The Texas RRC Oil & Gas Production Estimates are in. By now everyone should know that the Texas oil and gas data is incomplete and the drooping data lines will eventually look more like the EIA lines as the more and more data comes. The EIA data is only through May but all Texas Railroad Commission data is through June.
It appears that Texas C+C was flat to slightly up in June.
Dr. Dean Fantazzini has a program that attempts to correct for the incomplete data and give a pretty good estimate of what the final data will look like. He has April C+C down, May down also but only slightly so and has June Texas Crude+Condensate up slightly.
Texas crude only appears to have increased slightly.
Dean has crude only pretty much the same as C+C for April, May and June except tracking about half a million bpd lower.
Texas condensate appears to have declined slightly in June.
Dean has condensate flat to slightly up in June.
Texas total gas increased slightly in June.
Dean has total gas up slightly also.
Texas gas well gas peaked way back in 2008 but appears to be holding its own now.
Texas associated gas, or what the RRC calls casinghead gas, has been responsible for keeping Texas total gas increasing. But production of associated gas seems to have hit a snag around September 2014 and has been slowing down since.
A lot of peak oilers were upset over John Mauldin’s column yesterday. It did not bother me however, he is just another ignorant cornucopian who thinks technology will give us an infinite supply of oil. The media is full of such fools and we need not worry ourselves over them. However here is a link to his column.
Mauldin Economics: Thoughts from the Frontline: Riding the Energy Wave to the Future
I have written for years that Peak Oil is nonsense. Longtime readers know that I’m a believer in ever-accelerating technological transformation, but I have to admit I did not see the exponential transformation of the drilling business as it is currently unfolding. The changes are truly breathtaking and have gone largely unnoticed.
Shale companies now produce more oil with two rigs than they did just a few years ago with three rigs, sometimes even spending less overall. At $55 per barrel, at least one of the big players in the Texas Eagle Ford shale reports a 70 percent financial rate of return. If world prices rise slightly, to $65 per barrel, some of the more efficient shale oil operators today would enjoy a higher rate of return than when oil stood at $95 per barrel in 2012.
From this month’s Director’s Cut
May Sweet Crude Price = $44.70/barrel
June Sweet Crude Price = $47.73/barrel
July Sweet Crude Price = $39.41/barrel
Today’s Sweet Crude Price1 = $28.50/barrel
That was August 14th when WTI was at $42.50, today they are likely to be even lower as WTI closed today at $40.80.
James Howare Kunstler rakes Mauldin over the coals in a pretty good article.
As fracking implodes, the clowns deny reality
I thought the below article worth an honorable mention.
As Canada’s Oil Debt Soars to Record, an Industry Shakeout Looms
Canadian energy companies’ debt loads are the heaviest in at least a decade, boosting concern that some won’t survive the collapse in crude prices.
Trican Well Service Ltd., Canada’s largest fracking service provider, said last week it may be unable to continue because it’s in danger of breaching the terms of its debt. It’s the latest firm to see crude’s descent to a six-year low sap the cash flow needed to meet financial obligations.
Oil’s plunge has pushed a measure of the average debt burden among Canadian energy firms to the highest since at least 2002, and another measure of their ability to make interest payments to the third-lowest level in a decade, according to data compiled by Bloomberg. Facing some of the highest production costs in the world and carrying more debt than U.S. peers, the Canadian industry has become ripe for acquisitions.
A novice investor asks a long-time, astute investor – “How do you make money?” The astute investor asks: “Do you want the long story, or the short story?” The novice says: “Give me the short story.” The astute investor says: “Buy low, sell high.” The novice asks: ” How do you do that?” The astute investor says: “That is the long story.”
Everyone currently has the opportunity [my opinion] to buy low. Many fairly good quality oil & gas companies are trading at 30% to 50% of their recent (1 1/2 years) highs. In 10 years, will oil be plentiful and we no longer need it?? Ask someone I respect: Jeffrey Brown. (And, Mr. Brown, please tell me that is a joke that you are working at a Dairy Queen. If not, I will drive to your location, buy a cone, and give you a gigantic tip for all that you have done. Your analysis is truly appreciated.)
@clueless
I know that you are not trying to give stock advice. Still, I would be very careful to talk about something that you don’t know. Some people on this forum bought some stocks at suppose bottom when oil was $45-50. Well as you can see we have a new bottom today, lower than that bottom of 7-8 months ago. I hate when I see that people loose money out of ignorance. Picking stocks and market timing is fools game. If somebody really wants to know about investing than it better to read some good books than to listen from “newsletter experts” on the internet.
Ves, sage counsel.
http://newnormaleconomics.com/peak-oil/
http://newnormaleconomics.com/2015/08/02/oil-the-cycle-turns/
http://newnormaleconomics.com/2015/08/10/gasoline/
http://newnormaleconomics.com/2015/08/19/natural-gas/
http://newnormaleconomics.com/2015/08/19/imf-the-global-impact-of-lower-oil-prices/
http://www.bloomberg.com/news/articles/2015-08-14/oil-s-worst-ever-summer-signals-price-rout-is-nowhere-near-done
Ves – Right. I do not try to give stock advice. I think that my comment was pretty vanilla and anecdotal. I started working in 1962 [retired in 1999] and I started investing in the stock market in 1965. I got a degree and a masters’ degree, and I had pretty good jobs. I was a partner in one of the big 8 [at the time] international CPA firms. But, by just investing a fraction of my earnings in the stock market [I was net out of pocket with my parents deaths], I have made FAR more money in total from the stock investments than I ever earned in wages. But, to your point, my comment was more properly directed towards readers under age 40.
Just saying, if you do not buy low, when will you buy? And, I left it up to the reader to decide if oil is like the horse and buggy, or not. I do not claim to know for sure.
One further comment. I knew a billionaire fairly well. His statement was: “I never was able to buy a stock at the absolute bottom. If I had been able to, I could have always purchased it cheaper.” So, don’t beat yourself up, or others, if you are not perfect and do not buy at the absolute bottom. It is not, standing alone, a sign of ignorance!
It’s a good advice. I am 30 and I have been looking at buying energy related stocks, even some of the commodities for some time now. Probably it’s best to buy in small amounts every month instead of going all in.
This cycle could last for some time (years) though so it’s not for the faint hearted.
@clueless
I am not sure that you even remotely understand what I am talking about. Even if you made billions from 1965 buying individual stocks I would still say the same to a reader who is new/or old to investing and wants to invest and that is: “If you want to learn about investing you have to first read some good books” (There are also dangerous books, so you have to be careful 🙂 )
I would tell them: “Here are few books http://www.bogleheads.org/readbooks.htm and invest some time reading them and then we can discuss”
Compare this advice to your advice: “Buy low, sell high”!!!!?? What kind advice that is? That is dangerous advice. Sounds like one-liner advice that you get from Homer Simpson show. I have seen so many people get burned by investing with that simplistic advice.
Hi Ves, Clueless,
Except for a very few bucks in a couple of accounts involving working as an employee I have never been in the stock market.
But giving up television and bars means you have hours every day to read, and I have spent a LOT of time reading about stocks and bonds and investing in this and that and every thing else.
Just for the fun of it, here are a few culled observations.
The pros are exactly as competent as a monkey throwing darts . It is well known that the markets are dominated by professional traders- the amateurs manage a trivial percentage of all the stocks and bonds.
Any mathematician will tell you that the pros average return is the same as the average return of the market.
It has been a while since I looked but people in the forestry industry a few years back observed that returns on timberland have historically been as good as returns on stocks.
Fiat money will eat you alive in bonds unless you are living on the proceeds of trading them rather than spending the money as it comes in. Just about everything you might actually NEED will on average go up faster in a world with a growing population and shrinking non renewable resource base faster than you can collect and spend interest.
Your money will be worth maybe a tenth to three quarters what it was the day a long term bond matures compared to the day you bought it- excepting if you spend it in certain limited ways. You will be able to buy a better computer and maybe a new life saving medical treatment but beyond that….. you are almost sure to lose.
If as a young man I had started putting the retail price of one pack of cigarettes a day into the stock market and maintained this practice until today without withdrawals I could sell out and have a shapely blonde a third my age feeding me alternate sips of coffee and fresh fruit and own a Ferrari and a Tesla as well as a blue water sports fisherman, a beach front house and apartments in a few of the more desirable cities off the world- plus a jet of my own. With as equally young and shapely BRUNETTE to fly it for me.
All possible investments are potentially subject to being pumped full of hot air thus creating a bubble that will inevitably burst. Even farmland and timber.
A well informed and technically literate layman has at least as good a chance as professional managers ON AVERAGE of seeing a whole new paradigm emerging as technology progresses and life styles change by choice or by necessity.
Seeing the change coming however is not the same thing as predicting which companies will survive and thrive in a new industry or a new economic paradigm.
Betting on a new industry by going the index route will PROBABLY work if you are right about the new industry- and you don’t jump the gun too badly.
Personally getting down to the nitty gritty I believe that it is still a bit early to be betting on renewables based on the probability of making good financial returns- unless the investment time frame is a minimum of a decade or maybe two.
The big exception imo to this observation would be the battery industry or a start up auto company such as Tesla. GM is not ever going to make a whole lot more money selling pure electrics or plug in hybrids than the company has traditionally made selling conventional cars. My gut feeling is that the battery industry is about out of the toddler stage and will soon be growing like like crazy. Within ten years for sure imo.
ALL the major car companies will be selling electrics by the time GM is selling Volts and Bolts by the millions.
Times really do change and sometimes it really is different this time.
The conventional business model – eternal growth- is going to crash into the concrete bridge abutment of physical limits eventually.
BUT nobody really KNOWS how long that will be.
Growth could continue for quite some time, maybe even half a century , in the face of energy constraints. Naked apes are clever and industrious and might figure out ways of maintaining growth by improving efficiency faster than fossil fuel supplies deplete.
There could be a humongous more or less permanent crash starting later today. There is simply no way the banks and governments and businesses of the world can ever pay the on the books and off the books debts they owe- barring miracles. Praying for miracles is ok but betting on their arrival is not.
Industries that crash, as the oil industry has recently, always come back unless there are new industries coming on strong enough and fast enough to displace them.
Hard crashes are like freeway accidents in that most of those involved survive and relatively few die. Traffic can come to a dead stop or near dead stop driving prices to ridiculously low levels FOR A WHILE. Businesses run like most working people- from paycheck to paycheck. Damned few people who work can make ends meet for more than a few months before they start selling off the second cars etc as their savings deplete. Most companies are in the same situation. They live on receivables from month to month.
The oil industry will survive this crash because there is nothing out there YET to displace it. Twenty years from now… things might be different.
Have I learned anything?
Clueless. Are you talking integrated majors? Or are you including companies with only upstream?
I’d be careful on upstream only. There is something funky going on. Today’s realized BOE for US upstream ranges from $10-25 per BOE. Continuance of that price for a few months will inflict some serious damage.
We are making plans to shut in significant production. We did not do that in 1998-1999.
Maybe that kind of capitulation talk means it is time to buy. However, no oil crash since I have been alive ended without a significant OPEC cut. Not seeing signs of that yet, and the US publicly traded upstream appears it would rather BK than cut production much to conserve cash.
I assume Sheffield at PXD is still adding rigs?
Shallow: Just a general comment. But, look at some oil stocks that have been around 75-100 years. They went through the boom of the 1970’s, only to be decimated in the 80’s and again in 2008/2009. Exxon in July of 1982 was at $3.50 on a multiple split adjusted basis. Over twenty times higher now, 33 years later, at $76, even though significantly down in the last 1 1/2 years. If dividends were reinvested (like in an IRA) you would probably have 30 times your money or more. Lot’s of good companies are in the same situation, both producers and service companies. It depends on your view of the future. Are we going to need oil or not? So, this is more of an industry question than a stock question. Some stories are stock specific, not industry – like the comeback of Apple. I think that it is a little easier when it is an entire industry that is getting dumped on. Stay away from the companies that you point out have liquidity problems. If the world needs anywhere near 90 million barrels/day, capitalism will eventually sort out the price so that quality producers and service companies make a decent return. If in 15 years, you think that we will only need 10 million barrels/day, then I guess most of the posts on this board are pointless and get out now while the getting is good.
Clueless. You mentioned ExxonMobil, and I do not disagree on that one. Most other integrated majors also probably ok.
Two that spun off refining and pipelines, COP and MRO maybe a good speculative bet. However, when a company has to borrow all the money to pay its dividend, not a good sign.
Both paid big time bucks to get into shale. Both also paid to get into tar sands. By my calculation, both need north of $60 per BOE to maintain current production and be cash flow neutral with the dividend. If either cut the dividend, there will be another big drop.
I guess maybe the commodity drop could be impacting me too much because we are so close to it. Could be clouding my vision.
Read about a speaker at Kansas Independent Oil & Gas Association. Made the claim that Gulf OPEC states are shorting oil, that big money center banks are aware of this and are following suit. I don’t know if I believe this, but something strange is going on.
Most companies will be soon selling oil in the $20s un hedged. As almost all US companies have interest payments, have to wonder how many can make those payments.
A conventional producer selling 5000 barrels per month grosses $540K at $90 in the field, $480K at $80 in the field, $125K at $25 in the field. Look at Plains crude bulletin. Some are at $25 already. Probably the best price would be $38 in the field. That is still just $190K.
This really stinks.
clueless said:
Doesn’t that cut to the heart of the matter?
Doesn’t that allude to the same dilemma which James Howard Kunstler points to when he says: “Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies”?
Doesn’t that allude to the same dilemma which Gail Tverberg’s theorizing broods over?
The underlying question is this: Can capitalism survive the limits of growth?
But an even more fundamental question is: Can modernity survive the limits of growth?
As Naomi Klein said of her trip to the Vatican, the Pope says no: “So, I think what is significant about it [the Pope’s encyclical] is that it is very much a rebuke to the worldview that humans have been put on Earth to dominate and subjugate nature.”
http://www.democracynow.org/2015/8/4/naomi_klein_on_visiting_the_vatican
John Mauldin’s response: “What limits of growth?”
If in 15 years, you think that we will only need 10 million barrels/day, then I guess most of the posts on this board are pointless and get out now while the getting is good.
If in 15 years you think that we will need only 10 million barrels a day then you are a goddamn fool.
Of course I know clueless don’t believe that, and I hope Glenn don’t believe that, but just saying….
The 10 million barrels/day figure derives from societal collapse theories, for example that of the anthropologist Joseph Tainter:
Tainter argues that sustainability or collapse of societies follow from the success or failure of problem-solving institutions and that societies collapse when their investments in social complexity and their “energy subsidies” reach a point of diminishing marginal returns. He recognizes collapse when a society involuntarily sheds a significant portion of its complexity.
According to Tainter’s Collapse of Complex Societies, societies become more complex as they try to solve problems. Social complexity can be recognized by numerous differentiated and specialised social and economic roles and many mechanisms through which they are coordinated, and by reliance on symbolic and abstract communication, and the existence of a class of information producers and analysts who are not involved in primary resource production. Such complexity requires a substantial “energy” subsidy (meaning the consumption of resources, or other forms of wealth).
When a society confronts a “problem,” such as a shortage of energy, or difficulty in gaining access to it, it tends to create new layers of bureaucracy, infrastructure, or social class to address the challenge.
https://en.wikipedia.org/wiki/Joseph_Tainter
Do I believe modern civilization will collapse?
My answer is, I don’t know. I don’t believe its a foregone conclusion (which Tainter doesn’t believe it is either), but on the other hand I don’t believe it’s out of the realm of possibility.
What I believe Klein and the Pope seek to do is to do what they believe is necessary to avoid collapse.
Do I believe modern civilization will collapse?
My answer is, I don’t know. I don’t believe its a foregone conclusion (which Tainter doesn’t believe it is either), but on the other hand I don’t believe it’s out of the realm of possibility.
Well, I believe it is a foregone conclusion. In one of Tanter’s last videos he seemed to be hedging, leaning toward believing it is a foregone conclusion. I will try to find it.
Anyway the fact that we are already way past the long term sustainable population means that the population must collapse.
It does seem pretty bleak.
The only way out, short of some miraculous scientific-technological energy revolution, is a transition to what Almuth Ernsting calls a “low-energy economy and society.”
But, if I understand Tainter’s theory correctly, such a transition is not possible as it would lead to collapse of our highly complex society.
I feel we will be transitioning to a “low-energy economy and society” fairly soon. Whether we like it or not. It will be accompanied by a population bottle neck for the human species. We will call it “collapse of industrial civilization”. It’s not a choice we will make. It will be thrust upon us. Fairly soon I might ad.
I think everybody here is ignoring the painfully obvious.
This planet can’t take more carbon into the atm, in fact, already has way too much, and is NEAR CERTAIN to hit us somewhere real hard, and real soon.
At that point, people wake up, and ff’s are past, not at all because we don’t have them, but because we have decreed that they stay right where they are.
Meanwhile, human ingenuity, always underestimated, will start making solar/wind so good that ff’s are dead anyway, from simple economic forces like what killed the horse & buggy.
I see you are taking a view similar to that of Tony Seba. You condensed his presentation down to three sentences!
Ron and others,
I have long taken the position that the Earth could sustain a population of 60 billion people. However, that is contingent on humanity being smart about how it lives. Almost all my friends are correctly quite critical of my position. They point out how radically unlikely it will be that we will be smart about how we live. They are quite right. However, if we consider the German passive house standard that reduces energy consumption by nearly 90% we know that it is logically possible for us to similar improvements in the energy efficiency of all construction. Living in a smart way entails being focused on achieving such efficiencies in all areas of substantial consumption and achieving a very rate resource recycling. This is similar to what nature seeks in its ecosystems through millions of years of evolution. We just need to more fully understand the principles involved and put them to use.
Yes, Ron, I also expect waves of population decline. We have no reason to think humanity will be smart. That does not mean that we can’t be.
Earth can accommodate 60 billion homo sardinus. But, long term, Homo sapiens is limited to 1 billion.
I have long taken the position that the Earth could sustain a population of 60 billion people. However, that is contingent on humanity being smart about how it lives.
WOW! Claiming that Earth can sustain a population of 60 billion is about as extraordinary a claim as I have ever heard. I expect some very extraordinary evidence to back that up. Nothing in my experience from any scientific field gives me even the remotest hope that that would be possible!
There are fundamental physical limits imposed by the laws of ecosystem thermodynamics that really can’t be surpassed. Maybe if humans colonize the entire solar system and import resources but I seriously doubt that will ever happen!
As for it depending on humanity being smart enough, well, humanity so far has not demonstrated true collective intelligence. Perhaps that will come about as an emergent property of our technological capabilities and humanity will become like a cyborg hive.
Hopefully I will be long gone before anything like that happens because even if any of these things could happen I for one would not want to be a part of such a world!
There are fundamental physical limits imposed by the laws of ecosystem thermodynamics that really can’t be surpassed
Could you expand on that? It seems to me that the only basic limit we’re reaching is the CO2 “sink”, and that’s framing the problem in the wrong way, because CO2 isn’t essential to energy production. I’d call CO2 unnecessary pollution, not something like the essential heat “waste” that’s part of thermodynamics.
For Nick,
I fully agree that CO2 pollution is totally unnecessary. We should be moving as fast a possible to totally renewable energy. As for the 60 billion figure, it is just the obvious result of making all systems as close to 10 times as efficient as we can. Obviously that can be done for housing. Fairly trivial calculations indicate that we really don’t need much space to get the solar energy that we need. And yes we will need to build the systems to store it.
For Fred,
Don’t forget that my goal is to reduce energy consumption by a factory of 10. We really do not need a 4,000 plus pound vehicle for personal transportation. An enclosed powered chair with a highly efficient automated transport system might be quite feasible with a little engineering. Of course, that would not work to maximize the cash flow from consumer’s pockets. I would also not work for those trapped in the ego game of “I have greater status than thou.”
Obviously we need to do significant work to achieve the energy efficiency and renewable systems design to really achieve the intelligent living that is logically possible. And no, I do not want to put a great amount of work in further justifying this vision. As I have been saying the chances that we will be intelligent in this way is quite low. I do like to give a hint to others that it is possible.
Oh, don’t forget that blue-green algae is 10 times as efficient as almost all crops in converting solar energy to biological mass. The invention of single cell protein forms that are both tasty and make use of this efficiency is also logically possible. And most of the oceans of this planet are biological deserts because there are few nutrients. What if we had efficient mechanisms to move nutrients from the ocean bottom to the surface. The small areas of high ocean productivity are associated with ocean upwellings that provide nutrients.
Nick, yes, I could expand on that but it requires some background knowledge. CO2 is far from the only limit we are reaching. Ecosystems are nonlinear, dynamic systems, think tipping points and feedback loops. Here is a primer on basic ecosystem thermodynamics it covers energy flows:
http://goo.gl/GkcKCJ
There are many other kinds of inputs such as nutrients and minerals which are fundamental to ecosystem health and stability. Things like the nitrogen cycle. The biological diversity of the fauna and flora and how they interact. The flow and ebb of the population dynamics of certain predators and their prey. How habitat is impacted by human activities, etc.. etc…
This is definitely not a simple topic to expand on unless you are willing to do some background reading first.
Don, I composed a long response to your reply, unfortunately the internet ate it and I didn’t save a backup…
I’ll just touch on this one point of yours for now
And most of the oceans of this planet are biological deserts because there are few nutrients. What if we had efficient mechanisms to move nutrients from the ocean bottom to the surface. The small areas of high ocean productivity are associated with ocean upwellings that provide nutrients.
Let me just put it bluntly, that would be a very dangerous game even if we could pull it off! I would suggest the application of the precautionary principle in spades before attempting such a venture. We know too little about the unintended consequences of doing something like that.
As for feeding 60 billion people with blue green algae. Don’t even think about it, unless you are planning on really accelerating the mass extinction event we have already set in motion.
No, I really don’t think there is any way we could have 60 billion people living on this planet. It doesn’t even work as a mere thought exercise, let alone in practice.
Also see my comment to Nick, a lot of that same information is the basis for my extreme skepticism.
Don,
Of course, current primary calorie production is probably about 3x what’s needed to feed everybody: half the calories are consumed creating meat, and people overeat by probably about 20%: obesity kills 3x as many people around the world as malnutrition.
So, eliminate over eating, and meat production, and you could feed about 18M people with current agriculture. And, that’s without eliminating non-nutritious crops: coca, marijuana, coffee, ethanol (drinking and motoring)…
Fred,
I read the link you provided. It was helpful.
I still remember some of my college thermodynamics, and since then I’ve followed discussions of exergy and emergy.
I find emergy, and the idea of a literal common energy currency, a bit problematic.
In any case, with that as a foundation, could you expand on the idea that thermodynamics tell us something about limits that might be reached any time soon? I find that puzzling, given that the earth is an open system with so much solar energy flowing through it.
Don, we don’t have to move nutrients from the sea floor. All we need to do is seed the southern ocean with small amounts of iron. I think it’s time to carry out experiments with 10,000 ton injections in an area that’s heavily instrumented to measure the results.
Nick,
You wrote:
In any case, with that as a foundation, could you expand on the idea that thermodynamics tell us something about limits that might be reached any time soon? I find that puzzling, given that the earth is an open system with so much solar energy flowing through it.
It’s Sunday and I’m taking it easy. I’ll try to respond in more detail later.
But in the meantime here is some food for thought…
The Flow of Energy: Higher Trophic Levels
Three hundred trout are needed to support one man for a year.
The trout, in turn, must consume 90,000 frogs, that must consume 27 million
grasshoppers that live off of 1,000 tons of grass.
— G. Tyler Miller, Jr., American Chemist (1971)
Even if humans could change over to a 100% grass diet eliminating all the intermediate trophic levels we would still have to deal with the limits imposed by efficiency losses in energy conversion of all the biological processes involved in the plants producing biomass and then converting that vegetable biomass into energy to sustain our own physical processes and those can best be explained by the laws of thermodynamics.
Then think for a moment about what happens at the other end of the cycle where bacteria and fungi work on decomposing dead plants and animals and all the thermodynamic losses happening there.
Our universe and our ecosystems seem to be heading towards a death by heat loss 🙂
Fred,
Fred, i’m not sure how the details of thermodynamics really help us here.
The losses at each trophic level are pretty easy to understand. I don’t think we really need the laws of thermodynamics to explain that.
It’s not that hard for humans to eat at a lower trophic level. We don’t have to eat native grasses, we can use wheat, corn and soy beans.
Secondly, this stuff applies to food. Most of our discussions on POB are about extrasomatic energy, of which there is an enormous surplus from solar flows.
We went over some scientific literature over the maximum human population capacity in the Population problem article published a few months ago here at Ron’s blog.
The most rational analysis indicate that about 10 billion is a reasonable number for maximum capacity, and even that number might not be sustainable without major changes in the way we live.
Replies to two posters.
First Fernando: We have modest agreement on his point re iron. That is the single most deficient nutrient. Even small experiments such as the suggested 10,000 ton experiment would be certain to produce a substantial increment in local biomass. That would not be adequate to be anything other than a test. Substantial use of minimally productive ocean areas for food would require a sustained research effort and sustained access to incremental nutrients.
Second Fred:
I am quite aware that some people have speculated that there might be negative ecosystem consequences in regard to fertilizing the oceans. However, I have found neither a cogent model of what the consequences might be or evidence of these consequences. The fact that your comment did not provide any confirming evidence is at least tangential support for my position on this matter. If you have real evidence to support your concerns on this I and others will be happy to consider it. Note that I am hardly arguing that the entirety of the ocean deserts be used in this manner. Given the productivity of the most productive ocean areas not much area would be needed. I see no reason not to pursue experiments which are carefully monitored.
Also I have no intention of feeding anyone with blue-green algae. People cannot eat it. My point is that it has an extremely energy efficient mechanism for the conversion of solar energy to biomass. What we would need to do is use this efficiency to maximize an alternative system that produces a form of food that we can eat. And yes we need to reduce the layers of thermodynamic inefficiency in getting to a form that can be consumed. You are concerned with thermodynamic limits and I am just pointing out the obvious solution spaces to those limits.
I have no intention of maximizing our current mass extinction event. I would like to see very significant reduction in the physical footprint of our cities and much greater maintenance of contiguous wild areas. If you have noticed I want a radical increase in our energy efficiency and recycling of resources precisely to be better stewards of the wider ecosystem.
Don you wrote:
Second Fred:
I am quite aware that some people have speculated that there might be negative ecosystem consequences in regard to fertilizing the oceans. However, I have found neither a cogent model of what the consequences might be or evidence of these consequences. The fact that your comment did not provide any confirming evidence is at least tangential support for my position on this matter. If you have real evidence to support your concerns on this I and others will be happy to consider it.
I have to ask, how hard did you actually look?! It really bothers me when people make comments without any knowledge of the fact that there are plenty of scientists who do study this kind of thing. And the last thing we need is people like Fernando who have zero knowledge about how complex ecosystems work to suggest that we should just go out and start fertilizing the ocean. I suggest he stick to his area of expertise which is Petroleum Engineering. I wouldn’t trust him to manage a tiny frog pond, let alone something as complex as the marine ecosystem.
Perhaps you and Fernando both could start here:
https://www.cbd.int/doc/publications/cbd-ts-45-en.pdf
Starting on page 33 the paper addresses the consequences of Observed and Predicted Impacts of Ocean Fertilization Via Controlled Upwelling on
Marine Biodiversity
During all ve ship-based experiments, a consistent increase in phytoplankton biomass and primary production increase was observed following fertilization, with a demonstrated shi in phytoplankton communities from small (10µm diameter) diatom cells. ese observations are supported by long-term study of Station ALOHA, a typical LNLC habitat with non-limiting Fe concentrations
that experiences episodic natural upwelling. Karl and Letelier (2008) later hypothesized that
the controlled upwelling of low NO3-:PO4
3- seawater from below 300 metres in LNLC areas will trigger a two-stage phytoplankton bloom: the first stage characterized by NO3- supported diatoms and the second stage by a N2 fixing bacterial bloom, leading to enhanced N2 fixation, organic matter production and net carbon sequestration of 32.7mmol C m-3 upwelled water142.
The biogeochemical consequences of sustained upwelling of this nature are uncertain. Deep waters are known to contain high concentrations of DIC derived from long-term decomposition of sinking particulate matter, causing most natural upwelling sites to result in a net ocean-to-atmosphere transfer of CO2
143. However due to the regional and seasonal variations in deep-water DIC concentrations, the
observed impacts will be site and depth speci c.
e arti cial upwelling of deep waters also bears the risk of increasing ocean acidi cation and degassing of CO2. Colder deep waters absorb larger amounts of CO2 (cf. section on solubility pump above, and separate synthesis on ocean acidification), which decreases the pH and the calcium carbonate saturation of these waters. Recent hydrographic surveys along the continental shelf of western North America
from central Canada to northern Mexico confirm that seawater, undersaturated with respect to aragonite, upwells onto large portions of the continental shelf, reaching all the way to the surface of northern California. Although seasonal upwelling of the undersaturated waters onto the shelf is a natural phenomenon in this region, the ocean uptake of anthropogenic CO2 has increased the areal extent of the
affected area144. The artifcial up-welling of undersaturated deep water would accelerate the spreading of ocean acidifcation into areas which so far have not yet been impacted. Also, if carried out in tropical areas, the CO2 sequestered by increased phytoplankton growth may be offset by the CO2 released to the atmosphere due to the warming of the deep waters reducing the CO2 solubility (depending on the
localized pCO2).
Reply to Fred on Convention on Biological Diversity document.
Thanks so much for the reference. It does confirm my understandings of some of the possible negative consequences of ocean fertilization. My overview is that these are extremely minimal experiments that would say almost nothing at all about the implications of fertilizing for food production. My major reason for my minimal positive support for Fernando’s suggestion is that it would diminish other nutrients as the water continues on from the point of fertilization. He is right that iron is the major nutrient that is lacking but that does not confirm that it would be adequate alone for an ocean farming operation. Too great an imbalance of nutrients would obviously not work for food production. Also if excessive biomass descends and decomposes to an extent that an anoxic zone is created then the farming model has failed to deliver the biomass in a form useful for people to eat. Beyond that anoxic and hypoxic water can kill fish in a way that is very incompatible with ocean farming. It is a given that farming will not be done until it has been confirmed that these are not significant risks. It would fail as an enterprise if anyone tried it.
Farming of the ocean will of necessity have to emulate some of the positive qualities of the highly productive areas of the existing oceans or it would not work. Any potential ocean farmers will need to have a highly advanced education concerning the ocean ecosystem and how it works. The current research is all oriented toward taking CO2 out of the ecosystem in order to geoengineer a cooler planet. It is vastly less than what is required in order to justify any ocean farming operation.
Don wrote:
Any potential ocean farmers will need to have a highly advanced education concerning the ocean ecosystem and how it works.
On this we are in 100% agreement!
Regarding your comment that the experiments cited in the paper I linked to are minimal, I’d just like to emphasize the fact that there is a very large body of scientific work from multiple disciplines that could be cited to support my position. That paper is but one example .
I also agree that ocean farming is something that will be done on a large scale in the future and it is already happening.
Here is but one example:
http://www.openblue.com/
BTW, while they claim to be a sustainable model, unfortunately the way they currently obtain the feed for the fish they are raising is not even close to sustainable. Of course they don’t tell you that on their website. Though comparatively, the way we raise hogs, cattle and chicken in industrial farms is probably even less so…
Still, ocean farming is definitely the wave of the future, no pun intended.
But for what it is worth simplistic claims that all we need to do is toss some iron ore into the ocean and we’re good, just raise endless red flags for me!
James Howard Kunstler points to when he says: “Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies”?
It’s helpful to keep in mind that Kunstler doesn’t really know much abut energy, and is a permabear. Look through his works: he says nothing detailed about renewables that makes any sense. I asked him specifically about training and/or experience in energy tech, and he replied that he considered himself an entertainer (the word he used to describe himself was “clown”!). And, he made a very firm prediction that Y2K would absolutely, definitively, without a doubt cause TEOTWAWKI.
And, sadly, Tainter’s work draws from and applies primarily to agricultural societies. It makes no sense in a world where we know how to tap a resource of 100,000TW of solar power.
Personally I don’t have any problem with believing that the economy can easily adapt to seventy five to hundred dollar oil, over a period of a few more years.
But I do have a lot of trouble believing that a decade from now oil will be selling for less than one fifty or so and perhaps a lot MORE.
The real question is whether we can adapt to higher prices and lesser availability faster than oil depletes?
MY gut feeling is that we might hold our own for a few rounds but that in the end depletion is going to put us on the mat with a major depression resulting that will last a LONG time.
It took a five fold increase in price to hold production steady over the last few years up until a year ago.
It is not going to be possible to pay for another five fold increase in the cost of oil and maintain business as usual.
Mac,
Don’t forget, per Jeffrey, the 2008 recession was not caused by oil prices: recent oil prices, as a practical matter, were much higher in the last several years and the economy didn’t crash.
Monthly Brent prices were only over $100 for six months in 2008, whereas starting in February, 2011, monthly Brent prices were over $100 for 42 months, seven times longer than the six month $100 period in 2008.
And the annual Brent price in 2008 was $97, versus an average Brent price of $110 for 2011 to 2013 inclusive.
There are several big questions here:
1) what would have happened to supply if prices had stayed at $100? Would have it continued to expand, creating an larger glut? If so, does that suggest that the current equilibrium price is significantly below $100 – perhaps $75?
2) How much LTO is there in the world? I hear about the Vaca Muerte, and Russian projects. What’s out there? How would they expand if prices rose above $75?
3) What is the cost of alternatives? At $50 a Leaf is slightly cheaper to own and operate than the very cheapest ICE cars on the road. That suggests that above about $60 that oil prices will encounter more and more pressure from substitutes. EVs will continue to get cheaper. Would prices above $100 cause a land rush to EVs?
4) would would be the impact of oil above $100? Oil between 100 and 125 didn’t seem to stop world growth. What would happen with oil above $150? Most analysts just look at oil importers, and just look at the short term. What would happen in the long term? What would happen to the whole world?
Would oil imports drop? How many percentage points of oil importer GDP does imported oil represent – two? five? What would be the change if oil prices rose to $150? Would they reduce consumption by those percentage points, to make room for exports to oil exporting countries? Would they reduce their consumption of other imported goods? Would importers simply “kick the habit”, and switch to EVs and improved transit?
The big game is going to be played out between the Depletionistas and the Economistas.
I will not go so far as to predict that depletion of oil means a permanently crashed economy. But neither do I have faith in the Economistas winning the two team series championship every year year after year.
For some time I took the opposite tack and made many comments to the effect that when the oil shit hits the fan , Leviathan , the nation state , will finally awake from His long slumber and DO THINGS that will prevent the overall economy from suffering a catastrophic crash resulting in widespread violence and LOTS of people dieing hard deaths before their time.
The power of the nation state is almost beyond comprehension once fully aroused. Resources can be marshaled that seem to not even exist and near miracles actually HAPPEN. SOMETIMES.
BUT while I point out that such scenarios can and might come to pass, I do not know that Leviathan aroused will act wisely. Leviathan may act the fool.
LUCK plays a tremendous role in the affairs of individuals, nations, and humanity as a whole.
My own best guess is that MOST of the world will suffer a tremendous crash with enormous loss of life sometime within the next century and more likely within the next five or six decades-
BUT given that POWER (economic, military) and RESOURCES are NOT equally distributed, and geography does not favor all nations equally———–
My belief is that a few countries such as the USA, countries blessed with power and resources plus being favorably situated geographically etc
MIGHT pull thru the next century or two more or less whole.
The pessimists such as Ron win some , the optimists such as Nick G win some.
Things could play out a lot of different ways. ONE way they might play out is fleshed out in the novel ATLAS SHRUGGED.
Just about every body I have ever met, excepting a few hard core conservative republicans who have actually read it has judged Ayn Rand’s novel ATLAS SHRUGGED to be a blue print for disaster.
It was WRITTEN as a blue print for ONE possible disaster- incompetent government corrupted by business interests.
But this novel is nothing more than any other book , just ink on pages. The leftish leaning educational establishment has succeeded in demonizing Rand’s work to the point that I don’t even know a liberal who will admit having ever read it.
SO -They condemn it on the basis of politically correct HEARSAY. Their intellectual masters tell them what to think.
This novel has several separate themes.
ONE is that the LEAD character is a woman who does exactly to suit her self and smashes her way thru the glass ceiling to the very most powerful position in the most powerful company in the world, while conducting her personal and sex life as she pleases and saying so publicly.
I have not ever had a conversation with a true blue looking down her nose at me feminist who realizes this undeniable fact while lecturing me on Rand’s evil philosophy.
Another major theme involves the way business and government can morph into an incestous evil siamese twin , a single entity often described as fascism in the flesh.
They accuse Rand of being the ultimate fascist while in actuality her masterpiece is all about the true evil nature of fascism.
People who believe that the banksters are the ultimate evil masters of the world these days would LOVE this book if they were to read it.
Corrupt government, government controlled by businessmen, leads to the crash of industrial civilization in this novel.
Of course in the end the good guys and girls prevail- sort of at least.
There is a great deal of insight to be gained into the ways history MIGHT play out.
A third theme is the role of new technology in changing the way the economy works and the disruptions brought on new technology. Hank Reardon, one of Dagny’s friends and lovers,is an industrial titan in his own right who comes up with a major improvement in the steel making process effectively bankrupting his competitors- not to mention a new miracle alloy that promises to revolutionize other industries such as railroads.
The competition conspires with government to drive him out of business and then confiscate his tech and plant.
Everybody interested in the future ought to read this novel. But they need to remember it IS ONLY a novel.
Forget Rand as a philosopher. She was bright enough to write a novel but fell victim to the PETER PRINCIPLE when she got to thinking about the status involved in philosophy and got in over her head. WAY over her head.
Incidentally VERY few of the business types who hold her in awe have ever read her work – or much of any thing else for that matter so far as I can estimate from their public pronouncements.
Yogi sez predicting is hard, especially the future.
Mac,
What did you think of my questions, above?
Re: Clueless
Mike and I are (hopefully) using some exaggeration for effect, in regard to talking about our prospective Dairy Queen jobs, but in my case it’s not an exaggeration to say that my meals have certainly shifted to more beans and rice from steak and sea bass. And at current oil prices, it may be beans or rice, but not both. . . .
Regarding oil prices, I may be one of the worst prognosticators around, especially when it comes to demand side analysis. My primary contribution has been as an amateur supply side analyst, especially in regard to net exports.
In any case, earlier this year I thought that Dennis nailed the monthly low in Brent prices for the current oil price decline ($48 monthly average in January, 2015), and I thought we were more or less following an upward price trajectory, from the 1/15 low, similar to the price recovery following the 12/08 monthly oil price low.
Of course, as Shallow noted, the key difference between the 2008/2009 price decline and subsequent recovery and the 2014/2015 decline is that Saudi Arabia cut production from 2008 to 2009 while they increased production from 2014 to 2015.
But for what it’s worth (probably not much), I think that this is a tremendous buying opportunity, especially for quality dividend paying oil and gas stocks (although the dividend levels for some of these companies may be suspect going forward). I have no idea what Warrren Buffet might be doing, but I wouldn’t be surprised to learn that he is currently buying oil and gas stocks.
I also think that oil & gas stocks need to be placed in perspective in light of other investment options, which seem to be pretty poor, and as I have previously noted we may be in a long term period where “Winners” are best defined as those who lose the least.
The bottom line for me is that depletion marches on. A few years ago, ExxonMobil put the decline from existing oil wells at about 4% to 6% per year. A recent WSJ article noted that analysts are currently putting the decline from existing oil wells at 5% to 8% per year (IMO, the 8% number is more realistic). At 8%/year, globally we need about 6.5 MMBPD of new C+C production every single year, just to offset declines from existing wells, or we need about 65 MMBPD of new C+C production over the next 10 years, just to offset declines from existing wells. This is equivalent to putting on line the peak production rate of about thirty-three (33) North Slopes of Alaska over the next 10 years.
And as I have previously noted, it appears quite likely that global crude oil production (45 and lower API gravity crude oil) has been more or less flat to down since 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase.
If it took trillions of dollars of upstream capex to keep us on an “Undulating Plateau” in actual global crude oil production, what happens to crude production given the large and ongoing cutbacks in upstream capex?
And as Heinrich has noted, given the huge rate of decline in existing US gas production, it’s possible that we might see substantially higher North American gas prices this winter.
If you come through Austin, I’ll be happy to buy you a steak.
Following are links to charts showing normalized production values for OPEC 12 countries and global data. The gas, natural gas liquids (NGL) and crude + condensate (C+C) values are for 2002 to 2014 (except for gas, which is through 2013, EIA data in all cases).
Global Gas, NGL and C+C:
http://i1095.photobucket.com/albums/i475/westexas/Global%20Gas%20NGL%20C%20amp%20C_zpskb5bxu6d.jpg
OPEC 12 Gas, NGL and C+C:
http://i1095.photobucket.com/albums/i475/westexas/OPEC%20Gas%20NGL%20C%20amp%20C_zpsox3lqdkj.jpg
Also following is a link to OPEC 12 implied condensate (EIA C+C less OPEC crude) and OPEC crude only from 2005 to 2014 (OPEC data prior to 2005 was for a different set of exporters than post-2005). Obviously, data quality is an issue, and the boundary between actual crude and condensate is sometimes fuzzy. In any case, we have to deal with the data that we have.
As of 2014, OPEC and the US accounted for 53% of global C+C production (41 MMBPD out of 78 MMBPD). Implied OPEC condensate production increased by 1.2 MMBPD from 2005 to 2014 (1.2 to 2.4). The EIA estimates that US condensate production increased by about 1.0 MMBPD from 2011 to 2014. I’m estimating that US condensate production may have increased by around 1.5 MMBPD or so from 2005 to 2014. Based on the foregoing, OPEC and the US may have accounted for about 68% (about 2.7 MMBPD) of the 4 MMBPD increase in global C+C production from 2005 to 2014.
OPEC 12 Crude and Implied Condensate:
http://i1095.photobucket.com/albums/i475/westexas/OPEC%20Crude%20and%20Condensate_zps12rfrqos.jpg
“Everyone currently has the opportunity [my opinion] to buy low. Many fairly good quality oil & gas companies are trading at 30% to 50% of their recent (1 1/2 years) highs.”
Don’t catch a falling knife (my opinion)
Wear thick gloves. I bought in late January and focused on companies with large dividend returns. So far I’m doing ok, the prices go up and down, but the dividends are still coming.
I guess these were not US E&P stocks?
All of them were oil or service company stocks. I buy and hold long term, so I only check every couple of months how they are doing.
I think they’ll be fine, I see Saudi Arabia foreign reserves are dropping at a fast pace at current prices, they can’t take this too long either.
I’ve written that, when it gets like this, there’s a Darwinian process. We will see bankruptcies, properties will change hands, and there’s going to be takeovers and mergers. Large outfits with low debt and cash reserves are like vultures waiting for the weakest cattle to fall down. Then they feed. And I suspect we may see Arab money being funneled to buy USA and Canadian companies who went over the cliff.
“So far I’m doing ok, the prices go up and down, but the dividends are still coming.”
The correct answer of “how are you doing with your investment” is to calculate to a last cent how you are comparing your returns including dividends with broad index returns. Otherwise to whom are you comparing?
Why would I bother to log in to my portfolio merely to answer such a question? And what good would it do? I bought them to see how they do as the oil price returns to $100 per barrel.
Well you said that “you are doing ok with (your oil investment)”. I just asked with whom you are comparing? Are you comparing with Ves, Clueless, or with broad market? If your returns are less than broad market returns, than “you are not doing as well as you could do”. So if you know that info by calculating and comparing returns your better choice of investing would be to invest in broad index market instead of very narrow and risky sector based individual stocks. But on other hand some people are happy with making less than broad index market for no apparent logical reason.
I’m the one who gets to judge about my personal investments. They are doing ok.
AlexS wrote:
“Don’t catch a falling knife (my opinion)”
Good advice. All Commodities are collapsing, its just not Oil. Copper breach a 15 year low this week. This is a very dangerous time to own stocks as the global economy falls into a recession and taking with it stocks and non-gov’t bonds. I don’t think we will see a deep route as 2008-2009, but it could get pretty severe and even the best companies can get hammered. If institutional investment companies are forced to liquidate investments, it could get quite ugly. The valve of cash is likely to rise much further as stocks and bond tank.
http://newnormaleconomics.com/peak-oil/
Ron, I have had some personal interaction with Mauldin since the 1990s, and he’s no one’s fool and definitely NOT ignorant, believe me; but he doesn’t get paid in lucrative referral and investment conference speaking fees to sell out his deep-pocketed, big-money, oil-industry Tejas pals and those hedgies levered long the biotech bubble, in particular.
Mauldin and his pals are VERY WELL AWARE of Peak Oil, although it is not inaccurate to conclude that they don’t fully understand it as many here correctly do (IMO), which, for Mauldin and his pals, is an enviable position because they pile up mountains of coin irrespective of whether they’re correct or otherwise.
Mauldin has developed a golden network of A-list players and he hires bright people to poach/synthesize ideas from others in order to sell premium-priced newsletters with ideas in order to pitch to people with too much money other people who want to make lots of money from people with too much money.
I have often wondered if Mauldin has ever had an original investment idea in his career, but that’s probably just sour grapes talking on my part, when it’s conceivable that Mauldin has made a highly successful career out of NOT having had any original ideas. Ha ha!!!
It’s a great gig if one can get it, and Mauldin has proven that he’s REALLY GOOD at “it”. 😀
BC, many very smart people have an “ignorant blind spot”. That is they are very smart in most areas but in one or two, they simply let their preconceived ideas overrule their common sense. Proclaiming that the free market and technology will provide an infinite supply of a finite resource is such an ignorant blind spot.
I have no doubt that Mauldin is a genus in some fields. But I also have no doubt that he is an ignoramus in others. We all are.
Yes, I take your point, Ron. What might have been missed in the translation from my lack of being more succinct is that Mauldin and his ilk are very well aware that Peak Oil is real and has already occurred, but people at his level of the income strata don’t get paid to “sell” Peak Oil and its implications.
IOW, the rentier top 0.001-1% don’t need the economy to grow. They have detached from productive activities and are “set”, as it were, having accumulated more financial wealth than they and theirs will need for several lifetimes.
