The new Bakken and North Dakota production data is out with the August production numbers. The last data point for all charts is August 2014.
Bakken oil production was up 16,864 bpd in August to 1,067,745 bpd. This is about 6,100 barrels per day less than the growth in July which was 22,965 bpd. However all North Dakota was up 17,910 bpd in August compared to 21,661 growth in July. This was a growth of 1,046 bpd for North Dakota production outside the Bakken. In July production outside the Bakken was down 1,304 bpd.
The big surprise this month was in wells completed and wells producing. Bakken wells producing increased by 211 and all north Dakota wells producing increased by 274. That meant wells producing outside the Bakken increased by 63. That is a real shocker since Helms says 95% of all activity is in the Bakken. From the Director’s Cut, bold mine:
The drilling rig count was up two from August to September, but has since fallen 5 from September to today. The number of well completionsi increased from 197 in July to 270 in August with summer weather. However there was one major rain event in Dickinson and Minot as well as 3 days with wind speeds in excess of 35 mph (too high for completion work).
Over 95% of drilling still targets the Bakken and Three Forks formations.
The drillers did not outpace the completion crews. At the end of August there were about 600 wells waiting on completion services, a decrease of 30.
Crude oil take away capacity is expected to remain adequate as long as rail deliveries to coastal refineries keep growing.
Rig count in the Williston Basin is no longer increasing. Utilization rate for rigs capable of 20,000+ feet remains above 90%, and for shallow well rigs (7,000 feet or less) about 60%.
Drilling permit activity plateaued as operators worked on their summer programs and planned locations for next winter.
The number of well completions in August, as well as the number of producing wells in all North Dakota increased 73 more than they did last month yet production, in all North Dakota increased by 3,751 barrels per day less than in July. I find that strange.
Bakken bpd per well decreased by 1 to 129 and all North Dakota bpd per well also dropped by 1 to 101. That meant wells outside the Bakken stayed flat at 22 bpd per well.
This is the chart to watch. The total increase in all North Dakota will tell us the story. If average barrel per day increase keeps dropping then by the end of the year we should have a pretty good idea of what the future holds for the Bakken.
A Seeking Alpha article you have just got to read:
Daze Of Peak Oil… Or At Least Peak Oil Production
Production of crude oil has nearly stalled despite a near quadrupling in the price since ’01 and it seems likely the world has entered the Peak Oil phase and neither the governments nor central banks (try as they may) can paper this over. Without the growing supply of adequate cheap energy, there isn’t adequate GDP growth, and without the GDP growth, there is no way to outgrow, pay off, or service the huge debts incurred but by interest rate suppression. The dual occurrence of peak oil with ZIRP (zero interest rate policy) is a truly unfortunate state of affairs. But whether or not they happened in tandem, both were inevitable. Still, governments and central banks are attempting to maintain the pre-peak oil system and avoid the pain of free market corrections to supply, production, and price. It is in this light that the centralization and “intervention” of stock, bond, and real estate markets and the manipulation of commodities growing in scale and frequency since ’09 should not be shocking. Free markets are the enemy of fraud, the punisher of bad fiscal and economic behavior and thus free markets will not be allowed to facilitate true price discovery (i.e., REALITY).
There is a lot more to this article and a lot of very good charts. I hope we can have a good discussion about this article as well as on the Bakken.
Note: I send an email notice when I publish a new post. If you would like to receive that notice then email me at DarwinianOne at Gmail.com
Wow, Who turned the Lights on? “It is in this light that the centralization and “intervention” of stock, bond, and real estate markets and the manipulation of commodities growing in scale and frequency since ’09 should not be shocking. Free markets are the enemy of fraud, the punisher of bad fiscal and economic behavior and thus free markets will not be allowed to facilitate true price discovery (i.e., REALITY).”
Perhaps now the real shock …. Health NonCare “Insurance” with $4000 plus deductibles. 90% + of the people on the planet don’t spend that in their lifetime.
True enough but the more things change the more they stay the same in some respects at least.
Poor people who manage to get some coverage for a major illness simply won’t pay the big deductibles and eventually they will be written off either by the provider or a bankruptcy court.
Drowning in oil again
Does the decrease in spare capacity since 18 months means OPEC has virtually reached its peak? If the trend continues, they will reach their peak production before 2020.
Its hard to say. There certainly hasn’t been any capacity growth in 5 years. You need to bear in mind that some of these countries could boost production significantly short-term with investment, but choose to not do so since they don’t need the income and have other things to invest in. And they understand that a long plateau is better for them than a big peak followed by decline.
Spare capacity is largely a myth. Eleven OPEC countries have absolutely no spare capacity and it is doubtful that Saudi has very much. Saudi, in the last five years or so, has managed to increase production when they have put on new fields. Now they have no new fields to draw from and all their old fields are is decline.
You can also mention that OPEC was not able to increase production enough in 2008. That pushed oil to its record price. If they really had spare capacity they would have been able to increase the production between January and July 2008. These spare capacities cannot be activated quickly.
9 months ago, when I built this model, the ‘prediction’ for the August 2014 number was 1.063.044 bbd. The actual number now is 1.067.609 bbd. That is a difference of 0.43%. I still do not feel any urge to start tinker the parameters of the model.
I see you have a decline this winter and a fall peak next year then a decline that pretty much mirrors the upside of the curve. I really wouldn’t argue with that.
Very nice!
If oil prices remain low ($85/ barrel and rising to $105/b by 2033) and transport costs remain at $18/barrel or above, then North Dakota Bakken output will only be about 4.3 Gb, with a peak in 2015. I definitely did not see prices crashing so soon, oh well. I doubt they will stay this low for more than a few monhs, in the mean time Bakken output will slow down with these low prices before long, though transport constraints will ease and transport costs may fall back to $12/barrel. This is a very pessimistic scenario, though I have been too optimistic in the past so perhaps it will be worse than this, I doubt it, but have been wrong before (especially on near term oil prices, but also assuming transport costs would be stable).
Chart for “pessimistic” scenario above
“Prediction is very difficult, especially if it’s about the future.”
–Nils Bohr, Nobel laureate in Physics
This quote serves as a warning of the importance of testing a forecasting model out-of-sample. It’s often easy to find a model that fits the past data well–perhaps too well!–but quite another matter to find a model that correctly identifies those features of the past data which will be replicated in the future.
Although I agree with you about the difficulties of predictions, and the dangers of curve-fitting, it’s important to note that Dennis did not just fit a curve. He created a model based on reasonable, parameters, and showed how that model would perform in the future. There is nothing that will say that this will be accurate, but for people, and for other entities, often decisions have to be made based on future conditions, and then it is better to work with a coherent model, compared with having nothing.
“then it is better to work with a coherent model, compared with having nothing.”
Better in what way? What’s wrong with nothing?
What kind of model is this? is it based on wavelets or other similar statistical methods? If there is some literature in this regard (and it is not covered by a non-disclosure agreement), I would be grateful if you could send me some links. Thanks D.
I do not know who “Chris” is.
Anyway, Dean, this model is based on the Hubbert curve. That bell-shaped curve describes the production of oil fields (Theory of M. King Hubbert AD 1956 or something -> See Wikipedia). I adapted the curve, because I recognised an important seasonal effect in the Bakken production. So I added a sinus to the Hubbert Curve. The frequency of the sinus is one year, the phase is shifted to match the data and the amplitude is proportional to the magnitude of the Hubbert curve itself. To get the shift and the amplitude right, I calculated the first derivative of the model and the 5mth moving avg (5 mth = compromise between getting rid of data noise; and getting a grip on seasonal effects) and brought them in line with one another.
Thanks! Dean
This model is about Bakken. I just looked at the first derivative of the 4 weeks average US production that peaked in fall last year (inflection point). If the curve is symmetric, the new US peak should be in fall next year. This would be also in the same period as for the Bakken production. So 2016 should be the year production starts to decline or stays constant. It should be noted that OPEC is predicting US production increase to be 0.9 mb/d in 2015 compared to 1.4 mb/d in 2014.
Thanks for the reply. How the discrete approximation of the first derivative is computed?
This is the first derivative: -(a*b*EXP(b*(d+A123))*(EXP(b*(d+A123))-1))/(EXP(b*(d+A123))+1)^3+(a/e)*(f*COS(f*(A123+g))*EXP(-h*b*(A123+d))/(1+EXP(-h*b*(A123+d)))^2+SIN(f*(A123+g))*-b*h*EXP(-h*b*(A123+d))/(1+EXP(-h*b*(A123+d)))^2+SIN(f*(A123+g))*EXP(-h*b*(A123+d))*(2*b*h*EXP(2*b*h*(A123+d)))/((1+EXP(b*h*(A123+d)))^3))
withe a, b, d, e, f, g, h: parameters of the model. A123 = ‘x’. (The number of the month in the row).
🙂
Thanks. D
What evidence is there that ZIRP is the enemy of free markets? None is presented in the article. What is the “free market” rate?
As far as I can tell the argument is typical libertarian: The author has some (Puritanical?) objection to ZIRP, and so he puts it in the “bad” basket. Since “free market” is in his “good” basket, he reasons that ZIRP must be the antithesis of free market, by reason of sympathetic magic or something.
It reminds me of why it is so difficult to get Peruvian Indian women to boil water to purify it: They reason that fever is a bad thing, and boiled water is hot, so it must be antithetical to preventing fever.
There is no theoretically “correct” interest rate. It’s a tool that is used for a specific purpose in a specific context. Skyrocketing prices are not a major issue these days, ask any oil man. Why should interest rates go up?
Furthermore “free markets” are a mathematical notion with a specific (rather unrealistic) meaning. Free markets don’t cure warts. They may be the”enemy” of fraud, but only because fraud prevention is a prerequisite of free markets, like complete information, zero externalities, zero transaction costs, rationality etc. The author has his causality backwards.
If people are worried that the stock market is too buoyant, they should back increasing capital gains tax to 30%. That would let ZIRP fill government coffers instead of some bank accounts in the Caymans. Another idea would be a transaction tax.
