Texas Oil and Gas Production Declining

The Texas RRC Oil and Gas Production Data is out. This data is  always incomplete. But we can get some idea of what the trend is by comparing it with previous months. This is what I have done in the charts below. If the latest months data is below the previous months data then the trend is down. But if the latest months (incomplete) data is above the previous months (incomplete) data the trend is up.

All RRC data is through November 2015 but the EIA data is only through October. The oil data is in barrels per day.

Texas C+C

The trend is definitely down. The scale makes it difficult to gauge the month to month change but I have the exact month to month change here in barrels per day. Of course this only gives you a general idea of what is happening. The final change could be either less or greater than the numbers indicate here. But the EIA data should be very close.

Jun. to Jul.  7,245
Jul. to Aug. -63,827
Aug. to Sep. 34,507
Sep. to Oct. -33,486
Oct. to Nov. -52,802
Jun. to Nov. -108,363

EIA Dec. to Oct. -121,000

Dean C+C

Dr. Dean Fantazzini has developed an algorithm that gives a very close estimate of what the final data will look like. His data and the EIA data track each other pretty close.

Texas Crude Only

Crude only has had the lions share of the decline, the incomplete data is down 91,000 bpd since June.Dean Oil

Dr. Dean Fantazzini’s corrected data indicates that crude only will actually be down about what the incomplete data indicates.

Texas Condensate

Condensate shows a slightly more erratic decline, down 17,000 bpd since June.

Dean Condensate

And Dean’s condensate chart disagrees slightly with what I would estimate. He has condensate up in October where the RRC incomplete data has it down.

Texas Total Gas

The EIA has dramatically revised their estimate of Texas natural gas production since last month. I think they have it pretty close this time. The EIA data is only through October but the ups and downs pretty much agree with the ups and downs of the RRC incomplete data.

Dean Gas

Dean’s expectations for Texas total gas production is slightly different from the EIA’s. It does show a big drop in November as the Texas RRC data indicates.

Texas Gas Well Gas

Texas gas well gas shows a drop in November though it was up in September and October.

Texas Assciated Gas

Texas associated gas should show a considerable decline in November when the final data is in.

286 thoughts to “Texas Oil and Gas Production Declining”

  1. An off the immediate topic tidbit copied from the Gaurdian site:
    Jowett named a number of other technologies that were making vehicles more efficient. Among them were grille shutters to improve aerodynamics and more efficient air conditioning systems. He also explained that the 2025 fuel economy number that’s most often quoted – 54.5mpg – is misleading. The real number, the Corporate Average Fuel Economy standards that include more real-world driving parameters, is about 49mpg.

    “The EPA number is based upon two-cycle testing that came about 30 years ago, when the national speed limit was 55 miles per hour,” he said. “It doesn’t take cold weather testing, air conditioning use and other factors into account.”

    Bold is mine.

    This of course means a LOT of emphasis on pure electrics and plug in hybrids to get the CAFE of a manufacturer up to snuff.

  2. Texas is closer to the money, but still . . . . .

    btw ZH on a roll. Big article that goes like this . . . . oil sellers funded sovereign wealth funds. Big numbers 800+ billion for norway.

    When those SWFs grow, they gotta put the money somewhere and drive up stock markets. When oil revs are too low to fund govt spending, they gotta sell those stocks to raise cash to spend. It’s like reverse QE.

    1. Didn’t zh just put up a thing saying mark to market wavers out for some oil loans? Thoughts?

  3. What am I missing here?
    From 2011 to late 2014 rig count in US was floating around 1800–1900. Kicking up US production to latest peak (or final, depending on your view) to 9,56 thousand barrels in May. In a year 2015 rigs has dropped to 650. Production has only dropped to 9,22 in the same time.

    The question is: did the crazy drilling between 2011–14 generate that many holes that were DUC or are we in for some massive skydiving in production? If so I takes a lot of time for that to show up on EIA’s reports. Not even there drilling report makes sense with the knowledge of rigs in use.
    Sorry if I the question is stupid, well then I am.

    1. They drilled in the areas that mostly made over 200k barrels the first year, and less in areas that only generated 50k to 75k the first year. However, there is only so much of that. In Nov and Dec wells completed dropped from an average of over 1000 a month to less than 700 month. Plans by EOG is to not drill much and finish the DUC wells the first of the year. However, all I can say for sure about is Atascosa County, but those DUCs were not in very good areas.

    2. Amatoori,

      There is a time lag of six months for shale and 18 months for conventional projects from drilling towards production. The real decline is coming over the next months.

  4. Texas C+C fell approx 190 kb/d from its peak in March 2015 according to my corrected data. The fall in natural gas since September 2015 (particularly associated gas) makes me think that C+C will accelerate its fall in the coming months. Let’s see.

    1. Hi Dean,

      The low natural gas prices have reduced investment in natural gas in Texas, the money has moved to the Marcellus and Utica plays which may be more profitable.

      If the oil price forecast of the EIA in the Jan 2016 Short term energy outlook is correct we might see a steep drop in Texas output eventually.

      I am surprised the Texas C+C output has declined so slowly, only about 20 kb/d each month on average since March 2015. Considering the price of oil and the steep drop in rigs, I thought we would see a lower well completion rate. So far the drilled wells that have not been completed (DUC wells) seems to keep output relatively flat as they are gradually completed. In fact, so far much of the decline may be from conventional stripper wells that have been temporarily abandoned due to low prices based on comments from Shallow sand.

      It would be interesting to hear comments from Rockman, or Mike on whether they think a decline of 20 kb/d could be accounted for by decline in conventional oil output in Texas.

      Very roughly there is about 2.5 Mb/d of LTO output in Texas (split between the Eagle Ford and Permian basin). This would leave about 900 kb/d of conventional output.
      If there was a 10% decline in conventional output over a year that would be 90 kb/d or about 7.5 kb/d each month, so decline in conventional output might explain a third of the decline in Texas output.

      Another question I have is the RRC’s reports on the “oil wells on schedule” on the Eagle Ford information page (upper right). In November and December there were over 400 oil wells added to the schedule in the Eagle Ford, when a well has been drilled, but it still waiting for fracking does it get added to the “schedule”, or does this only happen when the well has started production?

      See http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/eagle-ford-shale/

      On Nov 1 the oil wells on schedule were 9,655, Dec 1 there were 9,887 oil wells, and Jan 1, 2016 there were 10,140 oil wells on schedule. That is 232 new wells in November and 253 new well in December, but whether all these wells are producing wells is not clear (at least to me). The completion numbers seem too high.

      Thanks in advance for any clarifications from those who might know.

      1. I am sorry but I do not know the situation with “oil wells on schedule”. I suggest you to contact the RRC data help center , since they are very polite and reply quickly.

      2. Marcellus and Utica are DOA. Basically it’s totally impossible to make money fracking for dry gas below $3 — the dry-gas breakeven prices mostly start at $4 and are upwards of $8 through most of the region — and there’s very little liquids in the Marcellus and Utica. They’ve mostly been fracked by land-flipping scam artists who cut corners, which has been really bad for the local environment.

        The few liquid-heavy sections of the Marcellus will continue being drilled, but there aren’t very many of them.

        You have to remember that Bakken makes its money on liquids, not on gas. Fracking for gas is basically unprofitable everywhere. It remains to be seen when gas production will drop, and whether gas fracking will revive because of that (I hope not, given what an environmental disaster it is).

        There’s a cap on natgas prices set by the point where it’s cheaper to use wind and solar to generate electricity (declining every year as wind and solar get cheaper) and another cap set by the point where it’s cheaper to use electricity to heat houses (declining every year as heat pumps get better); that leaves a fairly narrow window for natgas prices where fracking could be genuinely profitable. It’s never stayed in that window for long.

  5. RRC had it posted yesterday. EIA is on track about the drop, I just don’t think they are close as far as the total drop will be. Art Berman seems to think most of the Permian shale wells will be folded down at below 30 price. EOG contacted the mineral right owners on a 6000 acre parcel they were starting to drill on that I own a small piece in, and asked if they would sign an extension on drilling while the price is so low. As I know all of the mineral right owners, I know the general consensus was: air mail the agreement.

    1. Yeah, a lot of interest in Iranian oil interests. To pour mega millions in their sorry infrastructure, and then make pennies on the dollar for capex. Maybe Lukoil with their heavy pockets?

  6. I hear that the OCC finally had some wells shut down due to Deep Waste Water Injection issues. There seems to be studies now being looked at seriously by the OCC – Oklahoma Corporation Commission on Deep Water Injection and its impact on Earthquake activity. If a precedent is shown to exist… WATCH THE F*CK OUT.

    From what I understand, there are huge lawsuits in the pipeline if (once) a precedent is found. I also hear that the TRRC is watching closely the OCC hearings and meetings. If a precedent is found to exist and is made official by the OCC, the TRRC will likely follow.

    This could shut in a lot of Resource Oil & Gas Wells due to the liability and deep water injection issues. I have been doing some reading on Earthquake damage to homes, buildings and infrastructure and it is much worse than MSM has reported. There’s one hell of a lot of very angry and pissed off people in Oklahoma and Texas that have suffered damage from earthquakes.

    You add this to the recent Dallas Fed decision to keep the Banks from MARK TO MARKET their energy assets (LOL… Liabilities), and looks like we are going to see one hell of a BLOOD BATH in the U.S. energy industry this year.

    Prof MudFlap

    1. My brother is having a problem with that around Edmond, Okla. 50% of the wells in Texas, they just use surface ponds to allow them to dry OU. The better alternative they are starting to use is centralized wastewater treatment plants that they can reuse the water from. If it becomes a huge issue, then I hope they gravitate that way.

      1. Guy Minton,

        This requires an huge transportation infrastructure for waste water, which will require a lot of time. Obviously everybody wants to extinct the oil industry as there is the strong (mistaken) belief that the economy can do it with renewable resources. The same what happened with coal is now happening with oil.

        1. Heinrich Leopold says:

          Obviously everybody wants to extinct the oil industry as there is the strong (mistaken) belief that the economy can do it with renewable resources.

          And obviously you don’t believe in magic.

          The Lovin’ Spoonful has the cure for you:

          Do You Believe in Magic
          https://www.youtube.com/watch?v=TuiNtC4kURk

        2. Obviously everybody wants to extinct the oil industry as there is the strong (mistaken) belief that the economy can do it with renewable resources.

          Not really, nobody I know, who has even half a brain thinks that renewables alone can sustain the kind of global industrial economy that still exists today. And to say everybody wants to extinct the oil industry is just beyond ridiculous!

          The strong mistaken belief, I call it denial, is the idea that we don’t need a plan B! Pretending that fossil fuels can continue to sustain the global economy at current levels of consumption for the long term just isn’t going to end well.

          Arguing that renewables won’t work is like refusing to get into a life boat when the Titanic was sinking. In the life boats you won’t be sitting down to a nice dinner served by elegantly dressed waiters while listening to the live band… but it sure as hell beats drowning in the freezing water. Oh and let’s not forget that there weren’t enough lifeboats for everyone. Not everyone got to survive but a few lived to tell the story.

          BTW, Attacking the messenger is a rather pointless exercise in futility!

          1. The strong mistaken belief, I call it denial, is the idea that we don’t need a plan B!

            Ahhh yes, we definitely need one. But we don’t have one. And very likely will never have a drawn out plan. Things will just evolve. That is there will be some renewable infrastructure built, electric cars, solar panels, wind turbines, but not nearly enough to make the huge difference needed.

            The world moves according to the will of 7 billion people, and they definitely do not have a plan.

            Arguing that renewables won’t work is like refusing to get into a life boat when the Titanic was sinking.

            That statement does not make a lot of sense to me. Arguing what will work or wont work is not the point. The point is: “What will actually happen?” There will definitely be a lot of renewables built. But not nearly enough. And most of those folks will not make it into the lifeboat. That lifeboat is just not nearly big enough. Most of those folks will drown.

            1. There will definitely be a lot of renewables built. But not nearly enough. And most of those folks will not make it into the lifeboat. That lifeboat is just not nearly big enough. Most of those folks will drown.

              That is probably correct if we are talking about the people trying to maintain BAU living in the so called first world. But that still isn’t quite the same as:

              Obviously everybody wants to extinct the oil industry as there is the strong (mistaken) belief that the economy can do it with renewable resources.

              Not to mention that there are also about 1.3 billion people living in abject poverty, without any sanitation or electricity who will probably get access to some very limited electricity and communications technology via small local off grid solar. To them that would still be a huge step up!

              As to: “What will actually happen?”
              I guess we’ll all just have to wait and see, won’t we?
              Though for what it is worth there are some people who are still trying to steer the big avalanches away from the village by setting off a few smaller ones here and there. But most of the people are still sound asleep in their little cottages down in the valley oblivious to the possibility of being buried under tons of snow and ice…

              Just because some of us are trying to find other ways of doing things does not mean we are as stupid or naive as we are being made out to be by those who seem to be absolutely sure that they are right. Truth is none of us knows and we could probably all use a dose of humility.

            2. But a little electricity is not going to make food appear.

              Is there an “export land model” for food? What will Egypt (for instance) do when there is no food available on the international market? Or KSA? (Of course, it probably won’t be called ‘KSA’ much longer.)

              However, I do agree that in an environment with sufficient arable land, sufficient clean water, and sufficiently low population density that a little electricity is better than none.

            3. The people of Egypt are mostly going to starve, except for the ones who manage to emigrate, barring miracles.

              There just aren’t any agricultural technologies that can be brought to bear to allow Egypt to feed herself, and they aren’t going to be invented, in time to help, and if they were invented, Egypt could not pay for the implementation thereof anyway.

              Who believes the rest of the world will feed Egypt, on a charitable basis, indefinitely? Egypt has nothing to export.

              The only very slim hope for Egypt is a cultural revolution involving a birth rate that falls way below replacement level VERY soon.

              What are the odds of THAT coming to pass?

              Egypt is my chosen poster child of collapse.

            4. The people of Egypt are mostly going to starve, excepting the ones who manage to emigrate, barring miracles.

              There just aren’t any scalable agricultural technologies that can be brought to bear to allow Egypt to feed herself, and they aren’t going to be invented, in time to help, and if they were invented, Egypt could not pay for the implementation thereof anyway.

              Who believes the rest of the world will feed Egypt, on a charitable basis, indefinitely? Egypt has nothing to export.

              The only very slim hope for Egypt is a cultural revolution involving a birth rate that falls way below replacement level VERY soon.

              What are the odds of THAT coming to pass?

              Egypt is my chosen poster child of collapse.

            5. Hi Old Farmer Mac,

              I think they have a lot of sunshine there. Invest in solar panels and produce enough electricity to export to Europe by undersea HVDC cable.

              This is not an original idea, but it seems like a good one, it would help solve the problem of shorter days in Northern Europe during winter, dust storms may be a problem, but perhaps wind power would be adequate when dust storms are a problem.

            6. Egypt could feed itself better if they knocked that damn dam down and restored their natural agricultural cycle (which was ULTRA productive).

            7. Yeah, population needs to stabilize so that we stop overrunning our food supply. We can’t keep “juicing” it with artificial fertilizers — we’re already seeing mineral-deficient food.

              Luckily we know how to stabilize the population. Give women equal rights, educate them, and provide them with birth control. Wait 1 generation.

              This involves breaking up deranged fundamentalist cults which enslave women and force them to have dozens of babies, of course.

            8. Pfffft, renewables can easily cover the energy needs for a much larger population wasting much more energy than we are. Just look up the calculations regarding how large an array of solar panels is needed to power the world — laughably small numbers.

              That’s not to say that that’s what will happen, of course. Our governments are too stupid to actually *build* that solar array, so we’ll get much uglier results.

          2. “Arguing that renewables won’t work is like refusing to get into a life boat when the Titanic was sinking.”

            A very ignorant analogy fred. Apples and oranges. More accurate;

            Arguing that renewables won’t work is like refusing to gather a group in the dinning hall to design and discuss a method of construction of a life boat when the Titanic was sinking.

            1. Jef. On plan B for the titanic. I wrote it all out in plain anglosaxon long ago on good ol’TOD.

              Captain gets news from designer that ship has received fatal wound. Cap immediately calls crew and gives order

              “organize the passengers to tear up everything that floats and toss it all over the side. And I mean EVERYTHING.

              get the lifeboats over asap with enough crew and ropes to make rafts out of the floating stuff.

              Pull rafts alongside and chute the passengers down, feeble workers first. As each raft fills, pull it away and lash it to the next.

              Keep it up. And keep those radios working, and the rockets.”

              So, when the Carpathia shows, it finds lotsa miserable but alive people on rafts, cursing their fate and the dumbass designers.

              So, on this titanic we’re on, do the same Thing. Sure, renewables won’t provide the servants and the band, but might keep us afloat.

              I stick with my guess of 10% of present energy as ok for a reasonable life. Assuming of course, a moderate level of wit and wisdom.
              Doubtful, but not impossible.

            2. regarding:
              I stick with my guess of 10% of present energy as ok for a reasonable life. Assuming of course, a moderate level of wit and wisdom.
              Doubtful, but not impossible.

              I just want to add to that if I may. How well you make out:
              It depends on where you live.
              It depends on your skills and intelligence, including abilities to build and solve problems.
              It depends on your health and willingness to work hard.
              It depends on your preps made now.
              Finally, a dose of luck and good fortune will help.

            3. Sure. All you say.

              I’m assuming most folk don’t need to know it all. The goat shows how to eat thorns and the sheep just follow.

            4. Im with ya Wim – I just hate it when people imply that all we need do is switch to something else or even, to beat the Titanic metaphor some more, not worry because we have lifeboats. We NEED to worry big time because, again like on the Titanic we don’t have anywhere near enough lifeboats.

            5. Hi Jef,

              Keep in mind that on a blog, one cannot write a treatise or people will not read it.

              When someone says we can use EVs, public transportation, biking, walking, roller skates, etc. instead of ICE vehicles for transportation, that does not mean the writer believes that all problems of the World have been solved.

              It is one of many possible solutions to the problem of peak oil.

              Natural gas and coal may also peak (coal by 2030 and natural gas by 2035, roughly give or take 5 years plus or minus). Solar and wind are a potential solution to that problem, again we take the problems one at a time.

              Does anybody suggest these are the only problems?

              Not that I have read. YMMV.

            6. http://www.techinsider.io/map-shows-solar-panels-to-power-the-earth-2015-9

              This is an overestimate. Electric cars are far more efficient than gasoline cars; insulating our houses properly reduces heating and cooling costs massively; LEDs are eliminating massive waste of energy in incandescent lights; etc. So we don’t actually need to generate as much energy as this site shows.

              However, this site shows how easy it would be to generate the energy from solar. Trivial really.

          3. “Arguing that renewables won’t work is like refusing to get into a life boat when the Titanic was sinking.” ~ Fred Magyar

            So the implicit suggestion is that renewables are like lifeboats? And are they even renewable?

            1. So the implicit suggestion is that renewables are like lifeboats?

              Yep, in a way that is correct! What seems to get lost in the discussion is that since there is no way to rebuild the ship we were on, we will have to find ways to live with what we still have. One option, of course, is to choose to go down with the ship.

              And are they even renewable?

              By definition, yes! Is the definition correct? It guess it depends.
              Some of us will eventually find out. One thing we know for sure, fossil fuels are NOT renewable.

            2. Hi Fred,
              Renewables– yes– by definition, but whose? Team Greenwash’s? (waves in Glenn’s direction ‘u^)

              Now that was of course half-joking, but also half-serious. I am unsure we have really thought out so-called renewables long enough.
              For example, someone hereon has related their manufacturing, etc., to ‘BAU Lite’. That’s not good in and of itself, is it? Nor is it if you, yourself, are all about transcending BAU, is it?

              I also hear that the rush to their manufacture will further the C02 in the air and, through Jevon’s Paradox (potential bugs and loopholes aside), not really slow down the uptake and release of C02 from other sources/places anyway, will they? Chindia?

              What kind of so-called renewables do we want; how dispersed/affordable will they be (in a world of increasing job-cuts, economic-cum-oil-energy-industry-surrealism, and social unrest, etcetera); will they be integrated (on or off-grid or both?) and what will their scales be (home/low/wimbiTech/democraTech or large-scale centralized/eliTech)?
              What kind of post-sales, local and accessible support will they have, such as in an era of decline/collapse, such as of international shipping, and of relocalization?

              Have ‘we’ really considered other, say, competing, options, and as vigorously as we have considered BAU Lite-based options? What about passive solar, low-tech wind, and maybe some kinds if wimbiTech approaches? Here, I am perhaps feeling a little more confident that wimbi has achieved a certain level of wisdom, even though I am unsure about their ‘biochar’ thing (assuming it is understood as such), but that’s another can o’ worms for another day.

            3. Don’t let the perfect be the enemy of the good.

              We can use PV, wind, passive solar, and better efficiency to reduce carbon emissions.

              Things will change, maybe not as quickly as you would like or the way you would like.

              As I have pointed out before there are a lot of people in the World and not all people behave well.

