The EIA updated the Short Term Energy Outlook (STEO) in March and also released the 2023 version of the Annual Energy Outlook in March. This post will take a brief look at both of these reports with a focus on Crude plus Condensate (C+C) Output for the World, OPEC and Non-OPEC in the case of the STEO through the fourth quarter of 2024 and US C+C output for three oil price cases from 2022 to 2050, reference (medium oil price), high and low oil price cases.
Figure 1 above shows World C+C output from 2015Q1 to 2024Q4. The red line shows quarterly output using International data from the EIA. The yellow line is the Ordinary Least Squares (OLS) trend before the pandemic from 2015Q1 to 2019Q4, the annual rate of increase was about 478 kb/d over that period. The blue line is a projection based on the OPEC, non-OPEC liquids projection in the STEO and US C+C projection in the STEO from 2022Q4 to 2024Q4. The OLS trend for this EIA projection is an annual rate of increase of 970 kb/d. The quarterly peak in World C+C output was 84.36 Mb/d in 2018Q4, which was 1.2 Mb/d higher than the next highest quarter over the 2015 to 2019 period one quarter earlier, the highest 4 quarter average was 83 Mb/d from 1870 to 2023. The EIA projection has World C+C output rising from 81.53 Mb/d in 2022Q4 to 83.13 Mb/d for 2024Q4.
Figure 2 shows World, OPEC and Non-OPEC output from 2005 to 2024 with STEO projections shown for 2022Q4 to 2024Q4. Output was relatively flat from 2005 to 2009, with a noticeable rise in output from 2009 to 2018, followed by OPEC cuts, pandemic and then recovery. Of the 10 Mb/d increase in World output from 2010Q1 to 2018Q4, about 70% of the increase was from Non-OPEC nations.
Figure 3 above considers the centered 3 year average annual Real Brent Oil Price in 2022 US$/b. The centered 3 year average real Brent oil price remained above $90/b in 2022$ for the period from 2006 to 2014, and was above $100/b from 2007 to 2014. World output increased very rapidly from 2002 to 2005 in a response to a doubling of the real price of oil (from $40 to $80/b over 3 years for centered 3 year average real oil price), the annual rate of increase in World C+C output was 2625 kb/d over the 2002 to 2005 period (OLS trend on quarterly output). There was then a pause in World C+C output increases from 2005 to 2009, the World may have reached capacity limits and it took some time for capacity to be added, in addition the high oil price environment from 2006 to 2009 allowed the development of tight oil in the US to take off.
For the period covered in figure 4 above (2011-2014), for 3 years (2011-2013) the centered 3 year average real Brent price was over $130/bo in 2022$, World output increased at an average rate of 1083 kb/d with much of this increase coming from US tight oil.
The rate of increase in World C+C output dropped to 478 kb/d over the 2015 to 2019 period, less than half of the preceding 4 years. Centered 3 year average real oil prices had dropped to under $80/b over this later period which may have reduced the rate of oil field investment in resource development and thus reduced the rate of increase in output.
Figure 6 shows the 2023 Annual Energy Outlook scenarios for 3 cases of many (15 total cases) different scenarios, many of the other cases are not that different from the reference case, the only exception is the high and low oil and gas supply cases and I chose the high and low oil price cases to keep the analysis simple.
Basically I chose the high and low oil price cases because the range from high and low US output for those cases was larger than the High and Low Oil and Gas Supply cases.
If we consider US C+C output minus tight oil output for the three cases from figure 6, we find that the difference beween the high and low oil price cases is much smaller than for US C+C output in figure 6. See figure 8 below.
In 2030 the difference between the high an low oil price cases for conventional oil is only about 1.2 Mb/d vs. roughly 11 Mb/d for total US C+C output.
We can see clearly in figure 9 that there is a 10 Mb/d difference between the high and low oil pri ce cases in 2030 for tight oil and about a 7 Mb/d difference between the high oil price case and the reference case (16 Mb/d vs 9 Mb/d in 2030.) Note that if we assume tight oil output falls linearly to zero by 2055 in all three cases in figure 9, then the URR is 90 Gb, 127 Gb, and 173 Gb for each of the three cases in figure 9.
I doubt the low oil price scenario will be correct from 2022 to 2040, but potentially oil prices might fall between 2035 and 2040 as the transition to electric land transport occurs and oil demand may fall below oil supply at the World level. My expectation is that between 2024 and 2035 real oil prices (in 2022$) will be in the $100 to $120/bo range at the wellhead in the US L48. For my tight oil scenario I use a more conservative oil price scenario with maximum L48 average real wellhead oil prices of $90/bo in 2022$ (see figure 11 below.)
The AEO 2023 scenarios for US C+C output are highly unrealistic in my opinion, particularly the tight oil output scenarios. The low oil price tight oil scenario is most realistic in terms of URR at 90 Gb(though at the assumed real oil prices output would be half that level at most). My best guess US tight oil scenario with the oil prices shown as the DC model in figure 11, has a URR of about 70 Gb. My scenario is compared with the AEO scenarios in the chart below.
Thanks for breaking these reports down for us Dennis. Great work.
+1 . Dennis this is terrific work . Microanalysis — that is like splitting a hair in two . Hats off to you .
P.S : But still the world peak (C+C) was 2018 and US peak was 2019 . You can’t split that . Depletion and decline rates are a one way street . 🙂
Thx Schinzy and Hole in head.
Hole in Head,
As far as the US peak, I focus on the centered 12 month average rather than single monthly records (which are of little importance in my view). For the US the current CTMA C plus C peak is October 2019 at 12.565 Mb/d. If the EIA’s March 2023 STEO forecast is correct for 2023 and 2024 there will be a new CTMA C plus C peak in March 2024 and the CTMA then continues to rise until July 2024 (end of forecast). We will know in roughly November 2024, if the forecast proves correct.
Here’s the big picture, without permian basin, US total product supplied is at 40-50 year lows…
Dennis,
Thanks for the report. I agree with figure 12 AEO being extremely unrealistic. Are EIA abiotic oil advocates ? Because that scenario looks like something out of the abiotic oil handbook.
Dennis your tight oil model and world C+C model seem to peak around a similar time. Is that correct ?
Iron Mike,
You’re welcome. Yes the World Model peaks at about the same time at US tight oil in my best guess scenario, as I like to point out it is certain that my best guess will be wrong, but I would put the odds at about 50/50 that the World centered 12 month peak will be either before or after June 2028. Also note that if oil prices are $100 to $120 per barrel in 2022$ from 2024 to 2035 as I expect, the tight oil scenario may prove too low, URR could be 80 Gb in that case, but I expect the peak won’t change much, just a fatter tail after 2028.
Thanks Dennis. Interesting, it seems in the current global economic climate with debt levels being so high, the world cannot handle high energy prices in other words high inflation. So the only way the world can sustain a high oil price scenario is first through a great deleveraging or severe recession where global debt levels fall, and asset prices return to some form of normality based on fundamentals. That’s just my opinion of course.
Iron Mike,
The World did fine from 2011 to 2013 with oil prices over $130/bo in 2022$, much of the inflation has been due to supply disruptions and changes in demand from more people working at home and increasing demand for home office space and various durable goods for their home (workout equipment, home theaters etc), the growth was exceptional as the World rebounded from the pandemic, also there were chip shortages affecting auto output and raising new and used vehicle prices. Much of this has or will be sorted out in my opinion. The “debt problem” is less of an issue than many believe, much of that at the World level is from middle income economies that have gotten better access to credit, more in line with OECD levels. In any case predicting what will happen with the World economy is difficult, but it usually muddles through, odds are low we will see a depression in the near term (next 10 to 15 years) imho.
Dennis,
I agree the factors you mentioned which have added fuel to inflation.
However what you fail to mention the elephant in the room which is that the world has been awash with cheap money for about the last 15 years thanks to the central banks monetary policy and QE programs, during covid the easy access to credit went up exponential both through monetary and fiscal policy. Easy credit is a drug, everyone wants to live beyond their means. The world is hooked on this drug now.
Now asset lobbyists have hissy fits through the mainstream media everytime the Fed increases rates. Alot of “experts” want the Fed to stop raising rates even though inflation is at 6%. Powell will probably be remembered as Arthur Burns, he ain’t no Paul Volcker.
There might come a time when it will be time for rehab and deleveraging. The world needs a depression without taxpayer bailouts or the Fed debt buying programs. Shitty business/corporation practices need to be punished and allowed to fail. There has to be a reset.
This has direct consequences for oil prices.
Again all this is just my opinion.
Iron Mike,
Interesting opinion, yes interest rates have been low, but in my opinion things are not as bad as you seem to believe, lots of businesses still fail, we could have the government take over large businesses that fail to avoid systemic collapse, most Western nations do not like that approach and instead choose to coddle wealthy investors, I don’t particularly like that approach, but prefer it to a Great Depression, YMMV.
Dennis , you presume that the government or TPTB ( whosoever ) are omnipotent and can pull a lever here and there and bingo things will be stable . Look at the Covid debacle and the economic debacle brought about by loose monetary and fiscal policy . Here is the Secretary of Treasury Janet Yellen (fumble , stumble and mumble ) saying $ 50 trillion debt and Debt/GDP ratio of 110% is sustainable . Pathetic . You are allowing too much leeway . Geniuses or Bozos ? Probably monkey’s throwing darts .
https://www.youtube.com/watch?v=vy5A55YAZ7E
Hole in head,
The Covid pandemic was a major unforeseen event, lots of adjustments needed, we have muddled through. Ms Yellen is correct in my opinion. Current levels of debt/GDP are sustainable. No omnipotence or omniscience is assumed.
Dennis , if you concur with Ms Yellen then I am not going to argue . This is your opinion and I respect that . Parting note –It couldn’t be more obvious, but Socrates was spot on when he called amathia (willful ignorance) the one and only evil.
QED .
From Bank for International Settlements
https://www.bis.org/statistics/totcredit.htm?m=2669
US Debt to GDP, last data point is 2022Q3, note that this is similar to Euro Area, but far less than Japan and Luxembourg at about 416% or Hong Kong at 454%, several European nations are between 300 and 350% (France, Switzerland, Belgium). Japan has been at 296% debt to GDP or higher since 1997. The average for advanced economies is 256%, for G20 it is 239%, for all nations reporting data to the BIS the average is 237% and for emerging economies it is 211% at market exchange rates for 2022Q3.
Total Public Debt as percentage of GDP is currently high, last time it was this high was 1945.
From mid 1980s to 2008 the Debt/GDP % ratio was ~50-60%. Quickly climbing to 100% by the end of 2012. Slowly creeping up to 108% right before covid hit which launched it to 135%, since then it’s stabilized to 120%. Now I guess you could make an argument that 100% is fine, or even 120%.
70’s-80s was ~30%, 90s-00s was ~60%, 00s-10s was 90%, 20s-? are 120%.
The only drop on record since 1980 is the period of 1995-2000 (from 65% down to 55%).
To lower the ratio, GDP has to increase relative to debt (or Debt has to decrease more than GDP decreases).
So there in lies the problem, how do we grow out of the pile of debt when growth is no longer an option?
That leaves one option, austerity measures…
Kengeo,
As long as the debt can be serviced it is not a problem. Japan has had total debt to GDP of over 296% since 1997. As to growth stopping, so far little evidence of this. We will see. Recently US debt to GDP decreased by 37%, back to the 2010 to 2019 level.
Nice post from Rapier, I think Dennis would agree with his points. I think politically Biden and his administration are really in a difficult spot. If HHH is right, even if oil prices remain low its curtains for the Dems in 24. If HHH is wrong and oil prices rise, there will be NO cushion when they need it the most. I think, this in part played a roll in the North Slope Project approval. They did not want to run against the backdrop of high energy prices and such a visible and easy to understand, hard to explain its denial, in the face of high prices project. Just my opinion.
https://oilprice.com/Energy/Energy-General/Is-It-Time-To-Refill-The-Strategic-Petroleum-Reserve.html
a bit more color on the alaska willow project
https://oilprice.com/Energy/Energy-General/The-Only-Oil-Major-Betting-Big-On-Alaska.html
Texas tea,
Mr Rapier has a very reasonable point of view which I tend to agree with 99% of the time, this is indeed one of those cases.
Thanks Dennis, great post.
The EIA is pretty much useless as far as predicting Russian future production is concerned.
Ron,
That is all liquids for Russia in the STEO, it doesn’t look like a bad guess to me, if anything it looks too low. For 2023, OPEC has a similar estimate for Russia in its most recent MOMR. For 2023Q2 to Q4 Russia total liquids output at 10.00, 10.10, and 10.15 Mb/d according the March MOMR, same ballpark.
I was pretty much talking about their past predictions of Russian output. They have missed it by a country mile. The MOMR is just as useless. But they admit it. They say Russian future production is volitile and unclear.
The EIA has no idea what Russian production will be.
The OPEC MOMR has no idea and they admit it
I have no idea and I admit it.
Ron,
I don’t have a clear idea either, but analyses from those who know more than me have suggested a plateau in output, I think if anything the MOMR and STEO might be a bit on the low side as Russia may find ways around the sanctions. I think for all liquids a 10.5 Mb/d plateau might be a better guess than 10 Mb/d.
Ron
You might find this interesting insight in to Russia.
“Strengthening technological sovereignty. Together with the Ministry of Industry and Trade of the Russian Federation, a coordinating council for import substitution will be created. The focus will be on technology in the field of hard-to-recover oil deposits, because there is a decline in conventional production.”
https://www.business-gazeta.ru/article/588291
Thanks Dennis always interesting. I do not find the stranded oil argument very compelling. After witnessing how the energy markets reacted and more importantly how the governments reacted to the war, I think the most likely outcome, barring a long term deflationary depression, is higher over all energy cost and a higher priority on energy security for the short and near term say out 20 years. Looking at the “most hated” energy source, which is still in great demand(coal) as a model I think higher oil demand and higher oil prices are in the future.
While I do not want to get into the weeds of climate change, there is NO industrial country, NO government be it a democracy or theocracy, or dictatorship that will stand in the face of starvation or stagnation or stagflation due to the willful and purposeful refusal to use what ever resources are available to keep the power on, the industrial base productive, the agricultural base up and running. It is just not going to happen. Put me down for one of the higher price scenario’s.
https://www.iea.org/data-and-statistics/charts/global-coal-consumption-2020-2023
https://www.bloomberg.com/opinion/articles/2023-03-27/saudi-aramco-s-deal-will-cement-china-s-oil-demand-and-push-its-peak-higher?utm_medium=email&utm_source=newsletter&utm_term=230327&utm_campaign=author_19016770#xj4y7vzkg
Texastea,
I agree oil prices will likely be higher than the EIA’s reference case, but think 120 to 130 per barrel in 2022$ will be about as high as the annual average WTI price will go. A couple of things to keep in mind is that a lot more people are working from home which reduces oil demand and EV sales have been growing at 45% per year for about 5 years. When Tesla comes out with its next generation platform in a few years they expect the price will be about 50% of current vehicles, say 20 to 25k in 2022$, other car companies will try to match this and the transition to EVs will accelerate. By 2030 we may see demand for oil falling below supply and may see prices decrease to reduce supply to match demand. At some point lots of tight and extra heavy oil will no longer be able to compete with cheaper onshore conventional oil and is likely to be stranded due to lack of profitability.
In short, I disagree just based on simple neoclassical microeconomic reasoning and how I see land transportation developing over time. There is also the potential for self driving vehicles which when approved could have each self driving EV replacing 4 ICEVs (as a self driving vehicle can run almost constantly with occasional stops for level 3 charging). Once self driving cars are approved the transition to EVs makes a step change and proceeds 4 times faster than before.
“there is NO industrial country, NO government be it a democracy or theocracy, or dictatorship that will stand in the face of starvation or stagnation or stagflation due to the willful and purposeful refusal to use what ever resources are available”
You might call that the “Donner party theory of community well being”
Correct JJHMAN , there are no volunteers for starvation . You might call that the “Donner party theory of community well being” . Interesting a new theory .
Nobody is suggesting as much, As fossil fuel depletes it will no longer be the cheapest energy resource and will be replaced with cheaper energy resources.
That’s magical thinking. It’s cheap energy or collapse for our civilization. See https://youtu.be/5WPB2u8EzL8?t=363
Required,
Magical thinking is believing something will always be cheap when it is not the case for depleting resources. Wind, solar, and batteries are cheaper than fossil fuel especially in areas with good resources of wind or solar energy.
