The EIA has released its Petroleum Supply Monthly with C+C production numbers through May 2014. Of all the EIA data releases this seems to be the most accurate. However in some cases it is only as good as a few EIA employees guesses. And the more state data they have to work with, the better their guess.
The data in this report goes back to 1920 for total US production and to 1981 for individual states and offshore production. However I have chosen to shorten the time frame for my charts in order to better show what has happened recently.
US production was down 36,000 bp/d in May to 8,357,000 barrels per day. US production took off in mid 2011 when Shale production took off and has risen some 3,300,000 since. Of course there was shale production prior to this but it was only keeping US production on a relatively flat plateau.
Everyone is interested in the Bakken so I have combined the two Bakken states. Of course there is production in these two states outside the Bakken but this is the best I could do. Note that when the Bakken has one bad month as they had in December, it takes several months to get back to their prior production level.
Here is the most interesting chart. The EIA has Texas C+C production growing at exactly 44,000 barrels per day for 12 months straight. But last month they had Texas growing at 48,000 barrels per day for 8 months straight. A few months before that they had Texas production growing at 50,000 barrels per day for about 8 months straight.
The reason they have to estimate Texas growth is the EIA gets all their information from the individual states, or the BSEE for all offshore production. Texas gives oil companies up to two years to report their production so therefore Texas production numbers are always incomplete… so they just estimate what they think it will be.
I estimated, last month, that Texas C+C production was increasing by about 40,000 barrels per day per month.
This is Texas C+C from 2000. The shale revolution started to increase Texas production in early 2010.
This chart shows where the EIA expects US C+C production to be when they expect it to peak in 2016. They expect C+C production to top out at about 9.6 million bpd. They expect Tight oil to be approximately half of all US production. That would be 4.8 million bpd. They expect offshore production to be 2 million bpd, up from approximately 1.35 million bpd today, 1.3 million bpd in the GOM and 50 thousand bpd in the Pacific.
To get to 2 million offshore we need an increase of approximately 650,000 bpd by 2016.
Pacific offshore is in decline so all that increase would have to come from the Gulf of Mexico.
The BSEE, like Texas, sometimes reports incomplete data. But the BSEE data is a lot closer than it appears here. Here the EIA data is through May but the BSEE data is only through April. The EIA is showing the last four months above 1,300 kbd. However when the final BSEE data comes in, it is a very good bet that all four months will below 1,300 kbd. The EIA just appears to be wishing the numbers higher.
I consider it extremely unlikely that the GOM will reach 2 million barrels a day by 2016.
US production, in May, was about 1,250,000 below the point where the EIA thinks it will peak at in 2016. 9.6 million barrels per day is what they expect the average daily C+C production to be in 2016. So to get there we only need to have an average increase of about 50,000 barrels per day per month. In the past 24 months the US increase in C+C production has averaged 84,000 barrels per day per month. So the EIA believes we will not do quite as well in the next two years as we have done in the past two years.
From the paragraph under the second chart, combined North Dakota and Montana:
” Note that when the Bakken has one bad month as they had in December, it takes several months to get back to their prior production level.”
I can see no explanation for this except that the production of existing wells declines so fast that it takes the next three months or so just to finish enough new wells offset the decline from one month of no new or few new wells being brought online.
Talking about sliding three steps backward for every four steps forward !!!
And as far as increasing production in the Gulf from roughly one point three million barrels to two million is concerned – unless there are some very good fields already leased and explored and in the process of being brought into production over the next twenty four months it just doesn’t seem likely at all.Ron is right or I will eat my words.
IF the productivity of the overall industry in the Gulf stays about steady this would require around a twenty to thirty percent increase in men and equipment not only over the next couple of years-
GIVEN THE TIME FRAME it takes to bring offshore oil to market it would meant that all those extra men and rigs would have had to be out there for the last few years previous to this one and have a bunch of new production about ready to go.
If they WERE out there in such unusually large numbers we should have heard about it should we not? I don’t recall hearing about such a dramatic increase in men and machinery being employed in the Gulf.
Of course my memory is not what it used to be.
Regarding Old farmer’s comments about GOM activity – there currently are record levels of drilling activity in the deepwater GOM, with more new-build deepwater rigs coming, and, within the next year or so there will be 4-5 new projects coming on line – Hess’s Tubular Bells, Chevron’s Jack-St.Malo with Exxon’s Julia tied in, Chevron’s Big Foot, Exxon/Anadarko’s Lucius/Hadrian and Anadarko’s Heidelberg are the most notable. I think this new production will boost GOM total production over 1.5 MBOPD, but probably not over 2 MBOPD.
One of the more interesting things for this community to follow is how well the Wilcox (Lower Tertiary) fields do. Jack-St.Malo-Julia fall into that category from the list above. I’m sure when these fields start producing, there will be press releases, and talk about great upside, but the question will be how well are these fields doing 6 months later, 1 year later, 5 years later.
The only Wilcox production to date in the deepwater GOM is coming from Shell’s Perdido complex, where the Wilcox is relatively shallow (if 17000′ is shallow!) and the rock properties are favorable (good porosity and permeability, and good, or at least predictable, connectivity between wells), and also from Petrobras’s Cascade-Chinook complex. Cascade-Chinook has not done as well – the wells start off at reasonable rates, (5-10000 BOPD) and then pressure deplete and decline to lower rates within months. (Sound familiar!!). Jack-St.Malo-Julia, and many of the future Wilcox projects (Shell’s Stones project, BP’s Kaskida project) are much more similar to Cascade-Chinook than Perdido.
Yo South Guy, Ron is an aggressive follower of Thunderhorse and its associated wells/field and has noted that it has been profoundly disappointing.
It was/is deep. You know anything about what went wrong?
I think Thunderhorse had some bad completions early on, resulting in bad well performance, leading to severe early field-wide depletion. I don’t like to speculate too much, but I suspect the field will do OK – probably not the 800 MMBO to billion barrel field some thought early on, but, the oil is there, and the rock properties are favorable. The field will probably require more wells than they thought at first, though.
I like to think that many of these deepwater large GOM Miocene fields are somewhat “forgiving”. These fields include at least Mars-Ursa, Tahiti, Thunderhorse, Mad Dog, Shenzi and Atlantis. Projects and wells may be delayed and cost more than predicted, individual wells may not perform as hoped, but the connected volumes of oil are there (because the reservoirs are either very amalgamated turbidite channels and/or fan lobes). More wells may have to be drilled than predicted, and facilities may never reach nameplate capacity, but, these fields will be money makers.
This has yet to be demonstrated for the Wilcox – where the wells are deeper and the reservoirs are crummier.
That deep there is the other problem. If you make mistakes, the oil can flow deeper and the heat turn it into gas.
What, btw, is a bad completion?
Gas production will not be an issue with the Wilcox reservoirs. I am very sure the operators know what they will be producing, and in every case I have heard of, it will be oil. The question with the Wilcox wells will not be – “Is oil there?”, the question will be “Is my wellbore connected to enough oil that can flow at commercial rates (thousands of barrels a day) for long periods of time (years, not weeks or months)”
A “bad completion” – a producing well has 2 majors operations – the drilling phase, where the well is drilled through the reservoir interval, appropriate evaluation of the reservoir is done (logging, coring, etc), casing is set over the reservoir interval, then the well is turned over to the completion team.
In the case of a typical deepwater well, the major completion steps would include perforating the casing over the reservoir interval, fracking (yes – deepwater wells are fracked), running tubing in the well, and turning the well over to production.
Not sure what went wrong with some of the early Thunderhorse wells, but there apparently were issues with the completions.
My apologies to any drilling or completion engineers for greatly simplifying your efforts. Note that nowadays, a typical Wilcox well can cost $300 MM or more to drill and complete
We get so accustomed to microlooking at Bakken and Eagle Ford expenses down to $100s of thousands for water and proppant that to get re-exposed to the $300 million number is an eye opener.
Gotta be thousands of bpd for years.
Oh and the gas transition I referred to was what could happen at Thunderhorse via errors. It’s deep.
Th’ats going to make things a lot easier from here on out.
Ron, Expanding on the point that Mac made could LTO be expanded that much just considering the current count of drill rigs working? I am not familiar with how quickly they can be fabricated but I would assume that rigs of the sophistication required to drill LTO don’t come off the assembly line like autos.
They already have enough rigs to work existing LTO fields in the US. The only reason they would need a lot more rigs would be if shale oil hits it off big in other countries. I really don’t see that happening anywhere else within the next few years. Russian shale seems to be off the table now until this new cold war is over. That may take decades.
Hi Ron, thanks so much for such awesome articles and analysis! Yours is my favorite peak oil website.
Chevron soldiering on with Kitimat LNG as observers ponder its future
Houston-based Apache Corp., once Kitimat LNG’s lead proponent, announced Thursday that it is selling off its stake in the $4.5 billion project seemingly under pressure from an activist investor, the U.S. hedge fund Jana Partners LLC.
There sure are lots of second thoughts about pumping billions into massive oil/gas projects with questionable economic viability.
Penn West saga escalates as U.S. law firms ponder class actions
And here is a Canadian oil/gas company who fudged its books to make the economics look better than reality.
Hi Ron, In the last paragraph you said the average increase for the last 24 months was 84,000. Do you know what it was for the the last 12? Thanks
Yeah, it was 90. But it kinda jumps around with some big monthly gains and some negative. For the last 17 months it was 75 bpd per month.
It appears that US middle distillate exports have risen rapidly of late. Primarily diesel products to Europe.
http://www.platts.com/latest-news/oil/london/us-diesel-exports-to-europe-to-almost-double-26812319
This appears to be WCS, not LTO. WCS spread vs WTI is substantial, and Canadian oil is not diesel scarce.
Not just Russian tight oil shale off the table, but Argentina too: http://www.foreignpolicy.com/articles/2014/07/25/keeping_putins_hands_off_argentinas_oil
Questions for this crew. I’m skeptical on how viable tight shale oil plays will be in other countries. The U.S. has such unique land and minerals rights ownership policy, and tax policy on drilling, which allows depletion allowances and other affiliated exploration and drilling costs to be deducted, sometimes to the tune of multi-fold original expenditures, will this fracking be viable elsewhere? Is it a net energy contributor in many less-than-optimal shale oil plays? Interested in this groups views on this.