              You seem to think we can take 8 billion people and divide ourselves into 8 million small democracies of 1000. Seems there is a lot of potential for conflict among those 8 million non-governments.

              Now for every project that such a community does in common people will need to voluntarily donate time or money to accomplish the task.

              Perhaps this might work for a community of 1000, but probably not for 10,000 and definitely not for 100,000 or more.

              Why might community sizes become larger?

              If there is conflict among communities (and it is naïve to think there won’t be), who wins between a community of 1000 and another that is 100,000?

              This is possibly the reason that nation states developed.

              In general, 8 billion humans and anarchy are not a good mix, given human nature.

            4. Have ‘we’ really considered other, say, competing, options, and as vigorously as we have considered BAU Lite-based options? What about passive solar, low-tech wind, and maybe some kinds if wimbiTech approaches?

              Not sure what exactly you mean by BAU Lite but as far as passive solar, low-tech wind etc… those are no brainers. I worked for a while with PV installations the first thing we always suggested was that customers do their homework. Focus on the low hanging fruit first. Things like LED lighting, attic insulation, attic fans, etc…

            5. Superinsulation is a bit more complicated than mere attic fans, but has a humungous payback, cutting heating/cooling costs by 80% compared to a typical poorly insulated house.

            6. BAU Lite = BAU Greenwash I guess. It’s just that I’ve read BAU Lite before and it seems to sound about right– that BAU hasn’t really gone away like it should.
              I like low-tech responses better. They are, by nature, closer to democracy and community/ individual empowerment and resilience. I’ve quoted Ivan Illich about that before.
              Unsure about attic fans, but whatever.

            7. In a comment to Ron’s previous top post, I outlined how a 6kW PV array could power a typical 2015-2016 BEV (Volkswagen eGolf) for 605,900 miles of driving over a twenty year period. The actual math is a good deal more complicated than my back of the napkin calculations but, even if the results are way too optimistic, they are still quite revealing.

              Let’s just look at the first year. The 6kW PV array could provide enough energy to drive the eGolf about 30,000 miles. A regular 25 mpg VW Golf would consume 1,200 gallons of fuel to cover the same distance. The PV array will be able to repeat this feat for twenty five years and probably more with an expected 20% decrease in output by year 25. The car with the ICE will need 1,200 gallons of fuel every year if it is to cover the same distance. Which is more sustainable?

              The economics of renewables, batteries and EVs are such that, at the moment they do not compare favorably with fossil fuels but, if they follow their respective historical cost reduction curves, as Tony Seba speculates they will, they will be less costly than FF powered options at some point in the next fifteen years.

              I remember HereinHalifax over at TOD, giving us examples of huge savings he was achieving in the field of commercial lighting in Canada and at the time the doors were closed over at TOD, he had just started to look at using LED based lighting. There is huge potential for energy savings in North America from just switching to LED based lighting alone (80% reduction in power consumption for the same level of light, compared to incandescent lighting).

              The prospect of the proliferation of renewable energy and energy efficiency must be keeping team Koch up at nights. The question is, does the world have fifteen years of anything remotely resembling BAU ahead of us?

            8. A couple of elaborations to add to your comments I.B., when I tried to determine the net equivalent petrol energy investment required to manufacture 1kW capacity of solar PV, I came up with 660 gallons petrol/kWc.

              So in your scenario of a 6kW array, burning the fuel directly would yield 118,800 miles of travel @ 30/mpg. Compare with your 605,900 of travel the PV would yield over its lifetime: five times as much!

              I think it is important to note however that the average U.S. EV will need only 10kWh/day, which a mere 2kWc can provide.

              You also wrote: “The economics of renewables, batteries and EVs are such that, at the moment they do not compare favorably with fossil fuels.”

              I question this. Hasn’t the Edmunds’ data been posted multiple times demonstrating that in total cost of ownership, the Nissan Leaf is the least expensive new car to own over its lifetime?

              Internet debates won’t change the adoption rates of PV+EV though. What will influence it is people like Wimbi demonstrating for their family, friends and neighbors what personal energy security looks like.

            9. “The question is, does the world have fifteen years of anything remotely resembling BAU ahead of us?” ~ islandboy

              The other question is, is that the right question?

              Remember my previous quip to you last year regarding running around nude all day in the sun on your island, and, if recalled, you suggesting something along the lines that BAU doesn’t really care about that (thus applying itself to everywhere and everything, irrespective of its appropriateness.)?

              Also, you, along with whoever else, seem to be approaching your tech from an odd kind of internal logic; like well the costs are going to go down and bla bla bla, etc., which doesn’t really address the big pic of appropriateness, does it? Systems/Holistic thinking?

              Would you rather jerk around with your planet, while feeding the elites’ BAU setup, than run around nude all day, body-surfing, hiking. eating bananas and papayas and making love when you feel up to it? There’s no real reason to be doing much of anything else is there? Like pushing paper in an office cubicle breathing sick building syndrome canned-air on the best hours of the day while the sun shines outside?

              I’m here in Halifax, myself, incidentally, and could always try to look up TOD’s Hereinhalifax and if successful, try to coax them hereon. Can we get some leads? It was Paul? Anything else to go on?

            10. Would you rather jerk around with your planet, while feeding the elites’ BAU setup, than run around nude all day, body-surfing, hiking. eating bananas and papayas and making love when you feel up to it?

              How’s this for Systems/Holistic thinking?It is “making love when you feel up to it” that sort of got us into this pickle in the first place. As it stands, there are way too many people on this little island for us to be “eating bananas and papayas” and just about anything we could grow locally so, we depend a lot on imported rice and flour and even locally produced chicken meat, depends on imported grain for chicken feed.

              The thing is, evolution or if you are so inclined, your favorite deity, made sure that the act that results in procreation is a highly pleasurable one so, if naked apes don’t have enough to otherwise occupy their time, a lot of procreation happens. It would appear that lack of material resources doesn’t seem to hamper the tendency to procreate, as witnessed in the places in the world with the highest population growth.

              My attitude stems from an acceptance that we have a “bag of goods” to start with and that has to be our starting point. I’m totally there with Fred and his stuff about the circular economy and think that ought to be the ultimate goal, regardless of whether it his high tech or low tech.

              I am very disheartened when I drive across some of the bridges that span the storm channels (think Los Angeles) in the capital city, where I spend most of my time. Low income folks have taken to squatting along the land immediately adjacent to these channels and just throw their trash into the “gully” as they are called. I’m gonna take a picture of the mess and show it to you guys when I get an opportunity. There is definitely some “jerk around with your planet” going on. When I’ve posted the pic, I’ll invite you to get back to me about the running “around nude all day, body-surfing, hiking. eating bananas and papayas and making love when you feel up to it”.

            11. Hey guys, I am just heading out, but managed to skim your stuff and will be back again later today or tomorrow, but some off-the-cuffs for now to chew on:
              – Where exactly will we be going in our EV’s as this thing unwinds (and roadway infrastructure further degrades and remains neglected and as jobs are cut, [un]government salaries get frozen, and transnational shipping diminishes) and when will we all get one and charging stations and spare ‘just-in-time’ parts for them and in the face of Richard Duncan’s rolling blackout/aging grid Olduvai stuff?
              – Wimbi’s Titanic analogy seems to have presupposed that we haven’t dilly-dallied and, if so, won’t continue to do so and that the ship is not already listing and sliding everything and everyone to one end of it.
              – Given some of our concerns hereon with regard to a possible exponential unraveling, how sunk is the Titanic already and can the time left be used in different ways than what some on here seem to think it should be used (i.e., EV’s and PV’s and assorted BAU-lite)?
              Later…

            12. Sure. My little story started with captain getting off the dime soon as he heard the ship was doomed.

              We didn’t, so now we have all those other things to think about.

              The sad fact is, we have to start early, and earliest is always now.

              So, starting now, what best to do? Maybe PV not the best, so what is better? Actually, I prefer little heat engines instead of PV. Reason is, I know how to make damn good little engines that will run great on sun or biomass, and I don’t know how to make PV.

              Anyhow, what is better is sure as hell NOT just standing around pointing out that x is not the best.

            13. Can you do a good little heat engine from local materials– say, from scrap yards and neighbors’ collections and whatnot– and are they easy to learn for others, even the young, to reproduce on their own? Then we like it more, yes?
              What I am unsure I like is relying on BAU’s vast cold hard large-scale international just-in-time infrastructure while twilight-in-the-desert oil and its related uneconomics increasingly takes on a twilight zone.
              I think I prefer basic ‘quick-and-dirty’ local tech. That’s where real survival and comfort, such as in being self-sufficient and surrounding oneself with real community– that which has been gutted by the crony-capitalist plutarchy dynamic– seems to be. And it helps nurture that kind of smarts so that we are less left with repetitive overspecialized drudge jobs working for The Man.
              Some summers ago, I made insanely-delicious cold-milk-brewed tea frosties out of a local ‘weed’ here. It grows all over the forest floor and the locals in-the-know call it teaberry. It’s also called wintergreen. Imagine a beautiful pastel-emerald-colored wintergreen milkshake made with semi-frozen milk, a dollop of homemade custard and some pulverized and sieved wintergreen leaves in the middle of July. I should have taken a pic of that, but below’s a pic I did take of the plant in the wilds of Liverpool, NS.
              Don’t talk to me about big box corporate (grocery, etc.) stores. Visiting them and their general locations can give me a bad case of suburbarrhea. We have a far healthier and tastier green banquet growing right under our noses that often get mindlessly weed-whacked or poisoned.

              Tule Mulle Kaissu (translation)

            14. can you make good little engines from local materials?

              Yes. That’s what I was talking about. Have one in the shop as I speak made of nothing but steel pipe of the ordinary kind you find anywhere. No machining.

              Yes, I am remiss in not putting it on the web. Working on that.

            15. What I am unsure I like is relying on BAU’s vast cold hard large-scale international just-in-time infrastructure while twilight-in-the-desert oil and its related uneconomics increasingly takes on a twilight zone.

              I think that model has already proved itself as being unsustainable so probably sooner than later it will go the way of the Dodo.

              There is a better model. It’s known as the ‘Circular Economy’ and it is happening right now. Of course the people who are poo poing this concept are the same people who are telling us things like, alternative energy can’t ever substitute fossil fuels while they show us charts of how great sales of SUVs are doing in China…

              WHAT IS A CIRCULAR ECONOMY ?
              The best way to explain what a circular economy is, is to compare it to our current linear economy. In our current economic system, we extract resources from our planet at an ever-increasing pace, and turn them into a product that we mostly dispose after use. From the perspective of an individual or organization, that seems efficient. However, zooming out to a global level shows how unsustainable this approach is.

              In order for those same individuals and organizations to thrive, we need an economic system that operates within our planetary boundaries. A circular economy is one that is waste-free and resilient by design. It is a new economic model that is ambitious as well as practical. Designing the economy in a way that is restorative of ecosystems, ambitious with its innovation, and impactful for society, is a bold challenge but one that is achievable when guided by the below principles of the circular economy

              http://goo.gl/vO3mGj

              Checkout this as well:
              http://www.ellenmacarthurfoundation.org/

              I get criticized when I talk about disruption and the people who do the criticizing get stuck as if they can’t get past the One Note Samba of Solar powered EVs and driverless Uber transportation models. That is actually just the tiny tiny tip of one of many of the gigantic disruption icebergs floating around out there.

              My personal favorites are in the realm of biomimicry, I’d much rather listen to people like Janine Benyus then to the GSs of the world…. watch her video at this link.

              http://biomimicry.org/janine-benyus/#.Vp47JiorLIU

              But again, this too is just another one of those many many icebergs, Check out the next Disruption Innovation Festival:
              The next DIF takes place from 7 to 25 November 2016.

              https://www.thinkdif.co/

              Cheers!

            16. Fred,

              I know you’re on a crusade to save the world, and to spare mankind of the mayhem and destruction which now stare him in the face.

              Nevertheless, economic, political and engineering decisions are best left in the realm of the pracitical, the material, and the possible. When they move into the realm of the mystical, what we get are disasters like Energiewende and Caliwende, which stand in stark contrast to the highly efficient and well administered rollout of renewables in Texas.

              This is not in any way to downplay the importance of the mystical. It is merely to state that the mystical needs to be kept in its appropriate place.

              In Texas we have places where the mystical is practiced. They’re called churches.

            17. Fred,

              I know you’re on a crusade to save the world, and to spare mankind of the mayhem and destruction which now stare him in the face.

              Sorry Glen, you know absolutely nothing about me! Your portrait of me is a strawman. But for what it is worth, I’m definitely NOT part of any crusade.

              Nevertheless, economic, political and engineering decisions are best left in the realm of the pracitical, the material, and the possible.

              Despite your constant implications to the contrary, I only deal in the realm of the practical, the material and the possible.
              Case in point:

              http://www.asknature.org/article/view/why_asknature#whats_biomimicry

              If you can propose scientific evidence why any of these ideas are impossible or impractical I’d love to hear them.

              I do know one thing, the world built by engineers like yourself just isn’t working anymore. So I’m trying to work with people who actually understand the 3.8 billion years of life on this planet and the systems that have made it possible. I haven’t yet met too many economists, politicians or engineers, who can demonstrate a mastery of that body of knowledge so, IMHO they are not even remotely qualified to say what is or isn’t possible!

              When they move into the realm of the mystical, what we get are disasters like Energiewende and Caliwende, which stand in stark contrast to the highly efficient and well administered rollout of renewables in Texas.

              I do agree with you that Texas seems to be doing a lot of things right.

              I don’t agree that Energiewend is the disaster you claim it to be. Even if it were a complete failure it would still be a success because at least in my way of thinking F.A.I.L. stands for First Attempt In Learning. Anyone who has ever succeeded at anything knows that mistakes are a part of the learning process and I highly doubt the Germans are done learning.

              When all is said and done I’ll bet they will have a thing or two to teach the rest of us.
              Methinks, you are throwing the baby out with the bath water.

              In Texas we have places where the mystical is practiced. They’re called churches.

              Since those are places I never frequent, let’s do each other a favor and leave them out of the discussion.

            18. Caelan,

              Grammar: An Introduction

              Meaning should flow from one sentence to the next, carrying the argument or point of view forward in a clear and concise manner. If you do not use correct grammar and punctuation, or your sentences are too long and complex, what you are trying to say will become unclear and the reader will be unable to follow the text because the flow of meaning is interrupted.

            19. And don’t forget your Twitter feeds too (as well as examples and illustrations to support what you are talking about [such as from your own work], as well as indications that you’ve actually read what you are critiquing, such as those with qualifications, such as ‘off-the-cuff’ or those that may claim ‘artistic license’.).

              ^u^

              ” Imagine a beautiful pastel-emerald-colored wintergreen milkshake made with semi-frozen milk, a dollop of homemade custard and some pulverized and sieved wintergreen leaves in the middle of July.” ~ Caelan MacIntyre

              (You can almost taste it. Go on, admit it.)
              ;D

              Hollywood Dream Bubble

          4. Fred
            I have been reading your welcome take on resource depletion for a good number of years, but am glad to see you re-state it.

            Regarding Plan B it will at a minumum need Renewable electricity generation that can build and maintain its own sufficient industry over the decades of dwindling fossil fuel deployment. I am assuming that fossil fuels will be less and less energetically affordable as time goes by. How significant affordability will be (is there such a thing as net-affordability?) I cannot guess but it is interesting to see lower US demand for diesel now being ascribed to the lower fracking activity and its associated trades!

            best
            Phil

            1. I am with Fred Maygar all the way. Whatever gets built, whatever gets done, in the way of renewables, means we and following generations are better off to some extent.

              Now as to what WILL happen, nobody can say. Even old farmers don’t know EVERYTHING, lol.

              BUT I know that SOMETIMES when a LEVIATHAN is aroused from a long slumber, and gets thoroughly pissed off, the reaction can be astounding, in terms of old LEVIATHAN getting furiously busy.

              Half of what happens might make things worse, but the other half might make things IMMENSELY better.

              Suppose a country sees the handwriting on the wall, finally, after getting a few Pearl Harbor Wake Up Bricks upside it’s collective head.

              Such a country might immediately forbid the sale of oversized pickup trucks for use as personal transportation as a FIRST single step. A hundred other war time footing economic policies could be put in place within a matter of days or months, as far as setting up the rules, and put into actual effect, starting within a few months.

              If the usual projections for the decline of oil and gas production over the next few decades are even in the NEIGHBORHOOD of the ballpark, it would be possible to divert PLENTY of energy currently more or less WASTED to building out renewables.

              We might not WANT to burn coal- BUT speaking as a person committed to renewable energy, I would be PERFECTLY happy to see ANY AMOUNT of coal burnt, IF the juice generated is used to mine the materials needed, and to manufacture SOLAR PANELS.

              Hey guys, the price of JUST ONE typical car is going to be more than enough to cover the cost of a six thousand personal pv system, installed turnkey, pretty soon.

              The winning strategy is is not to go renewable overnight, but to go renewable as quickly as we can, as a practical matter, while at the same time EXTENDING the life of our depleting fossil fuel endowment.

              It was about fifteen F this morning here, and not a whole lot warmer now, with a stiff wind, but I am sitting toasty warm, and have been all day, in a sun room, which is not at all hard to cool even in high summer, because it is WELL SHADED by maples , and has the right sort of roof overhangs. Energy costs to heat our house today, during daylight hours, zero. And this is an old farmhouse, built back in the fifties. It has been upgraded,yes, but it is a mile from being REALLY energy efficient.

              Humanity as a whole does NOT have a plan, Ron is dead on right about that. But when the shit is finally well and truly getting spattered all around, by the proverbial fan, we will find that nation states are capable of creating and implementing plans.

              Note that I have often and continue to predict than a hard crash is baked in, and that a large portion of humanity is going to die hard, probably within this century.

              But some of us have a shot at living decently, maybe even quite well, on a sustainable basis, long term.

              Old Man Business As Usual is a dead man walking, but he has children and grandchildren, and some of them will survive. There will be a NEW generation BAU.

              It won’t be much like the one living today, but it might not be all that bad.It could even turn out to be pretty good, for SOME people.

    1. Boy, that’s a safe country for the Saudis to cooperate with. Mexico will not raise their oil production more than the Saudis. That oughta raise oil futures.

    2. Sarko,

      In my understanding his comments hint at a dramatic reduction in US supply.

  7. History doesn’t exactly repeat as a regular thing , but it DOES have a tendency to rhyme as a many a wag has noticed.

    Here is something for SS and the other hands on guys to cheer them up.

    http://www.cnbc.com/2016/01/15/oil-about-to-get-bullish-but-stocks-another-story-analyst.html

    From the link:

    “On Friday, U.S. Brent crude hit a fresh 12-year low as fears that the lifting of Iranian sanctions could flood an already oversupplied market for crude.

    In spite of the sell-off, the man who correctly saw the steep market correction in August told CNBC that investors would be smart to buy oil at these levels — and short the stock market.

    “Markets estimate the probability of a spike in oil, and a bear market at about 3 percent,” JPMorgan’s Marko Kolanovic, told the “Fast Money” last week. “But we think it’s actually much higher.”

    Kolanovic’s theory comes from looking at past instances of when crude has dramatically underperformed the equities market, as it is on Friday. In each of the 10 instances in the last 30 years this happened, oil eventually came back with a vengeance.”

    Bold is mine.

    By the end of the year, the Global Head of Derivative and Quantitative strategy says $45-$50 oil is fully reasonable to expect while “the doubling of oil prices to $60 is actually quite possible.”

    My gut feeling, backed up by my modest training in basic economics, plus a lifetime of watching farm commodity markets, is that UNLESS the world economy goes to hell in a hand basket, oil will be going up soon.

    Now as far as future traders, and speculators, and computerized stock trades , and all that sort of stuff goes, I just DO NOT BUY IT.

    Now it is reasonable to say that EXPECTATIONS of future oil price changes, up or down, might have SOME MINOR INFLUENCE on the DAY TO DAY ECONOMIC AFFAIRS of the world.

    BUT a huge influence?

    So far as I can see, that is a bullshit proposition, pure and simple, because people that buy and burn oil buy and burn it IN REAL TIME, not six months or two or three years down the road, or five or ten years down the road.

    And while oil producers may make decisions about FUTURE PRODUCTION, today, many months or even years down the road, based to some extent on futures prices, they actually PRODUCE OIL, day after day, in REAL TIME. Production decisions made today are not going to have an impact on the market for a year or longer, in most cases, except maybe small operators at the end of their rope finally going bankrupt. Even then, their wells will be kept in production, if they are generating some cash flow.

    Power politics can trump the basic rules of supply and demand, for a while, as in the case of Saudi Arabia arguably maintaining production so as to put a hurt on Russia and Iran, rather than cutting production and getting MUCH more money for a lot LESS oil.

    But most producers are not trying to wage a defacto war on anybody, they are trying to just stay in business and make a profit.

    And it is now painfully obvious that the oil industry is such a slow moving behemoth that it takes a YEAR for the people in it to go from full speed ahead to full speed reverse, even in the case of the most nimble operators. AFTER letting off the throttle, and shifting to REVERSE, it has STILL TAKEN months and months for production to start falling noticeably, as the current charts indicate.It will take MORE months for production to bottom out, maybe a year or longer. Maybe even two years, who knows?

