The EIA recently published the February edition of their Short-Term Energy Outlook. If you follow this month to month, and I do, you will notice their prognostications change a little every month. And over several months those small changes can add up to some rather dramatic changes. Nevertheless, below are several charts with their current oil production projections.
The EIA STEO only gives monthly data for total liquids. All C+C data is quarterly and annually. The monthly projected data begins in February 2016. Projections for quarterly and annual data begins January 2016.
The EIA says Non-OPEC total liquids dropped .5 million barrels per day in December and another .36 mbd in January. But then, other than another short drop in the first quarter of 2017, they see things leveling out for the next two years.
For the total world, the EIA expects far better production numbers than just for Non-OPEC. They expect new highs to be reached in 2016 and again in 2017.
They see US total liquids dropping in 2016 then they begin a slow rise through 2017, but not overtaking the peak in 2015.
Apparently the EIA thinks Russia has had it. They see a drop in December 2016 then a huge drop in January 2017. I have no idea why. However the scale here makes the decline seem greater than it really is. From January 2015 to December 2017 the decline is only 400,000 barrels per day.
Adding the other FSU nations to the mix, mostly Azerbaijan and Kazakhstan, only exacerbates the decline, making it half a million bpd between January 2015 and December 2017.
Looking at just Crude + Condensate I think we get a better picture of what the EIA really expects in the next two years. They expect Non-OPEC C+C to drop 580,000 bpd in 2016 and another 170,000 bpd in 2017 for a total of 750,000 bpd over the two years.
They are expecting far better things out of OPEC however. They have OPEC total liquids up 1,010,000 barrels per day in 2016 and another 870,000 bpd in 2017. They do not project OPEC C+C.
But taking a closer look at their US Projections:
The EIA expects US C+C to drop 740,000 barrels per day in 2016 and another 230,000 bpd in 2017 for a total decline over two years of 970,000 barrels per day.
However they have US total liquids faring much better then just C+C. They have total liquids declining by only 490,000 barrels per day in 2016 and increasing by 100,000 bpd in 2017.
What this means is that US “Other Liquids”, that is NGLs, biofuels and refinery process gain must show a very impressive gains while everything else is going to pot. They show other liquids increasing by 250,000 bpd in 2016 and another 330,000 bpd in 2017.
Most of this increase has to come from NGLs as biofuels are only a minor input and refinery process gain pretty much follows C+C consumption. But…
Using their projections for Dry Gas production we find that gas production increased more than other liquids increased in 2015. However they say gas production will increase by only .4 percent in 2016 while other liquids increase by 4.6 percent, and a similar story in 2017 though not quite as dramatic.
Bottom line: I find the EIA’s past production data very accurate. However their projections appear to be pretty lame. This observation is proven out by the fact that those projections are constantly changing. Also, those “Other Liquids” projections seem to make no sense whatsoever. It appears to be mostly a fudge factor.
But the very biggest problem with the EIA’s projections are with OPEC. That is because it is not a projection at all but an estimate of what will be needed to meet world demand. That is they estimate Non-OPEC production, then they estimate world demand, and the difference between the two will be the “Call on OPEC”. That is, they will simply expect OPEC to make up the difference, whatever that difference may be.
Lately however, OPEC seems to be producing a lot more than their call asked them to. That is, they appear to be ignoring their call. And they will likely do likewise when they are expected to produce more to meet demand. They are all currently producing flat out and if there is a call on them to produce more, it will very likely go unanswered. I expect the “Call on OPEC” is a running joke between OPEC nations.
______________________________________________________
Note: I send out an email notice whenever I publish a new post. If you would like to be added to that list then email me at DarwinianOne at gmail.com.
Hi Ron,
First thank you as always for your contribution on such an important topic. So in summary the EIA projections for increased world supply (2nd chart) are to come entirely from OPEC? Is there a country by country prediction for this?
No, the EIA does not publish OPEC country by country future oil production estimates, only OPEC as a whole. I guess the EIA thinks that when they make that “call on OPEC” OPEC will dictate just who puts out all that extra production. 😉
“Just How Accurate Are The EIA’s Predictions?” – has there ever been a statistical analysis of the accuracy of previous predictions? I’d guess the result would be poor. If every poster on this site was asked for a prediction and the results averaged I’d give it about five times more credibility that EIA or IEA.
A question more related to the previous OPEC post: when OPEC give Qatar numbers how is the GTL diesel from Pearl and Oryx recorded (e.g. as crude, as gas, as both or neither)?
The only thing that OPEC counts, in their quota totals, is crude, crude only. Not even condensate is counted. So it does not matter how much of any other product Qatar turns out, that is not counted.
Of course quotas are pretty much a moot point these days. No one pays any attention to them.
George
The EIA itself started doing a retrospective of their AEO (Annual Energy Outlooks) last year.
The report and tables as data files is at:
https://www.eia.gov/forecasts/aeo/retrospective/
The report as one big pdf:
https://www.eia.gov/forecasts/aeo/retrospective/pdf/retrospective.pdf
Hopefully somebody handy with a calculator will try to figure out roughly how much of total world production consists of condensates, natural gas liquids biofuels, etc.
I am not too sure about the comparative energy content of biodiesel and other bio fuel oils, as to their energy content compared to crude, but it takes almost three barrels of ethanol to equal a barrel of crude.
I seem to remember reading that natural gas liquids and condensate contain only about seventy percent of the energy per barrel as crude, about the same as ethanol.
So – with condensate and ngl’s making up an ever larger share of total liquids, the AVERAGE energy content of the total liquid barrel must be declining significantly.
Some people believe that the net energy content of American coal was declining significantly even as the tonnage mined was going up noticeably, a few years back, due to the coal from Wyoming being so much lower quality.
It seems possible that we might have already passed peak net energy from total liquids, and maybe even peak net energy from all fossil fuels combined.
I’m estimating that global crude oil production* was about 69 million bpd in 2005 and 68 million bpd in 2014. I would assume around 69 million bpd for 2015. Global total liquids production was 85 million bpd in 2005 and apparently about 96 million bpd in 2015.
So, I estimate that actual global crude oil production, as a percentage of total liquids, fell from about 81% in 2005 to about 72% in 2015.
In regard to the US, I estimate that actual crude oil as a percentage of total liquids fell from about 57% in 2005 (4.7/8.3) to about 49% in 2015 (7.3/14.8).
*45 API Gravity & Lower Crude Oil
If the collective or average energy content of “other liquids” IS only seventy percent of the energy content per barrel of conventional crude oil, then ten million barrels of conventional are worth about twelve and a half barrels of “other liquids”.
If it turns out that conventional crude HAS hit it’s ultimate upper limit, as indicated by the plateau in production of it, for the last decade, even with the price skyrocketing, then each MILLION new barrels of “other liquids” are will be worth be worth only seven tenths of a million barrels of actual OIL.
Of course the impact will not be quite so bad , in terms of the energy of the total liquid fuel supply, because the total supply already consists of about twenty eight percent “other ” according to JBB’s estimate.
Something tells me net energy per capita per barrel of liquid fuel is in the rear view mirror and receding from view at a steady clip, given the growth of population.
That might not matter as much, except at a moral and humanitarian level, as we think however, because most of the poor people of the world are never going to own and drive automobiles.
But it is reasonable to assume that even the poorest parts of the world will see substantial percentage point increases in oil consumption, so long as oil can be bought at any price, because the less oil you use, the greater the utility of each barrel.
A gallon burnt in a heavy truck delivering food from country side to city is worth twenty or thirty or even forty or fifty bucks, once the truck and the road are in existence, in comparison to the alternative of hauling it with draft animals or human muscle power.
It could turn out that the world wide economy will go downhill FASTER than the available supply of oil, even as high cost producers drop out. If NO new oil is brought into production, the supply will decline at somewhere between four and eight percent annually, according to all the estimates I have seen.
Personally I find it hard to imagine the world wide economy WILL go downhill FASTER than oil supply,barring global level Black Swan events, so I am convinced the price of oil will go up.
This is not to say the economy can’t go downhill faster than oil production in the SHORT term . It might, and so the price of oil might stay low for some time yet, until depletion takes it’s toll.
Oil producers are stubborn bastards, and will give up no faster than they go broke. Some of them can generate some cash for decades yet to come, even at thirty or forty bucks per barrel. If they go broke,due to not being able to pay off loans, whoever buys their wells will buy them cheap enough to continue to produce them.
I will personally gladly pay twenty bucks per gallon, so long as I can get diesel fuel, before I even CONSIDER going back to horses and mules.
Ya feed a car or truck PER MILE you drive it, and a farm tractor PER HOUR you run it. Ya feed draft animals three hundred sixty five days per year. NO CONTEST, unless you CANNOT buy diesel and gasoline at any price.
Mac,
I was chatting with my Norway niece (Nicole/Nikki) this morning and, I recalled, you were asking about the distinction between “oils” and their relative energy value. Remember, I’m 75 now and the grey cells are evaporating rapidly but we had a decent connection so this is (basically) her comment: all errors mine.
She said that any distinction between oil and condensate is artificial and arbitrary. They’re both crude in that compositions are whatever came from the well with no processing other than simple separation. Apparently some oil people simply use five classifications for reservoir fluids: black oil, volatile oil, retrograde gas-condensate, wet gas, and dry gas. And, since most hydrocarbon liquids are close to the (CH2)n formula, the energy content/pound is fairly constant (roughly 17,000 BTU/lb).
Really heavy crudes can be difficult to refine because they’re more likely to be contaminated with sulfur and heavy metals that can poison refinery catalysts, they’re hard to pump, they can leave fouling on the process equipment, and they need more processing (cracking, reforming, alkylation) to produce light fuels (gasoline, diesel, jet fuel). According to her, the bigger concern would be the percentage of heavy industrial gunk which is useful only for big power plants, ships, and industrial furnaces or even road asphalt.
When she got into C12+ hydrocarbons, aromatics, benzene rings, alkenes and branched isomers I got bored and asked about her new boyfriend. Is that any use?
Doug,
This actually is a pretty complex topic.
Please note that while the number of BTUs per unit of weight is equal for condensate and oil, the energy content per unit of volume (barrel) is not. It is approximately 12% lower for condensate (on average). So when you measure total production in volume units not weight units, and most of your production is condensate you inflate the amount of energy extracted. With 50/50 mix of oil and condensate the inflation is around 6%. That means that to get proper comparison with, for example, Europeans data where most production is Brent crude or heavier, you need to multiply US data with factor 0.96 or so to equalize the energy content. That also imply that any claim of world petroleum liquids production glut using volume comparison is unscientific. And any claim about “oil glut” which is less then 1% of total volume of petroleum liquids produced (around 1 Mb/d) is pure propaganda.
As Steve from Virginia aptly noted
http://peakoilbarrel.com/opec-january-production/#comment-559218
Repeating after Steve: “so-called ‘glut’ is simply another finance industry/media narrative”. Or, if you wish, another noble lie in Leo Strauss style. See http://peakoilbarrel.com/collapse-of-shale-gas-production-has-begun/#comment-558479
Looks like the US elite is afraid to go full force into oil conservation mode and was unhappy with “secular stagnation” of the economy. It preferred to drop oil price to solve the problem of “secular stagnation” or at least to postpone the day of reckoning: yet another financial crash which is immanent under neoliberalism, but which might undermine their political power.
Instead, Obama administration adopted Madame de Pompadour “Après nous le deluge” (“after us deluge”) mentality…
Also the mix of refined products you get from the unit of weight of each type of oil is different and you can never get even close in the amount of aviation kerosene and diesel from condensate as from WTI or Brent.
Actually my impression is that the fact that in the USA oil is bought by volume predispose US refineries to heavier oils, as there is more energy content in them and thus they can get more bang from the buck for them.
See Jeffrey Brown’s post about rejection of some blends by US refineries for details.
Hi Doug,
Thanks that is very useful.
Below I show World liquids consumption in Mb/d and Mboe/d using BP data from the Statistical Review of World Energy.
To find Mboe/d I took world consumption in metric tonnes and assumed 7.33 b per metric tonne. Sorry about the typo on the chart, too late to correct.
We hit the peak in World output per capita in 1979.
When she got into C12+ hydrocarbons, aromatics, benzene rings, alkenes and branched isomers I got bored and asked about her new boyfriend. Is that any use?
Well, compared to colliding black holes and gravitational waves, and E=MC^2, organic chemistry is pretty cut and dried… 🙂
Got a small problem with this.
Diesel became used for a reason. Ditto jet fuel. Problems arose that were only solvable by changing to that fuel. There’s a sort of overly glib presumption that energy content for condensate is only down and not zero, applied to . . . not a diesel engine but to the problem addressed by the diesel engine.
The volume/weight thing is a pretty big deal, too. Fuel tank capacity is not defined by weight.
Sorry, but Nicole is wrong. Oil is found as a liquid phase fluid in the reservoir, while condensate is found in the gas phase in the reservoir under static conditions. “Some oil people” isn’t the right description. Petroleum engineers consider the initial conditions and composition of the hydrocarbon system to define how it would behave under different development and operating schemes. These groupings you listed are a very sensible and technically sound system to describe system behavior as the reservoir is produced.
For the non specialist the separation of the crudes by API will do. Use 45 degrees, it seems to do the job. And don’t worry too much about the other details. As we can see, even petroleum engineers can get s bit lost in this area, which is mostly the purview of hard core reservoir engineers and process equipment designers.
Nicole responds: “With respect, the term black oil is particularly imprecise and context-dependent; to a reservoir simulation engineer like me, that means the simplifying assumption that the fluid can be characterized by only two components, one of which can exist in only one phase whose properties we can characterize the other component dissolves in that phase; that phase is black as in “black box”, not color. Usually the non-partitioning phase is the heavy component (separator oil may contain dissolved gas, but the gas phase contains no oil), but it works the other way, too (separator gas can contain condensate vapor, but condensate can dissolve no gas). When it’s applicable, the black-oil assumption saves “lots” of computational effort.”
Thank you Nicole and Doug for the information.
It seems if we are interested in the amount of liquid energy produced in terms of exajoules we would pay attention to the tonnes of liquids produced and just convert to Exajoules.
So for oil consumption data in BP’s Statistical Review of World energy we would focus on the data by weight and use a conversion to Joules (or Exajoules).
One billion metric tonnes of oil equivalent are about 41.87 EJ.
Chart below with World Liquids consumption in Exajoules per year using BP Statistical Review of World Energy 2015.
Nicole left for her bi-monthly platform tour so I’ll say if you stick to weight when doing your rough oil/condensate energy conversions your numbers will be OK. My Proviso: I’m NOT an oil guy. Don’t include NG though, which is mostly methane (22,000 BTU/lb) ????
Thanks Doug,
You know far more than me, just from your conversations with Nicole, and I believe you are also a geophysicist, and have worked in the industry. You may not be up to date on the latest oilfield tech, but you are very knowledgeable nonetheless.
The “liquids” are biofuels, NGL, and C+C in my chart. Methane is not included.
Barrels, BTU’s, mcf, CMO, enough dungpiles ! Save us. Remember http://www.theoildrum.com/node/2320.
Real Energy, as in MT, Calories, EJ would be so clear.
Nicole is still wrong. She answered the point I made with a rather pedantic point which failed to address my comment: the distinction between oil and condensate is whether they are found in the liquid or gas phase in the reservoir. Condensate is found as a gas in the reservoir. The distinction isn’t artificial nor is it arbitrary. She has a bit to learn, probably because she’s too much into her specific experience. Comments in a blog have to teach the audience whenever possible. Hers didn’t.
Right, I’ll suggest she forgo future comments. Nicole lacks confidence in her English anyway so it won’t be difficult to muzzle her.
I disagree.
The important point was energy per unit mass is the same.
In Nicolas view if we are concerned about energy just look at mass produced.
I agree.
Please keep the comments coming Douglas
Fernando knows more than me but not more than your niece.
I am a little puzzled over condensate. If it exists in the gas phase, in the reservoir with, presumably, high pressure, how does it condense to liquid when extracted and the pressure is reduced? I would have expected the reverse. Am I mis-understanding something, confused or just lost the thread?
NAOM
At high pressures, as found in gas reservoirs, things don’t work the same as at atmospheric pressure on the earth’s surface. There is a phenomena known as retrograde condensation where as the pressure is reduced at constant temperature, liquid condenses out of the gas (.e. condensate). If the pressure is further reduced then it will start evaporating again (which is what we are used to seeing).
If the gas is cooled at the same time (which happens naturally when gas is let down in pressure with no heat source present, or if it cools from the hotter reservoir to ambient conditions, say in a pipeline) then there is relatively more liquid formed. In the past condensate was sometimes called drip gas as it dripped out of pipelines from a combination of these effects.
http://www.jmcampbell.com/tip-of-the-month/2007/06/why-do-i-care-about-phase-diagrams/
That was a pretty good explanation. Several years ago I had to explain the way this works to my boss, and I resorted to explaining that a multi component system had molecules bouncing around, and that at high pressure we saw the lighter molecules kicking the heavier ones into the gas phase if they ever decided to settle down into a liquid. It worked.
Thanks, that helps.
NAOM
I posted a long explanation that seems to have got lost so try this:
http://www.jmcampbell.com/tip-of-the-month/2007/06/why-do-i-care-about-phase-diagrams/
because it also hot and will exist as liquid at ambient temperatures.
http://www.naturalhub.com/slweb/defin_oil_and_natural_gas.html
forbin
DougL,
“…asked about her new boyfriend. Is that any use?”
Of course not. Why would I care about her new boyfriend?
I would suggest, as I always do, that if she finds herself putting up with him acting like a jerk, walk away. His problem, not hers.
Synapsid,
Clearly my words are confusing because I wouldn’t expect you or anyone here to give a rat’s ass about Nicole’s boyfriend. OTOH, Nicole is dear to me (like both my Daughters) and her happiness is on my list of life’s concerns. Actually, when I was first working in industry female engineers took a lot of crap from fellow male workers; it’s not like that now. In fact, she once told me that guys on the rigs ALWAYS treat her with utmost respect and I’m sure it’s no different with her new boyfriend, who I met very briefly at Christmas. Besides, I’ve never met a Norwegian woman who’d tolerate much crap, and being married to one for over 40 years, I speak from experience. I apologize for any confusion.
The apology is mine, Doug–I used an invisible yellow smiley face. I do beg pardon.
I don’t try to be annoying. It’s (sigh) a natural talent.
Ahem. Now, about that organic-chemistry comment: At the level of reactions and bonding quantum effects are in play, and cut-and-dried goes out the window and EGO (eyes glazing over) is diminished.
Don’t forget it’s in Norway. The best solution is for her to call the city psych agency to send a team of reeducators who will treat him with kindness and teach him his behavior is his parents’ fault.
This is the sad part Old Farmer Mac. You will not even consider going forward to horses and mules.
I spend a lot of time in Ethiopia, Africa. Humanity and coffee originated here. A large part of their agriculture is still done with oxen plowing the fields. A public taxi in a rural town can still be horse and cart. Donkeys carry cement to many building sites side by side with modern trucks. Those animals are very frugal in their food and water consumption.
And then there are the do-gooders. Those damned NGO’s (charities) that see it as their first mission to buy Toyota Landcruisers to ensure their pompous leaders can be carried in perfect comfort from one five star conference to another to discuss some project in the way waste societies do business. These people are completely blind to the fact that they are destroying what are in all likelihood man’s oldest civilization. Ethiopians are not the ones who build the biggest castles or created the most exquisite art. But they have been around the longest. The skeleton of Lucy is dated at over 3 Million years . That means they know a thing or two about survival.
So you might be forgiven for assuming that people come here to LEARN and see how we could live sustainably. Instead, they introduce “development”. That is of course another term for burning fossil fuels.
Whatever “un-developed” pockets of humanity manage to survive will be among the leaders when oil man finally goes extinct.
This is the sad part Old Farmer Mac. You will not even consider going forward to horses and mules.
I spend a lot of time in Ethiopia, Africa. Humanity and coffee originated here. A large part of their agriculture is still done with oxen plowing the fields. A public taxi in a rural town can still be horse and cart. Donkeys carry cement to many building sites side by side with modern trucks. Those animals are very frugal in their food and water consumption.
And then there are the do-gooders. Those damned NGO’s (charities) that see it as their first mission to buy Toyota Landcruisers to ensure their pompous leaders can be carried in perfect comfort from one five star conference to another to discuss some project in the way waste societies do business. These people are completely blind to the fact that they are destroying what are in all likelihood man’s oldest civilization. Ethiopians are not the ones who build the biggest castles or created the most exquisite art. But they have been around the longest. The skeleton of Lucy is dated at over 3 Million years . That means they know a thing or two about survival.
So you might be forgiven for assuming that people come here to LEARN and see how we could live sustainably. Instead, they introduce “development”. That is of course another term for burning fossil fuels.
Whatever “un-developed” pockets of humanity manage to survive will be among the leaders when oil man finally goes extinct.
I very much sympathize with your view. But, being an incurable R&D engineer, I can’t leave good enough alone. I daydream of a hybrid donkey cart. The donkey pulls the cart, a super simple steam engine in the cart, running on the same fuel as the donkey, boosts the pull in proportion to the donkey pull, result, super strong donkey. Strongest part of donkey does not eat when not working.
Survival. On donkey fuel. Only a few fatal explosions every now and then. (Always some little cost for progress.)
“same fuel as the donkey”
Same as in reused?
😉
NAOM
Ahh. Yep, Donkey – poop – steam.
Like combined cycle. Gas turbine – exhaust – steam.
Donkeysteam. Quick, patent!
Sidney Mike,
I would suggest that whatever Lucy has to say, it applies to all of us, not just to the inhabitants of the Horn of Africa.
I agree with you about the NGOers. How they can act as they do is beyond my comprehension.
Nobody can tell if Australopithecus afarensis was an ancestor species to Homo or not, but in any case we share common ancestors with all Ethiopians since at least the emergence of anatomically modern humans at around “only” 50,000 years ago. We have evolved the same, we have survived the same, our ancestors have probably traveled more and picked some gene varieties from Neanderthals that Ethiopians don’t have, while they retain a bigger share of old sapiens varieties that didn’t make it out of Africa.
“So ‘ere’s ~to~ you, Fuzzy-Wuzzy, at your ‘ome in the Soudan;
You’re a pore benighted ‘eathen but a first-class fightin’ man;”
Well writ, Sydney Mike.
Wimbi, it’s the land that counts, naturally. We cannot afford to lose touch/sight of that in our pursuit of technology and pretty much anything else.
Inasmuch as technology is an enabler, it is also a decoupler/disabler in less-than-wise hands.
Timeless Land
So, if half of the US liquids is condensate, what are the refiners doing with it?
I’m assuming that the condensate is less than octane, so they can’t (easily) make gasoline or diesel or jet fuel or anything heavier out of it.
I know you think there is a lot of condensate in storage, but we don’t have that much storage.
Continued from here…
The State won’t hold without (at least close to) full and mutual ‘coercion’, mutual responsibility and interdependence– like an organism, an ant colony, with no real elites nor inequality/inequability.
But do you know what you then have? An ‘organism’. A ‘trap’.
The moment an element or elements in an organism get out of line (corruption, rebelliousness), the organism is in trouble and can– and does– collapse.
And then it’s back to ‘anarchy’ and much less coercion– dubious, structural or otherwise.
Is that the State you want, Dennis?
See also
Hi Ron, great post and love the blog.
When I look at the world total liquids production chart, it looks like production dropped from about 96.7mmbls/d in summer 2015 to about 95.1mmbbls/d in January – a drop of roughly 1.5 mmbbls/d from peak. Do you think this is accurate? If not, how accurate do you think those numbers are?
