What Will 2015 do for Peak Oil?

The Cornucopians are exuberant, they believe that collapsing of oil prices dealt the death knell for peak oil. An oil glut, they say, is what we have, not peak oil. But an oil glut is exactly what we would expect at the very peak. After all, that is what peak oil is, that is the the point in time when the world produces more oil than ever in history… and the most it ever will produce.

I am of the firm conviction that the world is at the peak of world oil production right now, or was at that point three or four months ago. I think history will show that the 12 months of September 2014 through August 2015 will be the one year peak. Whether the calendar year peak is 2014 or 2015 is the only thing still in question, or that is my opinion anyway.

The EIA says, in their Short Term Energy Outlook says US Crude oil will peak, at least temporarily, in May 2015.

STEO 1

Looking at the area breakdown for total US production:

STEO Total US

This chart includes net US crude oil imports. Notice how they expect crude oil imports to bottom out in February of 2015 at 5.78 mbd then increase to 6.71 mbd in August before declining to 5.82 mbd in December.

Lower 48

Lower 48, excluding the Gulf of Mexico, peaks in July and August of 2015 at 7.47 mbd, according to the prognosticators at the EIA, before starting a slow decline to 7.28 mbd in December.

GOM

The dip you saw in the first chart came from the projection of the GOM production. I have no idea why they are expecting that dip in August, September and October but I suppose it has something to do with the hurricane season. But if they can predict what will happen to oil production during the hurricane season they are good, really good.

However they are predicting GOM production will increase by 170,000 bpd by December of 2015. I don’t really think that is going to happen. However the EIA has come off a lot from their earlier GOM production, or seems to be leaning in that direction anyway. They originally had GOM production at over 2 million barrels per day by 2016.

The new Short Term Energy Outlook is due out Tuesday. I will report on any changes in the EIA’s outlook then.

But looking at the rest of the world, data for the two charts below is in thousand bpd with data through September 2014.

Big 11

Here is where all the growth has come from in the last five years. The combined production of these 11 nations are up about 10.7 million barrels per day since their low on January of 2009. All these nations, with the possible exception of Brazil and Iraq, will have reached their peak on or before the summer of 2015. Of course if the price increases again then the US and Canada will again start to increase production. But even in here their rapid production growth is over. Any increase after the price rise, if it happens, will be at a much slower rate.

The Rest of the World

The rest of the world is down and going lower. Of this group only Kazakhstan has any hope of increasing production very much and Kazakhstan will not see anything until 2017, if then.

The Baker Hughes Rig Count is out.

Baker Hughes 1Baker Hughes 2

Canadian rig count was up 158 to 366. That still leaves it down 25 rigs from the 391 it was at two weeks ago. I have no idea what is going on there.

But the US oil rig count was down 61 from one week ago. It now sits at 1420, down 188 rigs from the high of 1609 back in October. The Permian suffered the largest loss, down 28 rigs this week.

In other news: Lynn Helms says it takes at least 140 rigs to keep production flat.

At least 140 rigs are needed to maintain October’s production level of 1.2 million barrels per day, the most recent figure available, Helms said. Based on a survey of the Bakken’s top producers, he expects the rig count to drop to 150 by July 1 and to as low as 125 rigs by the end of the year if depressed oil prices persist.

I believe that figure is a little optimistic but it’s his job to be optimistic.  In the short term it is fracking crews, not rigs that will determine whether production goes up, down or stays flat. From my reading of new wells coming on line, November looks to be flat to down, December looks pretty good and January is starting out pretty bad.

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615 Responses to What Will 2015 do for Peak Oil?

  1. Rune Likvern says:

    Hello,
    I just put up the post
    Are Mountrail’s Sweet Spots Past Their Prime?
    http://fractionalflow.com/2015/01/09/are-mountrails-sweet-spots-past-their-prime/

    More analysis of Bakken LTO.

    • Watcher says:

      “The linear fits show that wells started in 2012 were poorer than in previous years.”

      That will be worth debate here.

      I’m afraid the debate will not reach a conclusion because :

      “Measurements from actual data showed that the smoothed month over month legacy decline varied between 5 – 6%.”

      This proving wrong is going to be the big monkey wrench thrown into correlation analysis.

      Bankrupt companies cannot continue to sell oil from already existing wells. They will be semi padlocked awaiting litigation. Simply that, metaphorically. What this will do is make the legacy decline rate steepen for the very old wells. On a graph they will slam down to near zero with just a handful escaping the padlock and the rest simply stopped, awaiting a very long court queue.

      These aren’t a bankrupt department store that asks for court protection from creditors. They can’t go on selling inventory until the shelves are empty. The inventory is collateral on the loans that have driven them into bankruptcy. It will take time for a judge to decide who can do what. They can’t just file and still send their guys out to the wells to load up trucks. The bondholders own that oil the day they file for bankruptcy.

      • Nick G says:

        I have the impression that wasn’t the case in previous oil price crashes.

        Do you have any support for this idea that oil company financial problems will mean capped wells? Sources, links, etc?

        • Watcher says:

          The best link would be finance.yahoo.com and the going yield on HYG.

          Past oil price crashes are not informative in the new normal of high yield funding. Besides which, would not past oil production during those crashes be the links you want?

      • Dennis Coyne says:

        Hi Watcher,

        Several people with knowledge of the oil industry much better than yours have repeatedly said you are wrong on this, and they are correct.

        Your knowledge of bankruptcy proceedings is severely limited, based on your comments.

        • shallow sand says:

          Watcher, I think the bankruptcy trustee will operate the wells via a contract operator if they are profitable to operate. Wells could be shutdown for a short period of time during a transition. Also, will the BK’s be liquidations or reorganizations? That could make a difference. If OPEX is higher than the oil price, they would likely be shut in. Again, the BK in shale will result primarily from debt incurred from CAPEX spent drilling and completing the wells. I have seen wells shut down, but those were primarily strippers whose OPEX or LOE was higher than the crude oil price, think 1998.

          I doubt they will all be padlocked.

          • Watcher says:

            As I said, padlocks are metaphorical. These are LLC, not corporations. The bankruptcy judge makes the call on how assets are distributed, and he can’t do that until the case comes to court.

            They are going to be inundated. And the lenders are not going to have any incentive in going fast if fast doesn’t provide them, rather than the LLC, and advantage. Largely, LLCs dissolve when they file. Then distribution of assets is even more difficult to arrange among creditors — none of whom want to operate an oil well.

            • shallow sand says:

              Watcher, I don’t think it will go down that way, but I won’t shed too many tears for the companies if you are correct. Will feel bad for the employees though.

        • TechGuy says:

          DC Wrote:
          “Several people with knowledge of the oil industry much better than yours have repeatedly said you are wrong on this, and they are correct.”

          Watcher is likely correct. Those that are in the oil industry haven’t seen this amount of over leaverage since the 1980s and finance had changed a lot since then. The issue is that contractors are going to get stiffed for sure and they aren’t going to come back to work, until the invoices get settled. Once a driller falls into bankruptcy it’s going to take time for the Bean counters to figure out who is rightfully owed money. There will need to be court hearing and meeting with creditors before money gets paid. Until a full audit is performed by a bankruptcy firm, no one is likely to get paid. That’s just the way it is!

          There is also a possibility that the creditors will shut in wells and wait for oil prices to recover, so they have a better opportunity to recovered as much loss capital as they can.

          In Jan 2009 Oil priced bottomed at about $30 bbl, by June 2009 they bounced back to about $70. It would be foolish not to shut-in and instead sell at a steep loss. If I recall correctly, during the plunge in the 1980’s wells were shut-in.
          In about 6 to 8 months, prices will likely rebound. The only reason not to shut-in is if your over leveraged and grasping for cash flow to pay those bond coupons that are coming due. I am sure a few drillers will do that in an attempt to wait out the plunge. Unfortunately they were already insolvent before oil prices started to collapse. They would have gone bankrupt anyway, just at a later date. The price collapse is just pulling forward the date of their demise. The smarter management teams will walk away and save themselves grief of trying to bailout a sunken ship.

          • In the oil business things have a tendency to roll downhill. This means the players involved react to crises to maximize their own value. This of course is driven to a large extent by expected future prices.

            So now we need to ask ourselves, what does the futures market say about prices in 2016? 2020? Can anybody put up a graph, and we can chit chat about the implications?

            • Mike says:

              As to Mr. Leanme’s question, above:

              There is not one CEO, prospect geologist, land man, roughneck, completion engineer, division order analyst or well gauger in the world wide oil industry right now who does not believe that the price of crude oil will find a bottom soon and start it’s relentless march back up to 8o dollars a barrel over the next 12-18 months. Futures strip outs and a 4th grade knowledge of worldwide production declines, net export factors, and the prospects for ever increasing hydrocarbon demand, strongly point toward the fact that oil prices will go up. It is inevitable. Wind, sun and corn, in spite of the rhetoric, won’t help you fly the kids to Disneyland next summer.

              What are the implications of rising oil prices? They are that while some people sit at a computer all day envisioning how the shale oil industry is going to fail, of bankruptcies and government bail outs, of padlocked wells and over 3 million barrels per day of LTO production vanishing into thin air…there are lots of very, very smart people out there figuring out a way to survive. And they will survive. My kind of oil industry (conventional) is not going away and the shale oil industry is not going away either, not entirely. It will be different as a result of this correction in prices, but it is not going to fail completely. Shale oil was never the answer that America needed anyway, but it will play a role in our energy future. That’s a damn good thing. I am still mad at the bastards (I cannot stand the abundance/technology bullshit that still, to this day, gets slung against the wall,) but hey, my kids and grandkids need the nasty stuff those guys are wringing out of all that crummy rock.

              If you want the shale oil industry to fail, for self serving reasons, to perhaps be right about peak oil production theories, to have something to waste away the days by on a computer, seek professional help immediately. There are pills to take for that sort of stuff.

              Things are getting tough out here in the oilfield right now, its time for me to get tougher. I’ve been thru this price thing a bunch of times; I am not going to lose one stinking BOPD if I can hep it, no sireee. But this is going to be my last post for awhile.

              I drive thru the biggest shale oil field in the world almost every day. I have been in the exploration and production business for a half century. I have done everything in it you can imagine, then some. I know what I am looking at. I know how long rigs stay on locations, how long it takes to drill shale wells. I have gotten daily drilling reports, I know what shale wells cost, and why; I have watched my royalty checks from shale wells get smaller and smaller over the years. I sure as hell know about decline rates and EURS based on IP’s and type curves that don’t, in the long run, end up anything like shale oil companies say. I know how to make money in the oil business. Most of the crap the shale oil industry feeds folks on the internet is worse than crap. When I read that stuff I always feel like I need to go take a shower. These days I see vacuum trucks lined up at water disposal wells 8 deep, rig iron stacked back in the woods, good men going to the house, or the beer joints, out of work. Worried. I ask people who I have known and worked with over 50 years, that work in the shale patch, what the real deal is.

              What I have found is that most people on blogs don’t want to know what the real deal is. They don’t want to listen to folks who have been there, and done that, or that are doing it now. They would rather read about it in a “link” and speculate about it. If its on the internet, it must be true, they think. People who use to not know what that spot was under their car on the driveway are now oil “experts.” They don’t want to hear, or read things that do not fit into their unique perception of reality. That’s a mistake. There are some smart people on this site that want you know the real deal. Pay attention.

              The oilfield is a very fluid environment that changes every day. The manner in which it can adapt and adjust to extenuating circumstances is unlike any other industry in the world. How most of you envision this is all going to shake out for the shale oil industry won’t be anywhere close to the real deal. Y’all can keep guessing about it but give the folks out here actually doing it, some credit. It ain’t the pizza business.

              Thanks.

              Mike

              Ron, I am in touch with Rune; if you and/or Dennis have a question for me, please give Dennis my email address. I am good with that. The data is important.

              Keep a bind on it!

              M.

              • Rune Likvern says:

                Kaffee: “I want the truth!”
                Col. Jessup: “You can’t handle the truth!”

                https://www.youtube.com/watch?v=5j2F4VcBmeo

              • shallow sand says:

                Mike. Gonna miss your posts. I need to tone it down myself. Think I need to quit reading the shale BS also and focus on staying afloat. Hang in there.

              • Mike, we value your input on this site. We also value the input of all other true oilmen on this site. I only wish there were more. I never discount the word of an oilman.

              • Dennis Coyne says:

                Hi Mike,

                It has been a pleasure learning from a pro! Thanks.

                I am with Ron. Learning from you and others with real world oil field experience is great, I apologize for coming across often as a know it all.

                Relative to you, Fernando, ManBearPig, Doug Leighton, Rune Likvern, and Ron I know little.

                I appreciate your patience and willingness to correct me when I am wrong and to answer my endless questions.

              • Caelan MacIntyre says:

                “When I read that stuff I always feel like I need to go take a shower.” ~ Mike

                Yup, and my skin’s pretty damn dry these days.
                (I should stockpile Oil of Olay before its price rockets back up or it goes in terminal decline.) ‘u^

              • Synapsid says:

                Mike,

                Thanks for all you’ve given us. I’ll look for your return.

              • TechGuy says:

                Mike,

                I hope my comments didn’t tick you off and that’s the reason your going to cut back on posting. I presume, that you need to spend more time on running your business. If I did say something that ticked you off, I am sorry. I just posting my views on various topics. I usually read all your post since they are the most valuable. As you stated its people with their boots on the ground that have the most valuable information.

                I think the price collapse absolutely sucks and is unfair. I absolutely appreciate the hard work of people like you and your crew. You group is some the hardest working people in America, and I can certainly relate to your point of getting pissed off when people start getting joyful over collapsing prices. I don’t like to see hardworking people lose their jobs, especially in such an important industry as yours.

                My fear is that this price collapse is going to have a long term problem as capital investment disappears and doesn’t come back for a long time. As I stated, investors are very reluctant to jump back in, having gotten burned. I suspect that your running a sound and tight ship and you don’t need to rely on cheap credit to drill. if that is the case than I am sure you will bounce back in a year or less. I hope you end up being able to use the price collapse to locate some bargains, so when the prices do bounce back, you’ll come back stronger.

                Best wishes for you and your crew. Please thank your crew for me. I really appreciate their hard work and commitment to help keep the economic running.

                • Caelan MacIntyre says:

                  Hi TechGuy,
                  Well I appreciate your posts, and thrig’s too, among others.
                  (Was that you about the 40 suns around the planet bit? It’s sobering.)
                  Ron’s world peak prediction here is just plain scary… so close…

              • notanoilman says:

                Thanks for your help in understanding the industry. I will look forward to your return. Keep safe.

                NAOM

              • SW says:

                I’ve learned a lot from reading your posts and wish you and yours the best as you try to deal with current circumstances.

              • ManBearPig says:

                Stay strong man. I’ll try to hold down the fort with the few other industry guys we have here until you return.

              • Toolpush says:

                Mike,

                Sorry to see you go, you have been a breath of fresh air. It has been great to see others confused by our conversation, as I am often confused by theirs. Smiles.

                Remember there are 3 handles on the slips, so don’t go too far.
                See you around a rotary table somewhere.

                Pusher

              • Mark says:

                Mike,

                I too am a producer of 30 plus years. Your comments are spot on. Over the next several months the USA, and perhaps the world, will see how far away America is from energy independence. Like you, I will still be here to pick up a few crumbs as the fallout matures into a wholesale reevaluation of shale plays, particularly oil, and gas may follow. I don’t about your experiences, but I’ve seen horizontal drilling and massive frac jobs prove to be technically successful, but the economics appear to fit better for government owned reserves rather than private or public owned companies. The Saudis, and their partner(s) in this effort to accomplish their objective(s), may achieve their goals, whatever they are, sooner or later. Unfortunately, I believe one objective has less to do with market share and more to do with technology. It is painful to think they, and others, will eventually adopt our technology to enhance their own EUR’s.

                Best of luck, Mike. Perhaps we will get acquainted at a spud meeting one day.

      • Rune Likvern says:

        My post will appear here on POB at a later date, likely within a couple of weeks.

        There are a lot of moving parts in LTO dynamics. Some wells are temporarily shut in for some reason, then brought back.

        To me going forward the dominant factor dictating future LTO extraction developments will all be about financial dynamics. This appears to be the part poorest understood as debt allowed for fast growth in LTO extraction. When debt no longer turbochargers growth the dynamics work in a powerful way in the opposite direction.
        This will also affect the points you list.

        • Rune, talking about financial dynamics, I noticed there’s an industry practice amongst smaller outfits to model investment economics using a very high target rate of return. They don’t apply risk and seem to be somewhat optimistic.

          My experience is that such practices lead to poorly optimized development plans. In real life the internal rate of return is lower, this means present value for later year cash flow is higher than estimated.

          What do you think, am I pointing out something real? Are they using IRR as high as 15 to 20 % to optimize their pad, equipment and well layouts?

          • Rune Likvern says:

            Fernando,
            With few exceptions I have not seen the assumptions smaller companies use for their economic evaluations. I have seen prospectuses where I found some of the assumptions with a clear positive bias and no sensitivity runs.

            A common feature from some of the more recent developments of conventional reservoirs have been too optimistic estimates on recoverable reserves (thus flow), development costs (CAPEX) and as of now on price trajectories leading to the owners taking considerable write downs some time after production was started. Risk was understated.

            Some have speculated that some of those involved in the early development phase (prior to the development being sanctioned) engaged in something close to wishful thinking (or worse) to help the development pass the hurdles and thus earn their bonuses.
            Those making development plans are humans with all that entails.

            Increased (debt) leverage has been a common feature for the more recent developments. This works fine as long there is profit growth, but if something goes south (flows, prices etc.) it destroys equity and borrowed capital at a very fast pace.

            To me the point above appears poorly understood, because companies that experiences write downs have their balance sheets impaired. Then add lower flow of profits and it finds itself in a vicious struggle to “target financial performance” (repairing its balance sheet) and they also have less debt carrying capacities.

            If oil prices remains subdued those companies remaining in the game will not have the same CAPEX capacities as they had on the way up (little remaining space on their balance sheets to take on more debt and at the other end you may have burnt investors afraid to come out in the water again).

            This is an important point I sense is missed by most analysts. Most analysis I have seen assumes the companies will continue to take on more debt as there is no tomorrow. They are in for a big surprise.
            In the shales, I do not expect a beautiful deleveraging to take place….. it will be an ugly one.

            The thing is if too optimistic assumptions are used to make the development (either conventional and/or shale) appear financially attractive the book keeping rules will at some point in time force the truth out in the sunlight.

            • I think the truth is their return on average capital employed over the years (if they live long enough to have a record). Just keep your eyes open for hurdle rates or discount factors they use in their pv presentations.

              I guess we do agree, they are optimists who use high hurdles to cover their behinds. And this means their plans aren’t really optmized. This in turn means they could probably do better using smaller amounts of sand per individual frac job and cutting well costs. Just a hunch.

    • coffeeguyzz says:

      Rune, you state correctly that the Parshall is about 300 square miles. As of October, 2014, there are 340 producing wells.
      As you know, the Drilling Spacing Unit (DSU) in ND is 2 sq. miles (1,280 sq. acres). The Parshall thus now averages about TWO wells per DSU.
      Rune, you must be aware of plans to place 12,16,24, or more wells/DSU. (EOG is floating plans to place 8 wells in each bench of MB, TF1-3, totalling a stunning 32 wells from EACH mega-pad).
      As the Parshall, along with the Sanish, is recognized as the most productive area in ND, much more future output would be considered reasonable.
      I appreciate all the work you contribute, while maintaining a longtime contrary stance.

      • so, let me see if I get this straight…, they drill a well in a two mile long by half mile wide rectangle. The spacing between wells is a half mile…..the two outer wells in that four tine configuration are 3/4 mile away from the pad center. So they got to drill directionally to step out 3750 feet, making the turn to drill at least a horizontal mile. And they expect to pump these wells with what? Rod pumps? Or do their engineers expect the wells to flow for a long time? What’s the water cut behavior in this Parshall area?

        • coffeeguyzz says:

          Fernando, virtually none of the numbers/layout that you described is congruent with what is happening in the Bakken. While I could suggest you refer to many of the E&P companies’ web sites for historically accurate operational info, they seem to roundly demonized by many on this site.
          The ND DMR site offers numerous highly informative presentations that clearly describe much of what has occurred up there these past several years, including well layout/density.

          • Coffeguyzz, I was referring to the “EOG is floating plans…” statement. If they are planning 32 well pads they have an ambitious layout.

            I have led teams laying out pads and wells for a few years, or served as consultant for companies preparing these plans, so I’m familiar with the problems involved. And I wonder if EOG engineers understand the implications of having wells turn that way, to later try to put a pump inside with decent run lives.

            Do they really publish their detailed pad layouts for these 32 well pads, or are they in the cartoon phase?

            • Toolpush says:

              Fernando,

              I work offshore so i am used to much closer spacing, 2.5 to 3m. Obviously we use gyro for positioning. Do you know what spacing is required where gyro is not required?
              As these pads become higher density, they may have to give up the luxury of being able to work over the well next to the one they are drilling and get really compact.

              • Toolpush, as you know when we work offshore the wells are located in the lower deck, and the rig sits on a deck sitting far above the wells. The costs are a lot higher, this forces us to have a much tighter spacing between wells.

                In Arctic areas we seem to drift to 8 meter centers. And on cheap onshore land they put them far apart.

                What I found when cost optimizing large pads is that an 8 meter center works fine. This is simply caused by the number of drilling rigs available and our ability to produce offset wells inside cages. This of course depends on the well. Drilling and producing is very feasible when the wells produce heavy oil or with lots of water.

                I know you understand these topics, I’m just making sure the exchange provides readers with the proper background.

            • coffeeguyzz says:

              Fernando, “cartoon phase” … I like that.
              While I cannot speak for the competency (or lack thereof) for the engineers at EOG, I can direct you to see an actual photo of a surveyed, staked out 32 well pad – the 30F – that Whiting is readying in their Retail area in the Niobrara. It can be seen as slide #14 to be found in their 11/14 presentation ‘Redtail Investor Update”. Slide #21 has different configurations re placement/layouts of both 16 and 32 well pads. This presentation also includes info on the Bakken, with Whiting now being bigger in many respects than Continental.
              Push, if you are inclined to access the aforementioned presentation, you may see a lot of technical info regarding well design, rock characteristics, frac’ing particulars, and other detailed stuff. All to be found at whiting.com, investor updates.
              Highly readable data for pro and novice alike.

              • Thanks! That Niobrara presentation is very good. I’m still wondering if the EOG layout requires a very widely spaced set of tines. I think they’ll have problems if they try to pump those wells. I guess they need to check their pumping system in a simulation to see what it does to tubing wear.

      • Rune Likvern says:

        Coffeeguyz,

        I/we focus on the hard data and the story these tell.
        The companies are in LTO extraction to make a financial profit. Period.
        I have done a lot of work looking at productivities for both Middle Bakken and Three Forks, and so far I have not seen the improvements in productivity that was held out. I have followed the hard data for close to 3 years. And I document the results, do not throw out claims.

        You refer to a company floating plans. The key word is floating.

        Further up I alluded to that going forward the developments will now be set by the financial dynamics created by high leverage when it meets a collapsing oil price…..”and no one saw it coming”.

        The companies will be constrained on 2 fronts;
        1) Reduced cash flow will limit their funding abilities for new wells. There could of course be investors that would continue throw more money their way while the oil prices are low.
        2) Profitability of the wells. LTO extraction is front end loaded and low oil prices dictates high flows from wells to make these profitable. With WTI around $50/b, a well needs to flow around 120 – 130 kb during its first year to come out clear.
        So far around 10% of all the wells in Bakken have had such a productivity or better.

      • Wes453 says:

        The Parshall DSUs are 640 acres, or 1 square mile. That was one of the first areas in the Bakken to be discovered, and the standard at the time was one mile horizontal laterals, so 640 acre DSUs were reasonable. Once the operators got their feet wet in the Bakken, so to speak, they began preferring two mile laterals in 1280 acre DSUs.

        • coffeeguyzz says:

          Wes, thanks for the input. So, at 300 sq. miles for the Parshall, and one sq.mi/DSU, we have bout 300 DSUs. Presently there are 340 wells. Reasonable to expect many more wells/increased production potential from this sweetest of all sweet spots?

          • It would be reasonable to test placement of a long horizontal covering the area between four half wells, which if successful would theoretically allow 150 additional Middle Bakken locations.

            Is Three Forks highly over pressured in the Parshall area?

            • coffeeguyzz says:

              Fernando, Mike Filloon has written numerous articles on these topics on Seeking Alpha. Just the other day he wrote a rather brief but informative piece discussing the varying pressure differentials throughout both the Bakken and TF and how they would likely impact companies with their particular acreage.

              • I can’t find it. Is it paywalled?

                • coffeeguyzz says:

                  Fernando, no paywall, but they may require some kind of ‘registration’. It has been quite awhile since I went through the process, so I cannot recall, but I know I did not pay.
                  Over time, I have found the Seeking Alpha sources to be highly informative, but still containing more than a few biased shills. Reader beware.
                  Filloon and Richard Zeits seem knowledgeable. Mr. Patterson has posted on there as well.

  2. MicroHydro says:

    Hi Ron,

    Thanks for keeping the lights on after TOD shut down. IMO, Hubbert modeled production of low cost, high EROEI conventional oil. Hubbert did not model high cost, low EROEI forms of oil production like shale fracking, nor ultra deepwater offshore oil, nor tar sand mining to make synthetic oil. In this sense, I still maintain that Hubbert’s peak in conventional oil was a decade ago in 2005.

    Yes, WTI and Brent are uneconomically cheap now. That is in part due to western strategic planners using derivatives to manage oil futures markets as weapons of mass destruction in a geopolitical struggle – primarily with Russia – but any damage inflicted on Iran and Venezuela is welcome as well. It is even possible that due to national security interests, money losing US shale production might be rescued by the Fed or Treasury buying fracking debts at par and forgiving them. From the NSC point of view, if it cost another trillion dollars on the Fed balance sheet to bloodlessly topple Putin and install someone more to their liking, it would be a bargain. Obama has already dropped hints in that general direction.

    Check out the latest from Steve St. Angelo, oil demand did not drop in 2014, a great contrast to what happened in 2008: RECORD GLOBAL OIL DEMAND: Even As The Price Of Oil Declined:
    http://srsroccoreport.com/record-global-oil-demand-even-as-the-price-of-oil-declined/record-global-oil-demand-even-as-the-price-of-oil-declined/

    • John B says:

      Why didn’t “western strategic planners” “manage oil futures” when the price hit $147/barrel, and western economies were driven into recession?

      I don’t believe anyone has the power to control the oil price like that.

      • MicroHydro says:

        Ok, you are most welcome to join me at the big poker table at the NYMEX sometime. Price is set in the derivatives market, but has at best a tenuous connection to the physical market. Fortunes are made daily by taking the other side of the trade versus people who think the markets are an honest price discovery mechanism for physical goods.

        I made a moderate amount of money in years gone by from selling sugar, orange juice, lumber, gold, natural gas, oil, and silver despite not actually having any of the above to deliver. The Fed’s balance sheet is over $4 trillion at the moment. With that kind of money, and the ability to make more out of thin air, one can push any market in any direction desired. The only game left in town in to figure out what the Fed wants and hitch your wagon to that star. Stocks have gone up since 2009 because the Fed wanted that to happen, no other reason.

        • Ilambiquated says:

          I agree with you that oil prices are set in the derivatives market. I think the root cause is that large gap between production costs and the pain point where demand destruction begins, as well as the inflexibility of demand. (The last two are closely related.)

          But that does not prove that the price is controllable. The derivatives market has plenty of players as well.

        • Price is set in the derivatives market, but has at best a tenuous connection to the physical market.

          Spoken like a man who hasn’t a clue as to what really controls oil prices. Oil prices are set by supply and demand with at best a tenuous connection to the futures market.

          I like this analogy: Picture a boat pulling a water skier. The skier can make wide swings to the right and to the left of the boat but his long term path must follow the path of the boat. He cannot release the boat and take off on a path of his own.

          That is the case of the price of oil on the futures market. The futures market make wide swings above and below the path that supply and demand dictates. But the price on the futures market can never just release supply and demand and take off on a path of its own. If that happens and the price swings too high, a glut soon happens and the price comes plunging back down. But if the price swings too low, demand goes up and production goes down and soon the price swings back in line with supply and demand.

          The idea that the price of oil is not ultimately connected to supply and demand but is controlled by the futures market instead is truly absurd. Prices fell because of 1) an oversupply of oil and 2) A decline in demand caused by a deepening recession in many parts of the world. Number 2 was likely the primary cause of the decline. The price of oil did not fall because of a glut of sellers in the futures market.

          • SRSrocco says:

            I have to agree with Ron on the SUPPLY vs DEMAND forces in determining price. However, I believe (AS STATED IN MY LINKED ARTICLE ABOVE), the U.S. sanctions as well as the U.S. forced European sanctions on Russia, plus the breakdown of the Ukrainian economy, destroyed EXPECTED IEA DEMAND of 94 mbd by Q4 2014.

            Furthermore, the strong U.S. Dollar as a result of falling oil prices is destroying revenue from oil producing countries that also impacts economic activity negatively… slowing consumption.

            Again, the expected global oil demand was supposed to be 94 mbd as global production is 94.1 mbd. However the decline to 93.5 mbd in Q4 2014 caused a glut… which I believe was due to the U.S. Govt intervention in Ukraine and Russia.

            I just listened to an interesting interview which stated that France, Germany, Ukraine and Russia heads of Govt are meeting in Kazakhstan this month to discuss dropping the European sanctions and working on a diplomatic solution to the current problem.

            Thus, we have Europe basically giving a MIDDLE FINGER to the U.S. Govt’s Hawkish Military policy against Russia.

            I believe the U.S. Govt and Economy experience some serious headwinds in 2015.

            steve

            • Keyser Soze says:

              Steve,

              Pease help me here:

              You wrote: “global production is 94.1 mbd.”

              However, Patterson has global oil production at about 77 mbd.
              http://peakoilbarrel.com/eias-world-production-numbers/

              We are talking over 20% difference.

              • Steve is counting total liquids which includes bottled gas, (NGLs), biofuels such as ethanol and palm oil and refinery process gain as well as C+C. But even here he is a little high. The EIA says all that came to a total of 93,451,162 barrels per day in September.

                Crude oil plus Condensate came to 78,493,816 bpd in September. I only deal with oil, not all that other crap that the EIA and Iea throws in there to make it look like the world is producing a lot more oil than it actually is.

              • It’s also useful to look out for “boe”, and remember gas prices are quite variable. I have seen gas sold at $0.60 per MMBTU booked together with 34 degrees API crude oil. It really swelled the boe figures.

          • Old farmer mac says:

            I am one hundred percent with Ron. The ONLY way a commodity price can be controlled to any serious extent is to control the supply and distribution of that commodity.

            This has been well established and unquestioned as fact in marketing more or less forever. People with various schemes to sell are out there in recent times trying to convince the world it ain’t so but it IS.

            Users have a certain amount of influence on prices by substituting alternate products or just cutting back on things they deem too expensive.

            But real price control- to the extent it is possible – depends on controlling supply and distribution.

            I have yet to see any argument to the contrary that is not based on smoke and mirrors thinking that can never be clearly delineated.

            Just who are these magical financial warriors who are able to insinuate themselves between the biggest and baddest great white shark corporations in the world such as Exon or Mobil or Saudi Aramco and their customers and rake off unearned profits??

            How do they do it? Where along the money trail do they extract their cut?

            Now the overall economy can be and is stimulated or damped down by the shenanigans of central banks and big banks. But this is not the same thing as controlling the price of a given commodity.The most that could be said of this effect is that as the economy in general rises or sinks commodity prices generally follow the trend.

            So long as there is a decent amount of competition in the business of supplying oil the supply will basically be determined by the costs of the last standing marginal high cost producer- on average. The price will oscillate above and below this level but not too far and not too long.Ron’s ski boat analogy is perfect.

            There is MORE that too much competition for customers right now in the oil business. It is about as cutthroat is it can get. Some of the suppliers are going to close up partially or totally before long – as soon as they can manage it in a business like fashion.

            It will take a few months for this to happen and a few months more for the excess supply in the distribution system to get used up and then prices will go up again.

            I had a professor who likened price supply and demand to three bugs circling a light with the light itself moving slowly – such as the light on a slow boat moving around in a harbor. The light itself is the economy in this descriptive scheme. The supply and demand bugs like each other and fly close together. The price bug steers clear of the other two as best it can so that if you know where any one of the three is you have a pretty good idea of the location of the other two.

          • Ilambiquated says:

            Oil prices are set by supply and demand with at best a tenuous connection to the futures market.

            Do have any evidence for this claim?

            ) A decline in demand caused by a deepening recession in many parts of the world.

            I don’t think world economic growth was lower in 2014 than in 2013. Also consumption of oil has been growing pretty steadily since 2008. Why would price crash now?

            • Oil prices are set by supply and demand with at best a tenuous connection to the futures market.

              Do have any evidence for this claim?

              Supply and demand is recognized as the price setter of all commodities. It’s just common sense. However if anyone claims that something else sets the price of commodities then the burden of proof lies with them.

              Supply and demand dictates the price, never one alone.

              • Ilambiquated says:

                So you would say that gold prices are also set by supply and demand?

                Considering how much bad economics there is around, and radical disagreement about basics, I would be careful to invoke “common sense” to justify economic claims.

                • DanInKC says:

                  No, the price of Gold is set by marketing hype – and an irrational expectation that owning paper claims on gold (that may or may not actually exist in some vault) will serve as a hedge against inflation.

                  But unlike Crude, Gold is not ‘consumed’ to facilitate the day to day operation of the global economy. Over 50% is used for jewelry, another 34% is used for holdings and investments, and a small portion (12%) is used by industry. If the industrial use could ‘only’ use Gold AND was an essential component of operating the global economy, and world global oil production came to an end, all the gold previously mined is STILL available to be applied whereas all previously mined Crude is now in the atmosphere and/or ocean as carbon dioxide.

                  Pick a different analogy based on something that is needed – but doesn’t exist after it is consumed (like, maybe, wheat or rice..or any other food stuff).

            • Ilambiquated says:

              Some other remarks:

              A recession is defined as falling economic output. You claim there is a “deepening recession”. Are you claiming economic output is falling worldwide? Or even that a significant proportion of the world economy is shrinking?

              Another point is that I would expect consumption of oil to track economic output, not economic growth. Do you agree with this?

              On the other hand, I guess oil prices may be sensitive to economic growth, but consumption.

              • AlexS says:

                There was a significant slowdown in global oil demand growth from 1.23 million b/d in 2013 to 0.67 million b/d in 2014 (as per IEA).
                There was no absolute decline in demand, unlike in late 2008 and 2009.
                However, in contrast to 2008-09, in 2014 there was a significant (+ 1.9million b/d) increase in non-OPEC liquids supply (incl. NGLs, biofueles and processing gains), large part of which came from the U.S.
                Combined with slowing consumption, this sharply reduced demand for OPEC crude. Yet, OPEC didn’t reduce its output, which led to the current supply glut.
                (Furthermore, there was a temporary increase in Lybian oil production from 0.2 to 0.9 mb/d, although this dropped again by the end of the year).
                The situation was exacerbated by the rise of the US$ exchange rate vs. global currencies (which is inversely correlated with the price of oil) and, to some extent, by expectations of an increase in the interest rates in the U.S. All this caused panic selling by financial investors. But I completely agree with Ron that supply-demand fundamentals, not speculation, was the primary reason for the current sharp drop in oil prices

    • St. Roy says:

      Damn MicroHydro, I was going make the same comments. You beat me too it. Right on. Net energy from liquid fossil fuels peaked in 2005 as Hubbert forecasted. The stuff called barrels today ain’t the same stuff.

    • Jeffrey J. Brown says:

      Micro,

      As I have periodically noted, in my opinion is quite likely that actual global crude oil production (45 and lower API gravity crude oil) effectively peaked in 2005, while global natural gas production and associated liquids, condensate and NGL, have (so far) continued to increase.

      In any case, when we ask for the price of oil, we get the price of 45 or lower API gravity crude oil, but when we ask for volumes, we get the volume of crude oil plus some combination of condensate + NGL + biofuels + refinery gains.

      Economists would argue that we are seeing a classic case of substitution, i.e., more reliance on less desirable condensate and NGL as the production of actual crude oil production stagnated, and they would be correct, but that’s not the issue. The Cornucopians claim that there is no possibility of any kind of peak in sight, and this assertion, based on the data, would appear to be flagrantly false in regard to actual global crude oil production, e.g., the “Texas Tea” portrayed in the “Beverly Hillbillies” TV series.

  3. Watcher says:

    “November looks to be flat to down, December looks pretty good and January is starting out pretty bad.”

    Sounds right. November would be shock, and “surely this will fix itself in the next few days”, and then December “okay, it’s epic disaster, but a decent person doesn’t fire anyone just before Christmas”, and then come January, WHAMO!

  4. Don says:

    I’m a long-time lurker here (and previously at TOD). Don’t have much to contribute, so I don’t. I live in NW Montana. After the housing bust, lots of guys with strong backs and weak minds left here and headed to the Bakken, leaving their families Behind. My wife, in her work, has contact with a lot of these guys, so I hear stories second hand. One guy told her yesterday that rigs are “being laid up like cordwood in the boneyards.” (kind of a mixed metaphor there.) Several others have said they’ve gotten their pink slips, and are going on unemployment ($4000/mo, so you can only wonder what they had been earning). They are still either in denial or just ignorant – they all say it will snap back quickly. But there is a sense of fear- most all of them are making payments on new $50,000 diesel pickups, and maybe a boat and a winterized trailer. I’m only surprised that we aren’t seeing a faster drop in the rig counts. Interesting times ahead.

