Post Carbon Institute’s LTO Reality Check

The Post Carbon Institute has just released a critique of the EIA’s Light Tight Oil projections. It is titled DRILLING DEEPER. The report is highly critical of the EIA’s projections and should be read by everyone interested in Peak Oil.

All data on all charts is in million barrels per day unless otherwise specified.

EIA Oil Projection

 First a look at the EIA oil projections for US production from all sources. They expect offshore to increase to 2 million barrels per day by 2016, an increase of almost 600,000 bpd from current production. Also note that the EIA has US almost peaking in 2016 and increasing only slightly until the peak in 2019.

EIA LTO Hi Lo Projection

The EIA has several projections, covering all bases. However the reference, or most likely, will be the only one covered in this post.

EIA LTO Projection

Here is where all the Light Tight Oil will be coming from. They have the Bakken peaking in 2016 at 1.1 million bpd and Eagle Ford peaking at about the same time at 1.5 to 1.6 million bpd.

While they have the Bakken and Eagle Ford peaking in 2016 all the rest continues to increase and peaks much later. And they have the rest declining faster than the Bakken and Eagle Ford.


They have all other tight oil plays peaking in 2028 at about 2.65 million bpd with the Austin Chalk and “Other” growing the most.


62% of all Shale oil is currently coming from the Bakken and Eagle Ford. But by 2028 the EIA says that will be reversed with over 60% coming from outside those two plays.

Bakken Decline Rate

We now have a much better handle on the decline rate. It is far worse than we thought, declining 72% the first year.

The Post Carbon Institute’s take on things are a little different. They have the initial production a little higher than the EIA but dropping off much faster.

PCI Realistic Case

 The Post Carbon Institute produced three cases, a Low Well Density Case, and Optimistic Case and a Realistic Case. And all three cases have three rates. In all cases the higher the initial production rate the faster the decline rate. I have posted here the Realistic Case.

EIA PCI Compare

Here we can see the difference in what the EIA predits and what the PCI predicts. The EIA has production still going relatively strong by 2040 while PCI has both the Bakken and Eagle Ford petering out.

EIA PCI Compare 2

That difference is made more clear in this chart.

Bakken Conclusions

1. High well- and field-decline rates mean a continued high rate of drilling is required to maintain, let alone increase, production. The observed 45% per year field decline rate requires the drilling of 1,470 wells per year just to maintain current production levels.

2. The production profile is most dependent on drilling rate and to a lesser extent the number of drilling locations (i.e., greatly increasing the number of drilling locations would not change the production profile nearly as much as changing the drilling rate). Drilling rate is determined by capital input, which currently is about $16 billion per year to drill 2,000 wells, not including leasing and other ancillary costs.

3. Peak production is highly likely to occur in the 2015 to 2017 timeframe and will occur at between 1.15 and 1.77 MMbbl/d. The most likely peak is between 1.15 and 1.22 MMbbl/d in the 2015 to 2016 timeframe.
4. Increased drilling rates will raise the level of peak production and move it forward a few months but do not appreciably increase cumulative oil recovery through 2040. Increased drilling rates effectively recover the oil sooner, making the supply situation worse later.

5. The projected recovery of 6.8 billion barrels by 2040 in the “Most Likely Rate” scenario (2,000 wells/year declining to 1,000 wells/year) of the “Realistic” case (80% of play drillable, at 3 wells per square mile), agrees fairly well with the mean estimate of latest USGS assessment of the Bakken (including the Three Forks) of 7.4 billion barrels.

6. These projections are optimistic in that they assume the capital will be available for the drilling “treadmill” that must be maintained (roughly $188 billion is needed to drill more than 23,500 wells, exclusive of leasing and ancillary costs). This is not a sure thing as drilling in the poorer-quality parts of the play will require much higher oil prices to be economic. Failure to maintain drilling rates will result in a steeper drop-off in production.

7. Nearly four times the current number of wells will be required to recover 6.8 billion barrels by 2040 in the “Realistic” case.

8. Projections that the Bakken will continue to grow and then maintain a plateau followed by a gentle decline for the foreseeable future51 are unlikely to be realized.

I have to add this. Five-Year Outlook: North Dakota Oil Production to Grow Steadily

On average, North Dakota oil production, which surged past the 1 million b/d mark earlier this year, will continue to grow steadily at a rate of about 18,000 b/d each month through 2019, according to a study completed in September for the state legislature.

Commissioned last year by state lawmakers, Bismarck-based engineering/planning firm Kadrmas, Lee & Jackson (KLJ) completed the work in partnership with North Dakota State University, concluding that daily production could hit the 2 million b/d level during the period.

KLJ and the university used three approaches to forecast the sustainability of oil and gas production: economic analysis of the Bakken/Three Forks shale formation; projections on population, employment and housing needs; and potential for enhanced oil recovery (EOR).

Got that, Bakken production will increase by an average of 18,000 barrels per day for the next 5+ years. 18,000 bpd increase just happens to be almost exactly what the Bakken has been averaging for the last 3 years. Here is what that chart will look like if they are correct.

Bakken KLJ Projection

So how do they plan on keeping production increasing at 18,000 bpd every month? Easy EOR! From that report:

EOR using carbon dioxide (CO2) injections to get extra production out of mature wells has the potential to increase overall production in North Dakota, the study pointed out. “In conjunction with other non-traditional technologies, such as horizontal drilling and hydraulic fracturing, CO2 EOR should be recognized as part of a long-term production strategy for North Dakota oilfields. Modeling and analysis proves there is significant opportunity.”

The primary challenges to EOR during the next five years, the study said, are the need to acquire sufficient volumes of CO2 and the oil/gas companies willingness to invest in EOR.

The study fails to mention that CO2 EOR has never been done on fractured non-porous reservoir rock. Here is how CO2 EOR works.


From an injection well you push CO2 into the reservoir. The pressurized CO2 combines with the oil and water and sweeps through the porous rock toward the well bore. But you can’t do that in a light tight oil reservoir. There are no injection wells in the LTO reservoir. And if there were it still wouldn’t work. The CO2 would hit one of the fractures in the rock and just channel all the CO2 right to the well bore and you would recover nothing but the CO2.

I did a little research and they tell me that the way they hope to do CO2 injection in a LTO field is just to push it down the original oil well bore under a lot of pressure, then let it come right back out. Okay but that sounds like it would be very inefficient. From what I read CO2 injection is already on the verge of being uneconomical.

But… there may be other ways of doing it. If you are in Atlanta from November 16th through the 21st then you can attend a seminar discussing just how it may be done. And you may be lucky. If they are looking for investors you may get in on the ground floor.

Evaluation of the EOR Potential in Shale Oil Reservoirs By CO2 Miscible Displacement Applied in Modified Zipper Fractured Horizontal Wells

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274 Responses to Post Carbon Institute’s LTO Reality Check

  1. Dennis Coyne says:

    Hi Ron,

    It is the Spraberry that grows the most (excluding Bakken and Eagle Ford).

  2. Old farmer mac says:

    My own gut feeling is that oil prices will be higher than most folks think and that the oil production both annually or daily and cumulatively from the tight oil fields will thus be at the high end of estimates simply because depletion of legacy conventional field will restrict supply enough to keep the price up.

    I believe this although I also believe we are going to adapt to higher oil prices faster and more successfully than most folks believe. This train of thought leads me to the conclusion that while there may well be a very deep recession associated with peak oil it may not be as so deep and disruptive as to totally destroy the business as usual economy.

    The consequences of peak oil are going to be determined to a very large extent by the shape of the production curve and the slope of the downside.If the peak turns out to be relatively flat and prolonged, a plateau rather than a spike, and production falls off slowly, there will be time to adapt to a substantial extent and we might be so lucky as to continue to live ” life (more or less) as we know it” after peak oil.

    Predicting as Yogi said is tough especially when it comes to the future.

    This link is about the change in attitudes about cars and car ownership among millennials.

    It is well worth the time needed to read it.

    Just because you have access to a shared ownership car does not mean you are going to drive it nearly as far or as often as you would a car of your own.If the cost of ownership of cars continues to go up and wages and salaries continue to stagnate then driving per capita will peak within the fairly near future. Total miles driven may peak as well.For what it is worth I expect both of these trends to continue uninterrupted.

    Shared ownership of automobiles may turn out to be one of the big mostly unanticipated changes in future lifestyles.

    If a younger homeowner decides to put just most of what he can save by avoiding the cost of owning a new car into upgrading his house in a decade or so he may well be the proud owner of a net zero energy house.

    Fifty grand will be enough to do the job in a lot of cases as the cost of renewables comes down and fifty grand is less than the price of one nice car and taxes and insurance and maintenance on it for a decade.

    As far as the rise of auto ownership in places such as India and China continuing to grow at the curent blistering place is concerned- I do not believe this is going to last. Peak oil will put a stop to it unless these markets are dominated by battery powered cars.

    Peak oil will also pretty much put an end to happy motoring even in the US..but we just might squeak thru peak oil without the country going entirely to hell in a hand basket.

    Volts and Leafs and fore and aft two seater super compact cars will be the norm eventually assuming peak oil arrives at a leisurely pace.If the peak is sharp and there is a shark fin decline in available oil …… Well in that case I recommend investing in survival gear and bomb shelters.

    I have a spot picked out to dig mine and the machinery and building materials on hand needed to construct it.If I ever hear anything out of Washington about embargoing oil shipments headed to Asia from Canada or Venezuela I am going to drop every thing else and fire up the backhoe and start digging that shelter.

    There is probably a ten percent per decade chance of a really bad disease such as ebola breaking out into the general population and quarantine measures failing to control it before it kills millions of people.

    The odds of a very hot oil war may not be any less and may be greater.

    • Boomer says:

      When do you suppose we will start seeing the oil industry itself facing the reality of peak oil? I suppose we have seen it a bit in that the major oil companies don’t seem to be sinking money into new projects.

      Companies working the Bakken and Eagle Ford must be aware of a projected peak in a couple of years even if they don’t want to tell investors that.

      As some companies are backing out of tar sand projects, that would suggest that maybe the Keystone pipeline might lose financial support.

      Are the companies still involved with high cost projects going to keep going if the price of oil is high enough? Or are more companies going to rethink projects? Of course, that implies companies think in terms of mid and long term, and we have seen that many companies only think in the short term even if that turns out to lead to a dead end that they could predict if they thought beyond the next quarter.

      • thrig says:

        When? How about March 20th, 2014, “age of austerity” seems pretty telling.

        On long-term thinking, some DOT do finally seem to be coming around, and now project less endless exponential growth and more flatlined demand (p. 27):

        which is probably bad news for debt service and road maintenance, and it’s not like they’ve really been maintaining the roads over the last, oh, two decades or so in Seattle, some arterial funds from bridging the gap taxes aside. Can’t wait to see the sticker shock when maintenance comes due on I-5 through the Seattle core… will the car drivers bluff, fold, or pay their money down?

        • Boomer II says:

          I haven’t been able to post any comments for several days. I keep posting and nothing shows up. (Since I’m not particularly controversial, I am assuming I haven’t been banned here.) So I’m trying a different name and a different email address.


          A few years ago I read that some counties were converting some roads back to gravel to avoid maintenance. I thought that was actually a good thing because it encourages people to stop planning for an ever expanding system of roads, cars, and trucks.

          • Nick G says:

            The lack of funding for roads has less to do with Peak Oil or the Great Recession, and more to do with Republicans attempting to defund government – in this case, local government. Governments have a perfectly good tax based, but they’re being prevented from levying the taxes needed.

            In this case, oil companies don’t want gas taxes, even though the gas tax hasn’t been raised in many years. After inflation, gas taxes have declined quite a bit.

            It’s not surprising that roads are in bad shape.

            • Boomer II says:

              The lack of funding for roads has less to do with Peak Oil or the Great Recession, and more to do with Republicans attempting to defund government – in this case, local government.

              Yes, I know. But by not providing money to fix roads and bridges, the anti-government folks push us closer to making driving an unpleasant experience. Also, in some areas, privatization of roads is happening again. You pay a toll to a private company in order to use “its” road.

              As government money disappears, and as income inequality increases, overall consumption goes down. It’s essentially preparing the country for the peak oil days to come.

              • Boomer II says:

                The idea that government will be called in to subsidize oil to keep the drilling going to avoid global collapse has its limits if the number of consumers who can afford oil, afford a car, and afford to go anyplace keeps going down.

                If your policies destroy everyone below the very wealthy, there’s less and less reason to have a society built on oil.

                That’s the upside of extreme income inequality. If all the wealth is in just a few hands, global consumption goes down.

                As we can already see, passing laws that enrich corporations doesn’t necessarily lead to more jobs. It just makes corporations richer.

              • Nick G says:

                I suppose you could look at it that way. OTOH, it’s a terrible way to prepare, given the heavy costs of vehicle damage, congestion, etc. It would be far, far better to tax oil heavily, and push EVs, hybrids, etc.

                • Boomer II says:

                  It would be far, far better to tax oil heavily, and push EVs, hybrids, etc.

                  What would be better and what will actually happen politically aren’t likely to be the same things.

                  At some point, I expect that the wealthy will see more money in green technology than in oil, but that critical mass in politics hasn’t hit yet. Can we hope that the Kochs become green tech champions?

                  • Nick G says:

                    There already is a great deal of money to be made in green tech. Tesla for instance.

                    The terrible thing is that the Kochs don’t care. They’re committed to making money from extractive industries, like oil and lumber. They appear ready to fight to the death to protect their industry. At the expense of democracy, the climate, and our national security.

            • John B says:

              The introduction of electric, hybrid electric, and other high mileage vehicles (Fiat 500 etc.), is no doubt taking it’s toll on gas tax revenues.

              In the future, some revenue method other than the gas tax will have to be implemented, in order to maintain the nation’s highways.

              • Nick G says:

                Yes, but not anytime soon. The level of gas tax needed to properly account for the various external costs of oil is significantly higher than the level needed to fund road repair.

                • John B says:

                  Actually, the revenues have been falling since 2004. Some States are taking action already.


                  • Nick G says:

                    The gas tax hasn’t been raised in many years. If we just indexed for inflation, that would make up for all the losses.

                    Gas taxes are far too low. This is an incredibly easy problem to fix.

                    Unless you’re an oil company, of course, in which case you desperately object to raising gas taxes.

                  • thrig says:

                    Mr. Burnsian Republican plots, and the gas tax is easy to fix? Mm, well, I’ve heard a lot of talk about raising that tax, but that purportedly easy action has been AWOL for decades now. Perhaps quite a few Americans are critically dependent on cars, and measures to mend that problem would run afoul deep cultural and built environment gotchas?

                    Meanwhile, on your purported Republican tax plot front, it was the Democratic-controlled Washington House that passed in 2013 a $10 billion transportation package titled rather heavily towards new roads. Thankfully, that went about as far as Big Bertha has.

                    Meanwhile, the roads still do crumble, the crush-load 7x series buses are a sad sight to behold, and I routinely bicycle past car drivers stuck in traffic. If they all switched to EV, as you claim is somehow possible, they would still be stuck in traffic, and the buses would still be crush-loaded, and there would still be a need to maintain the roads, somehow, in the face of higher energy prices.

                  • Nick G says:

                    Research shows that taxpayers support taxes that they believe are funding useful expenditures. If they’re told by the Kochs and their “think tanks” that tax increases will only increase waste, then they won’t.

                    If Democrats are supporting road work, isn’t that consistent with the argument that Republicans are blocking things?

                    And, yes, if higher energy costs are accompanied by lower gas taxes (reduced by inflation over many years) to fund road work, then yes, roads will crumble. But that doesn’t seem to *caused* by the higher energy costs…

                    Finally, I should say that I like bikes and mass transit. I use electric trains every day. I think bikes and rail are great. My point: PO isn’t going to force people to use bikes and trains – EVs (and hybrids, EREVs, etc) will work just fine for anyone who wants them.

            • Ilambiquated says:

              Republicans attempting to defund government

              True, but it also has to do with the fact that the US infrastructure is overextended. A lot of suburban and rural infrastructure was originally funded with a one off injection of Federal money. There is no money for the upkeep of the sprawl it created, and the sprfawl undermined local government tax base. Retrenchment is inevitable.

              • Nick G says:

                Have you seen anything that quantifies this?

                I’ve heard this before, and I’d be very curious to see real information. As best I can tell, suburban overall cost of living is lower than urban: I suspect suburbanites and exurbanites can afford a small increase in local taxes to fund infrastructure.

                And, of course, the country’s GDP is about 4x higher than it was when suburban sprawl started in the 50’s, when this stuff was expanded. If we could build it then, I can’t imagine we can’t afford to maintain it now.

    • Hillson says:

      FYI – VMT (actual and per capita) have already peaked; vehicle ownership trends are the same, but the link below doesn’t show that graph. I don’t expect any of these to reach their previous highs, although we may level off for the next few years with the increased domestic production, a stronger dollar, and weaker international demand.

  3. Paulo says:

    Whichever forecast one uses to estimate when accepted and observable overall decline sets in, the key point to make is: 5 YEARS!! Maybe 2018, and maybe 2020. Regardless, it might as well be tomorrow for all the difference it makes. It is a blink of an eye.

    I suppose if the economy tanks there will be so much ‘noise’ it won’t matter for awhile.

    I would really be interested to hear what preps folks are making, (or not). It would be interesting to understand other outlooks re preps with regard to age, occupation, location, family, etc.

    This post is pretty huge as far as I’m concerned.


    • Brian Rose says:

      I graduated from the University of MN in 2010, and took my Biology degree down to FL. Using money I made trading stocks using the lens of peak oil I purchased a house and am now in my 4th year of turning my yard into a food forest. I live in St. Petersburg, FL, 7 minutes from the heart of downtown.

