solar and possibly biomass), new jobs are created in these industries.”

          Sorry but that is incorrect. Incomes do not keep up with commodity inflation. Consider that back in the 1960’s and 1970s’ just about everyone paid cash for their new cars. Today only a very few pay cash for a new car. Up until the 1980s most families got by on a single salaries. Today most families need to incomes to meet ends.

          The substitutes for Oil will never be competitive since they are manufactured and shipped using fossil fuels. Old Jobs will disappear faster than new job creation. See below that US workforce participate continued to fail since Oil prices started rising in 2000. Business will get more efficient, with automation, further accelerating job losses.

          http://research.stlouisfed.org/fredgraph.png?width=630&height=378&range=Max&id=CIVPART

          DC Wrote:
          “The transition will not be easy, but once it is widely recognized that oil and natural gas (and eventually coal) depletion are a long term problem. Then we can get to work trying to adapt and mitigate the problem.”

          I very much doubt this. Once Oil and Natgas depletion is widely recognized, energy and other strategic resources will be hoarded preventing any transition efforts. Strong Centralize gov’t leaders will enjoy a very high standard of living, Hording resources for themselves and sending the rest of the populations in to deep poverty. Weaker nations will suffer civil war and extreme violence. Nations like the US and China will use their their power to seize control of resource rich nations (Already happening). When there are no more nations left to seize (almost there!) they will fight each other, first with proxy wars, later with nuclear weapons.

          DC Wrote:
          “If the wealthy choose not to invest, raise tax rates and the government can do the investment”

          It doesn’t work that way, The wealthy will find loopholes, move, or simply close up shop. The US already ship most of its manufacturing overseas to avoid higher taxes. People are not going to work for free or for next to nothing, and this very much applies to the wealthy. FWIW: As a small business owner, who is now facing double digit tax rate increases, I am closing up shop. I refuse to work when most of my labor is to pay for taxes. I am sure I am not the only business owner do this or planning on doing this. Recent events in Venezuela is a clear example of when the gov’t raises taxes and nationalizes businesses. When Hugo announced his new socialist programs, The wealthy packed their bags and left the country. In less than a Decade, Vz is on the verge of collapse and a civil war. Argentina is another example. Argentina was once the richest nation in the world and the world’s leading agriculture exporter. Today, it’s also on the verge of a collapse, all because of gov’t meddling.

          Gov’ts don’t solve problems, they just get in the way and exacerbate the problems. Politicians lie and tell the people what they want to hear to win elections. They never fix problems.

          • Dennis Coyne says:

            Income tax rates have favored the very wealthy since the 1980s, this is the reason for the decrease in real wages, it is a question of the distribution of income.

          • Dennis Coyne says:

            Hi tech guy,

            On your first point, median, weekly or hourly earnings falling reflects changes in the distribution of income. Real GDP is equal to real income, this is basic economics. Real GDP has not fallen overall since the 1970’s, so real income has not fallen either.

            Any apparent fall in real median income simply reflects a change in the distribution of income, the income has been transferred to those with higher income, mostly by a reduction of tax rates by Reagan and Bush Jr. See chart for Real GDP.

            Buying cars on credit reflects changes in credit availability and lending practices.

            Two income families reflect changing social norms and people demanding bigger houses and more stuff, for those doing relatively well and changes in income distribution, which could be alleviated by tax policy.

            A rise in fossil fuel prices will cause other prices to rise, but as the price of a good rises it gets used more efficiently and substitutes will be found,
            you do see the contradiction in your viewpoint here, I hope.

            On the one hand you think the market will not find a solution to diminishing fossil fuel supplies, on the other hand you seem to believe in a very laissez faire view of government intervention and that the government only causes problems and the market should be allowed to work. Which is it?

            The market solves all problems, except the depletion of fossil fuels?

            On labor force participation this is mostly a matter of demographics and the baby boom generation retiring at higher rates than the past.
            Discussed in the following paper:
            https://research.stlouisfed.org/publications/review/2014/q1/bullard.pdf

            I disagree on the hoarding of energy resources. What are the Saudis going to eat? Trade will continue, in energy and other products.

            Weaker nations are already suffering, as to nuclear war, I hope you are wrong, there will be conflict, hopefully we can avoid exchanging nukes.

            On the taxes being raised on the wealthy. Loopholes can be closed and revenue can be increased. It does not need to be a socialist revolution like Venezuela. Go back to US 1970s tax rates with loopholes closed.
            See in the chart below how badly the US economy did in the 1950 to 1970 period with much higher income tax rates than today.

            Edit: The chart doesn’t cover 1950-1970 see comment below with real GDP 1950 to 1970

          • Dennis Coyne says:

            Oops. Chart didn’t cover 1950-1970 new chart below

          • TechGuy says:

            DC Wrote:
            “On your first point, median, weekly or hourly earnings falling reflects changes in the distribution of income. Real GDP is equal to real income, this is basic economics. Real GDP has not fallen overall since the 1970′s, so real income has not fallen either.”

            This is not correct. Real GDP is no where near the figures the gov’t releases. Real GDP in the US is about 8 Trillion. The other half is gov’t spending (Federal, State, Local) which has exploded since the 1970’s . Almost none of gov’t spending contributes to real economic growth. Its used to pay for the salaries of gov’t workers, entitlements and the Miltary-Industrial complex. The GDP guestimates also do not remove the debt that continues to subsidize spending, debt that will ultimately be defaulted on. The gov’t spins figures to support whatever agenda they are trying to promote.

            http://www.drroyspencer.com/wp-content/uploads/US-Govt-quarterly-expenditures-vs-receipts-1970-thru-20101.gif

            DC Wrote:
            “Two income families reflect changing social norms and people demanding bigger houses and more stuff”

            There are a lot of people living in condos and apartments that need two incomes to meet ends. Today most college grads are buried in student loan debt and can’t even move out of their parent’s homes.

            DC Wrote:
            “Buying cars on credit reflects changes in credit availability and lending practices.”

            This is backwards. Credit and lending practices became more prevalent because the costs of vehicles have risen. If auto manufactures didn’t offer credit they would have gone out of business, or had to downsize. Whenever products become too expensive, manufactures turn to credit to avoid\delay shutting down. Not that prior to 2000, Homeowners were required to provide a 20% downpayment. Wages had become some bad that lenders ditched it for the no-money down loans.

            “On labor force participation this is mostly a matter of demographics and the baby boom generation retiring at higher rates than the past.”

            Nope, See this chart:
            http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/01/Labor%20Force%20Part%20Rate.jpg

            Boomers can’t afford to retire.

            ” Go back to US 1970s tax rates with loopholes closed.
            See in the chart below how badly the US economy did in the 1950 to 1970 period with much higher income tax rates than today.”

            You need to research this because your understanding is incorrect. Prior to Reagan, The tax code had more loopholes than swiss cheese. Also the Payroll tax was significantly lower. The effective tax liability for businesses and individuals was much less than it is today.

            “On the one hand you think the market will not find a solution to diminishing fossil fuel supplies, on the other hand you seem to believe in a very laissez faire view of government intervention and that the government only causes problems and the market should be allowed to work.”

            Yes, its going to collapse! My opinion is that centralize gov’ts become extremely corrupt. Politicians are the worst at making sound long term economic, social and science policy as they have the attention span to the next election. They know nothing. They just make false promises in order to get elected. They never even bother to try to fulfill their campaign obligations.

            Gov’t authority and power attracts the most self-centered and megalomaniac people in our society. Better to return the power to local and state gov’ts so that people have better access to influence policy. We should not permit a bunch of Lobbyist to create an atmosphere of cronism and corruption. Most of the biggest companies got to be huge by influencing Federal Policy to benefit them if not getting money directly from the gov’t.

            “I disagree on the hoarding of energy resources. What are the Saudis going to eat? Trade will continue, in energy and other products.”

