The Texas Rail Road Commission has just released their Oil & Gas Production Data through May. There are four categories of data, Crude, Condensate, Gas Well Gas and Casinghead Gas. Casinghead gas is what most folks call Associated Gas. That is gas that comes up with the oil in oil wells.
On all oil charts the July Report has data through May 2014 and is in barrels per day. Also the last month, May in this case, is always exaggerated on the low side. That is the data is incomplete back to about two years. But the last month is always far more incomplete than the previous months.
This data is of course incomplete but even from the incomplete data we can get an idea of the average monthly increase. I calculate that Texas Crude only is increasing at about 40,000 barrels per day per month.
I think Texas Condensate peaked back in May of 2013 and is now declining at about 500 bp/d per month.
Texas C+C, which is what the EIA measures, I calculate, to be increasing at about 40,000 barrels per day per month.
The EIA data here is through April while the RRC data is through May. As the Texas RRC data is incomplete, the EIA estimates what it will be when all the data is finally in. They estimate that Texas C+C inreased by 49,000 bp/d in April and 48,000 barrels per day every month for the previous 7 months prior to April.
What they appear to be doing is taking the average increase for the previous year, prior to July 2013, and assuming that increase will hold. I don’t think it will at all. Due to the decline in condensate, and perhaps other causes, Texas C+C appears to be increasing at about 40,000 bp/d, or perhaps a little less. And that increase is declining.
All Texas Gas data is in thousand cubic feet per day with the last data point May 2014. Also keep in mind that the RRC gas production numbers are incomplete also.
Texas Gas Well gas has clearly peaked. However that peak may be due to the price of gas rather than geology. Drillers are clearly losing money on gas so they have cut back quite dramatically on drilling for gas only. As of this writing, the price of natural gas is is $3.79 per million BTU. Horizontal multiple fracked wells need about twice that to break even.
Texas Casinghear Gas, or Associated Gas, obviously has not peaked. As long as long as crude oil production keeps increasing then associated gas production will also keep increasing.
Texas total gas appears to have peaked also. It is unlikely that production will reach the point it reached in June 2013. That is however, unless the price of gas doubles soon.
I posted earlier of Landman, who lives and worked most of his life in the Permian. He sent me the Oil Report from the Midland Reporter-Telegram newspaper. In that oil report there is a section for “Completions” which were completions for that week. Some of the completions were pretty good but most were pitiful. Here are the first 20 listed. They list Barrels of oil, Gas in MCF, and Barrels of Water, per day in that order. I have not picked the worst wells out but listed the very first 20 wells in the order they appeared in the paper.
BO MCF BW 191 435 311 12 55 15 182 187 320 170 72 1162 7 4 32 110 81 2269 2 28 228 110 40 163 12 1 271 2 349 38 14 169 275 315 3052 170 149 1132 330 358 1230 372 277 2622 517 769 1142 883 1291 112 56 1579 65 472 25 545
Energy and Capital has been pumping the Permian to the high heavens for many months now. They call it “The Petroplex”. I just don’t see it. I don’t understand how those Permian drillers are even breaking even.
Thanks for the update!
It looks like Texas has been peaking for months. When do you think Texas will peak?
No later than December 2015.
I agree with this estimate for the Eagle Ford, but for all of TX I think the Permian basin may be able to pick up some of the slack and keep TX C+C from decreasing until Dec 2016 or even mid 2017.
If the drought conditions in TX do not improve, then it is possible that limits on water availability may make this impossible, water recycling may be more feasible in the Permian where more water returns to the surface and needs to be disposed, recycling costs may not be much higher than disposal costs.
Hi Ron,
The vertical wells in the Permian have lower output than a typical Bakken well, but the well costs are much lower as well.
Are these much worse than in the past? We would really need to know the trend over time to be able to say much.
The average barrels of oil per day for those 20 wells is 180 b/d or a little less than half of the average Bakken/Three Forks well. The vertical wells typically cost about $2 million, or one quarter the cost of a Bakken/Three Forks well.
We really need to be able to distinguish between vertical and horizontal well data to make sense of the Permian Basin, maybe Landman can help.
Concerning costs per well, Landman tells me:
Those vertical wells drilled to 7,000-8,000 ft probably cost a minimum of $2.5-3.0 million completed. Dry hole cost is probably about $1.0 million. BUT, as you can see, Sandridge will complete a well for 2 bbl/day and not call it a dry hole.
Also, I think the Sandridge wells in the report are drilled with the royalty trust money they raised a few years ago. Those trusts created by the non conventional players were only Wall Street money vehicles for the companies (in my humble opinion). Once again, the common stock holders get screwed.
We have just talked about drilling and completing wells. It costs an enormous amount to provide electricity to these wells that produce 1,000s of bbls of produced water with those barrels of oil.
In 10-15 years, When a submersible pump goes out on a horizontal well that produces less than 50 bbls oil and about 10,000 bbls of water per day and it cost at least $250,000 ( in today’s $) to replace the pump and restore production, what do you think will really happen?
I no longer participate in drilling wells so remember that I am pulling these re-work cost numbers out of the air. Mike can probably give you actual cost numbers on electricity, pumps, and water disposal.
I don’t have the foggiest idea how much electricity it takes to run the pumps on a Permian well but if anybody knows please post the data.
But it seems unlikely it would be more than maybe a thousand bucks a day.That much juice will run a humongous motor.Even two thousand bucks a day for juice would leave at least three thousand for other expenses and hopefully a profit.
I know oil at the well sells for a substantial discount to delivered oil and the prices we hear quoted every day are delivered to a terminal.
But unless the whole idea of peak oil is one big mistake oil at terminals is going to sell for a lot more than a hundred bucks in ten or fifteen years.
Dennis,
Based on the diverse views expressed below respecting the Permian Basin play, your comment(s) are indeed prescient. Perhaps foresighted or farsighted would be better words. Trouble is, after reading it all, I can’t claim to understand it any better. Guess I’ll just assume Mike’s is the final word.
Doug
Thanks Doug,
I don’t understand it either, I was just sharing tidbits that I had read on the web from sources I believe are reliable.
I am definitely with you on Mike being the final word, his insights are a big help to an outsider like myself.
Thank you, gentlemen. After 50 plus years of being in the business I do not pretest to know very much about it either, actually. I sure don’t need to argue with folks about it. My goal, when I have time and don’t have 5% OWR wells to take care of, or books to cook, is to try and help people understand the operational side of the oil and gas business, things that the internet can’t tell you, or public companies with an agenda, won’t. If you understand the oil and gas business better, you will not mistrust it so much. It is also very important to understand operation matters to be able to make predictions about the future of oil and gas.
Water in Texas, and all across the Southwest, is in a critical state. The probable affect that 40,000 more stinkingshale wells might have on groundwater resources in Texas frightens me. But I have made my point, just without the links; I quit on the water thing. People believe what they want, or need to believe, generally. Smart people worried about the future know to be worried about all resources. Recycling of produced water and frac flow back water will begin to take off, in spite of the additional costs. Sooner, rather than later, I hope.
When shale oil was first being developed the soup of the day for artificial lift was gas lift. Gas to oil ratios quickly fell off the end of the world and soon enough there was not enough associated gas to lift with. ESP’s are very expensive from a CAPEX standpoint and use up the ‘ol Kw’s like no tomorrow. They don’t do well in paraffin environments, or when shale wells make formation clays or other solids, like many EF shale wells produce. You can send 4 kids to college for what it takes to pull one and replace it; Mr. Patterson’s landman friend is right about that. That is why rod lift is now the preferred means of lifting liquids in horizontal wells. They are still prone to mucho headaches, but it only takes one kid, two years of college to pull and replace a down hole rod lift pump. EOG buys pumping units in the EF like they are breakfast tacos.
Again, thank you. I will try and help when I can.
Mike
I have been very surprised with how petroleum stocks have held up so far this summer here in the U.S. The last four weeks imports have averaged less than 7.5 mb/d, and although there have been drops in crude stocks (stocks are still in the upper half of the average range for this time of year), gas and diesel stocks are strong.
http://ir.eia.gov/wpsr/wpsrsummary.pdf
If you are interested in seeing the historical import data here it is:
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRIMUS2&f=W
BTW, for the last four years, the four week average for crude imports during this same time of year are:
7/18/2014 7.3 million barrels
7/19/2013 7.7 million barrels
7/20/2012 9.0 million barrels
7/29/2011 9.3 million barrels
Best,
Tom
Tom,
Have you checked out net imports to the US? They are currently running at around 5.5 million barrels per day ( http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNTUS2&f=M ).
For me this is a more useful measurement and I must say that I was surprised by the numbers. I really hadn’t considered the possibility that they were that low. LTO and decreased US demand has meant that there’s probably better than 5 MMbpd of extra oil available on the global market at current prices. This has given the global economy a little bit of a breather… for now.
Professor Hamilton has another Econbrowser article up on global oil markets: “The changing face of world oil markets”
http://econbrowser.com/archives/2014/07/the-changing-face-of-world-oil-markets
Thanks for the link Jeff. I am surprised that in his conclusion he did not mention the high probability of a drop in unconventional production that would likely correspond with any drop in global oil price due to “peace and stability” breaking out in the Middle East.
Best,
Tom
High(ish) prices is a reasonable conclusion; it’s not necessarily a prediction.
‘Something’ has to enable the high price, there must be returns that are great enough or sufficient borrowing capacity. The ability to borrow seems to be a bit stretched these days due to ‘overuse’ of credit and exponential (and cumulative) increase credit cost. Unfortunately, there are zero returns on driving in aimless circles from gas station to gas station …
Borrowing it is: we borrow until we cannot any more then we must endure the consequences. One of these will be diminished bid for crude oil … we will endure the extraction consequences of no- or low bid.
Sounds unpleasant … indeed it will be, no putting a good face on it. Anyone with a millston … sorry, vehicle, will wish they hadn’t, will wish they didn’t live so far from the bathroom and the kitchen, will wish they could’ve managed better when they had the chance. There may indeed be $20/barrel crude oil or even $5/barrel crude … but nobody will have any money. A gallon of gas might be as fanciful as a flight to the Moon.
I for one just cannot see massive deflation , at least not in nominal terms. Fiat money is too easily inflated once the powers that be are determined to inflate it and no politician is going to choose massive deflation over inflation.
If the economy truly crashes back to the stone age then maybe there would be no substantial market for oil and the price could really decline to the point that any oil that could be produced for let us say twenty bucks a barrel would sell for that price.
But I think it is far more likely that as times get tougher oil supplies will actually shrink faster than demand even at sky high prices due to depletion of old cheap legacy oil.
Let us remember that I am a real farmer with a real tractors and that I can plow with twenty dollar diesel a hell of a lot cheaper than I can plow with a team of horses.
As the price of the marginal barrel rises, and supplies shrink, so will consumption. Consumption will shrink like a leaky balloon.
But I almost bought a 50 cc scooter yesterday that gets well over a hundred mpg at thirty mph.
I would rather pay twenty bucks for a gallon of gas for that scooter than spend three days a hundred mile round trip horseback and whatever it cost me to feed the horse and stable it and so forth – plus my own room and food not to mention loss of income from missed work -whereas I could easily make the round trip on the scooter in under four hours.
And let us remember that the scooter once the tank is filled will still be full in couple of days or a couple of weeks if I don’t ride it.In two weeks I would have to fill that horses belly fourteen times.
We may see dirt cheap oil again for a very short period of time in the event of a severe economic crash but as soon as oil already in the distribution system clears the system and is delivered to end users the price will either jump back up or the world will go mad max due to every body in the developed world being stuck without food and transportation.
I just cannot see oil not going to two hundred bucks in another ten or fifteen years. Rust and depletion never sleep.We will pay it because it will be our cheapest option in terms of day to day survival barring breakthroughs in other technologies such as batteries and solar and wind power.
I don’t see much hope for batteries ever propelling tractors and dump trucks but I do think they will rule the roost in terms of personal transportation within the next twenty years.
I would gladly bet my last can of beans that a hundred mpg car will be marketed in many parts of the world within ten years. It will be very small and not very fast but it will sure as hell make a horse look like a snail.