Jin
The actual data:
That’s a decline of 1.51 million barrels per day from August to January. I am sure that is not exactly accurate because all the January numbers are not in yet but I would think that it is pretty close. I am not really shocked by those numbers.
I am not really shocked by their projection through the end of 2017 either. But I just flat don’t believe those numbers at all.
Ron. This has probably been covered somewhere else, but are there any major non-opec projects coming online the next months that would account for the significant chnage in slops from historic data to the forecasts?
I haven’t heard of any new projects that would account for such such an increase as the EIA shows. However they have access to a lot more data sources than I. But I believe a lot more projects are being cancelled than are now coming on line.
An interesting WSJ article from late 2015:
WSJ: From Oil Glut to Shortage? Some Say It Could Happen (12/30/15)
The price rout has caused oil companies to cut deeply into investment
http://www.wsj.com/articles/from-oil-glut-to-shortage-some-say-it-could-happen-1451499384
*Awash in total liquids perhaps, but IMO not in actual crude oil
Talk about expensive crude oil . . . .
Based on the WSJ article, global upstream capex was about $1.5 Trillion in 2014 & 2015 combined. I don’t know what the division was between crude oil and gas + associated liquids (condensate & NGL), but it’s plausible that it took about a trillion dollars over a two year period, in order to keep our global crude oil production base approximately stable, at around 68 to 69 million bpd, versus an estimated 69 million bpd in 2005.
If that was solely CAPEX it seems high – assuming 4 mmbpd per year is needed to be bought on line and $70 to $90,000 per bpd average development costs gives $560 to $720 billion. maybe up to $1 to $1.2 trillion with gas developments included. So maybe it includes exploration DRILLEX as well, or costs have gone up a bit (or decline is higher than I’ve assumed). But I think it must include all oil and all natural gas, greenfield and brownfield.
Either the current ongoing cuts, which for me go back to the cancellation of the Voyageur upgrader in May 2013 with about $3 billion write off of sunk costs, are going to have a huge impact over the next five years for oil. Maybe a bit longer for gas as the LNG projects are still coming on line feeding an already large glut.
The cuts in exploration budget will impact as well, but given how little oil in large fields has really been found since Johan Sverdrup in 2010, maybe it’s not such a big deal (the lack of discoveries with or without exploration will of course be a large impact).
Here’s the relevant excerpt from the WSJ article:
You’re right. I was a little off with my math. They were projecting that 2015 + 2016 total global capex (oil and gas + associated liquids) would be about $1.2 Trillion, not $1.5 Trillion. So, then the question is the allocation between crude oil and gas reservoirs.
However, I was correct that Rystad Energy put total global upstream capex at about $1.5 Trillion for 2014 and 2015 combined.
According to the most recent Barclays survey, the primary source of data on global upstream capex, total spending was
$673.2bn in 2014; $520.5bn in 2015 and is projected at $444.4bn in 2016
http://www.oilandgas360.com/ep-capex-first-double-dip-since-86/
Assuming normal base overhead in a development group is 30% that would be $200 billion worldwide, leaving (say) about $500 billion for projects If each average project lasts five years but the main outgoings are in the central four years (the first year is studies, FEED, etc.) then $125 billion of projects are finished each year. To me that and the figures above imply that new project approvals are at best 10% of normal (in 2015 some projects in progress were cancelled and in 2016 the short term projects cancelled in 2014 and 2015 don’t show and therefore don’t need to be cancelled again). This year the same might happen and there would be $60 billion cancelled for 2017.
In my experience it is very difficult to do major projects faster than ‘normal’. You can try but then come start-up, whoops – nothing seems to work properly. And this would be especially true if a lot of the experienced staff were gone (i.e from redundancy or voluntary retirement) and there had been low recruitment of the better graduates.
Therefore in 2019 through to 2023 there will be virtually no new large projects coming on stream, oil or gas – maybe 400 mmbpd per year at best, maybe more if LTO can gear up quickly somehow (which seems to be assumed without any real evidence). If infill drilling gains have been exhausted and the real decline rates from larger fields reveal themselves to be 8 to 10% at the same time, we are really in trouble. Note it won’t just be transport that gets hit, NG poser generation would decline as well.It’s hard to see how it would be possible to f*ck things up for the future much more than we’re doing at the moment.
Somebody please tell me this is wrong.
Three factors to be taken into account:
1/ Projects at final stages of development scheduled for start-up in 2016-17 were not delayed. Projects that started in 2014-15 are ramping up output.
2/ Companies have severely cut exploration capex, but less so development capex. Greenfield projects with long payback period were cancelled or postponed, while less costly and shorter-term brownfield projects in already developed regions with existing infrastructure continue. Infill drilling continues in most regions.
3/ Lower capex partially reflects cost deflation (about 30% from mid-2014 to early 2016 in the U.S., 10-20% in other regions). Capex cuts in local currencies are less than in US$ terms due to massive devaluations in a number of oil exporting countries.
But in general you are correct. The impact of new project delays will be felt by 2020 and in the next decade (see the chart below from WoodMac).
Hi AlexS,
The chart is very interesting, but note that the evaluation was in June 2015 when the average Brent crude spot price was over $60/b.
The same analysis done in Jan 2016 with Brent crude at about $31/b might look somewhat different.
Came across this post at Wood Mac Blog,
http://www.woodmac.com/blog/breaking-the-cycle-cost-efficiency-in-upstream-oil-and-gas/
real costs have risen a lot in the last 10 years.
Chart below.
Note in an attempt to get the chart to post I reduced the resolution, but it is not readable.
Link below to a readable chart
https://drive.google.com/file/d/0B4nArV09d398bkUyOTRwLWhTNGc/view?usp=sharing
Dennis,
The report is dated January 2016
http://www.woodmac.com/analysis/PreFID-2016-USD380bn-capex-deferred
Furthermore, for 2016-17 production volumes, it doesn’t matter how many pre-FID projects are postponed. All those projects were expected to start production several years from now
Hi AlexS,
Thanks. I couldn’t find the article when I went to the WoodMac site.
I misinterpreted the chart without the link to the article.
For large projects the impact of low prices looks minimal before 2020.
Keep in mind there is about 20 Mb/d that WoodMac does not cover (probably smaller producers). Let’s consider the ongoing decline from existing output. If it is 5% per year without ongoing new drilling and maintenance, that is about 4.7 Mb/d of decline that needs to be offset by either new projects that have already been sanctioned or recently started projects that are ramping up. At $30/b we may start to see some decline in output, somewhere between 500 to 1000 kb/d seems realistic to me (change in annual average C+C output from 2015 to 2016.)
I found the following at Wood Mac,
http://www.woodmac.com/analysis/low-oil-prices-halt-production
Chart from link above.
Edit a more recent analysis at link below
http://www.woodmac.com/analysis/Oil-production-still-no-major-shut-ins?filter_sector=1
Hi Ron-
I enjoy reading your articles and all the banter they generate -some more than others 😉
Could you direct me to an analysis of peak us rig count (~1900 Dec 14 – Jan 15) and our most recent production data (or simply your thoughts)? With the rig count at <600 can we expect a similar 3x decline in oil production (I would suspect not, but with $30/barrel vs $90 it could make sense)? Looking at various charts a 2x production decline seems like a reasonable estimate over the next 6-12 mos.
I'm just trying to connect the dots…
US Supreme Court Justice Scalia dead:
http://www.mysanantonio.com/news/us-world/article/Senior-Associate-Justice-Antonin-Scalia-found-6828930.php
There is going to be an epic political fight over his replacement, given how many 5-4 decisions there have been recently (Scalia of course was solidly conservative). Among other things, the Supreme Court issued a stay of any implementation of the EPA’s new rules on power plant emissions:
Greens faced with nightmare scenarios at the Supreme Court
http://thehill.com/policy/energy-environment/269349-greens-faced-with-nightmare-scenario-at-the-supreme-court
And of course, the pro-lifers and pro-choicers are going to go absolutely crazy (or crazier).
The Republicans may try to postpone confirmation of his replacement until next year. (Most analysts seem to be putting the chances of the Senate confirming an Obama nominee this year at pretty much zero.)
It may not be politically correct, but this song rang through Isla Vista when Agnew resigned:
https://www.youtube.com/watch?v=0Yi7AJvzRUA
US Supreme Court Justice Scalia dead:
This is big. It is going to lead to the mother of all battles in the Senate. That is whether to let Obama name a successor to Scalia or hold off a year and let the next president appoint him/her. This will divide the nation and when the dust settles it will tell us in which direction the nation is really headed.
Some people are going to be really shocked at that direction, no matter which way it turns out to be.
I agree Ron— this could turn the tables.
There will be blood in the streets.
The issue for Congress is that if they hold up an Obama nominee that will just drive more Democrats to vote in November.
So the GOP choice is:
– give up the Supreme Court deciding vote now, OR
– desperately cling to their very small hope of stealing the Presidency in November
At the end of the day, the GOP will almost certainly lose both.
At the end of the day, the GOP will almost certainly lose both.
I know it’s strange words coming from an atheist, but… Dear God I hope so. 😉
I have made it clear here that I believe the writing is on the wall ( of the mausoleum, no less ) when it comes to the core of the so called conservative wing of American politics, with the boomers already declining in numbers at a substantial and increasing rate. The boomers parent generation, the WWII generation, is mostly already gone, or in nursing homes.
Younger folks are more liberal by far, across the board, and as the policies of the Koch brothers types, and the megabanks, etc, continue to erode the living standard of working class and middle class people, working class and middle class people will fight back by demanding MORE from government, in the form of health care and so forth.
So – barring Black Swan events favoring the R party, it will and must either fade away, becoming a third party, or move more towards the center.
BUT this does NOT mean, imo at least, that the D party has a lock on the NEXT presidential election, or on congress, either house, NEXT election cycle.
I have already said I will be voting for Bernie if I get the chance.
We are not yet there, but we are headed in the direction of hell, and I can’t see any real hope of reversing course with HRC or any current front running R in the White House.
HRC is very much a conventional politician who is WAY too indebted to the current power elite to really do much, other than run her mouth, about the crimes and criminals on Wall Street. The Trump Chump IS Wall Street.
Sanders has the young people behind him, heart and soul, and while the odds are still against him, he does have a serious shot at getting the nomination.
He ( again imo ) has as good a shot at winning the general election as HRC, and maybe better.
Anybody who mentions racial voting patterns and identifies himself as a conservative is generally accused of racism , but the HRC D faction gets a free pass on this point, and is allowed to claim that blacks will not vote for Bernie. ( unfortunate initials, BS!)
But black people sure as hell aren’t going to vote for Cruz, or Trump. IMO, the black vote for the D’s is perfectly safe, within a couple of percentage points variation, for either candidate. Furthermore tens of millions of working class people, people who aren’t doing so well, may be READY for a socialist flavored message, so long as Bernie is careful not to hit the wrong hot buttons among working class R voters.
It may just be good luck on my part, but I have been sure ( ready to give odds on a bet ) which party would win the White House this close to election time since Nixon’s day.
But THIS time- I don’t have a clue.
The R party is falling apart internally, with the rank and file people who VOTE R sick and tired of the party establishment. Very sick, and very tired.
No further explanation is needed to understand WHY Trump has been able to “crash the ( nomination ) party” without an invitation. Enough of the R rank and file are so desperate for change that the R elite cannot do anything about him, even though that elite hates his guts.
On the OTHER hand, HRC OWNS the D party establishment, and the rebellion is coming from the heart and soul core of the party, namely seriously committed young people.
My opinion, based on a lifetime of personal acquaintances with lots and lots of D voters of all descriptions, is that typical D voters keep their mouths shut, regarding HRC’s negatives, for reasons of party unity. Maybe half of them in total, and eighty or ninety percent of the younger ones, are DEAD TIRED of HRC, and wish she would GO AWAY.
( It is worth mentioning that the typical R voter is equally tired of anybody named BUSH. 😉 )
This explains how OBAMA could literally come out of nowhere nine or ten years ago, and win the nomination. The country, as I see it, was not tired of the D party, but it WAS tired of CLINTONS . ( again my opinion.)
The country NOW, if I am right, is even more tired of her than ever, and she will NOT imo ever light the fires of enthusiasm among D voters the way Bernie can and has already.
On the other hand, the typical hard core R voter hates her guts, and WILL bestir himself or herself to vote AGAINST her, even if not highly motivated to vote FOR who ever the R party nominates.
Let’s face it folks. Charisma counts, and it counts for a hell of a lot. Sanders has it in spades. Trump has it, to some extent, but I don’t know a soul who really looks up to Trump. He’s very popular among the foot soldier R party rank and file, but mainly because he is attacking the establishment.
The R voter might eventually wake up to the fact that Trump IS the establishment, if he gets the nomination. You can bet your last can of beans that the D party will not let anybody FORGET that Trump is part of the elite he is campaigning against.
The younger , smarter, better educated people have already figured out that HRC is part of that elite as well, and want a new day in American politics.
Cultural revolutions are nothing new.
The young people with brains are DONE with the establishment.
We are seeing a cultural revolution born right now, but it may be premature, and Bernie Sanders may crash and burn, and will, if the D party establishment gets its way , by fair means or foul. ( The D party debate schedule says it all for instance. )
The political waters are WAY to muddy imo to predict who will next live in the White House.
Furthermore, there is still plenty of time for shit to happen.
The country wants NEW faces.
I’m sure Bernie Sanders will rescue the democrats.
I wish I were sure. Maybe you are being sarcastic, maybe you have a crystal ball better than mine, maybe you are being humorous.
But both the D and the R parties are capable of shooting off their own toes.
The right personality at the right time , or the WRONG personality, at the wrong time, can determine the course of history, and HAS determined the course of history on occasion in the past.
No Hitler, then no nazis, and possibly no WWII. No Churchill, maybe British morale would not have sufficed to stand up to the nazis.
Lincoln held the Union states together during our Civil War, a job no other man of his time could arguably have managed. No Robert E Lee, the southern states would have collapsed in half the time, for two reasons. One , he was the man everybody looked up to, Jeff Davis was not. The other, he was a genius among generals.
But in the end, the environmental issue trumps (unfortunate word but the right word ) all other issues.
Whether a person believes climate is the KEY environment issue, or just one of the many interlocking environmental issues, anybody who is paying attention must conclude that environmental destruction and degradation are threats to our peace and prosperity and yes, even to our very EXISTENCE.
The R party is not philosophically suited to the task of looking after the environment, and will not, to any greater extent than forced to do so by grassroot pressure, which is unfortunately insufficient.
OFM, well said! Your knowledge of history and human nature are shinning through. Those many years of reading all those history books is paying off. That coupled with your background in reality and science plus wisdom gained through personal experience in dealing with people from all walks of life is also apparent in your comments.
While you may not always be right, none of us is, whenever I read your posts I always come away with the impression that you are a deep and free thinker! It is always a refreshing contrast to the ideological and dogmatic views of those that are so sure that they are right.
We are certainly living in a time of transition and flux the last thing we need is pseudo conservative authoritarians who see the world in stark black and white, getting hold of the reins of power again.
Even if they do, they are too rigidly stuck in their views to be able to hold it, other than by brutal force. And as history has shown us time and time again that never works in the long term.
Cheers!
I was being sarcastic. Bet you one thousand bolivars sanders will be like a democratic deer in front of the republican Mack truck. ?
By the way, did you notice I managed to interview Donald Trump? I did it while I was on my way to serve as mediator between comrade Pope and Kirill.
The Democrats are fools for even listening to Hillary, all she talks about is how good a president she will be. Gets real old, you stop listening. She’s like the creek in Wyoming, Old Woman Creek. Hillary is on her way to a floe. Just one of those things when you get old.
The Democrats are usually always crying wolf and basically never stop. They caterwaul night and day. They should be ruled illegal and disbanded, it would help a lot.
The Republicans are basically all fascists along with the political maverick, Donald Trump.
The back of the pack on the Republican ticket can’t gather 500 people to hear them speak. The quasi Republican Trump seats 10,000 at a rally, not a problem.
If Donald Trump is a fascist, everyone seated in the auditoriums he is filling to the brim must be too. Donald was at Chelsea’s wedding, had a photo op with Hillary and Bill. They were all smiles. Can’t really be much of a Republican, one that can be trusted to toe the party line, that goes without sayin’.
Trump is a prairie fire out there right now.
The Republicans are worried about Trump, he has lots of support.
I’m still going to write in Mickey Mouse, your vote doesn’t really count and you can’t possibly vote for any of the nutjobs on any political party’s ticket, that’s just not going to happen.
After the counting is done, the electoral college meets one day and picks the sucker who is then going to live in fours years of pure hell in the White House.
harumph!
Obama will nominate someone. At the very least it is an essential duty of the Executive Branch to offer a nominee. If he didn’t it would be a serious breach of his essential duties as the President of the United States.
It seems the Senate will reject literally any nominee; the Senate would reject the nominee even if it were a clone of Scalia himself for no reason other than… it’s Obama’s choice!
This will be a huge issue that won’t go away. It will be a prominent issue that will be talked about incessantly in the media until the position is filled, especially because of how well it ties into the other major news story – the election.
Obama should nominate a centrist who is favored by the Old Guard Republicans of the Senate; someone who is a shoe-in for both sides of the aisle.
Rejecting an ideal appointee, which is exactly what would happen, would backfire. As time goes on, and the position remains unfilled the subversive nature of that decision would become undeniable.
Intentionally subverting and damaging a fundamental piece of our democracy; holding the Supreme Court hostage; using the highest court of the U.S. as a political pawn.
It would be, frankly, treasonous to knowingly debilitate the functioning of the Supreme Court if presented a nominee who, under any other circumstances, would be acceptable for both parties. It would be undeniable that they intentionally undermined the functioning of our Justice System, and willfully betrayed our Constitution.
Imagine 11 months of media coverage about this truly unprecedented action. It will become crystal clear that there was no basis whatsoever for leaving a Supreme Court position vacant for an entire year…
That is ONLY if Obama nominates a centrist with an impeccable record of decisions that fall on both sides of the aisle.
Since the nominee will be rejected anyway it would be pointless to nominate whomever his preferred nominee is, and give them the talking point they’re HOPING to create – that it’s all Obama’s fault the position remains unfilled because he nominated someone with a “liberal” record.
Unlike the equally baseless tactic of the government shutdown in 2011 this event would not disappear and the evidence of its absurdity would only grow worse as time goes on, and all of this DURING AN ELECTION YEAR.
Independents who lean Republican would be increasingly worried about how a Republican would make decisions in the White House and lead the country with this radical move front and center on election day.
Democrats who aren’t thrilled with their candidate would be more likely to show up and vote. It would show that the two parties are not “the same” and a Republican President would act vastly differently than a Democrat President – even if it was not their preferred democrat.
McConnell said today the Senate will let the next president pick the next supreme court judge.
For those with a familiarity with US history, the politicsl atmosphere is so similar to the 1850s.
Obama will make a nomination.
This has consequences for McConnell, and the election.
This has consequences for everyone in the election. I dearly hope Obama does make a nomination. It will lead to a showdown. If his nomination is rejected by the republican senate, this will have serious consequences in the November election. It will bring out millions of voters who would have otherwise just stayed at home.
Make no mistake, if the republican senate blocks an Obama nomination, it will lead to a landslide victory for the democrats in November.
Historical all time record for delay in filling a USSC seat is 24 months. 10 months is a non event.
“Discussion: Within hours of the passing of Supreme Court Justice Antonin Scalia, Republican Senate Majority Leader Mitch McConnell vowed to block any replacement nominated by President Barack Obama. Holding a Supreme Court seat vacant for that long would be an unprecedented move since the Civil War.
If it takes the average time for the next president to nominate a Justice and to have them confirmed, the Supreme Court would be one Justice short for 415 days. It has been argued in the past, controversially, that the Senate should refuse to confirm Supreme Court nominees during the final six months of a lame duck presidency, but holding out for eleven months on the basis of the party of the President, rather than the particular nominees, would be a first in U.S. history.
Only one vacancy since the Civil War has lasted longer than 300 days, That was the 391 days between Justice Abe Fortas’s resignation in 1969 and Justice Harry Blackmun’s placement on the court in 1970. That extraordinarily long vacancy was the result of two factors. First, it took President Nixon three months to make a nomination because his first choice declined the offer. Second, the first two nominees were advocates of racial segregation and were rejected by the Senate.”
http://politicsthatwork.com/graphs/supreme-court-vacancies
10 months is a non event.
No one is talking about 10 months. A new president would take office January 20, just over 11 months from now. Then he/she would have to decide who, then send the nomination to the Senate. Then the Senate would have to debate and finally vote. Adding them all up would likely be a lot closer to 20 months than 10.
And as Ghung points out, the all time record, since the Civil War, was just under 13 months, not 24. So if the Senate does wait on a new president, that delay would break the all time record, (since the Civil War). That would be an event, a disgraceful event.
Nah, Congress won’t even be in session most of that time. 10 months is no big deal, especially with them all home campaigning.
Non event.
Really, can you not add? 10 months from now Obama will still be president. As I clearly explained above, it will be closer to 20 months than 10.
If Obama’s nominee is not approved then it will be the longest delay of a supreme court replacement in history.(Since the Civil War.)
How in God’s name is that a non event?
Oh, only one third of senators will be campaigning. And even that one third would not dare miss a vote on a supreme court justice.
The media won’t allow this to be a “non-event”. It’s the biggest story in years; guaranteed to have legs.
History didn’t start 1861. Someone cherry picked that.
Non event. Other things will occupy the front page.
I have often been amused at how people think issues du jour a year ahead will decide voters. In 2008 Obama backstabbed Hillary with fewer votes and maneuvered leftward with steadily decreasing timelines on when he would remove all troops from Iraq. She quoted later times, and the narrative was constructed that the election would be decided by Iraq.
Exit polls surveying what issue was most important to voters said what? The collapsing economy and Lehman.
History didn’t start 1861. Someone cherry picked that.
I really don’t think you know what “cherry picking” really is. If you clearly state that your data starts at a certain point, then that is not cherry picking. Are my charts “cherry picking” because they don’t start when the first barrel was produced?
Non event. Other things will occupy the front page.
Of course other things will occupy the front page. Just what the hell is that supposed to mean? Because the media also reports other news, that makes it a non event? If that be the case then there is no such thing as an “event”.
Exit polls surveying what issue was most important to voters said what? The collapsing economy and Lehman.
No, that is not what the exit polls said at all. Yes, most said the economy was the most important issue but no one said the collapsing economy was the most important. And no one said Lehman, you just made that shit up.
And that was all before Scalia died. Anyway, it was a primary election. It only becomes a really big deal in the battle between Republicans and Democrats. That is in the general election.
I predict this to be the supreme court nominee-
Padmanabhan Srikanth Srinivasan
https://en.wikipedia.org/wiki/Sri_Srinivasan
I predict the White House, Senate, House and the Supreme Court all in the hands of the Democrats by January 2017
Oh is that so? Care to predict which of the 30 Republican-held House seats the Democrats need for a majority will actually flip? Which is to also assume, improbably, that no seats currently held by a Democrat will flip to Republican control.
Here’s something to get you started; https://en.wikipedia.org/wiki/United_States_House_of_Representatives_elections,_2016#Competitive_districts
Maybe when done you can start working on predicting which of the 5 Senate seats the Democrats need for a majority will flip in their direction. Actually you might want to make that 6, since Harry Reid’s seat could easily go Republican.
I doubt that either the House or Senate will flip. However I don’t think Harry Reid’s seat will go Republican. There was a chance that it would before Scalia’s death. But now, not a chance.
