Peak Oil Open Thread

North Dakota Spuds hit 5 year low. Not since January of 2010 have spuds been below 77, the point they hit in September.

spuds

Indonesia: Missing pieces needed to revive oil and gas sector

The future of Indonesia’s oil and gas industry is in peril. Since the early 2000s, the resource-rich country has been experiencing a persistent annual oil production decline of 4 percent, significantly under performing relative to most producing countries.

The continued oil-production decline is mainly down to fields maturing and a downtrend in discoveries of new reserves. Indonesian oil production only is around 800,000 barrels per day (bpd), barely half the 1.4 million bpd production in 2000.

The reserves-replacement ratio is even more worrisome, averaging merely 75 percent over the same period, which means a quarter of oil produced is not replaced. Projecting the future from these numbers alone, oil production will tumble to around 500,000 bpd by 2025 before ceasing altogether by 2050.

I posted this to show just how fast some areas can decline. With new discoveries, Indonesia is replacing 75 percent of production each year. Yet their production is still declining by 4 percent per year.

Devon Energy Corp. posts record oil production but $3.5 billion loss in third quarter

Despite record oil production, Devon Energy Corp. on Tuesday reported a third-quarter loss of $3.5 billion, or $8.64 a share.

The loss compares to a profit of $1 billion, or $2.47 a share in the third quarter of 2014. The loss was fueled by a $5.05 billion noncash asset impairment charge based on the reduced value of the oil Devon controls that is still in the ground.

Even if you deduct the write down of assets they still lost $3.59 a share. How can oil producers keep producing and keep losing money at the same time?

Yergin predicts a 10 percent drop in US oil production, April 2015 to April 2016. That’s a 960,000 bpd drop and will take us to 8,638,000 bpd  in April 2016 if he is correct.

Yergin Sees Oil Price Near Bottom as U.S. Output Set to Fall

U.S. crude output, which surged to the most in more than three decades this year and triggered a price collapse, will retreat by about 10 percent in the 12-months ending April, according to Yergin, vice chairman at IHS Inc.

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418 Responses to Peak Oil Open Thread

  1. John S says:

    Ron,

    Rune Likvern wrote the article found at the link below:

    http://oilprice.com/Energy/Natural-Gas/Shrinking-Norwegian-Natural-Gas-Production-Puts-Europe-In-Dire-Situation.html

    It may be of more interest to Heinrich Leopold and me than to anyone else but it is energy related.

    • Synapsid says:

      JohnS,

      Europe is supposed to be looking far afield for NG supplies, and Australia and the US are both saying “Look at me!” Together the current building-up of LNG export capacity in the two countries will give them a hefty edge over Qatar, the current main exporter, and that should be the case by early next year. Cheniere, at Sabine Pass and Corpus Christie in the Gulf of Mexico, has been booking cargoes for a while now, so there’s some reality to the picture.

      Saudi Arabia is also moving into the European NG market. Europe is showing up on everyone’s screens. I’m waiting to see the numbers, myself.

      • Where does Saudi Arabia get natural gas to export to Europe?

      • John S says:

        Thanks Snyapid,

        I am aware of the LNG build up in the US. I am also watching Energy Transfer Partners build 2 40+ inch large transmission lines in West Texas to export gas to Mexico. One is going to cross the border at Presidio, Texas and the other a little south of El Paso.

        According to some of the local papers in West Texas, Mexico billionaire Carlos Slim is paying for the construction of the transmission line crossing at Presidio. I dontknow if that is the case with the other one.

        In any case,I am wondering where the gas to fill those line will come from though the gas marketer I know is confident that the US gas market is extremely efficient and that gas from the Marcellus and Utica will easily flow to the highest price whether it is in Mexico, US or some LNG export point.

        Me, I’m not smart enough to figure it out but I am sick and tired of the current situation.

      • Rune Likvern says:

        What about Iran?

        • Synapsid says:

          Rune,

          Iran has plenty of NG, for sure, but I don’t know of much capacity if any for exporting it as LNG. That might just be my ignorance. It would have to be LNG for Iran to get it to Europe anytime soon, I believe. Maybe Iran could work out a transport agreement with Qatar, the big exporter in the world?

          Iran has expressed interest in the pipeline being built to bring NG from Azerbaijan through Turkey to Europe (through Greece, I expect). What was mentioned was participating as an investor, with possibly beginning to ship NG through the pipeline later on. (Turkmenistan has been suggested as adding on via a pipeline across the Caspian but that would require Russia’s approval so fat chance there.) If Iran did pursue this it would be sometime in the future, not much help for Europe very soon.

          The wild card is Erdogan. Turkey is looking to be in the catbird seat for NG flows from Iran or most anywhere else to Europe, and Erdogan just got handed majority government by the Turkish electorate. He has been acting like he wants to restore the Ottoman sultanate with him as sultan. Might have his eye on restoring the Caliphate too, for all I know. No one knows what he’s going to do.

          • Irán has an existing set of pipelines which can be connected to Europe. I don’t know if the system is in useable shape. They could also ship to Russia’s system via Azerbaijan. 🐸

            • Synapsid says:

              Fernando,

              Iran could connect with the Trans-Anatolia pipeline I mentioned, yes, in theory. That was the possible-in-the-future item. With Turkey saying that Assad must go, and Iran supporting Assad, chances might be diminishing, though. Erdogan again. He takes things personally. And he has the bit between his teeth now.

              Iran connecting to the Russian network through Azerbaijan would mean Gazprom delivering Iranian oil to Europe, and I don’t see that as appealing to the Europeans. After all, the Good Guys (Australia and the US) will be coming over the horizon any day now, bearing LNG and Hersey bars.

    • Ulenspiegel says:

      The key assumption in Rune Likverns article is: “To sustain present levels of natural gas consumption in Europe a projected 100 – 150 Gcm/a additional supplies are needed by 2025.”

      Why does somebody assume a constant demand after 2014? What is the picture if the trend of the last ten years continues? Or, why should this trend not continue?

      Even with only 1% annual demand reduction we would see 50 Gcm less in 2025.

      With this 1% annual reduction we still face the fact that in the next decade the European NG production declines faster than the demand, however, the gap is only 50% of the projection with constant (2014) demand. A 2% demand reduction would compensate for the decline.

      • I suppose Europe could burn more coal and cut natural gas.

        • Ulenspiegel says:

          If you check where the NG is used -generation of electricity is only a minor theatre of war – then it becomes obvious that improving the thermal quality of buildings is by far the most efficient way to reduce NG demand, it happens for years but could be faster of course.

          Substitution of NG with hard coal has happened in case of electricity generation the last few years, e.g. NG has lost 30% of its market share in Germany. However, only around 10% of the NG goes into electricity generation, therefore, the overall effect is small.

          • Rune Likvern says:

            For Europe about 30% of natural gas consumption is for electricity generation (ref the studies I linked above). There are some variation among the European countries.

            • Ulenspiegel says:

              Rune Likvern,

              I referred to Germany, where less than 10% of the NG is used for the generation of electricity and where NG lost a lot. If the share is higher in other larger European countries (which?), then of course a solution is the substitution of NG with hard coal, there is enough unused generation capacity.

              BTW: Do you assume a stagnating NG demand or a continuation of the trend observed in the last ten years?

              • Rune Likvern says:

                If you take the time to read the reports I linked to (in another comment) you would find how use of nat gas varies among countries. UK was (back in 2010) above 40% but has since declined.

                I (for what that is worth) expect a moderate decline in European natural gas consumption going forward due to slow economic activity.

                • Global warming should help reduce gas consumption. However, if the eu is really interested in deploying more wind they’ll need much more combined cycle gas turbines with some load following ability.

                  I think there’s a need to develop some sort of ultra exotic metallurgy to allow burning coal in turbines..

                  • Fred Magyar says:

                    I could do just fine without an F35, or, for that matter, bananas.

                    I agree on the F35! As for the bananas, well I built a small solar dehydrator and I can produce sun dried bananas almost for free. They can be packed into the hold of a small cargo sailboat and I can ship them to some port of entry in the US, whereupon they can be distributed via barge, train and EVs to a location near you!

                  • Fred Magyar says:

                    However, if the eu is really interested in deploying more wind they’ll need much more combined cycle gas turbines with some load following ability.

                    Fernando, it is all about capacity factor plus the fact that the cost of fuel for solar and wind is free.

                    http://cleantechnica.com/2012/07/27/wind-turbine-net-capacity-factor-50-the-new-normal/

                    Clean energy haters love to talk about capacity factor because it’s clearly a metric wind, solar, and hydro don’t win at (though, geothermal and biopower actually do very well). However, capacity factor by itself is really not that important. What’s important is the total cost of producing electricity. In the energy field, levelized cost of energy (LCOE) is one of the most important metrics. This is “an estimate of total electricity cost including payback of initial investment and operating costs,” as NREL writes.

                    Capacity factor plays a role in LCOE, of course, but so does free fuel (i.e. wind and sunshine). (In a perfect market, LCOE should also include the cost of pollution, which is not the case at all in the US today.)

                    Even without the cost of pollution figured in, if you look at NREL’s LCOE tab, onshore wind energy has a median of $0.05/kWh. The only energy source that beats that is hydropower ($0.03).

                • Ulenspiegel says:

                  Rune,

                  I have read various reports on this matter. The EU and some green organisations already predicted in 2010 a declining demand, e.g. EU assumed -13% until 2030 for E-27. The picture has not been clear for the last 5 years.

                  If a high percentage of NG is used for electricity generation (UK, Italy), then a substitition with renewables and coal can be expected, however, in case of UK the transborder transmission capacity has to be improved.

                  The development in Germany can not be attributed to economic crisis, we have seen since the NG peak demand in 2005 an addition of a three million new full-time jobs, much higher GDP, at the same time only a small percentage of NG goes into electricity generation. Therefore, something else happens, very likely improving efficiency in the field of heat generation or demand. I do not expect that this will stop as only 15% of the German building are on a acceptable modern insulation level, simply replacing old building with new ones (with only 20% demand) drives the process for decades.

                  In addition, Germany has due to lower domestic demand an increasing electricity net export, this year very likely more than 40 TWh, this will increase in the next years and will kill fossil electricity generation in neighbour countries, usually the most expensive, i.e. NG.

                  My conclusion: As long as there is no dramatic increase for space heating, the demand in Europe for NG will shrink with around 1% per year without any special government programs.

                  • Fred Magyar says:

                    I do not expect that this will stop as only 15% of the German building are on a acceptable modern insulation level, simply replacing old building with new ones (with only 20% demand) drives the process for decades.

                    Germans are much more open to disruptive technologies:

                    http://www.arup.com/Homepage_Imagining_buildings_of_the_future/BIQ_film.aspx

                  • Don Wharton says:

                    Fred, The Passive House standard with its triple pane high windows, tightly sealed envelop, high tech heat exchange mechanism for external air, R60 roofs, etc is nearly ten times more energy efficient than typical American building standards. The 20% figure that you cite might be due to the average existing German home being only twice as energy efficient as the typical American house now. I don’t know precisely what is intended with your 20% figure, but I do want to suggest that the possible result can be even more spectacularly better than typical American inefficiency.

      • oldfarmermac says:

        Population is still growing but in Europe but only very slowly, in modern day terms, so Europe might actually manage between conservation and efficiency measures to use less gas in total for the next ten or fifteen years.

        It is reasonable to assume that politics mean more gas and less coal for electrical generation,however, so long as the gas can be had at a reasonable cost.

        Wind and solar generation will come on strong for both political and economic reasons.

        Here in my corner of the world, one branch of government, the branch concerned with public health, does what it can to reduce the use of the most dangerous single drug ever discovered, namely ethanol. Another branch is enthusiastically teaching people how to grow grapes and make wine, with the apparent intention of producing a bottle a day for every living adult, and two or three bottles each for the millions of new addicts the industry never mentions it hopes to create.

        Wind and solar politics in Europe are not directly comparable to wine in the USA, but wind and solar provide domestic jobs and save some money on imported fuels and the actual numbers will not matter much when elections roll around.A hell of a lot of wind and solar farms are going to get built, especially in countries obligated to import fossil fuels.

        Hopefully one of our resident numbers crunchers will create a graph or two showing how fast gas efficiency of use must increase in Europe to hold consumption steady and to reduce consumption one percent or two percent a year, taking population into account.

        Does anybody know how the gas consumption of individual Europeans changes as they age? Here in the USA, the so called “young old” folks still drive but not as much, and they travel a lot if they have money to do so.

        But the driving declines very sharply as they enter the mid seventies and the travel apparently drops off pretty fast too, at about the same age. A lot of them give up the larger houses and move into smaller ones in places with more pleasant climates as well.

        Europe is not going to need much in the line of new roads or housing or power plants etc, except to replace older worn out housing and power plants.My impression is that building codes in Western Europe at least mandate excellent energy efficiency in new construction.

      • Rune Likvern says:

        Ulenspiegel,
        There are lots of studies that show expectations for high(er) future European natural gas consumption (above 2014 levels).
        Like this from Eurogas (October 2013)
        http://www.eurogas.org/uploads/media/Eurogas_Brochure_Long-Term_Outlook_for_gas_to_2035.pdf
        ..or this from The Oxford Institute for Energy Studies
        http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/06/NG-87.pdf
        …or this from Cedigaz (February 2015)
        If these studies get it about right Europe will need to import more natural gas from more distant sources in the future.
        Now can you point to studies that show a continued decline in European natural gas consumption?

        There is of course the possibility also for a decline in European natural gas consumption, which could result from a combination of factors, slow economic activity, fuel substitution (coal and some renewables), conservation, improved insulation (if households can afford it) and likely others as well.

        My article first appeared on Fractional Flow
        http://fractionalflow.com/2015/11/01/status-of-norwegian-natural-gas-at-end-of-2014-and-forecasts-towards-2025/

        • Ulenspiegel says:

          Rune,

          I have simply checked the data for Germany. We see an decrease of NG consumption for ten years now, almost 20% reduction:

          2004: 3200 PJ
          2014: 2650 PJ

          In the field of electricity generation the losses are even higher, no surprise when there is enough excess generation capacity fueled with hard coal.

          As the underlying reasons will not change, I do not buy without good arguments scenarios that predict an increase of demand.

          Even on the European level you see that NG lose big in the field of electricity generation, as German exports (hard coal) substitute for much more expensive NG.

          • Longtimber says:

            Re: future European natural gas consumption
            http://www.zerohedge.com/news/2015-11-03/worst-refugee-crisis-world-war-ii-one-stunning-infographic
            The County by County infographic is stunning when you slide to 2015.
            These people are going to have to keep warm to survive. Their genetics are tropical..

          • Rune Likvern says:

            According to BP SR 2015 Germany had a high in 2006 (87.2 Gcm) which in 2014 had declined to 70.9 Gcm.

            For coal the same source show a decline during the same period for Germany.

            In the near future Norwegian nat gas exports, also to Germany, will come down so sustaining present consumption levels requires increased imports from other sources (Germany’s indigenous nat gas production is in general decline).

          • AlexS says:

            Natural gas consumption in the European Union has been declining since 2010 (the chart below is from BP, in billion cubic meters).
            Not sure if this trend will continue, given that prices for imported gas have dropped almost 2 times

            • Ulenspiegel says:

              Alex,

              for Germany as the largest consumer – with 45% of NG used for space heating – the situation is quite clear: The mandatory insulation levels of new buildings lead to a decreasing demand when around 1% of the old buildings are replaced per year with new ones or deep retrofitted ones. With only 15% of the buildings in future proof state the developement will last decades.

              Relatively small increase of governmental programs could accelerate this, the German developement bank KfW gets money for 0.5%.

              In countries with high percentage of (expensive) NG used for electricity generation the substitution is much easier and faster as enough generation capacity is available.

              My bet is that we will see an decrasing NG demand even with better economic performance in the souther EU states, however, I do not expect that this decresae will compensate for the decline of domestic NG production.

          • Yeah, but the Germans are doing volkswagens on their energy statistics.

  2. Guy Minton says:

    Actually, Yergin’s estimate drop to 8,600,000 is in line with EIA’s projection. Both are too conservative, my guess the drop will eventually surprise most.

    • Dennis Coyne says:

      Hi Guy,

      How about some numbers?

      How big a drop do you expect? I think Yergin may be right in this case. The drop in output in the US, along with increased demand at low oil prices will eventually balance the oil market, prices will rise and output will level off and may increase slightly if oil prices get above $75/by the end of 2016.

      I have no idea when oil prices will get to $75/b, but my WAG is mid 2017 at the latest when World output will be struggling to increase. That assumes no major World recessions (like 2008/9) between now and 2017, if the pessimists’ forecast of an impending crash due to a stock market and debt bubble are correct, then output could fall much more than forecast by Yergin due to sustained low oil prices due to lack of demand for oil due to low income growth (or negative income growth).

  3. Caelan MacIntyre says:

    “Have you heard of the free rider problem?

    It sure would reduce the size of government.

    No roads, no bridges, fossil fuel use would be reduced as well, a perfect system!” ~ Dennis Coyne

    With the almost constant statist apologetics we hear from many government and academic economists it is hard to believe that the discipline of economics was once a thorn in the side of the state and its political elite. So commonplace are fallacious economic arguments advocating state control that it sometimes seems that refutation of all of these arguments has become a case of cutting the heads off the Hydra — a tiring and fruitless endeavor.

    But if economics is to become an instrument of freedom and prosperity instead of an instrument of statism, then there are certain fundamental fallacies that must be continually challenged and discredited. Chief among these is the persistent non sequitur from externality to coercion — that is, the bogus conclusion that coercion is a proper means to solve problems involving economic externalities.

    One of the most blatant examples of this non sequitur occurs in discussions of the ‘free rider problem’ and the alleged solution of government provision of so-called ‘public goods’. This is a particularly insidious economic theory that bears a great deal of the responsibility of derailing economics into the ditch of statism…

    Indeed, there is a fundamental contradiction between the criterion of Pareto efficiency and the use of force against those who are to be made ‘better off’.

    Those who advocate government provision of goods or other coercive measures as the solution to the ‘problem’ of free riding frequently suffer from a lack of imagination in considering entrepreneurial solutions…

    Those who advocate coercive arrangements to obtain Pareto efficiency gains are forced to ignore the revealed preferences of the people involved, and thereby commit a fundamental economic error. By arguing for coercion as a means of solving the ‘problem’ of positive externalities, they elevate the policy of forced payment for unsolicited goods to the status of an economic ideal. This is surely one of the most conspicuously tyrannical arguments in modern economics.” ~ Solving the “Problem” of Free Riding

    • Dennis Coyne says:

      Hi Caelan,

      Do you think eliminating government eliminates the existence of coercion? I believe you are mistaken.
      Government exists for a reason. It can be minimized (usually the aim of those on the right) so that those with less power can be abused more easily by those with greater power or it can be made more democratic. If the majority decides that optional taxes are a smart idea, it can be implemented.

      Most people realize that “optional taxes” means no taxes and that means no government. I know that you think that is a good idea, most people do not.

      • Hi Dennis,

        I have posted a link to an essay more than once that argues that we don’t really have true government, but, rather, a ‘non-plural minority in relative anarchy’.

        So, to be fair and precise, maybe you should not be calling what we have, ‘government’ in our discussions.
        I would suggest calling it The Governpimp™, but that’s up to you. If you do, please remember to include the new trademark symbol and italicization, but I won’t coerce you to, or threaten you with prison or a garnish of your wages or something along those lines if you don’t.

        I’ve also already written, perhaps while you were asleep, that if you truly want real government, then let’s have it. Let’s make it truly democratic. But this means no coercion, and therefore this also means no coercive taxation.
        Now, I realize that you might be making a pouty-face ’round about now, but my own personal research tells me, contrary to what you seem to be inventing, that all people think it’s a good idea.
        Especially when you remove the Daddy-won’t-protect-you-anymore fear-based propaganda that eliminating what you and other people think of as ‘government’ would necessarily mean chaos, (looting, panic-in-the-streets, disease, decay and despair, etc.).

        If you are arguing for this kind of ‘non-plural minority-in-relative-anarchy’, then, essentially, you are arguing from/for an unethical platform. Suggesting what may happen with its ‘adjustment’ and/or in its absence is not a valid argument for it… Well, maybe you think so.

        On the other hand, if you are arguing for real government– which we don’t have– then we are on the same or a similar page.

        Real government would exist from/for ethical reasons, not just, as you write, ‘for a reason’.

        • Most people realize that ‘optional taxes’ means no taxes and that means no government. I know that you think that is a good idea, most people do not.” ~ Dennis Coyne

          Optional taxes means (at least closer to) real government, not no government; and what Dennis Coyne thinks about ‘most people‘ doesn’t necessarily represent what ‘most people‘ think.

          Dennis also seems to tread a fine line toward, if not steps firmly onto, this fallacy:

          “In argumentation theory, an argumentum ad populum (Latin for ‘appeal to the people‘) is a fallacious argument that concludes that a proposition is true because many or most people believe it: ‘If many believe so, it is so’. ” ~ Wikipedia

          Nevertheless, if most people are ideological indoctrinates in Dennis’ illusion-for-a-real-government, then what Dennis thinks about most people would seem to stand to reason.
          So I am fairly sure that most people, if given an honest, straightforward, (rather than disingenuous, deceptive), appraisal, would choose to govern themselves and leave the coercive minority behind.

          • Dennis Coyne says:

            Hi Caelan,

            My appraisal is realistic, yours is utopian.

            I noticed you did not address the problem of coercion in general.

            In your utopian world is coercion eliminated? How is this accomplished?

            • Caelan MacIntyre says:

              Hi Dennis,

              I also noticed that you have not– along with my previous point about how you seem to benefit, as one who lives in the USA, with all its trappings, for example, from a particular form of relative dystopia (global)– addressed ‘your’ ‘non-plural anarchistic non-government government’.

              But perhaps we can understand how those who perversely benefit from dystopia might feel threatened in the face of any suggestions for and efforts toward its transcendence, and label them, in perhaps a subconscious attempt to derail any discussion thereof, as ‘utopian’.

              That ‘most people’ prefer utopia over dystopia is not only a realistic appraisal, but a no-brainer.

              So we shouldn’t let pyschosociopaths, fallacious arguments or rationalizations (such as for the current status-quo-dystopia because they can’t imagine anything better), etcetera, get in the way of discussions and endeavors away from dystopia and toward utopia.

              Like, for example, opt-in/opt-out taxation.

              “Every daring attempt to make a great change in existing conditions, every lofty vision of new possibilities for the human race, has been labeled Utopian. “
              ~ Emma Goldman

              “The State is a condition, a certain relationship between human beings, a mode of human behavior; we destroy it by contracting other relationships, by behaving differently.” ~ Gustav Landauer

            • Caelan MacIntyre says:

              “In your utopian world is coercion eliminated? How is this accomplished?” ~ Dennis Coyne

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

              In short, Dennis, legitimate coercion aside (parenting children for example), you can’t absolutely eliminate illegitimate coercion, and making that a goal and/or suggesting that it’s reduction is impossible (or ‘utopian’ [as dystopia’s word for ‘impossible’] LOL) and so we shouldn’t try and make things more ethical, is ridiculous.

              Dystopia’s word for ‘impossible’ is ‘utopian’.” ~ Caelan MacIntyre, (with special thanks to Dennis Coyne for inspiration!) ^u^

              • Dennis Coyne says:

                Hi Caelan,

                Not a false dichotomy. You rail against government coercion. In your ideal World how is unethical coercion dealt with? One cannot just wish it away, it is taken care of government ( to the extent possible) by current society.

                Typically there are situations when force must be met with force, wouldn’t you agree? I think it should be avoided where possible.

                Last I checked Canada is not a lot different in its social structure than the US, though it is an improvement in my opinion. You do not seem satisfied with a social system where there is taxation unless it is optional, so most current social structures would be inadequate.

                And you still have not answered the coercion question, though you dance nicely

                • Caelan MacIntyre says:

                  “And you still have not answered the coercion question…” ~ Dennis Coyne

                  I have, but even if I have not, neither have you.

                  “…though you dance nicely…” ~ Dennis Coyne

                  Thanks, but time to start moving yourself.

    • Dennis Coyne says:

      HI caelan,

      You share a lot with the radical right in the US.

      We could have no public investment if you think that’s a good idea. Everything could be taken care of by the market.

      How would you handle polluters?

      Keep in mind we want to avoid coercion.

      • Caelan MacIntyre says:

        “HI caelan,” ~ Dennis Coyne

        HI dennis,

        How are you today? How’d you sleep?

        “You share a lot with the radical right in the US.” ~ Dennis Coyne

        “My opponent for office just received an endorsement from the Puppy Haters Association. Is that the sort of person you would want to vote for?” ~ Wikipedia, ‘Fallacy of Association‘ entry

        “I deal with what is rather than what might be, as far as governments.” ~ Dennis Coyne

        And defend their narratives and subvert any opposing ones? (And what about ‘what could be’?)
        Overseas, ostensibly, some ‘deal’ more, and more severely, from USA-backed coups and monarchies. In your name and on your dime. Does that bother you?

        Perhaps that’s in part how dictators/dictatorships form; from victims of their own fallacies; from rationalizations that mutate, after some repetition, ad nauseam, into concrete beliefs that populations then get a coercive taste of, whether they like it or not.

        “How would you handle polluters?

        Keep in mind we want to avoid coercion.” ~ Dennis Coyne

        Polluters already exist and in a whopping way– in your coercive so-called government context.

        Time to come to the Plural Anarchists’ boardroom, Dennis, we’re waiting…
        And while we’re at it, try to knock off the old corrupt narrative if you’re not going to help with any new; and/or do some homework beforehand and answer some of your own questions (and bring them to the boardroom). You’re all grown up now, right?

  4. MarbleZeppelin says:

    This may explain a lot about the problems in the human race. They can’t think because they have carbonated brains. Article on the effects of CO2 on cognitive ability.

    http://thinkprogress.org/climate/2015/10/26/3714853/carbon-dioxide-impair-brain/

    Now also consider that the young folks today spend a lot of time inside compared to a few generations ago. They are also surrounded by a lot more CO2 sources and spend a lot of time on congested road surrounded by CO2 sources.
    Adults and children often exercise indoors.
    Assaulted by television and other electronic chatter wherever they go, breathing polluted air, eating polluted food full of chemical additives. Sometimes they actually go outside, to get in the car.
    Life in modern times.

    • oldfarmermac says:

      “Sometimes they actually go outside, to get in the car.”

      It breaks my heart to think of the handful of young kids in my own family growing up under these precise conditions.

      Compared to living on a farm in the mountains, a suburban house is hardly any better than a jail in terms of a kid growing up knowing what life is all about.

      If one of them grows up to become an engineer, he will learn all about physics and be totally ignorant of the ACTUAL USE of a goddamned screwdriver and thus design cars, appliances, and machinery that will drive some poor mechanic to go postal and start murdering engineers at random. Sarc.

      • Silicon Valley Observer says:

        OFM, yes, it’s true, we live in our suburban jail cell. And when we go out it’s only to get into our CO2 emitting vehicle to go to the CO2 emitting mall that sells crap nobody needs. This is the suburban reality.

        Years ago I tried to convince my wife that living in the country (where I grew up) would be healthier for us and our son as well as good preparation for the future. But she grew up in a city, only knows people who live in cities, can’t imagine living near nature or, heaven forbid, living animals. I have since given up. Maybe I will have a chance before I die to live again where the smell of manure on the fields in spring is considered a welcome aroma.

      • MarbleZeppelin says:

        oldfarmermac,
        I do not think it is the suburbs that are the problem. Sure some of the isolated bedroom communities are manically homogenous but most suburbs have lots of open spaces, streams, woods, fields and vacant lots nearby. At least some of that within walking or biking distance. I was lucky, all that and a bunch of ma and pop stores within a mile radius. The town was just a 10 minute bike ride away.
        Yes, now it is tougher but it’s still not that bad.
        I think there is a huge difference in society and attitude towards children. Back when I was knee high to a basketball player, most parents let the kids run loose. We could wander where we wanted and learned to take care of ourselves as well as interact with the world. It almost seemed as if the parents didn’t care as much. Kids mostly stayed outside when they could, hanging around the house alone was just not done. We did a lot of stuff our parents never found out about.
        We didn’t get shuttled around to a dozen activities by parent chauffer’s.
        Now the parents put the kids on a pedestal, cow-tow to their wishes, buy them electronic entertainment to baby sit the little PIA’s . Instead of playing with other kids and exploring the world, they watch TV, play computer games and text.
        The parents are also afraid of the world, they fear something might happen to little Johnny or Jackie. All that hyped up news about the 1 in a million occurrence has them rattled. So Johnny ends up on drugs and Jackie ends up pregnant or alcoholic instead. See, they protected them. Life for kids is militarized by the school sports system. No time to have fun and build good friendships. No time to interact with the real world.

        Now here is a story about some city kids from the “good old days”
        https://archive.org/details/JeanShepherd1966
        click on #5 SWAMP ICE, sit back, close your eyes and listen
        I remember those days playing hockey on a pond, no protection, get a good smack in the knee from a fast puck and down you would go for a while. Great fun.

        • Old Farmer Mac says:

          Hi MZ, Every thing you say I agree with. It’s not just being in town or a subdivision, half or more of the problem is helicopter parenting and people being driven to insane levels of fear for their kids by the msm which constantly hypes any news involving violence.

          I have a cousin who was overly protected in such fashion and the poor kid went out into the world when he finally got out from under his parental thumbs with absolutely ZERO street smarts. He managed to get thrown in jail within a week of leaving home.

          I have been in pretty deep hot water, meaning I earned the only C grade posted in the entire graduate school of education at VCU, for telling the truth about missing children in a grad class..