Interesting side effect of fiat money pointed out elsewhere.
The Great Transition folks think high price will force people to gently, gradually, consume less and embrace the magical alternatives that are going to solve whatever.
But truth is, high price will increase consumption, not decrease it? Why? How?
The poor must not be denied access to gasoline, so it will be subsidized. How? Borrowing and printing, and any candidate who promises that will get elected.
Things that do not physically exist cannot be consumed.
Beyond that virtually everybody I know is reducing their consumption of gasoline except for people who have landed jobs that require a long commute.You may not have noticed but one of the worlds fastest and most highly respected cars – the Chevy Corvette – gets close to thirty mpg in the ’15 model year.I have a friend with an old one that gets twelve to fourteen at best.
I have plenty of reasonably well off neighbors who own big pickup trucks that they don’t drive every day any more. Just about all of them have bought a small car to save on fuel and maintenance and to avoid wearing out the truck.
Spending megabucks on oil subsidies may increase supplies to some small extent for a while.
But there is a hard limit to subsidies. At some point printed money becomes essentially worthless.
We probably are not too far from that point now. I don’t see the PIIGS countries consuming a lot of gasoline. They ran out of credit doncha see?
Then there is the unfortunate fact that many other things are already subsidized and the piglets on the receiving ends of those subsidies are going to fight to retain their hold on one of Momma’s tits.
They range from people on food stamps to unionized auto workers to social security recipients like me to corporate executives whose companies are getting good deals on federally provided loans.Academics whose university departments depend on grants from the government. Farmers paid not to plant crops. Farmers paid to plant crops.
We are drowning in subsidies already. Some body has to actually produce stuff.
If the crude ain’t there ……………..Then subsidies can be provided for coal to liquids. But at some point….. the game is over.
Gasoline consumption nationally and world wide has probably peaked for good.The crude just ain’t there any more to sell it cheap enough to keep consumption rising.
It’s no big deal to deny the poor gasoline, if you have a sensible public transportation infrastructure. Look at the gas prices in Europe. But the poor arguably have more mobility options than in America.
Watcher wrote
“The Great Transition folks think high price will force people to gently, gradually, consume less and embrace the magical alternatives that are going to solve whatever.But truth is, high price will increase consumption, not decrease it? Why? How?”
The poor will be squeezed out. But we will NOT get a smooth decline in consumption. It will be chaotic as high prices cause demand destruction as business layoff and close down. Detriot is the future model as businesses close down. Many regions are supported by a few key industries or companies. Once the Anchor companies close down or downsize, the whole region collapses as the the local business that supply goods and services are effected causing them to close down.
I think one of the next sectors to implode is going to be the airlines. They make almost no money even when times are good. So far it seems that the larger fish have been feeding on the smaller airlines to take over market share. But I think this process is reaching its final conclusion and we should see a one of the big fish fail. I believe sustained Oil spike in the $120 bbl would probably be a trigger.
I don’t see that higher prices will cause higher consumption since rising Oil prices aren’t tied to inflation (caused by rising wages). Oil supply is constrained and will remain constrained forever, unless start importing hydrocarbons from gas-giant moons (/fantasy). Consumers can’t consume what doesn’t exist. FWIW: The world is enduring stagflation as wages remain flat or falling, but costs for resources are rising.
Sooner or later the economy is going to have another major retraction. I think there is a chance it will begin this fall. When it happens we will see another drop in consumption. This may be the trigger that cuts off LTO expansion as investors stop throwing money at the drillers.
I don’t see that higher prices will cause higher consumption since rising Oil prices aren’t tied to inflation (caused by rising wages).
Naaaw, that’s not exactly the case. Rising wages are, far more often than not, a following indicator of inflation, not a leading indicator. Inflation forces employers to raise wages… sometimes but certainly not in every case.
There are many causes of inflation but the primary cause is demand pull.
What Are the Causes of Inflation
Demand-pull inflation is the most common. It’s simply when demand for a good or service increases so much that it outstrips supply. If sellers maintain the price, they will sell out. They soon realize now have the luxury of raising prices, creating inflation.
Nothing is tied to inflation. That is nothing has to move in lock step with inflation but the price of almost everything does, sooner or later, move up with inflation.
Demand for oil could very well outstrip supply. In fact that is exactly what causes oil prices to rise. The price simply rises until supply meets demand. And oil prices will, in my humble opinion, will rise faster than other goods and services. And of course everything produced from, or with the aid of, petroleum will rise also. Rising oil prices will very likely cause inflation in the future.
Ron,
Both you and Tech Guy are correct.
wage inflation is a form of demand-pull inflation. Labor is a “good or service” and when, say, the demand for welders in Bakken oil fields rises higher than the supply, then wage inflation is the end result as we are currently seeing.
Since natural resources were abundant for the last 200 years economists began focusing on the only resource that tended to become scarce and cause inflation – labor.
The issue with economics and setting interest rates on a broad scale is that it leads some sectors to grow more quickly than the supply of specialized labor can accomodate while at the same time other sectors experience wage stagnation due to oversupply of labor.
Ideally, interest rates should have been set by individual sector instead of by broad strokes. Interest rate variation between industries is done by market participants and leads to the opposite of an ideal effect – money usually pours into hot, fast growing sectors that are creating more jobs than the supply of that specialized labor can fill. This investment money lowers interest rates further, which is the opposite of what a fast growing industry needs.
The end result is that investment money flowing into fast growing sectors causes them to overheat further. At the moment, the tight oil boom is that industry, but in every business cycle this is what happens. It continues until it the magnitude of the demand pull wage pressures in that industry bleed into the broader economy through higher prices.
In the last cycle it was housing where this effect was the housing sector. Now, as far as I can see, the energy sector (specifically tight oil) has artificially low interest rates due to inflows of investment, and those lower interest rates are perpetuating the wage pressures for a number of specialized jobs where demand has outgrown supply.
It would be ideal for Central Banks to be able to individually target specific sectors and control interest rates with precision. Where some sectors of the economy need low rates the tight oil sector needs higher rates to allow supply/demand of labor to reach equilibrium.
It amazes me that central banks don’t seem to understand that over the last 200 years the “business cycle” is an artifact of interest rates whimsically targeting the entire economy instead of being set by sector depending on current growth trends and supply/demand balance within each industry.
If one sector is experiencing deflation and another inflation then why would we apply the same interest rate to them? It makes no sense, yet it is the basis of Central Bank interest rate policy.
It would be ideal for Central Banks to be able to individually target specific sectors and control interest rates with precision.
So what would happen if you eliminated central banks and let purely market forces set interest rates? Would this solve the problem?
Interesting call on the airlines.
Serial bankruptcies and the prototype for smashing pensions has really taken down their employment costs. It’s always the subtle part of airlines. Fuel costs are the #2 expense, not #1. People burn cash faster than the kerosene and the people were axed.
But . . . maybe.
You can think of Asia as a giant deflation machine pushing down the labor cost of manufactured goods. So I wouldn’t get too worried about “fiat currency”.
But because Asians tend to use oil frugally, it’s worth more to them, so they can bid up the price. As you say, private transportation in America will have to go electric. And what doesn’t go electric will have to shrink one way or another.
I think the average American who drives to work spends more on oil to commute than the average Bangladeshi gets at all. If you figure $3.50 a gallon, 20 MPG, 20 miles round trip, and 220 days a year, you get $770, about the per capita GNP of Bangladesh.
Those numbers aren’t very precise for several reasons, but you get the drift. Something has to give.
But American oil consumption doesn’t come from commutes. It comes from GDP.
Always hard to identify cause and effect of consumption and GDP. Causative or reflective tra la tra la tra la.
So if you build something and sell it, you gotta ship it and so that oil shipping consumption reflects that GDP.
But you couldn’t build it without the constituent gizmos and raw materials having been shipped to the factory, so GDP was caused by that consumption of oil.
Now if you redefine things you can always get the numbers you want. If you make an electron on the internet (line of code) an increment of production, then you can get a smidgeon of oil-less GDP, but that doesn’t hire any sub 100 IQ humans and provide them food to eat.
They have to have proper GDP to eat, and proper GDP burns oil.
It’s the same stuff of the military expenditure differential versus other countries. Yup, the per capita US military expenditures are higher than other countries. So is the GDP being defended.
Passenger cars account for about 40% of oil consumption in the US. Most of that is just waste. Rich industrial countries like Germany use much less. Your post ignores the concept of energy intensity.
Also I don’t know where the military claims come from, but they don’t seem to make a lot of sense. The US is not the world’s biggest economy, but it has by far the biggest “defense” budget, not even counting the defend-the-motherland pot or the various paramilitaries like the CIA and the DEA. so we obviously aren’t getting out money’s worth.
The definition of waste depends on who you are talking to.None of my acquaintances most of whom have burnt many thousands of gallons of gasoline over the years commuting consider it wasted. Commuting has allowed them to live at a substantially higher standard if freedom of movement and a larger nicer house with plenty of outside space is considered important.
In Virginia where I live a two hundred thousand dollar house in the boonies is a million dollar house in a desirable neighborhood in local cities.
Now that is a HUGE difference considering how much it costs to commute.
And efficiency gains are very real. We are going to continue to commute even as we burn less oil because we are going to use more efficient cars.
Hybrid and pure electric cars have not caught on yet in a big way (excepting the Prius) for two basic reasons: purchase price and fear of repairs and unpredictable resale value in my opinion.
Range is not an issue at all with hybrids and I know many people personally who own two or three vehicles and could get by very easily with a Volt five or six days out of the average week.At any given time I usually have two or three myself although the insurance premiums cost more than gasoline for them some months.But the old Chevy 4×4 is essential on the farm even if I only drive it once some months.
Thus in my opinion range is a bogeyman that will gradually be recognized for what it is. Nobody with two or three vehicles need worry about range in his errands and commuter car.
Beyond that we are going to see super compact cars on the road within the next decade in significant numbers- cars that will get a hundred mpg.All it takes is a little diesel engine, lightweight materials, and a super slippery shape with a small frontal area.
I could build one myself if somebody would pay my expenses. Nothing to it in principle- all I would have to do is mimic the design VW recently built. OF course with real engineers on the job they got well over two hundred mpg equivalent. I am only a mechanic and welder among other things.
We ain’t gonna give up suburbia just because gasoline prices go up.The owner of a far flung McMansion can more easily buy a super efficient car than he can take a huge loss on his cookie cutter palace.
Now on the other hand long distance trucking is a dead man walking industry except maybe for a few loads of super expensive produce. Pretty soon the long distance trucks are going to be piggy backed on trains because diesel already costs almost as much as nominal drivers wages.
(We hear a hell of a lot about how much truckers get paid but generally it ain’t so especially after considering their expenses on the road and the unpaid hours they put in.)
This is not to say that we aren’t going to experience some very very tough times associated with peak oil but only that individuals can change their ways and get by without too many problems if they choose to do so.
The thing about peak oil that is going to ”kill” us is the unemployment that will be associated with it.Too many people are too uninformed or too dumb to get it and will be locked into payments on gas hog vehicles etc.
So the prices of houses in suburbia may crash but it won’t be because the owners of them do not have options in terms of an affordable commute.
Waste is using more resources than is necessary to perform the task in hand. My 13 mile round trip commute uses 0.1KWh of electricity each day. (and the exercise saves me spending time and money in the gym). Electric only range is limited to about 20 miles, but in hybrid mode it goes about 50. Top speed of about 18mph, adds about 10 minutes to my daily commute compared to 4 wheeled transport.
The family car will shift 5 people or moderate loads, and averages about 70 mpg (imperial).
We use about 200 gallons a year between us. Range between fill ups is 700 miles.
Going hybrid would save a bit of oil, but not much.
If we were prepared to accept lower crash safety standards and speed limits, it would be easy to halve personal transport oil consumption. My car will return 100mpg long distance if you limit speed to 50 mph.
some info on hybrid sales…..
“In the case of battery electric and plug-in vehicles, May sales set some all-time records.