When interest rates are depressed to near zero people are very reluctant to hold cash except for the hide it in the mattress types and savings are not made available for investment since there is no point in loaning money unless it earns enough interest to cover the risk of loss and taxes on the interest and so forth.
So while I am not sure what a ”theoretically correct ” interest rate should be I am of the opinion that it should be at least high enough to cover inflation plus risk plus administrative costs plus at least a little more.
I doubt there has been a time since I was a very young man when an interest rate of less than five percent wasn’t a loser in terms of purchasing power after allowing a margin for expenses and risk.
ANOTHER WAY of expressing this is that if you have more cash than you need for current expenses plus a safety cushion then unless you are pretty inept as a manager of money if you can’t figure out a way to earn at least five percent virtually risk free.
A thousand bucks invested in extra insulation for the attic for instance is going to save more than fifty bucks annually ( five percent ) in heating and air conditioning expenses for sure and as the cost of electricity goes up- so will the savings.
The real rate of return on that insulation might be six or seven percent or even more because most people have to pay for electricity with after tax income.
A true free market would seem to only exist in a true tribal/band/small-scale/simple setting.
Once you get taxes and governpimps, along with increasing complexity in general, all bets are increasingly off.
One of the problems with a free market, as is evidenced by where the money does to these days, is what the people want is not necessarily what will be most important for survival. If money is allocated to wants rather than needs, then people might be happy in the short term but not do well in the long term. Can we depend on economic forces and the wisdom of the masses to make the best decisions for resource allocation?
I suppose if market forces allow societies to do whatever they want, and those with poor decisions pay the price by not being sustainable, the system is ultimately self-correcting. But the people who pay may not have been the ones with the money to make those economic decisions. And those poor economic decisions may end up hurting someone 30 years down the road, rather than hurting those thinking with their wallets.
I’ve always wondered why the US was in such a hurry to use up all of our own oil. I guess we’ll see how that plays out soon enough.
For one thing, we need pigovian adjustments to market price signals, like carbon taxes.
The fact that the bpd/well is holding fairly steady, despite the fact that new wells are initially higher producers than they were previously, shows that the red queen effect is hard on the production heels.
The economy is stalling because the middle class is stalled and sinking economically. The middle class is the bulwark of the economic system. They are over-taxed, have descending incomes, are hit with higher energy, food and medical bills. They also feel compelled to spend much of their “excess” cash on communication and entertainment (cell phones, computers, internet, cable TV, DVD’s, etc.) in order to even be able to operate within their own social circles. What used to be a one phone line household with one TV hooked to a free antenna is now often a three or four cell phone house with several TV’s, extended cable, high speed internets, ipads, iphones, and computers. Not to mention the cameras and video cameras and all that goes with that. All those things cost money to buy and there are large continuous monthly costs involved. So when your communication and entertainment bill exceeds one of your major energy bills (or two) the SHTF economically. Add in increased food costs and many homes are going into severe debt or severe cutback. That means they have little cash to fuel the internal economy.
Gotta be careful of the stats. Reread Helms’ disclaimer at the end of the Directors Cut.
I’m the 389th Follower of Chris Hamilton on SA. Ya think PO would guarantee returns in the LTO Patch, but only if you can connect the dots thru the fog. Too late to the Party or not?
Shoot the messanger – Chris H has 386 followers now..
In today’s ND Director’s Cut, Lynn Helms mentioned that the current ND light sweet crude oil price is now $66.25/barrel. It will be interesting to see the impact these plummeting oil prices have on rig count, wells awaiting completion, completions, and permitting in the coming months.
The rig count has fallen by five since September. I will be watching that, as well as permits and completions very close and report any significant changes here.
Guys. Focus.
This is an ABSOLUTELY HORRENDOUS oil production increase for a 200+ increase in wells producing. And frankly it’s two months in a row of very poor production increase — and this is all 2 months before the price smash.
But wait, there is more:
http://wolfstreet.com/2014/10/15/toxic-mix-for-fracking-oil-price-collapse-junk-bond-insanity/
If shale is the great saviour for the moment, then the cliff after the world peak will be steep. You will be able to base-jump off it. The sharp production declines of shale wells will leave the world short quite suddenly. When the investment community discovers that returns from shale investments are not what they were promised to be, there could be a major domino event of collapsing shale oil investments.
The current “flash-in-a-pan” low oil price will do its part in damaging shale oil returns and future investments.
It will be an interesting ride!
It comes down mathematically to this. Gentle decline graphs on the right side of the Bakken peak depend entirely on continued drilling.
At $60, that may not happen. Every well that doesn’t come online steepens the right side of the peak. Sharply. At $50, even sharper.
However, don’t go totally apocalyptic . . . because the decline in those shale wells shallows out in year 2.
Unless.
The truck guys just say to hell with it and leave town.
Didn’t explain. If the truck guys go home, the year 2 and year 3 etc production doesn’t flow. A well goes to zero the day trucks stop coming to pick up the oil, and that gets sooner and sooner when price declines, because the 5.9% loan never declines.
Playing with this scenario. Months ago Dennis and I talked about the hypothetical of shutting off drilling and what does production look like. Basic result for that question shows steep 1st year and then more shallow out year decline that is all downhill, but not too very steep.
The issue becomes, however, mechanism. As it always is. The outyears presume equivalent mechanism.
So here is what could happen. First of all we have the 590K dollars/year interest expense and let’s add another 200K dollars for maintenance expense and trucking and salt water disposal.
So the hill to be climbed by an outyear well is
0.85*price (royalty extraction) * flow bpd * 365 – 790K dollars/year.
790 / 0.85 = 929K dollars / 365 = 2.54K dollars/day required for outyear breakeven
That’s what flow * price has to be. At $100/b, this is 25 bpd, unless I’ve messed something up trying to do math on a tablet. Meaning when flow gets below 25 bpd, you ought to shut it down.
At $60/b shutdown at 42 bpd.
At these low flow rates, you can send a truck less often to pickup from the onsite tanks, but you are probably going to have to flush the well with freshwater a lot more often. Salt will be able to encrust easier.
I’m guessing this gets uglier faster. More and more truckers will be let go. More and more truckers will decide not to wait for the pink slip issued at someone elses convenience and will look for work elsewhere rather than be fired at a bad time. Additionally, all the support people . . . the big dorm complexes will be firing staff and all sorts of other things up there will shut down. Living standards will decline.
Those guys are not going to hang around. They will leave. These wells aren’t even going to make it to the outyears with price still falling.
1) If a well costs $10M to drill & complete, most of that will be paid off the first year. So, we’re not talking about $590K per year in the out years.
2) 5.8%?
3) interest costs on the initial investment are a sunk cost. They won’t figure into whether to shut down the well.
4) will trucking cost be mostly proportional to production?
So, if oil is at $60, we get $51 after royalties, and to cover $200k per year in fixed costs we need about 11k bpd. Based on the model below, that will take 30 years.
decline BPD-Jan avg
0 1,000.00
1 65% 350.00 675.00
2 35% 227.50 288.75
3 15% 193.38 210.44
4 10% 174.04 183.71
5 10% 156.63 165.34
6 10% 140.97 148.80
7 10% 126.87 133.92
8 10% 114.19 120.53
9 10% 102.77 108.48
10 10% 92.49 97.63
11 10% 83.24 87.87
12 10% 74.92 79.08
13 10% 67.43 71.17
14 10% 60.68 64.05
15 10% 54.61 57.65
16 10% 49.15 51.88
17 10% 44.24 46.70
18 10% 39.81 42.03
19 10% 35.83 37.82
20 10% 32.25 34.04
21 10% 29.02 30.64
22 10% 26.12 27.57
23 10% 23.51 24.82
24 10% 21.16 22.33
25 10% 19.04 20.10
26 10% 17.14 18.09
27 10% 15.42 16.28
28 10% 13.88 14.65
29 10% 12.49 13.19
30 10% 11.24 11.87
1) Don’t know that to be true. CLR and EOG might. They aren’t even the majority of wells. Small LLCs will carry the junk bonds and service the interest rather than pay them down.
2) The 5.8% is what HYG yields right now, that’s the high yield (“junk”) bond ETF. It’s a good estimate. There is a competing ETF called JNK (for junk). It yields 5.89%.
3) The money is already borrowed and interest must be paid, regardless of shutdown? Valid perspective. Not for the small fry. They can drain the cash from the LLC and fold. EOG and CLR are stuck, you’re right, and they won’t cap and abandon because of interest. But, again, they aren’t the majority.
4) Gotta think about that. Very possible I miscalculated on a small screen tablet. Note that semi new info from the end of the comments today adds NoDak tax to the costs. Not included in what both of us laid out. 5% of production, minimum.
Oh wait, it’s not error, it’s the interest ongoing assumption in your #4.
Wow, that’s powerful. The difference primarily in our layout is $590K/yr interest and that relatively small sum moves breakeven 25+ years. Wow.
I think you may be close to correct on this. LLCs may not have access to junk bond underwriting. Hmmm, but we do know they are not betting their own money on all this. So they borrow from somewhere. No, I change my mind. Small fry are not going to retire loans they can default on. They are going to pocket the money, go like gangbusters while the price of oil is high, and when / if it falls, THEY WILL FOLD and stick the lender with lost money.
I think they are going to service that loan ongoing.
1) What the heck do they do with the money, if they don’t pay off the debt?
2) Which rate do you like?
3) That would be dumb. Wouldn’t they sell the well to someone to service as a stripper well? There are a heck of a lot of 5-10 bpd stripper wells in the US.
4) The additional 6.5% only raises the minimum production to 12k. That’s still 30 years out. Again, that’s 1,000 times as large as the the tens of thousands of 1o bpd wells in the US.
The stripper wells usually have pipelines because they and their brethren have been there so long, pipeline companies built the pipes.
I think the latest presentation graph was 60% of NoDak wells are using trucks for ALL the transport to the railhead. the other 40% are a pipeline node to which the trucks go. One way or another, it’s a truck trip.
