The EIA has released their latest Short-Term Energy Outlook. Below I compare the EIA’s ever changing outlook for future oil production. The STEO charts below are total liquids and are in million barrels per day.
The EIA increased their December 2014 all liquids estimate but dramatically decreased their January 2015 estimate. The EIA now says US total liquids production declined by 480,000 barrels per day in January.
The EIA still believes non-OPEC total liquids production will take off but not until 2016. They have non-OPEC liquids reaching a new high in December but dropping almost one million barrels per day in January and not reaching that December high again until July of 2016.
The EIA’s optimism depends entirely on US production increase returning to the levels it reached in the last three years. Without any US increase they have non-OPEC production peaking in December 2014, so far anyway.
The EIA still has Russia peaking in 2014. Russia, so far, is having a pretty good year, producing about the same as last year, at least according to the official Russian web site CDU TEK
The Texas RRC publishes monthly oil and gas production numbers. However those numbers are always incomplete and it takes several months for the final numbers to come it. It turns out however that the RRC publishes an estimate of the final production for crude oil and gas well gas but not for condensate or associated gas.
The link for this data changes every month so the only way to get the numbers is via Google. So search on “RRC Production Statistics and Allowables for April 2015“. That will get you the January numbers and they will be this, bold their’s:
The Commission’s estimated final production for January 2015 is 81,015,390 barrels of crude oil and 536,271,896 Mcf (thousand cubic feet) of gas well gas.
If you do the same except insert “March” where “April” is in the above example you will get the December numbers. Always search the month three months ahead of the month you want. Anyway you will get:
The Commission’s estimated final production for December 2014 is 83,718,353 barrels of crude oil and 553,215,585 Mcf (thousand cubic feet) of gas well gas.
Gathering the numbers from January 2014 through January 2015, and converting the monthly data to barrels per day, we can compare them with the incomplete numbers and the EIA C+C Texas numbers.
You can see that the Texas RRC believes Texas crude only production has been basically flat for seven months and January 2015 is below the point it was in July 2014.
It is my opinion, and apparently the opinion of the Texas Railroad Commission also, that the EIA is way too optimistic when it comes to Texas oil production.
In Other News:
Record Energy Share Offerings Are a Warning
Yet, given the current profit outlook for upstream firms, I strongly suggest avoiding the exploration and production industry, including oil production master limited partnerships (MLPs), for the foreseeable future.
That’s $10.8 billion in new stock that small and mid size oil companies issued in the first quarter. Understand that is money that never has to be paid back so for the oil companies it is a little like free money. The oil companies, in exchange for this money, give the people shares of the company. So the people who buy this new issued stock hopes the price will double or triple and they will double or triple their investment. However it likely has a far greater chance of going to zero.
And from the Fed: Fed: Oil production to decline 0.7 to 8 percent
“With oil prices at about half their summer 2014 level, will the investment continue to be profitable and boost production?” asked Nida Çakır Melek, an economist in the Regional Affairs Department for the Kansas City Fed.
“Despite highly productive new wells and an increase in the number of wells drilled per rig, U.S. oil production could decline from 0.7 to 8 percent in 2015, due in part to the significant decline in rig counts and depletion in existing wells,” she said.
Down 8 percent? It all depends on what point you are measuring from, the 2014 average or the December 2014 peak. US average C+C production in 2014 was 8,677,000 barrels per day. But production reached a peak in December 2014 of 9,320,000 bpd. January production was already down by 1.45 percent at 9,185,000 bpd.
An 8 percent decline from December would put US production at 8,574,000 bpd. That is quite possible and I would say quite probable by December 2015. But an 8 percent decline from the 2014 average would be 7,83,000 bpd. Not likely an certainly not likely if you are talking about the average 2015 production.
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does the eia give any reason why production is apparently picking up at the moment. does not seem to make that much sense or does any other data support this assumption?
In a previous thread I believe I said something to the effect that the EIA did not know its ass from a rotary table with regards to Texas oil and gas production. I stand by that statement.
http://oilprice.com/Energy/Oil-Prices/EIA-Changes-Tack-On-Latest-Oil-Crisis.html
Mike
nicely put 🙂
Aims at keeping prices low to pressure Venecuba, Russia, Iran, etc?
“Our mainstream money system is based on competition, selfishness, greed, individual gain, instead of cooperative values, altruism, good will… The mainstream money system destroys communities. It affects everything in our lives…
Outside the USA, there is a worldwide movement to replace the dysfunctional money system that exists– all the individual national currencies.
One of the biggest hurdles is people’s ignorance of how the mainstream money system works… Mainstream money is issued by banks, and those banks have an agenda… they’re giving a public service in providing a medium of exchange which we all use– we have to use– but at the same time they have a for-profit agenda. And there’s a contradiction there. In fact, if you think about it, the banks issuing money is anti-democratic…
If everybody knew the full facts about how money is issued, how it’s put into circulation, who is issuing it, how they have power and control over the economy, and over individuals’ lives, I think there’d be a lot of very unhappy people around.” ~ Francis Ayley
———
“One way to promote local [‘glocal/trans-local’] spending is to introduce a local [‘glocal/trans-local’/ethics-based?] currency… Eventually, in a period of sufficient upheaval, a money monopoly may be impossible to sustain, then local currencies would be freer to operate… Any initiative which reduces our dependence on national currency in circulation is going to be useful in this regard… Holmgren points out that holding cash under one’s own control, outside of the banking system can greatly increase resilience by reducing dependency on the solvency of middle men. This is very much in accordance with our position at TAE [The Automatic Earth], as cash is king in a period of deflation…” ~ Nicole Foss (my parentheses/emphasis)
———
“…On Thursday, a collective of politically radical coders that calls itself unSystem plans to release the first version of Dark Wallet: a bitcoin application designed to protect its users’ identities far more strongly than the partial privacy protections bitcoin offers in its current form. If the program works as promised, it could neuter impending bitcoin regulations that seek to tie individuals’ identities to bitcoin ownership. By encrypting and mixing together its users’ payments, Dark Wallet seeks to enable practically untraceable flows of money online…
‘This is a way of using bitcoin that mocks every attempt to sprinkle it with regulation’, says Cody Wilson…’ ” ~ Wired
———
”Balkind: Permacredits… propose a way for people to invest in permaculture projects. …In the future, systems like Ethereum will create opportunities to rewrite how society operates. That process will present a historic opportunity for laws to be changed. Will the social justice activists be driving that change or will they be hiding from it?
Schneider: So this is really about power.
Balkind: Whenever we talk about money we’re also talking about power. If we want to focus solely on cryptocurrency, we’re talking about the ability of normal people to take control over money, to make it their own, to use it as a tool to better organize their communities and meet their needs… Cryptocurrency and crypto-contracts go hand in hand—so yes, we’re talking about a lot more than money…” ~ Resilience.org
———
“The Gulf States and OPEC, along with every other institution that holds dollar reserves, is sitting under what James Fallows and others have called the Sword of Damocles: they are damned either way. The issue is further precipitated every time the Fed manipulates the interest rate, creating bubbles and devaluing the currency even further.
Someone has to pay for the subsidized interest rates and that someone is anyone holding dollar-denominated assets. Despite the disdain some foreign politicians and planners in oil state may have for the US government, by pegging rates to the dollar and mandating the use of dollars for petroleum, they continue to prop up a dying fiat system at the expense of their own standard of living.
The only viable solution of solvency and prosperity is a free market in private currencies– a solution without the state and its central planners– one voluntarily determined by market participants.” ~ Tim Swanson
——————
“One response could include an alternative ethical currency or currencies as part of an exit-strategy, even if only initially, given the caveat of how money, as an outgrowth of complexity, can lead to various corruptions and losses of democratic control, and given that global trade systems, as well as the internet, itself, may become increasingly compromised over the course of decline/collapse, thereby rendering some widespread electronic currency forms ineffective.
That said, though, while things last, the rapid adoption of an electronic/software ‘crypto’-currency that ran under the radar through encryption and some kind of piggyback on top of something like Bitcoin’s protocol, such as ‘Dark Wallet’, or something along those lines, would appear to merit serious consideration…” ~ Me, from the ‘Permaea Manifesto’ article (out soon)
Those things writ, it is felt that money, itself, no matter its form, will nevertheless always be a problem, in part, because of vested-interest, power and ethical considerations as well as that…
Money is of course a kind of ‘conceptual/symbolic grid’, (another form of potential control), and, as such, can thusly be manipulated/distorted.
Yada, Yada, Yada- Your complaining about the Fed is simple Republican fear mongering when it’s party is out of power. Most anyone who has taken a macro economics course 1.0 understands the Fed is trying to stimulate the economy by putting money in the hands of consumers with no alternative but to spend it. Once financial fears from the Republican 2008 meltdown have subsided and consumption takes off. The Fed will return to a more normal monetary policy. Most of the world got the shit scared out of them in 2008 from the Republican deregulation and spending. The Republicans refuse to simulate the economy by means of fiscal policy now that they are not in power. So here we sit out of whack for the last six years with congress doing nothing but worthless economic ACA repeal legislation. The Republican’s will have their butts handed to themselves again with their God, Guns and fear constituency in 2016. Mark my words, 4/8/2015.
The Federal Reserve, and other central banks around the world are trying to substitute the cheap energy that enabled the economic growth that we’ve come to expect with quantitive easing and other money printing policies. This is not a partisan issue, it’s merely central planners delaying the inevitable collapse facing a civilisation starved of the cheap energy it needs.
Lady, your comment is utter nonsense.
The cost of an easy money policy from the Fed is inflation of which this country doesn’t have.
Non partisan please, “central planners” is code word for communism in the Republican vocabulary. Just who are these “central planners” you speak of ? The biggest bunch of central planners I can think of is the United States Congress. They manage the largest budget on earth at about $3.9 trillion per year and the Republicans have done everything they can to cut it. Including shutting down the government. You can’t grow a capitalistic economy buy cutting spending. You grow an economy by producing more goods and services from resource which includes labor.
Second, energy is only about 8% of the American economy. That’s half as much as heath care which has sky rocketed as a percentage of the economy over the last 20 years. Energy doesn’t cost anymore today as a percentage of the economy than it did 50 years ago . Fuel mileage is twice as good today as in the 1960’s. Back than the minimum wage was $1.35 and you could buy a new car for $2000, now it would cost you $20,000. Todays quality is far better and capital equipment last far longer. You couldn’t even buy a personal computers 50 years ago.
There is no shortage of low cost commodities in todays economy. The Fed doesn’t need to substitute money for energy(which the Fed can’t do). It needs consumers to rise their demand for goods and services, but they all had the shit scared out of them and their confidence stolen in 2008 and want to sit on larger amounts of cash with less debt. What’s has changed is the American consumers buying habits including it’s government.
“delaying the inevitable collapse facing a civilization starved of the cheap energy” You’ve been reading Gail Tverberg to much. She has been preaching “collapse next week” for five years and has been wrong for just as long. Civilization has always faced collapse. This is nothing new. We will kick this can again though another business cycle and adapt as humans have done from day one. You might even have to get out of you car and walk(that’s not collapse, it’s actually exercise which isn’t going to hurt a lot of Americans).
God bless the crazy Christians
I’m designing a human powered 18 wheeler truck. It will have a really long steel pole sticking out the front end, with attached Kevlar ropes. The Kevlar ropes will have 6 kangaroo hide harnesses. A total of 10 ropes per side will allow 120 persons to pull the truck at 3 kmph. The truck will be followed by two horse drawn carriages with the food and water for the human engines. There will also be 60 hooks on the trucks side to be used to hang the humans when the truck is going downhill. The contingent will be followed by two individuals with shovels who will pick up the feces and debris left behind by my invention.
Or…..you can cut fuel consumption by 50% with existing tech (which is available from the major truck makers, but not implemented yet because the demand is pretty recent). Then cut it by 50% again with rail. Then eliminate it by electrifying the track.
We have cheaper and better alternatives to oil, right now: electric vehicles are cheaper, quieter, cleaner, and have better performance. We need to kick the habit ASAP.
Tesla has a funny story: the owner of a very expensive high performance ICE vehicle came and did a test drive in a Tesla. Afterwards, he drove off, and came back very quickly. He angrily demanded to know who tampered with his vehicle, because it was suddenly noisy and low performance!!
.
Or one of these beauties
http://bakfiets.nl/nl/modellen/cargo+transport+/xl/
Won’t find much gulag labor in the Netherlands however.
Who would have guessed Fernando’s mental word search program of the word “communism” would miss an opportunity to comment nonsense? Everybody
Fernando, my I suggest you research your competition before you invest your life saving.
http://www.greencarcongress.com/2015/03/20150327-dtna.html
I think I can beat it on delivery timing. That’s a prototype, not for sale. I can put my truck together in 36 hours. But it will only be marketable in a country where gulag slave labor is available (that means only communists can use it).
Do ‘wage slaves / debt slaves’ count? No shortage of those in the West!
It’s not the same. This is an important theme in my life: what makes communists so horrible is their fundamental belief that human nature and society must be destroyed to “build socialist man”. They go on to rationalize terror and slavery “because it’s a transitional phase”. I have a tip for you: Istarted being trained in Cuba to become an agent for the regime at an early age, so I know the way they think (or at least the way they brainwash youngsters).
They are very similar to the Taliban who are forged in Pakistani Madrassas, and will destroy and murder because their cause requires it.
Some of you are leftist dabblers, what I consider fairly mild mannered kumbaya my lord types. But the guys at the top know where they are headed. And they don’t really hide it. Read the crap they write and learn your enemy.
Knowing them as well as I do, not too long ago I wrote a about this topic (I turned the communist manifesto on its head).
“The New Poor Working Class Will Destroy the Established Order”
Those who know me from the old TOD days may remember that I have spent my life as a rolling stone spending a little time as necessary doing this and that between short stints on the farm – and that I have spent nearly all my free time reading a lot of serious books rather than watching tv or hanging out in bars or whatever. And about the only people who have had more free time would be the rich folks.
At one time I was very much inclined to right wingish politics and a firm believer that technology would save us, that western style governments would eventually prevail all over the world etc.
But even then I was aware that there are basic physical limits imposed on us by geology , geography, ecology etc. How did I reconcile these contradictory positions?
By a combination of cognitive dissonance and ignoring the limits on the happy assumption that technology would outrun depletion and so forth. At that time climate wasn’t really on my personal radar.
Depletion was far enough away in the ever so distant future that it just didn’t matter to me being a young guy – young guys are not much interested in the distant future.
Now as it happens I being a hard core right winger back in those days at times (At other times I was a long haired hippie with a peace sign on a chain around my neck and a corn cob in mp pocket that would suffice to entertain a small party with one fill of wacky tabaccy , a card carrying ACLU sort of guy) and the sort that loves a hot debate I got into a lot of arguments about the relative merits of socialism democracy capitalism communism etc.
Hard facts such as the fact that there WAS an iron curtain enforced by the old USSR whereas just about anybody from just about anywhere could come and go to anyplace dominated by the so called USA empire convinced me that the people praising communism back in those days had their heads out of sight up their asses – I went to the trouble of reading what august authorities such as the NYT had to say about communism back in the days of Stalin for instance.
From there I moved on and started reading the stuff that I could find written by the handful of people published in the West who escaped from communist societies.
I don’t give a rats ass about PC or about being oh so much more sophisticated than other people , about being on a higher moral plane than others.
FERNANDO has his shit together when it comes to communism and about the way it works. The historical communists – the ones whose names everybody knows – have historically been as bad or worse than any other bad characters in the history of the world and they long ago mastered the art and science of propaganda and mind control to an extent that makes folks like the nazis look almost amateurish by comparison.
None of this is to say that other forms of government or similar governments known by other names are any better today or have been any better in the past or will be any better in the future.
But the fact remains that Fernando has the facts on his side when he says the things he does about communism.
I have some thoughts about why the liberal leaning elite in the USA is reluctant to acknowledge the reality of communism but it would take a while to organize them and this is not really the place for them anyway.
We have a much better human-powered vehicle in Austin: a pedal-powered beer wagon, where the patrons sit and pedal while drinking the beer carried by the wagon … gets at least 3 km.hour, and a good time is had by all.
http://www.pubcrawlerofaustin.com/gallery/
Heh, some people are in deny even in the very year of unraveling. Coal mines are closing around the world, and the price is still falling. Crude prices are way below needed to maintain production rate, and oil inventories are rising 2mb/d in the US.
In over 200 years of industrial age, we never had falling gross energy production. You make mistake of looking at GDP (which includes mining and energy sectors). Look at available money for average people after paying obligatory things.
Gross energy production isn’t falling. Gross Fossil Fuel consumption isn’t even falling.
It would be nice if FF consumption were really falling…but it isn’t. Not yet.
Yes, some people are in denial of the advancements and efficiency gains of the capitalistic free market. Yes, American coal is being substituted with low cost NG and ample low cost Colombian coal that is currently expanding it current production by 25 percent as I type. They have a 100 year supply.
Have no fear, plenty of energy here
😀 😀 😀
The slow-mo nature-wrecking catastrophy of your ‘capitalistic free market’, ay? I second Kam’s laughie faces, although mine are quite laced with some serious bitterness and contempt.
“The Eden that Europeans described when they reached North America was not a wilderness, but a well-managed resource, a complex combination of nature and culture, ecology and economy, a system so subtle and effective that it eluded the settlers who saw only natural wealth free for the taking. The result of this land grab in North America is that only 2% of the land is now wild, its major rivers are polluted, its lakes have caught fire, and its forests are dying from the top down. The tragedy of this commons was that it never really was a commons after colonization, but was surrendered to plunder, privatization, and exploitation in the name of Manifest Destiny and progress.” ~ intelligentagent.com
HI Caelan,
If Chiefengineer takes you for a REPUBLICAN or a Republican mouthpiece I think it is safe to conclude that he knows VERY LITTLE INDEED your philosophy and politics.
Sometimes I have a little trouble figuring out what you’re talking about but if you are a republican mouthpiece I will get my handle changed to OLD FARMER DUNCE.
You can’t stop progress.
Ritual incantations of progress are I suppose a thing for those so inclined, though, I must ask, what progress? The going-to-the-stars narrative seems to have taken a little tumble, given the year a human last escaped from low Earth orbit. Ah, yes, 1972. Bookended nicely by the Nixon Shock and the oil crisis. Right. So, what yardstick now measures progress? A weathervane, perhaps, that points where it will?
Death rates, subdivided by violence vs other causes, are a good measure.
Death rates are very high in small communal hunter-gatherer societies, especially by violence, as the carrying capacity is very low, and population growth is prevented by inter-group war deaths, supplemented by infanticide.
Farming societies do a bit better overall, as the violence is more organized and less part of daily life. Nutrition is more reliable, but much narrower, so tends to be a bit inferior.
Industrial societies do better. Modern society does best of all: infant and maternal mortality is greatly reduced, overall violence is much lower (though world wars in the 20th century were quite dramatic, their death rates as a percentage of the population were smaller).
Overall death rates are continuing to fall, and longevity is continuing to increase, though lately the rate of improvement has slowed down a bit because of over-eating: around the world, mortality due to obesity is about 3x as great as mortality due to under-eating.
NASA’s latest astronaut capsule did leave low earth orbit recently. Hopefully, this will lead to more manned missions.
http://www.dailymail.co.uk/sciencetech/article-2862440/Splashdown-Orion-successfully-lands-Pacific-Ocean-two-historic-orbits-Earth.html
Musk’s Millennium Falcon could possibly bring the cost of spaceflight down dramatically.
http://www.space.com/29065-spacex-cargo-launch-reusable-rocket-test.html
“The modern age is increasingly characterized by despair. Modern society seems out of control and on the brink of numerous irretrievable disasters. The interrelated issues of global climate change, biodiversity loss, overpopulation, and social unrest threaten the very existence of the civilization which most in the industrialized North consider so superior to cultures with simpler technologies.
It is somewhat comforting to realize that the blueprint for survival is contained within our cultural history. Judging from historical accounts of hunter-gatherers, for most of the time humans have been on the planet we have lived in relative harmony with the natural world and with each other. Our minds and cultures evolved under these conditions. Understanding how hunter-gatherer societies solved basic economic problems, while living within environmental constraints and with a maximum of human freedom, may give us a key to ensuring the long-term survival of our species.
But hunter-gatherers are more than interesting relics of the past whose history can give us valuable information about other ways to live. Hunter-gatherers and other indigenous people still exist and still offer alternatives to the possessive individualism of world capitalism. Indigenous people in many parts of the world are at the forefront of the struggle for human dignity and environmental protection… In spite of the onslaught of world culture, many indigenous people are maintaining, even expanding, alternatives to economic man… These alternatives may one day lead us to a new, environmentally sustainable, and socially just economy.” ~ John Gowdy
Hi Caelan,
Shitting outside may be your idea of “the good life”. But it’s certainly not a long term solution.
We need to leave the garden of Eden, and learn how to take care of ourselves before the Sun God gets angry.
Get off your ass if you haven’t and find out about, say what happens to shit once it leaves many people’s homes (and is that sustainable?), and about composting toilets and similar systems.
And then get rid of the shit you’re full of (remove head first of course).
Hi Caelan,
How many people have you convinced to start shitting outside so far?
Are you stipulating that all problems facing society are political in nature? That electing the blue team instead of the red team will magically make new, easy reserves of high quality oil appear in our backyard? Or grant us access to that magical power source that imitates fossil fuels in every way except that it’s cheap, renewable, and doesn’t have a carbon footprint?
This gerrymandered statistic that only 8% of GDP is allocated towards energy does not change the fact that the EROI of energy has decreased over the last few decades. The diminishing returns manifests not just in the electric bill, but systemically, such as in health care.
Of course efficiency is a huge factor in the energy equation, but so is Jevons paradox.
I really hope you’re exaggerating when you state that ‘there’s no shortage of low cost commodities in todays economy.’ Of course there are, all commodities are in finite supply. “But they’re cheap” you may say. Sure, but does that reflect the true cost of its production? Oil only costs ~$50 a barrel atm, so that must mean energy is cheap right? Tell that to the shale industry that could only scrape a positive cash flow in a handful of cases, even when oil was $1oo a barrel.
“Are you stipulating that all problems facing society are political in nature?” Please don’t put words in my writing. “All problems facing society” are not political. I’m saying today’s economic problems of American lowly skilled workers stems from Republican deregulation and tax policy to starve government spending.
Again, “You can’t grow a capitalistic economy buy cutting spending”. The cost of commodities(including labor) is falling because of lack of demand not the lack of resource.
How am I putting words in your writing? I merely asked you a question. The recession is the result of diminishing availability of energy, causing a lack of demand.
ChiefEngineer,
Ok I’ll bite. Firstly Lady Latitude referred to “central banks” not central planners and right now we have ECB, the BOE & BOJ all printing money so the federal reserve is hardly alone. Also note that of the last two mentioned the Bank of England is in a country with a right of centre political alignment & the Bank of Japan is in a country with a far right government. As to American being only 8% dependent on energy, seriously? There is not an economic activity in America or any industrial country in the world witch not almost 100% dependent on energy. Every good produced, everything transported uses energy in some form or other.
Sure, but it’s not hard to reduce oil consumption, then eliminate it entirely.
Go from an SUV at 10MPG to a hybrid at 50MPG, then to an EV at zero gallons per mile.
Sure, but it’s not hard to reduce oil consumption, then eliminate it entirely.
Naw, it’s a piece of cake. 😉
Well, the first 75% really is.
More than 50% of oil consumption is personal transportation – 90% of that can be eliminated really, really easily with extended range EVs like the Volt.
Much of the rest is very straightforward: truck freight moving to rail, asphalt moving to concrete, etc.
The last 25% is somewhat harder, but we’re going to have 20M bpd for a very, very long time – long enough to get those done.
And 100% of oil consumption can be eliminated by killing people who use it.
Kam, you first.
I’ll buy a electric car
Since when is drilling 5 mile deep into the earth in a mile deep of water a piece of cake ? But we do it.
Yes and I’m sure oil-soaked wildlife, etc., appreciate it.
Then you have to deal with all that and with chemicals and labor. Easy peasy.
But of course your bullshit (sorry for offending the bulls and their nice organics) economic-political dystem can conveniently ignore true costs, ‘absorbed’ by nature and community.
Coming up on Macondo’s 5th anniversary, incidentally… Pop the pesticide-residue champagne!
The problem with much of this is embedded in your very moniker; specialization; in-built/engineered myopia. In your case, what with the ‘Chief’ designation, the myopia is presumably of a high level.
CE wrote:
“Second, energy is only about 8% of the American economy.”
Energy is 100% of the economy, energy is used to produce, deliver all goods and services. Energy consumption per revenue in the US fell as the US offshored production to overseas. For instance, Imported steel, fertializer, electronics are not included. Before the US started outsourcing, energy was about 14% of GDP.
CE Wrote:
“The Fed doesn’t need to substitute money for energy(which the Fed can’t do). It needs consumers to rise their demand for goods and services, but they all had the shit scared out of them and their confidence stolen”
The Fed has steadily reduced rates over the past 30 years to “stimulate” the economy. In the process, it just blew a bunch of huge bubbles and created unsustainable debt loads. To “stimulate” the economy any more, the Fed will have to use negative rates, but this is equivalent to setting the house on fire to stay warm.
CE Wrote:
“What’s has changed is the American consumers buying habits including it’s government.”
yes, because consumers can’t borrow anymore. They can only spend their free cash flow (wages minus tax, debt payments, housing, food & energy). The gov’t went on a borrowing bing which took up some of the sack in Consumer spending. Sooner or later even the gov’t won’t be able to borrow anymore even if interest rates stay low. Currently, the Fed gov’t borrows about $1Trillion to keep its doors open.
Consumers spending will only bounce back when the inflation genie gets out. Good wage US jobs continue to be outsourced or being automated, and being replaced by low end service jobs (waiters,bartenders, bartenders, walmart, etc). Job growth is coming from workers being forced into multiple part time jobs as employers cut hours to avoid ACA and other labor regulations. So if one worker switched from one full time job to to two part time jobs, its indicated as job growth.
“The Fed will return to a more normal monetary policy. ”
Nope. Any attempt to normalize monetary policy will crash the economy with spiraling deflation. During one of Ben Bernanke’s Q&A session when he was still chairman a reporter asked him “When will the Fed normalize interest rates”. Ben replied “Not in my lifetime”.
If The fed does raise rates this year it will be tiny (like 10 to 25 basis points) and will eventually cut within 6 months.
The US is beginning to sliding into another recession, Q4 2014 GDP growth was cut to 2.2% (from an estimate above 3%). Q1 2015 GDP is now estimated to be at zero. The Stock market is running on empty as corporate buyback are being tapered (one of the main drivers for rising equities). Corp debt used to finance buybacks has grown to the point corporations are now risking credit downgrades. The strong dollar is hurting US exports and as you said, US consumers aren’t buying.
https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm
[Fed cuts Q1 GDP 2015 estimate to 0.1%]
The US gov’t can’t afford normalized rates. The cost of interest on 18.1 Trillion @ 5% is about 900 Billion. The US gov’t federal revenue is only about $2T. So about half of the revenue would be needed to just service its existing debt. The result would be the US defaulting on its debt. Interest rates will need to stay low indefinitely. I think after the next market correction, QE will be back and we will have negative interest rates, just like Europe is now introducing. The EU and at least parts of Asia are in a recession. The US economy isn’t an island.
Energy is 100% of the economy, energy is used to produce, deliver all goods and services.