  5. clueless says:

    I agree Ron, especially with the Bakken and Eagleford. Net cash flow per barrel for the drillers is down 60% per barrell. For a variety of reasons, most owe a lot of money. So, the banks see the cash flow. They want to ensure that they will be paid back. So, my forecast for this year in those 2 areas is 50% fewer wells for 2015 than in 2014. I am assumming a gradual increase in the WTI price back to $80 by year end. But, even with that, the drillers (and bankers) will be smart enough not to start many new wells in the Bakken from October of 2015 until March of 2016 because winter problems can cause increased costs, and the price trend, even if up as I think, will not be in place long enough to have the confidence to drill (with borrowed money). Therefore, with respect to the Bakken (and possibly the Eagleford), 2016 production I think will also decline again 20% from 2015. But, more wells drilled in 2016 than 2015 if prices are there.

    At current prices, new wells in those areas will take 3 years to pay out, leaving very little production for profit over an extended period of time. As a retired accountant, I just think that it is going to be an easy call not to drill until prices recover significantly. At that point, not enough good places to drill fast enough to get to a new peak.

  6. I guess the key question could be whether nuclear, wind and other renewables are competitive with oil at $150 per barrel and gas at $10 per MMBTU. If other forms of energy can’t compete then we can go for a while. Maybe peak in the early 30’s?

    • Old farmer mac says:

      Great question Fernando,

      The competitive status of alternative energy may well depend as much or more on social and political decisions as it will on nuclear , wind, solar and other technologies.

      Barring lucky but not too likely technical and engineering breakthroughs the bean counters probably have a fairly good handle on how fast the cost of wind and solar will come down- assuming their assumptions about economic conditions turn out to be good ones.

      But about all economists have managed to prove about predicting the future of the economy is that they are not very good at it !!!!

      Personally I expect wind and solar built in good spots to be economically competitive based on fuel cost savings alone within a decade-keeping in mind that a solar or wind farm completed in say 2025 is going to be competing with gas and SOME oil ( Oil is fungible on a world wide basis and the folks in Sand Country are going to go with a hell of a lot of solar if it means they can profitably sell the oil they are burning to run air conditioners etc) as generation fuel for until 2o55 at least. With refurbishment a wind or solar farm will last indefinitely and replacing the stuff subject to failure is will probably not cost more than half as much (half is a wild ass guess on my part ) as a scratch farm.

      Predicting the future is a fools game unless you attach so many caveats that it takes all day to read them.

      Here are some reasonable jumping off scenarios to use as starting points for a brainstorming or bullshitting discussion of what might happen.

      The price of oil stay holds for a few years at a stable low price with the consequence that battery electric and hybrid car sales are slow to glacial. The business as usual establishment is lined up with the oil auto airline building industries and business as usual politicians gut spending on renewables subsidies and even on basic research .The actual cost of renewables continues to fall but much slower than expected due to less economy of scale.

      Little is accomplished on the efficiency and conservation fronts due to complacency and behind the scenes pressure from our friends the Koch Brothers and their ilk.

      In ten years – or maybe twenty- the prices of oil and gas spike sharply with horrible economic and political consequences ranging from lots of unemployment to outright energy wars.

      Another scenario

      Oil goes back up within a year or so and within a year or two the price spikes sharply with the consequence that electric and hybrid cars sell as fast as they roll off the assembly line. This could set the stage for bankers, labor unions, entrepreneurs, job hungry political localities and every Tom Dick Harry and Tina Debbie Henrietta to buy into the NEXT BIG BUBBLE- during recent decades we have seen the bubbles grow and burst or mature in computers pharmaceuticals automobiles housing you name it- There could be a huge rush into renewables.

      This in turn might result in solar farms being built in cloudy rainy Scotland and wind farms built in my area where the wind resource is almost as marginal as Scottish sun.Hundreds of billions could be wasted.

      Or it might result in the wind farms being built where they should be – on the high plains of our mid west where the wind is very dependable and the technology of long distance transmission being scaled up to affordable levels.Ways could be found to balance consumption with availability – these ways might be sort of expensive but there is nothing technically tough about installing more insulation and more thermal mass so houses can serve as thermal storage as an example.

      Pure chance is going to play a huge role.If there is a major nuclear accident that results in not just a large scale evacuation but a few tens of thousands of people dieing in the short term my guess is that nuclear power will be down and out for decades- until some body somewhere manages to build and demo a new reactor design that just won’t melt down and they manage to convince the world it CAN’T MELT DOWN.

      If there is no new major nuclear accident within the next ten years I expect a hell of a lot of reactors will be built- barring the economy getting so bad that they can’t be financed.They may or may not be economically competitive. Aircraft carriers and armored divisions are not economically competitive but countries feel a LOT safer when they have these things.

      Another possibility

      The prices of oil and gas rise steadily but not too fast as the result of depletion and growing population on the one hand with efficiency and conservation measures on the other keeping the prices from breaking the back of the world economy.The renewables industries grow steadily. People trade in or scrap 2015 cars for 2040 models that get twice the mileage but pay twice the price for gasoline as well.

      Oil furnaces are obsolete and new guys in the hvac trades don’t even bother to learn how to service them. It’s all gas and heat pumps.

      (The 2040 car will probably be a lot smaller or a plug in hybrid if not a pure electric)

      There will be countless feedback loops popping up between each and every major occurrence on the political ,economic , engineering, and geological fronts.

      The only FOR SURE prediction I am willing to make is that the next couple of decades are going to be interesting times. 😉

      • Ilambiquated says:

        Nuclear power is pretty much fated to fall over the next 30 years or so due to a version of the Red Queen.

        Construction stopped almost completely for over thirty years. The fleet is aging, and one by one the existing plants are disappearing. A lot of plants will have to be built for the industry to even maintain current output in the coming decades.

        Decommissioning the existing plants or extending their lifetimes is going to be expensive and technically difficult. That will provide plenty of fodder for opponents of nuclear power as well.

        Also the cheap Russian uranium (taken from warheads) is running out.

        New plants are being built, but it is hard to imagine growth in output.

        • Old farmer mac says:

          I agree that the future of nuclear power is questionable on the grounds of fuel supply but it is my impression after reading all I can find on the subject that since so little uranium goes such a LONG way in a power plant that it will be possible to mine low grade ores successfully for a very long time .

          This would in essence be about the same thing we are doing now in mining low grade oil.Expensive but maybe not so expensive as to be out of reach if used wisely. It may be possible to extract uranium from sea water economically at some point , or alternative methods of mining it might be developed.Beyond this there is no question whatsoever that breeders work. If it comes down to choice between fast breeders and a general lack of affordable electricity I have no doubt that the naked ape will opt for the electricity regardless of the risks of weapons proliferation and runaway reactors.

          There is no doubt current day fast breeder designs are dangerous but there is also no doubt the designs can and will be improved substantially if they are put into commercial production.

          The only thing that scares me more than a big new fleet of nukes is the lack of them. As dangerous as they no doubt are the flip side of their utility is in my estimation just as great. A country with plenty of electricity is not so apt to go to war to seize another country’s coal or gas fields.Environmentalists withe their hearts in the right place all to often fail to pay any attention to the lessons of history.History ain’t over -not by a LONG SHOT.

          • Ilambiquated says:

            I think bankers are a bigger problem than environmentalists. No company can have a risk as big as a nuke on its balance sheet unless the government is willing to bail it out.

            Nuclear advocates (mostly engineers) will tell you that the likelihood of an accident is small, but that is beside the point. As long as the possibility of a meltdown is there, only government can finance nuclear power.

            Another problem is that the payoff time for nuclear plants is very long — sixty years for new plants is sometimes cited. And that is after construction is complete, so add another 10-15 years.

            So from the point of view of a central planner nuclear power might seem like a good bet. But in a free market the current technology isn’t really viable from a financial point of view.

            The long payoff time also means that governance issues are an additional risk. For example, China is building a lot of nuclear power right now. China seems very good at running big complex projects, but what happens if there is a civil war in 40 years?

            Governance is often an issue in the short term as well. Building a nuclear plant in Pakistan or Nigeria, both of which desperately need more electricity, doesn’t seem like a great idea. For one thing bill collection and grid maintenance are spotty at best.

            In other words, our central planner needs to feel confident his plans will work and be in place a long time.

            • Richard Stone says:

              So Ilambiquated do you think non-environmentalists have done a good job so far?

            • Old farmer mac says:

              All these things you point out are precisely the things that scare me so badly about HAVING nukes._Slow to build, very expensive to build up front, questionable maintanencce over the long haul, weapons proliferation…….There is a lot not to like about nukes.

              But as steady flow of juice that keeps the water and sewer and the lights on is for all intents and purposes essentially priceless.

              Nukes are not likely to shut down because of trade embargos or war unless they last a very long time.A recently refueled nuke can run for months at a time without an hour of downtime.

              • Synapsid says:

                OFM,

                No one is mentioning disposal of high-level nuclear waste.

                If the Thorium Angel really does come to visit us we could do a fair job of using it, perhaps, but I’m not holding my breath. As for burying it, for the US it would be as safe to shoot it into the Sun (awfully expensive, though) unless you can talk the Minnesota congressional delegation into allowing a depository there; not holding my breath on that one, either.

                • SW says:

                  The thing that I find staggering when you stop to think about it is the hubris involved in believing that any civilization is capable of dealing with nuclear waste. It is the time scales involved. There is no civilization on the face of the earth that is as old as the time scales that we are implied when we consider how long we will be responsible for this garbage. How can we make that commitment, put that burden on the future, a future that we have no conception of?

                  • clifman says:

                    Yup. Hubris. Worth watching:
                    http://www.intoeternitythemovie.com/

                  • clueless says:

                    Technology expands exponentially. More in the last 100 years than the previous millions. So within 100 years, I expect that it will not be a problem at all.

                  • Clueless, you haven’t a clue. Technology creates problems, it does not fix them. Technology created nuclear power. Nuclear power was a solution. The chief cause of problems is solutions.

                  • Ilambiquated says:

                    I remember when Danny Hillis came up with the idea of a clock that would last 10,000 years and made a complete fool of himself.

                    http://longnow.org/clock/

                    Nuclear storage is for longer times

                  • Old farmer mac says:

                    Long term storage is a hell of a problem -I should have mentioned it but just forgot – and no edit button.

                    But just as it seems certain that we will burn every ton of coal and drop of oil we can put our monkey paws on it seems pretty likely to me that we will pursue the nuclear option if the renewables option does not work out. In composing these particular comments I was thinking it terms of the next decade or two.

                    Once coal and oil and gas supplies are really short and electricity is really expensive – with renewables not having shouldered the load – most countries will opt for nukes if they are still capable of building them.

                    The prospect of a major accident – maybe one chance in a thousand any given year in any given area with a few nukes in the area- is going to be viewed as a trivial risk compared to not having lights and water and sewer and refrigeration and phones etc.

                    If renewables don’t scale up nukes are a dead sure bet over the long haul.

      • Thirunagar says:

        I like your third alternative. NG will act as the bridge fuel in countries where it is abundant. It already is replacing coal in US. Others will jump slowly but surely to renewables.

        • I read the british have been burning trees to meet their renewables goals. If I had assurance this policy will last I would buy me a chunk of jungle in Colombia, cut it up and sell it to the British. Afterwards I would plant it with sugar cane to make ethanol to sell to the Germans.

          • ralphw says:

            That has been the fate of the massive rain forests in SE Asia. Palm oil plantations to make mandated biodiesel for EU market. Its been estimated that cutting the forest releases as much co2 as the biodiesel will replace from fossil fuel in 70 years. Ecological and environmental devastation in the name of saving the environment. Exit the old man of the forest.

    • John B says:

      Wind, Solar, Nuclear, etc. don’t really compete that much with oil directly.

      It’s mostly the alt vehicles that compete with oil. CNG, Biofuel, battery electric, Hydrogen, etc.

      • Ilambiquated says:

        This is true in the US. However, electricity does compete with oil in Europe and East Asia, where electric trains compete with ICE vehicles both in the freight and passenger market.

    • TechGuy says:

      Fernando Wrote:
      “I guess the key question could be whether nuclear, wind and other renewables are competitive with oil at $150 per barrel and gas at $10 per MMBTU. If other forms of energy can’t compete then we can go for a while. Maybe peak in the early 30’s?”

      The issue is that the economy can’t afford $150 bbl. It can’t really afford even $100 bbl. Only Central banking money printing has prevented the global economy from falling into the greatest depression. The bottom line is that consumers can’t afford an economy dependent on renewable power systems, and money printing can’t continue indefinitely. Soon or later the problems will catch up. My guess is that perhaps they can postpone a global depression for the next five years, maybe stretching it as long as ten years. Its also very likely that WW3 will happen before a severe depression begins. The US has put the world on the road to WW3 with its policy of destabilizing the middle east and is now working to against Russia.

      • The way I see it the economy can stand high prices. The prices I quoted are seen in Europe at the retail level (we pay huge taxes on liquid fuels, and electricity is burdened by renewables subsidies and fuel taxes).

        I read a comment that renewables don’t compete with oil. To an extent they sure do. And if they don’t do so fully the question becomes to what extent they can penetrate the market to carve out a piece of the market, thus causing peak crude and condensate.

        I don’t agree that whether renewables can compete is a bean counter issue. Renewables just lack the technical attributes needed for large penetration. In spite of the propaganda and the outright lies we read about what goes on in Germany the bottom line is that the solar and wind programs they have aren’t feasible. And if the Germans can’t afford it then the bulk of nations definitely can’t.

        I don’t have the answers, I’m just pointing out this isn’t simply an oil industry issue, the renewables’ high cost will impact the timing for crude oil and condensate peak.

        • Fred Magyar says:

          In spite of the propaganda and the outright lies we read about what goes on in Germany the bottom line is that the solar and wind programs they have aren’t feasible. And if the Germans can’t afford it then the bulk of nations definitely can’t.

          Fernando, when you make a comment about something in the oil business I’m pretty sure you actually know what you are talking about from first hand experience and I therefor I’m pretty sure I don’t have to second guess the information that you provide.

          Having said that I can’t say the same about your comment above. I have family in Germany and I do visit on occasion. One of my siblings works for a large German global software company that is involved with developing smart grid technology used to integrate many different sources of energy.

          Have you ever heard of IRENE (Integration of Regenerative Energy and Electric Mobility.) Check out this link, maybe it will help give you a slightly different view on some of the things that are actually happening in Germany and Europe that aren’t yet on the radar of many of us living here in the US

          http://blog.rmi.org/blog_2014_11_06_small_german_town_becomes_testing_ground_for_smart_grid

        • Caelan MacIntyre says:

          Within the quest to maximize profit is
          “…the very incentive structure that would inevitably create the state or some institution that performs the same functions as the state (for the state protects the privatized commons with violence, protects the rich from the poor, allows corporations to avoid liability, and the state applies ‘the law’ selectively which makes those who control the state exempt from the state’s laws). When market economists use the term ‘Efficiency’ they are speaking of cost efficiency, which is a phrase that really means ‘maximize profit at every level of production’. This really translates to ‘maximize profit’ at the expense of resource efficiency and technical efficiency and human needs whenever possible. Underlying our current ecological crisis is an outdated hierarchical socioeconomic structure. Cost efficiency/economic growth are better measurements of ecocide than resource efficiency. It might be resource efficient for us to give everyone on the planet a clean energy supply/houses/clean food free of monetary charge but that does not maximize profit, and under capitalism profit must be prioritized above human needs. The problems aren’t the microcosms of corruption we see, but socioeconomic hierarchy itself. However the microcosms of corruption often help to reinforce/accentuate the system that created such corruption.”

  7. Nick G says:

    Nuclear: very roughly 8 cents per kWh. Wind: around 7 cents. With Transmission and Distribution of about 5 cents, that’s about 12.5 cents per kWh.

    EVs use about 1/3 kWh per mile (.2 per km). So, they’ll cost about 4.1 cents per mile.

    Oil at, say, $3.30 per gallon and 22 MPG (the US fleet average) costs 15 cents per mile.

    4.1 cents is a lot cheaper than 15 cents.

    • tahoe1780 says:

      Try building an EV, from ore extraction, plastic interior, tires, etc. using electricity. Try building additional nuclear plants without diesel. What’s the premium to buy an EV over ICE? Cheaper? Really? When’s the breakeven?

      • Nick G says:

        Mining is a common concern. Much mining, especially underground, has been electric for some time – here’s a source of electrical mining equipment. Caterpillar manufactures 200-ton and above mining trucks with both drives. Caterpillar will produce mining trucks for every application—uphill, downhill, flat or extreme conditions — with electric as well as mechanical drive. Here’s an electric earth moving truck. Here’s an electric mobile strip mining machine, the largest tracked vehicle in the world at 13,500 tons.

        Plastic consumption can be made more efficient by reducing packaging and redesigning structures to reduce density while maintaining strength (human bones are a good example: they’re hollow, and even the tubular structures are mostly empty space internally); other materials (glass, metal, cardboard) can substitute; and it can be recycled to reduce virgin material needs by 99%.

        Even now, much plastic is made from natural gas and coal. Industrial chemistry can produce very simple hydrocarbons from any source of hydrocarbons, and build them into any compound our heart might desire. Various kinds of feedstocks would work. Some are more convenient or slightly cheaper than others. Whatever fossil fuel is convenient will work; biomass will work just fine, or hydrocarbons can be synthesized from seawater, atmospheric CO2 and renewable electricity (air, fire and water!).

        Tires only have a little bit of oil in synthetic rubber: http://en.wikipedia.org/wiki/Tire_manufacturing

        Finally, the Nissan Leaf is the cheapest vehicle on the road to own & operate: check Edmunds.com Total Cost of Ownership.

        • Wake says:

          Cat and all the others do sell electric drive trucks, but all if them have Diesel engines powering the drives

          The trolley assist you show does exist but I think is only used in a handful (armful?) of the 30,000 trucks running in the world

          • John B says:

            If there were enough EVs and Hydrogen vehicles on the road, biofuel production could be diverted to heavy equipment like loaders, and farm tractors, etc.

          • Old farmer mac says:

            It is true that not many mining trucks have trolley wires for their electric motors but that is mostly because diesel fuel is still cheap. A really big truck can easily use as much as four or five hundred gallons of diesel in a day if it runs continuously and such expensive trucks are run around the clock if possible.Just one truck can easily burn well over a quarter of a million dollars worth of fuel in a year.Running it on electricity can save as much as ninety percent of the diesel bill.

            If the haul road is a long one and the mine needs a lot of trucks the trolley lines are going to get built if the electricity is available.In my opinion it will be in a lot more places in the future than it is now. A few dedicated wind turbines could power a whole bunch of these trucks for twenty years- any day or night the wind is blowing of course. If it is not then they will still run on diesel- which they do anyway at both ends of the trip.

            It occurs to me that we might actually see automated long distance trains at some point in the future- whereby a trucker could just drive his rig on one of a string of flat cars headed from Norfolk to LA along with a few other guys and dog her down and crawl into the sleeper and wake up a third of the way across the country doing a steady eighty mph – with that little train running itself by trolley wire under the eye of railroad controllers working more like air traffic controllers .

            A self driving train ought to be a lot easier proposition than a self driving car.

            • Toolpush says:

              OFM,

              You are on track, the Australian Iron ore and coal mines have been or are planning driverless train use for a while now.

              Of course mining trains with dedicated tracks are the easiest, as there is no other incidental traffic to deal with.

              As for getting away from using diesel, in mining operations, LNG seems to be the first option and is in current use.

              hhpinsight.com

            • Ilambiquated says:

              A self driving train ought to be a lot easier proposition than a self driving car.

              However, trains are already much more efficient in terms of labor costs than cars and trucks, because a single train replaces hundreds of cars or trucks. So self-driving trains don’t add much value. I doubt much will come of the idea.

              • Old farmer mac says:

                It is true that no more than three or four guys operate most trains and that one or two would suffice except for union rules and such.

                But the real value of self driving trains is not going to be mostly in the labor savings in my estimation. It will be in getting them organized and running them closer together on the tracks without traffic jams. ”Incidental traffic” on the rails themselves will cease to be much of a problem with one big well integrated computer system managing hundreds of miles or even thousands of miles of track.Standardization can be nearly perfect and any upright monkeys messing around can at least be well trained and well screened monkeys running on glucose rather than ethanol.

                I can visualize individual cars having their own electric motors and batteries and wireless controls – the batteries being only large enough for switching yard and siding maneuvers- with such cars one guy sitting at a control console in a tower could run a whole yard all by himself.Probably ten times as fast as it can be done now with a large well experienced crew.

                A dozen or a hundred such cars would not even need a locomotive.They would be able to propel themselves.

                Most people do not realize just how autonomous railroads in the US at least are in terms of managing their own affairs. They buy electricity from utilities but they do not have to answer to building inspectors or utility authorities etc concerning their work. If they want to string trolley wire they don’t even have to apply for a construction permit.They have their own cops.With guns.

                This sort of motor will be built right into the wheels of the train cars. The tech is already here and already commonplace.Considering how much it is going to cost to run trucks in the future and how much trouble and time is involved in switching cars in and out these days the technology will be competitive imo.

                Trains can take back most of the last couple of hundred miles that belong to the trucking industry these days with this sort of technology. Just about any car can be delivered economically to just about any siding this way.

                • Longtimber says:

                  They could build zip lines over the tracks that
                  could double as electrical distribution. A step to Toto’s Spider Web Rings.

                • Paulo says:

                  Gee, what could go wrong with driverless trains?

                  Planes can fly themselves too, including landing and takeoff.

                  Would you fly in one?

                  Trains have a few more implications than a big conveyor belt, and even a belt fucks up and needs monitoring and shutting down. If we have got to the point where marginal efficencies relative to cost are necessary to maintain profitable operations, then maybe it is time to shut it down. Personally, I like the law in Oregon that requires a gas jockey to pump your gas. It keeps the kids working and gets their foot in the door of work. Or, Oregon could go self-serve, tell them to stay home and increase taxes to pay them a welfare stipend or put them in free community college.

                  regards

                  • Anonymous says:

                    Many passenger planes are landed in low visibility by autopilot, depending on visibility. Plenty of self driving trains in England already too, on the underground. The robots are coming it would seem.

                • Ilambiquated says:

                  It is true that no more than three or four guys operate most trains and that one or two would suffice except for union rules and such

                  No such rules in heavily unionized Germany. Also the scheduling is already fulling automatic. I know a very brainy Russian/German women who does the math for German rail. The interesting part is how to deal with delays.

                  The cockpits of the modern trains have a screen showing where the train is, what the speed limits (upper and lower) are on the current stretch, how the signals are set, ETA and due time to next station etc. You can look right into the cockpit while the train is running and see the screen.

                  The drivers are mostly there for emergencies. Running a signal in any German train would set off very loud klaxons in the cockpit as far as I know. One time I was in a German train and the signal on the track was wrong. The driver waited 40 minutes for written permission from a nearly station to come before he would proceed.

                  Train and tracks in Germany where trains travel more than 80 kmh are required by law to use a so-called Zugbeeinflussungssystem, a set of sensors in the track that detect motion and position of passing trains and communicate with the on board systems automatically, slowing or stopping the train automatically if there is an issue. I think the current system, which required large numbers of sensors in the tracks, is being replaced by a cheaper wireless system.

        • Old farmer mac says:

          We have our Resident Court Jester Ronald- who is actually pretty damned smart and possessed of a certain amount of talent as a writer.

          And we have our Resident Optimist Nick- likewise a very intelligent guy.

          Ronald will hardly ever venture out of character but his stuff makes sense if you read it as satire or parody. Some days he is actually pretty good at it – as good as some classic stuff you will find in libraries . We tend to just know about the best efforts of guys like Voltaire or Twain- both of them wrote some lots of stuff that is ok to good that you won’t find it in their more popular anthologies.

          Now Nick in his role as Resident Optimist will NEVER in my opinion admit that his rosy scenarios might not come to pass -except maybe in such convoluted terms you would need a lawyer to parse his reply. Staying on message the way he does takes professional discipline . He has it and his having it says something about his background.

          If Old Man Business As Usual manages to hobble along for two or three decades most of the things Nick talks about will very likely be commonplace day to day realities.

          The problem is that Old Man Business As Usual is like me -I am still functional but not a very good long term bet as to longevity and productivity.

          In my neck of the woods we refer to successful people we know by reputation but not well personally as OLD MAN Everett UTT or just Old Man Utt for example when they are on their last legs and won”t be accomplishing any thing new.

          I am gravely concerned about Old Man Business As Usual’s health. He might do quite well for another twenty or thirty years but otoh he might have a stroke or a heart attack tomorrow.This might be my very last post here ever- I could be dead in an hour. I have no reason to think I will die other than bad luck but bad luck happens to the best of us as impartially as the cards fall in a poker game.

          But betting on my own death is no fun at all and no benefit at all to me. Ditto focusing entirely on what can go wrong.

          Good sense dictates keeping one eye on what can go right.

          • Nick G says:

            Nick in his role as Resident Optimist will NEVER in my opinion admit that his rosy scenarios might not come to pass -except maybe in such convoluted terms you would need a lawyer to parse his reply.

            I say that sometimes, and in pretty simple language. I often say things like “collapse isn’t likely”. That’s simple: it means it’s possible, but not likely. Which is what I think: the idea of a thorough collapse means assuming that humanity just panics, becomes paralyzed by fear and stays that way – that seems pretty unlikely to me.

            Really, the only collapse scenario that’s at all plausible is nuclear or biological war (or, in the longer-term, the very worst climate change scenarios). I get frustrated that people forget how many nuclear weapons we still have, and the potential for more because of nuclear proliferation. If every country in the M.E. has nukes, what are our chances?

            But economic collapse due strictly to physical limits on commodities like oil is highly unrealistic. Again, EVs work, and the US could eliminate oil imports overnight with carpooling.

            We should eliminate oil and other FFs right away: they’re dirty, risky and expensive. I’m not worried about collapse, I’m worried about trade deficits; oil wars; pollution; and climate change.

            And, in the end, I care more about: “What should be done”, rather than ruminating about the possibilities. I care about what’s possible, but more because of how it informs what we should be **doing**. I’ve eliminated pretty much all oil and most other fossil fuels in my life, and I work to make it happen elsewhere, including educating and advocating here.

            Make sense?

            • Caelan MacIntyre says:

              Collapse already seems to be well underway, Nick.
              Just because it is not all imploding at once, doesn’t mean it isn’t happening.
              Your infernal EV’s; shifting windmill eroei numbers; and ‘nuclear works’ quips, etc., don’t really mean much without a viable climate, a healthy biosphere or non-extinct species, to say nothing of real democracy and community.
              Some discourse just plain seems remarkably shallow, irresponsible and reckless sometimes.

        • E Auden says:

          The Edmunds Leaf analysis leaves some unanswered questions. Their analysis is for only the first 5 years. By coincidence the Leaf’s battery is only warrantied against capacity loss for 5 years. New batteries cost $4,499 plus parts and installation.

          What we really need is a life of vehicle comparison.

          “Batteries are without question the weak link of electric vehicles. They are the limiting variable in the longevity of the vehicle; though critical EV components like the drive motor and brakes will last far longer than their counterparts in gasoline vehicles, the battery pack limits the effective life of the car as the rest is useless without adequate battery life to power it”. – See more at: http://www.torquenews.com/2250/replacement-battery-cost-bodes-well-used-leaf-market#sthash.xf2Ikk85.dpuf

          • Boomer II says:

            I don’t have either a hybrid or an EV. I was wary for a long time about batteries in the Prius, but based on Consumer Reports, turns out the Prius is a very reliable car, even used.

            I don’t know the reliability history of EVs, but perhaps the battery issue won’t be a deal breaker.

          • Fred Magyar says:

            The way I look at it is batteries cost $5,000.00 every five years, ok divded by 5 years that’s a thousand dollars a year. I’m pretty sure that between gas and just regular maintenance my ICE car probably costs me quite a bit more than that per year to run and I have a compact with a manual transmission and don’t even drive much. Imagine someone with an SUV or a pickup who drives more than 12,000 miles a year.

          • Ilambiquated says:

            In the short term battery replacement can be much cheaper if there is a strong demand for used batteries. A battery that is only 80% might b a pain for a car owner, but it could still be used for grid storage and sold for say 60% of the original price. That would cut the replacement price by 60%.

            • Ilambiquated says:

              Note that Elon Musk is investing in cars, batteries and solar. This is an example of a Silicon Valley style “ecosystem” strategy because batteries solar and EVs feed on each other.

              In fact just about everything Musk does is part of a strategy very popular in the venture capitalist world: Applying the marketing lessons learned in the computer business to other areas, including media, advertising, telecoms, transportation, energy etc.

          • ralphw says:

            My efficient diesel car has a three year warranty. It is now four years old and recently cost me $5000+ in repairs to the engine and exhaust system – parts an EV does not have. I will take my chances on the battery life when I next buy a car.

        • Caelan MacIntyre says:

          Hey Nick, are you part of an astroturfing scheme?

      • wimbi says:

        Would everybody please keep in mind that one kind of energy is NOT like another one. Petroleum, for example, if you want electricity, will give you, if you are really good at it, 50% of the chemical energy released when petroleum comes to thermodynamic equilibrium with air. Half.

        Electricity, on the other hand, IS PURE ALL AVAILABLE ENERGY, which means in the limit, 100% of it can be used to do ANYTHING any other source of energy can do, like, for example, move vehicles, push chemical reactions to make plastics out of hydrogen and carbon, OR ANYTHING ELSE,

        So, bottom like, all this BS about ” just try making an EV using solar (wind) only”, etc, is just revealing basic ignorance of elementary thermodynamics.

        And FYI, NREL says a wind turbine can make ALL the energy required to make it in less than half a year. And PV can do it in about 2 yrs. After that, those things could be making the energy to make more of themselves for the rest of their lives.

        And, the cost of wind/solar is going down real fast every year, and the cost of ff’s is just about flat. Anybody knows what that says.

        • Old farmer mac says:

          I have recently inquired of a couple of well respected physicists – one of them known by reputation to most of the regulars here – concerning the question of whether a renewables based economy is theoretically possible.

          Both of them said that a renewables based economy cannot be ruled out on the basis of known physical laws. There is no known THEORITICAL reason why the wind and pv industries cannot be scaled up to provide all the energy needed to build out MORE wind and solar infrastructure on an exponential basis.

          The PRACTICAL CONSIDERATIONS are however quite formidable and whether we will succeed in making the transition is highly questionable.

          Making the effort and failing is one thing with nothing really lost when just about all is lost ANYWAY.

          Failing to make the effort is inexcusable.

          I am personally working on a novel that has the plot based on a lucky series of events that could actually happen in the real world so that our descendants a century from now will be able to lead comfortable healthy and convenient lives without either fossil fuels or nuclear power.

          But in order to make it realistic I am afraid I am going to have to kill off just about everybody. Tuff luck to the ninety five percent but hey it’s only a novel.

          And ninety five percent is not as bad as one hundred percent. 😉

          All you guys who post original work and comments are a great help to me in terms of refining my thinking. Thanks in advance and if by some odd chance I get to be famous I promise not to get stuck up and snooty.

          • Boomer II says:

            Making the effort and failing is one thing with nothing really lost when just about all is lost ANYWAY.

            Failing to make the effort is inexcusable.

            Better I could have put it, but I totally agree.

          • Muppet says:

            I can’t help thinking about my life (and probably others’) how the vast majority of energy I use is purely luxury usage and not anywhere close to necessary (and by American standards I am by no means an energy hog). We think of renewables as inadequate to meet our current needs, but thinking ahead we must surely plan to find ways to adequately meets much less wasteful lifestyles. If we start now, hopefully renewables will be able to meet our basic needs I the future,

            • Boomer II says:

              Yes, I think that is the important point. We “waste” a lot of energy in our US lifestyles. Between efficiencies and lowering consumption, we should be able to eliminate a lot of energy use.

            • John B says:

              Tech will help with this like smart buildings that turn off the lights/heat/ac when no one is in the room, etc.

              This is a neat device that quickly shows how much juice your various appliances use.

              http://www.amazon.com/P3-P4400-Electricity-Usage-Monitor/dp/B00009MDBU/ref=sr_1_1?ie=UTF8&qid=1420874269&sr=8-1&keywords=kill+watt+meter

              • notanoilman says:

                While useful they do lose calibration. You need a variac and 10 amp load to recalibrate. The models in power strips have more monitoring functions such as max/min that may well be useful.

                NAOM

            • wimbi says:

              I am guessing that about 70% of energy used in the USA is either for totally frivolous things, or for things that actually do us harm.

              Examples? All of advertising, most airline travel. Anything from china, most especially crappy hand tools.

              And all of it is robbing our grandkids of the planet that we inherited and won’t be passing on since we are ruining it as fast as we can possibly do so.

              And it bothers me that most of the chatter here totally ignores that uncomfortable little truth.

              • E Auden says:

                You can add to your list large fuel guzzling vehicles, focus on speed and power, deliberate obsolescence of electronics such as personal computers, big houses, second homes, corn to ethanol, junk fast food, high fructose corn syrup, factory farmed meat, over eating, shopping as a hobby, ever larger TV’s $150 sneakers, outrageously priced sports entertainment, over packaging, waste of water, grass lawns, fertilizing and adding herbicides / pesticides to same, runaway medical costs and finally ever people who want the same US lifestyle.

                • Boomer II says:

                  Yes. That’s why I, and others, think, “Who cares if clean energy technology can’t provide everything we have now?”

                  It might be BETTER if it can’t do that.

                  • wimbi says:

                    Would near certainly be better. We are drowning in stuff.

                    My sister asked me to fix her little bedside radio. I asked if she had another one to use while I fiddled with that one. She said there might be one in the attic. I went up there an found, no kidding, half a dozen little radios with totally trivial things wrong with them. I fixed all of them and then, just to be an annoying little brother, put them all on her bed at once, each tuned to yet another obnoxious talk show.

                  • E Auden says:

                    This last summer I visited my 94 year old mom in suburban NJ. There were woods, fields and farms here when I grew up. It is now 100% built up. I walked for a couple of hours. Every lawn was “perfect”. There was not a clover or dandelion to be seen. Everyone has lawn service. Most of the large oaks which provided shade have been taken down. I was told the fall leaves are too much of a hassle. The oaks in the school yard were removed. “They are dangerous.” The river which had schools of fish in it when I was a kid looked dead of life. I did see a few houses with solar panels which also had “perfect” lawns.There was no litter to be seen. This is the way people like it.

          • A renewables society is feasible for a much smaller pulation. The most profitable trade will be sword and spear head manufacture using recycled metals crafted by the ancient supermen who built those giant ruins where the river reaches the ocean.

            • Old farmer mac says:

              The guys who master the ancient art of t laminated recurved bow construction will do as well or better. 😉

              You may be right. I am not by any means certain that we will do any better.

              In any case you may rest assured that I really am a professionally trained farmer who has spent a truly substantial amount of time on the question of sustainability.

              The odds of this planet being severely over populated in fifty to a hundred years are very slim indeed in my considered professional judgement. It is not that farmers cannot in theory produce enough food for ten billion people but rather that we just aren’t going to due to economic and political considerations along with physical limitations imposed by shortages of resources needed as inputs.

              There may be anywhere from a few tens of millions of people around to a billion or two in a century. Probably no more than a billion or two. Probably no less than a few hundred million.The number will depend on politics and economics much more so than technology – excepting the technology of birth control and war.

              It has been correctly pointed out that a famine or major epidemic or war hardly even shows up in demographic trends after a half century but these recent wars and famines haven’t on the other hand taken out eighty to ninety five percent of the population in any given locality. Future wars and famines may well take this many.Climate change is hell of a joker in the deck. If there is a truly major failure of for example the Asian monsoons just one year the population will crash and the guns will roar at the same time.

              • I’m not worried about climate change. I think the climate isn’t as sensitive as some have theorized, and I suspect we will be running out of oil before it gets to be a top concern.

                Did you know the IPCC uses something the propaganda system calls “business as usual”? It includes the asumption that oil production will reach 175 million barrels of oil per day 60 years from now. That, and the judicious pouring of extra methane in the soup is what allows the to create those scary cases.

                • Dennis Coyne says:

                  Hi Fernando,

                  Your knowledge of the oil industry is great. Your knowledge of climate change is not very good.

                  Upon what basis do you assume that climate sensitivity is lower than most climate scientists estimate? There is uncertainty. The range is 1 to 4.5C for a doubling of CO2 above the pre-industrial level of 280 ppm (which was maintained within about 10 ppm throughout most of the Holcene from about 10,000 years before the present to about 1750 AD.)

                  Most engineers choose to err on the side of caution when faced with uncertainty. So if unsure about the dynamic loading on a bridge, a civil engineer might choose to build the bridge at 2 to 3 times stronger than needed for the highest expected load.

                  Choosing a low climate sensitivity of say 1 C, is a little like building a bridge at 1/3 the strength necessary.

                  Engineers usually do not remain employed for long when displaying that kind of judgement.

                  • Dennis, it could be I know more than you think I know about the subject. As I wrote, I believe the climate sensitivity has been overshot. Your claim that a presumed majority believes this or that doesnt sway me. I spent my life making a very good living judging these issues. And I have decided, based on careful thought, that global warming isn’t really that worrisome. I’m a lot more worried about the world running out of cheap energy.

                  • John B says:

                    I believe the IPCC 5th assessment lower range is 1.5.

                    1 degree C is the actual figure for CO2 alone without feedbacks. Most people do not know this. Feedback levels in the GCMs are hypotheses.

                    The current annual increase in CO2 is 2 ppm. So it will take 200 years to double the level of CO2, and increase global average temps by maybe 1 degree? This is not something I lose sleep over.

                    For one thing, I do not believe we will be using any great quantity of fossil fuels past 2050. All you have to do is graph out the increase in renewable energy, and alt vehicles.

                  • John B., I would include positive feedbacks. But if we use a sensitivity more in line with recent trends we do get less than 2 degrees by the end of the century. And if I take a very optimistic approach to fossil fuel reductions by diktat as suggested by dr ban Ki moon the temperature difference is about 0.2 degrees C. This means what the Californias of this universe are doing is pretty useless.