There is also a $90K cap and abandon expense. If you declare 10 bpd but don’t send any trucks for it, all you have to pay is 10 X $60 X .2 (royalty and tax) X 365 = $48K for a year, and it’s less than that because I was just reading and the tax and royalty slide down as production falls. PLUS the P&A regulation doesn’t require it to be done until you have reported 0 for something like 2 years. So . . . report 10 bpd 1 month a year and you are way below 48K. Even if not a drop flows.
I looked into CLR and EOG’s Moodys paper rating. Both are “below investment grade”, and there are only two categories, investment grade and junk. So their bonds categorize as junk. Therefore the smaller fry are even more junky and maybe 5.9% is low.
Oh forgot to mention the salt. At 10 bpd, these wells are going to clog. Have to have a biocided freshwater truck with a muscular pump come out and pound that water into the well to open the pipes. This could challenge the 200K number (largely pulled from the air) for maintenance.
Well, the model above shows 30 bpd at 20 years. That seems comfortably above the economic break-even point.
What did you think of the model?
I’d say you can’t have a model. We don’t have 10 years of data on 30 stage (and now more) frack wells, let alone 20 or 30 years.
But in general I’d suggest that above ground influences will decide more about flow after 3 years than geology. If the truckers go home and say to hell with minus 20 degrees F in winter, then nothing flows after they do, whenever they do.
This is a fundamental difference from conventional wells. Pipelines don’t go home.
Those drivers aren’t going anywhere as long as there’s paying work.
Heck, if there’s money to be made and the drivers won’t stay, the drivers will be eliminated with autonomous automated trucks. IIRC, they’re already in use in mining operations…
Macguy has that perspective. They stay if there’s a job.
But their buddy just got fired. More powerfully, they have had their heads filled with “there is 30 years of work here for you, and for your kids, the future is blindingly bright, we’re bringing in huge apartment complexes and great new facilities to improve everyone’s life. North Dakota is going to be PARADISE and you are here, on the ground floor!!!!!!!”
And then it doesn’t happen and people start getting booted. Nah, I can see drivers who haven’t been fired yet choosing to go — at their own convenience — rather than someone elses.
Oh, and you think CLR’s insurance is going to cover putting a robot in charge of driving a 400 barrel light oil bomb into the train head where they can blow up and wipe out a few billion dollars of train and other trucks and oil?
Absolutely!
Autonomous systems are 100x safer than human drivers. Human drivers get lonely, go off and spend their money on prostitutes and drinking, and come back hungover…
It’s possible those drivers do all that. In which case it will be them or the LLC that hires them that gets sued. Not a big company that invests in those robots.
Now if you can find an LLC that magically gets the capital to invest in the robots, we’re good — but such things have been tried before and the capital gets traced to the deep pocket funder — and the lawyers smile.
Hi Nick,
We can ignore transport costs if we use the wellhead price, but there is OPEX of $4/b and royalties and taxes are about 25%, there are also financial costs of about $3.50/b. First month is about 500 b/d for the average Bakken/Three Forks well. Also the point is that the sunk costs matter when deciding whether to drill a new well.
The question is, “Does it make sense to start drilling a new well if the oil price is $60/barrel. First year output is about 85 kb for the average Bakken well. So first year net revenue (ignoring financial costs) is about 3.5 million dollars after deducting royalties, taxes and OPEX. Every subsequent year is less and future revenue needs to be discounted to find net present value.
The Watcher model above computes the break even point from an production perspective and does not count the initial investment. So if a well produces more than 25-50 bpd, it is better to continue the production to reimburse partly capital investment than closing the well and loose everything. The Nick G model should be used before starting investment. So in the future, companies could say we stop new investment because there will be not profit and in the same time continue the production to reduce the loss, provided that the production per well is higher than 25-50 bpd.
Was there talk about the uprofitability and/or subsidies of/for fracking?
If so, and maybe what with money-printing, infinite-debt, price-undiscoveries and various other assorted financial instrumentationalisms, what or how does the price, or anything else, really matter?
~ Your friendly neighborhood Lumpen Pro.
It will be interesting to see how the politicians sell this. Overall I don’t see anything to lift the world out of recession unless there is a major commitment to developing alternative energy sources and channeling government and private investment money that way.
Congress will likely continue on its current course, turning non-issues into issues to avoid actually dealing with anything. And whoever gets elected president is likely to have the same national and global issues there are now. Could anyone sell a solution? Maybe if we had another Roosevelt and if the country was willing to let someone take charge.
OK, I sing my little song here. A solution (admittedly, a fantasy, but possible)
1) Big undoubtedly environmental disaster kills a couple of million middle class white people just like me and you.
2) Big howl to get off carbon, government forced to actually do a real carbon tax
3) People like me find what I have found. Going to solar costs no more than BAU and not going to solar, if you do solar -INSTEAD OF- BAU
4) Energy problem vanishes for good
5)leaving all the other problems that can kill us just as dead. Somebody else figure those out while I take my nap.
BTW, I just got back from a town meeting on sustainability. Great enthusiasm, lots of really smart and energetic young people who have already done things all fired up to do more things. These people are NOT going to be seduced by the Koch brothers. Hope!
They’ll be overrun by uzi wielding gang members fleeing zero food shelves in the city, mowed down, and the gangs will prove themselves superior to Darwin.
Quick! Go tell your uzi gang they’d better be carrying something a hell of a lot longer than that.
The point was hope doesn’t stop bullets, and enthusiastic commitment isn’t useful if the results are taken from you by force.
Watcher, you need to hang out with some of those younger enthusiastic people. I have a hunch that if push came to shove they would find ways to out smart the uzi gangs…
Cheers!
Pushing and shoving will trump brains in the post Peak world. Muscle plows fields. Brains uselessly burn calories.
An article some days ago on Nicole Foss’ blogsite caught my eye because it had ‘lumpenproletariat’ in the title, but, and while I could still be wrong, after stealing some gold-standard time to skim it, it didn’t look like what I think about when thinking of lumpenproletariat, which is more along the lines of…
“Newton argued that the economic and social system of his time was fundamentally different from that which Marx based his analysis on, saying, ‘As the ruling circle continue to build their technocracy, more and more of the proletariat will become unemployable, become lumpen, until they have become the popular class, the revolutionary class’. This is the class the Black Panther Party sought to organize, he said… a careful reading… reveals repeated references to the ‘unemployed’ and ‘unemployable’ as those with revolutionary potential.” ~ Wikipedia
…So how’s everyone these daze?
Summery autumn hugs from Nova Scotia.
“Muscle plows fields. Brains uselessly burn calories.” ~ Watcher
Bah. Some 10-poodle-power muscle-flexing brains pluck,/sautee/pickle edible weeds and build and live in all-season treehouses made out of skids/pallets and other civilizational detritus, etc…. but especially live in harmony with Earth.
I hesitate to post this after years of reading all the Rossi eCat whack-a-doodle schtuff, be since MIC behemoth LM’s name is attached to it, what the hey:
http://foxtrotalpha.jalopnik.com/gasp-lockheed-skunk-works-says-it-has-a-nuclear-fusion-1646903392/+damon
OK, so here is the marketing pitch from LM’s own web site (please be sure to scroll to the bottom of the page and read about the ‘infinity airplane’ schlock:
http://foxtrotalpha.jalopnik.com/gasp-lockheed-skunk-works-says-it-has-a-nuclear-fusion-1646903392/+damon
Aviation Leak and Spy Technology magazine is cheer-leading the ‘news’:
http://aviationweek.com/technology/skunk-works-reveals-compact-fusion-reactor-details
But not to let LM have all the PR fun, along come the University of Washington with their entry:
http://www.electronics-eetimes.com/en/cheap-fusion-beats-fossil-fuels.html?cmp_id=7&news_id=222922663&vID=1907
Poor fission…what to do…wait, if the ‘Mr. Fusion’ devices don’t pan out, the U.S. DOE, GTRI, and the UK government and University of Cambridge are working the small Thorium modular reactors, the Integral Inherently Safe Light Water Reactor (I2S-LWR), to lead us out of the FF morass into the bright promised land!
http://www.eurekalert.org/pub_releases/2014-10/eaps-cte101414.php
Doomers, repent! The end of the energy crisis is nigh!
Do I really have to do the sarcasm tag? (sigh)…/sarc
The article says they are looking for partners, which is why they went public with essentially nothing.
what Watcher said:
The Lockheed press release is a non-event:
http://www.lockheedmartin.com/us/news/press-releases/2014/october/141015ae_lockheed-martin-pursuing-compact-nuclear-fusion.html
“…can … in as little as ten years…”
“…anticipates…”
“… looking for partners…”
All the hype, pro- and con-, is people, especially journalists, projecting onto the announcement what’s in their heads.
Lockheed has a puff video or two here:
http://www.lockheedmartin.com/us/products/compact-fusion.html
Nothing real to show yet.
I find it hard to understand why the truckers will quit so long as they are getting paid and impossible to believe oil will get down to sixty bucks for more than a few weeks since the marginal cost of a lot of production appears to be well above that figure.
Truckers won’t have any other work to take the place of what they have now in the Bakken in the event that the oil price crashes much farther . That would indicate an economy so dead finding work for trucks would be next to impossible.
But they will still need to eat and make payments on their equipment and any that quit will be replaced easily. The housing crunch must be easing up a bit by now and if it isn’t it surely will ease up once drilling starts falling off.
Of course an economic panic could possibly scare the world so bad that business crashes right down thru the basement like a China syndrome nuclear meltdown and then there might be a price war among producers that could last a while.How long I won’t try to guess but I am sure not very long at all.
If diesel gets down into the two fifty class I am going to buy five thousand gallons.Back when the old style steel underground tanks used at service stations were outlawed I snagged a new one that is in perfect condition at a scrap yard and will set it up above ground.
Oil prices that are very much lower than they are today are going to solve themselves pretty damned quick because depletion never sleeps and hardly anything in the line of new production will be brought online at lower prices.
The ordinary retail consumer of oil can cut back considerably and may be forced to do so involuntarily even if he would rather not.But there is a limit to cutting back and once the excess consumption has been squeezed out then the remaining consumption will continue no matter how high the price goes because otherwise – the economy goes from a dead man walking to a dead man with the buzzards and the blowflies taking charge of the carcass.In that case it is game over no matter what.