Though neither the House or Senate are likely to flip, but many seats will. And a lot more seats will flip to the Democrats than flip to the Republicans, and that will be mostly because of the death of Scalia. However that band of clowns running for President will play no small part in it.
That is unless John Kasich wins the nomination. He is the only non-clown in the group and he scares the hell out of me. He is the only Republican who could win.
Edit: Well, I don’t think Bush is a clown either, but he hasn’t a snowball’s chance in hell.
Assuming the Republicans don’t confirm Obama’s nominee, it will make an “Interesting” election even more interesting. Of course the President always nominates people for the Supreme Court, but the next President would nominate the tie breaking vote for a generally evenly divided Supreme Court (again assuming the GOP controlled Senate fails to confirm). So, it’s a somewhat unusual election in which the control of the Executive Branch, the Legislative Branch and the Supreme Court are all up for grabs.
However, if Obama nominates a moderate who was previously confirmed for a lower level judicial appointment by a majority of Republicans, it will be an acute dilemma for the Republicans.
Agreed, Jeffrey. Centrists, liberals and many independents are tired of what they see as an obstructionist GOP/Congress; the “do nothing” stalemate in Washington. I see a likelihood that a GOP obstruction to an Obama appointment would result in a backlash to the left; more Democrats and left-leaning centrists getting out to vote against ongoing GOP stubbornness to move things along. Acute dilemma for the Republicans indeed.
One of the decisions this court gave us, and Scalia fully supported, was the Citizen’s United debacle; not only unpopular with the left, but generally unpopular with the center-right proletariat as well. This could be used as a wedge going into the general election if an Obama-nominated confirmation doesn’t look likely.
This is my thinking exactly.
The Republicans just gave Obama and the Democrats a huge opportunity.
Nominate a universally acceptable candidate. They reject the nominee, and the media runs with the story of such an unprecedented action until the seat is finally filled next year.
Debilitating the Justice System for blatantly political reasons, and holding the Supreme Court hostage… in an election year at that!
As the months drag on and the position remains unfilled for no reason whatsoever it will backfire TERRIBLY.
I honestly don’t know what McConnell was thinking.
If his thinking was “If we win the election then WE can pick a nominee”, then it is mind-numbingly short-sighted.
This tactic was their only hope of picking the nominee themselves, but it’s impact loses them the election… in which case all they accomplished was to damage the Justice System, and lose an election.
They really didn’t think this through.
Holding the govt hostage with the govt shutdown backfired, so why not double down and hold the Supreme Court hostage!
With the potential nominees they have the Republicans had an uphill battle for attracting independents. This is exactly the thing that would drive independents away. It’s like they WANT to lose the election.
Scalia is being lauded as a strict constitutionalist, but I’ve never been impressed. He generally dismissed checks and balances, either written into the Constitution or implied therein. It seems our two party legislative branch finds these checks inconvenient as well, especially the GOP., obtuse, spoiled by a corrupt campaign finance system, and uncompromising. Their debates are reminding me more and more of old Jerry Springer reruns. Anyway, this all exposes the Democrats as ineffective reactionaries who sell themselves as progressives and reformers. It’s all well designed to leave no room for pragmatism.
We get the government we deserve, eh?
Scalia has never been anything more than a bought and paid for “yes man” for the Republican elite.
1/5 of a presidency and red meat for the Holy Rollers
Jeff Brown Wrote:
“it will make an “Interesting” election even more interesting. ”
Let see if we make it to November first!
Turkish forces attack Syrian and Kurdish positions in northern Syria
http://www.euronews.com/2016/02/14/turkish-forces-attack-syrian-and-kurdish-positions-in-northern-syria/
[We now have a NATO member fighting against Russia]
Just to add more fuel to the fire:
Saudi fighter jets land in Turkey for anti-Daesh fight
http://www.yenisafak.com/en/news/saudi-fighter-jets-land-in-turkey-for-anti-daesh-fight-2412407
Turkey, Saudis threaten ground troops in Syria
http://www.cbsnews.com/news/turkey-saudi-arabia-threaten-ground-troops-syria/
[We likely have WW3 that is currently containined in Syria. I don’t see how this will end well unless there is a Coup or Civil war in Turkey. Currently we have the potential for Russian, Iranian, Turkey, and KSA troops battling it out. The Proxy War in Syria is now evolving into a hot war.]
Turkish PM confirms shelling of Kurdish forces in Syria
http://www.theguardian.com/world/2016/feb/13/turkey-shells-kurdish-forces-in-syria-in-retaliation-for-attack-on-border-posts
“The shelling took place on Saturday after Kurdish fighters, backed by Russian bombing raids, drove Syrian rebels from a former military air base near the Turkish border.”
““We will help our brothers in Aleppo with all means at our disposal. We will take those in need but we will never allow Aleppo to be emptied through an ethnic massacre”
The issue with the death of a Supreme court justice is insignificant to the the escalation in the Middle East.
If the democrats run Sanders and the Republicans run Rubio I bet Rubio wins. He will paint Sanders red.
Fernando, you are really hung up on this “red” thing aren’t you. The red scare is over, except for a tiny few who are still scared shitless about the subject.
Anyway, I think the nominees will be Trump and Clinton.
Seems he has a lot of ‘hang-ups’
I am watching Meet the Press…the Republicans are going to self-immolate on this issue of attempting to refuse to even consider a Supreme Court nominee.
I listened to the various R President candidates talk, and they are off their nuts. Perhaps John Kasich was the least nuts of the lot, but I would still not vote for him.
The fundamental problem with the Republicans is that they refuse to substantively discuss any issues…their mumbo jumbo is nothing but tired old jingoism and sloganeering…constant appeals to fear, ‘the other’ and old white people über alles code-word salads. They are intellectually bankrupt. And Ms. Clinton is a moderate Republican.
Don’t have to refuse. Just go slow.
This is not going to be a big deal.
I voted for Obama to be president for 4 years, not 3. The people elected Obama. There is no reason for delay.
Watcher, on this issue you are just dead wrong. This is one of the biggest deals, in US politics, in this century.
What is at stake is all the progress we have made in the last half century. Civil rights, a woman’s right to choose, homosexual rights, all these things can all be rolled back.
And the absolute worst decision to come out of the supreme court since the Dred Scott decision, Citizens United, needs to be rolled back. That was the decision that allows drug companies, and other large companies, to own their own congressmen. They buy them with their huge campaign contributions. And they vote to keep the money rolling in.
This is the most important supreme court appointment in over half a century. If you think this is not a big deal then you are totally out of touch with reality.
MSNBC on Scalia. Bryan Garner, the famous legal scholar and lexicographer, is the son of one of my Amarillo friends. http://www.msnbc.com/msnbc-news/watch/how-scalia-shaped-conservative-legal-theory-622792771813
Mr. Patterson
I could not agree more re the importance of this passing of Judge Scalia, but I believe the Senate will do exactly as Watcher described in foot shuffling in as non blatant manner as possible (pretty tough to achieve).
In two other quasi-related matters, Judge Ginsburg’s health is especially precarious.
Also, is it just me? Did anyone notice the number of New Yawkers on the stage?
Brooklyn Bernie versus Queens the Donald.
New Yawkers Kagan, Scalia, Ginsburg, Sotomayor (who went to same high school as my sister).
Guyzz are takin’ ovah da joint.
See Republicans for Choice, Republican Majority for Choice and Republicans for Planned Parenthood; all active organizations. https://plannedparenthoodaction.org/get-involved/advisory-boards-and-initiatives/republicans-choice/
but I believe the Senate will do exactly as Watcher described in foot shuffling in as non blatant manner as possible (pretty tough to achieve).
I have no doubt that they will. What I objected to was Watcher saying it is no big deal. Hell, this is the biggest deal, as far as the court goes, in half a century. Or if it is not the biggest deal, it is right up there at the top with the biggest deals.
The importance of this appointment cannot be overestimated. And the political fallout from the fight over the appointment, and the delay by the senate, cannot be overestimated.
This will bring out voters that would have otherwise stayed home. And most of those voters it will bring out are young liberals. The Republicans will rue the day they decided to let this appointment wait for the next president.
Dr. Wilson, I have no doubt that there are some Republicans for choice, or for Planned Parenthood, the vast majority do not.
Which Republican running for president supports a woman’s right to choose?
I rest my case.
Hi Ron,
As usual I agree with you in general, but this is another time I differ as a matter of degree. Citizen United is awful, no doubt about it.
But the Supreme Court, regardless of who the eventual new justice turns out to be, is reluctant to overturn it’s own past decisions.
The odds of recent decisions being reversed in short order are not all that high in my opinion.
But over a period of years……….. You could be right about the direction taken by the SC.
The odds are good there will be at least one more vacancy within the next four years.
But the Supreme Court, regardless of who the eventual new justice turns out to be, is reluctant to overturn it’s own past decisions.
Hey, it happens: 10 Overturned Supreme Court Cases And it will happen in this case, else there is no hope for our country. The House and Senate will be completely owned by Corporate America.
Some decisions are just so outlandish that they demand reversal. It has happened in the past and it will happen again.
I agree with Watcher, in a way: In a fraud-for-a-system that’s the State, it’s kind of an irrelevant detail. Kind of. It’s like talking about the shadows on the wall of Plato’s cave, (rather than the cave, itself, or the ‘shadowmasters’ over the shoulder), even though, of course, you are chained-up/bound to look in that direction.
” ‘Capitalism’ involves the domination… over the working class and it also involves the resistance of workers to that domination in the matrix of social relations that are manifested in political and ideological fields. So that’s class struggle, and it shapes our everyday lives, everything we do. It shapes our taste in music, what we care about, what we wear… It’s ideological domination… The whole society, the way that it exists has been shaped by the economic system that we live under… and in the interests of that class that dominates that system.” ~ Stephanie McMillan
“Behind Boetie’s thinking was the assumption, later spelled out in great detail by David Hume, that states cannot rule by force alone. This is because the agents of government power are always outnumbered by those they rule. To insure compliance with their dictates, it is essential to convince the people that their servitude is somehow in their own interest. They do this by manufacturing ideological systems…” ~ Llewellyn H. Rockwell, Jr.
Clinton is a moderate, but not a Republican. Cut the bullshit.
Right! If one expects to be taken seriously then they should definitely cut the bullshit.
Oh give me a break…
I imagine you both are familiar with this:
https://en.wikipedia.org/wiki/Overton_window
For reasons sake, I was not saying that HRC was LITERALLY a Republican…but her window of political discourse certainly represents what used to be considered expected of a moderate republican. Hell’s fire, people, Bill Clinton’s governance was typical of what used to be expected of a moderate Republican.
I voted for Bill (2x), and for Obama (2x), and I will vote for HRC over any of the brain-dead idiots in the current Republican lineup.
Jumping Jesus on a pogo stick, most political experts acknowledge that Saint Ronald Reagan would be marginalized in today’s Republican Party.
Stop taking everything so literally and shooting from the lip.
Go Read OFM’s rather insightful post on this thread regarding the current political climate wrt establishment vs. non-establishment politicians and consider taking his word on the matter.
Question:
Where does Hillary stand on Citizens United?
Where do Republicans stand on Citizens United?
Where does Hillary stand on Planned Parenthood?
Where do Republicans stand on Planned Parenthood?
Where does Hillary stand on Gay Rights?
Where do Republicans stand on Gay Rights?
And I could go on and on with issue after issue, but you get the point. Sure, you can theorize with your “Overton Window” and say this Democrat was really a Republican and vice versa, but today we identify Democrats and Republicans on where they stand on the issues, not the general demeanor of their past administrations or alliances.
Okay, calling your statement that Hillary is a Moderate Republican bullshit may be a little strong. Perhaps “pure hyperbole” would be a better term.
Among other things, the Supreme Court issued a stay of any implementation of the EPA’s new rules on power plant emissions:
Yes, but the US Navy and Boeing have gone ahead with an interesting zero emissions project. Conservative politicians can’t or don’t want to deal with reality but the US military can and will!
http://goo.gl/48NokK
Navy tests first ‘reversible’ clean energy fuel cell storage system
The fuel cell only needs sunshine and seawater to produce thousands of watts of electricity
Boeing has announced that, after 16 months of development, it has delivered a “reversible” fuel cell for the U.S. Navy that stores energy from renewable sources and generates zero-emissions electricity.
The Solid Oxide Fuel Cell (SOFC) system, which can generate 50 kilowatts (KW) of power, is the largest of its kind and can use electricity from wind or solar power to generate hydrogen gas, which it then compresses and stores.
When power is required, the system operates as a solid oxide fuel cell, consuming the stored hydrogen to produce electricity.
Uhu. This will be very useful for USA Marines setting up fire bases in the Afghan mountains. They can use special bullet proof solar panels. Having the ability to generate 50 kW will be very useful. The military advantage is their ability to use $500 toilet seats and $300,000 50 kW generators.
If it ain’t BAU, you are reflexively against it.
Me? I spend three hours a day trying to overthrow the Cuban dictatorship. And I would also propose boycotting Israeli products if it wasn’t against the law. That’s hardly backing business as usual.
I don’t think they have a lot of seawater in the Afghan mountains but I might be wrong. On the other hand most on the Navy’s ship don’t spend a lot of time there either… They tend to navigate the high seas where, guess what, there is a lot of sun and seawater. Imagine that!
And on another note, made in the USA:
The Ultimate in Off-Grid Transportation: Mini-Fleet-in-a-Box.
Really nice package!
http://ecowatch.com/2016/02/14/mini-fleet-in-a-box/
Hi Fred,
Thanks for the kind words.
It is good that you bring up what the Pentagon is up to, in terms of science and technology.
One of the best ways to get inside the “defenses” of a hard core right winger type is to just introduce him, without ever MENTIONING climate change, peak oil, or any of all that “liberal bullshit”, to things the guys in uniform are doing TODAY so as to be ready TOMORROW to deal with tomorrow’s problems.
When new ideas come to you from people you look up to and trust, they are easily accepted. When they come from the “THEM” side of the “US versus THEM” divide, they are generally dismissed out of hand.
The JOE papers are among the very best. I have not actually succeeded in convincing any hard core redneck high IQ republicans to vote D as the result of their reading them, but I HAVE succeeded in getting some to recognize that that issues such as forced climate change and peak oil are REAL PRESENT DAY ISSUES by leading them to this water.
They drank it without any encouragement, given the source of it. 😉
The guys in uniform are government employees. As such, the bureaucracy forces them to spend money on cockamamie weapons and systems they don’t really care for. Like the Stryker vehicle they sent to Iraq, or the fancy fighters which cost $500 million each.
Yeah, both the JOE’s report and the Bundeswehr’s report on peak oil were excellent reads! The Pseudo Conservative Chickenshit Hawks don’t seem to have a clue as to what may be coming down the pipeline.
They don’t need seawater. The salt is more of a pain in the butt. Unless you want to make chlorine gas, I suppose.
Whatever, Fernando, the point was that sufficient water is more readily available in the ocean than it is the mountains of Afghanistan…
Your comment about salt is irrelevant and it doesn’t affect the production of hydrogen in this system!
The big deals against oil prices are, now, the drop in (the increase) in future demand from 1.6 to 1.2%, per IEA, and the massive amount of oil that Iran is getting to lay out with unknown capital input. Supposedly glutting the market with 1.5 million more barrels with magic, I presume. However, I figure it, the drop in demand seems to indicate only about a 300k to 350k difference.
Ah, the magic of OPEC will prevail, then. Even though to fully ramp up more, Saudi has to drill in the offshore area, which I am sure is NOT $10 barrel cost of production. Iraq has to end their internal strife to gain some traction. Venezuela is sucking wind, badly. Ecuador, while not the massive producer of other OPEC members, currently has only one well drilling from 50 something rigs. It is hard to keep up with the news from every country, and it is clear that neither EIA nor IEA are really putting much effort into real data accumulation. I think OPEC is strapped for production for the next two years, with the exception of the magical production from Iran.
On the other hand, I read Canada has some smaller oil sands shut in, while larger ones are scheduling to cut back, or have extended periods of overhaul on production equipment. As rigs for conventional oil have dropped significantly, I fail to see were Canada will not have a decrease in production in 2016. Over a year ago, I said the shale production could drop by over one million, but didn’t anticipate the increase before the drop. Still from the high in March of last year, it is still projected to drop by 1.2 million by 2017 by EIA. I still thing they are low in their estimate of the drop, but not as much as they used to be.
I read where China’s production is expected to drop from 100k to 200k in 2016, base upon the current prices and capex. A recent post by the author indicates that up to 1.5 million barrels may be lost from in field drilling of offshore wells in 2016. All of South America, Africa, and Asia, including Russia, expect drops in 2016, and 2016 is just the tip of the iceberg.
Where are all of these figures in the garbage the EIA and IEA put out? Far as I can tell, the magical numbers put out for Iran, roughly match the drop in infield drilling offshore. But then I am not an expert, because I am not paid by a highly efficient and omniscient government entity.
While what is called a prediction of non-OPEC production seems to meet the definition of the word ‘prediction’ it seems that the OPEC production prediction is more of what I’d call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That’s some pretty weak tea!
It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite ‘the glut’, Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don’t know exactly how it’s gonna play out but whatever it is the word ‘train wreck’ is likely an apt description.
As well this ‘total liquids’ thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it’s on the 1/4 of beef and once again when it’s cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.
I figure in a few short years it’ll be pretty clear where all this is going and it’ll be a whole new paradigm aka Hobbesian scramble.
Intro sentence should have read:
While what is called a prediction of non-OPEC production seems to meet the definition of the word ‘prediction’ it seems that the OPEC production prediction is more of what I’d call an assumption.
While what is called a prediction of non-OPEC production seems to meet the definition of the word ‘prediction’ it seems that the non-OPEC production prediction is more of what I’d call an assumption. The methodology used to predict future OPEC production is basically as follows: world demand minus non-OPEC production equals OPEC production. That’s some pretty weak tea!
It seems to me that there is a bunch of strange and interesting things all going on at once here, several of which are as follows; global peak oil production occurring as we speak is significantly probable, the price of oil is low, Cushings is full of condensate but the market calls it crude and it drops the price of crude, imports of crude to USA have recently increased despite ‘the glut’, Saudi is likely producing flat out yet production is down month over month for 6 of the last 7 months, upstream investment is down 2 years in a row, demand is up, production is going to decrease. I don’t know exactly how it’s gonna play out but whatever it is the word ‘train wreck’ is likely an apt description.
As well this ‘total liquids’ thing bugs me. It takes energy to produce biofuels and refinery gains. That seems like double counting to me. Like counting the global beef production once when it’s on the 1/4 of beef and once again when it’s cut with pork fat and called Ukrainian Sausage, to use Mr JJ Browns beef analogy.
I figure in a few short years it’ll be pretty clear where all this is going and it’ll be a whole new paradigm aka Hobbesian scramble.
With tank farms, strategic storage, rows of rail tankers and flotillas of super tankers filling up all over the planet, producers will now have to match production to demand much more closely, else they will have to ‘spill their seed upon the ground’. And there is not much money to be made doing that.
Some producers with no where to deliver their oil to must be in very difficult positions; going from normal production to zero in a day. From cashflow positive yesterday to being the proud owner of a pile of useless junk and pipes wth zero income today.
Interesting times.
Try this.
Try listening to what is said by KSA. “We are not going to produce oil out of the ground for which we have no orders.”
This has been policy all along. Now think about what you just said, and about where you heard it.
Yes Watcher. The interesting moment arriving herewith is that we will now discover actual global consumption without the smoke n mirrors of production filling tanks somewhere.
I would imagine that the impacts will be neither selective or nice. Some good paying fields may have to be shut in if the tanks at the end of the pipe are full. Or it could be the final straw that pricks the light tight oil bubble. We shall see.
Tanks aren’t filling. No one is placing orders for oil they would put in a tank. That makes no sense. And note, btw, that filling a tank is demand itself and thus would not justify a price decline if you’re a supply/demand disciple.
The price is low because sellers are willing to sell for that lower price. Period. Even if buyers would pay more, the seller insists on less.
Wrap your mind around that and you understand pursuit of victory.
Oh! Silly me.
A helpful piece re Cushing storage:-
https://rbnenergy.com/just-my-imagination-how-full-is-cushing-crude-oil-storage-capacity-really
‘… many storage operators [at Cushing] may be turning prospective customers away. Not because they don’t have available capacity but because they don’t have enough heavier crude to make WTI lookalike blends with incoming light shale grades.’
Do those full-to-the-brim mega-tankers slow-steaming in circles in the Sargasso Sea and swinging at anchor off Singapore and Malaysia with no where to go waiting for a better time to sell into the market in the face of rising production and exports from Iran make sense?
http://www.bloomberg.com/news/articles/2016-02-10/oil-traders-look-again-at-floating-storage-as-onshore-tanks-fill
http://abcnews.go.com/International/wireStory/iran-exports-oil-shipment-europe-nuclear-deal-36929921
Not to me…
Producer-sellers are desperate for cashflow at any price, and the glut in supply means the competition to be the one who gets the sale is intense. Yet at the same time the near capacity storage available to some producers makes the potential for an individual field to be locked in because it has nowhere to send its product to much higher, no matter how hysterical the bean counters get.
The low price of crude is cutting the throat of many producers, who will not easily come back on line even if the price recovers. Its going to be an interesting year
Interesting article on the RBN Energy website, about Cushing. Note that the author touches on two key issues: (1) Insufficient heavy crude to offset the flood of condensate, thus making it more difficult to create their “Synthetic WTI” blend and (2) Weak demand for the Synthetic WTI blend itself.
The Reuters article from last year discusses the second point:
U.S. refiners turn to tanker trucks to avoid ‘dumbbell’ crudes (March, 2015)
http://www.reuters.com/article/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323
Link to my Oilpro.com article on crude versus condensate:
http://oilpro.com/post/22276/estimates-post-2005-us-opec-global-condensate-production-vs-actua
As I have previously stated, IMO the global total liquids oversupply is a house of cards, built on an unstable foundation of actual global crude oil production* that requires vast amount of capital every year, in order to keep global crude oil production from crashing.
Up the thread, I noted that a plausible estimate is that it may have taken about a trillion dollars in 2014 and 2015 combined to keep global crude oil production around 68 to 69 million bpd, versus my estimate of 69 million bpd in 2005.
*45 API Gravity and lower crude oil
Maybe KSA is FOS? Maybe that statement is not true.
Hi Ron,
On the issue of EIA’s predictions accuracy, I updated this graph from Mason Inman and added actual oil US production.
What this graph shows is a typical very conservative estimate system. This means that on the way up, they greatly underestimate production and on the way down, they are going to greatly overestimate production.
This clearly shows how credible their predictions are. Although the graph is only for the US, clearly they are going to be equally conservative (and thus equally wrong) about world oil production.
Javier,
The long-term projections of U.S. LTO production are from various issues of the EIA Annual Energy Outlook. They indeed were very conservative, even though none of them (even the AEO-2015) did not assume such a big drop in oil prices.
As regards the actual production data (the black line), it is from the Drilling Productivity Report and include almost 1 mb/d of conventional output, primarily from the Permian basin.
U.S. LTO production had never reached 5.5 mb/d, as the black line shows. According to the most recent EIA presentation, the local peak (In March 2015) was around 4.6 mb/d
OK, thanks. The black curve needs correction.
But the issue continues being that EIA underestimated production so much that it had to raise its predictions by about 100% each year.
Look at the prediction for 2020:
AEO 2012: 1.3 mbpd
AEO 2013: 2.8 mbpd
AEO 2014: 4.7 mbpd
And all this without any significant change in oil price.
So if the question is, as Ron is posting, how much value have EIA predictions? The answer clearly is none. EIA predictions are useless. Evidence indicates that they are going to overestimate production by a large amount for as long as production goes down.