    But since the quantity coming to market APPEARS to be falling, and some of the oil in storage is used up, it is totally reasonable to expect the price of oil to start going up, so long as the world economy doesn’t roll over and DIE.

    Supply and demand can be expected to work only so fast. When an industry is as slow to change as the oil industry, then the laws of supply and demand will work EQUALLY SLOWLY.

    These are my personal beliefs. Other folks are free to believe as they please.

    I think the facts are on my side, and that Occam’s Razor is on my side.

    1. Oh, I can see his point if oil was a widget sold over the Internet (one location), and could be mass produced, at will, in time. Then, yes, we have to wait til the entire over supply is eradicated. However, the traders, with absolutely perfect foresight that they have, will see a cliff before they fall over it. On second thought, maybe not, this time.

    2. Here is one scenario, perhaps coming to a globe near you-
      We have achieved ‘peak globalization’, not because of a shortage of energy (yet), but because of a slow motion grinding down of the global macro economic growth factors at play over the last 150 years. [Most of the good soils have been plowed, virgin forests sent to the mill, easy to minerals been dug, etc]. A majority of the worlds population now live in countries who are past their peak growth rates, growth rates that have been extended and jazzed up over the years by taking on massive debt and essentially borrowing potential growth from the future.
      Between massive debt and just getting older, the growths rates are declining in the ‘developed’ world, and now China is clearly starting to slow. Germany’s big export economy will likely start to show big cracks this year. A few countries are still on the upward trajectory of growth, like India and some African countries, but the majority of the population is starting to round the top of the global growth curve.
      And so while we probably have not reached peak demand for energy, the global populations ability to afford more energy consumption may be leveling off ( or at least slowing). In this scenario, depending on the relative rates of change that pan out, it is possible that fossil fuel production will outrun demand to some degree for longer than many of us have expected. Especially when you add on factors such ‘artificial’ brakes on fossil fuel use due to concerns over carbon, increasing deployment of renewables over the next decade, and the progressive aging of the big consuming countries.
      I hope that this comes across as coherent, it is a scenario that is slowly crystallizing in my mind as a possibility.

    3. Deutsche Bank’s Peak Oil Report a few years ago predicted massive swings: high oil prices cause demand for oil to drop, low oil prices cause oil exploration to drop, high oil prices cause demand for oil to drop… and so on until oil becomes a niche product like anthracite.

    1. We may just have to let the Russians handle this– they are the pro’s.
      The Valley Boy’s and Girls are better at smaller projects, and meeting creating consumer demand.

      1. Duncan Idaho,

        The Russians have never tried doing such a thing, that I’ve heard of. Neither has NASA.

        The previous one did land successfully, the first such landing ever. There’s a long way to go, of course. The payload was launched successfully, so consumer demand is satisfied. And SpaceX has sent six cargoes at least to the space station now, and brought back trash as well. (Keepin’ Space Tidy) Costs are way below the government launches; I hope to see the whole enterprise become more commercial.

    2. They’re having a lot of trouble with those barges. Maybe they need a marine expert. The land landing went fine….

  8. Not information but a scenario:

    Good chance that Ron is right about 2015 being peak, as low price cripples forward investment, reducing production in years ahead. And perpetual insipid demand keeps a ceiling on price rise; so perhaps a volatile price environment that is very difficult to plan future in investment under: creating a virtuous circle for transition from oil dependency. Price is set by the marginal barrel and there is little interest in that at any almost price now, and good reason to see that continuing.

    Insipid demand? Yes:

    1. Neither China nor India will drive like Americans, it is simply impossible both spatially and for air quality reasons, neither will get anywhere near it, and certainly not with ICE vehicles. Their urbanisation will continue but will follow Japan/Hong kong/Singapore model of density and Transit. This article, despite a silly title, is a good description of the set-up, especially for people only used to a drive-everywhere urban form: https://nextcity.org/features/view/war-on-cars-winnable
    The laws of spatial geometry are permanent, and cars are the most spatially inefficient ordering device for cities. Chinese new car growth is softening and this is likely permanent, they will settle for a much much lower level of vehicles per capita than the rest of the OCED.

    2. OCED countries will continue to exhibit flat to falling VMT per capita, plus accelerating average fleet fuel efficiency. Thus the demand response to cheaper oil will remain muted, even in North America, and fall everywhere else, especially Europe. EVs, PHEVs, and simply more efficient ICE vehicles will increase penetration of market. Again it is the marginal change, and the change in rate of uptake that matters. Ironically perhaps booming new car sales means more economical vehicles in the fleet sooner. That and of course continued urbanisation and increase in walkable, bikeable, and Transit focussed living are strong trends this century. My household of five, for example, has just gone from two cars to one, and that new car, not an EV, is startlingly efficient yet responsive. And we are all driving less, due to improving Transit. We also own and use five bikes. This what city living enables.

    3. And continued urbanisation is unstoppable: http://www.citylab.com/work/2015/12/mapping-65-years-of-explosive-urban-growth/419931/
    All cities in China over 500k pop are connected by high speed rail [and have metro systems/BRT/LRT], over 2 billion journeys a year, very safely [cf 30 000 US citizens killed by car ‘freedom’ annually] http://www.china.org.cn/business/2016-01/10/content_37542438.htm

    4. Increasing likelihood of real Carbon Taxes or other pricing measures to implemented globally, and even if the US tries to pretend it’s still last century, and keeps subsidising oil use, these will still impact on global demand, adding to demand suppression. The Carbon-club is shrinking, not only is China now in a new phase politically [especially because of air quality and other wider pollution issues] and political and market changes in the anglophone big polluter club [Australia, Canada, US] will also bite. See here for a fascinating view on Australia’s situation: http://www.canberratimes.com.au/comment/climate-change-and-confusing-economic-activity-with-economic-prosperity-20160114-gm6ess#ixzz3xJt3o6zk

    Sorry about the length of this, just wanted to add a perspective from outside the tight circle of the US auto-dependency and the oil patch itself. However these are views I value highly: I love this site and lurk here often, love the contributions of so many, especially Ron, DC, AlexS, Dr Dean, Nick G etc, and even the ones I often disagree with like the view from Watcher’s paranoid silo.

    Am not in the oil patch so my apologies for seeing the decline of this mega industry’s vice like grip on our fortunes as anything but good; especially for the continued habitability of the planet, and I do not see at all why this means TEOTW. Signs are clear that oil’s role as the master commodity are on the way out, but that this will take a very long time, [especially as coal is too], and I do not see any signs that this process will follow Gail-like catastrophising. Keep up the great contribs, all.

    1. Great to hear from our very own NZ Patrick. Good on ya, mate.

      1. Thanks Doug + Fred, should have included you and OFM on the always keen to read list. Plus of course Jeffrey B, Island, wimbi, and shallow, and others; it is a great space you curate here, Ron.

        Shorter version of above post: signs of peak demand as well as peak supply; could well be a strange little tango of these two down the back of the slope… oil left in the ground, especially in the Arctic etc.

        Agree I didn’t see this coming at USD100 oil, seemed like supply tightness and persistent demand would result, as ever, in robust price. However this variation seems quite plausible now. See how coal is now plateauing on low price. I can’t see coal going anywhere but down; every renewable installation adds supply at zero marginal cost, and installations are increasing faster and faster. And what matters is the cost of the marginal electron, not the current supply source.

        emissions: http://gregor.us/uncategorized/the-peak-in-oecd-emissions-is-starting-to-look-more-secure/

        ‘It’s common to see confusion over this point. Dependency, to the casual observer, looks alot like growth. But it’s not. The US oil adoption phase ended over a decade ago. Today, US oil consumption remains below levels seen in the year 2000 (in fact it’s barely above 1995 levels). In Japan and Europe, the classic cycle of economic growth begetting more oil consumption terminated even further back in time. But as you fly into London or Paris, you will still see strong evidence of the terrible dependency on oil the West has never fully shaken off, as the great motorway circulars pulse with vehicle lights’. – See more at: http://gregor.us/uncategorized/the-peak-in-oecd-emissions-is-starting-to-look-more-secure/#sthash.8G9HJPHY.dpuf

        coal: http://gregor.us/coal/after-great-pain-a-formal-feeling-comes-for-coal/

        1. Soooooo, the weird part about oil is that the cheapest production-cost source (Saudi) is still going, and is outlasting several of the more expensive production-cost sources.

          This is *not* what happened with anthracite (the cheapest production-cost sources were depleted first), or steam coal, or bituminous, or sub-bituminous, or lignite. In all these cases the cheapest production-cost sources were depleted first.

          So that will cause some really weird dynamics in the oil market near the end of the oil age.

          Direct-production natural gas follows the same dynamics (cheapest production depleted first), but a lot of natural gas comes as a side effect of oil production, so that’ll make it weird too. Renewable methane (biogas) has an odd role to play in this market too.

          The path to the end for coal is pretty clear. The path to the end for “market driven” oil production is quite clear to me too; it’s the same pattern. But the surviving cheap Saudi oil throws a wrench in my predictions. When oil demand drops to the level where the marginal barrel can be supplied entirely by the ultra-cheap Saudi oil (with every other oil company driven out of the market permanently) there will probably be a weird plateau.

    2. Hey Patrick,

      I think the scenario you describe is quite likely!

      BTW, Despite having a couple of folk on this site painting me as a member of an imaginary ‘Team Green’ I actually have a pretty eclectic background and like most here have greatly enjoyed the benefits of our fossil fueled global economy. Heck I even worked on oil rigs as a deep sea diver as a subcontractor for Petrobras and Pemex waaaay back in the day. But life goes on. I almost ended up in academia at one point, thought I wanted to get a doctorate in biological oceanography, then I had a few businesses and I’m working on another one right now. I’ve dabbled in art, still do. I do not now, nor have I ever, belonged to any clubs that would have me as a member and have managed to remain free of any particular ideology. I have lived in different parts of the world and do not see things in simple black and white.

      But, try as I might, I just can’t see fossil fuels continuing to be the driving force in the global economy going forward. Sure, like a huge oil tanker the global economy takes time to change course. The old ways don’t die overnight but they are dying. Anyone who frequents this site has to be seeing the writing on the wall.

      I suggest anyone still expecting the good old days coming back watch this movie.
      Who Moved my cheese?!
      https://goo.gl/argEhv

      Cheese! 🙂

      1. Hi Fred,
        There could be a sequel to that (maybe there is), where Haw goes again back to Hem to let him know of the new-found cheese and notices that Hem has managed to scale the wall with some rope he spun (‘hemmed’?) out of the growing unmowed grass and has transcended the maze, itself, and the reliance on the-powers-that-be to place the cheese in assorted locations, according to their own game.

        @Patrick R:
        NZ is its own silo/maze of sorts for various reasons, and what might work there may not work elsewhere and vice-versa. It is also important to keep in mind the context by which technology of various sorts (like electric vehicles) is arrived at (hint: undemocratically). NZ is a bit antithetical to a maze like China, for example. I’ve been to both mazes.

        Back to the maze analogy, I think we would do well to transcend/smash our own mental/physical silos/mazes that contain and indoctrinate us to see the world through the nation-state lens and to transcend those very geopolitical borders. That appears really hard and I am not getting much in the way of that from even those ‘in-the-know’, say, like James H. ‘I-Voted-For-Obama-Twice’ Kunstler; Nicole Foss; John Michael Greer, Dmitry Orlov (who seems to have a bit of a thing for Vlad P.) or Gail Tverberg. (To be fair, I haven’t, and cannot, catch all their words, and Nicole did mention governments as crowds, and ignoring them [easier said than done, babes]… Now that I think about it, she also relocated to NZ if recalled… perhaps along with some of the sociopathic elite who can afford to do so, since NZ’s governpimp allows immigration also under the ‘Lots’o’Money’ category. Ironically, I imagine that some of those, say, with Maori anscestry living on welfare, wouldn’t be able to immigrate into their own country… Of course, then again, last I looked, if I got it right; immigration-speaking, China was [maybe still is] a glorified lobster-trap in that if one from there received another governpimp maze-membership [AKA, citizenship], they would automatically lose their Chinese-maze-membership.)

        Many would seem to do well to peruse a few notable thoughts and passages from anarchist thinking and then apply them.

        *Game over. Please Try Again.*

        I like a good gruyere. Anyone like a good gruyere?

        Mouse In A Maze

        1. Nearly every government has a “lots of money” immigration category. Exceptions include Canada and… drumroll… New Zealand, which got rid of its category a few years back.

    3. Well said, well reasoned Patrick R.

      I believe that with some luck, with the cards of chance falling favorably, your scenario is not only possible but might actually even be PROBABLE. MIGHT.

      Let us hope you ARE right.

      You can bet I will be copying this comment into my book notes, verbatim, to be mined for the gold in it later on. Thank you!

      If I paraphrase you, I will link to this comment, so as to give you credit.

    4. Patrick R said:

      Chinese new car growth is softening and this is likely permanent…

      Nah.

      1. Glen, Patrick said sales were softening, he didn’t say they had stopped. They are softening because the entire Chinese economy is slowing down. Do you really expect a 7% growth rate year over year to continue? You do realize that such a growth rate means a doubling of the Chinese economy every decade. As the late Professor Albert Bartlett used to say: “The greatest shortcoming of the human race is our inability to understand the exponential function.”

        1. Fred,

          Just check out the latest December car sales figure for China http://www.tradingeconomics.com/china/total-vehicle-sales. Sales were soaring to an all time high of 2785500 cars per month, which is at least 50% higher than in the US. Also other economic numbers in China are staggering strong: House prices are up again, oil, iron and copper ore at all time highs… Low oil prices trigger already high economic growth worldwide.

          1. Heinrich,

            Here’s what Scotiabank has to say in its most recent Global Auto Report:

            Global car sales are expected to strengthen over the coming year, extending gains to a seventh consecutive annual record and surpassing the length of the previous upcycle which lasted six years….

            Despite the recent increase in short-term interest rates by the Federal Reserve, interest rates across the globe remain ultra-low and most central banks continue to add liquidity, providing support for global financial conditions and car sales. However, there is some concern that the sharp plunge in oil prices could lead to rising defaults for highly-indebted energy companies. These fears have led to an increase in several risk metrics and financial market volatility in recent months, including a spike in interest rates for high yield energy bonds to the highest level since mid-2009.

            http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf

          2. Heinrich,
            I think the latest figure I have seen is that China’s economy is still growing at 6.9% so almost 7%. Sure that is a phenomenal growth rate but I don’t see any way that that can be sustained. As for car sales, in a country with 1.3 billion people I don’t find those numbers all that impressive and I’m willing to bet that won’t continue growing either. I guess time will tell.

            IMHO the entire Chinese Economy is one gigantic bubble just waiting to burst. Anyone who thinks the Chinese Economy can continue to double every decade should sit down with a chess board and place a grain of rice on the first square and the progressively double the number of grains for each subsequent square until they get to the 64th square…

            For those wondering… On the entire chessboard there would be:
            2^64 − 1 = 18,446,744,073,709,551,615 grains of rice, weighing 461,168,602,000 metric tons, which would be a heap of rice larger than Mount Everest. This is around 1,000 times the global production of rice in 2010 (464,000,000 metric tons)

            I guess people just really don’t understand the exponential function!
            Doubling the Chinese economy in the next ten years would certainly require quite a bit of magic, to say the least!

        1. Dennis,

          Patrick R’s claim is that “Chinese new car growth is softening” (emphasis mine).

          Can you marshall any empricial, factual evidence to demonstrate that claim to be true?

          And why should you “ignore the 2016 forecast”?

          It’s based on something which I have heard you mentioning ad nauseaum on these comment threads. To wit:

          Despite the recent increase in short-term interest rates by the Federal Reserve, interest rates across the globe remain ultra-low and most central banks continue to add liquidity, providing support for global financial conditions and car sales.

          http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf

          You’ve consistently argued the mainstream prediction. Does this mean you are now reversing your previous position?

          1. Hi Glenn,

            I think we interpret what PatrickR said differently.

            He said new car growth was softening, I interpret that as a slow down in the rate of growth which I have found empirical evidence to demonstrate.

            I ignore the forecast because scenarios of the future, including my own, are usually incorrect.

            Also note that the quote of mine that you found is in response to those predicting a Worldwide recession.

            Slower growth (such as what has happened to new passenger vehicle sales in China) is perfectly consistent with no recession.

            If China grows at 4%/year that is slower than 7% growth, but it does not necessarily imply a World recession.

            You may believe that fiscal and monetary policy are ineffective in all cases and believe that the market should be left alone to determine how resources are allocated.

            I do not, I think government interference in the economy should be minimized, but during a severe recession fiscal and monetary policy should be used. The time for fiscal austerity is when the economy is booming.

      2. China has issued a diktat that new cars are to be electric, thanks to their local air pollution problems. They haven’t quite required it, but they have all kinds of stuff which massively benefits electric cars over gasmobiles. Like a license plate lottery (you have to wait for your “ticket to come up” to get a license plate) for gasmobiles, but electric cars get registered automatically.

        China now has the *three* largest-volume electric car manufacturers in the world, and has more electric buses on the road than any other country. They’re utterly serious about this. They’ve more than doubled production of both in the last year and intend to continue doubling production every year.

      1. Hi Glenn,

        I see increasing fuel economy in the US on your chart.

        What might explain the flattening of the curve in 2015?

        Hint: What has happened to gasoline prices in the US?

        What do you think might happen when gasoline prices return to $3/gallon and continue to rise from there.

        Note that if you think PatrickR’s scenario is too optimistic I agree, I doubt in the near term (next 15 years) we will see low oil prices due to a lack of demand for oil. Perhaps we will in 25 or 30 years, probably because high energy prices have caused a serious recession (from 2030 to 2040) which reduces demand. By then, people may realize that there won’t be enough oil unless oil prices are very high and alternative forms of transportation (public transport in cities and EVs and plugin hybrids in the suburbs and rural areas) will take off.

        1. Dennis:

          Simple extrapolation of the exponential solar power installation trend (a trend back 30 years now) has solar power producing all the electricity in the United States sometime around 2030-2035. (Obviously it will hit a bit of a wall when it’s producing 100% of daytime electricity, and the price of batteries will then be important, but you get my point: daytime usage is something like 2/3 of total usage, so this is a big deal.)

          Simple extrapolation of the exponential growth of electric car sales has them replacing all new gasmobile sales sometime around 2040. Electric cars are a demonstrably superior driving experience and are killing the high end of the gasoline car market. This means they’re being adopted even though there’s a price premium for them.

          Electricity usage is actually going *down* thanks to the implementation of obvious efficiency moves such as insulation and LEDs.

          Oil has *already* priced itself out of the heating market, and permanently (even the current oil price is too high to compete with gas *or* electric heat). Oil has already priced itself out of most of the industrial markets in favor of natgas. Oil’s been relegated to a transportation-fuel niche.

          Low oil prices due to a lack of demand for oil? It’ll happen. I’m not sure when, but remarkably soon — definitely within the next 15 years.

      2. The MODEL YEAR average fuel economy HAS declined a little.

        But the model year overall TREND is up, and will continue up,because higher fuel economy, as measured by CAFE, is mandated.

        By way of example, a typical early nineties F150 pickup truck gets substantially worse mileage than a 2016 F150, even though the newer truck is physically larger.Ditto the Chevy’s and Dodges, even though they are not yet built with a lot of aluminum.Ditto just about any comparably sized car, capable of comparable acceleration etc.

        The question is how fast are owners of really old cars and trucks scrapping them in favor of newer ones that get better fuel economy?

        We know that newer vehicles are driven far more miles, per vehicle, per year, than older ones. Really old cars and trucks are generally not used much at all.

        My guess is that for every ten new cars and pickups sold in the USA, at least eight or nine old ones are scrapped.

        I found links to tables with this data in them, but cannot get them to display properly for some reason.

        1. According to “Scarcity” – C. Clugston, The U.S. imports 100% of bauxite, mostly from Australia and Jamaica. The global peak extraction year is forecasted as 2038. Clugston analyses 89 ores and minerals necessary to grow/maintain industrial society and finds 69 of them have “almost certainly” reached permanent domestic (U.S.) extraction levels.

          1. Mineral recycling is critically important, for aluminum, copper, etc. etc. etc. I expect we’ll start to see landfill mining after a while.

      1. Hi Glenn,

        That forecast is based on very low oil prices through 2017, the forecast for prices will probably be too low because there will not be adequate oil supply at that price, unless there is a recession. If there is a recession consumption will decrease rather than increase.

          1. Hi Glenn,

            Do you think the EIA’s forecast is correct? The EIA has not posted anything here, but you have, I think the EIA’s AEO 2015 reference case oil prices seem reasonable, but their recent short term forecast based on the oil futures market is likely to be incorrect. Just double checked AEO 2015 ref scenario, 2016 may be a little high, probably $50/b for an average 2016 price is more reasonable.