We can get by with a lot less cars and a lot less beer trucks and hardly any air travel in my estimation is really essential except to the people who make their living out of it directly or indirectly.
But there is a pretty hard limit to how far oil consumption can fall and the world will give up damned near anything else before it will give up oil as that limit is approached.
The price is going to stay above the marginal cost of production on average.I will hazard a guess that the marginal cost of the last ten million barrels of production these days is either at or very very close to eighty bucks.
Whether or not Wather’s calculations are exactly right, he makes an interesting point: That falling prices won’t just reduce drilling, it will reduce the amount of oil that comes out of existing wells.
Certainly hope Watcher’s calculations are more accurate than my spelling!
Yeah, that was the point. 64% of production is from new wells and that disappears if there are no new wells, but the shallowish nature of the decline comes from already existing wells.
If they don’t flow, it becomes a cliff dive.
Enno’s latest, 70% from wells less than 20 months old.
there is a limit to cutting back
Depends on your timeframe. Carpooling is fast, and can reduce consumption by 50% overnight with just two people in a car (11% of commuters now carpool).
50% of passenger vehicle turnover takes about 6 years.
Rail takes a decade to build in the US.
Only about 10% of oil consumption is really difficult to replace, and that can come from biofuel and synthetic fuel. Ethanol is pretty cost competitive, and synthetic might cost $7 per US gallon. Europeans would laugh at the idea that $7/gallon for 4% of your energy use (10% of oil, which is 40% of overall energy) would sink your economy.
The cost per gallon USA vs Europe,might need an adjustment for the taxes. A lot of the future high cost here disappears into the ground,so to speak. In Europe the taxes are used for numerous productive projects, oh, wait, never mind…
The question is: who gets the profit/rent when the selling price is much much higher than the average cost of production?
That’s true whether we’re talking about taxes, or a market scarcity premium. Either way we’re talking about transfers of income/wealth, rather than true increases in production cost.
And either way, the price paid by the consumer is the same.
Permitting up in August, despite the reqt for flaring mgt procedure being required since June. Sept is down, but that’s seasonal.
I see no evidence NoDak’s flaring regs are slowing permitting.
The regs have a long adoption period… if anything they would encourage earlier production so that the producer is not encumbered by the requirement to capture a greater proportion of methane.
No, the issue is not the reg on flaring.
It’s the reg that says new drilling permit applications have to lay out a plan to manage flaring. It should have slowed down permit application completions/acceptances.
Nada.
The actual flaring reg doesn’t get enforced til January, when production is down anyway.
Oil will be there until it is gone, then everything changes.
The number of dollars out there to adequately supply the debits of all those users of electricity, fossil fuels, if you will, anything you use is going to be derived in one way or another from fossil fuels, be it the internet or water, will be able to satisfy those debts and if they don’t, the amount of credit available will fill the void. A low oil price will help make those ends meet. If not, the gov will supply the number of dollars in the trillions to make ends meet. If Wall Street is the arbiter, so what?
Be it ever so humble, there’s no place like home (Earth).
Opposition builds to Energy East pipeline plan
Shawn McCarthy – GLOBAL ENERGY REPORTER – OTTAWA — Globe and Mail – Last updated Wednesday, Oct. 15 2014, 7:03 PM EDT
Energy East, in a rational country, should have been DOA before it was even proposed… but my country is no longer governed rationally.
The moment there’s large scale and governpimps, it’s about as internally-rational as yeast in a petri-dish.
If you want a true ‘hierarchic’ society that functions, then the workers must work, etc., and the queens must lay their eggs, come hell or high water. 😉
Gas interests lining up against TransCanada’s Energy East pipeline
Shawn McCarthy – GLOBAL ENERGY REPORTER – OTTAWA — The Globe and Mail
From robertscribbler…
Reservoir at 5 Percent Capacity: Climate Change to Leave Sao Paulo’s 20 Million Without Water By November?
Tipping points. That is what I believe will be the black swan event – multiple tipping points, so huge in their effect (not to mention the domino effect that will result in those tips hitting each other) that no nation or group of nations will be able to keep order, much less address the problems. At what point will the First World class be history? Talk about Mad Max scenarios.
Meanwhile, here in the Hill Country of Texas our “leaders” and politicians are fighting over pumping water from the east to the west of IH 35. So developers can build more in an area that cannot on its own support the water needs of said development. Landowners here have the “right” to the water beneath their land. Water companies are securing those rights in order to pump and sell thousands of acre/ft of water (1 acre/ft equals approx 325K gallons). To get the water from there to here requires massive infrastructure at massive cost. There are, of course, other means to address the issue. However they require that the pause button on BAU be pressed. Conservation, rain collection, reuse. The state’s antiquated water legislation only adds to the struggle, starting with the classification of water – surface vs groundwater. State owns surface, landowners own groundwater. Trouble is, surface water becomes groundwater and vice versa. And it all comes from rain. And when the rains don’t come, both suffer. Another tipping point waiting in the wings until unfettered, BAU approach to growth pushes it over. And here, like most other places, no one has the balls to discuss the underlying problem: ever-increasing P O P U L A T I O N.
didn’t mean to be Anonymous!
California is next. No rain so far in October (north usually gets ~ 2 inches inland, looks to get squat), long-range forecasts are for November to be a bust as well.
They don’t get a good winter – nevermind another dry one – and everything except the Hoover Dam will run right out.
Wow.
I think the Republicans are missing an election opportunity here. They could be blaming Obama for drought and climate change.
The seeking alpha article by Chris Hamilton is great. For me the most interesting part is in the postscript.
“Noteworthy is the 10 month oil price moving average… We set a new record high for the previous 10 month period in June ’14 @ $99… higher than the $98.5 peak of ’08. The economic strains associated with such a prolonged period of historically elevated prices have typically led to recessionary reactions.”
This makes sense. It helps explains the current rapid decline in oil prices together with falling stock markets much better than the idea that the oil price is being manipulated lower by Saudi Arabia to punish Russia/Iran.
I do encourage folks to do what I did a few ronposts ago — have a look at the dollar’s appreciation against the pound, yen and euro over the time period of the oil smack. It’s a huge and sudden runup, and cause and effect can’t be confused because if you want to make a case for inverse causation, you have to explain why US oil production at a lower price suggests the US currency should be stronger.
If you’re producing product at a lower price, it makes you worth less, not more.
The yardstick has changed length.
Falling oil prices are a boon for China, India, South East Asia. The Shanghai stock market soared over 20% in the last few weeks. Just the oil producers like the US, Russia,… are down. Long term falling oil prices are a good harbiger for a strong World economy.
“Long term falling oil prices are a good harbiger for a strong World economy.” Nope they are a signal that even an unprecedented period of unconventional monetary policy can not prop up consumption forever and the world economy is headed for the next dip. Anybody got the latest figures for the Baltic Dry Index?
In my view it is important to distinguish between the developed and developing economies. As interest rates are extremely low in the developed world, central banks in India and China have interest rates between 6 and 8% and have been extremely restricitve in the last few years. If China starts printing money again the world economy will be soaring again.
Falling world oil prices are a symptom of a sick world economy.
Baltic Dry Index
Falling oil prices (ie. low inflation) force cental banks in China, India, South East Asia, to increase liquidity. Of course growth will not immediately show up, but will come in one or two years later. Oil is usually the last to rise in a cycle. A falling oil price indicates the beginning of a new cycle. A high oil price is usually also the reason for the end of an economic upswing.
The uneconomic economy is an inbred oxymoronic sick joke, but maybe now it can get or has contracted Econobola.
I wish there would be a wake up call, but with wealth so concentrated with so few people, I doubt they have an incentive to change the situation. They can live the lives they want to live even if most of the rest of the world goes to hell. And I don’t think a fear of upheaval will be enough to scare them. If you can buy governments and their armies, what do you have to fear? If they had been especially concerned about the fate of the world, I think they would have done something by now.
And look at the whole global warming situation. If those with the money had wanted to direct us away from carbon forms of energy, they could have done more to influence media and politicians to do something.
The problem with free market thinking is that there is nothing to prevent market forces from taking us off a cliff. If it weren’t for global warming, I think we could have waited until oil got so expensive that alternative forms of energy became more attractive. But now scientists are tell us the clock is ticking.
The reality is the opposite: the wealthy have used their influence over media and government to prevent proper planning to deal with Climate Change. That’s our main problem.
More precisely: the weathy owners of fossil fuel related companies.
What I don’t really understand is that if you already have more money then you can possibly use, why rig the system so that it can’t adjust to new realities?
I remember that about 10-15 years ago some of the big oil companies were saying that they viewed themselves as energy companies now, and that they were looking for options beyond oil.
So why not start switching over the alternative energy and phasing yourself out of fossil fuels? Why fight efforts to lower carbon?
Of course, those who have studied disruptive technologies say that traditionally the dominant companies aren’t the innovative ones. They keep going and then, seemingly out of the blue, new technology takes over and kills their business.
Again, I think that is what would have happened with fossil fuels in time anyway, but we appear to be running out of time.
Of course, we could also ask why Apple is sitting on cash rather than trying to save the world? Google at least has gotten into some alternative energy plays.
The US military is trying to do as much with alternative energy and technology as they can, but of course some in Congress are ordering them to stick with oil.
That’s a key question for our times.
One possibility: the wealthy are those people who have tunnel vision: sacrificing family, employees, a balanced life, etc., to become wealthy. Once they get to the top, they can’t stop and refocus. The strategy that got them there is no longer fully functional…
Another is that corporate systems are designed to select for tunnel vision, and those who are different are not selected, or are pushed out. Shareholders push for maximum income and growth, the rest be damned.
Gee. Am I the only one seeing something entirely different? Around here a lot of people are pushing hard to get off carbon, and get on to solar.
I am not hallucinating.
The Mayor, the city council, all sorts of citizens groups, locals with money to invest are pulling it off wallst and putting it on main st.
They are not just talking, they are doing.
