World Oil Production According to the EIA

A few days ago the EIA published the latest update to its International Energy Statistics. The data is updated through May 2014. The data on all charts below is through May unless otherwise stated and is in thousand barrels per day. Also, all data is Crude + Condensate.

World

World C+C production was down 72,000 barrels per day in May to 76,540,000 bpd. It was down 708,000 barrels per day since reaching a new all time peak in February of 77,247,000 bpd.

Matt, on his blog Crude Oil Peak, is saying the same thing I have been saying for months. That is US shale oil growth covers up production drop in rest-of-world.

CrudeOilPeak

The trend is clearly down and is going to get worse. Below is my graph using the same data.

World Less US & N-O Less US

World C+C production, less USA, is down about 2 million barrels per day since the all time peak. In the past decade world less USA has been up and down many times but I have reason to believe that this time it will not be up again. There are several reasons for this and it involves the peaking of several other countries that have shown considerable increase in the last few years. Not the least of which is Russia.

Russia

Russia, the world’s largest crude oil producer, has peaked. Russia is now in decline. Russian C+C production increased about 2,300,000 barrels per day 2005, the year that World conventional oil peaked.

Without sanctions Russia peaked in November 2013 and would have likely started dropping at 1 to 2 percent per year. But with sanctions the drop is likely to be much faster than that. We had this headline just this morning:

Russian crude oil exports seen down 6pc in Q4

MOSCOW: Exports of seaborne Russian Urals and ESPO crude oil blends were seen declining by 6.2 percent to 50.17 million tonnes in the last three months of the year from the previous quarter, traders said on Monday, citing a quarterly loading schedule.

Some of the decline was due to increased input to Russian refineries but it is likely much of it is due to reduced Russian production. And speaking of Russian Production I am getting suspicious of their reporting. They have completely changed the format at their site CDU TEK.

Russia Format

They no longer report production from individual companies, just total production. I think it may be possible that they are doing the same thing as Iran after their sanctions. Iran showed no decline whatsoever in their production numbers for almost a year after sanctions were imposed. And they still show about a quarter of a million barrels per day more than the rest of the world sees as Iran’s production.

Perhaps Russia has the same motivation but don’t want to bring individual companies into their deception… so they just dropped them from their reporting page. I just threw in the “Commercial Stocks in RF” block because I found it interesting.

Anyway, let’s look at the world’s three largest oil producers.

Saudi+Russia+USA

Saudi + Russia + the USA has been on a real five year tear since early 2009. But the combined growth in C+C production has slowed in the last ten months or so. And, I believe, it will peak next year and turn down rather significantly in 2016. Meanwhile the rest of the world….

The Rest

This is a graph of World oil production less Saudi, Russia and the USA. World less these three top producers peaked at 51,292,000 barrels per day and have dropped by 2,884,000 barrels per day in the 40 months since that date.

In other news there is Brazil: Petrobras Monthly Update: August Oil and Gas Production From Brazil Rises By 2.9% Over July.

Its domestic crude oil production grew by 2.7% from 2,049 thousand barrels per day in July to 2,105 MBD last month.

I have used the above figures to update my Brazil chart through August. (Assuming their numbers are C+C and not crude only.)

Brazil

But in other news things don’t look so rosy for Brazil.

Brazil “falling off the world oil map” over failed policies

RIO DE JANEIRO – Investors are losing interest in Brazil’s oil industry as the country’s energy policies raise costs, reduce efficiency and increase risk, Brazil’s oil industry association, the IBP, said on Monday.

Without changes Brazil will likely lose out to places such as Mexico, Iran, Iraq and Algeria where policies are becoming more open to private sector investment.

“I went to the three largest oil conventions in the world this year and you hardly heard Brazil’s name mentioned,” Milton Costa Filho, Executive Secretary of the IBP told reporters at an industry event in Rio de Janeiro.

“Brazil is falling off the world oil map.”

The pages Non-OPEC Charts and World Crude Oil Production by Geographical Area have been updated with the data for May 2014.

I send out an email to about the folks that wish to be notified whenever I publish a new post. If you would like to receive that notice then email me at DarwinianOne at Gmail.com

This entry was posted in Uncategorized and tagged , , , , . Bookmark the permalink.

286 Responses to World Oil Production According to the EIA

  1. DrTskoul says:

    Thanks Ron! The trend continues!! Even if we keep finding resources, because of their complexity they will be coming on line at a slower rate than the past. That is enough to keep the decline going.

  2. Dennis Coyne says:

    Hi Ron,

    Nice update. I prefer the trailing 12 month moving average, which hasn’t peaked yet, but if the current trend continues, it will occur within a few months. Of course these trends change all the time.

    • Dennis, I have made no claim that crude oil has peaked, only that the current peak is February. I really don’t expect that peak to hold but I do believe the peak will be by 2015 and I am talking about the 12 month average peak of world oil production.

      • Dennis Coyne says:

        Hi Ron,

        I think your call may be correct, it depends how fast the rest of the world declines and how quickly the current US increase slows down, I would guess as late as 2017 with my best guess around 2016, but 2015 is the earliest I would expect.

        There are a lot of wild cards, how fast will oil prices rise, and how soon will the world economy collapse in response? Nobody knows of course.

        Just out of curiosity, do you expect a noticeable decline by 2015 or do you think a short plateau (12 to 24 months with the 12 month moving average remaining within 2% of the 12 month peak) is a possibility?

        • I think I said “peak” by 2015 therefore I would not expect a noticeable decline at the same time. Plateau? No, I do not expect a plateau. A plateau has to be several years to be called a plateau. Level prices for about a year would just be called “The Peak”.

          I expect production to be declining by 1% or more by 2016 and to pick up speed by 2017. Of course I could be a year or so off, but I doubt it.

          • Anon says:

            No way we get a plateau. Shale alone is barely capable of plateauing. That stacked on everyone else declining? Forget about it. The scenario implied by that is Saudi + whoever expands production by at least as much as everyone else is declining. Russia sure won’t. Kazakhstan will be lucky to fix its engineering issues by 2016.

            Iran is a one-off shot in the arm. Iraq is, well, Iraq.

            I just don’t see how plateau works.

            • Dennis Coyne says:

              Once a peak is reached, prices will rise and after a delay (because it takes a couple of years to bring projects online) some previously marginal developments may be brought online, this could result in a short 1 to 2 year plateau, though Ron would not call this a plateau because he defines it differently, which is fine.

              I was just trying to see what Ron meant by a 2015 peak, because it is hard to define a peak without a decline (otherwise we would just have a plateau.

              Hirsch as defined a plateau as remaining within 4% of the peak.
              If we assume a plateau that wanders up and down (like the 2005 to 2008 period) we might use +/- 2% of the average output over the plateau period. If decline is only 1% per year for a couple of years, then we could see a plateau that lasts for 5 years.

              The average C+C world output from Jan 2012 to May 2014 has been about 76 Mb/d, 2% of this is 1.5 Mb/d so we could define a 74.5 to 77.5 Mb/d window for a plateau, currently the 12 month average is about 76.4 Mb/d and a 1% decline for 2 years would get us to 75 Mb/d with a plateau ( by Hirsch’s definition) that lasts about 4.5 years.

              The big unknown is how fast oil prices will rise (in 2005 to 2008 oil prices rose by 19.8% per year as measured by annual average real oil price change from 2004 to 2008 from the EIA real prices viewer, over the 2003 to 2008 period oil prices rose by 21.8% per year.)

              The economy might be able to muddle along with a real oil price rise of 10% per year for a couple of years, but a big jump like the 2003 to 2005 oil price increase of 24% per year will likely lead to a recession.

              • Dennis, if production falls at 1 to 2% per year for a couple of years and then goes back up to the previous level in the next couple of years then that is a plateau, a bumpy plateau if you will.

                However if production falls at 1 to 2% per year and keeps that up for many years then that is definitely a peak not a plateau. A “bumpy plateau” requires bumps. A peak is the point of maximum production. It doesn’t matter what happens after that if production never reaches that point again. You can have bumps after the peak but the peak is still the peak.

                I am predicting the peak of C+C in 2015, give or take one year. I do not expect there to be a bumpy plateau. However where I differ from your opinion, and also the opinion of many others in the peak oil field, I think, is not in the date of the peak or the plateau, it is about the price of oil.

                You, and many others, expect the price of oil to rise as production drops. I expect that to happen at first, but not to rise very far before it affects the economy and drives prices right back down again. Prices may spike, like they did in 2008, but they will never average, for one full year, more than $125 a barrel in 2014 dollars.

                I understand where you are coming from. You think we will adjust. You believe, if I understand you correctly, that as prices rise to $150 a barrel we will adjust. Then as they rise to $200 a barrel we will adjust again. It is my humble opinion that this is impossible. Sure some segments of the economy can adjust to higher and higher prices. But the economy as a whole cannot.

                The economy is already very sick. And the high price of oil is one very significant contributor to that sickness. Not the only one mind you, but a very significant one. The mounting debt is perhaps the primary contributor to the sickness of the economy but then the high price of oil is perhaps the most significant contributor to the mounting debt problem.

                Anyway I hope you get the gist of my argument.

                • Ilambiquated says:

                  I agree with you that the prices won’t rise much even if the juice runs out. It would be better if it would, but it won’t.

                  I think higher prices may or may not result in higher “production”. Depends on geology and technology, not just demand curves. But demand helps.

                  Having paid $8-10 a gallon for more than 10 years, I am not as worried as you are about shortages.

                  I think your claims that there is something wrong with the economy are borderline crazy, sorry to say it.

                  • Dennis Coyne says:

                    Hi Ilambiquated,

                    I agree with Ron’s analysis in general, that when real oil prices reach some higher level that a recession is likely and that this will reduce prices and oil output.

                    I disagree with his assessment of the particular price where this will occur.

                    If we use IMF World outlook World GDP data and assume that Hamilton’s analysis applies to the world (rather than just the United States where liquid energy use per unit of real GDP, based on PPP method of comparison, is higher than the World average), real oil prices could rise to $150/barrel in 2013 US$.

                    This would allow real oil prices to rise by 5%/year from 2014 to 2016 and 10% per year from 2017 to 2019. World GDP grew at 3.5% per year (PPP method) from 2005 to 2013 while World C+C output grew at only 0.4% per year over the same period. I assume that 0% growth in C+C will lead to 3.1% growth in World GDP and a 1% decline in C+C results in 2.1% World GDP growth. I also assume no growth in C+C output in 2014 and 2015 and a 1% decline in C+C output from 2016 to 2019. World spending on C+C remains below 4% of World GDP through 2018 in this scenario and real oil prices are at $140/barrel (2013US$), if real oil prices rise above $150/b in 2019, then recession hits (assuming that Hamilton’s analysis can correctly be applied to the World).

                    Note that Ron expects the decline rate to accelerate quickly, but my World Oil Shock model suggests decline rates will be relatively modest until recession hits.

                    I will post a chart with the World Shock Model and decline rates further down the thread so the chart is readable.

                  • Note that Ron expects the decline rate to accelerate quickly, but my World Oil Shock model suggests decline rates will be relatively modest until recession hits.

                    Ahh but that means we could both be right. Recession will very likely hit a lot sooner than you seem to believe. We are on the very cusp of recession right now. $125 oil could very well be the trigger that flips us into a recession, perhaps with all the other problems we have, a deep recession. Low demand will cause both prices and production to drop a lot faster than you expect.

                  • Dennis Coyne says:

                    Hi Ron,

                    As I attempted to argue, Hamilton showed spending on oil above about 4% results in recession. The US oil consumption per unit of GDP is slightly higher than the World average, so assuming this 4% Hamilton estimate for the World is conservative.

                    Using the rates of change of World C+C output and World GDP over the 2005 to 2013 period suggests a 3.1% increase in World GDP if C+C output is flat and a 2.1% increase in World GDP at a 1% decline in World C+C output. World GDP was 87 trillion using the purchasing power parity (PPP) method of estimation (which most economists agree is the best measure).

                    I will let you do the math, but a 1% C+C decline rate suggests the recession would hit in 2019 if prices rise above $150/b (2013US$). That analysis assumed 1%/year decline in C+C output from 2016 to 2019, that estimate is conservative, the decline rate will be slightly lower than that (0.7 to 0.8%).

                    You may still be correct that the recession will hit sooner, but Hamilton’s analysis applied to the World suggests otherwise. Since 2005 the World economy has been growing at an average rate of 3.5% per year, I predict that this will slow to 3.1% and then to 2.1%, Hamilton’s analysis suggests recession in 2019 if real oil prices breach 150/b by 2019.

                  • Dennis Coyne says:

                    That chart referred to a couple of comments up can be found at the link below:

                    http://peakoilbarrel.com/world-oil-production/comment-page-1/#comment-246155

              • Anon says:

                But on a finite map, where are projects that are both materially large, not economical to exploit at current levels, and can actually be brought to significant capacity in 12-36 months? Not tapped, but up and running enough to matter.

                • Doug Leighton says:

                  The 12-36 months part: that’s easy. Infill drilling in existing reservoirs.

                  • Dennis Coyne says:

                    Hi Doug,
                    🙁
                    you forgot the smiley face ” 🙂 ” which can be done with the colon or semi-colon and right parenthesis (or left for a sad face) surrounded by spaces. That is, you should leave the quotation marks out in the example above. 😉

            • Coolreit says:

              Anon: I completely agree with you! Latest Bakken monthly report says Bakken oil is selling for $75. There is minimal incentive to spend capex to earn $75/barrel. On top of that July North Dakota production grew just 18k b/d or 1.7%, down from an increase of $52k or a 5% increase the prior month. July should have been a good month as their are minimal cold weather excuses in summer.

              • Dennis Coyne says:

                Hi Coolreit,

                The 75/b is at the wellhead, at the refinery gate the price is $87. The current average North Dakota Bakken/Three Forks well breaks even at about $60/b at the well head assuming a 10% annual discount rate (used to find the net present value of future income from future output).

                When they run out of room in the sweet spots, and the average new well EUR decreases as a result, then these low prices will be an issue.

                • Dennis, there is already a lot of drilling outside the sweet spots. The current price of oil is already a huge problem in those areas.

                  Several things are happening.
                  1. To maintain current production more and more drilling must be done in areas of less and less production per well.

                  2. Downspacing is already reducing the “oil per well” production in the sweet spots.

                  3. The cost of production is rising. I have seen figures as high as 10% per year. Bernstein, (below) says it is even higher.

                  4. Gas capture regulations will limit profitability in areas outside the sweet spots.

                  Costs rise for ‘technological barrels’ of oil

                  US shale oil is increasing the marginal cost of production

                  Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year (2012) to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.

                  • Dennis Coyne says:

                    Hi Ron,

                    I have pointed this out before, but will try again. There is a lot of variability between wells in the Bakken, but what is important is the expected average output of any oil company’s wells that they are developing.
                    Not every well will be a great performer, though you would never know that by reading investor presentations.

                    As I stated earlier, when the average new well EUR starts to decline, low prices will cause the drilling to slow down, at the 2013 level of new well EUR, the breakeven price at the wellhead is $60/barrel, for the three forks wells (which have a lower new well EUR) the breakeven price is somewhat higher, about $66/barrel at the wellhead.

                    Keep in mind that no company plans to drill a poorly performing well, in fact every company plans on drilling above average wells 🙂 It doesn’t usually work out that way, some wells are way better than average and some are way worse, it’s the nature of the game.

                    The low prices will definitely hurt things if they continue. It may be that the Bakken shipments to the coasts are as large as the transportation infrastructure will allow and that may be depressing prices.

                  • Watcher says:

                    Wait, what?

                    “It may be that the Bakken shipments to the coasts are as large as the transportation infrastructure will allow and that may be depressing prices.”

                    So restricted supply pushes price down?

                  • So restricted supply pushes price down?

                    No, no, it’s oversupply at the rail head that pushes the price down. That is a possibility.

                  • Anonymous says:

                    Says the shipments can’t get larger and that lowers price. Makes no sense.

                • Watcher says:

                  Where did that 87 number come from? The variance in the oil is huge.

                  • Dennis Coyne says:

                    Anonymous,

                    If there is not capacity to transport all the oil, it get’s stranded at the wellhead and the price at the well head goes down.

                    For example if it costs $12/b to get the oil to a coastal refinery by rail, but it costs $24/barrel to get it to the refinery by truck, then if you have not contracted space on the train and have to use a truck to transport to the refinery then your oil sold at the well head would be priced $12 lower to account for the increased transport cost.

                  • Dennis Coyne says:

                    Transport cost to east coast refineries is $12/b by rail, so if the wellhead price is $75, the refinery gate price is 75+12=87.

                    Note that this oil competes with Brent at east cost refineries which is about $96 per barrel, so I would expect the wellhead price should be $84/b. The fact that it is $9/b less indicates a transport problem or that the price to transport the oil has risen to $21/b. Such a price increase would be expected if rail capacity was in short supply, the rail companies may be charging more for shipping.

  3. Watcher says:

    Oil popping up today. I don’t think people have been adequately focused on what it means to have 100K bpd flowing and billed at $40/barrel. ISIS may have been all that took the price down $15.

  4. Dennis Coyne says:

    I like Matt’s chart on the world less US. When we do a trailing 12 month moving average the world less US peaked in Sept 2012 and declined at a little less than 1% per year from Sept 2012 to May 2014. Hard to know if the levelling off of this decline since Dec 2013 will continue, probably not for long.

    • Dennis Coyne says:

      Hi All,

      Often in the main stream media they talk about all liquids rather than crude plus condensate. Using BP Data in tonnes and then dividing by 7.33 barrels/tonne allows rough conversion to barrels of oil equivalent where the barrels have similar energy content. The chart below uses BP consumption data for all liquids and BP production data for C+C+NGL in millions of barrels of oil equivalent per day (Mboe/d). Over the 1997 to 2013 period the average rate of increase in all liquids has been 1.2% and for C+C+NGL the rate of increase has been just under 1.1%. EIA C+C data is also shown for comparison, the rise in C+C output over the 1997 to 2013 time period was 0.9% per year.

      The peak in all liquids will likely be a few years after C+C, maybe 2018, though oil prices will be key and these are difficult to predict.

      • clifman says:

        “where the barrels have similar energy content”

        But they do not. As you well know, NGL’s and ethanol both come in at around 70% equivalent EC to crude… And a growing percentage of ‘all liquids’ is comprised of NGL’s, in particular.