      You can make a killing trading with the lens of peak oil. Not blindly so, but with it used as a major factor. For instance, markets will likely be taken by surprise that data is more optimistic than expected the next few months. Many markets have already rallied, but there is more rally to go before year end. 2015, however, will have a rough first half. Elections in Greece in March, a potentially rancorous Republican Congress, and rising oil prices (due to Russia, higher demand, low point of LTO seasonality, etc) will create strong negative pressure on stocks, and volatility will spike.

      Call me out on it in the future. As much as I hate predictions because they are by nature limited in scope and in assessing possibilities I will still predict a bullish 4Q 2014 (although, still range bound), and a 1Q and 2Q 2015 that really freak people out. There are a number of ETFs that can profit off this. Namely, triple inverse European markets, and triple value volatility ETFs. Later on this will set up for some significant rallies because the fundamental problem – growing energy supplies for global growth – will not yet have unfolded.

      Minus reasonably predictable political crises there will be upward market movements until we hit that elusive 2016-2018 peak. Early 2015 will present some political crises internationally that can be positioned for. They will inevitably reside, followed by a strong rally. Constant updates on trends in LTO and global production allow me to adjust my long term trading strategy. Portfolio management based on thermodynamics as the tide, and human psychology as the waves allows for predicting both underlying trends and superficial trends.

      I don’t want to ramble on too much, but using peak oil to invest pretty much saved my life and my future, so it has become a strong component of my prep suggestions. If it is real, and it is based on physical laws, then it by definition will effect human markets. Most political, financial, and Central Bank moves end up being predictable as a natural human reaction to the effects peak oil manifests.

      The only reason it is so easy to make money is because no one in the markets sees this. The general populations complete ignorance about the subject, including the investing classes, allows for the information and signals to be misinterpreted (usually as human errors instead of thermodynamic trends i.e. housing crisis, global recession = poor regulation/ greedy bankers, not limited energy supplies). Markets perfectly price assets according to how they interpret the information given. Wild market moves are times not where new information is necessarily presented, but when the same information is often being re-interpreted. With peak oil we are lucky – time and time again it accurately predicts and explains economic information, but no one sees that so it’s not “already priced in”.

      • Paulo says:


        You obviously have a unique knowledge base and skill set that has served you well. I am impressed having always distrusted the Market and the folks floating the offerings. It is simply a different world from the one I have known. Good on you.

        So, I assume you have some bucks in the bank as well as a yard in process of becoming a ‘food forest’. In your opinion, as PO begins to bite and considering your proximity to population…..what’s next? Would you stay in Fla? Would you move? Do you like it there? Is there a reason why you live in Fla as opposed to other places? I am curious, that’s all.

        Ron, delete if this is too off topic.

        Ron, thanks for this site. I know I have said it before but your data and articles are far and away the Peak as per PO. It has really filled the hole left after TOD folded. In fact, except for the fact that postings only arrive every few days, the info and comments are a real treat to read.


        • Brian Rose says:

          My view is that peak oil will force people into, not out of, urban areas. Job availability will decline outside metropolitan areas, and grow inside of them. On a relative basis this will make property close to metros more valuable while also ensuring a strong market for permaculture produce.

          There is tremendous potential for permacultural techniques to command higher prices even than organic produce. Permaculture takes organic to the next level – you literally build an ecosystem where animal and plant diversity increases. Living minutes from the heart of St. Petersburg I’ve had hawks, otters, turtles, crayfish, owls, snakes, bees, and various butterflies move into my yard. A bee hive set up shop late into my 2nd year – year round they have plentiful pollen to harvest due to my diversity of fruit trees and ornamental flowers.

          From putting in gutters, removing a 40 ft silk oak, buying and installing rainwater catchment tanks and dripline, purchasing plants, tools, etc it cost ~$4,500. I purchased young fruit trees though.

          In my standard urban lot I have Jujube, 3 Mango cultivars (early, mid, late season), 2 low chill hour apple varieties (early and mid season), 2 low chill hour peaches (early and mid season), type A Avocado, type B avocado, Blueberry, Pineapple, Raspberry, Blackberry, White Sapote, Pomegranate, Mulberry, Jaboticaba, Cherry of the Rio Grande, Grumichama, 2 Fig varieties, 3 Persimmon varieties, Guava, 6 Macademia trees, Lychee, Grapefruit, Tangelo, Blood Orange, Mandarin Orange, Strawberry Guava, Miracle Fruit, Ice Cream Java Banana, Pitomba, Blue Grape, Strawberries, Natal Plum, Longan, Muscadine Grape, Sugar Apple, and Passion Fruit. Then, there’s the standard annual veggies any old organic garden has.

          This is only possible because Florida has such solar intensity. Where I located myself you NEED a canopy layer, sub-canopy, bush, vining, and ground cover layer to not fry your plants. This means you can overlap many plants. Especially if you intentionally plant fruit trees near each other that fruit at opposite times of year – that way they don’t steal each others nutrient requirements. Also, plant shallow rooted fruit trees like Avocado next to deep taproot trees like Mangoes. By planting diverse species knowledgeably you do not sacrifice yield by planting close. Have 5 gas stations next to each other and they all suffer; have a gas station next to a barber shop, grocery store, e-cig shop, and a hotel and the effect is synergistic – each benefits by having the other near by. This is the fundamental principle of Permaculture.

          If things get to the point of complete collapse, like we almost had in 2008, then I think police and military enforcement will keep highly populated areas relatively safe in the U.S. By 2016 I will have solar panels, an EV, house fully paid off, and zero grocery bill if I must, so my monthly expenses will be small enough that any storm can be financially born indefinitely.

          I do have $3,500 of freeze dried food and the ability to filter/boil my lake water if the worst of worst scenarios unfolds. Even though I have spend capital preparing for that scenario I do not find it likely.

          If peak happened in 2008 we’d have been screwed. Total collapse of financial, monetary, and societal cohesion; the full doomer outcome. I had held that perspective from 2006-2011. My 2009 thesis for Advanced Writing for the Sciences hypothesized that oil sands and other unconventional production would not live up to expectations on the idea that the expensive market prices needed to maintain unconventional production created recessions. The conclusion was that high prices would create recession, causing severe price swings and preventing investment in unconventional production due to extreme oil price volatility.

          I was wrong. I was dead wrong, and between mid-2010 and late-2011 it cost me. I lost… a lot because no matter how much I looked at it I couldn’t fathom the world economy living with $100 barrel oil. I thought $100 meant another crisis. My view was validated by the EU Financial Crisis, or so I thought. I bet my all that the Eurozone Crisis was the next leg down, just as bad as 2008. How could it not? Oil was so damn pricey!

          I learn every day, and I learned a costly lesson in 2011 – no matter how confident you are ALWAYS have a hedge. Once the Euro crisis was “resolved” by the bazooka the ECB pledged markets rallied, which I thought temporary.

          It took until mid-2012 for me to accept reality and see my folly. High oil prices were inhibiting growth, but were clearly being tolerated, resulting in strong Central Bank action that guaranteed stock returns (returns even in excess of “normal” times due to how it influences asset allocation), AND liquid fuel production was increasing.

          My premise that high oil prices = recession = price volatility = no unconventional production was flat wrong. Turned out that most of the inefficient oil use was destroyed in the 2003-2008 runup; as a consequence, the price point society could handle was higher than it had been. Where $100 oil had before created recession, it now created marginal, low growth (efficiency gains mostly).

          Anyway, going on too long again…

          • El Ukuku says:

            I think things got distorted by all the financial tomfoolery. The picture isn’t at all clear whether the bazookas worked, at least in the long run. The withdrawal of U.S QE over the past year has coincided with a significant downturn in the world economy – China, Europe and Japan are still pumping money in to the system.

            It’s hard to say whether their actions have put the economy back on to the straight and narrow and growth (low as it may be) will continue or whether it was simply a reprieve and we’ve got more fun left to play out.

            I’m not taking any financial gambles like you but a lot of my life choices have been made based on my negative outlook of future conditions. I’m trying to balance things, continue engaging in society whilst trying to reduce my dependency on it so that disengaging won’t be too painful.

            • Brian Rose says:

              I should specify, my views compared to the average person are extremely pessimistic. My perspective is always changing as I learn (I accept that I am often wrong, and this will continue until the day I die).

              I only see upward market movement, barring various temporary political crises, until the date of peak liquid fuel production. I see this site as the best place that exists for discussing and hardening that very important date, which seems to generally fall between 2015-2018 given current trends. In my mind this will precipitate another 2008 type crisis, likely centered this time on Europe, Japan, or China. My bet being on Europe.

              If a permanent, sustained decline follows, without an equivalent ability to produce EV and renewable energy capacity, then we will face a complete system breakdown.

              I’m more optimistic than I was 5 years ago, but I put this chance at 50/50 currently. In other words, I have no clue whatsoever, but I do see the previously unfathomable progress in solar, wind, and EV continuing until parity. If peak oil happens 7-10 years before cost parity then I’d bet on complete financial breakdown. If cost parity happens about the same time as peak I’d bet on a near repeat of the 2008-2014 cycle. Again, political realities could have made 2008 the real collapse, and next time around it is entirely possible that collapse will happen not because it has to, but because something like TARP isn’t passed, leading to complete collapse.

              • Nick G says:

                Wind and EV are already at parity in the US, and PV is there in a few places.

              • El Ukuku says:

                I always find it strange that the attitude is always so Western / Developed world centric. I think that green technologies have the possibility to be a saving grace for the developed world but what about the developing?

                Peak oil and other crises will have a disproportionately high effect on the developing world, we’re already seeing failed states popping up left right and center and they’re a little close for comfort. These failed states will have 2 main effects, firstly you’ll have increased emigration from them (with the final destination being the developed world if possible) which will put both economic and social pressure on those societies. Secondly these failed states will begin exporting their failed nature to their neighbours, it will be hard to contain the chaos emanating from them. The most prominent example right now is the Middle East and North Africa. It isn’t off the cards that countries such as Pakistan, Iran and Turkey will start to see fallout from the conflicts in the region. I think there is a slight chance that the fallout could reach as far as places like the Balkans within the next 10-20 years. On the other side of the world I believe there is a good chance that Latin America could become a bit of a basketcase. Mexico is struggling to contain it’s problems, again within 10-20 years they will be having a harder job and areas of the country could be lost to government control.

                As the developing world suffers so will the developed as many of the raw materials used are sourced from them. It’s certainly not an end game scenario but the developed world will suffer – as OFM has mentioned before the logical outcome of these events will be governments taking a more authoritarian role and countries going in to lockdown to hold back the problems, this will also stifle economies but will be a small price to pay for stability.

                As you can see I also have a penchant for negative predictions. I don’t think such events are avoidable, there are too many external stresses beyond our control that are pushing people to take extreme stances. I think the most notable symptom of these pressures is manifesting in politics i.e. Europes growth of the far right and the political divisions / intransigence in the U.S.

                • Brian Rose says:

                  El Ukuku,

                  I completely agree with your sharp assessment in every way.

                  The next oil price spike or a bad year for global food production will almost assuredly precipitate multiple crises in developing countries that will have ramifications felt in the developed world.

                  Although such events can happen at any time their statistical likelihood increases rapidly as global food or energy prices increase.

          • Ilambiquated says:

            My view is that peak oil will force people into, not out of, urban areas.

            I agree entirely.

            • Nick G says:

              But why would that happen? PO isn’t going to raise the cost of commuting for anyone who has the sense to buy a more efficient vehicle. A Nissan Leaf is already cheaper than any other car on the road to own and operate, and it’s cost won’t go up if gas prices rise.

              • Dennis Coyne says:

                Hi Nick,

                It depends on how urban is defined. Many people live beyond the commuting distance for a Leaf and do not have good access to public transportation. So if one defines “Urban” as a metropolitan area with a radius of about 45 miles. The Round trip commute for someone with a leaf would be a problem outside 45 miles.

                At present most people do not have access to a place to recharge their vehicle at work. This might change in the future.

      • Shakespearean says:

        Excellent! I also follow your ideas. But I do it with literary criticism instead of stocks. It has also saved me in many ways.

      • scsnospam says:

        Brian, would you care to share some actual trades you have made money on, or are currently investing in, that would show this play between short term vs medium term trends?

        • Brian Rose says:

          Since the 400 point intrady drop in the Dow I invested in UDOW and UMDD; that is short-term (offload 1/3 in November, 1/3 in December, 1/3 during earnings season in January).

          Medium term – UWTI is something I will continue to strengthen my position in. Multiple factors, from seasonality to global demand, are causing prices to be much lower than they will be. I will begin offloading this position from February through April.

          I never unload everything, or buy everything, at once. Emotion and conviction must be put aside. Don’t go all in on a single idea, but if a bet goes bad don’t unload out of fear – if your analysis was correct, and data still empirically supports that then ADD to your position. Otherwise, just hold on. Selling after significant loses, or buying after missing significant gains is… well… there’s Warren Buffet quotes for this type of thing, but I’ll refer to the statistical concept of Reversion to the Mean (but in economics the mean itself is always changing, so it’s complicated!).

          The Greek elections could be a real doozy, so I cannot possibly think of what lies beyond March. Either an incredible rally, or a period of sustained volatility and turbulence; if Syriza wins big and keeps up its rhetoric, then we would very rapidly be in a bear market.

        • Brian Rose says:

          I can verify this; as you can see UWTI is a losing position right now. I plan on purchasing more this week as opposed to offloading this losing bet:

          • Heinrich Leopold says:

            In my view UTWI could go down further one leg. This is due to the disintegration of the oil market. Due to the high oil price over the last five years, oil is priced out from the space heating and electricity generating market. The residual fuel market stands at 10 mill bbd and the home heating oil market around 5 mill bbd and is currently replaced by coal, natural gas and biomass with an economic advantage of 50%. This will go on for a few years and will free up some 15 mill bbd additional supply. I follow the shrinkage of the oil market through FRO which is one of the leading oil carriers. Until 2008 this stock has been a high performer outpacing the oil price manyfold. However from 2009 this stock has underperfomed the oil price consistently despite rising oil price. This can only mean that the volume of oil shipped shrank considerably.
            Recently FRO fell once again indicating lower volume and presumably lower oil prices the days ahead.

            • Brian Rose says:

              Heinrich Leopold,

              Very interesting! I will keep FRO in my radar from now on. Most recent production gains are consumed without shipping. The U.S. obviously being the shining star that is using domestic increases simply to reduce imports. Thus both higher production and higher prices would not benefit FRO. This seems to match what has occurred in its value since the financial crisis.

              Using the Export Land Model as an indicator it would seem FRO may continue to suffer as exports continue to decline indefinitely, at least on average over the long term.

              UWTI was my example of a medium to long term play I’m dedicated to. I completely agree it has room to fall, in which case I will purchase more. Even if it falls another 15% it won’t effect me as I’m intentionally holding it for an extended period.

              I always purchase in increments because trying to time a precise top or bottom is a fools errand. That way my average purchase price is always at a level that reaps high returns. Often times I will only have purchased 50-80% of my intended total. I leave an extra 20-30% in case another drop happens, so I can scoop stocks up cheap, and maximize returns further.

              Statistically, that last drop that would allow me to purchase 100% of what I have in cash waiting for that opportunity is several standard deviation removed, and is an outlier on the normal curve. All the cash I have leftover after an upward move begins is simply pooled together for the next thing on my radar. Especially because once a move begins to happen it is time for me to slowly begin edging in to the next position that will take advantage of the market consequences of whatever is moving.

              For instance, UMDD has had such strong gains that I will begin offloading far sooner than expected. The consequences of strong gains in Midcap U.S stocks is that they will soon drop. I will begin investing in shorting Midcaps (even though I’m invested in a bullish ETF right now) in Mid-December, and will slowly increase my bear position through February.

              • Heinrich Leopold says:


                Agree with your invetment strategy. However my way is to look deeper behind a trend. Markets are seldom logic and do not follow common sense. The majority is always wrong. Take a look at the oil market. Production costs are high and companies outside shale do not invest very much. Production is going down worldwide and I think as well that peak oil is real. Therefore the oil price has only way and that is up – right? However the steep increase of oil over the last years does also provoque a response from market demand – as it always does when the price of a product rises. If the price is up the market shrinks, if the price is down the market grows bigger. Sometimes it takes time as compnies have to close facilities and invest in new capacities. If you look at the numbers of the oil market there has been a stampede out of the residual fuel market in the US, Europe and Japan (-14%,-10%,-21% respectively) last year. Asia (-5%) has been a laggard, yet the trend is here already starting. This year the stampede has turned out to be a tsunami (over -70% in the US). The residual fuel market in the US is now extinct. Europe and Asia are close behind the US. So there are millions of barrels per day coming out of the market searching for a new home. So this should be enough for a short term oil crash. The oil market does not understand peak oil, he understands just how much oil is on the market. UWTI has reached 18,61 and knocked three times on the important resistance of 18. By next week we know which direction the market takes. I think it will be down – and midcap400 higher.

      • Keyser Soze says:


        1) You wrote: There are a number of ETFs that can profit off this. Namely, triple inverse European markets, and triple value volatility ETFs. Later on this will set up for some significant rallies because the fundamental problem – a growing energy supplies for global growth….

        Triple inverse…. for a growing energy supplies for global growth?

        What are you thinking?

        2) Central Bank moves end up being predictable as a natural human reaction to the effects peak oil

        What are you smoking?

        3) The only reason it is so easy to make money is because no one in the markets sees this.

        Brian, there’s NO market. It’s all a Ponzi scheme.

        4) With peak oil we are lucky – it’s not “already priced in”.

        How about collapse? Would care to price that for us?

        • Brian Rose says:

          Keyser Soze,

          I’m obviously just some guy on the internet. Perhaps I have complicated defense mechanisms and protect my ego by pretending to be some market maker; that is, by far, the most likely scenario.