      1. Glenn,
        It is obvious there is no slowing down in terms of oil usage for transportation. What it is slowing down is the amount of disposable income due to built in price inflation. So that is manifesting in decrease of spending in non-essentials goods and services. So as the result Baltic dry index is way down. But amount of oil used for driving back and forth like in bumper cars in Amusement Park is the same in OECD or increased in Asia.

        1. Ves,

          Nevertheless, overall global oil demand continues to march inexorably higher according to the IEA’s latest Oil Market Report.

          1. Well actually they say demand was down in the 4th quarter 2015 and will be down further in the 1st quarter 2016. And the 2nd quater of 2016 quarter will still be below the 3rd quarter of 2015. Only in the third quarter of 2016 do they predict that it will start to rise again.

             photo IEA World Oil Demand_zpsviprwkx0.jpg

            1. Ron,
              these are normal seasonal variations in demand.
              To determine the trends in demand, we should compare the quarterly number with the same quarter of the previous year, not with the previous quarter

            2. The IEA provides a calendar quarter to calendar quarter comparison.

          2. Hi Glenn,

            Thanks for that chart.

            I guess my argument kind of cherry picks. I believe the IEA is correct that oil demand may increase by 1.2 Mb/d in 2016, but I expect that liquids output will fall by at least 500 kb/d (and if the EIA’s short term oil price forecast is correct, probably supply would fall by 1000 kb/d).

            So we would have an average stock draw of between 1.7 and 2.2 Mb/d, let’s call it 2 Mb/d. OECD stocks are about 260 Mb above average levels, so in roughly 3 months we would be back to normal levels. Under this scenario by June or July 2016 we should see oil prices start to recover. As it will take some time to reverse course and start to increase oil supplies we could be at $75/b by late 2016 or early 2017.

            1. I mistakenly assumed supply was equal to demand for 2015, not true. An increase in OPEC output of 500 kb/d would mean no change in stocks for 2016 if the IEA output and demand forecasts are correct.

              No doubt this is the basis for AlexS believing that oil prices will remain low throughout 2016 and oil prices will not begin to rise until the middle of 2017.

              If the IEA is correct, I will be wrong, but I think their supply forecast is too high (by roughly 1000 kb/d for all of 2016.)

      2. Hi Glenn,

        Again the forecast is based on low oil prices and an unrealistic expectation of the World Oil supply at a low oil price. Again if there is a recession as some believe, consumption will decrease and oil prices will remain low.

        If World growth continues, oil supply will not be able to meet oil demand at low oil prices, oil stocks will fall to normal levels (in 6 to 12 months), and oil prices will rise, this will tend to reduce European oil consumption, also slow growth in Europe will tend to reduce consumption.

        Also your chart tells an incomplete story, crude oil consumption declined from 2004 to 2013 in Europe see

        http://appsso.eurostat.ec.europa.eu/nui/show.do

        Chart below using Eurostat data.

        1. “oil prices will rise, this will tend to reduce European oil consumption”

          With taxes amounting to 60-70% of retail price for gasoline and diesel, oil consumption in Europe is almost non-sensitive to crude oil prices.

          On the supply side, you underestimate the resilience of producers to low oil prices. The excess supply will be eliminated not earlier than mid-2017, and it will take at least two more years for OECD inventories to return to normal levels.

          1. In general, the decline in annual average (Brent) price from $99 in 2014 to $52 in 2015 obviously had some positive effect on the demand, especially in the U.S. But the effect of decline from $52 to $40 in 2016 will be negligeable.
            And it will be largely offset by:
            1) high fuel taxes (Europe, Japan)
            2) the depreciation of local currencies vs. the dollar
            3) cancellation or reduction of fuel subsidies in a number of emerging economies

            1. Hi AlexS,

              Your offsets, I agree with, but I think there may still be some growth in demand due to economic growth.

              The IEA forecasts 1.2 Mb/d demand growth in 2016, this is not enough to balance supply until the third quarter of 2016, if oil prices remain around $40/b or less, I believe oil supply may be lower than the IEA forecast, which is roughly flat if OPEC increases output by 500 kb/d for 2016 (average output for the year).

              Despite my usual optimism, I think the IEA is too optimistic by at least 500 kb/d for 2016 and probably more like 1000 kb/d.

          2. Hi AlexS,

            I think much of conventional output requires investment in new wells to keep decline rates down. This investment may not occur at $40/b and decline rates may decrease more than you believe. There is a tipping point where even low cost wells cannot pay for their OPEX at too low an oil price, maintenance gets deferred, or wells get abandoned. This does not happen everywhere, but in North America, Canada, possibly the North Sea and Brazil we may see more decline than you believe especially at oil prices under $40/b.

            In the LTO plays output has been resilient so far, but eventually oil companies will be cut off from financing and will declare bankruptcy, once that snowball gets rolling there could be turmoil in the LTO industry and output could decline pretty sharply.

            In some cases people think all the DUCs will save the day, but the fracking amounts to half the cost of the well, you still need money to create a producing well from a DUC.

            No money, no oil.

            All of the cutbacks in CAPEX are eventually going to bite and bring down World C+C output by 1 to 2 Mb/d (2016 average output will be 77.5 to 78.5 Mb/d, assuming that 2015 average output was about 79.5 Mb/d).

            Based on IEA data OECD stocks are about 260 Mb above average levels, if oil supply falls by 1 Mb/d below demand, it would take 9 months to return to normal storage levels, oil prices will begin to rise once this draw begins, so that by 4 or 5 months oil prices will gradually start to rise.

            You are also forgetting the time lag between changes in prices and changes in consumer behavior, this lag tend to be 6 to 12 months and the demand increase in North America will be very apparent in May through September when all the new SUVs hit the road for the summer driving season.

            I imagine Europeans will have some response to lower fuel prices and they are subject to the same lag in responding to price changes even if the relative percentage change is smaller.

            1. Dennis,

              You are missing one point: today’s investments in conventional oil will result in production next year or even in 2018 (if it’s simple development drilling in already producing fields) or 2020-2025 if this is capex in large greenfield projects.
              2016 production depends on investments made in previous years

            2. Hi AlexS,
              Edit: See following comment before responding as I changed my mind (or just skip this comment).

              Not true of all investment.

              In a producing onshore oil field, every time a decision is made to drill and complete a new well, that results in a capital expenditure. Are you suggesting that it takes a year to drill and complete a well in an already producing oil field?

              Do you think the decision to drill a new well is more or less likely to occur when the price of oil is $30/b?

              So my conclusion is that less drilling of new wells in producing onshore conventional oil fields will result from lower capital budgets. Not all capital spending is on multiyear projects.

              The type of investment spending I am referring to is the spending that keeps decline rates in the average producing field at 2% rather than 6.5%. If this investment stops altogether, decline rates will be higher, and at $30/b there will be less of this investment.

            3. Hi AlexS,

              Thinking about this some more, you may be correct for most of the World, the only place where oil companies are small enough to respond quickly to market changes is in the United States, so my argument would only apply to some onshore production in the US.

              For the rest of the World where oil companies are larger, investment decisions are made and then they are put into place regardless of oil price and the lag time between changes in oil price and changes in investment decisions are longer (one to two years at least as you suggest).

              It is for this reason that in the absence of OPEC attempting to influence oil prices that we can expect volatile oil prices as we go from glut to shortage and back.

              Eventually large oil companies will realize that they need to have more flexible investment spending plans to keep supply and demand in balance, but it will take some tome to adjust to this new “free market” environment.

              Due to this effect do you expect a shortage and high oil prices in 2018? If the oil companies and OPEC do not change behavior, we could have a serious oil shortage in 2018, if things play out as you foresee.

            4. Dennis,
              I totally agree with this post. Indeed U.S. independents, both working on the shale plays and on conventional fields, are much more flexible and can change their capex programs (some of them did it twice in 2015).
              So investments by this sector are the most vulnerable to lower oil prices.
              Big oil companies generally approve investment programs for next year by the end of the previous year. Furthermore, most of the majors have 5-year investment plans that are adjusted annually. I think most of the global majors already have investment programs for this year. And these programs are based on rather conservative oil price assumptions. Finally, these companies, with few exceptions, have relatively strong balance sheets.

            5. Hi AlexS,

              I have come around to your view for most of the World. I do think that big companies probably can adjust their plans to some degree and I imagine there has been some slow down in investment spending as prices have fallen from $100/b to $45/b, there is little incentive to invest when profits are low. Even big oil firms will reduce drilling in developed fields at low oil prices and we may see some decline in supply in 2016 and more in 2017 and even more in 2018 as the lower investment spending starts to affect oil supply.

              Global oil investment fell by 22% in 2015 and is expected to fall another 14% in 2016.

              http://www.reuters.com/article/us-oil-companies-investments-idUSKBN0UH0AB20160103

              Mostly I agree with your analysis, I am just less optimistic that World output will be as high as you think. I think the very low prices may cause many smaller oil companies in the US to become bankrupt, and many high cost producers around the World have reduced investment and will cut further and we will see this become apparent by May to July 2016.

              The industry takes some time to respond so stock draw down could happen quickly and prices may rise quickly as well.

              So possibly prices remain under $75/b for all of 2016, but prices quickly rise to $100/b by the end of 2017.

            6. Dennis,

              Oil majors’ price projections for 2016 are already very conservative. And this is reflected in most recent non-OPEC ex-US output projections.
              I do not think that their capex plans will be significantly cut if prices correct upwards in 2Q16 and the average oil price for the year is close $40.
              However, if prices stay at or below $30 for longer than I expect, there will be obviously further capex cuts for 2016.
              We should take into account, however, the deflationary pressure in the oil and oil-related industries. The sharp increase in oil production costs (opex and capex) over the past decade was due to: 1) more complex geology of the new fields, 2) more costly technologies used to increase recovery rate of the old fields, but also, to a large extent, to 3) input cost inflation related with the ever-growing demand from the oil and gas industry.
              Now, as demand for all inputs, inc. metals, pipe, other materials, equipment, services and workforce is falling, their prices and rates are also rapidly declining. There is also an effect of the appreciating dollar. Thus, in Russia, despite a decrease in dollar-denominated upstream capex, capex increased in local currency terms , which resulted in a 10% increase in drilling activity.
              All that means that nominal decline in global upstream investments in USD terms is much bigger than the decline in real terms (“deflation-adjusted” and “currency-adjusted”).
              In my view, non-OPEC ex-US C+C output will decline this year, but the decline will not be much bigger than projected by the IEA, EIA and OPEC.
              Global supply will continue to exceed demand at least until mid-2017. And though this excess supply is gradually diminishing since mid-2015, there are still additional volumes of crude and products that are added to the inventories. And hence – downward price pressures.
              $100 by the end of next year is absolutely unreal, in my view (if there is no major war in the Arabian peninsula).
              But I also disagree with those who say that prices will never return to $100

            7. Alex,

              You are not taking into account the fact that some existing long term projects now can be slowed down due to the need to save cash and desire to get them online in better times. Look at Kazakhstan and Russia Arctic drilling as two examples. Nobody is especially eager to dump $60 oil at $30 market with the notable exclusion of US shale players.

              Large projects that have state support and can think in longer term might well be slowed down to wait for better prices and the scope of oil production increase from them might well became more limited (like shale players they will go for sweet spots only).

              Actually I heard that those hot guys in Rosneft with their rush to increase production needed white knight to repay the bridge loan. http://www.reuters.com/article/us-rosneft-funding-trafigura-exclusive-idUSKBN0L729N20150204

            8. likbez,

              As you may have noticed, we are discussing here prospects for global oil supply in 2016.
              Prior to the oil price crash and the sanctions against Russia, first production from Rosneft’s Arctic projects was expected in early 2020s, it will now be postponed to mid-2020s at best, but this will certainly have no impact on this year’s Russian oil output.
              Kashagan start-up has been postponed many times over the past 10 years, not because of low oil prices.

              I had already posted this chart from Woodmac, which shows estimated negative impact on global oil supply of the projects postponed or canceled in 2014-15. As you can see, there is zero impact on 2016 supply, and insignificant impact on 2017 and 2018 as well. However from 2020, project delays will have a visible impact on global oil output.

            9. Hi AlexS,

              I do not have access to the full report.

              It is possible that the WoodMac graphic only refers to large projects which have long lead times. There could be a slow down in infill drilling and wells maintenance that will affect decline rates that is not captured by that WoodMac graphic.

              As a simple exercise, let’s say there is somewhat less infill drilling and more low output wells abandoned throughout the World, does $40/b create enough incentive to keep oil output high? You believe so, I do not. We will have to wait and see. I believe 2016 C+C World output will be lower than 2015 by 500 to 1000 kb/d. It is unclear how much this will affect oil prices, but an average price of about $50/b for all of 2016 seems reasonable with the price at about $60/b or higher by December 2016 (monthly average).

            10. That’s fascinating, AlexS.

              My projections put solar at 10-12% of the US electricity supply by 2022 (and still doubling every two years), at which point the oil project slowdowns may turn into cancellations.

              A lot depends on battery prices. They determine how long the auto market will remain segmented by propulsion type (electric cars at the high end, gas cars at the low end). This segmentation happened back when autos were replacing horses-and-buggies.

              A naive extrapolation of current high-end electric car production growth (currently running on another exponential curve) sees them replacing the entire US car market in 2022. But they will hit some sort of wall for upfront purchase cost, which will allow the low-end gasmobile market to survive for a while.

              (P.S. I feel comfortable naively extrapolating the exponential growth of solar and wind and electric cars to the US market because the deployment curve only stops being exponential as you approach *global* market saturation, and sales won’t reach *global* saturation for quite a long time after they reach *US* market saturation. Modeling the global market is loads harder because I have to guess when the market hits ~50% saturation, and there are all kinds of things affecting that.)

            11. The article on Rosneft is dated February 2015. It was written almost one year ago.

              Meanwhile, between 3Q14 and 3Q15, Rosneft’s
              gross debt declined from $65.6b to $47.5bn,
              net debt from $45.0bn to $24.5bn.
              http://www.rosneft.com/news/pressrelease/25112015.html

              Rosneft’ high debt level was not due to “the rush to increase production”, i.e., not because their capex exceeded operating cashflow. In fact, the company remained casflow positive all those years, including 2015, which enabled repayment of the part of the debt.
              Their debt increased after Rosneft acquired TNK-BP. And the sale of TNK-BP became possible because of the multi-year conflict between BP and Russian private co-owners of TNK-BP, which impeded the development of the company.
              So in that case Rosneft was a white knight for BP and oligarch-owners of half of TNK-BP

          3. Hi AlexS,

            Yes I agree Europe is much less sensitive to oil price changes than North America. Mostly it will be GDP and population changes that will drive European oil consumption, with maybe a small effect from hybrids, plugin hybrids, and EVs at some point (after they become more widely accepted).

            Europe is not the problem, the US is where oil consumption needs to come down to European levels.

            1. Decline in average retail gasoline prices in local currencies in key OECD countries from mid-2014 peak to November 2015 (latest data available)

              France -16,0%
              Germany -17,0%
              Italy -17,3%
              Spain -19,2%
              UK -18,2%
              Japan -22,7%
              Canada -21,0%
              USA -41,5%
              Source: IEA

              Ref: Brent price: -60.4%

              Average end-use gasoline prices (in local currency, per liter)

            2. Note that average Brent price in November 2015 was $44.27 vs. the average $40,15 projected by the EIA for full-year 2016.
              Also note that fuel taxes in Europe are almost flat and do not decline with the price of crude oil. So the impact of slightly lower crude oil prices (vs. end-2015) on retail prices for gasoline will be minimal, and there will be zero impact on demand.

            3. Hi AlexS,

              Consumer demand takes time to respond to lower or higher oil prices, the response is not instantaneous.

              So I disagree that there will be zero impact on demand if oil prices remain low.

              Many consumers probably expected the fuel price decrease to be temporary, the longer the price remains low the more it affects car buying decisions.

              I agree the effect will be smaller in Europe than the US, but I disagree that the effect will be zero.

          4. Hi AlexS,

            The IEA has supply and demand in balance by the end of 2016.

            If oil prices are as low as the EIA predicts, then US output will be lower than the EIA and IEA predict, by at least 500 kb/d. If that is correct it would take 400 days to reduce the excess 200 Mb of OECD inventories, so about a year rather than two years. If there are other places such as Brazil, Canada, and China ( and many others) that respond to low oil prices by cutting back on investment spending on ongoing projects then we may see even more decline, possibly 1 to 2 Mb/d by the end of 2016 for World C+C output (YOY monthly change in output).

            My guess is that OECD stocks will be close to the 5 year average by at least the start of 2017, by June 2017 we could see oil prices spike to $100/b, but I would conservatively guess above $75/b (2015$) by that point.

            1. Dennis,

              The IEA OMR doesn’t have projections for global oil supply.
              They predict:
              – global demand
              – non-OPEC supply
              – OPEC NGLs

              And global demand – non-OPEC supply – OPEC NGLs = call on OPEC crude.
              If actual OPEC production exceeds the call on OPEC crude, there is global oversupply.

              As the chart below shows, the IEA expects continuing, albeit declining oversupply until end-2016 (they don’t yet have projections for 2017)

            2. Hi AlexS,

              I made assumptions on OPEC being 500 kb/d higher than the most recent quarter to estimate IEA “oil supply”.

              I think the IEA overestimates oil supply in that graphic. Low oil prices will reduce oil supply eventually.

        2. Hi Dennis,
          That decrease in euro area that you see from GFC in 2008 is just decrease on the back of periphery countries with the message from the core “You got eat less” to the periphery. So that decrease in oil consumption in euro area is all what you are going to get without triggering revolution 🙂
          High gasoline taxes, developed public transportation, tiny diesel ICE… it is all already baked in that oil consumption.

          1. Hi Ves,

            You may be right about Europe, there may not be a lot more reduction in oil consumption, though high oil prices may still have some effect, they can move to hybrids, plug in hybrids and EVs. There can be more electrification of rail and possibly more freight moving to rail or sea. Most of the room for improvement is North America, Europe has cut most of the fat.

    5. Patrick R said:

      Ironically perhaps booming new car sales means more economical vehicles in the fleet sooner.

      That looks to be true in China:

      Auto sales in China have accelerated in recent months and are expected to increase 7% in 2016, buoyed by a 50% reduction in the sales tax to 5% from 10% for new vehicles with engine capacity of less than 1.6 litres…

      http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf

    6. Patrick R said:

      Increasing likelihood of real Carbon Taxes or other pricing measures to implemented globally…will still impact on global demand, adding to demand suppression.

      “Adding to demand suppression”?

      What demand suppression?

      The much heralded “demand suppression” is like Erewhon. It is nowhere.

      1. Hi Glenn,

        The amount of oil used per unit of GDP has been falling. Some argue that this is due to a change in the structure of the economy to more services.

        I believe this effect is real, but for the World it is difficult to measure the size of this effect.

        Your Asia/Pacific demand includes China and India, without those countries, demand growth is not so great. Since 2012 oil consumption has been decreasing. Chart uses data from BP Statistical Review of World Energy.

        http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

        1. If you don’t count 2.5 billion of people (China + India) in Asia for oil consumption then shale guys are very profitable as well if they disregard principal payments on debt 🙂

          1. Hi Ves,

            The reason for leaving out rapidly growing economies is to show that for mature economies, demand is either flat or down.

            At some point growth in oil consumption will slow down in China and India as well especially as oil supply will eventually decrease faster than the decrease in consumption in OECD nations, at that point oil prices rise which speed the transition away from oil everywhere. Eventually there will be a lack of demand for oil (40 or 50 years down the road) which may drive oil prices lower so that much of the high cost oil is left in the ground. Possibly wishful thinking, but in any case there is some limit to how high oil prices can go (probably about $200/b in 2015$ at most) in the next 20 years and there is some limit to how much oil can be produced at that price, my guess is between 80 and 85 Mb/d.
            So there will be a limit to how high the consumption of oil can go for the World. How the oil is allocated will depend on preferences and prices, assuming war is not chosen as a rational solution (this would tend to reduce oil available to everyone).

            1. ” The reason for leaving out rapidly growing economies is to show that for mature economies, demand is either flat or down.”

              Hi Dennis,
              I agree that is flat or down not counting growing economies. And little bit up counting growing economies. But question is if that is the case then how come oil is down 70% in the same period of time? Obviously there are some other forces than just supply and demand. So I am just wondering how long these other forces can postpone supply/demand finding equilibrium?

            2. Hi Ves,

              This has to do with the elasticity of supply and demand.

              Mostly the suppliers are slow to respond to price, because there are a lot of sunk costs, and in the short term demand does not respond much to lower prices. Just because the price of gasoline is low doesn’t mean you will drive your car around all day.

              Eventually people will buy an F350 so they can feel powerful, but it takes some time. 🙂

            3. Dennis: ” Mostly the suppliers are slow to respond to price, because there are a lot of sunk costs”

              Hi Dennis,
              That is classic example of sunk-cost fallacy.
              Sunk-cost fallacy occurs when people make decisions about a current situation based on what they have previously invested in the situation. For example, spending $100 on a concert and on the day you find that it’s cold and rainy. You feel that if you don’t go you would’ve wasted the money and the time you spent in line to get that ticket and feel obligated to follow through even if you don’t want to. Shale should stop drilling 6 months ago 🙂

              Dennis: ” Eventually people will buy an F350 so they can feel powerful, but it takes some time.”