This is classic imperial decadence.
Therefore, no one who relies for his or her professional credibility and livelihood selling the Establishment metanarrative of perpetual growth from techno-utopianism to the Elysium-like top 0.001-1% can hope to sustain his or her credibility, professional livelihood, and socioeconomic status by selling THE ANTITHESIS of the fantasy/fallacy that sustains the hierarchical structure of disproportionate upward flows of resources, labor, profits, and gov’t receipts for social goods to the top 0.001-1%.
IOW, Peak Oil is well known by the Establishment intelligentsia, technocrats, politicos, CEO caste, Pentagon planners, and politically vetted military officer caste; but it can’t be articulated and fully framed within the historical, economic, financial, geopolitical, or socio-cultural context so as to fully inform the masses, i.e., you, me, and the readers of your blog.
That is to say, were Peak Oil and its local, regional, national, and global financial, economic, and geopolitical implications to be fully disclosed, contextualized, and become part of the political/geopolitical discourse, including the implied scrutiny of the top 0.001-1% rentier Power Elite’s values, objectives, expectations, and actions, the “story” of how we arrived at where we are today would beg to be scrutinized and thus likely challenged, which in turn would require scrutinizing the gov’t policies employed since the 1970s and thus revisiting the motives, values, expectations, and benefits accrued since, and to whom.
Please forgive the verbosity, but this is a “big idea”, and such a notion often requires rather more space in order to properly present its merits. But, as always, thanks for your kind forbearance and graciousness in permitting me to ramble on. 🙂
sounding like Mike Rupert
Yes, ezrydermike, thanks for noting that. Granted, being too early to the inevitable outcome at a systemic scale has a very high personal/per capita cost, sometimes a terminal cost; no one gets paid for that.
Peace.
yes, talking about peak oil, limits to growth, ecological overshoot, Deep State, etc., does tend to cut down one’s party invitations.
Peace to you BC.
re: “peak oil is well known to the … CEO caste …”
I dunno – was at a conference recently and talking to a consultant.
Big utility (we would all recognize) CEO customer of his says “300 years of natural gas, no need for solar…”
I think that is shockingly insane.
Newsletter guys are 2/20 wannabes that couldn’t gather AUM.
Meaning frustrated hedgie.
Watcher, often the case.
BC,
To me the whole situation looks like Mauldin has to help his rich clients to offload desastrous investments in the oil patch. Are there any dumb investors out there to help him?
Heinrich, I suspect you’re correct. Without “dumb investors”, there would not be much of a market for the predators.
Lots of ways for
1) oil to be scarce and priced low
2) oil to be scarce and priced high but have all the companies producing oil have low OPEX and low interest rates and still be ready to fold
3) oil to be scarce, priced high, and companies be doing well but you, as shareholder, making nothing from it
//////////////////////////////////////////////////////////////
1) scarcity doesn’t have to define price
2) if companies look like they will make too much money, they can be nationalized, or turned into regulated monopolies (regardless of how many of them there are) like utilities. Rather a lot of examples of this around the world, yes? Statoil? Rosneft? Sinopec?
3) The Apocalypse trade never pays off. The system is destroyed and there are no counterparties to write a check.
Devastating scarcity is devastating. As in not survivable. Devastating has a meaning and it’s not “I make a lot of money and competitively elevate .”
More like devastating abundance at this point.
Your only evidence of that is low price, which is not evidence of that.
What would be evidence of devastating abundance?
At today’s prices given current demand?
Oil that can be widely produced at $20 per barrel – all costs included.
That would certainly lead to an oversupplied market, I would think.
6 billion deaths within one year with none of them a result of no food on the shelves.
Obesity? Car accidents?
An abundance of asteroids and large meteors intersecting with the earth. Solves global warming at the same time.
Yes I think people overestimate the legitimacy of current contracts and the maintenance of BAU. Some people will even go so far as to say that TPTB will maintain BAU at all costs, therefore you should remain invested in the system and try to profit from it.
While I sympathize a little with this argument, it still rings hollow for me because natural capital cannot be created by 1’s and 0’s. It can only be extracted and transformed and, in the case of fossil fuels, mostly burnt and lost forever. If somebody out there can’t, or won’t, deliver the commodity, the game ends. Invading and bombing doesn’t help, because in the process you ruin further the production infrastructure.
A dislocation such as we face today is a dislocation, full stop. All bets are off! Deals can be reneged, pacts can be broken, laws can be changed, governments can collapse, currencies can fail. Happens all of the time, will happen more as time goes by.
I use the following as a general rule:
1) big banks and financial firms can play this game, because they profit enormously when they win, and when they lose they still win, because they get more free money from the central bank
2) for the rest of us, we just have to keep working and preparing
That’s it. I don’t think it’s more complicated than that. If you are in category 2 and try to join 1, you will find out very quickly that you don’t belong, and your so-called ticket doesn’t get you a seat at the table.
There is always plan B.
http://video.pbs.org/video/1864227276/
Problem is getting politicians to understand the need for it and show some courage in the face of adversity to implement the public good.
Shale companies now produce more oil with two rigs than they did just a few years ago with three rigs, sometimes even spending less overall.
Does anyone here know what revolutionary new technology came along over the last few years?
As far as I can tell they mainly got better at picking the sweet spots and avoiding the bad spots. I’m just an armchair analyst and make no claim to knowing how they learnt to do that, but it seems to me their success is based primarily upon that sweet spot drilling behaviour.
There is no evidence of this. First few months production has been flat for years (yielding quite the puzzle re stage count) across averaged wells. Lots of work has investigated this in comment threads here and rebutted company claims.
Frugal, my answer to that is….the internet, so called oil, “analysts” everywhere that do not know diddly squat about the oilfield and the new normal for lying.
Rigs don’t make wells, they drill holes in the ground. People make wells. LTO production has been holding steady thru 2015, even with the declining rig count, because shale companies have been frac’ing hundreds of wells drilled in 2014 that distorts the 2015 picture. Any well that still has sufficient induced energy (from the frac) they are producing wide open, they are using bigger fracs, and the flowbacks and subsequent 6 month production rates (note increasing GOR and CH gas (goodonya, Push)) are also wide open.
This is not rocket science. Shale companies are desperate and they desperately need money. There is no “revolutionary” new technology under way that will save their hineys now.
The CEO of H&P says rig commitments are not be renewed and in the next 60-90 days a lot more rigs are going to get stacked, a lot more people are going to lose their jobs.
This is LTO stuff is a bad deal, folks; its total mismanagement of a valuable natural resource. A failed business model. Let’s hope we (all Americans) don’t all end up having to pay the 300 billion dollars of debt off the LTO industry has incurred. When those CEO’s start walking off with big parachutes, remember them fondly.
Mike
Thanks Mike.
As I mentioned before, I am in an area that until recently was trying to decide what to do about fracking within suburban neighborhoods. There has been a lot of push back from people living in those areas. My fear was another boom and bust cycle where companies came in, drilled and created local disruptions, and then when the money ran out, pulled out and left messes.
I joined this forum to monitor decline rates in the Bakken in hopes that economics would make themselves evident before my area sold itself to the oil companies.
With economics being what they are now, I am hoping that the oil lobbying in my area has declined and that the state is thinking twice about concessions it was willing to make. The state is very strong economically right now and doesn’t need additional gas and oil activity to fill the coffers.
Boomer, I am aware of your fears from previous posts. I wish that I could arrest your fears regarding pipelines. I could easily statistically, and from a realistic standpoint, but of course I cannot because I am in the oil business and I am supposedly, bias. So believes the EV gang who has anointed themselves keeper of the future, in the world’s best interest.
I think I may have said this to you before; I have a wealthy, very successful friend is who has a prospect on the east slop of the Rockies in CO that I would die to have a piece of. It is a beautiful prospect that would make Coloradans a boat load of money. He has worked on if for 10 years and cannot get permits to drill it. It will never get drilled. Colorado is the most liberal state in the entire union, even more so than the great state of UCB. I think you are fine and need not worry about pipelines. Which, by the way, I believe, is the single safest means of transporting oil and refined products across our great country, far safer than trains, and way better than ships.
The largest oil spill in the country’s history (for actual harm to the environment) was the incident in Valdez. That oil was destined for Long Beach, California when the Valdez went aground. Californian’s are paranoid about their beaches, but are in great need of much oil and gasoline so they can stay stuck on the 405 for 2 hours at a time. So, for Californian’s, its OK to make a mess in the Gulf of Mexico as long as Texas and LA can get oil and gas to them cheap, and its plenty OK to “import” oil by ship from Alaska, as long as they, Californians, don’t have to deal with those messes. Which to this day they cannot, even over the Valdez incident. Such is the hypocrisy of the anti-fossil fuel crowd.
Again, I think you’ll be fine for several years and won’t have to worry about pipelines. Sooner, rather than later, you will. English law and the rights of private land ownership are being lost in the best interest of the common good of the citizens. Again, another little bit of hypocrisy about the anti fossil fuel, “its OK, I need it, as long as it does not come from my backyard” gang.
Mike
Thanks for your comments.
The pipeline issue doesn’t affect me personally. I bring it up because I know Nebraskans who are against it and I try to explain to Fernando why they are against it. He seems to think Venezuelans are the reason there is any opposition and that isn’t the case.
I am more concerned about tar sand mining. It looks like a messy operation, so I am wary of the economics and environmental damage of that.
Now the fracking discussions are in my state. I’ve lived here long enough to see what an oil bust did to it years ago. So I am wary of seeing that happen again. Now people want to drill in populated areas. So there is more at stake than when the boom was going to happen in unpopulated areas. Back then the oil industry packed up and left that part of the state very rapidly and it had a very negative impact both in those communities and in Denver as well.
I’ve seen how fast the oil companies can leave when the economics change.
What Every Westerner Should Know About Oil Shale: … on May 2, 1982 – a day known on the Western Slope as “Black Sunday” – everything came to a catastrophic halt. Reckoning with falling oil prices that made oil shale no longer profitable, Exxon’s board of directors announced that they would pull the plug on the Colony Project, effective immediately. The evening news delivered the first word most people in Colorado heard about it. Overnight the 2100 people employed on the project became unemployed, locked out and not even allowed to retrieve their personal effects when they showed up at the job site the next morning. The impact shot through the entire region, leaving everyone from construction workers to bus drivers to area business owners to appraise what a post-shale future might hold for them.
Boomer, I am a land owner too and actually have a big pipeline across my place. I don’t think much about it because I think its pretty safe. On the other hand, I understand why Nebraskans would not want one built thru the sand hills that transported oil sand oil from Alberta to the Gulf Coast. I have seen that mess up there and it is blight on Mother Earth in a big way. I wish we did not need to do things like that; its a God awful thing to see.
My industry has done some bad things in the past and disappeared leaving others to clean their messes up. A lot of industries occasionally do the same thing. I try and be a good steward of the land on leases that I operate. Its not my land but I treat it like it is. I think, however, that regulations are becoming so stringent regarding the environment and the correlative rights of others that the oil industry simply will not be allowed to do things the way it use to. Besides regulatory issues, mineral owners are now making mineral leases that are very, very protective of the land and incredibly hard to operate under. To comply with stricter regulations and leasehold terms, operating costs have gone up and most operators carry so much liability insurance for surface and downhole failures it is staggering. Things are changing and I think things will get even better.
Drilling wells in populated areas unfortunately might become more prominent. Rural ranch and farmland is getting overrun with housing developments. It’s a sensitive issue and I understand your concerns. I always think of the Barnett in the DFW area and think that was done pretty well in a very densely populated area.
I love Colorado and caught many wonderful trout in breathtaking places there. I don’t want it messed up either, not in any way. As to that oil shale stuff I hope we never have to open that can of worms.
Mike
Mike, thanks again for your comments.
I have felt that economics, more than safety or the environment, will ultimately determine what happens with future drilling in Colorado. And even the pipeline.
In a place like Colorado, water, land development, recreation, tourism, and agriculture all factor in so there are a variety of stakeholders in the discussions. So who gets priority may end up being an economic decision. Right now, the price of oil and gas being low, and the state booming economically, Colorado doesn’t need the disruptions that new drilling might bring. The conversation has likely shifted from a year or two ago. The conversation could shift again in the future.
In this world, a few Nebraskan farmers don’t amount to a hill of beans in national politics. Keystone XL was frozen by Obama because there’s intense lobbying by people who don’t give a hoot about Nebraska farmers. Their gig is global warming. And when I notice they are also the kind of people who swoon over the Chavista regime, and taking into account the huge amount of money the Chavistas have used to interfere in other countries’s internal affairs, it seems safe to conclude they financed “greens” who oppose Canadian heavy oil but thoroughly ignore the identical Venezuelan heavy oil coming in by tankers.
Keystone XL was frozen by Obama because there’s intense lobbying by people who don’t give a hoot about Nebraska farmers.
You haven’t been following this closely. The pipeline has been stalled because the some farmers have filed a lawsuit which is still going through the Nebraska court process.
Nebraska Judge Stops TransCanada from Using Eminent Domain for Keystone XL
I’m as green as they come, but have zero love for the Chavistas. Please don’t lump the two together.
I didn’t do the lumping. There are thousands of webpages and letters available showing a relationship between organizations and individuals in the USA and the Chávez regime. The leftists are also engaged in environmental causes, and quite often they seem to follow the Venezuelan line.
Do you know what I do? I follow their Twitter, lol at their Facebook pages, read their blogs. And the threads are quite evident.
The financing also flows via Hollywood. For example the Chávez regime paid Danny Glover $18 million for a movie project he never carried out. I’m pretty sure the FBI must have these guys all identified, because a lot of that money is laundered, illegal cash stolen by the Chavistas.
Given the huge pile of cash they stole (at least $20 billion), the “donation” under the table of several hundred million USD to USA and other western outfits seems like a reasonable estimate.
Fernando,
You’re worried about a few piddling billions the Chavistas have stolen?
You seem to be ignoring the biggest crazy aunt in the living room:
Congresswoman Cynthia McKinney Nails RUMSFELD with Hard Questions
https://www.youtube.com/watch?v=Px1t1-a9uxk
Though transparency was a cause he championed when campaigning for the presidency, President Obama has largely avoided making certain defense costs known to the public. However, when it comes to military appropriations for government spy agencies, we know from Freedom of Information Act requests that the so-called “black budget” is an increasingly massive expenditure subsidized by American taxpayers. The CIA and and NSA alone garnered $52.6 billion in funding in 2013 while the Department of Defense black ops budget for secret military projects exceeds this number. It is estimated to be $58.7 billion for the fiscal year 2015.
However, of greater interest to some may be the clandestine nature and full scope of the black budget, which, according to analyst Catherine Austin Fitts, goes far beyond classified appropriations. Based on her research, some of which can be found in her piece “What’s Up With the Black Budget?,” Fitts concludes that the during the last decade, global financial elites have configured an elaborate system that makes most of the military budget unauditable. This is because the real black budget includes money acquired by intelligence groups via narcotics trafficking, predatory lending, and various kinds of other fraud.
“What’s Up with the Black Budget?”
https://solari.com/blog/whats-up-with-the-black-budget/
The fact that SOME people are leftist, green, and like the Chavistas does NOT imply that all greens like the Chavistas. Do not lump the two together.
fears regarding pipelines….So believes the EV gang
Mike, that’s simplistic thinking. EVs don’t necessarily have anything to do with people not wanting pipelines.
You wouldn’t want people thinking simplistic thoughts about people in the oil industry…
Nick, I thought you were going to stay off my rig floor, man. The EV gang is essentially the anti-fossil fuel gang but I will try and be more clear in the future; I don’t want to hurt anybody’s feelings.
I believe you said the other day that biofuels were not the solution to 95 million barrels of oil per day of worldwide consumption, 80% of which is required for transportation, but wind and solar power was. In very “simplistic” terms, that makes no sense to me whatsoever. No need to try and explain it to me either.
Look, I don’t have time to get in a chicken fight with you about this anymore, I have to work. Pecking on a keyboard all day, made from hydrocarbons, takes up a lot of time. Its tough getting that nasty, risky, expensive stuff out of the ground and I don’t see people weaning themselves off of it ASAP, so I need to get. You know what they say, America needs America’s oil.
I thought you were going to stay off my rig floor, man.
The deal was: you stay out of EVs (or, I presume, other stuff outside your area of expertise), and I stay off your rig floor…
you said the other day that biofuels were not the solution to 95 million barrels of oil per day of worldwide consumption,
That’s right. Ethanol works fine for small volumes – maybe 10-20B gallons per year in the US – but not for much more.
wind and solar power was.
Actually, the subject was energy in general, not oil. But, yes, electricity (from any energy source) will replace oil.
Pecking on a keyboard all day, made from hydrocarbons
Yes, hydrocarbons are handy. But, they don’t have to come from oil, or fossil fuels for that matter. There’s plenty of hydrogen and carbon in the world.
No need to try and explain it to me either….Look, I don’t have time
Then don’t start arguments…(cue the Monty Python “argument” sketch https://www.youtube.com/watch?v=hnTmBjk-M0c).
Hi Mike,
I agree that the way Nick G phrases things he seems to be anti-oil.
For many of the EV gang, it is not so much being anti-oil as finding something to replace oil as it depletes. It is not just about EVs, it is fuel efficiency, public transportation in urban areas and at some point we will need to move to EVs or just drive less.
I assume you believe that oil will peak and decline at some point in the future, as oil prices rise substitutes for our current mode of transportation will be sought and will become more competitive.
The question is an interesting one, as oil output falls what comes next? Seems pretty relevant to me.
It does not mean I hope that oil producers do poorly. On the contrary I wish that oil prices would rise, but if they rise too much over the long run, then oil demand may fall (at any given level of World GDP). It seems to me that over the next 20 years oil output will decline and oil prices will rise. Eventually this may curtail oil demand, hopefully after you have retired.
For many of the EV gang, it is not so much being anti-oil as finding something to replace oil as it depletes. It is not just about EVs, it is fuel efficiency, public transportation in urban areas and at some point we will need to move to EVs or just drive less.
I’ve felt since the Carter days that we should be planning for the decline of oil so we can make a smooth transition. I’d rather not have us hit a wall before other plans are made.
Oil is important and has many uses. I think conserving for its least substitutable uses makes more sense than just using it up as fast as possible until we run so low it becomes prohibitively expensive.
Dennis, it is not necessary that you “explain” to me what this fella means; if you wish to defend his rationale you do not need to do so to me. I don’t want to hear the world needs to get off goddamn fossil fuels ASAP, not today. I have 11 good men and women that have worked for me for over 30 years and we are all scared to death right now. There are hundreds of millions of other people in the world relying on their governments and the proceeds from crude oil sales to give them basic needs like food, water and shelter. They are scared to death as well. If you or anyone else wants to starve them to death, ASAP, to make a statement about chicken shit EV cars, so be it.
Go cut some firewood or something. Winter is on the way.
Your friend,
Mike
Mike, if I’m understanding you correctly, the cost per barrel is simply calculated by dividing current production of all new wells by current well completion costs for all new wells. Not factored in are the sunk costs of drilling or other expenses in previous years. For example if you spent 4 million drilling a well in 2014 and another 4 million fracking that very same well in 2015, only the fracking costs are included in the current cost of production.
On top that, operators aren’t choking back well flows and just running them wide open to maximize current production at the expense of the long term viability of the well.
And this makes it look that costs have come down drastically, and the “experts” are saying this is because of new revolutionary technology.
Frugal, as to the first paragraph I don’t know if that is what I said, or implied, but I would not at all be surprised that is what might be going on in those shaley minds. Their accounting practices are very suspect to me; I think that is an interesting scenario you have raised. Maybe that is where they get the costs have come down 50% thing. Because actual drilling and completion costs have NOT come down 50%; no way. Umm.
I believe any well that can flow or is gas lifted, or on ESP and can be tweaked to higher daily rates are now pretty much wide open, yes sir. Rod lift wells are pretty much limited by the lift mechanism itself.
Mike
Crude & Condensate seem quite steady, but we have an increase in casing head gas? Me thinks those chokes are wide open!
After the nice sugar high of the wide open chokes, those decline rates should pick up big time. How many years are these wells suppose to produce for?
Hi Toolpush,
For the average Bakken/Three Forks well they will produce out to 27 years if they are abandoned at 7 b/d of output(EUR=340 kb) and about 15 years if wells are abandoned at 15 b/d (EUR=300 kb). In the case of Eagle Ford average wells, the decline a little faster and will last about 15 years if they are abandoned at 10 b/d(EUR=230 kb).
http://www.eia.gov/petroleum/supply/weekly/pdf/highlights.pdf
What am I missing? Imports up nearly half million bpd, refinery runs down quarter a million bpd, due to refinery breakdowns, and stocks only up 2.4 mill barrels in total. And the market was shocked by the build?
Us production must be down to make all this balance. (can someone advise me where the US production is reported in the EIA weekly please)
toolpush,
Go to http://www.eia.gov/petroleum/supply/weekly/ and select the pdf file for data overview. There you can find on the table ‘petroleum supply’ the production numbers. For the last week production declined 47 000 bbl/d. Last week it has been a decline of 70000 bbl/d. So decline is now pretty fast.
Thanks Heinrich,
I see only 14,000b of that drop was from the lower 48. Most of the drop was from Alaska, down 33,000b.
The drop in US production will come. The longer it takes the uglier it will be! We have yet to see a reaction to the rig count to the latest price fall.
U.S. C+C production: EIA weekly vs. monthly vs. STEO (Aug.15) data
Products supplied: 21.397M barrels/day, YTD: 19.729, 2014 YTD: 18.931.
Total stocks up 0.8M = 114k barrels/day
Total net imports 6.192, YTD 5.258, 2014 YTD 5.680.
Weekly wholesale product sales and imports bounce around quite a bit, so really no big news. Still a bit of accumulation, but not really any reason for a major price drop except that everyone now knows shale can now make a profit at $[insert current price here and divide by 2] per barrel.
You’re looking at total product supplied that will tell you nothing since it includes imports. instead look at ‘Domestic production’, if you put the data in a graph, you see fairly enough the decline in crude production
A guy
Shell is drilling at its Burger prospect in the Chukchi Sea. The well is almost certain to find hydrocarbons, the big question is whether they’ll find a gas condensate reservoir or an oil leg underneath the gas condensate we know already exists in the area. Since the discovery is going to unleash all sorts of wild estimates I’m going to link some old articles about the field, as well as other basic information I can find. Here’s a basic over view of the area geology and exploration history:
http://www.petroleumnews.com/pntruncate/328947931.shtml
A more detailed view of the Chukchi geology
http://www.tgs.com/uploadedFiles/CorporateWebsite/Modules/Articles_and_Papers/Articles/Alaskan%20Chukchi%20-%20GeoExpro_March.pdf
I agree, Fernando, this is going to be a fun well to watch going down. A very interesting well. I wish we could get daily reports, but then they’d probably have to kill us, uh?
Perception is reality.
An old friend told the story of an old gent who lived in our old hometown, a tale worth telling.
His first name was Harvey, but everyone knew him as Blimp. Must have been because of his size, at the pool hall Blimp would always write his name on the chalkboard and always use the entire board, used all capitals.
He also claimed that aliens abducted him, the aliens took him to Mars and brought him back, beamed him down, as the story goes. Blimp also claimed that the people in a small hamlet in Norway thought he was a saint, a great man worthy of respect. Blimp said that they began to carve his name onto the side of a nearby mountain. The stone carvers got as far as ‘St. Har’, however, Blimp then stopped them. He didn’t want so much admiration and respect, none of it. Blimp could travel great distances with ease, Mars, Norway, didn’t matter.
So, according to the one and only BLIMP, there is a mountain in Norway with the letters St. Har on it.
Believe the story, it’s true.
What Harvey claimed as true never happened, all fiction, Münchhausen Proxy, whatever, perception is reality. Can’t make up stuff like that.
You always think you’re buying at a low price and then it drops some more. The oil stocks are the prime example.
That’s the way it goes, first your money, then your clothes. Har
The Maudlin piece appears to have collected every single flawed argument in one place.
In particular, it’s clear that he has read this laughable load of nonsense: http://www.manhattan-institute.org/pdf/eper_16.pdf
He repeats the author’s vague hand waving that somehow ‘big data’ and ‘analytics’ will halve his already hilariously optimistic breakeven price range of $10-$55 by doubling production at apparently no extra cost.
I agree with you. Could he name one US E&P company with OPEX less than $15 per boe, not to mention full cycle costs + IRR at 10-12%
Out of all the whoppers that Mauldin committed, the biggest was misreading the *per rig* EIA productivity data as *per well* productivity.
Yes, it would be amazing if we were getting 10x the oil out of each shale well as we were 7 years ago, as he claimed.
To be fair, he was simply repeating the chart title from a grossly mislabeled Manhattan Inst chart, but he really should have known better.
An article about Saudi financial strength. It looks like at current prices they’ll run out of foreign reserves by late 2016 or early 2017:
http://www.economist.com/news/finance-and-economics/21661029-kingdom-borrows-compensate-falling-oil-prices-asset-rich-cash-poor?fsrc=scn%2Ftw%2Fte%2Fpe%2Fed%2Fassetrichcashpoor
Well there’s definitely an economic war going on.
We’ll see who’s left standing at the end of the day.
Denmark cutting back ambitious emissions reductions, too much renewables hurting business
http://www.cityam.com/222724/denmark-scales-back-climate-goals-are-proving-too-expensive-businesses
Denmark cutting back ambitious emissions reductions, too much renewables hurting business
First, I didn’t see anything in the article mention that emissions reductions were needing to be cut back because of too much use of renewables. Those are your words not theirs. There could be quite a few other reasons why they are finding it more expensive to reduce their emissions goals.
Not to mention that the real story here is, that despite the whopping 3% reduction in their goal for emissions reduction by 2020, Denmark is still way ahead of the curve compared to the rest of Europe!
In a goal set by the country’s previous government, Denmark had promised to reduce its carbon emissions at least 40 per cent by 2020, against 1990 levels…
This is proving too expensive though, so the northern European country is now settling for a 37 per cent reduction instead.
…By reducing emissions so much so quickly, Denmark’s goal remains more ambitious than most, as the EU has agreed to reduce carbon emissions to 40 per cent below 1990 levels by 2030.
So it looks like Denmark is still ahead of the curve by a decade!
Evidently the cut back isn’t needed because of the high cost of nuclear power. Denmark simply shows that too much renewables causes economic problems.
A bit off topic, but if China’s economy starts unraveling it’ll probably cause problems elsewhere. I don’t think countries will prioritize subsidizing renewables if the world economy is slowing down.
Evidently the cut back isn’t needed because of the high cost of nuclear power. Denmark simply shows that too much renewables causes economic problems.
Really? Surely you jest, Mr. Leanme! How exactly did you conclude that from reading the article which you linked to? BTW, Denmark doesn’t use nuclear power at all, so obviously that point is completely irrelevant!
Main article: Electricity sector in Denmark
Source Wikipedia.
The electricity sector relies on fossil energy and renewable energy: wind power, biogas, biomass and waste. No hydro power is produced domestically and other countries hydro is used only for buffering Denmark’s renewable generation. The average consumption of electricity per person was 0.8 GWh less than EU 15 average in 2008. Denmark invested in the wind power development in the 1970s and has been the top wind power country of the world ever since. Danish consumption of wind electricity has been highest in the world per person: 1,218 kWh in 2009. Denmark produced more wind power per person in 2009 than Spain or the UK produced nuclear power.
Because of energy taxes, Denmark has the highest household electricity prices in the world,[27] while industries pay just below EU average.[28] Transmission costs are around 7 øre/kWh, and support regimes cost 19 øre/kWh in 2014.[29]
And based on your link I can’t tell if emission reductions that are proving more expensive than anticipated are coming from the energy production sector at all. For all I know it could be from the transportation sector or somewhere else or even because of something else. So do you have any specific data to support your position that it is too much use of renewables that is causing economic pain other then those very vague statements in the article?
Fred Magyar,
The claims of the green utopians are every bit as exaggerated as those of the carbon utopians.
Instead of the BAU programs of the carbon and green utopians, Almuth Ernsting proposes a complely new paradigm:
“Renewable energy is growing faster than ever before…. Many view such news as rays of hope in a rapidly destabilizing climate. We all need some good news – but is renewables expansion really the good news people like to think? Can we really put our hopes for stabilizing the climate into trying to simply replace the energy sources in a growth-focused economic and social model that was built on fossil fuels? Or do we need a far more fundamental transition towards a low-energy economy and society?”
Here’s what Ernsting observes about Denmark:
What about the much-heralded renewable transition of Denmark? There coal use is falling and around 21 percent of total energy is sourced from renewables. Denmark holds the world record for wind energy capacity compared to population size. Unlike many other countries where wind energy is firmly controlled by large energy companies, Denmark has seen strong support for locally owned wind energy cooperatives, widely considered an inspiring example of clean, community-controlled energy. Nonetheless, wind energy in Denmark accounted for just 3.8 percent of Denmark’s total energy use in 2010.
Bioenergy accounts for a far greater percentage of Denmark’s “renewable energy” than does wind – and indeed for a greater share in the country’s overall energy mix than is the case in any other European country. As in Germany, Denmark’s bioenergy includes biofuels for transport, which studies show tend to be worse for the climate than equivalent quantities of oil once all the direct and indirect emissions from deforestation, peatland destruction and other land use change associated with them are accounted for. And it includes wood pellets, with Denmark being the EU’s, and likely the world’s, second biggest pellet importer after the United Kingdom. Most of those pellets come from the Baltic states and Russia, from countries where clear-cutting of highly biodiverse forests is rampant. Studies show that burning wood from whole trees can be worse for the climate than burning coal over a period of decades or even centuries.
https://citizenactionmonitor.wordpress.com/2014/11/20/shocker-our-only-hope-for-a-sustainable-future-is-to-return-to-a-low-energy-low-consumption-pre-1973-lifestyle/
If you look closely, the arguments here seem to be mostly 1) biofuel is bad, and 2) wind and solar haven’t replaced fossil fuels yet.
I agree that biofuels aren’t scalable to replace fossil fuels. But…they don’t need to be. Wind and solar electricity is far better.
As to renewables not replacing fossil fuels yet. Sheesh. Oil didn’t replace horses overnight!
Excessive push for renewables (mostly wind) are causing a bad business climate. They drive up energy costs for Danish companies. That’s what I gather from the article.
Denmark has done a great job of cutting their total liquids consumption (presumably through high taxes). Their liquids consumption fell at 2.0%/year from 2002 to 2014.
However, their oil production peaked in 2002 and fell at 6.6%/year from 2002 to 2014 (total petroleum liquids + other liquids), and because they did not cut their liquids consumption at the same rate as the rate of decline in production, or at a faster rate, the resulting rate of decline in net exports exceeded the rate of decline in production and the net export decline rate accelerated with time. The observed 2002 to 2014 rate of decline in Denmark’s net exports was 21%/year.
So, for 2002 to 2014, some rates of change:
Production: -6.6%/year
Consumption: -2.0%/year
Net Exports: -21.0%/year
The Net Export Mathematical fact of life is that given an ongoing decline in production in a net oil exporting country, unless they cut their consumption at the same rate as, or at a faster rate than, the rate of decline in production, the resulting net export decline rate will exceed the production decline rate, and the net export decline rate will accelerate with time.
This also applies to Chindia’s consumption of Global Net Exports of oil (GNE). Given an ongoing decline in GNE, unless the Chindia region cuts their net imports at the same rate as, or at a faster rate than, the rate of decline in GNE, the resulting rate of decline in Available Net Exports (ANE*) will exceed the rate of decline in GNE, and the ANE decline rate will accelerate with time.
*ANE = GNE less CNI (Chindia’s Net Imports)
Yes this is a very important point. Denmark, like New Zealand has very high renewable electricity generation so that sector is not the carbon problem. Also like NZ it has a big dairy industry (for its population) and this generates a considerable greenhouse gas emissions via cattle exhalation.
Transport of course, as ever, is the other problematic sector, but here Denmark is way ahead of NZ especially with its famous Transit and cycling oriented cities, especially its primary city of Copenhagen. NZ’s primary city Auckland is improving rapidly now through with urban rail Transit ridership growing at over 20% pa following investment including electrification and new routes and frequency. A big investment in urban on-street and of-road cycleways is beginning this year too.
http://transportblog.co.nz/2015/08/21/july-15-patronage/
This follows 60 years of trying to make this small (1.5m) city into a mini LA with freeway and sprawl only policies and subsidies.
Urban transformation is a vital part of the solution to all the converging issues of the 21st century. And it is survival of the fittest: those Metros that have the best fit for this age will continue to prosper. Walkable, bike-able, Transit rich, de-carred cities that focus on the rise of the local and abundant car-free access and interconnection will win this century. And their increasing density will allow the vital countryside and wildness to remain relatively unmolested.
I know this meme doesn’t fit with the run to the hills default of frontier cultures like ours but that’s what the evidence supports.
Additionally there is on-going work on the ruminant methane exhalation problem. Will have a look for some recent info.
Main point: electricity generation is not the problem everywhere, that is solvable, urban form and personal transport are associated issues that also will be addressed by successful societies.
Fernando is just reciting his usual prejudices and is clearly completely uninformed about Denmark. Too much ideology not enough curiousity, sadly.
Research centre on agricultural livestock methane generation: http://www.pggrc.co.nz
A third of US methane emissions is from the livestock industry:
http://epa.gov/climatechange/ghgemissions/gases/ch4.html
I merely linked an article which shows Denmark had to reduce its emissions reductions target because they hurt the economy. Evidently this implies too much renewables hurts the Danish economy. Can’t wiggle out of that one.
I merely linked an article which shows Denmark had to reduce its emissions reductions target because they hurt the economy.
You still don’t get it! What you did was claim there was a link between their need to readjust their ambitious emission targets because they use too much renewable energy. Even if that were true, the article you linked to does not provide any evidence to support that particular claim! It is you who is making that assumption and leaping to a conclusion.
Here is some data on their targets and their current energy consumption. The fact that they may have reduced their target of a 40% reduction in CO2 emissions to 37% because the 40% target was supposedly hurting the economy does not imply that they are using too much renewable energy! It only tells us that a 40% reduction target was a bit too ambitious for now.
08 January 2015 – Denmark is confident in achieving its 2020 GHG cut target
Denmark is confident in meeting its EU target in 2020, namely halving its coal consumption by 2020 and cutting greenhouse gas (GHG) emissions by 40% in 2020 compared to 1990. The country has already introduced measures that should reduce emissions by 37%, leading to a 2 MtCO2eq shortfall by this date. The country has an EU target to reduce GHG in the sectors not covered by quotas by 20% by 2020, compared with the 2005 level. According to projections by the Danish Energy Agency, the EU target will be exceeded over the 2013-2020 period, when the total exceeded compliance is expected to be 19 MtCO2eq. Denmark aims to reduce the share of the power and heating sector in overall emissions from 38% in 2012 to 29% in 2020, increasing the share of transport (from 22% to 26%). By 2020, the gross energy consumption is expected to decline by 4%, due to energy efficiency measures in the power generation and heating sector. Renewable power generation will continue to soar (+47% up to 2020), thanks to offshore wind parks, reducing the share of fossil fuels in the power consumption from 84% in 2000 to 29% in 2020. Coal consumption should fall by 57% and renewables (renewable power generation, biomass, biogas and biofuels) are expected to account for 38% of the primary consumption (from 26% in 2012) and for 30% of the final energy consumption by 2020.
I don’t think countries will prioritize subsidizing renewables if the world economy is slowing down.
You are right they will more likely subsidize failing oil companies because that makes so much more sense!
http://www.ipi.org/ipi_issues/detail/dont-subsidize-renewable-energy-fossil-fuels-are-the-way-to-go
Don’t Subsidize Renewable Energy; Fossil Fuels Are The Way To Go…
…Innovative drilling techniques that allow energy companies to extract oil and natural gas from shale have relegated Peak Oil fears to the sinkhole.
Yep, makes sense to me!
Please do not mix my remarks with other content. That’s dishonest.
Fernando Leanme said: “A bit off topic, but if China’s economy starts unraveling it’ll probably cause problems elsewhere.”
That’s the understatement of the day:
“Surge in emerging market capital outflows hits growth and currencies: Fears over China and US Fed policies spur exodus”
http://www.ft.com/intl/cms/s/3/00b81130-45c5-11e5-af2f-4d6e0e5eda22.html#axzz3jJe0cpCV
A surge of capital gushing out of emerging markets has risen toward $1tn over the past 13 months, roughly double the amount that fled during the financial crisis amid slumping confidence in the world’s developing economies.
The sustained exodus of capital reinforces concerns that emerging market economies, suffering slowing growth and weakening currencies, are relinquishing their longstanding role as locomotives for global growth to become a drag on demand instead.
Analysts say the flow may accelerate following China’s currency devaluation this month and nervousness over an expected rate hike by the US Federal Reserve….
“Emerging market currencies are currently facing the worst of all storms,” said Bernd Berg, strategist at Société Générale. “Global growth fears [are] driven mainly by a significant slowdown in emerging market countries, while the lukewarm recovery in developed nations is not strong enough to counteract weakness in China and other emerging countries,” he added.
I don’t think countries will prioritize subsidizing renewables if the world economy is slowing down.
Well here is an example of an eminently sensible use of renewable energy that does not involve subsidies per se.
NIC to introduce solar power to pump irrigation water
Minister of Agriculture, Labour and Social Security Derrick Kellier says the move will commence shortly with the commissioning into operation of solar power to operate the pumping system at Ebony Park in Clarendon.
In September a $300 million irrigation project will be launched at Spring Plain/Ebony Park bringing the nearly 3,000-acre property at the agro-park into full production.
Kellier, who was speaking at the 63rd Annual Denbigh Agricultural, Industrial and Food Show in Clarendon on Saturday, August 1, said that if Jamaica is to increase its production and productivity and ensure its food security, irrigation systems needed to be significantly improved and expanded.
I vainly hope that maybe, I might have influenced this ever so slightly, in that I attended the Denbigh Show last year and pointed out to a rep at the NIC’s display that, it was insane for Jamaica to be using imported fuels as the basis for pumping water in general and irrigation water in particular. That was just a year ago so, if it is a response to my suggestion that grid tied solar pv could reduce costs significantly, while being far more sustainable, that sure was fast!
The current low oil prices are reducing the urgency of those thinking of implementing solar pv around here especially if they buy into the meme that low prices will persist for a while longer. I do not buy into that and believe that as soon as the disruption is over, the hawks will quickly do whatever is necessary to bring supply back in line so that prices can recover. The hawks will be looking to pick up the carcasses (assets) of the distressed LTO operators but, what happens to the debt? Somebody is going to be left holding the bag but, how does that work?
Surely that three hundred million is either a typo or in some currency other than USA dollars.
Sorry, I normally insert J before Jamaican dollars when posting but, I was in a hurry to post. It is in fact Jamaican dollars so, divide by 117 as of today to get 2.56 million US
Given what Jamaica pays using diesel to generate electricity, the country really needs to put its house in order. As I wrote you in the past, it seems to me there is insufficient surface area AND money in the country to use renewables to in a meaningful fashion. For now, I would build a high efficiency coal plant. Another option would be to use compressed natural gas, or possibly LNG. Long term you would benefit from a study to see what you need to do to cross the Cayman through and connect to Cuba. I expect Cuba will connect to the USA grid after the people get rid of the Castro family dictatorship.
it seems to me there is insufficient surface area AND money in the country to use renewables to in a meaningful fashion.
You might want to spend more time on it, and look at it more carefully. Look at the recent cost of utility-scale PV (under 7 cents per kWh in good locations), the recent cost of wind (also under 7 cents good locations and under 5 cents in really good locations) and the recent cost of reasonably clean coal plants (I think it’s at least 7 cents per kWh – that would be interesting to look at).
Given how expensive oil generation is, anything would be an improvement, and I think there’s a value to domestic production over imported coal.
If the approximate one thousand dollar per acre cost of installing a presumably modern irrigation system includes the cost of the solar farm that is a dynamite quality investment for the country.
So long as the total quantity of water delivered once every three to five days is adequate the actual timing of irrigation is not generally very important. So the intermittency of solar power will not really matter in a country with tropical sun.
Irrigation drinks diesel fuel and diesel fuel will be going up and will always have to be imported. In a world run on fiat money the odds are high that such a country can repay a long term loan with depreciated currency, the net result being a huge savings compared to paying for imported fuel year after year.
If the soil is good and the management is skillful the yield per acre of some crops in such a climate can be awesome with four crops a year possible sometimes.
Austin Energy recently signed a utility-scale contract for PV for less than 5 cents per KWH.
Techsan Wrote:
“Austin Energy recently signed a utility-scale contract for PV for less than 5 cents per KWH.”
Until the Utility goes bust. Same deal as Shale, or the Housing bubble. it will eventually go bust. Now that China’s economy is going bust, they might have a wee bit of problem sourcing ultra-cheap, below cost PV panels needed for the 5cent Kwh contract.
Hell, in this case we can end all renewables subsidies. They are so competitive I’m pretty sure Jamaica will be looking like a windmill pincushion in five years.
You’d think. It’s baffling that Jamaica is so badly run.
In any case, you’re right: we should discontinue all subsidies for wind and solar…just as soon as we have a proper tax on fossil fuels for all the pollution and military costs they incur.
Maybe about $1 per litre for liquid fuel, and about $.10 per kWh for coal.
Most European countries have proper liquid fuel and power taxes, but they tend to badly under-tax commercial users. That leads to all kinds of distortions, like inadequate rail freight and excessive use of diesel for light passenger vehicles.
NickG wrote:
“You might want to spend more time on it, and look at it more carefully. Look at the recent cost of utility-scale PV (under 7 cents per kWh in good locations), ”
One Cat 5 Hurricane can destroy Billions $$$ in PV and Wind turbines in a hour or less. I am sure this will happen in the not to distant future.
Jamaica has over 4200 square miles. The energy cost is very high by American standards at $.25 per kwh. The average usage per person is quite low at a bit over 1,500 kwh per year. The total usage is only 3.07 billion kwh, source:
http://www.indexmundi.com/g/r.aspx?c=jm&v=81
It seems to me that Jamaica is ideally set up for a move to solar energy. Just using the existing roof tops that are properly situated would go a long way toward substantially reducing their electrical energy costs. In Washington DC we could serve 30% of total usage with this strategy and average usage is far higher than in Jamaica.
What do they use when the sun goes down? Diesel powered generators? And I suppose they will have to cut down the trees to make sure the solar panels get sunlight?
What do they use when the sun goes down?
You really don’t understand how this stuff actually works, do you? BTW, I’m assuming you are talking about fully off grid systems, here, right? You don’t normally need diesel generators at night. If you have sized you system correctly you should have fully charged battery banks to power your needs at night. Sure some people add a generator to their systems for those rare times when you might have a four or five days of truly horrendous weather.
Yair . . .
FRED MAGYAR.
Well said.
Many smartish folks don’t understand how basic solar works.
It is too simple, no computer code or whitefella majeec! (big grin)
Just basic strategies like turning off refrigeration overnight and having gravity tanks for household water pressure, solar water heater of course.
You can actually live a normal lifestyle with 1.5 KW of panels in the yard.
Cheers.
Oh, so Jamaicans are supposed to have homes with hurricane proof solar panels AND a ton of batteries? Where do they put these batteries? In a shed by the pool house? ?
Fernando you really need to educate yourself about PV systems. You apparently don’t know the first thing about them.
Hurricanes are not an issue with properly designed systems. I worked with many south Florida counties a few years back preparing the paperwork for the permits to install PV systems on rooftops. Perhaps you have heard that Florida, much like Jamaica is occasionally subject to some pretty intense Hurricanes!
http://floridasolardesigngroup.com/do-solar-panels-meet-miami-dade-hurricane-wind-requirements/
What is required for permitting solar panels anywhere in Florida is that the system meets the Florida Building Code. The 2010 Florida Building Code is now the effective code, and this requires that solar panels (components and cladding) meet wind loads that are imposed upon them. Solar panels must be firmly attached to the building and have enough attachment points to resist wind uplift. The weight of solar panels is negligible and rarely needs to be considered. In most of Southwest Florida, the ultimate design wind speed is 160 mph. In Collier County there is a large area that requires 170 mph, and Marco Island is 172 mph. Using calculations in accordance with ASCE 7-10, engineers determine the wind uplift at any given attachment point and ensure that the attachment method resists the required load at the design wind speed with a safety margin.
In other words, we have the same requirements that Dade County has, which is to meet the local wind speed requirement. This is done by selecting the proper number of tie-down straps and/or attachment points to resist wind uplift given any installation location and scenario. The building department reviews our plans and inspects our work to ensure that we have met the requirements of the Florida Building Code.
You don’t come across as being very knowledgeable about the battery packs either. You don’t need a TON of batteries and it isn’t all that hard to do the necessary calculations to properly size a system. Most high school graduates are capable of doing it…
Quote from:
http://www.energymanagertoday.com/it-takes-2-8-acres-of-land-to-generate-1gwh-of-solar-energy-per-year-says-nrel-094185/
A previous NREL report, “Land-use Requirements and the Per-capita Solar Footprint for Photovoltaic Generation in the United States,” had estimated that if solar energy was to meet 100 percent of all electricity demand in the US, it would take up 0.6 percent of the total area in the country.
My quick calculation is that for Jamaica it would be closer to one third of a percent of the total land area. Of course, it might be wiser to use the available rooftops since it would put the same land area to dual use.
Let’s see if we can work this out together:
Jamaica uses a 700 gigawatt generation kit.
In one year this kit generates 700 gigawatt x 365 x 24 = 6.1 million gwh.
If solar panels require ~ 3 acres to generate 1 gwh, then the solar panel kit to power Jamaica requires about 18.3 million acres. Or a bit over 28 thousand square miles.
I think the solution is to install a high efficiency coal or LNG plant. They really need to study a connection to Cuba, to get into a larger grid.
If I may remind you, I used to live in Cuba, and my paternal family was originally from the mountains facing Jamaica. That area has periods when clouds form over the mountain tops (the mountains and trees seem to work as cloud generators). There’s a rainforest above say 500 meters elevation, and in winter time the clouds just drip drip a fine mist hour after hour. It’s actually pretty nice, but I don’t think a solar panel fits very well with that geography. Plus it would ruin tourism, and god knows what it would do to precipitation if they cut down the trees.