          If we assume the markets are just a giant Ponzi scheme, then we’re simply adopting defeatism, which is itself a defense mechanism for not trying. Ultimately, we then blame the world for our situation instead of focusing on what pragmatic steps we can take to create a more secure future for ourselves.

          I’ll play devils advocate here. OK, so you know it’s all a Ponzi scheme. Doesn’t this actually make the market MORE predictable? Some secret cabal has plans and will implement them in this scenario. Do you not have any idea what this plan is? If it’s to always catch people at their weakest wouldn’t even that give you statistically significant clues as to how to take advantage of their rigging?

    • canabuck says:

      One can look at the data another way:
      In 30 years there will be over 3.0 Mbbl/day of Shale Oil, which is about the same as 2013.
      3-4 Mbbl/day for 30+ years.
      One can see this as an unexpected bonus on top of the conventional oil.

    • Old farmer mac says:

      Luck pure and simple has resulted in my personally being in a place and situation that is probably as good as I could hope for in respect to peak oil.

      Hence there is very little I feel a need to do personally (given that I am already old and won’t be around forever) that I would not be doing anyway for other reasons. It is said that if you collect coins a quarter will never be worth less than a quarter no matter what. A few barrels of diesel and a couple of tons of fertilizer and a truck load of lime and so forth are not bad investments at all since the price of these things tends to go up with the price of oil and while oil is down for the moment … it is not going to stay down.

      The downside risks of getting a small farm such as mine in shape for peak oil are minor and the upside benefits are going to be huge if I live long enough to see them realized.I expect that if things turn really bad to be able to raise plenty of food for myself and a few close friends and that sort of thing easily enough with some help …. even if I cannot buy fertilizers and insecticides.There is gravity flow potable water, there is timber for building and firewood ,there is a small bandsaw mill to mill it, there are masonry barns with metal roofs that will last a century easily if the roofs are kept painted. There is tightly fenced cropland.. …tight enough to keep deer out for the most part and if one gets in that deer will be an opportunity rather than a problem insofar as food is concerned.

      We used to raise a few cows and within a year I expect to be properly set up again to raise a few grass fed cows for beef…. and a milk cow can live right in there with the beef cows if she is needed.

      Above all there are neighbors who are going to be willing to work with me because our families have known each other and intermarried for generations and all our old folks are buried side by side in the same cemetery on the hill next to the church where I still go for an occasional service even though I am not a believer.

      (Covering your bets is a good policy and keeping up relations with the neighbors is a very prudent thing to do.)

      If things get really bad .. and there is of course a very real possibility that they will.. ….we are mostly red neck conservative violence prone southern mountain hillbillies with more than a few firearms in just about every house and at least one or two older people in every family who knows something about hard times and hard work.

      It may seem strange to some people but the sort of people around here who pack both Bibles and pistols are quite as ready to give you the shirt off their backs as they are to quote the Old Testament and shoot you…. but they hardly ever do actually shoot any body who is not in real need of it. Home invasions , armed robbery, and forcible rape are virtually unheard of in this community since the people who might be interested in that sort of career know better than to practice it locally.

      We won’t starve or die of thirst or exposure because this is small farm country lightly populated with a broad agricultural base. We can and do grow almost everything here (often in small quantities it is true ) you can imagine except tropical crops. There are plenty of streams heading up in this area – no towns above us polluting our water. It never gets so cold for so long that survival is an issue.

      We do not have a large population of unassimilated immigrants or enough racial minorities in the immediate area to worry about the sort of problems some larger communities and cities may experience due to cultural diversity.

      There are local doctors and dentists and a good hospital within a twenty minute drive.Twenty minutes to a Walmart superstore and a Lowes big box store.

      There are good highways and railroads but we are a long way from any really big city and thus hopefully insulated from any mad exodus from a city with failing water and sewer services and that sort of thing.

      All in all this sort of place is probably as good as can be found if somebody is seriously thinking about actually moving.

      The only real problem is earning as good a living as most people are used to in more prosperous areas. Wages and salaries are modest in the extreme compared to a lot of places .. but then so are taxes and the prices of many goods and services.The taxes on my farm and home combined are much less than the taxes on the little house I used to own in the city of Richmond.And since I have a well and septic system ( plus gravity fed spring water ) there is no water and sewer bill.

    • Rita says:

      What I have done to prepare is dig up all the ancient knowledge of natural local economies which used human labour and local materials, put it on line for all to know. The ultimate step would be to go to the countryside and work and live there. I learned and practice alternative medicine, knitting, hand washing of clothes, walking, haybox cooking, solar water heating etc. as part of the preparation for peak oil. But the real challenge will be when doing agriculture, I cannot prepare for that properly in the city.

      • PeterEV says:

        Hello Rita,

        I went to your site. What language was it written in?


        • Ilambiquated says:

          Looks like Albanian — “shqiptare” is Albanian for Albanian or Albania, I think.

          • notanoilman says:

            Yep, Google does a fair job of translating. First Albanian web site I’ve visited or even known about.


  4. ManBearPig says:


    The method that you refer to, with injection of CO2 and production of hydrocarbons out of the same wellbore, is called “huff and puff” production (SPE paper on a Bakken study: Some of the more carbonate prone unconventional reservoirs, like those in the Permian Basin, have the possibility of normal CO2 flood since the carbonates have better permeability then the clastics of the other unconventional plays. Though even with huff and puff, you still have the possibility of moving what would otherwise be immobile oil. The goal for either type of CO2 flood is having the reservoir above minimum miscibility pressure, which I assume the Bakken is at its average depth.

    • Will they get enough extra oil from this huff and puff procedure to cover the cost of doing it? What is your opinion on that?

      • ManBearPig says:

        I would say that depends less on the geology and more on the infrastructure cost associated with a CO2 flood. A place like the Permian Basin has a well developed CO2 pipeline system, that is the largest in the world, and thus has a relatively low cost to develop additional CO2 floods. On the flip side, a place like the Bakken would be more expensive since I don’t know of any CO2 domes that are piped to North Dakota (these are the sources for the CO2 that go to the Permian, like the Bravo Dome). One option is capturing CO2 from power plants and piping it to where it is needed, but that has not happened with any large volume yet.

        • Anon says:

          I don’t think any power plant is set up for carbon capture in the Upper Midwest.

          Whole idea smells like a bill of goods that the consultants, oil reps and legislature are getting into a circle jerk over.

          • sunnnv says:

            Anon – you may be right about both items you mention, but…

            The source is/would be a coal gasification plant near Beulah ND, that already sends CO2 to Canada via pipeline, which seems like it’d run thru the Bakken on its way to Weyburn Saskatchewan.

            This article notes 2 tests of CO2 in the Bakken, both not economic, but they learned from them…

            But note this caution:
            “Scientists don’t have time on their side.

            For CO2 injection to work, the pressure in the oil reservoirs can’t get depleted too much before the gas is injected, Harju said.

            “Because of the peculiar and unique nature of these rocks and the gargantuan size of the resource, the timelines are going to be diminished greatly,” Harju said. “Things that took us 20, 30, 40 years to arrive at previously, we need to do in two and three and four years now.

            • ManBearPig says:

              I just don’t see pressure drawdown as that big of an issue, for MMP CO2 injection, in unconventional reservoirs. By definition, these reservoirs have poor permeability, and each wellbore is generally considered separate and not connected to the porosity of nearby wellbores (infill drilling might connect some frac’d porosity). The exact opposite is true in conventional fields, where pressure drawdown can impact a large area because of a higher permeability. BHP data might show otherwise, but I would not consider pressure drawdown the limiting factor in unconventional CO2 floods.

              • From sunnnv’s link:
                CO2 injections = More Bakken Oil

                Harju said he knows of two field tests of CO2 injection into Bakken rocks – one in Mountrail County and one in Montana. Neither was economically successful, but they will help researchers with their laboratory experiments.

                I just don’t see how the “huff and puff” method can be very successful. I can understand how CO2 sweeping through a conventional field could be very successful and economical. But just blowing it in then letting it back out again the same way it went in and hoping to get enough extra oil to make it economical… that just sounds like a lot of wishful thinking.

                • Longtimber says:

                  DOE Funded Centralized generation poster child black hole. Co2 pumped into Nat Gas Fields.

                • Watcher says:

                  I just re-went thru the CLR September investors presentation and searched for the word “enhanced” in the Bakken section, and it occurs several times.

                  But none of those occurrences refer to any sort of CO2 injection project, pilot or otherwise.

                  If CLR isn’t doing it, it’s not going to happen anytime soon by anyone.

                • ManBearPig says:

                  The rule of thumb is that an unconventional well will produce maybe 8%-10% of the OOIP of the reservoir. In conventional reservoirs CO2 flooding can move as much as 15% of the previously immovable OOIP. If a CO2 flood is only one third as effective in unconventional reservoirs as it is in conventional reservoirs, then an additional 63% can be produced from an unconventional well. That is why EOR is such a big deal in unconventional play. There is just such a large percent of the OOIP that is not moved if only a small additional amount is movable it has a large economic upside.

              • sunnnv says:

                I don’t have time to research this now, but my take would be that in an unconventional field, where one HAS TO “huff and puff”, that CO2 will only work when one has a single phase (i.e. it’s still all liquid with all the natural gas still dissolved in the oil). And even then, it will be a slow process – each cycle will only get a little bit of oil.

                Once the downhole pressure is reduced so the natural gas exists in bubbles, even if one compresses everything back into all liquid with the injection of CO2, when the pressure is released, the CO2 will preferentially go with the natural gas (both light/small molecules), and the oil (the more valuable stuff) will mostly stay in place.

                Kinda like the difference from washing your clothes in a tub of water/solvent with a rinse cycle (conventional sweep Enhanced Oil Recovery) vs. (trying to) blot them clean (“huff and puff” in single well micro oil fields).

                n.b. CO2 under pressure is a replacement for conventional dry cleaning solvents.

                So I think “huff and puff” in fracked wells technically works (how economically is an open question), but ONLY while the downhole pressure during withdrawal is enough to maintain a single phase. Once the bubbles start coming out, it’s all over for all but the lightest oil components (i.e. natural gas condensate – which will mostly come out with the gas anyway). Note the study abstract ManBearPig linked to says soak times up to a year.

                That is in contrast to sweep EOR with CO2, in which even gaseous CO2 (non polar – like dissolves like) will dissolve in the oil and reduce its viscosity and even gas flow will sweep things toward the production wells. And you can (more likely) pump CO2 in at enough pressure to maintain CO2 as a supercritical fluid, where the oil will dissolve in the CO2, and a single phase will flow to the production well, which is choked down to maintain field pressure.

                That last thing just CANNOT happen in a single hole fracked micro oil field when downhole pressure drops below critical levels.

                Perhaps they’d try to drill between two old holes, and frac into both, and sweep that way. But getting into both of the old holes, in any uniform/high coverage sort of way seems like a very long shot.

                And if the time frame closes in only a few years, with low oil prices discouraging investment, then CO2 EOR in the Bakken may never happen.

      • KLR says:

        I was under the impression “huff and puff” referred to steamflooding, too. Cyclic Steam Stimulation, isn’t that the formal name?

        • ManBearPig says:

          Yes, that is correct. Huff and puff is just the term used to describe injection (of some fluid) and producing out of the same wellbore.

  5. Philip Backus says:

    I truly wonder if geological or financial constraints will cause the peak in LTO. With WTI hovering near $80.00 pb and some analysts calling for lows in the low to mid seventies…or worse will investors and other types of credit be found to continue to fund a project that was not particularly profitable at $100.00 pb? How long can these companies operate at how much loss? The still willfully ignorant public is rejoicing at the lowered prices and though math trumps magic every tine, the public prefers it’s comforting delusions no natter how short lived to economic and finite resource realities in the not too distant future. Sane as it ever was.

    • Anon says:

      Only the best individual shale wells can make money at $80 WTI, ideally if their operator has low overhead. Any “bust” well that starts <200b/day will cause loss of shirt if not head.

      A whole bunch of new, marginal projects will be killed at current prices.

      • Doug Leighton says:

        You may well be right. I’m going to take the liberty of repeating Dennis Coyne’s comment from yesterday here. According to Dennis:

        “The average Bakken well produces about 87,500 barrels in its 1st year or about 240 b/d average output for year 1. The first month’s output is about 477 b/d. Don’t forget OPEX of 4$/b in your calculations and I use 24.5% for royalties and taxes so I get 3.6 million of net revenue for the first year.

        It is better to discount by 7% to find the net present value of future output. Most of these wells have never paid off the drilling costs with one year of output even at $100/b the net revenue is only $5.7 million for the first year of an average well. Breakeven comes a few years later.”

        I expect I haven’t broken any “rules” or offended Dennis in any way by doing this. To me, his is a succinct, clear and valuable analysis of Bakken well economics: Not that I know screw all about economics or Bakken wells of course!

        • Watcher says:

          As we discussed, 240 is probably lethal at $60. This means . . . assuming average and median are close, that fully 1/2 of wells are throat cutters for the industry, given that 1/2 will be below 240.

          Whoever spiked the dollar will be facing some counter manipulation soon. Or bombing strikes in Libya.

          • Dennis Coyne says:


            Note that $60/b at the wellhead is equivalent to about $75 at the refinery gate if we assume transport costs of $15/b. For east coast refineries they pay Brent prices if they don’t get the oil from North Dakota so I usually use Brent as my benchmark. Under these assumptions (I am unsure about actual rail costs I have found estimates of $10 to $15/b so I am using $15/b), breakeven is currently about $75/b at the refinery gate for the average Bakken well.
            Your $60/b guess looks spot on. The EIA has Brent spot prices at $84/b as of Oct 20 and currently the Dec futures contract is at $86/b.

            For now the average Bakken well makes money and remember that when an oil company drills a well the expectation is that it is always better than average (its only the guys at the other company that drill a below average well 🙂 . The reality is that some of these wells will lose money and others will make money, but the average well(until the new well EUR starts to decrease) will be profitable at a Brent price as low as $75/b.

            • Dennis Coyne says:

              In the Oct 15 NDIC Directors cut Bakken oil prices were $66/b which would be equivalent to Brent at $81/b, however according to the EIA Brent prices were $84/b on that date (10/15/2014). I don’t know if maybe transport costs are $18/b and I am not sure what has happened to Bakken prices since mid October.

              • Watcher says:

                The discount is not all transport costs. The oil has high metal content variance and is light on diesel. It’s barely oil. The metal variance causes refineries to have to change procedures from rail car to rail car. Mountrail has API average of 43. Don’t lean on transportation for the discount and thus Brent and east coast refineries are not a legit metric. A definitive measure would be Midwest refineries and what they pay for the rail cars. Besides which, do you know any other rail shipped product that pays 25% of retail for transport? Cars don’t.

                Oct 13, 14 and 15 saw a $2+ drop of WTI . . . between 14th and 15th. $81.xx on the 15th, but the Director’s Cut likely didn’t wait til the close of trading on the 15th to release the document, so one presumes the text was prepared the day or two before at $84ish.

                • Dennis Coyne says:

                  Hi Watcher,

                  In an ideal world we could account for minute to minute variations in every variable. We could just as easily call it $15/b for rail transport (which would be 18% of the refinery gate price, call it the retail price) and $3/b discount for inferior quality crude (I will just assume you are correct though in the past you indicated Bakken oil was similar to WTI). It affects the bottom line the same way either way. Note that an East coast refinery tends to get Brent Crude from New York Harbor, the Crude pipelines mainly go to Texas and Louisiana from Cushing and not to the East Coast refineries, so Brent prices are what is paid if North Dakota oil is not used and it is the proper metric.

                  I was unaware of the discounting of Bakken crude do you have any links to confirm this? Thanks for the info.

                  • Watcher says:


                    That’s fairly hard work. You won’t absorb all of it, but will in a general way make clear what is going on.

                    WTI has recently had its definition changed. I posted a Bloomberg link when I saw the announcement. Don’t think I bookmarked it. If search works, it’s out there.

                    The issue overall is a comprehensive description of oil and the degree to which it is NOT described by “API 39”. This was usually not an issue with conventional oil because variance wasn’t huge. But early Eagleford days threw a hand grenade into the matter because of their condensate definition.

                    Bakken gets quoted as “API 39”, same as WTI. Well, there are probably a few wells flowing API 39, but Mountrail county in particular averages 42ish.

                    NoDak would LOVE to have samples taken that show 39. And samples NOT taken that would show 47. A recent controversy over the explosion of railcars had an initial assay quote a substantially large number for volatility (gas content of the liquid) and then a recent sample they were sent as Congress was looking into regulations showed a huge difference from their first assay publications.

                    These numbers are entirely unreliable.

              • Dennis Coyne says:

                Just realized I said Brent prices above where I meant to say I don’t know what has happened to Bakken oil prices since mid November.

        • Dennis Coyne says:

          Hi Doug,

          I take it as a complement that you quoted me and didn’t follow up with “that is hogwash” (which is usually not too far off). In this case it is mostly based on NDIC data with very little modelling ridiculously far into the future so it is a little more tolerable than my speculative scenarios of output to 2030.
          In short no offense and feel free to quote me and please continue to call me on stuff that you disagree with.

          • Dennis Coyne says:

            Hi Doug,

            In a comment in another thread (which I just read), you asked about net present value(NPV) of future output.

            Despite Watcher’s comments to the contrary, this is how a business evaluates an investment, and he is correct that it is never exactly correct because future income is unknown.

            If I am deciding whether to invest $9 million in a new well I consider how much money I will make on the investment. In order to do that I have to make a guess about how much money I will get from the oil produced by the well in the future and deduct from this gross revenue any expenses such as operating costs, interest costs, royalties and taxes.
            The net in NPV refers to the deduction of expenses, thus net revenue is gross revenue minus expenses. The present value accounts for the fact that there might be alternative ways I could invest the money which I could earn a return on.