          The statistics are so overblown they would embarrass the hell out of a carnival barker. According to the stats, about ten times as many kids are listed as missing per thousand people in most cities as are ACTUALLY MISSING in the sense that the cops are interested or would be interested if they had time. Half the kids that are supposedly missing are with one or the other parent or grandparent, and could be located physically within an hour almost any time at all. I know of supposedly missing kids who are still enrolled in the same school as previous to their being missed, without having missed a day of school.

          I do NOT condone rape by any means but sometimes I suspect that every woman who ever found it expedient to slap an overly eager date has been counted as an attempted rape victim, etc.

          The msm in a cutthroat race to the bottom for audience and advertising dollars has turned us into a nation of chicken littles.

          • Nick G says:

            The statistics are so overblown they would embarrass the hell out of a carnival barker.

            I agree about missing kids. I think the stat is that less than 1 in 1,000 child abductions is the kind of stranger abduction that gets the “Law and Order/SVU” treatment.

            I suspect that every woman who ever found it expedient to slap an overly eager date has been counted as an attempted rape victim, etc.

            Yow! No. Rape is badly under reported.

            These two things are very, very different.

            • Old Farmer Mac says:

              HI Nick,

              You are correct, rape IS underreported, but to what extent is anybody’s guess. I am sure it is to a LARGE extent..

              But I have had serious talks with young women in an academic environment WITHOUT being under the glaring eyeball of a PC feminist professor, and they tell me themselves that they do not consider a good many of the incidents that are counted as attempted rapes or sexual harassment as being significant, meaning counted in surveys.

              I have known some young woman to laugh when I tried a joke, they thought it was genuinely funny, no element of harassment. The joke was that I was looking around at all the girls and trying to remember why they were so INTERESTING. The next couple I tried it on were pretty hard core feminist pc types and ripped me a new backside.

              This situation was in an actual break between classes when the members all basically just stuck around for the next class a few minutes later in the same classroom. . In a small community college, and in a small program such as nursing, the same couple of dozen students will share nearly every specialized class. In one case, I am the well liked oldest by miles student, in the other I am an animal in need of horsewhipping. The women eighteen to twenty two or so mostly, a couple middle-aged. Me, white haired, white bearded sixties, bored, expecting to be looking after elderly parents and needing serious skills, also considering the training as prep for the baked in hard crash which just MIGHT arrive within my lifetime..The parental troubles got so bad so fast I had to drop out without graduating but the Mom spent her last years in her own home near her friends with her chickens and birds etc right outside the picture windows,nice view of the orchard and mountains, and Dad will likewise if my own health holds up.

              I simply cannot abide the THOUGHT of any body important to me being in a nursing home. I have BEEN in a couple of dozen nursing homes (pharmacy delivery driver for a few weeks ) at three am myself and they are not much better than humanely operated jails.

              When people create and run surveys, the surveys all too often prove not the facts but the prejudices of the creators.

              • Nick G says:

                Mac,

                One problem here is that just because someone is a member of a group (that is commonly mistreated in a systematic way) doesn’t mean that they perceive the mistreatment in the same way. Some won’t even agree that the mistreatment exists.

                You can find African-americans who disagree that racism exists (Clarence Thomas is a stand-out example). You can find women who don’t perceive rape or sexual harassment. There are plenty of Phyllis Schlafly’s, and people in between, who I would argue just don’t see the problem, even thought it’s real.

                Just because you’re jewish doesn’t make you an expert on anti-semitism, or all things jewish. It’s a half-way decent bet, but there’s no guarantee.

                Just because you live in the South, doesn’t mean you’ll agree about Southern politics.

                Right?

      • HVACman says:

        “If one of them grows up to become an engineer, he will learn all about physics and be totally ignorant of the ACTUAL USE of a goddamned screwdriver and thus design cars, appliances, and machinery that will drive some poor mechanic to go postal and start murdering engineers at random. Sarc.”

        OFM – LOL! When I was an undergrad mechanical engineering student, I worked summers for a food-industry machine-manufacturer as a mechanic – assembling and tuning custom palletizing and and packaging machines. I knew which end of a screwdriver to grab and learned to appreciate simple, clean, easy-to-service machine designs. This was pretty typical of my fellow US-born engineering classmates, who were typically car buffs or otherwise loved to tinker with machinery .

        There were also a lot of foreign engineering students in our classes. Apparently mostly upper-class bookworms, where their cultures frowned on people of their class getting greasy working on cars or even oiling a bicycle chain. In one class called “Production Processes” (basically a machine shop class), these students were literally dangerous to themselves and others. Not even familiar with basic hand tools like C-clamps, much less handling micrometers, clamps, or running an engine lathe, drill press, or Bridgeport mill.

        I suspect they went on to design a lot of the products that cause mechanics to go “postal”. Nowadays, it’s hard to get many US high school students interested in mechanical engineering, unless it is robotics. Most want to go into software design. And the few that do go to mechanical engineering don’t have hands-on skills. The most common training ground – cars – aren’t what they uses to be – you can’t tinker on them much anymore, unless you get into vintage automobiles.

        Plus almost all engineering schools are now dominated with foreign students. Very bright in math and science, but with the same issues as before…lack of hands-on machinery experience.

        Everything can’t be done with software or solid-state devices. Things still have to have some moving parts and nuts and bolts. Someone has to understand them. But who will in the future?

        • ezrydermike says:

          those guys from Orange County Choppers?

        • wimbi says:

          I went to college for an ME degree right after the war, in 1946, all of us were farm raised, knew all about hardware, were totally confident we could fix any of it, but had rather poor training in math, tho many had a lot of talent.

          No females, of course.

          Later, after a grad degree in rockets, ramjets, turbojets and other things that go boom and burn fuel like unbelievable, I taught undergrad ME. The students were already half indian/chinese, and knew lots of math, but nothing about what kept their house cool or warm. They were all the sons of very rich people.

          Hopeless in the lab. Matter of fact -Hostile in the lab–Nobody does that sort of thing where I come from.

          A few females, almost all way up in their class for the simple reason that they did the homework.

          Much later, my grandsons went into science and math, and did extremely well at it, but, all on a computer, totally out of it in the lab. Of course, things being as they are in grad schools these days, these kids are half chinese, and their dad got addicted to computers when we bought the first one in our town.

          Chinese science is super. Chinese plumbing is crap.

          Solution. Take all those damn intellectuals, jerk ’em out of the cushy jobs they have now, and force ’em into shit shoveling in the villages for a couple of decades.

          Ah, um, come to think of it —-=.

  5. shallow sand says:

    Since there is a lot of focus on Bakken, may be interested to know CLR reported they have pulled all completion crews from the Bakken. They are still running 8 rigs there but do not intend on completing any wells there the remainder of the year.

    Production in the Bakken fell, and will likely fall quite a bit more given this news.

    However, companywide production was up 1% from the previous quarter due to 15 rigs and 3 completion crews in OK.

    CLR realized $29.90 per BOE and lost $0.22 per share.

    I still haven’t figured out how OK is working so much better for them, other than product differentials. The OK wells are deeper, more expensive, more gassy, and appear to IP for less and decline more quickly. I do admit I haven’t seen enough lease operating statements to draw any definitive conclusions, but the ones I have seen looked pretty bad.

    Maybe someone working in the SCOOP could post some more info here?

    • Ves says:

      SS: “CLR reported they have pulled all completion crews from the Bakken. They are still running 8 rigs there”

      So it took them a year of basement prices to figure that out???!! Wow! That is some huge ego fighting “sunk cost”! Wow, when the company is public it is very easy to see this ego fight after prolong period of irrational behavior. But they can’t avoid “sunk cost “no matter how big ego they have.

    • Watcher says:

      Any chance they own the land? No royalties?

      • Watcher says:

        I am looking further into the possibility they own their Oklahoma land areas, rather than are leasing it. This would eliminate a royalty payout.

        Also, a comment on the Yahoo report of their earnings announcement says their projected increase of BOE is nat gas, not oil. Their oil output is falling.

        [Oops, Enno already caught this nat gas thing]

    • Enno Peters says:

      Shallow,

      Thanks. Some numbers I found interesting:

      – Gas/oil ratio is increasing fast for CLR (which is helping to show strong production in BOE). Oil production actually dropped quarter on quarter, by 1.6% (149.9 kbopd -> 147.5 kbopd).
      – First 9 months of 2015: Operating cash flow was 1.3B while net CAPEX was 2.6B. 1.2B was borrowed to cover most of this gap. In the 3rd quarter, this mismatch dropped, but they were still not cash flow positive (680M net CAPEX vs 540M operating cash flow).
      – The banks were willing to increase the credit facility with 250M, and they could get another loan of 500M (from 14 banks in total..). They finalized this agreement yesterday.
      – They have 89 net wells drilled but not yet producing (vs 213 at the end of 2014), according to their 10Q. Despite not having completion crews in the Bakken, their press release indicates that they want to bring this number further down there by year-end, although the 10Q is less clear on that (“Due to current market conditions we have chosen to defer completions and new production on certain wells until the commodity pricing environment improves”). This doesn’t necessarily contradict each other.
      – They did not mark down the value of their fixed assets yet, which then has to happen early next year.

      Yet, Hamm was feeling positive, as ever 🙂
      – “This was another solid quarter’s performance…” & “Continental had a very productive quarter with strong production growth…”

      • shallow sand says:

        How do they decrease the DUC inventory without completion crews?

        • Enno Peters says:

          You’re asking the wrong person 🙂

          From the press release:
          “Bakken
          Continental currently has 123 gross operated wells drilled and waiting on first production in the Bakken, compared to 95 at the end of second quarter 2015. This reflects the deferral of completion activities starting in third quarter 2015 and completed wells that have not commenced production. The Company expects to decrease this total to approximately 115 gross operated wells drilled and waiting on first production at year-end 2015.”

          Perhaps they will hire completion crews on a per-case basis, and not full time?

          • Dennis Coyne says:

            Perhaps these 10 DUCs are in Oklahoma?

            • shallow sand says:

              Dennis. I re read the press release. It refers soley to the Bakken.

              Enno may be correct, maybe what they mean is they currently have no completion crews contracted, but will periodically complete a well in Q4.

              On another note, I’d still like some education on SCOOP economics. I guess that will remain a mystery. Appears the Meremac formation is the hot oil play?

              • Dennis Coyne says:

                Hi Shallow sand,

                You are correct, poor reading on my part. Maybe the completion crews are working for other companies with an interest in these wells?

                In the grand scheme, 10 wells over 3 months doesn’t really move the needle much.

      • Watcher says:

        willing to increase the credit facility with 250M, and they could get another loan of 500M (from 14 banks in total..). They finalized this agreement yesterday.

        That’s why I’m sniffing around their Oklahoma holdings. Owned land is collateral leased land might not be.

        • Watcher says:

          And I found no evidence of extensive Oklahoma ownership. The reports say it’s all leaseholding.

          One item in the 2014 annual report says SCOOP economics are greatly aided by discovery of a Springer play 1000 feet above their original development. Suggests they can use the same wells and divert a lateral horizontal at a shallower depth in the same hole already drilled and drained. Lower cost, but also they brag at not having to buy more leases for a new discovery to develop it. Same lease already in hand.

    • Clueless says:

      Shallow Sand – or anyone. Does this also mean that they will not frac them until later? From $60 down, I have said that fracking a well was just throwing money away from a time value of money perspective. That is, paying back the frac cost with oil that nets them around $30.

      • shallow sand says:

        Clueless. I assume the primary reason they are not completing the wells at this time is due to the low price of oil, and they will resume to do so when the price improves. It appears that NDIC will work with operators on completion delays, given a rule change which appears to allow a two year time frame, as opposed to one. Also, I think there are steps that can be taken to delay that time further, but I am not well versed in administrative rules in ND.

        I assume they continue to drill due to penalties for early termination of rig contracts, and/or because of lease requirements.

  6. After my article on Saudi fiscal breakeven oil prices I did a similar exercise for Iraq:

    30/10/2015
    Iraq needs 1.3 mb/d additional oil exports and $70 oil to balance budget
    http://crudeoilpeak.info/iraq-needs-1-3-mbd-additional-oil-exports-and-us-70-oil-to-balance-budget

    • ChiefEngineer says:

      Gail Tverberg says:

      November 4, 2015 at 7:33 pm

      You have an interesting article about Iraq there. I read the Saudi Arabia one earlier.

      Nearly all of the exporting countries have difficulty if oil prices remain low. I am convinced that the end comes through low prices, not high. This is not a possibility that many forecasters ever considered.

      Reply

      • Dennis Coyne says:

        Hi Chief engineer,

        Gail’s understanding of economics is not very good. The story is pretty simple, low prices will lead to low output. What happens next? ….

        Oil prices increase …. output increases (though potentially not as high as before).
        The more likely scenario is volatility or an undulating plateau. OPEC should become OPPC and Russia, US, Norway, and US should join. Stabilize oil prices at a level where World supply roughly matches World demand at a minimal profit for marginal oil producers (deep water, oil sands, and LTO). The free market does not work well for the oil industry which is why the RRC and then OPEC tried to stabilize prices by restricting output. If the free market worked well, the RRC and OPEC would never have made the attempt to regulate output.

        At some point (about 2050 to 2070) low prices might be the end of the oil industry, this will be because high oil prices will lead to the development of substitutes for much of the transportation use of oil, demand for oil may fall below the available supply and low oil prices will drive marginal producers out of business.

        We will likely need oil to remain at $125/b to $150/b for 5 to 10 years in order for that to happen (probably 2020 to 2027). Declining oil output over this period will finally convince people that peak oil has arrived. A severe depression during the 2030s will slow the transition, but it will also focus the World’s attention on finding solutions.

        Maybe this time a grand effort building alternative energy rather than weapons of mass destruction will be the choice. It is possible that many will realize that World War 3 is not a good idea, though I imagine most people thought the same in 1938 about another “Great War”.

        • Gail’s understanding of economics is not very good.

          On that point Dennis, I will have to emphatically disagree. I think Gail’s understanding of economics is outstanding. The one thing that Gail understands is debt. Debt creates money as money is loaned into existence. Debt is the grease that keeps the wheels of industry turning. Debt is what the oil industry runs on. But sometimes money is loaned that can never be paid back.

          In the early part of this century massive amounts of money was loaned out to buy houses. Banks loaned money to people they knew could never repay the loan unless the price of real estate kept increasing. But they were not worried because they thought they could just repossess the house if the borrower failed to pay. Then they could just resell the house at a higher price even though the borrower defaulted. They would still make bundles of money.

          But they never counted on the bubble bursting and prices collapsing. Were it not for the bailout the US economy, and likely the economy of Europe, would have collapsed.

          Gail understands that the oil industry runs on debt also. Apparently Dennis fails to grasp this very simple fact. He seems to think price is all that matters. He is sorely mistaken.

          Gail on debt and low oil prices:

          Oops! Low oil prices are related to a debt bubble

          Why is the price of oil so low now? In fact, why are all commodity prices so low? I see the problem as being an affordability issue that has been hidden by a growing debt bubble. As this debt bubble has expanded, it has kept the sales prices of commodities up with the cost of extraction (Figure 1), even though wages have not been rising as fast as commodity prices since about the year 2000. Now many countries are cutting back on the rate of debt growth because debt/GDP ratios are becoming unreasonably high, and because the productivity of additional debt is falling.

          If wages are stagnating, and debt is not growing very rapidly, the price of commodities tends to fall back to what is affordable by consumers. This is the problem we are experiencing now.

          Great Gail-Kunstler interview at the link below.

          KunstlerCast 271 – A Conversation with Gail Tverberg of OurFiniteWorld.com

          A conversation with Gail Tverberg of OurFiniteWorld.com. Gail Tverberg is an analyst who has been researching the connection between oil limits and the economy for nearly 10 years. She writes a widely-followed blog called Our Finite World. Her background is as an actuary, working as a consultant to insurance companies. She also has a foot in the academic world, where she has lectured and written academic articles. Gail was in China in March-April of this year lecturing at China University of Petroleum in Beijing and is scheduled to return next spring, to teach another class.

          • Doug Leighton says:

            Interesting point(s) Ron: US federal debt is currently over 18.5 Trillion and increasing (rapidly). Unfunded liabilities are about 99 Trillion dollars, $100 T soon. Of course I’m continually reminded unfunded liabilities aren’t debt (implying they don’t matter). Perhaps Watcher is correct when he says the entire concept of debt is an obsolete idea: if you need money you simply print it (I think that’s what Watcher says). LTO certainly seems to be an effective debt generating industry, at the moment at least. Anyway, I think Gail is spot on but I’m old fashioned when it comes to money.

            • Watcher says:

              But they never counted on the bubble bursting and prices collapsing. Were it not for the bailout the US economy, and likely the economy of Europe, would have collapsed.

              Pretty good odds this is true. Even better odds this is not capitalism. Which in the largest of senses, is the point. Fiscal bailout as a specific event was TARP and less than 1 Trillion. The Fed’s monetary (as opposed to fiscal) bailout was 4 Trillion. This wasn’t government stimulus. It was monetary, and it’s not past tense. Japan and Europe are STILL creating unrationalized money by the trillions. Capitalism hasn’t started “working” again. Money is still just flowing out of a pipe.

              You can’t print 4.1 Trillion dollars in monetary bailout and then pretend everything is normal and free markets operate and no one should pay attention to what was done.

              Well, correction. You CAN pretend. That’s what is happening right now.

              As for Doug’s phrasing . . . obsolete. One would not think that’s the right . . . phrasing. It didn’t become obsolete. It just failed. Money with no underpinning (and no, gold doesn’t matter, there’s no GDP underpinning) was created and is being created to keep the wheels turning and not incidentally, the oil flowing.

          • Silicon Valley Observer says:

            Ron, In my opinion I think Dennis is essentially correct.

            Right now we are in an unusual short-term oversupply situation which, as Dennis correctly points out, cannot last. If prices stay below fully allocated production costs, production will have to decline resulting in an increase in price. I just don’t see how this cannot happen.

            Yes, high enough oil prices will hurt the economy and, in turn, dampen demand and create a temporary ceiling on oil prices . But longer term, as the supply of oil decreases due to depletion, the remaining oil will be claimed by those who can pay for it. Oil will become the ultimate luxury good.

            Perhaps this isn’t the best analogy, but consider heroin. Right now it’s super cheap because the supply is high. If the supply were drastically reduced causing a large price increase many addicts would suffer, but there would still be those able to pay the higher price. Oil is the ultimate addiction. And while the suffering will be extreme when the supply diminishes sufficiently, there will be those who do not feel the pain.

            I can imagine a future twenty years from now where the economy is in shambles, most people are walking or riding bicycles, but a privileged few will still be driving cars regardless of fuel price. The military and the government will always be able to pay top price.

            Also, isn’t it possible for the price of oil to stay the same in nominal terms, but become more expensive in relative terms? In a deflationary scenario that some predict, anything that stays at the same price effectively becomes more expensive. If the economy collapses, deflation is the expected result I believe.

            Actually, I think there’s a third alternative to either a high price scenario or a low price scenario and that is complete government control of oil distribution. This, I think, is the more likely outcome when things get really bad. Oil products like gasoline and diesel would be parceled out according to a rationing scheme under the authority of some emergency energy plan and price will no longer be the arbiter of who gets it.

            • SVO, I noticed your post did not contain the word debt even once. No evaluation of the economy, any economy, can be correct unless it accounts for the role of debt.

              Imagine a world where debt is impossible. You cannot buy a house, a car, or anything unless you have the cash to pay for it. Such a world could exist, it has existed in the past… the very primitive past. But but every facet of the industrial world runs on debt.

              And you wish to tell me how the oil industry works without ever mentioning the role of debt?

              Give me a break!

              Please read Gail’s article on low oil prices and debt. Then you will have, I hope, a far better understanding of debt and the price of oil.

              Oops! Low oil prices are related to a debt bubble

              I whole heartily agree with Gail’s opinion in this article. I wish anyone who disagrees would point out exactly where they disagree with Gail in this article.

              • ChiefEngineer says:

                Hi Dennis,

                I’m guessing most of us here would enjoy a good fucking break too and a little more money so that we can take all the breaks we would like without any debt.

                Debt isn’t the problem. It’s what the money is spent on going into debt that can become a problem. If your headed to the mall with a credit card to buy your 10th pair of pumps and you’re not a hooker. You have a problem. But, if you need a reliable vehicle to get to your ass to work, so you don’t loose your job. It’s time to borrow.

                After the collapse of 2008, the country needed to spend to repair it’s economy and get it flowing again. It’s like a car accident happening in 2008 and after we have to pay for the damage(debt, a government insurance company). If the car isn’t repaired, it’s useless. Now the right wing Teabaggers (Gail) are focused on the payment for repairs and not the cause of the accident (deregulation).

                Ron, I think Dennis and SVO have a better understand of economics than Tverberg. What Gail doesn’t seem to understand is that supply and demand don’t respond instantly to price and neither does the economy. It’s like she expects an aircraft carrier to be able to spin donuts in a harbor.

                The Republicans have been trying to lay the blame of the of the countries debt on Obama for almost 7 years now. And at same time, tying his hands in every budget negotiation in congress so that he can’t move the economy forward.

                Consequently, the largest spender(government) in the economy is in contraction and the worlds slow recovery is looking at deflation. Someone or thing has to spend to grow the economy and rise demand. Consumer sediment(Gail’s doomerism) is the problem, not debt. The cost of government easy money (printing to much) is inflation and that’s not the current problem.

                Infrastructure for a low co2 transportation and electric grid would be my priority. It’s not about how much you borrow, it’s about what you borrow for.

                • Ron, I think Dennis and SVO have a better understand of economics than Tverberg. What Gail doesn’t seem to understand is that supply and demand don’t respond instantly to price and neither does the economy.

                  Huh? From what passage in her writings did you draw that conclusion? Really Chief, you can do better than that. From Gail’s link I posted above:

                  Once there are major debt defaults, lenders will want to wait to see that prices will stay consistently high for a period (say, two or three years) before extending credit again. Thus, even if commodity prices should bounce back in 2017, it is doubtful that producers will be able to find financing at a reasonable interest rate until, say, 2020. By that time, depletion will have taken its toll. It will be impossible to make up for the many years of low investment at that time. Production is likely to continue falling, even if prices do rise.

                  It would help Chief, if you would reference your opinions with some text by Gail, something that supports your conclusions.

                  I think the idea that Dennis an SVO know more about economics than Gail is hilarious. Gail is an actuary who has studied economics all her life. I think she has a pretty good handle on the subject.

                  • ChiefEngineer says:

                    Here you go,

                    “Gail Tverberg says:

                    November 4, 2015 at 1:38 pm

                    It is hard to imaging that the current situation could go on for more than 6 months or a year without a big problem becoming evident. I suppose that TPTB might be able to keep that big problem from collapsing anything too major for another two or three years, by changing the rules regarding defaults on loans, giving money to individual consumers, and other techniques designed to keep the system going.

                    I have been surprised with the creativity of those keeping the financial system afloat so far. We can all hope that they will be even more creative this time around.

                    Reply”

                    Ron, Gail has been making these stupid comments for the last 5 years calling for collapse and the economy is stronger today than anytime in the last 10 years.

                    Gail is a rightwing doomer with no vision and believes God is the answer. Good luck with that buddy. We were all doomed the day we were born, it’s all about what we make of life. She is just playing to the Right Wing political agenda. Don’t be conned by her nonsense.

                    So you deleted the “F” word out of your previous comment. I would have too, but the system wouldn’t let me go back in after I saw you deleted yours.

                  • Nick G says:

                    Ron,

                    Actuaries don’t study economics (though economists do make use of actuarial results). They are entirely different professions, with entirely different methods and (somewhat different) data.

                  • Nick G says:

                    Once there are major debt defaults, lenders will want to wait to see that prices will stay consistently high for a period (say, two or three years) before extending credit again.

                    Wouldn’t they mostly rely on the futures market? If drillers could hedge their production, wouldn’t banks be happy?

                  • Nick, I know what an actuary is. You cannot be an actuary and be ignorant of economics.

                    Nick said: Actuaries don’t study economics.

                    Actuarial Science

                    Actuarial sciences includes a number of interrelated subjects, including probability, mathematics, statistics, finance, economics, financial economics, and computer programming.

                    And actuaries do study economics. Do you actually believe you could get a degree in actuarial science with no economic courses in your academic studies?

                  • ChiefEngineer says:

                    Ron, just because an actuary can do mathematics, calculate probability and do statistics. Doesn’t mean they understands what the results mean.

                    Gail has her opinion of the next year and it’s been wrong for the last 5 years with her doomer collapse BS. What’s the probability of her been right next year ?

                    I wouldn’t ask her to calculate it for you.

                  • Nick G says:

                    Ron,

                    Yes, I said that wrong. A little review, and I see that actuaries do take some econ courses.

                    But…I believe that most actuarial work, day to day, has little overlap with the work of professional economists. It’s very easy to be a successful actuary and not think much about macroeconomics.

                    Here are some analogies: lawyers generally take history classes, and some are history majors, but you can’t assume any specific attorney is a history expert.

                    Similarly, some attorneys are political science majors, and most take P.S. courses, but you can’t rely on an attorney to be an expert in political science.

                    In any case, as far as I can tell, ChiefEngineer is very much correct: Gail presents ideas about economics that would make someone like Krugman really shudder.

                • wimbi says:

                  Hey Chief, why isn’t everybody yelling for the same —

                  Low CO2 transport ( and everything) and grid should be a national and a world priority.

                  God knows we could sure afford it, just by redirecting spending both private and public, from frivolity to that REAL priority.

                  Here in my little hill town I’ve got a lot of resonance from harping on that note, and we actually doing it, at least a start.

                  I have put some significant bucks into it myself, emphasizing that all the meetings and work parties should be FUN, and have good eats.

                  It’s amazing to see how much real stuff people can do when they feel themselves one of a big happy party.

                  And when the honchos actually know what to do and how to do it, and don’t try to grab any credit.

                  I was dam lucky to have such folks show up out of nowhere, ready and eager to go.

                  INSULATE STANDING BLDGS
                  PUT UP PV
                  ALL CITY CARS EV.
                  CAR SHARE CLUBS (nobody misses work just on account of a crapped out junker they can’t afford to replace)
                  and so on.

          • Rune Likvern says:

            The role of CREDIT (debt) in the economy is apparently poorly understood and some refuse to recognize it without offering alternative explanations.
            CREDIT comes first, then access to energy.

            Growth in CREDIT = Growth in GDP (there is also something called the velocity of money here).
            This process was really set in motion in the 1970’s.

            Since 2008 the world economy used large amounts of CREDIT to bring the economies back on growth trajectory.
            CREDIT works both sides of the demand and supply equation and also allowed for some time for higher consumption of higher priced oil.
            Some believe that a problem with TOO MUCH CREDIT is to be solved with MORE CREDIT.

            This is the same as borrowing even more from the future to maintain today’s over consumptive life styles and leaving their children and grand children with the bill.

            “After all what good has the future done for us!”

            • Doug Leighton says:

              “This is the same as borrowing even more from the future to maintain today’s over consumptive life styles and leaving their children and grand children with the bill.” And, that says it all, thanks Rune.

              • Dennis Coyne says:

                Hi Doug,

                Imagine your children were just graduating from college.

                Would an economy with 25% unemployment be good for them? That’s what we get when we are too concerned over high public debt as the Hoover administration clearly was.

                You should read Keynes (it is a short book),
                The General Theory of Employment, Interest, and Money

                https://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money

                Or read Krugman’s End This Depression Now, for an alternative view on debt from Gail’s.

                • Doug Leighton says:

                  I’ve seen my children’s generation living a lifestyle kings and queens couldn’t have dreamt of (in the not too distant past): their own furnished homes upon marriage, multiple new-ish cars, international travel, etc. This was a blip in history, one that was financed by – debt.

                  • Dennis Coyne says:

                    Hi Doug,

                    My daughter just graduated from University.
                    You avoided the question, if your daughter had just graduated do you think a World with a 25% unemployment rate would be better, or one with a 6% unemployment rate?

                    Low government debt and balanced budgets (Herbert Hoover thinking) gets you low employment. Keynesian policies done properly get you higher employment.

                    Debt is important, of that there is no doubt.
                    When the economy is doing poorly it is usually because of too little debt rather than too much debt.

                    Greece is a notable exception and there are other cases where countries have taken on too much debt, in Greece’s case the lack of control over its own monetary policy is a big problem. If they had the ability to increase their money supply to get some moderate inflation (5% or so), they could have eased their debt burden and gradually got there spending and taxation to sustainable levels. The Euro was not a good idea for this reason, that is why the United Kingdom did not join in the monetary union, a smart economic and political move.

                • Dennis, there are two types of debt, public and private. If you read Gail’s article, you will see that it deals exclusively with private debt and not public debt. Keynes theories deals primarily with public debt, efforts by the government to prime the economy with public money.

                  I don’t think Krugman would disagree that strongly with Gail. I read some of the reviews of his book, End This Depression Now! It appears to me that they are talking about two entirely different subjects.

                  But back to Keynes, do you really believe that the economic theories of John Maynard Keynes, written in 1936 have more than a remote connection to today’s financing in the oil patch.

                  The US government public debt today is totally different from the public debt during the Hoover administration. It is more than just silly to compare the US economy today with that of the Hoover administration. But even doing so would would have only marginal connection to the oil patch.

                  • Nick G says:

                    Ron,

                    The question here is: why would oil patch debt cause a systemic crisis?

                    The 2007 real estate crisis was a crisis because it threatened to bankrupt very, very large banks. The Great Depression was caused by bank failures, and the failure of Lehman Brothers scared everyone with the possibility of a re-run of 1929.