See
https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
Energy storage will be critical. My latest analysis for Australia:
21/3/2023
NSW power supply on 16 March 2023 so tight that AEMO had to issue emergency response direction
http://crudeoilpeak.info/nsw-power-supply-on-16-march-2023-so-tight-that-aemo-had-to-issue-emergency-response-directions
13/3/2023
Lack of reserve on hot day in NSW as Liddell power plant is scheduled to close
http://crudeoilpeak.info/lack-of-reserve-on-hot-day-in-nsw-as-liddell-power-plant-is-scheduled-to-close
8 Mar 2023
Can NSW replace Liddell? (part 1)
http://crudeoilpeak.info/can-nsw-replace-liddell-part-1
30 Jan 2023
When the sun sets in Queensland, energy guzzler NSW is on its own
http://crudeoilpeak.info/when-the-sun-sets-in-queensland-energy-guzzler-nsw-is-on-its-own
stand in the face of starvation or stagnation or stagflation
If things get tough, the quickest way to save money is to stop wasting it on cars. The average American car costs its owner about $12,000 a year to own and operate. Public transportation typically costs about a twentieth of that.
Alimbiquated,
The UK is ~80,000 square miles in size with a population over 67 million people.
(Sparsely populated Scotland is over one third the UK landmass with about 5 1/2 million residents).
Just one state – Oregon – is almost 100,000 square miles with a little over 4 million people … way larger than the UK with 1/15 the number of people.
There are reasons why the US needs so many vehicles for transportation.
In Bend, because of a limited public transit, I use a car almost daily.
Portland?
Not needed, if you are a conscious human.
HT,
Italy is the same size as New Mexico, yet has 30 times the population.
Germany is smaller than Montana, yet has 80 times more people.
Different circumstances prompt varying responses with vast distances in the US giving rise to widespread adoption of vehicular travel.
Coffee,
That’s a ultra-lazy argument based on looking at the wrong numbers. You aren’t even trying.
The whole population density argument is a canard. Sweden is less densely populated that the US, but has much better public transportation.
If Alaska were to leave the union, would that change traffic planning in Florida? No. That is why average population density is irrelevant. Not really, most people are packed into small areas. You need to consider medians, which reduce the differences between
Density is measured in people per square mile, but nobody ever drove a square mile, so it’s the wrong number. You need to take the square root of the denominator, which gets rid of the exaggerated differences. When we talk about how much oil is in the ground, we don’t talk about the square of how much oil is there. why is the square of the distance we drive even mentioned?
I suggest you go back to the drawing board and consider the median distance between households. You may come up with halfway viable arguments.
Dennis
A lot of good work. However I think that you and I will continue to disagree on what is the right data set to use to estimate future growth. In particular I would like to present a different view of your first chart.
Not quite sure what the 81.53 Mb/d is. Could it be a quarterly average? In the chart below at the bottom is the latest C + C data from the EIA. The Q3 average is 81.1 Mb/d. The Q4 average is 81.9 Mb/d, using the December estimate in the attached chart, posted at the end here, https://peakoilbarrel.com/non-opecs-november-oil-production-increase-offsets-opecs-cutback/#more-42008.
The production increase in the attached chart from December 2022 to December 2024 is 930 kb/d. Using a simple average, that would be 465 kb/d/yr. I am using a simple average because the drop from December to April is due the Russian production drop, which may not have started till March. Regardless the average is less than 1/2 of the posted estimate of 970 kb/d/yr in the chart.
Ovi,
I used quarterly data for World liquids and World C plus C for both OPEC and non-OPEC minus US. I found the ratio of C plus C and total liquids from 2019Q4 to 2022Q3 for each of the two groups and then found the average ratio over that 3 year period. For OPEC it was 0.8974 and for non-OPEC minus US it was 0.8343. The STEO quarterly liquids estimate was multiplied by these ratios for each group to find a C plus C estimate, then the C C estimate for the US from the STEO was added to the OPEC and non-OPEC minus US estimate. Here is the chart, data is quarterly which I believe I mentioned in the post, but perhaps forgot. The trend line is an OLS from Excel. We are estimating future output differently, so we will get different results, I rarely use two endpoints to estimate a trend, I always use OLS.
Dennis
I use a similar process for my chart but use monthly data.
Let’s keep things simple. The EIA has hard C + C data for October and November 2022, 81.8 Mb/d and 81.9 Mb/d. I can’t see how Q4-22 average can up at 81.53 Mb/d.
Ovi,
Just used the quarterly data as I explained. Chart doing it monthly below with OLS on STEO monthly projection from Dec 2022 to Dec 2024.
Dennis
There is something wrong. The November C plus C production is 81.92 Mb/d and the above chart is plotted at 81.29 Mb/d, looks like December. On my chart December is 82.0 Mb/d.
Ovi,
We are not estimating the same way.
What is the slope of and OLS on your Dec 2022 to Dec 2024 estimate? To me that’s the important number. Using just two data points rather than 25 data points is not the best way.
Dennis
One step at a time. I am not interested in the slope in this discussion. My question is related to trying to understand the discrepancy between my 82.0 Mb/d estimate for December vs the 81.29 Mb/d in your chart. That is a difference of 700 kb/d. Something is amiss.
Note the actual October November C C average is 81.87 Mb/d. What causes the big drop 81.29 in December.
Ovi,
38.32057
30.87932
12.1
81.299898
From top to bottom for December 2023 from STEO (March 2023):
Non-OPEC minus US C plus C
OPEC C plus C
US C plus C
World C plus C
45.92
34.03
Data above for total liquids in December 2023 from March 2023 STEO
top number is Non-OPEC minus US
bottom number is OPEC
I multiply the top number by 0.8345 to estimate C plus C.
I multiply the bottom number by 0.89739 to estimate C plus C.
As to what causes the big drop in December, not known, simply using a consistent methodology on STEO data. The method I use suggests non-OPEC minus US C plus C output falls by 404 kb/d from Nov to Dec 2022 and US C plus C output falls by 275 kb/d and OPEC C plus C output increases by 56 kb/d from Nov to Dec 2022. The net decrease in World C plus C output in Dec 2022 using my method is 622 kb/d.
A slight change to the ratios below
0.834507270045957
0.897393908899655
first is non-OPEC minus US and second is OPEC, using sum of output from Dec 2019 to Nov 2022 (monthly international EIA data) for C plus C and total liquids and then taking the ratio of the sums (a weighted average).
Earlier you said:
The production increase in the attached chart from December 2022 to December 2024 is 930 kb/d. Using a simple average, that would be 465 kb/d/yr. I am using a simple average because the drop from December to April is due the Russian production drop, which may not have started till March. Regardless the average is less than 1/2 of the posted estimate of 970 kb/d/yr in the chart.
Based on that it seemed you were interested in the slope, does it seem to you that the best way to estimate the trend for a set of data points is to choose the end points and find the slope based on that? If so, I would disagree.
Ovi,
modified spreadsheet new link below should work
https://drive.google.com/file/d/1T10C_ej_wYbENgnOgmbcxYyr2_BTcBBb/view?usp=sharing
Ovi,
Perhaps you could explain in detail how you arrive at your estimate (as I have done). Then perhaps we can find what is causing the difference in our estimates, when I use the monthly data for International and STEO data we still reach different conclusions. I would note that US output decreased in December 2022 and by my estimate so did the rest of non-OPEC, OPEC rose a bit (60 kb/d), but based on the STEO output should be lower in December than November.
Dennis
I think I have sent you my calc sheet in the past. This is what I do, using the STEO and EIA World data.
Historical Info/Ratio
– World Liquids W/O US
– World C + C W/O US
– Monthly Historical Ratio (MHR) (World C + C W/O US / World liquids W/O US)
– Calculate 12 month moving average and use latest value. Not trailing.
Future
– MHR Average x World Liquids W/O US
– Future US C + C
– Add them
Attached is a chart which shows the MHR and the moving average. Note how the two have been getting closer over the past year and a half now that world production is getting back to normal.
Ovi,
I think your average might be a trailing average rather than a “centered average”. In other words, the moving average for November 2022 on your chart should use the average of data for 12 months from Dec 2021 to Nov 2022. I refer to this as a trailing average, you may have another name. Excellent method, I would use a weighted average which would take the sum of output for C C for the past 12 months and divide by the sum of total liquids output for the past 12 months and take that ratio.
Thanks. I didn’t know if your method had been changed over time.
Note that the convergence of the two numbers on your chart looks suspicious, my guess is that this has to do with models being used to estimate the most recent three months of data.
Ovi,
Using your method I get an MHR of 0.862833272079908 and using that with STEO data for World liquids minus US and adding back the US C plus C estimate I get the following chart.
I would add that your estimation method is better than mine, simpler and more straightforward, but you may want to check your spreadsheet.
Mine at link below
https://docs.google.com/spreadsheets/d/17cj5ERncioKy98fVT13NULQTlSYPk3obnJwKL-o4gV4/edit?usp=sharing
First data point on chart below is the first estimated point from the STEO (December 2022) the last point on the right is December 2024 (25 data points on chart).
Dennis
I have checked the model and see nothing wrong with it. The sheet you linked seems to work with Non-OPEC. I start with World data.
I have emailed you my work sheet so you can compare it with your model.
In this case I prefer to work with the trailing 12 month average since I want the latest data to project future production.
Ovi,
Look at the second spreadsheet linked below
https://docs.google.com/spreadsheets/d/17cj5ERncioKy98fVT13NULQTlSYPk3obnJwKL-o4gV4/edit?usp=sharing
this spreadsheet uses the exact method you outlined in your comment, but leads to a different result. I will look at your spreadsheet. Thanks.
Responded to your email with updated US C plus C from PSM and World liquids from March STEO (both downloaded 3/30/3023).
version 2 spreadsheet attached to email.
Ovi,
Chart using your spreadsheet with updated US C+C and updated World liquids data from STEO, corrected slope is 934 kb/d/year (earlier version 2 forgot to update using international data up to Nov 2022 (used STEO data by mistake).
If we drop July 2022 and do the OLS on Aug 2022 to Dec 2024 we get
“I fundamentally believe in the role of oil and gas for a long, long time to come,” he said in a recent interview with The Wall Street Journal.
What’s more, he said, he doesn’t believe renewable- and low-carbon energy projects should be subsidized by Shell’s fossil-fuel profits, but should deliver returns that merit continued investment on their own. “We’re definitely taking a hard look at the portfolio,” Mr. Sawan said.
https://www.wsj.com/articles/new-shell-ceo-faces-big-dilemma-should-the-company-pump-more-oil-9fa35497?st=v3zy1g50xh61jb4
i guess we got another “mexican cartel” member😂
Another way to look at World C+C, this includes the STEO March 2023 forecast from Dec 2022 to Dec 2024.
Dennis
Attached is my OLS from July 2022 to December 2024. It has a slope of 761 kb/d/yr. It all depends on the starting date. IMO, I don’t think that rate is realistic beyond January 2025. I think that production will start to plateau around 83 Mb/d, which reflects today’s current capacity plus 1,000 kb/d of OPEC reserve capacity. After 83 Mb/d, production increases will be difficult.
Ovi,
I agree growth will likely slow down after Dec 2024, though I believe Permian output will continue to grow beyond that, there may be some growth in Canada, Guyana, Norway, and Brazil and potentially some growth over time from Saudi Arabia, UAE, Iraq, and Kuwait, potentially there could be growth in Venezuela and Iran if there is sanction relief. To me it seems doubtful that growth stops at 83 Mb/d in Dec 2024, the STEO forecast is more optimistic than my own which has average annual output at about 83.5 Mb/d in 2028.
I am simply doing an estimate of the C plus C output implied by the STEO. There are many different ways this could be done.
Chart below shows the OLS from July 2022 to Dec 2024 for my estimate, the annual increase is 902 kb/d. Generally not including full years of data leads to distortions due to seasonality in the data. That’s why I chose Jan 2022 to Dec 2024 to give three full years of data, alternatively we could do two years from July 2022 to June 2024 which has a slope of 773 kb/d, similar to your estimate (but for a different time period).
Hunting Beach
it looks like Warren Buffett continues to aid and abet the “mexican cartels”. maybe you should protest his next investor meeting and explain your theories. better yet use all those insurance royalties and do a hostile takeover😜
https://finance.yahoo.com/video/berkshire-hathaway-buys-additional-3-134157848.html
The EIA Monthly Energy Review is out. The data is through February 2023. However, the months of January and February are subject to heavy revisions. The more accurate data will be in the EIA Petroleum Supply Monthly, due out Friday. However, that data will be only through January.
I have inserted the data for the last seven months.
US Gasoline consumption (Finished gasoline production minus net exports of finished gasoline) 4 week average data. Note the downward trend since 2021.
Dennis,
I suppose we will get a clearer picture of the cause of the “downtrend” in the next 4 months. If it was due to price “shock” or EV competition. Following gas buddy data I think it may be the former rather than the later but we will have the actual data later this year, and that will be the tell. However the chart period covers a low oil (gasoline) price period since it starts 2016, the only year we have had high oil prices in your chart is 2022. Do you see that differently?
Texas tea,
Would have to check high price periods, pretty sure the trend was up or flat during the high price period. My guess is that this has little to do with EVs and probably due to more people working from home.
Dennis, “My guess is that this has little to do with EVs and probably due to more people working from home.” I agree, I thought about that after my post, great point. 👍
Texasteastwo,
Chart below considers US consumption of finished motor gasoline (product supplied minus net exports) and uses the trailing twelve month (TTM) average to smooth out seaonal fluctuations in demand. I think that you are correct that high gasoline prices had an affect on demand, there might also be a demographic effect where the baby boomers reached retirement age and started driving less. Let’s take the height of baby boom as 1950 and add 60 years, that would be about 2010, the peak for gasoline demand was 2006 and the down slope after that might be due to a combination of high oil prices and demographics. In addition, population growth in the US has been slowing down which has an affect on demand along with an aging population.
Don’t forget that the nations fleet of ICE vehicles has been gradually achieving higher mpg efficiency, which could be a factor here.
https://www.energy.gov/eere/vehicles/articles/fotw-1195-july-19-2021-small-suv-segment-has-seen-greatest-improvement-fuel
Hickory,
Great point, thanks. Note that the decline in my chart occurs after 2020 so the timing does not align that well with your chart, so there may be a different affect lately, also we don’t know if fuel economy has continued to increase (as the data ends in 2020 in your chart), it might have or it may have plateaued as in the earlier 1985 to 2000 period.
The rapid recent increase in average mpg began roughly 2008, which does align pretty well with the gasoline peak consumption.
Its a big factor.
Consider how much higher the consumption would be if the battle over CAFE mandates hadn’t been gradually won. It began when the Saudis embargoed the US.
Hickory,
Yes I agree, consumption declined after 2008 so it does line up well, I stand corrected. Thanks.
Prices might also play a role as texastea2 suggested earlier. Also more telecommuting and changes in demography might play some role as well, no doubt there’s other stuff I am not accounting for.
Now if we could just put a hard limit on nationwide speed at 60 mph, we could save another roughly 10%.
If people don’t want 60, then we could 50.
That change would not collapse the world,
and think of all the money that could be collected from violators.
We would have enough money for universal preschool.
Win Win.
Hickory,
I also like the 60 MPH (or perhaps 65 MPH) national speed limit idea, but I think we are probably in the minority. High gasoline and diesel prices might change things, but my experience driving in Europe suggests this is probably not true (they seem to drive as fast or faster there and fuel prices are roughly double in the US).
Yes.
Its an example of how people who are swimming in cheap energy (gas under $20/g)
have no intention of taking the issue of pending scarcity seriously.
👍
Big Draw Across the Board
API
Crude -6.076mm (+300k exp) – biggest draw since 11/25/22
Cushing -2.388mm – biggest draw since Feb 2022
Gasoline -5.891mm (-1.6mm exp)
Distillates +548k (-1.1mm exp)
https://www.zerohedge.com/energy/wti-extends-gains-after-unexpected-large-crude-draw
The Main Factor For CPI – Consumer Price Inflation For DUMMIES…
KISS – KEEP IT SIMPLE STUPID.
steve
Here’s a better chart of US total petroleum product supplied (~50 year low excluding Permian contribution).
WTI price added for comparison…
US Refinery Input
Kengeo,
If we look at transport fuel consumption (gasoline, distillate fuel, jet fuel, and residual fuel consumption) by taking product supplied and deducting net exports of these fuels (this is the amount consumed in the US) we have the following.
Note that this has little to do with supply of oil (as we simply import what is needed over the amount produced locally), it is about demand for transport fuel, which has fallen by roughly 4000 kb/d since 2005 (about 23.5% over 17 years or about 1.6% per year on average if constant exponential decline is assumed).
Dennis –
I disagree, I’m also not sure about your assumptions related to the economic side. High prices curbed demand…high prices are a result of imbalance between supply (low) and demand (high).