                • Old farmer mac says:

                  ”Did you know the IPCC uses something the propaganda system calls “business as usual”? It includes the asumption that oil production will reach 175 million barrels of oil per day 60 years from now”.

                  Yes-I have long been aware of this insane discrepancy between the assumptions going into the climate models and what is actually going to happen in terms of oil and ng consumption due to depletion. The coal projections seem to be more realistic.

                  But having spent a lot of time on this question I still believe that we are putting enough extra greenhouse gases into the atmosphere- as well as changing things on the ground- to bring on a very dangerous warming trend.

                  The game is a statistical game. The doubters point to a string of very warm years and say that there is no warming occurring.

                  I look at that same string of years and ask where are the cool years ? The last record cool year world wide was a LONG time ago.

                  Beyond this the feedbacks are going to be mostly positive and they are going to be numerous and enormous.The loss of ice from the polar caps seems to be well established as a trend . The albedo feedback effect among others is going to result in a lot more net heat energy being trapped in ocean waters and everything I read about water and air interaction leads me to think that heat in sea water is going to find it’s way into the atmosphere resulting in a warmer atmosphere within the next few years.

                  I do recognize that the establishment MIGHT be wrong and that any warming might be minor and a long way off.But I am betting the climate science establishment is right. I always bet on the rabbit even though it may literally be napping at the moment.

                  • Farmer, this thread is getting too thin, and this is probably the wrong blog to discuss these issues. We could probably exchange several hundred pages about the subject and we won’t make a dent. This is a question of judgement, and I’ve judged. So have you. Why do you think most of what I write in my blog about things us sarcasm and bs? We can’t realky convince people about political issues writing blogs. But I’m very happy to see that you are aware that oil forecasts used in the rcp8.5 are bogus. I’m impressed, most people don’t evn notice.

              • notanoilman says:

                para 1

                Yew trees have uses 😉

                NAOM

              • Brian Rose says:

                Give me one good pandemic, and I’ll give you a sustainable global population without war or famine.

                Bacterial and viral contagion are merely a factor of population density and their evolution a factor of time. Tick tock.

          • Failing to make the effort is inexcusable.

            What you are actually saying is “Human frailty is inexcusable.”

            Humans don’t always make the right decisions, because they very seldom know what the right decision really it.

            • SW says:

              I would like to point out that we are making an effort, the question is what priority we give to that effort. Right now it is relatively speaking pretty far down on the list.

            • Old farmer mac says:

              Of course I will not dispute that- looking at the human race and it’s doings from the pov of the alien biologist observer in his orbiting stealthy flying saucer – there is no reason to think that we are actually going to make a conscious collective effort to solve our long term collective problems.

              But a couple of day ago you told somebody to purge their dictionary of a word involving caring and foresight and cooperation. I don’t remember which work right off the bat.

              But you as the fine individual you are have a sense of responsibility and decency built in that you have cultivated over the years .

              I have no doubt that you are in the last analysis a soft hearted old fogey just like me- an old fogey who occasionally cannot sleep for thinking about all the happy little girls and boys who will cry themselves to sleep with empty bellies when collapse hits.

              But we do what we can- some of us at least- even as we understand that most of the rest of our fellow men would not urinate on our exposed intestines if they were on fire – as local folks put things except they don’t use clinical language.

              A lot of people are making a serious effort to do something.

              It might not amount to a lot but on the other hand by running this blog you might actually be the man who inspires a future leader of the stature of a Churchill or a Washington- a man or woman who makes it to the top in politics- and then uses his or her accumulated political capital to move society towards conservation and efficiency.

              I am rather cynical about people saying they teach or nurse or farm or practice law or engineering out of love for their fellow man as a general thing but there are some who are actually serious about doing these things out of a sense of responsibility.

              It is inexcusable for you and me – contrary to our evolutionary programming if you will- to understand what the score is and yet fail to make any effort to warn our family near and far about the leopard we know is lurking in a particular patch of trees.

              Most of us are not capable of much in the way of critical thinking and so are accountable. They are the frail. Those of us whom you have gathered together here have eyes to see with and ears to hear with and brains to think with.

              The effort we are making may be grossly inadequate but maybe our efforts will be like a dropped match in field of grass. Sometimes a very small fire can grow into one big enough to get the attention of the fire brigade soon enough for them to set a backfire and save the village or the farm.

              We are starting a small fire here- sooner or later a similar fire somebody is starting will turn into a warning inferno. The odds are probably pretty high it will happen to late to save our sorry collective asses from collapse but they are not zero.

              Leviathan once aroused will do something- right or wrong. Leviathan is going to act and act decisively once awakened.

          • wimbi says:

            I like physics and physicists, but they are not engineers, who think in different ways. After all, the laws of physics are just there, and we can’t do a thing about them except learn what they say. And we are stuck with that, no mods allowed.

            Engineers, on the other hand, have a far wider latitude- working within the laws that the physicists have discovered, they then have free rein to just go whatever way might work- a semi-infinite set of possibilities.

            So, if a physicist says X is possible, that’s it. It is possible. He has had his say. But if he says “but unlikely”, then he is stepping in the wilds of engineering, a different jungle all together.

            See David McKay, “Sustainable Energy Without the Hot Air” in its entirety on the web, free for the taking. He says solar scales to any size we would ever want. True. He also says it would take a hell of a lot of effort- well, maybe and maybe not, especially in comparison to the effort now going into frantic drilling into real tough places all over the world to get the last remaining snort of the stuff we have all been brought up to hanker for.

            I think of ND- where there is megatons of wind energy just blowing past all those drilling rigs, doing nothing but making the drillers even more uncomfortable than usual, if possible, when it could be keeping them warm and toasty in the insides of those windmills they could be putting up by the thousands for the same effort and far more reward.

            Or, in sand country, to use your phrase, people running around with pipes and drills in the hot hot everlasting sun that could instead be keeping them nice and chilled as they sip tea during their break from putting up the next megawatt of everlasting PV.

            To this engineer, for one, the whole scene is just plain NUTS!

            • Tonight I went for a walk on the beach, talked about wind and solar with some friends. The temperature was nice, around 14 degrees C. Nights are long at this time of the year, it will be 7 to 8 degrees C in the morning. And there’s no wind. As it turns out, there’s barely any wind all over spain. It’s going to stay like this for a few days.

              • John B says:

                A few days of nightfall?

              • wimbi says:

                Who would put a wind turbine in Spain, when they could put it in the islands of Scotland, where my ancestors from there used to brag that the reason their cattle were all so close to the ground was because the higher ones had all been blown off the cliffs into the raging seas below by the endlessly screaming wind.

              • sunnnv says:

                Hmmm – Red Electrica de Espana says wind is providing 27.5% of electrical supply in Spain “right now” at 11:30 on 1/11/2015.

                That’s 7,229 MW .
                (click on the pie chart at upper right)

                https://demanda.ree.es/demandaEng.html

                “no wind all over Spain…” – uhhhh, 7 Gigawatts is a lot of wind if you ask me – enough to power 27% of the electricity you needed to post.

                • Yes, as I explained the wind is rather weak. The installed capacity is huge. But it can’t be pushed beyond the current share. There are also some irrational decisions in the past, which directed subsidies to solar. This in turn drove up prices for us regular customers. The authorities set up a system to discourage natural gas and encourage coal. But the natural complement to wind is gas. So what we have is very high prices, and the solar subsidies causing higher emissions as they reduce the ability to build more wind. Conclusion: we are at the top end of renewables penetration, in part because too much money was aimed at solar.

                • By the way, I checked the chart for Saturday the 10th of January 2015, at 6 to 8 pm, bracketing the time I was chatting with my friends. The wind contribution at 6 pm was 10.6 % of demand. At 8 pm it was 12.3 %.

                  The problem as we, the customers, see it, is that we don’t get the electricity as needed. It comes when the wind decides to blow. We also see way too many greens peddling cherry picked statistics to insist that we support more investment on an irrational solution. The wind here is maxed out to what can be covered with gas and hydro. Going beyond what’s installed just isn’t feasible.

                  • scrub puller says:

                    Yair . . . I don’t understand the hangup with “intermittency” . . . future societies will need to work around the availability of power.
                    Weather forecasting has become workably accurate to the extent that folks will know the plant will be down Thursday or Friday
                    but there will be plenty of wind Saturday and Sunday what’s the problem?

                    Cheers

                  • Scrub puller, having lived and worked in places with “intermittency” I can assure you the problem causes a lot of rotten meat and huge stomach aches from eating too much ice cream when the fridge goes out three days in a row. You know, it’s the little things you don’t appreciate until the maggots ate them.

            • Old farmer mac says:

              WELL SAID SIR WIMBI

              I am a mostly self trained amateur engineer myself in that I have put together a lot of projects of various sorts based on my knowledge of what is possible- physics- and what is doable – engineering and sweat..

              Most of the better educated and widely experienced farmers in this country can reasonably make the same claim.

              It has long been obvious to me that most of what naysayers tell us cannot be done —– could be done if we were to apply ourselves to the job in a sufficiently determined manner.

              Being a realist and an armchair historian as well as an amateur engineer I do fully understand that in the vast majority of cases the majority of people are NOT going to apply themselves with the determination and perseverance needed to prevent clearly visible but far off disasters.

              But some of us will. And with a little luck we will succeed to the extent that SOME little girls and boys will have full tummies and warm beds and puppies and kittens a hundred years from now.

              For now my personal contribution is to post comments at a few blogs- comments that will hopefully contribute to furthering any readers thinking about the future .

              My longer term plan is a future history novel in the works that falls between the anti and the utopian genres. I will publish it free online- assuming I ever finish it- in the hope that it will inspire a few boys and girls to make careers in politics and the fields of energy efficiency and conservation.

              My assets are going to go to the man – if he outlives me- who is the most effective environmentalist I know of to use as he sees fit.If I outlive him or he is unable to work when my time gets close I will donate my place to somebody who will use it as a training center and retreat for gung-ho youngsters willing to work in the trenches of the environmental effort.

              • wimbi says:

                “Hope,” Maimonides wrote, “is a belief in the plausibility of the possible as opposed to the necessity of the probable.”

                Like, for example “It ain’t gonna happen, it’s impossible”

                So, folks, just for fun, sit down for a minute and write down all the “impossible” things that HAVE happened in your lifetime.

                I grew up in the small-town south during the depression. Any thought of any one with the slightest hint of any african ancestry getting to be president of USA?

                “Goddam, man, what a totally nutty idea, it’s just plain IMPOSSIBLE”

                • SW says:

                  My family lives on a medium sized ranch 26,000 acres in the panhandle of OK. Prior to the dustbowl depression era only a very small fraction of this land next to creeks and what passes for a river was useful for running livestock. Then after the dustbowl that damn big gummint in the form of the Roosevelt administration made it possible for the ranchers to drill wells and put something called an ‘air motor’ on nearly every section turning the whole shooting’ match into a productive cow-calf operation. Each section with its man-made water hole powered by the ever present south wind. Prior to that it was considered ‘impossible’ that this land would ever be worth anything. What changed that? 1930’s wind technology. I have been both a physicist and an engineer during my career. Physical law is not etched in stone. We are still trying to figure it out. Of course many things are awfully well understood. But for most scientists I would wager that it is what we don’t understand that is interesting. As new ground is settled this presents opportunities for engineers to exploit. THere is no conflict there unless you are just taking potshots from the sidelines.

                  • wimbi says:

                    Yep. I think we are saying the same thing. Some of science is “awfully well understood” and some of it is an interesting puzzle to work on. The guy working on its fundamentals is tending toward what I think of as physics, and the other ones playing around with plausibilities might be better labeled as applied physicists, maybe.

                    My son is one of those. He worked for a long time at Stanford trying to fix a puzzle in something having to do with quantum effects in making chip masks, and finally got to a point where he and his advisors decided that the track he was working on was not at all likely to have any useful result.

                    So he dropped his cover and came out as an honest gadget engineer without any high-faluten pretensions of anything more elevated than that.

                    And lived happily ever after- so far- thinking up whizzy stuff that could never have occurred to me.

              • scrub puller says:

                Yair . . . For Mr Patterson or any computer folks. on this site . . . .

                There is occasionally a post with no reply button . . . such as the two immediately above OFM’s previous post, why is this?

                Cheers.

                • That’s used by contributors who wish to have the last word.

                • Boomer II says:

                  I’ve gotten the impression that when replies get low enough on the reply tree, the system doesn’t let you reply underneath the previous reply. You can still reply to the comment above it, but there’s a point which you can’t keep replying directly under a specific comment. And these replies of replies of replies keep getting narrower and narrower, too, so they become increasingly hard to read.

    • wimbi says:

      And zero is less than 4. That’s what you get nearer to when in addition to your EV you invest in the PV to drive it.

      I did it. It works, and IT DID NOT COST MORE than those things other people buy that just keeps gobbling the black stuff as long as they both shall live.

  8. Thanks for all your work. It would be nice to have graphs showing – for each basin in the Baker Hughes report – the drill rig count vs actual crude production, since February 2011, the start of the series.

    Most peak oilers would have expected a shortage of oil and high oil prices at the peak. And this is what happened at the conventional peak in 2006/07. I did this post from the Australian perspective:

    8/7/2011
    “Yes, Prime Minister”, peak oil 2006 under your watch
    http://crudeoilpeak.info/yes-prime-minister-peak-oil-2006-under-your-watch

    The response of the system (oil industry, governments, banks) was to develop shale oil/tar sands and bring on Quantitative Easing, i.e. cheap money to finance this unconventional oil. But as oil prices stayed high for the last 3 years, this killed demand. The experiment failed.

    If prices go up again as a result of production drops we are likely to see the same cycle again, provided another phase of QE is started – which is uncertain. Many scenarios possible.

    My latest incremental graphs are here:

    11/12/2014
    World on drip of unconventional oil
    http://crudeoilpeak.info/world-on-drip-of-unconventional-oil

    • BAU says:

      Hey Matt, thanks for your articles, I frequent your site! It doesn’t allow comments so I must let you know in Ron’s home 🙂

    • But demand for crude and condensate didn’t stop growing. And some of the gap began to get filled in with other liquids.

  9. Dennis Coyne says:

    Hi Ron,

    You said:

    I believe that figure is a little optimistic but it’s his job to be optimistic.

    I assume you are referring to the 140 rig number. If they can drill 130 wells per month with 140 rig and the productivity of the average new well remains at the 2010 to 2014 average level, I believe that Lynn Helms has actually underestimated the number of rigs needed.

    Note that Mike estimates about 13.5 wells per rig per year for the Bakken, if that is correct that would be 1890 wells per year and 157 new wells per month, more than are needed to keep production flat.

    Based on Mike’s estimate and my estimate of 130 new wells needed to keep production relatively flat (I won’t post the chart again so Kam won’t be offended), we only need about 116 rigs drilling 13.5 new wells per year to keep output in the 1000 kb/d range.

    • I believe that Lynn Helms has actually underestimated the number of rigs needed.

      Yeah, that’s what I meant. I agree. I believe the number is closer to 150.

      we only need about 116 rigs drilling 13.5 new wells per year to keep output in the 1000 kb/d range.

      Huh? What are you talking about? North Dakota production, in October, was 1.182 mbd, not 1000 kbd, (1 mbd) 1 mbd would be a decline. But how can Helms underestimate the number of rigs needed when you are saying a lot less are needed?

      • Dennis Coyne says:

        I meant overestimated rather than underestimated. I am talking about Bakken Production not all North Dakota, production was about 1100 kb/d in Sept and Oct, at 130 wells/ month by April 2015 output will decrease to 1000 kb/d and then rise back to 1100 kb/d in a couple of years, essentially an undulating plateau. See http://peakoilbarrel.com/bakken-lets-math/comment-page-1/#comment-479998

        • I think you are way off Dennis. But if you are counting the Montana portion of the Bakken in your data then the situation is even worse. Montana was down 3.55 thousand barrels per day in October. That puts the entire Williston Basin down about 7.55 thousand barrels per day in October.

          I think you are in for a huge shock concerning the Bakken decline rates Dennis.

          Crude Oil Production This gives you the monthly data. You have to divide by the days per month to get the daily rate.

          • Dennis Coyne says:

            Hi Ron,

            Time will tell. If new well EUR decreases sooner than my model assumes, then you will be correct. In the short term you have predicted that new well EUR will increase as focus on sweet spots increases. Over the next couple of years, my model may be correct or not, it depends on how accurate the underlying ssumptions prove to be.

            • In the short term you have predicted that new well EUR will increase as focus on sweet spots increases.

              Well that will be the case but only if the new well completion count drops considerably. As long as they are drilling 150 new wells per month, then there will likely be no increase in… EUR?

              But yes, the marginal areas will be the first to cease drilling. But production per well even in the sweet spots is falling.

              • Dennis Coyne says:

                Hi Ron,

                I have looked at the trend in cumulative output data at 3 months, 6 months and 12 months and the trend looks flat to up for wells which started producing as late as March 2014, it is a little early to tell if recent wells will have lower output, some oilmen have doubts that the 24 hour IP can be used to reliably predict output.

                • Dennis, go here:
                  Bakken New Wells Producing Less Confirmed

                  I have managed to match 1,127 wells in my database with the same well number in Enno’s data. Those 1,127 wells showed a clear and obvious connection between the first 24 hours measured production and the first full month’s production.

                  The data is in, the argument has been settled. Wells with higher production numbers are producing less. A lot of wells are still being drilled with low permit numbers. Also, wells with low first 24 hour production, on average, produced less the first month.

                  • Dennis Coyne says:

                    Hi Ron,

                    The first month of production is not really a good indicator of future production. You could possibly use the first 2 months of production. The data bounces around a lot so I think you are looking at statistical noise. I took Wells which started producing between Jan 2012 and Oct 2014 and sorted by well ID#, well #1 is the lowest well ID#, there are 5347 wells in total. I plotted the 200 well trailing moving average for 2 month cumulative output in average barrels per day and the overall trend is up, with a lot of variation above and below the trendline over the 2 year period. My judgement is that new well productivity has not decreased.
                    In the chart below the well # (1 to 5347 sorted by Well ID #) is on the Horizontal axis and 2 month output (200 well avg) in barrels per day is on the vertical axis.

            • Dennis Coyne says:

              Hi Ron,

              I do not include Montana in my Bakken estimates, only North Dakota. I am suggesting 130 new wells per month rather than 150 new wells per month. Also when I have suggested more rapid decline you thought that was too pessimistic. I also picked a number that would result in relatively flat output, if only 110 new wells per month are drilled, there will be a decline in output, to about 900 kb/d and than moderate decline from there for 5 years or so.

              EUR= estimated ultimate recovery. Currently the average North Dakota Bakken well has an estimated EUR of about 350 kb/d, if well productivity increases, EUR will increase. Note that I showed legacy decline at about 80-85 kb/d in Sept/Oct. If the number of new wells added per month decreases, the legacy decline in b/d will decrease.

              • Dennis, you say 130 wells per month is what it would take to keep production flat. Lynn Helms says it would take 140 rigs to keep production flat. 140 rigs works out to be about 150 wells per month. Not being an expert on such things I think I will, in this particular case, take Helms word over yours. 😉

                Currently the average North Dakota Bakken well has an estimated EUR of about 350 kb/d, KB/D?

                If the number of new wells added per month decreases, the legacy decline in b/d will decrease.

                Not really. If production increases the legacy decline will increase the next month. If production decreases then legacy decline will decrease the next month. Legacy decline is a function of legacy production, not new wells or new production.

                • Dennis Coyne says:

                  Yes Ron that is correct legacy decline will rise or fall depending on output.

                  I think Helms estimate is incorrect. When rigs were at about 190, the number of new wells averaged about 170 new wells per month. If this ratio remains the same, then 140 rigs would result in 125 new wells per month. Perhaps Mike’s estimate of 13.5 wells per year per rig applies to the Eagle Ford, but not to the Bakken where about 11 wells per year per rig are drilled.

                  So Helms thinks 125 new wells per month will keep output relatively flat, that is pretty close to my 130 new well per month estimate, especially if we assume the new well EUR increases somewhat.

                  • Hmmm… perhaps you are right. Just look at these figures. That works out to be 27 wells per year per rig!

                    There is something definitely wrong with these figures.

                    And he is saying it will take 3,800 wells per year to break even.That works out to be 317 wells per month.

                    Nahhhhh…..

                  • Dennis Coyne says:

                    Hi Ron,

                    I think the “new wells” in that table is over the 2015 to 2017 time frame or 36 months.

                    The numbers work out to about 9 wells per year per rig if that assumption is correct.

                    So Helms is too optimistic as you assume. His estimate is that 106 new wells per month will keep output flat through 2017.

                    I don’t know the best estimate for wells per rig per year, but my model suggests 130 new wells per year, will result in a small short term decline to about 1050 kb/d and then a rise back to 1100 kb/d by the end of 2017 for North Dakota Bakken/Three Forks C+C output.

                    I also think the 9 wells per rig per year estimate is too low, it should be about 11 wells per rig per year for the average ND Bakken horizontal drilling rig. At that estimate 140 rigs results in 128 new wells per month and Helms 140 rig estimate results in pretty flat output based on my model.

                    So you can believe Helms and me 🙂

                  • AlexS says:

                    Williston basin wells drilled per rig
                    (per quarter and year)

                    Q1 – 2012 2,46
                    Q2 – 2012 2,61
                    Q3 – 2012 2,87
                    Q4 – 2012 2,85
                    FY 2012 10,78
                    Q1 – 2013 3,05
                    Q2 – 2013 3,70
                    Q3 – 2013 4,10
                    Q4 – 2013 4,09
                    FY 2013 14,91
                    Q1 – 2014 3,80
                    Q2 – 2014 3,69
                    Q3 – 2014 3,77
                    Q4 – 2014* 3,73
                    FY 2014 15,00
                    Source: Baker Hughes
                    http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-wellcountus

                  • Alex, I cannot seem to locate those stats at the Baker Hughes web site. Do you have sub-page?

                  • Guys, be careful with unwashed statistics. I believe you are focusing on drlling times for horizontal wells completed in the Bakken and TF. If you use a basin wide number it might just have some other well types.

                • AlexS says:

                  Ron,
                  on this page http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-wellcountus
                  right-click “US Onshore Well Count”
                  It’s an excel file.

                  As I noted earlier

                  The number of wells drilled per 1 rig peaked in 4Q13 at 5,35 and declined to 5,14 in 4Q14 (U.S. total)
                  In the Bakken the peak was in 3Q13 at 4,10 wells/rig. The 4Q14 number is 3,73
                  Permian basin saw a decline from 5,08 to 4,87 wells/rig.
                  In the Eagle Ford the number of wells per rig continued to improve until 3Q14 when it peaked at 5,67. The 4Q14 number is 5,59

                  It may reflect the increased share of horizontal vs/ vertical wells , or wells with longer laterals. But it may also be a sigh of some deterioration in drilling efficiency

                  • Got it, thanks.

                  • Dennis Coyne says:

                    Hi Alexs,

                    That would be 20 wells per rig per year, so for 140 rigs that would be 2800 wells per year or 233 wells per month. Your wells drilled per rig estimate is too high based on NDIC data, for some reason Baker Hughes seems to underestimate North Dakota rigs, in this case I would trust the NDIC data more than Baker Hughes. NDIC data suggests the wells per rig per year is about 10.3 rather than 20.

                    In Ron’s post he suggested that about 150 rigs are needed to keep output flat, this estimate agrees with my estimate and suggests Helms 140 rig estimate is too optimistic as Ron has also said. If the 10.3 wells per rig per year remains the correct estimate for rig efficiency then 150 rigs would result in 1545 wells per year or 129 new wells per month.

                    In my model I chose 130 as a nice round number, but 129 wells will work also.

                    Ron and I seem to agree, I must have miscalculated somewhere 🙂

                  • Dennis, this time I must agree with Alex and Baker Hughes. Baker Hughes says, in 2014, 15 wells were drilled per rig, not 20. Just go to the site and read their data. They have the same rig count as the NDIC. They have the number of wells drilled per quarter which looks very reasonable. The below is copied and pasted directly from the Baker Hughes site.
                    Williston Wells per quarter 2014:
                    Q1 681
                    Q2 668
                    Q3 713
                    Q4 709
                    2014 2,771
                    Average Rigs per Quarter 2014
                    Q1 179
                    Q2 181
                    Q3 189
                    Q4 190
                    Average 185
                    Average Wells per Rig 2014
                    Q1 3.80
                    Q2 3.69
                    Q3 3.77
                    Q4 3.73
                    Per Year 15.00 2014

                  • AlexS says:

                    Hi Dennis,
                    BHI data shows an average of 15 wells per rig for Williston (in 2014), not 20.

                    Maybe that explains the difference between NDIC and BHI data:
                    “The NDIC notes 178 rigs are active in North Dakota, but around 13 of those are in the process of moving in and rigging up.”
                    “Note: The NDIC reports 178 rigs are active in North Dakota. That figure is three less than Baker Hughes reports in the Bakken area, and six more than the company reports in North Dakota. On any given week, a certain number of rigs are in route to the next well location or idle waiting to drill the next well. The NDIC notes that around 13 rigs are in the process of moving in and rigging up.”

                    http://bakkenshale.com/drilling-rig-count/
                    The article is dated Dec 22, 2014 and refers to BHI data for Dec 19.
                    It seems that indeed BHI has a stricter defininition of ACTIVE rigs

                  • AlexS says:

                    Eagle Ford rig count by county:
                    http://eaglefordshale.com/drilling-rig-count/

                  • AlexS says:

                    Baker Hughes provides data both for states and basins. On Dec19, 2014, there were 172 active rigs in ND, 9 in Montana and 180 in Williston. 1 well was outside of the Willistion, apparently in the western part of Montana.

                  • Dennis Coyne says:

                    Hi Ron and Alexs,

                    I stand corrected, I misread AlexS’s esrlier comment and took the peak drilling rate of 5 wells/rig/quarter and multiplied by 4.

                    A second mistake was that I was using the number of wells completed per rig, rather than the wells drilled.

                    Due to the different definitions of active rigs between Baker Hughes and NDIC, I would adjust the 15 wells/rig/year down to
                    14 wells per rig per year.

                    Clearly more wells are being drilled than completed if the Bakers Hughes numbers are correct.

                    I do not trust Helms estimates as much as Ron, but I do trust the data and my model which fits the data pretty closely. The model suggests that if the number of new wells completed decreased by 10 each month from 170 new wells in Nov 2014 to 130 new wells in March 2015 and then 130 new wells are added each month for the next 3 years, ND Bakken output will be relatively flat (between 1050 and 1100 kb/d). If the drilling rate is 14 wells/rig/year then only 112 rigs are needed to keep output flat. The 112 would be the NDIC method of counting active rigs where MIRU is considered active, only stacked rigs would be considered inactive.

                  • AlexS says:

                    How Lynn Helms makes his forecasts?

                    “The analysis is based on detailed and often private data about an oil well’s economics, royalty costs and other metrics that energy companies must present to state officials when they request a variance for certain rules, said Alison Ritter, a Department of Mineral Resources spokeswoman.
                    Common requests include exemptions to strict new anti-flaring standards and permission to put more wells on an oil pad. To win their appeal, companies must often present sensitive data they typically don’t release to the public.
                    Helms then crunches that data through a statistical model he developed to determine a best guess on where oil production could go in the state, where output has risen six-fold since 2010 to over 1.2 million barrels a day.
                    He performs the calculations himself and does not consult an economist, Ritter said, and also tabulates the lowest possible cost that oil producers could abide in each county in order to drill a new well.
                    Helms was not available to comment due to the state’s ongoing biennial legislative session.
                    He has privately collected the breakeven data and production projection data for years, sharing it only with the state’s Office of Management and Budget as it crafts a proposal for state spending.
                    Yet last October, with oil prices falling, Helms decided to release the breakeven projection to assuage concern.
                    “Just because there’s a price collapse doesn’t mean there’s a cause for panic,” Ritter said.
                    Helms’ decision late last week to release the production projection was born from the same logic, Ritter said. ”

                    Source: “North Dakota oil output forecast tabulated using internal model”
                    http://www.reuters.com/article/2015/01/12/north-dakota-oilprices-idUSL1N0UQ0P020150112

              • Doug Leighton says:

                Dennis/Ron,

                To my simple mind, EUR is defined as the sum of the proven reserves at a specific time plus the cumulative production up to that time. So, the answer would be a number with a unit(s): Say, X barrels.

                How can you say: Currently the average Bakken well has an estimated EUR of about 350 kb/d? Shouldn’t you be saying: average daily extraction rate.

                • Old farmer mac says:

                  And that 350kb/d looks like a typo from here unless I have misinterpreted another so called ”conventional practice.”

                  To my amateur eye that reads three hundred fifty thousand barrels per day.

                • Dennis Coyne says:

                  Hi Doug,

                  You are correct, the average North Dakota Bakken new well EUR from 2010 to 2014 is estimated to be 350 kb, based on fitting a hyperbolic function to the data using a least squares fit. Good catch, thanks.

  10. Dennis Coyne says:

    Hi all,

    The price of oil will be key. EIA estimates often prove wrong, I have a very bad track record at predicting oil prices, but Fernando, who has been in the business a long time, thinks oil prices will increase in the 3-5% range (annually) over the medium term. If that is correct a plateau might be maintained for many years, Ron’s prediction may prove correct as far as the peak, but I am not convinced we will see a decline in output, we could see an undulating plateau, which I have posted elsewhere.

    Of course if rising oil prices causes an economic crash, then the plateau will end due to lower demand for oil. It may be that Ron expects that such a crash will occur by 2015 or 2016. That is not impossible, my guess is the odds are only about 1 in 4 if oil prices rise by 5% or less per year, if they rise by 10% per year or more for several years (5 or more) the odds would be more like 50/50 for a severe recession or depression and the end of any potential plateau.

    • Watcher says:

      “The price of oil will be key. ”

      We’re gonna need some charts to prove this.

      • Dennis Coyne says:

        Hi Watcher,

        Nothing convinces you.

        • Old farmer mac says:

          Amen to that Dennis.

          Watcher’s comments would in my opinion be a lot more enlightening and convincing if he attached sarcasm tags to most of them – they do throw light on the subjects he mentions but they just don’t convince me if I rend them literally.

          Some of the things he predicts may well come to pass – but in my estimation for different and usually less cynical reasons.

        • shallow sand says:

          Dennis. Do you know much about SEC rules as they concern oil and gas producers production guidance? I am confused how many are announcing drastic rig count cuts, but yet are predicting 15-30% year over year production growth?

          Also, how does CLR get away with the Bakken EUR estimate in their 3rd quarter 2014 press release of 700,000 boe? I think you came up with something in the ballpark of 400,000 boe,

          This is an area I know little about. However, I have had it with the, “We are still profitable at ____” BS. Is this stuff actionable or can they pretty much exaggerate within 300,000 boe without incident?

          • Dennis Coyne says:

            Hi Shallowsand,

            I think the SEC rules apply mostly to 10k and 10q reporting. There are always long disclaimers in investor presentations which if you read them carefully essentially say that nobody knows the future and these are guesses which may or may not prove correct.

            Bottom line, they are fairy tales for investors 😉

    • Ves says:

      Hi Dennis

      I think you are looking at the wrong end of equation – oil price.
      You have to look at all other costs and also available credit. Remember 6-7 years ago how people and even some “respected” analyst were predicting peak oil at $500 around this time. Did it happen? No. But do we have more indebted people, more people on food stamps, more countries that are completely broke, no savings, living paycheque to paycheque….did $500 did that? Not even close.
      Do you believe that 55% crash in oil would result in 55% decrease in other oil related costs? No way. You will still paying everything else like that oil is $100.
      If you run business all other costs trump oil costs and you can not reduce those costs. I look at my cost insurance, tractor, quad, EM38 machine, electricity, rent, all these cost are not coming down they are marching up. Can you imagine business that works on very thin margins like most of the businesses. they don’t need $100 oil to go broke. Even $50 oil is enough. I am telling you if you go to country that does not have ability to issue enough of credit for whatever reason oil can go all the way to zero you will still have very small economic activity. even in developed countries you have huge areas where credit is slowly reducing because you can’t make a profit any more. So the actual unit price is not that important. It is understanding that credit is slowly reducing as our oil resources are getting depleted.

      • Dennis Coyne says:

        Hi Ves,

        Oil price is not the only thing that is important, but it has a big influence on oil output.
        Lower oil prices will tend to boost the economy if all other factors remain the same (which never happens in the real world.) There is a complex web of interactions in the real world economy, which is why economists find it difficult to predict the future. There are no controlled experiments in economics, which makes the “science” of economics very difficult to study on an empirical basis. Econometrics attempts to control for changing variables, but is imperfect.

    • AlexS says:

      “Fernando, who has been in the business a long time, thinks oil prices will increase in the 3-5% range (annually) over the medium term”

      Will increase by 3-5% annually from what level: $40, $50, or $80, or $100?
      Forecasters, including the IEA, the EIA and others usually say that prices will increase by 3-5%, or by 1-2% annually. They were saying that when price were in the $20-30 range and when they were above $100.
      In reality oil prices are very volatile, they can move up and down by 50-70%. And if you look at long-term compound average growth rate, it largely depends on which period you chose. It may be a declining trend, or an upward trend, depending on where we are in the oil price cycle.

      • I go by my perception that by 2035 (more or less) we will be needing about $150 per barrel (in 2015 dollars) to put fuel on the table. That’s roughly 5 % per year starting at $55 for a world wide basket. I’m not into predicting prices, but I have some understanding of the cost of the future resource base. For example, my educated guess is that a lot of that Bakken oil will require in excess of $100 per barrel. I KNOW a lot of the canadian extra heavy oil also requires over $100 per barrel. The same applies to the venezuelan extra heavy oil, deep water oil, and Arctic oil. It also applies to EOR.

        And it seems to be getting to be a trategic need for OPEC countries and Russia to have oil in the $80 to $100 range. So this tells me the price will be going up. Eventually something is going to break down as industry costs just shoot through the roof.

        • AlexS says:

          If we assume that current long-term projections for global demand are right, that the resource base remains more or less the same as we know it today, and there is no breakthrough in technologies, than by 2030-2040 oil prices should indeed be much higher than even the recent record high annual averages ($111-112 per barrel Brent).
          We always base our projections on our current knowledge, we tend to extrapolate current trends, and we cannot forecast “black swan” events. (LTO was obviously a “black swan” for the global oil industry. If not for LTO, prices would be at $130, not $50).
          Hubbert peak oil was perfectly precise for the US Lower 48 states conventional production, but he cannot predict Alaska, deepwater GoM and tight oil.

          • I don’t know about Hubert, but I don’t know of any incoming technology we can use to solve this puzzle. My approach is a bit different than what you may think. I happen to know something about oil extraction technologies. And I can’t visualize much we can use to fill the gap caused by decline.

            I’m curious, when you mention Alaska, what do you have in mind? I’m used to people bringing up the Kara and the Barents, but I haven’t heard much about great new finds in Alaska.

            • Synapsid says:

              FL,

              I believe he’s referring to Prudhoe Bay. He’s referring to things Hubbert wasn’t considering.

              • AlexS says:

                Exactly. In mid-50s, geologist King Hubbert created a model which accurately predicted that conventional oil production in the Low 48 States would peak around 1970.
                http://en.wikipedia.org/wiki/Hubbert_peak_theory
                However, quite understandably, he could not predict discovery of Prudhoe Bay (Alaska), deepwater Gulf of Mexico, and the rise of the LTO production, which substantially changed the curve of the TOTAL U.S. oil production.

                Similarly, when we forecast future global oil supply, we take into consideration only known resources, which are technically recoverable with the currently known technologies. That doesn’t mean however that over the next 20 years technological advances or discovery of new resources could not substantially increase the resource base.

                For example, who could predict 10 years ago, or even 5 years ago that the US light tight oil production could reach 4mb/d?

      • Dennis Coyne says:

        Hi AlexS,

        Very true. Prices are volatile in the oil industry. So we look at the long term trend in real oil prices. Let’s take 25 years as a nice round number. The real prices viewer from the EIA allows us to chart the natural log of real oil prices from 1995 to 2014 (see chart below). Over this period real oil prices rose by an average of 6.45% (using annual oil price data). There will no doubt be continued volatility, but if the trend continues prices would rise at a 6.5% annual rate from $90/b (2014$) in 2014.

        I doubt the trend will continue, increased oil prices will tend to slow down economic growth, reduce oil demand and slow the rate of increase in prices to 3 or 4% annually, this would lead to $131/b by 2025, the higher oil prices may lead to more substitution for oil, by public transport, trains and electric vehicles which could gradually slow the increase in demand for oil and the rate of increase in real oil prices. Let’s say it falls to 2%/year for 10 years, real oil prices would rise to $160/b in 2035. More substitution and slower price rise of 1% per year for 5 years leads to a real oil price of $168/b in 2040 in 2014$.

        • AlexS says:

          Hi Dennis,

          Interestingly, how this chart would look two year from now?

          • Dennis Coyne says:

            Hi Alexs,

            I have guessed that the exponential increase in prices would moderate as the World economy slows down due to higher prices and due to substitution. Clearly nobody knows the future path of real oil prices, but I am confident that over the next 25 years the overall trend will be higher real oil prices and would guess that the rate will be 5 to 10%.

            • Dennis, 100 dollar oil at a 5% increase per year would be $339 a barrel after 25 years. At a 10% increase it would be $1083 a barrel after 25 years. And you believe because the change will be so gradual, we will adjust.

              I am reminded of a story about a farmer and his calf. The farmer had no gate in his fence, only a stile over it. Every day he would pick the calf up and carry her over the stile. The calf grew a little each day of course. But because the growth was so gradual the farmer, after two years, was able to pick the whole cow up and carry her over the stile.

              The story sounded logical to us kids of course. Because the change was so gradual the farmer simply adjusted to the extra weight… gradually. But it was a story only a child would believe. Grownups would quickly understand that at some point the cow would be too heavy for the farmer to carry. The weight would be enough to break his back.

              • Nick G says:

                There are a lot of non-linear things going on.