Those are not physical limits. Argentina has seen oil production fall 40% in 10 yrs.
They NEED oil to flow. If you have tax or ownership obstacles, you eliminate them by decree and anyone who complains gets a bullet. When you MUST have it, and there is no physical limit stopping you, you WILL get it.
If Russia needs a lot of trucks and roads to get shale, China will be happy to provide them. Proppant is a different issue. That could be a physical distance problem.
I have no idea just how large the oil bearing shale area in Russia may be but it seems obvious to me that if it is reasonably compact in shape the Russians can build a railroad to it. They built the Transsiberian and they know how. Trains can haul both ways tracking materials up and oil back although I doubt there is a good way to haul sand or ceramic beads in tank cars.
In any case if the oil is there the price of it is going to go high enough for them to get it out eventually unless the world economy crashes.Depletion never sleeps.
Now as far trucking goes I have never personally been to the far North but I have talked to people who have lived there and they tell me that it is no problem at all driving trucks over the mostly flat terrain there in the winter. They just grade out road no paving needed and smooth it off occasionally and the ground freezes so hard for around six months that driving on it is almost like driving on a rough but paved highway.
But sky daddy alone can rescue a truck on such a road once it thaws.It is as apt as not to sit all summer until the road freezes again and a wrecker comes to pull it out.And by then it is frozen in as if set in concrete.The more I think about it the higher it seems the price of oil will have to go to make far northern shale work.
So I guess they can stockpile materials for summer use during the winter that are shipped up there by rail and distribute them by truck to individual wells and have them on site when the weather warms up. This would be very expensive in terms of interest costs on loans with the materials sitting around for months before being utilized but this is not an engineering issue.It will also be expensive in terms of the trucks not getting much use during the summers and the drilling rigs being shut down a lot during the winters.
Somebody is going to loan them the money if they can’t do it out of current income.
Russian daily oil production down in July
MOSCOW Aug 2 (Reuters) – Russian oil output stood at 10.39 million barrels per day (bpd) in July, down from 10.55 million bpd in June, Energy Ministry data showed on Saturday.
In tonnes, oil output reached 43.948 million versus 43.161 million in June.
Gas production was at 42.68 billion cubic metres (bcm) last month, or 1.38 bcm a day, versus 46.44 bcm in June.
State-controlled gas producer Gazprom produced 26.72 bcm, or 862 mcm per day, in July.
That comes to a 1.5% drop in oil production in July. I get a lot more than that from tracking the daily production. But the gas drop is huge, 11%. In June, 46.44 bcm, divided by 30 gives us 1.55 bcm daily. But in July they produced only 42.68 bcm. Divide that by 31 and we get 1.38 bcm daily, exactly as they say. That gives a drop of 11%, an enormous decline.
Hi Ron,
The Reuters article seems to have reversed the output data in tonnes by saying the June number was lower.
EDIT: I was mistaken yesterday when I said Russian oil production fell 5% in July. 1.5% is the correct number. I was thinking of the decline since the peak. From the peak in November to July, Russian production has fallen 4.75%.
Gazprom’s oil has since partially recovered but their gas has not. Now Rosneft’s oil production seems to be drifting lower and lower. Nothing catastrophic but it just drifts lower every week. The big decliners are now Rosneft, Gasprom and one or more of the small producers. The individual production from the small producers is not listed.
They cut off the Ukraine for non payment. So they don’t produce what they won’t ship?
The sad irony here is that Russia’s declining production will roughly sync up with the enacting of sanctions on Russia by Western governments.
Seems to me that if Russia production does begin a slow, but permanent decline it will not be seen as a landmark moment in terms of peak oil awareness. Like many other situations that have unfolded – 2008 GFC, Arab Spring, slow global GDP growth since the GFC – the deeper truth will likely be shaded by the superficial reasons i.e. Russian production entered decline due to successful sanctions, not due to natural depletion processes.
It’ll be yet another waypoint on the way to the peak that is lost in the “news of the moment” isntead of being seen as a piece of a larger puzzle.
Any thoughts on that analysis?
Hi Brian,
For as long as possible, the data points will be made to fit the pre-existing narrative. So yes, I expect most anyone who actually takes note of Russia’s decline will attribute it primarily to sanctions, unless they’re already in the peak oil camp. It will fit the no limits narrative and thus will be defaulted to.
I don’t see much of any chance of a widespread acceptance of the peak oil concept until the fracking bubble bursts. Then there will be an opening. But, even at that point, it’s a crapshoot–the general public may be convinced by another narrative, or “oil” may be redefined yet again to throw some other vaguely burnable liquid in there to continue the growth narrative. If there is a widespread acceptance of declining oil production, then I imagine the fracking burst will lead into a PV bubble. PVs shiny, technological, and fits the progress narrative well, so there may be a rush to force it into the role of giving us the bright and shiny future that’s ours by birthright.
If that does happen, at least it will probably be a more useful and somewhat less destructive bubble than the fracking bubble has proven to be. But I don’t really think PV can keep any semblance of an industrial economy humming along, so just another bubble it will be.
But hey, if it at some point creates a temporary flood of cheap PV panels, that at least will be useful to those who are ready and willing to take advantage of them. They can be very useful elements of a bridge to a future of dramatically lower energy and resource usage.
“For as long as possible, the data points will be made to fit the pre-existing narrative.”
You, sir, understand. There is very little data in the universe that can’t be manufactured.
As for some bizarre imperative that “the people must be made to know” . . . that which is inevitable is inevitable. The fewer who know the better your chances.
I’ve been very intrigued by Elon Musk and his plans for Tesla Motors, the Gigafactory, and SolarCity over the last year.
The man has a strong grasp of the fossil fuel predicament, is founder of the U.S.’ largest solar installer, built what is termed the Best Vehicle of the Century, which just so happens to prove electric is BETTER than ICE – a necessary step if the masses are to transition, AND he is breaking ground on a facility that will be making more lithium ion batteries than the current global world supply and reduce prices by 30%, a factory which will be entirely powered by wind and solar. Old batteries can then be re-used for grid storage.
To me at least, Elon Musk is our saving grace. Yet, once another 2008 type event occurs, and it will, it could spell the end of that rapid ramp-up just as Tesla was bankrupt in 2009. The more time the better!
Musk is a huckster that shows what’s wrong with the Silicon Valley mindset. Disruption for disruption’s sake, damn the economics.
Neither SolarCity nor Tesla are profitable enterprises by the usual measures. Excessive accounting gimmicks and political whining. SolarCity is a tax gimmick on top of that.
To even start to change out the US vehicle fleet for something that can run on solar, you need annual production of MILLIONS of electric vehicles, with the infrastructure to match.
Take it from a real farmer which in this case is close enough to being a forester.
From little acorns mighty oaks do grow.
Musk is about as far from being a huckster as it is possible for a businessman to be.
Your comments sound like Tea Party talking points to me.Your great grandfather probably talked about Henry Ford the same way.I would insert a smiley face here but I haven’t figured out how.
I have acquaintances in the Tea Party and friends who at least look favorably on it. Virtually all of them are in favor of nuclear power. Virtually all of them are totally ignorant of the enormous subsidies the nuclear energy industry has collected over the decades. Hardly a one of them has ever heard of the Price Anderson Act.Virtually all of them are dead set against free rides except when they happen to be on the collecting end which is where most of them happen to be since they are mostly on Medicare and Social Security. Of course they think they paid in enough and more to cover their goodies now but in actuality they did not. I know damned well I never paid enough to cover what I expect to collect if my luck holds and I make ninety five or so like most of my family.
I am not sure that Musk will succeed in realizing all his plans but if I had money to invest his companies would be very high on the list of the ones I would consider.
Just about every major automobile manufacturer in the world is working on electric assisted or pure electric vehicles. That ought to tell you something about what automobile engineers think about the possibilities of electrics and hybrids and automobile company economists think about the future price of gasoline-assuming it is even available.Personally I think it will be available, most of the time at least, for the foreseeable future but I would not be at all surprised to see it rationed for several different possible reasons.
Electric vehicle costs are coming down fast as volume ramps up and anyone who is a peak oil believer must understand that eventually the price of oil versus the combined price of batteries and juice to charge them is a no contest in favor of electric vehicles.
I am personally convinced that the there are only two reasons electric vehicles aren’t selling like ice water in hell. The first one is that they are still very expensive compared to comparable ice cars except in the case of the current Tesla which competes with top of the line luxury and performance cars rather than the ordinary cars ninety nine per centers drive.
The second reason is that people are simply not going to lay out thirty grand or so on a car when they are not sure about the reliability and resale value of it.
Range is not in my estimation the killer of the electric market.I know a half a dozen or so people who live in my immediate rural neighborhood who own two or three or even four vehicles and have an econobox or middle aged ordinary car such as a Honda Civic that they drive to work and to run errands. All six of them could get by just fine without that middle aged Civic by driving a Leaf or a Volt to work and to run their errands WITHOUT EVER GIVING RANGE A SECOND THOUGHT- unless in the case of the Leaf they happened to forget to plug it in the night before.
The problem with them driving used Leaf’s and Volt’s is pie simple.The very few available used are not yet cheap enough to be interesting to people who are interested in saving money.
Now as far as INFRASTRUCTURE is concerned- I know hundreds of people in APPALACHIA which is famous for being one of the poorest parts of the country and which incidentally is my home turf. Out of all of them only about half a dozen do not have hot grid connections at their houses. Two of them are pioneering off grid types who have invested heavily in solar panels and micro hydro.Both of them tell me they aare looking for a cheap used Volt or Leaf.
The infrastructure needed to charge electric vehicles is universally available in any country that has lots of cars and this is obvious to anybody who will open his eyes and look.
Now when electrics start seriously displacing ice cars the utilities and shopping malls and truck stops and restaurants on the main highway and hotels and airports and all other businesses that have large parking lots are going to look at supplying juice and charging stations as an opportunity rather than a problem.
I hope to own an electric such as a Leaf and a solar array adequate to keep it charged myself before I get too much older.I can install my own panels ground mount since being a farmer means having plenty of space.. And if the battery is down I can just drive my old Escort or one of the trucks.