The additional analysis is that current trends for past three years indicate annual loss in US conventional production of ~0.5 MBpD (note that while permian rebounded, conventional did not). If Permian production stalls (which it appears it has) then we can expect annual drop in production of almost 1 MBpD (this is significant).
It’s important to use multiple lines of evidence and not focus too much on one single factor/line.
Most here would agree that US and world supply of high quality oil has been on plateau for almost 20 years. There is limited evidence to suggest that this will change (the tight oil revolution muddy the waters and it took time to separate fact from fiction).
The trends you continue to model haven’t materialized and do not appear to be remotely possible.
While you’ve tempered your expectations very slightly in response to the data, at some point soon you will need to rethink the numerous assumptions being made to forecast future production.
But thank you Dennis for the posts and charts, it provides a valuable source of debate…
Kengeo,
I agree consumption may have dropped in part due to high oil prices, but note that consumption continued to rise while oil prices doubled from 2002 to 2006. Oil prices were at a relatively low level from 2015 to 2020, but oil consumption did not return to the high point of 2005 when oil prices were at a high level. As to a plateau in oil output for 20 years, I disagree, just look at data for World C plus C output and don’t arbitrarily exclude certain types of crude oil, 20 years ago World output of C plus C was about 67 Mb/d.
I look at multiple lines of evidence an focus on facts. My forecasts of future World output are quite conservative and if incorrect are more likely to be too low than too high, particularly through 2035.
Keep in mind the oil men are saying tight oil output will not grow at low oil and natural gas prices, I agree with them. I do not expect oil and natural gas prices will remain low, I expect we will see them rise to over $100/bo in 2022$ and over $3/MCF (2022$) by 2025 at the latest.
Can you remind me of your expectation for future oil and natural gas prices? Maybe we have different points of view on that.
As to whether the future output I have guessed at proves correct, we will see.
Starting in 2021 World average annual C plus C output 2021-2035 (Mb/d):
77.1
80.0
81.0
82.0
82.8
83.4
83.9
83.6
82.7
81.4
78.4
75.5
73.3
71.4
69.6
A scenario from December 2022.
November 2022 output was 81.9 Mb/d. Peak annual output was about 83 Mb/d in 2018. In a few years we may look back and wonder why my projections were so conservative, but I have always said just that.
I don’t believe high oil prices are sustainable. I also don’t believe continued oil growth is sustainable. We are reaching a growing number of limits and the entire system is at risk of failure. As others point out almost daily, the system in place which allows tight oil to be harvested is expensive, extremely complex, and relies on cheap labor to be profitable. High oil prices create feedback and compounding headwinds that result in demand destruction. Whether we like it or not the world economy is now running in reverse, we can expect simplification and reduction, all of which points to lower world oil production. The world growth model has now turned the corner and now is the shrink model.
Kengeo,
Can you define a high oil price please? Oil prices averaged about $128 per barrel (2022$) for imported crude oil for the US from 2011 to 2013. World Real GDP grew at about 3% per year over that period. Oil prices dropped after July 2014 due to oversupply of oil.
https://www.eia.gov/outlooks/steo/realprices/
Eventually oil prices will drop and I agree they will not be sustained at a high level indefinitely. My expectation is that oil prices will drop gradually from 2030 to 2040 due to lack of demand as the World transitions to electric land tansport, supply will drop as well as lower prices will lead to low profits for more expensive oil resources (tight oil, deep water offshore, Arctic oil, and oil sands).
As far as “shrink model” perhaps after 2021? See
https://data.worldbank.org/indicator/NY.GDP.MKTP.KD
From 1982 to 2021 (40 years) it looks like World real GDP in 2015$ has grown at an average annual rate of about 3% per year, perhaps it will be lower in the future, we will see.
Dennis Sure –
First of all though, for your chart above you should recognize/realize that global debt creation was 2x GDP between 2005-2015…if that’s not a symptom of an ailing world economy then I don’t know what is… what role will inflation play in growing debt and or shrinking GDP?
For oil price, it depends on the time period you look at. But in a nutshell the following are the ranges:
– Low Range is $50 and below ($25 in the case of ~1990s)
– Medium Range is $50-75, call it ~$63 (about 25% above the low price)
– High Range is $75-100, call it ~$87 (about 75% above the low price)
– Very High Range is >$100 – 125 (about 100% above the low price)
– Extremely High Range are the oil shocks of $150-$200 (200-300% above the low prices.
Looking at recent prices, 2021 was Medium priced but trending towards High. For 2022, prices quickly moved from High to Very High and stayed there for ~6 months. The second half of 2022 saw decreases in demand due to the Very High prices and corresponding drop in prices due to slightly lower demand. Remember that due to inelasticity of oil supply, price and demand have to respond in order to balance supply.
Since September 2022, prices have remained in the Medium / High range.
General expectation is that prices will move higher, but it’s unclear if the economy is going to face a serious recession (or not).
Kengeo,
I guess this is where we differ, I would call high oil prices as above $110/bo and those prices might not be sustained for very long. because we would see a fairly rapid transition to electric transport over 5 to 10 years which would kill demand and reduce oil prices. Any price below $90/bo could probably be sustained for a longer period, 10 to 15 years in my opinion, but much depends on the speed of the transition to electric transport which most people underestimate. If self driving cars gain widespread approval, the transition to electric transport accelerates by a factor of 3 or 4.
“Whether we like it or not the world economy is now running in reverse, we can expect simplification and reduction”
We are close to agreeing on this KenGeo,
although I don’t think we are there quite yet.
And I’d call it contraction. Semantic choice.
Despite that, I think the price of oil will generally be high and higher.
8 (soon to be 9) billion people will work hard to buy energy.
Kengeo,
Expanding credit is a property of an economy that is doing well, this is something that many get backwards. During a boom, credit expands and during a depression it contracts, generally the World economy has been growing at roughly 3% per year in real terms for about 40 years, that is just a brute fact that cannot be denied.
As to future rates of growth, they will probably be lower as World popultion growth continues to slow due to falling total fertility ratios as women get better access to education and healthcare and more equal rights.
From World bank
https://data.worldbank.org/indicator/NY.GDP.PCAP.KD
From 1975 to 2021 World real GDP per capita grew at an average annual rate of 1.6%.
As World population growth approaches zero and assuming no change in the annual rate of growth in real GDP per capita (likely incorrect), the annual growth rate in World real GDP would fall toward 1.6%.
Dennis,
Expanding credit is a property of an economy that is doing well, this is something that many get backwards.
Yes if it can pay back the debt via the creation of credit. While keeping inflation in check. You should attach a plot of world (private and public) debt to gdp to see how it correlates with real gdp growth. I think you will find they correlate well, which could imply pure expansion of credit is gdp positive which is why all governments and banks do it.
High oil prices are not sustainable in a debt ridden world. A depression is needed to reset the global economy in my opinion.
“As to future rates of growth, they will probably be lower as World population growth continues to slow due to falling total fertility”
There are other factors tilting towards slower growth trend as well
-higher cost of inputs of energy and materials
-gradual aging of the global population (1/2 now over age 30)
-higher debt load diverts capital from productive investment…
On this last point, according to S&P Global-
Global Debt Leverage: Is a Global reset Coming?
“Global debt has hit a record $300 trillion, or 349% leverage on gross domestic product. This translates to $37,500 of average debt for each person in the world versus GDP per capita of just $12,000.”
https://www.spglobal.com/en/research-insights/featured/special-editorial/look-forward/global-debt-leverage-is-a-great-reset-coming
Credit tightening is a healthy (or necessary?) thing in the current environment, it appears. This will contribute to lower growth. We are seeing this play out with the Fed tightening in the US currently, for example.
Lastly, it will be very interesting to see how automation in transport, and how AI being deployed globally will affect all white collar employment/incomes, between now and 2035. These factors could shake up the economic system quite a lot.
Iron Mike,
That is very old school thinking prior to Keynes seminal work.
https://www.amazon.com/General-Theory-Employment-Interest-Money/dp/0156347113/ref=sr_1_2?keywords=John Maynard Keynes&qid=1680187357&s=books&sr=1-2
The book costs 39 cents on Kindle, if you haven’t read it. You could also try Krugman’s, “End This Depression Now”.
In short, I strongly disagree that a depression solves much, unless one likes a lot of suffering for no good reason, I am not a fan.
On inflation, it has mostly been in check from 2009 to 2021, recent inflation has been due to a combination of supply chain problems due to the pandemic and aggressive fiscal stimulus in response to the pandemic downturn.
Hickory,
Much of the increase in Debt to GDP comes from emerging economies that had difficulty accessing credit in the past and have now been able to do so. As to what is “productive investment”, that is up to markets (in the case of private investment) and voters (in the case of government investment in democratic societies) to decide. Perhaps credit will grow more slowly in the future so that debt to GDP decreases, some governments may have overspent in response to pandemic and that fiscal stimulus will subside, higher interest rates will reduce private investment and short term growth will slow.
Will this be a permanent slow down in the rate of real GDP growth? I see a gradual decrease (over decades) as population growth slows. Of course business cycles will continue as before.
In the piece you linked, they argue for a “reset” that entails slower growth in credit so that debt to GDP ratio stops growing or is reduced, they don’t seem to be talking about a depression.
Agree.
I see the risk of depression, or sustained contraction, as not just an issue of debt/credit, but of a combination of factors including the cost of energy (old and new systems simultaneous), aging of many countries, gradual increase in cost of raw materials, food, and climate instability (food), for example.
The credit tightening/over-indebtedness factor just makes handling all those big issues harder.
I am skeptical that there will be a soft landing from population Overshoot.
One of these decades we are in for an avalanche of bricks.
Hickory,
Difficult to predict, energy costs could decrease (in real terms) as solar, wind, hydro, and batteries take on more of the energy load, better farming practices could improve the soil situation, and a more rapid transition to lower total fertility ratios worldwide as women become more educated, have better access to healthcare, and gain more equal rights to men which reduces the need for food, and other goods as population starts to decline at the World level.
Reality might fall somewhere between this admittedly optimistic view and your somewhat pessimistic view of the future, better policy may lead to better outcomes.
Global debt is only possible if there are global savings to match. It’s very one-sided to wring your hands about debt and ignore the fact that it is some else’s investment.
So you should say savers have lent record amounts of money, reflecting their growing wealth and strong confidence in the bright future of the economy. Investments have reached an all-time high.
Alimbiquated,
This is not how debt works. Debt does not come from the pockets of savers. When a bank issues a loan, they create two accounting entries. One on the assets side, one on the liabilities side. Their books now balance, and an amount of money equal to the loan enters the economy. No money was removed from an account anywhere else. From “insvestopedia”:
“In today’s modern economy most money takes the form of deposits, but rather than being created by a group of savers entrusting the bank withholding their money, deposits are actually created when banks extend credit (i.e., create new loans). As Joseph Schumpeter once wrote, “It is much more realistic to say that the banks ‘create credit,’ that is, that they create deposits in their act of lending than to say that they lend the deposits that have been entrusted to them.”
2
When a bank makes a loan, there are two corresponding entries that are made on its balance sheet, one on the assets side and one on the liabilities side. The loan counts as an asset to the bank and it is simultaneously offset by a newly created deposit, which is a liability of the bank to the depositor holder. Contrary to the story described above, loans actually create deposits.
Now, this may seem a bit shocking since, if loans create deposits, private banks are creators of money. But you might be asking, “Isn’t the creation of money the central banks’ sole right and responsibility?” Well, if you believe that the reserve requirement is a binding constraint on banks’ ability to lend then yes, in a certain way banks cannot create money without the central bank either relaxing the reserve requirement or increasing the number of reserves in the banking system.
The truth, however, is that the reserve requirement does not act as a binding constraint on banks’ ability to lend and consequently their ability to create money. The reality is that banks first extend loans and then look for the required reserves later.”
The idea that all debt is loaned from some other account is outdated, and in our modern financial system it is completely false.
Niko,
Facts. 1
Niko,
Let’s do a thought experiment and keep things very simple. A bank with two customers A and B.
The bank has a million in deposits from person A decides to grant a loan of one million to person B.
Now the Bank has two million in deposits (but only one million in reserves) for customers A and B and an asset ( the note on the loan) for one million. Customer B withdraws one million from his account to buy a boat and customer A decides to move his money to another bank (which he believes is more stable) one day later.
The bank is now insolvent as it has no cash reserves to pay customer A.
One can write any numbers they please on a ledger (or type them into a computer). The bank has a problem with the Fed when their reserves are less than zero as I understand it.
Yes banks create money (again macro 101), but bank runs are still possible as we have witnessed with SVB (second largest bank failure in US history).
It still remains true that the bank does not hold all of the deposits and bank runs are possible when customers lose faith in the bank.
I caught by accident Mike’s and GUNGAGALONGA continued debate regarding oil business history on the open forum. I will add, Mike’s is certainly entitled to his point of view, but I think it is clear he stands largely in the corner by himself screaming at the room. There is nothing new under the sun, in broad terms it’s the same business as it always has been.
I think it might help, based on some of Ron’s comments, as to why it seems to be so much disagreement within the oil community. There isn’t by the way but the appearance does exist on the board.
For those who made a living in the conventional oil business, and that includes me, all my partners, most of my friends and all of their families, the horizontal play increased the cost of business to us while at the same time deceased the price we can get for our products. That is to say, we (our ideas) could not compete with multi thousand dollar per acre lease bonuses, we could not compete with higher royalties burdens paid to mineral owners. I get exactly why Mike has a thorn in his backside. Like I stated before I no longer make a living doing what I love to do, that is mapping and selling my ideas. I did not have access to PE, not that my ideas needed it, but I could not compete with the lower risk and perceived returns of the horizontal plays. Back in the late 1990’s I could get a 8000′ well drilled for $150,000, last years I got an a AFE prepared for a similar well in the same area and it was $1,200,000, for a wildcat well. That is if you could get a rig and there is no guarantee of that before your lease expired. You would also have to buy your completion casing BEFORE drilling a well, because if you did not have it you could not case your well IF successful. So I do get it.
But it is the same ole story, look what walmart did to small-town main-street. While I get being mad, what I don’t get is not getting over it, moving on and or learning to participate. I was taught you leave the complaining to the woman and children.
TTT,
Expanding upon your observations concerning the ‘assing out’ of many conventional operators by the more costly/revenue producing unconventional realm, this is continuing apace within the ‘shale’ industry as well.
Smaller operators are struggling to keep up with newer innovations that strongly advantage the bigger players.
Today’s 10,000 foot laterals are quickly becoming yesterday’s 5,000 footers as both technology and economics strongly favor the increasingly common 15,000 foot laterals. (Even the Bakken – home to the 10,000 footers – is adopting 3 mile laterals. Ascent just drilled two 24,000 foot+ wells in the Ohio Utica).
So called simul fracs fracture 4 or more wells simultaneously, saving a claimed quarter million bucks per well.
Big capital challenge for ‘one at a time’ folks.
EQT is implementing (since paused) a program they label ‘combo development’ wherein 4 pads – each containing 4 to 5 wells and close to one another – are drilled/frac’d virtually at the same time. The shared logistics and operations reduce the overall cost per well. That said, it is still a capital outlay of ~$250 million before a penny of revenue is realized.
Consolidation is a given in the coming years.
Coffee, “Today’s 10,000 foot laterals are quickly becoming yesterday’s 5,000 footers as both technology and economics strongly favor the increasingly common 15,000 foot laterals.”
Don’t I know it. Our first well with Continental in Grady County Okla, was Woodford well with a 10,000 foot lateral which kicked off at 11,000′. AFE was for $11,500,000, we leased most of our minerals but kept a 1% WI. Four months after spud they reached their lateral length and exceeded the AFE by 50%. OUCH ! We came out ok as we HBP the 1200 acres, waited as the new formation called the Springer was developed and still have yet to drill out the Woodford Density Wells.
They are now routinely drilling those type wells in 30 days or less. Cost based on the wells we drilled with Ovintiv late last summer was about the same. Consolidation would be great for prices but hard on the consumer, but like you, I think it is coming. Thanks for the input, I always learn a thing or two when you contribute.
“Perceived returns of horizontal plays.”
5 words say so much.
This is a stoopid comment designed to be insulting, by someone who likes to belittle people behind the safety of a keyboard. For the record I have asked this person to stop, to come see me, man to man, and he hasn’t.
I am not a sheep, don’t run with the flock, have lots and lots of followers, and am not alone in my concern for my country’s hydrocarbon situation. I am only “mad” or angry, at the way these amazing shale resources are being so grossly mismanaged. You’ll see what I mean soon enough.
These guys that cannot address the specific issues that I raise, the ‘message’ regarding the future of tight oil in our country… instead like to attack the messenger. That’s all they’ve got. Ignore it and try to remember that not all Texans are like this and certainly not all oilmen in the US are NOTHING like this.