Hybrid sales were at a second-best ever high, exceeded only (slightly) by August 2013. Increases in fuel prices presumably played a role in this result.”
http://www.hybridcars.com/may-2014-dashboard/
I agree, I think if oil prices go up much further and battery technology keeps improving, the switch to electric transportation could be pretty fast. We’ll see.
I think shifting long distance trucking to trains depends on logistics software for speeding up the last mile.
I would also submit that part of the waste comes from the government investing in sprawling suburban infrastructure instead of in making urban neighborhoods desirable.
”Making urban neighborhoods desirable” sounds so good and so easy on paper or on a screen but in reality urban neighborhoods already simply EXIST as they are.
Making them ” desirable” generally involves spending so much money that doing so is nearly impossible.This is not to say we couldn’t do it if we were rational but too many people have too much invested in the status quo for it to work very often.
Nobody in an area densely packed with houses or apartments wants the proposed new grocery store next to HIS house.Nobody wants to sell HIS apartment building so it can be torn down and a nice new park with trees and playground equipment can be built. He wants it a block or two away.
The people who live in ” undesirable ” neighborhoods can no longer afford to stay when things improve and the neighborhood becomes ” desirable ” because somebody wised up and decided a walkable environment is the way to go. They original residents have to go.
I believe the management capability exists today. The problem seem to be mostly in getting a couple of hundred acres of land near both the rail lines and the major highways together in one tract and getting the zoning approved – in several locations at once.
This is the sort of chickens and eggs question that is stopping current day truckers from using natural gas rather than diesel fuel. IF the fueling infrastructure were there the trucks would be at the dealerships. If the trucks were at the dealerships truck stop owners would be installing the ng fueling infrastructure….
It is because electricity is almost universally available that I believe the FORESEEABLE future of light transportation is electricity although it is possible fuel cells might eventually be cheap enough to start displacing batteries.
The US is not the world’s biggest economy, but…
But it is…
World’s Largest Economies
Depends on how you measure, of course. PPP measures show China as bigger. If you count the Euro area as an economy it is bigger as well. The US defense budget is bigger than all Euro area defense budgets plus the Chinese defense budget, so I think my point stands.
Nope. The US is still the largest.
List of countries by GDP (PPP)
We live in the age of the internet. It is just so damn easy to get your facts straight these days.
I don’t dispute the fact that the US military is by far the largest in the world, just that the US economy is the largest also.
Ron Wrote:
“Nope. The US is still the largest.”
The Real US economy is probably about half that. Private sector in the US is ~7.7 Trillion. The rest is Gov’t (Fed, State, Local, etc) . Not All countries count Gov’t in GDP. I don’t know if the EU or China does include Gov’t expendures in their GDP figures, but the US certainly does.
I think US company overseas operations may also be included the US GDP guestimate. ie Apple makes tens of Billlions selling iPods/iPhones made in China but sold in the US, and the profits of those sales are kept outside the US to avoid Corp. taxes.
Ilambiquated & RalphW:
Unfortunately People will NOT be adapting Bike riding to Work, or switching to electric. I believe Peak sales for Hybrids was in 2011 or 2012. Since then, sales have declined. I posted a chart on this about two weeks ago. People can’t afford to buy expensive hybrids. At best they will buy compact and subcompact cars. For now the only reason why people are buying new cars at all. is because car manufacturers are still offering subprime loans. Sooner or later these subprime loans are going to bite them as they did in 2008/2009.
What is going to happen is a continuation of economic collapse. We will see the Labor force participation rate continue to sink (already at a 36 year low in the USA). The Only reason why the US jobs report is showing job growth, is because companies are switching from full time workers to mulitple part time workers for the pending Obamacare changes that take affect next year. I believe the June Jobs report stated a loss of 500K full time jobs, but a gain of 800K for part time jobs (as it takes more than one part time worker to replace a full time position, so it appears there is positive job growth, when its really declining).
People will cut spending because they won’t be able to borrow, and their real wages continue to fall. Taxes, Healthcare, Rent, etc will continue to rise which is eliminating their disposable income.
We’ll will see homelessness continue to swell as more people lose their jobs and end up on the streets. Cities will become the worse places to live with lots of homeless people living on the streets and few jobs to be found.
Currently I have a job in one of the richest regions in on the East Coast. I frequently read articles in the local newspapers about swelling homeless in the regions cities and towns. Already they don’t have space for them. Lots of companies in this area are downsizing and either moving operations overseas or to rural states. Sales are declining and taxes and regulations are rising so they have no choice but to move or go out of business. Its just a matter of time before more regions suffer Detriot’s fate.
FWIW: I am currently in the process of relocating a rural region. I rather have acres of land to grow food and provide my own resources then get stuck in misery.
The Real US economy is probably about half that. Private sector in the US is ~7.7 Trillion. The rest is Gov’t (Fed, State, Local, etc) . Not All countries count Gov’t in GDP.
Not correct. Though the US commerce department tracks the US GDP that number is often adjusted by the agencies that report the data. The International Monetary Fund, The World Bank, The United Nations and the CIA Factbook all report the GDP for the USA and all other nations and they, quite obviously, try to measure the GDP of all nations with the same yardstick. If they counted the US GDP using one set of measures and Japan or China with another with another, then the data would be worthless.
Please… give these guys a little credit for knowing what they are doing.
List of countries by GDP (nominal)
What have I done?
Ron Wrote:
“the US commerce department tracks the US GDP that number is often adjusted by the agencies that report the data. The International Monetary Fund, The World Bank, The United Nations and the CIA Factbook all report the GDP for the USA”
The US GDP figures from those sources originate from the figures the Federal gov’t publishes. They don’t do independent estimates. What Washington reports, they just copy and paste.
http://wiki.mises.org/wiki/Gross_domestic_product#GDP_Numbers_are_Flawed
According to the US GDP figures, the US economy has grown by about 15% since 2007. Do you honestly believe that is anywhere near correct? The US real economy has declined since 2007.
Hard to decline GDP over 7 years with 0.75-1% population growth per year. Even the additional guy holding a sign saying will work for food . . . buys food, and is additional.
A copy of one of my posts on the Econbrowser thread:
*Ratio of production to consumption
I estimate that the rate of depletion of our remaining supply of Global CNE increased from about 3.0%/year in 2006 to 3.8%/year in 2013.
I would not use the well completions from the MRT as a sign of poor unconventional performance in the Permian. I’m not sure how to embed links, but http://www.mrt.com/business/oil is where they are located. If you look at the most recent list, on 7/20, most listed wells are vertical infill wells in legacy fields.
Dumb browser didn’t load the whole page the first time. The Texas wells listed are almost all infill wells, but the New Mexico wells are mostly unconventional Bone Springs wells.
Hi Ron,
I ran the numbers on the 20 wells you posted. That is a water cut (fw) of 81%. Conventional wells are usually shut in with a WOR (water oil ratio) of 40 – 45 :1, or about a 97.5% water cut. The lifting costs can’t be justified after that. 81% on a completion is (as far as I know) pretty much unheard of. That would be past breakthrough on a conventional water drive well. These wells must be operating on a razor thin profit margin (if any). I wouldn’t think that they could be justified on an ROR bases.
http://www.thehillsgroup.org/
I know of many fields (in the Permian) with wells that have an average water cut above 95% that are profitable. TD might influence the maximum profitable WOR.
What is ” TD”?
Total depth.
From the link supplied by ManBearPig you can find the Permian completions on line.
Midland Reporter-Telegram Business & Oil
Go to the bottom of the page and click on “Completions”. They have the last five weeks listed there. You can get a good idea of what’s happening by checking them out.
And thanks ManBearPig.
BW Hill,
Sorry, that is far too general a statement to make regarding WOR and well economics without being able to ascertain vertical, from horizontal. Many, many “conventional” fields producing from vertical well bores are economical with OWR of 2.5%. Five hundred BTFPD with 2.5% OWR is 12 BOPD; at 100 dollar gross oil per barrel, 20% royalty burdens, 7.5% severance and property tax burdens and 20-25 dollars a barrel incremental lift costs…I would operate wells like that aaaalllll day long. Depends on depth of artificial lift, AF methods and in-field disposal of produced water costs.
Those boys out in the PB did not fall off the turnip truck last week; they know how to handle lots of water, and make money doing it.
That’s vertical stuff. Horizontal wells with artificial lift set in radiuses, at depth’s over 7000-8000 feet, especially ESP (very expensive CAPEX and Kw use), WOR will indeed put a big kink in well economics. Will 20 year old EF and Bakken stripper wells be making lots of water? I don’t know. If so, they will be goners.
Mike
Re: the video in the comments of the previous RonPost.
That guy saying “an oil pad in the Bakken will produce water for 40 years so my job hauling it has job security” — they lied to him. The day his paycheck and diesel and insurance and overall risk exceeds the price of what comes out of the ground is the day that pad shuts, and likely long before 40 yrs.
There in Texas you guys don’t have this truck issue. Permian has been there so long they MUST have pipelines ready for produced water.
Most fields in the Permian that have large volumes of produced water are either on waterflood or some tertiary production method, so they just reinject the water back into formation. Wastewater from fracs is still moved by truck to SWD wells.
Ya that is clear. What was not clear, but now is, the freshwater to frack NoDak wells is also hauled by truck, as is proppant, and oil and production water and the drilling equipment and it’s all narrow dirt roads.
A lot of trucks hauling things in NoDak and there is a sense that the surface area of just a county or two is going to clog up and define a peak as readily as geology might.
Watcher, respectfully (your are a pretty savvy guy); water to drill and frac a Bakken well is not hauled to each location. You see some photos of vacuum trucks backed up to ground reservoirs, or large above ground storage tanks, and you must be thinking they are hauling 200,000-225,000 BW to each location. It is not true.
Professional bloggers who are interested in the practical side of the oilfield have got, GOT, to quit believing everything you read on the internet. Don’t believe me, I don’t care; somebody else chime in. Man Bear, hep me out here, bro.
At 150 BW per load it would take 1,500 truck hauls to supply all the water a typical LTO well uses. That would add a million dollars per well to total costs, minimum. Drill a water well instead, or pump it out of the River, these guys are not dumb; if they can save 3/4 million dollars per well, they are going to do it. Every now and then in the drilling and frac’ing process, you need a load of water…to flush the toilets, to water the roads, whatever. If you see a picture of vacuum trucks backed up to a big surface tank that does not mean they haul all the water. They don’t.
And by the way, lease roads are crushed rock, we can’t afford to pave them. In N. Dakota all that stuff freezes up like two dogs in a parking lot in the winter, and some day its all going to have to get picked up and hauled away anyway.
Watcher, I appreciate it… you have given me an opportunity to bring up Peak Water yet again. Previously, in other posts, I have mentioned that one stinkingshale well uses the same amount of potable, drinkable water that 93,000 people will use in one day. That seems to go plumb over most people’s heads. Don’t trust me, do your own arithmetic. Use 225,000 barrels of water per well (that’s the real deal) and figure it out. Google it. Multiply it times 5000 wells per year in a very dry part of American, use 90 gallons per day per homo being. Does that even register with people who want to predict the future of LTO resources?
How much longer do you think that can go on, y’all? There are cities in Texas that have now taken to having to drink their own sewage to survive this drought we are in.
Peak oil my ass. Without water, peak everything.
Mike
I’ll keep digging.
We do have a pipeline sales presentation somewhere that was saying that it takes 2000 truck trips for a new well – from drilling to 1 year of oil (and production water) output on the calendar. The pitch was selling pipelines. The 2000 was to scare the companies into paying for pipeline.
And I think that presentation was as 30 stages was just getting started. So your quoted trip total is not horribly inconsistent with that pitch.
But your read on this is important. Will keep digging.
https://www.youtube.com/watch?v=GwLt5t7vABM
Here’s that final vid found. Just before Ron posted this Ronpost. Towards the end of it shows the big swimming pool container of freshwater being filled by multi truck trips.
No question if they can drill a water well, that’s the way to go, but . . . at least that well is hauling in freshwater.
Mike,
I agree that water wells are drilled and there aren’t that many truck trips taken, but I disagree that if we are approaching a peak water situation it has much to do with fracing wells. A lot of fresh water is used, there is no denying that. But in Texas, where fracing is huge, water use from fracing is under 1% of the total use of the state. Fracing is a rounding error compared to the water use to grow crops.