Even though I am semi tired I still find myself going to town three or four times a week sometimes.When I can get a Leaf for say five grand used that will still go forty to fifty miles on a charge I can save twenty to thirty bucks a week just on gasoline.IF my panels and inverters cost me eight grand that is fourteen thousand with a ten percent return on the back of an envelope. Add in no oil changes no antifreeze no tuneups no muffler no fuel pump no exhaust pipes no brake jobs no transmission etc etc and I will save at least another five hundred a year and probably closer to a thousand.
There is going to be another oil price spike as sure as the sun coming up tomorrow- maybe next week ,maybe two or three years down the road. When it comes electric cars are going to fly off the dealers lots and anybody who wants one is going to have to pay a hefty premium for it.
At my work we hosted a Congressional meeting between Senators and lobbyists just last week. This was for the Florida Senate.
I overheard a conversation in which the table was discussing a marriage between Google, Tesla, and Uber to provide a self-driving, electric vehicle that would revolutionize the idea of owning a vehicle. There’d just be thousands of driverless vehicles, and instead of owning a car you would just pre-request one at a certain time, even days ahead of time.
I was pretty shocked that Florida Senators would be this far ahead of the curve – and they were enthusiastic.
Realistically, this possibility is over 10 years away. When I think of what my phone looked like in 2004 compared to 2014 though, it seems the only inhibitor will be laws and politics.
In the DOEs 2005 Hirsch Report it was concluded that we needed a 10 year crash program (not happening) or a 20 year natural transition to avoid the worst case scenario for peak oil. Had the financial system not be stitched back together in 2008 we’d have been… I honestly can’t imagine. It would have been horrific.
But now, we have this magical grace period that will last a few more years. All the pieces are in place to make the transition much, much smoother, albeit troublesome. The combination of these new technologies available really could change the world.
Once the next crunch hits and the middle class becomes the former middle class they will naturally switch to ordering driverless cars since they won’t be able to afford owning a vehicle.
Driverless cars will have cheap insurance because they’re already less accident prone than humans and their still in beta testing. There’s no driver that needs to be paid, and if it’s electric maintenance costs due to the lack of moving parts and cheap re-charge will make these “taxi” trips incredibly cheap.
I think that after the Tesla Model III comes out in 2017 that Musk will work on this transportation model. Tesla is already working on driverless tech, and Sergey Brin is quoted as saying he would give his fortune to Elon Musk if he died because of his trust in his ambitions and foresight.
I was a doomer in 2008, shoot I was a doomer in 2005 when I first learned of peak oil. Today I’m cautiously optimistic. Still prepared for the worst, but seeing a lot of progress that reminds me of the findings of The Hirsch Report.
Florida needs driverless cars because of all the old people running into things.
And because it lacks decent public transportation.
Nobody doubts that what some such as Tesla are doing is very interesting, but the main point is that we don’t thing any of it is going to make that much of difference. Industries of scale are based on fossil fuels, that’s it, nothing else. If you don’t burn them, somebody else will benefit from doing so.
If somebody said back in 1972 that landing a man on the moon is impressive, but it’s never going to happen again in our lifetime, that person was correct, even if to say that sounds cynical and pessimistic. If somebody said in 2000 or 2007, ok the stock market is high but it’s going to crash, that person was right.
We are basically saying the same thing. Ok, Tesla and solar panels are impressive, but they aren’t going to save the system. So far we are being proven right by the obvious turmoil around the world.
I hope folks here understand GAAP vs non GAAP.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07-overflow/TSLA%20EPS.jpg
I see what you’re saying and I don’t disagree.
My philosophy is that we’ve bought ourselves some time. We were so close to the edge in 2008 that I see this as free time. Like that moment you realize you nearly died, and everything from here forward is just free life.
Every extra PV panel, every electric car, every urban Permaculture food forest grown, is ONE more thing that wouldn’t have been there otherwise. We can say that the end result is the same, and for many it will be the same, but every PV panel, residential fruit tree, and electric car does have a tangible value that would not have existed otherwise.
In 2008 I was in college. Graduated in 2010 with plenty of debt, and not much else to my name. Now I have a house with 1200 gallons of rainwater harvesting, 27 species of fruit tree, solar panels, and later this year an electric vehicle (probly a Volt since the Tesla Model III is a few years out).
Those are the real ways in which the statistics of “1 gigawatt of PV installed” or “80,000 Teslas sold” DOES have a real impact in the world. The overall picture is still the same, but on an individual basis there are more people than before that are going to make it through this.
I agree that the numbers don’t add up to make any meaningful difference, but I am living proof that just because the system can’t be saved doesn’t mean that individuals can’t be saved.
That is what it boils down to.
Even if we made a full transition to renewables and electric vehicles we still would not be able to have infinite growth on a finite planet. At some juncture the combined resource and environmental stresses would ensure that growth stopped, and when that occurs it will render void the entire idea of stock markets, debt with interest, the monetary and sovereign debt systems.
All of those systems fall apart in a world that cannot have constant sustained growth, so regardless of how much we transition we still face that deeper problem that our entire economic system is based on a concept that mathematically cannot continue forever.
I have owned a 2013 Volt for a little over a year now with now about 16K miles on it. It is a very fun car to drive. I charge up to around 45 miles each night, closer to 40 in the winter. I live in Colorado and regularly run it up and down the mountains with great results.
What impressed me the first time I drove it was the response and power the vehicle has. My 38 mile commute fits very well into it so I stay electric most of the time. I am now looking to get those solar panels. I can’t see how these types of cars are not the future.
So just how much gasoline have you used in your Volt per mile so far on average?
With a thirty eight mile commute you are getting just about the possible maximum use of the battery on a daily basis and you will be using about the max amount of electricity and the minimum amount of gas that is possible commuting in a Volt with such a long commute.
I have read some reports of people using only a couple of tankfuls in a year if they stick close to home on a daily basis.
I posted the comment above under anonymous. I forgot I wasn’t logged in.
The odometer is 15819 miles and shows I have used 132.4 gallons or about 119.4 MPG. But I do use about $1.30 per night in electricity to charge up at .12 per KWH. At one point I guesstimated that I get around 65 MPG all costs in, but I wouldn’t swear to my math.
If I strictly used it for commuting, I doubt I would use any gas at all, but I do enjoy the fact that I can deal with the mountain passes here in Colorado with relative ease. The car has 4 driving modes that you can use to conserve the batteries to get better performance with the hills.
The most fun I have is when I know I am not going to use all the charge on my errands. I will put it into “sport” mode. It practically jumps out of your hands…and I might spend maybe 30 or 40 cents in electricity to do it.
Brian,
For what it’s worth, in my opinion, your analysis may become one important result of Russia’s declining production. Of course there are always an almost infinite range of possibilities and whatever transpires will be a result of numerous causes.
Some will no doubt suggest Russia is deliberately holding back to exert pressure on the West, for example, which is a conceivable though unlikely action (everyone needs all the revenue they can get). Many will say Russia is becoming constrained by reduced Western investment and/or technical input (your sanctions argument, in a way).
But, whatever is said, or implied, Russia’s oil fields are mostly in their twilight years and barring something dramatic, like war or perhaps Devine intervention, continued “creaming” of remaining reserves will just keep exacerbating depletion rates and production will continue to decrease at some unpredictable, by us, rate(s).
Doug
BTW several reports of Kurd shipments getting out, despite Iraq demands they be seized. Probably a significant source the $5 oil price decline this week (along with inventory explosion in the GDP report).
You get weekly or monthly UK reports that “a decision to increase production will stop the decline in Scotland oil output.” Hell, the Scottish independence vote in a few months is dependent on this thinking.
You get the same thing out of Mexico. More “investment” can turn things around.
It’s like politics. There will never be an occasion where a politician goes on camera and says “complete disaster is about to happen and it’s because of my policies”. That’s never going to happen about any disaster. You’re never going to hear anyone say “peak oil is about to destroy all lifestyles and there’s nothing that can be done.”
I absolutely agree. Don’t let the peasants know what’s coming. I also think global warming dba as climate change is the primary way that the powers that be educate the masses about peak oil.
The Russians probably won’t blame sanctions themselves, but they will vigorously dispute they have peaked. It’s very likely that’s what they’ve been doing for a couple of years now. Fudge numbers here, claim more internal consumption there (despite a sick economy), infill another few hundred wells more over there…
Russia’s plateau is unnatural and I’m pretty sure it leads to a cliff.
Hey, check this one out:
How Fracking Is Blowing Up Balance Sheets of Oil and Gas Companies
It always starts with a toxic mix. Now even the Energy Department’s EIA has checked into it and after crunching some numbers found:
To fill this $110 billion hole that they’d dug in just one year, these 127 oil and gas companies went out and increased their net debt by $106 billion. But that wasn’t enough. To raise more cash, they also sold $73 billion in assets. It left them with more cash (borrowed cash, that is) on the balance sheet than before, which pleased analysts, and it left them with a pile of additional debt and fewer assets to generate revenues with in order to service this debt.
The EIA report is here:
As cash flow flattens, major energy companies increase debt, sell assets
So I guess the $110 billion question is…how long can this little scheme continue before the bubble bursts?
The other big money question is how much should oil be selling for to exceed the blue line enough to make a profit and avoid incurring more debt and selling assets?
Very very roughly by about enough to make up the difference between the two lines. That appears by eyeballing it to be about one hundred to one hundred twenty billion.
If we knew the gross production of the companies involved we could figure out the answer in a flash. I expect for a wild ass guess it would be at least another ten bucks and probably more like fifteen or maybe even twenty.
This is partly why I am so certain oil prices are going to go up substantially before too much longer.Eventually the people supplying the money are going to realize they are at risk of losing it and cut off the credit and then production will fall off enough for the price to go up and actually match costs.
“This is partly why I am so certain oil prices are going to go up substantially before too much longer. Eventually the people supplying the money are going to realize they are at risk of losing it and cut off the credit and then production will fall off enough for the price to go up and actually match costs.”
OFM, that’s presuming importing economies can handle higher oil prices. What if oil is already at a price inflection point, in which higher price causes demand destruction and a lower price increases consumption, maintaining price in a narrow range. Which of course is what has been happening for a long time now.