                    So, is there a threat that the oil patch will bring down Chase, or Bank of America?? I don’t see any evidence of that – that’s what needs to be looked at.
                    ———————–

                    I suspect any mainstream economist, including Krugman, would think Gail is crazy to suggest that excess debt is causing the current commodity deflation. The straightforward explanation, AFAIK, is that commodity deflation is a long-term (secular) phenomenon, that was temporarily interrupted by a construction bubble in China.

                  • Rune Likvern says:

                    BIS (Bank for International Settlements) apparently gives some attention to the oil and gas sector total debt.

                    ”First, the oil–debt nexus illustrates the evolving risks in the financial system. Rapidly rising leverage creates risk exposures in the non-financial corporate sector that may be transferred across the global financial system. Similarly, rising leverage puts a greater premium on the liquidity of the markets for the assets that back debt. Both developments underscore the need to better understand the functioning, behaviour and interaction of markets and intermediaries.
                    Second, the build-up of debt in the oil sector provides an example of how high debt levels can induce new linkages between individual markets and the wider economy. Such interaction needs to be taken into account in assessments of the economic implications of falling oil prices.”

                    https://www.bis.org/publ/qtrpdf/r_qt1503f.pdf

                  • Dennis Coyne says:

                    Hi Ron,

                    Doug was talking about public debt, I used to read Gail’s stuff at the Oil Drum, on economics she is not very good in my opinion.

                    One thing she may be missing is that when oil companies go bankrupt, they may sell off their assets to bigger companies with deeper pockets. When oil prices recover, these financially stronger companies will be able to get financing to drill profitable wells.

                    I won’t comment further, there will be much less of a lag in new drilling once oil prices get above $75/b than Gail believes.

                • Rune Likvern says:

                  There is something called a balanced budget (I am aware that there are pockets on this planet that this principles do not apply).

                  To run a deficit means spending more than what is received as income. This may work temporarily if that puts the economy back on an organic growth trajectory.

                  According to data (Warning these are predatory data!) the Office of Management and Budget (OMB)
                  https://www.whitehouse.gov/omb/budget/Historicals

                  The US has since 1945 accumulated a total debt of around $12Trillion from (total) fiscal deficits (OMB) and has not run a surplus since 2001 and OMBs estimates now is for deficits through 2020.

                  So solving the debt problem created by one generation by arguing that youth unemployment needs to be kept in check by adding more debt for them to service later is [insert appropriate description here].

                  The thing is as the total debt levels grows and it becomes apparent that the debtor is not capable of repaying the debt, trust is lost in the debtor (and its currency) and it gets harder to run a deficit, which means austerity measures are introduced.

                  ”Overall, unemployment in Spain stands at 22.4 percent.”
                  http://www.reuters.com/article/2015/10/04/us-spain-apprentices-idUSKCN0RY09N20151004

                  • Watcher says:

                    and it gets harder to run a deficit, which means austerity measures are introduced.

                    Not if you have a central bank that finances the deficit via purchase of gov’t securities.

                    Rather a lot of that going on right now.

                    Everywhere with a CB.

                  • ChiefEngineer says:

                    Rune says:

                    “The thing is as the total debt levels grows and it becomes apparent that the debtor is not capable of repaying the debt, trust is lost in the debtor (and its currency) and it gets harder to run a deficit, which means austerity measures are introduced.”

                    If this is true, why do so many right wing conservatives have their panties in a wad about the United States ? The US is the strongest economy in the world and the dollar is at record strength. Why won’t Republicans return to the tax policies of the year 2000 if debt is that important to them? The year of a record surplus.

                    History shows Conservatives only care about debt when a Progressive is in the White House. I never heard a word about debt from the Republicans during the Bushy and Raygun years. Remember, Dick Cheney said deficits don’t matter.

                    http://www.ontheissues.org/Celeb/Dick_Cheney_Budget_+_Economy.htm

                  • Dennis Coyne says:

                    Hi Rune,

                    Yes when unemployment is low, a balanced budget makes perfect sense to me.

                    I am not in favor of unending deficits (though I probably don’t sound like it). It would be better for the government to pay down debt when the economy is doing well (lets say 5.5% unemployment rate or lower).

                    When the unemployment rate is high (I was talking about unemployment in general rather than youth unemployment rates), government deficits make perfect sense, even if too much private debt initially caused the recession. Sometimes solving a problem caused by too much private debt, requires increasing public debt to get the economy growing. The economic growth should decrease the deficit as increased income will increase tax revenue and reduce government spending on unemployment benefits and government aid to low income citizens.

                • “Would an economy with 25% unemployment be good for them?” Dennis Coyne

                  Would it be a real economy or an uneconomy, helped run by an ungovernment?

                  If the latter, then I would answer, yes, if with 100% unemployment. (Because they would be employed in a real economy with a real government)

                  …Dennis, why is it that you seem to like crappy stuff like fake governments and fake economies?

                  • ChiefEngineer says:

                    There is nothing crappy or fake about the current economy, unless your on the outside looking in.

                    Do you need a job Caelan ?

                  • “There is nothing crappy or fake about the current economy,” ~ ChiefEngineer

                    The economy is uneconomical, so, yes, it’s crappy.
                    …Well, ok, its much worse than crappy. Happy?

                    Economy:
                    “1. thrifty management; frugality in the expenditure or consumption of money, materials, etc.” ~ dictionary.com

                    “Do you need a job Caelan ?” ~ ChiefEngineer

                    You mean like one that manufactures a need for a relatively useless, overpriced and/or otherwise crappy junk sweatshopped product that breaks more often and sooner than ever before and cannot be fixed or fixed easily or cheaply by the owner?

                  • ChiefEngineer says:

                    That crappy economy produced that crappy computer which keeps posting your crappy comments. All because of the crappy education you got from the fake school from a crappy fake government.

                    Caelan, I hope your having a real nice day

                  • Caelan MacIntyre says:

                    Ya all this fake/virtual communication in place of the real, all the while those with an education (in what?) run around and help to perpetuate the above, the aforementioned and this kind of uneconomy that pushes the planet ever closer to the precipice.
                    Back to the ol’ drawing board, ChiefEngineer.

                  • Dennis Coyne says:

                    Hi Caelan,

                    I deal with what is rather than what might be, as far as governments. Your imaginary utopia is likely to remain just that.

                    I imagine everyone would vote for optional taxation, what could possibly go wrong? 🙂

                  • Caelan MacIntyre says:

                    “Hi Caelan,” ~ Dennis Coyne

                    Hi Dennis,
                    How are you?

                    I imagine you haven’t forgetten to slip ‘what could possibly go right’ into your imagination too, yes? ^u’

                    “I deal with what is rather than what might be, as far as governments.” ~ Dennis Coyne

                    What ‘governments‘?

                    I might be more inclined to suggest that what you ‘deal with’ is more along the lines of what you seem to defend/uphold and/or pander/cowtow to.

                    Google dictionary:

                    “pan·der
                    ˈpandər/
                    verb…
                    1. gratify or indulge (an immoral or distasteful desire, need, or habit or a person with such a desire, etc.).
                    “newspapers are pandering to people’s baser instincts”…

                    noun…
                    1. a pimp.”

                    I appreciate how well the noun dovetails with what I like to suffix with ‘govern’ in place of ‘ment’.

                    Dystopia’s word for ‘impossible’ is ‘utopian’.

                • Fred Magyar says:

                  My daughter just graduated from University.
                  You avoided the question, if your daughter had just graduated do you think a World with a 25% unemployment rate would be better, or one with a 6% unemployment rate?

                  I think you are living far far in the past. I have a son who is still at a University, My brother’s daughter also just graduated. so I think I can relate to your concerns. However I think what is happening now, is going to change how society views employment at a fundamental level. The idea of a career might not even apply at all anymore for the current crop of graduates.

                  https://goo.gl/EbR8lY

                  “We are in the middle of an economic transition, from the old industrial economy to the new collaborative economy” – Peers Inc.

                  New sharing practices, facilitated by information technology and pervasive networking, are disrupting the status quo in business, education and society. As co-founder of Zipcar, Robin Chase has been a pioneer and leading thinker in this movement since its emergence. Now, with Peers Inc, Robin aims to “combine the best of people power with the best of corporate power” to help realise the wider benefits when decentralisation, localisation and specialisation meet scale and resources.

                  On top of examples and success stories from this ‘new collaborative economy’, what could this mean for the economy as a whole? Are we in the midst of a transition from capitalism to something new and different? Are the rules of our current economic model being rewritten? If so, what are the new rules of the game and how do we play by them?

                  • Dennis Coyne says:

                    Hi Fred,

                    The transition may be good for many, my point is that many University graduates are having a tough time finding work that utilizes what they have learned at University.

                    This is potentially much more of a problem for young people than excess government debt. In addition, the idle labor and capital is wasteful, there is work to be done to transition away from fossil fuel we should get to it. The ensuing economic growth will reduce government deficits so that the debt incurred to jump start the economy will be reduced if the government surplus that results is not given away in lower tax rates (as Republican presidents since 1980 have tended to do.)

            • BC says:

              Speaking of money velocity, it’s acceleration is contracting at the fastest rate since 2008, 2001, and the early 1980s:

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2mPb

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2n98

              And a bear market for the broad equity market is underway (especially value and small-cap stocks, which typically is followed by the large-cap stocks “catching down” thereafter):

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2n96

              So-called “health” care spending has been growing at twice the rate of final sales, which is characteristic of recessionary conditions:

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2qs5

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2qrZ

              Subprime auto loans are driving (bad pun) auto sales to bubbly heights vs. real wages, but the rate of growth of auto sales is decelerating:

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2oZu

              https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2qsp

              Without subprime auto loans, vehicle sales would be 13M vs. 17-18.

              Subprime debt and ACA-induced spending (subsidies to insurers) for “health” care is what is preventing the US economy from decelerating from around stall speed to recession since late 2014. But “health” care spending has become a net drag on the rest of the economy.

              The recession-like contraction in the acceleration of money velocity to private GDP implies that the market is tightening financial conditions (credit/debt-money acceleration) before the Fed can begin raising rates and tightening reserves.

              Therefore, rather than raising rates, the Fed (and ECB, BOJ, BOE, and PBoC) is more likely to resume QEternity to fund increasing deficits/GDP to prevent nominal GDP from contracting from the post-2007 trend rate per capita of below 2% (slowest since the Great Depression, 1890s, and 1830s-40s).

              Moreover, don’t be surprised if the Fed is compelled to resort to negative interest rate policy (NIRP) because of debt and price deflation hereafter, including for the service sector (“health” care, “education”, law, personal services, etc.).

            • Petro says:

              Mr. Likvern,

              Normally I would think twice before commenting/correcting you, but this time I noticed you used “Credit” and “Debt” as equivalent terms, therefore I will try:
              although many economists and finance people erroneously use those terms as equivalent – they are NOT!
              Simply/shortly said: credit is a “worthiness” notion -economically not useful in practical terms.
              In order for it to be “useful” economically (i.e generate economic activity/GDP), it has to become debt.
              Signatory parties with COLLATERAL who are pledging/willing to circulate it (i.e. spend it) are necessary for credit to become debt.
              Although this ” concept” is altered by Glass_Stegal repeal and interest paying central bank reserves (i.e. FED) which erased the line between commercial and investment banking (today they are one and the same), it still holds generally true throughout economy.
              Be well,

              Petro

              P.S.: an essential mistake most economic/finance luminaries make is: “money is backed by debt”.
              Today money is debt – debt is money!
              If one does not clear that concept up, one is certain to stay in the fog when it comes to money/debt/credit…

              • Rune Likvern says:

                Petro thanks!
                I should have spent more time on the wording of my comment and I agree it is important to distinguish (and make clear) the concepts of credit and debt.

          • gwalke says:

            As I have studied the Bakken more and more over the past year, I have come to realise that you really need an understanding of debt to make sense of tight oil production. I have seen many articles from Bloomberg etc with headlines similar to:

            “Here’s how US shale production has kept from collapsing”

            They always have focussed on some technological fix, often at odds with what they are trying to say (e.g. more frack sand, closing the choke).

            The REAL reason US shale production has been “surprisingly resilient” is the level of credit extended to its debt Ponzi companies. Generally speaking, since the price collapse production levels have continued to increase at those companies that are overleveraged while they have decreased at those focussed on extracting oil at a profit. The net effect in the Bakken has been for production to hold flat up to the last few months. This is because the bulk of production is controlled by debt Ponzi companies – their increases in production have balanced the value companies’ reductions.

            What this tells us is that price is not a good predictor of production levels of tight oil in America at the present time, but availability of credit is. If the assets end up in the hands of the value creators, then maybe price and production will be correlated.

        • Schinzy says:

          I agree with Gail. My forcast for oil prices: the base or average price of oil will be below the most expensive 10% of production (money wise, not quantity wise, this guesstimate should be a confidence interval, but I have no basis with which to construct the confidence interval). To this base price add an oscillatory function with zero average. In other words, going forward, the most expensive oil produced will be unprofitable on average until oil ceases to be produced or is produced in very small quantities. I think this will characterize the contraction phase of oil production which has started: production will have to be cut to make production profitable.

          I don’t think anyone will pay attention to the neoclassical theory of exploitation of natural resources in 15 years. The model is useless for predicting future quantities and prices.

          • Dennis Coyne says:

            Hi Shinzy,

            Why will the price be 10% below the most expensive oil?

            First, we only know the production cost of oil that is produced, over the long term oil will only be produced if it is profitable so your theory seem to assume that oil is always (on average) unprofitable for the highest cost producers. I doubt that will be the case, if that is what Gail argues (I haven’t read her lately) she is incorrect.

            Over the long term the average oil price will allow the marginal producers to earn the weighted average cost of capital (essentially barely turning a profit). As oil depletes and if oil demand is adequate, the cost of the marginal barrel will increase. If the higher prices result in lower demand for oil, (because income growth becomes lower) oil prices will fall and the higher cost producers will stop drilling because it will no longer be profitable.

            Essentially your model sounds similar, but I think oil prices will be 10% higher than you have assumed. The prices will likely oscillate above and below the marginal cost as supply and demand try to balance, rising and falling oil in storage above and below “normal” levels indicate the balance of supply and demand.

            • Schinzy says:

              Hi Dennis,

              I believe the business or economic cycle of oil consists of a growth phase, a stagflation phase, and a contraction phase. During the growth phase high prices increase production and low prices increase demand. During the stagflation phase (which I believe will be roughly 2005-2014) prices increase, but production only increases marginally. During the contraction phase, a major paradigm shift occurs. Low prices no longer increase demand. Low prices decrease production. High prices no longer increase production, they decrease demand. Thus I believe that producers will continue to lose money until production falls. This will cause a price shock, but in my opinion the price shock will be short lived because demand will fall. Demand can fall because of substitution, but more prevalently, loss of income due to low wages and unemployment. Wood Mackenzie estimates that $1.5 trillion of planned investment will be unprofitable at $50 oil. If this investment is not made oil production will fall, but a lot of jobs will not be created lowering demand.

              Thus the big difference between the growth phase and the contraction phase will be that during the growth phase the average oil price remains above production costs, but during the contraction phase high priced producers will continually be priced out of the market and forced to shut down operations leading to a contraction in production.

          • BC says:

            https://app.box.com/s/ejyjgfb5bsaupghi425y2vjlfl9um7hf

            https://app.box.com/s/0hroqkg7zym2us8em4k55a36affs4xmc

            https://app.box.com/s/ys8ijadj4b57nb95ka0b3ilph38ga7fm

            The oil/commodities cycle/rhythm is turning negative, as occurred in 1986 and the early 1960s.

            However, the price and rate of change of growth of oil consumption as a share of final sales with decelerating final sales implies that the price of WTI at $45 is still too high to permit “escape velocity” and the 5- and 10-year rates of real final sales per capita at faster than ~0%. This condition has become demonstrably entrained since the onset of Peak Oil after 2005-06.

            http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

            Peak Oil, population overshoot, resource depletion per capita, global peak demographic drag effects, excessive debt to wages and GDP, low labor share of GDP, regressive taxation of labor, worsening inequality, decelerating productivity, falling money velocity and contracting acceleration, and fiscal constraints will combine to result in the price of oil falling to the $20s-$30s, no growth of trade, and real GDP per capita trending at 0% or slower indefinitely hereafter.

            The current neo-Keynesian/neo-liberal canon is utterly ill-equipped to even recognize and acknowledge the foregoing converging, self-reinforcing factors, let alone devise comprehensive policies to adapt to and mitigate the worst effects hereafter.

            • Donn Hewes says:

              Here is the question. Are the economic models and rules that we apply to everything, and have developed and believed for the last 100 years; tied to an expanding energy supply or, are they distinct from energy; or decoupling from energy, in a way that will ensure they are just as relevant to decline as they were to growth? Second if these models are tied to our continuously expanding energy supply, what new “rules” or models, can replace them to help describe the energy decent? I am surprised at the resistance to new economic theories here.

              Here is a simple example. Everyone agrees that in the past, “Declining price = declining production = higher price = higher production” and yet peak oil says that at some point one of these links must fail. Which one? Where? How? When?

              Suggesting that declining price could lead to declining production, could lead to more price and production declines is just an attempt to describe how the chain might break. The chain will break.

              • Dennis Coyne says:

                Hi Donn Hewes,

                The higher price has two effects, higher production and lower demand ceteris paribus. When the peak arrives, higher prices will just reduce demand until it is equal to the supply that can be profitably produced at the higher price.

                The higher oil prices will also make other types of transportation more competitive, so people will use more public transport, more goods will be shipped by rail, some rail will be electrified, people will buy more hybrids, plugin hybrids and EVs, and they will car pool and drive less. As long as there is adequate demand for oil, the decline in World C+C output will be between 1% and 2% per year after the peak is reached.

              • houtskool says:

                I think Gail Tverberg is correct. Wages are too low for an economic impulse that can support higher oil prices. That’s what is going on for a while now, and there’s already too much debt, the world cannot add more debt to compensate a slowing economy and low incomes. The oil price stays under the costs of extraction, it’s affordability is going south due to diminishing returns.

    • sunnnv says:

      Thanks for that post by Art Berman, Matt.

      The fuller post in now up on Forbes, and is way more detailed and interesting than the preview.
      http://www.forbes.com/sites/arthurberman/2015/11/03/only-1-of-the-bakken-play-breaks-even-at-current-oil-prices/

      note it goes on for 6 pages…

      “Only 1% of the Bakken Play area is commercial at current oil prices based on my analysis that follows.

      Only 4% of horizontal wells drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed to break even at current oil prices, drilling and completion, and operating costs.

      The leading producing companies evaluated in this study are losing $11 to $38 on each barrel of oil that they produce, the very definition of waste. …”

  7. Boomer II says:

    The Tough Realities of the Paris Climate Talks – The New York Times: Adaptation can be effective. Humans today live in climates ranging from the tropics to the Arctic and have adapted through many climate changes, including the Little Ice Age about 400 years ago.

    • I have deleted Bobby Lloyd’s post and kicked him off the list. I had to delete all the replies to his post or else it messes all replies to every message up. Sorry about that.

    • Jef says:

      Its not that humans can’t adapt to the changes, its all of the rest of the flora and fauna and biosphere in general all of which humans rely 100% on to exist which is dying off at exponential rates that will kill us.

      • Doug Leighton says:

        You’ve got it wrong. We HAVE to kill off flora and fauna to make room for more humans. Getting rid of buffalo was a master stroke but now there’s the other stuff to exterminate. Think about how many people we can fit into Africa by getting rid of that useless wildlife. And, all the bio-fuel we can generate with land wasted by jungle in the Amazon. The key is HUMAN CARRYING CAPACITY. That’s what really matters guy.

  8. ChiefEngineer says:

    Occidental Petroleum to Exit Bakken Shale Among Heavy Losses — Update

    2:42 pm ET October 28, 2015 (Dow Jones) Print

    By Lynn Cook

    Occidental Petroleum Corp. is bailing out of its oil fields in the Bakken Shale in North Dakota, saying Wednesday that its operations there were losing money at current oil prices and showed little hope of becoming profitable.

    The company is among the first to turn its back on what had been one of the fastest-growing oil fields in the U.S. before oil prices plunged last year.

    Occidental said it will net $600 million by selling its Bakken acreage to an undisclosed buyer and will turn its attention to the Permian Basin in West Texas.

    “With this $600 million we could run four to five rigs in the Permian for a year and generate more production than we would get out of the Bakken,” said Steve Chazen, the company’s chief executive. “We just don’t see how it competes for capital in any reasonable price scenario,” he told investors and analysts Wednesday on a conference call to discuss earnings.

  9. ChiefEngineer says:

    Phil Flynn
    http://www.pricegroup.com/
    pflynn&pricegroup.com

    The Energy Report 11/04/2015

    Don’t be cruel. The Obama Administration is saying it will still make a decision on the Keystone Pipeline despite the fact that TransCanada asked for a pause. After keeping TransCanada waiting around for 7 years and study after study that showed that the pipeline would have no impact on greenhouse gasses, now they won’t even let them pause their bid. The White House said the request reeked of politics. What reeks is that the Obama Administrations has kept this company in limbo for 7 years due to nothing put politics. The Administration wanted to kill the pipeline right before Obama leaves office, The Administration has lacked the courage to kill the deal earlier due to fears of a labor union backlash over lost jobs. Now the President doesn’t need the steelworkers anymore because he is not running for anything so he can please his environmental base. Killing the pipeline won’t help the environment, in fact it may endanger the environment because of transportation issues, but at least the President will make a political point.

    • Boomer II says:

      Considering the trouble gas and oil companies are in right now, I’m not sure there’s the economic wherewithal to get the pipeline done.

      Where’s the money going to come to build it?

      I’m glad it has been stalled, for the same reason I am glad some fracking projects didn’t get done. If these things don’t turn out to be economically sustainable, I’d rather than not be started and then need some government to bail them out.

      • oldfarmermac says:

        I will try not to forget my weasel words from now on out when I predict the future price of oil. 😉

        Barring the world economy getting worse and never recovering, or a few literal miracles on the renewable energy front, oil will not STAY cheap.

        Them there pinko commie tree hugging whale loving types ARE right about it not growing back like potatoes after all.

        Just to be sure, I went thru all my old ag textbooks and a bunch of ag websites as well as searching the USDA and while there are lots of oil farmers these days, they all produce oil in the usual way they produce other crops, by growing plants in the sunshine.

        History IS NOT OVER.

        There is apt to come a day we wish like hell that pipeline HAD BEEN BUILT. Telling Canada we want the oil after Canada contracts it to China in exchange for financing and maybe also building pipelines east and or west to get it to market is NOT going to go over very well.

        The vast majority of the people who comment in this forum apparently seldom communicate DIRECTLY with even ONE right right winger type person, which is understandable, given that birds of a political feather flock together.

        So it is entirely understandable in turn that they do not APPRECIATE how POTENT the Keystone issue is when it comes to motivating R inclined individual voters.

        But the Keystone IS a political hot button issue on the right, and an extremely potent one, for the very reason that IN THE MINDS OF RIGHT WINGERS IT IS AMPLE PROOF POSITIVE that environmental politics are bullshit politics driven not by science but by Democrats in bed with environmentalists.

        When you get right down to the nitty gritty, how many times do you have to catch a businessman, or husband or wife, lying to you before they lose all credibility? From the redneck R side, the D’s have been caught in a red hot smoking lie about the Keystone, since Foggy Bottom, the D dominated and run agency tasked with judging it, said it is ok.

        Whether this environmental assessment is actually TRUE and accurate or not is irrelevant in terms of the political perceptions of people inclined to vote R.

        ( Or D if the issue is one with the R side stopping something the D side wants, so far as that goes.)

        Drawing lines in the sand for political purposes works sometimes. Sometimes it does not.

        My dear old Daddy was a TEAMSTER for almost fifty years due to his holding a PART TIME forty hour a week job in an industrial plant mostly in order to have insurance on us kids, and later on my Mom who sucked up a couple of million in hospital expenses over the years. I have a couple of old union cards around someplace with my own name on them. So I know BOTH sides of the union story, and I have read the history books etc as well.

        The mistake the Obama administration has made is to assume the greens would abandon the D’s if he approved the pipeline.

        This is about as foolish as thinking black people all over the country would suddenly quit voting D and start voting R if the D’s were to give in on one minor point or another involving civil rights, say something such as having to register to vote more than a couple of days or weeks before an election.

        I have often said Ocare is going to go down in history as a big winner for the D’s, but that it is a short term disaster. It cost them another governership yesterday, state of Kentucky.

        Incidentally if anybody cares to actually follow Ocare news by creating a search for it and reading it on a daily basis, they are likely imo to come to the conclusion that it is going to cost the D’s a LOT of offices next election cycle.

        The Keystone is in my estimation costing the D’s several times as many votes as it is gaining them. The environmental true believers are in the fold ANYWAY.

        The issue is serving the republicans very well to keep the right wing hornets pissed off and will continue to serve as a gift to the R’s.

        Humans are hairless monkeys, not thinking machines.

        Right and wrong matter, but not much in terms of elections results.

        • Clueless says:

          OFM says: “Humans are hairless monkeys, not thinking machines.”
          Descarte said: “I think, therefore, I am.”
          Have humans gotten smarter or dumber since Descarte? Can OFM think? If he thinks he can think, is he saying he can think, but R’s cannot? If so, then I am forced to agree with his opening quote as it applies to him.

        • Nick G says:

          Mac,

          I don’t get it. Why does anyone care about Keystone? It’s imported oil. It’s just as bad for our trade deficit as Saudi oil. Are Republicans really preparing for WWIII, and worrying about Chinese submarines blowing up ME oil tankers??

          As far as I can tell, it doesn’t really matter what Obama does, the Republican PR machine will spin it as the work of the devil. The affordable Care Act (aka Obamacare) is a good example: it’s overall a very good idea, and yet republicans have managed to demonise it.

          • Synapsid says:

            NickG,

            “Why does anyone care about Keystone?”

            Originally Canadian producers cared about Keystone XL (Keystone is a separate pipeline and has been in operation for years) because they would be able to ship more oil out of the country. US refiners on the Gulf Coast cared about KXL because they would have more oil to refine into products they could sell. Gulf Coast producers cared about KXL because they didn’t want it: more oil from Canada would push down the prices they received for their oil.

            Much has changed. With KXL held up for years other parts of the pipeline network, particularly the parts owned by Enbridge, have been expanded, and rail was used to ship oil to an increasing extent. There is less need for KXL now than there was to begin with, especially with prices low. Up until halfway through last year Canada kept shipping out more oil each year than the year before, without KXL. It was the case that TransCanada kept extending the sign-up period for users of KXL, and that suggests that there wasn’t enough interest from shippers to justify the line anyway. (You don’t build a long, large-capacity oil pipeline without strong, locked-in commitments from shippers first. Not if you’re smart, anyway. Those subscription terms are detailed and ironbound, and TransCanada kept extending the time shippers had to sigh up by.)

          • Clueless says:

            The Keystone is really, really important to Canada right now. They are our neighbor and a good one at that. It is not that important to the US right this moment, but it could be in the future. Why do we want to poke a sharp stick in our neighbors eye, and enjoy doing it?

          • ChiefEngineer says:

            Hi Nick,

            Why does anyone care about Keystone?

            I would imagine an environmentalist see’s it as a line in the sand to stop and change direction of the life destroying capacity of earth by man.

            Isn’t that your number one reason to support EV over ICE ?

            • MarbleZeppelin says:

              Spills into natural preserves and rivers.
              Keystone XL is just another monument to continuing BAU until total failure occurs. Just running faster toward the cliff rather than turning aside.

            • Nick G says:

              Yes, I think stopping Keystone XL is symbolic.

              Personally, it doesn’t seem that important either way. It’s far more important to reduce our overall oil/FF consumption than it is to worry about where it’s produced, exactly, or about modest differences in pollution.

              I certainly think that all FF should be charged for it’s pollution, and sources like oil sands should be charged more for their higher level of pollution.

              • Old Farmer Mac says:

                All you guys are talking mostly about practical considerations, the sort of considerations that matter to thinking people.

                I was too, in terms of somebody else eventually having first dibs on that nasty old tar sands oil. Some forum members seem to forget this is after all a peak oil site, and personally I BELIEVE we are going to be short of oil a damned sight sooner than we are going to be free of the NEED for oil.

                EV’s are FINE, but only a fool could believe we are going to replace our existing auto fleet with electric cars anytime SOON, never mind trucks, farm machinery, construction machinery etc being electrified.

                MOSTLY I am trying to point out that the facts hardly matter, the issue is one that people make use of to decide who is who in the “us ” and “them” division of society.

                The “IMPORTANT ” aspect of the Keystone above and beyond all others is that it may actually turn out to be THE issue that determines some close elections. We have all heard of the kingdom that was lost for the sake of a horseshoe nail, have we not?

                THE ACTUAL FACTS DO NOT MATTER VERY MUCH- excepting the one fact that a lot of races are going to be close. The closer they are, the more likely the R candidate is to win because of the Keystone being endlessly delayed or denied. Elections are won in the middle in this country. Issues such as this one tip middle of the road voters one way or another.

                Most people are not very happy with the economy right now, and that is NOT good for D electoral hopes, not good at all. Delaying the pipeline looks bad from a working class pov.

                • ChiefEngineer says:

                  Personally, I think the economy is doing Great. My 401K in dollar value is 6 times bigger than under the last Republican President. The price of gasoline is cheaper than anytime since 2009. The countries budget deficit is getting smaller. Over 200,000 new jobs every months. Interest rates are at record lows for new home buyers. The rate of health insurance premiums are going up at the smallest rate since President Clinton. I got a 60″ screen TV mounted on the wall in the living room and fiber optics internet connection to it. Plus a smart phone that tells me when I need to wipe my butt. There is no inflation.