            They are not going to give their Oil away for green pieces of paper when depletion is broadly accepted as a fact. They will demand tangible access or goods and stop allowing imports to use credit or fiat currency for Oil purchases. If extremely likely it would trigger a sell off of US dollars causing a panic since it would be obvious that the US isn’t going to pay off its debts. That said I think an Arab spring is coming to SA, and Its going to rock production just as it has in Libya.

            “Income tax rates have favored the very wealthy since the 1980s, this is the reason for the decrease in real wages, it is a question of the distribution of income.”

            Not really. Income tax rates have favored the developing world, which is where all of the manufacturing jobs moved to. Now even professional jobs are moving overseas (Engineering, R&D, Medical, etc). The only thing left is the Financial industrial and Defense, which are the most despicable sectors. The US entire is morphing into Detroit!

            Raising taxes will not do anything to fix the problems. They will just lead to more authoritarianism, corruption, and vote buying, via income wealth redistribution. All of the recent tax increases is used to pay for entitlements in order to buy votes. Raising taxes will also make it more difficult for business and individuals to become more energy efficient. They will have less money to invest in their own infrastructure to cut costs. And as far as gov’t investments, see the Ethanol mandate, Solyndra, Fisker, etc, which a few people become incredibility rich and ended by default on Billions in debt.

            • Dennis Coyne says:

              Tech guy,

              You are incorrect about Real GDP, there is no argument you can make to convince me so we will just have to disagree, a quick thought experiment for you. If you worked for a government agency or a company like Raytheon or Boeing (private companies that the government purchases lots of goods from) you would receive a paycheck which is funded by government expenditure. In your view this paycheck is not income? What do you call it, most people think of it as income.

              Also note that I am using “investment” in the macroeconomic sense. So if the economy is doing poorly due to a lack of private investment spending and the unemployment rate is 25% (as in the Great Depression), the government can spend money on building roads (they can just hire private companies to do this) or tanks to increase employment, it was the military spending for World War 2 that got us out of the Great Depression, but an equivalent amount of spending could have been spent on roads, communication, the power grid, or homebuilding.

              I agree that government spending is a second best solution to private investment, however there are cases where a severe financial shock warrants this solution because private investment is inadequate in some cases to provide adequate employment. Once the unemployment rate is reduced to reasonable levels (6% or less in my view), government spending can be cut back so that private investment is not “crowded out” as the private investment will lead to a more efficient allocation of resources.

              On income tax rates, these have changed quite a bit since 1980 and the distribution of income has become much more skewed.

              http://krugman.blogs.nytimes.com/2014/01/18/the-myth-of-the-deserving-rich/

              see chart below from

              http://www.usnews.com/opinion/blogs/economic-intelligence/2013/12/06/3-charts-illustrating-the-disturbing-rise-of-income-inequality

              And finally you offer yet another contradiction, you don’t like government spending or taxes (less of both of these would be better in your view), but your comment about jobs moving overseas indicates that you think free trade is a bad idea as well?

              Strange bedfellows. Free trade is a bedrock of laissez faire capitalism.

              I do not expect I will convince you, we will just have to disagree.

              • TechGuy says:

                DC Wrote:
                You are incorrect about Real GDP, there is no argument you can make to convince me so we will just have to disagree, a quick thought experiment for you. If you worked for a government agency or a company like Raytheon or Boeing (private companies that the government purchases lots of goods from) you would receive a paycheck which is funded by government expenditure”

                It is not! Consider that the money used to pay for the gov’t contractors comes from a taxpayer, and only the taxpayers NOT producing goods and services for the gov’t provide real cash flow. Consider if you and I run a lemonade stand and we are the only customers. There is no positive cash flow! We need customers outside of our business to generate real cash flow. Gov’t workers and Gov’t contractors get all of their wages from the taxes collected from non-gov’t workers. If everyone was a gov’t employee the economy will collapse, because there is no real cash flow.

                DC Wrote:
                “I agree that government spending is a second best solution to private investment, however there are cases where a severe financial shock warrants this solution because private investment is inadequate in some cases to provide adequate employment. Once the unemployment rate is reduced to reasonable levels…”

                Only if there was a “rainy day fund” with saving set aside to draw from. But that’s not how it works in our economy.
                1. The increased gov’t spending primary comes from Debt. Debt that must be paid back. The Debt is drain on future economic production. The US Federal Gov’t now pays 26% of its revenue just on interest payments, and interest rates are at rock bottom rates. What happens when interest rates rise back up to 5% to 6% range? The US will pay close to 40% of its revenue on interest payments! Which means that the gov’t will need to substantially increase tax rates or declare itself bankrupt.
                2. Higher tax burden on the working class to help pay for the higher gov’t spending. The gov’t taxes money from one group (the productive group) and gives it to the non-productive group. The productive group is the group that will create jobs by investing their earnings that will create lasting jobs. Those on the receiving end just consume, consume less than if they had a job, and they don’t go out and start businesses either. Those on the receiving end, had no incentive to become productive.

                In my personal instance. I have no incentive to expand my business or work harder because all of my increased profits will go to pay gov’t taxes. if I earn more, my effective tax rate goes up. So why should I work harder when I get nothing in return? In fact, I have little incentive to work at all. After all, I could just quit working and start collecting gov’t handouts.

                DC Wrote:
                “And finally you offer yet another contradiction, you don’t like government spending or taxes (less of both of these would be better in your view), but your comment about jobs moving overseas indicates that you think free trade is a bad idea as well?”

                Its not a contradiction. Its because it doesn’t create a free trade environment. If an overseas company has a much lower tax and regulatory burden, they can sell products at a much lower cost. Every time the gov’t raises taxes or increases regulation, companies are forced to raise prices on the goods and products the sell, to pay for the increased burden. These increase burdens to not return any benefits that would make them more productive or make it easier to hire new workers. In fact, it makes it much harder to hire workers. Eventually companies have no choice but to ship production overseas to stay in business. Thus reducing the number of jobs and increasing unemployment.
                By no means does the US have a free market for US businesses. Only if you’re an overseas company since you can sell goods and services in the US, without restriction and the tax/regulation burdens. This is anything but free trade.

                DC Wrote:
                “On income tax rates, these have changed quite a bit since 1980 and the distribution of income has become much more skewed.”

                Yup, But not for the reason Krugman believes. Maybe I will explain another time.

              • Dennis Coyne says:

                Hi Techguy,

                If something is produced and sold it is a part of GDP, if I receive a paycheck it is income.

                If the government borrows to fund government spending, it is not a problem as long as the money is paid back. As I recall Ronald Reagan did quite a bit of deficit spending.

                There have been times when businesses have been unwilling to invest not because of high taxes or regulations, but because of a lack of aggregate demand.
                Under such circumstances we could wait for businesses to invest, like Hoover did from 1929 to 1933, or the government could try to create jobs by investing in roads, bridges, research (maybe a space program or development of new energy sources), until the economy picks up.

                The increase in taxes on the middle 60% of the income distribution was due to a reduction of tax rates on those with the highest incomes.

                So we are only free if there is no government?

                I will assume you do not believe that to be the case.

                On regulations, they exist for a reason. Banking regulations were put in place in response to the Great depression. Eliminating most of those regulations was not very helpful. No doubt you will argue that not enough regulations were eliminated, I have heard those talking points before, I will not be convinced.

                A last thought on borrowing. Do you think that all borrowing and lending are bad?

                It can be overdone, I think we would agree on that.
                If people have 20% to put down on a home mortgage, it seems you are ok with borrowing to buy a home.

                If there are people willing to lend money to the government, we could even require that they be US citizens if that makes you more comfortable, why is that bad? As long as not too much money is borrowed and the money is paid back (as in the period from 1950 to 1970 when debt to GDP fell from 90% to under 40%), government borrowing is not a problem.