I call this the “garbage-man fallacy”, based on the argument that sanitation workers are the most important group in New York City, because without them the city falls apart.
Energy is essential, but not fossil fuels. We have better and cheaper alternatives to FF.
In fact energy isn’t that important. Information is everything.
For example, it doesn’t matter how much gas you have in your tank, you’ll never get from Miami to Seattle without a map.
Full disclosure: I work in the computer business.
Yes, information is everything.
The romans had lots of coal, but didn’t know it, and didn’t know what to do with it if they did. We have lots of energy all around us – it’s just knowing how to use it that’s key.
“We have lots of energy all around us – it’s just knowing how to use it that’s key.” ~ Nick G
Yes, ethically and truly democratically. Which is, intelligently.
Great remark. They also thought there was nothing of value at all east of the Rhine. It took Saxons like Henry the Lion to unlock the silver mines of Bohemia and Moravia.
Inflation, negative interest rates, bail ins or debt jubilees; makes no difference what the method is, savers will have to pay sooner or later. 95% of our money is only borrowed, after all.
To hell with the Demopublican™ governpimps, their sleazy revolving-door orgy parties and cult wreckonomics.
You can be pimped, tied up with a dog collar, and be whipped if you want. Just leave me out of it. I don’t believe in that religiosity.
Hi Caelan,
I have never lived under anarchy. My guess is that it may be less pleasant than you imagine. You are much more optimistic about the nature of humans than I am.
I may lack imagination in this regard, I was enthralled by the notion of Utopia as a teenager. Alas I grew up.
I was a big fan of the Whole Earth Catalog and remember a lot of optimism in the 1960s and 1970s for new sorts of communities. Lots of communes started and hoped for.
I am all for various utopian ideas, but unfortunately through out history they have tended to be short-lived.
That doesn’t mean I support the current system. But finding the right substitution is not without its challenges.
Caelan, I support where you are coming from, but I want you to create these places, not just talk about them.
First, I am creating those ‘places’ as well as the ‘logistical setups’. Would you believe I even learned new skills/knowledge and uprooted provinces and an old life in the process? I walk the talk even though it is difficult and slow going with all the likes of governpimp/nanny-state suckups/thugs/etc. and assorted zombies walking around and getting in the way. And trying to eat my brains with their asinine narratives/memes/etc..
Second, what are you doing, yourself, about that, seeing as you are advocating it? Do you want a friendly competition in that regard? If so, I’d be up for it and to co-report the progress here. It’s a challenge. Right here, in front of the readership. It’s a good idea, frankly, and perfectly on-topic too. We could even communicate by email if you want and see if we could get Ron to post a mutual article or two that we co-write about our progress/experiences.
Let’s have it, Boomer II. Consider that I have just taken my nice glove off and slapped you in the face with it. ^u^
Second, what are you doing, yourself about that, seeing as you are advocating it?
Not enough to be of much help. I live in a small place. I try to minimize my driving. I don’t buy a lot. But living in a utopian community, I’m not and probably won’t be. There are some co-housing projects near me but they would be more expensive to join than just staying where I am.
Given that I am of retirement age, I don’t see myself leading any movements these days. I have thought about trying to create places where people my age and older can live frugally, happily, and not place a lot of demands on the system. I am worried about my generation becoming a burden.
At any rate, I will continue to follow what people like you are doing, though I probably won’t be a participant myself.
My interests still reflect the spirit of the Whole Earth Catalog. I like all of that self-sufficiency, back-to-the-land, small footprint kind of stuff.
I thought we went through this already, Dennis…
It doesn’t matter. It is not so much I’m necessarily advocating anarchy either. (Then again, we are all anarchists if we really think about it.)
I am advocating ethics, real democratic control, or we have nothing and collapse and/or decline. If you can’t imagine that, or call for it, if you, your narrative or your fetishes are that ethically bankrupt, that’s your prerogative, but, again, leave me and others out of your nightmares/freakshows, your impositions at the business ends of your so-called private security, police and military industrial complex.
You want the nanny state and can’t imagine or call for anything else, any other narrative, and subvert others’s attempts to boot, then feel free to keep your diapers on, one thumb in your mouth, the other in the other end, and continue to writhe around in that orgy. Because that’s what you have; that particular orgy is what gets you sociopoliticultural problems/disasters, declines/collapses and wrecked ecosystems, never mind sore anuses.
Well now I am convinced.
In your ‘government-will-step-in’ quipped reality, ‘convincing’ is a moot point with an embedded government gun in your face. Ironic, given your comment.
Those who make peaceful revolution impossible will make violent revolution inevitable. ~ John F. Kennedy
Ya, guns can be real ‘convincing’.
As per your previous ‘study some economics’ quip, you would seem to do well to ‘study some anarchy’. (In part because anarchy is you, unless you are happy with your pacifier, in your diapers and with your nanny-state.)
“Grown men do not need leaders.” ~ Ed Abbey
Who’s ethics?
Muslims may consider it unethical for a woman to walk in public without being completely covered with a Burka. They may also consider it completely ethical for a blogger to receive 100 lashes for insulting the Monarchy.
Others may completely disagree.
You can rationalize away your questionable so-called ethics until, ultimately, it bumps up against natural constraints. That’s what’s so tragically amusing.
Ethics seem to mean effectively dealing with the global problems we have today and averting collapse. IOW, lack of fundamental ethics may be in large part what leads to collapse. It includes the control over one’s own life. 100 lashings is not democracy, not control over one’s own life, but someone else’s over you.
Here’s a thought experiment for you: Take your ‘100 lashings for insulting the monarchy’ culture for example, and run it as a simulation over time and see what results…
My hypothesis? Yeast in a petri-dish. So we have to transcend our apparent natural constraints and/or trajectories by invoking ethics. Pretty simple, but, good luck!
Speaking of monarchy/oligarchy and collapse and their interrelatedness, I’ll leave this comment with this:
“…all forms of organization, regardless of how democratic they may be at the start, will eventually and inevitably develop oligarchic tendencies, thus making true democracy practically and theoretically impossible, especially in large groups and complex organizations. The relative structural fluidity in a small-scale democracy succumbs to ‘social viscosity’ in a large-scale organization. [Accordingly] …democracy and large-scale organization are incompatible.” ~ Wikipedia
“Why do complex societies become vulnerable to the very kinds of stress which, at an earlier time in its history, the society in question would simply shrug off? Tainter’s answer lies with complexity, itself, and the law of diminishing returns. As a society becomes more complex, greater complexity becomes more costly. The escalation of complexity becomes increasingly difficult to maintain, until it finally becomes impossible.” ~ Jason Godesky
Caelan I generally sympthacize with your sentiments – as best I can tell- since so far as I can tell your heart is in the right place.
But whatever it is you mean by ” true democracy ” I haven’t a clue. If you don’t mean anarchy then you must mean some sort of communal government.
I beg the forgiveness in advance of the majority of the commenting regulars here but I suggest that given the monkey brains and monkey behaviors of our species that any sort of truly communal government is utterly out of the question.
The average man or woman on the street in this world – even in a university town- is so ignorant he or she can be lead around by the nose as easily as a puppy can be lead with a nice savory smelling bit of meat.
What we have in terms of government, especially in western European countries , is probably about as good is it is ever going to get so long as we exist by the billions.
Now if there were to be a die off to the point that we could live in family bands again – perhaps we could have a communal government.
And perhaps the dozen biggest and toughest guys would make all the rest of us wait on them hand and foot.
Hi ofm, nice to catch you again, and bugged that the other one, (my entire comment may be filtered out if their name is spelled out) who seemed to have a working brain, could still not seem to get a handle on some kind of composure.
At least you took yourself out of the equation for a time.
Anyway, yes, the paradox may be that if we as a species can’t get a handle on some kind of composure in our current context, then I fear Mother Nature, like Ron, will be banning some, if not all, of us.
If by some fundamental law of nature, we simply cannot exist sustainably at current levels of complexity, scale and numbers, then discussions and attempts to do so won’t really matter.
Now if there were to be a die off to the point that we could live in family bands again – perhaps we could have a communal government.
Based on what I understand of human history and anthropology, the default system seems to be something tribal, with a leader.
I can’t think of any sustaining human groups where everyone is given equal power. It’s a nice thought, but perhaps humans don’t operate that way. Maybe because in times of crisis, there may not be a time to hold a meeting. So you end up having one person who can decide, on a moment’s notice, what to do and have everyone else follow. That leader may not have the right plan, but having everyone agreeing to listen to one person in times of crisis may be more effective in most cases than having everyone doing what they want without any agreed upon organization.
Now, if you find tune it a bit, you can perhaps have meetings to establish crisis management and when then something happens, everyone knows his/her role and what to do. But I think even with meetings, you end up with someone calling the meeting to order. Now, perhaps you can have a rule book that discusses how meetings are formed, and so on. So you can codify all of this if you want. But if you go back to simpler times, maybe people just decided to recognize a tribal head, or a king, etc.
Once you allow the camels head of complexity into the organizational tent you will get to kings pretty quick and from there to more modern nation states just a little later in biological terms. In historical terms these processes are considered slow, taking thousands of years to get to kings and the a couple thousand more to get to the modern nation state.
Once you allow the camels head of complexity into the organizational tent you will get to kings pretty quick and from there to more modern nation states just a little later in biological terms.
Yes, the bigger the group, usually the more complex the organization. I suppose you can have an empire ruled by just one person and everyone else takes orders.
At any rate, to keep things simple you probably need very small, like-minded groups. But again, seems to me that historically, groups were ruled by the head of the family or the religious leader.
One of the big decisions in the modern history of governments has been how to protect the minority from the rule of the majority. Especially when the minority might not be able to speak or represent itself, like children or the disabled.
“I am advocating ethics, real democratic control, or we have nothing and collapse and/or decline.”
I am not sure direct democracy would work any better than representative gov’t since the people would still choose similar policies. The majority voted for the gov’t they wanted. The only semi-realistic method is to descentralize gov’t so, at least of if a local regional/local gov’t go nuts, you can move out. In the case of a big gov’t, there is no place to move to.
To be honest this is just fantasy talk. The system is locked on autopilot as everyone has their view on how things should be and you can’t change stupid. Don’t believe me? try changing the mind of a Christian to become an atheist or make an Muslim become Christian. Politics is not much different from religion. Most people have “faith” or even political fervor for one party or ideology. Just about everyone that votes wants some form of entitlement from gov’t: Security, Wealth fare, Health care, employment, etc. Trying to convince them otherwise is just a good way to get beaten up or labeled (aka anarchist).
Second, decline and collapse is inevitable. Too many people consuming a finite supply of resources. To believe you can change this would be delusional. Changing the form of gov’t won’t change physics.
Hi Ron,
Notice how as you go back farther in time the RRC final estimate becomes too low, if we go back 25 months. it gets worse and the EIA estimate from 25 months ago matches the RRC data as currently reported almost exactly. A comparison of the EIA’s C+C will always be higher than the RRC’s crude only estimate.
For Texas C+C in Jan 2014 the PDQ gives 2746 kb/d and the EIA has 2832 kb/d, over time the Texas value in the PDQ may continue to increase. The final crude only estimate for Jan 2014 was 2255 kb/d and the current PDQ has 2341 kb/d so the EIA estimate might be 82 kb/d too high, but the RRC final estimate seems to be 86 kb/d too low.
You may be right about current EIA estimates being too high. In March 2014 the EIA estimates Dec 2013 Texas C+C at 2853 kb/d, but the PDQ has Dec 2013 C+C at 2686 kb/d. For crude only in Dec 2013 the RRC final estimate was 2075 kb/d and the PDQ has crude only at 2286 kb/d. In this case the RRC was 211 kb too low and the EIA was 167 kb/d too high. Link to Dec 2013 final estimate below.
http://www.rrc.state.tx.us/all-news/022614b/
Perhaps a good estimate is the average of the RRC final estimate and the EIA’s estimate, but we would need to assume we could apply the production adjustment factor to both crude and condensate to create a final RRC C+C estimate and then average that with the EIA’s estimate.
For Jan 2015 that method would give an estimate of 3234 kb/d of Texas C+C output. I think the eventual data point will be about 3300 kb/d +/-100 kb/d.
A comparison of the EIA’s C+C will always be higher than the RRC’s crude only estimate.
Wow, I had no idea that crude + condensate would be higher than just crude.
Dennis, I showed the EIA C+C because I wanted to show how the EIA sees a constant increase of production every month. The EIA does not produce crude only numbers.
Hi Ron,
The point is that the impression is given that the EIA numbers should be compared with the Texas crude only numbers, look at the chart, obviously the EIA is overestimating.
The RRC underestimates by a similar amount that the EIA over estimates (actually the EIA is a little closer but the difference is small).
The idea that the RRC final estimate is more accurate than the EIA’s estimate in the Petroleum Supply Monthly is not confirmed by the actual data.
Okay, the Texas RRC says Texas crude only was down by 87,000 bpd in January while the EIA says Texas C+C was up by 3,000 bpd in January. Since Texas condensate was likely down in January that is more than a 90,000 barrel per day difference. Time will tell which figure is closer to the truth but I am betting the EIA is the one who is off by a country mile.
Hi Ron,
Yes you may be correct that the EIA number will be high, the RRC final estimate will also be too low. So if we say the difference between the estimates is a country mile (is that like a nautical mile 🙂 ), both estimates will be off by about half a country mile. It is a little difficult to compare because in one case the estimate is crude only and in the other case it is C+C. The EIA estimate will be about 150 kb/d too high, but the RRC final estimate will be 300 kb/d too low, if the production adjustment factor(1.175) is applied to the condensate estimate in the PDQ.
Excellent point and one I’ve been trying to make for months. The longer in time the accumulated graph is, the bigger the “apparent” discrepancy, when in fact, there likely is no difference at all (or very little.)
Much ado about nothing.
But of course! After several months the RRC has the correct data after all the oil companies report their final data. And the EIA keeps revising their data until it matches the RRC data exactly. It could not possibly be otherwise because that’s where the EIA gets their data.
Exactly!!
I have previously tried to give everyone the benefit of 50 years of filing production reports in Texas; how and why it works the way it does. I do not report to anyone other than the Railroad Commission of Texas. The Texas RRC data is the accounting basis in which billions of dollars of royalty and taxes are paid. Those barrels are not estimates, I assure you. Corrections to reports or the occasional filing of a delinquent report to balance sales to production gets done in a matter of a month or so, at the most, or the operator is severed and cannot move oil off the lease premise.
There is one source and one source only for oil production data in Texas.
Mike
Hi Mike,
How do you explain the difference between the final production estimate from 12 months ago and the reported crude output in the Production Database Query.
I know the production gets reported to the RRC, the EIA uses that data to produce a more accurate estimate of Texas output.
What makes you think that the bureaucrats in Texas have a better ability to make these estimates than the bureaucrats at the EIA?
If you look at the data, the EIA estimates over time have been far superior to the estimates by the RRC. Everyone looks at the same data(as reported by you and others to the RRC) and has to guess at the amount of “missing barrels” in the reported data. The fact is that the EIA guesses are more accurate than the RRC’s guesses in their “Final Production estimate”.
Dennis:
1 BO sold = 1 BO produced. The two numbers must balance. Within 23 days of the close of last months business, I get paid for ALL my barrels sold last month. So do my royalty owners, so does the great State of Texas in the form of severance taxes. The accounting for barrels of oil produced and sold in Texas is so precise that a barrel of oil can be reduced by 2/10ths of 1% of total volume for its poor quality (BS&W). That is ultimately accounted for. We are not in the habit of refunding money to each other in Texas based on incorrect barrels of oil sold (produced) that are reported incorrectly to the TRRC or that are delinquent for years at a time. The Texas RRC is the keeper of the accounting. That is precisely why my “bureaucrats” know more than your bureaucrats. Yours deal with imaginary barrels, mine deal with real barrels. I cannot make it more clear than that. All this TRRC vs. EIA hubbub is, in my opinion, ridiculous and I no longer wish to bore people with it.
Mike
Yo Mike, at what point in time for your process is an assay done of the content of your oil? Is it done periodically or just once, or ever?
Watcher, good question. The oil is assayed at the point of sale. A typical “load” of oil is 165 barrels. The operator checks the oil to make sure it meets minimum standards for quality (1% maximum BS&W by volume); if it is good, it gets called in. The crude oil buyer (truck driver) comes out to haul it and assays the oil again going on the truck. His prevails. The buyers wants to buy oil, not water.
M.
So frequent assays . . . of that type. I was more groping towards diesel/kerosene/middle distillate content.
But still, that’s at least a look at it frequently.
Watcher. Every run ticket left in our jars at the tank batteries contains the API gravity as determined by the crude purchaser to the tenth. For example API 34.4. Observed oil temperature is also on the ticket as well as BS & W information,for example 3/10. Opening gauge and closing gauge. Date, time identity of gauger and identity of driver. Operator name and number, lease name and number and tank number. Tank size. Sometimes comments like, “clean tank bottom!”
In our area a gauger employed by the crude purchaser checks the tank first. He says yes or no on if it’s bought. Don’t want to mess with driving a tanker or bobtail to the lease if too much BS & W %. We definitely try to stay in his good graces.
A few days after the end of the month, we receive run statements from the crude purchaser which contain mostly the same info plus price per barrel and gross proceeds calculation. Always check against run tickets.
To a certain extent, wonder if maybe better approach for the EIA would be to have every crude purchaser send them amount of oil purchased each month. They are all heavily automated businesses and really what goes into the pipeline is what matters. Seems EIA would know within less than 30 days how much crude went into the nations pipelines the previous month. Maybe that is big government though? Yikes. LOL!!
Heck, crude purchasers already send this stuff to the states, the county assessors and folks who pay for it like IHS Energy and Drilling Info. Why not just have them send it to the EIA as well, have them add it up and be done with it! This isn’t the KSA for crying out loud! This is the good ole USA where we all need to to know everything including battle plans for crying out loud! LOL!!
For crying out loud, make all the crude purchasers send the EIA the gravity of the oil they bought too! That way we can see if Jeffrey J. Brown is correct.
Given how much freaking speculation there is over in the crude markets, why can’t our government at least compile information in the way I have described? I mean, come on!! Knowing how much goes in the pipeline each month would make it easier to be more accurate on the crude storage numbers, and would also help both our government and the public in figuring out how much oil is being imported.
What revolutionary statistical ideas given we are in the year 2015. Heck, my I phone probably has enough juice to take in an compile the data.
BTW, there cannot be more than a few hundred crude purchasers out there anyway. None of this is rocket science.
Instead we will have to argue till we are blue in the face. I suppose IHS knows all of this information, GS, Citibank, et al, buy it, and then use it to trade while the rest of us plebes try to rely on free public data that is contradictory. Maybe I need to find a class action attorney??
Hi Ron,
I have kept some of the old EIA data as originally reported, the EIA estimates are not perfect, just much better than the RRC “final estimate” which is lower than the data reported in the RRC’s Production Database Query (PDQ). If you look back at some of the data for your charts from 12 months ago you will see that the EIA estimates are far better than the RRC estimates. You have the data just look at it.
In fact your chart in this post shows that you cannot “take the final RRC estimate to the bank”, their final estimates are too low, in every case, from 8 months ago and further back in time.
Another example of data downloaded on Oct 1, 2013. EIA estimate for July 2013 was 2625 kb/d for TX C+C, the Texas C+C output reported in the PDQ on Oct 1, 2013 was 1908 kb/d (1692 kb/d of crude only).
The final RRC estimate for crude only was 1856 kb/d so the production adjustment factor was 1856/1692=1.097.
If we apply the production adjustment factor to both crude and condensate we get 2093 kb/d for TX C+C output. The PDQ estimate for July 2013 is currently 2531 kb/d, closer to the EIA estimate(2625) than the RRC final estimate (as always).
The revisions by the eia are much smaller than the rrc because the initial estimates are far more accurate.
I will guarantee you that the EIA’s estimate of a 3,000 barrel per day increase for Texas C+C for January is nowhere in the ballpark.
Hi Ron,
It is the level of output that matters as a change in output depends on two numbers, Dec 2014 output and Jan 2015 output, so to keep it simple let’s just talk about the level of Jan 2015 output, not the change in output from Dec to Jan.
The EIA estimates Texas C+C in Jan 2015 at 3400 kb/d. If output ended up at 3350 kb/d, that would be about 100 kb/d less than the Dec 2014 estimate by the EIA.
You are talking about changes in output and I am talking about the absolute level of output so that we are talking past each other, it seems.
My argument is that the final level of C+C output in Texas will be pretty close to the EIA estimate, within 100 kb/d and between the Texas final estimate( with the RRC production adjustment factor applied to the RRC production data query).
If you consider an error of 100 kb/d “nowhere near” 3400 kb/d, then you would be correct, I consider an error of 3% better than an error of 10%.
The RRC estimate will be low by 10% and the EIA will be high by 3% for the absolute level of C+C output for Texas in January 2015. At minimum the EIA estimate will be as good as the RRC estimate (the barrels per day that it is high will be equal to the number of barrels that the RRC estimate is low.)
A final thought is that you probably have a lot of this data from older EIA and RRC estimates, just as I do. You can easily prove to yourself that I am correct by looking back at some of your old data. In every case in the past 3 years, the EIA estimates have been far more accurate than the RRC estimates of statewide production for the most recent 2 months reported.
The Texas RRC “final estimates” have been uniformly too low by about 3 times the number of barrels that the EIA estimates have been too high (typically the EIA is high by about 100 kb/d and the RRC is low by about 300 kb/d).
I have given numerous examples showing this, obviously you are not convinced and as Mike has said this is boring. Time will show if you or I are correct about the absolute level of output.
The 87 kb/d fall in output in Jan 2015 may indeed be correct, if output continues to fall at a 2.5% rate for 3 or four months it will be significant. I expect output will level off at 3200 kb/d and will increase back to as much as 3400 kb/d as oil prices climb over the summer, maybe returning to this level by Nov 2015.
So a plateau between 3200 and 3400 kb/d for Texas C+C for 2015 is what I expect for 2015.
This can only be judged in Dec 2017 when all of the RRC data is in, and nobody will remember anyway.
Dennis, you are trying to figure too many angles here. I said, well before the EIA came out with their estimate, that Texas appeared to take a huge hit in January. I made that assessment from looking at the RRC incomplete data, not their later assessment of final numbers or the EIA’s estimate that it was not really that bad.
I stand by that original estimate. We will know in a few months, or perhaps sooner, whether or not I am correct.
Dennis, If I may be so presumptuous as to posit an explanation for the difference between you and Ron, here goes. I cannot recall seeing any explanation as to how exactly the EIA comes up with their estimates but, it appears to me that they have been extrapolating previous growth trends. If this is in fact how they are doing it, each months new data will be x% more than the previous month and as long as the linear growth trend matches what is actually happening, the estimates can turn out really well.
This beaks down when you have a discontinuity such as growth flattening or in fact, declining. If we are witnessing a discontinuity, the EIA estimates will continue to pile on new production at previous growth rates while RRC figures reflect what is actually happening on the ground.
Ron can correct me if I am wrong but, what he has been trying to point out to you is that, even judging by the incomplete RRC data, the growth trend appears to be slowing dramatically. At the same time, while the growth trend in the EIA estimates may have been tempered somewhat by some mechanism known only to the technocrats over at the EIA, they are nowhere near to reflecting the actual decline in growth that the RRC data will eventually show in all it’s glory!
We will all just have to wait and see how this all plays out but, I suspect that in a years time, Ron’s position will be vindicated.
I have seen this all the time with corporate forward looking business plans, projecting growth going forward and saying shit like, “We expect to earn 6% more revenue for the next financial year based on (insert reason here) and over the next five years should experience growth in the region of (insert WAG here)%”. Then you have some event like a war or a new disruptive technology or an unexpected increase/decline in the price of some commodity or the other and you can throw that entire projection in the toilet!
As has been said many times before,“Past performance is no guarantee of future results.”
Alan from the islands
Hi Islandboy,
Maybe you are correct, note that the EIA sees the same data that we see, and may very well see the discontinuity that Ron sees, that may be why they have Texas output basically flat in Jan 2015 and why I have suggested they may revise this downward. For the two previous months the EIA estimated output had increased by 50 kb/d, the most recent estimate had an increase of only 3 kb/d so the EIA sees that something has changed.
Another factor that may mess the EIA up is the RRC’s change to all digital reporting, this will make the data behave differently than in the past and should make the RRC data more timely within 6 to 12 months.
That may figure into Ron’s thinking, I don’t know. In fact Dean’s methodology may give us the best guess. He estimates 3300 kb/d for Nov and Dec and 3160 for Jan 2015. I still like 3300 kb/d for Jan, but 3250 kb/d is probably better based on Ron and Dean’s analysis.
Output will definitely be between 3000 kb/d and 3440 kb/d for Jan 2015, if it is between these at 3220 kb/d and we define a 220 kb/d error as nowhere near correct, then both the RRC and EIA will be nowhere near correct for Jan 2015 C+C output for Texas. We will know in 12 to 24 months.
This link is not directly on topic but since oil has so much to do with climate, climate IS discussed here often.
http://www.resilience.org/stories/2015-04-03/how-long-can-oceans-continue-to-absorb-earth-s-excess-heat
This article is longer than most dealing with the subject in the msm and goes into some detail.
Another great read, although more pertinent for the last thread:
http://dark-mountain.net/blog/rivershift/
Disclamer: Dark Mountain has published some of my work.
The Law of Diminishing Returns
Part one of a four-part video series. Released in conjunction with Afterburn: Society Beyond Fossil Fuels.
Is modern society hitting the point of diminishing returns?
In this brand new short video released today, Richard Heinberg explores how — in our economy, the environment, and energy production — we may well be. When previous societies have hit similar limits, they often doubled-down by attempting ever more complex interventions to keep things going, before finally collapsing. Will this be our fate too? And is there an alternative?
http://www.postcarbon.org/the-law-of-diminishing-returns/
Mac, thats a climate change panic inducing piece. If you want to get into ocean temperature change issues you should try loading the Argo buoy data on your Google Earth software. Google has a deal which allows you to obtain the location and measurements from thousands of buoys.
What I do is take the buoy temperature and salinity plots and mount them in panels to make my own cross sections. This allows me to study what goes on by looking at actual data. It’s also useful to understand heat capacities as well as salt water densities/specific volumes.
I should add that if an article includes the cockamamie Hiroshima bomb analogue then it should immediately be discarded. That’s a low brow technique invented by the SKS ignorati who make propaganda for a living. The best way to understand energy uptake is to look up and understand the actual figures.
For example, if you want to estimate the energy uptake in the upper 300 meters of the ocean you can use the Levitus et al data, work out the slope in joules per year, change it to watts per m2 using the oceans total surface area.
http://data.nodc.noaa.gov/woa/PUBLICATIONS/grlheat12.pdf
Very informative research letter Fernando. However, saying it’s not a global emergency does not change the realities. It’s a global emergency since our civilization is so overbuilt and so precariously perched on the very things that caused the predicaments.
“We have estimated an increase of 24 1022 J representing
a volume mean warming of 0.09C of the 0–2000 m
layer of the World Ocean. If this heat were instantly transferred
to the lower 10 km of the global atmosphere it would
result in a volume mean warming of this atmospheric layer
by approximately 36C (65F). This transfer of course will
not happen; earth’s climate system simply does not work
like this. But this computation does provide a perspective on
the amount of heating that the earth system has undergone
since 1955.” Nothing scary there.