        • Anonymous says:

          Hi climan

          I use mass and then convert all to barrels. Energy content by mass is pretty close to the same for ngl crude etc

  5. Euan Mearns says:

    Ron, this may be the last time I post from the UK. Brazil may have production problems. Our’s are much more serious. I think the most extreme view takes us towards Scotland having more oil than has ever been produced in the world. For those interested there are some very well informed comments, obviously from industry folks. And links at the end to other posts I’ve had on this fundamentally important issue.

    For A Few Trillion Barrels More

    For those not following, Scotland votes on Thursday on whether or not to stay in the UK. The polls are very finely balanced 50:50.

    • Dennis Coyne says:

      Hi Euan,

      Is the discovery data backdated?

      • Euan Mearns says:

        Dennis, I don’t know. But we are looking at numbers of fields here, not discovered volumes. The date is the discovery well.

        • Dennis Coyne says:

          Hi Euan,

          Sorry, I should have looked at the chart more carefully.

          Is the discovered volume data available, it seems(to me) that it would be more relevant?

    • Jeffrey J. Brown says:

      Last year, I believe that the average Bakken well produced a little over 100 bpd, and the median Bakken well produced a little less than 100 bpd. I wonder what oil price would be necessary to support offshore production from these type of wells in a region like the North Sea?

      • Euan Mearns says:

        Jeffery, One of the back of envelope analogies I used is that 13 steel jacket platforms would be required to develop an unconventional resource that could be developed using a single steel jacket for a conventional resource. So maybe *13 is a god starting point.

    • Watcher says:

      That clay may bend, not frack.

      • Euan Mearns says:

        Yes in comments I make the point tha the Kim Clay is more like plasticine. But the reality here on the ground is that Nationalist politicians love these numbers

      • ManBearPig says:

        How ductile or brittle the clay is depends on its species. The other issue with high volume clay rocks is their tendency to swell in the presence of water, which makes holding fractures opened difficult.

        • Watcher says:

          Must not be any water down there then. I was wondering what happens if you get large amounts of contaminated production water from shale wells off shore. Do you just dump it in the ocean?

          • ManBearPig says:

            On your first part, there is water where the shales are, there is just volumes equivalent to the pore volumes that exist in the rock. When you far exceed that pore volume with water the clay will swell and absorb the extra, depending on its species. Remember, the porosity and permeability of shales is extremely low, so water does not flow easily through them without fractures, either artificial or natural (large amounts of water wont contact all of the clay without help). That’s what has always confused me about the pad drilling where 8 wells go in all directions. Half of them are going to be oriented parallel to preferential permeability, which should make them underperform.

            As far as water handling offshore, I have no direct experience. However, I doubt they simply dump it. The drilling mud they use could also be considered contaminated, since it ends up taking some of the heavies and radioactives back to surface, but I doubt it is simply pumped out into the water (that might be legal, I don’t know). I’m sure there are regulations dealing with the disposal of waste from drilling operations offshore somewhere.

            • Watcher says:

              Sea going trucks to haul oil and waste water from 600 bpd wells. Hard to see how that works.

    • Anon says:

      The Scots are smoking dope. No one reverses that kind of decline.

      • Old farmer mac says:

        Anon is probably right but the Brits apparently lied about the oil reserves the last time the independence question came up and so lack credibility this time.

        Beyond that people mostly believe what they want to believe and there is not much that can be done about that other than to just wait and let them see for themselves what the truth is.

  6. Much is made of the notion of ‘economically recoverable’ petroleum (or analogs) without understanding that in real terms, ALL industrial activities are incapable of paying their own way, NO industrial enterprise is by itself economically ‘feasible’; ALL industrial enterprises are dependent upon a continual debt subsidy. Industrial activity here includes drilling for oil.

    The definition of ‘feasible’ is flexible. Drilling relatively shallow vertical wells in conventional, dry land fields cost less than drilling and completing ultra-deep horizontal wells particularly offshore. Every drilling effort is inherently ‘underwater’ (debt-dependent) but the high-tech fracking projects are much more so by an order of magnitude. More drilling = more debt; the cost of credit must be added to the actual drilling costs; at some point the service on ballooning aggregated debt cannot be met with new loans … this is your ‘Minsky Moment’.

    – That this moment is already underway as can be seen in world oil prices: fall-off in the availability of credit => insolvency of borrowers => less of a bid for oil cargoes. This is a component of the longer-term trend from 2008 of (diminishing) high crude prices periodically rendering customers insolvent (oil mini-shocks).

    – Governments-central banks are subsidizing drillers with zero-percent interest rates (ZIRP), contrived stock- and bond market ‘bubbles’, the issuance- and forced purchase of ‘high-yield’ (junk) financing along with favorable government treatment of oil drillers (leases, tax advantages, depletion, etc). In other words, credit expansion and asset price increases serve the interests of the petroleum industry, it also has governments as borrowers-slash-subsidizers of last resort => scraping the bottom of the energy barrel.

    – China/Japan/EU/Russia/Brazil recessions due to diminished credit flows and failed/stupid policies. Recession = adverse affect on credit due to the inability to market collateral or raise loans to retire those that are maturing.

    • Jeffrey J. Brown says:

      – Governments-central banks are subsidizing drillers with zero-percent interest rates (ZIRP), contrived stock- and bond market ‘bubbles’, the issuance- and forced purchase of ‘high-yield’ (junk) financing along with favorable government treatment of oil drillers (leases, tax advantages, depletion, etc). In other words, credit expansion and asset price increases serve the interests of the petroleum industry, it also has governments as borrowers-slash-subsidizers of last resort => scraping the bottom of the energy barrel.

      I made a similar point on the prior thread, to-wit, it seems to me that central banks are in effect are partially funding both sides of the war, i.e., supporting demand (via QE support for public debt) and supply (via low interest rates). An interesting chart would be total global public debt + total global oil and gas company debt, from 2002 to 2013.

      By definition, as we have seen a massive debt buildup, we have depleted the remaining post-2005 supply of global crude oil reserves and the remaining post-2005 supply of Global CNE (Cumulative Net Exports), the only question would be the respective rates of depletion.

      • Watcher says:

        But see, guys, that hides reality behind complex phrasing.

        Reality is money doesn’t matter. If you HAVE to have the oil, you create money to get it and pretty much just hope everyone believes the money means something.

        This is why a voluntary shut in event “to save it for our grandchildren” will be such a global earthquake. It will make clear the people in question don’t care what you’re willing to pay for it.

  7. DANIELE says:

    I wonder why OPEC has acted to reduce oil production cause low prices.
    The OPEC countries are not the ones with the conventional wells at greater profit margin? Instinctively, I would say that other countries should reduce output having margins are too low. …

    • Old farmer mac says:

      Only one or two OPEC countries will actually reduce production. The rest of them will just lie about doing so.

      The ones that can and will do it are usually Saudi Arabia and the UAE. They can afford to do it.

      All the other oil exporting country are in too bad a spot for money to cut back. They are all compelled to sell every drop they can as fast as they can to get their hands on the money..

  8. Quote of the day, well it was actually made on June 30th.

    Right now, the citizens of the planet are more than 223 trillion dollars in debt, and “too big to fail” banks around the world have at least 700 trillion dollars of exposure to derivatives.

    So it doesn’t really matter too much whether the short-term economic numbers go up a little bit or down a little bit right now. The whole system is an inherently flawed Ponzi scheme that will inevitably collapse under its own weight.

    Let us hope that this period of relative stability lasts for a while longer. It is a good thing to have time to prepare. But you would have to be absolutely insane to think that the biggest debt bubble in the history of the world is never going to burst.

    18 Signs That The Global Economic Crisis Is Accelerating As We Enter The Last Half Of 2014

    • Watcher says:

      The level of desperation and the magnitude of measures already taken are deeply hidden by sheer complexity.

      If there is trillions in debt and that debt threatens systemic collapse, just expunge the debt. The debt holders can be killed, literally, or figuratively. This has already happened. It’s not new. It happened in Greece in 2011. The global system was at risk. The holders of Greek debt were ordered to accept a change of maturity and essentially lose all their money AND they were forbidden to declare that a default. Consequence? Cyprus a year or so later. They were big holders of that debt. The EU managed to make it look like Cyprus was irresponsible.

      But nobody starved in Cyprus. You just expunge the debt. It doesn’t have to mean anything. It’s just an artificial concept — money, that is. It’s a substance invented by man. It doesn’t exist in nature. You can change its meaning at will.

      • Are you seriously claiming that the debt problem could be solved by just declaring all debts forgiven, and all debtors are just shit out of luck? That the US Government declare the national debt null and all bondholders are just SOL? All public debt null therefore all mortgages were no longer valid and the banks left holding useless paper while the borrowers then owed nothing?

        Would people keep driving their cars while the car dealers went out of business, and people stayed in their homes while the banks all went bust. That might work fine for awhile but there would be no more cars made because only a tiny few could afford to pay cash. And no more houses built for the same reason. The manufacture of all expensive items, cars, trucks, boats, homes, large appliances and such would stop immediately because there would be no borrowing.

        Farmers could not produce crops because they could not borrow. Drillers could not drill wells because they could not borrow. All construction would stop because all construction is done with borrowed money.

        Debt is not an artificial concept. It is the very backbone of the economy. And what applies to a tiny country, population wise, could not be applied to the entire world. A nullification of all debt would mean half the employed population would be out of work next week, and the other half out of work next month.

        • The Wet One says:

          Yes, notwithstanding the massive economic destruction that would ensue (it would be EPIC!!!), it could, nonetheless be done.

          In fact, it kinda happens all the time in bankruptcy courts where creditors take a haircut. It’s just that this time, all creditors would be scalped. Emergent effects from such a massive undertaking would no doubt arise.

          I would note though that we’d almost end up in the same place if everyone stopped spending all but the bare minimum and actively worked to pay off the debt ASAP. Could you imagine the economic shockwaves from no one engaged in discretionary spending? That would be devastating. Not as devastating as everyone’s debts being nullified to be sure, but orders of magnitude worse than the Great Recession.

          Which is, when you think about it, a really kind of weird system. The system would be near collapse if people actually paid their debts without taking on new debt.

          So it goes.

          • Longtimber says:

            World Graphic of Oil Flow by Nation.
            http://www.businessinsider.com/r-exclusive-us-considering-options-if-oil-export-ban-challenged—sources-2014-9
            Those in Washington will now to work some magic and just fix it till the US turns Green. Good to know they are on top if it…. /sarc

          • Woody says:

            What you are describing is how debt default or pay down in one country would work. Extended to the whole world, the effect would be that those surplus countries that have been induced to run surpluses and used foreign debt as a store of value will realize they have been had. Not wanting to get burned twice they will be reluctant to run surpluses in the future unless forced. In other words, trade balances will matter.

            • Andy Hamilton says:

              Ron said:” Are you seriously claiming that the debt problem could be solved by just declaring all debts forgiven, and all debtors are just shit out of luck? That the US Government declare the national debt null and all bondholders are just SOL?”

              Thing is – hasn’t the Federal reserve become by far the biggest buyer of US government debt? Hasn’t the BoE been doing the same thing with UK gilts? Now I am just purely being hypothetical here, but surely therefor isn’t the mechanism for substantial government debt cancellation being put in place? Your central bank just buys all the latest government debt and then at some point in the future just cancels it?

              • Woody says:

                The Fed buying debt is a slow motion default. It raises bond prices in the near term but sets up negative real rates of return over the long term. So without force, who wants to keep adding to assets that offer a negative real rate of return?

                • Andy Hamilton says:

                  Exactly. So ‘foreign’ non-government/central bank holders of debt gradually sell out, the respective ‘home’ central banks gradually accumulate this debt too, and then somewhere down the line they cancel this as well. Or the respective central banks (Fed, BoE, ECB) act in concert to cancel cross holdings. Is this not the sort of thing Keene was alluding to in his ‘jubilee’ hypothesis?

                  • Woody says:

                    So then what do the foreign holders of all the debt do with the trillions of dollars they are paid by the Fed? Park it in a bank at negative real rates and take the chance of losing it all or investing in over priced real assets that currently offer a poor risk return ratio? Domestically, where are the retirement and insurance funds supposed to go for a real return on investment?
                    Central bank buying has set the stage for negative real rates of return for a long period of time.

              • It’s not the same thing Andy. What about the bonds the Chinese, Japanese and everyone else holds? What about all those retirement funds? Retirement funds disappear overnight and seniors depending on them starve.

                And that was not all, the proposition was all debts would be cancelled. No one pays a mortgage or car loan or credit card debt. The economy runs on borrowed money and without borrowed money the economy collapses. That was the point, not how the government prints money.

                • Andy Hamilton says:

                  Perhaps I didn’t phrase it right – but a slow motion default (via debt cancellation) is what I was getting at. If we just look at the US – My understanding is that in recent times the Fed has been buying the vast majority of US debt. As you quite rightly say, there are other diners at that table (foreign banks, investment funds, pension funds) – and as you say a cancellation of the US debt they hold kills them. But what if it is not done like that – instead it takes place over 5-10, however many years. The Fed crowds all new buyers of US govt debt out (something I believe they have been doing for several years now) and then gradually accrues (over years again) all the debt held by external bodies (pension funds etc), either as the debt matures, or by direct purchase. That way they are not discomforted, and the Fed goes on its merry way, endlessly buying and cancelling debt (this of course brings with it huge issues of currency debasement etc but then when have central banks been too concerned about that?). Anyway just some random musings….

                  • Andy Hamilton says:

                    Woody – I totally agree this sort of financial engineering brings huge problems (where do you go to get yield?) and I think it is shocking if it has indeed come to this. But the Central banks are there to keep at least some semblance of the system going, and if this is the only way open to them I can see them going down that avenue. After all their is that old saying ‘Debt that can’t be repaid, won’t be repaid’.

                  • Hey, don’t get me wrong. I believe the system is going to collapse. But I just don’t think we should force that collapse… overnight… by cancelling all debts.

                • Strummer says:

                  “Retirement funds disappear overnight and seniors depending on them starve.”

                  If retirement funds disappear, that does not mean that food disappears too. They only starve if the state lets them starve, and food security is the primary purpose of state administration. That’s why Hitler had no problem in restarting the German economy in the 1930, because the real economy did not disappear with the financial crisis, all of it was still there, all the resources and productive capital. You just need a dictatorship to manage and redistribute it anew.

                  • real economy did not disappear with the financial crisis, all of it was still there, all the resources and productive capital.

                    Well hell, now you are catching on. If the productive capital disappears then the system crashes. If lenders lose all their capital there is no more lending, no more mortgages, no more cars, no more construction, no more economy.

                  • Ilambiquated says:

                    That’s also how Roosevelt rebooted the American economy. Why are Americans so in love with Hitler? It’s weird.

                    Be that as it may, it is a conscious choice you make. For example, there has been a lot of squealing (including around here) in America about increasing the money supply despite the fact that trillions disappeared just a few years ago.

                    Another episode worth remembering is the Irish potato famine of 1848. The British government refused to send aid because it would be bad for the Irish economy if they did, and it would encourage laziness as well. Millions died.

        • Nick G says:

          Have you read “This Time Is Different: Eight Centuries of Financial Folly”??

          You’ll find that countries go bankrupt, and sovereign debt goes unpaid, all of the time.

          Have you looked at the book?

          • No, I have not read the book and it does not happen all the time. The only time it almost happened, in modern times, was in Argentina but even there the debt was actually restructured. And that was government debt. No private debts were forgiven. Many were defaulted, as they are often even in the USA, but they were not forgiven.

            Argentine debt restructuring

            Argentina began a process of debt restructuring on January 14, 2005, that allowed it to resume payment on the majority of the USD82 billion in sovereign bonds that defaulted in 2002 at the depth of the worst economic crisis in the country’s history. A second debt restructuring in 2010 brought the percentage of bonds out of default to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring, accepted repayments of around 30% of face value and deferred payment terms, and began to be paid punctually; the value of their bonds also began to rise. The remaining 7% of bondholders later won the right to be repaid in full.

            • Nick G says:

              Ron,

              I’m not suggesting a “jubilee”, or program of large-scale debt cancellation. I agree that this would cause a depression. Heck, just losing Lehman Brothers caused a Great Recession. But, there is another point here:

              Sovereign defaults happen all the time – please note that includes restructurings: any time the terms of a debt are involuntairly changed to the detriment of the lender, that’s a partial default. Argentina defaulted. So did Greece. Heck, Greece has been defaulting roughly every 25 years, for the last 200 years! All of the major European powers has defaulted in the last 200 years. That’s why US debt is so golden – it has an unprecedented history of never defaulting (the Continental Congress doesn’t count – it was before our current Constitution, and is really considered a different “country”).

              Again, I agree that a US default, or defaults by major banks like Chase or Bank of America, would cause a major depression. I don’t think such a default is likely any time soon, but if it were to happen, it wouldn’t be the end of the world as we know it – things would eventually recover. Defaults of world reserve currencies have happened before – we know how it played out.

              Really, you should read at least part of the book – you can’t talk intelligently about these issues otherwise.

        • Strummer says:

          “Are you seriously claiming that the debt problem could be solved by just declaring all debts forgiven, and all debtors are just shit out of luck?”

          Yes, exactly. That’s what the first proper economies on this planet discovered very soon and practiced succesfully for millenia:

          http://cadtm.org/The-Long-Tradition-of-Debt

          http://www.washingtonsblog.com/2011/07/we-have-forgotten-what-the-ancient-sumerians-and-babylonians-the-early-jews-and-christians-the-founding-fathers-and-even-napoleon-bonaparte-knew-about-money.html

          • Strummer, both your links are totally unrelated to the whole world economy. The first, third world debt owed to first world countries. Yes that could happen without too much harm because third world is but a tiny fraction of total world dept.

            Your second link, about the ancient world where they occasionally had a “Debt Jubilee” would be impossible in today’s world. In those days debt was only a tiny fraction of the total economy. Today the entire economies of all first world nations are based on debt.

            For God’s sake, sit down for a minute and think about it. All banks would go bust. Because of fractional banking they have far more money loaned out than they have on deposit in their vaults. All banks in the world would have a run on their deposits. They could give depositors only a tiny fraction of their money back.

            There could be no further loans for anything. All the world’s economies would crash… immediately.

            Again, the ancient world was simple compared to the complexities of today’s world. You cannot use 200 BC economics to solve 21st century problems.