In a week there will be a mob of people at my house to see how we got it entirely off ff’s and entirely on to PV, and why we think they should all go to electric car clubs.
I can’t believe we are any way unique in this, and in fact, I do see lots of talk on the web about just the same doings.
But here, money money, oil oil oil. But, after all, it’s the oil barrel, so what do I expect?
It’s a complex story, with lots of currents going to different directions.
EVs are growing reasonably strongly. Solar is growing very strongly. But the powers that be are fighting a very strong rearguard action.
“So why not start switching over the alternative energy and phasing yourself out of fossil fuels? Why fight efforts to lower carbon?”
Because you can quite easily set yourself up to be a gatekeeper/landlord in the fossil fuel business and this is what these guys have become expert at doing. It seems to me that capitalism has been all about amassing wealth with the primary method being to acquire exclusive rights to resources. Whether it be forests or farmlands, mines, leases once you acquire them, mobody else can make any money from them.
The thing about renewables is that, while you can secure the best locations for wind or solar, I can stay in my tropical island and harvest enough solar energy to run a whole lot of stuff. Right now I have to buy imported diesel to run my van and there is very little chance of many new sources for petroleum with which to make diesel being found, let alone finding any sources around here.
On second thoughts, while writing this, it occured to me that the fossil companies could own all the solar panels and all the windmills and they’d have us all by the gonads again. Maybe they just haven’t figured that out yet and as a result, are allowing others to get in on the ground floor. I f they don’t figure it out soon, the new players may eventually displace them. It may allready be too late.
I’m wondering if it’s as simple as we’re not ants or bees and so can’t really function with leaders and specialists and large-scale hives and so forth.
If we were, then our leaders, and everyone else, would do what they were supposed to do.
Over here in the other glorified prison known as ‘Canada’, on the new and plasticky $20 bill, there is the newer mug of ‘the queen’ (whose queen? certainly not mine) who seems to be wearing something or a vague, subtle grimace… as if to be regarding its peons with contempt.
It’s perfect in that sense, and this has already been illustrated with good response to ‘the peons’ (whose peons?) in the checkout lines.
You want to be a queen? Ok, fine, but you have some responsibilities… You have to, in part, hang out in your chamber all day and night and pop out lots and lots of eggs and spitting images of Charles.
The Shanghai stock market isn’t correlated with anything, ever.
Cheap oil prices are not good for oil importers in this case. Too much of the production they will need in a few years is very expensive ($100+); if it doesn’t get started now because it loses money, they are in huge trouble.
There is no evidence of long term falling price. There is evidence of a short term falling price.
The oil price has currently broken nearly all chart resistance to the downside. The reason for me is unclear. Maybe it is just the oil which is coming out of inventory waiting for the oil price to break out. Or is it the Ebola scare which reduces tarvel? Usually it takes a while until it can recover from this chart damage. However, the oil bull has taken the shale beast on its horn and is trying to shake it off. After that, I think as well that oil prices will go up strongly in about two years.
The dollar is the yardstick by which oil is measured.
The dollar has run up sharply against almost everything, not just oil.
Oil’s “price” redenominated. There doesn’t have to be any fundamental reason for it.
The Shanghai stock market is strongly inversely correlated with the price of oil. The Dow became in the last few years strongly positive correlated with the oil price and needs a a strong oil price. Having fiercly fought a high oil price for decades, who would ever thought that Wall Street would hope for high oil prices.
CNBC quoted an oil exec as sales 2/3 hedged six months into 2015 at 100$/barrel. For some the record price continues. Interesting lag times.
Off topic
http://headlines.ransquawk.com/headlines/yemen-shi-ites-take-control-of-board-post-near-saudi-arabia-according-to-sky-16-10-2014
Based on the latest NDIC data, I updated my numbers.
See below 4 graphs:
1) The first shows the average cumulative production of wells that peaked in a certain year. It’s interesting to see that 2014 wells are performing, on average, slightly better than earlier wells, which was not visible a couple of months earlier.
2) This shows the ratio of water vs oil production for wells peaking in certain years. It looks as if most wells are running pretty stable, but once water production increases, it can increase fast as we see for the average 2009 & 2011 well.
3) The overall oil production in North Dakota, based on production from wells drilled in different years. The sum of production from 2013 and 2014 wells already contributes about 70% to current production.
4) I think a very interesting development in North Dakota is the decline in growth in the number of new Middle Bakken wells. In my estimation Middle Bakken wells perform about 20% better than Three Forks wells, but it looks as indeed now the Middle Bakken sweet spots are slowly running out. In 2012, 1212 Middle Bakken wells were drilled, vs 1100 in 2013, and 518 until (incl) July. The number of new Three Forks wells is rising fast (273 in 2011, 525 in 2012, 720 last year, and 416 until July). This chart shows the relative frequency of wells in these formations in North Dakota. I have the impression that Three Fork wells decline much faster after 5 years, but we will probably need to have more data to make this conclusion.
1) Stage count is definitely increasing, per the CLR presentation, even beyond 30. Recent wells are going to flow more and conceal any sweet spot effect. They cost more too, which will be lethal as price declines. The downspacing work also eliminates wells drilled in a semi-exploratory fashion that has a bit of risk. A downspaced well is pseudo-infill with lower risk. So I would suspect these effects will corrupt your analysis of performance by year drilled.
2) Your #3 graph remains your most meaningful. This is August data so looking back to Jan 2013 and quoting 70% of production from that period is 20 months. When drilling stops, this field gets smashed.
3) With price falling, costs become definitive. You can’t overwhelm them with $100 price anymore. So what’s the deal with 2011’s water cut? Where were they drilling then that was different, because water disposal costs will eat those companies alive if that’s what they can look forward to at year 3 or 4. Those cost numbers laid out above will be way too low and wells will have to shut down at higher flow rates.
Unless, of course, the US gubmint, being ever so green and concerned with “proper disposal of production water”, decides to take on that task “to be sure it is done well”.
This would be a backdoor subsidy that no one will complain about.
Interesting graphs. I planned to do something similar myself. Was it from this page you got the data?
https://www.dmr.nd.gov/oilgas/mprindex.asp
In the July pdf I can only see 39 Three Fork wells.
In this there are 26:
https://www.dmr.nd.gov/oilgas/stats/2013Formation.pdf
So obviously I am looking in wrong place?
Hey Freddy,
I started with this earlier this year. Indeed that’s the place where I get the detailed well reports from. I have a mostly automated procedure now to parse them, and update my analyses.
Regarding formation data, Wes once pointed me to the following awesome site, which provides the formation breakdown:
https://www.dmr.nd.gov/oilgas/bakkenwells.asp
In my above chart I only go until July, as I look at the moment wells are peaking (so I need at least 1 more month data, to determine the well decline).
Great, thanks. That will help me alot. I have just started to create a program which will collect all the well data from the pdf documents. When that is done I can start to generate interesting statistics.
You are free to do that, but I don’t mind sending my data in a more readable format(excel) to you. I have a hotmail account, with a dot between my names.
http://www.kmot.com/story/26799356/bakken-reaches-new-production-high-despite-low-oil-prices
Interesting comments by Lynn Helms that were not included in his director’s cut. Note comments about August production growth rate in previous years compared to this last August, the impact lower prices will have on ND state budgets, and what counties are already uneconomic for drilling.
Good find, ductguy.
And we should be ashamed of ourselves. How did we not know this?
quoting from a FAQ on the oil extraction tax:
***The gross production tax rate on oil is 5% of the gross value and the oil extraction tax rate is 6.5% of the gross value; 4% if the well qualifies for a reduced rate; 2% from qualifying wells in the Bakken formation; and 0% if the well qualifies for an exemption.***
That reads like 5% is absolute and the 6.5% may get exemptions of various amounts.
That 15% royalty number from above calculations needs another 5% slapped on it, wrt when wells stop making money at low price.
why didn’t the links post
http://www.nd.gov/tax/oilgas/
http://www.nd.gov/tax/misc/faq/oilgas/index.html
probably my fault, not yours Ron
I gotta look into this more. Maybe API 46 doesn’t get taxed.
Fatal truck accidents have spiked during Texas’ ongoing fracking and drilling boom
By Lise Olsen, Houston Chronicle, September 11, 2014
From the last EIA US production data, there is no sign of decrease in production last week. Oil price starts to increase again.
http://www.eia.gov/dnav/pet/pet_sum_sndw_a_epc0_fpf_mbblpd_w.htm
The EIA gets their data from the states. No state reports their production on a weekly basis. The EIA’s weekly production numbers are just a wild ass guess that are never revised. Whenever they find the weekly numbers too high or too low they bring them back in line by lowering or raising the numbers until they match the monthly estimate. And even the monthly numbers are just an estimate. However the monthly numbers are revised monthly as the data from the states are revised monthly.
So one have to wait for the next incomplete state report…
We wait for North Dakota to publish their data. We wait for Texas to publish their data, incomplete though it is. We wait for the EIA to publish the data from all 50 states as well as the offshore data. We wait for the EIA to tell us what other nations of the world produce. It is a waiting game.
But we can look at all past data and ascertain a trend, if one exist. We can look at which nation is increasing oil production and which nations are in decline. And we can make some kind of educated guess as to what next year’s oil production will look like, and the next.
But everything is just a guess because we have no idea what next years economy will look like. The economy has a tremendous effect on oil production. But oil production also has a tremendous effect on the economy. It is a round robin complicated mess that makes your head hurt when trying to figure it all out. But we must try.
After all, when you are watching the end of civilization as we know it, it’s just damn hard to take your eyes off it.
It’s useful to recognize that those who define BAU will not just let it destroy them. They will take action to protect their position. And they will rationalize and write academic papers or celebrate those written by others that support that rationalization — namely the issue of deflation vs inflation.
Bernanke declared that deflation destroys banks and banks are vital to American civilization and so banks must be saved and the people must be protected from the horrors found in lower prices for living. Inflation targets will be 2% and when you get below that you WILL inject money hand over fist. If you get above that . . . well, let’s wait and see.
Perhaps another reason to expect intervention amid plunging oil prices. The Fed could get clever and weaken the dollar to adjust the price.