These are projections for LTO, a new resource type.
Its emergence as a new important source of global supply and its rapid growth was a “black swan” event, which nobody could predict.
This is a good example why all such projections are just a snapshot that reflects our current knowledge of geology, technology and other factors affecting energy supply
AlexS,
In my view the past surge in shale production was based on the favorable conditions of the bond market (‘search for yield’). As long as the bond market has been liquid, production could surge. However, as the recent collapse of the bond market starts affecting production (see below chart) we could see another ‘black swan’ event on the downside of production.
An analyst on CNBC had an interesting quote, which he attributed to John D. Rockefeller, to-wit, there has been more money lost to the ill advised search for yield, than in all of the bank robberies in recorded history.
Jeffrey,
All the three bubbles of the last decade – internet bubble, housing bubble and now the shale bubble – reflect deeply the American approach how to respond to challenges in the economy and society:
It is better to ask for forgiveness than to ask for permission.
Greenspan famously said when the internet bubble burst: You can only recognize a bubble when the bubble has burst.
This approach has probably avoided also some damage ( for instance an escalating oil price surge), yet has also done some huge damage to investors.
The lesson for investors is to recognize and understand the thinking behind Wall Street’s motivation and adjust the investment strategy accordingly. As the bond collapse is far from over, we have not yet seen the bottom of the production decline. The bond market is the major driver of oil and gas production. Any forecast which ignores changes of capital markets is very likely irrelevant.
Heinrich,
Yes, access to cheap money (not only bonds, but also bank loans) was one of the key factors that contributed to the shale boom.
As regards the ‘black swan’ event on the downside of production, we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat.
we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat.
I agree if you are talking about the money the bankers and investors already have invested in shale. But the bankers and investors will not likely be looking for ways to lose more money. New investment in shale will be difficult to come by.
Nationalize it and this annoying little issue of profit pursuit disappears.
Unintended consequences?
Can the government produce oil better than the private sector?
I fucking doubt it.
Not to mention as soon as the government starts grabbing stuff, no one is gonna want to put their capital at risk any more.
“Nationalize it and this annoying little issue of profit pursuit disappears.”
US banks were not “nationalized” during the 2008-2009 crisis. I very much doubt the gov’t will nationalize the Oil industry, unless there is a very drastic event that cause the price to skyrocket suddenly (ie above $200). A KSA/Iran hot war would probably do that.
Collapsing Oil prices is just a symptom of a mounting global economic crisis. Even if the US nationalized its Oil industry it still not going to fix problems overseas: The Middle East, China and Europe.
The period of kicking the can with ease has reached its end. Now the World’s gov’t will need to resort to ever increasing drastic actions to avoid a global depression.
“we will see which financial tricks the shale guys, their bankers and investors will invent to keep shale production afloat.”
Maybe they start investor focused campaign “World is running out of oil” meme 🙂 LOL
… similar to “We are running out of land” meme during Housing bubble 🙂
Just kidding. 🙂
Heinrich,
I think we should view “surge in shale production” not as something “based on the favorable conditions of the bond market” but as yet another “boom and bust” cycle which is the hallmark of neoliberal economy. Third in the sequence dot.com-real estate-shale oil, if you wish.
In all three cases it was reckless financing using new instruments which became available after deregulation which initiated the bubble. In this case covenant-light loans — the crappiest kind of junk.
Like in all previous bubbles the deflation of the shale bubble might take some banks (this time regional) with it and result in a real extinction of shale companies. Technological progress achieved will remain intact and will be picked up by survivors.
The wave of bankruptcies will depress new drilling and might serve as another catalyst of the decline of shale oil production in 2016 and 2017 (despite takeover of properties). The decline that was not accounted for in the current forecasts.
Unlike two previous bubbles, this is a more localized disturbance and the size of CCC and lower junk bond market is just around one and a half trillion, but it will likely spread to the broader economy at least in six affected states due to links to mortgages, commercial real estate, municipal bonds, etc.
And it coincides with the weakening of the US economy.
likbez,
CCC and lower is just the canary in the mine. It is a sign of strength or weakness in the sector. It affects also private equity, loans….
The big question now is: How far will this go? Can it escalate? As this is impossible to predict, it is also impossible to make an accurate production forecast – even for the next two years.
It is ironic that even the FED- having thousands of economists on its payroll – has been a very bad forecaster. Greenspan did not recognize the internet bubble, Bernanke had to deal with the housing bubble ( the housing crisis is contained) and now Yellen has to face the shale bubble, which she did not foresee (in December there was still talk about escape velocity and inflation).
It is still open how deeply the burst of the shale bubble will affect the US economy. There could be some political events which brings out some oil production worldwide and the shale industry will be saved for a while. However, my gut feeling tells me that this will go very deeply. It looks like the FED has painted itself into a corner again.
Hi AlexS,
I agree. Also your point about oil prices is important, oil prices are very difficult to predict and eventually they will affect output, though there is a significant time lag (maybe 18 to 36 months) between a change in oil prices and a change in the oil supply. I have not yet figured out what this time lag is, but my current guess is about 24 months on average.
This will vary depending on the oil field (deep water projects have a longer lag and onshore conventional and LTO may be somewhat shorter than the global average).
http://www.theoildrum.com/files/PeakOil1.png
Another forecast that was incorrect.
Who were the authors of those forecasts?
http://www.theoildrum.com/node/5154
http://www.theoildrum.com/node/5177
Edit
So Ace got it wrong. We have been knowing that for a long time. That’s history. What’s your point?
Oil production will definitely, one day, peak. The fact that past predictions of peak oil were wrong only means they were too early. People who are predicting peak oil now, or at any time in the future, will be 8 years closer to hitting the date than Ace did.
I am reminded of insider traders in the stock market. That is company executives buying or selling stock in their own companies. The saying is, They are almost always right. But… They are almost always too early.
That is, they see that something is definitely happening so they act. But they just expect it to happen way before it really does. The same can be said about peak oil prognosticators. We saw that peak oil was definitely going to happen. But most of us were way too early with our prognostications, about 8 years too early. 😉
Ron,
I am reminded of insider traders in the stock market. That is company executives buying or selling stock in their own companies. The saying is, They are almost always right. But… They are almost always too early.
An excellent point !
Dennis,
Yes the time lag is different for different type of resource, different type of projects, different producing fields, different countries and different companies.
A big question is how to calculate this time lag.
LTO was expected to be the first to react, and it indeed reacted the most. But I was expecting much bigger declines last year.
Conventional output was almost unaffected last year (low short-term price elasticity). There will be some negative supply-side impact this year, but the biggest cumulative impact from low prices should be felt by 2020.
With LTO the production was accelerating y-o-y at a high rate, more in percentage terms than has been seen in fields before, at least since the very early days of the industry. The cut has been from that high rate to a slow decline. If the LTO production had been steady or a growth rate that was more representative of previous new fields then the decline would have been pretty steep by now. That and the different impact, and decoupled timing, of drilling and completions compared to conventional fields is what through off a lot of the predictions in my opinion.
Hi AlexS,
I read your reply on the previous thread and I appreciate your insight. I think I mostly agree with your take.
One place that I may not agree is that you think $45/b is high enough to keep output flat. I think that in the LTO plays $45/b is not enough to make the completion of drilled uncompleted (DUC) wells financially viable so we will see a fairly steep decline in LTO output if the EIA oil price forecast is correct.
In addition there are no doubt fields throughout the World where there are few long term projects in the works, but have continual infill drilling that either maintains a plateau or reduces the overall field decline rate. I would expect that even $45/b may not be enough to justify the continued drilling of new wells in many fields.
Note that the EIA STEO predicts Brent at $46/b in the fourth quarter of 2016. This is the reason that I believe the EIA’s oil supply forecast is too high (assuming their price forecast is correct). I would expect at least a 1 Mb/d drop in 2016 average annual World C+C output compared to 2015 average output levels if the EIA’s most recent oil price forecast for Brent crude is correct.
Dennis,
I didn’t say that “$45/b is high enough to keep output flat”. I said that $40-45/b is enough to cover operating costs and maintenance capex in a vast majority of the world’s currently producing conventional fields (as well as oil sands operations).
That doesn’t mean keeping production flat. Where production was falling due to natural declines at $90-100, it will continue to decline (probably, at higher rates) at $40-45.
Project delays and lower upstream capex will also have a negative impact on new conventional production. But as project start-ups scheduled for 2015-17 are generally not postponed, the overall impact on global conventional production will be relatively modest this year. However the effects of low prices will gradually increase in the next few years and peak by 2020, even if oil prices recover by that time.
As regards LTO, I agree that $45 is not enough to keep production flat. I guess the required price is closer to $60.
Finally, I certainly do not expect global C+C production to drop by 1 mb/d y-o-y in 2016. Barring unlikely OPEC cuts and unexpected large-scale supply outages, the increase in OPEC output (Iran) should partially offset declines in non-OPEC production.
Hi AlexS,
Sorry I misunderstood. Let’s assume the EIA STEO oil price predictions are correct.
What would you expect for the average annual C+C output level in 2016, if that assumption were correct?
Note that I also do not expect C+C output will fall by 1 Mb/d, but the reason will be that the EIA’s oil price prediction will be too low. I expect an average annual Brent price level for 2016 of about $55/b+/-$5/b and at that price level average annual C+C output will decline by about 500 kb/d in 2016 (about 79 Mb/d for an average output level) relative to the average 2015 output level (about 79.5 Mb/d).
average annual C+C output will decline by about 500 kb/d in 2016 (about 79 Mb/d for an average output level) relative to the average 2015 output level (about 79.5 Mb/d).
Through the first ten months f 2015, world C+C production has averaged 79.94 Mb/d. If we have the decline that I expect in November and December, I believe the average for 2015 will be around 79.85 to 79.9 Mb/d.
I expect 2016 C+C production to be about 78.9 Mb/d or a decline of about 1 million barrels per day.
Below is the 2015 C+C production, through October, according to the the EIA. The Peak so far, was in July 2015 at 80,525,000 million barrels per day.
Hi Ron,
You are correct the 79.5 Mb/d was based on an older estimate when we only had EIA data through June 2015, I has assumed about a 200 kb/d decline each month from July to Dec and that worked out to 79.5 Mb/d.
Using current data and assuming about 250 kb/d decline in Nov and Dec, and estimate of 79.9 Mb/d for 2015 average annual C+C output seems reasonable.
I agree that 78.9 Mb/d for 2016 average annual C+C output is reasonable if the EIA’s recent Short term energy outlook oil price forecast is correct. I think oil prices will be higher than the EIA predicts and that C+C average annual output for 2016 will be about 79.4 Mb/d.
Dennis, I think higher oil prices may impact 2017 oil production but they will not have very much effect on 2016 oil production. Well, that any further effect. They have already had, of course, a rather dramatic effect. But there is always a delay.
If oil prices rise toward the middle of the year, then sometime in 2017 you will likely see an increase in shale oil production as a result of that price rise.
I think my estimate of a decline of about one million barrels per day in 2016 is very conservative, regardless of what oil prices do later this year.
Hi Ron,
There might be a decline of 1 Mb/d in non-OPEC (mostly US, Canada, North Sea and Brazil), but I believe this will be offset by increased output from Iran. Time will tell, I believe a rise in prices by midyear (June to August) might cause the decline in LTO to level off by the end of 2016. Perhaps there will be a delay until 2017, in that case 2016 might be see a 79.1 Mb/d average C+C output level, but I doubt it will be less than that.
The time lag probably also depends on when financial spigot that inflates the bubble is shut down.
A bad news for frackers:
http://5newsonline.com/2016/02/13/earthquake-rattles-oklahoma-residents/
The vast majority of wastewater comes from producing the oil and gas, not from fracking operations.
It’s still part of the same process. Where’s the fracking wastewater going to go if it’s not being injected at disposal wells?
Fracking water in OK is pristine compared to the brine that comes up with the oil production. Further, most new wells in OK will produce more brine wastewater in their first 30 days of oil production [not counting the frac water] than the total amount of frac water retrieved.
I would buy me a Hugoton field lease and start putting water away in the gas sand.
I owe an apology from the last thread for some chauvinistic comments.
My better half tells me her group does not discuss the economy, oil supply, etc., because it isn’t a polite thing to discuss.
As for the spending, same is really more a generational thing than a male/female thing.
I do the financial stuff, and as I am reminded I get out of doing quite a few things I would not enjoy doing. I was also reminded that if I was so good at the financial stuff I would have cashed out at the top. . LOL.
I was picturing a certain group in my head with those comments. My bad.
I do agree with OFM that there is a lot of green thought process but actually living off the grid is something few want to try, including me.
“As for the spending, same is really more a generational thing than a male/female thing.” LOL, I think you’ve got it right now Shallow. Doug.
Yes, Doug. I amended my comment with my much better half, who hit me with another zinger.
“I wonder what our respective grandmother’s would have thought of your comment.”.
All four lived on Midwestern farms during the depression, all lived in the same house on the farm for 60+ years before the nursing home, all died owning land and bank deposits despite time in the nursing home.
Hopefully that comment marks the high mark of idiotic comments I make here or elsewhere.
I need to stick to oil related for sure.
I wouldn’t want to leave this discussion with people thinking I think men are more responsible than women, when it comes to managing money. QUITE the contrary!
But the younger generation of women in my opinion is not NEARLY as level headed as their mothers and grandmothers.
Younger men and women BOTH have in my estimation had it so easy growing up, with hardly any responsibilities, and almost everything handed to them on a platter, with ribbons on it, that they have the attitude that they will always have money enough to do as they please.It pleases them to spend all they get on mostly frivolous luxuries such as four wheel drive vehicles that will never be driven off road or even on an icy street, outrageously expensive phones, vacation trips, four times as many new clothes as they need, etc etc etc.
Just yesterday I heard all about a family BARELY getting by, month to month, paycheck to paycheck, renting, driving financed cars, taking off for DISNEYLAND, with their tax refund money, rather than paying off bills and maybe investing part of it in a washing machine and dryer, rather than feeding fistfuls of quarters into laundromat machines.
We are all to a large extent products of our environment. If we have never had any experiences teaching us the necessity of being thrifty, well then, We WON’T.
Antarctic Icebergs Have Surprise Role in Slowing Warming
Since New Zealand’s emissions are about 0.14% of the global total, these effects ARE small and localsed. Helpful; yes. Significant; no.
Good to know, thanks.
One or two tenths of a percent of global carbon emissions is supposedly sequestered by iceberg fertilization? Doesn’t sound like much of a factor to me. The leverage factor is too low (1:1000). Not a viable carbon reduction scheme. 🙂
Does that mean that several percent of global emissions have been reduced by all that fertilizer we dump into the oceans, lakes and rivers?
Yes, it does.
Yes, but at a huge cost to aquatic ecosystems. Excess phosphorus and nitrogen speed up natural eutrophication processes and contribute to hypoxic dead zones and toxic algal blooms.
You are absolutely correct Fred. I was being subtly sarcastic, since both shedding large icebergs and fertilizer plumes are examples wrecking the environment.
We could make several percent change in fossil fuel burning just by turning down the thermostat a little, keeping tires inflated properly and planning our needed auto trips.
Using materials and products longer (not jumping on that next new product update) and repairing things would also make a significant change in fossil fuel use.
Saves money too.
Well I just ran into the item sort of by accident, as a side effect of something related, and decided to post it. It’s like when Ron Patterson posts an article by someone else, it doesn’t necessarily reflect his own opinion, and it’s interesting to see what others, including you, might think.
Of course there will be counter-responses to anthropogenic global warming, but my own feeling is that burning the vast amount of fossil fuels that we are and have doesn’t seem like there’s going to be hardly any effect at all and everything’s going to be fine while the rest of our footprint makes other things way worse. That just seems too selective, and Fred in this subthread makes one example of this.
Inasmuch as Javier might ignore another possible mass extinction event in progress or at least try to downplay it and/or dubiously raise doubt about whether this is the case or not, ironically, it serves to underscore the concern many have that ‘we just don’t know’, which then of course suggests erring on the side of caution (which implies…).
Naturally, too, the prospect of wrapping up BAU, ASAP sets off all kinds of vested-interest alarm bells. Science is funded by BAU.
Future accounting problems – There have been many posts here over the past 2 years analyzing the cost incurred by the O & G companies to produce LTO. In my opinion, some of the ability to do that may go away.
Most companies have had to write down the balance sheet value of their LTO reserves (costs incurred) in 2014, 2015 and probably will again in 2016. If the price of oil increases, write ups to reinstate the value back to where it was are not permitted. So the true costs become invisible. So, if in 2017, if the price of oil is back to $50, companies could produce income statements that show a profit. But, some of that will be because much of the cost was written off in previous years due to “one time, extraordinary valuation write offs.”
The companies offset the oil being sold with a DD&A [depletion, depreciation and amortization] cost. In general, that means that they ratably deduct their capitalized costs over each barrel of oil produced. But, if they have already written off half of their capitalized cost due to a valuation write off, then future DD&A will be one half of what it would have been without the write off.
And, it will likely be very difficult in 2017 to separate out their 2017 operations.
Clueless,
Excellent point. That is why careful investors, like e.g. Warren Buffett, don’t accept accounting profit.
They calculate something like “owner earnings”, in which you ignore accounting DDA and include your own conservative estimate of the depletion/depreciation of assets.
In my opinion, there is a seriously flaw in the calculation of the accounting profit for LTO companies. The depletion/depreciation amount doesn’t fully reflect the actual reduction of the NPV of the assets over a year. In other words, the very fast decline in production of shale wells, and the larger variable costs later in the life of a well, are not fully accounted for. LTO companies are in general getting away with a much smaller DDA amount, and therefore front loading profits. Normally lowering DDA is a bad corporate strategy, because it leads to more corporate taxes, but these companies in general also benefit from major tax deductions to compensate for this. I think this accounting flaw has played a big role in the shale boom.
Most retail investors unfortunately take book profits and book value too seriously. Like Shallow sand, you, and others have shown, there are much better ways to make value estimates.
Good points, as we have discussed previously.
If oil prices don’t return to 2011-14 levels, tough to see how loan principal gets paid.
Asset sales to pay principal are self defeating. Due to IDC elections, depletion and depreciation, would seem that shale asset sales would generate a lot of tax liability. A $1 billion sale may generate only $600 million after tax?
Also, assets sales cause company wide production to fall.
Interesting how all of the companies in 2015 are reporting year over year production growth AFTER excluding the effects of asset divestures. So we are selling production to drill more wells to grow production. Our production is falling, but by gosh we have more new wells with 1 million EUR.
The production they are selling tends to have higher OPEX, but lower decline, and therefore, despite the higher OPEX, more PV per BOE.
A prime example would be Whiting, who last summer tried to sell its North Ward Estes CO2 flood.
As I recall, NWE accounted for less than 10% of company wide BOE in 2014, yet almost 20% of PDP PV10. This despite having much higher current OPEX than the Bakken and Nirobrara assets.
I have never understood how long term value is being created by these companies. One thousand 200 BOE average wells will be 40 BOE average in 5 years, for example, yet little to no ability to pay down debt principal.
PV10, 9, 8, or whatever discount value is appropriate does matter. Now that PDP PV10 is greatly less than long term debt, I hope some investors pay attention to it.
SS – I believe that current asset sales generally are unlikely to result in any cash taxes being paid. Especially since prices have fallen so much in the last year and a half. Further information below, for those who might want to delve a little deeper, but not fully into the complexities.
As you know, the companies deduct most of their drilling/fracking costs on their tax returns in the year that the money is spent. But, for their financial presentation books, following the GAAP principle to match expenses with revenue, these expenses are capitalized and included in their Oil & Gas Assets. For the financial statements these costs are rateably amortized as production occurs as DD&A expense.
Generally speaking, the companies create significant net operating losses on their tax returns because of those deductions. However, because in the future they will eventually deduct the costs [DD&A], but they cannot again deduct them for tax purposes, they are required to book deferred taxes payable as a liability.
Looking at PXD. At year end they have a $1.776 billion long term deferred tax liability. Using a 32% tax rate, this can imply a tax net operating loss of up to $5.55 billion. Assume that they have a producing field on the books at $500 million [GAAP using $49/bbl], with future drilling prospects, and a zero tax basis. They sell it for $1 billion, a $500 million book profit. A 32% tax on the book profit is $160 million, which is recorded in the income statement, but, which does not have to be paid. It offsets some of the net operating losses. The tax return shows a gain of $1 billion, an extra $500 million. The 32% tax on that extra $500 million offsets their deferred tax liability of $1.776 billion, reducing their deferred tax liability to $1.616 billion.
Clueless. Yes, have to work it through to get a clear picture.
Enno
one of the “things” that the shale industry has given the oil industry is lower “finding costs” ……at the “expense” of greater variability in outcomes (EUR / IP / PV10). Again – thankyou for your site – outstanding work
rgds
simon
More accurate than this one:
http://www.theoildrum.com/files/ksa1r.gif
My latest graphs using EIA update to October 2015
15/2/2016
World outside US and Canada doesn’t produce more oil than in 2005
http://crudeoilpeak.info/world-outside-us-and-canada-doesnt-produce-more-crude-oil-than-in-2005
Thanks! Much more than an excellent presentation!
Awesome article Matt! Thanks for fleshing out the EIA report data!!
Excellent site Matt!
http://crudeoilpeak.info/
One question- I see that you have US crude imports at about 7Mbpd, where as Jan data from iea have US net liquids import at about 5 Mbpd.
Is this difference because we export things like refined product and condensate?
A big 2 page story in the business section of today’s Daily Oklahoman. Oklahoma’s oil production is up over 100,000 bbl/day starting in December – over 25%. Well, actual production is not up, but the EIA started doing their surveys last year to get more accurate production numbers. After months of consultation with the Oklahoma Tax Commission, they agreed that the EIA #’s are the correct ones. The OK Tax Comm claims that they have been collecting the right amount of tax.
Apparently, the data is loaded into a 30 year old mainframe system and computer program. Any data that does not match is kicked out of the system. That data is then processed manually but, has never been able to be loaded back into the existing computer system. So, numbers from Oklahoma have been understated for a long time. The Tax Comm says that they have one year left [estimate] on a four year project to put in a new computer system that will fix their problem. Meanwhile, the EIA is going with their survey.
Is this really the 21st century?
The EIA explains their new methodology here:
Updating Monthly EIA Crude Oil Production Estimates for Oklahoma to Use Survey Data
After months of consultation with the Oklahoma Tax Commission, they agreed that the EIA #’s are the correct ones. The OK Tax Comm claims that they have been collecting the right amount of tax.
Of course, when the volume of production suddenly is up 100K bbl/day nothing changes taxwise. Just a rounding error 😉 How can it be otherwise ?
Good afternoon–
At the risk of hijacking of this thread, I have several questions to pose to this group, starting with why are petroleum imports from Canada continuing to increase? (See link to EIA below). Is it caused in part by the anemic Canadian dollar, the need to keep pumping because cash flow generation trumps all other considerations, or something else? Which leads to another question How much further must the price of petroleum decline before petroleum imports from Canada start to dwindle? Until it does–and who knows when that will happen–I have a hard time believing that oil prices will move higher in the current cycle.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPC0_IM0_NUS-NCA_MBBLD&f=W
Hello Ned,
After you save us from your Ayn Rand Paul Ryan white trash here in Westeros. We can talk about building a Wall to stop the Wildlings from entering the kingdom. And of course the White Walkers are going to pay for it.
Joffrey
Who pray tell is NED, where the hell is “Westeros” , and which wildlings are you wanting to keep out of WHICH kingdom?
For that matter, who are YOU ,Joffrey?