              It is hard work to tame the mind 🙂

            4. Hi Ves,

              It is easy to tell what the right decision is after the fact. Six months ago nobody knew what oil prices would be n the future.

              I agree they should have stopped drilling, especially now, at the time I thought supply would drop and oil prices would rise.

              On sunk costs, if you have already drilled a well for $3.5 million, it may make sense to complete the well so you can earn some money producing oil. That is the sunk cost I am talking about.

              People don’t buy new cars every day, but if gasoline prices are low they may choose a less efficient vehicle.

            5. Hi Dennis,

              Dennis: “It is easy to tell what the right decision is after the fact.”

              I was offering steak and beer about 8-9 months ago to anyone, right here on the blog, to tell me why anyone is still drilling and especially LTO drillers. There is that post somewhere. Only Shallow Sand understood seriousness of my question and tried to give an educated response. It was obvious to me at that time that this crash is different than the 2008 and 1986.

              Dennis: “On sunk costs, if you have already drilled a well for $3.5 million, it may make sense to complete the well so you can earn some money producing oil.”

              Not at all if you are losing the money on every barrel that they produce like most of them do. That is why it is called sunk cost fallacy. They are losing the money period. No ifs, no buts.

            6. Hi Ves,

              I agree that drilling more wells does not make sense.

              If you have spent 3.5 million dollars to drill a well you have a decision, take the 3.5 million loss (lets say you cannot find a buyer for the drilled well) or spend another 3.5 million to complete the well. Now as long as the NPV of future output is equal to 3.5 million, you are in the same spot as you were without completing the well. If NPV is lower you are in worse shape and if NPV is higher you are in better shape.

              It is a matter of expectations, if one expects prices will be continuing to fall, then not completing the well makes sense, if one believes oil prices have reached a bottom and at present oil prices NPV is more than completion cost, then completing the well makes sense.

      2. Hi Glenn,

        If we consider North America, Europe and Eurasia Oil Consumption from 2006 to 2014, there was a decrease of 1.3% per year from 2006 to 2014.

        In 2014, these areas consumed 45% of the oil consumed in the World.

        Chart using BP data below.

          1. Hi Glenn,

            Yes oil consumption has increased in the past.

            Does this prove it will continue forever?

            You have now told us you agree that there will be a peak in fossil fuels.

            When do you think this might occur? My guess is 2030 for all fossil fuels in millions of tonnes of oil equivalent and for C+C around 2025.

            Now if you agree oil will some day peak, clearly you do not believe that oil consumption curve can continue to increase forever.

            The point of my charts was to show that oil consumption is decreasing for Europe and Eurasia as well as North America (45% combined oil consumption in 2014.) At some point this will be true for the entire World.

            Perhaps you have faith in the EIA forecast for 99 Mb/b of C+C output in 2040. That forecast is extremely unlikely in my view.

            1. Hmmm. I think we all agree that coal is declining very fast and has probably already peaked.

              So if you project C+C peaking at 2025 and all fossil fuels in 2030, you must be projecting *huge* amounts of natgas from 2025-2030. I don’t see that happening.

              I don’t want to make explicit predictions about the date of peak overall numbers, but I suspect that fossil fuels as a whole will peak *before* oil peaks. Coal will decline early and fast and natural gas will track oil closely.

    7. Patrick R said:

      The Carbon-club is shrinking….

      Sorry about the length of this, just wanted to add a perspective from outside the tight circle of the US auto-dependency and the oil patch itself….

      Am not in the oil patch so my apologies for seeing the decline of this mega industry’s vice like grip on our fortunes…

      California Dreamin’

      All the leaves are brown and the sky is gray.
      I’ve been for a walk on a winter’s day.
      I’d be safe and warm if I was in L.A.;
      California dreamin’ on such a winter’s day.

      https://www.youtube.com/watch?v=3kcmwXUdDCE

  9. Well, not really reverse QE, or . . . maybe.

    If you’re an oil funded Sovereign Wealth Fund and oil is flowing money into you, you gotta put that money to work somewhere and that’s likely stock markets. Up bias on them. If oil revs stop being big and govt spending exceeds govt revenue then the SWF will be tapped (along with borrowing to fund that deficit). Neither would extract money from the system (the system being uber macro) so it’s not reverse QE.

    But . . . it is a down bias on equities. Now THAT can be reverse QE via HFT momentum. Money disappears when equity prices fall.

    1. “Neither would extract money from the system (the system being uber macro) so it’s not reverse QE.”

      But stock market drop is in itself a kind of reverse QE.

      ” Now THAT can be reverse QE via HFT momentum. Money disappears when equity prices fall.”

      Exactly. Money from QE lifted stock markets tremedously in 2008-2014 (S&P500 from around 660 to around 2200). Now the process reversed itself. HFT just guarantees that the drop will be amplified.

      An interesting question here to what extent the drop of energy companies stock prices is just “normalization” and how much “subdued” the rebound will be when oil prices rise.

      Moreover there is another feedback loop via drop of imports from oil producing countries, which now lo longer have money to export usual staff from G7. Germany lost over 40 billions of exports to Russia in 2015. Of course, this is not only due to oil price drop (probably $5 billions are due to sanctions), but still it’s a lot…

      Similar situation exists in the USA where oil price drop negatively affects real estate markets in at least five states and all connected to real estate chain of businesses.

      As well as stock prices of financial sector (Wells Fargo has 17 billion of “oil loans” on books). So “contagion” effect does exist.

  10. One thought I had, which in itself is dangerous, is maybe the lag of posting to the rrc site by delinquents is maybe not as big as it was during the heyday of drilling. Maybe, EIA’s new project by estimating production from direct reports by companies is not as perfect as they want it to be. EIA and RRC seem to be drifting apart again. Not surprising if it is, but it is nowhere near as far apart as it once was before EIA kept revising figures and methods.

    1. Hi Guy Minton. I noticed the same trend in the last few reports. It really appears as if the previous month corrections are getting smaller then they used to be. Either this is an intermediate occurance and bigger corrections will occur in the future or both the EIA forecast and Dr. Dean Fantazzini’s predictions are actually too high. Will be interesting to see.

  11. Well dang Petro, I looked at home mortgage rates, and my how they have fallen.

    Still waiting on the rest of your post, including a specific answer on negative crude prices. I would think $0 is low enough.

    1. Baa zaar .. So there you have it.
      “The global deflationary supply glut has now reached the point that the market is effectively forcing producers to pay to give their oil away or else see it sit in bloated storage facilities until Riyadh decides enough is enough and until the world comes to terms with the return of Iranian supply.”

      “The message for the Wells Fargos and Citis of the world: you’re going to need a bigger loan loss reserve.
      It’s no wonder the Dallas Fed suspended mark-to-market on energy debts – there’s no market to mark to”

      http://www.zerohedge.com/news/2016-01-18/negative-oil-prices-arrive-koch-brothers-refinery-pays-050-north-dakota-crude

    2. I did post my comment yesterday.
      It must have gotten stuck again somewhere…
      I will ask Ron again to help us with posting it…

      It is long…don’t hate me…

      Be well

      Petro

    3. there is an article on oilprice.com about some nd sour going for -50cent per barrel

        1. daniel, Verwimp,

          It turns out, we are told, that the $-0.50 was an error. It has been corrected to $1.50 (not negative).

            1. Toolpush,

              Sorry, sorry.

              Forgot where I was for a moment. Won’t happen again.

            2. Hey,

              I see Dean is making the big time on this.

              http://oilpro.com/post/21619/negative-crude-oil-price-happening-north-dakota?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-01-18&utm_content=Article_4_txt

              Credit Where Credit Is Due
              I first saw this news in a tweet posted by energy economist Dean Fantazzini on Friday (embedded below). Today, Dean’s observation is going mainstream as Bloomberg’s Javier Blas and Dan Murtaugh wrote about it for the leading business news publication.

    4. Dear Shallow,

      I do not know what happened…
      I posted my comment yesterday (comment #556263)
      I asked Ron for help.
      If it does not show up by 4-5 pm, I will try to post it again.

      Be well,

      Petro

    5. I tried to post it againg Shallow…this time comment#556375
      It did Not show up again…
      I do not know what to say…
      Perhaps Ron helps us later today…it is 5PM EST now..
      If it shows up twice…sorry for the annoyance!

      Be well,

      Petro

  12. Thank you for the update Ron!

    And I apologize for the length of my previous comment.
    It was in response to what Shallow Sand asked me and after my mistake with him in the last posting, I thought to take the time and be thorough…
    Thanks for understanding.

    Be well,

    Petro

    1. Ron,
      Can you help me with posting me comment to Shallow from earlier today?
      It probably got stuck again somewhere…

      Thank you for your help.

      Be well,

      Petro

  13. Hi all,

    In a previous post Enno suggested we should be humble about any future scenarios because we cannot get the month to month fluctuations right. I certainly can’t in my models, so I agree.

    We do not know future prices, the month to month fluctuations in average new well output, we do not know how many new wells will be added each month in the future and eventually the sweet spots will run out of room for new wells and average new well EUR will decrease. We do not know when that will occur or how rapidly the EUR will decrease once it does occur.

    So there is some room for error. 🙂

    I created three scenarios for future North Dakota Bakken/Three Forks output under the assumption that the USGS mean estimate of about 10 Gb for the TRR of the North Dakota Bakken/Three Forks play is correct and that eventually oil prices will be high enough to make production of this oil profitable.

    The three different North Dakota Bakken/Three Forks scenarios are as follows:

    Low scenario- the EUR starts to decrease in Dec 2015 and reaches its maximum rate of decrease in Dec 2016, new wells added falls quickly to 60 new wells per month and remains at that level until June 2017 when the rate that new wells are added increases by 2 wells per month until reaching 90 new wells per month, this level of wells continues to be added through Dec 2025.

    Medium scenario- the EUR starts to decrease in June 2016 and reaches its maximum rate of decrease in June 2017, new wells added falls quickly to 60 new wells per month and remains at that level until June 2017 when the rate that new wells are added increases by 5 wells per month until reaching 130 new wells per month, this level of wells continues to be added through Dec 2025.

    High scenario- the EUR starts to decrease in June 2017 and reaches its maximum rate of decrease in June 2018, new wells added falls to 75 new wells per month and remains at that level until June 2017 when the rate that new wells are added increases by 5 wells per month until reaching 170 new wells per month, this level of wells continues to be added through Dec 2025.

    In my opinion, output will fall somewhere between the low and high scenarios, if the USGS estimate for TRR is correct and oil prices rise similar to the EIA’s AEO 2015 reference oil price scenario to 2018 and towards the high oil price scenario by 2025. Output will be higher with higher prices and lower with lower prices.

    Chart below.

    1. Dennis,

      The decline in 2016 in your model is almost double the decline I would get.
      Do you take the appropriate decline rate for each group of existing wells with the same age?

      I think your red graph shows most clearly that something may be wrong: an initial very high decline rate, while increasing just with 30 wells/month even leads to growth.

      1. Hi Enno,

        Yes the model uses the average well profile from 2013-2014 for newer wells, wells from 2008 to 2012 use the average well profile for all Bakken Three/Forks wells from those years.

        In any case the new wells added are 60 new wells per month for the low and medium scenario until June 2017 and 75 new wells per month for the high scenario. Output falls from 1056 kb/d in Oct 2015 (the model is a little too low at that point) to 800 kb/d in June 2017 for the lower scenarios (60 wells per month) and 866 kb/d for the 75 well per month scenario. The output increases because the number of new wells per month increases:

        low 60, 62, 64, …. , 86, 88,90 (2 more wells than month before until 90 wells)
        medium 60, 65, 70, … , 120, 125, 130 (5 more wells than month before until 130)
        high 75, 80, 85, … , 160, 165, 170 ( 5 more wells than month before until 170)

        In each scenario when the maximum (90, 130, or 170 wells) number of wells per month is reached, that number of wells continues to be added each month until 2025.

        Just so we are clear, my low and medium models (with 60 new wells per month) fall to about 850 kb/d by Dec 2016, your model with the same number of new wells per month would only fall to 900 kb/d by Dec 2016?

        One problem with my model is that it has been underestimating output, in November the model estimate is 1036 kb/d (80 kb/d too low), so the fall in output to Dec 2016 is under 200 kb/d for the model.

      2. Hi Enno,

        I think I understand your question. When output has fallen to 800 kb/d, it does not take many more wells, to increase output, note how with 75 new wells per month output falls to about 865 kb/d by June 2017, with 90 wells per month output only rises to 862 kb/d, this is because I have assumed the EUR of new wells starts to decrease by Dec 2015 in the low scenario, where the high scenario assumes EUR decrease begins in June 2017.

        1. Dennis,

          Based on the actual November 2015 data, if no more wells are added, where do you project production to be in Jan 2017? I get about 690 kbo/d for MB+TF in Jan 2017.

          With 60 wells/m until then added, I get about 890 kbo/d.

          With 75 wells/m until then added, I get about 940 kbo/d.

          Wells that started to produce in November, are on average likely to produce more in December. Typically wells show 2 calendar months of growth, before declining.

          1. Hi Enno,

            If I take the average of all producing wells in your database, I get month 2 as the highest average output per well (including all Bakken/Three Forks wells and assuming 95% of confidential wells are Bakken/Three Forks wells), I haven’t checked to see if this has changed in the last 6 months or so, perhaps recent wells are different.

            Note I define month 1 as the first month a well produces (even if it is only for one day), so on average month 2 has always been the highest month of production when a large number of wells is averaged.

            One difference is that my model underestimates actual output by about 74 kb/d in Nov 2015. So I think this may explain part of the difference.

            For output in Jan 2017:
            60 wells, 836 kb/d, 54 kb lower than your estimate
            75 wells, 888 kb/d, 52 kb/d lower than your estimate
            0 wells, 627 kb/d, 63 kb/d lower than your estimate

            Note that my model estimate for Nov 2015 is 1036 kb/d or 74 kb/d too low.

            If we assume your model has November output exactly right (error is zero), then your change in output is actually higher than my model estimate. If your model has Nov 2015 output at 1119 kb/d,
            then comparing your model with my model for change in output (your model, then my model for Nov 2015 to Jan 2017 delta output in kb/d):

            0 wells, 429, 409
            60 wells, 229, 200
            75 wells, 179, 148

            My rational for not adjusting my model, is that through Sept 2015 it was pretty close and I think something different has been going on in Oct and Nov 2015 which might be an anomaly, this guess may prove to be incorrect.

            In any case the change in output of our two models (arrived at independently) is fairly close, perhaps reality will be somewhere between these two estimates, maybe I should have chosen 68 new wells per month for the medium scenario minimum wells added. That scenario would have resulted in 864 kb/d in Jan 2017 with a decrease in output of 172 kb/d (1036-864) from Nov 2015.

    2. Dennis, Why would there be such a huge and ‘everlasting’ revival post 2018?

      1. Hi Verwimp,

        The increase in output is because it is assumed that oil prices will increase to profitable levels by June 2017 and that there will be more new wells added each month because drilling has become profitable. This will require oil prices of around $80/b or higher, the increase could start later if oil prices remain low for longer.

      2. Hi Verwimp,

        Output declines in all these scenarios after 2025, if you are interested I can show a chart beyond that, but generally I catch a lot of flack for scenarios that extend too far into the future. I know that the farther we extend such scenarios the less likely they are to be correct, that is obvious to everyone, but it doesn’t stop people from pointing it out.

        Note that the EIA estimates about 5.5 Gb of proved reserves in the Bakken/Three Forks at the end of 2014, typically proved plus probable reserves(2P) are about a factor of 1.7 higher than proved reserves or 9.35 Gb. In addition about 1.6 Gb of C+C has been produced in the Bakken/Three Forks since 1951, so the URR is likely to be about 11 Gb for the North Dakota Bakken/Three Forks. I have been conservative and used a TRR (technically recoverable resource) estimate of 10 Gb.

        Output falls to 280 kb/d in Jan 2040 in this scenario and no new wells are added after Feb 2032. Oil prices rise to $160/b (2015$) by Oct 2020 and remain at that level, economically recoverable resources(ERR) are 10.0 Gb with 9.5 Gb of oil produced by 2040. Chart below (which in my humble opinion is unlikely to represent the future which is unknowable) representing the “high” scenario.

        1. Dennis, Do you really expect another ~50.000 wells to be drillled in the ND Bakken?
          Where?
          After the last Ronpost I added my model in the comments. No one reacted, but that model is now 24 months old, without ever tinkering the parameters, and it gives exactly the reality of today. Hubbert is still alive. There is only one way now for Bakken. Down.

          1. Verwimp

            The number of future wells to be drilled in the Bakken is, obviously, unknown, but the amount of data pointing to far more, rather than less, is large and growing.

            Simply looking at the graphics posted on this site recently by Mr. Nolan should provide some clues.
            The graphic showing the Bakken’s existing wells overlaying the formation’s isopach showed an enormous concentration in the Sanish field.
            While that may always be amongst the densest of areas due to great geology, vast areas of the surrounding counties will also experience MUCH higher well density due to several factors.
            Prominent amongst these factors is the keeping closer to the wellbores the fractures during the latest iteration of completion technology.
            This factor alone influenced EOG to increase by a factor of 50% the amount of future wells they plan on drilling in North Dakota.

            The second biggest factor is, pricing permitting, the vastly increased recovery factor in areas outside the core.
            Visually, this may be more clearly seen by going to the original graphic from which Mr. Nolan created his depiction, the North Dakota DMR graphic showing 60 day IPs in color-coded hash marks. This graphic is frequently updated and presented via their ‘Information’ page at various presentations.
            Heck, the Canadians are effectively marching southward from the border as they continually innovate with success north of the border.
            Mr. Verwimp
            When the lower benches of the Three Forks are NOT even delineated yet (they are not), how can an estimate of future potential even be put forth?
            To think that less than 50,000 more wells will be drilled in the Bakken atop the existing 10,000 displays a significant degree of unawareness.

            1. The recovery factor appears to be borrowing oil from the future and accelerating the decline curve.

          2. Hi Verwimp,

            We will see in Jan 2019, my low model has about 820 kb/d at that point and your model about 400 kb/d, a pretty clear difference. My “low” model is likely to be too low, I think 930 kb/d is a better guess, but it will depend on oil prices, if they are $90/b at the end of 2018 in 2015$ and have averaged $80/b or higher from June 2017 to Dec 2018, that estimate is conservative.

            Oh and 40,000 is the total wells drilled, my model has 10,600 wells drilled (including wells no longer producing) as of Nov 2015. The NDIC estimates at least 45,000 total wells will be drilled, with estimates as high as 60,000 wells.

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

    Explains the low price for oil.

    Of the 1.3 billion who live with no electricity, 173,000,000 are urban dwellers.

    http://www.citylab.com/work/2013/06/where-billion-people-still-live-without-electricity/5807/

    It all means only one thing, use the oil surplus, glut, to burn more oil to generate electricity so those 1.3 billion people can switch on a light and not be left in the dark anymore.

    Build a few hundred oil-fueled power plants and wire the homes for the less fortunate. Problem solved. Use oil to generate electricity.

    It will end the oil glut and people’s homes will have electricity. The price of oil will rise and 1.3 billion people will not be deprived of something they deserve, just by using oil to generate electricity. Plenty oil out there to help out those who don’t have electricity. Might as well make good use of it, 1.3 billion people will thank the oil industry and the oil industry will be saved. By helping those in need, there will be a new appreciation for the oil conglomerates.

    British Petroleum will be viewed as a Good Samaritan.

    You are also supplying more lifeboats on earthship World in the form of electricity.

    You’re standing on one leg and holding your breath by trying to work renewables into the equation.

    You can have your cake and eat it too with electricity. A win-win.

    The very best usable energy out there, electricity. Let oil do the work to generate electricity.

    Oil can solve a lot of problems. Instead of being the oft-beat red-headed step brother getting beat down every single hour of the day, oil can be like a mother nourishing all of humanity.

    Just a better world.

    1. Oh Ronald! If only it were that simple!

      It will end the oil glut and people’s homes will have electricity. The price of oil will rise and 1.3 billion people will not be deprived of something they deserve, just by using oil to generate electricity.

      Just in case you didn’t know, in my neck of the woods, we never stopped using oil to generate electricity. It is pretty much the same in Hawaii, Puerto Rico and many other island states. Many islands do not have much in the way of fossil fuel resources (Trinidad and Tobago being one notable exception) and oil is still the most convenient fuel to use to generate electricity. I tell you what though. If what you proposed were to be implemented, a significant number of your 1.3 billion people could end up deprived. Electricity generated by $100 oil is going to be somewhere in the region of three times more expensive as electricity generated by $30 oil.

      Right now people in my neck of the woods are heaving a sigh of relief because of $30 oil. $100 oil was killing them but, if the price returns to $100, a great deal of stress will be added to many budgets and the folks who invested in renewables will be the ones heaving sighs of relief.