                  Now explain to me again why the XL pipeline is why I should vote for an R ? Mac, you must have gone to the school of Tverberg Economics.

                  • Old Farmer Mac says:

                    Chief I have never disputed the economy is FINE for some people. But read the stats and working class and middle class people are not very happy campers these days. I am happy for you. As a matter of fact you sound sort of like a one per center wannabe and maybe getting close. But don’t forget that electoral politics or party politics have had very little to do with your big screen tv etc. That would have come to pass regardless of which party is IN and which is out.

                    Now all I can see is that e you are MISSING THE POINT I am trying to make. Maybe it is TOO SIMPLE for people like you and NICK.

                    DO NOT OVERANALYZE such a simple concept. The typical middle of the road or R type working class voter does not share your happy circumstances, and he is LOOKING for somebody to blame his troubles on , and since OBAMA IS PRESIDENT, well by damn and BY GOD, IT MUST BE OBAMAS GXXXXXXXD FAULT- in the mind of the typical middle of the road voter.

                    IF ROMNEY were president, it would be ROMNEY”S FAULT.

                    BRAINS AND THINKING DO NOT HAVE MUCH TO DO WITH POLITICS.

                    NOW is putting it THIS way simple enough ?.

                    Remember Clinton getting elected?”It’s the economy, stupid.”

                    Personally I think Tverberg is blind as a bat due to being unable to think out side the box of her own background.

                    She accepts current banking and finance conventions and rules as natural laws, rather than conventions and rules that are subject to change.

                    OTOH, she has a brand and a rep and appears to be making a good thing out of it, traveling, getting paid etc, and so if she believes something other than what she presents on her website and at her seminars, she sure as hell is never going to say so PUBLICLY.

                  • Old Farmer Mac says:

                    ”Now explain to me again why the XL pipeline is why I should vote for an R ?”

                    I am coming back to insert this additional reply to Chief Engineer.

                    God help me Chief.Could what I am saying possibly be any simpler?

                    I am NOT talking about YOU voting FOR a damned republican.

                    I am talking about middle of the road working class people voting AGAINST democrats because they perceive the Keystone delay, and now denial, as PANDERING to environmentalists. They see it as PART and PARCEL of political plans that threaten their own well being.

                    The self selected membership of a forum such as this one, where in just about every body is technically and scientifically literate and personally liberal, tends to be BLIND when it comes to understanding traditional working class values and politics.

                  • ChiefEngineer says:

                    Mac,

                    The economy is good for a lot of people here. I live in a solid blue state. My second job at the age of 16 was a box boy at a unionized local supermarket. At 18, I was working nearly full time next to family men making equal pay and also attending the state university system for about $100 per semester. Forty years later, I can say I have always voted “D” and don’t complain about taxes that supports this system of my success. I don’t think most in the red south have this same kind of opportunity. Party politics has everything to do with my quality of life.

                    Mac writes –

                    “The typical middle of the road or R type working class voter does not share your happy circumstances, and he is LOOKING for somebody to blame his troubles on”

                    “I am talking about middle of the road working class people voting AGAINST democrats because they perceive the Keystone delay, and now denial, as PANDERING to environmentalists”

                    From my view, the red south voter only has themselves to blame for their situation. To many of your red friends let Fox News, hate FM radio and religion impair their judgment .

                • MarbleZeppelin says:

                  OFM,
                  What makes you think we have to have as many EV’s as there are cars now?
                  I doubt if there will be that many people alive or who can run an industrial society in the future. Probably less than one billion once push gets to shove.
                  There are too many predicaments all coming to a head this century to even worry about how much at this point. The key idea is to develop the technology far enough that when things settle down, we can head off in a better direction.
                  There is no way that the next century is going to look anything like this century.
                  BAU is going to die, one way or the other. So don’t sweat the numbers, just have the better ideas available.

                  • Old Farmer Mac says:

                    DANG IT ALL , MZ

                    YOU ARE MISSING THE POINT TOO.

                    I AM TALKING ABOUT WHO THE XXXX IS GOING TO WIN THE NEXT ROUND OF ELECTIONS.

                    THAT IS WHY THE KEYSTONE IS IMPORTANT.

                    AND just maybe the Keystone will determine some elections a couple or three cycles down the future road as well, if we experience an oil supply crisis or a very sharp price spike or both, which in my estimation is VERY likely to come to pass WELL BEFORE we are ready to give up our ice automobiles.

                    IF such a crisis arrives, and the Canadians have built east and or west pipelines to ship that nasty old tar sands oil to ASIA, and CONTRACTED the sale of it preferentially to whoever finances the pipelines for them, well, the R spinmeisters are going to have one hell of a talking point.

                    FOR damned sure bau is a dead man walking. BUT he is STILL WALKING, and will be for some time yet.

                    Monkeys think in terms of today, and maybe a few days down the road.

                  • Nick G says:

                    Mac,

                    You’re also missing the point: if the facts don’t matter, then what Obama doesn’t matter.

                    Republicans will use anything at all to demonize Democrats, and you can’t blame that on the Democrats.

                  • Boomer II says:

                    Yes, if it isn’t XL, it will be something else. They will blame Obama for programs they support if they think it will turn voters against Democrats.

                    What are they going to say about vetoing the XL? That prices for oil and gasoline are so high that vetoing the XL will kill the US economy and make consumers pay more?

                    Gasoline is now cheaper in my location than I have seen in years. Yeah, that’s Obama’s fault and his unfair environmental policies.

                  • MarbleZeppelin says:

                    Sorry Old Farmer, guess I did miss the point. Oh well, old guys get a free pass to ramble sometimes, so I have to practice up. 🙂

                  • Boomer II says:

                    AND just maybe the Keystone will determine some elections a couple or three cycles down the future road as well, if we experience an oil supply crisis or a very sharp price spike or both, which in my estimation is VERY likely to come to pass WELL BEFORE we are ready to give up our ice automobiles.

                    I have a feeling that the Republican Party a few cycles down the future road will be different than what we see today.

                  • Boomer II says:

                    Aside from the fact that the Republican Party has some questionable candidates, there are two other factors which may shape whether or not they care about the same issues as today:

                    1. Their core voters continue to get older. They will die off. I can’t see too many younger voters becoming Republicans to replace them.

                    2. Money in politics will come from other sources. Many of America’s younger wealthy don’t care about the same issues as Fox News and the Kochs. If that money buys politicians, it’s going to be politicians with different priorities than those currently on the right.

                    I just saw this the other day. Now Reich is a Democrat, so you need to factor that into what he is writing about. But he is quoting a Republican (or maybe a former Republican) who is saying what I know other moderate Republicans (now former Republicans) also think. This isn’t a party they recognize.

                    Robert Reich (Reality Check): The other night I phoned a former Republican member of Congress with whom I’d worked in the 1990s on various pieces of legislation. …

                    Him: “… There’s no party any more. It’s chaos. Anybody can just decide they want to be the Republican nominee, and make a run for it. Carson? Trump? They’re in the lead and they’re both out of their f*cking minds.”

                  • Antonio Giscard says:

                    Trump and Carson are stalking horses for the eventual run of Rubio and Kasich. After Trump and Carson take enough slings and arrows that they cannot suck all the oxygen out of the Republican voter space, then Rubio and Kasich will ride in on their white horses as the seeming adults in the room, relatively undamaged by dint of their lying low and playing the long game in the shadows of the huge fake candidates acting as their linemen.

                    People: In order to play and wind at baseball, you have to know the rules!

                    To wind the Presidency, the candidate must win the Electoral college.

                    To win the Electoral College, the candidate must win either Florida or Ohio.

                    The candidate is a lock to win if he/she wins both Florida and Ohio.

                    Young. Hispanic. Good Looking. Says just enough of the right-sounding words to entice just enough moderates and independents. From Florida. Batman’s Robin is from Ohio…mixes enough red-meat-sounding words to entice the base to vote in with enough more moderate words to entice enough of the moderates and independent to vote. Neither ones’ last name is either Bush or Clinton.

                    It adds up.

                    And depletion and the rest of the LTG march on, not caring a whit.

                  • ChiefEngineer says:

                    Hi Antonio,

                    I agree with you, I’ve been thinking the same thing. It could have been Bush/Kasich, but Bush has been a total disaster on the stump.

                    It’s the Republicans only chance.

  10. Enno Peters says:

    Ron,

    Thanks for the post.

    Last month I also noticed that the number of new spuds in September in ND was very low (I count 69 based on the status of all individual wells), but this number is up again in October (113 so far, still open for revision upwards). The size of this fluctuation is surprising to me. It does appear now that rig productivity has increased in recent months, but still too early to tell how much exactly.

  11. R Walter says:

    When you want to have some gross income from the production and sale of any commodity, it is desirable, necessary, to earn ten dollars for every dollar of expense, 10 to 1. A general rule of thumb. The costs can’t be greater than earnings, you are then losing some money.

    If an oil company spends six million dollars to complete an oil well that produces 300,000 barrels of oil over a twenty year period and the price of oil is 45 dollars, an income of 13,500,000 dollars is what you will have in twenty years. 7.5 million dollars realized in twenty years, 375,000 dollars average income of the life of the well, 18 percent for royalties, 10 percent to pay for extraction taxes, costs to operate, hauling it to market, 1/3 subtracted from the average is 125,000 dollars. A whopping 250,000 dollars for the producer each year on the average from a six million dollar investment, or a return on the original investment of 4.2 percent. Not to mention the taxes to be paid at filing time.

    Might as well invest your six million in a CD, earn 2 percent return, sit at home to watch TV and drink coffee. The oil in the ground is making money just sitting there like you are. If you are going to be a fool, might as well be one while watching TV, not drilling for oil all day long and be making pennies. You’ll be doing the world a favor. You’ll be dancing, not drinking booze all day long and crying over all of the losses.

    I know the numbers are not in any way near what they really will be, but you have the idea.

    A different related topic for your interest:

    The watery grave of Europe’s monsters:

    “The remains of mammoths, of three different species of woolly rhinos as well as hippos, lions, bears, wild horses, bison, elk, reindeer, hyenas, wolves and sabre tooth cats of at least two species have been trawled from the bottom of the North Sea in the past 140 years (but with increasing intensity in the past 20 years as bottom-scraping, beam trawlers have become more powerful).

    A fossil leg bone brought up from the sea bottom by a Dutch beam trawler last year proved that a giant sabre-toothed cat, as heavy as a horse, lived on the “North Sea plain” around a million years ago – much further north than scientists had previously imagined.

    The discovery of part of a Neanderthal skull by a Dutch shell dredger in 2001 – first publicised last month – suggested that our enigmatic, hirsute near-cousins were active on what is now the bed of the North Sea 60,000 years ago. Scores of artefact finds by Dutch boats suggest that the mysterious Mesolithic people, who lived between the two stone ages, had widespread settlements in the very middle of what is now the North Sea around 10,000 years ago.

    This landscape – or the final version of a series of appearing and disappearing landscapes spread over more than 1.5 million years – was finally obliterated by global warming and the gradual melting of the last great ice sheet about 7,500 years ago.”

    More at:

    http://www.independent.co.uk/news/science/the-watery-grave-of-europes-monsters-1744973.html

    • Synapsid says:

      R Walter,

      Archaeologists (palaeontologists too, I believe) call the region Doggerland when it’s dry land.

  12. MarbleZeppelin says:

    Studying the gravity of the situation in the North Atlantic, scientists, with the help of the trapezoidal shaped GRACE satellites, have determined a decrease in the flow of the deep return AMOC.

    http://www.jpl.nasa.gov/news/news.php?feature=4761

    Since this acts as a major heat energy transfer system for much of the ocean, the effects will be global in nature if this slowdown continues. By the way, the GRACE satellites are used to measure changes in ice cap mass, a much simpler mission.

    • BC says:

      Marble, right. Google Prof. de Jager, Gleissberg/Suess/de Vries cycles and the association to Jupiter’s orbit, solar equatorial angular velocity, sunspots, geophysical forcing, underwater volcanoes, ocean temperatures, AMOC, Gulf Stream, and PDO.

      The lowest average sunspot maxima in 210-220 years and mid-latitude continental cooling (with colder, wetter winters, mega-drought, increased variability of continental weather, etc.) over the next 20-30 years . . . ???

      • MarbleZeppelin says:

        Uh, BC the variation in solar output is small compared to radiative forcing changes. So why bother? This has been gone over and over again.
        You do realize that a low maximum is still an increase in solar output?

        • BC says:

          Of course. Let’s see if the so-called “pause” coincident with the convergence of the Gleissberg and Suess cycles manifests in the implied mid-latitude continental cooling and weather effects over the next 2-3 Schwabe cycles.

          • MarbleZeppelin says:

            Or the fake pause doesn’t exist and the reduction in atmospheric increase is due to increased pollution- see the 1960’s. We are in for some cooking when that pollution ceases, though it looks like it won’t for a while.

  13. R Walter says:

    http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/

    Cars of petroleum at 8,432 for week 43. Week 43 of 2014, 11,839.

    Costs too much to haul crude oil by rail.

    Railroad Bill, Railroad Bill, never worked and never will. har

    • MarbleZeppelin says:

      It is cheaper to import crude from overseas by ship than to bring it very far by rail. At least right now it is. If the price rises some more that will change.

    • Synapsid says:

      R Walter,

      Look at grain shipments. They’re up, partly because of less oil (and coal) on the tracks, and partly because BNSF has increased tracks.

      Grains are used to make beer. You like beer.

      • R Walter says:

        Winemaking and beer brewing came into existence because you couldn’t drink the water.

        About time oil got out of the way and the most important commodities replace the loss, fill the void. The barley must be malted, Rahr Malting can do the job. Make that mash, go for the gusto. Malting barley is not an easy thing to do.

        ‘The water up on Bear Creek tastes like cherry wine’ – A. P. Carter, Bear Creek Blues

        Al Capone didn’t do it for the money, he did it for a shitload of money!

        Today’s recommended brew is Odell’s IPA. Well, the 5 barrel Pale Ale is great too.

        Fly to Fort Collins, Colorado and tour the brewery, you won’t be disappointed.

        I do suggest some Weihenstephaner, any brew, the hefeweißen is superb.

        The world’s oldest brewery, established in 1040 CE, worth a try for that reason.

  14. John S says:

    North Dakota No Longer Attractive For Drillers Or Refiners

    http://oilprice.com/Energy/Oil-Prices/North-Dakota-No-Longer-Attractive-For-Drillers-Or-Refiners.

    It looks like the rail transportation cost for the Bakken may increase supply problems.

    “But falling production is contributing to another problem for the region. Several East Coast refiners are losing interest in Bakken crude, instead preferring to import oil from abroad to use in their refineries. to Reuters, it is now cheaper for East Coast refiners to import oil from South America, Africa, or the Middle East, than it is to buy oil from North Dakota. The transit costs of moving crude by rail from North Dakota across the country tips the balance in favor of foreign oil.”

    Where will Bakken crude go it the east coast refiners can buy cheaper imported oil? What will that do to WTI posted prices?

    • Ves says:

      This is exactly what happens when price inflation cost is built into the economic system and price of product (oil) due to external factors do not follow that trend. System crashes down. Unbalanced system always does that.

  15. Peter says:

    So when will peak oil be?

    Some oil drummers said in was 2000, when production was 68 million barrels per day.
    Other oil drummers said it was 2005, when production hit 73 million barrels per day of crude and condensate.
    Others plumped for 2008 when they saw production decline the following year. The fact the world was in the worst recession for 3 generations did not stop them jumping to conclusions.
    2010 “PEAK” came and went along with lots more peak prediction failures.
    The world is producing 10 million barrels per day more than in 2000 and prices have fallen to sub $50.
    Looks like Iran could deliver another million barrels per day, depressing prices even further.
    15 years is a long time to be getting it wrong.

    • Jeffrey J. Brown says:

      Or, actual global crude oil production (45 and lower API gravity crude oil, i.e., the stuff that corresponds to the price indexes) peaked in 2005, while global natural gas production and associated liquids, condensate and natural gas liquids, have (so far) continued to increase:

      http://peakoilbarrel.com/jean-laherreres-bakken-update/comment-page-1/#comment-534101

      • Dennis Coyne says:

        Hi Jeffrey,

        I believe when people said in 2005 and 2008 that we were at the peak they were talking about crude plus condensate. When that turned out to be wrong people started talking about “major inflection points” or “crude only 45 API and below”, note that the higher API crudes are considered “premium” crudes because they are so cheap to refine, the heavier grades are less expensive because they are more costly to refine.

        We don’t really have World data for crude only or for specific API gravity classes of crude. So far World C+C has not peaked (at least through April 2015) hopefully the EIA will update the international data at some point.

        • Jeffrey J. Brown says:

          Or, in other words, global crude oil production probably peaked, while global natural gas production and associated liquids have so far not peaked.

          Rate of change in Global NGL production 2005 to 2014 (EIA data): +2.6%/year.

          Rate of change in Global C+C production 2005 to 2014 (EIA data): +0.5%/year.

          Whereas they pretty well tracked each other from 2002 to 2005.

          I wonder what could have possibly changed in 2005 to cause the the rate of increase in global NGL production to be five times the rate of increase in global C+C production? I got it now, it had to be a global collapse in condensate production.

          • Dennis Coyne says:

            Hi Jeffrey,

            Condensate output probably increased, we don’t know by how much, the amount of condensate per MCF of natural gas is not fixed, also you often consider 2002 to 2005 which was an anomalous period where output was increasing much faster than the rest of the 1985 to 2014 period.

            My point is very simple, without data we are simply guessing, which I do all the time, but it is usually about the future more than the past.

    • Dennis Coyne says:

      Hi Peter,

      The peak will probably be between 2016 and 2020, that is for crude plus condensate and for the centered 12 month moving average(MA). Chart below for data through April 2015 (most recent 12 months is 78,778 kb/d).

      • Dennis Coyne says:

        Looking at the October Monthly Oil Market report from OPEC, there may have been a peak in June 0f 2015, using the OPEC estimates for 2015 and assuming the oil supply from liquids other than C+C is unchanged from first quarter levels, the centered 12 month moving average of C+C would be at a peak in June 2015 at about 79.74 Mb/d, falling slightly the following 12 month period.

        If output continues to decline even after oil prices begin to increase (in late 2016 or early 2017), then Ron Patterson’s prediction of a peak in 2014/2015 will be correct.

        I expect declines will be small until 2020 and think an undulating plateau will be followed between 78 and 81 Mb/d from Nov 2014 to July 2020 (for C+C centered 12 month MA).

    • BC says:

      World oil production per capita peaked in 2005. C+C per capita is not much higher than in 2001. Net energy in terms of quality of current supply is lower in per capita terms. Available world oil exports per capita (see Jeffrey Brown’s work, including ELM) have fallen significantly since 2005-08. Outside the US and Canadian unprofitable, unsustainable kerogen and tar industries’ production, there is not much of a global oil “glut”, if any.

      http://www.unice.fr/sg/resources/docs/Meadows-limits_summary.pdf

      http://www.theguardian.com/commentisfree/2014/sep/02/limits-to-growth-was-right-new-research-shows-were-nearing-collapse

      https://insightmaker.com/insight/1954/The-World3-Model-A-Detailed-World-Forecaster

      http://thumbs.media.smithsonianmag.com//filer/Futurism-Got-Corn-graph-631.jpg__800x600_q85_crop.jpg

      https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2qvt

      Oil production per capita was part of the resource use multiplier per capita used by “Limits to Growth” (LTG), including the projection that industrial production per capita (at the level of 1999) would peak sometime in the early 21st century, which has occurred in the US (and about 70-75% of world GDP), whereas services per capita would peak years later, which is also occurring (the difference being growth of spending for prohibitively costly “health” care in the case of the US).

      Moreover, even with the price of oil at $45, presumably “cheap”, it is still too costly in terms of oil consumption to final sales at the differential rates of growth of consumption and the price of oil and for final sales so that real final sales per capita can grow faster than the secular trend rate of less than 1% to near 0%.

      Peak Oil per capita is history, i.e., it’s a decade behind us in the rear view mirror; and the structural effects are increasing around the world. Most of us don’t realize that Peak Oil has happened/is happening because we simply do not actually understand Peak Oil and LTG and the implications for the future.

      • Dennis Coyne says:

        Hi BC,

        You are correct about oil per capita peaking, for primary energy (based on BP data and UN population data) the energy per capita peak was in 2013.

        • Dennis Coyne says:

          However we are using energy more efficiently so the Energy (toe from BP) per million $ of GDP (2005$ using Fred data for World GDP and UN population data) has been decreasing.

          • Dennis Coyne says:

            This results in increasing GDP per capita from 1960 to 2014 (from Fred) in 2005$ per person.

            • Nick G says:

              The basic question: won’t a Prius (55 mpg) get you to your job just as well as an SUV that gets 15 mpg??

              Won’t a Leaf do just fine for commuting? And do it far more cheaply?

              Why does anyone think oil is essential??

              • MarbleZeppelin says:

                Oil is great for chemicals and other materials. We should not use it for a transport fuel if at all possible.

                • Nick G says:

                  I agree.

                  Though, it’s worth noting that there are other sources of hydrogen and carbon besides Fossil Fuels & oil. FF and oil are convenient and cheap, but not essential.

              • Watcher says:

                But you don’t care about these matters. If you did you would take up arms and support mowing down these people who dare to live as they choose.

              • Old Farmer Mac says:

                How about because it will take DECADES to build out a fleet of electric cars etc?

                It will take a battery five or six as good as the battery in a top of the line Tesla to run my LITTLE tractor from breakfast to lunch pulling plows. AND it will take in industrial park level of electric grid all out thru farm country to support the superchargers in the event we ever have electric tractors.

                A typical highway truck needs six to ten or eleven gallons of diesel per hour. A battery capable of propelling such a truck very far may EVENTUALLY be invented and commercialized, but the odds are pretty high I will not live to see battery powered eighteen wheelers.

                • Dennis Coyne says:

                  Hi Old Farmer Mac,

                  First it doesn’t have to happen overnight.

                  Long haul freight can go by train, which eventually can be electrified. Short haul trucking (from rail terminal to final destination) can probably be done with swappable battery packs.

                  Farm tractors will continue to use diesel, but this is a pretty small part of total petroleum use.

                  Also note that we can first transition to hybrids and plug in hybrids and then to EVs. If gasoline and diesel prices rise to $8/gallon or more, the transition to more efficient personal transportation will happen in 20 years. A plug-in hybrid, gets rid of range anxiety and will be the intermediate step for many. More charging stations will be constructed at rest stops and parking lots and will make EVs more practical.

                  • oldfarmermac says:

                    Hi Dennis,

                    Of course you are right about trains and short haul trucks etc. I have never disputed that oil is potentially dispensable LONG TERM.

                    But folks who talk about oil being unnecessary continuously remind me of kids talking about life without parents.

                    MAYBE twenty thirty forty years from now, we can get by without oil. We sure as hell are going to be getting by with very little oil per capita by then.

                  • Nick G says:

                    Mac,

                    We can argue about the time frame. But, please note that the people discussed above, Garrett, Hill, Tverberg etc., do not agree with you when you say that “oil is potentially dispensable LONG TERM.”

            • BC says:

              Ex China’s overstated growth, and there has been little or no growth per capita since 2007-08.

              • Dennis Coyne says:

                Hi BC,

                Any peer reviewed data to challenge the World Bank’s estimates for Real GDP?

                When we look at the World, the offshoring does not matter, debt on a World basis is not an issue at current levels.

                Peak fossil fuels will lead to a transition to other forms of energy which may increase real growth.

                I agree the increased income inequality is a problem. At some point this will be addressed by progressive taxation (similar to pre 1965 tax rates in the US).

          • BC says:

            You need to adjust the GDP for debt, offshoring, etc. The annual US imputed debt service from debt built up over 30-35 years now absorbs all growth of output per capita in perpetuity.

            Combined gov’t spending, private health care and education, and net flows to the financial sector is an equivalent of ~54% of GDP. These sectors are low- or no-productivity activities that are dependent upon financialization and increasing debt/GDP, which now precludes real growth per capita for the rest of the private sector.

            Since 1970, US oil production per capita is down 45%, and 25% since 1985. US oil production per capita is at the level of the late 1940s.

            Adjust for the constant-dollar value of US oil production per capita and we’re at the level of the 1930s-50s.

            We’re using less energy because we’re producing less value-added output while consuming more (of future production/consumption) with debt (well, we were) that can’t be repaid (not meant to be) and its service now precludes real growth per capita forever (or until debt is forgiven).

            We’re using less energy/GDP because the bottom 90%+ not directly benefiting from hyper-financialization are poorer, a condition that will worsen as the global structural effects of Peak Oil persist indefinitely.

            • Dennis Coyne says:

              The change in Energy per unit of GDP is for the World. You assert that the debt is at levels that cannot be repaid, I doubt this is correct. Research by Rogoff et al indicates this tend to reduce economic growth by about 1%, though their focus is on public debt.

              Other studies suggest high private debt indicates a crisis. For the World there is not good long term data that I could find on private debt.

              Based on the following article:

              http://www.theatlantic.com/business/archive/2014/09/government-debt-isnt-the-problemprivate-debt-is/379865/

              it looks like private debt to GDP of less than 150% is probably ok. In 2008 the US private debt to GDP was about 170% and total debt (public and private) to GDP was about 233% in 2008.

              Total US debt to GDP has continued to rise (increase in public debt) to 256% through 2012 and the economy is growing (slowly).

              It is not clear that this level of debt is a problem.

              US GDP per capita has recovered since the recession.

    • scrub puller says:

      Yair . . .
      “Peter”.
      I have been following the peak oil saga since we ran out of fuel in a remote town back in the seventies and I believe all the comments and theories to be meaningless . . . 15 years is not a long time to be getting it wrong.

      No one knows and all the experts will have their wins and loses but, in the end, all the sage advise and opinion on forums and the various published books makes not one damn bit of difference to the outcome . . . we are going to run out of oil and the age of abundant fossil fuelled energy will be but a blip on the graph of humanity so hang on for the ride.

  16. Fred Magyar says:

    The world is producing 10 million barrels per day more than in 2000 and prices have fallen to sub $50.

    Right, and how many trillions of dollars in Capex were spent by the oil majors during the last 15 years to deliver those measly 10 million extra barrels per day?

    http://www.energypost.eu/trillion-dollar-question-big-oil-investing-high-cost-projects/
    $21 trillion of capex on high-cost production poses substantial financial risks for investors in oil companies.

    • Dennis Coyne says:

      Hi Fred,

      I don’t think that peak oil references oil prices or capital spending, it is maximum C+C output, that’s all, oil prices and capital spending are not really part of the equation.

      • Watcher says:

        That moves the peak significantly rightward.

        You can get a lot of oil out of the ground if you put guns to the heads of drillers and tell them they WILL flow oil regardless of price or anything else.

        When you have said no to capitalism once, it’s much easier to keep doing it. The end of pretending i will be harder though. It’s when necessity compels it that eyes open.

        • Dennis Coyne says:

          Hi Watcher,

          Yeah that’s a pretty dumb way to go about it though. You end up with an inefficient Soviet style economy wasting resources by trying to pump very expensive oil because someone thinks it’s a good idea. Better to tax externalities appropriately (this includes carbon emissions) and let the market work (eliminate all government subsidies and tax breaks to any industry), that will give you the most efficient allocation of limited resources.

      • Fred Magyar says:

        Then think of it another way. If oil were easily available then how much oil would have been recovered for the same 21 trillion? I think the fact that that much capital during a 15 year period only managed to increase production by a mere 10 million barrels a day is a clear sign that peak oil is here now. There simply is no more cheap, easily available oil to be found. In the past with good EROEI the oil would be flowing and fueling massive economic growth all over the world. Granted, just for the sake of argument, I’m disregarding all issues with CO2.

        • Dennis Coyne says:

          Hi Fred,

          I repeat, it is not complicated, peak oil is when we reach the maximum output of C+C over any 12 month period, that is all it is. Price doesn’t matter, capital spending doesn’t matter, net energy also of no importance. They are all interesting subjects, but they do not determine if we have reached peak oil. Let’s say peak C+C turns out to be 80 Mb/d in 2015, we won’t really know if it is the peak until many years later when output gas fallen to 76.8 Mb/d.

          • Fred Magyar says:

            I repeat, it is not complicated, peak oil is when we reach the maximum output of C+C over any 12 month period, that is all it is.

            I’m not disputing that at all! What I’m saying is that I think what we are seeing is the sponge being given one last really big squeeze that will completely leave it dry.That is what the last 21 trillion accomplished.

            Of course I could be wrong but I think we are close to seeing that the maximum output of C+C over any 12 month period will soon be in the rear view mirror. At that point, even if the capital were available it won’t matter how much money you throw at trying to increase production, there simply won’t be any increase, ergo ‘Peak Oil’ QED…

            I know, I know, making predictions, especially about the future is hard 🙂

            • Dennis Coyne says:

              Hi Fred,

              If by “soon” you mean within the next 5 years I would agree, I think we won’t know until oil prices go up and stay high (more than $100/b) and stay high for 12 to 18 months, if a new peak is not reached, then the oil peak will indeed be in the rearview mirror.

              The oil optimists won’t believe until C+C output has fallen 2 to 4% below the previous 12 month peak, that might take 5 years if the World does not fall into a severe recession in the mean time.

          • Let’s say peak C+C turns out to be 80 Mb/d in 2015, we won’t really know if it is the peak until many years later when output gas fallen to 76.8 Mb/d.

            I am not at all sure what “output gas” is. I don’t recall seeing that term anywhere. And I don’t see anything magical, or even significant by 76.8 Mb/d. It is very possible that we could see that figure after only a couple of years after the peak.