            • Strummer says:

              “Today the entire economies of all first world nations are based on debt. ”

              Nope, they are not. They are based on food, tools and energy. Just like 6000 years ago. Debt is an abstraction of the value of those things, nothing more. Also, above I mentioned “productive capital” and you misunderstood is as money, saying it would disappear. That’s not what I meant. “Productive capital” is farmland, coal mines, factories, power stations, every single tool that can be put to use to produce added value. Those things do not disappear in the event of a financial crash. You only need to allocate them properly, as Hitler (and of course FDR too) did back then.

              • Yes they are. It takes money to buy food. It takes money to buy tools. It takes money to produce and buy energy. The world could not possibly be run on the barter system as it was run 6000 years ago.

                6000 years ago people were either farmers or hunter-gatherers. They had no need for money and the economy of one group or tribe was totally separated from the economy of their neighbors… except when they were fighting each other of course.

                We live in a capitalist world where capital is everything. So let me put it another way.

                A capitalist economy is based on capital. Capital (money) is created by debt.

                • Ilambiquated says:

                  Actually capital is created by savings. That is the key difference between modern so-called “consumerist” societies and hunter gatherers — we save much more.

                  • Capital is what is left over after the basic needs of a society have been satisfied. Or you could substitute “individual” or “corporation” for society. Capital is money to spend not money to save. If you save it it is not capital. It becomes capital only when you use it.

      • Lloyd says:

        It doesn’t have to mean anything. It’s just an artificial concept — money, that is. It’s a substance invented by man. It doesn’t exist in nature. You can change its meaning at will.

        Well, yes and no.
        What money does is more than just provide a means of exchange. It provides security for your value: it is protected by the legal and military systems in place in your country.

        It is an agreement on what your labour and assets are worth, a protection on your ownership or holding rights of both cash and property, and through things like various boards of health, the EPA, and right on down to things like the SAE, assurance of the value and efficacy of everything from cars to flu shots. None of us can check every bolt and weld on our cars, or do our own checks on tetanus vaccines. Money allows us to believe (sometimes wrongly, I know) that competent systems are in place, and when the systems fail, to sue for redress.

        Make no mistake: I think that the system is gamed. There is a reason the 1% have all the money, and it’s not because god wanted them to have it or that they worked harder.

        But it’s the fault of the players, not of the game.

        -Lloyd

        • Watcher says:

          Wow, look what I did.

          • Watcher says:

            But before macro-ing out a sweeping perspective about What Would Happen, I urge folks to go back and look at PRECISELY what was done with Greece.

            People who were owed money by Greece Did Not Get Paid On Time. At all. The EU waltzed in and informed all those debt holders that they would agree to be eviscerated and under no circumstances would they declare default when it happened, because that would trigger CDS.

            So yeah, ask yourself, what about all those Greek retirement funds. What happened to them? Total, epic destruction. But we never really heard much about that, did we? All we hear is about how the EU and IMF has agreed to send another tranche to Greece.

            As for those folks with money in Cyprus banks who held Greek debt, they got smashed, too, unless they were Russians, who managed to get their money out the weekend prior.

            • Andy Hamilton says:

              But to be fair, in economic terms Greece is a flea. They did what they did to Greece because they knew Greece didn’t matter in their great scheme of things.

            • Ilambiquated says:

              I am not sure why people are so excited about Greece, I guess it is Rupert Murdoch conspiring (yeah I went there) with the City (of London) to save the lucrative pound/euro arbitrage business, and creating a meme as a side effect.

              Greece only owed people money because the Greek government offered guarantees to private Greek banks that went broke. The guarantees were there to provide security to Greek savers. The banks abused this security to buy worthless CDRs. Worse, there was a general run on all European banks after a minor German bank died. This run was caused by the stupidity on Wall Street, which is driven by skewed incentives — high rewards and low risks.

              TLDR There are no cosmic forces at work here, and few lessons to be learned except let’s try not to scrfew things up quite so badly next time.

              • Watcher says:

                You guys aren’t calibrated on swaps. Greece is a flea, but flea size doesn’t matter in the credit default swap derivative market.

                THAT was the concern. There is claimed to NOW be some measure of international regulation on swaps, but there wasn’t during Lehman (it was the swaps that smashed the world, they were just too complex for reporters to understand and talk about). And there wasn’t for Greece and the alleged control now probably is worthless still.

                Look, quick layout. Joe lends Bill $1 million at 4% interest. Bill says I’ll pay it back in 5 yrs and starts making payments. But Tom, completely uninvolved in the whole thing, decides he wants to make some money so he offers to underwrite an insurance policy on the debt. If Bill defaults before complete payback, Tom’s insurance policy would pay the policy holder $X dollars. So Jim buys that policy thinking that Bill is going to default and he pays Tom an insurance policy premium.

                There can be thousands or millions of Toms and Jims out there essentially placing bets on someone else paying off debt. That $1 million loan could have TRILLIONS of dollars hanging on it being paid. Half the parties are slashing Bill’s tires so he can’t go to work and half the parties are trying to give Bill the money to make payments.

                That’s what credit default swaps are. That’s what can threaten the entire global system at any moment in time. And so, no one is allowed to default. Too risky when you don’t know if that loan is swapped to the stratosphere.

                • Watcher says:

                  Left out a relevant part. It’s a swap of risk. A tool of risk management. A legal contract. The risk of credit default is swapped to another party.

                  So given that there exists a tool to adjust the risk of default, the interest rate on the loan no longer is the only measure of that risk. Welcome to yet another reason rates have fallen.

  9. Longtimber says:

    “But with Asia thirsty for oil to satisfy fuel and petrochemical demand, and Europe anxious to diversify supplies away from Russia, other countries are urging the United States to practice what it has preached for decades: free trade.”

    Read more: http://www.businessinsider.com/r-exclusive-us-considering-options-if-oil-export-ban-challenged—sources-2014-9#ixzz3DbJNexPN

    Asia bombed the US with Cheap Solar Panels. Our response should clearly to bomb Asia with our “surplus” cheap oil. We have a Solar Panel trade war(s) going on, what needed is oil war(s) .. wait a minute..

     photo CrudeNetBalance_zps813ee9fe.png

    • Allan H says:

      So the US alone imports the equivalent of all of Saudi Arabian export and most of the Russian export. Need a little belt tightening?

  10. ND sets new production records, flaring concerns linger

    Not unexpectedly, North Dakota’s oil and gas production set new records in July, but declining Bakken crude prices combined with concerns about meeting the state’s gas capture goals could jeopardize future increases…

    Helms expressed concern about price of North Dakota sweet crude, which has fallen from just over $90 a barrel in June to its current price of less than $75 a barrel.

    “That’s putting some pressure on industry, especially on the fringe areas around the outer edge of the Bakken,” he explained. “Those lower oil prices really press those economics pretty hard.”

  11. Old farmer mac says:

    I can’t see any reason why debt is theoretically necessary. What is necessary is a concentration of buying power in spots where it is needed. It requires a good bit of money to pay for a new house for instance but a new house could be sold owner financed if the owner has enough money himself.

    A big infrastructure project could be paid for by selling ownership shares in it to people who at this time have their money in savings accounts and so forth.

    But getting from the ” here ” debt based system to a ”there ” equity based system appears to be a near impossibility.

    The beautiful and marvelous thing about debt is that it makes it possible for a person who saves to finance the consumption of a person who is consuming.

    But there is no reason farmers must borrow money to operate their farms in principle. We have not borrowed any money to operate ours for many years.I just recently bought a neighbors place owner financed with zero participation by a bank or finance company or real estate agent.The man I bought it from bought it forty years ago the same way.

    The total closing costs on a six figure loan came to well under a thousand dollars and the attorneys who drew up the deeds and note got most of that. The rest went to the county as a recording tax.

    What the seller has done in essence is to lease me the property to do with as I please for the duration of the note. So long as I make the payments and pay the taxes it is mine. But miss a payment or two or three .. and he will call the attorney holding the deed of trust and it will be auctioned off to pay the balance.

    This is still debt any way you slice it or dice it but it is not the sort of debt that requires a whole top heavy system of parasites collecting more profits easier than the people who do the actual work that directly provides goods and services.

    It would be hard for me to raise enough cash to buy all new equipment but if the equipment company were possessed of the assets of banks then it could sell by leasing to own the equipment.

    The one company specializing in wooden bedroom furniture in this part of the country that made it thru the recent crash did so handily by being one hundred percent debt free. This company has been paying cash for many years for everything it uses.

    The owners philosophy is this paraphrasing his own words.

    If the furniture business is worth being in it is worth keeping the profits in the business.

    When other people are paying ware house rent he is stocking his inventory in his own warehouse.

    IF owning a warehouse is worthwhile to a warehouse landlord then it should be even more worthwhile to a man who needs one since he will never have to pay increasing rents or higher rent to cover the fees charged by commercial real estate agents.

    He could invest his profits in another company or real estate or whatever but if he did then … well then he would have to pay interest on borrowed money with all the strings and pitfalls that would put on him in managing his business.

    IF a bank can be profitable and satisfied with for instance a five percent return on a loan then he thinks he should be satisfied with a five percent return on his money spending it to run his business.AND if he cannot earn enough to compete with companies operating on borrowed money.. then he will sell out.

    So far he has bought out the almost new state of the art equipment purchased by at least three companies that went broke when business crashed on them in the recent mini depression.

    And he bought it a fire sale prices.

    But just because it can be done in principle doesn’t mean it can be done on an economy wide basis given our current situation.

    • Ilambiquated says:

      If you are worried that debt might end the world, consider the following: Mao Zedong made it a habit every time he marched into a village to destroy all bank and property records in a big bonfire in the market square. This is one of the main things that gave him so much rural support. When the Communists took over in ’49, they absolved ALL rural debt at the stroke of a pen. It was the birth of modern China.

      I find it strange that this blog, which peddles the hyper-materialistic theory that all economic growth is tied to oil production, can get so excited about something as ephemeral as debt. Humanity owes humanity a lot of money. Are you sure that is a problem? If we owed the Martians a lot of money I might start getting worried. But we owe it to ourselves.

      • Watcher says:

        “If you are worried that debt might end the world, consider the following: Mao Zedong made it a habit every time he marched into a village to destroy all bank and property records in a big bonfire in the market square. ”

        This is a critical truth of the world of 1s and 0s in money. It used to be that sovereign debt could be expunged by defeating a country to whom you owed money and finding the relevant documents in their capital city and burning them.

        But it’s all multinational now. There is no bankruptcy court for countries. There is no entity with the power to expunge sovereign debt. Argentina was recently declared in default, but the relevant debt holders aren’t going to pay any attention to that. They didn’t tear up their documents when the declaration was made.

        They didn’t tear up documents in the early 2000s when Argentina ITSELF declared the default. The debt remained in the hands of the debt holders and they negotiated terms and have been getting paid since.

        A country that doesn’t need to borrow more money can declare default with impunity. A country that needs to borrow more money can’t, because there won’t be any lenders.

      • Ilambiquated, the subject is all debt, not just government debt. You do not owe your mortgage payment to yourself. Ditto for your car payment. And the money the government owes is not all to us. The Chinese, the Japanese and a lot of other people are owed a chunk as well. And much is owed to corporations, pension funds and such.

        The full faith and trust of the government is on those bonds, just like the money in your wallet and the money in all banks. If the full faith and credit of the USA is lost then everything else is lost also. Standing armies would not get paid, police would not get paid, no one would get paid anything. There would be only chaos and anarchy. Half the people in the USA and most of the world would be dead within a year. And over the next few years 90% of the rest of the world would be dead also.

        It would be the end of civilization as we know it… total world collapse.

        • Jeffrey J. Brown says:

          All debts are paid, if not by the debtor, then by the creditor.

          Of course, in a hyper-inflationary environment, like the Weimar Republic, mortgages were paid off with money that would buy a few loaves of bread, but even in this case, in effect the creditor “paid” the debt, as they suffered the loss in purchasing power.

          • Watcher says:

            One man’s debt is another man’s asset.

            I think the original point has been missed in the conversation.

            Lemme go get my quote:

            “If there is trillions in debt and that debt threatens systemic collapse, just expunge the debt. ”

            Rather zero emphasis has been put on the “and that debt threatens systemic collapse” in the discussion and it was the whole point of all of the text.

            This was why the EU destroyed the assets of those guys who held Greek debt via pseudo expungement. The situation threatened total global systemic collapse via swaps.

            Now it HAS been suggested that swaps be outlawed — but they are legal contracts. Hard to outlaw contract law, and even harder to get one country’s legislation imposed on contracts in another country. Ask Argentina about that one. They borrowed money via bonds whose text clearly said New York state law. Now . . . they want to escape that text.

        • Strummer says:

          I’d recommend reading David Graeber’s book “Debt: The First 5000 Years” for a brilliant explanation of what debt really is. Debt is not going to collapse the global economy, because the real economy is not going to disappear magically when debts are cancelled.

          • Strummer, the economy is more than just debt but debt is a major part. What matters most is people’s ability to purchase goods and services. The economy is money, energy, labor, goods and services. All these things work together bur remove any one of them and the system breaks down. If people have no money they are helpless. If their money is worthless they are just as helpless.

            If debt disappears and all debtors are left with nothing but losses then they will not lend any money. There can be no borrowing for homes, cars or anything else. People manufacturing and servicing these things will have no jobs. The economy crashes, more people are out of jobs and the economy sinks even deeper.

            We do not live in such a very simple world as a lot of people seem to believe. Everything is connected. Remove any necessary ingredient from the system and the system crashes.

          • The Wet One says:

            There is that.

            There’s the real economy of goods and services. I.e. stuff.

            Then there’s the flipside of the real economy, which is the money and financial system. All kinds of manipulations and obfuscations are possible here, but they are entirely reliant, ultimately, on the real economy. The financial system can blow up and cause real problems in the real economy (because payments don’t get made and so on). But some parts of the financial system are far removed and practically detached from the real world economy (e.g. credit default swaps to infinity).

            The real world economy doesn’t work like that. If harvests fail, and there’s no grain on the market to be bought, people starve. If there’s no gasoline to be had because there’s no oil reaching refineries, our modern transportation network grinds to a halt (as we all well know) and people starve.

            It takes a whole lot of disruption in financial system for people to starve, though it is possible (I suppose). So that’s what one, I think, one is wise to keep an eye on, in these discussions.

            If financial systems collapse, hard times are definitely ahead, due to uncertainty and chaos, but I’m not entirely sure that starvation NECESSARILY results. Hardship yes, collapse of civilization, eh, not so sure about that.

            However, if enough of the grain harvest is toasted by whatever, you can be certain that civilization will take a massive hit. People will starve. If the harvest collapses completely (in a manner equivalent to the financial system collapsing completely), essentially everyone will starve and collapse of civilization is pretty much certain (or at least far more certain than in the case of financial collapse).

            I always find it odd / remarkable that we (i.e. government and the press, and by extension John Q. Public) expend a lot of energy and worry on financial matters, but no one worries a whole lot about crop failure (the very linchpin of civilization) or food supply issues (except maybe some eggheads in the agriculture faculties at universities and related government departments, but even they seem pretty quiet on the matter). Perhaps we’ve gotten too good at beating that particular Horseman such that we don’t seriously pay him any mind. It wasn’t always so. I guess this means it’s a great time to be alive, or at least in those countries where famine hasn’t been experienced in generations (the last large scale famine in North America was when exactly? Has one ever occurred ever on this continent since the Europeans arrived? If so, I don’t think I’ve ever really heard about it, except for the very first settlers who had some very hard and lean times). Even in Europe post WWII when the whole continent was shattered and wrecked, they didn’t suffer large scale famine (and that was the most precarious situation in that respect that Europe has seen in probably a century or more) though rations were pretty lean (I’m reading Postwar by Tony Judt so I’m reasonably confident about my facts here).

            Can we have a financial collapse so bad that it’s the equivalent of WWII’s physical destructiveness in Europe? I suppose it’s possible, and the cancelling of all debts would have to be one of direst financial hits that the system could take, but I don’t know with any kind of certainty that it would really do the trick. The banks and various financial companies would be wiped out. The real world would operate less smoothly, and not at in some or many cases. But would everyone starve? Maybe. But I’m not seeing it as a certainty. I could well be seeing it wrong. Probably am. But even the Great Depression and Great Recession, financial calamities of the highest order didn’t lead to famine (so far as I’m aware), so I dunno.

            • Ronald Walter says:

              The Summer of 1816

              http://www.erh.noaa.gov/car/Newsletter/htm_format_articles/climate_corner/yearwithoutsummer_lf.htm

              “It didn’t matter whether your farm was large or small.
              It didn’t matter if you had a farm at all.
              Cause everyone was affected when water didn’t run.
              The snow and frost continued without the warming sun.
              One day in June it got real hot and leaves began to show.
              But after that it snowed again and wind and cold did blow.
              The cows and horses had no grass, no grain to feed the chicks.
              No hay to put aside that time, just dry and shriveled sticks.
              The sheep were cold and hungry and many starved to death,
              Still waiting for the warming sun to save their labored breath.
              The kids were disappointed, no swimming, such a shame.
              It was in 1816 that summer never came.” – Eileen Marguet

              • The Wet One says:

                I had heard about this before and read that very quote before. I can’t say I recalled it when I wrote this. However, did large scale famine result?

                From the link you provided: ” Orchard yields ranged from barren to moderate but enough grains, wheat, and potatoes were harvested to prevent a famine but hardships did occur.”

                That said, if a similar event occurred today in North America, we’d import food from somewhere else. If such a thing happened worldwide, well, we’d have a few wars, some famines and other kinds of nastiness on our hands. I’m pretty sure North Americans wouldn’t starve though all the same. And yeah, I know that I could be wrong. But could you imagine it? Actual starvation or even food insecurity in North America? I can’t. The fact that the link you provided goes back 2 centuries (7 – 10 generations or so) shows just how incredibly odd the idea of widespread famine is to us.

                • RalphW says:

                  It was worldwide, thanks to volcanic eruptions.

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

                  “Farther north, nearly 12 in (30 cm) of snow was observed in Quebec City in early June, with consequent additional loss of crops—most summer-growing plants have cell walls which rupture even in a mild frost. The result was regional malnutrition, starvation, and increased mortality.”

                  Could easily happen again.