If oil price cannot go much higher than it is now to match capex then soon we will be facing the backside of the bell curve/shark fin as discoveries crash. Another way to put it is even more barrels consumed for every barrel discovered. In a sense, once the scales tilted to more consumed than discovered, the writing was on the wall to eventually descend from peak. It’s just that the situation is hastening itself, i.e. accelerating in our disfavor with the feedbacks becoming ever more apparent.
HI Earl,
As I see things we are both right.
Oil companies cannot run at a loss forever -not even nationalized ones. Sooner or later subsidies will fail to keep government owned oil flowing because the oil will not be worth the cost of it to the government supplying the subsidy.
And most importing countries are already slowly bleeding to death from the current price of oil.They are not going to be able to pay much if any more than they are already.
But the wheel never ceases to turn and nobody is going to supply oil over the long term for less than the cost of it.Subsidies just magical. The cost of them comes out of the supplier’s economy one way or another.Bankers can finesse the books for a long time but Mother Nature is an honest bookkeeper.
Depletion never sleeps and you are dead on about future supplies shrinking dramatically.BUT again the wheel keeps on turning and as consumption falls the utility of the marginal barrel rises dramatically.I have often pointed out that I can plow cheaper with twenty dollar diesel fuel than I can plow with horses.
I do agree with you and Ron and many others that demand destruction might result in falling oil prices for some significant period of time.BUT over the longer run I think depletion and falling production are going to more than offset demand destruction in relation to the utility of the marginal barrel produced and that prices will therefore on average continue to go up.
I just cancelled the registration and insurance on my old Ford Ranger and put my Escort back on the road again.I will use the old Chevy four by four from here on out to do all my essential hauling and sell the Ranger.
Now the situation worked out like this for me.The compact Ford gets about twice the mileage of the larger Chevy and the Escort outdoes the Ranger by about twenty five to forty percent. The Chevy averages twelve and a half mpg. The Ranger averages well over twenty.The Escort averages thirty.I can haul most of the things I buy these days in the Escort and by paying careful attention to combining trips save enough on trips to offset the extra gas the Chevy burns in comparison to the Ford.It will after all haul nearly twice as much.
When gas gets to be really expensive I will do what my grandparents did back during the Depression and drive very little and trade rides to town with my neighbors to save on gas.
The utility of my marginal gallon bought and burned is going to go up faster than the price of oil as I cut my consumption and this will allow me to pay ever higher prices for ever less gasoline.
It is my belief that on average over time that things will work out the same way for our own economy and the world economy in general.Consumption will shrink but prices will rise.The rising utility of the marginal barrel will enable the buyer to pay the higher price.
I do acknowledge that there might be some price dips along the way because demand might at times fall faster than supplies.If the world economy suffers a really bad heart attack the price oil might be depressed for quite a while maybe even for five or ten years.
So the relevance between the topic and dentistry is that they both involve drilling? Spambasterd.
Guest blog: Hamilton has it right on oil
By Steven Kopits | July 30, 2014 11:57 AM COMMENTS (11)
Steven Kopits is the Managing Director of Princeton Energy Advisors, LLC. He is currently writing a book on supply-constrained oil markets analysis.
Once again, we return to the debate over the direction of oil prices, this time led by the high price school.
In a recent article, Professor James Hamilton of the University of California argues that sluggish supply growth, coupled with sustained emerging market demand, will tend to keep oil prices elevated. He writes, “the world of energy may have changed forever…hundred dollar oil is here to stay.”
This prompted a rebuttal from John Kemp, Senior Market Analyst for Commodities and Energy at Reuters. In Forecasts for Higher Oil Prices Misjudge the Shale Boom, Kemp highlights perceived weaknesses in Hamilton’s argument, stating:
“The problem with Hamilton’s analysis is that it largely ignores the impact of the shale revolution on the economics of oil production and understates the tremendous variability in real oil prices in response to changes in technology.
So while Hamilton concludes that $100 oil is here to stay, in real terms, the outlook is far less certain. In fact, a betting man, looking at the price history, might conclude prices are currently abnormally high and due for a fall.”
Kemp seems to be arguing that shale oil is a game-changer which will materially change the supply outlook and catalyze a fall in oil prices.
To test this assertion, it is worth asking if shale production has actually led to the predicted fall in oil prices. As is well known, the shale surge caused a divergence of the West Texas Intermediate (WTI) oil price, the US domestic standard, from Brent, the international standard. Historically, these two prices rarely diverged by more than a dollar or two. Notwithstanding, from late 2011, surging shale production depressed the WTI price as US supply outran domestic infrastructure capabilities, and government regulations prevented the export of US crude.
Have prices fallen since? Growth of field production in the lower 48 states has been impressive, increasing by 400,000 b/d in the 12 months ending in mid-2011, and rising to a gain of 1 million b/d by mid-2012, a pace it has held ever since.
How did prices react? In the three months ending July 2011, WTI averaged $98, falling to $88/b a year later. On the other hand, by July 2013, WTI was back to $98, and will close this July around $104. Has surging shale production caused the US oil price to collapse? Not all at. It has been accompanied by increasing oil prices, even in the US.
Nor has Brent collapsed. True, Brent averaged $115/b in the three months to July 2011, and fell to $103 just a year later. But it will close this July at about $111/b, not much different from three years ago, and higher than it was at the beginning of the “shale gale.” Shale oil has not led, as a statistical matter, to lower oil prices in the US—or globally—in the last two years.
How can this be, if the oil supply is in such fine fettle? Has peak oil really been debunked? Is Kemp right when he says: “Since 2008, the dramatic increase in oil and gas production from shale formations in North America, and the abundance of shale resources around the world, has discredited theories about peaking oil production.”
World Oil Supply
As the chart shows, just as many analysts have contended, the oil supply hit an inflection point in 2005. That year signals the high water mark of conventional crude and condensate production, which is 2.1 mbpd less than it was then.
Even if we include refinery processing gain, biofuels and NGLs (these latter two adjusted for energy content equaling about 70% of that of a barrel of crude), we find the oil supply is up only 0.4%, 300,000 b/d, compared to 2005.
Virtually all of the growth—92%, on an energy-adjusted basis—has come from unconventionals, specifically, Canadian oil sands and US shale (tight) oil. Indeed, 70% of the net growth of the global oil supply from 2005 through 2013 came from US shales alone. Shales are not the icing on the cake; they are the cake itself.
This matters, because shale production in turn depends overwhelmingly on only two plays, the Eagle Ford and the Bakken, where production is expected to peak in 2016 or 2017 or see much slower growth in production as the sweet spots there are exhausted. The Permian Basin may pick up the slack, but to date has not done so in needle-moving quantities.
Meanwhile, lagging oil prices are calling into question a number of oil sands projects, particularly those slated to begin production after 2020. Unconventional growth may well be approaching its high water mark. If 1 million b/d growth has led to higher oil prices, what will happen when unconventional growth slows to 300,000 b/d in two or three years?
And there’s more. Kemp states: “North American shale is currently the marginal source of supply in the world oil market, and most producers claim they can break even at $70 or even $60 per barrel.”
It is not clear that the US independents are profitable. An industry can see a boom irrespective of profits or free cash flow if banks and investors are willing to underwrite the promises of future profits. The internet bubble showed us that.
We do not yet know if shale oil and gas will be consistently profitable. We do know, however, that US independents have been massively free cash flow negative in recent years.
Cash Flow
This does not mean the shale oil, or even shale gas, is unprofitable, even if Shell was unable to make Eagle Ford economics work. It does mean, however, that the industry as a whole is not generating enough cash to cover its capex and the meager dividends these companies pay as a group. It will take a while until truly underlying profitability becomes apparent.
Nor are the US independents the marginal producers. This distinction falls to the international oil companies (IOCs), and the marginal projects are in deepwater, the Arctic and the Canadian oil sands. Goldman Sachs has calculated the free cash flow breakeven for several of the majors above $100/b, and as high as $130/b.
Even at recent oil prices approaching $110 basis Brent, the majors find themselves compelled to reduce capex. Reduced oil production may well follow reduced capex, just as it has at Hess, the most advanced of the oil companies in rationalization and capital discipline.
Now imagine that oil prices collapsed, as Kemp proposes. Oil production has been falling at the majors at a 750,000-1 million b/d as it is. A price collapse would accelerate this process dramatically, just as shale oil production is peaking. How would such an eventuality promote lower oil prices?
Kemp closes with this admonition: “But productivity has also increased as companies have learned to target the highest yielding formations and drill faster and more accurately. Hamilton’s paper is silent on all these matters, and that is ultimately what makes it unconvincing.”
Hamilton is most emphatically not silent on this matter. He writes, “Figure 12 [reproduced below] shows that combined production from the 11 largest publicly-traded oil companies has fallen by 2.5 mb/d since 2005, despite a tripling of their capital expenditures.”
Production and Capex
As the graph above shows, productivity of capital has deteriorated by a factor of four, from $5,300 capex b/d of oil production in 2004 to $21,400 in 2013. This deterioration is net of technology improvements. Geology is not only winning, it is crushing technology.
Hamilton’s graph testifies to the grizzly unraveling of the economics underpinning oil production since 2005. For the oil business as a whole, productivity has imploded, not improved.
Jim Hamilton closes with a necessary caveat, noting, “certainly a change in…fundamentals could shift the equation dramatically. If China were to face a financial crisis, or if peace and stability were suddenly to break out in the Middle East and North Africa, a sharp drop in oil prices would be expected.”
These are, in fact, the downside risks. China is undoubtedly the medium to long term driver of oil prices. If China implodes, it will drag other emerging markets down as well. On the other hand, I may disagree about the likelihood that Middle East peace would lower oil prices durably. But this much is not in question: We are heavily dependent on shales to provide incremental oil, not only in the US, but globally.
As we look to 2017, the prospects for oil supply growth look increasingly tentative. US shales may be running their course, even as other countries’ potential remains untested. Oil prices will not rise to fully offset swelling E&P costs, and the oil majors will trim their sails to right their financial ships. Their oil production will continue to fall, and with reduced capex, the pace of decline could well accelerate, even in the face of stable oil prices.
In addition, international affairs are in a parlous state. In less than a year, Iraq has transformed from embodying OPEC’s upside potential to being the greatest risk to current production levels. Russia seems intent on provoking sanctions or embroiling itself in a European war. Neither augurs well for its oil exports or expansion of its oil business.