            But the point I wish to make is that we have no idea at what the decline rate may be. You think it will be very slow at first. Possible but I believe that is nothing but a wild ass guess on your part. Economic conditions could play a very important role here. And even geological conditions may dictate a much higher decline rate.

            A very slow post peak decline rate is nothing but pure speculation on your part Dennis. Why are you so cock sure that it will be so slow?

            • Dennis Coyne says:

              HI Ron
              Gas was a typo it was supposed to be has.

              The slow decline assumes no severe recession causing a lack of demand. If that is correct discovery data from Jean laherrere, a Hibbert lineaization as done by deffreyes, and the current extraction rates estimated from an oil shock model result in slow decline. We can only guess about futur

            • Dennis Coyne says:

              Not sure at all. If the economy crashes decline will be steeper and I have presented several scenarios showing this.

              The economy won’t crash due to a steep decline the reverse will be true.

              If a slow decline leads to a severe recession then a steep decline will happen.

              In fact my best guess is a depression in 2030 with a steep decline. And that is indeed a WAG.

              I do not think a permanent collapse is likely.

        • Peter says:

          To Fred

          You say.

          “I think the fact that that much capital during a 15 year period only managed to increase production by a mere 10 million barrels a day is a clear sign that peak oil is here now.”

          From EIA statistics Crude Oil only has increased from 67.5 Million barrels per day to 75.1 million barrels per day. An increase of 7.6 million in Crude alone.
          Condensate has increased from 1 million to 2.7 million barrels per day.
          NGPL have increased from 6.3 to 10 million barrels per day, at the moment everything is increasing and has NOT peaked.

          Capex has increased substantially over the last 10 years, which tells us that we are having to exploit more difficult and costly sources. It does NOT tell us how abundant these more costly sources are.
          Considering a barrel of oil does as much work as a man working for 2 years I hardly think $100 or $150 per barrel is a bad deal. I would happily pay someone $150 to work for me for a year.

          • Fred Magyar says:

            Considering a barrel of oil does as much work as a man working for 2 years I hardly think $100 or $150 per barrel is a bad deal. I would happily pay someone $150 to work for me for a year.

            No argument from me on that! 🙂

            Capex has increased substantially over the last 10 years, which tells us that we are having to exploit more difficult and costly sources.

            Agree again, but I interpret that to mean that cheap easily exploitable oil has peaked.

            It does NOT tell us how abundant these more costly sources are.

            It think, how abundant these more costly sources are, is irrelevant, because they are not economically viable resources for the maintenance of BAU. ‘Peak Oil’ doesn’t depend on how much oil is in the ground or will remain there.

            From Ron’s definition up top:

            What is Peak Oil?
            Peak oil is the point in time when the maximum rate of crude oil extraction is reached, after which the rate of extraction is expected to begin to decline… forever.

            It simply does not matter why peak crude oil extraction is reached, the peak is the peak regardless of the cause. The cause could be geological or it could be economics but most likely it will be a combination of the two.

            I happen to think we are already at or at least very close to ‘Peak Oil’ regardless of the proximate cause and regardless of how abundant costly sources are. A couple trillion here and a couple trillion there and pretty soon you are talking ‘REAL’ (pun intended) money! Eventually you run out of pixels on your LED screens… 🙂

            • Peter says:

              BAU was very sustainable at $120 per barrel, consumption continued to increase even with higher prices.

              Average oil consumption for developed countries is 10 barrels per person per year. Even at $150 per barrel, £1,000 all my driving, food delivered, plastics, chemicals, fuel to fly on holiday.

              £2.73 per day is a bargain and will not stop anyone’s BAU.

              At $150 shale oil pays and so do all the other more difficult oil projects.

              It will have to take some else, probably droughts leading to food shortages to derail things.

              • Fred Magyar says:

                BAU was very sustainable at $120 per barrel, consumption continued to increase even with higher prices.

                Peter, I think you are still missing my point. BAU might even be sustainable if the price of a barrel was $200.00 a barrel. What isn’t sustainable is the Oil majors spending trillions in capex to produce $50.00 a barrel oil. That is what will crash BAU and end the oil age.

          • Dennis Coyne says:

            Hi Peter,

            EIA does not give condensate data separately, so it is not clear where you came up with that. Note that the energy content of NGL and ethanol is lower than crude plus condensate by about by about 30%. So when you see some of the “oil supply” numbers out there in barrels, this conversion has not been done.

            Your basic point that output has been increasing is correct.

  17. AlexS says:

    article in Bloomberg:

    Cheap Crude Hasn’t Crippled the U.S. Shale Boom
    Shale drillers defy OPEC and double down on drilling.

    http://www.bloomberg.com/news/articles/2015-11-05/cheap-crude-hasn-t-crippled-the-u-s-shale-boom

    • shallow sand says:

      AlexS. The title of the article does not exactly match the content. Good, short read.

      The article states US will average 9.2 million bopd this year, 8.8 next year. This ignores that US climbed to 9.6 and will end below 12/14. The 2016 number assumes a rebound in the second half of the year. I am not sure about that.

      If OPEC can keep a lid on oil prices through the end of 2016, I wonder what US production will average in 2017?

      • AlexS says:

        shallow sand,

        The EIA estimates annual average U.S. C+C production at 9.25 mb/d this year (+540 kb/d y-o-y) and 8.86 mb/d in 2016 (-390 kb/d y-o-y).
        Monthly peak of 9.60 mb/d was in April 2015, monthly low is forecast for June 2016 at 8.77 mb/d.
        Thus, projected decline in monthly average between 4/15 and 6/16 is 830 kb/d.
        Projected decline for Lower 48 onshore between 3/15 and 6/16 is 910 kb/d.
        The EIA expects U.S. production to rebound in 2H16, from 8.77mb/d in June to 9.02 mb/d in December.
        The EIA assumes WTI to average $55.3 in 2H16 vs. $51.7 in 1H16 and $45.9 in 2H15.
        So they think that $55 is sufficient to trigger an increase in drilling/completion activity.

    • Heinrich Leopold says:

      AlexS, Shallow Sand,
      Again I think there is a time lag of six months between lower capex and and actual production response. As shale companies have kept capex until recently quite high at the price of huge losses (http://wolfstreet.com/2015/11/05/giant-sucking-sound-of-capital-destruction-in-us-oil-gas-impairments/), they have finally responded with much lower capex in 3q15. This implies that the production decline will start in earnest during the first quarter 2016. It is interesting that the time lag between capex and production response for conventional production stands around 18 months. Therefore production in the Golf of Mexico is still rising (up 200,000 bbl/d in the last two months alone). This mitigates somehow the decline of shale production. This explains e.g. also the resilience of Russian production, which will in my opinion still rise over the next half year.

      Future production of oil will strongly depend on the oil price. If the oil price rises to over $ 80 per barrel in December (through a possible OPEC cut), US production will still be down until mid next year and then rise again. This is the scenario the above forecast implies. However, if the oil price stays below $ 50 per barrel, production will keep falling at roughly 1% per month, which is the average decline of the FED oil and gas production index since April 2015. This scenario implies an at least 1.5 mill bbl/d decline until the end of next year – provided the oil price stays at the current level. My personal view is that US production will be down by more than 3 mill bbl/d by end of next year as there are strong signs of depletion of sweet spots, which accelerate the underlying decline.

      • AlexS says:

        Heinrich,

        According to the EIA, U.S. LTO production at the peak earlier this year was about 4.6 mb/d (it is now 200-300 kb/d lower). The projected decline in U.S. production comes primarily from shale plays, and to a much less degree from Alaska and other conventional fields, while production in the GoM is expected to increase.
        If, as you say, U.S. production drops by 3 mb/d by year-end 2016, that would mean a decline in LTO production by almost 2/3. That is impossible even if shale operators completely stop drilling new wells. According to the estimates I’ve seen, with no new wells, LTO production in the Bakken and the Eagle Ford would decline by between 30 and 40% within a 12-months period.

        • Heinrich Leopold says:

          AlexS,

          3mill bbl/d is a lot and it is the top end of my estimate, yet also conventional production will decline by end of next year. It is just my gut feeling and I guess it has to do something with depletion of sweet spots.

  18. ezrydermike says:

    Is Exxon about to get into big trouble?

    “The New York attorney general has begun a sweeping investigation of Exxon Mobil to determine whether the company lied to the public about the risks of climate change or to investors about how those risks might hurt the oil business.

    According to people with knowledge of the investigation, Attorney General Eric T. Schneiderman issued a subpoena Wednesday evening to Exxon Mobil, demanding extensive financial records, emails and other documents.

    The focus includes the company’s activities dating to the late 1970s, including a period of at least a decade when Exxon Mobil funded groups that sought to undermine climate science. A major focus of the investigation is whether the company adequately warned investors about potential financial risks stemming from society’s need to limit fossil-fuel use.
    ….
    Mr. Schneiderman’s decision to scrutinize the fossil-fuel companies may well open a sweeping new legal front in the battle over climate change. To date, lawsuits trying to hold fossil-fuel companies accountable for the damage they are causing to the climate have been failing in the courts, but most of those have been pursued by private plaintiffs.

    Attorneys general for other states could join in Mr. Schneiderman’s efforts, bringing far greater investigative and legal resources to bear on the issue. Some experts see the potential for a legal assault on fossil-fuel companies similar to the lawsuits against the tobacco companies in recent decades, costing those companies tens of billions of dollars in penalties.”

    http://www.nytimes.com/2015/11/06/science/exxon-mobil-under-investigation-in-new-york-over-climate-statements.html?_r=0

  19. ezrydermike says:

    “Faraday Future, a mysterious electric car start-up taking shape in Nissan’s former U.S. sales office in Gardena, said it plans to sell its first vehicle in 2017 and is looking to make a $1-billion investment in a factory.

    The company founded by former Tesla Motors employees said Wednesday that it was eyeing several locations, including California, Georgia, Louisiana and Nevada, but is keeping the source of its development funds and ownership secret.”

    http://www.latimes.com/business/autos/la-fi-hy-faraday-auto-factory-plan-20151105-story.html

  20. ezrydermike says:

    Elon Musk is still loopy….

    “Elon Musk’s Hyperloop technology project, which is to ferry passengers between major cities at record speeds, just announced a new infusion of venture capital on Thursday.

    At the Web Summit conference in Dublin, CEO Rob Lloyd announced $26 million in new funding led by Khosla Ventures, the venture firm founded by legendary Silicon Valley investor and former Sun Microsystems co-founder Vinod Khosla. Other investors include Formation8 and Sherpa Capital.

    This investment is part of a larger $80 million Series B round, the rest of which the company expects to raise by the end of 2016. Hyperloop, which operates independently of Musk, had previously raised $8.5 million.”

    http://fortune.com/2015/11/05/hyperloop-funding/?xid=gn_editorspicks&google_editors_picks=true

  21. Don Stewart says:

    I will try to give some perspective on the work of three people: Tim Garrett, BW Hill, and Gail Tverberg. My apologies to all the others who have done good work that I don’t mention. Of course, none of the three necessarily agree with what I am about to say.

    Tim Garrett
    Are there basic physical constraints on future anthropogenic emissions of carbon dioxide?
    http://link.springer.com/article/10.1007%2Fs10584-009-9717-9#/page-1

    Quotations:
    For civilization, ‘food’ includes the chemical and nuclear bonds in oil, coal and uranium, combined with mineral matter from the Earth’s crust. These build structures that include not just human bones, flesh, blood and nerves, but cities, roads, shopping and telecommunications.

    if all current exothermic processes supporting civilization were to suddenly cease such that a equalled zero, all civilization would become worthless; it would no longer be associated with a non-equilibrium level of potential energy…

    From society’s perspective, any societal element, whether living or synthetic, only has value to the extent it is able to operate in synergy with all other elements to define an interface with environmental available energy.

    Equation 5 implies that real economic production … is, perhaps rather intuitively, only a measure of thermodynamic work….

    the historical accumulation of real economic value through real economic production is maintained by continuous primary energy consumption; the relationship between value and rates of energy consumption is a constant parameter.

    Perhaps surprisingly, changes in population and standard of living might best be considered as only a response to energy efficiency.
    End quotations.

    My takeaways:
    Available energy determines the size of the economy.
    All the pieces are interrelated and each is required to produce civilization.
    Humans will consume all the energy they can access.

    Now, moving to BW Hill’s model. Hill further simplifies the ‘available energy’ metric to ‘net energy from oil’. Implicitly, Hill denies the practicality of regressing to a coal only economy from our current oil economy. No steam automobiles burning coal.

    So, my takeaways:
    Looming, or perhaps now historical, limits on the net available energy from oil are likely to limit the growth of the economy.
    Since energy is required to produce energy and net energy is required to maintain civilization, it is important to look at ‘net’.
    If the economy cannot grow, but instead begins to contract, then there will be monetary and financial chaos.

    If one looks carefully at Garrett’s work, Hill’s work, and Tverberg’s work, one sees a lot of similar concepts. Emphasis varies more than underlying concepts. For example, Tverberg is sometimes quite adamant that her work has nothing much to do with Hill’s work. However, they are looking at many of the same factors, in pretty much the same way.

    Garrett sees the civilization which humans have constructed as the mechanism by which energy is accessed. It is not like oil just flows and then creates civilization. But the size of the civilization which produces the oil is around 25 times the size of the oil producing sector. Therefore, if oil doubles in price, then the rest of the economy must shrink dramatically. If there is no reconfiguration of the economy, then the shrinkage of 1 unit of net oil results in the loss of 25 units of civilization. If Central Banks print money to prevent the shrinkage, then there must be mal-investment and debt which can never be paid off. BW Hill similarly emphasizes the relationship between GDP and net energy from oil. The reduction in the size of the economy explains how energy and other commodity prices can be ‘too low’ to sustain production, and do not stimulate additional demand.

    In BW Hill’s version, if ‘net energy’ peaked around the year 2000, then the global economy should have been shrinking since that time. The fact that it has not been shrinking, as yet, is due to the accumulation of vast additional debts and the accompanying mal-investment. However, Hill sees the current collapse in oil prices as indicative that his model is accurate. He expects industrial production to decline sharply over the next 5 years.

    A standard Economics 101 viewpoint would observe that as the price of gasoline or diesel declines, then people buy bigger pickup trucks. But those trucks are being financed at very nearly zero rates of interest, and the loans may never be repaid. Similarly, the money invested in the manufacturing plants may never be repaid. If interest rates reflected a realistic probability of repayment, how many new manufacturing plants would be built and how many new pickups would be financed?

    We may be bankrupt and just not realize it. If we were able to measure the ‘work promised’ against the ‘work which will be available’, we might find that we have been declining. E.g., promised social security keeps climbing, but will never be paid. The gold being traded vastly exceeds the actual gold. And so forth
    Don Stewart

    • Nick G says:

      limits on the net available energy from oil are likely to limit the growth of the economy.

      The US economy is 2.5x as large as it was in 1979 (with 50% more manufacturing), but it’s oil consumption is lower.

      The basic question: won’t a Prius (55 mpg) get you to your job just as well as an SUV that gets 15 mpg?? Won’t a Leaf do just fine for commuting? And do it far more cheaply?

      Why does anybody think FF/oil energy is essential?

      • MarbleZeppelin says:

        Those people that do not have an EV or heat their homes with FF, think fossil fuel is essential. If the car companies would stop messing around and make a low end EV that was practical, or even a good hybrid that was inexpensive, then we would see more people questioning the need for oil.

        • Don Stewart says:

          Think of double entry bookkeeping. For every asset, there is a liability. And for a society the sum total of the assets equals the sum total of the liabilities. To the novice, it sounds like a zero sum game.

          What it actually is is a bubble levitated by energy. We basically have two soap bubbles operating at the present time. The first and older bubble is powered by photosynthesis. That bubble also depends, as Tim Garrett says, on materials, which Nature recycles assiduously. There is no ‘waste’ of materials. And the Sun provides a pretty constant source of new energy for time frames almost beyond human comprehension.

          IF we were living in the first bubble, we would use very little money. We would have an economy based mostly on trade among neighbors. If a despot rules us, he would likely be paid in kind. Edo Japan was probably the highest level of development a non-fossil fuel economy could achieve. The store of wealth is mostly land.

          The second soap bubble is what we call ‘civilization’, and it is powered mostly by fossil fuels. Money becomes the medium of exchange and the store of wealth. But money only functions if all the people in the society can make (or receive as a gift) the money. How do we persuade each other to give away our money to each other? Mostly, we use energy to transform raw materials into consumer products. Even people such as ministers mostly feel the need to have a church of some sort in which to do their preaching. So the economy can be described as individuals (sometimes aggregated into companies) using energy to transform raw materials which they can sell to other people for money so that they may purchase the things that the other people make.

          If the fossil fuels begin to collapse, then that monetary economy will collapse. (Barring something like a sudden transition to fusion.)

          Suppose everyone begins to drive very efficient cars, or ride bicycles, or walk to work. Tim Garrett’s model says that population and standard of living expand to use up the newly available energy. We can fantasize about global laws which require us to use less energy than we could produce…that is one of the key issues Garrett looks at. But humans have never done that on a large scale.

          There is also the question of automation. Many careful observers think that automation is destroying more jobs than it creates…or, more correctly, reducing the wages that workers receive. We may be moving into a vicious cycle where automation destroys wages which destroys the ability of more of the population to afford mobility….which is the driver behind oil. Kunstler speculates a little on the end of ‘happy motoring’ in the Tverberg interview.

          Don Stewart

          • wimbi says:

            Dammit, what’s wrong with this crowd?

            “Growing the economy” is an absurdly inadequate expression. Everybody knows that we have activity which we want to get more of, and activity which we most desperately need less of.

            So any talk about growing the economy, to be meaningful, should specify which is growing, the good, that makes the world a better place, or the bad, which makes it worse.

            Today my wife took me into the cardiologist, who once again, dutifully, but in a cheery voice, pronounced me a dead man walking, the while not quite hiding a bit of peeve at my not living up (haha) to his prognoses–again.

            On the way back home, my wife drove our leaf down the main shopping drag of our little town. On my right was the biggest pickup I have ever seen, except for the one in front of us — and the one behind.

            From the newspaper ads this morning, I knew those creatures cost on the order of $50K each. That’s growing the economy??

            Yep.

            Nope.

            • ChiefEngineer says:

              Hi Wimbi

              I agree GDP has nothing to do with quality of life. But nothing says my penis is bigger than yours like a raised up 4×4 pick-up in the office parking as the own sits in his cubical.

              That’s 50K plus $300 a month for the Quick Trip

          • MarbleZeppelin says:

            Don S.,
            I thought civilization started long before we used fossil fuels. The Egyptians, Babylonians, Greeks, Romans and more. Civilization is not dependent upon fossil fuels.
            Tim Garrett’s model is just a model. The number of cars and the amount of energy available will always be limited, since it depends upon quite a number of limiting factors.

            I think you are missing the point. EV’s use that ever present massive energy that comes from the sun. That is what PV and wind turbines are for.

            Automation is a major problem and benefit of our time. We just have to learn how to have jobs and careers that are independent of automation. Or we could automate the whole system and everyone gets a certain amount of free access to the products and foods produced. If you want more access then you need to provide a useful service.

        • Nick G says:

          The Prius C is awfully cheap: at $19k it’s 12k less than the average new car, and it’s almost as cheap as the Leaf to own and drive.

          It’s just hard for people to wrap their minds around new things…

          • Caelan MacIntyre says:

            ” talking points

            Political and Moral sign posts for the walking dead.

            1) I tried to reason with my mother but it seemed her entire vocabulary had been reduced to a few trite talking points she had heard from the Bills (O’Reilly and Crystal). I had learned to aim for the head when shooting zombies, and now was no time for mistakes.

            2) The make-up man did a remarkable job of hiding the bite wounds on the president, but that odd speech rhythm and blathering talking points were a dead give-away. The camera hid the mangled hand, but you could see the rotting flesh on the live feed.” ~ Urban Dictionary

            3) “The Prius C is awfully cheap: at $19k it’s 12k less than the average new car, and it’s almost as cheap as the Leaf to own and drive.

            It’s just hard for people to wrap their minds around new things…” ~ Nick G

          • Old Farmer Mac says:

            For the twenty plus a new Prius would cost me, including taxes, extra insurance premiums etc, I can drive my old Escort for another decade at least, easily, even hiring out all maintenance and repairs. By THEN, a pure electric with a couple of hundred miles range is apt to cost no more than a comparable ice car.

            That twenty plus is invested USEFULLY. It grows, cars depreciate. Unless you drive a carefully selected and maintained clunker.

            • Nick G says:

              Mac,

              Sure, used cars are cheaper than new cars. But we need to compare apples to apples: a used Prius C is going to be very affordable, and cheaper overall than a comparable used ICE.

              So, sure, buy a used car. And, as you kind’ve say, a used hybrid or used EV will be the right choice.

      • Why does anybody think FF/oil energy is essential?

        Are you serious? Or perhaps you have no idea of the things in your life that are possible only because of fossil petroleum.

        A partial list of products made from Petroleum (144 of 6000 items)

         photo FF Products_zps3716mfg6.gif

        Americans consume petroleum products at a rate of three-and-a-half gallons of oil and more than 250 cubic feet of natural gas per day each! But, as shown here petroleum is not just used for fuel.

        Of course that is only 144 of over 6,000 items. And you will make none of them from sunshine.

        • ChiefEngineer says:

          Why does anybody think FF/oil energy is essential?

          I think Nick was referring to gasoline, diesel and jet fuel. When he put the word “energy” in the question. Which is 80% of oil consumption. Your list falls under products that are not burned for energy use.

        • wimbi says:

          Fact. You CAN make all of them from earth, air, fire (sun) and water. Why? Simple. Those things are made of the molecules we can get from earth and air and water, using the energy we can get from sun.

          Easy? No, Possible? yes.

          “You will make none of them from sunlight”. Speak for yourself, Ron.

          Speaking just for myself, I say we are making altogether too much right now, and I would be far happier, and the planet sure would, if we did a lot less of what we do now.

          I could do just fine without an F35, or, for that matter, bananas.

          • Fred Magyar says:

            I could do just fine without an F35, or, for that matter, bananas.

            I agree on the F35! As for the bananas, well I built a small solar dehydrator and I can produce sun dried bananas almost for free. They can be packed into the hold of a small cargo sailboat and I can ship them to some port of entry in the US, whereupon they can be distributed via barge, train and EVs to a location near you!

            • wimbi says:

              I’ll take ’em!

              Would you trade for some salt pork from them damn wild pigs around here?

          • Fact. You CAN make all of them from earth, air, fire (sun) and water. Why? Simple. Those things are made of the molecules we can get from earth and air and water, using the energy we can get from sun.

            Wimbi, did you just throw that paragraph in to show that I was “technically” mistaken but you fully realize that such a future of creating everything we currently get from fossil fuels from air and water is not “technically or economically” feasible?

            Or, to put it in short and simple terms, do you really believe we are gonna do that?

            • wimbi says:

              Gonna do it? Certainly not! Totally unnecessary. There are plenty of easier ways to get to all those things by starting higher up the molecule- like waste plastic, or cellulose, or any plant matter at all.

              BTW, I am having fun writing my own very long list of ways we have right now to make BIG cuts in energy use to get the same good.

              Example- winter time heatpipe keeps fridge cool without any electricity. It’s flat out stupid to run a fridge when three feet away it’s way colder.

        • MarbleZeppelin says:

          The list of products is longer than that, a lot of them we can do without if we have to, but that only represents a small percentage of fossil fuel.

          I only used a gallon of gasoline last week and didn’t use any natural gas. Must be the fact that the US is the second largest manufacturer in the world, it’s certainly not the people (at least many of them). Somebody is using the stuff.
          Of course out here in the sticks we don’t have any industry and are happy with watching sunsets and taking walks. Sometimes we even talk to each other (real talking not texting).
          Are fossil fuels necessary? Right now it is, because we have built a technical machine society based on them. Potentially we could shift to about 10 percent of what we use now and eventually even not need that. But that is the future, now we are in the grip of the fossil fueled world. Conserve, reuse, replace, protect but enjoy the ride; it’s one of the most amazing (and weird) times on the planet.

          As a chemist and a physics major, I have to disagree with Ron. We can make all of those things from sunshine! Sunshine provides the energy needed to run the reactions. Think about it, although fossil fuels are the most inefficient source of energy on the planet, sunshine made them too. We can concentrate and transform sunshine to do our bidding. Don’t have to wait millions of years to squeeze some dead oozings out of the ground.

          • Fred Magyar says:

            As a chemist and a physics major, I have to disagree with Ron. We can make all of those things from sunshine! Sunshine provides the energy needed to run the reactions. Think about it, although fossil fuels are the most inefficient source of energy on the planet, sunshine made them too. We can concentrate and transform sunshine to do our bidding. Don’t have to wait millions of years to squeeze some dead oozings out of the ground.

            Yep, but I think it goes even beyond that. The answers definitely lie in basic research in the fields of physics, chemistry and biology. The sooner we end the oil age and get past the culture of pick up trucks and guns the better off we will all be!

            University of California, Berkeley
            Alternative Food Production: Human Nutrition From Inedible Materials
            02 Nov 2015 17:00 – 17:45 GMT

            https://goo.gl/J796lh

            What would be the value of a “food machine,” e.g., a technology that could quickly and reliably convert inedible material such as carbon dioxide and water, fossil fuels, or plant fiber, into something with human nutritional value?

            We explore the technical and economic challenges of developing such a system, as well as its likely use cases: poverty alleviation, crisis response, military operations, and voyages in inhospitable environments.

          • As a chemist and a physics major, I have to disagree with Ron. We can make all of those things from sunshine! Sunshine provides the energy needed to run the reactions. Think about it, although fossil fuels are the most inefficient source of energy on the planet, sunshine made them too. We can concentrate and transform sunshine to do our bidding. Don’t have to wait millions of years to squeeze some dead oozings out of the ground.

            Oh my goodness, you really believe we are going to do that. We can use solar energy to create hydrocarbons from air and water. Of course that is technically possible but ….

            It is my strong opinion that people who think we will actually do that in the future, that is create all the products we now get from fossil hydrocarbons, from air and water…. are delusional!

            • MarbleZeppelin says:

              From air and water .. Where do you think all the fossil fuels came from anyway. Did god drop them here for our convenience to play lords of the earth? Sort of magical? As I suspected, oil is now a religion.

              They came from air, water and sunlight.

              Delusional my ass, we are already doing it. Take your head out of the oil patch and start looking around. There is more going on then you know of .

              • Oh give me a fucking break Marble. You know damn well we are talking about what we can do today, not what took millions of years for nature to create.

                We are doing it today? What percentage of the earth’s polymers are being created today from air and water using solar energy? Or even other fossil energy?

                Numbers Marble, give me some numbers!

                • MarbleZeppelin says:

                  Why are you so set on specifying CO2 as the only source of carbon and what makes you think we can’t power a society without fossil fuels? Why do you think we will need much liquid fuel anyway? Sounds like very limited thinking to me. Are we only capable of doing what we did years ago? Of course not, everything is changing and old patterns of thinking and doing are fading away.
                  Thank goodness.
                  I am sure that when the first television or radio was made you would have said there is only one, show me the numbers!
                  http://breakingenergy.com/2014/01/30/co2-based-plastics-and-polymers-attract-powerful-investors/
                  http://www.ceramatec.com/documents/catalysis-for-sustainable-energy/Novel-Catalyst-for-Carbon-Dioxide-Conversion-to-Methanol.pdf

                  http://www.technologyreview.com/news/522246/a-faster-and-more-efficient-way-to-convert-carbon-dioxide-into-fuel/
                  http://www.sciencedaily.com/releases/2009/04/090416102247.htm
                  neoprene from limestone
                  http://www.thecleanestline.com/2008/05/green-neoprene.html

                  • Why are you so set on specifying CO2 as the only source of carbon…

                    What the hell are you talking about. I never mentioned CO2 even once.

                    …and what makes you think we can’t power a society without fossil fuels?

                    First of all I was talking about feeding society, not just powering society.. And if you do not understand that cheap fossil fuel is what creates all that food then it would be an exercise in futility for me to try to explain such a simple concept to you.

                    But… I will try. Converting the world’s food production industry from fossil fuel to solar power would be extremely expensive just for the conversion process. I can just picture a battery powered tractor. It would likely more than triple the cost of food production.

                    More expensive energy would make food production and delivery more expensive. The world is already in revolt because of desperate and hungry people. If you were to triple the cost of food then the current “Arab Spring” would look like a Sunday picnic.

                    But Marble, I think it would behoove you to show how it can be done. You just say it can be done then ask me to prove that it cannot be done. That is bullshit. You say it can be done. Then prove it.

                  • MarbleZeppelin says:

                    Sorry Ron, my assumption. When you kept saying air, I assumed you meant using CO2 for the carbon to make the fuels.

                  • Nick G says:

                    I can just picture a battery powered tractor. It would likely more than triple the cost of food production.

                    Ron,

                    That’s a failure of imagination. Again, EVs are much cheaper to run than liquid fueled vehicles. A Leaf is much cheaper than to run than any of it’s competition. A Leaf is cheaper, overall, to own AND operate than comparable cars.

                    So, why would a tractor be more expensive??

                    Now, you’d probably have to swap batteries every couple hours, and have to charge the batteries a few hundred miles away. That wouldn’t be convenient, so we’d probably synthesize liquid fuels instead. But, that’s just for convenience.

                    ————–

                    Have you looked at the cost composition for food, eaten by consumers? The fuel used on the farm is a very, very small percentage of that final price – probably less than 5%.

                  • Ron, you have no clue what I think.

                    Well golly, just why do you think I said: “And please correct me if I am mistaken.”

                    I have never thought there would be a homogeneous collapse of civilization.