        • Ilambiquated says:

          >the subject is all debt, not just government debt

          I agree. All this noise about government debt you read in the American press is just Republican code for screw the poor.

          > And the money the government owes is not all to us.

          But you are switching back to the topic of government debt.

          Americans have been importing more than exporting for a generation. The current account deficit has tracked net oil imports pretty well. It is a real problem.

          I don’t know if you’ve seen this equation before.

          Exports – Imports = Savings – Investment

          In other words running a current account deficit means your savings don’t cover you investment. That can mean investment is high and foreign money is flowing in (as in South Korea in the 70s), but in the case of the US it is low savings rate. Government debt is only part of that.

          The dollar is not really in much danger in the short term because it is trusted, and because it is the grease in the wheels of international trade (outside the EU anyway). You can tell the dollar is trusted because the exchange rate rises in times of crisis. I understand that it would be a bad thing for the dollar to collapse, however. I would say money is trust, not debt.

          I think it could be solved by taxing oil at the pump, which would result in reduced waste would grow the economy by increasing net exports.

          The good news is that total debt (public + private) is falling in the US. We’ll have to see if that translates to reduced foreign debt.

          In a final comment, a lot of people believe that current account deficits come from foreign competition. But at the end of the day the question is whether the country as a whole is spending more than it is producing.

          • Woody says:

            Total debt is falling? Hardly.

          • Yeah, hardly.

            Total US debt soars to nearly $60 trn, foreshadows new recession

            America – its government, businesses, and people – are nearly $60 trillion in debt, according to the latest economic data from thethe St. Louis Federal Reserve. And private debt – not government borrowing – is the biggest reason for the huge deficit.

            Total US debt at the end of the first quarter of 2014, on March 31 totaled almost $59.4 trillion – up nearly $500 billion from the end of the fourth quarter of 2013, according to the data. Total debt (the combination of government, business, mortgage, and consumer debt) was $2.2 trillion 40 years ago.

            “In 50 short years, debt has gone from being a luxury for a few to a convenience for many to an addiction for most to a disease for all,” James Butler wrote in an Independent Voters Network (IVN) op-ed. “It is a virus that has spread to every aspect of our economy, from a consumer using a credit card to buy a $0.75 candy bar in a vending machine to a government borrowing $17 trillion to keep the lights on.”

            • Watcher says:

              Ahh expungement beckons. Probably via some redefinition.

              $4+ Trillion of that is on deposit at the Fed as balance sheet Treasuries. They don’t have to be expunged . . . well, maybe they won’t bother to pretend. When those bonds mature and it’s time for Treasury to pay the holder, Treasury will do just that. And the Fed will return that money to Treasury, just as they do RIGHT NOW with interest payments Treasury sends to the Fed for those bonds monthly payout.

              But that graph is somewhat bogus for another reason — that being the Fed doesn’t know . . . no one really knows, the value of mortgages on file a the big banks. They are still carrying those at full value, despite the fact that so many of them haven’t rec’d a payment from the house owner for 5 yrs.

              Marvelous maneuvers take place on those, btw. When someone is 2 yrs in arrears and living in the house, the bank says, okay, we’ll cut your interest rate and your payment is now this lower monthly amount. Okay? The guy agrees. THAT MOMENT, he ceases to be delinquent. The clock starts again, and he never says a payment. He’ll repeat the process in a couple of years and say . . . look, just cut the principal. This house is not in Orange County. The price hasn’t recovered and it’s not going to, so just cut the principal since that’s all you’d get anyway if I walk away. The bank says no, but we can cut your interest again. The guy says okay and the clock starts again and that house is reported to the Fed or whomever as up to date.

              • Woody says:

                The renegotiate approach worked on the way to ZIRP while there was still a good margin to play with but it doesn’t work as well once ZIRP has been achieved. Over time, as legacy high interest loans are payed off or refinanced, the banks have less profit to hide the bad loans with.

  12. Ilambiquated says:

    Doomsters are like, “I don’t have my cake and don’t eat it either”.

    • Old farmer mac says:

      You have an excellent point.

      Another point is that the elimination of old debts does not eliminate the potential existence of new debt.

      Countries that have experienced runaway inflations and ruinous wars are still able to issue money and borrow money.

      Ditto people who have gone bankrupt can still borrow money.

      I do not however believe in a debt jubilee. The thought of my spendthrift neighbors getting off scot free and holding onto all the stuff they have bought on credit might drive me to the point of doing something irrational.

      But the thought of my owning my recently acquired additional farm land free and clear without that deed of trust ( mortgage in most states ) is sort of attractive lol.

      • Watcher says:

        A quick stroll thru the Salem Witch trial archives will reveal that the people accused and killed owned land and if they died it was often the case that their wives or husbands did not inherit it. Neighbors did.

        Neighbors did a lot of accusing.

        • Strummer says:

          Same in Rwanda. There was a quote somewhere: “The people who were killed were the ones who had cows.”

          • Old farmer mac says:

            AND BEFORE I quit this topic of debt I want to say that as a practical matter Ron is right and dead center in the ten ring , given that we are locked into the existing financial system.

            But there is an interesting side to a possible debt jubilee that has not yet been mentioned. The owners of all the more valuable assets after a jubilee would very often want to sell those assets for lots of good reasons and bad.

            The only way the owner of a nice house ( for example ) could sell it in the absence of money lenders would be to sell it owner financed.

            It would not take very long for capable and ambitious businessmen to accumulate enough money to do a lot of lending and thus allow the seller to get paid immediately.

            I don’t think it is possible as practical matter to abolish debt in a modern society. It would probably be hard even in a mediaevial society.

            • Watcher says:

              Nope. I think I saw a recent statistic that 30+% of real estate sales are currently cash.

              • Obviously that is not home sales. When WalMart buys land or a building they likely pay cash. Ditto for many other companies. But if you are talking about personal property I would bet it is 95% credit.

                • Watcher says:

                  No, it was houses. Single and multi family. The single family houses are being bought to rent out.

                  A lot of it is investors.

                  Another lot of it is foreign money.

                  (Russian and Greek money have held up the London house market for years. In fact, during the Greek 2011 apocalypse, that money was flooding into London so fast the buyers were not even bothering with an inspection. They needed to get their money out of Greece ASAP.) NYC and Florida and San Fran are getting the influx now.

                  It’s not the old normal, Ron. That’s all gone forever. ‘Twas a bit of surprise to me, too. It really is a big % of houses being bought and sold for cash now. No mortgage.

  13. aws. says:

    Bomb Trains Keep Rolling While Congressional Committee Bickers About Bakken Crude

    Justin Mikulka, DesmogBlog, Wed, 2014-09-17 08:59

    During his opening remarks, Congressman Broun (R-Ga.ripped into the Obama administration for denying his attempts to get “experts in the subject matter” as witnesses.

    “While I look forward to hearing from both panels today, I must say I am disappointed — though not surprised — at this Administration’s continued unwillingness to work with the Congress. Chairman Lummis and I invited representatives from the agencies who are experts in the subject matter because we are interested in the science behind Bakken crude. Instead, both agencies appearing before the Committee today declined to provide the witnesses we requested, sending us in their place witnesses more knowledgeable on the politics behind Bakken crude. As I said, I am not surprised, just disappointed.

    After setting that tone, Broun repeatedly used this line of argument while belittling the actual witnesses. In one bizarre exchange, Broun asked Timothy P. Butters, the deputy administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA), a question and then when given a scientific response, dismisses the answer.

    Broun: “Is ignitability and flammability synonymous with volatility?”

    Butters: “Volatility in the science vernacular is a material’s propensity to vaporize and so as a flammable liquid has a higher propensity to vaporize, then it introduces…it has a higher likelihood of ignitability.”

    Broun: “Can you answer yes or no to this question?”

    Butters: “I’m trying to answer the question.”

    And from the Bakken Magazine I noticed this while reading an article there that Ron had posted. I think it would be fair to say that the ‘magazine’ is a cheerleader for the Bakken petroleum production…

    Witnesses Backtrack on Bakken Crude Claims

    By Luke Geiver, Bakken Magazine, September 10, 2014

    The hearing included representatives from the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), U.S. Department of Energy (DOE), North Dakota Petroleum Council, Turner, Mason & Co., and the Syracuse Fire Department.

    During the hearing, members of the Subcommittee asked a representative of the PHMSA how the PHMSA knew Bakken crude was more volatile than other light sweet crudes. The PHMSA representative, along with another representative from the U.S. DOE on the panel, could not answer directly how PHMSA knew Bakken crude was more volatile. As the hearing continued, it was obvious the lack of information and the unacceptable answering ability of the PHMSA or DOE was causing tension and uncertainty about the PHMSA’s big Bakken claim (PHMSA released a report in July claiming Bakken crude was more volatile than other similar crudes).

    See also this from the same site…
    Bakken crude characteristics topic of U.S. House hearing

    North Dakota Petroleum Council Vice President Kari Cutting testified before two U.S. House subcommittees In a hearing titled, “Bakken Petroleum: The Substance of Energy Independence.”

    —“Three independent studies have now shown that Bakken crude is similar to other North American light sweet crude oils in gravity, vapor pressure, flash point and initial boil point,” said Cutting. “According to these studies, Bakken crude oil chemical properties attest to its proper classification as a Class 3 flammable liquid. This category contains most of the valuable fuels and fuel feedstocks offered for transportation in the United States.”

    When asked the question of whether Bakken light sweet crude oil was more volatile than other light sweet crude oils produced in the U.S., PHMSA representatives could not provide an answer because the team only tested Bakken oil.

    They, along with their congressional fellow travelers, seem to be engaged in an exercise in obfuscation. I suppose it is just an unfortunate observation that Bakken DOT-111 tank cars seem to blow up in such dramatic ways.

    • Watcher says:

      Who were the experts he asked for? And what is the Administration’s alleged agenda here? To improve oil output from a GOP state? Or to slow oil output from a GOP state?

      • Watcher says:

        The reality is the contents of rail cars from the Bakken vary so extremely in nature that sample sizes in testing them are probably far too small. Present regulations would suffice if they could be applied to each car. But these trains are 2 miles long and that’s a lot of cars.

  14. Ronald Walter says:

    1221 dollars for one troy ounce of 24 karat gold.

    94 dollars for a barrel of oil.

    How many barrels of oil can one ounce of gold buy?

    You’re kidding me, right? Gold is n0where to be seen unless you are hoarding the stuff.

    1221/94 dollars per barrel=12.989 barrels of oil for each ounce of gold you have, if you have one.

    When gold was worth a twenty dollar bill that had ‘gold certificate’ at the top of the bill, oil was selling for about 1.61 per barrel. In ca. 1910, you received 12.5 barrels of oil for every double eagle out there.

    It is the same trade today, but it is not the same. Lots of room for all kinds of shenanigans in the world of finance, especially with fiat clown bucks doing its magic, which obviously has taken us to the brink of financial disaster, which is not a real big surprise. Too much room for corrupt financial practices to occur, the accounting methods become convoluted, it just looks like big bucks, but it’s not. The lunatics are in charge of the asylum.

    Gold and silver minted coin prevent such distorted nonsense.

    Sow the wind, reap a whirlwind.

    • Old farmer mac says:

      Hi Ronald,

      This is the first comment you have made that I can wholly agree with without scratching my head trying to figure out if you are serious or just having some fun out of us or maybe smoking something that interferes with your train of thought lol.

      There is only one real problem as I see it with money based on precious metals. There simply is not enough gold and silver or platinum or anything else out there in sufficient quantity to use it as the basis of money.

      The universal tendency of politicians and bankers to inflate money makes it impossible to use precious metals as backing for paper or electronic currency.

      • Watcher says:

        If you base money on gold supply, you open up the Goldfinger scenario as a new form of terrorism. This is all old arguments.

      • Ronald Walter says:

        In 1988 I bought ten 10 foot lengths of half inch copper pipe for 2.76 usd. Today, the price is 4 to 5 times more. What cost me for ten pieces now buys two 10 foot lengths of copper pipe. The 2014 dollar buys 20 percent of what a dollar did in 1988. Eventually, inflation will kill the goose that lays the golden eggs.

        A copper penny minted before 1982 weighs approximately 3.1 grams and is 95 percent copper. If you multiply 2.95 times 154, you will have approximately one pound of copper pennies, pre-1982. 5 percent is zinc content, so there is some monetary value there too.

        Copper has a price of 3.13 usd today, so your 150 old copper pennies are worth double the face value.

        A 95 percent copper US minted Lincoln cent is worth 2 cents, not just one cent.

        It costs one old, tired, worn out penny these days to add your two cents. Some things do have value and you save money too!

        Politicians and bankers take Crazy Pills these days, so their excuse for their ignorance is understandable, but their worth has zero value. We need politicians and bankers like a teat on a boar. If 17 trillion dollars in debt doesn’t convince even the Village Idiot that politicians and bankers don’t have a clue and never will, then nothing will.

        There is an excuse for ignorance, but not for stupidity.

        • Ilambiquated says:

          On the other hand, between 1980 and 2010 the price of a gigabyte of hard drive storage fell 99.99999%.

          http://ns1758.ca/winch/cost-hard-drives-komorowski.jpg

          As a computer guy I’m always a bit bewildered by claims of runaway inflation.

          Economies are fundamentally driven by human productivity. Raw materials like metals and are only valuable to the extent that they add to human productivity. This does not mean that they don’t matter, but in many cases they aren’t a big deal.

          For example, Americans waste vast amounts of oil. It is easy to imagine an America that is just as well off with significantly lower oil consumption.

          Lack of certain resources can cause huge, maybe even unsurmountable problems. But measuring the economy in copper gives you very skewed results.

          • Ronald Walter says:

            One tulip bulb in Holland was traded for a house, money, and a wagon load of goods, if you could swing the deal. Bagholders just had to grin and bear it. Then the tulips weren’t worth much after the mania died off, after that, it was just laughter and tears. A ‘discovery’ of vast amounts of tulips in Constantinople had a devastating effect on the tulip market.

            Gigabyte mania lasted for only so long too. Now it’s over.

            Last I looked, gold and silver and copper, a precious metal these days (it is worth more than its face value), have physical properties that do have lasting qualities and hence the reason for their value and worth. You will get a lot of bang for your buck.

            There are small amounts of gold in a computer, so the gigabytes in use are really backed by gold, one hundred percent.

          • Watcher says:

            Neodynium

        • wimbi says:

          Um, what’s all this chatter about proper basis for money? I thought it was long since decided, on very solid science, that the only rational basis for anything “valuable” was the energy required to make/replace it.

          “Energy- the capacity to produce an effect”. No energy, no effect. End.

          • Watcher says:

            There is a branch of economics that asserts nothing has value but crops in a field. There is merit to that concept.

            • And there is a lot of nonsense in that concept. How are crops in the field planted, cultivated and harvested? How about tractors, plows, harvesters and processors. How is the food distributed? And then there is the portion of the crops that are irrigated. It takes power to run the pumps.

              I would think that oil, gas and coal in the ground also has value. Without fossil fuels we would either freeze or starve to death. I don’t know which would come first but either way we would be dead.

              • wimbi says:

                Either way a hell of a lot of us would be dead, right, on accounta overshoot fueled by ff’s. But the ones with a smidgeon of wits would not have be, just like the Bangladeshi folks I have spent time with, or the Inuit, or –ever so many others all over the planet- got along with no ff’s in sight.

                The town junkyard here has more real wealth just sitting there waiting for somebody to notice it than was available to all the villagers I knew in Bangladesh.

              • Watcher says:

                The school of thought re crops revolved about other assets being valued by buyer and seller agreement.

                Crops can be valued strictly by days of calories provided for the owner of them.

                • Ronald Walter says:

                  Fossil fuels? What fossil fuels? We don’t need no steenking fossil fuels.

                  Butchering chickens all day long can become an arduous task, better than shoveling chicken manure, that’s for sure.

                  After a hundred chickens, you are the fox guarding the hen house. You’re guilty. A machete and a chopping block, the nitty gritty of the business rears its ugly head. If you want a piece of chicken and are hungry, a live chicken becomes dinner. Grab a chicken by the legs, march it to the chopping block, secure the neck where it is ready to be decapitated and voila, a bouncing headless chicken bleeding like a stuck pig. Dunk the headless chicken body into some boiling water to loosen the feathers from the skin, pluck it, disembowel the dead chicken, cool it in some cold water. You’ll end up with a clean chicken with no coagulated blood on the chicken bones. Grilled the next day with some barbecue sauce makes a great meal. It is hard to eat fried chicken the day you butcher them, but it is still done. Everything smells like chicken, especially the butchering part. Ham and eggs will be a sufficient substitute. You have to eat. It would be nice if you never had to eat or pay bills and just get the gas for free, but that is not how it is in the real world. The dynamics are much different in the real world.

                  A crop in the field that goes unsold is stored in a grain bin or at the grain house. If the eleven thousand bushels of durum wheat heat up in the bin, the crop isn’t worth much at all, it is a loaf of bread baked in the grain bin, not an oven. It has to be ground into semolina to get the pasta, in the field or the bin does no good until it becomes a sold commodity and the cash is in your hand or in the form of a check from the grain buyer. Not everybody wants to mill the grain berries, they want the packaged product.

                  If the durum is hauled off to the field instead of from the field, the deer have a feast. It happens a lot. I would be a very wealthy fat cat if I could just collect the grain that is thrown out with the straw from combines from Oklahoma to Alberta.

                  If the grain goes bad, your costs become serious losses that can bend the pocketbook severely.

                  The crop must be sold to have any kind of value, otherwise, it is just a pigment of your imagination.

                  You are going to need equipment, air seeders, drills, tractors, oil, fuel, not just the land where the crop just appears one day, then you go out and harvest it. Seed is always the first on the list. If it is good hay land and well managed, it still pays. Saves on seed expense. Involves more people than just the grain producer or the cattle rancher. Where do you send the hide after the critter has been sold as ground chuck? Requires whole cities of working populations of humans. It doesn’t work any other way.

                  Much easier said than done. You need barley up the wazoo to satisfy the beer drinking that is drunk here there and everywhere. Maltsters would be sorely missed. A vacuum, a black hole on the earth if maltsters disappeared. Robots can’t do the work required, don’t have the capacity to make up a mind.

                  It is your bread and butter. Requires inputs and energy like you can’t believe.

                  Diesel fuel does the job. Peanut oil will too. Just like Rudolph Diesel envisioned.