            In my calculations I do things in real dollars so inflation can be ignored and I use a real discount rate of 7%. This discount rate is assumed to be the real rate of return (which is also figured in inflation adjusted dollars) which I could earn by investing in something different from a new well (maybe large cap stocks).

            Clear as mud. Most of this you probably know, I am trying to do the explanation so any high school student could understand it.

            As a numerical example for an average Bakken new well with the refinery gate piece at $80/b, transport costs at $15/b, OPEX at $4/b, royalties and taxes at 24%, and financial costs at $4/b and 23 year EUR at 320 kb each barrel, each barrel nets us $41.4/b after expenses in real dollars so over 23 years the net revenue is 320,000 b times $41.4 or $13.25 million dollars. The problem with the previous calculation is that we need to account for the future dollars being worth less than current dollars (because I could have put the money in a mutual fund and earned a 7% real rate of return.)

            When the calculation is done by discounting at a 7% annual rate on a monthly basis out to when the well is shut in at 23.5 years the NPV of future output is $10.39 million. If the initial cost of the well will be $9 million and the expenses and output over the next 23.5 years match what has been assumed in the calculation then my profit over 23.5 years in present dollars will be $1.39 million on my $9 million investment (on top of the 7% return assumed in the NPV calculation.)
            This would be about a 15% real rate of return, when the 7% is added in the total return is 22%.

            • Dennis Coyne says:

              Hi Doug,

              Some corrections

              “As a numerical example for an average Bakken new well with the refinery gate piece at $80/b” piece should be price.

              “23 year EUR at 320 kb each barrel, each barrel” should be “24 year EUR at 320 kb, each barrel”

              I say “23 years” several times, in every case it should have been “24 years”, the average well is shut in after 23.5 years when output falls to 7 b/d.

              “assumed in the calculation” should have been “assumed in the NPV calculation”

              Sorry I should read more carefully before posting my comments.

              • Doug Leighton says:

                Thanks Dennis but I think I’ll just stick to quantum field theory and superfluid decoupling in pulsars: and avoiding making ill informed comments about anything to do with economics. However, I really do enjoy your and Watcher’s discussions of oil economics mostly because they highlight the complexities involved. Besides, as I said to Watcher, my (scientific) calculator lacks an NPV button. [smiling yellow face].

                • Dennis Coyne says:

                  Hi Doug,

                  Just wanted to get that out there, it can be done very simply using a spreadsheet, but is not all that interesting. It is much less math heavy than quantum field theory, though to be honest I really have never gone beyond introductory Quantum mechanics (and have forgotten most of that).

                  When I do the Bakken or Eagle Ford scenarios I initially ignore NPV and just assume some number of wells will be drilled given the area of the play and the likely well density and estimates of technically recoverable resources (which drives you nuts, but this is just the starting point). I also make assumptions about when new well EUR will start to decrease (because the sweet spots are fully drilled) and how quickly this EUR decrease will proceed (we can only guess at both of these, I always say what I am doing, everyone says its no good, but I can easily run any scenario that someone suggests that is more realistic, nobody has ever made specific suggestions).

                  Then based on the TRR scenario (without considering NPV) I begin to look at NPV in order to develop the Economically recoverable resources (ERR) scenario. Using very similar assumptions to my comment above, I require that the NPV is greater than the well cost. In order to accomplish this fewer new wells are drilled which decreases the rate that new well EUR decreases.
                  For example if a drilling rate of 150 new wells per month caused new well EUR to decrease by 1% per month, a decrease in the drilling rate to 135 new wells per month (10% fewer new wells) would cause the decrease in new well EUR to also be 10% less, so the rate of decrease would fall to 0.9%.

                  Over time the oil price increases in these scenarios usually similar to one of the EIA oil price scenarios (I usually use the reference scenario), in most scenarios I assume well costs remain fixed at $9 million (2013$) and hold all economic assumptions fixed over the scenario (except oil prices which rise to about $140/b by 2040).

                  Note that in Hughes analysis he assumes that the number of new wells added (he calls it the drilling rate) gradually declines in his most likely scenarios, these look somewhat similar to the scenarios I have done with explicit economic assumptions, but usually the drilling rate decreases more rapidly in my scenarios than in the Hughes analysis.

                  • Dennis knows what he is doing and I agree with him that it is not that complicated and something that can be done on a spreadsheet.

                    Yet, I still lament the fact that there is not a “convolution” function in Excel. It would make these computations very slick.

                    The oil industry probably paid off Microsoft not to include a convolution fxn 🙂

                  • D Coyne says:

                    Hi paul,

                    Thanks for the vote of confidence.

                    It is your analysis and that of Rune Likvern that I have built on.

                  • Doug Leighton says:

                    Dennis, if you’re interested, Excel does have a Fourier analysis tool as a part of the “Analysis ToolPak” that could, I suppose, be used by you to analyze periodic data via the Fast Fourier Transform. The tool also supports inverse transformations. Access by clicking “Tools, Data Analysis, Fourier Analysis” on toolbar. Note Excel’s Fourier transform assumes periodic data starts at x = 0 and data corresponding to negative x-values are in the second half of range. This confused me at the first get-go.

                    Since convolution involves integration, however, I highly recommend that any Fourier analysis would best be done by a program other than Excel. My wife and I regularly use Mathematica and/or MatLab for that sort of thing but I confess these are pretty expensive for personal use. If you work in (for) the petroleum industry naturally there is always cool proprietary stuff available to play with: The heart and soul of the exploration geophysicist. I have no doubt you already know all this.

                    I can’t pursue this now because my wife and I are off to Norway shortly. In fact, if I linger for one additional second at this computer my decapitation if guaranteed.

                  • Dennis Coyne says:

                    Hi Doug,

                    I must admit that I have never really used fourier transforms. Convolution can be done brute force by simple summation rather than integration (numerical integration of sorts).

                    As we do not have the functional form of either the well profile or the rate of well additions, the integration is hard to do.
                    Convolution can be done by simply setting up the spreadsheet properly, but it would probably be better to write a macro routine to do it.

                    Paul Pukite (aka Webhubbletelescope) is correct that a convolution function should be built into Excel.

                    I tried searching for macros on the web, but no luck. I can write code in fortran, C and basic, but I have never learned visual basic.

  6. Watcher says:

    Factoid. About 52 gallons of oil are required to make a truck tire. Of so says a source. Yeah, yeah, not interested in orange oil blather. Interested in the numbers reality.

    Another factoid, 300 million passenger car tires are tossed each year and each tire holds 10 gallons of oil (they ARE a lot lighter than truck tires). Sooooo, looks like 3 billion gallons of oil used up in tread loss and that’s 71ish million barrels/year or 194K bpd, which is definitely hilarious.

    We should check bike tire burn in China.

    • Nick G says:

      Replacing the oil in tires with biomass wouldn’t be hard. Here’s detailed info:

      “About 250 million tires are sold yearly in the United States. Each one is roughly one-fourth synthetic rubber (the rest consists of natural rubber, steel, nylon, polyester, assorted reinforcing chemicals, waxes, pigments and oils). Synthetic rubber production dates back to the early 1900s and mushroomed into an industry during World War II. Today it takes about seven gallons of oil to make a standard tire—five gallons as feedstock for chemicals that make up synthetic rubber, plus two for the energy required to power the manufacturing process.

      Many types of plants, including poplars, oak trees and kudzu, produce isoprene, a volatile hydrocarbon liquid that’s a building block of natural rubber. (Isoprene emissions from trees on hot days are a component of smog.) Chemical companies also refine isoprene from petroleum and use it to make synthetic polyisoprene rubber, which has good strength, flexibility and resistance to cold. Synthetic polyisoprene is widely used in tires, as well as other goods like hoses, rubber bands and pipe gaskets.

      Working with Goodyear Tire & Rubber, Genencor has developed a way to make isoprene by starting with plant material instead of oil. The company uses E. coli bacteria to break down cellulose-based sugars derived from plant materials like corn, corn cobs or switchgrass, generating natural isoprene as a byproduct.

      It’s cleaner to make than the oil version. “Some of the microbe cell mass is left over after the microbes catalyze the reaction,” says Genencor vice president Carl Sanford, “but that can be recycled, used as fertilizer or burned for energy. There are no highly toxic waste products.”

      Genencor’s business case relies on making BioIsoprene cost-competitive with isoprene from petroleum, so its prospects hinge partly on world oil prices over the next five years. Global rubber supplies will also be a factor. BioIsoprene could sub in for a portion of the natural rubber already in tires, Sanford says. “And sometimes companies can’t get enough petro-derived isoprene, so we may be able to fill the void.”

      While federal agencies have estimated that the U.S. could produce as much as a billion tons of biomass crops per year within the next several decades, enough to satisfy the renewable fuel mandate with materials left over, not all experts agree on that number.

      It’s worth noting, however, that although the global isoprene market isn’t trivial—about 1.7 billion pounds per year—replacing that entire amount with plant-based isoprene is a much smaller undertaking than meeting federal biofuel targets. Sanford estimates that every ton of BioIsoprene requires about four tons of feedstock, so it would take only about 3.4 million tons of cellulosic materials to make enough plant-based isoprene for all global applications. ”

  7. sunnnv says:

    Hi Ron,

    The link to the conference abstract on EOR had an extra %22 on it,

    This works:

  8. DownToTheLastCookie says:

    Shale Oil should be viewed as a gift of time to transfer to a renewable transportation infrastructure. Others might see it as a gift from god.

    Think Fossil Free New Cars by 2030 ( Tesla, Volt E 85, Leaf, Solar Panels ). We should accept no less from no one. If you disagree, stock up on your burners now.

    Green means Peace in the MidEast

    • Watcher says:


      Global EV sales 2013 about 243000 (from a shill site so maybe bogus high)
      Global 2013 vehicle sales 83ish million. 0.003 3 tenths of 1 percent.

      Oh btw that was 17,600 in China. China total vehicle 2013 sales 21.98 million.
      Yes Sally, that’s 0.0008 8 hundredths of 1%

      Your flowers and unicorn world is NEVER going to happen.

      Green means you need to clean that rifle barrel.

      The bad news is you’ll be shooting Americans with it. Unless you’re willing to kill Chinese with something bigger.

      • Old farmer mac says:

        I am not complacent about the switch away from oil insofar as personal transportation is concerned but there is absolutely no reason to believe it cannot happen.People are not yet buying Leafs and Volts in substantial numbers out of a lack of familiarity with the technology and fear of poor resale value on the one hand and on the other because the naysayers have gotten them convinced that they must have a car that will go all day and only need five minutes to be refueled or recharged anywhere any time.

        But the truth of the matter is that the vast majority of people can get along just fine driving a Leaf for weeks on end and then maybe borrow a conventional car or rent one for a day or two or a week if they plan a long trip.

        There must be fifty million households in yankee land that already possess a a good conventional car that will last for two or three decades very easily if kept under a shelter and used only once or twice a month for that longer trip.

        We got away from horses on the farm for the most part in a couple of decades once the first really workable tractors were sold and only a fool would contend that a Volt or a Leaf or a Tesla is not a workable car.

        I have said before that China and India are not going to be happy motoring countries with fleets of cars comparable per capita to western countries- not if those cars must run on gasoline or diesel fuel.There IS such a thing as peak oil after all.

        IF I had money to invest which alas I do not a lithium mine would be pretty far up on my list of potential investments.

        There will be another oil supply crunch sooner than most of us anticipate- even sooner than peak oilers anticipate. It will probably be triggered in the not too distant future by the very same low prices we are enjoying right now.

        Low prices equals lack of new investment in exploration and development and depletion never sleeps.

        When people are lined up to buy rationed gasoline the Volt and Leaf factories will be on 24 /7 if the battery manufacturers can keep up.

        Automobiles themselves are a mature technology and there is very little that can be done to reduce the cost of building them except to make them smaller and include less features .

        But the manufacture of high capacity batteries is in its infancy and there is probably not a single critical step that happens in a factory manufacturing them that is not protected by a patent on either the technology itself or a machine built to execute that step.

        Battery prices will come down substantially and I can’t really see any reason why a battery powered car won’t actually be cheaper than a conventional ice powered car in twenty years.

        Modern engines and transmissions have hundreds and hundreds of separate parts any one of which must perform flawlessly for the life of the car because the failure of that part means either a new engine or a new transmission will be needed.

        Electric motors in an auto on the other hand eliminate the need for a transmission altogether and the electric motor itself will have as few as half a dozen moving parts. There is no reason in principle that such a motor can’t be built to last half a century without any maintenance at all.

        It took over ten years for personal computers to go from something every body had heard about to something most people had actually seen in the home or office of a friend or coworker. They are everywhere now after another fifteen or twenty years.

        The biggest thing holding up the adoption of the electric car in my estimation is lack of choice in models and lack of familiarity with it.In a decade there will be enough choices and enough dealers will have them in showrooms that buying one is actually something that can happen without going to hunt for one out of town someplace.

        And once that good looking young professional woman in the next cubicle or office over has bought one…. they will sell like ice water in hell assuming gasoline has gone up to six or eight bucks in current day money.It won’t take very long at all for the other women in her place of employment to come to appreciate that there are no oil changes no tuneups etc needed and that repairs are going to be quite infrequent compared to a conventional car.

        This is a peak oil forum.Personally I believe in peak oil and consequently very high gasoline prices even though I do believe we may actually skinny thru the peak oil bottleneck ( in countries such as the US) without the economy going entirely to hell in a hand basket.IF we manage it a big part of the explanation will be battery powered cars and electrically powered trains etc.

        Coal to liquid plants can be built that will supply enough synthetic diesel to keep the ESSENTIAL truck fleet running. Long distance trucking is a dead man walking anyway. The rail industry will own long distance freight markets again before very long. Agriculture can take care of itself. Farmers will never produce enough biofuel feedstock to maintain business as usual but we can collectively produce enough to run our own industry.

        And anyway peak oil does not mean NO OIL.

        There will be enough for truly critical needs for a long time to come- maybe three or four decades.Air travel is not essential to our economic survival. F250 beer runs are not essential. Four seats in a car occupied by a single driver are not essential.Ships can easily be built to run on coal again. They are big enough now that the space will hardly matter and there has been a century of progress in the art of coal combustion and building steam turbines since it was last used to power ships.

        • Nick G says:

          Heck, we’ll still be producing 10M bpd 100 years from now, if we want. Canada and Venezuela have enough tar sands to produce most of that by themselves.

          10M bpd is enough for those things where liquid fuels are really optimal: seasonal ag, long-distance water shipping, aviation.

          Eventually that can be replaced with synthetic fuel and biofuel.

      • Stephen Hren says:


        From small beginnings, great things grow. Don’t forget about the power of the exponential function. Total EVs (including plug-ins) on the road in the US a little over 250K. Sales growth of e-vehicles is up 43% from last year:

        A good little price bump from plateau-ing or peaking oil production won’t hurt, as long as it’s gradual (as it has been for the last decade) and doesn’t wipe out the financial system with it (a big maybe). Cars are on the road an average of 15 years or so before being replaced, so the idea of new electric vehicles replacing the old gas guzzlers as oil production begins its descent seems natural, even likely. By 2030 it’s easy to imagine most new cars will be electric. We need to focus on making that source of electricity renewable. Fortunately, all those batteries in all those cars will be a major factor in stabilizing the grid and evening out the production swings from renewables.

        • Watcher says:

          Starting off slow and tapering off.

          Get your mind wrapped around killing Chinese. Unless you want your family to die.

          • Nick G says:

            At some point it’s no longer funny, and we start to wonder if you’re off your meds.

            • Watcher says:

              So we’ll mark you down as wanting them to die.

              • Nick G says:

                Nah, we’ve already kicked the oil habit.

                Saving a lot of money…

                • Ilambiquated says:

                  Meanwhile back in the real world, anyone who’s ever been to china and thought about urban design knows china will never imitate American car culture. The Us flatten most of its cities over since the late forties — a third of urban surface area is parking lots, and another 25-30% is used for streets. In addition, maybe 5-10% of urban land is marginally habitable because of the noise and dirt of nearly roads. That leaves about 30-40% of urban land for human use.

                  Low density also means the city centers lose their main differentiator from the countryside, and it means that mean trips are longer — requiring even more cars and wider roads.

                  The Chinese are not going to destroy half their own city land the way we did. At least not in Eastern China, which is about the size of the Eastern US but supports 800m people. There’s simply no room for shenanigans like that. They are building up not out. that means there will be no room for cars.

                  • Ilambiquated says:

                    I’ve always found it ironic that the Americans flattened all the German cities in WWII. Within a few decades the German cities had bounced back, and the American cities are now in ruins.

          • Stephen Hren says:

            Instead of killing Chinese people, I’ll just buy an electric car. Thanks for the suggestion, though, I guess.

            • Watcher says:

              Think globally, act locally. Just imagine how your purchase will stop the Chinese oil consumption explosion underway and showing no signs of stopping.

              • Nick G says:

                It’s true: if I stop drinking, that won’t prevent alcoholism next-door.

                But I’ll be a lot happier, healthier and wealthier them the people next-door.

                Oil is expensive dirty and risky. It’s time to kick the habit.

        • sunnnv says:

          “from small beginnings….” – yep.

          In January 2014, Toyota announced 6 million cumulative hybrids.

          This Oct. 13th, they passed 7 million.

          9 months to make and sell a million hybrids.
          Yes, I know, total 2013 cars were 83 million, but other companies are now doing hybrids, and Toyota’s 1st was just in 1997.

          BTW, the Chinese gov’t is encouraging people there to buy EVs.

  9. Euan Mearns says:

    On Energy Matters:

    Drilling Deeper – A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom

    Some of the points I make:
    1. US gas production has been static because US has been self-sufficient and any additional production has had nowhere to go
    2. LNG exports should push US gas prices higher, reducing demand but perhaps broadening the shale horizon
    3. WTI on $50 (which is possible) might kill off shale liquids production and the N Sea

    Forecasting is fraught with complex difficulty.