I wonder how much soil and rock heating anomaly has occurred in the continents. The atmosphere is the lowest mass and exposed directly to space. Rock, soil, biomass and freshwater are all more massive than the atmosphere by far. With so much more soil being exposed directly to sunlight due to agricultural deforestation, how much heat is being stored in the ground?
I would think that increased evaporation in farm fields would cool the ground, moving the energy to atmosphere and then somewhat to the ocean through rain, conduction, convection and infra-red irradiance.
Luckily we also have the melting polar ice to absorb energy, though that is a one off.
Too bad the GLORY launch failed and destroyed our chances to understand atmospheric aerosol distribution and properties in detail.
Yes screw those thousands of phd scientist and thousands more grad students who compile the data from thousands of instruments on land, in the oceans, and in space and confer with each other on an ongoing basis. Any schmoe with a computer can do it better.
Jef, I happen to be adult, educated, and wise. I’m also very curious. This makes it impossible for me to turn into a groupie, a follower of anybody or anything. I don’t care fir any political parties, and I prefer to do things my way. If you prefer to have blind faith then that’s up to you.
SO hows your “faith” in gravity doing.
You act like my kids when they were 5 through 16, you simply have to be oppositional regardless of the facts.
My faith in Gravity? I assume you mean Eisnstein’s idea that gravity isn’t a force but a property of space time which distorts due to the presence of mass?
General relativity is an incomplete idea. It fails to deal with quantum effects. And it has led to the introduction of “dark matter” to account for observations. Thus far we can’t find dark matter (this is why it’s said to be dark).
My hunch is that dark matter doesn’t exist, and that observations are explained by the fact that gravity is imparted by tiny things (call them the particles which define space time properties) which happen to have anisotropic behavior. If they find dark matter I will recant. Otherwise I prefer my solution to theirs.
Is your curiosity satisfied? Would you rather discuss something about the oil and gas industry? That’s my real strength.
Otherwise I prefer my solution to theirs.
LOL!
I’m starting to come around to OFM’s theory that most of what you say is an attempt at sarcasm but I think you need to work on your delivery a bit more…
When are you going to publish your grand theory of everything based on you knowing more about anything and everything in the entire universe, than any of us mere mortals ?
La Grande Théorie Unifiée de Tout de Fernando Leanme
Now available at Amazon.com for $14.95
Limited time offer. Hurry supplies won’t last!
Fernando’s perspective on the nature of dark matter is the general position of many Astrophysicists.
He is not conveying some radical personal belief.
The term “dark matter” often confuses laymen because the title suggests we know of this concrete, tangible thing, but just haven’t found it. This is completely false.
Observations show that there is significantly more gravity around the periphery of galaxies than there should be according to our current understanding of physics via Special Relativity. The term “dark matter” is merely a place holder for the “extra” gravity.
Astrophysicists will readily admit that “dark matter” is likely an artifact of our model (Relativity), and will simply vanish once a Unified Theory comes about. Dark matter is most likely an indicator that our current model isn’t perfect; dark matter likely isn’t an actual physical thing floating around in space.
It doesn’t mean Relativity is WRONG – Newton didn’t prove Kepler’s Laws to be false he simply refined them; Einstein didn’t prove Newton’s Laws to be false, he simply refined them; a Unified Theory won’t prove the Laws of Relativity or Quantum Mechanics false it will simply refine them.
It is not audacious to say that Einstein’s Laws of Relativity were lacking in completeness. Einstein himself was very outspoken on the fact that Relativity is simply a stepping stone. It yields complete gibberish on small scales, and is therefore, by definition, not accurately reflecting the realities of the physical universe.
Dark matter (and dark energy) are just symptoms of an incomplete model, not actual physical “things” out there in the cosmos. Astrophysicists readily and happily hypothesize this as the “origins” of dark matter. The fact that our current models don’t sufficiently explain the physical universe is extremely exciting to Astrophysicists, and they embrace it.
The best way of thinking about dark matter and dark energy in relation to General and Special Relativity is that these laws break down both on very small scales (quantum level, black holes, singularity), at very large scales (edge of galaxies having “extra” gravity i.e. dark matter), AND very, very large scales (universe as a whole expanding faster than Relativity predicts i.e. dark energy).
Putting it this way reveals that Relativity is really only accurate on a specific scale, but it is astonishingly accurate on that one scale. Fortunately for us it is at the scale of stars and planets that it is impeccably accurate thus allowing us to use GPS (w/o Relativity your Google Maps would be off due to speed, mass, time dilation), send probes to Mars, and even rendezvous with comets 10 years and billions of miles after launch.
The thing is, people completely misunderstand this reality. Yes, Einstein’s Theories of Relativity are impeccable at describing the physical universe at this specific scale, but no physicist deludes themselves into thinking this means it is accurate, and therefore true, for any and every scale larger or smaller.
Relativity describes a segment, a small part of the total spectrum of the physical universe. It happens to be the part of the spectrum we most need described for our activities (like GPS and exploring our solar system), but this is still a very limited scale in a lot of ways, and it is by no means anywhere near a Unified Theory that accurately describes all scales faithfully.
I obviously can’t speak for Fernando, but hopefully that helps elaborate on why Fernando is not being audacious in any way, shape, or form on his hypothesis regarding the nature of “dark matter”.
Fair enough!
The Modern Concept of Matter – Frank Wilczek
https://www.youtube.com/watch?v=q63CnyBu3nQ
Brian, that’s about right. It’s not like I think it’s turtles all the way down.
maybe we could change the snark detectors to look for WIMPS?
My problem is that when ever I see the government stepping in to “help” us, it always costs us more in taxes and lost freedoms down the road. I don’t “hate” the phd scientists and grad students you mention, but I sure don’t want to see any of my taxes fund their research. If climate change is so important, I say let the private sector step in to fund the research and find solutions. Outside of military operations, government should only have a spectator role.
“…but I sure don’t want to see any of my taxes fund their research.” ~ M.Marcellin
Why stop there?
I don’t want to see governpimps.
Never mind our funding of anything through them and by taxation-by-force.
It doesn’t work, and worse– including scientific research in that context– and is not ethical.
No emergency? Well maybe there is and maybe there isn’t…
I’ve been diving on coral reefs for almost 38 years and I have been witnessing more and more coral bleaching in the last decade. I think we have reason to be quite worried. There are many many stressors affecting the health of coral reefs. Warming oceans is definitely one of them. Here’s another link from NOAA .
http://oceanservice.noaa.gov/facts/coral_bleach.html
Warmer water temperatures can result in coral bleaching. When water is too warm, corals will expel the algae (zooxanthellae) living in their tissues causing the coral to turn completely white. This is called coral bleaching. When a coral bleaches, it is not dead. Corals can survive a bleaching event, but they are under more stress and are subject to mortality.
In 2005, the U.S. lost half of its coral reefs in the Caribbean in one year due to a massive bleaching event. The warm waters centered around the northern Antilles near the Virgin Islands and Puerto Rico expanded southward. Comparison of satellite data from the previous 20 years confirmed that thermal stress from the 2005 event was greater than the previous 20 years combined.
So back to the link you provided and a chart from it using the Levitus et al data. You don’t see a problem?
Thanks, too, for the Richard H./Resilience.org video, Fred, (which was shared with others).
Richard seems to make things as simple and as easy to understand as possible and that’s the idea. To get the message out, it needs to be as understandable to as many as possible.
Ron Patterson also does good work at consolidating the confusion.
Fred, put the Levitus chart next to this one and stare at them…focus on the dip in world ocean energy content 0 to 2000 meters, in the 1960’s. Look at the surface temperature change during the same period of time…what happened? Greenhouse gas concentrations were increasing fast.
Oh, and check the sea level rise (I keep my own data)
http://21stcenturysocialcritic.blogspot.com.es/p/fernandos-sea-level-rise.html
Sea level dipped. Dropping sea level means the water column AS A WHOLE is shrinking. This means it’s cooling.
The sea level curve confirms the Levitus energy content estimate, which also drops. This gives us two pieces of data which show a large energy loss during that period.
Solar activity records don’t show a cooling sun, so that can be discarded.
The surface temperature held steady or dropped a small amount, which also matches the other data. We were pouring CFCs into the air, gobs of CO2, methane, you name it. Something made the planet loose energy when it was supposed to be gaining it. What was it?
I know you hold the position that climate scientists know much less about climate science than you do and that they seem to be involved in a global conspiracy to hoodwink the public into funding their research. So I’m sure you will disagree with this post over at realclimate.org.
http://www.realclimate.org/index.php/archives/2013/09/what-ocean-heating-reveals-about-global-warming/
I’m sure you have studied and modeled the thermo haline circulation patterns of the oceans as well. See also:
http://www.realclimate.org/index.php/archives/2015/03/whats-going-on-in-the-north-atlantic/
I guess since there is no sea level rise where I live (near Miami) the fact that I have to drive through salt water on Collins Avenue at high tide must be due to the fact that South Florida is sinking into the earth…
Fred, don’t attempt to write what you think I think. This works better if you express your thoughts and ask questions. Thanks.
No offense intended its just that based on your own claims that is how I have interpreted your thinking.
But you are right I shouldn’t jump to conclusions or assume.
Interesting read OFM. I haven’t been over to the resilience site in a while.
Yes, the ocean is acting like a giant heat storage battery, it has a huge surface area to capture and re-radiate/convect heat energy. Eventually it all comes to equilibrium.
There are two areas that most studies, many scientists and articles ignore.
The first is global dimming.
The article says “That is a major reason the planet’s surface temperatures have risen less than expected in the past dozen or so years, given the large greenhouse gas hike during the same period, ” The other very major reason is that globally sunlight has been reduced by 10 percent. It varies across the globe hitting up to 25 % in some areas. Dirty burning, mostly coal, is keeping enough SOx and aerosols in the atmosphere to continue this. However coal burning is plateauing. Forest burning is still increasing. That has saved us from a huge amount of heating. But it will all change and change quickly since the residency time of those aerosols is short, once we start to clean up our act.
Most of the dimming occurs in the northern hemisphere south of the sub-arctic so the arctic regions and the southern hemisphere are getting more solar insolation than the northern temperate region. The article says that is where the heating is occurring, ergo global dimming is a large factor.
The second thing that is ignored is a very powerful GHG called water vapor. Since it is mostly of natural origin, it is not counted in most calculations of GHG concentration, climate sensitivity and total radiative forcings. The IPCC has ignored it for many years.
So let’s look at water vapor in clear air. Water vapor in clear air has a forcing of 75 watts per m2 compared to CO2 which has a forcing of about 35 watts per m2. CO2 is energy saturated, meaning it only absorbs more energy through band-broadening, lessening it’s effect as a warming gas. As far as I know, water vapor is not energy saturated. More water vapor in the atmosphere, a lot more radiative forcing. As the ocean surface warms and the air warms, increasing water vapor content will play a huge role in global warming. The atmosphere used to have 3 percent water vapor, now it has 4 percent. What happens as it hits 4.5 percent or more?
Water vapor IS considered in the Global Climate Models.
See 8.6.2.3 page 630
http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-chapter8.pdf
It seems that water vapor (spelled vapour in the IPCC) is considered and generally held constant. The components of radiative forcings chart (technical summary Figure TS.7) does not include water vapor other than stratospheric water vapor generated by decomposing CH4.
“Other changes in stratospheric
water vapour, and all changes in water vapour in the troposphere, are
regarded as a feedback rather than a forcing. {2.2.2, 8.1–8.3; FAQ 8.1”
So point me to specific models that actually use feedbacks in their estimates.
It isn’t held constant. It’s the main positive feedback effect. There’s very little debate about the way it works. The debate as far as I can tell is the way water vapour turns into clouds. This is influenced by aerosols. There’s also differences in the way scientists consider energy transfer by rising water vapor, which condenses and warms the upper atmospheric layers.
I think you ought to read about this topic, you are missing a very interesting debate.
Hi AllenH,
The water vapour feedback is included in all the models which are based on basic physical processes. So your idea that water vapor is ignored by the models is incorrect.
“The water vapour feedback is included in all the models which are based on basic physical processes.”
For over a century…
Arrhenius estimated that halving of CO2 would decrease temperatures by 4–5 °C (Celsius) and a doubling of CO2 would cause a temperature rise of 5–6 °C.[12] In his 1906 publication, Arrhenius adjusted the value downwards to 1.6 °C (including water vapor feedback: 2.1 °C).
http://en.wikipedia.org/wiki/Svante_Arrhenius#Greenhouse_effect
From the IPCC 2013 technical summary:
Box TS.2 | Radiative Forcing and Effective Radiative Forcing
RF and ERF are used to quantify the change in the Earth’s energy balance that occurs as a result of an externally imposed change. They
are expressed in watts per square metre (W m–2). RF is defined in AR5, as in previous IPCC assessments, as the change in net downward
flux (shortwave + longwave) at the tropopause after allowing for stratospheric temperatures to readjust to radiative equilibrium, while
holding other state variables such as tropospheric temperatures, water vapour and cloud cover fixed at the unperturbed values
I see now that some of the models do incorporate water vapor feedback. What is unsettling is the total feedback range of all models is large, varying from 2 to 4 watts/m2/C. Also only 7 of the 13 models use feedbacks at all. Chapter 9 Figure 9.43.
Some interesting info.
WATER VAPOR FEEDBACK AND GLOBAL WARMING
http://www.annualreviews.org/doi/abs/10.1146/annurev.energy.25.1.441
Water vapor is the dominant greenhouse gas, the most important gaseous source of infrared opacity in the atmosphere. As the concentrations of other greenhouse gases, particularly carbon dioxide, increase because of human activity, it is centrally important to predict how the water vapor distribution will be affected. To the extent that water vapor concentrations increase in a warmer world, the climatic effects of the other greenhouse gases will be amplified. Models of the Earth’s climate indicate that this is an important positive feedback that increases the sensitivity of surface temperatures to carbon dioxide by nearly a factor of two when considered in isolation from other feedbacks, and possibly by as much as a factor of three or more when interactions with other feedbacks are considered. Critics of this consensus have attempted to provide reasons why modeling results are overestimating the strength of this feedback.
Soot climate forcing via snow and ice albedos http://www.pnas.org/content/101/2/423.short
Abstract:
Plausible estimates for the effect of soot on snow and ice albedos (1.5% in the Arctic and 3% in Northern Hemisphere land areas) yield a climate forcing of +0.3 W/m2 in the Northern Hemisphere. The “efficacy” of this forcing is ∼2, i.e., for a given forcing it is twice as effective as CO2 in altering global surface air temperature. This indirect soot forcing may have contributed to global warming of the past century, including the trend toward early springs in the Northern Hemisphere, thinning Arctic sea ice, and melting land ice and permafrost. If, as we suggest, melting ice and sea level rise define the level of dangerous anthropogenic interference with the climate system, then reducing soot emissions, thus restoring snow albedos to pristine high values, would have the double benefit of reducing global warming and raising the global temperature level at which dangerous anthropogenic interference occurs. However, soot contributions to climate change do not alter the conclusion that anthropogenic greenhouse gases have been the main cause of recent global warming and will be the predominant climate forcing in the future.
http://www.sciencemag.org/content/310/5748/657.short
Role of Land-Surface Changes in Arctic Summer Warming
A major challenge in predicting Earth’s future climate state is to understand feedbacks that alter greenhouse-gas forcing. Here we synthesize field data from arctic Alaska, showing that terrestrial changes in summer albedo contribute substantially to recent high-latitude warming trends. Pronounced terrestrial summer warming in arctic Alaska correlates with a lengthening of the snow-free season that has increased atmospheric heating locally by about 3 watts per square meter per decade (similar in magnitude to the regional heating expected over multiple decades from a doubling of atmospheric CO2). The continuation of current trends in shrub and tree expansion could further amplify this atmospheric heating by two to seven times.
A good source for similar data that is kept in one location so you don’t need t use Google:
http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/monthly-crude-oil-production-by-district-and-field/
Hi MBP,
Thanks.
Looking back at the final estimate for June 2013, the crude only estimate is 1808 kb/d. The current Production Database Query(PDQ) from the RRC, gives us 2105 kb/d, so the final estimate was 297 kb/d too low.
An EIA estimate from Oct 2013 for June 2013 Texas C+C was 2575 kb/d, the current PDQ estimate for Texas June 2013 C+C is 2484 kb/d, so the EIA estimate was too high by 91 kb/d.
Again EIA estimates are not perfect, just better than the RRC estimates. The RRC estimate was 16% too low and the EIA estimate was 4% too high.
So if January C + C fell, and it appears this will continue with reduction in completions in 2015, what explains the seemingly never ending inventory builds?
what explains the seemingly never ending inventory builds?
I have no idea but if you figure it out let me know.
I just have guesses, but they are not original thoughts on my part. I do know if I owned a refinery, I would be buying all the cheap crude I could get my hands on, especially heading into what appears could be record setting summer demand. Would not care if I “topped my tanks”. Crack spread is very high, doubt it will come in till fall.
Given oil patch carnage, including analyst estimates of losses for most shale producers for Q 1, it would appear continued strong supplies are unsustainable long term at sub $50 WTI.
Continues to confuse me, but I will admit I am easily confused. Just ask my wife! LOL!!
I kind of agree with SS. If a refiner had a budget in $’s for a spring inventory build in, and is now spending it without change, they are adding twice as many barrels into inventory. Maybe they figure the odds of that being smart is better than cutting the budget.
I agree. I think storage will go up to about 80 to 85% and then flatline and after early May start to decline. They need some space for contingency and to allow blending operations, but otherwise if oil is available and considered cheap they will keep on buying. USA driving season kicks up in May and Middle East demand for A/C power will likely reduce available exports then as well.
How are they calculated or measured is the first question.
Good question. Wonder if reports KSA produced 10.3 million bopd is contributing.
As previously noted, I suspect that late last year US refiners may have hit the limit of how much additional very light crude crude oil (roughly 40 to 45 AP gravity) and condensate production (45+) that they could take, at least not without causing an unacceptable loss in distillate output:
http://econbrowser.com/archives/2015/03/oil-sands-outlook#comment-189357
http://eaglefordforum.com/forum/topics/destabilized-condensate
US net crude oil imports increased from 6.8 mbpd for the previous week to 7.7 mbpd for last week. The four week running average number increased from 6.8 to 7.1.
http://www.eia.gov/petroleum/weekly/crude.cfm
Vastly increased imports. I think imports were up nearly 1mbpd last week.
I love following the detailed fisking of the supply data on this site. But it is also interesting to turn attention to the other side of the picture. Now getting a sense that demand weakness may become structural. OECD is soft, now uses less crude than non-OECD, therefore no longer in the driver’s seat on price, China’s historic consumption ramp-up is certainly softening if not nearly over. Will India ever replace that demand growth?
If such a picture settles I suspect this will make for a jittery oil price pattern: unable to bust upwards due to weak demand, unable to fall on the cost of the marginal barrel. Rather than end-of-times so favoured by this site’s readers I still see a gradual unwinding of oils’s centrality to our economy. The electron age is ahead. Much that seems permanent will end of course. Same as it ever was.
Additionally good signs that renewables are starting to make meaningful inroads to old certainties, on cost, of course: http://www.theguardian.com/environment/2015/apr/07/are-we-reaching-a-positive-climate-change-tipping-point
Hi Patrick R,
Your analysis seems logical. Also, China is ramping up it’s EV production. Something The Guardian article didn’t cover:
http://seekingalpha.com/article/3052496-byd-chinas-number-1-electric-vehicle-company-is-booming
First batch of three-year leases ending now on Volts and Leafs, huge supply of used electrics entering the market with interest low because of low gas prices. If you’ve ever thought of buying an electric car, they can be had for a song at the moment.
http://cleantechnica.com/2015/04/06/us-electric-car-sales-no-surprises-tesla-model-s-nissan-leaf-bmw-i3-on-top-again/
Looks like Leaf sales were down 27% Y/Y.
where’s Nick?
Why?
Hi Watcher,
That has nothing to do with a fall in gasoline prices by about 50% because economics is no longer relevant. Also the popularity of the new BMW EV has had no effect, no it is that magic aluminum effect plus pixie dust that is the obvious explanation 🙂
The real growth in electric vehicles is coming in bicycles, scooters, low speed (max 50mph) passenger vehicles and light utility vehicles.
Because safe following distance increases with the square of speed, travelling over 30 mph in the city is a huge waste of space.
In Asia, where congestion is growing, car penetration is low, and incomes are low, the demand for slower, smaller, cheaper passenger vehicles and light utility vehicles will probably outpace the roadhog market for years to come. EVs do fine here. This is bad news for ICE manufacturers, because that is where the growth is.
Patrick: As long as demand continues to increase and well capacity continues to decease the capacity overhang tends to decrease. Renewables have negligible impact on oil, therefore the Guardian article isnt that relevant.
Hi Fernando,
For people like Patrick and me there are two big problems, peak oil and climate change (and I would add population growth). For some people climate change is a non-issue so renewables are of little concern. If peak oil is the only problem, then replacing liquid fuels is the major concern.
Even if one takes the position that climate change is of little concern (not my position, but there are some who believe this), if one takes the broader perspective of peak fossil fuels, then we need something to replace coal and natural gas and it is unlikely to happen overnight. In that case wind, solar, nuclear, biofuels, and hydro become very relevant. Chart below with a peak fossil fuels scenario, peak is 2020.
Dennis, bottom line is that renewables have little impact on oil prices. This is the reason I’m worried about peak oil. I did go ahead and buy some shares in late January (so far it’s looking good), but my main worry is that we are headed for a brick wall.
Hi Fernando,
Over the short term you are correct I think that oil prices and renewable energy are disconnected. To think that fossil fuel prices are not connected to renewables would be incorrect. When we broaden the analysis to peak fossil fuels, which makes more sense in my view, renewable energy is highly relevant.
You are no doubt not very tuned in to the coal industry, but I would think you know a lot about oil and natural gas. Does the natural gas scenario in my chart look too pessimistic in your view? Note that the fossil fuel output falls by about 1.4% per year on average from 2020 to 2095.
If we imagine an all electric world with fewer fossil fuels in the future and no growth in energy consumption due to efficiency gains after 2020, we could get the following.
Oil is used with about 25% efficiency at most and electric transport is at least 75% efficient, so about 1/3 of the energy would be needed for similar energy services provided by oil, that is about 1.7 Gtoe/3 or 0.6 Gtoe using EVs, electric trains and buses, and light rail.
For coal we assume all of the reduction in coal use is from electric power and for simplicity we will assume lower natural gas use also comes from reduced electricity generation. The average power plant is 38% efficient, I will use 40%, so a 5 Gtoe reduction in coal and natural gas use from 2020 to 2095, would only need about 2 Gtoe of energy at 100% efficiency to replace it, we will assume the electricity produced by wind and solar have the same losses as existing electricity production by coal and natural gas.
So under these optimistic assumptions only 2.6 Gtoe are needed to replace a 6.7 Gtoe reduction of fossil fuel use.
There are other things that could be included such as replacing natural gas boilers for heating (95% efficient) with heat pumps (at least 200% efficiency) so about half the energy use (maybe 45% once transmission and distribution losses are accounted for).
Note also that high penetration of solar PV eliminates a lot of transmission and distribution losses because some electricity is produced on site (though there will still be losses for grid tied systems, overall the losses will be smaller).
The main point is that such a transition might be possible, higher fossil fuel prices and a removal of subsidies for all types of energy and an imposition of taxes for externalities so that the market can operate to allocate resources most efficiently would help make such a transition possible.
Dennis : How do you get a heat pump to have “200 % efficiency?”.
Your gas profile is ok. It looks sort of like mine. There’s a gas resource we haven’t discuused: gas in the geo pressured gas sands in the us gulf coast. That requires producing a lot of brine, may be a bit expensive. I’ve seen really high estimates (see Scientific American article).
Hi Fernando,
My understanding is that a heat pump produces about 3 kJ for each kJ of energy input, so 300% efficiency, I reduced this to 200% because in very cold conditions the heat pump becomes less efficient.
After reading about heat pumps:
So I was using incorrect terminology, the correct term is coefficient of performance (COP) and 2 kJ out for every kJ in would be a COP of 2. Ground source heat pumps (for colder climates) have a COP of 4 to 5 and the best air source heat pumps have a COP of 3, COP of 2 is conservative, but may be right for the best air source heat pumps in fairly cold climates (say eastern Massachusetts).
No doubt you knew this and were pointing out my not using COP 🙂 Thanks.
http://en.wikipedia.org/wiki/Heat_pump
DC wrote:
“Note that the fossil fuel output falls by about 1.4% per year on average from 2020 to 2095.”
Seems unlikely oil & gas production will fall only by 1.4%. Fields typically decline at about 7%. CapEx for Oil & Gas growth is gone, and likely gone for good. O&G industry is switching to cannibalism as the big fish consume the smaller fish to replace reserves instead of drilling. (example: Shell buying BG group this week). I am sure some other big fish will also announce a major M&A this year. Its cheaper to buy up the smaller fish than to spend big $$$ on non-conventional drilling projects (deep sea, Artic, Tar sands, Shale).
DC Wrote:
“In that case wind, solar, nuclear, biofuels, and hydro become very relevant.”
Not necessarily, As the cost for fossil fuels rise, consumers can just cut energy consumption. Consider if air travel, air freight vanishes freeing up about ~8 mbpd (guestimate) of consumption. As energy cost rise, the most likely scenario is decreased use of energy, not substitution of more expensive energy systems. Of course declining energy consumption also means a shrinking global economy. The top industries to shrink with be those that have the highest energy costs and that are the most discretionary (air travel tops the list in my opinion).
Hi Techguy,
Consumers cutting consumption is definitely important, but I don’t think that will be enough. We need both renewables and greater efficiency. I agree that efficiency is the better approach, but doubt it can get the job done by itself.
You guys know what Ronnie Raygun had to say about political arguments ? That if somebody agrees with you eighty percent of the time, he is your friend and that you should never forget it.
Now when it comes to my friend Ron I agree with him about collapse to eighty percent or even ninety percent maybe.
Efficiency isn’t going to save Old Man Business As Usual. Conservation isn’t going to save him. He is a dead man walking but in the sense of the ants as related by Fred Maygar posts recently a few of his component parts will probably survive and come together in a NEW GENERATION BUSINESS AS USUAL.
The new model human ant colony is going to be very different from and much much smaller than the existing model.
Efficiency isn’t going to save Old Man Business As Usual. Conservation isn’t going to save him. He is a dead man walking but in the sense of the ants as related by Fred Maygar posts recently a few of his component parts will probably survive and come together in a NEW GENERATION BUSINESS AS USUAL.
Here’s two young ants at work today in the NEW GENERATION BUSINESS AS UNUSUAL.
First one is reporting what most of us here already know.
New UN report finds almost no industry profitable if environmental costs were included
http://www.exposingtruth.com/new-un-report-finds-almost-no-industry-profitable-if-environmental-costs-were-included/#ixzz3WvBjcD5S
Second one is actually doing something about it…
20 Year Old Claims He Can Rid the World’s Oceans of Plastic
http://ecowatch.com/2015/04/08/boyan-slat-ocean-cleanup-plastic/
His TED talk is worth watching.
Cheers!
DC Wrote:
“Consumers cutting consumption is definitely important, but I don’t think that will be enough. We need both renewables and greater efficiency”
I think you missed my point. That is if consumers cannot afford higher fossil fuel costs, they also won’t be able to afford the higher cost of renewables. Reduction in consumption is the only choice.