The supply upside is ever harder to perceive, even as the downside risks are multiplying. Instead of complacency, we should feel concern. An oil shock is already visible on the horizon ahead of us.
http://blogs.platts.com/2014/07/30/peak-oil-forecasts/?sf3931351=1
Peak oil will spell peak neoclassic economic theory. My take on oil prices can be found here:
http://www.math.univ-toulouse.fr/~schindle/articles/2014_rant.html
Schindler, I read your paper with interest. I am really dumbfounded. I don’t know how to respond. This bothers me:
Conjecture 4.2 The price of oil depends on the amount of capital which transforms oil into useful work (in other words into sex, drugs, rock and roll, and conquest).
I don’t think that is how I would describe useful work.
OK,
The point I was trying to make is that the goal in producing oil is not to produce oil. The goal is to use the oil to travel, transport goods, make plastics, have fun, etc. So I lump all that together and call it sex, drugs, rock and roll, and conquest. This is why EROEI is an important number to look at. It is a measure of the diversity of the economy. This fracking boom looks like it’s creating lots of jobs, but if every job in the country is related to oil (and food) production, the economy has no diversity. It’s like an island with only two species on it. I am a bit provocative because I am surrounded by economists who try and use optimization to understand the economy and I think it’s the wrong mathematical tool. Nothing I’ve ever seen in the economy makes me think of optimization. I’ve always been amazed by what people spend their money on.
I understand prices the following way. Suppose there is an airline that wants to transport people. If they have customer’s willing to buy tickets, enough oil to transport those customers, but not enough planes. Then the price of planes will rise relative to the price of oil. If they have customers and enough planes, but not enough jet fuel, then the price of jet fuel will rise relative to the price of planes. If they have enough planes and jet fuel, but no customers, then they will reduce the price of tickets until they can attract customers. In order to check this conjecture, I need data on which to do some regression analysis.
I don’t think this supply and demand nonsense economists talk about is at all useful in predicting prices.
I think he added some irony in the paper 😉 (Just his way of describing the economy.)
Ron, I put this comment on an old post, but I thought I’d repost it here, in hope of getting someone to take a critical look at the data.
“Fracked” wells appear to have much higher decline rates than conventional wells.
But, look at the article below. The charts (a) through (e) all show very high decline rates. For instance, chart a (wells drilled 1990-1992) shows production starting about 160 bpd, and declining to about 20 bpd in 36 months. That’s not 8% per year. We see roughly 75% decline in the first year (160->40), 35% in the 2nd (40->25), and 20% in the 3rd (25->20). Succeeding years show somewhat lower decline rates, because the initial rates are lower.
The authors isolated all of the (conventional) Texas wells that they could – they had lease data, so these were all of the leases that had just one well.
We’ve seen a lot of estimates for field depletion, but never individual wells, without the benefit of infill drilling.
So, maybe tight wells don’t really deplete significantly faster than conventional? Or, are these historic Texas decline charts inaccurate?
http://econbrowser.com/archives/2014/07/keeping-oil-production-from-falling
EDIT: I was mistaken yesterday when I said Russian oil production fell 5% in July. 1.5% is the correct number. I was thinking of the decline since the peak. From the peak in November to July, Russian production has fallen 4.75%.
I posted this edit in my original post but I wanted to put it here to make sure everyone saw it.
Okay people, what’s your opinion of this article?
Peak oil proponents still dancing around reality
The debate over whether we are running out of oil sometimes resembles the medieval controversy over how many angels could dance on the head of a pin. By redefining the size of the pin and the agility of the angels, today’s “peak oil” proponents have managed to continue the argument.
The characters have changed though. Matthew Simmons, author of Twilight in the Desert, casting doubt on Saudi oil production, died in August 2010, and the Oil Drum website closed down last September.
New disputants, including economist James Hamilton from the University of California, and Stephen Kopits, the managing director of the consultancy Douglas-Westwood, argue that oil production is limited by geology and is a severe drag on economic growth.
These factors will ultimately drive up the oil price if they are right. On the other side of the argument, voices such as the Reuters columnist John Kemp, who states that because of shale oil and other unconventional sources, “the supply of liquid transportation fuels is unlimited at prices of $100 per barrel”.
The debate is certainly more sophisticated than in the early 2000s, when the focus was on physical declines in oil production and possible economic and the collapse of civilization.
The new “peak oilers” argue that crude oil production has barely grown globally since 2005, and extra output is increasingly in the form of “low-quality” hydrocarbons that are not real substitutes for oil. All new growth is coming from North America – the United States and Canada.
Actually non-Opec crude oil production has shown signs of revival over the past two years, up 2.3 per cent last year and 2.6 per cent to March this year. Meanwhile, Opec output is down – showing the organisation’s role in balancing the market.
It is remarkable that Mr Kopits, in a 60-page presentation, makes only a single reference to Iraq, Iran and Libya. It is hardly surprising that virtually eliminating two-and-a-half major producers has caused global crude oil output to flatten.
Crises in these countries have removed more than 2.5 million barrels per day from the world market since 2011. Without that, Opec production would be substantially higher or Saudi Arabia would have had to cut back and restore spare capacity – and either way oil prices would be lower.
A few years ago, “peak oil” advocates were claiming that new oil was poor quality because it was too heavy – now they say it is too light, because of condensates from shales. This lightness does require some rebalancing of refineries, but natural gas liquids are relatively easy substitutes for oil in vehicle engines, petrochemical feedstocks and home heating.
It is true that most recent non-Opec growth has come from US shales and Canadian oil sands. The mid-2000s argument that unconventional resources could not be brought on-stream quickly has been quietly forgotten in the face of history’s largest production surge.
Elsewhere, mature areas such as the North Sea have indeed continued to slump, while major frontier projects such as Kazakhstan’s giant Kashagan field have suffered technical delays. Security disruptions the in smaller non-Opec producers Syria, Yemen and South Sudan also contribute.
But it is not surprising that capital is flowing to North America. It offers political stability, moderate taxation, a huge resource opportunity and efficient services. North American shales are simply outcompeting oil reserves holders elsewhere, who have not moved fast enough to open up to investment, improve fiscal terms and unlock their own unconventional resources. Exploration and production companies operating elsewhere are short of capital, while successful North American players such as Occidental, Apache, Murphy and Hess are under shareholder pressure to sell their overseas assets.
By focusing on the head of the pin – the narrow details of what counts as “oil” – and ignoring the grander factors of geopolitics and Opec, it is indeed possible to make it seem that oil prices can only go up. But this latest peak oil debate is unlikely to be the last.
Robin M Mills is Head of Consulting at Manaar Energy, and author of The Myth of the Oil Crisis
Thnx for the link.
He doesn’t address that there is always a portion of production out due to crisis, het doesn’t mention EROI. So far I like Kopits’s way of thinking better, his IOC arguments are pretty convincing, as are his demand side arguments.
It doens’t matter if total liquids is going up, if EROI is going down. (= rising capex)
LTO needs more surpluss energy than old fashioned oil. The more we run on LTO the more we will notice I guess.
On the other side of the argument, voices such as the Reuters columnist John Kemp, who states that because of shale oil and other unconventional sources, “the supply of liquid transportation fuels is unlimited at prices of $100 per barrel”.
The supply of liquid transportation fuels is unlimited at prices of $100 per barrel?? This statement is incorrect on several levels. The light tight oil companies are collectively losing billions a year extracting oil from shale deposits, and a bunch of big tar sand projects are being cancelled because they are uneconomic. At some point, investors will pull the plug and the money losing oil companies will go broke. So $100/barrel isn’t enough to grow production or even keep it at current levels. And of course the word unlimited does not apply to anything under the surface of a planet of finite size.
The amount of oil presently shut in by security or politics concerns is far less than the historical norm.
There will always be contention regarding the depletion status of world petroleum reserve as long as analyst continue to ignore the thermodynamic ramifications of depletion. This in itself is an interesting phenomena as petroleum is our primary source of energy for powering the world’s transportation fleet. Regardless, they continue to attempt to sum up the barrels that might be used to accomplish that without regard to which barrels might serve that purpose.
Without the delegation of a criteria founded on what properties are needed to fulfill petroleum’s primary role, it reduces to an exercise in guess work. Basically something like: this field can produce that many barrels, and that field this many. This is done with an off the cuff estimate of what production cost, and price will be at some point in the future. Mr. Mills is convinced that if enough capital flows to an oil project, that useful product can be produced at a profit. Of course this is absurd. If enough capital flows to a project for a commodity that has little market value it only insures that the supplier of the capital will eventually go broke. America’s recent experiment with ethanol is evidence of that result. More than half of the countries ethanol producers have closed their stills since the Bush era ended. It is evident that we will never be running the world on moonshine.
A thermodynamic analysis of petroleum production highlights the inevitable conclusion to the age of oil. It states that once the energy half way point is reached (when one half of the energy content of a unit of petroleum is needed to produce it, and its products) the the cost of production will increase faster than its price will increase. This is analogous to stating that production cost will increase forever, but the price that the end consumer can pay can not. We have already passed the energy half way point. We see this in lower discovery rates per dollar invested in E&D, Ron’s cash graph above, and increasing production costs that are contracting margins. As long as we are extracting petroleum its production costs will continue to increase. The day when the end consumer can no longer pay for those increases is not that far away.
http://www.thehillsgroup.org/
Robin Mills is active at Twitter. 8,000 + followers, some of whom are probably familiar to readers of POB. He lives in Dubai and calls himself a “Middle East energy guru”. US energy gurus might consider entering the discussion at his site
https://twitter.com/robinenergy
So this guy acknowledges our argument- but doesn’t address it at all. He moves on to unrelated topics, hoping we won’t notice he has no answer for us.
“”(L)ow quality” hydrocarbons” are frequently alluded to here, but rarely elsewhere: all liquid fossil fuels are not equal. Most oil trades at a contracted percentage of WTI or Brent: the refineries know what it is worth to them based on what they can make out of it.
If oil were priced at some kind of standard fractionation value, it would put the lie to shale oil and probably Heavy oil as well: the actual quantity and value of reserves, and of production output, would have to be considered in a whole new way.