                  You get the picture, so another thousand words won’t be needed.

                  Doomed Doomsters are history. har

                  • Watcher says:

                    Don’t plant so much next time. You only need what you need.

                    Sort of like keeping the oil in the ground for the grandkids.

          • BW Hill says:

            The number of BTU a $ will buy over time:

            http://www.thehillsgroup.org/depletion2_008.htm

            The last time the value of a BTU changed was about 14 billion years ago; right after the Big Bang. The $, yesterday. There’s not much doubt why economists have such a hard time figuring out what is really going on with oil! Measuring oil with dollars is like using a rubber ruler to build your house, then acting surprised when it falls down.

            http://www.thehillsgroup.org/

      • Dennis Coyne says:

        Hi OFM,

        It is pretty difficult to maintain a currency at a zero inflation rate. Deflation can be worse than inflation for an economy. Let’s imagine the world economy with currency deflating at an annual rate of 5%, who would invest their money in such an environment when just sitting on a hoard of cash would bring a 5% return.

        Given this fact central banks try to maintain a low rate of inflation, especially when the economy is doing well. If there are a lot of unemployed people then society usually decides that moderate inflation is the lesser of two evils (when choosing between employment and inflation). Would it make sense to choose 15% unemployment and 0% inflation? Not to me.

        I do not understand the concern over fiat currencies.

        As a side note Ron posted a link to an article about World debt at 223 trillion, which is about 3 times World GDP. Note that World assets are estimated at about 223 trillion (in 2011), so the debt may be a little high if we thought an 80% debt to asset ratio is prudent.

        • The Wet One says:

          I thought world GDP was about 60 – 65 trillion dollars in 2012 or so, not 80 trillion.

        • Old farmer mac says:

          Hi Dennis,

          We are on about the same page in respect to bankers and the economy and inflation.

          ”I do not understand the concern over fiat currencies.”

          Think of a runaway inflation in terms of a medical analogy.

          If you are in considerable pain you can generally get a prescription for the pain from a hopefully competent physician who will keep a close eye on you and your consumption of painkillers.

          BUT painkillers can be addictive and pleasurable and if you can put your hands on them in quantity there is a very real possibility of a disaster in the making.

          When a govt can in effect create money out of thin air the doctor is left out of the doctor patient relationship and the government serves as doctor, patient, and pharmacist all in one.

          Economic pain and or incompetence or less than scrupulous people in positions of power can put a govt in a position where it medicates itself with printed money to the extent the money supply in circulation far exceeds the available supply of goods and services at former prevailing prices..

          Prices then shoot thru the roof. Runaway inflation.

          I personally believe that almost any government in economic and political extremity with the power to do so will in the last analysis print the hell out of money rather than allow a massive deflation to occur.

          This obviously will not cure underlying economic diseases but it will probably postpone the inevitable for some period of time that might range from weeks to years depending on how well the inflation is managed.

          Personally I tend to think of inflation as ”runaway” at ten percent or more but I suppose most people think of runaway inflation as two or three times or more than that.

          The question in respect to fiat currencies is the question of trust. Who can you trust to play by the rules over the long term when the entity you must trust also makes the rules and is far more powerful than you are?

          I have noticed that people in the computer oriented industries seem to always be utterly surprised at the relatively glacial pace of progress in other industries.

          For a rough guess my neighbors are raising apples about twice as efficiently as their parents did twenty years ago.

          But apples at half the real cost don’t translate like computers at half the real cost.Eighty percent or so of the cost of apples at your grocery store is distribution costs. So halving the wholesale cost doesn’t have much effect maybe ten percent or so on retail cost.

          At this point I will start guessing but I suppose a laptop that leaves the factory by the truck load at five hundred bucks per sells for perhaps six hundred at retail at Walmart or Costco or wherever.A hundred bucks is a lot to deliver and ring up a small item that takes up very little space and does not rot like produce or meat or milk or die like goldfish.About the only real worry would be keeping the computer dry and keeping somebody from stealing it.

          So when the performance doubles at five hundred wholesale the price at retail stays about the same. It still fits in the same size box and takes up the same amount of retail shelf space and costs remain about the same in every respect. Ergo a computer can sell for the same or about the same and be twice as fast every couple of years or less.

          My doubled efficiency as an orchardist over a couple of decades is entirely lost in the noise of generally rising distribution and retailing costs.

          • Dennis Coyne says:

            Hi Mac,

            I am with you on inflation. I just don’t see it as an important problem at present. If money is tied to some physical commodity (gold for example), then deflation would be baked in unless it grew in supply faster than real GDP. Low inflation is much less of a problem than deflation, low inflation is what we have had for 30 years or so, so I guess those who dislike fiat currencies may have found a cure that is worse than the “disease”.

            • WeekendPeak says:

              The problem with gold (or commodity based currencies in general) as the basis of currency is that having a static number of currency units in a dynamic economy makes no sense.
              Rgds
              WP

  15. Dennis Coyne says:

    Hi all,

    In a comment further up the thread (see link below)
    http://peakoilbarrel.com/world-oil-production/comment-page-1/#comment-245984

    I mentioned a World Oil Shock Model. This model assumes that depletion rates (aka extraction rates) of crude oil rise slightly until 2015 and remain at the 2015 level through 2030. This is a simplifying assumption, the actual rates in the future are unknown (and have been estimated for the past), they could rise somewhat if oil prices rise without crashing the economy and they will fall if there is a severe recession. I do not know what will happen to oil prices (but I believe they will rise somewhat when the peak arrives), and I also do not know what oil price will result in recession, but my guess based on Hamilton’s analysis for the US is about $150/b in 2013US$. Any way the simple model assumes that extraction rates neither rise nor fall from 2015 to 2030, chart below with annual decline rates on the right axis, the Model is based on a World URR of 3000 Gb (2500 is crude less extra heavy oil and 500 Gb comes from combined extra heavy oil output from Canadian oil sands and the Orinoco belt in Venezuela. The model suggests decline rates will remain below 1% until 2025 if depletion rates are unchanged from 2015 levels. Note that the depletion rates are assumed to rise to match Ron’s prediction of a 2015 peak in C+C output, a model with depletion rates unchanged from 2013 to 2030 would peak in 2013.

    • Dennis Coyne says:

      An alternative scenario presented below where depletion rates rise at the same rate as the average rate of increase in depletion rate over the 2002 to 2013 period (about 0.05% per year) until 2018 and then the rate of increase slows down gradually up to 2023 and then remains constant until 2030.

      The peak remains in 2015 with a plateau over the 2013 to 2018 period, the annual decline rate (on the right axis) remains under 1% until 2023, the decline rate is estimated at about 1.3% in 2030 in this scenario, nobody knows what these decline rates will be, even Ron 😉

    • Political Economist says:

      Dennis, interesting graphs. What are the underlying extraction rates and depletion rates assumed for your graphs?

      • Dennis Coyne says:

        Hi Political economist,

        Thanks.

        The extraction rate and depletion rate are just two different names for the same thing.

        In these scenarios the depletion rate for crude minus extra heavy proved producing reserves is in the range of 5 to 6% and proved producing reserves are estimated at about 475 Gb in 2010. These reserves are both added to (as non-producing proved reserves are developed) and subtracted from as reserves are produced. In the model they are declining after 2004. Note that Jean Laherrere has estimated 2P reserves in 2010 at about 850 Gb for crude less extra heavy (oil sands and Orinoco belt oil). Proved reserves will be about 75% of 2P reserves and proved producing reserved (aka proved developed reserves) will be 75% of proved reserves or about 478 Gb, which is similar to my model. Chart below with proved producing reserves and depletion rates (on right axis) for the second model presented above. Left axis is millions of barrels of proved producing reserves.

        • Political Economist says:

          Dennis, thanks for posting the graph. I should have made it clearer. In addition to depletion rate, how does the annual new production rate look like? I mean the new production before depletion is subtracted.

          • Dennis Coyne says:

            Hi Political Economist,

            In any given year there are proved producing reserves that exist on a specified date. For example let’s say on Dec 31, 2010 there were 475 Gb of proved producing reserves, lets assume further that 26 Gb of oil is produced in 2011, the depletion rate would be 26/475=5.47%, alternatively one could say that 26 Gb were extracted from the 475 Gb of reserves and that the extraction rate is 26/475, which obviously is also 5.47%. There are really only two rates to be concerned with depletion (aka extraction) rates and decline rates.

            I am sorry that I am not answering your question. For your new production rate the numerator would clearly be the yearly output, but I am not sure I understand what would be in the denominator besides producing reserves, could you clarify?

            • Political Economist says:

              Dennis, thanks for the comments. What I meant was the following:

              Say, the world has a total crude oil production of 80 million barrels per day. If no new field is brought on line, there would be a “natural” decline rate (let’s call that decline rate; I confused your depletion rate with the decline rate). This decline rate is probably about 5% now. So the annual decline would be 4 million barrels per day. To have an annual growth 1 million barrels per day, the annual NEW PRODUCTION needs to be 5 million barrels per day.

              If the annual new production stays at 5 million barrels per day and there is no change in decline rate, the eventual “equilibrium” output will be 100 million barrels per day. If the annual new production falls or rises, the eventual equilibirum outptu will change accordingly.

              Do you have some idea about the decline rate and the annual new production implied by your model?

              • Dennis Coyne says:

                Hi Political economist,

                The short answer is no. This analysis is done very differently from my analysis of the North Dakota Bakken or the Eagle Ford where I have some estimate of the “average new well”. For the world as a whole this would be an impossible task.

                The decline rate in the oil shock model is simply the rate that World output declines after reaching peak output and depletion ate is as I described. I have no estimate of “legacy decline”.

              • Dennis Coyne says:

                Hi Politcal economist,

                Note that there is no reason to assume that the “natural decline rate” will remain fixed, or that the “new production” would remain fixed. Rather than make assumption about fixed decline rates or new production the oil shock model uses discovery data (from Jean Laherrere) and output data and very general assumptions about the average length of time from discovery of a resource to becoming a proved reserve (the fallow period in the oil shock model) and the time to develop the reserve (the build period in the model).

                At any point in time the proved developed reserves (or proved producing reserves) will be added to as proved undeveloped reserves are developed and subtracted from as the developed reserves are produced. The depletion rate in the model is simply the rate that the reserves are depleted so that the historical output is produced (based on the developed reserve estimate from the model.)

                Future depletion rates can only be guessed, but the range over the 1965 to 2013 period is between 5 and 6.7%. Since 2002 the depletion rate rose from 5% to 5.8%.

                For a 2015 peak depletion rate must rise to about 5.9%, beyond this it depends on oil prices and economic activity.

                My expectation is that as oil prices rise that the extraction rate (depletion rate) will rise to as much as 6% where technological limits may be encountered. At some point, a further rise in oil prices will lead to recession, possibly in 2019 (this depends on how fast prices rise and the ability of the economy to substitute other forms of energy for liquid petroleum).

                When recession hits the extraction rate will decrease due to a fall in oil prices, though I doubt it will fall below 5%.

                • Watcher says:

                  Yo Dennis, scope the article from farmer guy just under this. The number exploring done has been “suppose wells get cheaper to drill”. Might be worth looking at Europe’s situation of 3X costs.

                  • Dennis Coyne says:

                    Hi watcher,

                    The oil shock model is based mostly on conventional oil (2500 Gb URR vs Laherrere’s 2200 Gb and USGS 3000 Gb estimates) plus extra heavy oil from oil sands and Orinoco belt (which are addressed in two separate models with a URR of 250 Gb from each).

                    Any contribution from LTO worldwide will be no more than a rounding error, 30 Gb being my best guess.

  16. Old farmer mac says:

    http://www.theguardian.com/environment/2014/sep/10/how-hillary-clintons-state-department-sold-fracking-to-the-world

    This is well worth the time it will take to read and digest it.Hopefully it will attract a lot of comments..I am eager to read what the regulars here make out of it.

    • Watcher says:

      Went through it. No interest in environmental this or that.

      There is a passage in the middle of it talking about an estimate of how the numbers work out when the cost per fracking well is 3X the US norm. That is a good question, and the issue is about gas, not oil.

      Of course, as is usually not discussed, dry gas from fracking makes nada. It’s gas with lotsa liquids coming up that can work. They fund the effort. Those liquids are not high priced and a 3X on input costs would be ugly.

      Europe may have no decision to make.

      • Old farmer mac says:

        The decision may be between extraordinarily expensive domestic gas and no gas at all.

        Even at triple the usual cost gas and oil will still be economic for some applications.

        I would rather pay twenty dollars a gallon for diesel fuel than to farm with horses or mules. But if diesel were not available at any price then moonshine and tractors would still whip horses and mules.

        The next big boom in service industries may be the renovation of existing houses for energy efficiency. Ten or twenty thousand bucks spent on most houses in this country would be enough to save a thousand bucks or more in utilities annually and as fossil fuel prices rise the savings would mount up.

        Given that houses generally last a very long time this will be a viable investment if the money is made available thru some sort of govt guaranteed low interest loan.

        People who can’t afford to add insulation and triple glazed windows and so forth will hopefully be able to afford lots of long johns and wool socks.

        • Watcher says:

          “The decision may be between extraordinarily expensive domestic gas and no gas at all.”

          Sounds rather a lot like “If you HAVE to have the oil, money doesn’t matter. You’ll print what you need and hope people still believe in it.” A wise man once said essentially that.

  17. Andy Hamilton says:

    Big (250,000b/d) jump up in US weekly oil production – anyone know why? pipeline re-opened somewhere?
    http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

    • Over half of it, 132,000 barrels per day, was Alaska. Maintenance last week had them way down. The rest is of course just a wild ass guess by the EIA.

    • Political Economist says:

      Yes, but compared to a year ago, the annual growth is about 1 million barrels per day, not very exceptional compared to the recent weeks.

      It appears that the US weekly production GROWTH has passed the peak and has been decelerating. I’ll post some graphs on this when I’ve a chance.

      • Dennis Coyne says:

        Hi PE,

        I am not sure what you mean, the growth numbers bounce around quit a bit, especially on a weekly basis. Looking at output over time, US C+C output looks pretty linear from June 2011 to June 2014. Chart below.

        • Political Economist says:

          I have been following how the weekly production compares with the production 52 weeks ago. This is a graph showing the 52-week moving average. Each point represents the difference between the average production over the last 52 weeks less the average production over the previous 52 weeks. By this measure, the weekly production growth peaked in December 2013.

          • Political Economist says:

            The following graph looks at the weekly numbers, difference between the latest weekly production and the weekly production 52 weeks ago as well as the trend. The trend indicates the peak growth was in November 2013.

            I was going to wait a few more weeks to make sure the trend is better established. But since we come to this discussion, here they are.

            • Anonymous says:

              Hi pe,

              The weekly data is not revised and is unreliable. The data for monthly output is much more reliable. I will not attempt to reproduce your analysis with the monthly data. It would be a good check on your Hypothesis.

    • Dave_P says:

      Looks like we’re going to ensure that we ‘hit the wall’ as fast and hard as possible! Should make for an interesting future..

      The state of affairs today depresses me. Sure, it’s humans doing what humans are programmed to do (genetics) but I had hoped we would have been smarter than this. Good luck to the next few generations.

  18. aws. says:

    It’s September 18th and the Canadian Gas Association still hasn’t updated it’s Canadian underground storage volumes chart for the end of August… I miss Jim Hansen’s Master Resource Report, he had access to Bentek data and was on top of the storage situation.

    By the way, it’s going down to zero Celsius tonight in my part of the country.

  19. aws. says:

    KTM Electric Off Road bike!

    From a post at insideEVs

    http://youtu.be/U7IkFRaGJ28

  20. aws. says:

    NGI’s Shale Daily September 18, 2014

    Proposed Bakken Gas Pipe Project Lacks Shippers, MDU Exec Says

    An open season earlier this year has failed to generate enough interest to move forward with a major natural gas pipeline project from the Bakken to an interconnection in northwest Minnesota, an executive with a unit of Bismarck, ND-based MDU Resources Group told an analysts’ day meeting Wednesday in Las Vegas, NV

    The article is behind a paywall here… http://www.naturalgasintel.com/articles/99739-proposed-bakken-gas-pipe-project-lacks-shippers-mdu-exec-says

    First time readers get to read two articles, so maybe someone can dig out the details. I’ve exhausted my free allocation.

  21. aws. says:

    Drought bites as Amazon’s ‘flying rivers’ dry up

    Scientists say deforestation and climate change responsible for forests not producing vapour clouds that bring rain to Brazil, reports Climate News Network

    Jan Rocha for Climate News Network, theguardian.com, Monday 15 September 2014 12.52 BST

    The unprecedented drought now affecting São Paulo, South America’s giant metropolis, is believed to be caused by the absence of the “flying rivers” − the vapour clouds from the Amazon that normally bring rain to the centre and south of Brazil.

    Meteorologist Jose Marengo, a member of the Intergovernmental Panel on Climate Change, first coined the phrase “flying rivers” to describe these massive volumes of vapour that rise from the rainforest, travel west, and then − blocked by the Andes − turn south.

    Satellite images from the Centre for Weather Forecasts and Climate Research of Brazil’s National Space Research Institute (INPE) clearly show that, during January and February this year, the flying rivers failed to arrive, unlike the previous five years.

    Deforestation all over Brazil has reached alarming proportions: 22% of the Amazon rainforest (an area larger than Portugal, Italy and Germany combined), 47% of the Cerrado in central Brazil, and 91.5% of the Atlantic forest that used to cover the entire length of the coastal area.

    As long ago as 2009, Antonio Nobre, one of Brazil’s leading climate scientists, warned that, without the “flying rivers”, the area that produces 70% of South America’s GNP would be desert.

    In an interview with the journal Valor Economica, he said: “Destroying the Amazon to advance the agricultural frontier is like shooting yourself in the foot. The Amazon is a gigantic hydrological pump that brings the humidity of the Atlantic Ocean into the continent and guarantees the irrigation of the region.”

    “Of course, we need agriculture,” he said. “But without trees there would be no water, and without water there is no food.

    Hydro-electric generation is way down in Brazil because of the drought. Fossil fuel based generation has had to make up the supply.

  22. aws. says:

    And on the topic of…

    Spawn of climate change devouring forest at alarming rates

    A forest pest is doubling in size each year, expanding beyond its historic range and threatening to spread across the vast boreal forest, but it’s not the British Columbia mountain pine beetle.