Reduction in consumption is the only choice.
Politically you’ve got a group of voters who are against anything that requires changing their current lifestyles. Of course, those lifestyles won’t be sustainable, and what they can give, will give up, and ultimately must give up aren’t “big” things in the greater scheme of things. Big cars. Big houses that consume a lot of energy. Big lawns that use a lot of water.
Yes, maybe the reduction in consumption will happen faster than improving efficiency and replacing fossil fuels with renewables. But the politicians who are in office while the economics force the reductions in consumption aren’t going to be happy being associated with those economics. Or they will tell the people who find they can’t afford much anymore that it was all the fault of the poor, or Medicare, or left-wingers, etc. The politicians will tell the voters that we just need to get rid of the problem people and the problem policies and America will be back in its glory. And when the problems don’t go away, we just need to attack those problem people and those problem policies that much harder. Why, if we didn’t have gay marriage, America would triumph economically again.
There are already places in the world where renewables are actually more affordable than fossil fuels in the not so long run. Locations far removed from the grid in places like India and Africa, where kerosene lamps are the alternative to renewables for lighting, come to mind.
Even in the US state of Hawaii, solar PV is very competitive with their high electricity costs. One of the difficulties is going to be, to get people who are used to electricity always being available at the flick of a switch, to accept a different paradigm that involves any loss of “convenience”.
The doctrine of the “Clean Disruption” is that, renewables and EVs will eventually supplant fossil fuel powered option because they are better and more importantly, more affordable without any big increases in fossil fuel costs.
Whether that will actually happen before TSHTF is anybody’s guess.
Alan from the islands
EVs are much cheaper than ICEs.
Wind is already cheaper than new, moderately clean coal.
We have better and cheaper alternatives to fossil fuels.
China’s historic consumption ramp-up is certainly softening if not nearly over
There is no evidence of this. There is evidence to the contrary.
But in general there is no clear evidence of anything yet.
Watcher, we do have evidence that there are millions of empty office spaces and apartments in China. We have evidence that there are whole cities, newly built cities, that are almost totally empty, empty malls and empty buildings. And we have evidence that the construction is still going on. We also have evidence that the average Chinese does not make enough money to ever hope to live in one of these new apartments.
Therefore we have evidence that there is currently a huge construction bubble in China. And from all this evidence we can infer that at some point in the future this Chinese construction bubble must burst.
We also have evidence that they buy 26 million cars a year and they are nouveau riche and thus don’t have old ones to leave the inventory, so it’s all new consumption.
Oh wait, I thought this was about oil consumption.
No idea what cement consumption looks like.
Hi Watcher,
It is pretty clear that if the Chinese economy crashes that oil consumption will decrease. It is possible that the Chinese economy will not crash, I have no clue, but Political Economist follows China quite closely and might have a more informed opinion than me.
China will go through a very painful correction as it attempts to switch to a consumer/service-driven economy and ships its manufacturing to SEA or East Africa countries.
Those megacities don’t stay empty for long. Half of China still lives in non-urban areas.
China’s main problem is this: can it get rich before it gets old?
Bet it takes a lot of diesel to move and put into place all that damn cement.
Oil demand should drop when they stop building so much stuff. No need for economic collapse for a decrease in demand.
When oil starts to become scarce one of the first signs you’ll see anywhere don’t matter what country is less new stuff being built. Imagine an economy where little to no new houses are built.
26 million new cars a year, driven by people who didn’t trash their old car because they didn’t have one.
All new consumption.
They ain’t driving much. The rate of chinese oil consumption growth is slowing. So unless India or Africa step up global demand is going sideways. This caps price growth unless supply is properly down…? Stuck between cost of marginal barrel and sluggish demand.
Shell is wise to move into LNG, oil is not golden egg it was. Beginning of the end.
“The rate of chinese oil consumption growth is slowing.”
No evidence of this.
Don’t know how you define the word ‘no’:
http://www.rfa.org/english/commentaries/energy_watch/china-slows-oil-demand-growth-02232015112019.html
”They ain’t driving much.”
I believe this is almost for sure the case given that the rate of road construction must be lagging auto sales substantially and that most of the people who now have money enough to buy cars probably live in places where it takes an hour to go ten miles or less due to traffic.
But I don’t know of any actual data about miles driven per driver or per car in China.
Any links would be appreciated.
No idea what cement consumption looks like.
Cement trucks have diesel engines.
Ron,
However there is also evidence that the Shanghai stock market has soared 100% over the last 9 months. Chinese consumer confidence is at a nine year high, the yuan is actually stronger than the US dollar and the People Bank of China can lower interest rates by a wide margin as the short interest rates is still higher than 5%. In addition, China has a wide trade and current account surplus and can therefore protect its currency and moreover can help other countries out with refinancing debt, which is good for Chinese exports. It is actually the US economy, which shows tremendous weakness (Dallas manufacturing PMIand Chicago PMI at multiyear lows, wholesale and retail inventory /sales ratio at multiyear high). It is not yet mentioned in the media, yet it cannot be denied forever.
Furthermore, the US Office vacancy rate stands at over 16 % and although the rate is slightly declining, it is still a catastrophic number. In addition, many houses have been bought over the last years for investment purpose and the occupancy rate for these houses is unknown.
Us westerners tend to a binary panic about China, it’s either: ‘China’s so strong they’re going to take us over’ or ‘they’re going to collapse and take us down’. Could it be that China’s scale and return to strength is a source of stability in the world’s economy…?
Furthermore, the US Office vacancy rate stands at over 16 % and although the rate is slightly declining, it is still a catastrophic number.
If 16% is a catastrophic number then 22.4% should be ultra catastrophic. But good gravy, what about 27.6%? And that was two years ago, no doubt it is a lot worse now.
Are China’s property vacancies a danger sign?
The numbers are high, with around 22.4 percent of sold residential homes in urban areas sitting empty in 2013, or a total of 49 million homes, while the number of unsold units is estimated at 3.5 million units, according to the Survey and Research Center for China Household Finance.
But regionally, second and third-tier cities have a vacancy rate of 27.6 percent each, 9.2 percent higher than the larger first-tier cities, the data show.
The rate is climbing because it was only 20.6 percent in 2011.
China Filling with Empty Homes
In 2011, the empty-home share in urban areas stood at 20.6 percent, while vacancy rates have climbed as high as 27.6 percent in second and third-tier cities since then.
Hi Ron,
The difference is the China is growing and urbanizing so potentially this vacant space could be filled as the rural to urban migration continues in China. The Chinese economy is growing at 3 times the rate of the advanced economies (6% vs 2%), it will slow down eventually, but again it would be great to hear Political Economist’s analysis, I think he only drops by occasionally so he may not comment. Doug might also have some insight as he occasionally travels to China I think.
The truth may be somewhere between a catastrophic collapse and China taking over the world, reality is usually somewhere between the extreme views.
The difference is the China is growing and urbanizing so potentially this vacant space could be filled as the rural to urban migration continues in China.
Obviously Dennis you have not been following the Chinese building boom controversy very closely. The Chinese migration from the country to the cities are leading to a massive increase in Chinese shantytowns.
The megacity boom is creating mega-ghost towns
Since late 2012 it has become clear that tens of millions of new high-rise apartments, from the residential suburbs of Zhengzhou to the brand new city of Ordos, are sitting empty. The price range of most apartments is US$60,000-120,000 which is way out of reach for the average Chinese.
China’s construction boom may not be sustainable. Real estate bubbles are common to economies all over the world and certainly the United States has had its share. But in China, everything is bigger and if this bubble does burst, it will be the biggest real estate meltdown the world has ever seen. That will not do away with China’s megacities, but it may change the way they are planned.
That is the theme I read in almost every article on the Chinese building boom. There is a “new wealthy” class in China. They are not allowed to invest outside China. Just about the only place they have to put their money is in the Chinese building boom. So the Chinese just keep building and building and building buildings that will never be occupied.
Images of Chinese Shantytowns
Hi Ron,
You are correct that I don’t follow the situation closely in China. Is the viewpoint in the article you point to universal? Eventually the unoccupied buildings will be rented to the growing Chinese middle class. The wealthy people that invested in these buildings will have to rent them for less than they planned and will lose money on their investment. Other builders will start to focus on building apartments that are affordable or will remodel exiting expensive apartments into smaller units that are less expensive.
I think that the New Republic forecast may be too gloomy. The forecast from trading economics is more realistic (link below).
http://www.tradingeconomics.com/china/forecast
The trading economics forecast expects GDP per capita to double by 2030.
My wife is Chinese and owns 3 apartments (total $750,000) in Qingdao, a second tier city.
Nationwide, the government has been attempting to cool the market, to get a mortgage, one has to put a down payment of 60%, but it doesn’t matter as most pay cash. There are no yearly property taxes. She believes the value of her apartments are holding steady.
My wife was importing coal to china, coal becomes coke which becomes steel. The last 3 years the coal import business has not been good, as the steel industry is in a downturn, from a construction slowdown. And no, she does not believe in peak energy.
Well I do know that the housing excess receives little comment in China, and in Japan, who analyze China economics ad nauseam, this is not considered an overly serious matter. Remember, the building boom is part of an orchestrated event by a government managed economy. I think Patrick (somewhere above) nailed it: China is a very complex animal so analyzing it in black and white terms is naive.
When I sit down with a random collection of Chinese the more common topic of conversation is environmental and/or some social issue. And for the record, while China is doing a lot to advance “green technology” and this is being slowly becoming a more significant part of the energy mix, but a lot of the development is being done with a view to selling these products abroad. Anyway, my advice would be: don’t make sweeping statements about China unless you don’t care about being wrong.
Yes, respecting Jeff’s post below: Cars. The Chinese are all looking to own nice cars (not EVs) and they want BMWs, Mercedes, SUVs, etc. VWs are popular as well.
Thanks Doug.
Do you speak Chinese or do your Chinese friends speak English? I appreciate your perspective as I know little to nothing about China.
Well I do know that the housing excess receives little comment in China, and in Japan, who analyze China economics ad nauseam, this is not considered an overly serious matter.
Not a serious problem? Well now, that is a rather sweeping statement.
Anyway, my advice would be: don’t make sweeping statements about China unless you don’t care about being wrong.
Oh!… Okay…
“… that is a rather sweeping statement.” Now hold on a sec Ron. My comment was based partly seeing on many newspaper articles I’ve seen by Japanese economists stating that the housing bubble in China is a manageable issue. I make NO economic statements of my own because I know NOTHING about economics.
Hi Dennis,
“Do you speak Chinese…..?” I am perfectly fluent in Japanese but don’t pretend to understand their culture well. Although I read Chinese passable, my aural comprehension is pathetic. Many of my Chinese friends (but not all) are scientists or engineers who have studied in the US or the UK. But, I always travel with an interpreter, a young girl who was an English language student (But Yuan is a rare individual who understands an unbelievable number of technical terms and thus was/is invaluable to me). I have a rarely used apartment in Hanoi and speak Vietnamese too but English and French work fairly well in Vietnam now, especially among young people. Sadly, my language skills are evaporating — like snow in April.
I tried to learn basic chinese, but I can’t sing. The third time I went for my lessons my teacher said to forget it and use a translator. On the other hand my daughter speaks mandarin. But she lived in China, and she sings real nice.
Chinese light vehicle sales remain strong:
China’s auto sales pick up in March
Read more here: http://www.star-telegram.com/news/nation-world/world/article17928365.html#storylink=cpy
Hi Jeff,
The more important figure is total vehicle miles travelled and the change in that figure. We could also look at Chinese oil consumption. This is forecast to grow by 300 kb/d in 2015 by OPEC from 10.46 Mb/d in 2014 to 10.77 Mbd in 2015, from OPEC’s March Monthly Oil Market Report (page 47).
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR_March_2015.pdf
As I have periodically noted, given an inevitable ongoing decline in Global Net Exports of oil (GNE*), unless the Chindia region cuts their oil consumption at the same rate as, or at a faster rate than, the rate of decline in GNE, it’s a mathematical certainty that the rate of decline in ANE (Available Net Exports, GNE less Chindia’s Net Imports, CNI) will exceed the rate of decline in GNE, and the rate of decline in ANE will accelerate with time.
ANE have already declined from 41 mbpd in 2005 to 34 mbpd in 2013.
*Combined net exports from (2005) Top 33 net exporters.
Hi Jeff,
I expect oil prices will rise when that occurs and less oil will be used by nations that import. Also the oil exporters may start to use less as oil revenues begin to dwindle as their exports decline, many members of OPEC are heavily dependent on oil export revenue, they may find it necessary to limit oil subsidies to reduce domestic consumption.
At some point the rise in oil prices to $150/b or more(2015$) will lead to much less oil use due to substitution of EVs, trains, buses, light rail, bicycles, and walking for internal combustion engines.
http://www.rfa.org/english/commentaries/energy_watch/china-slows-oil-demand-growth-02232015112019.html
http://www.bloomberg.com/news/articles/2015-04-09/we-travelled-across-china-and-returned-terrified-for-the-economy
Ron, Dennis, Jeffrey, Doug, and all,
At China’s oil consumption/GDP and its rate, deflator, and reported wages and consumption/GDP, China’s economy is growing less than 4% and near 3% per capita, whereas virtually all net growth is attributable to consumer spending. Money velocity continues in free fall.
Using the same metrics for the US economy, real SAAR GDP is at less than 1% and near 0% per capita, which are the post-Peak Oil and -2007 trend rates, not coincidentally.
Thus, in the aggregate, the two largest economies of the world are growing well below 2% and no faster than 1% per capita. With Russia, Brazil, and much of the EZ contracting or growing very slowly, if at all, the global economy, including trade, is at effective “stall speed”.
The Fed cannot raise the reserve rate under these conditions.
In this context, the crash in the price of oil was to be expected, as the commodities market has become increasingly financialized, with levered speculators becoming disproportionately influential at the price margin, creating gross distortions to implied demand, forcing producers and intermediaries to become futures traders rather than producers of vital business inputs.
“At some point the rise in oil prices to $150/b or more(2015$) will lead to much less oil use due to substitution of EVs, trains, buses, light rail, bicycles, and walking for internal combustion engines.”
We have seen high oilprices already. It will lead to much less oil use mainly because of the negative effects on the economy. Then oil prices tumble and we start all over again. Déja vu.
Why The Oil Price Collapse Is The Fed’s Fault
“The record price of oil was an underlying cause of The Financial Crisis. It increased the cost of global trade, produced inflation and higher interest rates that contributed to real estate loan defaults, and caused demand destruction for oil and other commodities.
Weak demand for all commodities and loans remains a chronic artifact of the years since 2008 despite the best efforts of central banks to correct the problem.”
–
“The current oil-price collapse is because of expensive tight and other unconventional oil and the market’s inability to support its cost. $90 per barrel WTI price appears to be the empirical threshold for demand destruction. Only the best parts of core areas of the Bakken and Eagle Ford shale plays make some profit at $90 per barrel and almost nothing makes money at present oil prices.”
I agree that the action in the oil markets added to the crises. But, the real plunge started when there was fear that the banks would go under. I forget the term, but basically world trade uses sight drafts (?) to conduct it. A shipper will send the ship full of goods to a port after the buyer’s bank issues such a draft. But, no money to the shipper yet. When the goods land, the shipper tries to get the money by informing the bank that the ship has docked. The banker sends inspectors, who upon receiving confirmation that the goods are there, releases the site draft funds by wire transfer to the shipper. When the shipper in China, Korea, etc. is getting flooded with rumors that , e.g., BankAmerica is going to go bankrupt and he tells the purchaser that he will only take a sight draft from Wells Fargo or Goldman Sachs, well that does not automatically happen. So trade comes to a screeching halt.
Things get dicey real quick. The FDIC insurance for the most part does not cover corporate deposits. So your corporation deposits $10 million bi-weekly to cover payroll into a Bank America account. In the face of such rumors how do you feel? If it turns out to be true, the money very well could be gone. You trade oil and you get a margin call for $1 million, which you put into your B of A account to wire to Merrill Lynch. If the bank declares bankruptcy before the wire is sent – you are screwed. With such possible scenarios unfolding, sheer panic sets in.
I think the term you wanted was “letter of credit”.
No. Google “sight draft”
Clueless,
Since the complexity of the economy is a function of energy, if there are strains on its availability the economy will suffer, the question is what that suffering will manifest as.
OK, what do you mean when you say: the complexity of the economy is a function of energy? And, does having more (cheep) energy make an economy more or less complex? Presumably energy refers to coal, oil, natural gas, biomass, nuclear, geothermal, wind and whatever. So, does Saudi Arabia have a more complex economy than Ireland? There are definitely more alcohol drinking options in Ireland, and except for peat moss, lively conversation and pretty girls, not many energy sources. I’d have thought having more different kinds of energy in use would make an economy more complex and only one type of energy (let’s say oil) available, a much simpler economy but of course my economy IQ is probably a negative number.
There is always a perpetual effort underway to simplify explanation of “the economy” and the effort usually fails. Everyone has an agenda in anything written about such things. Academe’s agenda is to not simplify it. Money advisor’s agenda is to persuade that it has been simplified, but only in their proprietary understanding.
Just ignore it all. Most of it is controlled by government whim and corruption.
As for energy’s input, there is a consensus of agenda to obscure and rebut any such thing. If it all depends on energy, then there is no pseudo science and everyone involved in such pretense loses their job.
There was, about 10 years ago, a quiet and somewhat default presumption in things financial that “a problem delayed is a problem solved.” No one really knew why this worked, but it usually did. Problems for which one could maneuver to buy time usually got solved.
This is what high net joule oil did via reliable GDP growth. That’s all gone now. But the problems still have to get solved. The central banks have stepped up to do that.
Are you familiar with the concept of Energy Returned on Energy Invested (EROI)? It is a ratio describing the amount of energy that a unit of energy invested will produce. In the past it has been as high as 50-100:1, so for every barrel of oil invested, an additional 50-100 barrels of energy can be produced. At this ratio, energy is cheap, and the huge surplus can be diverted to other uses, generating prosperity and enabling highly specialised, complex societies to exist.
This is why horticulturist societies didn’t have multibillion dollar corporations investing millions of dollars in projects involving professionals educated in highly specific and complicated fields desiging semiconductors or software architecture. The hallmarks of a complex society is having a very small percentage of the population directly involved in producing food. In industrial society, this number is as low as 2%.
While there is debate as to what EROI is needed to sustain industrial civilisation, or what the average EROI is available to society at the moment, it is a fact that the EROI has steadily declined in the past few decades. As civilisation depletes the ‘sweet spots’ and moves onto unconventional reserves such as fracking, with EROIs commonly estimated to be as low as 5:1, the available energy that can be diverted to wealth generating activities is severely diminished.
A country like Saudi Arabia that exports vast amounts of oil to the world enables complexity.
Guess if you don’t know you can always theorize about it.
Yes, but increasing complexity can also be a coping mechanism for strains caused by decreasing access to energy.
Social complexity
According to Tainter’s Collapse of Complex Societies, societies become more complex as they try to solve problems. Social complexity can be recognized by numerous differentiated and specialised social and economic roles and many mechanisms through which they are coordinated, and by reliance on symbolic and abstract communication, and the existence of a class of information producers and analysts who are not involved in primary resource production. Such complexity requires a substantial “energy” subsidy (meaning the consumption of resources, or other forms of wealth).
When a society confronts a “problem,” such as a shortage of energy, or difficulty in gaining access to it, it tends to create new layers of bureaucracy, infrastructure, or social class to address the challenge. Tainter, who first (ch. 1) identifies seventeen examples of rapid collapse of societies, applies his model to three case studies: The Western Roman Empire, the Maya civilization, and the Chaco culture.
Source Wikipedia
So are you suggesting that adding more levels of bureaucracy to our society can avert collapse?
Or that good ol’ human ingenuity will triumph over all, like it did in the dozens of other civilisations that existed in the past?
So are you suggesting that adding more levels of bureaucracy to our society can avert collapse?
Where the hell did you get that idea?! No, exactly the opposite. More levels of bureaucracy makes the problem worse but it is a sign or a symptom of collapse and this phenomenon was studied by Joseph Tainter.
Fred, you wrote that ‘increasing complexity can also be a coping mechanism for strains caused by decreasing access to energy.’ You then provide a source that states that bureaucracy is a way of coping with this collapse. I suppose that I interpreted your use of the term ‘cope’ as meaning that it is a sound method of avoiding collapse. If you’re merely stating that it is an indicator of collapse, then I agree with you.
Yes, that was my original intent.
That Zero Hedge article makes no sense.
Tight Oil didn’t create the high prices, the supply/demand imbalance did. The Tight Oil has destroyed the price, not the demand.
Also on loans, inflation didn’t cause the collapse of the subprime market. Collapse was a foregone conclusion of handing out money to people who had no ability to repay the loans.
And yes, the current credit market is slow compared to the good ole days of handing out money to anyone. But is that really a fair comparison?
As the market share of tight oil grows, the price will tend to increase to compensate for the large captital investment required for production. If the market becomes fatigued, demand will falter. This is what has driven the price down recently.
You’re correct in stating that inflation wasn’t responsible for the subprime bust, high inflation rates were, as stated in the article.
http://www.businessinsider.com/these-are-the-10-largest-oil-and-gas-fields-in-the-us-2015-4
Top 10 Oil Fields
1. Eagleville (TX) – 238 million barrels
2. Spraberry (TX) – 99 million barrels
3. Prudhoe Bay (AK) – 79 million barrels
4. Wattenberg (CO) – 47 million barrels
5. Briscoe Ranch (TX) – 62 million barrels
6. Kuparuk River (AK) – 29 million barrels
7. Mississippi Canyon (Fed Gulf) – 15 million barrels
8. Wasson (TX) – 19 million barrels
9. Belridge South (CA) – 23 million barrels
10. Green Canyon (Fed Gulf) – 27 million barrels
Top 10 Natural Gas Fields
1. Marcellus Shale (PA & WV) – 2,836 billion cubic feet
2. Newark East (TX) – 1,951 billion cubic feet
3. B-43 Area (AR) – 1,025 billion cubic feet
4. San Juan Basin (CO & NM) – 1,024 billion cubic feet
5. Haynesville Shale (LA) – 1,425 billion cubic feet
6. Pinedale (WY) – 568 billion cubic feet
7. Carthage (TX) – 653 billion cubic feet
8. Jonah (WY) – 239 billion cubic feet
9. Wattenberg (CO) – 304 billion cubic feet
10. Prudhoe Bay (AK) – 147 billion cubic feet
Read more: http://oilprice.com/Energy/Energy-General/The-Top-10-Largest-Oil-And-Gas-Fields-In-The-United-States.html#ixzz3WgFZC9qC
Total MCF for B-43 ( AR ) http://www.aogc2.state.ar.us/FayettevilleShaleInfo/regularly%20updated%20docs/B-43%20Field%20-%20Well%20MCF%20Totals.pdf
Numbers like these should hit peak oil skeptics like a Mike Tyson punch to the unprotected solar plexus but somehow just about every body manages to ignore them or avoid ever even seeing them in the first place.
A few days back I commented about the Japanese being broke and not realizing it. Ignorance is bliss. I have been hoping to run up on a history of the oil industry that lists the towns or communities in the USA that were at one time or another oil towns.
Such a list might have some effect on people who are not peak oil aware if they are capable of critical thinking. Numbers such as these should likewise sober people up – I don’t know if they are good numbers but they are probably.
If we could take it out and use it up straight thru the biggest oil field in the USA wouldn’t last us but a two or three weeks.
The tenth biggest would last us only a couple of days with emergency rationing in effect.
If I were rich I might buy an electronic billboard within sight of the busiest highway possible and constantly have it flashing with such information.
This article gives examples of the different methods of estimating current US oil production and gives a couple of estimates. The article talks about how estimating current oil production is getting increasingly difficult.
US oil output is falling! Or maybe not – market’s data quandary
And the article closes with these two paragraphs:
Energy industry intelligence service Genscape uses cameras placed along pipelines to gauge energy use by the big pumps needed to force crude down the pipe, another source of real-time data that helps calculate production figures, said Jodi Quinnell, manager of crude analytics at Genscape.
The company expects production to peak at 9.5 million bpd in April – slightly above EIA’s 9.44 million estimate – before heading down.
Considering the EIA estimated January production at 9.185 million bpd that means production would have to increase by over 100,000 bpd per month for February, March and April. And I believe that January estimate was way too high since that estimate includes a Texas production increase of 3,000 bpd in January while the Texas RRC says Texas crude production was down 87,000 bpd.
“Energy industry intelligence service Genscape uses cameras placed along pipelines to gauge energy use by the big pumps needed to force crude down the pipe, another source of real-time data that helps calculate production figures, said Jodi Quinnell, manager of crude analytics at Genscape.”
Wait, what?
What are the cameras watching? A pipe? An RPM meter on a pump? Isn’t that going to be viscosity dependent?
If this is the best anyone can do to measure flow, we’re in trouble.
This article tries to find out what it actually costs to produce one barrel of shale oil.
How Much Does It Cost To Produce One Barrel Of Oil From Shale (41 Companies In 2014)?
The average, from the chart below, is $54.62 per barrel.
Hi Ron,
Great read thanks!
The average cost for all the shale companies analyzed was $47/b.
From your linked article:
Average total production costs for one BoE rose slightly, from $46.46 to $47.13, reflecting the rise in liquid production. SG&A costs were the only category that went down, but is still high with $5.87 per barrel. This is an average, there is a couple of companies that spend more than $10 per BoE on SG&A in 2014. Last year, the shale industry was still able to earn money, but it is highly questionable if this will also be the case in 2015.
Yeah, that’s probably the average of all barrels produced. I just averaged the “Total Costs” form the chart. Of course that would not be correct since some companies produce a lot more barrels than others.
You will notice that I stated: “From the chart below.”
But $46.46 means most, and likely all, companies now drilling and fracking in the Bakken are losing money. From the latest Director’s Cut.
Today Sweet Crude Price = $32.00/barrel (lowest since Feb 2009 and Jan 2015) (all-time high was $136.29 7/3/2008)
Ron: The problem with the figures you cite is that D,D & A understates the yearly cash cost by delaying realization of expenses for a period of years. I pull out D, D & A and replace it with CAPEX for the period in question in order to determine how much cash is headed out the door. Shale wells are not factories that will produce substantially the same output for 39.5 years, nor are they even business equipment that will produce substantially the same output for 5, 7 or 10 years. Until the shale companies have many years of the same or similar amount of CAPEX, D, D & A can really distort things, IMO. Clueless could probably correct me if I am off on this analysis.
Also, be very careful to see if the numbers you are looking at are per barrel of oil, or per barrel of oil equivalent. Makes a big difference, and I think you will find most companies report per BOE. For example, with CLR, their production mix last year was approximately 70% oil, 30% gas and NGL. Their realized price per BOE will be much lower than per barrel of oil. I did some calculations looking at MRO and found their company wide BOE for the first quarter would be around $33-$34. Again, open to critics on that one. However, for the first quarter, a BOE of nat. gas sold for between $12-$18 per.
Also note ND rig count still falling, down to 91. Remember local service company operator predicting 50 by June. Still have almost two full months to drop forty more.
Good point. Wellhead price for natural gas in BOE terms, is probably about $12 per BOE (assuming gas price of about $2.00 per MMBTU at the wellhead).
And I would think that we are going to be seeing some very substantial writedowns in proven undeveloped reserves.