                Above about $80 per barrel, Electric transportation is less expensive. if you include the cost of supply security and climate change, that break even point is much lower.

                Electric transportation is growing exponentially. Just like cell phones and land lines, at some point the rising trendline of electric transportation will cross the trendline of oil consumption, and oil consumption will start to fall, never to tide again.

                I don’t think we’re quite at that point, but clearly alternatives are part of the reason why oil consumption hasn’t risen as quickly as expected

              • AlexS says:

                There is empirical evidence that the global economy is starting to feel significant pain when the cost of oil consumed globally reaches 4.5-5% of the global GDP.
                The first time it was in early 80s, after the second oil shock, which caused the deepest recession in post WW2 period.
                Next time it was in 2008, which also caused a deep recession.

                • Dennis Coyne says:

                  Hi AlexS,

                  If you are talking about Hamilton’s research, that was for the United States only. We can assume it applies to the World economy, but no research that I have seen actually does this, in fact one study I read showed that this was not the case in general outside the US.

                  In many of these cases of oil shock, I think the problem was more the rate of increase in oil prices, rather than simply the absolute spending on oil relative to World GDP.

                  Also keep in mind that the World Real GDP (using the Purchasing Power Parity [PPP] method for exchange rates ) per barrel of oil consumed has been increasing over time, but when oil peaks and oil prices rise, I agree the there will be a slow down in World GDP growth, substitution of other forms of energy for oil may mitigate this effect to some degree.

                  • AlexS says:

                    There was a chart in IEA’s OMR in 2008 showing the share of oil cost in global GDP.
                    I have borrowed their idea and built a similar chart at that time, using IMF data for global GDP, Brent oil price and total volume of global oil consumption.
                    I understand that 99% of liquids consumed globally is not Brent, but this is a very simplistic calculation shows a general trend. If someone explains me how to insert a chart into a post in this blog, I can update it.

                    Besides, Merrill Lynch energy analysts have made similar calculations for the cost of total global primary energy consumed

              • Ilambiquated says:

                Feller’s name was Milo of Croton, best wrestler in ancient Greece.

              • Dennis Coyne says:

                Hi Ron,

                The current price is about $55/b. A 5% rise for 20 years would be $145/b, a 6.5% rise for 20 years would be $194/b.

                I agree a 10% rise in prices could not be sustained for 20 years, and even a 6.5% rise would not work if we start at $100/b. The trendline in my chart above suggests about $100/b in 2015. If prices get back to that trend line in 5 years, that would be $137/b in 2020 (2015$), which would require a 20% annual increase for 5 years if we start at $55/b.

                A fairly realistic scenario would be a 10% annual increase for about 5 years from $55/b to $89/b in 2020 and then a 7% increase for 5 years to $125/b in 2025, then I would expect a slower rate of increase of maybe 3% annually for 10 years with prices at $167/b in 2035. At that point prices might level off or fall depending upon the state of the world economy, how successfully substitutes for oil have been adopted and the efficiency with which oil is used.

                The economy may adjust to higher prices, prices were at the $100/b level for a few years without catastrophic effects.

                You always assume that I think adjustment to higher oil prices will have no ill effects. I have never said as much.

                Real oil prices rose by 6.5% on average for 24 years.
                In 1994 when oil prices were $25/b, nobody thought the world could survive with $100/b oil and I doubt that another jump to $400/b in the next 20 years would be tolerated well by the world economy (that would be roughly 7% per year for 20 years.)

                The reality is that oil prices will rise, if they do not there will be shortages of oil, the rising oil prices will slow economic growth and increase the use of alternatives.

                There will be nothing easy about this transition and it might lead to collapse or it may lead to changes in how we use energy and what types of energy we use.

                I don’t think a crisis necessarily results in collapse, I agree with your thesis that very little will happen before a crisis arrives. The next step in your story is unclear. How quickly does this collapse occur? I guess your assumption is that any attempt at mitigation always makes things worse, kind of a murphy’s law on steroids.
                I find this line of reasoning far fetched. Old Farmer Mac’s thesis that powerful nation states (Leviathan) will act in ways that keep as much of their population healthy as possible to be more reasonable.

                Unlike you, I do not think that collapse is collapse, I think it can take many different forms.

                In the essay by David Price, which I find unconvincing, he assumes population will only decline because of collapse, if total fertility ratio falls population could decrease without collapse. There are also two different scenarios for collapse, in one there are “a handful” of human survivors, in the other humans become extinct.
                I assume one of these is what you mean by collapse.
                I find such a scenario unlikely.

    • nNgass says:

      The 3-5% annual increase in oil (using Brent price) as stated by F. Leanme leads to:
      2015: 51.5 – 52.5
      2016: 53 – 55.1
      2017: 54.6 – 57.9
      2018: 56.2 – 60.8
      2019: 57.9 – 63.8
      2020: 59.6 – 67
      In my opinion that is much too low. Who are the oil producers who can sustain such low oil prices over such a period? Not the US producers. On this board there are numerous discussions that shale oil producers will have a difficult time even after a few months, let alone years. Even conventional oil will be in trouble over that period, such as North Sea oil.

      • See txt a few lines above.

      • Dennis Coyne says:

        Hi ngass,

        Let’s assume a 5% annual rate of increase in real oil prices and 10 years. Fernando assumes we start at $55/b (Brent oil price) in 2015. In 2025 oil prices would be about $90/b in 2015$. You may be correct that this rate of increase is too low, and I am fairly sure that Fernando does not expect prices will follow an exponential trend exactly (I certainly don’t), real oil prices will bounce above and below this trend line, the may increase at 15% for a few years and then be flat for a couple of years, the short term price is impossible to predict, the long term trend will follow production costs which Fernando has a much better handle on than me.

  11. Toolpush says:

    Well, the rig count is certainly dropping, with more to come by the sounds of things, with stories of Companies going for early retirement of contracts as posted above, still coming through the system.

    American count down 61
    Permian count down 28 but still above 31 above 12 months ago
    Bakken continues its steady decline, down 8
    California seems to stopped it drop of the last couple of weeks.
    Apart from a 3 from the Eagle Ford and Mississipian, the other shale areas seem to be holding up fairly well. These other areas may have more permit drilling going on, being newer plays.
    The gas plays didn’t seem to have changed at all. So with the current cheap Nat gas price, we will have to wait and see if the gas area rigs decline along with the oil rigs or hold up against gravity.

    It looks like Canada is back from Christmas dinner, a cheery New Year.

    Mike,

    Why don’t you do this for your hands?

    • Mike says:

      I don’t want to be the first in my neighborhood to start spoiling hands. Its a dangerous precedent. Start giving them Christmas off and next thing you know they’ll be wanting bug fans, or rags to wipe their hands on, that sort of thing. Can’t have that, no sir.

      I was running tongs on a workover rig once, long time ago; my 2nd day on this rig. I was just a kid. We had been yo-yoing pipe like maniacs all morning long. Hotter than hell, it was. Come noon the rig operator hollers, LUNCH! so I jump off the floor to go get mine and find a tree to sit under. The toolpusher comes piling out of this pickup, arms waiving in a hissy fit, and asks me where the hell I thought I was going? I said I was going to eat lunch. He kicks a dirt clod and hollers, “son, the only thing we take off for lunch around here is one glove, get your sandwich and get your ass back up there on the floor and get to pulling pipe.”

      I grew up to be just like him.

      Mike

      • On the other hand I was on an offshore rig in Africa and they flew lobster for Xmas meal for the senior personnel. Some of us ate it in the dining room in daylight, and they even put white linen on the table. I remember eating chunks of lobster dipped in a french butter sauce and looking at the blue ocean. It was pretty nice. And I think the rig hands also ate a special meal, they got sliced turkey and mashed potatoes, all served in nicely decorated metal bowls.

        • coffeeguyzz says:

          Fernando, Sounds like a Total operation. Only the French would think of pulling a ‘stunt’ like that.

          • The French are much more sophisticated. What they call Bon Vivants in West Africa. They put flowers on the table, drink wine, eat lobster Thermidor and have a wonderful Creme Roulee desert. French rigs have a saucier and a pâtissière

  12. Ronald Walter says:

    So this is Peak Oil? Really? Tell me another one, I can go from laughter to guffaw to chortle, then snort too right through my nose. A knee slapper if there ever was one.

    Ahem, pardon me, but one fact is missing. Mineral owners own the oil, nobody else. The oil company signs a lease with the lessor, the owner of all of the minerals, the oil companies have nothing to do with the ownership of the minerals once they are ba-roke. The lessee, the oil company doesn’t have a leg to stand on, they’re helpless, no money, no one is going to lend them a dime, they might as well be beggars in Mumbai. The lessor retains all and takes all, the banks are SOL, sorry Charlie. Just who in the hell do these bankers think they are? God? I know they do God’s work, but they are sorely mistaken. The Ogre at the Gates of Hell will see to it that they spend eternity in Hades, by God. They can go straight to hell, not pass go, not collect two trillion dollars.

    Any bankruptcy will, by legal necessity, defer to the actual owners of the oil, not the oil companies.

    If I were a cynic and not a stoic, I would subjectively conclude that it is nothing more than a swindle by disguise and hoodwink.

    The mineral owner will sue to the hilt, not blink an eye, and be damned sure he or she loses nothing, especially the oil.

    Anything other than that is all pure el toro poopoo.

    The world is filled with dumbasses and it shows. Bankers appear to be at the top of the list. It’s great to be number one, until it ain’t.

    Peak Oil is nothing more than a grab, oil, money, land, the whole enchilada.

    It’s not nice to fool Mother Nature. Jokers to left, clowns to the right, fools stuck in the middle.

    Nicht so schnell!

    But, hey, it was worth a try, nothing ventured, nothing gained. Don’t do it again, you’ll get burned twice.

    • shallow sand says:

      One reason the secured creditors will push for continued operation of the wells is that they don’t want to risk the lease being forfeited. Can’t have a security interest in a lease cancelled by the court, nor the oil that has yet to be produced.

      Also, although secured creditors would still have a security interest in the leasehold equipment, that can be lost in several states, I believe, if the lease is shut down so long the court finds the equipment has been abandoned.

      There would be folks all over the place in these shale areas top leasing if wells are shut down for very long.

      • Watcher says:

        Well, the oil is there. Shutdown is not permanent. It lasts as long as the court queue lasts. The issue is the creditors are multiple. No one has greater claim to assets than another, unless their paper was explicitly subordinated, and subordinated debentures or even mortgages do happen.

        Mostly it’s the LOCs that will chop off. That does away with cash flow, and the reality of the filing will force operations to demand up front money. It won’t be there. This is what DIP money is all about.

        But again, the oil is there. It will just take months and maybe a year or so depending on court queue to let the pre drilled wells flow again. Debt riddled companies with multiple tiers of financing do NOT just trot out to their business and keep operating without a court order. That’s fraud.

        • Watcher says:

          Debt riddled *bankrupt* companies . . . .

          And again, note that these entities may and probably will in many cases just dissolve. Then who goes to court?

  13. AlexS says:

    “At least 140 rigs are needed to maintain October’s production level of 1.2 million barrels per day, the most recent figure available, Helms said. Based on a survey of the Bakken’s top producers, he expects the rig count to drop to 150 by July 1 and to as low as 125 rigs by the end of the year if depressed oil prices persist.”

    Helms’ forecast and companies’ guidance are based on $70-plus oil, and if current $50-minus WTI and $35 Bakken Sweet crude persist for the rest of the year, the rig count will be much lower, and production will start declining from mid-year or even earlier.
    Continental is planning to cut its number of rigs in the Bakken from 19 in 2014 to 11 this year, a 42% decline. If we see similar cuts from other producers, that translates to 105 rigs for North Dakota (the average number of rigs in 2014 was 176).

    Note that in 2008-09 the U.S. oil & gas rig count dropped by 60% from Nov’08 peak to June’09 low. This time, the decline could be smaller, but still very significant. A quote from Bloomberg:
    “Unless oil prices recover, absolutely, this is the end of the drilling boom,” James Williams, president of energy consulting company WTRG Economics in London, Arkansas, said by telephone yesterday. “The total rig count should hit 1,000 by March or April, and oil production growth should be flat or declining by mid-year.”
    http://www.bloomberg.com/news/2015-01-09/u-s-oil-rigs-decline-by-most-in-a-week-since-1991.html

    1,000 rigs mean a 48% decline from last year’s peak of 1,931 rigs (in September).
    It seems that both oil companies and analysts and experts have initially underestimated the extent of the decline in oil prices and its consequences for the global oil industry in general, and tight oil production, in particular. Now they are capitulating.

    • (the average number of rigs in 2014 was 176).

      The average, January through October, end of each month, was 190.8 as per the Director’s Cut.

      • AlexS says:

        I am using Baker Hugues data for North Dakota. Average of 52 weeks from January 3, 2014 to Dec. 26, 2014

        • Go here: Monthly Oil Data (ND & Bakken) and average the average rig count for the first 10 months of 2014. It comes to 190.8. And that jives with what they were publishing in their list of rigs, daily here: Current Active Drilling Rig List After all, they listed the rig name, location it was drilling, and the well number it was drilling so it must have been there.

          • AlexS says:

            I have noticed before that NDIC rig data differ from Baker Hughes.
            (http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
            The file name is “North America Rotary Rig Count (Jan 2000 – Current)” )
            I’m looking primarily at BHI data as it allows comparisons between the states and key basins.
            I do not know if BHI data is incorrect, or maybe they are using a more strict definition of active drilling rigs. ???

          • Dennis Coyne says:

            Hi Ron,

            Using the data from the spreadsheet, and using the 12 month average from Nov 2013 to Oct 2014, about 10.3 wells per rig per year are drilled by Bakken rigs, and 140 rigs would lead to 120 new wells per month, about 150 rigs are needed to drill 130 new wells per month with no change in rig efficiency. So Helms’s 140 rig estimate is 10 rigs too low, if we assume rig efficiency of the previous 12 months continues into the future. Perhaps Helms thinks that rig efficiency will increase to 11 wells per rig per year.

            • Dennis Coyne says:

              Hi Ron and AlexS,

              It seems that fracking crews are the real bottleneck, and we don’t have data on the number of active fracking crews as far as I know.
              I think only 112 rigs can drill 130 new wells per month, but the number of fracking crews is unknown.

              • AlexS says:

                Hi Dennis,
                In fact capacity utilization in the U.S. frack industry was about 85% in 2014 due to significant increase in capacity during the last 2-3 years.
                It’s a question for me, why there is so many drilled but not fracked wells, especially in the bakken

                • Dennis Coyne says:

                  Hi AlexS,

                  Good info, thanks. Do you have a link?

                  I have always assumed that there is a shortage of fracking capability because the number of wells waiting on completion services has grown over time, this may simply be my lack of real world insight into the oil industry. Recently the number of wells waiting on completion services (which I assume means fracking) was about 650 wells which is about a 3 month supply of wells at the peak average 3 month completion rate (210 wells/month). The drilling rate at 190 rigs is about 221 wells/month, so these two rates match up fairly closely. Does Baker Hughes keep track of fracking capacity?

  14. Old farmer mac says:

    It’s always a good policy to never say never without the very best of reasons. I just mentioned lucky break throughs in technology up thread not being very likely in terms of renewables.

    But according to the Economist there is a good possibility a sulphur battery may be a commercial reality within the next year. If so this could be a real game changer considering that sulphur is dirt cheap and that the energy density is potentially much higher than lithium ion .

    http://www.economist.com/news/science-and-technology/21637344-adding-sulphur-electrical-cells-may-quintuple-their-performance-whiff

    • Longtimber says:

      Current Chemical aka. Battery storage cost per kWh is comparable to Grid Price. Rooftop PV Power lets say is 8 cents. Battery cost ~ 2X per kWH. So Offgrid Living is all about moving loads to Real time PV Power. “Over” Size array to power loads on cloudy days and avoid storage via load management. PV is much cheaper than Batteries now. Chemical Storage cost may come down 20-40% with mass production, but Lithium not likely to be replaced for traction applications. it’s the most reactive metal on the Table of Elements.

    • John B says:

      No doubt there will be better battery tech in the future.

      But look how easily this little lithium battery jumps a car.

      https://www.youtube.com/watch?v=9Zyv5kztfU8

    • TechGuy says:

      “But according to the Economist there is a good possibility a sulphur battery may be a commercial reality within the next year. If so this could be a real game changer considering that sulphur is dirt cheap and that the energy density is potentially much higher than lithium ion .”

      FYI: Li-S batteries have an extremely high self-discharge rates. This paper discusses using fluorinated electrolytes to reduce the self discharge rate of about 36% per day to about 9% per day. In comparision, a lead-acid battery has a self discharge rate of about 0.1% per day.
      http://jes.ecsdl.org/content/162/1/A64.full

      Other work on Li-S batteries was using thin permeable ceramic plates to fix the self-discharge problem, but these Li-S batteries only operate at elevated temperature (about 240C/450F)

      While Sulphur make be cheap, Lithium, the other metal needed isn’t cheap. FYI: Lead-Acid Batteries are “sulphur” based since they use sulfuric acid.

      FWIW: No chemical battery is viable for long term storage. All chemical batteries cause anode depletion via electro-depositing (like electroplating but in reverse). No chemical battery will retain a lifespan beyond a few thousand cycles. to date, the longest lasting battery is the Nickel Iron (invented in the 1890’s), but it energy density is low and has other issues. What is needed is a completely different battery technology that works on chemical states or phase changes to produce electricity instead of traditional electro-chemical reactions.

      • Longtimber says:

        Elon says Cost of Materials ~ $80 per kWH for LI Batteries. . Current price of 18650 cells is ~ $400 in Bulk. Same for Latest 100Ah Prisms. Best Batteries sourced from CALB. Chicom Aviation Li Battery. Latest Generation are a big step forward. You can get previous Generation Batteries for big discount while available. US Better wake up.
        http://store.evtv.me/products.php?cat=10

      • Old farmer mac says:

        Modern battery chemistry is way over my head given that I last studied the subject back in the sixties and only took two years of basic courses even then.

        But if a company such as Nissan is talking putting these batteries into production within a year then they must think they have licked the worst of the problems involved with the technology.

        Nine percent a day self discharge is obviously no good for long term storage.

        But if you can charge a car or light truck up overnight with relatively cheap coal or wind or nuclear power and run it all day the next day while avoiding future relatively expensive gasoline and diesel fuel purchases I guess nine percent is an acceptable self discharge rate.

        My personal wild ass guess is that while the cost of materials that go into batteries may remain high the cost of actually processing and assembling the materials into batteries is going to drop like a stone within a decade or two.

        When I was a kid only the wealthiest of gear heads could afford exotic stuff such as double overhead cams and electronic fuel injection for their hot rods.

        But every econobox on the road these days has this stuff and more on it. The economies of scale and incremental improvements in parts manufacturing and assembly have worked miracles in auto internal combustion engines.

        I don’t see any reason why battery costs won’t with some luck come down in just as dramatic fashion even as the performance of a battery of given dimensions increases.

        Five thousand cycles at a cycle a day is long enough in a car or light truck to justify a new battery. Current day engines and transmissions often fail within ten years. An electric motor ought to last almost forever.

        • wimbi says:

          I have a high regard for the powers of a good team of R&D engineers, since I put together such a team about 3/4 of a lifetime ago, and the widget we came up with was certified by NASA to be not only by far the best performer, but also, surprise, surprise, the cheapest as well.

          Of course the big guys couldn’t stand for that, so one of them bought my little company and started making the very same widgets faster and faster and selling them to all the other companies who used such things– which is dam few.

          Good engineers like to work on hard problems, and given enough money, usually make real fast progress, as long as the bean counters, who tend to know the price of everything but the value of nothing, stay out of their way.

          I am betting on Musk.

    • Once they have the battery on sale we will have to see how it performs. If it works and is commercial the next problem is called “peak lithium”.

      • Fred Magyar says:

        If it works and is commercial the next problem is called “peak lithium”.

        Yeah, I’m sure there will be a “peak lithium” at some point in time but I’m going to go out on a limb here and suggest that it’s a heck of a lot easier to recycle lithium than it is to recycle combusted hydrocarbons, so it might take quite a while to reach “peak lithium”.
        Plus I still expect some major die off voluntary reduction in human populations in the not too distant future… thus further extending the horizon of reaching certain peak resources.

        • clueless says:

          There is some new battery that the Japanese are working on – “double carbon” I believe. Both anodes are carbon. And they make their own carbon. Should cost the same as LI, but recharges in 25% of the time. I read some articles about a year ago and do not have time right now to research it again.

        • wharf rat says:

          As hemp makes a comeback in the U.S. after a decades-long ban on its cultivation, scientists are reporting that fibers from the plant can pack as much energy and power as graphene, long-touted as the model material for supercapacitors. They’re presenting their research, which a Canadian start-up company is working on scaling up, at the 248th National Meeting & Exposition of the American Chemical Society (ACS) in San Fransisco this week.

          http://www.sciencedaily.com/releases/2014/08/140812121549.htm

          • Fred Magyar says:

            Thanks for that link, wharf rat!
            I just got back from a trip to Brazil and I’ve been looking for things to make out of bamboo as Brazil has over 200 native species of that grass, the most of any place on earth. Just did a quick check on bamboo bast and I’m going to bet it can also be used in a similar way. I’m sending that link to my cousins, one of whom is an agronomist the other a chemical engineer, they have a farm in Brazil where bamboo is a pest plant and grows like a weed. Hey ya never know!

          • dave ranning says:

            You still in Mendo?

        • Ilambiquated says:

          Dumping batteries will be more or less illegal in the EU after 2020, and already is in most of the EU, so recycling will have to happen. It’s hard for Americans to grasp that landfills really don’t belong in a modern society.

  15. Regex Wald says:

    The North Dakota Department of Mineral Resources has a new presentation that some here will like. Since I know not everybody sees or clicks on links, I’m attaching two of the slides to this post.

    https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf

    We also learn, in this presentation, that the average “lag time” between when the agency receives a drilling permit application to when it approves (or rejects) said application is approximately 45 days. In the 4th quarter of 2014, the number of permit applications declined between October and November, but then rose between November and December.

    P.S. coffeeguyzz, this presentation (on page 3) also contains an updated map of the first 60 day average production by Bakken well.

    • Toolpush says:

      Reg,

      Thanks for the post. Just to get things straight, the prices that are referred to in the PDF, are for posted ND prices and not WTI. Correct?
      This being so there doesn’t seem to be very much left in ND that is going to be economical to drill, and with the current ND oil price posted in the $30 range, the ND govt at least admits oil production will be in a decline, Page 10, contrary to company reports, which love to paint a glossy picture.

      • Regex Wald says:

        Just to get things straight, the prices that are referred to in the PDF, are for posted ND prices and not WTI. Correct?

        Your guess is as good as mine, but that was also my assumption. They do refer to wellhead pricing in a different slide.

        • AlexS says:

          Regex,

          Thanks for the post and the link.
          Very informative presentation, much better than several previous ones.
          Important clarification that breakeven refers to wellhead prices.
          Basically, it shows that even some sweet spots (Mountrail) are not breaking even at current prices.
          Their Production Projections (page 10) confirm that, if prices remain at current levels, the rig count will decline to some 100 units and production will be lower by year-end than now

          • shallow sand says:

            Thank you very much for this information. I feel this information is much more accurate than what the shale companies are putting out regarding 2015 production growth.

            • AlexS says:

              Shale companies generally assume that oil prices will rebound shortly and will average some $70 (WTI) for the whole year.
              Besides, when they guide for production growth in 2015 vs. 2014, they mean annual average numbers, not the growth in monthly averages from Dec 2014 to Dec 2015.
              Similarly, EIA now expects a still very healthy growth in 2015 average US crude+condenstae production of 0,72 mb/d.
              However if we look at their monthly projections, we can see that growth peaks in May, and Dec15 number will be higher than Dec2014 by only 0,26 mb/d.
              In fact, I expect the EIA to cut these projections in their January STEO release on lower oil prices and rig counts.

      • Watcher says:

        Take 25% off these numbers per normal govt optimism in tax revs and the result will probably be close.

    • coffeeguyzz says:

      Mr. Wald, I thank you for the info and will say something of significance, IMHO, regarding that slide #3/60 day IP chart …
      If anyone looks and sees the few white lines pretty much dead center, THAT is the group of wells that Whiting has frac’d with the new Bottom Hole Assembly Tool from NCS Multistage (94 and 104 stages in two out of the three simultaneously completed wells on that pad). These are still on confidential list, in the Twin Valley field, and the three wells have produced about 88k, 103k, and 112k. boe in the FIRST TWO months.
      That, folks, is a glimpse of future shale development.

      • Watcher says:

        These are still on confidential list, in the Twin Valley field, and the three wells have produced about 88k, 103k, and 112k. boe in the FIRST TWO months.

    • Regex, thanks for this link. It is very revealing. They are saying it will take oil prices of $55 a barrel, wellhead price, and 140 rigs to keep production flat. Average wellhead price right now, or as of this publication, was $40.54 a barrel. That would put ND production on July 1, 2015, according to this publication, somewhere between 1.03 and 1.1 mbd.

      This means that, if prices stay at the current level or below, then production will start dropping well before mid year.

      Make no mistake, I do not discount the word of Lynn Helms. I think he may have a tendency to be a little over optimistic. After all it is his job to sell North Dakota to potential investors and industrialists. But I extremely doubt that he would be pessimistic concerning the number of rigs required to keep production flat in North Dakota. If he says it would take 140 rigs then I would bet it would take at least 140 rigs.

      • Watcher says:

        Oh, he’s not lying. But the California effect should come into play hugely very soon. Calif consistently overestimated tax revs (up to the point where they rammed through the ability to raise taxes without 2/3 vote) Just To Make The Budget Proposals Not Cause Suicides. NoDak has stacked up a ton of plans for buoyant government spending growth, plus further feeding of their sovereign wealth fund.

        The pressure on people to project positive things is pretty high in an environment like that. If the projections aren’t met, they aren’t going to lose their jobs. They’ll just manufacture a cause that could not have been foreseen.

        So . . . the Helms read is probably rather more pollyannish than you think.

      • Dennis Coyne says:

        Hi Ron,

        They are estimating about 9 wells per rig per year (it should be about 10 wells per rig per year) and you are correct that it will take at least 140 rigs to keep output flat (if we assume no increase in rig efficiency), my estimate is 150 rigs would be needed to drill 130 new wells per month which would keep ND Bakken output between 1050 kb/d and 1100 kb/d through 2017.

        • I prefer to look at all North Dakota rigs and production. After all total oil is what counts. But until that excess of 650 wells “awaiting completion” is used up, it all depends on how many fracking crews are working, not how many rigs are working. And we will get updated only once a month as to how many new wells each month is brought on line from those 650 wells. We will watch whether that number gets larger or smaller.

          One specific point needs to be made. Helms talks about Production from Bakken-Three Forks and production from “conventional pools”. These are not pools of course but oil that has migrated from the source rock up to the reservoir rock in the few anticlines which are also“located inside the Bakken area.” So when Helms talks about oil from the Bakken he is talking that layer of source rock, not a particular area of North Dakota. It’s all coming from the Bakken-Three Forks area.

          • Dennis Coyne says:

            Hi Ron,

            I have no model for the formations that are not middle bakken or three forks. When I model the Bakken/Three Forks, it is based on Bakken and Three Forks data for North Dakota from the NDIC from these geologic formations, the area is of no importance. For the Nov 2013 to Oct 2014 period all North Dakota rigs were operating in the Bakken/Three Forks formations, based on the spreadsheet you linked to in another comment. My North Dakota models are always for Bakken/Three Forks and ignore output from other formations in North Dakota (output from those was about 100 kb/d or less in Oct 2014.)

            • Dennis Coyne says:

              I checked the North Dakota output from formations other than the Bakken/Three Forks formations in Oct 2014. It was less than I realized at 64 kb/d, it can effectively be ignored as it is negligible compared to the 1100 kb/d output from the North Dakota Bakken/Three Forks.

          • Miws says:

            Have you looked at the stratigraphic column? There are other source rocks. They just aren’t getting as much attention as the Bakken.

            (this is a big detailed PDF but worth waiting for it to load)

            https://www.dmr.nd.gov/ndgs/documents/Publication_List/pdf/Strat-column-NDGS-%282009%29.pdf

            • Miws, that PDF is simply the Stratigraphic Column of North Dakota, back to the Precambrian. What makes you think there are other source rocks there?

  16. canabuck says:

    I wonder if the increase of lawless regions is related to the limits of resources per person on this planet?
    Lawless regions:
    – (Libya, northern Nigeria, parts of Mali), South Sudan, (Yemen, Somalia), (northern Pakistan, Afghanistan), ISIS, eastern Ukraine.
    In five years from now, one may expect these regions to expand. And if they expand too much, then there will be a “civilized world” and a “barbarian world” in the future.

    • Ilambiquated says:

      The idea that these regions are lawless is one of perception I think. Nobody even talked about these places thirty years ago in the American media. Now they are fodder for the sensationalist scare mill.

      The very fact that the world is growing together increases the perception that is is falling apart.

      • Anon says:

        I’m pretty sure all of those areas are lawless for real, not just perception. The list is a bunch of tribal-dominated areas and civil war zones.

        Anyone with enough muscle can dictate what goes on in those places.

        • Ilambiquated says:

          Yes, they may be lawless for real, but it is not clear that they were significantly less lawless 30 years ago. Libya and the Ukraine I guess. In addition, some places that were more lawless 30 years ago (Cambodia, Ethiopia, Uganda, Surinam, Sri Lanka, Columbia, South Africa, Mozambique, and Angola for example) need to be taken into account.

          The perception is that lawlessness is spreading. It is not by any careful measure. It’s just getting more press.

    • Philip Backus says:

      I’ll have to say that when I first saw the pictures of ISIS in columns of pick up trucks with mounted weapons it was very reminiscent of the Road Warrior/mad max films of the 80’s though with a lot of reality baked into the script.

    • thrig says:

      Let’s see, Pakistan 30 years ago was under General “policeman on every cornor” Zia, and Americans were busy arming the Afghans tooth and nail (stingers and such, actually) for the quite enlightened task of teaching the Soviets to bleed. I should mention Ojhri camp. Granted, with no more Soviets to kill, well, US-AID was busy about a decade later closing down all the roads and schools and other projects in Pakistan, seeing as there was apparently no money for that sort of foreign intervention. Whoops!

  17. Javier says:

    Roger,

    I agree that 2014-2015 looks like the the all liquids peak and it is difficult to imagine another rabbit can be pulled from that hat to prevent it. The world economy looks in deep trouble for 2015-17 at the least.

    Now an important question is the rate of decline from here. Hook et al. 2009 found that the decline rate of giant oil fields have been growing with time with data up to 2005.
    http://www.postpeakliving.com/files/shared/Hook-GOF_decline_Article.pdf

    It seems clear that enhanced oil recovery technologies only bring forward future production and thus make the decline much worse. The poster child is Cantarell with a fall in production of 80% in 5 years. We know that enhanced oil recovery has been taking place since 2005 to keep production from falling. We have the increase in E&P spending since 2005 to show it (see for example Steven Kopics data) and we know that Saudi Arabia has increased the number of rigs by 3 since 2005 with a very modest increase in production to show for all that drilling.

    ¿Do you have any guess at what rate of decline in production of crude + condensates we might be facing?

    Without any expertise and based on the above data I would guess that we might see a 10-25% decline rate.

    For oil importers this has to be compounded with any rate in consumption growth of the exporters as Jeff Brown has showed. So much of the world might experience much higher decline rates.

    Any thoughts?

    Thanks.

    Javier

    • BW Hill says:

      Javier says

      Without any expertise and based on the above data I would guess that we might see a 10-25% decline rate.

      If the production decline rate follows the price decline rate, as predicted by the Etp model, the decline rate would be 13%. As the technically extractable resource is some where in the vicinity of 3600 Gb, price decline is the only mechanism that can reduce production.

      http://www.thehillsgroup.org/depletion2_022.htm

      That is fairly close to what a number of good analysts have predicted.

    • whats your definition of enhanced recovery?

      • clueless says:

        Enhanced – I think that one way is to pump carbon dioxide down the well.

      • Javier says:

        I do not have a definition of my own, but Wikipedia has a quite long entry on that:

        http://en.wikipedia.org/wiki/Enhanced_oil_recovery

        I don’t have anything to add or subtract to that.
        Is there any reason not to think that what happened to Cantarell was an example of overexploitation leading to an earlier and more abrupt collapse in production?

        • What they did in Cantarell was simply to inject nitrogen into the reservoir, simply to keep the pressure high enough to extract the oil. Had they not injected the nitrogen the reservoir would have simply lost all pressure and they would have gotten a lot less oil. They simply figured out a way to keep the pressure high enough to get most of the recoverable oil out.

          I don’t believe there was any over exploitation of the reservoir at all. They simply did what they needed to get all the oil out they possibly could. That is what everyone else in the world is trying to do.

          • clueless says:

            Probably not hydrogen. You probably meant to say nitrogen again.

          • That’s a dual porosity carbonate, has a partial water drive, right?

            • Watcher says:

              Vague recollection of people saying the injected nitrogen was at such a pressure that it drove oil deeper, hotter and thus turned it into nat gas.

              Meaning, they destroyed some of the recoverable oil? Cool.

              • it drove oil deeper, hotter and thus turned it into nat gas.

                Really now? That just seems an incredible claim. How many thousand feet deeper would you need to drive it to increase the heat that much? And how many years would it take such a slight increase in temperature to crack the oil into natural gas?

                I am not a physicist and cannot answer those questions. But I just ain’t buying that story.

                World’s largest N2-generation plant starts up for Cantarell reservoir pressure maintenance

                Originally it was at a depth of 10,500 ft subsea and had risen to 9,000 ft and, in some places 8,000 ft subsea in sections of the southern part of the Akal field.

                The Akal is part of Cantarell. The oil window is 7,500 feet to 15,000 feet. Below that, after a few million years anyway, all oil is cracked into gas. There is just no chance that the oil was pushed so deep it was cracked into gas in a couple of years.

          • Javier says:

            Yes, simply inject nitrogen to keep extracting, except that they doubled the production from a field that had already peaked in 1998. In essence they brought a lot of oil from the post-peak side to the pre-peak side, increasing the decline rate after the new peak in 2004.

            This is what some people are saying and the research supports it. Trying to delay the peak, which is what we have been doing for 10 years does not produce more oil, just brings it from the post-peak, making the decline rate worse than it would be otherwise.

            That is what worries me.

            • Not all EOR is rate acceleration. And sometimes rate acceleration can actually induce extra reserves (think of a case where a platform is reaching the economic limit, in that case we do try to speed up recovery from reservoirs which may not be fully depleted when the platform reaches the limit).

              Other EOR, for example miscible gas injection, will add reserves, it’s not rate acceleration.

              Cantarell reservoirs are a bit different. Those dual porosity carbonates are difficult.

        • Javier, if you parse that Wikipedia article it’s really vague. It seems some people call enhanced anything other than drilling a well and letting the oil flow. I would use EOR for techniques beyond simple water and gas injection. And Cantarell isn’t exactly a typical reservoir. I would reserve the term EOR for say a polymer and chemical flood in a carbonate. Or CO2 injection when under water flood. I don’t consider steam injection into a heavy oil to be an EOR. But if you add a bit of butane to the steam in a SAGD chamber you could argue its EOR. It’s a pretty loose term, I suppose.

          • Javier says:

            Thank you for the information.

            I guess is one of these things with boundaries problems that everyone can have their own definition.

  18. Jeffrey J. Brown says:

    Venezuelan government official tells Venezuelans not to believe their lying eyes:

    Venezuelans Throng Grocery Stores Under Military Protection

    http://www.bloomberg.com/news/2015-01-09/venezuelans-throng-grocery-stores-on-military-protection-order.html

    Long lines, some stretching for blocks, formed outside grocery stores in the South American country’s capital as residents search for scarce basic items such as detergent and chicken. “I’ve visited six stores already today looking for detergent — I can’t find it anywhere,” said Lisbeth Elsa, a 27-year-old janitor, waiting in line outside a supermarket in eastern Caracas. “We’re wearing our dirty clothes again because we can’t find it. At this point I’ll buy whatever I can find.”

    . . . . Government officials met with representatives from supermarket chains today to guarantee supplies, state news agency AVN reported. Interior Minister Carmen Melendez said yesterday that security forces would be sent to food stores and distribution centers to protect shoppers. “Don’t fall into desperation — we have the capacity and products for everyone, with calmness and patience. The stores are full,” she said on state television. . . .

    “You can’t find anything, I’ve spent 15 days looking for diapers,” Jean Paul Mate, a meat vendor, said outside the Luvebras store. “You have to take off work to look for products. I go to at least five stores a day.”

  19. Pingback: » What Will 2015 do for Peak Oil? Olduvai.ca

  20. Interesting read, but I have to disagree with the conclusions. The story here is that high oil prices coupled with easy money policies led to mal-investment in excessive U.S. shale production, and that led to a very temporary excess of supply over demand.

    I don’t see any evidence that “the peak is in”, but when you consider the realistic prospects for shale against the longer-term decline rates in conventional production (which clearly peaked almost a decade ago in May 2005), the picture becomes clear. This price depression is temporary and the supply destruction it causes will lead to MUCH higher prices.

    I just released a third video on this subject. Free at http://eriktownsend.com/Peak-Oil/peak-cheap-oil-investing-video-3.html.

    Erik

    • SRSrocco says:

      Erik,

      Your assumptions seem correct at FACE VALUE, but unfortunately you fail to incorporate the FED’s liquidity as the reason Americans and many in the rest of the world can afford HIGH OIL PRICES. It’s no coincidence that the huge $20-$30 trillion currency swaps between Central banks and the Fed’s massive liquidity since 2008 allowed the world to AFFORD expensive crap TAR SANDS and SHALE OIL.

      The only way we are going to see MUCH HIGHER PRICES if that is in tandem with a great deal more monetary stimulus from the CLOWNS at the FED and other assorted NITWITS from Central Banks.