Your comment makes no sense at all.
He’s referencing the popular HBO series Game of Thrones …. but it still makes no sense.
Here is a clue-
StuckinWalkerWorld means: I’m a liberal/progessive living in Wisconsin
An extra clue for OFM: Ned use to rule the North until Joffrey cut off his head and put it on a pike. The White Walkers aren’t going to pay for no f’n wall either.
I can just picture Donald Trump in his fancy suit negotiating with the White Walkers with papers and pen in hand
Thanks and please excuse my ignorance of tv shows.
I broke the TV habit over forty years ago, realizing that like most other people in this country I was wasting twenty hours a week , or MORE , staring at the idiot box.
People wonder how it is that I have read four or five thousand serious books. Half of the answer is NO idiot box.
OFM,
‘People wonder how it is that I have read four or five thousand serious books. Half of the answer is NO idiot box.’
or, perhaps, proculvision or teleopsis, depending upon your preference for Latin or Greek.
I had an old and very dear friend who died a few years back, an ancient historian at Oxford. We were talking one day about his family, who were German, and his aunt who had recently died. Tom was wrestling with her library and I asked how many books she had, to which he replied, seven or eight thousand. I was suitably impressed, but his view was that ‘yes, she was moderately well read’!
delete
I haven’t seen this discussed, but my apologies if it is a duplicate. Paragon Offshore to file Chapter 11 – is this the largest bankruptcy for offshore drillers so far?
http://splash247.com/paragon-offshore-set-declare-chapter-11-bankruptcy/
http://www.paragonoffshore.com/investors-relations/investor-news/investor-news-details/2016/Paragon-Offshore-Announces-Agreement-With-Bondholders-And-Revolver-Banks-To-Restructure-Its-Balance-Sheet/default.aspx
Oil crisis leaves the East barrelling out of control
“It’s sad. These people never thought the day would come where a barrel of oil would be below $30 (U.S.),” he said. “They were just living for the moment and they were making a huge amount of money and just thought it would continue on.”
The oil price collapse is also hitting the opposite side of Canada.
A very good article. Thank you!
Looks like everything is connected those days. Or “over connected”. A lot of common people suffer consequences of those big boys games. Business bankruptcies lead to personal bankruptcies.
I wonder where they got the 12 billion barrels of reserves from. Wikipedia gives the following numbers for the estimated oil in place:
Hibernia = 2.1 billion barrels with 700 million already produced by 2010
Terra Nova = 400 million barrels
White Rose = 440 million barrels
As far as I can tell, these are the only major oil fields off Canada’s east coast.
Dead on Frugal,
“A government land sale in the Flemish Pass basin took in a record $1.2 billion of new oil company spending commitments. There are an estimated 12 billion barrels of oil reserves in that area alone.”
So what is it, 12 billion barrels or 300 to 600 million barrels? Total production 1977-2005 at Prudhoe Bay = 11 billion barrels with perhaps two billion barrels of recoverable oil remaining. Let’s be generous and say 0.5 billion barrels total in the Flemish Pass Basin; 12 billion, no bloody way.
“In late September 2013, Statoil ASA and its 35 per cent joint-venture partner, Husky Energy Inc., announced two back-to-back light crude discoveries in the deepwater Flemish Pass Basin, offshore Newfoundland. The larger of the two discoveries, the Bay du Nord exploration well, confirmed the existence of 300 to 600 million barrels of 34 degree API oil recoverable.”
http://www.albertaoilmagazine.com/2014/01/light-crude-discovery-newfoundland/
Hebron – comes on line 2017, maybe 700 million barrels or more of heavy oil. BP and Shell each paid about $1 billion for exploration rights offshore Nova Scotia. Shell is drilling at the moment The author might also be considering ‘equivalent’ oil offshore Labrador which might have a lot of gas (but very difficult to develop). There are a couple of areas on the border with USA which are off limits at the moment. Against this Terra Nova and WhiteRose are well into their run down phases and don’t have much left.
http://www.cnlopb.ca/pdfs/off_prod.pdf
Say, Ron, have you looked at the most recent Drilling Productivity Reports? A couple days ago, they showed the major frack-oil fields having a reversal of legacy well declines. Bakken, Eagle Ford, etc. all show an UPWARD move in the legacy graphs (in other words, they’re losing less production monthly than they were previous few months).
I thought that looked really odd.
What is your thinking on this?
Bobby G,
at the GPM
I think that is due to the decline rate being very high initially for new wells followed by a long period of slower decline and more steady production over the course of a well’s life. As new producing wells were only enough in quantity to keep production flat (rather than increase it like previous years), there was less proportionally of this initial production spike and steep decline, and more proportionally of the slower more gradual declining production due – the composition of the wells now being mostly older rather than many new wells.
Also as production had fallen a bit, the decline should naturally be smaller even at the same decline rates. For instance a 10% decline on 1,000,000 mbpd will be higher than the decline at 10% on 900,000 mbpd
New shale wells have much higher decline rates than the old ones.
The less the number of new producing wells, the lower is the average decline rate
It does not look odd at all. That is exactly what you would expect, as Alex and Econ pointed out. Production is declining and therefore you have less oil to decline. And fewer wells are coming on line and older wells have a slower decline rate than new wells.
According to the Texas RRC, there were 10,441 oil wells on schedule in the Eagle Ford on Feb 1, 2016 and on Jan 1, 2016 there were 10,140 oil wells on schedule, so an increase of 301 wells in Jan 2016 in the Eagle Ford. Based on wells added to the schedule in the Eagle Ford and assuming the wells added gradually decreases from 200 wells per month to 100 wells per month, I get the scenario below if the average well profile is unchanged from now until Jan 2017. Output decreases by about 290 kb/d over the next 12 months, output has been relatively flat since at about 1430 kb/d from Sept 2015 to Jan 2016 based on the wells added to the oil schedule and output falls to 1140 kb/d by Jan 2017, if the guess on the declining number of wells added (10 wells fewer each month) and the unchanged well profile is correct. So the “model” after Jan 2016 is just a guess at future output based on the assumptions.
I didn’t get back to say thanks for the answers to my question about condensate energy content yesterday, or day before but thanks everybody.
Maybe somebody who can still remember their math will calculate the loss of energy per average barrel of so called total liquids as the percentage of condensates increases, with the quantity of conventional crude decreasing.
At first glance it looks as if the rising percentage of condensate is cutting significantly into the energy of an “average” total liquid barrel.
I have not run across any research yet performed with the intent of designing internal combustion engines to run mostly or entirely on condensates, but it would appear at first glance that using straight condensate, or a very high percentage of condensate as ice fuel would be practical and economic, so long as it continues to sell for substantially less than ordinary crude- at least in the case of large stationary engines, or engines powering equipment that mostly stays very close to a home base, such as farm machinery and heavy construction equipment. The condensate could probably be hauled to a big construction job or large farm at no more trouble and expense than LP .
Why blocking Obama’s pick to replace Scalia could cost Republicans their Senate majority
Assuming the president picks a Hispanic, African American or Asian American – bonus points if she’s a woman – this could be exactly what Democrats need to re-activate the Obama coalition that fueled his victories in 2008 and 2012. Even if he does not go with a minority candidate, the cases on the docket will galvanize voters who are traditionally less likely to turn out.
That is exactly what I have been saying.
Keep in mind that a quarter of Nevada’s population is Hispanic. Beyond being a battleground in the presidential race, there is also an open Senate race to succeed Harry Reid. Democrats will nominate a Latina and Republicans will nominate a white guy who is already in Congress.
This will absolutely assure that Harry Reid’s seat will stay in Democratic hands.
More broadly, this could also undermine efforts by Senate Republicans to show that they are capable of governing and not just “the party of no.”
Ron, looks like a leading choice is Sri Srinivasan. I know nothing about him, other than what I have just read. 48. Born in India, raised in Kansas, Stanford graduate. Was appointed to DC circuit and confirmed by senate 97-0, in 2012.
Good question shallow. But I don’t think he will be shot down. Even if he is the nominee McConnell will not allow it to come up for a vote. He will just sit on it until the next president is elected. And sit on it longer if a Republican is elected. Which is not likely.
That is just what they do. They are the party of NO!
I know that this is useless to point out, but Harry Reid said “no vote” to almost every single proposal passed out of the Republican controlled House.
The question is how many of those Hispanic “Nevadans” have the right to vote. I bet less than less than half of that quarter.
And my guess is you’ll see republicans very motivated to avoid an imperial presidency ruling by decree backed by an activist court. That reminds me of Venezuela.
“an imperial presidency ruling by decree backed by an activist court. That reminds me of Venezuela.”
Lol take ‘er down a couple 1000 captain.
I think a post of mine might have been lost.
In summary, I was comparing PXD (Pioneer) with CLR (Continental).
PXD produced 204K BOEPD in 2015, 53% oil. PV 10 12/31/15 $3.2 billion at $50 WTI, 89% PDP.
CLR produced 222K BOEPD in 2015, 63% oil, PV10 12/31/15 $8 billion at $50 WTI, 43% of proved reserves are PDP.
PXD enterprise value much greater, plans to grow BOEPD in 2016.
CLR enterprise value less, plans to shrink BOEPD in 2016.
Big difference, PXD well hedged, CLR is not.
Why the great disparity in PUD PV10? PXD supposedly has the most core acreage in Permian?
I really would like to see these reserves reports. I don’t see how CLR has much in the way of PUD PV10.
Note, proved reserves % PDP doesn’t necessarily equal % of PV10 that is PDP.
I will wait for 10K. I think we will find at $50 WTI, almost all have less PDP PV10 than long term debt.
Further, I hope we get indication in 10K what PV10 is at $30 WTI.
Something has looked fishy to me with CLR reserves and production every time I looked at it. I just stay away from that one.
dclonghorn.
Ironically I used the “fishy” word too discussing CLR today.
Don’t know anything they report is not correct, just seems OPEX is always very low compared to peers operating in the same areas.
Seems odd that PUD BOE would be 57% given terrible economics for new wells.
Again, BOE reserve category percentages do not equal PV10 value percentages, but 2/3 of OAS BOE reserves are PDP. Assume PXD is high % PDP reserves, given almost 90% of PV10 is PDP.
Also, never have figured out why all the $10+ million non core wells in places like Divide, Stark, Elm Coulee, etc, haven’t caught up with CLR. EOG, WLL, QEP and others seem to have better wells/ locations companywide in Bakken.
Oh well, it’s just speculation. Maybe the 10K’s will give us more clues.
If you look at Enno’s shaleprofile.com, you can get actual production curves for them and compare them with their presentation production. I made that comparison when Enno’s site first came up. It is a remarkable difference. I don’t know how much NPV they assign to any of their reserves, but I’ve seen enough to know that I don’t trust their reserves for volumes or dollars.
In other news, January Arctic sea ice extent was the lowest in the satellite record.
http://nsidc.org/arcticseaicenews/
And the ice mass was close to average. As it turns out it covers less area in the Barents, but it’s thicker.
Data set?
Bullshit, as usual.
Don’t hold your breathe Jimmy.
It may take Ferndando a while to cherry pick some numbers.
Ice mass in September has been running between 7,000 and 4,000 cubic kilometers since 2010, compared to a previous peak of 19,000 cubic kilometers and the 1979 to 2015 average of 11,000 cubic kilometers.
Volume descent is 3,000 cubic kilometers per decade. Since the lowest level has hit 4.000 cubic kilometers twice, if the rate continues it will hit zero or near zero in a little more than a decade (temporarily of course since that is a minimum).
Data is from the Polar Science Center graphs.
As I see it, only when these climate scientists are sufficiently concerned about their carbon footprint as to forgo cruises to the Antarctic to “study the ice” there will we finally have reason to worry about what they actually say.
And in this corner we have irresponsible climate scientists using fossil fueled power machines to take vacation cruises to the Antarctic to study the ice there, while in the other corner we have all of industrial civilization continuing with BAU! So we have absolutely no reason to take seriously what climate scientists have to say…
And in other news did you know that most biochemists in Europe and the US have been known to drive cars, take buses and trains and even fly to science conferences?! How can we possibly take any of their research seriously.
Glen is that you? Whoever you are, please crawl back under whatever rock you crawled out from under!
Hi Fred,
This is my last comment on Ron’s Blog (not that I ever had anything useful to say). Of course there’s always something of interest but you top the list for well informed rational dialogue. In spite of that, to my mind, too much space is being wasted by schadenfreude attitudes and know-it-all mindsets. Besides, I’ve not the slightest interest US politics and totally irrelevant matters which too often come to the fore (and take time to scroll past). And, it’s all interfering with my main focus — grandchildren and neutron stars. Press on with The Cause.
Adieu, Doug
Doug, I deeply hate to see you go. And I am sorry that you have no interest in US politics but US politics deeply affects our energy policy, our global warming policy, the conflict in Asia and just about everything else in the world.
But I understand your concerns. And I understand your love for astronomy. I have been a long time subscriber of Astronomy Magazine and look forward every month to each new issue.
But I must find time for other endeavors as well. I think the coming oil crisis, as well as the coming environmental crisis, tops all other subjects in importance. After all, I believe they mean the end of civilization as we know it.
Take care,
Ron
Hey Doug, very sorry to see you go and thank you for the kind words. There is no doubt that grand children and neutron stars are more important than any commentary on a blog. As good as Ron’s blog is I do get your point! Best wishes to you and yours! And stay out from under Thor’s hammer!
Fred
sorry to see you go Doug. Please check back from time to time.
Hi Doug,
You will be missed, enjoy the astrophysics and your children and grandchildren.
DougL,
“…too much space is being wasted by schadenfreude attitudes and know-it-all mindsets.”
All too true.
I’ll miss you, fella. Anyone who can involve Thorr in astrophysics is worth my attention, particularly one who can do that in a pleasant way. This is the saddest thing since Mike left.
Best of luck, and joy of your family.
Silicon Valley Observer,
There are however some very good news from Europe.
Great Britain experiences one of its coldest winter during the last decades and glaciers in the Alps are covered with up to 4 m of new snow. We have a beautiful winter here. This makes it likely that glaciers will grow again this year. So, all is not lost. There is hope again.
Heinrich,
“Great Britain experiences one of its coldest winter during the last decades….”
I normally only read the comments here, but I can’t let that go. England is having one of the mildest winters I can remember. Can’t comment about Scotland.
http://www.bbc.co.uk/news/uk-england-35264132
Here in West London December weather was exceptional, and since then we have only had one snow fall of about 2cm. Melted same day. I could count the number of frosty mornings on my fingers.
If you weren’t being serious, it would probably be better to have made that obvious.
Congrats to Ron on an excellent site.
Delboy, what kind of winters would you consider normal?
Hi Caelan,
London and the SE of England is generally milder than the rest of the country. Even so, I would expect a few days each winter when the temperature struggles to get above zero. And I would expect to get a couple of falls of snow of up to a foot and remaining on the ground for a few days. Apart from the winter of 2010-11, however, this pattern has become less normal, and there have been years when there has been hardly any snow at all. Mild, cloudy and damp is now predominantly the pattern. Winter average max daytime temps between 5-8 degrees.
This winter has been so exceptional that the UK industrial production figures seem to have been affected:
http://www.theguardian.com/business/2016/feb/10/uk-industrial-production-shrank-in-2015
This picture contrasts with my experience as a boy. As I recall, you would expect to get a good snowfall each year as a norm. The coldest I can remember was the winter of 1963, when we had a freeze that lasted over 2 months. Over a period of 50 years, winters here have gradually declined in severity.
That pretty much sounds like Vancouver’s weather over here in Prison Canada.
From what is understood, as a species, we’ve see a relatively-stable climate. We could be near hunting-and-gathering again before long as that changes and if how ‘we’ like to do things, such as in the Middle East now or around 1943 is any indication.
Make no mistake, we are physical and ideological hostages to these so-called-government manifestations, as we frame our perspectives, narratives and actions through the nation-state lens. Prime Minister, President, Supreme Leader…
Give my love to Julian Assange for me by the way. Maybe you lot can finally rise up and kindly escort him out past Cameron and his cops, seeing as you are paying for them.
Delboy,
What about the ‘Daily Telegraph’ article:
http://www.telegraph.co.uk/news/weather/12159068/UK-weather-Britain-continues-to-shiver-ahead-of-widespread-snow-by-midweek.html
“It will be extremely cold in high places. Snow is a real possibility in the Midlands and East England and even as far south as London from Wednesday’.
London has never a lot of snow, yet when it snows it is exceptional. West London is not Britain and East England, Midlands and Yorkshire are not Scotland. It is not fair to cry out each time when there is a warmer month and then when it is cold just to deny it.
According to newspaper reports there is also snow in Mallorca.
Heinrich,
‘Snow is a real possibility….’ A possibility???? It’s winter, there should be snow in high places. And one single cold week doesn’t make a cold winter.
My first hand experience is that my household energy consumption is about 15% lower than the same period last year (beginning of December to mid Feb). And people who live here are having to mow their lawns, something which shouldn’t be necessary until the end of March.
Read the Guardian article again:
“The Office for National Statistics said output in the energy supply sector dived by 5.4% month-to-month, accounting for 0.5 percentage points of the fall in overall production, as demand for heating energy from households and businesses was lower than usual owing to the mild winter in much of the country.”
Here’s some more high level evidence about the effect of successive mild winters on the UK’s salt suppliers. Apparently we’re not using as much of the stuff to grit our roads because it has been less icy.
http://www.bbc.co.uk/news/uk-england-35322992
Peak salt?
Delboy,
You are right. Since 1660 most of the warming in Central England has been due to Winter warming, with almost no Summer warming.
Obviously this warming predates anthropogenic high level emissions by almost 300 years.
This is Central England Temperature record from Hadley Met Office, the longest running temperature record on the planet. Only average for three summer and winter months are shown. Spring and Autumn have contributed to warming a little more than Summer, but a lot less than Winter.
Delboy,
What about the ‘Daily Telegraph’ article:
http://www.telegraph.co.uk/news/weather/12159068/UK-weather-Britain-continues-to-shiver-ahead-of-widespread-snow-by-midweek.html
London has never a lot of snow, yet if t snows it is exceptional. It is not fair to cry out each time when there is a warmer month and then when it is cold just to deny it.
Silicon Valley Observer,
Arctic sea ice alarmism is relentless in the face of continuous failure of dramatic predictions. Ever since 2006 predictions not only by Al Gore, but by very important cryospheric scientists like Peter Wadhams, head of the polar ocean physics group at the University of Cambridge, Wieslaw Maslowski from Dept. Oceanography of the US Navy, and Jay Zwally, NASA climate scientist, of an essentially ice-free summer Arctic have failed miserably.
The next prediction up for failure is by Mark Serreze, director of the NSIDC, who predicts a summer ice free Arctic by 2030, author of the famous Arctic sea ice death spiral meme.
They are simple curve fitting extrapolators who have failed to understand the cyclic nature of Arctic sea ice associated to the Atlantic Multidecadal Oscillation.
Nobody here is going to live long enough to see a summer ice free Arctic, and there is the distinct possibility that it may not happen until a future interglacial.
Javier – are you paid by Skeptical Science to attract users? Every time I search based on one of your claims I get one of their climate myth pages in the top two or three sites, which includes all the rebuttals:
https://www.skepticalscience.com/Arctic-sea-ice-melt-natural-or-man-made.htm
It’s actually a good set of articles, well written and referenced and I like the way they present it as easy, intermediate or advanced arguments.
Nobody pays me for sharing my knowledge over internet. I offer it free to all.
On Skeptical Science they are only skeptical about skeptics, all the rest they swallow fully even when there are glaring contradictions. They also delete and change user comments at will. Nevertheless it is a good site to check the official line of climate alarmists. Just do not expect any balanced view.
In my opinion, Realclimate, another AGW site, is better and more scientific and they do allow discussions with people and scientists from the other side of the fence.
On the issue of Arctic ice melting Skeptical Science and I agree on several things. The ice melting is mainly due to the warming of the planet, and natural variability alone cannot explain it. It is clear that anthropogenic warming is contributing to the melting. We disagree on things that science cannot demonstrate:
-They say that antropogenic forcing dominates Arctic sea ice melting. There is no evidence for that as we do not know the relative contributions.
-They say Atlantic Multidecadal Oscillation (AMO) has a small contribution to Arctic sea ice changes. We do not know the contribution of AMO, but the evidence shows that it could actually be very big.
And this is going to be very easy to demonstrate. AMO just changed trend a few years back. Prediction from the AMO model indicates that Arctic sea ice is going to be quite stable over the next 10 years within seasonal variability, while anthropogenic models predict a continuation of Arctic sea ice loss.
Simple and testable. We should know in about 5 years. That is how science works. Hypotheses make predictions, those predictions that fail lead to the rejection of the corresponding hypothesis. The problem is that CO2 hypothesis makes lots of failed predictions yet there is so much invested in it that an explanation post hoc is quickly put in place to avoid rejection. Most people outside science do not understand that post hoc explanations for failed predictions are a damning sign of scientists trying to keep alive a wrong hypothesis.
This is the correlation between AMO index and September Arctic sea ice extent, inverted because AMO warming leads to less ice. You won’t see this at Skeptical Science. They won’t show it to you. It is very easy to win a debate if only one side is allowed to speak.
Some questions about accuracy of EIA statistics. My impression is that in certain areas they has been playing fast and loose. I might be wrong. Among areas of some concern:
1. Is not the net effect of usage of volume instead of weight result in approximately 6% inflation of gross totals (which include all types f fuels) and thus EIA is distorting the “peak oil” situation? (“Great Condensate Con”)
2. Is not the same concern true about accounting of gasoline in those EIA totals which include both oil and refined products ?
3. Is not (1) and (2) make EIA “mixed totals” statistics completely bogus (inflating the data by up to 12%) ?
4. Is EIA accounting of refiner gains just an artifact of usage of volume as the metric?
a. The whole concept might be viewed as a mirage created by usage of volume as a metric (the first law of thermodynamics).
b. How refiner gains on imported oil should be accounted? Should they be classified as domestic production like EIA does?
5. Is EIA usage of volume acceptable in case of ethanol production? A unit of volume of ethanol contains approximately 55% of energy in BTUs in comparison with WTI. Huge difference: 76,000 Btu/gal vs. 138,000 BTU/gal. That affects mileage and all other usage metrics.
6. How dilutants for Canadian tar sands imported to Canada from the USA are accounted by EIA. They are first exported to Canada and then imported as a part of Canadian oil import? So part of the volume of Canada production was already “produced” in the USA.
7. The same question about Venezuela heavy crude.
IMHO Ron’s graphs would be definitely twice more convincing if they were constructed in weight metric instead of volume.
Well, volume is all that I have so my charts are in volume. But I am not really concerned with NGLs, process gain or biofuels. In fact I would never post “total liquids” if I had crude, or C+C for that data.
But all that being said, C+C is a pretty good indicator, even though it is not perfect. It will tell us when the peak occurs, or more correctly, it will tell us when the peak occurred in the past.
Here we talk about peak oil and measure every uptick and downtick in production. On the other hand oil is so abundant that they are now giving it away for free. India will get free oil from UAE in return for offering storage.
http://www.zerohedge.com/news/2016-02-15/uae-offers-india-free-oil-ease-storage-woes
No kidding. I offer you a free ton of beef if you allow me to store 10,000 tons in your freezers for six months.
Energy is free as long as it takes less of it to get it. –> Fernanado’s frog here <–
Fernando, where do you get your frog? I can’t find it.
Did you even read the article? For every 3 tons of UAE oil stored by India, it gets 2 tons for free. That is not 1/10000, more like two thirds.
Suyog,
UAE paying for storage with oil?