    • Mike Barnard says:

      There are about 300,000 wind turbines with a capacity of over 300 GW, and the factoid about 14,000 wind turbines is so thoroughly hilariously wrong it’s amazing anyway can say it with a straight face. I’ll give you a hint: there were only about 14,000 wind turbines in California when that claim was first made. Get a sense that there’s something wrong with the statement?
      http://barnardonwind.com/2013/03/03/anti-wind-lobbyists-claim-more-than-1-in-20-wind-turbines-permanently-inactive-theyre-wrong-as-usual/

      Since your base numbers are broken, and your ability to apply even a gloss of common sense to them, I won’t bother to look at your calculations and point out the likely obvious errors.

  59. Kam says:

    Russia’s oil production dropped 3rd month in a row: http://af.reuters.com/article/energyOilNews/idAFL5N0MU1E020140402
    It could be a beggining of endless decline in their output.

    • Watcher says:

      Oh it will be. And after Iran nukes Ghawar with some delightfully long lasting isotope, KSA’s output will also decrease.

    • Patrick R says:

      Really interesting, so long as this isn’t just a seasonal issue, it puts a really interesting gloss on the oil-goods swap with Iran. Is depletion in the Western Siberian fields part of the motivation to find this extra-state source of oil to honour export contracts and to maintain ‘top dog’ status over the KSA? Putin’s regime seems to care enormously about bragging rights.

      Also note (come in Jeff!) that while production only fell 0.2% exports dropped 2.3%. The beginning of secular decline in the FSU is probably even more of a turning point for global peak than the KSA’s recent moves. If this continues into Spring and Summer all that Shale hoopla is going to be shown for exactly what it is in the global context: a blip, a sideshow.

      • Jeffrey J. Brown says:

        Ask and you shall receive . . .

        Even with Russia’s slowly increasing production, through 2012, their net exports were flat to down from 2007 on, at or below 7.2 mbpd through 2012 (total petroleum liquids + other liquids, EIA).

    • Anonymous says:

      Steve,

      You might be interested is the following: “The Perp in the Greatest Mass Extinction on Earth? Methane”

      http://truth-out.org/news/item/22885-the-perp-in-the-greatest-mass-extinction-on-earth-methane

      Not sure on the conclusions but the science seems reasonable based on a quick scan. There is one reference, sort of, to info in Proceedings of the National Academy of Science by MIT professor of geophysics Daniel Rothman, Gregory Fournier, and five other researchers at MIT and in China. I haven’t followed up but might at some point. In any case, I expect you will find a couple of gems in this.

      Doug

      • Old farmer mac says:

        I have been talking to the smartest person I ever got to know about methane as the key to the mass extinction in question and he is of the opinion that this is very probably correct.
        Some of the regulars here would know him but I do not mention his name without permission.

      • TechGuy says:

        The Siberian traps eruption was the cause. It was a super-volcano that erupted for at least for 100K years continuously and perhaps discontinuously up to a million years
        http://en.wikipedia.org/wiki/Siberian_Traps

        The last Super-volcano that erupted 70K years ago, Toba may have nearly killed off the human race and that was a much much smaller eruption than the Siberian Traps eruption.

        I suspect this is more a less a FUD document trying to link human activities causing as much damage as 100K year eruption. This group is speculating, and attempting to grab the spotlight with climate change.

        As I stated many times, worry less about climate change and worry about the nuclear power plants and the spent fuel pools. A cascade loss of nuclear reactors causing a Permian extinction level event in your lifetime is 95%. The chances of a Permian extinction level event triggered by human CO2 emissions in the next 500 years is practically zero. Even if all of the ice caps melt, life will still go on and only a few species at the poles are endangered. The rest will adapt or relocate and survive.

        As soon as the global economy collapses because of declining energy production human CO2 emissions will collapse with it. But when our economies collapse, who is going to maintain our reactors and the spent fuel pools? We will die and destroy the planet by our nuclear power systems well before we see the caps melt.

        • SRSrocco says:

          TechGuy,

          You made some interesting statements about climate change, so I thought I might throw some tidbits that might interest the readers. I am not making this comment to persuade you… as I see you are handsomely confident in your assumptions.

          You say a human extinction level event is not possible in the next 500 years. However, the IPCC just released their report stating rapid global warming is BAKED IN THE CAKE, without some sort of massive geo-engineering. The IPCC is a very conservative group of climate scientists who have to reach a political consensus. Which means, what they normally release is watered down.

          You say, even if the Ice Caps melt, life will go on… people will adapt. I gather you are not familiar with the physics of melting ice. It takes 80 calories of heat to melt 1 gram of ice. Once the ice has melted another 80 calories raises the temperature of the water to 80 C.

          So, the Ice Caps currently melting are buffering a great deal of heat. Once the ice caps are gone… then the warming really shoots up rapidly.

          At one time, collapse of human industrial society was thought to be a good way to stop global warming. However, new studies show that if we turned everything off overnight, global temperatures would increase 1.15 C quite rapidly due to lack of sulfites and aerosols being thrown in the atmosphere from modern industry. Sulfites and aerosols that are part of industrial pollution actually help cool the global temperatures.

          So… if we did shut the system down, it would actually be worse.

          The focus is no longer on Carbon. The Methane is the real problem. Because of the 30 positive feedback loops in the Arctic, methane emissions are increasing in an exponential fashion.

          The NASA CARVE project (flights over the Arctic Ocean) reported 150 kilometer long methane plumes coming from the Arctic Ocean during the summer of 2013.

          It looks like things get really out of hand when the Arctic Ice is totally gone… which will occur first during the month of Sept. The Navy’s model shows the Arctic to be ice free in Sept by 2016 plus or minus a few years.

          However, I will agree with you that it will probably be the 400 +/- Nuclear plants going down that remains one of the biggest threat.

          I gather we may get to chose our poison.

          steve

          • TechGuy says:

            “So, the Ice Caps currently melting are buffering a great deal of heat. Once the ice caps are gone… then the warming really shoots up rapidly.”

            Only to a certain point will temperatures increase. As the rising temperatures increase water vapor in the atmosphere increasing global cloud coverage, which will reflect light and heat back into space. Snow on the ground reflects heat and light and so do clouds. Increased water and increase temperatures will increase plant life globally that will lock up CO2 at a faster rate (although this will take many thousands of years at a much slower rate than humans had put the CO2 in the atmosphere)

            Global temperatures were much warmer in the distance past and life thrived:
            http://c3headlines.typepad.com/.a/6a010536b58035970c017c37fa9895970b-pi

            http://www.geocraft.com/WVFossils/PageMill_Images/image277.gif

            There are things humans can do to slow the CO2 emissions without killing the economy, such as putting out the peat bog fire in Indonesia, or the massive coal seam fires in China. The Indonesian peat fires emit at least half of the amount of CO2 of all US coal fired plants. Why not spend a few billion to put them out? The coal fired plants have a productive use, the peat fires contribute zero and are very destructive on the environment. Why not target the low hanging fruit first? Yet the media, the scientific community and of course gov’ts ignore these fires, because its doesn’t get them in the spotlight. I fear climate change and the war on industialized carbon emissions is becoming a religion as it has nothing to do with protecting the environment, but serves as a power grab and to force Western society into serfdom and abject poverty.

            http://www.theguardian.com/environment/2014/mar/14/fires-indonesia-highest-levels-2012-haze-emergency

            https://www.chinadialogue.net/article/show/single/en/6296-The-world-s-longest-burning-fires-China-s-unseen-story

            • SRSrocco says:

              TechGuy,

              I agree it’s a waste of time trying to convince Washington or anyone about the seriousness of climate change.

              Here’s my take… It really doesn’t matter what we do about our modern industrial society. The cards have been dealt and the hand is already known. There is a 40 year lag in emissions and causation. We’ve run out the clock.

              There’s no turning back now. Recent studies also show it would take at least a 1,000 years to lower carbon emissions.

              Lastly, carbon isn’t the problem any longer… it was the match that lit the fuse which is now heading towards the METHANE BOMB. As I stated before, there’s nothing we can do to stop it (if the recent data and analysis released by climate scientists are correct).