Wait! What? 6.1 million Gwh? Thats 6100 Twh or 40% more than US consumption. Check your numbers! Don Wharton says 3 billion Kwh or 3 Twh. You are off by a factor of 1000!
Does Jamaica have a 700+ gigawatt power generation kit? No. They have a 700 megawatt power generation kit. Thus the right answer is they will require 28 square miles of solar panels. However, this still fails to address the intermittency issues. What do they do when it’s cloudy for 10 days in a row? Tell the tourists to light candles and let all the refrigerator contents spoil?
Dude you were way off mark with your numbers which i highlighted for the benefit of the readers.
Your math is way off.
An easy way to think about it is this: Solar panels to power your entire house (at an American standard, with air conditioning), plus two electric cars, will fit on the roof of your house.
Not only have I done the math, I actually have it on my roof, thoroughly instrumented, and it works.
I got lazy and went to the PVWatts Calculator web page at the NREL web site I used a map based tool to draw a rectangle representing a 357 MW array since the tool maxes out at 500 MW. The results indicate that the array would generate 600 million kWh annually so, it would take five of those squares to generate 3 billion kWh. As shown in the attached screen shot we could easily fit more than five of the rectangles in the area covered by the capital city alone!
I hope this silences the naysayers once and for all, as far as the area required to generate all the power needed by jurisdictions with decent solar resources is concerned. What the tool shows is that Jamaica would need some 2.5 times the power capacity that exists in the current grid if 100% of the electrical energy were to be provided by solar PV. It would obviously not be practical to do this because of the amount of electrical storage capacity (batteries) that would be required.
There is an existing base of hydroelectric capacity that provides some 6% of the energy IIRC and surveys have been done that indicate that there is untapped hydroelectric potential. There is also some existing wind power with more under construction as we speak. There is potential for waste to energy and biomass. I would really be curious to know how many tons of biomass have been burned in. not so wild-fires, over the last two years.
All in all, I believe there is significant scope for a much larger role for renewables in the electricity sector in Jamaica. I am much more in support of using gas turbines to supply the needs in the short term as it is much more likely that they can be decommissioned and sold than is the case for a coal plant.
Below is another look at the size of a 350 MW array relative to Kingston Jamaica, zoomed out so that the dormitory community of Portmore, to the south west and the old capital, Spanish Town directly west, are in the frame. The east to west extent of this image is about 33 miles and the rectangle representing the 350 MW array is roughly one square mile.
Boy Fernando is cementing his reputation for making wildly inaccurate claims whenever solar energy is discussed. Of course, Jamaica has superb opportunities for accessing solar energy. See:
http://solargis.info/doc/_pics/freemaps/1000px/ghi/SolarGIS-Solar-map-Jamaica-en.png
This is about as good as it gets for solar energy.
Law of unconsidered consequences:
Except when a Cat 4 or 5 hurricane hits. All of it will get “blown” away.
Great CNBC article and video: Oil bear market will end in panic liquidation
The bear market in U.S. crude will continue, eventually ending one day in “panic liquidation,” widely followed investor Dennis Gartman predicted Wednesday.
“It will end when you’ve had an announcement of five or six bankruptcies. It will end when mergers and acquisitions step in and take over,” the founder and editor of The Gartman Letter said on CNBC’s “Closing Bell.”
It won’t end in panic liquidation. The process is already taking place. It’s just that people with deep pockets didn’t get their money by being rash or having a tendency to pay too much. The losers will be the weak and debt burdened company shareholders.
Point made last Ronpost.
The theory that private equity is going to come in and buy these assets cheap is very shaky.
The issue being the decline rates. The assets, if they are just 1 year old or older, and most are, don’t flow much. A low price is all they are worth.
Another rule of thumb for valuing low decline conventional oil production was 40 times the average of the last six month’s cash flow.
So lets say we have a Bakken well completed in 2010 that has settled in at 50 barrels of oil per day (gross). The above calculation would look something like this:
Oil sales 9,125 barrels x .80 net revenue interest x $40 = $292,000
Severance tax (10%) (29,200)
Six months OPEX, plus down hole repairs (134,000)
Last Six Months’ Net cash flow $128,800
Average Monthly cash flow $21,466.67
40 x $21,466.67 = $858,666.80
$858,660.80/ 40 barrels of oil per day net $21,466.67
Of course, if we plug in a $30 per bbl oil price, we get $420,666.67 or $10,516.67 per barrel.
Multiply $21,466.47 x 226,000 BOE per day for CLR=
$4.85 billion dollars.
CLR has over $7 billion dollars of long term debt.
34% of CLR production is now gas, and a high percentage is declining much faster than the well I describe above.
Note: I recollect that at $30 oil, settled conventional production was bringing $10-15K per barrel (2003-2004 time frame.) OPEX was running about $15 per barrel at that time.
Shallow, well done; that’s how real oil folks evaluate the value of production to buy, IMO. When oil prices were 90 plus I think the rule of thumb was often 48 months net income. I would look at any production buy on a 40 month net payout basis as long as it was declining at the rate of 5% annually. Shale oil stuff, nu uh. No way.
Most mergers and large scale acquisitions these days involves the assumption of debt; everyone seems to be very confident that these shale guys will simply be able to sell this junk to bigger companies. I am not so sure.
By the way, Shallow, is that 34% gas thing from CLR in the Bakken or Bakken/Scoop? If that is the percentage of production stream from a strictly LTO player like CLR, that’s a big number and another indication of increasing GOR and of much bigger problems on the horizon.
Mike
34% is company wide, and it has increased 4% in six months.
Just guessing, but I think the increase in gas ratio for CLR is due to:
1. More completions in SCOOP than Bakken.
2. The general trend others here have pointed to regarding increasing GOR in all shale fields.
Agree too regarding my hypothetical in that it would apply to low decline, and not recently completed shale, with recent being 5 years or less.
Hi Watcher,
The property will be evaluated and will be sold for what it is worth using a discounted cash flow analysis. A Bakken well produces about 87 kb in year one and roughly 300 kb over its life. Are you suggesting a well that will produce on average 213 kb is worthless? At the right price there will be many who will be willing to buy these at a discount from a bankrupt company.
The experts on this site can correct my logic, but my guess is that at a low enough price, Mike or Shallow sands might consider buying a shale well from a bankrupt oil company. My understanding is this is a natural part of the boom bust cycle of the oil industry.
I guess you don’t know the oil industry. A property valuation uses an oil price forecast. Experience shows different players use different price decks. This means a property can be put up for sale and can fetch a price and be sold as long as the abandonment and environmental liabilities don’t exceed the estimated PVx.
Right now there are hundreds of teams evaluating properties for acquisition. There will be hostile bids, arranged sales, sales forced by lenders, and all sorts of accommodations. This means the weaker players are going down the wood chipper.
“A property valuation uses an oil price forecast.” Totally agree. Spent 35 odd years in the industry and never once saw a resource valuation that didn’t contain price forecasts.
Yes Doug. We have some participants who like to use the oil price at the moment. If it’s $45 then they think everybody uses $45 forever.
One lesson I learned over the years was that asset sales usually were made to companies with a more aggressive price forecast, or who thought they had smarter engineers and geoscientists. And whenever we kicked tires and lost out we were facing a more aggressive forecaster. I learned to dread when we did succeed and bought a producing property, because it usually meant we were too aggressive somewhere in the process.
Fernando. Depends on whether you can pay cash/issue bonds, or have to borrow from a bank. If you have to borrow from a bank you use the banks price deck, and need to come up with cash/equity of 40-50%.
I don’t believe oil will be $45 forever. The question is how long will it be low.
You and Doug may be more used to multi year IOC type projects. I am talking about US lower 48 PDP. For the types of projects I am referring to, oil prices next 12-24 months pretty darn important.
For US shale, even more so.
Shallow, large companies usually have cash reserves, and issue bonds backed by the company assets. I think we just have a different perspective because I worked or consulted mostly for very large companies. Back in 2012 I consulted for a smallish Canadian outfit looking at purchasing a property in South America, but their cash was 100 % equity from shares they sold in the Toronto stock market and from internal cash flow. That outfit had ZERO debt, and they had the cash in the bank.
Fern Wrote:
“It’s just that people with deep pockets didn’t get their money by being rash or having a tendency to pay too much. The losers will be the weak and debt burdened company shareholders.”
People with Deep pocket typically got that way by investing OPM (other people’s Money) not their own. The Housing Bubble was a prime example how a few people ended up with deep pockets, but that didn’t stop the housing bubble from popping.
The only way this turns around without a panic is with substantial gov’t intervention, as happened in the 2008-2009 bust. However, I am not sure energy companies will be on the recieved end of Gov’t bailouts and they are pretty much deemed “evil” (ie climate change).
That’s not the way I see it. I think there’s too much bullshit going on about industry over leveraging. The fact is that most investments use significant equity. The company where I worked forbid any consideration of leveraging beyond 30 % of the total CAPEX.
I am not talking about Energy companies themselves, but the companies that invest in energy companies (well everything, not just energy companies). When there is a market correction, everything will get sold off. Big institutional investors, those running pensions, investment banks, ETFs, Hedges, etc (ie managing OPM). When corrections happen they will sell everything, either to cover margin debt, investor redemptions, or increase liquidity.
It appears the correction may have started, with yesterday’s 300 pt sell off and continuing today with a ~ 250 pt selloff. XOM is off 1% today.
After this correction cycle has run its course, the smaller, marginal energy companies that relied on debt are going to get wiped out. The losses will be in the billions (LTO drillers going bust). These investors aren’t going to get bailed out. and when oil prices recover, they aren’t jumping back in, having been burned.
Ron, I do question something Gartman has been asserting.
He keeps saying oil lower for longer because of the large contango in the futures market for WTI. He states that shale companies are continuing to drill because they are able to hedge the production 3-4 years into the future at much higher prices.
First, the prices 3-4 years out are not that high in relation to what shale (and most conventional) drilling projects need to be economic.
Second, a shale oil well completed today will be producing a fraction in 2018-19 of what it will in the remainder of 2015 and in 2016. The $30-35 price now for the flush production mows down the benefit of $50-55 price in 2018-19.
Third, he seems to think producers are somehow getting $50-55 for oil produced now. At least that seems to be what he implies. If this is what he thinks, he does not know what he is talking about. I suppose a producer could store all the oil produced and sell it in 2018-19? Maybe payment of all the OPEX can be deferred till then too, based upon what Mike has commented re: slow pay shale operators. LOL!!
Fourth, hedging 2018-19 production at $50-55 is an incredible risk. We are in a tremendous bear market. I don’t think anyone foresees $50-55 WTI three to four years from now, absent Great Depression 2. Imagine what happens if you lock production now at $50-55 in 2018-19 and the price spikes to $150. I can guarantee the cost of everything will also skyrocket. Drilling and completing well costs will rise. OPEX will rise. For example, what if in 2009 one had locked in $50-55 per barrel in 2012-13. That would have been a disaster for the company.
Fifth, think about trying to predict production from shale wells not yet drilled for 2018-2019. Companies typically do not hedge more than 60-70% of production 18-24 months out, in part, due to this unknown.
Finally, he completely ignores how much margin it takes to hedge production that far out, and what happens in the event of a price spike. I assume he is not talking about buying puts, as none of these companies have the cash on hand to buy those for next year, let alone 2018-2019, where the premium is cost prohibitive. SWAPS or costless collars is surely what he is referring to when he says “hedging”. Funny he is not specific as to the hedging product. Anyway, unless a counterparty will agree to take a lien on production, in lieu of margin, and I bet they won’t now, the margin requirements to hedge for 3-4 years out are simply cost prohibitive. An oil price spike could bankrupt a company with a massive long term hedge book due to the margin calls.
When it comes to hedging, I am a novice. I’d like to know what I am missing regarding Dennis Gartman’s idea that shale companies who hedge 3-4 years out on the current strip are doing the smart thing. I have found that putting on much in the way of hedges past 18-24 months is pretty tough.
Maybe someone could fill me in on what I am missing. Of course, I am still waiting on someone to slam me on my simple (lack of) payout calculations for US shale. The only responses I ever get to those in way of criticism are general “look at the increasing IP’s” or “everyone knows costs are coming down”.
Apparently the shale cheerleaders cannot do the 5th grade math that my calculations require. LOL!!
Gartman is supposed to be an expert, so I assume I am missing something.
Here are some hedging indications emailed to me today, just to show why I have no clue what Gartman is talking about. All prices are in WTI, so if Bakken is your focus, knock $6-10 dollars off.
Floors
Balance 2015 $38.00 costs .73 per barrel.
Balance 2016 $44.00 costs 3.63 per barrel.
So, if CLR wanted to lock a price at or above $30 at the well on 120K bbl per day for 9/1-12/1/15 they would need to fork over $17.8 million dollars.
If CLR wanted to lock a price at or above $36 at the well on 120K bbl per day for 1/1/16 to 12/31/16 they would need to fork over $159 million dollars. (I’m assuming $8 spread between WTI and what they realize, which is within the range reported in their Q2 2015 10Q).
WTI SWAP indications
Balance of 2015 $42.49
2016 $48.03
2017 $53.19
2018 $56.84
Collars
2015 $34-$51
2016 $40-$56
Would not hedging at the above prices doom almost all shale oil producers? The exception being, of course, the floors. Floors are the only place you do not give up the upside.
Shale producers did not use floors (puts) much due to the costs involved. Instead, they used three-way collars, with a strike at around $65-$70, thinking there was no way WTI would drop below that. We did not think it would either, so we look pretty dumb now too.
He keeps saying oil lower for longer because of the large contango in the futures market for WTI. He states that shale companies are continuing to drill because they are able to hedge the production 3-4 years into the future at much higher prices.
That makes no sense whatsoever. Hedging 3-4 years into the future can only get you more money in 3 to 4 years, not one thin dime today.
Futures Crude Oil
If you go to the link above you can get the futures prices for future production. The price you see in the “Last Trade” column is actually the last trade for that contract. That trade may have been many months ago. But the price you see in the “Open-High-Low” columns are trades actually made today. So there you get the actual today’s future price.
But… you can only hedge oil produced then at that price. In other words you could sell oil that you plan on producing in December 2018 at about $57 a barrel. That will not get you a dime for today’s oil or any oil produced between now and December 2018. You must wait until December 2018 to sell at that price. Then you get $57 a barrel regardless of the price of oil then. If oil is then going for $100 a barrel you still only get $57 a barrel.
And yes, he must put up margin money. However producers can actually sell their oil in the future without margin money. Big companies do that all the time, companies like Exxon or BP. But I doubt is small shale producers can do that. The broker must be absolutely sure the company will still be producing then and that is not guaranteed when there is a chance a driller may go broke.
But all this is beside the point. Unless a driller hedged months or years ago, he must sell today’s oil at today’s prices. Hedging in the future will not get him a dime today. Hedging in 2018 will only bring him that price in 2018 and nothing today.
One cannot hedge today and get a better price today.
I will not comment on hedging with swaps, collars and such. At any rate that is still hedging for future production. If you did not hedge last year at last year’s prices, you are just shit out of luck.
I agree Ron. Isn’t that what Gartman is saying? Or am I misunderstanding him?
No, I think he is talking about those who hedged last year and earlier. They can sell at the price they hedged at which should a price pretty close to last years prices.
I think he does in one part refer to pre-bust hedges, but early on he talks about the contango and companies that “continue to hedge.”
Oh well, I think we are all pretty much screwed at these levels long term, so no reason to quibble over what one talking head says.
Gartman never knows anything.
Yep–
Debt free royalty trusts. They are getting beat up but will survive for the rebound.
I like DMLP, and Freehold in Canada.
Researching NDRO–500 book down to 85 million
Re-Broadcasted with Comments for a Bailout.
Carnage In The Shale Junk Patch——These 5 Frackers Could Be The Next To Fall
RePost from new places.
http://davidstockmanscontracorner.com/carnage-in-the-shale-junk-patch-these-5-frackers-could-be-the-next-to-fall/
Lags in Recalculating PV’s. Oh My
http://www.mcdep.com/8mr150714.pdf
Blame FaFrackers or Blame em BEDs and Fankers?? No ZIRPBankers No Cry.
Hi all,
The Texas railroad commission updates the number of oil wells on schedule in the Eagle Ford play each month. See
http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/eagle-ford-shale/
and click on the graphic to the right, or watch the video to get the numbers for most months since 2011.
For June 2015 192 oil wells were added to the schedule (I believe this is a good proxy for the number of completed wells) and in July 223 oil wells were added to the Eagle Ford oil schedule. Mike can correct me if I am incorrect with my assumption that the change in the number of wells on the schedule correlates with the number of wells completed.
Scenario below adds 150 new wells per month from Aug 2015 to April 2020. Oil prices rise from $67/b in Aug 2015 to $149/b in Aug 2034 (2015$) or by 4.3%/year. New well EUR decreases (due to sweet spots becoming fully drilled up) by 6% per year after July 2015 (with a gradual increase in the rate of decrease from Aug 2014 to July 2015. OPEX is a fixed plus variable rate with $10k/month fixed costs plus $4/b variable costs (in real 2015$), annual discount rate is 12% nominal, royalties and taxes 27% of wellhead revenue, well cost is $7 million (2015$), transport cost $4/b, other costs are $4/b.
Average well EUR is 260 kbo before EUR starts to decrease and well life is 15 years with wells abandoned at 7 b/d. The EUR decreases to 177 kbo in April 2020 when drilling stops because oil prices are too low for profitable drilling.
Dennis, I am going to stay out of the speculating business. Please do not confuse wells being brought on line with rig counts, however. More wells are being brought on line than are being drilled because many of the wells drilled in 2014 are now being frac’ed. Its distorting the 2015 picture and making lots of new oil experts think fewer rigs are resulting in greater productivity. It doesn’t work that way. Rigs just drill holes in the ground. There is still a 3 month “lag” between RDMO and reporting initial production, trust me. Probably more like 4 months.
The Eagle Ford is not near as healthy as the Bakken; wells decline faster and don’t have the UR. When this shale oil party starts to crash, and its gonna, real soon, it will be in the EF first. There are some very, very puny companies in the EF right now. Short of a miracle their going to start dropping like flies. The story that will break first will be in Texas, not N. Dakota.
Mike
Hi Mike,
Thanks for the lesson. I realize that many of the wells being completed are from the DUC wells, though there are still some rigs running in the Eagle Ford based on Baker Hughes data. The number of horizontal rigs drilling for oil in the Eagle Ford has averaged about 76 rigs for the last 6 weeks, which is down by about 8 rigs from the previous 6 week average. This is less than half the rigs running in November (around 190 horizontal oil rigs) so when the DUCs run low there will be a big drop in completed wells unless more rigs are brought back. At these prices I doubt that will happen and output should fall. I am quite surprised there are so many wells being completed, maybe the RRC numbers are incorrect, but in most cases the RRC is very conservative and I doubt their numbers are too high.
The RRC of Texas is where I got the information on oil wells.
For June 1, 2015 Oil wells=8448 wells,
for July 1, 2015 Oil wells=8640 wells,
for Aug 3, 2015 Oil wells=8863 wells.
Wells added to oil schedule in June = 192 wells=8640-8448
wells added to oil schedule in July = 223 wells=8863-8640.
I have speculated that about 192 wells were completed in June and 223 wells were completed in July. The relevant clip from the graphic (which is large) is below.
Another scenario with 75 new wells per month, nominal discount rate increased to 20%, and wells abandoned at 10 b/d which reduces EUR to 235 kb from 260 kb. In this scenario the EUR decrease begins in June 2015 and reaches the maximum annual rate of decrease of 3.5% in May 2016, all other economic and price assumptions are the same as the previous scenario.
Output drops sharply in 2015 and 2016 and then declines more gradually.
Hi Mike: in this regard, I would like to ask you if the (almost) perfect delay of 4 months between the number of active rigs reported and the WTI price is only a statistical artifact or it represents the time needed to put a rig to work. Thanks.
Dean, I apologize for not understanding your question exactly.
There is historically a delay in the time between when the drilling phase of a well is finished and when the well is completed, tested, production facilities are built and production is first reported to its governing regulatory agency. I think with regard to LTO wells, many have referred to this as “lag” time. Historically in the Eagle Ford, that lag time has been 4-6 months.
There has been a rather significant decline in availability in all services rendered to the shale business because of employee layoffs, etc. I therefore believe, in spite of fewer rigs running, it is still taking 3-4 months for production from a well to manifest itself publically. In fact, it could be more like 5-6 months given regulatory processing delays; I don’t know.
Rig “productivity” is a meaningless metric. I believe it is determined by production volumes v. rig counts, perhaps with no consideration given to lag time; I don’t know that as I pay no attention to it. The point I wished to make to Dennis is that new LTO wells that were spudded (started) in April of 2015 are only today, at the end of August, now ready to report first production. We (oily folks), at least this one, believe that sustained LTO production levels thus far in 2015 are due, partially, to far more old wells (2014) being completed than are being drilled (2015). This is the only logical explanation to me for sustained LTO production, that and bigger frac’s, higher IP’s and subsequent production rates where long term reservoir management is forsaken for cash flow. I am skeptical of all things published on the internet reported by, or in behalf of, the sinking LTO ship; particularly the frac back log stuff. I watch and hear what is occurring in the field and think for myself. There was a back log from lag time but I think if we knew the truth those shale fellas are getting pretty caught up.
If that doesn’t answer your question I will happily try again.
Mike
Thanks Mike for the useful information … but it is not what I asked for ^_^. I am sorry for not being clear. I will try again. It is known that in the last years the number of active oil rigs (weekly published by Baker Hughes) follows the movements of the WTI price with a delay of 4 months: for example, if the WTI went up in March, oil rigs are expected to go up in July and so on. My immediate interpretation of this fact is that once a manager decides to hire a rig –say in May-, it will take 4 months approximately to have the rig fully working (for example to sign the contract, hire the workers, tools, etc): is this interpretation of the 4 months delay correct? Or instead this delay has no real operative meaning and is only a temporary statistical artifact? Thanks (I hope now is clear ^_^)
Yes sir, I am clear now. My apologies.
I believe the 4 month delay is simply a statistical anomaly. It has no real operational meaning. Prior to mid 2015 I believe over 75% of the rig fleet servicing the shale industry was on long term contract, the other 25% floated around between smaller operators on a as needed basis. If a rig is on contract it essentially works every day of the year because it is paid for on that basis. If I am an operator that cannot afford to put a rig on long term contract I call Bubba Drilling and say I need a well dug, then ask how long its going to be before he can get to me. Depending on how busy Bubba is, he might squeeze me in 3 weeks later, or it might take 3 months.
Warm stacking, or hot stacking means a rig is temporarily in the yard but fully deployable within a short period of time. Cold stacking means those rigs are put to bed for long periods and the crew let go. Those rigs would not be immediately deployable. Your question raises an important question about how quickly cold stacked rigs can be mobilized and how quickly the shale industry could ramp back up. I think that is going to be a very big problem myself. But I digress; the answer to your 4 month question is that is just a coincidence, I believe.
Mike
Thanks! Dean
Dennis,
As far as I understand your model is still based on rising price assumptions. However, oil prices are rather in the forties (your assumption Aug 2015 WTI 67 USD per barrel) and as far as I remember from our discussions a few months ago your pricing model suggests 70 USD per barrel in September and 80 USD per November this year. This model looks more and more unrealistic. If prices stay low and move even lower, companies will simply lack the funding for drilling at all and production can move precipituously lower (think at the Seneca curve). This scenario is in my view much more likely than your above model.
Hi Heinrich,
My expectation is that low oil prices will not continue forever. If I am wrong, then LTO production will certainly fall, so far in the Bakken and Eagle Ford the rig count has stabilized at around 70 to 75 oil rigs so for the next few months we will probably see roughly that number of wells completed at minimum. If oil prices remain under $50/b long term, LTO production may cease altogether. This would lead to higher oil prices within 6 to 12 months and LTO output would resume.
What is your oil price forecast? If we see peak oil between now and 2018, do you expect oil prices will remain less than $70/b?
Note that I also expected that output would drop, but so far in the Bakken they are still completing 125 wells per month (June) and in the Eagle Ford over 200 wells were completed from June 1 to August 3. What happens in the future depends on future oil prices, the futures strip has WTI rising to $48/b by Dec 2016, but I believe that $80/b is much more likely by then. Truth is, nobody knows the future price of oil.
DC Wrote:
“My expectation is that low oil prices will not continue forever. If I am wrong, then LTO production will certainly fall, so far in the Bakken and Eagle Ford the rig count has stabilized at around 70 to 75 oil rigs so for the next few months we will probably see roughly that number of wells completed at minimum”
Oil prices will rise, but its very likely drillers will have a difficult, if not impossible to borrow money to fund operations after this correction. Investors are going to get burned, and they are very unlikely to jump back in when the price of Oil recovers. Unless I am mistaken most of the gains in US oil production were the smaller drillers, willing to take on debt and risks that the major energy companies avoided. Oil majors may be reluctant to invest due to excessive volatility fear future prices plunges.
There is a chance that we are at beginning a long term energy demand-destruction period for energy. Since 2008 debt for just about all sectors, private, corporate had continued to increase. Nothing has been resolve, except lots of “can kicking”, with more sovereign debt and QE. Perhaps Gov’ts and central banks will manage to pull the global economy out of another tailspin this round, but at some point they will fail. Without gov’t intervention (credit markets, subsidies, etc) consumers are unlikely to be able to afford expensive oil, and thus putting a cap on long term oil prices.
US Corp. Debt
https://research.stlouisfed.org/fred2/series/NCBTCMDODNS
US household Debt
https://research.stlouisfed.org/fred2/series/CMDEBT
US Federal Debt held by Public
https://research.stlouisfed.org/fred2/series/FYGFDPUN
Hi Heinrich,
Let’s assume that oil prices rise to $68/b by Jan 2023 and that no wells are added to the Eagle Ford from August 2015 to Dec 2022 and that 150 new wells per month are added from Jan 2023 to June 2025. After Jan 2023 we assume oil prices rise from $68/b to $112/b by Nov 2034 (4.28% annual rate of increase), all other assumtions remain the same as my second scenario above. Secondary peak is 950 kb/d in June 2025.
Couple of mistakes. The discount rate was 15%/year in nominal terms in the scenario above and the wells were added until 2025 (not 2035 as it says on the chart). Also the EUR decrease is similar to the first scenario with the start date changed to Jan 2023.
I noted that Heinrich says he thinks prices will rise before 2022 so I assumed a new oil price profile where oil price rises to $69/b (2015$) by Jan 2018 which is high enough to make wells profitable if we assume prices continue to rise at 4.28% per year until Nov 2034 when they reach $139/b (2015$) and then remain constant at that level until 2040. Eur decrease starts in Jan 2018 in this case and again is similar to the first scenario (7% annual rate of decrease in new well EUR).
The secondary peak is somewhat higher in this case (1100 kb/d) and then output falls rapidly after Nov 2020. A different oil price scenario would change the economically recoverable resources, this is one of an infinite number of possibilities.
Dennis,
Nature works in waves. An uptrend creates immediately a counterforces which breaks at some point the wave.My model for oil prices is based on the US current account which creates a weaker or stronger dollar. As US production incrased the current account deficit decreased, which in turn strengthened the US dollar, who brought the oil price down. So a long as shale increases production, the oil price will go down. However, the counterforce is already here as the low oil price brings down the bond market and makes funding for new production unavailble. This can be – as we see just now – very vicious. I can imagine a complete shale collapse for the next months. However this will bring down the US dollar which would give way to a new upswing of the oil price in 2016/2017. In my view your oil price predictions are way too smooth. We will see some wild swings. Expect the oil price to rise when the last oil price bull has given up.
However this will bring down the US dollar which would give way to a new upswing of the oil price in 2016/2017.
I’d guess that low oil prices will reduce the US trade deficit more than increased barrels of imports will increase it.
You might want to do an excel model of how you expect this to play out…
Nick G
A low oil price decreases also the US current account deficit, yet high US oil imports and low oil prices set up a certain dynamic of an upward spiral for rising oil prices. High US oil imports create a low dollar, which speeds up the world economy, which in turn gives a higher US current account deficit and an even lower dollar and a higher oil price. This eventually has lead to oil at 149 USD per barrel. Policy makers have been surprised by this dynamic and the answer has been that the US has to increase oil production at any price. However the succes of shale has set up a downward spiral for oil as more shale production means a stronger dollar, who is now on its way to destroy shale until US oil production comes down and the oil upward spiral can start again.
Heinrich Leopold said: “As US production incrased the current account deficit decreased, which in turn strengthened the US dollar, who brought the oil price down.”
Has the US’s current account deficit decreased? The trade deficit surely hasn’t, and it makes up the bulk of the current account deficit.
If the US’s current account deficit hasn’t decreased, then it’s necessary to find other factors which explain the dollar’s rise.
Glenn,
he US current account deficit increased 1991 to 2007 from 0 to 800 billion dollar, it then went down to 400 bn in 2013 and is now worsening again to 500 bn. see:http://www.tradingeconomics.com/united-states/current-account. Net US oil and product imports are up again in the latest few weeks to over 6 mill bbl/d. However net oil imports must be back to 10 mill bbl/d again until the dollar weakens and brings up the oil price again. You can be sure that I have made a lot of research to understand what moves the dollar and the oil price. It is not interest rates, it is the current account deficit which is the most vulnerable point for the US dollar.
Heinrich,
The current account defict has been essentially flat for the last 6 years.
And yet, the dollar experienced a precipitous increase in value beginning in August of 2104.
The sudden rise in the value of the dollar does not correlate with any like change in the current account.
Maybe the dollar rose because of the eurozone crisis? The euro tanked when the Greeks started going bananas.
Well that certainly seems to be a more plausible explanation than the dollar’s rise was caused by an improvement in the US’s current account balance.
Likewise, the price of oil began its nosedive at about the same time the dollar began its rise, again with no great change in the current-account balance.
So I don’t see any correlation between the price changes of the dollar and oil with a change in the current-account balance, much less any causation, at least not in these short-term time frames.
Hi Heinrich Leopold,
I agree that oil prices will be volatile, it is impossible to know in advance what oil prices will be. I cannot model “volatility”, I asked earlier what you expect prices to be. If you give me numbers, I can model it. Anything else is handwaving. The last scenario presented is pretty close to what you outlined. Prices rise to $68/b by Jan 2018 from $40/b today, this could be consistent with prices starting to rise in late 2016, by 2018, I expect the peak in oil output will be reached, but decline rates will be relatively slow for a couple of years, so an economic crash could be averted and prices may continue to rise. Eventually scarce oil and high oil prices may lead to a depression, this depends on how quickly the economy substitutes for oil over time, also difficult to predict.
One point I think we can agree on is that any scenario for future oil output that is created is very likely to be wrong.
Nobody knows the future, not me anyway, perhaps you do.
But by 2022 drilling becomes profitable again because prices rise. ?
Fernando,
This very much depends on how deeply the production will fall in the US. If the US net imports rise from currently 6 mill to 10 mill barrels/d (this includes also net products exports of 2 mill barrels per day), then the oil price has a good chance to rise again through a falling US dollar. This may be far earlier than 2022.
Yes Heinrich, but what counts is the concept. I was trying to convey to Dennis the idea that his model needs a tweak. It has to have a test to see when wells become economic again and have a rolling start drilling program. I used to write these models and have orgasms watching the plots until I realized company management behaved irrationally. Drilling seems to resume when things are still bad. Thus the production curve is smoothed out.
Hi Fernando,
The model does look at economic viability.
What do you mean by rolling start?
A gradual ramp of 10 wells more each month? 10, 20, … , 90, 100 over 11 months.
A rolling start is like you point out a slow build, with rigs increasing month after month. But your model shows a very sharp inflection point. The way it works is that even as economic return goes negative the rigs don’t go away immediately, there’s a gradual reduction (I think it’s exponential). The number of rigs doesn’t go to zero (because we really high grade locations or remain optimists), when production goes down it induces higher prices and we get a slow build.
I’ve seen this happen. In my case we kept on drilling because we were negotiating for tax breaks, so we cut back to two rigs to keep the top rated personnel and showed the locals we were trying as hard as possible. This gave us the tax breaks we needed and allowed us to pick up more rigs.
Hi Fernando,
Yes I realize that the wells completed will not fall to zero overnight and they will not jump from zero to 150 overnight either. I did this to keep things simple, it does not really change the outlook very much if you have a ramp up or ramp down. and changing it from linear to exponential will also have little effect. Anything is possible, what exponential rate would you expect would a 100% annual rate of change make sense (well completion rate either doubles or halves in 12 months)?
Alternative scenario with higher oil price increase of 7% per year, oil prices rise (in 2015$) from $67/b in July 2018 to $200/b by Nov 2034. Maybe these two scenarios will define the upper and lower limits for Eagle Ford output.
The ERR and number of wells are based on David Hughes analysis in Drilling Deeper (URR=7.6 Gb, 36,000 wells).
I put this chart in the wrong place, I intended the comment to be below the comment below (which is the earlier of the two scenarios.)
Hi Fernando,
I tried a scenario along the lines you suggest. The wells completed fall by a factor of 10 over 12 months (to 10% of the July 2015 level and then continue to fall at this rate until June 2017, then there is an exponential rise (an increase by a factor of 10 over 12 months) which is assumed to stop at 150 new wells per month (arbitrarily chosen). Real oil prices rise at a 4.3% annual rate from $70/b in June 2017 to $145/b in Oct 2034 (both prices in 2015$). Scenario below, I expect oil prices will be higher than this scenario in reality, but I am generally wrong on oil prices.
What if the oil age is finally really over? Private automobiles Kaput? EVs, driverless cars and Uber are winners of the new paradigm? Climate change is more real than you think? There are massive carbon taxes imposed on any emissions? Wind solar and all other alternatives become the new norm of energy production? And oil never again is profitable? If I were you I’d seriously consider those possibilities because All of the above could happen, heck actually are happening right now, not 5 or 10 years in the future.
Oil is a very precious commodity and shouldn’t be squandered for driving around in private ICE automobiles. It will be used for a long long time into the future but not as it has been in the past and up to now!
If I were you I’d take a long hard look at your investment portfolio as well.
The times they are a changing!
I know I live in a rural area that is considered backwards by most. However, I do visit cities on occasion.
I do see an occasional Tesla plugged in at a fashion mall.
I see solar panels at the airport.
I do see several wind mills when driving on an interstate.
I see gas stations everywhere. Many new ones with many more pumps than the old ones.
I see semi trucks everywhere.
I see road construction everywhere.
I see more gas powered cars than ever before.
I will see diesel powered combines harvest again this fall.
I see more E85 capable powered vehicles than electric by at least 1000 times.
I know two people who own electric vehicles. Both are in the top 1% and both have two other gasoline powered vehicles.
The EIA and IEA both predict increased oil demand in 2015 and 2016. Worldwide oil demand rarely decreases year over year.
The end of oil may be coming, but 5-10 years, or less, seems a little quick.
The EIA and IEA both predict increased oil demand in 2015 and 2016. Worldwide oil demand rarely decreases year over year.
EIA and IEA have consistently shown that their predictions aren’t worth a bucket of warm spit.
The end of oil may be coming, but 5-10 years, or less, seems a little quick.
I actually was of that opinion myself even 5 years ago, what changed is I now see a slew of disruptive and converging technologies brewing up a perfect storm that weren’t even on my radar back then.
I think that the changes already in the wings are going to start speeding up from here on out.
5 years ago if someone told me I’d be considering giving up my personal ICE vehicle because I could depend on a smartphone app to get me practically instant transportation to and from anywhere in a city at prices that are a fraction of the cost of a taxi ride I would have said that would never happen in my lifetime! Well it has happened and that is just the tip of the iceberg.
Disruption is all around us right now and I’m not surprised you claim you can’t yet see the consequences of most of it, but then again, less than a decade ago the iphone didn’t even exist. Did you see that one coming? I sure didn’t…
I’m certainly not making predictions as to how exactly things will pan out but my gut tells me that the oil business is in for a big contraction and some radical changes.
I’m also betting that the ICE automobile recycling business is set for a major economic boom.
In any case there is a good chance we will still be around in 5 to ten years so we will get to see first hand which of us is right!
On another note India now has the first 100% solar powered airport in the world. Just another tiny furry little mammal scurrying around amongst the feet of the dinosaurs awaiting its chance to evolve once the meteor hits… And there are a lot of meteors on the way right now!
http://www.digitaltrends.com/cool-tech/india-solar-powered-airport-cochin-international/
If you thought that globetrotting solar-powered airplane was impressive, wait until you see the solar airport that India just finished building. After a great deal of development and construction, the country’s Cochin International Airport in the southern state of Kerala is now officially the world’s first airport that runs exclusively on solar power.
The facility is now reportedly “absolutely power neutral” — meaning it creates just as much energy as it consumes. That’s a pretty impressive feat when you consider that Cochin International is one of the biggest airports in India, with over 1,500,000 square feet of terminal space alone.
http://oilprice.com/Energy/Energy-General/Warren-Buffett-And-Elon-Musk-To-Spark-A-Lithium-Boom.html
I Also heard through the grapevine that Elon Musk’s biggest competitor Chinese BYD, backed by Warren Buffet, is planning on building another Lithium battery Giga factory in Brazil with about the same capacity as Elon Musk’s factory in Nevada…
I see lot’s of disruption coming on line sooner than later!
Fred. Hard to say I suppose. I do pay attention to the developments you describe for obvious reasons.
I guess part of my skepticism comes from my observations of Mr. Musk and Tesla.
I know to many here he is a god-like person.
He may very well change transportation and utilities.
I guess my skepticism comes from my ingrained view that an investment has to eventually be cash flow positive.
It hit me wrong when Mr. Musk joked about being cash flow negative and burning enormous amounts of cash in the future.
OTOH, I admit I am not smart enough to understand high tech stuff. For example. Not so sure how great smart phones and the internet really are. Sometimes I wish I did not have them. I waste a lot of time on them, here an elsewhere. Not saying I do not appreciate this site, etc. and I try to exercise some discipline, on being on at breakfast, lunch (which I usually eat alone) if I am on a break, or before bed.
I know some folks who are so addicted to Facebook, etc., they really get nothing done and their lives are a mess.
I see one of the main “benefits” of self driving automobiles is the ability to safely text, surf the net, etc. while driving. Is doing that crap that important that we need self driving cars?
Fred, keep posting info. I do read your posts.
Hi Shallow Sands and Fred,
Interesting discussion. I am with Fred on this one. I don’t know about you guys but the first computer I owned I purchased in 1987 (a IBM PC compatible XT class). I did not have a computer that could connect to the internet until 1996. My kids cannot even imagine a world without the internet.
Possibly 5 to 10 years is too short a time for the realization of the “clean disruption” that Tony Seba envisions.
Keep in mind I was connecting at 56 kb/s over a modem in 1996, now I connect at speeds about 178 times faster (10 Mb/s) and I have a relatively slow connection.
The future is difficult to predict, sometimes change happens more rapidly than most people think is possible.
My impression is that technology optimists generally over estimate the rate of change in the short term.
Just about everybody underestimates it in the long term, excepting the most optimistic of the techno optimists.
Personally I don’t see autonomous cars taking more than maybe ten percent of the market within ten years. It is not so much that the tech might be inadequate but rather than people are slow to change life long habits and TRUST really expensive new technology.
It’s one thing to enter into a contract for a cell phone that will cost less than a couple of thousand bucks. It’s another to buy a thirty thousand dollar car that might not work satisfactorily or have a lousy trade in value.
I do believe pure electrics and plug in hybrids are going to take market share FAR faster than predicted by mainstream economists BECAUSE there are enough such cars on the road NOW for people to start thinking of them as ordinary rather than risky and cutting edge.
I watch the classifieds in craigslist and the local swap and sell papers like a vulture- looking for an opportunity to bottom feed on a dirt cheap car or truck I can fix and drive for a decade.
SO far I have yet to see a single dirt cheap LEAF or Volt or PRIUS. That alone tells me something. Nobody junks a LEAF or VOLT or PRIUS unless it has been in a major accident.
They are going to LAST. The public is coming to understand that they will LAST. But this understanding and acceptance is going to take a few more years to really affect the auto market.
OFM if autonomous cars take 10% of the market the costs will be dropping incredibly fast. The time frame for complete conversion (and perhaps legally required conversion of all new production) will be quite short after the 10% level of market penetration is reached.
Hey Mac,
I have an old prius (2004) with 170k that I will probably get rid of soon. It needs a front wheel bearing, just had front brakes done (repair for wheel bearing estimated at $450, but you could probably do it yourself). When the new Chevy Volts come out I will see what I can get at trade-in (probably not much), e-mail me if your interested. The car is in good shape except for the wheel bearing according to my mechanic.
Is doing that crap that important that we need self driving cars?
The primary benefit is safety – a large reduction in accidents.
Keep in mind that self-driving vehicles are arriving not in one fell swoop but in tiny increments. The first increment was probably cruise control: you could take your foot off the pedal on the highway. The next increment was perhaps automatic parallel parking. Highway adaptive cruise control is here. Highway lane keeping is perhaps the next thing.
Trucks will probably be the first vehicles on the highway that allow the driver to sleep in the cab – trucking companies have a lot of money to save there.
These things will be implemented stepwise, one by one. Absolutely fully door to door autonomous vehicles may not happen for 15 years, but the transformation is right here, right now.
Tools like this should help to reduce concerns that solar will be pushed upon locations that won’t benefit.
You can now Google your home to see if you should go solar
JULY WAS EARTH’S HOTTEST MONTH ON RECORD, NOAA SAYS
http://www.bbc.com/news/world-us-canada-34009289
“July was the hottest month on Earth since records began, averaging 16.6 C (61.9 F), according to US scientists.”
“The first seven months of 2015 have already set an all-time temperature record for the period.”
“The world is warming. It is continuing to warm. That is being shown time and time again in our data.”
Dang it Doug, that’s just alarming!
The hits just keep rolling along don’t they. Still, I’m not convinced. 🙂
“A new study says that global warming has measurably worsened the ongoing California drought. While scientists largely agree that natural weather variations have caused a lack of rain, an emerging consensus says that rising temperatures may be making things worse by driving moisture from plants and soil into the air. The new study is the first to estimate how much worse: as much as a quarter. The findings suggest that within a few decades, continually increasing temperatures and resulting moisture losses will push California into even more persistent aridity. The study appears this week in the journal Geophysical Research Letters.”
https://www.ldeo.columbia.edu/news-events/warming-climate-deepening-california-drought
Global land-ocean temperature has risen 0.7 C in 40 years. We still have 40 to 100 years to go to realize the temperature rise from what has already been put in the atmosphere, let alone the rise from any increases after today.
EU calls for urgency in ‘seriously lagging’ Paris climate talks
http://www.theguardian.com/environment/2015/aug/20/paris-climate-talks-seriously-lagging-eu-calls-urgency
Will it just be more talk?
https://www.youtube.com/watch?v=6hHnOBlwU3A
Talk Talk “All you do to me is talk talk”
Apparently the people in Minnesota think it’s not warming fast enough.
https://www.youtube.com/watch?v=qJUFTm6cJXM
A fun song from out in the country.
The problem with all those records is that they are just hand waving to hide the important fact that global land-ocean temperature rose 0.6°C in 30 years and nothing at all in the last 10 years.
This figure is from James Hansen, so I guess you will find no fault with it other than my coloring to highlight the changes. Is anybody’s guess what will happen next, but my bet is a continuation of the blue area for two more decades.
http://csas.ei.columbia.edu/2015/01/16/global-temperature-in-2014-and-2015/
Records, what records? What you talking about?
It just keeps getting hotter and hotter and all the talking in the world will not change that.
From the paper:
“Global surface temperature in 2014 was +0.68°C (~1.2°F) warmer than the 1951-1980 base period in the GISTEMP analysis, making 2014 the warmest year in the period of instrumental data, but the difference from the prior warmest year (2010), less than 0.02°C, is within uncertainty of measurement. The eastern two-thirds of the contiguous United States was persistently cool in 2014, cooler than the 1951-1980 average in all seasons. Record warmth at a time of only marginal El Niño conditions confirms that there is no “hiatus” of global warming, only a moderate slowdown since 2000. Global temperature in 2015 may further alter perceptions. We discuss the prospects for the 2015 global temperature in view of the seeming waning of the current weak El Niño.
Update of the GISS (Goddard Institute for Space Studies) global temperature analysis (GISTEMP)[1],[2](Fig. 1), finds 2014 to be the warmest year in the instrumental record.”
That says it all. EOS
How fast is it getting hotter lately? I see that red curve has become flat since 2005. Can you spot the change in slope on 2005?
Your opinion only. I go to google scholar and query for climate hiatus and I get 53,700 results. There is a pretty big scientific consensus that there is a warming hiatus. That warming hiatus that the scientific community acknowledges is that period of flat red curve that you have trouble seeing.
Are you okay Javier? You are quoting the paper and saying it is my opinion only. Really?
That quote was from Hansen et al.
Slow down, take some breaths and actually read what the paper says and what I wrote. No one listens if you keep jumping to obviously wrong conclusions.
Yes the red line and the data show that temperature has been climbing for over 90 years. I of course can cherry pick times when it appears to level out but climate is measured over three decades not a few years. If you want to play that game, temperature has been rising very rapidly the last three years.
Your quoting google hits which could be either pro or against is hilarious. Digging deep in the pile now.
You got to be kidding me. Don’t tell me you are so ignorant about climate change as to not know that the literature is choke full of articles on the global warming hiatus or pause, a period of the last decade and a half with little if any warming. Amazing that you will preach about global warming not knowing such basic stuff.
This is just a small 5 min. list. I could easily bring you 10 times more just for a start. Now you go and tell this hundreds or thousands of scientists that they are spending their time and research money studying something that according to you, Hansen and a few others, doesn’t exist.