      I believe Ugo Bardi and his SENCA CLIFF make perfect sense at to what we are facing in the future. “Growth is slow and sluggish, but the way to ruin is RAPID.”

      There is no way to predict what’s coming and I would like to say, the result will probably be much worse than most have imagined.

      steve

  21. Frugal says:

    Simons: A chilly wind blows through Edmonton

    Alberta has seen the price of oil dive plenty of times before: in 1986, in 1998, in 2001, in 2008. Each time we wail and gnash our teeth and promise that next time, next time, we won’t piss away the boom.

    Yet each time we’re amazed when the good times screech to a halt.

  22. YankDownUnder says:

    off topic alert:

    Since peak oil is upon us and in my unqualified opinion Ron is probably correct.

    A timely article.

    USA Oak Ridge lab (ORNL) is going for thorium in < 10 years, blue print in 2 years. Given that Oak Ridge (ORNL) created a functioning reactor in the 1960s and they still have that intellectual property I believe they have a good chance of being successful.

    I am shocked this article hasn't gotten more press. Thorium IMO is the one possible game changer on both Climate Change and Peak Oil front.

    Credit to Karl Denninger who has been on the thorium + coal to liquids band wagon forever:
    http://market-ticker.org/akcs-www?post=229716

    Forbes link:
    http://www.forbes.com/sites/jamesconca/2015/01/07/nuclear-power-turns-to-salt/

    My understanding is you can use the excess energy from the process to create CTL/GTL/Kerogen to liquids.

    Given that South Africa is economically producing coal-to-liquids as we speak, and the USA has largest coal reserves……Hope is in the air!!! (except I live in Australia…LOL!!!)

    This is also positive for climate change as well!!

    I have officially gone from a "doomer with some hope" to a "cross your fingers optimist". LOL!!!

    Take it easy on me…….

    • Longtimber says:

      Under 5 cents kWh from PV may make it hard. At some point you have to have Time Of Use Billing to reflect actual cost.

  23. Old farmer mac says:

    The situation in Sand Country is getting ever more explosive.There is no telling exactly what a hot war involving more countries and more foreign troops on the ground would mean to oil markets but my guess is that any additional hot war in that part of the world will lead to an oil price spike.

    http://www.spiegel.de/international/world/evidence-points-to-syria-still-working-on-a-nuclear-weapon-a-1012209.html

    • robert wilson says:

      This was known in 1959. I have long liked the terms “Asymptotic State of Humanity” and “…burn the seas (fusion) or to burn the rocks (fission)…”. He did not neglect “… trap the sun’s energy in a practical way”. It is of interest that although Alvin Weinberg was known as the leader of Oak Ridge physicists, he actually had a strong background in biology. http://energyfromthorium.com/energy-weinberg-1959/

      • Fred Magyar says:

        Thanks Robert! That was a great read, could have been written today. I read his comments about solar energy capture with special interest given how the state of the art in that arena has changed and costs have dropped dramatically since the late 50s. Also since he has a strong background in biology he obviously grasps what so very few understand even today. “It’s all about population dynamics!” Growth has very well defined limits on a finite planet. Perhaps we can tweak those limits a little here and there but not forever, in the final analysis we have to find ways to live within the boundaries of those limits there is no alternative to that. The scientifically ignorant cornucopian fools who have occasionally posted here recently would do well to listen to the likes of Ugo Bardi and take a long hard look at the scenarios that the Club of Rome have come up with. Our current path is obviously unsustainable and it is becoming evermore clear that that we will have to switch our energy sources away from a dependence on fossil fuels. That will happen within a relatively short time, whether any of us wants it to or not, regardless of our individual acceptance of the inconvenient realities and consequences of increasing the energy content of our atmosphere. That acceptance is for all practical purposes moot! Cheap, easy to access fossil fuels are a thing of the past so quibbling about which alternative sources of energy we are going to use to maintain BAU is a rather pointless excerscise. We aren’t going to maintain BAU we will have a new paradigm for civilization and my bet is we will all be doing more with less energy and my gut feeling is that we will be richer in many ways for it.

        I leave you with the late great George Carlin on “Stuff”
        https://www.youtube.com/watch?v=MvgN5gCuLac

        • wimbi says:

          Thanks ever so much, Fred. You often pop in and say exactly what I am thinking I really ought to do but am too damlazy to actually do.
          I have a slight acquaintance with Weinberg- drove him from and to the airport when he gave a lecture at a local university. I liked him a lot.

          What you say about solar is what i was thinking. It’s still a real hard job to burn rocks and seawater, but solar has simply got easier and easier, and still has a long way it can go without all that much effort.

          And we would be A LOT better off if we quit running around like headless chickens and settled down to doing no more than what we need to do. Would be a hell of a lot easier on everybody- and every thing.

          Plus maybe a few beers at the local pub every time we need it.

          • Dennis Coyne says:

            Hi Wimbi and Fred,

            My comments are often not very clear and I somehow give the impression that I think business as usual can continue, I do not. I think the world needs to use less stuff, build quality stuff that lasts almost forever if it is to be built at all, live in walkable neighborhoods where possible, build more alternative energy (wind and solar preferably) and HVDC transmission, more trains, light rail, bike paths, better urban design, more passive solar, insulation, heat pumps, time of use electricity pricing, some EVs, more recycling and cradle to grave manufacturing. The peak in fossil fuels will be upon us soon, hopefully the rise in prices that follows will create a crisis that leads to positive changes rather than collapse.

  24. Watcher says:

    Concerning shale debt. Lotsa flinging about numbers for breakeven and capex reduction.

    There’s a somewhat more compelling fact that oughta be embraced more fully.

    At $100+/barrel, these companies had issuance rated as junk. Debt on the balance sheets was growing leaps and bounds, so they weren’t funding drilling from their negative cash flow. Every piece of paper that left the CFO’s office was rated junk. At $100+/barrel.

    Read it. Know it. Live it.

  25. Ronald Walter says:

    If there are 500 billion, might be as much as 900 billion barrels of oil in the Bakken Formation and the extraction is at three percent, most of the oil will remain in the ground, a good place to keep it. Future generations will benefit, it’s still a win, not a loss.

    Might be of some interest:

    http://www.searchanddiscovery.com/documents/2014/10600millard/ndx_millard.pdf

    Henry Bakken probably didn’t give a hoot if there was oil on his farm or not, didn’t matter to him if there was and it didn’t matter him if there wasn’t. It was better if there was any, but it probably wasn’t going to make his day any better. A milk cow and acreage was all he needed. Oil was icing on the cake. If I were to guess anything at all, it would be he would hope for the best. I’ll ask a couple of his relatives one of these days since I have known them for over forty years. Great people to know, the Bakken Formation which bears Henry’s name is a respectable title for the oil that is there in North Dakota.

    Don’t knock it, it doesn’t help anybody.

  26. TechGuy says:

    Humor: Williston, I think we have a problem!

    Oilfield Directional Drilling Nightmare:
    https://www.youtube.com/watch?v=1HiBeLRsJoM

    • scrub puller says:

      Yair . . . Can someone explain how the directional drilling anomaly could ever happen.

      Cheers.

      • Миша says:

        It Is Russia. Vodka was good 🙂

      • Toolpush says:

        Scrub,

        I can’t give you a definitive answer, but this is the last comment on Drilling Ahead. It certainly looks like a planned operation, rather than a mistake. I have heard several reasons, but this comment sounds the most logical. There has also been a lot of jokes about this this clip over the years.

        Comment by Bill Sydor on December 15, 2013 at 3:21pm
        They will now put on a back reamer and open the hole, when they are on the bank on the other side a larger hole opener will ream through and repeat this process to desired hole diameter. Tie onto a bull nose pipeline and pull under the river, or whatever obstacle was in the pipeline’s path. Very common practice, first time I saw it we sent one of the locals to go stand by the tree with the ribbon tied around it. Gave him a radio and when we heard him freaking out, we knew we could shut down the pump. The challenge is breaking the bit and installing the backreamer.

        Read more: http://www.drillingahead.com/video/directional-drilling-nightmare?id=3116006%3AVideo%3A203251&page=2#comments#ixzz3OVPgYVI7

      • Scrub, there are two circumstances: one, that’s directional drilling to get under a river. That’s done to cross the Ob because it has large chunky ice at breakup.

        The other instance I have seen was when a drilling foreman didn’t want to stop to take directional surveys in an S curve directional plan. The well recurved like crazy, the mud logger didn’t keep track of his samples, the field office was out for Xmas and the rig crew was really happy to see the well drilling at really high speeds with only minor mud losses…..

        • scrub puller says:

          Yair . . . Thanks fellers, I really appreciate being able to get answers to tech stuff I don’t understand.

          Cheers.

  27. ChiefEngineer says:

    “I am of the firm conviction that the world is at the peak of world oil production right now”

    That’s one limb that looks to dangerous for me to go out on. In fact, I would put my money against now being peak. The world can’t produce enough $60 oil. It would also light the economy on fire. We also know a $100 oil has held back the economy of years and can now produce more than the world needs. At $80, America will maintain it’s current production for years with a little growth. Demand will grow compared to the last 5 years. This current pricing will turn around soon.

    Enjoy speed boating while it lasts, 200 Merc loves it!

    • Watcher says:

      “The world can’t produce enough $60 oil. It would also light the economy on fire. We also know a $100 oil has held back the economy of years and can now produce more than the world needs. At $80, America will maintain it’s current production for years with a little growth. Demand will grow compared to the last 5 years. This current pricing will turn around soon. ”

      What is enough?

      We don’t know $100 oil has held the economy back. CNBC says so, but they weren’t saying that when it was $100. When it was $100 it was something “we have gotten used to”. The evisceration of the shale industry could undo . . . more than undo any of this alleged stimulus.

      Why would demand pick up if there are no jobs to go to? Buoyant economy is going to make jobs? Those jobs aren’t very good. Sub prime lending is selling cars, but they replace older ones so there’s not much of a consumption jump, unless the economy is REALLY buoyant, and were that so you would not see the 10 year Treasury note sub 2% (and falling).

      Of course, when any of that negative reality manifests itself, a bailout is the solution du jour, well more like du decade.

    • Ilambiquated says:

      It’s hard for me to believe $100 oil is holding the economy back when people kept buying SUVs the whole time.

      • SW says:

        Well, its hard for me to believe that people think carrying a gun around in their purse makes them safer but hell this is America.

    • Anon says:

      Peak is probable because the only real variable in it is what US shale production peaks at. Everything else is already at peak, in decline, or has no mechanism for huge growth in the next decade (and so will come too late to reverse the global conventional decline).

      US shale production was already showing major signs of strain before this. Well quality was getting worse in the Bakken and even the EIA was expecting peaks ~ 2016 in the US shale fields, at not much greater levels than they are at now. NOW, US shale production is going to fall hard by Q2 2015 and will have a very difficult time regaining its past momentum, for several reasons:

      — Shale production falls rapidly; a 6-month drilling hiatus will lead to huge declines from the current high production numbers, meaning that to turn it around, truly massive efforts will be needed. However…
      — They already extracted the best sites.
      — Many existing companies won’t survive this.
      — Those that do will not be able to obtain financing at less than double-digit rates due to the upcoming wave of energy junk bond defaults. These things, which fueled the pace of development much more than what was actually being produced, were badly mispriced and people are going to be cautious going forward.

      This sort of crazy production binge has been seen before in conventional fields, most notably Iran under the Shah. It never came close to regaining that blow-off top after being disrupted.

      • Anon says:

        In terms of things that can’t be straightened out quickly enough to ON NET stop peak…

        — Russian shale and Russian arctic. 10+ years away, especially with current prices and politics.

        — Arctic in general. Shell wishes they had never heard of it.

        — Brazilian pre-salt. The technical difficulty for this was underestimated and Petrobras is not in condition to fix that anytime soon.

        — Iraq. They can gain assuming the violence gets under control, but the idea of them becoming a new Saudi Arabia (and a sustained one) off of massive virgin fields was never realistic. The numbers behind that were essentially fake. Keep in mind, their gains need to cover A LOT of other people’s losses in conventional fields. So far they basically cover…Norway?

        — Alberta tar sands. Increase, yes, but only another million or two, and only at extremely high costs of production.

      • You know, as far as I can tell these rocks aren’t shales. They seem to be dolomitized shaly carbonates, silts, and other lousy quality rocks.

        So if I were in the exploration game I’d be looking for strat traps or large structures with very light hydrocarbons. And I can think of several places to look for. Which means there must be hundreds of such target basins. All it takes is $150 per barrel.

        • Dennis Coyne says:

          Hi Fernando,

          Let’s assume for a moment that the World economy can handle real oil prices at $150/b in 2014$ 20 years from now. Christophe McBride estimates a World URR of C+C+NGL of about 5100 Gb (excluding kerogen oil), 3800 Gb of conventional oil (C+C+NGL that is not natural bitumen or extra heavy oil) and 1300Gb of natural bitumen(900 Gb) and extra heavy oil(400 Gb).

          These estimates seem unrealistically high to me. What oil prices would be needed for these levels of oil output? I doubt the World can handle real oil prices at $250/b by 2040.

          • Dennis, I wouldn’t include NGL with crude oil. And I don’t know what you define as “natural bitumen”. I consider anything under 10 degrees API to be extra heavy oil.

            • Dennis Coyne says:

              Hi Fernando,

              Mcbride’s thesis lumps NGL with C+C, if we assume the URR of NGL is 600 Gb, then McBride’s estimate for C+C becomes 4500 Gb with extra heavy oil (by your definition natural bitumen from the Canadian oil sands would be extra heavy oil) from Venezuela and Canada at 1300 Gb and “conventional” C+C at 3200 Gb.

              You have said in the past that you are skeptical of Venezuela’s oil sand resources (estimated by McBride at 400 Gb), do you have an opinion on the Canadian oil sands URR (McBride thinks this will be 900 Gb)?

  28. Old farmer mac says:

    If you guys want to be taken seriously you better be putting some sarcasm indicators in your comments when you say we don’t know that hundred dollar oil has been holding back the economy.

    Such remarks come across as .. well I just can’t think of any way to put it without being red line SARCASTIC myself .. or using words that cannot be mistaken as anything other than an outright accusation of stupidity.

    It is true that hundred dollar oil did not actually STOP the world economy from growing- according to some economists – depending on the time frame under consideration.

    I have had plenty of friends and acquaintances who have done ok- for a long time- who drank a few too many beers almost every night.

    Some of them are dead now – dead of diseases associated with drinking- others are desperately ill- and others yet WILL die early as a result of overindulgence.

    Beer has not obviously held back or sickened most people who drink it.

    Maybe high priced oil has not obviously held back the overall economy- but I will bet the farm that any poll of economics professors randomly selected will indicate that high oil prices do indeed inhibit economic growth.

    With diesel at four bucks rather than two bucks – which it was not that long ago-he has to spend an extra hundred and fifty bucks a day just on fuel alone. He has not managed to raise his rates quite enough to cover this additional expense.I hire him less often and for fewer hours.

    This little example plays out over and over thru the entire economy.

    You can keep on making a profit- even a rising profit- running a company with a losing division or a small business with a couple of lousy employees. But you will do BETTER without them. You will do BETTER without the higher expenses associated with higher oil prices.

    I just can see how ANYBODY with any critical thinking skills at all can say with a straight face that high oil prices don’t ” hold back ” the economy.

    The high price of gasoline most definitely holds ME back.Ditto most of the people I know. Even my one per center surviving siblings have less left to invest even though they hardly even notice the price of gasoline.

    • Dennis Coyne says:

      Hi Old Farmer Mac,

      Let’s look at the problem in another way. The world has limited resources, $100/b oil may have held back the economy, but what if oil was $70/b and oil output (C+C) was only 70 mb/d instead of 76 mb/d? Would that have held back the economy more or less than 76 mb/d and $100/b oil.

      The problem is that the World economy needs oil and only high oil prices will result in it being produced over the medium term. Without high prices we will never reduce our dependence on oil.

      I see high oil prices as a good thing. They are smack in the head that the World needs to get to work on finding alternatives to fossil fuels. High oil prices definitely hold back the economy, the only thing that would hold back the economy more is low oil prices and the low oil availability that will go with it.

      • Old farmer mac says:

        ANY WAY you slice it or dice it and reassemble it the result when you are done is that a ”shortage” of energy in either quantity or price dampens economic activity.More oil at seventy bucks or cheaper oil with a larger supply still means more economic activity.Energy is not a zero sum economic game- it is a multiplier.

        • Dennis Coyne says:

          Hi Old Farmer Mac,

          I may have stated things incorrectly. Remember that at high prices there is no shortage of energy, that only happens if we have artificially low prices that are not set by the market, in the case of high prices the available energy is rationed by price, in a market economy that is how we allocate scarce resources.
          With given resources the free market will generally produce goods as efficiently as possible. High oil prices may seem like a bad thing and I agree that in the short term might lead to slower economic growth.

          Over longer time periods these high prices provide a signal that the resource is depleting and might lead to the production of substitutes, over time as the production of substitutes increases, economies of scale may lead to reduced costs for those substitutes while also providing employment to people that work in this new industry. It may be that high fossil fuel prices is exactly what we need.

          • Doug Leighton says:

            Dennis, another possibility is a higher frequency oscillation between high and low oil (energy) prices: general instability. Obviously prices (and economic activity) have always gone in cycles. We adjust (high employment to low employment, etc.) but, it seems the world could enter into an era of higher frequency cycles, averaging say, three years rather than seven years: One consequence of PO/decreasing EROI.

            Of course I have zero understanding of economics including stimulus program effects etc. so my reasoning may be completely false. But the highly cyclic nature of economic cycles is my primary objection to your projections and the current (unanticipated?) low oil price phase is a good example. Of course things even out but people don’t seem to be very good at short much less medium term planning. Do you think that many people will use the respite of current low gas prices to “electrify” their lives? I don’t. To me it seem more likely for the majority to say: see PO was a myth, let’s strap on the water skis and party.

            • Dennis Coyne says:

              Hi Doug,

              You may be correct that the price may be more volatile. I don’t expect the trend line would be followed precisely, just as it has not in the past, think of it as a sinusoidal function added to an exponential function. Obviously it will not be that simple, it will be an irregular cyclical function which cannot be predicted, but the general trend will be up.

  29. aws. says:

    The RRR ‘Ridiculously Resilient Ridge’ Returns to California

    By: Christopher C. Burt, Wunderground.com 10:04 PM GMT on January 09, 2015

    Now, it appears, the RRR has settled in once again deflecting Pacific storms to the north of California (and bringing flooding to Washington State). No precipitation is on the horizon (going out to at least January 17-18) and some locations in the state have already fallen below seasonal normal precipitation for this time of the year, this following a well above normal wet December.

    Not Just Dry but Warm too

    According to NOAA/NCDC, the calendar year 2014 was the warmest such on record for the state of California: by the HUGE margin of 1.8°F! The 61.5° statewide average temperature smashed the previous record of 59.7° set in 1934. December was also the warmest such on record for the state and the past few days, this January, have once again seen many daily record highs statewide. On January 6th, the temperature peaked at an amazing 91° at Camarillo in southern California (the January monthly state record remains 97° at Riverside in January 2003).

    • Cotter says:

      This blog keeps deleting my comments because they don’t go along with the marxist climate change agenda? Typical commie.censoring the truth.

      Sent from my Samsung Galaxy S5 powered by Verizon® Wireless

      • Not to worry, there will be no need to delete any more of your posts. That is because there won’t be any more of your posts.

      • Boomer II says:

        This blog keeps deleting my comments because they don’t go along with the marxist climate change agenda? Typical commie.censoring the truth.

        Guess this isn’t your kind of place. Why not post elsewhere instead?

  30. SW says:

    Hindsight: I think that many of us who have followed this issue for a number of years are probably kicking ourselves right now because in retrospect it looks like this might have been relatively easy to predict. Backwards predictions are never all that impressive. But when you look at it from this perspective we have always known about the shale and tar sands resources. That is they are vast and that techniques exist for their exploitation. And we may have assumed that once conventional oil became scarce enough, the price would rise enough so that shale and tar sands would become economically extracted. One may have postulated a relatively brief interval when conventional oil was in decline but still producing at significant quantity and the economics where such that the unconventional resources came on line to augment the supply leading to a price crash as these new resources where added to the mix. It is the overlap of a still relatively abundend conventional resource and the unconventional resource that signals the peak. Again in retrospect you could see it coming in that unrelenting upward trajectory in the production numbers from the U.S. When supply and demand is in rough balance that is simply not sustainable. It was all there staring us in the face wasn’t it?

    • It sure was. What I find a bit difficult to understand is the state of North Dakota’s rather relaxed attitude about the whole issue. Their leaders appear to be pretty shortsighted politicians. It would have made more sense to tax the industry a bit, control gas flaring and demand more use of pipelines rather than trucking. This is a pretty good example of irresponsible development. And I suspect Texas was doing something similar, although Texas can stand the wear and tear a bit better.

      • SW says:

        I don’t think it is particularly hard to understand. One of the great American political parties has effectively been turned into a cult that denies that regulating business is a legitimate government function. I think that the mistake that we made was in assuming that this resource would be tapped when conventional oil was in severe decline. What we didn’t bargain on was that the new political climate meant that the moment the price rose high enough that anyone could make money off of the unconventional resource there would be a sort of gold rush response with no real attempt to regulate its implementation either for economic or environmental reasons. The astonishing scale and rapidity of the play happening in sparcely populated areas controlled by ideologues really took everyone by surprise.

        • If I were a North Dakota voter I would expect a pretty hard nosed attitude from my local congressman in the state legislature. The key is to understand the hydrocarbons will run out, and maximize value for both the landowners, those impacted by the industry as well as the license holders.

          • John B says:

            Shale has been producing for what? 7-8 years at a decent rate?

            Doesn’t that mean there’s still 92 more years of abundance left. /sarc

          • John H.B says:

            Comment above from John B2 (sorry John B, didn’t realize there was already a John B alias!)

  31. aws. says:

    Alan from the Islands, might be interested in this.

    A Caribbean Island Says Goodbye Diesel and Hello 100% Renewable Electricity

    Kaitlyn Bunker, RMIOutlet, RMI, January 7, 2015

    The result is a transformed electricity system on Bonaire. The island is now home to 12 wind turbines with a total of 11 MW of wind power capacity, which contribute up to 90 percent of the island’s electricity at times of peak wind, and 40–45 percent of its annual electricity on average. Battery storage (6 MWh) is included in order to take advantage of available power in times of excess wind, and provide that stored electricity in times of low wind. The battery also boosts the reliability of the overall system—it is capable of providing 3 MW for over two minutes, allowing time for additional generation to be started when there is a sudden drop in wind.

    The Bonaire system also includes 14 MW of diesel generation, five total generators, which provide the necessary power to meet the load when there is not enough wind power available. The generators are equipped to run on both traditional diesel as well as biodiesel. The next steps in the island’s energy transformation involve using local algae resources, grown in the large salt flats on the island, to create biofuel, which can then be used in the existing generators. This will allow Bonaire to operate a 100 percent renewable electricity system—with on average 40–45 percent from wind and 55–60 percent from biodiesel.

    Not really 100% yet but the infrastructure is in place to get there. Surprised they didn’t incorporate solar into the mix to deal with the variability of wind. And I guess if a jurisdiction has a local algae resource then biodiesel has potential… seems optimistic. Looking forward with sea level rise will those salt flats be inundated?

    • Solar is too expensive in real life. I’ve been in the area and they do get pretty good wind. But the algae biodiesel is baloney. I wonder if they’ll try it in Aruba. They can probably put the wind towers in those volcanic hills facing the North coast and the tourists won’t care.

      • Bob Nickson says:

        Solar is too expensive compared to what?

        Solar generated power is already less expensive than petrol as a transportation fuel, and will continue to drop in price, as will electric cars.

        • Solar is too expensive compared to other alternatives.

          • John B says:

            Not true.

            Photovoltaics are now starting to compete in some places without subsidies. Shi Zhengrong has said that, as of 2012, unsubsidised solar power is already competitive with fossil fuels in India, Hawaii, Italy and Spain. As PV system prices decline it is inevitable that subsidies will end. “Solar power will be able to compete without subsidies against conventional power sources in half the world by 2015”.[16][17] In fact, recent evidence suggest that photovoltaic grid parity has already been reached in countries of the Mediterranean basin (Cyprus).[18]

            http://en.wikipedia.org/wiki/Grid_parity

            • Yep, I’m sure you will convince me that solar is cheaper in Spain as soon as you come and install a 100 MW plant without any subsidies, and also provide a mechanism to compensate power generators who are forced to standby to generate electricity when the sun is down.

              Go ahead, tell your chinese friend to make my day.

              • John B says:

                I think one of the problems with Spain’s solar industry is that they installed a lot of the more expensive CSP. You all should have went with PV. And maybe waited a few years until the price came down a bit. Timing is important.

    • Old farmer mac says:

      Without knowing more about the local political situation it would be hard to say why solar power has not been included as a significant part of the mix.

      But politics move slower than technical realities and at the time the decisions to go with wind were made-probably a decade or so ago- wind was the cheaper option.

      A cynical observer might wonder if certain powerful local interests happened to have tight connections to wind power companies whereas solar businessmen lacked similar access.

      I expect that given the fact that this locality has seen the light regarding wind that it will soon also be investing in solar power.

      We hear constantly that intermittent solar and wind can’t GITER done but if I lived in such a place with nothing BUT wind and solar I would have a large double insulated refrigerator freezer with a substantial ice reservoir in it if I had to build it myself.

      Then I could have priceless cold drinks out of it probably at least ninety five percent of the time and kill my chickens and reliably freeze them for at least a week or ten days before consuming them.With a VERY modest amount of diesel fuel and my own generator I could have reliable refrigeration year around.

      We are never going to simply run OUT of oil – not within the next few decades and probably not for centuries. What we are going to run out of is AFFORDABLE oil.A gallon of diesel at twenty bucks once in a while would be a bargain if it kept a freezer full of food frozen for another day or two until the sun and wind get back from a holiday. And a gallon would be more than ample for that purpose burnt in a small diesel generator.

      It is of some interest to know that the first technical use of the knowledge that deep sea water is very cold was to provide captains of sailing ships and their more privileged passengers and crew with cold drinks.

      The trick was to drop a weighted container over on a long line and allow it to fill with near ice cold water from the depths,retrieve it as rapidly as possible and use that to cool the drinking water or wine or whatever.

      This info comes from a text with an introductory chapter on the history of oceanography but I forget which one.It only worked well when becalmed or anchored due to the difficulty of getting the container down to depth if the ship is traveling. Any fisherman knows his line trails behind a traveling boat very near the surface unless it has a VERY heavy ”sinker” on it.

      Knowledge of this trick apparently never became widely dispersed. I assume this is so because the new steam ships traveled fast enough to haul small amounts locally (port of departure ) manufactured ice on board not long after it was discovered.Onboard refrigeration followed not too long after that.

      I spend many a midnight weak and weary pondering over quaint and curious little known if not actually forgotten books of lore. 😉

      • Old farmer, the Netherland Antilles is a tiny three-island nation located just off the venezuela coast. Their main income is from tourism and oil refining.

        Bonaire is the least densely populated, has excellent reefs, gets very little rain and from what I recall has a fairly steady wind.

        Small nations can’t afford solar subsidies, this is even more so if they can get wind turbines. (I assume you did notice they expect about 55 % diesel and 45 % wind?). This has nothing to do with local business interests or any dark conspiracies. It’s just a common sense solution for a small island.

        • Old farmer mac says:

          I am not acquainted with local conditions there other than knowing where they are located and what the climate is like. That part of the world does indeed have an excellent wind resource- but it has a reasonably sunny climate as well- not at all like Scotland or Germany with lots of rain and long dark winters.

          Is solar power for some reason much more expensive in this small island country than it is elsewhere?Or is it that this particular island nation simply has an excellent wind resource and existing wind infrastructure?

          Of course with wind penetration already approaching half the amount of diesel they could save would be a lot less than in a place with less reliable wind.

          Solar power is usually economical enough to use it to offset some diesel generation based on fuel savings anyplace with a good solar resource according to what I read elsewhere.

          And the price of it is coming down faster than the price of wind power as well.

          You have said yourself that the price of oil has nowhere to go but up over the next couple of decades.

          It is very important to me to understand these things in order that I do a good job with the book I am working on.

          Thanks for any enlightenment.

          I do not pretend to have good answers myself but farmers are like doctors in that when we don’t have a cure for a problem we do the best we can to make it as easy to live with it as possible.

          FF depletion is an unavoidable fact. Renewables and nukes are all the options we have other than going back to animal skins sooner or later.

  32. Fuser says:

    More than a few readers here may enjoy this video interview. Yesterday, MSNBC interviewed Paul Ehrlich, the author of The Population Bomb. He discusses population, climate change, starvation and gives us a very small chance of avoiding total collapse within the next 50 years. Click Here for Paul Ehrlich interview

    • Fuser says:

      Sorry, my link doesn’t appear to be working. Here is the address http://www.msnbc.com/msnbc/watch/will-humankind-survive-the-century-382779971582

      • Old farmer mac says:

        Erlich came to Va Tech as a visiting scholar back in the dark ages when I was there learning the basics of chemistry and biology which are in the end what agriculture is all about.

        He was a great guy who was willing to spend as much time with an awestruck country boy meeting one of his first world class celebrities as any country boy could wish- he stuck with us in a conference room full of mostly ag and biology majors after his talk for a long time.

        I accepted his reasoning as that of a God like figure back then and still accept it today with the caveat that prediction’ is hard and timing predictions is especially hard.

        There is LITTLE reason to believe collapse is not baked in and PLENTY of reason to believe it IS.

        But reality is a card game of sorts with strange rules. Cards can change values as the game progresses. Birth control consisted of ” rubbers” when I first ” got some” but by the time I graduated most of the girls were on the much more convenient and reliable PILL.

        Culture as well as technology has worked out in foreseeable ways but in ways that seemed to be poor bets back then.

        I was seriously thinking about having myself an adventure of the Peace Corp type – going to some exotic place and showing the locals how Yankees GITER done on the farm.

        A foul mouthed crusty old ag professor took about two minutes to talk me out of it on moral grounds- his argument being that yes we WERE going to teach the backward countries how to double their food production – with the consequence that they would just have twice as many people at risk of starvation in twenty years. He was basically right give or take a few years.

        I stuck with my hot country girl on the pill. In retrospect I think I should have gone to see the world.

        As things worked out I mostly forgot all about the problems facing the world for the next fifty years being busy with the problems facing ME.

        A hell of a lot of people obviously believe that the integration of the world economy means that when the world economy eventually implodes it will take the entire world down with it but after spending many a long year reading night after night in the fields of history and science I have yet to run across any CONVINCING evidence that collapse WILL be universal in time and space on a world wide basis.

        I DO recognize that there is a very real possibility that collapse will be fast and universal planet wide. But there is a hell of a difference between a possibility and a certainty.

        Estimating the odds of the survival of any given society or country or region is probably a near impossible task but history indicates that some countries are going to have a pretty good shot at pulling thru the next century MORE or LESS whole – severely tested no doubt but survivors of the test.

        So far as I am concerned anybody who argues that the US MUST actually do any business at all on a voluntary or involuntary basis with the rest of the world to survive is badly mistaken .

        We might or might not lose a war but we have EVERYTHING within our borders ESSENTIAL to our national survival in ecological and economic terms. We have enough people to run a diverse enough economy and enough mineral resources and enough good farmland and enough water and enough of every single think I have been able to think of. A few things we are short of but there are ways to get around just a few things such as diamonds and tungsten and rare earth metals.

        Going it alone would be very very disruptive but by no means impossible.It would no doubt mean MUCH deeper economic depression than we have ever known and authoritarian government etc but tough times are not the same thing as EXTINCTION as a nation.

        If and when global collapse is well under way our national response will be to do whatever it takes to keep the borders secure and the lights and water and sewer on and food in the stores and the streets peaceful- most of the time at least.

        The biggest reasons in my estimation we might fail are these:

        We collectively screw up the biosphere to the extent that industrialized civilized life is impossible.This is possible without a doubt but my guess is that widespread collapse will arrive before we reach that tipping point.

        WWIII might set us all the way back to the Stone Age except for all the steel and other artifacts that will be around in enormous quantities.

        We realize just how much danger we are in but we get started doing something about it TOO LATE.

        Mismanagement once the reality of possible collapse has sunk it.

        There are wild cards and jokers in the deck of reality and any of them may hit the table any time the cards are dealt- or they may remain unseen for a good many hands.

        In times gone by we might have failed in the face of collapse due to lack of the basic knowledge needed and a lack of technologies suitable to dealing with collapse. We have the knowledge now.

        We may not be able to cure a contagious disease but we know how to quarantine it. We know how to build a house that needs no external energy input to stay livably warm even in zero weather- if we put a few humans inside it their body heat alone will suffice in a super insulated house.

        We know above all how to control our own numbers.

        • Old farmer mac says:

          I can’t for sure remember exactly when my girl and wife to be first used the pill but it was about the same time or maybe just a little later.

    • Fixed your link. I love Ehrlich but if he thinks we will leave the fossil fuels in the ground, intentionally, he is sadly mistaken. We will get every lump of coal, every barrel of oil and every cubic foot of natural gas out of the ground we possibly can. We will burn it all.

      The part that starts at about 4:20 into the interview is exactly what will happen. That is we will not do anything and things will just gradually get worse and worse. That is we will do nothing, not one goddamn thing.

      I have to laugh at people who actually believe we will take steps to avoid the complete collapse of the earth’s ecosystem. We will do nothing.

      Toward the end of the interview Earlich says he believes the odds are 90 to 10, or 9 to 1 that there will be a total collapse, or the odds are 90% against the idea that we can avoid collapse. A colleague of his told him he was crazy, that the odds that we can avoid collapse are 99 to 1. I think they are both way too optimistic. I see the odds at avoiding collapse at 1000 to nothing.

      • ezrydermike says:

        “It’s the New Year, and the global economic crisis is still going strong. But while pundits cross words over whether 2015 holds greater likelihood of a recovery or a renewed recession, new research suggests they all may be missing the bigger picture: that the economic crisis is symptomatic of a deeper crisis of industrial civilization’s relationship with nature.”

        http://motherboard.vice.com/en_uk/read/endless-growth-part-1

      • Watcher says:

        One remains interested in the logistics of collapse. What would collapse look like? What does it mean?

        The gubmints will surely confiscate all oil to distribute food to cities. The GDP will stop, but who cares? Money won’t matter. Farmers will grow crops when they aren’t paid for them? They will if the crops are nationalized and diesel is sent to them for the explicit and specific purpose of powering tractors and a gun is put to their heads to plant, fertilize and harvest.

        One can picture that, but how does distribution look? Store shelves? No one will have money in a zero GDP situation, so the food is rationed out how? And the stores volunteer their shelves for zero money product and the clerks work for no pay . . . how? No transport so how do people get to the store, and carry their loot, er, food back home? The water utility workers will also be standing in the food queues, so water will stop flowing in pipes. The gubmint will have to put a gun to their heads, too.

        Most interesting will be the narrative of how “we’re going to get things back to normal”. That will be intriguing.

        • Old farmer mac says:

          Things will never get back to any ” normal ” that means anything in todays terms. But eventually things will settle down to an entirely new ” normal”. What it will be like is impossible to say but we can say some things it will NOT be like compared to today. There will not be a lot of frivolous petrol powered travel. Not much air travel. Not much wasted anything. Stuff made to last. WAY lower standard of living.ETC etc etc

      • wimbi says:

        That’s what good ol’ Maimonides was warning against “the certainty of the probable”

        I go for “the feasibility of the possible”. Because I see it with my own eyes right here. There is a LOT of serious activity here on getting down to a low carbon living. Next week I am giving my pitch to city council for a favorite of mine- a big lake in our present flood plain covered with little islands of PV, so they can all easily track the sun. Each island has recreation cabins, and below it is hanging a scientifically designed fish hatchery, where the little bait fish can flourish in swarms to feed the big predators lurking outside- ready to get hooked by the fishers living in the cabins.

        The PV pumps storage water up the adjacent hills to provide 24 hr power.

        Fun! Money! Low Carbon power!

        Unlikely? Maybe. Impossible? Absolutely Not.

      • ChiefEngineer says:

        “I have to laugh at people who actually believe we will take steps to avoid the complete collapse of the earth’s ecosystem. We will do nothing.”

        Ron, you live in a religious poorly educated red state environment surrounded by oil rich self centered takers. I wouldn’t expect you to have a different view.

        There is a reason why President Obama has not signed on to the XL pipeline and it’s not because he wants to burn every last bit of fossil fuel. The president also signed on to doubling fuel economy over the next 10 years.

        The progressive state of California which is the environmental leader of the world, also disagrees with you.

        http://www.huffingtonpost.com/william-bradley/jerry-browns-big-green-in_b_6450490.html

        These two major leaders both have a (D) in front of their names on the ballot. I think you should rephrase your statement and say “Republicans will do nothing to avoid the complete collapse of the earth’s ecosystem.”

        • Old farmer mac says:

          CE,

          FYI

          Ron has described himself more that once as a card carrying liberal democrat.He has an excellent eduction and he has traveled over a large part of the world.

          I hardly ever disagree with him.

          In this case you and I have simply arrived at a different conclusion as to what the modern naked ape will do when the shit hits the fan.

          Noboby actually knows in my opinion. I think some people and some societies or parts of some societies will make it thru the natural resources bottleneck more or less in recognizable form.

          I take it you believe that there is only a slight possibility of collapse even happening.

          I don’t know how many but I will bet he has read a thousand serious books .

          • ChiefEngineer says:

            Mac,

            The post was not to be an attack on Ron. It was more to point out your view of who are the “modern naked ape”.

            The fact that Ron is Democrat says enough about himself living in his southern environment. I knew that before you posted. If he lived in California, he would have near make that statement.

            • If he lived in California, he would have near make that statement.