AGAIN MIKE, ‘I am only “mad” or angry, at the way these amazing shale resources are being so grossly mismanaged”. That is an opinion, which you are entitled to. But it is contrary to the opinion of most oil and gas professionals, regulators and politicians. So how many people are employed in the Oil Drilling & Gas Extraction industry in the US in 2023? There are 148,610 people employed in the Oil Drilling & Gas Extraction industry in the US as of 2023. When I got into the business in the mid 1980’s there were 800,000 and 4500 rigs running. By the late 1980’s it was closer to 300,000 with the collapse of the oil price. Today with half that number and 824 rigs running we are producing a record amount of oil and gas. SO mismanagement is in the eye of the beholder. Getting more from fewer people is the definition of efficiency. Some might call that a technological miracle. I know it’s painful but that is the way it is. It aint going to stop. In fact these exact practices will be adopted around the world where suitable rock is located. There is NOTHING THAT WILL STOP IT. Certainly not complaining about it.
Now for some basic math, there are let’s say 200,000 people in the in the oil and gas business. There are 331 million Americans, everyone of them benefits from what you call “mismanagement” , to them it means lower prices for necessary products, diving, heating and cooling the house, all products derived from petroleum. Do you see why NO ONE but you is UP IN ARMS about this “mismanagement”. Now let’s talk about our European allies who take the majority of our exported Oil. Do you hear them complaining about mismanagement? No you don’t, and again it was the FREAKIN DEMOCRAT PRESIDENT calling on us to produce more. CAN you see the picture NOW?
There are a number of people here who I don’t know, but I know I would enjoy having a personal conversation with over a beer because of their critical thinking abilities, even when I disagree with them, that includes Dennis. I have watched his thinking evolve. Coffee, I know I could learn a thing or two. There are many here whose life or professional experience is broader than mine. I can see that right away. There are many here who are much more intelligent than me, I can recognize that right way, it’s why I read the blog, I want to learn more, I want to have my assumptions challenged, it’s how we grow.
You on the other hand, I have read nothing from you that leads me to conclude I could learn anything of value. To the contrary It’s like a friend who got divorced 10 years ago and still can’t stop talking about it,(tilting at windmills) no one wants to be around that. It is my opinion, it is a close call between you and Steve, which one delivers less value per digital word spoken, good news for you is I think Steve has got you by a nose and I am sure he has lots of “followers” too🖖
I will admit that I sometimes have a bit of fun at other peoples expense, kind of like playing with a cat with a laser light. The cat can’t figure out what’s happening, people should be able too. It’s not personal, but I “usually” don’t want to be intentionally offensive. I don’t go over to read or post on Mikes blog so I don’t go out of my to challenge him.
I ask for the forbearance of the board, I have gone back and forth on if I should address this or not, and decided it is best that I do.
Mike says “For the record I have asked this person to stop, to come see me, man to man, and he hasn’t.” Mike here is my response. You constantly attack people, not their ideas, but the people themselves. Second with your farm animals reference and constant invitations to “Man to man meeting” I am not sure if you are looking for a lonely farm boy fantasy experience or a fist fight. But resorting to physical threats is the tell you are losing the debate. that’s a pro tip by the way or as Scott Adams post today.
@ScottAdamsSays
·
6h
Dumb people argue without using data.
Smart people argue with data.
Smarter people know you can torture data until it tells you what you want to hear, so don’t trust it.
Smartest people know the data is not real and neither are you
Now let’s talk risk/reward. I stand 6 foot about 205lbs. I am 64 years old. Today like most days I start my workout doing 100 pull-ups. ON back day i do half of those with a 45lb plate. I have 17” biceps and do dips with two 45lb plates. To say you would be outclassed would be an understatement. While I know that does not intimidate you, to the contrary you are probably getting excited, who could blame you, I would get ZERO benefit or joy from a man to man “meeting” with you. So perhaps Mike let’s just stick to ideas.
Texastea2,
From your comment it sounds like you are losing the debate.
Your comment above adds very little to the discussion.
More comments along those lines and you will be gone.
Plus 1 – I’m starting to wonder if this site should be renamed, maybe angryoldoilmen.com?
Maybe add a third thread/topic:
Oil, Open, and Gloves-off…
while I think it’s generally great to give some leeway to the topics, not sure threats and insults add any real value here…
Kengeo,
Yes the insults are of no value. Unfortunately people feel insulted and return the insults, I do it myself, when someone insults me (sometimes by using the words of others).
Dennis that is fair enough and I agree it does not in any way add to the discussion. But so we are clear, posters can challenge people to a physical confrontations and routinely attack others like Mike does all the time and that is OK by you? I think that is a bit of hypocrisy but it is your blog. I think you understand this, but there are several posters here that routinely attack people personally for their ideas. Would you care to address that at this time? Do you think it is proper, do you think that adds anything to the discussion?
Texastea,
No I do not. Your thinking that Mike wants a physical fight I think might be incorrect. He is aggravated that people like you hide their identity, and can claim they are tough when they might be a 10 year old at a computer. He may have been saying that people are less likely to be impolite when they are face to face with someone. That is likely correct.
You do have a knack for ad hominems. There are others that do the same. None of it adds anything to the discussion, but I don’t really want to play hall monitor here.
My preference is that people behave like adults.
I’ve never “threatened” this guy; that is ridiculous. If you wish to insult someone, or call him/her names, or ridicule 60 years of work and family heritage, simply because you don’t agree with that person, in Texas you ought to have the huevos to do that to his face. Man to man. That is, of course, all I meant, all I asked. Hell, he is way younger than I am and certainly has bigger biceps.
I have not done well at ignoring the insults and I apologize to the community for making people feel uncomfortable. I am sorry. I will do my best not to look, or contribute anymore to the forum in spite of what people wish to say.
Good luck to all; think past next week and always think for yourself. The future is NOT now, it’s in the future.
Mike,
No apology is necessary. Although some like to insult you perhaps because you have a strong point of view, I agree the ad hominems add little to the discussion.
Sometimes people become offended by a comment when some one offers a conflicting point of view and in the process ridicules the opposing view point (calling something flat earth and such, which I am guilty of myself).
We should all try to refrain from these tactics, especially the personal insults.
It is too much work to either edit comments to remove offenses or to delete comments which contain them, note that all responses to the deleted comments get deleted as well (just the way the software was written and I don’t have the programming chops to modify that).
In any case, Mr Shellman will be missed and I am sorry that he wants to leave, his comments are wonderful and we all are wiser when we listen to what he has to say.
Hey Shellman,
I think it would be a mistake for you to stop reading and posting here at POB. For no other reason, if you really are apologizing to the community. Then you owe it to Dennis to stick around for the guy who gets a 10 for tolerance, accepts you for who you are and has always had your back.
You and I may have our differences, but I know your a well intentioned good person who loves his country. I’m pretty sure most others here believe the same. Personally, I can enjoy someone like yourself who pushes back. There’s a lot here for all of us to learn including socialization and writing skills. We could all learn more from Dennis about letting comments roll off our shoulders and being more tolerant. Remember, it’s called the United States and divided we fall. We all make mistakes.
Sticks and stones will break my bones, but names will never hurt me. Now get back up on that horse and be who you want to be. You have earned it. The future is ours to leave a better mankind.
Let it go
Mike , I will add to Dennis’s comments below, It should be recognized by the numbers of people who are still in the business, after the many price shocks, evolving technology, F’ing government shut down, those who still are a making living in this business (800,000 down to 150,000) are very unique individuals. I liken it to being an olympic competitor or pro athlete. Many started out… few got to the finish line. Mike and Shallow are still in the game, their business savvy and hard work demonstrates how a high level personal commitment achievement where many others failed. So with the understanding that a disagreement about ideas is not a personal attack on those recognized achievements, all input especially from those that actually know a thing or two should be welcome.
On a positive note, My base case is a replay of the 1970’s. Higher oil prices because of much higher inputs cost combined with restricted cap ex over the last 6 years will fuel an inflationary cycle. Those with a reserve base that is paid for should be rewarded. Price solves a lot of issue in the oil patch. But don’t borrow money on that, I have been wrong before🖖
HB comment +1
Crude Stocks Down by 7.5 M barrels
Attached is the weekly balance sheet for March 24. Net imports were down by 500 kb/d and crude input to refineries up by 450 kb/d. Combined those two account for a draw of 6.65 M barrel of the total draw of 7.5 M barrels.
Total product supplied was up by 449 kb/d to 20,476 kb/d while Gasoline supplied was 9,145 kb/d up by 185 kb/d.
https://mobile.twitter.com/JKempEnergy
U.S. PETROLEUM INVENTORIES including the strategic reserve fell -11 million bbl in the seven days to March 24, after declining -10 million in the week to March 17:
World Consumption of transport fuel 1983-2021 (gasoline, distillate fuel, jet fuel, and fuel oil) fro BP Stats 2022. Trend line is based on 1983-2019 only and uses OLS average annual increase of 585 kb/d per year.
Natural gas below $2, any thoughts on what’s going on there? Didn’t think we’d see that ever again
Stephen
Two thoughts. Are the gas fields wet so the producers get a good price for the liquids, Ethane, Propane, Butane and Pentane. The other possibllity is that many of the drillers have contracted a higher price with the LNG liquifiers and the low price is the price they get for the excess they can’t sell to anybody else.
Just speculating
Stephen Hren,
Much of the demand for natural gas is weather dependent, this past winter was unusually warm reducing demand for natural gas in North America and Europe where most US gas is being utilized for the past 12 months or so. Simply an oversupply situation which may result in lower completion rates in shale gas plays in the US (particularly Haynesville, Marcellus, and Utica plays) at this price level. Supply will decrease until prices rise to a level where completing new wells becomes profitable again, date unknown.
Also see
https://www.eia.gov/naturalgas/weekly/
From the report linked above (from EIA)
The price at the Waha Hub in West Texas, which is located near Permian Basin production activities, fell 36 cents this report week, from $1.27/MMBtu last Wednesday to $0.91/MMBtu yesterday.
This reduces profits for Permian producers that have chosen not to hedge. As LTO Survivor and Mr Shellman have been saying for a while, current prices for oil and natural gas may lead to fewer wells being completed in Texas and New Mexico because there is very little profit to incentivize greater output.
Hint:
Daily CO2
Mar. 29, 2023 = 421.60 ppm
Mar. 29, 2022 = 420.49 ppm
You lucky human!
You have levels no other human has experienced.
Stephen, I will take a crack at your question. ON a macro level there is a sh!T ton of natural gas available. Relatively small surpluses or tightness leads to over size price volatility, same as we see in the oil markets.
This is just an opinion but it looks to me the traders feel free to trade these commodities up or down until something breaks. For oil it means getting OPEC to make a move one way or the other. For nat gas it might be a public announcements where producers are shutting their gas in.
The Freeport plant is now back to full operation: https://oilprice.com/Energy/Energy-General/Freeport-LNG-Returns-To-Full-Power.html
Once we get past shoulder season I expect prices to tick back up, but that is just a guess. We are only 6 months away from significant new export capacity coming online and that will continue for serveral years. I posted before the EPD report showing a doubling of export capacity over the next 3-4 years. That should help prices significantly. It should also help with price volatility. I don’t have any use for Steve’s “Analysis” below as it is nothing more than panic porn, it takes two data points and paints an over simplistic picture. Since the commodity has fallen from $9 to $2 jumping in now seems like piling on rather than thoughtful analysis.
I appreciate the thoughtful responses. My natural gas bill was less than half in February. I work more in construction than energy and I feel like since the pandemic I am getting a taste of what energy folks have to deal with all the time with the price of their products zinging back and forth all of the place. It makes multi year investments incredibly stressful.
Stephen,
Maybe you might consider the chart below. 🙂
steve
Are you calling Stephen a Dummy?
Stephan here is a bit more color on the nat gas situation. I think it a bit under appreciated the impact the close of the freeport plant had on available domestic supplies and therefor storage levels. It really is a unique time in our business. I did a back of the napkin calculation on how much proved nat gas reserves we have an interest, its off the charts. The point is there has never been a time before where those reserves would not have been developed. Now to be fair most of those reserves would not be available without the much improved hydraulic factoring technology. So we sit and wait for higher prices. Consumers should count their blessing, if the consolidation Coffee and many others predict, with tighter control and discipline, these low prices will not last.
https://oilprice.com/Latest-Energy-News/World-News/US-South-Central-Natural-Gas-Withdrawals-Set-A-Record-Low-This-Winter.html
Randomly noticed that Comstock Resources sold off their entire oil stake in 2019-2020 timeframe and primarily has a natural gas portfolio now…interesting and wonder what their thinking was for selling 15 Bbls…
Super-Low Natgas Prices & Why The Price Is Heading Even Lower For DUMMIES
I thought I’d mentioned this, but I gather it wasn’t understood. The problem with the Natgas Market is that Europe Natgas Storage is 112% higher than where it was last year, and at current projected trend, it will be COMPLETELY FULL by Aug-Sep, something it has never done before.
Also, the United States Natgas Storage Levels are at 5- Year highs, regardless that Freeport is getting back up to Full Export Capacity.
NOTE: I just took the Last Year Gas Inventory Trend Line Chart (BLUE LINE) and added it to the current trend to give a FORECAST for 2023. If true… Europe won’t need anymore gas in Late Summer. This is certainly very BEARISH for the Natgas Price and for the U.S. Shale Industry… which a large percentage of profits came from high natgas and NGL prices.
steve
Steve,
It was a very warm winter, which reduced demand below normal levels, fewer natural gas wells will be completed in pure natural gas plays (Haynesville, Marcellus, Utica) and supply is likely to decrease. This is something that most dummies understand, freshman microeconomics.
One might guess that Europe will import less this summer than last summer as generally storage cannot be filled to more than 100% (assuming no new storage is being commissioned).
Collateral damage .
https://oilprice.com/Latest-Energy-News/World-News/Americas-LNG-Problems-Hit-Banking-Crisis-Snags.html
I wonder how far storage gets them through next winter if it happens to be a frigid, brutal one.
John,
Relevant question.
Quick number crunching …
About 100 billion cubic meters in storage as of end of January, 2023.
2021 saw ~400 billion Cubic meter consumption.
There should be an additional 150 Cbm LNG import capacity by the end of this year via new FSRUs (Floating Storage and Regasification Units) and ~60 Bcm more by the end of 2024.
(Current LNG import capacity is ~200 Bcm per year).
There are still natgas supplies coming in from at least one Russia-sourced pipe, I believe, as well as Netherlands, UK and Norwegian, Algeria, et al supply.
The above data was compiled quickly, but should be accurate.
A long, cold winter could prove to be daunting.
Coffee your data source is incorrect . Use this site . Day to day situation . Average is not important . Look for stock/consumption ratio . The Belgians may be cold while the Latvians may be warm . Averages are misleading .
https://agsi.gie.eu/
Proposed waiver for EU’s upcoming ban on fueled vehicles.
Such cars can be manufactured and sold provided there is assurance their fuel comes from pumps powered by electricity.
Whatsoever the guys in Brussels are smoking , I am not interested .
https://www.hagerty.co.uk/articles/news-articles/e-fuels-u-turn-eu-allows-new-petrol-cars-to-be-sold-after-2035/
A reasonable comprehensive read on Natural gas:
https://oilprice.com/Energy/Natural-Gas/Natural-Gas-A-Comprehensive-Guide-To-The-Worlds-Most-Crucial-Fuel.html
Chickens are ‘coming home to roost’ in the shale patch
We’ve been reporting for months about the souring outlook in the shale patch. The mood is certainly becoming dark. Yes, last year was a bumper year with record cash flows. But cost inflation is wreaking havoc on profitability, and premium acreage is getting thin. Problems in one of the world’s crucial swing suppliers should also be a recipe for higher prices. But as Myles writes below, even shale execs have become gloomier about the commodity.
more Biden backtracking, I suppose the greens are getting a bit of what minorities get, broken promises by the dems. I also suppose this is not news worthy either?
https://www.zerohedge.com/commodities/huge-block-gulf-mexico-auctioned-oil-drilling-infuriating-bidens-climate-activists
Dennis and Mike, I will also apologize, I think Dennis’s comments above are fair. From now on when I or someone else is attacked I will just point it out to the moderator rather than respond in kind. I have used ad hominems when I felt like others were attacking me personally or others personally, rather than just the ideas, Hunting beach and Hickory come to mind. I actually try to keep it light and humorous perhaps it does not come out that way. My regrets.
Dennis and Ovi, I am really curious as to the work you put into the blog. Is it a mere personal curiosity, is there a professional link? What drives the passion?