    Raphael Lopoukhine, Vancouver Observer, Sep 17th, 2014

    In past observed outbreaks, the spruce budworm attacked the older trees and the younger trees took over once the infestation ran its course.

    But with this infestation, the “regeneration layer (of younger trees) is being hit really hard,” says spruce budworm expert, Daniel Kneeshaw from the Université du Québec à Montréal.

    Historically, infestations have started in the south and spread northward, but this outbreak started in the north.“We don’t know in the last couple of centuries of any outbreak that has caused as much damage this far north,” says Kneeshaw. “We are seeing something that is very unusual.”

    The movement north aligns with the projections made by climate change scientists [at Natural Resources Canada] showing that a longer summer will allow the budworm to expand its range, says Kneeshaw.

  23. El Ukuku says:

    http://www.rt.com/news/188916-ebola-health-team-killed/

    Fear and misunderstanding is going to make this disease a lot harder to deal with. Communities will turn on each other, people fleeing infected areas will be turned away. The area isn’t one of the most stable in the first place and Ebola could push it back over the edge.

    • canabuck says:

      Let’s look at Sierra Leone:
      population: 6 million
      population growth rate: 2.33%: about 140,000 per year, or 11,500 per month.
      Ebola deaths in Sierra Leone in 8 months: 562. Or about 80 per month.

      The death rate has to increase by 100X to just counter the population growth rate in the country.
      This is nothing to be too concerned about.

      • Fred Magyar says:

        This is nothing to be too concerned about.

        Really?!

        What I hope to do is, I hope to be able to convince you that the greatest shortcoming of the human race is our inability to understand the exponential function.
        The late Dr. Albert Bartlett

        Apparently the good Dr. underestimated the exponential growth of human ignorance…

        • Old farmer mac says:

          Hi Fred,

          I think maybe Canabuck meant that ebola is not going to depopulate Sierra Leone or any other country with a growth rate over two percent.

          Sarcasm does not come across well in such a forum as this one.

          Meanwhile I lost the link and title and will have to look it up again to an article that indicates new demographic research puts population growth on a steady path to eleven billion about 2100.

          Personally being an ag guy and a student of the natural economy as well as a student of human nature I just cannot see eleven billion happening.

          No doubt it could happen in theory at least but if and only if we have peace and planning capable of diverting the necessary energy and other resources away from other consumption and to food production and we we rich westerners drop a level down the food chain etc.

          People are even harder to herd than cats sometimes and this is going to be one of those times.

          My old crusty redneck conservative friends tell me that the daughters they have slaved over and paid their way thru university are mostly all hung ho about saving the environment but not at all interested in living in small houses or driving small cars or staying close to home on vacation or turning down the heat or anything else of that nature.

          SELLING a low energy stick at home lifestyle is not going to be easy no sir not easy at all. AINT GONNA HAPPEN!!! ( voluntarily that is )

          And people in places like southern Africa and Indonesia are not going to pull themselves up by their own bootstraps barring miraculous breakthru’s providing very cheap renewable energy etc.

          The Four Horsemen are ready to ride and the Good Reverend Malthus is going to get the last laugh just as he has always been getting it at one place or another.

          Regulars here should keep this little gem of info handy in their minds:

          Sooner or later we will experience a crisis that will jam the gears of industrial civilization. When it happens forting up will be necessary to survival. Starvation will be a very real issue.

          The likeliest way in a mad rush to get enough food stocked up to make it thru the mad max phase – if you happen to live in or near mixed farming country- is to buy a truck load of horse or dairy feed dry concentrate. It may have a few preservatives and a lot of salt in it but it is also jam-packed with calories and protein and it will keep almost forever if kept dry.

          IF the crisis passes without going mad max some local farmer will be glad to take it off your hands for eighty percent of what you paid for it.

          The people shooting each other will be at the supermarkets.;-)

          • Watcher says:

            “The likeliest way in a mad rush to get enough food stocked up to make it thru the mad max phase”

            See, this is the beautiful thing about an oil scarcity driven global collapse.

            It won’t be a phase. It will be forever. The lower level civilization then existent won’t have any easy oil to get to make any attempt at re-elevation.

            The direction will be down. Then flat at 700 million. Then fewer and fewer and fewer as little natural disasters wipe out each enclave.

            • The Wet One says:

              Nah. Humanity’s been around for a long time. A floor will be reached with oil free technology and population should stabilize around there (1 or 2 billion I think, I don’t recall the exact figure for world population circa 1800 or so).

              This assumes of course that full scale nuclear war doesn’t break out in the collapse, in which case, well, 700 million is quite possibly very optimistic.

              Whatever the case is, time shall tell.

            • canabuck says:

              Thankfully, Elon Musk will have civilization on Mars in 25 years, and we can keep expanding to other solar systems. Solar energy and lithium batteries will power the way.

              • Watcher says:

                That’s betting on a miracle.

                The path of least resistance is low population that cannot grow and natural disasters chipping away at it until zero.

              • Brian Rose says:

                I’m assuming that was said tongue in cheek.

                I will say Elon Musk is the one person who gives me a more optimistic outlook, but this is only because before his ascent with SpaceX, SolarCity, Tesla, and the coming Gigafactory I saw zero prospect of anyone with any influence and affluence putting their muscle behind necessary changes.

                Then, Elon Musk decided he wanted to do ALL of it, and is genuinely willing to sacrifice everything to speed the transition. He’s explicitly stated he plans on using Tesla in a way which essentially makes it a bad stock investment. At every opportunity he will sacrifice profits to speed progress – opening up patents, free supercharger stations, guaranteeing resale value with his personal fortune (not just Tesla’s reserves).

                This is all more a reflection of my extreme pessimism over the last 10 years, especially after 2008 where everything almost collapsed, and no one even recognizes the fundamental driving reason (energy).

                I hope there’s another hail mary that saves us during the next oil price spike. If the financial and monetary system can hold together due to intervention one more time the reduced demand from the ensuing deep recession will buy us 2-3 years before declining supply reaches destroyed demand.

                If we make it to 2020 without financial collapse technologies like self-driving cars, PV, wind, electric vehicles, telecommuting, permaculture, and others will allow for a standard of living far beyond that of the 1700s.

                If the next crisis in 2016-2018 turns out like 2008 by all means should have, and it all falls apart… well… it’ll be interesting times as the average citizen devolves into their ugliest selves. You can only measure someone by how the act in desperate times, and I have no doubt most people will act in dangerous and harmful ways.

                I give it a 50/50 chance. All of Elon Musk’s companies were essentially bankrupted in 2008. Permanent negative growth will force the very concept of stock markets, interest, and currencies into question.

                No matter what happens the only guarantee is that most people in the developed world will find themselves impoverished. Only those who planned ahead and sacrificed to invest in a home, growing a food forest, buying en electric vehicle, and PV on their roof will be able to maintain a semblence of a middle class lifestyle – minus the vacations, trips to bars/restaurants, and other frivolous luxuries.

                Simply living in a home that is paid for with a fully mature food forest and an electric vehicle powered by the Sun itself is more wealth than the wealthiest nobles of the 1700s. Nothing besides total collapse and the civil unrest that would follow can strip it away once it is built and owned.

                • Watcher says:

                  As Admiral James Stockdale said, the optimists die first.

                  • Brian Rose says:

                    Extremes in any direction are always paralyzing of course.

                    I’m only an optimist compared to my view 5 years ago – when I thought total breakdown was imminent.

                    When I tell the average person my views they consider me severely pessimistic. It’s quite relative in that sense.

                    I whole heartedly agree optimism that amounts to “someone will fix it and everything will be fine” is going to lead to tremendous suffering.

                    My kind of “optimism” is the view that I personally have enough time to make the costly and time consuming changes required to best weather the coming storm. My optimism is “I can do something about this to make my future less dreary”.

                    A friend of mine is an extreme pessimist, which in terms of action is equivalent to an extreme optimist. His view is “we’re all so fucked, so soon, that it is worthless to sacrifice now and build a more resilient future for myself”.

                    Both extreme pessimism and extreme optimism lead to one thing: inaction.

                    I must reiterate that according to 99.5% of the public my views are preposterously pessimistic, so please take my use of “optimistic” with a dose of salt and some tequila.

                    Where would you say you lie on the line between optimism and pessimism, both in terms of relative to the general public and relative to others aware of peak oils ramifications?

                    Ultimately, I am a realist, driven by data. however, all the empirical evidence in the world cannot accurately predict the manner in which industrial civilization will unwind. All it would have taken in 2008 was for Congress to not pass TARP a second time. We were hours from irreversible meltdown. Had that vote not passed, well, we’d be living the most vividly pessimistic scenario at this moment.

                    Without a functioning financial and monetary system no shale oil would be pumping, and we’d be well on our way down the Hubbert Curve, but a hail mary saved us… for a few years. My optimism is the very fact that we aren’t in that bleak place I was sure we’d be experiencing in 2014.

                  • Watcher says:

                    Relativism is rather often an emotional sanctuary.

                    The math unfolds. 5.6 million btus in a lousy 42 gallons of oil. That’s 1.6 X 10^3 kilowatt hours. 1600 kilowatt hours in one lonely barrel.

                    This is basically 2-3 tanks of gas for your car. You burn that on the most modest of trips for the summer. These celebrated 10 KW panels need 20 eight hour cloudless days to get you two tanks of gasoline. Damn near a month to get you a little trip. If the birds are kind enough not to crap on them or wind doesn’t tear them out or kids don’t throw rocks at them.

                    Now I can extrapolate what that means in terms of 80 million barrels/day — but the miracle seekers will explode out of their seats demanding that people live the way THEY tell them to live and not drive anywhere and ride bicycles in -15 degrees weather and thus not face that 80 million bpd consumption REALITY. This stuff doesn’t change because the numbers don’t. When the numbers say failure, then rule changes are demanded.

                    There’s no room for optimism or pessimism. There is room for lots of mathematical death. Soon.

                  • Nick G says:

                    A barrel of oil has about 42 gallons. The average US car gets 22MPG. That’s 924 miles per barrel.

                    A Leaf only needs 231 kWhs to drive 924 miles. That’s about $25 of electricity, vs $150 for 42 gallons of gas.

                    The average car is driven 30 miles per day. That would require about 8 kWhs in a Leaf. That’s 1.5 kW of panels, which would cost maybe $7k installed. That will provide enough power for the vehicle for *life*.

                  • Watcher says:

                    900 miles is 450 each way to grandma’s house at thanksgiving in late November, which is a pretty typical scenario, maybe Indiana to Minnesota.

                    How were you planning to recharge the Leaf enroute at 10 degs F? See how the rules changed from a typical trip (btw, 22 mpg will be a challenge with the family and their luggage for a few days in the trunk) to some mundane close commute with zero traffic in 75 deg weather. A rule change.

                    A generic Camry will do what I described for the 450 mile trip in November PLUS deal with work commutes — all with the same car and same insurance and with 100% confidence there will be gas along the way. In fact, judging from sales figures, it will be an SUV doing the trip and commute, not a Camry.

                    You guys are just indulging in pointlessness.

                  • Nick G says:

                    Again, it sounds like you want a Chevy Volt, or a Prius.

                    BTW, the typical vacation drive is more like 250 miles, and 80% of US vehicle miles traveled are less than 30 miles from home.

                  • Watcher says:

                    Oh, and about that trunk . . . .

                  • Techsan says:

                    Nearly every 2-car family could do just fine with one car being electric.

                    As for that trunk…

                    Rick Perry, (thankfully outgoing) Governor of Texas, said “you can’t put a bale of hay in a Prius”. [Watcher, it should give you pause that you are being put in a class with Rick Perry.]

                    The local humor columnist borrowed a Prius and got 3 bales of hay in it. Not that I recommend lending a Prius for that.

                • wimbi says:

                  In all this chatter about collapse and dieoffs we gotta keep in mind that as people die off, their remains, in the form of abandoned bldgs, junk and all that make the remaining people richer.

                  People around here have lived for generations on the gawdawful wastefulness of the wealthier class. I myself grew up in the depression, and got the habit of making do with what I could lay my hands on. Nowadays, with no need to do it, I still do because that’s what I do.

                  So, while all you city people are running around mowing each other down in empty supermarkets, my kind will be having a happier time in them-thar hills, cosy as can be, living offa your junk and our hickory nuts and protected from madmax by what looks to him as an unlivable desert, and way too much work to climb, anyhow.

                  plenty of us all over the planet will make it just fine. And as for information, books last a long time, and despite rumors, we know how to read.

                  As for nasty, brutish and short, well, we are used to all that. When I was a kid, it was routine to die young- I almost did a couple of times.

        • canabuck says:

          Let’s put this to the test.
          As of today, Sept. 19th, the report is that 2,630 have died.
          On Aug. 18th, there was 1350 deaths.

          In one month, some are predicting that the number will double.
          I predict that it will increase by much less.
          Let’s see who is right.

          • 2,000 deaths in the next month would be much less than double but it would still be a lot more than in the last month. Could you be a little more specific?

            • canabuck says:

              In the past month, there seems to be a 100% increase in recorded deaths. (the actual value could be higher).
              Zerohedge speculates that in the next 4 weeks, we will see 130% increase from 2630. (= 6050 by Oct. 20).
              Due to better hygiene and education, I suspect the real increase will be 75% or less from 2630 ( = 4600 by Oct. 20)

              • Anonymous says:

                The outbreak has reached the point where most deaths are not formally recorded. They are dieing in their homes and are being buried by their family, spreading the disease fastest, not slower.

              • Anon says:

                The healthcare systems in Sierra Lieone and Liberia are destroyed at this point. Why would that ever lead to better education and infection control?

                It will lead to a much higher death RATE since if you don’t get fluids, this thing WILL kill you. Without gear, it probably kills any family member trying to care for you too.

      • El Ukuku says:

        I’m not suggesting that the disease will cause places like Sierra Leone to go in to a population freefall (although as mentioned it has the potential to expand far more than it has so far), more that the disease will start to spook people and an already fractured society will fracture further. I think something that people don’t factor in is that Ebola causes notable physical effects – reddening of / bleeding from the eyes, bleeding from the mough and nose and anus and bloody vomit /coughing blood. Flu is far more deadly but not as gruesome for those unaffected.

        Sierra Leone began a 3 day lockdown of it’s population today which is a pretty extreme measure, it will probably be fairly ineffective as 30,000 health workers are unlikely to be able to assess 6 million people in 3 days. They’d be hard pressed to assess the 1.2 million in the capital. Then you have the problem of people not showing symptoms for up to 3 weeks after infections.

        • Ilambiquated says:

          I think a lockdown would be effective whether or not there is any health care available, because it reduces the infection rate.

      • Anon says:

        That’s not how exponents work.

  24. El Ukuku says:

    http://www.rt.com/business/188756-shale-gas-china-goal/

    ‘China has halved its 2020 goal for shale gas production. The country faces challenges ranging from difficult geology to shortage of technology in the area meant to quench its ever-growing energy needs.’

    • Watcher says:

      Interesting tidbit in the China oil shale (note oil shale vs shale oil) wiki. There is a quote of oil production from them . . . well several . . . looks like it adds up to about 5-7 million barrels per YEAR. RDS has a piece of the pie.

      The interesting tidbit is a quoted cost of production of $19ish/barrel.

      It’s interesting in that the output is fuel oil. Heavy stuff, and that’s why the price is low. They are custom building generators and various other things to use it. That’s how they avoid a need for it being diesel.

      The rock looks like it’s all Eocene. 50ish million years back. Young, which is why it’s oil shale.

  25. Old farmer mac says:

    Solar costs are continuing to come down.

    The owners of this new mounting system will no doubt manage to get a price premium for it but patents do expire – eventually.

    http://www.renewableenergyworld.com/rea/news/article/2014/09/solarcity-enters-commercial-space-with-new-zep-mounting-technology?cmpid=WNL-Wednesday-September17-2014

    Somebody at the REW site commented that he was in China recently and saw hundreds of electric motorcycles ( most likely scooters in our terminology) but not a single gas burner motorcycle during his visit.

    An authoritarian government does have a few things going for it especially when it comes to solving critical problems.I suppose that Chinese city must have outlawed gasoline powered scooters in the core area.

    The outlawing of gasoline fueled cars in densely packed western cities due to pollution of the local air is now extremely unlikely -ironically!!!- due to past success in cleaning up automobile emissions.

    CO2 doesn’t bother anybody in the immediate sense that other emissions bother us so there is no LOCAL incentive to worry about it.

    If we still had fifties and sixties vintage cars jamming the roads you would not be able to live in a really big city without knowing numerous people with obvious health issues related to auto emissions.

    • Ilambiquated says:

      There are now more than 200m electric bikes in China. I think a major reason they are so popular is that electricity is cheaper than liquid fuel. That and the extreme population density in Eastern China that makes driving a pain.

      Electricity is quite a bit cheaper than liquid fuel in the US as well, so if batteries get cheap there could be a big shift to electric or plug-in hybrid here as well.

      • Old farmer mac says:

        Does anybody here know anything about the taxation and permitting of gasoline powered motorcycles and scooters and cars in China compared to electric scooters and motorcycles?

        Since there are so many electric bikes in China the people there must have a pretty good experience with them in terms of reliability and battery life.

        Unfortunately no Chinese bike or scooter manufacturer that I am aware of has succeeded in building up brand loyalty and recognition here in the US the way the Japanese have with their gasoline powered bikes.

        You can count on a Japanese scooter or small motorcycle lasting twenty or thirty thousand miles without any real problems and very little routine maintenance.

        When Honda , Suzuki, Yamaha and Kawasaki come out with small electric motorcycles that will go forty to fifty miles I am ready to buy one.

        Parts for Japanese makes are readily available generally without waiting except maybe the first few warm days in the spring. The dealers have shops with mechanics which is something no local Chinese scooter dealer even pretends to have..

  26. The Texas RRC has come out with their monthly update that includes July numbers. But their numbers are truly absurd. The June and July numbers look fairly reasonable but all previous data is way, way, too high. Their numbers for this year are below. I have converted the monthly data to barrels per day. So all the data below is barrels per day or MCF per day.