              I think you meant that if I lived in California I would have never made that statement. Perhaps…. that is if I thought California represented the entire world I would have never made that statement. But I just happen to have some inside information. And that is that California is not the world. The USA is not the world. And far too many people on this blog seem to think it is.

              People, whether your are looking at fossil fuel consumption or global warming or climate change, you need to shake the very silly idea that the USA can be used as a guide to what what is going on in the world. It cannot. And sure as hell what is happening in California cannot be used as any kind of example as to what is going on in the entire world.

        • ChiefEngineer, there is a couple of things you do not seem to understand here. 1) we are talking about the World here, not California. And 2) We are talking about the actions of 7.2 billion people, not the 40 million people living in California.

          The Keystone pipeline, when viewed from a standpoint of looking at the entire world and what is happening, means nothing. You may as well piss in the river to try to make the water rise.

          Any real effort to stop global warming would have needed to have started 20 to 30 years ago. World Resources Institute identifies 1,200 coal plants in planning across 59 countries, with about three-quarters in China and India How does the efforts in California or the Keystone pipeline stack up against that?

          I know there are a few people who realize the full extent of the problem and are making every effort to mitigate the circumstances. But compared to the size of the problem their efforts are futile. People, that is people in the rest of the world, want a better life, they want a car, they want electricity, they want what the people of California already have. And no argument about global warming will sway them.

          • ChiefEngineer says:

            Yet the people and leaders of California are determined to show the rest of the world they can have “what California has” without heading full steam into the wall of collapse.

            The world as we know it can continue for a long time with solar panels and electric cars. Counting every hole in the ground and crying too late baby is like stepping on the accelerator when the traffic signal turns red.

            For a man who counts weekly the number of drilling rigs in a state of a little over a million barrels of production per day. Plus understands the impact that fracking has done to the price of oil in the last 6 months. An additional almost 1 million barrels that could be moved from Canada to the Gulf of Mexico means a lot more than “nothing” on the world stage.

            7.2 billion people don’t dictate the consumption of the world. A handful of governments do. Those governments have the power to change what we consume. But it won’t happen because of the deniers and pessimists. It will happen from knowledge and leadership.

            “We will do nothing” is already a false statement demonstrated by the leadership of the 7th largest economy in the world. What your statement does say about you Ron is that you will do nothing.

            Deniers to the right of me, pessimists to the left

            • 7.2 billion people don’t dictate the consumption of the world. A handful of governments do.

              Pure Bullshit! A handful of government? Which handful is that? People consume. People of California consume, people of France consume, people of Germany consume, people of Brazil consume. The governments of these countries or states do not tell them what or how much to consume. Of course governments do consume some but the people consume many times what the governments consume.

              Those governments have the power to change what we consume.

              An absolute crock of shit! When was the last time the government of California told you what to consume?

              I am sorry I am so harsh tonight but I have had perhaps one too many tonight and am not in the mood to suffer fools lightly. The world is going to hell in a handbasket and some people actually believe we are fixing things? We are not. We are destroying the ecosystem, we are driving every species of mega-fauna into extinction, we are destroying almost ever river, lake and inland sea in the world, we are cutting down not just the rain forest but the boreal forest as well. Human overpopulaion is destroying the earth and some people actually believe things are getting better?

              And you say Ron will do nothing. Ron is one of 7.2 billion people and so is some guy who calls himself ChiefEngineer. You have the same influence in the world as I do, that is 1 over 7,200,000,000. And if you think that is a lot, and I think you do, then you are… are… hell if you think one in seven point two billion is a lot then why am I wasting my time writing this damn comment?

              • Old farmer mac says:

                ”The world is going to hell in a handbasket and some people actually believe we are fixing things? We are not. We are destroying the ecosystem, we are driving every species of mega-fauna into extinction, we are destroying almost ever river, lake and inland sea in the world, we are cutting down not just the rain forest but the boreal forest as well. Human overpopulaion is destroying the earth and some people actually believe things are getting better?”

                Ron is right. I might quibble a little about the details but in general he is right. The world is headed to hell in a hand basket and as far as the WORLD is concerned there is hardly any chance at all for any other outcome.

                Where I part paths with this reasoning is that I believe a general human collapse will precede the complete destruction of the ecosystem. It has already been severely damaged and the damage will get to be a LOT worse but there is enough of it remaining that it will eventually restore itself once most of us are gone- if we go soon enough.

                In my estimation the bulk of humanity will perish before the remaining bulk of the ecosystem perishes and the demise of most of humanity will be piecemeal in time and space.

                Piecemeal collapse MIGHT allow a few societies to pull thru in more or less recognizable form more or less intact in terms of population and territory.

                Every ton of coal might NOT get burnt because there might not be people around to burn it. As a matter of fact I am personally convinced that most of the coal in the ground will stay there for centuries or millennia at least because there will NOT be very many people around to burn it.

                I am betting on the survival of the US not because I believe it WILL survive but because there is basically nothing else TO BET ON. The US, Canada and a few other countries might have a future of a sort.

                The nature of the ape is to fight even if losing the fight is a foregone conclusion.

                A farmer is equipped by experience to understand collapse and starvation in the simplest of terms.

                IF I put a hundred cows in a large pasture and forget about them they will survive for a while and they might even increase in numbers for a while- assuming the pasture is big enough and the first few winters are mild.

                But if the fence is strong enough to hold those cows the first bad winter will see MOST of them starve. A really bad winter will see EVERY LAST ONE OF THEM STARVE.

                In nature the cows take off for places known or unknown in search of food and predators keep their numbers down to the point that large scale starvation is rare.

                But we humans have driven our large predators to extinction and driven the small ones into hiding- more about predators in a minute.

                And we live in pastures with VERY strong fences- fences that exist literally in the form of oceans and mountain ranges and deserts- and other even better fences that effectively exist as national borders defended by force of arms.

                Once the food situation gets totally out of hand- and the odds are very high that it will- international cooperative sharing of food and other essentials will necessarily grow less and less until it ceases to exist.

                Some countries will over run others . Some will defend themselves. Widespread starvation will wipe or nearly wipe large areas clean of humans.

                The small predators mentioned earlier will emerge and take their toll. Ebola may never get more than a few million of us but other communicable diseases will get us by the tens of millions.

                We will prey on ourselves. Most of the world is sort of short of firearms but improvised weapons ranging from a piece of pipe to a machete work quite well against other similarly armed or unarmed individuals.

                Without the usual commerce that supplies food and other essentials to people who get them by trade the big cities of the world will cease to exist in short order.

                In a place such as the US Leviathan can seize and distribute such food and other resources as exist and can compel the production and distribution of more. There is fat enough in the US domestic economy to permit us to survive while we switch over to an emergency footing.

                A country dependent on imported food and energy is toast in the event of collapse.Imports are not going to be available.

                • Where I part paths with this reasoning is that I believe a general human collapse will precede the complete destruction of the ecosystem.

                  Well that depends on how you would describe the complete destruction of the ecosystem. If you ae talking about extinction, then the collapse will make it worse, much, much worse. Almost every animal in the wild will be killed for food. Africa will be a wasteland with all the large animals gone and only a few of the small ones left.

                  The oceans will recover because the giant trawlers and factory ships will disappear. The consumption of fossil fuels will drop like a rock and that will be good news for climate change but every standing tree within reach of humanity will be cut for cooking fuel and heat.

                  So yes, some things will get better and some things will get a lot worse.

                  • Old farmer mac says:

                    Yes- I would expect all the larger species of animals living it the wild to be hunted to extinction in Africa. A few species might survive as zoo specimens in a few places such as the US and eventually be restocked. But all the trees won’t be cut down in my estimation because you burn trees rather than eat them and starvation will save huge remnants of forest from being cut. Plus a lot of trees are in places where there is no need of heat anyway.Species of trees dependent on particular birds or insects for spreading seed or pollination etc will go extinct in many cases.

                    Bugs and small animals will thrive and quickly replace the larger animals lost in a new ecology once people are either absent or scarce. This ecology will be unstable for a long time but it will be functional.Just a couple of rabbits can over run a large part of a continent under the right conditions in a few years. Witness Australia and rabbits.

                    A few larger animals of all the domesticated species will no doubt survive collapse and with intensive reproductive management some of them will be available for release into the wild. Longhorn cattle would do ok in the niche vacated by bison in the US once people are gone and domestic dogs will survive too as companion and guard animals . Some of them will revert to wolves in a lot less generations than anybody except a farmer or a geneticist interest in such things would ever guess.

                    It is hard to guess what might happen to the oceans without whales and they might be hunted entirely to extinction – or not as the whalers might go totally busted before they get them all.

            • Woody says:

              Hard to believe there is anything sustainable or green about California when it is busily adding 300,000 people a year.

              This isn’t growth that is forced on California. The state, starting with Brown, welcomes the increased population.

              • Just in case, I want to add I support the keystone xl pipeline for political reasons. The venezuelan dictatorship is marketing a very heavy oil blend they ship by supertanker to the USA Gulf of Mexico refining centers. I’d rather see the identical canadian crude reach those refineries, so they can displace the venezuelan “blood” oil.

          • Synapsid says:

            Ron,

            Robert Rapier published a calculation last year showing that CO2 emitted by burning the crude that would flow through KXL over 30 years is equaled by the CO2 emitted by burning coal worldwide in 2 months.

      • Dennis Coyne says:

        Hi Ron,

        Can you define what you mean by collapse? Both you and Old Farmer Mac make very good points, but I often wonder if you are using terms in different ways such that you basically agree, but have different points of emphasis. If there is collapse, wouldn’t most oil, natural gas and coal production stop? If so, all of the oil, natural gas, and coal will not have been extracted. Don’t you think that the prices of fossil fuels will rise as they deplete? Wouldn’t that lead to some level of substitution of alternative forms of energy? Why is it not possible for that to happen? Your faith in collapse is hard to understand, but I might understand better if you defined collapse as it can have many connotations.

        • Really? I need to explain collapse? I thought the very word “collapse” explained everything. But apparently not. Apparently some people seem to think that perhaps collapse don’t really mean collapse but only “hard times”.

          Collapse is collapse, the total collapse of our economic system, the collapse of the foundation of everything we depend on for stability in our lives. Collapse will mean we are transformed into a dog eat dog world where only a few survive.

          Collapse means collapse. It is all explained here: Energy and Human Evolution. If you have never read this very short essay, and I strongly suspect that you have not, then you should. Because after you have read it you will understand what I mean when I say “collapse”. What I really mean is collapse.

  33. Frugal says:

    Outlook grows gloomier for oilpatch with no end to dropping crude prices in sight

    Not only are crude prices low now, but long-term softness is evident in crude futures contracts, said Andrew Botterill, senior manager of consulting firm Deloitte’s resource evaluation and advisory business.

    It’s the longer term weakness that leads Botterill to conclude there could be downward revisions in companies’ crude reserves.

    Reserves are a key measure for oil and gas companies. Outside firms are hired to evaluate not only how many barrels of crude lie in the ground, but what proportion of it is technologically possible to extract and how much of it is economically feasible to develop.

    This is the first time I hear a major accounting firm stating that reserve estimates are dependent on price.

    • clueless says:

      SEC filing requirements include rules that require company reserves of oil & gas of registered companies take price into consideration (only economic reserves are counted). Go back and look at the end of the year write-downs after 2008 in those filings. Their reserves are required to be disclosed once per year and included in the annual 10-K filing for each company. It has been in the accounting/regulatory filing rules for a very long time – perhaps the 1970’s or earlier. [Quarterly reports, 10-Q’s, do not have that information.] You can look at any company’s filings for free on the SEC’s data base -“EDGAR.” Financial web sites, such as Yahoo financial etc. have links to the SEC filings. The reserve data is usually deep into the reports under supplemental information, but listed on the index page so you can go right to it. They also MUST include a calculation of the net present value of all of their reserves, using a required 10% discount rate. This calculation also takes into account the estimated cost of future development and taxes that must be paid. You can look at that figure, and compare it to what is on the balance sheet as “total cost of property and equipment net of depreciation.” So, if the balance sheet shows $2 billion of those costs, and the net present value is $1 billion some things have to go right for them to be successful long term. Among those are: Maybe the 10% discount is too large; future development will allow them to accrete more reserves; the price goes back up; etc.

    • Reserves will be reduced as a result of lower prices. When prices go back up, some of these reserves will be returned to life. It’s accounting BS. Those accountants don’t really know much about the oil field as such. They talk to consultants, who in turn can call other consultants. It gets funny.

      • clueless says:

        The reservoir engineers do it all with regard to reserves. The prices used are determined by published market prices on the last day of the accounting year of the company – usually December 31 [like closing Dow Jones stock quotes on the last business day of the year]. Many companies hire outside consultants for reservoir analysis (they usually have access to other producers’ records as well as the company that hires them). Degoyler & McNaughton used to be the industry standard, but they were very expensive. So, some companies do it in-house to save money, but they are not trusted as much as outside consultant engineers. Accountants know nothing about reserves nor do they have anything to do with calculating them. With respect to the net present value of the reserves, the engineers calculate the future development/production costs (not the accountants) but the accountants compute the future tax costs (not the engineers). A few years ago Shell was found to have overstated their reserves and I believe had to restate several years of financial statements, and, if I recall correctly, had to pay a substantial fine.

        • Most large and medium size oil companies use their engineering staffs to estimate reserves. They also have internal auditors. My job used to involve dealing with this bs at least 30 % of the time. Lucky for me, I worked strictly in countries with contract limits, or where the limit was set by the overall platform complex cash flow.

          In some cases we were producing oil at a loss, so we only booked the oil we produced during the year. Weird, isnt it?

        • Doug Leighton says:

          Clueless,

          That’s an excellent summary and one that corresponds closely to my limited experience. One way I might modify your explanation is say that the role of accountants has increased, and continues to increase, with time. Engineers have a basic understanding of resource evaluation but the world is increasingly complex so accountants (lawyers more) are more important every day and with every step of the development process. Don’t get the idea I think this is a good direction to be moving, I don’t, but rules are written by lawyers and often they require lawyers/accountants to interpret them: In fact, these days, an idiot is the engineer who doesn’t welcome input from fellow accounting/legal people.

  34. Old farmer mac says:

    http://www.theguardian.com/environment/2015/jan/11/stanford-professors-fossil-fuel-investments?CMP=ema_565

    This is highly relevant news in that it indicates where educated society is headed in terms of beliefs about fossil fuels a decade or two or three down the road.

    For anybody who has any real understanding of the scientific process it is also clear evidence that scientists in general do not doubt the work being done by climate researchers.

    • Ronald Walter says:

      Just about the stupidest thing I have ever read, well, it is the stupidest thing I have ever read. Stanford Management Company would have to sell every equity in their portfolio, from wind to solar to any railroad stocks they might own, they would have to reduce their investments to zero. Everything is based on fossil fuels, everything. The use and consumption of fossil fuels will not stop because some mathematician wants to decrease carbon emissions. Wind turbines need maintenance and the use of fossil fuels is going to be required to transport someone to the location of the wind turbines. Forrest Gump is a genius next to the idiocy displayed by Stanford’s brain trust. It is complete nonsense.

      Let me know when those Stanford professors all sell their cars, which they probably drive home with no one else in them while they listen to happy talk about wind technology on their satellite radios on their way home. Not drink wine, not eat, no beer, don’t even live in a house. They’re out of their minds.

      It is obscene. It would seem they are utterly clueless, no brains at all, just solid bone in their heads all of the way through, not an ounce of gray matter there whatsoever and that is because they are.

      It would be wise for the board of directors at Stanford to re-evaluate their priorities. The first is to fire some of the faculty, the wisest choice in the decision making process, without a doubt.

      • Bob Nickson says:

        Their position appears to rest upon the premise that it is possible for humans to transition their economy to renewable sources of energy.

        Your argument appears to rest on the conviction that no such transition is possible.

        If the transition is possible, the more quickly we begin, and the more intensively we pursue it, the better off we will be. The social, political and economic obstacles will have to be overcome regardless. The economic ones will only become more difficult as fossil fuels become costlier and more difficult to extract.

        I didn’t include technical obstacles in the list, as I think we already have the technical capability.

        So, sincere question Ronald Walter: Greenhouse gas issues completely aside, what fossil fuel policies do you advocate we pursue, and what brighter human future do you perceive those policies delivering?

        • Ronald Walter says:

          The first thing, person, who came to mind with the question considered was Isaac Newton.

          “I can calculate the motion of heavenly bodies, but not the madness of people.” – Sir Isaac Newton

          If he were alive today, he would be aghast.

          What would be a clear, concise policy to pursue? Solar power of all forms.
          The abundance of natural resources will be the deciding factor to choose which resources will be used and for what use they can be best applied, to what goal is most desirable. Coal and oil lead the pack. Use them to develop all solar technology and implement the technology to a useful form of product that can last for years, which is there now, but there is always room for improvement. If solar needs to be supplied to the poor free of charge, then do it. It is going to be an asset, not a liability. So what if Solyndra spent 840 million and went broke, if they achieved one breakthrough technology in which the future of humanity can benefit, it was worth every penny spent. The 840 million can be paid back in 100 years, an inexpensive loss that can be recovered with some penny pinching. Might as well begin with a thousand year plan, because that is what it is going to take. Grant Solyndra another 500 million and let them continue to work at what they were doing. Humans need to re-think and think ahead and not with money in mind, money does cause many problems, too many. More money in this world than you can shake a stick at, the amounts spent these days are astronomical. What will it matter if Solyndra spends another 500 million and goes broke again, if more progress is made in solar technologies, even if it just one more breakthrough again, it will be all worth it again.

          Build a giant sphere with solar panels on it all the way around the sphere. I dunno.

          A complete stoppage of wind turbines, period. People reject them and the wind turbines cause ecological mayhem. Resistance is not futile when wind energy boondoggles persist like they do. At some point in time, the deterioration of the materials will bring all of them to a screeching halt. It can’t happen too soon.

          Solar is energy is the answer more so than anything else.

        • Ronald Walter says:

          The first thing, person, who came to mind with the question considered was Isaac Newton.

          “I can calculate the motion of heavenly bodies, but not the madness of people.” – Sir Isaac Newton

          If he were alive today, he would be aghast.

          What would be a clear, concise policy to pursue? Solar power of all forms.
          The abundance of natural resources will be the deciding factor to choose which resources will be used and for what use they can be best applied, to what goal is most desirable. Coal and oil lead the pack. Use them to develop all solar technology and implement the technology to a useful form of product that can last for years, which is there now, but there is always room for improvement. If solar needs to be supplied to the poor free of charge, then do it. It is going to be an asset, not a liability. So what if Solyndra spent 840 million and went broke, if they achieved one breakthrough technology in which the future of humanity can benefit, it was worth every penny spent. The 840 million can be paid back in 100 years, an inexpensive loss that can be recovered with some penny pinching. Might as well begin with a thousand year plan, because that is what it is going to take. Grant Solyndra another 500 million and let them continue to work at what they were doing. Humans need to re-think and think ahead and not with money in mind, money does cause many problems, too many. More money in this world than you can shake a stick at, the amounts spent these days are astronomical. What will it matter if Solyndra spends another 500 million and goes broke again, if more progress is made in solar technologies, even if it just one more breakthrough again, it will be all worth it again.

          Build a giant sphere with solar panels on it all the way around the sphere. I dunno.

          A complete stoppage of wind turbines, period. People reject them and the wind turbines cause ecological mayhem. Resistance is not futile when wind energy boondoggles persist like they do. At some point in time, the deterioration of the materials will bring all of them to a screeching halt. It can’t happen too soon.

          Solar is the ultimate energy source and is the answer more than anything else.

      • ezrydermike says:

        “The oil price crash coupled with growing concerns about global warming will encourage at least one of the major oil companies to turn its back on fossil fuels in the near future, predicts an award-winning scientist and former industry adviser.”

        http://www.theguardian.com/business/2015/jan/11/oil-company-fossil-fuels-jeremy-leggett-soaring-costs-risky-energy-projects

    • That article sure is pretty funny. I encourage all Stanford graduates to sell all their oil stocks, at whatever price they get tomorrow morning. Sell as low as you can, use the money to buy chinese solar panel stocks in the Shanghai exchange.

      • Old farmer mac says:

        Divestment by a university is not going to break any endowment. It will give some political impetus to the job of getting on with the transition away from fossil fuels.

        Given that you ARE an engineer and an engineer in the OIL BIZ no less I presume you understand that fossil fuels DO DEPLETE and that at some future time we are not going to be able to afford them any more due to the energy returned on the interest invested problem.

        You are pretty bright guy and you have a hell of a lot to say about renewables not working out.

        Just what do you think your grandchildren and great grandchildren- in case there are any – are going to do ?

        Dress in animal skins and leaves ?

        • I dunno. Given the way fashion trends evolve, they could be wearing disposable diapers?

          Did it bug you because I found the whole divestment bs to be really funny? I can’t help it. It’s as effective as those “let’s not buy gasoline for our SUVs on Tuesdays” enviromentalist programs I hear about.

          • Old farmer mac says:

            In one sense I think it is funny too. It certainly will have pretty close to zero effect on the market prices of energy company stocks in the short run and probably likewise hardly any effect in the long run.

            The animal skin and leaves were intended to represent living as hunter gatherers again.

            So it IS funny in the short term. Sort of like a fellow who enjoys his booze laughing at some old lady who is a teetotaler.

            Bugged is not exactly the right word. I am a little disappointed that you don’t seem to understand that such actions will probably – almost for sure actually – have a serious impact on what happens over the next ten or twenty or thirty years.

            The fossil fuel problem is morphing into a moral question as well as a technical, environmental, geological and economic question.

            These divestment actions in my opinion based on recent history WILL take root and grow. They are going to be integral to what people are taught in college classrooms in any field that touches on fossil fuels even in a passing or tangential manner.

            The net result will be to create much more pressure from educated people to push harder for clean environment regulations and to push harder for a faster build out of renewables. ONE result is that some areas will be designated as national monuments or wilderness or parkland in order to prevent mining and drilling- which has already happened in several cases.

            Another result will be ever more pressure on the government to tighten up fuel economy regulations and building codes.

            It will play a role in in given localities – even localities as large as entire states- passing anti Fracking and anti mining regulations.

            Now sometimes such efforts BACKFIRE in spectacular fashion. The Keystone is one such time- the environmentally oriented faction in effect shot of it’s toes in opposing the pipeline and the net result is that there are more republicans in Washington now than there would have been otherwise.

            But I don’t think the fossil fuel divestment movement is going to backfire. ALL the hard evidence seems to me to be in favor of the folks who believe we need to move away from fossil fuels.

            The depletion issue alone trumps every other aspect of the problem. We ARE going to give up fossil fuels no matter what eventually because they WILL eventually be all used up.

            Having recognized this fact the question becomes one of how much longer can we safely rely on fossil fuels?

            My opinion is that we HAVE NO CHOICE at all except to rely on them for at least four or five decades yet – and that in those same four or five decades they are going to run dangerously short and become prohibitively expensive as well.

            If we get our asses in gear we have a decent shot at building out renewables and maybe new generation nukes to the extent that we can continue to live modern lifestyles on the dregs of our one time endowment of accessible coal, oil and gas for a LONG time.

            This shot is going to be dependent on using energy far more efficiently than we do now – and it is going to depend on the population leveling off and declining.

            I have no doubt the population is going to level off and decline in the next fifty years – and in my estimation the decline is going to be very steep and pretty fast at some point. And UGLY as HELL.

            I don’t know that we can avoid an outright world wide collapse due to natural resource depletion, environmental degradation and overpopulation. A lot of people a LOT smarter than I am with MUCH better training than mine in the hard sciences and life sciences believe such a collapse is inevitable.

            But being a generalist with a strong interest in history I personally believe that collapse will almost for sure be piecemeal in time and place and that a few fortunate societies and or countries have a shot at pulling thru the fossil fuel and climate bottleneck more or less whole.

            North America is the place to be. This continent is big enough and rich enough and populous enough and well enough endowed with all the critical resources except a couple or three to get by just fine without the rest of the world- assuming the environment doesn’t go entirely to hell in a hand basket.

            Something is sure to get us all someday- but someday for a few hundred million fortunate people may be centuries or millennia down the road.

      • wharf rat says:

        “I encourage all Stanford graduates to sell all their oil stocks, ”
        OK, I challenge all Cal grads to dump both oil and coal stocks.

    • ezrydermike says:

      “What are the Moral and Practical Considerations of a Fossil Fuel Divestment Strategy?
      May 13th, 7:00 P.M. at First Church in Boston — Unitarian Universalist

      Bill McKibben of 350.org has called for the divestment of fossil fuel stocks as a key strategy in the fight against climate change. Thoughtful professionals within the socially responsible investment and liberal religious communities have taken reasoned and moral positions both for and against this strategy. This is a dilemma for people of conscience who are struggling with questions and decisions about what to do in their institutional and personal portfolios. Since there are strong arguments both for and against divestment, how are we to know what is our “right” decision?

      What exactly do we mean by “fossil fuel divestment”?
      • Which companies and why? What time horizon?
      • Whose behaviors are we hoping to influence and how? What levers are we trying to pull — financial, moral, public opinion?

      What are the real costs — both opportunity and financial — of divesting or not divesting?
      • How do we keep faith with our fiduciary responsibilities to our institutions and their future?
      • How does this impact shareholder activism efforts?
      • What are the alternative investment opportunities and their comparative risk/reward profiles?”

      https://www.youtube.com/watch?v=Ja4oqJ1X3S4&list=PLHstxRrh0Malpv5xrJ1kjrZJ8jwvQlqJD&index=14

  35. Watcher says:

    Re: ya don’t know if $100 oil held back the economy.

    The stuff goes in both directions. If the destruction of the shale industry (which has been suggested to be the only organic (as in non stimulated) source of post 2009 growth, then it works in the other direction, too.

    If it is to be destroyed by low price, then high price is what generated its GDP. Thus you do not know high price held back the economy. High oil price may have been the only thing providing what growth there was/is.

    • Old farmer mac says:

      YOU may not know if hundred dollar oil held back the economy.

      But everybody else I have had contact with- almost without exception – believes it has. These people range from redneck laborers to assistant managers at McDonalds to some bankers and even a few economics professors.

      It is simply amazing how many busy and even famous people will answer an emial.

      • Watcher says:

        You must be very excited about the bright future pending this year.

        • Old farmer mac says:

          A seller’s market might be one of the best times for a seller’s cartel to come into being. With supplies tight and prices high just a couple of sellers could hold back a little and force up prices to a significant extent. And what they hold back they know they will have available for later sale.

          The question is the same as it is now – would the cartel be able to enforce compliance with the rules and get enough sellers to sign up?

          Not every seller is necessarily going to be desperate for cash in the future the way just about all sellers are today.

  36. ezrydermike says:

    “The frantic pace of drilling, combined with a state government looking the other way, is putting North Dakota oil field workers at considerable risk, according to a documentary that will be aired Monday (January 12) on the Al Jazeera America cable station.”

    http://www.midwestenergynews.com/2015/01/09/documentary-highlights-dangers-for-bakken-oil-field-workers/

  37. Andy Hamilton says:

    Reasonable article waving a few red flags:
    http://fortune.com/2015/01/09/oil-prices-shale-fracking/
    ”Unlike conventional projects, shale wells enjoy an extremely short life. In the Bakken region straddling Montana and North Dakota, a well that starts out pumping 1,000 barrels a day will decline to just 280 barrels by the start of year two, a shrinkage of 72%. By the beginning of year three, more than half the reserves of that well will be depleted, and annual production will fall to a trickle. To generate constant or increasing revenue, producers need to constantly drill new wells, since their existing wells span a mere half-life by industry standards.”

    ”But the numbers are still daunting. It’s easy to get financing when your costs are $65 and you’re selling at $100. But when the price is $50, where will the producers find the funds to keep sinking those new wells? It will take a lot of new drilling just to keep production where it is now. A steady but no-growth shale industry is not what America has been counting on. The spread of rigs and jobs that seemed such a certainty, and such a staple of our recovery, may be a fading vision.”

    • Watcher says:

      “It’s easy to get financing when your costs are $65 and you’re selling at $100. But when the price is $50, where will the producers find the funds to keep sinking those new wells? It will take a lot of new drilling just to keep production where it is now. A steady but no-growth shale industry is not what America has been counting on. ”

      tra la tra la

      And as noted above, let’s keep in mind that Moodys, S&P and Fitch all rated the paper these guys were issuing to be junk Even At $100/b. What will their rating be now? haha sub Junk.

      You want to operate your bizness at $48/b? Find someone to finance it. Can’t find nobody? Then You Ain’t Gonna Operate.

      Until the slam is more profound. Then the Fed will come to town.

  38. John S says:

    I have a few comments about oil and gas lease that I would like to share with the Peak Oil Forum because there is a lot of misinformation going back and forth.

    In Texas, and most other states, except Louisiana which is based on the Napoleonic Code, follow to a large extent Texas oil and gas law.

    An oil and gas lease is treated for all purposes as a sale of the oil and gas rights not as a lease as most people would think of a lease agreement. At some future point in time the mineral rights may revert to the original Lessor.

    Lessors negotiate to retain a royalty interest of various percentages. This entitles them to a share or the oil and gas production “produced and saved” from the well or lease as the case may be.

    A lessor may sue in court to recover unpaid royalty but the courts treat the unpaid royalty as “debt”. Thus, in the event of a Lessee bankruptcy, typically a Lessor is an unsecured creditor and must stand in line with all other unsecured creditors. He can not sue to terminate an oil and gas lease unless provided this remedy is specifically for in the lease.

    Generally speaking, an oil and gas lease will only terminate for lack of commercial production after the primary term expires. Many, many lawsuits have been tried to determine just what “commercial production” means in this industry.

    In a bankruptcy proceeding, the bankruptcy court will typically decide which secured creditor takes a haircut.

    The royalty owners and common stockholders in a public company who are also unsecured creditors ALWAYS get SCREWED.

    John S.

    • Watcher says:

      Well, GM proved that bankruptcy law doesn’t have to really mean anything. What will be cool in this stuff will be when the railways or sand miners go to court to enforce long term contracts. Then the shale guys stand up and offer the magic words Force Majeure. Might be in the K text or not. It will be paid attention to if it is found shale was the only thing holding GDP together beyond the Fed’s rubber bands and duct tape.

  39. AlexS says:

    Wood Mackenzie estimated how current global oil production is sensitive to lower oil prices.

    Nearly 2% Of Global Crude Could Be Cash Negative at $40 Brent

    http://www.rigzone.com/news/oil_gas/a/136693/Nearly_2_Of_Global_Crude_Could_Be_Cash_Negative_at_40_Brent

    Wood Mackenzie concludes that producers could start shutting in production at $40/bbl Brent crude or lower, causing a significant reduction in global supply.
    A recent analysis by Wood Mackenzie found that 1.6 percent, or 1.5 million barrels of oil per day (MMbopd), of global oil supply could be cash negative on an operating basis if Brent crude falls to $40/barrel.
    Wood Mackenzie’s analysis of 2,222 producing oil fields, which account for 75 million barrels per day of total liquids production, determined at three price points the impact on oil production and percentage of global supply which will turn cash negative.
    The firm concluded that producers would begin shutting in production at $40/bbl Brent crude or lower, to a point where a significant reduction in global supply would result.
    “The cash operating cost for oil fields becomes very important as prices producers can achieve for the oil they produce nears the marginal point,” said Robert Plummer, corporate research analyst for Wood Mackenzie, in a Jan. 9 press statement.
    Production from U.S. onshore ultra-low production volume “stripper” wells could be the first to be halted. Approximately 1 MMbopd comes from these wells; many produce only a few barrels per day and have operating costs between $20 and $50.
    “We believe that once the cost of collecting the oil from these wells becomes marginal, shut-ins are likely,” said Plummer.
    At the $40/bbl price point, several Canadian oil sands projects are contributors to production. However, tight oil production only starts to become cash negative as Brent falls into the high $30s.
    “Turning on and off bitumen production is a complex and lengthy process,” said Plummer. “Stopping the injection of steam into oil sand reservoirs would result in a long and expensive restart.”
    Interestingly, a significant portion of oil sands operating costs is fuel for the extraction processes, so at low oil prices, operating costs may be lower than current levels, Plummer noted.
    Wood Mackenzie also found that, at $50/bbl Brent, only 190,000 bpd of oil production, or .2 percent of world supply, is cash negative. Seventeen countries supply oil that is cash negative at $50; the main contributors are the United States and the United Kingdom. At $45, 400,000 bpd, or .4 percent of global supply, is cash negative. Half of this production comes from conventional U.S. onshore production.
    Being cash negative – which means that the production is more costly than the price received – doesn’t necessarily mean that production will be stopped. Typically, producers will store oil to sell when the price recovers.
    “For others, the decision to halt production is complex and raises further issues. Thus, there is no guarantee these volumes would be shut-in,” said Plummer.
    Instead, operators may prefer to continue producing oil at a loss rather than stop production – especially for large projects such as oil sands and mature North Sea fields. In the North Sea, deciding to halt production from fields is often irreversible. Some platforms share their cost burden with other linked fields, and satellite fields are dependent on a mother platform.
    “Consequently, the economics of a group of fields have to be considered,” said Plummer.
    A company looking to reduce expenditure for the next two or three years may prefer to operate with a small loss versus decommissioning a field at the cost of hundreds of millions of dollars.
    In Latin America, where a number of heavy oil projects become marginal at lower oil prices, governments dependent on these revenues may provide royalty relief to producers to maintain that production.
    The slide in global crude production prices has prompted producers to cut capital expenditures and drilling plans, leaving many to wonder how low prices would go and if the Organization of Petroleum Exporting Countries (OPEC) would budge from their pledge not to cut production. Saudi Arabia and its Gulf OPEC allies haven’t shown any sign of considering a cut to boost oil prices, despite oil dipping below $50/barrel this week, Reuters reported Thursday. OPEC ministers and delegates have blamed non-OPEC producers such as Russia, Mexico and Kazakhstan, as well as U.S. shale and tight oil production, for the oversupply of oil in the world market.

    Link to the original release by WoodMac:
    http://www.woodmac.com/public/views/low-oil-prices-halt-production

    • I suspect there are quite a few oil companies preparing documents and slide shows to argue for tax cuts all over the world. Renegotiating contracts is common, but South American governments do know how to renegotiate in a hurry.

  40. Watcher says:

    Sun’s coming up in Asia and Sydney is open. Dollar slightly up. WTI down 40 pennies with bid/ask floating $47.80ish.

    • clueless says:

      At some point, we might want to revisit the fundamentals.

      Why does any Cartel form? In order to raise prices. There is more supply than demand so they generally restrict supply. Generally, the state of affairs with oil since 1972.

      Why can they do that? Well, they are illegal in most places in the Western World, like the US, but our laws do not apply to them. And, since they are countries, it is difficult to regulate/punish them, without cutting off our nose to spite ourselves.

      But, now it seems that Saudi Arabia is abandoning the Cartel -why? Only they can know for sure, but one good guess is that we are now, or shortly will be, in a position where world supply and demand are more in balance. That is, they, or other cartel members (cheaters), have little ability to “flood” the market with supply. So, they will get a fair market price no matter what any one individual member (former member) of the cartel (or other country) can do.

      Almost certainly, there would be no cartel if the world is at peak oil. Assuming the status quo, we should have an answer in 2 years or less.

      • Watcher says:

        Stuff gets measured with dollars. Or money. Not the same thing. If you step back and look at who is hurt the most, measured in money rather than dollars — it’s the US (assuming shale proves to be the post 2009 organic (i.e. sans Fed) GDP engine).

        The folks hurt least, Russia.

  41. Old farmer mac says:

    http://www.usatoday.com/story/money/columnist/bartiromo/2015/01/11/bartiromo-saudi-prince-alwaleed-oil-100-barrel/21484911/

    Even plutocrats and stopped clocks tell the truth occasionally and I find little to dispute in this interview.

    I do not personally believe that the US government in collusion with the Saudis and or anybody else engineered the oil price crash although I do not doubt some people in some departments of the government are very happy indeed with low oil prices..

    The only point this guy makes which strikes me as being a swing and a miss is his prediction that we will not see one hundred dollar oil again.

    I think we will see it at that price again well within five years unless the world economy has to check itself into the nursing home for good.

    It may not stay there very long but the long term trend has always been up and I believe it will continue to be UP as a general thing for a long time to come.

    We are constantly learning and doing when it comes to getting more done with less oil and this trend will continue so long as OLD MAN BUSINESS AS USUAL remains on his feet and functional.

    If OMBAU remains on his feet we will see oil go to two hundred bucks eventually as it depletes and as we silmantaneously learn to get by with less and less of it OR until we can manufacture it from coal and or using renewable energy.

    The ”getting by with less and less ” is a process well under way in rich western countries in terms of bang per barrel and per barrel per capita and the population in rich western countries taken as a group will level off in my estimation a lot sooner than most people think it will.

    I just asked ( day before yesterday ) a bunch of young future professional women how many kids they think they may have on average and the answer was ONE and a tenth approximately. More said none than said two and NONE said three or more.

    Ask the average young guy how many kids he wants to raise and the answer is very seldom more than two and one or none quite often in my part of the world. Hardly anybody in the western world believes that their kids are going to look after them when they are old. Hardly anybody believes in large families in the West anymore.

    Renewables will continue to take market share from fossil fuels from here on out with maybe a pause for the moment with oil gas and oil prices temporarily down.

    But efficiency and lifestyle changes and renewables are extremely unlikely to come on fast enough to prevent the price of oil spiking well past a hundred bucks again in my opinion.

    If BAU lasts we will be able to afford oil at a hundred fifty in twelve or fifteen years as easily as we could at ninety to a hundred two or three years ago.If I am still able to drive – which is doubtful – I will probably treat myself to a new battery only car and charge it mostly from my own solar panels.

    The backup oil furnace will be out altogether and a heat pump running off the panels whenever the sun is shining is going to be heating up a big pile of crushed stone in the unneeded basement. Local buses that belong to the people driving them will be either properly permitted and legal or they will just run informally ANYWAY – taking people to town to work and shop.