    • Watcher says:

      The Euro has been weakening vs the Dollar (driving up the dollar) and ditto Pound sterling so $50 WTI may mean nothing to the N Sea.?

      No one has focused on this. There has been no surge in global oil production over the past 2 months. KSA didn’t flood the world with oil. There may have been a demand fall. Data on that won’t be available for months. Hard to see it being so with China’s relentless car purchases. US car sales have also been strong as now 30% of all sales are using sub prime loans (for you non Americans it means low life scum with poor credit rating are given a car loan).

      So dollar spike, and it HAS spiked, is about the only thing that aligns with the 2 relevant months.

      • Jeffrey J. Brown says:

        Low Prices Lure China into Oil Market
        Uncharacteristically Opportunistic Buying Reported by Singapore Traders

        China is on a buying spree in the global oil markets as prices slumber near the lowest in years. The trading unit of state-run China National Petroleum Corp. has bought 36 cargos of crude oil in the open market so far in October, the largest purchase ever in a single month, Singapore traders familiar with the transactions said.

        The purchases show how China, the world’s second largest consumer of oil after the U.S. , is taking advantage of the energy glut to stock up on oil used for making transportation fuels like gasoline and diesel. It’s also a change from usual buying patterns as Beijing normally secures its oil needs through long-term contracts with fixed prices—and is rarely a big player in the Singapore spot market, Asia’s biggest oil trading hub. . . .

        Traders say China has frequently taken advantage of price drops to buy up cheap oil, though never on this scale, and that the strategy implies China views the current oil price decline as temporary.

        “If the Middle Kingdom puts the barrels into strategic storage, something that would be logical given low outright prices, they will disappear entirely from the market and China will still have to buy more crude for its day-to-day needs,” analyst Richard Gorry at energy consulting firm JBC Energy said.

      • Old farmer mac says:

        Correlation does not prove causation. You can’t just pull on one end of a rope.

        If the price of oil on world markets is down because the dollar is up then anybody selling oil for dollars outside the US can use those extra valuable dollars to buy more of whatever he was buying previously.

        So if he gets FEWER dollars for his oil he will be able to exchange them for proportionately MORE euros or whatever other currency he normally uses. There may be a minor loss of purchasing power involved for this seller but nothing major unless he spends his money on stuff from the US.

        Maybe I am wrong but imo the current price of oil is due to a weak overall economy with perhaps faster adoption of more fuel efficient cars than was expected , more heat pumps and fewer oil furnaces etc. Tight oil has offset declining conventional production to the point that supply exceeds demand at higher prices. No more complicated explanation is needed.

        My folks held on in the apple business running at a loss for a long time by going to town and getting a job to support the farm but eventually the smaller (and thus higher cost) growers were forced to give up. Some oil producers will give up before too long too. Prices will go back up unless the economy gets worse for other reasons.

        • Watcher says:

          “Maybe I am wrong but imo the current price of oil is due to a weak overall economy with perhaps faster adoption of more fuel efficient cars than was expected , more heat pumps and fewer oil furnaces etc. Tight oil has offset declining conventional production to the point that supply exceeds demand at higher prices. No more complicated explanation is needed.”

          As Jeff points out, we have no evidence of anything other than a consumption INCREASE during this time frame. As I mentioned before, we have to add an item to your depletion never sleeps — population gain never sleeps. The Chinese buy 22 million new oil burning nodes every year and that didn’t stop during these two relevant months.

          There Is No Evidence Of Aug-Sept Consumption Decline. It may have happened, but there is no evidence of it and in fact the only evidence we have suggests increase.

          “Maybe I am wrong but imo the current price of oil is due to a weak overall economy with perhaps faster adoption of more fuel efficient cars than was expected , more heat pumps and fewer oil furnaces etc. ”

          There is no evidence of anything like this over the last 2-3 months. Nothing has happened that wasn’t happening at $110/barrel.

          Except the dollar spike.

        • Ilambiquated says:

          I think the point you are missing is that LTO has reduced the net export of dollars from the US sharply in the past couple of years. So there are fewer dollars floating around the money markets. That could be a partial explanation for the strong dollar.

          This means that net US exports (net purchases of American goods by foreigners) has gone up sharply as well. Still very negative, but sharply up.

    • Dennis Coyne says:

      Hi Euan,

      Do you think WTI at $50/b long term(more than 12 months) is likely? I don’t. Even the EIA’s low price scenario only goes down to about $70/b (2012$), I would put the odds of the EIA low price scenario(or lower) at about 10%. I don’t know the costs in the North Sea, but the average Bakken well breaks even at an oil price of about $75 at the refinery gate. So $70/b will be enough to slow things down in the shale plays.

      If you were just talking about a short term fall in oil prices like early 2009, that is possible, but will be short lived (12 months or less) if it occurs.

  10. DownToTheLastCookie says:

    This report makes it clear the XL pipeline should be approved to be completed. But only with an additional 10 cents a gallon fuel tax per year for the next 5 years. It’s going to be dug up either way and it’s economic security.

    Obama should also be topping off the national reserve at $80 a barrel.

  11. Ronald Walter says:

    At the moment, some oil company stocks are down some 30 percent like CLR, 80 to 54. A sign of tougher times for them, couldn’t happen to a nicer company, the big babies at CLR are taking their lumps lately, as it should be.

    Keep an eye on oil stocks if you are an investor and want to own an oil stock, they’re going to be approaching some lows in the near future. It is a sea of red for them these days. Oil at 80 makes them cry like babies and squeal like pigs, they’re both, but that’s another story.

    Besides, Goldman Sachs quotes a futures price of 75 or lower, can watch the oil stocks plummet, then pick them up for a song. God’s work, I guess.

    Statoil, STO, has a good dividend and the price is low enough to make it a possible buy, but it could go a bit lower with oil on the skids.

    Anywhere along the eastern seaboard of the US and over to the Mississippi will be The Pale, the last place you’ll want to be. It’ll be pell mell chaos like it is in Chaosastan in the ME. The same for the Pacific coast. California’s drought portends a future, a harbinger of what you’ll be looking at.

    Greenland might be your refuge, you’ll be safe and sound, but take an extra parka with you and learn how to build an igloo.

    If it all goes to hell in a handbasket, make sure you are a near a military installation.

    It’ll be important. Collapse means war. You will need help.

    Gold and silver minted coins in your possession will help, along with brass, lead, and a delivery system for those two metals.

    When it is all gone, any semblance of civilization, paper money will be useless, money in the bank will be useless. Any garden you find will probably have been scoured ten times over before you find it to scour once more. At Auschwitz, when the cattle cars were unloaded, everybody headed for the nearby gardens which had been emptied long ago. “Potatoes, if we only had potatoes, we’d be rich.” Words I heard from an elderly woman who had been at Auschwitz, she was quoting her Mother’s words. When there is nothing, it sinks in fast, one helpless feeling.

    Beef Wellington and Chateau Briand won’t be for supper.

    No electricity, meltdowns of nuclear facilities will possibly take place, no gas, no cars, no running water, the few places to find refuge will be overwhelmed. The upheaval will be mind boggling.

    Relax, it hasn’t happened… yet.

    Horses manage on their own without running water, electricity, a car, a bank account, except for a Kentucky race horse, any of those conveniences are foreign to a horse, yet they still manage to make it through out there in the middle of Nevada.

    Start thinking like a horse.

  12. Old farmer mac says:

    In general I take anything in Forbes regarding oil with plenty of salt but this piece is well worth reading for the content on thinking at the big French oil company.

    We have to hand it to the French. They saw the light and the writing on the wall sooner than anybody else when it comes to reliance on imported fuels. That is why they have so many nukes and will soon have one hundred percent electrified trains.

    Some people no doubt wish to occupy the high moral ground and will thus condemn the departed Mr Mustasche for consorting with low life politicians in distant lands but given the French choice between having oil from such places and having none.. ….well I personally cannot find anything in his record for which to condemn him. The very survival of not only his company but possibly also of his country depends on oil from such places. Nukes or no, electrified trains or no, the French must have it for now and for the foreseeable future.

    I would want to count on foreign suppliers or the ability of foreign buyers to buy enough French wine to pay for oil if I were a Frenchman. Some of my own neighbors are making and selling pretty good wine -and selling it cheap.

    • Phil Harris says:

      Maybe a change in emphasis in France these days.

      In Britain we apparently have signed up for one giant new NP plant to be built by EDF (large French part-State-owned). Hovever, EDF required guaranteed price for electricity for 30 years to be twice the price per unit charged at the moment to us Brit consumers by suppliers.


      • Old farmer mac says:

        I have been reading about this shift from time to time but in my estimation the French are not going to give up their nukes until AFTER they have gotten their renewables act together.

        They seem to be a bit more hard nosed about reality and a little less likely to do things rashly in a hurry than most other countries.

        I am a big believer in renewable energy but the only thing that scares me more than the nuclear power industry is the next few decades without it.

        Renewables are going to take a long time to scale up and the possibility in the meantime of WWIII due to a lack of affordable and readily available coal oil and natural gas is a very real one.

        • Dennis Coyne says:

          Hi Glen,

          If I understand you correctly, I think you are saying we should ramp up wind, solar and nuclear (based on whatever the low cost option is) as rapidly as possible. If so I agree.

          I would also mention that we should start by trying to get to about 50% of grid capacity from wind initially with maybe 30% nuclear and the rest natural gas and solar, then see how the costs play out. All RPS and subsidies to wind solar and nuclear should be eliminated and fossil fuels should be taxed at $10/ton of carbon emitted to the atmosphere (collected at wellhead, minemouth, or when imported).

  13. Old farmer mac says:

    If the juice out of that new nuke is the difference between keeping the water and sewers working during a potential fuel supply crisis and everybody crapping in non existent portapotties and getting their drinking water off the back of (also nonexistent ?) military tank trucks then it will be a bargain.

    A working nuke is a big investment that can properly viewed in some respects in the same light as a fleet of warships or an army. These things are uber expensive too but nobody much is willing to risk the future without them.

    The cost of nuclear power would probably come down substantially if the various pressure groups working to prevent new nukes from being built would allow the industry to move to a standardized design and planning process.There would certainly be substantial economies of scale to be had from a standardized design which would of course need to be updated every decade or so as the technology develops.

    • Longtimber says:

      Southern Co is building 2 new AP1000’s at Vogle Ga. because they have to. Spent fuel pools for the existing reactors are at capacity. The designers and builders here in Pensacola of the fleet of Westinghouse PWR’s NEVER considered the unthinkable: Storage of decades of spent fuel on site. The nightmare of Breach Of Containment is now just one concern, the majority of the Radionuclide hazard is waiting in pools outside of containment for removal for the site and isolation from the Biosphere. Insanity. What’s that Forrest Gump quote again?

  14. Old farmer mac says:

    I think the guys and gals who wrote this article are both naive and overly optimistic about the issues we are facing.

    A pandemic disease that will put a truly major dent in world population may not be very likely but it is certainly a real possibility.

    And barring miracles on a couple of technology fronts and the world cultural front there will never be food enough produced to support a population in excess of ten billion unless the people who live in countries with some spare farmland are willing to supply that food to strangers far away for nothing and to also give up eating meat themselves. Perhaps I am somewhat cynical but I just don’t see that many people going along with charity and personal sacrifice on that scale.

    Now there is a possibility that when the shit gets well into the fan in countries that are not self sufficient in food that the men and women who live there will submit voluntarily to sterilization in exchange for a more or less guaranteed personal food supply.

    That sort of thing could if it comes to pass pretty much put a stop to population growth in some places.

    And maybe some old B 52 bombers will be converted to pesticide sprayers that spray a long lasting birth control drug onto every field they fly across. The drug probably does not exist but it may be invented and it may be used without much notice in a country desperate enough to go to that length.I do not think birth control drugs will actually be sprayed on crops but merely made up this example as out of the box thinking and acting that will have to take place at some point over the next few decades.

    I wouldn’t move to a country such as Egypt for any sum of money plus a few dozen good looking virgins if I had to stay there for another decade or two.Ditto any place in sand country where the oil comes from. The risk of outright war in such places is too high and any way eventually the oil revenues are going to be in adequate for the support the population with imported food.

    • El Ukuku says:

      I spotted this story (the version) but decided not to post it due to the population debate that always follows.

      Here’s the original article,

      At a glance the 12 billion by 2100 number comes from a U.N report, their BAU prediction appears to be a population of between 10.3-10.4 billion by 2100.

    • El Ukuku says:

      we did not incorporate any density feedback to emulate the effects of a planet-wide human carrying capacity on vital rates, apart from scenarios imitating possible demographic consequences of reduced food supply or resource driven war or disease

      Although they mention that they ran the scenario for reduced food supplies and war they don’t actually include that scenario in their results, perhaps it didn’t make pleasant reading or more probably it wasn’t relevant to their theme that humans need to cut back consumption if we’re not going to eat ourselves out of house and home.

      • Doug Leighton says:

        I too was reluctant to introduce this topic (for your very valid reason) but since you’ve mentioned it……………..


        “To work out the impact on population, the team constructed nine different scenarios for population change up to the year 2100, using data from the World Health Organization, and the US Census Bureau’s international database.”

        “These growing numbers mean a greater impact on the environment than ever, with worries about the conversion of forests for agriculture, the rise of urbanisation, the pressure on species, pollution, and climate change.”

        “Even draconian measures for fertility control still won’t arrest that growth rate – we’re talking century-scale reductions rather than decadal scale, because of the magnitude.”

        • Watcher says:

          The probable 6 billion short term decline in population will have an ugly impact on environment issues, because it takes too many calories to bury that many bodies. They’ll be tossed in rivers to rot. The insect and fly population will choke the air around cities and add more corpses.

          But then a few years later when the flies starve the environment will be cleaner for the 700 million (and falling) remaining people, so y’all green folks should be rooting for a China east coast pre-emptive strike and maybe greens should go drive some symbolic spikes into trees in preparation.

          • Tom Fugate says:

            There was a PBS special where some organization in Kentucky is doing experiments to see how human corpses decompose. They found that unburied bodies can decompose right down to the bare skeleton in as little as four weeks. It depends on the weather. So lots of dead people will be a terrible stench and a health hazard for a short time but it won’t last long. Good news for the survivors (if any).

            • Watcher says:

              Nod. I give it a few years because some bodies will be buried under other bodies. The flies will feast and choke the air.

              And then they won’t. Don’t live downstream from cities. But of course if you live upstream, that’s where the toughest and smartest of the cities will walk with their uzi’s.

        • Aspera says:

          Greer spoke of population decline in a recent blog. Like below and an excerpt. What I found fascinating was how his example shows how population can be reduce to 5% of it original level over 300 years without the Hollywood apocalypse imagery.

          h ttp://

          “Let’s explore that by way of a thought experiment. Between family, friends, coworkers, and the others that you meet in the course of your daily activities, you probably know something close to a hundred people. Every so often, in the ordinary course of events, one of them dies—depending on the age and social status of the people you know, that might happen once a year, once every two years, or what have you. Take a moment to recall the most recent death in your social circle, and the one before that, to help put the rest of the thought experiment in context.

          Now imagine that from this day onward, among the hundred people you know, one additional person—one person more than you would otherwise expect to die—dies every year, while the rate of birth remains the same as it is now. Imagine that modest increase in the death rate affecting the people you know. One year, an elderly relative of yours doesn’t wake up one morning; the next, a barista at the place where you get coffee on the way to work dies of cancer; the year after that, a coworker’s child comes down with an infection the doctors can’t treat, and so on. A noticeable shift? Granted, but it’s not Armageddon; you attend a few more funerals than you’re used to, make friends with the new barista, and go about your life until one of those additional deaths is yours.

          Now take that process and extrapolate it out. (Those of my readers who have the necessary math skills should take the time to crunch the numbers themselves.) Over the course of three centuries, an increase in the crude death rate of one per cent per annum, given an unchanged birth rate, is sufficient to reduce a population to five per cent of its original level. Vast catastrophes need not apply; of the traditional four horsemen, War, Famine, and Pestilence can sit around drinking beer and playing poker. The fourth horseman, in the shape of a modest change in crude death rates, can do the job all by himself.

          Now imagine the same scenario, except that there are two additional deaths each year in your social circle, rather than one. That would be considerably more noticeable, but it still doesn’t look like the end of the world—at least until you do the math. An increase in the crude death rate of two per cent per annum, given an unchanged birth rate, is enough to reduce a population to five per cent of its original level within a single century. In global terms, if world population peaks around 8 billion in 2030, a decline on that scale would leave four hundred million people on the planet by 2130. “

          • Nick G says:

            Greer is a good writer, and I imagine he’s a good Druid, but he knows very little about energy.

            • Aspera says:

              Perhaps you are right.
              Then again, this sub-thread is not about energy.

            • Marcus says:

              Greer is peak oil aware no doubt about that. He seems to stick almost obsessively to the idea of catabolic collapse refusing to even consider the idea of a fast collapse scenario.

              • Nick G says:


                A slow decline makes even less sense than collapse: I hope that it’s crystal clear that there are lots of solutions to PO, given time.

                The idea of a sudden collapse seems to depend on the idea that modern civilization just isn’t very resilient: that a shock to the system will make it fold up. I suppose one can’t completely rule that out – a deep recession is certainly possible, if the financial system gets completely destabilized – but it seems mighty unlikely to me.

    • The Wet One says:

      I was going to post and comment but I see I’m not the only one reading this a.m.

      There will be an interesting century ahead.

    • wimbi says:

      Um, have you folks noted that those sand counties have a huge open pit gold mine called solar energy just waiting for someone to notice?