Not if the rules change.
But ya BOE matters.
Cost per barrel has become almost political. The definitions of measurement are getting redefined by whoever has what agenda to quote a number.
I expect lawsuit threats to start flying at people who produce a high number in a published estimate. It can damage loan rollover negotiations.
SS – you are on the right track in that you have to dig into the numbers and look at them from different perspectives, rather than just looking at a company’s income statement. Not to discourage anyone, but for many large companies there can be, e.g., 10 Wall Street analysts following each of them. One has a strong buy, one has a strong sell, six are hold, one is moderate buy land 1 is moderate sell. These guys are all looking at the same numbers, and with their assistants, each one probably has 1000 hours a year put into exotic excel spreadsheets, etc. Yet they come up with different answers. And, they are not idiots – many make more in a year than I did in my lifetime.
It is especially difficult with growth companies. And, energy companies that are purchasing leases and drilling, are in effect purchasing inventory (of oil and gas). They just do not know exactly how much. Simplified (maybe stupid) analogy follows:
Year 1: Purchase $100 widgits. Sell for $200. Buy $200 more. Cash flow negative $100.
Year 2: Sell the $200 for $400. Buy $400 more. Cash flow zero.
Year 3: Sell the $400 for $800. Buy $800 more. Spend $100 on new office and equipment. Cash flow negative $100.
Good business? Probably – [assume each $100 really is $100,000]
Note that at the end of year 3, you have $100 in equipment and $800 of inventory and $200 of debt.
Wall Street firms with analysts don’t do any prop trading based on the output from those analysts. They are mostly decoration used to attract clients. How can they be anything else when, as you point out, they all look at the same numbers and offer up a different answer (dictated by the client demographic du jour)?
Clueless. I understand the reasons for going cash flow negative. When I started, I was cash flow negative, I borrowed $x to buy Lease #1. At end of year 1 cash flow was -$x reduced by net income for year 1. After year 2, had -$x and was in hole more because 1998 was year 2. Luckily -$x was small, principal reduction was smaller by about 1/5 and had income from other sources which was used to make P & I payments plus cover operating losses. Fortunately year 3 was positive and away we went. Have been very fortunate, for most part from 1997-2015.
My point, however, is how long is ok to be cash flow negative AND have no debt principal reduction with a high declining asset? Throw on a %50-60 reduction in gross revenue.
The answer, of course, is as long as the bank will allow it, or with a public company, the debt and equity markets.
Our goal is no longer growth, but maintenance. More growth always requires taking on more risk. We took it on several times and were lucky on that important thing we have no control over, the oil price. We hit a level where more growth was going to require not only more risk, but also require other operational requirements we did not want to commit to. As the price skyrocketed, so did the cost of growth. The cost of that extra widget a day increased ten fold if you were buying it, 2-3 fold if you were drilling it, assuming you got what you expected at the bottom of the hole.
I wish I had the time and ability to accurately figure what it costs shale companies to remain in place. However, that really is impossible, because despite all my calculations about break even, shale is not really very predictable.
Look at gross oil for ND Bakken and TF wells. Sorry to quote ND again, but they do have good free public information. One can find how much oil every well has produced through 2/1/15.
You will find some that have topped 600,000 in a short time, some that haven’t made 10,000 over several years, and much in between. Point, which I’m sure you know, is that this business is a risky one. Only sell a limited number of products, whose selling price for one we have sold for between $8 and $140 over an 18 year period.
Most shale companies have been cash flow negative every year, AND have paid $0 in principal reduction. Oil is still less than 1/2 of its previous 3-4 years selling price. The upfront costs are still tremendous. The early decline is tremendous, by year 5, lucky to be selling 1/5 of what you sold in year 1.
Yet, as Ron points out above, investors are still throwing them the money. They must know what we don’t, that before the clock strikes, we are going to have one heck of an oil rally.
Yet, as Ron points out above, investors are still throwing them the money. They must know what we don’t, that before the clock strikes, we are going to have one heck of an oil rally.
Really, do you think they are that smart? Wall street investors are wrong just as often as they are right. In this case I believe they are wrong.
My sarcasm was mixed in with too much hope they do know what they are doing, for my own personal reasons, of course. I have no clue why anyone other than a day trader would put money in a non dividend paying independent oil company. Never have seen investing in those as a good buy and hold strategy for things such as retirement.
Agreed. There might be a couple of companies breaking even. Most are hurting. I believe in Texas well head prices may be better than ND. Mike or mbp would know.
Ron,
these numbers refer to operating costs and some other costs from the income statement, and they include non-cash items, like DD&A.
I think what is more important, is cashflow analysis.
Here is a table by Art Berman, which shows that the 19 largest tight oil producing E&P “companies out-spent cash flow by 25%, spending $1.25 for every $1.00 earned from operations. Only 3 companies–OXY, EOG and Marathon–had positive free cash flow”.
And that was in 2014, when WTI averaged $93.2/bbl and Henry Hub $4.39
For this year, the EIA expects the average price for WTI at $52.48 and HH at $3.07
Even with an average 40% reduction in capex and some 20-30% reduction in costs the E&Ps will face a significant increase in negative free cashflows
Source: “Why The Oil Price Collapse Is U.S. Shale’s Fault”. By Arthur Berman
Posted on Mon, 06 April 2015
http://oilprice.com/Energy/Oil-Prices/Why-The-Oil-Price-Collapse-Is-U.S.-Shales-Fault.html
AlexS. Thank you for the posts. I have been doing the same analysis, but per BOE. I get companies like EOG, MRO and COP coming out best in the high 40s low 50s per BOE.
CLR, WLL come in around $90+ BOE range. They are more heavily oil weighted. If I recall correctly, EOX came in over $200 per BOE. Something about a highly compensated CEO and management team, maybe?
Easy to calculate. Just replace annual D, D & A with annual CAPEX, then total, then divide by BOE. Its all in the 10K.
I think it is a good way to evaluate. It is how we determine, in part, how many wells to drill each year. In our case, depends how much $ in bank. Still good on $ so far, but think we will hold off on drilling. Wouldn’t want to contribute to this “glut”. Geez, it defies logic. I think something is up, just don’t know what.
Pretty sure KSA trying to bury US producers. Too bad that includes us small folks who are just trying to be boring and mind our own business. Glad to see we are funding both Sunni v Shia and Shia v Sunni, and none of them like us. Glad to see we are so close to energy independence that we have to keep doing this kind of stuff. LOL!!
pssst. Look farther north for the enemy. And they’re going to win.
You mean last falls best laid plans will backfire? Surely not? LOL
Mason Inman says the Bakken was down again in February:
The Bakken bust continues
North Dakota’s oil production fell 3.1 percent from December to January, and another 1.5 percent from January to February, according to statistics I compiled from the state, ahead of their monthly “Director’s Cut” report.
Bakken is mostly in North Dakota—and North Dakota’s oil production is overwhelmingly from the Bakken. So Bakken and North Dakota are, for most intents and purposes, the same thing.
So this means Bakken oil production has declined for two months in a row, and was running at a rate of 1.17 million barrels per day in February. (Remember, folks, you heard it here first.)
http://www.slate.com/articles/health_and_science/science/2015/04/gallup_poll_on_the_environment_have_journalists_failed_on_climate_change.html
Wow.
That article right there is just depressing.
Not only are humans not any smarter than yeast, they can’t even see that there’s more to the world than the space they occupy, or see beyond their short, narrow, political tribes. Humans can’t grasp just how colossal Homo colussus even is. The most influential group of humans on earth think things are getting better. They have no idea. 1/2 of vertebrates and invertebrates have disappeared in the mere 40 years I’ve been alive and things are “better.” WTF?!?!?!
Ron, I’m not quite as doomerish as you are, but I’m getting there. Slowly but surely, I’m getting there.
https://www.hcn.org/articles/the-earth-has-half-as-many-animals-as-it-did-in-1970 (WOW!!! 1/2 gone in my lifetime. Jeez. What a downer. I heard about 1/2 the invertebrates being gone, but not 1/2 the vertebrates too. Jeez. Just Jeez….)
Ah well.
In time, life will arise anew from the wastes of the anthropocene mass extinction event. It has arisen anew from all the other mass extinctions. No reason to think it won’t bounce back from this one. The sun’s still got a billion or two years left in it before the planet is sterilized for good.
See also: What Americans Think About Climate Change in Seven Maps Researchers publish a new mapping tool that estimates county-level public opinion
The maps you can explore the data for yourself, at http://environment.yale.edu/poe/v2014
As I’ve said before, the liberals, progressives and communists, Democrats, and what have you continue to lose, badly, in the whole global warming debate. 😆 All I can say is maybe if these people would show as much interest in the shamefully enormous national debt my beautiful grandchildren will inherit in their lifetimes as they do with the weather, more citizens would be listening to them and their warnings.
You must be the kind of guy who cheers at a hanging?
I have no idea what that is supposed to mean? To clarify what I’m saying is that all the concern the left has over the climate would be better for their messaging if they shifted to having the same concern over the 17, 18 trillion dollars (and counting) in debt my beautiful grandchildren will inherit because of reckless politicians. That is a sure thing. On the other hand the increased taxes and regulations being pushed by the left on the back of climate change research have no guarantee of saving us from anything in particular since other less developed countries would continue doing what they do, all while we would be intentionally harming ourselves by reducing our standards of living and prosperity.
You’re thinking about debt in terms of a currency user (household, company). Debt in terms of a currency issuer (nation state) is a completely different kettle of fish. Mostly because, unlike you, nation states tend not to die, therefore don’t really need to worry about paying off their debts. Also, because they are sovereign issuers of their own currency, demand for which they create by levying taxes in said currency, they can be definition never default.
Over the next 50-100 years the national debt will be the least of your grandchildrens worries, but the rapidly warming planet will have lots of unpleasant surprises in store for them I’m sure.
To clarify what I’m saying is that all the concern the left has over the climate…
Jerry, that is truly as absurd statement. Climate change is not a left-right thing, it is a scientific thing. All scientifically literate people whether on the left or right are concerned with climate change.
I am old and don’t have any kids or grandkids. The climate on the other hand is going to kick your beautiful grandkids ass and a large part of the blame is going to fall on your attitude. But frankly, as I said before I am old and I don’t really give a damn.
And you’re surprised that we live in a nation of morons?
Any Nation that elected (or at least close enough to steal) GW twice deserves its current decline.
fool me once, shame on you
fool me um, you can’t get fooled again!
Not only nobody talks about GW .
Nobody WANTS to talk about GW .
It’s like talking about your X or next winter .
I was wondering if that data could be correlated to the Texmex population? I watch CNN en español and it seems to be aimed at a fairly low brow Texmex audience. And they really focus on global warming propaganda.
The truly funny thing about your comment Jerry is that I said not a word about climate change.
Yet you say not a word about 1/2 of animal life on this planet disappearing in short span of time.
That concerns you not at all?
Money and debt is just ones and zeros in a computer somewhere. Lifeforms are real, live, breathing, running, creeping, crawling things. When there are none of them (which seems to be the trend) like as not there won’t be any grandkids (yours or anyone else’s) either.
Or do you really think that humans can live all alone as the sole species alive on this planet?
Could you explain to me how that works out exactly?
And is that more or less important than a national debt that can be reneged on with the stroke of pen?
Do tell.
The link you posted was about climate change reporting and how Americans view climate change. I read that as your main concern being that Americans don’t fear climate change at the level you’d like them to. I didn’t mention anything about animal life going away because I don’t share the concern or understand the reasoning behind it. Sorry. Species come and go all the time and mass extinctions are simply a part of life that nobody on earth can really control. If animals are going to go extinct, they’re going to go extinct no matter how loud the special interest environmentalists and activists scream. I see mastodon teeth and skeletons in museums all the time. Humans have gotten along just fine for thousands of years without that animal, even though it became extinct while humans were roaming about the earth. The same thing’s true of thousands of other animals extinct now. As long as our domesticated “meat” animals like cows, chickens, and pigs stick around, I don’t see what the problem is. We’re even getting better at being able to raise some food animals like fish in captivity. I never read about any of these animals we enjoy at dinner being in danger of going extinct worldwide.
That is by far the most ignorant and callous post I have ever read on this or any other blog in my entire life.
I second that. Some guys just make you ashamed to be a human.
It is kind of callous. But, but nowhere near as ignorant as many posts that I have seen.
Let me clarify that somewhat. To many, Darwin was brilliant. I think that he basically said that evolution [in the entire history of the earth] was based upon survival of the fittest. To my knowledge [extremely limited in that I am not a Darwin expert] he did not propose that humans alter that billions of years of history and try to change it to “survival of all.” Cast your stones.
Darwin never said evolution was based upon survival of the fittest. The first version of “Origin of Species” never mentioned that phrase at all. From wiki Survival of the fittest
Herbert Spencer first used the phrase – after reading Charles Darwin’s On the Origin of Species – in his Principles of Biology (1864), in which he drew parallels between his own economic theories and Darwin’s biological ones, writing, “This ‘survival of the fittest, which I have here sought to express in mechanical terms, is that which Mr. Darwin has called ‘natural selection’, or the preservation of favoured races in the struggle for life.
But you got one thing right, you are definitely not a Darwin expert.
Furthermore, it is clear in this context that ‘fittest’ does not mean anything like ‘strongest’ at all, but rather refers to that species that has the best ‘fit’ for the ecological niche in question: the fittest; the best fit. It is a very unfortunate thing that this word has these two quite different meanings and the rather quaint 19C precise ecological term is more obscure than what is more popularly understood.
Natural Selection is not a charter for brutes, bullies, and demagogues at all, but a subtle description of adaptation and change, and that above all this is understood through the degree of ‘fitness’ an organism has to its environment; the fitting of creature to place. And the change of each through time, and the great ability life has to alter in this never ending dance to maintain a good fit with its changing world.
The mechanism is rather brutal however; the die off of those organisms that no longer fit with their world, or that are too slow to adapt. Human society, especially the technologically sophisticated version, has more opportunity to change itself and the environment to maintain, or destroy, the fit.
Oil-age society is going have to adapt to a post oil-world in order to maintain a good fit with the environment. Fossil fuel to electric. Many here see that as impossible, and can only imagine die-off due to excessive inflexibility. I see the change as underway and envisage it accelerating. C’est la vie.
Patrick R,
Technology has knocked many of us out of knowing how to do much for ourselves anymore– clothes, local/rudimentary agriculture/recognizing wild edibles, building dwellings– and has created a kind of infantilistic/overly-dependent precarious situation, such as in light of decline/collapse.
While PV’s and EV’s might seem relatively-benign and all fine and nice in the current techno-/high-energy context, we can often focus too intently/myopically on tech for tech’s sake and ignore/miss the questionable paths it can lead us down, and the unintended consequences. That some of this focus is on so-called renewables seems in part precisely because we have gone so far down particular paths, that many seem to think we need it to ‘smooth out the transition’. We’ve become too many levels removed from hunting and gathering– from the planet, really– our environment– and, coupled with our numbers, has in any case made it a very questionable prospect.
Tweaking our relationship with habitat with technology can be a bit like floating above it; a bit like symbolism; a bit like a map/conceptual grid; a bit like a distortion of reality (the actual habitat and the creatures in it); a bit like money: It gives us some dangerous detachments and illusions that we have adapted, when we’ve only cheated time in having to adapt, while eroding previous adaptations that may become necessary for survival once again. Technology can dull necessary feedback of reality; and there is a kind of denial of reality when mediated/modulated through technology.
Our capacity for complexity that enables technology yet that disables certain forms of feedback and control (think democracy too) may be what ultimately kills us. A paradox. This may be what some call a lethal/fatal mutation.
Further. Why does everyone want to play God? If an insect infestation is wiping out West Coast Fruit trees, it is spare no expense to kill them. If a foreign fish gets into the great lakes and starts to eat game fish – then kill them as fast as you can. But, if in your eyes [God’s eyes?? – who knows] you like pictures of and want to see a particular animal in a zoo, then it is wrong to harm them in any way. Kill all of the wolves if they eat one cow? I think that there are arguments on both sides without one side or the other being the most ignorant.
I didn’t mention anything about animal life going away because I don’t share the concern or understand the reasoning behind it.
Saying you don’t understand the reasoning behind being concerned about animal life going away defines you as possibly one of the stupidest people I have ever had the misfortune of encountering anywhere!
Ron called you ignorant and callous, I disagree! Let’s call a spade a spade what you wrote is the absolute stupidest thing I have ever read in my entire life! I’ll be 62 next month and I started reading at around age the of four and have been an avid reader all my life. I’ll go even one step further and say that a stupidity so deep and profound as you have just demonstrated in your comment can only be achieved by a deliberate concerted and life long effort! Congratulations!
Ignorance vs Stupidity
1. Ignorance implies a lack of awareness, while stupidity implies the inability to understand.
2. Ignorance can be removed by the acquisition of knowledge, while a stupid person is intrinsically so, and therefore difficult to reform.
3. Ignorance is caused by the circumstances of one’s life, whereas stupidity is due to an attitude problem or mental deficiency in the person concerned.
4. While the reasons of ignorance are universally the same, stupidity is often defined by one’s perception of what comprises stupidity.
Disclaimer: I will readily agree that in this particular case I define your stupidity by the metric of my own perception as to what comprises stupidity. Other people’s perception may vary, so be it! Ron if you find this comment overly harsh and wish to delete it I understand, however I will remain forever unapologetic for making it!
Read more: Difference Between Ignorance and Stupidity | Difference Between | Ignorance vs Stupidity http://www.differencebetween.net/language/difference-between-ignorance-and-stupidity/#ixzz3WsbQRT17
“Ron if you find this comment overly harsh and wish to delete it I understand, however I will remain forever unapologetic for making it!” Overly harsh? Hell, If anything, I thought you were being overly diplomatic.
Ron if you find this comment overly harsh and wish to delete it I understand,
Hell, I don’t find your comment overly harsh, I find it spot on.
I must intervene here on the side of Jerry O as if he were the accused in court and I were his lawyer and try to get him off on a lesser charge than stupidity – because in the end nobody can control who his parents were or how much raw intellectual horsepower he possesses between his ears.
Jerry might be a troll but I don’t think so.
His problem is not stupidity but rather ignorance.
I actually have two areas of professional expertise – according to the usual standards by which such matters are judged. I have a degree in agriculture from a land grant university – and I have an (expired ) professional license to teach certain subjects in the public schools of the state of Virginia.
All you guys talking about how stupid Jerry is MAY be right but you do NOT know that. I can assure you that anybody who has ever taught a few years in a classroom filled with the ” vocational track ” kids of non professional parents has met DOZENS of people as IGNORANT as Jerry. I have met HUNDREDS of people no better informed myself.
You all remind me of the joke about the corduroy jacketed with elbow patches pipe smoking professor in a small private Vermont liberal arts college remarking ,” I can’t understand how Mc Govern lost. Everybody I know voted for him.” ROTFLMAOFF
At least half of the people in this country are as ignorant of environmental matters as Jerry. ;-(
Of course ignorance IS something that is at least partly curable on the part of the individual.
Something tells me I am just about the only regular here who grew up in a desperately backward environment in terms of my parents and the people around me all being ignorant as fence posts in respect to science and history.
This is not to say I grew up in a bad environment or was deprived in any way except for lacking much in the way of educated role models.I was loved and physically well cared for in every way , well fed and safe and encouraged to do well at school and taught good habits and all that sort of thing.
People who have not actually LIVED INTIMATELY among the run of the mill Joe and Suzie Sixpacks are generally incapable of understanding just how pervasive gross ignorance IS.
A professional person working with or supervising such people generally doesn’t have a clue since the relationship is almost invariably a one way power trip. The supervisor talks , the peon keeps his mouth shut and listens, and if he says anything , it is what he thinks the overseer or professional wants to hear.
Actually Jerry, if you read the first article I linked to, Climate change was just one environmental issue they talked about.
The halving of animal life on Earth in the last 40 – 50 years was another topic they spoke about and which I myself focused on (and yet you couldn’t seem to pick that up, which is bizarre). It’s not even about extinction. It’s about absolute numbers declining by half.
I suppose the fact that the numbers of other life forms declining by half in a short span of time is totally irrelevant to you, but to thinking people, this ought to be a wake up call or at least something they might try to understand a bit about rather than completely ignoring.
Imagine if half the human beings on earth disappeared in 40 years. That might be worth looking into.
You say, naah.. Nothing to see here, nothing at all going on. I think most reasonable people would disagree. Hell, we seemed to get pretty excited about WWII and the Spanish Flu Epidemic of 1918, and those events only killed about 2% of the extant human population of their respective times. You’d think that decrease of 50% in 4 decades might get some attention.
Anyways. Whatever. Carry on. It clearly doesn’t matter in the least to you, so you can safely ignore. It will obviously have no impact on you whatsoever in whatever world it is you inhabit.
Also, I don’t know how much you know about biology, but do you really think that the world is so simple that it could actually carry on without a hiccup or the least inconvenience to human beings (the only things that matter in the universe after all) if the only things alive in the world (other than plants and microbes) are humans, cows, chickens and pigs?
I know you wrote that. I’m just curious if you’re actually going to stand behind the idea that you seem to be expressing there.
So, to clarify, you’re just a-ok and see absolutely no problems whatsoever for HUMAN BEINGS with a world that contains ONLY humans, cows, pigs and chickens?
Is that what you actually believe?
Yes or no will do as a response. I suppose a paragraph or two of explanation of why you see this as being just an a-ok state of affairs might be nice, but I won’t press the matter that much. Thanks!
We have been conditioned for 60-90 years (and by millennia before that during our evolution) in the US to associate “(un)economic growth” with increasing (net) energy consumption/waste per capita, which ceased in 2007 (and also briefly in 1979-84 and during the 1930s before WW II).
If the imperative were to be to conserve (taking care to avoid the rebound effect), recycle, and, gulp!, ration resources per capita, it would follow that the top 0.001-1% to 10% consume/waste colossally disproportionately more (have multiples more fossil fuel “energy slaves”) than the bottom 90%, and especially the bottom 50%.
The cost is now prohibitive to society (and the bottom 90%+) to maintain this absurd system of net upward flows of low-entropy resources to increasingly complex, higher-order, high-entropy production, income, wealth, and political power increasingly to the top 0.001-1% at the apex of the hierarchical pyramid.
Were there to be any chance for the majority of us to successfully adapt (be fit) sustainably for the indefinite future, the top 0.001-10% must become exemplars of “systemic fitness” in terms of net energy per capita, influencing from the top down the necessary values, preferences, tastes, and social markers of “success”/status that does not model unsustainable perpetual growth of population and resource consumption, conspicuous, wasteful, non-renewable consumption of high-entropy goods and services at the expense of everyone else.
Dilworth’s “Too Smart for Our Own Good”.
Elon Musk on the global energy situation.
Clearly we human apes have the capacity to envision and model such a set of values, expectations, and behaviors, but we’re hard wired not a lot differently than we were 3-4 million years ago when there was an infinitesimally small number of us adapting to a world that we would not even recognize today for “human” habitation and adaptation.
Yes I do stand by that but I only listed a few of the food animals that we would need to keep around in order to keep humans alive. For example even though we don’t eat them directly I think bees are food animals since they help grow a few of our food plants. So we would need to protect a little more then just the four animals you listed? Except most of our food animals are domesticated, which wouldn’t be hard to make sure they stick around since they already depend on human hands to keep them alive. My main issue is with the extreme leftists and progressives who always seem to be out to take more of our money and our freedoms. They yell extinction and climate change at the top of their lungs but if an animal humans have no use for or if only 1% (if that) of the world’s population has ever even heard of goes extinct what does it matter for the vast majority of us who are just trying to live our lives free from government overreach and could care less? To borrow Hilary’s famous words “what difference does it make?” It reminds me of the saying about a tree falling in a forest and nobody around to hear it. Just not a big deal in the big picture where we are all trying to provide the best lives we can for our families and children.
I see.
Thank you for responding.
Ron, like I was saying earlier, I grow less hopeful as time goes by.
Thankfully, humanity’s days are numbered just as with everything else. In due course, human extinction will come to pass. Perhaps life will go on less troubled by creatures such as ourselves.
We’ll see until of course we don’t and that will, ecologically speaking, be a good day.
Ah well.
Remember folks, enjoy as many incidents of nature as you can. It won’t last much longer at the rate things are going.
Saudi Arabia opening the spigots: http://www.marketwatch.com/story/saudi-arabia-crude-output-at-record-high-in-march-2015-04-08
I wonder if actual exports will confirm this production increase. Regardless it’s a strange time to be boasting about record production during an oil price collapse. Watcher et al will no doubt see it as a deliberate attempt to destroy shale competitors.
Given that KSA never changed their behavior since July, it was never them doing the destroying — unless their sovereign wealth fund was deployed to short the Euro.
Agreed Saudi did not start nor create anything, however this recent behaviour i.e. talking up your increased production does not make sense in any other context.
But this is the nature of Arab oil ministers. That original 16 million bpd projection came from an Iraqi oil minister. They all do the mubalagha thing.
Some recent numbers.
For 2013, the EIA put Saudi production* at 11.7 mbpd, with consumption of 3.0 mbpd, resulting in net exports of 8.7 mbpd, versus 9.1 mbpd in 2005.
For 2014, it looks like the EIA will show Saudi production at about 11.6 to 11.7 mbpd. Subject to the 2014 production and consumption numbers, I estimate that Saudi net exports in 2014 were probably between about 8.4 to 8.6 mbpd.
Using 8.6 mbpd for 2014, Saudi net exports averaged about 8.4 mbpd for 2006 to 2014 inclusive, versus 9.1 mbpd in 2005.
At the 2002 to 2005 rate of increase in Saudi net exports (when they went from 7.1 mbpd to 9.1 mbpd), their net exports would have been at about 19 mbpd in 2014.
The appropriate headline for Saudi Arabia should be:
For Ninth Straight Year, Saudi Net Oil Exports Probably Remained Below 2005 Rate of 9.1 mbpd
In addition, as I have periodically noted, I estimate that Saudi Arabia, through 2013, had already shipped about 40% of their post-2005 CNE (Cumulative Net Exports). In a similar fashion, as combined production from the Six Country Case History** increased from 1995 to 1999, they had already shipped 54% of their post-1995 CNE.
*Total petroleum liquids + other liquids (EIA)
**Six major net exporters, excluding China, that it or approached zero net exports from 1980 to 2010
Hi Jeff,
Is picking 2005 cherry picking? What were the average Saudi net exports from 1999 to 2005? How does that average compare with the 2006 to 2013 average Saudi net exports?
EDIT
I answered my own question using EIA total production minus total consumption for a net exports estimate. From 1999 to 2005 Saudi net exports were 8.1 Mb/d and from 2006 to 2013 they were 8.7 Mb/d. 2005 was the high point at 9.5 Mb/d, but the net exports have bounced around since 2005, dropping to 7.9 Mb/d in 2009 and rising back to 9 Mb/d in 2012.
Chart with Saudi net exports from 1999 to 2013 (Total production minus total consumption from EIA data).
The reason for comparing 2002 to 2005 to 2005 to 2013 is of course that we saw two price doublings.
Annual Brent crude oil prices doubled from $25 in 2002 to $55 in 2005, and then doubled again from $55 in 2005 to an average of $110 for 2011 to 2013 inclusive.
My point is that the Saudis showed a large increase in net exports from 2002 to 2005 (in response to first price doubling), but post-2005 net exports have been below the 2005 rate for eight straight years (in response to second price doubling).