    The sheriff is not going to get reelected pulling over these buses and he will damned well know it- just as the city council in places such as San Francisco today knows better than to stir up much of a stink about illegal apartments being carved out of garages and large houses.

    Depletion guarantees oil prices will go up . Changes in lifestyles and steadily improving efficiency in using it will enable us to pay the higher price – for some indeterminate time. We could actually ride out peak oil without a crash if the supply were to decline slowly enough- say one or two percent a year over the next couple of decades.Coal to liquids and renewables combined with efficiency and conservation would enable us to deal with a one or two percent decline annually. Renewables would eventually be able to shoulder the load.

    But I am afraid the post peak decline will be much sharper.Sure of it actually.There is a crash coming as sure as old age.

    • Dennis Coyne says:

      Hi OFM,

      How sharp a decline do you expect? If the decline starts in 2015 and the rate of extraction from producing reserves remains about what it was in 2013, then decline will be under 1% for 8 years or so, and less than 1.6% through 2040. Chart below is an oil shock model with C+C URR=3000 Gb, 2500 Gb of conventional, and 500 Gb of extra heavy oil. The extraction rate is for conventional oil only, extra heavy oil is modelled separately and added to conventional output for the C+C model.

  42. Petro says:

    Ron:

    …”The Cornucopians are exuberant, they believe that collapsing of oil prices dealt the death knell for peak oil. An oil glut, they say, is what we have, not peak oil. But an oil glut is exactly what we would expect at the very peak. After all, that is what peak oil is, that is the the point in time when the world produces more oil than ever in history… and the most it ever will produce.

    I am of the firm conviction that the world is at the peak of world oil production right now, or was at that point three or four months ago. I think history will show that the 12 months of September 2014 through August 2015 will be the one year peak. Whether the calendar year peak is 2014 or 2015 is the only thing still in question, or that is my opinion anyway.”…

    Well said!
    -I am afraid that “The Cornucopians” (and all of us) will soon learn that, THAT is not just an opinion, but a well informed and educated observation!
    Here’s what Mr. Simmons said back in 2005 (before the “…energy independent…” and “…Saudi America…” fairy tale bong/hookah shale dream):

    https://www.youtube.com/watch?v=u8BJUWKZKHM

    “The Cornucopians” shall wake up one day soon and wished they did pay attention.
    Indeed!

    Be well,

    Petro

  43. Huckleberry Finn says:

    Amazing slide from Arsenal Energy.
    Shows impact of different oil prices on the company. Obviously each company is different but this gives some idea of how lower prices impact payout time.

    • Watcher says:

      That says anything drilled after 2012 pretty much won’t ever payout at these $31 levels, and since 63% of output was drilled in the last 18 months . . . .

      • Watcher says:

        No, that’s wrong. Anything drilled now, or beyond 3 months ago, won’t ever payout. The 2012 wells had a couple of years to payout — though of course that went to bonuses and Cessna.

        • Toolpush says:

          The truth is starting to come out. by the looks of things.
          How long before the quarterlies have to reported?
          It can only be a couple of weeks.

          • Jeffrey J. Brown says:

            In Washington D.C., they say a gaffe occurs when one accidentally tells the truth.

          • Watcher says:

            The quarterlies will report flow money, which should crash for sure.

            But the reduction in drilling is going to be later. Another item that may appear earlier is the lenders walking away from lines of credit, and maybe making covenant declarations. That would accelerate everything.

            • Toolpush says:

              On a three-, six- and 12-month basis, Brent will likely trade at $42, $43 and $70 a barrel, Goldman estimates, down from its previous $80, $85 and $90 a barrel forecasts, respectively. For WTI, Goldman has $41, $39 and $65 a barrel forecasts on three-, six- and 12-month horizons, down from $70, $75 and $80 a barrel previously.
              http://www.cnbc.com/id/102328108

              If Mr Goldman is correct, the drilling rig count might tale an earlier down turn?
              Current price WTI $47.22 Brent $48.84 down over more than one dollar each.

              • Watcher says:

                ZH down the scroll has a layout of GDP impact **DIRECTLY** from loss of shale.

                A bit over 1% after you dig thru. So truth is likely several %. That eats growth.

    • Huckleberry Finn says:

      Petro,
      It is strange that they project breakevens for countries like Russia. Their budgetary breakeven is a function of the price and the exchange rate. And one impacts the other quite a lot.

      • Petro says:

        …you are correct IF they were to accurately calculate that.
        They are not!
        That will be almost impossible and so volatile that, even if one had a computer software with all the variables and for each individual country and even assuming that data from lybian (or whatever) oil agency, or ministry lets say are accurate (a big if!), it will look like a stock ticker tape and move constantly.
        These are projections…and as we all have previously experienced, our friends at CITI, BoA,JPM,GS etc, etc… change their projections about everything and for everything a lot…a lot lot lot.
        -Now, this is pure speculative assumption (and assumptions are source of major f***-ups!), but I think they just take the official data for what % of budged comes from oil sales for each country, what % of gdp is as a result of oil sales, averige oil price and simply do a division and round up the result with a WIDE sigma error.
        -Again, only an assumption.
        I have not thoroughly read the data….used to do that a while ago when even I thought that another Ghawar, or efficiency, or wind, or….would save us.
        No matter what data, it is pretty clear what’s coming at us…..soon.
        The wind and PV farmers do not see it yet, but they shall!
        Be well,

        Petro

        • Huckleberry Finn says:

          I think you are right Petro.
          If you look at the oil price in Rubles until Mid-December 2014, it was FLAT! As the Ruble depreciation kept exact pace with oil decline.

        • Doug Leighton says:

          Petro,

          Yes, I think you’ve summed it up pretty well. In the end it’s a roller coaster ride and we’re wearing blindfolds. Perhaps the only constant is depletion and that won’t go away. But I will say, depletion of not, there’s still enough oil-gas-coal to fry the planet so that’s one projection which could be valid. Of course there’s always geo-engineering, sometimes called ego-engineering, but what are the odd of that working out? Personally I preferred the old planet where we built tree forts and swam in rivers and nobody sued anybody when one of us broke his/her arm falling out of a tree. But I’m a fossil.

  44. windriven says:

    http://rt.com/business/221147-traders-tankers-oil-stockpiling/

    “A continuous fall in global oil prices has prompted major oil traders to start hiring supertankers as they can benefit from stockpiling crude oil at sea. The oil giant Shell and energy traders Trafigura and Vitol have booked crude tankers for up to 12 months, said Reuters, referring to the fixture lists provided by tanker brokers and oil traders.”

    • Watcher says:

      Maybe they were booked to deliver oil, as they always have been.

    • notanoilman says:

      So, they are expecting prices to rise again.

      NAOM

      • Old farmer mac says:

        They know prices are going up again barring TEOWACKI.

        All indications are than just about every empty tank and tanker in the world has been snapped up by folks with the money to buy and hold physical oil.

        ”They” might be wrong of course but the odds are very very high that they are right.

        If I could get it without the damned ethanol in it I would buy up a thousand gallons of gasoline. Now or within the next few weeks. Will be buying as much diesel as I can find storage for as well on a bet that I will use it all myself and make a better return by far than on money in the bank.

        The history of all the price crashes I have read about plays out about the same- prices always drop well below the ” new normal” price in just about every case unless some technical innovation permanently lowers costs and increases supply.

        Some oil is going to come off the market pretty soon because it is costing more to get it out of the ground than it is bringing when sold. Beyond that not much new production is going to come on line of even low cost oil unless the project is already nearing completion.

        And those who think the economy is not going to get a shot in the arm from low oil prices are going to get a surprise. OF course the economy may be in such bad shape that it doesn’t show much improvement and it might even keep on going downhill.

        • Kam says:

          Holding oil will only make price lower. We need to burn this stuff to afford to pay for future supplies.

          • Old farmer mac says:

            Your argument is technically correct in that oil put in storage NOW will depress the price of oil LATER when it is sold.

            But the amount that is going into storage is trivial compared to consumption on a daily basis . If the price has gone up say ten bucks ( a number I just pulled out of thin air) the stored oil that is sold any given day will probably only have the effect of depressing the price maybe a dollar or two (another number I have pulled out of the air.)

            It might not work out this way but the people storing oil believe it will.

            At any rate the folks who are storing it are no doubt hedging most of it which means they have locked in a profit regardless of the price when they sell- which I forgot to point out earlier.

      • Thomas says:

        It’s not a gamble, it’s arbitrage: They are buying oil at current prices and selling it on the forward market. The forward price is higher, so they are locking in the profit.

        • Old farmer mac says:

          Yes most of these guys are probably selling ahead for a guaranteed profit.Should have been more wide awake or I would have remembered to say the word.

          But some may be holding and gambling that they can get an even higher price.Farmers who produce large quantities of grain which is easily stored and not highly perishable play this game both ways except they actually grow the grain instead of buying it.Little fellas like me don’t hedge.

  45. Caelan MacIntyre says:

    Life cycle energy analysis (LCEA)

    “…is an approach in which all energy inputs to a product are accounted for, not only direct energy inputs during manufacture, but also all energy inputs needed to produce components, materials and services needed for the manufacturing process…

    Energy production

    It is recognized that much energy is lost in the production of energy commodities themselves, such as nuclear energy, photovoltaic electricity or high-quality petroleum products. Net energy content is the energy content of the product minus energy input used during extraction and conversion, directly or indirectly… Another new concept that flows from life cycle assessments is Energy Cannibalism. Energy Cannibalism refers to an effect where rapid growth of an entire energy-intensive industry creates a need for energy that uses (or cannibalizes) the energy of existing power plants. Thus during rapid growth, the industry as a whole produces no energy because new energy is used to fuel the embodied energy of future power plants. Work has been undertaken in the UK to determine the life cycle energy (alongside full LCA) impacts of a number of renewable technologies.”

    • Fred Magyar says:

      Life cycle energy analysis (LCEA)

      “…is an approach in which all energy inputs to a product are accounted for, not only direct energy inputs during manufacture, but also all energy inputs needed to produce components, materials and services needed for the manufacturing process…

      Well it sounds like a small step in the right direction but it still seems to have some limitations. To begin with I have a problem with the statement “all energy inputs “, I highly doubt that is realistic. Though it might be interesting to have a comparison of the life cycle energy analysis results of say fracking shale to produce automotive fuel vs producing solar panels to charge batteries for EVs as imperfect as such a comparison might be.

      A problem the energy analysis method cannot resolve is that different energy forms (heat, electricity, chemical energy etc.) have different quality and value even in natural sciences, as a consequence of the two main laws of thermodynamics. A thermodynamic measure of the quality of energy is exergy. According to the first law of thermodynamics, all energy inputs should be accounted with equal weight, whereas by the second law diverse energy forms should be accounted by different values.

      The conflict is resolved in one of these ways:

      value difference between energy inputs is ignored,
      a value ratio is arbitrarily assigned (e.g., a joule of electricity is 2.6 times more valuable than a joule of heat or fuel input),
      the analysis is supplemented by economic (monetary) cost analysis,
      exergy instead of energy can be the metric used for the life cycle analysis.[41]

      But in the final analysis (pun intended) the ecological footprint of all steps in the supply chains will have to be assigned costs, I’m not sure we really know how to do a very good job of that at this at this particular juncture of our civilization. When it comes to Nature vs Economics:

      For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.
      Richard P. Feynman

      And even from my very limited perspective the impression I get is that there an awful lot of people who are still trying their damnedest to fool Nature, which would be funny if the consequences weren’t so serious.

      Cheers!

      • Caelan MacIntyre says:

        Hey Fred, how are you? How’s Brazil?
        In fact, I’m unsure I posted the right part of the right article previously (was also looking at ‘industrial metabolism’ too [had all kinds of browser tabs open]) but I’m currently swamped for time. Back later.

  46. Old farmer mac says:

    Hi Fred,

    Well said sir!

    Personally I believe life cycle analysis and energy cannibalism are concepts that are going to be further developed and much more useful as time passes. It the meantime I believe contrary that money itself can be used to compute a very rough absolute energy content of any product.

    Let us assume that a solar panel can be bought for two hundred bucks- a very reasonable assumption. Let us add another fifty dollars to that to account for any subsidies involved that do not appear in the purchase price. Two fifty for the panel.

    Now let us assume that coal is used for all the energy utilized in manufacturing this panel and that coal can be had for sixty dollars a ton- about the going price in my area at the mine.I believe it is reasonable to assume that the panel at the absolute maximum upper limit has no more energy embedded in it than is to be had from burning four tons of coal.Energy from any other source would COST MORE given that coal is the cheapest and thus must have been used in lesser quantity due to the two fifty limit.

    But the game is never so simple because the panel provides electricity on site without transmission losses etc where as the coal is never burnt at more than fifty percent efficiency with another five percent average loss (or more) during transmission.

    My opinion for what it is worth is that the juice from the panel is worth at least two and a half to three times the energy in the coal after the losses involved in burning it for generation and distributing it.

    QED Solar panels are a great deal because they generate a lot more electricity over their lifetime than can be generated by burning the amount of coal needed to manufacture them.

    • Shuffling Along says:

      Mac,

      Intriguing line of thought.

      I would like to see more published research on this topic.

      There are some folks over on ‘Our Finite World’ who swear up, down, left, right, and orthogonal to all that besides that solar PV is the most asinine energy production investment on the planet, bar none.

      I have to wonder, especially given all the other frivolous things we waste money and resources on in this World, how logical it would be for the government to go full-tilt WWII-style balls-out on production of good, old fashioned polycrystalline solar PV panels, speced/built to produce 80% of rated initial out put after 100 years, given adequate cleaning of the glass and minor maintenance, if any.

      Produce the hell out of the things and install them on any home, business, factory, or gubmit building at government expense. Pay for them with a VAT; by cutting and redistributing money previously spent on ‘Defense’; mint trillion dollar coins, whatever hokey-smoke it takes…gee, its not as if the whole system at this point isn’t a contrived fantasy disco house of mirrors anyhoo.

      Store any excess in government-guarded underground caves, keep stockpiling them by surging current installations and put any extra in storage.

      They will come in handy someday. So will a robust wind turbine industry.

      ‘Mr. Fusion’ would help a //whole lot//…phone call for Lockheed-Martin…Polywell?

      Oh well, if Mr. Fusion doesn’t ride over the hill on his white Stallion, we better figure out how to live with solar PV, solar thermal, and wind power…a littl biomass, and one hell of a lot less electric load.

      Necessity will be a Mother.

      • Old farmer mac says:

        Hi Shuffling,

        It is not entirely out of the question that something along these general lines will actually happen – the details will be very different of course.

        The naysayers are basically saying party on we are going to starve or die of thirst anyway. My thinking is that while the end of life as we know it may indeed be inevitable it certainly can be postponed for a LONG TIME if we get our acts together.

        The naysayers seem to all believe that a hundred million bucks spent on a wind or solar farm is wasted in terms of the economy while that same hundred million spent on cars or jet fuel is well spent. That is their first big mistake and it is a KILLER of a mistake.

        Unless you have skin in the auto biz you should not care if that money is spent on factory workers and construction guys doing renewables or on cars. It is still spent and still supporting consumption and production.People are still employed. The odds are pretty good for most people that the wind and solar investment will be closer to home than an auto factory or steel mill. A wind or solar farm down the road pays local taxes and employs local people.

        I am plugging away at getting all the arguments pro and con clearly outlined in an impartial fashion. Please post any thoughts you might have or links I might have missed. Thanks.

        • Boomer II says:

          The naysayers seem to all believe that a hundred million bucks spent on a wind or solar farm is wasted in terms of the economy while that same hundred million spent on cars or jet fuel is well spent. That is their first big mistake and it is a KILLER of a mistake.

          The only way I can understand the naysayers who believe the world is going to hell and “there’s nothing that can be done to prevent it, so why try?” is that they have embraced their own ideas as a religion.

          They have a profound belief system in how the world will collapse and don’t want to discuss any possible alternatives because it conflicts with their belief system.

          I can understand the skepticism, but my sense of survival pushes me to look at alternative options even if they may not work. I’ve been anti-nuke, but am now open to the idea if that is our only way to counter GW. I’m not sure that it is our only option, but it’s worth looking at it.

          Similarly, I think geo-engineering to alter GW could turn out to be a disaster, but I am still willingly to think about it if it comes to that.

          • Fuser says:

            Hi Boomer,

            Defining the naysayer’s viewpoint as religious comes across insulting because it implies that the naysayers have been, and continue to, reject facts and or science.

            My viewpoint, that you have in quotation marks above, I would rewrite as “there’s nothing that can be done to prevent it, but I support your efforts to try.” -Naysayer

            • Boomer II says:

              Defining the naysayer’s viewpoint as religious comes across insulting because it implies that the naysayers have been, and continue to, reject facts and or science.

              Point taken.

              I just got so frustrated over at ourfiniteworld.com. Anytime one would bring up alternative scenarios, the response was, “Nope. Not going to happen. Haven’t you read what we are saying? We’re doomed and this is the way it will unfold.”

              I quit posting because there was going to be no discussion. They had made up their minds and that was that.

              • Fuser says:

                The biggest problem isn’t instituting the alternative scenarios, the biggest problem is human nature and you are now observing that problem.

                Everyone from the posters you’re referring to above, to the right-wing posters that deny climate change, to the religious posters that believe God’s will is for us to simply run amok and multiply. Our main problem is that we are acting just as programmed -marching on to oblivion.

                …almost sounds religious 🙂

  47. Frugal says:

    CNRL cuts $2.4 billion from 2015 capital spending plan

    The tar sands are really taking it on the chin at the moment — $2.4 billion, that’s not pocket change.

  48. Ronald Walter says:

    Where’s all of that 147 dollar oil? It was three times better oil than this cheap 47 dollar oil out there today. I demand the 147 dollar oil, it lasted three times longer than this crummy 47 dollar oil out there now.

    The oil companies would rather have the 147 dollar oil, but I think Mother Nature is making fools of them.

    It is a good thing that the Cape Wind Project is dead, the beginning of the end for wind turbines. Nothing but complete waste and totally useless, the current wind energy technology and it is painfully obvious, money frittered out the window, ecosystems damaged, a black mark on humanity. Fools go where angels fear to tread and somebody finally faced the music, money talks and speaks volumes.

    Sow the wind, reap a whirlwind.

    • Ronald Walter says:

      Please delete the pdf link.

      http://www.saveoursound.org/

    • E Auden says:

      Cat’s kill a billion birds a year. Wind farms kill a lot less. Do cats kill raptors? Do wind farms kill bird species which cats do not kill? Is it ok to kill birds with wind farms as long as they kill less birds? Why do Wind Farms need an exemption form the Endangered Species Act? Maybe it is ok for wind farms to kill birds until they are scaled up to match cat kills? Why does the Audubon Society favor Wind farm bird killing over cat bird killing?

  49. The Wet One says:

    So is this Saudi prince smoking crack: http://www.usatoday.com/story/money/columnist/bartiromo/2015/01/11/bartiromo-saudi-prince-alwaleed-oil-100-barrel/21484911/

    “Saudi prince: $100-a-barrel oil ‘never’ again”

    I’d say geology trumps a Saudi prince, but then again, he’s Saudi, a prince and a billionaire (so he’s probably 1/2 way decently informed and might have brain cell or two kicking around in his skull) so his words can’t be dismissed as easily as some others.

    What’s the thinking on this? I still say geology trumps all and sooner or later (even if it’s a century from now) $100 a barrel oil will be back. I’d say it’ll be a lot sooner than that, but I am a pessimist so I have certain biases.

    • Anon says:

      The thinking on it is that the Saudi is trying to kill investments in ultra-expensive projects. Lots of proposed mega projects that need $110+. None are in Saudi Arabia…

  50. I have been watching the North Dakota Rig Count all morning. It sat 167 all weekend since I don’t think they update it on weekends. It dropped to 162 very early this morning. I kept watching it figuring it would jump back up 2 or 3 like it did last Monday. But it did not, it clicked down to 160, then 159, then 158, then 157 where it sits right now. That is a drop of 10 over the weekend… so far.

    At noon… it just ticked down one more. Now at 156.

    • Watcher says:

      The mechanism of reporting is a question mark. Each rig is not radio instrumented with a button that says idle to transmit to Helm’s central recording facility. So something else is happening. Maybe the reporting agency waits for phone calls. Hard to imagine that they make phone calls every day.

      • Watcher says:

        “they” being the reporting agency. Doesn’t seem logical that they sample by phone call every day. They must somehow wait to be notified.

      • What’s so hard to imagine. The company calls in and says “Hey, we are folding up rig #12345 and getting the hell out of here”. The folks at the NDIC says, “Okay, we are taking you off the list right now.”

        Now I didn’t find that hard to imagine at all.

        • Watcher says:

          Misunderstood. I tried to clarify. “they” is the reporting agency. Hard to imagine they make sampling phone calls every day.

          Much easier to imagine the companies make the phone calls, though one wonders why, in this environment, when it would amplify the terror. Maybe it’s regulatory.

    • Chris says:

      Based on the drop in permits in November, wouldn’t be logical to imagine a progressive drop of rigs in January-February?

      • I don’t think there is a close connection between permits and rigs. Permits are good for one year and then renewable for a small fee for as many years as you need. They could be getting permits in anticipation, or hope, the the oil price will rise in another year or so.

        • MBP (ManBearPig) says:

          You can renew permits as long as you want, but if the terms of the lease expire before you drill a well it does not matter. It will be interesting to see how many companies try to HBP undeveloped acreage or simply let it go.

  51. Old farmer mac says:

    It occurs to me from reading the comments of many different people here and elsewhere – people with degrees from well known colleges and universities- that a great many university graduates do not understand the peer review process in depth.

    Now a two bit lawyer or economist or business man – or a two billion dollar lawyer or economist or businessman- can get his work published in journals that nobody takes very seriously. It may be good work or bad but unless it is demonstrably bad it he will find a journal to publish it.

    But when you enter the hallowed halls of the physical sciences – the ones occupied with professors holding chairs named after people such as Newton- things change. People who have earned solid reputations as genuine contributors to the ever accumulating body of knowledge known as science are justifiably gravely concerned with their reputations and value them above all else. Such people are not hard up for money -they have lifetime appointments with excellent salaries and benefits and a great deal of what they work for is recognition from their fellow scientists today and their place in the history books of tomorrow.

    Men and women who are fortunate enough to have earned such reputations and positions by doing original work put more value on the integrity of the process than can be easily understood by anyone who has not made a serious effort to understand how it works.

    Such people ( as my dear old departed country woman Momma) would put it would rather eat shit with a splinter than to get caught out telling a lie or misrepresenting data of any sort involving hard science.

    When they put their good names on the line they are in essence putting EVERYTHING that really matters to them professionally on the line.. They are not going to lie about the work of people in other fields so as to help questionable people get money to further their questionable careers.. If they think the people in other fields are mistaken they are not at all inhibited about saying so. A tenured professor of physics is about as well insulated from harm -except to his reputation – as it is possible for a man to be in terms of his professional life and work.

    But it is not so hard to understand why most people believe they are willing to lie and that countless people believe they ARE lying. Most people work in businesses and professions where the lines are fuzzy and money trumps honesty so long as the money is good and the chance of being prosecuted or ridiculed is small.

    Lawyers and accountants are not interested in simplifying the tax code. Mechanics are not interested in cars being easier to work on. Doctors are more than willing to charge exorbitant fees for services that cost hardly anything at all. I watched a good friend pay out almost nine hundred bucks for an ultrasound that start to finish including check in check out and getting the results took less than an hour recently. The machine may have cost megabucks a decade ago but it has been in constant use all day for the whole decade and the tech is a two year community college graduate and the doc sent back his opinion within five minutes of it being sent to his office.

    I will say it again. People who are full professors of physical sciences at the worlds most highly respected universities do not risk their reputations pushing junk science. If they say they believe work is sound they believe it is sound.

    Nearly all the top physical scientists I have ever known to express an opinion on climate science believes the science is sound and that the predictions of warming will be borne out.

    Each and every one of these men and women at the very top of their fields treasure every shred of professional reputation beyond price because each and every one of them hopes to break new ground in his or her own field and getting their work accepted into the mainstream in a timely fashion is made infinitely easier when they have unsullied credentials.

    Engineer are professional people but in general they are willing to sign their names to just about anything that meets the requirements of their professional and legal codes. Truth has little to do with what they are willing to say or do if they know their asses are well covered. Ditto lawyers and just about every body else. Doctors send people home to die every day for lack of money to pay for their services and yet on that same day often tell us that they practice medicine out of love of humanity.

    Only a very small handful of engineers who worked on the Fukushima nuclear power plant were man enough to resign rather than sign off on the design of the plant even though it was well known even to laymen that other historically verified tsunami events that happened nearby were large enough to flood the plant seawalls or no.

    Their names should go on brass embedded in stone at a high spot near the plant when the mess is finally cleaned up.A picture of their monument should be included in elementary engineering textbooks.

    The rest of them put their paychecks ahead of their consciences if they even bothered to double check the work of their fellows.

    The paychecks of the very top people in the hard sciences come mostly in the form of prestige and reputation rather than cash and benefits. They are not for sale.

    • Doug Leighton says:

      Mac, are you suggesting that all those climate scientists aren’t leading a giant conspiracy to dupe the gullible unwashed? Actually, I read you rant to my wife who found it amusing. She said to pass on that the academic world is riven by false pride, jealously and conniving (especially within universities) but agreed it’s rare to find anything misleading in the scholarly world given the strict oversight procedures that govern life there.

      • Fred Magyar says:

        She said to pass on that the academic world is riven by false pride, jealously and conniving (especially within universities)

        LOL!

        As someone who has a few scientists in his extended family and knows a few more on a first name basis, I can attest to the fact that they are indeed human and while there may be a few truly bad apples in any group of people my experience has been that there are far fewer bad apples amongst scientists than most other professional groups.

        Huge egos?! Well, that’s a whole nuther apple full of worms… I suspect OFM will agree >;-)

        • Old farmer mac says:

          Oh I agree wholeheartedly and absolutely that scientists at the top of the heap are just as human as anybody else and far more so when it comes to ego and pride. A LOT of them would kill a rival without a second thought if murder would advance their careers and they thought they could get away with doing so.

          I will not name them but two of the most accomplished and famous biologists of the last century seem to have passionately hated each others professional guts while working out of the same building at you know where -Harvard. I have spent many a long evening or winter day reading both of them- both of them being not only great scientists but gifted writers as well.

          My point precisely is that ”it’s rare to find anything misleading in the scholarly world given the strict oversight procedures that govern life there.”

          This carries over to public announcements relating to hard science when the scientist in question is a top man or woman in any hard science field.

          A physicist may make foolish remarks about football or theatre or a foreign culture or religions or economics or politics- these fields are outside the scope of his profession and he can generally say what he pleases in these cases with no more harm to his reputation and standing than any other person would experience so long as he doesn’t unduly embarrass his company or his university.

          But I defy you to find a remark made by a physicist who is a known as a top guy that disputes the basic tenets or conclusions of any laboratory based science. A few may yet be reserving judgement but that is about all. You will never find a chemist telling a biologist that life is impossible because it violates the laws of thermo. You will never find a chemist or a biologist who disputes the laws of mathematics.

          You will not find a reputable hard scientist who holds that eternal growth is possible on this finite planet.There are a few gals and guys out there who are not taken seriously by the rest of their profession. They will never land professorships at prestigious universities or even at podunk state u.

          Hoyle the astronomer never really said that an eyeball or the original eyeball was constructed in the same fashion as an airliner assembled out of parts in a junkyard. His words were kidnapped and molested and twisted into something entirely different by creationists.

          He was talking about the ORIGINS of life at the time to the best of my recollection – and for what it is worth we still don’t really have a good explanation of the way life got started thirty years later.

          Even so he is has been a laughingstock ever since among freshman biology students.

          The people at the very top are so far as I can tell from long observation about as careful of their professional reputations as supreme court justices.

          Now insofar as their PERSONAL habits and mores are concerned .. well the only thing I have to say is that they are human but on the average much more discreet than your average redneck.

          This is why I say they are not for sale when it comes to supporting bullshit artists by putting their names and reputations on the line WITH climate change skeptics. They are almost equally careful not to endorse work they believe may be questionable. So when you see that hundreds of physicists agree with climate scientists that the world is warming up- you can be sure they are NOT agreeing just to help their buddies in the next building over get some more grant money in literally the same fashion that congress critters exchange favors.

          That old peer review process keeps them honest when they publish and pride and fear of ridicule keeps them at least mostly honest when they talk about other scientists work.

          When their names and reputations are on the line they are very careful indeed to make sure nobody is going to point out at a conference or in a letter to NATURE or at a meeting of the university board that controls the budget that they have xxxxdd up and made fools of themselves for no good reason.

          In this sense they are better described as ” not for sale” than any other single group of people I can think of except maybe high court justices.

          And justices seem to have egos that are more apt to get in the way of what they do professionally than scientists. A scientist might wish an experiment or data proves a certain point or theory and reluctantly conclude that it does not when it does not. His work is subject to review by anybody in his field at any time.. A judges work is subject to review only by judges farther up the ladder who may believe in the same things he does.

          A judge is not necessarily constrained in this fashion..Judges can come up with some amazing ways to justify the results they want to get.

          • Old farmer mac says:

            Now speaking as an advocate for the integrity of scientists in general and top flight scientists in particular I have painted my argument in the most attractive terms I could without spending any time other than what it took to type it up. I do acknowledge that my description of professional scientific integrity is idealized and that such integrity is occasionally honored in the breach.

            Now contrast that to the real world incentives that influence the public pronouncements of those who doubt the integrity of the climate scientists.

            Most of them are as ignorant as a fence post – which is perfectly obvious from their commentary. They argue the way they do because they perceive climate scientists in particular and environmentalists in general as the enemy. Given what they have to work with in terms education it is not to be expected that they would believe otherwise. The cherry picked evidence they are familiar with is convincing enough to convince them and they are not generally intellectually equipped to understand the more nuanced and detailed evidence that proves the case.

            Once you get above the cannon fodder level in the climate wars you will find that the people in the anti camp are in just about every case politically aligned with business interests in such a way as to determine what their opinion is going to be.We have all heard the famous saying about a man believing whatever he must – or must not- when his salary is at stake.

            Peer review for all intents and purposes does not exist in the mass media and the mass media are mostly owned and operated by business interests with ties to the fossil fuel status quo. enuf said.

            • Doug Leighton says:

              Mac, don’t get the wrong idea from what “we” said above. Some of the very finest people I’ve met, friends, are scientists and/or mathematicians. One time my wife and I were at a conference in Princeton NJ where my wife introduced me to a slim animated fellow who quickly asked: Do you folks have kids? When we said two lovely girls he said can you wait here a sec and soon returned with three heavy red books: The Feynman Lectures on Physics; Vol. I, II & III. Yes, it was a gift from THE Richard Feynman and those books became my youngest Daughter’s Bibles; she now has her own physics doctorate and a good research position to boot — plus the Three Red Books.

              • ezrydermike says:

                sweet

              • Old farmer mac says:

                Awesome!

                Feynman is one of the people I was referring to as those at the top of their fields.

                There are not many people of his stature walking the Earth on any given day.

                In my estimation such a man has more credibility all alone that a hundred bankers or congressmen or all the people on the board together at the fed.

      • wimbi says:

        Think of that arrogant and ignorant young snot James Watson’s delight in reading a paper on DNA by the greatest chemist in the world, containing a “sophomoric error”!

        Watson then goes on, uninhibited by any excess of understanding, and plays around a while and gets the right answer. Pauling then graciously admits that Watson is right and he was wrong.

        What else could he have done? After all, Watson was right and he was wrong. End.

        • dave ranning says:

          It was a Pretty good guess (in fact one of the best of all time).

          Franklin had the data, just didn’t act on it.

    • ezrydermike says:

      Nope, I don’t care a fig about what Newton says, it’s a scam. The Goracle and that McKibben fellow have convinced all of those eggheads to climb into their liberal limousine and figure out how to steal my bible, my money and my freedom. Oh and watermelon, don’t forget the watermelons.

      • Cotter says:

        You know what’s the funniest thing about pompous arrogant “scientists” such as yourself? None of you can explain how a carbon tax on people is going to magically make the earth “all better” and “renewed”! Yea I’d be pissed too, if I had to work for free without my taxpayer supported grants.

        Sent from my Samsung Galaxy S5 powered by Verizon® Wireless

        • Fred Magyar says:

          Perhaps you should take a moment to thank a few of those pompous arrogant scientists for providing you with the magic of your Samsung Galaxy S5 powered by Verizon® Wireless…

        • Synapsid says:

          Troll alert.

      • Old farmer mac says:

        Now hold on a minute . If them there librul ijiots is after my watermelons I am a gonna vote publican next leckshin. I got lotsa Bibles and if they steal a few maybe some one of them will git bored one day and read one o them..Ain’t got no money ‘cept my old age check which thank god the publikins is keeping them dimerrats away from it.

        ‘N the onliest reason AH ain’t in jail anyway is that some fool judge said it uz overcrowded and turn some of us shorties loose.

    • John B says:

      I don’t think it’s really a question of lying or telling the truth. It’s a question of knowing or not knowing. The climate scientists all probably worked very hard on their models. The reality is that all of the variables are not known, and there are estimates and assumptions built into the models. When ALL OF THE MODELS fail to match up with actual observed temps, it’s probably very difficult for an entire group of self professed geniuses to admit that they were wrong. Yet there it is.

      http://climateaudit.org/2014/12/11/unprecedented-model-discrepancy/

      • ezrydermike says:

        Steve McIntyre alert

        • John B says:

          Typical. Attack the messenger, no facts, no arguments.

        • dave ranning says:

          “McIntyre has been described as a “persistent amateur who had no credentials in applied science before stepping into the global warming debate in 2003”

          Probably a wing pawn talking point creator.

          • John B says:

            You sound very knowledgeable about the subject. Perhaps you could enlighten me as to the reason why the GCMs are not tracking actual recorded temperatures?

            Or were you simply not aware of that fact?

            • dave ranning says:

              Take a look—

              • John B says:

                Take another look. And please explain the divergence between GISS, and the GCMs:

                https://bobtisdale.files.wordpress.com/2013/04/figure-24.png

                • dave ranning says:

                  They seem remarkably in sync to me.
                  But call me old fashioned, and data centric, but I’ll stick to temperatures and thermometers.

                  They have a good track record.

                  • John B says:

                    Yes they do, unlike the GCMs. So we agree.

                  • Here you go. The recipe is to remove the natural variation due to El Ninos, volcanos, etc and then plot the residual temperature against the logarithm of atmospheric CO2. The slope is the temperature response to CO2 increase.

                    http://imagizer.imageshack.us/a/img27/2007/mkx.gif

                  • John B says:

                    If your model is so good, why isn’t Schmidt & Co. using it? Professional jealousy?

                  • They probably will eventually.

                  • DanInKC says:

                    The ‘smell’ factor for me on that plot is the ‘5 year’ running average. Why ‘5’? Climate is a longer term process so 5 years seems a tad short.

                    I could presume to guess why the author used 5 years, but maybe my guess would be uncharitable – in any case, picking a longer averaging period would clearly show a continued rise…. If in 20 years the running-average ‘trend’ shown in this plot holds true (over the same 20 years), and is no higher than it is today, then I’ll gladly state that my unprofessional observation was unwarranted.

              • TechGuy says:

                Explain this:
                http://climate4you.com/images/GISP2%20TemperatureSince10700%20BP%20with%20CO2%20from%20EPICA%20DomeC.gif

                The change in the 20th century barely measures up! Those bronze Age humans sure must have burned a heck of lot of Coal and Oil! Maybe it was all those Legumes they ate causing huge methane emissions 🙂

                Most of the recent global warming occurred when humans were still hunter-gatherers:

                http://c3headlines.typepad.com/.a/6a010536b58035970c017d41a96489970c-pi

                People don’t understand Earth is still exiting from a Ice Age that began about 50K years ago. Its still continuing has have infrequent burst changes.

                As the Earth warms up, more land will become available for plant growth, but it will take time, as trees takes decades to mature and it takes even more decades for the seeds of the trees to reach land that is thawing out.

                If you want to decrease global CO2 emissions than the very first thing to do is to put out the Indoniesian bog fires than emit about 60% of all US CO2 emissions. Some of the bog fires were started by farmers to clear land to grow crops for biofuels (law of unconsidered consquences again!) . Putting out the bog fires would be incrediblity cheap ( I would guess about a 2 Billion USD). The second thing is to start planting evergreens in regions where the perafrost is thawing out (also cheap) to give nature a helping hand. Over decades the trees will start consuming CO2. In addition, the trees will also clean the air and water of toxins and pollutants by bounding them up. But No, it “better” to build PV plants that produce megatons of toxic waste and also emitt lots of CO2 emissions to boot. The best thing Human can do for the Planet is stop trying out smart ourselves and delude ourselves that technical fixes can solve all problems!

                Third, I believe Ron is right and Global Oil production has peaked in 2014 or before 2016. As production falls, so will the global economy and Human CO2 emissions will fall, permanently.

                The biggest threat to humanity and mass extinction is those damn spent fuel pools. Yet nobody is even remotely concerned. Humans are just stupider than a box of rocks.

                • Boomer II says:

                  As the Earth warms up, more land will become available for plant growth, but it will take time, as trees takes decades to mature and it takes even more decades for the seeds of the trees to reach land that is thawing out. …

                  The second thing is to start planting evergreens in regions where the perafrost is thawing out (also cheap) to give nature a helping hand. Over decades the trees will start consuming CO2. In addition, the trees will also clean the air and water of toxins and pollutants by bounding them up.

                  You know, I think you would find a lot of support for this from environmentalists. How much is being done to encourage a meeting of the minds between those on the right who are skeptical of GW and those on the left who want to decrease CO2 in the air?

                  What can be done to encourage restoration of rainforests, and more vegetation planting in other areas currently stripped of vegetation?

                  • TechGuy says:

                    Boomer Wrote:
                    “What can be done to encourage restoration of rainforests, and more vegetation planting in other areas currently stripped of vegetation?”