“I agree that water wells are drilled and there aren’t that many truck trips taken, but I disagree that if we are approaching a peak water situation it has much to do with fracing wells. A lot of fresh water is used, there is no denying that. But in Texas, where fracing is huge, water use from fracing is under 1% of the total use of the state. ”
This is true and stressed in the NoDak reading to find how the water gets to the well site. Especially for NoDak, an agriculture state, they point out that the well total per year doesn’t even reach 1% of agricultural reqmts.
As best I can see, the water issues for Texas and NoDak are not at all similar.
The water situation is indeed different in North Dakota, I am sure. I would not expect folks to care too much about the amount of water being used to extract marginal shale oil anyway. I think you have to watch your lawn burn up because of water restrictions and try to mentally get past the notion of having to wash dishes in your own sewage water to be concerned about water.
The mantra of the LTO business is 1% of total water use. I have heard that for 4 years, like a broken record. In the mean time in S. Texas water wells are drying up and TDS and TSS content is going up in municipal water wells all along the Carrizo Wilcox trend. In the PB, where it never rains, frac source water is a big deal.
But, if you don’t live here, there, its not your problem. We’re headed for energy independence, right? Giddyup!
Mike
Mike,
I’m not using the 1% figure b/c businesses use it, I’m using it b/c that’s what the data says. I like this presentation: http://twri.tamu.edu/docs/education/2012/em115-presentation.pdf
Go to the slide where it give you bar charts on water use per industry. Compare “mining,” which is all oil and gas use, to other water uses. Prospective is everything. That doesn’t mean that oil and gas production uses small amounts of fresh water, they use a lot, but compared to agricultural and municipal uses it is quite small. Combine that with an increasing use of brackish water for fracs and a move away from water intensive coal fired power plants (http://iopscience.iop.org/1748-9326/8/4/045033/), I just don’t see fracing as a long term fresh water use issue.
I would think that the key question would be the volume of water used in frac jobs as a percentage of local water supply, e.g., in West Texas (and not statewide).
Things that do not physically exist cannot be consumed.
Beyond that virtually everybody I know is reducing their consumption of gasoline except for people who have landed jobs that require a long commute.You may not have noticed but one of the worlds fastest and most highly respected cars – the Chevy Corvette – gets close to thirty mpg in the ’15 model year.I have a friend with an old one that gets twelve to fourteen at best.
I have plenty of reasonably well off neighbors who own big pickup trucks that they don’t drive every day any more. Just about all of them have bought a small car to save on fuel and maintenance and to avoid wearing out the truck.
Spending megabucks on oil subsidies may increase supplies to some small extent for a while.
But there is a hard limit to subsidies. At some point printed money becomes essentially worthless.
We probably are not too far from that point now. I don’t see the PIIGS countries consuming a lot of gasoline. They ran out of credit doncha see?
Then there is the unfortunate fact that many other things are already subsidized and the piglets on the receiving ends of those subsidies are going to fight to retain their hold on one of Momma’s tits.
They range from people on food stamps to unionized auto workers to social security recipients like me to corporate executives whose companies are getting good deals on federally provided loans.Academics whose university departments depend on grants from the government. Farmers paid not to plant crops. Farmers paid to plant crops.
We are drowning in subsidies already. Some body has to actually produce stuff.
If the crude ain’t there ……………..Then subsidies can be provided for coal to liquids. But at some point….. the game is over.
Gasoline consumption nationally and world wide has probably peaked for good.The crude just ain’t there any more to sell it cheap enough to keep consumption rising.
”And by the way, lease roads are crushed rock, we can’t afford to pave them. In N. Dakota all that stuff freezes up like two dogs in a parking lot in the winter, and some day its all going to have to get picked up and hauled away anyway.”
Just what are you saying is going to be picked up and hauled away?I guess gravel is expensive enough these days to scoop it up and move it.I would if some body would give it to me.
Once all these shale wells are abandoned, leases expire and the land should be reclaimed, put precisely back they way it was. Would you want crushed limestone pads and roads all over your ranch, or cropland? Regardless of whether the material has a value or not in my mind removing ALL infrastructure should be part of decommissioning.
Understood, but what happens if the driller goes bankrupt?
And fore sure they will not return the water they pumped from beneath the land. So the rancher or farmer will have a lot less water than he had before.
Well now…. we don’t have wide open spaces around here the way they do in the Dakotas.
BUT I sure wouldn’t mind having a few gravel roads randomly distributed over my own land. Working around them would be a small price to pay for the increased ease of access. Now a drill pad that covers a BIG patch of ground is a different matter.
But I really do think gravel is so expensive – especially if it has to be hauled very far- that scooping it up from an unneeded road would be a very good deal even if you got forty percent soil. The dirty gravel could be used satisfactorily as bed for a new road nearby a lot cheaper than hauling clean gravel more than an hour one way.
Ditto the drilling pads gravel.It could be used again nearly a lot cheaper than hauling new gravel very far.
Any metal above ground can be profitably salvaged as scrap at some point.
The price of gravel here delivered twenty miles from the quarry is double the price at the quarry itself. It costs a lot of money to run a truck these days.150 bucks versus three hundred bucks a load.
Mike said:
“Sorry, that is far too general a statement to make regarding WOR and well economics without being able to ascertain vertical, from horizontal.”
Number one we are talking above vertical. Horizontal does not effect left cost to any significant degree (just the tiny amount of friction in the horizontal). The rest has to do with gravity, short and simple. Since most wells in the US are 4,000 feet or better, it is not possible to lift 97.5% water (which is about a WOR of 40:1) and make money on the oil. A WOR of 40-45:1 has been the shut in point for US wells since day one. If you can beat that you have come up with my old Grandpa’s anti-gravity machine.
PS, any company making LOTS of money with a water cut of 95% is fudging their books. Seems to be a trend now a days in the shale industry.
Mr. Hill, I have no earthly idea what you just said.
Artificial lift in horizontal wells has significantly different dynamics, and costs, than vertical wells. I understand bottom hole pressure, solution gas and water drive mechanisms in reservoirs; the “gravity” thing I am confused about. Mox nix; lots of vertical production throughout America, even below 4000 feet is very profitable with WOR of 95%. Just gotta move lots of water and know how to handle it.
If you were speaking of vertical production then what the “shale industry” does is irrelevant as I do not believe the two, generally, are related. Thousands of non-public companies producing convention resources, that were, and still are, the energy backbone of our country do not need to “cook books.”
Have a nice Friday.
Mike
I guess the point is that it takes a minimum amount of energy even at 100% efficiency to pump a volume of water through a given height against gravity. If your oil well has a water cut of 95%, then there is a maximum depth of well before the energy used to pump the oil and water out exceeds the energy content of the oil recovered. EROEI falls below one just on lifting costs.
Of course, it might still be profitable.
I think they just use down-hole electric pumps for horizontal wells. I don’t know what the cost of instillation is nor the cost of the electricity to run them is. But I understand that they may have to be replaced after about 10 years and that can be very expensive.
Specifically, lifting 1 litre of water 1000 metres against gravity needs about 0.03 KWh. At 95% water cut, the energy in the oil lifted with the water would be about 0.5KWh. At 98% water cut it would be o.2 KWh. Oil at $70 a barrel (well head) is $0.05 KWh.
How much is electricity?
I read that US electricity is $0.12 KWh, presumably retail.
So at 1000 metres and 95% water cut, you get $0.02 of oil for each litre of water pumped, at a cost of $0.0036 in electricity. So electric costs are 18% of the value of the oil. at 98% water cut it is 45% the value of the oil.
Those numbers look accurate but may not be correct.
Because . . . two miles of rock above are pressing that oil to the low pressure aperture going to the surface and helping the pump per the gushers of yesteryear. And then we have accompanying nat gas and NGLs thinning out the stream.
Hmm, but nat gas is heavier than air, which makes the pump’s job harder.
Pretty solid calculations there, but I would not be surprised if they are wrong, in either direction, or not at all haha.
Hi Mike,
Your comments on the water issue in TX lead me to dig into this a little so I wanted to share this article from the Texas Tribune. I am not from Texas and have no idea how reliable their reporting is (some papers are better than others on fact checking).
http://www.texastribune.org/2014/02/18/water-fracking-counties/
From the article linked above (from Feb 18, 2014):
The first five counties in the chart, along with Gonzales County, are all in South Texas’ Eagle Ford Shale, where drilling activity is increasing daily. In McMullen County, where the population is less than 1,000, more water was used for fracking in 2012 than the entire county used in 2011. The share of water used for fracking in Webb County is much smaller than the entire county’s water use because that county includes another large water user, the city of Laredo.
Glasscock and Irion counties, also in the top 10, are in West Texas’ oil-rich Permian Basin, where water recycling and the use of brackish water is likely more prevalent because of the geology in the region: When water is sent underground for fracking, a large portion of it comes back to the surface and can be reused. Despite having a population of less than 2,000, Glasscock County’s overall water use is quite high even when hydraulic fracturing is not considered, because agriculture is a major water user in the county, where irrigated cotton farming dominates.
It does look like water is a big issue in Texas, hopefully the Texas legislature tries to address the problem part of which is the right of capture rules in TX, which could be rewritten, along with better state oversight of the water districts. Those issues are decisions to be made by the people of Texas.
Chart below.
Dennis, good stuff, thank you.
Its important to distinguish West Texas counties from South Texas counties; all of the water withdrawal for LTO in the EF play comes from one single source, the Carrizo Wilcox. It is I believe the 2nd largest groundwater aquifer in Texas and all of South Texas relies on it for everything. Dimmit, La Salle, Karnes, McMullen, Webb (which is more or less in the dry gas leg of the EF and not getting a lot of wells drilled in it) and Gonzales Counties are all in the EF. Gonzales County is full of rigs (EOG’s hood); I don’t believe that particular number in your graph.
West Texas, because of severe drought and groundwater issues, is indeed taking the lead on recycling produced and spent frac water. Mr. Jeff I hope would confirm that a lot of source water used in hydrocarbon extraction in West Texas happens to come from the largest groundwater aquifer in Texas, the Ogallala. South Texas is not in too big a hurry to recycle because of the massive Carrizo Wilcox. They’ll catch up someday, I hope. Most of the pressure I believe will come from private land ownership. Lots of minerals in Texas are severed from surface ownership and who owns the surface, owns the water under the land. That is getting to be a bone of contention in this stinkingshale play also. Water rights issues are as old as Texas and will not be changed very soon, I can assure you. We are a proud lot down here and private ownership is often worth fighting to the end for.
Again, you have to be running out of water to understand the significance of it, and to be concerned about it for the future of your children. You can’t google stuff like that. I understand why some are trying to refute my concerns. Nevertheless, in Texas we seem to be in a race to which is going to poop out first, shale oil or water.
Mike
Hi Mike,
The fact that you live in Texas likely makes you much better informed on the water issues of the state. If there is something about the water rights rules in Texas that could be changed to improve the water situation, then hopefully that will be done, but as I said that is up to the citizens of Texas to figure out. There was a time when oil production was not regulated very closely in Texas and it led to problems. The rules were changed (as far as I understand) when the RRC took on the regulation of the oil industry. Maybe they should hand over water to the RRC as well or create a TWC (Texas Water Commission) to regulate water in TX?
Re: Texas RRC numbers
Do you have any idea where most of the propane (LPG, Liguified Petroleum Gas) is coming from in those charts? Is most of it coming from “Condensate”? Are there any rough averages of what percentages of LPG is in the various outputs?
Thanks.
Jon, I am not an oilman and only know what I have absorbed from my years on the net studying about crude oil and other hydrocarbons. But propane is separated from natural gas at gas plants that process natural gas. The gas coming out of the ground is about 75% methane according to a link I found.
Chemical of the week
Methane is a colorless, odorless gas with a wide distribution in nature. It is the principal component of natural gas, a mixture containing about 75% CH4, 15% ethane (C2H6), and 5% other hydrocarbons, such as propane (C3H8) and butane (C4H10).