1 Strengthening of ocean heat uptake efficiency associated with the recent climate hiatus
Watanabe et al Geophysical, 2013
2 Recent intensification of wind-driven circulation in the Pacific and the ongoing warming hiatus
England et al Nature Climate, 2014
3 Externally forced and internally generated decadal climate variability associated with the Interdecadal Pacific Oscillation
Meehl et al. J of Climate, 2013
Section 3 contrasts the signatures of surface climate during hiatus and accelerated warming decades in the model
4 Model-based evidence of deep-ocean heat uptake during surface-temperature hiatus periods
Meehl et al. Nature Climate, 2011
There have been decades, such as 2000–2009, when the observed globally averaged surface-temperature time series shows little increase or even a slightly negative trend 1 (a hiatus period).
5 Climate model simulations of the observed early-2000s hiatus of global warming
Meehl et al. Nature Climate Change, 2014
6 Recent global-warming hiatus tied to equatorial Pacific surface cooling
Kosaka & Xie Nature, 2013
7 Natural variability, radiative forcing and climate response in the recent hiatus reconciled
Huber & Knutti Nature Geoscience, 2014
8 Reconciling anthropogenic climate change with observed temperature 1998–2008
Kaufmann et al. Proceedings of the National Acad Sciences, 2011
Another explanation for the recent hiatus in warming focuses on the internal variability of the climate system.
9 Contribution of natural decadal variability to global warming acceleration and hiatus
Watanabe et al. Nature Climate
10 Climate science: The cause of the pause
Held Nature, 2013
11 CMIP5 multimodel hindcasts for the mid1970s shift and early 2000s hiatus and predictions for 2016–2035
Meehl & Teng – Geophysical Research Letters, 2014
12 Drivers of decadal hiatus periods in the 20th and 21st centuries
Maher et al. – Geophysical Research, 2014
13 Observed and simulated temperature extremes during the recent warming hiatus
Sillmann et al. Environmental Research, 2014
14 Surface warming hiatus caused by increased heat uptake across multiple ocean basins
Drijfhout et al. Geophysical, 2014
15 Equilibrium climate sensitivity in light of observations over the warming hiatus
Johansson et al. Nature Climate, 2015
16 Quantifying the likelihood of a continued hiatus in global warming
Roberts et al. Nature Climate Change, 2015
17 Application of the Singular Spectrum Analysis Technique to Study the Recent Hiatus on the Global Surface Temperature Record
Macias et al. 2014
18 The global warming hiatus – a natural product of interactions of a secular warming trend and a multi-decadal oscillation
Yao et al. Theoretical and Applied Climatology, 2015
19 Why the hiatus in global warming in the last decade?
Bala CURRENT SCIENCE, 2013
20 A link between the hiatus in global warming and North American drought
Delworth et al. J of Climate, 2015
You truly need professional help.
http://dilbert.com/strip/1998-01-16
The ‘hiatus’ is no more?
Part of the problem here is simply semantic. What do people even mean by a ‘hiatus’, ‘pause’ or ‘slowdown’? As discussed above, if by ‘hiatus’ or ‘pause’ people mean a change to the long-term trends, then the evidence for this has always been weak (see also this comment by Mike). If people use ‘slowdown’ to simply point to a short-term linear trend that is lower than the long-term trend, then this is still there in the early part of the last decade and is likely related to an interdecadal period (through at least 2012) of more La Niña-like conditions and stronger trade winds in the Pacific, with greater burial of heat beneath the ocean surface.
So while not as dead as the proverbial parrot, the search for dramatic explanations of some anomalous lack of warming is mostly over. As is common in science, anomalies (departures from expectations) are interesting and motivating. Once identified, they lead to a reexamination of all the elements. In this case, there has been an identification of a host of small issues (and, in truth, there are always small issues in any complex field) that have involved the fidelity of the observations (the spatial coverage, the corrections for known biases), the fidelity of the models (issues with the forcings, examinations of the variability in ocean vertical transports etc.), and the coherence of the model-data comparisons. Dealing with those varied but small issues, has basically lead to the evaporation of the original anomaly. This happens often in science – most anomalies don’t lead to a radical overhaul of the dominant paradigms. Thus I predict that while contrarians will continue to bleat about this topic, scientific effort on this will slow because what remains to be explained is basically now well within the bounds of what might be expected.
http://www.realclimate.org/index.php/archives/2015/06/noaa-temperature-record-updates-and-the-hiatus/#more-18571
We will know if it’s mostly over after the current El Niño peters out and we get a few years’ more temperature measurements. I’m really curious to see what happens by mid 2017.
Bottom line:
Even allowing for a rather crazy-seeming trend with discontinuity, no slowdown can be confirmed. Even cherry-picking (actually) the final 3-year span for a t-test can’t do it (I only picked a 3-year span because it looked like it might give me the result I was looking for). I only tried a t-test because the ANOVA test gave no significant result. I tried lots of other grouping intervals for ANOVA besides just 3 years and 5 years and 6 years and 10 years, without even bothering to account for multiple trials. I did the ANOVA because I couldn’t find any significant polynomial pattern, although I pushed the polynomial degree all the way up to 10. I tried polynomials because the original change point analysis found no trend change after 1970. And I did all of that after first chopping off the most recent data, consisting of the hottest year on record followed by the hottest three-month start to a year on record. I also did all of that without chopping off the most recent year’s data.
I think I gave it a fair shot. More than a reasonable chance. I still I found no reliable evidence of a slowdown.
Maybe there has been one. Really. Maybe not. Really. If you think the slowdown is real and you want to study why it happened, that’s a great idea because we’re likely to learn more. I suspect we may learn more about the fluctuations than we do about the trend — but either way we learn.
Still, don’t say there is a slowdown as though it were a known fact; when you publish your hypothesis in Geophysical Research Letters, refer to the slowdown as purported or possible. ‘Cause I’ve tried to show it a dozen ways from Sunday, but it’s just not there, and I have yet to see anybody else show it either.
https://tamino.wordpress.com/2015/04/30/slowdown-skeptic/
Unfortunately, I believe you and a few of the others here are victims of data manipulation strengthened by not paying attention to the information from scientists on both sides of this debate. If you measure global temperatures the exact same way that scientists have always gathered that information you will see that the planet is not warming at all.
You see, the scientists have been doing this neat little trick since Obama became president to make it look like the earth is warming. But global temperatures have been recorded and archived as land temperatures for more than a hundred years. Satellite temperature gathering is relatively new, but gives an accurate picture of the entire globe. It’s land temperatures that are used, because it’s the only way to accurately compare present temperatures with historical temperatures and get an apples to apples comparison.
When all the data started showing that the earth was cooling, both with land data and satellite data, this destroyed their whole global warming argument. So, for the first time ever, they now use land and ocean temperatures as the historical global temperature average. That has never been done before and it allows them to manipulate the data in as many political ways as they desire. The temperature comparison is no longer apples to apples but rather historically and scientifically invalid. Nevertheless, the scientists, who are funded through grants obtained by your and my tax monies, report these comparisons as facts in the journals they and their peers crank out like candy, causing many people like yourself to think it’s all an honest depiction of the climate rather than just one huge farce. If you use the land temp to land temp comparison, you will see that we are actually in a cooling cycle that has gone on for 19 years and counting.
That is simply a blog entry. Tamino, aka Grant Foster or as he calls himself, Hansen’s bulldog, could try to publish his opinion. You should be aware that he is not a climatologist. Not even an academic. His opinion is not worth much more than anybody else’s.
In the meantime, Kevin Trenberth, who spent a lot of time looking for the missing heat in the oceans, has published a paper on Science last week entitled:
Has there been a hiatus? K. Trenberth 2015 Science 14 August 2015: Vol. 349 no. 6249 pp. 691-692
His bottom line: “The increasing gap between model expectations and observed temperatures provides further grounds for concluding that there has been a hiatus.”
Of course he thinks the hiatus is over due to 2014-15 El Niño. I think he is premature. We’ll see about that in 2017 as Fernando says. If past is prologue we still have about 15 years of hiatus left.
more misdirection from you.
this article is not a research paper but it is a “perspective”
bottom line?
from the same paper…
The main pacemaker of variability in rates of GMST increase appears to be the PDO, with aerosols likely playing a role in the earlier big hiatus. There is speculation whether the latest El Niño event and a strong switch in the sign of the PDO since early 2014 (see the figure) mean that the GMST is stepping up again. The combination of decadal variability and a trend from increasing greenhouse gases makes the GMST record more like a rising staircase than a monotonic rise. As greenhouse gas concentrations rise further, a negative decadal trend in GMST becomes less likely (13). But there will be fluctuations in rates of warming and big regional variations associated with natural variability. It is important to expect these and plan for them.
The bottom line is exactly as Trenberth says: The hiatus is real. PDO (also known as natural variability) is the main pacemaker on variability of warming, and fluctuations in rates of warming are associated with natural variability.
Exactly what we skeptics have been defending all along. Natural variability plays a role in global warming. So not all the warming can be due to CO2 as IPCC defends. So the final rate of warming has nothing to do with what IPCC and models project. So we can forget all the catastrophism.
That was easy, right? It is the logical conclusion from all the evidence.
Now you probably feel relieved that you don’t have to worry anymore about the end of the world from global warming. You are welcome.
Javier,
So what you’re saying is that theEarth has been consistently warmer than average for decades now, so that means the Earth isn’t warming.
A hiatus in warmig would mean going BACK to previous global averages.
What has happened is that every single year the Earth has been 0.7 C above the previous average.
Look at the chart and tell me that temperatures maintaining record highs since 2005 is not global warming.
If a pot of previously room temp water starts boiling, then I note that is has warmed. If, 5 minutes later, that water is still boiling but has not increased in temperature, then I do not conclude it is no longer warm. It has maintained that record temp! It is an affirmation that something is driving the global system to higher average temps. Otherwise, it would reach equilibrium by having a cooling trend that corrects for the “fake” warming.
For nitpickers out there: the boiling water is just an analogy! I am aware it will never increase in temp unless I lower P or V
The global average is artificial. It is something we define by choosing a period to average. There is no and has never been an equilibrium in temperatures. The temperatures of the Earth have always been changing up and down.
The 20th century warming has not exceeded normal Holocene variability. Since at least 1910, but more probably since the end of the Little Ice Age at about 1850, there has been an overall warming trend clearly visible to all in the data. Over imposed to that warming trend there is a 60 year cycle clearly visible to all in the data (see areas of red and blue in the above graph, and the graph in this comment). Both trend and cycle have been studied for a very long time by many scientists. They are not a made up feature. Since both trend and cycle precede significant global anthropogenic CO2 emissions and are still taking place, and since effect cannot precede cause we can conclude that there is natural warming (the trend) and natural variability (the cycle) taking place. Warming by CO2 and its feedbacks cannot therefore be responsible for all the warming. The conclusion is that the danger from CO2 emissions is not as great as IPCC and some scientists claim.
This obvious observation that everybody can make by looking at the data also explains why there has been no significant warming for the past 15 years. We have entered in the cool phase of the 60 year cycle. It also predicts that the pause will last until about 2030. This prediction is in stark contrast of IPCC prediction in 1999 that the world was going to warm for about 0.2° C / decade to about +2° C by 2100.
So one theory predicts continuous warming and +2°C by 2100 and the other predicts periodic 3 decades cooling and warming to about +0.5° by 2100. In science one rejects the theories whose predictions don’t hold. After 15 years IPCC proposed explanation for global warming is failing its predictions. At some point we will have to come to terms and reject this theory, but it is going to be extremely painful to many climate scientists and politicians that have made a career out of alarmism and to many internet trolls that enjoy insulting and attacking those that hold a different point of view.
but my bet is a continuation of the blue area for two more decades.
And you would lose big time. I would love to place $100K on that bet if there were any way to really guarantee that you would pay up. You are wasting our time with your crackpot denialist speculations.
Ooh, such faith on a failing theory is moving.
I already told Ron that I was willing to make a public intellectual challenge on this in a comment on his 07/22/15 article:
He did not answer and probably I would have done the same in his place. This is not a climate change blog is an oil blog.
Javier, I missed your challenge. I seldom read every comment and on days that I am busy I miss a lot of them. I search on “Ron” and read all comments that are directed to me. (That’s how I found the above comment.) But if you failed to address it to me with that word then it is entirely possible that I will miss it.
But as far as your challenge goes, I am 77 years old and don’t expect to be alive 15 years from now. I often tell folks that I hope to be safely dead when the shit hits the fan. But if I expected to live that long I would definitely take your bet. A person would have to be stone fucking blind to not see what is happening to the world. We are destroying the environment and it is definitely getting warmer.
NOAA: July hottest month on record, and 2015 could be hottest year
Thursday’s report “is reaffirming what we already know,” NOAA climate scientist Jake Crouch said. “The world is warming. It’s continuing to warm.”
Data from NOAA dates back to 1880, but it is possible that July was the hottest month in at least 4,000 years. Climate research suggests these are the hottest temperatures the Earth has seen since the Bronze Age.
When the short video at the above site is over, continue to let it play. There will be several other very good short videos on climate change.
Ron, I am not blind and I see the same you see. I clearly see that we are destroying the environment and I see that the world has been getting warmer for the last 200 years, so we agree on both. While we are responsible 100% for the first, it is not clear how much we are responsible for the second. And instead of dedicating our resources and efforts to combat the first, we are dedicating them to limit CO2 emissions, without evidence that it is an effectual measure.
I think the problem is not with what we can see, but with what we cannot see, which is the future.
Regarding climate change one school of thought is very pessimistic and regards global warming being a lot worse during 21st century than during 20th century. Human nature being what it is, alarmism is very attractive and sells a lot of newspapers, gathers a lot of attention and raises a lot of funds, while rationalism and prudence does not sell.
One example is that you were sold by the media and some alarmists that we are in a extreme danger from the increase in methane in your article Are We Headed For Global Warming Collapse?. I already pointed to you then that there is no evidence of that. Scientists don’t believe we are in danger from a catastrophic methane raise. This is what IPCC has to say about it:
In fact the entire section 2.2.1.1.2 on methane from AR5 is a let down for anybody catastrophically inclined. However despite this, you didn’t believe me and you probably still think that we are in danger from methane. How do you claim scientific support for that, puzzles me.
To make matters worse, this prudent assessment on the dangers of methane from IPCC comes from the same IPCC that gets so many predictions wrong, between them their projections of methane levels for the future, that are incredibly pessimistic and are failing as much as their temperature projections. Despite significant reductions in the upper limit range of their projections from report to report, the actual levels are always outside of the range, as figure 1.6 from IPCC AR5 WG1 Chapter 1 shows below.
So yes, we are seeing the same. The difference is that you are interpreting it in a catastrophic way not supported by evidence and I simply go as far as evidence takes us and then extrapolate in a conservative way. This leads me to reject most catastrophic predictions, that time and time again are proven unfounded. My position is not appealing or popular but I get the satisfaction of being mostly right.
I know you have many worries and I do share some of them, but I hope you can take some comfort in knowing that we have little to fear from climate change during the next centuries. We are most fortunate of having been born after the Little Ice Age ended and during a global warming that is making life so much easier. Once it ends, hopefully not too soon, we have enough thermal inertia and CO2 to protect us for decades from global cooling which is the real bane of mankind. We will all be dead long before climate change becomes dangerous. And it will. Interglacials end. Glacial periods are the norm during Ice Ages.
While we are responsible 100% for the first, it is not clear how much we are responsible for the second. And instead of dedicating our resources and efforts to combat the first, we are dedicating them to limit CO2 emissions, without evidence that it is an effectual measure.
I stay out of most of the climate discussions because I don’t follow the data. I have no particular reason to doubt to scientists who say the globe is warming, and that it is due to increased release of CO2, so I don’t. But on the other hand, I think we’ve got problems that will impact us before the worst of global warming hits us, so I focus on those.
I see the main difference between the peak oil/global warming focus and the peak oil/not global warming focus is nuclear. We know that we have to phase out fossil fuels for several reasons: declining resources, pollution, and environmental degradation. If we want to continue to have as much energy as possible, but without CO2, nuclear looks good. If we are less concerned about CO2, we’re still going to need to transition away from fossil fuels for the above reasons, but perhaps we’ll let economics rather than global warming dictate the timetable.
As I have said before, I don’t think the global warming issue needs to be dissected in this forum at all if we continue to focus on fossil fuel depletion. That’s happening regardless of climate issues.
That seems to be too simple and sensible for most folks.
But…it’s true. Oil & FFs have a lot of large costs, including familiar pollution like sulfur, particulates and mercury, security of supply, etc. We don’t need to include the risks of Climate Change to be confident that we need to transition away from oil & FFs ASAP.
On that we can all agree. We need to leave oil before oil leaves us.
But we need to do it with the truth, not deceiving and scaring billions of people. When they find out they have been lied they won’t take it kindly. The damage to Science reputation could be widespread and long lasting.
Truth will set you free. I grew up reading that phrase everyday carved in stone and worked hard to become a scientist and a truth seeker. I will not collaborate in lying to billions just because our politicians think that it is for their own good. I have had enough of government lies and I have never seem them being any good except for those that tell them.
When they find out they have been lied they won’t take it kindly.
Statements like this raise red flags for me. As I have said, I don’t really get into the climate debates because I don’t study the numbers closely.
However, when you say that so many scientists are “lying,” that there has been a worldwide coordinated effort at fraud, and it is being done for political reasons, my BS sensor goes off.
It’s one thing to investigate the data. It’s another to be claiming that there is fraud and conspiracy. You just can’t leave it alone, can you? You have an agenda just as blatant as what you accuse others of having.
Boomer, Exactly!
If your argument depends on the majority of the world’s scientists being bald faced liars then I would say you have no argument whatsoever.
Scientist, by and large, are just scientists and they don’t give a damn about your silly conspiracy theory.
Boomer II and Ron, you both got it wrong. It is not the scientist who are doing the lying. They are just scientists and are doing science and have their opinion like everybody else.
The ones doing the lying are those telling us that 97% of scientists agree that global warming is human caused and dangerous when they know that is not true. That is a huge lie, that is deceiving billions into thinking that science is settled when it is not. This lying is done by a few people and gladly spread by those with an agenda.
Polls that have not been manipulated show that about 66% of climatologists believe that humans are responsible for most of the warming, not 97%, and that only 17% share the IPCC view of mankind causing >100% of warming.
This graph is from figure 2 of the Verheggen et al. 2014 article Scientists’ Views about Attribution of Global Warming, Environ. Sci. Technol., 2014, 48 (16), pp 8963–8971
The graph shows that out of 1868 scientists of which 98% has published in climatology in peer reviewed science journals, only 66% believe that GHGs have contributed more than 50% to global warming, and only 17% believe that they have contributed >100%, which is the IPCC official standing as can be seen in IPCC AR5 WG1 Chapter 10. Figure 10.5
These results are consistent with the polls regularly conducted by Dennis Bray and Hans von Storch since 1996, and that have appeared in several publications, for example see figure 2a in D. Bray The Scientific Consensus of Climate Change Revisited. Environmental Science & Policy 13 (2010) 340-350.
In that figure (data combined for both graphs) only 60% of the polled scientists show agreement that IPCC reports reflect consensus pertained to temperatures.
Now look at that evidence and tell me that you have not been lied when you have been told that 97% of the scientists agree that global warming is human caused and dangerous. Of course you may like that lie so you might want to cling to it. But anyway you look at it this is conclusive evidence that people are being lied about climate change. Not by the scientists, but by a small group of people that want to present an image of the scientific debate that is not real knowingly, and they are being helped by a lot of people and organisations that either believe it or go along with it because it furthers their interests.
This is not a conspiracy theory, it is evidence that lies about climate change are being spread, knowingly or not, by governments (Obama’s tweet of May, 16, 2013. 1:48 PM about 97% scientists) and by the mass media. It isn’t the first time, is it? Where Iraq’s weapons of mass destruction a conspiracy theory?
The ones doing the lying are those telling us that 97% of scientists agree that global warming is human caused and dangerous when they know that is not true. That is a huge lie, that is deceiving billions into thinking that science is settled when it is not. This lying is done by a few people and gladly spread by those with an agenda.
I’m still skeptical of your premise. There aren’t many players that will benefit from overemphasizing global warming other than the nuclear industry.
The decline of fossil fuels is coming because of the problems (depletion, pollution, environmental damage) with fossil fuels. The changes in lifestyles are coming because of economic reasons (recession, income inequality, technological changes).
And if you think people are “lying” to facilitate some sort of takeover, trying to scare people with a problem that everyone says is more of a mid-term and long-term problem than a short-term problem isn’t very effective. If you want panic people, then it’s better to “lie” about an immediate threat, so you can bring out the troops and invade countries or institute marshal law. Now, those scenarios won’t happen right now because of global warming. They have happened because of oil.
If any thing, Fernando’s constant harping about communists is more of a call to military action, loss of freedoms, and surveillance than global warming is. We’ve seen it happen in the past. What you guys seem to fear has already been done in the name of anti-communism.
Here’s a good overview of the discussion.
How to Determine the Scientific Consensus on Global Warming – Scientific American
If you had just stuck to something like this and discussed survey methods, that would be fine.
But you keep tossing around “lying.” You haven’t given me evidence that this is happening or why. Who would benefit from a massive lie? Why would anyone bother?
Because you keep talking about “lying” I see you as a political crusader. I’m not here for that and therefore see you as someone who is posting topics that are attempting to sidetrack the conversations.
Javier, I’m willing to give you the benefit of the doubt and assume you are an honest broker but when you say things like this it really get’s difficult indeed!
The ones doing the lying are those telling us that 97% of scientists agree that global warming is human caused and dangerous when they know that is not true. That is a huge lie, that is deceiving billions into thinking that science is settled when it is not. This lying is done by a few people and gladly spread by those with an agenda.
I’m sorry Javier but you are profoundly mistaken. Check out these links:
http://climate.nasa.gov/scientific-consensus/
Then within that link you will find these:
List of worldwide scientific organizations
The following page lists the nearly 200 worldwide scientific organizations that hold the position that climate change has been caused by human action.
http://opr.ca.gov/s_listoforganizations.php
U.S. agencies
The following page contains information on what federal agencies are doing to adapt to climate change.
http://www.c2es.org/docUploads/federal-agencies-adaptation.pdf
I don’t know if you have a personal agenda or not or if you are just in denial about reality due to ideological reasons.
But the fact is there is indeed a consensus among the scientific community that humans are causing climate change and that the impacts could be severe.
Now it is possible that all those scientists will be proven wrong and you will be proven right but I’m betting on the scientific community over you!
Fred Magyar,
I do not dispute that there is a scientific consensus, do I? Please read again my post. It presents evidence from peer-reviewed studies, published by scientists that believe in that consensus (do you know who John Cook, one of the authors, is?), that indicate that the consensus is 66%. That is a 2:1 consensus that humans are causing climate change and that the impacts could be severe. That is exactly what I have said. I have no denial of reality and I do accept that a 2:1 consensus exists indeed.
But we are NOT being told that about two thirds of scientists believe that humans are causing climate change and that the impacts could be severe, we are being told that nearly EVERY scientist believes it. That is a lie. Do you seriously believe that 97% of scientists could agree on something that is still being hotly debated in journals and with so many things about climate that we don’t know? About 15-20% of the scientists respond that we don’t know. Would you expect otherwise?
Regarding those scientific organizations that support the consensus, they were specifically asked to support it, and since 2/3 of its members do support it, it is only logical that they would do so.
I don’t really understand why do you get so worked up from me just showing the published results in peer reviewed journals of two studies showing that the scientific consensus is 66%. It is not that I invented that. I read it in the scientific literature. Is that a crime nowadays?
Boomer II,
I am fine with your skepticism. You belong to my class if you don’t accept what you are told unless shown proof.
I know most scientists are convinced on global warming being of human origin and dangerous, but when I heard the 97% propaganda line I was very skeptical of it, because as a scientist I know that scientists almost never agree unanimously on anything. A lot of us will simply tell you we don’t know enough. So I did a little bit of research and found scientific evidence that polls give a different result. About one in three scientists either thinks that we don’t know the attribution or is not convinced that it is mostly human.
So clearly we are being lied when we are told that 97% of scientists agree. Who is lying to us? Obviously the authors of those 97% studies that know perfectly that counting abstracts has not been shown to be a reliable technique to poll scientific opinions, or know how to manipulate the universe in a poll to give the desired answer. Who else? I don’t know. Probably somebody in the peer review process or the journal should have realized that those studies were flawed, but we have no evidence of that. Those that repeat the result not necessarily know that it is false.
That is what I know with certainty. Since I base my knowledge in science, I do not like to speculate. I do not believe in conspiracy theories, but I have no problem in believing in colluding interests. Most people honestly believe in global warming being of human origin and dangerous. It is not too difficult to think that some of them would lie about it if they think that lying would help the cause.
This is the Double Ethical Bind that Stephen Schneider defended in 1998 and that you might have heard. It is essentially a soft “end justifies the means” approach to climate change communication:
“On the one hand, as scientists we are ethically bound to the scientific method, in effect promising to tell the truth, the whole truth, and nothing but — which means that we must include all the doubts, the caveats, the ifs, ands, and buts. On the other hand, we are not just scientists but human beings as well. And like most people we’d like to see the world a better place, which in this context translates into our working to reduce the risk of potentially disastrous climatic change. To do that we need to get some broad based support, to capture the public’s imagination. That, of course, entails getting loads of media coverage. So we have to offer up scary scenarios, make simplified, dramatic statements, and make little mention of any doubts we might have. This ‘double ethical bind’ we frequently find ourselves in cannot be solved by any formula. Each of us has to decide what the right balance is between being effective and being honest. I hope that means being both.” Source: Wikipedia.
So we see how some scientists have thrown honesty away in their search for effectivity. Can you now detect how that effectivity is being played on us all through the Mass Media? (hint: re-read the bold part).
It is not too difficult to think that some of them would lie about it if they think that lying would help the cause.
But that’s my point. What cause?
Boomer II,
For some reason I cannot post the answer that I wrote to your comment at 11:05 am.
I’ll try a very short one:
Please read at the end of that Scientific American article that you link, the first comment by Richard Tol. He is also calling the authors of the 97% paper dishonest, as I have done.
Please read at the end of that Scientific American article that you link, the first comment by Richard Tol. He is also calling the authors of the 97% paper dishonest, as I have done.
This is the last paragraph of the article. It seems to say the opposite of what you are saying.
“[Tol] has even said there is no doubt in his mind that there is an overwhelming scientific consensus, so everyone is a little bit amused by the fact that he agrees with our results and yet he has been attacking our research,” he said.
Boomer II,
You have to read the first comment after the last paragraph in the article. That’s where Richard Tol rebates that paragraph and accuses John Cook of dishonesty.
The cause of saving the planet from global warming, of course. That is what justifies being dishonest in their opinion.
Did you read the rest of the comments? Richard Tol isn’t much, if any, support from the other people making comments.
Is there a consensus in the comments that Tol’s opinions are in the minority? Yes, it appears so.
The cause of saving the planet from global warming, of course. That is what justifies being dishonest in their opinion.
You realize, don’t you, that there isn’t agreement on solutions. Some people want nuclear. Some people want less overall energy consumption. Some people want renewables in big way. Some people think it is too late to save the planet and we are doomed.
So what cause are you referring to that would unite people to “lie” about global warming?
We are losing track here, Boomer.
I have no wish to convince you of anything. You said “you say that so many scientists are lying, that there has been a worldwide coordinated effort at fraud.” I have showed you that I did not say that and that is not what I believe. Some people have lied and their lies have been widely repeated.
You said “But you keep tossing around lying. You haven’t given me evidence that this is happening or why. Who would benefit from a massive lie? Why would anyone bother?” I have given you scientific evidence from two published articles that the correct number for the consensus is 66% and therefore the 97% number is a fabrication. I have given you the information on the Double Ethical Bind that since at least 1998 defends the right of climate scientists to scare, exaggerate and disguise doubts to defend anthropogenic global warming. What the 97% does exactly is disguise doubts.
You said “Because you keep talking about lying I see you as a political crusader. I’m not here for that and therefore see you as someone who is posting topics that are attempting to sidetrack the conversations.” That is your prerogative, but I kindly note that I have never started a climate thread in Ron’s blog. I don’t come here for that either. I have just responded to climate misinformation posted by others. You can check that yourself easily. I do not have any need to defend from what you believe of me.
I don’t care if my opinions on climate change are in the minority. I am really used to that. My opinions on Peak Oil and an impending collapse of the industrial civilization are also in the minority. Since I am an independent thinker I don’t find any solace in participating in consensus opinions.
Regarding your last question, I do not hold any particular view on what unites people around anthropogenic warming or what particular solutions are preferred. I haven’t read anything on that. My opinion regarding the authors of the 97% meme is that they are convinced of the dangers of climate warming and they didn’t mind lying to convince public opinion that not believing on it was anti-science. But I have no evidence of that, so it’s just speculation. At the end only a liar knows why he lies.
My opinion regarding the authors of the 97% meme is that they are convinced of the dangers of climate warming and they didn’t mind lying to convince public opinion that not believing on it was anti-science. But I have no evidence of that, so it’s just speculation.
Yes, that’s what I have been saying. Why don’t you just stick with the data and drop referring to some people as “liars.”
If you trust your data and if you believe this is an intelligent audience, you don’t need to keep saying that some people are liars. In fact, I have no idea why you keep doing it. It takes your points out of the realm of science and into politics. Is that what you are constantly trying to do? Why?
No you’re not blind. I agree. You’re a fanatic. And possibly a troll. Why else would once come to a peak oil blog and post endlessly about denying climate change other than to distract from and obfuscate the topic of peak oil? You don’t see the good people here going to climate change denial websites and posting endlessly about peak oil. Fanatic. Troll. Easy to see.
Can you explain the following for me? Why, despite the fact we’ve had 18 yrs now with no measurable global warming, are the democrats still trying to convince us that we must surrender our freedoms, bank accounts and sovereignty to all the computer models imagineered by scientists made wealthy and famous through taxpayer funded grants?
D Graham
You have no conception of science and how the science community works. These people just want to understand what is real. They are not getting rich. A small few of them are visible to the wider media but most of them work in extreme obscurity doing their best to get it right. You post is a slanderous restatement of the worst of right-wing anti-science extremism.
Things are going according to plan.
2015 global temperatures are right in line with climate model predictions
Climate model global surface temperature projections have been quite accurate
http://www.theguardian.com/environment/climate-consensus-97-per-cent/2015/aug/10/2015-global-temperatures-right-in-line-with-climate-model-predictions
Hi Javier,
The slope of the temperature curve from 1880 to the present is much steeper than at any other time during the Holocene for Global land ocean temperatures.
From 10,000 BP to 8000 BP temperatures increased at about 0.03C per 100 years. For 1880 to 2014 the rate of increase was about 0.6 C per 100 years or roughly 20 times more rapid a rate of increase in Global Land Ocean temperatures. The earth has probably not been warmer than present levels for 10 million year and it is highly unlikely that it has been warmer in the past 800,000 years. Given the uncertainty about climate sensitivity it would be wise to play it safe. If climate sensitivity turns out to be low(I doubt this will be the case), we can burn carbon later if needed, to warm both ourselves and the planet.
See
http://www.realclimate.org/index.php/archives/2013/09/paleoclimate-the-end-of-the-holocene/
Liberal Lies!
It was very cold in the beer cooler at the Monster Truck Event last night!
You realize the global temperatures since 1980 have been grossly adjusted upward. Like all the months of this year are particularly cold yet NOAA is adjusting numbers and using disparate datasets to prove they are the warmest ever yet again.
Here’s a good scientific article on the matter.
LOL! The Daily Caller?! You call that a scientific article?!
obvioisly he’s never taken a physics course lol
Doug,
Yes I can read the data, yet the summer in Europe has been rather exceptionally cold save for a few hot days. Currently it is around 15 C and in the Alps temperatures are already below zero. We desperately hope here for more global warming. We had here a case people warmed a weather station with exhausts from a truck to measure higher temperatures. The hype is getting really absurd now.
Try this, it’s the actual sea surface temperature measured by satellites. It’s fun to watch and see how the ice melts and grows etc.
http://images.remss.com/sst/sst_data_daily.html
Fernando,
Thanks for the link.
Hey, try this one. It’s the Danish web page for Greenland ice accumulation (this is the ice deposited on Greenland’s giant ice field and its glaciers, one has to subtract the ice it sheds to get a full balance)
http://beta.dmi.dk/en/groenland/maalinger/greenland-ice-sheet-surface-mass-budget/
The latest trend seems to be for much more ice accumulation on the ice field. I’ve also noticed the latest satellite look shows it as an intensely white surface.
Finally, here’s the NOAA sea surface temperature. The water to the east of Greenland is colder than normal, the water to the west along the coast is very warm. I think this explains why they are getting so much snow in August.
http://www.esrl.noaa.gov/psd/map/clim/sst.shtml
From one of the local rags in my neck of the woods yesterday:
Private sector welcomes lower light bills – JPS announces seven per cent dip in electricity charges
With electricity rates set to decline by 7.1 per cent this month, the Jamaica Manufacturers’ Association (JMA) says it hopes that this will be part of an ongoing movement to lower light bills.
JMA President Metry Seaga said yesterday that the reduction is “a welcome one”.
“It is not enough, but it is a good start. It makes a difference to many companies that are barely holding on. Some of us when we get our light bill, we hold our hearts for three days trying to figure out how we are going to pay it. Any reduction in those bills keeps us afloat longer,” the JMA boss said.
The Jamaica Public Service Company Ltd (JPS) said yesterday that the reduction in bills was attributed to reduced fuel prices.
Some dude calling himself Peak Oiler, tries to set the record straight on the sheer good luck that these price reductions represent. Based on what they wrote, they must read this here blog! 😉
Island boy,
I while ago I posted my thoughts that, Jamaica would be importing LNG by 40ft sea container. It appears someone took notice as per the following link.
http://www.eia.gov/naturalgas/weekly/
Jamaica inks contract to get LNG from Florida
Jamaica Public Service (JPS), Jamaica’s electricity distributor, and New Fortress Energy, an energy service provider and a subsidiary of the American based Fortress Investment Group, entered into a contract for New Fortress Energy to deliver containerized liquefied natural gas (LNG) from Florida to JPS’s 120-megawatt (MW) Bogue power plant in Montego Bay, Jamaica.
From my favorite EV blog:
Mercedes B-Class ED Set To Get Range Bump To Over 300 Miles – Report
Audi Releases Details On 310-Mile All-Electric SUV
UPDATE: Enhanced 2016 Nissan LEAF To Launch Nationwide In September
Volkswagen Group Slide Shows Plug-In Electric Car Plans
The vehicle we’re most excited to see is the pure electric Porsche, which presumably will be more of a Tesla Model S-like offering.
This electric Porsche is expected to have a range of 265 miles and will likely launch in late 2017. The latest rumor is that Porsche may show a concept version of the car sometime later this year.
Barring a major Black Swan event, there will be an avalanche of 200+ mile range EVs on the market in the not too distant future. Cant rule out a Black Swan event though.
You could do us a favor and republish that utube lecture you have referred to on EV as disruptive, which I very solidly believe for all the reasons it gives.
A real selling point is comparison of number of moving parts in ICE with number in EV. No comparison!
And as it says, the flop over to EV is gonna be FAST! Will catch lots of people here with pants down.
Not sure about fast, or rather that could be the case but when and what are the conditions for this? Question is what are the necessary tipping points? Availability of a full range of cost competitive vehicles seems to me to be a current hurdle. The next generation of full EVs look to have lavish range, so will their appearance on the market be the moment?
A car is a car, people will move to EVs once the rationality to do so is clear, despite the campaigns against them. Sufficient numbers of the public are rational actors.
One paradoxical problem for EVs comes with the decline of urban driving. I know Wimbi you are in the countryside and the powered vehicle will always be best for your situation, but here in the city I like many others are radically replacing my driving distances with other modes. Ironically this means that the cost savings from the switch from ICE to EV are reducing as the fixed cost of vehicle ownership v the running costs (fuel) means I can’t make buying any kind of new car stack up v my old gas guzzling Volvo that is mostly parked!
https://www.youtube.com/watch?v=Y_NmWB-D7-Y
Wimbi, and everyone else, what this guy is calling a “clear disruption”, can more adequately be described as a “technological revolution”. And it can happen very fast as it did with the internal combustion engine, the cell phone and the personal computer. But it happens if, and only if, what is offered shows a clear technological advantage and/or an economic advantage over what it replaces as did the gasoline powered automobile over the horse drawn carriage. Failing that there is absolutely no reason to believe it will happen. Thousands of gadgets and inventions have come and gone because they failed to offer either.
So don’t believe that because it’s there it will replace the internal combustion engine or fossil fuel power plants or whatever. When it shows a clear technological and/or economic advantage it will happen and not one day before. And if it don’t happen it will be because it offers neither.
It already offers both. That’s what the video says and that’s what I say, as a mere humble operator of a leaf, that runs on my PV for nothing more than what I had already invested to do other things entirely.
My wife, daughter and granddaughter, none of them car freaks, say Leaf is just plain more pleasant to drive than their perfectly good hondas.
Now that the Leaf is moving into the over 100 mile range, I will consider getting one. I think a lot of people are ready to try electric but the dearth of charging stations is putting them off.
Come on Wimbi, don’t you get it?! The best selling car/truck in America is the Ford F-150, not some wimpy little battery powered toy… 🙂
On the other hand I’m down in Brazil working with some truly disruptive technologies and I see things very differently than Ron. Tony Seba mentions two of them in this video, they are ‘Big Data’ and the ‘Cloud’. Those are precisely the kinds of technology that allows a company like Uber disrupt the traditional taxi cab business. I can’t wait to see what happens when all Uber drivers have 100% EVs. Not that there aren’t some truly dark clouds on the horizon… but I can’t bring myself to completely give up all hope and retreat to my cave just yet! GRIN!
I recommend reading The WTF economy post by Tim O’Reilly.
https://goo.gl/5ODALY
In only four short years Uber managed to do triple the revenue of the entire prior taxi and limousine industry in the city of San Francisco. I personally know a number of people who are seriously planning on no longer owning a personal automobile because of Uber.
ICEs are not something I would be betting on for long! I think personal transportation modes are going to be disrupted very quickly now.
This is exactly it.
The majority of people in this forum and in the world at large are either:
1. Skeptical of the potential for autonomous EV taxi services in the next 10 years
2. Or simply haven’t heard of this combo of tech disruption.
Most average folks I encounter still have zero knowledge about the capabilities of EVs, even though articles highlighting the capability of a Tesla P85D, P90D, or the soon-to-be-released Model X.
How is the public going to comprehend the disruptive combination of Uber, driver-less vehicle tech, and EVs?
The average person has this idea that the culture of vehicle ownership is so strong it is an impenetrable Titanic.
The moment a method of transport is introduced that is 90% cheaper, with all the same benefits of the convenience and control of ownership, that impenetrable Titanic will sink.
Humans are terrible at driving. In 50 years children will be genuinely amazed at the very concept of monkeys driving 45 mph towards each other with a yellow line being the only thing preventing severe injury or death.
We do not think it is insane because it is culturally normal. In fact, it is so NOT insane that any other scenario is dismissed… or was dismissed, until a mere 24 months ago when a tangible, realistic vision began forming of an established synthesis of new taxi tech (Uber), EV tech (Tesla), and autonomy (Google, Tesla, Apple, Uber, Nokia… and many more).
Anyone who can not see the revolution in the concept of vehicle ownership are driven by conditioning and lack of information. A 4% rate of vehicle utilization is an economic inefficiency ripe for radical disruption. Until now there was no synthesis of tech that allowed for that disruption.
A 4% rate of vehicle utilization is an economic inefficiency ripe for radical disruption.
A quibble: I’d say about 1%. One hour per day is 4%, and 1.2 people per vehicle is about 20% capacity, with the net at less than 1%.
The autonomous cars can be ICE’s or hybrids also, so the change can come very much faster than many people think. Once the tech and legalities get straightened out, all high end cars will have it and of course the taxi and trucking industry will love it.
I notice that we are putting a lot of dependency on the GPS system. Is that a potential weak link or are the back-up systems already up there in place?
Mr. Rose
To validate – in the real world – what you just described …
The semi-suburban city in which I live, just south of San Francisco, rarely had taxis cruising through either picking up or discharging passengers.
The past several months, it has become common to see people standing by the curb, intently staring at their smart phone, and then hop in an arriving Uber (I call ’em Goobers).
Last weekend, there were three people, spaced a few hundred feet apart, simultaneously awaiting Goobers.
The little bastards have completely overrun the streets of San Francisco.
Big, BIG paradigm change happening almost overnight.
The semi-suburban city in which I live, just south of San Francisco, rarely had taxis cruising through either picking up or discharging passengers.
I heard about something similar in my area. People who go drinking in town can get a mom-pop business to take them from the bar to 10 miles out to a semi-rural area for about $70. Their friend, in from a big city, wanted to leave the group early one evening out and do the same trip. She called Uber and was only charged $16. Granted their trip was at about 1 AM and her trip was about 10 PM, but still, the savings was significant.
Boomer said:
People who go drinking in town can get a mom-pop business to take them from the bar to 10 miles out to a semi-rural area for about $70. Their friend, in from a big city, wanted to leave the group early one evening out and do the same trip. She called Uber and was only charged $16.
I recently used Uber with my girlfriend in Miami to take a ride down to South Beach normally about a $25.00 ride cab ride one way. I think we paid about $10.00 round trip with Uber. That’s a huge difference…
No wonder the taxi cab companies are worried!
I know Ron is off for the day but I’ll reply anyway since I am the person who introduced this blog to Tony Seba and keep referring to him. One of the reasons I do this is that, his presentation reminds me of the work of several people who post on this site, Dennis probably the most prominent. He uses historical data and based on the trends, makes certain projections pretty much the same way Dennis does albeit Dennis’ models are more complex.
Another reason is that he appears to have studied the matter of business disruption in some amount of detail, as alluded to in his bio. Consequently he looks at the projections and the results they will have on the affected markets then, makes some predictions about how the markets will react.
In his presentations, I don’t see any bold claims that some pie in the sky, breakthrough technology is necessary for his projections to materialize. Bear in mind, he does not only address EVs but, solar pv and the whole personal car ownership paradigm as well. His prognostications might be a little “over the top” at times but, even if one extends the time scales by slowing down the pace of advancements, it is clear that he is on to something.
I am surprised by the opposition to his ideas from some people on this web site since his ideas include a 80% reduction in the amount of cars, definitely not BAU. I am not saying he can’t be criticized, far from it. Implicit in all his work is an assumption of the maintenance of BAU during the transition. That means a working financial system and stock market, both of which are likely to suffer convulsions in the coming months as the LTO fiasco unwinds.
What I would like to see/hear is a unemotional, unbiased evaluation of the likelihood of things turning out as suggested in his presentation (embedded above, roughly 50 minutes long), given the maintenance of some semblance of BAU.
There is resistance to the disruption of our current transportation model.
This is undeniable.
In conversation it becomes clear that resistance is founded in lack of knowledge, and not ideological resistance.
People would generally like the idea of not having to pay car insurance, maintenance, or car payments. Instead of spending 45 minutes navigating traffic to work anybody, everybody would much rather be responding to e-mail, waking up later to do various hygiene habits, eating, reading, journaling, etc.
The largest productivity loss in our society is the loss that occurs by having to focus on driving during travel. Not to mention the productivity loss that occurs when, every day, in every metro, people die because monkeys driving high mass, high velocity objects is currently our least worst option.
Much like Uber, the transition will take most people by storm, but will lead to an “I told you so” reaction from others.
By 2025 the disruption in vehicle ownership will be strong enough that previous deniers will claim they always knew it was coming because it was so obvious… Even though they bought a new ICE non-autonomous vehicle in 2022.
If you have a friend who uses Uber, they may seem confused when you discuss EVs. If you have a friend who bought a Volt or LEAF they may look skeptical if you mention the magnitude of every large tech company making significant investment in autonomy tech.
A percentage of the people that understand ONE aspect of the upcoming transport disruption do not understand the synthesis of autonomy, EV, taxi service, and big data to make car ownership as unlikely as owning your own music studio – the price difference between owning and renting while experiencing the same convenience – will make car ownership a unique oddity for only affluent machine-heads.
Most people still think that they love owning and controlling their vehicle.
They are mostly rationalizing the cost of a major purchase.
In a famous psychology experiment, a movie that was universally regarded as terrible was offered to participants for free. The experimental group paid $10 to see the movie. Turns out that the more we pay for something the more we are psychologically dedicated to rationalizing that purchase.
Give me a Ferrari Enzo for $2.9 million and I will be more statistically enamored with its performance relative to cost.
Give me a Ferrari Enzo for free, or for $40,000 and I will be more pointed about noting its flaws.
We rationalize all things relative to their cost – be it literal $ cost or psychological or physical cost. Things are rated relative to the effort expended. The more effort/cost, the better it is perceived by psychological default.
A battle will come between people battling this psychological reality. They will maintain that they love how much they pay for their ICE when they could have MORE convenience, MORE free time, and pay LESS by a large margin by hitting a button and having an autonomous EV pull up before they finish brushing their teeth.
Once the societal expectation of vehicle ownership reaches a critical mass point these people will transition to saying they ALWAYS believed this new transport method was better, but that until now it hadn’t been good enough.
They will, again, simply be rationalizing their choice emotionally instead of assessing value objectively.
Anyone in this forum who is skeptical about the medium-term potential of autonomous EV taxi service and how rapidly it will re-define the concept of vehicle ownership will, in 10 years time, claim that they always knew it was inevitable, and were always confident it would happen as rapidly as it did.
Brian,
I like your optimism, but I’m not so sanguine.
You’re assuming the human animal to be a rational animal.
Almost all recent studies indicate it is not.
Homo economicus is more myth than reality.
I think it’s going to be an uphill battle to get people out of their private automobiles.
I see Tony Seba’s ideas as logical next steps from already present technology. There are so many pluses to society from implementation of autonomous vehicles,that the conversion will occur. Timing will vary dependent upon local politicians and power lobbying allowing the implementation of autonomous vehicles.
Some of the plusses:
Lower accident rate
Improved usage of resources
Any motor can be used (gasoline, diesel, natural gas, hybrid, electric)
Cars can drive themselves for maximum efficiency
Economic shift of money from fixed asset to service
Improved traffic control through sensor and communication
Less congestion, less wasted fuel
I think that the fully autonomous car taxi service will be most useful in the high population density areas of cities and large towns or contiguous towns. Rural application will probably mostly be private.