Yes. India gets two thirds of the oil it stores for free.
It’s not free. It’s a payment but instead of with cash it’s with oil.
If you give me one of your hotel room for the night I’ll give you 60 dollars for free.
What don’t you get?
What you don’t get is that it is an extremely generous offer which indicates excess supply. Why would UAE make such an offer unless they were running out of storage?
It is also a windfall for India because they pay for the cost of local storage in Rupees and save dollars by not having to pay for imported oil.
I’m not disputing that they’re running out of storage. I’m disputing that they’re giving oil away for free. Try stay on topic. You know, the topic you started.
is it possible to protect enough land and ocean to stave off catastrophic ecological decline? Are we even close?
http://www.nytimes.com/2016/02/13/us/obama-california-national-monument.html?_r=1
What average are you referring to? According to PIOMAS arctic sea ice volume has been on a downward trend for a long time. I don’t expect sea ice mass and sea ice extent to track uniformly, but their trends are both the same.
http://psc.apl.uw.edu/research/projects/arctic-sea-ice-volume-anomaly/
As I understand it volume isn’t measured directly but has to be modelled using ice age, air and sea temperature histories and other arcane stuff beyond my understanding. Area and extent can be measured directly (microwaves?) but area measurements can get confused by melt pools in summer when there are such things. There are three volume prediction sites that I have found – PIOMAS, Danish Polar Institute and the US Navy. As you say they all seem to show a level that is lower than the recent average (2004 to 2013 for the Danish averages) and therefore presumably much lower than say for pre 1979. PIOMAS has a significant down trend last month so might be heading well below average in the future.
I’d guess the extent is the more important value for affecting the albedo, but volume for the lag in melting time. But local weather in the melt season, especially wind patterns and number of storms, is probably a bigger and less predictable factor on the overall melting expecting through to September.
All that might be wrong though – I’ve only really got interested in the Arctic after being clobbered by a seemingly endless series of storms here in NW England over the last three months.
Hello George,
The climate change data now transcends science although the two never really went hand in hand anyway for most involved in the research community. Sure these scientists will say that the science was settled years ago, whereas it obviously wasn’t. Most of what we know about the climate was put forward by the un-elected bureaucrats down at that UN (that’s right, those guys who have always done such a “great” job preventing wars and suffering). Everyone with a true interest in climate change here ought to review the work of one Maurice Strong while he had a UN job. He has stated that his and his fellow bureaucrat’s goal oh 20 to 30 years ago was to invent a special type of CAUSE that could unite the globe against the existing governments to create something new and GLOBAL in scale. So they all became overnight environmentalists out to save the world from mankind. Don’t believe me? Look up speeches given by him and lots of others while he was there.
By the way, some of the same GHG emissions reducing plans that Obama tried to implement in the US before the courts shut him down had already been tried in other parts of the world. The Europeans went FULL ON into green (taxpayer subsidized projects which cost good paying jobs and money with no meaningful progress made). Here in Ontario in Canada our premier went totally headstrong into trying to make our province the envy of the greenies all up and down throughout North America with his green projects to eliminate coal and other things found to be undesirable. Well what do you know, we now have probably the HIGHEST electricity rates in all of the Americas and as usual NOTHING good to show for it. Although try to spend all day arguing this point with those on the left who are all gungho into the science and you will get to feel like arguing with someone wearing blinders. Sadly for so many of them political dogma trumps logic and I guess there’s NOTHING that will change opinions over to the clearly correct side.
Be well,
Walt
I have some interest in the modelling and phenomena of ice shrinkage. I have absolutely no interest in conspiracy theories. Humans in disparate groups are simply not capable of carrying through the prolonged dissimulation required, especially scientists who in my experience are the amongst least politically astute people around.
As far as renewables are concerned in Britain we are heavily reliant on fossil fuel imports (LNG, coal, Norwegian gas) and a lot of our nuclear and coal plants are coming to the end of their lives. I’d be more than happy to be paying higher rates if we had a big renewables build out program so when the gas is gone and lots of other countries are competing for the remaining LNG and coal my descendants had a chance of staying warm and reading a book in bed.
This is irrespective of any global warming issues – in fact I think the evidence from some predictions is that UK will be one of the places to do reasonably OK in the future under climate change scenarios (some people call it life boat Britain). In these while southern Europe and central continents might overheat and turn to desert the cooling from Arctic and Greenland keep it quite pleasant. Of course to enjoy this fully you’d have to be capable of ignoring the suffering everywhere else in the world.
Most of what we know about the climate was put forward by the un-elected bureaucrats down at that UN (that’s right, those guys who have always done such a “great” job preventing wars and suffering). Everyone with a true interest in climate change here ought to review the work of one Maurice Strong while he had a UN job.
Oh, Great! Another conspiracy theorist nut telling us that what we know based on science just ain’t so!
Yeah go ahead and look up Maurice Strong, for one thing he is dead. The other is that he was a Canadian mineral business man, a diplomat and apparently a realist and you can find numerous climate change denier blogs taking his views completely out of context and painting him as the evil creature from the black lagoon!
Current lifestyles and consumption patterns of the affluent middle class – involving high meat intake, the use of fossil fuels, electrical appliances, home and work-place air-conditioning, and suburban housing – are not sustainable.
Maurice Strong
But the actual peril is more subtle. A small cadre of obscure international bureaucrats are hard at work devising a system of “global governance” that is slowly gaining control over ordinary Americans’ lives. Maurice Strong, a 68-year-old Canadian, is the “indispensable man” at the center of this creeping UN power grab.
That quote is from the Australian Sceptics Blog.
Right! global governance, gaining control over ordinary Americans’ lives led by a Canadian.
Seriously! WTF!
What do you mean no meaningful progress? We, Europeans, have saved the planet.
Here is the evidence:
1. Ever since the Kyoto accords of 1998 Europeans have been busy reducing CO2 emissions and constitute the region of the World that has reduced them most.
2. Since 2012 global emissions of CO2 have stagnated and in 2015 they have declined for the first time outside of a global economic crisis. Europeans are the biggest contributors to that decline.
3. According to satellite records, and discounting El Niño CO2-unrelated warming, the planet essentially has not warmed since 2003.
Now when the cooling starts you know who you should be thankful to.
Troll alert
North Dakota should be releasing their December production numbers soon. A lot of people consider North Dakota’s reporting as an indicator of the trends for all shale oil. Their reporting is much more timely than waiting 8 months to see what Texas looks like after revisions.
North Dakota surprised with small production gains for October and November. The EIA’s November Drilling Productivity Report forecast a 27 kbopd decline from November’s estimated 1137 kbopd to December’s estimate of 1110 kbopd. North Dakota’s report for November was 1119 kbopd. It may be that they trade some accuracy for timeliness as their monthly numbers seem to be very erratic. That said, I think they are due for a decline of over the forecast 27 kbopd.
Three years ago today a meteor streaked across the sky over Siberia. It will happen again, who knows when, nobody knows. Just will have to wait and see. Nobody saw it coming.
During those three years, 100 billion barrels of crude and condensates have been burned and close to 23 billion tons of coal. The gaping maws have a voracious appetite.
Over the next thirty years another trillion barrels of oil will be consumed if all goes like it does now, then after that, things might change. Overshoot requires copious amounts of resources. Remove the resources and all hell breaks loose.
Going to have to have people doing all of that fossil fuel consuming, how many will be around over the next thirty years is a good question.
Ice-free Arctic by 2013:
“In particular, the sea ice in the northern polar regions is at historic low levels. The 2010 minimum ice level records were the third lowest ever recorded. The first and second lowest recorded levels were in 2008 and 2007. The loss of several million square kilometres of sea ice is a big deal. Even the most pessimistic naysayer can’t explain away that much missing ice.
There are credible scientists who are now predicting an ice-free (summer) arctic by as early as 2013. The implications are mind boggling. The impact on wildlife, humans and the rest of the world’s weather patterns is impossible to predict for specific areas and to exact detail.”
http://www.niagarafallsreview.ca/2011/01/15/taking-the-effects-of-global-warming-seriously
Guess they got that one wrong too.
PIOMASS data seems to indicate the first ice free Arctic occurrence 15 to 20 years from now. Those Niagara Review scientists must have been political science majors. 🙂
Of course we all know it will freeze up again in the winter, right? Just much thinner than it used to be.
Currently, January Arctic Ice extent was 1 million square kilometers below average. Looks like there is quite a bit of open water north of Greenland and Finland.
Not time to start planning summer resorts on the edge of the Arctic Ocean yet.
I hope Virginia is ready for alligators. Makes water hazards really hazardous on the golf course.
http://www.slate.com/articles/health_and_science/animal_forecast/2013/02/alligators_in_virginia_climate_change_could_be_pushing_cold_blooded_species.html
The waters of the planetary ocean are trapping and holding more heat than expected, slowing down atmospheric warming.
Some folks argue that we will never put enough co2 in the air to prevent nature doing what nature has always done, which is to vary the climate from hot to cold over long periods of times, over thousands and tens of thousands of years,
And IF WE STEP BACK FAR ENOUGH, they are probably RIGHT. But we aren’t as a practical matter considering what will happen a thousand years, or two thousand , or five or fifty thousand years from now. We are concerned about the next few decades , and the next century or two, mainly.
And so far as I can see, the preponderance of the evidence indicates that we ARE forcing up the average temperature of the planet, slowly in human terms, but steadily.
In natural terms, the forcing is extraordinarily fast.
But I am enough of a realist to give credit to Fernando ,and a few others, who remind us that if we fossil fuel pessimists are right, and our estimates of fossil fuel reserves are in the ballpark, we won’t be putting nearly as much co2 into the atmosphere going forward as the climate science community assumes.
So- Maybe the high end forecasts, predicting the greatest rises in temperature, are too high.
But even a couple of degrees is going to play hell with life as we know it, due to the impact on food production and water supplies in places that are already short of water.
Is KSA’s strategy succeeding?
http://fivethirtyeight.com/features/saudi-arabia-is-winning-its-war-against-the-u-s-oil-industry/
This article from Quartz is much more in-depth:
http://qz.com/604756/the-us-bet-big-on-american-oil-and-now-the-whole-global-economy-is-paying-the-price/
I have given up any pretense of trying to understand what will happen next, then further down the road. Except to understand, that at some point, depletion becomes unequivocally evident to all…then it will get ‘interesting’.
Talking about getting things wrong, Ron and the others who say the R’s are making a BIG mistake insisting they will stall the nomination of a new SC justice are PROBABLY right, that is PROBABLY a stupid move politically. But there are R voters to be rallied, as well as D voters, and it’s hard to know for sure how turn out will be affected, given so many wild cards this time around.
But if the shoe were on the other foot, with a Republican in the White House, the D’s would play the same game. The only difference is, they would be a little more discreet about it, and merely insist that they will not approve a conservative partisan. The thing is , every nominee would be found, on THEIR examination to be a conservative partisan, until AFTER the election, in hopes of a D president nominating a liberal, which of course to them means a perfectly middle of the road jurist.
Live long enough, and you WILL become a cynic, when it comes to human nature.
The D’s are smarter politicians than the R’s.
The R party power structure is fossilized, and thus beyond any hope of doing any real thinking. The D power structure is alive and well and in prime fighting condition, with only one problem. HRC owns it, lock stock and barrel, and there are a HELL of a lot of people who ought to be in the bag democratic voters who have less than no use for her.
We have never had an election shape up like this one in my lifetime, but the Vietnam era elections throw some light on the situation. The thing is , the R coalition is not what it used to be , back then. The world has moved on, the R coalition is riddled with the troubles brought on by old age. What’s left of it is owned mostly by Wall Street, which I fear owns a controlling interest in the D party power structure as well.
OFM,
I personally disagree that, were this situation flipped, the Democrats would stop the nomination of an SC judge that was unanimously approved just 2 years ago like Sri Srinivasan.
The fact is that this really is unprecedented so long before an election.
It’s no different than the equally unprecedented move of shutting down the government, or the record number of appointed seats left unfilled throughout Obama’s 8 years. These are all genuinely radical, unprecedented, and harmful actions with no equivalent precedent in modern times.
In many ways I feel sorry for the Republicans. It is due to the recent radical insurgence called the Tea Party that these irrational and harmful practices have come about.
Ultimately, it’s not that history shows Democrats wouldn’t do such extreme things; it’s that history shows both Democrats AND Republicans would never previously do such radical things.
Thanks Brian, you expressed it far better than I would have been able to.
Hi Old Farmer Mac,
Usually your comments are pretty good. In this case I disagree.
If you do not see how far to the right the Republican party has moved since 1980, then you are not paying attention. The Democratic party has moved to the right as well an though there are a few Democrats on the “far left” by US standards, in most advanced nations of the World these “socialists” would be in the center of the political spectrum.
Signif blurbs from ZH
As Russia’s oil minister meets his Saudi Arabian counterpart in Doha on Tuesday, the world’s second-largest crude producer faces numerous obstacles in cooperating on such a deal even if Putin decides it’s in the national interest. Reducing the flow of crude might damage Russia’s fields and pipelines, require expensive new storage tanks or simply take too long.
In Siberia, Russia’s main oil province, winter temperatures can go below minus 40 degrees Celsius (minus 40 Fahrenheit). That’s a challenge for anyone thinking of turning off the taps.
The oil and gas that flows from wells always contains water, so once pumping stops, pipes may freeze, Mikhail Pshenitsyn, who has worked for more than 10 years in the Russian oil industry, said by e-mail. The problem goes away in summer, but there’s still the risk of a long-term reduction in output because a halted reservoir can become polluted with salts and residues, he said. Production from a shut-in well might never be restored in full, Maxim Nechaev, director for Russia at consulting firm IHS Inc., said by phone.
Blink. Someone from IHS says oil wells can be permanently damaged?
Might want to go thru the article. It’s loaded with frown inducers.
Why would anyone “produce oil” aka extract it from the ground if they don’t have an order for it. There is verbage about Russia pumping it to store it. Hell, it’s already stored. Underground. Russia isn’t going to get tax revenue from oil flow that isn’t sold. The sales revs are what pay the taxes.
People are so desperate to sprint to the oversupply narrative that they don’t think it through.
Watcher,
Thanks for your debunking of ZH drivel.
Looks like ZH is short on oil for some time. And narrative of his site instantly changed accordingly. Before that he was kind of a “peak oiler”.
Zero hedge is a really crooked site when it comes to oil.
I had an account banned there for continually pointing out the inconsistencies of their narrative on production and supply. You’ll notice they’ll only use graphs when there’s been an uptick in production. All the time last year when production was falling they never once used a graph.
When production was still increasing they always used a combined rig count/production graph, the moment production started to fall they pulled the production line from the graph. The moment production plateaued and slightly increased, the production line reappeared.
There’s some skilled propagandists there because most of the commenters lap it up, I doubt many of them would realise production actually fell in the US in 2015, they probably still think it’s increasing. None of them would realise Saudi production has fallen either.
Watcher,
That part of the text that was quoted from ZH is totally wrong (like most of the MSM garbage) in way that it looks at the tomorrow’s meeting. Russia is not negotiating any cuts at all with SA in Doha or vice versa. The whole meeting is about a possible attempt of negotiation only of oil production freeze of additional production in retrospect of Iran return to the oil market.
Ves,
I agree. There will be no output cuts.
KSA has ‘cut’ production in 6 out of the last seven months. Cut might not be the right word though as I suspect it was not a choice. It was thrust upon them by geology. KSA will IMO face month after month of decreasing production. They managed a production surge for a short while but that’s all they had in them. They’ve shot their bolt. Iran probably has some good increases coming but that’s about it, and not all of that Iranian increase will be exported.
This has nothing to do with geology.
The increase in Saudi oil production in the summer season was due to peak demand from the domestic power generation for air conditioning.
As demand moderated in the past several months, KSA slightly reduced output levels, while crude exports have actually increased.
KSA oil production and exports in 2015 – Jan. 2016
sources: JODI, OPEC
Thanks AlexS,
Do you believe that the slightly reduced production level of the last 6 of 7 months was optional? I tend not to. I feel they are producing every single barrel that they possibly can. They’ve got the peddle to that floor. No holding back.
Jimmy,
Although this is a peak oil blog, we should not see any seasonal/monthly/weekly/daily decline in oil production as a sign that it has already peaked.
Alex,
How you can expand exports when Iran is very aggressively trying to get back into the market with the very similar product at a very similar price. And somehow signed contracts for at least 0.3 Mb/d in Europe alone.
Does this mean that there is a huge deficit in the world for good quality oil or they simply undercut competitors, including Iranians ?
Something is wrong with this picture.
Alex,
“There will be no output cuts.”
And here is GS analysis conveniently voiced by Bloomberg:
http://www.bloomberg.com/news/articles/2016-02-15/putin-s-reward-for-doing-a-deal-with-opec-overshadowed-by-risks-ikogu2ez
Looks like some negotiations are happening behind closed doors between Saudis and Russians (probably discussion over Iran return to the world oil market) despite thick smoke of disinformation from Bloomberg presstitutes.
With French, Italian and Greek deals (and Spain deal in pipeline) it might well be that accommodation of Iran is already started in full force. The question is whether they are able to produce additional volumes of oil above 0.3 Mb/d that is expected (and actually already contracted) and if yes, when.
Iraq and a couple Persian Gulf monarchies are on board for the cuts. Saudis need to pander to growing Wahhabi sentiments of its population. So they probably are not in order to “punish” Iran and Russia. Also hardliners are now in power. But as money evaporate from their coffers even hardliners might soften their position. Eventually.
Still here is Bloomberg disinformation in full glory:
BTW looks like Bloomberg intentionally distorted the position of Sechin. IMHO he is onboard about a one time cut around 1 Mb/d if it is implemented as a proportional cut by all major oil producers. As Russians most probably have a reasonably good intelligence about Persian Gulf countries they should understand the situation with new projects and natural decline of wells in Gulf which now will drive the world oil production dynamics.
Saudi oil minister is now more like figurehead. Real power is in the hands of deputy crown prince Mohammed bin Salman. Here is French analyses:
http://www.atlantico.fr/decryptage/et-homme-plus-dangereux-moyen-orient-est-indice-avez-probablement-jamais-entendu-parler-lui-2555562.html
likbez,
To me the Saudi strategy looks like that they want to push everything to the extreme as this will turn the table in politics and also in the oil market more likely than a ‘soft approach’. In other words oil prices will be staying lower for the next half year, yet can go then much higher by next year.
Hi Heinrich,
How much higher do you think oil prices will go by Dec 2016?
Are we talking $50/b or $90/b for the Dec 2016 monthly average spot price for Brent Crude?
The reciprocal frame represents civilization or a social structure that works. The moment one member wants to be somehow unequal is the moment it risks structural collapse, seeing as the structure is reciprocal.
The problem with a sufficiently-complex social structure, however, would appear to be that, as the structure grows in complexity, it perhaps needs to shrink in terms of personal autonomy. Given that humans are not just social creatures, but also complex creatures, however, that would seem to be in part what may cause increasingly-chaotic perturbations in the social structure over time as non-reciprocal forms of hierarchy start to cascade through the system, and create a throttling effect toward increasing complexity through greater risk of catastrophic failure.
————
Donald J. Trump:
Trump represents, to the people, the superhero, ‘Mr. Economy’. That’s why I think there’s a big chance he’ll get elected. BAU– oil-growth-based BAU– is slowly going down the funnel, and many people– those for example who are part of the hidden unemployment statistics– may need someone who looks like they might be able to bring it back from the brink. Enter Trump, the lowbrow high-end entrepreneur and real estate guy, or whatever. From what I’ve seen and heard, Trump talks like someone who some of might have, as a relative, friend, neighbor or acquaintance, over at their home, maybe after a drink or more.
I am deeply disturbed by the thought of the government becoming an ever larger and larger player in the economy, because once we go very much farther down that road, so many people, both the recipients of government largess, and the people who distribute it , will be so numerous we will be LOCKED IN to whatever policies are in place. Serious change, short of revolution, can become impossible.
Witness Venezuela, where the folks getting the goodies are desperate to hang on to them, and a government run economy is incapable of changing its policies or ways. This is an extreme example but ought to make my point.
ON THE OTHER HAND, the sort of free wheeling no holds barred capitalism that Wall Street wants, with privatized profits, and guaranteed socialized losses, is SURE to be a disaster, and that imo is where the Trump Chump would lead us.
The environmental question TRUMPS every thing else, period. All the other issues are basically deck chair issues. We need to concentrate on the fact that the ship IS going to sink, if we don’t get our asses in gear, and implement workable solutions to our environmental problems.
Basically this means we need a D in the White House, because the R’s are not going to take the initiative when it comes to the environment, they have made that PERFECTLY clear.
So- the question becomes, which D candidate is more likely to win the actual election, if nominated.
The conventional wisdom coming from the msm may be no more than spin.
http://www.theatlantic.com/politics/archive/2016/02/the-pragmatic-case-for-bernie-sanders/462720/#article-comments
“ON THE OTHER HAND, the sort of free wheeling no holds barred capitalism that Wall Street wants, with privatized profits, and guaranteed socialized losses, is SURE to be a disaster, and that imo is where the Trump Chump would lead us. ”
A rejoinder – and Sanders offers free-wheeling no-holds barred taxing and regulation and guaranteed socialized “profits”
Both Trump and Sanders play variations of what Garrett Harding Called the “CCPP” game. Commonize Costs, Privatize Profits. They just differ in who’s pocket is picked. Both are equally dangerous and popular, which makes this election both critical and frightening.
http://www.garretthardinsociety.org/articles/art_who_benefits_who_pays.html
I give a copy of Hardin’s “Filters Against Folly” to anyone who I genuinely respect and wish to impart, via reading material, a sense of my own philosophy. That book, plus Viktor Frankl’s “Man’s Search For Meaning”, should be on every adult’s reading list. Understanding natural ecology, human ecology and human nature – and how to survive all three – are vital life skills.
I have read almost everything by Garrett Hardin. Nature and Man’s Fate was written before he became the fire breathing Hardin. I bought a copy of his biology textbook Biology: Its Principles and Implications (1966) and had him sign it. One of my rare purchases of a non-assigned textbook. I once spent a day reading his papers at the UCSB special collection. http://www.garretthardinsociety.org/ is excellent. An even earlier influence was the less well known biologist N. J Berrill https://en.wikipedia.org/wiki/N._J._Berrill Don’t be misled by the title The Person in the Womb (1966).
One of the pictures is of Garrett Hardin with a couple of oil experts, Buz Ivanhoe and Walter Youngquist. Garrett had a submission to Ivanhoe’s Hubbert Center Newsletter rejected. It was too much about coal. Ivanhoe wanted to keep the newsletter oily. I disagreed but to no avail. Ivanhoe’s suicide was the week after Doctor and Mrs. Hardin’s . All three were in poor health and believed in the right, perhaps even an obligation to die. http://www.garretthardinsociety.org/gh/gh_pictures2.html
There is no one in either party that I particularly wish to see as President. I have not decide on the likely “least of evil”. How could one possibly tell. I would like a Malthusian non-interventional social liberal with at least mildly conservative economic policies. Of course California will go for the democrat. Perhaps I will vote for the libertarian candidate, hoping to raise him or her to the million vote total. Will the make-up of the Supreme Court really matter in a collapse scenario.
It doesn’t matter of course who ([PITA]POTUS) is if/as they are merely window-dressing over a shitty, dangerous building, with every election being merely a new paint job with maybe a strip, some caulking, and an undercoat beforehand to make it look new (or at least less-than-condemned).
If JFK’s remarkably-anarchistic comments that I’ve heard of before are true, Trump or whoever will simply toe the line or risk life (easy for Trump and maybe a dream for the cronies if it is close to his line anyway).