So natural gas, from the well, is 90% methane and ethane and the rest is propane and butane. Condensate is mostly pentane.
The gas plant can never remove all NGL from the gas. Natural gas in the pipeline to your house is from 95 to 98% methane, or so says the links I found on the net.
The Permian is smoke and mirrors. It is talked up so much because there’s too much cheap money chasing too few things that yield decent return. So people are trying to buy themselves some oil wells, and the wells get drilled regardless of profitability because otherwise it breaks financial covenants.
And yes, this is as dumb as the housing boom. It will end the same way, as plenty of articles with no skin in the game have noted.
Get real. The miraculous energy revolution we are seeing right now in the United States is the greatest thing to happen in the country since we got Europeans hooked on tobacco and sugar. More millionaires are made out of ordinary people every day than ever before. You own some land that previously had you working from dawn to well after dark to eek out a poverty level living from now is suddenly a gold mine. People living in the middle of nowhere with very little to do and no real prospects now have purpose and now have opportunity. Take for example a person that was living off food stamps in run down conditions can now do something as simple as wash clothes and make a fairly good living. Trust me as somebody who provides consultant services for economic development corporations in areas with large oil development when I say someone working in the oil patch has very little time to wash clothes and you are very willing to pay to have it done. You have no time to cook food, so you eat out. This provides employment. The examples keep going on and on.
I know for a fact that you cannot drive 1000 yrds in Midland/Odessa these days and not see a banner wanting help. $50,000 a year for assistant manager at Whataburger. Equipment haulers, water haulers, oil haulers, rig haulers, chemical haulers, rig hands, roustabouts, mechanics, electricians, welders, plumbers, pumpers, gas plant operators, disposal hands, convenience store workers, grocery store workers, security personnel, gate watchers, equipment operators, pipefitters, general construction building housing with all housing trades needed, the list is endless. Places like Midland, Odessa, Victoria, Williston, Towanda are just about paved over by gold for anybody who is not afraid of work.
There is something repeated over and over in these areas where there is abundant oil and gas…If you do not have a job where there is oil and gas, you do not want to work. Simple as that.
My advice to anyone who wants a job and is willing to work hard is to seek out these opportunities. You can sit around and blame Wall Street, Fat Cats, the 1% , the Man or whoever. White, Black, Brown it does not matter, the money is green and they do not care who they pay it to as long as you are willing to earn it. It is absolutely true, a guy with no high school diploma can make $80,000 a year OR MORE working in the oil fields. All you need to start with is a strong desire to work.
“Trust me as somebody who provides consultant services for economic development corporations in areas with large oil development”
What’s an economic development corporation?
From Wikipedia “An economic development corporation is an organization common in the United States, usually a 501(c)(3) non-profit whose mission is to promote economic development within a specific geographical area. These organizations are similar, and complementary, to Chambers of Commerce.”
Basically an organization that does whatever it can to bring perpetual economic growth in the form of jobs and prosperity to its community or region.
Chambers of Commerce are incorporated? Didn’t know this. Do they go to Delaware to do it? That would be cool.
Hawkeye nobody here ( so far as I have noticed at least) denies that tight oil has created boom times in the tight oil fields.Hell if it weren’t for looking after my old Daddy I would probably be up in North Dakota myself doing one of the jobs an old guy can do and raking in some of that dough.I could still drive a Cat truck especially a new one with an air ride seat and air conditioning. I could still run a tool room or a maintenance shop. I could run a hotel. I could even still weld pipe in a fab shop but I couldn’t work all day any more all hunched up in a tight corner on my knees.
The primary focus of this site and similar ones is on the rise and fall of the oil industry. We are here because we want to know how long that boom is going to last and how high production will go before it starts to fall off and how fast it will fall off.
The North Dakota fields may last for a pretty long time but they are not going to save the world.
BUT tight oil IS having a very salutary effect on our overall economy no doubt and it is probably the only thing that is saving the rest of the world – temporarily at least –from having to pay another twenty or thirty bucks a barrel for oil right now since our rising domestic production is freeing up the same amount of oil for other countries to use.
For what it is worth- my opinion is that you should grab every dollar you can and run with it because the bonanza days are probably going to last only a few more years.I wouldn’t mind being wrong though. If diesel were still cheap I could tour the country in a big old motor home and I wouldn’t be spending so much running my old farm trucks.
Rust and depletion never sleep.Hat tip to MR SIMMONS
Is it just me, or is the RATE of increase in total US oil production in the last few years declining (even allowing for seasonality):
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W
Might be just you. I don’t see any flattening.
I did not mention flat lining (yet). I mentioned RATE of increase.
2012 Jan average 5.753mbpd
2012 Dec average 6.921
Annual increase 1.168, 20% rise
2013 Jan average 7.005
2013 Dec average 8.09
Annual increase 1.09, 15% rise
2014 Jan average 8.1
as of July 2014 average about 8.55 – means they have to get up to 9.35 by December 2014 to keep up with previous years rate of change of 15% ie add another 750,000 in the last 5 months.
I don’t think they will do that. Ergo the RATE of increase is declining.
At a given gross decline rate from existing production, the greater the production, the greater the production decline from existing wells. Of course, the gross underlying decline rate has probably increased too since 2008.
Let’s assume that the gross underlying US decline rate from existing oil wells was 5%/year in 2008 and 10%/year in 2013. And let’s assume that the 2014 US C+C production averages 8.6 mbpd.
Based on foregoing, in 2008 we lost 250,000 bpd from existing wells (5% of 5.0 mbpd), and in 2014 we would lose 860,000 bpd from existing wells. So, again based on foregoing, a 72% increase in production would correspond to a 344% increase in the volume of oil lost to declining wells–from 250,000 bpd per year to 860,000 bpd per year.
Based on foregoing, in order to hit 9.0 mbpd in 2015, the industry would have to put on line about 1.3 mbpd of new production in 2015.
In other words, the greater the production increase, the closer in time that the region is to the point at which contributions from new wells can no longer offset the declines from existing well, which is why Peaks Happen.
Hi Jeff,
Your explanation for why peaks happen actually explains why a plateau will happen. If the rate that new wells are added remains constant and new well EUR does not decrease a plateau will result eventually, but the peak is only explained by a decrease in the rate that new wells are added and/or a decrease in well productivity (EUR) unless we wait for many years (more than 25 years in the case of the Eagle Ford).
At some point we may reach a physical limit, in Texas the likely limitation will be water.
The main limitation for an oil field is the area of the play, eventually all the best spots will be drilled and then less prospective areas must be drilled or drilling must stop. As these “non-sweet” spots will produce less oil per well, the lower profitability will reduce the rate that new wells are added and the field output will decrease. Until the average new well EUR starts to decrease or the well completion rate decreases, the rate of increase of field output will slow down, but it will take quite a long time for the field output to reach a plateau.
To illustrate what happens if the new well EUR remains constant and the rate that new wells are added remains constant, I created an unrealistic Eagle Ford model with constant new well EUR= 210 kb (over a 30 year well life) and with the rate that new wells are added at 2750 new wells per year from 2014 to 2040. The plateau is reached in 2035 and no decrease in field output occurs through 2041.
I do not think this scenario is remotely plausible, the point is that only a plateau will result under these unrealistic assumptions we need a decrease in the well completion rate or new well EUR in order for field output to decline in the near term, see chart below.
A more realistic Eagle Ford scenario with a TRR close to David Hughes model of about 7 Gb, it is assumed that real well costs increase at 1% per year over the 2015 to 2018 period and otherwise remain flat, real oil prices increase at 3% per year starting in August 2015 and remain flat until that time, annual discount rate is 10% (7% in real terms), OPEX is $4/ barrel, oil transport costs are $3/barrel, royalties and taxes are 24% of wellhead revenue. Income from natural gas is ignored and economic calculations are on a point forward basis.
The ERR based on these assumptions is 6.4 Gb over the 2009 to 2073 period, peak is about 1500 kb/d in 2016 and about 27,000 wells are producing in 2030.
Water issues may cause well costs to rise faster than this scenario assumes (recycling water or treating brackish water will raise costs), in which case the ERR will be lower. I have also assumed that David Hughes analysis, which suggests about 7 Gb from the Eagle Ford, is correct and have raised the TRR from earlier scenarios by about 1 Gb (from 6 Gb to 7 Gb).
The water issue is likely to reduce the ERR by at least 1 Gb.
This is a lengthy investigative article that puts particular emphasis on the political and social ramifications of the Bakken boom. Recommended reading if that side of the story interests you.
How oil and gas firms gained influence and transformed North Dakota
There are only four roads into the western oil fields, and one of them, Highway 22, heads straight north from Dickinson. Almost immediately, trucks begin to dominate the traffic. Warehouses line the road, labeled with the logos of oil field giants like National Oilwell Varco and Marathon Petroleum. Wells appear. Pretty soon, nearly every vehicle is connected to the drilling — most of them semi-trucks — and a well or drilling rig is always within sight….
Some of the most intensive drilling activity is centered around New Town, which sits within the boundaries of the Fort Berthold Indian Reservation and also in the district of state Rep. Kenton Onstad, the Democratic House minority leader. On a bright June day, Onstad was driving a white Chevy Silverado down a gravel section-line road — the land here is divided into a grid of 640 acre sections — lined with well after well, one every few hundred feet for a mile. Down another road, he pointed out a well that he said had been drilled in a flood zone, just a couple of hundred feet from a creek that ran directly into Lake Sakakawea, a dammed stretch of the Missouri River that provides drinking water and irrigation to much of the state. The Department of Mineral Resources has essentially rubber-stamped drilling permits as they come in, he said, ignoring whether they’re in environmentally sensitive areas or whether roads could handle the traffic….
Nearly three years ago, a picture began circulating on the Internet showing a satellite image of the middle of the country. The photograph, taken at night, showed what looked like a sprawling megalopolis glowing in western North Dakota. The lights were flares of natural gas, many of which burn for months or years. The fossil-fuel rich rock formation that energy companies are tapping, known as the Bakken, holds both oil and gas, and there’s no way to extract one without the other. But while oil can be trucked away from a well site, gas requires pipelines and processing plants, and North Dakota has few of either. Because the oil is worth much more than the gas, and because energy companies have been racing to drill before their five-year leases with mineral owners expire, the drillers stand to make more money drilling as fast as they can even if they’re wasting gas they might otherwise sell. The gas they burned off in 2012 was worth about $1 billion, according to a report by Ceres, an advocacy group that pushes for sustainable investing, and released the greenhouse gas equivalent of one million cars. Flares also emit noxious pollutants including benzene, a known carcinogen.
North Dakota addresses flaring in two ways: administrative rules restrict flaring on a field by field basis — generally by limiting production if companies flare for more than 60 days — while state law allows companies to flare for up to a year without paying royalties or taxes. Those limits are much less stringent than in other states — even oil-friendly Texas allows for just 10 days — but the Department of Mineral Resources has issued countless waivers to the rules, [spokeswoman Allison] Ritter said, allowing companies to continue flaring because they demonstrated that capturing the gas was not economically feasible. Ritter said comparing North Dakota to other states is unfair. For one thing, drillers in North Dakota were looking for oil, not gas, and Texas has many gas fields and, therefore, a large infrastructure prepared to handle extra gas from oil wells. Officials also point to North Dakota’s harsh climate as a limitation, noting that companies can dig for pipelines for barely half the year….
[This month] the Industrial Commission announced that it would institute targets for reducing flaring, and would require that companies curtail their oil production if they are not hitting those targets.
The goals, however — cutting flaring to 26 percent of all the gas produced by the end of this year and dropping the limit gradually to no more than 10 percent by 2020 — were set by the industry itself, in a series of recommendations it gave to the commission. Companies also must now submit plans for capturing the gas when they apply to drill a well, another recommendation from the industry.
The rule has met mixed reviews. Notably, the targets are percentage-based, meaning the total volume of flared gas may not drop as quickly as the figures suggest, since production continues to increase. Dan Grossman, regional director of the Environmental Defense Fund’s Rocky Mountain office, was happy to see the commission tie production to statewide flaring targets, a move he said the industry fought. Grossman said the rule is a good start, but that North Dakota still has a long way to go to catch up with other oil and gas producing states. “They’re all below 10 percent,” he said. The federal Bureau of Land Management is also developing rules for wells on federal lands.