                    Marble, collapse is collapse regardless of how long it takes and which governments collapse first. I don’t think I have ever heard anyone claim that it would be a homogeneous collapse. That would defy common sense to make such a claim.

                    Do you have a plan? Do you have any answers or ways to solve some of the problems we face?

                    Are you joking? Do I have a plan to save civilization? Just who do you think would listen to me if I had a plan? If you, or anyone else out there, has a plan, it is worth about as much as a bucket of warm spit. Nobody is going to listen to you or your plan. Anyone who actually believes they can save the world, or make a difference has visions of grandeur.

                    You are one of 7.3 billion. And that is about as much influence as you have when it comes to saving the world.

                  • Sorry Ron, my assumption. When you kept saying air, I assumed you meant using CO2 for the carbon to make the fuels.

                    What I said was air and water.

                  • MarbleZeppelin says:

                    Ron, Ha, Ha. I meant personal plans. Save the world? What a concept. From what, it’s own creations? You really do come up with the simplest concepts or are you just being condescending.
                    I have trained many years in survival, tracking and lots of practical technology. Even so, if the shit hits the fan, I will make my decision then whether it is worth the effort. Nothing like current knowledge.
                    With the knowledge that I no longer have any family left, lost the last of them over the past two years, it just might be time then to say goodbye. Unless I find a good reason to do otherwise.
                    Speaking of goodbyes, it’s been a nice run here, lots of interesting people and ideas. Ron does a great job presenting relevant data. I can see I don’t really fit here. I am also getting heavily involved in efficiency and conservation projects so really shouldn’t spend so much time here. It does stimulate thought so I might lurk once in a while.
                    Goodbye, good luck, to all of you. Off to my delusional land.

                  • Oh, you meant my plans to save my own ass instead of trying to save the world. Well no, I am 77 years old and I hope to be safely dead when the shit hits the fan. I am making no other plans whatsoever.

                    Sorry to see you go but I understand. I am getting tired of this shit myself and am seriously considering packing it in soon.

                  • wimbi says:

                    When I started my own little company, good luck sent me a very wise mentor. He noticed how stressed I was, given that my only qualifications to run a startup were ignorance and enthusiasm.

                    ” Don’t take anything too seriously, and don’t let problems interfere with your vacation, no matter how important and difficult those problems seem to be at the moment.

                    Fear not, those problems will survive until you get back, and they will be immediately followed by even more difficult and important ones.”

                    “Don’t take life too seriously, after all, you’ll never get out of it alive anyhow”

                  • Fred Magyar says:

                    Speaking of goodbyes, it’s been a nice run here, lots of interesting people and ideas. Ron does a great job presenting relevant data. I can see I don’t really fit here. I am also getting heavily involved in efficiency and conservation projects so really shouldn’t spend so much time here.

                    Hey Marble, best of luck! I’m also getting involved in some interesting projects with people who at least want to try to change things. I know that we might not actually succeed but sitting around and just giving up doesn’t feel right either.

                  • wimbi says:

                    So where do people who want to do something go to talk and compare ideas?

                    I am having the best time in my life doing something, a high fraction of that not actually getting things done doing but making me feel like I am doing something.

                    So — where do we go to talk?

                • Nick G says:

                  Ron,

                  We don’t need to replace things like plastic right now: it’s such a small part of overall FF consumption that it’s a rounding error. We have many decades to do it, and fuel for other things, like personal transportation, can take the brunt of any shortfalls in production.

                  “In the United States, plastics are not made from crude oil. They are manufactured from hydrocarbon gas liquids (HGL) and natural gas. HGL are byproducts of petroleum refining and natural gas processing. These liquids are used as feedstocks by petrochemical manufacturers to make plastic and are used as fuels in the manufacturing process.

                  In 20101, about 191 million barrels of HGL were used in the United States to make plastic products in the plastic materials and resins industry, which was equal to about 2.7% of total U.S. petroleum consumption. Of those 191 million barrels, 190 million barrels were used as feedstock and 1 million barrels were consumed as fuel to manufacture these products.

                  In addition to HGL, about 412 billion cubic feet (Bcf) of natural gas were used to make plastic materials and resins in 2010. This was equal to about 1.7% of total U.S. natural gas consumption. Of the 412 Bcf of natural gas, 13 Bcf were used as feedstock, and 399 Bcf were consumed as fuel to manufacture these products.”

                  http://www.eia.gov/tools/faqs/faq.cfm?id=34&t=6

                • Nick G says:

                  Hydrocarbon gas liquids (HGL):

                  A group of hydrocarbons including ethane, propane, normal butane, isobutane, and natural gasoline, and their associated olefins, including ethylene, propylene, butylene, and isobutylene. As marketed products, HGL represents all natural gas liquids (NGL) and olefins. EIA reports production of HGL from refineries (liquefied refinery gas, or LRG) and natural gas plants (natural gas plant liquids, or NGPL). Excludes liquefied natural gas (LNG).

                  NGL’s are in surplus right now.

            • Old Farmer Mac says:

              ”It is my strong opinion that people who think we will actually do that in the future, that is create all the products we now get from fossil hydrocarbons, from air and water…. are delusional!”

              Ron is dead center in the ten ring if we are talking about any really meaningful time frame such as the remainder of the lives of every body in this forum.

              Every once in a while, we all need a dose of Fernando’s renewables sarcasm.

              • MarbleZeppelin says:

                Old Farmer, you and your tractor will be replaced by solar powered free roaming robotic stations that will disgorge reconfigurable robots to do everything that farmers do now with large machinery and do it using less energy and far less chemicals.
                Most farming in the future will be done using perennials anyway. Bush farming and tree farming. No need to keep digging up most of the soil on the planet every year.

                • Old Farmer, you and your tractor will be replaced by solar powered free roaming robotic stations that will disgorge reconfigurable robots to do everything that farmers do now with large machinery and do it using less energy and far less chemicals.

                  Robots disgorging other robots. What a line of unadulterated bullshit. I assume these robots would have computers, memory chips and a program that tells them how to create or “disgorge” other robots.

                  Memory chips, processor chips and other computer chips are created in a factory clean room with very large and sophisticated lasers. The creation of a computer and all the chips it contains cannot possibly be done by a robot on a farm with nothing but dirt and rocks from which to create and “disgorge” other robots.

                  The body of the robot is another story as well. He would need gears and equipment that must be created in a machine shop with lathes and other equipment. But your robots will disgorge other robots that get their power from…? Hey just where will these little guys get their energy from?

                  • MarbleZeppelin says:

                    Ron, I never said they create or build the bots. Just carry them around. You have seen it, like passengers getting off of a bus. Pretty simple concept.
                    I have no idea how you came up with creating robots in the field. The “mother” robot carrier would house, booster charge and carry various tool attachments. It’s not a factory. Wow, that would be amazing.

                • Old Farmer Mac says:

                  There is little doubt in my mind that if civilization as we know it survives, which is by no means guaranteed, new technologies will be invented that would leave me speechless- I could travel forward in time to see them.

                  But I am ready to bet my last hundred dollars against a stale donut that neither you nor I will live to see farming done as you envision it.

                  For now we have hardly any idea what the limits of genetic engineering might be.

                  Most of my neighbors have given up plowing commercially already, sod planting is pretty much sop. But they use weed killers to knock out the weeds formerly controlled by plowing.

                  I enjoy speculating about such things as much as the next person, so long as we make it clear we are talking about things that might come to pass at some future time. A DISTANT future time.

                  Maybe a couple of generations down the future road….. I grow some excellent nuts myself, just about all high quality protein and fats, and the yield of such nuts, with some genetic engineering of the trees, could be truly substantial.

                  It is impossible to guess how LONG it might take for such technologies as you mention to go from the imagination to the drawing board to the prototype shop to field testing to the permitting and financing stage of building factories to produce such machines.

                  BUT however long it will be, it will be long enough I will not live to see robots tending grossly engineered crops on the grand scale. You won’t either.

                  There are some FUNDAMENTAL reasons why we are apt to continue to grow conventional field crops such as wheat and corn as opposed to tree or “bush ” crops on the grand scale but I would have to write a book to even begin to explain these reasons.

                  For sure a self driving combine or tractor is a technical possibility.

                  But will such a tractor be cheaper than a human operator? I am not so sure about that, given that it does not take very long to learn to operate a tractor , and there may be lots of men willing to run one for a daily bowl of beans and a piece of bread and the privilege of sleeping in the equipment shed.

              • Nick G says:

                Not really.

                For instance, about 4% of US industrial hydrogen production is from electricity and water: electrolysis.

                It’s here, right now.

                • When it comes to producing fuel, any kind of fuel, from air and water, then it is going to cost more, a lot more! We can now barely feed the world with very cheap fossil fuel. When that fuel starts to cost four to five times as much then all hell is going to break loose.

                  Hydrogen Basics – Production

                  The cost of hydrogen production is an important issue. Hydrogen produced by steam reformation costs approximately three times the cost of natural gas per unit of energy produced. This means that if natural gas costs $6/million BTU, then hydrogen will be $18/million BTU. Also, producing hydrogen from electrolysis with electricity at 5 cents/kWh will cost $28/million BTU — slightly less than two times the cost of hydrogen from natural gas. Note that the cost of hydrogen production from electricity is a linear function of electricity costs, so electricity at 10 cents/kWh means that hydrogen will cost $56/million BTU.

                  • Nick G says:

                    First, I wouldn’t suggest using synthetic fuel for more than about 10% of our current consumption. For instance, a Chevy Volt reduces liquid fuel consumption to about 10% of the current fleet average. Electricity is much cheaper.

                    That might include seasonal ag, such as combines. But, that’s a very small cost component of our food.

                    So, yes, I’d say that with current tech & industrial power prices, liquid fuel is likely to cost around $10/US gallon. I asked Robert Rapier about that, and he agreed.

                    But, that doesn’t matter much if you reduce fuel consumption by 90%.

                    3rd, it’s very likely that there will be large amounts of surplus electricity for the majority of the year, due to seasonal variation in wind and solar power production. That power will be very cheap, and it could be used to produce synthetic fuel. If you produce hydrogen with 2 cent power, it’s pretty affordable.

                • sunnnv says:

                  Mmmm, pushing it here …

                  That “4% by electrolysis” is an incidental by-product of chlor-alkali plants.
                  http://www.eia.gov/oiaf/servicerpt/hydro/appendixc.html

                  The only place that *had* large-scale electrolytic production of hydrogen was Norway, a place with water-cheap hydroelectric power.
                  https://en.wikipedia.org/wiki/Norsk_Hydro_Rjukan
                  But even they couldn’t compete with petroleum-based hydrogen production.

                  So, as peak oil/peak natural gas hits, artificial nitrates fertilizer is set to be more expensive –> less will be used –> food production will decline –> hungry people …

                  • Nick G says:

                    Well, I was surprised by that 4% (from an industry site), because I wouldn’t expect a process that was even slightly more expensive to be used widely. So, that makes sense.

                    But, some thoughts:

                    If H2 got more expensive, how much would it increase the retail price of fertilizer, and

                    How much would that increase retail food prices?

                    And, how much would farmers shift their crops towards less intensive fertilizer crops, and more careful fertilizer utilization?

                    If the H2 input is 30% of the retail price of fertilizer, and fertilizer is 10% of the price of food, then a tripling of cost for H2 should only increase food prices by a maximum of 10%, and rather less if farmers optimize fertilizer consumption.

                    Finally, large scale installation of wind and solar are likely to over-built, to reduce the impact of intermittency. That will produce massive amounts of surplus power, which will be cheap for this kind of off-peak, secondary consumption.

                    And, if it doesn’t, then that would mean that wind and solar intermittency was solved by less expensive tactics than over-building, which is only to the good, for the overall energy system.

                    It’s a win, either way.

              • Dennis Coyne says:

                A lot can be recycled. Most Petroleum is used for energy. Much of this can be replaced with electricity. As the Petroleum gets expensive it will be used efficiently. We will not run out of oil and gas we will produce less. About 1 to 2 % less per year if demand is high. Low demand for oil could cause faster decline.

          • Air + water = gasoline? Not quite…

            According to Allen Ginsberg’s poetic rewording of the laws of thermodynamics:

            1. You can’t win
            2. You can’t break even
            3. You can’t quit
            Air Fuel Synthesis, Ltd. (AFS), a small company in the northern English county of Durham, has recently made headlines for a chemical process that claims to synthesize gasoline from air and water. In essence, AFS is using energy to unburn fuel so that it can be burned as fuel again – a great deal of energy. Sixty kWh of electric energy are used up to store 9 kWh of that energy in a liter of gasoline. When you take into consideration that gasoline vehicles are about 15 percent efficient, a car fueled with synthetic gasoline would use roughly 35 times more energy on a given trip than would an electric vehicle. Not, it would seem, a prescription for a commercially valuable green product.

            Of course we are not talking only about gasoline here, we are talking about longer, or in some cases shorter, polymers that make plastics, asphalt, synthetic rubber, pesticides, defoliants, fertilizers, medical supplies, pharmaceuticals, lubricants, paints, cosmetics and thousands of other products. But if it takes six and two thirds as much energy in as you get energy out, nothing is going to be cheap.

            The idea among folks who believe solar is the answer to everything, or as Jay Hanson used to call them “solar rollers”, is that solar energy is or soon will be … dirt cheap. I simply don’t believe that is, or ever will be, the case. It is not as simple as PV panels. There are batteries, inverters and other infrastructure to consider.
            If solar energy were cheaper today we would see solar energy swiftly replacing fossil energy. But we do not see that at all.

            People economics exist. To talk about what is possible without considering the cost to the economies of the world, is sheer nonsense. Many governments today are teetering on the verge of financial collapse.
            The vast majority of the earth’s population live on the edge of existence. Producing enough food to feed the earth’s people is an ever going struggle. Only with vast amounts of cheap fossil energy is it possible to feed 7.3 billion people. When fossil energy begins to decline, the earth’s population will also begin to decline, or shortly thereafter.

            • Old Farmer Mac says:

              Hi Ron,

              In general terms I agree with you, solar power is just not going to hack it for seven billion plus people, a hard crash is baked in because we are going to eventually run short of ff SOONER than we can build out renewables or nukes.

              BUT solar power might EVENTUALLY be cheap enough to run automated industrial processes such as converting CO2 and water into liquid fuels.

              A lot of industrial processes can be operated intermittently in the future, meaning when the wind is blowing and the sun is shining. We have all sorts of heavy industrial infrastructure that is used intermittently, such as highways that are almost deserted during the wee hours and power plants that are running at less that capacity.

              Build it just big enough and run it 24 hours a day, or build it four times as big and run it six hours a day on the sun.. A GIANT solar farm is not impossible even today and there sure as sunrise is plenty of dry SUNNY real estate where it can be built.

              Eighty or ninety million barrels no, a few million maybe.

              It depends on what we decide to spend our resources on, a generation or two down the road.

              Within five years a homeowner in a sunny climate with German quality craftsmen to do the installation will be able to go net zero on electricity for his house for the price of one average new car.

              • MarbleZeppelin says:

                Why is everyone stuck on liquid fuels? Most operations can be run off of electricity directly.

              • wimbi says:

                I run my whole all-electric house and electric car on solar from a system that cost me, entire, $15K.

                I did shop around for bargains, used a lot of used things, and did the installation myself (with assistants), but still, nothing very out of the ordinary in any of it.

                It all works far better than the non-electric stuff I had before. Proof – wife says so.

              • sunnnv says:

                “Within five years a homeowner in a sunny climate with German quality craftsmen to do the installation will be able to go net zero on electricity for his house for the price of one average new car.”

                German residential PV costs are low = TODAY – call it $2.10/Wp.
                https://emp.lbl.gov/sites/all/files/lbnl-188238_1.pdf
                (Figure 14, page 23, 2014 data. N.B. Australia was $1.8/Wp.) (n.b. Tracking the Sun has split out the utility scale data into a separate report now).

                30 kWh/day average US residential use (can be reduced a lot, this include all electric houses with electric heat, etc.).

                Assume a conservative capacity factor of 20%, means 4.8 hours a day of full sun (24 hrs/day * .2 = 4.8 hours).
                30 kWh/day / 4.8 hours of full sun/day = 6.25 kWp PV needed.

                at $2.10/Wp, that’s $13,125.
                What’s the price of an average new car TODAY?

                Median US installed price in 2014 $4.3/Wp.
                That comes to $26,875 – that’s more like a new car price.

                Why wait 5 years?
                Or, Old Farmer Mac has a successful prediction?

                • Old Farmer Mac says:

                  I don’t pretend to be an expert when it comes to solar power but I do read a couple of sites devoted to the subject, and the consensus view there seems to be that it still costs us Yankees about twice what it does a German citizen to install a turn key residential solar system, and that the price of one big enough,installed turnkey, to go net zero in the USA is still WAY above the price of a typical automobile.

                  I am presuming that in five years, with some luck, that our own electricians, code writers, building official inspectors, permit issuers, etc etc will manage to catch up with the Germans in terms of ”giterdone competitively”.

                  More specifically I presume this on days I am feeling optimistic. On pessimistic days I presume it will take TEN years.

                  Now here is a question I have asked many times in many places without getting an answer.

                  HOW IS THE PRICE OF A TYPICAL NEW CAR IN THE USA COMPUTED?

                  I have posted this question in a LOT of places without ever getting an answer. Is it a MEDIAN, with half the cars more, half less? Is it the arithmetic average, with TESLA’s, MERCEDES, CADDY’s raising the figure disproportionate to market share?

                  Does it include tricked out pickup trucks?

                  Does it include all the fees and costs the dealers add on?

                  I get to be suspicious of numbers that cannot be attributed to anybody in particular.

                  • Fred Magyar says:

                    The estimated average transaction price of a new car or truck sold in the U.S. in April was $33,560 — 2.6% higher than in the month a year ago, according to data from auto researcher Kelley Blue Book.

                    Here are the major mainstream automakers’ average transaction prices in April, including all brands sold by each company, and the amount the average price rose or fell in April from the month a year ago:

                    • Volkswagen Group (Audi, Volkswagen, Porsche), $39,203, down 0.9%.

                    • General Motors (Buick, Cadillac, Chevrolet, GMC), $38,632, up 2.9%.

                    • Ford Motor (Ford, Lincoln), $35,406, up 3.3%

                    • Fiat Chrysler Automobiles, (Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Ram), $33,901, up 3.3%.

                    • Toyota Motor (Lexus, Scion, Toyota), $30,463, up 1.1%.

                    • Nissan North America (Nissan, Infiniti), $27,767, up 2.4%.

                    • American Honda (Acura, Honda), $27,564, up 1.9%.

                    •Hyundai Motor Group (Hyundai, Kia), $24,980, up 4.7%. “The redesigned Sonata, up 7.9%, helped the Hyundai brand to a 4.2% gain, while the Kia Sedona, up 16.5%, lifted the Kia brand 5.2% in April,” said Tim Fleming, analyst for Kelley Blue Book.

                  • R Walter says:

                    The solar array installers that show up at the job site to install the solar panels will all have one ton pickup trucks to get them there, 2015 models, of course.

                    Gotta giterdun somehow.

                  • Fred Magyar says:

                    The solar array installers that show up at the job site to install the solar panels will all have one ton ELECTRIC (there, fixed that for you) pickup trucks to get them there, 2015 models, of course.

                    Tesla co-founder says it’s electric trucks, not electric cars, that matter

                    http://www.theverge.com/2015/2/27/8119981/electric-trucks-wrightspeed-ian-wright

                • wimbi says:

                  Yesterday, an average Nov. day, I ran my house only on grid electricity in order to get a reading on daily use for everything. 25kW-hr.

                  For everything, and I could knock that down easily, but my 9kW p PV takes care of it easily, except maybe one month out of the year, where last year I came out behind about 150kW-hrs for the month.

                  My out of pocket system cost – less than half new car cost.

                  All the local PV installers, usually the appalachian junk genius types habituated to penny pinching, will put one up for only a little more than I paid. They are all over-busy.

                  After all, these systems are no harder to put up than ordinary house wiring.

                  My suggestion, as always; quit talking and go do it.

            • MarbleZeppelin says:

              Ron, I know you believe that there will be a collapse so why do you repeatedly concern yourself with a population of 7.3 billion? It just further weakens your arguments, throwing in convenient numbers to prove a point. I mean in the same breath you talk of Jay Hanson, of dieoff infamy.
              So why not revamp your view on population at least?
              Personally I veer away from people like Hanson who uses a veneer of science while not taking into account the many variables in the situation.
              I got tired of the continuous year after year proclamations of disaster and doom. I started looking at the new vectors being initiated within society. They are far more important than the old ones.

              • Marble, I find Jan Hanson’s arguments far more plausable than yours. Robots disgorging other robots… Really?

                The thing about peak oil is that for year that passes that it does not happen, only makes the obvious far more likely the next year.

                I never expected the earth to reach 7.3 billion people. We were in deep overshoot at half that number of people. To make room for that 7.3 billion people, and an additional 200,000 new people every day, we are simply killing off all other megafauna to make room for more people. And you think that 7.3 billion people should be of little concern to us? Good God, what planet are you living on.

                10,000 years ago humans and their animals represented less than one tenth of one percent of the land and air vertebrate biomass of the earth. Now they are 97 percent. All wild animal land and air vertebrate biomass is 3 percent. Actually less because the wild vertebrate biomass is declining every day.

                And you think I should revamp my argument and take up one that is unconcerned with the massive overshoot we find ourselves in. Or that I should be totally unconcerned with the continuous decline of other species or the destruction of the environment our 7.3 billion population is causing.

                You say that is weakening my argument. Marble, that is the only fucking argument I have. Peak oil is just a part of that overpopulation, overshoot, environmental destruction argument.

                And please correct me if I am mistaken. But you think that civilization as we know it is never going to collapse. Though the environment is collapsing around us every day, you think civilization as we know it will still survive.

                All of a sudden I find myself having a deeper respect for the opinions and writing of Jay Hanson. Of course I have always respected his work and the work of others he posted on his web site. I have re-posted one of his pages on my own blog. Energy and Human Evolution

                • MarbleZeppelin says:

                  Again, what is with the robots disgorging other robots. If a truck can carry cars why can’t a robot carry other robots? Simple concept.

                • MarbleZeppelin says:

                  “And please correct me if I am mistaken. But you think that civilization as we know it is never going to collapse. Though the environment is collapsing around us every day, you think civilization as we know it will still survive.”

                  Ron, you have no clue what I think.
                  I have never thought there would be a homogeneous collapse of civilization. If we do have a massive collapse, it will be heterogeneous and have a wide variety of outcomes across the planet.

                  I am fully cognizant of the sixth extinction and the general changes in the environment.

                  Since you are so adverse to others plans, thoughts and opinions; what is your plan for this upcoming collapse you advocate? Do you have a plan? Do you have any answers or ways to solve some of the problems we face?

                  • Ron, you have no clue what I think.

                    Well golly, just why do you think I said: “And please correct me if I am mistaken.”

                    I have never thought there would be a homogeneous collapse of civilization.

                    Marble, collapse is collapse regardless of how long it takes and which governments collapse first. I don’t think I have ever heard anyone claim that it would be a homogeneous collapse. That would defy common sense to make such a claim.

                    Do you have a plan? Do you have any answers or ways to solve some of the problems we face?

                    Are you joking? Do I have a plan to save civilization? Just who do you think would listen to me if I had a plan? If you, or anyone else out there, has a plan, it is worth about as much as a bucket of warm spit. Nobody is going to listen to you or your plan. Anyone who actually believes they can save the world, or make a difference has visions of grandeur.

                    You are one of 7.3 billion. And that is about as much influence as you have when it comes to saving the world.

                • MarbleZeppelin says:

                  Ron said”And you think that 7.3 billion people should be of little concern to us? Good God, what planet are you living on.”

                  Again Ron, not what I said or meant at all. What I said was that with collapses likely there would be a lot less people to provide for. We shouldn’t plan for 7.3 billion or more because there likely will be a lot less. Any estimates of material needs in the future should at least take that into account.

                • robert wilson says:

                  My wife and I once spent three days visiting with Jay Hanson in Hawaii, vacationing and attending a mini-conference that he organized. It was an extraordinary trip. Jay and I did have had some differences, both then and later. The past year or so he seems to have disappeared. I have seen no news regarding his recent or current activities.

            • Nick G says:

              folks who believe solar is the answer to everything

              They don’t exist, except in the imagination of people like Hanson. No sensible person is proposing a 100% solar grid. Much more likely would be something like 40% wind, 25% solar, 20% nuclear, 15% other.

              And, of course, land-based wind power is cheaper than coal in the US right now.

              • ChiefEngineer says:

                Hi Nick,

                Those numbers are close to my imagination. I would guess that the wind and solar numbers will be reversed. Nuclear being a base load supplier. Current and future NG plants making nice peekers. Solar matching well with day use demand. Fazing out coal plants. Charging EV’s used to help balance the grid.

                One will plug in their EV and program the charger on how and when to do it’s job. Depending on the users needs and a cost factor.

                Personal transportation is the low hanging fruit. Trucks and tractors will have more of a hybrid mix.

      • Caelan MacIntyre says:

        As the economy tanks or, to make it easier, with some new kind of economy that smoothly sidles right in and that, presumably, runs on much less oil and available energy than it does now, what kind of jobs will we– all 7 billion or so of us– all be going to in our new EV’s? The same ones as always? Or will we all smoothly transition to the new ones too and with negligible unemployment rates? And for what?

        And who decides? For the rest of us?

        People like Elon Musk, Obama’s gang, the 1%, the military, the police, Monsanto, the ‘Chinese billionaire’ or the corporate psychosociopath?

        All of the above?
        Would that sound like a smooth transition to you?

        What kind of economy do we expect to have running on electricity generated with realtime wind, water, sun and aging nuclear plants with radioactive waste piling up? An economy that pretty much looks like this one? And do we even want it? I mean, has it honestly improved our world and lives? Over the long haul?

      • thrig says:

        Here’s your shovel, Interstate needs some maintaining. Oh, what, you need to burn some carbon?

        Meanwhile, I note that Earl Blumenauer’s proposal to increase the gas tax was not even heard by the House, with a raid on the Federal Reserve Capital Surplus Account as sort of a last minute thing to cover the $40 billion transportation bill (a number that is notably south of the $3.6 trillion desired by the ASCE).

      • G. Lowy says:

        Use of fossil fuels will not go away until a cheap alternative is found for powering aircraft, ocean vessels, large trucks, and the like. Also, most of the ultra politically left-leaning folks who spend their days doing nothing but arguing on websites such as this one about how we must transition everything right this very moment to costly, unreliable, and unproven alternatives to fossil fuels are either gullible or completely ignorant to the greater ecological damage caused by the production, installation, maintenance, and disposal of the very alternatives they advocate. I have been working with the scientific researchers and partner industries for years now trying to implement new energy technologies. However, what I have personally encountered is that most of the science and research has merely turned into a semiannual sprint to find more government subsidized funding sources. Meanwhile, being ignored is how there are relatively few incentives from industry to actually advance the technologies being studied. Heck, some of the research includes trying to find ways to make substitute / synthetic petroleum blends which proves there are some in government who understand we aren’t going to be able to force the widespread abandonment of hydrocarbon-based fuels. Now maybe when we get cold fusion and the like, but even that is unlikely to be feasible in a broad range of applications.

        • Fred Magyar says:

          Also, most of the ultra politically left-leaning folks who spend their days doing nothing but arguing on websites such as this one about how we must transition everything right this very moment to costly, unreliable, and unproven alternatives to fossil fuels are either gullible or completely ignorant to the greater ecological damage caused by the production, installation, maintenance, and disposal of the very alternatives they advocate.

          What people like you have yet to grasp is that none of this has the slightest thing to do with political leanings either to the right or to the left. Disruption goes beyond partisan politics. Furthermore I doubt you understand what you are talking about with regards ecological damage caused by alternatives. The damage that is caused by staying the current course of BAU is immensely worse!

          Watch Hunter Lovins’ talk about ‘Natural Capitalism’. If you do you might begin to understand why you are just plain wrong. Try to open your mind a bit. The old ways just aren’t working we need new thinking and being stuck in the old left vs right mode just isn’t going to cut it anymore. We need to get out of the linear economic model.

          Here’s a link: https://www.thinkdif.co/headliners/hunter-lovins

        • ChiefEngineer says:

          Without subsidizes and regulation the oil industry would have lead us all off the cliff years ago with 1973 chevy impala’s with 454’s and 8 mpg.

          Now we find out Exxon has been hiding the truth all long.

    • ChiefEngineer says:

      My takeaway:

      Don is addicted to fossil fuel and Tverberg economics
      Don needs to buy solar panels, EV and hug a tree
      Don needs to stop fascinating about a big trucks and gardening

      That will be $200 and come back and see me again next month. The world will be OK.

      • Don Stewart says:

        I try to use as little fossil fuels as possible. I was one of the first people in the US to buy a Prius. I try to garden with no external inputs. But I am not dumb enough to think that fossil fuels don’t touch my life in many ways.

        Don Stewart

        • ChiefEngineer says:

          I know. Keep up the good life style. I’ve read your comments plenty of times.

          Peace

    • Dennis Coyne says:

      Hi Don,

      I am not familiar with Garrett, I will not comment further on Tverberg, BWHill’s work uses entropy, but fails to define the boundry of his system. The net energy of the Petroleum processing system needs to consider all inputs and outputs of energy and the net energy of the entire system. A fundamental error is the assumption that oil cannot be an “energy carrier” where its net energy is zero or it will be worthless. Isn’t electric power the ultimate “energy carrier”? The last time I checked they are not giving away electricity for free.

      Oil price will decrease when substitutes are cheaper, once the peak is reached.

  22. MarbleZeppelin says:

    Oregon State University has shown that a potassium ion battery is possible.