-Lloyd
If reserves were estimated in this
Yup.
We have API ratings. But we know for a fact that oil of API 39 from some Libya source has more diesel than oil of API 39 from Saudi Arabia. The fractions in the liquid don’t have to have the same constituent percentages to create the density ratio of 39 for all such liquid. You can get to 39 will all sorts of different combinations.
And if those combinations are light on diesel (the single fastest growing petroleum product consumption liquid), then it ain’t as valuable.
A 39 API crude from anywhere delivers the same quantity of energy.
http://www.thehillsgroup.org/depletion2_011.htm
As long as you have the heavier fractions to work with they can be cracked into pretty much anything needed. Dodecane (diesel) can be produced from decane. Even pentane can be converted into diesel with the use of a splitter. The energy cost of doing it, however, only makes it marginally profitable. The preference for a particular crude is usually determined by the set up of the refinery. A US refinery set up to process Canadian dumbbell crude wouldn’t produce much diesel even from a Libyan crude.
“A 39 API crude from anywhere delivers the same quantity of energy. ”
This is true. The same number of carbon atoms per unit volume will be there. The same quantity of diesel won’t be.
You can always make diesel from something else with carbon and hydrogen. You can make it from nat gas. That’s a good question to ask, though — can you make it as easily from nat gas as from bunker.
Hey Mr. Hill, I read your online stuff through a few times, I like it ’cause it’s going in depth of some of the thermodynamics of it all;
Especially interesting is that you have tried to quantify efficiancy in turning oil into useful work to get more oil within the oil system.
So what you are generally saying is:
– One BTU of energy extra needed for oil retrieval and processing takes away 5x the btu’s from the rest of society?
– The oil system as a whole is getting dangerously close to a point where this extraction and processing take up so much BTU’s there aren’t enough getting through to the rest of society?
right?
Are tarsands and LTO, as a whole:
– Still a little net energy positive? (so still a little net BTU benefit)
– Net neutral, so in fact just sustaining themselves, or
– Actually net BTU negative and only able to exist because we still got Ghawar and others like it?
Until you can get gasoline, diesel and jet fuel economically from non-oil, yes, it matters a great deal what is “oil” and what is not. The liquid fuels are the problem, not the petrochemicals.
Syria, Iraq and Libya also are not “outages.” Syria and Libya don’t exist anymore as organized entities and will NEVER reach their pre-civil war numbers again. Too much stuff is destroyed, both above and below ground. Iraq is a slaughterhouse and rapidly getting to the point of no return.
It’s interesting how financial media calls Libya and Syria “political risk” factors on oil price.
There’s no risk. The oil isn’t flowing. It’s not a risk of it not flowing. It’s a reality that it’s not flowing.
Mr. Patterson,
You are also mistaken, again, when you state that Texas allows its operators up to two years to report oil and natural gas production. That is simply not true. As a Texas operator myself, I have explained the production reporting process to you several times, once in great detail, and speculated how the EIA gets its Texas data. In Texas we are two months behind in reporting production to the public, not two years, with a margin of error around 15% for adjustments between buyer, and seller, delays due to processing and delinquent filings by operators.
Texas, of course, leads the United States in energy production and the Texas Railroad Commission is the model for regulatory guidance of the industry that ALL other states follow, indeed much of the world follows. All the complaining in the world is not going to change the way we report production down there and it seems to me, like it or not, for a public forum to want credibility in predicting the energy future of our country, it needs to get on Texas time, not the other way around.
If the EIA is wrong about Texas liquids production each month, what makes you think it is not wrong about
every other state also? Does anybody believe for one minute that the federal government is better at reporting oil and gas production in Texas, than Texas is?
Maybe this will help, maybe not:
http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/ or this,
http://www.rrc.texas.gov/oil-gas/research-and-statistics/production-data/production-adjustment-factor/
and if you are interested in Eagle Ford shale this,
http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/eagle-ford-shale/
Good luck.
Mike
In Texas we are two months behind in reporting production to the public, not two years, with a margin of error around 15% for adjustments between buyer, and seller, delays due to processing and delinquent filings by operators.
I understand where you are coming from Mike, but it appears to take about two years for everything to settle out. And how long does it take for those delinquent filings to catch up. All in all it appears to take about two years. And what the RRC reports to the public takes just about that long as well. Well that is if you are waiting for the RRC to catch up with all those adjustments and delinquent filings. As demonstrated by the below graph.
If the EIA is wrong about Texas liquids production each month, what makes you think it is not wrong about every other state also? Does anybody believe for one minute that the federal government is better at reporting oil and gas production in Texas, than Texas is?
Mike, you are getting all excited over nothing. All we want do do is arrive at the correct data. No, no one is better than Texas at reporting Texas data. And eventually the EIA reports exactly what the RRC says Texas produced. But the fact is it takes about two years for the RRC to report the final Texas production numbers. But for most states, what they report is not delayed at all but up to date to the nearest month. Example below:
The above chart is what the EIA reported for North Dakota production thru May 2014 overlaid by what North Dakota reported they produced. You can barely see the EIA chart because the data is almost exactly the same. Now the numbers for May, and perhaps April will likely be revised, up or down, but only by a very small amount. Those numbers are very near what they will be after any revision.
Mike, if you would like me to reword my comment about Texas allowing producers two years to report production then I will do so. But there is some reason that it takes the Texas RRC two years or better to arrive at the final numbers.
Mike, this delay in Texas production numbers is just something we have to deal with. I am not blaming anyone but it is something we see in the Texas numbers, and in the GOM numbers but only for two or three months, and hardly at all in the North Dakota numbers. It is there and I must explain it to the readers of this blog. But if there is a better way to explain it then tell me how and I will do so.
Hey Ron,
U c where the Kurds withdrew from some strategic parts of Iraq?
I think they r angry over our attempt to stop their oil exports, such as that tanker off Houston , so giving land to Isis is a message to Washington.
“Withdrew” is too kind a word. And they didn’t do it because they were angry at the US. They did it because they got kicked out by ISIS. But ISIS is no longer their name. They are now called the Islamic State.
Islamic State grabs Iraqi dam, oilfield after defeating Kurds
Islamic State fighters seized control of Iraq’s biggest dam, an oilfield and three more towns on Sunday after inflicting their first major defeat on Kurdish forces since sweeping through the region in June.
The Islamic State, which sees Iraq’s majority Shiites as apostates who deserve to be killed, seized the Ain Zalah oil field, adding to four others already under their control, in addition to three towns.
Now THAT is a bunch perfectly willing to save the oil for later.
Later being defined as anyone who converts to Islam can have it on that day. If you don’t convert, you can’t buy it, at any price.
Meanwhile, in Nigeria . . . .
Civilian Vigilante Effort Against Boko Haram Backfires in Nigeria
Uprising Collapses as Islamist Insurgency Turns its Weaponry on Nigerian Population
http://online.wsj.com/articles/civilian-vigilante-effort-against-boko-haram-backfires-in-nigeria-1407108799
http://daily.sightline.org/2014/01/21/why-bakken-oil-explodes/
This issue has been successfully pushed off the even minor headlines it got before.
The references are worth reading.
Operative items, Bakken oil in rail cars contain lots of Volatile Organic Compounds, and “dissolved gas in the oil makes it worse”. All ignite at lower temps than crude. The critical phrasing was:
“DeSmog Blog explains what is likely behind the explosions: Bakken oil contains volatile organic compounds (VOCs). As one piece of evidence, consider a permit application by Marquis Missouri Terminal LLC, the company that was to receive the oil from the BNSF train that exploded in North Dakota. In its application to construct a crude oil storage and receiving facility, Marquis reported that the oil was expected to contain Toluene, Xylene, Benzene, and Hexane—all VOCs. The estimated maximum weight of each component in the oil was 5 percent, 5 percent, 2 percent, and 3 percent, respectively, for a maximum total of 15 percent of the oil by weight.”
and
“Scott Smith, the Water Defense chief scientist, explains the role played by the peculiar geology of the Bakken formation. Oil there is found “trapped” between layers of shale rock about 2 miles below ground with no surface outcropping that might allow volatile or gaseous compounds to escape. As a consequence, when the oil is extracted it often contains high levels of VOCs or other hazardous compounds. In fact, Smith estimates that up to 40 percent of the material in a tank car carrying Bakken oil may be volatile organic compounds, and therefore more flammable than the oil itself.
The North Dakota Department of Health has confirmed that Bakken oil contains more VOCs than initially expected, but federal PHMSA sampling data has not yet been released.”
Shrug.
btw dunno how that by weight translates to “by volume”, but 15% less oil production than is advertised is 150K bpd.
NDIC considers oil conditioning rules to create a ‘true’ Bakken barrel of oil
[Excerpt from article]
Standardizing a barrel of Bakken oil could be part of the solution to safer transportation of the light, sweet crude.
The North Dakota Industrial Commission discussed what may be needed to regulate oil conditioning at their monthly meeting on July 29, and decided to quickly set up an additional meeting to gain greater insight on the subject. Oil conditioning can be done one of three ways: through processing at a refinery where various components are removed through the boiling process; by stabilization at a plant by removing anything lighter than butane; or separating oil from the water and gas at the wellhead. While the conditioning options downstream are often utilized, the state’s Department of Mineral Resources Director Lynn Helms told the commission that properly handling the oil as it comes out of the wellhead before it goes to pipe, on a truck or rail car allows for the safest transport.
“We do want to be sure that we understand the conditioning that’s required and is meant to be taking place in North Dakota,” said Gov. Jack Dalrymple. “What steps do we have to take to begin to monitor and basically regulate that, oversee it? We assume (operators) are doing conditioning but we have no mechanism to verify that.”
A recent study conducted by Turner Mason, a Dallas-based consulting company, reviewed Bakken crude samples collected at refineries by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, to create a set of parameters so that if a company buys or hauls a barrel of oil, it would be standardized much like a West Texas Intermediate benchmark.
A unique aspect of the study was that Turner Mason also recorded field-operated data to determine what conditions resulted in a certain type of barrel versus another. Helms said that is the only study that provides the parameters to achieve a uniform, safe barrel.
“By having those, they can now model how many separators should it go through, what should the conditions at a heater treater be, how many tanks should it move through, so at the end it has no propane in it and very, very little butane,” Helms said. “It can go into a truck, rail car, or anywhere and not have potential problems.”