In an interview before the rules were announced, [Lynn] Helms, the regulator, defended his department’s approach to flaring, saying that the wells turned out to produce far more gas than anyone expected and that there simply was no feasible way to capture more of it.
“We try really hard not to give the industry any more input into the rulemaking than we give the landowner groups,” Helms said. “I will say that typically, when industry comments on rule making, they have engineers and geologists and lots of technical experts at their disposal, and so their comments are often much more to the point and make a huge difference in terms of what the final rule comes out like.”
Morrison, of the Dakota Resource Council, put it a different way. “How do things work? North Dakota state government says, ‘What should we do?’ And then the industry comes back and tells them how to do it.”
Industry dictating rules on some highly technical matter probably isn’t all that outrageous. They may have all the experts.
One thing some reading is making surprisingly clear is the workers in NoDak generally do not last a year. This is not a huge voting bloc that can dictate government policy. They probably never get around to registering to vote. Though, the state reps of the four counties don’t really need to be pressured by the oil workers. The people who are permanent residents of Williston were going to vote that way regardless.
We’ll see in January if Helms is going to actually use teeth. I would note that will be an easy month for him to make someone an example. They probably would not be producing much that month anyway.
Over the years I have had occasions to fly from Los Angeles to Houston. The Permian Basin is impressive from 30,000+ feet. Try Google Earth if interested. http://restance.wordpress.com/2011/04/26/new-topographics-photographs-of-a-man-altered-landscape/cluipermianbasin/
A trip to the moon on gossamer wings.
Now look, the oil is not going to be depleted, it will always be there. Someone is going to be smart enough to find it wherever it is and the chickens will never come home to roost. So there, harumph, and all of that nonchalant jazz. All of those charts represent conjecture, projection, all bunkum and bosh, as we all shall soon see.
What? Me worry?
The oil will never run out and there will always be more somewhere, so why all of the fuss and bother with the Peak Oil scam?
Jeesh, get real.
I saw pigs flying today too, so it must be true, the oil drum will never run dry.
If I paid 27 cents per gallon for gasoline in 1970 and earned 3.27 per hour, then my wages should be approximately 15 times more or in the range of 51 dollars per hour. Ergo, if the price of gas is 3.60 per gallon, then your average wage should be in the range of 102 thousand dollars per year for the average Joe working stiff to make a go at it in this life.
If you aren’t making 102 thousand dollars each and every year to live a decent life style, then the gov needs to provide the shortfall of dollars so working stiffs in this world can live the Life of Reilly.
The answer is more government assistance and more oil, not jobs that pay eighty grand per year to fill the coffers of every tax collecting entity out there. You are a pure fool to work for a measly eighty grand per year.
80 grand per year is wage slavery too. Wall Street loves it, more money for them.
Anybody making less than 10 million dollars per year lives in poverty.
Gasoline in KSA is about 45 cents/gallon.
It is even cheaper in Venezuela unless the subsidy has been cut lately. Haven’t checked.
But these are only two countries and relatively small ones.
Countries such as Egypt are struggling mightily just to subsidize bottled gas for cooking.
Printed money does not pay for a damned thing. It merely shifts the payment to whoever is holding preexisting cash. There may be a considerable time lag before this becomes obvious however.
Note that Indonesia and Egypt maintained their petroleum consumption subsidies all the way down to zero net exports. Once subsidies are in place, it’s pretty hard to get rid of them, and one can cite US examples.
India has a huge subsidy to go with a rising pop. Latest election the winner said he’s cutting the subsidy. That will last right up until the polls show anger at price increase.
Egypt’s subsidy issue is an IMF issue. IMF won’t lend money if a country is subsidizing energy. This is part of the reputation the IMF has as a GDP killer.
Oil consumption has a population derived minimum for food growing and transport and spare parts transport, which would exist at zero GDP. If you want something more than zero GDP, you will burn oil and a lot of it.
Note an interesting thing . . . the alleged US subsidies (which never seem to deduct gasoline taxes) are not at the consumer level. Most international subsides are at the consumer level.
Bottom line, the candidate who promises to subsidize gasoline prices is the guy who is going to get elected. This means higher price generates subsidies and that raises consumption. As we’ve seen, you can print money with impunity if all central banks cooperate and don’t punish you, so there will be nearly no limit to those campaign promises until EREOI kills lots and lots and lots of people.
On the other hand the Germans elected the Greens about 15 years ago on the promise to raise the price of gas to €5 a liter, or say $25 a gallon. Didn’t happen, but $8-$10 gas did. I don’t think there is any iron rule that says oil has to be cheap.
Let’s put thing in perspective. First the average German can afford to pay a lot more for gasoline than the average Venezuelan. Second, the German leadership is not worried about political insurrection or riots in the streets or lynch mobs overrunning government buildings.
And there is an iron rule that states that the more you spend on gasoline the less you have to spend on everything else. When a person lives on very little income, as most Venezuelans do, every penny spent on gasoline means they have less to spend on food or other necessities.
What first world Europeans can afford to pay for gasoline cannot be compared to what third world near paupers can afford pay.
And THAT . . . is why those delightful little mazamascience black lines for China and India are going to keep punching up.
You can cut subsidies any time you think you are green. And then you can write op eds criticizing the guys who beat you in the next election.
I find the comment of Hawkeye above to be quite short sighted.
The current boom of oil production in the United States is not sustainable. The demand doesn’t exist at higher prices, and the whole operation is financed by big banks who borrow from the Federal Reserve at close to zero percent. Depletion is relentless.
We are very, very close to widespread bankruptcy in the entire oil sector.
Low cost money isn’t the problem. Its the high cost money – all the private money being raised by promising unrealistic annual returns because, hey, its an oil well. This money raised from people who have never been to North Dakota or Texas and know nothing about the industry
Even at current prices and relatively good wells, most of these investments are *barely* profitable, if that. Certainly not at the rates they promise. A lot of wells are sunk to keep leases (used to raise the money) or meet covenants. That both means extraordinary high, disorderly extraction (as Iran how that works out…) and reasons for drilling that have nothing to do with what comes up. A lot of this “boom” money is coming from New York, not from selling what is underground.
Too many marginal companies and marginal finance that don’t care at all about sustainable production.
Furrealz? That’s mavlslouery good to know.
Using the latest RRC data up to May and the previous data up to April, I computed the amount of corrections that each month should undergo to be close to the real data. In doing this, I consider only the last 24 months (older months have only negligible corrections): what I did was to sum for each month the corrections which took place in the previous “h” months, where I put h=24 for computational simplicity.
For example, the correction for the last month (which is one subject to the highest degree of corrections over time) were equal to 341470 bbl/day (only oil , no condensate).
By doing this for all the past 24 months, I reconstructed the supposed “real” Texas oil production data. The result is the figure attached to this comment.
In may there was a good rebound of oil production probably driven by the Permian. The correction factor continues its decreasing trend.
Dean F. Wrote:
“In may there was a good rebound of oil production probably driven by the Permian. The correction factor continues its decreasing trend.”
No Water in the Permian:
https://www.hcn.org/blogs/goat/permian-basin-in-new-mexico-and-west-texas-americas-newest-fracking-boom
“Water is one of the key ingredients facilitating the boom. In the Permian Basin, like many other oil and gas producing regions, water is scarce and over allocated. A new report by Ceres, a Boston-based environmental non-profit focused on sustainable investing and business, found that more than 70 percent of the Permian’s oil wells are in areas of extreme water stress, which means over 80 percent of surface water and shallow groundwater is already allocated.”
[Its Drilling is likely to peak soon, if not decline]
Thanks for the information!
The same correction for condensate is here:
Oil + condensate is here:
oil + condensate
This C+C plot doesn’t look like it’s flattening to me, yet. It’s recovering from a bad spell.
But whether or not it is going to get back to the strong uptrend should be visible in the next few months. If it goes past, then extra stages are making a difference.
The EIA has Texas C+C increasing by 49,000 barrels per day in April to 3,010,000 barrels per day. I will wager you that when the final count comes in for April Texas will not be producing 3,000,000 barrels of C+C per day.
Texas C+C increase rate is most definitely slowing down.
Hi Ron,
I agree, but think it likely that by July 2016, the RRC will be reporting about 2950 kb/d for statewide C+C production in April 2014. Usually the EIA is high by about 1.5% for its initial TX C+C estimate compared to the actual output which is finally reported by the RRC about two years later.
Natural gas is here
The EIA data up to April and mine up to May (expressed in thousand barrels per day) are here:
Question: Does anyone know what kind of purity is required of frac water? Can the water pulled up with the oil be used? You know, the “barrels of water” that comes up with the “barrels of oil”. Or can salt water be used straight from the ocean?
Looked into that some time ago. Answer: no. Gotta be fresh. Dunno why.
Tons of startups or hype about having a way to “recycle”, but don’t think it works.
You’re probably following the Mike, Bearguy thing about where the water comes from. Sure looks like underground in TX and not underground in ND. Lots of indication of that, but it sure would be nice to have someone driving freshwater trucks in ND to post and confirm or deny.
Elaboration. Those vids of production water hauling (what comes up with the oil) are chock full of H2S meters and this safety check and that safety check. There is probably a lot more in the water than salt.
At the moment water has to be pretty fresh (<3000+-TDS) to be compatible with gelling polymers, friction reducers, that sort of thing. They are working on that, however, and starting to find that more brackish water works OK with new polymers that are being developed. Can produced water (spent frac water and/or bound formation water) be used again? No, not without filtration of suspended solids, residual oil and TDS, that sort of thing. They are working on that, a little, but it is not cheap. At least in the EF there is no really bad stuff to recycle out, like radon or whatever it was that is found in the up-dip areas of the Marcellus in New York that completely shut that part of the play down forever.
Ocean water, no. Not yet. Chlorides are too high for polymers to thicken the water.
In spite of the drought, and lack of recharge into the primary groundwater aquifer, the shale dudes will keep using potable water until someone tells them they can't anymore. Regulators are starting to mumble about it. Because water is subject to rule of capture principles in Texas, and privately owned underground, lots of landowners who own the water also own the minerals and were willing to sacrifice one, for the other. That's changing, I am told. As water tables go down and wells dry up in areas of high withdrawal (sweet spots), some ranchers are saying enough is enough. Recycle or else. Unfortunately, cattle use to be king in S. Texas, now royalty income is king.
I remember reading something in the write up by a company claiming to be able to process production water to make it frack friendly . . . something like this — “we also extract the radioactive stage markers used to trace which stage is producing the most oil. We can get that out of the production water, but it requires extra work and money.”
Now that’s scary.
The situation out west:
Drought drains critical US water supply
http://www.ft.com/intl/cms/s/0/257fc542-135a-11e4-84b7-00144feabdc0.html#axzz38TwvLyTw
In regard to the effort to tunnel under Lake Mead, I remember talking to an employee of the Las Vegas water authority, circa 2008 or so, and when she described this plan, I literally thought that she was joking. It sounds like something out of “The Onion.”
NYT article on same topic:
http://www.nytimes.com/2014/01/06/us/colorado-river-drought-forces-a-painful-reckoning-for-states.html?_r=0
Mike,
You are closer to the action than me, so I am just throwing this in for debate but the wells I was involved in with fraccing, used Guar gum as the major thickening agent. I don’t know if anything else was used, but it was a slick water frac. Now I have used guar gum drilling holes with straight sea water, and even cross linked it with borax, so guar definitely gels in salt water. Xanthan gum on the other hand, needs fresh, but I don’t if it is used in frac jobs. If you have any other details so we can try and sort out the big picture, it would be appreciated.
I was thinking along the lines, that the Sodium salts would make the shale swell, and that may have been the reason for not using salt water. But that was purely my thought process.
I don’t know the answer, but then I have not seen anybody go into detail of why it must be fresh water either. It is crazy the amount of secrets that surround fraccing.