Wouldn’t it be nice to rent a car for the weekend or day over the phone and have it drive to your location? Senior citizens are going to love this.
I personally do not believe that a vehicle requiring a human to maintain through pumping gas, oil changes, belt replacements, alternator change, new spark plugs, etc, etc, etc will be a valid business model for any company wanting to enter the auto-taxi service industry.
Businesses uses EVs will have a cheaper service, and will outcompete any service offering the same with an ICE or hybrid.
Tesla developed a self-plugging charger for a reason. Not to mention that wireless charging will be equally compelling for autonomous taxi services. The need for human labor will be much, much, much lower than for an autonomous ICE.
Maintenance cost will be negligible compared to an ICE as well. With auto-regen brakes the only regular repair will be changing brakes every 60,000 miles.
These differences in maintenance, and need (or lack thereof) for human labor to do the maintenance (including fueling the vehicle) will make EV taxi service for cheaper, which means lower prices, which means the other guy goes bankrupt.
That is why EVs are so compelling, and, I think, necessary for a genuinely disruptive autonomous taxi model. It isn’t only autonomous for the driving period, it is autonomous even when out of service.
Self-charging EV taxi services would order thousands of vehicles, and have charging hubs placed in algorithmically calculated places to maximize utilization and minimize the amount of vehicles purchased for each area.
I just don’t see how this kind of full autonomy, both on and off the road, is possible in an ICE. Fueling the vehicle alone requires someone to pump. Then, the crazy amount of moving parts that can and will break down have to be accommodated by higher prices, and lower utilization since a % of vehicles will always be in the shop.
There is a reason Uber is drooling over the idea of autonomous Tesla Model IIIs instead of licensing Google autonomous tech and putting it into ICEs. One is a viable business, the other is not.
To me EV is a crucial element to the autonomous taxi concept, and any business doing otherwise will go bankrupt due to any EV auto-taxi competitor having lower costs and therefore prices… but time will tell.
Yes, I am sure you are right over the long run. I do agree that EV is the way to go and would be less expensive than ICE. I just do not think that production capability for EV’s will grow fast enough to supply demand.
Patrick has nailed it when it comes to the adaptation of electric vehicles on the basis of dollars and cents happening very fast.
Everything else held even, as electrics start to sell, the price of used ice cars will start to fall off.
The real expenses involving a nice newer car are depreciation, taxes, insurance, etc rather than gasoline unless you are a road warrior- and even in that case you can burn a lot of gasoline in an older car for less than the depreciation on a NEW car.
BUT there are millions, tens of millions of people actually, who simply WILL drive a new car even if it means eating beans for supper rather than steak. They can and will buy electrics once they get comfortable with the idea.
And quite a few of them will buy an electric as the second or third car for the kids and to run errands and to drive to work so as to put fewer miles and parking lot dings on the Belch Fire XXL status symbol.
These people are not going to worry much about a hundred mile range because when they go to work they know they are coming home with maybe a side stop at the supermarket or drugstore. They also know if the car will go only a hundred miles it will keep the kids from getting too far from home.
One of my acquaintances noticed an extra six hundred miles on his odometer – his kids early start Saturday with friends turned out to be an unannounced trip to the beach three hundred miles away. Six hours there, six in the sun and sand six back.
I wonder if the shorter range reduces theft? You can’t steal a Leaf and drive it to Mexico overnight…
What do we have here, a Donald Trump wannabe?
Not at all – I wasn’t suggesting that Mexicans were stealing cars. But, I have the impression that Central and S. America are a prime market & destination for stolen (and used) cars, especially high efficiency small ones.
Well about 15 years ago US law enforcement agencies and their institutuional representatives came up with the notion that a great percentage of cars stolen in the US were exported to Mexico.
So we got a flurry of sensationalist articles in the MSM from law enforcement spokespersons touting that song and dance, as well as various and sundry “studies” commissioned by those same people, which of course confirmed their preconceived notions.
US police agencies had no idea where cars stolen in the US ended up. Nevertheless, the theory put forth by US law enforcement was that, because most car thefts happened close to the Mexican border, the cars were stolen for export to Mexico, and ultimately wound up there. This placed them outside the jurisdiction of US law enforcement, and thus eliminated the accountability and obligation of US law enforcement to find them.
However, when the empirical data finally started coming in, it did not confirm the underlying assumption, which was that more cars are stolen near the Mexican border than in places far away from the border.
For instance a 2009 study showed few counties in Texas along the Mexican border with high auto theft rates. And the northeastern and northwestern US were hotbeds of car theft (see dark grey areas on attached US map).
A more recent study identified the top 10 metro areas with highest auto theft rates in 2014. None of them are anywhere near the Mexican border.
San Francisco-Oakland-Hayward, California
Bakersfield, California
Stockton-Lodi, California
Odessa, Texas
Modesto, California
Spokane-Spokane Valley, Washington
Vallejo-Fairfield, California
Seattle-Tacoma-Bellevue, Washington
Fresno, California
San Jose-Sunnyvale-Santa Clara, California
http://www.rmiia.org/auto/auto_theft/statistics.asp
But, again, this discussion is addressing whether Mexicans are stealing cars. That’s not what I was talking about. I was talking about cars being stolen by whoever, then being transported to Mexico for sale. That could happen anywhere in the US – wherever it was easiest to steal them
How many people would it occur to that US-born, English-speaking Anglos are involved in trafficking stolen cars to Mexico?
It’s pretty clear who the authorities were trying to scapegoat.
“And as it says, the flop over to EV is gonna be FAST!”
The more EV’s the less demand for fuel (an end product of oil), the lower the price at the pump, the less competitive EV’s will be, the greater the economic advantage for consumers to buy ICE’s.
Um, little problem here. Aren’t people here lamenting long and loud that price of oil already too low for profit? Does any oil guy here want to see it lower?
And another one- no way in hell is gasoline ever gonna get cheaper than electricity per mile driven. That’s right now, and it will get even more lop-sided as time goes by–fast!
Like the man said, the status quo folks are always the last to see the earthquake as it shakes their world down around their ears.
Even more so than fuel prices, if electrics become very popular very quickly the market will be glutted with nice CHEAP conventional cars both new and used.
This will slow down the transition to a substantial extent.
I am a firm believer in plugin and plug in hybrids but most likely I will never own one. I can get a nice used conventional car for such a great price that I can buy enough gasoline and maintenance work that most likely I will not live long enough to ”break even ” on an electric car.
And so far as an electric truck is concerned …… There are NONE of the sort I use available at any price.
Meant to post this a when it came out. So, thanks for the opening.
Ritholtz’ article reminded me that EVs (and hybrids) have features beyond efficiency that make them appealing. The torque and traction at low speeds on my hybrid really help in winter driving.
Tesla Just Did Something Really Big
By Barry Ritholtz, BloombergView, July 20, 2015 11:17 AM EDT
This old redneck gear head used to spend some time at the drag strip busting axles and transmissions and having a great time getting greasy helping friends put eight or maybe ten miles on a car over the course of an afternoon while spending a few hundred dollars on new parts and tires an average weekend.
A new Tesla will out generally run anything even remotely in the same price class – and it is a land yatch with sports car pretensions rather than a performance car as such.
IF you are a highly skilled drag racer you can hold your own beside one with a very hard to buy top of the line Corvette or Dodge Hellcat. You MIGHT even win.
But the Tesla merely discharges its battery. The Corvette eats fifty bucks worth of rubber in one flat out hard start. Figure ten bucks to charge your Tesla for an afternoon of drag racing and the probability of busted parts near zero.
Figure four hundred bucks minimum for two high performance tires alone for the Corvette or HellCat.
Thanks Mac for the anecdote. I hadn’t considered the costs of drag racing an ICE car.
EVs are cheaper to maintain. Check.
But the Tesla merely discharges its battery. The Corvette eats fifty bucks worth of rubber in one flat out hard start. Figure ten bucks to charge your Tesla for an afternoon of drag racing and the probability of busted parts near zero.
I agree you probably won’t bust any parts drag racing a Tesla and the fuel is much cheaper but I think the Tesla will still burn some rubber as well, right, well maybe not as much but I’ve seen videos of it burning rubber…
Electric motor torque-speed control technology, largely perfected in the industrial sector and the railroads (diesel-electric locomotives use electric drive motors and have to start under tremendous loads with zero wheel slip), has transferred well to EV’s. Electric motors inherently have extremely high torques at zero RPM. Their power control modules can finely tune the motor’s torque-speed ramps to exactly match actual vehicle acceleration, virtually eliminating wheel slip and rubber burn while optimizing effective acceleration. Basically, EV’s have the perfect infinitely-variable transmission, all software-driven. ICE’s are a highly variable torque/speed device, which can’t start moving the vehicle turning at zero RPM – they have to rev and be “clutched” to engage their torque to the drive line to start the vehicle moving, either with a friction clutch or a torque-converter fluid clutch. It is impossible to seamlessly complete this mechanical torque conversion – therefore the inevitable wheel spin and rubber burn.
As the author claimed, the next generation of the world’s fastest dragsters will have electric drive trains. The EV revolution in racing is has already claimed a championship at the Pikes Peak hill climb race. This year, an EV won it. Not just best-in-class – it was the fastest vehicle up the hill this year, beating out all the ICE-driven racers. EV’s actually finished 1-2.
http://www.treehugger.com/cars/electric-vehicle-wins-famed-pikes-peak-hill-climb.html
I’ve seen videos of it burning rubber…
Actually it is not possible to get a Tesla to burn rubber by simply disabling traction control from the touch screen. There is a fuse that must be pulled also so, it is very unlikely that most people will ever see a Tesla burn rubber. At any rate, like HVACman says above, the torque mapping of electronically driven EV motors results in almost perfect acceleration. Tesla’s recent upgrade to “Ludicrous Mode” (0-60 in 2.8 seconds) was achieved by tweaking the torque-speed map and developing an electro-mechanical 1500 amp fuse to replace the 1300 amp thermal one so, while part of the upgrade requires replacing hardware the rest is all software!
For more see: http://jalopnik.com/the-tesla-model-s-just-got-upgraded-to-ludicrous-speed-1718577723
A Tesla CAN burn rubber in spectacular fashion but it generally does not burn very much at all since it has a very sophisticated traction control very high performance tires and ideal weight distribution and suspension.
The fastest way to launch a conventional car is with hot sticky smoking tires and wheel spin which allows the engine to be revved all the way up producing max horsepower from the starting line. Launching your Corvette or Hellcat without wheelspin means having less than half your total horsepower working for you for the first critical hundred feet or so of the track.
With the extremely low final drive ratio and enormous torque at very low rpms the Tesla can launch with neck snapping suddenness WITHOUT revving the engine. A conventional American hot rod with a large engine is usually limited to about six to seven thousand rpm due to running it any faster resulting in a ”rapid unscheduled disassembly” event.
My understanding is that a Tesla motor is turning six to seven thousand rpm in the ONLY forward gear at typical open road cruising speeds.
In essence this means the final drive in “DRIVE” in a Tesla is not much different from FIRST gear or SECOND gear in a typical hot rod.
A conventional performance car would be going between one hundred twenty and one hundred seventy mph in top gear with the engine turning that fast. One that will go only one twenty has an especially low final drive ratio (in auto talk a low ratio means a high numerical ratio) intended to make it fast off the line at the expense of top speed.
I have watched numerous Tesla drag races on video but not yet seen one for real- and likely won’t since I no longer go to the races. Very little wheel spin is evident and almost none at all with the four wheel drive variant.
Expensive EVs will not be a solution. Last time I checked the middle class was being destroyed, median household income was going down, Youth income was going down, labor participation was going down, wages were not raising nearly enough. We have an affordability problem. We need energy and vehicles that are cheaper than what we currently have, and we need them now. Expensive energy and expensive vehicles are not a solution.
We need energy and vehicles that are cheaper than what we currently have, and we need them now.
Agreed, neither of which will continue to be supplied by oil and ICEs anymore so what do you have in mind?
I don’t really think we are going to make it. My bet would be to try to rely as much as possible on cheap fossil fuels while we urgently develop as much nuclear as possible complemented with renewables. In the meantime we should really tackle the population problem and try to protect the biosphere over other considerations.
I have little hope that a successful transition can be achieved. We should be pulling together as things get worse. Instead I see the opposite. Massive migratory flows due to wars and deteriorating conditions, and fundamentalism taking hold over large areas of the world. Rich nations appear to be ready to start currency wars just to beggar their neighbors so the can continue their BAU a little longer than the rest.
Yesterday I read that ISIS had beheaded and 82 year old archaeologist, Khaled al-Asaad, and hung his body from a Roman column in Palmyra. He was a renowned expert working for 40 years as head of antiquities at Palmyra and one of the few people fluent in Palmyran and Aramaic.
That is the type of world we run the risk of transitioning to.
Public transportation?
Elimination of the private vehicle?
I like trains – electric trains are my main mode.
But, EVs will work. They can eliminate CO2 emissions, and they’re better and cheaper than ICEs.
That would be true, if EVs were expensive. But, they’re not.
Tesla’s are much cheaper than comparable ICEs. The Leaf is the cheapest thing on the road, without the tax credit. EVs are much cheaper, and they’re getting even cheaper than that…
I already showed that for the price of an EV you can buy two ICEs. Your concept of cheap is not the same as for most of mankind. You belong to a fortunate minority that thinks that a Tesla is affordable. It is not. You can buy an ICE vehicle for about 9,000 € and at that price tag you can choose between a lot of models. The cheapest EVs start over 18,000 € after heavy subsidies and rebates.
1st, I’m talking about the US – I haven’t checked prices in the UK.
2nd, EVs are much cheaper to buy AND operate. If you save $1,500 per year on fuel and maintenance it’s pretty easy to save $20k over the life of the car.
If the up front cost is a problem, almost everybody can get into a lease.
1st. This is a world problem. It is not going to be solved by Americans buying lots of Teslas.
2nd. Cheap ICMs are very fuel efficient. There is no way in hell you are going to save 1500 $/year on that. And you have to factor the price of a new battery for the EV every X years. Those batteries are very expensive.
TCO does not look good compared to cheap ICMs which is what the majority of the world can afford now.
I am withholding judgement on the life of the batteries in electric vehicles. They are still too new and the batteries are still basically first generation.
I can remember old folks talking with pride about having a car that was not yet burning oil at forty thousand miles back in the fifties and when I was a young guy it was almost unheard of for an auto engine to last two hundred thousand miles. My current vehicles are well past this point and I expect the truck to make four hundred thousand and the car to get to three hundred or close.
There is no reason that I can see why batteries might not also be improved over the years to the point they will last for decades.
Or new batteries might get to be cheap enough you just expect to replace them like tires except at longer intervals.
Don’t forget that doing away with the ice engine also means doing away with the second most troublesome part of a car- the transmission. Transmission repairs running into the mid four figures are quite common these days.
I think it is such a riot that we are finally going to perfect Edison’s approach from over 100 years ago. Could oil have actually stunted real progress, diverted our time and resources and sent us down a dead end?
I’d say yes, because we never really needed oil. But, we would’ve used a lot more coal, and that wouldn’t be great either.
Ideally we would have imposed stiff pigovian taxes on all fossil fuels, as early as possible. But, that’s 2020 hindsight.
This is a world problem. It is not going to be solved by Americans buying lots of Teslas.
I’m not sure why you’re fixated on the 1st generation of Teslas which, like CD, cell phones etc are starting out expensive. Look at Leafs and other low cost EVs.
The single largest use of fuel around the world is for passenger transportation – roughly 50% overall. The large majority of fuel is used by transportation in general. These are both nicely susceptible to electrification, though commercial transportation takes longer, due to much smaller volumes.
Cheap ICMs
ICM? Infernal combustion machine?
are very fuel efficient
That’s fuel, maintenance and repairs. Brakes, fluids, belts, oil changes, transmissions, etc., etc.
Those batteries are very expensive.
The Volt’s battery will last the life of the car. You might have to replace a Leaf battery once, for $5,500.
cheap ICMs which is what the majority of the world can afford now.
I’d be curious to see data on that. It’s certainly not true in the US or Europe.
The average price of a new car in the US was $32,086 in 2014.
That means that the median US household can no longer afford the averaged priced car. Consequently the proportion of young people with driving permits is falling and the cohort most likely to buy a new car is 55-64 years old. At the same time the average age of a car is increasing.
Average American can no longer afford “average-priced” new car or truck (and why it’s getting worse)
The Dubious Future of the American Car Business—in 14 Charts
This is the situation in the US which is a rich country. In most of the world people have even less money at their disposal for buying a car.
So, what happens when those cars are not sold because people don’t have money to buy them? Well it is a sobering view:
Where the World’s Unsold Cars Go To Die
Now you go and think that we are going to buy zillions of EVs. That plan is going to fail.
Javier,
Young people are just less interested in cars: they have social media, so they don’t need to cruise the streets to meet someone.
The average new car is $32k, but new cars are available for $14k (and used cars are available for $5k). The cheapest cars sell at much lower volumes than more expensive cars: that tells you that car sales are not limited by the price of the average car.
The transition to EVs isn’t limited by affordability. It’s limited by the limited selection of EVs; propaganda against them on Fox news and talk radio; the natural slowness of adoption of new ideas; and our society’s refusal to properly tax oil & fossil fuels to account for their real costs.
The Nissan Leaf is much nicer than a Nissan Versa, and yet the overall cost of ownership is the same with oil at $50. EVs are cheaper and better.
median household income was going down
IIRC that’s rising, though not nearly as quickly as average income. Even individual median income isn’t falling, though it’s not rising the way it should in an ideal world.
Didn’t want to look for the graph, but I guess a lot of people have bought on that recovery bullshit.
Interesting. What do the median individual, and average individual charts look like?
It looks like median income has levelled off so the claim that it is dropping is false, it is also not rising the change is about zero.
Also a later chart shows median income is indeed increasing.
https://research.stlouisfed.org/fred2/series/MEHOINUSA672N
It was also going up from 2005-2007, yet the maximum was and still is 1999 and since then the trend is negative.
There is clearly no recovery there, just a slowing in the drop.
You’re using median income, not average income. That’s useful if you want to look at how the median person is doing, but it doesn’t tell you if overall economic production has stalled.
If rising inequality of income means that the median person isn’t doing as well as the averages, that’s a problem. But it’s not the same thing as the economy not recovering, right?
We all now that quantitative easing benefits only the high income part of the population that holds significant financial assets.
But really the data is all over the place that the recovery is no such. I invite you to check the following data:
The shrinking global commerce pie by ECRI
The American driving major change and peak car.
And the many economic charts at http://www.advisorperspectives.com/dshort/ that show no recovery since the 2008 crisis or even since a previous peak.
I don’t really see evidence in those charts that we haven’t had a recovery. I certainly see evidence that it’s been slow.
Would you like to highlight the charts you feel are most important?
Good question Nick.
For personal income it is as shown below.
https://research.stlouisfed.org/fred2/series/MEPAINUSA672N
Interesting. That suggests that households are getting smaller.
Hi Nick,
That might not be correct. It depends on how the personal incomes are distributed amongst households.
There are no solutions. That’s because we don’t face a problem. We face a predicament. Problems have solutions. Predicaments don’t. Straw dogs Janvier. As usual.
With this most recent upgrade, Tesla has acquired bragging rights in producing the fastest accelerating four door production sedan in the world bar none! I think I can confidently say that this accolade will never again be held by a vehicle sporting an internal combustion engine. Tesla has leveraged all the superior performance characteristics of electric motors for use in a car and in doing so proven that high performance can be achieved at a lower cost. If someone can come up with a convincing argument as to how quicker acceleration can be achieved at a lower cost, using an internal combustion engine in a production car, I’d like to hear it.
The point is that, this involves another attempt at using battery powered electric propulsion that is only a two or three decades old at the most, up against technology that has been in constant development for over a hundred years and electric propulsion is proving to be superior.
Electric propulsion was always superior from a technical point of view. The problem with it always was (and still is) the costs and scalability. Also this:
“battery powered electric propulsion that is only a two or three decades old at the most”
is not true. Battery powered electric propulsion is 150 years old and was extremely successful before the above mentioned high costs and limited scalability kicked in.
Yes, EVs are older than ICEs, and the electric hybrid was invented by Porsche in 1904.
But…in 1904 we thought oil was cheap. Now we know it’s expensive, dirty and risky.
EVs are cheaper and better than ICEs.
another attempt at using battery powered electric propulsion
It is the latest attempt to use electric propulsion that is new, not electric propulsion itself, That’s what I get for trying to be brief. The latest attempt to develop EVs was mainly a result of a California Zero Emission Vehicle mandate enacted in 1990. The GM EV1 was released in 1996 as a result of that mandate. All the nineties vintage EVs were a result of that mandate which was fought tooth and nail by the auto manufacturers to the point of suing the California Air Resources Board.
The fact that there are still some nineties vintage Toyota RAV4 EVs still in daily use might offer a clue as to why traditional auto manufacturers are not enthusiastic about EV. Electric motors don’t wear out like ICEs do so they can almost last forever. As Nick keeps telling us, evs require so little maintenance that they cannot be relied on to provide a revenue stream anywhere near the size of that generated by ICEs.
I am well aware of the fact that EVs were quite popular during the dawn of the automobile age. I read somewhere that, the invention of the electric starter motor made quite a big difference to consumers since cranking an ICE to start it requires considerable strength. Also the availability of a cheap byproduct of the refining of kerosene from petroleum made a big difference. Had abundant, cheap fuel not been available who knows how things would have turned out?
Reality check: there are very many, very large, very successful EVs in the world that have been around for a very long time.
Almost all trains.
All “diesel” (and some nuclear) submarines.
Etc., etc.
Hand cranking an antique car motor is actually sort of dangerous and requires a certain amount of muscle and physical dexterity.
Hand cranks resulted in a lot of broken hands and arms.
Most women and a lot of white collar men would have had trouble hand cranking a car.
Hand cranking requires learning the proper technique and requires some muscle.
Doing it IMPROPERLY – actually spinning the engine using the crank rather than a quarter turn at a time – requires a LOT of muscle and is BEGGING for a broken arm. But starting a balky engine often required spinning it.
The right way is to pull UP on the crank holding it with the fingers only, thumb out of the way, a sharp quarter turn.
Spinning the engine requires pushing DOWN on the crank using the thumb to maintain grip. If it backfires, which happens quite often, the crank kicks back violently resulting in broken hands and arms. If you only have your FINGERS around the handle, using the correct upward pull technique, the sudden reversal simply straightens your fingers usually without injury.
Surprisingly enough there are still a lot of hand cranked machines around.
Maybe I’ll put up a comment on luxury yatchs, or the best five star restaurants in Bhutan? What about the latest ultra laser eye lash treatments for movie stars?
Now, this is a clean technology to get excited about:
http://www.wired.com/2015/08/elon-musk-hyperloop-project-is-getting-kinda-serious/
Actually, I’m not sure if it’s clean, but I like it.
It’s an old idea, has nothing to do with generating energy. It uses an evacuated tube as the pathway, to avoid air friction losses, but it has to deal with friction between the vehicle and the tube sides. The system works better if it uses a maglev concept. The drawback is the need to have the vehicle pressurized to operate in a near vacuum.
The system is risky because a tube breach floods the tube with air, the turbulence destabilizes the vehicle, which starts slamming the tube walls at 700-800 kmph. This stresses the pressurized walls, breaks the seals and blows a hole in the vehicle, which decelerates at 22 gravities, turning the passengers into a pinkish-brownish-red purée with little bits of bone sprinkled for a more macabre effect.
Ok, I’ll wear a helmet.
A helmet will be an excellent idea. We could put in a g force sensor, and a high pressure rubber diaphragm around your neck. As soon as the craft starts falling apart the deceleration activates the diaphragm, which tightens really hard around your neck and preserves your head for the burial service.
Fernando is a remarkably conservative engineer when he estimates of the usefulness of renewables technologies but conservatism is a cardinal virtue in engineering.
I admire Elon Musk in the abstract as much as any living man for the depth of his vision and his ability to inspire the very smartest people to join his team and work like firefighters.
But methinks building REALLY good batteries is a piece of cake job compared to building an affordable hyper loop transportation system. Don’t look for anything other than a demo anytime soon- as in the next decade or two.
Note to all: I will be out of pocket, until late tomorrow, Friday August 21st, or early Saturday. Dennis Coyne can do anything I can do on the blog so post him if you need anything deleted, like a racist post or something like that.
Ron
I got $20 I can front you…
Jef,
You’ve been noticing that too?
I’d never heard the usage anywhere until here, not all that long ago. Weird.
Hi All,
Let me know by email (for those that know it) if there are problems. Last time I was away at the same time as Ron, but today I am here.
Can we survive the genetic VS cultural trap we have entered?
We are rapacious apes:
“But perhaps the most striking observation, say authors Chris Darimont and colleagues, is the way human beings focus so heavily on taking down adult prey.
This is quite different from the rest of the animal kingdom, for which the juveniles of a species tend to be the most exploited.
Part of this is explained by the tools that human hunters exclusively can deploy.
We can tackle adult prey at minimal cost, and so gain maximum, short-term reward, explained Prof Darimont from the University of Victoria (UoV), Canada.
“Advanced killing technology mostly excuses humans from the formerly dangerous act of predation,” he told reporters.
“Hunters ‘capture’ mammals with bullets, and fishes with hooks and nets. They assume minimal risk compared with non-human predators, especially terrestrial carnivores, which are often injured while living what amounts to a dangerous lifestyle.”
Predator ‘financials’
This concentration on large adult prey is triggering extinctions, as well as driving an evolutionary shift towards smaller fish sizes and disrupting global food chains, say the authors.
Prof Tom Reimchen, a UoV co-author on the study, uses a financial analogy to explain the damaging consequences of hitting adult populations hardest.
He calls the adults the system’s “reproductive capital” – the equivalent of the capital held in a bank account or a pension fund. And he says we are eating into this capital when we should really be living off the interest – the juveniles, which many species will produce in colossal numbers, expecting a good fraction to be doomed from the moment they are born via predation, starvation, disease, accidents and more.
The heavily biased preference for adults was not a sustainable strategy long-term, which ought to be clear from fundamental biology, argued Prof Darimont: “In the overwhelming number of cases as fishes age, they become more fecund. That is to say, they produce more eggs, have more babies, and, in fact, in many cases, many of those babies are more likely to survive and reproduce themselves.
“So when a predator targets that reproductive age class and especially the larger more fecund animals in those populations, we are dialling back the reproductive capacity of populations.”
The heavily biased preference for adults was not a sustainable strategy long-term, which ought to be clear from fundamental biology, argued Prof Darimont: “In the overwhelming number of cases as fishes age, they become more fecund. That is to say, they produce more eggs, have more babies, and, in fact, in many cases, many of those babies are more likely to survive and reproduce themselves.
“So when a predator targets that reproductive age class and especially the larger more fecund animals in those populations, we are dialling back the reproductive capacity of populations.”
Not only that but our civilization’s waste streams are changing the chemistry of the ocean environment so quickly that natural selection and Darwinian evolution doesn’t give enough time for species adaptation to the new conditions. This doesn’t bode well for long term ecosystem stability. Usually such conditions in the past have led to mass extinctions!
Not only that but our civilization’s waste streams are changing the chemistry of the ocean environment so quickly that natural selection and Darwinian evolution doesn’t give enough time for species adaptation to the new conditions. This doesn’t bode well for long term ecosystem stability. Usually such conditions in the past have led to mass extinctions!
Or algae blooms!
Beautiful Caribbean beaches now a smelly mess after massive seaweed invasion
One of the Caribbean’s most important and alluring assets is in trouble. Beautiful beaches that, as the official tourism site for Barbados describes as “nothing less than perfect,” have become infested with a massive amount of smelly and decaying seaweed.
From the east coast of Mexico to Barbados, large clumps of the brown seaweed known as sargassum have been piling up, attracting biting sand fleas. In some cases, the seaweed piled up as high as 10 feet, the Associated Press reports…..[snip]
Some researchers believe that the blooms are being by fueled bt sewage waste, nitrogen-heavy fertilizers or other pollutants and land-based nutrients washing into the ocean. “The nutrients may be increasing to a point where they’re fertilizing this seaweed, allowing them to grow faster and reach a greater amount of biomass,” Lapointe told PRI.
I drove down to the coast from my rural homestead yesterday and saw this stuff first hand on a little beach in front of the only hotel in the area. Very unpleasant smelling stuff. The pictures from the Wa Po article linked of Beaches in Cancun, Mexico are alarming. It strikes me that nature is reacting to “sewage waste, nitrogen-heavy fertilizers or other pollutants and land-based nutrients washing into the ocean”. Maybe we should have thought that our actions will have unpleasant unforeseen consequences. Makes you wonder what other tricks the biosphere might have up it’s sleeve.
The entrepreneur in me sees a business opportunity. Harvest sargassum and take it to facilities to wash off the salt and either sell the salt or dump it back into the ocean. The sargassum would then be allowed to decompose and then dried. Depending the amount of nutrients it could then be sold as fertilzer or mixed with other organic waste to be used as fertilizer. Hopefully the nutrients would take a while to get back to the ocean.
The entrepreneur in me sees a business opportunity. Harvest sargassum and take it to facilities to wash off the salt and either sell the salt or dump it back into the ocean. The sargassum would then be allowed to decompose and then dried. Depending the amount of nutrients it could then be sold as fertilzer or mixed with other organic waste to be used as fertilizer. Hopefully the nutrients would take a while to get back to the ocean.
Sargassum has been washing up in Florida as well and I had the same idea! The main problem is finding a facility that has enough access to fresh water to wash the salt out of the seaweed. BTW it should be a really good fertilizer because of all the sea creatures that live in the seaweed. I wonder if you could get funding for something like this through some kind of crowd sourcing like Kickstarter.
Pyrolyze it. Use the gas for electricity and put the salty carbon back into the ocean. Energy problem SOLVED AT LAST.
Hi Fred,
I see Sargussum is an important component in the marine ecosystem, supporting all kinds of marine life, much of it juveniles of economically important species. Removing too much of it is not a good idea, unless we wish to hasten decline of ocean health. I suspect it is even important washed up on beaches, providing nutrients to a low nutrient system as it decays. Your economic opportunity is just another BAU disaster reducing global productivity and carrying capacity.
But as a species, isn’t that what we do?
Jim
Is that true of our farmed species which are our major animal food source and far outnumber wild species? Even fish farming is becoming a big business. I don’t know the selection process for cattle, chickens or fish.
It seems to me Saudi Arabia has grown an inch taller over the last short while. It could be the new king, but I suspect more likely it’s the hot fresh production spike due to CO2 EOR in Ghawar. Saudi Arabia is rather opaque but the history of CO2 flooding is rather well researched and documented. As goes the CO2 EOR in Ghawar, so goes Saudi Arabia. Manifa could be up to 900,000 barrels a day. Shaybah is probably good for 3/4 of a million. Khurais is no doubt doing slightly over a million a day on the back of water injection. Anybody have any good guesses or back of the envelope answers on how CO2 in Ghawar will play out as far as future production and declines?
Here’s a few links I found on CO2 flooding case studies.
http://neori.org/resources-on-co2-eor/how-co2-eor-works/
http://petrowiki.org/CO2_miscible_flooding_case_studies
http://www.usea.org/sites/default/files/event-presentations/Chevron_Industry_Experience_CO2_EOR_1.pdf
It seems to me this is KSA’s last kick at the can. I’m interested to figure out how far they can kick it.
Any opinions?
This CO2 source is vastly undersized for Ghawar. The project is sized to the available source, not to the needs of Uthmaniyah.
40 million scf will only be around 13k barrels/day liquid (and that at a lower pressure than Ghawar). USA average CO2 EOR productivity would give around 4.5k barrels/day. Initially it would be more, so my central estimate would be around 25k barrels/day production increase.
It’s a great idea to use the CO2 they have lying around already, but for a complete project in a reasonable time frame, they’d need a source orders of magnitude larger.
They can use it to increase recovery factor, but the current project is puny. The optimum way to use CO2 is to inject it to create a supercritical mixture of oil with CO2. The CO2 and oil slug is pushed to the producers with water. The incremental recovery is a result of lower viscosity and oil “swelling”. The process is adversely impacted by the difference in viscosity between the pushing fluid (water), the oil+CO2 slug, and the reservoir oil. The oil plus CO2 slug has a tendency to finger through the reservoir oil, and this causes problems. The CO2 also has a tendency to “push through” the oil plus CO2 slug, which reduces efficiency.
The net result is we inject a bunch of CO2, and if we exclude the slight volumetric pressure pulse the incremental rate starts off tiny, grows to a peak, and declines slowly. The decline period includes very painful production of acid water and lots of CO2. A good way to design a project is to chain different sectors to use recycled CO2. But the Saudi fields are huge. What they need to do is build electric power plants using gasifiers, and gasify the heavy oil molecules (the asphaltines) to allow CO2 capture. A reasonable size project would cost tens of billions of $.
Fernando
With your engineering background, you may find it of interest what the EERC folks (specifically, Steve Hawthorne’s presentation) are finding in regards to EOR in the Bakken formation.
Apparently, the high temperature (110/129C) found in the formation causes ethane, rather than CO2, to be far more effective in mobilizing the oil. The Mean Miscible Pressure for ethane is one half that of CO2.
The percentage of oil that has been recovered from both the Upper/Lower Bakken benches (shale) and the Middle bench (dolomite) in lab testing has been extremely high.
Would you suggest that the production from tertiary recovery of Ghawar with CO2 is not gonna be resulting in a big production increase capability?
I’m curious how long great minds think KSA can keep up this production spike and what the decline will be afterwards. I figure they must be hitting the wall pretty soon.
Jimmy, ghawar EOR will extend plateau, and/or slow down decline. But it’s more like putting a Popsicle stick in an old horse’s behind. It makes it jump and walk away a little faster, but it won’t make it run.
Ves – regarding discussion above. Give me a break!!! I tell an anecdotal joke about “buy low sell high” and you accuse me of giving faulty advice. At least I admit to being clueless, but you are absolutely cl——. You want me to read some book you read. I have probably averaged reading 2 hours per day of financial articles, news, books, etc. for 50 years. Thanks for the advice. Here is some advice for you. Almost everything that I read, I read with a skeptical perspective and towards a view of asking myself – “What is wrong with this advice/point of view? Why might it be wrong? What is the authors agenda? What are others saying? What do I believe? If different than my view, what are the odds that I am wrong? Is there something that I had not previously considered. Is there something that I can learn from this ” And, I have been wrong many times. But, with investing, probably 60% right and 40% wrong is okay. If you bet on every NFL game and you were right on 60% – you are living well in Las Vegas.
clueless,
Why do you stress out? 🙂 Listen, I have read 3 of your posts and still I could not figure out how you invest. I am not sure that you can even explain it coherently how you invest beside “buy low, sell high”. I can write you in one easily understandable paragraph how I invest. All you do is hand waving with buzz words like these internet oil analysts. Of course that I should point out if something wrong with your comments about investing. Some people bought gold in 80’s and waited 30 years to recover, some people sold their whole portfolio in 2009 after it dropped 50% and waited on sidelines for more drop the last 7 years that never materialized. On the contrary equities recovered even higher. Some people bought oil wells, even though they are not in oil business, because that Swiss guy with funny accent told them in pricey newsletter that they have to have physical assets. Clueless what do you think they are doing with that oil at $40? It is so cheap that they can give to the kids on the street like candy. Do you get it? These are all irrational investing decisions. For most people buying individual stocks and being right 60% is not their skill but their luck. And I don’t care if you read any of the books that I left. By talking with you I am also talking with other people here and maybe some of them will be curious and buy 1-2 books and learn themselves how to properly invest for the rest of their life instead to rely for every investing decisions on newsletter “experts”, rumors on the internet, or what Ves or Clueless tell them. They will have knowledge and independence to make their own investing decisions. That is priceless.
Do you get it? These are all irrational investing decisions. For most people buying individual stocks and being right 60% is not their skill but their luck.
That comment is on the money!
That is the essence of what Nassim Taleb says in his Black Swan story as well.
Part Two: We just can’t predict
In chapter thirteen Taleb discuss what can be done regarding epistemic arrogance. He recommends avoiding unnecessary dependence on large-scale harmful predictions, while being less cautious with smaller matters, such as going to a picnic. He makes a distinction between the American cultural perception of failure and European and Asian stigma and embarrassment regarding failure: the latter is more tolerable of people taking small risks. He also describes the “barbell strategy” he used as a trader, which consists in avoiding medium risk investments and putting 85-90% of money in the safest instruments available and the remaining 10-15% on extremely speculative bets. Source Wikipedia
Ves says: ” Listen, I have read 3 of your posts and still I could not figure out how you invest. ”
Good!! This is not an investment site, nor should it become one. I tryto keep my comments to generalities, which is why I could not figure out your previous comment. “I would be very careful to talk about something that you don’t know.”
Dude, our investment strategies are top secret.
For a reasonable fee, five years hence I will be willing to tell you what you should have invested in.
Fern,
Do you have any good book to recommend about these secretive investing strategies or this last post is just to fill you daily “quota” of posts 🙂
This is not an investment site. It’s an oil scarcity site.
@Watcher
What do you do with your remaining and ever diminishing wealth is very relevant to the oil scarcity site. I think it is more relevant than the fairly regular updates by Fern of the costs of toilet paper roll in Maduro’s Venezuela unless you happen to live there or looking in Crystal ball every morning to see if the Fed will “bailout” shale guys as you do. Bailout did not happen. So all that irrelevant talk is just one big waste.
What happens in Venezuela is HIGHLY RELEVANT to any discussion involving oil in particular and energy in general.
I strongly disagree with Fernando about some things but his understanding of the oil industry and the politics of oil producing countries appears to be perfectly sound.
If you want to understand the possible range of future histories even my own ramblings involving politics and agriculture are worth reading.
Military intelligence specialists go over every little tid bit of information available to them and add it to the mental data base they use to make decisions or predictions. They don’t usually have the luxury of KNOWING something that makes the future a foregone conclusion but rather have to make their predictions based on the ”preponderance of the AVAILABE evidence”.
Ron has indicated that all comments which are civil are welcome so long as they relate after some fashion to energy and future of our society.
Venezuelan production may crash to zero for some time in the event of a revolution or it might slowly decline if the Maduro gang holds on.
If the people gain their freedom they will likely be exporting substantial amounts of oil as soon as they can get people in to fix up the mess.
Talking about Venezuela, last night the chief of police was attacked with hand grenades as he cruised along Cota 905 near downtown Caracas. The firefight left seven dead.
The bolivar broke cleanly over 700 per dollar, it’s at 704. I’m still seeing reports of serious breakdowns in the health care system. The tuberculosis and flu epidemics are not under control, and now they seem to have a large number of newborns dying. The tourism minister tried to attend a sports event and was whistled out of the stadium by the crowd.
Wow. That is really valuable info, Fern . Should I start thinking about switching to EV? Am I late? Is it oil going up or down because of that info? What do you think? Are my investments in diversified index funds safe? or should I start building bunker in my backyard? Do you think Venezuela will stop exporting oil? or maybe they will increase? So valuable info about Bolivar exchange rate but still so many unanswered questions.
Fernando,
You make it sound like Venezuela is the only place in the world on the verge of collapse due to low oil prices. It’s not.
And some of the regimes which are bordering on collapse are US-backed. Others, like that in Venezuela, are not.
Persistently low oil prices have already inflicted economic pain on oil-producing countries. But with crude sticking near six-year lows, the risk of political turmoil is starting to rise.
There are several countries in which the risks are the greatest – Algeria, Iraq, Libya, Nigeria, and Venezuela – and RBC Capital Markets has labeled them the “Fragile Five.”
http://oilprice.com/Energy/Energy-General/Low-Oil-Prices-Could-Break-The-Fragile-Five-Producing-Nations.html
And let me assure you, there exists a narrative in Latin America very different than the one you and Old farmer mac are disseminating:
Desde hace algún tiempo se ha decretado por las derechas, sectores de izquierda desorientados de América Latina y el Caribe (ALC), y también de Europa, el fin de lo que llaman ciclo progresista….
[L]os califico de gobiernos que en distintos grados son independientes de Estados Unidos, se distancian de los dictados del consenso de Washington, abogan activamente por la unidad y la integración latino-caribeña y por un mundo multipolar. Si atendemos a estos rasgos podemos decir que cumplen con ellos, en alguna medida, Antigua y Barbuda, Argentina, Bolivia, Brasil, Cuba, Dominica, Ecuador, El Salvador, Granada, Nicaragua, San Cristóbal y Nieves, Santa Lucía, San Vicente y las Granadinas, Surinam, Uruguay y Venezuela….
Pero antes de 2013 ya había comenzado otra variable fundamental: la contraofensiva de Estados Unidos y las oligarquías contra los gobiernos independientes y contra la unidad e integración de ALC, desde el ataque yanqui-uribista a territorio ecuatoriano y el restablecimiento de la IV Flota por Washington (2008), hasta los golpes de Estado exitosos contra los presidentes Zelaya y Lugo en Honduras (2009) y Paraguay (2012) y los derrotados en Bolivia (2008) y Ecuador(2010) contra sus homólogos Evo y Correa….
Hoy vemos que además del embate prioritario contra Maduro, atacan a fondo a Correa, Dilma y Lula, y hostigan a Sánchez Serén. Pero no hay tal fin de ciclo. Lo que sí hay es golpismo de derecha debido a su imposibilidad de ganar elecciones a esos gobiernos.
La razón es sencilla. Pese a la crisis económica internacional que golpea también y duro a países desarrollados como Estados Unidos, Alemania, Francia y Japón los gobiernos independientes de Washington tienen logros sociales incomparables en ALC que llegan a quienes nunca tuvieron nada. Entre ellos sacar de la pobreza a millones de personas, llevado a las aulas a millones de estudiantes, extendido apreciablemente la atención médica y elevado la calidad de vida de sus poblaciones.
http://www.jornada.unam.mx/2015/08/20/opinion/024a1mun
Personally, in a world approaching the limits of growth, I believe both the developmentalism/progressivism of some Latin American regimes (certainly not the neoliberal wet dreams Columbia, Chile and Mexico) and the neoliberalism of the United States are obsolete.
I think they’re both going to wind up on the losing side of history.
Isn’t this, in essence, what the Pope is saying?
Hope its nothing like Cantarell
http://energyskeptic.com/2014/2nd-largest-oil-field-in-the-world-mexics-cantarelle-declining-rapidly/
Very few fields are like Cantarell. And very few oil companies are like Pemex.
Note that that article is really from 2008. Old news.
Speaking of hedges—-
Does anybody have a good idea about how much longer it will be before the last hedges the small tight oil guys put in place before the price crash will expire?
My impression is that a lot of tight oil is still being sold at hedge prices but that most tight oil hedges made before the price crash are either expired or will soon expire, soon meaning within this calendar year.
Are most of the little guys already selling at the spot market price?
I listened to the sage advice of a financial adviser and ended up losing a substantial sum, many dollars. I wasn’t too happy, but that is just too bad. That’s why there is beer and when you need to cry into something, beer is it.
Any idiot willing to listen to a financial adviser needs to have their head examined.
The machines don’t need Artificial Intelligence to kill us. It’s been happening for a while and now it appears that the trend is continuing. Think about it. Both children and adults sitting for long periods of time at work, school and “play” in front of computers, TV’s, smart phones, and game boxes. No wonder cardiac problems are a major cause of death.
Stupid people playing with computerized electronics when they should not be. They even know better but still do it.
http://www.forbes.com/sites/billvisnic/2015/08/19/traffic-deaths-on-the-rise-whats-really-to-blame/
I wonder how many pedestrian accidents are due to the pedestrian being distracted by a phone.
Around here we get more accidents from drivers getting distracted by human flesh. The good part is that going topless is no longer fashionable for young women, this used to distract the drivers so much they had to close the beachside avenue. The bad part is we see less topless women at the beach.
Another article in Bloomberg that scares (misleads?) investors looking for investment advise to this paper.
Gary Shilling, Bloomberg News | August 20, 2015:Why crude oil prices still have a long way to fall.
Excerpts: In February, I predicted that crude oil prices would drop to US$10 to US$20 a barrel. I’m sticking with my forecast of US$10 to US$20 a barrel. The logic behind that February projection still seems valid. Cartels exist to keep prices above equilibrium. But that encourages cheating, as cartel members want more than their allotted share and outsiders sell more to take advantage of the artificially elevated price. So the job of the cartel leader — in OPEC’s case, Saudi Arabia — is to cut its production to accommodate the cheaters and prevent a price collapse. The Saudis got tired of seeing their market share shift to others, so they and the other financially strong Persian Gulf producers decided to play a high-level game of chicken.
This shows how easy it is to get it wrong by ignoring the fact that, when prices hit around $40 per barrel, many operators start closing shop.
Here’s an article in Bloomberg about Venezuela. The article doesn’t get everything right, but it does give you an idea:
“Venezuela is slipping toward a humanitarian crisis. News of its latest economic low point, or of President Nicolas Maduro’s most recent political tantrum, tends to eclipse this slow-motion disaster. Yet the danger of a Venezuelan implosion is growing.”
http://www.bloombergview.com/articles/2015-08-19/maduro-s-venezuela-veers-toward-a-humanitarian-crisis
While am at it, I wish to remind you one reason it got this far is the support this nauseating regime received from the international left, red blogosphere like ThinkProgress, the Guardian, “experts” like Mark Weisbrot, movie stars like Sean Penn and Danny Glover, and Latinamerican leaders like Raul Castro, Dilma Rouseff, and Evo Morales.
You forgot Rafael Correa.
Colombia is the only US Client State left in SA, the bright spot on the planet, IMHO.
Of course FARC will not go away.
So putting a bus driver in the chief exec’s chair was as bad as putting a community organizer..ok just never mind.
We should all pray now.
http://youtu.be/23BJNveKMRI
You must be living in an alternate reality if you think Latin America is the brightest spot in the planet. It has two giant eyesores, Venezuela and Cuba, Brazil, would be rich country, rocked by hyper corruption and economic mismanagement, Argentina in its usual dance with populist garbage, and the rest watching their economies slow down as the commodities markets nose dive?
cyctochrome C says: “Colombia is the only US Client State left in SA….”
And Paraguay after Lugo’s removal from office in 2012?