    2. Walter,
      I’m wondering if you have some vested interest in seeing higher oil prices. Do you derive your income from the oil industry? Is your local economy highly dependent on oil revenues?
      Based on your postings over time, including those regarding your massive fear about the global warming possibility, I can only suppose that your ideas are extremely influenced by your vested interest.
      Is there truth to this supposition?
      And I’m very curious where you live. I suspect it is a cold and cloudy place.

      1. No one should ever read Ronald Walter literally. I have referred to him as our resident court jester many many times, and he never denies this description.

        If he is not a farmer, he at least knows some people who are, judging by reading between the lines of his comments. I suspect he lives in open farm country, probably upper midwest, and seriously appreciates natural things such as wild ducks on a piece of marshy ground.

        From wikipedia:

        ” In Shakespeare’s Twelfth Night, Feste the jester is described as “wise enough to play the fool”.”

        That’s our RW , the description fits him to “T”.

        Ya gotta have a good sense of the ridiculous to write such ridiculous stuff as he often posts.

        One role of the jester was to make fun of people too highly placed to be openly criticized by anyone OTHER than the jester, either for the fun of everybody, OR because his master encouraged him to do so, for malicious purposes.

        A jester was sometimes a close confidant of his master, and thus a man of some influence.

        1. OFM- I think Walter has got you fooled. He is very serious about his climate change denial, and I’m pretty sure he has a (desperate) vested interest in the oil consumption story.

          1. I know that there isn’t going to be any power plants built to generate electricity using oil where the energy impoverished can have a plentiful supply of electricity. The crude oil from Africa will be delivered to Europe and the United States for refining and consumption. That is what is happening.

            The energy impoverished will have to wait for solar panels to arrive from China so they can charge their cell phones.

            Oil from African nations is going to go to markets that need it for more efficient consumption. That is what really happens.

            I dabble in a couple of oil stocks, sold one recently before the shellacking was too much to bear. The other oil stock makes me cry in my beer. Fundamentals change like the wind for those oil stocks. One day they’re making money, the next, they don’t have any and they’re looking for more. It’s hilarious.

            Utilities are by far and away better yielding investments than oil stocks and yes, they do include wind power.

            I am opposed to wind chargers, however. They are too imposing on the environment and are a chimera. It is ecocide to situate wind chargers where they don’t belong. They are not in any way a part of the solution.

            Apparently, I am a climate change denier, which is news to me.

            The price of oil in Japan today is $22.44.

            The -50 cent per barrel oil of the sour stuff amounts to 15,000 barrels per day. Sell it all to Japan and deduct 7500 dollars from the bill.

          2. Poe’s Law. There’s no way to tell satire from real crazy views.

  15. Off the immediate topic, but relevant to the larger sustainability and environmental questions.

    http://www.climatecentral.org/news/ocean-depths-are-trapping-heat-19922

    A large portion of the heat coming into the planet is warming relatively deep water in the oceans, rather than the atmosphere.

    Now this heat may and in the opinion of a lot of people in the climate science field will find its way into the atmosphere, maybe not immediately, but later if not sooner.

    Later could conceivably turn out to be a rather long time, in human terms.

    If the heat stays down, and penetrates even deeper, the atmosphere would warm up more slowly than projected. But otoh, ice sheets extending out into sea waters, floating ice shelves, would likely melt much faster, etc, and sea level will continue to rise as the water expands.

    The fossil fuel age is not going to last much over another hundred years, if that long. If the extra heat finds its way into really deep water, and the turnover is slow enough, this could go a long ways toward preventing average temperatures on land from getting totally out of hand on the high side.

    The effect of this extra heat on the deep ocean ecology is pretty much an open question so far as I know, for now. A change in deep waters could force changes that cascade over into shallower waters, where the fish live that feed so many of us.

    1. OFM,

      Personally I found your referenced article on ocean temperature data very interesting BUT aren’t you concerned about feeding the troll?

      1. Hi Doug,

        Trolls are a pain in the hemorrhoids, for sure, but the truth , so far as I can see, is more or less as follows:

        We know about a bunch of positive feed back loops that are going to accelerate global warming, without a shadow of doubt. Less snow cover, for instance, results in positive feedback. The less snow on the ground spring and fall, the warmer it gets , because snow reflects sunlight back into space, and the LESS snow, ……. the warmer it gets.

        ( I can assure you, speaking as a former teacher, that at least half of the people in America do not know what is meant by a positive feedback loop , so I put in this example. )

        Warming is happening, no doubt, and barring powerful unforeseen negative feed back loops, will continue, indefinitely, for as long as we keep adding co2 to the atmosphere, and for some decades after that.

        There may be processes both known and unknown that will slow warming down, and a substantial amount of the accumulating heat energy finding its way into deep ocean waters appears to be one of the ones known.

        The flip side of this possibility is that this warmer water may find its way back to the surface, and ACCELERATE warming five or ten or fifteen years down the road.

        Personally I believe that the average temperature, globally , has been increasing slower than it would otherwise, precisely because the oceans warm up only very slowly, due to the waters turning over a little faster and deeper than anticipated by the climate modelers.

        So – the question boils down to this. In the public debate, do we treat our readers and listeners like adults, and tell both sides of the story, or fight fire with fire , so to speak, and tell white lies or half truths by ignoring or minimizing the effects of some factors that might slow the pace of warming to some extent?

        There are good reasons for going either way. Fighting fire with fire is necessary sometimes. Telling outright lies is sometimes the right thing to do too.

        German and Japanese soldiers are humans too, but it was EXCELLENT practice to tell Yankee troops getting shot at that the Germans and Japs were sons of bitches, in NEED of killing, and that killing them was God’s work.

        In my estimation, the lurkers in this forum are most likely smart enough to be trusted with the truth. I would not bring this topic up in a forum dominated by the typical man on the street, knowing such a man is incapable of dealing with complex issues.

        Some fossil fuel trolls will of course seize on any honest evaluation of the big picture, and cherry pick it, hoping to keep ignorant people ignorant.

        I won’t allow their bullshit to go unanswered here in this forum, unless Ron kicks me out.

        1. Yes, it’s all about inputs, outputs, and feedbacks with feedbacks being the tricky part. I’d guess an ice-albedo feedback is the classic positive feedback loop in the current warming climate system.

          1. Hi Doug,

            Yes the ice-albedo feedback is a positive feed back, but it diminishes as more and more ice sheets melt, desertification of other parts of the earth may work as a negative feedback as deserts may be more reflective than forests.

            Not saying that is a good thing, it is just the basic physics (which I know that you know better than me, as I have not studied geophysics.)

            Feel free to correct my physics, if I have it wrong.

            I would also expect the ice-albedo feedback to be a smaller effect than during the glacial interglacial transitions as the total area covered by ice sheets is considerably smaller than during the last glacial maximum(LGM).

            1. Hi Dennis,

              I’ve no quibbles with your physics; was simply supporting OFM. Clearly climate models disagree on the strength of terrestrial climate feedbacks though most include various feedback loops that probably accelerate global warming to some degree: Forest Fires, Peat Decomposition, Methane Release, etc. You know this stuff as well (or better) than I.

            2. Hi Doug,

              I would humbly suggest that my understanding of climate change at the physics level is far less sophisticated than yours.

              Not sure about the peat, but the forest fires would be a temporary effect. Methane although it has a larger effect over the short term, it remains in the atmosphere as methane for a much shorter time than CO2 which cycles through the atmosphere land and ocean and the atmospheric level of CO2 declines very slowly with a half life of about 30,000 to 100,000 years (time for CO2 level to go from 550 ppm to 275 ppm when net CO2 emissions by humans are zero.) So according to folks like David Archer, methane is less of a problem than CO2.

              See http://www.realclimate.org/index.php/archives/2014/09/the-story-of-methane-in-our-climate-in-five-pie-charts/

              and

              http://www.realclimate.org/index.php/archives/2014/08/how-much-methane-came-out-of-that-hole-in-siberia/

            3. “…but the forest fires would be a temporary effect…”

              Well yes but I was thinking more along the line of hot fires that initiate peat burning (i.e., Borneo, Alaska, Siberia) and ash spreading to snow/ice covered regions. The consensus seems to be that “normal” fires are more-or-less carbon neutral so I’d have to agree with you there. Doesn’t matter, remember, I was simply supporting OFM on the importance of feedback loops in general.

    2. OldMacFarmer,

      This is really a non-issue an a prime example of the foolishness of climate alarmists. The ocean is HUGE and has a thermal capacity four orders of magnitude higher than the atmosphere. And the ocean is terribly cold, with an average temperature of 3.9°C.

      An interesting question is why the ocean is so cold, as it is sandwiched between an atmosphere with an average temperature of 14°C and a crust that radiates heat from the Earth’s interior. Part of the answer is that the planet (and the ocean) has been getting colder for the past 10 million years. Could it be that the ocean is warming because we are in an interglacial?

      Now we are detecting a slight warming of the ocean. According to the Argo system the warming rate of the 0-2000 m depth is 0.023°C/decade. So low that scientist prefer to display heat content data so the numbers are very large.

      That level of warming, if it were to continue, would take centuries to have any serious effect, perhaps millennia. It will most probably not continue that long, as the climate changes in cycles.

      So to try to scare us, alarmists say that “this heat may and in the opinion of a lot of people in the climate science field will find its way into the atmosphere.” But they fail to point a mechanism. If they could find one they would deserve a Nobel prize for finding an exception to the second law of thermodynamics that explains that these type of processes are irreversible. Once the heat diffuses into the ocean, entropy explains that it will not concentrate again in the time allowed for the Universe to run its course, and it will not move to a warmer atmosphere, as heat moves from warmer to colder.

      That this type of bullshit, that contradicts the most basic principles of thermodynamics is accepted without anybody questioning it, is evidence for the sorry state of suspended disbelief on any climate claim, no matter how outrageous.

      That anybody that refuses to consume this bullshit is called a troll is evidence of the low mental state that some people have reached. One has to wonder how much brain they had to start.

      1. Javier, you are either a shill or an idiot. The local atmosphere is often much colder than the ocean surface, so of course heat will move out of the ocean. Atmospheric temperatures range well below the ocean temperatures. The ocean and atmosphere exchange heat in both directions across the planet. They don’t need to come up with a mechanism, because anyone with a tenth of a brain knows this.

        Right now the ocean near me is warming the lower atmosphere. I don’t know what part of the planet you come from or what planet, but over much of the earth we have seasons and much of the time the ocean is warmer than the lower atmosphere.

        Of course like a programmed machine, you will totally ignore facts and just spew out more unbelievable crap supported by averages that are meaningless to the discussion and meaningless in general. Your ploy pretending that a 0.5 watt/m2 slow change due to orbital and tilt changes is greater than 2 watts/m2 due to GHG effects is not swallowed by anyone of significance.
        Your use of slow, small radiation changes to explain current large fast changes is just one more twisted fairy tale.

          1. Hi Javier,
            Be prepared to hand out several billion Nobel Prizes because the ocean does exchange heat in both directions with the atmosphere and you are one of the few people on earth that does not know it. The temperature differential at the ocean/atmosphere interface varies dramatically across the globe.
            Ocean surface temperatures can be as high as 36C and as low as -2C. Air temperatures above the ocean surface vary to an even greater degree. Last night air temperature near NYC was 9C below ocean surface temperature. Which way do you think the heat energy was traveling?

            As far as the mass of the ocean, 90 percent of the mass is below the thermocline and takes many thousands of years to mix. It’s basically out of the picture. So multiply your value by at least 10 to get something nearer reality.

            Comprende?

      2. Javier,

        “…heat moves from warmer to colder…”

        Well, no, but what you mean is clear so let it pass. Are you allowing for the fact that the ocean circulates in three dimensions, not just two? We all know about surface currents, but upwelling and downwelling are very important and take cold surface water (with its dissolved gases, we must not forget) to depth and somewhat warmer water (with its vital nutrients) to the surface or at least to the photic zone, where photosynthesis is supported (yay!)

        I ask because it sounds like you are treating warmth as moving through the oceans only by diffusion. The mention of entropy is what gives that impression.

        1. You should take this to Argo, that as you know, measures the average temperature from a fleet of 3918 floats all over the world’s oceans. I guess all type of currents are represented.

          Anyway I never said that temperatures or diffusion were uniform. As a matter of fact, the Atlantic ocean is cooling, while the Indopacific is warming faster.

          It is interesting to note that the biosphere is on top of a very cold ocean, and current temperatures are only allowed because there is very little vertical mixing in the ocean waters. If the rate of mixing were to increase enough, we would freeze to death.

          1. Hi Javier,

            I DO understand your arguments. They actually make sense, and in very general terms, they are good arguments.

            I am quite willing to consider the possibility that the almost unimaginable thermal storage capacity of the oceans is adequate to prevent any serious warming for quite some time, IF the incoming heat from the sun, above and beyond what radiates back into space, DOES indeed wind up in really deep water, because the turnover is SLOW indeed.

            But weather and climate appear to be balanced on a knife edge, so far as I can see, and water a thousand feet down, may wind up back on the surface again as quickly as it got FROM the surface DOWN to a thousand feet. It takes only a small difference in water temperature , over an ocean sized area, to have a BIG influence on climate and or weather.

            Now IF the warmer than usual surface waters WERE to wind up a couple of miles down, and come back up a thousand years from now, warming would be slowed substantially, no doubt.

            My bet is on the climate science establishment, but I do recognize that there is a ( probably slight ) possibility you are right, and that there will not be any dangerous warming any time soon as the result of our burning fossil fuels.

            1. Olfarmermac,

              But weather and climate appear to be balanced on a knife edge

              They are not. The idea that the climate was or should be in equilibrium is incorrect. Climate is always changing, as most things in Nature. Only 20,000 years ago (an instant) this planet was in its coldest state in 350 million years, perhaps even more. Right now its temperature is below average for the past 550 million years. But the amazing thing is that over those 550 million years the climate of the planet has been kept within the very narrow band of temperatures compatible with life, a band of only 18°C (+10 to -8°C anomaly) for the planet’s average. Within this very long period of time, the planet had to deal with things that make our modest increase in CO2 puny. An increasingly brighter Sun, asteroid impacts, giant lava fields (traps) that altered the atmosphere and acidified the oceans to levels we can only imagine. A system that is so stable as to resist such strong pushes has to be dominated by negative feedbacks. We do not know of stable systems dominated by positive feedbacks.

              As such the planet is going to resist any attempt at warming through its negative feedbacks. The average temperature that corresponds to this planet at this point in its geological history is that of a glacial period, about 5°C colder than present anomaly, and that is where the planet is going to be headed once present anomaly ends in a few thousand years.

              We should enjoy the weather. It is unseasonably warm for an ice age.

            2. Yeah, but unfortunately the climate is still warming and I really don’t like what I see happening with the deep oceans.

              As for choosing between your opinions on climate change and the hard evidence from reputable climate scientists and organizations like NOAA, I think I’ll go with the latter.

              http://goo.gl/w4fssd

              The long-debated hiatus or pause in global warming, championed by climate denialists who tried to claim it proved scientists’ projections on climate change are inaccurate or overblown, probably did not happen at all.

              A new study by researchers at the National Oceanic and Atmospheric Administration finds that the world’s warming never really stalled during the last 15 years—it was just masked by incomplete data records that have been improved and expanded in recent years.

              “The rate of temperature increase during the last half of the 20th century is virtually identical to that of the 21st century,” said Tom Karl, director of NOAA’s National Centers for Environmental Information and lead author of the study.

              The research, published in the peer-reviewed journal Science this week, is just the latest in a growing number of studies refuting the idea of a slowdown or stop in global warming.

            3. Sure, Fred, if it comes down to a question of faith, you can believe in them. I am not asking anyone to believe me, just to look at the evidence.

              But just remember that science is not a question of faith, so no, we don’t have to believe what they say, they have to prove it. And scientists before they get anything right, they get it wrong, like everybody else.

              We all know the evidence and they have an hypothesis. They haven’t proved their hypothesis, their hypothesis doesn’t match the evidence very well, and really sucks at making predictions. Scientific logic dictates that they have got their hypothesis wrong this time.

              Regarding the pause, you should take it to the satellites. They say it is still going. And a lot of other data also agrees with them, like Outwave Long Range radiation measured by Ceres satellite.

            4. Wrong. The hypothesis that global warming and ocean acidification are (a) happening and (b) caused by CO2 emissions from fossil fuel burning has mountains of evidence behind it and has pretty much been proven. You just haven’t bothered to read it. It’s been making great predictions. You just haven’t bothered to read them.

            5. Hi Javier,

              No the earth will not be cooling significantly in a few thousand years. It will be more like 100,000 years, before atmospheric CO2 returns to 275 ppm or less even if total anthropogenic carbon emissions are only 1000 Gt.

            6. Only if your assumptions are correct.

              -If CO2 is not as powerful warming agent as believed, as the current pause indicates, then we will see that, as in the previous interglacials, glacial inception takes place at maximum CO2 levels unimpeded.

              -If obliquity is the main determinant of glacial cycles, as some scientists are proposing, and Northern Summer insolation is a secondary factor, then we still have 11,500 years of reducing obliquity, while Northern Summer insolation is not going to raise much due to to the low eccentricity of this cycle.

              -If MIS19 (interglacial 800,000 years ago) is a much better analog than MIS11 (interglacial 400,000 years ago) due to a much more similar astronomical signature to MIS1 (current interglacial), then our next glacial period could be due to start in a couple of thousand years.

              Frankly some scientists are pretty bold. They still haven’t proven their hypothesis but they are already claiming victory over the ice age.

              Do you know that in 1972 a couple of geologists expert in glaciations sent a letter to president Nixon to warn him about the dangers of an impending end to the interglacial? This was the first climate change policy, as Nixon ordered a panel on current interglacial. They came up to the conclusion in 1974 that probably humanity was making the cooling worse through pollution.

              Some scientists are really basic. If it is warming they predict that present interglacial will not end for tens of thousands of years, but if it is cooling they predict it is already ending. They might get lucky, but most likely than not they’ll get it wrong.

            7. You’re talking nonsense; basically most of what you wrote is easily debunked bullshit which is spread by propaganda sites.

              I suggest you study some geology and learn about the P-T extinction, which is what we’re currently repeating.

              It is an open question how fast we can *remove* CO2 from the atmosphere (using chemical processes powered by solar power, naturally). If we set our engineers to it, we may be able to pull the CO2 back out of the atmosphere and reverse the warming / induce cooling quicker than the “natural” 100,000+ years. It’s worth starting to work on doing that.

  16. Shallow: Here is an article about my favorite Permian company in the local Midland Reporter Telegram whose motto should be “Nothing to see here folks. Move along.”

    Recent successful stock offerings by drillers reflect the shale play’s enduring strengths

    Read more: Permian still has lifeline amid oil bust – MRT.com: Top Stories http://www.mrt.com/business/oil/top_stories/article_aac6cabc-bdad-11e5-8320-67c2d9c83cd0.html#ixzz3xcG6nmfc
    Under Creative Commons License: Attribution

    http://www.mrt.com/business/oil/top_stories/article_aac6cabc-bdad-11e5-8320-67c2d9c83cd0.html

    1. “In 1973, the U.S. made a pact with the Saudi King to conduct all crude oil trades in U.S. dollars—in return for U.S. protection of its oil fields. Because of the global hunger for crude, the demand for U.S. dollars experienced a similar, sustained hunger.”

      1. These things will not occur for economically favorable reasons. They occur because someone seeks non economic dominance/victory.

        If the US dollar is a source of US dominance, then US enemies have no reason to participate in such a thing. They can insist on some other method of payment while explicitly removing their currency (or that method) specifically from currency or goods exchange markets that would attempt to link them to the dollar.

        It’s common sense. If the dollar obstructs your path to victory, then you must find another path. It is not in the nature of mankind to acquiesce to perpetual subordination.

        1. The use of the dollar as a “reserve” currency, and the resulting “strong” (high-priced) dollar is in fact a source of US *weakness*. Ask any serious macroeconomist such as Krugman.

          This rather changes the entire dynamic…

      2. The description of the deal is incorrect.

        The deal was that the Saudis *kept supplying the US with oil* at low prices, and in exchange the US *sold the Saudis lots of US weaponry*… the Saudis recycled their oil income to the US through the military-industrial complex. Pricing in US dollars really has nothing to do with it.

        The Saudis have warehouses full of weaponry which they don’t know how to use and don’t have the manpower to use. As a result of this deal.

  17. Shallow,
    my comment did not post yesterday, so I am trying again. If it posts twice, I apologize for the anoyance…

    You wrote:
    “Well dang Petro, I looked at home mortgage rates, and my how they have fallen.”

    Dang indeed, Shallow…dang indeed!
    Wait ’til they go 150-200 times of Forwards Earnings/Share. Their share price, even after the carnage of the last 30+ days, would be 1/3 of what it is (and for some even $0!!!).
    But (the)Market trades on sentiment and expectations – NOT fundamentals…….and that applies to truly free, capitalistic markets…something we haven’t had in a long…long…long time.
    If you have not read the first part of my answer, please do so. If you have, re-read it…again and again.
    Take/get fundamentals OUT of your head!