I think many on my side of the issues discussed, use your data to fill out their perspective on exactly where oil markets and oil production are relative to historic trends. I assume based on what I know, particularly about Dennis, is input from a variety of oil and gas professional is appreciated, wanted and needed to fill out their ideas, thoughts regarding trends. I don’t get as deep into the data as each of you mainly because I don’t see the personal value in doing so. So I am really curious as to why you both do?
Texastea,
Just a hobby for me.
My hobbies are watching movies and lifting weights. Lol
Long time interest in Peak Oil. Looking for something to occupy my time during the Covid lockdowns and avoiding crowds for 2 1/2 years. Appreciate the different perspectives.
US Production at Post Pandemic High
Production was up by 347 kb/d, after recovering from the December weather related drop. The increase is related to big gains from GOM 125 kb/d, North Dakota 97 kb/d and Texas 76 kb/d.
Full Update Monday night.
Thanks Ovi,
The STEO from March had forecast 12241 kb/d for Jan 2023 (as you know) about 221 kb/d too low, which is a fairly large miss.
US C C centered 12 month average (CTMA), including STEO projection from Feb 2023 to Dec 2024.
New peak for US C plus C CTMA in March 2024 (if projection is accurate). Also the trend for US C plus C output from Jan 2023 to Dec 2024 (using OLS) is an average annual increase of 178 kb/d. For World C plus C output, the OLS trend from Jan 2023 to Dec 2024 is about 1085 kb/d per year. Most of the projected increase comes from nations besides the US over the 2023 and 2024 period, about 83.6% of the total.
For World CTMA, includinf STEO projection we have
hhh, are you still committed to $25 oil? the dollar looks to be poised to break down from a very nice head and shoulders topping pattern on the weeklies . If it breaks below 101 I can’t help but think we get a rally in oil and metals. IF the banking crises is stable, I think the fed is trapped for a while. Inflation or stagflation the most likely outcome. Gold closes at a record monthly high in USD. Technically it looks strong, would love for Silver to confirm but lots of data points suggest we are living in the That 70’s show!
goldman see something a bit late I might add.
https://oilprice.com/Latest-Energy-News/World-News/Time-To-Buy-The-Oil-Dip-Goldman-Sachs.html
Banks are hoarding dollars and collateral. As they should because banking crisis has a long way to go before being over.
Let’s entertain the idea of higher oil prices. A move back to $95-$100 would mean more rate hikes from the FED.
These banks that are in trouble are locked in 5-7 years in these treasuries that they have unrealized losses on.
We are staring at 100’s if not 1,000’s of small and mid sized bank failures. Deposits will continue leaving.
You can park cash in RRP for 4.8%. And that is back by the FED who supposedly can never run out of money. Why would anyone keep their money in a bank in this current environment above what the need to pay their bills? Banks particularly the small and mid sized banks are going to have to pay way more to keep old and attract new deposits.
Goldman’s CTA’s are long oil currently. A lot of short covering as 3 bank failures weren’t the end of the world. Don’t be fooled though.
Recession isn’t even here yet. But it’s coming. And that is on top of or combined with the deflationary money due to banks having to hoard dollars and collateral to attempt to make it through.
I’m not at all worried about inflation. I’m worried about $25 oil and what that means.
Collateral is what the problem is. I can guarantee you these banks tried to borrow the money needed but were unable to. Bank reserves created at Fed don’t solve this issue.
I can guarantee you these banks tried using their illiquid loan book as collateral to try to borrow the prime collateral that they really need to borrow money in REPO. Didn’t work for them.
Hole in head,
Seems likely inflation goes to low levels and Fed eases rates, then the treasuries held by banks goes up in value. Oil price will settle at a level where supply and demand roughly match. Unless we have a Depression oil is unlikley to go to $25/bo, certainly not for a monthly average price for WTI.
I would note that you have still not offered a date (or even a range of dates) for when you think this will happen, doubtful we see it before 2030.
My comment above was incorrectly addressed to Hole in head, it should have been for
HHH.
Hole in head has guessed that WTI will be $25/b in 2025, though he might have revised his estimate.
My current guess for 2025 would be $90/bo for WTI for average annual price.
HHH thanks for the commentary, I understand a fair bit of that. As you nailed almost perfectly the SVB issues I was curious what you are watching. I don’t disagree the bank are sitting on huge unrealized losses. But as long as we don’t get a new triggering event that leads to a cascade of failures they can just be crippled business for some time. Yes that does pose deflationary pressure, but I am still seeing much commentary from CEO’s and all are seeing nothing but inflationary pressures as far as they can see out in their businesses. Best that they see is a slower rate of increase in inflation. Inflation looks to be with us for sometime to come.
“Let’s entertain the idea of higher oil prices. A move back to $95-$100 would mean more rate hikes from the FED.” I “think” you may be missing an option here, they just use the excuse that they have no control over oil prices and let it roll, and I think that is what they will do. Come up with some excuse to let inflation run. It’s what’s all countries do when they get in this type of financial situation.
Locally here in central Texas, I am getting flyers for pre-approved car loans and HELOC loans almost every day from my local banks, I have not see that for some time. Not sure what that means but it is a change.
As always time will tell.
FED is going to have to cut rates back to zero and do QE to get all this underwater collateral off the balance sheets of theses banks. To save them.
They don’t have the cover to do that currently. Currently inflation is at 3 times their target. FED’s mandate are price stability and employment. As unemployment hasn’t yet surged. It’s coming but not here yet.
Politically those who are in office can’t afford a renewed surge in inflation.
M2 money supply is in contraction btw. And not just here in US. Soft landing isn’t in the cards.
Money supply is actually controlled by Eurodollar banks not central banks.
Money dealers or primary banks have tightened lending. Which is why these smaller banks are in so much trouble.
Less rehypothecation of collateral. Oil prices are bid up in futures using collateral to borrow money. Oil prices aren’t as simple as supply and demand.
As more banks de-risk and hoard money and collateral prices not just in oil but across the board are going to fall.
OPEC Makes Surprise 1 Million-Barrel Oil Production Cut
there is a saying in my business, it is better to be lucky than good.
https://www.zerohedge.com/commodities/saudi-arabia-makes-voluntary-cut-500000-barrels-day-may
Opec has been signaling for some time the need for additional cap ex to prevent shortages in the coming years. Problem is $75 oil does not provide enough income to pay for both societal needs and additional investments for the future. Add in the volatility and that makes new investments even harder. The “surprise” announcement achieve both goals.
It signals to traders any day you may wake up and have your head handed to you on a stick, and two raises prices for the money to make future investments. When the futures open later today its going to be fun.
I think this goes without saying but you guys might now need to adjust your inflation thinking, it’s the 1970’s all over again.
Abhi Rajendran
@ARaj_EnergyAll depends on demand
#macro overhang turned $80-90 to $70-80
#Opec pulls it back into the former range. And demand holding up risks upside to $90 for sure
#OOTT #ONGT #oil
Quote Tweet
Giovanni Staunovo🛢
@staunovo
·
3m
Oil production cut could lift prices by $10 per barrel, analyst says
#oott
https://reuters.com/business/energy/opec-production-cut-could-lift-oil-prices-by-10-per-barrel-analyst-says-2023-04-02/
Wonder how well global recession works for CAPEX projections. Betting not well.
Guys it is 1,6 mbpd . What is Biden going to do ? Release more from the SPR ? 🙂
https://twitter.com/Amena__Bakr/status/1642550873166426113
This note confirm my thesis as to the timing of the cuts.
https://www.zerohedge.com/commodities/short-oil-bets-plunge-most-7-years
“Will oil continue its recent ascent? The answer will depend on whether the short capitulation accelerates and whether bulls finally step in with some conviction.
It seems OPEC+’s decision to suddenly slash 1 million barrels/day of output could not be better timed from a ‘squeeze the specs’ perspective.”
this is not at all a bullish signal.
of course it will take a day or two for the machine to realize that. Q1 reporting starts soon and it will be quite the reality check. Declining growth, stubbornly high inflation. With the Fed still raising rates. And now OPEC cutting off the juice. We are in Minsky Moment territory. We are talking days or a couple weeks here, not months. (and no – I’m not a perma bear. I was bullish from June 2020 to January 2022)
Yes – HHH was wrong about the month of the $25/barrel call, but his logic was sound and he probably assumed the market would front run Q1 earnings season, which it does like 99.9999% of the time. But hey, they are milking the rebound from the banking dip (e.g. Barron’s cover: “Buy the Big Banks”). But it’s just everyone piling into the remaining part of the ship that’s still above water. the boat is still sinking.
No way SVB and Signature collapse just two days after Silvergate if the system wasn’t already on the razor’s edge.
But don’t worry, the stocks that literally everyone is piled into has gone up for a couple weeks so I think we are 100% in the clear! /sarc
Texas tea,
For the past 4 months (Nov 22 to Feb 23) the average annual rate of inflation (seasonally adjusted) has been about 3.7%. With the banking crisis this is likely to return to 2% before long. I disagree that inflation is here to stay, within 12 months the concern may be deflation and the Fed will be back to zero interest rates. Much of the increased inflation is due to a poor estimate of housing inflation which is likely to be coming down due to a lack of financing for homes.
The future trend for home prices is down and shelter index is a dominant part of the CPI, as home prices decrease inflation will decrease as well. Average home prices increase at annual rate of 15% from Dec 2019 to Dec 2021 (Case Shiller index).
https://fred.stlouisfed.org/series/CSUSHPINSA
See also link below for rental rates, which have been decreasing lately after a rapid rise From April 2021 to April 2022.
https://www.rent.com/research/average-rent-price-report/
source on that inflation rate?
https://www.cnbc.com/2023/03/14/heres-the-inflation-breakdown-for-february-in-one-chart.html
6% – feb
6.4% – jan
6.5% – dec
7.1% – nov
Twocats,
I took the seasonally adjusted monthly rate of inflation for past 4 months and annualized it, the numbers you quote are year over year inflation rates.
https://www.bls.gov/news.release/cpi.nr0.htm
The average monthly rate from Nov 2022 to Feb 2022 was 0.29987%, when this is annualized (1.0029987^12 minus 1) the annual rate of inflation is 3.658% per year.
I’m pretty sure my numbers are the ones people, the economy, and the Fed care about. Rate of Change in economics is one of the least understood concepts by tourists.
Twocats,
That is the number cited in headlines, most look no further, I am not one of those.
Lets look at it another way, Inflation was 9% in June 2022 and has fallen by 3% in 8 months, should that trajectory continue we would be at 3% inflation in 8 months time and back to 2% in perhaps 11 months. It took about 15 months to go from 2% to 9% and 8 months to go from 2% to 6% inflation, so maybe 8 to 11 months to get back to 2%. An intervening recession may make this happen more quickly.
I understand Dennis, we are going to be on different side of this debate. I am the side that inflation is required, desired and wanted as that is the only way to reduce the debt at this point without a depression style economic event. Politicians prefer inflation as it papers over their policy mistakes. I grant inflation is going to come down a bit and I agree the shelter index is a tailwind for the next several months for reduced headline inflation. But again if you listen to the CEO’s of major companies they are seen inflation now built into the system. And with all due respect to government statisticians I am going with those who’s job depend on them being right.
TT and Dennis , my view . Stagflation plus recession in conjugation . A double whammy .
https://mobile.twitter.com/EnergyCynic/status/1642555608615337989?cxt=HHwWioC-9fLnw8stAAAA
OPEC+ is in the driver seat again
Welcome to the defining feature of the future of the oil market
While bullish oil, it’s bearish developed markets who are fighting inflation
One could suspect if you wanted to crush the West geopolitically – you’d keep the heat on inflation
My view is this isn’t the last OPEC + cut we will see this year.
Credit bubble that has been building since the aftermath of 2008 is popping due to bank driven credit squeeze. M2 will continue falling.
yeah, when you have the largest concentric series of bubbles in human history piled one on top of the other, I don’t know as there is a way for things to “come down a bit”.
this is actually what I think of when I think of peak oil over the past couple of years. thinking about “maximum rates of production” is just insufficient for understanding such a complex dynamic of the interplay between the economy, price, and production.
prices are too high for the economy to grow, so they must come down, but there isn’t enough oil (major input) to allow that price to fall enough. mix in a little export land model. pour in marginal oil sources (tight oil, oil sands). bake at 32 trillion dollars for 15 years. and Vwa-Lah Peak Oil Pie!
Texasteatwo,
It is in the interest of CEOs to say inflation is baked in as they can get away with raising prices and get less flack. Competition makes it hard to overdo this and a recession will tend to put a brake on price increases.
The lack of a big union presence in the US makes the wage-price spirals of the 70s and 80s far less likely in the US, I think inflation gets back to 2% within a year (and sooner if there is a bad recession). I agree oil that oil and natural gas prices are likely to rise to $90/bo and $3/MCF gas or higher by September 2023.
HHH,
While M2 has been falling the velocity of M2 has been rising.
https://fred.stlouisfed.org/series/M2V#
In 2021 annual average M2 velocity was at the lowest level since 1960.
they opened up the discount window super-wide – actually beating out 2008? Wow I didn’t realize this crises was worse than ANYTHING that happened in 2008. Huh, it’s probably nothing.
maybe I should go buy some oil futures with that borrowed money?
https://www.bloomberg.com/news/articles/2023-03-16/banks-rush-to-backstop-liquidity-borrow-164-8-billion-from-fed
Bank reserves aren’t really liquidity though. Which everyone will shortly find out if they don’t already know.
This didn’t start in the US though. It showed up in the UK and China long before it got to US banks. It’s a dollar and collateral shortage. Which is why China is desperately trying to use their own currency in foreign exchange to settle payments.
HHH,
I am not disagreeing with you.
Can you please explain this more thoroughly?
“Bank reserves aren’t really liquidity though. Which everyone will shortly find out if they don’t already know. ”
Why don’t Bank Reserves count? This goes against everything you learn in Finance and Economics.
When the FED prints credit ( not money ) in US Dollars, why can’t those be used?
The entire Fractional Reserve Banking system is a FRAUD?.
Please link sources to your claims…again I think you may be right…but this is a game changer
Mind boggling . Did the treasury get privatized ? Economist Michael Hudson and Radhika Desai . 85 minutes but a different insight .
https://www.youtube.com/watch?v=y1je89h1eIg
Q ; What is the difference between a conspiracy theory and reality ?
A : Two years .
We don’t have a fractional reserve banking system. 100-200 years ago yes we did. But that isn’t how banking and money work in today’s world. Banks don’t lend your deposits out. That’s what your told but that’s not what actually happens.
Everything is a collateralized loan. When you borrow from a bank to buy a house or car. Money is created out of thin air at the bank and loaned to you. You have to pay back more than you borrowed because of the interest cost. Which is why there has to be continuous growth in money supply. Otherwise debts aren’t payable.
Commercial banks have the power to print money. But it’s really just a ledger system and banks are really just bookkeepers.
If you deposit money in a bank. The bank knows on average those deposits will stay for 5 years. So bank uses your deposits to buy government bonds. Which are assets that back your deposit. If everyone goes to a bank to withdraw their money at the same time the bank has to sell assets to get that money.
During the pandemic an enormous amount of bank deposits hit the banks at once due to government stimulus. Banks had no choice as they are required by law to back those deposits with assets. So they bought treasury bonds. Well the value of those bonds fell rather dramatically when FED raised rates to fight inflation. The underlying collateral that backs your deposits lost value. Which isn’t a problem until deposits start leaving.
If you want return on your deposits banks are paying 0.5%. You can get 4.8% in money market funds. Or you can buy T-bills that yield about the same. Why would anybody hold more cash at a bank beyond what is needed to pay bills is beyond me.
Banks borrow short term and lend long term and pocket the spread. Can’t do that with an inverted yield curve. But since banks are only paying 0.5% on deposits and loaning out money at 4-5% or whatever they can still make a profit. Banks are going to have to up what they pay on deposits in order to keep them now. Which will shrink their profit margins.
Banks however don’t have the ability to print money to bail themselves out.
If bank reserves were actually money there would be no bank failures. FED would just print them up hand them over to bank in need and bank would continue on as if nothing was wrong.
If the SNB could print money Credit Suisse would still be in business.
Central banks aren’t central to the monetary system. Primary banks and collateral are central to the monetary system.
That was great HHH. Thanks!
I’ll have to WRESTLE with those idears!
HHH , we have discussed the Eurodollar problem and it’s application to China . China must accelerate . The West vs the rest . A divorce ?
Eurodollar system built the China we know today. Without decades of western money flowing into China. China would look a lot more like it did in the 60’s and 70’s than it does today.
We going to decouple from China. But in order for China’s currency to become a reserve currency that gets used. They are going to have to free float their currency. No peg! And also do away with capital controls. Otherwise trade in RMB will remain at 2-3% of global trade.