              The only reason why I bring this data and information up is to pass it on to others. I had no idea just how bad the situation has become in regards to the climate. Now that I know, I plan on making a lifestyle change within the next 1-2 years. The place I currently live will probably become less hospitable as temperatures rise and drought conditions increase.

              steve

      • SRSrocco says:

        Doug,

        Thanks for the link. Yeah, most folks are still hung up on Carbon. Methane is the real black sheep. I plan on reading that article to my niece and nephew as a bed time story.

        steve

  60. Old farmer mac says:

    http://news.yahoo.com/ukraine-emergency-talks-european-neighbors-over-gas-imports-111021898.html

    I wonder where the people who are themselves importing gas are planning on getting the gas they are planning to ship to Ukraine.

    • Watcher says:

      Better question is why would they think they’ll get paid for it.

      • Old farmer mac says:

        An excellent point.

        There isn’t anybody around who isn’t in deep financial trouble already except the oil and gas exporting countries and most of those are living hand to mouth.

        And whoever does send it- if any is sent- will put themselves on the Russian’s sxxt list.

        Europeans are fixing to find themselves in a world of hurt it the not so distant future in respect to energy.

        Nobody in the entire world is making a truly serious effort to go renewable except the Germans.

        Unfortunately for them they are poorly situated for solar and while their wind resource is pretty good it is nothing compared to what they really need.

        They will not reconsider the nuclear question anytime soon but it is remarkable how fast humans can forget things.

        Once the cost of imported coal and gas begins to bite hard enough they will change their minds about shuttering their existing nukes.

        And not too long after that people every where are going to be thinking about how slight the chances are that a new nuke near their city will melt down and how nice it would be to be warm in the winter and cool in the summer without paying for imported coal year after year forever.

        Nukes are expensive to build no doubt about it but once built they run for almost nothing.

        Plain old everyday inflation will double the cost of coal and gas in less than fifteen years and probably quicker.

        Depletion of easily extracted reserves and geopolitics will double prices again beyond that.

        Given the likelihood of these price projections coming true, locked in baseload juice at nuclear prices looks pretty good to a pessimist or a realist.

        Of course I don’t live near one myself anymore- but I used to live very close to North Anna .

        • TechGuy says:

          “Nukes are expensive to build no doubt about it but once built they run for almost nothing.”

          Sorry, that’s completely wrong. Nuclear power plants are expensive to run and maintain. And when decommission time comes there is never any money to pay for the clean-up. 90% of all US Nuke plants have serious problems, with cracked and leaking reactors, the NRC keeps extending and praying because the power companies have no money to decommission them and the country has no money to replace them. Look what happening in Japan with Fukashima, It still leaking hundreds of tons of contaminated water into the Pacific every day, and we still are not out of the woods and there are serious risks of the reactors spent fuel pools failing which would render all of Japan inhabitable.

          http://cleantechnica.com/2014/04/02/vermont-nuclear-plant-seeks-decommission-lacks-funds/

          Consider that Three Mile Island which was shutdown 35 years ago still have spent fuel pools on site that still require cooling and maintenance. 35 Years after its shutdown!

          And there there are the near epic disasters:
          http://en.wikipedia.org/wiki/Davis–Besse_Nuclear_Power_Station

          “In March 2002, plant staff discovered that the borated water that serves as the reactor coolant had leaked from cracked control rod drive mechanisms directly above the reactor and eaten through more than six inches[13] (150 mm) of the carbon steel reactor pressure vessel head over an area roughly the size of a football (see photo). This significant reactor head wastage on the interior of the reactor vessel head left only 3⁄8 inch (9.5 mm) of stainless steel cladding holding back the high-pressure (~2500 psi, 17 MPa) reactor coolant. A breach most likely would have resulted in a mass loss-of-coolant accident”

          Do you really want to put your life or of your fellow country men in the hands of a bunch of homer simpsons? So far the US has been incredible lucky that we have avoided a major nuclear disaster, but soon or later our luck is going to run out!

          • Perk Earl says:

            “serious risks of the reactors spent fuel pools failing which would render all of Japan inhabitable.”

            uninhabitable

            I concur with the rest of the post.

        • Karen Allen says:

          I’ll be contrary, but in a hopeful vein. Many European countries actually have made great strides in the past few years towards renewables, even better than Germany as a percent of their energy consumption. We can look at BP’s 2013 statistical review of world energy and examine each countries’ primary energy consumption in 2012. (This includes all sources of all energy consumed by the residential, commercial, industrial and transportation sectors, not just electricity, but doesn’t include behind-the-meter consumption of rooftop solar, rooftop solar hot water, and biomass used in home space heating.) I’ll list the country, then the percent of their total energy consumed that comes from renewables, then percent that comes from renewables + large hydro. (I’ll also include from another source, if I have it, the percent that country increased wind and solar capacity in 2013, which will give a nod as to how 2013 is likely to shake out for them.)
          US–2%, 5% (wind 2013 +2%, solar 2013 + 65%)
          Austria–5%, 32% (wind 2013 + 22%)
          Czech Republic–3%, 5%
          Denmark–20%, 20% (wind 2013 +16%)
          Finland–10%, 24%
          France–2%, 8% (wind 2013+8%)
          Germany–8%, 10% (wind 2013 +10%, solar 2013 +14%))
          Greece–4%, 7% (wind 2013 + 7%)
          Ireland–8%, 10% (wind 2013 + 16%)
          Italy–7%, 13% (wind 2013 + 6%)
          Norway–1%, 68%
          Poland–3%, 4% (wind 2013 +35%)
          Portugal–14%, 24% (wind 2013+5%)
          Romania–2%, 10% (wind 2013+36%)
          Spain–10%, 14% (wind 2013 + 1%)
          Sweden–8%, 42% (wind 2013 + 19%)
          Switzerland—1%, 31%
          Turkey–1%, 12% (wind 2013 + 29%)
          UK–4%, 5%–(wind 2013 + 21%, solar +88%)

          And let’s add on China:
          China–1%, 8% (wind 2013 +21%, solar 2013 +157%)
          (China added more solar in 2013 than the US had installed cumulatively up until 2012.)

          When it comes to weaning themselves off fossil fuels, many European countries are considerably ahead of the US, although given their energy situations, with the exception of Norway, they pretty much have to be. Just as a note, France is the second biggest nuclear country in the world after the US. (Its nuclear energy output is about 50% that of the US and makes up 39% of its primary energy supply.)

          • Patrick R says:

            And this energy transition is the only appropriate use of the oil plateau. Well this and a much more ambitious buildout of electric rail urban transit and long distance passenger and freight. Which is happening globally but also not as consciously or as quickly as it should. These changes need to be on a WWII kind of pattern, but the abundance meme makes that politically impossible. The next major repricing of oil will offer another chance for societies to have this conversation. But given that the US needed Pearl Harbour to identify the enemies last time, what sort of event could conceivably concentrate attention and action by the whole world towards the common enemies of resource depletion and biosphere destruction through pollution?

            • Karen Allen says:

              I think it’s not a single event, but a series. I think at some point Saudi Arabia has their “arab spring” perhaps encouraged by Russia, and most SA production goes off line. (Putin has every reason to take out SA–it will push the value of the oil he has left in the ground through the roof and will damage the US. Perhaps Russia will wait until we are into our shark fin drop in shale oil and gas so it will hurt us the most.)

              After a few more nasty climate events and a threat to the food supply, there will be an urgency in developing countries and even most of Europe to start carbon emissions reductions. This will gain momentum when China decides that they have something to gain by accepting a carbon reduction plan on a per capita basis that expects the big per capita emitters to drop the fastest first. (This would be the US.) It would actually give China a competitive advantage to force big carbon emitters to make do with less coal while they reduce on a more gradual schedule. The US won’t agree to this but most of the rest of the world will. This will serve to isolate the US from all but say Mexico, Britain and Canada. Mexico can be bribed with aid and solar panels. (Mexico has fabulous sun and has made almost no use of it as of yet.)