The presidents of Paraguay’s neighbouring countries rejected Lugo’s removal from office, and compared it to a coup d’état. Brazilian president Dilma Rousseff proposed suspending Paraguay’s membership in Mercosur and the Union of South American Nations. Cristina Fernández de Kirchner of Argentina, Rafael Correa of Ecuador and Leonel Fernández of the Dominican Republic announced that they would not recognize Franco as president.[31] Condemnation also came from more conservative governments in the region, such as Colombia and Chile. Lugo’s removal has drawn comparisons[32][33] to the ouster of Honduras’ Manuel Zelaya in 2009; like the ouster of Lugo it was defended as legal and constitutional by its supporters while being denounced as a coup across the Latin American political spectrum.[1]
https://en.wikipedia.org/wiki/Impeachment_of_Fernando_Lugo
Was it a US-engineered coup?
Publicly, the U.S. State Department remained studiously neutral as Lugo’s ouster convulsed his capital and Paraguay’s neighbors sought to apply maximum pressure on their poor, landlocked neighbor to abort what they now call an “institutional coup.”
Should the U.S. have done more to defend Lugo, despite the fact that he had lost the confidence of all but a handful of lawmakers in a country where the constitution enables any leader to be removed from office for mere “poor performance” with a two-thirds vote of the Congress?
A chorus of voices around the region—mostly leftists—is saying yes, and some squarely blame Washington for Lugo’s downfall.
“The coup in Paraguay was being prepared for a long time and is part of a continental policy imposed by the United States against democratic governments, with the complicity of the economic and political powers,” declared Adolfo Perez Esquivel, the Argentine Nobel Peace Prize laureate. He urged the entire region to defend democracy by calling for the restoration of Lugo’s presidency.
Venezuela’s President, Hugo Chavez, went even further, claiming without presenting any evidence that Lugo’s ouster was a “decision of the Pentagon.”
Others disagree…
http://humanrightsfoundation.org/news/us-neutrality-on-lugo-impeachment-draws-criticism-00244
And you might also want to take a more critical look at Bachelet:
“Chile en la era de Michelle Bachelet”
http://www.jornada.unam.mx/2015/08/14/opinion/007a1pol
Just when you would expect drilling rigs to be shutting down, ND is up to 76 active rigs. It was down to 69, only a few weeks ago.
These shale companies are going to drill until the bank account is empty and the bailiff arrives at the well site and evicts them!
Perhaps it is not the shale companies that are increasing the drilling.
Quoting from: http://fuelfix.com/blog/2015/08/21/us-oil-rigs-increase-by-two-as-drillers-prop-up-vertical-units/#34553101=0
Baker Hughes’ data also shows that in recent weeks drillers have been propping up vertical-drilling rigs. Those units have climbed from their lull of 99 in early June to 130 on Friday, boosting the share of vertical rigs in the U.S. market from 11.4 percent to 14.7 percent. In that same time, active horizontal drilling rigs have increased by four.
That suggests that the rigs being sent back to the field aren’t chasing oil that’s trapped in shale rock, but rather in conventional sandstone or carbonite reservoirs. They’re the kind of formations the industry has drilled for a century, but that lost their luster in the last decade with the advent of shale formations in Texas and North Dakota. There, operators can benefit from lower drilling costs — about a third of the cost of horizontal shale drilling — and a longer life-span for their wells. Shale wells deplete rapidly, by up to 80 percent in one year, which is unattractive when oil prices are hovering around $40 a barrel.
There have been some reports that more vertical wells are being drilled in the Permian Basin. The reason is to hold acreage, and because the companies lose less $$ drilling vertical wells at current prices.
It’s a good environment to drill injectors. Sometimes I wonder why not locate surplus casing & tubing and well jewelry and drill cheap slim hole injectors? Injecting water with chemicals and CO2 is probably going to lead to a delayed response in producers. For a company with the financial strength it seems to be a good option.
NORWAY GIVES GO-AHEAD TO GIANT NORTH SEA OIL PROJECT
http://www.enca.com/technology/norway-gives-go-ahead-giant-north-sea-oil-project
“Norway on Friday gave its green light to the development of the mammoth Johan Sverdrup gas field in the North Sea, the first phase of which is worth 12.7-billion euros alone.”
“Production at the oil field is expected to be between 315,000 and 380,000 barrels per day during the first phase, before reaching 550,000 to 650,000 once the field is completely developed.”
Hi Doug,
Do you know what the expected marginal cost per barrel is supposed to be for this project? I guess they don’t expect oil prices to be low in 2019 when this project is completed (I don’t either, I expect $100/b (2015 US$) or higher).
Only figure I’ve seen (Statoil) is “less than $40 per bbl”, however, if I remember correctly Rune chimed in on this awhile back and I think he said it was $37.
Ya, but that doesn’t matter. Some dood here just a handful of months ago spammed graphs and loudly provided his prediction of oil price never going under $40 and then held forth all sorts of ramifications therefrom.
Reality is clearly flawed.
That be the “dood” who was “predicting” $70 oil this Fall (which starts 10 days from now)? 🙂
Reality is egregiously flawed and should be recalculated.
Hi Doug,
Based on analysis of Kopits and Brown, I thought we would see oil prices rise.
I also thought that LTO output would fall due to low oil prices by now and the reduced supply would drive oil prices higher. I did not expect higher output from Saudi Arabia, I thought their output would be flat to down slightly. Clearly I was wrong.
When oil supply decreases, oil prices may rise if there is not an economic crisis in the intervening period.
Mike thinks by this fall we will see LTO output fall, I think he is right. If so, we will see oil prices rise by winter.
Note to Doug, the autumn in the Northern hemisphere ends December 20 (in most years). So a prediction for $70/b oil in the fall would be correct until that time (my predictions were for late fall, I think). Anyone who thinks I know the future price of oil is mistaken, nobody knows.
Sorry Dennis, I thought you’d said by third quarter. But if you said by Fall your going to have to say late September, not Dec. 20ish. 🙂 Somehow it all seems irrelevant to me.
Hi Doug,
Thinking back I think you are right. In January I thought LTO output would fall quickly and that in the summer demand for oil would pick up and the combined effect would balance the oil market. I thought by late Sept or early October we would see oil at $75/b.
I don’t remember saying this loudly and I don’t think there were any charts (maybe those are very loud). 🙂
I do remember saying on many occasions that my guess that Brent was at a low point in January was a lucky guess and now with hindsight it proved to be wrong.
I will say that i think oil prices will rise in the future, but that’s not saying much. Like most people I have no idea what will happen to oil prices in the future.
I think I’ve been exactly right about oil prices precisely once, right before the start of the air war in Desert Storm, in 1991. At the time, we were developing a nice oil shallow oil field, and I argued vigorously, in late 1990, in favor of hedging oil production, because I was certain that oil prices would fall as soon as the air war started, because it would become apparent that Hussein was not a threat to global oil supplies.
I finally convinced my partner at the time to hedge, but unfortunately, before we could hedge our production, the air war started (in early January, 1991). Monthly Brent prices fell from $36 in October, 1990 to $20 in February, 1991.
Reality should be outlawed and severely punished, taking liberties as not to follow the dood’s models. 😉
Doug,
According to reports in the media the Johan Sverdrup development (Oil EUR of 2.2 – 2.3 Gb) has by Statoil been estimated to have a break even of $36/b (I assume that is at a discount rate of 7%).
Statoil has indicated this could come down to $32/b.
Right.
And Petrobras now says it can produce oil from the subsalt for $45 per barrel.
http://www.reuters.com/article/2015/01/06/brazil-petrobras-subsalt-idUSL1N0UL1VI20150106
And Bloomberg says “Oil at $30 No Problem for Some Bakken Drillers Cutting Costs.”
http://www.bloomberg.com/news/articles/2015-08-12/oil-at-30-is-no-problem-for-some-cost-cutting-bakken-drillers
If these guys could figure out some way to bottle and sell flatulence, the energy problem would be solved.
http://www.nydailynews.com/news/national/farts-jar-kickstarter-company-sells-global-flatulence-article-1.2128446
Glenn, are you questioning the break even of the Johan Sverdrup development?
In such case I demand to see your estimates and what assumptions these were based upon!
Rune,
Well I suppose it all depends on how one defines “break even.”
When one doesn’t have to pay royalties, wellhead severance taxes and ad valorem taxes, that goes a long way in bringing those production costs down, and thus that “break even” figure.
“Estimated operating costs will be less than $5 per barrel!” crowed one article in the Wall Street Daily of the Johan Sverdrup field .
http://www.wallstreetdaily.com/2015/02/23/statoil-asa-sto-johan-sverdrup/
This looked mighty suspicious, given that operating costs around the world are typically several times that, including those on the British side of the North Sea.
And sure enough, if one takes a look at Statoil’s 2014 annual report, one sees similar low production costs for its North Sea properties — averaging about $8.50 per boe.
But if we get past the semantics and look at only the bottom line, things don’t look so peachy. Here’s what DPN’s — the division of Statoil which operates its North Sea properties — 2014 financials looked like:
Average Daily Production: 1,183 mboe
Annual Production: 431,795 mboe
Average Price of Oil & Condensate Sold: $98.30
Revenues: $28 billion (exchange rate 6.5 NOK/USD)
Average Price of mboe Sold: $64.84
Operating, G & A expense: $3.9 billion
Depreciation & Amortization: $6.2 billion
Exploration Expenses: $0.8 billion
Net Operating Income: $17.2
That’s a whopping $39.83 per barrel in Net Operating Income, which sounds great. That is, until we subtract what the people who make international comparisons of company financials call the “government take.”
In the case of Statoil’s North Sea properties, the government take in FY2014 was $13.4 billion.
So after we subtract the government take, what is left for the stockholders is $3.8 billion, or $8.80 per boe.
In Norway it looks like the government take is calculated as a percentage of Net Operating Income.
In the United States, the lion’s share of the government take is calculated as a share of Gross Revenues.
If an operator must pay taxes and royalties calculated as a percentage of gross revenues instead of Net Operating Income, that brings that break even figure way down in times of low operating margins.
Glenn,
I guess $5 per barrel refers to lifting costs only, not all operating costs.
Let’s take the example of what the Net Operating Income would be for a barrel of oil produced on University of Texas lands with a 25% royalty and price of $65 per boe, same as Statoil in 2014, using the same figures for other costs that Statoil used:
Gross Revenues: $65 per boe
Royalty: $16.25 per boe
Welhead Severance Tax: $3.25 per boe
Ad Valorem Tax: $2.60 per boe
Operating, G&A Expense: $9.03 per boe
Depreciation & Amortization: $14.36 per boe
Exploration Expense: $1.85 per boe
Net Operating Income: $17.66 per boe
Income Tax would then be a percentage of this, assuming the producing company overall earned a profit.
Now let’s drop the Gross Revenues to $36 and see how that would effecet Net Operating Income:
Gross Revenues: $36 per boe
Royalty: $9.00 per boe
Welhead Severance Tax: $1.80 per boe
Ad Valorem Tax: $1.44 per boe
Operating, G&A Expense: $9.03 per boe
Depreciation & Amortization: $14.36 per boe
Exploration Expense: $1.85 per boe
Net Operating Income: -$1.48 per boe
And finally, let’s use $36 per boe and see what sort of Net Operating Income we come up with using Statoil’s formula for calculating it:
Gross Revenues: $36 per boe
Operating, G&A Expense: $9.03 per boe
Depreciation & Amortization: $14.36 per boe
Exploration Expense: $1.85 per boe
Net Operating Income: $10.76
Glenn,
below are my calculations for Statoil’s operations in Norway, in USD/Barrel of oil equivalent (2014 annual average)
Source: Statoil 2014 Annual report, p.203, “Results of operations for oil and gas producing activities”
Note, that project economics for Johan Sverdrup field might be much better than the average for Statoil’s operations in Norway
AlexS said: “Note, that project economics for Johan Sverdrup field might be much better than the average for Statoil’s operations in Norway”
Or they might be worse. A lot of the cost cutting claims we are now hearing from industry propagandists are highly exaggerated.
According to Offshore Technology, there have been a grand total of only 6 wells drilled in the Johan Sverdrup field.
http://www.offshore-technology.com/projects/johan-sverdrup-field-north-sea/
Predictions of future production rates vary wildly. Offshore Technology reports peak producing rate of 120,000 to 200,000 bopd. The article Doug linked says 650,000 to 650,000 bopd.
Reserves estimates also vary wildly, from 1.7 billion boe to 3.3 billion boe.
Since development costs of the field are estimated at $31 billion, if the lower reserve estimate proves correct you’re already looking at over $18 a barrel in CAPEX alone.
From Statoil’s website:
• expected resources: between 1.7 – 3.0 billion barrels of oil equivalent
• First-phase investments estimated at NOK 117 billion (2015 value)
[USD14.3bn at today’s exchange rate]
• Daily production during first phase estimated at 315,000 – 380,000 barrels per day. First oil is planned for late 2019.
• Peak production estimated to reach 550,000 – 650,000 barrels daily
• The ambition is a recovery rate of 70%, allowing for advanced technology for increased oil recovery (IOR) in future phases.
Glenn, thanks a lot.
The tax rate (total of 78%) is on net operating income.
There are some rules in place that allows the companies to recover CAPEX over a 6 year period. This is deducted before taxable net income is estimated. (I will leave this for now.)
It is hard to say what the referred $5/boe operating cost covers.
(I’ll be back with more later.)
Hi Rune,
You probably follow Norway’s oil industry more closely than most people at POB.
Do the Statoil estimates for marginal costs per barrel for new Norwegian oil projects seem reasonable to you?
Dennis, yes the Statoil estimates (break even prices) hitting the public domain seems to be reasonable given estimates on reserves and development costs (CAPEX).
Thank you Rune.
Glenn, AlexS and other interested
What you so well illustrated is what puzzled me with the US petroleum tax system.
In Norway those who puts money at risk (primarily CAPEX, but also exploration) are allowed to recover it (or most of it) at generous terms. The idea is to get the money reinvested and (allow for) reduce time at debt exposure.
Low oil prices => low effective tax rate and vice versa.
What you get from Statoil’s reports are the average OPEX, and there is a huge span in operating costs depending on size (reserves) at what stage in their extractive life cycle the fields are at. That means most of the CAPEX has been recovered and the fields have reasonable OPEX.
Troll (gigantic gas and big oil field) produced in 2014 an average of about 650 kboe/d of a total around 3,800 kboe/d (oil, condensates, NGLs and natural gas).
Sorry I do not have updated data on OPEX for Troll, but for the natural gas (operations, processing and transport to customer/delivery point, there are 3 installations producing Troll, 1 for natural gas and 2 for the oil column(s) in the filed) about $3-4/boe should be close.
Rune,
So what’s the take-away from all this?
1) That Johan Sverdrup achieves “break even” by Norwegian standards (at an oil price of $36), but not by US standards, and
2) That even the most stellar of conventional oil projects struggle at current oil price, requiring the most optimistic of predictions (e.g., costs, reserves, future production rates) and most favorable accounting practices to make them economically feasible.
Glenn,
On 1) and 2) Agreed.
For me, from Alex and yours works there appears to another thing as well. US oil is more sensitive to “low” oil prices due to the taxation structure.
Rune said: “US oil is more sensitive to ‘low’ oil prices due to the taxation structure.”
Yep, and in my way of thinking the Norwegian system is better, as it allows the state to insulate productive activities from the caprices of irrational markets or the manipulation of prices by foreign governments.
This allows a medium-term vision and strategy, and not the short-term vision and strategy of purely market-driven decision making.
I suppose the caveat to my thinking is that you need a legitimate state with a fairly honest democracy for it to work.
http://www.bloomberg.com/energy
WTI –1.31 to 40.01 (almost sub 40!)
Brent –1.47 to 45.15
https://www.google.com/?gws_rd=ssl#q=dow
DOW curently -310.50 to 16,680.19, keeping in mind not many days ago it was more than 18,000
It’s dropping fast along with other stock markets around the world, including China. Where’s our ‘recovery’? Will Yellen still raise rates next month?
Stilgar,
This time the USD is weak with weaker oil prices. This is a tantamount difference to the latest months. This is a sea change.
I agree, HL. Just checked and the Dow is now down 470, but more importantly, from the opening bell this week on Wednesday at 17,509. it is now Friday with 1/2 an hour from closing down to 16,520 which is just 11 off a drop of 1,000 pts. in 3 days!
Adding on here through edit at a later time:
Dow ended down 530 pts. to 16459.88 OUCH!
You mean the US can’t defy gravity forever, despite what Nixon and every other US president since has told us?
It’s going to be a horrible shock for most people in the US when the petrodollar finally bites the dust. Cheney’s pot of black gold didn’t pan out in Iraq, and neither did Hilary’s in Mexico.
Here’s how Immanuel Wallerstein sees the US’s future:
Finally, there are two real consequences of which we can be fairly sure in the decade to come. The first is the end of the U.S. dollar as the currency of last resort. When this happens, the United States will have lost a major protection for its national budget and for the cost of its economic operations. The second is the decline, probably a serious decline, in the relative standard of living of U.S. citizens and residents. The political consequences of this latter development are hard to predict in detail but will not be insubstantial.
http://iwallerstein.com/consequences-decline/
Glenn,
Your chart confirms the link between dollar fall between 2000 and 2010 and the US trade deficit (current account defcit). The US economy needs urgently a competitive energy source. The question now the markets are now sorting out: Is shale really competitive and sustainable?
Well, the dollar did fall from 2002 to 2008.
This does seem to correlate well with the US’s massive trade deficit during that same period.
Oftentimes, in the short-term at least, it seems the US can defy gravity.
But maybe in the long-term no?
And what price has the US paid in the long-term for these short-term gravity-defying acts?
Down over 400 now.
Bad day at the Dog Track.
Time will tell if this is a correction– but one can only pretend for so long.
cytochrome C,
In my view the high yield bond market suffering from shale defaults has triggered this decline. The only way out of this is in my opinion a dollar decline. A low oil price does not benefit the US economy, but is over shale investments a serious burden.
A so so article about OPEC infighting
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11817312/Opec-is-being-eaten-alive-and-needs-to-meet-to-heal-its-wounds.html
Baker Hughes oil rig count by basin:
Barnett -2
Cana Woodford +2
Eagle Ford -6
Granite Wash +1
Haynesville +1
Permian -2
Williston +3
“Others” +5
Total U.S. oil rigs +2
Oil-directed rigs now total 674, up 46 units since the week ended June 26
AlexS
Is it possible US rigs since June are the result of companies who took the view the price increase earlier in the year from $43 to $61 was going to continue toward $70-80 by year end?
I assume companies contracted the rigs for Q3 during that time?
This is sure one heck of a deal. The tiny fraction of people who predicted in May, 2014 that WTI oil prices would dip below $40 by August, 2015 are looking like Nostradamus.
There are over 500,000 stripper wells producing in the US. Most are in jeopardy of being shut in as we speak.
Given the potential for a massive loss of low decline production in this country, is there any chance of Federal action that could allow for the emergency shutting in of these wells until this price rout is over? I suspect most small producers who have debt will be forced into bankruptcy. Unlike shale, small producers are required to make principal payments with interest, and are not able to issue more shares to pay interest, or borrow more money to pay interest. It could even be that small producers with no debt will be too, given potential plugging liabilities.
I do know there are simply not enough plugging crews to cement all of these wells within a year or two, it will take years and years. Either the world is ending, or at some point there will be a massive snap back in the price.
I think US strippers produce somewhere between 700K-1.1 million bopd. Prices in the field are $25-$35. I suspicion a large majority of these wells are now underwater on an operating basis.
Mike, or others involved with conventional production, what happens in this regard if we stay in this ballpark or go lower through the end of 2016? Is the US government so naïve as to think this is not an oil security issue of national importance?
shallow sand,
I think you are right, shale companies started to contract new rigs in 2Q, when WTI was close to $60. I’m not sure if they expected prices to rise to $70-80 by year-end, but surely they were not expecting WTI to drop to $40.
Low oil prices so far failed to reverse the rising trend in oil rigs, but at least they slowed it. This is especially visible in the case of the Bakken and Eagle Ford, where rig count is still close to end-June lows.
Oil rig count in the Bakken and Eagle Ford
The increase in the number of oil-directed rigs was most notable in the Permian and “other” (mostly conventional) basins. But it has slowed down there too.
Drilling activity in Cana Woodford was the most resilient among all shale basins, not least because of CLR still drilling in the SCOOP. Cana is up 7 oil rigs from recent lows.
Niobrara has experienced a 62% decline in oil rig count (similar to 3 major basins), before increasing by 6 rigs since mid-May. However, growth has almost stopped in the last 5 weeks.
As might be expected given the high breakevens, Mississippian and Granite Wash have seen the biggest declines in oil rig count. Surprisingly, the number of oil-directed rigs has increased by 7 in Granite Wash from end-June to end-July.
Oil-directed drilling activity remains low in these 3 shale basins:
wait just a dang gurn minute! What the hell is going on in West Texas??
“Texas currently has only 193 megawatts of large-scale solar arrays, enough to power about 40,000 Texas homes on a summer afternoon. But the Electric Reliability Council of Texas, the operator of the power grid that covers most of the state, expects between 10,000 megawatts and 12,500 megawatts of solar-generating capacity to be installed by 2029. That is roughly equal to the size of all solar farms currently operating in the U.S.”
http://www.wsj.com/articles/next-texas-energy-boom-solar-1440149400
They may dress like cowboys, but they know where to put their money.
Or they have long range plans to secede from the Union and be energy independent too.
Texas maintains a separate electric grid. They are already energy independent.
Wind is growing like gangbusters in Texas too. They have not been afraid to invest in long distance transmission lines to take advantage of the wind resource in parts of the state distant from the population centers.
Later on they will be able to sell a whole lot more of the gas they are currently burning to meet their own needs to other states.
Texas gets base load power from mine mouth generating plants burring cruddy brown coal they actually refer to as oily mud sometimes. With no transportation costs this is cheap , disregarding the environmental aspects.
For now they are balancing their wind and solar power by curtailing gas which has actually resulted in their burning a higher percentage of coal than in former times. But their renewables production is growing much faster than total production and bodes well for the environment of the state.
That offset gas may sell for enough a decade or two down the road that those wind and solar farms look like the bargains of a lifetime.
Shallow, he say: “Is it possible US rigs since June are the result of companies who took the view the price increase earlier in the year from $43 to $61 was going to continue toward $70-80 by year end? ”
Mike, he say that is a lot of what happened, yes. Nobody is drilling shale wells right now to make money, they are drilling only the stuff they absolutely must to meet drilling commitments and not lose acreage in sweet spots and in areas of dense infrastructure. These little weekly bumps in rig counts are meaningless; the worse is yet to come, in my opinion.
We are on our own, Shallow. Nobody is going to bail us out of this mess and you don’t want that anyway. We should expect no help from this particular administration regarding energy security. The shale industry has changed the entire complexion of the domestic oil industry forever, in my opinion. It is very, very hard not to be very, very angry at the shale oil industry. I hold them responsible for 90% of this mess.
Don’t quit anything yet. Things are going to get better, promise.
Mike
Mike, not quitting and not asking for any bailout.
Just think its will be a real problem for the states if half a million wells are shut in and immediately ordered plugged.
Also, not good for US to lose that much production, which is low decline.
Understand action would run afoul of state regulations and lease contract provisions. So likely not workable and could open up more cans of worms.
Maybe I am overestimating how many are now operating at a loss or underestimating how long conventional producers will be able to operate at a loss.
When stuff like this happens, causes one to think about a lot of different scenarios.
Just know a lot of wells were plugged in the late 1980s and 1990s around here that would have done very well late 1999-2014. We managed to pick a few up off the plugging list before they were cemented and they have done quite well.
I know plugged wells can be drilled out, but that is usually not a good option.
Maybe this won’t last much longer, but the price is now on month nine of being low. Every month we are 20s-30s in the field adds to the problems.
I just think the people not involved in oil have been lied to quite a bit about shale and don’t realize that the conventional non ponzi folks could suffer damage that will take a long time to reverse. I guess if we survive that, $150 oil is around the corner and those of us who survive this won’t feel sorry for anyone, as no one gives a crap about the small US producer either.
The bad news is for you guys . . . that the most credible bailout scenario won’t help you.
It would be the shale lenders who get backstopped. And they’ll continue to lend. And you’ll still get too little for your oil.
They’d lend, the oil will flow, and pretense there is a profit probably will be tried for quite a while. The banks in early 2009 that were completely and utterly insolvent pretended otherwise until mark to market was changed and overnight they became solvent.
I don’t see how this can help you guys unless you go out and and protect personal assets and then get in line for borrowing. Borrowing is how money is printed, after all. Borrow every penny you can get. Then borrow some more. Good chance you won’t have to repay it.
The really hard thing to extrapolate is imagining what KSA and Russia do when they see oil is being printed.
As far as I know the Federal Reserve is beholden to Congress via the Federal Reserve Act of 1913.
The Federal Reserve CANNOT simply print money to save any industry under current legislation.
This is Austrian, you can buy a pencil eraser for a trillion dollars, bullshit.
I like Austrian economics by the way, but the “you can print money for anything” is bullshit.
You can only print money to buy DEBT instruments that have been issued by the federal government.
When the Federal Government starts issuing Shale Oil/Gas Bond Securities (which they must have previously purchased for sale) for purchase from Janet Yellen…
RUN FOR THE HILLS!!!!!
SatansBestBriend said: “You can only print money to buy DEBT instruments that have been issued by the federal government.”
I think that little rule went out the door when the Fed started buying agency debt under the aegis of Quantitative Easing.
A lot of that agency debt had a market value of only a fraction of face value at the time. Those who were paying attention dubbed the Fed’s generous lending practices as “cash for trash.” Of course you’re right about the legislature, which played along by passing a law which made the taxpayers guarantor of agency debt.
The Fed has tremendous power, and the power to decide who gets regulatory forebearance and who doesn’t is a source of much of that power. During a crisis, this gives the Fed almost pharaonic power, getting to decide which businesses live and which businesses die.
Think of it like corrupt law enforcement, which is bribed and whose only role in the commission of a crime is to cast its glance the other way.
Of course. MBS was the precedent established.
Yep.
And now the ECB, when it recently announced it was going to implement QE, says it is going to take it to the next step, and may buy corporate bonds.
There seems to be no limit to what the scientist kings believe they can get away with.
Money CAN be printed by any sovereign government and HAS BEEN printed throughout history since the invention of paper money. When actual precious metal coins were used , they were reminted frequently being debased with other metals. Printing gold in effect.
The idea that money CANNOT be printed is bullshit. It is true however that it cannot be printed at will within the context of the CURRENT federal laws regulating the fed and the treasury.
Congress and the executive branch are free to change these laws – at least in theory. In actuality the bankers are holding them hostage by means of campaign funding and the revolving door.
OFM,
Most, but of course not all, money in the United States is created endogenously by the private banks, and is not printed by the federal government.
Through its monetary and regulatory policies, with some exceptions, the Fed can control how much money the private banks create.
”Through its monetary and regulatory policies, with some exceptions, the Fed can control how much money the private banks.”
True.
MY point is that the Fed is a creation of congress and congress could DO AWAY with the fed and create money directly or indirectly by other means. Including simply printing it or entering electrons in electronic accounts..
I think my point is being missed. Not asking for $$ from anyone. Also agree I am speaking in hypotheticals.
If oil went to $10, we could shut in everything and pay our well fees for many years. We would monitor the wells daily, as is done presently. OTOH, we absolutely could not operate them at $10 for more than a few months till all cash would be burned through.
There are many small operators that could do the same, who actually paid off debt and built up cash.
I agree the water floods will suffer, but they won’t be worthless assuming prices go back up.
There will be many who can’t sit on them, who have debt. They will BK, and guess what, the states will be left with the wells.
As I state above, the 1986-1999 era resulted in abandoned wells all over the place. The states ended up using funds to pay to plug thousands of those. I have heard many stories from those who plugged those wells about how they wished they didn’t have to plug X well or Y lease out, they saw plenty of oil on them.
Don’t say I am asking for a bailout, at least in the monetary sense. I am merely looking at a possible scenario.
If the price stays here or below for a few years, most low volume conventional production will be shut down. I suppose if the mineral owners want the wells plugged, they have that right contractually. However, I think if they knew the operator was not walking away from them, they won’t. There would likely be less chance of obtaining royalty in the future if the wells were plugged. It would also be better to keep the current wells than to plug them all, only to have the land re drilled yet again when prices rise.
I realize there are many variables at play here. Part of my thinking is the current oil price is very unusual. Maybe market forces will work things out. However, I know what US shale costs. Almost none is profitable at the strip, yet rigs are still out there. Most other worldwide projects are not profitable either. Yet gas demand is sky high. Look what a couple of refinery outages have done to regional prices. RBOB should be a dollar, but it isn’t.
What if oil goes to $10 for one year. Should we just require all wells that can’t make it at that price be plugged? I think OPEC would be all in favor of that.
SS,
What rights in general mineral owner has in the contract regarding continuing production or not due to prices? Is it different in every state?
You aren’t quite tuned in, SS.
Asking for it would get a denial.
It’s when you don’t ask for it that you get it. It will be forced on you. Your debt runup is . . . drumroll . . . systemically threatening, and therefore of course action must be taken.
Those banks were FORCED to accept money (and there was a price in not allowing dividend payout and management of executive compensation). The MBS on the balance sheets were a systemic threat.
That would be the mechanism here. The HY paper total would have to be called a systemic threat and boom, action.
I think maneuvers will be put into place that are more obscure and deceptive tho. Watching carefully this “monitoring” the Fed is going to do of collateral revaluation in late Sept. Getting an SEC waiver and some phone calls to those banks could keep the lending flowing without any big headlines.
Never ever forget in this whole shebang . . . the Normalcy Narrative is HUGELY important. It must be defended via this sort of obscurity.
I often think about if new genetic selection is playing role in our economy.
Overtime are humans becoming less ambitious and less intelligent?
Some think it takes thousands of years for genetic change to take place but the Russian fox experiments show not many generations are needed.
A profound change has occurred on last few decades. One change is the birth control pill and another is socialism. These two changes dramatically alter human conditions. Possibly for the better, or for the worse. I don’t know but Usa productivity is not what it used to be. The gains are no longer coming. Why ?
Is it less ambition ? Are people too reliant on others ? Is natural selection now choosing the weak ?
Since when was intelligence and ambition a criteria for mate selection? Looks and superficial charm are what makes mating pairs in USA for as long as I’ve been paying attention. I tend to notice the men with the most children are handsome Devils who score high on the psychopathy index. Most women have an average number of children. Men vary more widely around the average, from zero to 9 (children with multiple women) is what I’ve observed first hand.
Women like bad boys. They complain about them but they forgive them and don’t leave them unless they are total losers.
We are in long term energy decline, and we are using the remaining energy in a desperate attempt to keep our present dysfunctional system going. There is no future, our future has been sold off many times over.
For what it’s worth I’m a healthy male who has lost all ambition and hope for the future because of what I know. I can’t speak for everybody, but perhaps people only realize it at a subconscious level. I’m going to enjoy my remaining time on this planet and not really work that hard for a failing system.
We long ago passed the point where any type of selection is going on. The industrial economy basically supports everybody, and if people stop breeding, the powers that be are happy to bring in new workers from the third world, whose own population will of course keep on expanding due to aid. And of course my own productivity is taxed and taken away in the form of high health insurance premiums to keep all of the old and sick alive in bankrupt hospitals.
You need to look in the mirror before casting stones. People are fed up, isn’t it obvious. You have another thing coming if you think we are going to man the boiler rooms on the Titanic so that some academics and economists can look at some statistics and marvel at how productivity is increasing.
Depression, apathy, cynicism are real. I know because I have them.
Limits To Growth.
Declining Return on Investment.
Declining Energy Returned on Energy Invested
Law of Diminishing Returns
Depleting the last remnants of ancient sunshine.
Richest/most concentrated/easiest to get to ore/mineral deposits exploited first and the most cheaply…then we move on to progressively lower concentration ores, buried deeper, in more remote locations.
Pollution overwhelming sinks…degrading primary wealth resources…land…water…air
Increasing Automation
Outsourcing/Offshoring
Living beyond our means
Degrading the productive and supportive capacity of the planet….recovery times well beyond human timescales to-date
Too many people
There’s too many men, too many people
Making too many problems
And not much love to go round
Can’t you see this is a land of confusion?
Too many churches and not enough truth
Too many people and not enough eyes to see
Too many lives to lead and not enough time
She wanted truth but all she got was lies
Oh hell’s fire…she didn’t ever want the truth.
I will just put some questions out there. Why is this our business anyway. we are not gods? Every other species on the planet is self-centered and pretty much ignores the rest of the species, why do we think we know enough to interfere and make things right?
Who put us in control?
Just questions, not judgments.
Bond market a mess, equities crashing, commodities tanking…somebody knows something. That’s a lot of money that’s been taken off the table. Weak dollar and weak WTI. A lot of currencies in the tank around the world too.
Interesting times.
Production has to drop off somewhere.
Why? With the alleged overproduction of 2 million bpd since June 2014, there is apparently infinite storage for it and people are buying it just to put it in tanks somewhere. So since excess can be stored in imaginary storage, why would production need to fall?
Seldom do I find myself totally in agreement even at first glance with Watcher but so help me Sky Daddy WHERE is two million barrels a day going into STORAGE day after day month after month? DOES that much SPARE storage space actually exist? Why was it built and if it was built why was it not torn down for scrap during a recession or to avoid paying taxes on it? At one time I really thought the Chinese might be building storage at furious pace, a fire fighters pace, in order to stock up as much oil as possible as fast as possible while getting it dirt cheap was still possible. But I see nothing in the news indicating such construction is taking place.There could not possibly be THAT many old tankers around– could there?
Methinks somebody is burning nearly all that two supposed million barrels by now unless somebody else has invented and deployed a secret technology to compress oil the way programmers compress data. sarc!!!!!!!!!!!!
So – after a moments thought I see that SUPPLY and CONSUMPTION truly are related by PRICE and that if the price drops far enough then the world WILL consume a couple of million more barrels per day than at the former higher price.
Demand is a weasel word that is misused nearly all the time to mean consumption.
Demand is a FUNCTION , a mathematical abstraction.
CONSUMPTION is a hard fact.
Theory relates supply and consumption by means of the FUNCTION known as demand which simply tells us that EVERYTHING ELSE HELD EQUAL- meaning in SNAPSHOT WORLD- the cheaper the PRICE the higher the CONSUMPTION.
Price, production and consumption in SNAPSHOT WORLD can change and DO change without the DEMAND FUNCTION, an abstract line on an abstract graph, changing in any respect WHATSOEVER.
DEMAND CANNOT CHANGE IN BASIC ECONOMIC THEORY, or in ANY discussion where in the term is used PROPERLY, because the theory is an abstraction based on SNAPSHOT WORLD.
PRICE, PRODUCTION and CONSUMPTION can change in SNAPSHOT WORLD because SNAPSHOT WORLD itself is an ABSTRACTION.
DEMAND CANNOT CHANGE IN SNAPSHOT WORLD due to the very DEFINITION of SNAPSHOT. (Folks old enough know snapshot means a photograph or picture taken at a given instant in time, freezing everything in place.)
In the real world things DO change instant by instant. This results in the demand FUNCTION shifting right or left and the shape of the function changing.
Am I the ONLY person in this forum who actually took the basic course in economics who actually remembers what was taught in that intro level course?
More than just oil price determines oil consumption. The overall health of the world economy, amongst other factors, also plays a role.
World oil consumption has inexorably increased for the past few years, and by some estimates was expected to increase by 2 million bopd this year alone, and by over 1 million bopd in 2016. Almost all this increase, however, was/is in the developing nations.
Now that the overall world economy, and especially those developing countries, show signs of catching a cold, or worse, the continued growth of world oil consumption no longer looks like a sure thing.
This perceived change, among other factors, is depressing oil prices.
What effect do high oil prices have on the health of the overall world economy? There are lots of theories on that one.
The material balance equation is ironclad. Production (Demand) must equal Consumption + Oil-Put-Into-Storage.
Suppose oil price is determined by nothing more than agreement between buyer and seller?
And suppose the seller is willing to sell for less than anyone else, even if he could sell for more?
If I had plenty of oil and someone sanctioned me and I knew I could sledgehammer that someone’s GDP by cutting price, even if I could get more, personally I (and most) would exact my revenge. Or if I had plenty of oil and someone backstabbed me by cutting a dangerous deal for nuclear arms with my archenemy, despite my asking them not to, I (and most) would exact my revenge.
Hell, I’d even release all sorts of data about fiscal deficit to show the pain I’m allegedly suffering while staying the course and waiting for the enemy to get past the idea that I have to care about my fiscal balance vs do this for decades while he or his policies lose election after election to poor GDP performance, and worse.
OFM,
According to an article in 21 August’s Bloomberg, China will bring in 80 million barrels a day of new oil-storage capacity this year. China has gone right on buying crude to fill an expanding strategic reserve, and it’s been buying at a rate higher than last year’s, if I’m reading correctly.
The article was about a Singapore oil trader.
Thanks Synapsid!
I have long suspected the Chinese were buying as much oil as possible in the firm belief it will prove to be an EXCELLENT use of cash otherwise sitting idle. Ditto scrap steel etc.
But eighty million barrels will hold only forty days excess if there really is two million barrels of excess oil in the market on a daily basis. I believe nearly all that supposed two million is either imaginary or is being BURNT on a daily basis.
Oil imo is SURE to go back up within the fairly near future barring the economy going into free fall world wide.
Depletion never sleeps – but upstream capex has shrunk like a cancer victim in the final stages.
‘Since 1997 Toyota’s hybrids have saved 5.8billion gallons of gasoline’
http://www.treehugger.com/cars/milestone-1997-toyota-has-sold-8-million-hybrids-saving-5-billion-gallons-gasoline.html
More renewables = higher grid reliability, apparently:
http://www.renewablesinternational.net/german-grid-keeps-getting-more-reliable/150/537/89595/?utm_source=twitterfeed&utm_medium=twitter
PWC calculate autonomous vehicles will reduce the U.S. Car fleet by 99%, from 245m to 2.4m! End private car ownership:
http://www.govtech.com/fs/perspectives/Ubers-Plan-for-Self-Driving-Cars-Bigger-Than-Its-Taxi-Disruption.html
You will have to pry my car from my cold, dead hands.
How bout we just bury you in it? No need to cut down any trees for a coffin 🙂
That would be fine, but I was planning to give it to my great-grandchildren so they will have an ICE vehicle to drive in 2060.
A ninety nine percent reduction in cars for any reason except economic collapse is complete bullshit.
It is true that most cars sit around most of the time but that is because we organize our use of cars around other activities such as going to work or school.One percent is never going to be enough to meet peak demand barring demand simply going away.
The infrastructure of modern life is in place- the subdivisions the rural homes the schools stores hospitals etc. It is too expensive to abandon it in favor of living without cars.
Lawyers will ride enclosed go carts powered by batteries and pedals before they give up their nice houses to live above their offices. We hear all this anti auto propaganda about the joys of urban living but I have visited enough cities and read enough about a hundred more to know that DESIRABLE urban housing is EXPENSIVE AS HELL and in EXTREMELY short supply.
If you want a truly NICE place to live it is now and probably will for the foreseeable future going to be cheaper out in the burbs than it will be in town. If gasoline goes to twenty bucks a gallon, people able to do so will carpool and drive golf cart type autos to work in order to have enough interior and exterior space and privacy to live the way they want to.
Now an autonomous bus with individual passenger compartments is an idea that might fly. All the people who work for a given company and live in a given subdivision could own such a bus cooperatively to get to work. They would have privacy on the road and no worries about the car pool driver failing to show up.
An eighty percent reduction in auto numbers would be stretching it like a banjo string in my humble opinion. Twenty percent MIGHT be enough to meet peak demand.
I completely agree there will be no 99% reduction.
There is however a huge resource that will almost certainly be unlocked by ride share and autonomy; the fact that all our private vehicles are parked over 96% of the time.
Private car ownership, and all its associated businesses (manufacture, advertising, sales, repair, refuelling, insurance, storage, theft) will be savagely transformed. This process is already underway. The intensity of vehicle ownership in OECD nations is falling, and in Metros is diving. And urbanisation is increasing. And autonomy is not here yet.
Ride share, Transit, the rise of bikes and walking and the spatial reshaping of communities into more complete places has launch this revolution. But I concede you won’t be seeing if you remain entire suburban or, like most here it seems, ex-urban.
But it will affect everywhere as this century rolls on. And combined with EVs almost certainly condemns oil demand for transport to a secular decline. Don’t gamble on the return of high price. This is not only the age of peak oil but of peak car too. They are heading the way of other big 20C industries like newspapers etc…New technology will disrupt private car ownership just as surely as carbon emission regs and oil supply.
Movement won’t stop, vehicles will still be on the roads, the economy won’t end, but some currently big and permanent seeming businesses are already on their way to zombie status…
Questions as ever with the above is timing.
Bill Gates is surely right when he says we tend overestimate change in the short term but underestimate it in the long.
Spatial shift not just in ‘hipster’ cities:
http://www.citylab.com/work/2015/08/walkability-comes-to-the-american-west/401891/
Uber + Transit, a winner:
http://www.citylab.com/cityfixer/2015/08/uber-and-public-transit-are-trying-to-get-along/400283/
Thanks Patrick,
”This is not only the age of peak oil but of peak car too. They are heading the way of other big 20C industries like newspapers etc…”
I agree … if we are talking about the longer term.
BUT short term
We are not yet at peak autos world wide and alternative motive power sources ( batteries and fuel cells etc ) are not YET up to the job. If oil remains affordable I will hazard a guess that peak auto and peak total driving are at least a decade away, or longer, world wide.
So I believe oil will go up and mostly STAY up for quite a while yet.IMO, depletion will outrun efficiency and conservation for a while yet, ASSUMING the world economy doesn’t go to hell in a hand basket in the short term.
Business as usual ought to have a model year designation just like an automobile. A nineteen ninety model year business as usual economy cannot cope with hundred dollar oil- but a twenty nineteen model year economy probably can without too much trouble.
Cars and light trucks will be twice as fuel efficient in the longer term. Lifestyle changes across the board will also make expensive oil more affordable.I still use a small high efficiency oil furnace for back up heat at home but I have cut our fuel oil consumption from close to three hundred gallons in a bad year to less than seventy five gallons over the last few years.
Personally I believe pure electric and plug in hybrid cars will be sold by the millions here in the USA within ten years or so and that oil at a hundred fifty bucks in current money will be affordable.
Engineers will squeeze another twenty percent or greater improvement in fuel efficiency out of ”same sized” conventional cars and downsizing will take care of the rest of the problem. I once owned a Caddy convertible that was half again physically bigger than current Caddys. Ten years from now new ones will be still smaller and lighter- unless they are electrics.
My gut feeling is that so long as the the man on the street can afford a car, there will still be a hundred million cars at least on the road in the USA even if autonomous cars that can be hired with a smart phone get to be dirt cheap.
The combination of a car plus a NICE place to live in the burbs or country is going to remain cheaper for a LONG time than just a NICE place to live in the heart of a city.
I believe in the hundred mpg conventional car, redesigned. I could build one myself if I were free to do so. Two seater fore and aft low narrow and streamlined and very light powered by a lawn mower sized off the shelf diesel engine….. governed to a top speed of forty to fifty mph.
ALL the mechanical components are available off the shelf, except the chassis or body shell itself. Laying it out as motorcycle , a three wheeler, would vastly simplify getting it registered.
Building a car is not that big a deal. Lots of my gear head acquaintances have built personal rides almost from scratch but a custom built car costs a lot in time and money.
Another day, another minimum for the Marcellus naturalgas price: 0.670 $/MMbtu on the 21/08/2015
Dean
Although the designation is for Marcellus NE (northeast), more and more it will include Utica formation gas (as well as Burket).
Shell, operating as SWEPI is bringing online Utica-targeted wells with output WAY higher than Marcellus sourced gas.
The recently brought online – Lopatofski(?) – well has produced a half billion cubic feet of gas its first 30 days production.
Shell has been vigorously leasing acreage in the Tioga county area with reports that their holdings now exceed one half a million acres there.
Shell’s tentative plans to build a $5 billion dollar ethane cracker in Beaver county, PA, may be hinge upon perceived possible output.
Hence, they drill.
coffeeguyzz,
However monster wells tend to have also monster declines due to closure of pores in extreme depth and pressure. After 120 days most of the monster well show extreme declines in production. Do you know how much the Lopatofski well produced after 120 days? As the high initial production is often used as reserve evaluation, it is in my view also the source of the massive dissent of reserves estimates in shale deposits.
Mr. Leopold
You may wanna hold off a bit before saying there are monster declines after four months as there is both variation involved as well as very few deep Utica wells at the moment.
Some numbers:
Range’s much ballyhooed Sportsman dropped like a rock with output of 18/16/10/8 MMcfd over its first four months. Total being 1.77Bcf over 129 days. The depth was 11,700′ IIRC.
50 miles west, in Belmont county Ohio, Rice energy has several wells producing a steady 16MMcfd on restrained choke. The oldest, Bigfoot 9H, has produced over 5 Bcf its first year. The nearby Blue Thunder wells are doing the same, along with the two Gold Digger wells. These Utica wells are 9,500′ deep.
Over in Tioga county, hundreds of miles east, the Lopatofsky 287 23H has produced 425Mmcf its first 25 days (just came online).
The four other wells on this pad – all targeting the Marcellus – have cumulatively produced about 1.2 Bcf over 2,500 days of production.
The ‘original’ Shell Utica wells – the Gee and the Neal – have produced 1.6 Bcf and 3.5 Bcf, respectively, over 14 months time.
The Gee has gone from 8/5/2.5 MMcfd over its first 16 months online (PA had biannual reporting then), to 2.5/2.2/2.1/1.7/1.6/1.4 MMcfd these past six months.
The Neal averaged 13.5/7.1 MMcfd its first twelve months. Past six were 6/5.1/4.7/3.8/3.6/3.3 MMcfd.
These two Shell wells are at about 12,000′ depth.
Of particular note, perhaps, is the Neal well produced 3.5 Bcf in 14 months.