      All the energy we will ever need for anything. Lasts forever, and always gets cheaper and cheaper. So, put all the energy intense things there, generate the juice with good old steam engines and pipes and sheet aluminum reflectors, and pump the spare energy water up the local hills, and the ocean to transport all the stuff all over.

      Of course to start off, you gotta do a little work to run all those camel herders off the sand to make room for civilization.

  15. Doug Leighton says:


    “…..It’s worse than we thought. Scientists may have hugely underestimated the extent of global warming because temperature readings from southern hemisphere seas were inaccurate.

    The team estimate that the extent of warming in the southern hemisphere oceans since 1970 could be more than twice what has been inferred from the limited direct measurements we have for this region. This means that together, all the world’s oceans are absorbing between 24 and 58 per cent more energy than has previously been estimated by direct in-situ measurements…..”

    • Anon says:

      Ask California. They be cooked. Hottest year on record and no rain. NorCal got *nothing* this October inland from the Pacific. November doesn’t look good either

  16. Watcher says:

    Dollar is a smidgeon weaker today vs yen, euro and sterling.

    Oil, ominously, up single digit pennies, just a bit over $81.

  17. Old farmer mac says:

    Bad for the environment maybe but possibly good for business as usual and for us individuals in this forum.

    Mexican oil production may actually go up for another decade or two. It is probably impossible to say just what they still have untapped in the ground.

  18. Jeffrey J. Brown says:

    Islamophilia in action:

    Berkeley students try to boot Bill Maher

    A student petition at University of California, Berkeley, aims to prevent Bill Maher from speaking on campus following his recent comments on Islam. The petition, which now has more than 2,200 signatures and is circulated on, demands that the university revoke its invitation for the liberal comedian to speak at a December commencement ceremony.

    “Bill Maher is a blatant bigot and racist who has no respect for the values UC Berkeley students and administration stand for,” the petition reads. “Bill Maher’s public statements on various religions and cultures are offensive and his dangerous rhetoric has found its way into our campus communities.”
    UC Berkeley student government senator Marium Navid and Khwaja Ahmed launched the petition Thursday, according to The Daily Californian. Ahmed is a member of the Middle Eastern, Muslim and South Asian Coalition, which is a supporter of Navid. . . .

    Earlier this month, Maher made headlines during a debate on Islam on his HBO show, “Real Time with Bill Maher.” The comedian and Sam Harris — an author whose books have addressed the corrosive influence of organized religion — got into a heated exchange with actor Ben Affleck after they made comments urging liberals to stand up against Islam. Affleck at one point called Harris and Maher’s views on the religion “gross and racist.”

    Read more:

  19. Old farmer mac says:

    Perhaps the biggest reason I am unable to think of myself as a liberal although I hold to many values considered liberal is that so many liberals are idiots when it comes to cultural and political realities.

    It is amazing how blind people can be to obvious facts. I don’t personally know of single self professed liberal woman at this time who is ready and willing to come out and publicly announce the unvarnished truth about the way women are treated in Islamic societies but every last one of them goes ballistic if some redneck such as myself happens to ogle her even as she most blatantly displays her desirability in miniskirt and tight blouse – in the event she happens to be attractive of course.

    And yet people think this way believe they are smarter than folks who believe in sky daddy.

    But believing in sky daddy is foolish in their eyes only if you happen to believe in a protestant version of him and reside in the US of course.

    If you rename him Allah and you live in the East it it is not only ok it is a cardinal sin to criticize this belief. It is also ok to believe in Allah if you live in this country so far as that goes and they make damned sure– if they can- -that you will be dragged thru the mud and denied a degree at university if you make fun of them personally or of any believers in Allah.

    They have the power in many departments to make sure of this. Fortunately so far they don’t have much power in departments of physical sciences and scientists usually take only a very few courses in their departments- just enough to graduate.

    • Dennis Coyne says:

      Hi Glen,

      You really are a liberal, even though you might consider that an insult. There are varying degrees of liberal just as there are varying degrees of conservatives. When each of these two modes of thinking approaches sensibility the differences are small enough that compromises can be reached.

      It used to be that the US Senate operated like this in the “good old days” of say a Bob Dole and George Mitchell run Senate.

      • Old farmer mac says:

        I have been accused of being a liberal before but I sued the guy and got a judgement for slander.LOL

        You are right of course about the fact that when people start thinking ( I hold that ”sensibly” is redundant if thinking is properly defined) then they will reach similar conclusions regardless of their political orientation.

        There are many good sound conservative reasons to support tough environmental law the first and most important one being that I have a property right in a clean and sustainable environment. I have a property right to clean air to breathe.

        The right of a businessman or individual to swing his fist stops short of my nose.

        If the current day medical establishment fails to take care of the people of this country sufficiently well and efficiently to ensure a safe and sound society then the rest of us have a right and obligation to do something about that since millions of bankrupt sick people are not exactly good for the body politic.If turning medical care over to the government is the only way to fix the problem then turning it over to government is justified if the problem is sufficiently serious.

        Better to socialize medicine than to let the problem get so bad that the poor and working classes revolt and demand and get a fully socialized government.

        We can’t afford to tolerate the cops beating Rodney King or shooting Micheal what’s his name because that sets a precedent for the cops to shoot us when the balance of political power changes – and it is inevitable that it will change since change is the only truly dependable constant in human affairs other than stupidity and ignorance.

    • Nick G says:


      I know a lot of women who are delighted to criticize the treatment of women in Islam.

      I suspect a lot of politicians would be a lot faster to do so if we weren’t addicted to oil.

      • Old farmer mac says:

        So do I but they are republican or conservative women.

        I also have plenty of reason to believe that most or all of the liberal politically active women I am acquainted with are condemn Islamic treatment of women in private but they are political hypocrites and refuse to do so in public.

        Political solidarity is more important to them than the truth.

        • Nick G says:

          That’s interesting – I hadn’t thought that attitudes toward Islam were that partisan. On the other hand, if they are partisan, then a willingness to criticize Islam is not a virtue of Republican women it’s just part of their tribal culture.

          Uuhhmmmm….wern’t you just writing about the importance of diplomacy about religion?

          • Old farmer mac says:

            Of course nobody has a monopoly on political hypocrisy.

            If it were a useful source of energy there would be no need for oil lol.

            Diplomacy about religion is important to a greater or lesser degree depending on the context. If the political left in this country were a little more careful about insulting religious folks they would probably be more successful in getting what they want.

            Of course if the political right wing would face up to environmental realities EVERYBODY would have a much better chance to live a long happy life.

            Deceit is as natural as any other behavior and has been with us as far back as we can trace evolution in a lot of respects. The air around here on some days is full of flies without stingers that look more so much like wasps that it is impossible to tell the difference without examination at very close range.

            • Old farmer mac says:

              I would add that people on both wings criticize or ignore many things and that they do not always allow their larger political convictions to stop them if they feel strongly about a particular issue.

              It just strikes me that liberal women failing to criticize Islamic societies is one of the most blatant examples of people putting their political agenda – basically political correctness in this case- ahead of their true beliefs.I have confronted a number of such women with this discrepancy in their thinking and behavior and succeeded in making sworn enemies of them for my trouble. Cognitive dissonance is the key of course.They just don’t allow themselves to think about this sort of thing very much or very often and if they do they just keep their mouths shut in public.

              Confront some of them with this issue and they spit and hiss like bobcats. The more timid ones look like a deer caught in headlights.

              I managed to get the only ” C” ever awarded to my knowledge at VCU in a graduate level education course – I have to take one every four years to keep my professional license current in case I need to teach as a fall back option- because I insisted on confronting the professor on this issue.

              Now in this context a ” C” is a failing grade because it cannot be used to meet the requirements for a masters degree.Did not matter to me of course since it still punched my ticket in terms of keeping my license current.

    • Ilambiquated says:

      Interesting linguistic foot note: Arab speaking Christians call their god Allah as well. The Hebrew word is El, as in Isra-el, which means god rules. Also Daniel, Samuel, Raphael etc. Jesus spoke Syriac, aka Aramaic. (Arabic, Syriac and Hebrew are all closely related.) The word there is eloi.

      On the other hand, Jesus never talked about his god using this word. He always said the Syriac Abba(s) (or Pater in Greek translation) meaning father. Except when he was dying on the cross, when he says God why have you forsaken me. Then he uses the Syriac word “eloi”.

  20. Old farmer mac says:

    Business men are quite expert at seeking out profits and there are enormous profits to be made in most fields by reducing energy costs.

    We may adapt to higher priced scarce energy easier and faster than most people expect.

  21. Watcher says:

    Day closed with Euro a tad strong vs the dollar (which weakens the dollar) 0.3%. Sterling up tiny. Yen down 0.3% and oil up 20 cents, which seem to have been cause for major league relief.

    The yen may be the focal reality.

    They, Abe and the BOJ, are essentially desperate to trash their own currency. They HAVE to push Toyotas out the door and a trashed yen helps that happen. But it means they have to hand over more pieces of printed paper for oil. It is said that “At some point” . . . damn near all bozos of the world will do the “at some point” thing oil sellers are going to question providing 4.5 mbpd to the Japanese for paper.

    Japanese QE has made Bernanke look like a piker. On a GDP proportional basis they have printed about 3X more money, and they started in the 1990s. They can’t stop. OTOH, “at some point” hasn’t starved anyone in Tokyo yet, so why stop. You only stop when the counterparty gets rational and refuses goods of actual value in return for what is called money.

    But . . . trashing the yen helps spike the dollar and spiking the dollar can and likely will destroy the shale oil industry and very very fast.

  22. Watcher says:


    12:58 p.m. Today12:58 p.m. Oct. 28, 2014 – By Claudia Assis
    API reports weekly crude supply increase above expectations SAN FRANCISCO (MarketWatch) — U.S. crude-oil inventories rose by 3.2 million barrels in the week ended Oct. 24, the American Petroleum Institute reported late Tuesday, according to reports.

    EIA reports tomorrow and also expects a crude inventory build (of 2.8 mb).

    This is the general measure watched for no very good reason, but on an FOMC day (tomorrow) this becomes a tad important for oil’s price, which as we’ve seen can destroy NoDak. Ordinarily these reports should increase willingless/urgency to sell and take the price down. But the Fed reports tomorrow so shrug.

    • Watcher says:

      Don’t know what time zone that 12:58 is but the news wasn’t out an hour ago.

  23. SRSrocco says:

    Here is an interesting article about those stupid SWEDES…

    Currency traders eye Swiss vote on gold holdings

    A referendum that would force the Swiss central bank to hold a fifth of its assets in gold could rock foreign exchange markets, analysts have warned.

    On the 30th November, voters in Switzerland will head to the polls to decide whether the Swiss National Bank (SNB) should boost its gold holdings and refrain from any further selling of Swiss gold.
    Well, I don’t know about anyone else in this blog, but the list of countries who are putting faith in GOLD is growing…… insane to say the least. The Swedes will vote to see if their Franc will be backed 20% by gold. Also, the referendum also calls for an END TO SELLING GOLD, as well as a REPATRIATION all GOLD held outside the country.

    What is going on here?? We have the lousy RUSSIAN GOVT increasing gold reserves, record buying by the Chinese & Govt holdings as well as robust Indian gold demand… not including the huge amount that is being smuggled into the country.

    So, now we have the NITWIT SWEDES voting on this gold referendum. Right now, some polls says it will pass, while others say its too close to call. Can you imagine that?? Swedes voting for a GOLD-BACKED CURRENCY. The F*CKING nerve of them.

    What is wrong with the world today? By the way… I hear from sources in my group that there is speculation that the U.S. Dollar will get a devaluation shortly. Of course, there is no way to corroborate this… but I would imagine if the Swiss pass this vote… we may see a Dollar devaluation SOONER than LATER.

    Good luck to all the PAPER MACHE INVESTORS.


    • Ronald Walter says:

      The Swedes are in Sweden, the Swiss are in Switzerland.

      If the currency doesn’t have a guarantee that it will be redeemable in gold, then it is an exercise in futility. Any currency containing words like ‘silver certificate’ or ‘gold certificate’ means there is an amount on deposit in the treasury of either gold or silver coin to match the paper dollar denomination of one dollar or ten dollars or twenty dollars. Back in those days, money had some meaning to what the amounts actually were providing there were words to that effect on the paper money. Too far down the rabbit hole to go back now.

      Read Roger Sherman’s ‘A Caveat Against Injustice’.

      How come oil wells were drilled and pumped in the Williston Basin the 55 years preceding the Bakken play when oil was 2.60 usd per barrel back in 1951 and well took months to drill?

      Oil from the Williston Basin was being sold and shipped when the price was 60 dollars per barrel in 2007.

      The oil from the Williston Basin and the Bakken have been shipped to the market for 63 years now, why would it just stop?

      It won’t.

      • Old farmer mac says:

        Generally speaking I read Ronald’s comments as humor and satire but once in a while he does make a truly pertinent point.

        The fact that a bank has some gold in its possession is not very meaningful unless it is actually willing to sell that gold at a price fixed in its own currency.

        There is simply no way any central bank is ever going to have enough gold to sell it any time somebody wants it by the ton and keep accepting their own printed currency in exchange for it.Paper money and electronic money depreciate by nature and while this depreciation is not a law of nature it is pretty damned close in its operation.

        There is simply not enough gold in the world to back the world money supply these days.

        Chaining money to gold at a fixed price makes it impossible to inflate the money. No politician will ever go along with that unless he is the fully owned property of old existing money.If the point is not to guarantee the value of the money — is there any point at all???

        At one time the world was dominated by old existing money. Not anymore.
        Businesses that provide nothing except entertainment which hardly existed a couple of decades ago have larger market caps now than some truly essential industries.

        • El Ukuku says:

          Preaching to the choir I know but it’s the same with the banks, banks simply do not hold the money we’ve deposited with them. Runs on banks do occasionally happen and are pretty disastrous, Northern Rock a small UK player was hit in 2008, Cyprus had to close their banks a few years back when they announced the haircut to everyones accounts, Argentina had a run on it’s banks when they went bankrupt 12-13 years ago.

          The monetary system is based on a belief that it works and while everyone agrees that it works the system does appear to work. A knock to the belief that the system works can cause the system to stop working. I tend to agree with Steve that it does appear some countries are hedging that the system will receive a knock by buying up gold. Perhaps in comparison to the size of their economies it’s just a gnat bite but the idea of gold may be enough to be a spark of belief that will keep things working. As others have commented, the U.S may have enough belief behind it that they won’t need to convince anyone with shiny metal.

      • Ronald, a couple of points. Every currency in the world is a fiat currency. All currencies are in the same boat so railing about fiat currencies is meaningless.

        There is a conventional reservoir in the Williston Basin. All wells prior to the shale boom were conventional wells drilled in the anticline reservoir. They were low cost vertical wells.

    • Old farmer mac says:

      Of course nobody has a monopoly on political hypocrisy.

      If it were a useful source of energy there would be no need for oil lol.

      Diplomacy about religion is important to a greater or lesser degree depending on the context. If the political left in this country were a little more careful about insulting religious folks they would probably be more successful in getting what they want.

      Of course if the political right wing would face up to environmental realities EVERYBODY would have a much better chance to live a long happy life.

      Deceit is as natural as any other behavior and has been with us as far back as we can trace evolution in a lot of respects. The air around here on some days is full of flies without stingers that look more so much like wasps that it is impossible to tell the difference without examination at very close range.

  24. Old farmer mac says:

    This is an excerpt from an EDF article about the German renewables effort.

    ”Furthermore, while renewables fuel sources have no fuel costs, Germany’s costs of importing oil, gas, and hard coal have increased by factors of 2.77, 2.68, and 2.26, respectively, over the past ten years. In addition, steel and cement prices jumped between 2000 and 2011, contributing to the cost of constructing a new power plant rising by 70-100 percent in many cases.”

    – See more at:

    The future monetary cost alone of imported fossil fuels virtually guarantee that the Germans are going to ” come out ahead” on the transition.

  25. Frugal says:

    OPEC Chief: Lower oil price to cut shale output

    Speaking at the Oil and Money conference in London, Abdalla Salem el-Badri, OPEC’s secretary-general, said, “At this [current] price, 50% of tight oil will be out of the market.”

    • Watcher says:

      Saw that. So Bakken reduction of 500K bpd. I think a typical truck hauls 220 barrels. Give them a benefit of doubt and say 65% of it goes by truck somewhere, 35% somehow has a pipeline to the pad. 500K X 0.65 /200 = 7738 truck trips per day not made. At 20 mins per trip this is 7738 X 0.33 = 2553 man hours not worked each day in NoDak.

      For the generic 120K dollar guys on 80 hr weeks ($29/hr) this is $74K not earned or taxed per day. X 365 = $27 million X 3 for a 66% water cut (hauling water reqmt) = $81 million in trucker money not earned per year JUST FROM HAULING OUTPUT. This doesn’t include the hours not worked hauling proppant and water to new wellsites that won’t be drilled.

      BTW 2553 man hours not worked each day for the 10 hr shift guys would be 255 guys X 3 for watercut or 765 truck drivers fired, or more likely a lesser number but with all shifts reduced to maybe 5 hrs. and pay $60K/yr if no firings. That’s the incentive to do the winter there.

  26. Old farmer mac says:

    Does anybody here have a firm opinion about this new battery technology?

    The backers must be pretty sure of themselves to commit to such a large investment in setting up the factory.

    • Nick G says:

      I’d say that their key claim is essentially unlimited cycle life. If their batteries cost $500 per kWh, and they can get 40k cycles or more, then the cost per kWh charge-discharge cycle is roughly a penny.

      That’s very cheap.