              Britain in the end will align with Europe. Canada will still want to sell some of its remaining energy to countries other than the US. The US will have to cope with declining fossil fuel use whatever we do because there won’t be much on the market or much left at home that’s not extremely expensive. (Even coal is affected by the price of oil. Right now, for some states, the cost of shipment of coal by rail is as much as the cost of the coal itself.)

              Brown outs and rolling blackouts will encourage much home use of solar PV and solar hot water. Depending on the reliability of one’s utility, battery back up may become popular. The cost of natural gas will encourage heat pumps for heating and cooling. (Heat pump technology will improve to deal with below zero temps.) High energy manufacturing will begin to locate itself in the windy midwest states since they will have plenty of electricity. Fertilizer will be made through electrolysis of water in the windy states as well, rather than via natural gas. It will be more expensive, so most fertilizer will go actually towards food production for humans rather than crops for fuel or feed for animals. We will eat less meat.

              Hawaii and Alaska will become 100% renewable quite quickly. Private cars will disappear from cities (and will provide a treasure trove of steel to recycle), far flung suburbs will be abandoned, outer suburbs without transit will be habitats for the poor, air travel will be largely for the very rich. (The rest of us will travel by rail.) Americans will bike and walk and become much healthier, allowing our health care costs to drop by half. Eventually the US will lose its economic hegemony and be dragged along with everyone else into a lower carbon, lower energy future.

              But the US has much in the way of resources, and if we retrench and reorient ourselves, we could possibly live quite comfortably on a third of the energy we use today. If we ever do end up with widespread car ownership again, they will be pod-like, lightweight little things for trips between 3 and 30 miles that take little energy per mile to run.

              Will this all happen in time to make a difference? It seems improbable, but there is a difference between the improbable and the impossible.

              • Agree with all of the above in a messy and surprising and non-synchronous way. In other words neither resource peaks nor Climate Change effects will hit every country nor areas within counties equally nor at the same times.

                Crazy that Hawaii [and NZ] is not already 100% renewable for electricity. Alaska too I guess except they no doubt were seduced by their own hydrocarbon output.
                And Mexico had better hurry and start harnessing its sunshine [and use its rail systems better].

                Electricity is the energy form of this century, and it will be generated every way we can, though those places that can get more of it from renewables will have a competitive advantage. Especially as carbon and other pollution tax or tariffs are inevitable. Grids and generation will need new financial structures, and there will be a greater reliance on local and micro grids, including right down to the personal level.

                Many will be slow to understand that this means a significant change in who is lucky and who is not across the globe. Old certainties are already falling away; are the Oil Majors really ‘Blue Chip’ anymore. Renewable Energy stars are already able to take business off competitors, like the way aluminium smelters are moving to Iceland to take advantage of the cheap renewable electrons there, and closing elsewhere.

                Most change is incremental so those with their heads in the sand can avoid seeing it until it has run them over [then they resort to conspiracy theory and attempts at force]. We all walk backwards into the future; only seeing the past, and even that not clearly.

              • TechGuy says:

                “This will gain momentum when China decides that they have something to gain by accepting a carbon reduction plan”

                China is not going to cut back on carbon emissions, especially now when they have mountains for debt, and trillions invested in High carbon emission assets. FWIW: Communist nations have the most deplorable record on the environment. Communists have no interest in preserving the environment and only care about maintaining or expanding their control.

                “Brown outs and rolling blackouts will encourage much home use of solar PV and solar hot water”

                Unlikely. When the rolling blackouts arrive the real unemployment rate will be near 50%. People won’t have any money to invest in PVs system or even Solar thermal panels. Why do you think that people will suddenly become more wealthy when the energy crunch begins that would allow them to purchase things they can’t afford today?

                “High energy manufacturing will begin to locate itself in the windy midwest states since they will have plenty of electricity. Fertilizer will be made through electrolysis of water in the windy states as well, rather than via natural gas”

                Most manufacturing requires the utmost reliable power to function. Even lost of power for just a few cycles is enough to cause thousands $$$ to millions $$$ in losses as the entire line had to be reset, usually scraping what ever parts that were in the wrong place when the power loss happened. As an engineer, I’ve seen this happen.

                I don’t see Fertilizer reverting to electrolysis for Hydrogen. They would use coal gasification or other pyrolysis processes instead since its much more energy efficient. I think when NatGas is no longer readily avail. for Fertilizer it will be the beginning of Malthusianism.

                “Private cars will disappear from cities (and will provide a treasure trove of steel to recycle), far flung suburbs will be abandoned, outer suburbs without transit will be habitats for the poor.”

                Cities will be the preferred haven for the poor not the burbs. Do you really think that all of the poor will move out into the Burbs creating utopian cities?

                Cities will become terrible places with extremely high taxes, very high crime, drug abuse, Prostitution, and other vices will be everywhere. People with no jobs will pour into the cities looking for job, a meal, or someone to steal from. There will be few jobs in the cities as there is no manufacturing or food production. They certainly won’t be manfacturing 3 MW wind farms in downtown Manhattan, anywhere in NYC or any of the other major cities!

                Today Cities thrive on cheap and abundant energy to provide office jobs or service jobs supporting the office workers. Most of these office jobs are going to disappear over the next decade (even if there was no energy crunch) because of recent developments with software automation that eliminates the need for most office workers. This isn’t a recent change, as it began in the 1980s when desktop computers moved into offices.
                For instance Call centers that use to hire hundreds of people to process calls are getting replace by machine (call automation systems) and Web-based systems. This is now even applying to Professional jobs such as Legal (Paralegal, review attorneys) IT (cloud base solutions, server virtualization) and this will reach all job trades. Processes that use to require a dozen or more workers will be reduced to a single worker. The only place that will have jobs is the rural area as companies move manufacturing to the places with the least tax burden and lowest cost real estate. Farming is not going to disappear either. All of the resources that cities need to survive originate from rural regions.

                Already we can see manufacturing relocating to rural regions. Most of the remaining successful car manufacturing has relocated out of Detriot to rural regions in Tennesse, NC, SC, etc Ford, Toyota, GM, Crysler all have plants in Rural america. This trend is going to continue for all manufacturing that remains in the USA as its too expensive and margins are too slim to operate in dense populated areas.

                Here is what I think life would be in the Big City after the energy crunch:
                Tiny micro apartments for the well off and and Hot rack beds for the middle class. As more and more people pile in, we’ll see poor neighborhoods morphing into future Kowloon slums (google it). The infrastructure of the cities will have a hard time coping with the large influx of people. System failures (electricity, water, sewers, sanitation) will be the norm. Food and water quality will be poor as costs to ship in food will soar. People will be forced to eat food they used to throw away. Expiration dates of foods sold in stores will be extended. Ration cards will the norm limiting access to constrained foods (meat, sugar, coffee, fruit, and anything that needs to be imported). With the influx of people from the Suburbs, there will be insufficient clean water and bringing in new sources of water takes decades. Its unlikely that cities will have any free cash flow for mega-projects to bring in new water sources so people will have to make do with less. I would imagine luxuries like daily showers or baths may also disappear for most.

                The diseases of the 18th and 19th centuries will make a strong comeback as proper health care will become un-affordable or people are force to wait long times for medical treatment. Antibiotics are already losing their effectiveness as the bugs adapt, and become untreatible or very difficult to treat. The close proximity of very many people will result the spread of Diseases like TB and Typhoid which have already become resistant to antibiotics. Lack of proper nutrietion will also exacerbate diesease.

                Granted this isn’t going to happen overnight, but it coming. How do I know? Because its already happening. Visit some of failing cities: Detriot, Philadelphia, Chicago, etc. Its just going to take years before it reaches its conclusion.