And for what it’s worth, I am on record, circa January, 2006, as saying that Saudi Arabia was then at a production and/or net export peak. I was slightly off on the production peak (in regard to total liquids, while C+C has barely exceeded the 2005 rate), but I have so far been right about a net export peak.
However. . . .
I am stunned that the EIA seems to have significantly revised their total liquids and total petroleum liquids production numbers for Saudi Arabia, at least for circa 2005.
For years, up to and including a few months ago, they showed 2005 Saudi total petroleum liquids production at 11.1 mbpd, but they are now showing it at 11.5 mbpd, with no increase in C+C production. I wonder if there was data entry error somewhere.
In any case, if we use the revised numbers, it accentuates the post-2005 decline in net exports, relative to 2005. It would also result in materially worse post-2005 CNE estimate. I’ll email a contact at the EIA and see if there might have been an error somewhere.
From Marcus:
“Regardless it’s a strange time to be boasting about record production during an oil price collapse.
You’re missing the important line in the article:
“Saudi Arabia is willing to participate in restoring market stability and steering prices back up, but it can only do so with participation from major oil-producing countries inside and outside OPEC, he said.”
(The “he” in question is Saudi oil minister Ali al-Naimi.)
This is a call for international efforts at supply management and price control. I suggested some time back that the Saudis may have decided that even if they cut back production, they couldn’t be sure of maintaining the price- so they didn’t. This isn’t proof I was right, but it sure hints at it.
-Lloyd
Given the extraordinarily hazardous political situation in Sand Country ( my pet name for the part of the world generally referred to as the Middle East ) in general and within Saudi Arabian borders in particular I personally think the Saudi royal family – or more specifically the faction of it that actually holds the levers of power in the country – are afraid to risk alienating the USA and other western countries right now by unilaterally reducing their oil production.
We hear all sorts of peeing and moaning about the troubles associated with low oil prices but in actuality the gross effect on the American economy and the economy of the world in general is positive in the extreme.
I can’t imagine anybody in power in Washington or London actually wanting to do anything to RAISE the price of oil given the anemic state of the economy . A few oil state congress critters maybe, a few scientific types in regulatory agencies or academia maybe , but nobody else.
AND for those who say the low price of oil has not CURED our ( short term ) economic troubles, all I have to say is ”Just how much worse might they be if oil were still at a hundred bucks ?”
Power politics at the ultimate level is a subtle game and right now the stakes may very well be life or death for a lot of countries. A foreign minister or president or king cannot know for sure just where the tipping points are that can turn an ally into an enemy or a neutral or vice versa.
It is generally accepted as a given among people who have some knowledge of Saudi internal politics that the country is sitting on a a powder key with fuses hanging out of it on every side. Any loss of internal control on the part of the royal family could result in the key exploding.
Right now is not a good time at all to piss off the rest of the world by cutting back on oil production to raise the price. Sky Daddy alone knows who will be in control of Washington , London , Paris , Brussels, Tokyo, Peking , or Moscow in two years.
And unless the Saudis could get the rest of the exporting countries to cooperate with them – they would be tarred and feathered in terms of world public opinion.
Beyond all this there is and has been an unwritten but very firm treaty in effect between the Saudis and the US and allies for a long time, the basic terms of this being that the Saudis will not screw us too badly in times of energy shortages and that they will help us when we call on them to flood the market with oil if that suits UNCLE SAMs current geopolitical strategies.
Right now low oil prices are not only serving as a blood transfusion to our sick economy but they are also putting a hell of a hurting on Putin and his Russian buddies – not to mention the folks in power in Venezuela. I am not too sure about what the Obama administration really wants to happen in Venezuela but I am of the tentative opinion that the Obumbler is not too upset about Venezuelan troubles. (Actually he is a better president in a lot of respects than that fool what’s his name would have been.)
If it weren’t for western military protecting them the odds are high the House of Saud would all be dead or refugees or maybe at best local warlords or something along that line by now.
It is hard to imagine anything that western countries could do to hurt the Russians more than low oil prices are hurting them without risking going to war.
International power politics are never simple.
As some great Limey statesman once said, his country has no permanent friends, and no permanent enemies but his country does have permanent interests.
The Saudis may need our armed forces on the ground inside their borders to repel an invasion within the next few years. If I were a Saudi prince or an adviser to one I would do every thing in my power to keep on the good side of Uncle Sam for the foreseeable future.
AND unless I am an utter and absolute fool, Uncle is very very glad oil is cheap right now.
If the price of oil had collapsed a year or a year and a half sooner , the Democrats would have had a far better shot at maintaing their hold on congress.
Is Yemen Becoming Saudi Arabia’s Vietnam?
http://www.washingtonpost.com/world/middle_east/saudi-air-war-struggles-to-make-gains-as-yemen-fragments/2015/04/09/1a045766-ddf6-11e4-b6d7-b9bc8acf16f7_story.html
Apologies if this has been posted elsewhere, but Mason had a link to Ron’s interview and its worth a look for anyone who has not seen it.
http://bizbeatblog.dallasnews.com/2015/04/when-it-comes-to-oil-statistics-not-all-data-is-equal.html/
so this is in today’s LA Times
“Even in California — where prices recently surged a dollar above the national average, sparking accusations of collusion by oil refineries — analysts expect gasoline to be the cheapest it’s been in years.
….
Travelers buoyed by a strengthening employment market and improving incomes will use 1.6% more gasoline this summer, according to the agency. But their fuel spending will be the lowest since 2004.
lRelated Renewable energy investment heats up worldwideBusinessRenewable energy investment heats up worldwideSee all relatedí
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“It will cause people who are buying a new car to maybe change their minds about how fuel-efficient their vehicle has to be,” said David Hackett, president of transportation energy consulting firm Stillwater Associates in Irvine. “They’ll think, ‘I can buy myself an F-150 truck.'”
In large part, the decline reflects a supply that overwhelms demand. Last year, the U.S. was the top producer of petroleum in the world.
The surplus will cause the price of benchmark Brent crude oil to plunge 46% this summer to an average of $58 a barrel from $107 a barrel last summer, the energy agency predicts. In 2016, prices are expected to rise but only moderately.
…
If current negotiations result in oil-related sanctions against Iran being lifted, the government believes that prices could fall even further. Iran has at least 30 million barrels in storage and can quickly ramp up production, according to the energy agency.”
http://www.latimes.com/business/la-fi-gas-prices-20150408-story.html
http://portal.ransquawk.com/headlines/apache-to-sell-its-australian-unit-for-usd-2-1bln-co-ending-its-production-and-exploration-operations-in-the-country-08-04-2015
from Forbes…
“The current crisis is one of plunging oil prices and a glut as far as the eye can see.
Oil production, after prices have fallen over 60%, is at a new high. As we predicted late last year, oil producers are making up for plummeting income by pumping even more. Rig counts in production are plunging, but these are from the low production wells. The high producers are still pumping away. In fact, the latest rig count even shows that there is little additional reduction in producing rigs.
The bulls say a bottom in oil prices is in place. That means the oil market isn’t even close to the final plunge. The eagerness to call a bottom is not what you see at a true bottom.
For a short period, this also keeps the supply companies working. That is, of course, until the production companies have to shut down. They have more than $210 billion of junk bond debt. Eventually, the defaults will cause a “credit event” in this sector of the financial markets. And that’s when oil production will diminish. A credit event means fears of an avalanche of junk bond defaults. It only takes one default to start that domino effect.
No one can predict the timing. However, the next plunge in oil prices will be very sharp. It will consist of dumping by the early bargain hunters.”
http://www.forbes.com/sites/investor/2015/03/27/why-oil-could-be-facing-a-20-year-bear-market/
I’ve never understood market types who make calls on commodities like they have some higher technical logic.
Oil is simple. It is constrained by how much is recoverable from the ground and how much that costs to do on one side, and by the fact that there is no use for surplus oil on the other.
Turns out the world’s first “clean coal” plant is a backdoor subsidy to oil producers
By David Roberts, Grist, on 31 Mar 2015
BTW, Dave Roberts will be joining Brad Plumer over at Vox.com
I suggest you look into the discounted profiles. Use something extremely generous, or do you want me to prepare my analysis?
Greentech Media covers the release of RMI’s The Economics of Load Defection
‘Load Defection’ From Customer-Owned Solar and Batteries Is Already Here
Not even fixed charges or net metering rollbacks can stop solar-plus-storage from undermining utilities that can’t adapt.
Jeff St. John, Greentech Media, April 7, 2015
A commercial by the Yingli Green Energy solar panel company?
Watched this recently, probably been posted before…
Art Berman- Shale Plays Have Years, Not Decades of Reserves February 23, 2015
Art Berman’s presentation to the Houston Geological Society.
Some highlights
– Points out the dismal EROI of shale gas, and calls wind in comparison a “windfall”.
– Says shale is a Ponzi scheme.
– The oil majors are in liquidation mode.
I wouldn’t call it shale. It’s tight or low permeability zones which produce gas and light liquids. And the guy is wrong. The investment seems to be quite profitable at higher prices.
Everybody calls it shale. Its tight and low perm though, that part you got right. I think Art Berman’s economic analysis of LTO production is meticulous.
So define “quite” profitable and let ‘er rip with your analysis. We’re talking money here, not BTU’s, so use 19:1 for your gas to oil calculations, don’t leave things out like leasehold costs, taxes and royalties, plugging and decommissioning and oh, best not forget the cost of borrowing the money. Remember, the average OWR in the Bakken is 50% so there’s lots of water to dispose of. All that info is right here on this site. If you think there are no risks in drilling shale wells, the price of oil just fell 60%, so you better risk the CAPEX some factor, then let us know how profitable these kind of wells can be, and at what price. I may be in the wrong oil business, who knows.
Nah.
Mike
Mike
Mike. I think some works at $100 WTI. They way these companies stocks are trading, Wall Street must think we will be back over $100 in the near future.
I hope that is right, but for some reason I’m not so sure.
Why include p & a costs? I thought that always equals salvage? Or is that another way of saying we intend to dump this on someone else before that happens? LOL.
Still wouldn’t trade it for our stuff, and our stuff,
as I’ve been told, isn’t world class. LOL.
Howdy, Shallow. You’ll have to define “works” for me. Spending 8 million dollars on a well that might make 12 million dollars over 20 years does not work for me. You read a lot of annual reports, take a look at the total IRR those fellers are content with. My observations, from having interest in shale wells and being able to watch it all unfold around me: fewer than 35% of the wells I see, and look at on DI, will ever pay back drilling and completion costs, much less be profitable. A lot of individual wells are hero wells, sure. But if the LTO business is a manufacturing business (it certainly is), we should evaluate it as such. If it was profitable at 100 dollar it would be out of debt.
Hi Mike,
What is the minimum amount of revenue would you want to see over 20 years for an 8 million dollar investment? Or in simple terms what IRR is the minimum that is acceptable for a shale type investment in your view?
Its a good question but I don’t even know how to answer it, Dennis. All I can tell you is that I will not drill an infield development well in a conventional reservoir (similar in “risk” to a shale well) unless I can be reasonably assured of 300% over 15-18 years. I think those shale boys are peachy with 65%. I think that is stupid. I have heard and read all the shale oil hooey why 65% is good; I don’t get it. On the other hand, I don’t owe anybody any money either and I will pop out the other end of this price downturn will all my appendages still attached.
I would NEVER risk 8 million borrowed dollars for <4% ARR. I'd rather bury it in the back yard with the dog bones.
Mike
Is “an infield development well” the same thing as “an infill development well?”
Dunno. I never used the term infield. Maybe you meant infidel? Are you religious?
Fernando – I hope you know that I was asking Mike, who used the term.
Dennis. I guess I still view oil investments as risky, with drilling being more so than purchasing settled production.
Another real life example. Say I have a lease that made 4,000 barrels for the year net. The oil price averaged $90 and the total of all expenses and CAPEX totaled $40 per barrel.
So I net $200,000 pre-tax. Assuming my lease declines less than 3% per year, what do you think its worth?
After you have answered, I can give you the range I think that lease would have sold for last year. Anyone else have any opinions?
Mike,
I’d say EOG probably did pretty good on their wells in Parshall field in ND. Majority have cumulative oil of 500,000+ in five years or less. If you have 80% NRI and $90 oil that would be $36 million gross. Those wells look to have produced more than double the “average”, though.
Notice I said $100 WTI. I don’t know if as a whole the stuff works at $100 WTI. But I do think some does, and individual wells can do better at less $ WTI. And some will be disappointments. Drilling a duster is no fun.
I don’t get why they are continuing at $50 WTI, but I’m beating a dead horse.
Mike, what do you think of my idea above of just having crude purchasers send info to EIA? Seems to me that would be simple.
Infill and infield would be the same, I guess.
Shallow, as I said, there are some good areas and some hero wells; everyone here wants to discuss the shale oil industry as a whole and I don’t believe it has been profitable. I define profit as starting when the well is paid completely out, and there is zero debt associated with it. I was around before the shale oil industry put it’s first bit in the ground and I’ll be here when it’s 1/1000th what it was. Which won’t be long. Ultimately this shale stuff that has everybody’s panties in a bunch will just be another source of expensive crude oil. It represents <4% of total world production and its on an express elevator going down.
Shallow, with no disrespect to you or anyone else, I don't think the oil and natural gas business in Texas gives a rats ass about EIA's estimates necessary for the prediction of peak oil. There is nothing wrong with the way we do things down here except the governing regulatory body got a little bogged down with 12,000 new shale wells in 5 years and had to come up with some ridiculous "adjustment factor" to appease the predictors. I have tried to explain to folks that barrels of oil equal dollars and cents in Texas but it seems to go plumb over peoples heads. Its how we keep the books straight. It doesn't take "years" for the books to get straight, that's stupid. In 2014 Texas severance taxes on oil and natural gas production totaled over 6.6 billion dollars. That was all based on real barrels, not imaginary EIA barrels. In 53 years of being an operator I have NEVER had to pay royalty or working interest income back to anyone because the EIA's estimates of barrels were better than the TRRC's.
The government is going to do what it is going to do. I have a spud meeting to get to.
Keep a bind on it.
Mike
My analysis shows it works well at $100 per barrel if the transportation cost is about $6 per barrel and the cost structure is managed. I think there was too much enthusiasm, too much overpaying, and I also think the PV hurdles some of you use are too agressive. Given enough acreage and reserves a large company will be satisfied with a zero pv10. But it does require a more cautious approach.
That’s it? That’s all you got? Others like Berman have this shale stuff down to the dollar and all you have is ifs, toos, I thinks and pv’s? If this shale stuff works so well, why all the debt? Debt’s a good thing when you are running an oil company? Gimme a break.
I think I’ll keep my day job.
Mike
Mike, I was trained in a large outfit. I assume a company with very agressive and optimistic management will take on debt if they find people willing to lend. I’ve seen them purchase properties we were looking at for twice what we were willing to pay. And these are several hundred million USD type deals. You wouldn’t believe half the stories I could tell.
I do notice there are large outfits investing in the light tight oil plays. This tells me they think they can make it work. I’ve run the technical side of assets, never became a high level boss, but I know the ins and outs, and I know how they think. A large company will take this acreage and thread carefully.
They’ll watch their price forecasts, work hard to keep costs down, line up deals to move the oil to a refinery without middle men, emphasize technology, personnel training, keeping in good terms with the locals, and in the end take a zero pv10.
The property will be developed, in 10 years they’ll know if they can use EOR, if not they sell it. It’s a fairly common approach.
The overagressive little guys are a nuisance, like roaches walking on a slab of ribs. They just can’t get it that the risk is high, and the bankers are a bunch of con artists lending to such ventures. What we need in the end is to have a system which allows banks to fail.
What we need in the end is to have a system which allows banks to fail.
Yes, and that’s why focusing on how the system will collapse if debts aren’t repaid is just propping up the “too big to fail” mentality. The doomers who say debt runs the world and can’t be defaulted on until the end are giving debt holders more power than they should have. Let the debt holders lose their money. Then maybe they won’t lend money to people and companies that can’t pay it back.
Zerohedge is propaganda all lies
Tyler Durden is a propagandist. It is so obvious. It was killer in the beginning now all propaganda. Nobody goes there anymore it’s too crowded and all propaganda.
China is the oil importer that has crashed the price. They’re saving 30 billion dollars with the price of oil where it is at today.
They are the number one oil importer. They have the pasteboards. They’re calling the shots.
They have the cash everyone else is in debt. The money does the talking.
“Nobody goes there anymore… all propaganda.” ~ raw
Really? Absolutely nobody? Wow!
Tyler Durden’s pretty prolific… How does he do it?! ‘u^
raw,
Chinese companies have $1.1 trillion in debt denominated in US dollars. Last time i checked the PoCB can’t print dollars. So China owns about $1.2 trillion in US treasury bonds Which the FED can print at the drop of a hat if it need be. China buys and sells US bonds in order to manage their currency peg to the dollar. Anybody who believes that those reserves can be used widespread in a crisis is mistaking. If you want to have a crisis in China sell half them US treasury bonds and see what happens to their manufacturing base.
Furthermore the PoCB is not actively loaning out yuan or renminbi. China didn’t make loans to Venezuela in yuan. They loan Venezuela dollars.
Saudi deficit increases:
http://news.yahoo.com/saudi-borrow-finance-soaring-deficit-says-report-111142510.html;_ylt=AwrBEiLoXSVV5Q4ArE_QtDMD
For the record, for the record: Here (“traditional”), a lack of clear vertical line separating the graph existing mining (statistics) than expected, a fantasy about the future!
Gatwick England oil find:
http://www.bbc.com/news/business-32229203
Interesting. Maybe that region will be a british Bakken in 5 to 10 years.
The weald has been a small scale producer for years now. The kim clay is hardly an amazing reservoir rock, and they do seem to be extrapolating across a rather large area from a single well. Be interesting to see what the further exploration wells end up turning up. I wonder what the breakeven price they’ll need is.
I don’t expect a simple exploration and appraisal campaign will be sufficient. They will have to test those wells For a while. I’ve visited the area, and I suspect the local Aborigenes will be making trouble. They’ll need a few cargo containers full of give away goods for the local community..
2 or 3 years supply.
NAOM
I read all this and think- do these guys know what they are talking about? I conclude that, yes they do, for the most part, and no, they don’t know what what they know means for the future because, according to Prigogene’s second principle, nobody CAN know the future of a sufficiently complex system, and this is one, for sure.
But one thing stands out to me. All of above either ignore or miscomprehend the extremely rapid forward momentum of so called, (belittlingly, with a sneer) “renewables”, even in the presence of undeniable facts easily measured, such as their adoption ever more strongly in places blessed with better foresight than ours- China, northern europe, etc. As well as big money bettors who say coal is doomed in the near future, so shift their chips to solar/wind.
A reason is obvious- people here have lived and labored on oil, etc, and would hate to see their expertise, as well as their reserves, diminished in importance.
My own prediction of the future (“impossible’, of course) is:
1) big climate catastrophe forces everybody to face up to the fact that we have so long denied.
2) big carbon tax as a result
3) result of that- huge input of resources into solar-based energy
4) next, astoundingly rapid rise in use of solar, etc.
5) even more astounding- IMPROVEMENT, not decay, of quality of life, not least by sense that we are doing something actually useful rather than pissing away our lives churning out worthless junk and ruining the planet in the process.
Now, back to something useful.
I think we got lots of people with commercial interests in solar power writing up solar panel propaganda squibs. I identified this in my interview with Ebenezer Rabbet.
And those sucker Chinese fell for it! Dam clever, those squibs. Gotta hire me somathem.
Hi Wimbi,
You and Old Farmer Mac are a nice antidote more extreme perspectives (both optimistic and pessimistic.)
Thanks. My guess is that it will not be easy to get to where your vision takes us, I also think that you don’t think this will be easy to accomplish. Possible, yes. Easy, most certainly not, imo.
Dennis. Once upon a time, long ago, I was one of the people in the moon shot caper. I casually said early on that I thought it would be easy.
The other guys fell on me hard as belittling their monster design task. I had to realize that when I think “easy”, what I am actually thinking is “we know all the physics we need for this job, all we need to do is work on it. Just plain work is easy.”
To me, the hard part is getting anybody behind us to pay the rent, etc, while we are merely doing the work.
So, getting to a sane solar society- I think we know how all right, what we don’t know is how to get people to listen to how- and why, and then back us up.
My scheme is to first, just do it myself, and then tell my friends about it, and take them thru the all solar PV house. The newspaper guy who wrote us up a couple of weeks ago kept saying he couldn’t find the signs of stress or parsimony he had expected and could’t see how we did it.
Of course the answer is obvious. We did it by not doing what he did.
Interest paid on US debt:
For 2015, to date: $160,736,128,061.37
2014 $430,812,121,372.05
2013 $415,688,781,248.40
2012 $359,796,008,919.49
2011 $454,393,280,417.03
2010 $413,954,825,362.17
2009 $383,071,060,815.42
2008 $451,154,049,950.63
2007 $429,977,998,108.20
2006 $405,872,109,315.83
2005 $352,350,252,507.90
2004 $321,566,323,971.29
2003 $318,148,529,151.51
2002 $332,536,958,599.42
2001 $359,507,635,242.41
2000 $361,997,734,302.36
1999 $353,511,471,722.87
1998 $363,823,722,920.26
1997 $355,795,834,214.66
1996 $343,955,076,695.15
1995 $332,413,555,030.62
1994 $296,277,764,246.26
1993 $292,502,219,484.25
1992 $292,361,073,070.74
1991 $286,021,921,181.04
1990 $264,852,544,615.90
1989 $240,863,231,535.71
1988 $214,145,028,847.73
The amount of interest paid is in the 13 trillion dollar ball park over the last 27 years.
The taxpayers are suckers.
There’s a sucker born every minute – David Hannum
Hi Ronald,
We could cut spending or raise taxes, we choose not to.
A lot of the rise in the deficit was due to Reagan and Bush tax cuts. Put taxes back at 1979 levels and the problems go away. Or you could suggest specific budget cuts, you will find there is very little that can be cut from the budget. The average yearly increase in debt over the 1988 to 2014 period was about 2.7%. Over that same period the US economy grew on average at a 4.7% rate so interest payments to GDP has been declining from 1988 to 2014. Interest payments were was 4.1% of GDP in 1988 and they were 2.5% of GDP in 2014.
Although we paid 13 trillion in interest over 27 years, GDP was 294 trillion over the 1988 to 2014 period.
I double checked your math and from 1988 to 2014 $9.4 trillion in interest was paid. That is about 3.2% of GDP over that period. Not really a big deal.
Someone with some god damn sense.
Debt is a problem for many countries. It is not a problem for the United States:
– world’s largest and most powerful military
– guarantor of the international economic system and many institutions
– large, growing economy
– ability to raise taxes without hurting growth
– can always inflate away the debt
The austerity nuts are so obviously pushing an anti-government agenda it hurts, and lots of dupes have bought into their “sky is falling” debt narrative.
Poe’s Law…
Avoid sarcasm and facetious remarks.
Without the voice inflection and body language of personal communication these are easily misinterpreted. A sideways smile, :-), has become widely accepted on the net as an indication that “I’m only kidding”. If you submit a satiric item without this symbol, no matter how obvious the satire is to you, do not be surprised if people take it seriously.
Fred, you continue to amaze me: Perfect!
So Ronald’s comment was satirical? I totally missed that.
I was serious, maybe Anonymous was being satirical?
That must be it he said I was sensible, ok now I get it 🙂
Okay Dennis, let me see if I can help. Fred’s reply was to Anonymous, not to Ronald. Anonymous was, I believe, very serious. Fred was saying, or rather implying, that such a comment was so absurd that it had to be satire. Therefore Anonymous must have forgot his smiley face.
Fred was being satirical.
“Fred was being satirical.” No, Fred wasn’t just being satirical, he was being brilliantly satirical: I wish that I had his way with words.
Hi Doug,
I guess everyone here believes that debt is bad, I know that you claim ignorance of economics.
It is surprising to me that so few have good understanding of macroeconomics.
Current levels of debt in the US are not a problem in the view of mainstream economists. See for example
http://econbrowser.com/archives/2015/02/sovereign-debt-scares-is-the-u-s-immune
The bottom line James Hamilton thinks that US public debt levels are sustainable.
I didn’t see any smileys in his post, maybe I missed them.
For every economist that says y, there is another economist who says not-y.
I guess everyone here believes that debt is bad.
My opinion of debt is qualified. Debt for projects that improve society and lessen our impact on the environment is good. Debt for projects that encourage waste and harm to the environment is bad.
So Capitalism was intended to operate with fiscal stimulus of (this year) 17% of total gov’t spending (564B deficit/3.9T spending)? Because the economy is large and growing and healthy?
And how’s that inflating away of debt working at sub 1% inflation?
And btw, austerity includes tax increases. It’s not just spending cuts. Ask Greece.
I was 100% serious.
I know austerity includes tax increases, but it generally refers to tax increases on the lower and middle classes. We need tax increases upon the wealthiest Americans and corporations.
The Fed’s target of 2% inflation is a political, not economic choice. For them and the ruling elite, 2% inflation is the Goldilocks solution: enough to keep the economy growing (and the plebs happy) but not enough to seriously threaten their vast accumulation of wealth. The reason why the economy is so weak is because of the lack of spending to carry out necessary work.
We could easily balance the budget. It’d involve some relatively painful military cuts and vast tax increases on the wealthy, but it could be done. It could be done in tandem with massive infrastructure and technology programs, too. Unfortunately, Congress is currently run by those for whom government is the enemy that must be destroyed at all costs. It must be starved, shown to be ineffective, and destroyed so that private power can run free.
Talk of intention in capitalism is silly.
Increasing taxes on the wealthy may help a (very) little with the deficit, but it won’t make for a strong US economy.
The US economy has declined because of excessive Government regulations. Probably the worst being OSHA regulations, coupled with an over abundance of lawyers, and you’ve got a recipe for destroying US manufacturing. One big lawsuit can put a company out of business. I’ve seen it happen. I really don’t blame US manufacturers for going overseas.
With regards to Capitalism, it may not be perfect, but it works a whole lot better than any Government run economy ever has.
http://usawatchdog.com/financial-system-will-collapse-just-a-matter-of-when-laurence-kotlikoff/
$200 trillion in liabilities. Discount that for 30 years at the current average 2.3% interest the US gov’t is paying and the trend rate of GDP since 2007-08. Interest would average ~10% of GDP per year (and ~14% of private GDP) in addition to household debt service of 7-8% of GDP (if household debt/GDP did not grow), which includes mortgage debt equivalent to ~80% of GDP and 110% of private GDP. This does not include corporate debt to GDP, which is at a record high, nor does it include corporate debt service.
But note that these future public and private debt and debt service projections are academic at this point. Total annual net flows to the financial sector equal total annual output of the US economy.
Moreover, the cumulative imputed interest to total credit market debt outstanding to average term is an equivalent today to 100% of GDP in perpetuity.
That is, despite some household debt deleveraging because of the financial meltdown in 2008-10, total public and private debt to wages and GDP, and the associated debt service, has already begun to exert a permanent constraint on the post-2007 trend rate of growth of real GDP per capita indefinitely hereafter.
Then add in the structural constraint of Peak Oil and the energy cost of oil extraction and the fact that the 5- to 10-year rate of real GDP per capita does not grow historically with the price of oil above $40, and we have already reached the log-limit bound for real GDP per capita due to energy/exergy, debt, and now increasingly population-induced ecological constrains, including water.