[End of excerpt]
Interesting Interesting. I have been surfing around and I am pretty sure I saw a strong industry pushback something like this:
“Do not start claiming everything we are measuring as oil is something else. This is not good science you’re dabbling in. You don’t have any reason to conclude these things. We think the better option is for the rail companies to simply upgrade their cars and safety concerns can be thus addressed.”
Which is starting to smell more and more and more that 1 million bpd number is not correct.
Video: The Crude Gamble of Oil by Rail (via Vice)
A decent overview for those not up to speed. I got a few useful items out of it especially regarding the municipal council of Vancouver Washington’s vote against an oil loading terminal at the port.
NoDak have shot themselves in the foot by not regulating there LTO industry.
Queston: What would be the effect on the world’s oil market if the Chinese Real Estate bubble burst? I just watched a 60 Minutes episode on the Chinese Real Estate Bubble. I don’t see how this bubble can possibly keep from bursting. Yet this episode was first aired one year ago. It hasn’t burst yet. That, to my way of thinking means that it is even more likely to burst in the near future. What happens then? What happens to the world’s oil market? What happens to the economies of the world?
Watch it, it’s only 13 minutes long.
China’s real estate bubble
AUGUST 11, 2013, 7:41 PM|China’s economy has become the second largest in the world, but its rapid growth may have created the largest housing bubble in history. Lesley Stahl reports.
It’s pretty obvious what will happen when the Chinese real estate bubble pops. The same thing will happen in China which has happened in all other countries whose real estate prices have collapsed, i.e, China will be thrown head first into a great recession, maybe the biggest recession in human history. This will be bad news for resource based economies such as Australia, Russia, Canada, and Saudi Arabia.
Let’s play spot the bubble.
I’d be more concerned about the OECD driving bubble when you consider that the Chinese economy functions on a VMT per capita of 513, and the US one of 9,361. India’s is 85! For comparison in Italy they get by on 1,379 Vehicle Miles Travelled per person per year.
http://www.aceee.org/portal/national-policy/international-scorecard
Liquid fuels are, after all, mostly wasted driving those tin boxes to mall and back so I reckon Anglophone new world suburbia is more likely to burst [again] before China does. Also China does actually still have a growing economy even though it is shifting from huge infrastructure builds to more consumption.
From the report above, on the US:
“The lowest-scoring section for the United States is the transportation sector, where the United States ranks second to lowest. The number of vehicle miles traveled (VMT) per person in the United States far exceeds the VMT by people anywhere else in the world, and use of public transit is very low. Current fuel economy standards are the bottom half of the countries with standards in place, and average fuel economy also remains lowest here. The United States should look to other countries that have implemented effective transportation policies to improve its performance in this sector, such as Italy, Japan, or the UK.
The low U.S. scores suggest that these other economically developed countries may have an economic advantage over the United States in that using less energy to produce and transport the same economic output costs less. This raises a critical question: how can the United States compete in
a global economy if it continues to waste more money and energy than other developed economies?”
“The number of vehicle miles traveled (VMT) per person in the United States far exceeds the VMT by people anywhere else in the world, and use of public transit is very low.”
I’m often reading posts by Europeans failing to understand why Americans have trouble paying a similar amount as they do for fuel – the above explanation is why.
Ya, that.
Besides which all those folks need only build themselves a military and come force US per capita driving to be what they demand it to be. They don’t seem to want to do that, so they must not care all that much.
Why? Sorry to disappoint your military fantasies; price will do it with its loving invisible hand. Driving is soooo last century, most don’t know it yet.
This is why God gave us the concept of subsidies.
The reason gas is so high in Europe is because the countries and the people there are socialists and communists. As is certain in any kind of far-left money grabbing scheme, they ran out of other peoples money a long ling time ago. They also foolishly forgot to build a pipeline from Russia and a couple of refineries. None of them have any clue what capitalism, free market enterprise or the profit motive is nor can they fathom making investments in the marketplace. If anybody in Europe can’t get what they want from the government they have no idea how to get it as they have no idea how to take risks and reward themselves through capitalism.
The reason gas is so high in Europe is because the countries and the people there are socialists and communists.
With the possible exception of Russia, not a single country in Europe is governed by communists.
As is certain in any kind of far-left money grabbing scheme, they ran out of other peoples money a long ling time ago.
I don’t understand what you mean by running out of other peoples money? Taxes are still being collected by European governments.
They also foolishly forgot to build a pipeline from Russia
There’s a whole bunch of pipelines between Russia and the rest of Europe, including the recently completed Nord Stream pipeline which runs along the bottom the Baltic Sea. How else did you think Russian gas was transported to Western Europe?
If anybody in Europe can’t get what they want from the government they have no idea how to get it as they have no idea how to take risks and reward themselves through capitalism.
Yet there’s a whole bunch of huge multinational companies based in Europe, for example Daimler, Siemens, ABB, IKEA, Alstom, BP, Shell …
If you want the highest quality, you need those German Socialist to build it for you.
And they pay their workers top wages.
But agree, Capitalism is God, and The Free Market is the Chosen Path.
How are things, when you look around?
And then there’s the socialistic Swedes who refused to bail out SAAB, while the capitalistic Americans bailed out GM and Chrysler (twice).
One area where the Americans are heavily into socialism/communism is highways. They don’t like tolls or fuel taxes, and yet they want the government to pay for all highways.
This poses no problem. It’s why the Federal Reserve exists.
Watcher, I don’t understand your statement at all. The Federal reserve does not pay for highways and neither do they bail out car companies.
Hi Ron,
I think Watcher is saying the Fed can just print some more money to pay for some more ” free” highways and bailouts.
Well that would not be correct either. Money is not literally “printed”, it is created by computer entry when the Fed buys bonds from the government. The Fed is not part of the government so they do not print money, the government does that by printing, or creating bonds.
So yes, the government could print money and pay for the roads but not the Fed. And every dollar the government prints, or creates out of thin air by printing bonds, becomes part of the national debt. The government “sells” the bonds to the Fed.
Yes but the reason is that American city planners invest in sprawl. If you reward people for taking public transportation instead of rewarding them for driving long distances, they will prefer using public transportation.
It is often claimed that the low population density of the US is the reason why Americans drive more than Europeans. but population density is not really relevant.
A much better measure is median distance between households. This measure ignores Alaska and the Great American Desert (because there are so few households there) and increases linearly with the distance likely to be traveled, instead of decreasing with the square of that distance.
Furthermore, median distance between households can easily be seen to be a direct result of urban planning.
Our planners have given us what the automobile and oil industries have told us we want.And we for damned sure do want it so long as it is affordable. Problem is- it is becoming unaffordable.
I will give up my trucks and car when they pry my cold dead fingers off the steering wheel but I have made a point of buying a more economical one every time I get another one and drive substantially less than I used to.
The Arctic? Not so much:
http://oilprice.com/Energy/Energy-General/More-Oil-Companies-Abandoning-Arctic-Plans-Letting-Leases-Expire.html
Wow, talk about news getting lost in the environmental squealing.
Arctic exploration is (as Shell would gladly moan) not quick or easy. If the plug gets pulled now, write off at least five years on top of the existing timeline for when that was supposed to come to market. If it ever works; that Shell hates life right now argues that this is extraordinary risk.
Also raises another set of questions for Russia’s exploration, beyond the sanctions issues with BP & ExxonMobil. Arctic is their one big hope, much more than shale. They never talk that much about their own shale, that tends to be people who have never been to Russia.
From Patrick’s OilPrice link above I ended up at this article, New Drilling Largely Driven By Debt which quoted this report…
Effective Tax Rates of Oil and Gas Companies: Cashing in on Special Treatment (pdf)
Taxpayers for Common Sense, July 2014
Race to the bottom… of the aquifer!
California Farms Sink Wells as Record Drought Escalates
By Alison Vekshin and Michael B. Marois Aug 1, 2014
Chesapeake and other natural gas producers in the Marcellus shale experienced significant weakening of natural gas price differentials relative to the Henry Hub
How’d Rex describe the profitability of the dry shale gas business in 2012…
“We are all losing our shirts today.We’re making no money. It’s all in the red.”
A bit intriguing . . . scroll up to discussion of the content/nature of Bakken oil. If these volatile fractions get into shale oil, no reason, one supposes, the gaseous ones can’t be in gas. The buyer, if forced to extract, will pass that cost not along, but back, to the supplier?
Speculation in the commodities market adds about 40% to a gallon of gas. Hedge funds are artificially inflating cost at the pump. Without them, we would be looking at about $2.40 for a gallon of gas. And some politicians are fiercely against regulation to prevent this artificial price inflation. Ultimately, yes, we pretty much know Obama is responsible for high gas prices.
Odd that they are conspiring to drive oil prices up, but US natural gas prices down.
And some politicians are fiercely against regulation to prevent this artificial price inflation. Ultimately, yes, we pretty much know Obama is responsible for high gas prices.
Strange that you blame it on Obama when the republicans are the ones who are fiercely against any and all regulations.
That’s a shrewd answer to a tricky qutiseon
Fascinating…how did you arrive at this figure? Got a graph? We love to see the math around here…especially when we’re pretty sure it will make us laugh.
-Lloyd
I must call bullshit on this claim.You are so far off base you aren’t even in the ball park. The only way a speculator can control prices on the grand scale over any extended period of time is to actually have control of production and distribution of the product or commodity in question.
Please name some of these speculators. I can for you never mind.Saudi Aramco . Chevron. BP. Shell. Exxon.Pemex. These are a few of the biggest ones. These are the companies and entities that can control the supply and distribution of gasoline but even they can control it only to a minor extent since they compete with each other for customers.Regular volume buyers such as refineries will seek other suppliers when their supplier starts monkeying around with price and delivery schedules and what all the big boys want second after profits is stability of their business.
I will not deny that speculators in the commodities markets can temporarily cause a run up in the price of oil especially on a regional basis but that is a zero sum game in the end. If they manage to hold back a few shiploads today and the price goes up a bit they eventually must sell it and at that time the price will be depressed a bit.