           Oil (BBL)    Casinghead (MCF)   GW Gas (MCF)   Condensate (BBL)
    Jan-14	4,462,948	 9,366,938	33,118,007	733,972
    Feb-14	4,515,473	 9,565,389	32,673,132	722,984
    Mar-14	4,547,238	 9,872,075	32,701,300	713,486
    Apr-14	4,612,626	10,149,740	32,591,318	708,628
    May-14	4,541,929	10,132,610	31,979,010	674,703
    Jun-14	2,338,627	 5,296,292	16,044,744	339,815
    Jul-14	2,256,533	 5,176,581	15,299,887	316,297
    

    I will have a post on this, later tonight or early Saturday, if they correct the numbers. But I am not going to fool with it as long as these numbers are this silly.

  27. Ronald Walter says:

    Another day in Paradise.

    Just for the record, one Zimbabwe dollar is worth 0.00276319 usd.

    One thousand Zimbabwe dollars is worth $2.76. One million Zimbabwe dollars is worth 2760 murkan pesos.

    After the Reichmark currency was marked up from a bill that read 10 Reichmarks to 10 million, it still just got you a bus ride across town. Then the worthless Reichmark currency was used for fuel to heat the cook stove so supper could be cooked, that’s the way it goes, first your money, then your clothes. The defeated Germans were cruelly abused by corporate ‘ethic’ and held in poverty for war reparations, set the stage for Hitler to become der Fuhrer. He can be credited for helping many Germans become gainfully employed and removed from their poverty, victims of circumstance, as it were. Corporations taking advantage of the German people are responsible, culpable. Didn’t the unemployment rate of over 30 percent dive to less than 5 percent after Adolf got things underway? Besides, President Jackson sent the Cherokee packing and the Trail of Beers was born. Humans can be so cruel.

    An election is a pre-arranged auction of already stolen property. If it is so important to have clean energy, just abandon Manhattan Island and give it back to the Manhattan tribe in its original condition. It’ll be free of all of the oil and buildings and clean energy will be from the sun alone. Fat chance that will ever happen. A whole island for some beads and trinkets and if that ain’t good enough, we’ll just wipe you off of the face of the earth. What you call a swindle.

    Money can become worthless and the murkan peso can too! Keeps the paper making business busy.

    A few words concerning energy and why it matters:

    “There are some who say that the rural electrification loan program gives the cooperatives an advantage over private utilities. But the reason is that rural electric cooperatives largely serve the remote and sparsely settled rural areas largely by-passed by commercial utilities. Their power lines climb over mountains and wade through swamps — where costs are high and commercial appeal is low. Adequate service is available, in many instances, in short, only because the financing of power distribution can be obtained at a favorable rate of interest.

    With many fewer customers per mile — with the high costs of meeting high peak loads during the day, when farm equipment is operating — with only a fraction of the total revenues of the city utilities — of course, parity of opportunity requires that the REA cooperative continue to have a more favorable interest rate. And even then, parity of opportunity is yet to be achieved.

    Moreover, unless capital is easily available, the increasing power needs of the farmer would soon result in acute shortages of energy. Great quantities of capital are needed in the electric business. And a major source of that capital in the farm areas is REA.

    Here in North Dakota, for example, REA is financing the largest lignite-burning plant in North America, located here to tap the lignite deposits of this state which represent 12 percent of the entire world’s coal resources. This plant alone will supply the power needs of 140,000 rural customers, served by 61 electric cooperatives in seven states. This is the kind of action which will help bring parity of opportunity to the upper Midwest. It will not only help meet the rapidly growing needs of the rural systems for more electricity, but permit those systems to avoid unnecessarily high power costs.

    De Toqueville said, after his travels through pioneer American, “Everything is extraordinary in America — but the soil upon which (their) institutions are founded is more extraordinary than all the rest.” He was referring to this nation’s family farms — farms such as those which predominate in North Dakota. Today those family farms and small towns still support the essential fabric of our institutions. And to them the rural electric systems which have bought them low-cost electric service represent hope as well as justice. In this effort they must be encouraged.” – President John F. Kennedy, September 25, 1963

    http://und.edu/john-f-kennedy-digital-archive/planned.php

    • Ilambiquated says:

      More mastrubation about Hitler. It’s so weird.

      • Old farmer mac says:

        Ilambiquated,

        I generally find your comments to be thoughtful and well worth reading but I have a hard time understanding why you say things such as ” More mastrubation about Hitler. It’s so weird.”

        Nazi Germany and Hitler are the best and most recent well known examples of the evils leaders commit and countries make and thus the best way to illustrate a lot of arguments.

        I haven’t seen any comments here praising Nazis or Hitler.

        We are so naive these days, most of us anyway , that we need frequent reminders of such evil people and what they will do given the opportunity.

        It just so happens that one reason Hitler succeeded in becoming a powerful dictator and starting WWII is that he did indeed put Germans back to work.

        I can’t remember the name of it, or of the author , but there is a classic short story about a commie takeover of America and a commie elementary school teacher running a classroom. She has the kids pray very very hard for candy but of course they don’t get any.

        Then she has them talk about the great new state and how good it is going to be and so forth and take their little nap and when they woke up THERE WAS CANDY ON EVERY DESK!!!

        I am personally afraid right now that we are trading away our privacy and civil liberties at a very fast pace for a mess of pottage in terms of a little temporary safety.

        Hence there has never in my opinion been a time when we need reminding more of the ways of government out of control.

        Of course the story was misinterpreted by almost every God fearing parent in the country that heard about it.Some love thy brother folks were ready to lynch the author.

        • Ilambiquated says:

          “He can be credited for helping many Germans become gainfully employed and removed from their poverty, victims of circumstance, as it were. Corporations taking advantage of the German people are responsible, culpable. Didn’t the unemployment rate of over 30 percent dive to less than 5 percent after Adolf got things underway?”

          Sounds like praise to me.

          There are plenty of examples of hyperinflation more recent than the Weimarer Republic, and Hitler didn’t solve the problem. There is no connection between Hitler and Zimbabwe.

          • Ilambiquated says:

            Want to talk about hyperinflation? Wikipedia mentions the following episodes:

            Angola, Argentina, Armenia, Austria, Azerbaijan, Belarus, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Chile, China, Estonia, France, Free City of Danzig, Georgia, Germany (Weimar Republic), Greece, Hungary 1923–24, Hungary 1945–46, Kazakhstan, Kyrgyzstan, Serbian Krajina, North Korea, Nicaragua, Peru, Philippines, Poland 1923–1924, Poland 1989–1990, Republika Srpska, Soviet Union / Russian Federation, Taiwan, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Yugoslavia, Zaire (now the Democratic Republic of the Congo), Zimbabwe

            What makes Hitler so important? I don’t get it.

            • Old farmer mac says:

              Sounds like the recognition of reality to me.

              Everybody has heard about Hitler and knows enough that reminding them can help raise awareness a little.

              Now think about this. In the old Russia of Stalin’s time it was a criminal offense to mention the TRUTH about enemies real or imagined. Solzenitsin (I can never remember how to spell his name.) recounts in The Gulag Archipelago the name of the law and meeting people PERSONALLY given ten year sentences to Siberia for remarking that the Germans were enemies not to be taken lightly. The approximate name of the charge was ” Praising the enemy ” .

              I personally consider any attempt to prevent actual known facts from being mentioned in good faith in discussing public policy,economics, ecology,etc, nothing more than pc doo doo.

              We are very easily lead down the primrose path by people who promise us things we want.

              Sometimes the very worst sort of leaders are the very best at keeping their promises. If you actually had read a good history about Hitler and the Nazis you would know that he kept almost all of his promises except the one that mattered the most- winning the wars he started.

              He laid out his basic program in principle in his book Mein Kampf (probably spelled wrong too) before he came to power. He kept the promises he made in it and more. Some of those promises had things to do with Jews and other minorities.

              WE CURRENTLY HAVE A GOVERNMENT PROMISING US SAFETY HERE TODAY IN THE US AT THE PRICE OF OUR PRIVACY AND CIVIL LIBERTIES.

              Full employment in Nazi Germany did not end so well now did it?

              I FEAR that promises of safety here are not going to end so well as unthinking people may think.

              There is more to understanding reality than pc doo doo.

              A ban on mentioning Hitler is the one and only thing guaranteed to make the world forget him and his evil doings sooner rather than later.

              Please forgive my ire but I am basically totally worn out with l the students in schools of eduction getting exclusively ”A ”s and ” B”s just being a passing grade.All the children are not above average.

              We need to face up to reality.

              We need to be reminded of what governments can do depending on the various forms of government.

              One aspect of reality that concerns me greatly right now is that our more or less representative government is not doing very much to get ready for an energy constrained future compared to the more or less authoritarian Chinese government for instance.

              I am not advocating swapping democracy for energy security and the Chinese may fail at achieving it in any case but they are making strides that leave us looking like heedless children.

              At some point the people who have stopped us from having a spent fuel storage facility in this country may wake up one day and find that their strategy has backfired in the worst possible way.

              We may have a Fukushima of our own. Spent fuel should be stored in places not subject to tsunamis and earth quakes.

              Now I understand the dangers associated with nuclear power as well as anybody.

              The only thing that scares me more than a big new fleet of nukes is the prospect of being without them and burning enough more coal to most definitely fry the planet.

              A nuclear accident that kills a million people and contaminates a few thousand square miles past habitability would be a horrible disaster- but compared to a few hundred million people starving due to climate change or a few billion dieing in HOT resource wars all about access to fossil fuels- not so bad.

              Reality is tough.Pretending otherwise is not going to make dealing with it any easier.

    • canabuck says:

      For the record, the Zimbabwe dollar was suspended in April 2009.

      This country serves as a good example of a collapsing economy, which may happen due to high energy prices, or bad government policy. I visited there in 2008, and inflation was 100% per week.
      I think the government was only 20% funded by taxes, with the rest made up by printing currency. The USA is about 80% funded by taxes. So, there is a long way to go before severe inflation.

  28. Techsan says:

    Here you go, OFM: a Nissan Leaf pickup conversion:

    <A HREF="http://www.bbc.com/autos/story/20140918-the-leaf-gets-rugged&quot; Meet Sparky, Nissan’s Leaf-based electric pickup

  29. The Wet One says:

    BTW,

    Is this: http://www.theatlantic.com/international/archive/2014/09/china-fracking-natural-gas-report/380450/

    going to change anything about the peak?

    If not, why not?

    And yes, I get that they’re fracking natural gas here and not oil, but aren’t there oil deposits in shale elsewhere to be fracked? Could such resources not be found elsewhere and exploited to hold off the peak for another few years just like in the U.S.?

    Thanks.

    • Old farmer mac says:

      I am only well informed layman but I think I know enough to say that nobody knows or else anybody that does know is keeping his pie hole shut in order to make a few hundred million bucks.

  30. BW Hill says:

    Hi Ron,

    We’re just finishing up an analysis on what the maximum price that the consumer can pay for a barrel of oil. We did this by looking at the energy dynamics of petroleum production, and consumption. It is essentially an extension of the Etp model. We still have some software to complete for more testing of the results, but I don’t think we are likely to turn up anything extra. Hope to have a page up on it at our site in the next few weeks.

    Thought you might be interested in the results because they very closely parallel your estimations. Our determination, to date, puts peak liquid hydrocarbon production in late 2016, at $117 per barrel. This calculation has a plus-minus 4.5% margin of error, which would put your estimate of 2016, and $125/b within its 95% confidence interval.

    PS: WHO just put out another briefing on the Ebola epidemic. They say the number of people who could have contracted the disease may hit 550,000 by the end of January. They say the number of cases are doubling every three weeks. Zero Hedge has an article on it.

    http://www.thehillsgroup.org/

    • Political Economist says:

      Very interesting! Looking forward to it.

    • Thanks BW, I am also very much looking forward to the report. I know there is a point, a price, where demand destruction will stop any price rise. I just don’t know what that point is. My best guess is $125 a barrel.

      The Zero Hedge Ebola article:
      Exponential: Ebola Cases Now Double Every 3 Weeks; CDC Warns As Much As Half A Million May Be Infected Soon

      This thing is getting scary, real scary. When it gets so bad people start fleeing the infected areas, it will only get worse.

      • Old farmer mac says:

        Yeah in might get bad enough that nobody other than some kid who lose their parents will starve soon in the countries where it is running wild. This is hard core sarcasm in case anybody wonders.

        Given the situation on the ground in countries where there is little modern infrastructure, even less in the way of medical professionals and equipment , and even less than that in terms of an educated population I am afraid the only realistic scenario is that the epidemic will burn itself out after a while for lack of victims. This could really depopulate some neighborhoods and maybe even large areas including any cities.

        This could take anywhere from a few months to a few years , depending on how many reservoirs of infection may exist. The pathogen may survive quite well without killing some hosts other than humans.

        Since there is basically nothing I can do about it other than drop my congress critter an email I am focusing on the likelihood of enough carriers getting into this country to start an epidemic here.

        The odds of this seem pretty slim to me but surely not slim enough to dismiss the possibility.

        As an old friend who I am not at liberty to name but who is nevertheless familiar to many regulars here is fond of saying,paraphrased ,Thank God terrorists are nearly always underachievers.

        • Anon says:

          This has an r0 pushing 2. It won’t burn itself out so long as it has anywhere to spread.

          • Lloyd says:

            Sorry to ask… What’s an ” ro pushing 2″?

            -Lloyd

            • Old farmer mac says:

              This is usually written ” r subscript zero” and pronounced r nought or something similar depending on who is talking.

              Basically it may mean the number of offspring born to an individual or couple in biology in general. In epidemology it is used to indicate disease transmission rates. If it is rtwo this means each infected individual on average will infect two more individuals.

              This is a vastly oversimplified answer but adequate in this context.

              But it does not matter how high it goes every epidemic must eventually burn itself out due to lack of new hosts.

              At some point the population will fall far enough for r to become less than one and new cases start declining.

              This might take a very long time and the disease may flare up several times.

              • Watcher says:

                I’d never heard of Rnought until Contagion. They devoted film time to it. Kate Winslet I think was the actress lecturing.

                Pretty cool.

    • Ilambiquated says:

      How much consumers can pay for oil depends on how frugally they use it — that is, how much value they get out of it. A lot of countries tax oil at a high rate. $117 a barrel would barely scratch the end user price, and could even be offset by lowering taxes.

      • Nick G says:

        On the other hand, a lot of industrial/commercial users will find better and cheaper substitutes.

    • Watcher says:

      “We’re just finishing up an analysis on what the maximum price that the consumer can pay for a barrel of oil. ”

      Will that be with or without the gov’t subsidies that will be enacted to protect jobs/GDP?

      • BW Hill says:

        Will that be with or without the gov’t subsidies that will be enacted to protect jobs/GDP?

        Yes it does. Those are societal costs of oil production. You don’t have oil production without roads, or a legislative system, an educational system, or a military. Some portion of them is included in the cost of producing the oil. As a matter of fact the societal costs of production are greater than the actual booked production costs. Utilizing the energy dynamics of the process allows for their computation, where as the bean counting approach can never take into consideration all the various components of the process. For example: does EXXON include the cost of the gas that the rough neck pours into this truck to get to the drilling site? Or, the millions spent by a state judicial system in a suit with Chevron. Or, the 100 of thousands spent by the state of Texas to train one of their reservoir engineers. The actual cost of producing oil is much different than what a double entry booking system would indicate. Energy dynamics is the only avenue available to incorporate them all.

        http://www.thehillsgroup.org/

  31. Nick G says:

    We’re surrounded by enormous amounts of energy: 100,000 terawatts of solar power continuously. PV is high EROEI, scalable, affordable, etc.

    Using PV to power a Nissan Leaf is far cheaper than using oil.

    • thrig says:

      Mmm hmm. And how much coal does China chow down on to whisk into existance those “too cheap to meter” solar panels? And how much oil is required to keep all those roads built and repaired? “Free” sunlight won’t magically fix the roads; every road repair crew I’ve seen has been heavy on the diesel, assuming there’s money to maintain the roads. The Highway Trust Fund is yet again not solvent, for the second time since the 2005 oil peak, and the Seattle roads I walk around on are mighty cracked and broken; something about not really maintaining the non-arterial roads since 1994 or so. Various engineering groups make noises after this or that bridge failure, and shake the collection cup, all the while car usage continues its healthy downwards decline. So why even bother rebooting the total marketplace failure that is the electric car 100 years later as we bump back down the energy density ladder? For the lithium strip mines, mere lucre, and toxic mine tailings? What a bankrupt culture.

      • Nick G says:

        And how much coal does China chow down on to whisk into existance those “too cheap to meter” solar panels?

        Quite a bit. And horses moved the first barrels of oil, and wood was used to mine the first coal.

        And how much oil is required to keep all those roads built and repaired?

        None is *required*, though quite a lot is still used. Electric equipment, and non-asphalt materials (concrete, etc) work just fine.

        The Highway Trust Fund is yet again not solvent

        Time to raise gas taxes, if only the Koch brothers would permit it.

        • Watcher says:

          Oil subsidies are coming, not taxes. Taxes would destroy all that employment in NoDak, and make no mistake here, that’s a signif chunk of national GDP.

          • Nick G says:

            Taxes on oil consumption would only lower prices if they dramatically reduced consumption.

            Which would be a good thing.

            • Watcher says:

              Nothing good about lower American consumption. That just leaves more for the Chinese.

              Sell the conservation meme to the Chinese FIRST, then come talk elsewhere. It is they who are growing consumption.

              • Nick G says:

                Why waste money, and expand our trade deficit, on unneeded oil imports?

                The less we spend on oil, the more money we have for other things, and the less there is for KSA and Iran to give to radical Islam.

                • Watcher says:

                  If you don’t spend on oil you weaken those govts.

                  But since when was the motivation for green consumption decline . . . money? That sounds like an item thrown in after the generic conservation motivation ran into the brick wall that is that mazamascience.com/oilexport link showing the slope of Chinese consumption.

                  Why not burn it before they can?

                  • Nick G says:

                    Nah, money is a perfectly good motivation.

                    Oil is expensive, dirty and dangerous. Some people care about the expensive part some people care about the dirty part, and some people care about the dangerous part. Take your pick.

      • Ilambiquated says:

        >And how much coal does China chow down on to whisk into existance those “too cheap to meter” solar panels?

        Less and less as the output from previous rounds of manufacture increases.

    • BW Hill says:

      Using PV to power a Nissan Leaf is far cheaper than using oil.