The larger point is that growth is over for real GDP per capita, oil production, industrial production, employment per capita, and real after-tax income and purchasing power of the bottom 90-99%. Printing trillions more in bank reserves to prevent money supply and nominal GDP from contracting with debt/asset and price deflation, and in the process hyper-financializing the economy, is not a “solution” but a desperate act to prevent systemic collapse.
The main advantage for the US is the Dollar as reserve currency. This allows for borrowing at artificially lower rates.
Inflating away debt has been going on for a long time in the US. The big problem with this strategy, is that it hurts those that don’t own real assets, primarily young people. The percentage of home ownership is declining.
Dennis, why do you not come up with hard facts that supports your claims?
Looking at data from the Federal Reserve, it can be shown that you are wrong on so many levels that it is hard to know where to start.
Increasing taxes may be one way to balance the budget, but this does little for GDP as this shifts demand from the private to the public sector.
The chart below, based upon data from Federal Reserve, documents that US total public debt grew faster than the GDP from 1988 to 2014.
That runs contrary to Dennis Coyne’s claim that public debt grew at an annual average rate of 2.7% versus the economy, GDP, grew at an annual average rate of 4.7%.
Back in 1988 the total (US) public debt to GDP was around 50%, in 2014 it was about 102%.
Increasing taxes may be one way to balance the budget, but this does little for GDP as this shifts demand from the private to the public sector.
Well that depends a lot on what is being taxed. Taxing high incomes does little to decrease demand, because the rich have a high savings rate anyway.
Taxing consumption on products commonly imported (like oil) reduces demand to foreign producers, resulting in a net increase in exports, so it grows the economy directly.
Ilambiquated,
GDP is the total of all end transactions within an economy in a year.
”Taxing high incomes does little to decrease demand, because the rich have a high savings rate anyway.”
No, it works the opposite way. Higher taxation of high incomes are a redistribution of spending (or a reduction in savings which is deferred spending) and is normally thought to increase GDP. Taxing high incomes reduce the rich savings rate and puts money in the hand of others that hopefully will spend it.
How this eventually nets out is widely debated.
”Taxing consumption on products commonly imported (like oil) reduces demand to foreign producers, resulting in a net increase in exports, so it grows the economy directly. ”
Taxation affects the demand for products/services subject to it. This may divert demand from one product/service/sector to another. It becomes a zero sum game.
If taxation on imported crude oil were increased, that would likely lead to a lower demand/consumption of crude oil, but this sets of a range of feedback loops that is hard to predict the outcome from.
A higher taxation on crude oil would likely lower demand (and thus imports of it) and likely result in a lower (oil) price. For a country that is also a considerable producer of crude oil this would affect its economic output (ref the recent collapse in the oil price), the lowered costs of imported oil needs to be weighted against what this does for the country’s own oil industry (if it has one).
Hi Rune,
I think I must have misunderstood what you wrote when you said higher taxes would have little effect on GDP.
I think you are saying an increase in tax rates on higher incomes( “the wealthy”)would tend to increase GDP, but only a little (or that there are differences in opinion about how large the effect would be). If I understand correctly, I would agree.
I misread your original comment as meaning that you thought GDP would decrease. My apologies for not reading more carefully.
I actually did not realize my mistake until reading your reply to Ilambiquated, where I think it is clear that you expect that an increase in tax rates on the wealthy would tend to increase GDP (and perhaps not by very much, though that part is unclear, I seem to misinterpret your comments.)
Again sorry.
A higher taxation of those with higher incomes is a redistribution of income within the nation. Therefore its GDP effects needs to be understood.
How can this have any meaningful impact on GDP?
Robbing Peter to pay Paul.
Hi Rune,
You are correct I mistakenly said debt. I was using Ronald’s data on interest payments and should have said the increase in interest payments on the national debt increased by 2.7% on average over the 1988 to 2014 period.
If you want a balanced budget you can cut spending or increase taxes, that is a fact.
I don’t remember saying that GDP would not be affected, could you find a quote please?
It is absolutely true that if aggregate spending is fixed, that more public spending will lead to lower private spending. News flash, aggregate spending is not fixed! If there is inadequate private investment, government spending can increase employment and output. The classical economics notion that the economy is always at full employment is wrong.
Only in a economy with resources fully employed will public spending crowd out private investment. Do you believe this is currently the case in Europe?
http://ec.europa.eu/eurostat/statistics-explained/index.php/Unemployment_statistics
If you believe that the 11% unemployment rate in the Euro area is a fully employed economy, I would disagree. If you believe that a balanced budget would help reduce unemployment, I would also disagree.
When I suggested to Ronald that raising taxes or reducing spending would reduce the budget deficit, that was all I was saying. I think a balanced budget is a really bad idea in Europe, in the US it would probably be ok if we taxed the rich more heavily, because a lot of their money is idle capital that does little to support the economy.
The reduced taxes on the wealthy in the US only happened because of a strange thing called supply side economics and a charismatic president that could have convinced most Americans that apple pie was a communist plot 🙂
Returning to the 1979 tax code might reduce GDP, but if we mostly returned to the higher income tax rates of 1979 (with tax brackets indexed based on inflation from 1979 to 2015), with most other tax policies left as they are (an exception being to tax dividends and capital gains as ordinary income), it would reduce the deficit, reduce income inequality with only a small reduction in GDP. The reduction in GDP could be offset with a small increase in government spending on public transportation or grid upgrades or other potentially useful public investment.
Dennis, of course I am right.
You wrote;
”The average yearly increase in debt over the 1988 to 2014 period was about 2.7%. Over that same period the US economy grew on average at a 4.7% rate so interest payments to GDP has been declining from 1988 to 2014.”
How is that supposed to be interpreted? Or how would you rephrase what you originally meant?
”I don’t remember saying that GDP would not be affected, could you find a quote please?
I did not suggest that you said that.
”Only in a economy with resources fully employed will public spending crowd out private investment. Do you believe this is currently the case in Europe?”
Dennis, let us stay with one subject at the time (in case you have not noticed this thread was about US GDP!). I have observed that it is a favored tactic of you to throw in other subjects when you come up short or you just ignore it.
I have repeatedly advised you against straying away from the subject and trying to put words in my mouth.
Shame on you, Dennis!
Apart from that you are of course free to think and believe whatever you want….. for whatever that is worth.
But you should be prepared that your belief and thoughts will be called upon in the public domain to be supported by hard data and logic…..and so far you do a poor job at that.
Hi Rune,
I would rephrase the following:
The average yearly increase in debt over the 1988 to 2014 period was about 2.7%. Over that same period the US economy grew on average at a 4.7% rate so interest payments to GDP has been declining from 1988 to 2014. Interest payments were was 4.1% of GDP in 1988 and they were 2.5% of GDP in 2014.
To the following:
The average yearly increase in interest payments over the 1988 to 2014 period was about 2.7%. Over that same period the US economy grew on average at a 4.7% rate so interest payments to GDP has been declining from 1988 to 2014. Interest payments were 4.1% of GDP in 1988 and they were 2.5% of GDP in 2014.
The main change is to replace the first occurrence of “debt” with “interest payments”. also there was an “was were” towards the end of the quote that should have been “were”.
you said,
Increasing taxes may be one way to balance the budget, but this does little for GDP as this shifts demand from the private to the public sector.
At first I thought your main point was that increasing taxes would affect GDP, I agree that it will, but when I spoke about GDP I was comparing the ratio of interest payments to GDP, because the level of interest payments without GDP to compare it to is of little use.
Thank you for pointing out my mistake on saying debt, when I intended to say interest payments (which was what Ronald’s comment was about that I replied to).
I did not put any words in your mouth. I did not say that you think this or that, but you did talk about a shift of demand from the public to the private sector and I responded to that comment.
When unemployment was high in the US higher government spending made sense for the same reason it would make sense in Europe at present. For someone that believes that budget deficits are a problem either tax increases or budget cuts would be the answer, the US legislature cannot agree on anything so it really doesn’t matter. If the US legislature chooses to balance the budget as they did during the Clinton presidency, now would be a good time to do it because the unemployment rate is low.
Note that if higher taxes resulted in less saving by the wealthy and the extra tax revenue was used for paying down the debt, this would simply take idle savings by the wealthy and be used to reduce the public debt, it might have little effect on private vs public spending.
”Note that if higher taxes resulted in less saving by the wealthy and the extra tax revenue was used for paying down the debt, this would simply take idle savings by the wealthy and be used to reduce the public debt, it might have little effect on private vs public spending.”
The first step towards being able to reduce public debt is to have a budget surplus.
How can you say that the wealthy savings are idle? Why if these are invested in productive enterprises?
Hi Rune,
I think you mean in 1988 debt to GDP was 140% and in 2014 about 216%. It seems GDP is plotted on the right axis in your chart, you may have got your axes mixed up.
The increase in total debt is explained in part by more use of credit cards as a means of payment, even when there really is no debt.
When I look at a credit report it shows any balance on my credit card as a debt, even if it is paid in full every month. I imagine I am not the only person in the US that uses a credit card in this way, but much of the increased household debt may not be debt at all unless only debts of 60 days or longer are included in the credit card reporting.
It really is a non issue.
I brought up wealth in an earlier comment and you thought it was not relevant.
Perhaps there are people reading who are in the banking industry who can correct me if I am wrong. When ever I have applied for a loan the bank asks what my assets and liabilities are and I have the impression that net worth is very relevant to a bank in deciding whether to lend.
If I had a million dollars of net worth and wanted to buy a $250k vacation home, income would be a factor, but I believe net worth also has some role to play in the decision by the bank on whether to lend and what the interest rate will be.
The fact that US wealth is at least ten times GDP makes total debt of 216% of GDP less of a problem. In the US, a bank will lend a home buyer up to 2.9 times their income with a 20% down payment, even if their net worth is only the 20% down payment for the home (based on current interest rates of 3.2% for a 15 year mortgage, 100k income, and 69k down payment).
It seems that 290% of GDP is a safe level of total debt for an advanced economy that has control of its own money supply.
It also seems strange to me that the debt hawks have shifted to total debt rather than just public debt. It was once thought that private debt was ok, but deregulation of the banking system has made us concerned with all debt.
Maybe we should regulate the banking and credit industry like we did in before in the 1970s.
The rate of increase in GDP was only a little slower (5% vs 5.7%) than the rate of increase in total debt from 2009 to 2014. If you are arguing that it would be better if debt grew at the same rate as GDP (or a little slower), I would agree.
I do think that when the economy is at less than full employment (let’s call it 4.5%) that a little more debt is a good thing for the economy and that more private debt is better than public debt. In those cases when the private debt is inadequate to spur enough economic growth, public debt should be used to fill the gap.
”Hi Rune,
I think you mean in 1988 debt to GDP was 140% and in 2014 about 216%. It seems GDP is plotted on the right axis in your chart, you may have got your axes mixed up.”
Dennis, I am aware that you have serious problems with your reading comprehension (which you repeatedly admit to). And that taxes my patience with you. In short I am wasting time on you.
And NO,which you would have understood if you had read what I wrote, repeated below for your convenience;
”Back in 1988 the total (US) public debt to GDP was around 50%, in 2014 it was about 102%.”
Just above the figure which I included. That figure (since you apparently have problems of understanding it) shows the development of the total of household (blue area), Nonfinancial corporate (orange area) and federal public (dark red area) debt.
The black line with the right downward slope shows development in the interest rate on US 10 year Treasuries.
The green upward sloping line towards the left is the GDP.
Dennis, you document again that you have issues with your reading comprehension.
Further, you try to make it look like I describe something which I obviously have not.
Dennis, I can guarantee you that I am tired of your games and your efforts at trying to misrepresent me.
Credit card debt is extinguished when it is paid.
Dennis, try to come up with something of substance. Your objective is clearly not to further any debate but to create as much noise as possible.
”I brought up wealth in an earlier comment and you thought it was not relevant.”
Dennis, provide link or reference to where I made such a statement?
I sense you are mixing things here as you think that wealth (which is some figure) can be used to pay off debts.
I am not interested to learn about what you would do if you had a high net worth.
”It seems that 290% of GDP is a safe level of total debt for an advanced economy that has control of its own money supply.
Dennis, can you provide documentation for that this is so by an organization that is tasked to make such evaluations.
What you think is irrelevant in the real world.
We are not discussing how things works on Fantasy Island or how it may have been if different policies had been deployed in the 80’s.
In the real world, one has to relate to what is!!!!
Dennis, again, I am tired of you having to second guess what I mean or not mean. I am perfectly capable of expressing what I think on my own. The problem appears to be your reading comprehension.
Let’s have that as a % of US GDP.
Sam,
if you look at my chart further upthread you will see that lowering the interest rate allowed both private and public sectors to take on and service more debt.
Growth in total debt was what fueled GDP growth.
How much debt can be assumed varies among economies due to their structures.
When the total debt goes beyond a certain point (debt to GDP) creditors may become hesitant to continue to lend and/or may charge a higher interest as the presumed risk is considered higher.
A country with a sovereign currency may print to honor its debts, but this will do something to the trust of the currency and the ability to raise funds in the future to fund deficits.
Suppose they all print.
That would be a race to the bottom.
(And sadly it may be the only way to extend this bubble.)
It’s underway, guy.
Only oil scarcity stops all this. When Russia refuses pieces of paper for oil, and KSA does too, the game ends.
Rune,
I read several of your recent comments here and have to say, “You’re making way too much COMMON SENSE.”
The thing that will totally BLOW away the typical POOR SLOBs (invested in paper assets) is the impact of peak oil on the economic principle called NET PRESENT VALUE. Talk about a great big sucking sound for the $24 trillion U.S. Retirement Market & $105 trillion in Global paper assets under management. Charles Ponzi is more famous now than ever.
When peak oil finally reveals its ugly head, I doubt the Magicians at the Fed & Central Banks will be able to continue manufacturing a Growing GDP with the printing press…LOL
steve
Hello Steve and thanks!
I am very much aboard Ron’s prediction for when (time range) we will see peak oil extraction, there may be a small quibble about the causes, but that is besides the point.
IMHO Ron should be given the honor of placing an empty gold barrel on the peak.
Someone could produce growth in GDP numbers and print away the debts, but that will not make peak oil and the sucking sounds go away.;-)
Sam,
I would consider interest payments expressed as portion of public revenues and/or public budgets and/or public deficits a more relevant metric.
GDP is a metric which may be subject to rule changes as it is fit.
Rune,
Fair enough, it’s good to see it in context. I don’t believe that giving the absolute amounts is particularly useful. As a percentage of gdp it isn’t looking that bad:
https://research.stlouisfed.org/fred2/series/FYOIGDA188S
Assuming I’ve plotted the right time series, the next one seems to show that interest payments as a fraction of government expenditures have been decreasing, though recently they’ve maybe stabilised for a time.
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=17fH
I don’t see anything that would unduly worry me in these charts.
Of course, I agree that in the current low interest rate environment many people are likely to be taking on larger risks in the search for yield, which may indeed create problems, but this is surely a problem involving private debt, not public debt. Anyway, the current low intereste rates seem to show no sign of going away, there’s still presumably a strong demand for government debt, even as it grows ever larger.
Of course, intersting questions arise about what will happen should we enter the next recession with interest rates already at zero. Current softening data in the US means that this could happen relatively soon. Maybe something fun like the levy institute thinks might happen:
http://levyforecast.com/jlwpnew/wp-content/uploads/downloads/2014/07/The-Zero-Interest-Rate-Decade.pdf
Sam, thanks and my objective was not to raise worries, but to bring numbers into a more meaningful context, then anyone can on their own form their opinions.
Public debt is serviced from the public budget (not from GDP) and running a deficit for an extended period of time will at some point have consequences (public debt is not like private debt, but all debts counts).
From Congress of the United States Congressional Budget Office (CBO); “The 2014 Long-Term Budget Outlook”, p3.
http://www.cbo.gov/sites/default/files/45471-Long-TermBudgetOutlook_7-29.pdf
What Consequences Would a Large and Growing Federal Debt Have?
”How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policy makers with extremely difficult choices and would probably have a substantial negative impact on the country.”
CBO’s forecast towards 2039 is for growth in public debt, also as a portion of GDP (for whatever that is worth).
Some refer to the present low interest rate bluntly as “interest suppression”, which helped service the growth in total debt. This comes with consequences for those who based their income from “safe” sources, like pension funds, insurance companies etc. that based their investment on an expected return of 7-8%/a (it is a NPV thing).
So some pensioners will be left with less “income” (already happening) which has the potential to reduce consumption and thus GDP.
Public debt is held by the public, but some of those purchasing this debt (holding this debt) are pension funds (and others) and public debt is considered to be the safest ….until it is not.
From what I understand the Fed now appears to be preparing for a delay of raising the feds funds rate. Just a sign of the times.
The government revenues come primarily from taxation. From what I have seen the US labor participation rate has been in decline
https://research.stlouisfed.org/fred2/series/LRAC64TTUSA156S
Then add the decline in households real income
https://research.stlouisfed.org/fred2/series/MEHOINUSA672N
And the product becomes an eroding tax base.
I’d like to see Tax revenues side by side with those figures. They talk about interest rate hikes. Soon we will be like Japan with no room for even the smallest interest rate hike. But i guess that should be expected since only interest payments are made not principle payments. It’s a poorly designed system. The debt is actually never intended to be paid off just continuously rolled over. It’s designed for an economy with no limits on growth which doesn’t and never has existed. Over time the debt becomes so large that interest payments consume most of the tax revenue crowding out all other spending.
QE and zero interest rate policies, monetizing debt only buys time it doesn’t prevent the financial collapse and reset that are coming. None of those policies make any of the debt go away. In a system where debt is money you can’t afford for any of the debt to go away so it just keeps growing. Debt will expanding until it no longer can expand then collapse and reset takes place.
Oil limits will put a cap on growth limits which will bring down our debt based money system.
I should add that 10,000 baby boomers reach retirement everyday. SS is actually a transfer of money from today’s workers. There aren’t enough Gen-x and millennials to support SS much less buy all the assets such as stocks, bonds, and houses that the boomer generation owns at current prices much less ever increasing prices. Gen-x er’s and millennials are not well enough off to do so.
I wonder what Americans will be saying when the national debt reaches something like $75 trillion not including unfunded liabilities. Thats of coarse if we don’t collapse before then.
What can’t be sustained won’t be sustained. Everything about how we currently live is unsustainable.
You continue to think an unwinnable game will be played by rules.
If debt threatens to destroy the system, it will be expunged. Debt holders wiped out will be either denied access to the courts or killed.
Why is this difficult?
System will die by either debt deflation or hyperinflation there is no third choice regardless of what rules are played by. Collapse is 100% certain no if’s and’s or but’s. There is the question of how long is it between now and then. Peak Oil gurantees this outcome.
Expunging debt, wiping out debt holders, killing debt holders doesn’t change the outcome. That stuff is all part of the collapse.
Why is that difficult?
Of course that is true Sawdust but no one wants to believe it. I am reminded of the little boy who looked up to Shoeless Joe Jackson of the Chicago Black Sox as he was exiting the courthouse after being charged with fixing the world series. He said: “Say it ain’t so Joe.”
Collapse? Please somebody say it ain’t so. Please, please, somebody say it ain’t so.
But what’s the mechanism? Collapse!
What precisely does that mean? Does it mean people are unhappy? Does it mean prices go extremely high? So what? Suppose the government decrees them lower?
The usual answer is “that doesn’t work. The magnitude of The System overwhelms all that. Decreeing lower prices means things won’t be sold!
So order them sold by decree. Truckers won’t ship goods because their pay is too low? Start shooting them. They’ll drive.
The issue here is not the specifics of what measures are taken. The issue is what does collapse mean? How many die? Why? Does it mean there are some riots we see on TV? Well, if TV is working that’s not really much of a collapse.
So again, what’s collapse look like and what is the path from these numbers we see today to outright death?
Insufficient oil is the only thing that can do this. Not numbers on a screen created from nothing. And insufficient oil won’t do it uniformly globally. There will be winners and losers. The losers will glow in the dark.
Funny I should ask.
Okay here is what collapse looks like.
Oil becomes insufficient. Prices go up? No reason that would be allowed. Besides which, insufficient means insufficient. Charge as many pieces of paper for it as you wish. If someone needs it, they’ll print in cooperation with everyone else and you, a producer/exporter, have to decide if you want more pieces of paper.
So . . . you don’t. You amplify the insufficiency.
Trying to outbid for tanker trips becomes meaningless as the exporters have chosen to reject pieces of paper. So if you’re an importer, you divert tankers by force — after manufacturing a news story about piracy threats and the need to provide escort for tankers . . . to your own ports, for their own safety, you see.
The other importing folks want those tanker in their own ports, though. In fact, some headed to those new “safe” ports were originally enroute to these other importing ports. This becomes an issue. Some more news stories will have to be created about the evil nature of these other importing folks, but that grows fairly fast as the next trip of tankers begins with the navies of several importing countries parked just outside the Straits of Hormuz, prepared to escort tankers to their own ports, for their safety.
A choice has to be made whether or not to suggest some of those navy vessels are pirates. That would be justification for force. You see, maintenance of the narrative is pretty important. And it gets especially interesting in that US imports are largely not out of the Straits of Hormuz, but there have been NATO requests for support. Will an American president fire on Chinese naval units to protect flow of oil to Europe, with the North Sea dying? Tough call.
But that’s just the warm up. This is not collapse. People are still watching all this on TV. You won’t even get European collapse from this. Russia will demand NATO disarm in return for oil, and that will probably happen because it’s the easier path than starvation, and if you’re Europe, you can’t even think of invading Russia because doing so would not get you oil.
For America, it’s all about Canada and Mexico and Venezuela. That’s so very local that flow won’t be interdicted for rerouting elsewhere. China will be taking Europe’s oil. In the end it will come down to that. China will be taking Europe’s oil. Europe will have to turn to Russia and Russia won’t want pieces of paper. That’s besides the reality that Europe’s EU sanctions on Russia won’t leave Russia positively predisposed towards them when the time comes.
And so, collapse . . . a right and proper people-eating-rats-in-the-street collapse, comes first to Korea and Japan. They will not be allowed to receive oil import shipments. They will invoke their treaties with the US, but even a GOP president will be looking for an exit.
That will start the ball rolling on mushroom cloud potential. The next domino would be Chinese rerouting of oil from Australia. That . . . might just start missiles flying. The Brits have submarine launched nukes.
So starvation in Japan and Korea, then Australia.
BTW somewhere along this path India has to find oil. The future is not bright for Pakistan.
Intriguing comment, Watcher…
I seem to be leaning toward looking at it from the metaphoric standpoint of the brain of someone with Alzheimer’s…
If global economic connections are the neuronal connections, and each country and/or corporation is a neuron cell, then perhaps collapse/decline proves as simple as the gradual, fractal decay/disconnections over time of the interconnections between the cells, as well as the decays/deaths of the cells, themselves, with maybe some shaking and convulsions.
To avert excessive geopolitical dangers; overuse, such as from military operations of increasingly-precious fuel; and blown budgets for anything else, countries will likely start to turn more locally/inward, such as, and as you mention, US with Canada and Venezuela, etc., for resources, etc. This is contraction/relocalization, not necessarily collapse. Peak Oil 101.
In this context, it is perhaps no real surprise that Obama has recently initiated new relations with Cuba.
I also have nonsensical nightmares. But, I usually do not try to reduce them to writing. After all, they are just nonsense.
Elevate.
Not reduce.
I can make a case that insufficient oil is already here and has been here for more than a decade. Not in the sense that there are countries that currently can’t meet their oil demand. But insufficient to support current debt loads much less increasing debt loads.
If it were the case that if we could just burn enough oil to grow are way out of debt it would have already happened.
All those unserviceable digits made out of nothing do matter cause they are all claims on the use of energy. Another reason why unproductive debt is so destructive. Once you burn the energy it’s gone and unless you made a profit you can’t service your debt unless you go further into debt which requires burning even more energy to service the same debt.
But dood, they are NOT claims on energy if the exporters choose to save it for the grandchildren and reject pieces of paper for it. It makes much more sense for them to demand slave labor . . . and CERTAINLY disarmament . . . from their customers.
Dood, They are claims on energy. And if your an exporter who chooses to save it for the grandchildren and rejects pieces of paper for it. You will be bombed and invaded.
That’s the spirit!
But the US won’t face this from Canada and Mexico. Will they bomb and invade Russia for Europe’s oil?
“Will they bomb and invade Russia for Europe’s oil?”
No, they won’t, as Russia is a nuclear superpower. Nobody bombs or invades a nuclear superpower. However, they will try everything they can to destabilize the country, remove any leadership not aligned to western interests and try to replace them with western puppets. The hysterical anti-russian and specifically anti-Putin campaign that’s going on currently in Europe is a part of that effort.
Then who exactly were you going to bomb if they wanted something other than paper? KSA? We get 800someK bpd from KSA. Compared to 3 mbpd from Canada. Mexico sends us a bit more than KSA. Venezuela 660K bpd to the US. Why would we bomb and invade KSA for . . . China, who gets big shipments of their oil.
“But the US won’t face this from Canada and Mexico. Will they bomb and invade Russia for Europe’s oil?” ~ Watcher
Of course not to the latter point, as well as it making more sense to go more local as per the former point. Canada, Mexico and South America will become ‘more local’ or integrated if the governpimps have any sense left.
Dmitry Orlov, not too long ago, posted something of US overseas military bases– ‘The Empire’– already shrinking/atrophying. The Ukraine and NATO thing may be some kind of stop-gap measure, what with issues with ISIS, Yemen, etc., and the ME in general.
In the context of Peak Oil, the oily geopolitical landscape in the next 10 years or sooner is unlikely to resemble anything like the landscape that came before it.
So put away your LSD, forget about Holly’ or Bollywood, and keep your eyes peeled on ‘the news’, because it’s likely going to get a lot weirder than it already has become.
“Truth is stranger than fiction…” ~ Mark Twain
“There is the question of how long is it between now and then.” Predictions that require a time span longer than most people’s lives are utterly worthless nonsense.
I think most people alive today will still be alive when the shit hits the fan.
It’s going to happen a lot sooner than most people think. We have less than 10 years before economic and monetary system collapse. If the equivalent of the production of a US or a Russia or a Saudi Arabia comes offline. Oil production drops world wide by 9-10 mbpd That would effectively end all growth everywhere. Nobody’s debt is serviceable at this point. I’m not just talking government debt. I’m actually referring mainly to all the private debt out there cause thats where the real collapse will take place. Even printing endless digits in a computer will not stop economic collapse.
It going to happen a lot quicker than most people think and it won’t take near as much decline in oil production as most people think.
Hi Sawdust,
Tax revenue (excluding payroll taxes for social security and medicare) in 2013 was $2.775 trillion, interest paid on the debt (if Ronald’s numbers are accurate) was $0.416 trillion or 15% of tax revenue (on budget revenue). Non payroll tax revenue is about 16.5% of GDP.
This is why interest rate are so important. Normalize them to pre-2008 and that 15% of tax revenue becomes a unmanageable number.
That is why debt matters. We can’t ever return to the pre-2008 world because of the amount of debt.
Sawdust, here is a graph of tax revenues and US interest payments back to 1950, as you can clearly see, tax receipts are far larger and are growing far faster than interest payments.
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=17fO
Interest payments should actually have declined even on a doubling of the debt since 2008 because interest rates were cut so drastically.