    “The findings are of considerable importance, researchers say, because they open some new alternatives to batteries that can work with well-established and inexpensive graphite as the anode, or high-energy reservoir of electrons. Lithium can do that, as the charge carrier whose ions migrate into the graphite and create an electrical current.

    Aside from its ability to work well with a carbon anode, however, lithium is quite rare, found in only 0.0017 percent, by weight, of the Earth’s crust. Because of that it’s comparatively expensive, and it’s difficult to recycle. Researchers have yet to duplicate its performance with less costly and more readily available materials, such as sodium, magnesium, or potassium.

    “The cost-related problems with lithium are sufficient that you won’t really gain much with economies of scale,” Ji said. “With most products, as you make more of them, the cost goes down. With lithium the reverse may be true in the near future. So we have to find alternatives.”

    That alternative, he said, may be potassium, which is 880 times more abundant in the Earth’s crust than lithium. The new findings show that it can work effectively with graphite or soft carbon in the anode of an electrochemical battery. Right now, batteries based on this approach don’t have performance that equals those of lithium-ion batteries, but improvements in technology should narrow the gap, he said.”

    http://oregonstate.edu/ua/ncs/archives/2015/oct/discovery-about-new-battery-overturns-decades-false-assumptions

  23. Greenbub says:

    @shallow sand (since you like to think about this subject);
    I don’t think the Saudis are likely to cut in December. They would only be making room for Iran. They also have not yet achieved their desired effect on American shale. They are digging into their sovereign wealth reserves, but could easily go another year without doing too much harm. I can’t think of any reason they would cut anytime soon, but I’m open to suggestions.

    • shallow sand says:

      Greenbub. You may be correct. I was basing December on history, in that the longest period they have waited after the beginning of a price collapse was 1999, 18 months after the price drop began in 1997.

      Given the rapid rise in production in the US, which has now stopped, but has not fallen much, and given the large reserves, OPEC could wait awhile.

      I do think OPEC will cut, maybe a return to trying to enforce 30 million barrels per day?

      OPEC has surely figured out by now that if US can prop up zombie banks it can also prop up zombie oil companies.

      Look at Sandridge Energy’s financials, Halcion’s, or almost all of the others. All are still drilling. Heck, Sandridge just announced a $190 million acreage acquisition in a place they have never operated. They have been buying back their own unsecured bonds at 30 cents on the dollar. Think about that. They are defaulting on debt principal, yet being lent money to acquire acreage in a brand new basin, and to keep drilling wells in the same area that has caused their financial demise. If you are interested, go look at the KS public website. Each SD well cost $2-$3.5 million. Count how many have been shut in/have made under 25K barrels of oil. They have a market cap of $240 million with $3+ billion of debt, falling production.

      12/4 meeting will be interesting. IMO KSA had no clue oil would fall this hard, and that US production would hang in like it has. They and their immediate neighbors will have to quell a lot of dissent 12/4.

      • shallow sand says:

        Speaking of the SD $190 million acquisition in Colorado, appears the wells have extreme decline rates. Definitely no fat tails. Here is 1/15-8/15 gross oil barrels per Colorado Oil & Gas Commission for the 16 producing wells they acquired, each a horizontal with a TD of 11,000+ feet.

        625. 2.57 bopd
        2096. 8.63 bopd
        27985. 115.16 bopd
        3618. 14.89 bopd
        1873. 7.71 bopd
        10249. 42.18 bopd
        74091. 304.90 bopd
        9384. 38.62 bopd
        11230. 46.21 bopd
        4812 19.80 bopd
        555. 2.28 bopd
        4104. 16.89 bopd
        5984. 24.63 bopd
        6376. 26.23 bopd
        37737 155.30 bopd
        21074. 86.72 bopd

        These wells cost over $2.5 million each. The ones that are 20K plus barrels 1/1/15-8/31/15 were all completed in late 14, about one year production history.

        SD bought from a hedge fund who bought from EOG.

        Need to also keep in mind discount to WTI running $11.60 in 2015 per SD conference call.

      • Ves says:

        Shallow: ” OPEC has surely figured out by now that if US can prop up zombie banks it can also prop up zombie oil companies.”

        How US can prop up oil decline rates of 70% within 6 months of production in shale? How US can prop up inhospitable climate for exploration in Arctic? How US can prop up geology? How US can prop up built in price inflation of the costs within economy unless it changes the system itself? Would geologist/engineers/drillers in oil patch in Texas work from now on for $10 hour? Well, they would have to default first on their home loans and sleep & eat in trucks in order to beat the price inflation. But even that it is only temporary.
        Banks are different. They do not operate in reality.

  24. Petro says:

    Ron,
    thank you for the post/update!

    I envy/admire the methodical patience you exhibit while educating/answering the:
    “…fossil fuels are not essential…”
    and
    “…Gail’s understanding of economics is not very good. The story is pretty simple, low prices will lead to low output…”
    crowd.

    Be well,

    Petro

    • Dennis Coyne says:

      HI Petro

      So you agree with tverberg’s analysis?

      • Petro says:

        Hi Dennis,
        your understanding ( and the understanding of almost all who comment here!) of supply/demand and money multiplier (the official name of what you know as fractional reserve banking) and a few other key concepts is very outdated. I tried to “enlighten” you on these things (fruitlessly!) on several occasions, so I will not go there:
        http://peakoilbarrel.com/debt-oil-price-bakken-red-queen/comment-page-1/#comment-419619
        http://peakoilbarrel.com/the-problem-of-the-human-population/comment-page-1/#comment-507947
        http://peakoilbarrel.com/the-problem-of-the-human-population/comment-page-1/#comment-508007
        http://peakoilbarrel.com/jodi-iraqi-reserves-and-ghawar/comment-page-1/#comment-506970
        http://peakoilbarrel.com/the-problem-of-the-human-population/comment-page-1/#comment-508160

        You are convinced in the way you “know” these concepts and there is no way I can change your mind on that.
        I told you (shallow sand, and others) on several occasions:
        there shall not be a $100-$200brl/oil price again. Not this time – this time is different!
        I said this long before watcher, bc and others started commenting on debt/credit and finance (often not correctly!)
        Learning money and money multiplier from Chris Martenson is not a problem. Being convinced that that is indeed the correct story – now that is a problem!
        Oil, barring a spike here and there due to “..a bomb went off here…”, “… a plane blew up there….”, “…a refinery exploded there…” etc, is going down…permanently!
        The volatility and price will increase dramatically Right Before the collapse and/or war….but until then, oil will be stable here ($40-$50) and pointing downwards!

        As far as Ms Tverberg:
        she has a “foggy” understanding of how debt/money come to be and the modern money economics, but as far as how debt/money works throughout the economy and the role/importance it has ONLY a handful of people (literally!) have a more thorough understanding of it than hers (…including yours truly here…well maybe…or maybe not…)
        She is correct in what she writes so one should think twice before one dismisses her completely as you did.
        Is not about agreeing with her. This is a matter of opinion as much as the boiling temperature of water is a matter of opinion.
        But to understand that, first you have to erase:
        “..The story is pretty simple, low prices will lead to low output…higher prices increased production…” from your mind.
        That is so ’60s. we can alter supply/demand at our will by QE1…QE99….and soon coming NIRP.
        The time has come however for A. Bartlet to be correct:
        “the greatest shortcoming of human beings is not understanding the exponential functions”

        This time is indeed different!

        Be well,

        Petro

  25. Heinrich Leopold says:

    Shale Gas Economics,

    Chesapeake CHK published its 3q15 results. Loss $5.4 bn on revenue of $880 mill. Total loss for the first nine months $16bn. See also http://wolfstreet.com/2015/11/05/giant-sucking-sound-of-capital-destruction-in-us-oil-gas-impairments/.
    Total oil and gas industry loss of $25 bn during last quarter indicates deeply uneconomic production. As no economic system could carry on to produce at such losses, companies have already responded. Chesapeake has cut rig count to 18 from 69. Gross wells completed are down to 84 (from 309) and gross wells spud are down to 81 from 296. Activity is reduced threefold!!! As there is a time lag of six to nine months from lower capex to actual production, I expect a significant fall of natgas production for the first quarter 2016. As CHK is one of the leading producers in the US, this will also impact total US production.

    • MarbleZeppelin says:

      Reminds me of some old cars I have had, keep pouring money into them and get poor performance all the way to the next time they suck your wallet dry. Answer, dump the old one, get a newer more efficient car.
      So if oil is not working out for us, dump it. Get our energy elsewhere. Time to stop throwing money at it, it’s in a death spiral.

    • AlexS says:

      Heinrich,

      Thanks for the link. The article has a link to the original research by Evaluate Energy on U.S. oil & gas companies’ 3Q results. Recommended reading
      http://blog.evaluateenergy.com/us-oil-gas-company-earnings-take-a-huge-hit-in-q3-2015-impairments

      • Heinrich Leopold says:

        AlexS,
        Thank you for the link. As prices – especially natgas – are now even lower than in 3q15, this becomes even bigger this quarter. I get the feeling that this is very big and I am wondering what the consequences will be.

        • shallow sand says:

          Wont their be even more impairments in Q4 as companies like CLR, who have held off, will be forced to write down assets?

          • Heinrich Leopold says:

            shallow sand,

            If oil prices do not take off, CLR will have no choice and make the impairment. The longer oil prices stay low, the more dramatic the situation. What strikes me is that OXY left the Bakken at a huge loss. Fidelity Oil&Gas closed…. There must be something going on here. There is probably more to asset impairments other than price (depletion of sweet spots, monster decline of monster wells?) I think we will see more when the next Bakken production numbers are out.

            • Enno Peters says:

              It doesn’t matter if prices will take off now, the impairment still has to be made. Only December may make a very small difference:

              “The United States Securities and Exchange Commission (SEC) calculates the economics of proved reserves using the unweighted, trailing 12-month average of the closing prices from the first day of each month. Year-end 2014 impairment tests were evaluated using a $94.99/barrel of oil prices and a $4.31 per MCF gas price, with 2014’s low year-end prices buoyed by strong prices from the first 10 months of the year.”

              http://press.ihs.com/press-release/ep-impairments/gloomy-price-outlook-signals-continued-impairments-likely-throughout-20

              • HR says:

                I saw wolf richters article this mornings as well. Those are some ugly numbers mainly because of the write downs. I think I already know the answer, but without the write downs are any of these guys even cash neutral much less making money?
                Wasn’t it Harold Hamm that said by spring production will fall off a cliff?

                • Heinrich Leopold says:

                  HR,

                  It would be interesting to know if the write downs are just related to price or is there any write down on the quantity of reserves?

            • AlexS says:

              Heinrich Leopold said:

              “What strikes me is that OXY left the Bakken at a huge loss”

              Occidental was planning to sell its Bakken assets long before the drop in oil prices.
              But the actual price was far from what they were initially expecting.

              Occidental Reportedly Sells Bakken Assets To Lime Rock

              October 15, 2015
              http://www.ugcenter.com/occidental-reportedly-sells-bakken-assets-lime-rock-823211

              As recently as last fall, Wall Street had expected Oxy’s Bakken assets to sell for more than $3 billion. The sharp drop in the deal’s value represents the most-significant pullback in valuation yet in the second-largest U.S. oil producing state.
              =================================

              Occidental Petroleum cuts spending, scales back in the Bakken

              By Patrick C. Miller | February 03, 2015
              http://www.thebakken.com/articles/1005/occidental-petroleum-cuts-spending-scales-back-in-the-bakken

              Occidental Petroleum Corp. will scale back operations in the Williston Basin and is reducing its 2015 capital cost budget by 33 percent in response to low oil prices.
              “Our capital program will focus on our core assets in the Permian Basin and parts of the Middle East,” said Stephen Chazen, president and CEO. “We have minimized our development activities in the Williston Basin, domestic gas properties, Bahrain, and the Joslyn oil sands project, as these have subpar returns in this current product price environment.”
              ========================================
              Oxy Says Permian Operations Still Solidly Profitable

              FRI, JAN 30, 2015
              http://www.energyintel.com/pages/eig_article.aspx?DocId=875317

              … while Hess regards the Bakken as a crown jewel in its portfolio, it is far less important to Oxy, which lacks the core acreage positions and sheer scale that Hess enjoys there.
              In fact, Oxy is cutting spending in the Bakken to “virtually nil” this year, matching similar cuts across its gas-weighted Midcontinent holdings, Chazen said.
              ===========================================
              Oxy sale of Bakken assets would make strategic sense -analysts

              Reuters, Oct 7, 2014
              http://www.reuters.com/article/2014/10/07/occidentalpetroleum-bakken-idUSL2N0S22HI20141007

              Any sale of Occidental Petroleum Corp’s roughly 330,000 acres in North Dakota’s oil-rich Bakken shale formation would make strategic sense for the company, which is likely eager to strike a deal, two analysts said on Tuesday.
              Oxy is looking to sell its Bakken holdings, which are largely undeveloped, for as much as $3 billion, according to a report from Bloomberg News.
              Even with the recent dip in crude oil prices, the divestment “makes sense to us, strategically,” Raymond James analysts Pavel Molchanov and Kevin Smith said in a note to clients on Tuesday.
              “This is substantially undeveloped acreage, and Occidental has long cited it as a likely monetization candidate, so it’s been puzzling why the company kept it this long,” the analysts said.
              Oxy is spending about $510 million this year on its North Dakota holdings, and any buyer would have to invest significant capital to boost production. Currently, Oxy is the 18th-largest oil producer in North Dakota with about 17,000 barrels per day as of July, trailing peers of the same size and even much-smaller rivals.
              Oxy said last October that it would pursue “strategic alternatives” for some of its North American assets, including those in North Dakota. In a statement to Reuters on Tuesday, the company reiterated that position.
              ===============================================

              Occidental said to seek buyer for $3 billion Bakken oil business

              10/07/2014
              http://www.worldoil.com/Occidental-said-to-seek-buyer-for-3-billion-bakken-oil-business.html

              HOUSTON (Bloomberg) — Occidental Petroleum is seeking to sell oil assets in North Dakota for as much as $3 billion, people with knowledge of the matter said.
              Occidental is working with investment bank Tudor Pickering Holt & Co. to sell about 335,000 net drilling acres in the Williston Basin, said the people, who asked not to be identified because they were discussing private information. The holdings include a part of North Dakota’s Bakken formation, an area that has been less successful for Occidental because of higher costs, though it’s one of the fastest-growing oil-producing regions in the U.S.
              Melissa Schoeb, an Occidental spokeswoman, said the Houston-based company reported plans last year to “pursue strategic alternatives” for some assets, including in the Williston Basin.
              Occidental, CEO, Stephen I. Chazen has embraced a restructuring plan that includes selling part of Occidental’s Middle East business and spinning off the company’s California operations. Chazen told investors in July that he might accelerate plans to sell assets in what the company calls its “midcontinent” operations in the Piceance and Williston basins.
              ==============================================

              Will Oxy’s Divorce Spur The Break Up Of Big Oil?

              2/19/2014
              http://www.forbes.com/sites/christopherhelman/2014/02/19/will-oxys-divorce-encourage-the-break-up-of-big-oil/

              … Occidental Petroleum has decided to slim down as well.
              Oxy’s plan, announced last Friday, will be dramatic. Its California assets will be rolled into a separate publicly traded company … . Analyst Tim Rezvan with Sterne Agee expects Oxy to sell down its Middle Eastern and Bakken assets as well as its oil trading division in order to focus on Texas.
              =============================================
              Occidental Petroleum starts breakup plan in Middle East, North Africa

              Bloomberg, 10/18/2013

              The company said today it will pursue “strategic alternatives” for Mid-continent assets, including some in the oil-bearing Bakken shale of North Dakota as well as in the Hugoton gas field in Kansas and the Piceance gas fields in the Rocky Mountains.

        • Longtimber says:

          OMG – 33 Billion poof ball for Q3, Top 10 From link above. http://blog.evaluateenergy.com/us-oil-gas-company-earnings-take-a-huge-hit-in-q3-2015-impairments
          63 Billion USB went poof in the Enron Collapse.
          http://usatoday30.usatoday.com/money/energy/2002-01-22-enron-numbers.htm..
          Sportsfans- this is serious, and the train is still on the tracks.

          • I think this one was more impressive. These are “energy companies”.

            Evaluate Energy has analysed the preliminary Q3 earnings statements of 48 U.S. companies and compared it with their earnings in previous periods. The 48 companies had a combined total net loss of US$25.5 billion, which is a staggering 70% and 58% larger than these companies’ significant combined net losses of US$14.9 billion and US$16.6 billion in Q1 and Q2 2015 respectively.

             photo Net Income_zpsoxne1mv2.gif

            • AlexS says:

              In fact, the sharp increase in combined net losses was largely due to the increase in asset impairments.
              “Impairments are clearly the main reason for this continued downward trend”.
              Impairments are a non-cash item. My preliminary analysis of companies’ 3Q results suggests that operating cashflows remained close to 2Q levels, while capex was sharply reduced. As a result, cash burn was also considerably lower than in previous two quarters, and some companies were cash positive. However lower capex will likely results in lower 1h16 production volumes.

              • shallow sand says:

                AlexS. I agree with you.

                Do you have any statistics on gas/ oil ratio trend? Seems to me oil production is declining faster than gas and NGLs production for the oil weighted companies.

                I think Enno has posted that associated gas is not falling to the extent oil is, and this masks oil decline in the company headline reports. Have to look at each report/10Q.

                An example of this is SD, who saw Mid-Continent BOE production fall 10%, but oil fell 18%.

              • Heinrich Leopold says:

                AlexS,

                Asset impairments relate to revisions of reserves and resources. However, the main question is now did the revisions relate to oil and gas prices only or is there also a revision of the quantity of reserves due to faster than expected decline? Is there any way to find this out?

                • AlexS says:

                  Heinrich,

                  I think impairments mainly reflect the reduction in the value of the reserves (due to lower prices), rather than volumes.
                  There was no mention of faster decline rates

                  • shallow sand says:

                    I think it should be noted in the SEC reserve reports there are the following categories:

                    PDP – Proved Developed Producing
                    PDNP – Proved Developed Non-Producing
                    PUD- Proved Undeveloped

                    Although admittedly simplistic, and I stand to be corrected, PDP are active wells, PDNP are inactive wells and PUD are where there are no wells, but the locations have been “proved” by offsetting wells, and there are plans to drill and complete the location within 5 years.

                    All categories will be hit by WTI and Henry Hub prices being half of 2014, but also there should be a hit due to a number of PUD locations being no longer economically viable.

                    Banks traditionally lend money only on PDP reserves, or if PUD is included, there is a large discount applied, per Office of the Comptroller of the Currency regulations. Also, it should be noted SEC reserve valuations and bank reserve valuations are not necessarily the same. SEC uses the average of the price of WTI and Henry Hub on the first day of each month, with no escalation in the event of contango, nor deceleration in the event of futures backwardization.

                    Banks, on the other hand, use a price deck, which should closely mirror the WTI and Henry Hub strips, subject to maybe a little of the banks’ own forecasts on future prices.

                    As I have noted many times, total debt levels for all US companies operating in the Bakken, except for XOM, EOG and Abraxas will be greater than 65% of SEC PDP PV10 at 2015 year end, if my calculations are close. Prior to the shale boom, would have meant no further monies advanced using reserves as collateral, assuming bank price decks are close to the current strips.

                    Yes, this will include, companywide, the likes of COP, MRO, HES, QEP, CLR and WLL.

                    Another exception would be Statoil (not US), I did not include them, as I could not get a handle on their debt/PDP PV10. I did also not analyze Canadian firms operating in the Bakken. However, most Canadian shale firms have large amounts of long term debt, similar to US shale firms.

                  • Rune Likvern says:

                    Just dropping by and remembered an article (Linn Energy) from yesterday;
                    ”Non-cash impairment of long-lived assets of approximately $2.3 billion for the third quarter 2015, primarily driven by lower commodity prices and the Company’s estimates of proved reserves; and”
                    http://www.bloomberg.com/research/markets/news/article.asp?docKey=600-201511050650PRIMZONEFULLFEED6022751-1

                    More later if time allows……….

                  • Heinrich Leopold says:

                    AlexS,

                    If OXY devalues a property six times (initial estimated value $3bn – actual sale $500 mill) and the price of oil is down by half, then this must go with a substantial reduction in reserve/resource estimate. Usually a lower price goes always hand in hand with a reserve/resource reduction as lower prices reduce the reserve base. However, the reduction in this case is suspiciously high. Chesapeake CHK reduced its assets by half over one year and equity came down fourfold. This cannot be explained by the lower gas price alone as these impairments are huge and imply much lower cash flow from production in the future. This is why I think that the decline over next year will be much faster than many think. The companies cannot admit this publicly, yet the impairments are in my opinion hidden signals.

                  • I used to recommend timing impairment prior to the sec filing early in January. The impairment is based on the pv10 run which of course recalculated the reserves. It helps cut dead tissue.

  26. R Walter says:

    Humor time, mirth and laughter, hilarity, and so on.

    A local farmer paid a visit to the social security offices at a nearby city. He was applying for disability benefits, he thought he was eligible, 100 percent handicapped.

    The social security worker asked him why he thought he was eligible for benefits.

    “I lost my ass,” was his reply. 😁

    Back to peak oil, which happened about ten years ago and will happen sometime in the future again.

  27. The Wet One says:

    Huh.

    I would have thought the post would have already been up already. I guess I’m the first despite it being 2 or so hours later than the decision.

    Keystone XL rejected by Obama. http://www.cbc.ca/news/business/keystone-xl-pipeline-obama-1.3307440

  28. learner2 says:

    If all these companies are leaving the Bakken, where does that leave someone like OAS?

    • shallow sand says:

      OAS is well hedged in 2015, but not in 2016. $2.3+ billion of Long Term Debt, 50,000 BOEDP, 88% oil, a lot of non-core acreage. I posted recently they need $72-74 WTI to be cash flow neutral, not counting debt payments, and that interest expense is $8 per BOE.

  29. MarbleZeppelin says:

    Elon has big dreams for Tesla, eventually producing millions of cars per year.

    https://www.yahoo.com/autos/s/musk-expect-millions-teslas-500-183000469.html

  30. Just a couple of days ago the North Dakota Drilling rigs stood at 70. They closed out the day at 64. Why the sudden drop?

    • shallow sand says:

      Ron. I noticed that too.

      I am getting the vibe that sentiment in the Bakken is falling, given OXY taking 1/6 of what they wanted, Fidelity selling out and dissolving, Continental and EOG suspending most completions, etc.

      Also, I really appreciate this site, hopefully you will keep it going. Thank you for the work you do on it.

      • Doug Leighton says:

        Agreed. And all made possible by dudes like you Shallow.

        • Toolpush says:

          TRINIDAD 35 DENBURY ONSHORE CHSU ML24-14SH 15 SESW 14-131N-105W BOW 31981 33011015480000 10/14/2015 Re-entry of the Cedar Hills 21-22

          The top line of the rig report is interesting. This rig’s next well is for a work over or a re-frac. I wonder if this will become a more common operation.
          BH has Bakken at 63 rigs this week down for the 64 last week, when the govt figures were at 70. Were the other 6 rigs also work overs, or re-fraccing?

          Also BH has Eagles Ford down 3 more rigs to 72. I am sure they are racing with the Bakken on who can go the lowest?

          It was at this time last year, a lot of rigs were taken on contract, just before the Thank Giving Day massacre. I wonder how many were on 12 months contracts about to expire?

      • AlexS says:

        shallow sand,

        as per Baker Hughes, oil rig count in the Bakken is at least more resilient compared with the Eagle Ford

        Active oil rigs in the Bakken and Eagle Ford

    • AlexS says:

      Ron,

      According to Baker Hughes, ND rig count is 63, up 1 rig from last week.
      Including 1 rig in Montana, total Williston basin rig count is 64 (all drilling for oil)
      Williston basin oil rig count is down 67.7% from last year’s peak.

      Eagle Ford: 61 oil rigs (down 3 units from last week) and 11 gas rigs (unchanged)
      Eagle Ford lost 22 oil rigs since the end of August – the biggest decline in relative terms (-26.5% vs. -12.3% for the Bakken and -10% for the Permian basin).
      EFS oil rig count is down 69.8% from last year’s peak, also the biggest decline among the key LTO basins.

      Permian: 226 oil rigs (up 4 units) +6 gas rigs (down 1 unit)
      Permian basin oil rig count is down 59.2% from last year’s peak.

      DJ-Niobrara: 27 oil rigs (up 1 unit) and 0 gas rigs (down 1 unit).
      Surprisingly, Niobrara oil rig count, which has shown the fastest decline rates in the end of 2014 and in the first quarter of this year, has stabilized in 2Q15 and was increasing since early July.
      Hence DJ-Niobrara oil rig count is down only 46% from last year’s peak.

      Total U.S. oil rig count is down 6 units from last week, down 103 units (-15.3%) from the end of August and -64.4% from last year’s peak.
      U.S. gas rig count is 199, up 2 units from the previous week.

      % change in oil rig count by key U.S. tight oil plays

    • AlexS says:

      The best performer among the U.S. shale basins is still Cana Woodford (SCOOP, STACK, Springer shale), where the rig count is down only 31% from early October 2014. However over the past 10 weeks Cana Woodford lost 8 rigs (-21.6%). This week oil rig count is 29, down 3 units.

      The biggest declines among second-tier shale basins were in Granite Wash and the Mississippian, which lost 88% and 82% of oil rigs since October 2014.

      “Other” (conventional basins) oil rig count is down 9 units this week, 17 rigs over the past 10 weeks (-11.2%) and
      -66.9% since October 2014.

      % change in oil rig count in second-tier U.S. tight oil plays and in conventional basins

      • Toolpush says:

        Thanks Alex,

        You express yourself, so much better than I ever can!

      • Enno Peters says:

        Thanks All,

        I read in the transcript of CLRs 3Q conference call that they currently have 8 rigs in the Bakken, but that if the current pricing environment persists, they may lose another 5 rigs some time next year, once the contracts expire. So existing rig contracts definitely add to the inertia that we’re seeing. It looks like they almost lost complete interest in the Bakken.

        Another interesting note I found is that they said that the company wide decline is in the mid 30s on an annual basis. Unsurprising, but I didn’t expect them to reveal this.

        • Watcher says:

          So existing rig contracts definitely add to the inertia that we’re seeing. It looks like they almost lost complete interest in the Bakken.

          Good call. The cancellation fee may cost more than doing some drilling. I researched their Oklahoma situation and they apparently found oil geologically above their original target depth, which enables them to use the same holes drilled and to avoid cost of buying new leases.

          What did you mean by company wide decline in the mid 30s?

          • shallow sand says:

            Means wells put on though end of Q3 2015 company wide will decline by 35% or about 60,000 BOEPD by Q3 2016.

        • shallow sand says:

          Enno. I read the CC after I saw your post. Looks like nobody wanted to talk about Bakken. Strange turn of events for CLR.

          Also explained how they will add wells in Bakken with no completion crews. The wells are completed, they just aren’t in a hurry to put them on production. Wow.

  31. ezrydermike says:

    from Chris Rhodes…

    The Global Oil Supply: Implications for Biodiversity?

    “Much attention is given to global carbon emissions and climate change, and rightfully so, yet this is just one feature of the “changing climate”. Many challenges that confront humankind (“The World’s Woes”) are often regarded as though they are individual problems, but actually are merely symptoms of a single problem – a too rapid consumption of resources of all kinds, and the attendant consequences. Some of these are:

    • Carbon emissions: leading to global warming and climate change.
    • Population increase: 9.5 billion by 2050, possibly rising to 11 billion by 2100?
    • Declining (“peak”) resources: water, oil, gas, coal, uranium, metals, phosphorus, soil, fish stocks.
    • Land degradation: soil erosion – desertification. 30% of global arable land has become unproductive in the past 40 years, and much of this has been abandoned. The connection between soil and water via the hydrologic cycle means that the degradation of soil leads to increased drought, but also flooding.
    • Loss of biodiversity: it is believed that we are in the midst of the “Sixth Mass Extinction”, since the current rate of biodiversity loss is estimated to be at least as high as (or even higher than) occurred in the previous five mass extinctions.
    • Increasing poverty: rising food costs, high prices of imported fertilizers, unfair global trade practices.”

    http://ergobalance.blogspot.co.uk/2015/10/the-global-oil-supply-implications-for.html

  32. ezrydermike says:

    Thank you Ron Patterson for an excellent site.

    • ChiefEngineer says:

      Yes, thank you Ron for carrying forward some of the best parts of TOD.

  33. R Walter says:

    There are 13,000 wells in the Williston Basin that pump oil. Somebody has to go out and get it. I suppose they could shut it all down, screech to a halt, but then the price would rise overnight. The oil would flow again as soon as that would happen.

    The oil will flow, it flowed at two dollars per barrel in 1951, it did at a buck a barrel in 1940, it did during the Civil War at eight dollars, it flows at a hundred bucks, it will flow at 45 dollars.

    Price does not matter, it will flow. Seems like the price should matter, but it just does not.

    Just how it is.

    • Watcher says:

      I still don’t know if this is understood.

      Money is something of value only from agreement of parties. It’s not joules. It’s imaginary.

      If you had to pay for air, you would. If you didn’t have the money to pay for air, you’d borrow it to pay for it. If you were not going to repay the loan, the lender lends it anyway because the lender would have no society to live in if everyone died for lack of air — and what he’s lending is an imaginary substance.

      Oil is as necessary as air.

      • Fred Magyar says:

        Oil is as necessary as air.

        Hmm, 3.8 billion years of life on this planet without oil being necessary and suddenly we can’t live without it?! Sorry, I’m not buying it!