The remaining three wells on this pad, targeting the Marcellus, cumulatively produced LESS (1.8 Bcf) over a 3,000 day span than the single Utica well in 436 days output.
The engineering, operational, geological challenges will indeed be daunting, but the potential payoff is simply enormous.
coffeeguyzz,
As a summary to my understanding the monster wells have around 1.8 bcf – 5 bcf over an average time span of 1400 – 3000 days over the long term. That is 6 – 30 Mmcf per day. Given the technoligical challenge of having extreme flow at the beginning and extreme low flow at the end – not to speak of how to create a transportation infrastructure for such a fluctuation in flows – this is an extreme poor performance. In addition, also the REX numbers three weeks after start up of the reversal show poor performance. Marcellus prices at all time low of 0,6 USD per mcf. Overall Production rather declines. It is increasingly evident that the shale propaganda is all hot air.
Mr. Leopold
As we will clearly seem to disagree about much of the present and future status of the Appalachian basin. I will express some puzzlement re your comment about technological challenge in moving initially high, then low, gas volumes off well pads.
Just a few weeks ago, EQT announced the highest 24 hr IP ever – 72.9MMcf. The initial pressure was over 8,600psi. This well flowed for eight days into already existing pipelines that had been servicing the several producing (Marcellus sourced) wells adjacent to the new Utica well (Scott’s Run).
The eight day production was over 260MMcf at a flowing casing pressure above 9,500 psi. It does not get much more extreme, more challenging than that.
And they’ve already done it.
honestly, given the lack of transportation infrastructure and extremely low prices, it is clearly not economically viable now (and both the Marcellus and Utica shales have lost a large number of rigs in the last months).
However, I think that there could be a rational point to stay there: betting that sooner or later the massive decline rates and the fall in associated gas from oil wells will start to be felt, pushing the natgas price higher and higher (potentially spiking). ==> Financially speaking, this is a classical out-of-the-money call option.
Dean,
Exactly my opinion. Wild swings are very likely.
Don’t forget that there is a massive increase in the takeaway capacity that is coming on-line shortly for the northeast. These prices will move up a lot. The major question is how much will be added to the national market and how much will that move prices down nationally.
Crude oil spot prices on the 21/08/2015:
http://www.oph.hotlineprinting.com/
Options expired yesterday on all of those puts and calls that make up the whole of the stock market, it was time to cover.
Turned out to be a panic mode close.
Another down day of 500 will not look too good.
BNSF was down 1200 plus petroleum cars compared to week 32 of 2014.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/
Way upthread Nick asks me for answers to his questions. Here are some partial answers, better ones would require writing a book.
Don’t forget, per Jeffrey, the 2008 recession was not caused by oil prices: recent oil prices, as a practical matter, were much higher in the last several years and the economy didn’t crash.
Monthly Brent prices were only over $100 for six months in 2008, whereas starting in February, 2011, monthly Brent prices were over $100 for 42 months, seven times longer than the six month $100 period in 2008.
And the annual Brent price in 2008 was $97, versus an average Brent price of $110 for 2011 to 2013 inclusive.
There are several big questions here:
1) what would have happened to supply if prices had stayed at $100? Would have it continued to expand, creating an larger glut? If so, does that suggest that the current equilibrium price is significantly below $100 – perhaps $75?
In my opinion the expansion of supply would have continued if supply is measured as ” all liquids” for some time , maybe another year or two or maybe a little longer. My opinion is that we are pretty much at the limits of production of conventional crude due to geological constraints. Peak oil is either here or will be here in the relatively near future. Depletion never sleeps and the resources remaining in the ground probably cannot be tapped at PAYABLE prices as fast as legacy production declines.The good cheap easy crude is long gone except in Iran and Iraq.
The jokers are unconventional and politics since Iran and Iraq still have substantial potential on the up side.
The world is obviously over supplied with oil on THIS DAY even at sixty dollars. But the industry is ponderous as hell and moves like a six hundred pound man trying to break dance. The economy is shaky and might get better or worse in short order. It is impossible imo to say what the equilibrium price might be since there is no equilibrium and conditions are probably changing to fast for the price to settle down at any given level for any great length of time.Personally I expect the price of oil to go up substantially within a year or so , two years at the most, unless the economy gets worse or unless Iran and Iraq bring on enough new production to suppress the price.
2) How much LTO is there in the world?I haven’t got a clue.
I hear about the Vaca Muerte, and Russian projects. What’s out there? How would they expand if prices rose above $75?
I doubt if this oil is there it can be produced anytime soon, soon meaning in the next few years, at seventy five bucks or any price at all, due to the men and machinery and necessary being in short supply, not to mention the political questions. Long lead times are part and parcel of the oil industry. In the longer term, seventy five dollar fracked oil might be possible and profitable. It might also be subsidized so that it sells for seventy five but actually costs over a hundred. I am open minded but skeptical about all this supposedly plentiful tight oil ever making it to market at less than well over a hundred bucks per barrel.
3) What is the cost of alternatives? At $50 a Leaf is slightly cheaper to own and operate than the very cheapest ICE cars on the road. That suggests that above about $60 that oil prices will encounter more and more pressure from substitutes. EVs will continue to get cheaper. Would prices above $100 cause a land rush to EVs?
I believe EV’s will own the auto market within twenty years or so. But the fleet turns over slowly so the EV true believers have to take into account the bargains that will be available in the form of used conventional cars, ingrained habits and beliefs, etc. The conventional ICE engine is supposedly a dead man walking but the engineers squeeze more out of the ICE year after year and it is still likely to be the prime motive power source in trucks farm machinery construction machinery trains ships etc for the foreseeable future.Let’s not forget that trains are moved by DIESEL electric locomotives. The electric final drive is used because it is simpler and cheaper than a transmission robust enough to use it in a locomotive.
4) would would be the impact of oil above $100? Oil between 100 and 125 didn’t seem to stop world growth. What would happen with oil above $150? Most analysts just look at oil importers, and just look at the short term. What would happen in the long term? What would happen to the whole world?
High oil prices slow growth but also spur innovation and substitution. The game changes. Either team might win short term to medium term, the adaptationists or the stodgy ”I like things as they are” entrenched ff interests.
In the long term adaptation and efficiency will make it possible to maintain or restore growth imo in a theoretical world wherein OIL is the only critical resource in short supply.
In the real world wherein LOTS of critical resources are in short supply….. Depletion and ecological troubles and growing populations may and probably will imo bring on a catastrophic crash in many many parts of the world. Other parts imo will pull thru with some real belt tightening and maybe do ok for some time … maybe a century or two. Beyond a few decades only pure speculation is possible.
Would oil imports drop?
EVENTUALLY. How soon is anybody’s guess.
How many percentage points of oil importer GDP does imported oil represent – two? five?
ABOVE my pay grade. Not even in my line of work.No idea.
What would be the change if oil prices rose to $150? Would they reduce consumption by those percentage points, to make room for exports to oil exporting countries?
EVENTUALLY I think exporters will reduce domestic consumption in order to have more oil to sell to pay for imports because this would result in higher living standards. A hundred gallons of gasoline burnt to no real purpose adds a lot less to living standards than say five hundred dollars worth of imported food or furniture.
Would they reduce their consumption of other imported goods?
Everything else held equal importers will HAVE to reduce consumption of not only imported goods but also domestic goods as well to pay for ever more expensive imported oil. But everything else cannot be held equal except theoretically.
Would importers simply “kick the habit”, and switch to EVs and improved transit?
High oil prices will definitely result in the transition to electric vehicles happening MUCH faster. Ditto the construction of mass transit will be accelerated. Kicking the habit is going to take a LONG time.
I don’t see any COUNTRY kicking the habit in the short term.Individuals and companies can and WILL kick the oil habit in ever increasing numbers as depletion takes an inevitable bite out of production.
ONE thing I am sure of is that the giant legacy fields that supply most of our current consumption are depleting fast and that tight oil will NOT prevent peak oil being an established fact within a few years at the most. Nobody has discovered a supergiant conventional field for decades. Hardly any big new conventional fields have been discovered at all for the last forty or fifty years and s and there are NOT a lot of places left to look.
Eventually we must leave oil or oil will leave us.
REPLY
OFM – Golly. There are 19 questions (?) in that post. Could you prioritize – if you are looking for answers\ and/or input?
Nick asked the questions way upthread, addressing them to me. I answered as briefly as I could noting that good answers would require writing a book. Several books so far as that goes.
ANY input is always welcome.
The more the better in improving my understanding and throwing light on my blind spots.
Mac,
The last I looked, the US was importing roughly 5.5M bpd of oil. If we’re paying $50 per bbl (remember, some of that is heavy stuff that’s cheaper than Brent), that’s about $100B. US GDP is about $16T, so imported oil is accounting for about .6%.
If oil goes up to $150, then that would rise to about 1.8%.
So, US consumers would have to reduce their standard of living by 1.2% in order to pay that bill (or raise the Federal deficit and sell some more T-bills…). A loss of 1.2% in domestic consumption would make people unhappy, of course, but it doesn’t seem earthshaking.
And, of course, if people wanted to eliminate that “import tax”, they could buy an EV. They might have to put in their order and then carpool for a while (or put the extra gas bill on their credit card, to be repaid with the tax rebate financed with the extra Federal deficit mentioned above!), but that’s not too bad.
Hi Nick,
I am familiar with the direct cost of importing oil. I responded to your question with my ”no clue ” answer due to misinterpreting it. I thought you meant something else- the influence on the rate of growth on the economy. I could have given you an opinion but it would have been the result of a fast google search.I have little faith in the quantitative predictions of economists in changing times.
”The times they are ah changing.”
I am totally with you on the upsides of electric vehicles- every dime saved on expendable imports such as oil ( or tropical fruit etc ) is a boon to the domestic economy. At least imports such as metal ores are used to make durable products so the hit to the economy is not nearly so bad.
I presumed you already knew answers to all these questions and just wanted to know MY opinions of the same. We both have answers- but maybe not the SAME answers and maybe neither of us has THE answer.
BUT comparing end results of long complicated chains of thought is an excellent way of checking results. If people who use different methods starting from different assumptions get the same answers, this is a good indication the conclusions reached are accurate.
When we get right down to the basics, the only thing that really separates us in our conclusions is that you are FAR more optimistic than I am. IF everything goes well and FATE or LUCK or the CARDS ( take your choice ) smile upon us you will be looking back and telling everybody ”see I was right” – IF you live long enough.
I have been involved in too many affairs large and small that have ended poorly to have much faith in good luck left to me. I have read too many classic novels and too many history books.
I am not a hard core doomer by any means or else my home place would be fortified ALREADY. I HAVE given quite a bit of thought to the possibility that REAL troubles MIGHT come to my little corner of the world and done the necessary preliminary planning to get ready for such troubles.
IF for instance a situation analogous to the Cuban Missile Crisis were to develop, I would have a substantial fallout shelter ready within a week, stocked up for a years stay in it. This would not be a start from scratch job but rather the down and dirty conversion of a large masonry barn already mostly below grade ( under ground) using a backhoe on the premises and some farm hands hired at a premium rate.
The water supply is in place already , the fuel needed to run the generators ( I have THREE ) is in place , etc. Long ago I started INVESTING in a small personal armory ( all strictly legal ) and have every reason to believe that if I ever get really short of cash I can sell ANYTHING in it at a profit.
If cash money is no good or not to be had, I will be able to trade off an old shotgun and a couple of boxes of shells for a month of hard labor- a good deal for ME and my weaponless customer – unless my potential customer murders or robs me.
Life IS a darwinian affair.
The odds are truly excellent that I will not live long enough to have to deal with such troubles.
But likewise the odds are truly excellent that any one person will not die in an auto accident.Over the years I have known at least a couple of dozen who died that way. Half a dozen at least that died in house fires. A few that died of communicable diseases. Some who died of domestic violence etc. Some who died fighting in hot wars. Quite a lot who died younger than necessary as the result of the the low level but pervasive pollution of the environment. I live in a FAR healthier environment than just about any city dweller.
Preparation costs very little in comparison to a lack of it at need.
I have been involved in too many affairs large and small that have ended poorly to have much faith in good luck left to me
Sure. Lots of bad things happen, and it’s good to be prepared. But…that’s not the question here. The first question here is: should we transition away from oil and FF ASAP. On that we agree – the answer is a very strong yes.
The 2nd question is far less important: how well would the US, and the world, cope with an oil shock? Now, if I were interested simply in anti-oil propaganda, I’d say that a major oil shock would be a total disaster. That would support the “transition from oil” meme, right?
But…in all honesty, I can’t say that. I just don’t think oil is that important. An oil shock would be painful, but we’d get through it and be better off for the brick upside the head that it would provide (as you’ve often said).
It helps to think through what the impacts would be. There’s the direct transfer of income, that I quantified above. There’s the temporary impact on car sales that Prof. James Hamilton analyzed. What else?
Nick G,
I like to recall that the US is oil refiner to the world–a lot of what US refineries produce is sold abroad, not used by US consumers.
Central America and the Caribbean host some of the biggest buyers, I believe.
Yeah, I was talking about net imports.
Charts below based upon actual NDIC data as of June 2015. The tails may contain noise.
Oasis wells of 2015 vintage had so far a 50% improvement in well productivity relative those of 2014 vintage.
Gas Oil Ratio (GOR) is so far in 2015 up 50% relative to 2014.
Anyone wrestling with oil secrets from the underground want to venture explanations?
Rune,
I think you have solved the riddle of increasing flow rates and “productivity improvements”. Just open the choke full bore, or better still, remove it completely. I believe it will not be long before the wells begin to fail, and production will take a real and final plunge.
Mr. Likvern
Oasis is now drilling almost exclusively in their Indian Hills area – one of the few higher producing areas they have (so called sweet spot). They have over 330,000 acres leased that is mainly marginal – or worse – at these realized prices.
(This is the main reason Samson Resources is faltering. The several billion $ they got from KKR went to leasing now-recognized goat pasture up in Divide County. In contrast, Aussi owned Samson Oil &Gas is muddling through on their much higher valued land).
As per the GOR numbers … question, are you using the gas produced or gas sold figures? With the gathering line infrastructure continuing apace, with the ever tightening flaring regs, with the oil conditioning rules recently imposed … comparing gas output/capture/sales may all be impacted by these factors.
I have not closely followed this, but an example may go …
These guys were drilling way up in Bumfuck, Egypt last year to hold their acreage. Getting $80/bbl enabled the lower production to be somewhat economically palatable.
With no gathering lines, the gas would have been torched.
Now, drilling/producing in ‘uptown’ areas, with all of the higher gas output captured, the sales numbers would be high, especially compared to 2014.
Dunno, but going over individual well data would prove or disprove the just described scenario.
I’ll be short on GOR.
NDIC lists produced gas and gas sold (on the individual well listings).
Gas produced is what I always use for GOR calculations.
As of June 2015, the most recent well started (Schmitz 4-9H) on Indian Hills was in April 2012. Cumulative as of June 15: about 151 kb.
MISSOURI 5302 44-35H started Aug 2010. Cum as of Jun 2015, 230 kb (a decent well)
So with new wells on Indian ills, we will just have to wait and see.
These are two remarkable charts of an LTO company in dire straits and desperately in need of as much production/cash in can get it’s hands on in 2015. High concentrations of frac sand per horizontal stage is not new technology to the shale industry; that procedure was being used extensively as late as 2013. This company apparently did not use that frac technology in 2014, when oil prices were over 90 dollars a barrel, or did use that technology and practiced long term reservoir maintenance with proper post frac choke management.
In 2015, with ND prices far below 45 dollars, this company appears to now be frac’ing wells for the highest IP’s it can achieve and there is no credence being given to long term reservoir management whatsoever over ensuing production months. TP is right, these wells are being gutted.
GOR is an important tool in gauging natural depletion in dense, ultra-tight mudstone like the Bakken or EF. It is also an important indicator of how post frac’ed wells are being produced. Water production is also important. Slick water frac’s, also very old technology, that were being used in the Bakken, is only partially the cause for incrementally higher post frac water production due to capillary entrapment. Most of that induced water is staying in the rock (SPE 173380). Increased water production throughout the play (Enno) is a function of natural depletion, IMO.
Thank you, Mr. Likvern.
Mike
Oasis is only drilling in Indian Hills at the moment, and was mostly drilling in Indian Hills and Alger earlier this year. Alger has a fairly high initial pressure, and Indian Hills has close to the highest in the Bakken. The initial Gas/Oil ratio should be quite high, even in the absence of pressure depletion. G/O ratio not that useful as a pressure depletion indicator unless you’re comparing wells in similar areas.
Oasis is rather late to the party on enhanced completions, apparently not switching over until around the start of this year. Enhanced completions may not increase production that much after the first year, and they’re very much overhyped based on the IP increase, but they don’t cost that much more, so if a well is worth drilling in the first place, they’re still very much worthwhile.
Oasis showing plans for 15 wells/sq mile in core areas, presumably including Three Forks. This would seem excessive, except I’m not finding reference to standard lateral lengths over 4800′, so, perhaps that means 15 4800′ lateral wells. This would still be be a bit high, but they’re quoting completed well prices around $7.8M for slickwater completed wells Bakken. $7.8M for 4800′ laterals? Awfully expensive isn’t that?
They mention they’re doing slickwater and high volume sand, presumably the high viscosity type, but don’t mention numbers. Presumably this means they’re doing mostly slickwater which is cheaper, and probably better long-term anyhow. They quote 225k barrels of water per well for this. Due to the extra water, slickwater ramps up more slowly, which presumably explains the small dropoff from month 1 to month 2.
“High Grading” is very much real, but it’s also still experimental. Oasis has basically stopped held by production drilling, and gone to high density core drilling. This obviously increases IP, but the wells will interfere with each other, and we don’t really know how much yet, longer-term.
The water/oil graph would very much help to see what’s going on. I suppose it seems natural to people used to conventional wells that water/oil goes up, but that’s because conventional wells have a free water/oil interface to draw water in from. In shale, there usually effectively isn’t one, or since it’s very far away laterally.
Differential permeability due to capillary network connections will tend to make the oil/water ratio in the rock converge towards roughly 50%, as everyone is familiar with when trying to get the last bit of oil out of a conventional reservoir. So the water/oil ratio will go up a bit with time, but it won’t get very high unless there’s a water source.
If you’re drawing in a lot of water, it mostly has to come from the frac fluid of your well, the frac fluid of other wells, or through holes in the supposedly impermeable confining layers, most probably holes you’ve poked in them yourself.
People tend to dismiss the latter possibility, but I’m not entirely convinced. If they’re pumping in 225k barrels of water per well or more, though, that does provide a quite large water source without requiring holes in the confining layer.
Blaine,
I love your highly informative posts. It is a shame so many of them seem to end up on stale threads, and therefore missed by most readers.
As you seem to have good insight into the Bakken players, when do you see them slashing their drilling programs again? To me, they just seem to accelerating harder towards that brick wall at the end of the road.
Most of them I haven’t looked at, but the ones I look at I tend to look at in depth.
I haven’t seen anyone who isn’t cutting CapEx overall. I see a lot with sharp increases in individual plays while they’re cutting deeper elsewhere.
Most of them had about 2-3 quarters nearly flat, followed by a sharp cut of around 40%, followed by 5-10% sequential cuts after that. For some of them, the 40% cut was Q1-Q2 2015, so it hasn’t really shown up in production or cash burn numbers yet.
I don’t really feel I have much insight into what they’re going to do, since it often doesn’t seem to make whole lot of sense. It’s tough enough keeping up with what they did 2-3 months ago.
The question isn’t whether they’re cutting, but whether, absent new funding, they’re cutting enough at current prices to not go bankrupt and have to sell their valuable (in 5-10 years at least) mineral rights at fire-sale prices, which once it starts leaves the company worth nothing. More often than not, the answer seems to be that they are not.
In this case, the question becomes whether they can obtain the funding they need to not go bankrupt, and I’m not good at predicting the answer to this question, either.
Oasis funded most of their 1H2015 cash burn with a stock sale. Clearly someone though a 37% dilutive stock sale at $12.80/share to fund high-density core Bakken drilling at the price strip available in March was a good idea, when they could just as easily have waited for better prices. Go figure.
Thank you, Blaine. In the Bakken you then believe produced water is primarily induced frac water. Holes poked in impermeable confining layers would be, what, out of zone fracs?
WOR will not get very high unless there is a water source, you suggest. Is there a water source within the shale interval being stimulated, for instance connate water? Because ultimately if produced water is, for the most part induced, sooner or later that WOR will go down and I have in the past suggested difficulties in rod lifting high GOR wells that produced little water and that long tails on the EURs won’t be realized. Does that make any sense?
The SPE paper I referenced is interesting as to slick water frac’s and capillary binding. I looked at several, this one I believe is a Statoil paper.
Thanks again, please post more often.
Mike
Yes, I meant leaks through out of zone fracs as a possible major water source, but that isn’t really confirmed yet.
The high oil cut parts of the Bakken were originally around 70% liquid volume fraction oil, and around 85-90% original produced liquid oil fraction. The water cut would go up with time, but no matter how hard you frac and squeeze that, you’d still have no more than around 30% water cut from the liquids originally in the formation.
So a lot of the produced water can be water that was originally in place, but a lot has to come from somewhere else.
I suppose we could speculate about transport within the middle Bakken from the east as a water source in the SW Mountrail sweet spots where water cut has gone up a lot. That would require long-range permeability much larger than is generally assumed, which would have its own implications for production.
The obvious source is the water in the frac fluid. That would go down a lot with time, if left alone, but most of these areas haven’t been left alone much.
If you don’t have much of a pre-existing natural fracture network, then then more of the water in the frac fluid tends to get stuck in deeper in the rock, as in the SPE paper you referenced. With a larger network, more tends to wind up in the pre-existing fracture network, where it is more accessible.
Blaine
Thanks for the info.
The 15 well per sq. mile is actually per Drilling Spacing Unit – 2 square miles … laterals being 9,000’+ as a rule.
These wells, and also near-real time drill rig activity, can be seen on ND DMR’s website on their Gis map.
Thanks
I read an interesting comment elsewhere about US crude oil storage statistics and thought I would float it here.
The comment was that storage data include all crude in pipelines. Apparently in the last ten years pipeline miles for crude has expanded greatly. The idea is that if we subtract pipeline storage from 2015 and do the same for 2005, there is not as much of a “glut” as MSM claim.
I there anything to this or hot air?
Increased pipeline capacity could be a contributing factor, but IMO a bigger factor is the increase in the US Condensate (45+ API gravity) to Crude + Condensate (C+C) Ratio, for both production and inventories. I’ve thought for a while that US refiners may have approximately hit the limit, late last year, of how much additional condensate that they could take, if they wanted to maintain their distillate output volumes.
On the production side, the EIA estimates that the Condensate to C+C Ratio increased from about 12% in 2011 to about 19% in 2014.
Globally, I suspect that increased US condensate production accounted for about 1.5 MMBPD of the 4 MMBPD increase in global C+C production from 2005 to 2014.
J, does that really work to drop Brent? If there is diesel scarcity, imports would demand it and blah blah drive import price up.
Doesn’t play.
Got to thinking. How many US public non integrated oil and gas companies could pay long term debt in 5 years if they stopped all new wells and hedged at the current futures strips for oil and natural gas?
Could any pay off the debt?
I think almost none could.
Hope the shorts figure this out soon and decide to end this BS.
Sorry. The big boys can fund debt by cutting their sacred dividend payout.
The petroleum industry is losing it’s demand. Without demand will shale gas producers ever see the price they need to break even?
First coal, now gas. Start charging more EV’s with PV sourced electricity and oil will be next.
SunEdison Solar Farm Beats Gas With Biggest Colorado Project
Chris Martin, Bloomberg, August 20, 2015 — 1:30 PM EDT, Updated on August 20, 2015 — 6:04 PM EDT
I don’t know about gas demand but oil demand in both US and worldwide is strong. Or is that not accurate?
Who knows.
Maybe oil demand is headed down? WTI strip goes from 40.21 on front month to $60.99 for 12/22 and $60.00 for 12/23.
Apparently world wide demand in 2023 and 2024 is projected to be under 50 million bopd. That is what the future’s strip implies.
How can you deduce future demand from the forward price of oil?
What happens to well economics when the producer can’t get much for their associated gas?
I know the answer in part is “It depends”, but would it make a difference whether some wells go forward?
For instance NoDak regulations on flaring will mean more associated gas in the pipeline so to speak. There is some cost to the producer to get it there?
I appreciate your commentary.
Thomas. I am just guessing, but based on what I have read, very few large projects outside the middle east are economic at $60 WTI, so if the futures market is correct, they should never proceed ahead. I am just being sarcastic though, as I don’t think the futures market accurately predicts anything very far out. I think making a bet on 2022 futures is extremely expensive for that very reason.
aws. I do not know a lot about gas. However, I presume it is not very economic in ND if the state had to pass rules against it being flared, instead requiring producers to sell it. If you take gas sales out of the equation for bakken wells it does not affect the economics much because the gas sells for very little per mcf.
https://www.iea.org/oilmarketreport/omrpublic/
Of course this could turn on a dime if China catches cold.
Change of subject but perhaps a useful insight.
I believe a huge part of the success of TESLA so far is due to the gleeful reactions of ev optimists being able to say a TESLA can mop the floor with just about any affordable conventional car in a drag race.
Muscular performance takes the WIMP FACTOR out of the occasion enabling a status conscious male to drive a Tesla without being suspected of wearing thick glasses and peeing in his drawers if growled at by a puppy.
Now POLARIS is out with a high performance electric motorcycle that (like Tesla has done already) will probably break out of the niche market into the mainstream.
Twenty grand is not a peanut price but once these bikes are in mass production the stage will be set for people who want an electric bike ( a bike to me is a motorcycle rather than a BICYCLE , being a gear head) to buy one that is substantially less expensive.
It seems to me that a high volume small to medium sized electric bike ought to be profitable at WELL under ten thousand bucks. Motorcycles after all contain a hell of a lot less materials and embedded labor than cars.Such bikes could go a LONG way in terms of reducing oil consumption and traffic congestion if they sell- and they might just sell as a result of the COOL factor and the likelihood that they will require next to nothing in the way of routine maintenance and costly repairs of the sort that PLAGUE gasoline powered motorcycles.
http://www.startribune.com/polaris-revs-up-electric-motorcycle-business-with-victory-empulse-tt/322462501/
Muscular performance takes the WIMP FACTOR out of the occasion enabling a status conscious male to drive a Tesla without being suspected of wearing thick glasses and peeing in his drawers if growled at by a puppy.
This was a necessary step in the marketing of EVs. It’s the same reason suburban types buy trucks they don’t need. And it is the same way guns are marketed in the US. The macho factor is still a big deal when marketing to men.
To sell more EVs, it helps to have people associate EVs with “cool.”
EVs for the Macho Man!
Yep. I suppose asking men to stop using their car as a surrogate for their penis is just too much to ask for.
Evolution programmed us to operate on the basis of STATUS within the social group in which we live.
Once upon a time males competed on the basis of physical strength and prowess. Bulls and boy dogs still do it that way. Pro athletes are a vestigial remnant of that heritage.
Ten thousand years ago you got a woman by bringing home the MEAT, raw and bloody with the hide on. Now you attract her with the size and sleekness of your car, the size of your house etc.
Women are able to compete on their own but they don’t HAVE to compete on the same material basis to attract men. NO woman is ever without the opportunity to mate if she wishes to do so.
Yep. I think you’ve summed it up very nicely.
Don Wharton wrote… up-thread:
I have long taken the position that the Earth could sustain a population of 60 billion people. However, that is contingent on humanity being smart about how it lives.
I have two very serious problems with that statement. First that is a totally absurd number. We are totally destroying the earth with our 7+ billion people. To support 60 billion we would have to cut down every tree standing to make space for them to live and grow food. But even then there would not be near enough farmland to support over eight times today’s population. We would have to kill every wild animal alive because we need the space. And we would have to find “some other” source of energy because 60 billion would go through all remaining fossil fuels in less than a decade. Fat chance of that happening.
The second thing seriously wrong with that statement is that it depends on “humanity” behaving in some different manner than humanity has behaved for the last few thousand years. Humanity will behave, in the future, exactly as humanity has behaved in the past.
There is no “one” human behavior. Human behavior is as varied as the 7 million people who make it up. Every effort to make massive changes in the way we live is, and will be, always opposed by all those whom such behavior would require some sacrifice. And there always so-called “experts” on both sides of every issue who will proclaim that the other sides experts are either lying or ignorant.
We are deep, deep into overshoot. The earth cannot long support 7 billion people. The population will soon start a precipitous decline and it will not be voluntary or pretty.
Hi Ron,
I am with you all the way , as a practical matter, the only exception being that I think the modern industrially based economy MIGHT and probably will survive in some relatively small parts of the world.
The folks who talk about populations in the tens of billions are talking about theoretically possible futures based on the invention of lots of so far imaginary technologies. Such a world might actually be possible -IF such technologies were invented and deployed. They won’t be.
It is an amusing coincidence that just a couple of minutes ago I read a news article about the ITALIANS – who have some extremely tough problems of the economic sort of their own ALREADY- picked up FOUR THOUSAND would be illegal immigrants at sea YESTERDAY ALONE.
Most of us in this forum know about exponential functions and tipping points.
If something is not done very quickly to convince people desperate to get away from failing countries that they WILL NOT make it successfully into Western Europe, the number arriving on a daily basis will grow exponentially and totally overwhelm the welfare system of countries such as Italy in very short order.
A lot of bleeding hearts -people with fine intentions who unquestionably occupy the moral high ground point out that Western Europe COULD cope with millions of semicivilized and generally ignorant immigrants.
This is true enough, after a fashion.
I COULD donate all my worldly goods to my local church and become an itinerant missionary. AIN’T GONNA HAPPEN.
I donate some money – more than I can really afford – because the church does a lot of excellent local work far more efficiently than government operated social services. Most days the only company we get is a visit from local church people looking in on the old and infirm.
ONE of the most liberal people I know ordered me off HIS property once when I camped there without asking permission, which I HAD asked on previous occasions. I would never in a hundred years thought about his camping on my place as trespassing. I would have been GLAD to see him unexpectedly. I expected him to be glad to see me. ALL my friends are welcome on my place at any time.
STRANGERS are a different matter altogether.
Allowing LOTS of immigrants in will UNQUESTIONABLY result in the sort of political backlash that will result in well intentioned liberals in curling themselves up into fetal balls as the hard core right wingers start winning elections by landslide margins.
They WILL win because poor and relatively less well off people are ALWAYS more numerous than the well to do and will not passively allow funds and jobs that could go to THEM go instead to newcomers.
Middle of the roaders generally learn pretty fast that lots of immigrants in their OWN communities lead to lots of problems when the immigrants are not well educated and productive in local terms. Furthermore plenty of well to do people LIKE the status quo.
Maybe I am as dumb as a fence post and as wrong as eating babies but I believe anybody who disagrees with this political analysis is either utterly naive or a complete fool.
And no I have NOT forgotten that my own people came HERE as immigrants within the last two hundred years or so.
Life is a darwinian affair.
Old Farmer and Ron, given the fact that we have lots of new knowledge to rebuild and energize civilization, how long will it take for humanity to get back to overshoot again after a population collapse?
Again, one cannot predict the outcome of chaos. How far will the population collapse? How long will it take? What will survive? But most of the fossil energy will be gone. We will, very likely, return to an agrarian economy with little left over for development of a leisure society. If that happens then we will likely just live at the level the land will support and not go into overshoot. That is what we did for many thousands of years before the development of the fossil fuel society.
I just saw Ken Burns on “Face The Nation”. He was talking about some people saying, after the economic collapse of 08, some people were saying we were in a depression. He said that during the Great Depression, in many American cities, all the animals in the zoo were shot and the meat was distributed to the poor. When that happens again you will know we are in a depression.
When that happens… again… and later gets even worse… you will know the collapse has begun.
Impossible to say, there are too many unknowns. We might never get to be that numerous again, globally. Locally it might take as little as a couple of centuries or even less.
I am with you all the way , as a practical matter, the only exception being that I think the modern industrially based economy MIGHT and probably will survive in some relatively small parts of the world.
Since I did not mention the subject of the industrial based economy at all, why did you think that would be an exception? I have to agree with you, it might survive. Who knows? I have often said before, you cannot predict the outcome of chaos. And when masses of people are unemployed and many are starving, there will be chaos, no doubt.
As a species we have a lot of experience with chaos and collapse. It has happened over and over again. While we might not predict the outcome, there are certain things that are a lot more probable than not. I have studied with some detail the Roman collapse and I think many of the characteristics of that collapse are very likely to take place over the next decades (in no particular order):
– Reduction in global commerce (already starting)
– Increased migrant flows that disturb recipient societies (already starting)
– Reduction in wealth unequally distributed (already starting)
– Increase in armed conflicts that encroach (already happening)
– Reduction in manufacturing
– Reduction in agricultural output
– Social disorganization
– Increase in banditry and fringe sociality
– Famine and increased mortality
– Reduced natality
– Increased diseases and world pandemics
– Increased government oppression
– Reduction in social complexity
– Break up of large and/or heterogeneous nations
– End of globalization
– Increase in fanaticisms of all classes
– End of international cooperation
– End of scientific advancement and loss of knowledge
– General loss of infrastructure due to age and lack of maintenance
All of these peak oil fanatics running around all over the place are being extremely disruptive, for one glaring example.
They all need to sell their gasoline fueled automobiles and hire Uber to do their driving for them.
I’ll keep my ice automobile for the moment, I don’t have to wait for anybody or anything to get me there, I just jump in the thing and go buy beer.
Don’t need no stinking auto taxi, I can drive myself, my one cell bouncing around inside my empty skull can at least do that. The hundredth monkey finally gets the clue, not too hard to figure out, go get your own car.
There’ll be so many people waiting for a self-driving vehicle to help them hop, skip and jump to their next stop, the system will be overwhelmed, overload in a New York minute.
You’ll need an inventory of surplus automatic automobiles, it’ll become a logistical nightmare. The riders will get tired of waiting around, they’ll become impatient. It’ll graduate to Uber buses.
The riders will go out an buy themselves a car and enough of this auto driving nonsense, standing around wasting time and mostly their lives. har
I get you Ronald, the whole doomster psychology is so rife with logical holes that it’s pathetic. It’s worse than a doughnut factory.
Experts running around moaning about hundreds of previous civilizations collapsing. Yet civilization elsewhere continued, in fact usually the people were still there. So what if one empire or city or small set of villages goes by the wayside? Everywhere else is fine.
Now we have the peak oil doomsters. Apparently oil production is either just going to suddenly vanish or it will slowly reduce in amount. Who believes in the sudden stoppage of oil production? Of course we are all so stupid that we can’t make electric cars or trains, power transport with coal, gas or electricity. We certainly would never think of wood gas powered vehicles. And people are too stupid to use chemistry to make liquid fuels from other carbon sources. Being so dumb we will just all lay down and die because Exxon-Mobil and Aramco just can’t make a buck anymore. No one would ever think of ride-sharing or moving closer to work.
And then there are the climate change doomsters. Just because the world is in the process of massive change, large areas turning to desert, monsoons stopping or arriving at the wrong time, severe weather events producing local disasters and floods, they think we will all just up and die. Add to that the fact that agriculture depends primarily on monocultures that will be severely effected by all those changes and huge migrations of people from the inundated cities and coastal regions will overwhelm other regions. OK, it’s going to be painful and damaging but come on it takes so long to happen that it’s easier than stepping out of the way of an oncoming train.
We already know about it, so I guess it’s believed that humans can’t adapt to changes over decades and centuries. We already are adapting.
And then there are the population doomsters. Too many people, not enough food. That one has been heard through the ages. Massive famines have occurred in the past without there being many people on the planet. Oh no they say, we depend on technology for our food — and everything else if they look at it. It’s pretty simple and old technology, so what is the problem? Apparently we won’t change methods and adapt or find ways to stop wasting half our food before it gets in our mouths. We are just too dumb. They think people will just keep procreating and the whole world will go down. The whole world? I could see some areas or regions having a famine, but the whole world because there are too many to feed. I don’t think we have even begun to scratch the surface of how to make and grow food.
And in all these doomster scenarios there are either no dates given or dates were given and are long past. Much like Microsoft software, they reboot the dates and come up with new reasons to justify doom. Hogwash.
As far as civilization as we know it ending, it does that all the time. Civilizations have changed through the ages and now they are changing so fast that people born sixty or seventy years ago do not recognize their world anymore. New civilization is growing right out of the ones still in existence.
So why do they doom everyone? Sometimes it’s a lack of vision or breadth of view, tunnel vision on how we could exist without certain things or live under different conditions. Some think we can’t adapt, but history says we can. Other times it just a psychological need to have supposed superior knowledge. The reality is as Ronald states they are “standing around wasting time and mostly their lives”.
Maybe there is a reason that 99 and 44/100 percent of the people don’t really pay attention to all these doom scenarios. Maybe they know better. Maybe they know that it’s more likely their doom will be cancer or heart disease or in some parts of the world, getting shot or bombed, enslaved or murdered.
So stop dooming and start doing something about it. Or just go and party, if anyone will still talk to you.
Are you a troll? Your input to this site is decidedly useless and usually off topic.
Look who thinks they are running the show now. this site is beleaguered by lurkers and trolls.
Mr. Walter
“…graduate to Uber buses”.
That has already started, sorta.
The Uber/Llyft folks are coming up with a way to have drivers pick up multiple individual passengers ‘along the way’, and drop each off at their destinations.
Apparently there are bugs still to be worked out, but I have noticed a sharp increase in SUV-sized Goobers recently … and that is probably the cause.
Lyft is great!
Uber is getting stagnate from it’s size, a given for any capitalist corp.
We will se if thy can survive as profits get squeezed.
Sorry Ron I expressed myself poorly.
Most doomers seem to believe that collapse will be universal. I am agnostic about that.
Glad to hear you agree that some pockets of industrial civilization might survive.
Old farmer mac said:
The number of immigrants seeking refuge in Europe is miniscule in comparison to those fleeing to Jordan, Lebanon, and Turkey.
Those Syrian refugees at the border between Greece and Macedonia are so desperate that they claim to the TV journalists that they rather die that going back.
How do you deal with that? Nobody in Europe has any idea on how to deal with that except perhaps Marine Le Pen, Nigel Farage and others that we better not follow advise.
How long do you think Jordan, Lebanon and Turkey can continue to cope before the local people in these countries are themselves in dire economic straights?
It appears that many of the Syrian refugees who at first fled to Turkey, Lebanon and Jordan are now making their way to Europe.
Almost all the refugees who flee to Europe go to Germany.
I saw an article yesterday which said that Germany now anticipates 800,000 asylum seekers will arrive to Germany this year.
That number indicates a huge increase from the number that arrived to Germany in the first quarter of this year (83,130).
German neo-nazis staged a riot in the German town of Heidenau on Saturday in which 31 police officers were injured.
https://news.vice.com/article/31-police-officers-injured-as-anti-immigrant-protesters-riot-in-germany
Here’s the citation I mentioned above:
Almost 83,000 refugees arrived in Germany last month, and the government estimates that by the end of the year, 800,000 people will have come seeking asylum.
http://www.nytimes.com/2015/08/24/world/europe/germany-heidenau-anti-immigration-protest-police.html?_r=1
If the German government does not get a handle on this level of asylum seekers very soon, I look for the backlash to put a far right wing government in power within the next five years or so.Ten max.
Yep. That’s not at all outside the realm of possiblity.
And regardless of what Marx said, the working class is not immune to racism and nationalism, and working-class populist movements invariably take on a racist and nationalist character. There are explanations for this grounded in material class-interest, perhaps first articulated by Adam Smith, and later explored much more thoroughly by the Russian scientist Peter Turchin.
I think many people forget that Nazism was first a working-class movement, largely financed by US and British industrialists. Each of course had very different motives for supporting Nazism.
Not until later, in 1934, would Hitler throw the working-class under the bus, cementing his alliance with the global industrialist class, with the assasination of Ernst Röhm during the Night of the Long Knives.
As Reinhold Niebuhr put it:
The success of Nazi diplomacy and propaganda in claiming the poor in democratic civilization as their allies against the “plutocrats” in one moment, and in the next seeking to ally the privileged classes in their battle against “communism,” is a nice indication of the part which the civil war in democratic civilization played in allowing barbarism to come so near to a triumph over civilization.
Here’s what Syria’s neighbors are dealing with.
Ron, you clearly did not read what I said would be required to support that 60 billion. Frankly we need to leave far more trees standing exactly where they are and I want a much more robust wild ecosystem where we let nature be. What would be needed is a robust use of science to find the best practices and a world wide governmental structure that would enforce some uniformity in using those standards. I explicitly agree that these conditions are wildly improbable. I also agree that there will be massive political opposition. My point is that all of the objections do not logically preclude humanity being extremely intelligent about how we live on this planet. It is possible for us to be very smart about how we do things. Yes it is unlikely, but the first step in being smart about things is to imagine the possibility of it happening.
Don, I understood you perfectly. My point is even if the great god in the sky twitched her nose and everyone on earth suddenly had the intelligence of Einstein, and all these people acted in the best way possible to help the earth feed more people, a population of 60 million would still not be possible. There is just not enough earth to grow enough food to feed that many people.
But all that is just a fairy tale. People do not “get smart”. The average IQ level of the world’s population is 100, or somewhere near that level. It is not within the circle of possibility to change that fact.
People desire to believe what they desire to be true. Not all of them do but the vast majority of people believe what they desire to be true. That is just human nature. There is simply no way to change human nature.
Ron, OK we are in nearly full agreement about the backward nature of average humanity. We are also in full agreement the most likely future will include waves of population decline from a level not much greater than our current 7 billion. However, we do have thousands of people with an IQ near that of Einstein. We do make use of the genius that is there in many fields. Just consider the vast number of very intelligent solutions that are embedded in an iPhone. Don’t forget that we already have a well defined solution for highly efficient housing. The German passive house standard will be at most only slightly greater than current construction because there is no need for a furnace to heat the home. The energy of a single room heater is sufficient to heat a good sized home because the heat lose is 90% less. All I am asking is that you imagine the possibility of people “getting smart” enough to find some of these solutions and put them to use. That IS possible. And if we are going to prevent the human disaster that both of us see as the most likely future then we have a moral obligation to communicate the basic principles of energy efficiency, much higher recycling and the next generation of food science. I am most certainly not advocating that we move toward having 60 billion people on our planet. I am advocating the energy efficiency that is implicitly required to imagine that.
Don, the iPhone, the cell phone, and every other thing that showed a success during the past century, or centuries, did so because they offered an advantage over what they replaced. No one was asked to make a sacrifice in their living standards in order that the iPhone, or whatever, may succeed.
A few thousand Einsteins wont make one whit of difference when a few billion, not so smart people, are asked to make sacrifices so that others may stand a better chance of surviving.
If it makes their life easier and cost very little, people will buy into it. If it makes their life harder and cost them a lot, almost everyone will reject it.
Right now no one is listening to us doomers. They expect life to continue as is, or get better, for many decades to come. They will not do one damn thing until it is too late to do anything.
Ron,
That’s why I point out that EVs are better. They require no sacrifice.
Sure, a pure EV has limited range. But that’s not really that big of a problem. And, for those that really care about it, it’s easy to add a small range extender, like the Chevy Volt. That will take care of that problem until there are lots of recharging stations and battery size is large enough to make those stations not needed very often. And, of course, synthetic fuel or ethanol will work when you only need fuel for 10% of miles driven.
That’s why I point out that EVs are better. They require no sacrifice.
You’ve got a point. If you can offer a transportation system that is more efficient and generates less pollution, that is an improvement.
Renewables are an improvement over fossil fuels in many ways. So new technology replacing old technology can be viewed as offering something better.
When people say renewables can’t power BAU, some of us think BAU isn’t worth saving.
Sure. BAU is fossil fuels.
BAU is dead. Long live it’s replacement: cleaner, better EVs and renewables.
Right now no one is listening to us doomers.
Well, I’m not sure there’s an advantage to listen to the extreme doomers who tell us there is nothing we can do. If that is the case, we might as well enjoy what we have for as long as we have, and then die.
I do listen to those who offer some element of hope. Not necessarily for me because I am older and won’t live to see the worst of it. But I want to believe (and do believe) homo sapiens will continue on in some fashion. The idea that life will need to be simpler and use a lot less energy is no problem, as I see it. In fact, I think it would be better. Definitely better for the planet, at any rate.
And I am even hopeful for the planet if homo sapiens don’t make it. Then I just see our species as having been a relatively momentary thing in the long life of our planet.
I worked for Apple when both the iPod and the iPhone were released.
(iPod a slam dunk- wasn’t sure about the iPhone)
I would not put much value in “imagine the possibility of people “getting smart” theory of human survival.
Just saying! Apple people are very clueless.
Elegant design is not intelligence.
loopnet.com has a plethora of commercial properties for sale from Williston to Dickinson to Watford City to Bismarck to Mandan and there seems to be no end to the properties for sale.
Wanted to share some insights I got last Thursday. Met some landmen and sales types I’ve known for years for drinks outside the North American Prospect Expo in Houston. I stopped attending the Expo for the last couple of years, going to parties and social networking instead, since the focus for many years has been LTO/Unconventional and I’m a conventional player. According to these folks, attendance is down, but focus was largely conventional. That’s a big change. We expected smaller numbers of attendees. The hotel was dead and the party invites were non-existent. The increase in conventional prospects, particularly Texas and Louisiana was a surprise.
Richard,
I too stopped attending NAPE. However, I am planning to attend the Febuary 2016 NAPE
Did you get any feedback on the NAPE business conference speakers? I noted that the past president of Swift Energy was scheduled to speak and since Swift is struggling to remain viable I am interested in what he has to say.
John,
I didn’t discuss keynote speakers. I focused more on general direction of conference. I’ll check into the keynote speakers. I’m planning on going to NAPE in February. For the past couple of Expos I’ve been focused on networking to finance/sell my prospects rather than buy prospects. I was surprised to hear how many did attend.
Regarding Swift, an engineer there who was let go recently painted a picture of doom. They’re a mess according to him. How they’ll survive the debt situation is a great question.
Makes sense. $1-2 million onshore wells would have more of an economic chance than $6-8 million onshore wells.