Just curious but how would the Fed go about “weakening” the dollar?
Intervention. The NY branch is authorized to buy and sell in the FX market, though they have not formally for sometime. However that branch also is the official conduit for intervention by other central banks and these have been used for essentially stealth intervention much more frequently.
Ron, you may not be aware of the extent of CB activity. For example, did you know the BOJ directly can buy stocks on the Nikkei exchange? Not just Japanese bonds, which they have done at magnitudes beyond imagining. But also stocks.
There’s not much free market out there, and there is an entire industry devoted to self delusion in that regard.
The wiki on Quantitative Ease is interesting along these lines.
If you dig down into it you’ll find one of those rationales of how QE is “not printing money”, and if you read thoroughly you’ll see that the delineated difference between QE and printing money is “the purpose of the activity”. Which apparently means if a CB buys government bonds and says they are doing it to monetize debt, then they are monetizing debt. But if they buy bonds and say they are doing it to stimulate the economy, then somehow this is not monetizing debt.
Okay, BOJ? I am guessing that is Bank of Japan. CB? Central Bank?
Watcher, you should only use acronyms when they are very familiar to everyone, like WTF. 😉
I don’t really understahd what the Bank of Japan buying Japanese stocks on the Nikkei has to do with the US FED weakening the dollar. That just don’t make any sense.
Intervention on the FX. Let’s start with the daily activity of the FOREX.
So just how much money would the FED need to “flood the market” with in order to weaken the dollar? And which currencies are they going to buy with all that money, and how much of each?
That volume of the Forex is total. It’s not just dollar vs Euro or dollar vs Pound or dollar vs Yen. It’s all the “crosses” too, yen vs euro, Euro vs pound, euro vs ruble, euro vs swedish krona etc — assuming that’s what you quoted. So the Swiss National Bank wishing to execute an intervention in cooperation the Fed would execute it thru the NY branch and move the Swiss Franc vs the dollar — though that’s a somewhat bad example because the SNB nowadays is only interested in franc vs euro.
But that’s the macro point. The Fed can orchestrate purchase of Euros (and note here the volume is only half the question, there is also the price — obviously if you want to move things you don’t just bid up 1 penny, you bid up 5, and scare the other players into running away). Note that a direct buy of Euros would be not at all unprecedented, but unusual lately (the stealth option via other CBs is more often used) and because unusual lately it would immediately affect the other currencies pricing.
The point of mentioning BOJ purchases of stocks was macro — to illustrate the pervasive influence CBs have on daily goings on. That QE wiki talks about what Japan has done and the magnitude.
The Fed can orchestrate purchase of Euros (and note here the volume is only half the question, there is also the price — obviously if you want to move things you don’t just bid up 1 penny, you bid up 5, and scare the other players into running away).
That’s not how it works. You buy at the offered price, whatever that happens to be. And you sell at the bid price, whatever that happens to be.
And the difference between the bid and ask price, among major currencies, is usually about 3 basis points. That is 3 cents per $100, or three one hundredths of one percent, not a penny and certainly not 5 pennies. And it is not in cents but percent.
And in case anyone is wondering, the banks make their money by the difference between the bid and ask price. And that bid and ask price is constantly changing, it jumps up or down one or two basis point every few seconds. But it never moves dramatically in a short period of time.
Ron, BOJ offers to buy above market by whatever amount they want (aka bid). What seller is going to say, no, I will sell to you for less than that amount? I don’t want your extra bid.
There was a similar issue that arose with the mechanism for QE as it pertained to purchase of Mortgage Backed Securities. Half of Bernanke’s QE3 was US Ts, and half was MBS. But what price did they bid for those? There was no market for them — which was why Mark-to-Market was eliminated on the relevant FASB (Financial Accounting Standards Board) rule for member bank holdings starting March 2009 (and has never been restored since). With no market price, Bernanke could just hand out a gift to the banks in return for possibly worthless paper.
You have way too deep a trust in the legitimacy of the markets. Did you happen to read or maybe read a synopsis of Michael Lewis’ Flashboys earlier this year that exposed HFT as rigging the markets?
oops high frequency trading
Watcher, I know all about high frequency trading. It is essentially legalized front running. It is not remotely related to the subject under discussion.
P.S. If you don’t know what front running is I will gladly explain it to you.
Well, the subject was the macro issue of over confidence in market legitimacy.
“The market is rigged.”
But I think the specific question you’re referring to in a non macro way is can dollar value wrt other major currencies be controlled by CBs. If one wants to say no, then one has to explain why CBs so often intervene.
Okay, as to front running, there seems to be one thing you do not understand. Cheating is not the same thing as manipulating. Front runners cheat, they are not manipulating the market. The market price of any stock or commodity does not change because of a front runner. I felt you mentioned it because you though high frequency trading was “manipulating” the market. It is not. It is cheating and should be outlawed but it has no effect of the price of the stock being front run.
Front running is making a trade before a very large block of stock is bought or sold, taking advantage of the move that such a trade cause, then immediately closing the trade out right after the large trade goes through… and making the profit from the movement the large block trade caused.
There was a time when a bank could intervene with a very large buy or sell of a block of currency. Now, dealing with major currencies, those days are no more. No bank has enough money to do that. They might buy 10 billion British Pounds, and that might move the pound up a tad. But in the next ten minutes such a trade would be lost in the noise.
Good call. I generally agree that front running is market neutral (doesn’t move the market), but you’re thinking somewhat only about colocated engines that have a signal propagation advantage over farther away engines whose trades can be seen prior to execution. Goldman was accused of something similar when their proprietary trading desks were in the same building with their client trading desks and they could front run a client trade on the prop trading desk and clearly profit at the client’s expense.
But.
HFT engines also do quote stuffing or false orders.
Quote stuffing is a very high frequency sequence of requests for quotes that overwhelms the exchange machines and prevents function — until they have a desired trade queued. Now the desired trade won’t be in the same vehicle, of course, because they will be queued behind the competitor. Rather they will freeze the competitor while they take a position in an ETF or some related vehicle that will move correlated with the frozen vehicle but not until it unfreezes. So they can position in that.
False orders are essentially quote stuffing too. They are bids to buy or offers to sell that are output and then cancelled before they can be filled. Again, this freezes trading and permits positioning in correlated vehicles.
These correlators can turn the sequence non neutral. They can move the market by not allowing trading until they are positioned.
There are some recent maneuvers to try to stop this, outlawing
outlawing placing X number of orders per second without anything being traded. That’s probably bad phrasing but the SEC released some cursory text to try to intimidate.
Overall, in terms of equities, there is likely somewhat more non economic influence on prices from share buybacks than HFT engines . . . now. I suspect that was reversed in 2009ish.
“it’s the end of the world as we know it” if you work for on oil company, or are you manufacture infernal combustion engines.
Otherwise, you’ll drive an EV and get your goods delivered via electric train.
Six Reasons to Panic (over Ebola):
It’s the Weekly Standard (with a general conservative point of view), but it’s a pretty good article, and they noted that the R0 for Dallas, so far, is the same as Liberia (one infection produces two new infections).
http://www.weeklystandard.com/articles/six-reasons-panic_816387.html?page=1
Ebola crisis: No impact from pledges of help, MSF says
http://www.bbc.com/news/world-africa-29656417
“International pledges of deployments and aid for Africa’s Ebola-hit regions have not yet had any impact on the epidemic, a major medical charity says.”
“In fact when you look at the evolution of the crisis, the international community really woke up when the disease got to America and Europe.”
I read the article and it mentions immigration. If we really wanted to stop a flood of people, it would be hard. It’s not like there is a fence around the entire country (and putting one up as some suggest, would be awfully expensive).
I read the Weekly Standard article. I’m not referring to the BBC article.
I looked briefly for some epidemiology graphs/charts, and accordingly, it looks like either the reporting is becoming less accurate or we may be nearing peak Ebola as it appears to be slowing down.
Haven’t followed it closer but there was some estimate of a doubling of cases every 6 weeks?
JMGreer mentioned something about that in one of his articles, and I had done the some napkin-math myself and reached, based on it, and nothing of transmission bottlenecks, or survival rates, etc., that an uncontrolled epidemic might approach the entire population in around a year and a half.
Well, not possible. This is like gamma ray damage to solar panels in orbit. After a while the energy starts passing thru junctions already destroyed.
In the ebola situations, after a while infection events start taking place with people who already got hit and survived and are immune.
So you shallow out the curve.
That’s what I meant. The survival rate is roughly 60 or 70 percent, yes?
Wind blows away fossil power in the Nordics, the Baltics next
http://www.reuters.com/article/2014/10/17/us-nordicpower-windfarm-idUSKCN0I60M520141017
“Wind power is blowing gas and coal-fired turbines out of business in the Nordic countries, and the effects will be felt across the Baltic region as the renewable glut erodes utility margins for thermal power stations.”
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html futures:
Fixed your link.
Venezuela blames U.S for global oil price slump
“Washington is “flooding” the market with cheaper shale oil to bring down prices and ultimately impact Russia and other oil-producing nations, Maduro said at a televised Cabinet meeting.
“The U.S. and its allies want to affect oil prices to harm Russia, which produces around 10 million barrels per day, and that is the vital income of their economy,” said Maduro.”
Yo Baby – Top down planned economy, it’s all Washington’s Fault.. we all know that Obama is “The Drill Baby Drill Pres.”
http://news.xinhuanet.com/english/business/2014-10/17/c_133723506.htm
The law of supply and demand rules, not some kind of political espionage. Mr. Maduro doth protest too much. I guess he can say any ol’ dern thing he wants, but it is pure nonsense, all bunkum and bosh.
I know that my consumption of fuel is less at the 4.00 dollars for each gallon than it is at 3.00. And it is more than 25 percent. Gives the Chinese a chance to burn some too.
Seeking Alpha is predicting a rebound in oil prices.
5 Reasons The Oil Sector Is Due For A Big Rebound
A slide in the price of oil has led to what some are calling a crash in the energy sector.
This “crash” is overdone, especially since the price of oil has not been down for a sustained period of time.