I see all the headlines of how the petrodollar is doomed. But let’s be clear there was never really such a thing as the petrodollar. It’s Eurodollars. And Eurodollars are decentralized. No government or central bank oversight.
And just because some countries want to do away with the dollar that doesn’t mean the markets care. Markets demand Eurodollars.
HHH,
are you saying the discount window is basically for cash on hand in case people withdraw their deposits but isn’t really money going into the economy per se?
that’s how I interpret the discount window (and why I agree with you), but I may be misunderstanding.
HHH , you are in good company . All the small banks are toast . Nouriel Roubini . It is nota liquidity problem but an insolvency problem .
https://www.marketwatch.com/story/most-u-s-banks-are-technically-near-insolvency-and-hundreds-are-already-fully-insolvent-roubini-says-18b89f92
On the blog “Resilience ” .
https://www.resilience.org/stories/2023-03-29/americas-fossil-fuel-economy-is-heading-for-collapse-it-signals-the-end-of-the-oil-age/
Thanks for the link HH. Here it is again;
America’s Fossil Fuel Economy is Heading for Collapse – It Signals the End of the Oil Age Bold mine.
“US Shale Boom Shows Signs of Peaking as Big Oil Well Disappear” read one headline in the Wall Street Journal. “The aggressive growth era of US shale is over,” Scott Sheffield, CEO of top independent shale firm Pioneer told the Financial Times. “The shale model definitely is no longer a swing producer.” And according to Bloomberg: “The specter of peak oil that haunted global energy markets during the first decade of the 21st century is once again rearing its head”.
US industry executives are now openly acknowledging that US oil production is likely to peak within the next five or six years, or perhaps in 2030. But there is mounting evidence that the peak will come much earlier, with some industry observers pinpointing its arrival as early as within the next one or two years.
Ron, I will add a bit of commentary, here. Again it reads a bit like panic porn rather than analysis. I am not saying us oil production is going to grow, but lack of growth does not mean collapse, it means lack of growth. If oil prices stay at these levels but input prices continue to rise, “new” oil production will drop, not just here but everywhere. Likewise if oil prices rise greater than the increase in input cost, I would expect producers to keep their production flat to very small amounts of growth, as that is what they are guiding for in the investors presentation.
I can almost assure readers, based on where I am active the US producers still have a fair bit of runway ahead, there is not a “collapse” in the cards unless we get another severe economic shock. If that happens all bets are off, but thats was not the point of the article. Again, I would add to watch the midstream guys, look where they are building pipeline capacity, they have a much better understanding of the future production trends than a journalist sitting at a desk that takes one or two data points to build a thesis for an article that he/she/it makes money to write. food for thought.
I think “flat” oil production in the US is the most likley case for the next few years.
Texastea,
The EIA agrees and is forecasting annual average growth in US C plus C output of about 177 kb/d per year over the next two years, nearly flat and perhaps they are too optimistic (though this seems roughly correct to me).
TT , ” but lack of growth does not mean collapse, it means lack of growth. ” You are on the wrong side of the equation . The end of ENERGY growth means the end of ECONOMIC growth . The three fundamental truths (1) The energy is the economy (2) There is no such thing as a steady state economy (3) The end of growth is the beginning of collapse . Now add to the energy and economic degrowth the ecological collapse ( 3 E=Economy, Energy , Ecology ) and we have a perfect storm . Connect the dots . Nothing is in isolation . My guru told me ” When in doubt ,return to the fundamentals ” I am not even talking about the 3 D ( Debts , Deficits , Demographics ) . Add 3 E and 3D and you will get the big picture .
P.S ; When in doubt return to the earth — Tibetan Lama
HIH, well I think we are talking about two different issues, the article I was addressing was relating to the lack of shale oil growth due to local economics and industry goals not the broader principle of Peak Oil. I personally do not think we are at the dawn of the energy emergency. Like I have said many times, NAT gas will supply energy for the industrial base at least for the US and our allies for some time to come.
When I see the NE part pf the US stop burning oil to generate electricity, I will revisit the peak oil issues in much greater detail. Right now I will focus on just keeping the green wing nuts from throwing our economy into a depression.
Tex, of course, the US peaking will not cause collapse. That was not the peak I think they were talking about when they wrote this sentence:
“The specter of peak oil that haunted global energy markets during the first decade of the 21st century is once again rearing its head”.
That is the world peak they are talking about. Whether or not it will cause collapse is another debate. It all depends on how fast the decline is and how fast renewables come online. It could go either way. But if I had to bet, I would bet on collapse. If we do get collapse, it will not be just because of peak oil. That will be only one of the contributing factors.
Correct Ron , ” A small hole can sink a big ship ” . Here we have a dyke with multiple holes but the hand has only 8 fingers and 2 thumbs to plug the holes . See my post above .
In the USA, people are completely ignoring that Medicare and Medicaid cost the USA 2 trillion dollars last year.
That is growing at 9% per year.
This will collapse the government, or the citizens or we collapse the medical industry to stop it ( 20% of GDP ).
If this happens with declining oil….I’m all in on collapse 20 – 50% of GDP (self aware internet “expert”)
Cascading effects (real estate, less tax revenue, bank deposit liquidity, etc) could be devastating.
Karl Denninger is the expert on this.
http://www.market-ticker.org
Ron and anyone else who sees peak oil as not just a peak liquids event will find this very informative.
https://m.youtube.com/watch?v=CDBJdQnjE2o&pp=ygULbmF0ZSBoYWdlbnM%3D
That was an interesting discussion thanks for posting.
OPEC oil output falls on Angola, Iraq outages Bold mine.
OPEC oil output fell in March due to oilfield maintenance in Angola and a halt in some of Iraq’s exports, a Reuters survey found on Friday, adding to the impact of strong adherence by top producers to a supply cut deal by the wider OPEC+ alliance.
The Organization of the Petroleum Exporting Countries (OPEC) has pumped 28.90 million barrels per day (bpd) this month, the survey found, down 70,000 bpd from February. Output is down more than 700,000 bpd from September.
OPEC and its allies, known as OPEC+, agreed to cut production in late 2022 to support the market as the economic outlook worsened and prices weakened. A meeting of top OPEC+ ministers on Monday is expected to confirm the existing policy.
OPEC+ lowered its output target by 2 million bpd, of which about 1.27 million bpd was to come from the 10 participating OPEC countries. The target remains in place for March.
There is a lot more to this article. Click on blue headline above to read it.
An indirect but likely very accurate indicator of peak oil, and peak oil affordability, is the global air passenger charts or the global land passenger miles.
These measures do show downturn related to covid or other significant economic depressive episodes, but the long trend has been up and up.
At some point we should expect to see peak oil being reflected in a sustained drop in these indicators, as non-essential uses of transport fuel gets scaled back. Its where the metal meets the grindstone.
On land, electric transport will blunt this effect but there will still likely be an easily recognizable drop in global transport numbers.
example of data sources that will show the action-
https://www.statista.com/statistics/564717/airline-industry-passenger-traffic-globally/
I’ve wondered if perhaps the “shale revolution” won’t go down in history as one of the biggest mistakes humanity has ever committed and the largest misallocation of resources ever made–despite the obvious competence and expertise exhibited by those involved in the fracking of tight oil, whom I have no intention of dissing.
Why? Because at the reputed oil “peak” circa 2005-2008, the arrival of growth in the shale patch did three things to hamstring our chances of having a robust future:
1. It put people to sleep about the reality of peak oil. The noise on the internet was tremendous–including the bloviating of incompetent, narcissistic commentators. So when shale put the lie to the overheated predictions that were circulating, it buried peak oil deeply and permanently for most people. Likely there are many who will never, ever accept the concept again; and when the effects of peak are being felt, they’ll blame it on something else, because “peak oil” has obviously been “disproven.”
2. It further delayed by at least fifteen years any chance of mitigating the inevitable peak, whenever it should happen. Robert Hirsch was famous for his estimate that it would take approximately 20 years to properly “mitigate” a worldwide drop in oil production; so the false reprieve granted by US tight oil growth has not only cost us those years to prepare but put us further in the hole as far as time to mitigate is concerned. I also wonder if the stretching out of the peak hasn’t sharpened the cliff on the other side–the so-called “Seneca cliff” that we’ve heard so much about.
3. It allowed humanity to dump yet more CO2 and attendant GHGs into the atmosphere for a couple more decades than would have happened had peak fallen on Deffeyes’ date of 2005 [yes, his prediction for “conventional” was pretty accurate; but who knew there was so much crap oil to mine, blast and scrape out of Earth’s crust?] Trying to shift gracefully and painlessly to a less-carbon-intensive paradigm while the carbon paradigm itself is being unceremoniously ripped from our grasp is bound to be problematic, shall we say.
But then again, maybe this is just flatulence.
Mike B,
plus 1 for the three points
HiH mentioned: “Socrates was spot on when he called amathia (willful ignorance) the one and only evil.”
Dennis wrote: “Wind, solar, and batteries are cheaper than fossil fuel especially in areas with good resources of wind or solar energy.”
These so called green energy sources are not common produced goods. They need a lot of ‘rare earth metals’. Not so rare now, but could become so when demand is rapidly soaring. Other problem: now the world depends for about 90% of production of rare earth metals on China. That is much worse than the present situation with crude oil. The European Union is planning to produce 10% of their need of these metals in Europe in 2030. But the mines are not in place yet. For various reasons it will take many years before the first metals can be mined in big quantities in different European countries. Not a favourable situation for a rapid energy transition.
The electricity companies also have a lot of work to do to be able to take the increasing supply of electricity. Anyhow, that’s the condition now in the Netherlands.
Han Neuman,
Solar requires very few rare earth metals, and most uses of these rare earth metals can be reduced as they become more expensive. As fossil fuel energy becomes more expensive solar and wind become relatively cheaper. We are are pretty far from an energy shortage especially as energy requirements are reduced by a factor of 3 as we move to wind and solar from fossil fuel use for energy production.
If fossil fuel energy becomes more expensive so will solar and wind as both need massive amounts of them to manufacture, transport and maintain them. The youth I know would refer to such claims as a cope.
Required,
Non-fossil fuel energy will gradually provide a larger and larger share of total energy, from 2012 to 2021 fossil fuel consumption grew at 0.7% per year while non-fossil fuel energy consumption grew by 4% per year, costs for wind and solar have been decreasing while fossil fuel prices have been increasing, so history contradicts your claim.
Coyne;
First of all, those “few rare elements” that you say are required for a solar panels still require tens of thousands of pounds of mining tailings per ounce of rare element to produce them. Furthermore, huge amounts of diesel are required to build the mine roads and operational infrastructure, dig/scrape the hole and process those elements such that they’re suitable for manufacturing in the solar panel. Clearly, huge amounts of energy are expended before you can even get access to the minerals to build those cells. And then there is the cost and energy involved in cleaning up those tailings afterwards. Or did you ever bother to think about that?
Then, you say that the costs for wind and solar are decreasing while fossil fuels have been increasing. But, you knew damn well that Germany had to offload It’s windmill blade manufacturing operations to India this year, and almost all solar is now built in China even as hundreds of solar cell manufacturers went BK both in China and the US. Most of those cells produced in China are at either break-even or at a loss, with manufacturing operations and shipping are being financed by the Chinese government.
Green Energy production in Germany last year was dismal, they had very little wind and solar activity to produce energy that was at break-even cost of production.
With respect to wind energy production, it appears that you are forgetting to mention certain intractable problems with that. For example, windmill energy production is not linear through the wind speed range; if wind speeds drop even 10% (i.e 5-10 km/h) for a large windmill, then energy production drops off by about 30 to 40%. So we even slight discrepancies in wind patterns can have huge effects on actual electrical production at windmill farms.
And your last quote is a real beauty, where you said that fossil fuel prices are going up while solar prices are going down. Now how is that even faintly possible? It is after all, fossil fuels, that are used to build those green energy items so it follows that if prices go up for base inputs then that is what it’s going to happen for the finished product. The only reason that those green energy items have gone down despite increasing fossil fuel prices is because China is manipulating green energy manufacturing and supply economics.
Finally, I noted with interest that Saudi Arabia has announced 1mmbbl/day production cuts. So it will be interesting to see how this is going to mess with your ongoing cornucopian oil production pronouncements.
Mike Sutherland,
Solar costs
https://www.nrel.gov/solar/market-research-analysis/solar-installed-system-cost.html
Wind costs
https://www.nrel.gov/docs/fy23osti/84774.pdf
all the costs you mention are included in the system,
see also page 8 from document linked below
https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
where for new units entering service in 2027 solar is the cheapest form of energy with LCOE of $36/MWh(without any tax credit) vs $37/MWh for combined cycle natural gas (cheapest form of fossil fuel generation).
I have oil output at about 3000 Gb for my best guess scenario, about 500 Gb less than the famous cornucopian Jean Laherrere et al from 2022.
https://www.sciencedirect.com/science/article/pii/S2666049022000524
Dennis Coyne,
That is not an answer to the problem of the high dependence on China for those metals.
Why Europe desperately want own mines of rare earth metals, if only to produce 10% of their need ? ‘The world’ also plans to scrape the ocean floor with giant machines to collect rare earth metals. Various countries are waiting for the Arctic to become ice-free and permafrost to melt because there is crude oil and NG to extract. Your opinion is probably that those fossil fuels will be needless.
Solar panels (how many ?) require very few, but one wind turbine requires a ton of Neodymium, among others.
By the way, China and India are planning to use record amounts of coal for electricity production this summer. And the climate change agreements ? To hell with them.
More heat waves: many more airconditioners in the near future.
Fresh water shortages are looming in quite some countries, even in Europe. Same with chaos and anarchy.
You live a little bit in Utopia land. Not meant to offend you. Just my vision of the big picture.
Han- “Not a favourable situation for a rapid energy transition.
The electricity companies also have a lot of work to do to be able to take the increasing supply of electricity.”
Agree. Its a gargantuan job to undertake. Even harder for a civilization were the vast majority of people, and therefore governments, have been sleepwalking or outright obstructing their way into the situation-
a situation which has been clearly written in huge letters on the wall since the early 1970’s.
It will be bumpy, and many or most places will fail to get the job done to the extent people have come to expect.
And big choices have to made by experts who don’t have a vested interest. Consider hydrogen for example…this may be a huge waste of resource, effort and capital.
Consider the information presented in this podcast with a hydrogen expert (long history in chemical engineering) https://www.thegreatsimplification.com/episode/63-paul-martin
Niko —
he reality is that banks first extend loans and then look for the required reserves later.
Yes, financial accounting is complicated, and there are way to bend the rules. However, the idea that banks can just invent money at will is populists nonsense.
Fundamental question: where does money come from? Who is allowed to create money?
The numbers I have heard are that 90% or more of the money in circulation is created by banks as loans. I remember the days when people could sign over checks, essentially using checks as currency. Money creation. In any case, the first step in understanding prices is money creation. The people in charge of setting interest rates are incompetent in that they understand neither growth in economic production (because they vastly underestimate the role of energy) nor prices (because they believe the law of supply and demand actually says something, it doesn’t, it is compatible with all price and production data, nothing can be deduced from it).
Have we reached Peak Shale ? Interview with Mr Goehring of Goehring and Rozencwajg ,
https://www.youtube.com/watch?v=iHzWGnbI9nw
Novak says Russia to extend 500,000 bpd oil production cut until end of year Bold mine.
MOSCOW, April 2 (Reuters) – Russia will extend a 500,000 barrels per day (bpd) oil production cut until the end of the year, Deputy Prime Minister Alexander Novak said on Sunday.
Russia announced the move within minutes of statements by Saudi Arabia, Kuwait, Oman, Iraq and the United Arab Emirates that they were also reducing output until the end of the year. Russia is part of OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies.
“Acting as a responsible market participant and as a precautionary measure against further market volatility, the Russian Federation will implement a voluntary cut of 500 thousand barrels per day till the end of 2023, from the average production level as assessed by the secondary sources for the month of February,” Novak said in a statement.
The announcement means Russia has now twice extended the output cut that Novak first announced in February.
Novak said on Feb. 10 that Russia would reduce production by 500,000 bpd in March. On March 21, he said the cut would continue until the end of June.
On March 24, Novak said Russia was very close to reaching the targeted level of output, which he said would be 9.5 million bpd.
I am posting a note here because I have noticed a dramatic increase in the level of animosity, and also a tendency to apply the religion of electric vehicles and renewable energy sources to nearly every woe facing mankind. I personally think this is a good site for intellectual back and forth, and I learn from each of you. But you’re not evaluating the Big Picture–at least as I see it. Even worse, you’re not mad about the right things.