                • Patrick R says:

                  Well Tech, that’s the view from around the 1960s, seems like your views on demographics and urban form calcified then, and things have changed a lot since and are speeding up now; poverty is already relocating to the ‘burbs. Auto dependant sprawl was the hardest hit in the subprime crisis, and a whole lot of even recent sprawlburbia will be reverting to wilderness or, better, productive countryside. Especially come the next oil repricing.

                  China has to confront pollution and is, and more likely to be better at this than western democracies, because of their ability (for better or worse) to command change. The acceleration of renewables and indeed nuclear (not a great thing in my view, but certainly better for particulates than coal burning) is already ramping up dramatically. Change is a-coming.

          • Karen Allen says:

            Renewable electricity production and total electricity consumption in the state of California yesterday, April 5th, 2014.

            • OK so very little intermittence in wind supply yesterday. Is this simply because wind was steady over 24 hours everywhere, or because of a geographical distribution of farms evening out the natural variation?

              What do we see over longer periods, say a month, and how steady is the daily solar supply too over a longer period?

              • Karen Allen says:

                Wind does vary a lot. Some days (like windy yesterday) very good; some still days very little. Usually pretty decent at night and then drops during the day (which actually complements solar.) Solar is more predictable, partly because what this shows is utility-scale solar and a lot of that has been put in southern california (land of mega sunshine.) Rooftop solar is behind-the-meter and does not show up on this chart except as reduced demand.

  61. B says:

    Shale Gas Helps Fracture US-Saudi Ties

    The rising production of fossil fuel including oil is a portent of US self- sufficiency in energy; the forecasts differ substantially as the timing is concerned with a consensus saying 2025 to 2030, but some expect the self-sufficiency happening even earlier. In 2020 the US will have displaced Saudi Arabia as the world’s biggest oil producer. US dependency on petroleum imports from the Gulf has fallen dramatically, close to 20 percent in 2012; Saudi Arabia accounted for 13 percent of total imports in 2012.

    • Old farmer mac says:

      The people that write this sort of article -even the ones connected at the hip to Ivy League universities-seldom ever manage to see the elephant in the room- the continuous long term depletion of existing fields and declining legacy production.

      We will be very lucky indeed to maintain world wide production levels never mind increase them for the next decade.After that we will almost as sure as the sun shining going to be adapting as best we can to fast shrinking oil supplies.

      There is a very real prospect of our becoming self sufficient in oil though- because there isn’t going to be very much for sale on international markets.We may well have to get by on whatever we can produce.

      But on the other hand we may be able to swap some grain and drumsticks for some oil.

      I doubt many countries are going to be interested in selling on credit in the future.If they are willing to take dollars you can bet those dollars get back home fast and something tangible leaves on the next boat out.

  62. B says:

    3 myths on our natural gas boom

    We know the good news: Oil and gas production is rising so fast that U.S. dependence on imports will soon disappear. Growth in natural gas has made America the world’s largest producer and could soon make us a huge exporter. In the past half-dozen years, America’s hydrocarbon juggernaut has boosted our economy by hundreds of billions of dollars.

    To keep the boom going, the federal government needs to keep out of the way, even as pressure grows to tighten energy-industry regulation….First, abandon the antiquated laws that restrict natural gas exports. More customers for U.S. gas mean more investment and more jobs. Second, resist the temptation to layer job-killing federal regulations on top of state efforts. States are doing the job just fine.

    • Old farmer mac says:

      If I have ever read a cornucopian piece of propaganda written by a person on the payroll of the industry this is it.

      The gas may be there. It may not-at an affordable price of extraction.

      Any body who has ever been fishing knows all about sweet spots. The drillers have yet to move out of the sweet spots.

      The states are not doing a great job of regulating the industry.

      A lot of places aren’t ever collecting enough taxes to pay to repair and maintain the roads destroyed by fracking trucks.

      I have no doubt the export of natural gas is a baked in reality-if the gas can be gotten out of the ground– given the political clout of money in American politics and that the world price of gas is three times the domestic price.

      That price will probably be necessary just to maintain production once the drillers move out of the sweet spots.

      In any case the era of cheap energy is over.

  63. Watcher says:

    Kashagan

    Flowed 75K bpd in Oct for a few days. Then they shut down. Looked into problems.

    Found them.

    The methane coming up has the highest concentration of hydrogen sulfide ever recorded. It is corrosive. It has destroyed miles, repeat, miles of pipe. Lotsa leakage. Kazakhstan wants to fine the companies $800 million for the leakage. The 75K number is alleged to have been done for a short time to avoid another delay fine.

    Word is thinking is that the pipes won’t be repaired. A seperate line, next to that one, will be laid for the required miles with new pipe, hopefully more resistant.

    The govt says the spice can flow by July. Companies say not this year.

  64. aws. says:

    Domestic Crude Oil First Purchase Prices by API Gravity

    Annual chart: something happened in the spring of 2011. Remember there isn’t much diesel in >40 API.

  65. aws. says:

    Still in withdrawal

    Note that injections started earlier in the previous two years. A long way behind and a lot of catching up to do, and we haven’t even started the race!

  66. aws. says:

    Waaaaaaay behind…

  67. If you take one look at Glacier National Park in photos and compare and contrast the advance and retreat of glaciers in the park over the past 100 years, global warming is without a doubt a fact. Maybe this winter is an aberration and glaciers are adding some size to them. It was cold for a long time. I’ve seen snow drifts so deep, they go over the top of a snowplow on the railroad tracks by some 4 feet. Like a wave out on the ocean. That was forty years ago now, but I digress.

    I guess I can argue that anthropogenic global change doesn’t happen, but I would be just plain wrong. Too pigheaded to see the light. Not willing to bend. I’ll think about it.

    Humans exhale 1 kg of CO2 daily, so we are a contributing factor.

    If I were to begin to debate that humans are in no way able to contribute to climate change, I’d be wrong again. Seems as though this winter, the cooling is what is happening. It just never stops, climate change.

    I can raise my tolerances and maybe believe that global warming does exist in a state where it will be warmer the next year and then again the next year, it just didn’t happen this past winter, so I am not going to be fooled into believing that global warming is inevitable and there is nothing that can be done. The facts make more sense sometimes and simply refute such foolish talk about global warming as a phenomena that must be accepted, you have to become a believer or you are just plain nuts. To be brutally frank, I know that when I am standing outside in the cold, the cold does all of the talking. That is when global warming is needed the most, when it is too cold outside it is unbearable and the temperatures make your everyday existence a real chore. It is better to hibernate.

    A forty-mile wide asteroid headed to earth at 66 thousand miles per hour will hit the ocean floor in less than a second, throw chunks of earth into the stratosphere. teotwawki

    Humans make mistakes. I’ve seen them do it. I do it all of the time. It is not a difficult task. One mistake that can’t be denied is the build up of too many wind turbines; concentrated high numbers of wind turbines on wind farms are bad, not good. The environmental destruction that they have already caused has made ostriches out of renewable energy freaks.

    Like I say, people make mistakes and some are real doozies.

    The most difficult job is to get wind turbine advocates to see the light. It will take patience. I have the patience. The facts maybe I don’t have, maybe I’m all wrong, maybe wind turbines are an answer. Time will tell.

    I doubt very much I am wrong about wind turbines, they’re bad.

    About those 14,000 abandoned wind turbines in California. Are they really that many and is it true or not? If I presented the information as fact and am indeed wrong, I’m humble enough to admit I made an error. I’ll eat crow.

    I did a google search, of course, and I’ll provide one link.

    http://www.naturalnews.com/034234_wind_turbines_abandoned.html

    If it is all bunkum and bosh, then that’s fine.

    Sometimes, the musing meanders. So sorry about that, I’ll try to make more sense and more sense of it all.

    Wind farms in their present incarnation make no sense to me, therefore, I am in opposition to any further development of wind energy.

    When a new and improved plan for wind power to produce energy, electricity, comes into play, I’ll think about it. Until then, there should be a worldwide moratorium.

    It is better to spend the money to drill for oil.