A few policy moves by China or Europe or OPEC and oil prices could rebound sharply.
The recent talk by Saudi Arabia about being comfortable with lower oil prices could be a huge bluff for negotiation tactics in advance of the next OPEC meeting.
Oil stocks are extremely oversold and sifting through the wreckage and buying the “crash” in this sector could lead to big gains.
Oversold and Overbought have always been pretty much absurd words.
You can’t sell if there’s not a buyer, and vice versa.
A rebound would require that short term supply came down.
I think that comes down to whether the US shale patch is willing to accept a decline in production to raise prices. They’re so uncoordinated this would be almost impossible to implement as a conscious decision, though. Market forces could force it, but that is a much longer cycle.
Saudi can keep doing this for a while. They’re below budget break-even, but are otherwise solid financially and still make money on the *production* of oil.
Russia of course can’t cut, they need every barrel they can get.
Most of OPEC is in the same boat as Russia.
Short of the Libyan truce falling apart or Islamic State conquering Baghdad, I don’t see who blinks.
There is at least one ray of sunshine in this discussion of oil prices.
All the folks who blame high prices on speculators have disappeared from every forum I have visited.
I have never understood how intelligent people can blame speculators who cannot possibly control the production, processing, and marketing of oil for the price of it. If they are in a position to control production or processing or marketing then they are part of the industry and not a bunch of parasites sucking the blood out of companies such as Exon and Aramco.
I will of course readily admit that in some places there may be no price competition because there is not enough business to support any competition or because the government has allowed one company to seize control of the market or else runs the oil market.
My local country store gets an extra dime compared to other stores a lot farther away but I would rather pay another couple of bucks on a purchase than burn it up plus my time going farther to buy gasoline.
Oil remains under $83 this moment, and there is no question efforts were underway today to elevate it. Yen and Euro both down strongly vs the USD so . . . it was hard to do that elevation.
These 6 Countries Will Be Screwed If Oil Prices Keep Falling
https://ca.finance.yahoo.com/news/6-countries-screwed-oil-prices-110424494.html
Here’s why: For governments in oil-exporting countries to meet their spending commitments they need oil to remain above a certain price. With oil prices under $87 a barrel, countries that rely on high oil prices, including Venezuela, Russia, and Saudi Arabia, may have a reason to be concerned.
CNBC wacko took it further. “The US is now a huge producer of oil. How can it be good if one of our most vibrant products falls in price?”
Heads exploded.
Saudi Arabia has huge financial reserves. They don’t want to dip into them (absolute monarchy = country the same as the family) but they’re in nowhere near as bad shape as the others. They can do both that and reign in wasteful spending they don’t need (military, vanity projects, etc.).
Venezuela is the worst off by far and will probably implode if this continues for any length of time.
Forbes hits the panic button:
http://www.forbes.com/sites/chipregister1/2014/10/17/time-to-protect-the-us-shale-revolution/
”So where does all of this leave US shale oil producers? While production at many plays is still worthwhile, increasing production costs will take its toll on margins as the oil price continues to fall. Indeed, Deutsche Bank estimates that 9% of US shale oil production slated for 2015 is already uneconomic at around $90 a barrel. If oil prices continue to fall below $80 a barrel, that number jumps to 39%. ”
”Energy has once again become a major driver of the US economy. In the last ten years, employment in the oil and gas sector has nearly doubled, contributing nearly 5% to total US job growth during that time. From 2009 to 2011, the energy industry added around 600,000 new jobs, and now accounts for some 8% of the total US workforce. The impact of the shale revolution on US GDP is expected to double over the next decade, rising from $284 billion in 2012 to an estimated $533 billion in 2025.
All this economic progress is now under threat thanks again to Saudi meddling. As such, the US has a choice to either stay true to its free market principals or move to somehow protect its oil industry from going bust, again. ”
Hilarious. You could not make this stuff up.
Forbes has a few rational oil columnists, and a few who aren’t.
I saw Lawrence Kudlow the other day say the Bakken is profitable at any price over $40, because of innovation and entrepreneurship. But I know for a fact I recall him saying $60 for the same thing about 6 mos ago.
Again, what did Saudi Arabia do? They have done nothing. In fact, if they maintain production and continue to do nothing they will be accused of manipulation.
“In fact, if they maintain production and continue to do nothing they will be accused of manipulation.”
EXACTLY. The Russians have already accused them of manipulation. For what: For doing absolutely nothing!
Jesacotnpigginminutthere, weren’t all the MSM outlets enthusiastically raving how LTO would bring the price of oil crashing down and how wudderful that would be, just a few months ago? Sheeeesh!
NAOM
Truly when someone doesn’t be aware of then its up to other viewers that thery will assist, so herre it takes place.
“…hits the panic button…”
I don’t know about the rest of you, but I am tired of the media and Internet noise machines working overtime to try to make everyone afraid, all the time, of everything.
Watch out, Saddam and his henchmen will engineer a blind white flash and mushroom cloud over one or more major cities in the U.S. … or would that be Al Quaeda?
Afghanistan!
Wait…news flash…North Korea is poised to light SE Asia on fire! Or…ummm…now it those Iranians and their bomb schemes!
Benghaziiiiii!
Japan Inc vs. China Inc. in the battle over little known rocks in the Pacific! Round One, Begin! Hey, what happened to that ‘crisis’??
Assad and his Baathist cronies in Syria must be stopped! Why aren’t we bombing?! He has chemical weapons…wait, he gave them up…it obviously is a Russian plot to make us look bad!
Brown children giving themselves up by the thousands at the border!!! Seal the Border! IMPEACH OBAMA!!! Wait, what happened to that ‘crisis’, hmmm?
Putin is in Crimea today, maybe in a year he will invade the Rest of the World!
Bright shiny objects! …Look over here, here comes ISIS…errr…ISIL…no, the Islamic State ™! Launch the air strikes…my God, put boots on the ground again in Iraq and Syria! …maybe Iran and the Baathist can help us defeat our new enemies…then we can fear them again later!
Tick-tock, tick-tock…another ‘news cycle’ begins…EBOLA!
Oil was UP…now it is Down…wait, maybe it will go up again!
Who in their fracking right mind can guess what new ‘crises’ await up on the airwaves, dutifully fed to the masses by the breathless, clueless ‘news’/infotainment marionettes?
Surely given the median age of folks who post here, I imaging at least several of yuse folks remember the classic movie ‘Network’? What a great, prescient movie!
The character Howard Beale, written by Paddy Chayefsky, tried to warn us through this movie, but we have short memories and were soon too busy anyway dreaming about the promised morning in America, and the re-invigoration and expansion of that shinning city on the hill…heck, for a couple of decades people thought they were living that dream!
….
You have meddled with the primal forces of nature, Mr. Beale, and I won’t have it! Is that clear? You think you’ve merely stopped a business deal. That is not the case! The Arabs have taken billions of dollars out of this country, and now they must put it back! It is ebb and flow, tidal gravity! It is ecological balance! You are an old man who thinks in terms of nations and peoples. There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels. It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today! And YOU have meddled with the primal forces of nature, and YOU… WILL… ATONE! Am I getting through to you, Mr. Beale? You get up on your little twenty-one inch screen and howl about America and democracy. There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today. What do you think the Russians talk about in their councils of state, Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do. We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations, inexorably determined by the immutable bylaws of business. The world is a business, Mr. Beale. It has been since man crawled out of the slime…
…
http://www.imdb.com/title/tt0074958/quotes
Rumors, insinuations, lies, half-truths, carnival barkers…mixed with huge does of bread and circuses. Sleights of hand, mis-direction, bright flashing lights, smoke and mirrors…
Oh, what the hey, please return to your normal activities…here endeth the pointless lesson for the day…
Simple. Don’t watch. I quit years ago.
Hm, maybe that’s why I am puzzled by all the up-down angst here, when what I see out the window is so different-
All together now, let’s get on to the next level of civilization.
I gave up television back around 1980 or so and have seldom watched anything since except a weather forecast or a major sporting event such as the Kentucky Derby and then only because I was invited to a gathering with good food and good company on the day of the race.
It would be hard to find words to do justice to how breaking the idiot box habit improved my life but in essence it means that I have had about twenty or thirty hours a week for the last thirty five years to live rather than vegetate.
This extra time has been spent reading serious books and learning and
practicing a whole bunch of new skills for the most part but a whole lot of it has been spent out in the woods and fields in the sort of environment we are designed to live in..
“I gave up television back around 1980…………”
When I was a kid my Mum and Dad decided to scrap the TV until I finished High School. Hence, when bored, I just read (everything). When my kids started school we scrapped the TV. Hence, when bored they read (everything). Except one girl who became a concert pianist because when she got bored reading she played the piano. Now kids don’t “need” a TV; they can spend all day playing games on their i-phone, or whatever. So you can see how far we’ve come.
The news took a noticeable turn for the worse with CNN. 24 hour news created a lot of space to fill. So we started getting hourly coverage.
Then the Internet encouraged people to report everything the moment something happened, even if that news was wrong or inconsequential. It’s worse now with reporting data. We get stock market ups and downs immediately. We get daily political polls. We get sound bites from politicians which encourages them to say stupid stuff to get on the air.
I stopped reading the news awhile back. I couldn’t keep up and it was becoming a full-time job to do so. The only subject I follow fairly closely now is well decline in the Bakken. I’ll Google that topic.
For the rest of the news, I find that developments don’t change enough to warrant paying close attention to them.
Who gives a shit about people who think corporations are part of the natural order of things and are more important than biophysics?!
I witnessed massive coral bleaching on my local reefs recently… Now THAT is what I call meddling with the primal forces of nature you stupid idiots!
I was born in Sao Paulo and spent eight months there last year, can’t wait to see what happens when they run out of water in a few weeks. 20 million people will be up shit’s creek if that happens! don’t think the price of oil or what Putin and ISIS are doing will be what they are most worried about.
Sao Paulo…we can look even closer to home (for many of us on this list)…Texassistan!
Macondo contaminated the Gulf? Get back to drilling! Don’t look back!