I am a little bit of every aspect of oil and gas, but I don’t consider myself an “oilman”. I own mineral rights that have been in my family for well over a hundred years. On that land is a Cheyenne Indian cemetery as well as our own. My brother, who died of bulbar polio, is in the ground there, as are three generations of my family. I have bought minerals in five states. I have had WI in both unconventional and conventional oil wells. I have sold oil and gas pipeline right of ways and also transmission line right of ways to wind farms. I have been drilled vertically and horizontally–and it hurts both ways. The shale revolution saved America and the world from oil prices well over $150. My last adventure in conventional wildcat drilling (in Texas) is going to produce a strong well (from e-log and test) but the cost ballooned to almost $7M. After writing another check for my 8% WI, I poured myself a whiskey and turned on the TV, only to see the last Republican president interviewed by Sean Hannity. Asked what ie would do differently than Mr. Biden, he said–and I kid you not–“Well, the first thing would be to drive down the price of oil.” How out of touch is that? The shale basins are barely above breakeven unless you had the sense to employ luxurious spacings and are in a wonderful spot. This conventional well I’m a small part of has turned out to be a complicated issue–in a desperate attempt to get oil out of an overlooked fault block. It may make money, or I may get drilled vertically again. As bad as the Republican, the current Democrat president has perverted the “Inflation Reduction Act” into a cash cow for EV’s and renewables without much regard for human rights issues infiltrating those industries.
Those with religious fervor over EV’s and renewables should read the book, “Cobalt Red” by Siddharth Kara, and then enlarge upon it. The DRC (Democratic Republic of Congo) was blessed and cursed with a graben during an upheaval, and it brought magnificent riches to the near surface. Copper was most important in the 19th century, and cobalt was a by-product in the so-called Central Africa Copper Belt. But now, due to the use of cobalt in lithium batteries and renewable energy instruments, it’s the cobalt that’s valuable. In lithium batteries, cobalt is what gives you a 400-mile driving range versus 100, and if you reduce the cobalt and increase the nickel you get fires that can’t be put out. The cobalt is in great demand for its energy density. Unfortunately, a very significant slice of it is mined by children and women, hacking at the ground for heterogenite, the ore that holds high-grade cobalt. They do this for about a dollar a day. Then the cobalt is processed by the Uyghurs in another slave labor environment. It is impossible to drive a Tesla without using a battery containing the work of child and forced labor. Impossible! In 2023! Why? Because as much as 25% of the cobalt from the DRC is “artisanal” or collected by children and women on starvation wages. The “system” allows it to be admixed with the “non-artisanal” cobalt from open-pit mines, mostly in the Katanga region. There seems to be no replacement for cobalt. Computers, pacemaker batteries, smartphones all used tiny amounts–but these big long-range lithium batteries require gargantuan amounts of it.
You have a need to get mad? Then get mad over this. There are tens of thousands of these kids. The cobalt came up from the mantle in close affiliation with copper, but also with lead and uranium. These kids have 40 times the normal level of lead in their bloodstream. The world is setting the stage for untold misery from lead poisoning and radiation. This so-called clean energy revolution is utterly grotesque with human labor violations. Having been involved in the oil and gas industry in different capacities for a very long time, I have never seen or heard of child labor or substandard wages. What I’d like to know is, where the hell is the outrage over this? The very people who write sanctimonious notes about the terrible effects of oil and gas are surprisingly silent on this issue.
Thank you for allowing me to vent my own personal brand of animosity here. I’ll go back inside my old-man cave. Those of you who reply with a rather superior mood about solving the energy crisis that looms from peak oil need to check your batteries, so to speak.
Gerry, I hope it was a good whiskey, you deserve it for such forthright clarity. I think they call this type of thinking “selective outrage” where they chose to be “mad” about something with out any context what so ever. Kuddos
Abhi Rajendran
“The timing of this with where demand was headed, plus product market tightness and coming out of turnarounds, isn’t really adding up to me”
at the risk of mansplaining to a highly regarding oil industry analyst I think it is very clear, America is now weak, we are in a war, we have debt coming out of our A$$es. We are divided, we just blew through our strategic petroleum reserves for political purpose, we try to prohibit our own companies from producing oil here, and last but not least we have a skeleton for a president, and by golly they are going to shove that type of decision right back up our backsides.
And here at POB on the oil side “we have” political rants “coming out of our A$$es.
“America is now weak” compare to who ? Just name one country who is stronger ?
“we are in a war” with who ? When did congress declare America at war ?
“blew through our strategic petroleum reserves for political purpose” says who ? Fox and their followers ? Almost two thirds of the reserve remains and the next time the price of oil falls below production costs you will enjoy it being refilled.
“we try to prohibit our own companies from producing oil here” Just less than a month ago the Biden Administration approved the Willow project. America is producing record amounts of oil and gas. Replacing Europe’s lost production from Russia.
” last but not least we have a skeleton for a president, and by golly they are going to shove that type of decision right back up our backsides” The man has 40 years of experience from the Senate, 8 years as Vice President, he got over 5 million more votes from Americans than the twice impeached Trump. And maybe most important of all, for over a year now he has keep America out of war and has supported Ukraine against Russian tyranny.
Your denial of facts makes you full of shit. Turn off the right wing talking points and educate yourself.
HB, I give you credit and fully acknowledge HB you are the reigning champion of denial, and the king of kings at being full of sh!t. But at least you are loyal you got the going for ya 🐶 and now next to no one cares what our “great” “experienced” leader thinks:
https://www.wsj.com/articles/japan-breaks-with-u-s-allies-buys-russian-oil-at-prices-above-cap-1395accb
You didn’t address one of your bogus statements. You just went strait for the propaganda Trump card and accuse me of your lying type of behavior.
“Dominion is suing Fox for $1.6 billion in connection with what it alleges was the network’s airing of false information about the company’s software, claims promoted by former President Trump’s associates and allies after the election.
Delaware Superior Court Judge Eric Davis rejected Fox’s attempt to throw out the suit ahead of trial, and he ruled that Dominion has proven the first elements of their defamation claim: namely, that the network’s statements about Dominion and the 2020 election were false.”
https://thehill.com/homenews/media/3928459-judge-sends-dominions-1-6-billion-lawsuit-against-fox-news-to-trial/
HB, you aint got the brains that god gave a goat. I have no intention of “debating you’. I don’t respect you, your ideas or what you stand for. From where I sit you are one of the few remaining jerks left posting here.
I do not see how the above relates to oil and gas so perhaps you intend to mock the rules Dennis has outlined for the forum. Take that crap to the open forum.
Texastea,
HB was responding to your rant. I also note that only you resorted to name calling.
Biden is a paper tiger aka skeleton.
“Biden made a controversial trip to the region last July but came away without any commitments on oil production. Then in October, when OPEC made a surprise cut of about 2 MMbpd just weeks before the U.S. midterm elections, Biden vowed there would be “consequences” for Saudi Arabia, but the administration did not follow through.”
https://www.worldoil.com/news/2023/4/3/opec-makes-shocking-oil-production-cut-amidst-new-inflation-risk/
OPEC+ oil alliance announces surprise production cuts from May
Saudi Arabia and other OPEC+ oil producers have announced voluntary cuts to their production amounting to about 1.15 million barrels per day (bpd), calling it a “precautionary measure” aimed at market stability.
Frugal
Next stop $25/b. 🤣 🤣 🤣
Ovi, you’re hedging your bet!
For Algeria, Gabon, Oman, Kazakstan, Iraq and, possibly, Kuwait I doubt if the cuts are really voluntary. They are either reversions to pre-covid decline rates or eliminating the boosts to production that can come after prolonged shut downs that allow pressure recovery from resting some fields or a catch up on maintenance requirements.
More to come . Rigs at Haynesville . $ 2.50 for fracked NG at Henry Hub is unsustainable .
Aera energy in California is about to shut down a few more rigs because the lack of permits for new drilling. The company I work for will only have one rig from Aera operating. It will definitely get slow and hoping they don’t cut my hours.
oh look, i have good company in the full of shit lane😂
“This action takes a significant amount of oil off the market. The move comes after the US President Biden having sold the US SPR down to lows not seen since 1980. Very clearly this is a political afront to the US. The move comes around six months after President Biden visited Saudi Arabia in a bid to repair relations between the world’s biggest oil consumer and its biggest crude-oil exporter.”
“The decision could undermine a plan by the Group of Seven to cap the price of Russian oil on the global market. The OPEC production cut will limit Russia’s loss of market share, it represented an unprecedented effort by the world’s biggest oil producers to collectively help Russia with the political and economic problems caused by the war in Ukraine.”
https://traderscommunity.com/opec-announces-surprise-cut-in-crude-oil-production-1-million-barrels-per-day/
This large cut is very surprising.
Current production of 28.9 Mb/d is 0.15 Mb/d above world demand for Q1 and 0.3 Mb/d above world demand for Q2. These are two typical week quarters. I have heard that the warm winter in the US further reduced heating oil demand.
Maybe OPEC has decided that they need $80 oil to cover their ever increasing social payments in this current high inflation environment. This will also help Russia.
The traders who were short over the weekend are going to be burned.
All I see is a $5 trade gap. That can get filled in a hurry. Meaning prices opened $5 dollars higher from where they closed. And depending on what else happens this week oil could easily close down instead of up on the week.
OPEC stated they see the ongoing banking issues and likely fallout. Which is why they made the move. OPEC just told you they see prices going lower not higher. They are so certain that prices are going lower they cut production.
With respect HHH i see it a bit different. Yes we just went to the top of the range at $81 that has been in place since November. We are coming up on the summer driving season, inventories are historically low, actual demand trends are positive. I wont get super excited until we break $82, but when we do a new range up to the low $90’s is not only possible but most likely in my opinion.
Also keep in mind the geopolitical factors. The Saudis Russians and Chinese have been glob trotting together the last few week. Many deals announced. This did not happen in a vacuum. I see it more like the oil is needed, it going to take “x” price to deliver it and they are not concerned with domestic issues, they are concerned with long term supply issues. Energy security is the on the main stage an d other issues are side shows to the big tent.
I understand how the CTA’s work. And they are going to have to cover their shorts. Not just in oil, not just in stocks, not just in bonds. Trading has everything to do with momentum. Maybe we get one last hurrah before credit cracks.
Fine bid these things back up and you’ll get an ultra hawkish FED again.
Right now markets believe FED is done or near done with rate hikes and they believe they are in the clear to bid up prices.
I think there is currently a strong correlation between prices and the value of the dollar. Seems as prices go up the value of the dollar goes up against other currencies. Perhaps that’s because it requires sourcing more dollars which requires more collateral just to do business. Buy and sell oil among other things.
I’d look outside of US for things to break if inflation reignites.
But ultimately we will revisit $25 when enough stuff breaks.
All the same banking issues that the US has exist in Europe. If inflation comes raging back into Europe. ECB will keep raising rates. All those negative yielding bonds on the balance sheets of European banks become a problem.
HHH,
I think its abundantly clear now, OPEC will do their upmost to never let prices hit $25. They might completely halt production if they have to.
Only a global depression will have $25/barrel in its sight.
Well that is what the inverted yield curves are suggesting. Everybody is hedging for a really bad outcome. Trillions upon trillions of dollars are hedging for a really bad outcome.
It’s not just little ole me that thinks a really bad outcome is in the cards. It’s the most sophisticated markets the world has that think that.
hhh so now we wait to see who will be most accurate. but here are some supporting opinions on my side of the argument’
https://finance.yahoo.com/news/100-oil-tighter-markets-analysts-025535859.html
TTT – you argue the peak oil supply side issue very well. and i’m surprised you’re not getting more support from the Dennis and Ron’s of the thread. supply and demand is pretty much their only mantra for oil price predictions. on the other side you’ve got HHH pointing to the macro economic condition. and like you side – I guess we will see.
two final points: one: if demand is so great why are we seeing fed, treasury and OPEC panic actions all within the space of one month. two: could the oil price run from march 17th just be a front-run, fraud on a decision middle east knew was going to happen. i.e. is this opec cut already “priced in”.
Two cats
“could the oil price run from march 17th just be a front-run,” Well your sure can’t say the odds of that are zero. But I think it was a bounce off technical support with favorable demand factors. Look at the recent “surprise” inventory declines.
I posted the other day how Bershire was adding to it oil positions (in March) and now we have this,”Leon Cooperman is bullish on oil and has 20% of his portfolio in energy stocks”. Now it could be these guys are wrong but they are not prone to make emotional decisions, you can bet it’s based on solid research. A 20% weighting is a signal of a lot of confidence in where the oil market is and what the underlying fundamental are.
Looking at the charts it does look like a successfully pulled off bear trap.
Oil prices surge after surprise move to cut output Bold theirs.
Oil prices have surged after several of the world’s largest oil exporters announced surprise cuts in production.
The price of Brent Crude oil jumped by more than $5 a barrel, or 7%, to above $85 as trading began.
The increase came after Saudi Arabia, Iraq and several Gulf states said on Sunday they were cutting output by more than one million barrels a day.
Oil prices soared when Russia invaded Ukraine, but are now back at levels seen before the conflict began.
However, the US has been calling for producers to increase output in order to push energy prices lower.
High energy and fuel prices last year helped to drive up inflation – the rate at which prices rise – putting pressure on many households’ finances.
Responding to news of the latest cuts, a spokesperson for the US National Security Council said: “We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear.”
The reduction in output is being made by members of the Opec+ oil producers. The group accounts for about 40% of all the world’s crude oil output.
Saudi Arabia is reducing output by 500,000 barrels per day and Iraq by 211,000. The UAE, Kuwait, Algeria and Oman are also making cuts.
A Saudi energy ministry official said the move was “a precautionary measure aimed at supporting the stability of the oil market”, the official Saudi Press Agency said.
Nathan Piper, an independent oil analyst, told the BBC the move by Opec+ appeared to be an attempt to keep the oil price above $80 a barrel in the medium term, given that demand could be hit by a weakening global economy and sanctions have had a “limited impact” on restricting Russian oil supplies
WTI also jumped in price, now trading at around $80 a barrel.
Bring it on! The cure for high prices are high prices.
Why EVgo Stock Skyrocketed This Past Week
Story by Joe Tenebruso • Yesterday 2:07 PM
EVgo’s revenue rocketed 283% year over year to $27.3 million in the fourth quarter. The charging infrastructure company added more than 180 new stalls during the quarter, bringing its total to over 2,800 in operation or under construction at the end of December.
EVgo subscribes to an “if you build it, they will come” strategy. So far, the plan is working. EVgo gained 59,000 new customer accounts in the fourth quarter. It ended 2022 with 553,000 clients, up 63% from 2021.
The charging solutions provider’s growth is being boosted by a deal with Pilot Flying J. EVgo is adding charging stations to Pilot’s popular truck stops and travel centers.
“In 2022 EVgo achieved record revenue reflecting the continued growth of EVgo’s ultra-fast DC charging network, blue-ribbon partnerships, and industry-leading technology offerings,” CEO Cathy Zoi said in a press release.
https://www.msn.com/en-us/money/companies/why-evgo-stock-skyrocketed-this-past-week/ar-AA19msQ2
Ten’s of thousands of Democratic voter jobs installing chargers for EV’s. Transition marches on. Did you hear that, neither did I because it was an EV.
Hmm .. wondering if these production cuts are because Middle Eastern countries simply cannot sustain current production?
Frugal,
If the cuts occurred with oil prices at $100/bo, I might agree, in this case I think they believe the market is oversupplied and they want oil prices to go up. Too bad the SPR was not filled while oil prices were low.
I guess they are waiting for HHH’s $25/bo. Though he still has not told anyone when this occurs (the future is a long window). His March 2023 date has now passed.
It doesn’t really matter. The cuts came when the OPEC 13 were producing 2,931,000 barrels per day less than their high 12-month average of 31,837,000 barrels per day in August 2017. And they were, in February, producing 4,450,000 below their all-time monthly high of 33,374,000 bp/d in November 2016. Their February production was 28,924,000 bp/d.
In other words, these cuts are coming over 6 years after OPEC peaked.
Mark Fisher world known oil and gas trader states today oil at $65 is a buy and $85 is a sell.
It was just 2-3 months ago when the Saudi’s were screaming China reopening, China reopening, not enough oil lol
More Bullish Natgas Price Action For DUMMIES…
No comment necessary…
steve
SRSROCCO,
The Jan 2025 Henry Hub Futures contract is trading at $4.63.
https://www.cmegroup.com/markets/energy/natural-gas/natural-gas.quotes.html
click on chart below for larger view.
DENNIS….
LOL… Jan 2025.
Thanks for the laugh.
steve
And today natural gas is trading at around $2. I assume many traders believe the current low price isn’t sustainable.