                    For one, Stop encouraging the destruction of undeveloped land (ie Forests) to create farms to grow biofuels. The global environments are like the use Miltary “We had to destroy the planet, in order to save it!”.

                  • Boomer II says:

                    Some environmentalists have always been opposed to growing crops for biofuels. Others have been in favor of only using waste materials for biofuels. At any rate, I think you would find support among many environmentalists to give up on biofuels for the reason you have stated. Forests left standing are better than forests cut down.

                    Again, finding ways for the planet to benefit from the increased amount of CO2 currently in existence and to remove it from the atmosphere should be a concept that might bring both sides together.

                    Environmentalists have gotten the name “tree huggers” for a reason. Stopping clear cutting was one of the first environmental crusades. I would love to see that become a cause across the political spectrum.

      • SW says:

        If you are a real person, I will say this real slowly so that you can comprehend it. There are two issues here. One is the reality and seriousness of anthropogenic climate change and the second is the scientific community’s attempts over the years to predict the consequences of this effect over time on the complex nonlinear system that we call the climate. If you simply do not believe in anthropogenic climate change you are turning your back on basic nineteenth century physics. No fancy modeling is required. It is fundamentally a consequence of Maxwell’s equations. Absorptions and reflection. It really is the same mechanism that makes a greenhouse warm in the wintertime. You can be skeptical about the climate models if you wish, even though my guess is you know next to nothing about mathematical modeling of complex dynamic systems. But here is the rub, uncertainty cuts both ways. You can’t argue that the climate models are crap and therefore we can’t predict what the consequence of dumping all this carbon into the atmosphere will be and because we can’t predict the outcome we should continue the experiment. Because of the persistence of carbon in the atmosphere, the fact that it is difficult to predict what may happen when we essentially play this game of Russian Roullette is the best reason imaginable to be really really careful about what we are doing. One of the signatures of complex dynamic systems is their tendency to fall into metastable states. We have been blessed with an exceptionally hospitable climate during all of mankind’s recorded history. We are, right now in danger of messing with that without the understanding of knowing what the next metastable state will be. To me, the uncertainty is what should be scaring the hell out of us. The ‘ignorance” or the climatologists is precisely why we can’t afford to indulge your fantasies of burning the planet.

        • John B says:

          I assure you that “burning the planet” is not my fantasy. But perhaps global economic collapse is yours.

          The climate scientists are the ones making the alarmist claims. If they can’t back up their fantastical stories with data, I would say that is their problem, not mine.

          I am not the only one pointing out the climate scientists’ alarmism.

          http://timesofindia.indiatimes.com/home/environment/global-warming/Fears-of-man-made-global-warming-exaggerated/articleshow/45786412.cms

          • SW says:

            My goal is to de-couple economic growth from adding increasing levels of carbon to the atmosphere.

        • Dennis Coyne says:

          Hi JohnB,

          Try the CSALT model by Paul Pukite at

          http://contextearth.com/2013/10/26/csalt-model/

          I played around with it a bit and although it does not match actual temperature perfectly, for a relatively simple model it matches Global average temperature data fairly well from 1880 to 2013. Chart below compares the model to NOAA land-Ocean temperature data using the 60 month centered moving average for both the data and the model output. The correlation coefficient is 0.98.

          • John B says:

            On CSALT:

            David Springer | November 20, 2013 at 7:52 am |

            CSALT is not a model. A model would reproduce the Southern Oscillation Index history over 130 years not use it as an input. All you are doing is taking a temperature proxy (SOI) and converting it to a temperature.

            • Dennis Coyne says:

              The SOI is an atmospheric pressure differential which correlates with ENSO. If it was excluded from the model, it would not follow actual temperatures as well. There are pretty clear reasons why more or less overturning of the Southern Pacific would affect temperature, though perhaps your understanding of basic science is not very good. Perhaps you could explain why this would not be the case?

          • Sloop John B:

            Yes, I included that quote by Springer so I could debunk it. I have a model for ENSO in the following linked paper, which can be used along with CSALT:
            http://contextearth.com/2014/11/18/paper-on-sloshing-model-for-enso/

            What removing the El Nino/Southern Oscillation component from the global temperature profile does is to isolate the warming trend due to CO2. So with a model for ENSO, we can project temperature with a higher degree of fidelity.

            • John B says:

              No offense, but I will believe it only when I see the measured temps.

            • And we’re sure this is REAL data this time, and not that politically motivated, falsified stuff that was all revealed through those incriminating Climategate e-mails, right?

              Any given weatherman in this country is lucky if he even gets close on his 7 day forecast, yet I guess you’ll believe that someone can make an accurate forecast for a whole year, much less a decade or a century?

              Riiiiight.

              We haven’t even discovered every animal that exists on our own planet. We haven’t even been to a single planet other than our own moon. We don’t know yet how miraculously beneficial increased CO2 will be for worldwide crop yields needed to feed the increasing population.

              So no, just no. We haven’t figured out our own planet’s weather patterns to the extent that we can blame other creatures (including humans) for whatever the weather happens to do.

              C’mon, bro. Seriously. Wake up! Pull your head out of where it don’t belong.

  52. Watcher says:

    ZH has traditionally had a mixed agenda of click bait and Fed hatred. But they also have the widest array of hat tips you can find anywhere, so they have this paraphrased

    [Goldman] scrambled to explain overnight that nothing short of a mass default wave within the shale space will end the ongoing collapse in prices, which are driven not by supply/demand fundamentals but by ZIRP, and a generation of junk bond BTFDers, who can’t wait to invest in the latest 10%, 15%, 20% or higher “yielding” opportunity (ignoring that the issuer may default before even one coupon is paid). from Goldman:

    [U]nlike physical stress, how low prices need to go is dependent upon the producer’s view of the future and the persistence of the current low price environment. The lower and more persistent the producer views the future pricing outlook, the quicker the restructuring. Given the optimistic nature of the oil drilling business, producer views are unlikely to change until the environment becomes extremely hostile with prices low enough such that survival becomes questionable.

    And given the optimistic nature of people trying to keep their jobs and defuse what appeared to be gloom and doom in what they just said — this:

    We believe a new industry will be born out of this environment with lower costs driven not only by cost deflation in other commodities, currencies, rig rates and oil services but also by substantial productivity gains created by engineers facing tighter margins. Although what exactly this new industry will look like is still extremely uncertain, we do know is that cost deflation has already created a 25% reduction in expenses. Accordingly, to reflect cost deflation in the industry and its sustainability through significant efficiency gains, we are reducing our 2016 and long-term price forecasts to $65/bbl and $70/bbl for WTI and Brent from $80/bbl and $90/bb,l respectively.

    So Goldman’s client seeking Utopia presentation is essentially technocopia that will allow $10 million wells to become $7 million wells. And haha THEY KNOW cost reductions of 25% have already occurred, because all those drillers were just delighted 6 months ago to earn 25% less than they might have. It’s the financial equivalent of saying “at these prices those rigs will be going to the sweet spots now” as if 6 months ago rigs were intentionally sent away from sweet spots.

    • Woody says:

      Capital recovery on equipment can be deferred for quite awhile.

    • Watcher says:

      btw sportsfans, the US 10 yr is now 1.91% down 6 bps. Because the end of shale is so stimulative.

      • Verwimp says:

        1.91% Really? Belgian 10 yr is now 0.79% down 4 bps. Belgian 1 yr is minus 0.10% and hasn’t been positive since august.

        • Watcher says:

          Yup, and Germany is 0.5%. This is not the stuff of economic growth. Been this way trend-wise for years.

          Relentless civilization decline. Behold EROEI.

    • Toolpush says:

      Watcher,

      As I was saying the other day, the market makers, who ever they may be, are looking for capitulation. They don’t want to hear a bunch of wining about how cheap the shales can produce, they just want to see the blood flowing and drilling/production shutting down. Once everyone starts screaming the sky is falling in, they will jump on the other side of the trade and wait for the price to re-balance.
      I am waiting and watching for that moment, where the price can rebound to something that can sustain the drilling industry. I do have some skin in this game, you know.

      • Watcher says:

        This is powerful beyond guys catching falling knives or hyping the future.

        This is light years past supply and demand.

        This is war, and we’re going to lose.

  53. Watcher says:

    ZH is noting a rig count surge for 2014 in KSA, Kuwait and UAE. Here, that would be evidence of scarcity asserting itself.

    On ZH, it’s part of the war on shale.

    • Kam says:

      Saudi rig count just shows that they don’t want to cut production. We know this since late November.

  54. Chris says:

    Amasing to see that a so small excess of oil can divide oil price by 2 or even more… Truth about production cost should come in a few weeks now. Interesting to see the OPEC report on Thursday.

    • Watcher says:

      Opening price WTI in Asia is $45.72, down 30+ pennies. So they don’t care what Iraq does.

  55. Today the NDIC Daily Activity Report showed 8 wells released from confidential “Tight Hole” status and 4 “Producing Wells Completed”. The first 24 hours of production of oil and water were listed. See if you can guess why some wells are kept on the confidential lists for months while some have their data released immediately?

    • Huckleberry Finn says:

      I think the “confidential well” guys are afraid Saudi Arabia may come to steal their water considering how much of it they are producing.

    • Regex Wald says:

      All wells on the confidential list come off of confidential status 6 months after drilling begins. No sooner, no less. Wells “released from ‘tight hole’ status” on the daily activity reports that are not yet completed will have no oil or water IPs. However, when they do get completed, they will reappear in the daily activity report, this time under “producing well completed” and complete with oil and water IPs.

      In short, all of the wells on the “producing well completed” list within any given daily activity report were either never confidential to begin with or they had not yet been completed by the time the confidentially period expired.

      • Regex Wald says:

        Just to be clear, of the 4 wells listed on today’s activity report:

        #28312 Showed up on the list of “wells released from ‘tight hole’ status” in the December 15, 2014 report

        #28311 Showed up on the list of “wells released from ‘tight hole’ status” in the December 17, 2014 report

        #28313 Showed up on the list of “wells released from ‘tight hole’ status” in the December 15, 2014 report

        #27679 Showed up on the list of “wells released from ‘tight hole’ status” in the October 8, 2014 report

        • Regex Wald says:

          Meant to say of the 4 wells listed under “producing well completed” on today’s activity report.

        • Now this is really confusing. I did not catch these wells earlier because they listed no production numbers. I only track wells that list their production. So we have wells coming off the “Tight Hole” list before they are listed as “Producing wells completed”. In what month is the first production for these wells logged?

          • Regex Wald says:

            I think you’re making this more complicated than need be. The list showing “wells released from ‘tight hole’ status” in the activity reports can include both completed and uncompleted wells. You can tell which is which by looking for the 24-hour oil and water IPs. Completed wells have these numbers; uncompleted wells do not.

            • So can we conclude that regardless of whether they are listed as tight hole or producing wells completed, if they report BOPD then we can conclude that their production will be reported in that month? In other words, all 12 wells that I listed will be counted as coming on line in January?

              At any rate I am very glad you posted what you did. I have wondered why quite often there were no BOPD posted. But there are cases when “producing wells completed” does not quote BOPD as well, just the well number, company and location. What the hell is ting on there?

              • Regex Wald says:

                No, not necessarily.

                For those 8 wells coming off of tight hole/confidential status in your chart, all we can infer from the daily activity report is that they were completed before the confidentiality period ended. Again, confidentiality runs for 6 months after the start of drilling. Thus, for these wells, they could have been completed any time between today and last July.

                As far as the “producing wells completed,” my general observation is that wells listed under this heading were completed within the last month. So the 4 in the chart may have been completed this month, but they could have also been completed last month as well.

                The only sure way to know when a well was completed is to have access to the supplemental well files available with a paid subscription to the North Dakota data. I do not have one. But perhaps you are aware of Bruce Oksol’s blog. He does have a subscription to the data, and every day he uses that subscription to relay information about new wells reporting. For example, he reports wells coming off the confidential list here. He informs about “producing wells completed” in standalone posts — here is today’s post for instance.

                Part of his notation for completed wells includes the month and year that the well was tested for those IPs you see in the daily activity reports. For example, you will see a notation such as t12/14, indicating the well was tested in December of 2014.

                Utilizing his work, the 12 wells in your chart were tested for IPs and came online in the following months:
                #23697 November 2014
                #26413 July 2014
                #27068 November 2014
                #27441 July 2014
                #27482 October 2014
                #27978 July 2014
                #28151 December 2014
                #28349 September 2014

                #28312 December 2014
                #28311 December 2014
                #28313 December 2014
                #27679 December 2014

              • Regex Wald says:

                Just saw this part… But there are cases when “producing wells completed” does not quote BOPD as well, just the well number, company and location.

                All I know is that those are wells that have been reported by the operator to be producing, but have no accompanying IP data at the time of reporting. The production from these wells will later show up in the monthly production reports.

                Why they don’t have IPs, I don’t know. Possibly anomalies or discrepancies in the way IPs are reported to the state. Seems like Continental has the most wells reported as completed but missing IP data.

                I suspect being able to access the scout ticket data available with a paid subscription would provide answers.

    • Watcher says:

      Might sorta expect crapola flow from those non big 4 counties.

      But McKenzie and Mountrail is supposed to flow no matter what you do right or wrong. Four did well. Five did not.

    • Toolpush says:

      I hope these are some of the pads they have pipelines hooked up to for produced water disposal, or Watcher will be in his element, counting those trucks running down the road.

      I wonder at what point it become economic to run this produced water through a reverse osmosis unit, and make use of the water. Getting rid of the salt content would be no problem. The trace oil would need to be separated, as RO would hate it. The only issue is NORM. Natural radioactivity. But even then, they should be able to use it for frac water?

      • I don’t think it would ever become economical to run this water through a reverse osmosis unit. There is just way too much crap in it, salt, oil, radioactive material and more. Reverse osmosis is basically just a micron filter. That filters, basically tiny plastic porous tubes, would become clogged and useless quickly. They have disposal wells where they just pump the crap back deep underground. Quite expensive but one hell of a lot cheaper than reverse osmosis.

        • Toolpush says:

          Ron,

          It maybe a case of never saying never. Unless of course there is a straight mandate against it, but it seems water can be produced a few cents per gallon. I have seen Rockman mention up to $6 per barrel, disposal cost, so if this volume can be minimized, then there is plenty of money to play with.
          As for potential added costs, separating out any oil, is the first on the list. It will come at a cost, but possible. The unknown, it NORM. But as I said before, if this water was sold for fraccing, I can not see a problem, unless as I said before, if regulations get in the way.

          http://www.harnrosystems.com/papers/capitalandomcostforro_presentation.pdf
          Page 6
          24 MGD Tampa Bay Water Desalination Plant ter Desalination Plant
          z Original Construction Cost $110,000,000
          z Sell Water Price $1.71
          z Annual operating cost estimated $10,000,000
          z Currently two proposals to remedy plant
          – Veolia Water
          • $50,198,000 additional capital
          • $16,353,000 estimated annual operating cost
          • Delivered water cost $2.63/1000 gal
          – American Water Services
          • $28,670,000 additional capital
          • $16,712,000 estimated annual operating cost
          • Delivered water cost $2.54/1000 gal

          Just to show you it is not totally out of the question, Coal Bed methane projects in Australia are putting their waste through RO, and using it for irrigation.
          http://www.santos.com/coal-seam-gas/coal-seam-gas-water.aspx

          • Toolpush, did you read the coal seam methane water article? Let me quote:

            Water quality

            Coal seam gas water quality varies by region but is typically brackish in quality (100-10,000 mg/L of total dissolved solids [TDS]), sodic, and high in bicarbonate, making it unsuitable for many uses without treatment.

            Water from Santos-operated fields typically contains between 100-10,000 mg/L TDS. (Comparatively, Brisbane tap water is typically 240 mg/L and seawater, 35,000 mg/L Water used in the Burnett region for irrigation can be up to 7,000 TDS.)

            The water is far less salty and has far fewer solids than seawater. That water is the perfect candidate for reverse osmosis treatment. I just think the stuff that comes up with the oil has a lot more crap in it.

            Reverse osmosis membranes are extremely sensitive to too many solids. Also any long polymers, (oil), in the water would be deadly to the membranes.

            I am not familiar with landlocked reverse osmosis plants. But I have worked in and around saltwater reverse osmosis plants. There far more water is just flushed through the system than is filtered out. That is salt water goes in, some fresh water comes out through the membranes but far more water is flushed right through the system and back into the ocean. The water that goes back into the ocean is just a lot saltier than it was when it was pulled out of the ocean.

            So via this process the solids, salt and other crap just gets dumped right back into the ocean. But I am at a loss to explain how a landlocked system would work. But I think there must be a lot of waste-water. That is only part of the water would be filtered. You would still wind up with a lot of water that needed to be disposed of.

            • Toolpush says:

              Ron,

              I understand RO, is not a complete disposal system. It merely concentrates the contaminates, and decreases, the quantity to be disposed. The side benefit is it gives a salable product, fresh water. As water supply is an issue for fraccing, it has the possibility of taking care of two oilfield problems in one go.
              I am not saying it is a total fix, but would definitely minimize the issue.
              As for pre-treatment, micro and/or ultra filtration is a commonly used. Maybe not in sea water treatment, but where other contaminates are present.
              http://www.htiwater.com/technology/ultrafiltration.html
              High Solids Ultrafiltration technology can be applied to various industries including:

              Landfills
              Machining
              Food Processing
              Methane Digesters
              Membrane Bio Reactor
              Oil and Gas Wastewater
              Refining

              • Yeah, well I guess anything would help. But you realize the link you posted is not a reverse osmosis system. I have no idea what would be the quality of the water after it went through this system.

                High Solids Ultrafiltration Technology can be applicable any time high molecular weight solutes must be removed from a solution allowing low molecular weight molecules and water to pass through

                I don’t know what a low molecular weight molecule might be but I would bet the sodium cloride molecule would qualify.

                • Toolpush says:

                  Ron,

                  The micro or ultra filtration is a “pre-treatment” for RO. As you rightly said, RO does not like long chain polymers or in fact any organic compounds. Ultra and Micro filtration will remove the organics and basically leave salt water, which the RO can handle.
                  It would all come down to regulation combined with economics. As we know both of these can change at anytime.

        • dave ranning says:

          The Second Law always kicks your butt when you get complex.

          Desalinization is the Poster Child for the Second Law.

          • Toolpush says:

            Dave,

            It appears RO may not use as much energy as you would think.

            https://www.watereuse.org/sites/default/files/u8/Power_consumption_white_paper.pdf
            page 15 there is a nice table comparing the energy input for RO and other methods of water supply in California. RO comes out quite well, and note that brackish water has a very low energy use.
            Also, injection wells quite often had very high back pressures. I have seen cutting injection wells operating up to 6000psi. I am not saying this is typical, but just showing what is can happen.
            6000psi=high energy input

            • dave ranning says:

              I worked hard to stop a desal project in Marin (got both Social Justice and Marin Rod and Gun on our side), and was successful.
              It would of doubled the energy needs of Marin for water.

      • coffeeguyzz says:

        Briefly did some checking on some of the above wells …
        28349 is a vertical (cheaper) targeting the Madison, produced 6k in less than 3 months, probably flow for decades
        27441 is an EOG well in the Parshall, short lateral, produced 64k – say again – 64 k in less than 5 months
        27482 is from Newfield, produced 28k in less than 2 months
        26413 is s Whiting Pronghorn. Story to that, I’m sure
        27068 is a WPX well in the Spotted Horn field … considered a good area. Still produced 8k in less than a month.
        There can be so many aspects that continually come into consideration in this industry/analysis.

        • Regex Wald says:

          #28349 is a horizontal Madison well, check the name, MMU 31-31-H1. Enduro has been drilling horizontal wells in between the old vertical Madison wells they took over with the purchase of Ward Williston a few years ago. Look at the Newburg Field in Bottineau county on the GIS server to see the best example of what they’re doing.

          • coffeeguyzz says:

            Regex, tnx for clarifying. What the heck do those guys know that, apparently, no one (?) else does drilling horizontals way over in Bot county?

            • Watcher says:

              Apparently, how to go bankrupt.

              6000 barrels in 2.5 months is 80 bpd. X $28ish wellhead (WTI $44.xx in Singapore right now) = $2240.

              Minus 25% royalty and tax = $1680. X 365 = $614,000 for the year.

              If they borrowed $5 million to drill and frack the short horizontal, and did so with 5 year paper, that’s $1 million per year to repay the loan, with interest tacked on and Opex tacked on.

              What are you celebrating?

        • Jonathan Madden says:

          Innovative techniques for US oil extraction, unless they are produced more cheaply than ME oil, will just continue to depress prices. OPEC is showing few signs of curtailing output:

          ‘Analysts say that richer OPEC members like the UAE have been ready to accept the price fall in the hope that it will force higher-cost shale producers out of the market.

          “We cannot continue to be protecting a certain price,” UAE Energy Minister Suhail al-Mazrouei said.

          “We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected,” he told participants in the Gulf Intelligence UAE Energy Forum in Abu Dhabi.’

          https://uk.finance.yahoo.com/news/opec-cannot-protect-oil-price-081421190.html

          • shallow sand says:

            I am now expecting oil to hit not just the absurd level it is at this morning, but to fall another $10-30 from here.

            Apparently the US and Canada need to take about 2 million bopd off the market? I guess. I have no clue. Bakken is below $30. EFS and Permian is below $40. There is no exploration in North America that can pay out at todays prices in a reasonable period of time. If you put the 10 year strip to any almost any shale driller, they will be bankrupt. USA is not a net exporter of oil, despite what some ill informed folks claim.

            These rapid price swings are a bad sign for our future. $140 was bad. This is bad. Have been at this 17 years. Family has for 31 years. Probably was happiest with things when price was around $20 and expenses were around $12. That of course was a long time ago. But then at least felt like could not go much below expenses. Now convinced price can go short term and maybe up to a year or more way below expenses.

            This is dire folks. We have no debt and are in full survival mode. Guys who bought production for a high dollar may not last a couple months without bank cooperation. Every service rig is parked. I am afraid to talk to guys I am friends in the local industry. This is just like the feeling we had in 2008-2009.

            I appreciate having this forum to be able to vent a little. I know there are many different views here and I appreciate most of them. Some very intelligent people here. Very thankful for the shale info, helps me realize it probably will not destroy our company even though its bubble will damage us some. Mr. Patterson, keep this site going!

            In closing, to explain where most conventional producers are to a guy working for a wage. Imagine 6 months ago you were making $15,000 per month. Now your employer says you need to keep working, but now you need to pay your employer $2000 per month to keep working there, and next month it could be more, we will let you know. That money you saved for a rainy day? Its pouring. Time to use it.

            Worse than the above is having men and women who bust their buts for you out in the field and in the office and seeing the fear. And though you try to reassure them, both they and you know that all is unknown.

            It just seems our whole economy is becoming more violent. Sorry for the rant. I am sure the majority in the world have it worse than me, so no need to feel sorry.

  56. ChiefEngineer says:

    For all you hole counters out there. The future is all about the demand side of the economics. Your looking at the wrong curve.

    http://www.greencarcongress.com/2015/01/20150112-bolt.html

    Nick has been trying to explain this to you for a long time.

    • Stephen Hren says:

      Have been doing a bit of car shopping myself, looking at used electrics. One good thing about the oil price drop is that they are on sale right now! Two year old used Leaf for $12-13K in my area. A good time to use this almost certainly temporary downturn in oil prices to lock in a deal and have some good laughs a year or two hence when gas costs $8 a gallon.

    • Longtimber says:

      Guess GM is trying to beat Elon to an electric Volks car. Bolt Crossover? I find any car close to the
      ground scary going forward with the North America roads. Forget high water in this thing. What’s the odds of raising the gas tax? They should have done as a %, not cents per gallon as they did when gas was sub $1.00.

    • Longtimber says:

      I spoke too soon, The Bolt crossover may change ground clearance. Hmmm. A Sabura outback has 8.7″ ground clearance. Key critical item in car selection is how many will they make? Can you get affordable third party parts in the future? A real plus for the Prius. They are everywhere.

  57. Toolpush says:

    http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

    The EIA, has Bakken rig count during Jan-Feb at >170, current 156
    Eagle Ford at 300, current 197
    Permian at 550, current 502
    I think they have been overtaken by events.

  58. Ronald Walter says:

    The price this morning is 44.95 at Bloomberg.

    How come oil drillers were in North Dakota drilling for oil on the Clarence Iverson farm in September of 1950, drilled for months, then in April of 1951, oil began to flow from a depth of 11,830 feet at a rate of 240 barrels per day and the price was at 2.60 usd per barrel? The well pumped for 28 years and produced 585 thousand barrels leaving Clarence with some money to bank and spend during all of that time.

    Anyone? Bueller?

    http://www.forecast-chart.com/chart-crude-oil.htmlz

    If you had two sections of farmland to farm and is in the heart of the Williston Basin in the Bakken Formation, would you rather have an oil company drill for oil or would you rather wind developers build four 500 foot tall wind turbines that can fail at any time?

    Which of the two will be more valuable and will not decrease the value of your land? Don’t think to long to formulate an answer.

    Probably be able to drill four wells, pump out two million barrels of oil over time, 25 years, receive lease money and twenty percent of the oil, 400,000 barrels, have money to buy fuel for all your machinery, what not, so on and so forth.

    What would you rather have? Oil to plant and harvest crops, or some wind to dry them all out, a reduced yield, and some electricity for the power utility to benefit?

    A simple question with an easy answer, don’t take too long to think about it.

    • SW says:

      Yep. Wind blows.

    • Ronald Walter says:
    • Stephen Hren says:

      And those wind spills are hell on the local environment!

      • Boomer II says:

        And those wind spills are hell on the local environment!

        Funny.

        • Old farmer mac says:

          And while the old farmer who owns that land now will be gone in twenty years the wind will still be blowing.

          Plus if you go for the wind the oil will still be there too- pretty nice gift for the grandkids given what it will likely be selling for in twenty five years.

    • Allan H says:

      Typical wind contracts are for twenty to twenty five years and should include an inflation index. Those four wind turbines could make $40,000 to $60,000 per year for the farmer. Wind power has yet to cause illness from pollution or wreck a water supply. So the farmer gets over a million dollars and still has a viable farm and place to live. Not a bad deal if one doesn’t mind the view.

      • Ronald Walter says:

        However, if the wind developer explains to the farmer that his land’s value will decrease from anywhere from fifty percent to eighty percent, the farmer may balk. He won’t make a dime in royalties if the farmland is degraded and worth less.

        The farmer may as well sell to the developer for what the land is worth before wind turbines are installed, bank the money and live off of the interest for the next 50 years, or buy a new farm somewhere else.

        The farmer will not have to be burdened, put an end to it from the getgo.

        After it dawns on the most dullard of dullards, the farmer will take the oil and keep the farm, dispense with the wind turbine fiasco right then and there and the wind developer can be on his way. Twenty-five years of income from land production and oil royalties will take care of that wind royalty loss and then some. Plenty of wild life will thank the farmer immensely, they’ll be the happiest of all.

        Wind turbines are dependent upon the grid, the won’t work without electricity supplied to them.

        They need backup power supply.

        • Old farmer mac says:

          Court jesting is one thing. Farming is another thing. I haven’t seen much evidence of farm land depreciating from fifty to eighty percent. Land located close to town or on a mountain top where vacation houses might be built maybe.

          You can still farm almost all of a square mile with wind turbines on it. The real fact is that the rental income from leasing to a wind operator is apt to be more than the net income you can earn from farming.And the wind money will come more or less forever. A wind farm will be refurbished where as an oil field will be abandoned.

          In is true that a wind turbine will ” shed ” it ‘s blades on rare occasions but this sort of accident is not a big deal in a corn field or a cow pasture unless you happen to be there when it happens- which is rather unlikely since it almost sure to happen during a high wind event.Oil field trucks will almost for sure run over more farmers than will ever be hit by turbine parts.

    • Longtimber says:

      From Article way above

  59. Allan H says:

    We were here once before. Two dollar gasoline that we thought was expensive at the time. Soon it went to four dollars and the world economy fell on hard times for a long time. Makes one think that when the price doubles again it will initiate another economic downturn. I have the strange sensation of coming deja vu.

  60. Tom F says:

    Brent ($45.79) just dropped below WTI ($45.85). When was the last time that happened?

    • energyecon says:

      July 2013. But it was baseline before the tight oil ramp up in North America.

    • AlexS says:

      In December 2008, the monthly averages for Brent and WTI were around $40, daily prices dipped below $35. Prices remained low in January 2009 and started to rise in February

  61. James Stricher says:

    http://www.theguardian.com/us-news/2015/jan/12/republican-senator-ted-cruz-nasa-congress
    Republican senator Ted Cruz to oversee Nasa in Congress
    Slowly but surely more Republicans are lifting the veil on climate change…

    Senator Ted Cruz will chair the committee that oversees science and Nasa in the new Republican-controlled Congress, raising fears that the conservative Texan will cut funding to the space agency and science programs.

    Cruz’s appointment to the space, science and competitiveness subcommittee comes amid a broad shift of power in the Senate, where the GOP won a majority in the 2014 midterm elections. Cruz was the top Republican on the subcommittee before the elections.

    He has publicly stated support for Nasa but has also attempted at least once to cut the agency’s funding, arguing that larger government cuts necessitated changes to the space program’s budget. In 2013, Cruz both tried to reduce Nasa’s budget and said: “It’s critical that the United States ensure its continued leadership in space.”

    Cruz has constituents invested in the space agency’s future – for instance, Nasa employees and contractors at the Johnson Space Center in Houston.

    Cruz has also spoken out against decades of science that indicate climate change, telling CNN last year that in “the last 15 years, there has been no recorded warming” to support “a so-called scientific theory”. His vociferous opposition to the Environmental Protection Agency (EPA) and his support of extreme budget cuts could spell an end for Nasa’s less prominent programs, such as its own climate research and sophisticated supercomputers.

    His role on the front lines of the 2013 government shutdown, which critics say had lasting negative effects on public safety, Nasa research and EPA scientists’ ability to visit contaminated sites, also suggests at best a narrow focus on Nasa’s largest projects and at worst a disregard for agencies that require science funding.

    Senator Marco Rubio, Republican from Florida, was named chair to the subcommittee on oceans, atmosphere, fisheries and coast guard, which oversees the National Oceanic and Atmospheric Administration (Noaa) and the protection of oceans and marine life in US jurisdiction. Rubio has said he does not “believe that human activity is causing these dramatic changes to our climate”, which is a more lenient position than the new chair of the environment committee, Jim Inhofe, who denies climate science outright.

    • Boomer II says:

      I would think Houston might have something to convey to Cruz about NASA cuts. And given that Houston also has a huge hospital district, I would think they might want continued funding for medicine research.

      But I can foresee Cruz doing something like approving funding for space and medicine on the condition that there is no funding to GW research.

      I think GW research can continue without government funding. Perhaps more concerning are the steps that have been taken to suppress public testimony. It’s one thing not to fund the research. It’s a step further to censor it.

      However, tech is generating more billionaires these days than fossil-fuel tied industries and at some point, there will likely be a tipping point which reflects that. If the Republicans become the “no science” party, they will be increasingly out of step with some of the big money in the US.

      • Old farmer mac says:

        Damn fool democrats have their snooty condescending hearts in the right place but their heads up their hind ends.

        The country didn’t want Ocare , it doesn’t want gun control.It does want the Keystone. These and a few other key hot button issues put them in the dog house and the neanderthals in control of Washington.

        People vote these issues in serious numbers on the issue itself or stay home on the basis of a particular issue. Not a whole lot of hard core union guys stayed home on the basis of the Keystone alone but some did. A hundred times as many conservative leaning people decided on the basis of this one issue alone that it proves democrats are anti American idiots. ( Whether this is true is entirely irrelevant to my point.)

        People decide how they are going to vote on the basis of just a few such hot button issues. If anybody doesn’t get it consider this. Suppose I get invited to a gathering of liberal democrats and let slip the N word and something uncomplimentary about gay people. It may be than I am the worlds greatest physician or environmentalist or philanthropist but nobody is going to invite me over to their house for the next gathering.

        I might be as good looking as George Clooney and as rich as Bill Gates but I still would not get to first base with any woman on the premises excepting a predatory gold digger maybe.

        Conservative white folks feel about the same way about democrats as the democrats at this hypothetical party would feel about me. Disguisted. Disappointed. Wary.

        I TRIED HARD to tell all my liberal buddies. Not a damned one of them would listen.

        They could have had some serious incremental change and in another few years most of the hard core right wing voters will be DEAD.

        Believe it or not thirty years ago redneck conservatives were convinced despite the rock split evidence that smoking was ok and even good for you and that the anti smoking campaign was a liberal plot. But it has been years since I have heard even the dumbest of the dumb say that smoking isn’t dangerous.

        In ten years the young guys and girls who are conservatives will believe in global warming because they will have been taught that it is real in school and at college and because they are going to see the evidence with their own eyes. A whole lot of the ones who would not believe it if their yard starting sprouting cactus in North Dakota will be DEAD DEAD DEAD.

        Some famous wag once said that progress in science itself arrives one funeral at a time. This is true times ten to the seventh in politics.

        IF they don’t mess up too bad the republicans will own congress and the White House for at least four to six years. In that time they might manage to put as many as three redneck justices on the Supreme Court and sky daddy alone knows how many on the federal bench.

        Conservatives don’t rejet climate science because they are ignorant and superstitious. They own smart phones and ride jets and get heart transplants and keep their lights on with nuclear power the same way democrats do.

        They reject climate science because the issue is closely tied to the democrats in their mind. As it happens this is true.

        Before too long in historical terms it is going to become obvious that the climate scientists are right and the republicans will have to quit campaigning on the basis of being against it.

        Unfortunately this political quicksand is going to put us a decade or more behind in scaling up renewables and scaling back our dependence on fossil fuels.

        Be careful what you wish for folks. Most things come with strings attached.

        I tried to tell ya.

  62. Jeffrey J. Brown says:

    My assumption is that rising US production was sufficient to keep us in a $110 equilibrium price range for Brent for 2011 to 2013 inclusive, as rising US production reduced the US demand for net imports enough to keep annual oil prices from materially exceeding the $110 range, as China and India increased their net imports from 7.6 mbd in 2010 to 8.5 mbpd in 2013, and as ANE* fell from 37 mbpd in 2010 to 34 mbpd in 2013.

    Note that US net oil imports (total liquids basis) fell from 9.4 mbpd in 2010 to 6.2 mbpd in 2013. Basically, from 2010 to 2013, the fall in US net imports matched the decline in ANE, about 3 mbpd in round numbers for both declines.

    And note that US net imports fell to 4.7 mbpd in June, 2014, a decline of 1.5 mbpd from the 2013 average value, which would certainly contribute to reduced demand for ANE:

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_3.pdf

    However, recently, starting in late 2014 US net imports have increased back to 5.9 mbpd, based on most recent four week running average data, which is only a little below the 2013 average value:

    http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

    Also, China’s crude oil imports were up about 10% year over year, although some of the oil could of course be going into storage, and hit yet another all time record high last year:

    http://www.ft.com/intl/cms/s/0/78f88222-9aff-11e4-882d-00144feabdc0.html#axzz3Oj35ztmh

    If we assume some modest short term decline in demand in Asia in the second half of 2014, and if we assume some modest increases in second half global production in the second half of 2014, plus the seasonal fourth quarter and first quarter decline in Persian Gulf domestic oil consumption, combined with the Saudi refusal to cut production, with some unilateral price cuts by the Saudis, would all of that go a long way toward explaining the price decline? But it seems likely that all of these factors, except for the Saudi decision to maintain production, might be very transient factors.

    *ANE = Available Net Exports, i.e., the supply of Global Net Exports of oil (GNE) available to importers other than China & India. ANE fell from 41 mbpd in 2005 to 34 mbpd in 2013.

    • Watcher says:

      “However, recently, starting in late 2014 US net imports have increased back to 5.9 mbpd, based on most recent four week running average data, which is only a little below the 2013 average value:

      http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

      Also, China’s crude oil imports were up about 10% year over year, although some of the oil could of course be going into storage, and hit yet another all time record high last year:

      http://www.ft.com/intl/cms/s/0/78f88222-9aff-11e4-882d-00144feabdc0.html#axzz3Oj35ztmh

      This doesn’t look consistent with final para. This looks like consumption has not been falling.
      There is an article out this morning that China has been filling its SPR over the past month or so, which is extra demand, and not moving the price up.

      • Jeffrey J. Brown says:

        I suspect that falling US net imports were, until very recently, offsetting falling ANE.

  63. HS says:

    Ever consider that the deflationary asset bubble collapse of 2008 was engineered in response to the peak in conventional oil that occurred in 2005-2006? They can’t create more supply but they can certainly quash demand to mask the peak. Perhaps, they’ve seen the writing on the wall for shale oil and are repeating the process.

    This isn’t as conspiratorial as it sounds, considering how many times the major investment banks have been caught rigging financial markets. Saudi Arabia has been a sock puppet for the US/Israel for decades now, so the only reason that crude is below $50/bbl is because the US/Israel wants it there.

    • Old farmer mac says:

      I must say I am utterly amazed that ANYBODY believes such a thing is possible.

      But on the other hand I know dozens of people who believe they are going to live a life of the utmost ease and pleasure forever- live forever in wrinkle free pink skinned young bodies with flat tummies and tight butts and in perfect health – but NO SEX ALLOWED. NONE WANTED.

      So I guess it is fair to say each to his own in terms of fantasies, it is still a free country in some respects at least.

      Now on the other hand given that the oil price situation is what it is there is no doubt that there are plenty of people in the federal government and in Saudi Arabia who are busy doing the best they can to make as much lemonade as they can out of this unexpected giant lemon.

  64. doodlebugger says:

    Forgive me if this has been discussed; Who are the backers of the hedge positions? Are they strong enough to survive several months of being on the wrong side of a move? I remember just a few years ago that some companies hedged in gas positions were left naked due to insolvency of companies guaranteeing the hedge.

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