Tax receipts are going to hit a wall the minute insufficient fuel is available for growth. There will just be less economic activity to tax.
Debts are piling up exponentially. I don’t see the trend since 1950 lasting much longer.
We could stay out of Iraq wars. That one cost $1 trillion, and look at the mess it created.
And it could have been an even bigger mess if we let Saddam Hussein rule Kuwait, and Saudi Arabia, and develop nuclear weapons. Which he most surely would have done without Western intervention.
So what flavor of big mess do we have then? A US-ruled-by-puppet one? Oh yay. No sugar-cone, we will have ours in a cracked bowl, with a waterboard milk-sheik. Delish.
American Sheik. Sheik it, baby.
(Nation state politics is this dance, to spell it out for you.)
“The beat goes on and I’m so wrong
The beat goes on and I’m so wrong
The beat goes on and I’m so wrong…” ~ Frank Zappa
Obama has pretty much abandoned Bush’s “capture and torture” policy. And has replaced that with the surgical drone strike, which is usually not that surgical.
Obama’s overall policy in the region appears to be “let them all kill each other, and don’t involve US troops”. Except of course for dropping bombs on one side, or the other.
I guess you can blame the US (that was especially popular with George W ) for all the world’s ills if you like. I tend to think there would be just as many problems if the US did not exist.
What blame? But the US crony capitalist plutarch empire sticks their neck out for blame. And you write it yourself anyway, with your ‘…if we let…’.
I was doing some contract work at the time.
wait, what?
https://www.youtube.com/watch?v=1uMXkqL5XUY
Pleeeze
Saddam Hussein wasn’t in Kuwait in 2003, nor did he have nuclear weapons. Saudi Arabia wasn’t about to be invaded, and the USA faced no real danger from that dictatorship.
It’s easy to live in a world where your side is always the good guys, never make mistakes, and things are simple. I’m too old for that.
Iraq 2003 was a historic blunder. So was creating Israel on top of land occupied by Muslims and Christians who weren’t asked if they wanted that deal.
The space shuttle was a shitty design, and so is that crappy fusion project we got going.
The gods of Christians, Jews, and Muslims don’t exist. The USA bombed Dresden, communism is worse than cancer, in this world there is no justice and if you want it you got to fight for it.
People aren’t born equal, they deserve equal treatment under the law, and this is an alien concept to most of us.
So you’re saying that the Persian Gulf War of 1990 – 1991 was justified, but the 2003 Iraq war was not justified?
And yes, Saudi Arabia was about to be invaded, or they never would have invited foreign troops on their soil.
I’ve heard all the anti-US propaganda before.
“The king called up his jet fighters
He said you better earn your pay
Drop your bombs between the minarets
Down the Casbah way” ~ The Clash
https://www.youtube.com/watch?v=bJ9r8LMU9bQ
And so it goes.
I am one of those stock pickers who is working with stupidity and not any common sense, stupidity and lack of common sense go hand-in-hand.
I buy oil company stocks that plummet in value as soon as I complete the transaction. Fools never learn. Sometimes, it just doesn’t pay and never will. I am considering buying land on Mars, that’s how far fetched it gets sometimes. Probably better prospects on Mars than purchasing oil company stocks.
Statoil strikes oil in Yeti prospect in the GOM.
No, I don’t own any Statoil stock, full disclosure. However, I do own another oil company stock that is none of your business.
Do your own diligence.
A lowering tide drops all boats.
Not always. I gather you’ve never been stuck on a mud flat even before the tide has gone out completely… GRIN!
from Colin Campbell at Resilience today….I can’t seem to post the link.
“The world faces a major challenge in adapting to the radically reduced energy supply, which may mean that it will be able to support no more than about half its present population by the end of the century. But there are useful steps that can be taken to prepare.
….
Radical policy changes are now called for and the following lists some ideas:
1. Develop as much alternative energy as possible from tide, wind, wave, solar panels, hydropower, geothermal sources and anaerobic digestion, a process that converts agricultural and urban waste into methane that can be used to generate electricity. Nuclear power can also ease the transition although the production of prime grade uranium has also passed its peak. So-called frac-ing can also provide more oil to ease the transition.
2. Install smart meters whereby businesses and households are made constantly aware of their electricity consumption, and change tarrifs so that the more that is used, the more expensive it becomes. The present waste of electricity is colossal.
3. Remove energy costs as a charge against taxable income for business, which is an oblique subsidy, encouraging management to concentrate on energy saving.
4. Have fuel rationing to meet people’s essential needs in their particular circumstances.
5. Encourage car sharing and the giving of lifts.
6. Encourage permaculture and allotments whereby city dwellers can grow more of their own food. Changed building design can even permit the conversion of balconies on apartments into green houses.
7. Adopt the Rimini Protocol whereby countries agree to cut consumption to match world depletion rate, and conduct sufficient research to properly determine what that is (Heinberg 2006).
8. Encourage localism so that people again come to rely on whatever their particular region can support, which implies severe restrictions on immigration.
9. Take control of the financial position so that banks are no longer able to lend more than they have on deposit, and reintroduce properly managed local currencies.
10. Above all, inform people that their changed circumstances are imposed by Nature. “
haha that’s hilarious.
1) Congressman proposes fuel rationing to meet someone’s necessary needs. This eliminates cruises for the elderly. Hell, pretty much all vacations. And that Congressman’s seat in Congress.
2) Remove energy costs as a deductible expense of doing business, presumably including salary for your shipping dispatcher, who burns a lot of gasoline. That’s another Congressman leaving Congress.
3) “I, Congressman, encourage . . . what is that word again . . . oh yeah, permaculture and y’all guys in Atlanta grow your own food.” Penalties? My opponent can propose those.
4) “Oh and I, Congressman, encourage . . . oh, **localism**. ” What does that mean? It means you go to your local polls and vote for me.
5) What’s this? Banks can’t lend out anything they don’t have on deposit? Wait a minute, what happens if people withdraw money? Do we foreclose on mortgages? I think maybe we’ll have my opponent propose this one, too.
Campbell is retired from petroleum geology specialization, yes? Maybe he is atoning for his sins. Derrick Jensen may have taken a degree in mining; Jan Lundberg did something like oil financing; and Michael Ruppert did police-work, and so on… Plato’s Cave/The Matrix’s former prisoners perhaps…
“The Matrix is a system, Neo. That system is our enemy. But when you’re inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.” ~ The Matrix
Presumably, they swapped out the woman in the red dress with an agent (‘Look again.’) to make the point about how everyone so inured, yet attractive and/or harmless-looking, ‘might as well be an agent’.
No, what is funny is shooting truckers or killing debt holders or pirating tankers.
Now that’s funny.
Wonder how these ideas will work as election platforms.
The world faces a major challenge in adapting to the radically reduced energy supply
Haha, you can always count on Campbell for some good nonsense.
By what metric is there a “radically reduced energy supply”?
Look up. That blur is a falling piano.
“By what metric is there a “radically reduced energy supply”?”
Available net energy per capita?
By the metric of withdrawals to what’s left in the ground, the price trends, the population and gdp increase rates, and the fact that this darned planet won’t increase in size at the same rate, nor can we migrate out and conquer another one with the available rocket technology.
from the article, which is actually quite good and worth a read imho….
“Public data on reserves are very unreliable for all these reasons. The BP Statistical Review is widely taken as an authoritative source, being sponsored by a major oil company, but in 2014 it reported unchanged reserves for 38 countries despite it being utterly implausible that intervening discovery should have exactly matched production. Another misleading statistic it reports is Reserve to Production Ratio quoted in years which is misinterpreted to mean that production can stay flat for a given number of years and then stop dead overnight despite the fact that production in all mature oilfields declines gradually to final exhaustion.
Another cause of confusion is that there is no standard definition of the different categories of oil, each having its own endowment, costs, depletion profile and net energy yield. The primary supply to-date has been from so-called Regular Conventional Oil having a density of less than 17.5o API. The evidence suggests that its production peaked in 2005, which significantly was only one year after the peak of the production by the major oil companies. They are now reduced by merger from seven to four in number, which probably indirectly reflects a contraction from dwindling exploration opportunities.
With the decline of the prime source, attention turned to Non-Conventional oils, comprising that from Heavy oil and Tar Sand; Shale Oil (secured by heating immature source rocks); Tight Oil (secured by fracturing rocks lacking enough natural porosity and permeability to be a normal reservoir); Deepwater Oil (>500m); and Polar Oil. An argument rages as to the date of the peak of production of all categories of oil, which is imminent, but misses the point when what matters is the vision of the long decline that comes into sight on the other side of it.”
Some problems in Alaska:
http://www.reuters.com/article/2015/04/09/us-usa-alaska-energy-idUSKBN0N02JU20150409?feedType=RSS&feedName=domesticNews
I’ve an unusual explanation for oil inventory built up. This is my first post but I have enjoyed reading Ron’s blog and want to thank him.
If I were SA and gulf countries and want to trouble shale oil producers I would create 10 controlled entites in US and each start importing 100k to 200k barrels of oil from SA and gulf countries every day and fill up storage and pressure oil prices in US and financial distress to Shale oil producers. Abuse our free trade policy to their advantage. Just a little weird idea!
Many things are possible, but there is always the simple explanation: US producers are not producing enough of the type of crude that refiners need, resulting in high–and recently rising–net crude oil imports, even as US crude + condensate inventories continue to build:
U.S. refiners turn to tanker trucks to avoid ‘dumbbell’ crudes
http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323
The key word in this headline is avoid, as in refiners don’t want more of the crude/condensate blends.
As I have frequently mentioned, the CEO of Pemex expressed similar sentiments, when he was discussing their need for sweet/light crude oil imports last year. He noted that they needed crude, not condensate.
May be of interest for some,
Top 100 U.S. Oil and Gas Fields from EIA, April 2015
http://www.eia.gov/naturalgas/crudeoilreserves/top100/pdf/top100.pdf
Tx as expected.. 20 of the top are in GOM.. Hmm
Clean Energy Revolution Is Ahead of Schedule
By Noah Smith, BloombergView, Apr 8, 2015 8:00 AM EDT
I use $100 per kWh when I’m feeling optimistic. That happens to be way too expensive for large scale energy storage.
When I think about this problem I try not to put on an American hat, which is what so many Americans do. I try to think about a country with lots of people and nukes. Say Pakistan.
But maybe what needs to be done is reduce rich country fuel demand by building these electric gadgets inside the fence, rather than letting the chinese do it. Sort of like a job corps program with millions of people working on the manufacture of gazillion windmills and batteries. It may be an impossible task, but it sure beats picking wars with Russia or wasting time trying to “fix” the Middle East with periodic bombing campaigns. So I’ll trade more subsidies for home built gadgets to put young people to work if we rationalize foreign policy and stop trying to be imperial Rome.
http://www.washingtonpost.com/world/us-navy-alarmed-at-beijings-great-wall-of-sand-in-south-china-sea/2015/04/01/dda11d76-70d7-4b69-bd87-292bd18f5918_story.html
China is manufacturing an artificial island to “bolster” claims to the poorly named South “China” Sea.
This is an UNBELIEVABLE geopolitical move. This is an OBVIOUS PEAK OIL MOVE. Sweet Jesus!!!
Combine this with the NATO ( oil importers) vs #1 OIL EXPORTER on the planet Vladimir Putin War in the Ukraine….
This IS NOT A COINCEDENCE!!!
The Top Strategists in the Military are VERY INTELLIGENT HUMANS.
They can look at a graph a 6th grader can understand and PLAN!!!!
US Military JOE Report predicted Peak Oil in 2015 (hat tip to Ron)…..Simply Google it..2010 report.
http://www.theguardian.com/business/2010/apr/11/peak-oil-production-supply
Ron Patterson for President!!!
I love myself,
A Boltzmann Brain Part II
The Report you cited has failed in its predictions.
2015 will pass with things roughly the same as they are right now.
At some point down the road inevitably the situation will become much more stressing…I am not not offering any specific predictions
Yeah, it wasn’t 100% accurate. I am not going to reread the report, but if I remember correctly they said Peak Oil at the earliest 2013 and likely by 2015.
I suspect the other militaries (Russia invading Ukraine, China buying up oil everywhere, NATO building a missile shield) have come to similar conclusions.
thanks!
The Top Strategists in the Military are VERY INTELLIGENT HUMANS.
Usually.
West Point, Colorado Springs and Annapolis are substantially more difficult to enter academically (and otherwise) than Harvard. After graduation, the military pays for graduate degrees if sought.
West Point, Colorado Springs and Annapolis are substantially more difficult to enter academically (and otherwise) than Harvard. After graduation, the military pays for graduate degrees if sought.
Given that the military are the ones who die if we get into wars, they tend to pay much more attention to political situations around the world than US politicians.
If we had listened to the generals, we wouldn’t have gotten involved in Iraq. Or if we would have, it would have been with adequate personnel and money. Cheney’s idea of it would be a quick in and out was disputed by the generals and he chose not to listen to them.
The military has also been telling Congress that it needs to find alternatives to oil because it is going to be expensive and it is a logistical problem. Some in Congress don’t want to hear that. The military has also been studying declining world resources and climate issues. Again, some in Congress don’t want to hear that.
The US navy is well aware of the geopolitical implications of sea level rise and loss of arctic ice –
http://greenfleet.dodlive.mil/climate-change/
About 30 years ago I was talking to someone who taught at the Air Force Academy. He mentioned that the school was holding a symposium on the book, Catch 22.
I was surprised and impressed. The fact that they were talking about a satirical, anti-war book suggested to me that they were more open and aware than I had realized.
Obviously they are not all “Very Intelligent”. But on average, across different militaries (NATO, China, Russia) you are going to come across quite intelligent guys at the top strategy levels, I would suspect.
I wasn’t brave enough to join the military, but my pappy was in the Navy and he said they drill into your head the importance of your oil supply.
After all, cutting off your opponents oil supply is a classic Military Strategy.
Electric vehicles?
in 1975 were evaluated:
““corresponding calculations show that global energy consumption of the charging stations in the current population mobility more than 10exp12 kWh would be.”
[“entsprechende Berechnungen zeigen daß, der weltweite Energie verbrauch der Ladestatinen bei der gegenwärtigen Mobilität der Bevölkerung mehr als 10exp12 kWh betragen würde.”]
[Der Große Bildatlas des Weltverkehrs, Prag 1978 y.]
Sorry: How many kWh would be needed in 2015.?
A SHARP FALL IN NORTH SEA OIL PRODUCTION IN FEBRUARY HIT THE UK’S INDUSTRIAL PRODUCTION OUTPUT AND DROVE DOWN THE POUND ON FOREIGN EXCHANGE MARKETS.
“A rise in industrial production of just 0.1% in February leads analysts to predict a 0.4% rise in GDP in the first quarter of 2015”
http://www.theguardian.com/business/2015/apr/10/slowdown-in-uk-economy-predicted-after-slide-in-north-sea-oil-output
Apparently oil and gas production was 12% lower in February than a year earlier, the biggest fall in a year and a half.
Wowsers, that’s nasty. Question is, is that due to seasonal maintenance, or is the oil price doing our production in? Production is expected to pick up a bit over the next few years as some larger projects come online, but if depletion accelerates because of the price crash then that increase might prove harder to come by.
Hi Sam,
I hoped you would chime in on this and perhaps clarify. I have some access to “inside” info on Norway portion of the North Sea owing to my niece (a petroleum engineer who works there) but am simply quoting a newspaper article here. Please add to, support or refute at will. Cheers, Doug
Hi Doug
Well, decc have only got data out as far as last December, and as far as I can see it’s up slightly on December from the year before.
https://www.og.decc.gov.uk/pprs/full_production.htm
Looks like the reports are using one data from here: http://www.ons.gov.uk/ons/rel/iop/index-of-production/february-2015/stb-iop-feb-2015.html
Must admit I’m not entirely certain what some of the statistics mean. Volume multiplied by price perhaps.
Things have certainty been quiet in my office of late. 18 months ago I was working on 2 big 3d projects at once, as were most others. Now all of a sudden I’ve very little on, and only a few little gather condition projects in the pipeline. Far fewer people staying late too.
Well, given the effluxion of time, as (pompous) lawyers are wont to say, I guess we’ll find out. Thanks for your input on this Sam.
DECC reports monthly figures. January has 31 days and February (2015) 28 days.
I have followed the data from DECC for years and a year over year decline of 12% does not look likely and even less likely a 12% month over month decline.
Crude oil production (UK) was up from Dec 14 to Jan 15 according to DECC data.
https://www.gov.uk/government/statistics/oil-and-oil-products-section-3-energy-trends
Table ET 3.10
President Obama spent a little less than 24 hours in my neck of the woods, leaving at about 17:00 hrs. yesterday (April 9). One of the stories that emerged from the visit is:
US puts LNG back on Ja table
” Almost two years after giving up on liquefied natural gas (LNG), the Government’s dream of bringing the fuel to Jamaica has been reignited.
“This has been an area that has eluded us for many years,” Energy Minister Phillip Paulwell stated at the signing of a statement of intent between the United States Department of Energy and Jamaica’s Ministry of Science, Technology, Energy and Mining yesterday.
In addition to cooperation on LNG, it provides for technical assistance in energy conservation and fuel diversification.”
Not sure what to make of this since there were no quotes of anything that the US Energy Secretary said and the story is very light on what is actually included in this signed “agreement”. I wait with baited breath to see the details of this agreement. I should have an opportunity to quiz one or two high level contacts about this next week.
Alan from the islands
Scenarios and Projections
World Energy Outlook
Ice Core Studies Prove CO2 Is Not the Powerful Climate Driver Climate Alarmists Make It Out to Be
“On the basis of atmospheric CO2 data obtained from the Antarctic Taylor Dome ice core and temperature data obtained from the Vostok ice core, Indermuhle et al. (2000) studied the relationship between these two parameters over the period 60,000-20,000 years BP (Before Present). One statistical test performed on the data suggested that shifts in the air’s CO2 content lagged shifts in air temperature by approximately 900 years, while a second statistical test yielded a mean lag-time of 1200 years. Similarly, in a study of air temperature and CO2 data obtained from Dome Concordia, Antarctica for the period 22,000-9,000 BP — which time interval includes the most recent glacial-to-interglacial transition — Monnin et al. (2001) found that the start of the CO2 increase lagged the start of the temperature increase by 800 years. Then, in another study of the 420,000-year Vostok ice-core record, Mudelsee (2001) concluded that variations in atmospheric CO2 concentration lagged variations in air temperature by 1,300 to 5,000 years.”
“Ice core studies…” –
Nothing there more recent than 2003. The Idso family appear to be genetically related mavericks with a bee in their bonnet that buzzes around saying “Bzzz – CO2 is not a greenhouse gas…”
Statistical exercise, not physical mechanism
Recall David Hume’s philosophical question: if one observes that the sun has risen for a thousand times, how can one be sure it will necessarily rise for the one thousand and first time.
The question can be answered if one understands the physical operation of the solar system
With my coupon discount, the price of gas today is at 1.15 per gallon.
Music time, take some time to listen to the Dillards performing ‘What’s Time to a Hog’:
https://www.youtube.com/watch?v=uIDQnuE8EB8
The decline in the U.S. oil rig count sharply re-accelerated this week, according to Baker Hughes/
Total oil rigs number was down 42 unit
Permian is – 20, Eagle Ford – 14, Bakken only minus 2.
It seems that several companies in Texas have their rig contracts terminated from the beginning of April
Since last year’s peak level oil rig count is down 849 units, or 52.8%
some small cause for hope….
Tompkins Conservation
“We see the loss of biodiversity as the greatest crisis of our time. The sheer number of humans and the scale of our impact on the Earth have triggered the most massive wave of extinctions since the dinosaurs disappeared 65 million years ago. Unraveling ecosystems and associated species loss are severely undermining the planet’s ecological health, upon which all of us, non-human and humans alike, depend. Climate change now threatens to accelerate this assault on biodiversity.
We believe that humans have an ethical obligation to share the planet with other species, and that we must reorient our values and activities so that all forms of life can flourish. Toward this end, we direct our energies to park creation, activism, restoration, and ecological agriculture. Throughout diverse programs, we uphold our commitment to a common set of ideals: ecologically grounded local economies; local, renewable energy production; thoughtful, place-appropriate architecture and design; and meaningful work for individuals and communities. For a longer discussion on the environmental ethics and ecocentric thinking that guide our work, see here, where we share a more complete treatment of this highly nuanced subject.
We focus on environmental and conservation work (including agriculture) while supporting in spirit other progressive social movements. However, since we see that many foundations exclusively fund social justice, antiwar, and women’s issues, we direct our limited resources toward the areas where we can have the biggest impact and have the most experience: conservation and environmental activism.”
http://www.tompkinsconservation.org/home.htm
About the Weald Basin (recent Gatwick discovery)….so how much recoverable oil is there?
The British Geological Survey (BGS) in association with the Department of Energy and Climate Change (DECC) has completed an estimate for the amount of shale oil and shale gas in the Weald Basin in south-east England; published 23 May 2014.
The estimate is in the form of a range to reflect geological uncertainty. The range of shale oil in place is estimated to be between 2.20 and 8.57 billion barrels (bbl) or 293 and 1143 million tonnes, but the central estimate for the resource is 4.4 billion bbl or 591 million tonnes.
http://www.bgs.ac.uk/shalegas/wealdShaleOil.html
Good article by John Kemp in Reuters:
Oil wells in England’s green and pleasant land: Kemp
By John Kemp
Apr 9, 2015
http://www.reuters.com/article/2015/04/09/england-oil-kemp-idUSL5N0X639020150409?feedType=RSS&feedName=everything&virtualBrandChannel=11563
(Reuters) – There could be up to 100 billion barrels of oil onshore beneath southern England, the chief executive of a small exploration firm told the BBC in an interview on Thursday. To which the correct response is “yes, but”.
Based on an analysis of samples from a single well drilled near London’s Gatwick airport, UK Oil and Gas Investments estimates there could be 158 million barrels per square mile in the local area.
Horse Hill, where the well was drilled, is part of the Weald Basin, which stretches across large parts of the counties of Dorset, Hampshire, West and East Sussex, and Surrey, as well as parts of neighbouring Wiltshire and Kent.
Scaled up across the whole of the basin, there could be 50-100 billion barrels of oil, though only 3-15 percent might be technically recoverable, the firm admitted (“Oil discovery near Gatwick airport significant” April 9).
“We think we’ve found a very significant discovery here, probably the largest (onshore) in the last 30 years, and we think it has national significance,” the company’s chief executive said in the BBC interview.
The company described the Weald Basin discovery as “a potentially strategic asset for the UK” and went on to say “the key thing about this discovery is about what Britain and the British government want to do about this strategic asset”.
Onshore oil and gas production touches a raw nerve in Britain, where it pits exploration firms against environmental groups worried about climate change and the industrialisation of the landscape.
It also plays into the country’s north/south political divisions, and even exposes internal tensions between the Conservative Party’s pro-business wing and its supporters in rural southern England.
The idea that an exploration company had “found” up to 100 billion barrels below the rolling chalk landscape of southern England has propelled the story to the top of the daily news agenda.
It immediately raises the prospect of thousands of wells being drilled across the landscape of some of the wealthiest parts of the country.
“England’s green and pleasant land” was immortalised by William Blake in his poem “Jerusalem” which is an unofficial anthem for England.
“It’s one thing to have fracking in the vast plains of America,” one Conservative Member of Parliament complained to the Financial Times in 2013. “It’s a whole different matter when people will see gas production in the rolling hills of Surrey.”
But the problems with the Gatwick oil well story should be obvious and they offer a cautionary tale about the difficulty of estimating oil resources and writing about them.
ONSHORE OIL FIELDS
There is nothing new in the idea substantial amounts of oil and gas are buried across Britain. There are three large oil and gas-rich sedimentary basins across southern England, northeastern England, and the central belt of Scotland.
Substantial volumes of oil and gas have been produced in all three areas for well over a century. In Victorian times, shales on England’s south coast were mined as one of the country’s first sources of oil. In Scotland and northern England, oil-bearing shales were used to produce manufactured town gas for early street lighting.
More than 2,000 wells have been drilled onshore since 1902, according to the Department of Energy and Climate Change.
Britain’s onshore fields have collectively produced more than 500 million barrels of oil, though that compares with more than 45 billion barrels recovered from the North Sea.
During World War Two, a specially recruited team of Oklahoma roughnecks drilled more than 100 oil wells in Sherwood Forest (famous as the setting for Robin Hood).
Billeted at Kelham monastery near Newark in Nottinghamshire, the drillers developed an oilfield which eventually produced 3,000 barrels per day. By the end of the war, the field has produced 3.5 million barrels of oil (“The Secret of Sherwood Forest: Oil Production in England during World War II” 1973).
The biggest onshore field, at Wytch Farm in the Weald Basin, is also the largest in western Europe. Discovered in 1979, it had estimated recoverable reserves of almost half a billion barrels and production peaked at around 100,000 barrels per day in 1996.
A string of other small fields, containing hundreds of millions of barrels of oil between them, stretch across the Weald Basin and have been discreetly producing for the last 30 years (“Fracking beneath southern England’s rolling hills” June 2013).
As of February 2014, 117 exploration, 31 appraisal and 100 development wells had been drilled in the Weald area, and of these, 26 were classified as discoveries or at least indicated the presence of petroleum. Thirteen fields were in production plus a gas well which lights a local rail station, according to the British Geological Survey (BGS).
RESOURCES AND RESERVES
There is no question that there are billions of barrels of oil beneath southern England, but how much could be technically or profitably produced remains extremely uncertain.
In 2014, the BGS, under contract from the Department of Energy Climate Change, produced a detailed resource estimate which put the total amount of oil in place at between 2 and 9 billion barrels (“Jurassic shales of the Weald Basin: geology and shale oil and shale gas resource estimation” 2014).
The BGS examined all the available data, which is sparse, on formation thickness, burial depth, thermal maturity, total organic content, clay content, porosity and other factors used to produce resource estimates. It was sceptical about how much free oil the basin contained and whether it could be made to flow to the wells.
UK Oil and Gas Investments is much more optimistic, and puts the oil originally in place at 158 million barrels per square mile near Gatwick and by extrapolation at 50-100 billion barrels basin wide.
But this is based on an analysis of rock samples from a single location which is unlikely to be representative of the entire basin. The company has not yet conducted a flow test to see if the oil can be produced.
To firm up the resource estimates, dozens of wells would need to be drilled across the basin area. They would need to be put into production to turn resource estimates into estimates of reserves that are technically and economically recoverable.
UK Oil and Gas Investments is entitled to be excited by its core samples, and its share price rose more than 200 percent on the news, from less than 2 pence to more than 4 pence per share (less than 2 cents to 6.7 cents).
But rock samples from a single hole do not provide any meaningful information about oil resources (let alone producible reserves) across an area of almost 11,000 square km in southern England.
There may well be large volumes of oil and gas trapped beneath southern and northern England and eventually some of it may be produced, if local and political opposition can be overcome.
There are no good practical reasons why oil and gas should not be produced in England.
But shale oil and gas production in Britain would need to compete for investment with much better understood and probably less costly fields in the United States and elsewhere.
With oil prices currently at $50 per barrel, and the world market awash in surplus oil, the Weald is not top of anyone’s list of investment locations.
The fact this story has received any attention says less about the prospect for oil production than the non-existent understanding of petroleum production among politicians, journalists and the public, and the country’s neurosis about the potential for fracking across England’s green and pleasant land.
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