Running low on water? Frac baby frac!
Screw expanding Medicaid, screw Obamacare! Oh golly, we have two cases of Ebola…too bad one-quarter of our population has no health insurance! Never mind, we are a low-tax, low-services state, and that’s how we like it! Hurricane, pandemic, massive oil spills? Uncle Sugar, Help! Build a more resilient society…nope, Ayn Rand rules the roost!
The Brazilians will be hosting the next Summer Games…more bread and circuses. How’s that pre-sal oil going?
At least Brazil’s population growth has turned the sigmoid corner…unlike the U.S., which is merrily cruising onwards and upwards with no end in sight!
http://mazamascience.com/PopulationDatabrowser/?country=BR&language=en
http://mazamascience.com/PopulationDatabrowser/?country=US&language=en
Unfortunately, Fred, for most people what goes on in the Earth’s oceans might as well be on the far side of Pluto. The masses don’t know or care, and that is heart-breakingly sad. All this glorious information at our fingertips on the Interwebs…and for a lot of folks, its ‘hey, lets get some wings and pizza and beer and watch the game!’ Lets burn lots of brain cells doing out Phantasy Football thing!
Ten years from now, the song will remain strange…little league RollerBall ™ anyone?
The politics of Ebola are interesting. You now have conservative politicians who believe the government should do as little as possible screaming that the government hasn’t done enough to stop Ebola.
So are we going to have people who favor privatization of everything coming up with a plan to fight current and future epidemics? And if Congress is asked to budget more money to fight epidemics in Africa so they don’t get to the US, do you think they will vote for it? Probably not.
Whatever happened to “Fight ’em over there so we don’t have to fight ’em over here!”?
That’s what most people think is the most sensible approach. Help Africa so it doesn’t spread.
None of it has really gone away, we’ve just chosen to look at something else for the meantime. I watch it for the reason OFM doesn’t, to vegetate. The world happens, it’s there to be absorbed. Some of what we see is relevant, a lot not. It helps us to make predictions and plan ahead.
News happens whether it gets reported on the world stage or not, I try and keep track of the forgotten news stories to watch them play out.
Fighting goes on in Ukraine, over 300 dead in the Ukrainian army since the ceasefire, Libya continues to fall apart, daily fighting in Benghazi, Egyptian planes bombing Libya, Japan vs China has quietened down although the fact that Japan changed it’s constitution earlier this year allowing it to go to war in defense of an ally is a major step, China pulled out an exploratory rig from Vietnamese waters just a few months back after finishing their exploration, if they found anything they’ll be back, China is building artificial islands in Philipines waters, Syria and Iraq are in your face every day although I think that the Baathist’s in Iraq went with Islamic State rather than Iran.
The fluctuations in oil price are of interest as many believe here that they are a sign of change, like birds migrating when the seasons change.
None of it is really all that important, the world continues its ebb and flow and we continue on as casual observers.
The fluctuations in oil price are of interest as many believe here that they are a sign of change, like birds migrating when the seasons change.
None of it is really all that important, the world continues its ebb and flow and we continue on as casual observers.
The collapse of oil prices in 2008 was extremely important. It marked the beginning of the big world recession. The high price of oil in July 2008 was definitely part of the cause of the collapse. But the actual price collapse, from $147 a barrel all the way down to the mid $30s was a symptom of a very sick world economy.
Likewise the current collapse of world oil prices, though not as dramatic as the 2008 collapse, nevertheless is extremely important, contrary to your belief. It signals that the world economy is going from bad to worse. It also tells us, contrary to what many even on this list believe, that there is a price ceiling, a point that triggers demand destruction for many buyers.
Yes the fighting in the Ukraine is very important. But it is not nearly as important to the world as a whole as the availability and price to the very life blood of the economy, oil.
Ron said:
It also tells us, contrary to what many even on this list believe, that there is a price ceiling, a point that triggers demand destruction for many buyers.
As you know, our analysis uses a thermodynamic approach to model oil production, and cost. We have recently completed an evaluation of what the maximum sustainable price of petroleum is based on that model. You are correct; there is a price ceiling that is determined by the the energy content of a unit of oil. If this is not true the Second Law took a vacation and we are in really serious trouble (/sarc).
What we determined was that the price of oil can not exceed $117/barrel. This is a fact regardless of what any central bank does to try in to manipulate the financial system. This is a case of where physics will always trump economics. In actuality, $117/barrel is probably a high estimate; we are using maximum theoretical values in the calculation. My guess would be that the true value is just somewhat above $100.
This is very bad news for the petroleum industry. Our model also shows that production costs must continue to increase as petroleum is extracted. That is also a Second Law mandate. The industry is now caught between increasing production costs, and a capped (and long term) declining price. As the Etp model predicts, high cost production sources will be phased out before conventional. Bitumen, ultra deep water, arctic, high sulfur extra heavy, and shale will be the first to go.
We’ll be adding a page to our site to explain how we came to this conclusion. I’ve had a zillion interruptions in the last few weeks so things on the posting side have lately been progressing slowly. Maybe, Old Man winter will slow things down for us a bit.
Thanks, you run a very nice, and needed site.
http://www.thehillsgroup.org/
“We’ll be adding a page to our site to explain how we came to this conclusion.”
Yes, I hope so. It’s not good enough to just say “we apply Second law of thermodynamics to a problem” The Second Law was formulated in the early 1800s and is familiar to pretty well every High School student. My granddaughter applying it to her chocolate brownie recipe which doesn’t mean the brownie will turn out edible. There’s not a single word in Hills comment that I don’t agree with but it is not acceptable, to me, to simply say: “our study concludes” without ample clarification. There is almost nothing in Dennis Coyne’s projections that I agree with, for example, but at least you know his methodology — exactly. So I have no problem with what he is doing.
What the hell: my study employing the Third Law concludes that Titans lakes contain little green men fishing from outrigger canoes. So, I dare you to disagree with me!
The Titan central bank can bailout those canoes, as it were.
The Titan central bank can bailout those canoes, as it were.
Maybe the Titan central bank can import duct tape from us to stop the canoes from leaking so they won’t need to keep bailing them out, eh?… >;-)
The Third Law deals with the entropy of a pure crystalline structure at absolute zero. It refers to the absolute entropy concept. If you think that this has anything to do with little green men on Titan you have obviously jointed the delusional wacko club, and there is not much to discuss. Our model is a numerical solution to the “Entropy Rate Balance Equation for Control Volumes.” Because the equation is non-deterministic for oil production our solution is the first of its kind. Its solution can be correlated to the historical price of oil with a correlation coefficient of 0.965. All curve fitting is done employing the Levenberg-Marquardt algorithm, rather than the amateurism often displayed in the blog-sphere.
Since thermodynamics is obviously not your strong suit, you can find an overview to get you started at our site.
http://www.thehillsgroup.org/
“Since thermodynamics is obviously not your strong suit, you can find an overview to get you started at our site.”
Having my first degree in Engineering Physics I think I have some understanding of thermodynamics. Perhaps you are simply too dense to realize I was just making a point? Rather, trying to make a point!
Having said that, the explanation of your procedure was excellent. And, your observation respecting amateurism often displayed in the blog-sphere is valid as well. Often I feel so strongly about this that it becomes impossible for me to bother commenting about issues in subsequent discussions.
However, I will add, it would have been VERY helpful if you had prefaced your comment(s) with this information.
Anon. Take the prize for the most obvious absurdity offered by commenter taken seriously wrong by reader.
Q- in everyday conversation, what is probability that listener is hearing speaker wildly wrongly? Surely there are PhD’s galore studying this.
Hi Doug,
Thanks.
A basic problem is the well profile, which I only have data for wells out to about 5 years (thanks to Enno Peters) and use a hyperbolic to estimate future production. Note that the first 5 years average cumulative well output is about 200 kb, over the following 18 years I estimate about 120 kb cumulative output for 320 kb total after 23 years, at that point the well is down to about 7 b/d and I assume the well is shut in. Chart below, data from NDIC for about 6000 wells from 2008 to 2013 from Enno Peters.
Chart above y axis should be labelled barrels per month, the x axis is month from first well output.
I wish more reporters understood this. I just read a piece yesterday on the NPR site about how peak oil predictions were wrong. I’ve always assumed NPR had smarter reporters than most, but this reporter didn’t understand the economics of oil and how peak cheap oil has already happened.
A stripper well, one that maybe produces 9 barrels per day, is probably going to be located in a place where there are 9 or 10 wells that are producing more and makes the stripper well worth the while to gather the oil with those low numbers. Might as well take that extra 270 barrels along with the other wells that are producing a 100 barrels per day with a monthly total of 27,000. The stripper well will pay the expenses of operating the wells. You will see shut down wells and a new well 300 yards away pumping more of the same oil, just all brand new equipment. It only makes sense to drill new wells where old wells are worn out. The oil is still down there, billions of barrels of the slippery substance that does the world a world of good. Makes some do real goofy things, but that’s life.
The Dickinson State No. 74 oil well produced 8000 barrels per day initial production and accounted for 3 percent of Conoco’s domestic production ca 1993.
https://www.dmr.nd.gov/ndgs/outofprint/NewsLetters/1993Summer.pdf
There are good oil wells out there and there are wells that produce 17 bpd initial production, dry hole, and that is how it works.
With 11,200 plus wells pumping 101 barrels per day, you will capture market share and the oil will be in demand.
https://www.dmr.nd.gov/oilgas/stats/historicaloilprodstats.pdf
BNSF shipped 11,577 carloads of petroleum last week. Warren Buffet is swimming in gopher gravy just like Jed Clampett.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/pdf/20141011.pdf
I have read so many articles or reviews about the blogger lovers except this piece of writing is really
a good paragraph, keep it up.
UN document admits WHO badly fumbled response to Ebola, says top officials unaware of severity
https://ca.news.yahoo.com/un-document-admits-badly-fumbled-response-ebola-top-134428272.html
In a draft document, the World Health Organization has acknowledged that it botched attempts to stop the now-spiraling Ebola outbreak in West Africa, blaming factors including incompetent staff and a lack of information.