    • sunnnv says:

      There aren’t that many public details, though I haven’t gone groveling through patent records (the only stuff assigned to Alevo is not relevant, so one would have to get names, then search under inventors…)

      On the chart on this page:

      if I read the German right, at 40,000 cycles their Entl.Kap (Entlassung Kapazität ??? “dismissal capacity” in % of Nennkapazität (“rated capacity”) is like 30% (grey curve).
      The caption says “retains functionality”.
      They seem to be touting that the internal cell resistance stays the same (black curve), meaning no dendrites are growing to short the thing out. That is goodness.

      If 40,000 cycles leads one down to 30% capacity, then one must continually add new capacity to maintain the original system rated capacity. The “red queen” effect. Hey, where have I been hearing about that lately? 😉

      At least the batteries can be recycled in a timely fashion, unlike LTO that has been burned.

      Non-flammable electrolytes were a bit of a trick (poor performance, very expensive) until recently (2013), with the development of functionalized perfluoropolyethers.

      They don’t say what they use that I can find, but if they have any performance to speak of, they must be using something different than the usual suspects of ionic liquids (imidazoliums and similar).

      My firm opinion is we’ll have to wait and see.

    • Longtimber says:

      Electro-Chem aka “Battery storage” currently costs 100-250% over average power costs. I don’t see any technology that could change this, but a 25% cost reduction is electro-chem per kWH a big deal. Generation costs vary by an order of magnitude depending on time and capacity, so this expensive stored power will play an increasing important role. IIRC, 99% of grid power storage is currently pumped hydro. Batteries make more since as effeciency increases, especially for PV DG. The future of energy WILL BE distributed. example:

      • scrub puller says:

        Yair . . . Hello . Can you explain why generation costs vary? . . . I have never been able to get my head around the concept


      • Watcher says:

        Y’all do realize you sound precisely like technocopians, who are sure advances will solve all decline rates?

  27. Old farmer mac says:

    I think anybody who is interested in our privacy and civil rights ought to take a minute or two to google the woman who is the subject of a current article in the Washington Post.

    Sharyl Attkisson

    • Paulo says:

      Geez Mac,

      re: “Could those utility trucks have had something to do with the extra cable? Who knows.”

      We had the same thing at our place. Strange humming and clicks. Poor cable reception. Sudden surges of static and the phone would cut off.

      Telus came out and sent a kid who (luckily was an ex-student of mine which meant no charge) who went through the system. On a Sunday!! No charge to inform me mice chewed off an unused line which nevertheless somewhat shorted the main communication line. He didn’t know what the line serviced or who put it in as it wasn’t ‘their’ connection.

      Wasn’t mine, either.

      Of course I don’t live in DC or write about Benghazi. But…….

      Who Knows? (dum dee dumm dum dummmm)

      I don’t think those folks need hard cable hookups to spy on reporters anymore.

      regards, Paulo

      • Old farmer mac says:

        I don’t know which is scarier -the spying or the keystone cops three stooges management of it.

        This sort of thing if it is not stopped now may mean that eventually people who want to blog about peak oil find themselves subjected to the same treatment or worse.

        In almost any totalitarian or authoritarian state this forum would be shut down as a threat to the peace and security of the state and to the power of the ruling elite.

        • Paulo says:

          I agree. We do take our freedoms for granted. They can surf my comments anytime as I would say them aloud, anyway.


  28. El Ukuku says:

    About 2,000 hectares of fertile land are lost each day due to damage caused by salt, according to a UN analysis.

    Salt degradation occurs in areas of dry irrigated land with little rainfall and where there is no natural drainage.

    I’m not too familiar with agriculture but isn’t this caused by artificial fertilisers?

    • Anon says:

      It’s an old, old problem, older than industrial civilization by a lot. When you irrigate rather than use rain, minerals build up in the soil, including salt.

    • El Ukuku says:

      Thanks for that. I thought I’d read something a few years about fertilisers which is why I asked. Why does irrigation cause mineral build up where rain doesn’t, only enough water used for the job so there is no real water flow to move the minerals along?

      • The minerals, including salt, is in the irrigation water which is either taken from rivers or aquifers. On farmland there is very little runoff and little drainage. Most of the water on farmland is taken up by the plants or evaporation. So the salt just builds up in the land. There is no salt in the fertilizer.

        The rivers feeding the Aral Sea were dammed back in the 70s, or sometime near that time. The water was used to irrigate cotton land. Since then the Aral Sea has dried almost completely. It is nothing now but a small brine puddle with no fish. But the cotton land is now salted up so much the cotton yield is only a fraction of what it was when the irrigation started.

        The Aral Sea once supported a huge fishing fleet and on the shores several canneries that supplied canned fish to millions. Now there is no fish and little cotton.

        • The Wet One says:

          And that right there is called human ingenuity at work.

          Beautiful isn’t it?

      • HVACman says:

        Ron didn’t finish answering the other part of your question re: rainfall and lack of salt, so I’ll clarify. Rain water is essentially distilled water, without minerals or salt, so when rain water evaporates, it leaves no salt or minerals behind. Well water or river water frequently leaches salts and minerals from the surrounding rocks in the aquifers and stream beds, which dissolve into the water. When that water then evaporates on an irrigated field, the salts and minerals remain.

        • El Ukuku says:

          I should have been able to thunk that myself. Thanks for the clarification.

          During the day I did a bit of digging and I wasn’t entirely wrong regarding fertilisers –

          When raw ingredients used to make inorganic and synthetic fertilizers are added to water, they become soluble salt often referred to as fertilizer salt…What is not absorbed by plants stays in the rooting medium. Once the water evaporates, the soluble salt will remain intact…The more often plants are fertilized, the more salt will accumulate and raise the level of dissolved salt

          The rest of the article that came from is all about flushing salts from the soil so fertilisers along with irrigation (which doesn’t flush) can cause a build up of soil salinity. From reading it’s the overuse / misuse of fertilisers rather than the fertilisers themselves that is the problem.

          Anyone feel free to correct me 🙂

          • El Ukuku, when you quote from the net you should include the URL. Always give the source of your information, no matter what the source.

            There are different kinds of salt. The salt that leaches out of the land and is left in the soil from irrigation is sodium chloride, the same thing as common table salt, or sea salt. Incidentally all the salt in the sea leached out of the land and was dumped into the ocean via the rivers. The sea gets a little saltier all the time.

            Fertilizer salt is not sodium chloride, not the kind of salt left in the fields by irrigation.


            The kind of salt is important. Specific salt ions have greater effects than others. The ammonium ion in particular can release free ammonia, especially at higher soil pH. Ammonia moves directly into plant cells. High concentrations can prevent root growth and even kill seedlings. On the other hand, phosphate ions hardly pose a salt hazard at all, since they never get to high concentrations in soil water.

            Salt is often associated with sodium, because common table salt is sodium chloride. Sodium ions can destroy soil structure and clog the flow of soil water. But there’s hardly any sodium in most commercial fertilizers.

            • El Ukuku says:

              Sorry – here is the link where the quotes came from

              On reading again it’s probably referring to growing in a contained environment in this specific case, however I think the principle still applies.

              Here’s some further links

              Actively growing annual crops require a continuous supply of balanced nutrients in the soil. These are usually provided by the application of fertilizers which include soluble salts.

              In North Carolina, the majority of soluble salt problems originate from the improper use of fertilizers; in a few cases by using irrigation or municipal water high in salts.

     – Just an abstract

              Effects of excessive fertilizer and manure applications on the soil environment were compared in greenhouse vegetable systems…Due to excessive fertilizer application in greenhouse vegetable production in northeast China, excessive salt and nitrate concentrations may accumulate and soil quality may deteriorate faster than in conventional wheat–maize rotations.

              To be honest there isn’t too much about it that I can find, the majority of papers discuss irrigation and capillary action as the major cause. I’ll rest my case there, it does appear that overuse of fertilisers can have a negative, long term detriment on soil but is not a big problem compared to other forms of salinity.

              /sarc on

              Obviously the lack of information is a conspiracy by the evil American fertiliser companies who are burying the truth to keep us in the dark about their treacherous practices.

              /sarc off

              • Old farmer mac says:

                This subject has been pretty well accurately covered in depth enough for this forum. I will add only that there is probably nothing to be done about this problem except to quit irrigating since almost all the water available for irrigation has salt in it in greater or lesser amounts.

                We aren’t going to quit irrigating.Too many people would starve in the short term. Of course they are probably going to starve in the longer term anyway.

  29. Eastex says:

    I think it is interesting that all the focus is on the tight oil, when that offshore increase, way out at the 2040 mark looks funny to me. Any thoughts on how realistic that is?

  30. Doug Leighton says:


    There seem to be many misconceptions about the famous (or infamous) One Child Policy in China. Having lived/worked in China for about seven years, I kept meeting people with multiple kids and asked a lot of questions; later I read whatever I could find about this topic.

    To begin with only about 35% of China’s population is subject to the restriction and, as you might imagine, there are many way around this; enforcement is haphazard and in some provinces is non-existent. To my mind, the biggest flaw in the system is that almost all of China’s family planning programs contribute heavily to infanticide to the detriment of girls – every family wants boys. Even then many girls born in rural areas “go missing” as in, sold into slavery. At one point a small bridge was pointed out to me that was a “transfer point” where an estimated 100,000/year young girls had been told they could meet people who would find them good well paying city jobs: Yeah right.

    In 2013, the Communist Party, China announced the decision to relax the one-child policy. Under new rules, families can have two children if one parent is an only child. The coastal province of Zhejiang, one of China’s most affluent, became the first area to implement this “relaxed policy” this year.

    I’m not suggesting fertility rates aren’t relatively low but in my opinion the One Child Policy is a mistake: mostly it’s a failure (My wife claims it’s a disaster.) Currently the Chinese fertility rate is (officially) about 1.5 children per women. Many births are “hidden” so it’s actually higher but I have no idea how much higher.

    • Nick G says:

      Two side effects of excess men:

      lots of unemployed young single men creates instability, making the rulers of China very nervous about unemployment.

      And, single men without children lower the Total Fertility Rate.

    • Reproduction is a natural drive, part of human nature or animal nature. Such an innate drive does not yield very well to government dictation.

      • Nick G says:

        Sex is a natural drive. Reproduction? Not so clear.

        Fertility is dropping like a rock, around the world. That includes places like India and S. America.

        Only in Africa and the M.E. do we see a (large) exception, due to rigid cultures. The women in these cultures would have fewer children if they were free to, and far fewer children if they had education and other career options.

    • Watcher says:

      Overall somewhat meaningless since India is outgrowing them anyway. But friend of mine in Hong Kong says there is a fairly strong flow of early pregnancy women into HK from China (and Macau, btw) to carry the baby to term and then take it back home. Pretty standard stuff and there are no fines for babies born outside China.

      • Nick G says:

        India’s fertility is dropping very quickly. Half of it’s provinces have fertility below replacement, and the other half are getting there fast.

      • Doug Leighton says:


        Yes, in fact India takes great pride in overwhelming China’s population statistics. Actually you aren’t fined for extra babies in China (depending on how you define fined). What happens is that you’re placed in a higher tax bracket (so, same thing I guess). And you’re correct about babies born outside China; this is one of many ways to beat the system. Another is to be a Party Member, based on what I saw and people I dealt with: Not something anyone admits to of course. Unless you’re in a very quiet bar and you’ve had a couple of drinks too many and you’re talking to a Canadian and his sympathetic wife.

        • Watcher says:

          Yup. If there’s food, there will be babies. Period. The poor breed.

          Population growth often has migration in it so we don’t always have good numbers, but for now Africa seems to be the human factory and they export them to Europe.

          • Doug Leighton says:



            “This car doesn’t want to go straight. It doesn’t do polite, or graceful. It does sideways. All of the time. Dropping grandma off at the hair salon? Sideways. Driving home after a painful vasectomy? Sideways. Carrying a trunk-full of explosives to an off-the-grid location somewhere in the deserts of Arizona? Sideways.”

            Doesn’t sound very green to me but some guys (and gals)seem to be able to rationalize just about anything. This car proves it.

            • Doug Leighton says:

              Maybe this is slightly “off topic”.

            • Watcher says:

              If you don’t get consumption up, price can’t rise to a shale oil industry sustainable level.

              These guys are great Americans.

          • Nick G says:

            Well, no, there are very poor provinces in India with fertility below replacement level.

            Education seems more important.

          • Watcher says:

            Nigeria is my absolute fave for this stuff. Quadrupled population in the last 50 yrs or so. And check this out. 55% of them are between 15 and 65, with only 3% 65+.

            This ain’t happening from migration. hahahahah

            And hell, they are spiking like this even while they kill a few million every election day or thereabouts. 174 million 2013. Just excellent growth and if they can make it a government policy to get their per capita oil consumption up so they can have things like Social Security etc that big oil consumption fuels, then we’re talking about serious acceleration of global war.

            • Watcher says:

              It just warms one’s heart to see it, doesn’t it? Hey, maybe we should have some aid programs to be sure there’s enough food for those kids. What a great idea, yes? Maybe even have the kid write a letter in darn good English at age 5 telling you about all the food your $5/month bought, and include a few photos too of the kid smiling and holding a plate of KFC.

              What great humanitarians we are!!

              • Watcher says:

                BTW Chester;s chicken, the kind you see at convenience stores when you stop in for gas, that’s out of Brazil. Their number one growth market . . . Nigeria and countries surrounding. Short shipping trip, burning oil to push the boat.

            • Doug Leighton says:

              I go to Uganda once a year and can say without exaggeration (well not much exaggeration) that approximately every kilometer along every significant road there is a school hosting about 1000 kids. Soon all these kids will be of child bearing age. So the march goes on and on and on…………. Until there’s not enough food and they start making their way towards Europe

              • Old farmer mac says:

                My guess is that the Europeans are going to figure out what it means to have a few million refugees that cannot be assimilated into a technological educated western society before the refugee situation gets totally out of hand from their point of view.

                It is often said that an empty belly will trump principles every time. In my estimation the odds of comfortable well to do Europeans will run totally out of every thing except sympathy once they actually have enough refugees on hand to cause them some personal problems.

                I live in an economically depressed part of the US and my sort of place is where most of the refugees from south of the border stop and stay.This is because housing is cheap and there are lots of jobs that require only a strong work ethic and physical stamina such as tending machines in factories and farming.

                This immigration has caused local people a substantial amount of hardship because the increased competition for the available low skill jobs has been greatly increased.

                Of course any well educated well paid typical liberal never has to compete with these new people since they are not able to get jobs as lawyers teachers accountants nurses or technicians etc.

                So they are able to put principles in front of their own full bellies no problem.They even benefit because they can hire their lawns mowed and their houses cleaned dirt cheap.

                But in the end…. the numbers of immigrants gets to be a big problem for everybody if too many are allowed into the country.

                Western European citizens are not going to allow millions of desperate uneducated people into their countries.

                They will allow in just enough to salve their consciences and no more.

                The rest will be turned back forcibly if necessary but in will take a while for the situation to become obvious to the countries involved.

                • Nick G says:


                  Educated people are facing very tough competition from immigration or outsourcing. It’s not “liberals” that are underpinning open immigration, it’s employers.

                  Europe is turning away a lot of immigrants right now – much of the immigration problem you see in Europe has to do with the peculiarities of colonialism: ex-colonies have much more access to immigration to their old “masters”.

  31. Ronald Walter says:

    Alkali soils are a natural phenomena, you can’t farm them, nothing will grow except for plants that are naturally adapted to that soil type, however, draining the land does help and those areas can be farmed over time. Fertilizers do run off into streams, deposit into reservoirs and cause serious damage to fresh water supplies. Manure will do the same.

    At one time, the Red River of the North was the eighth most polluted river in North America thanks to over application of fertilizers, pesticides and herbicides. It fell from that standing not because of less pollutants, but because other rivers became even more polluted. The ag economics have changed and one goal was to reduce the use of fertilizers and pesticides in copious amounts. Today, measurement of land in production and the problem areas of noxious weeds are studied more and less use of herbicides and pesticides is being practiced. Anhydrous ammonia applied when seeding takes place or in the fall will reduce the use of other sythetic fertilizers and virtually assures germination. You can’t apply anhydrous in temperatures above 55 degrees F, it won’t remain in the soil. One quart of Roundup per acre decreases the need for additional cultivation while the crop is growing, less use of fuels is a result. One application of Roundup is all you will need, every weed will die and the Roundup Ready GMO seedlings will be unharmed. One quart of Roundup per acre or one or two gallons per acre of diesel to cultivate the unwanted weeds? What is your choice? The ag science is light years ahead of the ag industry from the 1950’s and 60’s. If it is good or bad, the jury is still out, but it is good because the production increases are noticed most of all. The bottom line is what counts. The price of wheat was 1.60 per bushel in 1961. Silver was in the coinage, so at 18 dollars per troy ounce, wheat today would be at 30 dollars per bushel. Oil and fertilizers bring down the costs of production and increase the yields. Farmers with 16,000 acres of land to farm can do it far more efficiently today than at any other time in history. Thank oil for that.

    Farmers have contests on how much land can be seeded in a 24 hour period. The record is 3600 acres, that’s 150 acres per hour with one tractor and seeding equipment. Tractors are re-worked to increase horsepower to beat the record. A sport for some.

    On 10-10-2008, the Dow Jones traded 11,456,230,400 shares, the highest volume ever.

    Yesterday’s volume was 83,700,000 shares traded on the DJIA.

    That is a drop in volume by some 136 times. Not that much to see there.

    If oil supplies would drop in volume by 136 times, the impending disaster would make WWII look like a Roman Holiday.

    • Nick G says:

      If aliens landed and took all our oil, it would be a disaster.

      If we phase out oil over several decades, we’ll be far, far better off.

      Oil is expensive, dirty and risky.

      • Watcher says:

        The more credible scenario is the terrorist funded bio lab that extends the temperature upwards for oil eating bacteria, gets the strain developed, and injects it into essentially all oil fields of the world — taking out global supply within a few months.