The USA appears as essentially a 1-party system dressed up as 2. At least North Korea is ‘honest’.
(Exposed thought: “Bloody hell, when does this shit the fan already?”)
3 Dressed Up As A 9 (LOL)
Much ado about nothing:
Saudi Arabia and Russia Agree Oil-Output Freeze in Qatar
http://www.bloomberg.com/news/articles/2016-02-16/saudi-arabia-and-russia-agree-oil-output-freeze-in-qatar-talks
Nations agree to maintain output at Jan. 11 level, Naimi says
Ministers from Qatar, Venezuela also agreed to freeze”
Saudi Arabia and Russia, the world’s two largest crude producers, agreed to freeze output after talks in Qatar.
Freezing output at January levels will be “adequate” and the nation still wants to meet the demand of its customers, Saudi Oil Minister Ali Al-Naimi said in Doha after talks with Russian Energy Minster Alexander Novak. Qatar and Venezuela also agreed to participated in the freeze, Al-Naimi said.
“A freeze would not create an immediate U-turn but it creates a better foundation for the price recovery in the second half,” Olivier Jakob, head of oil consultants Petromatrix GmBh, said in a note to clients before the meeting concluded.
According the International Energy Agency, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015. Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data.
Qatar will lead monitoring of output freeze agreement, the nation’s Energy Minister Mohammad bin Saleh al-Sada said at a press briefing.
My comment: Anyway, Russia and Saudi Arabia were not expected to increase oil production this year
Yes, but the markets don’t know that Russia and Saudi Arabia cannot increase output. With this agreement they are trying to sustain oil prices or even increase them, one of the few things Saudi Arabia and Russia can agree on.
Yes, and they are successfully “talking up” oil prices over the past 2 or 3 weeks
Alex,
What do you mean by “talking up”? Funny, but you sound like ZeroHedge. The current prices are unsustainable and will go up talking or no talking. Now the effect will be amplified by a short squeeze.
Those presstitutes from Reuters already proudly reported that Azerbaijan will not join. As if it matters.
Look at the example of the current Western propaganda drivel:
https://finance.yahoo.com/news/four-oil-producers-agree-freeze-091449519.html
As you can see this fake narrative of 1-2 Mb/d of “glut” is still in place.
If this is not taking the price down I do not know what is. In this “fog of war” we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about.
In view of this event it looks like the recent visit of Qatar minister to Moscow was crucial. I expect Iraq joining this agreement immediately.
In any case please understand the Western game to talk down oil prices down until recently included Saudis. Now they are out of this game.
But Reuters still tries to play Iran card.
https://finance.yahoo.com/news/oil-powers-fly-doha-private-003013958.html
In this “fog of war” we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about.
I can understand some political bias in what national oil companies are reporting, or in some cases what government agencies themselves are reporting. But I just flat do not believe that agencies like Platts, and other such sources, are deliberately lying about what they believe a nation’s oil production really is. What reason would they have to lie? Fog of war? Shit, they are not at war with anyone.
I do not believe that the news agencies, and agencies that track oil production, around the world are engaged in some kind of giant conspiracy to deceive the world into believing that either more or less oil is being produced than it really is.
Why the hell do some people always believe that the media or agencies that track and sell data are always lying? They don’t have a dog in that fight. Their first priority is to find out and accurately report what is actually happening. It is in their interest to tell the truth, as near as they can determine what the truth actually is. Because if they are caught lying it could severely damage their reputation and deeply hurt their company profits in the long run.
I don’t believe they have an agenda, but follow normal human behavior in following the crowd. The media coverage seems to be very one-sided at the moment and at times poorly researched. It appears though as if the game of the moment is to talk to “oil-price down”. Headlines and world-events that would have caused an immediate oil-spike in the last years is suddenly seen as good opportunity to short oil. As a person working in the oil industry this is extremely frustrating at times.
Daniel,
There is no spin or bias in the fact that refined product inventories are at record highs leading to large discounts to remove winter blend gasoline stocks.
There is no spin or bias in the fact that inventories are at record highs. This data is tracked from multiple independent sources AND in several different ways. There are data analytic companies that have used satellite data to estimate storage tank usage by means of the shadow they cast. Even this unique and statistically accurate way of measuring changes in storage agrees that storage is well above historical highs.
There is no spin or bias in the fact that oversupply and price competition between major producers has led the UAE to offer India free oil so long as it stores it.
There is no spin or bias in the fact that oversupply is causing bidding wars between major producers forcing the Saudis and others to continuously lower prices to keep contracts.
It is glaringly obvious, from every single angle, that the world is oversupplied at the moment. Current production declines aren’t yet having an impact because this time of year is a period of seasonally low demand. Add in Iran’s need to win contracts, and you get a temporary bidding war where every exporter is desperately lowering prices to keep contracts. Once it gets really bad you get things like the UAE deal with India.
Within the next 3 months all these trends will reverse. Seasonal demand will rise while production declines rise, and Iran’s production stabilizes eliminating the new production bidding war.
Just because the market will re-balance strongly in 2016 does not mean that it is currently in the process of re-balancing. Due to the confluence of Iran competing for contracts, record high storage, and the seasonal lull in demand canceling out any nascent production declines we’re in the most acute phase of oversupply relative to demand.
It doesn’t matter where the market will be in 3 months. Oil produced today needs to be bought by SOMEONE NOW. This is causing a massive bidding war because there aren’t enough buyers now that Iran entered and needed to win contracts immediately.
Why the hell do some people always believe that the media or agencies that track and sell data are always lying?
A good point. Really, why some people distrust Western MSM and agencies ? Can it be for the same reasons they distrust bankers, IMF and World Bank ?
http://www.globalexchange.org/resources/wbimf/oppose
No, it absolutely cannot be the same reason. Banks deal in money, news agencies deal in news. Banks have a vested interest in secrecy, news agencies have a vested interest in telling everything they know.
News agencies desperately want a reputation for telling the truth. Banks desperately want a reputation for making money for their clients, investors and stockholders. These people don’t give a damn if banks lie or not as long as they make money. Money is the only thing they care about.
Likbez, the fact that you see the same motives behind what news agencies report and what banks do, tells me you really don’t understand either.
Ron,
If Congress and government are owned by banks according to senator Durbin ( “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” ) why do you think government agencies and major MSM are different ?
Oh for God’s sake! Platts can create a banking crisis? Petroleum Intelligence Weekly has a lobby? The Oil and Gas Journal has the same agenda as CitiBank?
Good gravy man, get real!
The Oil and Gas Journal has the same agenda as CitiBank?
Thank you for attacking my viewpoint. That actually clarified my thinking.
Looks like our viewpoints are not that different. In my view we can (and should) mentally rate each source information as for objectivity and bias (for example your blog and posts vs ZeroHedge ).
The sources of information that have bias of opposite sign in comparison with MSM are especially valuable. Even in MSM comment sections are much more valuable then the articles published. Right now for me the most valuable sources of information that help to reveal the bias are sources that question the mainstream hypothesis of oil glut (and related spin about Saudis desire to preserve market share), as well as those who were critical of shale oil boom and are questioning EIA, IEA and friends statistics. Your mileage may vary.
The key point is that whenever possible we should try to compare different sources of data. That’s the only way to reveal the real picture as none of us can verify the data provided by agencies and MSM.
This is a classic situation called “Plato cave” “https://en.wikipedia.org/wiki/Allegory_of_the_Cave”
Still we can for major oil-related data to estimate the error margin and the direction of bias. Like I tried to estimate error margin for EIA data. Much depends whether you assume it to be 1% or 10%. If, for example, you think about particular source as 100% reliable that’s fine, but 100% rating should be rare in this world and should never be awarded uncritically. Actually your posts for me are close.
So non-US media, discussion forums that attract professionals like your blog, posts of professionals who try to present unbiased views like your posts, Jeffrey Brown posts, Art Berman posts (to name a few) and remnants of media still loyal to oil industry (your example of The Oil and Gas Journal), not to Wall Street traders interests (Bloomberg) are especially important islands of sanity in this distorted, crazy, financial speculation dominated world.
“sources that question the mainstream hypothesis of oil glut ”
No one serious source (IEA, EIA, OPEC, Platts, Woodmac, Rystad, IHS, energy ministries of exporting countries, oil companies, large oil traders, etc.) questions the oversupply in the global oil market.
Oil glut is not a hypothesis, it’s a fact.
Right now for me the most valuable sources of information that help to reveal the bias are sources that question the mainstream hypothesis of oil glut
I think this is hilarious. The sources that you believe are those who think there is no oil glut at all. The sources that believe the price of oil has been driven from over $100 a barrel to $30 a barrel by…. some kind of giant conspiracy.
Yeah right! Rolling in the floor laughing my ass off.
Perhaps you believe Watcher’s theory. That it was all because some exporter, Saudi I think, just kept selling at a slightly lower price until after many months they had gotten the price down to thirty bucks a barrel.
Yeah… that’s the ticket. 🙂
Alex & Ron,
Did you ever hear about “Great Condensate Con” hypothesis? This is an alternative to “oil glut” hypothesis and I think it is more plausible.
Did you ever hear about “Great Condensate Con” hypothesis? This is an alternative to “oil glut” hypothesis and I think it is more plausible.
Well no, it is not. While the Great Condensate Con is very real, it is not an alternative to the oil glut. The oil glut simply deals with supply and demand. If the supply of oil is greater than the demand for oil then the price falls. It is as simple as that.
The increase in production by Iran and Saudi Arabia, that began in March of 2015, was not condensate, it was curde oil. Much of the increase before that date was condensate. But the decline in demand had nothing to do with the Great Condensate Con. It was a decline in demand due to very high prices and a definite decline in the world economy.
Bottom line, there is a definite oversupply of crude oil in the world today. That is the reason we are seeing oil in the range of $30 a barrel, and not any kind of conspiracy by anyone.
Hey! I am a peak oil advocate. I would love to say that there is a shortage of oil in the world today as a result of crude oil peaking. But the very obvious facts do not allow me to make such a claim. There is a glut of oil today. That cannot be denied.
For Christ’s sake, don’t try to spin reality into some kind of conspiracy. Accept reality as it is and go from there.
I have said all along that peak oil will be a time when more oil is produced than any time in history of the world or ever will be produced in the future of the world. And such a time will be far more likely to be perceived as a time of an oil glut than as a time of an oil scarcity.
Hi Ron,
I think the peak in C+C output will be when maximum output coincides with high oil prices. You are correct that the peak is not determined by oil price, it is simply the final peak in output.
Most people will not be convinced that the peak is behind us until high oil prices (over $100/b in 2015$) for several years (say from 2018 to 2020) are unable to increase C+C output to over 10.9 metric tonnes of oil per day for a yearly average (79.9 Mb/d).
Note that the average real Brent oil price (2015$) was $110/b from 2011 to 2014 and dropped to $52/b (2015$) for the average 2015 oil price.
Dennis, you are likely to be wrong.
Peak oil should take place at a time of low prices, since high oil prices are conductive to increased production.
Peak oil will be determined when low oil prices are for a time long enough so that production reduction for the next years is so affected as to not being able to overcome oil decline as to produce a higher peak.
The present situation fits perfectly. We have conventional oil in a plateau since 2005 with increasing costs of keeping there. We have low oil prices for a long time affecting expensive oil production and reducing and delaying future prices. And we have weak demand despite low oil prices.
Everything is in place. Summer of 2015 is Peak Oil.
Hi Javier,
I disagree. If a temporary peak occurs in 2015 when oil prices are low that peak will be surpassed when oil prices increase once supply and demand are balanced, the increase in price will cause supply to increase until the final peak is reached at high oil prices (possibly $150/b in 2015$) between 2020 and 2025 at about 170 to 175 Exajoules per year (1 EJ=1E9 GJ) of C+C output. Time will tell.
Note 2015 average C+C output will be about 167 EJ per year.
“that peak will be surpassed when oil prices increase once supply and demand are balanced”
No it won’t, Dennis.
Already there is a funding gap in capex of several hundreds of billions $.
See the graph AlexS has posted: http://peakoilbarrel.com/just-how-accurate-are-the-eias-predictions/#comment-560005
That funding gap is going to reduce future production for several years no matter what. Over those years the decline will increase creating a red queen race situation. When prices are high enough to pay for production, decline will be slowed or halted, when they are not, the decline will continue. The peak will not be surpassed.
Hi Javier,
There are many projects already sanctioned that will be coming online and will keep output relatively flat, when prices increase, the projects that have been cancelled will be restarted, possibly there will be a plateau rather than a new peak, I doubt there will be significant decline before 2025 and a new peak is very likely.
An undulating plateau between 2015 and 2018 is likely and whether a new peak is reached between 2020 and 2030 will depend on oil prices, if they are high (over $100/b) a new peak will be attained, if not we will remain on an undulating plateau for a longer period, possibly until 2030.
So Dennis, you say that all this:
27 Billion Barrels Worth Of Oil Projects Now Cancelled
Oil price rout forces companies to slash $170 billion in projects from 2016-2020
TPH: Canceled projects could draw down 19 million daily oil barrels
is not true, then.
Dennis – define ‘sanctioned’. Is that FID – if not they are just studies and can be cancelled at any time. Even after FID they are not guaranteed to proceed. And name which ones, oil or gas, with expected boepd production. Also note that for deep and ultra deep developments expected production plateau has almost never been achieved for the expected period.
As usual I agree with Ron in terms of broad outlines. News agencies and organizations as a whole or a group are more interested in the truth than in spinning the truth, or ignoring it.
But there is no doubt at all in my mind that a lot of news organizations spin the truth for some particular reason, emphasizing the news in such a way as to support an agenda OTHER than getting the truth out.
WHY?
Because in this day and time, the OWNERSHIP of news organizations is in the hands of people who have HUGE stakes in spinning the news to suit themselves, in a lot of cases.
Business interests have bought control of news organizations as much for the power gained thereby, as for legitimate investment purposes.
AND the organizations themselves, after a while, tend to become hotbeds of partisan employment.
It’s not that the truth doesn’t matter, in terms of getting caught out wholly in the wrong, but rather that the truth is judged expendable in terms of certain events and issues, or at least , just something to be IGNORED.
I have no problem AT ALL with FOX NEWS when it comes to reporting earthquakes, airplane crashes, and day to day local news. But I would be laughed out of this forum if I said that Fox does a great job of reporting on environmental issues. Fox does not, of course.
OTOH, FOX has actually started reporting in an even handed manner, at least some of the time, about electrified personal automobiles.
I listen to NPR almost exclusively, whenever I turn on a radio, or else a folk and bluegrass music station, if NPR is playing organ music.
But so far as I am personally concerned, I cannot ever REMEMBER hearing anybody on NPR on a regular basis who sounds like a R partisan.
OTOH, I am confident I can identify the political orientation of everybody talking on NPR, with ninety nine percent accuracy, just by reading an hour or less of randomly selected black and white transcript of what they have to say, word for word.
The OVERWHELMING majority are conventional stereotypical liberals, with a few token conservative voices popping up once in a long while.
Tone of voice and choice of words can convey the message , quite as effectively as the actual words spoken.
Note that I continue to listen to NPR.
I might listen to some other outfits, but there isn’t any other programming WORTH listening to. There is no comparable right wing radio. So called talk radio is all about the lowest common denominator, and that denominator is ignorance.
So if you want to hear anything that is based on knowledge and reason, coming from the conservative pov, you are reduced to a few magazines, for all intents and purposes.
Mac, of course news agencies like Fox News spin political news. Neither they, nor any other news agencies would need to lie about Azerbaijan’s oil production numbers. Or China’s oil production numbers. Or… well, I hope you understand that.
To accuse Fox, or Platts, or whomever, of lying about some Asian countries oil production, just smacks of stupid conspiracy theories.
Juan Williams was at NPR for years. He is now one of the popular liberals at Fox.
likebz,
it is not so much of price and production levels at this point but more about dividing the “important” customers. As you can see which customers (European) are getting lined up with Iranian deliveries and that explains all distortions from Bloomberg and Reuters.
Russians are splitting SA dominant Opec and splitting the Nato at the same time.
Russians are way more “convincing” (after Syria intervention) than Iranians in negotiations with Saudis regarding the Iranian pie of the market as we can see with the result of the meeting in Doha. Meeting was just about freeze of additional output and they all agreed on freeze. There will be a time when all of them will agree on broad cuts as well. But we are not there yet.
AlexS. I assume intent was to try to stop slide in price below recent lows?
Traders seemed to be trying to push price below $20, maybe this will slow that push?
Issue is whether Iran and Iraq will comply.
Further, a slow recovery this year will be too late for many high cost producers, who will have to cut (by halting development/through natural declines).
US companies lost record amounts with 2015 average of $50 WTI. Another year of $50 WTI or less will be fatal. But assuming US rigs continue to fall, US output will eventually fall significantly.
Also, appears stabiliing the oil price will help equity markets, which is beneficial.
Shallow,
Traders seemed to be trying to push price below $20, maybe this will slow that push?
You made a very good point. This might be a preemptive move in order not to allow GS and friends to crush the oil prices into low 20th or even teens range.
I remember Sechin complaining about this possibility recently in London.
shallow sand,
You are correct, traders were trying to push price down, and the talks of potential OPEC – non-OPEC cut have slightly changed the sentiment in the market and helped to stabilize the price. If not for these talks, Brent price would probably be about $5 lower (the effect on WTI was lesser).
But as there is no real output cut, the impact is limited, and may be short-lived.
“US companies lost record amounts with 2015 average of $50 WTI. Another year of $50 WTI or less will be fatal. But assuming US rigs continue to fall, US output will eventually fall significantly.”
This is one of the reasons, why KSA and Russia will not cut output. If they cut by some 1 mb/d, oil price could rise to $50 and U.S. output would be flat this year instead of declining by 0.6-0.8 mb/d like most projections suggest.
Another reason is Iran, which will continue to increase supplies in any case.
Iraq most likely will not increase production further this year.
AlexS,
I read (John Kemp at Reuters, I think) that the agreement is conditional on other producers adhering to it. I doubt Iran will.
BREAKING:Pennsylvania #naturalgas data out:
December 2015 13.42 bcf/d,
November 2015 revised up +0.7bcf/d.
All others unchanged #Marcellus #Utica
Build it and they will come! (pipelines that is)
For the time being at least!
High risk of bankruptcy for one-third of oil firms: Deloitte
“These companies have kicked the can down the road as long as they can and now they’re in danger of kicking the bucket,” said William Snyder, head of corporate restructuring at Deloitte, in an interview. “It’s all about liquidity.”
Saudis and Russia agree to oil output freeze, Iran still an obstacle
Saudi Oil Minister Ali al-Naimi said freezing production at January levels – near record highs – was an adequate measure and he hoped other producers would adopt the plan.
Ha ha … this plans shouldn’t be very difficult to implement — just do nothing.
Frugal,
As Shallow Sand pointed out this is probably a preemptive move to block “irresponsible games” with oil futures and a real possibility of “testing $10”.
http://peakoilbarrel.com/oil-production-is-going-to-drop/#comment-559227
The US is the dominant force in international banking. It is this position from which sanctions are derived. Iran had to (and often did) find other ways to get paid for shipping oil than money flow through international banking, which US and EU sanctions prohibited.
If you seek to oppose the US, you must not fight in a money arena. It’s a disadvantageous battlefield.
The price of oil is determined by what? NYMEX traders? Or agreement between a refinery and an oil exporter?
I would suggest it is the latter, which need not depend on NYMEX numbers at all.
If your goal is to destroy US shale, the last thing you would do is allow your weapon (price) to be defined by your target (the US in general, which is where the NYMEX is). Nor would you allow it to be defined by something as variable as free market forces. If you specify price to your buyer, perhaps lower than his bid, you remove the marketplace from involvement in the battle.
The goal is victory. Not profit. How could you allow yourself to define victory in pieces of paper printed by your enemy?
If your goal is to destroy US shale, the last thing you would do is allow your weapon (price) to be defined by your target (the US in general, which is where the NYMEX is). Nor would you allow it to be defined by something as variable as free market forces.
If your goal is to destroy US shale then the only way you can do that is to produce every barrel of oil you possibly can. It would not be within your power to allow the price to be defined by anyone or anything other than market forces. Of course every exporter negotiates a price with his buyer. But that price must be within a reasonable amount of what the world oil price is at the moment.
The price of oil is determined by supply and demand just like every commodity on the market.
Every day, there are thousands of oil buyers around the world. There are dozens of sellers, many of them exporters. All the buyers are in competition with other buyers to get the lowest possible price. All the sellers are in competition with other sellers to get the highest price possible. And the price moves up and down with each trade, hourly or sometimes minute by minute.
To believe that even one of those dozens of exporters has the power to set the price oil, much higher than everyone else is getting, is just silly. And likewise, to believe that a buyer can get a much lower price than everyone else is getting, is just as silly.
They say that depletion never sleeps. Well, market forces never sleep either.
But that price must be within a reasonable amount of what the world oil price is at the moment.
Which is why it took the predator 18 mos to get it down to lethal levels. Just repeatedly be willing to sell for a bit less than the bid and down it will go, because others will protect their marketshare by matching your price (sound familiar?). Then you’re no longer the only one offering a low price.
All the sellers are in competition with other sellers to get the highest price possible.
Were this so there would exist no wiki for predatory pricing.
You aren’t thinking about victory. If you seek victory, you don’t fight in an arena where you are disadvantaged. If you’re the low cost producer of the lifeblood of civilization, you assert that advantage and kill the enemy.
Hi Watcher,
By your reasoning the price of oil should be close to zero, say $1/b.
Explain why that isn’t the case, if “victory” is the sole objective.
Also predatory pricing is not an effective strategy especially in commodity markets where the barriers to entry are low.
OPEC does not set the price of oil on World Markets, they simply influence it by their level of output. In the case of the oil industry attempts at predatory pricing are not rational, it is simply a strategy for losing money.
Which is why it took the predator 18 mos to get it down to lethal levels. Just repeatedly be willing to sell for a bit less than the bid and down it will go, because others will protect their market share by matching your price (sound familiar?). Then you’re no longer the only one offering a low price.
Oh good grief. I give up. You are a hopeless case.
Tell that to the Soviets.
“Tell that to the Soviets.”
Perfect !
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11220027/Cheap-oil-will-win-new-Cold-War-with-Putin-just-ask-Reagan.html
http://www.susmitkumar.net/index.php/reason-for-ussr-collapse-oil-a-german-banks-not-reagan
http://www.hubbertpeak.com/reynolds/sovietdecline.htm
I don’t think Watcher expresses the situation very clearly, especially with words like ‘predator’. I don’t see it as an apt analogy. I do however feel that the current price war/production war/phantom production war is clearly an act of economic warfare by Saudi Arabia against their competitors. It seems odd to me that a world oil production system that can’t very accurately tell me how much oil was produced today until months after the fact is going to start the day tomorrow by saying ‘we are over supplied by 1.8 million barrels a day today’ and then proceed to talk the price into the gutter.
The predator is not KSA.
Thanks that really clears up all the lose ends in your attempt to explain things 😉
https://www.strausscenter.org/energy-and-security/fungibility-oil.html
Hi Watcher,
There are no longer any Soviets, perhaps you mean Russians?
“The price of oil is determined by supply and demand just like every commodity on the market.”
Ron is damned tooting right.
The only way a commodity price can be higher than the price set by unimpeded operation of the principle of supply and demand is that SOMEBODY has the power to deliberately withhold ENOUGH production from the market to force the price up. This could happen locally, if there is no competition, as in the case of a local distributor having a monopoly in a given area. It could happen world wide, if a couple of big producers get together to cut out a couple of million barrels a day of production, or more.