I noticed for 6/15 Elm Coulee field in MT (the first “Bakken”) had only 53 wells which produced over 100 bopd for the month versus 50 that produced zero bopd for the month. This during a time when things did not look so bleak, WTI $57-62.
Wonder what production there will be in 8/15 and whether more wells will produce zero.
Is Elm Coulee a preview of ND Bakken in 2020?? I suggest if you have time look at the biggest wells of EOG and Whiting from 2008-2011 and see what they produced per month in 6/15. I think one will find more are below 100 bopd than above. I’m talking about the wells that have cumulative of 500K plus oil.
Iran to raise oil output ‘at any cost’ to defend market share
“We will be raising our oil production at any cost and we have no other alternative,” said Oil Minister Bijan Namdar Zanganeh, according to his ministry’s news website Shana. “If Iran’s oil production hike is not done promptly, we will be losing our market share permanently.”
Now we’ll soon find out how much oil Iran can really produce.
And I consider any talk by anyone about losing market share a bogus argument. Oil refineries will buy oil that they can refine from any source. If you produced 5 million barrels last year and now you only 4 million and then decide to produced 5 million barrels barrels next year, Why would any buyers care?
The oil drop has been fascinating and perplexing.
It appears to my unsophisticated eye that so many major players want the price of oil to crash as hard as possible – these major players include Iran, Saudis (OPEC inner circle), the big oil companies (such as BP and Exxon), the money center banks (Goldman Sachs, Citibank, BOA), hedge funds, the EIA, the Obama administration, and there are others I am sure…
Are my lying eyes deceiving me or is there something very funny (suspicious) going on?
Arceus,
You’re not alone. Two different writers on Seeking Alpha, Boslego and Balan, and one on OilPrice, Leonard Brecken, have made multiple statements in the same vein. Further, a number of commenters on these sites believe the same thing.
Brecken believes the prices have been manipulated in what he refers to as the Trillion Dollar Swindle. He does make some solid points. His latest article highlighted the huge shift in bets from long to short and that fifty hedge funds are driving the prices artificially low to generate massive payoffs. Yes, he sounds like a conspiracy theorist at times, but he makes some very interesting points.
How do you spell EIA?
Mike,
I’m with you. Every source I check has a different view than the EIA. I stop short of calling it malicious, but I do wonder about the numbers. Had a college professor used to say if it comes from here, points to his head, it’s biased.
I do believe that the hedge funds are playing a dangerous game. And the consumer, us, will end up paying in the end. I hate the shale fools, especially when I look at my production, but the speculators ain’t much better in my book. Just my two cents. Just like you, Shallow, and a few others I’m trying to weather this storm and keep on with CONVENTIONAL exploration, shale be damned. The antiFF guys my not approve, but I’m a simple oilman from Texas.
Hanging in there, just like you.
Richard, we owe no one an apology for who we are and what we do to feed our families. Oil plays a vital role in the lives of all Americans, and will for a long time to come. To wish ill will on an entire industry that employs, and feeds, so many people throughout the world is the height of ignorance.
I am not a conspiracy nut but I know, as everyone should, that world oil markets have been manipulated since 1977. I am unclear what role the EIA has had in this one, if any, but it has greatly overstated production volumes for a long time and that has had an adverse affect on oil price speculation.
Short of a miracle, within the next 12 months America is going to lose 1/2 of all of its LTO gains made in the last 8 years, 1/4 of its conventional production and all of its stripper wells. It seems to be going plumb over people’s empty heads.
Keep a bind on it, Richard.
Mike
Mike,
Went into oil 20 years ago and never regretted it. I love what I do and make no apologies for that.
What worries me about this mess is that almost no one is concerned about the destruction of production in this country. WE increased the majority of global production. A lot of the world is in decline, and the rest is producing flat out. Does anyone wonder what happens when Murphy’s law reasserts itself? The WSJ, had a story that investors were totally confused by the data on production. THAT is a terrible thing the EIA and the IEA have done.
When this thing comes undone, and it will, it will create a spike. Yes, those of us who have production will benefit. But what a cost, man what a cost to the rest.
The other thing I’m waiting to see is the short squeeze.
Asia has oil at $39.84.
The National Stripper Well Association estimates that if every stripper oil and gas well in the lower 48 is plugged, over 250K jobs will be lost.
Early on in the price crash, I read maybe 3 stories about the consequences for small producers. That was late 2014-early 2015.
I haven’t read a word since.
For some reason, after 2009 the EIA quit publishing country wide and state by state data on the number of wells and production amount categories. Kind of odd if you ask me. To them it is shale and shale only.
In any event, there were over 300K wells in 2009 producing less than 15 barrels per day. The vast majority were under 5.
Heck, a large part of the shale wells are under 30 barrels per day already. If you don’t believe me, look it up. MT and ND have very user friendly websites.
KS, CO and WY have very used friendly websites also. Take a look at wells there. Last I looked the average KS well produces 2.5 bbl per day.
Small conventional producers in the Mid Continent and Rockies are getting the crap kicked out of them. Almost all Plains postings in those states are in the 20s. Don’t get me wrong, though, it is bad everywhere.
Up hole I mentioned some governmental action. I have reconsidered. There could be so much production shut in at once that the states will be overwhelmed. Hopefully orders to plug will be so delayed that it will buy enough time for a price snap back.
We are going to keep stuff on as long as we can but there is a limit. But we will fight like hell to keep what we have. No leasehold debt so it will be between us and the state.
Ordinary folks in the US have nary a clue. Had an et al ask what the heck was going on, why is he in the hole? Explained to it him. He was shocked. He’s soon going to be in the hole about 2K per month at sub $35 oil.
That is a pretty cold shot of water to the face, eh? He has owned interest for over 30 years and never got hit that hard, even in 1986 and 1998. Electric a lot higher. Corrosion inhibitor still $22.80 per gallon and parifin chemical still $22.00 per gallon. No relief!! Where is our 30-50% price reduction, he wonders. He read that was going on everywhere in the WSJ. Ha!
Again, to all you out there who this is your sole lively hood, fight like hell and hang in there. There could be one hellacious price spike once the cabal gets what it wants.
Shallow,
2 years ago I was talking to a representative of the RRC at their booth at NAPE. They were begging people to step in and take over abandoned wells. They had thousands at that point, if not tens of thousands. This will be a nightmare. Yes opportunity would seem to be there to go in and scoop them up at some point, but you have to have incentive. Thirty nine a barrel or lower won’t work. This looks horrible.
Shallow,
Well written!
I am amazed the MSM has not got on the story about the stripper wells.
Total production from these are high and this is low decline supplies!
Mike said”Short of a miracle, within the next 12 months America is going to lose 1/2 of all of its LTO gains made in the last 8 years, 1/4 of its conventional production and all of its stripper wells. It seems to be going plumb over people’s empty heads. ”
That is a large drop, isn’t that more than half of US production?
Why are the stripper wells going down, too costly to separate and deal with the water at these prices?
Stripper well expenses may include:
Electricity to power pumping units and salt water injection pumps.
Truck hauling of salt water if there is no on lease disposal.
Down hole chemicals to fight corrosion, parifin, barium and a load of other stuff
Replacement of worn out rods, tubulars, down hole pumps, including service costs to pull all of that out of the hole, test the tubing and run it back down in the hole.
Repair of pumping units, electric lines, flow lines, disposal lines, separators, heater treaters, stock tanks, water tanks, injection pumps.
Belts on pumping units.
Water meter repairs on injection and disposal wells.
Repairs and maintenance to roads and locations, including weed control, grading lease roads, repair of tank fire walls.
Most importantly, payment of personnel to keep all that stuff going, including FICA, comp insurance, health insurance, clothing, providing trucks and fueling the trucks, maintaining and insuring the trucks.
Liability insurance and environmental insurance.
Accounting and software for that purpose.
Annual well fees so the state can pay well inspectors to regulate everyone.
Ad valorem taxes, severance taxes, unemployment taxes.
No income taxes this year.
Tools, gloves by the dozen, rags, trash disposal.
Several more but I think that should be enough to get the idea.
Keep in mind in 10 years from completion, the typical shale well in the lower 48 will produce between 0-40 barrels per day, and OPEX by my estimation will be $15-75 per bbl. With many posted prices below $30, they aren’t exactly knocking it out of the park. Flush, flowing new sells are keeping the reported OPEX or LOE per BOE low. My examination of lease operating statemts for wells completed from 2008-2012 in Bakken has shown OPEX of $8-$55.
Look at my post above re Em Coulee field. Almost as many wells at 0 production as over 100 bopd for 6/15.
Think 8000′ in GOM works at sub $40? Think tar sands work at $22? Think Artic projects are using the price forecast by the WTI CME futures?
Oil production is expensive these days. This isn’t 2004. BTW, how much higher is demand than in 2004 anyway??
Mr. Zepplin, Shallow Sand has answered your question regarding stripper wells quite well. Marginal production simply means marginal economics.
Other conventional production over the next 12 months is going to decline at what I believe, and my esteemed colleague, Jeffery Brown believes, will be at least 8-10%, probably a lot more at 40 dollar oil. LTO production in the US now equates to something like 45% of total domestic production and I believe that is going to drop like a rock from its steep decline rates and its inability to stay on the drilling hamster wheel.
The shale oil industry has done a masterful job of convincing the American public of an abundance of oil in our country and that we need not be concerned for our energy future. For God’s sake, there are now oil pundits who are calling for the end of the SPR, because of shale oil. The problem with the shale revolution is that it forgot about oversupplying world markets and what 40 dollar might do to it’s charge up San Juan hill. And I personally do not believe the shale industry is going to be easily put back together after this mess.
If oil prices stay below 45 dollars the next 12 months America might very well lose half of its current production rates. That is probably a stretch, but you get my drift. We are in serious doo-doo.
Mike
Thanks for the complete answers Sand and Mike.
I just realized last night that with US (and North American) production now constantly wandering near a tipping point that OPEC and possibly Russia can play us like a puppet economically.
Say price goes up eventually as say the Saudis pull back in production also, but only after a lot of losses in the NA oil fields. Buyers of already drilled wells and new well drillers flock to the shale, conventional and tar sands. Investors, being greedy, back them. Then as NA production starts up again, the Saudis push production and the Russians make a mad rush to develop their shale. The Chinese could even get in on the act.
Prices could fall again in a few years and again crush the NA oil industry.
There are other factors that will decrease demand just waiting for a price rise to kick into high gear.
With all those expenses, it does not look pretty for the oil industry.
Mike said:
For God’s sake, there are now oil pundits who are calling for the end of the SPR, because of shale oil.
Guess who’s doing just the opposite?
China may add 100,000 barrels a day of oil to strategic stockpiles this year and increase it to 200,000 barrels a day in 2016, PIRA Energy Group, a New York-based energy consultant, said in May. The government has filled four sites in the first phase with 91 million barrels of crude, the National Bureau of Statistics said on Nov. 20. The second phase, which includes the Qingdao and Huizhou sites, is designed to take in 168 million barrels, according to Gao Shixian, a deputy director at the National Development Reform and Commission’s energy research institute.
http://www.bloomberg.com/news/articles/2015-07-13/china-crude-oil-imports-rebound-as-new-emergency-reserves-open
EOG?
Just wanted to show an updated chart for EOG production covering the period Jan 08 – Jun 15.
EOG has some of the best wells in Bakken. 2013 vintage, average first year total at about 240 kb. The flip side is the decline rate.
Since Dec 14 and per Jun 15 total production has declined 30% while 17 wells were started.
Rune. Wow!!
Rune,
I find it interesting when you compare your graph against EOG press release on their second quarter results.
http://investors.eogresources.com/2015-08-06-EOG-Resources-Reports-Second-Quarter-2015-Results-Increases-Potential-Bakken-Reserves-to-1-0-BnBoe
Exceeds Second Quarter Production Forecast and Reduces Per Unit Lease Operating Costs by 17% Versus First Quarter
Are EOG into finance double speak? or can this drop be explained by incomplete data? How does production of confidential well get handled in your graph? I believe EOG like to make nearly all of their wells confidential! I feel it is the hang over of their earlier Enron days.
They didn’t actually disclose their Bakken production volume in the press release, though.
They exceeded their forecast, which implies they forecasted a steeper decline than observed. The reserves are described as “potential”, which means J.S.
If you mean jack shit, I agree.
Tool, in the graph runs has been used as a proxy for production for wells on confidential list.
The detailed monthly data is compared to totals (for each well) for formation data (which I hold to include all production from confidential wells). The databases are juxtaposed.
For the wells started to produce in Jan – Jun 2015 the deviation for the total (for all wells) were less than 0.3% (the relative portion of underreporting)
If 0.3% is a significant underreporting to change the story, I leave to other to have an opinion on.
I know my answer to that one.
This 0.3% applies to flow early in the wells life as long it is on the confidential list. With time the relative deviation for the total decreases.
I have been through some shale companies press releases 10-Qs for Q2 15.
Few talks about profitability, but it is all about monster wells, IPs, first 180 days flow etc.
I would like to see more focus on metrics for profitability presented.
It is what they do NOT focus on, that is interesting.
Oh well. George Orwell, after all, did once say that “Omission is the greatest lie.”
Rune, EOG is famous in S. Texas for monster IP’s and monster declines; I’ll buy you a cold one at your favorite beer joint if you can do the same chart for EOG in the Eagle Ford.
Mike
Mike,
If I had the data for each well operated by EOG (or whoever) in Eagle Ford that is an exercise that would take an hour to complete.
Hi Mike,
The way the RRC reports production makes it tough to do the same for the Eagle Ford because output is reported by lease rather than by well as in North Dakota.
So for lease X we might have wells completed in Jan 2013, Jan 2014 and Jan 2015, but trying to figure out the output from the individual wells requires a huge amount of guesswork, even too much guessing for me!
I am pretty sure Rune would prefer not to make wild guesses and he may not have access to the proprietary data that would be needed for the usual fine analysis that he always provides.
I understand that, Dennis; I was more or less joking when asking for the data, but also implying it would be just as bad or worse for EOG in the EF.
I can get all that EF data but what the hell. 80% of my production can be classified as stripper; I own and operate 100% of it. It supports 11 employees and 53 wives, kids and grandkids. I am a little worried about all of us right now.
Did you just say something was too much guessing even for you??!! Yeowwww!
Mike
Hi Mike,
If you have access to the EF data, it would be interesting to analyze. I am sure Rune could do it very quickly and I would be interested also, but you are probably joking about having access to EOG data for the EF.
I agree, it would probably be worse in the Eagle Ford compared to the Bakken, unless EOG has decided to focus on the Eagle Ford because their leases there are more profitable than their Bakken leases.
Hi Rune,
If you have the numbers handy for comparison, how many ND Bakken/TF wells were completed by EOG in 2013 and 2014?
Is the decline primarily because fewer wells were completed in 2015 relative to 2013 and 2014?
Number of EOG operated wells reported started flowing by NDIC (Bakken/Three Forks/Sanish).
2013: 75
2014: 82
2015 (Jan – Jun): 17
Hi Rune,
Thanks.
So about 6.5 wells per month in 2013 and 2014 and about 3 wells per month in the first half of 2015. If there was not a big change in the average well profile in 2015 compared to 2013 and 2014, the decline would partially be explained by fewer wells completed. They may also be running out of room to drill new wells in their more productive areas which might lead a decrease in new well EUR.
I haven’t looked closely at EOG’s wells, an earlier post at Fractional Flow suggests that Mountrail County wells were less productive in 2014 and I believe many of EOG’s wells are in the Parshall field in that county so lower well productivity could well be an issue.
http://fractionalflow.com/2015/03/21/is-the-red-queen-outrunning-bakken-lto-extraction/
Interesting stuff as always.
If the peak oil meme of high oil prices caused the last big recession then the low oil prices should usher in a new golden age of prosperity.
Richard,
Thanks for the information. My feeling is that this is quite a tangled web. My feeling is that quite a few of the CEOs and upper management of the soon to be bankrupt oil companies are complicit in this charade as well. Granted, with many of these companies having very high debt levels, there was not much of a choice in the long run – but I feel most of these companies will go down without much of a a fight. In return, they will get to keep their jobs. The big loser in all of this, of course, is the small investor in the common stock who will lose everything. Few will shed many tears for these “speculators.” And yet, many of these investors will have invested in energy through mutual funds or IRAs or ETFs or whatnot.
In many ways, it is almost the perfect crime – many will benefit from lower oil prices (a least in the short run, and let’s face it, this country has never been much of a long-term planner. And is almost a victimless crime – the victims being the aforementioned retail investors as well as the oil industry workers.
Too fantastic to be possible you say?
Arceus,
Yes, the investors will be left holding the bag. The geniuses who set it in play will skate. With LTO, the employees below upper management will pay the bill, pretty much losing everything they worked for, while the officers will collect massive spoils and move on to the next gig.
And when the spike comes, we all pay. Those on fixed and low incomes will struggle, and the middle class will get crushed. The whole thing sucks. If there is a charade, everyone needs to wake up and ask why?
Yes, it will be a repeat of the Radio Shack bankruptcy all over again. With just a barely competent CEO, the company likely could have survived for another few years. With a great CEO RadioShack might have even thrived. But the CEO would not shut down stores until it was too late. Possible tieups were never fully explored.
In the end, shortly after declaring bankruptcy, it became clear that a buyer was waiting in the wings
Standard General, a New York hedge fund.
Prior to declaring bankrupty, RadioShack had taken loans from Salus Capital Partners. Later on, those lenders refused to approve RadioShack store closures unless RadioShack paid significant fees, prepaid a substantial portion of its debt and agreed to other covenants and concessions. Game over.
RadioShack entered bankruptcy with more than 4,000 stores, listing assets of $1.2 billion and debt of $1.38 billion. I believe Standard General bought the company for $170 million. A tie-up with Sprint was announced shortly after the acquisition.
I wonder if this scene will replay over and over with many of the shale companies and other oil-related stocks, right before the market recovers.
Good post on spare capacity on Motley Fool
http://boards.fool.co.uk/1986-global-production-58-million-13257163.aspx
Caught in the Catch 22 of having to pump aquifers during a period when those aquifers are getting little input and were already low. portions of California are sinking. California is truly in a state of dehydration.
http://www.livescience.com/51943-california-sinking-faster-than-thought.html
Does the ground re-raise in times of abundant rain?
In 150,000 years.
(With no withdrawals)
We really discount the future as a species.
McKinsey Inst on impact of autonomous vehicles, 80% reduction in vehicle numbers, huge spatial productivity gain in urban areas.
http://www.mckinsey.com/insights/sustainability/full_speed_ahead_how_the_driverless_car_could_transform_cities
change change change.
Robot taxis gonna hit demand, and carbon emissions: http://spectrum.ieee.org/cars-that-think/transportation/efficiency/robot-taxis-may-lead-to-greener-cities-?utm_content=bufferfdec3&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
Getting interesting—-
Asia down big time on Monday.
We will see if the elite can keep this afloat in the morning.
The tools available are diminishing.
http://www.bloomberg.com/markets/stocks/futures
“We will see if the elite can keep this afloat in the morning.” Yeah cytochrome, it should be interesting to see if they can turn this situation around. Right now at the link above Dow futures are at -401 but were at -450 earlier, so still lots of time until the opening bell. I’m wondering if there will be a big rally tomorrow to the upside, like the elite players will be able to do a head fake that will get the cab drivers and waitresses back in.
Meanwhile oil has dipped another -1.14 to break the 40 buck marker down to $39.31
Oil hasn’t been in the 30’s since 08, right? So are all these signals suggesting a recession?
“Ghost houses” in Japan:
http://www.nytimes.com/2015/08/24/world/a-sprawl-of-abandoned-homes-in-tokyo-suburbs.html?hp&action=click&pgtype=Homepage&module=photo-spot-region®ion=top-news&WT.nav=top-news&_r=0
JB, that seems like a vision of the future for the whole world. Descending population with the rural areas going first, followed by the suburbs, with the young one’s living in cities where the last of the jobs are and internet/phone connections are good. Maybe there is a future for humankind and it’s by ‘bundling’ the remaining masses together in highrises where transport is short distance and cheap.
Well it looks like they will not have a problem with housing for the Olympic Games in a few years?
From the end of the very interesting article:
Hidetaka Yoneyama, a housing specialist at the Fujitsu Research Institute, a think tank, said that until recently, homes in Japan were built to last only about 30 years, when they were then expected to be torn down and rebuilt. Building quality is improving, but the market for secondhand homes remains tiny. Developers are still building more than 800,000 new homes and condominiums a year, despite the glut of vacancies.
“In the high-growth era, everyone was happy with this arrangement,” Mr. Yoneyama said. But in 20 years, he calculated, more than one-quarter of Japanese houses could be empty. “Now the tables are turned. The population is declining and no one wants to live in these old houses.”
——————————————————
In my opinion, Japan is a harbinger. I think that if they can manage their population decline well, they can be set up better than many other countries for the future. Hopefully the Chinese won’t covet Japan to obtain more living space.
If the U.S. population could decline at a rate of one million per year, starting in about 15 years, with the decline curve starting to flatten by 2125, by the year 2150 we could be stabilize at about 200M people. With skill, determination to adapt, and luck, we could make it into the future without a catastrophic population crash and unraveling of a fairly modern and civilized society.
Best Hopes for humanity’s population and per capita resource usage to reach more sustainable levels in a slow, steady, peaceful manner.
An interesting document discusses how the Obama administration organizes campaigns linking state governors, climate activists, rich donors, and solar/wind corporate interests.
I found the “Echo Chamber” section on page 38 very interesting, because it follows the same pattern as the Bush Iraq WMD lies and other government propaganda campaigns of the past.
http://eelegal.org/wp-content/uploads/2015/08/EE-Legal-111d-etc-Steyer-et-al-Report-8-24-15-Final.pdf
That black and white photograph at the beginning of the document is hilarious!!!
They men in it sure look like they were conspiring to do something really shady and evil!
When do you think that photo was taken? Sometime in the 1940s? Wonder who those people are?
Then the text overlaying the photo is even funnier: THE CLIMATE AGENDA
Private Interests &
Public Office:
Coordination Between Governors,
the Obama White House and the
Tom Steyer-“Founded and Funded”
Network of Advocacy Groups to
Advance the “Climate” Agenda
So what we have here is more conspiracy theories… It’s getting kinda boring!
I haven’t read the report. But every business has a lobby and an agenda. You don’t think the oil, coal, and auto industries haven’t used their political influence to shape policies over the years?
As I have been telling you, Silicon Valley has no love for fossil fuels and will be using its influence to push various energy policies that appeal to them. Silicon Valley is no more altruistic than any other business group. All that this means it is old money will be pushed out by new money.
Fernando, I have yet to figure out what you think should happen. On the one hand you are constantly harping about communists and people who want a green agenda. On the other hand, you are suspicious of government. Who, exactly, do you want to fight these communists? Who do you want to organize worldwide pressure on communist governments?
Also, I have pointed out that some Nebraska farmers have stalled the XL pipeline because they won’t give a foreign company access to their land. You seem to want eminent domain to force them to do so. And who controls eminent domain issues? Government.
Fernando is often living in a pre Bay of Pigs World.
But I do appreciate his insight of some subjects that my literacy is challenged in.
OilPrice.com has published an article about wind power taking over from fossil fuel generation.
“The average levelized long-term price from a sample of wind power sales agreements signed in 2014 (and admittedly concentrated in the lowest-priced central region of the country) fell to just 2.35¢/kWh. These prices are below the bottom of the range of nationwide wholesale power prices, and compare very favorably to a range of projections of the fuel costs of gas-fired generation.”
http://oilprice.com/Alternative-Energy/Wind-Power/Wind-Energy-Could-Blow-US-Coal-Industry-Away.html
Change of subject, back to the affordability of automobiles.
You simply CAN’T buy a basic automobile these days on an American dealership lot. They don’t sell them anymore.
EVERY single car and truck on the new lot at the local Chevy dealer has power steering power brakes air conditioning carpet clear coat paint sophisticated radio with cd player or something equivalent, and nearly every one has an automatic transmission etc. Just about all have electric mirrors locks windows.
BUT these new cars and trucks DO mostly last twice as long as the ones sold just twenty or thirty years ago. They are a hell of a lot cheaper to drive too, in terms of fuel economy and maintenance and repairs. They are not prone to rusting out to the point of having to scrap them in less than ten years even in Michigan or Ohio.
But it is true that more and more people cannot afford one.
If modern cars were to be sold in only a very FEW models, and these models kept in production without major changes for five or ten years at a time, the cost of maintaining them would drop low enough that they could be kept running for thirty or forty years. Standardization works miracles when it comes to maintenance and repair costs.
I can get a new alternator for my old Chevy truck for a hundred bucks with a lifetime guarantee. Same for an older Ford truck. An alternator for a car the same age that sold poorly generally costs two to three times as much. Forget buying cheap new parts for unpopular cars. NOT available except for the parts that exchange with more popular models.
Having many models makes it possible for the dealers and the after market parts retailers to keep prices high. I went to buy a clutch for a Ford tractor once and realized it was the EXACT same clutch used in a heavy duty Ford truck. Same box, identical item except the stock number and paint.
The Ford truck dealer wanted two hundred , the tractor dealer wanted four hundred NAPA wanted one fifty for the truck and three for the tractor. NAPA had to know too.
After doing the SAME identical repair three or four times a mechanic can do it in half or less time with fewer mistakes. On new cars you hardly ever get to be REALLY familiar with them, they come and go too fast. So you are constantly consulting manuals to solve problems.
Yair . . .
Spot on with your 7:34AM post OFM . . . too much choice in everything leads to inefficiency.
I once worked for an outfit that had standardised on the 71 series GM two stroke engine, trucks, dozers, loaders, scrapers, cranes, sand dredges all had the same engine from two cylinder to twenty four cylinder.
Minimum parts inventory and fitters/mechanics who knew the beasts inside out and could rebuild an engine overnight.
Cheers.
http://www.righttorepair.org/main/default.aspx
Got past in ONE State … DOA on the HILL.
You did not buy that tractor. It belongs to us.
http://www.wired.com/2015/04/dmca-ownership-john-deere/
Whoops!
Look out below.
http://money.cnn.com/2015/08/23/investing/world-stock-markets/
Wow!
Dow off 1000 points at opening—-
Is the ponzi being exposed?
Time will tell.
We’ll see if all the king’s men can put Humpty Dumpty back together again.
Maybe the technocrat scientist kings aren’t as omnipotnet and all-powerful as they think they are?
https://en.wikipedia.org/wiki/Reality-based_community
The stock market cycle runs in 8 to 10 year wavelengths. I felt that the market was overpriced when it went past 13000, but there was a lot of government easing going on and the wave just kept building. Anyone who has not taken their profits already will be jumping on the band wagon over the next few weeks.
Large plunges seem to fall in a series of steps and can take several years to complete, so it is difficult to ascertain a bottom.
Chinese market has plunged 38 percent since June.
CC says: “Is the ponzi being exposed? ” Apparently, you have zero knowledge of what a ponzi is. Please try to read something about it, probably at about the fourth grade level.
From the article:
And then there’s oil. A year ago, a barrel of oil cost about $100 — now it’s trading near $40.
Oil is a lifeline of economic growth for many developing countries, which are also seeing their currencies lose value because of their economic exposure to China.
So if oil is so cheap shouldn’t the economies of those developing countries be booming?
It’s a double-edged sword.
But if you’re like Mexico, you’re in deep doo-doo.
Mexico has both falling quantity and price of oil exports.
Massive build-up of external debt in recent years, the majority of which is dollar-denominated so that a devaluation of the peso offers no debt relief.
And now, a reduction of that debt as short-term loans to Mexico get pulled.
And foreign investment dries up.
It’s the perfect storm, which almost all countries in Latin America — Mexico, Chile, Columbia, Venezuela, Brazil, Ecuador and Argentina, to name some of the bigger ones — are facing.
Glenn,
It is worth noting that the numbers for external debt, current account… are much worse for the US economy than for Mexico. Why not worry about the US economy? Dollar is down a massive 2% today as well as the Dow.
Economic decisions have political consequences.
Do you have any idea what the consequences would be for the United States if it ends up with a failed state — like Syria — on its southern border?
We could save a lot of money on fences if we made Mexico the 51st state. It would take the wind out of the sails of some of those anti-immigration candidates too. 🙂
I’ve been thinking that maybe the Fed would throw Mexico a lifeline like it did back during the Great Financial Crisis with another dollar swap.
But so far the Fed has not intervened to bolster the price of the peso.
Glenn,
Luckily the US FED – as the only central bank in the world – can do more QE and fix the problems for a while without much consequences. There will be more inflation, yet this is much welcomed now. Nevertheless, markets have to force the FED to do so as it is the case right now.
Glenn, thanks for sharing. This is important.
And in addition, the Mexican political class was already in crisis, even before the economic crisis began impacting the country so hard.
As the political crisis deepened, the Mexican political class responded with ever-increasing state violence in order to maintain social and political control. The Mexican state now stands accused of four mass murders in the past couple of years, allegedly perpetrated in order to terrorize and maintain control over the lower orders of Mexican society.
One of those mass murders — the murder of 43 students from the rural school in Ayotzinapa — triggered mass demonstrations all across Mexico, where millions of people took to the streets.
I saw an opinion poll yesterday where Mexico’s president, Enrique Peña Nieto, now has a 4.5% approval rating.
Of course you hear nothing of this in the United States, because Mexico is a client state of the United States.
The only bad things you hear in the United States are what’s going on in those countries which represent a “national security threat” (as Obama put it) to the United States, like Venezuela.
What you hear depends on how hard you listen and who to. I agree the MSM coverage of Mexico and points south is generally inexcusably skimpy and shallow.
But if you look you shall find.
The LA Times ran a long series about internal Mexican affairs that pulled no punches at all a year or two back. Any body with access thru a university library can read it free. Mexico could collapse at any time if the cards fall wrong.
Uncle Sam’s Pentagon rates Mexico as one of the three countries in the world most likely to morph into a ”failed state” or did , as of a couple of years ago.
Well you don’t have to look very damned hard.
Take this, for instance.
The front cover of Time Magazine, no less.
”Of course you hear nothing of this in the United States, because Mexico is a client state of the United States.”
You said that just upthread. I merely pointed out that if you look you can find good reporting rather than propaganda.
I assure you that the LA TIMES series will not leave anybody who reads it with any delusions about prevailing conditions in Mexico.
And while the MIC looks after itself, the Pentagon does not talk bullshit about the likelihood of any given nation becoming a failed state.
Demonstrators burn an effigy of Mexican President Enrique Peña Nieto in front of Mexico’s National Palace during mass protests against the state murder of 43 students from the normal rural school in Ayotzinapa.
We had Reagan as a B Actor, they have a Soap Star.
No one said late stage capitalism would be fun—–
Surreal, but not fun.
I’ve thought a lot about this, but I think the fateful decision to set the United States down the road to perdition came before Reagan.
The US’s transformation from productive capitalism to finance capitalism began with the Nixon administration. As Nixon joked: “We’re all Keynesians now.” Keynes would have rolled over in his grave at Nixon’s debauchery of his economic philosophy.
Since Nixon, every successive president, regardless of which side of the aisle he came from, has followed in Nixon’s footsteps. It was, after all, Carter who appointed Volcker as Fed chair. It was, after all, Carter who crafted the Carter Doctrine which fully militarized US energy policy. It was, after all, Carter who signed the presidential finding to help the Mujahideen, which made him the first president to use Islamic fundamentalism against the Soviets. ( Talk about a decision with some serious blowback!)
Financial capitalism is like a cancer which slowly grows until it finally devours and kills its host.
In the United States, this cancer has been slowly growing since 1971.
I agree—
And as Abbey pointed out:
“Growth for the sake of growth is the ideology of the cancer cell.”
It was, after all, Carter who crafted the Carter Doctrine which fully militarized US energy policy. It was, after all, Carter who signed the presidential finding to help the Mujahideen, which made him the first president to use Islamic fundamentalism against the Soviets. ( Talk about a decision with some serious blowback!)
I agree those were mistakes. But, how do they relate to “finance capitalism”?
The most concise explanation I’ve found is that which Chris P. Dialynas and Marshall Auerback articulated in “Renegade Economics: The Bretton Woods II Fiction”:
[BWII] is less a monetary “system” and more a monetary fiction, articulated to rationalize the dollar’s perverse resiliance in the face of America’s increasingly parlous debt build-up and America’s seeming immunity to Third World style debt-trap dynamics….
All parties that have embraced the conventions of BWII have had good short-term reasons for doing so. The U.S. has acceded to this arrangement because it has served to boost U.S. asset prices and lower risk spreads, thereby helping to facilitate America’s “guns and butter” foreign policy. In the absence of its Asian creditors acting as “dollar sub-underwriter of last resort,” it is hard to envisage a chronic debtor country like the U.S. mounting sucessive wars with little financial strain and an absence of tax increases….
And there is little political appetite for tax increases to fund the military option… Further reinforcing America’s renegade status is an increasingly militaristic foreign policy….
The U.S. has been perfectly happy to accede to the current state of affairs in spite of the immense economic damage it has inflicted on its domestic manufacturing sector (and the concomitant evisceration of its middle class) because it has provided the country with a cheap form of war finance, a particularly important consideration as it has gradually militarized its energy policy.
As well as this.
And does this mean that there was a reluctance on the part of the rest of the world, beginning in 2013, to continue to finance the US’s borrow and spend lifestyle?
Or can the US continue to borrow and spend forever?
In their paper, Dialynas and Auerback conclude that Bretton Woods II is not sustainable, and that eventually the rest of the world will say “no more,” and the US will have to begin living on what it produces.
Maybe this will help to explain what Dialynas and Auerback are talking about.
And this:
Shut in 3 leases this A.M. Neighbor plans on shutting all in by weekend if price action continues.
Here comes the cliff boys.
It’s really tough times in oil business. I do hope we’re near the low point in price.
The right decisions are not always easy. Hang in there shallow sand.
The conventional wisdom here is pretty much that shutting in a waterflood project is a Very Bad Thing. Sweeping an interface between oil, water or gas through the rock will result in stranded oil or decrease permeability, and it isn’t something you want to do any more often than you have to.
An old waterflood project is mostly water pretty much everywhere, though, so that doesn’t really apply. There are even some projects which deliberately inject water intermittently for enhanced recovery, although getting much benefit from this seems to depend on having permeability anisotropy, which would not be the case in sand.
I’d worry about bacteria growth in the injector wells ruining them, but I don’t know that much about that.
Maybe the shut-in won’t hurt your wells nearly so much as you seem to think.
9501, TEPCO, lost 67 yen on the Nikkei today and is at 775 yen, 6.25 per share.
Oil stocks hitting new lows, oil price below 40 USD, it is chaos and mayhem, a mauling, burning down the house. The turd blossom hit the giant cooling fan in the milking barn.
Chickens coming home to roost. A bloodbath.
Yes Ronald, we have wild dogs and coyotes making bloodbaths around here with the livestock. My favorite egg producer (small farm and free range chickens) stopped raising them after the third time the chickens got decimated.
I wonder what the oil industry thought peak oil would look like? Wasn’t it Ron who said that peak oil was the period of time when would have the most oil production ever? I guess that implied the possibility of a fall in prices for at least a short term, if we had thought about it.
It may not appear so at first but this financial debacle could open the doors to a kinder, gentler and more prosperous world (I am talking the whole world, not just humans). Of course we must watch out for the vultures and sociopaths taking advantage of the situation. Even war makes big profits for somebody and the system is designed to make people rich from other’s failures. In some ways we never left the African plains.
Of course we must watch out for the vultures and sociopaths taking advantage of the situation.
“Ideology,” as the political essayist and Czech dissident Vaclav Havel once wrote, is “the bridge of excuses” a government offers to the people it rules. Between 2001 and 2009, the U.S. government was run by neoconservatives; they had a fair shot and the public judgment went against them; but in a climate of resurgent confusion about the Middle East, they have come a long way toward rebuilding their bridge. They are zealots but also prudent careerists, and the combination of money and revived propaganda may succeed in blurring many unhappy memories. Nor can they be accused of insincerity. When a theorist at a neoconservative think tank, the Foundation for Defense of Democracies or the American Enterprise Institute, affirms that democracy is what the Iranian people will have as soon as the U.S. cripples the resources of that country, he surely believes what he is saying. The projection seems as true to them now as it was in 2002, 2007, and 2010, as true as it will be in 2017 when a new president, preferably another young man of “spirit” like George W. Bush, succeeds the weak and deplorable Barack Obama. For such people, the battle is never over, and there is always another war ahead. They will push until they are stopped.
cytochrome said ” preferably another young man of “spirit” like George W. Bush,”
I say “ROFL”
Massive buying inputs just before 1000 EST almost halved equity losses. Oil back from 38 to 38.50. Look at that buying spike! Who would jump in and catch a billion falling knives? Evidence of the plunge protection team? What a mess.
Day traders feeding on themselves?
HR says: “Who would jump in and catch a billion falling knives? ”
Maybe some people who invested in March – June of 2009, who now have triple their investment. Or some people who invested on Tuesday October 20th, 1987, after the Dow was DOWN 22.6% in ONE day on Monday, Oct 19th. They now probably have more than 10 times their money, even in index funds. By the end of the year 1987, the stock market was higher than it was on January 1, 1987, the start of the year.
But, maybe every stock will be 50% cheaper tomorrow. And, that is always the fear/greed factor.
WTI – unstable @ 38.45 USD/bbl … opps now 37.xx -6.5% on Day
WTI is at 38.36 and dropping hard this morning. Oil has totally detached itself from all currency movement. Euro is up about 300 basis points, Yen about 300 just since last night to the dollar(not actual Euro and Yen strength just carry trade unwind). ECB and BOJ can’t afford carry trade unwind due to the currency move. All commodity currency are getting slaughtered. DJI just crashed another 300 or so in the opening minute of trade. Any and everything that is a carry trade is unwinding. Deflationary Collapse!
PBoC, BOJ, ECB all have lost the battle with deflation. Chances are FED has lost as well and it won’t matter if they cuts rates from here and do more QE. This is a sinking ship and it’s going under as we speak. This will be nothing short of a pure bloodbath that goes from financial markets to main street markets. The moment of collapse is upon us.
Sawdust,
Please notice also: The USD is also treated as commodity currency and is down a massive 2 % today. Having already fallen substantially the last few days, this is massive and shows which direction this trend goes.
PPT was out in full force and did there best to prop this market up this morning. But the day is not over yet and we can still close near the lows. Without a change in direction from the FED i don’t see this save holding. We will see.
2k swing!
Never saw that before.
Has anyone else?
Yeah now if they would just turn them HFT on to buy oil instead of sell oil we could fix this low price issue. Guess somebody somewhere doesn’t want oil price to go back up. Well thats how i see it.
“I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”
~ Thomas Jefferson
It’s almost a shrug.
Numbers on a screen are not going to be allowed to cause millions to die. The numbers will be manipulated or changed by decree.
Only oil scarcity can and will kill the billions upcoming. Today’s events will be dealt with by creating money cooperatively globally to keep the wheels turning.
I’m watching 50 point S&P moves in 5 minutes. No humans do that. The HFT engines were given their orders and they define the market to be what they wish. They don’t predict. They never have. They define.
There is no capitalism. It all died in 2009. Now there is pretense, and we’ll get an avalanche of articles about how “traders” decided not to accept 1000 point declines for business that remains solid and everyone will accept it as real and truth because the alternative is not acceptable.
Watcher, you may be right (I suspect you are) but $40 oil prices (sustained) will cause havoc. As will generally collapsed commodity prices for mining companies. The above comments about Mexico are a case in point: chaos in the making. BTW, what are HFT engines?
High Frequency Trading. Computers are about 80% of trading volume now.
Oil was sub 40 for all of the 1990s, yes?
Sure, oil prices were relatively low in the 1990s but most modern developments require much higher prices to be viable, especially the much touted Arctic stuff.
I semi like that. Dollars as a measure of joules effort required.
Except that they aren’t — it it’s needed that they not be.
But when reality finally catches up they will need something other than whats been in place since 2009. All this crap they’re doing has a shelf life. When it no longer works it no longer works. Maybe it will work for a little while longer. But time is running short. Debt cannot be service in a zero growth environment. You can create all the money or debt you want but you can’t avoid collapse. Actually in a zero growth environment the more debt or money that is created and added to the economy the faster the collapse will happen. And thats why it’s difficult to be 100% certain what the policy response will be. QE and lower interest might not be an option. Collapse might be the only option at this point.
Somewhere in their plan. You got to believe they will thin the herd a bit before oil scarcity arrives. If they allow market crash it would be a step towards thinning the herd. There are a lot of different ways to look at it. There is no way to predict the unpredictable.
As Catherine Austin Fitts put it:
We know that the official story is not truthful.
When a system does not work and continues to not work, there is something that prevents its learning. Ultimately what we must understand that the problem is not that the system does not work and that it is not learning. The problem is that the system is controlled and operated by the most powerful forces in that system and that the system is indeed working and learning in the general direction they want it to go. This happens in a manner that is highly organic and requires lots of planning, trial and error and factionalism that involves competition and cooperation over time in the pursuit of the system’s real goals. Hence, the system is working and is learning. It is our construct that is wrong. We do not understand the system and the goals of the system. Once we are clear that the system is working and is learning, once we stop falling back on scapegoating as a technique to explain events, we can start to understand the real system that we are a part of. This is how power and money work in reality.
Watcher Wrote:
“There is no capitalism. It all died in 2009”
Capitalism died back in the 1980s, when the “Greenspan Put” put an end to the normal business cycle. Capitalism required period cleansing to remove failed businesses and let new business that create innovation and improvement. Today the US (and perhaps all of the developed world) is full of Zombie business that grew enormous, but failed to innovate. These companies are propped up by Govt bailouts, subsidies, and regulations designed to prevent small business from competing.
FWIW: Next on the table is going to be rout in the Non-gov’t bond market, with especial focus on corporate bonds (that were used for Stock buybacks and well as financing Shale drilling). Unless the Fed starts QE4 real soon.
Capitalism required period cleansing to remove failed businesses and let new business that create innovation and improvement. Today the US (and perhaps all of the developed world) is full of Zombie business that grew enormous, but failed to innovate. These companies are propped up by Govt bailouts, subsidies, and regulations designed to prevent small business from competing.
True. Capitalism without risk isn’t really capitalism.
The Fed will do what it must to keep the wheels turning. And if you were in charge of it, you’d do the same thing. You might wave your hands aloft and talk about what should have been done or what needs to happen in the future, but for NOW, to keep the wheels turning, you’ll do the same thing.
There is no fixing oil scarcity, and IT is at the core of all of this.
What oil scarcity?
http://www.cnbc.com/2015/08/24/12-records-hit-in-the-global-market-selloff.html
12 records hit in the global market sell off. Each one a different stock index starting with the Dow & Nasdaq, then moving around the world to different stock markets.
For all you market watchers. This is a Monthly Candlestick chart of the Dow Jones since 1995. We are currently underneath the monthly trendline that comes off the lows from 2009. If we close below this trendline which by looking at this same chart in it’s daily form instead of monthly it looks like we are in fact are going to close below it. More than likely the last few day are only a taste of what is to come.
A lot of people don’t put much faith in technical analysis. With markets being controlled by HTF and so forth. Long-term trendlines are what they are and they don’t require any adjusting and there is no guess as if it is in a certain pattern or not. If prices fail to recapture this trendline by the end of the day. Then the Up trend from 2009 lows is over.
I think Ropert Rapier is more or less saying that ~$40 / bbl is the bottom.
http://www.energytrendsinsider.com/2015/08/20/why-the-20-oil-predictions-are-wrong/
Robert Rapier in January 2015
http://www.energytrendsinsider.com/2015/01/22/why-50-oil-wont-last/
”Therefore oil will not — as I have seen more and more pundits predict — sink to $40/bbl and stay there.”
And back in October 2014
http://www.energytrendsinsider.com/2014/07/10/world-sets-new-oil-production-and-consumption-records/
”Arguably the only thing preventing the world from experiencing oil prices in the $150-$200/bbl range is the continuing shale oil boom in the US.”
The market does not care about Rapiers predictions.
WTI now at $38/b.
The price doesn’t care about Rapier’s predictions.
No markets anymore. It’s all gone.
so do you think it can go much below $40 and stay there?
I’m not advocating a position one way or another, but sub $40 for any length of time sounds like big big trouble.
amazing
That just shows what kind delusions mind can create. Mind can create thoughts that are completely irrational. I hope he is not trading with real money with these thoughts in the background since he mentions that he is betting 10k with somebody. The whole game in investing is in relations to index and it is zero sum game. If you read in paper somebody made millions or billions that means many others lost a little bit to make that million. Way less people are better than index than the ones that are worse than index. Here is the great paradox of the market: you can choose to be “stupid” and invest in just “average” of the market (and that is what index represent) and you will have higher return then all those “smart/expert” ones that are guessing and trading individual stock/commodities in order to beat the index.
Ves says: Investing is a “zero sum game.” That is caveman thinking. When Zuckerberg invested in Facebook stock, and now is worth ten’s of billions, who lost? Do you think that the world-wide 100’s of trillions of dollars of wealth was “lost” by some space aliens? Suppose you bought a house in California (invested in a house) in 1970 that cost $200,000 and today it is worth $2 million. Who lost the 1.8 million?
I think that someone who runs this site would say “bullshit.” But, maybe not – he can speak for himself.
Proof that money is a substance created from thin air. Think Facebook would have run up without the Fed printing $4 Trillion in that time frame?
Who lost? The money lost. Money is a medium of exchange and when it takes 10X the amount of money to buy the same thing that means money has lost value. If you hold the money, you will lose. If you hold an asset, you may break even or win, then again you may lose too.
As far as Facebook goes, the consumers lose. Businesses spend their money to the tune of 1 billion dollars every quarter and hope they get more paying customers in return. When businesses advertise, the consumer pays the cost. So the consumer loses by paying extra for the product and Facebook along with the business wins. Well, Facebook wins whether or not the business wins.
Art Berman takes on Mauldin’s claims
« John Mauldin Defends The Faith, Fails Economics 101
http://www.artberman.com/john-mauldin-defends-the-faith-fails-economics-101/
530 +588=1118 point drop in two days. Decline, as in steep, at a decent clip, worse than a Bakken well.