        And then . . . death, in quantity.

  32. Cave Bio says:

    My apologies if this has been posted already. Technologies in the solar area are evolving very rapidly.


  33. aws. says:

    While You Were Getting Worked Up Over Oil Prices, This Just Happened to Solar

    By Tom Randall, The Grid, Bloomberg, Oct 29, 2014 7:52 AM ET

    After years of struggling against cheap natural gas prices and variable subsidies, solar electricity is on track to be as cheap or cheaper than average electricity-bill prices in 47 U.S. states — in 2016, according to a Deutsche Bank report published this week. That’s assuming the U.S. maintains its 30 percent tax credit on system costs, which is set to expire that same year.

    Even if the tax credit drops to 10 percent, solar will soon reach price parity with conventional electricity in well over half the nation: 36 states.— Solar is becoming mainstream, and prices will continue to drop as the technology improves and financing becomes more affordable, according to the report.

    The chart below shows how far solar will come out ahead in each state in 2016, assuming a worst-case scenario of lower tax credits. The blue bars show the anticipated cost of solar energy (assuming a conservative 20-year lifespan for the panels) minus average electricity prices. Positive numbers indicate the savings for every kilowatt hour of electricity.

    • Boomer II says:

      One thing we’ll have to hope for is that enough people get a sense of the economies of solar that they don’t allow Koch-controlled politicians to tax it out of existence.

      • Watcher says:

        Not quite sure why you would think this will be allowed. If we can get the shale industry destroyed by the dollar spike, then the providers of oil to the US should properly insist that all such activity on solar and other silliness be stopped.

        There is no reason for an oil supplier kind enough to put food on your shelves to permit you to try to backstab him by with some imagined replacement.

        • Boomer II says:

          My thinking is that the pro-fossil forces will do what they can to stop solar even if solar becomes cheaper than fossil fuel. They could construct legal means to keep solar from being established. Then it becomes not a market forces battle but a political battle, and that is an issue of buying elections.

          Right now the Kochs seem to be hoping to shape the country to their liking. whether or not it is in the best interests of the country. If you stack the Congress and the Supreme Court, and then create laws that prevent market forces, the solar doesn’t have a chance if they don’t want it to have a chance. I suppose, though, individuals could still install solar and deal with the consequences.

          • Nick G says:

            Yes, we’re seeing that in Hawaii right now. Solar is so much cheaper than grid power that people are going off-grid because of the utility’s resistance.

          • Watcher says:

            The suppliers I was talking about are not domestic. With no US shale, Russia becomes dominant.

            • Nick G says:

              And the alternatives Boomer is talking about aren’t shale.

              Shale is temporary. EVs are permanent (until something even better comes along).

              EVs are growing reasonably quickly, though obviously not as quickly as would be best. People take a little while to get used to new things like online shopping and cell phones, but after a transition they take to them like beagles to ham sandwiches.

          • wimbi says:

            I installed solar and dealt with the consequences- all highly favorable. If and when I want to, I can ditch the grid. It has ditched me several times in last few years, once for 11 days. We did fine. Neighbors took notice, now planning to do the same.

            PS. Love that Leaf. And half the life cost of Corolla!

            Wake up, people.

    • Longtimber says:

      Re: this just happened to Solar. New for 2014. G4 Inverters and ~275 vs 250 watt panels have boosted output of the typical 5 kW rooftop PV Plant. PV adoption slope will steepen *when* NG prices normalize. Perhaps as the 1st LNG export plant comes on line (??). It will be interesting what happens now when the next hurricane enters the upper GOM near the Mississippi.

  34. aws. says:

    Also this chart from the article above…

  35. aws. says:

    When all you have for new production is either extra-light or extra-heavy…

    Mercedes Drivers Stung by Shale Boom’s Quirks at the Pump

    By Lynn Doan and Dan Murtaugh, Bloomberg, Oct 28, 2014 2:59 PM ET

    While regular gasoline-chugging drivers are paying just $3.03 a gallon in the U.S., the lowest in four years, those cruising around in luxury cars and demanding only the finest of grades, known as premium, have seen smaller declines. The price gap between the two grades swelled last week to the widest since 2008.

    Shale drilling is one of the main reasons behind the growing divergence. The record oil being pumped at U.S. shale formations tends to be more easily turned into low-octane gasoline. That’s helping push its price down more than the cost of premium fuel as benchmark U.S. crude oil sank below $80 a barrel for the first time since 2012.

    It’s all the low-octane naphtha in shale oil that makes it more compatible for blending into regular gasoline. Foreign oils, which the U.S. is depending less on as domestic output grows, tend to produce high-octane fuel better, said John Auers, vice president at at Turner Mason & Co., a Dallas-based consultant.

    Low EROI fossil fuel is all we got left.

    • Watcher says:

      I don’t think this makes sense. Octane is added. It’s not in the product already. This needs tracking down.

      Perhaps there is some refinery esoteric issue (like the varying metals content), but in general the issue would not be high octane gas. It would be diesel.

      • Err… not quite correct. Octane just means a hydrocarbon molecule with eight carbon atoms and 18 hydrogen atoms. Basically gasoline.

        Wiki: Octane

        Octane is a hydrocarbon and an alkane with the chemical formula C8H18,..

        Use of the term in gasoline
        “Octane” is colloquially used as a short form of “octane rating” (named for the ability of octane’s branched-chain isomers, especially isooctane, to reduce engine knock), particularly in the expression “high octane.” However, components of gasoline other than isomers of octane can also contribute to a high octane rating, while some isomers of octane can lower it, and n-octane itself has a negative octane rating.

        From aws’s article “It’s all the low-octane naphtha in shale oil that makes it more compatible for blending into regular gasoline.”

        Gasoline is never pure octane. That is it always contains some hydrocarbon molecules with more than 8 carbon atoms and some with less than 8 carbon atoms. With a high percentage of molecules less than 8 would be what makes it low octane naphtha.

        Wiki again: Naphtha

        It is a broad term covering among the lightest and most volatile fractions of the liquid hydrocarbons in petroleum. Naphtha is a colorless to reddish-brown volatile aromatic liquid, very similar to gasoline.

        In Petroleum Refinery Engineering, full range naphtha is defined as the fraction of hydrocarbons in petroleum boiling between 30 °C and 200 °C. It consists of a complex mixture of hydrocarbon molecules generally having between 5 and 12 carbon atoms. It typically constitutes 15–30% of crude oil, by weight. Light naphtha is the fraction boiling between 30 °C and 90 °C and consists of molecules with 5–6 carbon atoms. Heavy naphtha boils between 90 °C and 200 °C and consists of molecules with 6–12 carbons.

        • Watcher says:

          I’m not sure that clarifies, Ron, but it’s certainly additional. I will have to refind the assay data I have been quoting (on a diff puter today) and see if it delineates high(er) temperature distillation naptha vs lower. I suppose the refinery has to have a source for what is added to the product to stop low compression pre ignition.

          I wonder way back in olden days when pre ignition first happened who figured out the octane fix vs an engine redesign.

          • Watcher says:

            Okay, it took me days to find before and I’ll just wait til I get back to that computer’s bookmarks. For now, tho, referring to the link way above and the article by the fluid catalytic cracking guys there is this sentence regarding their assay of Bakken:

            At a riser outlet temperature of 970°F, the whole Bakken feed produces more gasoline, less LCO and less coke than the reference Mid-Continent VGO. Compared to the VGO, which produced gasoline with a RON of 93 and a MON of 80, the SR Bakken oil produced a paraffinic low-quality gasoline (at all three reactor outlet temperatures) with a RON of less than 80 and a MON of less than 70.

            Research Octane Number and Motor Octane Number

            This suggests the Bakken octane number is indeed lower in its gasoline pre refining (octane added) than reference oil. So I’ll stand down about half way. I know I have an assay link that delineates product yield by temperature range of distillation, but not with me haha

          • Condensate is basically light naphtha, and you can run your car on it. Jeffrey Brown once posted on TOD that among oil patch workers they could always tell who was stealing condensate, their cars always knocked like hell.

            • Watcher says:

              Ya the history of drip gas. Someone REALLY smart came up with higher octane as a solution rather than throwing the ball back to Detroit.

  36. Pingback: Edito | Blog de Yoananda

  37. Longtimber says:

    “Oil prices would need to fall at least another $20 a barrel to choke off the U.S. energy boom, industry experts say, though some smaller American producers would face serious problems from a more modest decline.”

    • Watcher says:

      Ya, I am sure the experts called by the reporter were impartial.

      • Anon says:

        I don’t understand why the media is so bad about pointing out (a) that Bakken producers *do not* get WTI quote for their oil, and (b) they have costs beyond direct well costs.

        • Watcher says:

          Bingo. Dennis has a bad habit of quoting breakevens based on price at refinery gate. A producer doesn’t give a damn about the price at the refinery gate (unless he has a catalytic cracker / distiller on the pad haha).

          He is interested in price paid into his pocket and only price paid into his pocket.

          • D Coyne says:

            Hi watcher,

            Find me information on the price that each producer receives for a barrel of oil.

            I have also shown the breakeven based on wellhead price, the difference is mostly transport cost with possibly a small discount for oil quality. Lately the difference has been 18 dollars between Brent and Bakken oil prices. So if I give the refinery gate price and you want wellhead subtract 18.

            • Watcher says:

              You could make some phone calls and see if they answer, or you can manufacture the number based on what Helms tells you. Does Texas quote for all parts of the state? Or any parts?

              What do you think rail ships for per ton mile? You can search for that. See if you can make that come out to $18. Good luck.

              • Dennis Coyne says:

                Hi Watcher,

                There is a price per ton-mile, but I am sure there are handling fees as well for crude which requires special tank cars, and possibly checks to make sure the fuel isn’t too volatile.

                Also a breakeven of $60/barrel at the wellhead is independent of transport costs. The $18/b consists of $15/b for transport and the $3/b discount that you suggested because the Bakken oil is lower quality than Brent. I don’t know where to get the Bakken prices except the director’s cut, where in mid October the price was $66 when Brent spot was $84, this differential fluctuates. Sept 12 Bakken was $74.5/b when Brent was $96.3/b ($22 differential). Aug 15, 2014 Bakken $79.5/b, Brent $101/b($21.5 differential). Aug 2013 bakken $94.25/b, Brent $111.60 ($17.35 differential). Aug 2012, Bakken $80/b, Brent $115.5 ($35 differential).

                I do not have a handle on specifically what controls the price differentials but they fluctuate from $17 to $35 per barrel.

                Looking at Continental’s(CLR) 2013 annual report the price differentials between Brent and CLR’s average crude price from 2011 to 2013 ranged from 18 to 27.
                Based on this it seems a number larger than $18 is needed, possibly $22. If transport cost is indeed $15/barrel, then the Bakken oil is discounted by $7/barrel for quality or some other reason.
                Note that I have read in several places that transport of Bakken crude by rail to the East coast is between $10 and $15/b, this was before new regulations were proposed to keep crude by rail from exploding (literally) so I have assumed these regulations will increase transport costs to $15/barrel.

    • Donald, I cannot add graphs to your posts, I can only do it to mine. But you can, just click the “Choose File” box and type in the name of the file from your “Pictures” file, or wherever you have it saved. But here is the chart you wanted posted:

      • Frugal says:

        But the tight oil companies have been collectively losing billions of dollars when oil was $100/barrel. And that’s while extracting from sweet spots. The above graph cannot be correct.

      • Watcher says:

        Besides which, why would we think these bozos have any better information than we have. Does CLR hand out their cost information to guys named Baird, knowing they are going to be calling EOG next?

        Hello, EOG, what is your average cost per well of 30 stages? Really! That’s $1.2 million better than CLR just told me. Way to go!!

        • Watcher says:

          I will say the Eagleford likely does have lower costs than the Bakken. Lots more years laying pipeline. Surprised we the same isn’t quoted of Permian.

  38. Ronald Walter says:

    October 29 daily activity report shows an increase in daily production from new wells completed at or near 16 000 bpd, if my quick addition is kind of correct.

    365 million barrels added to the supply chain in a year’s time will have a direct effect on supply issues. Domestic production will remain constant, it seems, the buyers of the crude will continue to purchase product from the nearest source, imo.

    The world supply would have an additional 365 million barrels for sale, the 365 million barrels of oil are no longer purchased on the open market for consumption in the US.

    BNSF’s carload report shows shipments in oil carloads at 12,000 plus. Demand has not gone away and if the price is lower, seems to me the demand will increase. A rather simple conclusion, but looks correct.

  39. SRSrocco says:


    Alan Greenspan, Former Fed Chair, Goes for the Gold

    According to Wall Street Journal reporter Michael S. Derby, “Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.”

    On Wednesday, though, as the Federal Open Market Committee prepared to announce the end of the years-long asset purchase program known as Quantitative Easing, Alan Greenspan, the near-legendary Fed chair whose every utterance used to be parsed by market watchers, spoke before the Council on Foreign Relations and advised listeners that under current conditions, gold is probably a good investment.
    Cripes All Mighty.. you can’t make this stuff up. Who knows if ex-Fed Chairman Greenspan is talking his book or someone else’s, but this has to be on of the FUNNIEST THINGS I have heard coming from someone who ran the FED.

    One more thing… those SILLY CHINESE took delivery of another 68.4 metric tons of gold in just 5 days after the Chinese National Holiday.

    What the hell are wrong with these people?? And how about ex-Chairman of the Fed, Alan Greenspan talking about gold ownership?

    Are we going COMPLETELY MAD here?


  40. SRSrocco says:

    Just one more tidbit on the Barbarous Relic:

    If you listen to the folks on CNBC for anymore than a few minutes, you could really suffer long-lasting brain damage. That being said, one of the MANTRA’s that is regurgitated over and over again, is the term, “GOLD IS A BARBAROUS RELIC.”

    At face value, this would make a lot of sense as we don’t have to work anymore, because technology and monetary printing will do everything for us. However, if we do a simple BRAIN-CHECK and think about the following items, we might realize Barbarous Relics are stuff quite useful.

    The Romans baked bread to feed the masses. Folks paid for bread in the Roman silver denarius. Silver is no longer used as currency, but bread is still one of the staples found on most dinner tables. Bread also falls into the category of BARBAROUS RELIC.

    Then from time to time, we come across some POOR SLOBS out there who still have to do work for a living moving around an item called a BROOM. The Romans used brooms extensively to clean… and I would imagine you can go into any hardware or Dollar store and find a rack of nothing but brooms.

    The Broom.. another example of a BARBAROUS RELIC.

    I could go on and on, but of course when we are trying to REASON about real money and wealth.. it’s impossible when a modern society has been lobotomized from the NECK UP.


  41. Longtimber says:

    A fine Cramer Rant – It’s all about crude stuff –
    “34 States are Oil Takers, 16 Produce oil and jobs” obviously clueless on currency net flows in and out of states. “As Oil goes lower , company failures increase”. I think if I watched it twice I’d be 3X as

    • Ilambiquated says:

      I mentioned somewhere else in this thread that some Americans seem to crave being brainfucked by TV. Cramer viewers belong to this group.

      • Longtimber says:

        Rodger .. BOHICA are SOP.. now CBF’s till moral improves … That guy’s brain is shot from all the drugs he was on while at GS. At least someone in the media is starting to wake up to the critically of Crude Flows, Price and availability to maintaining Ship upright.

  42. Dennis Coyne says:

    Hi all,

    I did a quick check on Hughes analysis for the Bakken, I think it may be a little on the low side.

    I assume his analysis is for both North Dakota and Montana, my analysis is for North Dakota only, But I cut off the total wells at 31,500, I think the nature of these wells will allow access to most places because they go down 10,000 feet and then 10,000 feet horizontally, so that can go to the edge of town or the edge of a park or even to the bank of a river and still access the oil 10,000 feet below due to the lateral, so the 80% risk Hughes puts in his analysis is too conservative. I think 31,500 is reasonable for the North Dakota Bakken /Three Forks, I used the following economic assumptions:

    9 million well cost (2013$)
    OPEX $4/b
    Financial Cost $4/b
    Royalties and taxes 24% of wellhead revenue
    Discount for poor oil quality $3/b
    Transport Cost $15/b
    Oil prices start at $85/b in Oct 2014 remain flat to Aug 2015 then rise at a 1.8% annual rate reaching $133.26/b in Aug 2040 (all oil prices in 2013$, in fact all $ in the analysis are 2013$)

    The result is 7.6 Gb of output to 2040 (slightly higher than Hughes 6.8 Gb and slightly lower than the EIA’s 8.8 Gb). Note that I did not model the Montana Bakken where about 0.4 Gb had been produced through 2012 so only an additional 0.8 Gb would be needed to match the EIA forecast.

    The USGS has a mean estimate for the Montana Bakken/Three Forks undiscovered technically recoverable resources (UTRR) of 1.6 Gb, so if 50% of this resource can be produced by 2040, the EIA forecast of 8.8 Gb for the total US Bakken/Three Forks might be met. Note that about 67% of the mean UTRR estimated by the USGS for the North Dakota Bakken/Three Forks is produced by 2040 in my analysis.
    I have not analyzed the Montana Bakken/Three Forks in any detail so a 0.8 Gb output from 2013 to 2040 is speculative. Chart below shows the North Dakota Bakken/Three Forks scenario with 7.6 Gb output from 1951 to 2040.

    • Dennis Coyne says:

      The oil prices reflect refinery gate prices and in this case the Brent price is what the East coast refineries use when they don’t use the Bakken oil. The oil quality of the Bakken oil is lower so the refinery pays $3 less per barrel relative to Brent (that’s the $3 discount in the economic assumptions).

  43. Pingback: De la fin du pétrole à l’age des low et light-tech ? | Blog de Yoananda

  44. yiedyie says:

    Typo: July 2104 should be July 2014

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