Apache is using brackish water and some recycled water:
https://www.hcn.org/blogs/goat/permian-basin-in-new-mexico-and-west-texas-americas-newest-fracking-boom
“Still, there is at least one oil company operating in the Permian that’s trying to cut its water use. Apache Corporation recycles fracking water and supplements it with brackish water pumped from aquifers, reducing its consumption of fresh groundwater. But there’s a catch: in some parts of the Permian Basin, there is no fresh water to be found. “Using brackish water looks good on paper, but there is no other choice,” Nicot says. “They could use fresh water, but they’d have to ship it from 15 miles away. So it doesn’t make sense.”
In the Bakken, Statoil has also been working on using produced water in well completions. There is a presentation at http://www.ndoil.org/image/cache/Darren_Schmidt.pdf. Apparently for the first time this past May they completed two wells with 100% produced water.
That presentation is also the first I’ve seen that details the chemical composition of the water produced by Bakken wells.
http://www.businessweek.com/articles/2014-07-23/texas-mexico-oil-pipelines-offer-cover-for-smugglers-violence
http://www.reuters.com/article/2014/07/25/citgo-pete-pdvsa-mergers-idUSL4N0Q00HR20140725
Desperation for cash from PDVSA. Selling cash-flow generating assets for a one-time infusion.
Scientists at the University of California, Irvine, and NASA analyzed data from a satellite that measures underground water reserves to calculate that the Colorado River Basin has lost 65 cubic kilometers—that’s 17.3 trillion gallons—of water between December 2004 and November 2013. That represents twice the capacity of the United States’ largest reservoir, Lake Mead in Nevada. Most worrying, 75 percent of the loss came from groundwater supplies.
“We don’t know exactly how much groundwater we have left, so we don’t know when we’re going to run out,” Stephanie Castle, the report’s lead author and a water resources specialist at UC Irvine, said in a statement. “This is a lot of water to lose. We thought that the picture could be pretty bad, but this was shocking.”
Terrifying, actually. Groundwater reserves have accumulated over thousands of years and recharge at an exceedingly slow rate as rainwater and snowmelt seep into the ground. Rain is rare as the current drought enters its 15th year.
The data indicates that farmers and cities are pumping far more groundwater than can be replenished. At some point, the well will run dry.
http://news.yahoo.com/drought-apocalypse-approaches-colorado-river-basin-dries-221214264.html
The water situation in the Southwest is far more serious than people seem to grasp. Its like they know they can’t run out because they’re First World and that’s a Third World problem.
Bad surprises coming…
Interesting article posed on the Econbrowser website:
Trolls just want to have fun:
http://scottbarrykaufman.com/wp-content/uploads/2014/02/trolls-just-want-to-have-fun.pdf
Very good summary of global supply/demand issues, including oil intensity and GDP here:
http://www.resilience.org/stories/2014-07-25/iea-oil-market-forecast-optimistic-assumptions-and-an-economy-unable-to-grow-out-of-its-problems
And here is the EU at least attempting to grasp the nettle of this issue. For economic growth, or perhaps in deference to all you grumpy old doomsters, I should say; for economic non-collapse, is certainly going to require the decoupling of liquid fuels use and GDP:
http://www.theguardian.com/environment/2014/jul/23/eu-agrees-to-improve-energy-efficiency-30-by-2030
That’s euphemism for magical generation of enormous amounts of horsepower with no oil — particularly, one supposes, tiny nuclear reactors on trucks generating 350-400 of those ponies.
Because, after all, if you don’t ship it, it’s not GDP.
The article is written around a proposed thirty percent improvement in energy efficiency by 2030.
Personally I believe that should be easily achievable from a tech standpoint and practically achievable but maybe not so easy from a political and economic standpoint.
Given that liquid fuels are used mostly for transportation, agriculture, and construction, with transportation being the lion’s share a forty percent or so improvement in fuel economy across the board by then would probably just about do it in the transport sector- but of course there will still be many millions of older cars and trucks on the road pulling down the average.
Just slowing down would be enough to increase fuel economy substantially and when gasoline and diesel get to be uber expensive we will see action on that front.A fifty percent or better improvement in personal transportation could be achieved by truly downsizing cars and lowering speed limits without any new technology or engineering.
I am a world class rolling stone and have driven trucks quite a bit- anybody can learn how in a week or so and I learned on the farm before I was old enough to get a license.If you slow down from pedal to the metal sixty to seventy mph with a big truck to forty five mph everything else held equal the improvement in fuel economy is awesome- you will go at least a third farther per gallon.
Beyond that trucks in general have not yet been very well optimized for fuel economy but that is changing fast. Newer models are better streamlined and have more efficient engines and tires that roll a lot easier. They are also a little lighter and thus able to haul a little bit heavier payload legally all of which cuts fuel expense per ton mile significantly.
The real question in my mind is what can be done – and what will be done- in upgrading the many millions of older houses and commercial buildings to improve energy efficiency in these buildings.
The car and truck fleet will have mostly turned over in fifteen years. The housing and larger building stock will be pretty much the same as it is now.Not that many new houses will be built and not that many old ones will be torn down.
The best hope of making the goal so far as buildings are concerned probably involves either subsidies or tax breaks for building owners or else simply forcing them to upgrade.Forced actions of this sort tend to backfire badly on the political front.
There is not a whole lot of room to improve the fuel efficiency of agricultural and construction equipment.Such machinery is already designed with fuel economy in mind as one of the very highest priorities. There is no point in slowing down a tractor since even the fastest ones don’t go fast enough for aero drag losses to matter.
“.A fifty percent or better improvement in personal transportation could be achieved by truly downsizing cars and lowering speed limits without any new technology or engineering.”
I am not sure lowering speed limits would improve fuel efficiency. Consider that slowing speed limits will lead to more traffic congestion causing more fuel to be wasted. More people will travel longer distances to avoid congestion, etc. Most cars have gearboxes optimized for 60 mph. Speed reduction requires the vehicle to operate at a lower gear which will likely consume more fuel to travel the same distance.
It doesn’t really matter, since demand has way outstripped supply (recall Kopits presentation that global demand for oil should be about 120M to 140Mbpd). Improved efficiency will just mean more drivers driving more mores. China has outstriped US auto sales (selling about 22M cars, US ~14M for 2014).
A more reasonable solution would have been not to rip out the railroads is they did in between the 1960s and the 1980s, and put more money into mass transit instead of super highways. But it way too late to implement this now.
The only quick, partial solution is to permit information workers to work at home or some sort of business co-op office so they don’t have to commute into the office. The technology already exists but most employers fear that workers will be less productive when they work at home.
“The best hope of making the goal so far as buildings are concerned probably involves either subsidies or tax breaks for building owners or else simply forcing them to upgrade.”
Force is not necessary. Companies are very motivated to cut costs, and that includes energy in-efficencies. Part of the problem in improving building efficiencies is the gov’t red tape that makes upgrades take twice as long trying to follow the stack of regulations that they need to comply with. Towns, cites, states, all have there own set of distinct rules and regulations that must be followed. It would be better to just standardize and simply them to one set so that contractors don’t need to spend six months reading them, and putting to together a gov’t approved implementation plan.
The argument that people will drive more is based on Jevon’s paradox – which is valid in my estimation in theory and in practice but only if all conditions are held constant and the time frame under consideration is a fairly long one.
But conditions as you have pointed out yourself are not holding constant.Most drivers in my estimation are not going to drive a WHOLE LOT more no matter what because they are situated personally in such a way as to prevent their doing so.Mr Commuter might consider a job a half hour farther away of course but generally people are locked in by the location of their jobs and their homes over any moderately short time span such as less than a decade.Maybe they would hit the roads more on vacations and weekends but thats about it.
Lowering speed limits can certainly induce traffic jams but on the other hand if people using freeways- which is the only place they would likely ever be lowered noticeably- can’t travel as fast it would also over the long term give them an incentive to stick closer to home when hunting jobs.
It is quite commonplace for people to drive across town these days and do exactly the same job whereas if they swapped jobs each of them could drive eighty percent less commuting. In my community I have noticed over the last few years that the number of people working low paid jobs (such as in fast food ) who are staying put is increasing dramatically. When I casually mention this to such a worker they usually respond that having finally found something ” close to home” they are not turning loose of it.
Now as to people voluntarily making improvements- the ones who have ” sharp pencils” and readily available capital are prone to do so if managing their own money. I for instance have done all I can within the limits of my resources to cut my energy consumption for economic reasons more than environmental ones.
But most businesses are not run by people managing their own money and cash flow and or short term profit is the key metric by which managers are usually evaluated.Not many managers are willing to forgo short term cash for modest monthly savings over many future years.
I have myself driven a gas hog truck for the last ten years not because better trucks are not for sale but because it is paid for. The money I could save on gas would be lost in making payments three or four times over and I am perpetually short of cash.That three or four hundred monthly cash is more important than saving a fifty hundred bucks a month on gasoline.( Part of it has gone into double glazed windows and led lights and other energy efficiency measures such as vinyl siding over stryofoam on the masonry walls of our old house.Part of it has gone into buying land and equipment that enable us to earn more additional money make more than a new truck would save.)
But one thing is for sure. Once the old large 4×4 truck is finally worn slap out I will buy one that gets substantially better mileage-partly because the manufacturers have been forced to build them that way. The last full size two wheel drive on our place we got rid of in 1991- we traded a 67 full size that got twelve mpg at best for a new compact that we are still using that gets in the low to mid twenties.
I must agree that knowing just what the consequences of forcing people to do things are unpredictable though.The big push to increase the fuel economy of cars over the last couple of decades had a hell of a lot to do with people buying so called ” suv’s” which were mostly just wolf trucks in sheep clothing but they were what people wanted – Bigger. Safer in an accident every thing else considered equal.Getting tboned by a Metro in a Suburban is not the same thing as getting tboned in a Metro by a Suburban.
You are dead on about the need for a streamlined and standardized building code.If I were the dictator of this country one of the first things I would do would be lock all the people involved in building codes up on beans and water and bread and not turn them loose until the whole shooting match was thoroughly revised for efficiency in issue and construction or renovation.
That ought to take maybe a month or so once they get the idea that they aren’t going home until the job is finished.
I know in the UK the government introduced a scheme where householders could upgrade their properties energy efficiency, I’m pretty sure it was free of charge coming from the energy suppliers pockets. Having said that, nothing is free of charge and the energy companies have been ramping up costs in recent years partly because of the outlay for all the installations they put in.
Someone else with a better idea of how the scheme works can chime in. I’ve been out off the UK for many years so this is second hand knowledge.
OFM Wrote:
“The money I could save on gas would be lost in making payments three or four times over and I am perpetually short of cash.That three or four hundred monthly cash is more important than saving a fifty hundred bucks a month on gasoline”
This is very typical as people only replace their vechicle as the old one wears out. That said, I see far, far less SUVs on the road. back in 2004-2008, I think about 50% of the vehicles on the road were SUV or large fancy pickup trucks. Today I think its less than 10%. I even see far less Luxury cars (Lexus, BWM, etc) than I did pre 2008.
OFM Wrote:
“I for instance have done all I can within the limits of my resources to cut my energy consumption for economic reasons more than environmental ones…The big push to increase the fuel economy of cars over the last couple of decades had a hell of a lot to do with people buying so called ” suv’s””
Exactly. Most people will do what they can to save money. Trying to box people and business in will always have unintended consequences. If gov’t wants to chnage, they should just provide options and information so people can make better informed decisions. People will resist mandates because they don’t like to be pushed around. Its better to help than to push.
OFM Wrote:
“Lowering speed limits can certainly induce traffic jams but on the other hand if people using freeways- which is the only place they would likely ever be lowered noticeably- can’t travel as fast it would also over the long term give them an incentive to stick closer to home when hunting jobs.”
Unfortunately Job Security died back in 2000. If I recall most people retain jobs for less than 4 years. It will be very difficult for people find work that’s close to home. People with Kids are reluctant to relocate since they usually try to live in a good school district. I doubt any policy changes will impact commuting distances, or fuel consumption. People will continue to ignore speed restrictions as they already do anyway.