Frugal,
Correct… not sustainable over the long term. However, it will be interesting to see Europe and USA Natgas inventories over the next few months. If they continue to fill at Above Record Levels, Natgas prices will remain weaker on the SHORT TERM.
Sure… we get much higher natgas prices, OVER $15 in the years ahead.
steve
Frugal,
Most natural gas produced in the US is shale gas, at $2/MCF most shale gas plays are no longer profitable, the well completion rate is likely to decrease and output will fall reducing natural gas supply until natural gas prices rise to a level that is profitable.
I agree the $2/MCF natural gas price is not sustainable, that’s probably why the futures market expects that natural gas prices will gradually rise.
Starting in June 2023 and then continuing with each monthly contract we have:
2.32, 2.57, 2.63, 2.59, 2.69, 3.09, 3.57, 3.78, 3.68, 3.38, 3.11, 3.11, 3.26
the last month listed is June 2024
link below (note that prices change over time, my quote is from time on my comment)
https://www.cmegroup.com/markets/energy/natural-gas/natural-gas.quotes.html
Russian oil output down 300,000 bpd in first three weeks of March
March 29 (Reuters) – Russian oil production fell by around 300,000 barrels per day (bpd) in the first three weeks of March as Moscow reduces output in the face of Western sanctions, two sources familiar with the data told Reuters on Wednesday.
According to the sources, Russian crude oil production excluding gas condensate was around 9.78 million bpd in the period, down from about 10.07 million bpd for the whole of February on average.
Russia is targetting oil production cuts of 500,000 bpd, or around 5% of output , to 9.5 million bpd on average through June.
Deputy Prime Minister Alexander Novak said on Friday Russia was very close to achieving that target.
The cuts relate to crude oil only, without gas condensate, a type of light oil.
Russia plans to cut refinery runs in April, allowing the state to maintain crude oil exports while sticking to previously announced output cuts, data from industry sources and Reuters calculations showed
Russia’s oil and gas output last year defied numerous predictions of a decline, rising by 2% to 535 million tonnes (10.7 million bpd) thanks to a jump in sales to Asia, especially, to India and China.
Renewables Surpass Coal in U.S. Electricity Generation
https://www.statista.com/chart/1503/coal-is-still-americas-predominant-electricity-source/
More support of Dennis’s claim above .
Although I don’t understand this:
energy requirements are reduced by a factor of 3 as we move to wind and solar from fossil
“energy requirements are reduced by a factor of 3 as we move to wind and solar from fossil”
Electric motors are roughly 3 times more efficient at converting energy to forward motion where the wheel meets the road, than are internal combustion engines.
Its kind of a 70,000 ft observation, like EROEI, or oil depletion.
But it does factor in to the practical equation that results in the cost/mile traveled being much less with EV’s in places with a good electrical supply. My wife has an EV and cost for her travel is right about $1.50/gallon gasoline equivalent. We are fortunate to have 2/3rds electricity from hydroelectric here. Other places have coal, or solar, or gas, or wind, or nuclear as their majority source, but almost all places have mixed supply system.
I suggest that people become much more concerned about their regional electricity system- supply, storage, distribution. As oil depletes globally, the electrical system is rapidly becoming the most important thing in energy for the rest of the century and beyond.
Hickory,
You are correct in part (at the axle, electric motors might be even more efficient at roughly 4 times an ICEV), I was referring more to electricity generation where most fossil fuel power plants can convert about 35% of the energy in fossil fuel to electric power, the rest of the energy input is generally waste heat. For wind and solar the output is electricity and we eliminate this waste heat. The line losses apply to all electric power whether coal or solar is the power source. If we look at both land transport energy use (possibly replaced by EVs in the future at least for light duty transport) the factor of 3 reduction in primary energy needs might be roughly correct (some natural gas combined cycle power plants might be 40% efficient, but many ICEVs may be 25% efficient so these might roughly offset.
For space and water heating energy use can be reduced by the use of heat pumps, with air source being roughly 3 times more efficient than a natural gas system and ground source heat pumps being about 6 times more efficient.
Ok 3x less with ev projection.
As for power plants there seems to be a limit to solar due to FF as M /et al point out.
In any case I can just look at price(ignoring manipulation) to cut thru the complexity.
https://www.dw.com/en/desert-large-solar-plants-also-pay-off-in-countries-with-less-sun/a-58284114
Solar plant 3x less than coal.
I’m skeptical but Until the trend is broken I’m leaning towards your arg.
As for intermittent solar and the need for storage the way I see it FF is the storage. It’s not like you have to dismantle power plants.
An interesting aspect of that statista graph is it looks like nat.gas is climbing. So, I’m supposing those new gas plants were strategically placed cutting transmission costs as well.
(But the impact $15 nat.g per SRocco doesn’t bode well)
OPEC just made the Fed’s job more complicated
One anonymous OPEC source said discussions to coordinate further independent cuts gained traction toward the end of last week, when volatility in the banking sector following the failures of several U.S. and Swiss lenders eroded investor confidence in more historically volatile assets, such as oil. OPEC delegates have previously expressed that the oil impact of the banking turbulence would be short-lived, with longer-term questions lingering over the looming demand of a reopening China, the world’s largest consumer.
“What happened to the oil prices over the last three weeks was nothing to do with oil factors, it was everything to do with the banking crisis, and the fears that brings with it. We also had a huge, huge increase in the short market, and that is something that OPEC are very keen to stomp out,” Amrita Sen, co-founder and director of research at Energy Aspects, told CNBC’s Dan Murphy.
Investors generally assume short positions when they expect market or price declines.
OPEC+ doing a short squeeze. Lets see how far they take it. It is economic war right before our eyes.
Iron Mike
I guess OPEC is sending a pretty strong message to the commodity traders.
Ovi,
Definitely, not just to commodity traders but the west who needs cheap energy.
Oil prices between $80 and $150 should surprise no one for the rest of this decade.
Normal range for a scenario like we have.
It may bounce higher or lower briefly.
Ovintiv to buy EnCap’s Permian basin oil assets in $4.3 billion deal
The deal will add more than 1,000 well locations to Ovintiv’s Permian holdings
The move is part of Ovintiv’s efforts to expand its operations in the Permian basin, where the company has already committed to undertaking additional drilling work.
Talk about good/bad timing. This deal must have been signed last week.
I find this deal interesting because it does raise the question of which side has it right. There are many on this board that claim the Permian is close to peak and I guess the seller is agreeing with them. Also the seller knows how their well economics are doing.
On the other hand Ovintiv thinks they know more than the seller and have better technology and are prepared to buy and do not agree that the Permian is running out of good drilling prospects.
Ovi,
I read the message from oil men as being:
Permian growth will be slower in the future, especially at Oil prices under $70/bo and natural gas prices around $2/MCF.
I think oil at $90/bo and natural gas at $3.50/MCF (Dec 2023 Henry Hub futures are currently trading at this level) might create a different picture, but I probably have it wrong.
Dennis replying to your note above regarding my “rant”, the points I made in the “rant “are very much on the minds of our geopolitical allies and enemies , you may agree or disagree but I am certain that is a factor. I also posted a number of others market analysis who made the exact same points. This caught the markets completely by surprise, I can’t recall anytime like this before at least in recent memory, usually opec telegraphs their moves. Lots of ideas on why they did it this way.
Ovi, I have owned and followed Ovintiv for some time. I did sell most of my position after the last investor report because they they failed to achieve their own guidance on 2 important metrics. But this did not come as a surprise, consolidation is a must, higher prices are a must for the economics of the shale plays to work as the input cost keep rising and they keep drilling away their drilling inventory. I don’t think it says anything as to the bigger picture regarding the Permian. Mostly a company specific thing. Ovintiv had to do something and they did.
some excellent random commentary;
Joe Weisenthal
@TheStalwart
THE WHITE HOUSE RISKS BLOWING THE GREATEST OIL TRADE EVER
By not taking seriously the SPR refill it means:
1) Missing a chance to refill cheap
2) Letting OPEC manage the oil cycle
3) Undermining domestic producers
4) Wasting a powerful non-monetary tool to fight inflation
Javier Blas
“The new OPEC+ cuts risk exacerbating those strains and pushing up oil prices at a time when strong inflationary pressures are hurting vulnerable consumers around the world, especially in emerging and developing economies.” #OOTT
John Arnold
@JohnArnoldFndtn
The OPEC cut was only possible because of the inability/unwillingness of the US shale oil sector to grow at the same rate as it was in 2016-2020. With much less supply elasticity in the market today, OPEC is less worried about losing market share if it defends higher prices.
Javier Blas
OIL MARKET: And we’re back with SPR sales.
According to preliminary DoE data, 400,000 barrels flew out of the reserve last week (~57,000 b/d). The US gov plans to sell ~26m barrels in the next few months as part of disposals mandated by Congress a few years ago | #OOTT
“THE WHITE HOUSE RISKS BLOWING THE GREATEST OIL TRADE EVER”
Republicans blocked the opportunity to buy at a lower price
Liz Young head of investment strategy for Sofi says Biden administration couldn’t buy oil to refill reserves because congress is blocking rising debt limit and no money.
Gun, foot, gone
Interestingly the administration does not see it that way. they DO NOT BLAME REPUBLICANS
“The US is unlikely to take advantage of a recent drop in prices to start buying crude for the US Strategic Petroleum Reserve (SPR) this year, US energy secretary Jennifer Granholm said today.
President Joe Biden last year laid out plans to buy crude to start refilling the SPR whenever spot prices were below $72/bl. But a pending drawdown from the SPR and ongoing maintenance at two storage facilities are posing obstacles to start executing the crude purchase plan this year.
“This year it will be difficult for us to take advantage of this low price,” Granholm said in testimony on Capitol Hill today. “But we will continue to look for that low price into the future.”
Nymex WTI prompt crude futures settled at a 15-month low of $66.61/bl on 17 March, and prompt futures today were trading around $70/bl. Those prices are well below Biden’s targeted price, but administration officials say SPR facilities are already tied up handling a congressionally mandated sale of 26mn bl that is set for delivery from 1 April to 30 June.”
https://www.argusmedia.com/en/news/2432531-spr-oil-purchases-difficult-this-year-granholm
I will add it takes a special kind of ignorance to believe we could refill the SPR in a couple of months and at the same time continue to sell reserves out of the SPR.
The world is between a rock and a hard spot. Most of the world needs very inexpensive transportation–which is not an electric vehicle. THE PRICE OF RARE EARTH ELEMENTS AND VITAL MINERALS IS GOING SKY-HIGH.
As a country, we cannot forever ignore the fact that the vital elements going into lithium batteries comes in part from tens of thousands of slave labor: kids picking up lead-encrusted radioactive heterogenite in order to sell the cobalt for pennies. It is hypocritical beyond words to drive a damn Tesla and pretend that you’re doing something grand, or even good, for humanity. It’s just utter bullshit!
To collect enough lithium for one battery, tens of hundreds of tons of earth have to be moved. The REE’s for these batters are, without fail, preferentially found in grabens–and they’re not all that common. Lake Tahoe fills a graben, but most of them are ugly and in poor places on the planet–making it easy to manipulate the populace. There is one in the Helmand Province of Afghanistan, which we surveyed and demarcated, then gave away. it is filled with REE’s and is now being proselytized by China. There is another in the DRC, where the Cobalt Arc is located. China processes 95% of REE’s. China also is gaining a stronghold over the DRC. China is not our friend. China is getting ready to close the door on REE’s (and pharmaceuticals).
The human cost of EV’s is enormous. You simply can’t talk about energy efficiencies, and axle ratios, without at least paying tribute to this–subliminally if nothing else. It is beneath your dignity. Our dignity. Our country–our government–is doing no one a favor by pretending this doesn’t exist. If it existed in the world of oil and gas there’d be a dozen documentaries made about it. I don’t want this to be political but it makes me sick to my stomach to see Governor Newsom lay a production tax on California refineries while the far-greater share of California wealth comes from women and children scrapping for cobalt, and Uyghurs processing REE’s, and the earth being moved using vast amounts of rubber and petroleum in order to build Teslas, smartphones, computers, and store zillions of worthless crap in the high-energy data centers (“clouds”) owned by Google. It has been estimated that, in sheer energy to power these data centers alone, 10% of the electricity will be required in another two years. Who the hell is talking about this? Where is the outrage over the outages and the purchase of electricity from coal-powered utility plants in Wyoming? What hypocrisy!
This sanctimonious BS makes me sick! No one is talking about the bad-smelling end of the stick, and they should be. Everyone should be talking about this. No one talks about the “forever gases” in the magnets of large wind turbines, or that since gas is an escape artist, these forever gases are leaking into the environment–with a greenhouse gas score 27,000 times that of the standard (carbon dioxide). The Inflation Reduction Act was a cleverly disguised and massive endowment plan for the EV and renewables energy thrust, despite the fact that it was the straw that broke the back of the debt to GDP ratio. On many levels, there are so many warning signs that we should be shoveling much of this subsidy money towards carbon capture, and hydrogen, not “this,” whatever this really is. The Democrats–and some Republicans–are pushing renewables and EV’s with very little understanding that it’s going to be net/net nothing, except creating whole new industries from gossamer and moonbeams.
The world needs hydrocarbon energy. That energy needs to be carefully parceled out. Our deep earth energy–hydrocarbons, REE’s, cobalt, thermal, hydroelectric–is the thing that will sustain life on this planet. It is being wasted in so many forms we can’t keep up with the list–and mostly for nothing more than individual greed and profit. I tell you, every damn senseless photograph and half the words that are created on smartphones and computers go into some stupid cloud and are forgotten. But Google doesn’t forget them. They’re collecting billions of dollars for that, using vast amounts of electricity (not to mention the damn cobalt).
Wake up! Like I said before, you’re not mad about the right thing.
this is a great read a little bit of something for everyone. at least one of the”rant” points regarding draining the SPR is featured.
“Now we wait and see what Jerome Powell does… This is, after all OPEC vs the FED still.”
https://www.zerohedge.com/news/2023-04-03/gs-td-say-opec-controls-spice
here is Javier with his take in a 2 min video on the OPEC decision.
https://mobile.twitter.com/JavierBlas
What is implied by his comments on Saudis and Russian common interest, is that they could not have done this without the US energy policy, we shot our biggest bullets, sanctions and SPR drawdown last year and now have nothing to bring to the table, but a squirt gun to a gun fight. They have completely built run arounds to all the sanctions, we can’t raise production and probably wont risk more SPR withdraws. We have no political pressure to bring to bear. Now game this out one more level, if they can force the FEDs hand to raise interest rates they will be in position to bring yet another financial crises to the US because the weakness of our banks. They are playing chess and our president is worried about what flavor of ice cream is getting for lunch.
Texasteatwo,
We will see how it plays out, higher oil prices will bring more oil to market and will speed the transition to alternatives to oil. From May 2012 to December 2014 US inflation was under 2% every month whicle oil prices were over $120/bo in 2022$.
Not clear that oil prices will be high enough to affect inflation very much.
It will be interesting to watch.
Unclear they have gotten around all sanctions, if so Russia would not be reducing output by 500 kbpd, that seems to be an admission by the Russians that the sanctions are indeed working.
Unclear they have gotten around all sanctions, if so Russia would not be reducing output by 500 kbpd, that seems to be an admission by the Russians that the sanctions are indeed working.
Exactly! They held out as long as they could but it finally caught up with them. They will be down about 350 K barrels per day in March and down by at least 500 K bpd in April.
It is not only the sanctions but the fact that all the Western oil majors and oil service companies have pulled out of Russia that will cause their production to gradually decline over the months and years. They deny this but then they deny anything they don’t like.
Ron,
I agree, the sanctions may indeed be hurting Russian output and also making it difficult to sell any more, so less incentive to produce more. At $60/bo there may not be a lot of incentive to develop more expensive resources such as Arctic oil or tight oil.
I expect we may see $90/bo before long, though the higher oil prices may lead to higher output from US tight oil producers, Canada, Brazil, Norway, Guyana, and perhaps China.
Ron and Dennis here is an article that outlines the Russian Workarounds. I agree it is a murky picture but I think the jest of the article support my claim above. I also agree in time lack of western technology will have an impact on Russian production. But you have to weigh that against price. I may have mentioned this before, high prices solves a lot of problems in the oil patch.
https://www.ecb.europa.eu/pub/economic-bulletin/focus/2023/html/ecb.ebbox202302_02~59c965249a.en.html
A new thread on US January oil production has been posted.
https://peakoilbarrel.com/us-january-oil-production-at-post-pandemic-high/
A new open thread Non-Petroleum has been posted.
https://peakoilbarrel.com/open-thread-non-petroleum-april-4-2023/