For now, suppliers are selling for whatever they can get, and all the middle men in the oil industry, from pipeline operators to refineries to local distributors are pretty much just collecting their normal operating margin.
I personally think it takes a fool to believe that a great white shark corporation such as EXON MOBIL or PEMEX or SAUDI ARAMCO is dumb enough or hard up enough to allow a few guys operating a con game from Wall Street or anywhere else to get between them and their customers.
Producers are engaged in a price war. Price wars happen when the producers in a competitive industry get to be productive enough that supply outruns the desire of the collective end user for the product.
I may be a farmer with shit on my boots and sunburn on my neck, but nevertheless I know a little about how business works.
A supermarket does not give a flying XXXX about the price of apples, or donuts or toothpaste, or anything else. The management just wants to earn a certain amount of revenue, day after day, selling these things. If the price of apples goes up wholesale, they raise the price, and cut back on the volume in stock, so as to get the desired amount of revenue from the floor space alloted to apples. Ditto oranges, green beans, corn meal, and everything else.
The wholesaler who supplies apples by the truck load doesn’t give a XXXX either. He just wants to make a certain amount of markup on every box, so as to pay his bills and make a living. He could care less if a certain grade and variety of apple costs twenty five or if it costs thirty bucks, per box. He just adds on his margin, and sends them on down the retail road, to stores.
Ditto the trucking company, they could care less, they work by the box and by the mile hauling those boxes. It makes NO difference to the trucker if the box costs ten bucks, or fifty. NO concern of his.
Basically what this means is that poor Oldfarmermac suffers virtually the entire burden, if the price of apples crashes. The supermarkets, and the wholesalers, and the truckers, and the guys who sell me boxes, are NOT interested AT ALL in sharing the pain with me, and they don’t NEED to share the pain, there is no REASON for them to share the pain.
( Of course there is a flip side, and every few years, the price of apples spikes, and those years, if my family happened to make a good crop, well, we punched WAY above our weight class in terms of income those years. My grand parents on both sides, although just simple barely literate country folks managed to build and PAY FOR very nice brick houses and buy new new trucks in ONE year, once upon a time. Some other years, they lived on home grown beans, and ran in the hole pretty deep. )
So long as oil producers are willing to sell cheap, the low cost of oil will pretty much be passed right along, by ocean going shippers, by refiners, by pipeline companies, by local distributors, and by retailers.
Anybody who has BEEN in the business of selling a commodity product in a competitive market place for a lifetime understands this basic reality.
Now can the smoke and mirror guys influence the price of oil? Sure they can cause the price to go up a little bit, or down a little bit, but over any significant period of time, this results in a wash. IF one of them makes a buck today, somebody else loses it.
But there just XXXXing AIN’T nobody out there who can CONTROL the oil producers, or the shipping companies, or the refiners, or the distributors, or the retailers. Every body gets their markup. Every passes along his costs. Nobody is in a position, as a general thing, in a competitive market, to buy below the going price, or sell above the going price. Anybody who thinks otherwise is deluded.
The price of oil will stay down until enough a cartel of some sort, a cartel capable of LIMITING production, comes into being, OR until depletion and lack of upstream spending results in production falling off WITHOUT a cartel.
Any individual oil company going broke will have just about a zero effect on the price, even if that company is a big one, because somebody else will buy up the assets, and continue production. Some companies with deep pockets may shut in some production in effect betting on the price being up enough later to justify shutting in NOW.
Hey folks, outfits like Exon Mobil are not operated by little children. Nor are pipeline companies, or retail chains such as Walmart, or oil refineries, or trucking companies.
I am not arguing that an outfit like gold in sacks can’t cause the quoted price of oil to go up or down a little, short term, and make some bucks, playing the long and short game from minute to minute, or hour to hour, or day to day, knowing with a reasonable degree of certainty which way the price is apt to go for the next day or week, or hour, for that matter. They only need to be right about the direction of the price fifty one percent of the time, and a move of a quarter or a dollar a barrel is enough for them to fill up some more sacks, assuming you believe they CAN AND DO manipulate the price a little.
But a dollar up, or a dollar down doesn’t mean diddly squat to do you know what with your pants down, in terms of the overall industry situation, from the producers pov.
OFM,
That’s naïve. Think about Walmart and how it drives its suppliers into bankruptcies. It is Walmart who dictates the price to suppliers.
Wall Street is the same.
Bullshit.
Walmart does not have the power to compel any company to sell to Walmart at a price below the company’s cost of operation FOR MORE THAN A VERY SHORT PERIOD OF TIME- as long as it takes that company to go broke. And this applies only if Walmart has succeeded in driving ENOUGH of the companies OTHER customers out of business.
It is that given company’s COMPETITORS that drive it out of existence,NOT WALMART. The COMPETITION is responsible for lower prices.
THE COMPETITON determines the going market price, over any extended period of time.
I have heard the same arguments made about chicken processing companies and other agricultural processors for decades.
The fact remains that there are always chickens available, live , by the truckload, as many as ANYBODY wants to pay for, and the average price over a years time is always high enough for the farmers who raise them to make money – the farmers who don’t get weeded out, that is.
Companies have been acting this way since the first ones got big enough to drive out smaller competitors.Nobody forces any given company to do business with Walmart.
If a company can supply the goods at the MOST COMPETITIVE PRICE, it survives , selling to Walmart OR to Walmart’s competition, or both.
Half the local farmers in the USA in my lifetime went busted before anybody ever heard of Walmart, well before Walmart ever ran its first big loss leader advertisement for eggs, or bacon, or any other food product. Countless manufacturers of various items go broke every year- companies that sell stuff Walmart does not.
Companies that cannot produce at the lowest going price will continue to go broke, unless that price is the result of a price war. Price wars are always temporary, and companies with deep pockets survive.
At one time there were over five hundred manufacturers of automobiles in the USA. Now, less than a dozen big enough to really matter. Is THAT Walmart’s doing?
I have ONE neighbor who raises as many apples as the next four or five local growers combined. He has the scale to take advantage of all the scales of economy available to him. In another decade, anybody left in the biz will be as big as he is NOW, excepting a few “boutique ” growers in a position to market direct to the retail customer.
Little operators such as yours truly are continuously forced out of the producing end of the market. Our little family operation ceased to be cost competitive well over a decade ago, but we ran it anyway, as a life style choice, until a couple of years ago.
Mac,
Walmart dictates the price but not directly through the price but through the quality of products that it sells. So the low cost “chicken” that you can buy in Walmart is not really a chicken but poison with printed word “chicken” on the package. Walmart customers don’t even know how REAL chicken is supposed to tastes. It is all part of conditioning.
And Rocky IV movie is not really Art either. It is conditioning as well to think it is some kind of Art.
Fully agree. Walmart does not dictate the price, but the direction of the price (lower). Many companies accept lower prices (even below profitability) in the hope entering Walmart will decrease cost by increasing volumes. But the price should be lower compared to competitor. If nobody can provide whatever product at the desired Walmart price, either Walmart will not sell it or sell it at a higher cost or sell it with a lower quality.
Competition fix the price. In rare cases producers can chose when they are well known. Think about Coca-Cola and Pepsi-Cola refusing to sell their products through Wallmart. What will the customers do? If they are going to other shops, then competition start again.
Interesting that oil /stock market correlation broke today.
Further US oil co mixed.
Due to KSA Russia aanouncement?
Shallow,
Art Berman thinks cooperation between Saudi and Russians is an important development (http://www.forbes.com/sites/arthurberman/2016/02/16/opec-russia-production-freeze-not-a-cut-meaningless )
But it looks like Wall Street decided to show oilmen who are the Masters of the Universe.
I feel it’s a feeble attempt by Saudi Arabia to get Iran to freeze production.
http://in.reuters.com/article/us-opec-oil-iran-idINKCN0VQ17P
Young Saudis See Cushy Jobs Vanish Along With Nation’s Oil Wealth
http://www.nytimes.com/2016/02/17/world/middleeast/young-saudis-see-cushy-jobs-vanish-along-with-nations-oil-wealth.html?action=click&contentCollection=International%20Opinion&module=MostPopularFB&version=Full®ion=Marginalia&src=me&pgtype=article
Like Norway, Saudi Arabia’s oil money has created a generation of lazy bums who get paid a lot for doing little of importance. Lower oil prices is the only thing that’ll force the Saudi population to work harder.
Frugal. Having worked both in Norway and the middle east, I think it is unfair to put them in the same pot. There are more productive nations than Norway, but they do work much harder than the nationals of the oil-rich middle east countries. In addition, if one nation ever got the work-life balance right than it is them.
I suppose they could try get jobs that displace the expats but it’s not like they’re gonna go be lumberjacks and farmers. Who the hell is hiring in KSA, Wendy’s? As a kid I remember my dad once remarked ‘never buy a house in a one resource town’. KSA is a one resource country! 30 million people with no detectable prospects whatsoever. The best any of then can do is get educated and flee.
http://www.downstreamtoday.com/news/article.aspx?a_id=51083
Gulf of Guinea Sees Piracy Drop as Oil Price Deters Looters
Obviously the profits from the sale, is below the cost of procurement!
http://oilpro.com/post/22393/oklahoma-orders-producers-to-cut-wastewater-injection-40
Does anybody know what the average water-cut is in the region? One would assume that this should result in a measurable production-decrease.
A lot of OK production is 90% water.
I guess proper treatment is too expensive. So one would assume that this is roughly 50000 bpd of the table then?
Abolish The Supreme Court
We Used To Have Ideals
I think I just heard congressman Joe Barton say that the U.S could produce 20 million barrels of oil a day on CNN.
If costs, profit and EROI were not an issue USA perhaps could. In the real world though, IMO, it’s not gonna happen. But these kind of statements are lapped up by the unwashed masses and garner votes. It seems to me that the truth is bad news and bad news is unpatriotic. There aren’t many grownups around these days to deal with the big issues and hard facts.
To comment on an up screeen post:
News business are in the business of selling ads to generate revenue. They could care less about whether they accurately inform the public/their customers/the viewership-readership or not. Most headlines online are ‘click bait’. Click bait gets clicks. Clicks sell ads. Ads generate revenue. Revenue generation is what news organizations are in the business of. Nothing more.
The best news and information today can be found online for free from interested parties who like to analyze world affairs, trends and information. Not from media corporations who have a mandate to generate profits for shareholders.
Hi Greenbub,
Mr. Barton may be thinking in terms of total liquids which in Quarter 2 of 2015 were at 15 Mb/d when all liquids (including biofuels and processing gains) are counted.
I still think 20 Mb/d of total liquids for the US is unlikely. Barton may agree with optimists such as Maugeri and Lynch, we might see US output of 18 Mb/d of total liquids when oil prices return to over $100/b in 2020, but it will go no higher than that (and 15 Mb/d may indeed be the peak). Keep in mind that natural gas output will continue to grow and the NGL increase may offset some of the C+C decline.
Chart below from EIA data for C+C+NGL in Exajoules per year, note about 2 Mb/d of US total liquids are refinery processing gains (probably negative net energy) and other liquids (about 80% of which is ethanol which has very low net energy). In “real” energy terms US liquids output has increased from 15 EJ/year in 2010 to 25 EJ/year in the fourth quarter of 2014.
The North Dakota numbers seem very late this month!
I wonder if there are any anomalies they are trying to sort out?
Yes, and there are only 40 rigs, among which 3 MIRU and 1 stacking. Probably a new bad week for drillers.
Toolpush,
Permits are down 30% to 40% in December from November https://www.dmr.nd.gov/oilgas/stats/2015monthlystats.pdf and are soon lower than spuds. In the semiconductor industry this would mean the book to bill ratio is falling below 1 and indicates a turnaround.
It is out now. I am sure ron will have a proper summary, but looks like a decent drop in all numbers. Production down roughly 28500 bpd
Thanks Daniel,
Chart below assumes about 54 new wells were added in Dec 2015 (I haven’t seen Enno’s data yet) and that 54 wells per month are added each month in 2016. Output drops about 200 kb/d in that scenario. Chart below.
Crude-Oil-Peak has a recent post that shows that since 2005, the only region of the world that was been able to bring on any additional oil was the United States. Does anyone have a figure for how much CapEx was spent during that time to keep us essentially on a plateau? How much CapEx was spent during 2005-2014?
You can check out Steve Kopits’ presentation a Columbia.
http://energypolicy.columbia.edu/events-calendar/global-oil-market-forecasting-main-approaches-key-drivers
This chart was posted above in this thread:
Hi AlexS,
Thanks for introducing me to the WoodMac site, lots of interesting stuff there.
You may have posted this before, but there is an interesting post on future output at link below:
http://www.woodmac.com/analysis/PreFID-oil-projects-global-breakeven-analysis
In summary, by 2025 about 15 Mb/d of output will be from pre-FID projects and new US lower 48 onshore drilling (primarily LTO and shale gas condensate in my view).
Only about half of these barrels break even at $60/b. Chart below from link above.
Half of oil production from future developments is uneconomic at US$60/bbl Brent – this is the conclusion from our comprehensive breakeven analysis of future global oil developments. These comprise of conventional projects which have yet to receive final investment decision (pre-FID) and future drilling in US onshore Lower 48 plays; which are critical for future oil supply.
Start Preparing for the Collapse of the Saudi Kingdom
February 16, 2016 By Sarah Chayes Alex de Waal
Saudi Arabia is no state at all. It’s an unstable business so corrupt to resemble a criminal organization and the U.S. should get ready for the day after.
For half a century, the Kingdom of Saudi Arabia has been the linchpin of U.S. Mideast policy. A guaranteed supply of oil has bought a guaranteed supply of security. Ignoring autocratic practices and the export of Wahhabi extremism, Washington stubbornly dubs its ally “moderate.” So tight is the trust that U.S. special operators dip into Saudi petrodollars as a counterterrorism slush fund without a second thought. In a sea of chaos, goes the refrain, the kingdom is one state that’s stable.
But is it?
In fact, Saudi Arabia is no state at all. There are two ways to describe it: as a political enterprise with a clever but ultimately unsustainable business model, or so corrupt as to resemble in its functioning a vertically and horizontally integrated criminal organization. Either way, it can’t last. It’s past time U.S. decision-makers began planning for the collapse of the Saudi kingdom.
In recent conversations with military and other government personnel, we were startled at how startled they seemed at this prospect. Here’s the analysis they should be working through.
Understood one way, the Saudi king is CEO of a family business that converts oil into payoffs that buy political loyalty. They take two forms: cash handouts or commercial concessions for the increasingly numerous scions of the royal clan, and a modicum of public goods and employment opportunities for commoners. The coercive “stick” is supplied by brutal internal security services lavishly equipped with American equipment.
The U.S. has long counted on the ruling family having bottomless coffers of cash with which to rent loyalty. Even accounting today’s low oil prices, and as Saudi officials step up arms purchases and military adventures in Yemen and elsewhere, Riyadh is hardly running out of funds.
Still, expanded oil production in the face of such low prices—until the Feb. 16 announcement of a Saudi-Russian freeze at very high January levels—may reflect an urgent need for revenue as well as other strategic imperatives. Talk of a Saudi Aramco IPO similarly suggests a need for hard currency.
A political market, moreover, functions according to demand as well as supply. What if the price of loyalty rises?
It appears that is just what’s happening. King Salman had to spend lavishly to secure the allegiance of the notables who were pledged to the late King Abdullah. Here’s what played out in two other countries when this kind of inflation hit. In South Sudan, an insatiable elite not only diverted the newly minted country’s oil money to private pockets but also kept up their outsized demands when the money ran out, sparking a descent into chaos. The Somali government enjoys generous donor support, but is priced out of a very competitive political market by a host of other buyers—with ideological, security or criminal agendas of their own.
Such comparisons may be offensive to Saudi leaders, but they are telling. If the loyalty price index keeps rising, the monarchy could face political insolvency.
The Saudi ruling elite is operating something like a sophisticated criminal enterprise.
Looked at another way, the Saudi ruling elite is operating something like a sophisticated criminal enterprise, when populations everywhere are making insistent demands for government accountability. With its political and business elites interwoven in a monopolistic network, quantities of unaccountable cash leaving the country for private investments and lavish purchases abroad, and state functions bent to serve these objectives, Saudi Arabia might be compared to such kleptocracies as Viktor Yanukovich’s Ukraine.
Increasingly, Saudi citizens are seeing themselves as just that: citizens, not subjects. In countries as diverse as Nigeria, Ukraine, Brazil, Moldova, and Malaysia, people are contesting criminalized government and impunity for public officials—sometimes violently. In more than half a dozen countries in 2015, populations took to the streets to protest corruption. In three of them, heads of state are either threatened or have had to resign. Elsewhere, the same grievances have contributed to the expansion of jihadi movements or criminal organizations posing as Robin Hoods. Russia and China’s external adventurism can at least partially be explained as an effort to re-channel their publics‘ dissatisfaction with the quality of governance.
For the moment, it is largely Saudi Arabia’s Shiite minority that is voicing political demands. But the highly educated Sunni majority, with unprecedented exposure to the outside world, is unlikely to stay satisfied forever with a few favors doled out by geriatric rulers impervious to their input. And then there are the “guest workers.” Saudi officials, like those in other Gulf states, seem to think they can exploit an infinite supply of indigents grateful to work at whatever conditions. But citizens are now heavily outnumbered in their own countries by laborers who may soon begin claiming rights.
For decades, Riyadh has eased pressure by exporting its dissenters—like Osama bin Laden—fomenting extremism across the Muslim world. But that strategy can backfire: bin Laden’s critique of Saudi corruption has been taken up by others and resonates among many Arabs. And King Salman (who is 80, by the way) does not display the dexterity of his half-brother Abdullah. He’s reached for some of the familiar items in the autocrats’ toolbox: executing dissidents, embarking on foreign wars, and whipping up sectarian rivalries to discredit Saudi Shiite demands and boost nationalist fervor. Each of these has grave risks.
There are a few ways things could go, as Salman’s brittle grip on power begins cracking.
One is a factional struggle within the royal family, with the price of allegiance bid up beyond anyone’s ability to pay in cash. Another is foreign war. With Saudi Arabia and Iran already confronting each other by proxy in Yemen and Syria, escalation is too easy. U.S. decision-makers should bear that danger in mind as they keep pressing for regional solutions to regional problems. A third scenario is insurrection—either a non-violent uprising or a jihadi insurgency—a result all too predictable given episodes throughout the region in recent years.
An energetic red team should shoot holes in the automatic-pilot thinking that has guided Washington policy to date.The U.S. keeps getting caught flat-footed when purportedly solid countries came apart. At the very least, and immediately, rigorous planning exercises should be executed, in which different scenarios and different potential U.S. actions to reduce the codependence and mitigate the risks can be tested. Most likely, and most dangerous, outcomes should be identified, and an energetic red team should shoot holes in the automatic-pilot thinking that has guided Washington policy to date.
“Hope is not a policy” is a hackneyed phrase. But choosing not to consider alternatives amounts to the same thing.
Start Preparing for the Collapse of the Saudi Kingdom
http://www.defenseone.com/ideas/2016/02/de-waal-and-chayes-saudi-arabia/125953/
Links to an excerpt from “On Saudi Arabia” and to a NYT article on the young prince, Prince Mohammed bin Salman, who seems to be calling the shots in Saudi Arabia:
http://peakoilbarrel.com/bakken-up-in-november-plus-steo/#comment-556202
http://peakoilbarrel.com/bakken-up-in-november-plus-steo/#comment-556205
Jeffrey,
Amazing analysis at defenseone.com ! Somewhat correlates with http://peakoilbarrel.com/bakken-up-in-november-plus-steo/#comment-556001
but without rose glasses typical for MSM coverage of Saudi politics (including news.com.au article that you referenced in your old post)
As Heinrich suggested Saudi now preach “war is the health of the state” mantra. They need to push everything to the extreme to cement their society before it falls apart.
http://peakoilbarrel.com/just-how-accurate-are-the-eias-predictions/#comment-559872
Brilliant article. Thanks! Feudal states and the Mafia family type business don’t differ much. Many great examples throughout history. It’ll b very interesting to watch KSA unwind and train wreck.
What’s unfolding is what Karen Elliott House described in her book “On Saudi Arabia.”
Buckle your chin strap muchachos! Once KSA train wrecks it’s a whole new ball game!!
ND Bakken december 2015 data are out. Production fell back to levels not seen since august/september 2014. Exactly what the Season Effect Model predicted 25 months ago (within a 0.64% error margin).
CNN this weekend had a pretty sobering report on the possibility of Russia invading the Baltic states, Estonia, Latvia, and Lithuania. I knew that NATO had been expanded, but I hadn’t realized how many countries had been added to the alliance, at the same time that NATO has basically been disarming.
If Russia Started a War in the Baltics, NATO Would Lose — Quickly
War games show NATO’s eastern flank is vulnerable. To deter Moscow, the United States will need to deploy heavy armor on a large scale, a new study says
http://foreignpolicy.com/2016/02/03/if-russia-started-a-war-in-the-baltics-nato-would-lose-quickly/
Jeffrey, there is nothing to win in the Baltics. No coal, no oil, no gas. Declining population, no growth. I don’t see why there would be an invasion. (There is a lot of coal in the eastern part of Ukaine.)
Verwimp,
Not only coal. Eastern Ukraine is very rich with strategic minerals. The land is also the most productive agricultural land in the whole Europe. With a good water supply. Germany tried to grab Ukraine for several centuries (“Drang nach Osten”) and succeeded only now.
Jeffrey,
Baloney article from CNN. Pure propaganda. I used to know a little bit about this region (Latvia)
I wonder what can be motives for invasion ? Those are really tiny countries without oil deposits. And they are already colonies. EU colonies. Or Germany colonies if you wish.
Estonia 1.325 million
Latvia 2.013 million
Lithuania 2.956 million
So in total they are smaller then New York.
Governments are incompetent and try to create out of them ethnographic museums. Population is poor. Most population with high education already left for EU. Russian speaking population (who were deprived of citizenship on independence and treated as the second class citizens since) does not really want to join Russia as it values EU visa free travel and does not win much in the standard of living. Many of younger, better educated Russians moved to Germany.
That’s even more true for “natives” who are now indoctrinated in nationalistic bent. In no way they would support absorption into Russia. So essentially “color revolution” staged in Ukraine, was staged here at the very beginning and the same ultra nationalist elements who collaborated with Germans and were defeated during WWII became the driving political force since “independence” (which was actually the change of metropolia, from which they are ruled — Brussels instead of Moscow).
What’s left are mostly old people and people who have nowhere to go.
Economies are completely destroyed by neoliberal reforms. Level of national debt probably is comparable with Greece. They also lost the access to Russian market which was a death sentence in itself, as what they produced is not suitable for EU markets anyway. Russian companies own most of what’s left (ports, hotels, real estate in large cities like Riga, etc).
There is some agriculture, fishing and tourism. Estonia tried to create IT industry at one point, but with mixed success.
Those countries might die out naturally and can be repopulated with Chinese or Indians 😉
Thank you for preparing this article. I have been following crude oil prices and production closely for over a year now, and have begun to suspect that EIA estimates are biased (i.e., they seem be overly optimistic in favor of ample production in spite of effects of natural decline & underinvestment ). I hadn’t been able to put my finger on the disconnect between reality and EIA’s estimates before and this article is helpful.
Peak coal for China:
http://www.vox.com/2016/3/6/11168914/china-peak-coal
EV Dreams:
http://www.vox.com/2016/3/4/11161758/electric-cars-oil-crisis
Whither goest nuclear power?
http://www.vox.com/2016/2/29/11132930/nuclear-power-costs-us-france-korea