      Well, I don’t know that I would go so far as to say “far cheaper”. But, you are right about one part; the end consumer doesn’t care how they get their energy; whether it is a stinky, toxic hydrocarbon, or magic pixie dust delivered in a brown paper bag. As long as it heats their home, and makes their car go they could give a dam. That’s why we say people don’t buy oil, they buy energy.

      But oil offers a life style that few are willing to give up on, nor is there any ready replacement for it. Now, I just got back from Sarasota. If I had been driving a PV powered Leaf I would probably still be trying to get out of the state of Florida. By the time I got back to Virginia the dog would have forgotten who I was, and there would have been two years of mail in the mail box! You’ve got to admit that oil is pretty neat stuff.

      Nope, I don’t think that people are going to voluntarily leave the oil age, the oil age is going to leave the people. That’s when things will start getting messy.

      http://www.thehillsgroup.org/

      • Nick G says:

        Well, I don’t know that I would go so far as to say “far cheaper”.

        Ah, but you should. The Leaf is far cheaper to own and operate, per Edmunds.com, and PV is getting pretty competitive at the retail level.

        But oil offers a life style that few are willing to give up on, nor is there any ready replacement for it.

        There are better and cheaper replacements for it, right now, especially for passenger transportation: HEVs, PHEVs, EVs.

        Now, I just got back from Sarasota. If I had been driving a PV powered Leaf I would probably still be trying to get out of the state of Florida.

        Sure. What you want is a Chevy Volt. Or a Prius, which is a transitional EV.

        …oil is pretty neat stuff.

        Oil is dirty, dangerous and expensive. The sooner we kick the habit, the better.

      • Techsan says:

        I would go so far as to say that powering a Nissan Leaf on PV is far cheaper.

        A Nissan Leaf is seven times as energy-efficient as a gasoline car, at 4 miles per KWH; a Chevy Volt also gets 4 miles per KWH. (We have both; these are our measured values.)

        Because electric cars are so efficient, less than 3 years’ cost of gasoline for an average gasoline car will buy PV to power an electric car for the same number of miles per year for the rest of your life.

        Al Capone used to light his cigar with a $100 bill. Incredibly wasteful, no? But that’s what Americans do every week when they fill up two cars with gasoline and burn it.

        • Woody says:

          Your numbers seem rather off the mark as you are assuming a rather low gas mileage car and also don’t factor in that most electricity production is only about 1/3 efficient which eliminates most of the efficiency advantage.

          • Old farmer mac says:

            Efficiency doesn’t matter if it is solar or wind sourced electricity. Only the actual monetary cost of the electricity matters.

            Most people would not be able to keep an electric car charged all the time with their own pv system but the average cost of gasoline for a new car driven an average number of miles is probably in the neighborhood of thirty to forty bucks a week. People with new cars tend to drive them more than average and the gasoline bill would be more in a lot of cases.

            Add on another five hundred bucks for the extra routine maintenance needed by a gasoline car annually if you take it to the dealer and it wouldn’t take any longer to pay for a personal solar system with the savings than it would to pay for the car in a lot of cases IF YOU COULD INSTALL IT YOURSELF.

            IF old age does not prevent it I am eventually going to install a fairly good sized ground mount system myself with a laborer to help me and the only hired out part will be to have a licensed electrician do the final grid tie in for lack of expertise and for insurance purposes.

            I am fairly sure on the basis of rough calculations that I can easily harvest enough juice to drive a Leaf ten thousand miles a year with a system that would currently cost me well under ten thousand bucks except for batteries.

            The hangup is that I would have to arrange the use of the car so it is on the charger in the middle of the day a good many days which would pretty much rule out using it as a commuter except for an evening or night shift job.

            But a lot of trips to town in the middle of the day would not be a problem at all given that the car could be on the charger most of the day and maybe the next day during the best hours.

            If I could buy a very small pickup truck with a Leaf drive train in it right now I would be powerfully tempted to buy both the pv and the truck.The only thing that would stop me is poverty alas.

            A payload of less than a thousand pounds is plenty if you also have a larger truck as back up.Lots and lots of time before we retired I hauled loads to and from the farm smaller than that.

            Four super sized adults weigh a thousand pounds these days.

            One thing that I have not seen discussed seriously in any forum is the amount of money that could be saved by building a new bev car such as a Leaf in a factory leaving out all the extras we have become accustomed to over the last fifty years.

            Clear coat paint, carpet, sound insulation ,stereo systems ,electric mirrors,body moldings, remote controlled locks ,air conditioning and that sort of thing must add up to a fairly substantial amount.

            Stripping them out would not be a big deal to a farmer or auto parts store owner who has hired help driving the vehicle and the weight reduction would add at least a couple more miles to the average range.

            I suspect that everything else held the same the car would be at least a couple of hundred pounds lighter and that it would cost at least a couple of thousand bucks less to manufacture it.

            That couple of thousand bucks could go a long way if spent on adding back a somewhat larger battery.Maybe ANOTHER TEN MILES PER CHARGE?

            Another consideration is that the car body shell and chassis could be redesigned around the lack of this extra equipment making better use of the space.With an under the floor battery the conventional engine compartment would be mostly empty and available as an up front trunk since the electric motor is very small and mounts low.

            • wimbi says:

              We bought a Leaf about 7 months ago along with 10kW of PV, which I put in quite easily myself. since we live in the boonies and don’t worry about laws and all that. We then gave our honda fit to granddaughter, with right of instant return in case of need.

              BTW, all of above cost less than our friend’s pickup with camper, which he bought at the same time.

              Since then, have used only $10 in gas in the fit to get to a conference on how to save gas and other carbons. Rest of trips we much prefer the Leaf, which not only costs us nothing to run, but while far more plushy than needed, is real smooth to drive , and the ladies clubs love it and envy wife as she ferries them around.

              And, as the local fixit man, I far prefer the electric drive to that long line of IC engines I have nursed thru their messy terminal illnesses over the past many decades.

              We have just retrofitted a small tractor to electric, and use it’s battery pack as house backup power when grid goes down, which it tends to do if you really happen to need it. Tractor has an inverter, which runs all the standard AC power tools we cart around in a tool trailer to whatever catastrophe needs fixing at the moment.

              Yep, I am convinced PV electric everything is the way to go.

              • Watcher says:

                Given the reality that home ownership is cratering and renting is the New Normal, how does any of this silliness work?

                • wimbi says:

                  Watcher, you are a smart guy and real fast with a good short answer.

                  So, everybody rents, nobody owns any real estate, but they use energy, and move around. So to each, solar is silly.

                  What if they start to think as A COMMUNITY, not a bunch of isolated strangers fighting to survive. They notice something, if solar makes sense to me, a community of two, why wouldn’t it make sense to them, a community of say, E5?

                  Now, I await a good, short answer. Thanks.

                  • Old farmer mac says:

                    I’m a land lord and wouldn’t mind at all selling tenants all the solar electricity they want and will be doing so if I live long enough.

                    Short enough?

                • Watcher says:

                  Sell this to China first. That’s a big community for you to work on. And the operative word on all this is FIRST.

                  • Nick G says:

                    See my note above: unneeded oil imports are bad for the economy.

                  • wimbi says:

                    OK, I’m in luck. don’t have to sell it to the chinese, they are smart and can see ahead, unlike some people we know, and have already bought it. China putting big emphasis on EV’s and solar.
                    Done, now for here.

                  • Watcher says:

                    Be done after you look at Chinese consumption growth.

                  • wimbi says:

                    Can’t do a dam thing about the Chinese. Can do a little about me. So, just to get the ball rolling, sorta, I went out and retrofitted house and car for solar PV, and since that sort of thing is what I call fun, got a big bang out of it for fewer bucks than the guy down the road who went for the fat pickup.

                    But, you’re right, I forget that most people do not, as I do, think of hardware as nothing sacred at all, but just another opportunity to rearrange things to my desires.

                    “Be what you would wish the world to be.”

              • D.B. Turton says:

                The city of Edmonton, Alberta, at around Latitude 53.5 degrees north, is using a little Ford electric van as an experiment. They run for about 135 km (84 miles) in the short summers, and about 75 km (46 miles) in the long winters – heaters suck a LOT of juice in all vehicles!
                Problem in their evaluation of the vehicle is that almost all electric power in Alberta is from coal-fired plants (with about 10% from wind farms). No CCS is used on these plants, including the new natural gas-fired one. Still waiting to see results for the ‘efficiency’ of this little van.

  32. North Dakota governor sees oil production dip from flaring rule change

    WILLISTON, N.D., Sept 18 (Reuters) – Some of North Dakota’s oil companies likely will experience a production dip starting next month as they try to meet aggressive new flaring standards, Governor Jack Dalrymple said on Thursday.

    Flaring, the wasteful burning of natural gas that is extracted alongside crude, has become a widespread problem in the state, the nation’s second-largest oil producer.

    In an effort to curb the problem, which harms quality of life and reduces tax revenue, state regulators will require companies to flare no more than 26 percent of produced gas starting Oct. 1, with standards tightening in the future.

    If producers fail to meet the standards, they will have to curb production.

    Dalrymple: Oil production may decrease next month

    Reuters reported yesterday that the governor of North Dakota, Jack Dalrymple, stated that oil companies may experience a production dip in October due to new rules that limit flaring in the area. Flaring is the wasteful practice of burning off natural gas during oil production. Flaring is not good for the environment or for business. Companies in North Dakota alone burn off billions of dollars’ worth of natural gas every day. State regulators are requiring that companies do not flare off more than 26 percent of their gas beginning October 1st. These standards will continue to evolve and continue to lower the amount of gas that is flared as time goes on. If a company does not meet the standards they will have to produce less all together. North Dakota only flared 26 percent of its natural gas last month, reaching the October goal three months early.
    Reuters reports:
    “Even though they hit the goal months ahead of schedule, producers will have to maintain that into and beyond October as the physical volume of oil produced, and therefore natural gas, rises, Dalrymple said”.

    • toolpush says:

      Just in time to support the oil price!

    • Watcher says:

      If true this is a change from just a month or two ago. At that time it was said no production restraint would be imposed until January.

      That’s probably still true the this Governor was badly briefed.

  33. Regex Wald says:

    The North Dakota Association of Oil and Gas Producing Counties held its annual meeting this week. The big story was that the state has now revised the upper limit of the oil production forecast upward to 2 million bpd by the end of the decade (see the chart below which was extracted from the presentation at this link). This is in line with what a number of private sector studies undertaken during the last year have also determined. In fact, one of those studies was also released just this week — KLJ presents study on next 5 years of boom (“In the past, [KLJ] said the Bakken would peak at 1.4 to 1.7 million barrels per day, but…now predictions are for 2 million bpd by 2019. Forecasters in the past also considered multi-well pads to have four to six wells on them, but…in the most profitable areas, companies are putting more like 24 wells on a single pad.”).

  34. Watcher says:

    Small heads up, re washing salt encrustation out of shale wells periodically so they don’t close up.

    A ceramic proppant company is marketing some special chemical included with the ceramic proppant that is released on contact with water and inhibits scale build up.

    So the proppant (ceramic is already more than sand) would cost more, but save some money long term. This will be sufficiently puzzling that they’ll probably make a few sales, until the companies decide they don’t care if the well closes up, it wasn’t flowing much anyway.

  35. Ronald Walter says:

    Caterpillar manufactures 1000 horsepower engines for drilling rigs. When you need some power, a thousand horsepower is going to deliver the goods. It won’t happen with a foot driven crank. Something to think about.

    Riding a bike to work to avoid driving a car lasts about two weeks and then one day the rain is falling, maybe the wind is blowing, or it is 100 degrees outside, then the fad wears off quickly. I rode a bike on a 55 mile trek once and that was far enough for a long bike ride. The last 15 miles take much longer than the first twenty. I was determined to use a bike for transportation purposes, but after the ride ended, so did the determination. Way too much monkey business involved with bikes. Bikes are for kids.

    Might as well have a good car that has decent mileage or an electric car when it can be used and save your breath. You’ll be thirsty after a two mile ride in 100 degree temperatures, you’ll buy a bottled water for a dollar and it will cost more to ride a bike two miles than it will to drive your car those two miles. New York City had electric taxis in the 1890’s. Just keep changing batteries, you’ll be good to go. They knew back then bikes weren’t that great. Boneshakers and nothing more.

    Besides that, you’ll tire yourself out and the first two hours at your job will be for the rest you need to do the next six hours of work, then back on your bike for the four mile ride back home. A lot of work and expense to ride a bike, and one costs a grand and more these days for a good one, so it will be a wash in the long run. Cars are a better mode of transportation. You stay rested and clean, the bike will hang on the wall in the garage sooner than you think. It’s a terrible form of transportation. Take a bus or drive your car. There’s millions of cars for one good reason, it is a great way to transport yourself and others. It can’t be beat. It might not last forever, on the other hand, other kinds of transport will still be there. There’s always steam and coal to build the fire to heat the water. A steam powered locomotive will hit a 100 mph easy. Lots of horsepower and for a reason. Drop some sand on the rails and away you go. Diesel electric drives are even better, gotta have oil though. Urban dwellers don’t need cars, nor bikes, take a taxi or walk.

    I don’t think pro football players, pro basketball players and pro baseball players are going to ride a bike to the practice field during the week or to the stadium on game day.

    When the first oil well was fracked to loosen the rocks to release the oil, all that was done was to throw a stick of dynamite down the hole. You’ll get results, oil.

    Electric cars won’t be great on snow covered roads, there are limits. The ICE car is going to be a better choice when road conditions are less than desirable. A bicycle won’t even be considered.

    • Old farmer mac says:

      Keep it up Ronald, your comments are getting to be entertaining rather than merely bewildering. Beyond that you are dead on about biking today.

      We Americans will avoid them like the plague until we have no choice in the matter.The million or maybe two million of us who ride as adults for transportation rather than recreation and exercise are ” the exception that proves the rule”.

      Biking advocates are prone to overselling their arguments although the arguments are certainly rock solid for the most part. Bikes are cheaper by a factor of ten or more than cars, they cost next to nothing for maintenance compared to a car, they are dirt cheap to insure and insurance and tags aren’t even mandatory most places.Actually I haven’t heard of any place requiring an insurance policy but there may be some places that do.Bike roads if any are built will be dirt cheap compared to ordinary highways.No air pollution , no noise, and the traffic jam problem mostly vanishes with enough bikes.

      And I have saved the very best reason of all to ride for transportation till last. It is a proven fact that people dumb enough to ride in traffic live longer and healthier lives than their counterparts who drive and thus get a lot less exercise. It may be a bit counterintuitive but the benefits of the exercise substantially outweigh the risks of getting run over by a car or truck.

      But the ease, comfort, convenience, and REAL WORLD COST of driving in most people’s circumstances trump biking handily nearly every time.

      The plain facts are that most people who live near enough their jobs,shopping,friends,etc, to ride bikes already own cars and would still have to own a car even if they COULD ride a bike at least part of the time.

      And IF you have a car, a car that you must insure and maintain ANYWAY unless you get rid of it, THEN the cost of the additional short trips you COULD make on a bike are trivial.

      I go to town in my elderly Escort about once a week for fresh produce ( most of the people who sing the praises of local farm markets never seem to notice that they close up most of the year or that farmers markets in town actually sell the same shipped produce that supermarkets sell for the most part) and groceries and all the things I need that will fit in the car. As cars go it is very easy on gas averaging over thirty mpg. It costs me less that four bucks for gas to get to town and back.

      It takes a team of pretty tough looking bikers in their pretty suits that are all emblazoned with sponsors logos an hour to make it ONE WAY carrying nothing but a water bottle.I have passed them numerous times in both directions. I can go to the supermarket, get my groceries, and be back home in well under an hour if there is no line at the checkout counter.

      The average driver may not be able to articulate the cost argument in proper economic terms but he understands that the MARGINAL cost of using an existing insured and tagged car is trivial in terms of expense compared to the time alone needed to ride a bike more than a mile or two at the most. Of course this argument does not apply in city centers where you have to pay to park and walk half a mile to work anyway.

      The economy will probably eventually collapse to the point we cannot afford cars but we will never give them up in my opinion until that time arrives. Slamming the door and turning the key beats pedaling -except for fun and exercise- so badly there is simply no reason at all to think we will give up our cars until forced to do so.

      All the arguments we constantly hear about the range limitations of battery electric cars will blow away like smoke in a breeze once the choice is between batteries and gasoline. That trip to town to get my groceries illustrates the argument. I could go twice on a single charge in a Leaf with twenty miles to spare.And that is driving normally. Driving hypermiling style would probably enable me to make three trips with twenty miles to spare. That would still be MUCH MUCH faster than a bicycle and I would still be dry and my groceries would still be dry on a rainy day.

      One last thing-There is no reason to think a pure electric car won’t go just as well on a slick road as a conventional car but the range will fall off in cold weather.

    • TonyinPDX says:

      One of the reasons we moved to Portland, Oregon was because of the bicycling community. We ride our bikes for almost everything (NB: we are members of two car share companies, Zip Car and Car2Go, although we seldom use them). With my smaller bike trailer, I can tote the usual grocery store stuff. When my wife brings her trailer as well, we can tote a LOT of stuff. When I bring my big trailer, I can haul lumber, sacks of fertilizer … bigger stuff. And, no, we’re not young. I’ll be 58 soon, my wife is in her 60s. I’ll ride in just about any weather. Even when it’s ice (I have studded tires for one of my bikes). They say that there’s no bad weather, merely bad clothing choices.

      When I worked at the VA hospital, which was one heck of an uphill ride (leaving at the end of the day was a blast!), several people used to comment on how I hit the ground running everyday. That ride really woke me up, and energized me.

      Driving downtown is a pain, and parking is even worse. But biking there is a snap. And fun. And then there’s the naked bike ride in June (with 8-10,000 of our closet friends), but that’s another story. You won’t see that in the “automotive community”.

    • Techsan says:

      As someone who still (at age 67) rides a bike to work several times a week, I beg to differ. I have ridden from 25 F to 108 F, in sun and rain and snow and ice. Once, after an ice storm, when I needed to get to work by noon and roads in the hills were still closed to cars, with police blocking the roads, I was able to get through on a bike (walking around the ice patches).

      Bicycling to work is so good for your health that it will add about 8 years to your life on average (after subtracting the small chance of being killed by a car). Google “Andersen bicycle mortality Denmark” : they found that those who do not ride bikes to work have 39% higher all-cause mortality.

Comments are closed.