In my opinion the best way to reduce consumption is to leverage improving the quality of life, For instance letting information workers work from home. Companies can save money and reduce energy consumption because they will no longer need large amounts of office space for their employees. Suppose for instance People worked 4 days a week at home, and had to go into the office once a week (perhaps even less). They would save a minimum of 1 hour per day in commuting. less wear on their vehicles, more family time and free time. Business could downsize their office space by 80% since they don’t need to have offices and cubicles and just used shared cubes/offices when workers need to go into the office. That alone would save on energy and the expense of operating a large building than they need.
Why cut oil consumption? To make life better for Chinese and Indians?
To reduce the current account deficit.
If you lower the speed limit, it improves fuel efficiency.
It also reduce jams.
The difference in speed of cars produce jams. With more speed it is more easy that it happens. When you drive more fast, you must leave more distance between cars. I remember driving in France at summer. The dates for end of holidays the speed limit was reduced for avoid jams.
OFM,I respect your comments but I am HIH . What is tech and practical but not achievable politically and economically is just that “NOT ACHIEVABLE” . Same like the reserves and resources battle we have all the time . So why waste time on doing something “not achievable” . We all know what has to be done to solve the “peak oil ” “climate change””population growth” etc ,etc since I would guess Hubbert so let us say +50 years . But where are ” Up the creek without a paddle” . You always opine that the US citizens will survive because the US has a lot of resources and etc etc .Sorry to deflate ,but the US is a predator(that is why it has a trade deficit over the last 20 years which means it lacks the resources internally to meet it’s own needs) on the rest of the world resources and once the victims decide that enough is enough you are in deep s*** . This has started by the Russians showing the middle finger to the EU and USA ,the BRICS starting their own bank and China flexing it muscle in the East and there is nothing that the US can do about this . As Ron has often observed this time the collapse is going to be “International” because of “interconnectivity” and “globalisation” . No way the US is immune ,yes you may be the last bozo on the bus but ” We are bozo’s on the same bus to cliff” . I am very much in Ron’s camp “The collapse will start with decay and then a sudden down the cliff ” ,much like the food which is past expiry date, we never notice until it really stinks in the frigo . I have already expressed my appreciation about your POV but I think you are way out on your view of US exceptionalism (if I may call that ) .
I agree. Having traveled and worked in many so-called third world countries it’s my opinion that these people will “adapt” better to the oncoming collapse than anyone in the so-called developed countries, where people are soft and totally reliant on numerous services they take for granted. As far as “living off the land” it might be possible in some villages in Viet Nam, for example, where people are already used to a high degree of self reliance but certainly not here. The average North American can’t cope with the internet being down for ten minutes much less than being without fuel and power. As my neighbor said on day, when things get tough the first thing I’ll do is shoot you and clean out your freezer — unless you get me first.
HOH,
I appreciate where you are coming from.Things may well work out in the end closer to your vision than to mine.
Please allow me to outline the conditions under which I think the US and Canada and maybe a few other countries still well endowed with natural resources and favorably situated geographically might- notice the MIGHT-come thru the coming general collapse more or less whole.
First off I am HOPING there will be no chemical biological and nuclear WWIII within the time frame I am thinking about- the next century or so.
Second I am HOPING that climate change and environmental degradation do not get so bad as to make it impossible for us to survive as a more or less self contained continent.
Third I am assuming that things will by current every day ” business as usual” standards get to be VERY bad here as the consequences of extremely wide spread unemployment and the failure of many businesses and many local governments comes to pass.
I assume that many parts of the country will be under martial law perhaps for extended periods of time and I think that there is a very real possibility that we will sink so low as to become a police state where everything not forbidden is mandatory and that any body in uniform (cop or soldier) is apt to be a very dangerous enemy along the lines of the Gestapo in Nazi Germany.
But we are not actually going to run out of oil in this country any time soon- or hardly anything else that is truly ESSENTIAL.We will probably be able to maintain at least half of our current domestic oil production for another fifty years or longer.On a per capita basis that would be half as much as a lot of rich countries use today- and enough to maintain essential transport by truck and to maintain farm production and so forth.
The modern nation state -Hobbe’s Leviathan- has proven to be incredibly resilient and tough and there are only a few places at any given time on the Earth where a government is not in control. The exceptions to this rule tend to be short-lived.In Mexico for instance the federal government will either prevail or fail- if it fails to control the drug cartels then the drug cartels will be come the government in the areas they control.Those areas will in essence be police states after that-under the control of a central authority accountable only to itself.If you keep your mouth shut and maintain a low profile under such a government you generally survive- unless you happen to be rich in which case you may disappear so as not to inconvenience the new owners of your property.
Murder and robbery were not significant problems in Nazi Germany or the old USSR except when committed by the government.
The US is the best situated and for now at least the most powerful country on Earth. Yes we are predatory. BUT as a recently deceased hard core conservative realist put it, more or less, after I convinced him peak oil and peak resources were very real problems :
We will burn up all we can from other countries and ours will still be here in the ground thanks to the econut cases and they( the exporting countries) will find out all the stuff they sold to us on credit is NEVER going to be paid for.
We are perfectly safe in terms of conventional war – nobody except the occasional terrorist is going to XXXX with us for the foreseeable future and terrorism will cease to be a problem once the fecal matter hits the fan. We will close the borders and under martial law anybody here whose grandparents weren’t born here will wind up in a prison or deported if anybody he even knows is even suspected of spitting on a sidewalk.
Now coal to liquid synthetic gasoline and diesel would apparently cost anywhere from four or five bucks a gallon wholesale on up to six or so right now to the best of my knowledge. Add on a couple of bucks in taxes and distribution costs and we are still looking at less than ten bucks a gallon.
Ten dollar gasoline today would certainly send the economy to the intensive care unit and it would still probably die. But over a long period -a decade or two or three we can adapt and barring bad luck and bad management we will adapt to high energy costs.
It is certainly possible to build cars that get three times the mileage we get today- the engineering and materials needed are off the shelf as of today. Let’s not forget that the current day fleet average is only roughly around twenty mpg.( I forget the figure but it may not even be that high given all the older cars and trucks still on the road.)These cars will be smaller and probably slower of course.
There’s nothing stopping us in principle from building lots of mass transit.Once the people who can no longer afford to drive a personal car outnumber those who can we will get humping on that mass transit.
I suppose I am in one respect the sort of expert a forum such as this one needs-I am the resident rolling stone in terms of career. I grew up on a farm and majored in agriculture and taught high school. I worked as a profession mechanic, a welder, a builder, a heavy equipment operator, a farmer, a trucker, and other things as well over the last half century. The more you know the faster the next trade comes and if you have more than a peanut’s worth of brains it doesn’t take very long to get to be a pretty good carpenter, welder, trucker, or teacher or dozer operator or almost anything else except something really deep such as medical doctor or engineer.
So- understanding heat loss at a tradesmen’s level and buildings at a tradesman’s level and simple machines such as refrigerators at a tradesman’s level-I can say that building and equipping a super energy efficient house is not all that hard.All it takes is a few thousand bucks more everything else held equal such as square footage.Houses built in the future- a decade or more down the road- will be substantially more efficient than houses built today.
Ditto appliances. It is a trivial problem in actual terms taking advantage of intermittent wind and solar power-the only real difficulty in doing so is in the heads of people stuck in conventional thinking boxes.
If for instance I had an opportunity today to buy wind or solar power at a very low rate and I wanted to build a new house this is what I would do.
I would excavate and waterproof a good sized hole inside the foundation trenches and fill it up with crushed stone and electrical heating cable and some vent tubing.When the intermittent energy is cheap I would heat the stone – thirty or forty tons of it cost maybe a thousand bucks delivered most places less.Heating issue solved.
I would install a triple insulated and triple sized water heater and that would hold me for a at least four or five days without any coal or gas fired hot water since it would only run when the signal comes that cheap renewable juice is available.
In the future – a decade from now or two at the most-I will be able to pick up a new refrigerator locally that needs only a trivial amount of power for a week at a time to run the computer chip and an internal fan-because that future refrigerator will store ”negative” heat-it will have a reservoir of water frozen to forty or fifty below zero Fahrenheit big enough to keep it cold for a week given that it will also be super insulated. Intermittent juice problem solved again.
Air conditioning peak load- by damn and by XXX we will just do without. I said times would get to be VERY hard compared to business usual did I not?
I expect to live to see lawyers riding bicycles to court in this country because they finally understand that they need the exercise and because they can thereby save their gasoline ration for other uses such as a trip to Grandma’s house.
We can eat pork for half what we can eat beef for in terms of energy in puts and we can eat chicken for half what we can eat pork for and beans and bread are even cheaper than chicken in terms of energy and resources needed on the farm.
We will see an end to the transport of potato chips and beer over long distances in trucks but both can be made locally.
There is an intermodal freight terminal in the permitting process not very far from where I live. It will have a sister facility on the West coast. Truck trailers will go on flat cars there and someplace in California and go cross country on a quarter of the oil it takes to tow them behind a road tractor not to mention saving paying hundreds of drivers.They will make the last hundred or two hundred miles on the highway soon at each end rather than running four or five thousand miles per trip on the highway.
I firmly believe that with a little luck I will live long enough to actually own a battery electric car such as a Nissan Leaf – second hand of course with three hundred thousand miles on the odometer when I buy it but still running like new with a new battery in it.Might have to get my caretaker to drive it by then though.
I have one friend already who is selling electricity on an annual basis back to his power company. He could put a hundred miles a day on a Leaf driving it early or late but parked in the middle of the day without ever buying a drop of gasoline or a kWh’s worth of coal or gas fired juice.Would he ? No.
But a restaurant running deliveries at lunch and dinner on up to midnight could and probably IS someplace already if the owner also drives it to and from work to his home.
The possibilities are endless. We can manage the transition if we want to. Of course I cannot promise it will happen.
If things go downhill slowly enough the public and the government will come to understand what is happening and act accordingly. If things go really bad over a very short period of time we are royally screwed and your scenario will come to pass.
High labor costs are not going to be an issue. Remember how Thatcher dealt with unions? Skilled workers and engineers often find themselves in rifle platoons in times of national emergency getting shot at and hit.
They will find themselves working for wages that are peanuts in terms of purchasing power in the future building nuclear power plants and wind and solar farms and near zero energy houses. And they will like it compared to the consequences-being out of work and without the all important ration cards that will be issued for damned near everything that really matters from gasoline to pork chops to chicken legs.
Remember I said we can come thru the next half a century more or less whole but that times are going to be VERY BAD compared to today.But with some luck not many people are going to starve or die of exposure in North America.
Most of the planet however is going to be a literal hell on Earth within half a century or so barring miracles of good luck good management and breakthroughs in renewable energy and conservation technologies.Poor countries just don’t have the economic resources in reserve to weather the coming storm.
I use the word but I do not really believe in miracles.
Ron,I posted a reply tp OFM and I find that it is posted as “anonymàus” and also not just below the reply from OFM .Did I make a mistake ?
Your reply was placed in the right place. It was placed below TechGuy’s reply to the same post then below all the reply’s to that post. That’s just how it works.
I have no idea why your post was listed as anonymous. If you had inserted your name in the box it should have shown up.
It’s about time somonee wrote about this.
That’s the best answer by far! Thanks for conniibutrtg.
Liberian man dies from Ebola in Nigeria:
http://www.cbsnews.com/news/ebola-outbreak-spreads-to-fourth-country/
Can’t figure out how to replay to Ron about the size of the US economy. I don’t really want to get into a argument about ordinal numbers anyway. But it is interesting how disparate the numbers.
The World Bank made quite a fuss recently that China is producing more this year than the US.
http://www.bloomberg.com/news/2014-04-30/china-set-to-overtake-u-s-as-biggest-economy-using-ppp-measure.html
That is what I had in mind when I made the comment. There was some pushback in the media, especially on the American right, who seem to feel there are some pride/identity issues involved. Again, I am not really interested in this kind of comparison. The point to my remark is that the economic justification for Pentagon spending is doubtful.
Here’s another thing: Ron’s CNN link seems to claim that the US economy is growing at about 5% and will keep doing so for several years. That seems a bit optimistic.
Hey, I am not really that excited about it. I am moving on to something else. I just posted another post today that I think will cause some controversy.