    My Micro part of the answer (I warned it will be long…patience please. It will be worth it. I promise!):

    Well, I was criticized/corrected/told/suggested/revised/…/…/… by a couple of “luminary” commentators on this respected blog for being too complex and not simple enough with the Macro part of my answer to you.
    Therefore, upon considering their (the luminaries) advice, I decided to go a bit more “folksy” with the Micro part of my answer to your question.
    Here it goes.

    Plot:
    Joe: husband; former blue/white/whatever collar worker; former middle class. Present dairy farmer…
    Jane: wife;house maker; former blue/white/whatever collar worker; former middle class. Present dairy farmer…

    -After losing their jobs in early 2009 and as the crisis was deepening, Joe and Jane were desperate.
    They had gotten several “notice of eviction” letters and one of their vehicles was already repossessed.
    They loved their house and went several times to the bank to renegotiate and/or get a new loan, but to no avail.
    “Not credit worthy” they were told.
    “How come you never asked for any ‘proof of income’, or ANY other document when we applied for our mortgage in 2005”- Joe said to the banker – “but now you are asking for proof of my dead uncle’s inheritance documents from before I was even born, in order for me to get a loan???”

    -His insistence changed nothing. They did lose their home and had to move with relatives in the country.
    A couple of years later as they were suffering and muddling along, the TV, radio and just about every newspaper Joe was reading was saying that the economy was booming.
    “How come we are not ‘booming’ and are so poor?” – Joe asked his wife Jane.
    “Maybe we should buy cows and have a dairy farm” -Jane said. “Everyone drinks milk and eats meat, right? We are in the country anyway, so…?”
    “How? We have no money and bad credit” – Joe quipped…..but he already had an idea…inspired from the “LoanDepot” and “GetTheFreeCashYouDeserve” commercials on TV, of course…
    So he went to visit his banker body in the city again and sure enough the TV/Radio/Papers were correct.
    Economy was indeed booming!
    The non-farm payroll numbers (aka job numbers) for the month were 1 gazillion new jobs…
    Joe was happy!
    It was 2005 all over again. He got his loan and then some, no questions asked!
    “Milk is in high demand” -the banker said – “we should produce lots of it here, instead of importing it from countries and people who do not like us. A dairy farm is a great idea!”

    -Joe got the money, bought the cows and all state of the art farm equipment and soon enough was producing and selling lots of milk at $6/gallon. Everything was very expensive, but the milk was on high demand and everybody was using it.
    Joe had contracted his production with a few cheese and yogurt makers for the next 2-3 years already and, because he had others begging him for his milk, he renegotiated the contracts and increased the price.
    The banker told him that he could borrow much more money at low interest if he re-hypothecated his cows, farm equipment and house in the farm. That way he could buy more cows, employ more milk workers and produce more milk at high prices.
    “How come you are loaning money so easy?” – Joe asked the banker – “Do you have enough for everybody?”
    “The Bank can borrow ALL the money it wants at 0% interest” -the banker continued – “Thank God for TARP and QE1…4… we are making a killing financing milk farmers like you in the Dakotas. They are drilling thousands of wells…errr, I mean opening thousands of milk farms everyday. No more milk shortages!”

    -Soon enough Jane, being tired of life in the farm (after all, she always was a city girl) and her children’s complaints, pressed Joe for a house in the city.
    “Sure” -said Joe- “we can borrow as much as we want. Lets go big this time and buy a house by the sea…and a boat (he always wanted one and now he could…why not?)”.
    “How about a red sports car?” – his son Joe jr. asked – “The peasants drive pick-up trucks only. I am tired of it! Makes me feel sooo country”

    -And so they did.
    Life was good again…but…it was 2016 already and a new diet was in fashion.
    People could not afford the high milk prices and were doing without, or using soy milk.
    Because of that, all of the farmers who joined the milk farming “craze” in the last 8 years, started to “squeeze” their cows more and produce much more milk than people were using. They wanted their milk to be sold first, before that of the other farmers in the marked and soon enough…from $6/gal, the price of milk went to $3/gal…
    “Not to worry”- said Joe to his wife Jane – “People will come to their senses again. Plus, we have the best and most productive cows in the business. We can outsell the other guys by lowering the price of milk. After all, this thing cannot last forever. Supply/demand shall reaffirm itself and milk shall sell again for $6/gal. You’ll see!”

    But a few months went by and milk was selling for $2/gal in the market. The cheese and yogurt makers called Joe and demanded new lower price, or they threatened to switch supplier…
    “What to do?” -said Jane to her husband – “Should we let some of our milk workers go?”
    “No!” – replied Joe assertively – “These people are like family. They worked with cows forever. They have children, houses, cars…plus if we need them later, they would not come back and we would get stuck with newbies who know nothing and we have to train. It will cost us a lot…”
    A brief pause and then he continued:
    “I know what to do! I will feed corn to the older cows we had set aside for beef. Corn is cheaper and the milk will be cheaper.”
    “Isn’t that milk of lower quality and different taste?” -Jane asked – “Will the cheese and yogurt producers be able to process it?!”
    “It will be OK” – Joe said – “They have new equipment that can handle it. Cheese and yogurt will not be as tasty and good, but people will still use it. And we have loans to pay…do not forget that!”
    Joe spoke firmly to Jane…it gave her the creeps… She had not seen him before such anxious and unhappy.
    They were not making any money selling their milk, but they had reserves and they were so far able to pay AT LEAST the interest on their loans. So, the house, cars and their farm were safe for the time being. They were sure that this rout was toward the end now. Milk could not sell forever for this low price. Market would go up soon!

    A few more months went by and the news was talking about some farmers going bankrupt. They were selling their milk next to nothing. The price went to $1/gal.
    Joe put one of his cars and the boat (which he loved!) for sale on Craigslist…no bids after 10 days.
    The few who called were asking prices equal to a wheel for the whole car…
    Joe talked to Jane about letting go of some of their new and less experienced workers. It was a devastating scene…tears, hugs..drama…but it HAD to be done otherwise the farm would not survive…
    Because the trucks from the cheese and yogurt producers were not coming everyday now, Joe had to fill his water storage tanks with milk now. Situation was getting desperate. Tanks were filing up fast and milk was still flawing from the cows.
    He almost lost it when he turned on the TV and learned that the price of milk went down again to $.50/gal. They were losing money and the mortgage payment was due a week ago. Postman came by and had express delivery for him. Joe opened the mail and read: “Delinquency Notice. Please disregard this letter if you submitted your payment already”.
    But he knew that the payment was not submitted…
    He did not know what to do. He could not fire more people, for the farm could not function with less workers. He tried to sell some of his cows but both the demand and price for them were down… way down.
    The phone was ringing and he heard his wife Jane crying after she answered with a “Hello” and a brief pause.
    “What is it?” -Joe asked – “Are the kids OK?”
    “It was the boat dock directory” – Jane told him -“They took our boat…” whispered her, while walking away crying.
    After a deafening moment, the ring of the phone scared him again.
    “Hello! Who is it?” – asked Joe.
    It was the cheese and yogurt maker. They called to tell Joe that the factory could not take his corn-fed-older-cows milk anymore. They wanted only the milk from his grass-fed cows.
    “why?” – he asked.
    “It’s too heavy and tastes sour. It is sour and crude.” – they replied – “People do not like it and our equipment does not ‘like’ it either”.
    “Well, my tanks are full. I cannot store it anymore” – Joe spoke – “It will spoil. I cannot dump it either. The EPA and CDC will shut me down in a heart beat and I will get prosecuted for polluting the environment”.
    “Do not produce it to begin with” – the other side of the phone said.
    “I can’t! I have to!” – jumped Joe – “Cows will get sick and die if I do not milk them daily. I cannot afford the Vet.” A brief pause followed and then Joe continued: “I’ll tell you what I am going to do. I will give it to you for FREE. Take it!”.
    “No can’t do!” -the factory replied – “Our storage in Cushing is full and we are are processing milk at full capacity already. We cannot handle anymore of it. Even if we get it for free, we have to pay to dispose of it legally and properly before it spoils and becomes a health hazard. But since we have been in business with you for a long time and in good standing, we will do you a favor and take it… for a fee…”
    ………………………………………………………………..pause………………………………………………………………………..
    “What?!?! Are you f***** kidding me?!?”
    -Joe could not believe his ears. Not only he was losing money left and right , but now he had to pay the factory to take his milk!!!
    “Look Joe…we are trying to help. We have been doing this with other farmers, as well. There is no other way. We are very sorry! With the milk market the way it is…you understand…right? Well, let us know…”
    Click!

    What had happened?
    He was in shock…was he dreaming?
    Joe walked in the hallway towards the other room to tell Jane. While entering he was hearing the TV news anchor saying: “Price of milk went negative for the fist time today on the Stock Exchange and farmer bankruptcies are mounting to staggering numbers… After a binge of junk bong financing and a gazillion% increase in milk production over the last 7-8 years, milk farmers are suffering as milk prices have plummeted to levels unseen since the end of the last century…”
    Click!
    Joe pressed the OFF button.
    It was enough for the day…

    …and of course it is fiction!

    Be well and let me know,

    Petro

    1. The first paragraph of my comment got messed up (the first 3 sentences)
      The rest of the comment from: “…But (the) Market trades on sentiment and expectations….”
      is OK
      I tried to correct it but it did not let me…
      Don’t know what’s wrong
      Sorry for the annoyance.
      be well,

      Petro

      1. I understand your story very well, except, of course, many wells can be shut in, but I agree some are like cows. I guess when everyone pointed out the negative price, they raised it, without comment, to $1.50.

        I am trying to back off thinking about this stuff daily, but after watching what happened to oil shares today, I think it is now better for the stripper well producer who has no debt if the price goes to $10 or less, and the faster the better.

        The stripper well operator, in most instances, can just shut down. Employees will have to be laid off and go on unemployment, but I think they would understand, and would likely be called back very quickly.

        Why?

        Because WTI $10 or lower is $7 or less for everyone. It puts the OPEC basket at $5, Urals at $6. It is an absolute knock out punch for shale and tar sands.

        Of all that have to shut down for awhile, stripper operators are in the best position. Total market disruption happens at $10 WTI or less, IMO. How long will OPEC hold off on cutting when they are losing $$ on an operating basis? Same with Russia? Will banks ignore mark to market when CLR is getting $3 or less per barrel?

        Any predictions on what happens if oil is $10 WTI, with Brent around parity, for 3-6 months? Think we see rigs keep drilling? Think it will be BAU for world wide operations?

        1. “I think it is now better … if the price goes to $10 or less, and the faster the better”

          better a horrible end than an endless horror 🙂

          1. When you are hibernating it doesn’t matter whether it is 20 degrees F or 0 degrees F.

            But for those who are not hibernating, because they are incapable (debt, public spending obligations) it is much colder at zero.

            I agree, one cannot hibernate forever, but one can usually hibernate longer than those who cannot are able tolerate zero F.

            The only way I see the traders changing course is if those who cannot hibernate eventually get too cold and start a fire, hopefully a contained and peaceful fire, (cut).

            KSA said they didn’t care if they hit $20. They are there, I say let’s see how they do with $0.

            By the way AlexS, I have a hunch Russian bears are capable of hibernation. I’m not so sure about Middle Eastern monarchs.

            1. shallow sand,

              What you and all other oilmen worldwide need now is patience.
              I think the second half of the year will be slightly better than the first half, 2017 will be better than 2016, and 2018 will be better than 2017. By 2020, price will return to comfortable levels.

        2. Shallow Sand,

          They did comment. Flint Hills Resources said that the $-0.50 price had been posted in error on Friday (?); it was corrected on Tuesday.

        3. “I understand your story very well….”

          Shallow,

          with all do respect: no you DO NOT!

          -Allow me to explain and this time I will be technical – which I hate, for I will have some moron correct my punctuation and give me advice to be “simpler”, or put numbers and spaces between my sentences, or whatever…thinking I did not know that and I needed their wise advice on how to write…
          Never did it occur to these “smarties” that I did that on purpose…
          Anyway,
          you wrote: “…Total market disruption happens at $10 WTI or less, IMO…”
          -Yes! It does IYO…, for you are thinking prior to ’98-’99-’00!
          In that case your opinion is correct.
          You should be reading Dennis, Eno, Javier, and a few other (and not me!) who are absolutely correct IF we assume that the “System” is as before and holding steady, therefore supply/demand and market fundamentals are going to re-assert themselves soon and this insanity of <$30/brl oil is going to end…soon, right?

          However, what I am trying to tell you different from that of the respected names I mentioned above (and just about everybody else) who are absolutely correct in the way things worked before 2000 (or 2005-2009 at the very latest), is that:
          the Marked is disrupted already!
          It does not need $10/brl oil to be disrupted!
          What you see is the consequence of that disruption and therefore, things are not going to rebound akin to other declines.
          -This time "…the cure for low oil prices, is NOT low oil prices"
          -This time is DIFFERENT!
          -This time is a debt-deflation/demand-affordability issue – NOT a normal business cycle which shall rebound at some point in time!
          Take supply/demand and market fundamentals OUT of you brain – literally!
          Forget about them!
          -This time, "shut in" wells are not going to be "un-shut in" and the employees who, as you put it :"..will have to be laid off and go on unemployment, but I think they would understand, and would likely be called back very quickly." are not going to be called back that quickly.
          I am trying to educate you to think OUTSIDE the frame of classical economics, because IT does not work when limits are reached…and we my friend, have reached the limits…on everything!

          "The greatest shortcoming of human race is our inability to understand the exponential function" ~A. Bartlett

          The above brilliant quote explains it all better than I ever can.

          Now, technical:
          WTI and Brent and other blends/grades which are widely used/preferred will NEVER go negative!
          Before 2009 (when I fully understood the predicament we are in and gave up on fundamentals of the market and supply/demand) I could have given you the exact range (+/_ $5) below which WTI and Brent would NEVER trade, for our system would have imploded before we had markets to trade that particular price. Back then (2009) I new the exact numbers. Now, in the big picture of things, numbers do not matter anymore. They will alter timing, but NOT the course of the events.
          -We are the Titanic minutes before the "scratch" with the big white rock…if you catch my drift.

          – I am guessing however, that $7-$10 (as you wrote) is not reachable.
          Even below $20 for more than a few weeks it will be a catastrophe of biblical proportions, but that is my PERSONAL opinion!
          The story is different for sour and other "undesirable" blends/grades. Theoretically, they can go to $0/brl and even negative…just like interest rates can (and will, soon!) go negative.

          Let me know, take it easy and as alwayz:
          be well!

          Petro

  18. Oil Collateral Damage … Top Story 2016?
    Time to feel for the Banks? Poor WallStreet! Poor Banks! ahh .. just a headache .. Fed will save you. many of the rest of us would be Lucky to have the Flu as retirement savings evaporates.
    “Three of America’s biggest banks warned last week that oil prices will continue to create headaches on Wall Street — especially if doomsday scenarios of $20 or even $10 oil play out.”
    http://money.cnn.com/2016/01/18/investing/oil-crash-wall-street-banks-jpmorgan/index.html

  19. Jodi preliminary November numbers are out. Its hard to see a trend. Maybe Ron can make some sense of it.

    1. Nope, the JODI November data looks totally worthless. It is woefully incomplete, only a few countries reporting. I am going to ignore it and try to make some sense of it when the next report comes out next month.

  20. Does anybody actually know how many tight oil wells have been drilled but left uncompleted, and how fast they are being completed?

    1. Rystad energy had a press release on Dec. 1,2015 where they estimated 3500 remaining at year-end. They have some tracking system but its normally behind their pay wall. Go to their website, press release, Dec. 1, 2015. That the best info I’ve seen.

      1. Thanks dclonghorn,

        This is the first time I have visited Rystad. I am impressed with the quality of the interviews and press releases.

        Now I am wondering if the owners of these wells can generate any cash, short term, by putting them into production. If the cost of completion really IS in the neighborhood of four or five million bucks, including the frack job, and all the other smaller items, it does not seem likely- unless the completion money is borrowed from idiots at a couple of percent, and the idiots lose their asses, unless Uncle Sam bails them out.

        With the industry in such a bad slump, the cost of completion is no doubt down substantially, but it is hard to imagine it falling by more than maybe a quarter or a third, max.

        Does anybody have a current figure for completion costs?

        1. Hi Old Farmer Mac,

          In the Bakken/Three Forks total well cost is about $8 million and in the Eagle Ford it is somewhat less, maybe 6.5 to 7 million dollars. I believe I have read that drilling is about half and fracking is about half the cost. If the money has already been spent to drill the well (a sunk cost) and these companies can find the money to complete the wells, they might do so. Finding someone to lend money may be problematic at current oil prices. At an oil price of $40/b or more, if we ignore the “sunk cost” as the money has already gone down that hole, then the money from the oil at $40/b may pay for the fracking costs. This may be the game some of the LTO companies will play.

          1. Dennis,
            Drilling is about 1/3 of total cost, in any case not exceeding 40%

            1. Hi AlexS,

              Thank you for the correction. I imagine this might vary from Bakken to Eagle Ford, though perhaps not if the longer laterals in the Bakken lead to a higher number of frack stages so that the drilling cost to completion cost remains proportional at 1/3 to 2/3 or 40% to 60%.

              Here is an article with drilling and completion costs which are much lower in the Eagle Ford than I realized ($4.5 million).

              https://www.quora.com/How-much-does-it-cost-to-drill-and-frac-a-shale-gas-oil-well

              The article below suggests about 38% of the total well cost is drilling cost in 2013 in the Bakken/Three Forks.

              http://www.dtcenergygroup.com/bakken-5-year-drilling-completion-trends/

              My 50% estimate was based on older data from 2010 when fewer frack stages and less proppant was used.

              For Eagle Ford in 2011 drilling was also 38% of total well cost based on the following:

              http://www.rigzone.com/news/oil_gas/a/108179/Costs_for_Drilling_The_Eagle_Ford

              A good article covering LTO in general gives 35 to 40% as an estimate for drilling cost and 60 to 70% for completion (which doesn’t seem to add up). I would call it 37% drilling and 63% for completion. Note that fracking alone is about 50%, but other completion costs (besides fracking) are around 13% of total cost.

              http://oilpro.com/q/1421/cost-detail-horizontal-well

              Note that a detailed estimate from a few years ago is roughly 50/50 between drilling and completion (Bob Malone Consulting).

              So estimates vary.

              http://oilpro.com/q/1421/cost-detail-horizontal-well

            2. Dennis

              Those are great links that help to display the advances in this field, which, cumulatively, are enabling production to continue even in this horrific pricing environment.

              The advances are still underway with the likes of monobore drilling that the guys in Canada and the Niobrara are adopting. In areas of the Permian, it is in the early stages of implementation.
              In addition to the cost savings, the larger diameter ‘pipe’ can facilitate the placement of things like ESPs that Carl earlier pointed out can boost prduction, yet be difficult/expensive to place in smaller diameter hardware.

              BTW, in one of the more stunning, to me, graphics that shows the current financials, vis-à-vis cash flows in the Bakken, Rune Lukvern produced an updated chart on Bakken cash flows one month ago on that oilpro.com site.
              It can be found by typing in Rune’s name at the search box

              Cash flow POSITIVE in the fall of 2015???

      2. I retired from a petroleum marketer, that had an oil and gas service division. We provided diesel fuel to rigs at drilling locations nationwide. We had the largest market share of active drilling rigs in the US – approximately 50%. Since then, the company has merged with several other companies in that business, and as part of the fracking boom, they expanded to provide the trucks that line up full of the frac fluid that is necessary for the frac ( a lot of trucks at each location). They are by far the largest player for that. On December 22, 2014 they were on 192 frac locations in the US. On December 22, 2015 they were on 31 locations in the US, according to my friend at lunch, who is one of their top officers. They are majority owned by a billionaire, who has many other holdings, so they will probably be able to survive whatever happens.

  21. Hi Ron,
    A very interesting future posting would be one where you open the discussion to your visitors to discuss the following scenario-
    The USA is no longer able to import oil from anywhere but Canada, and domestic production is stagnant (or falling). What can/should the country do to adapt immediately, and over a decade, to this scenario? How is fuel consumption rationed, what measures can be taken for implementing reasonable alternatives, what conservation measures do the least harm to economic stability/growth?

    I would be very interested to hear the various viewpoints and suggestions people have in this regard, especially those of you readers who are operating on a reality based mental footing.
    Thanks for the blog!

  22. Hi all,

    The IEA released its January Oil Market report:

    https://www.iea.org/oilmarketreport/omrpublic/

    Can it go any lower?

    Although we do not formally forecast OPEC oil production, in a scenario whereby Iran adds 600 kb/d to the market by mid-year and other members maintain current output, global oil supply could exceed demand by 1.5 mb/d in the first half of 2016. While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply. So the answer to our question is an emphatic yes. It could go lower.