        • Doug Leighton says:

          I think Watcher is talking about the real world, the one with 7.5 billion souls all dreaming about living like Texas billionaires. I shouldn’t have said ALL, there is that 0.05% who dream about living off sunshine. BTW, the only person I know who drives an EV is a Norwegian petroleum engineer, most have F250/350 Ford trucks among their collection of ICEs. Yes, I know Fred, things are changing — slowly.

        • Hmm, 3.8 billion years of life on this planet without oil being necessary and suddenly we can’t live without it?! Sorry, I’m not buying it!

          Absolutely correct Fred. The world can probably support one billion people without oil. Or pretty close to a billion anyway.

          • Fred Magyar says:

            Tried to post a table showing biomass of different organisms on earth, it didn’t format correctly so I deleted it. Suffice it to say that in terms of total biomass humans aren’t all that significant. Life does and has done quite well on earth without oil. If humans really can’t manage without it then I guess the fears of die off are justified. Personally I fully expect a rather significant reduction in human population over the next couple of decades. The human population was at roughly one billion at the beginning of the 19th century and many civilizations had come and gone without using a drop of oil by that time. So it is possible to have some sort of civilization without oil.

      • R Walter says:

        Isn’t there a power plant out there that burns discarded banknotes?

        Money is joules!

        http://www.telegraph.co.uk/finance/newsbysector/energy/11287488/A-Chinese-city-is-burning-money-for-power-instead-of-coal.html

        • ChiefEngineer says:

          Yes, it’s called the internet. I can log on to my banks website and pay anybody without touching a greenback. I can slide my card at the checkout stand and never touch a greenback. One can even wave their phone at the at the checkout to pay.

      • Ves says:

        Watcher,
        But why the 1700 drilling rigs are not roaming around North America if are at the point that money does not matter? It is 662 and rapidly going down. Maybe the truth is there is nothing to drill that is worth drilling regardless of how we define the concept of money.

        • Watcher says:

          Guys, yeah, you have to use the numbers in your accounts for day to day life.

          But the obfuscation HAPPENED. Mark to Market was abrogated. Bank balance sheets were about to be the definition of insolvent but FASB changed the rules on evaluating the price of Mortgage Backed Securities. Banks could declare them to be big numbers rather than zero. Presto. Money existed. Ditto solvency. And bonuses.

          But because we move numbers from our accounts in return for food, we find it convenient to forget what happened just 6 yrs ago, and believe that it won’t ever ever ever ever happen again. No, that was a one time thing. Money is back to being real and concrete again.

          That’s just willful delusion.

          • Ves says:

            You can create illusion with concepts of wealth but only up to the point. But nobody is arguing about that. But the facts are:
            1) oil rigs are waaaay down
            2) oil related unemployment is waaaay up
            3) US oil production is down
            4) Grandma & Grandpa lost money buying oil companies stocks regardless what big numbers banks declare.

            Throw in a concept of time and you don’t have to be Nostradamus to see what will happen in a year with NA oil production.

            • Watcher says:

              FYI Suncor, the oil sands yardstick

              Nov 2014 expected production for 2015 540K-585K BOE/d

              July 2015 expected production for 2015 550K-595K BOE/d

              Down?

              • Ves says:

                I am sorry Watcher but there is no drilling involved in oil sands production. And it is the most extreme marginal case of oil exploitation. Suncor would love to shut down production at these prices but it can’t because it is even more expensive then producing at these price. In one word Boondoggle like Concorde used to be.

                • Ovi says:

                  Boondoggle Eh! Up 10% over last month.

                  Suncor Energy Q3 Earnings Beat on Solid Refinery Utilization

                  Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. SU reported third-quarter 2015 operating earnings per share of 28 Canadian cents (21 US cents), breezing past the Zacks Consensus Estimate of 9 US cents. Strong refinery utilizations along with higher contributions from Oil Sands operations led to the improvement. A weak crude pricing environment, however, partially dampened the results.

                  However, the reported earnings deteriorated from the year-ago quarter level of 89 Canadian cents. Quarterly revenues of C$7.6 billion also decreased significantly from C$10.3 billion in the year-ago quarter.

                  Quarterly operating earnings of C$410 million were significantly lower than C$1.3 billion recorded a year ago. Moreover, cash flow from operations decreased to C$1.9 billion from C$2.3 billion in the third quarter of 2014.

                  • Ves says:

                    ” Up 10% over last month.”

                    If you bought Tesla few years ago you would be up 10.000%. So what is your point?

                • Danny says:

                  The surface mining in the ft. Mac area (Suncor, Syncrude) is only a small part of the Canadian “oil sands”. The majority of bitumen production is done via sagd, which utilize drilled wells. These wells also require a bit of other infastructure as they are tied to plants for steam, water separation ect.

                  Production rates off sagd wels is quite flat, which is why you wont see production falling off, but make no mistake, drilling and associated construction have been slashed considerably.

                  • Ves says:

                    It is NOT conventional production. Of course it is flat and not falling because you have to pay interest and principal on 100’s of billions of sunk cost investment. Do you even know what “sunk cost fallacy”means ?

                • coffeeguyzz says:

                  Ves

                  ” …no drilling involved in oil sands production”.

                  Apparently you are unfamiliar with both Suncor and the entire SAGD process.

                  A few minutes Googling may prove both instructive and surprising.

                • coffeeguyzz says:

                  For those interested in cutting edge SAGD stuff, possibly including Ves, the WSJ had a fascinating piece on October 6, 2015 describing miniature, modular SAGD facilities that might be profitable in Saskatchewan at $40/bbl.
                  These are pre-manufactured facilities of varying capcities that can be quickly assembled onsite and put into production far more rapidly and cheaply than the big units in use up till now.

                  If this approach continues to prove viable, far more resource may open up to economic production in western Canada.

                  • Ves says:

                    Coffee you are hilarious. You read something in that rag of the paper called WSJ and you want to inform me what is happening in my neighborhood. Wow, that is fascinating.

                    They say $40 breakeven?!! Wow!! Let me tell you one thing that former oil patch people in Saskatchewan are back to farming grain & canola & peas and they have a message to inventors of those miniature/modular SAGD facilities to stick those units somewhere on Mars.

                  • coffeeguyzz says:

                    … as per Mark Twain …

                    “It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt”.

                  • Fred Magyar says:

                    They say $40 breakeven?!! Wow!! Let me tell you one thing that former oil patch people in Saskatchewan are back to farming grain & canola & peas and they have a message to inventors of those miniature/modular SAGD facilities to stick those units somewhere on Mars.

                    LOL! I hear NASA is looking for astronauts to go on a suicide mission to Mars maybe they could take some of those modular SAGD facilities with them…

                    I think I’d rather work with people like Dr. Carmen Hijosa – Founder, CEO, Design & Product Development of Ananas-anam (London-Barcelona)

                    http://www.ananas-anam.com/pinatex/

                    They are still using a tiny bit of oil in their product line in the form of a petroleum based coating on their material, pinatex but are working to get rid of even those last small amounts. There are thousands of scientists, thinkers, designers, farmers, business people, entrepreneurs, etc… out there who are putting all their energy into ending the oil age. I think they are starting to make a serious dent and helping to usher in the end of the age of oil much faster than any of us had anticipated.

                  • Ves says:

                    Coffee,
                    Wow, beside you knowing everything about natural gas plays in Pennsylvania, you also know everything about Canada oil production, and you even read few books based on given Mark Twain quotes! Have you actually read the book or you just google the quote 🙂
                    Wow, you know everything.

                  • Watcher says:

                    My quote of Suncor output expectations had nothing to do with superior technology. There are no significant developments of that sort.

                    The point was they also get funded to keep the ball rolling, even when it rolls badly. Their earnings surprise was from refining, not oil output, and since food appearing on your shelf depends on oil output and not earnings, watching earnings is watching the wrong thing.

                    They are every bit as capable of flowing oil at a loss as everyone else.

                  • Ves says:

                    Watcher,
                    Sure, I agree with you that game of extend & pretend can go little bit longer but tell me for how long? For how long do you expect oil companies to have negative cash flow? 1 year, 2 year, forever?
                    I mean Harold Hamm is all dressed up but there is nowhere for him to go and drill.

  34. R Walter says:

    ‘No matter how you struggle and strive, you’ll never get out of this world alive’ – Hank Williams

    Looks like battery systems are developing just fine.

    “PRIMOVE wireless charging builds on the vision of a city where all vehicles are electric, emission-free and quiet. No pollution, no fumes, no noise; without catenaries, cables, wires or plugs – completely invisible and automatic. PRIMOVE e-mobility doesn’t change driving habits or journey times.”

    http://primove.bombardier.com/products/charging.html

    BBD.B on the Toronto Stock Exchange

    It’s at 1.52 USD, lower than I’ve seen it in several years. Maybe they’ll be OK in the long run, nobody really knows anymore.

    I’ve been watching Bombardier for years as a potential ‘buy’. It is maybe in the ‘buy’ range now. I do not own any, just so you know.

    I’ve been breathing air for years, helps keep me alive. It’s a gas, every time I fill my lungs with some, it gets me to where I’m going. 😊

    • Longtimber says:

      WTF.. Do we need wireless calories also … bypassing the teeth?
      Not 4 me, I love eatings and I love cables.
      Fast Charging is Like Fast Food. Elon’s liquid cooled megawatt
      charging cables? Humph ! I WANT IT and I WANT IT NOW
      Cut and paste removing the **
      **https://www.youtube.com/watch?v=xFhptbSPn8w

  35. Jeju-islander says:

    The downturn in offshore oil exploration is hitting the Korean shipbuilding industry hard.
    “The total third-quarter losses for the nation’s big three – Hyundai Heavy Industries (HHI), Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries – increased by 313.8 billion won ($275.3 million) from the 1.81 trillion won reported last week due to foreign clients cancelling orders”
    Cancellations include a semi-submersible drilling ship for Fred Olsen Energy, a semi-submersible oil drilling rig for Seadrill, and a drill ship for Pacific Drilling.
    see http://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3011211

    • Greenbub says:

      Their contracts favor the customer. Plus, they have been making mistakes and giving customers reason to cancel orders.

  36. Old Farmer Mac says:

    Back to Dennis from way up thread,

    My Dad USED to have a fine mind, although he grew up in one of the poorest parts of the country during the Depression and thus had no opportunity to get more than a little basic schooling, and that in a one room school run by a badly overworked old maid teacher.

    So – He USED to think quite competently, using such data as he DID possess, and his own experiences, accumulated, which we usually refer to as common sense.He does not think much these days , his body is outliving his brain.

    He is or was for all intents and purposes utterly ignorant of astronomy, and a few years ago one of his equally old friends said the moon shots were bullshit because “everybody knows there ain’t even no air out there in outer space ” or something to that effect. So he asked me about that, and I said it is true , but the spaceship is sealed and pumped up with air like a tire, and given that he had an excellent knowledge of practical physics and mechanics, he got it instantly. So he never questioned the moon shots, he just accepted them in the same way he accepted the evidence the Earth is round, because nobody has ever found an edge to fall off of, and he has talked on the phone with somebody ( my baby sister ) on the other side of the Earth etc basically watching the sun set while she watched it rise.

    It is interesting to point out that people who lack education can THINK quite as well as those with doctorates, the only real difference being that they have less data to work with.

    The most interesting aspect of his thinking about a moon shot is that he just accepted it as one more routine occurrence without ever appreciating what was involved.

    Now to get to the point, of course most people did not expect men to go to the moon within their lifetimes.

    MY POINT is that damned few men have ever been to the moon, and the odds are extremely high that damned few men WILL be going to the moon,at least not within the next few decades.

    There is a hell of a difference between a technically proven possibility and an economically feasible technology.

    Things are not going to change in any truly fundamental way on the farm anytime soon because the way we do things now works extremely well, in terms of utilization of manpower on modern mechanized farms. Not many farmers are going to trade in their equipment in order to save a few bucks in operators wages. Operators “seat time ” wages are a rather minor line item on a large scale operation, and small scale operators have a hell of a hard time just staying in business, never mind investing in lots of brand new state of the art equipment.

    For the next decade or two, any really serious change, GAME CHANGING CHANGE,IF SUCH CHANGE COMES, is going to come on the genetic engineering front.

    A few cutting edge farmers will have self driving tractors most likely.A self driving tractor is a technical piece of cake compared to a self driving car, which is why they were invented sooner than self driving cars.. But getting rid of the tractor operator is not so simple, given that the operator generally has many other duties and actually operates a tractor or other machine relatively few hours except during planting and harvesting seasons. A few people will have self driving cars, near term. Not very many.

    The very people who are most concerned about the ecological damages associated with current day industrial style farming are paradoxically the same people who will prevent any real change in the way we go about doing it SOON because they are utterly and absolutely opposed to the adoption of the necessary KEY new technology, namely genetic engineering.

    If you care to go exploring sites such as RESILIENCE, you will find tons of pie in the sky schemes promoted day after day by dreamers who simply haven’t got a CLUE as to what they are talking about. Sometimes the things they propose will or might work, from the technical pov.

    But when somebody proposes a scheme for farming that involves growing our food LOCALLY and buying and selling it in farmers markets and going organic all the way ………. Well , they have their heads so far up their backsides they will NEVER see daylight. We just aren’t going to all move out of our comfy digs and go out in the countryside and live in non existent housing and take up mucking around in the dirt, at least not anytime SOON. Maybe LATER we will, since we might not have any other option.

    For now we will continue to live in places like New York City and eat sorta kinda fresh tomatoes in January grown in faraway places such as California or Mexico.

    For the foreseeable future, it will be possible to grow wheat and corn in giant fields in farm country for a rather minor fraction of the cost of them grown by somebody using such small scale methods as you read about at Resilience. For the foreseeable future, the people who live in mcmansions are going to HAVE a cow if any body proposes actually HAVING a cow within say FIVE MILES of their castle. Twenty five miles would suit them better, because they might otherwise happen to catch a whiff of cow once in a while, otherwise, in the event they have rolled a car window down for some obscure reason.

    I am not saying change is not coming, but rather that it is not coming nearly as fast as most of the optimists here in this forum seem to think it is.

    • Old Farmer Mac says:

      Change for the worse might arrive a WHOLE LOT sooner than even the pessimists in this forum expect it.

      OLD MAN BUSINESS AS USUAL has about half a dozen potentially fatal chronic health issues, any of which could flare up and finish him off any day or any year. OTOH, he might continue to stumble along, and the Technology Doctors might come up with treatments for some of his troubles, allowing him to continue to stumble along for a couple of decades or maybe even longer. A treatment does not necessarily have to be a CURE.

      The TECH DOCTORS can treat oil addiction with the electric automobile, which is potentially a good enough treatment for oil addiction to allow us to continue to live as oil addicts considerably longer than otherwise..leaving the dregs of the oil endowment for trucking, maybe until such time as rail retakes the trucking market. ETC.

      But OLD MAN BAU’S FUNERAL is not an IF question. It’s a WHEN question. We are too many and resources are too short for tech to save most of us at this late date.

      Every once in a while we all need a dosing with Fernando’s renewables sarcasm medicine. The RESOURCES necessary to transition from today’s FF BAU paradigm to a renewables based new generation low energy low environmental impact society exist in sufficient quantity if we were to go at it on a permanent war time footing starting yesterday.

      BUT the will power and collective intelligence necessary for the transition most certainly do not.

      GIVEN enough Pearl Harbor Wake Up Bricks upside our collective head, the various Leviathans might arouse themselves and manage the problem well enough for a few countries to pull thru more or less whole, given the enormous amount of currently wasted resources that COULD BE DIVERTED to sustainability.

      So long as the air remains breathable, a Fortress North America could survive as an industrial civilization indefinitely. I am not PREDICTING such a future super nation, but rather merely pointing it out like a teaser for a future history novel.

      Renewables cannot support todays version of BAU, but otoh they do not HAVE to, over time we CAN transition to a low energy economy, at least in principle. There are resources enough left in North America for such a transition to be a realistic possibility, if they were to be properly conserved and used wisely.

      The DEMOGRAPHY PROBLEM is NOT an existential issue for the USA and Canada- if we collectively display brains and resolution enough to very sharply limit immigration. It will solve itself before we run seriously short of food, water and shelter, assuming we run SHORT ENOUGH of R type politicians. 😉

      If I were as rich as Bill Gates, one of the first things I would do is give every young woman in this entire country a totally free supply of birth control drugs, including necessary minimal professional health care services relating to birth control, and a BONUS in folding green cash every couple of years she does NOT have a baby. Plus a little gold pin to wear proving her environmental and ecological bonafides.

      ONE thing that seems to be invariably overlooked, in any scenario with a falling population, is that the NEED for NEW housing, roads, schools, hospitals, airports, highways, water treatment plants, automobile assembly lines, tractors, trucks, fast food joints, etc etc etc ad infinitium will be SUBSTANTIALLY reduced.

      Manpower will be plentiful, even if energy and materials are not, and refurbishing older infrastructure to state of the art energy efficiency standards is substantially cheaper than building new- assuming cheap labor.

      Unless it burns, somebody is going to live in our modernized old farm house for a century, or maybe two centuries. Maybe even three or four or five centuries, if it is meticulously maintained.

      Once upon a time I lived for a little while in an efficiency apartment in an old mansion in that had been converted from a one per centers type residence into NINE apartments. It was great, the place was a never ending party spot, for those young enough to enjoy such an environment. Body heat and appliances kept it tolerably warm in the winter, and open windows kept it at least bearable in the summer. Bars, restaurants, and a supermarket were all within walkable distances, but getting to class meant a car, a bus ticket, or a bicycle, campus was a couple of miles.

  37. Fred Magyar says:

    I am not saying change is not coming, but rather that it is not coming nearly as fast as most of the optimists here in this forum seem to think it is.

    Hey OFM, check out some of these ideas and tell me what you think! I think change is coming much faster than any of us thinks! None of these people and ideas are pie in the sky they are all business people with fantastic innovative ideas.

    https://www.thinkdif.co/schedule/catchup#materials

    • oldfarmermac says:

      Hi Fred.

      The links are long on getting you to register and building hope, but essentially without any actual content.

      To take just the very first one I clicked on, this guy is proposing to install some sort of plastic composite facade on buildings in order to conduct a little photosynthesis.Getting any actual FOOD or fiber off such a wall would be a fit scenario for a Three Stooges movie- unless you also assume cheap robotic drone harvesters. And built in pipes to carry water and nutrients and maybe pesticide applications?

      I do not doubt technically it can be done, but the cost of doing so would no doubt in my mind be three or more orders of magnitude greater than the cost of just replanting a bit of forest someplace in terms of removing co2 from the air.

      Now the one remaining local furniture factory has managed to achieve nearly complete recycling of all plant waste within the last couple of years, with a positive impact on the bottom line. But they were ninety percent of the way there ten or fifteen years ago so the impact of this improvement is rather minimal.

      New technologies such as the cell phone required only minimal new infrastructure in relation to the value to the customer and revenues generated for the producers.

      After poking around a few minutes looking at the stuff in the link, I am comfortable betting most of the things touted will be forgotten in a couple of decades, but some of them will likely be widely adopted on an INCREMENTAL basis.

      One or two might actually turn out to be game changers- but most likely not within the next two or three decades.

      Take one of your favorite toys/ tools / potential game changers for instance, bamboo. It can be manufactured into excellent flooring, and probably into sheets comparable to plywood or chipboard just as well as wood chips, although I have not personally seen any bamboo chip board or ersatz plywood.

      But a bamboo bicycle still requires a whole bunch of metal parts, and my guess is that metal will stay cheap enough that all metal bikes will be cheaper than bamboo bikes for the easily foreseeable future.

      So bamboo will not be a game changer on the grand scale, trees and real plywood will probably be cheaper for the rest of your life and mine, or at least for the easily foreseeable future.

      Truly major technological change, the kind of change that CHANGES EVERYTHING, is going to take a long time to arrive, in human terms.

      Now in historical terms, such change may arrive more or less over night, and probably will.

      But most of the change will come during the “just before dawn hours”, whereas collapse due to overshoot is almost for sure going to come earlier in the night.

      Recently I find myself playing the pessimist gadfly role when it comes to technology saving our collective butt.

      • Fred Magyar says:

        Recently I find myself playing the pessimist gadfly role when it comes to technology saving our collective butt.

        Fair enough! Though my point is not that I expect any particular technology to save our collective butts! I expect to live through a period of massive disruption and witness a change from our current way of doing things. I’m not making any predictions just saying I’m seeing the seeds of that change being sown everywhere I look.
        And you are right 9 out of 10 new ideas never make it it the market place of ideas but the one out of ten that do tend to dramatically change the world.

        BTW the Disruptive Innovation Festival that I linked to is something sponsored in part by The Ellen MacArthur foundation. These are some of their global partners: Cisco, Google, H&M, KingFisher, Phillips, Renault, Unilever, to name a few. I think those are some pretty solid businesses. Not a lot of pie in the sky folk in that group. It also goes back to something we have discussed on this forum before. The new smart money wealth of the Silicon Valley style entrepreneur understands disruption a la, Uber, Airbnb, EV’s driverless car technology etc… They are putting their money behind these ideas. They of all people know that the chances for success of any one technology is minimal but they also know they need to sow a lot of seeds to get a few great results.

        I’m betting with them against the old fossil fuel based linear style consumptive model and for a more regenerative dynamic system. We shouldn’t discount Tony Seba’s insights about disruption out of hand. Don’t forget that scene in New York of a street in 1900 full of horse drawn carriages and only 13 years later the same street full of horseless carriages. How many people saw what was coming back in 1900?

        Right now there is an almost perfect storm of disruptive technologies happening in multiple areas of the economy the potential synergies are mind boggling. Just imagine combining desktop 3D additive printing technology with the water based chemistry set used by nature as explained by Jenine Benyus https://goo.gl/mmgNqr

        So at least for the time being, I have decided to take on the (uncharacteristic for me) role of the optimistic gadfly! 🙂

    • R Walter says:

      Fred is just too wise and much too knowledgeable for humanity.

      I suspect he might have alien origins and has a spaceship to board when the moment of collapse begins.

      Fred is on fire, call Boots and Coots. 😊

      • Fred Magyar says:

        I suspect he might have alien origins and has a spaceship to board when the moment of collapse begins.

        Unfortunately I missed the last spaceship and now I’m stranded on this planet for the next thousand years, so I’m forced to make the best of it on my own… 🙂

        “The Martians” was the name of a group of prominent scientists (mostly, but not exclusively physicists and mathematicians) who emigrated from Hungary to the United States in the early half of the 20th century.[1] They included, among others, Theodore von Kármán, John von Neumann, Paul Halmos, Eugene Wigner, Edward Teller, George Pólya, and Paul Erdős. They received the name from a fellow Martian Leó Szilárd, who jokingly suggested that Hungary was a front for aliens from Mars. (This is analogous to Enrico Fermi’s answer to the question whether extraterrestrial beings exist: “Of course, they are already here among us: they just call themselves Hungarians.”)

        As I said, I’ll just have to do my best to single handedly ward off collapse for at least the next thousand years. I have an earthling son and he deserves better! 🙂

  38. shallow sand says:

    Saw that a non-operated interest in the SACROC unit is for sale on the auction. For those who haven’t heard of it, one of the largest CO2 floods in the US, 34,000 BOPD, operated by Kinder Morgan, cumulative oil production nearing 1.3 billion barrels.

    OPEX $29.42. CAPEX $18.40, both per BOE. That is for 12 month period 7/14 to 6/15.

    If SACROC is any indication, CO2 floods getting hurt badly.

    Got me to thinking, we assume Gulf OPEC lifting is very low. Have to wonder about that in the old fields which are under secondary and tertiary production. I am not saying costs anything like US secondary and tertiary, but I wonder about $1-5 OPEX also. Furthermore, as in the case of SACROC, CAPEX is constant, and not discretionary in many cases.

  39. Draft says:

    I’m trying to convince some somewhat skeptical (but influential) folks about the impact peak oil will have on agriculture, especially 15-20 years from now when oil and gas production will be on the decline, and I’m looking for reports or studies that are peak-oil aware that I can cite.

    Does anyone know of any such reports? Something official-ish is best — IEA, EIA, or some other agency, or a paper published in some big-name science journal. If it talks about the impact of climate change, that’s even better. I was thinking of citing the Hirsch report, for lack of anything better, but that’s pre-shale boom and they’ll probably dismiss it on those grounds, plus it doesn’t talk about agriculture.

  40. shallow sand says:

    Might be of interest to those who care about oil and gas debt.

    The Fed, FDIC and OCC released a joint statement 11/5, disclosing after a thorough review of oil and gas debt held by banks ($243 billion) the percentage rated substandard or worse rose from 3.6% in 2014 to 15.0% in 2015.

    Banker friend of mine says this is big. Although oil and gas debt is only slightly more than 6% of total loans of $3.9 trillion held by US banks, this increase moved the needle on total bank loans with ratings of substandard or worse.

    • AlexS says:

      shallow sand

      Thanks for the information. Do you have a link to this statement?

      • shallow sand says:

        Go to FDIC website. It is the most recent press release. I note I made an error, oil loans are 7.1% of all bank loans, over $271 billion.

  41. shallow sand says:

    Also, for a view of US conventional pain, look at California Resources Corporation, the production that OXY spun off (and saddled with over $6 billion of debt).

    This is generally good mature, low decline, conventional production. The Q3 press release is easy to read.

    Bottom line, they cannot hold production flat and remain cash flow neutral, IMO.

    When I look at how we did at year end, I add up everything that went into the checking account, and subtract everything that went out. I bet at year end, very few US oil companies will have had more oil income go in the account than monies going out.

    This is likely true in other parts of the world. Given the carnage, are we setting up for another super shock in a few years.

  42. R Walter says:

    The price of crude per tonne is 37,210 ¥, $307.50.

    500,000 metric tons bought at $307.50 each.

    Japan spends $153,760,330 each day for crude oil.

    If the entire world burns 73,000,000 barrels per day, 10 million tonnes, the price to pay each day totals $3,075,000,000. About 45¢ per day for every fun loving happy go lucky fortunate soul walking and talking among the crowd.

    In other words, if you are spending more than 45¢ each day for some oil, the other 7,299,999,999 are subsidizing your profligate habits.

    A simple penny tax per day per capita for all of the hapless eggheads roaming the earth would amount to $73,000,000 each day. That amount would bail out the shale producers in about 1.5 years if the total debt for shale development is $300,000,000,000.

    A penny a day from every poor sap on the planet could save the day for Whiting, EOG, OAS, and the rest of the pack.

    Every investment bank like Goldman and Deutsche would become solvent.

    No need to walk up to Capitol Hill with hat in hand wearing sack cloth and covered with ashes to panhandle for another trillion dollars to save the banking industry.

    The US gov could add another penny per capita tax and have a steady stream of revenue from all 7.3 billion world citizens and reduce the tax burden on the 308 million Americans paying through the nose now.

    An immigration tax, since everybody on earth is clamoring to be somewhere other than where they are, and the US is the first choice, it is only fair to allow the US gov to have another $73,000,000 each day to fritter out the window.

    Call it God’s Work to give it credence.

    A penny a day could save the world’s money troubles.

    Imagine the possibilities for just one cent.

    Of course, it would just all end up as another trillion in debt, Congress would apply for another trillion dollar loan immediately.

    7.3 billion people need to lend a helping hand instead of always begging for more, the filthy swine.

    How much is enough? Just a little bit more. – John D. Rockefeller

    Just kidding.

  43. Heinrich Leopold says:

    Time Lag between Spuds and Actual Production

    There is a time lag between the year over year change of spuds and actual production (see below chart) of around six months. During the period 2008/9 production recovered six months after the low in spuds. As the slowdown in 2014/15 is even steeper, production will recover not before April 2016 – even if oil prices recover significantly by year end and spuds start going up again. However, should oil prices stay low until mid next year, the chart below implies that production in the Bakken will decline 30% by year end 2016.

  44. oldfarmermac says:

    For anybody who doubts just how fragile a lot of modern civilization actually IS, read this .Carefully.

    ONE really big earth quake in a place noted for big quakes could take out the water management infrastructure essential to California as we know that state today.

    http://www.wired.com/2015/08/californias-katrina-coming/#slide-3

  45. oldfarmermac says:

    http://www.climatecentral.org/news/renewable-energy-supply-to-double-19650

    Hopefully renewable energy supplies will increase even faster, and barring the world economy crashing , I personally believe renewable energy supplies WILL increase faster.

    But this level of renewable energy supply will basically be a fossil fuel game EXTENDER rather than a fossil fuel game changer, over the same time frame.

    Of course I advocate keeping the pedal to the metal in terms of supporting renewable energy and conservation.

    The bigger the base of manufacturing capacity and the bigger the base of skilled workers capable of actually deploying renewables, once the fossil fuel supply DOO DOO hits the fan (perhaps I should say FAILS to hit the fan due to depletion and high prices ) the better our chances of pulling thru without things going mad max on us, at least in places such as the land of the free and the home of the brave.

    Doubling from say twenty percent renewable energy to forty percent will be ALMOST INFINITELY easier and MUCH MUCH faster than going from say ten percent to forty percent.

  46. shallow sand says:

    Most recent OPEC statistics are that 36,140 oil wells produced the 30.6829 million OPEC oil production in 2014.

    In 2010 OPEC had 35,272 oil wells producing.

    2010-2014, OPEC put 16,483 new wells on production. So they shut in 15,615 during 2010-2014?

    Further, they report it took over 1 million oil wells to produce the world’s non OPEC oil in 2014.

    Would appreciate comments on accuracy of this information.

  47. oldfarmermac says:

    http://www.theonion.com/graphic/beijing-fire-department-extinguishes-massive-five–51720

    NO TEXT with this pic but the pic itself is a belly laugh.

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