    If the cost of all forms of energy becomes prohibitive for the average blockhead out there to afford, there will be trouble in River City. There will be outright theft on a constant and regular basis; no argument from anybody, I’d wager money.

    You’ll get your war, but it won’t be among world powers.

    • Old farmer mac says:

      I will not go so far as to say that wind turbine syndrome does not exist.

      It may and in certain places it may be worse than others depending on the layout of the wind farm, the local terrain, the ground cover and other factors.It seems pretty obvious to me that low frequency sound will bounce around and travel farther in a bare ground or nearly bare ground location than it would in places with a lush growth of vegetation of any sort.

      But in general I do not think that this so called health issue is ever going to prove to be a real problem.

      Wind farms are generally not located near very many homes but taken all together there must be at least a million people who live near a wind farm by now and these reports are few and far between.

      As a matter of fact they seem to be so few and far between as to be plain old statistical noise so far as I can tell but I could be wrong about that.

      If in the end they prove out then the end result will be what it always is when it comes down to the building of essential large scale infrastructure from hydroelectric and potable water and irrigation water reservoirs to highways to schools to sewage plants to airports to electric power lines to military facilities to -by now I should have examples enough.

      Even sports stadiums are considered necessary infrastructure these days.

      The people who do not want to live near the wind farm going up in their neighborhood will have to either like it or move.

      For now they may be able to block the construction process.

      A decade from now when gas is a lot more expensive and warming is more evident the eminent domain process will be used to build wind farms just as it is now to build other essential infrastructure.

      Insofar as abandoned turbines being scattered all over the landscape- maybe there are a few thousand very small ones rusting away- small ones that should really never have been erected in the first place except for the fact that the return on such small units in borderline locations was grossly oversold by the manufacturers to gullible buyers.

      I can find very little evidence that modern commercial sized turbine sites that are already permitted and grid tied are not in use or in the process of being upgraded with new turbines.

      There will probably in the end be a few thousand old wind sites that will never be upgraded any time soon because the wind resource is just not good enough to justify the investment.

      Most of them are single unit sites such as the ones erected by back to the earthers who have found that it is far cheaper to buy pv now than it is to maintain a turbine up on a tower.

      The going rate to rent a crane capable of handling a thousand pounds a hundred feet in the air is well over a thousand bucks a day and a day is the minimum. That does not include the labor for the electrician or iron worker or the cost of repair-and getting that sucker down takes the first day with the crane and you gotta call it back again after it is repaired to replace it.

      Small scale wind is not often a practical solution to energy needs unless the site is superb and the owners are the sort of people who are capable of doing dangerous heavy work themselves.

      I have a couple of pieces of heavy equipment and friends and neighbors who have more and we do things like build roads and ponds on our farms but I would not even think about erecting a turbine big enough to matter on a tower over fifty feet high.

      And although all of us live in the mountains not a single one of us owns a really good wind site.
      Not only does it need to be high up and unobstructed but it also needs to be easily accessible and large enough and flat enough to set up the tower.

      Such sites are not as common as the sellers of small wind would have it.

      PV is far cheaper now and far more reliable on the average in terms of daily output in most places.

      Wind is a superb resource but it is for the big boys to put it to use.It is not a little fella’s game.

      Now as far as Walter is concerned – he acknowledges peak oil. He must also realize that peak gas is a reality and that coal itself is a commodity that is not avail able in unlimited quantity.

      I have not yet heard what he expects the world to use to generate electricity unless it is wind and solar once fossil fuels are too scarce and costly.

    • Mike Barnard says:

      You really ought to try looking for better sources of information than the vanity press blog of a retired history associate professor, which touts a terribly weak study which is rejected by courts and public health experts as being of no evidentiary value.

      Professor Simon Chapmon of the Faculty of Public Health in USydney studied this ‘abandoned home’ factoid recently and published on it.

      “This process produced 12 cases, near seven of Australia’s 51 wind farms, not “over 40”. I found none that could be said to be true “abandonment” cases, where a residential asset had been literally written off forever without any sale. In nearly all cases, there was more to each case than a simple story of a family moving away reluctantly because of turbine noise. There were histories of protracted negotiations to have properties bought, sometimes involving ambit claims. There were cases of people having moved for other reasons (employment, to be near a needed health facility) and of lengthy opposition to wind farms, even before they were constructed.”
      http://www.abc.net.au/news/2014-02-10/chapman-who-exactly-are-these-wind-farm-refugees/5248910

      Meanwhile there are 51 wind farms in Australia that have been operating for over 20 years all in with 1600 wind turbines. Chapman was only able to find some gristle and grease related to 12 homes underneath the smoke screen raised by anti wind campaigners.

  68. B says:

    Explosive questions: Study of oil from deadly Quebec derailment points to Bakken crude’s volatility

    A federal study and a study commissioned by the North Dakota Petroleum Council are underway to analyze the characteristics of Bakken crude, but the results are not yet available.

    “Bakken crude is comparable to other light sweet crudes according to all the information we have to date, but we know that some have questioned whether it is somehow different,” said Kari Cutting, vice president for the NDPC. “This study will provide a thorough third-party analysis to help regulators and industry determine the facts so we can make decisions based on sound science.”

    Perhaps the Petroleum Council study is a reopening of the study they talked about starting last year to downplay myths about the Bakken crude dangers. They were going to do that but then the Casselton derailment happened. There’s an interesting writeup about everything on another blog.

    What Happened To The “White Paper” Stenehjem, Goehring and Dalrymple Were Preparing?

    On December 5, 2013, Justin Kringstad, director of the North Dakota Pipeline Authority, became concerned about Bakken crude. He wasn’t so much concerned that 47 people had been killed in Canada, or that a dangerous explosion had happened in Alabama too, polluting sensitive wetlands. He wasn’t concerned that trains full of this same explosive oil travels through downtown Bismarck, Jamestown and Fargo every day.

    No, Kringstad was concerned about the “almost daily reports” about Bakken oil’s “volatility, corrosiveness, etc.” He had read a story at “NewTimes.com” about a lengthy report relating to a proposed California oil refinery, in which it was noted much of their oil would likely be “volatile” Bakken crude oil. The story was about how locals in California were upset about the dangerous Bakken oil coming through their communities. Opposition was mounting.

    Kringstad was so concerned that he decided to contact Ron Ness — President of the North Dakota Petroleum Council — to suggest that Ness work on getting a white paper put together, promoting the idea that Bakken crude is safe for unicorns and butterflies to drink.

    • Watcher says:

      This is a bit of a rehash, and here is how a benign report can be produced — just analyze the crude and report on it.

      This differs from “just analyze what’s in the rail cars and report on it”. The cars don’t have all crude. In fact, it seems likely the production numbers are not all crude. It would be useful to know how the production numbers are collected.

      It is for this reason that the best numbers would be from whoever the state revenue agency is that computes taxes. That is the one place, and maybe only place, to which the companies will want to lowball their report.

  69. Anybody see any videos on wind turbines malfunctioning, failure of the turbine that then destroys the structure and the ignition of a large fire burning at 300 feet above the ground?

    3 to 4 million dollars up in smoke and a pile of wreckage at the bottom of the wind tower. Forced abandonment is the result. There has to be a number out there that is a total of wind turbines rendered useless. They catch fire and there are numerous reports and stories. One of those inconvenient truths. All somebody has to do is count them and you’ll have your number. It would be a good fact to know, just so everybody does know. At the moment, it is one of those unknown knowns and the wind energy lobby plans on keeping it that way; anyhow, that is how it appears when I see how it is looking from as far away as I can be from the things.

    Purdy much toast after a wind turbine has caught fire. Fire suppression would be one solution. Another would be to remove the danger entirely to eliminate the risk.

    Can’t escape loss in any venture, you’re not going to win them all. 3 million all at once must hurt someplace. I’d say the consumer, and I doubt I’m wrong there too.