    I just don’t see how oil supply remains as high as the IEA forecasts with oil prices between $15 and $25/b,
    at these prices the OPEX of much of North American oil production is not covered and a lot of production may be shut in where possible. North American C+C output was about 13 Mb/d in the 2nd quarter of 2015, let’s assume the full year average for 2015 is close to this level and that in 2016 output falls by 10% if oil prices remain under $30/b for the first 2 quarters of 2016, that would be a decrease in output of 1.3 Mb/d from North America alone, all of non-OPEC output is about 47 Mb/d for 2015, if that output fell by only 5% we would see a 2.35 Mb/d drop in C+C output, possibly Iran will increase by 500 kb/d, which would leave World output 1.85 Mb/d lower on the assumption that oil prices remain under $30/b.

    Eventually the drop in output will draw down inventories by 675 Mb over 365 days and I imagine oil prices would recover.

    So prices may go lower, but they will not remain low for long.

    1. Dennis,

      The idea that Iran can add 600 kb/d midyear is also extremely optimistic, probably 50% overoptimistic. In any case increase will be by-and-large in condensate, not oil.
      === Quote ===

      Jan 18, 2016 | http://oilprice.com/Energy/Oil-Prices/Is-This-The-Bottom-Balance-In-Oil-Markets-Closer-Than-Many-Think.html

      Reality is catching up with the Iran-Oil-Export-Boom-Apocalypse.

      January 14 Bloomberg released the results of a survey of twelve analysts and economists, including from UBS and Saxo Bank A/S, on their estimates of the increase in Iranian crude output over the next year. Their median estimate was 100,000 barrels/day in the first month, 400,000 barrels in six months, and 680,000 within a year.

      One Norwegian analyst, Per Magnus from Nysveen, Rystad Energy AS, citing the need to add production equipment, put the increase at just 150,000 within 6 months, and 250,000 in a year.

  23. Peak Oil Overrated.

    Over the years of reading Oildrum articles and other peak oil websites, one thing that really sticks out is how those warning about peak oil vastly overplay it’s importance.

    When we look at the various problems facing humanity and the damage done to the planet there are problems that are far more important and which have no solution.

    Global fresh water supply is under tremendous stress, aquifers at critical levels and farm land being abandoned because the ground water has been used up.

    http://www.deccanherald.com/content/484290/groundwater-depletion-india-worst-world.html

    http://voices.nationalgeographic.com/2015/02/03/indias-food-security-threatened-by-groundwater-depletion/

    Once these aquifers are depleted arid areas that currently produce a great deal of food will become waste lands. The 2 billion people who are feed from food produced in these areas will either starve or try to move, causing major problems in other countries.

    Once these vast aquifers are gone, the game really is up.

    When peak oil occurs building additional electric trains, electric cars, trams are the solutions that already exist. Many people in towns and cities with good public transport have never owned a car, extending public transport is very possible and happens in Europe all the time.

    1. Peak oil just hasn’t happened yet. Or at least the continual decline has not happened yet. Neither you nor I have any clue as to what will be the consequences of that decline. Though I strongly suspect you are vastly underrating those consequences.

      1. Hi Peter,

        I am with Ron, and think that the consequences of peak oil are going to be any where from bad if we are very lucky, to catastrophic .

        If the eventual inevitable decline in oil supplies turns out to be slow, and steady and gentle, meaning maybe one or two percent a year, there is a chance the economy in general can adjust, although growth will be sharply inhibited, or eliminated.

        This will depend mostly on how various governments deal with the issue, and on how people individually react to it. With a great deal of luck, we could avoid any hot oil wars, and change our oil addicted ways sooner and faster, rather than later, when change will be FORCED, and maybe get by ok, if in straightened circumstances, for a long time.

        Personally I strongly doubt we will be so lucky, and expect peak oil to result in being the proximate cause of some really tough times in some countries, and maybe all countries, including countries with relatively honest competent sovereign governments.

        The above is the best and gentlest possible scenario I can envision involving peak oil.

        The worst is probably more likely, and ranges right up to a hot WWIII and the end of life as we know it for most of humanity.

        Our overall situation is like that of a soldier crossing a mine field, if peak oil doesn’t result in the loss of one foot, or his very life, the depletion of fossil water, or the loss of topsoil, or the destruction of ocean fisheries, or the conversion of the remaining tropical forests to farmland, or a dozen other mines might kill him.

        The one “hopeful” aspect to soldiers and minefields is that some soldiers who must enter minefields get across without getting seriously crippled.

        We are collectively already in the mine field, but not yet into the heart of it.

        It remains to be seen how much of humanity will get thru the rest of this century, but just about anybody around in the year 2121 will have adjusted to life with very little in the way of fossil fuels.

        There could be exceptions. There will still be plenty of accessible coal in some places, and enough people may migrate to such places to establish a new coal fired economy for themselves.

        Some of the coal fields are pretty far north, and living that far north might mean you can still stay outside all day mid summer without suffering a heat stoke. I don’t know if I should add a smiley, or a sarc alert at this point.

        1. Hi Ron and Farmer

          If you model peak oil properly you would see that initially there will be a plateau. This is because even though most countries will have peaked or are in decline there will be about 10 counties which will still increase production. As these last few go into decline the global decline rate will gradually increase to around 2% per year.
          If you think about the scrappage rate of vehicles a country’s entire fleet is replaced every 15 years or so. Most vehicles do around 30-35mpg, yet today already vehicles exist that can do over 200 mpg.

          http://www.autocar.co.uk/car-review/vauxhall/ampera

          Indeed there are electric cars that use no fuel other than in production. So reducing fuel usage by 5% per year is easily achievable, coupled with trams, electric trams powered mainly by wind and solar the solutions are there.

        2. Nah. Peak oil is harmless. I follow it for investment reasons, because it makes a huge difference for what to invest in, but for humanity? It doesn’t matter. We’re going to switch to solar power and solar power is a true cornucopia, for a billion years or so.

          It’s actually global warming and ocean acidification which are going to destroy most of humanity!

    2. Peter – you need to write to the major military organisations of the world and tell them to stop wasting so much money on developing contingency plans to handle the social breakdown they expect might happen during the run down following peak oil.

      1. The Military make up contingency plans for everything. The more threats they can come up with the more money they get. When there are no threats they make one, like invade Iraq and kill 100,000 people destroy a government and create the ideal chaotic situation for terrorist groups to proliferate.
        So no I will not bother writing to them.

    3. Peter,

      Yeah, water isn’t given the consideration it deserves. What often is overlooked is the extent to which energy production, including oil, depends on water.

      Worth noting is how much more expensive vegetables from the U.S. Have become at Canadian grocery stores. Cauliflower has become a luxury item because of the California drought.

      1. Aws

        My bet is water and food will be the biggest threat in the coming years.

    4. Yeah, I actually agree that peak oil simply isn’t that important. I follow peak oil for investment reasons — it has a large effect on the investment markets — not because it’s important for humanity.

  24. I had been looking for a “fossil free” fund that a “low net worth” Canadian investor like me could put retirement savings into. It turned out to be surprisingly difficult, and impossible, until now.

    NEI has come out with a “fossil free” fund called the Environmental Leaders Fund.

    Worth considering the importance of this, now middle class Canadian families can invest in a “fossil free” fund for their retirement or their children’s education. It’s divestment through investment. Average Canadians before had no other choice but to invest indirectly in fossil fuels as petroleum had so much weight in Canadian equities.

    From a Q & A for advisors (sorry no link)…

    3. What type of investors would be interested in this mandate?

    As a thematic solution, the NEI Environmental Leaders Fund focuses on fundamental macro-economic drivers
    such as growing populations, rising living standards, increasing urbanization, rising consumption, and depletion
    of limited natural resources, etc. The mandate’s thematic focus allows its investment objective to speak to a
    broad spectrum of investor types including:

    Fossil Fuel Free: Investors that firmly believe their investments must divest 100% of fossil fuels.

    1. aws wrote:
      “I had been looking for a “fossil free” fund that a “low net worth” Canadian investor like me could put retirement savings into. It turned out to be surprisingly difficult, and impossible, until now.”

      Buy some farmland. Plant it with trees, and in 20 to 30 years harvest the trees. Doesn’t get any greener than that! Its low risk since the land and trees have intrinsic value. The hard part is finding affordable property since farmland is significantly overpriced just about everywhere, caused by the absurdly low interest rates. That said, I doubt you be able to collect, since odds favor a full global meltdown before then.

      Option B: By some land, build a homestead, and live off the land. Let your children inherit the property after you die.

      aws quoted:
      “Worth considering the importance of this, now middle class Canadian families can invest in a “fossil free” fund for their retirement or their children’s education”

      I doubt it work. Most of these Hedge fund, money managers lose investor money, while become very wealthly. Hedge funds and other investor funds are largely scams. They risk other peoples money, but invest their own person wealth in ultra-low risk, investments (ie gov’t bonds, and cash). I suspect this fund is no different. Just remember: “A fool and his money soon part ways.”

      In my opinion the age of retirement is fading away. Retirement was extremely rare for the working class prior to the 20th Century. Retirement for the working class, was built on vast abundant resources that have already been largely exploited. The last generation to experience retirement will be the boomer generation. Neither, Gen X or the Millennials will have the opportunity to retire. Gov’ts are borrowing Trillions just to prop up the Boomer retirement. The US alone has $19T in debt on the books, and about $75 Trillion in unfunded liabilities. Europe & Japan is even in worse shape, and I doubt Canada fairs any better. Unless you’re 55 or older, don’t plan on retirement.

      FWIW: I expect gov’ts will start targeting retirement funds as its the only remain source of capital left. Its appears to be starting in Europe:

      http://www.cityam.com/232657/uk-pensions-changes-osborne-prepares-to-raid-retirement-savings-again-by-changing-the-tax-system-and-higher-rate-taxpayers-will-lose-out-from-the-new-single-rate-of-relief-

      In my opinion the best option would be avoid putting money into any retirement plan since its subject to changes, Tax deferred accounts are subject to gov’t law changes. Best option is to pay a known tax rate, then to risk unknown tax and penalty changes as gov’t seek to raid retirement funds to prop up the system. I stopped contributing to retirement plans back in 1999, but continued to save money.

    2. Buy so many solar panels and batteries that you have excess electricity… sell it to your neighbors to charge their electric cars. 🙂 (Not serious advice.)

  25. What happened to my post? Hopefully, Ron has it and can release it. If not, I will try again later today. By the way, why can everyone refer to a post #. I never see any numbers.

  26. OPEC January report came out yesterday – based on secondary sources pretty well all the OPEC countries production is down m-o-m. To me that looks like everybody has been producing flat out and there is no spare capacity (and also, based on the recent decline rates, that none of them has as much oil as they claim). For non-OPEC they expect 2 mmbpd new production this year based on projects coming on-line which were sanctioned during the high price period, but overall expect production to be down, mostly due to North America decline. I expect there will be a new post that shows it more clearly with the historical charts.

  27. Ron

    https://managewp.com/best-anti-spam-plugin-for-wordpress

    http://akismet.com/

    It is the gold standard, but there is definitely talk about it being overzealous.

    Some stats from their April numbers across all Askimet users:

    The total number of spam comments this month is 4,167,247,500 – just over four billion, which is still a big number even though it’s a slow month

    As for ham – we saw a total of 145,308,000 real messages come through. As usual, there’s much more spam going around than real messages – only 3.4% of all messages sent this month were not spam.

    There may be settings that can be set to loosen, but if not we have to live with having comments not appear.

  28. Kazakhstan and China announce cut in production in 2016, not much but will cut 50-100 kb/d if i see good. Non-opec supply drop will be greater than what IEA and EIA said, 800 kb/d-1 mb/d down. Also, i think, demand will be greater. IEA badly miss projections for demand growth for 2015 in december 2014. IEA said, 1.2 mb/d demand growth i will put that number in 1.4-1.5 mb/d.

  29. Venezuela up date:
    1. Pdvsa has asked foreign partners to pay for diluent crudes and nafta being imported to dilute faja crude. Thus far the foreigners are refusing. If the refusal holds we should see a production dip ranging from 100 to 300 kbopd on top of ongoing decline, to take place over the next 30 to 120 days.
    2. The zika epidemic is hitting hard in western Venezuela.
    3. Maduro’s economic emergency decree is being reviewed by the unity controlled National Assembly. It’s not likely to pass.
    4. Cubans are working hard to support government propaganda efforts. Some street actions and protests in Argentina appear to be developing only to serve as props to document Macri repression. Thus it looks like the Cubans, Argentina Kirchneristas, Podemitas from Spain,& Correa in Ecuador are in a tight group working in a coordinated fashion.
    5. Serious water shortages impacting water quality.
    6. Electric power cuts increasing.

    Conclusion: seems to be heading towards breakdown. Possible famine by May. Possible heavy unrest. Civil war not out of the question.

      1. Mac, that link doesnt go in depth. If you jump to my blog look on the right hand side for these blog links

        1. The Devils Excrement
        2. Daniel Venezuela
        3. Caracas Chronicles

        For those who read Spanish I recommend ” Runrunes de Nelson Bocaranda”.

        I don’t think all the crude exports will be cut. The lack of diluent means they have to reduce the 8 degree API stream, but they do have some light crude and diluent produced in country.

        The situation is so serious some cable tv stations are now showing Unity deputies discussing politics, economists discussing government failures, etc. but that’s the cable. The government keeps all over the air tv completely censured. And poor people don’t usually have cable. So the news gets to those with cable and Internet access.

        Internet is censured on a customized basis. For example, my blog can’t be seen by Venezuelans using the government Internet service. It is seen by expats using customized access.

        The next crisis may arise on Friday or Saturday if the National Assembly refuses to approve Maduro’s economic emergency decree. The decree was supposedly written by Spanish comunists linked to the Chavista party Podemos, and won’t solve anything. The authors are brain dead commies.

        I’m also seeing a lot of discussion about water shortages. The water system hasn’t been maintained properly, leaks all over, the reservoirs are full of dirt and weeds, and now they have the El Niño effects on top (it doesnt rain much now, won’t rain much until June).

        1. They are unlikely real commies.

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

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

          At any rate, the collapse of a state, such as Venezuela, might be good for the people imprisoned in it after the dust settles. In the mean time, my heart goes out to those caught in the dust.

          Failed State is practically a tautology.

  30. Environmental regulations sometimes have the effect of pushing along technology that will be NEEDED later to earlier commercial development.

    One such instance is motive power for very large boats and ships.

    Wartsila is the company you go to when you want a REALLY big diesel engine. They have commercialized their dual fuel technology sooner than otherwise so as to be able to build engines that run clean enough in environmentally restricted waters, and still run cheap enough to be competitive in open waters.

    http://www.lngindustry.com/small-scale-lng/19012016/Wartsila-to-deliver-milestone-dual-fuel-engine-1889/

    1. OFM,

      Yes. the pollution regulations along with the recent high price of oil, is having an impact on the shipping market. and helping LNG substitution.
      Just a little point. Wärtsilä, actually make medium sized/speed engines. Similar to what we use on the oil rigs. In fact I have been on rigs that have used up to 5 Wärtsiläs, all hooked up to gensets for electric drive.
      Meanwhile Man, do make the biggies!

      http://www.corporate.man.eu/man/media/content_medien/doc/global_corporate_website_1/verantwortung_1/megatrends_2/klimawandel/me_gi_dual_fuel_en_01.pdf

      1. Also, further to OFM’s point of pollution rules pushing Nat gas usage. The flaring rules in ND, are forcing/encouraging, nat gas to be used a fuel for drilling and frac pumps.

  31. Malaysia oil giant Petronas to cut $11.4 billion in spending

    KUALA LUMPUR, Malaysia — Malaysia’s state oil firm, Petroliam Nasional Bhd., or Petronas, is planning to slash as much as 50 billion ringgit ($11.4 billion) in capital and operating expenditure over the next four years, according to an internal memo sent to staff by its chief executive officer.

    No one can convince me that all these billions of spending cuts right across the world aren’t going to reduce production.

    1. Of course, these spending cuts will reduce production. The next question is when. There is a very good answer posted above by AlexS:
      http://peakoilbarrel.com/texas-oil-and-gas-production-declining/#comment-556493
      He said, “there is zero impact on 2016 supply, and insignificant impact on 2017 and 2018 as well.”

      My guess is that the data charted will be different than the reality as it unfolds. However, who among us will have a clue about those differences. The relevant point that Carl makes though is that it may take YEARS before these spending cuts will be seen in the production numbers.

      1. Don,

        “Of course, these spending cuts will reduce production. The next question is when”

        Market behavior is about future, not present. So this news increases the possibility of the short squeeze of reckless speculators (and HFT computers) in futures. I sometimes wonder who is shorting oil at below $50 level.

        The current situation with oil prices only indirectly connected with oversupply of oil on world markets that is discussed to such length by AlexS, who is kind of obsessed with finding the balance of supply and demand in some future point by analyzing supply and demand data from available sources (which are probably pretty fuzzy). That’s an important part of the story but this not the whole story.

        There are other important factors and first of all Saudis dumping of oil. Such behavior would move market quickly down even with zero oversupply. That’s important to understand.

        The second important factor is incorrect accounting for oil reserves (absence of separation of oil and condensate) which might be deliberate. Which create wrong signal to traders, who in turn are subject to crowd psychology. In other words this facilitates artificial panic (with significant role played by MSM, remember all those crazy stories that we can run out of storage). My impression is that the “glut” and excessive volumes in storage are mainly about condensate, not so much for “real” oil.

        The third factor are economic pressures of “secular stagnation” in which all G7 economies found themselves with high oil prices (but not only because of high oil prices; other factors are involved too). This is perfect (albeit temporary) solution for this problem. That’s why MSM are supporting glut theory like crazy. They know who butter their bread.

        Destabilization of financial system with “naked” commodity trading, derivatives and HFT also plays a role. It well can be the Saudis started this mess hoping to bring prices to say $60-$70 level and then it went out of control due to those mechanisms.

        And of cause geopolitical factors can’t be discounted as well. Especially plausible are “Economic war with Russia” theories as this is an official policy of Obama administration. In any case, explanation of Saudis behavior by pure desire to preserve market share is very unconvincing.

        So oversupply might well be not even the most important factor in all this mess.

  32. Here’s some more gasoline for the climate change fire .

    http://www.sciencedaily.com/releases/2016/01/160119141756.htm

    There is a distinct possibility that “early farmers” may have burnt off enough land, habitually, to have presented us current day naked apes with the gift of an extended interglacial warm spell.

    The basic textbooks in the field do point out that the next ice age is due, and maybe past due, except for our mucking around burning so much carbon.

    I don’t really personally think of these early “environmental engineers” as “farmers” but rather as hunter gatherers just beginning to take the earliest tenative steps toward the domestication of cattle. Proto farmers is more like to my taste, but this is a mere quibble on my part.

    Such research as I have done in the field ( not in the field research but in books ) has convinced me that the use of fire by earlier people to keep large areas of land open was a VERY common practice, for a very long time.

    Setting fires anytime conditions are favorable (drought and windy etc ) in places that get enough rain to support forests can keep such lands open enough to support large numbers of grazing animals, and also make it much easier to hunt them. Eventually providing grazing by burning and hunting gradually evolved into herding and then into true domestication.

    The irony of it all is that the pollution that is very seriously messing up our current highly desirable climate may actually be responsible for us HAVING this climate in the first place.

    Sky Daddy has a sense of humor.

    In actuality, lots of things are ok or good for us, or even essential, in moderate quantities,whereas too much of these same good things are very bad.

    Food is the classic example. Too much of it will kill you slowly.

  33. Ron,
    please help me with the comment to Shallow from yesterday.
    It got stuck…

    Thanks and be well,

    Petro

  34. Ron,

    Great article. Your statement on the EIA’s revised estimate of Texas’s total natural gas production confused me. You stated, “I think they have it pretty close this time.” After March ’15, the difference between the EIA’s estimates and the Texas RRC gets wider and wider each month. It seems like the drop off is so dramatic that even the RRC’s upward revisions in subsequent months will never get to the EIA’s estimate. Were you referring to the EIA’s estimates before March ’15, or do you think that the RRC’s numbers will end up being closer to the EIA’s estimate?

    Thanks,

    Phil

  35. What’s very important here and was missing, and is certainly a factor in underscoring the availability of oil as resource extraction costs have increased, is that where everything goes off the rails is in November – January of 2014-2015 – is the crash in spot prices here (See the 5 year trend http://www.bloomberg.com/quote/CO1:COM) – notably when the price drops below around 80 dollars, it’s just cheaper to walk away from the wells apparently.

    What’s tragic is that we as a society are not more mindful of the boom/bust cycle in terms of the longer term economic cycle that builds up, booms leading to surpluses which lead to decreased prices, increased supplies and increasing demand, which lead (eventually) to lower supplies and increased prices.

    Now as we slowly start to convert off of oil into lithium/hydrogen biogenerated forms of hydrocarbons we’re going to see this same cycle but hopefully we can decouple GDP sooner rather than later.

    We are never more than one serious terrorist incident or OPEC policy decision away from trouble in that way.

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