Local prices can be manipulated a bit by suppliers that dominate a local market. Gasoline is consistently ten to fifteen cents cheaper in a town close to my home on the north than it is in the town closest to the south. This is because a single local oil company dominates the market in the town to the north but has to compete with a couple more wholesalers in the town to the south. Plus the delivery haul to the north is an hour longer for the trucks that haul the gasoline to stores.That would account for a three cents or so more cost.
I encounter this claim often and always ask why giant companies such as Exxon or Shell and big ones such as Sheetz and Seven Eleven would allow speculators to get between them and suck up a major portion of the profits to be made in producing and selling gasoline. Such companies are after all not run by idiots after but by corporate executives who have gotten to the top by dint of having very big and very sharp teeth when it comes to taking a bite out of costs and thereby increasing profits.
Ditto everybody above the level of local distributor. And a local oil company can switch suppliers as contracts for delivery run out which happens on an annual basis most of the time. If an oil company can get its supply from Exon or any other company a dime cheaper per gallon than it does from say Chevron they can and will switch company owned stations being the only real exception.Signs are cheap. You can switch brands for a couple of thousand bucks if you own the business and premises and at just a dime a gallon difference you can make that up in a hurry at a busy store. A lot of stores sell a thousand gallons by noon day after day.Some sell several times that much.
I am not a big Obama fan but it gets pretty tiresome hearing him be accused of responsibility for everything wrong in the whole world.
He would have to be president for a century to get around to doing half the things I have heard him accused of doing and even then he would not be able to catch up.
Mac, great post. I am glad we agree here anyway. (As opposed to politics.) 😉
Ron & Mac,
Actually the markets have been manipulated. However, it isn’t what most think… such as trying to CONTROL the markets by rigging, but rather the birth and manufacture of the huge Derivatives Monster.
The Bankers (probably ignorantly) didn’t realize they were creating this paper leveraged monster, it just happened out of the need to be GREEDY.
Anyhow, we have no idea of what a FREE MARKET will do in pricing goods and services. However, PEAK OIL will be the DEATH of the Derivatives Monster.
Thus, a great deal of MARGINAL commodity resources-reserves will no longer be commercially viable after the collapse of the present debt-based system.
Basically, the ability to STEAL resources such as oil-copper-gold-silver-corn from the future with debt will collapse…. and along with it the decline into the SENECA CLIFF.
That is the manipulation…..It will end badly.
steve
Steve, as I have stated many, many times before, derivatives are often responsible for short term swings in the market but it is not possible for derivatives, futures and options on those futures, to control the long term trend of the market. Only supply and demand can do that.
I started to explain how supply and demand worked but if you don’t already know that then there is no hope. But on the other hand, if you do know how supply and demand works, how on earth can you believe that derivatives can raise or lower the long term price of a commodity.
Banks did not create the futures market, farmers and traders did.
Futures Markets: A Brief History
Tim Morgan lambasts shale in the UK’s Daily Telegraph:
http://www.telegraph.co.uk/finance/personalfinance/investing/11006723/fracking-for-Shale-gas-the-dotcom-bubble-of-our-times.html
The crude-by-rail “pipeline on rail” revolution these days extends to the Denver-Julesburg, Powder River, Permian, and Anadarko Basins…stated simply, it’s not just a thing for the Williston Basin/Bakken anymore. But the irony is there probably wouldn’t be all these “bomb trains” rolling around the US if there weren’t as much misguided environmental opposition to pipelines.
There’s an awful lot of crude-by-rail infrastructure already in place and more on the way… http://shale.bnsf.com/partials/interactive-map/download-maps.html
“… misguided environmental opposition to pipelines.”?!
Nah, just basic physics…
Muse – The 2nd Law: Unsustainable
https://www.youtube.com/watch?v=EF_xdvn52As
Cheers!
Fred
Hi Fred ,
I haven’t had time to watch the video.
Generally I do agree with your positions on just about everything and I agree that bau based on oil is not sustainable over the long term. I don’t think peak is very far away if it is not here already and I don’t believe in a thirty or forty year undulating plateau either.
BUT I do believe we are going to be using quite a bit of oil for another three or four decades at least and we might as well use it in the safest and most efficient manner we can.That probably means pipelines.
Given the alternatives in practical everyday terms I am of the opinion that environmentalists opposition to pipelines is causing and going to cause more environmental harm than proposed pipelines would if built.Stopping pipelines is not going to stop the exploitation of oil or even slow it down noticeably.
But there is one bright spot about shipping oil by train. The extra business is very good for the rail industry and it will be bigger and stronger when oil is in very short supply later and and thus in better shape to take over from long distance trucking.
OFM, as Jerry Maguire says ” Show me the money” . Well, all the money is down the black hole called “banking” . This is never going to come back . All your hopes are based on a period of BAU for a certain period of time . We are in “The Long Emergency ” . All expected increments you expect and hope even in the short term(forget the medium and long term) to continue BAU will not happen . This is not only ” The Long Emergency” but also ” The Great Disruption” What did GWB II say ” This sucker is going down”
Maybe I am overoptimistic but I think business as usual is not on its deathbed just yet.Ten or twenty years is a long time in the life of a man but only an eye blink in terms of natural history and biology.
And while I am reasonably sure that poor countries that are importing food and energy are up the creek without a paddle nature is Darwinian to the core and we are a part of nature.By luck I was born into the dominant racial group in the dominant country of my time and while I expect hard times- very hard times – in my future and the future of my country I do not expect collapse within the foreseeable future.
There is something to be said for controlling the richest and largest stretch of prime real estate on the planet protected on two sides by big oceans and another by a thinly populated huge country with close economic and cultural ties and incidentally a lot of oil to boot.Add in the world’s biggest military establishment that is by far the most technologically advanced.We may have a few trivial problems with terrorists but nobody is going to monkey with Uncle Sam in a big way anytime soon.
When the fecal matter hits the fan we WILL get busy doing something about our troubles and while we will not succeed totally we aren’t going to just roll over and die.
There will be gasoline and groceries for sale in almost every corner of the US twenty years from now barring bad luck such as WWIII.
But we might be living under an authoritarian government or even a police state if our choice of leaders is bad.
Maybe I am overoptimistic but I think business as usual is not on its deathbed just yet.
Oh but yes it is, it is on life support right now. I will have a post coming up later this evening explaining it all.
Hi OFM, You are more than likely right! As for the video it isn’t what most would probably expect >;-) Someone here has recently posted a comment about how oil fuels our drive for sex, drugs, rock and roll etc… Well this video is the sex, drugs, rock and roll crowd producing a music album and talking about things like peak oil, resource limits and the 2nd law of thermodynamics.
Cheers,
Fred
You have to play
You can’t win
You can break even if it is really cold
It never gets that cold
This the scariest Ebola article I have read so far:
Doctor: Ebola Outbreak Is ‘Spinning Out Of Control’
http://atlanta.cbslocal.com/2014/08/05/doctor-ebola-outbreak-is-spinning-out-of-control/
This could get really scary. It looks like this is more contagious than first suspected. 887 dead is frightening. And that is likely only the ones they know about. In overcrowded and in unsanitary conditions, such as in most African cities, thousands could be infected. The only way to slow the spread would be to quarantine the entire country, nobody in, nobody out. That might be impossible.
Hi Ron,
This could get really scary.
If you plot the deaths reported since March it appears that this epidemic is progressing exponentially. If it continues on its present path, there will be over 2 million dead in 18 months. We expect that Nigerian production will be shut in within a year if things continue. The foreign work force now operating these fields will leave. The loss of 2 mb/d of this very high quality crude will have a major impact on the world’s economy.
http://www.thehillsgroup.org/
Talking to a buddy of mine.
He says properly outfitted docs in the proper suits . . . those suits will be described as “stops 99.99% of all particles/virii of XXXXXX microns or bigger” where XXXXXX is smaller than an ebola virus.
Of course, when you say your missile defense can stop 99% of incoming nuclear armed ICBMs, and there are 300 incoming, you’re in trouble.
Your presence on this blog is invaluable.
Only wish more paid closer attention to your net energy analysis.
Excellent point about losing Nigeria’s oil export.
I work in an ER in the Midwest US and we had a measles outbreak. The health department stated do not go to the ER or Urgent Care Clinics, or the doctor’s office. The public was to call your doctor to make arrangements so as not to go through the waiting rooms. Guess what? Everyday, two or three people would bring their infant/kid to the ER for the measles due to a rash or at the ground zero , risking exposure to those in the waiting room. The other problem is that there is no repercussions for neglect or stupidity. Albeit, the local media sensationalized the measles but only half chose to add the Health Department’s instructions, while the other half left out the pertinent message. I can see how a pandemic spread, we have too much mobility. Maybe, peak oil will drive down people’s ability to travel in general but all it takes is one person at the wrong place at the wrong time like Typhoid Mary.
Hi Jeffrey,
Yeah if it get’s out of control in a place like Lagos, it will make the Bubonic plague that swept through Europe in the 14th century look like a mere practice session for the four horsemen of the apocalypse. One of the implications of your ELM theory is that many countries with already precarious health care systems will be even less able to deal with widespread health crises. Imagine if something like MERS mutates and becomes more virulent and starts to spread in a place like Cairo…
We live in very interesting times indeed!
Cheers,
Fred
I’ve been thinking of updating my ELM for Dummies >;-)
One confirmed and three suspected cases of Ebola for the medical staff that treated the patient who arrived in Nigeria and then died?
Sounds to me like this thing may at least slightly airborne. For a review of an airborne Ebola scenario, people might want to watch the movie “Outbreak.”
My brother was planning to fly to Ghana in a few days but they just cancelled. Primary fear was that they would get there and then the airlines would suspend flights.
Generally speaking the Washington Times is pretty much of a joke when it comes to the environment and everything else except for digging up dirt on democrats that the mainstream papers are not too eager to explore sometimes.
But every body has a piece of the truth and this article is well worth reading for perspective in respect to ebola.
For what it is worth I agree with the author. A widespread ebola outbreak is extremely unlikely in rich western countries such as the US.
This is not to say it might not break out and kill thousands or even millions in third world countries without good sanitation and well developed public health systems.
I assume you meant to post a link with that comment… but forgot.
http://www.washingtontimes.com/news/2014/aug/4/pruden-a-panic-more-lethal-than-a-virus/