    If coal-fired power plants would catch fire like a wind turbine does, they’d be shut down permanently.

    • Doug Leighton says:

      Ronald,

      Perhaps you’ve flogged your anti-windmill argument to death? For what it’s worth, I’ve passed by wind farms in Denmark, Holland and the UK and never noticed one blackened by fire. I’ve seen a row of turbines working away with one or two idle and wondered why but never one that seemed to be damaged. I know for certain the Danes get a lot of their power (about 20 %) from wind and intend to get more. There are certainly a lot of abandoned, and working, windmills spread around the US that pump(ed) water, but again, what possible harm is there in this? In any case, maybe it’s time to move on.

      Doug

      • Andy Hamilton says:

        Yes enough already with the anti-wind power diatribe. Many of the claims being made are demonstrably false. We have a large wind power industry here in NZ, which is highly visible and successful, and which generally has good public support. Long may it continue to expand (and lift our renewables generating capacity beyond an already healthy 75% of electricity production).

      • Dennis Coyne says:

        Another point on abandoned windmills. If this were a good reason to give up on a technology, we would have left oil and gas long ago. I wonder how many abandoned oil and gas wells there are in the US, I imagine this number would be in the 100s of thousands.

        I checked this out, based on US EIA data from 1949 to 2009 about 1 million developmental oil wells had been drilled in the United States and 363,000 wells were still producing (with over 50% of these wells at less than 5 BOE per day and 35% at 1 BOE per day or less) BOE=barrel of oil equivalent.

        So 677,000 abandoned oil wells (and 138,000 natural gas wells) and 815,000 oil and natural gas wells abandoned (of the wells drilled since 1949, note that dry holes are excluded from these figures).

        We should definitely give up on oil and gas due to all those abandoned oil and gas wells. 🙂

    • Mike Barnard says:

      Wind turbine fires and collapse are extremely rare. The last time I did the math there were a lot fewer wind turbines, but this is what I calculated based on the data: a wind turbine has a maximum of a one in 1200 chance of catching fire in its lifetime of 20 years, or about a one in 24,000 chance of catching fire in any given year.
      http://barnardonwind.com/2013/03/01/wind-farms-causing-fires-all-smoke-no-flame/

      Meanwhile, this coal mine serving a coal generation plant next door has been burning for months, causing evacuation of hundreds, everyone remaining to wear serious filters and basically looking like the pit that Frodo threw the ring in.
      http://www.newsweek.com/coal-mine-fire-still-burning-after-weeks-looks-mordor-fills-australian-town-smoke-230557

      And this is pretty common.
      http://www.theaustralian.com.au/news/coal-seam-fires-common-but-extremely-difficult-to-manage/story-e6frg6n6-1226844169552

      So you are wrong coming and going.

  70. aws. says:

    From Sales of natural gas, Table 129-0003

    Comparing gas sales in Alberta and Ontario.

    It takes a lot of gas to get bitumen out of the tar sands, as the daily volume of bitumen produced rises so will gas consumption.

    It’s a low EROI world, households are competing for gas with bitumen producers who are betting the price of bitumen will rise greatly. If they can get a higher price for their bitumen they should be able to pay more for the gas they need to produce the bitumen. Will households be able to afford higher gas prices?

    Note: To get the annual sum of gas sales select the manipulate tab and change the “Frequency of output data will be:” to “Annual (sum)

  71. You don’t get the impact of wind development, it does not serve your bottom line.

    It is a lose lose in the long haul and it will not work. For every argument, there is a counter argument. Proponents of wind power believe what they do has less environmental cost, but it there is no free lunch, it all comes at a cost. If it is loss of habitat for animals and humans, there is zero gain.

    Peak Oil deniers I can accept, wind power advocates are blind as bats if they can’t see what is being done is worse than coal’s damage, the waste of oil, too much consumed at too fast a rate. Filling a jumbo jet with 54,000 gallons of jet fuel is a fool’s errand.

    Flying millions of people across the earth is a waste of fossil fuels.

    Spending hundreds of millions of dollars on wind turbines is a complete waste of raw materials, capital, the whole nine yards.

    You can lead a horse to water, but you can’t make him drink.

    Isn’t there a lake in China that is polluted from a nearby factory that builds components for wind turbines?

    http://www.instituteforenergyresearch.org/2013/10/23/big-winds-dirty-little-secret-rare-earth-minerals/

    Maybe I am out in left field, but I don’t think so.

    I’ll decide when to stop beating a dead horse. The beatings will continue until the morale improves.

  72. Open coal veins are struck by lightning and burn for years. An natural phenomena that has long been known. Coal fires occur in nature, too.

  73. RalphW says:

    The BBC news site runs frequent pieces on the oil and gas industries and these are often uncritical industrial promotion pieces with demonstrably unfounded claims on prices and reserves. Nice to have one show the other side of fracking outside the US, where economic and environmental factors are given good balance.

    http://www.bbc.co.uk/news/business-26735000

    • Old farmer mac says:

      If the gas is there in economic amounts the poorer countries of Europe will surely drill for it within fairly near future.They aren’t going to have any other choice except to freeze and shut down their economies because they aren’t going to be able to afford imported energy much longer.

      It will be a little longer in the countries such as UK.

      But any country dependent on importing energy and (other ) raw materials and exporting finished goods is in a race that it will be running potentially forever against poorer countries where people are willing to work for lower wages and salaries.

      Industries will move from one country to another chasing the lowest cost of production anytime they can and countries such as Germany cannot hope to stay ahead forever on the basis of better technology and more highly skilled workers.

      Globalization has created a race to the bottom for working class people in developed countries and when a country’s working class hits bottom it will not be too awfully long until the middle class follows as the result of having to subsidize the working class and the increasing numbers of non working former members of that class.

      One such consequence of this race to the bottom that has so thoroughly pissed off well off American conservatives in favor of globalization is Ocare.

      Without globalization socialized health care for everybody would still be a distant possibility rather than a reality in this country.

      Of course this sort of consequence never occurs to people who are advocating this position or that.

      We focus on what we want almost exclusively.

      But Mother Nature doesn’t give a hoot about what we want and when oil and gas are eventually in short enough supply we Yankees will drill in our national parks- barring a few near miracles on the renewables front.

      One positive aspect of being old already is that I will not live long enough to see it happen.

    • Watcher says:

      No one is going to agree to starvation in order to be green.

      Economics will similarly be ignored if food doesn’t move.

  74. Tim E. says:

    Milwaukee lemon law lawyer sues luxury electric car maker Tesla

    From the Milwaukee Journal Sentinel:

    A Franklin man has filed what is likely the first lemon law case against luxury electric car maker and Wall Street darling Tesla Motors, already facing other legal hurdles in a growing number of states where the company’s direct-to-consumer sales are under attack.

    Robert Montgomery paid more than $95,000 to have his white Tesla S delivered to his home from Palo Alto, Calif., in March 2013, but according to his lawsuit, the car has had major troubles — like not starting. He had it towed to service centers in Chicago four times. In all, in was out of service 66 days in the first year.

    His attorney, Milwaukee lemon law expert Vince Megna, said the car clearly meets Wisconsin’s definition of a lemon, but that Tesla may try to settle the dispute under strict provisions in its five-page sales contract, such as that only California law will control any disputes and that those disputes must be settled in arbitration in California.

    “They’re the only car company in the world that has you agree to confidentiality when you buy a car, over any problems or claims,” Megna said.

    Montgomery’s lawsuit, filed in Milwaukee County Circuit Court, lists more than a dozen of what it calls defects and problems with the car — not starting, not going into drive, recessed door handles that do not emerge when touched, faulty battery coolant pumps, faulty steering wheel controls and several electrical problems.

    By November, Montgomery had had enough and sought to return his Tesla for a refund under Wisconsin’s lemon law. After the company failed to respond, he sued.

  75. Pingback: Weitere Peak-Oil-Anzeichen: BP im Sinkflug | peak-oil.com

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